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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13D
(Rule 13d-101)
Under The Securities Exchange Act of 1934
(Amendment No. )(1)
Geokinetics Inc.
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(Name of issuer)
Common Stock, par value $0.20 per share
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(Title of class of securities)
372910 10 9
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(CUSIP Number)
c/o William R. Ziegler
Parson & Brown
666 Third Avenue, 9th Floor
New York, New York 10017; (212) 551-9860
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(Name, address and telephone number of person
authorized to receive notices and communications)
April 28, 1997
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(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1 (b)(3) or (4), check the following box [ ].
Note. Six copies of this statement including all exhibits, should be
filed with the Commission. See Rule 13d-1 (a) for other parties to whom copies
are to be sent.
(Continued on following pages)
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(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 99 Pages
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CUSIP NO. 372910 10 9 13D PAGE 2 OF 99 PAGES
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NAME OF REPORTING PERSONS
1 S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Steven A. Webster
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
2 (b) [ ]
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3 SEC USE ONLY
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SOURCE OF FUNDS*
4 BK (See Item 3)
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e)
5 [ ]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6 United States
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7 SOLE VOTING POWER
See Item 5(b)
NUMBER OF ---------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY See Item 5(b)
OWNED BY ---------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING See Item 5(b)
PERSON WITH ---------------------------------------------------------
10 SHARED DISPOSITIVE POWER
See Item 5(b)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
500,000 shares of Common Stock issuable upon exercise of Warrants (See
Item 5 (a))
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES* [X]
See Item 5(a)
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.2%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP NO. 372910 10 9 13D PAGE 3 OF 99 PAGES
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NAME OF REPORTING PERSONS
1 S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
William R. Ziegler
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
2 (b) [ ]
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3 SEC USE ONLY
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SOURCE OF FUNDS*
4 BK (See Item 3)
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e)
5 [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
See Item 5(b)
NUMBER OF ---------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY See Item 5(b)
OWNED BY ---------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING See Item 5(b)
PERSON WITH ---------------------------------------------------------
10 SHARED DISPOSITIVE POWER
See Item 5(b)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
500,000 shares of Common Stock issuable upon exercise of Warrants
(See Item 5 (a))
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES* [X]
See Item 5(a)
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.2%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
INTRODUCTION.
The reporting persons named in Item 2 below are hereby jointly
filing this Schedule 13D as a group solely because they may be deemed a "group"
within the meaning of Rule 13d-5(b)(1) promulgated pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), by virtue of the fact
that they may be deemed to have acted in concert in connection with their
acquisition of certain securities of the issuer, including warrants to purchase
shares of common stock of the issuer, pursuant to the terms and conditions of a
certain Securities Purchase Agreement dated April 25, 1997 (the "Securities
Purchase Agreement"). In accordance with Rule 13d-1(f) promulgated pursuant to
the Exchange Act, the persons named in Item 2 below have executed a written
agreement relating to the joint filing of this Schedule 13D (the "Group Filing
Agreement"), a copy of which is attached hereto as Exhibit I.
ITEM 1. SECURITY AND ISSUER.
This statement relates to the common stock, par value $0.20
per share (the "Common Stock") of Geokinetics Inc., a Delaware corporation (the
"Company"). The address of the principal executive offices of the Company is
5555 San Felipe, Suite 780, Houston, Texas 77056.
ITEM 2. IDENTITY AND BACKGROUND.
Steven A. Webster ("Webster") and William R. Ziegler
("Ziegler") are purchasers of Units of the Company consisting of 12% Senior
Secured Notes of the Company and Warrants to acquire Common Stock of the
Company, pursuant to the terms and conditions of the Securities Purchase
Agreement. Webster and Ziegler are sometimes hereinafter individually referred
to as a "Reporting Person" and collectively referred to as the "Reporting
Persons").
Webster is a natural person and has a business address of 1900
West Loop South, Suite 1800, Houston, Texas 77027. The present principal
occupation or employment of Webster is as the Chairman, Chief Executive Officer
and Treasurer of Falcon Drilling Company, Inc., a marine oil and gas drilling
contractor with its principal place of business located at 1900 West Loop South,
Suite 1800, Houston, Texas 77027. Webster is a United States citizen.
Ziegler is a natural person and has a business address of 666
Third Avenue, 9th Floor, New York, New York 10017. The present principal
occupation or employment of Ziegler is as a partner of Parson & Brown, a law
firm with its principal place of business located at 666 Third Avenue, 9th
Floor, New York, New York 10017. Ziegler is a United States citizen.
During the last five years, neither of the Reporting Persons
has been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors). During the last
Page 4 of 99 Pages
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five years, neither of the Reporting Persons was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to the terms and conditions of the Securities
Purchase Agreement, each of Webster and Ziegler purchased 250 Units of the
Company. Each Unit consisted of $1,000 principal amount of 12% Senior Secured
Promissory Notes of the Company, Geokinetics Production Co., Inc. ("GPC"),
Geoscience Software Solutions, Inc. ("GSS") and HOC Operating Co. ("HOC";
together with GPC and GSS, the "Subsidiary Obligors") and Warrants to acquire an
aggregate of 2,000 shares of Common Stock of the Company (2 shares of Common
Stock for each $1 principal amount of Senior Notes). On April 28, 1997, (i)
Webster tendered his subscription price of $250,000 for 250 Units of the Company
and received in exchange therefor a Senior Note in the principal amount of
$250,000 and a Warrant to purchase an aggregate of 500,000 shares (subject to
adjustment) of Common Stock of the Company and (ii) Ziegler tendered his
subscription price of $250,000 for 250 Units of the Company and received in
exchange therefor a Senior Note in the principal amount of $250,000 and a
Warrant to purchase an aggregate of 500,000 shares (subject to adjustment) of
Common Stock of the Company.
The source of funds for the $500,000 aggregate subscription
price for the 500 Units acquired by Webster and Ziegler was a draw down by
Webster and Ziegler under a joint demand line of credit facility issued by
Citibank N.A. in their favor, which credit line is secured by common stock of a
company not affiliated with the Company that is owned indirectly by the
Reporting Persons through a corporation that they own and control.
ITEM 4. PURPOSE OF TRANSACTION.
As disclosed in Item 3 above, the Reporting Persons acquired
the Warrants that are exercisable for shares of Company Common Stock as part of
their subscription for Units pursuant to the terms and conditions of the
Securities Purchase Agreement. The Warrants are presently exercisable, in whole
or in part at any time prior to 5:30 p.m., New York time, on December 31, 2002
(the "Expiration Date"), for an aggregate of 1,000,000 shares of Common Stock
(the "Warrant Stock") at a purchase price per share of $0.75 (the "Warrant
Price"). The number of shares of Warrant Stock and the Warrant Price are subject
adjustment upon the occurrence of specified events, as provided in Section 4 of
the Warrants. The Senior Notes issued by the Company and the Subsidiary Obligors
(i) bear interest at a rate of 12% per annum, payable monthly on the last day of
each month, commencing April 30, 1997, and at the Maturity Date (as hereinafter
defined), (ii) are due and payable on June 30, 1997, subject to extension until
a date not later than September 30, 1997 at the option of a majority-in-interest
of the holders of all Senior Notes (the "Maturity Date"), (iii) are subject to
mandatory prepayment in the event that the Company sells its equity securities
or debt securities convertible or exchangeable for equity securities of the
Company to institutional and other investors and the aggregate cash net proceeds
Page 5 of 99 Pages
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of such sale of securities equals or exceeds $4,000,000 (the "Institutional
Offering") and (iv) are convertible at the option of the holder thereof at any
time after the Trigger Date (as hereinafter defined) and on or before the close
of business on October 31, 1997, into such number of shares of Common Stock of
the Company, obtained by dividing the aggregate face amount of the Senior Note
by the lesser of (A) the price per share of the Common Stock of the Company (or
other of equity securities or debt securities of the Company convertible or
exchangeable for equity securities of the Company) that are sold in the
Institutional Offering or (B) $0.75, in the event that the Senior Note has not
been paid in full on or before the 30th day after the completion of the
Institutional Offering or September 30, 1997, whichever is earlier (the "Trigger
Date"). In addition, the Senior Notes (x) bear interest at a default rate of
interest equal to the lower of (A) 5% per annum in excess of the current
applicable interest rate and (B) the highest permissible legal rate, during any
period of default under the Senior Notes, and (y) bear interest payable in
shares of Common Stock of the Company ("PIK Stock Interest") equal to an
incremental rate of 1% of the principal amount of such Senior Note (not
compounded) for each one month period such Senior Note is outstanding after July
31, 1997 up to an aggregate maximum rate of 12%, in the event such Senior Note
has not been paid in full on or before October 31, 1997. The purpose of the
acquisition of the Units and the consummated of the transactions pursuant to the
Securities Purchase Agreement was to provide bridge financing to the Company in
anticipation of equity financing.
The Warrants issued to the Reporting Persons that are
exercisable for an aggregate of 1,000,000 shares (subject to adjustment as
provided therein) of Company Common Stock were acquired by such Reporting
Persons primarily for investment purposes, but also with a view towards
influencing management.
As further described in Item 6 below, contemporaneously with
the execution and delivery of the Securities Purchase Agreement, Ziegler entered
into a consulting and engagement agreement with the Company, and with Jay D.
Haber, President of the Company ("Haber"), as to paragraph 1 thereof (the
"Consulting Agreement"). Pursuant to the terms of the Consulting Agreement, (i)
upon any request by Ziegler, the Company and Haber shall use their best efforts
to cause Ziegler to be elected as a director of the Company so long as Ziegler
and/or any person or entity controlled by or affiliated with Ziegler shall hold
at least 3% (on a fully diluted basis, including holdings of debt which may be
converted into equity securities and warrants to purchase equity securities) of
the equity securities of the Company and (ii) in the event that Ziegler serves
as an independent, outside director of the Company, the Company shall grant to
Ziegler non-qualified stock options to purchase an aggregate of 50,000 shares of
Common Stock of the Company.
The Securities Purchase Agreement further provides that in the
event the Senior Notes shall not have been paid in full on or before October 31,
1997, and the holders of the Senior Notes shall have received or then be
entitled to receive PIK Stock Interest, the majority-in-interest of the holders
of Senior Notes may, but need not, designate an individual to serve as a
director of the Company, for so long as such holders shall receive or be
entitled to receive PIK Stock Interest; provided, however, that the
majority-in-interest of the holders of Senior Notes shall not be entitled to
designate an individual to serve as a director of the Company pursuant to
Page 6 of 99 Pages
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any provision of the Securities Purchase Agreement or the Senior Notes to the
extent, or during any period of time, that Ziegler is already serving as a
director of the Company pursuant to the exercise of any right contained in the
Consulting and Engagement Agreement.
Although there is no present intention to do so, either of the
Reporting Persons may decide to make additional purchases of Common Stock in the
future either in the open market or in private transactions, subject to their
evaluation of the Company's business, prospects and financial condition, the
market for the Common Stock, other opportunities available to the Reporting
Persons, prospects for the respective business' of the Reporting Persons,
general economic conditions, money and stock market conditions and other future
developments.
Depending upon the results of the reviews and the other
factors mentioned above, either one of the Reporting Persons, at any time, may
decide to change his intention with respect to the acquisition and/or retention
of shares of Common Stock, including, without limitation, a determination to
increase, decrease or entirely dispose of its holdings of Common Stock (or
common stock equivalents, as the case may be), although, except for the possible
acquisition of the options to acquire Common Stock that may be granted to
Ziegler under the terms of the Consulting Agreement in the event that he elects
to become a director of the Company, or any Common Stock that may be issued by
the Company to any Reporting Person under the terms of the Senior Notes (whether
as PIK Stock Interest or pursuant to any exercise of the conversion rights
thereunder) as described above, neither of the Reporting Persons has any current
intention to do so.
Either of the Reporting Persons may also approach members of
the Company's management in connection with the foregoing and/or any other
matter enumerated in clauses (a) through (j) of Item 4 of Schedule 13D and/or
Ziegler, in the event that he becomes a director of the Company upon an exercise
of the option contained in the Consulting Agreement, may seek to influence the
management of the Company in such capacity as a director of the Company.
The descriptions of the Securities Purchase Agreement, the
Senior Notes, the Warrants and the Consulting Agreement (inclusive of the other
agreements which are exhibits thereto) contained in this Item 4 are summaries
and are subject to and qualified in their entirety by reference to the detailed
provisions of the Securities Purchase Agreement, the Form of Senior Note, the
Form of Warrant and the Consulting Agreement, copies of which are attached
hereto as Exhibits II, III, IV and VI, respectively, and incorporated herein by
reference.
Except as discussed above in this Item 4 (inclusive of the
provisions of the documents incorporated herein by reference), neither of the
Reporting Persons has any current plans or proposals which relate to or would
result in the occurrence of any actions or events specified in clauses (a)
through (j) of Item 4 of Schedule 13D.
Page 7 of 99 Pages
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The aggregate number and percentage of shares of Common
Stock beneficially owned by the Reporting Persons named in Item 2 above are as
follows:
The aggregate number and percentage of the Common Stock which
are owned beneficially by Webster on the date hereof are 500,000 shares of
Common Stock, or approximately 9.2% of the 5,453,288 shares of Common Stock
issued and outstanding as of April 28, 1997 (assuming the exercise of the
Warrants to acquire 500,000 shares of Common Stock owned by Webster).
The aggregate number and percentage of the Common Stock which
are owned beneficially by Ziegler on the date hereof are 500,000 shares of
Common Stock, or approximately 9.2% of the 5,453,288 shares of Common Stock
issued and outstanding as of April 28, 1997 (assuming the exercise of the
Warrants to acquire 500,000 shares of Common Stock owned by Ziegler).
Notwithstanding the foregoing, if Webster and Ziegler are
deemed to constitute a "group" within the meaning of Section 13(d)(3) and Rule
13d-5(b) by virtue of their action in concert in connection with the acquisition
of Warrants to acquire an aggregate of 1,000,000 shares of Common Stock pursuant
to the Securities Purchase Agreement, then each of Webster and Ziegler may be
deemed to beneficially own an aggregate of 1,000,0000 shares of Company Common
Stock, or approximately 16.8% of the 5,953,288 shares of Common Stock issued and
outstanding (assuming the exercise of the Warrants to acquire an aggregate of
1,000,000 shares of Common Stock owned by Webster and Ziegler). Each of Webster
and Ziegler expressly disclaims beneficial ownership of the shares of Common
Stock issuable upon the exercise of the Warrants owned of record by the other.
The foregoing aggregate number and percentage of the Common
Stock beneficially owned by the Reporting Persons as of the date hereof does not
include any shares of Common Stock that Ziegler may hereafter have the right to
acquire pursuant to any options that may be granted to him under the Consulting
Agreement or any shares of Common Stock that may be issued to either Reporting
Person pursuant to the terms of the Senior Notes (whether as PIK Stock Interest
or upon any conversion of the principal amount of the Senior Notes), as any such
rights to acquire shares of Common Stock pursuant to the Consulting Agreement or
the Senior Notes are not presently exercisable and either may not be exercisable
within 60 days of the date hereof or are contingent upon the occurrence of
events not within the control of either of the Reporting Persons and which may
or may not occur within 60 days of the date hereof, as the case may be.
(b) With respect to each person named in response to paragraph
(a) of this Item 5 of Schedule 13D, set forth below are the number of shares of
Common Stock as to which there is sole power to vote or to direct the vote,
shared power to vote or direct the vote, and sole or shared power to dispose or
direct the disposition:
Page 8 of 99 Pages
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Assuming the exercise of the Warrants owned by Webster,
Webster has sole power to vote (and direct the vote of) and to dispose of (and
direct the disposition of) the 500,000 shares of Common Stock issuable upon
exercise of such Warrants.
Assuming the exercise of the Warrants owned by Ziegler,
Ziegler has sole power to vote (and direct the vote of) and to dispose of (and
direct the disposition of) the 500,000 shares of Common Stock issuable upon
exercise of such Warrants.
In addition, notwithstanding the foregoing, if Webster and
Ziegler are deemed to constitute a "group" within the meaning of Section
13(d)(3) and Rule 13d-5(b) by virtue of their action in concert in connection
with the acquisition of the Units (inclusive of the Warrants) pursuant to the
Securities Purchase Agreement, then (i) Webster may be deemed to share with
Ziegler the power to vote (and direct the vote of) and to dispose of (and direct
the disposition of) the 500,000 shares of Common Stock issuable upon the
exercise of the Warrants owned of record by Ziegler and (ii) Ziegler may be
deemed to share with Webster the power to vote (and direct the vote of) and to
dispose of (and direct the disposition of) the 500,000 shares of Common Stock
issuable upon the exercise of the Warrants owned of record by Webster. Each of
Webster and Ziegler expressly disclaims beneficial ownership of the shares of
Common Stock issuable upon the exercise of the Warrants owned of record by the
other.
(c) Except for the acquisition of the Warrants to purchase an
aggregate of 1,000,000 shares of Common Stock by Webster and Ziegler pursuant to
the terms of the Securities Purchase Agreement disclosed in response to Items 3
and 4 above, during the past 60 days, neither of the Reporting Persons has
effected any transaction in the Common Stock. See Items 3 and 4 above and
subsection (a) and (b) of this Item 5 for further details in connection with the
acquisition of the Warrants to purchase shares of Common Stock pursuant to the
Securities Purchase Agreement.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
As previously disclosed in Item 4 above, the Reporting Persons
are (i) parties to the Securities Purchase Agreement, which provided for the
sale and issuance of the Units (inclusive of the Warrants) to the Reporting
Persons (ii) holders of the Senior Notes, which provide for the issuance to the
holders of shares of Common Stock under certain circumstances (whether as PIK
Stock Interest or upon conversion of the principal amount thereof) more fully
described therein and in Item 4 above and (iii) holders of the Warrants which
are exercisable for an aggregate of 1,000,000 shares of Common Stock. See Item 4
above for further details with respect to the provisions of the Securities
Purchase Agreement, the Senior Notes and the Warrants.
Page 9 of 99 Pages
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Contemporaneously with the execution and delivery of the
Securities Purchase Agreement, the Company entered into the Consulting Agreement
with Ziegler. The Consulting Agreement provides that in consideration of certain
strategic planning and other consulting services to be provided to the Company
and its subsidiaries by Ziegler, as determined from time to time by Ziegler and
the President of the Company, Ziegler shall be paid a quarterly consulting fee
(the "Consulting Fee") equal to one half of 1% of the total investment made by
Ziegler and certain other persons in debt and equity securities of the Company
that is outstanding as of the end of each quarter during the three year term of
such agreement. The Consulting Fee is to be paid quarterly in arrears on the
last business day of March, June, September and December, commencing on
September 30, 1997. The Consulting Agreement further provides that in the event
that Ziegler serves as an independent, outside director of the Company, the
Company shall grant to Ziegler non-qualified stock options to purchase an
aggregate of 50,000 shares of Common Stock of the Company, which stock options
(i) shall not (A) be subject to any vesting requirements or other conditions or
(B) expire on Ziegler's ceasing to serve as a director of the Company or a
consultant thereunder, and (ii) shall (A) be freely transferable (subject to
applicable federal and state securities laws), (B) have a five year exercise
period, (C) have an exercise price of $0.75 and (D) otherwise be on such terms
and conditions reasonably satisfactory to Ziegler.
In addition, contemporaneously with the execution and delivery
of the Securities Purchase Agreement, the Company and the Reporting Persons
entered into a Registration Rights Agreement (the "Registration Rights
Agreement"), that requires the Company, upon the occurrence of certain events,
to register for resale under the Securities Act of 1933, as amended (the
"Securities Act"), the shares of Company Common Stock owned or to be owned
(whether pursuant to any exercise of the Warrants, issuance of PIK Stock
Interest under the Senior Notes, conversion of the principal amount of the
Senior Notes, or otherwise acquired) by the Reporting Persons, their affiliates
or permitted transferees of the Warrants or Senior Notes.
The descriptions of the Securities Purchase Agreement, the
Senior Notes, the Warrants, the Registration Rights Agreement and the Consulting
Agreement contained in this Item 6 are summaries and are subject to and
qualified in their entirety by reference to the detailed provisions of the
Securities Purchase Agreement, the Form of Senior Note, the Form of Warrant, the
Registration Rights Agreement and the Consulting Agreement, copies of which are
attached hereto as Exhibits II, III, IV, V and VI, respectively, and
incorporated herein by reference.
Except as discussed in this Item 6 and in Item 4 above (in
each case, inclusive of the provisions of the documents incorporated herein by
reference), neither of the Reporting Persons is a party to any contract,
arrangement, understanding or relationship (legal or otherwise) among the
Reporting Persons named in Item 2 above or between any such Reporting Persons
and any other person with respect to any securities of the Company, including,
without limitation, those relating to the transfer or voting of any securities,
finder's fees, joint ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or loss, the giving or withholding of
proxies, the pledge of securities or any other arrangement involving a
contingency the occurrence of which would give another person voting power or
investment power over such securities.
Page 10 of 99 Pages
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
I. Group Filing Agreement referred to in the Introduction.
II. Securities Purchase Agreement referred to in Items 3, 4, 5 and 6.
III. Form of Senior Note referred to in Items 3, 4 and 6.
IV. Form of Warrant referred to in Items 3, 4, 5 and 6.
V. Registration Rights Agreement referred to in Item 6.
VI. Consulting Agreement referred to in Items 4 and 6.
Page 11 of 99 Pages
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SIGNATURE
After reasonable inquiry and to the best knowledge and belief
of the undersigned, each of the undersigned hereby certifies that the
information set forth in this statement is true, complete and correct.
Dated: May 2, 1997 /s/ STEVEN A. WEBSTER
-------------------------- --------------------------------
Steven A. Webster, Individually
Dated: May 2, 1997 /s/ WILLIAM R. ZIEGLER
-------------------------- --------------------------------
William R. Ziegler, Individually
Page 12 of 99 Pages
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page No.
