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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 LLP
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)
July 18, 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 241 Pages
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CUSIP NO. 372910 10 9 13D PAGE 2 OF 241 PAGES
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NAME OF REPORTING PERSONS
1 S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Blackhawk Investors, L.L.C.
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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 OO (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
Delaware
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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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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 8,666,667 shares (assuming the conversion of the Series A and Series B
Preferred into Common); 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)
59.01% (assuming the conversion of the Series A and Series B Preferred
into Common); See Item 5(a)
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14 TYPE OF REPORTING PERSON*
OO (Limited Liability Company)
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 241 Pages
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CUSIP NO. 372910 10 9 13D PAGE 3 OF 241 PAGES
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NAME OF REPORTING PERSONS
1 S.S OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Blackhawk Capital Partners
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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 OO (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
Texas
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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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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 8,666,667 shares (assuming the conversion of the Series A and Series
B Preferred into Common); 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)
59.01% (assuming the conversion of the Series A and Series B
Preferred into Common); See Item 5(a)
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 241 Pages
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CUSIP NO. 372910 10 9 13D PAGE 4 OF 241 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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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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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 10,347,915 shares (assuming the conversion of the Series A and Series
B Preferred into Common and the exercise of the Bridge Loan Warrants
owned by Webster); 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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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 64.5% (assuming the conversion of the Series A and Series B Preferred
into Common and the exercise of the Bridge Loan Warrants owned by
Webster); See Item 5(a)
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 4 of 241 Pages
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CUSIP NO. 372910 10 9 13D PAGE 5 OF 241 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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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 10,397,929 shares (assuming the conversion of the Series A and Series
B Preferred into Common and the exercise of the Bridge Loan Warrants
and Ziegler Options owned by Ziegler); 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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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 64.6% (assuming the conversion of the Series A and Series B Preferred
into Common and the exercise of the Bridge Loan Warrants and Ziegler
Options owned by Ziegler); See Item 5(a)
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 5 of 241 Pages
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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, pursuant to the terms and conditions of a
certain Securities Purchase and Exchange Agreement dated July 18, 1997 among the
Company (as hereinafter defined) and the reporting persons (the "Securities
Purchase and Exchange 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.
Steven A. Webster and William R. Ziegler, two of the reporting persons
named in Item 2 below, are also signatories to (i) a certain Schedule 13D which
was jointly filed with Securities and Exchange Commission (the "Commission") on
May 5, 1997 by such reporting persons (the "Initial Group Filing") because such
persons may have been deemed to constitute a "group" within the meaning of Rule
13d-5(b)(1) promulgated pursuant to the Exchange Act by virtue of the fact that
they may have acted in concert in connection with their acquisition of certain
securities of the issuer, inclusive of certain 12% Senior Secured Notes of the
Company and certain subsidiaries of the Company (collectively, the "Senior
Notes") and Warrants to acquire Common Stock of the Company (collectively, the
"Bridge Loan Warrants"), pursuant to the terms and conditions of a certain
Securities Purchase Agreement dated April 25, 1997 (the "Bridge Loan Securities
Purchase Agreement") and (ii) a certain Amendment No. 1 to the Initial Group
Filing, which is being filed with the Commission contemporaneously with the
filing of this Initial Statement of Beneficial Ownership, on Schedule 13D, to
disclose a termination of such Initial Group Filing (the "Termination of Initial
Group Filing") upon the filing of this Statement.
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.
Blackhawk Investors, L.L.C. ("Blackhawk"), Blackhawk Capital Partners
("BCP"), Steven A. Webster ("Webster") and William R. Ziegler ("Ziegler") are
purchasers of
Page 6 of 241 Pages
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certain securities of the Company, consisting of shares of Common Stock, shares
of Series A Convertible Preferred Stock of the Company and Shadow Warrants to
acquire Common Stock of the Company, pursuant to the terms and conditions of the
Securities Purchase and Exchange Agreement and Blackhawk is the purchaser of
certain additional securities of the Company, consisting of shares of Series B
Convertible Preferred Stock of the Company and Shadow Warrants to acquire Common
Stock of the Company, pursuant to the terms and conditions of the Securities
Purchase Agreement dated as of July 24, 1997 between the Company and Blackhawk
(the "Subsequent Securities Purchase Agreement"). Blackhawk, BCP, Webster and
Ziegler are sometimes hereinafter individually referred to as a "Reporting
Person" and collectively referred to as the "Reporting Persons").
Blackhawk is a Delaware limited liability company that was formed
recently to acquire, own and hold the securities of the Company (inclusive of
the shares of Common Stock) to be purchased by it pursuant to the Securities
Purchase and Exchange Agreement. The address of the principal business and the
principal office of Blackhawk is 3662 Piping Rock, Houston, Texas 77027. The
sole managing member of Blackhawk is BCP.
BCP is a Texas general partnership that was formed recently to serve
as the sole managing member of Blackhawk. The address of the principal business
and the principal office of BCP is 3662 Piping Rock, Houston, Texas 77027. The
only partners of BCP are Steven A. Webster and William R. Ziegler.
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 LLP, 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, none of the Reporting Persons has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors). During the last five years, none 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 and
Exchange Agreement, on July 18, 1997, Blackhawk purchased from the Company (i)
5,041,667 shares of
Page 7 of 241 Pages
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Common Stock, (B) 171,875 shares of Series A Convertible Preferred Stock of the
Company (the "Series A Preferred Stock") and (C) a Shadow Warrant to purchase up
to an aggregate of 6,512,095 shares of Common Stock, subject to adjustment (the
"Initial Blackhawk Shadow Warrant"), for an aggregate cash purchase price of
$5,500,000, of which $3,781,250 was paid in consideration of the Common Stock
($0.75 per share) and $1,718,750 was paid in consideration of the Series A
Preferred Stock ($10.00 per share). Pursuant to the terms and conditions of the
Subsequent Securities Purchase Agreement, on September 30, 1997 Blackhawk
purchased from the Company (i) 100,000 shares of Series B Convertible Preferred
Stock of the Company (the "Series B Preferred Stock"; the Series A Preferred
Stock and the Series B Preferred Stock are sometimes hereinafter collectively
referred to as the "Preferred Stock") and (ii) a Shadow Warrant to purchase up
to an aggregate of 1,100,255 shares of Common Stock, subject to adjustment (the
"Subsequent Blackhawk Shadow Warrant"), for an aggregate cash purchase price of
$1,000,000, all of which was paid in consideration of the Series B Preferred
Stock ($10.00 per share).
The source of funds for the $6,500,000 aggregate purchase price for
the securities of the Company purchased by Blackhawk pursuant to the Securities
Purchase and Exchange Agreement and the Subsequent Securities Purchase Agreement
was the offering and sale of limited liability company interests in Blackhawk in
a private placement transaction.
Pursuant to the terms and conditions of the Securities Purchase and
Exchange Agreement, on July 18, 1997, Webster and Ziegler (sometimes hereinafter
individually referred to as a "Holder" and collectively referred to as the
"Holders") purchased from the Company (i) 458,333 shares of Common Stock (of
which 229,166 shares were issued to Webster and 229,167 shares were issued to
Ziegler), (ii) 15,625 shares of Series A Preferred Stock (of which 7,812 shares
were issued to Webster and 7,813 shares were issued to Ziegler) and (iii) Shadow
Warrants to purchase up to an aggregate of 592,009 shares of Common Stock,
subject to adjustment (the "Holders' Shadow Warrants", consisting of (A) a
Shadow Warrant issued to Webster with respect to the right to acquire up to
296,004 shares of Common Stock (the "Webster Shadow Warrant") and (B) a Shadow
Warrant issued to Ziegler with respect to the right to acquire up to 296,005
shares of Common Stock (the "Ziegler Shadow Warrant")), in consideration of an
aggregate purchase price of $500,000 (the "Holders' Purchase Price"), of which
$343,750 was paid in consideration of the Common Stock ($0.75 per share) and
$156,250 was paid in consideration of the Series A Preferred Stock ($10.00 per
share). The Holders' Purchase Price was paid by the surrender and delivery by
the Holders to the Company of the Senior Notes, in the aggregate principal
amount of $500,000 (Senior Note No. 1 issued to Webster in the principal amount
of $250,000 and Senior Note No. 2 issued to Ziegler in the principal amount of
$250,000).
The source of funds for the $500,000 aggregate purchase price for the
securities of the Company acquired by Webster and Ziegler pursuant to the
Securities Purchase and Exchange Agreement was the surrender to the Company of
the Senior Notes, in the aggregate principal amount of $500,000. As previously
disclosed in the Initial Group Filing, the source of funds for the $500,000
subscription price for the Senior Notes and Bridge Loan Warrants acquired by
Webster and Ziegler pursuant to the Bridge Loan Securities Purchase Agreement
was a draw
Page 8 of 241 Pages
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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 Webster
and Ziegler through a corporation that they own and control.
ITEM 4. PURPOSE OF TRANSACTION.
As disclosed in Item 3 above, (i) on July 18, 1997, pursuant to the
terms and conditions of the Securities Purchase and Exchange Agreement, (A)
Blackhawk acquired from the Company (x) 5,041,667 shares of Common Stock, (y)
171,875 shares of Series A Preferred Stock and (z) the Initial Blackhawk Shadow
Warrant, representing the right to purchase up to an aggregate of 6,512,095
shares of Common Stock (subject to adjustment), (B) Webster acquired from the
Company (x) 229,166 shares of Common Stock, (y) 7,812 shares of Series A
Preferred Stock and (z) the Webster Shadow Warrant, representing the right to
purchase up to an aggregate of 296,004 shares of Common Stock (subject to
adjustment) and (C) Ziegler acquired from the Company (x) 229,167 shares of
Common Stock, (y) 7,813 shares of Series A Preferred Stock and (z) the Webster
Shadow Warrant, representing the right to purchase up to an aggregate of 296,005
shares of Common Stock (subject to adjustment) and (ii) on September 30, 1997,
pursuant to the terms and conditions of the Subsequent Securities Purchase
Agreement, Blackhawk acquired from the Company (A) 100,000 shares of Series B
Preferred Stock and (B) the Subsequent Blackhawk Shadow Warrant, representing
the right to purchase up to an aggregate of 1,100,255 shares of Common Stock
(subject to adjustment).
Pursuant to the terms of the Certificate of Designation of Series A
Convertible Preferred Stock of the Company (the "Series A Certificate of
Designation"), each share of the Series A Preferred Stock (i) has a liquidation
preference of $10.00 per share, (ii) has the right to vote as one class with the
shares of Common Stock, with each share of Series A Preferred Stock entitling
the holder thereof to such number of votes as shall be equal to the number of
shares of Common Stock into which such share of Series A Preferred Stock is then
convertible into, (iii) is entitled to dividends at the same rate as such
dividends are declared with respect to the shares of Common Stock, with each
share of Series A Preferred Stock being deemed to represent such number of
shares of Common Stock into which it is then convertible, (iv) is not be subject
to any redemption rights in favor of the Company and (v) is subject to mandatory
conversion into 13 1/3 shares of Common Stock (subject to adjustment) upon the
filing by the Company of an amendment to its Certificate of Incorporation to
increase the number of authorized shares of its Common Stock from 15,000,000
shares to 100,000,000 shares (the "Charter Amendment"). Pursuant to a covenant
contained in the Series A Certificate of Designation, the Company is obligated
to use its best efforts to cause the Charter Amendment to be approved by its
stockholders as soon as possible following the closing of the transactions
contemplated by the Securities Purchase and Exchange Agreement and to file the
Charter Amendment with the Secretary of State of Delaware promptly following
such stockholder approval.
Pursuant to the terms of the Certificate of Designation of Series B
Convertible Preferred Stock of the Company (the "Series B Certificate of
Designation"), each share of the Series B Preferred Stock (i) has a liquidation
preference of $10.00 per share, (ii) has the right to
Page 9 of 241 Pages
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vote as one class with the shares of Common Stock and the shares of Series A
Preferred Stock, with each share of Series B Preferred Stock entitling the
holder thereof to such number of votes as shall be equal to the number of shares
of Common Stock into which such share of Series B Preferred Stock is then
convertible into, (iii) is entitled to dividends at the same rate as such
dividends are declared with respect to the shares of Common Stock and the Series
A Preferred Stock, with each share of Series B Preferred Stock being deemed to
represent such number of shares of Common Stock into which it is then
convertible, (iv) is not be subject to any redemption rights in favor of the
Company and (v) is subject to mandatory conversion into 13 1/3 shares of Common
Stock (subject to adjustment) upon the later of (A) January 1, 1998 or (B) the
filing by the Company of the Charter Amendment. Pursuant to a covenant contained
in the Series B Certificate of Designation, the Company is obligated to use its
best efforts to cause the Charter Amendment to be approved by its stockholders
as soon as possible following the closing of the transactions contemplated by
the Subsequent Securities Purchase Agreement and to file the Charter Amendment
with the Secretary of State of Delaware promptly following such stockholder
approval.
The Initial Blackhawk Shadow Warrant and the Subsequent Blackhawk
Shadow Warrant (collectively, the "Blackhawk Shadow Warrants") provide Blackhawk
the right to acquire up to an aggregate of 7,612,350 shares of Common Stock
(subject to adjustment) under certain circumstances. The Webster Shadow Warrant
and the Ziegler Shadow Warrant (collectively, the "Holders' Shadow Warrants";
the Blackhawk Shadow Warrants and the Holders' Shadow Warrants being sometimes
hereinafter collectively referred to as the "Shadow Warrants"), provide Webster
and Ziegler the right to acquire up to an aggregate of 296,004 shares of Common
Stock (subject to adjustment) and 296,005 shares of Common Stock (subject to
adjustment), respectively, in each case, under certain circumstances. The Shadow
Warrants are essentially anti-dilution devices that are exercisable only in the
event that certain designated warrants that were outstanding on the date of the
Bridge Loan Securities Purchase Agreement (the "Subject Warrants") are
exercised, and in such event, only with respect to such percentage of the
aggregate number of shares issuable pursuant to the Subject Warrants
(hereinafter, the "Exercise Shares") as equals, in the aggregate, approximately
65% of the sum of the maximum amount of Exercise Shares and the maximum amount
of shares issuable under the Shadow Warrants, in the aggregate. The exercise
price for the Shadow Warrants is $0.20 per share.
Pursuant to Section 1.6(i) of the Securities Purchase and Exchange
Agreement, and in satisfaction of the requirements set forth in that certain
consulting and engagement agreement dated April 25, 1997 between the Company and
Ziegler and Jay D. Haber, President of the Company ("Haber"), as to paragraph 1
thereof (the "Consulting Agreement"), the Company and Ziegler entered into a
certain stock option agreement dated July 18, 1997 (the "Stock Option
Agreement"), providing for the Company's grant to Ziegler of stock options (the
"Ziegler Options") to acquire 50,000 shares of Common Stock. The Ziegler Options
(i) are immediately exercisable and not subject to any vesting requirements or
other conditions, (ii) expire upon the earlier of the fifth anniversary of the
date of the Stock Option Agreement or the ninetieth (90th) day after Ziegler
ceases to serve as a director of the Company or a consultant under the
Consulting Agreement, (iii) have an exercise price of $0.75 per share and (iv)
are freely transferable (subject to applicable federal and state securities
laws). The Consulting Agreement
Page 10 of 241 Pages
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further provides that 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.
It was a condition precedent to the obligations of Blackhawk, Webster
and Ziegler to consummate the transactions contemplated by the Securities
Purchase and Exchange Agreement that prior to or contemporaneously with such
closing, the Company effect a management reorganization, consisting of several
changes in the Board of Directors and senior management. The changes at the
Board level involved the increase in the total number of directors from four to
five, the resignations of two outside directors and one management director (who
would remain as an executive officer of the Company), the election of each of
Webster and Ziegler to fill two of the four vacancies caused by such
resignations and increase in the size of the Board, and the election of two
other new directors to be selected by the new Board. The changes in senior
management, which resulted in part from a repositioning of the Company from an
oil and gas exploration and production company to a provider of "3-D" seismic
services, involved (i) the addition of (A) a new President and chief operating
officer, who became responsible for the day to day operations of the Company's
seismic acquisition business, (B) a chief technology officer (elected to the
position of Vice President - Technology) and (C) a new chief financial officer
(elected to the position of Vice President and Chief Financial Officer) and (ii)
the change in title and duties of two incumbent executive officers of the
Company, including the former President of the Company becoming the Chairman and
Chief Executive Officer of the Company. In addition, as part of this management
reorganization a fourth new executive officer was added at the subsidiary level,
in connection with the Company's acquisition of a new subsidiary engaged in the
seismic acquisition services business, which acquisition was also a condition
precedent to the closing of the transactions contemplated by the Securities
Purchase and Exchange Agreement.
The obligations of Blackhawk, Webster and Ziegler (sometimes
hereinafter collectively referred to as the "Purchasers") to consummate the
transactions contemplated by the Securities Purchase and Exchange Agreement were
also subject to the following conditions: (i) the execution and delivery by the
Company of (A) the Registration Rights Agreement (as defined in Item 6 below)
and (B) the Monitoring Agreement, (ii) the filing by the Company with the
Secretary of State of Delaware of (A) an amendment to the Certificate of
Incorporation of the Company that was approved by the stockholders of the
Company at its last annual meeting of stockholders, providing for the creation
of 2,500,000 shares of series preferred stock, par value $10.00 per share, and
(B) the Series A Certificate of Designation, and (iii) the payment by the
Company of the reasonable legal fees and other expenses of the Purchasers'
counsel. The obligations of the Company to consummate the transactions
contemplated by the Securities Purchase and Exchange Agreement were subject to
the following conditions: (i) the surrender of the Senior Notes to the Company
for cancellation, (ii) the return to the Company of the subsidiary stock
certificates that had been pledged by the Company to secure the indebtedness
represented by the Senior Notes and (iii) the execution by Webster and Ziegler
of such releases and other documents as the Company shall require to evidence
the release and termination of all
Page 11 of 241 Pages
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liens and security interests granted to Webster and Ziegler in connection with
the transactions contemplated by the Bridge Loan Securities Purchase Agreement.
The Subsequent Securities Purchase Agreement provided that the following events
would take place at or prior to the closing of the transactions contemplated
thereby: (i) the execution and delivery of an amendment to the Registration
Rights Agreement, (ii) the filing by the Company of the Series B Certificate of
Designation and (iii) the payment by the Company of the reasonable legal fees
and other expenses of Blackhawk's counsel.
As a result of the issuance of an aggregate of 5,500,000 shares of
Common Stock to Blackhawk, Webster and Ziegler pursuant to the Securities
Purchase and Exchange Agreement, and the issuance by the Company of an aggregate
of 400,000 shares of its Common Stock to Gallant pursuant to the terms of the
Signature Stock Purchase Agreement, and assuming the conversion of the Series A
Preferred Stock into Common Stock, the number of shares purchasable by each of
Webster and Ziegler pursuant to the Bridge Loan Warrants previously issued by
the Company to him, was increased from 500,000 shares to 1,347,922 shares and
the purchase price per share was decreased from $0.75 to $0.2782, in each case,
pursuant to the adjustment provisions thereof. After giving effect to the
adjustment to the Bridge Loan Warrants triggered by the conversion of the shares
of Series A Preferred Stock into shares of Common Stock, the Bridge Loan
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, for an aggregate of 2,695,844
shares of Common Stock (the "Bridge Loan Warrant Stock") at a purchase price per
share of $0.2782 (the "Bridge Loan Warrant Price"). The number of shares of
Bridge Loan Warrant Stock and the Bridge Loan Warrant Price are subject to
further adjustment upon the occurrence of specified events, in accordance with
Section 4 of the Bridge Loan Warrants. The conversion of the Series B Preferred
Stock into Common Stock will trigger further adjustment to the number of shares
of Bridge Loan Warrant Stock and the Bridge Loan Warrant Price.
The Common Stock, Series A Preferred Stock, Series B Preferred Stock
and the Shadow Warrants issued to the Reporting Persons pursuant to the terms
and conditions of the Securities Purchase and Exchange Agreement and the
Subsequent Securities Purchase Agreement (collectively, the "Securities Purchase
Agreements"), were acquired by such Reporting Persons not only for investment
purposes, but also for the purpose of acquiring control of the Company and
influencing management.
As further described in Item 6 below, contemporaneously with the
execution and delivery of the Securities Purchase and Exchange Agreement,
Blackhawk entered into an investment monitoring agreement with the Company (the
"Monitoring Agreement").
Although there is no present intention to do so, any 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.
Page 12 of 241 Pages
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Depending upon the results of the reviews and the other factors
mentioned above, any of the Reporting Persons, at any time, may decide to change
his or its 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 acquisition of shares
of Common Stock by the Reporting Persons upon the automatic conversion of the
shares of Series A Preferred Stock and/or shares of Series B Preferred Stock,
and/or upon the exercise in whole or in part of any of the Shadow Warrants, the
Bridge Loan Warrants or the Ziegler Options, in each case, in accordance with
the terms thereof, as described above, none of the Reporting Persons has any
current intention to do so.
Any 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 Webster
or Ziegler may seek to influence the management of the Company in his capacity
as a director of the Company.
The descriptions of the Securities Purchase and Exchange Agreement,
the Subsequent Securities Purchase Agreement, the Series A Preferred Stock, the
Series B Preferred Stock, the Shadow Warrants, the Stock Option Agreement, the
Monitoring Agreement, the Bridge Loan Warrants and the Consulting Agreement (in
each case, 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 and
Exchange Agreement, the Subsequent Securities Purchase Agreement, the Series A
Certificate of Designation, the Series B Certificate of Designation, the Shadow
Warrants, the Stock Option Agreement, the Monitoring Agreement, the Form of
Bridge Loan Warrant and the Consulting Agreement, copies of which are attached
hereto as Exhibits II, III, IV, V, VI, VII, VIII, IX and X, 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), none 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.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The aggregate number and percentage of shares of Common Stock
(assuming the conversion of the Series A Preferred Stock and the Series B
Preferred Stock into shares of Common Stock, although the Series A Preferred
Stock might not be converted into Common Stock within sixty (60) days of the
acquisition thereof and the Series B Preferred Stock will not be converted into
shares of Common Stock within sixty (60) days of the acquisition thereof, since
both the Series A Preferred Stock and the Series B Preferred Stock presently are
entitled to dividend and voting rights as though same had been converted into
shares of Common Stock) beneficially owned by the Reporting Persons named in
Item 2 above are as follows:
Page 13 of 241 Pages
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The aggregate number and percentage of the Common Stock which are
owned beneficially and of record by Blackhawk on the date hereof are 8,666,667
shares of Common Stock, or approximately 59.0% of the 14,686,621 shares of
Common Stock that would be issued and outstanding after giving effect to the
consummation of the transactions contemplated by the Securities Purchase
Agreements (assuming the conversion of the Series A Preferred Stock and the
Series B Preferred Stock into shares of Common Stock).
The aggregate number and percentage of the Common Stock which are
owned beneficially by BCP on the date hereof are 8,666,667 shares of Common
Stock, or approximately 59.0% of the 14,686,621 shares of Common Stock that
would be issued and outstanding after giving effect to the consummation of the
transactions contemplated by the Securities Purchase Agreements (assuming the
conversion of the Series A Preferred Stock and the Series B Preferred Stock into
shares of Common Stock), which number and percentage consist solely of the
shares owned of record by Blackhawk, since BCP is the managing member of
Blackhawk.
The aggregate number and percentage of the Common Stock which are
owned beneficially by Webster on the date hereof are 10,347,915 shares of Common
Stock, or approximately 64.5% of the 16,034,543 shares of Common Stock that
would be issued and outstanding after giving effect to the consummation of the
transactions contemplated by the Securities Purchase Agreements (assuming the
conversion of the Series A Preferred Stock and the Series B Preferred Stock into
shares of Common Stock) and assuming the exercise of the Bridge Loan Warrants to
acquire 1,347,922 shares of Common Stock owned by Webster, which number and
percentage include the 8,666,667 shares owned of record (assuming the conversion
of the Preferred Stock into Common Stock) by Blackhawk, since Webster is a
partner of BCP and BCP is the sole managing member of Blackhawk.
The aggregate number and percentage of the Common Stock which are
owned beneficially by Ziegler on the date hereof are 10,397,929 shares of Common
Stock, or approximately 64.6% of the 16,084,543 shares of Common Stock that
would be issued and outstanding after giving effect to the consummation of the
transactions contemplated by the Securities Purchase Agreements (assuming the
conversion of the Series A Preferred Stock and the Series B Preferred Stock into
shares of Common Stock), and assuming the exercise of the Bridge Loan Warrants
owned by Ziegler and the Ziegler Options to acquire an aggregate of 1,397,922
shares of Common Stock, which number and percentage include the 8,666,667 shares
owned of record (assuming the conversion of the Preferred Stock into Common
Stock) by Blackhawk, since Ziegler is a partner of BCP and BCP is the sole
managing member of Blackhawk.
Notwithstanding the foregoing, if Blackhawk, BCP, 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 securities of the Company pursuant to the Securities Purchase and
Exchange Agreement, then each of Blackhawk, BCP, Webster and Ziegler may be
deemed to beneficially own an aggregate of 12,079,177 shares of Common Stock, or
approximately 69.3% of the 17,432,465 shares of Common Stock that would be
issued and outstanding (assuming the conversion of the Series A Preferred Stock
and the
Page 14 of 241 Pages
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Series B Preferred Stock into shares of Common Stock, the exercise of the Bridge
Loan Warrants to acquire 2,695,844 shares of Common Stock owned by Webster and
Ziegler, and the exercise of the Ziegler Options to acquire 50,000 shares of
Common Stock). Each of Blackhawk and BCP disclaims beneficial ownership of the
shares of Common Stock owned of record by Webster and Ziegler and the Common
Stock issuable upon the exercise of the Bridge Loan Warrants and the Ziegler
Options owned of record by Webster and Ziegler, as the case may be, and each of
Webster and Ziegler expressly disclaims beneficial ownership of the shares of
Common Stock owned of record by the other and the shares of Common Stock
issuable upon the exercise of the Bridge Loan Warrants and Ziegler Options 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 may be issuable upon any exercise of any
of the Shadow Warrants, as any such rights to acquire shares of Common Stock
pursuant to the Shadow Warrants are not presently exercisable and are contingent
upon the occurrence of events not within the control of any of the Reporting
Persons, which events 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 (assuming the conversion of the Series A Preferred Stock and the Series B
Preferred Stock into shares of Common Stock, although the Series A Preferred
Stock might not be converted into Common Stock within sixty (60) days of the
acquisition thereof and the Series B Preferred Stock will not be converted into
shares of Common Stock within sixty (60) days of the acquisition thereof, since
both the Series A Preferred Stock and the Series B Preferred Stock presently are
entitled to dividend and voting rights as though same had been converted into
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:
Blackhawk may be deemed to have the sole power to vote (and direct the
vote of) and to dispose of (and direct the disposition of) the 8,666,667 shares
of Common Stock owned of record by it (assuming the conversion of the Preferred
Stock into shares of Common Stock). Notwithstanding the foregoing, BCP, as the
sole managing member of Blackhawk, and each of Webster and Ziegler, as the
general partners of BCP, may be deemed to share the power to vote (and direct
the vote of) and to dispose of (and direct the disposition of) the 8,666,667
shares of Common Stock owned of record by Blackhawk (assuming the conversion of
the Preferred Stock into shares of Common Stock).
BCP, as the sole managing member of Blackhawk, may be deemed to share
the power to vote (and direct the vote of) and to dispose of (and direct the
disposition of) the 8,666,667 shares of Common Stock owned of record by
Blackhawk (assuming the conversion of the Preferred Stock into shares of Common
Stock).
Webster has the sole power to vote (and direct the vote of) and to
dispose of (and direct the disposition of) 333,326 shares of Common Stock owned
of record by him (assuming
Page 15 of 241 Pages
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the conversion of the Series A Preferred Stock owned by him into 104,160 shares
of Common Stock) and, upon the exercise of the Bridge Loan Warrants owned by
Webster, Webster will have the sole power to vote (and direct the vote of) and
to dispose of (and direct the disposition of) the 1,347,922 shares of Common
Stock issuable upon exercise of such Bridge Loan Warrants. In addition, Webster,
as a general partner of BCP, the sole managing member of Blackhawk, may be
deemed to share the power to vote (and direct the vote of) and to dispose of
(and direct the disposition of) the 8,666,667 shares of Common Stock owned
beneficially and of record by Blackhawk (assuming the conversion of the Series A
Preferred Stock and the Series B Preferred Stock owned by Blackhawk into
3,625,000 shares of Common Stock).
Ziegler has the sole power to vote (and direct the vote of) and to
dispose of (and direct the disposition of) 333,340 shares of Common Stock owned
of record by him (assuming the conversion of the Series A Preferred Stock owned
by him into 104,173 shares of Common Stock) and, upon the exercise of the Bridge
Loan Warrants and Ziegler Options owned by Ziegler, Ziegler will have the sole
power to vote (and direct the vote of) and to dispose of (and direct the
disposition of) the 1,397,922 shares of Common Stock issuable upon exercise of
such Bridge Loan Warrants and Ziegler Options. In addition, Ziegler, as a
general partner of BCP, the sole managing member of Blackhawk, may be deemed to
share the power to vote (and direct the vote of) and to dispose of (and direct
the disposition of) the 8,666,667 shares of Common Stock owned beneficially and
of record by Blackhawk (assuming the conversion of the Series A Preferred Stock
and the Series B Preferred Stock owned by Blackhawk into 3,625,000 shares of
Common Stock).
In addition, notwithstanding the foregoing, if Blackhawk, BCP, 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 securities of the Company pursuant to the Securities
Purchase Agreements, 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 333,340 shares of Common Stock owned of record by him
(assuming the conversion of the Series A Preferred Stock owned by him into
104,173 shares of Common Stock) and, upon the exercise of the Bridge Loan
Warrants and Ziegler Options owned by Ziegler, the 1,397,922 shares of Common
Stock issuable upon the exercise of such Bridge Loan Warrants and Ziegler
Options, (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
333,326 shares of Common Stock owned of record by him (assuming the conversion
of the Series A Preferred Stock owned by him into 104,160 shares of Common
Stock) and, upon the exercise of the Bridge Loan Warrants owned by Webster, the
1,347,922 shares of Common Stock issuable upon the exercise of such Bridge Loan
Warrants, and (iii) each of Blackhawk and BCP may be deemed to share (A) with
Webster, the power to vote (and direct the vote of) and to dispose of (and
direct the disposition of) the 333,326 shares of Common Stock owned of record by
him (assuming the conversion of the Series A Preferred Stock owned by him into
104,160 shares of Common Stock) and, upon the exercise of the Bridge Loan
Warrants owned by Webster, the 1,347,922 shares of Common Stock issuable upon
the exercise of such Bridge Loan Warrants and (B) with Ziegler, the power to
vote (and direct the vote of) and to dispose of (and direct the disposition of)
the 333,340 shares of Common Stock owned of record by him (assuming the
conversion of the
Page 16 of 241 Pages
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Series A Preferred Stock owned by him into 104,173 shares of Common Stock) and,
upon the exercise of the Bridge Loan Warrants and Ziegler Options owned by
Ziegler, the 1,397,922 shares of Common Stock issuable upon the exercise of such
Bridge Loan Warrants and Ziegler Options. Each of Webster and Ziegler expressly
disclaims beneficial ownership of the shares of Common Stock (inclusive of the
shares of Common Stock issuable upon the conversion of the Series A Preferred
Stock) owned of record, and the shares of Common Stock issuable upon the
exercise of the warrants and options (as the case may be) owned of record, by
the other. Each of Blackhawk and BCP expressly disclaims beneficial ownership of
the shares of Common Stock (inclusive of the shares of Common Stock issuable
upon the conversion of the Series A Preferred Stock) owned of record, and the
shares of Common Stock issuable upon the exercise of the warrants and options
(as the case may be) owned of record, by Webster and Ziegler.
(c) Except for the acquisition of the shares of Common Stock, Series A
Preferred Stock, Series B Preferred Stock and Ziegler Options, pursuant to the
terms of the Securities Purchase Agreements (inclusive of the adjustments to the
number of shares of Common Stock issuable upon exercise of the Bridge Loan
Warrants triggered by the consummation of the transactions contemplated by the
Securities Purchase and Exchange Agreement), all as more fully disclosed in
response to Items 3 and 4 above, during the past 60 days, none 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 shares of Common Stock, Series A
Preferred Stock, Series B Preferred Stock and Ziegler Options pursuant to the
Securities Purchase Agreements and the adjustments to the number of shares of
Common Stock issuable upon exercise of the Bridge Loan Warrants.
(d) As more fully described below in Item 6, (i) BCP, as the Managing
Member of Blackhawk, is entitled to receive 25% of any and all distributions of
cash (which may include proceeds from the sale of securities of the Company) and
securities made by Blackhawk to its members after its members have received
distributions equal to the sum of their investment in Blackhawk plus a specified
preferred return thereon and (ii) BCP has entered into contractual arrangements
with certain members of Blackhawk, including Ziegler, pursuant to which it
agreed to pay to such persons a specified percentage of the distributions it
received from Blackhawk.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
As previously disclosed in Item 4 above, (i) the Reporting Persons are
(A) parties to the Securities Purchase and Exchange Agreement, which provided
for the sale and issuance of the Common Stock, Series A Preferred Stock and
Shadow Warrants to the Reporting Persons (B) holders of the Series A Preferred
Stock, which will be automatically converted into shares of Common Stock upon
the filing of the Charter Amendment and (C) holders of the Shadow Warrants
(inclusive of the New Blackhawk Shadow Warrant) which are exercisable for an
aggregate of up to 8,204,359 shares of Common Stock, but only in the event that
the Subject Warrants are exercised, (ii) Blackhawk is a (A) party to the
Subsequent Securities Purchase
Page 17 of 241 Pages
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Agreement, which provided for the sale and issuance of the Series B Preferred
Stock and New Blackhawk Shadow Warrant to Blackhawk and (B) holder of the Series
B Preferred Stock, which will be automatically converted into shares of Common
Stock upon the later of the filing of the Charter Amendment or January 1, 1998,
(iii) Webster and Ziegler are holders of the Bridge Loan Warrants which are
exercisable for an aggregate of 2,695,844 shares of Common Stock (after
adjustment to give effect to the conversion of the Series A Preferred Stock into
shares of Common Stock) and (iv) Ziegler is a party to the Stock Option
Agreement which provided for the grant of the Ziegler Options to acquire 50,000
shares of Common Stock. See Item 4 above for further details with respect to the
provisions of the Securities Purchase and Exchange Agreement, the Subsequent
Securities Purchase Agreement, the Series A Preferred Stock, the Series B
Preferred Stock, the Shadow Warrants, the Bridge Loan Warrants and the Ziegler
Options.
In addition, contemporaneously with the execution and delivery of the
Securities Purchase and Exchange Agreement, (i) 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 Common Stock owned or to be owned (whether
pursuant to the conversion of the Series A Preferred Stock, any exercise of the
Shadow Warrants, or otherwise acquired) by the Reporting Persons, their
affiliates or permitted transferees of the Series A Preferred Stock or Shadow
Warrants and (ii) the Company and Blackhawk entered into the Monitoring
Agreement, providing for the payment by the Company to BCP of an annual
investment monitoring fee of $25,000 (the "Investment Monitoring Fee") for
services to be performed by BCP with respect to the monitoring on behalf of
Blackhawk and BCP of the investment in the Company made by Blackhawk and BCP
pursuant to the Securities Purchase and Exchange Agreement. The Investment
Monitoring Fee is payable quarterly in arrears on the last business day of
March, June, September and December of each year, commencing on September 30,
1997. Contemporaneously with closing of the transactions contemplated by the
Subsequent Securities Purchase Agreement, the Company and the Reporting Persons
entered into an Amendment to the Registration Rights Agreement (the "Amendment";
the Registration Rights Agreement, as amended by the Amendment, being sometimes
hereinafter collectively referred to as the "Blackhawk Registration Rights
Agreement"), pursuant to which the definition of Registrable Securities was
amended to include the shares of Common Stock issuable upon the conversion of
the Series B Preferred Stock and the exercise of the New Blackhawk Shadow
Warrant.
As previously disclosed in Item 4 above and in the Initial
Group Filing, contemporaneously with the execution and delivery of the Bridge
Loan Securities Purchase Agreement, (i) the Company and Webster and Ziegler
entered into a certain registration rights agreement (the "Bridge Loan
Registration Rights Agreement") and (ii) the Company entered into the Consulting
Agreement with Ziegler. The Bridge Loan Registration Rights Agreement requires
the Company, upon the occurrence of certain events, to register for resale under
the Securities Act, the shares of Common Stock owned or to be owned (whether
pursuant to any exercise of the Bridge Loan Warrants, the issuance of certain
PIK Stock Interest under the Senior Notes, the conversion of the principal
amount of the Senior Notes, or otherwise acquired) by
Page 18 of 241 Pages
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Webster or Ziegler, their affiliates or permitted transferees of the Bridge Loan
Warrants or Senior Notes. As part of the consummation of the transactions
contemplated by the Securities Purchase and Exchange Agreement, the Senior Notes
were surrendered to the Company by Webster and Ziegler for cancellation, in
exchange for shares of Common Stock, shares of Series A Preferred Stock and the
Holders' Shadow Warrants; however, the Bridge Loan Registration Rights Agreement
remains in full force and effect with respect to any other Registrable
Securities (as defined therein) covered thereby. 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 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. The securities issued to the Reporting Persons pursuant to the
Securities Purchase and Exchange Agreement and the securities issued to
Blackhawk pursuant to the Subsequent Securities Purchase Agreement are
includable for purposes of calculating both the Consulting Fee and the three
percent (3%) threshold for the director election provision described above. The
execution and delivery by the Company of the Stock Option Agreement, and the
grant to Ziegler of the Ziegler Options thereunder, satisfied another provision
of the Consulting Agreement.
Pursuant to Article V of that certain Limited Liability Company
Agreement of Blackhawk dated as of July 18, 1997 (the "Blackhawk LLC
Agreement"), once the members of Blackhawk have received distributions of cash
and/or securities equal in value to the sum of a specified priority return on
their investment in Blackhawk and the amount of such investment ("Payout"), BCP,
as the managing member of Blackhawk, is entitled to receive 25% of all
subsequent distributions made by Blackhawk of (i) available cash flow from
Blackhawk (which may include proceeds from the sale of Common Stock or other
securities of the Company) and (ii) securities of the Company (the "BCP
Contingent Interest").
BCP is a party to certain profit sharing agreements (individually, a
"Profit Sharing Agreement" and collectively, the Profit Sharing Agreements"),
pursuant to which it agreed to pay a specified percentage (individually, an
"Allocation Percentage" and collectively, the "Allocation Percentages") of the
net distributions that it receives from Blackhawk under the terms of the
Blackhawk LLC Agreement to certain persons and entities who are members of
Blackhawk (collectively, the "Special Participants"). In some instances, such
payments to Special Participants involve consideration, while other such
payments do not involve consideration. The aggregate Allocation Percentages
under the Profit Sharing Agreements is approximately twenty percent (20%) of the
BCP Contingent Interest, or approximately five percent (5%) of all
Page 19 of 241 Pages
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distributions to be made by Blackhawk under the Blackhawk LLC Agreement after
Payout. Ziegler is one of the Special Participants, with an Allocation
Percentage of 0.67%.
The descriptions of the Securities Purchase and Exchange Agreement,
the Subsequent Securities Purchase Agreement, the Series A Preferred Stock, the
Series B Preferred Stock, the Shadow Warrants, the Stock Option Agreement, the
Monitoring Agreement, the Bridge Loan Warrants, the Consulting Agreement, the
Registration Rights Agreement, the Bridge Loan Registration Rights Agreement,
the Blackhawk LLC Agreement and the Profit Sharing Agreements (in each case,
inclusive of the other agreements which are exhibits thereto) 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 and Exchange
Agreement, the Subsequent Securities Purchase Agreement, the Series A
Certificate of Designation, the Series B Certificate of Designation, the Shadow
Warrants, the Stock Option Agreement, the Monitoring Agreement, the Form of
Bridge Loan Warrant, the Consulting Agreement, the Registration Rights
Agreement, the Bridge Loan Registration Rights Agreement, the Blackhawk LLC
Agreement and the Form of Profit Sharing Agreement (inclusive of a Schedule of
the Special Participants and their Allocation Percentages), copies of which are
attached hereto as Exhibits II, III, IV, V, VI, VII, VIII, IX, X, XI, XII, XIII
and XIV, 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.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
I. Group Filing Agreement referred to in the Introduction.
II. Securities Purchase and Exchange Agreement referred to in Items 3,
4, 5 and 6.
III. Subsequent Securities Purchase Agreement referred to in Items 3,
4, 5 and 6.
IV. Series A Certificate of Designation referred to in Items 4 and 6.
V. Series B Certificate of Designation referred to in Items 4 and 6.
VI. Shadow Warrants referred to in Items 3, 4, 5 and 6.
Page 20 of 241 Pages
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VII. Stock Option Agreement referred to in Items 4 and 6.
VIII. Monitoring Agreement referred to in Items 4 and 6.
IX. Form of Bridge Loan Warrant referred to in the Introduction and
in Items 3, 4, 5 and 6.
X. Consulting Agreement referred to in Items 4 and 6.
XI. Registration Rights Agreement referred to in Item 6.
XII. Bridge Loan Registration Rights Agreement referred to in Item 6.
XIII. Blackhawk LLC Agreement referred to in Item 6.
XIV. Form of Profit Sharing Agreement referred to in Item 6.
Page 21 of 241 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: October 16, 1997 BLACKHAWK INVESTORS, L.L.C.
---------------------- By: Blackhawk Capital Partners, its Managing
Member
By:/s/ WILLIAM R. ZIEGLER
------------------------------------------
William R. Ziegler, Partner
Dated: October 16, 1997 BLACKHAWK CAPITAL PARTNERS
-----------------------
By:/s/ WILLIAM R. ZIEGLER
------------------------------------------
William R. Ziegler, Partner
Dated: October 16, 1997 /s/ STEVEN A. WEBSTER
------------------------ ---------------------------------------------
Steven A. Webster, Individually
Dated: October 16, 1997 /s/ WILLIAM R. ZIEGLER
------------------------ ---------------------------------------------
William R. Ziegler, Individually
Page 22 of 241 Pages
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page No.
- ------ ----------- --------
<S> <C> <C>
I Schedule 13D Group Filing Agreement dated as of July 18, 1997, 25
among Blackhawk Investors, L.L.C., Blackhawk Capital Partners,
Steven A. Webster and William R. Ziegler
II Securities Purchase and Exchange Agreement dated as of July 18, 27
1997, among Geokinetics Inc., Blackhawk Investors, L.L.C., Steven A.
Webster and William R. Ziegler
III Securities Purchase Agreement dated as of July 24, 1997, between 62
Geokinetics Inc. and Blackhawk Investors, L.L.C.
IV Certificate of Designation of Series A Convertible Preferred Stock of 95
Geokinetics, Inc.
V Certificate of Designation of Series B Convertible Preferred Stock of 107
Geokinetics, Inc.
VI(a) Shadow Warrant issued by Geokinetics Inc. in favor of Blackhawk 119
Investors, L.L.C. on July 18, 1997
VI(b) Shadow Warrant issued by Geokinetics Inc. in favor of Steven A. 132
Webster on July 18, 1997
VI(c) Shadow Warrant issued by Geokinetics Inc. in favor of William R. 145
Ziegler on July 18, 1997
VI(d) Shadow Warrant issued by Geokinetics Inc. in favor of Blackhawk 158
Investors, L.L.C. on September 30, 1997
VII Stock Option Agreement dated July 18, 1997 between Geokinetics, 172
Inc. and William R. Ziegler
VIII Monitoring Agreement dated as of July 18, 1997 between Geokinetics 177
Inc. and Blackhawk Investors, L.L.C.
IX Form of Warrant issued by Geokinetics Inc. in favor of each of Steven
A. Webster and William R. Ziegler on April 25, 1997 (Incorporated by
reference to Exhibit IV to the Schedule 13D filed by Messrs. Steven A.
Webster and William R. Ziegler with the Commission on May 5,
1997)
</TABLE>
Page 23 of 241 Pages
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<TABLE>
<S> <C> <C>
X Consulting Agreement dated April 25, 1997, between Geokinetics Inc.
and William R. Ziegler and agreed to as to paragraph 1 thereof by Jay
D. Haber (Incorporated by reference to Exhibit VI to the Schedule
13D filed by Messrs. Steven A. Webster and William R. Ziegler with
the Commission on May 5, 1997)
XI(a) Registration Rights Agreement dated as of July 18, 1997, among 180
Geokinetics Inc., Blackhawk Investors, L.L.C., Steven A. Webster and
William R. Ziegler
XI(b) Amendment to Registration Rights Agreement dated as of July 18, 198
1997, among Geokinetics Inc., Blackhawk Investors, L.L.C., Steven A.
Webster and William R. Ziegler
XII Registration Rights Agreement dated as of April 25, 1997, among
Geokinetics Inc., Steven A. Webster and William R. Ziegler
(Incorporated by reference to Exhibit V to the Schedule 13D
filed by Messrs. Steven A. Webster and William R. Ziegler with
the Commission on May 5, 1997)
XIII Limited Liability Company Agreement of Blackhawk Investors, L.L.C. 202
dated as of July 18, 1997
XIV Form of Profit Sharing Agreement dated as of July 24, 1997 between 236
Blackhawk Capital Partners and the Special Participants, together with
a Schedule of the Special Participants and their respective Allocation
Percentages
</TABLE>
Page 24 of 241 Pages
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<PAGE>
EXHIBIT I
SCHEDULE 13D GROUP FILING AGREEMENT
AGREEMENT by and among Blackhawk Investors, L.L.C., a Delaware
limited liability company ("Blackhawk"), Blackhawk Capital Partners, a Texas
general partnership ("BCP") and the sole managing member of Blackhawk, 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 securities (inclusive of shares of
common stock, shares of preferred stock convertible into shares of common stock
and shadow warrants to purchase shares of common stock) of Geokinetics Inc. (the
"Company"), pursuant to the terms and conditions of that certain Securities
Purchase and Exchange Agreement dated as of July 18, 1997 by and among the
Company, Blackhawk, BCP, 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 18th day of July, 1997.
BLACKHAWK INVESTORS, L.L.C.
By: Blackhawk Capital Partners, Managing Member
By:/s/ WILLIAM R. ZIEGLER
________________________________________________
Name: William R. Ziegler
Title: Partner
BLACKHAWK CAPITAL PARTNERS
By:/s/ WILLIAM R. ZIEGLER
________________________________________________
Name: William R. Ziegler
Title: Partner
Page 25 of 241 Pages
<PAGE>
<PAGE>
/s/ STEVEN A. WEBSTER
________________________________________________
Steven A. Webster, Individually
/s/ WILLIAM R. ZIEGLER
________________________________________________
William R. Ziegler, Individually
-2- Page 26 of 241 Pages
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EXHIBIT II
- --------------------------------------------------------------------------------
GEOKINETICS INC.
