SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 30, 1998
GEOKINETICS INC.
(Exact name of Registrant as specified in charter)
DELAWARE 0-9268 94-1690082
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
5555 SAN FELIPE, SUITE 780, HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (713) 850-7600
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 30, 1998, Registrant acquired all of the outstanding
capital stock of Geophysical Development Corporation, a Texas
corporation ("GDC"), from Fred J. Hilterman, N. Wayne Lauritzen,
Reginald N. Neale and John W.C. Sherwood pursuant to the terms of a
Stock Purchase Agreement (the "GDC Agreement") among Registrant, GDC
and the holders of all of the outstanding capital stock of GDC. GDC
is a Houston, Texas-based provider of seismic data processing,
software and consultation services. Pursuant to the GDC Agreement,
Registrant acquired 6,750 shares of GDC's common stock (the "GDC
shares"), representing 100% of the outstanding capital stock of GDC
from the shareholders of GDC in exchange for (I) cash in the amount
of $26,000,000 and (ii) 1,000,000 newly-issued shares of
Registrant's Common Stock, $0.01 par value per share (the "Common
Stock"). In addition, Registrant agrees to grant options entitling
certain employees of GDC to purchase up to an aggregate of 1,000,000
shares of the Common Stock at an exercise price of $3.00 per share.
Effective April 30, 1998, the Registrant also entered into
employment agreements with certain of the former GDC shareholders,
pursuant to which such former GDC shareholders were granted options
to purchase up to an aggregate of 400,000 shares of Common Stock at
an exercise price equal to the closing price per share of the Common
Stock on April 30, 1998. The amount of consideration paid by
Registrant to the former GDC shareholders for the acquisition of the
GDC Shares was determined as a result of arms-length negotiations
and agreement between unrelated parties.
The description contained herein of Registrant's acquisition of the
GDC Shares is qualified in its entirety by reference to the GDC
Agreement, a copy of which is attached hereto as Exhibit 2.1 and
incorporated herein by reference.
In order to finance the acquisition of the GDC Shares, Registrant
completed a private offering in the amount of $40,000,000 of certain
securities designated as its 12.0% Senior Subordinated Notes (the
"Notes") to DLJ Investment Partners, L.P. ("DLJ") and certain
additional investors (DLJ and certain other investors being referred
to herein collectively as, the "Purchasers") pursuant to the terms
of a Securities Purchase Agreement dated as of April 30, 1998, by
and among the Registrant and the Purchasers. In addition, the
Registrant (i) caused certain of its wholly-owned subsidiaries to
execute guarantees of the Notes pursuant to an Indenture executed by
each of them, (ii) granted warrants ("Warrants") to the Purchasers
entitling them to purchase up to an aggregate of 7,618,594 shares of
Common Stock at a price of $2.00 per share, subject to certain
adjustments, and (iii) granted certain registration rights in favor
of the Purchasers with respect to the Notes, the Warrants and the
shares of Common Stock which may be acquired upon exercise of the
Warrants.
-2-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
As of the date of filing of this Current Report on Form 8-K,
it is impracticable to provide the financial statements
required by this Item 7(a) with respect to the acquisition of
Geophysical Development Corporation. In accordance with Item
7(a)(4) of Form 8-K, such financial statements shall be filed
by amendment to this Form 8-K no later than 60 days after May
15, 1998.
(b) Pro Forma Financial Information
As of the date of filing of this Current Report on Form 8-K,
it is impracticable to provide the financial information by
this Item 7(b). In accordance with Item 7(b) of Form 8-K, such
financial information shall be filed by amendment to this Form
8-K no later than 60 days after May 15, 1998.
(c) Exhibits
(2.1)* Stock Purchase Agreement dated as of March 24, 1998,
among Registrant, Geophysical Development Corporation
and the holders of all of the capital stock of
Geophysical Development Corporation.
(4.1)*+ Securities Purchase Agreement dated as of April 30,
1998, among Registrant, DLJ Investment Partners, L.P.
and certain additional investors.
(4.2) Warrant Agreement dated as of April 30, 1998, among
Registrant, DLJ Investment Partners, L.P. and certain
additional investors.
(4.3) Note Registration Rights Agreement dated as of April
30, 1998, among Registrant, DLJ Investment Partners,
L.P. and certain additional investors.
(4.4) Indenture dated as of April 30, 1998, executed by the
Registrant, HOC Production Co., Inc., Geokinetics
Production Co., Inc., Quantum Geophysical, Inc.,
Geoscience Software Solutions, Inc., Signature
Geophysical Services, Inc., Reliable Exploration,
Incorporated, and Geophysical Development
Corporation.
(4.5) Tag Along-Drag Along Agreement dated as of April 30,
1998 among Registrant, DLJ Investment Partners, L.P.
and certain additional investors.
-3-
<PAGE>
(99) Press Release Dated May 1, 1998
* Registrant hereby agrees to furnish supplementally to the Securities and
Exchange Commission, upon request, a copy of any omitted exhibit or schedule to
the attached Exhibit, all of which omitted exhibits or schedules are listed on
the last page of the attached Exhibit.
+ To be filed by amendment.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned herein to duly authorized.
Dated: May 15, 1998
GEOKINETICS INC.
By: /s/ JAY D. HABER
Jay D. Haber, Chief Executive Officer
-4-
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
AMONG
GEOKINETICS INC.,
GEOPHYSICAL DEVELOPMENT CORPORATION
AND
THE HOLDERS OF THE
CAPITAL STOCK OF
GEOPHYSICAL DEVELOPMENT CORPORATION
MARCH 24, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Page
ARTICLE 1.
GENERAL..............................................................................1
1.1 DEFINITIONS.................................................................1
1.2 AGREEMENT TO PURCHASE AND SELL ACQUIRED SHARES..............................6
1.3 PURCHASE PRICE..............................................................6
1.4 REGISTRATION RIGHTS.........................................................6
1.5 EARNEST MONEY DEPOSIT.......................................................6
1.6 THE CLOSING.................................................................7
1.7 DELIVERIES AT THE CLOSING...................................................7
1.8 NO ASSIGNMENTS..............................................................7
1.9 PAYMENT IN FULL SATISFACTION OF RIGHTS......................................7
1.10 WORKING CAPITAL ADJUSTMENT..................................................7
(a) DETERMINATION OF WORKING CAPITAL ADJUSTMENT........................7
(b) REVIEW OF WORKING CAPITAL STATEMENT................................8
(c) PAYMENT OF WORKING CAPITAL ADJUSTMENT..............................8
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES.......................................................8
2.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS...............................8
(a) AUTHORIZATION OF TRANSACTION.......................................9
(b) NONCONTRAVENTION...................................................9
(c) BROKERS' FEES......................................................9
(d) ACQUIRED SHARES....................................................9
(e) RESTRICTED SECURITIES.............................................10
2.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER................................10
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER OF THE BUYER......10
(b) AUTHORIZATION OF TRANSACTION......................................11
(c) NONCONTRAVENTION..................................................11
(d) BROKERS' FEES.....................................................11
(e) INVESTMENT........................................................11
(f) BUYER COMMON STOCK................................................11
2.3 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY......................12
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER..................13
(b) AUTHORITY RELATIVE TO AGREEMENT...................................13
(c) CAPITALIZATION....................................................13
(d) SUBSIDIARIES......................................................14
(e) NONCONTRAVENTION..................................................14
(f) BROKERS' FEES.....................................................14
i
<PAGE>
TABLE OF CONTENTS (Cont'd.)
(g) TITLE TO ASSETS...................................................14
(h) FINANCIAL STATEMENTS..............................................15
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS..............................15
(j) UNDISCLOSED LIABILITIES...........................................17
(k) PERMITS AND LEGAL COMPLIANCE......................................17
(l) TAX MATTERS.......................................................17
(m) REAL PROPERTY.....................................................19
(n) INTELLECTUAL PROPERTY.............................................20
(o) TANGIBLE ASSETS...................................................23
(p) CONTRACTS.........................................................23
(q) NOTES AND ACCOUNTS RECEIVABLE.....................................24
(r) POWERS OF ATTORNEY................................................24
(s) INSURANCE.........................................................24
(t) LITIGATION........................................................25
(u) WARRANTY..........................................................26
(v) LABOR AND EMPLOYMENT MATTERS......................................26
(w) EMPLOYEE BENEFITS.................................................27
(x) GUARANTIES........................................................29
(y) ENVIRONMENT, HEALTH, AND SAFETY...................................29
(z) CERTAIN BUSINESS RELATIONSHIPS....................................29
(aa) INVESTMENT COMPANY................................................29
(bb) DISCLOSURE........................................................30
ARTICLE 3.
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING...........................................30
3.1 GENERAL....................................................................30
3.2 NOTICES AND CONSENTS.......................................................30
3.3 OPERATION OF BUSINESS......................................................30
3.4 PRESERVATION OF BUSINESS...................................................33
3.5 FULL ACCESS................................................................33
3.6 NOTICE OF DEVELOPMENTS.....................................................33
3.7 EMPLOYMENT OF COMPANY EMPLOYEES............................................33
3.8 ASSUMPTION OF COMPENSATION OBLIGATIONS.....................................34
3.9 BONUSES TO COMPANY EMPLOYEES...............................................34
3.10 SELLER INDEBTEDNESS AND RECEIVABLES........................................34
3.11 EXCLUSIVITY................................................................34
3.12 SELLERS RELEASE OF CLAIMS..................................................34
3.13 CONFIDENTIALITY............................................................35
ii
<PAGE>
TABLE OF CONTENTS (Cont'd.)
ARTICLE 4.
POST-CLOSING COVENANTS..............................................................36
4.1 GENERAL....................................................................36
4.2 LITIGATION SUPPORT.........................................................36
4.3 TRANSITION.................................................................37
4.4 BUYER OPTIONS..............................................................37
4.5 DISTRIBUTION OF COMPANY PROFIT SHARING PLAN................................37
4.6 ELIGIBILITY UNDER BENEFIT PLANS............................................37
4.7 EMPLOYEE BONUS COMPENSATION................................................37
4.8 ASSIGNMENT OF ACCOUNTS RECEIVABLE..........................................38
4.9 ADDITIONAL CAPITAL CONTRIBUTIONS...........................................38
4.10 CONFIDENTIALITY............................................................39
4.11 CERTAIN TAX MATTERS........................................................39
4.12 COMPLIANCE WITH SECURITIES LAWS............................................40
ARTICLE 5.
CONDITIONS OF CLOSING...............................................................40
5.1 CONDITIONS OF OBLIGATIONS OF THE BUYER.....................................40
5.2 CONDITIONS OF OBLIGATIONS OF THE SELLERS...................................42
ARTICLE 6.
REMEDIES FOR BREACHES OF AGREEMENT..................................................43
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................................43
6.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER........................43
6.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS......................44
6.4 INDEMNIFICATION LIMITATIONS................................................44
6.5 INDEMNIFICATION PROCEDURES.................................................44
6.6 OTHER INDEMNIFICATION PROVISIONS...........................................46
ARTICLE 7.
MISCELLANEOUS.......................................................................46
7.1 TERMINATION OF AGREEMENT...................................................46
7.2 EFFECT OF TERMINATION......................................................46
7.3 NO THIRD-PARTY BENEFICIARIES...............................................46
7.4 ENTIRE AGREEMENT...........................................................46
7.5 SUCCESSION AND ASSIGNMENT..................................................47
7.6 COUNTERPARTS...............................................................47
7.7 HEADINGS...................................................................47
iii
<PAGE>
TABLE OF CONTENTS (Cont'd.)
7.8 NOTICES....................................................................47
7.9 GOVERNING LAW..............................................................48
7.10 AMENDMENTS AND WAIVERS.....................................................48
7.11 SEVERABILITY...............................................................48
7.12 EXPENSES...................................................................48
7.13 CONSTRUCTION...............................................................48
7.14 INCORPORATION OF EXHIBITS AND SCHEDULES....................................48
7.15 SPECIFIC PERFORMANCE.......................................................49
7.16 SUBMISSION TO JURISDICTION.................................................49
7.17 JOINDER OF SPOUSE..........................................................49
</TABLE>
EXHIBITS:
Exhibit 1.3 Allocation of Purchase Price
Exhibit 1.4 Registration Rights Agreement
Exhibit 1.5 Escrow Agreement
Exhibit 2.1(d) Acquired Shares
Exhibit 4.4 Option Schedule
Exhibit 5.1(f)(1) Hilterman Employment Agreement
Exhibit 5.1(f)(2) Lauritzen Employment Agreement
Exhibit 5.1(f)(3) Neale Employment Agreement
Exhibit 5.1(i) Opinion of Counsel to Sellers
Exhibit 5.2(g) Opinion of Counsel to Buyer
iv
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT") is made and entered
into as of March 24, 1998, by and among Geokinetics Inc., a Delaware
corporation (the "BUYER"), Geophysical Development Corporation, a Texas
corporation (the "COMPANY"), and the holders of all of the outstanding capital
stock of the Company (each, individually, referred to herein as a "SELLER" and
all, collectively, referred to herein as the "SELLERS"). The Buyer, the Sellers
and the Company are sometimes referred to collectively herein as the "PARTIES."