- ------ ----------- --------
<S> <C> <C>
I Schedule 13D Group Filing Agreement dated April 30, 1997 among 14
Steven A. Webster and William R. Ziegler
II Securities Purchase Agreement dated as of April 25, 1997, among 15
Geokinetics Inc. and each of Steven A. Webster and William R.
Ziegler
III Form of Senior Note issued by Geokinetics Inc., Geokinetics 56
Production Co., Inc., Geoscience Software Solutions, Inc. and HOC
Operating Co., Inc. in favor of each of the Purchasers of the Units
IV Form of Warrant issued by Geokinetics Inc. in favor of each of the 67
Purchasers of the Units
V Registration Rights Agreement dated as of April 25, 1997, among 78
Geokinetics Inc., Steven A. Webster and William R. Ziegler
VI Consulting Agreement dated April 25, 1997, between Geokinetics Inc. 96
and William R. Ziegler and agreed to as to paragraph 1 thereof by Jay
D. Haber
</TABLE>
Page 13 of 99 Pages
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EXHIBIT I
SCHEDULE 13D GROUP FILING AGREEMENT
AGREEMENT by and between Steven A. Webster, an individual
("Webster") and William R. Ziegler, an individual ("Ziegler"), whereby each of
them agrees to jointly file a statement on Schedule 13D with the Securities and
Exchange Commission (the "Commission"), pursuant to Section 13D of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
and regulations promulgated by the Commission thereunder, in connection with
their acquisition of certain Units (inclusive of warrants to purchase shares of
common stock) of Geokinetics Inc. (the "Company"), pursuant to the terms and
conditions of that certain Securities Purchase Agreement dated as of April 25,
1997 by and among the Company, Webster and Ziegler, and any required amendments
thereto, and that such Schedule 13D (inclusive of any amendments thereto) with
respect to the beneficial ownership of shares of common stock of the Company,
shall be deemed to be filed on behalf of each of them.
IN WITNESS WHEREOF, each of the undersigned have executed this
Agreement as of the 30th day of April, 1997.
/s/ STEVEN A. WEBSTER
---------------------------------
Steven A. Webster, Individually
/s/ WILLIAM R. ZIEGLER
---------------------------------
William R. Ziegler, Individually
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EXHIBIT II
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GEOKINETICS INC.
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SECURITIES PURCHASE AGREEMENT
Dated as of April 25, 1997
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UNITS
consisting of
SENIOR NOTES
and
WARRANTS
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TABLE OF CONTENTS
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ARTICLE I
THE UNITS: PURCHASE AND SALE OF UNITS
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1.1 Authorization and Description of the Units.............................................1
1.2 Sale and Purchase of the Units.........................................................1
1.3 Closing................................................................................2
1.4 Application of Proceeds................................................................2
1.5 Conditions of Closing..................................................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization, Authority and Capitalization of the Company; Stock Ownership.............4
2.2 Subsidiaries...........................................................................5
2.3 Qualification; Enforceability..........................................................5
2.4 Business and Property; Financial Statements............................................6
2.5 Compliance with Laws, Other Instruments; No Conflicts, etc.............................6
2.6 Consents and Approvals.................................................................7
2.7 Litigation.............................................................................7
2.8 Security Interests.....................................................................7
2.9 Private Offering.......................................................................8
2.10 No Defaults; Debt, etc; Liens..........................................................8
2.11 Full Disclosure........................................................................8
2.12 Environmental Matters..................................................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
3.1 Investment Representation.............................................................10
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ARTICLE IV
COVENANTS
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4.1 Financial Statements; Information.....................................................12
4.2 Certain Restrictions..................................................................14
4.3 Maintenance of Office.................................................................14
4.4 Corporate Existence...................................................................15
4.5 Compliance with Laws; Government Filings..............................................15
4.6 Environmental Matters.................................................................15
4.7 Certain Contracts.....................................................................15
ARTICLE V
EVENTS OF DEFAULT
5.1 Events of Default.....................................................................16
5.2 Appointment of Director...............................................................17
ARTICLE VI
MISCELLANEOUS
6.1 Expenses..............................................................................17
6.2 Reliance on and Survival of Representations...........................................18
6.3 Amendment and Waiver..................................................................18
6.4 Register..............................................................................19
6.5 Directly or Indirectly................................................................20
6.6 Successors and Assigns................................................................20
6.7 Notices...............................................................................20
6.8 LAW GOVERNING.........................................................................20
6.9 SUBMISSION TO JURISDICTION; Service of Process........................................21
6.10 Headings, etc.........................................................................22
6.11 Entire Agreement......................................................................22
6.12 WAIVER OF TRIAL BY JURY...............................................................22
6.13 No Waiver.............................................................................22
6.14 Applicable Interest Rate..............................................................23
6.15 Indemnification.......................................................................23
6.16 Interpretive Provision................................................................24
6.17 Severability..........................................................................24
6.18 Counterparts..........................................................................24
6.19 Finder's Fee..........................................................................24
6.20 Pari Passu Rights.....................................................................25
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Schedules:
Schedule 1.2 Purchasers
Schedule 1.4 Use of Proceeds
Schedule 1.5(d) Subordinated Lenders
Schedule 2.1(b) Capitalization of the Company
Schedule 2.1(c) Capitalization of the Subsidiaries
Schedule 2.5 Noncontravention
Schedule 2.6 Required Consents
Schedule 2.7 Litigation
Schedule 2.8 Collateral and Prior Security Interests
Schedule 2.10 Debts; Liens
Exhibits:
Exhibit A Form of Senior Note
Exhibit B Form of Warrant
Exhibit C Form of Consulting and Engagement Agreement
Exhibit D Form of Opinion of Company Counsel
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Pledge Agreement
Exhibit G-1 Form of Deed of Trust (re Lien Junior to Input/Output)
Exhibit G-2 Form of Deed of Trust (re Lien Junior to Harbin/Murphy
Entities)
Exhibit G-3 Form of Deed of Trust (re First Lien)
Exhibit H Form of Personal Property Security Agreement
Exhibit I Form of Subordination Agreement
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of April 25,
1997, between GEOKINETICS INC., a Delaware corporation, and each of the
PURCHASERS who have executed this Agreement.
WHEREAS, the capitalized terms used herein have the meaning
given to such terms in Appendix I; and
WHEREAS, the Company has authorized the issuance of and wishes
to sell to each Purchaser the number of Units set forth opposite such
Purchaser's name in Schedule 1.2; and
WHEREAS, each Purchaser wishes to purchase the number of Units
set forth opposite such Purchaser's name in Schedule 1.2, subject to the terms
and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and upon the terms and conditions hereinafter set forth, the
Company and each Purchaser, intending to be mutually bound, agree as follows:
ARTICLE I
THE UNITS: PURCHASE AND SALE OF UNITS
1.1 Authorization and Description of the Units.
(a) The Company has authorized the issuance and sale of 500
Units, consisting of Senior Notes in the aggregate principal amount of $500,000
and Warrants to purchase an aggregate of 1,000,000 shares of Common Stock. Each
Senior Note shall be in the form of Exhibit A attached hereto and each Warrant
in the form of Exhibit B attached hereto, in each case with such appropriate
insertions therein to reflect the number of Units so purchased and the date of
the purchase.
(b) The Senior Notes shall be entitled to the benefits of
certain security described in the Security Agreements.
1.2 Sale and Purchase of the Units.
The Company will sell to each of the Purchasers and each
Purchaser severally will purchase from the Company, subject to the terms and
conditions of this Agreement and in reliance on the representations, warranties
and covenants of the Company and the Subsidiary
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Obligors contained herein and in the Exhibits hereto, such number of Units as
are set forth in Schedule 1.2, at the purchase price set forth in Schedule 1.2.
1.3 Closing.
The initial sale and purchase of Units shall take place on the
date hereof (the "Closing") at the offices of Parson & Brown, 666 Third Avenue,
9th Floor, New York, New York 10017. At the Closing the Company will deliver to
each Purchaser one or more Senior Notes and one or more Warrants in the
aggregate amount to be purchased by each Purchaser, each dated the date of the
Closing and registered in the name of such Purchaser, against delivery by each
Purchaser of the purchase price therefor by check or wire transfer of such
purchase price to such account as the Company shall designate. The failure of
any Purchaser to deliver such purchase price shall not excuse any other
Purchaser from delivery of his purchase price. If any Purchaser shall fail to
deliver such purchase price at the Closing but within ten Business Days
thereafter shall tender such Purchase Price to the Company, the Company shall
deliver to such Purchase the Senior Notes and Warrants, dated the actual date of
delivery.
1.4 Application of Proceeds.
The Company shall apply the proceeds from the sale of the
Units as set forth in the Schedule 1.4 attached hereto.
1.5 Conditions of Closing.
Each Purchaser's obligations to purchase and pay for the Units
to be purchased by him is subject to satisfaction, prior to or simultaneously
with the closing, of the following conditions:
(a) The Company shall have delivered (i) a certificate of the
Vice President of the Company, dated the Closing Date, certifying that the
representations and warranties of the Company contained in this Agreement and
any Exhibit to which the Company is a party are true and correct in all material
respects and that the Company has performed in all material respects all
agreements and complied with all conditions contained in this Agreement and in
any Exhibit to which it is a party that are required to be performed or complied
with on or before the Closing Date and (ii) a certificate of the Vice President
of each Subsidiary Obligor, dated the Closing Date, certifying that the
representations and warranties of such Subsidiary Obligor contained in any
Exhibit to which such Subsidiary Obligor is a party are true and correct in all
material respects and that such Subsidiary Obligor has performed in all material
respects all agreements and complied with all conditions contained in any
Exhibit to which it is a party that are required to be performed or complied
with on or before the Closing Date.
(b) The Company shall have delivered (i) a certificate of the
Secretary of the Company, dated the Closing Date, certifying as to (A) the
certificate of incorporation of the Company and any amendments thereto, (B) the
by-laws of the Company, and (C) resolutions of the Board of Directors of the
Company authorizing the execution and delivery of the Senior
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Notes, the Warrants, this Agreement and all Exhibits to which the Company is a
party and reserving for issuance such number of shares of Common Stock as is
required to deliver shares of Common Stock upon exercise of rights therefor as
provided in the Senior Notes and the Warrants and (ii) a certificate of the
Secretary of each of the Subsidiary Obligors, dated the Closing Date, certifying
as to (A) the certificate of incorporation of such Subsidiary Obligor and any
amendments thereto, (B) the by-laws of such Subsidiary Obligor, and (C)
resolutions of the Board of Directors of such Subsidiary Obligor authorizing the
execution and delivery of the Senior Notes and all Exhibits to which such
Subsidiary Obligor is a party.
(c) The Company shall have delivered to the Purchasers each of
the following documents, instruments or certificates: (i) a copy of the
Harbin/Murphy Extension, Waiver and Standstill Agreement, duly executed by each
of the Harbin/Murphy Entities; and (ii) a copy of the I/O Extension, Waiver and
Standstill Agreement, duly executed by Input/Output, Inc.
(d) The Company, the Subsidiary Obligors and each of the
parties listed on Schedule 1.5(d) attached hereto shall have executed and
delivered to the Purchasers the Subordination Agreement.
(e) The Company and the Subsidiary Obligors shall have
executed and delivered the Security Agreements to which it is a party.
(f) The Company shall have executed and delivered to the
Purchasers the Registration Rights Agreement and the Consulting and Engagement
Agreement.
(g) Each of the other Exhibits hereto shall have been executed
and delivered to the Purchasers by the parties thereto.
(h) Financing statements on Form UCC-1 relating to the
Collateral shall have been executed and delivered to the Purchasers by the
Company and the Subsidiary Obligors for filing in those jurisdictions identified
by counsel for the Purchasers.
(i) Chamberlain, Hrdlicka, White, Williams & Martin, counsel
for the Company, shall have delivered to the Purchasers the Opinion of Company
Counsel.
(j) All proceedings taken in connection with the
authorization, issuance and sale of the Units and the consummation of the
transactions contemplated hereby to occur on or prior to the Closing and all
documents and papers relating thereto shall be satisfactory in form, scope and
substance to the Purchasers and their counsel, and each Purchaser and their
counsel shall have received copies (executed or certified as may be appropriate)
of such documents and papers as each may reasonably request in connection
therewith.
(k) The Company shall have paid the reasonable legal fees and
other expenses of the Purchasers' counsel and all other expenses for which the
Company is obligated to pay pursuant to Section 6.1 and for which the Company
shall have received invoices on or prior to the closing.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as follows:
2.1 Organization, Authority and Capitalization of the
Company; Stock Ownership.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own or hold under lease the
Collateral and the other property it purports to own or hold under lease, to
carry on its business as now conducted, to enter into this Agreement and the
other Exhibits to which it is or is to be a party, to issue and sell the Units
(including the Senior Notes and the Warrants), to perform its obligations under
this Agreement, the Units (including the Senior Notes and the Warrants), and the
other Exhibits to which it is or is to be a party and to consummate the
transactions contemplated hereby and thereby. The Company has, by all necessary
corporate action (no action of stockholders of the Company being required by
law, by its charter or by-laws, or otherwise in connection therewith), duly
authorized the execution and delivery of this Agreement, the Units (including
the Senior Notes and the Warrants), and the other Exhibits to which it is or is
to be a party, the performance of its obligations hereunder and thereunder and
the consummation of the transactions contemplated hereby and thereby.
(b) Schedule 2.1(b) sets forth the authorized capital stock of
the Company. All such authorized capital stock has been duly and validly
authorized, and either are, or will be when issued, duly and validly issued and
outstanding and are, or will be, fully paid and nonassessable. Such capital
stock is not subject to any rights (either preemptive or otherwise) or warrants
to subscribe for or to purchase, nor any options for the purchase of, nor any
agreements providing for the issue (contingent or otherwise) of, nor any calls,
commitments or claims of any character relating thereto or any stock or
securities convertible into or exchangeable for any capital stock, other than as
set forth in Schedule 2.1(b). All securities of the Company have been issued in
compliance with the Securities Act and applicable state securities laws. The
shares of Common Stock that will be issuable pursuant to the Senior Notes and
the Warrants in the manner referred to in the Senior Notes and the Warrants have
been duly authorized and reserved for issuance, are not subject to any
preemptive or similar rights on the part of the holders of any shares of capital
stock or other securities of the Company, and when issued in the manner referred
to in the Senior Notes and the Warrants will be validly issued, fully paid and
nonassessable.
(c) Schedule 2.1(c) sets forth the authorized, issued and
outstanding capital stock of each Subsidiary, including the record ownership
thereof, and the ownership interests of the Company (direct and indirect), in
any other Person. There are no liens on any capital stock of any Subsidiary or
on the Company's ownership interests in any other Person, except as set forth
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in Schedule 2.1(c). There are no outstanding rights, options, warrants,
conversion rights or agreements for the purchase or acquisition from the Company
or any Subsidiary of any shares of capital stock of any Subsidiary or any other
securities convertible into or exchangeable for any shares of capital stock of
any Subsidiary, except as set forth in Schedule 2.1(c).
2.2 Subsidiaries.
(a) Each of the Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority to own or hold
under lease the Collateral and other property it purports to own or hold under
lease, and to carry on its business as conducted by it.
(b) Each of the Subsidiary Obligors has all requisite
corporate power and authority to issue the Senior Notes, to enter into the
Security Agreements and any other Exhibit to which it is or is to be a party, to
perform its obligations under the Senior Notes and under the Security Agreements
and other Exhibits to which it is or is to be a party and to consummate the
transactions contemplated thereby. Each Subsidiary Obligor has, by all necessary
corporate action (no action of stockholders of the Subsidiary Obligor being
required by law, by its charter or by-laws, or otherwise in connection
therewith), duly authorized the execution and delivery of the Senior Notes and
the other Exhibits to which it is or is to be a party, the performance of its
obligations thereunder and the consummation of the transactions contemplated
thereby.
2.3 Qualification; Enforceability.
(a) Each of the Company and each Subsidiary is duly qualified
or licensed and in good standing as a foreign corporation duly authorized to do
business in each jurisdiction in which the nature of the activities or the
character of the properties owned or leased makes such qualification or
licensing necessary, except for jurisdictions in which the failure to be so
qualified would not have a Material Adverse Effect.
(b) This Agreement, the Security Agreements, the Senior Notes,
the Warrants and the other Exhibits hereto have been (or at the Closing will be,
as the case may be) duly executed and delivered by the Company and the
Subsidiary Obligors that are a party thereto, and, assuming due execution and
delivery by the Purchasers of this Agreement and the Exhibits that require
execution by the Purchasers, constitute (or upon execution and delivery at the
Closing, will constitute) the legal, valid and binding obligations of the
Company and the Subsidiary Obligors, as the case may be, enforceable against the
Company and the Subsidiary Obligors, as the case may be, in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect relating to or affecting the enforcement of
creditors' rights generally or by the application of equitable principles
(whether such application is considered in equity or in law).
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2.4 Business and Property; Financial Statements.
The Company has furnished to each Purchaser a true and
complete copy of the Unit Offering Disclosure Documents. The Unit Offering
Disclosure Documents correctly describe in all material respects the business
and material properties of the Company and its Subsidiaries and the nature of
their operations as of the date thereof. The Financial Statements included in
the Unit Offering Disclosure Documents, were prepared in accordance with GAAP,
applied on a consistent basis throughout the periods specified, and present
fairly in all material respects the financial position of the Company and its
Subsidiaries for the respective periods specified. Except as specifically
described in the Financial Statements contained in the Unit Offering Disclosure
Documents, neither the Company nor any Subsidiary has as of the date thereof any
material liabilities, contingent or otherwise, which under GAAP are required to
be disclosed therein.
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc.
(a) Except as set forth in Schedule 2.5, neither the Company
nor any Subsidiary is (i) in violation of any term or provision of its corporate
charter or by-laws or (ii) in violation of or default under (A) any term or
provision of any agreement, indenture, mortgage, instrument, permit or license
to which it is a party or by which it or any of its properties may be bound or
affected or (B) to the Company's knowledge, any existing statute, law,
governmental rule, regulation or ordinance, or any order of any court,
arbitrator or Governmental Body applicable to it or its properties (including,
without limitation, any statute, law, rule, regulation, ordinance or order
relating to occupational health and safety standards, or equal employment
practice requirements), the consequences of which violation or default, either
in any one case or taken together with all other such violations or defaults,
(x) could have a Material Adverse Effect or (y) could materially and adversely
affect the ability of the Company or any Subsidiary Obligor to perform its
respective obligations under this Agreement, the Senior Notes, the Warrants or
any other Exhibit to which the Company or any Subsidiary Obligor is a party.
(b) Except as set forth in Schedule 2.5, neither the
execution, delivery or performance by the Company or any Subsidiary Obligor, as
the case may be, of thisAgreement, the Senior Notes or the Warrants (including,
without limitation, the issuance of Common Stock pursuant to the Senior Notes or
the Warrants), or any other Exhibit to which it is a party, nor compliance by
the Company or any Subsidiary Obligor with the respective terms hereof and
thereof, as the case may be, will result in (i) any violation of or be in
conflict with or constitute a default under (A) any term or provision of the
corporate charter or by-laws of the Company or any Subsidiary, (B) any term or
provision of any agreement, indenture, mortgage, instrument, permit or license
to which it is a party or by which it or any of its properties may be bound or
affected, or (C) to the Company's knowledge, any existing statute, law,
governmental rule, regulation or ordinance, or any order of any court,
arbitrator or Governmental Body applicable to it or its properties, or (ii) the
creation of (or impose any obligation on the Company or any Subsidiary to
create) any lien upon any of the properties or assets of the Company or any
Subsidiary, except for any liens in favor of the Purchasers pursuant to the
Security Agreements.
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2.6 Consents and Approvals.
Except for the Required Consents set forth in Schedule 2.6, no
consent, approval or authorization of, or filing or registration with, or the
taking of any other action in respect of, any Governmental Body or any other
Person (including any trustee or holder of any indebtedness, securities or other
obligations of the Company or any Subsidiary) is required (i) for or in
connection with the valid execution and delivery by the Company or any
Subsidiary Obligor of, or the performance by the Company or any Subsidiary
Obligor of any obligation under, this Agreement or any Exhibit to which it is a
party or the consummation by the Company or any Subsidiary Obligor of the
transactions contemplated hereby and thereby, including, without limitation, the
offer, issue, sale and delivery of the Senior Notes or the Warrants (including
without limitation, the issuance of stock pursuant to the Senior Notes or the
Warrants) or (ii) as a condition to the legality, validity or enforceability as
against the Company or any Subsidiary Obligor of this Agreement or any Exhibit
to which it is a party. The Company shall use all reasonable efforts to obtain
the Required Consents on or before the Closing. In the event of the failure of
the Company to receive the Required Consents within ten Business Days of the
date hereof, this Agreement shall terminate, except for the obligations of the
Company pursuant to Section 6.1.
2.7 Litigation.
Except as set forth on Schedule 2.7, there are no actions,
suits or proceedings pending (or, to the knowledge of the Company, threatened)
against the Company or any Subsidiary or affecting any of their respective
properties in any court or before any arbitrator of any kind or before or by any
Governmental Body, which (i) involve any of the Collateral or question the
validity or legality of this Agreement, the Senior Notes or the Warrants or any
other Exhibit or any action taken or to be taken pursuant hereto or thereto or
(ii) might result, either in any one case or in the aggregate, in (A) a material
impairment of the ability of the Company or any Subsidiary Obligor to perform
its obligations under this Agreement or any other Exhibit to which it is a
party, or (B) a Material Adverse Effect.
2.8 Security Interests.
Upon execution thereof and delivery of consideration therefor,
the Security Agreements will be effective to create in favor of the Purchasers
the legal, valid and continuing lien in the Collateral, and upon filings and
other actions set forth in the Opinion of Company Counsel, as described in
Section 1.5(i), a perfected security interest in the Collateral, prior and
superior to all other existing or future liens arising from any act of the
Company or any Subsidiary or of which the Company has knowledge, except to the
extent set forth on Schedule 2.8 hereto. The Collateral consists of (i) all
assets and properties of the Company and its Subsidiaries that as of the date
hereof are not, and as of the Closing Date will not be, subject to any security
interest in favor of any Person other than the Purchasers and (ii) all assets
and properties of the Company and its Subsidiaries that are subject to prior
security interests in favor of Persons other than the Purchasers pursuant to
documents or instruments that do not prohibit the granting of any junior lien or
security interest with respect to such assets and properties.