------------------------------------------------------------------
SECURITIES PURCHASE AND EXCHANGE
AGREEMENT
Dated as of July 18, 1997
------------------------------------------------------------------
COMMON STOCK
and
SERIES A CONVERTIBLE PREFERRED STOCK
and
SHADOW WARRANTS
- --------------------------------------------------------------------------------
Page 27 of 241 Pages
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I
PURCHASE AND SALE OR EXCHANGE OF COMMON STOCK,
SERIES A PREFERRED STOCK AND SHADOW WARRANTS
1.1 Authorization and Description of Common Stock, Series A Preferred
Stock and Shadow Warrants.............................................................2
1.2 Sale and Purchase of Securities.........................................................2
1.3 Exchange of Senior Notes for Securities.................................................2
1.5 Application of Proceeds.................................................................3
1.6 Purchaser's Conditions of Closing.......................................................3
1.7 Company's Conditions of Closing.........................................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization, Authority and Capitalization of the Company;
Stock Ownership.......................................................................6
2.2 Subsidiaries............................................................................7
2.3 Qualification; Enforceability...........................................................8
2.4 Business and Property; Financial Statements.............................................8
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc.....................................................................8
2.6 Consents and Approvals..................................................................9
2.7 Litigation..............................................................................9
2.8 Private Offering.......................................................................10
2.9 No Defaults; Debt, etc; Liens..........................................................10
2.10 Full Disclosure........................................................................10
2.11 Environmental Matters..................................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
3.1 Investment Representation..............................................................12
3.2 Organization and Authority of Blackhawk; No Conflicts; Approvals;
Enforceability.......................................................................14
ARTICLE IV
COVENANTS
4.1 Financial Statements; Information......................................................15
4.2 Corporate Existence....................................................................16
</TABLE>
- i - Page 28 of 241 Pages
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<TABLE>
<C> <S> <C>
4.3 Compliance with Laws; Government Filings...............................................16
4.4 Environmental Matters..................................................................17
ARTICLE V
CERTAIN OTHER COVENANTS
5.1 Approval and Filing of Charter Amendment...............................................17
5.2 Repayment of Debt and Removal of Liens.................................................17
ARTICLE VI
MISCELLANEOUS
6.1 Expenses...............................................................................18
6.2 Reliance on and Survival of Representations............................................18
6.3 Amendment and Waiver...................................................................19
6.4 Shadow Warrant Register................................................................19
6.5 Directly or Indirectly.................................................................19
6.6 Successors and Assigns.................................................................19
6.7 Notices................................................................................20
6.8 LAW GOVERNING..........................................................................20
6.9 SUBMISSION TO JURISDICTION;
Service of Process...................................................................20
6.10 Headings, etc..........................................................................21
6.11 Entire Agreement.......................................................................21
6.12 WAIVER OF TRIAL BY JURY................................................................21
6.13 Indemnification........................................................................22
6.14 Interpretive Provision.................................................................22
6.15 Severability...........................................................................23
6.16 Counterparts...........................................................................23
6.17 Finder's Fee...........................................................................23
</TABLE>
Schedules:
Schedule 1.1 Purchasers
Schedule 1.5 Use of Proceeds
Schedule 2.1(b) Capitalization of the Company
Schedule 2.1(c) Capitalization of the Subsidiaries
Schedule 2.2 Subsidiaries
Schedule 2.5 Noncontravention
Schedule 2.6 Consent and Approvals
Schedule 2.7 Litigation
Schedule 2.9 Debts; Liens
- ii - Page 29 of 241 Pages
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Exhibits:
Exhibit A Form of Certificate of Designation
Exhibit B Form of Shadow Warrant
Exhibit C-1 Form of Employment Agreement (Lynn Turner)
Exhibit C-2 Form of Employment Agreement (Michael Dunn)
Exhibit C-3 Form of Employment Agreement (Thomas Concannon)
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Monitoring Agreement
Exhibit F Form of Opinion of Company Counsel
- iii - Page 30 of 241 Pages
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<PAGE>
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
THIS SECURITIES PURCHASE AND EXCHANGE AGREEMENT, dated as of
July 18, 1997, among GEOKINETICS INC., a Delaware corporation (the "Company"),
BLACKHAWK INVESTORS, L.L.C., a Delaware limited liability company ("Blackhawk")
and each of the undersigned HOLDERS OF THE SENIOR NOTES (individually, a
"Holder" and collectively, the "Holders"; Blackhawk and the Holders being
sometimes hereinafter collectively referred to as the "Purchasers" and
individually as a "Purchaser").
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 an
aggregate of 5,550,000 shares of Common Stock, 187,500 shares of Series A
Preferred Stock and the Shadow Warrants and wishes to sell to Blackhawk an
aggregate of 5,041,667 shares of Common Stock, 171,875 shares of Series A
Preferred Stock and the Blackhawk Shadow Warrant, for the consideration provided
herein, and wishes to issue to the Holders an aggregate of 458,333 shares of
Common Stock, 15,625 shares of Series A Preferred Stock and the Holders' Shadow
Warrants, in the individual amounts set forth opposite each Holder's name on
Schedule 1.1, in exchange for the surrender of the Senior Notes, in each case,
subject to the terms and conditions of this Agreement; and
WHEREAS, Blackhawk wishes to purchase 5,041,667 shares of
Common Stock, 171,875 shares of Series A Preferred Stock and the Blackhawk
Shadow Warrant, subject to the terms and conditions of this Agreement; and
WHEREAS, the Holders wish to exchange the Senior Notes, in the
aggregate principal amount of $500,000, for an aggregate of 458,333 shares of
Common Stock, 15,625 shares of Series A Preferred Stock and the Holders' Shadow
Warrants, in the individual amounts set forth opposite each Holder's name on
Schedule 1.1, 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 the Purchasers, intending to be mutually bound, agree as follows:
Page 31 of 241 Pages
<PAGE>
<PAGE>
ARTICLE I
PURCHASE AND SALE OR EXCHANGE OF COMMON STOCK,
SERIES A PREFERRED STOCK AND SHADOW WARRANTS
1.1 Authorization and Description of Common Stock, Series
A Preferred Stock and Shadow Warrants.
The Company has authorized (i) the issuance and sale to
Blackhawk at the Closing of (A) 5,041,667 shares of Common Stock, (B) 171,875
shares of Series A Preferred Stock and (C) a Shadow Warrant to purchase up to an
aggregate of 6,512,095 shares of Common Stock, subject to adjustment (the
"Blackhawk Shadow Warrant"), and (ii) the issuance to the Holders of an
aggregate of (A) 458,333 shares of Common Stock, (B) 15,625 shares of Series A
Preferred Stock and (C) Shadow Warrants to purchase up to an aggregate of
592,009 shares of Common Stock, subject to adjustment (the "Holders' Shadow
Warrants"), in the individual amounts set forth opposite each Holder's name on
Schedule 1.1, in exchange for the surrender of the Senior Notes, in the
aggregate principal amount of $500,000. The Series A Preferred Stock shall have
the powers, rights and privileges and shall be subject to the terms and
conditions set forth in the Certificate of Designation of Series A Convertible
Preferred Stock (the "Certificate of Designation"), which shall be in the form
of Exhibit "A" attached hereto. The Shadow Warrants shall be in the form of
Exhibit "B" attached hereto.
1.2 Sale and Purchase of Securities.
The Company will sell to Blackhawk and Blackhawk 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
contained herein and in the Exhibits hereto, (i) 5,041,667 shares of Common
Stock, (ii) 171,875 shares of Series A Preferred Stock and (C) the Blackhawk
Shadow Warrant, on the Closing Date, in each case, registered in the name of
Blackhawk, in consideration of an aggregate purchase price of $5,500,000 (the
"Blackhawk Purchase Price"), of which $3,781,250 will be paid in consideration
of the Common Stock ($0.75 per share) and $1,718,750 will be paid in
consideration of the Series A Preferred Stock ($10.00 per share). The Blackhawk
Purchase Price shall be payable in cash by wire transfer of immediately
available funds to the Company's bank account with Frost National Bank (the
"Cash Payment"), in accordance with wire transfer instructions delivered by the
Company to Blackhawk at least one business day prior to the Closing.
1.3 Exchange of Senior Notes for Securities.
The Company will sell to each of the Holders and each Holder
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 contained herein and in the Exhibits hereto, an aggregate of (A)
458,333 shares of Common Stock, (B) 15,625 shares of Series A Preferred Stock
and (C) the Holders' Shadow Warrants, on the Closing Date, registered in the
names of the Holders in the individual amounts set forth opposite each Holder's
name on Schedule
- 2 - Page 32 of 241 Pages
<PAGE>
<PAGE>
1.1, in consideration of an aggregate purchase price of $500,000 (the "Holders'
Purchase Price"), of which $343,750 will be paid in consideration of the Common
Stock ($0.75 per share) and $156,250 will be paid in consideration of the Series
A Preferred Stock ($10.00 per share). The Holders' Purchase Price shall be
payable by the surrender and delivery by the Holders to the Company of the
Senior Notes, in the aggregate principal amount of $500,000.
1.4 Closing.
The sale and purchase or exchange (the "Closing") of the
shares of Common Stock, shares of Series A Preferred Stock and the Shadow
Warrants (collectively, the "Securities") shall take place on the date hereof
(the "Closing Date") 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 certificates for the shares of Common Stock and Series A Preferred
Stock and the Shadow Warrants purchased hereunder, each dated the Closing Date,
and registered in the names and amounts as set forth on Schedule 1.1 hereto,
against delivery by the Purchasers of the Purchase Price in the form of the Cash
Payment and the surrender for cancellation of the Senior Notes. The failure of
any Purchaser to deliver such Purchase Price shall not excuse any other
Purchaser from delivery of his or its Purchase Price.
1.5 Application of Proceeds.
The Company shall apply the proceeds from the sale of the
Securities as set forth in Schedule 1.5 attached hereto.
1.6 Purchaser's Conditions of Closing.
Each Purchaser's obligations to purchase and pay for the
Securities to be purchased by him or it is subject to satisfaction, prior to or
simultaneously with the closing, of the following conditions:
(a) The Company shall have delivered a certificate of the
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.
(b) The Company shall have delivered a certificate of the
Secretary of the Company, dated the Closing Date, certifying as to (i) the
certificate of incorporation of the Company and any amendments thereto, (ii) the
by-laws of the Company, and (iii) resolutions of the Board of Directors of the
Company authorizing the issuance of the shares of Common Stock and the shares of
Series A Preferred Stock and the execution and delivery of the Shadow Warrants,
this Agreement and all Exhibits to which the Company is a party and reserving
for issuance (subject to the filing of the Charter Amendment with the Secretary
of State of Delaware) such
- 3 - Page 33 of 241 Pages
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<PAGE>
number of shares of Common Stock as is required to deliver shares of Common
Stock upon exercise of rights therefor as provided in the Series A Preferred
Stock and the Shadow Warrants.
(c) The Company shall have delivered a certificate of the
President of the Company, dated the Closing Date, certifying that (i) the
purchase and sale transaction contemplated by that certain Stock Purchase
Agreement dated June 25, 1997 (the "Signature Stock Purchase Agreement"), among
the Company, Gallant Energy, Inc. and Signature Geophysical Services, Inc.
("Signature") shall have been consummated substantially in accordance with its
terms and (ii) the Master Seismic Agreement between Signature and Geco-Prakla is
in full force and effect and the Supplemental Agreement referred to in the
Geco-Prakla Letter has been entered into on substantially the terms stated
therein (or if such Supplemental Agreement has not been executed as of the
Closing Date, the Company has no knowledge, after due inquiry, of any change or
proposed change with respect to the terms stated therein).
(d) Messrs. Lynn Turner, Michael Dunn and Thomas J. Concannon
shall have entered into Employment Agreements with the Company (collectively,
the "Employment Agreements"), substantially in the forms of Exhibits "C-1",
"C-2" and "C-3", respectively.
(e) The Company shall have executed and delivered to the
Purchasers the Registration Rights Agreement, substantially in the form of
Exhibit "D" hereto.
(f) The Company shall have executed and delivered to the
Managing Member of Blackhawk the Monitoring Agreement, substantially in the form
of Exhibit "E" hereto.
(g) The Company shall have filed each of the Preferred Stock
Charter Amendment and the Certificate of Designation with the Secretary of State
of the State of Delaware.
(h) Messrs. Steven A. Webster and William R. Ziegler shall
have been duly elected to the Board of Directors of the Company and Messrs.
Michael Hale, Herbert Hedick, and William Murphy shall have tendered their
resignations from the Board of Directors of the Company, effective and
conditioned upon the Closing.
(i) The non-qualified stock options referred to in the
Consulting and Engagement Agreement shall have been issued to William R. Ziegler
in accordance with the terms thereof.
(j) Each of the other Exhibits hereto shall have been executed
and delivered to the Purchasers by the parties thereto.
(k) No foreclosure action shall have been instituted by any of
the Harbin/Murphy Entities or Input/Output, Inc. with respect to any default
under either the Harbin/Murphy Notes or the I/O Note and the I/O Extension
Agreement shall be in full force and effect with no breach by either party
thereunder.
- 4 - Page 34 of 241 Pages
<PAGE>
<PAGE>
(l) Chamberlain, Hrdlicka, White, Williams & Martin, counsel
for the Company, shall have delivered to the Purchasers the Opinion of Company
Counsel, substantially in the form of Exhibit "F" hereto.
(m) All proceedings taken in connection with the
authorization, issuance and sale of the Securities and the consummation of the
transactions contemplated hereby to occur on or prior to the Closing Date 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.
(n) 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.
1.7 Company's Conditions of Closing.
The Company's obligations to issue and sell the Securities are
subject to satisfaction, prior to or simultaneously with the closing, of the
following conditions:
(a) Blackhawk shall have delivered a certificate of a Partner
of the Managing Member, dated the Closing Date, certifying that the
representations and warranties of Blackhawk contained in this Agreement and any
Exhibit to which Blackhawk is a party are true and correct in all material
respects and that Blackhawk 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.
(b) Each of the Holders shall have delivered a certificate,
dated the Closing Date, certifying that the representations and warranties made
by him as Purchaser in this Agreement and any Exhibit to which he is a party are
true and correct in all material respects and that he has performed in all
material respects all agreements and complied with all conditions contained in
this Agreement and in any Exhibit to which he is a party that are required to be
performed or complied with on or before the Closing Date.
(c) The Holders shall have delivered to the Company the stock
certificates representing the shares of capital stock of the Subsidiaries that
were pledged in favor of the Holders pursuant to the Pledge Agreement, together
with the stock powers executed and delivered pursuant thereto.
(d) Each of the Holders shall have (i) surrendered to the
Company for cancellation the Senior Note registered in his name and (ii)
executed and delivered to the Company (A) such releases with respect to the
Security Agreements and the Subordination Agreement as shall have been prepared
by counsel for the Company and in form and substance reasonably satisfactory to
such Holder and his counsel, (B) UCC-3 Termination Statements with
- 5 - Page 35 of 241 Pages
<PAGE>
<PAGE>
respect to the UCC-1 Financing Statements filed pursuant to the Bridge Loan
Securities Purchase Agreement and the Personal Property Security Agreement as
shall have been prepared by counsel for the Company and in form and substance
reasonably satisfactory to such Holder and his counsel and (C) any and all other
documents, instruments and certificates reasonably requested by the Company to
evidence the release and termination of the Security Agreements executed and
delivered pursuant to the Bridge Loan Securities Purchase Agreement, in each
case, in form and substance reasonably satisfactory to such Holder and his
counsel.
(e) Each of the other Exhibits hereto shall have been executed
and delivered to the Company by the parties thereto.
(f) All proceedings taken in connection with the purchase by
the Purchasers of the Securities and the consummation of the transactions
contemplated hereby to occur on or prior to the Closing Date and all documents
and papers relating thereto shall be satisfactory in form, scope and substance
to the Company and its counsel, and the Company and its 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.
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
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 Securities (including the issuance of
Common Stock upon the exercise or conversion, as the case may be, of the Series
A Preferred Stock and the Shadow Warrants), to perform its obligations under
this Agreement, the Securities (including the issuance of Common Stock upon the
exercise or conversion, as the case may be, of the Series A Preferred Stock and
the Shadow 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, other than with respect to the approval of the Charter Amendment),
duly authorized the execution and delivery of this Agreement, the Securities
(including the issuance of Common Stock upon the exercise or conversion, as the
case may be, of the Series A Preferred Stock and the Shadow 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.
- 6 - Page 36 of 241 Pages
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<PAGE>
(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. Upon
the issuance of the shares of Series A Preferred Stock by the Company against
payment of the Purchase Price by the Purchasers in accordance with the
provisions of this Agreement, the shares of Series A Preferred Stock will be
duly authorized, validly issued and fully paid and nonassessable with no
personal liability attaching to the ownership thereof. The shares of Common
Stock that will be issuable upon the exercise or conversion, as the case may be,
of the Series A Preferred Stock and the Shadow Warrants in the manner referred
to in the Certificate of Designation and Shadow Warrants, respectively, have
been duly authorized and reserved for issuance (subject to the filing of the
Charter Amendment with the Secretary of State of Delaware), 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 Certificate of Designation and the Shadow 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 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) Schedule 2.2 sets forth the name and jurisdiction of
incorporation or other organization of each Subsidiary. Except for the
Subsidiaries, the Company does not directly or indirectly own any interest in
any other Person.
(b) 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 property it purports to own or hold under lease, and to carry on
its business as conducted by it.
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
- 7 - Page 37 of 241 Pages
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<PAGE>
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 Shadow Warrants and the other Exhibits
hereto to which the Company is a party have been (or at the Closing will be, as
the case may be) duly executed and delivered by the Company 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, enforceable against the Company 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).
2.4 Business and Property; Financial Statements.
The Company has furnished to each Purchaser a true and
complete copy of the Offering Disclosure Documents (other than the PPM, which
was prepared by the Purchasers, in large part, with information with respect to
the Company, its industry, Signature and the Signature acquisition, provided by
or on behalf of the Company). The 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 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 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. There has been
no material adverse change in the financial position or condition of the Company
and its Subsidiaries since the date of such Financial Statements.
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)
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could materially and adversely affect the ability of the Company to perform its
obligations under this Agreement, the Shadow Warrants or any other Exhibit to
which it is a party.
(b) Except as set forth in Schedule 2.5, neither the
execution, delivery or performance by the Company of this Agreement, the Shadow
Warrants (including, without limitation, the issuance of Common Stock upon any
exercise or conversion, as the case may be, of the Series A Preferred Stock or
the Shadow Warrants), or any other Exhibit to which it is a party, nor
compliance by the Company 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.
2.6 Consents and Approvals.
Except as set forth on Sechedule 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 of, or the performance by the Company of
any obligation under, this Agreement or any Exhibit to which it is a party or
the consummation by the Company of the transactions contemplated hereby and
thereby, including, without limitation, the offer, issue, sale and delivery of
the Securities (including without limitation, the issuance of Common Stock upon
any exercise or conversion, as the case may be, of the Series A Preferred Stock
or the Shadow Warrants) or (ii) as a condition to the legality, validity or
enforceability as against the Company of this Agreement or any Exhibit to which
it is a party.
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) question the validity or legality of this
Agreement, the Shadow 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 to
perform its obligations under this Agreement or any other Exhibit to which it is
a party, or (B) a Material Adverse Effect.
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2.8 Private Offering.
Neither the Company, any Subsidiary, nor any other person
acting on behalf of the Company or any Subsidiary has taken, or will take, any
action which would subject the issuance or sale of the Securities (inclusive of
the issuance of shares of Common Stock pursuant to any exercise or conversion,
as the case may be, of the Series A Preferred Stock or the Shadow Warrants) to
Section 5 of the Securities Act or to the registration or qualification
requirements of any securities law of any state.
2.9 No Defaults; Debt, etc; Liens.
(a) Schedule 2.9 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.
2.10 Full Disclosure.
None of this Agreement, any Exhibit, the Offering Disclosure
Documents or any document, certificate or instrument delivered to the Purchasers
by or on behalf of the Company or any Subsidiary 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.
2.11 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 2.11(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 2.11(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.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally as to himself, represents and
warrants as follows:
3.1 Investment Representation. (a) The Purchaser of the
Securities hereby acknowledges that the Securities (inclusive of any shares of
Common Stock issued upon any exercise or conversion of the Series A Preferred
Stock or the Shadow warrants, as the case may be) are not being registered (i)
under the Securities 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 Securities will not sell or transfer
all or any part of the Securities 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 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 certificates
representing the Common Stock and Series A Preferred Stock and the Shadow
Warrants (and upon any exercise or conversion of the Series A Preferred Stock or
the Shadow Warrants, as the case may be, 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
Securities on its books should a Purchaser attempt to transfer the Securities
otherwise than in compliance with this Section 3.1.
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(d) The Purchaser has adequate means of providing for his or
its current needs and possible personal contingencies, he or it anticipates no
need now or in the foreseeable future to sell the Securities (or upon any
exercise or conversion of the Series A Preferred Stock or the Shadow Warrants,
as the case may be, the Common Stock) which he or it is purchasing and he or it
can afford the loss of his or its entire investment in the Company.
(e) If an individual, the Purchaser either
(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 or it is capable of evaluating the merits
and risks of investment in the Company and of making an informed investment
decision.
(g) The Purchaser has received and read and is familiar with
the Offering Disclosure Documents and confirms that all documents, records and
books pertaining to his or its proposed investment in the Company have been made
available to him or it. The Purchaser is aware that no federal or state agency
has passed upon the Securities or made any finding or determination concerning
the fairness of the investment represented thereby.
(h) 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 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 Securities or the tax consequences
thereof. The Company has urged each Purchaser to consult his or its own tax
adviser concerning any tax matters relating to this investment.
(i) The Securities (inclusive of any shares of Common Stock
issued upon any exercise or conversion of the Series A Preferred Stock or the
Shadow Warrants) which Purchaser is acquiring will be acquired for his or its
own account for investment. The Purchaser intends to hold the Securities
(inclusive of any shares of Common Stock issued upon any exercise or conversion
of the Series A Preferred Stock or the Shadow Warrants) indefinitely and he or
it is not purchasing such securities with a view toward distribution in a manner
which would require registration under the Securities Act, and he or it does not
presently have any reasons to anticipate any change in his or its circumstances
or other particular occasion or event which would cause him or it to sell, the
Securities (inclusive of any shares of Common Stock issued upon any exercise or
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conversion of the Series A Preferred Stock or the Shadow Warrants) which he or
it is purchasing hereunder, subject, nevertheless, to any requirement of law
that the disposition of his or its property shall at all times be within his or
its control.
(j) The Purchaser acknowledges that it has been called to his
or its attention both in the Offering Disclosure Documents and by those
individuals with whom he has dealt in connection with his investment in the
Company that his or its investment in the Company involves a high degree of
risk.
(k) The Purchaser has received no representations or
warranties from the Company other than those contained herein (inclusive of the
Exhibits hereto) or in the Offering Disclosure Documents or otherwise furnished
in writing and signed by the Company.
3.2 Organization and Authority of Blackhawk; No Conflicts;
Approvals; Enforceability. (a) Blackhawk is a limited liability company
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to enter into this Agreement,
to perform its obligations under this Agreement and the other Exhibits to which
it is or is to be a party and to consummate the transactions contemplated hereby
and thereby. Blackhawk has by all requisite limited liability company action as
required by law and its governing instruments duly authorized the execution and
delivery of this Agreement and the other Exhibits to which it is or is to be a
party, the performance of its obligations hereunder or thereunder and the
consummation of the transactions contemplated hereby and thereby.
(b) Blackhawk is not in violation of or in default with
respect to any term or provision of its organizational documents or any terms 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 any existing statute, law, governmental rule, regulation or
ordinance, or any order of any court the consequences of such violation or
default would conflict with this Agreement or any Exhibit to which Blackhawk is
or is to be a party or adversely affect the ability of Blackhawk to perform its
obligations hereunder or thereunder.
(c) No approval by, from or with, and not other action, in
respect of, any Governmental Body or any other Person is required in connection
with the execution and delivery of this Agreement or any Exhibit to which
Blackhawk is or will be a party and the consummation of the transactions
contemplated hereby and thereby.
(d) This Agreement has been duly executed and delivered by
Blackhawk and is a legal, valid and binding obligation of Blackhawk, enforceable
against Blackhawk in accordance with its terms and conditions, except to the
extent that its enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally and by general equity principles (regardless of
whether such enforceability is considered in a proceeding a law or in equity).
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ARTICLE IV
COVENANTS
The Company, so long as at least 10% of either the Series A
Preferred Stock or the Common Stock is owned by the Purchasers, agrees to
perform and comply with each of the following covenants.
4.1 Financial Statements; Information.
The Company shall furnish to each Purchaser the following:
(a) Financial Information. The Company shall send, or cause to
be sent, to each Purchaser (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
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, (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 or any Exhibit to which the Company is a party, as may be
reasonably requested by a Majority-in-Interest of the Purchasers.
(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
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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 under any
agreement with respect to any debt for borrowed money in excess of $100,000 of
the Company or any Subsidiary or becoming aware 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
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 Shadow Warrants or any other Exhibit to
which the Company is a party, notice thereof specifying in each case in
reasonable detail the facts and circumstances surrounding such litigation,
proceeding or judgment.
4.2 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.
4.3 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.
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4.4 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.
ARTICLE V
CERTAIN OTHER COVENANTS
5.1 Approval and Filing of Charter Amendment. In accordance
with a covenant contained in the Certificate of Designation, the Company shall
use its best efforts to cause an amendment to its certificate of incorporation
to increase the number of authorized shares of its Common Stock from 15,000,000
shares to 100,000,000 shares (the "Charter Amendment") to be approved by its
stockholders as soon as possible following the Closing and to file such Charter
Amendment with the Secretary of State of Delaware promptly following the receipt
of such stockholder approval.
5.2 Repayment of Debt and Removal of Liens. The Company
covenants and agrees to use the proceeds of the sale of the Securities as
provided in Schedule 1.5, including without limitation, the repayment in full of
the Harbin/Murphy Notes and the I/O Note as promptly as practicable following
the Closing hereof. In connection therewith, the Company shall condition the
repayment of such notes upon the execution and delivery to the Company by the
holders thereof of such documents, instruments and certificates as shall be
required to evidence the release and termination of all liens and security
interests granted by the Company and its Subsidiaries in favor of the holders
thereof or their agents, which documents, instruments and certificates shall be
in form and substance (including recordable form, with respect to liens of
record) sufficient to evidence the release and termination of such security
interests, and the
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Company shall file or record any such documents, instruments or certificates as
promptly as possible following the Closing.
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; (c) pay, and save each Purchaser of any
Securities 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 Securities to each Purchaser; (d) pay all fees and other charges
payable in connection with the filings, recordings and registrations
contemplated by this Agreement or any other Exhibit; 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 Securities or of any amendment of, or waiver or consent
under or with respect to, this Agreement, any of the Securities or any other
Exhibit and save each Purchaser of the Securities harmless against each
Purchaser any loss or liability resulting from nonpayment or delay in payment of
any such tax.
6.2 Reliance on and Survival of Representations.
All agreements, covenants, representations and warranties of
the Company herein or of (or on behalf of) the Company in any Exhibit or 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 or its behalf, and (b) survive the execution and delivery of this
Agreement and the execution and delivery of the Securities to each Purchaser and
any investigation made at any time by him or it or on his or its behalf or any
disposition of any of the Securities, until the expiration of any applicable
statute of limitations.
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6.3 Amendment and Waiver.
(a) Any term, provision, covenant, agreement or condition of
this Agreement, the Shadow 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 Purchasers.
6.4 Shadow Warrant Register.
(a) The Shadow Warrants shall be issued in registered form
only. The Company shall keep a register (the "Shadow Warrant Register") in which
provision shall be made for the registration of the Shadow Warrants and the
registration of transfers of the Shadow Warrants. Such Register shall be kept at
the principal office of the Company and the Company is hereby appointed "Shadow
Warrant Registrar" for the purpose of registering the Shadow Warrants and
transfers of the Shadow Warrants. Subject to compliance with the provisions of
Section 3.1 hereof by a transferee, upon surrender for registration of transfer
of any Shadow 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 Shadow Warrant of a
like amount and kind. The Company shall treat the individual or entity in whose
name each Shadow Warrant is registered on the Shadow Warrant Register as the
sole and absolute owner thereof, notwithstanding any contrary notice.
(b) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any Shadow 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 Shadow Warrant, if mutilated, the Company
will make and deliver a new Shadow Warrant of like tenor in lieu of such lost,
stolen, destroyed or mutilated Shadow 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 Shadow Warrant,
registered assigns. The provisions of this Agreement are intended to be for the
benefit of all Holders from time to time of the Series A Preferred Stock, 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.
- 19 - Page 49 of 241 Pages
<PAGE>
<PAGE>
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 Purchaser of
Securities or each Holder of Series A Preferred Stock or Shadow Warrants at the
time outstanding, or (b) if to the Purchasers, at the address of each Purchaser
as set forth in Schedule 1.1 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 Series A Preferred Stock or Shadow Warrant, at the address of such Holder as
it appears on the Series A Preferred Stock Register or the Shadow Warrant
Register, as the case may be.
6.8 LAW GOVERNING.
THIS AGREEMENT AND THE SHADOW WARRANTS AND ALL AMENDMENTS,
SUPPLEMENTS, MODIFICATIONS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE
STATE OF NEW YORK.
6.9 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
AGREEMENT, THE SHADOW 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
Purchasers and any Holders, 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 Agreement or
- 20 - Page 50 of 241 Pages
<PAGE>
<PAGE>
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 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 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 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. 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 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 of its 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 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
- 21 - Page 51 of 241 Pages
<PAGE>
<PAGE>
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 Indemnification.
In consideration of the execution and delivery of this
Agreement by each Purchaser, the Company hereby agrees to indemnify, defend and
hold each Purchaser and the Managing Member and each partner of the Managing
Member and the employees and agents thereof, and each Holder from time to time
of any Series A Preferred Stock or Shadow Warrant (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 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 Securities, or (b) the
execution, delivery, performance or enforcement of this Agreement, the Shadow
Warrants or any other Exhibit, or the consummation of any of the transactions
contemplated hereby or thereby or (c) any failure of any representation or
warranty set forth in Section 2.11 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 4.4 or any liability of the Company arising pursuant to
Environmental Laws. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Company 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 under, this Section 6.13 shall survive the execution and delivery of
this Agreement, the enforcement of any provision hereof, 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; and any such
Indemnitee seeking to enforce the indemnification provided for hereunder may
initially proceed directly against the Company without first resorting to any
other rights of indemnification or otherwise that it may have.
6.14 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.
- 22 - Page 52 of 241 Pages
<PAGE>
<PAGE>
6.15 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.
6.16 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.
6.17 Finder's Fee.
(a) The Company 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 Securities 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 Securities 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.
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/ JAY D. HABER
______________________________________
Name: Jay D. Haber
Title: President
- 23 - Page 53 of 241 Pages
<PAGE>
<PAGE>
PURCHASERS:
BLACKHAWK INVESTORS, L.L.C.
By: Blackhawk Capital Partners, Managing Member
By: /s/ WILLIAM R. ZIEGLER
____________________________________________
Name: William R. Ziegler
Title: Partner
/s/ STEVEN A. WEBSTER
_______________________________________________
Steven A. Webster, Individually
/s/ WILLIAM A. WEBSTER
_______________________________________________
William R. Ziegler, Individually
- 24 - Page 54 of 241 Pages
<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.
"Blackhawk Purchase Price" has the meaning set forth in
Section 1.2.
"Blackhawk Shadow Warrant" has the meaning set forth in
Section 1.1.
"Bridge Loan Securities Purchase Agreement" means that certain
Securities Purchase Agreement dated as of April 25, 1997 between the Company and
the Holders.
"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.
"Cash Payment" has the meaning set forth in Section 1.2.
"Certificate of Designation" has the meaning set forth in
Section 1.1.
"Charter Amendment" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 1.4.
"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 to the Bridge
Loan Securities Purchase Agreement.
"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
- 25 - Page 55 of 241 Pages
<PAGE>
<PAGE>
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 dated as of April 25, 1997 between the
Company and one of the Holders.
"Deeds of Trust" means those certain deeds of trust of GPC and
HOC in favor of the Holders, each dated as of April 25, 1997, each executed,
delivered and recorded in accordance with the terms of the Bridge Loan
Securities Purchase Agreement.
"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.
"Exhibit" means any of the exhibits to this Agreement,
including such exhibits as executed and delivered pursuant to the terms of this
Agreement.
"Financial Statements" means (i) the (A) condensed statements
of financial position of the Company and the Subsidiaries as of March 31, 1997
and December 31, 1996, and (B) the condensed statements of operations of the
Company and the Subsidiaries for the three months ended March 31, 1997 and 1996
and (C) condensed statement of cash flow of the Company and the Subsidiaries for
the three months ended March 31, 1997 and 1996, in each case, together with the
notes thereto, and as set forth in the Form 10-QSB of the Company for the
Quarter Ended March 31, 1997, and (ii) the unaudited consolidated balance sheet
of the Company and the Subsidiaries as of May 31, 1997, and the unaudited
consolidated statement of operations of the Company and the Subsidiaries for the
five month period ended May 31, 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.
- 26 - Page 56 of 241 Pages
<PAGE>
<PAGE>
"Geco-Prakla Letter" means that certain letter dated June 25,
1997 from Jeffrey W. Imber, Project Manager TZ-NEPS Department, Geco-Prakla,
addressed To Whom It May Concern with respect to the terms of Weeks project job
awarded by Geco-Prakla to Signature.
"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.
"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 Notes" means those certain promissory notes of
the Company, in the aggregate principal amount of $701,001.85, payable to 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 any shares of Series A
Preferred Stock or any Shadow Warrant, as the case may be, or a Holder of
either.
"Holders' Purchase Price" has the meaning set forth in Section
1.3.
"Holders' Shadow Warrants" has the meaning set forth in
Section 1.1.
"Indemnified Liabilities" has the meaning set forth in Section
6.13.
"Indemnitees" has the meaning set forth in Section 6.13.
"I/O Extension Agreement" means that certain agreement dated
April 9, 1997 between Input/Output, Inc. and the Company, providing for an
extension of the maturity or other due date of the current outstanding principal
amount of the I/O Note issued by the Company in favor of Input/Output, Inc.
until the earlier of October 1, 1997 or the closing date of any financing of the
Company (excluding the Senior Note financing) or change in control of the
Company, provided that the Company make six monthly payments totaling $14,722.18
representing repayment of interest owing on the I/O Note, commencing on the
execution date of an amended note.
- 27 - Page 57 of 241 Pages
<PAGE>
<PAGE>
"I/O Note" means that certain promissory note of the Company
payable to Input/Output, Inc. in the original principal amount of $300,000, as
amended.
"Majority-in-Interest" means the Holders of at least 50.1% of
the Common Stock (assuming the conversion of the Series A Preferred Stock into
shares of Common Stock) purchased hereunder.
"Managing Member" means Blackhawk Capital Partners, a Texas
general partnership and the managing member of Blackhawk.
"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.
"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.
"Monitoring Agreement" means that certain Monitoring Agreement
to be entered into between the Company and the Managing Member, in the form of
Exhibit "E" attached hereto.
"Offering Disclosure Documents" means (i) the Annual Report on
Form 10-KSB of the Company for the year ended December 31, 1996, and the Form
10-QSB of the Company for the Quarter Ended March 31, 1997, in each case, as
filed with the Commission, (ii) the Financial Statements and (iii) that certain
Confidential Private Placement Memorandum of Blackhawk dated June 25, 1997, but
only to the extent of the information provided or supplied to Blackhawk or its
counsel by or on behalf of the Company.
"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 "F" 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 dated as of April 25, 1997 of the Company and the Subsidiary
Obligors in favor of the Holders, executed and delivered pursuant to the Bridge
Loan Securities Purchase Agreement.
"Pledge Agreement" means that certain pledge agreement of the
Company in favor of the Holders dated as of April 25, 1997 with respect to all
of the capital stock of the Subsidiaries
- 28 - Page 58 of 241 Pages
<PAGE>
<PAGE>
owned by the Company, executed and delivered pursuant to the Bridge Loan
Securities Purchase Agreement.
"Preferred Stock Charter Amendment" means that certain charter
amendment that was approved by the stockholders of the Company at its last
annual meeting of stockholders providing for the increase in the authorized
capital stock of the Company to consist of (A) 15,000,000 shares of Common Stock
and (B) 2,500,000 shares of series preferred stock, par value $10 per share (the
"Preferred Stock").
"Purchaser" means a person set forth on Schedule 1.1 with
respect to that number of Securities set forth opposite his or its name and a
person who executes and delivers a counterpart signature page to this Agreement,
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 "D" hereto.
"Securities" has the meaning set forth in Section 1.4.
"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 Notes" means those certain 12% Senior Secured
Promissory Notes of the Company and the Subsidiary Obligors, in the aggregate
principal amount of $500,000, executed and delivered pursuant to the Bridge Loan
Securities Purchase Agreement.
"Series A Preferred Stock" means that series of Preferred
Stock of the Company created and designated pursuant to the Certificate of
Designation of Series A Convertible Preferred Stock of the Company, in the form
of Exhibit "A" attached hereto.
"Shadow Warrants" collectively means the Blackhawk Shadow
Warrant and the Holders' Shadow Warrants, and individually means any of such
Shadow Warrants, in each case, issued by the Company pursuant to the terms
hereof in the form of Exhibit "B" attached hereto.
"Shadow Warrant Register" has the meaning set forth in Section
6.4.
"Subordination Agreement" means that certain subordination
agreement dated as of April 25, 1997 executed and delivered pursuant to the
terms of the Bridge Loan Securities Purchase Agreement.
"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
- 29 - Page 59 of 241 Pages
<PAGE>
<PAGE>
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. For purposes of the
covenants contained in Article IV hereof, Subsidiary generally includes any
corporation or other legal entity in which the Company or any other Subsidiary
of the Company hereafter acquires 50% or more of the voting stock, and
specifically includes Signature.
"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.
- 30 - Page 60 of 241 Pages
<PAGE>
<PAGE>
SCHEDULE 1.1
PURCHASERS
<TABLE>
<CAPTION>
Name, Address, Telefax No. No. Shares No. Shares No. Shadow
and Tax Identification No. Common Preferred Warrant
of Purchaser Stock Stock Shares
- -------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Blackhawk Investors, L.L.C 5,041,667 171,875 6,512,095
1013 Centre Road
Wilmington, Delaware 19805-1297
Steven A. Webster 229,166 7,812 296,005
c/o Falcon Drilling Company, Inc.
1900 West Loop South, Suite 1800
Houston, Texas 77027
Telefax No.: (713) 623-8103
William R. Ziegler 229,167 7,813 296,004
c/o Parson & Brown
666 Third Avenue, 9th Floor
New York, New York 10017
Telefax No.: (212) 682-9112
</TABLE>
Page 61 of 241 Pages
<PAGE>
<PAGE>
EXHIBIT III
- --------------------------------------------------------------------------------
GEOKINETICS INC.
- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
DATED AS OF JULY 24, 1997
- --------------------------------------------------------------------------------
SERIES B CONVERTIBLE PREFERRED STOCK
AND
SHADOW WARRANTS
- --------------------------------------------------------------------------------
Page 62 of 241 Pages
<PAGE>
<PAGE>
TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE OF
SERIES B PREFERRED STOCK AND SHADOW WARRANT
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1.1 Authorization and Description of Series B Preferred
Stock and New Blackhawk Shadow Warrant .......................................... 1
1.2 Sale and Purchase of Securities........................................................2
1.3 Closing................................................................................2
1.4 Application of Proceeds................................................................2
1.5 Events at Closing......................................................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization, Authority and Capitalization of the Company;
Stock Ownership...................................................................3
2.2 Subsidiaries...........................................................................7
2.3 Qualification; Enforceability..........................................................7
2.4 Business and Property; Financial Statements............................................8
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc..................................................................8
2.6 Consents and Approvals.................................................................9
2.7 Litigation.............................................................................9
2.8 Private Offering.......................................................................9
2.9 No Defaults; Debt, etc; Liens..........................................................9
2.10 Full Disclosure.......................................................................10
2.11 Environmental Matters.................................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BLACKHAWK
3.1 Investment Representation.............................................................11
3.2 Organization and Authority of Blackhawk; No Conflicts; Approvals;
Enforceability........................................................................13
</TABLE>
Page 63 of 241 Pages
- i -
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE IV
COVENANTS
4.1 Financial Statements; Information.....................................................14
4.2 Corporate Existence...................................................................16
4.3 Compliance with Laws; Government Filings..............................................16
4.4 Environmental Matters.................................................................16
ARTICLE V
CERTAIN OTHER COVENANTS
5.1 Approval and Filing of Charter Amendment..............................................17
5.2 Adjustments to Shadow Warrants........................................................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 Shadow Warrant Register...............................................................18
6.5 Directly or Indirectly................................................................19
6.6 Successors and Assigns................................................................19
6.7 Notices...............................................................................19
6.8 LAW GOVERNING.........................................................................20
6.9 SUBMISSION TO JURISDICTION;
Service of Process....................................................................20
6.10 Headings, etc.........................................................................21
6.11 Entire Agreement......................................................................21
6.12 WAIVER OF TRIAL BY JURY...............................................................21
6.13 Indemnification.......................................................................21
6.14 Interpretive Provision................................................................22
6.15 Severability..........................................................................22
6.16 Counterparts..........................................................................22
6.17 Finder's Fee..........................................................................22
6.18 Third Party Beneficiary...............................................................23
</TABLE>
Page 64 of 241 Pages
- ii -
<PAGE>
<PAGE>
Schedules:
- ----------
Schedule 2.1(b) Capitalization of the Company
Schedule 2.1(d) Capitalization of the Subsidiaries
Schedule 2.2 Subsidiaries
Schedule 2.5 Noncontravention
Schedule 2.6 Consent and Approvals
Schedule 2.7 Litigation
Schedule 2.9 Debts; Liens
Exhibits:
- ---------
Exhibit A Form of Series B Certificate of Designation
Exhibit B Form of New Blackhawk Shadow Warrant
Exhibit C Form of Amendment to Registration Rights Agreement
Exhibit D Form of Opinion of Company Counsel
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of July 24, 1997,
between GEOKINETICS INC., a Delaware corporation (the "Company") and BLACKHAWK
INVESTORS, L.L.C., a Delaware limited liability company ("Blackhawk").
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 an
aggregate of 100,000 shares of Series B Preferred Stock and the New Blackhawk
Shadow Warrant and wishes to sell to Blackhawk an aggregate of 100,000 shares of
Series B Preferred Stock and the New Blackhawk Shadow Warrant, for the
consideration provided herein, subject to the terms and conditions of this
Agreement; and
WHEREAS, Blackhawk wishes to purchase 100,000 shares of Series
B Preferred Stock and the New Blackhawk Shadow Warrant, 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 Blackhawk, intending to be mutually bound, agree as follows:
ARTICLE I
PURCHASE AND SALE OF
SERIES B PREFERRED STOCK AND SHADOW WARRANT
1.1 Authorization and Description of Series B Preferred
Stock and New Blackhawk Shadow Warrant.
The Company has authorized the issuance and sale to Blackhawk
at the Closing of (i) 100,000 shares of Series B Preferred Stock and (ii) a
Shadow Warrant to purchase up to an aggregate of 1,100,255 shares of Common
Stock, subject to adjustment (the "New Blackhawk Shadow Warrant"). The Series B
Preferred Stock shall have the powers, rights and privileges and shall be
subject to the terms and conditions set forth in the Certificate of Designation
of Series B Convertible Preferred Stock (the "Series B Certificate of
Designation"), which shall be in the form of Exhibit "A" attached hereto. The
New Blackhawk Shadow Warrant shall be in the form of Exhibit "B" attached
hereto.
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1.2 Sale and Purchase of Securities.
The Company will sell to Blackhawk and Blackhawk 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
contained herein and in the Exhibits hereto, (i) 100,000 shares of Series B
Preferred Stock and (ii) the New Blackhawk Shadow Warrant, on the Closing Date,
in each case, registered in the name of Blackhawk, in consideration of an
aggregate purchase price of $1,000,000 (the "Purchase Price"), with the entire
$1,000,000 being deemed paid in consideration for the Series B Preferred Stock
($10.00 per share). The Purchase Price shall be payable in cash by wire transfer
of immediately available funds to the Company's bank account with Frost National
Bank, in accordance with wire transfer instructions delivered by the Company to
Blackhawk at least one business day prior to the Closing.
1.3 Closing.
The sale and purchase (the "Closing") of the shares of Series
B Preferred Stock and the New Blackhawk Shadow Warrant (collectively, the
"Securities") shall take place on the date of the filing of the Series B
Certificate of Designation with the Secretary of State of Delaware (the "Closing
Date") at the offices of Parson & Brown, 666 Third Avenue, 9th Floor, New York,
New York 10017. At the Closing the Company will deliver to Blackhawk a
certificate for the shares of Series B Preferred Stock and the New Blackhawk
Shadow Warrant purchased hereunder, each dated the Closing Date, and registered
in the name of Blackhawk, against delivery by Blackhawk of the Purchase Price.
1.4 Application of Proceeds.
The Company shall use the proceeds from the sale of the
Securities for working capital.
1.5 Events at Closing.
The following events shall take place at the Closing:
(a) The Company shall deliver a certificate of the Chairman
and Chief Executive Officer 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.
(b) The Company shall deliver a certificate of the Secretary
of the Company, dated the Closing Date, certifying as to (i) the certificate of
incorporation of the Company and any amendments thereto (with copies of any and
all amendments thereto since July 18, 1997
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being attached as an exhibit thereto), (ii) the by-laws of the Company and the
absence of any amendments thereto since July 18, 1997, and (iii) resolutions of
the Board of Directors of the Company authorizing the issuance of the shares of
Series B Preferred Stock and the execution and delivery of the New Blackhawk
Shadow Warrant, this Agreement and all Exhibits to which the Company is a party
and reserving for issuance (subject to the filing of the Charter Amendment with
the Secretary of State of Delaware) 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 Series B Preferred Stock and the New Blackhawk Shadow Warrant
(with copies of such resolutions being attached as an Exhibit thereto).
(c) The Company shall execute and deliver to Blackhawk the
Amendment to Registration Rights Agreement, substantially in the form of Exhibit
"C" hereto, and Blackhawk shall deliver to the Company counterpart signature
pages thereto bearing the execution of same by Blackhawk and each of Messrs.
Webster and Ziegler.
(d) The Company shall deliver to Blackhawk a certified copy of
the Series B Certificate of Designation filed with the Secretary of State of the
State of Delaware.
(e) Chamberlain, Hrdlicka, White, Williams & Martin, counsel
for the Company, shall deliver to Blackhawk the Opinion of Company Counsel,
substantially in the form of Exhibit "D" hereto.
(f) The Company shall pay the reasonable legal fees and other
expenses of Blackhawk's 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.
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
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 Securities (including the issuance of
Common Stock upon the exercise or conversion, as the case may be, of the Series
B Preferred Stock and the New Blackhawk Shadow Warrant), to perform its
obligations under this Agreement, the Securities (including the issuance of
Common Stock upon the exercise or conversion, as the case may be,
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of the Series B Preferred Stock and the New Blackhawk Shadow Warrant), 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, other than
with respect to the approval of the Charter Amendment), duly authorized the
execution and delivery of this Agreement, the Securities (including the issuance
of Common Stock upon the exercise or conversion, as the case may be, of the
Series B Preferred Stock and the New Blackhawk Shadow Warrant), 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. Upon
the issuance of the shares of Series B Preferred Stock by the Company against
payment of the Purchase Price by Blackhawk in accordance with the provisions of
this Agreement, the shares of Series B Preferred Stock will be duly authorized,
validly issued and fully paid and nonassessable with no personal liability
attaching to the ownership thereof. The shares of Common Stock that will be
issuable upon the exercise or conversion, as the case may be, of the Series B
Preferred Stock and the New Blackhawk Shadow Warrant in the manner referred to
in the Series B Certificate of Designation and the New Blackhawk Shadow Warrant,
respectively, have been duly authorized and reserved for issuance (subject to
the filing of the Charter Amendment with the Secretary of State of Delaware),
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 Series B Certificate of Designation and
the New Blackhawk Shadow Warrant will be validly issued, fully paid and
nonassessable.