The Company is engaged in the business of providing geophysical
processing, software and consultation services to the oil and gas industry (the
"BUSINESS").
The Sellers own, in the aggregate, all of the issued and outstanding
common stock of the Company, no par value per share (the "COMMON STOCK"),
representing 100% of the outstanding capital stock of the Company.
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer all of the
shares of the Common Stock in return for cash and shares of the Buyer's common
stock, par value $.01 per share ("BUYER COMMON STOCK").
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
ARTICLE 1.
GENERAL
1.1 DEFINITIONS. Unless otherwise stated in this Agreement, capitalized
terms shall have the following meanings:
"ACQUIRED SHARES" means 6,750 shares of Common Stock of the Company
owned by the Sellers, representing one hundred percent (100%) of the total
outstanding shares of the capital stock of the Company.
"ADDITIONAL CAPITAL CONTRIBUTIONS" has the meaning set forth in Section
4.9 below.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act.
1
<PAGE>
"AFFILIATED GROUP" means any affiliated group within the meaning of
Section 1504 of the Code or any similar group defined under a similar provision
of state, local or foreign law.
"AGREEMENT" has the meaning set forth in the first paragraph above.
"ARBITRATING ACCOUNTANTS" has the meaning set forth in Section 1.10(b)
below.
"BASE CONSIDERATION" has the meaning set forth in Section 1.3 below.
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"BUSINESS" has the meaning set forth in the second paragraph above.
"BUYER" has the meaning set forth in the first paragraph above.
"BUYER COMMON STOCK" has the meaning set forth in the fourth paragraph
above.
"BUYER INDEMNIFIED PARTIES" has the meaning set forth in Section 6.2
"BUYER PREFERRED STOCK" has the meaning set forth in Section 2.2(h)
below.
"BUYER SEC FILINGS" has the meaning set forth in Section 2.2(g) below.
"CAUSE" has the meaning set forth in Section 4.7 below.
"CLOSING" has the meaning set forth in Section 1.6 below.
"CLOSING DATE" has the meaning set forth in Section 1.6 below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the common stock, no par value, of the Company.
"COMPANY" has the meaning set forth in the first paragraph above.
"COMPANY DISCLOSURE SCHEDULE" has the meaning set forth in Section 2.3
below.
"COMPANY FINANCIAL STATEMENTS" has the meaning set forth in Section
2.3(h) below.
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section 3.13(a)
below.
"CONTINUING EMPLOYEES" has the meaning set forth in Section 3.7 below.
2
<PAGE>
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in Section
1563 of the Code.
"DISCREPANCY NOTICE has the meaning set forth in Section 1.10 below.
"DEFERRED INTERCOMPANY TRANSACTION" has the meaning set forth in Treas.
Reg. ss.1.1502-13.
"EARNEST MONEY DEPOSIT" has the meaning set forth in Section 1.5 below.
"EMPLOYEE BENEFIT PLAN" means any (a) non-qualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"EMPLOYEE BONUSES" has the meaning set forth in Section 3.9 below.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in Section
3(2) of ERISA.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in Section
3(1) of ERISA.
"ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGREEMENT" has the meaning set forth in Section 1.5 below.
"EXCESS LOSS ACCOUNT" has the meaning set forth in Treas. Reg.
ss.1.1502-19.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"FIDUCIARY" has the meaning set forth in Section 3(21) of ERISA.
3
<PAGE>
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"GDC PROFIT SHARING PLAN" has the meaning set forth in Section 4.5
"INDEMNIFIED PARTY" has the meaning set forth in Section 6.5(a) below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 6.5(a) below.
"INDIVIDUAL BALANCE" has the meaning set forth in Section 4.5 below.
"INTELLECTUAL PROPERTY" means (a) all inventions, including algorithms
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, seismic data bases, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) all computer software
(including source codes and object codes, data and related documentation), (g)
all other proprietary rights, and (h) all copies and tangible embodiments
thereof (in whatever form or medium).
"KNOWN" OR "KNOWLEDGE" means that whenever a statement regarding the
existence or absence of facts in this Agreement is qualified by a phrase such as
"to such Person's knowledge" or "known by such Person," the Parties intend that
the information to be attributed to such Person is information that is actually
or constructively known to (a) the Person in the case of an individual, or (b)
in the case of a corporation or other entity, an officer or an employee who
devoted substantive attention to matters of such nature during the ordinary
course of his employment. A Person has "constructive knowledge" of those matters
which the individual involved could reasonably be expected to have as a result
of undertaking an investigation of such a scope and extent as a reasonably
prudent man would undertake concerning the particular subject matter.
"LETTER OF INTENT" means that certain letter dated February 18, 1998
executed among Sellers, the Company and Buyer.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"MULTIEMPLOYER PLAN" has the meaning set forth in Section 3(37) of
ERISA.
4
<PAGE>
"NET WORKING CAPITAL" has the meaning set forth in Section 1.10(a)(i)
below.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"OPTIONS" has the meaning set forth in Section 4.4 below.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PARTY" has the meaning set forth in the first paragraph above.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PREFERRED STOCK" means the preferred stock, no par value, of the
Company.
"PROCESS AGENT" has the meaning set forth in Section 7.16 below.
"PROHIBITED TRANSACTION" has the meaning set forth in Section 406 of
ERISA and Section 4975 of the Code.
"PURCHASE PRICE" has the meaning set forth in Section 1.3 below.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section
1.4 below.
"REPORTABLE EVENT" has the meaning set forth in Section 4043 of ERISA.
"REQUISITE SELLERS" means Sellers holding a majority in interest of the
Acquired Shares as set forth in SECTION 2.3(C) of the Company Disclosure
Schedule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, deed of trust, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"SELLER" and "SELLERS" have the meanings set forth in the first
paragraph above.
"SETTLEMENT NOTICE" has the meaning set forth in Section 6.5(c) below.
5
<PAGE>
"SUBSIDIARY" means any Person in which the Company (a) owns or controls
more than 50% of the voting securities, directly or indirectly, (b) has the
power to vote, or direct the voting of sufficient securities to elect a majority
of the directors, or (c) acts as manager or general partner.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"WORKING CAPITAL ADJUSTMENT" has the meaning set forth in Section
1.10(a)(ii) below.
"WORKING CAPITAL STATEMENT" has the meaning set forth in Section
1.10(a) below.
1.2 AGREEMENT TO PURCHASE AND SELL ACQUIRED SHARES. Subject to the
terms and conditions of this Agreement, the Buyer agrees to purchase from each
of the Sellers, and each of the Sellers agrees to sell to the Buyer, all of the
Common Stock owned by each such Seller, in the aggregate constituting the
Acquired Shares, for the consideration specified below in Section 1.3.
1.3 PURCHASE PRICE. Subject to the adjustments, set forth in Section
1.10 below, in consideration for the delivery of the Acquired Shares, Buyer
agrees to pay and deliver to the Sellers at the Closing the aggregate
consideration allocated among the Sellers in the manner set forth on EXHIBIT 1.3
attached hereto (the "PURCHASE PRICE") consisting of (i) $26,000,000 in cash
payable to the Sellers by wire transfer or delivery of immediately available
funds (the "BASE CONSIDERATION") and (ii) 1,000,000 shares of validly issued,
fully paid and nonassessable shares of Buyer Common Stock; PROVIDED, HOWEVER,
that each Seller shall have the right to receive the Base Consideration
allocated to such Seller in any combination of cash and Buyer Common Stock as
such Seller shall designate by written notice to the Buyer no later than three
business days prior to the scheduled Closing Date. In the event any Seller
elects to receive any of the Base Consideration in shares of Buyer Common Stock,
such shares shall be valued at $3.00 per share.
1.4 REGISTRATION RIGHTS. The Buyer and each of the Sellers shall
execute and deliver the Registration Rights Agreement in the form attached
hereto as EXHIBIT 1.4 (the "REGISTRATION RIGHTS AGREEMENT") .
1.5 EARNEST MONEY DEPOSIT. Upon the execution and delivery of this
Agreement, the Buyer shall deposit $1,000,000 in immediately available funds
(the "EARNEST MONEY DEPOSIT") with William G. Small in accordance with the terms
of the Escrow Agreement attached hereto as EXHIBIT 1.5 (the "ESCROW AGREEMENT").
At the Buyer's option, the Earnest Money Deposit, plus interest earned thereon,
shall be applied towards payment of the Base Consideration portion of the
6
<PAGE>
Purchase Price; PROVIDED, HOWEVER, that in the event that the transactions
contemplated by this Agreement shall not proceed to Closing by reason of the
failure of any condition precedent under Section 5.1 (except Section 5.1(d)) or
5.2 hereof (unless the failure results from the Company or the Sellers breaching
a representation, warranty or covenant contained in this Agreement or otherwise
breaching an obligation to proceed with the Closing hereunder), the Earnest
Money Deposit, together with interest earned thereon, shall be forfeited to
Sellers as liquidated damages and not as a penalty.
1.6 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Chamberlain,
Hrdlicka, White, Williams & Martin in Houston, Texas, commencing at 9:00 a.m.
local time on the second business day following the satisfaction or waiver of
all conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date as the
Buyer and the Sellers may mutually determine (the "CLOSING DATE").
1.7 DELIVERIES AT THE CLOSING. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 5.1 below, (ii) the Buyer will deliver to the Sellers the
various certificates, instruments, and documents referred to in Section 5.2
below, (iii) the Sellers will deliver to the Buyer stock certificates
representing all of the Acquired Shares, together with completed stock powers
transferring the shares to Buyer duly executed by such Seller, and (iv) the
Buyer will deliver to the Sellers the Purchase Price as specified in Section 1.3
above.
1.8 NO ASSIGNMENTS. No assignment, transfer or other disposition of
record or beneficial ownership of any shares of Common Stock may be made on or
after the date hereof.
1.9 PAYMENT IN FULL SATISFACTION OF RIGHTS. The delivery of the
Purchase Price to the Sellers with respect to the Common Stock shall be deemed
to be payment in full satisfaction of all rights pertaining to the outstanding
Common Stock.
1.10 WORKING CAPITAL ADJUSTMENT. The Purchase Price is subject to the
adjustment described in this Section 1.10:
(a) DETERMINATION OF WORKING CAPITAL ADJUSTMENT. Within 90
days after the Closing, the Buyer shall prepare and deliver to the
Sellers a statement (the "WORKING CAPITAL STATEMENT") based on the
financial statements of the Company, prepared in accordance with GAAP,
and showing (i) the calculation of the amount of the Company's current
assets and current liabilities as of the Closing Date and the amount of
the Company's Net Working Capital (defined below), and (ii) the
calculation of the Working Capital Adjustment (defined below), if any.
For purposes of this Section 1.10:
(i) "NET WORKING CAPITAL" means the current assets
minus current liabilities of the Company as determined in
accordance with GAAP; PROVIDED, HOWEVER, that current
liabilities for unpaid taxes shall be excluded from the
current liabilities of the Company PROVIDED FURTHER, that
accruals for unpaid (x) contributions
7
<PAGE>
to the GDC Profit Sharing Plan, (y) bonuses payable to GDC
employees (exclusive of the Sellers) in respect of the fiscal
year ending June 30, 1998, and (z) expenses described in
Section 7.12 below shall be included in the current
liabilities of the Company; and
(ii) "WORKING CAPITAL ADJUSTMENT" means (A) the
amount, if any, by which the Company's Net Working Capital as
of the Closing Date is less than One Million Seven Hundred
Fifty Thousand and 00/100 Dollars ($1,750,000), PLUS (B) the
aggregate cash surrender value of the life insurance policies
assigned by the Company to the Sellers at or prior to the
Closing. The cash surrender value of each policy shall be
determined based on a statement issued by each underwriter of
such life insurance policies delivered to the Buyer at or
prior to Closing, which statements shall be dated not earlier
than 30 days prior to the Closing Date.