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2.9 Private Offering.
Neither the Company, any Subsidiary Obligor nor any other
person acting on behalf of the Company or any Subsidiary Obligor has taken, or
will take, any action which would subject the issuance or sale of the Units,
Senior Notes or Warrants to Section 5 of the Securities Act or to the
registration or qualification requirements of any securities law of the State of
New York or the State of Texas.
2.10 No Defaults; Debt, etc; Liens.
(a) Schedule 2.10 correctly lists (i) all secured and
unsecured funded debt of the Company and any Subsidiary and (ii) any liens on
any assets of the Company or any Subsidiary, in each case, as of the date
hereof. Upon receipt of any Required Consent, no default or event of default,
after giving effect to the issuance and sale of the Units and the consummation
of the other transactions contemplated by this Agreement and the Exhibits, will
exist (or, but for the waiver thereof, would exist) under any instrument or
agreement evidencing, providing for the issuance or securing of, or otherwise
relating to, any such debt or liens.
(b) There is no pending foreclosure with respect to the
Collateral or any other assets or properties of the Company or any Subsidiary,
and as of the Closing there will not be any pending foreclosure with respect
thereto, in each case, whether pursuant to the Harbin/Murphy Foreclosure Notices
or otherwise.
2.11 Full Disclosure.
None of this Agreement, any Exhibit, the Unit Offering
Disclosure Documents or any document, certificate or instrument delivered to the
Purchasers by or on behalf of the Company or any Subsidiary Obligor in
connection with the transactions contemplated by this Agreement as of their
respective dates contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances under which the same were made, not
misleading.
2.12 Environmental Matters.
(a) To the Company's knowledge, the Company and the
Subsidiaries hold all Environmental Permits required under all Environmental
Laws except to the extent failure to have any such Environmental Permit has not
had and will not have a Material Adverse Effect.
(b) To the Company's knowledge, the Company and the
Subsidiaries currently are, and at all times heretofore have been, in compliance
with all terms and conditions of all such Environmental Permits and all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in all applicable Environmental
Laws except to the extent failure to comply therewith, in any one case or in the
aggregate, has not had and will not have a Material Adverse Effect.
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(c) Neither any of the Company nor any Subsidiary has ever
received, and, to the Company's knowledge, no predecessor in interest of any the
Company and the Subsidiaries has ever received in respect of any of the Company
Premises, from any Governmental Body or other Person any written notice of, and
the Company has no knowledge of, any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans that could
reasonably be expected to interfere with or prevent compliance or continued
compliance in all material respects with the Environmental Permits referred to
in Section 2.12(a) or any scheduled renewals thereof or any Environmental Laws,
or that could reasonably be expected to give rise to any liability on the part
of any the Company and the Subsidiaries or otherwise form the basis of any
claim, action, demand, request, notice, suit, proceeding, hearing, study or
investigation (collectively, "Environmental Claims") involving any of the
Company and the Subsidiaries based on or related to (i) a violation of any
Environmental Law or (ii) the manufacture, refining, generation, processing,
distribution, use, sale, treatment, receipt, storage, disposal, transport,
arranging for transport or handling, or the emission, discharge, release or
threatened release into the environment, of any Hazardous Substance, other than
liabilities or Environmental Claims referred to in this Section 2.12(c) that
have not had and will not have, either in any one case or in the aggregate, a
Material Adverse Effect.
(d) To the Company's knowledge, there has not been any civil,
criminal or administrative action, suit, demand, summons, citation, claim,
hearing, notice or demand letter, information request, notice of violation,
judgment, order, lien, investigation, study or proceeding pending or threatened
against any of the Company or the Subsidiaries, or against any predecessor in
interest thereof, in its capacity as such, relating to any such Environmental
Permits or any scheduled renewals thereof or any Environmental Laws that has had
or will have, either in any one case or in the aggregate, a Material Adverse
Effect.
(e) To the Company's knowledge, (i) no part of the Company
Premises or, so far as is known to the Company, the area surrounding the Company
Premises is being used, or has been used at any time in the past, to
manufacture, generate, refine, process, distribute, use, sell, treat, receive,
store, dispose of, transport, arrange for transport of, handle, or conduct any
other activity involving any Hazardous Substance except in a manner that has
been in compliance in all material respects with all applicable Environmental
Laws and Environmental Permits and to an extent that has not had and will not
have a Material Adverse Effect; and (ii) neither the Company nor any Subsidiary
is conducting or has ever conducted any such activities anywhere else except in
a manner that has been in compliance in all material respects with all
applicable Environmental Laws and Environmental Permits and to an extent that
has not had and will not have a Material Adverse Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally as to himself, represents and
warrants as follows:
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3.1 Investment Representation. (a) The Purchaser of the Senior
Notes and of the Warrants hereby acknowledges that the Senior Notes and the
Warrants are not being registered (i) under the Securities Act of 1933, as
amended (the "Act") or (ii) under any applicable state securities law; and that
the Company's reliance on the Section 4(2) exemption of the Act and under
applicable state securities laws is predicated in part on the representations
hereby made to the Company in the Agreement.
(b) The Purchaser of the Senior Notes will not sell or
transfer all or any part of the Senior Notes unless and until he shall first
have given notice to the Company describing such sale or transfer and, if
requested by the Company, furnished to the Company either (a) an opinion,
reasonably satisfactory to counsel for the Company, of counsel skilled in
securities matters (selected by the Purchaser and reasonably satisfactory to the
Company) to the effect that the proposed sale or transfer may be made without
registration under the Act and without registration or qualification under
applicable state law, or (b) an interpretive letter from the Securities and
Exchange Commission to the effect that no enforcement action will be recommended
if the proposed sale or transfer is made without registration under the Act. The
Purchaser acknowledges that the Senior Notes and the Warrants (and upon any
exercise thereof, the certificates representing the Common Stock) subscribed for
hereby will bear a legend restricting transfer thereof as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN
ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION
OR QUALIFICATION PROVISIONS OF FEDERAL AND STATE SECURITIES
LAWS BASED, IN PART, ON AN INVESTMENT REPRESENTATION OF THE
PART OF THE PURCHASER THEREOF. THESE SECURITIES MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED
WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM."
(c) The Company may refuse to recognize a transfer of the
Senior Notes or the Warrants on its books should a Purchaser attempt to transfer
the Senior Notes or the Warrants otherwise than in compliance with this Section
3.1.
(d) The Purchaser has adequate means of providing for his
current needs and possible personal contingencies, he anticipates no need now or
in the foreseeable future to sell the Senior Notes or the Warrants (or upon any
exercise thereof, the Common Stock) which he is purchasing and he can afford the
loss of his entire investment in the Company.
(e) If an individual, the Purchaser either
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(i) has a net worth or joint net worth with spouse which exceeds
$1,000,000; or
(ii) has had an individual income in excess of $200,000 in each of
1995 and 1996 or joint income with spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the same income
level in 1997.
(f) The Purchaser has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of investment in the Company and of making an informed investment
decision.
(g) Each Purchaser will be the only owner, beneficial or
otherwise, of the Senior Notes and the Warrants (and upon any exercise thereof,
the Common Stock) being purchased by the Purchaser hereunder.
(h) The Purchaser has received and read and is familiar with
the Unit Offering Disclosure Documents and confirms that all documents, records
and books pertaining to his proposed investment in the Company have been made
available to him. The Purchaser is aware that no federal or state agency has
passed upon the Senior Notes, the Warrants or the Common Stock or made any
finding or determination concerning the fairness of the investment represented
thereby.
(i) The Purchaser had an opportunity to ask questions of and
receive answers from representatives of the Company concerning the terms and
conditions of this investment, and all such questions have been answered to the
full satisfaction of the Purchaser. The Purchaser understands that no person
other than the Company has been authorized to make any representation or
warranty other than as contained herein (inclusive of the Exhibits hereto) or in
the Unit Offering Disclosure Documents and, if made, such representation may not
be relied on unless it is made in writing and signed by the Company. The Company
has not rendered any investment or tax advice to the Purchaser with respect to
the suitability of an investment in the Senior Notes and the Warrants (and upon
any exercise thereof, the Common Stock) or the tax consequences thereof. The
Company has urged each Purchaser to consult his own tax adviser concerning any
tax matters relating to this investment.
(j) The Senior Notes and the Warrants (and upon any exercise
thereof, the Common Stock) which Purchaser is acquiring will be acquired for his
own account for investment. The Purchaser intends to hold the Senior Notes and
the Warrants (and upon any exercise thereof, the Common Stock) indefinitely and
he is not purchasing such securities with a view toward distribution in a manner
which would require registration under the Securities Act, and he does not
presently have any reasons to anticipate any change in his circumstances or
other particular occasion or event which would cause him to sell, the Senior
Notes and the Warrants (or upon any exercise thereof, the Common Stock) which he
is purchasing hereunder, subject, nevertheless, to any requirement of law that
the disposition of his property shall at all times be within his control.
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(k) The Purchaser acknowledges that it has been called to his
attention both in the Unit Offering Disclosure Documents and by those
individuals with whom he has dealt in connection with his investment in the
Company that his investment in the Company involves a high degree of risk.
(1) The Purchaser has received no representations or
warranties from the Company other than those contained herein (inclusive of the
Exhibits hereto) or in the Unit Offering Disclosure Documents or otherwise
furnished in writing and signed by the Company.
(m) The Purchaser, if a corporation, partnership, trust or
other form of business entity: is authorized and otherwise duly qualified to
purchase and hold the Senior Notes and the Warrants (and upon any exercise
thereof, the Common Stock) and to enter into this Agreement and the Exhibits
hereto to which it is a signatory; represents that the purchase of the Senior
Notes and the Warrants (and upon any exercise thereof, the Common Stock) will
not result in a breach of or violation of the terms or provisions of, or
constitute a default under, the certificate of incorporation, by-laws, or other
charter document of such entity or any indenture or other agreement or
instrument by which the entity or its property is bound, or violate any
applicable law, administrative regulation, or court decree; and represents that
such entity has its principal place of business as set forth on its signature
page and that such entity has not been formed for the specific purpose of
acquiring the Senior Notes and the Warrants (or upon any exercise thereof, the
Common Stock). If the Purchaser is one of the aforementioned entities, it shall
supply any additional written information that may be required by the Company.
(n) All of the information that the Purchaser has heretofore
furnished or which is set forth in this Agreement and the Schedules and Exhibits
hereto with respect to his financial position and business status is correct and
complete as of the date of this Agreement and, if there should be any material
change in such information prior to the Closing, the Purchaser will immediately
furnish the revised or corrected information to the Company.
ARTICLE IV
COVENANTS
The Company, so long as any Senior Note shall be outstanding,
agrees to perform and comply with each of the following covenants.
4.1 Financial Statements; Information.
The Company shall furnish to each Holder of the Senior Notes
the following:
(a) Financial Information. The Company shall send, or cause to
be sent, to each Holder (i) its consolidated audited annual financial
statements, fairly and accurately presenting in all material respects the
financial condition and the results of operations and cash flows of the Company
and its Subsidiaries, prepared in accordance with GAAP, as soon as is
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practicable after the same have been issued but in any case within ninety days
of the end of its fiscal year, together with the report thereon by independent
public auditors as may be acceptable to the Majority-in-Interest, (ii) its
unaudited quarterly consolidated financial statements, of each of the first
three fiscal quarters of its fiscal year, fairly and accurately presenting in
all material respects the financial condition and the results of operations and
cash flows of the Company and its Subsidiaries, prepared in accordance with
GAAP, as soon as is practicable after the end of each fiscal quarter but in any
case within forty-five days of the end of its fiscal quarters, certified by its
duly authorized chief financial officer, together with a certificate signed by
its duly authorized chief executive officer or treasurer to the effect that,
based upon due inquiry and investigation, during such fiscal quarter no Event of
Default, or event which with the passing of time or giving of notice would
constitute an Event of Default, occurred, (iii) a copy of any monthly financial
report or statement of the Company and/or any of its Subsidiaries as may be
prepared by or for the directors of such company or for any other Person, as
soon as same is available, and (iv) such financial or other information relating
to the Company and its Subsidiaries or any of the transactions contemplated by
this Agreement, the Security Agreements or any Exhibit to which the Company or
any Subsidiary Obligor is a party, as may be reasonably requested by a
Majority-in-Interest of the Holders.
(b) Information Delivered to Creditors. Concurrently with the
furnishing thereof, copies of any statements, reports or documents relating to
the business or condition generally of the Company or any Subsidiary which are
furnished by the Company or any Subsidiary to any other holder of funded debt of
the Company or Subsidiary, or any notices which are so furnished, in each case
pursuant to the terms of any indenture, loan, credit or similar agreement and
not otherwise required to be furnished pursuant to any other clause of this
Section 4.1.
(c) Commission and Other Reports. Promptly upon their becoming
available (and in any event within five Business Days thereafter), copies of (i)
all financial statements, reports, notices, proxy statements and other
information sent or made available generally by the Company to any class of its
security holders (in their capacity as such) or by any Subsidiary to any class
of its security holders other than the Company or another Subsidiary, (ii) all
regular and periodic reports and all registration statements, forms and
prospectuses filed by the Company or any of its Subsidiaries with any securities
exchange or with the Commission, and (iii) all press releases and other
statements made available generally by the Company or any of its Subsidiaries to
the public concerning material developments in the business of the Company or
any of its Subsidiaries.
(d) Defaults, etc. Promptly upon and in any event within five
Business Days after any officer of the Company obtaining knowledge of any
condition or event which constitutes a Default or an Event of Default or
becoming aware that the Holder of any Senior Note has given any notice or taken
any other action with respect to a claimed Default or Event of Default or that
any person has given any notice to the Company or any of its Subsidiaries or
taken any other action with respect to a claimed default under or in respect of
any debt for borrowed money in excess of $100,000 or with respect to the
occurrence or existence of any
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event or condition of such type, written notice in reasonable detail specifying
the facts and circumstances of such condition, event or action.
(e) Litigation, etc. Promptly and in any event within five
Business Days after any officer of the Company obtains knowledge of any
litigation, administrative proceeding or judgment (i) affecting the Company or
any of its Subsidiaries which involves claims against the Company or its
Subsidiaries aggregating, when taken together with all other such litigation,
proceedings and judgments, $100,000 which are not considered by the Company, in
its reasonable judgment, to be covered by insurance, or (ii) relating in any
material way to this Agreement, the Senior Notes, any other Exhibit or any
portion of the Collateral, notice thereof specifying in each case in reasonable
detail the facts and circumstances surrounding such litigation, proceeding or
judgment.
4.2 Certain Restrictions.
(a) The Company shall not pay any dividend or distribution in
respect of any class of its capital stock or make any payment on account of the
purchase, redemption or other retirement of any of its shares of capital stock
without the prior written consent of the Majority-in-Interest of the Holders of
the Senior Notes.
(b) Without the prior written consent of the
Majority-in-Interest of the Holders of the Senior Notes, for so long as the
Senior Notes are outstanding, the Company shall not, and shall not permit any
Subsidiary to, mortgage, pledge, create a lien or security interest in or
otherwise encumber any assets or property of the Company or any Subsidiary,
except as contemplated by (i) any loan or security document specifically
referenced in any of the Schedules to this Agreement or (ii) the Senior Notes.
(c) Without the prior written consent of the
Majority-in-Interest of the Holders of the Senior Notes, the Company shall not,
and shall not permit any Subsidiary to, voluntarily liquidate or dissolve, or
consolidate or merge with or into any other Person (except where the Company or
Subsidiary is the surviving entity and the net worth of such surviving entity is
at least equal to the net worth of the Company or Subsidiary, as the case may
be, immediately prior thereto), or sell, lease, transfer, contribute or
otherwise dispose of all or substantially all of its assets to any other Person
(other than sales of inventory and worn out and obsolete assets in the ordinary
course of business).
4.3 Maintenance of Office.
Until the principal of and interest on the Senior Notes has
been paid in full to the Holders, (i) the Company and each of the Subsidiary
Obligors shall maintain its principal office at a location in the United States
of America where notices, presentations and demands in respect of this Agreement
and the Senior Notes may be made upon it, and (ii) shall notify each Holder of a
Senior Note in writing of any change of location of such office at least 20 days
prior to such change of location. Such principal office shall first be
maintained at Marathon Oil Tower, 5555 San Felipe, Suite 780, Houston, Texas
77056.
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4.4 Corporate Existence.
The Company will, and will cause each of its Subsidiaries to,
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence.
4.5 Compliance with Laws; Government Filings.
The Company shall, and shall cause each of its Subsidiaries
to, comply in all material respects with all laws, statutes, rules, regulations
and ordinances and all orders of, and restrictions imposed by, any court,
arbitrator or Governmental Body in respect of the conduct of the business of the
Company or Subsidiary and the ownership of the properties of the Company or
Subsidiary (including, without limitation, applicable laws, statutes, rules,
regulations, ordinances and orders relating to occupational health and safety
standards, consumer protection and equal employment opportunities), except to
the extent that the applicability or validity of any such law, statute, rule,
regulation, ordinance or order is being contested in good faith by appropriate
and timely actions or proceedings diligently pursued, and for which such reserve
or other appropriate provision, if any, as shall be required by GAAP shall have
been made.
4.6 Environmental Matters.
(a) The Company shall, and shall cause each of its
Subsidiaries to, (i) obtain and maintain in full force and affect all
Environmental Permits that may be required from time to time in order for the
Company and such Subsidiary to comply in all material respects with all
Environmental Laws applicable to the Company or such Subsidiaries and (ii) be
and remain in compliance in all material respects with all terms and conditions
of all such Environmental Permits and with all other limitations, restrictions,
conditions, standards, prohibitions, require ments, obligations, schedules and
timetables contained in all applicable Environmental Laws.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, (i) cause or allow (A) any Hazardous Substance to be present at
any time on, in, under or above the Company Premises or any part thereof or (B)
the Company Premises or any part thereof to be used at any time to manufacture,
generate, refine, process, distribute, use, sell, treat, receive, store, dispose
of, transport, arrange for transport of, handle, or be involved in any other
activity involving, any Hazardous Substance, or (ii) conduct any such activities
described in the foregoing clause (i) on the Company Premises or anywhere else,
except, in each case referred to in the foregoing clauses (i) and (ii), in a
manner that is in compliance in all material respects with all applicable
Environmental Laws and Environmental Permits or to an extent that will not have
a Material Adverse Effect.
4.7 Certain Contracts.
The Company shall notify the Holders of the Senior Notes
promptly following receipt of notice of any default or assertion of any material
breach under any existing Material Contract, and shall notify the Holders of the
Senior Notes promptly following the entering into of any new Material Contract.
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ARTICLE V
EVENTS OF DEFAULT
5.1 Events of Default. In the event that:
(i) the Company or any Subsidiary Obligor defaults for more
than five days after written notice from any Holder hereof in making any payment
required to be made on the Senior Notes; or
(ii) any other obligation of the Company or any Subsidiary for
the payment of borrowed money in excess of $100,000 becomes or is declared to be
due and payable prior to its expressed maturity, unless the validity of any such
indebtedness or obligation is being contested in good faith by appropriate
proceedings; or
(iii) the Company or any Subsidiary Obligor defaults in the
observance or performance in any material respect of any of the covenants and
agreements (other than covenants and agreements with respect to the payment of
principal or interest on the Senior Notes) contained in this Agreement or in any
Exhibit hereto and if the same is capable of being cured the continuance of the
same for 30 days after the date of such default; or
(iv) any warrant of attachment, execution or other writ is
levied upon any property or assets of the Company or any Subsidiary in excess of
$100,000 and is not discharged or stayed (including stays resulting from the
filing of an appeal) within 30 days; or all or any substantial part of the
assets or properties of the Company or any Subsidiary are condemned, seized or
appropriated by any government or governmental authority; or any order is
entered in any proceeding directing winding up, dissolution or split-up of the
Company or any Subsidiary; or
(v) any representation or warranty of the Company or any
Subsidiary Obligor made in this Agreement or any Exhibit hereto or in connection
herewith or therewith shall prove to have been false or incorrect or breached in
any material respect on the date on which made; or
(vi) the security interest in any of the Collateral and
proceeds thereof granted to the Purchasers pursuant to the Security Agreement
ceases to be a perfected security interest, prior and superior to all other
liens (other than such existing liens as are set forth on Schedule 2.8 hereto)
and enforceable in accordance with its terms, the Company or any Subsidiary
Obligor defaults in the observance or performance in any material respect of any
of its obligations under the Security Agreements; or
(vii) the Company or any Subsidiary hereafter makes an
assignment for the benefit of creditors, or files a petition in bankruptcy as to
itself, is adjudicated insolvent or bankrupt, petitions a receiver of or any
trustee for the Company or any Subsidiary or any substantial part of the
property of the Company or any Subsidiary under any bankruptcy,
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reorganization, arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or if
there is hereafter commenced against the Company or any Subsidiary any such
proceeding and an order approving the petition is entered or such proceeding
remains undismissed for a period of 60 days, or the Company or any Subsidiary by
any act or omission to act indicates its consent to or approval of or
acquiescence in any such proceeding or the appointment of any receiver of, or
trustee for, the Company or any Subsidiary or any substantial part of its
properties, or suffers any such receivership or trusteeship to continue
undischarged for a period of 60 days;
then, and in any such event, and at any time thereafter, if such event shall
then be continuing, any Holder as to Section 5.1(i) and 5.1(vi) and a
Majority-in-Interest of all Holders as to any other Event of Default may, by
written notice to the Company, declare the Senior Notes due and payable,
whereupon the same shall be due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby expressly waived.