(c) Immediately prior to the date of the Initial Purchase
Agreement, the outstanding options to acquire Common Stock of the Company
consisted of options granted to employees, officers and directors of the Company
to acquire an aggregate of 212,500 shares of Common Stock (collectively, the
"Initial Options"). As part of the Initial Transactions, options to acquire an
aggregate of 1,625,000 shares of Common Stock were granted by the Company to
persons who became executive officers or directors of the Company on the
effective date of the consummation of such Initial Transactions (the "Subsequent
Options") and, pursuant to the terms of the Gallant Employment Agreement,
Gallant received options to acquire up to an additional 400,000 shares of Common
Stock (the "Earn-out Options") exercisable over the course of the two years
following the closing of the Initial Transactions pursuant to the "earn-out"
provisions thereof. The consummation of the Initial Transactions (inclusive of
any subsequent conversion of the shares of Series A Preferred Stock into shares
of Common Stock and/or any exercise of
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any of the Initial Blackhawk Shadow Warrant or Holders' Shadow Warrants into
shares of Common Stock) did not (and will not, as the case may be) require any
adjustment to the aggregate number of shares of Common Stock issuable pursuant
to the Initial Options. Neither the consummation of the Subsequent Transactions
(inclusive of any subsequent conversion of the shares of Series B Preferred
Stock into shares of Common Stock and/or any exercise of the New Blackhawk
Shadow Warrant into shares of Common Stock), nor the exercise by any holder of
any outstanding option, warrant or convertible security of the Company, will
require any adjustment to the aggregate number of shares of Common Stock
issuable pursuant to the Initial Options, the Subsequent Options or the Earn-out
Options (collectively, the "Outstanding Options").
Immediately prior to the date of the Initial Purchase
Agreement, the outstanding warrants to acquire Common Stock of the Company
consisted of (i) warrants to acquire an aggregate of 2,076,207 shares of Common
Stock that had been granted by the Company prior to the consummation of the
transactions contemplated by the Bridge Loan Securities Purchase Agreement (the
"Initial Warrants") and (ii) warrants to acquire an aggregate of 1,000,000
shares of Common Stock that were granted as part of the Bridge Loan Transaction
(the "Subsequent Warrants"). As a result of the issuance of shares of Common
Stock as part of the Initial Transactions (inclusive of the 400,000 shares of
Common Stock issued pursuant to the Signature Purchase Agreement), the Initial
Warrants and the Subsequent Warrants were adjusted to represent the right to
acquire an aggregate of 3,676,176 shares of Common Stock and 2,191,128 shares of
Common Stock, respectively. In addition to standard adjustment provisions in the
event of any stock split, stock dividend, recapitalization or reclassification
of Common Stock or merger or consolidation of the Company, the Initial Warrants
contain the following types of additional adjustment provisions: (i) Initial
Warrants that first become exercisable on July 31, 1997 and expire on July 31,
1999 and currently represent the right to acquire an aggregate of 1,041,778
shares of Common Stock (the "Type A Initial Warrants"), are subject to
adjustment in the event that the Company issues any additional shares of Common
Stock prior to the expiration date of such warrants, whether pursuant to the
exercise of other options or warrants or the conversion of any convertible
securities of the Company or otherwise, except that the issuance of shares of
Common Stock pursuant to the exercise of any other Type A Initial Warrants shall
not require any adjustment to the number of shares issuable upon exercise of
such warrants; (ii) Initial Warrants that first became exercisable on September
30, 1994 and expire on September 30, 1999 and currently represent the right to
acquire an aggregate of 613,880 shares of Common Stock (the "Type B Initial
Warrants"), are subject to adjustment in the event that the Company shall issue
more than ten percent (10%) of its then outstanding shares of Common Stock
during any successive twelve (12) month period from October 1 through September
30 of any year prior to the expiration date of such warrants, whether pursuant
to a merger, consolidation, stock or asset acquisition or otherwise; (iii)
Initial Warrants that first became exercisable on either June 14, 1996, July 27,
1996 or August 29, 1996 and expire on the third anniversary thereof and
currently represent the right to acquire an aggregate of 65,734 shares of Common
Stock (the "Type C Initial Warrants"), are subject to adjustment in the event
that the Company shall issue more than ten percent (10%) of its then outstanding
shares of Common Stock during any successive twelve (12) month period (from July
28 of one year through July 27 of the following year) prior to the expiration
date of such warrants, whether pursuant to a merger, consolidation,
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stock or asset acquisition or otherwise; (iv) Initial Warrants that first became
exercisable on March 31, 1997 and expire on December 31, 1997 and currently
represent the right to acquire an aggregate of 1,221,817 shares of Common Stock
(the "Type D Initial Warrants"), are subject to adjustment in the event that the
Company shall issue more than ten percent (10%) of its then outstanding shares
of Common Stock at any time prior to the expiration date of such warrants,
whether pursuant to a merger, consolidation, stock or asset acquisition or
otherwise; and (v) Initial Warrants that first became exercisable on either
October 1, 1995 or March 1, 1996 and expire on the third anniversary thereof and
currently represent the right to acquire an aggregate of 732,968 shares of
Common Stock (the "Type E Initial Warrants"), are not subject to adjustment in
the event of any additional stock issuances by the Company. The conversion of
the Series A Preferred Stock into shares of Common Stock prior to the exercise
of any Initial Warrants or Subsequent Warrants will result in the following
adjustments to the Initial Warrants and the Subsequent Warrants: the Type A
Initial Warrants will be adjusted to represent the right to acquire an aggregate
of 1,281,746 shares of Common Stock; the Type B Initial Warrants will be
adjusted to represent the right to acquire an aggregate of 755,284 shares of
Common Stock; the Type C Initial Warrants will be adjusted to represent the
right to acquire an aggregate of 80,875 shares of Common Stock; the Type D
Initial Warrants will be adjusted to represent the right to acquire an aggregate
of 1,503,256 shares of Common Stock (assuming that such conversion occurs prior
to December 31, 1997); the Type E Initial Warrants will not be adjusted; and the
Subsequent Warrants will be adjusted to represent the right to acquire an
aggregate of 2,695,844 shares of Common Stock. The consummation of the
Subsequent Transactions (exclusive of any subsequent conversion of the shares of
Series B Preferred Stock into shares of Common Stock and/or any exercise of any
of the New Blackhawk Shadow Warrant into shares of Common Stock) will not
require any adjustment to the aggregate number of shares of Common Stock
issuable pursuant to the Initial Warrants or the Subsequent Warrants. The
conversion of the Series B Preferred Stock into shares of Common Stock prior to
the exercise of any Initial Warrants (other than the Type D Initial Warrants) or
Subsequent Warrants will result in the following adjustments to the Initial
Warrants and the Subsequent Warrants: the Type A Initial Warrants will be
adjusted to represent the right to acquire an aggregate of 1,409,729 shares of
Common Stock; the Type B Initial Warrants will be adjusted to represent the
right to acquire an aggregate of 830,699 shares of Common Stock; the Type C
Initial Warrants will be adjusted to represent the right to acquire an aggregate
of 88,951 shares of Common Stock; neither the Type D Initial Warrants nor the
Type E Initial Warrants will be adjusted; and the Subsequent Warrants will be
adjusted to represent the right to acquire an aggregate of 2,965,025 shares of
Common Stock. In addition, the exercise in whole or in part of any of the
Outstanding Options, or Outstanding Warrants (other than, with respect to the
Type A Initial Warrants, the other Type A Initial Warrants) or the Shadow
Warrants, (i) will cause an adjustment to any then outstanding Type A Initial
Warrant or Subsequent Warrant, (ii) may cause an adjustment to any then
outstanding Type B Initial Warrant or Type C Initial Warrant if the number of
shares of Common Stock issued upon such exercise, either singly or when
aggregated with any other issuances of Common Stock during the applicable twelve
(12) month period, represents a ten percent (10%) increase in the total number
of shares of outstanding Common Stock and (iii) may cause an adjustment to any
then outstanding Type D Initial Warrant if the number of shares of Common Stock
issued upon such exercise, either singly or when aggregated with any other
issuances of Common Stock since the date of the last adjustment (i.e., July 18,
1997) and prior to the
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expiration date thereof (i.e., December 31, 1997), represents a ten percent
(10%) increase in the total number of shares of outstanding Common Stock.
(d) Schedule 2.1(d) 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 in
Schedule 2.1(d). 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(d).
2.2 Subsidiaries.
(a) Schedule 2.2 sets forth the name and jurisdiction of
incorporation or other organization of each Subsidiary. Except for the
Subsidiaries, the Company does not directly or indirectly own any interest in
any other Person.
(b) 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 property it purports to own or hold under lease, and to carry on
its business as conducted by it.
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 New Blackhawk Shadow Warrant and the
other Exhibits hereto to which the Company is a party have been (or at the
Closing will be, as the case may be) duly executed and delivered by the Company
and, assuming due execution and delivery by Blackhawk of this Agreement and the
Exhibits that require execution by Blackhawk, constitute (or upon execution and
delivery at the Closing, will constitute) the legal, valid and binding
obligations of the Company, enforceable against the Company 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 Blackhawk a true and complete
copy of the Offering Disclosure Documents (other than the PPM, which was
prepared by Blackhawk, in large part, with information with respect to the
Company, its industry, Signature and the Signature acquisition, provided by or
on behalf of the Company). The 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 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 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. There has been
no material adverse change in the financial position or condition of the Company
and its Subsidiaries since the date of such Financial Statements.
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 to perform its obligations under this
Agreement, the New Blackhawk Shadow Warrant or any other Exhibit to which it is
a party.
(b) Except as set forth in Schedule 2.5, neither the
execution, delivery or performance by the Company of this Agreement, the New
Blackhawk Shadow Warrant (including, without limitation, the issuance of Common
Stock upon any exercise or conversion, as the case may be, of the Series B
Preferred Stock or the New Blackhawk Shadow Warrant), or any other Exhibit to
which it is a party, nor compliance by the Company 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,
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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.
2.6 Consents and Approvals.
Except as set forth on 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 of, or the performance by the Company of
any obligation under, this Agreement or any Exhibit to which it is a party or
the consummation by the Company of the transactions contemplated hereby and
thereby, including, without limitation, the offer, issue, sale and delivery of
the Securities (including without limitation, the issuance of Common Stock upon
any exercise or conversion, as the case may be, of the Series B Preferred Stock
or the New Blackhawk Shadow Warrant) or (ii) as a condition to the legality,
validity or enforceability as against the Company of this Agreement or any
Exhibit to which it is a party.
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) question the validity or legality of this
Agreement, the New Blackhawk Shadow Warrant 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 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 Private Offering.
Neither the Company, any Subsidiary, nor any other person
acting on behalf of the Company or any Subsidiary has taken, or will take, any
action which would subject the issuance or sale of the Securities (inclusive of
the issuance of shares of Common Stock pursuant to any exercise or conversion,
as the case may be, of the Series B Preferred Stock or the New Blackhawk Shadow
Warrant) to Section 5 of the Securities Act or to the registration or
qualification requirements of any securities law of any state.
2.9 No Defaults; Debt, etc; Liens.
(a) Schedule 2.9 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. No
default or event of default exists under any
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instrument or agreement evidencing, providing for the issuance or securing of,
or otherwise relating to, any such debt or liens.
(b) The Harbin/Murphy Notes and the I/O Note have been paid in
full and all liens on assets of the Company and its Subsidiaries granted to
secure the Harbin/Murphy Notes and the I/O Note have been released and
discharged of record.
2.10 Full Disclosure.
None of this Agreement, any Exhibit, the Offering Disclosure
Documents or any document, certificate or instrument delivered to Blackhawk by
or on behalf of the Company or any Subsidiary 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.
2.11 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.
(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 2.11(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
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Environmental Claims referred to in this Section 2.11(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 BLACKHAWK
Blackhawk represents and warrants in favor of the Company as
follows:
3.1 Investment Representation. (a) Blackhawk hereby
acknowledges that the Securities (inclusive of any shares of Common Stock issued
upon any exercise or conversion of the Series B Preferred Stock or the New
Blackhawk Shadow Warrant, as the case may be) are not being registered (i) under
the Securities 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) Blackhawk will not sell or transfer all or any part of the
Securities unless and until it 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 Blackhawk 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 Commission to the effect that no
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enforcement action will be recommended if the proposed sale or transfer is made
without registration under the Act. Blackhawk acknowledges that the certificates
representing the Series B Preferred Stock and the New Blackhawk Shadow Warrant
(and upon any exercise or conversion of the Series B Preferred Stock or the New
Blackhawk Shadow Warrant, as the case may be, 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
Securities on its books should Blackhawk attempt to transfer the Securities
otherwise than in compliance with this Section 3.1.
(d) Blackhawk has adequate means of providing for its current
needs and possible personal contingencies, and it anticipates no need now or in
the foreseeable future to sell the Securities (or upon any exercise or
conversion of the Series B Preferred Stock or the New Blackhawk Shadow Warrant,
as the case may be, the Common Stock) which it is purchasing and it can afford
the loss of its entire investment in the Company.
(e) Blackhawk has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
investment in the Company and of making an informed investment decision.
(f) Blackhawk has received and read and is familiar with the
Offering Disclosure Documents and confirms that all documents, records and books
pertaining to its investment in the Company have been made available to it.
Blackhawk is aware that no federal or state agency has passed upon the
Securities or made any finding or determination concerning the fairness of the
investment represented thereby.
(g) Blackhawk 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 Blackhawk. Blackhawk 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
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the 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 Blackhawk with respect to the
suitability of an investment in the Securities or the tax consequences thereof.
The Company has urged Blackhawk to consult its own tax adviser concerning any
tax matters relating to this investment.
(h) The Securities (inclusive of any shares of Common Stock
issued upon any exercise or conversion of the Series B Preferred Stock or the
New Blackhawk Shadow Warrant) which Blackhawk is acquiring will be acquired for
its own account for investment. Blackhawk intends to hold the Securities
(inclusive of any shares of Common Stock issued upon any exercise or conversion
of the Series B Preferred Stock or the New Blackhawk Shadow Warrant)
indefinitely and it is not purchasing such securities with a view toward
distribution in a manner which would require registration under the Securities
Act, and it does not presently have any reasons to anticipate any change in its
circumstances or other particular occasion or event which would cause it to
sell, the Securities (inclusive of any shares of Common Stock issued upon any
exercise or conversion of the Series B Preferred Stock or the New Blackhawk
Shadow Warrant) which it is purchasing hereunder, subject, nevertheless, to any
requirement of law that the disposition of its property shall at all times be
within its control.
(i) Blackhawk acknowledges that it has been called to its
attention both in the Offering Disclosure Documents and by those individuals
with whom it has dealt in connection with his investment in the Company that its
investment in the Company involves a high degree of risk.
(j) Blackhawk has received no representations or warranties
from the Company other than those contained herein (inclusive of the Exhibits
hereto) or in the Offering Disclosure Documents or otherwise furnished in
writing and signed by the Company.
3.2 Organization and Authority of Blackhawk; No Conflicts;
Approvals; Enforceability. (a) Blackhawk is a limited liability company
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to enter into this Agreement,
to perform its obligations under this Agreement and the other Exhibits to which
it is or is to be a party and to consummate the transactions contemplated hereby
and thereby. Blackhawk has by all requisite limited liability company action as
required by law and its governing instruments duly authorized the execution and
delivery of this Agreement and the other Exhibits to which it is or is to be a
party, the performance of its obligations hereunder or thereunder and the
consummation of the transactions contemplated hereby and thereby.
(b) Blackhawk is not in violation of or in default with
respect to any term or provision of its organizational documents or any terms 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 any existing statute, law, governmental rule, regulation or
ordinance, or any order of any court the consequences of such violation or
default would conflict
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with this Agreement or any Exhibit to which Blackhawk is or is to be a party or
adversely affect the ability of Blackhawk to perform its obligations hereunder
or thereunder.
(c) No approval by, from or with, and not other action, in
respect of, any Governmental Body or any other Person is required in connection
with the execution and delivery of this Agreement or any Exhibit to which
Blackhawk is or will be a party and the consummation of the transactions
contemplated hereby and thereby.
(d) This Agreement has been duly executed and delivered by
Blackhawk and is a legal, valid and binding obligation of Blackhawk, enforceable
against Blackhawk in accordance with its terms and conditions, except to the
extent that its enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally and by general equity principles (regardless of
whether such enforceability is considered in a proceeding a law or in equity).
ARTICLE IV
COVENANTS
The Company, so long as at least 10% of any of the Series A
Preferred Stock, Series B Preferred Stock or the Common Stock is owned by
Blackhawk or the Holders, in the aggregate, agrees to perform and comply with
each of the following covenants.
4.1 Financial Statements; Information.
The Company shall furnish to Blackhawk the following:
(a) Financial Information. The Company shall send, or cause to
be sent, to Blackhawk (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 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 of the Purchasers, (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, (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 or any Exhibit to which
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the Company is a party, as may be reasonably requested by a Majority-in-Interest
of the Purchasers.
(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 under any
agreement with respect to any debt for borrowed money in excess of $100,000 of
the Company or any Subsidiary or becoming aware 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
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 New Blackhawk Shadow Warrant or any other
Exhibit to which the Company is a party, notice thereof specifying in each case
in reasonable detail the facts and circumstances surrounding such litigation,
proceeding or judgment.
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4.2 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.
4.3 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.
4.4 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.
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ARTICLE V
CERTAIN OTHER COVENANTS
5.1 Approval and Filing of Charter Amendment. In accordance
with a covenant contained in the Series B Certificate of Designation, the
Company shall use its best efforts to cause an amendment to its certificate of
incorporation to increase the number of authorized shares of its Common Stock
from 15,000,000 shares to 100,000,000 shares (the "Charter Amendment") to be
approved by its stockholders as soon as possible following the Closing and to
file such Charter Amendment with the Secretary of State of Delaware promptly
following the receipt of such stockholder approval.
5.2 Adjustments to Shadow Warrants. The Company covenants and
agrees in favor of Blackhawk, each Purchaser and each subsequent Holder of
Shadow Warrants that, in accordance with the provisions of subsections (b) and
(c) of Section 6.1 of each of the Shadow Warrants, it shall amend promptly the
terms of each of the Shadow Warrants to reflect an appropriate increase to the
maximum number of shares of Common Stock issuable thereunder, each and every
time that there is an adjustment to the number of shares of Common Stock
issuable under any of the Initial Warrants, including, without limitation, any
adjustment to the number of shares of Common Stock issuable pursuant to such
Initial Warrants caused by (i) the conversion of the shares of Series A
Preferred Stock and/or the conversion of the Series B Preferred Stock, in each
case, into shares of Common Stock, (ii) the exercise of any Outstanding Options,
(iii) the exercise of any other Outstanding Warrants or Shadow Warrants or (iii)
the exercise or conversion of any other option, warrant or convertible security
of the Company whether presently outstanding or issued after the date hereof.
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 Blackhawk 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 Blackhawk for its 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 Blackhawk; (c)
pay, and save Blackhawk 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 Securities to Blackhawk; (d) pay all fees and
other charges payable in connection with the
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filings, recordings and registrations contemplated by this Agreement or any
other Exhibit; 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 Securities or of any
amendment of, or waiver or consent under or with respect to, this Agreement, any
of the Securities or any other Exhibit and save Blackhawk harmless against any
loss or liability resulting from nonpayment or delay in payment of any such tax.
6.2 Reliance on and Survival of Representations.
All agreements, covenants, representations and warranties of
the Company herein or of (or on behalf of) the Company in any Exhibit or 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 Blackhawk,
notwithstanding any investigation heretofore or hereafter made by Blackhawk or
on its behalf, and (b) survive the execution and delivery of this Agreement and
the execution and delivery of the Securities to Blackhawk and any investigation
made at any time by it or on its behalf or any disposition of any of the
Securities, until the expiration of any applicable statute of limitations.
6.3 Amendment and Waiver.
Any term, provision, covenant, agreement or condition of this
Agreement, the New Blackhawk Shadow Warrant 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 Blackhawk.
6.4 Shadow Warrant Register.
(a) The New Blackhawk Shadow Warrant shall be issued in
registered form only. The Company shall keep a register (the "Shadow Warrant
Register") in which provision shall be made for the registration of the New
Blackhawk Shadow Warrant and the registration of transfers of the New Blackhawk
Shadow Warrant. Such Register shall be kept at the principal office of the
Company and the Company is hereby appointed "Shadow Warrant Registrar" for the
purpose of registering the New Blackhawk Shadow Warrant and transfers of the New
Blackhawk Shadow Warrant. Subject to compliance with the provisions of Section
3.1 hereof by a transferee, upon surrender for registration of transfer of any
New Blackhawk Shadow 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 New
Blackhawk Shadow Warrant of a like amount and kind. The Company shall treat the
individual or entity in whose name each New Blackhawk Shadow Warrant is
registered on the Shadow Warrant Register as the sole and absolute owner
thereof, notwithstanding any contrary notice.
(b) Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any New Blackhawk
Shadow Warrant and of a letter of
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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 New Blackhawk Shadow Warrant, if mutilated, the Company will
make and deliver a new New Blackhawk Shadow Warrant of like tenor in lieu of
such lost, stolen, destroyed or mutilated New Blackhawk Shadow 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 Series B Preferred Stock
or any New Blackhawk Shadow Warrant, registered assigns. The provisions of this
Agreement are intended to be for the benefit of all Holders from time to time of
the Series B Preferred Stock and/or the New Blackhawk Shadow Warrant, 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 Blackhawk or its
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 Blackhawk or each
Holder of Series B Preferred Stock or New Blackhawk Shadow Warrants at the time
outstanding, or (b) if to Blackhawk, c/o Blackhawk Capital Partners, 3662 Piping
Rock, Houston, Texas 77027, Attn: Steven A. Webster, Partner, with a copy to
Parson & Brown, 666 Third Avenue, 9th Floor, New York, New York 10017, telecopy
number (212) 682-9112, to the attention of William R. Ziegler, Esq., or at such
other address as Blackhawk may hereafter designate by notice to the Company, or
(c) if to any other Holder of any Series B Preferred Stock or New Blackhawk
Shadow Warrant, at the address of such Holder as it appears on the Series B
Preferred Stock Register or the New Blackhawk Shadow Warrant Register, as the
case may be.
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6.8 LAW GOVERNING.
THIS AGREEMENT AND THE NEW BLACKHAWK SHADOW WARRANT AND ALL
AMENDMENTS, SUPPLEMENTS, MODIFICATIONS, WAIVERS AND CONSENTS RELATING HERETO OR
THERETO SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
IN THE STATE OF NEW YORK.
6.9 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
AGREEMENT, THE NEW BLACKHAWK SHADOW 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 Blackhawk
and any Holders, 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
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
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 Blackhawk and any Holders of any
change in the address of the Process Agent and may, with prior notice given to
Blackhawk and any 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 shall designate forthwith a
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successor Process Agent in the County and State of New York and shall give
prompt notice of such designation to Blackhawk and any Holders, 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 address specified in Section 6.7 hereof. Nothing herein
shall preclude service of process in any other manner permitted by applicable
law or prohibit Blackhawk or any Holder from commencing legal proceedings
against the Company or any of its 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 and Blackhawk 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 BLACKHAWK IN
THE NEGOTIATION OR ENFORCEMENT HEREOF OR THEREOF.
6.13 Indemnification.
In consideration of the execution and delivery of this
Agreement by Blackhawk, the Company hereby agrees to indemnify, defend and hold
Blackhawk and the Managing Member and each partner of the Managing Member and
the employees and agents thereof, and each Holder from time to time of any
Series B Preferred Stock or the New Blackhawk Shadow Warrant (herein
collectively 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 collectively called the "Indemnified
Liabilities", which term shall not include, however, in respect of any
particular
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Indemnitee, liabilities incurred by reason of the gross negligence or willful
misconduct of such Indemnitee) incurred by the Indemnitees or any of them 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 Securities, or (b) the execution, delivery, performance or
enforcement of this Agreement, the New Blackhawk Shadow Warrant or any other
Exhibit, or the consummation of any of the transactions contemplated hereby or
thereby or (c) any failure of any representation or warranty set forth in
Section 2.11 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 4.4 or any
liability of the Company arising pursuant to Environmental Laws. If and to the
extent that the foregoing undertaking may be unenforceable for any reason, the
Company 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 under, this Section 6.13 shall
survive the execution and delivery of this Agreement, the enforcement of any
provision hereof, 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; and any such Indemnitee seeking to enforce the
indemnification provided for hereunder may initially proceed directly against
the Company without first resorting to any other rights of indemnification or
otherwise that it may have.
6.14 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.
6.15 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.
6.16 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.
6.17 Finder's Fee.
(a) The Company 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 Securities and agrees to
indemnify and hold Blackhawk harmless against any
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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) Blackhawk 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 Securities 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
Blackhawk.
6.18 Third Party Beneficiary.
The Company hereby expressly agrees that the covenant and
agreement of the Company set forth in Section 5.2 hereof with respect to the
amendment of the Shadow Warrants shall be for the benefit of the Purchasers
under the Initial Purchase Agreement (with respect to the Initial Blackhawk
Shadow Warrant and the Webster/Ziegler Shadow Warrants) and any subsequent
Holders of any of the Shadow Warrants, in addition to inuring to the benefit of
Blackhawk with respect to the New Blackhawk Shadow Warrant and any subsequent
Holders thereof, it being the express intention of the parties hereto that any
and all subsequent Holders of any of the Shadow Warrants shall be deemed to be a
third party beneficiary of Section 5.2 of this Agreement.
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/ JAY D. HABER
-----------------------------
Name: Jay D. Haber
Title: Chairman & CEO
PURCHASER:
BLACKHAWK INVESTORS, L.L.C.
By: Blackhawk Capital Partners,
Managing Member
By: /s/ WILLIAM R. ZIEGLER
-----------------------------
Name: William R. Ziegler
Title: Partner
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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.
"Blackhawk" means Blackhawk Investors, L.L.C., a Delaware
limited liability company and the purchaser hereunder.
"Blackhawk Shadow Warrants" means the Initial Blackhawk
Shadow Warrant and the New Blackhawk Shadow Warrant.
"Bridge Loan Securities Purchase Agreement" means that certain
Securities Purchase Agreement dated as of April 25, 1997 between the Company and
the Holders.
"Bridge Loan Transaction" means the transactions consummated
pursuant to the terms of the Bridge Loan Securities Purchase Agreement.
"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.
"Charter Amendment" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 1.3.
"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.
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"Earn-out Options" has the meaning set forth in
Section 2.1(c).
"Environmental Claims" has the meaning set forth in
Section 2.11(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.
"Exhibit" means any of the exhibits to this Agreement,
including such exhibits as executed and delivered pursuant to the terms of this
Agreement.
"Financial Statements" means (i) the (A) condensed statements
of financial position of the Company and the Subsidiaries as of March 31, 1997
and December 31, 1996, and (B) the condensed statements of operations of the
Company and the Subsidiaries for the three months ended March 31, 1997 and 1996
and (C) condensed statement of cash flow of the Company and the Subsidiaries for
the three months ended March 31, 1997 and 1996, in each case, together with the
notes thereto, and as set forth in the Form 10-QSB of the Company for the
Quarter Ended March 31, 1997, and (ii) the unaudited consolidated balance sheet
of the Company and the Subsidiaries as of May 31, 1997, and the unaudited
consolidated statement of operations of the Company and the Subsidiaries for the
five month period ended May 31, 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.
"Gallant" means James V. Gallant, the President of Signature.
"Gallant Employment Agreement" means that certain employment
agreement dated June 25, 1997 between Gallant and Signature, pursuant to which
Gallant continues to serve as the President of Signature after the Company's
acquisition of all of the outstanding capital stock of Signature, for an initial
period of three years.
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"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.
"Harbin/Murphy Entities" means Elinor T. Harbin, Elinor
T. Harbin Trust, Richard W. Harbin, William H. Murphy and Michael A. Kimmel.
"Harbin/Murphy Notes" means those certain promissory notes of
the Company, in the aggregate principal amount of $701,001.85, payable to 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.
"Holder" means initially any Purchaser and thereafter shall
include any Person who from time to time is the registered Holder of any shares
of Series A Preferred Stock, Series B Preferred Stock or any Shadow Warrant, as
the case may be, or a Holder of any of such securities.
"Indemnified Liabilities" has the meaning set forth in
Section 6.13.
"Indemnitees" has the meaning set forth in Section 6.13.
"Initial Blackhawk Shadow Warrant" means that certain Shadow
Warrant issued by the Company to Blackhawk on July 18, 1997 pursuant to the
Initial Purchase Agreement, initially representing the right to purchase up to
an aggregate of 6,512,095 shares of Common Stock, subject to adjustment, in
accordance with the terms thereof, as the same may be amended from time to time,
and inclusive of any warrant or warrants issued in replacement thereof, whether
pursuant to Section 1.4 or 4 of the such Initial Blackhawk Shadow Warrant or
otherwise.
"Initial Options" has the meaning set forth in Section 2.1(c).
"Initial Purchase Agreement" means that certain Securities
Purchase and Exchange Agreement, dated July 18, 1997, among the Company,
Blackhawk and Messrs. Webster and Ziegler.
"Initial Transactions" means the transactions consummated
pursuant to the Initial Purchase Agreement and the transactions referred to
therein and in the PPM to be consummated contemporaneously therewith, including,
without limitation, the issuance of the Subsequent Options as part of the
management reorganization of the Company and the issuance by the Company of
400,000 shares of Common Stock pursuant to the Signature Purchase Agreement.
"I/O Note" means that certain promissory note of the Company
payable to Input/Output, Inc. in the original principal amount of $300,000,
as amended.
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"Majority-in-Interest" means the Holders of at least 50.1% of
the Common Stock (assuming the conversion of the Series A Preferred Stock and
Series B Preferred Stock into shares of Common Stock) purchased by the
Purchasers hereunder and under the Initial Purchase Agreement.
"Managing Member" means Blackhawk Capital Partners, a Texas
general partnership and the managing member of Blackhawk.
"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.
"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.
"New Blackhawk Shadow Warrant" has the meaning set forth in
Section 1.1.
"Offering Disclosure Documents" means (i) the Annual Report on
Form 10-KSB of the Company for the year ended December 31, 1996, and the Form
10-QSB of the Company for the Quarter Ended March 31, 1997, in each case, as
filed with the Commission, (ii) the Financial Statements and (iii) the PPM, but
only to the extent of the information provided or supplied to Blackhawk or its
counsel by or on behalf of the Company.
"Opinion of Company Counsel" means the legal opinion of
Chamberlain, Hrdlicka, White, Williams & Martin, counsel for the Company, in
favor of Blackhawk, in the form of Exhibit "D" hereto.
"Outstanding Options" has the meaning set forth in
Section 2.1(c).
"Outstanding Warrants" has the meaning set forth in
Section 2.1(c).
"Person" means a corporation, a partnership, an organization
or business, an individual, a government or political subdivision thereof or
governmental agency.
"PPM" means that Confidential Private Placement Memorandum of
Blackhawk dated June 25, 1997, as amended by that certain Supplemental
Memorandum of Blackhawk dated as of July 24, 1997.
"Preferred Stock" means the 2,500,000 shares of series
preferred stock, par value $10 per share, of the Company.
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"Purchaser" means any of Blackhawk, Steven A. Webster and
William R. Ziegler, as the purchasers of securities of the Company pursuant to
the Initial Purchase Agreement and/or this Agreement.
"Purchase Price" has the meaning set forth in Section 1.2.
"Registration Rights Agreement" means that certain
registration rights agreement dated as of July 18, 1997 between the Company,
Blackhawk, Steven A. Webster and William R.
Ziegler, as amended.
"Securities" has the meaning set forth in Section 1.3.
"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.
"Series A Certificate of Designation" means the Certificate of
Designation of Series A Convertible Preferred Stock of the Company that was
filed with the Secretary of State of Delaware on July 10, 1997.
"Series A Preferred Stock" means that series of Preferred
Stock of the Company created and designated pursuant to the Series A Certificate
of Designation.
"Series B Certificate of Designation" has the meaning set
forth in Section 1.1.
"Series B Preferred Stock" means that series of Preferred
Stock of the Company to be created and designated pursuant to the Series B
Certificate of Designation.
"Shadow Warrants" collectively means the Blackhawk Shadow
Warrants and the Holders' Shadow Warrants, and individually means any of such
Shadow Warrants.
"Shadow Warrant Register" has the meaning set forth in
Section 6.4.
"Signature" means Signature Geophysical Services, Inc., a
Michigan corporation, which became a subsidiary of the Company upon the
consummation of the transactions contemplated by the Signature Purchase
Agreement contemporaneously with the consummation of the transactions
contemplated by the Initial Purchase Agreement.
"Signature Purchase Agreement" means that certain stock
purchase agreement dated June 25, 1997 among the Company, Gallant Energy, Inc.
and Signature, pursuant to which the Company acquired all of the issued and
outstanding capital stock of Signature.
"Subsequent Options" has the meaning set forth in
Section 2.1(c).
"Subsequent Transactions" means the transactions contemplated
by this Agreement.
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"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.
For purposes of the covenants contained in Article IV hereof, Subsidiary
generally includes any corporation or other legal entity in which the Company
or any other Subsidiary of the Company hereafter acquires 50% or more of the
voting stock, and specifically includes Signature.
"Type A Initial Warrants" has the meaning set forth in
Section 2.1(c).
"Type B Initial Warrants" has the meaning set forth in
Section 2.1(c).
"Type C Initial Warrants" has the meaning set forth in
Section 2.1(c).
"Type D Initial Warrants" has the meaning set forth in
Section 2.1(c).
"Type E Initial Warrants" has the meaning set forth in
Section 2.1(c).
"Webster/Ziegler Shadow Warrants" means those certain Shadow
Warrants issued by the Company to Messrs. Steven A. Webster and William R.
Ziegler on July 18, 1997 pursuant to the Initial Purchase Agreement, initially
representing the right to purchase up to an aggregate of 592,009 shares of
Common Stock, subject to adjustment, in accordance with the terms thereof, as
the same may be amended from time to time, and inclusive of any warrant or
warrants issued in replacement thereof, whether pursuant to Section 1.4 or 4
of such Webster/Ziegler Shadow Warrants or otherwise.
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EXHIBIT IV
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
GEOKINETICS INC.
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
The undersigned, Jay D. Haber, President of Geokinetics Inc.,
a Delaware corporation (the "Corporation"), does hereby state and certify that
the Board of Directors of the Corporation, by unanimous written consent dated as
of July 10, 1997, duly adopted the following resolution providing for the
issuance of a series of its Preferred Stock, par value $10.00 per share(the
"Preferred Stock"), and further providing for the designation, powers,
preferences, and relative, participating, optional and other special rights, and
the qualifications, limitations and restrictions thereof, all in accordance with
the provisions of Section 151(g) of the General Corporation Law of the State of
Delaware:
RESOLVED, that pursuant to the authority expressly granted to
and vested in the Board of Directors of the Corporation by Article
FOURTH of the Corporation's Certificate of Incorporation (the
"Certificate of Incorporation"), a series of Preferred Stock of the
Corporation be, and hereby is, created out of the authorized but
unissued shares of capital stock of the Corporation and authorized to
be issued, such series to be designated Series A Convertible Preferred
Stock (the "Series A Convertible Preferred Stock"), to consist of
187,500 shares, par value $10.00 per share, of which the powers,
preferences and relative, participating, optional and other special
rights, and the qualifications, limitations and restrictions thereof,
shall be, in addition to those set forth in the Corporation's
Certificate of Incorporation, as follows:
1. Dividends. Holders of shares of Series A Convertible
Preferred Stock will be entitled to receive, when and as declared by
the Board of Directors of the Corporation (the "Board") out of assets
of the Corporation legally available for payment, dividends payable in
cash, evidences of indebtedness, assets or property other than cash, or
securities of the Corporation, at the same rate as such dividends are
declared with respect to shares of Common Stock (as defined in
paragraph 3(a) below). In connection therewith, the shares of Series A
Convertible Preferred Stock held by each holder shall be deemed to
represent that number of shares of Common Stock into which they are
then convertible, rounded to the nearest 1/100th of a share. Dividends
will be payable to holders of record of the Series A Convertible
Preferred Stock as they appear on the stock books of the Corporation on
such record dates, not more than 60 days nor less than 10 days
preceding the payment dates thereof, as shall be fixed by the Board.
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No dividends may be paid upon or declared or set apart for the
Series A Convertible Preferred Stock for any dividend period unless:
(a) as to each series of Preferred Stock entitled to
cumulative dividends, dividends for all past dividend periods
shall have been paid or shall have been declared and a sum
sufficient for the payment thereof set apart; and
(b) as to all series of Preferred Stock (including
the Series A Convertible Preferred Stock), dividends for the
current dividend period shall have been paid or be or have
been declared and a sum sufficient for the payment thereof set
apart ratably in accordance with the amounts which would be
payable as dividends on the shares of the respective series
for the current dividend period if all dividends for the
current dividend period were declared and paid in full.
No dividend in respect of past dividend periods shall be paid
upon or declared and set apart for payment on any of the Preferred
Stock entitled to cumulative dividends unless there shall be or have
been declared and set apart for payment on all outstanding shares of
Preferred Stock entitled to cumulative dividends, dividends for past
dividend periods ratably in accordance with the amounts which would be
payable on the shares of the series entitled to cumulative dividends if
all dividends due for all past dividend periods were declared and paid
in full.
So long as any shares of the Series A Convertible Preferred
Stock are outstanding, the Corporation shall not pay or declare any
dividend payable in cash, evidences of indebtedness, assets or property
other than cash, or stock of the Corporation ranking equally with or
senior to the Series A Convertible Preferred Stock in respect of
dividends, or make any other distribution on the Common Stock or any
other class or series of stock ranking equally with or junior to the
Series A Convertible Preferred Stock in respect of dividends, unless
the Corporation has paid, or at the same time pays or provides for the
payment of, all accrued and unpaid dividends on the Series A
Convertible Preferred Stock; provided, however, that the Corporation
may pay less than the amount of all accrued and unpaid dividends on any
class or series of stock ranking equally with the Series A Convertible
Preferred Stock in respect of dividends if such payment is made ratably
in accordance with the respective accrued and unpaid dividends on the
Series A Convertible Preferred Stock and such class or series of stock
ranking equally with the Series A Convertible Preferred Stock in
respect of dividends. The Series A Convertible Preferred Stock shall
rank junior as to dividends to any class or series of stock of the
Corporation which is by its terms made senior as to dividends to the
Series A Convertible Preferred Stock. The Series A Convertible
Preferred Stock shall rank equally as to dividends with the
Corporation's Common Stock and with all shares of the Corporation's
Preferred Stock and any other class or series of stock of the
Corporation which is expressly stated to rank on a parity as to
dividends with the Series A Convertible Preferred Stock. For purposes
of the Series A Convertible Preferred Stock, the amount of dividends
"accrued" on any share of Series A Convertible Preferred Stock at any
date shall be deemed to be the amount of any declared but unpaid
dividends thereon.
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2. Liquidation Preference. The shares of Series A Convertible
Preferred Stock shall rank prior to the shares of Common Stock and of
any other class of stock of the Corporation ranking junior to the
Series A Convertible Preferred Stock upon liquidation, so that in the
event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the Series A
Convertible Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to its
stockholders, whether from capital, surplus or earnings, before any
distribution is made to holders of shares of Common Stock or any other
such junior stock, an amount equal to $10.00 per share (the
"Liquidation Preference" of a share of Series A Convertible Preferred
Stock) plus an amount equal to all cash dividends accrued and unpaid on
the shares of Series A Convertible Preferred Stock to the date of final
distribution. (For purposes hereof, the Common Stock shall rank on
liquidation junior to the Series A Convertible Preferred Stock.) If,
upon any liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation, or proceeds thereof, distributable among the
holders of shares of the Series A Convertible Preferred Stock and any
other preferred stock ranking on a parity as to liquidation preference
with the Series A Convertible Preferred Stock (such other preferred
stock and the Series A Convertible Preferred Stock hereinafter being
collectively referred to in this paragraph 2 as the "Parity Preferred
Stock") shall be insufficient to pay in full the preferential amount
aforesaid, then such assets, or the proceeds thereof, shall be
distributable among such holders ratably in accordance with the
respective amounts which would be payable on such shares if all amounts
thereon were payable in full. In liquidation, the Series A Convertible
Preferred Stock shall be senior to the Corporation's Common Stock and
senior to or pari passu with any other series of convertible Preferred
Stock hereinafter authorized and issued by the Corporation, but junior
to any series of Preferred Stock which does not have any conversion
feature and which is hereinafter authorized and issued by the
Corporation.
After payment to holders of the Series A Convertible Preferred
Stock of the full preferential amounts as aforesaid, holders of the
Series A Convertible Preferred Stock as such shall have no right or
claim to any of the remaining assets of the Corporation.
The merger or consolidation of the Corporation into or with
any other corporation, or the merger of any other corporation into the
Corporation, or the sale, lease or conveyance of all or substantially
all of the property or business as of the Corporation shall not be
deemed to be a dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this paragraph 2.
3. Conversion. The holders of the Series A Convertible
Preferred Stock shall have the following conversion rights:
(a) Automatic Conversion. Shares of Series A Convertible
Preferred Stock automatically shall be converted into fully paid and
non-assessable shares of Common Stock, at the conversion ratio (the
"Conversion Ratio") of 13 1/3 shares of Common Stock for each share of
Series A Preferred Stock (13 1/3:1), upon the filing by the Corporation
of the Charter Amendment (as defined in subparagraph (e) below of this
paragraph 3) with the Secretary of State of the State of Delaware. Upon
the occurrence of any automatic
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conversion of the Series A Convertible Preferred Stock, the holders
thereof shall be entitled to the payment of all accrued and unpaid cash
dividends through the date of such conversion.
Upon the occurrence of such automatic conversion of the Series
A Convertible Preferred Stock, (i) the Corporation shall cause to be
filed with the conversion agent and shall cause to be mailed to the
holders of the Series A Convertible Preferred Stock, in accordance with
the notice provisions of subparagraph (d) of this paragraph 3, a notice
of automatic conversion (a "Notice of Automatic Conversion") which sets
forth the instructions for the surrender of all certificates
representing shares of Series A Convertible Preferred Stock and (ii) as
promptly as possible thereafter, the holders of such Series A
Convertible Preferred Stock shall surrender for cancellation the
certificates representing such shares at the office of the Corporation
or of any conversion agent designated by the Corporation or the
transfer agent for the Common Stock, all in accordance with the
instructions contained in the Notice of Automatic Conversion.
Thereupon, there shall be issued and delivered to each such holder a
certificate or certificates for the number of shares of Common Stock
into which the shares of the Series A Convertible Preferred Stock
surrendered were convertible on the date on which such automatic
conversion occurred, together with a check in the amount of all accrued
but unpaid cash dividends on the Series A Convertible Preferred Stock
through the date of such automatic conversion, and any fractional
interest in respect of a share of Common Stock arising from such
conversion shall be settled as provided in subparagraph (b) of this
paragraph 3. Upon such automatic conversion date, the holders of shares
of Series A Convertible Preferred Stock shall cease to be holders of
Series A Convertible Preferred Stock and shall automatically become
holders of shares of Common Stock, irrespective of whether or not the
certificates for shares of Series A Convertible Preferred Stock shall
have been properly surrendered for cancellation in accordance with the
Notice of Automatic Conversion, and thereafter such shares of Series A
Convertible Preferred Stock shall no longer be transferrable upon the
books of the Corporation and such holders of shares of Series A
Convertible Preferred Stock shall have no interest or claim against the
Corporation with respect to such shares except the right to receive a
certificate representing the shares of Common Stock into which such
shares were converted, together with a check in the amount of all
accrued but unpaid cash dividends on the Series A Convertible Preferred
Stock through the date of conversion and payment of any cash in lieu of
fractional interests as provided in subparagraph (b) of this paragraph
3.
The term "Common Stock" shall mean the Common Stock, par value
$0.20 per share, of the Corporation as the same exists at the date of
this Certificate or as such stock may be constituted from time to time,
except that for the purposes of subparagraph (c) of this paragraph 3
the term "Common Stock" shall also mean and include stock of the
Corporation of any class (other than Series A Convertible Preferred
Stock), whether now or hereafter authorized, which shall have the right
to participate in the distribution of either earnings or assets of the
Corporation without limit as to amount or percentage.
(b) Cash Payment for Fractional Shares. No fractional
shares or script representing fractions of shares of Common Stock shall
be issued upon conversion of the
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Series A Convertible Preferred Stock. Instead of any fractional
interest in a share of Common Stock which would otherwise be
deliverable upon the conversion of a share of Series A Convertible
Preferred Stock, the Corporation shall pay to the holder of such share
an amount in cash (computed to the nearest cent) equal to the current
market price (as determined in a reasonable manner prescribed by the
Board in its sole discretion) thereof at the close of business on the
business day next preceding the day of conversion. If more than one
share shall be surrendered for conversion at one time by the same
holder, the number of shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate Liquidation
Preference of the shares of Series A Convertible Preferred Stock so
surrendered.
(c) Adjustments to Conversion Ratio. The Conversion Ratio
shall be adjusted from time to time as follows:
(i) In case the Corporation shall hereafter (A) pay a
dividend or make a distribution on the Common Stock in shares
of Common Stock, (B) subdivide its outstanding shares of
Common Stock into a greater number of shares, (C) combine its
outstanding shares of Common Stock into a smaller number of
shares, or (D) issue by reclassification of the Common Stock
any shares of capital stock of the Corporation, the Conversion
Ratio in effect immediately prior to such action shall be
adjusted so that the holder of any share of Series A
Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares
of Common Stock or other capital stock of the Corporation
which he would have owned or been entitled to receive
immediately following such action had such share been
converted immediately prior thereto. An adjustment made
pursuant to this subdivision (i) shall become effective
immediately after the record date, in the case of a dividend
or distribution, or immediately after the effective date, in
the case of a subdivision, combination or reclassification.
If, as a result of an adjustment made pursuant to this
subdivision (i), the holder of any share of Series A
Convertible Preferred Stock thereafter surrendered for
conversion shall become entitled to receive shares of two or
more classes of capital stock or shares of Common Stock and
other capital stock of the Corporation, the Board (whose
determination shall be conclusive and shall be described in a
statement filed with the conversion agent by the Corporation
as soon as practicable) shall determine the allocation of the
adjusted Conversion Ratio between or among shares of such
classes of capital stock or shares of Common Stock and other
capital stock.