(b) REVIEW OF WORKING CAPITAL STATEMENT. Sellers shall have
the right to review the Working Capital Statement (and supporting work
papers) and provide written notice to the Buyer of Sellers' objections
with respect to any error, omission or other discrepancy in the Working
Capital Statement (the "DISCREPANCY NOTICE") until 20 days following
the Sellers' receipt of the Working Capital Statement. Buyer and the
Sellers shall work together in good faith to resolve any such dispute
and agree on the final Working Capital Statement. In the event that the
Buyer and the Sellers cannot agree on the final Working Capital
Statement within 10 days after delivery of the Sellers' Discrepancy
Notice, the Buyer and Sellers shall refer the disputed issue or issues
to a national independent public accounting firm (other than the
regular accountants for any Party or any accountants who prepared the
Working Capital Statement) which is reasonably acceptable to each Party
(the "ARBITRATING ACCOUNTANTS") within 15 days following delivery of
the Sellers' Discrepancy Notice. The Arbitrating Accountants shall be
instructed to render a decision, which shall be binding upon both
parties, within 20 days. Each Party shall be entitled to present any
information or analysis concerning the matter in good faith to the
Arbitrating Accountants with a copy provided to the other Party. The
Buyer and Sellers shall each bear their own fees and expenses, and the
fees and expenses of the Arbitrating Accountants shall be shared
equally by the Buyer and the Sellers.
(c) PAYMENT OF WORKING CAPITAL ADJUSTMENT. The Sellers shall
deliver payment of the Working Capital Adjustment to the Buyer (if the
Working Capital Adjustment is greater than zero) via wire transfer or
other immediately available funds, within 10 days after the Working
Capital Adjustment is finally determined. No interest will be payable
in respect of the Working Capital Adjustment.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the Sellers
represents and warrants to the Buyer, severally and not jointly with any other
Seller, that the statements contained in this Section 2.1 are correct and
complete as of the date of this Agreement and will be correct and
8
<PAGE>
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2.1
with respect to each Seller).
(a) AUTHORIZATION OF TRANSACTION. The Seller has the full
right, power, and legal authority to execute and deliver this Agreement
and to consummate the transactions contemplated on his part hereby. No
proceeding on the part of the Seller and, no notice, consent,
authorization, order or approval of, filing or registration with, any
governmental commission, board or other regulatory body or any bank,
bonding company, lender, surety, customer, supplier, or any other
Person whatsoever is required for or in connection with the performance
by the Seller of this Agreement and the consummation by the Seller of
the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Seller and is a valid and binding
agreement of the Seller, enforceable against the Seller in accordance
with its terms.
(b) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which the Seller is subject, or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Seller is a
party or by which it is bound or to which any of Seller's assets is
subject. The execution, delivery and performance of this Agreement by
the Seller do not and the consummation by the Seller of the
transactions contemplated hereby will not violate or conflict with any
other restriction of any kind or character to which the Seller is
subject or by which any of the Seller's assets may be bound.
(c) BROKERS' FEES. The Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
(d) ACQUIRED SHARES. The Seller holds of record and owns
beneficially the number of shares of Common Stock set forth next to his
or her name in EXHIBIT 2.1(d) attached hereto. The Seller is, and as of
the Closing Date will be, the sole and exclusive lawful owner of such
shares of Common Stock, free and clear of all liens, claims,
encumbrances and rights of others of any nature whatsoever, with full
power to vote all such shares on any matter that may properly come
before shareholders of the Company, and the Seller may exercise such
voting power on any matter without violation of the rights of any
person. There are no rights, warrants or options outstanding with
respect to such Common Stock, and the Seller has no obligation to
deliver capital stock of the Company to any Person as of the date
hereof, at any time on or prior to the Closing Date, except as provided
in this Agreement.
9
<PAGE>
(e) RESTRICTED SECURITIES.
(i) The Seller acknowledges that the shares of Buyer
Common Stock which the Seller shall acquire pursuant to this
Agreement have not been registered under the Securities Act,
and are being acquired for the Seller's own account for
investment and not with a view to the distribution thereof.
The Buyer Common Stock will be subject to the stock transfer
restrictions described in Section 4.12 below.
(ii) The Seller has the knowledge and experience in
financial and business matters to enable him to evaluate the
merits and risks of approving this Agreement and the
transactions contemplated herein and acquiring shares of Buyer
Common Stock.
(iii) The Seller is able to bear the economic risks
of his investment in the Buyer Common Stock.
(iv) The Seller has been represented by legal counsel
in this transaction and the Seller and his advisors, including
such counsel, have been given the opportunity to ask questions
of, and receive answers from, the officers of the Buyer
concerning the terms of the transactions contemplated by this
Agreement and the affairs and the business and financial
condition of the Buyer.
(v) The Seller has received copies of Buyer's most
recent Form 10-KSB and each report or document subsequently
filed by the Buyer with the Securities and Exchange Commission
pursuant to the Securities Exchange Act, and the Seller and
his advisors have been given access to all documents, books
and additional information concerning the Buyer which they
have requested regarding the Buyer.
(vi) The Seller has made such inquiries by himself
and/or through his advisors in making a decision to approve
this Agreement and the transactions contemplated herein as the
Seller has deemed necessary and advisable.
(vii) The Seller acknowledges and agrees that the
Buyer Common Stock issued to the Seller may not be disposed of
except in accordance with the requirements of the Securities
Act and any applicable state securities laws.
2.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Sellers and the Company that the statements contained in
this Section 2.2 are correct as of the date of this Agreement and will be
correct as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
2.2).
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER OF THE
BUYER. The Buyer is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware. The Buyer is
duly authorized to conduct business and is in good standing under the
laws of each jurisdiction where such qualification is required. The
Buyer has full
10
<PAGE>
corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it.
(b) AUTHORIZATION OF TRANSACTION. Buyer has full corporate
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and
performance by the Buyer of this Agreement and the consummation by the
Buyer of the transactions contemplated on its part hereby have been
duly authorized by its Board of Directors. This Agreement constitutes,
and each other agreement to be executed by Buyer hereunder, when
executed and delivered by Buyer, will constitute the valid and legally
binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms and conditions. The Buyer is not required to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
to consummate the transactions contemplated by this Agreement.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which the Buyer is subject or any provision of its certificate of
incorporation or bylaws or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by
which any of Buyer's assets is subject.
(d) BROKERS' FEES. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Seller could become liable or obligated.
(e) INVESTMENT. The Buyer is not acquiring the Acquired Shares
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
(f) BUYER COMMON STOCK. The shares of Buyer Common Stock to be
issued to Seller pursuant to Section 1.3 above have been duly
authorized for issuance, and when issued and delivered pursuant to this
Agreement, will be validly issued, fully paid and non-assessable. The
issuance of the Buyer Common Stock pursuant to this Agreement is not
subject to any preemptive or similar rights.
(g) SEC FILINGS. Buyer has heretofore delivered to Sellers
accurate and complete copies of all reports, registration statements
and other filings filed by Buyer with the Securities and Exchange
Commission since January 1, 1997 ("BUYER SEC FILINGS"). As of their
respective dates, the Buyer SEC Filings did not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which
they
11
<PAGE>
were made, not misleading. The audited consolidated financial
statements and unaudited consolidated interim financial statements of
Buyer included in the Buyer SEC Filings present fairly, in conformity
with GAAP applied on a consistent basis the consolidated financial
position of Buyer as of the dates thereof and its consolidated results
of operations and cash flows for the periods then ended (subject to
normal year-end audit adjustments in the case of any unaudited interim
financial statements).
(h) CAPITALIZATION As of the execution date of this Agreement,
the entire authorized capital stock of the Buyer consists of
100,000,000 shares of Buyer Common Stock and 2,000,000 shares of
Preferred Stock, $10.00 par value per share ("BUYER PREFERRED STOCK"),
of which 18,326,816 shares of Buyer Common Stock and no shares of Buyer
Preferred Stock are validly issued and outstanding, fully paid and
nonassessable. No shares of the capital stock of the Buyer have been
issued in violation of the preemptive rights of any past or present
shareholder. In addition, as of the execution date of this Agreement,
the Buyer has outstanding options granted to employees, officers and
directors of the Buyer to acquire an aggregate of 2,882,500 shares of
Buyer Common Stock and warrants entitling the holders thereof to
purchase an aggregate of 11,542,375 shares of Buyer Common Stock.
Except as described in this Section 2.2(h), there are no outstanding
subscriptions, shares of capital stock, calls, warrants, options,
contracts, commitments, or demands relating to the capital stock of the
Buyer or other agreements of any character under which the Buyer would
be obligated to issue or purchase shares of its capital stock. There is
no voting agreement, voting trust, proxy, or other agreement or
understanding with respect to the voting of the capital stock of the
Buyer.
(i) DISCLOSURE. The representations and warranties contained
in this Section 2.2 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 2.2 not
misleading.
2.3 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. Mr.
Sherwood, severally but not jointly, and each of the remaining Sellers and the
Company, jointly and severally, represents and warrants to the Buyer that the
statements contained in this Section 2.3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 2.3), except as set forth in the
disclosure schedule delivered by the Sellers and the Company to the Buyer on the
date hereof and initialed by the Parties (the "COMPANY DISCLOSURE SCHEDULE").
Nothing in the Company Disclosure Schedule shall be deemed adequate to disclose
an exception to a representation or warranty made herein unless the Company
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Company Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 2.3. References in Section 2.3 to
a numbered schedule mean the section of the Company Disclosure Schedule that
corresponds with that number; for example, references to "Schedule 2.3(a)" mean
SECTION 2.3(a) of the Company Disclosure Schedule.
12
<PAGE>
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The
Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Texas. The Company is duly
authorized to conduct business and is in good standing under the laws
of each jurisdiction where such qualification is required. The Company
has full corporate power and authority and all licenses, permits and
authorizations necessary to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it. SECTION
2.3(a) of the Company Disclosure Schedule lists the directors and
officers of the Company. The Sellers have delivered to the Buyer
correct and complete copies of the charter and bylaws of the Company,
as amended to date. The minute book (containing the records of meetings
of the Sellers, the board of directors, and any committees of the board
of directors), the stock certificate books, and the stock record books
of the Company are correct and complete. The Company is not in default
under or in violation of any provision of its charter or bylaws.
(b) AUTHORITY RELATIVE TO AGREEMENT. The Company has the full
right, power, and legal authority to execute, deliver and perform this
Agreement, and to consummate the transactions contemplated on the part
of the Company hereby. The execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated on its part hereby have been duly authorized
by its Board of Directors and the Sellers in their capacity as the
holders of all of the capital stock of the Company. No proceeding on
the part of the Company, and, except for those approvals described in
SECTION 2.3(b) of the Company Disclosure Schedule, no notice, consent,
authorization, order or approval of, filing or registration with, any
governmental commission, board or other regulatory body, or any bank,
bonding company, lender, surety, customer, supplier, or any other
Person whatsoever is required for or in connection with the Company's
execution, delivery and performance of this Agreement. This Agreement
has been duly executed and delivered by the Company and is a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms.
(c) CAPITALIZATION. The entire authorized capital stock of the
Company consists of 50,000 shares of Common Stock and 50,000 shares of
Preferred Stock, of which 6,750 shares of Company Common Stock and no
shares of Preferred Stock are validly issued and outstanding, fully
paid and nonassessable, are held of record by the Sellers and represent
all of the outstanding capital stock of the Company. No shares of the
capital stock of the Company have been issued in violation of the
preemptive rights of any past or present shareholder. An aggregate of
2,250 shares of the capital stock of the Company are in the treasury of
the Company. There are no outstanding subscriptions, shares of capital
stock, calls, warrants, options, contracts, commitments, or demands
relating to the capital stock of the Company or other agreements of any
character under which the Company would be obligated to issue or
purchase shares of its capital stock. There is no voting agreement,
voting trust, proxy, or other agreement or understanding with respect
to the voting of the capital stock of the Company. The Company has no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company Common
Stock. The Company has no commitments to issue or sell any securities
or obligations convertible into or exchangeable for, or giving any
Person any right to subscribe for or
13
<PAGE>
acquire from the Company, any shares of its capital stock and no
securities or obligations evidencing any such rights are outstanding.