5.2 Appointment of Director.
At any time after October 31, 1997, if principal and interest
on the Senior Notes have not been paid in full and the Holders of the Senior
Notes shall have received or then be entitled to receive PIK Stock Interest, the
Majority-in-Interest may, but need not, designate an individual to serve as a
director of the Company, for so long as such Holders shall receive or be
entitled to receive PIK Stock Interest. Notwithstanding the foregoing, the
Majority-in-Interest shall not be entitled to designate an individual to serve
as a director of the Company pursuant to this provision or any similar provision
contained in the Senior Notes to the extent, or during any period of time, that
any Purchaser is already serving as a director of the Company pursuant to the
exercise of any right contained in the Consulting and Engagement Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Expenses.
Whether or not the transactions contemplated by Article I
hereof are consummated, the Company shall: (a) directly pay the reasonable fees
and expenses of special counsel to the Purchasers rendered in connection with
such transactions or in connection with any actual or proposed amendment, waiver
or consent pursuant to the provisions hereof, and all other expenses in
connection with the foregoing (including, without limitation, document
production and reproduction expenses); (b) reimburse each Purchaser for his
reasonable out-of-pocket expenses in connection with each such actual or
proposed amendment, waiver or consent pursuant to the provisions of this
Agreement, and any items of the character referred to in clause (a) which shall
have been paid by any Purchaser; (d) pay, and save each Purchaser of any Senior
Note harmless from and against, any and all liability and loss with respect to
or resulting from the nonpayment or delayed payment of any and all placement
fees and other liability to pay any agent or finder in connection with the sale
of the Senior Notes or the Warrant to each Purchaser;
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(d) pay all fees and other charges payable in connection with the filings,
recordings and registrations contemplated by this Agreement or any other Exhibit
in connection with the security provided for the Senior Notes; and (e) pay all
documentary, stamp or similar taxes (including interest and penalties) which may
be payable in respect of the execution and delivery or issuance (but not the
transfer) of any of the Senior Notes or of any amendment of, or waiver or
consent under or with respect to, this Agreement, any of the Senior Notes or any
other Exhibit and save each Purchaser of the Senior Notes harmless against each
Purchaser any loss or liability resulting from nonpayment or delay in payment of
any such tax. The obligations of the Company under this Section shall survive
payment and transfer of any Senior Notes.
6.2 Reliance on and Survival of Representations.
All agreements, covenants, representations and warranties of
the Company or any Subsidiary Obligor herein or in any Exhibit or in any
Financing Document or of (or on behalf of) the Company or any Subsidiary Obligor
in any certificate or other instrument delivered pursuant hereto or thereto
shall: (a) be deemed to be material and to have been relied upon by each
Purchaser, notwithstanding any investigation heretofore or hereafter made by
each Purchaser or on his behalf, and (b) survive the execution and delivery of
this Agreement and the execution and delivery of the Senior Notes to each
Purchaser and any investigation made at any time by him or on his behalf or any
disposition of any of the Senior Notes, and all representations and warranties
contained in Article II hereof and in any Exhibit hereto and in any Financing
Document shall expire and terminate upon payment in full of the Senior Notes
including all accrued interest thereon.
6.3 Amendment and Waiver.
(a) Any term, provision, covenant, agreement or condition of
this Agreement, the Senior Notes or the Warrants or any other Exhibit hereto
may, with the written consent of the Company, be amended or modified, or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), by one or more substantially
concurrent written instruments signed by the Holder or Holders of not less than
66 2/3% in aggregate unpaid principal amount of all Senior Notes or Warrants, as
the case may be, at the time outstanding; provided, that
(i) with respect to the Senior Notes no such amendment,
modification or waiver shall (A) change the principal of, or change the
rate of interest or change the time of payment of principal, or
premium, if any, or interest on any of the Senior Notes, (B) change the
percentage of Holders of Senior Notes required to accelerate or rescind
any acceleration of the Senior Notes, or (C) modify any provision of
this Section, without the consent of the Holders of all Senior Notes
then outstanding,
(ii) with respect to the Warrants no such amendment,
modification or waiver shall change the Warrant Price, as provided in
the Warrant, without the consent of the Holders of all Warrants then
outstanding, and
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(iii) no such amendment, modification or waiver shall extend
to or affect any obligation not expressly waived or impair any right
consequent thereon.
(b) Any amendment, modification or waiver pursuant to this
Section 6.3 shall apply equally to all the Holders of the Senior Notes or the
Warrants, as the case may be, and shall be binding upon them, upon each future
holder of any Senior Note or Warrants, as the case may be, and upon the Company
(and, with respect to the Senior Notes, the Subsidiary Obligors), in each case,
whether or not a notation thereof shall have been placed on any Senior Note.
Promptly after any amendment, modification or waiver pursuant to this Section
6.3 has become effective, the Company shall deliver to each Holder of a Senior
Note or Warrant, as the case may be, a true and complete copy of the written
instruments pursuant to which such amendment, modification or waiver was
effected, signed by the Holder or Holders of the requisite percentage and
setting forth any such amendment or modification or the terms of any such
waiver.
(c) Each Holder shall continue to make its own analysis and
decisions in taking or not taking action under this Agreement. In no event shall
the Majority-in-Interest be deemed to be an agent or fiduciary for the
Purchasers, and shall not be required to keep informed as to the performance or
observance by the Company of this Agreement or any other document referred to or
provided for herein or therein or to inspect the properties or books of the
Company. No Holder shall have any duty or responsibility to provide any other
Holder with any credit or other information concerning the affairs, financial
condition or business of the Company that may come into the possession of such
Holder.
6.4 Register.
(a) The Senior Notes and the Warrants shall be issued in
registered form only. The Company shall keep a register (the "Senior Note
Register") in which provision shall be made for the registration of the Senior
Notes and the registration of transfers of the Senior Notes and a register (the
"Warrant Register") in which provisions shall be made for the registration of
the Warrants and the registration of transfers thereof. Such Registers shall be
kept at the principal office of the Company and the Company is hereby appointed
"Senior Note Registrar" and the "Warrant Registrar" for the purpose of
registering the Senior Notes and the Warrants, respectively, and transfers of
the Senior Notes. Subject to compliance with the provisions of Article III
hereof by a transferee, upon surrender for registration of transfer of any
Senior Note or Warrant at the principal office of the Company and compliance
with the provisions of Section 3.1, if applicable, the Company shall execute and
deliver, in the name of the designated transferee, a new Senior Note or Warrant,
as the case may be, of a like amount. The Company shall make or cause to be made
a notation on each new Senior Note of the amount of all payments of principal
previously made on the surrendered Senior Note and the date to which interest
accrued on the surrendered Senior Note has been paid. The Company shall treat
the individual or entity in whose name each Senior Note is registered on the
Senior Note Register or Warrant on the Warrant Register, as the case may be, as
the sole and absolute owner thereof, notwithstanding any contrary notice.
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(b) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any Senior Note or
Warrant and of a letter of indemnity reasonably satisfactory to the Company, and
upon reimbursement to the Company of all reasonable expenses incident thereto,
and upon surrender or cancellation of a Senior Note or Warrant, if mutilated,
the Company will make and deliver a new Senior Note or Warrant of like tenor in
lieu of such lost, stolen, destroyed or mutilated Senior Note or Warrant.
6.5 Directly or Indirectly.
Where any provision of this Agreement refers to actions to be
taken by any person, or which such person is prohibited from taking, such
provision shall be applicable whether the action in question is taken directly
or indirectly by such person.
6.6 Successors and Assigns.
All covenants and agreements in this Agreement by or on behalf
of the respective parties hereto shall bind and inure to the benefit of their
respective successors and, in the case of any Holder of a Senior Note,
registered assigns. The provisions of this Agreement are intended to be for the
benefit of all Holders from time to time of the Senior Notes, and shall be
enforceable by any such Holder, whether or not an express assignment to such
Holder of rights under this Agreement has been made by the Purchaser or his
successors or assigns.
6.7 Notices.
Unless otherwise expressly provided in this Agreement, all
notices, opinions and other communications provided for in this Agreement shall
be in writing and delivered by hand or mailed, first class postage prepaid,
return receipt requested or sent by overnight courier, or by confirmed telefax
transmission (confirmed by hand-delivered, mailed or overnight courier copy)
addressed (a) if to the Company, to the Company at Marathon Oil Tower, 5555 San
Felipe, Suite 780, Houston, Texas 77056 (with a copy sent by telefax
transmission to it at (713) 850-7330), marked to the attention of the President,
with a copy to Chamberlain, Hrdlicka, White, Williams & Martin, 1400 Two Allen
Center, 1200 Smith Street, Houston, Texas 77002-4310, telecopy number (713)
658-2553, to the attention of James J. Spring, III, Esq., or at such other
address as the Company may hereafter designate by notice to each Holder of
Senior Notes or Warrants at the time outstanding, or (b) if to the Purchasers,
at the address of each Purchaser as set forth in Schedule 1.2 or at such other
address as such Purchaser may hereafter designate by notice to the Company, or
(c) if to any other Holder of any Senior Note or Warrant, at the address of such
Holder as it appears on the Senior Note Register or the Warrant Register, as the
case may be.
6.8 LAW GOVERNING.
THIS AGREEMENT AND THE SENIOR NOTES AND ALL AMENDMENTS,
SUPPLEMENTS, MODIFICATIONS, WAIVERS AND CONSENTS RELATING HERETO
OR THERETO SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
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ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED IN THE STATE OF NEW YORK.
6.9 SUBMISSION TO JURISDICTION;
Service of Process.
(a) THE COMPANY (ON BEHALF OF ITSELF AND EACH SUBSIDIARY
OBLIGOR) HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES
THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT, THE SENIOR NOTES OR
WARRANTS OR ANY OTHER EXHIBIT MAY BE LITIGATED IN SUCH COURTS, AND THE COMPANY
WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT.
(b) In relation to any dispute arising out of or in connection
with this Agreement or any Exhibit, and for the exclusive benefit of the
Holders, the Company (on behalf of itself and each Subsidiary Obligor)
irrevocably and unconditionally submits to the non-exclusive jurisdiction of the
United States District Court for the Southern District of New York, and to the
non-exclusive jurisdiction of any court of the State of New York located in the
City and County of New York, for the purposes of any suit, action or other
proceeding arising out of, or relating to, this Agreement or any Exhibit or any
of the transactions contemplated hereby or thereby, and hereby waives, and
agrees not to assert, by way of motion, as a defense, or otherwise, that it is
not personally subject to the jurisdiction of the above named courts for any
reason whatsoever, that such suit, action or proceeding is brought in an
inconvenient forum, or that the venue of such suit, action or proceeding is
improper, or that this Agreement or any Exhibit or the subject matter hereof may
not be enforced in or by such courts. The Company (on behalf of itself and each
Subsidiary Obligor) hereby agrees that process against it and each Subsidiary
Obligor may be served by mail or delivery of service of process in any of the
aforementioned action, suits or proceedings to CT Corporation System, 1633
Broadway, New York, New York 10019 (such agent being hereinafter called the
"Process Agent"), which the Company (on behalf of itself and each Subsidiary
Obligor) hereby irrevocably designates and appoints as its and each Subsidiary
Obligor's attorney-in-fact to receive service of process in any action, suit or
proceeding with respect to any matter as to which it or any Subsidiary Obligor
submits to jurisdiction as set forth above, it being agreed that service to such
office or upon such agent shall constitute valid service upon the Company and
any Subsidiary Obligor. The Company (on behalf of itself and each Subsidiary
Obligor) hereby directs the Process Agent to receive and accept all process on
its and each Subsidiary Obligor's behalf. The Company shall promptly notify the
Purchasers of any change in the address of the Process Agent and may, with prior
notice given to Holders, appoint a successor Process Agent; provided, however,
that if the Process Agent shall at any time cease to exist or its agency shall
for any reason cease, the Company (on behalf of itself and each Subsidiary
Obligor) shall designate forthwith a successor Process Agent in the County and
State of New York and shall give prompt notice of such designation to the
Holders, together with evidence of the acceptance of any such appointment.
- 21 -
<PAGE>
<PAGE>
The Company (on behalf of itself and each Subsidiary Obligor) agrees irrevocably
to the service of process of any of the aforementioned courts in any suit,
action or proceeding described above by mailing of copies of such process to the
Company and/or any Subsidiary Obligor at its address specified in Section 6.7
hereof. Nothing herein shall preclude service of process in any other manner
permitted by applicable law or prohibit any Holder from commencing legal
proceedings against the Company or any Subsidiary Obligor or any of its
respective properties in any other jurisdiction.
6.10 Headings, etc.
The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning or
construction of any of the terms hereof. Unless otherwise specified, any
reference in this Agreement to a particular section, clause or other
subdivision, or a particular schedule or exhibit, shall be considered a
reference to that section, clause or other subdivision of, or to that schedule
or exhibit to, this Agreement.
6.11 Entire Agreement.
This Agreement (inclusive of the Exhibits hereto) embodies the
entire agreement and understanding among the Company (inclusive of the
Subsidiary Obligors, as appropriate) and the Purchasers and supersedes all prior
agreements and understandings among such parties relating to the subject matter
hereof.
6.12 WAIVER OF TRIAL BY JURY.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
PARTIES HERETO IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY EXHIBIT HERETO OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF THE PURCHASERS
IN THE NEGOTIATION OR ENFORCEMENT HEREOF OR THEREOF.
6.13 No Waiver.
No failure on the part of any Holders of the Senior Notes to
exercise any right or remedy hereunder with respect to the Company or any
Subsidiary Obligor, whether before or after the happening of an Event of
Default, shall constitute waiver of any such subsequent Event of Default or of
any other Event of Default. No failure to accelerate the debt of the Company or
any Subsidiary Obligor evidenced hereby by reason of an Event of Default or
indulgence granted from time to time shall be construed to be a waiver of the
right to insist upon prompt payment thereafter; or shall be deemed to be a
novation of the Senior Notes or a reinstatement of such debt evidenced hereby or
a waiver of such right of acceleration or any other right, or be construed so as
to preclude the exercise of any right any Holders of the Senior Notes may have,
whether by the laws of the state governing the Senior Notes, by agreement or
otherwise; and the Company
- 22 -
<PAGE>
<PAGE>
(on behalf of itself and each Subsidiary Obligor) hereby expressly waives the
benefit of any statute or rule of law or equity that would produce a result
contrary to or in conflict with the foregoing.
6.14 Applicable Interest Rate.
The Holders of the Senior Notes, on the one hand, and the
Company and the Subsidiary Obligors, on the other hand, intend that the
obligations evidenced by the Senior Notes conform strictly to the applicable
usury laws from time to time in force. All agreements between the Company and
the Subsidiary Obligors and any Holder of the Senior Notes, whether now existing
or hereafter arising and whether oral or written, hereby are expressly limited
so that in no contingency or event whatsoever, whether by acceleration of
maturity hereof or otherwise, shall the amount paid or agreed to be paid to such
Holder, or collected by such Holder, by or on behalf of the Company or any
Subsidiary Obligor for the use, forbearance or detention of the money to be
loaned to the Company or any Subsidiary Obligor hereunder or otherwise, or for
the payment or performance of any covenant or obligation contained herein of the
Company or any Subsidiary Obligor to such Holder, or in any other document
evidencing, securing or pertaining to such indebtedness evidenced hereby, exceed
the maximum amount permissible under applicable usury law. If under any
circumstances whatsoever fulfillment of any provision thereof or any other
document, at the time performance of such provisions shall be due, shall involve
transcending the limit of validity prescribed by law, then, ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity; and
if under any circumstances any Holder of Senior Notes ever shall receive from or
on behalf of the Company or any Subsidiary Obligor an amount deemed interest, by
applicable law, which would exceed the highest lawful rate, such amount that
would be excessive interest under applicable usury laws shall be applied to the
reduction of the principal amount owing hereunder and under the Senior Notes and
not to the payment of interest, or if such excessive interest exceeds the unpaid
balance of principal and such other indebtedness, the excess shall be deemed to
have been a payment made by mistake and shall be refunded to the Company and/or
the Subsidiary Obligors or to any other person making such payment on the
Company's or any Subsidiary Obligor's behalf.
6.15 Indemnification.
In consideration of the execution and delivery of this
Agreement by each Purchaser, the Company (on behalf of itself and each
Subsidiary Obligor) hereby agrees to indemnify, defend and hold each Purchaser
and each Holder from time to time of any Senior Notes, and such Purchaser's and
their respective officers and directors, general and limited partners (and
directors and officers thereof), employees and agents (herein called the
"Indemnitees") free and harmless from and against any and all claims, actions,
causes of action, suits or other proceedings (whether or not any such Indemnitee
is a party thereto), losses, liabilities and damages, and expenses in connection
therewith, including, without limitation, fees and disbursements of counsel,
consultants and experts and claims relating to personal injury or property
damage (herein called the "Indemnified Liabilities", which term shall not
include, however, in respect of any particular Indemnitee, liabilities incurred
by reason of the gross negligence or willful misconduct of such Indemnitee)
incurred by the Indemnitees or any of them
- 23 -
<PAGE>
<PAGE>
as a result of, or arising out of, or relating to (a) any transaction financed
or to be financed in whole or in part directly or indirectly with proceeds from
the sale of any Senior Note, or (b) the execution, delivery, performance or
enforcement of the Senior Notes, or the consummation of any of the transactions
contemplated thereby or (c) any failure of any representation or warranty set
forth in Section 2.12 to be true and correct when made or any failure by the
Company to comply with any of its covenants or agreements set forth in Section
4.6 or (d) the acquisition, use, operation, disposition, or retention of a lien
on or security interest in any property at any time granted or held as
collateral security for the Senior Notes or any of them. If and to the extent
that the foregoing undertaking may be unenforceable for any reason, the Company
(on behalf of itself and each Subsidiary Obligor) hereby agrees to make the
maximum contribution to the payment of each of the Indemnified Liabilities which
is permissible under applicable law. The provisions of, and obligations of the
Company (on behalf of itself and each Subsidiary Obligor) under, this Section
6.15 shall survive the execution and delivery of this Agreement, the delivery,
payment or transfer of any Senior Note, the enforcement of any provision hereof
or thereof, the consummation of the transactions to occur on the Closing Date,
and any amendments or waivers, and shall be enforceable by each Indemnitee
separately or together without necessity of accelerating the maturity of any
Senior Notes; and any such Indemnitee seeking to enforce the indemnification
provided for hereunder may initially proceed directly against the Company or any
Subsidiary Obligor without first resorting to any other rights of
indemnification or otherwise that it may have.
6.16 Interpretive Provision.
Wherever any representation, warranty or other statement made
by the Company in this Agreement is limited to the Company's knowledge, such
limitation shall mean the actual knowledge or awareness of any person who, on
the date hereof, is an executive officer or director of the Company after due
inquiry of the circumstances thereof.
6.17 Severability.
Any provision of this Agreement which shall be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or enforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
6.18 Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
6.19 Finder's Fee.
(a) The Company (on behalf of itself and each Subsidiary
Obligor) represents and warrants that it has not incurred any obligation or
liability to any broker or finder for any fee
- 24 -
<PAGE>
<PAGE>
or payment with respect to the offering or sale of the Units and agrees to
indemnify and hold the Purchasers harmless against any claims or liabilities
asserted against them by any person acting or claiming to act as a broker or
finder on behalf of the Company or any Subsidiary.
(b) Each Purchaser represents and warrants that it has not
incurred any obligation or liability to any broker or finder for any fee or
payment with respect to the offering or sale of the Units and agrees to
indemnify and hold the Company harmless against any claims or liabilities
asserted against them by any person acting or claiming to act as a broker or
finder on behalf of such Purchaser.
6.20 Pari Passu Rights.
The rights in and interests of each Purchaser in the
Collateral shall be pari passu, regardless of the time of perfection of any such
interests, based upon the ratio of (i) the amount of principal and interest owed
from time to time by the Company or any Subsidiary Obligor to such Purchaser
under the Senior Notes and any notes issued in payment of interest thereon which
are held by such Purchaser to (ii) the aggregate amount of principal and
interest owed at such time by the Company or any Subsidiary Obligor to all
Purchasers under the Senior Notes and any notes issued in payment of interest
thereon.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first before written.
COMPANY:
GEOKINETICS INC.
By: /s/ THOMAS J. CONCANNON
------------------------------------
Name: Thomas J. Concannon
Title: Vice President
PURCHASERS:
All those Purchasers whose
signature pages,
substantially in the form
of page 26 hereto (and with
respect to Purchasers from
the State of New York,
substantially in the forms
of pages 26 and 27 hereto
are attached hereto)
- 25 -
<PAGE>
<PAGE>
PURCHASER'S SIGNATURE PAGE
The undersigned desiring to become a Purchaser of Units,
hereby agrees to all of the terms of the Securities Purchase Agreement dated as
of April 25, 1997 among the Company and the Purchasers signatory thereto (the
"Agreement") and agrees to be bound by the terms and provisions of the
Agreement.
- ------------------------------------ ---------------------------------
(Signature of Purchaser) (Please print name: if signing
for corporation or other entity,
please also print title of
signature and name of entity; if
husband and wife are subscribing
as joint owners, please also
print spouse's name and form of
ownership)
- ------------------------------------ ---------------------------------
(If husband and wife are subscribing (Social Security or Tax
as joint owners, signature of spouse) Identification Number)
- ------------------------------------
(Address for notice of payment)
- ------------------------------------
Execution date
- 26 -
<PAGE>
<PAGE>
GEOKINETICS INC.
Supplemental Signature Page
(New York Investors)
In connection with my subscription for Units of Geokinetics Inc.
(the "Company"), I hereby represent to the Company as follows:
I understand that this offering of Notes and Warrants (and upon
any exercise thereof, Common Stock) of the Company (the "Offering") has
not been reviewed by the Attorney General of the State of New York
because of the Company's representations that this is intended to be a
nonpublic offering under the Federal Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the "Securities
Act"). I understand that any offering literature used in connection with
this offering has not been prefiled with the Attorney General. The
securities subscribed for hereby are being purchased for my own account
for investment, and not for distribution or resale to others. I agree
that I will not sell or otherwise transfer these securities unless they
are registered under the Securities Act or unless an exemption from such
registration is available. I represent that I have adequate means of
providing for my current needs and possible personal contingencies, and
that I have not need for liquidity of this investment.