(ii) If at any time after the date of issuance of
the shares of Series A Convertible Preferred Stock, the
Corporation shall issue to all holders of its Common Stock or
sell or fix a record date for the issuance to all holders of
its Common Stock of (A) Common Stock or (B) rights, options or
warrants entitling the holders thereof to subscribe for or
purchase Common Stock (or securities convertible or
exchangeable into or exercisable for Common Stock), in any
such case, at a price per share (or having a conversion,
exchange or exercise price per share) that is less than $0.75
(the "Placement Price") then, immediately after the date of
such issuance or
Page 99 of 241 Pages
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sale or on such record date, the number of shares of Common
Stock to be delivered upon the conversion of the Series A
Convertible Preferred Stock shall be increased so that the
holders of the Series A Convertible Preferred Stock thereafter
will be entitled to receive the number of shares of Common
Stock determined by multiplying the number of shares of Common
Stock such holder would have been entitled to receive
immediately before the date of such issuance or sale on such
record date by a fraction, the denominator of which will be
the number of shares of Common Stock outstanding on such date
plus the number of shares of Common Stock that the aggregate
offering price of the total number of shares so offered for
subscription or purchase (or the aggregate initial conversion
price, exchange price or exercise price of the convertible
securities or exchangeable securities or rights, options or
warrants, as the case may be, so offered) would purchase at
such Placement Price, and the numerator of which will be the
number of shares of Common Stock outstanding on such date plus
the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible or
exchangeable securities or rights, options or warrants so
offered are initially convertible or exchangeable or
exercisable, as the case may be). Notwithstanding anything
contained herein to the contrary, the provisions of this
paragraph 3(c)(ii) shall not apply to any issuance of shares
of Common Stock to employees, officers or directors of the
Corporation pursuant to the exercise of options or pursuant to
a stock option plan or other arrangements approved by the
Board of Directors of the Corporation.
(iii) In case the Corporation shall distribute pro
rata to holders of shares of its Common Stock evidences of its
indebtedness or assets (excluding any cash dividends payable
in Common Stock or equity securities of the Corporation) or
rights or warrants to subscribe for securities of the
Corporation or any of its subsidiaries (other than shares of
Common Stock referred to in subdivision (ii) above), then in
each case the number of shares of Common Stock into which each
share of the Series A Convertible Preferred Stock shall be
convertible thereafter shall be determined by multiplying the
number of shares of Common Stock into which each such share
was convertible theretofore by a fraction, of which the
numerator shall be the Average Market Price (as defined below)
for a share of Common Stock on the record date mentioned
below, and of which the denominator shall be such Average
Market Price, less the fair market value (as determined by the
Board of Directors of the Corporation, whose determination
shall be conclusive) as of such record date of the portion of
such evidences of indebtedness or assets or rights or warrants
to subscribe which are applicable to one of the outstanding
shares of Common Stock. Such adjustment shall be made whenever
such a distribution is made and shall become effective
retroactively immediately after the record date for the
determination of stockholders entitled to receive such
distribution.
(iv) In any case in which this paragraph 3 shall
require that an adjustment be made immediately following a
record date or an effective date, the Corporation may elect to
defer (but only until five business days following the filing
by the
Page 100 of 241 Pages
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Corporation with the conversion agent of the certificate of
the chief financial officer of the Corporation required by
subdivision (vi) of this subparagraph (c)) issuing to the
holder of any share of Series A Convertible Preferred Stock
converted after such record date or effective date the
additional shares of Common Stock or other capital stock
issuable upon such conversion over and above the shares of
Common Stock or other capital stock issuable upon such
conversion on the basis of the Conversion Ratio prior to
adjustment, and paying to such holder any amount of cash in
lieu of a fractional share.
(v) No adjustment in the Conversion Ratio shall be
required to be made unless such adjustment would require an
increase or decrease of at least 1% of such Conversion Ratio;
provided, however, that any adjustments which by reason of
this subdivision (v) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations under this paragraph 3 shall be
to the nearest 1/100th of a share. Anything in this paragraph
3 to the contrary notwithstanding, the Corporation shall be
entitled to make such adjustment in the Conversion Ratio, in
addition to those required by this paragraph 3, as it in its
discretion shall determine to be advisable in order that any
stock dividend, subdivision of shares, distribution of rights
to purchase stock or securities, or distribution of securities
convertible into or exchangeable for stock hereafter made by
the Corporation to its stockholders shall not be taxable to
the recipients.
(vi) Whenever the Conversion Ratio is adjusted as
herein provided, (A) the Corporation shall promptly file with
the conversion agent a certificate of the chief financial
officer of the Corporation setting forth the Conversion Ratio
after such adjustment and setting forth a brief statement of
the facts requiring such adjustment and the manner of
computing the same, which certificate shall be conclusive
evidence of the correctness of such adjustment, and (B) a
notice stating that the Conversion Ratio has been adjusted and
setting forth the adjusted Conversion Ratio shall forthwith be
mailed by the Corporation to the holders of the Series A
Convertible Preferred Stock at their addresses as shown on the
stock books of the Corporation.
(vii) In the event that at any time as a result of
an adjustment made pursuant to subdivision (i) of this
subparagraph (c), the holder of any share of Series A
Convertible Preferred Stock thereafter surrendered for
conversion shall become entitled to receive any shares of the
Corporation other than shares of Common Stock, thereafter the
Conversion Ratio of such other shares so receivable upon
conversion of any share shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock
contained in this paragraph 3.
(viii) The Average Market Price of Common Stock at
any date shall be deemed to be the average of the Current
Market Prices (as defined below) for the 30 consecutive
business days commencing 45 business days before the date in
question.
Page 101 of 241 Pages
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The "Current Market Price" on any given day shall mean the
closing price per share of the Corporation's Common Stock on
the principal national securities exchange on which the Common
Stock is listed or admitted to trading or, if not listed or
traded on any such exchange, on the National Market System
(the "National Market System") of the National Association of
Securities Dealers Automated Quotations System ("NASDAQ"), or
if not listed or traded on any such exchange or system, on the
Nasdaq Bulletin Board, or if not listed or traded on any such
exchange, system or board, the average of the bid and asked
price per share on NASDAQ or, if such quotations are not
available, the fair market value per share of the
Corporation's Common Stock as reasonably determined by the
Board of Directors of the Company.
(d) Notices of Record Date. In case:
(i) there shall be any capital stock reorganization
or reclassification of the Common Stock (other than a
subdivision or combination of the outstanding Common Stock and
other than a change in the par value of the Common Stock), or
any consolidation or merger to which the Corporation is a
party or any statutory exchange of securities with another
corporation and for which approval of any stockholders of the
Corporation is required, or any sale or transfer of all or
substantially all the assets of the Corporation; or
(ii) there shall be a voluntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed with the conversion agent,
and shall cause to be mailed to the holders of shares of the Series A
Convertible Preferred Stock at their addresses as shown on the stock
books of the Corporation, at least 10 days prior to the applicable date
hereinafter specified, a notice stating (A) the date on which a record
is to be taken for the purpose of such distribution or rights, or, if a
record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such distribution or rights are to be
determined, or (B) the date on which such reorganization,
reclassification, consolidation, merger, statutory exchange, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, statutory
exchange, sale, transfer, dissolution, liquidation or winding up.
Failure to give such notice or any defect therein shall not affect the
legality or validity of the proceedings described in subdivision (i) or
(ii) of this subparagraph (d).
(e) Reservation of Common Stock for Conversion. The
Corporation covenants that it will (i) use its best efforts to cause an
amendment to its Certificate of Incorporation to increase the aggregate
number of shares of authorized Common Stock from 15,000,000 shares to
100,000,000 shares (the "Charter Amendment") to be approved and adopted
by its stockholders as soon as possible after the date hereof and
thereafter promptly to file the Charter Amendment with the Secretary of
State of the State of Delaware and (ii) thereafter,
Page 102 of 241 Pages
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at all times reserve and keep available, free from preemptive rights,
out of the aggregate of its authorized but unissued shares of Common
Stock or shares of Common Stock held in its treasury, or both, for the
purpose of effecting conversions of the Series A Convertible Preferred
Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series A Convertible Preferred
Stock not theretofore converted. For purposes of this subparagraph (e),
the number of shares of Common Stock which shall be deliverable upon
the conversion of all outstanding shares of Series A Convertible
Preferred Stock shall be computed as if at the time of computation all
such outstanding shares were held by a single holder.
(f) Taxes Upon Conversion. The Corporation will pay any and
all documentary stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of shares of Common Stock on
conversions of the Series A Convertible Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock in a name other than
that of the holder of the Series A Convertible Preferred Stock to be
converted and no such issue or delivery shall be made unless and until
the person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(g) Modification of Common Stock. Notwithstanding any
provision herein to the contrary, in case of any consolidation or
merger to which the Corporation is a party (other than a merger or
consolidation in which the Corporation is the continuing corporation),
or in case of any sale or conveyance to another corporation of the
property of the Corporation as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with
another corporation (including any exchange effected in connection with
a merger of a third corporation into the Corporation), the holder of
each share of Series A Convertible Preferred Stock then outstanding
shall have the right thereafter to convert such share into the kind and
amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance by a
holder of the number of shares of Common Stock into which such share of
Series A Convertible Preferred Stock might have been converted
immediately prior to such consolidation, merger, statutory exchange,
sale or conveyance, assuming such holder of Common Stock failed to
exercise his rights of election, if any, as to the kind of amount of
securities, cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance (provided that if the
kind or amount of securities, cash or other property receivable upon
such consolidation, merger, statutory exchange, sale or conveyance is
not the same for each share of Common Stock in respect of which such
rights of election shall not have been exercised (each, a "non-electing
share"), then for the purpose of this subparagraph (g) the kind and
amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance for each
non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares).
Thereafter, the holders of the Series A Convertible Preferred Stock
shall be entitled to appropriate adjustments with respect to their
conversion rights to the end that the provisions set forth in this
paragraph 3 shall correspondingly be made applicable, as nearly as may
Page 103 of 241 Pages
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reasonably be, in relation to any shares of stock or other securities
or property thereafter deliverable on the conversion of the Series A
Convertible Preferred Stock. Any such adjustment shall be approved by
the Board of Directors of the Corporation, evidenced by a certificate
of the chief financial officer of the Corporation to that effect
delivered to the conversion agent; and any adjustment so approved shall
for all purposes hereof conclusively be deemed to be an appropriate
adjustment.
The above provisions of this subparagraph (g) shall similarly
apply to successive consolidations, mergers, statutory exchanges, sales
or conveyances.
4. No Reissuance of Series A Convertible Preferred Stock. No
share or shares of Series A Convertible Preferred Stock acquired by the
Corporation by reason of purchase, conversion or otherwise shall be
reissued, and all such shares shall be cancelled, retired and
eliminated from the shares which the Corporation shall be authorized to
issue. The Corporation may from time to time take such appropriate
corporate action as may be necessary to reduce accordingly the
authorized number of shares of the Series A Convertible Preferred
Stock.
5. Voting Rights. Except as otherwise expressly provided
herein or as required by law, the holders of the Series A Convertible
Preferred Stock shall be entitled to vote on all matters upon which
holders of Common Stock have the right to vote and, with respect to
such right to vote, shall be entitled to notice of any stockholders'
meeting in accordance with the Corporation's Bylaws, and shall be
entitled to a number of votes equal to the number of shares of Common
Stock into which such shares of Series A Convertible Preferred Stock
could then be converted, at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record
date is established, at the date such vote is taken or any written
consent of stockholders is solicited. Except as otherwise expressly
provided herein, or to the extent class or series voting is otherwise
required by law or agreement, the holders of the Series A Convertible
Preferred Stock and the holders of the Common Stock shall vote together
as a single class and not as separate classes.
6. No Consent Required. No consent of the holders of the
Series A Convertible Preferred Stock shall be required for (a) the
creation of any indebtedness of any kind of the Corporation, (b) the
creation of any class of stock of the Corporation ranking senior
(provided such class of stock is not convertible into Common Stock or
any equity security convertible into or exchangeable for Common Stock),
junior or pari passu as to dividends or upon liquidation to the Series
A Convertible Preferred Stock or (c) any increase of decrease in the
amount of authorized Common Stock or any increase, decrease or change
in the par value thereof or in any other terms thereof.
7. Reservation of Rights. The Board reserves the right by
subsequent amendment of this resolution from time to time to increase
or decrease the number of shares which constitute the Series A
Convertible Preferred Stock (but not below the number of shares thereof
then outstanding) and in other respects to amend this resolution within
the limitations provided by law, this resolution and the Certificate of
Incorporation.
Page 104 of 241 Pages
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IN WITNESS WHEREOF, Geokinetics Inc. has caused this
Certificate of Designation of Series A Convertible Preferred Stock to be made
under the seal of the Corporation and signed by Jay D. Haber, its President, and
attested by Michael Hale, its Secretary, as of this 11th day of July, 1997.
GEOKINETICS INC.
By:/s/ JAY D. HABER
Name: Jay D. Haber
Title: President
[SEAL]
Attest:
/s/ MICHAEL HALE
Name: Michael Hale
Title: Secretary
Page 105 of 241 Pages
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STATE OF TEXAS)
)ss.:
COUNTY OF HARRIS)
On the 11th day of July, 1997 before me, the undersigned Notary
Public, personally came Jay D. Haber, to me known, who by me duly sworn, did
depose and say that deponent is the President of GEOKINETICS INC., the
corporation described in, and which executed the foregoing instrument, that the
facts stated therein are true, that deponent knows the seal of the Corporation,
that the seal affixed to the instrument is the corporate seal, that it was
affixed by order of the board of directors of the Corporation, and that deponent
signed deponent's name to the foregoing instrument by order of the board of
directors of the Corporation being authorized so to do on its behalf.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ SUSAN POE
Notary Public
STATE OF TEXAS )
) ss.:
COUNTY OF HARRIS)
11th day of July, 1997 before me, the undersigned Notary
Public, personally came Michael Hale, to me known, who by me duly sworn, did
depose and say that deponent is the Secretary of GEOKINETICS INC., the
corporation described in, and which executed the foregoing instrument, that the
facts stated therein are true, that deponent knows the seal of the Corporation,
that the seal affixed to the instrument is the corporate seal, that it was
affixed by order of the board of directors of the Corporation, and that deponent
signed deponent's name to the foregoing instrument by order of the board of
directors of the Corporation being authorized so to do on its behalf.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ SUSAN POE
Notary Public
Page 106 of 241 Pages
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EXHIBIT V
CERTIFICATE OF DESIGNATION OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
GEOKINETICS INC.
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
The undersigned, Jay D. Haber, Chairman and Chief Executive Officer of
Geokinetics Inc., a Delaware corporation (the "Corporation"), does hereby state
and certify that the Board of Directors of the Corporation, by unanimous written
consent dated as of August 1, 1997, duly adopted the following resolution
providing for the issuance of a series of its Preferred Stock, par value $10.00
per share(the "Preferred Stock"), and further providing for the designation,
powers, preferences, and relative, participating, optional and other special
rights, and the qualifications, limitations and restrictions thereof, all in
accordance with the provisions of Section 151(g) of the General Corporation Law
of the State of Delaware:
RESOLVED, that pursuant to the authority expressly granted to
and vested in the Board of Directors of the Corporation by Article
FOURTH of the Corporation's Certificate of Incorporation (the
"Certificate of Incorporation"), a series of Preferred Stock of the
Corporation be, and hereby is, created out of the authorized but
unissued shares of capital stock of the Corporation and authorized to
be issued, such series to be designated Series B Convertible Preferred
Stock (the "Series B Convertible Preferred Stock"), to consist of
100,000 shares, par value $10.00 per share, of which the powers,
preferences and relative, participating, optional and other special
rights, and the qualifications, limitations and restrictions thereof,
shall be, in addition to those set forth in the Corporation's
Certificate of Incorporation, as follows:
1. Dividends. Holders of shares of Series B Convertible
Preferred Stock will be entitled to receive, when and as declared by
the Board of Directors of the Corporation (the "Board") out of assets
of the Corporation legally available for payment, dividends payable in
cash, evidences of indebtedness, assets or property other than cash, or
securities of the Corporation, at the same rate as such dividends are
declared with respect to shares of Common Stock (as defined in
paragraph 3(a) below). In connection therewith, the shares of Series B
Convertible Preferred Stock held by each holder shall be deemed to
represent that number of shares of Common Stock into which they are
then convertible, rounded to the nearest 1/100th of a share. Dividends
will be payable to holders of record of the Series B Convertible
Preferred Stock as they appear on the stock books of the Corporation on
such record dates, not more than 60 days nor less than 10 days
preceding the payment dates thereof, as shall be fixed by the Board.
Page 107 of 241 Pages
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No dividends may be paid upon or declared or set apart for the
Series B Convertible Preferred Stock for any dividend period unless:
(a) as to each series of Preferred Stock entitled to
cumulative dividends, dividends for all past dividend periods
shall have been paid or shall have been declared and a sum
sufficient for the payment thereof set apart; and
(b) as to all series of Preferred Stock (including
the Series A Convertible Preferred Stock and the Series B
Convertible Preferred Stock), dividends for the current
dividend period shall have been paid or be or have been
declared and a sum sufficient for the payment thereof set
apart ratably in accordance with the amounts which would be
payable as dividends on the shares of the respective series
for the current dividend period if all dividends for the
current dividend period were declared and paid in full.
No dividend in respect of past dividend periods shall be paid
upon or declared and set apart for payment on any of the Preferred
Stock entitled to cumulative dividends unless there shall be or have
been declared and set apart for payment on all outstanding shares of
Preferred Stock entitled to cumulative dividends, dividends for past
dividend periods ratably in accordance with the amounts which would be
payable on the shares of the series entitled to cumulative dividends if
all dividends due for all past dividend periods were declared and paid
in full.
So long as any shares of the Series B Convertible Preferred
Stock are outstanding, the Corporation shall not pay or declare any
dividend payable in cash, evidences of indebtedness, assets or property
other than cash, or stock of the Corporation ranking equally with or
senior to the Series B Convertible Preferred Stock in respect of
dividends, or make any other distribution on the Common Stock or any
other class or series of stock ranking equally with or junior to the
Series B Convertible Preferred Stock in respect of dividends, unless
the Corporation has paid, or at the same time pays or provides for the
payment of, all accrued and unpaid dividends on the Series B
Convertible Preferred Stock; provided, however, that the Corporation
may pay less than the amount of all accrued and unpaid dividends on any
class or series of stock ranking equally with the Series B Convertible
Preferred Stock in respect of dividends (inclusive of the Series A
Convertible Preferred Stock of the Corporation (the "Series A
Convertible Preferred Stock") if such payment is made ratably in
accordance with the respective accrued and unpaid dividends on the
Series B Convertible Preferred Stock and such class or series of stock
ranking equally with the Series B Convertible Preferred Stock in
respect of dividends (inclusive of the Series A Convertible Preferred
Stock). The Series B Convertible Preferred Stock shall rank junior as
to dividends to any class or series of stock of the Corporation which
is by its terms made senior as to dividends to the Series B Convertible
Preferred Stock. The Series B Convertible Preferred Stock shall rank
equally as to dividends with the Corporation's Common Stock and with
the Corporation's Series A Convertible Preferred Stock and with all
shares of the Corporation's Preferred Stock and any other class or
series of stock of the Corporation which is expressly stated to rank
Page 108 of 241 Pages
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on a parity as to dividends with the Series B Convertible Preferred
Stock. For purposes of the Series B Convertible Preferred Stock, the
amount of dividends "accrued" on any share of Series B Convertible
Preferred Stock at any date shall be deemed to be the amount of any
declared but unpaid dividends thereon.
2. Liquidation Preference. The shares of Series B Convertible
Preferred Stock shall rank prior to the shares of Common Stock and of
any other class of stock of the Corporation ranking junior to the
Series B Convertible Preferred Stock upon liquidation, so that in the
event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the Series B
Convertible Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to its
stockholders, whether from capital, surplus or earnings, before any
distribution is made to holders of shares of Common Stock or any other
such junior stock, an amount equal to $10.00 per share (the
"Liquidation Preference" of a share of Series B Convertible Preferred
Stock) plus an amount equal to all cash dividends accrued and unpaid on
the shares of Series B Convertible Preferred Stock to the date of final
distribution. (For purposes hereof, the Common Stock shall rank on
liquidation junior to the Series B Convertible Preferred Stock and the
Series A Convertible Preferred Stock shall rank on liquidation equal to
the Series B Convertible Preferred Stock.) If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of
shares of the Series B Convertible Preferred Stock and any other
preferred stock ranking on a parity as to liquidation preference with
the Series B Convertible Preferred Stock, including, without
limitation, the Series A Convertible Preferred Stock (the Series A
Convertible Preferred Stock and any such other preferred stock and the
Series B Convertible Preferred Stock hereinafter being collectively
referred to in this paragraph 2 as the "Parity Preferred Stock") shall
be insufficient to pay in full the preferential amount aforesaid, then
such assets, or the proceeds thereof, shall be distributable among such
holders ratably in accordance with the respective amounts which would
be payable on such shares if all amounts thereon were payable in full.
In liquidation, the Series B Convertible Preferred Stock shall be
senior to the Corporation's Common Stock and senior to or pari passu
with any other series of convertible Preferred Stock hereinafter
authorized and issued by the Corporation, but junior to any series of
Preferred Stock which does not have any conversion feature and which is
hereinafter authorized and issued by the Corporation.
After payment to holders of the Series B Convertible Preferred
Stock of the full preferential amounts as aforesaid, holders of the
Series B Convertible Preferred Stock as such shall have no right or
claim to any of the remaining assets of the Corporation.
The merger or consolidation of the Corporation into or with
any other corporation, or the merger of any other corporation into the
Corporation, or the sale, lease or conveyance of all or substantially
all of the property or business as of the Corporation shall not be
deemed to be a dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this paragraph 2.
Page 109 of 241 Pages
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3. Conversion. The holders of the Series B Convertible
Preferred Stock shall have the following conversion rights:
(a) Automatic Conversion. Shares of Series B Convertible
Preferred Stock automatically shall be converted into fully paid and
non-assessable shares of Common Stock, at the conversion ratio (the
"Conversion Ratio") of 131/3 shares of Common Stock for each share of
Series B Convertible Preferred Stock (131/3:1), upon the later of (i)
January 1, 1998 or (ii) the filing by the Corporation of the Charter
Amendment (as defined in subparagraph (e) below of this paragraph 3)
with the Secretary of State of the State of Delaware. Upon the
occurrence of any automatic conversion of the Series B Convertible
Preferred Stock, the holders thereof shall be entitled to the payment
of all accrued and unpaid cash dividends through the date of such
conversion.
Upon the occurrence of such automatic conversion of the Series
B Convertible Preferred Stock, (i) the Corporation shall cause to be
filed with the conversion agent and shall cause to be mailed to the
holders of the Series B Convertible Preferred Stock, in accordance with
the notice provisions of subparagraph (d) of this paragraph 3, a notice
of automatic conversion (a "Notice of Automatic Conversion") which sets
forth the instructions for the surrender of all certificates
representing shares of Series B Convertible Preferred Stock and (ii) as
promptly as possible thereafter, the holders of such Series B
Convertible Preferred Stock shall surrender for cancellation the
certificates representing such shares at the office of the Corporation
or of any conversion agent designated by the Corporation or the
transfer agent for the Common Stock, all in accordance with the
instructions contained in the Notice of Automatic Conversion.
Thereupon, there shall be issued and delivered to each such holder a
certificate or certificates for the number of shares of Common Stock
into which the shares of the Series B Convertible Preferred Stock
surrendered were convertible on the date on which such automatic
conversion occurred, together with a check in the amount of all accrued
but unpaid cash dividends on the Series B Convertible Preferred Stock
through the date of such automatic conversion, and any fractional
interest in respect of a share of Common Stock arising from such
conversion shall be settled as provided in subparagraph (b) of this
paragraph 3. Upon such automatic conversion date, the holders of shares
of Series B Convertible Preferred Stock shall cease to be holders of
Series B Convertible Preferred Stock and shall automatically become
holders of shares of Common Stock, irrespective of whether or not the
certificates for shares of Series B Convertible Preferred Stock shall
have been properly surrendered for cancellation in accordance with the
Notice of Automatic Conversion, and thereafter such shares of Series B
Convertible Preferred Stock shall no longer be transferrable upon the
books of the Corporation and such holders of shares of Series B
Convertible Preferred Stock shall have no interest or claim against the
Corporation with respect to such shares except the right to receive a
certificate representing the shares of Common Stock into which such
shares were converted, together with a check in the amount of all
accrued but unpaid cash dividends on the Series B Convertible Preferred
Stock through the date of conversion and payment of any cash in lieu of
fractional interests as provided in subparagraph (b) of this paragraph
3.
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The term "Common Stock" shall mean the Common Stock, par value
$0.20 per share, of the Corporation as the same exists at the date of
this Certificate or as such stock may be constituted from time to time,
except that for the purposes of subparagraph (c) of this paragraph 3
the term "Common Stock" shall also mean and include stock of the
Corporation of any class (other than Series B Convertible Preferred
Stock), whether now or hereafter authorized, which shall have the right
to participate in the distribution of either earnings or assets of the
Corporation without limit as to amount or percentage.
(b) Cash Payment for Fractional Shares. No fractional shares
or script representing fractions of shares of Common Stock shall be
issued upon conversion of the Series B Convertible Preferred Stock.
Instead of any fractional interest in a share of Common Stock which
would otherwise be deliverable upon the conversion of a share of Series
B Convertible Preferred Stock, the Corporation shall pay to the holder
of such share an amount in cash (computed to the nearest cent) equal to
the current market price (as determined in a reasonable manner
prescribed by the Board in its sole discretion) thereof at the close of
business on the business day next preceding the day of conversion. If
more than one share shall be surrendered for conversion at one time by
the same holder, the number of shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate
Liquidation Preference of the shares of Series B Convertible Preferred
Stock so surrendered.
(c) Adjustments to Conversion Ratio. The Conversion
Ratio shall be adjusted from time to time as follows:
(i) In case the Corporation shall hereafter (A) pay a
dividend or make a distribution on the Common Stock in shares
of Common Stock, (B) subdivide its outstanding shares of
Common Stock into a greater number of shares, (C) combine its
outstanding shares of Common Stock into a smaller number of
shares, or (D) issue by reclassification of the Common Stock
any shares of capital stock of the Corporation, the Conversion
Ratio in effect immediately prior to such action shall be
adjusted so that the holder of any share of Series B
Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares
of Common Stock or other capital stock of the Corporation
which he would have owned or been entitled to receive
immediately following such action had such share been
converted immediately prior thereto. An adjustment made
pursuant to this subdivision (i) shall become effective
immediately after the record date, in the case of a dividend
or distribution, or immediately after the effective date, in
the case of a subdivision, combination or reclassification.
If, as a result of an adjustment made pursuant to this
subdivision (i), the holder of any share of Series B
Convertible Preferred Stock thereafter surrendered for
conversion shall become entitled to receive shares of two or
more classes of capital stock or shares of Common Stock and
other capital stock of the Corporation, the Board (whose
determination shall be conclusive and shall be described in a
statement filed with the conversion agent by the Corporation
as soon as practicable) shall determine the allocation of the
adjusted Conversion
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Ratio between or among shares of such classes of capital stock
or shares of Common Stock and other capital stock.
(ii) If at any time after the date of issuance of
the shares of Series B Convertible Preferred Stock, the
Corporation shall issue to all holders of its Common Stock or
sell or fix a record date for the issuance to all holders of
its Common Stock of (A) Common Stock or (B) rights, options or
warrants entitling the holders thereof to subscribe for or
purchase Common Stock (or securities convertible or
exchangeable into or exercisable for Common Stock), in any
such case, at a price per share (or having a conversion,
exchange or exercise price per share) that is less than $0.75
(the "Placement Price") then, immediately after the date of
such issuance or sale or on such record date, the number of
shares of Common Stock to be delivered upon the conversion of
the Series B Convertible Preferred Stock shall be increased so
that the holders of the Series B Convertible Preferred Stock
thereafter will be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares of
Common Stock such holder would have been entitled to receive
immediately before the date of such issuance or sale on such
record date by a fraction, the denominator of which will be
the number of shares of Common Stock outstanding on such date
plus the number of shares of Common Stock that the aggregate
offering price of the total number of shares so offered for
subscription or purchase (or the aggregate initial conversion
price, exchange price or exercise price of the convertible
securities or exchangeable securities or rights, options or
warrants, as the case may be, so offered) would purchase at
such Placement Price, and the numerator of which will be the
number of shares of Common Stock outstanding on such date plus
the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible or
exchangeable securities or rights, options or warrants so
offered are initially convertible or exchangeable or
exercisable, as the case may be). Notwithstanding anything
contained herein to the contrary, the provisions of this
paragraph 3(c)(ii) shall not apply to any issuance of shares
of Common Stock to employees, officers or directors of the
Corporation pursuant to the exercise of options or pursuant to
a stock option plan or other arrangements approved by the
Board of Directors of the Corporation.
(iii) In case the Corporation shall distribute pro
rata to holders of shares of its Common Stock evidences of its
indebtedness or assets (excluding any cash dividends payable
in Common Stock or equity securities of the Corporation) or
rights or warrants to subscribe for securities of the
Corporation or any of its subsidiaries (other than shares of
Common Stock referred to in subdivision (ii) above), then in
each case the number of shares of Common Stock into which each
share of the Series B Convertible Preferred Stock shall be
convertible thereafter shall be determined by multiplying the
number of shares of Common Stock into which each such share
was convertible theretofore by a fraction, of which the
numerator shall be the Average Market Price (as defined below)
for a share of Common Stock on the record date mentioned
below, and of which the
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denominator shall be such Average Market Price, less the fair
market value (as determined by the Board of Directors of the
Corporation, whose determination shall be conclusive) as of
such record date of the portion of such evidences of
indebtedness or assets or rights or warrants to subscribe
which are applicable to one of the outstanding shares of
Common Stock. Such adjustment shall be made whenever such a
distribution is made and shall become effective retroactively
immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(iv) In any case in which this paragraph 3 shall
require that an adjustment be made immediately following a
record date or an effective date, the Corporation may elect to
defer (but only until five business days following the filing
by the Corporation with the conversion agent of the
certificate of the chief financial officer of the Corporation
required by subdivision (vi) of this subparagraph (c)) issuing
to the holder of any share of Series B Convertible Preferred
Stock converted after such record date or effective date the
additional shares of Common Stock or other capital stock
issuable upon such conversion over and above the shares of
Common Stock or other capital stock issuable upon such
conversion on the basis of the Conversion Ratio prior to
adjustment, and paying to such holder any amount of cash in
lieu of a fractional share.
(v) No adjustment in the Conversion Ratio shall be
required to be made unless such adjustment would require an
increase or decrease of at least 1% of such Conversion Ratio;
provided, however, that any adjustments which by reason of
this subdivision (v) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations under this paragraph 3 shall be
to the nearest 1/100th of a share. Anything in this paragraph
3 to the contrary notwithstanding, the Corporation shall be
entitled to make such adjustment in the Conversion Ratio, in
addition to those required by this paragraph 3, as it in its
discretion shall determine to be advisable in order that any
stock dividend, subdivision of shares, distribution of rights
to purchase stock or securities, or distribution of securities
convertible into or exchangeable for stock hereafter made by
the Corporation to its stockholders shall not be taxable to
the recipients.
(vi) Whenever the Conversion Ratio is adjusted as
herein provided, (A) the Corporation shall promptly file with
the conversion agent a certificate of the chief financial
officer of the Corporation setting forth the Conversion Ratio
after such adjustment and setting forth a brief statement of
the facts requiring such adjustment and the manner of
computing the same, which certificate shall be conclusive
evidence of the correctness of such adjustment, and (B) a
notice stating that the Conversion Ratio has been adjusted and
setting forth the adjusted Conversion Ratio shall forthwith be
mailed by the Corporation to the holders of the Series B
Convertible Preferred Stock at their addresses as shown on the
stock books of the Corporation.
Page 113 of 241 Pages
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(vii) In the event that at any time as a result of
an adjustment made pursuant to subdivision (i) of this
subparagraph (c), the holder of any share of Series B
Convertible Preferred Stock thereafter surrendered for
conversion shall become entitled to receive any shares of the
Corporation other than shares of Common Stock, thereafter the
Conversion Ratio of such other shares so receivable upon
conversion of any share shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock
contained in this paragraph 3.
(viii) The Average Market Price of Common Stock at
any date shall be deemed to be the average of the Current
Market Prices (as defined below) for the 30 consecutive
business days commencing 45 business days before the date in
question. The "Current Market Price" on any given day shall
mean the closing price per share of the Corporation's Common
Stock on the principal national securities exchange on which
the Common Stock is listed or admitted to trading or, if not
listed or traded on any such exchange, on the National Market
System (the "National Market System") of the National
Association of Securities Dealers Automated Quotations System
("NASDAQ"), or if not listed or traded on any such exchange or
system, on the Nasdaq Bulletin Board, or if not listed or
traded on any such exchange, system or board, the average of
the bid and asked price per share on NASDAQ or, if such
quotations are not available, the fair market value per share
of the Corporation's Common Stock as reasonably determined by
the Board of Directors of the Company.
(d) Notices of Record Date. In case:
(i) there shall be any capital stock reorganization
or reclassification of the Common Stock (other than a
subdivision or combination of the outstanding Common Stock and
other than a change in the par value of the Common Stock), or
any consolidation or merger to which the Corporation is a
party or any statutory exchange of securities with another
corporation and for which approval of any stockholders of the
Corporation is required, or any sale or transfer of all or
substantially all the assets of the Corporation; or
(ii) there shall be a voluntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed with the conversion agent,
and shall cause to be mailed to the holders of shares of the Series B
Convertible Preferred Stock at their addresses as shown on the stock
books of the Corporation, at least 10 days prior to the applicable date
hereinafter specified, a notice stating (A) the date on which a record
is to be taken for the purpose of such distribution or rights, or, if a
record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such distribution or rights are to be
determined, or (B) the date on which such reorganization,
reclassification, consolidation, merger, statutory exchange, sale,
transfer, dissolution,
Page 114 of 241 Pages
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liquidation or winding up is expected to become effective, and the date
as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, statutory exchange, sale, transfer, dissolution,
liquidation or winding up. Failure to give such notice or any defect
therein shall not affect the legality or validity of the proceedings
described in subdivision (i) or (ii) of this subparagraph (d).
(e) Reservation of Common Stock for Conversion. The
Corporation covenants that it will (i) use its best efforts to cause an
amendment to its Certificate of Incorporation to increase the aggregate
number of shares of authorized Common Stock from 15,000,000 shares to
100,000,000 shares (the "Charter Amendment") to be approved and adopted
by its stockholders as soon as possible after the date hereof and
thereafter promptly to file the Charter Amendment with the Secretary of
State of the State of Delaware and (ii) thereafter, at all times
reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued shares of Common Stock or
shares of Common Stock held in its treasury, or both, for the purpose
of effecting conversions of the Series B Convertible Preferred Stock,
the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series B Convertible Preferred
Stock not theretofore converted. For purposes of this subparagraph (e),
the number of shares of Common Stock which shall be deliverable upon
the conversion of all outstanding shares of Series B Convertible
Preferred Stock shall be computed as if at the time of computation all
such outstanding shares were held by a single holder.
(f) Taxes Upon Conversion. The Corporation will pay any and
all documentary stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of shares of Common Stock on
conversions of the Series B Convertible Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock in a name other than
that of the holder of the Series B Convertible Preferred Stock to be
converted and no such issue or delivery shall be made unless and until
the person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(g) Modification of Common Stock. Notwithstanding any
provision herein to the contrary, in case of any consolidation or
merger to which the Corporation is a party (other than a merger or
consolidation in which the Corporation is the continuing corporation),
or in case of any sale or conveyance to another corporation of the
property of the Corporation as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with
another corporation (including any exchange effected in connection with
a merger of a third corporation into the Corporation), the holder of
each share of Series B Convertible Preferred Stock then outstanding
shall have the right thereafter to convert such share into the kind and
amount of securities, cash or
Page 115 of 241 Pages
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other property receivable upon such consolidation, merger, statutory
exchange, sale or conveyance by a holder of the number of shares of
Common Stock into which such share of Series B Convertible Preferred
Stock might have been converted immediately prior to such
consolidation, merger, statutory exchange, sale or conveyance, assuming
such holder of Common Stock failed to exercise his rights of election,
if any, as to the kind of amount of securities, cash or other property
receivable upon such consolidation, merger, statutory exchange, sale or
conveyance (provided that if the kind or amount of securities, cash or
other property receivable upon such consolidation, merger, statutory
exchange, sale or conveyance is not the same for each share of Common
Stock in respect of which such rights of election shall not have been
exercised (each, a "non-electing share"), then for the purpose of this
subparagraph (g) the kind and amount of securities, cash or other
property receivable upon such consolidation, merger, statutory
exchange, sale or conveyance for each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality
of the non-electing shares). Thereafter, the holders of the Series B
Convertible Preferred Stock shall be entitled to appropriate
adjustments with respect to their conversion rights to the end that the
provisions set forth in this paragraph 3 shall correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares
of stock or other securities or property thereafter deliverable on the
conversion of the Series B Convertible Preferred Stock. Any such
adjustment shall be approved by the Board of Directors of the
Corporation, evidenced by a certificate of the chief financial officer
of the Corporation to that effect delivered to the conversion agent;
and any adjustment so approved shall for all purposes hereof
conclusively be deemed to be an appropriate adjustment.
The above provisions of this subparagraph (g) shall similarly
apply to successive consolidations, mergers, statutory exchanges, sales
or conveyances.
4. No Reissuance of Series B Convertible Preferred Stock. No
share or shares of Series B Convertible Preferred Stock acquired by the
Corporation by reason of purchase, conversion or otherwise shall be
reissued, and all such shares shall be cancelled, retired and
eliminated from the shares which the Corporation shall be authorized to
issue. The Corporation may from time to time take such appropriate
corporate action as may be necessary to reduce accordingly the
authorized number of shares of the Series B Convertible Preferred
Stock.
5. Voting Rights. Except as otherwise expressly provided
herein or as required by law, the holders of the Series B Convertible
Preferred Stock shall be entitled to vote on all matters upon which
holders of Common Stock have the right to vote and, with respect to
such right to vote, shall be entitled to notice of any stockholders'
meeting in accordance with the Corporation's Bylaws, and shall be
entitled to a number of votes equal to the number of shares of Common
Stock into which such shares of Series B Convertible Preferred Stock
could then be converted, at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record
date is established, at the date such vote is taken or any written
consent of stockholders is solicited. Except as otherwise expressly
provided herein, or to the extent class or series
Page 116 of 241 Pages
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voting is otherwise required by law or agreement, the holders of the
Series B Convertible Preferred Stock and the holders of the Common
Stock shall vote together as a single class and not as separate
classes.
6. No Consent Required. No consent of the holders of the
Series B Convertible Preferred Stock shall be required for (a) the
creation of any indebtedness of any kind of the Corporation, (b) the
creation of any class of stock of the Corporation ranking senior
(provided such class of stock is not convertible into Common Stock or
any equity security convertible into or exchangeable for Common Stock),
junior or pari passu as to dividends or upon liquidation to the Series
B Convertible Preferred Stock or (c) any increase of decrease in the
amount of authorized Common Stock or any increase, decrease or change
in the par value thereof or in any other terms thereof.
7. Reservation of Rights. The Board reserves the right by
subsequent amendment of this resolution from time to time to increase
or decrease the number of shares which constitute the Series B
Convertible Preferred Stock (but not below the number of shares thereof
then outstanding) and in other respects to amend this resolution within
the limitations provided by law, this resolution and the Certificate of
Incorporation.
IN WITNESS WHEREOF, Geokinetics Inc. has caused this
Certificate of Designation of Series B Convertible Preferred Stock to be made
under the seal of the Corporation and signed by Jay D. Haber, its Chairman and
Chief Executive Officer, and attested by Michael Hale, its Secretary, as of this
30th day of September, 1997.
GEOKINETICS INC.
By:/s/ JAY D. HABER
------------------------------------
Name: Jay D. Haber
Title: Chairman and Chief Executive Officer
[SEAL]
Attest:
/s/ MICHAEL HALE
- -------------------
Name: Michael Hale
Title: Secretary
Page 117 of 241 Pages
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STATE OF TEXAS )
) ss.:
COUNTY OF HARRIS )
On the 30th day of September, 1997 before me, the undersigned
Notary Public, personally came Jay D. Haber, to me known, who by me duly sworn,
did depose and say that deponent is the Chairman and Chief Executive Officer of
GEOKINETICS INC., the corporation described in, and which executed the foregoing
instrument, that the facts stated therein are true, that deponent knows the seal
of the Corporation, that the seal affixed to the instrument is the corporate
seal, that it was affixed by order of the board of directors of the Corporation,
and that deponent signed deponent's name to the foregoing instrument by order of
the board of directors of the Corporation being authorized so to do on its
behalf.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ CHARLOTTE A. KRECOW
------------------------------
Notary Public
STATE OF TEXAS )
) ss.:
COUNTY OF HARRIS)
On the 30th day of September, 1997 before me, the undersigned
Notary Public, personally came Michael Hale, to me known, who by me duly sworn,
did depose and say that deponent is the Secretary of GEOKINETICS INC., the
corporation described in, and which executed the foregoing instrument, that the
facts stated therein are true, that deponent knows the seal of the Corporation,
that the seal affixed to the instrument is the corporate seal, that it was
affixed by order of the board of directors of the Corporation, and that deponent
signed deponent's name to the foregoing instrument by order of the board of
directors of the Corporation being authorized so to do on its behalf.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ CHARLOTTE A. KRECOW
------------------------------
Notary Public
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EXHIBIT VI(a)
BLACKHAWK SHADOW WARRANT
THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE
OF THIS SHADOW WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
GEOKINETICS INC.
SHADOW WARRANT
This certifies that, for $10.00 and other good and valuable
consideration, Geokinetics Inc, a Delaware corporation (the "Company"), grants
to Blackhawk Investors, L.L.C., a Delaware limited liability company, or
permitted registered assigns (the "Warrantholder"), the right to subscribe for
and purchase from the Company 6,512,095 validly issued, fully paid and
nonassessable shares (the "Warrant Shares") of the Company's Common Stock, par
value $0.20 per share (the "Common Stock"), at the purchase price per share of
$0.20 (the "Exercise Price"), exercisable at the times permitted herein, all
subject to the terms, conditions and adjustments set forth in this Shadow
Warrant. This Shadow Warrant is the warrant referred to as the Blackhawk Shadow
Warrant in that certain Securities Purchase and Exchange Agreement of even date
herewith (the "Purchase Agreement"), among the Company, the Warrantholder and
the Holders (as defined therein).
- ------------------------------------------------------------------------------
Dated: New York, New York
July 18, 1997
Page 119 of 241 Pages
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THIS IS A SHADOW WARRANT AGREEMENT (the "Shadow Warrant")
dated July 18, 1997, by and between GEOKINETICS INC., a Delaware corporation,
and BLACKHAWK INVESTORS, L.L.C., a Delaware limited liability company.
WHEREAS, the capitalized terms used herein have the meaning
given to such terms in Section 8; and
WHEREAS, Warrantholder, simultaneously with the acquisition of
this Shadow Warrant from the Company, is acquiring from the Company (i)
5,041,667 shares of Common Stock of the Company, and (ii) 171,875 shares of
Series A Preferred Stock of the Company (convertible into an aggregate of
2,291,666 shares of Common Stock of the Company), which securities constitute
approximately 57% of the shares of Common Stock of the Company that would be
outstanding upon the consummation of the Warrantholder's acquisition of
securities from the Company (assuming the conversion of the Series A Preferred
Stock of the Company into shares of Common Stock of the Company) (excluding any
shares of Common Stock being issued in connection with the Company's acquisition
of the stock of Signature Geophysical Inc. contemporaneously with the
Warrantholder's acquisition of securities pursuant to the Purchase Agreement);
WHEREAS, immediately prior to the consummation of the
transactions contemplated by the Purchase Agreement, the Company had the
obligation to issue up to 2,076,207 shares of Common Stock pursuant to issued
and outstanding warrants (the "Subject Warrants") of the Company (other than
those certain warrants of the Company issued in April of 1997 in the names of
the Holders pursuant to a certain bridge financing transaction), and upon the
consummation of the transactions contemplated by the Purchase Agreement, such
number of shares issuable pursuant to such outstanding warrants will be
increased to 4,354,128 shares of its Common Stock (the "Exercise Shares");
WHEREAS, the parties desire that in the event of the exercise
by the holders of the Subject Warrants of their conversion rights, resulting in
the issuance of the Exercise Shares, or a portion thereof, the Warrantholder
shall have the right to acquire a number of shares of Common Stock equal to 150%
of the number of Exercise Shares issued and outstanding, up to a maximum of
6,512,095 shares of Common Stock (the "Warrant Shares"), which equals
approximately 57% of the sum of (i) the maximum amount of Exercise Shares and
(ii) the maximum amount of Warrant Shares hereunder and the maximum number of
warrant shares under the other Shadow Warrants of even date herewith issued
pursuant to the Purchase Agreement;
WHEREAS, all rights to acquire Warrant Shares shall become
exercisable only upon issuance of the Exercise Shares (an "Exercise Event"), to
the extent of 150% thereof (the "Exercise Percentage");
WHEREAS, in the event adjustments are made by their terms in
the number of Exercise Shares, similar and proportionate adjustments shall be
made in the number of Warrant Shares issued upon exercise of this Shadow Warrant
pursuant hereto; and
Page 120 of 241 Pages
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WHEREAS, the parties desire that these intents and principles
be observed in the event of corporate changes or other events or conditions
which may occur which are not contemplated by this Shadow Warrant;
NOW THEREFORE, in consideration of the premises and covenants
and upon the terms and conditions hereinafter set forth, the parties agree as
follows:
1. Duration and Exercise of Shadow Warrant;
Termination; Limitation on Exercise; Payment of Taxes.
1.1 Exercisability; Amount of Warrant Shares Subject to Shadow
Warrant. This Shadow Warrant shall be exercisable by the Warrantholder during
the Exercise Period (defined below) only upon the occurrence of an Exercise
Event and only to the extent of the Exercise Shares issued by the Company and
outstanding as a result of an Exercise Event, up to a maximum of 6,512,095
Warrant Shares. The expiration, redemption, cancellation or other termination of
a right by a holder thereof to acquire Exercise Shares shall automatically
reduce pro tanto the amount of Exercise Shares and, proportionately, the Warrant
Shares hereunder. The Exercise Period (the "Exercise Period") shall commence on
the date hereof and shall terminate upon the exercise of this Shadow Warrant for
the full amount of Warrant Shares provided hereby as so reduced in accordance
herewith; provided, however, that if this Shadow Warrant shall not have been so
exercised in full it shall nevertheless expire at 5 P.M., local, New York time
on the later of the fifth anniversary of the date hereof or the first
anniversary of written notice to the Warrantholder of the issuance of the
maximum amount of Exercise Shares less any Exercise Shares the rights to which
have expired, been redeemed, canceled or otherwise terminated. On each occasion
on which an Exercise Event occurs, the Company shall give the holder of the
Shadow Warrant written notice thereof setting forth all material information
relating to the Exercise Event, including the number of Exercise Shares being
issued and the corresponding number of Warrant Shares for which the Shadow
Warrant is then exercisable and any adjustments thereto (the "Exercise Event
Notice"), within 30 days of the Company first obtaining notice of such Exercise
Event. The Warrantholder shall, at its option, exercise the Shadow Warrant for
the number of Warrant Shares set forth in the Exercise Event Notice, on or
before the earlier of the fifth anniversary of receipt of the Exercise Event
Notice or the expiration of the Exercise Period, after which time the Shadow
Warrant shall expire as to the Warrant Shares which were the subject of the
Exercise Event Notice. In the event the Shadow Warrant shall expire with respect
to all Warrant Shares for reasons other than its exercise as provided herein,
the Warrantholder agrees to surrender the Shadow Warrant to the Company on
demand.