(d) SUBSIDIARIES. SECTION 2.3(d) of the Company Disclosure
Schedule sets forth the name, the interest of the Company, and the
capitalization of each of the Company's Subsidiaries. Except as
described on SECTION 2.3(d), neither the Company nor any Subsidiary
owns or has any right or obligation to acquire any class of securities
(including, without limitation, debt securities) issued by any person
or company, and neither the Company nor any Subsidiary is a party to or
bound by any partnership, joint venture, voluntary association, or
other agreement with any Person for the conduct of any business.
(e) NONCONTRAVENTION. Except as set forth in SECTION 2.3(E) of
the Company Disclosure Schedule, the execution, delivery, and
performance of this Agreement by the Company do not and the
consummation by the Company of the transactions contemplated hereby
will not (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, government agency, or court to which the
Company or any of their assets is subject or (ii) violate any provision
of the Articles of Incorporation or Bylaws of the Company, or (iii)
violate or result in (whether with the giving of notice or the lapse of
time or both) the violation of any provision of, or result in the
acceleration of or entitle any party to accelerate (whether after the
giving of notice or lapse of time or both) any obligation under, or
result in the creation or imposition of any Security Interest or other
encumbrance upon any of the property of the Company pursuant to any
provision of any mortgage, lien, lease, contract, agreement, license,
or instrument to which the Company is a party or by which any of its
assets is bound. The execution, delivery and performance of this
Agreement by the Company do not and will not violate or conflict with
any other restriction of any kind or character to which the Company is
subject or by which any of its assets may be bound, and the same do not
and will not constitute an event permitting termination of any such
mortgage, lien, lease, agreement, license or instrument to which the
Company is a party or by which any of its assets are bound. Except as
set forth in Section 2.3(e) of the Company Disclosure Schedule, the
Company does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency or any other Person in order for the Parties to
consummate the transactions contemplated by this Agreement.
(f) BROKERS' FEES. The Company has no liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(g) TITLE TO ASSETS. Except as set forth in SECTION 2.3(G) of
the Company Disclosure Schedule, the Company has good and marketable
title to, or a valid leasehold interest in, the properties and assets
owned or used by them, located on their premises, or shown on the
unaudited balance sheet as of February 28, 1998 or acquired after the
date thereof through the Closing Date, free and clear of all Security
Interests.
14
<PAGE>
(h) FINANCIAL STATEMENTS. The Sellers have previously
furnished Buyer with true and complete copies of the audited balance
sheets of the Company as of June 30, 1997, June 30, 1996, June 30,
1995, and the related statements of income, retained earnings and cash
flows for each of the three years in the period ended June 30, 1997.
Such financial statements have been prepared in conformity with GAAP
consistently applied and present fairly the financial position and
results of operations of the Company as of and for the respective
periods then ended. The Sellers have also previously furnished the
Buyer with a copy of the unaudited monthly balance sheets of the
Company as of the last day of each month from July 31, 1997 through
February 28, 1998, and the related monthly unaudited statement of
income, retained earnings and cash flows of the Company with respect to
each month from July 31, 1997 through February 28, 1998. Such financial
statements have been prepared using a tax basis method of accounting
consistently applied and present fairly the financial position and
results of operations of the Company as of and for the periods then
ended (subject to normal year-end audit adjustments). Subject to
Section 2.3(l)(ix), the Company does not have any liabilities or
obligations of a type which should be included in or reflected as such
in financial statements , whether related to tax or non-tax matters,
accrued or contingent, due or not yet due, liquidated or unliquidated,
or otherwise, except (i) Liabilities disclosed or reflected in such
financial statements, (ii) Liabilities described in the notes
accompanying the Company Financial Statements, (iii) Liabilities which
have arisen since the date of the balance sheet included in the Company
Financial Statements in the Ordinary Course of Business, (iv)
Liabilities arising under executory contracts in the Ordinary Course of
Business, and (v) other Liabilities which are not, individually or in
the aggregate, material to the Company. The financial statements,
including the certificates, described in this Section 2.3(h) are the
"COMPANY FINANCIAL STATEMENTS."
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1997,
there has not been any adverse change in the Business, financial
condition, operations, results of operations, or future prospects of
the Company. Without limiting the generality of the foregoing, since
that date, except as set forth in SECTION 2.3(i) of the Company
Disclosure Schedule, the Company has not:
(i) sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than for a fair
consideration;
(ii) entered into any agreement, contract, lease or
license (or series of related agreements, contracts, leases,
and licenses) involving more than $25,000;
(iii) accelerated, terminated, modified, or canceled
any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) to which
the Company is a party or by which the Company is bound, nor
has any other Person accelerated, terminated, modified, or
canceled any of the foregoing;
(iv) imposed any Security Interests upon any of its
assets, tangible or intangible;
15
<PAGE>
(v) made any capital expenditure (or series of
related capital expenditures) involving more than $25,000;
(vi) made any capital investment in, any loan to, or
any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and
acquisitions);
(vii) issued any note, bond, or other debt security
or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation;
(viii) delayed or postponed the payment of accounts
payable and other Liabilities;
(ix) canceled, compromised, waived, or released any
right or claim (or series of related rights and claims);
(x) granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(xi) made or authorized any change in the charter or
bylaws of the Company;
(xii) issued, sold, or otherwise disposed of any of
its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(xiii) declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(xiv) experienced or suffered any damage,
destruction, or loss (whether or not covered by insurance) to
its property;
(xv) made any loan to, or entered into any other
transaction with, any of its directors, officers, and
employees;
(xvi) entered into any employment contract or
collective bargaining agreement, written or oral, or modified
the terms of any existing such contract or agreement;
(xvii) granted any increase in the base compensation
of any of its directors, officers, and employees outside the
Ordinary Course of Business;
16
<PAGE>
(xviii) adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its
directors, officers, and employees;
(xix) made any other change in employment terms for
any of its directors, officers, and employees;
(xx) made or pledged to make any charitable or other
capital contribution; or
(xxi) become aware of any other material occurrence,
event, incident, action, failure to act, or transaction
involving the Company.
(j) UNDISCLOSED LIABILITIES. Except as described in SECTION
2.3(J) of the Company Disclosure Schedule, the Company has no Liability
(and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability), except for (i)
Liabilities set forth on the face of the Company Financial Statements
(or in any notes thereto), (ii) Liabilities which have arisen after
February 28, 1998 in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law), (iii) Liabilities arising under
executory contracts in the Ordinary Course of Business, and (iv) other
Liabilities which are not, individually or in the aggregate, material
to the Company.
(k) PERMITS AND LEGAL COMPLIANCE. The Company has all permits,
licenses, orders, qualifications, and approvals of all governmental and
regulatory authorities material to the conduct of their business, a
correct and complete list of which is set forth in SECTION 2.3(k) of
the Company Disclosure Schedule. All such permits, licenses, orders and
approvals are in full force and effect, and no suspension or
cancellation of any of them is pending or threatened. None of such
permits, licenses, orders or approvals, and no application for any of
such permits, licenses, orders or approvals, will be adversely affected
by the consummation of the transactions contemplated by this Agreement.
The Company has complied in all material respects with all applicable
laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced
against the Company or its Subsidiaries alleging any failure so to
comply.
(l) TAX MATTERS.
(i) All Tax Returns required to be filed by the
Company prior to the date hereof have been filed on a timely
basis with the appropriate governmental authorities in all
jurisdictions in which such Tax Returns are required to be
filed, and all such returns are correct and complete. Sellers
have delivered to Buyer correct and complete copies of all Tax
Returns, examination reports, and statements of
17
<PAGE>
deficiencies asserted against or agreed to by the Company
since January 1, 1993. The Company is not currently the
subject of any audit, examination or any similar investigation
by any governmental authority. SECTION 2.3(L) of the Company
Disclosure Schedule sets forth all audits, examinations or
similar investigations of the Company and its Subsidiaries by
any governmental authority since January 1, 1993. The Company
currently is not the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where the Company does
not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no Security Interests on any
of the assets of the Company that arose in connection with any
failure (or alleged failure) to pay any Tax.
(ii) All Taxes due from or properly accruable by the
Company and its Subsidiaries have been fully and timely paid
or, in the cases of Taxes for which payment is not yet
required, properly and fully accrued for on the Company
Financial Statements with respect to all taxable periods
ending on or prior to the date of this Agreement and interim
periods through the date of this Agreement.
(iii) The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(iv) The Company has not filed a consent under
Section 341(f) of the Code concerning collapsible
corporations. None of the Sellers or the Company is a party to
any agreement, contract or arrangement that would, by reason
of the consummation of any of the transactions contemplated by
this Agreement, individually or in the aggregate, result in
the payment of any "EXCESS PARACHUTE PAYMENT" within the
meaning of Section 280G of the Code. None of the assets of the
Company is required to be treated as being owned by any other
person pursuant to the "SAFE HARBOR" leasing provisions of
Section 168 of the Internal Revenue Code of 1954, as in effect
prior to the repeal of such leasing provisions.
(v) No Seller or director or officer (or employee
responsible for Tax matters) of the Company expects any
authority to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of the Company either (A)
claimed or raised by any authority in writing or (B) as to
which any of the Seller and the directors and officers (and
employees responsible for Tax matters) of the Company has
Knowledge, based upon personal contact with any agent of such
authority.
(vi) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
(vii) The Company is not a party to any Tax
allocation or sharing agreement. The Company (A) has not been
a member of an Affiliated Group filing a consolidated
18
<PAGE>
federal income Tax Return (other than a group the common
parent of which was the Company) or (B) has no Liability for
the Taxes of any Person (other than the Company) under Treas.
Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(viii) SECTION 2.3(L)(VIII) of the Company Disclosure
Schedule sets forth the following information with respect to
the Company as of the most recent practicable date: (A) the
basis of the Company in its assets; (B) the amount of any net
operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution
allocable to the Company; and (C) the amount of any deferred
gain or loss allocable to the Company arising out of any
Deferred Intercompany Transaction (as defined in Treas. Reg.
Section 1.1502-13).
(ix) The Tax Liability of the Company as of June 30,
1997, has been paid and was materially correct as recorded.
The February 28, 1998 financial statements reflect the
customary practice of recording federal estimated tax payments
in the balance sheet with no year-to-date federal income tax
provision recorded in the Company's financial statements.
(x) The Company will not be liable for any Taxes
under Section 1374 of the Code in connection with the deemed
sale of the Company's assets (including the assets of any
qualified subchapter S subsidiary) caused by the an election
under Section 338(h)(10) of the Code. Neither the Company nor
any qualified subchapter S subsidiary of the Company has, in
the past 10 years, (A) acquired assets from another
corporation in a transaction in which the Company's Tax basis
for the acquired assets was determined, in whole or in part,
by reference to the Tax basis of the acquired assets (or any
other property) in the hands of the transferor or (B) acquired
the stock of any corporation which is a qualified subchapter S
subsidiary.
(m) REAL PROPERTY.
(i) The Company does not own any real property.
(ii) SCHEDULE 2.3(m)(II) of the Company Disclosure
Schedule lists and describes briefly all real property leased
or subleased by or to the Company (whether as lessor or as
lessee). The Sellers have delivered to the Buyer correct and
complete copies of the leases and subleases listed in SCHEDULE
2.3(m)(II) (as amended to date). With respect to each lease
and sublease listed in SCHEDULE 2.3(m)(II):
(A) the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(B) the lease or sublease will continue to
be legal, valid, binding, enforceable, and in full
force and effect on identical terms immediately
following the consummation of the transactions
contemplated hereby;
19
<PAGE>
(C) neither the Company, nor to the Sellers'
Knowledge, any other party to the lease or sublease,
is in breach or default, and to the Sellers'
Knowledge no event has occurred which, with notice or
lapse of time, would constitute a breach or default
or permit termination, modification, or acceleration
thereunder;
(D) neither the Company, nor to the Sellers'
Knowledge, any other party to the lease or sublease,
has repudiated any provision thereof;
(E) there are no disputes, or forbearance
programs in effect as to the lease or sublease;
(F) with respect to each sublease, the
representations and warranties set forth in
subsections (A) through (E) above are true and
correct with respect to the underlying lease;
(G) the Company has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or
subleasehold;
(H) to the Sellers' Knowledge all facilities
leased or subleased thereunder have received all
approvals of governmental authorities (including
licenses and permits) required in connection with the
operation thereof and have been operated and
maintained in accordance with applicable laws, rules,
and regulations;
(I) all facilities leased or subleased
thereunder are supplied with utilities and other
services necessary for the operation of said
facilities.