It is understood that all documents, records and books pertaining
to this investment have been made available for inspection by my attorney
and/or my accountant and/or my purchaser representative and myself, and
that the books and records of the Company will be available upon
reasonable notice for inspection by investors at reasonable hours at its
principal place of business.
Dated: April 25, 1997
-------------------------------
Name of Investor (Please Print)
-------------------------------
Signature
- 27 -
<PAGE>
<PAGE>
APPENDIX I
DEFINITIONS
As used in this Agreement the following terms shall have the
meanings ascribed thereto:
"Agreement" means this agreement, as it may be amended from time
to time, including all schedules and exhibits thereto.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which commercial banks are required or authorized by law or
regulation to be closed in New York, New York.
"Closing" has the meaning set forth in Section 1.3.
"Collateral" means the rights and interests of the Company and
Subsidiary Obligors in to the property and assets of the Company and the
Subsidiary Obligors described and as set forth in Schedule 2.8 hereto and in the
Security Agreements.
"Commission" means the Securities and Exchange Commission or any
other United States agency at the time administering the Securities Act.
"Common Stock" means common stock of the Company having a par
value of $.20 per share.
"Company" means Geokinetics Inc., a Delaware corporation.
"Company Premises" means real property in which (a) the Company,
(b) any Subsidiary of any person referred to in clause (a) of this definition or
(c) any person which has at any time been a Subsidiary of any person referred to
in clause (a) of this definition at any time has or ever had any direct or
indirect interest, including, without limitation, ownership thereof, or any
arrangement for the lease, rental or other use thereof, or the retention or
claim of any mortgage or security interest therein or thereon.
"Consulting and Engagement Agreement" means that certain
consulting and engagement agreement to be entered into between the Company and
one of the Purchasers in the form of Exhibit C hereto.
"Deeds of Trust" means those certain deeds of trust of GPC and HOC
in favor of the Purchasers providing for (i) a lien on all assets currently
pledged in favor of Input/Output, Inc., junior in priority only to the interests
of Input/Output, Inc., all as more fully set forth on Schedule 2.8 hereto, and
in the form of Exhibit G-1 hereto, (ii) a lien on all of the assets currently
pledged in favor of the Harbin/Murphy Entities, junior in priority only to the
interests of the Harbin/Murphy Entities, all as more fully set forth on Schedule
2.8 hereto and in the form of
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<PAGE>
<PAGE>
Exhibit G-2 hereto, and (iii) a first priority lien on all presently
unencumbered oil and gas reserve assets of the Company and the Subsidiary
Obligors, as identified on Schedule 2.8 hereto, in the form of Exhibit G-3
hereto.
"Environmental Claims" has the meaning set forth in Section
2.12(c).
"Environmental Law" any past, present or future Federal, state,
local or foreign statutory or common law, or any regulation, ordinance, code,
plan, Order, permit, grant, franchise, concession, restriction or agreement
issued, entered, promulgated or approved thereunder, relating to (a) the
environment, human health or safety, including, without limitation, emissions,
discharges, releases or threatened releases of Hazardous Substances into the
environment (including, without limitation, air, surface water, groundwater or
land), or (b) the manufacture, generation, refining, processing, distribution,
use, sale, treatment, receipt, storage, disposal, transport, arranging for
transport, or handling of Hazardous Substances,
"Environmental Permit" means any and all permits, consents,
licenses, approvals and registrations of any nature at any time required
pursuant to or in order to comply with any Environmental Law.
"Event of Default" has the meaning set forth in Section 5.1.
"Exhibit" means any of the exhibits to this Agreement, including
such exhibits as executed and delivered pursuant to the terms of this Agreement.
"Financing Document" means any UCC Financing Statement with
respect to the Collateral.
"Financial Statements" means (i) the consolidated balance sheet of
the Company and the Subsidiaries as of December 31, 1996, and the consolidated
statement of operations and cash flows for the year ended December 31, 1996, and
(ii) the consolidated balance sheet of the Company and the Subsidiaries as of
February 28, 1997, and the consolidated statement of operations and cash flows
for the two month period ended February 28, 1997, in each case, together with
the notes thereto.
"GAAP" means generally accepted accounting principles as from time
to time set forth in the opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants and in statements by the
Financial Accounting Standards Board or in such opinions and statements of such
other entities as shall be approved by a significant segment of the accounting
profession in the United States of America.
"Governmental Body" means any Federal, state, municipal, local or
other governmental department, commission, board, bureau, agency,
instrumentality, political subdivision or taxing authority of any country.
- 29 -
<PAGE>
<PAGE>
"GPC" means Geokinetics Production Co., Inc., a Texas corporation
that is a Subsidiary Obligor.
"Harbin/Murphy Entities" means Elinor T. Harbin, Elinor T. Harbin
Trust, Richard W. Harbin, William H. Murphy and Michael A. Kimmel.
"Harbin/Murphy Extension, Waiver and Standstill Agreement" means
an agreement to be executed and delivered by each of the Harbin/Murphy Entities
in favor of the Company, GPC and HOC, providing for (i) an extension through
June 30, 1997 of the maturity or other due date of the current outstanding
principal amount of all promissory notes issued by the Company in favor of any
of them, (ii) a waiver of any and all existing interest payment and/or covenant
defaults under such promissory notes and any related loan and security
documentation, including the default that was the subject of the Harbin/Murphy
Foreclosure Notices and (iii) an agreement not to declare any default or take
any other foreclosure or similar action under such notes or any security
agreement executed by any of the Company, GPC and HOC in favor of them in
connection with any subsequent interest payment or covenant default that may
hereinafter occur thereunder at any time during the extension period, which
Harbin/Murphy Extension, Waiver and Standstill Agreement shall be in form and
substance reasonably satisfactory to the Purchasers and their counsel.
"Harbin/Murphy Foreclosure Notices" means those certain Notices of
Foreclosure Sale, each dated March 10, 1997, executed by or on behalf of the
Harbin/Murphy Entities with respect to a public non-judicial foreclosure sale of
the mortgaged property conveyed in trust by GPC and HOC to the Harbin/Murphy
Entities as security for the promissory notes payable by the Company to the
Harbin/Murphy entities, pursuant to those certain Deeds of Trusts, each dated in
October of 1996, executed by GPC and HOC in favor of the Harbin/Murphy Entities.
"Hazardous Substances" collectively, contaminants; pollutants;
toxic or hazardous chemicals, substances, materials, wastes and constituents;
petroleum products; polychlorinated biphenyls; medical wastes; infectious
wastes; asbestos; paint containing lead; and urea formaldehyde.
"HOC" means HOC Operating Co., Inc., a Texas corporation that is a
Subsidiary Obligor.
"Holder" means initially a Purchaser and thereafter such person
who from time to time is the registered Holder of a Senior Note or a Warrant, as
the case may be, or a Holder of either.
"Indemnified Liabilities" has the meaning set forth in Section
6.15.
"Indemnitees" has the meaning set forth in Section 6.15.
- 30 -
<PAGE>
<PAGE>
"I/O Extension, Waiver and Standstill Agreement" means an
agreement to be executed and delivered by Input/Output, Inc. in favor of the
Company, GPC and HOC, providing for (i) an extension of the maturity or other
due date of the current outstanding principal amount of all promissory notes
issued by the Company in favor of Input/Output, Inc. until at least September
30, 1997, (ii) a waiver of all existing interest and/or principal payment
defaults and covenant defaults under such promissory notes and related loan and
security documentation and (iii) an agreement not to declare any default or take
any other foreclosure or similar action under such notes or any security
agreement executed by any of the Company, GPC and HOC in favor of Input/Output,
Inc. in connection with any subsequent interest payment or covenant default that
may hereinafter occur thereunder at any time during such extension period, which
I/O Extension, Waiver and Standstill Agreement shall be in form and substance
reasonably satisfactory to the Purchasers and their counsel.
"Majority-in-Interest" means the Holders of at least two-thirds of
the outstanding principal amount of the Senior Notes or two-thirds of the
outstanding Warrants, as the case may be, provided, however, that if fewer than
one-half of the principal amount of Senior Notes or Warrants originally issued
pursuant to this Agreement are outstanding then Majority-in-Interest means 50.1%
of such outstanding principal amount of Senior Notes or Warrants.
"Material Adverse Effect" means any circumstance or event which is
material and adverse to the financial condition or business operations or
prospects of the Company and its Subsidiaries, taken as a whole, or which may
reasonably be expected to result in or cause an Event of Default.
"Material Contract" means any contract of the Company or any
Subsidiary with any Person that is presently in effect and (i) that either (A)
accounted for 10 percent or more of the annual revenues of the Company or any
Subsidiary during any of the past three fiscal years or (B) is expected to
account for 10 percent or more of the annual revenues of the Company or any
Subsidiary during the present fiscal year or (ii) the expiration or termination
of which would have a Material Adverse Effect.
"Opinion of Company Counsel" means the legal opinion of
Chamberlain, Hrdlicka, White, Williams & Martin, counsel for the Company, in
favor of the Purchasers, in the form of Exhibit D hereto.
"Person" means a corporation, a partnership, an organization or
business, an individual, a government or political subdivision thereof or
governmental agency.
"Personal Property Security Agreement" means that certain security
agreement of the Company and the Subsidiary Obligors in favor of the Purchasers
providing for a blanket security interest and first priority lien in and on all
presently unencumbered assets owned by the Company and the Subsidiary Obligors
and identified on Schedule 2.8 hereto, in the form of Exhibit H hereto.
"PIK Stock Interest" has the meaning set forth in the Senior Note.
- 31 -
<PAGE>
<PAGE>
"Pledge Agreement" means that certain pledge agreement of the
Company in favor of the Purchasers with respect to all of the capital stock its
owns in the Subsidiaries, in the form of Exhibit F hereto.
"Purchaser" means a person set forth on Schedule 1.2 with respect
to that number of Units set forth opposite his name and a person who executes
and delivers an identical agreement to this Agreement which is dated within ten
Business Days from the date of this Agreement with Schedule 1.2 attached which
reflects the name of such Purchaser and the securities so purchased, and
Purchasers means two or more Purchasers.
"Registration Rights Agreement" means that certain registration
rights agreement to be entered into between the Company and the Purchasers in
the form of Exhibit E hereto.
"Required Consents" means the approvals, consents and agreements
set forth on Schedule 2.6.
"Securities Act" means the Securities Act of 1933, or any similar
United States statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Security Agreements" means (i) the Pledge Agreement, (ii) the
Deeds of Trust and (iii) the Personal Property Security Agreement.
"Senior Note" means a 12% Senior Secured Promissory Note of the
Company in the form of Exhibit A.
"Senior Note Register" has the meaning set forth in Section 6.4.
"Subordination Agreement" means the agreement of certain holders
of indebtedness under certain notes of, or advances to, the Company or its
Subsidiaries, as set forth on Schedule 1.5(d) hereto, in favor of the
Purchasers, substantially in the form of Exhibit I.
"Subsidiary" means any corporation or other legal entity 50% or
more of the voting stock of which is owned by the Company or another Subsidiary
of the Company. For these purposes voting stock means the capital stock or other
form of ownership which ordinarily, in the absence of contingencies, entitles
the holder to elect corporate directors or persons performing similar functions.
"Subsidiary Obligor" means: (i) each of the existing Subsidiaries
of the Company other than Quantum Geophysical, Inc.; and (ii) any Subsidiary
hereafter formed or acquired by the Company, either directly or through one or
more other Subsidiaries.
"Unit" means a unit of securities consisting of a $1,000 principal
amount Senior Note and a detachable Warrant, issued by the Company.
- 32 -
<PAGE>
<PAGE>
"Unit Offering Disclosure Documents" means the Annual Report on
Form 10-KSB of the Company for the year ended December 31, 1996, as filed with
the Commission, together with the Financial Statements.
"Warrant" means a warrant of the Company to purchase two shares of
Common Stock for each $1 principal amount of Senior Note, in the form of Exhibit
B.
"Warrant Register" has the meaning set forth in Section 6.4.
- 33 -
<PAGE>
<PAGE>
SCHEDULE 1.2
PURCHASERS
<TABLE>
<CAPTION>
Name, Address, Telefax No.
and Tax Identification No. No. Units
of Purchaser Subscribed For Subscription Price
- --------------------------- -------------- -------------------
<S> <C> <C>
Steven A. Webster 250 $250,000
c/o Falcon Drilling Company, Inc.
1900 West Loop South, Suite 1800
Houston, Texas 77027
Telefax No.: (713) 623-8103
William R. Ziegler 250 $250,000
c/o Parson & Brown
666 Third Avenue, 9th Floor
New York, New York 10017
Telefax No.: (212) 682-9112
</TABLE>
<PAGE>
<PAGE>
PURCHASER'S SIGNATURE PAGE
The undersigned desiring to become a Purchaser of Units, hereby
agrees to all of the terms of the Securities Purchase Agreement dated as of
April 25, 1997 among the Company and the Purchasers signatory thereto (the
"Agreement") and agrees to be bound by the terms and provisions of the
Agreement.
/s/ WILLIAM R. ZIEGLER William R. Ziegler
- ------------------------------------- ---------------------------------------
(Signature of Purchaser) (Please print name: if signing for
corporation or other entity, please
also print title of signature and name
of entity; if husband and wife are
subscribing as joint owners, please
also print spouse's name and form of
ownership)
N/A ###-##-####
- ------------------------------------- ---------------------------------------
(If husband and wife are subscribing (Social Security or Tax
as joint owners, signature of spouse) Identification Number)
c/o Parson & Brown
666 Third Avenue, 9th Floor
New York, New York 10017
- -------------------------------------
(Address for notice of payment)
April 25, 1997
- -------------------------------------
Execution date
<PAGE>
<PAGE>
GEOKINETICS INC.
Supplemental Signature Page
(New York Investors)
In connection with my subscription for Units of Geokinetics Inc.
(the "Company"), I hereby represent to the Company as follows:
I understand that this offering of Notes and Warrants (and upon
any exercise thereof, Common Stock) of the Company (the "Offering") has
not been reviewed by the Attorney General of the State of New York
because of the Company's representations that this is intended to be a
nonpublic offering under the Federal Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the "Securities
Act"). I understand that any offering literature used in connection with
this offering has not been prefiled with the Attorney General. The
securities subscribed for hereby are being purchased for my own account
for investment, and not for distribution or resale to others. I agree
that I will not sell or otherwise transfer these securities unless they
are registered under the Securities Act or unless an exemption from such
registration is available. I represent that I have adequate means of
providing for my current needs and possible personal contingencies, and
that I have not need for liquidity of this investment.
It is understood that all documents, records and books pertaining
to this investment have been made available for inspection by my attorney
and/or my accountant and/or my purchaser representative and myself, and
that the books and records of the Company will be available upon
reasonable notice for inspection by investors at reasonable hours at its
principal place of business.
Dated: April 25, 1997
William R. Ziegler
-------------------------------
Name of Investor (Please Print)
/s/ WILLIAM R. ZIEGLER
-------------------------------
Signature
<PAGE>
<PAGE>
PURCHASER'S SIGNATURE PAGE
The undersigned desiring to become a Purchaser of Units, hereby
agrees to all of the terms of the Securities Purchase Agreement dated as of
April 25, 1997 among the Company and the Purchasers signatory thereto (the
"Agreement") and agrees to be bound by the terms and provisions of the
Agreement.
/s/ STEVEN A. WEBSTER Steven A. Webster
- ------------------------------------- ---------------------------------------
(Signature of Purchaser) (Please print name: if signing for
corporation or other entity, please
also print title of signature and name
of entity; if husband and wife are
subscribing as joint owners, please
also print spouse's name and form of
ownership)
N/A ###-##-####
- ------------------------------------- ---------------------------------------
(If husband and wife are subscribing (Social Security or Tax
as joint owners, signature of spouse) Identification Number)
c/o Falcon Drilling Company, Inc.
1900 West Loop South, Suite 1800
Houston, Texas 77027
- -------------------------------------
(Address for notice of payment)
April 25, 1997
- -------------------------------------
Execution date
<PAGE>
<PAGE>
EXHIBIT III
[FORM OF 12% SENIOR SECURED PROMISSORY NOTE]
No. _______ $__________
GEOKINETICS INC.
GEOKINETICS PRODUCTION CO., INC.
GEOSCIENCE SOFTWARE SOLUTIONS, INC.
HOC OPERATING CO., INC.
12% Senior Secured Promissory Note
due June 30, 1997
THIS 12% SENIOR SECURED PROMISSORY NOTE (THE "SENIOR NOTE") IS ISSUED PURSUANT
TO THE TERMS OF, IS ENTITLED TO THE BENEFITS OF, AND TRANSFER THEREOF IS
RESTRICTED BY, A SECURITIES PURCHASE AGREEMENT (THE "PURCHASE AGREEMENT") OF
EVEN DATE HEREWITH BETWEEN GEOKINETICS INC. AND THE HOLDERS OF SENIOR NOTES. A
COPY OF THE PURCHASE AGREEMENT IS ON FILE AND MAY BE EXAMINED AT THE PRINCIPAL
OFFICE OF THE COMPANY. TERMS USED HEREIN WHICH ARE NOT DEFINED HEREIN HAVE THE
SAME MEANINGS USED IN THE PURCHASE AGREEMENT UNLESS THE CONTEXT OTHERWISE
REQUIRES.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION
FROM THE REGISTRATION OR QUALIFICATION PROVISIONS OF FEDERAL AND STATE
SECURITIES LAWS BASED, IN PART, ON AN INVESTMENT REPRESENTATION OF THE PART OF
THE PURCHASER THEREOF. THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED,
DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM.
FOR VALUE RECEIVED, the undersigned Geokinetics Inc., a
Delaware corporation ("GEOK"), Geokinetics Production Co., Inc., a Texas
corporation ("GPC"), HOC Operating Co., Inc., a Texas corporation ("HOC") and
Geoscience Software Solutions, Inc. , a Texas corporation ("GSS"; together with
GEOK, GPC and HOC, the "Company"), hereby jointly and severally promise to pay
to __________________________, the registered holder or registered assigns
hereof (the "Holder"), the principal amount of __________________ ($________)
Dollars payable on the 30th day of June, 1997, subject to extension until a date
not later than September 30, 1997 at the option of the Majority-in-Interest of
the Holders (the "Maturity Date"), together with interest on the outstanding
principal amount of this Senior Note
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at the rate of twelve percent (12%) per annum calculated on the basis of a
360-day year or the actual number of days elapsed, such interest to be payable
monthly on the last day of each month that this Senior Note is outstanding,
commencing on April 30, 1997, and at the Maturity Date. This Senior Note shall,
in addition, bear interest (i) payable in common stock, par value $0.20 per
share, of GEOK (the "Common Stock") in certain circumstances as hereinafter
provided ("PIK Stock Interest") and (ii) payable at the Default Rate (as
hereinafter defined) in certain circumstances as hereinafter provided ("Default
Interest").
This Senior Note is secured pursuant to certain Security
Agreements (as defined in the Purchase Agreement) entered into pursuant to the
terms of the Purchase Agreement.
1. Payments and Prepayments.
1.1 Payments of principal and interest on this Senior Note
shall be made at the principal office of the Company, Marathon Oil Tower, 5555
San Felipe, Suite 780, Houston, Texas 77056, to the Holder at the address set
forth in the Purchase Agreement or on the 12% Senior Secured Promissory Note
Register or such other place or places within the United States as may be
specified by the Holder of this Senior Note in a written notice to the Company
at least 10 Business Days before a given payment date.
1.2 Except with respect to PIK Stock Interest, payments of
principal and interest on this Senior Note shall be made in lawful money of the
United States of America by mailing the Company's good check in the proper
amount to the Holder at least three days prior to the due date of each payment
or otherwise transferring funds so as to be received by the Holder on the due
date of each such payment.
1.3 If any payment on this Senior Note becomes due and payable
on a Saturday, Sunday or other day on which commercial banks in the City of New
York, New York are authorized or required by law to close, the due date of such
payment shall be extended to the next succeeding business day, and, with respect
to payments of principal, interest thereon shall be payable during such
extension at the then applicable rate.
1.4 Except in the event of Mandatory Prepayment, the Company
shall not be entitled to prepay this Senior Note either in whole or in part at
any time prior to June 30, 1997.
2. Obligation Absolute. The obligations under this Senior Note
are absolute and unconditional obligations of the Company, subject to Sections
3, 4 and 5 below, and no modification, release, consent, waiver, removal,
rearrangement or amendment shall impair the obligations of the Company
hereunder.
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3. Extension of Maturity Date; Payment on Demand.
3.1 The Majority-in-Interest of Holders of the Senior Notes,
may by written notice to the Company at its principal office delivered on or
before June 15, 1997 extend the initial June 30, 1997 maturity date of all
Senior Notes including this Senior Note to September 30, 1997, in which case
such latter date shall be the Maturity Date of this Senior Note.
3.2 If the Maturity Date hereof is extended as contemplated in
the preceding section or if this Senior Note becomes payable on demand, all
accrued but unpaid interest payable hereunder shall nevertheless be due and
payable on June 30, 1997 and monthly thereafter on the last day of each month,
commencing on July 31, 1997, at the rate of twelve (12%) per annum, subject to
the applicability of the Default Interest provisions of Section 8(b) below.
4. Mandatory Prepayment.
The Company shall prepay (the "Mandatory Prepayment"), without
premium or penalty, all Senior Notes including this Senior Note, inclusive of
all outstanding principal and accrued interest and PIK Stock Interest and
Default Interest thereon, at any time contingent upon and subject to the funding
to GEOK of the net proceeds of any sale of its equity securities or debt
securities convertible or exchangeable for equity securities by GEOK to
institutional and other investors, the aggregate cash net proceeds of which are
equal to or exceed Four Million Dollars ($4,000,000) (the "Institutional
Offering").