1.2 Duration and Exercise of Shadow Warrant. This Shadow
Warrant may be exercised by the Shadow Warrantholder by (a) the surrender of
this Shadow Warrant to the Company, with a duly executed Exercise Form in a form
reasonably acceptable to the Company specifying the number of Warrant Shares to
be purchased, during normal business hours on any Business Day and (b) the
delivery of payment to the Company, for the account of the Company, by cash or
by certified or bank cashier's check, of the Exercise Price for the number of
Warrant Shares specified in the Exercise Form in lawful money of the United
States of America. The Company agrees that such Warrant Shares shall be deemed
to be issued to the Warrantholder as
Page 121 of 241 Pages
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the record holder of such Warrant Shares as of the close of business on the date
on which this Shadow Warrant shall have been surrendered and payment made for
the Warrant Shares as aforesaid. A stock certificate or certificates for the
Warrant Shares specified in the Exercise Form shall be delivered to the
Warrantholder as promptly as practicable thereafter. The stock certificate or
certificates so delivered shall be in such denominations as may be reasonably
specified by the Warrantholder in the Exercise Form. If this Shadow Warrant
shall have been exercised only in part, the Company shall, at the time of
delivery of the stock certificate or certificates, redeliver to the
Warrantholder the Shadow Warrant containing a notation reflecting the partial
exercise thereof and evidencing the rights to purchase the remaining Warrant
Shares, which Shadow Warrant shall in all other respects be identical with this
Shadow Warrant. No adjustments shall be made on Warrant Shares issuable on the
exercise of this Shadow Warrant for any cash dividends paid or payable to
holders of record of Common Stock prior to the date as of which the
Warrantholder shall be deemed to be the record holder of such Warrant Shares.
1.3 Payment of Taxes. The issuance of certificates for Warrant
Shares shall be made without charge to the Warrantholder for any stock transfer
or other issuance tax in respect thereto; provided, however, that the
Warrantholder shall be required to pay any and all taxes which may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the then Warrantholder as reflected upon the books
of the Company.
1.4 Divisibility of Shadow Warrant. This Shadow Warrant is
divisible and may be divided into two or more Shadow Warrants, with such
amendments hereto as may appropriately effect the division thereof. Subject to
the restrictions on transfer referred to in Section 2, the Shadow Warrants may
be transferred of record in whole or in part as the then Warrantholder may
specify without charge to such Warrantholder (other than any applicable transfer
taxes).
2. Restrictions on Transfer; Restrictive Legends.
Except as otherwise permitted by this Section 2, each Shadow
Warrant shall (and each Shadow Warrant issued upon direct or indirect transfer
or in substitution for any Shadow Warrant pursuant to Section 1.4 or Section 4
shall) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS SHADOW WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT."
Notwithstanding the foregoing, the Warrantholder may require
the Company to issue a stock certificate for Warrant Shares without a Securities
Act legend, if either (i) such Warrant Shares have been registered for resale
under the Securities Act or (ii) the Warrantholder
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has received an opinion of counsel reasonably satisfactory to the Company that
such registration is not required with respect to such Warrant Shares.
3. Reservation and Registration of Warrant Shares, Etc.
The Company covenants and agrees that all Warrant Shares which
are issued upon the exercise of this Shadow Warrant will, upon issuance, be
validly issued, fully paid and nonassessable and free from all taxes, liens,
security interests, charges and other encumbrances with respect to the issue
thereof, other than taxes in respect of any transfer occurring contemporaneously
with such issue. The Company further covenants and agrees that, during the
period within which this Shadow Warrant may be exercised, the Company will at
all times have authorized and reserved, and keep available free from preemptive
rights, a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Shadow Warrant, and will at its
expense, upon each issuance of such shares, procure such listing thereof as then
may be required on all stock exchanges on which the Common Stock is then listed.
The Company further covenants and agrees that it will, from time to time, take
all such action as may be required to assure that the par value per share of the
Warrant Shares is at all times equal to or less than the then effective Exercise
Price.
4. Exchange, Loss or Destruction of Shadow Warrant.
Subject to the terms and conditions hereof, upon surrender of
this Shadow Warrant to the Company with a duly executed Assignment Form and
funds sufficient to pay any transfer tax, the Company shall, without charge,
execute and deliver a new Shadow Warrant of like tenor in the name of the
assignee named in such Assignment Form and this Shadow Warrant shall promptly be
canceled. Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Shadow Warrant and, in the
case of loss, theft or destruction, of such bond or indemnification as the
Company may reasonably require, and, in the case of such mutilation, upon
surrender and cancellation of this Shadow Warrant, the Company will execute and
deliver a new Shadow Warrant of like tenor. The term "Shadow Warrant" as used in
this Agreement shall be deemed to include the Shadow Warrant issued in
substitution or exchange for this Shadow Warrant.
5. Ownership of Shadow Warrant.
The Company may deem and treat the person in whose name this
Shadow Warrant is registered as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary, until
presentation of this Shadow Warrant for registration of transfer as provided in
Section 4.
6. Certain Adjustments.
6.1 The number of Warrant Shares purchasable upon the exercise
of this Shadow Warrant shall be subject to adjustment as follows:
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(a) Reorganization, Etc. If any capital
reorganization of the Company, or any reclassification of the
Common Stock, or any consolidation of the Company with or
merger of the Company with or into any other person or any
sale, lease or other transfer of all or substantially all of
the assets of the Company to any other person, shall be
effected in such a way that the holders of Common Stock shall
be entitled to receive stock, other securities or assets
(whether such stock, other securities or assets are issued or
distributed by the Company or another person) with respect to
or in exchange for Common Stock, then, upon exercise of this
Shadow Warrant the Warrantholder shall have the right to
receive as Warrant Shares the kind and amount of stock, other
securities or assets receivable upon such reorganization,
reclassification, consolidation, merger or sale, lease or
other transfer by a holder of the number of shares of Common
Stock that such Warrantholder would have been entitled to
receive upon exercise of this Shadow Warrant had this Shadow
Warrant been exercised immediately before such reorganization,
reclassification, consolidation, merger or sale, lease or
other transfer, subject to adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided
for in this Section 6.
(b) Increases or Decreases in Exercise Shares. If, at
any time after issuance of this Shadow Warrant, the number of
Exercise Shares shall have been increased or decreased
pursuant to the provisions of the Subject Warrants, then the
Warrant Shares shall likewise be increased or reduced on a
proportionate basis so that the Warrantholder shall be
entitled to exercise this Shadow Warrant for Warrant Shares in
an amount equal to the number of Exercise Shares, as increased
or decreased at the time of such increase or reduction.
(c) Equitable Adjustments. It is the intent of this
Section that the right of the Warrantholder on one hand to
exercise this Shadow Warrant for the appropriate amount of
Warrant Shares and the right of the Company on the other hand
to protect against dilution of the other securityholders of
the Company be preserved to the extent possible so that if an
event or condition occurs as to which the provisions of this
Article are not strictly applicable, or if strictly
applicable, would not fairly protect the right of the
Warrantholder or the right of the Company in accordance with
the essential intent and principles of this Shadow Warrant,
the Board of Directors of the Company in good faith shall be
authorized to make an adjustment in the application of such
provisions, in accordance with such essential intent and
principles so as to protect such rights to the extent
feasible.
(d) Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued to any Warrantholder in
connection with the exercise of this Shadow Warrant. Instead,
if any fractional shares of Common Stock would otherwise be
issuable to such Warrantholder, the Company will pay to such
Warrantholder a cash adjustment in respect of such fractional
interest in an
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amount equal to that fractional interest of the Closing Price
per share of Common Stock on the date of such exercise.
As used in this Section 6.1(d), the term "Closing
Price" shall mean the closing price per share of the Company's
Common Stock on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if
not listed or traded on any such exchange, on the National
Market System (the "National Market System") of the National
Association of Securities Dealers Automated Quotations System
("NASDAQ"), or if not listed or traded on any such exchange or
system, its last sales price on the Nasdaq Bulletin Board or,
if no sale occurred on such date, at the last "bid" price, or
if not listed or traded on any such exchange or system or
bulletin board, the average of the bid and asked price per
share on NASDAQ or, if such quotations are not available, the
fair market value per share of the Company's Common Stock as
reasonably determined by the Board of Directors of the
Company.
(e) Exercise Price Adjustment. Whenever the number of
Warrant Shares purchasable upon the exercise of the Shadow
Warrant is increased, as herein provided, the Exercise Price
payable for the exercise of this Shadow Warrant shall be
adjusted by multiplying such Exercise Price immediately prior
to such adjustment by a fraction, of which the numerator shall
be the number of Warrant Shares purchasable upon the exercise
of the Shadow Warrant immediately prior to such adjustment,
and of which the denominator shall be the number of Warrant
Shares purchasable immediately thereafter.
6.2 No Adjustment for Dividends. Except as provided in
Section 6.1, no adjustment in respect of any dividends shall be made during the
term of this Shadow Warrant or upon the exercise of this Shadow Warrant.
6.3 Notice of Adjustment. Whenever the number of Exercise
Shares is adjusted, as herein provided, the Company shall promptly mail by first
class, postage prepaid, to the Warrantholder, notice of such adjustment or
adjustments and a certificate of the chief financial officer of the Company
setting forth the number of Exercise Shares and Warrant Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
7. Certain Notifications.
7.1 Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive
any dividend or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any
other right, or
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(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any consolidation or merger involving the
Company and any other party or any transfer of all or
substantially all of the assets of the Company to any other
party, or
(c) any voluntary or involuntary dissolution
liquidation or winding-up of the Company,
the Company will mail to the Warrantholder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right and the amount and character of any such
dividend, distribution or right and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or other securities) shall be entitled to exchange their shares of Common
Stock (or other securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 20 days prior to the date herein specified in the foregoing
subdivision (i) or (ii).
7.2 Pre-Merger Notification. In the event that any exercise of
this Shadow Warrant by the Warrantholder shall require the filing of a
Pre-Merger Notification with the Federal Trade Commission and/or the Department
of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules promulgated thereunder (the "HSR Act"), each of the
Company and the Warrantholder shall use its respective reasonable efforts to
furnish, or cause to be furnished, such information and to promptly file, or
cause to be filed, such documents as may be required in order to comply with the
HSR Act and each such party will cooperate fully in order that all necessary
filings in connection therewith may be completed as soon as possible after the
determination by either party that such filing is required. In such event, each
of the Company and the Warrantholder shall use its respective reasonable efforts
to respond promptly to any request for additional information received in
connection with an HSR Act filing, and each party shall promptly notify the
other party of any such request for additional information.
8. Definitions. As used herein, unless the context
otherwise requires, the following terms have the following respective meanings:
Business Day: any day other than a Saturday, Sunday or a day
on which national banks are authorized by law to close in The City of New York,
State of New York.
Assignment Form: an Assignment Form in the form annexed
hereto as Exhibit B.
Closing Price: the meaning specified in Section 6.1(d).
Company: Geokinetics Inc., a Delaware corporation.
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Exchange Act: the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the time.
Exercise Form: an Exercise Form in the form annexed hereto as Exhibit A.
Exercise Event: the meaning specified in the preambles.
Exercise Event Notice: the meaning specified in Section 1.1.
Exercise Percentage: the meaning specified in the preambles.
Exercise Period: the meaning specified in Section 1.1.
Exercise Price: the meaning specified on the cover of this Shadow
Warrant.
Exercise Shares: the meaning specified in the preambles.
NASDAQ: the meaning specified in Section 6.1(d).
National Market System: the meaning specified in Section 6.1(d).
Purchase Agreement: the meaning set forth on the cover page of this
Shadow Warrant.
SEC: the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act or the Exchange Act,
whichever is the relevant statute for the particular purpose.
Securities Act: the Securities Act of 1933, as amended, and
the rules and regulations of the commission thereunder, all as the same shall be
in effect at the time.
Series A Preferred Stock: means that series of Preferred Stock
of the Company created and designated pursuant to the Certificate of Designation
of Series A Convertible Preferred Stock of the Company, in the form of Exhibit A
to the Purchase Agreement.
Shadow Warrant: the meaning specified in the preambles hereto.
Warrantholder: the meaning specified on the cover of this
Shadow Warrant.
Warrant Shares: the meaning specified on the cover of this
Shadow Warrant and in the preambles.
9. Miscellaneous.
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9.1 Entire Agreement. This Shadow Warrant constitutes
the entire agreement between the Company and the Warrantholder with respect
to the Shadow Warrant.
9.2 Binding Effects; Benefits. This Shadow Warrant shall inure
to the benefit of and shall be binding upon the Company and the Warrantholder
and their respective heirs, legal representatives, successors and assigns.
Nothing in this Shadow Warrant, expressed or implied, is intended to or shall
confer on any person other than the Company and the Warrantholder, or their
respective heirs, legal representatives, successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this Shadow Warrant.
9.3 Amendments and Waivers. This Shadow Warrant may not be
modified or amended except by an instrument or instruments in writing signed by
(i) the Company and (ii) the holder of this Shadow Warrant. Either the Company
or the holder of this Shadow Warrant may, by an instrument in writing, waive
compliance by the other party with any term or provision of this Shadow Warrant
on the part of such other party hereto to be performed or complied with. The
waiver by any such party of a breach of any term or provision of this Shadow
Warrant shall not be construed as a waiver of any subsequent breach.
9.4 Section and Other Headings. The section and other headings
contained in this Shadow Warrant are for reference purposes only and shall not
be deemed to be a part of this Shadow Warrant or to affect the meaning or
interpretation of this Shadow Warrant.
9.5 Further Assurances. Each of the Company and the
Warrantholder shall do and perform all such further acts and things and execute
and deliver all such other certificates, instruments and documents as the
Company or the Warrantholder may, at any time and from time to time, reasonably
request in connection with the performance of any of the provisions of this
Shadow Warrant.
9.6 Notices. All notices and other communications required or
permitted to be given under this Shadow Warrant shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by United States
mail, postage prepaid, to the parties hereto at the following addresses or to
such other address as any party hereto shall hereafter specify by notice to the
other party hereto:
(a) if to the Company, addressed to:
Geokinetics Inc.
Marathon Oil Tower
5555 San Felipe, Suite 780,
Houston, Texas 77056
Telecopier No.: (713) 850-7330
Attention: Chairman
(b) if to the Warrantholder, addressed to the
address of such Warrantholder appearing on the books of
the Company.
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Except as otherwise provided herein, all such notices and communications shall
be deemed to have been received on the date of delivery thereof, if delivered
personally, or on the third Business Day after the mailing thereof.
9.7 Separability. Any term or provision of this Shadow Warrant
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the terms and
provisions of this Shadow Warrant or affecting the validity or enforceability of
any of the terms or provisions of this Shadow Warrant in any other jurisdiction.
9.8 Governing Law. This Shadow Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to such agreements made and to be performed entirely within such
State.
9.9 No Rights or Liabilities as Stockholder. Nothing contained
in this Shadow Warrant shall be determined as conferring upon the Warrantholder
any rights as a stockholder of the company or as imposing any liabilities on the
Warrantholder to purchase any securities, whether such liabilities are asserted
by the Company or by creditors or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the parties hereto have caused this Shadow
Warrant to be signed by their duly authorized officers.
GEOKINETICS INC.
By:/s/ JAY D. HABER
-----------------------------
Name: Jay D. Haber
Title: President
BLACKHAWK INVESTORS, L.L.C.
By: Blackhawk Capital Partners, Managing
Member
By:/s/ WILLIAM R. ZIEGLER
-----------------------------
William R. Ziegler, Partner
Dated: July 18, 1997
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Exhibit A
THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON EXERCISE OF THIS SHADOW WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SUCH ACT.
EXERCISE FORM
(To be executed upon exercise of this Shadow Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase ____________ of the Warrant Shares and
herewith tenders payment for such Warrant Shares to the order of Geokinetics
Inc. in the amount of $________ in accordance with the terms of this Shadow
Warrant. The undersigned requests that a certificate for such Warrant Shares be
registered in the name of the undersigned and that such certificate be delivered
to the undersigned's address below.
The undersigned represents that it is acquiring such Warrant Shares for
its own account for investment and not with a view to or for sale in connection
with any distribution thereof (subject, however, to any requirement of law that
the disposition thereof shall at all times be within its control).
Dated: ______________________
Signature: _____________________________________
(Print Name)
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- --------------------------
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Exhibit B
THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON EXERCISE OF THIS SHADOW WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SUCH ACT.
FORM OF ASSIGNMENT
For value received, the undersigned registered holder of the within
Shadow Warrant hereby sells, assigns and transfers unto _______________________
________________________________ the rights represented by such Shadow Warrant
to purchase initially up to 6,512,095 shares of Common Stock of Geokinetics Inc.
to which such Shadow Warrant relates and all other rights of the Warrantholder
under the within Shadow Warrant, and appoints ________________________ Attorney
to make such transfer on the books of Geokinetics Inc. maintained for such
purpose, with full power of substitution in the premises.
Dated: ______________________
Signature: _____________________________________
(Print Name)
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- --------------------------
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EXHIBIT VI(b)
HOLDER'S SHADOW WARRANT
THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE
OF THIS SHADOW WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
GEOKINETICS INC.
SHADOW WARRANT
This certifies that, for $10.00 and other good and valuable
consideration, Geokinetics Inc, a Delaware corporation (the "Company"), grants
to Steven A. Webster, or permitted registered assigns (the "Warrantholder"), the
right to subscribe for and purchase from the Company 296,004 validly issued,
fully paid and nonassessable shares (the "Warrant Shares") of the Company's
Common Stock, par value $0.20 per share (the "Common Stock"), at the purchase
price per share of $0.20 (the "Exercise Price"), exercisable at the times
permitted herein, all subject to the terms, conditions and adjustments set forth
in this Shadow Warrant. This Shadow Warrant is the warrant referred to as the
Holder's Shadow Warrant in that certain Securities Purchase and Exchange
Agreement of even date herewith (the "Purchase Agreement"), among the Company,
Blackhawk Investors, L.L.C., a Delaware limited liability company ("Blackhawk"),
the Warrantholder and the other Holder (as defined therein) signatory thereto.
- ------------------------------------------------------------------------------
Dated: New York, New York
July 18, 1997
Page 132 of 241 Pages
<PAGE>
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THIS IS A SHADOW WARRANT AGREEMENT (the "Shadow Warrant")
dated July 18, 1997, by and between GEOKINETICS INC., a Delaware corporation,
and STEVEN A. WEBSTER.
WHEREAS, the capitalized terms used herein have the meaning
given to such terms in Section 8; and
WHEREAS, Warrantholder, simultaneously with the acquisition of
this Shadow Warrant from the Company, is acquiring from the Company (i) 229,166
shares of Common Stock of the Company, and (ii) 7,812 shares of Series A
Preferred Stock of the Company (convertible into an aggregate of 104,160 shares
of Common Stock of the Company), which securities constitute approximately 2.6%
of the shares of Common Stock of the Company that would be outstanding upon the
consummation of the Warrantholder's acquisition of securities from the Company
(assuming the conversion of the Series A Preferred Stock of the Company into
shares of Common Stock of the Company) (excluding any shares of Common Stock
being issued in connection with the Company's acquisition of the stock of
Signature Geophysical Inc. contemporaneously with the Warrantholder's
acquisition of securities pursuant to the Purchase Agreement);
WHEREAS, immediately prior to the consummation of the
transactions contemplated by the Purchase Agreement, the Company had the
obligation to issue up to 2,076,207 shares of Common Stock pursuant to issued
and outstanding warrants (the "Subject Warrants") of the Company (other than
those certain warrants of the Company issued in April of 1997 in the names of
the Holders pursuant to a certain bridge financing transaction), and upon the
consummation of the transactions contemplated by the Purchase Agreement, such
number of shares issuable pursuant to such outstanding warrants will be
increased to 4,354,128 shares of its Common Stock (the "Exercise Shares");
WHEREAS, the parties desire that in the event of the exercise
by the holders of the Subject Warrants of their conversion rights, resulting in
the issuance of the Exercise Shares, or a portion thereof, the Warrantholder
shall have the right to acquire a number of shares of Common Stock equal to 6.8%
of the number of Exercise Shares issued and outstanding, up to a maximum of
296,004 shares of Common Stock (the "Warrant Shares"), which equals
approximately 2.6% of the sum of (i) the maximum amount of Exercise Shares and
(ii) the maximum amount of Warrant Shares hereunder and the maximum number of
warrant shares under the other Shadow Warrants of even date herewith issued
pursuant to the Purchase Agreement;
WHEREAS, all rights to acquire Warrant Shares shall become
exercisable only upon issuance of the Exercise Shares (an "Exercise Event"), to
the extent of 6.8% thereof (the "Exercise Percentage");
WHEREAS, in the event adjustments are made by their terms in
the number of Exercise Shares, similar and proportionate adjustments shall be
made in the number of Warrant Shares issued upon exercise of this Shadow Warrant
pursuant hereto; and
Page 133 of 241 Pages
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WHEREAS, the parties desire that these intents and principles
be observed in the event of corporate changes or other events or conditions
which may occur which are not contemplated by this Shadow Warrant;
NOW THEREFORE, in consideration of the premises and covenants
and upon the terms and conditions hereinafter set forth, the parties agree as
follows:
1. Duration and Exercise of Shadow Warrant;
Termination; Limitation on Exercise; Payment of
Taxes.
1.1 Exercisability; Amount of Warrant Shares Subject to Shadow
Warrant. This Shadow Warrant shall be exercisable by the Warrantholder during
the Exercise Period (defined below) only upon the occurrence of an Exercise
Event and only to the extent of the Exercise Shares issued by the Company and
outstanding as a result of an Exercise Event, up to a maximum of 296,004 Warrant
Shares. The expiration, redemption, cancellation or other termination of a right
by a holder thereof to acquire Exercise Shares shall automatically reduce pro
tanto the amount of Exercise Shares and, proportionately, the Warrant Shares
hereunder. The Exercise Period (the "Exercise Period") shall commence on the
date hereof and shall terminate upon the exercise of this Shadow Warrant for the
full amount of Warrant Shares provided hereby as so reduced in accordance
herewith; provided, however, that if this Shadow Warrant shall not have been so
exercised in full it shall nevertheless expire at 5 P.M., local, New York time
on the later of the fifth anniversary of the date hereof or the first
anniversary of written notice to the Warrantholder of the issuance of the
maximum amount of Exercise Shares less any Exercise Shares the rights to which
have expired, been redeemed, canceled or otherwise terminated. On each occasion
on which an Exercise Event occurs, the Company shall give the holder of the
Shadow Warrant written notice thereof setting forth all material information
relating to the Exercise Event, including the number of Exercise Shares being
issued and the corresponding number of Warrant Shares for which the Shadow
Warrant is then exercisable and any adjustments thereto (the "Exercise Event
Notice"), within 30 days of the Company first obtaining notice of such Exercise
Event. The Warrantholder shall, at its option, exercise the Shadow Warrant for
the number of Warrant Shares set forth in the Exercise Event Notice, on or
before the earlier of the fifth anniversary of receipt of the Exercise Event
Notice or the expiration of the Exercise Period, after which time the Shadow
Warrant shall expire as to the Warrant Shares which were the subject of the
Exercise Event Notice. In the event the Shadow Warrant shall expire with respect
to all Warrant Shares for reasons other than its exercise as provided herein,
the Warrantholder agrees to surrender the Shadow Warrant to the Company on
demand.
1.2 Duration and Exercise of Shadow Warrant. This Shadow
Warrant may be exercised by the Shadow Warrantholder by (a) the surrender of
this Shadow Warrant to the Company, with a duly executed Exercise Form in a form
reasonably acceptable to the Company specifying the number of Warrant Shares to
be purchased, during normal business hours on any Business Day and (b) the
delivery of payment to the Company, for the account of the Company, by cash or
by certified or bank cashier's check, of the Exercise Price for the number of
Warrant Shares specified in the Exercise Form in lawful money of the United
States of America. The Company agrees that such Warrant Shares shall be deemed
to be issued to the Warrantholder as
-2- Page 134 of 241 Pages
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<PAGE>
the record holder of such Warrant Shares as of the close of business on the date
on which this Shadow Warrant shall have been surrendered and payment made for
the Warrant Shares as aforesaid. A stock certificate or certificates for the
Warrant Shares specified in the Exercise Form shall be delivered to the
Warrantholder as promptly as practicable thereafter. The stock certificate or
certificates so delivered shall be in such denominations as may be reasonably
specified by the Warrantholder in the Exercise Form. If this Shadow Warrant
shall have been exercised only in part, the Company shall, at the time of
delivery of the stock certificate or certificates, redeliver to the
Warrantholder the Shadow Warrant containing a notation reflecting the partial
exercise thereof and evidencing the rights to purchase the remaining Warrant
Shares, which Shadow Warrant shall in all other respects be identical with this
Shadow Warrant. No adjustments shall be made on Warrant Shares issuable on the
exercise of this Shadow Warrant for any cash dividends paid or payable to
holders of record of Common Stock prior to the date as of which the
Warrantholder shall be deemed to be the record holder of such Warrant Shares.
1.3 Payment of Taxes. The issuance of certificates for Warrant
Shares shall be made without charge to the Warrantholder for any stock transfer
or other issuance tax in respect thereto; provided, however, that the
Warrantholder shall be required to pay any and all taxes which may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the then Warrantholder as reflected upon the books
of the Company.
1.4 Divisibility of Shadow Warrant. This Shadow Warrant is
divisible and may be divided into two or more Shadow Warrants, with such
amendments hereto as may appropriately effect the division thereof. Subject to
the restrictions on transfer referred to in Section 2, the Shadow Warrants may
be transferred of record in whole or in part as the then Warrantholder may
specify without charge to such Warrantholder (other than any applicable transfer
taxes).
2. Restrictions on Transfer; Restrictive Legends.
Except as otherwise permitted by this Section 2, each Shadow
Warrant shall (and each Shadow Warrant issued upon direct or indirect transfer
or in substitution for any Shadow Warrant pursuant to Section 1.4 or Section 4
shall) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS SHADOW WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT."
Notwithstanding the foregoing, the Warrantholder may require
the Company to issue a stock certificate for Warrant Shares without a Securities
Act legend, if either (i) such Warrant Shares have been registered for resale
under the Securities Act or (ii) the Warrantholder
-3- Page 135 of 241 Pages
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<PAGE>
has received an opinion of counsel reasonably satisfactory to the Company that
such registration is not required with respect to such Warrant Shares.
3. Reservation and Registration of Warrant Shares, Etc.
The Company covenants and agrees that all Warrant Shares which
are issued upon the exercise of this Shadow Warrant will, upon issuance, be
validly issued, fully paid and nonassessable and free from all taxes, liens,
security interests, charges and other encumbrances with respect to the issue
thereof, other than taxes in respect of any transfer occurring contemporaneously
with such issue. The Company further covenants and agrees that, during the
period within which this Shadow Warrant may be exercised, the Company will at
all times have authorized and reserved, and keep available free from preemptive
rights, a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Shadow Warrant, and will at its
expense, upon each issuance of such shares, procure such listing thereof as then
may be required on all stock exchanges on which the Common Stock is then listed.
The Company further covenants and agrees that it will, from time to time, take
all such action as may be required to assure that the par value per share of the
Warrant Shares is at all times equal to or less than the then effective Exercise
Price.
4. Exchange, Loss or Destruction of Shadow Warrant.
Subject to the terms and conditions hereof, upon surrender of
this Shadow Warrant to the Company with a duly executed Assignment Form and
funds sufficient to pay any transfer tax, the Company shall, without charge,
execute and deliver a new Shadow Warrant of like tenor in the name of the
assignee named in such Assignment Form and this Shadow Warrant shall promptly be
canceled. Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Shadow Warrant and, in the
case of loss, theft or destruction, of such bond or indemnification as the
Company may reasonably require, and, in the case of such mutilation, upon
surrender and cancellation of this Shadow Warrant, the Company will execute and
deliver a new Shadow Warrant of like tenor. The term "Shadow Warrant" as used in
this Agreement shall be deemed to include the Shadow Warrant issued in
substitution or exchange for this Shadow Warrant.
5. Ownership of Shadow Warrant.
The Company may deem and treat the person in whose name this
Shadow Warrant is registered as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary, until
presentation of this Shadow Warrant for registration of transfer as provided in
Section 4.
6. Certain Adjustments.
6.1 The number of Warrant Shares purchasable upon the exercise
of this Shadow Warrant shall be subject to adjustment as follows:
-4- Page 136 of 241 Pages
<PAGE>
<PAGE>
(a) Reorganization, Etc. If any capital
reorganization of the Company, or any reclassification of the
Common Stock, or any consolidation of the Company with or
merger of the Company with or into any other person or any
sale, lease or other transfer of all or substantially all of
the assets of the Company to any other person, shall be
effected in such a way that the holders of Common Stock shall
be entitled to receive stock, other securities or assets
(whether such stock, other securities or assets are issued or
distributed by the Company or another person) with respect to
or in exchange for Common Stock, then, upon exercise of this
Shadow Warrant the Warrantholder shall have the right to
receive as Warrant Shares the kind and amount of stock, other
securities or assets receivable upon such reorganization,
reclassification, consolidation, merger or sale, lease or
other transfer by a holder of the number of shares of Common
Stock that such Warrantholder would have been entitled to
receive upon exercise of this Shadow Warrant had this Shadow
Warrant been exercised immediately before such reorganization,
reclassification, consolidation, merger or sale, lease or
other transfer, subject to adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided
for in this Section 6.
(b) Increases or Decreases in Exercise Shares. If, at
any time after issuance of this Shadow Warrant, the number of
Exercise Shares shall have been increased or decreased
pursuant to the provisions of the Subject Warrants, then the
Warrant Shares shall likewise be increased or reduced on a
proportionate basis so that the Warrantholder shall be
entitled to exercise this Shadow Warrant for Warrant Shares in
an amount equal to the number of Exercise Shares, as increased
or decreased at the time of such increase or reduction.
(c) Equitable Adjustments. It is the intent of this
Section that the right of the Warrantholder on one hand to
exercise this Shadow Warrant for the appropriate amount of
Warrant Shares and the right of the Company on the other hand
to protect against dilution of the other securityholders of
the Company be preserved to the extent possible so that if an
event or condition occurs as to which the provisions of this
Article are not strictly applicable, or if strictly
applicable, would not fairly protect the right of the
Warrantholder or the right of the Company in accordance with
the essential intent and principles of this Shadow Warrant,
the Board of Directors of the Company in good faith shall be
authorized to make an adjustment in the application of such
provisions, in accordance with such essential intent and
principles so as to protect such rights to the extent
feasible.
(d) Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued to any Warrantholder in
connection with the exercise of this Shadow Warrant. Instead,
if any fractional shares of Common Stock would otherwise be
issuable to such Warrantholder, the Company will pay to such
Warrantholder a cash adjustment in respect of such fractional
interest in an
-5- Page 137 of 241 Pages
<PAGE>
<PAGE>
amount equal to that fractional interest of the Closing Price
per share of Common Stock on the date of such exercise.
As used in this Section 6.1(d), the term "Closing
Price" shall mean the closing price per share of the Company's
Common Stock on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if
not listed or traded on any such exchange, on the National
Market System (the "National Market System") of the National
Association of Securities Dealers Automated Quotations System
("NASDAQ"), or if not listed or traded on any such exchange or
system, its last sales price on the Nasdaq Bulletin Board or,
if no sale occurred on such date, at the last "bid" price, or
if not listed or traded on any such exchange or system or
bulletin board, the average of the bid and asked price per
share on NASDAQ or, if such quotations are not available, the
fair market value per share of the Company's Common Stock as
reasonably determined by the Board of Directors of the
Company.
(e) Exercise Price Adjustment. Whenever the number of
Warrant Shares purchasable upon the exercise of the Shadow
Warrant is increased, as herein provided, the Exercise Price
payable for the exercise of this Shadow Warrant shall be
adjusted by multiplying such Exercise Price immediately prior
to such adjustment by a fraction, of which the numerator shall
be the number of Warrant Shares purchasable upon the exercise
of the Shadow Warrant immediately prior to such adjustment,
and of which the denominator shall be the number of Warrant
Shares purchasable immediately thereafter.
6.2 No Adjustment for Dividends. Except as provided in Section
6.1, no adjustment in respect of any dividends shall be made during the term of
this Shadow Warrant or upon the exercise of this Shadow Warrant.
6.3 Notice of Adjustment. Whenever the number of Exercise
Shares is adjusted, as herein provided, the Company shall promptly mail by first
class, postage prepaid, to the Warrantholder, notice of such adjustment or
adjustments and a certificate of the chief financial officer of the Company
setting forth the number of Exercise Shares and Warrant Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
7. Certain Notifications.
7.1 Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive
any dividend or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any
other right, or
-6- Page 138 of 241 Pages
<PAGE>
<PAGE>
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any consolidation or merger involving the
Company and any other party or any transfer of all or
substantially all of the assets of the Company to any other
party, or
(c) any voluntary or involuntary dissolution
liquidation or winding-up of the Company,
the Company will mail to the Warrantholder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right and the amount and character of any such
dividend, distribution or right and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or other securities) shall be entitled to exchange their shares of Common
Stock (or other securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 20 days prior to the date herein specified in the foregoing
subdivision (i) or (ii).
7.2 Pre-Merger Notification. In the event that any exercise of
this Shadow Warrant by the Warrantholder shall require the filing of a
Pre-Merger Notification with the Federal Trade Commission and/or the Department
of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules promulgated thereunder (the "HSR Act"), each of the
Company and the Warrantholder shall use its respective reasonable efforts to
furnish, or cause to be furnished, such information and to promptly file, or
cause to be filed, such documents as may be required in order to comply with the
HSR Act and each such party will cooperate fully in order that all necessary
filings in connection therewith may be completed as soon as possible after the
determination by either party that such filing is required. In such event, each
of the Company and the Warrantholder shall use its respective reasonable efforts
to respond promptly to any request for additional information received in
connection with an HSR Act filing, and each party shall promptly notify the
other party of any such request for additional information.
8. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
Business Day: any day other than a Saturday, Sunday or a day
on which national banks are authorized by law to close in The City of New York,
State of New York.
Assignment Form: an Assignment Form in the form annexed hereto
as Exhibit B.
Closing Price: the meaning specified in Section 6.1(d).
Company: Geokinetics Inc., a Delaware corporation.
-7- Page 139 of 241 Pages
<PAGE>
<PAGE>
Exchange Act: the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the time.
Exercise Form: an Exercise Form in the form annexed hereto as
Exhibit A.
Exercise Event: the meaning specified in the preambles.
Exercise Event Notice: the meaning specified in Section 1.1.
Exercise Percentage: the meaning specified in the preambles.
Exercise Period: the meaning specified in Section 1.1.
Exercise Price: the meaning specified on the cover of this
Shadow Warrant.
Exercise Shares: the meaning specified in the preambles.
NASDAQ: the meaning specified in Section 6.1(d).
National Market System: the meaning specified in Section
6.1(d).
Purchase Agreement: the meaning set forth on the cover page of
this Shadow Warrant.
SEC: the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act or the Exchange Act,
whichever is the relevant statute for the particular purpose.
Securities Act: the Securities Act of 1933, as amended, and
the rules and regulations of the commission thereunder, all as the same shall be
in effect at the time.
Series A Preferred Stock: means that series of Preferred Stock
of the Company created and designated pursuant to the Certificate of Designation
of Series A Convertible Preferred Stock of the Company, in the form of Exhibit A
to the Purchase Agreement.
Shadow Warrant: the meaning specified in the preambles hereto.
Warrantholder: the meaning specified on the cover of this
Shadow Warrant.
Warrant Shares: the meaning specified on the cover of this
Shadow Warrant and in the preambles.
9. Miscellaneous.
-8- Page 140 of 241 Pages
<PAGE>
<PAGE>
9.1 Entire Agreement. This Shadow Warrant constitutes the
entire agreement between the Company and the Warrantholder with respect to the
Shadow Warrant.
9.2 Binding Effects; Benefits. This Shadow Warrant shall inure
to the benefit of and shall be binding upon the Company and the Warrantholder
and their respective heirs, legal representatives, successors and assigns.
Nothing in this Shadow Warrant, expressed or implied, is intended to or shall
confer on any person other than the Company and the Warrantholder, or their
respective heirs, legal representatives, successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this Shadow Warrant.
9.3 Amendments and Waivers. This Shadow Warrant may not be
modified or amended except by an instrument or instruments in writing signed by
(i) the Company and (ii) the holder of this Shadow Warrant. Either the Company
or the holder of this Shadow Warrant may, by an instrument in writing, waive
compliance by the other party with any term or provision of this Shadow Warrant
on the part of such other party hereto to be performed or complied with. The
waiver by any such party of a breach of any term or provision of this Shadow
Warrant shall not be construed as a waiver of any subsequent breach.
9.4 Section and Other Headings. The section and other headings
contained in this Shadow Warrant are for reference purposes only and shall not
be deemed to be a part of this Shadow Warrant or to affect the meaning or
interpretation of this Shadow Warrant.
9.5 Further Assurances. Each of the Company and the
Warrantholder shall do and perform all such further acts and things and execute
and deliver all such other certificates, instruments and documents as the
Company or the Warrantholder may, at any time and from time to time, reasonably
request in connection with the performance of any of the provisions of this
Shadow Warrant.
9.6 Notices. All notices and other communications required or
permitted to be given under this Shadow Warrant shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by United States
mail, postage prepaid, to the parties hereto at the following addresses or to
such other address as any party hereto shall hereafter specify by notice to the
other party hereto:
(a) if to the Company, addressed to:
Geokinetics Inc.
Marathon Oil Tower
5555 San Felipe, Suite 780,
Houston, Texas 77056
Telecopier No.: (713) 850-7330
Attention: Chairman
(b) if to the Warrantholder, addressed to the
address of such Warrantholder appearing on the books of the
Company.
-9- Page 141 of 241 Pages
<PAGE>
<PAGE>
Except as otherwise provided herein, all such notices and communications shall
be deemed to have been received on the date of delivery thereof, if delivered
personally, or on the third Business Day after the mailing thereof.
9.7 Separability. Any term or provision of this Shadow Warrant
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the terms and
provisions of this Shadow Warrant or affecting the validity or enforceability of
any of the terms or provisions of this Shadow Warrant in any other jurisdiction.
9.8 Governing Law. This Shadow Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to such agreements made and to be performed entirely within such
State.
9.9 No Rights or Liabilities as Stockholder. Nothing contained
in this Shadow Warrant shall be determined as conferring upon the Warrantholder
any rights as a stockholder of the company or as imposing any liabilities on the
Warrantholder to purchase any securities, whether such liabilities are asserted
by the Company or by creditors or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the parties hereto have caused this Shadow
Warrant to be signed by their duly authorized officers.
GEOKINETICS INC.
By:/s/ JAY D. HABER
-----------------------------
Name: Jay D. Haber
Title: President
/s/ STEVEN A. WEBSTER
-----------------------------
STEVEN A. WEBSTER
Dated: July 18, 1997
-10- Page 142 of 241 Pages
<PAGE>
<PAGE>
Exhibit A
THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON EXERCISE OF THIS SHADOW WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SUCH ACT.
EXERCISE FORM
(To be executed upon exercise of this Shadow Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase ____________ of the Warrant Shares and
herewith tenders payment for such Warrant Shares to the order of Geokinetics
Inc. in the amount of $________ in accordance with the terms of this Shadow
Warrant. The undersigned requests that a certificate for such Warrant Shares be
registered in the name of the undersigned and that such certificate be delivered
to the undersigned's address below.
The undersigned represents that it is acquiring such Warrant Shares for
its own account for investment and not with a view to or for sale in connection
with any distribution thereof (subject, however, to any requirement of law that
the disposition thereof shall at all times be within its control).
Dated: ______________________
Signature: _____________________________________
(Print Name)
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- --------------------------
-11- Page 143 of 241 Pages
<PAGE>
<PAGE>
Exhibit B
THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON EXERCISE OF THIS SHADOW WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SUCH ACT.
FORM OF ASSIGNMENT
For value received, the undersigned registered holder of the within
Shadow Warrant hereby sells, assigns and transfers unto
________________________________ the rights represented by such Shadow Warrant
to purchase initially up to 296,004 shares of Common Stock of Geokinetics Inc.
to which such Shadow Warrant relates and all other rights of the Warrantholder
under the within Shadow Warrant, and appoints ________________________ Attorney
to make such transfer on the books of Geokinetics Inc. maintained for such
purpose, with full power of substitution in the premises.
Dated: ______________________
Signature: _____________________________________
(Print Name)
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- --------------------------
-12- Page 144 of 241 Pages
<PAGE>
<PAGE>
EXHIBIT VI(c)
HOLDER'S SHADOW WARRANT
THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE
OF THIS SHADOW WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
GEOKINETICS INC.
SHADOW WARRANT
This certifies that, for $10.00 and other good and valuable
consideration, Geokinetics Inc, a Delaware corporation (the "Company"), grants
to William R. Ziegler, or permitted registered assigns (the "Warrantholder"),
the right to subscribe for and purchase from the Company 296,005 validly issued,
fully paid and nonassessable shares (the "Warrant Shares") of the Company's
Common Stock, par value $0.20 per share (the "Common Stock"), at the purchase
price per share of $0.20 (the "Exercise Price"), exercisable at the times
permitted herein, all subject to the terms, conditions and adjustments set forth
in this Shadow Warrant. This Shadow Warrant is the warrant referred to as the
Holder's Shadow Warrant in that certain Securities Purchase and Exchange
Agreement of even date herewith (the "Purchase Agreement"), among the Company,
Blackhawk Investors, L.L.C., a Delaware limited liability company ("Blackhawk"),
the Warrantholder and the other Holder (as defined therein) signatory thereto.
- ------------------------------------------------------------------------------
Dated: New York, New York
July 18, 1997
Page 145 of 241 Pages
<PAGE>
<PAGE>
THIS IS A SHADOW WARRANT AGREEMENT (the "Shadow Warrant")
dated July 18, 1997, by and between GEOKINETICS INC., a Delaware corporation,
and WILLIAM R. ZIEGLER.
WHEREAS, the capitalized terms used herein have the meaning
given to such terms in Section 8; and
WHEREAS, Warrantholder, simultaneously with the acquisition of
this Shadow Warrant from the Company, is acquiring from the Company (i) 229,167
shares of Common Stock of the Company, and (ii) 7,813 shares of Series A
Preferred Stock of the Company (convertible into an aggregate of 104,174 shares
of Common Stock of the Company), which securities constitute approximately 2.6%
of the shares of Common Stock of the Company that would be outstanding upon the
consummation of the Warrantholder's acquisition of securities from the Company
(assuming the conversion of the Series A Preferred Stock of the Company into
shares of Common Stock of the Company) (excluding any shares of Common Stock
being issued in connection with the Company's acquisition of the stock of
Signature Geophysical Inc. contemporaneously with the Warrantholder's
acquisition of securities pursuant to the Purchase Agreement);
WHEREAS, immediately prior to the consummation of the
transactions contemplated by the Purchase Agreement, the Company had the
obligation to issue up to 2,076,207 shares of Common Stock pursuant to issued
and outstanding warrants (the "Subject Warrants") of the Company (other than
those certain warrants of the Company issued in April of 1997 in the names of
the Holders pursuant to a certain bridge financing transaction), and upon the
consummation of the transactions contemplated by the Purchase Agreement, such
number of shares issuable pursuant to such outstanding warrants will be
increased to 4,354,128 shares of its Common Stock (the "Exercise Shares");
WHEREAS, the parties desire that in the event of the exercise
by the holders of the Subject Warrants of their conversion rights, resulting in
the issuance of the Exercise Shares, or a portion thereof, the Warrantholder
shall have the right to acquire a number of shares of Common Stock equal to 6.8%
of the number of Exercise Shares issued and outstanding, up to a maximum of
296,004 shares of Common Stock (the "Warrant Shares"), which equals
approximately 2.6% of the sum of (i) the maximum amount of Exercise Shares and
(ii) the maximum amount of Warrant Shares hereunder and the maximum number of
warrant shares under the other Shadow Warrants of even date herewith issued
pursuant to the Purchase Agreement;
WHEREAS, all rights to acquire Warrant Shares shall become
exercisable only upon issuance of the Exercise Shares (an "Exercise Event"), to
the extent of 6.8% thereof (the "Exercise Percentage");
WHEREAS, in the event adjustments are made by their terms in
the number of Exercise Shares, similar and proportionate adjustments shall be
made in the number of Warrant Shares issued upon exercise of this Shadow Warrant
pursuant hereto; and
Page 146 of 241 Pages
<PAGE>
<PAGE>
WHEREAS, the parties desire that these intents and principles
be observed in the event of corporate changes or other events or conditions
which may occur which are not contemplated by this Shadow Warrant;
NOW THEREFORE, in consideration of the premises and covenants
and upon the terms and conditions hereinafter set forth, the parties agree as
follows:
1. Duration and Exercise of Shadow Warrant;
Termination; Limitation on Exercise; Payment of
Taxes.
1.1 Exercisability; Amount of Warrant Shares Subject to Shadow
Warrant. This Shadow Warrant shall be exercisable by the Warrantholder during
the Exercise Period (defined below) only upon the occurrence of an Exercise
Event and only to the extent of the Exercise Shares issued by the Company and
outstanding as a result of an Exercise Event, up to a maximum of 296,005 Warrant
Shares. The expiration, redemption, cancellation or other termination of a right
by a holder thereof to acquire Exercise Shares shall automatically reduce pro
tanto the amount of Exercise Shares and, proportionately, the Warrant Shares
hereunder. The Exercise Period (the "Exercise Period") shall commence on the
date hereof and shall terminate upon the exercise of this Shadow Warrant for the
full amount of Warrant Shares provided hereby as so reduced in accordance
herewith; provided, however, that if this Shadow Warrant shall not have been so
exercised in full it shall nevertheless expire at 5 P.M., local, New York time
on the later of the fifth anniversary of the date hereof or the first
anniversary of written notice to the Warrantholder of the issuance of the
maximum amount of Exercise Shares less any Exercise Shares the rights to which
have expired, been redeemed, canceled or otherwise terminated. On each occasion
on which an Exercise Event occurs, the Company shall give the holder of the
Shadow Warrant written notice thereof setting forth all material information
relating to the Exercise Event, including the number of Exercise Shares being
issued and the corresponding number of Warrant Shares for which the Shadow
Warrant is then exercisable and any adjustments thereto (the "Exercise Event
Notice"), within 30 days of the Company first obtaining notice of such Exercise
Event. The Warrantholder shall, at its option, exercise the Shadow Warrant for
the number of Warrant Shares set forth in the Exercise Event Notice, on or
before the earlier of the fifth anniversary of receipt of the Exercise Event
Notice or the expiration of the Exercise Period, after which time the Shadow
Warrant shall expire as to the Warrant Shares which were the subject of the
Exercise Event Notice. In the event the Shadow Warrant shall expire with respect
to all Warrant Shares for reasons other than its exercise as provided herein,
the Warrantholder agrees to surrender the Shadow Warrant to the Company on
demand.