(n) INTELLECTUAL PROPERTY. SECTION 2.3(n) of the Company
Disclosure Schedule sets forth a correct and complete list of
Intellectual Property owned by the Company. With respect to each of
such item of Intellectual Property:
(i) The Company owns or has the right to use pursuant
to license, sublicense, agreement, or permission all
Intellectual Property necessary or desirable for the operation
of the businesses of the Company as presently conducted and as
presently proposed to be conducted. Each item of Intellectual
Property owned or used by the Company immediately prior to the
Closing hereunder will be owned or available for use by the
Company on identical terms and conditions immediately
subsequent to the Closing hereunder. Except as otherwise
disclosed in Section 2.3(n) of the Company Disclosure
Schedule, the Company has taken all necessary and desirable
action to maintain and protect each item of Intellectual
Property that it owns or uses.
(ii) The Company has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights
20
<PAGE>
of third parties, and none of the Sellers and the directors
and officers (and employees with responsibility for
Intellectual Property matters) of the Company has ever
received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement,
misappropriation, or violation (including any claim that the
Company must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of any
of the Sellers and the directors and officers (and employees
with responsibility for Intellectual Property matters) of the
Company, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of any of the Company.
(iii) SECTION 2.3(n)(III) of the Company Disclosure
Schedule identifies each patent or registration which has been
issued to the Company with respect to any of its Intellectual
Property, identifies each pending patent application or
application for registration which the Company has made with
respect to any of its Intellectual Property, and identifies
each license, agreement, or other permission which the Company
has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). Upon
request, the Sellers will deliver to the Buyer correct and
complete copies of all such patents, registrations,
applications, licenses, agreements, and permissions (as
amended to date) and will make available to the Buyer correct
and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each
such item. SECTION 2.3(n)(III) of the Company Disclosure
Schedule also identifies each trade name or unregistered
trademark used by any of the Company and its Subsidiaries in
connection with any of its businesses. With respect to each
item of Intellectual Property required to be identified in
SECTION 2.3(n)(III) of the Company Disclosure Schedule, except
as otherwise set forth therein:
(A) the Company possesses all right, title,
and interest in and to the item, free and clear of
any Security Interest, license, or other restriction;
(B) the item is not subject to any
outstanding injunction, judgment, order, decree,
ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of any of the Sellers
and the directors and officers (and employees with
responsibility for Intellectual Property matters) of
the Company, is threatened which challenges the
legality, validity, enforceability, use, or ownership
of the item; and
(D) the Company has not ever agreed to
indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict
with respect to the item.
(iv) SECTION 2.3(n)(IV) of the Company Disclosure
Schedule identifies each item of Intellectual Property that
any third party owns and that the Company uses
21
<PAGE>
pursuant to license, sublicense, agreement, or permission.
Upon request, the Sellers will deliver to the Buyer correct
and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect
to each item of Intellectual Property required to be
identified in SECTION 2.3(n)(iv) of the Company Disclosure
Schedule:
(A) the license, sublicense, agreement, or
permission covering the item is legal, valid,
binding, enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on
identical terms immediately following the Closing;
(C) neither the Company, nor to the Sellers'
Knowledge, any other party to the license,
sublicense, agreement, or permission is in breach or
default, and to the Sellers' Knowledge no event has
occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) neither the Company, nor to the Sellers'
Knowledge, any other party to the license,
sublicense, agreement, or permission has repudiated
any provision thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in
subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual
Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of any of the Sellers
and the directors and officers (and employees with
responsibility for Intellectual Property matters) of
the Company and its Subsidiaries, is threatened which
challenges the legality, validity, or enforceability
of the underlying item of Intellectual Property; and
(H) the Company has not granted any
sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
(v) To the Knowledge of any of the Sellers and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Company, the use of the
Company's Intellectual Property will not interfere with,
infringe upon, misappropriate, or otherwise come into conflict
with, any Intellectual Property rights
22
<PAGE>
of third parties as a result of the continued operation of its
business as presently conducted and as presently proposed to
be conducted.
(vi) None of the Sellers and the directors and
officers (and employees with responsibility for Intellectual
Property matters) of the Company had any Knowledge of any new
products, inventions, procedures, or methods of manufacturing
or processing that any competitors or other third parties have
developed which reasonably could be expected to supersede or
make obsolete any product or process of the Company, other
than those affecting the industry generally.
(o) TANGIBLE ASSETS. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the
conduct of its businesses as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from defects
(patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject
to normal wear and tear), and is suitable for the purposes for which it
presently is used and presently is proposed to be used. A correct and
complete list of all such properties and assets (other than properties
and assets described in Sections 2.3(m) and 2.3(n)) is set forth in
SECTION 2.3(O) of the Company Disclosure Schedule.
(p) CONTRACTS. SECTION 2.3(p) of the Company Disclosure
Schedule lists the following contracts and other agreements to which
the Company is a party:
(i) any agreement (or group of related agreements)
for the lease of personal property to or from any Person;
(ii) any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which
will extend over a period of more than one year, may result in
a material loss to the Company, or involve consideration in
excess of $25,000;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed
any indebtedness for borrowed money, or any capitalized lease
obligation, or under which it has imposed a Security Interest
on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with any of the Sellers or their
Affiliates (other than the Company);
23
<PAGE>
(vii) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation,
severance, or other plan or arrangement for the benefit of its
current or former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other
basis providing annual compensation in excess of $20,000 or
providing severance benefits;
(x) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and
employees;
(xi) any agreement under which the consequences of a
default or termination could have a material adverse effect on
the business, financial condition, operations, results of
operations, or future prospects of the Company; or
(xii) any other agreement (or group of related
agreements) the performance of which involves consideration in
excess of $25,000.
Upon request, the Sellers will deliver to the Buyer a correct and
complete copy of each written agreement listed in SECTION 2.3(p) of the
Company Disclosure Schedule (as amended to date) and a written summary
setting forth the terms and conditions of each oral agreement referred
to in SECTION 2.3(p) of the Company Disclosure Schedule. With respect
to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms immediately following the consummation of
the transactions contemplated hereby; (C) neither the Company, nor to
the Sellers' Knowledge, any other party is in breach or default, and to
the Sellers' Knowledge, no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and
(D) neither the Company, nor to the Sellers' Knowledge, any other party
has repudiated any provision of the agreement.
(q) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable of the Company are reflected properly on their books and
records, are valid receivables subject to no setoffs or counterclaims,
are current and collectible, and will be collected in accordance with
their terms at their recorded amounts.
(r) POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Company.
(s) INSURANCE. SECTION 2.3(s) of the Company Disclosure
Schedule sets forth the following information with respect to each
insurance policy (including policies providing property, casualty,
liability, life, health and workers' compensation coverage and bond and
24
<PAGE>
surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within
the past three years:
(i) the name, address, and telephone number of the
agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether
the coverage was on a claims made, occurrence, or other basis)
and amount (including a description of how deductibles and
ceilings are calculated and operate) of coverage; and
(v) a description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the
policy will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms immediately following the
consummation of the transactions contemplated hereby; (C) neither the
Company, nor to the Sellers' Knowledge any other party to the policy is
in breach or default (including with respect to the payment of premiums
or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy;
and (D) neither the Company, nor to the Sellers' Knowledge, any other
party to the policy has repudiated any provision thereof. The Company
has been covered during the past three years by insurance in scope and
amount customary and reasonable for the businesses in which they have
engaged during such period. SECTION 2.3(s) of the Company Disclosure
Schedule describes any self-insurance arrangements affecting the
Company.
(t) LITIGATION. SECTION 2.3(t) of the Company Disclosure
Schedule sets forth each instance in which the Company (i) is subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or to the Sellers' Knowledge is threatened to
be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. Unless specifically noted in
SECTION 2.3(t) of the Company Disclosure Schedule, none of the actions,
suits, proceedings, hearings, and investigations set forth in SECTION
2.3(t) of the Company Disclosure Schedule could result in any material
adverse change in the business, financial condition, operations,
results of operations, or future prospects of the Company. None of the
Sellers and the directors and officers (and employees with
responsibility for litigation matters) of the Company has any reason to
believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Company.
25
<PAGE>
(u) WARRANTY. Each product and service sold or delivered by
the Company has been in conformity with all applicable contractual
commitments and all express and implied warranties, and the Company has
no Liability (and to the Sellers' Knowledge there is no Basis for any
present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against the Company giving rise to
any Liability) for replacement or correction thereof or other damages
in connection therewith. No product or service sold or delivered by the
Company is subject to any guaranty, warranty, or other indemnity beyond
the applicable standard terms and conditions of sale or lease. SECTION
2.3(U) of the Company Disclosure Schedule includes copies of the
standard terms and conditions of sale for the Company (containing
applicable guaranty, warranty, and indemnity provisions).
(v) LABOR AND EMPLOYMENT MATTERS.
(i) SECTION 2.3(v) of the Company Disclosure Schedule
sets forth all collective bargaining agreements, employment
and consulting agreements (other than consulting agreements
terminable by the Company within 60 days without payment of a
premium or a penalty), executive compensation plans, bonus
plans, deferred compensation agreements, employee pension
plans or retirement plans, employee profit sharing plans,
employee stock purchase and stock option plans, group life
insurance, hospital ization insurance or other plans or
arrangements providing for benefits to employees of the
Company.
(ii) To the Sellers' Knowledge, there are no
controversies between the Company and any employees or any
unresolved labor union grievances or unfair labor practice or
labor arbitration proceedings pending or threatened, related
to the Company and there are not any organizational efforts
presently being made or threatened in an organized fashion
involving any of the employees of the Company. Except as
otherwise set forth in Section 2.3(v) of the Company
Disclosure Schedule, to the Knowledge of the Sellers and the
directors and officers of the Company, no executive, key
employee, or group of employees has any plans to terminate
employment with the Company.
(iii) Sellers and the Company have complied in all
material respects with any laws relating to the employment of
labor, including any provisions thereof relating to wages,
hours, collective bargaining, the payment of social security
and similar taxes, equal employment opportunity, employment
discrimination and employment safety, and to the Sellers'
Knowledge, the Company is not liable for any arrears of wages
or any taxes or penalties for failure to comply with any of
the foregoing.
(iv) SECTION 2.3(v) of the Company Disclosure
Schedule sets forth the current annual compensation, including
base salary, bonuses and fringe benefits (and the basis
thereof) of all employees of the Company (by position or by
department) as of the date hereof.
26
<PAGE>
(w) EMPLOYEE BENEFITS.
(i) SECTION 2.3(w) of the Company Disclosure Schedule
lists each Employee Benefit Plan that the Company maintains or
to which the Company contributes:
(A) Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund)
complies in form and in operation in all material
respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
(B) All required reports and descriptions
(including Form 5500 Annual Reports, Summary Annual
Reports, PBGC-1's, and Summary Plan Descriptions)
have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of Title I of
ERISA and of Section 4980B of the Code have been met
with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
(C) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been paid to each
such Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any
period ending on or before the Closing Date which are
not yet due have been paid to each such Employee
Pension Benefit Plan or accrued in accordance with
the past custom and practice of the Company and its
Subsidiaries. All premiums or other payments for all
periods ending on or before the Closing Date have
been paid with respect to each such Employee Benefit
Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan meets the
requirements of a "qualified plan" under Section
401(a) of the Code and has received, within the last
two years, a favorable determination letter from the
Internal Revenue Service.
(E) The market value of assets under each
such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer
Plan) equals or exceeds the present value of all
vested and nonvested Liabilities thereunder
determined in accordance with PBGC methods, factors,
and assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for
determination.
(F) The Sellers have delivered to the Buyer
correct and complete copies of the plan documents and
summary plan descriptions, the most recent
determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance
contracts, and other funding agreements which
implement each such Employee Benefit Plan.
27
<PAGE>
(ii) With respect to each Employee Benefit Plan that
the Company and the Controlled Group of Corporations which
includes the Company maintains or ever has maintained or to
which any of them contributes, ever has contributed, or ever
has been required to contribute:
(A) No such Employee Benefit Plan which is
an Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially
terminated or been the subject of a Reportable Event
as to which notices would be required to be filed
with the PBGC. No proceeding by the PBGC to terminate
any such Employee Pension Benefit Plan (other than
any Multiemployer Plan) has been instituted or, to
the Knowledge of any of the Sellers and the directors
and officers (and employees with responsibility for
employee benefits matters) of the Company,
threatened.
(B) There have been no Prohibited
Transactions with respect to any such Employee
Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act
or comply in connection with the administration or
investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or
the investment of the assets of any such Employee
Benefit Plan (other than routine claims for benefits)
is pending or, to the Knowledge of any of the Sellers
and the directors and officers (and employees with
responsibility for employee benefits matters) of the
Company, threatened. None of the Sellers and the
directors and officers (and employees with
responsibility for employee benefits matters) of the
Company has any Knowledge of any Basis for any such
action, suit, proceeding, hearing, or investigation.