5. Purchase Agreement.
This Senior Note is issued simultaneously with other Senior
Notes of like tenor in an aggregate principal amount of up to $500,000, pursuant
to the Purchase Agreement of even date herewith among GEOK and the holders of
the Senior Notes, which Purchase Agreement contains provisions as to collateral,
Events of Default (inclusive of acceleration provisions with respect thereto)
and other terms of the Senior Notes. The foregoing provisions of the Purchase
Agreement and the representations and warranties of GEOK set forth in the
Purchase Agreement are hereby incorporated herein as if set forth at length
herein, which provisions and representations shall survive the execution and
delivery hereof so long as any amount is owed under this Senior Note. Any notice
herein required shall be given in accordance with the notice provisions of the
Purchase Agreement.
6. Detachable Warrants.
Contemporaneously with the execution and delivery hereof
pursuant to the Purchase Agreement, GEOK has issued to the Holder a detachable
warrant to purchase two shares of the Common Stock, for each $1 principal amount
of this Senior Note at an initial warrant exercise price of $0.75 per share of
Common Stock.
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7. Conversion Right.
(a) In the event this Senior Note has not been paid in full
(including all accrued interest and PIK Stock Interest and Default Interest
thereon) on or before the 30th day after the completion of the Institutional
Offering or September 30, 1997, whichever is earlier (the "Trigger Date"), the
Holder of this Senior Note shall have the right, exercisable at any time after
the Trigger Date and on or before the close of business, New York City local
time, on October 31, 1997, by notice to GEOK at its principal office at his
option to cause the conversion of this Senior Note at the principal amount
hereof into that number of shares of the Common Stock of GEOK, obtained by
dividing the aggregate face amount of this Senior Note by the lesser of (i) the
price per share of the Common Stock of GEOK (or other of equity securities or
debt securities of GEOK convertible or exchangeable for equity securities of
GEOK) that are sold in the Institutional Offering or (ii) the exercise price per
share of the detachable warrants of GEOK (the "Conversion Price Per Share").
(b) Subject to the right of the person in whose name this
Senior Note is registered on the record date to receive all interest (including
PIK Stock Interest and Default Interest) on such Senior Note accrued through the
date of conversion, no adjustment for interest (including PIK Stock Interest and
Default Interest) or dividends will be made upon the conversion of this Senior
Note. No fractional shares will be issued upon conversion, but if the conversion
results in a fraction, an appropriate amount will be paid by GEOK in cash. This
right of conversion shall cease upon payment in full of all principal and
accrued interest and PIK Stock Interest and Default Interest and other amounts
due in respect of this Senior Note.
(c) GEOK hereby agrees that at all times there shall be
reserved for issuance in respect of PIK Stock Interest and upon the exercise of
any conversion right under this Senior Note such number of shares of its Common
Stock as shall be required for issuance upon payment of PIK Stock Interest and
upon exercise of conversion rights under this Senior Note and that the par value
of such shares will at all times be less than or equal to the lesser of $0.75
per share or the applicable Conversion Price Per Share. GEOK further agrees that
all shares which may be issued upon the exercise of any rights represented by
this Senior Note will, upon issuance, be validly issued, fully paid and
non-assessable, free from all taxes, liens and charges with respect to the
issuance thereof other than income or gross receipt taxes and taxes, if any, in
respect of any transfer occurring contemporaneously with such issuance and other
than transfer restrictions imposed by federal and state securities laws.
(d) The conversion rights, if any, under this Senior Note are
subject to the following further provisions:
(i) If any recapitalization of GEOK or
reclassification of its Common Stock or any merger or
consolidation of GEOK into or with a corporation or other
business entity, or the sale or transfer of all or
substantially all of GEOK's assets or of any successor
corporation's assets to any other corporation or business
entity
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<PAGE>
(any such corporation or other business entity being included
within the meaning of the term "successor corporation") shall
be effected, at any time while this Senior Note remains
outstanding and is then convertible into Common Stock at the
Conversion Price Per Share then, as a condition of such
recapitalization, reclassification, merger, consolidation,
sale or transfer, lawful and adequate provision shall be made
whereby the Holder of this Senior Note or GEOK, as the case
may be, thereafter shall have the right to receive upon the
exercise of any conversion rights hereunder as provided in
Section 7(a) and in lieu of the shares of Common Stock
immediately theretofore issuable upon the exercise of
conversion rights under this Senior Note, such shares of
capital stock, securities or other property as may be issued
or payable with respect to or in exchange for a number of
outstanding shares of Common Stock equal to the number of
shares of Common Stock immediately theretofore issuable upon
the exercise of conversion rights under this Senior Note had
such recapitalization, reclassification, merger,
consolidation, sale or transfer not taken place, and in each
such case, the terms of this Senior Note shall be applicable
to the shares of stock or other securities or property
receivable upon the exercise of conversion rights under this
Senior Note after such consummation.
(ii) If GEOK at any time while this Senior Note
remains outstanding and is then convertible into Common Stock
at the Conversion Price Per Share shall subdivide or combine
its Common Stock, the number of shares of Common Stock
purchasable upon exercise of the conversion rights under this
Senior Note (the "Conversion Stock") shall be proportionately
adjusted.
(iii) If GEOK at any time while this Senior Note is
outstanding and is then convertible into Common Stock at the
Conversion Price Per Share shall take a record of the holders
of its Common Stock for the purpose of entitling them to
receive a dividend payable in, or other distribution of,
Common Stock (other than PIK Stock Interest), then the
Conversion Price Per Share shall be adjusted to that price
determined by multiplying the Conversion Price Per Share in
effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such record
date, and (ii) the denominator of which shall be the sum of
(A) the total number of shares of Common Stock outstanding
immediately prior to such record date and (B) the total number
of shares of Common Stock issuable pursuant to such dividend
or distribution.
(iv) The number of shares of Common Stock outstanding
at any given time for purposes of the adjustments set forth in
this Section 7(d) shall exclude any shares then directly or
indirectly held in the treasury of GEOK.
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(v) GEOK shall not be required to make any adjustment
of the Conversion Price Per Share pursuant to this Section
7(d) if the amount of such adjustment would be less than one
percent (1%) of the Conversion Price Per Share in effect
immediately before the event that would otherwise have given
rise to such adjustment. In such case, however, any adjustment
that would otherwise have been required to be made shall be
made at the time of and together with the next subsequent
adjustment which, together with any adjustment or adjustments
so carried forward, shall amount to not less than one percent
(1%) of the Conversion Price Per Share in effect immediately
before the event giving rise to such next subsequent
adjustment.
(vi) Following each computation or readjustment of an
adjusted Conversion Price Per Share as provided in this
Section 7(d), the new adjusted Conversion Price Per Share
shall remain in effect until a further computation or
readjustment thereof is required.
(e) Notices to Holders.
(i) Notice of Record Date. In case, at any time
while this Senior Note is outstanding and is then convertible
into Common Stock at the Conversion Price Per Share:
(A) GEOK shall take a record of the holders of
its Common Stock (or other stock or
securities at the time receivable upon the
exercise of any conversion rights under this
Senior Note) for the purpose of entitling
them to receive any dividend (other than a
PIK Stock Interest or a cash dividend
payable out of earned surplus of GEOK) or
other distribution, or any right to
subscribe for or purchase any shares of
stock of any class or any other securities,
or to receive any other right; or
(B) of any capital reorganization of GEOK, any
reclassification of the capital stock of
GEOK, any consolidation with or merger of
GEOK into another corporation, or any
conveyance of all or substantially all of
the assets of GEOK to another corporation;
or
(C) of any voluntary dissolution, liquidation or
winding-up of GEOK;
then, and in each such case, GEOK will mail or cause to be
mailed to the Holder hereof at the time outstanding a notice
specifying, as the case may be, (x) the date on which a record
is to be taken for the purpose of such dividend, distribution
or right, and stating the amount and character of such
dividend, distribution or right, or (y) the date on which such
reorganization, reclassification, consolidation,
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<PAGE>
merger, conveyance, dissolution, liquidation or winding-up is
to take place, and the time, if any, is to be fixed, as of
which the holders of record of Common Stock (or such stock or
securities at the time receivable upon the exercise of any
conversion rights under this Senior Note) shall be entitled to
exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 30 days prior to the record
date therein specified, or if no record date shall have been
specified therein, at least 30 days prior to such other
specified date.
(ii) Notice of Adjustments. Whenever any Conversion
Price Per Share shall be adjusted, pursuant to Section 7(d)
hereof, GEOK shall promptly make a certificate signed by its
Chairman, its CEO, its President or a Vice President and by
its Treasurer or Assistant Treasurer or its Secretary or
Assistant Secretary, setting forth in reasonable detail, the
event requiring the adjustment, the amount of the adjustment,
the method by which such adjustment was calculated and the
Conversion Price Per Share after giving effect to such
adjustment, and shall promptly cause copies of such
certificates to be mailed (by first class mail postage
prepaid) to the Holder of this Senior Note.
8. Interest Payment in Kind.
(a) In the event this Senior Note has not been paid in full
(including all accrued and PIK Stock Interest and Default Interest thereon) on
or before October 31, 1997, the Holder thereof shall be entitled to receive in
addition to any other interest hereon, a monthly premium interest payment
payable in Common Stock equal to an incremental rate of one percent (1%) of the
principal amount of this Senior Note (not compounded) for each one month period
this Senior Note is outstanding after July 31, 1997 up to an aggregate maximum
rate of twelve percent (12%), to wit: one percent (1%) for the month ending
August 31, 1997, two percent (2%) for the month ending September 30, 1997, three
percent (3%) for the month ending October 31, 1997, four percent (4%) for the
month ending November 30, 1997, five percent (5%) for the month ending December
31, 1997, six percent (6%) for the month ending January 31, 1998, seven percent
(7%) for the month ending February 28, 1998, eight percent (8%) for the month
ending March 31, 1998, nine percent (9%) for the month ended April 31, 1998, ten
percent (10%) for the month ended May 31, 1998, eleven percent (11%) for the
month ending June 30, 1998 and twelve percent (12%) for the month ending July
31, 1998; and at a rate of twelve percent (12%) for each month thereafter while
this Senior Note is outstanding (the "PIK Stock Interest"). The amount of PIK
Stock Interest shall be adjusted pro rata for payment of this Senior Note in
full (including all accrued interest and PIK Stock Interest thereon) prior to
the end of any month period on the basis of actual days elapsed and the number
of days in such month period. The amount of Common Stock payable as PIK Stock
Interest shall be calculated using the Warrant Price (as defined of the Warrants
issued pursuant to the Purchase Agreement)
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<PAGE>
determined as if such Warrants remained issued and outstanding through the date
of payment in full (including all accrued interest and PIK Stock Interest
thereon) of this Senior Note.
(b) Upon any default in the payment of any interest, principal
or other payment required hereunder, such payment and the unpaid principal
balance hereof shall bear interest thereafter at the rate of five percent (5%)
per annum in excess of the then current applicable rate of interest being
charged hereunder, or at the highest permissible legal rate, which ever is lower
(the "Default Rate"), until the default shall have been cured.
9. Senior Note Holder Not a Stockholder. The Holder of
this Senior Note, as such, shall not be entitled by reason of this Senior Note
to any rights whatsoever as a stockholder of GEOK.
10. Applicable Interest Rate.
The Holder of this Senior Note, on the one hand, and the
Company, on the other hand, intend that the obligations evidenced by the Senior
Notes conform strictly to the applicable usury laws from time to time in force.
All agreements between the Company and the Holder of this Senior Note, whether
now existing or hereafter arising and whether oral or written, hereby are
expressly limited so that in no contingency or event whatsoever, whether by
acceleration of maturity hereof or otherwise, shall the amount paid or agreed to
be paid to such Holder, or collected by such Holder, by or on behalf of the
Company for the use, forbearance or detention of the money to be loaned to the
Company hereunder or otherwise, or for the payment or performance of any
covenant or obligation contained herein of the Company to the Holder, or in any
other document evidencing, securing or pertaining to such indebtedness evidenced
hereby, exceed the maximum amount permissible under applicable usury law. If
under any circumstances whatsoever fulfillment of any provision thereof or any
other document, at the time performance of such provisions shall be due, shall
involve transcending the limit of validity prescribed by law, then, ipso facto,
the obligation to be fulfilled shall be reduced to the limit of such validity;
and if under any circumstances the Holder of this Senior Note ever shall receive
from or on behalf of the Company an amount deemed interest, by applicable law,
which would exceed the highest lawful rate, such amount that would be excessive
interest under applicable usury laws shall be applied to the reduction of the
principal amount owing hereunder and under this Senior Note and not to the
payment of interest, or if such excessive interest exceeds the unpaid balance of
principal and such other indebtedness, the excess shall be deemed to have been a
payment made by mistake and shall be refunded to the Company or to any other
person making such payment on the Company's behalf.
11. LAW GOVERNING.
THIS SENIOR NOTE AND ALL AMENDMENTS, SUPPLEMENTS,
MODIFICATIONS, WAIVERS AND CONSENTS RELATING HERETO SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
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<PAGE>
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
IN THE STATE OF NEW YORK.
12. SUBMISSION TO JURISDICTION;
Service of Process .
(a) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK,
AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS SENIOR
NOTE, THE PURCHASE AGREEMENT OR ANY OTHER EXHIBIT TO THE PURCHASE AGREEMENT MAY
BE LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES ANY OBJECTION WHICH IT MAY
HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY
PROCEEDING IN ANY SUCH COURT.
(b) In relation to any dispute arising out of or in connection
with this Senior Note, the Purchase Agreement or any other Exhibit thereto, and
for the exclusive benefit of the Holder, the Company irrevocably and
unconditionally submits to the non-exclusive jurisdiction of the United States
District Court for the Southern District of New York, and to the non-exclusive
jurisdiction of any court of the State of New York located in the City and
County of New York, for the purposes of any suit, action or other proceeding
arising out of, or relating to, this Senior Note, the Purchase Agreement or any
other Exhibit thereto or any of the transactions contemplated hereby or thereby,
and hereby waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, that it is not personally subject to the jurisdiction of the above
named courts for any reason whatsoever, that such suit, action or proceeding is
brought in an inconvenient forum, or that the venue of such suit, action or
proceeding is improper, or that this Senior Note, the Purchase Agreement or any
other Exhibit thereto or the subject matter hereof or thereof may not be
enforced in or by such courts. The Company hereby agrees that process against it
may be served by mail or delivery of service of process in any of the
aforementioned action, suits or proceedings to CT Corporation System, 1633
Broadway, New York, New York 10019 (such agent being hereinafter called the
"Process Agent"), which the Company hereby irrevocably designates and appoints
as its attorney-in-fact to receive service of process in any action, suit or
proceeding with respect to any matter as to which it submits to jurisdiction as
set forth above, it being agreed that service to such office or upon such agent
shall constitute valid service upon the Company. The Company hereby directs the
Process Agent to receive and accept all process on its behalf. The Company shall
promptly notify the Holder of any change in the address of the Process Agent and
may, with prior notice given to Holder, appoint a successor Process Agent;
provided, however, that if the Process Agent shall at any time cease to exist or
its agency shall for any reason cease, the Company shall designate forthwith a
successor Process Agent in the County and State of New York and shall give
prompt notice of such designation to the Holder, together with evidence of the
acceptance of any such appointment. The Company agrees irrevocably to the
service of process of any of the aforementioned courts in any suit, action or
proceeding described above by mailing of copies of such process to the Company
at its
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<PAGE>
address specified in Section 12(b) hereof. Nothing herein shall preclude service
of process in any other manner permitted by applicable law or prohibit the
Holder from commencing legal proceedings against the Company or any of its
properties in any other jurisdiction.
13. WAIVER OF TRIAL BY JURY.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
PARTIES HERETO IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS SENIOR NOTE OR THE PURCHASE
AGREEMENT OR ANY OTHER EXHIBIT THERETO OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY OR THE ACTIONS OF THE HOLDERS IN THE NEGOTIATION OR ENFORCEMENT
HEREOF OR THEREOF.
IN WITNESS WHEREOF, the Company has signed this Senior Note as
of the _____ day of April, 1997.
GEOKINETICS INC.
By:
-------------------------------
Name: Thomas J. Concannon
Title: Vice President
GEOKINETICS PRODUCTION CO., INC.
By:
-------------------------------
Name: Thomas J. Concannon
Title: Vice President
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<PAGE>
GEOSCIENCE SOFTWARE SOLUTIONS, INC.
By:
--------------------------------
Name: Thomas J. Concannon
Title: Vice President
HOC OPERATING CO., INC.
By:
--------------------------------
Name: Thomas J. Concannon
Title: Vice President
INITIALED FOR IDENTIFICATION______
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<PAGE>
EXHIBIT IV
[FORM OF WARRANT]
WARRANT TO PURCHASE COMMON STOCK OF
GEOKINETICS INC.
VOID AFTER 5:30 P.M. NEW YORK CITY
TIME ON THE EXPIRATION DATE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION
FROM THE REGISTRATION OR QUALIFICATION PROVISIONS OF FEDERAL AND STATE
SECURITIES LAWS BASED, IN PART, ON AN INVESTMENT REPRESENTATION OF THE PART OF
THE PURCHASER THEREOF. THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED,
DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM.
GEOKINETICS INC. (the "Company"), a Delaware corporation, for
value received, hereby agrees to sell upon the terms and on the conditions
hereinafter set forth, but no later than 5:30 p.m., New York City Time, on the
Expiration Date (as hereinafter defined) to
, the registered holder hereof (the "Holder"), having an address
set forth in the Warrant Register maintained by the Company, under the terms as
hereinafter set forth, [INSERT SUCH NUMBER AS EQUALS TWO SHARES OF COMMON STOCK
FOR EACH DOLLAR OF PRINCIPAL AMOUNT OF NOTE] fully paid and non-assessable
shares of the Company's Common Stock, par value $.20 per share (the "Warrant
Stock"), at a purchase price per share of Seventy-five Cents ($0.75) (as
adjusted as provided herein, the "Warrant Price") pursuant to this Warrant (the
"Warrant"). In accordance with the terms of that certain Securities Purchase
Agreement of even date herewith (the "Securities Purchase Agreement") between
the Company and the Holders of those certain 12% Senior Secured Promissory Notes
of the Company in favor of the Holders of even date herewith, the initial number
of shares as comprise the Warrant Stock was calculated on the basis of two
shares of Warrant Stock for each $1 principal amount of 12% Senior Secured
Promissory Notes subscribed for by the Holder. The number of shares of Warrant
Stock to be so issued and the Warrant Price are subject to adjustment as
hereinafter set forth. The term "Common Stock" shall mean, when used herein,
unless the context otherwise requires, the stock and other securities and
property at the time receivable upon the exercise of this Warrant.
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1. Exercise of Warrant.
(a) The Holder may exercise this Warrant according to its terms by
surrendering this Warrant to the Company at the address set forth in Section 10,
the subscription form attached hereto having then been duly executed by the
Holder, accompanied by cash, certified check or bank draft in payment of the
purchase price for the number of shares of the Warrant Stock specified in the
subscription form, or as otherwise provided in this Warrant prior to 5:30 p.m.,
local New York City time, on the Expiration Date. The Expiration Date shall be
December 31, 2002.
(b) This Warrant may be exercised in whole or in part so long as any
exercise in part hereof would not involve the issuance of fractional shares of
Warrant Stock. If exercised in part, the Company shall deliver to the Holder a
new Warrant, identical in form, in the name of the Holder, evidencing the right
to purchase the number of shares of Warrant Stock as to which this Warrant has
not been exercised, which new Warrant shall be signed by the Chairman and CEO or
the President and the Secretary or the Assistant Secretary of the Company. The
term Warrant as used herein shall include any subsequent Warrant issued as
provided herein.
(c) No fractional share or scrip representing fractional shares shall
be given upon the exercise of this Warrant. The Company shall pay cash in lieu
of fractions with respect to the Warrants based upon the Warrant Price at the
time of exercise of this Warrant.
(d) In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the Warrant Stock so purchased,
registered in the name of the Holder, shall be delivered to the Holder within a
reasonable time after such rights shall have been so exercised. The person or
entity in whose name any certificate for the Warrant Stock is issued upon
exercise of the rights represented by this Warrant shall for all purposes be
deemed to have become the holder of record of such shares immediately prior to
the close of business on the date on which the Warrant was surrendered and
payment of the Warrant Price and any applicable taxes was made, irrespective of
the date of delivery of such certificate, except that, if the date of such
surrender and payment is a date when the stock transfer books of the Company are
closed, such person shall be deemed to have become the holder of such shares at
the opening of business on the next succeeding date on which the stock transfer
books are open.
2. Disposition of Warrant Stock and Warrant.
(a) By the acceptance of this Warrant, the Holder hereby acknowledges
and covenants that this Warrant and any Warrant Stock purchased pursuant thereto
are and will be held for investment and not for distribution; provided that:
(i) the Warrant and/or Warrant Stock may not be transferred by
the Holder, (A) unless an exemption is available under the Securities
Act of 1933, as amended, and the rules and regulations promulgated by
the Securities and Exchange Commission
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thereunder (collectively the "Act"), and to a person who, in the
opinion of counsel to the Company, is a person to whom the Warrant
and/or Warrant Stock may be transferred legally without registration
and without the delivery of a current prospectus under the Act with
respect thereto and then only against receipt of (x) an agreement of
such person to comply with the provisions of this Section 2 with
respect to any resale or other disposition of such securities and (y)
an agreement by such person that he is acquiring such securities for
investment and not for distribution except in compliance with the Act;
or (B) except to a person upon delivery of a prospectus relating to the
Warrant and/or Warrant Stock then meeting the requirements of the Act;
and
(ii) the Warrant Stock shall be issued upon exercise of this
Warrant only in compliance with the Act.