1.2 Duration and Exercise of Shadow Warrant. This Shadow
Warrant may be exercised by the Shadow Warrantholder by (a) the surrender of
this Shadow Warrant to the Company, with a duly executed Exercise Form in a form
reasonably acceptable to the Company specifying the number of Warrant Shares to
be purchased, during normal business hours on any Business Day and (b) the
delivery of payment to the Company, for the account of the Company, by cash or
by certified or bank cashier's check, of the Exercise Price for the number of
Warrant Shares specified in the Exercise Form in lawful money of the United
States of America. The Company agrees that such Warrant Shares shall be deemed
to be issued to the Warrantholder as
Page 147 of 241 Pages
- 2 -
<PAGE>
<PAGE>
the record holder of such Warrant Shares as of the close of business on the date
on which this Shadow Warrant shall have been surrendered and payment made for
the Warrant Shares as aforesaid. A stock certificate or certificates for the
Warrant Shares specified in the Exercise Form shall be delivered to the
Warrantholder as promptly as practicable thereafter. The stock certificate or
certificates so delivered shall be in such denominations as may be reasonably
specified by the Warrantholder in the Exercise Form. If this Shadow Warrant
shall have been exercised only in part, the Company shall, at the time of
delivery of the stock certificate or certificates, redeliver to the
Warrantholder the Shadow Warrant containing a notation reflecting the partial
exercise thereof and evidencing the rights to purchase the remaining Warrant
Shares, which Shadow Warrant shall in all other respects be identical with this
Shadow Warrant. No adjustments shall be made on Warrant Shares issuable on the
exercise of this Shadow Warrant for any cash dividends paid or payable to
holders of record of Common Stock prior to the date as of which the
Warrantholder shall be deemed to be the record holder of such Warrant Shares.
1.3 Payment of Taxes. The issuance of certificates for Warrant
Shares shall be made without charge to the Warrantholder for any stock transfer
or other issuance tax in respect thereto; provided, however, that the
Warrantholder shall be required to pay any and all taxes which may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the then Warrantholder as reflected upon the books
of the Company.
1.4 Divisibility of Shadow Warrant. This Shadow Warrant is
divisible and may be divided into two or more Shadow Warrants, with such
amendments hereto as may appropriately effect the division thereof. Subject to
the restrictions on transfer referred to in Section 2, the Shadow Warrants may
be transferred of record in whole or in part as the then Warrantholder may
specify without charge to such Warrantholder (other than any applicable transfer
taxes).
2. Restrictions on Transfer; Restrictive Legends.
Except as otherwise permitted by this Section 2, each Shadow
Warrant shall (and each Shadow Warrant issued upon direct or indirect transfer
or in substitution for any Shadow Warrant pursuant to Section 1.4 or Section 4
shall) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS SHADOW WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT."
Notwithstanding the foregoing, the Warrantholder may require
the Company to issue a stock certificate for Warrant Shares without a Securities
Act legend, if either (i) such Warrant Shares have been registered for resale
under the Securities Act or (ii) the Warrantholder
Page 148 of 241 Pages
- 3 -
<PAGE>
<PAGE>
has received an opinion of counsel reasonably satisfactory to the Company that
such registration is not required with respect to such Warrant Shares.
3. Reservation and Registration of Warrant Shares, Etc.
The Company covenants and agrees that all Warrant Shares which
are issued upon the exercise of this Shadow Warrant will, upon issuance, be
validly issued, fully paid and nonassessable and free from all taxes, liens,
security interests, charges and other encumbrances with respect to the issue
thereof, other than taxes in respect of any transfer occurring contemporaneously
with such issue. The Company further covenants and agrees that, during the
period within which this Shadow Warrant may be exercised, the Company will at
all times have authorized and reserved, and keep available free from preemptive
rights, a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Shadow Warrant, and will at its
expense, upon each issuance of such shares, procure such listing thereof as then
may be required on all stock exchanges on which the Common Stock is then listed.
The Company further covenants and agrees that it will, from time to time, take
all such action as may be required to assure that the par value per share of the
Warrant Shares is at all times equal to or less than the then effective Exercise
Price.
4. Exchange, Loss or Destruction of Shadow Warrant.
Subject to the terms and conditions hereof, upon surrender of
this Shadow Warrant to the Company with a duly executed Assignment Form and
funds sufficient to pay any transfer tax, the Company shall, without charge,
execute and deliver a new Shadow Warrant of like tenor in the name of the
assignee named in such Assignment Form and this Shadow Warrant shall promptly be
canceled. Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Shadow Warrant and, in the
case of loss, theft or destruction, of such bond or indemnification as the
Company may reasonably require, and, in the case of such mutilation, upon
surrender and cancellation of this Shadow Warrant, the Company will execute and
deliver a new Shadow Warrant of like tenor. The term "Shadow Warrant" as used in
this Agreement shall be deemed to include the Shadow Warrant issued in
substitution or exchange for this Shadow Warrant.
5. Ownership of Shadow Warrant.
The Company may deem and treat the person in whose name this
Shadow Warrant is registered as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary, until
presentation of this Shadow Warrant for registration of transfer as provided in
Section 4.
6. Certain Adjustments.
6.1 The number of Warrant Shares purchasable upon the exercise
of this Shadow Warrant shall be subject to adjustment as follows:
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(a) Reorganization, Etc. If any capital
reorganization of the Company, or any reclassification of the
Common Stock, or any consolidation of the Company with or
merger of the Company with or into any other person or any
sale, lease or other transfer of all or substantially all of
the assets of the Company to any other person, shall be
effected in such a way that the holders of Common Stock shall
be entitled to receive stock, other securities or assets
(whether such stock, other securities or assets are issued or
distributed by the Company or another person) with respect to
or in exchange for Common Stock, then, upon exercise of this
Shadow Warrant the Warrantholder shall have the right to
receive as Warrant Shares the kind and amount of stock, other
securities or assets receivable upon such reorganization,
reclassification, consolidation, merger or sale, lease or
other transfer by a holder of the number of shares of Common
Stock that such Warrantholder would have been entitled to
receive upon exercise of this Shadow Warrant had this Shadow
Warrant been exercised immediately before such reorganization,
reclassification, consolidation, merger or sale, lease or
other transfer, subject to adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided
for in this Section 6.
(b) Increases or Decreases in Exercise Shares. If, at
any time after issuance of this Shadow Warrant, the number of
Exercise Shares shall have been increased or decreased
pursuant to the provisions of the Subject Warrants, then the
Warrant Shares shall likewise be increased or reduced on a
proportionate basis so that the Warrantholder shall be
entitled to exercise this Shadow Warrant for Warrant Shares in
an amount equal to the number of Exercise Shares, as increased
or decreased at the time of such increase or reduction.
(c) Equitable Adjustments. It is the intent of this
Section that the right of the Warrantholder on one hand to
exercise this Shadow Warrant for the appropriate amount of
Warrant Shares and the right of the Company on the other hand
to protect against dilution of the other securityholders of
the Company be preserved to the extent possible so that if an
event or condition occurs as to which the provisions of this
Article are not strictly applicable, or if strictly
applicable, would not fairly protect the right of the
Warrantholder or the right of the Company in accordance with
the essential intent and principles of this Shadow Warrant,
the Board of Directors of the Company in good faith shall be
authorized to make an adjustment in the application of such
provisions, in accordance with such essential intent and
principles so as to protect such rights to the extent
feasible.
(d) Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued to any Warrantholder in
connection with the exercise of this Shadow Warrant. Instead,
if any fractional shares of Common Stock would otherwise be
issuable to such Warrantholder, the Company will pay to such
Warrantholder a cash adjustment in respect of such fractional
interest in an
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amount equal to that fractional interest of the Closing Price
per share of Common Stock on the date of such exercise.
As used in this Section 6.1(d), the term "Closing
Price" shall mean the closing price per share of the Company's
Common Stock on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if
not listed or traded on any such exchange, on the National
Market System (the "National Market System") of the National
Association of Securities Dealers Automated Quotations System
("NASDAQ"), or if not listed or traded on any such exchange or
system, its last sales price on the Nasdaq Bulletin Board or,
if no sale occurred on such date, at the last "bid" price, or
if not listed or traded on any such exchange or system or
bulletin board, the average of the bid and asked price per
share on NASDAQ or, if such quotations are not available, the
fair market value per share of the Company's Common Stock as
reasonably determined by the Board of Directors of the
Company.
(e) Exercise Price Adjustment. Whenever the number of
Warrant Shares purchasable upon the exercise of the Shadow
Warrant is increased, as herein provided, the Exercise Price
payable for the exercise of this Shadow Warrant shall be
adjusted by multiplying such Exercise Price immediately prior
to such adjustment by a fraction, of which the numerator shall
be the number of Warrant Shares purchasable upon the exercise
of the Shadow Warrant immediately prior to such adjustment,
and of which the denominator shall be the number of Warrant
Shares purchasable immediately thereafter.
6.2 No Adjustment for Dividends. Except as provided in
Section 6.1, no adjustment in respect of any dividends shall be made during the
term of this Shadow Warrant or upon the exercise of this Shadow Warrant.
6.3 Notice of Adjustment. Whenever the number of Exercise
Shares is adjusted, as herein provided, the Company shall promptly mail by first
class, postage prepaid, to the Warrantholder, notice of such adjustment or
adjustments and a certificate of the chief financial officer of the Company
setting forth the number of Exercise Shares and Warrant Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
7. Certain Notifications.
7.1 Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive
any dividend or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any
other right, or
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(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any consolidation or merger involving the
Company and any other party or any transfer of all or
substantially all of the assets of the Company to any other
party, or
(c) any voluntary or involuntary dissolution
liquidation or winding-up of the Company,
the Company will mail to the Warrantholder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right and the amount and character of any such
dividend, distribution or right and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or other securities) shall be entitled to exchange their shares of Common
Stock (or other securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 20 days prior to the date herein specified in the foregoing
subdivision (i) or (ii).
7.2 Pre-Merger Notification. In the event that any exercise of
this Shadow Warrant by the Warrantholder shall require the filing of a
Pre-Merger Notification with the Federal Trade Commission and/or the Department
of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules promulgated thereunder (the "HSR Act"), each of the
Company and the Warrantholder shall use its respective reasonable efforts to
furnish, or cause to be furnished, such information and to promptly file, or
cause to be filed, such documents as may be required in order to comply with the
HSR Act and each such party will cooperate fully in order that all necessary
filings in connection therewith may be completed as soon as possible after the
determination by either party that such filing is required. In such event, each
of the Company and the Warrantholder shall use its respective reasonable efforts
to respond promptly to any request for additional information received in
connection with an HSR Act filing, and each party shall promptly notify the
other party of any such request for additional information.
8. Definitions. As used herein, unless the context
otherwise requires, the following terms have the following respective meanings:
Business Day: any day other than a Saturday, Sunday or a day
on which national banks are authorized by law to close in The City of New York,
State of New York.
Assignment Form: an Assignment Form in the form annexed hereto
as Exhibit B.
Closing Price: the meaning specified in Section 6.1(d).
Company: Geokinetics Inc., a Delaware corporation.
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Exchange Act: the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the time.
Exercise Form: an Exercise Form in the form annexed hereto as
Exhibit A.
Exercise Event: the meaning specified in the preambles.
Exercise Event Notice: the meaning specified in Section 1.1.
Exercise Percentage: the meaning specified in the preambles.
Exercise Period: the meaning specified in Section 1.1.
Exercise Price: the meaning specified on the cover of this
Shadow Warrant.
Exercise Shares: the meaning specified in the preambles.
NASDAQ: the meaning specified in Section 6.1(d).
National Market System: the meaning specified in Section
6.1(d).
Purchase Agreement: the meaning set forth on the cover page
of this Shadow Warrant.
SEC: the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act or the Exchange Act,
whichever is the relevant statute for the particular purpose.
Securities Act: the Securities Act of 1933, as amended, and
the rules and regulations of the commission thereunder, all as the same shall be
in effect at the time.
Series A Preferred Stock: means that series of Preferred Stock
of the Company created and designated pursuant to the Certificate of Designation
of Series A Convertible Preferred Stock of the Company, in the form of Exhibit A
to the Purchase Agreement.
Shadow Warrant: the meaning specified in the preambles hereto.
Warrantholder: the meaning specified on the cover of this
Shadow Warrant.
Warrant Shares: the meaning specified on the cover of this
Shadow Warrant and in the preambles.
9. Miscellaneous.
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9.1 Entire Agreement. This Shadow Warrant constitutes
the entire agreement between the Company and the Warrantholder with respect to
the Shadow Warrant.
9.2 Binding Effects; Benefits. This Shadow Warrant shall inure
to the benefit of and shall be binding upon the Company and the Warrantholder
and their respective heirs, legal representatives, successors and assigns.
Nothing in this Shadow Warrant, expressed or implied, is intended to or shall
confer on any person other than the Company and the Warrantholder, or their
respective heirs, legal representatives, successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this Shadow Warrant.
9.3 Amendments and Waivers. This Shadow Warrant may not be
modified or amended except by an instrument or instruments in writing signed by
(i) the Company and (ii) the holder of this Shadow Warrant. Either the Company
or the holder of this Shadow Warrant may, by an instrument in writing, waive
compliance by the other party with any term or provision of this Shadow Warrant
on the part of such other party hereto to be performed or complied with. The
waiver by any such party of a breach of any term or provision of this Shadow
Warrant shall not be construed as a waiver of any subsequent breach.
9.4 Section and Other Headings. The section and other headings
contained in this Shadow Warrant are for reference purposes only and shall not
be deemed to be a part of this Shadow Warrant or to affect the meaning or
interpretation of this Shadow Warrant.
9.5 Further Assurances. Each of the Company and the
Warrantholder shall do and perform all such further acts and things and execute
and deliver all such other certificates, instruments and documents as the
Company or the Warrantholder may, at any time and from time to time, reasonably
request in connection with the performance of any of the provisions of this
Shadow Warrant.
9.6 Notices. All notices and other communications required or
permitted to be given under this Shadow Warrant shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by United States
mail, postage prepaid, to the parties hereto at the following addresses or to
such other address as any party hereto shall hereafter specify by notice to the
other party hereto:
(a) if to the Company, addressed to:
Geokinetics Inc.
Marathon Oil Tower
5555 San Felipe, Suite 780,
Houston, Texas 77056
Telecopier No.: (713) 850-7330
Attention: Chairman
(b) if to the Warrantholder, addressed to the
address of such Warrantholder appearing on the books of the Company.
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Except as otherwise provided herein, all such notices and communications shall
be deemed to have been received on the date of delivery thereof, if delivered
personally, or on the third Business Day after the mailing thereof.
9.7 Separability. Any term or provision of this Shadow Warrant
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the terms and
provisions of this Shadow Warrant or affecting the validity or enforceability of
any of the terms or provisions of this Shadow Warrant in any other jurisdiction.
9.8 Governing Law. This Shadow Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to such agreements made and to be performed entirely within such
State.
9.9 No Rights or Liabilities as Stockholder. Nothing contained
in this Shadow Warrant shall be determined as conferring upon the Warrantholder
any rights as a stockholder of the company or as imposing any liabilities on the
Warrantholder to purchase any securities, whether such liabilities are asserted
by the Company or by creditors or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the parties hereto have caused this Shadow
Warrant to be signed by their duly authorized officers.
GEOKINETICS INC.
By: /s/ JAY D. HABER
---------------------------------
Name: Jay D. Haber
Title: President
/s/ WILLIAM R. ZIEGLER
--------------------------------
WILLIAM R. ZIEGLER
Dated: July 18, 1997
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Exhibit A
THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON EXERCISE OF THIS SHADOW WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SUCH ACT.
EXERCISE FORM
(To be executed upon exercise of this Shadow Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase ____________ of the Warrant Shares and
herewith tenders payment for such Warrant Shares to the order of Geokinetics
Inc. in the amount of $________ in accordance with the terms of this Shadow
Warrant. The undersigned requests that a certificate for such Warrant Shares be
registered in the name of the undersigned and that such certificate be delivered
to the undersigned's address below.
The undersigned represents that it is acquiring such Warrant Shares for
its own account for investment and not with a view to or for sale in connection
with any distribution thereof (subject, however, to any requirement of law that
the disposition thereof shall at all times be within its control).
Dated: ______________________
Signature: _____________________________________
(Print Name)
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- --------------------------
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Exhibit B
THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON EXERCISE OF THIS SHADOW WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SUCH ACT.
FORM OF ASSIGNMENT
For value received, the undersigned registered holder of the within
Shadow Warrant hereby sells, assigns and transfers unto
________________________________ the rights represented by such Shadow Warrant
to purchase initially up to 296,005 shares of Common Stock of Geokinetics Inc.
to which such Shadow Warrant relates and all other rights of the Warrantholder
under the within Shadow Warrant, and appoints ________________________ Attorney
to make such transfer on the books of Geokinetics Inc. maintained for such
purpose, with full power of substitution in the premises.
Dated: ______________________
Signature: _____________________________________
(Print Name)
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- --------------------------
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EXHIBIT VI(d)
NEW BLACKHAWK SHADOW WARRANT
THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE
OF THIS SHADOW WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
GEOKINETICS INC.
SHADOW WARRANT
This certifies that, for $10.00 and other good and valuable
consideration, Geokinetics Inc, a Delaware corporation (the "Company"), grants
to Blackhawk Investors, L.L.C., a Delaware limited liability company, or
permitted registered assigns (the "Warrantholder"), the right to subscribe for
and purchase from the Company 1,100,255 validly issued, fully paid and
nonassessable shares (the "Warrant Shares") of the Company's Common Stock, par
value $0.20 per share (the "Common Stock"), at the purchase price per share of
$0.20 (the "Exercise Price"), exercisable at the times permitted herein, all
subject to the terms, conditions and adjustments set forth in this Shadow
Warrant. This Shadow Warrant is the warrant referred to as the New Blackhawk
Shadow Warrant in that certain Securities Purchase Agreement dated as of July
24, 1997 (the "Purchase Agreement"), between the Company and the Warrantholder.
- ------------------------------------------------------------------------------
Dated: New York, New York
September 30, 1997
Page 158 of 241 Pages
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THIS IS A SHADOW WARRANT AGREEMENT (the "Shadow Warrant")
dated as of September 30, 1997, by and between GEOKINETICS INC., a Delaware
corporation, and BLACKHAWK INVESTORS, L.L.C., a Delaware limited liability
company.
WHEREAS, the capitalized terms used herein have the meaning
given to such terms in Section 8; and
WHEREAS, Warrantholder, (i) simultaneously with the
acquisition of this Shadow Warrant from the Company, Blackhawk is acquiring from
the Company 100,000 shares of Series B Preferred Stock of the Company
(convertible into an aggregate of 1,333,333 shares of Common Stock of the
Company) pursuant to the terms of the Purchase Agreement and (ii) on July 18,
1997, pursuant to the terms of a certain Securities Purchase and Exchange
Agreement (the "Initial Purchase Agreement") among the Company, the
Warrantholder and the Holders (as defined therein) acquired from the Company (A)
5,041,667 shares of Common Stock of the Company, (B) 171,875 shares of Series A
Preferred Stock of the Company (convertible into an aggregate of 2,291,666
shares of Common Stock of the Company), which securities collectively constitute
approximately 60.7% of the 14,268,621 shares of Common Stock of the Company that
would be outstanding upon the consummation of the Warrantholder's acquisition of
such securities from the Company (assuming the conversion of the Series A
Preferred Stock of the Company held by the Warrantholder and the Holders and the
conversion of the Series B Preferred Stock of the Company into shares of Common
Stock of the Company) (but excluding the 400,000 shares of Common Stock that
were issued in connection with the Company's acquisition of the stock of
Signature Geophysical Services, Inc. contemporaneously with the Warrantholder's
acquisition of securities pursuant to the Initial Purchase Agreement) and (C) a
Shadow Warrant (the "Initial Blackhawk Shadow Warrant") to acquire up to
6,512,095 shares (subject to adjustment) of Common Stock of the Company;
WHEREAS, immediately prior to the consummation of the
transactions contemplated by the Initial Purchase Agreement, the Company had the
obligation to issue up to 2,076,207 shares of Common Stock pursuant to issued
and outstanding warrants (the "Subject Warrants") of the Company (other than
those certain warrants of the Company issued in April of 1997 in the names of
the Holders pursuant to a certain bridge financing transaction), and upon the
consummation of the transactions contemplated by the Initial Purchase Agreement
(inclusive of the conversion of the shares of Series A Preferred Stock into
shares of Common Stock), the number of shares issuable pursuant to the Subject
Warrants will be increased to 4,354,128 shares of its Common Stock (the
"Exercise Shares");
WHEREAS, the parties desire that in the event of the exercise
by the holders of the Subject Warrants of their conversion rights, resulting in
the issuance of the Exercise Shares, or a portion thereof, the Warrantholder
shall have the right to acquire a number of shares of Common Stock equal to
25.3% of the number of Exercise Shares issued and outstanding, up to a maximum
of 1,100,255 shares of Common Stock (the "Warrant Shares"), which equals
approximately 8.8% of the sum of (i) the maximum amount of Exercise Shares and
(ii) the maximum amount of Warrant Shares hereunder and the maximum number of
warrant shares under the other Shadow Warrants dated July 18, 1997 issued
pursuant to the Initial Purchase
Page 159 of 241 Pages
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Agreement (inclusive of the Initial Blackhawk Shadow Warrant)(collectively, the
"Other Shadow Warrants");
WHEREAS, (i) the maximum number of Warrant Shares hereunder,
together with the maximum number of warrant shares issuable under the Initial
Blackhawk Shadow Warrant, equals approximately 60.6% of the sum of (A) the
maximum amount of Exercise Shares and (B) the maximum amount of Warrant Shares
hereunder and the maximum number of warrant shares under the Other Shadow
Warrants (inclusive of the Initial Blackhawk Shadow Warrant) and (ii) the
maximum number of Warrant Shares hereunder, together with the maximum number of
warrant shares issuable under the Other Shadow Warrants (inclusive of the
Initial Blackhawk Shadow Warrant), equals approximately 65.3% of the sum of (A)
the maximum amount of Exercise Shares and (B) the maximum amount of Warrant
Shares hereunder and the maximum number of warrant shares under the Other Shadow
Warrants (inclusive of the Initial Blackhawk Shadow Warrant);
WHEREAS, all rights to acquire Warrant Shares shall become
exercisable only upon issuance of the Exercise Shares (an "Exercise Event"), to
the extent of 25.3% thereof (the "Exercise Percentage");
WHEREAS, in the event adjustments are made by their terms in
the number of Exercise Shares, similar and proportionate adjustments shall be
made in the number of Warrant Shares issued upon exercise of this Shadow Warrant
pursuant hereto; and
WHEREAS, the parties desire that these intents and principles
be observed in the event of corporate changes or other events or conditions
which may occur which are not contemplated by this Shadow Warrant;
NOW THEREFORE, in consideration of the premises and covenants
and upon the terms and conditions hereinafter set forth, the parties agree as
follows:
1. Duration and Exercise of Shadow Warrant;
Termination; Limitation on Exercise; Payment of
Taxes.
1.1 Exercisability; Amount of Warrant Shares Subject to Shadow
Warrant.
This Shadow Warrant shall be exercisable by the Warrantholder
during the Exercise Period (defined below) only upon the occurrence of an
Exercise Event and only to the extent of the Exercise Shares issued by the
Company and outstanding as a result of an Exercise Event, up to a maximum of
1,100,255 Warrant Shares. The expiration, redemption, cancellation or other
termination of a right by a holder thereof to acquire Exercise Shares shall
automatically reduce pro tanto the amount of Exercise Shares and,
proportionately, the Warrant Shares hereunder. The Exercise Period (the
"Exercise Period") shall commence on the date hereof and shall terminate upon
the exercise of this Shadow Warrant for the full amount of Warrant Shares
provided hereby as so reduced in accordance herewith; provided, however, that
if this Shadow Warrant shall not have been so exercised in full it shall
nevertheless expire at 5 P.M., local, New
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York time on the later of the fifth anniversary of the date hereof or the first
anniversary of written notice to the Warrantholder of the issuance of the
maximum amount of Exercise Shares less any Exercise Shares the rights to which
have expired, been redeemed, canceled or otherwise terminated. On each occasion
on which an Exercise Event occurs, the Company shall give the holder of the
Shadow Warrant written notice thereof setting forth all material information
relating to the Exercise Event, including the number of Exercise Shares being
issued and the corresponding number of Warrant Shares for which the Shadow
Warrant is then exercisable and any adjustments thereto (the "Exercise Event
Notice"), within 30 days of the Company first obtaining notice of such Exercise
Event. The Warrantholder shall, at its option, exercise the Shadow Warrant for
the number of Warrant Shares set forth in the Exercise Event Notice, on or
before the earlier of the fifth anniversary of receipt of the Exercise Event
Notice or the expiration of the Exercise Period, after which time the Shadow
Warrant shall expire as to the Warrant Shares which were the subject of the
Exercise Event Notice. In the event the Shadow Warrant shall expire with respect
to all Warrant Shares for reasons other than its exercise as provided herein,
the Warrantholder agrees to surrender the Shadow Warrant to the Company on
demand.
1.2 Duration and Exercise of Shadow Warrant. This Shadow
Warrant may be exercised by the Shadow Warrantholder by (a) the surrender of
this Shadow Warrant to the Company, with a duly executed Exercise Form in a form
reasonably acceptable to the Company specifying the number of Warrant Shares to
be purchased, during normal business hours on any Business Day and (b) the
delivery of payment to the Company, for the account of the Company, by cash or
by certified or bank cashier's check, of the Exercise Price for the number of
Warrant Shares specified in the Exercise Form in lawful money of the United
States of America. The Company agrees that such Warrant Shares shall be deemed
to be issued to the Warrantholder as the record holder of such Warrant Shares as
of the close of business on the date on which this Shadow Warrant shall have
been surrendered and payment made for the Warrant Shares as aforesaid. A stock
certificate or certificates for the Warrant Shares specified in the Exercise
Form shall be delivered to the Warrantholder as promptly as practicable
thereafter. The stock certificate or certificates so delivered shall be in such
denominations as may be reasonably specified by the Warrantholder in the
Exercise Form. If this Shadow Warrant shall have been exercised only in part,
the Company shall, at the time of delivery of the stock certificate or
certificates, redeliver to the Warrantholder the Shadow Warrant containing a
notation reflecting the partial exercise thereof and evidencing the rights to
purchase the remaining Warrant Shares, which Shadow Warrant shall in all other
respects be identical with this Shadow Warrant. No adjustments shall be made on
Warrant Shares issuable on the exercise of this Shadow Warrant for any cash
dividends paid or payable to holders of record of Common Stock prior to the date
as of which the Warrantholder shall be deemed to be the record holder of such
Warrant Shares.
1.3 Payment of Taxes. The issuance of certificates for Warrant
Shares shall be made without charge to the Warrantholder for any stock transfer
or other issuance tax in respect thereto; provided, however, that the
Warrantholder shall be required to pay any and all taxes which may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the then Warrantholder as reflected upon the books
of the Company.
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1.4 Divisibility of Shadow Warrant. This Shadow Warrant is
divisible and may be divided into two or more Shadow Warrants, with such
amendments hereto as may appropriately effect the division thereof. Subject to
the restrictions on transfer referred to in Section 2, the Shadow Warrants may
be transferred of record in whole or in part as the then Warrantholder may
specify without charge to such Warrantholder (other than any applicable transfer
taxes).
2. Restrictions on Transfer; Restrictive Legends.
Except as otherwise permitted by this Section 2, each Shadow
Warrant shall (and each Shadow Warrant issued upon direct or indirect transfer
or in substitution for any Shadow Warrant pursuant to Section 1.4 or Section 4
shall) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS SHADOW WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT."
Notwithstanding the foregoing, the Warrantholder may require
the Company to issue a stock certificate for Warrant Shares without a Securities
Act legend, if either (i) such Warrant Shares have been registered for resale
under the Securities Act or (ii) the Warrantholder has received an opinion of
counsel reasonably satisfactory to the Company that such registration is not
required with respect to such Warrant Shares.
3. Reservation and Registration of Warrant Shares, Etc.
The Company covenants and agrees that all Warrant Shares which
are issued upon the exercise of this Shadow Warrant will, upon issuance, be
validly issued, fully paid and nonassessable and free from all taxes, liens,
security interests, charges and other encumbrances with respect to the issue
thereof, other than taxes in respect of any transfer occurring contemporaneously
with such issue. The Company further covenants and agrees that, during the
period within which this Shadow Warrant may be exercised, the Company will at
all times have authorized and reserved, and keep available free from preemptive
rights, a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Shadow Warrant, and will at its
expense, upon each issuance of such shares, procure such listing thereof as then
may be required on all stock exchanges on which the Common Stock is then listed.
The Company further covenants and agrees that it will, from time to time, take
all such action as may be required to assure that the par value per share of the
Warrant Shares is at all times equal to or less than the then effective Exercise
Price.
Page 162 of 241 Pages
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4. Exchange, Loss or Destruction of Shadow Warrant.
Subject to the terms and conditions hereof, upon surrender of
this Shadow Warrant to the Company with a duly executed Assignment Form and
funds sufficient to pay any transfer tax, the Company shall, without charge,
execute and deliver a new Shadow Warrant of like tenor in the name of the
assignee named in such Assignment Form and this Shadow Warrant shall promptly be
canceled. Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Shadow Warrant and, in the
case of loss, theft or destruction, of such bond or indemnification as the
Company may reasonably require, and, in the case of such mutilation, upon
surrender and cancellation of this Shadow Warrant, the Company will execute and
deliver a new Shadow Warrant of like tenor. The term "Shadow Warrant" as used in
this Agreement shall be deemed to include the Shadow Warrant issued in
substitution or exchange for this Shadow Warrant.
5. Ownership of Shadow Warrant.
The Company may deem and treat the person in whose name this
Shadow Warrant is registered as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary, until
presentation of this Shadow Warrant for registration of transfer as provided in
Section 4.
6. Certain Adjustments.
6.1 The number of Warrant Shares purchasable upon the exercise
of this Shadow Warrant shall be subject to adjustment as follows:
(a) Reorganization, Etc. If any capital
reorganization of the Company, or any reclassification of the
Common Stock, or any consolidation of the Company with or
merger of the Company with or into any other person or any
sale, lease or other transfer of all or substantially all of
the assets of the Company to any other person, shall be
effected in such a way that the holders of Common Stock shall
be entitled to receive stock, other securities or assets
(whether such stock, other securities or assets are issued or
distributed by the Company or another person) with respect to
or in exchange for Common Stock, then, upon exercise of this
Shadow Warrant the Warrantholder shall have the right to
receive as Warrant Shares the kind and amount of stock, other
securities or assets receivable upon such reorganization,
reclassification, consolidation, merger or sale, lease or
other transfer by a holder of the number of shares of Common
Stock that such Warrantholder would have been entitled to
receive upon exercise of this Shadow Warrant had this Shadow
Warrant been exercised immediately before such reorganization,
reclassification, consolidation, merger or sale, lease or
other transfer, subject to adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided
for in this Section 6.
Page 163 of 241 Pages
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(b) Increases or Decreases in Exercise Shares. If, at
any time after issuance of this Shadow Warrant, the number of
Exercise Shares shall have been increased or decreased
pursuant to the provisions of the Subject Warrants, then the
Warrant Shares shall likewise be increased or reduced on a
proportionate basis so that the Warrantholder shall be
entitled to exercise this Shadow Warrant for Warrant Shares in
an amount equal to the number of Exercise Shares, as increased
or decreased at the time of such increase or reduction.
(c) Equitable Adjustments. It is the intent of this
Section that the right of the Warrantholder on one hand to
exercise this Shadow Warrant for the appropriate amount of
Warrant Shares and the right of the Company on the other hand
to protect against dilution of the other securityholders of
the Company be preserved to the extent possible so that if an
event or condition occurs as to which the provisions of this
Article are not strictly applicable, or if strictly
applicable, would not fairly protect the right of the
Warrantholder or the right of the Company in accordance with
the essential intent and principles of this Shadow Warrant,
the Board of Directors of the Company in good faith shall be
authorized to make an adjustment in the application of such
provisions, in accordance with such essential intent and
principles so as to protect such rights to the extent
feasible.
(d) Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued to any Warrantholder in
connection with the exercise of this Shadow Warrant. Instead,
if any fractional shares of Common Stock would otherwise be
issuable to such Warrantholder, the Company will pay to such
Warrantholder a cash adjustment in respect of such fractional
interest in an amount equal to that fractional interest of the
Closing Price per share of Common Stock on the date of such
exercise.
As used in this Section 6.1(d), the term "Closing
Price" shall mean the closing price per share of the Company's
Common Stock on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if
not listed or traded on any such exchange, on the National
Market System (the "National Market System") of the National
Association of Securities Dealers Automated Quotations System
("NASDAQ"), or if not listed or traded on any such exchange or
system, its last sales price on the Nasdaq Bulletin Board or,
if no sale occurred on such date, at the last "bid" price, or
if not listed or traded on any such exchange or system or
bulletin board, the average of the bid and asked price per
share on NASDAQ or, if such quotations are not available, the
fair market value per share of the Company's Common Stock as
reasonably determined by the Board of Directors of the
Company.
(e) Exercise Price Adjustment. Whenever the
number of Warrant Shares purchasable upon the exercise of the
Shadow Warrant is increased, as herein provided, the Exercise
Price payable for the exercise of this Shadow
Page 164 of 241 Pages
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Warrant shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which
the numerator shall be the number of Warrant Shares
purchasable upon the exercise of the Shadow Warrant
immediately prior to such adjustment, and of which the
denominator shall be the number of Warrant Shares purchasable
immediately thereafter.
6.2 No Adjustment for Dividends. Except as provided in
Section 6.1, no adjustment in respect of any dividends shall be made during the
term of this Shadow Warrant or upon the exercise of this Shadow Warrant.
6.3 Notice of Adjustment. Whenever the number of Exercise
Shares is adjusted, as herein provided, the Company shall promptly mail by first
class, postage prepaid, to the Warrantholder, notice of such adjustment or
adjustments and a certificate of the chief financial officer of the Company
setting forth the number of Exercise Shares and Warrant Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
7. Certain Notifications.
7.1 Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive
any dividend or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any
other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any consolidation or merger involving the
Company and any other party or any transfer of all or
substantially all of the assets of the Company to any other
party, or
(c) any voluntary or involuntary dissolution
liquidation or winding-up of the Company,
the Company will mail to the Warrantholder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right and the amount and character of any such
dividend, distribution or right and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or other securities) shall be entitled to exchange their shares of Common
Stock (or other securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 20 days prior to the date herein specified in the foregoing
subdivision (i) or (ii).
Page 165 of 241 Pages
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7.2 Pre-Merger Notification. In the event that any exercise of
this Shadow Warrant by the Warrantholder shall require the filing of a
Pre-Merger Notification with the Federal Trade Commission and/or the Department
of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules promulgated thereunder (the "HSR Act"), each of the
Company and the Warrantholder shall use its respective reasonable efforts to
furnish, or cause to be furnished, such information and to promptly file, or
cause to be filed, such documents as may be required in order to comply with the
HSR Act and each such party will cooperate fully in order that all necessary
filings in connection therewith may be completed as soon as possible after the
determination by either party that such filing is required. In such event, each
of the Company and the Warrantholder shall use its respective reasonable efforts
to respond promptly to any request for additional information received in
connection with an HSR Act filing, and each party shall promptly notify the
other party of any such request for additional information.
8. Definitions. As used herein, unless the context
otherwise requires, the following terms have the following respective meanings:
Business Day: any day other than a Saturday, Sunday or a day
on which national banks are authorized by law to close in The City of New York,
State of New York.
Assignment Form: an Assignment Form in the form annexed hereto
as Exhibit B.
Closing Price: the meaning specified in Section 6.1(d).
Company: Geokinetics Inc., a Delaware corporation.
Exchange Act: the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the time.
Exercise Form: an Exercise Form in the form annexed hereto as
Exhibit A.
Exercise Event: the meaning specified in the preambles.
Exercise Event Notice: the meaning specified in Section 1.1.
Exercise Percentage: the meaning specified in the preambles.
Exercise Period: the meaning specified in Section 1.1.
Exercise Price: the meaning specified on the cover of this
Shadow Warrant.
Exercise Shares: the meaning specified in the preambles.
Initial Blackhawk Shadow Warrant: the meaning specified in
the preambles.
Page 166 of 241 Pages
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Initial Purchase Agreement: the meaning specified in
the preambles.
NASDAQ: the meaning specified in Section 6.1(d).
National Market System: the meaning specified in
Section 6.1(d).
Other Shadow Warrants: the meaning specified in the
preambles.
Purchase Agreement: the meaning set forth on the cover page
of this Shadow Warrant.
SEC: the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act or the Exchange Act,
whichever is the relevant statute for the particular purpose.
Securities Act: the Securities Act of 1933, as amended, and
the rules and regulations of the commission thereunder, all as the same shall be
in effect at the time.
Series A Preferred Stock: means that series of Preferred Stock
of the Company created and designated pursuant to the Certificate of Designation
of Series A Convertible Preferred Stock of the Company, in the form of Exhibit A
to the Initial Purchase Agreement.
Series B Preferred Stock: means that series of Preferred Stock
of the Company created and designated pursuant to the Certificate of Designation
of Series B Convertible Preferred Stock of the Company, in the form of Exhibit B
to the Purchase Agreement.
Shadow Warrant: the meaning specified in the preambles hereto.
Warrantholder: the meaning specified on the cover of this
Shadow Warrant.
Warrant Shares: the meaning specified on the cover of this
Shadow Warrant and in the preambles.
9. Miscellaneous.
9.1 Entire Agreement. This Shadow Warrant, together with
Section 5.2 of the Purchase Agreement, constitutes the entire agreement between
the Company and the Warrantholder with respect to this Shadow Warrant.
9.2 Binding Effects; Benefits. This Shadow Warrant shall inure
to the benefit of and shall be binding upon the Company and the Warrantholder
and their respective heirs, legal representatives, successors and assigns.
Nothing in this Shadow Warrant, expressed or implied, is intended to or shall
confer on any person other than the Company and the Warrantholder, or their
respective heirs, legal representatives, successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this Shadow Warrant.
Page 167 of 241 Pages
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9.3 Amendments and Waivers. This Shadow Warrant may not be
modified or amended except by an instrument or instruments in writing signed by
(i) the Company and (ii) the holder of this Shadow Warrant. Either the Company
or the holder of this Shadow Warrant may, by an instrument in writing, waive
compliance by the other party with any term or provision of this Shadow Warrant
on the part of such other party hereto to be performed or complied with. The
waiver by any such party of a breach of any term or provision of this Shadow
Warrant shall not be construed as a waiver of any subsequent breach.
9.4 Section and Other Headings. The section and other headings
contained in this Shadow Warrant are for reference purposes only and shall not
be deemed to be a part of this Shadow Warrant or to affect the meaning or
interpretation of this Shadow Warrant.
9.5 Further Assurances. Each of the Company and the
Warrantholder shall do and perform all such further acts and things and execute
and deliver all such other certificates, instruments and documents as the
Company or the Warrantholder may, at any time and from time to time, reasonably
request in connection with the performance of any of the provisions of this
Shadow Warrant.
9.6 Notices. All notices and other communications required or
permitted to be given under this Shadow Warrant shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by United States
mail, postage prepaid, to the parties hereto at the following addresses or to
such other address as any party hereto shall hereafter specify by notice to the
other party hereto:
(a) if to the Company, addressed to:
Geokinetics Inc.
Marathon Oil Tower
5555 San Felipe, Suite 780,
Houston, Texas 77056
Telecopier No.: (713) 850-7330
Attention: Chairman
(b) if to the Warrantholder, addressed to the
address of such Warrantholder appearing on the books of the
Company.
Except as otherwise provided herein, all such notices and communications shall
be deemed to have been received on the date of delivery thereof, if delivered
personally, or on the third Business Day after the mailing thereof.
9.7 Separability. Any term or provision of this Shadow Warrant
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the terms
Page 168 of 241 Pages
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and provisions of this Shadow Warrant or affecting the validity or
enforceability of any of the terms or provisions of this Shadow Warrant in any
other jurisdiction.
9.8 Governing Law. This Shadow Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to such agreements made and to be performed entirely within such
State.
9.9 No Rights or Liabilities as Stockholder. Nothing contained
in this Shadow Warrant shall be determined as conferring upon the Warrantholder
any rights as a stockholder of the company or as imposing any liabilities on the
Warrantholder to purchase any securities, whether such liabilities are asserted
by the Company or by creditors or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the parties hereto have caused this Shadow
Warrant to be signed by their duly authorized officers.
GEOKINETICS INC.
By: /s/ JAY D. HABER
____________________________________
Name: Jay D. Haber
Title: Chairman & Chief Executive
Officer
BLACKHAWK INVESTORS, L.L.C.
By: Blackhawk Capital Partners, Managing
Member
By:/s/ WILLIAM R. ZIEGLER
____________________________________
William R. Ziegler, Partner
Dated: September 30, 1997
Page 169 of 241 Pages
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Exhibit A
THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON EXERCISE OF THIS SHADOW WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SUCH ACT.
EXERCISE FORM
(To be executed upon exercise of this Shadow Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase ____________ of the Warrant Shares and
herewith tenders payment for such Warrant Shares to the order of Geokinetics
Inc. in the amount of $________ in accordance with the terms of this Shadow
Warrant. The undersigned requests that a certificate for such Warrant Shares be
registered in the name of the undersigned and that such certificate be delivered
to the undersigned's address below.
The undersigned represents that it is acquiring such Warrant Shares for
its own account for investment and not with a view to or for sale in connection
with any distribution thereof (subject, however, to any requirement of law that
the disposition thereof shall at all times be within its control).
Dated: ______________________
Signature: _____________________________________
(Print Name)
_____________________________________
(Street Address)
_____________________________________
(City) (State) (Zip Code)
Signed in the presence of:
__________________________
Page 170 of 241 Pages
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Exhibit B
THIS SHADOW WARRANT AND ANY SHARES ACQUIRED UPON EXERCISE OF THIS SHADOW WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SUCH ACT.
FORM OF ASSIGNMENT
For value received, the undersigned registered holder of the within
Shadow Warrant hereby sells, assigns and transfers unto _______________________
________________________________ the rights represented by such Shadow Warrant
to purchase initially up to 1,100,255 shares of Common Stock of Geokinetics Inc.
to which such Shadow Warrant relates and all other rights of the Warrantholder
under the within Shadow Warrant, and appoints ________________________ Attorney
to make such transfer on the books of Geokinetics Inc. maintained for such
purpose, with full power of substitution in the premises.
Dated: ______________________
Signature: _____________________________________
(Print Name)
_____________________________________
(Street Address)
______________________________________
(City) (State) (Zip Code)
Signed in the presence of:
___________________________
Page 171 of 241 Pages
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EXHIBIT VII
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is made effective as of
July 18, 1997, by and between Geokinetics Inc., a Delaware corporation (the
"Corporation") and William R. Ziegler, an individual resident of the State of
New York ("Optionee").
RECITALS:
WHEREAS, Optionee is currently a consultant to the Corporation pursuant
to the terms of the Consulting and Engagement Agreement dated as of April 25,
1997, between the Corporation and Optionee ("Consulting Agreement"); and
WHEREAS, the Corporation desires to grant Optionee a non-qualified
stock option to purchase shares of Common Stock in accordance with the terms of
the Consulting Agreement as partial compensation for Optionee's contributions
and continued services as a consultant to the Corporation.
NOW, THEREFORE, in consideration of the recitals and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Corporation and Optionee agree as follows:
1. GRANT OF STOCK OPTION. The Corporation hereby grants an option
("Option"') to Optionee, under the terms and conditions hereinafter specified,
to acquire an aggregate of 50,000 shares of Common Stock (the "Option Shares")
pursuant to the terms of this Agreement.
2. PURCHASE PRICE. The purchase price per share of the Option Shares
(the "Purchase Price") shall be equal to $0.75 per share and shall be paid to
the Corporation in cash or a combination of cash and Common Stock.
3. EXERCISE OF OPTION.
(a) The Option is fully vested as of the date hereof and may be
exercised, in whole or in part, at any time or times during the Term (as defined
below).
(b) The Option shall be exercised by giving written notice to the
Corporation pursuant to Section 12 of this Agreement. Such notice shall state
the number of Option Shares with respect to which the Option is being exercised
and shall specify a date which shall not be less than fifteen (15) nor more than
thirty (30) days after the date of such notice, as the date on which the
purchase of the specified Option Shares will be completed. If any law or
regulation requires the Corporation to take any action with respect to the
Option Shares specified in such notice prior to their transfer, then the date of
the payment for and delivery of such Option Shares shall be extended for the
period necessary to take such action. In the event of any failure by Optionee to
be prepared to complete the purchase of the number of Option Shares specified in
such notice on the date set
Page 172 of 241 Pages
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forth therein, as the same may be extended as provided above, the exercise of
the Option shall become void and the Corporation may terminate the Option with
respect to the number of shares specified in such notice.
(c) In connection with the purchase of Option Shares, the Optionee
will acknowledge that (i) the purchase of the Option Shares will not be
registered under the Securities Act of 1933, as amended ("1933 Act"), or
applicable state securities laws pursuant to exemptions therefrom, (ii) the
Option Shares are not being acquired with a view to the distribution thereof, as
defined in the 1933 Act, and (iii) any subsequent sale of the Option Shares will
be in connection with a transaction registered under applicable securities laws
or pursuant to an exemption from registration. In addition, the Optionee shall
represent to the Corporation that he has had available for review all
information, books and records, and other material of the Corporation relating
to its business and a description of the capital stock of the Corporation as he
has requested and has had the opportunity to ask questions and receive
satisfactory answers from the Corporation with respect to the business and
condition of the Corporation and its capital stock.
(d) The purchase of the Option Shares shall take place at the
principal offices of the Corporation upon delivery of the notice of exercise, at
which time the total Purchase Price for the Option Shares shall be paid in full
by any of the following methods or any combination of the following methods:
(i) In cash or by certified or cashier's check payable to the
Corporation;
(ii) The delivery to the Corporation of certificates representing
the number of shares of Common Stock then owned by the
Optionee, the fair market value of which equals the Purchase
Price of the Option Shares purchased pursuant to the Option,
properly endorsed for transfer to the Corporation; provided,
however, that no Option may be exercised by delivery to the
Corporation of certificates representing Common Stock,
unless such Common Stock has been held by the Optionee for
more than six months. (For purposes of this Agreement, the
fair market value of any shares of Common Stock delivered in
payment of the Purchase Price upon exercise of the Option
shall be the fair market value as of the exercise date, and
the exercise date shall be the day of delivery of the
certificates for the Common Stock used as payment of the
Purchase Price); or
(iii) By delivery to the Corporation of a properly executed notice
of exercise together with irrevocable instructions to a
broker to deliver promptly to the Corporation, in payment of
the Purchase Price, the amount of the cash proceeds of the
sale of shares of Common Stock or a loan from the broker to
the Optionee sufficient, in each case, to pay the Purchase
Price, and in a form satisfactory to the Secretary of the
Corporation.
Upon such notice to the Secretary of the Corporation and payment of the
total Purchase Price, the exercise of the Option shall be deemed to be
effective, and a properly executed certificate or
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<PAGE>
certificates representing the Option Shares so purchased shall be issued by the
Corporation and delivered to the Optionee.
4. TERM AND TERMINATION OF OPTION. The term of the Option (the "Term")
shall commence as of the effective date hereof and shall expire upon the earlier
of (a) the expiration of the five-year period commencing as of the effective
date hereof or (b) that date which is ninety (90) days after the date Optionee
ceases to serve as a member of the Board of Directors of the Corporation or a
consultant under the terms of the Consulting Agreement.