(C) The Company has not incurred, and none
of the Sellers and the directors and officers (and
employees with responsibility for employee benefits
matters) of the Company has any reason to expect that
the Company will incur, any Liability to the PBGC
(other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any such
Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(iii) None of the Company and the other members of
the Controlled Group of Corporations that includes the Company
contributes to, ever has contributed to, or ever has been
required to contribute to any Multiemployer Plan or has any
Liability (including withdrawal Liability) under any
Multiemployer Plan.
(iv) The Company does not maintain or contribute to,
and has never maintained, contributed, or been required to
contribute to any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other welfare-type
benefits
28
<PAGE>
for current or future retired or terminated employees, their
spouses, or their dependents (other than in accordance with
Section 4980B of the Code).
(x) GUARANTIES. The Company is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any
other Person.
(y) ENVIRONMENT, HEALTH, AND SAFETY.
(i) Each of the Company and its predecessors and
Affiliates has complied in all material respects with all
Environmental, Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of
them alleging any failure so to comply. Without limiting the
generality of the preceding sentence, each of the Company and
its predecessors and Affiliates has obtained and been in
compliance in all material respects with all of the terms and
conditions of all permits, licenses, and other authorizations
which are required under, and has complied in all material
respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental,
Health, and Safety Laws.
(ii) The Company has no Liability (and none of the
Company, or its predecessors and Affiliates has handled or
disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or
facility in any manner that could form the Basis for any
present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the
Company giving rise to any Liability) for damage to any site,
location, or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other
individual, or for any reason under any Environmental, Health,
and Safety Law.
(iii) All properties and equipment used in the
business of the Company and its predecessors and Affiliates
have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(z) CERTAIN BUSINESS RELATIONSHIPS. Except as disclosed on
Section 2.3(z) of the Company's Disclosure Schedules, none of the
Sellers and their Affiliates has been involved in any business
arrangement or relationship with any of the Company within the past 12
months, and none of the Sellers and their Affiliates owns any asset,
tangible or intangible, which is used in the business of the Company.
(aa) INVESTMENT COMPANY. The Company is not an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or a
"holding company", a "subsidiary company" of a
29
<PAGE>
"holding company" or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
(bb) DISCLOSURE.
(i) The representations and warranties contained in
this Section 2.3 do not contain any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements and information contained in this
Section 2.3 not misleading.
(ii) There is no fact known to any of the Sellers
that has any specific application to the Company (other than
general economic or industry conditions) and that materially
adversely affects the assets, business, prospects, financial
condition, or results of operations of the Company (on a
consolidated basis) that has not been set forth in this
Agreement or in the Company Disclosure Schedule.
ARTICLE 3.
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
3.1 GENERAL. The Parties agree that with respect to the period between
the execution of this Agreement and the Closing, each of the Parties will use
his or its best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Article 5 below).
3.2 NOTICES AND CONSENTS. The Sellers will cause the Company to give
any notices to third parties, and will cause the Company to obtain any
third-party consents in connection with the matters referred to in Section
2.3(e) above or as may be required in connection with the representations made
in Sections 2.3(m)(ii)(B), 2.3(n)(iv)(B), 2.3(p) and 2.3(s) pertaining to the
legal, valid, binding and enforceable nature of leases and subleases, licenses
and sublicenses of Intellectual Property, contracts and agreements and insurance
policies following the consummation of the transactions contemplated hereby.
Each of the Parties will (and the Sellers will cause the Company to) give any
notices to, make any filings with, and use its best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
required for the transactions contemplated by this Agreement.
3.3 OPERATION OF BUSINESS. The Sellers shall cause the Company to, and
the Company shall, conduct its operations according to its ordinary and usual
course of business, and shall use its best efforts to preserve intact its
business organization, keep available the services of its officers and
employees, and maintain its present relationships with licensors, suppliers,
distributors, customers and others having significant business relationships
with it. Representatives of the Company will on request confer during such
period with representatives of Buyer to keep it informed with respect to the
general status of the on-going operations of the business of the Company.
Without limiting the
30
<PAGE>
generality of the foregoing and except as otherwise affected by matters
contemplated by this Agreement or in connection with the transactions
contemplated by this Agreement, the Sellers will cause the Company during such
period to:
(a) carry on the business in substantially the same manner as
heretofore carried on and not introduce any material new method of
operation or accounting, nor provide discounted services outside the
ordinary course of business;
(b) maintain its properties, facilities, equipment and other
assets, including those held under leases, in good working order,
condition and repair, ordinary wear and tear excepted;
(c) perform all of its obligations under all debt and lease
instruments and other agreements relating to or affecting its business,
assets, properties, equipment and rights, and pay all vendors,
suppliers, and other third parties (including mechanics and
materialmen) as and when their bills are due, except to the extent that
such payments may be subject to undisputed claims of offset or
reimbursement in favor of the Company, and pay in full all payroll
obligations when due;
(d) maintain its present debt and lease instruments (unless
same are otherwise mature) and refrain from entering into new or
amended debt or lease instruments, except for debt incurred or leases
entered into in the ordinary course of business which involve a total
liability of the Company not in excess of $20,000 per instance or
$50,000 in the aggregate, without prior written notice to Buyer;
PROVIDED, HOWEVER, that the Buyer hereby consents to the Company's
incurring debt and leasing obligations up to $600,000 in favor of Bank
Texas N.A. relating to the upgrading of the Sun Enterprises 10,000
Server used by the Company in the Business; PROVIDED, FURTHER, that
Buyer consents to the Company's incurring additional debt obligations
and/or making capital expenditures not to exceed $100,000 for upgraded
replacement discs;
(e) not incur any indebtedness other than ordinary trade
accounts payable in the ordinary course of business, except for debts
incurred to fund the distributions contemplated in Section 3.9 below;
PROVIDED, HOWEVER, that Buyer consents to the Company's incurring
additional debt obligations and/or making capital expenditures not to
exceed $100,000 for upgraded replacement discs;
(f) keep in full force and effect its present insurance
policies or other comparable insurance coverage PROVIDED, HOWEVER, that
prior to the Closing, the Company may assign to the Sellers the life
insurance policies currently maintained by the Company covering the
Sellers;
(g) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationship with suppliers, customers and others having significant
business relations with the Company;
31
<PAGE>
(h) refrain from effecting any change in the articles of
incorporation, bylaws or capital structure of the Company and refrain
from entering into or agreeing to enter into any merger or
consolidation by the Company with or into, and refrain from acquiring
all or substantially all of the assets, capital stock or business of
any person, corporation, partnership, association or other business
organization or division of any thereof;
(i) refrain from incurring any expenditures outside the normal
course of business, including any capital expenditures (or series of
related expenditures) in excess of $20,000, without prior written
notification to Buyer; PROVIDED, HOWEVER, that Buyer consents to the
Company's incurring additional debt obligations and/or making capital
expenditures not to exceed $100,000 for upgraded replacement discs;
(j) refrain from starting or acquiring any new businesses
without the prior written notification to Buyer;
(k) maintain its present salaries and commission levels for
all officers, directors, employees or agents, except as permitted by
Section 3.9 below and except for raises that may be awarded to
employees at or below the level of supervisor in keeping with past
practices of the Company in the ordinary course of its business,
refrain from entering into employment agreements except in the ordinary
course of business, and refrain from entering into any collective
bargaining agreement; and
(l) refrain from declaring or paying any fees, commissions or
loans outside the ordinary course of business, except as permitted by
Section 3.9 below; and
(m) refrain from declaring or paying any dividends or
distributions to Sellers in excess of an aggregate of $100,000;
(n) promptly notify Buyer of any claim or litigation
threatened or instituted, or any other material adverse event or
occurrence involving or affecting the Company or any of its assets,
properties, operations, businesses or employees;
(o) comply with and cause to be complied with all applicable
laws, rules, regulations and orders of all federal, state and local
governments or governmental agencies affecting or relating to the
Company or its assets, properties, operations, businesses or employees;
(p) other than in the ordinary course of business, refrain
from any sale, disposition, distribution or encumbrance of any of its
properties or assets and refrain from entering into any agreement or
commitment with respect to any such sale, disposition, distribution or
encumbrance (other than the sale or use of inventories in the ordinary
course of business);
(q) refrain from any purchase or redemption of any capital
stock or other voting interest of the Company and refrain from issuing
any capital stock or other voting interest;
32
<PAGE>
(r) refrain from making any change in any accounting
principle, classification, policy or practice, except as required by
GAAP; and
(s) manage working capital in the ordinary course consistent
with past practice; PROVIDED, HOWEVER, that the Company will be
entitled to distribute bonuses pursuant to Section 3.9, pay dividends
to the extent not prohibited by Section 3.3(m) and make contributions
to the GDC Profit Sharing Plan prior to the Closing Date, in each case
to the extent that the Company's Net Working Capital shall be not less
than $1,750,000 on the Closing Date.
3.4 PRESERVATION OF BUSINESS. The Sellers will (i) cause the Company to
keep its Business and properties substantially intact, keep in full force and
effect all rights, licenses, permits and franchises relating to its Business or
properties, keep available the services of its officers and employees as a group
and maintain satisfactory relationships with suppliers, distributors, customers
and others having significant business relationships with the Company; (ii)
report on a regular basis to representatives of Buyer regarding operational
matters and the general status of ongoing operations; (iii) not take any action
which would render any representation or warranty made by the Company in this
Agreement untrue at any time prior to the Closing if then made; and (iv) notify
Buyer of any emergency or other change in the normal course of its Business or
in the operation of its properties and of any tax audits, tax claims,
governmental or third party complaints, investigation or hearings (or
communications indicating that the same may be contemplated) if such emergency,
change, audit, claim, complaint, investigation or hearing would reasonably be
material, individually or in the aggregate, to the financial condition, results
of operations or Business of the Company, or to the Company's and Buyer's
ability to consummate the transactions contemplated by this Agreement.
3.5 FULL ACCESS. The Sellers will permit, and the Sellers will cause
the Company to permit, representatives of the Buyer to have full access, at all
reasonable times, to all premises, properties, personnel, books, records
(including Tax records), contracts, and documents of or pertaining to the
Company.
3.6 NOTICE OF DEVELOPMENTS. Each Party will give prompt written notice
to the others of any material adverse development causing a breach of any of his
or its own representations and warranties contained in Article 2 above. No
disclosure by any Party pursuant to this Section 3.6, however, shall be deemed
to amend or supplement the Company Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
3.7 EMPLOYMENT OF COMPANY EMPLOYEES. Prior to the Closing, the Buyer
will (and Sellers will cause the Company to permit Buyer to) offer continued
employment with the Company following the Closing to all of the individuals that
are employees of the Company immediately prior to the Closing. The Buyer shall
have full and absolute discretion in determining the terms, conditions and
benefits relating to such employment after the Closing; PROVIDED, HOWEVER, that
the terms, conditions and benefits offered to each such employee, in the
aggregate, shall be no less favorable to such employee than the terms,
conditions and benefits applicable to his or her employment, in the aggregate,
immediately prior to the Closing. The Buyer agrees to cause the Company to
maintain,
33
<PAGE>
for a period of not less than two (2) years after the Closing, a health
insurance program pursuant to which the Company pays the premium cost for its
employees and their dependents and such employees and dependents are entitled to
participate in a preferred provider organization ("PPO") program (as opposed to
a health maintenance organization or "HMO") program. Nothing contained in this
Section is intended to create any claim or right on the part of any employee of
the Company, and no such employee shall be entitled to assert any such claim or
right as of the Closing Date. In addition, nothing in this Section shall
obligate the Buyer to maintain any bonus or incentive compensation plans
currently sponsored by the Company for the benefit of the Company's employees.
Those Company employees (excluding the Sellers) electing to remain employed by
the Company following the Closing are referred to herein as the "CONTINUING
EMPLOYEES."
3.8 ASSUMPTION OF COMPENSATION OBLIGATIONS. The Buyer will take
appropriate actions to assume the current obligations of the Company under the
compensation arrangements between the Company and each of Sharad Purohit and
Richard Verm as described in SECTION 2.3(w) of the Company Disclosure Schedule.