(b) If, at the time of issuance of the shares issuable upon exercise of
this Warrant, no registration statement is in effect with respect to such shares
under applicable provisions of the Act, the Company may at its election require
that the Holder provide the Company with written reconfirmation of the Holder's
investment intent and that any stock certificate delivered to the Holder of a
surrendered Warrant shall bear legends reading substantially as follows:
"Transfer of the shares represented by this certificate is
subject to certain restrictions set forth in the Warrant pursuant to
which these shares were purchased from the Company. Copies of those
restrictions are on file at the principal offices of the Company, and
no transfer of such shares or of this certificate, or of any shares or
other securities (or certificates therefor) issued in exchange for or
in respect of such shares, shall be effective unless and until the
terms and conditions therein set forth shall have been complied with."
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, and may not be sold,
transferred, pledged or otherwise disposed of in the absence of an
effective registration statement under the Securities Act of 1933 or an
opinion of counsel satisfactory to the issuer of this certificate that
registration is not required under said Act."
In addition, so long as the foregoing legend may remain on any stock certificate
delivered to the Holder, the Company may maintain appropriate "stop transfer"
orders with respect to such certificates and the shares represented thereby on
its books and records and with those to whom it may delegate registrar and
transfer functions.
3. Reservation of Shares.
The Company hereby agrees that at all times there shall be reserved for
issuance upon the exercise of this Warrant such number of shares of its Common
Stock as shall be required for issuance upon exercise of this Warrant and that
the par value of such shares will at all times be
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less than or equal to the applicable Warrant Price. The Company further agrees
that all shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued, fully paid and
non-assessable, free from all taxes, liens and charges with respect to the
issuance thereof other than taxes, if any, in respect of any transfer occurring
contemporaneously with such issuance and other than transfer restrictions
imposed by federal and state securities laws.
4. Capital Adjustments.
This Warrant is subject to the following further provisions:
(a) Recapitalization, Reclassification and Succession. If any
recapitalization of the Company or reclassification of its Common Stock or any
merger or consolidation of the Company into or with a corporation or other
business entity, or the sale or transfer of all or substantially all of the
Company's assets or of any successor corporation's assets to any other
corporation or business entity (any such corporation or other business entity
being included within the meaning of the term "successor corporation") shall be
effected, at any time while this Warrant remains outstanding and unexpired,
then, as a condition of such recapitalization, reclassification, merger,
consolidation, sale or transfer, lawful and adequate provision shall be made
whereby the Holder of this Warrant thereafter shall have the right to receive
upon the exercise hereof as provided in Section 1 and in lieu of the shares of
Common Stock immediately theretofore issuable upon the exercise of this Warrant,
such shares of capital stock, securities or other property as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore issuable upon the exercise of this Warrant had such
recapitalization, reclassification, merger, consolidation, sale or transfer not
taken place, and in each such case, the terms of this Warrant shall be
applicable to the shares of stock or other securities or property receivable
upon the exercise of this Warrant after such consummation.
(b) Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the number of shares of Warrant Stock purchasable upon
exercise of this Warrant shall be proportionately adjusted.
(c) Certain Dividends and Distributions. If the Company at any time
while this Warrant is outstanding and unexpired shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend payable in, or other distribution of, Common Stock, then the number of
shares of Warrant Stock purchasable upon exercise of this Warrant shall be
adjusted to that number determined by multiplying the number of shares of
Warrant Stock so purchasable immediately prior to such record date by a fraction
(i) the numerator of which shall be the sum of (A) the total number of
outstanding shares of Common Stock immediately prior to such record date and (B)
the total number of shares of Common Stock
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issuable pursuant to such dividend or distribution, and (ii) the denominator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to such record date.
(d) Other Adjustments to Number of Shares of Warrant Stock. If the
Company at any time while this Warrant is outstanding and unexpired shall issue
more than ten percent (10%) of its then outstanding shares of Common Stock,
whether pursuant to a merger, consolidation or an acquisition of the stock or
assets of another corporation or entity, or otherwise (the "Additional Stock
Issuance"), then the number of shares of Warrant Stock purchasable upon exercise
of this Warrant shall be adjusted to that number determined by multiplying the
number of shares of Warrant Stock so purchasable immediately prior to the
Additional Stock Issuance by a fraction (i) the numerator of which shall be the
sum of (A) the total number of outstanding shares of Common Stock immediately
prior to such Additional Stock Issuance and (B) the total number of shares of
Common Stock issuable pursuant to such Additional Stock Issuance, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the Additional Stock Issuance.
(e) Corresponding Warrant Price Adjustment. Whenever the number of
shares of Warrant Stock purchasable upon the exercise of the rights granted to
the Holder herein is increased or decreased as provided in Section 4 (b) or (c),
the Warrant Price payable for the exercise of such rights shall be adjusted by
multiplying such Warrant Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of shares of Warrant Stock
purchasable upon the exercise of such rights immediately prior to such
adjustment, and of which the denominator shall be the number of shares of
Warrant Stock purchasable immediately thereafter.
(f) Certain Other Warrant Price Adjustments. (i) If the Company at any
time while this Warrant is outstanding and unexpired issues and sells, or is
deemed to have issued and sold (as provided in Section 4(f)(ii) or (iii)), any
shares of Common Stock, for a consideration per share of less than the Warrant
Price in effect immediately prior to the issuance of such additional Common
Stock, then, immediately following the issue and sale of such additional Common
Stock, the Warrant Price shall be adjusted by multiplying the Warrant Price in
effect immediately before the issuance of such additional Common Stock by the
number determined by dividing:
(A) An amount equal to (1) the total number of shares of Common
Stock outstanding immediately following the last previous adjustment of
the Warrant Price pursuant to this Section 4 (or on the date hereof if
there shall have been no previous adjustment) multiplied by the Warrant
Price in effect immediately prior to such issuance, plus (2) the
consideration, if any, received or deemed to have been received by the
Company upon such issuance and upon the issuance of any Common Stock
issued subsequent to the last previous adjustment of the Warrant Price
pursuant to this Section 4 (or subsequent to the date hereof if there
shall have been no such previous adjustment), by
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(B) The total number of shares of Common Stock outstanding
immediately after the issuance of such additional Common Stock (or
which would have been outstanding but for retirement of Common Stock or
acquisitions of Common Stock by or for the account of the Company
during the period covered by the computation) multiplied by the Warrant
Price in effect immediately prior to such issuance.
(ii) If the Company at any time while this Warrant is
outstanding and unexpired grants any rights, warrants or options (other
than the rights granted herein or in any stock option plan of the
Company covering officers, directors or employees of the Company) to
subscribe for Common Stock or any securities convertible or
exchangeable into Common Stock (such rights, warrants and options being
called the "Options" and such securities convertible into Common Stock
the "Convertible Securities"), then the maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the
conversion or exchange of the Convertible Securities will be deemed to
have been outstanding and to have been issued and sold by the Company,
and the appropriate adjustment to the Warrant Price will be made in
accordance with Section 4(f)(i). For purposes of this paragraph, the
consideration of the shares of Common Stock issuable upon the exercise
of such Options will be equal to the total amount received or
receivable by the Company for the granting of the Options plus the
minimum aggregate amount of additional consideration due the Company
upon the exercise of the Options (plus, in the case of the Options
relating to Convertible Securities, any additional consideration
payable upon the issuance or sale and the conversion and exchange
thereof).
(iii) If the Company at any time while this Warrant is
outstanding and unexpired issues or sells any Convertible Securities,
then the maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities will be
deemed to be outstanding and to have been issued or sold by the
Company, and the appropriate adjustment to the Warrant Price will be
made in accordance with Section 4(f)(i). For purposes of this
paragraph, the consideration for the shares of Common Stock issuable
upon conversion or exchange of all such Convertible Securities will be
equal to the total amount received or receivable by the Company for the
issue or sale of such Convertible Securities plus the minimum aggregate
amount of additional consideration, if any, payable upon the conversion
or exchange thereof.
(iv) If at any time while this Warrant is outstanding and
unexpired the purchase price per share for any Option, or any
additional consideration payable to the Company upon the exercise of
any Option or upon conversion of a Convertible Security, or the rate at
which any Convertible Securities are convertible or exchangeable into
Common Stock, is reduced, then the consideration for the shares of
Common Stock issuable upon the exercise or conversion thereof will be
recalculated giving effect to such reduction, and immediately after any
such price reduction or rate reduction becomes effective, the
appropriate adjustment to the Warrant Price will be made in accordance
with Section 4(f)(i).
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(g) Certain Shares Excluded. The number of shares of Common Stock
outstanding at any given time for purposes of the adjustments set forth in this
Section 4 shall exclude any shares then directly or indirectly held in the
treasury of the Company.
(h) Deferral and Cumulation of De Minimis Adjustments. The Company
shall not be required to make any adjustment of the Warrant Price pursuant to
this Section 4 if the amount of such adjustment would be less than one percent
(1%) of the Warrant Price in effect immediately before the event that would
otherwise have given rise to such adjustment. In such case, however, any
adjustment that would otherwise have been required to be made shall be made at
the time of and together with the next subsequent adjustment which, together
with any adjustment or adjustments so carried forward, shall amount to not less
than one percent (1%) of the Warrant Price in effect immediately before the
event giving rise to such next subsequent adjustment.
(i) Duration of Adjusted Warrant Price. Following each computation or
readjustment of an adjusted Warrant Price as provided in this Section 4, the new
adjusted Warrant Price shall remain in effect until a further computation or
readjustment thereof is required.
5. Notices to Holders.
(a) Notice of Record Date. In case:
(i) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the
exercisable of this Warrant) for the purpose of entitling them to
receive any dividend (other than a cash dividend payable out of earned
surplus of the Company) or other distribution, or any right to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right; or
(ii) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation
with or merger of the Company into another corporation, or any
conveyance of all or substantially all of the assets of the Company to
another corporation; or
(iii) of any voluntary dissolution, liquidation or winding-up of
the Company;
then, and in each such case, the Company will mail or cause to be mailed to the
Holder hereof at the time outstanding a notice specifying, as the case may be,
(i) the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any, is to be fixed, as of which
the holders of record of Common Stock (or such stock or securities at the time
receivable upon the exercise of this Warrant) shall be entitled to exchange
their shares of Common Stock (or such other stock or securities) for
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securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 30 days prior to the record
date therein specified, or if no record date shall have been specified therein,
at least 30 days prior to such other specified date.
(b) Notice of Adjustments. Whenever any Warrant Price shall be
adjusted, pursuant to Section 4 hereof, the Company shall promptly make a
certificate signed by its Chairman, its CEO, its President or a Vice President
and by its Treasurer or Assistant Treasurer or its Secretary or Assistant
Secretary, setting forth in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated and the Warrant Price after giving effect to such adjustment, and
shall promptly cause copies of such certificates to be mailed (by first class
mail, postage prepaid) to the Holder of this Warrant.
6. Loss, Theft, Destruction or Mutilation.
Upon receipt by the Company of evidence satisfactory to it, in the
exercise of its reasonable discretion, of the ownership and the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to the Company and, in the
case of mutilation, upon surrender and cancellation thereof, the Company will
execute and deliver in lieu thereof, without expense to the Holder, a new
Warrant of like tenor dated the date hereof.
7. Warrant Holder Not a Stockholder.
The Holder of this Warrant, as such, shall not be entitled by reason of
this Warrant to any rights whatsoever as a stockholder of the Company.
8. Transfer; Register.
Subject to the provisions of Section 2 above, this Warrant is
transferable in the same manner and with the same effect as in the case of a
negotiable instrument payable to a specified person. Pursuant to Section 6.4 of
the Securities Purchase Agreement, the Warrants shall be issued in registered
form only and the Company shall keep a register (the "Warrant Register") in
which provisions shall be made for the registration of the Warrants and the
registration of transfers thereof. Such Register shall be kept at the principal
office of the Company and the Company is hereby appointed the "Warrant
Registrar" for the purpose of registering the Warrants and transfers of the
Warrants. Subject to compliance with the provisions of Section 2 hereof and
Article III of the Securities Purchase Agreement by a transferee, upon surrender
for registration of transfer of any Warrant at the principal office of the
Company and compliance with the provisions of Section 2 hereof and Section 3.1
of the Securities Purchase Agreement, if applicable, the Company shall execute
and deliver, in the name of the designated transferee, a new Warrant. The
Company shall treat the individual or entity in whose name each Warrant is
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registered on the Warrant Register as the sole and absolute owner thereof,
notwithstanding any contrary notice.
9. Registration Rights.
The Holder shall have certain registration rights with respect to the
Warrant Shares, all as set forth in a Registration Rights Agreement of even date
herewith among the Company, the Holder and certain other Holders, a copy of
which is annexed hereto.
10. Notices.
Any notice required or contemplated by this Warrant shall be deemed to
have been duly given if transmitted by registered or certified mail, return
receipt requested, to the Company at Marathon Oil Tower, 5555 San Felipe, Suite
780, Houston, Texas 77056, Attention: President, or to the Holder at the name
and address set forth in the Warrant Register maintained by the Company.
11. Choice of Law.
This Warrant shall be governed by the local laws of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned has duly signed this Warrant as of
this ____ day of April, 1997.
GEOKINETICS INC.
By:
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Name: Thomas J. Concannon
Title: Vice President
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ASSIGNMENT FORM
FOR VALUE RECEIVED, the Undersigned Holder of the attached
Warrant, hereby sells, assigns and transfers unto _________________________
_______________________________ the right to purchase _____________________
shares of Common Stock of GEOKINETICS INC. evidenced by the attached Warrant,
and does hereby irrevocably constitute and appoint _______________________
Attorney to transfer the said Warrant on the books of the Company with full
power of substitution.
HOLDER:
_______________________________
Name:
Dated: _____________________, ______
In the presence of:
___________________________________
Name:
(NOTE: The signature of the Holder on the foregoing Assignment must correspond
exactly to the name as written on the face of the Warrant, without any
alteration, enlargement or change whatsoever.)
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SUBSCRIPTION FORM
The Undersigned, the Holder of the attached Warrant, hereby
irrevocably elects to exercise purchase rights represented by such Warrant for,
and to purchase thereunder, the following shares of Common Stock of GEOKINETICS
INC.:
Number of Shares Purchase Price Per Share
The undersigned herewith makes payment of $
therefor, and requests that certificates for such shares (and any warrants or
other property issuable upon such exercise) be issued in the name of and
delivered to whose address is and, if such shares shall not
include all of the shares issuable under such warrant, that a new warrant of
like tenor and date for the balance of the shares issuable thereunder be
delivered to the undersigned.
HOLDER:
_______________________________
Name:
Dated: _____________________, ______
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EXHIBIT V
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REGISTRATION RIGHTS AGREEMENT
By and Among
PURCHASERS OF UNITS
and
GEOKINETICS INC.
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Common Stock, par value $.20 per share
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Dated as of April 25, 1997
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Registration Under Securities Act, etc..........................................................1
1.1 Registration on Request................................................................1
1.2 Piggy-Back Registration................................................................3
1.3 Registration Procedures................................................................4
1.4 Underwritten Offerings.................................................................6
1.5 Preparation: Reasonable Investigation..................................................7
1.6 Qualification to Obligations under Registration Covenants..............................8
1.7 Indemnification........................................................................8
2. Definitions....................................................................................10
3. Rule 144 and Rule 144A.........................................................................12
4. Amendments and Waivers.........................................................................12
5. Nominees for Beneficial Owners.................................................................13
6. Notices........................................................................................13
7. Assignment.....................................................................................13
8. Calculation of Percentage Interests in Registrable Securities..................................14
9. No Inconsistent Agreements.....................................................................14
10. Remedies.......................................................................................14
11. Severability...................................................................................14
12. Entire Agreement...............................................................................14
13. Descriptive Headings...........................................................................14
14. Governing Law..................................................................................14
15. Counterparts...................................................................................14
</TABLE>
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REGISTRATION RIGHTS AGREEMENT, dated as of April 25, 1997,
among Geokinetics Inc., a Delaware corporation (the "Company") and each of the
undersigned Purchasers of Units identified on the signature page hereto
(individually, a "Purchaser" and collectively, the "Purchasers").
This Agreement is being entered into in connection with a
Securities Purchase Agreement, of even date herewith between the Company and the
Purchasers (the "Purchase Agreement") providing for the issuance by the Company
to the Purchasers of Units consisting of Senior Notes of the Company and
Warrants (collectively, the "Warrants") entitling the holders thereof to
purchase up to 1,000,000 shares (subject to adjustment) of Common Stock, par
value $.20 per share, of the Company (the "Common Stock"), upon the terms and
subject to the conditions set forth therein. It is a condition precedent to the
obligations of the Company and the Purchasers to consummate the transactions
contemplated by the Purchase Agreement that the Company and the Purchasers enter
into this Agreement. Capitalized terms used herein but not otherwise defined
shall have the meanings given them in the Purchase Agreement.
1. Registration Under Securities Act, etc.
1.1 Registration on Request.
(a) Request. At any time, or from time to time,
upon the written request of one or more holders (the "Initiating Holders") of
Registrable Securities representing not less than 25% of the Registrable
Securities that the Company effect the registration under the Securities Act of
all or part of such Initiating Holders' Registrable securities, the Company
promptly will give written notice of such requested registration to all
registered holders of Registrable Securities, and thereupon the Company will use
its best efforts to effect, at the earliest possible date, the registration
under the Securities Act of (i) the Registrable Securities which the Company has
been so requested to register by such Initiating Holders, and (ii) all other
Registrable Securities which the Company has been requested to register by the
holders thereof (such holders together with the Initiating Holders hereinafter
are referred to as the "Selling Holders") by written request given to the
Company within 30 days after the giving of such written notice by the Company,
all to the extent requisite to permit the disposition of the Registrable
Securities so to be registered.
(b) Registration of Other Securities. Whenever the
Company shall effect a registration pursuant to this Section 1.1, no securities
other than Registrable Securities shall be included among the securities covered
by such registration unless Initiating Holders of greater than 51% of the
Registrable Securities to be included in such registration shall have consented
in writing to the inclusion of such other securities, which consent shall not be
unreasonably withheld or delayed; provided however, that the foregoing
limitation shall not apply to any securities of the Company that were subject to
registration rights that were granted by the Company prior to the date hereof
and identified on Schedule 1.1(b) attached hereto (collectively, the "Existing
Registration Rights"), but provided further, that in the event that any notice
is given pursuant to Section 1.1(f) below with respect to such registration, the
Registrable
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Securities hereunder shall be given absolute priority over any other securities
subject to Existing Registration Rights with respect to inclusion in such
registration.
(c) Registration Statement Form. Registrations
under this Section 1.1 shall be on such appropriate registration form of the
Commission as shall be reasonably selected by the Company.
(d) Effective Registration Statement. A
registration requested pursuant to this Section 1.1 shall not be deemed to have
been effected unless a registration statement with respect thereto has become
effective and remained effective in compliance with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement for a period of at least 120 days.
(e) Selection of Underwriters. If the Selling
Holders of at least 50% of all Registrable Securities to be covered by a
registration so elect, the offering of such Registrable Securities pursuant to
this Section 1.1 shall be in the form of an underwritten offering. The
underwriter or underwriters of each underwritten offering of the Registrable
Securities so to be registered shall be selected by the Selling Holders of at
least 50% of the Registrable Securities to be included in such registration and
shall be reasonably acceptable to the Company.
(f) Priority in Requested Registration. If the
managing underwriter of an underwritten offering shall advise the Company in
writing (and the Company shall so advise each Selling Holder of Registrable
Securities requesting registration of such advice) that, in its opinion, the
number of securities requested to be included in such registration is
sufficiently large to materially adversely affect the success of the offering,
the Company, except as provided in the following sentence, will include in such
registration, to the extent of the number and type which the Company is so
advised can be sold in such offering, Registrable Securities requested to be
included in such registration, pro rata among the Selling Holders requesting
such registration on the basis of the estimated gross proceeds from the sale
thereof. To the extent Registrable Securities so requested to be registered are
excluded from the offering, the holders of such Registrable Securities shall be
deemed not to have used a demand registration pursuant to this Section 1.1.
(g) Limitations on Registration on Request.
Notwithstanding anything in this Section 1.1 to the contrary, the Company shall
not be required to take any action to file a registration statement pursuant to
this Section 1.1:
(i) within 120 days following the effective date of any
subsequent registered offering of the Company's securities to the
general public;
(ii) in any registration having an aggregate sales price
(before deduction of underwriting discounts and expenses of sale) of
less than $1,500,000;
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(iii) any registration having an aggregate sales price (before
deduction of underwriting discounts and expenses of sale) of more than
$5,000,000 unless such registration is firmly underwritten; or
(iv) after the Company has effected an aggregate of three such
registrations.
(h) Expenses. The Company will pay all Registration
Expenses in connection with any registration requested pursuant to this Section
1.1 and each Selling Holder shall pay all underwriting discounts or commissions
with respect to the Registrable Securities sold by such Selling Holder in such
registration.
1.2 Piggy-Back Registration.
(a) Right to Include Registrable Securities. If the
Company at any time proposes to file a registration statement to register any of
its equity securities (or any security convertible into or exchangable for any
equity security of the Company) under the Securities Act (except for
registration on Form S-4 or S-8 or any successor or similar forms), whether or
not for sale for its own account, it will each such time give prompt written
notice to all registered holders of Registrable Securities of its intention to
do so and of such holders' rights under this Section 1.2. Upon the written
request of any such holder (a "Requesting Holder") (which request shall specify
the amount of Registrable Securities intended to be disposed of by such
Requesting Holder) made as promptly as practicable and in any event within 30
days after the receipt of any such notice (20 days if the Company states in such
written notice or gives telephonic notice to all registered holders of
Registrable Securities, with written confirmation to follow promptly thereafter,
stating that (i) such registration will be on Form S-3 and (ii) such shorter
period of time is required because of a planned filing date), the Company will
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Requesting Holders thereof. No registration effected under this Section 1.2
shall relieve the Company of its obligation to effect any registration upon
request under Section 1.1.