5. ADJUSTMENTS. In the event that the outstanding shares of the Common
Stock are hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Corporation or of
another corporation, by reason of a recapitalization, stock split, merger,
consolidation, reorganization, combination, liquidation, stock dividend or
similar transaction involving the Corporation, appropriate adjustment shall be
made in the number and kind of shares as to which this Option, or the portion
thereof then unexercised, shall be exercisable, to the end that, to the extent
practicable, the proportionate interest of the Optionee shall be maintained as
before the occurrence of such event. Such adjustment in the Option shall be made
without change in the total price applicable to the unexercised portion of the
Option but with a corresponding adjustment in the Purchase Price per share.
6. EFFECT UPON EMPLOYMENT. This Agreement shall not have any effect on
the consulting relationship between the Corporation and Optionee under the
Consulting Agreement or otherwise.
7. RESTRICTION ON ISSUANCE OF SHARES. The Corporation shall not be
obligated to sell any of the Option Shares hereunder unless the transaction in
which the Option Shares are to be sold is registered or exempt from registration
under the 1933 Act, and applicable state securities laws. Optionee shall make
such investment representations to the Corporation and shall consent to the
imposition of such legends on the stock certificates as are necessary, in the
opinion of the Corporation, to secure to the Corporation an appropriate
exemption from applicable securities laws.
8. SUCCESSORS. This Agreement shall be binding upon any executor or
legal representative of the Corporation.
9. VESTING OF SHAREHOLDER RIGHTS. Optionee shall have no rights as a
shareholder by reason of this Agreement until the certificates evidencing the
Option Shares purchased are properly issued in Optionee's name.
10. TRANSFERABILITY. The Option shall be transferable by Optionee,
subject to complying with applicable federal and state securities laws to the
reasonable satisfaction of the Corporation and its counsel; provided, however,
that any attempted transfer of the Option contrary to the provisions hereof will
be null and void and without effect.
- 3 - Page 174 of 241 Pages
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11. WITHHOLDING.
(a) The Optionee hereby agrees to make appropriate
arrangements with the Corporation to provide for the amount of additional tax
withholding under Sections 3102 and 3402 of the Internal Revenue Code and
applicable state income tax laws resulting from the exercise of the Option. If
such arrangements are not made, the Corporation may refuse to issue any Option
Shares to the Optionee.
(b) The Optionee may elect to pay all such amounts of tax
withholding, or any part thereof, by electing to transfer to the Corporation, or
to have the Corporation withhold from shares otherwise issuable to the Optionee,
Option Shares having a value equal to the amount required to be withheld or such
lesser amount as may be elected by the Optionee. All elections shall be subject
to the approval or disapproval of the Board of Directors of the Corporation. The
value of the Option Shares to be withheld shall be based on the fair market
value of the Stock on the date that the amount of tax to be withheld is to be
determined (the "Tax Date"'). Any such election by the Optionee to have Option
Shares withheld for this purpose will be subject to the following restrictions:
(i) All elections must be made prior to the Tax Date;
(ii) All elections shall be irrevocable; and
(iii) If the Optionee is an officer or director of the
Corporation within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended,
("Section 16"), the Optionee must satisfy the
requirements of such Section 16 and any applicable
rules thereunder with respect to the use of the
Option Shares to satisfy such tax withholding
obligation.
12. NOTICES. Any notice or request herein required or permitted to be
given to any party hereunder shall be given in writing and shall be personally
delivered or sent to such party by United States mail at the address set forth
below the signature of such party or at such other address as such party may
designate by written communication to the other party to this Agreement. Each
notice given in accordance with this Section shall be deemed to have been given,
if personally delivered, on the date personally delivered, or, if mailed, on the
fifth day following the day on which it is deposited in the United States mail,
certified or registered mail, return receipt requested, with postage prepaid, to
the address last given in accordance with this Section.
13. AMENDMENTS. This Agreement may be amended only by a writing
executed by the Corporation and Optionee.
14. GOVERNING LAW. This Agreement shall be governed by, construed under
and enforced in accordance with the laws of the State of Texas.
15. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, such provision shall be
- 4 - Page 175 of 241 Pages
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fully severable and this Agreement and each separate provision hereof shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part of this Agreement, and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid, or unenforceable provision or by its severance from
this Agreement. In addition, in lieu of such illegal, invalid, or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
16. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning,
interpretation, or scope of this Agreement.
17. WAIVER OF DEFAULT. Any waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver by
such party of any subsequent breach of this Agreement.
18. ENTIRE AGREEMENT. This Agreement embodies the entire Agreement and
understanding between the Corporation and Optionee relating to the subject
matter of this Agreement and supersedes any prior negotiations and agreements
between the parties concerning the same subject matter, except as expressly
provided or allowed by the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective on the date first set forth above.
GEOKINETICS INC.
By:/s/ JAY D. HABER
_________________________________________
Jay D. Haber, President
Address: 5555 San Felipe, Suite 780
Houston, Texas 77056
OPTIONEE
/s/ WILLIAM R. ZIEGLER
_________________________________________
William R. Ziegler
Address: c/o Parson & Brown LLP
666 Third Avenue, 9th Floor
New York, New York 10017
- 5 - Page 176 of 241 Pages
<PAGE>
<PAGE>
EXHIBIT VIII
INVESTMENT MONITORING AGREEMENT
INVESTMENT MONITORING AGREEMENT (hereinafter referred to as this
"Agreement"), dated as of July 18, 1997, by and among GEOKINETICS INC., a
Delaware corporation (the "Company"), BLACKHAWK CAPITAL PARTNERS, a Texas
general partnership (the "Investment Monitor") and BLACKHAWK INVESTORS, L.L.C, a
Delaware limited liability company ("Blackhawk").
W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase and Exchange Agreement of
even date herewith (the "Purchase Agreement") among the Company, Blackhawk and
certain Holders (as defined therein), Blackhawk will invest in the Company (the
"Investment") by purchasing 5,041,667 shares of Common Stock of the Company,
171,875 shares of Series A Preferred Stock of the Company and a Shadow Warrant
to purchase up to an aggregate of 6,512,095 shares of Common Stock, subject to
adjustment;
WHEREAS, the Investment Monitor is the managing member of Blackhawk;
WHEREAS, as an inducement to the consummation of the transactions
contemplated by the Purchase Agreement Merger and the making of the Investment,
the parties have agreed that the Investment Monitor will oversee the Investment
on behalf of Blackhawk, and the Investment Monitor is willing to undertake such
responsibility on the terms and conditions set forth herein; and
WHEREAS, capitalized terms used herein without definition shall have
the respective meanings ascribed to the in the Purchase Agreement.
NOW, THEREFORE, in consideration of the conditions and mutual
agreements hereinafter set forth, the parties hereto agree as follows:
1. The parties agree that the Investment Monitor will monitor the
Investment, on behalf of Blackhawk, during the term of this Agreement (the
"Term"), which shall commence on the Closing Date of the transactions
contemplated by the Purchase Agreement and terminate as provided in paragraph 6
below.
2. During the Term, the Company shall pay to the Investment Monitor an
annual fee, in the amount of $25,000, in payment for its services to be rendered
hereunder (the "Fee"), which Fee will be paid quarterly in arrears on the last
business day of March, June, September and December of each year, commencing
September 30, 1997.
3. Nothing herein shall require the Investment Monitor to devote full
time to its duties hereunder, the Investment Monitor hereby agrees to devote
such of its time and activity during normal
Page 177 of 241 Pages
<PAGE>
<PAGE>
business days and hours as it, in its sole discretion, shall deem necessary for
the accomplishment of its duties hereunder.
4. The Investment Monitor shall not be liable to Blackhawk or any of
its members on account of any compensation received or action taken pursuant to
this Agreement.
5. Blackhawk hereby agrees to hold the Investment Monitor harmless from
and indemnify the Investment Monitor against all actions, proceedings, claims
and demands (herein referred to as "Claims") which may be brought against,
suffered or incurred by the Investment Monitor by reason of its performance or
nonperformance of its duties under the terms of this Agreement (including all
reasonable legal, professional and other expenses incurred), except any such
Claim that arises from the willful misconduct, gross negligence or fraud of the
Investment Monitor in the performance or nonperformance of its obligations or
duties hereunder.
6. This Agreement shall terminate (except for the provisions of
paragraph 5), upon the earlier to occur of (i) the date that on which Blackhawk
and/or its affiliates ceases to own 10% of the equity securities of the Company
or (ii) December 31, 2002, provided, that, if the event described in
subparagraph (i) above shall not have occurred before December 31, 2002, this
Agreement shall be automatically extended beyond December 31, 2002 for
successive one year terms, unless either the Company or Blackhawk shall give
written notice to the Investment Monitor at least 30 days before such expiration
date or such extended expiration date or until the occurrence of the event
described in subparagraph (i) above.
7. No modification of this Agreement, or any part hereof, shall be
valid or effective unless in writing and signed by the party or parties sought
to be charged therewith.
8. This Agreement contains the entire understanding of the parties and
supersedes any prior agreements and understandings between the parties with
respect to its subject matter.
9. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to choice of law or conflicts
of law principles.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
GEOKINETICS INC.
By:/s/ JAY D. HABER
______________________________________
Name: Jay D. Haber
Title: President
BLACKHAWK CAPITAL PARTNERS
By:/s/ WILLIAM R. ZIEGLER
______________________________________
William R. Ziegler, Partner
-2- Page 178 of 241 Pages
<PAGE>
<PAGE>
BLACKHAWK INVESTORS, L.L.C.
By: Blackhawk Capital Partners, its Managing Member
By:/s/ WILLIAM R. ZIEGLER
________________________________________________
William R. Ziegler, Partner
-3- Page 179 of 241 Pages
<PAGE>
<PAGE>
EXHIBIT XI(a)
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
By and Among
BLACKHAWK INVESTORS, L.L.C.,
STEVEN A. WEBSTER,
WILLIAM R. ZIEGLER
and
GEOKINETICS INC.
------------------------------------------------
Common Stock, par value $.20 per share
------------------------------------------------
Dated as of July 18, 1997
- --------------------------------------------------------------------------------
Page 180 of 241 Pages
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <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.................................................................7
1.5 Preparation: Reasonable Investigation..................................................8
1.6 Qualification to Obligations under Registration Covenants..............................8
1.7 Indemnification........................................................................8
2. Definitions....................................................................................11
3. Rule 144 and Rule 144A.........................................................................13
4. Amendments and Waivers.........................................................................13
5. Nominees for Beneficial Owners.................................................................14
6. Notices........................................................................................14
7. Assignment.....................................................................................14
8. Calculation of Percentage Interests in Registrable Securities..................................15
9. No Inconsistent Agreements.....................................................................15
10. Remedies.......................................................................................15
11. Severability...................................................................................15
12. Entire Agreement...............................................................................15
13. Descriptive Headings...........................................................................15
14. Governing Law..................................................................................15
15. Counterparts...................................................................................15
</TABLE>
Page 181 of 241 Pages
<PAGE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of July 18, 1997,
among Geokinetics Inc., a Delaware corporation (the "Company"), Blackhawk
Investors, L.L.C., a Delaware limited liability company ("Blackhawk"), Steven A.
Webster ("Webster") and William R. Ziegler ("Ziegler").
This Agreement is being entered into in connection with a
Securities Purchase and Exchange Agreement, of even date herewith (the "Purchase
Agreement"), among the Company, Blackhawk, Webster and Ziegler (Blackhawk,
Webster and Ziegler being sometimes hereinafter individually referred to as a
"Purchaser" and collectively as the "Purchasers"), providing for (i) the
issuance and sale to Blackhawk of (A) 5,041,667 shares of Common Stock, (B)
171,875 shares of Series A Preferred Stock and (C) a Shadow Warrant to purchase
up to an aggregate of 6,512,095 shares of Common Stock, subject to adjustment
(the "Blackhawk Shadow Warrant") and (ii) the issuance to the Webster and
Ziegler of an aggregate of (A) 458,333 shares of Common Stock, (B) 15,625 shares
of Series A Preferred Stock and (C) Shadow Warrants to purchase up to an
aggregate of 592,009 shares of Common Stock, subject to adjustment (the
"Webster/Ziegler Shadow Warrants"), in the individual amounts set forth opposite
such Purchaser's name on Schedule 1.1 to the Purchase Agreement, in exchange for
the surrender of the Senior Notes, in the aggregate principal amount of
$500,000. 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 (exclusive of any shares of Common Stock issued or issuable pursuant
to the Bridge Financing Warrants) 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
Page 182 of 241 Pages
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<PAGE>
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 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;
-2- Page 183 of 241 Pages
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<PAGE>
(ii) in any registration having an aggregate sales
price (before deduction of underwriting discounts and expenses of sale) of less
than $1,500,000;
(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 exchangeable
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
-3- Page 184 of 241 Pages
<PAGE>
<PAGE>
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.
(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
-4- Page 185 of 241 Pages
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<PAGE>
the requirements of this subdivision (iv) be obligated to be
so qualified or to consent to general service of process in
any such jurisdiction;
(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 Act and Rule
-5- Page 186 of 241 Pages
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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 (the "Comparable Securities") are then listed, or on
the National Market System (the "National Market System") of
the National Association of Securities Dealers Automated
Quotations System ("Nasdaq") if such Comparable Securities are
then listed or traded on such system, or on the Nasdaq
Bulletin Board if such Comparable Securities are then listed,
traded or quoted on such bulletin board, as the case may be.
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
-6- Page 187 of 241 Pages
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<PAGE>
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 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
-7- Page 188 of 241 Pages
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<PAGE>
by the Commission and take all reasonable actions required to prevent the entry
of such stop order or to remove it if entered.
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
-8- Page 189 of 241 Pages
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<PAGE>
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 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
defense, the indemnified party may retain counsel
-9- Page 190 of 241 Pages
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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:
-10- Page 191 of 241 Pages
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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.
"Blackhawk Shadow Warrant" is defined in the second
introductory paragraph on page 1.
"Bridge Financing Warrants" means those certain warrants to
purchase shares of Common Stock issued by the Company to Webster and Ziegler
contemporaneously with the issuance of the Senior Notes, as the same may be
modified from time to time.
"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.
"Comparable Securities" is defined in Section 1.3(xi).
"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.
"LLC Agreement" means that certain Limited Liability Company
Agreement of Blackhawk, dated July , 1997, as the same may be amended from time
to time.
"Nasdaq" is defined in Section 1.3(xi).
"National Market System" is defined in Section 1.3(xi).
"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.
-11- Page 192 of 241 Pages
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<PAGE>
"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) the shares of Common Stock
acquired by the Purchasers pursuant to the Purchase Agreement, (ii) any shares
of Common Stock issued upon conversion of the Series A Preferred Stock acquired
by the Purchasers pursuant to the Purchase Agreement, (iii) any shares of Common
Stock issued from time to time upon exercise of the Shadow Warrants, (iv) any
shares of Common Stock acquired from time by any Purchaser or any Affiliate
thereof, and (v) 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 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.
-12- Page 193 of 241 Pages
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<PAGE>
"Senior Notes" means those certain 12% Senior Secured
Promissory Notes of the Company and certain of its subsidiaries issued in favor
of Webster and Ziegler, in the aggregate principal amount of $500,000.
"Series A Preferred Stock" means that series of Preferred
Stock of the Company created and designated pursuant to the Certificate of
Designation of Series A Convertible Preferred Stock of the Company, in the form
of Exhibit A attached to the Purchase Agreement.
"Shadow Warrants" means the Blackhawk Shadow Warrant and the
Webster/Ziegler Shadow Warrants, inclusive of any warrant or warrants issued in
replacement thereof, whether pursuant to Section 1.4 or 4 of the initial Shadow
Warrants.
"Webster/Ziegler Shadow 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
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.
-13- Page 194 of 241 Pages
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<PAGE>
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
(which, with respect to Blackhawk, shall include any member thereof to whom
shares of Registrable Securities may be distributed pursuant to the LLC
Agreement and any person to whom the managing member of Blackhawk shall have
agreed or shall hereafter agree to distribute shares of Registrable Securities
that such managing member may become entitled to receive under the terms of the
LLC Agreement) 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 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.
-14- Page 195 of 241 Pages
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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.
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/ JAY D. HABER
______________________________________
Name: Jay D. Haber
Title: President
-15- Page 196 of 241 Pages
<PAGE>
<PAGE>
PURCHASERS:
BLACKHAWK INVESTORS, L.L.C.
By: Blackhawk Capital Partners, Managing Member
By:/s/ WILLIAM R. ZIEGLER
____________________________________________
Name: William R. Ziegler
Title: Partner
/s/ STEVEN A. WEBSTER
_______________________________________________
Steven A. Webster, Individually
/s/ WILLIAM R. ZIEGLER
_______________________________________________
William R. Ziegler, Individually
-16- Page 197 of 241 Pages
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<PAGE>
EXHIBIT XI(b)
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
AMENDMENT, dated as of September 30, 1997 ("Amendment"), to
Registration Rights Agreement dated July 18, 1997 (the "Registration Rights
Agreement"), among Geokinetics Inc., a Delaware corporation (the "Company"),
Blackhawk Investors, L.L.C., a Delaware limited liability company ("Blackhawk"),
Steven A. Webster ("Webster") and William R. Ziegler ("Ziegler").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Securities Purchase and
Exchange Agreement dated July 18, 1997 (the "Initial Purchase Agreement") among
the Company, Blackhawk, Webster and Ziegler, (i) Blackhawk purchased (A)
5,041,667 shares of Common Stock of the Company, (B) 171,875 shares of Series A
Preferred Stock of the Company and (C) a Shadow Warrant to purchase up to an
aggregate of 6,512,095 shares of Common Stock, subject to adjustment, for an
aggregate purchase price of $5,500,000, and (ii) Webster and Ziegler exchanged
certain 12% Senior Secured Promissory Notes of the Company and certain of its
subsidiaries, in the aggregate principal amount of $500,000, for an aggregate of
(A) 458,333 shares of Common Stock, (B) 15,625 shares of Series A Preferred
Stock and (C) Shadow Warrants to purchase up to an aggregate of 592,009 shares
of Common Stock, subject to adjustment;
WHEREAS, contemporaneously with the consummation of the
transactions contemplated by the Initial Purchase Agreement, the parties thereto
entered into the Registration Rights Agreement, providing for certain
registration rights with respect to the Common Stock of the Company acquired by
Blackhawk, Webster and Ziegler pursuant to the Initial Purchase Agreement
(inclusive of shares of Common Stock issuable upon the conversion or exercise,
as the case may be, of the Series A Convertible Preferred Stock and the Shadow
Warrants) and certain other shares of Common Stock that may be thereafter
acquired by such parties;
WHEREAS, pursuant to the terms and conditions of a certain
Letter Agreement re Additional Investment dated as of July 24, 1997, between the
Company and Blackhawk (the "Letter Agreement"), Blackhawk has made an additional
$1,000,000 investment in the Company, on substantially the same terms as its
initial investment, except that the additional securities to be purchased
thereunder are (i) 100,000 shares of a new series of its authorized Series
Preferred Stock, par value $10.00 per share, which Preferred Stock shall be
designated as Series B Convertible Preferred Stock (the "Series B Convertible
Preferred Stock") and (ii) shadow warrants on substantially the same terms as
the Shadow Warrant issued to Blackhawk on July 18, 1997;
WHEREAS, pursuant to the terms and conditions of the Letter
Agreement, the Company and Blackhawk entered into a Securities Purchase
Agreement, dated as of July 24, 1997 (the "Subsequent Purchase Agreement"), with
respect to such additional $1,000,000 investment by Blackhawk in exchange for
the issuance by the Company of the Series B Convertible Preferred Stock and a
Shadow Warrant to purchase up to an aggregate of 1,100,255 shares of Common
Stock, subject to adjustment (the "New Blackhawk Shadow Warrant");
Page 198 of 241 Pages
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<PAGE>
WHEREAS, pursuant to the terms and conditions of both the
Letter Agreement and the Subsequent Purchase Agreement, the parties to the
Registration Rights Agreement desire to amend the Registration Rights Agreement
in certain respects to clarify that the term Registrable Securities includes any
and all shares of Common Stock that may be issued upon the conversion or
exercise, as the case may be, of the Series B Convertible Preferred Stock and
the New Blackhawk Shadow Warrant; and
WHEREAS, capitalized terms used herein without definition
shall have the respective meanings ascribed to them in the Registration Rights
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the Registration Rights
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto agree as follows:
I. AMENDMENTS:
1. Section 2 of the Registration Rights Agreement is
hereby amended by adding the following definitions:
" 'Initial Purchase Agreement' means that certain
Securities Purchase and Exchange Agreement, dated July 18,
1997, among the Company, Blackhawk, Webster and Ziegler."
" 'Subsequent Purchase Agreement' means that certain
Securities Purchase Agreement, dated as of July 24, 1997,
between the Company and Blackhawk."
" 'New Blackhawk Shadow Warrant' means that certain
Shadow Warrant of even date herewith issued by the Company in
favor of Blackhawk pursuant to the terms of the Subsequent
Purchase Agreement, representing the right to purchase up to
an aggregate of 1,100,255 shares of Common Stock, subject to
adjustment, in accordance with the terms thereof (including
without limitation, upon any adjustment to the number of
Subject Warrants (as defined therein) upon any conversion of
the Series B Convertible Preferred Stock into Common Stock),
as the same may be amended from time to time."
" 'Series B Preferred Stock' means that series of
Preferred Stock of the Company created and designated pursuant
to the Certificate of Designation of Series B Convertible
Preferred Stock of the Company, in the form of Exhibit A
attached to the Subsequent Purchase Agreement."
2. Section 2 of the Registration Rights Agreement is hereby
further amended by deleting, in its entirety, each of the definitions of
"Blackhawk Shadow Warrant," "Purchase Agreement, "Webster/Ziegler Shadow
Warrant" and "Shadow Warrants" and respectively replacing same with the
following:
Page 199 of 241 Pages
-2-
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<PAGE>
" 'Initial Blackhawk Shadow Warrant' means that
certain Shadow Warrant dated July 18, 1997 issued by the
Company in favor of Blackhawk pursuant to the terms of the
Initial Purchase Agreement, initially representing the right
to purchase up to an aggregate of 6,512,095 shares of Common
Stock, subject to adjustment, in accordance with the terms
thereof (including without limitation, upon any adjustment to
the number of Subject Warrants (as defined therein) upon any
conversion of the Series B Convertible Preferred Stock into
Common Stock), as the same may be further amended from time to
time."
" 'Purchase Agreement' means the Initial Purchase
Agreement and/or the Subsequent Purchase Agreement, as the
context requires."
" 'Webster/Ziegler Shadow Warrants' means those
certain Shadow Warrants dated July 18, 1997 issued by the
Company in favor of Webster and Ziegler pursuant to the terms
of the Initial Purchase Agreement, initially representing the
right to purchase up to an aggregate of 592,009 shares of
Common Stock, subject to adjustment, in accordance with the
terms thereof (including without limitation, upon any
adjustment to the number of Subject Warrants (as defined
therein) upon any conversion of the Series B Convertible
Preferred Stock into Common Stock), as the same may be further
amended from time to time."
" 'Shadow Warrants' means the Initial Blackhawk
Shadow Warrant, the Webster/Ziegler Shadow Warrants and the
New Blackhawk Shadow Warrant, inclusive of any amendments
thereto and any warrant or warrants issued in replacement
thereof, whether pursuant to Section 1.4 or 4 of any such
Shadow Warrant."
3. Section 2 of the Registration Rights Agreement is hereby
further amended by deleting, in its entirety, the first sentence of the
definition of "Registrable Securities" and replacing it with the following:
"'Registrable Securities' means (i) the shares of Common Stock
acquired by the Purchasers pursuant to the Initial Purchase
Agreement, (ii) any shares of Common Stock issued upon
conversion of the Series A Preferred Stock acquired by the
Purchasers pursuant to the Initial Purchase Agreement, (iii)
any shares of Common Stock issued upon conversion of the
Series B Preferred Stock acquired by Blackhawk pursuant to the
Subsequent Purchase Agreement, (iv) any shares of Common Stock
issued from time to time upon exercise of the Shadow Warrants,
(v) any shares of Common Stock acquired from time by any
Purchaser or any Affiliate thereof, and (vi) any Related
Registrable Securities."
II. GENERAL:
1. Except as set forth above in Article I of this Amendment,
the Agreement shall remain in full force and effect in accordance with its
terms.
2. This Amendment may be executed in two counterparts, each of
which shall be deemed an original but both of which together shall constitute
one and the same instrument.
Page 200 of 241 Pages
-3-
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3. This Amendment shall be interpreted so that it amends and
modifies the terms of the Registration Rights Agreement, and in the event of a
conflict between the provisions set forth in this Amendment and those set forth
in the original Registration Rights Agreement, the terms of this Amendment shall
govern and control.
4. THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT GIVING EFFECT TO ITS CHOICE OF LAW
RULES OR PRINCIPLES.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of the day and year first above written.
GEOKINETICS INC.
By:/s/ JAY D. HABER
--------------------------------------------
Name: Jay D. Haber
Title: Chairman & Chief Executive Officer
PURCHASERS:
BLACKHAWK INVESTORS, L.L.C.
By: Blackhawk Capital Partners, Managing Member
By:/s/ WILLIAM R. ZIEGLER
--------------------------------------------
Name: William R. Ziegler
Title: Partner
/s/ STEVEN A. WEBSTER
---------------------------------------------
Steven A. Webster, Individually
/s/ WILLIAM R. ZIEGLER
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William R. Ziegler, Individually
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EXHIBIT XIII
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LIMITED LIABILITY COMPANY AGREEMENT
OF
BLACKHAWK INVESTORS, L.L.C.
Dated as of July 18, 1997
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Page 202 of 241 Pages
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
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1 Definitions..............................................................................................1
ARTICLE II
THE COMPANY AND ITS BUSINESS
2.1 Formation.......................................................................................4
2.2 Certificate of Formation........................................................................4
2.3 Name............................................................................................4
2.4 Place of Business...............................................................................4
2.5 Registered Office and Agent.....................................................................4
2.6 Purposes........................................................................................4
2.7 Title to Property...............................................................................5
2.8 Duration........................................................................................5
ARTICLE III
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
3.1 Member's Capital................................................................................5
3.2 Limitations on Member's Liability and Return of Capital.........................................5
3.3 Capital Accounts................................................................................5
3.4 Member Loans....................................................................................6
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
4.1 Allocation of Net Profits and Net Loss of the Company...........................................6
4.2 Residual Allocations............................................................................7
4.3 Qualified Income Offset.........................................................................7
4.4 Minimum Gain Chargeback.........................................................................7
4.5 Special Allocations.............................................................................7
4.6 Fees to Members or Affiliates...................................................................7
4.7 Section 704(c) Allocation.......................................................................8
4.8 Distribution in Kind............................................................................8
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ARTICLE V
DISTRIBUTIONS
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5.1 Distributions of Available Cash Flow............................................................8
5.2 Estimated Taxes and Withholding.................................................................9
ARTICLE VI
CONTROL AND MANAGEMENT
6.1 Management of the Company.......................................................................9
6.2 Authority and Responsibility of the Managers....................................................9
6.3 Limitations on Authority of Managers. ........................................................11
6.4 Participation by Members. ....................................................................11
6.5 Other Activities of Managers or Members........................................................12
6.6 Fees and Expenses; Compensation of Managers....................................................12
6.7 Liability for Acts and Omissions; Indemnification..............................................12
6.8 Number, Tenure and Qualifications of Managers..................................................13
6.9 Resignation of Managers........................................................................13
6.10 Removal of a Manager...........................................................................13
6.11 Vacancies of Managers..........................................................................14
6.12 Place of Managers' Meetings....................................................................14
6.13 Special Meetings of Managers...................................................................14
6.14 Notice of Adjournment..........................................................................14
6.15 Waiver of Notice...............................................................................14
6.16 Action by Managers; Quorum; Voting; Action Without a Meeting...................................15
6.17 Meetings by Telephone..........................................................................15
6.18 Adjournment....................................................................................15
6.19 Committees of the Managers.....................................................................15
ARTICLE VII
MEETINGS OF MEMBERS
7.1 Meetings.......................................................................................15
7.2 Place of Meetings..............................................................................16
7.3 Notice of Meetings.............................................................................16
7.4 Record Date....................................................................................16
7.5 Quorum.........................................................................................16
7.6 Manner of Acting...............................................................................16
7.7 Proxies........................................................................................16
7.8 Action by Members Without a Meeting............................................................17
7.9 Waiver of Notice...............................................................................18
7.10 Voting Agreements..............................................................................18
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ARTICLE VIII
TRANSFERS OF COMPANY INTERESTS
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8.1 Investment Representation......................................................................18
8.2 Assignment by Members..........................................................................18
8.3 Void Transfers; Effective Date.................................................................19
ARTICLE IX
ACCOUNTING AND RECORDS; CERTAIN TAX MATTERS
9.1 Books and Records..............................................................................19
9.2 Reports........................................................................................20
9.3 Tax Returns....................................................................................20
9.4 Section 754 Election...........................................................................20
9.5 Tax Matters Partner............................................................................20
9.6 Withholding....................................................................................20
9.7 Bank Accounts..................................................................................21
ARTICLE X
DISSOLUTION AND TERMINATION
10.1 Withdrawal.....................................................................................21
10.2 Dissolution....................................................................................21
10.3 Distribution Upon Liquidation of the Company...................................................22
10.4 Capital Account Deficits.......................................................................22
10.5 Certificate of Cancellation....................................................................23
ARTICLE XI
AMENDMENTS
11.1 Amendments Adopted Solely by the Managers. ...................................................23
11.2 Amendments to be Adopted by Managers and Members...............................................23
ARTICLE XII
VALUATION OF SECURITIES OF GEOK
12.1 Normal Valuation...............................................................................23
12.2 Legal Restrictions on Transfer.................................................................24
12.3 Objection to Valuation.........................................................................24
ARTICLE XIII
MISCELLANEOUS
13.1 Notices........................................................................................24
13.2 Successors and Assigns.........................................................................25
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13.3 No Oral Modifications; Amendments..............................................................25
13.4 Captions.......................................................................................25
13.5 Terms..........................................................................................25
13.6 Invalidity.....................................................................................25
13.7 Further Assurances.............................................................................25
13.8 Complete Agreement.............................................................................25
13.9 Attorneys' Fees................................................................................25
13.10 Governing Law..................................................................................25
13.11 No Third Party Beneficiary.....................................................................25
13.12 Exhibits and Schedules.........................................................................26
13.13 References to this Agreement...................................................................26
13.14 Power of Attorney..............................................................................26
13.15 Reliance on Authority of Person Signing Agreement..............................................27
13.16 Consents and Approvals.........................................................................27
13.17 GEOK Common Stock..............................................................................27
Schedule A Members
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LIMITED LIABILITY COMPANY AGREEMENT
OF
BLACKHAWK INVESTORS, L.L.C.
--------------------------------------------
This Limited Liability Company Agreement of Blackhawk
Investors, L.L.C. (the "Company"), dated as of July 18, 1997, is made and
entered into by and among Blackhawk Capital Partners, a general partnership, as
a Member and the sole initial Manager (the "Managing Member"), and the other
Persons listed on Schedule A hereto, as Members (the "Investor Members"),
W I T N E S S E T H :
In consideration of the mutual agreements made herein, the
Members hereby agree to constitute a limited liability company pursuant to the
Act as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Agreement shall have the
respective meanings specified in this Article I:
"Accountants" means any firm of independent certified public
accountants as shall be engaged by the Company.
"Act" means the Delaware Limited Liability Company Act, as
amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(i) increase such Capital Account by any amounts which such
Member is obligated to contribute to the Company (pursuant to the terms of this
Agreement or otherwise) or is deemed to be obligated to contribute to the
Company pursuant to Treasury Regulations Sections 1.704-2(g) (1) and 1.704-2(i)
(5); and
(ii) reduce such Capital Account by the amount of the items
described in Treasury Regulation Section 1.704-1(b) (2) (ii) (d) (4), (5) and
(6).
"Adjusted Invested Capital" (with respect to each Member)
means, at any time, the sum of all Capital Contributions made by such Member
pursuant to Article III less distributions previously made to that Member
pursuant to Section 5.1 (ii).
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"Affiliate" means, when used with reference to a specified
Person, (i) any Person directly or indirectly controlling, controlled by or
under common control with such Person, (ii) any Person owning or controlling 10%
or more of the outstanding voting interests of such Person, and (iii) any
relative or spouse of such Person.
"Agreement" means this Limited Liability Company Agreement, as
originally executed and as amended from time to time, as the context requires.
"Available Cash Flow" means, with respect to any Fiscal Year
or other period, the sum of all cash receipts of the Company from any and all
sources, less all cash disbursements (including loan repayments, capital
improvements and replacements) and a reasonable allowance for reserves,
contingencies and anticipated obligations as determined by the Managers.
"Bankruptcy" means, with respect to a Person, the occurrence
of any of the following events: (a) the filing by that Person of a petition
commencing a voluntary case in bankruptcy under applicable bankruptcy laws; (b)
entry against that Person of an order for relief under applicable bankruptcy
laws; (c) written admission by that Person of its inability to pay its debts as
they mature, or an assignment by that Person for the benefit of creditors; or
(d) appointment of a receiver for the property or affairs of that Person.
"Capital Account" means, with respect to each Member, an
account determined in accordance with the provisions of Section 3.4 of this
Agreement.
"Capital Contribution" means, with respect to each Member, the
total amount of money and fair market value of any property contributed to the
Company by such Member.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Company" means the limited liability company formed under
this Agreement.
"Company Minimum Gain" means the amount determined by
computing with respect to each nonrecourse liability of the Company, the amount
of gain (of whatever character), if any, that would be realized by the Company
if it disposed (in a taxable transaction) of the Company's property subject to
such liability in full satisfaction thereof, and by then aggregating the amounts
so computed as set forth in Treasury Regulation Section 1.704-2(d).
"Fiscal Year" means the fiscal year of the Company as
determined the Managers. As used in this Agreement, a Fiscal Year shall include
any partial Fiscal Year at the beginning and end of the Company term.
"GEOK" means Geokinetics Inc., a Delaware corporation, or any
successor thereto.
"Interest" means a Member's percentage interest in the
Company.
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"Investor Member" means a Person who or which is listed in
Schedule A hereto and executes a counterpart of this Agreement as an Investor
Member and each Person who or which may hereafter become a party to this
Agreement as a substitute Investor Member.
"Majority-in-Interest of the Members" means such of the
Members whose Interests equal (at the time of determination) more than 50% of
the total Interests of all Members.
"Managers" means the Managing Member or any other Persons who
or which succeed the Managing Member or are added as Managers pursuant to this
Agreement.
"Member" means the Managing Member and each Person who or
which is listed in Schedule A hereto and executes a counterpart of this
Agreement as an Investor Member and each Person who or which may hereafter
become a party to this Agreement as a substitute Member.
"Net Profits" and "Net Loss" shall mean, for each Fiscal Year
or other period, an amount equal to the Company's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) Any income of the Company that is exempt from Federal
income tax and not otherwise taken into account in computing Net Profits or Net
Loss shall be added to such taxable income or loss; and
(b) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into
account in computing Net Profits or Net Loss shall be subtracted from such
taxable income or loss.
"Person" means an individual, trust, estate, tax-exempt
entity, partnership, joint venture, association, company, corporation, limited
liability company, government or agency thereof, or other entity.
"Prime Rate" means the base rate of interest announced from
time to time by Chemical Bank, New York, N.Y.
"Priority Return" means, with respect to a Member, a sum
equivalent to the Priority Return Rate, cumulative but not compounded (pro rated
for any partial year), of the amount of the Adjusted Invested Capital of such
Member from time to time, calculated from time to time during the period to
which the Priority Return relates, commencing on the date the Member is admitted
to the Company.
"Priority Return Rate" means six percent (6%) per annum for
the first one-year period to which the Priority Return Relates; nine percent
(9%) for the second one-year period; twelve
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percent (12%) for the third one-year period; fifteen percent (15%) for the
fourth one-year period; and eighteen percent (18%) for the fifth one-year
period.
"Treasury Regulations" means all proposed, temporary and final
regulations promulgated under the Code, as such regulations may be amended from
time to time.
"Two-Thirds-in-Interest of the Members" means such of the
Members whose Interests equal (at the time of determination) more than 66 2/3%
of the total Interests of all Members.
ARTICLE II
THE COMPANY AND ITS BUSINESS
2.1 Formation. The Members hereby form a limited liability
company under and pursuant to the provisions of the Act and upon the terms and
conditions set forth in this Agreement.
2.2 Certificate of Formation. A Certificate of Formation has
been filed in the office of the Delaware Secretary of State in accordance with
the provisions of the Act. The Managers shall take any and all other actions
reasonably necessary to perfect and maintain the status of the Company as a
limited liability company under the Act.
2.3 Name. The name of the Company shall be Blackhawk
Investors, L.L.C., and all business of the Company shall be conducted in such
name.
2.4 Place of Business. The office of the Company shall
be located at such place within or without the State of Delaware as may be
determined by the Managers.
2.5 Registered Office and Agent. The registered office of the
Company in the State of Delaware shall be at 1013 Centre Road, Wilmington,
Delaware 19805-1297. The registered agent of the Company for service of process
at the address shall be Corporation Service Company. The Company may, upon
compliance with the Act, change the location of its registered office in the
State of Delaware or its registered agent for service of process in the State of
Delaware as the Managers deem appropriate.
2.6 Purposes. The purposes of the Company shall be (i) to
invest in GEOK, an oil and gas exploration, exploration and production company
that plans to strategically reposition itself as a technologically focused
provider of three dimensional ("3D") seismic acquisition services to the oil and
gas industry in selected United States markets, which investment is more fully
described in the Private Placement Memorandum of the Company dated June 25,
1997, as the same may hereafter be amended, pursuant to which the membership
interests in the Company were offered, and (ii) to enter into any lawful
transaction and engage in any lawful activities in furtherance of or incidental
to the foregoing purposes. The Company shall not engage in any other activity
except as set forth above.
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2.7 Title to Property. All real and personal property owned by
the Company shall be owned by the Company as an entity and, insofar as permitted
by applicable law, no Member shall have any ownership interest in such property
in its individual name or right and each Member's Interest shall be personal
property for all purposes.
2.8 Duration. The Company shall commence as of the date the
Certificate of Formation for the Company is filed in the office of the Delaware
Secretary of State and shall continue for a period of five (5) years thereafter,
unless sooner dissolved or terminated pursuant to statute or any provision of
this Agreement.
ARTICLE III
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
3.1 Member's Capital. Prior to or upon the execution of
this Agreement, each of the Members shall contribute to the capital of the
Company the sum designated opposite his or its name under the heading "Capital
Contribution" on Schedule A.
3.2 Limitations on Member's Liability and Return of Capital.
Subject to compliance with the other terms of this Agreement, the personal
liability of each Member (in his capacity as a Member) arising out of or in any
manner relating to the Company and its activities and obligations shall be
limited to and shall not exceed the Member's Capital Contributions, except as
provided by the Act. A Member shall not (i) be obligated to lend or advance
funds to the Company for any purpose except as expressly provided in this
Agreement, (ii) be liable for the obligations of any other Member, (iii) be
entitled to the return of his or its Capital Contribution at any fixed time or
upon demand, or (iv) receive any interest on capital.
3.3 Capital Accounts. The Company shall maintain for each
Member a separate Capital Account in accordance with the rules of Treasury
Regulations Section 1.704-1(b). Such Capital Account shall be increased by (i)
such Member's cash contributions, (ii) the agreed fair market value of property
contributed by such Member (net of liabilities secured by such contributed
property that the Company is considered to assume or take subject to under Code
Section 752), and (iii) all items of Company income and gain (including income
and gain exempt from tax) allocated to such Member pursuant to Article IV or
other provisions of this Agreement and decreased by (i) the amount of cash
distributed to such Member, (ii) the agreed fair market value of all actual and
deemed distributions of property made to such Member pursuant to this Agreement
(net of liabilities secured by such distributed property that the Member is
considered to assume or take subject to under Code Section 752), and (iii) all
items of Company deduction and loss allocated to such Member pursuant to Article
IV or other provisions of this Agreement.
In the event any Member transfers any Interest in accordance
with the terms of this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the transferred Interest.
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The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Treasury Regulations Section 1.704-1(b), and shall be interpreted and
applied in a manner consistent with such Regulations and any amendment or
successor provision thereto.
3.4 Member Loans. In the event that additional funds (in
excess of the Members' agreed Capital Contributions) are required by the Company
for any purpose relating to the business of the Company or for any of its
obligations, expenses, costs, or expenditures, including operating deficits, the
Company may borrow such funds as are needed from any Member or other Person for
such period of time and on such reasonable business terms as the Managers and
the lender may agree and at the rate of interest then prevailing for comparable
loans, or if such loan is from a Member or Affiliate, at an interest rate equal
to the rate at which the lending Member or Affiliate has borrowed such funds,
provided that such rate charged by a Member or Affiliate may not exceed the
Prime Rate plus four percent (4%) per annum. Any security interest in the
property of the Company which is given to any Member or Affiliate shall be
subordinate to any security interest in Company property given by the Company to
any lender who is not a Member or Affiliate of a Member. Loans made under this
Section may be repaid out of Available Cash Flow, but any amount of any such
loan that is outstanding at the time of the occurrence of any of the events
described in Article X shall be repaid as provided in Article X.
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
4.1 Allocation of Net Profits and Net Loss of the Company.
Except as otherwise provided in this Article IV, Net Profits and Net Loss of the
Company in each Fiscal Year shall be allocated among the Members as follows:
(a) Net Profits. Net Profits shall be allocated among
the Members as follows:
(i) first, to each of the Members until the
cumulative Net Profits allocated to such Member pursuant to this Section 4.1(a)
is equal to the cumulative Net Loss previously allocated to the Member pursuant
to Section 4.1(b);
(ii) second, to the Members until the cumulative
Net Profits allocated to the Members pursuant to this Section 4.1(a)(ii) is
equal to 100% of the accrued amount of the Members' Priority Return; and
(iii) thereafter, (A) 25% to the Managing Member
and (B) 75% to the Members (including the Investor Members and the Managing
Member), in proportion to their Capital Contributions.
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(b) Allocation of Net Loss. Except as otherwise provided
in this Article, Net Loss shall be allocated among the Members as follows:
(i) first, in proportion to the positive
balances, if any, in the Members' respective Capital Accounts, until such
balances are reduced to zero; and
(ii) thereafter, to the Members, in proportion
to their Capital Contributions.
4.2 Residual Allocations. Except as otherwise provided in this
Agreement, all items of Company income, gain, loss, deduction, and any other
allocations not otherwise provided for shall be divided among the Members in the
same proportions as they share Net Profits or Net Losses, as the case may be,
for the Fiscal Year.
4.3 Qualified Income Offset. If any Member unexpectedly
receives any adjustments, allocation or distributions described in clauses (4),
(5) or (6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d), items of
Company income shall be specially allocated to such Member in an amount and
manner sufficient to eliminate the Adjusted Capital Account Deficit created by
such adjustments, allocations or distributions as quickly as possible. This
Section 4.3 is intended to constitute a "qualified income offset" within the
meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(3).
4.4 Minimum Gain Chargeback. If there is a net decrease in
Company Minimum Gain during a Fiscal Year, each Member will be allocated, before
any other allocation under this Article IV, items of income and gain for such
Fiscal Year (and if necessary, subsequent years) in proportion to and to the
extent of an amount equal to such Member's share of the net decrease in Company
Minimum Gain determined in accordance with Treasury Regulations Section
l.704-2(g)(2). This Section 4.4 is intended to comply with, and shall be
interpreted consistently with, the "minimum gain chargeback" provisions of
Treasury Regulations Section l.704-2(f).
4.5 Special Allocations. Any special allocations of items of
Net Profits pursuant to Sections 4.3 and 4.4 shall be taken into account in
computing subsequent allocations of Net Profits pursuant to Section 4.l, so that
the net amount of any items so allocated and the gain, loss and any other item
allocated to each Member pursuant to Section 4.l shall, to the extent possible,
be equal to the net amount that would have been allocated to each such Member
pursuant to the provisions of this Article if such special allocations had not
occurred.
4.6 Fees to Members or Affiliates. Notwithstanding the
provisions of Section 4.l, in the event that any fees, interest, or other
amounts paid to any Member or any Affiliate thereof pursuant to this Agreement
or any other agreement between the Company and any Member or Affiliate thereof
providing for the payment of such amount, and deducted by the Company in
reliance on Section 707(a) and/or 707(c) of the Code, are disallowed as
deductions to the Company on its federal income tax return and are treated as
Company distributions, then
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(i) the Net Profits or Net Loss, as the case may be, for the
Fiscal Year in which such fees, interest, or other amounts were paid shall be
increased or decreased, as the case may be, by the amount of such fees,
interest, or other amounts that are treated as Company distributions; and
(ii) there shall be allocated to the Member to which (or to
whose Affiliate) such fees, interest, or other amounts were paid, prior to the
allocations pursuant to Section 4.l, an amount of gross income for the Fiscal
Year equal to the amount of such fees, interest, or other amounts that are
treated as Company distributions.
4.7 Section 704(c) Allocation. Any item of income, gain, loss,
and deduction with respect to any property (other than cash) that has been
contributed by a Member to the capital of the Company and which is required or
permitted to be allocated to such Member for income tax purposes under Section
704(c) of the Code so as to take into account the variation between the tax
basis of such property and its fair market value at the time of its contribution
shall be allocated to such Member solely for income tax purposes in the manner
so required or permitted.
4.8 Distribution in Kind. If assets of the Company are
distributed in kind, Net Profits and Net Losses shall be allocated as if such
assets had been sold for their fair market value on the date of distribution.
For purposes of this allocation, the fair market value of any securities of GEOK
shall be determined as provided in Article XII hereof and the fair market value
of any other assets shall be determined by the Managers, in their sole and
absolute discretion.
ARTICLE V
DISTRIBUTIONS
5.1 Distributions of Available Cash Flow. Available Cash
Flow shall be distributed as soon as practicable, and securities of GEOK may be
distributed from time to time, to and among the Members as follows:
(i) first, to each of the Members to the extent
of its accrued Priority Return, reduced by any prior distributions made under
this Section 5.1(i);
(ii) second, to each of the Members to the extent
of its Adjusted Invested Capital; and
(iii) thereafter, (A) 25% to the Managing Member
and (B) 75% to the Members (including the Investor Members and the Managing
Member), in proportion to their Capital Contributions.
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For the purposes hereof, securities of GEOK distributed to the Members shall be
valued in accordance with Article XII hereof.
5.2 Estimated Taxes and Withholding Notwithstanding the
provisions of Section 5.1, distributions of Available Cash Flow with respect to
any Fiscal Year or other applicable period shall be made on a quarterly basis,
based on estimated results of operations through any applicable quarter, to all
Members to pay any required quarterly estimated federal and state income taxes
with respect to any profits of the Company attributable to such Fiscal Year or
other applicable period, assuming that all Members are subject to the highest
marginal federal and New York income tax rates. Distributions on account of
estimated income taxes shall be made at least ten (10) days prior to the due
date of any quarterly estimated tax payment. Any amounts withheld by the Company
with respect to any profits allocated to any Member as required under the Code
or any provision of applicable state and local income tax law shall be treated
as amounts distributed to the Members pursuant to this Article V. To the extent
any distributions under this Section 5.2 exceed the amounts distributable to the
Members under Section 5.1, any such excess shall be deemed to be an interest
free advance to the Members receiving such excess distributions, payable to the
Company from subsequent distributions as made. The foregoing distributions with
respect to federal and state income taxes shall be made even if as of the
applicable period the Company does not have sufficient Available Cash Flow to
cover such distributions.