3.9 BONUSES TO COMPANY EMPLOYEES. The Buyer acknowledges and agrees
that the Company will be entitled to pay bonuses (either before or after
Closing) for the fiscal year ended June 30, 1998 (the "EMPLOYEE BONUSES") to its
employees (including Sellers) in any amount and in any combination of cash or
unsecured notes payable as determined by the Company; PROVIDED, HOWEVER, that
the Company's Net Working Capital (as defined in Section 1.10 hereof) shall be
not less than $1,750,000 following the payment of the Employee Bonuses. Buyer
acknowledges that a portion of the Employee Bonuses may be paid after Closing,
after receipt by the Parties of the Working Capital Statement.
3.10 SELLER INDEBTEDNESS AND RECEIVABLES. Immediately prior to Closing,
the Sellers shall cause to be paid in full in cash all accounts payable, notes
payable and advances payable by any Seller to the Company, and the Company shall
pay in full in cash all accounts payable, notes payable (other than notes
payable incident to the Employee Bonuses) and advances payable by the Company to
any Seller.
3.11 EXCLUSIVITY. Prior to the earlier of the termination of this
Agreement or the Closing Date, the Sellers will not (and the Sellers will not
cause or permit the Company or any of its officers, directors, employees,
representatives or agents to) (i) directly or indirectly solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets of, the Company (including any acquisition
structured as a merger, consolidation, business combination or share exchange or
any joint venture involving the Company) or (ii) participate in any discussions
or negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. The Sellers will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
3.12 SELLERS RELEASE OF CLAIMS. Effective as of the Closing, each of
the Sellers hereby (i) releases, acquits and forever discharges the Company and
its Subsidiaries from any and all liabilities,
34
<PAGE>
obligations, indebtedness, claims, demands, actions or causes of action arising
from or relating to any event, occurrence, act, omission or condition occurring
or existing on or prior to the Closing, including, without limitation, any claim
for indemnity or contribution from the Company or any of its Subsidiaries,
except for (A) salary and expense reimbursement payable to the Sellers as an
officer, director or employee in the Ordinary Course of Business, (B) notes
payable incident to the Employee Bonuses, and (C) all benefits (including
interests in Employee Benefit Plans) and fringe benefits to which the Sellers
are entitled; and (ii) waives any and all preemptive or other rights to acquire
any shares of capital stock of the Company and releases any and all claims
arising in connection with any prior default, violation or failure to comply
with or satisfy any such preemptive or other rights.
3.13 CONFIDENTIALITY. The provisions of this Section 3.13 shall
supersede and replace all prior agreements and understandings of the parties
with respect to the subject matter hereof.
(a) Until the Closing of the transactions contemplated herein,
all Confidential Information, as hereinafter defined, acquired by Buyer
with respect to the Sellers or the Company, or by the Sellers or the
Company with respect to Buyer, shall be (i) maintained in strict
confidence, (ii) used only for the purpose of and in connection with
evaluating the transactions contemplated herein, and (iii) disclosed
only (A) to employees and duly authorized agents and representatives
who have been informed of the obligations of the parties under this
Agreement with respect to such Confidential Information, who have a
need to know the information in connection with consummating the
transactions contemplated herein, and who agree to keep such
information confidential, or (B) as required by legal process (of which
the other parties shall be given prompt notice). Buyer, the Sellers and
the Company shall be responsible for any breach of this Section by any
of their respective representatives and each agrees to take all
reasonable measures to restrain its representatives from prohibited or
unauthorized disclosure of the Confidential Information. For the
purpose of this Agreement, the term "CONFIDENTIAL INFORMATION" shall
mean all information acquired by any Party from another Party hereto or
its representatives pursuant to Section 3.5 hereof or otherwise with
respect to the business or operations of such other Party, other than
(A) information generally available to the public which has not become
available as a result of disclosure in violation of this Section and
(B) information which becomes available on a nonconfidential basis from
a source other than a Party to this Agreement or its representatives,
provided that such source is not known by the Party to this Agreement
receiving such information to be bound by a confidentiality agreement
or other obligation of secrecy to another Party to this Agreement or
its representatives. If the transactions contemplated herein are not
consummated, all Confidential Information in written or printed or
other tangible form (whether copies or originals) shall be returned to
the Party of origin, and all documents, memoranda, notes and other
writings whatsoever prepared by any Party or its representatives based
on Confidential Information shall be destroyed; and Buyer and its
representatives will thereafter hold all Confidential Information
concerning the Company or the Sellers in strict confidence.
(b) No press release, public announcement, confirmation or
other information regarding this Agreement or the contents hereof shall
be made by Buyer, the Sellers or the Company without prior consultation
with the Buyer and the Company, except as may be
35
<PAGE>
necessary in the opinion of counsel to any Party to meet the
requirements of any applicable law or regulations, the determination of
any court, or the requirements of any stock exchange on which the
securities of such Party may be listed. Prior to the Closing, the Buyer
and the Company shall jointly approve the contents of any press
releases, written employee presentations, or other comparable materials
of potentially wide distribution that disclose or refer to the
transaction contemplated hereby, except for such press releases or
other communications required by law. If the transactions contemplated
herein are not consummated, neither the Buyer nor the Sellers shall
disclose to any third party or publicly announce the proposed
transaction contemplated hereby, except as otherwise permitted
hereinabove and except as agreed in advance, in writing, by the parties
or otherwise required by law, in which case the Party so compelled will
give reasonable written notice in advance to the other parties.
(c) Notwithstanding Sections 3.13(a) or 3.13(b) above, the
Buyer may, subject to Section 3.13(a) above, disclose pertinent
information, including Confidential Information, regarding the
transaction contemplated hereby and the Company to its existing and
prospective investors, lenders or investment bankers or financial
advisors for the purposes of obtaining financing. Buyer may also make
appropriate disclosure as required in connection with any registration
statement or confidential private placement memorandum prepared by the
Buyer.
3.14 REPLACEMENT GUARANTIES. With respect to any loan, letter of credit
or other outstanding obligation of the Company which has been personally
guaranteed by any Seller, Buyer shall, on or before the Closing Date, obtain the
release of such Seller's personal guaranty and, to the extent necessary to
obtain such release, assume such guaranties or replace or refinance such
guaranteed debts, liability and obligations of the Company.
ARTICLE 4.
POST-CLOSING COVENANTS
4.1 GENERAL. If at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Article 6 below).
Each of the Sellers acknowledges and agrees that from and after the Closing, the
Buyer will be entitled to possession of all documents, books, records (including
Tax records), agreements, and financial data of any sort relating to the
Company.
4.2 LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, each of the other
36
<PAGE>
Parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under Article 6 below).
4.3 TRANSITION. For so long as each Seller remains employed by the
Company, such Seller will not take any action that is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of any of the Company and its subsidiaries from
maintaining the same business relationships with the Company after the Closing
as it maintained with the Company prior to the Closing.
4.4 BUYER OPTIONS. On the Closing Date, the Buyer will grant
nonqualified stock options (the "OPTIONS") to purchase an aggregate of 1,000,000
shares of the Buyer Common Stock at an exercise price of $3.00 per share. The
Options shall be granted among the Continuing Employees (including the Sellers)
as allocated at the sole discretion of the Sellers and as set forth on EXHIBIT
4.4 attached hereto. The Options shall be exercisable during a five-year term,
vesting over a period of three years, with one-third of the Options granted to
each individual vesting at the first, second and third anniversary of the
effective date of this Agreement. The Options shall be granted pursuant to the
terms of the "Geokinetics Inc. 1997 Stock Awards Plan" maintained by the Buyer.
4.5 DISTRIBUTION OF COMPANY PROFIT SHARING PLAN. As soon as practicable
after the Closing, the Buyer shall request the trustee(s) of the Employee
Benefit Plan known as the "Geophysical Development Corporation Profit Sharing
Plan" described in SCHEDULE 2.3(W) of the Company Disclosure Schedule (the "GDC
PROFIT SHARING PLAN") to report on the aggregate value of the assets comprising
the GDC Profit Sharing Plan and the account balance under the GDC Profit Sharing
Plan for each employee of the Company (for each employee, the "INDIVIDUAL
BALANCE"). As soon as administratively feasible after the Closing, the Buyer
shall (a) establish a defined contribution plan which shall be qualified under
Section 401(a) of the Code and (b) thereafter cause the trustee(s) of the GDC
Profit Sharing Plan to either (i) distribute each Individual Balance in a lump
sum cash payment to the employee or (ii) if requested by the employee, transfer
the Individual Balance to such qualified rollover investment (including the
Geokinetics Inc. 401(k) Savings Plan which shall be adopted by the Buyer on or
before the Closing Date) as may be specified by the employee.
4.6 ELIGIBILITY UNDER BENEFIT PLANS. Neither Buyer nor, following the
Closing, the Company shall terminate any health or medical insurance, life
insurance, 401(k) plan or other Employee Benefit Plan (including the GDC Profit
Sharing Plan) in effect with respect to the Company until such time as Buyer
replaces such plan. Any such replacement plan shall give the officers and
employees of the Company full credit, for purposes of eligibility and vesting,
for the period of time each has been employed by the Company prior to the
Closing and for the period of time each is employed by the Company after the
Closing, and all waiting periods and pre-existing condition limitations under
any such replacement plan shall be waived.
4.7 EMPLOYEE BONUS COMPENSATION. On each of the first and second
anniversary of the Closing Date, the Buyer shall pay (or cause the Company to
pay) to each Continuing Employee a
37
<PAGE>
non-discretionary bonus payment in an amount equal to 50% of the Continuing
Employee's annual salary as of the Closing Date; PROVIDED, HOWEVER, that if the
Company terminates the employment of any Continuing Employee without Cause (as
defined below) prior to the second anniversary of the Closing Date, the
Continuing Employee shall be entitled to receive the full amount of such bonus
payment that would otherwise have been payable if the Continuing Employee had
remained employed by the Company through the anniversary date immediately
following the effective date of termination. Notwithstanding the foregoing, if
the Company terminates any Continuing Employee's employment with the Company for
Cause, or if the Continuing Employee voluntarily resigns, all rights to receive
the bonus compensation not yet paid to and received by such Continuing Employee
described in the Section shall be forfeited. When used in connection with the
termination of employment with the Company, "CAUSE" shall mean: (i) the
Continuing Employee's failure to adhere to any written Company policy after the
Continuing Employee has been given a reasonable opportunity to comply with such
policy or cure his failure to comply; (ii) the conviction of, or the indictment
for (or its procedural equivalent), or the entering of a guilty plea or plea of
no contest with respect to, a felony, the equivalent thereof, or any other crime
with respect to which imprisonment is a possible punishment; (iii) the
commission by the Continuing Employee of an act of fraud upon the Company or any
of its Affiliates; (iv) the misappropriation (or attempted misappropriation) of
any funds or property of the Company or any of its Affiliates by the Continuing
Employee; (v) the failure by the Continuing Employee to perform duties assigned
to him after reasonable notice and opportunity to cure such performance; (vi)
the engagement by the Continuing Employee in any direct, material conflict of
interest with the Company without compliance with the Company's conflict of
interest policy, if any, then in effect; (vii) the engagement by the Continuing
Employee, without the written approval of the board of directors of the Company,
in any activity that competes with the business of the Company or any of its
Affiliates or that would result in a material injury to the Company or any of
its Affiliates; or (viii) the engagement by the Continuing Employee in any
activity that would constitute a material violation of the provisions of the
Company's or Buyer's insider trading policy, if any, then in effect. As soon as
practicable after the Closing Date, the Buyer shall (or cause the Company to)
prepare and deliver to each Continuing Employee a written summary of the
provisions of this Section to be executed by the Continuing Employees providing,
among other things, for such Continuing Employee's acknowledgment and acceptance
of the terms and provisions of this Section.
4.8 ASSIGNMENT OF ACCOUNTS RECEIVABLE. Within 180 days after the
Closing Date, Buyer may elect to assign to Sellers any accounts receivable that
were part of the calculation of the Working Capital Adjustment and which remain
uncollected for 120 days or more, and Sellers shall purchase such accounts
receivable from Buyer for cash in the amount of the uncollected face amount,
less any allowance for doubtful accounts reflected in the calculation of Net
Working Capital based on the financial statements of the Company.
4.9 ADDITIONAL CAPITAL CONTRIBUTIONS. During each of the two
twelve-month periods immediately following the Closing Date, the Buyer will make
additional contributions to the capital of the Company in an aggregate amount of
not less than $1,000,000 per twelve-month period (the "ADDITIONAL CAPITAL
CONTRIBUTIONS"). The Buyer shall make the Additional Capital Contributions for
research and development of new Company projects as determined by the board of
directors of the Buyer.