(b) Priority in Incidental Registrations. If the managing
underwriter of any underwritten offering shall deliver a written opinion to the
holders of Registrable Securities that the total amount of Registrable
Securities requested to be included in such registration would have a material
adverse effect on such offering, then the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in (or during the time of) such offering, first, all securities proposed by
the Company to be sold for its own account, and second, such Registrable
Securities requested to be included in such registration pursuant to this
Agreement, pro rata among Requesting Holders on the basis of the estimated gross
proceeds from the sale thereof; provided that if securities are being offered
for the account of other persons or entities as well as the Company, such
reduction shall not represent a greater fraction of the number of securities
intended to be offered by holders of Registrable Securities than the fraction of
similar reductions imposed on such other persons or entities over the amount of
securities they intended to offer.
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(c) Expenses. The Company will pay all Registration
Expenses in connection with any registration effected pursuant to this Section
1.2 and each Selling Holder shall pay all underwriting discounts or commissions
with respect to the Registrable Securities sold by such Selling Holder in such
registration.
1.3 Registration Procedures. If and whenever the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 1.1 and 1.2, the Company will, as
expeditiously an possible use its best efforts to:
(i) prepare and (within 90 days after the end of the
period within which requests for registration may be given to
the Company or in any event as soon thereafter as practicable)
file with the Commission the requisite registration statement
to effect such registration and thereafter use its best
efforts to cause such registration statement to become
effective;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by
such registration statement for a period of at least 120 days;
(iii) furnish to each seller of Registrable Securities
covered by such registration statement such number of
conformed copies of such registration statement and of each
such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus
contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably
request;
(iv) register or qualify all Registrable Securities and
other securities covered by such registration statement under
such other securities or blue sky laws of such States of the
United States of America where an exemption is not available
and as the sellers of Registrable Securities covered by such
registration statement shall reasonably request; keep such
registration or qualification in effect for so long as such
registration statement remains in effect; and take any other
action which may be reasonably necessary or advisable to
enable such sellers to consummate the disposition in such
jurisdictions of the securities to be sold by such sellers,
except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for
the requirements of this subdivision (iv) be obligated to be
so qualified or to consent to general service of process in
any such jurisdiction;
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(v) cause all Registrable Securities covered by such
registration statement to be registered with or approved by
such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to
the Company and counsel to the seller or sellers of
Registrable Securities to enable the seller or sellers thereof
to consummate the disposition of such Registrable Securities;
(vi) furnish at the effective date of such registration
statement and, if applicable, the date of the closing under
the underwriting agreement, to each seller of Registrable
Securities, and each such seller's underwriters, if any, a
signed counterpart of (x) an opinion of counsel for the
Company, dated the effective date of such registration
statement and (y) a "comfort" letter signed by the independent
public accountants who have certified the Company's financial
statements included or incorporated by reference in such
registration statement, covering substantially the same
matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events subsequent
to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants'
comfort letters delivered to the underwriters in underwritten
public offerings of securities and, in the case of the
accountants' comfort letter, such other financial matters,
and, in the case of the legal opinion, such other legal
matters, as the sellers of the Registrable Securities covered
by such registration statement, or the underwriters, may
reasonably request;
(vii) notify each seller of Registrable Securities
covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the happening
of any event as a result of which, the prospectus included in
such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading, in the light of
the circumstances under which they were made, and at the
request of any such seller promptly prepare and furnish to it
a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they
were made;
(viii) otherwise comply with all applicable rules and
regulations of the Commission, and, if required, make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the
effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities
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Act and Rule 158 promulgated thereunder, and promptly furnish
to each such seller of Registrable Securities a copy of any
amendment or supplement to such registration statement or
prospectus;
(ix) keep each Selling Holder and each Requesting Holder
advised in writing as to the initiation and progress of any
registration under Section 1.1 or 1.2 hereunder, as the case
may be;
(x) provide and cause to be maintained a transfer agent
and registrar (which, in each case, may be the Company) for
all Registrable Securities covered by such registration
statement from and after a date not later than the effective
date of such registration; and
(xi) list all Registrable Securities covered by such
registration statement on any national securities exchange on
which Registrable Securities of the same class and, if
applicable, series, covered by such registration statement are
then listed or on the National Association of Securities
Dealers Automated Quotations ("NASDAQ") if the Registrable
Securities are reported on NASDAQ.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities, as is required by law or
the Commission to be included within the registration statement or as the
company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in subdivision (vii) of this
Section 1.3, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 1.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
1.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested
by the underwriters for any underwritten offering by holders of Registrable
Securities pursuant to a registration requested under Section 1.1, the Company
will use all reasonable efforts to enter into an underwriting agreement with
such underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to each such holder and the underwriters and
to contain such representations and warranties by the Company and such other
terms as are generally prevailing in agreements of that type, including, without
limitation, indemnities to the effect and to the extent provided in Section 1.7.
The holders of the Registrable Securities proposed to be sold by such
underwriters will reasonably cooperate with the Company in the
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negotiation of the underwriting agreement. Such holders of Registrable
Securities to be sold by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company other than representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution or any other representations required by applicable law.
(b) Incidental Underwritten Offerings. If the
Company proposes to register any of its securities under the Securities Act as
contemplated by Section 1.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
Requesting Holder of Registrable Securities, use its best efforts to arrange for
such underwriters to include all the Registrable Securities to be offered and
sold by such Requesting Holder among the securities of the Company to be
distributed by such underwriters. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriters and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. Any such Requesting
Holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Requesting Holder, such Requesting Holder's Registrable Securities and such
Requesting Holder's intended method of distribution or any other representations
required by applicable law.
1.5 Preparation: Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company (i) shall give the holders of
Registrable Securities registered under such registration statement, their
underwriters, if any, and their respective counsel and accountants the
reasonable opportunity to participate (at the expense of such holder or holders)
in the preparation of such registration statement, each prospectus included
therein or filed with the Commission, and each amendment thereof or supplement
thereto, (ii) shall give each of them such reasonable access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act and (iii) shall promptly notify the registered
holders of Registrable Securities and their counsel of any stop order issued or
threatened by the Commission and take all reasonable actions required to prevent
the entry of such stop order or to remove it if entered.
26426-1
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1.6 Qualification to Obligations under Registration Covenants.
The Company shall be entitled to postpone for a reasonable period of time (but
not exceeding 90 days) the filing of any registration statement otherwise
required to be prepared and filed by it pursuant to Section 1.1 if the Company
determines, in its reasonable judgment, that such registration and offering
would interfere with any financing, acquisition, corporate reorganization or
other material transaction involving the Company or any of its affiliates and
promptly gives the holders of Registrable Securities requesting registration
thereof pursuant to Section 1.1 written notice of such determination, containing
a general statement of the reasons for such postponement and an approximation of
the anticipated delay. If the Company shall so postpone the filing of a
registration statement, holders of Registrable Securities requesting
registration thereof pursuant to Section 1.1 and representing not less than 50%
of the Initiating Holders shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days after
receipt of the notice of postponement and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which holders of Registrable Securities are entitled pursuant to Section 1.1
hereof.
1.7 Indemnification.
(a) Indemnification by the Company. The Company will, and
hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Section 1.1 or 1.2, each seller of any Registrable
Securities covered by such registration statement and each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, and their respective directors,
officers, partners, employees and affiliates against any losses, claims, damages
or liabilities, joint or several, to which such seller or underwriter or any
such director, officer, partner, employee, affiliate or controlling person may
become subject under the Securities Act or otherwise, including, without
limitation, the reasonable fees and expenses of legal counsel, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the Company will
reimburse such seller or underwriter and each such director, officer, partner,
employee, affiliate and controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by or on behalf of such
seller or underwriter, as the case may be, specifically stating that it is for
use in the
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preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, employee, affiliate, partner or controlling Person and shall
survive the transfer of such securities by such seller.
(b) Indemnification by the Sellers. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 1.7) the Company, and each director of the Company, each officer of the
Company and each other Person, if any, who participates as an underwriter in the
offering or sale of such securities and each other Person who controls the
Company or any such underwriter within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, however, that the liability of such indemnifying party
under this Section 1.7(b) shall be limited to the amount of proceeds received by
such indemnifying party in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 1.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 1.7, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified,
to the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation, provided, however,
that if the indemnified party reasonably believes it is advisable for it to be
represented by separate counsel because there exists a conflict of interest
between its interests and those of the indemnifying party with respect to such
claim, or there exist defenses available to such indemnified party which may not
be available to the indemnifying party, or if the indemnifying party shall fail
to assume responsibility for such
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defense, the indemnified party may retain counsel satisfactory to it and the
indemnifying party shall pay all reasonable fees and expenses of such counsel.
No indemnifying party shall be liable for any settlement of any action or
proceeding effected without its written consent. No indemnifying party shall,
without the consent of the indemnified party, consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation or which
requires action other than the payment of money by the indemnifying party.
(d) Contribution. If the indemnification provided for in
this Section 1.7 shall for any reason be held by a court to be unavailable to an
indemnified party under subparagraph (a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under subparagraph (a) or (b) hereof, the indemnified
party and the indemnifying party under subparagraph (a) or (b) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the relative fault of
the Company and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company and such prospective sellers from the offering of the securities
covered by such registration statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Such prospective sellers' obligations to
contribute as provided in this subparagraph (d) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld or delayed.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding subdivisions of this
section 1.7 (with appropriate modifications) shall be given by the Company and
each seller of Registrable Securities with respect to any required registration
or other qualification of securities under any federal or state law or
regulation of any governmental authority other than the Securities Act.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 1.7 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
2. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
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"Affiliate" means any person that directly or indirectly
controls or is controlled by or is under common control with any Purchaser. For
purposes of this definition, an Affiliate of any Purchaser shall be deemed to
include any corporation, partnership, limited liability company or other entity
in which such Purchaser (whether directly, or indirectly through any other
Person that is an Affiliate) is an officer or director, general partner,
managing member or otherwise holds a significant equity interest.
"Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Common Stock" is defined in the second introductory paragraph
on page 1.
"Company" is defined in the first introductory paragraph on
page 1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include a reference to the comparable section, if any, of any such similar
Federal statute.
"Existing Registration Rights" is defined in Section 1.1(b).
"Initiating Holder" is defined in Section 1.1.
"Person" means any individual, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind.
"Purchaser" and "Purchasers" are defined in the first
introductory paragraph on page 1.
"Purchase Agreement" is defined in the second introductory
paragraph on page 1.
"Registrable Securities" means (i) any shares of Common Stock
issued from time to time upon exercise of the Warrants, (ii) any shares of
Common Stock issued from time to time as PIK Stock Interest (as such term is
defined in the Senior Notes) or upon any conversion of the Senior Notes, (iii)
any shares of Common Stock acquired from time time time by any Purchaser or any
Affiliate thereof, and (iv) any Related Registrable Securities. As to any
particular Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been distributed to the public pursuant to Rule
144 (or any successor provision) under the Securities Act, (c) they shall have
been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not require
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registration of them under the Securities Act, or (d) they shall have ceased to
be outstanding. All references to percentages of Registrable Securities shall be
calculated pursuant to Section 8.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with Section 1, including, without
limitation, all registration, filing and NASD fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and disbursements
of counsel for the Company and of its independent public accountants, including
the expenses of "cold comfort" letters required by or incident to such
performance and compliance, any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (excluding any underwriting
discounts or commissions with respect to the Registrable Securities) with
respect to an underwritten offering.
"Related Registrable Securities" means any securities of the
Company issued or issuable with respect to the securities by way of a dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise.
"Requesting Holder" is defined in Section 1.2.
"Securities Act" means the Securities Act of 1933, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such similar statute.
"Selling Holder" is defined in Section 1.1.
"Warrants" is defined in the second introductory paragraph on
page 1.
3. Rule 144 and Rule 144A. The Company shall take all actions
reasonably necessary to enable holders of Registrable Securities to sell such
securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, (b) Rule 144A under the Securities Act,
as such Rule may be amended from time to time, or (c) any similar rules or
regulations hereafter adopted by the Commission, including, without limiting the
generality of the foregoing, filing on a timely basis all reports required to be
filed by the Exchange Act. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether the Company has complied with such requirements.
4. Amendments and Waivers. This Agreement may be amended with
the written consent of the Company and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such amendment,
action or omission to act of the holder or holders of at least 50% of the
Registrable Securities affected by such amendment, action or omission to act.
Each holder of any Registrable Securities at the time or thereafter outstanding
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shall be bound by any consent authorized by this Section 4, whether or not such
Registrable Securities shall have been marked to indicate such consent.
5. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities hold by any holder or holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
6. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telex,
telegram, telecopier, reputable courier service or personal delivery:
(a) if to the Purchasers, addressed to them in the
manner set forth in the Purchase Agreement, or at such other
address as it shall have furnished to the Company in writing;
(b) if to any other holder of Registrable Securities, at
the address that such holder shall have furnished to the
Company in writing, or, until any such other holder so
furnishes to the Company an address, then to and at the
address of the last holder of such Registrable Securities who
has furnished an address to the Company; or
(c) if to the Company, addressed to it in the manner
set forth in the Purchase Agreement, or at such other address
as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; one business
day after being sent by reputable courier service; three business days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; and when receipt is acknowledged, if telecopied.
7. Assignment. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and, with respect to
the Company, its respective successors and assigns and, with respect to each
Purchaser, any holder who is an affiliate or successor entity to such Purchaser
or a transferee therefrom of any Registrable Securities, subject to the
provisions respecting the minimum numbers of percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein. The Purchasers named on the signature
page of this Agreement (and not any other holder of Registrable Securities or
any other Person) shall be permitted, in connection with
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a transfer or disposition of Registrable Securities, to eliminate or impose
conditions or constraints on the ability of the transferee, as a holder of
Registrable Securities, to request a registration pursuant to Sections 1.1 and
1.2 and shall provide the Company with copies of such conditions or constraints
and the identity of such transferees.
8. Calculation of Percentage Interests in Registrable
Securities. For purposes of this Agreement, all references to a percentage of
the Registrable Securities shall be calculated based upon the number of shares
of Registrable Securities outstanding at the time such calculation is made.
9. No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement.
10. Remedies. Each holder of Registrable Securities, is
entitled to exercise all rights granted by law, including recovery of damages;
such rights not to extend to incidental or consequential damages.
11. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Purchaser shall be enforceable to the fullest extent permitted by law.
12. Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
13. Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for reference
only and shall not limit or otherwise affect the meaning hereof.
14. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of New York applicable to agreements made and to be
performed entirely within such State.
15. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
GEOKINETICS INC.
By:/s/ THOMAS J. CONCANNON
--------------------------------------
Name: Thomas J. Concannon
Title: Vice President
PURCHASERS:
/s/ STEVEN A. WEBSTER
--------------------------------------
Steven A. Webster, Individually
/s/ WILLIAM R. ZIEGLER
--------------------------------------
William R. Ziegler, Individually
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SCHEDULE 1.1(b)
EXISTING REGISTRATION RIGHTS
(See Attached)
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EXHIBIT VI
Mr. William R. Ziegler
c/o Parson & Brown
666 Third Avenue, 9th Floor
New York, New York 10017
April 25, 1997
Geokinetics Inc.
Marathon Oil Tower
5555 San Felipe, Suite 780
Houston, Texas 77056
Attention: Jay D. Haber, President
Dear Mr. Haber:
This letter is to confirm the understanding between Geokinetics Inc.
("GEOK") and me with respect to my involvement with the ongoing affairs of GEOK
in connection with the $500,000 bridge loan financing provided to GEOK by me and
certain other persons pursuant to the Securities Purchase Agreement of even date
herewith among GEOK and the purchasers signatory thereto (the "Securities
Purchase Agreement"). Capitalized terms used herein without definition shall
have the respective meanings ascribed to them in the Securities Purchase
Agreement.
The following provisions are to govern our relationship:
1. Upon my request, GEOK and Jay D. Haber shall use their best efforts
to cause me to be elected as a director of GEOK so long as I and/or any person
or entity controlled by or affiliated with me shall hold at least 3% (on a fully
diluted basis, including holdings of debt which may be converted into equity
securities and warrants to purchase equity securities) of the equity securities
of GEOK.
2. I shall hold myself available to perform strategic planning and
other consulting services to GEOK and its subsidiaries as determined from time
to time by me and the President of GEOK (including, but not limited to, advice
as to the financial structure of GEOK and its subsidiaries and the refinancing
of the indebtedness of GEOK and its subsidiaries), such services to be rendered
upon the request of the President of GEOK and at such times and for such periods
as we shall mutually agree. In consideration for such services, GEOK and its
subsidiaries hereby agree to pay to me a quarterly consulting fee
(the "Consulting Fee") equal to one half of 1% of the total investment made by
me and the other purchasers of debt and equity securities of GEOK identified or
introduced by me on or before July 31, 1997 that is outstanding as of the end of
each quarter for the full quarter or pro rata portion thereof during the term
hereof. Such total investment shall include (i) the principal amount of any
senior notes issued pursuant to the
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Geokinetics Inc. -2- April 25, 19972
Securities Purchase Agreement, (ii) the purchase price of any shares of Common
Stock of GEOK acquired pursuant to any exercise of Warrants issued pursuant to
the Securities Purchase Agreement, (iii) the Conversion Price Per Share (as
defined in the Senior Notes) of any shares of Common Stock of GEOK issued as PIK
Stock Interest pursuant to the Senior Notes or upon conversion of the Senior
Notes and (iv) and the purchase price of any securities of GEOK that may be
purchased by me or any affiliate of mine or any investor identified by me on or
before July 31, 1997, as part of any private placement of securities of GEOK.
The Consulting Fee will be paid quarterly in arrears on the last business day of
March, June, September and December, commencing on September 30, 1997.
3. GEOK agrees to reimburse me for such reasonable out-of-pocket fees
and expenses that may be incurred by me in connection with or arising out of the
consulting services to be rendered by me hereunder, including, but not limited
to, telephone, telex, courier services, accommodations, and travel and
secretarial costs, and other similar costs (collectively, the "Expenses"). The
Expenses shall be reimbursed to me within thirty days after presentation by me
to GEOK of an invoice setting forth in reasonable detail the Expenses or such
other evidence of same as reasonably may be requested by GEOK.
4. The services to be rendered by me hereunder shall be rendered by me
as an independent consultant and not an employee of GEOK or any of its
subsidiaries.
5. GEOK agrees to indemnify me and my heirs and personal
representatives and my employees and each person, if any, who controls me within
the meaning of Section 20 of the Securities Exchange Act of 1934 or Section 15
of the Securities Act of 1933 (any and all of such persons are herein referred
to as an "indemnified party"), from and against all losses, claims, damages and
liabilities, joint or several (including all legal or other expenses reasonably
incurred by an indemnified party, as incurred, in connection with the
preparation for defense of any claim, action or proceeding, whether or not
resulting in any liability), to which such indemnified party becomes subject
under any applicable federal or state law or otherwise and arising out of the
relationship created hereunder, including, without limitation, any such
liability that is (i) caused by or arising out of any untrue statement or
alleged untrue statement by GEOK of a material fact or the omission or the
alleged omission by GEOK to state a material fact necessary in order to make the
statements made by GEOK not misleading in light of the circumstances under which
they were made, or (ii) caused by or arising out of any act or failure to act by
GEOK, or (iii) caused by or arising out of my rendering the services pursuant to
this consulting agreement; provided, however, that GEOK shall not be liable
under clause (iii) of this paragraph for any losses, claims, damages or
liabilities of any kind which result from or arise out of the bad faith, willful
misconduct, recklessness or gross negligence of any indemnified party. The
parties hereto acknowledge that such indemnification is in addition to and
separate from any indemnification that may be available to me under the
certificate of incorporation or by-laws of GEOK in the event that I become a
director of GEOK.
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Geokinetics Inc. -3- April 25, 1997
If any action or proceedings shall be brought or asserted against any
indemnified party in respect of which indemnity is to be sought from GEOK, the
indemnified party shall promptly notify GEOK in writing, and GEOK shall assume
the defense thereof, including the employment of counsel and the payment of all
expenses. The indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be the expense of the indemnified party. GEOK
shall not be liable for any settlement of any action or proceeding effected
without the written consent of GEOK, but if settled with such written consent,
or if there be a final judgment for the plaintiff in any such action or
proceeding, GEOK agrees to indemnify and hold harmless the indemnified party
from and against any loss or liability by reason of any such settlement or
judgment. Any obligations pursuant to the indemnification included in this
paragraph and the preceding paragraph shall survive the termination or
expiration of this consulting agreement.
6. As additional compensation for the services to be provided by me as
an independent, outside director of GEOK, GEOK shall grant to me non-qualified
stock options to purchase an aggregate of 50,000 shares of Common Stock of GEOK,
which stock options (i) shall not (A) be subject to any vesting requirements or
other conditions or (B) expire on my ceasing to serve as a director of GEOK or a
consultant hereunder, and (ii) shall (A) be freely transferable (subject to
applicable federal and state securities laws), (B) have a five year exercise
period, (C) have an exercise price of $0.75 and (D) otherwise be on such terms
and conditions reasonably satisfactory to me.
7. The initial term of my consulting arrangement shall be three years
from the date hereof, at which time GEOK and I will review the continuation or
expansion of the scope of and compensation under this consulting agreement.
If the foregoing correctly sets forth your understanding and agreement
as to the consulting arrangements between GEOK and me, please so indicate by
signing and returning to me the enclosed duplicate of this letter.
Sincerely,
/s/ WILLIAM R. ZIEGLER
-----------------------
William R. Ziegler
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Geokinetics Inc. -4- April 25, 1997
The foregoing correctly sets forth our understanding as of the date of this
letter.
GEOKINETICS INC.
By: /s/ THOMAS J. CONCANNON
-----------------------------------
Name: Thomas J. Concannon
Title: Vice President
The undersigned agrees and consents as to paragraph 1 of this letter.
/s/ JAY D. HABER
- ---------------------------------------
Jay D. Haber