ARTICLE VI
CONTROL AND MANAGEMENT
6.1 Management of the Company. The overall management and
control of the business and affairs of the Company shall be vested solely in the
Managers, who shall be responsible for the management of the Company's business.
6.2 Authority and Responsibility of the Managers.
(a) Except as expressly provided in this Agreement, all
decisions respecting any matter set forth in this Agreement or otherwise
affecting or arising out of the conduct of the business of the Company shall be
made by the Managers, and the Managers shall have the exclusive right and full
authority to manage, conduct and operate the Company's business. Specifically,
but not by way of limitation, the Managers shall be authorized and responsible,
subject to the limitations elsewhere set forth in this Agreement, in the name
and on behalf of the Company:
(i) to borrow and lend money and, as security
therefor, to mortgage, pledge or otherwise encumber the assets of the Company;
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(ii) to cause to be paid on or before the due
date thereof all amounts due and payable by the Company to any Person,
including, without limitation, to Affiliates of the Managers to the extent
permitted under this Agreement;
(iii) to employ such agents, employees, managers,
accountants, attorneys, consultants and other Persons, (including, without
limitation, itself and its Affiliates to the extent permitted under this
Agreement) necessary or appropriate to carry out the business and affairs of the
Company, and to pay such fees, expenses, salaries, wages and other compensation
to such Persons as it shall, in its sole discretion, determine;
(iv) to pay, extend, renew, modify, adjust,
submit to arbitration, prosecute, defend or compromise, upon such terms as it
may determine and upon such evidence as it may deem sufficient, any obligation,
suit, liability, cause of action or claim, including taxes, either in favor of
or against the Company;
(v) to pay any and all fees and to make any and
all expenditures which it, in its sole discretion, deems necessary or
appropriate in connection with the organization of the Company, the management
of the affairs of the Company, and the carrying out of its obligations and
responsibilities under this Agreement;
(vi) to cause to be paid any and all taxes,
charges and assessments that may be levied, assessed or imposed upon any of the
assets of the Company;
(vii) to cause all payments and other income which
become due with respect to the Company's investments to be collected;
(viii) to sign checks and make proper disbursements
of Company funds and to issue receipts for and on behalf of the Company;
(ix) to sell or refinance all or any portion of
the Company's investments;
(x) to enter into the agreements and engage in
transactions with entities and persons with which or whom the Managers are,
is or may be affiliated or with other Persons;
(xi) to make all elections required or permitted
to be made by the Company under the Code, except as provided in Section 9.4; and
(xii) to assume and exercise all rights, powers,
and responsibilities granted to Managers by the Act and, subject to the
limitations set forth in this Agreement, to do any and all acts and things which
shall be in furtherance of the Company's business as set forth in this
Agreement.
(b) With respect to all of its rights, powers and
responsibilities under this Agreement, the Managers are authorized to execute
and deliver, in the name and on behalf of the Company, such notes and other
evidence of indebtedness, contracts, assignments, deeds, leases, loan
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agreements, mortgages and other security instruments as it deems proper, all on
such terms and conditions as they deem proper.
6.3 Limitations on Authority of Managers.
Notwithstanding anything to the contrary contained in this Agreement, the
Managers shall not have the authority,
(a) Without the approval of all the Members:
(i) to do any willful act in contravention of
this Agreement;
(ii) to confess a judgment in a material amount
against the Company;
(iii) to convert property of the Company to its
own use, or assign any rights in specific property of the Company for other than
a purpose of the Company;
(iv) to perform any act that would subject the
Members to liability other than as members of a limited liability company in
any jurisdiction;
(v) to pay for any services performed by the
Managers or an Affiliate thereof, except as otherwise permitted in this
Agreement;
(vi) to execute or deliver any general assignment
for the benefit of the creditors of the Company; or
(vii) to make any loan to a Manager or its
Affiliates; or
(b) without the vote or written consent of a
Majority-in-Interest of the Members:
(i) to admit additional or substitute Members,
except as permitted hereunder; or
(ii) to admit any new Managers, except as
permitted hereunder.
6.4 Participation by Members. No Investor Member shall
participate in or interfere with the management of the Company or the operation
of its business. The exercise by an Investor Member of any of his rights or
powers granted in this Agreement shall not be deemed taking part in control of
the business of the Company and shall not constitute a violation of this Section
6.4. No Investor Member shall have any power or authority to sign for or to bind
the Company in any manner or for any purpose whatsoever. No Investor Member
shall have priority over any other Member with respect to any rights or duties
contained in this Agreement, unless expressly provided for in this Agreement.
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6.5 Other Activities of Managers or Members.
(a) The Managers shall not be required to devote their full
time and effort to the affairs of the Company, but shall devote such time and
effort as may reasonably be required to adequately promote the Company's
interests.
(b) The parties hereto expressly agree that any Manager or
Member may at any time engage in and possess interests in other business
ventures of any and every nature and description, independently or with others,
including, but not limited to, engaging in activities which parallel or compete
with the business of the Company, and neither the Company nor any Member shall
by virtue of this Agreement have any right, title or interest in or to such
independent activities or to the income or profits derived therefrom.
6.6 Fees and Expenses; Compensation of Managers.
(a) Except as specifically provided in this Agreement, no fees
shall be paid to any Member or Manager by the Company. However, the Managers
(and/or any Affiliate of the Managers, as the case may be) shall be entitled to
receive fees or other compensation from GEOK for services that it may render to
GEOK, including without limitation, an annual fee from GEOK for its or their
services in monitoring the Company's investment in GEOK, and reimbursement for
all reasonable out-of-pocket costs and expenses incurred on behalf of the
Company.
(b) Nothing in this Agreement shall be deemed to limit or
restrict the rights of the Managers or any of their Affiliates to contract for
and receive separate fees and benefits, directly or indirectly, as a result of
their interests in any Person which supplies goods or services to, or otherwise
transacts business with the Company or GEOK; provided, however, that the
material terms of any such transaction with the Company shall be (i) disclosed
to each Member or a predecessor in interest in writing at or prior to his or its
admission to the Company, or (ii) approved by a Majority-in-Interest of the
Members, or (iii) not materially less favorable to the Company than those which
would be obtainable from an unrelated party in an arm's-length transaction.
6.7 Liability for Acts and Omissions; Indemnification. The
Managers shall not be liable, responsible, or accountable in damages or
otherwise to any of the Members for, and the Company shall indemnify and save
harmless the Managers from, any loss or damage incurred by any of them by reason
of an act or omission performed or omitted by any of them in good faith on
behalf of the Company and in a manner reasonably believed by any of them to be
within the scope of the authority granted to them by this Agreement and in the
best interests of the Company, except for willful misconduct.
6.8 Number, Tenure and Qualifications of Managers. The number
of Managers of the Company may be amended from time to time by the vote or
written consent of at least Two-Thirds-in-Interest of the all Members. Each
Manager shall hold office until the next annual meeting of Members or until a
successor shall have been elected and qualified. Managers shall be elected by
the vote or written consent of at least a Majority-in-Interest of the Members
and need not be residents of the State of Delaware or Members of the Company.
Notwithstanding the foregoing, the
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Managing Member shall be the sole Manager of the Company until it has resigned
or been removed for cause as herein provided.
6.9 Resignation of Managers. Any Manager may resign at any
time by giving written notice to the Company. The resignation of any Manager
shall take effect upon receipt of such notice or at any later time specified in
such notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of the
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a withdrawal as a Member.
6.10 Removal of a Manager.
(a) The Members, at any time, upon the consent of
Two-Thirds-in-Interest of the Members, may remove a Manager for "cause." For
purposes hereof, "cause" means the occurrence of any one or more of the
following acts on the part of the Manager(s):
(1) willful and persistent inattention to the
Manager's duties hereunder;
(2) an act or acts amounting to gross negligence
or willful malfeasance to the material detriment of the Company; or
(3) a material breach of a Manager's obligations
and duties pursuant to this Agreement.
(b) To accomplish removal, the Members shall give notice to
the Manager, who shall have sixty (60) days from such notice to cure the reason
or reasons for such removal, and in the event of such cure he shall remain as a
Manager. If, at the end of sixty (60) days such Manager has not cured the reason
or reasons for such removal, upon a further notice from the Members, the powers
and authorities conferred on such Manager as a Manager under this Agreement
shall cease. If the Manager shall: (i) at or before the expiration of the 60-day
period notify the Members that in his reasonable opinion there is no cause for
such Manager's removal under the standards set forth in this Section 6.10 or
(ii) upon its receipt from the Members of the notice stating he is being
removed, notify the Members that in such Manager's reasonable opinion such
Manager has cured the reason for the proposed removal, then the question of
whether the Manager is to be removed shall be referred to an impartial
arbitrator mutually agreeable to the Manager and the Members, or, failing such
agreement within ten (10) business days, the parties shall apply within fifteen
(15) business days to the American Arbitration Association for appointment of an
independent arbitrator, who, in either case, shall have had no prior dealings
with any Manager or Member. The determination of the arbitrator shall be made
within sixty (60) business days of the date upon which the arbitrator receives
the question and shall be final, conclusive and binding upon such Manager and
the Members. The costs of the arbitrator shall be borne equally by the Manager
and the Company.
(c) The removed Manager shall have no further right or
obligation to bind or manage the Company. Otherwise, the removal of the Manager
shall not affect any existing rights
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or obligations of such Manager with respect to the Company, including such
Manager's right to exoneration and indemnification under Section 6.7 for acts or
omissions prior to the date of such removal, or to such Manager's interest, if
any, as a Member in the Company's capital, distributions, income, gains, losses
and deductions.
6.11 Vacancies of Managers. Any vacancy occurring for any
reason in the number of Managers may be filled by the vote or written consent of
at least a majority of the remaining Managers then in office; provided, however,
that if there are no remaining Managers, each vacancy shall be filled by the
vote or written consent of at least a Majority-in-Interest of the Members. A
Manager elected to fill a vacancy shall be elected for the unexpired term of the
Manager's predecessor in office and shall hold office until the expiration of
such term and until the Manager's successor has been elected and qualified. A
Manager chosen to fill a position resulting from an increase in the number of
Managers shall hold office until the next annual meeting of Members and until a
successor has been elected and qualified.
6.12 Place of Managers' Meetings. Regular and special meetings
of the Managers shall be held at any place within or without the State of
Delaware which has been designated from time to time by resolution of the
Managers. In the absence of such designation, all meetings shall be held at the
principal office of the Company.
6.13 Special Meetings of Managers. Special meetings of the
Managers for any purpose or purposes shall be called at any time by any Manager.
Notice of such special meetings, unless waived by attendance thereat or by
written consent to the holding of the meeting, shall be given by written notice
mailed at least ten (10) days before the date of such meeting or be hand
delivered or sent by facsimile at least ten (10) days before the date such
meeting is to be held.
6.14 Notice of Adjournment. Notice of the time and place of
holding an adjourned meeting need not be given to absent Managers if the time
and place be fixed at the meeting adjourned.
6.15 Waiver of Notice. The transactions approved or the
actions taken at any meeting of the Managers, however called and noticed or
wherever held, shall be as valid as though such transactions had been approved
or such other actions taken at a meeting duly held after regular call and
notice, if (a) a quorum be present, and (b) either before or after the meeting,
each of the Managers not present signs a written waiver of notice, or a consent
to holding such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the Company records or made a
part of the minutes of the meeting.
6.16 Action by Managers; Quorum; Voting; Action Without
a Meeting.
(a) A majority of the total number of Managers shall be
necessary to constitute a quorum for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the Managers present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Company, unless a greater number be
required by the Act. The Managers present at a duly called or held meeting at
which a quorum is present may
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continue to do business until adjournment, notwithstanding the withdrawal of
enough Managers to have less than a quorum.
(b) Each Manager shall have one vote. Any action which under
any provision of this Agreement may be taken at a meeting of the Managers may be
taken without a meeting if authorized by a writing signed by a majority of
Managers who would be entitled to vote upon such action at a meeting, unless the
Agreement requires such action to be taken by the unanimous vote of all of the
Managers, in which case such writing shall be signed by all of the Managers who
would be entitled to vote upon such action at a meeting, in each case filed with
the records of the Company.
6.17 Meetings by Telephone. Managers, or any committee
designated by the Managers, may participate in a meeting of the Managers by
means of conference telephone or similar communications equipment, by means of
which all persons participating in the meeting can hear one another, and such
participation in a meeting shall constitute presence in person at the meeting.
6.18 Adjournment. A majority of the Managers present may
adjourn any Managers' meeting to meet again at a stated day and hour or until
the time fixed for the next regular meeting of the Managers.
6.19 Committees of the Managers. The Managers, by resolution,
may designate from among the Managers one or more committees, each of which
shall comprise one or more of the Managers, and may designate one or more of the
Managers as alternate members of any committee, who may, subject to any
limitations imposed by the Managers, replace absent or disqualified Managers at
any meeting of that committee. Any such committee, to the extent provided in
such resolution, shall have and may exercise all of the authority of the
Managers, subject to the restrictions contained in the Act and hereunder.
ARTICLE VII
MEETINGS OF MEMBERS
7.1 Meetings. Meetings of the Members, for any purpose or
purposes, may be called by any Manager or by any Member or Members holding not
less than twenty percent (20%) of the Members' Interests.
7.2 Place of Meetings. Meetings of the Members may be held at
any place, within or outside the State of Delaware, for any meeting of the
Members designated in any notice of such meeting. If no such designation is
made, the place of any such meeting shall be the principal office of the
Company.
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7.3 Notice of Meetings. Written notice stating the place, day
and hour of the meeting indicating that it is being issued by or at the
direction of the person or persons calling the meeting, stating the purpose or
purposes for which the meeting is called shall be delivered no fewer than ten
(10) nor more than sixty (60) days before the date of the meeting.
7.4 Record Date. For the purpose of determining the Members
entitled to notice of or to vote at any meeting of Members or any adjournment of
such meeting, or Members entitled to receive payment of any distribution, or to
make a determination of Members for any other purpose, the date on which notice
of the meeting is mailed or the date on which the resolution declaring a
distribution is adopted, as the case may be, shall be the record date for making
such a determination. When a determination of Members entitled to vote at any
meeting of Members has been made pursuant to this Section, the determination
shall apply to any adjournment of the meeting.
7.5 Quorum. Members holding not less than a majority of all
Members' Interests, represented in person or by proxy, shall constitute a quorum
at any meeting of Members. In the absence of a quorum at any meeting of Members,
a majority of the Members' Interests so represented may adjourn the meeting from
time to time for a period not to exceed sixty (60) days without further notice.
However, if the adjournment is for more than sixty (60) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each Member of record entitled to vote
at such meeting. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed. The Members present at a meeting may continue
to transact business until adjournment, notwithstanding the withdrawal during
the meeting of Members' Interests whose absence results in less than a quorum
being present.
7.6 Manner of Acting. If a quorum is present at any meeting,
the vote or written consent of Members holding not less than a majority of
Members' Interests shall be the act of the Members, unless the vote of a greater
or less proportion or number is otherwise required by the Act or this Agreement.
7.7 Proxies.
(a) A Member may vote in person or by proxy executed in
writing by the Member or by a duly authorized attorney-in-fact.
(b) Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Member executing it, except as
otherwise provided in this Section.
(c) The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy
unless, before the authority is exercised, written notice of an adjudication of
such incompetence or of such death is received by any Manager.
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(d) Except when other provision shall have been made by
written agreement between the parties, the record holder of a Member's Interest
which he or it holds as pledgee or otherwise as security or which belong to
another, shall issue to the pledgor or to such owner of such Member's Interest,
upon demand therefor and payment of necessary expenses thereof, a proxy to vote
or take other action thereon.
(e) A proxy which is entitled "irrevocable proxy" and which
states that it is irrevocable, is irrevocable when it is held by (i) a pledgee,
(ii) a Person who has purchased or agreed to purchase the Member's Interest,
(iii) a creditor or creditors of the corporation who extend or continue credit
to the corporation in consideration of the proxy if the proxy states that it was
given in consideration of such extension or continuation of credit, the amount
thereof, and the name of the person extending or continuing credit, (iv) a
Person who has contracted to perform services for the Company, if a proxy is
required by the contract of employment, if the proxy states that it was given in
consideration of such contract of employment, the name of the employee and the
period of employment contracted for, or (v) a nominee of any of the Persons
described in clauses (i)-(iv) of this sentence.
(f) Notwithstanding a provision in a proxy described in
Section 7.7(e)(i), (iii) or (iv) stating that it is irrevocable, the proxy
becomes revocable after the pledge is redeemed, or the debt of the Company is
paid, or the period of employment provided for in the contract of employment has
terminated and, in a case provided for in Section 7.7(e)(iii) or (iv) of this
Agreement, becomes revocable three (3) years after the date of the proxy or at
the end of the period, if any, specified therein, whichever period is less,
unless the period of irrevocability is renewed from time to time by the
execution of a new irrevocable proxy as provided in this Section 7.7. This
paragraph does not affect the duration of a proxy under paragraph (b) of this
Section 7.7.
(g) A proxy may be revoked, notwithstanding a provision making
it irrevocable, by a purchaser of a Member's Interest without knowledge of the
existence of such proxy.
7.8 Action by Members Without a Meeting.
(a) Whenever the Members of the Company are required or
permitted to take any action by vote, such action may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken shall be signed by the Members who
hold the voting interests having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all of
the Members entitled to vote therein were present and voted and shall be
delivered to the office of the Company, its principal place of business or a
Manager, employee or agent of the Company.
(b) Every written consent shall bear the date of signature of
each Member who signs the consent, and no written consent shall be effective to
take the action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered in the manner required by this Section to the
Company, written consents signed by a sufficient number of Members to take the
action are delivered to the office of the Company, its principal place of
business or a Manager, employee or agent of the Company having custody of the
records of the Company.
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(c) Prompt notice of the taking of the action without a
meeting by less than unanimous written consent shall be given to each Member who
has not consented in writing but who would have been entitled to vote thereon
had such action been taken at a meeting.
7.9 Waiver of Notice. Notice of a meeting need not be given to
any Member who submits a signed waiver of notice, in person or by proxy, whether
before or after the meeting. The attendance of any Member at a meeting, in
person or by proxy, without protesting prior to the conclusion of the meeting
the lack of notice of such meeting, shall constitute a waiver of notice by him.
7.10 Voting Agreements. An agreement between two or more
Members, if in writing and signed by the parties thereto, may provide that in
exercising any voting rights, the Members' Interest held by them shall be voted
as therein provided, or as they may agree, or as determined in accordance with a
procedure agreed upon by them.
ARTICLE VIII
TRANSFERS OF COMPANY INTERESTS
8.1 Investment Representation.
(a) Each Member represents and warrants that it is acquiring
its Interest for its own account for investment purposes only and not with a
view to the distribution or resale thereof, in whole or in part.
(b) Each Member agrees that he will not sell, assign or
otherwise transfer his Interest or any fraction thereof to any Person who does
not similarly represent and warrant and similarly agree not to sell, assign or
transfer such Interest or fraction thereof to any Person who does not similarly
represent and warrant and agree.
8.2 Assignment by Members. Except as otherwise expressly
provided in this Section 8.2, a Member shall not sell, assign, transfer or
encumber all or any part of his Interest to any other Person, whether or not a
Member, unless the assignment is effected by substitution of the assignee as a
Member in compliance with the following conditions:
(a) the assignment shall be set forth in a written instrument
in the form and substance acceptable to legal counsel to the Company which (i)
states that the assignee desires to be substituted as a Member and accepts and
adopts all of the terms and provisions of this Agreement, and (ii) provides for
the payment by the parties to the assignment of all reasonable expenses incurred
by the Company in connection with the substitution, including, but not limited
to, the cost of obtaining opinions of legal counsel, preparing the necessary
amendment to this Agreement, the filing of an amendment to the Certificate of
Formation, if required, and all legal fees in connection with any of the
foregoing;
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(b) a majority of the Managers that are also Members
shall consent to the assignment, which any Manager/Member may refuse to do with
or without cause; and
(c) if requested by the Managers, the Company shall obtain an
opinion of legal counsel acceptable to the Managers, or shall require the
parties to the assignment to provide to the Company an opinion of legal counsel
acceptable to the Managers, to the effect that (i) the assignment is exempt from
registration and qualification under the Securities Act of 1933, as amended, and
all applicable state securities laws and (ii) the assignment will not cause a
termination of the Company for Federal income tax purposes.
8.3 Void Transfers; Effective Date.
(a) Assignment of a Member's Interest to a minor or person
adjudged insane or incompetent is prohibited (unless by will or intestate
succession), and consent of the Managers to any such assignment shall be void
and of no effect.
(b) Any purported assignment of a Member's Interest otherwise
than by way of substitution in accordance with this Article VIII shall be of no
effect as between the Company and the purported assignee and shall be
unenforceable as against the Company and the Members or the Managers. The
Managers shall not be charged with actual or constructive notice of any such
purported assignment and are expressly prohibited from making allocations and
distributions under this Agreement in accordance with any such purported
assignment.
(c) Any substitution of Members shall (unless otherwise agreed
by the Managers or required by law) become effective for all purposes as of the
first day of the month in which all the conditions of the substitution have been
satisfied. Any Person substituted as a Member pursuant to Section 8.2 shall
(except as otherwise expressly provided in this Agreement) be a Member for all
purposes of this Agreement to the extent of the Interest acquired by that
Person.
ARTICLE IX
ACCOUNTING AND RECORDS; CERTAIN TAX MATTERS
9.1 Books and Records. The Managers shall keep at the
Company's principal office separate books of account for the Company which shall
show a true and accurate record of all costs and expenses incurred, all charges
made, all credits made and received and all income derived in connection with
the operation of the Company business in accordance with generally accepted
accounting principles consistently applied.
Each Member shall, at its sole expense, have the right, upon
reasonable notice to the Managers, to examine, copy and audit the Company's
books and records during normal business hours.
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9.2 Reports. The Managers, at the expense of the Company,
shall cause to be prepared and distributed to the Members within ninety (90)
days after the expiration of each Fiscal Year, a balance sheet and profit and
loss statement prepared by the Accountants.
9.3 Tax Returns. The Managers shall cause the Accountants to
prepare all income and other tax returns of the Company to be filed not later
than the date when such filings are required by law. The Managers shall furnish
to each Member a copy of each such return as soon as it has been filed, together
with any schedules or other information which each Member may require in
connection with such Member's own tax affairs. Each of the Members shall, in its
respective income tax return and other statements filed with the Internal
Revenue Service or other taxing authority, report taxable income in accordance
with the provisions of this Agreement.
9.4 Section 754 Election. In connection with any assignment or
transfer of an Interest described in Sections 734(b) and 743(b) of the Code and
which is permitted by the terms of this Agreement, the Managers shall in their
reasonable discretion cause the Company, at the written request of the
transferor, the transferee or the successor to such Interest, on behalf of the
Company and at the time and in the manner provided in Treasury Regulations
Section 1.754-1(b) (or any like statute or regulation then in effect) to make an
election to adjust the basis of the Company's property in the manner provided in
Section 755 of the Code provided such adjustment increases the basis of Company
property, and such transferee shall pay all costs incurred by the Company in
connection therewith, including, without limitation, reasonable attorneys' and
accountants' fees.
9.5 Tax Matters Partner. The Managers shall designate one
Manager as the "Tax Matters Partner" under Code Section 6231(a)(7), with all
powers attendant thereto, who shall be authorized and required to represent the
Company (at the Company's expense) in connection with all examinations of the
Company's affairs by tax authorities, including resulting administrative and
judicial proceedings, and to expend Company funds for professional services and
costs associated therewith. Each Member agrees to cooperate with the Managers
and the Tax Matters Partner and to do or refrain from doing any or all things
reasonably required by them to conduct such proceedings. The Managing Member
shall be the initial Tax Matters Partner.
9.6 Withholding. If the Managers, in their reasonable
judgment, determine that the Code requires the Company to withhold any tax with
respect to a Member's distributive share of Company income, gain, loss,
deduction or credit, distributions of Available Cash Flow, or liquidating
distributions, the Managers shall cause the Company to withhold and pay the tax.
If at any time the amount required to be withheld exceeds the amount that would
otherwise be distributed to the Member to whom the withholding requirement
applies, that Member shall, as a condition to receiving any further
distribution, make an additional Capital Contribution equal to the excess of the
amount required to be withheld (and interest and penalties, if applicable) over
the amount, if any, that would otherwise be distributed to that Member and which
is available to be withheld. Any amount withheld with respect to a Member shall
be deducted from the amount that would otherwise be distributed to that Member
but shall be treated as though it had been distributed to that Member for all
purposes of this Agreement.
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9.7 Bank Accounts. The bank accounts of the Company shall be
maintained in such banking institutions as the Managers determine and
withdrawals shall be made only in the regular course of Company business and as
otherwise authorized in this Agreement on such signature or signatures as the
Managers may determine. The funds of the Company shall not be commingled with
the funds of any other person.
ARTICLE X
DISSOLUTION AND TERMINATION
10.1 Withdrawal. Except as otherwise provided in this
Agreement, no Member shall at any time retire or withdraw from the Company or
withdraw any amount out of its Capital Account. Any Member retiring or
withdrawing in contravention of this Section 10.1 shall indemnify, defend and
hold harmless the Company and all other Members (other than a Member who is, at
the time of such withdrawal, in default under this Agreement) from and against
any losses, expenses, judgments, fines, settlements or damages suffered or
incurred by the Company or any such other Member arising out of or resulting
from such retirement or withdrawal.
10.2 Dissolution. The Company shall be dissolved and its
business wound-up upon the earliest to occur of:
(i) the expiration of the term;
(ii) the Managers and a Majority-in-Interest of the
Members determine that the Company should be dissolved;
(iii) the Bankruptcy of the Company;
(iv) the Bankruptcy, dissolution, death, incapacity or
withdrawal of any Manager that is also a Member or the occurrence of any other
event that terminates the continued membership of any such Manager, unless
within one hundred eighty (180) days after such event the Company is continued
by the consent of a Majority-in-Interest of all of the remaining Members; and
(v) the sale or other disposition of all or substantially
all of the Company's assets.
Except as otherwise set forth herein, upon the dissolution of
the Company, the Managers shall take all actions deemed necessary or appropriate
in their sole discretion to wind-up the business affairs of the Company.
10.3 Distribution Upon Liquidation of the Company. Any
proceeds received by the Company in connection with the liquidation of the
Company, or other distributions made on
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liquidation (including distributions of securities of GEOK), shall be
distributed (after giving effect to all charges and credits to Capital Accounts
resulting from allocations and prior distributions) as follows and in the
following order or priority:
(a) first, to the payment of debts and liabilities of the
Company to the extent required (including all expenses of the Company incident
to any such liquidation of the Company, other than loans or other debts and
liabilities of the Company due to any Member or any Affiliate of any Member);
(b) second, to the setting up of any reserves which the
Managers deem reasonably necessary for contingent, unmatured or unforeseen
liabilities or obligations of the Company;
(c) third, to the repayment of any unrepaid loans theretofore
made by any Member or any Affiliate of any Member to the Company for Company
obligations, and to the payment of any other debts and liabilities of the
Company to any Member or any Affiliate of any Member;
(d) fourth, to each of the Members to the extent of its
accrued Priority Return, reduced by any prior distributions made under
Section 5.1;
(e) fifth, to each of the Members to the extent of its
Adjusted Invested Capital; and
(f) thereafter, (A) 25% to the Managing Member and (B) 75% to
the Members (including the Investor Members and the Managing Member), in
proportion to their Capital Contributions.
For the purposes hereof, securities of GEOK distributed to the Members shall be
valued in accordance with Article XII hereof.
10.4 Capital Account Deficits. If any Member has a deficit
balance in its Capital Account following the liquidation of its Interest, as
determined after taking into account all adjustments to such Capital Account for
the Fiscal Year of the Company during which such liquidation occurs (other than
those made pursuant to this Section 10.4), such Member shall have no obligation
to make any Capital Contribution, and the negative balance of any Capital
Account shall not be considered a debt owed by the Member to the Company or to
any other Person for any purpose.
10.5 Certificate of Cancellation. Following the dissolution of
the Company, or at any time there are less than two Members, the Managers shall
file a Certificate of Cancellation with the Secretary of State of Delaware
pursuant to the Act.
Page 228 of 241 Pages
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<PAGE>
<PAGE>
ARTICLE XI
AMENDMENTS
11.1 Amendments Adopted Solely by the Managers. The
Managers may, without the consent of any Member, amend any provision of this
Agreement and execute whatever documents may be required in connection
therewith to reflect:
(a) a change in the name of the Company or the location
of the principal place of business of the Company;
(b) the admission of a substituted Member in accordance
with this Agreement;
(c) a change which is necessary to qualify the Company under
the laws of any jurisdiction or which is necessary and advisable in the opinion
of the Managers to assure that the Company will not be treated as an association
taxable as a corporation and not as a limited liability company;
(d) a change of address of any Member; or
(e) any other amendment which is ministerial or similar
to the foregoing.
11.2 Amendments to be Adopted by Managers and Members. All
amendments to this Agreement shall be in writing and, except as provided in
Section 11.1, shall be approved by the Managers and by a Majority-in-Interest of
the Members, unless a greater vote or the specific approval of a Member is
required by this Agreement, in which case such greater vote or specific consent
shall be required.
ARTICLE XII
VALUATION OF SECURITIES OF GEOK
12.1 Normal Valuation. For the purposes of this Agreement, the
value of any security of GEOK as of the date of distribution to the Members (or,
in the event such date is a holiday or other day which is not a business day, as
of the next preceding business day) will be determined as follows:
(a) a security which is listed on a recognized securities
exchange or the National Market System will be valued at its last sales price
or, if no sale occurred on such date, at the last "bid" price; and
Page 229 of 241 Pages
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<PAGE>
<PAGE>
(b) a security which is traded on the Nasdaq Bulletin Board
will be valued at its last sales price or, if no sale occurred on such date, at
the last "bid" price;
(c) a security which is traded over-the-counter (other than on
the National Market System or the Nasdaq Bulletin Board) will be valued at the
last "bid" price; and
(d) all other securities will be valued on such date by the
Managing Member at fair market value in such manner as it may reasonably
determine.
12.2 Legal Restrictions on Transfer. Any security which is
held under a representation that it has been acquired for investment and not
with a view to public sale or distribution, or which is held subject to any
other legal restrictions, will be valued at such discount, if any, from the
value determined under 12.1 above as the Managing Member deems reasonably
necessary in its sole discretion to reflect properly the effect of such legal
restriction on the marketability of such security.
12.3 Objection to Valuation. If a Majority-in-Interest of the
Members object to the valuation of any security, the Managing Member will (at
the Company's expense) cause an independent securities expert (mutually
acceptable to the Managing Member and a Majority-in-Interest of the Members), to
review such valuation, and such expert's determination will be binding on the
parties.
ARTICLE XIII
MISCELLANEOUS
13.1 Notices. All notices required or permitted by this
Agreement shall be in writing and may be delivered by hand to the party to be
served or may be sent by registered or certified mail, with postage prepaid,
return receipt requested, or may be transmitted by overnight courier service,
and addressed in the case of the Company to 1013 Centre Road, Wilmington,
Delaware 19805-1297, with a copy to William R. Ziegler, Esq., c/o Parson &
Brown, 666 Third Avenue, New York, New York 10017, and in the case of the
Members as set forth on Schedule A hereto, or to such other address as shall
from time to time be supplied in writing by any party to the other. Notice sent
by registered or certified mail, post-paid, with return receipt requested,
addressed as above provided, shall be deemed given four (4) days after deposit
of same in the United States mail. Any notice or other document sent or
delivered in any other manner shall be effective only if and when received.
13.2 Successors and Assigns. Subject to the restrictions on
transfer set forth herein, this Agreement shall bind and inure to the benefit of
the parties hereto and their respective legal representatives, successors and
assigns.
Page 230 of 241 Pages
-24-
<PAGE>
<PAGE>
13.3 No Oral Modifications; Amendments. No oral amendment
of this Agreement shall be binding on the Members or the Company. Unless
otherwise set forth hereunder, any modification or amendment of this Agreement
must be in writing signed by all of the Members.
13.4 Captions. Any article, section or paragraph titles or
captions contained in this Agreement and the table of contents are for
convenience of reference only and shall not be deemed a part of this Agreement.
13.5 Terms. Common nouns and pronouns shall be deemed to refer
to the masculine, feminine, neuter, singular and plural, as the identity of the
Person may in the context require. Any references to the Code or other statutes
or laws shall include all amendments, modifications or replacements of the
specific sections and provisions concerned.
13.6 Invalidity. If any provision of this Agreement shall be
held invalid, it shall not affect in any respect whatsoever the validity of the
remainder of this Agreement.
13.7 Further Assurances. The parties hereto agree that they
will cooperate with each other and will execute and deliver or cause to be
delivered, all such other instruments, and will take all such other actions, as
either party hereto may reasonably request from time to time in order to
effectuate the provisions and purposes hereof.
13.8 Complete Agreement. This Agreement constitutes the
complete and exclusive statement of the agreement between the Members. It
supersedes all prior written and oral statements and no representation,
statement, condition or warranty not contained in this Agreement shall be
binding on the Members or have any force or effect whatsoever.
13.9 Attorneys' Fees. If any proceeding is brought by one
Member against one or more of the other Members to enforce, or for breach of,
any of the provisions in this Agreement, the prevailing Member(s) shall be
entitled in such proceeding to recover reasonable attorneys' fees together with
the costs of such proceeding therein incurred.
13.10 Governing Law. This Agreement shall be construed
and enforced in accordance with the laws of the State of Delaware.
13.11 No Third Party Beneficiary. Any agreement to pay any
amount and any assumption of liability herein contained, express or implied,
shall be only for the benefit of the Members and their respective heirs,
successors and assigns, and such agreements and assumption shall not inure to
the benefit of the obligees of any indebtedness or any other Person, whomsoever,
it being the intention of the Members that no one shall be deemed to be a third
party beneficiary of this Agreement.
13.12 Exhibits and Schedules. Each of the Exhibits and
Schedules attached hereto are hereby incorporated herein and made a part hereof
for all purposes, and references herein thereto shall be deemed to include this
reference and incorporation.
Page 231 of 241 Pages
-25-
<PAGE>
<PAGE>
13.13 References to this Agreement. Numbered or lettered
articles, sections and subsections herein contained refer to articles, sections
and subsections, respectively, of this Agreement unless otherwise expressly
stated. The words "herein," "hereof," "hereunder," "hereby," "this Agreement"
and other similar references shall be construed to mean and include this
Agreement and all amendments thereof and supplements thereto unless the context
shall clearly indicate or require otherwise.
13.14 Power of Attorney.
(a) Each of the Members and each successor or assign thereof
irrevocably constitutes and appoints each Manager his true and lawful attorney,
in his name, place and stead, to make, execute, acknowledge, swear to and file
any of the following documents:
(i) any modifications or amendments of this
Agreement as required under the laws of the State of Delaware or any
other state;
(ii) any modifications or amendments of the
Certificate of Formation or other instrument which may be required to be filed
by the Company under the laws of the State of Delaware or any other state;
(iii) a certificate of fictitious name for the
Company;
(iv) any other instrument which may be required
to be filed by the Company under the laws of any state or government or by any
governmental agency, or which the Managers deem it advisable to file; and
(v) any documents which may be required to
effect the continuation of the Company, the admission of an additional or
substituted Member or the dissolution and termination of the Company, provided
such continuation, admission or dissolution and termination are in accordance
with the terms of this Agreement.
(b) The within and foregoing power of attorney:
(i) is a special power of attorney coupled with
an interest and is irrevocable; and
(ii) may be exercised by any Manager for each
Member by listing all of the Members executing any instrument with a single
signature of the Manager acting as attorney-in-fact for all of them.
(c) Pursuant to the power of attorney hereinabove granted by
each Member to each Manager with the execution of this Agreement, as hereinabove
described, each Member authorizes said attorney to take any further action which
said attorney shall consider necessary or convenient in connection with any of
the foregoing, hereby giving said attorney full power and authority to do and
perform each and every act and thing whatsoever requisite and necessary to be
Page 232 of 241 Pages
-26-
<PAGE>
<PAGE>
done in and about the foregoing as fully as said Member might or could do if
personally present, and hereby ratifying and confirming all that said attorney
shall lawfully do or cause to be done by virtue hereof.
13.15 Reliance on Authority of Person Signing Agreement. If a
Member is a trust (with or without disclosed beneficiaries), general
partnership, limited partnership, limited liability company, estate,
corporation, or any entity other than a natural person, the Company and the
Members shall:
(a) not be required to determine the authority of the person
signing this Agreement to make any commitment or undertaking on behalf of such
entity or to determine any fact or circumstance bearing upon the existence of
the authority of such entity or to determine any fact or circumstance bearing
upon the existence of the authority of such person;
(b) not be required to see to the application or
distribution of proceeds paid or credited to persons signing this Agreement on
behalf of such entity;
(c) be entitled to rely on the authority of the person signing
this Agreement with respect to the voting of the Interest of such entity and
with respect to the giving of consent on behalf of such entity in connection
with any matter for which consent is permitted or required under this Agreement;
and
(d) be entitled to rely upon the authority of any general
partner, joint partner, or successor trustee, or president or vice president, as
the case may be, of any such entity the same as if such person were the person
originally signing this Agreement on behalf of such entity.
13.16 Consents and Approvals. Whenever the consent or approval
of a Member is required by this Agreement, such Member shall have the right to
give or withhold such consent or approval in his or its sole discretion, unless
otherwise specified.
13.17 GEOK Common Stock. Each of the Members agrees, so long
as he is a Member, not to establish or maintain a short position in the Common
Stock of GEOK.
Page 233 of 241 Pages
-27-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
MANAGING MEMBER: BLACKHAWK CAPITAL PARTNERS
By:/s/ WILLIAM R. ZIEGLER
----------------------------
Name: William R. Ziegler
Title: Partner
Page 234 of 241 Pages
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<PAGE>
<PAGE>
Investor Member Signature Page
INVESTOR MEMBER:
------------------------------
(Signature of Investor)
------------------------------
(Please print name)
------------------------------
(Number of Interests)
Residence Address of Investor (please print): Mailing Address if different from
residence address (please print):
- --------------------------------- ---------------------------------
(Street) (Street)
- --------------------------------- ---------------------------------
(City) (State) (Zip Code) (City) (State) (Zip Code)
- --------------------------------- ---------------------------------
(Telephone Number) (Telephone Number)
Page 235 of 241 Pages
-29-
<PAGE>
<PAGE>
EXHIBIT XIV
FORM OF PROFIT SHARING AGREEMENT
PROFIT SHARING AGREEMENT (hereinafter referred to as this
"Agreement"), dated as of July 24, 1997, by and among BLACKHAWK CAPITAL
PARTNERS, a Texas general partnership (the "Managing Member"), and [NAME OF
SPECIAL PARTICIPANT] (the "Special Participant").
W I T N E S S E T H:
WHEREAS, the Managing Member is the managing member of
Blackhawk Investors, L.L.C, a Delaware limited liability company ("Blackhawk")
that was formed for the purpose of acquiring certain securities of Geokinetics
Inc. ("GEOK"), consisting of shares of the Common Stock, par value $0.20 per
share (the "Common Stock"), certain shares of Series A Convertible Preferred
Stock, and certain shares of Series B Convertible Preferred Stock, each par
value $10.00 per share (collectively, the "Preferred Stock") and certain shadow
warrants to acquire shares of Common Stock that are only exercisable to the
extent that certain other warrants held by third parties are exercised (the
"Shadow Warrants");
WHEREAS, pursuant to the terms of that certain Limited
Liability Company Agreement of Blackhawk dated as of July 18, 1997 (as the same
may be amended from time to time, the "LLC Agreement"), the Managing Member will
be entitled to receive 25% of all distributions made by Blackhawk of cash and/or
securities of GEOK to its Members, after the Members have received distributions
of cash and/or securities equal to their capital contributions to Blackhawk plus
the specified Priority Return thereon; and
WHEREAS, the parties hereto desire to provide for the sharing
by the Managing Member with the Special Participant of a specified percentage of
the net distributions to be received by the Managing Member under the LLC
Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Adjusted Invested Capital" (with respect to each Member)
means, at any time, the sum of all Capital Contributions made by such Member
pursuant to Article III of the LLC Agreement less distributions previously made
to that Member pursuant to Section 5.1 (ii) of the LLC Agreement.
"Agreement" means this agreement, as it may be amended from
time to time.
"Allocation Percentage" means [ ]
Page 236 of 241 Pages
<PAGE>
<PAGE>
"Available Cash Flow" means, with respect to any Fiscal Year
or other period, the sum of all cash receipts of Blackhawk from any and all
sources, less all cash disbursements (including loan repayments, capital
improvements and replacements) and a reasonable allowance for reserves,
contingencies and anticipated obligations as determined by the Managers.
"Capital Contribution" means, with respect to each Member, the
total amount of money and fair market value of any property contributed to
Blackhawk by such Member.
"Current Market Value" of any Security means the value of such
security as of the date of distribution of same to the Managing Member (or, in
the event such date is a holiday or other day which is not a business day, as of
the next preceding business day), determined as follows: (i) a security which is
listed on a recognized securities exchange or the National Market System will be
valued at its last sales price or, if no sale occurred on such date, at the last
"bid" price; (ii) a security which is traded on the Nasdaq Bulletin Board will
be valued at its last sales price or, if no sale occurred on such date, at the
last "bid" price; (iii) a security which is traded over-the-counter (other than
on the National Market System or the Nasdaq Bulletin Board) will be valued at
the last "bid" price; and (iv) all other securities will be valued on such date
by the Managing Member at fair market value in such manner as it may reasonably
determine.
"Distribution" means any distribution of Available Cash Flow
(other than any distribution with respect to or on account of estimated taxes
and withholding made under Section 5.2 of the LLC Agreement) or Securities under
the LLC Agreement.
"Fiscal Year" means the fiscal year of Blackhawk as determined
the Managers. As used in this Agreement, a Fiscal Year shall include any partial
Fiscal Year at the beginning and end of Blackhawk's term.
"GEOK" has the meaning set forth in the preambles.
"LLC Agreement" has the meaning set forth in the preambles.
"Managers" means the Managing Member or any other Persons who
or which succeed the Managing Member or are added as Managers pursuant to the
LLC Agreement.
"Members" means the members of Blackhawk signatory to the LLC
Agreement.
"Net Proceeds" means cash or the Current Market Value of
Securities, net of transaction costs and taxes (inclusive of income taxes
imposed upon the Managing Member on account of any such Distribution) [and less
any reimbursed expenses of the Managing Member], received or to be received by
the Managing Member on account of a Distribution.
"Payout Amount" means such amount as shall equal the sum of
all Capital Contributions made by the Members and the aggregate Priority Return.
-2- Page 237 of 241 Pages
<PAGE>
<PAGE>
"Person" means an individual, trust, estate, tax-exempt
entity, partnership, joint venture, association, company, corporation, limited
liability company, government or agency thereof, or other entity.
"Priority Return" means, with respect to a Member, a sum
equivalent to the Priority Return Rate, cumulative but not compounded (pro rated
for any partial year), of the amount of the Adjusted Invested Capital of such
Member from time to time, calculated from time to time during the period to
which the Priority Return relates, commencing on the date the Member is admitted
to Blackhawk.
"Priority Return Rate" means six percent (6%) per annum for
the first one-year period to which the Priority Return Relates; nine percent
(9%) for the second one-year period; twelve percent (12%) for the third one-year
period; fifteen percent (15%) for the fourth one-year period; and eighteen
percent (18%) for the fifth one-year period.
"Securities" means any shares of Common Stock or Preferred
Stock of GEOK that may be distributed to the Members under the LLC Agreement.
Section 2. Sharing in Distributions. The Special Participant
shall be entitled to the Allocation Percentage of the Net Proceeds of any and
all Distributions made by Blackhawk to the Managing Member after the Members
have received or been credited with receipt of the Payout Amount. The Managing
Member shall make any payment due to the Special Participant in accordance with
the Allocation Percentage within ten (10) business days after receipt of the
applicable Distribution.
Section 3. Payment in Respect of Securities. Notwithstanding
anything contained herein to the contrary, the Managing Member shall not be
obligated to make any distribution to the Special Participant of any Securities
that it may receive under the LLC Agreement. With respect to any Distribution
that consists of Securities, the Managing Member, in its sole and absolute
discretion, may elect to either (i) effect the sale of such securities in the
open market and then distribute to the Special Participant the Allocation
Percentage of the Net Proceeds of such sale of Securities or (ii) pay to the
Special Participant an amount equal to the Special Participant's Allocation
Percentage of Net Proceeds, in either case, in lieu of transferring Securities
to such Special Participant.
Section 4. Notices. All notices, demands, and other
communications required or permitted hereunder shall be made in writing or by
telecopy, and shall be deemed to have been duly given when delivered by hand,
or, if mailed, five (5) business days after deposit in the mail, with postage
prepaid for first-class mail, or, when telecopied, when sent, and, regardless of
method, addressed to the party at the address set forth below, or such other
address as the party shall furnish to the other party in accordance with this
section:
If to the Managing Member:
-3- Page 238 of 241 Pages
<PAGE>
<PAGE>
Blackhawk Capital Partners
c/o William R. Ziegler
Parson & Brown
666 Third Avenue, 9th Floor
New York, New York 10017
Telecopy No.: (212) 682-9112
If to the Special Participant:
[Name]
[Street Address]
[City, State, Zip]
Telecopy No.: ( ) -
Section 5. Invalid Provision. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if any such invalid or unenforceable provision or provisions had
been omitted.
Section 6. Entire Agreement; Amendment and Waiver; Governing
Law. (a) This Agreement contains the entire understanding of the parties and
supersedes any prior agreements and understandings between the parties with
respect to its subject matter.
(b) No modification or waiver of this Agreement, or any part
hereof, shall be valid or effective unless in writing and signed by the party or
parties sought to be charged therewith.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to choice of
law or conflicts of law principles.
Section 7. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
MANAGING MEMBER:
BLACKHAWK CAPITAL PARTNERS
By:
______________________________________
William R. Ziegler, Partner
-4- Page 239 of 241 Pages
<PAGE>
<PAGE>
SPECIAL PARTICIPANT:
______________________________________
[NAME]
-5- Page 240 of 241 Pages
<PAGE>
<PAGE>
EXHIBIT XIV (con't)
SCHEDULE OF SPECIAL PARTICIPANTS
<TABLE>
<CAPTION>
Indirect Percentage Interest Allocation Percentage of
in Total Distributions by Distributions by Blackhawk
Blackhawk Investors, LLC to Blackhawk Capital
Name ("Blackhawk") After Payout Partners After Payout
- ---- ---------------------------- ---------------------------
<S> <C> <C>
Lawrence J. Goldstein .0037 .0148
Peter A. Hurwitz .0037 .0148
Michael A.M. Keehner .0037 .0148
Paul Majane .0037 .0148
Mike L. Mullen .0037 .0148
Roy T. Oliver, Jr. .0037 .0148
Thomas H. O'Neill, Jr. .02023 .0809
Winston Partners, L.P. .001475 .0059
Winston Partners II LLC .001475 .0059
Winston Partners II LDC .00295 .0118
William R. Ziegler .00167 .0067
TOTALS: .05 .20
</TABLE>
Page 241 of 241 Pages