38
<PAGE>
4.10 CONFIDENTIALITY. Each of the Sellers will treat and hold as such
all of the Confidential Information and refrain from using any of the
Confidential Information except in connection with this Agreement. In the event
that any of the Sellers is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, the Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 4.10. If, in the absence of a
protective order or the receipt of a waiver hereunder, any of the Sellers is, on
the advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Seller may disclose the
Confidential Information to the tribunal; provided, however, that the disclosing
Seller shall use his reasonable best efforts to obtain, at the request of the
Buyer, an order or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be disclosed as the
Buyer shall designate.
4.11 CERTAIN TAX MATTERS.
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. Buyer
shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the Company for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. Buyer shall permit
Sellers to review and comment on each such Tax Return described in the
preceding sentence prior to filing. Sellers shall reimburse Buyer for
any Taxes of the Company with respect to such periods within fifteen
(15) days after payment by Buyer or the Company of such Taxes to the
extent such Taxes (i) are not reflected in the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) shown on the
face of the Company Financial Statements, and (ii) are calculated based
on the assumption that the entire $1,750,000 in working capital
required by this Agreement to be retained by the Company on the Closing
Date is treated as a deductible expense during the period prior to the
Closing Date.
(b) COOPERATION ON TAX MATTERS.
(i) Buyer, the Company and Sellers shall cooperate
fully, as and to the extent reasonably requested by the other Party, in
connection with the filing of Tax Returns pursuant to this Section and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other Party's
request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. The Company and Sellers agree (A) to retain all books and
records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified
by Buyer or Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into
with any taxing authority, and (B) to give the other Party reasonable
written notice prior to transferring, destroying or discarding any such
books and records and, if the
39
<PAGE>
other Party so requests, the Company or Sellers, as the case may be,
shall allow the other Party to take possession of such books and
records.
(ii) Buyer and Sellers further agree, upon request,
to use their best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
(c) CERTAIN TAXES. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement,
shall be paid by Sellers when due, and Sellers will, at their own
expense, file all necessary Tax returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable
law, Buyer will, and will cause its Affiliates to, join in the
execution of any such Tax returns and other documentation.
4.12 COMPLIANCE WITH SECURITIES LAWS. Each Seller agrees that he will
not transfer or dispose of any of the Buyer Common Stock acquired pursuant
hereto other than (i) pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or (ii) pursuant to an
exemption from registration under the Securities Act or applicable state
securities laws; PROVIDED, HOWEVER, that, except for sales pursuant to Rule 144
promulgated under the Securities Act, the Buyer Common Stock shall not be sold
pursuant to this clause (ii) at any time prior to the first anniversary of the
Closing Date unless and until such Seller shall have furnished to the Buyer, at
the expense of such Seller or his transferee, an opinion of counsel, reasonably
satisfactory to the Buyer, to the effect that such transfer may be made without
registration under the Securities Act or applicable state securities laws. Any
certificate representing shares of the Buyer Common Stock shall bear appropriate
legends restricting the sale or other transfer of such Buyer Common Stock in
accordance with applicable federal or state securities or blue sky laws and in
accordance with the provisions of this Section 4.12.
4.13 LISTING. As soon as practicable following the Closing Date, Buyer
shall use its best efforts to cause all shares of Buyer Common Stock issued
pursuant to this Agreement to be listed or authorized for inclusion on each
securities exchange or similar trading system on which securities of Buyer are
then listed or authorized for trading.
ARTICLE 5.
CONDITIONS OF CLOSING
5.1 CONDITIONS OF OBLIGATIONS OF THE BUYER. The obligations of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing are subject to satisfaction of the following conditions:
40
<PAGE>
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in Section 2.1 and Section 2.3
above shall be true and correct in all material respects at and as of
the Closing Date.
(b) PERFORMANCE OF COVENANTS. The Sellers shall have performed
all obligations and agreements and complied with all of their covenants
in this Agreement in all material respects at or before the Closing.
(c) APPROVALS. The Sellers and/or the Company shall provide
evidence, satisfactory to Buyer, that there have been obtained all
consents, approvals and authorizations required for the consummation by
the Sellers of the transactions contemplated by this Agreement.
(d) LEGAL ACTIONS OR PROCEEDINGS. No action, suit, or
proceeding shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (C) affect adversely
the right of the Buyer to own the Acquired Shares and to control the
Company, or (D) affect adversely the right of the Company to own its
assets and to operate the Business (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect).
(e) CLOSING CERTIFICATE. The Sellers shall have delivered to
the Buyer a certificate dated as of the Closing Date and executed by
each of the Sellers and the President of the Company to the effect that
each of the conditions specified above in Sections 5.1(a) to 5.1(d) is
satisfied in all respects.
(f) EMPLOYMENT AGREEMENTS. The Employment Agreements attached
hereto as Exhibits 5.1(f)(1), 5.1(f)(2) and 5.1(f)(3) shall have been
executed by the Company and each of the individuals specified therein.
(g) REGISTRATION RIGHTS AGREEMENT. The Sellers shall have
executed and delivered the Registration Rights Agreement substantially
in the form attached as EXHIBIT 1.4 hereto.
(h) CONTRIBUTIONS TO GDC PROFIT SHARING PLAN. The Company
shall have either (i) made its contributions to the GDC Profit Sharing
Plan (in an aggregate amount of not less than $300,000 and not more
than $500,000) and paid its bonuses to employees (other than the
Sellers) (in an aggregate amount of not less than $550,000 and not more
than $750,000) for its fiscal year ending June 30, 1998 or (ii) shall
have accrued any unpaid contributions or bonuses on the Company's
balance sheet from which the Working Capital Adjustment is to be
calculated.
(i) TERMINATION OF STOCK REDEMPTION AGREEMENT. The Sellers
shall have produced evidence to the satisfaction of the Buyer that all
the stock redemption agreements by and
41
<PAGE>
among the Company and its current or former shareholders have been
terminated in their entirety and are without legal effect as of the
Closing Date.
(j) DUE DILIGENCE SATISFACTORY. The Buyer's due diligence
investigation of the Company as contemplated by Section 3.5 hereof
shall have been completed to the satisfaction of Buyer, no later than
fifteen (15) days after the date of this Agreement.
(k) OPINION OF COUNSEL TO SELLERS. Buyer shall have received
the favorable opinion of Griggs & Harrison, P.C., counsel for the
Company and the Sellers, dated the Closing Date, substantially in the
form and to the effect set forth in EXHIBIT 5.1(K) hereto.
(l) ALL PROCEEDINGS SATISFACTORY. All necessary director and
shareholders resolutions, waivers and consents and all other actions to
be taken by the Sellers and the Company in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby shall be satisfactory in form and substance to the
Buyer and its counsel.
The Buyer may waive any condition specified in this Section 5.1 if it executes a
writing so stating at or prior to the Closing.
5.2 CONDITIONS OF OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing are subject to satisfaction of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in Section 2.2 above shall be
true and correct in all material respects at and as of the Closing
Date.
(b) PERFORMANCE OF COVENANTS. The Buyer shall have performed
all obligations and agreements and complied with all of its covenants
in this Agreement in all material respects at or before the Closing.
(c) APPROVALS. The Buyer shall provide evidence, satisfactory
to Sellers and/or the Company that there have been obtained all
consents, approvals and authorizations required for the consummation by
Buyer of the transactions contemplated by this Agreement.
(d) CLOSING CERTIFICATE. The Buyer shall have delivered to the
Sellers a certificate dated as of the Closing Date and executed by the
Buyer to the effect that each of the conditions specified above in
Sections 5.2(a), 5.2(b) and 5.2(c) is satisfied in all respects.
(e) EMPLOYMENT AGREEMENTS. The Employment Agreements attached
hereto as Exhibits 5.1(f)(1), 5.1(f)(2) and 5.1(f)(3) shall have been
executed by the Company and each of the individuals specified therein.
42
<PAGE>
(f) REGISTRATION RIGHTS AGREEMENT. The Buyer shall have
executed and delivered the Registration Rights Agreement substantially
in the form attached as EXHIBIT 1.4 hereto.
(g) OPINION OF COUNSEL TO BUYER. The Sellers shall have
received the favorable opinion of Chamberlain Hrdlicka White Williams &
Martin, counsel for the Buyer, dated the Closing Date, substantially in
the form and to the effect set forth in EXHIBIT 5.2(G) hereto.
(h) ALL PROCEEDINGS SATISFACTORY. All actions to be taken by
the Buyer in connection with consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and
other documents required to effect the transactions contemplated hereby
shall be satisfactory in form and substance to the Sellers, the Company
and their counsel.
The Sellers may waive any condition specified in this Section 5.2 if they
execute a writing so stating at or prior to the Closing.
ARTICLE 6.
REMEDIES FOR BREACHES OF AGREEMENT
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement and
the other documents, instruments and agreements contemplated hereby shall
survive the Closing hereunder (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of two (2) years thereafter,
except for representations regarding Company's Tax Liabilities, which
representations will expire and be terminated on the date of expiration of the
statute of limitations for collection of such Tax Liability in question.
6.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER. Subject to the
provisions of Sections 6.1 and 6.4, Mr. Sherwood, severally but not jointly, and
the remaining Sellers, jointly and severally, shall indemnify, save and hold
harmless the Buyer and its officers, directors, employees, representatives,
agents, advisors and consultants and all of their respective heirs, legal
representatives, successors and assigns (collectively, the "BUYER INDEMNIFIED
PARTIES") from and against any and all Adverse Consequences arising from, out of
or in any manner connected with or based on:
(a) the breach of any covenant of any Seller or the Company or
the failure by any Seller or the Company to perform in any material
respects any obligation of a Seller or the Company contained herein,
the Company Disclosure Schedule, or any certificate, document or
agreement delivered by the Sellers or the Company pursuant to this
Agreement;
(b) any inaccuracy in or breach of any representation or
warranty of any Seller or the Company contained herein, the Company
Disclosure Schedule, or any certificate, document or agreement
delivered by the Sellers or the Company pursuant to this Agreement; or
43
<PAGE>
(c) any act, omission, occurrence, event, condition or
circumstance occurring or existing at any time on or before the Closing
Date and involving or related to the assets, properties, business or
operations now or previously owned or operated by the Company and not
(A) disclosed in the Company Disclosure Schedule or (B) disclosed in
the Company Financial Statements.
The foregoing indemnities shall not limit or otherwise adversely affect the
Seller Indemnified Parties' rights of indemnity for Adverse Consequences under
Section 6.3.
6.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS. Subject to
the provisions of Sections 6.1 and 6.4, the Buyer shall indemnify, save and hold
harmless the Sellers and the Sellers' heirs, legal representatives, agents,
advisors, consultants, successors and assigns (collectively the "SELLER
INDEMNIFIED PARTIES") from and against all Adverse Consequences arising from,
out of or in any manner connected with or based on:
(a) the breach of any covenant of the Buyer or the failure by
the Buyer to perform any obligation of Buyer contained herein or any
certificate, document or agreement delivered by the Buyer pursuant to
this Agreement;
(b) any inaccuracy in or breach of any representation or
warranty of the Buyer contained herein or any certificate, document or
agreement delivered by the Buyer pursuant to this Agreement;
The foregoing indemnities shall not limit or otherwise adversely affect the
Buyer Indemnified Parties' rights of indemnity for Adverse Consequences under
Section 6.2.
6.4 INDEMNIFICATION LIMITATIONS. Notwithstanding the foregoing to the
contrary, (i) none of the Sellers shall be required to indemnify the Buyer
Indemnified Parties from any Adverse Consequences pursuant to Section 6.2 until
any of the Buyer Indemnified Parties has suffered Adverse Consequences in excess
of a $50,000 aggregate threshold (at which point the Sellers will be obligated
to indemnify the Buyer from and against all such Adverse Consequences in excess
of $50,000); (ii) the aggregate liability of the Sellers to the Buyer pursuant
to this Article 6 shall be limited to 50% of the Base Consideration; (iii) the
liability of each Seller to the Buyer, pursuant to this Article 6 shall be
limited to such Seller's proportionate share of 50% of the Base Consideration,
and (iv) in no event shall any recovery under this Agreement include the loss of
anticipated profits, cost of money, loss of use of revenue, or any special,
incidental or consequential losses or damages of any nature arising at any time
or from any cause whatsoever, including lost profits or revenue, lost savings,
diminution in value, loss of managerial time, business interruption or other
lost opportunity.
6.5 INDEMNIFICATION PROCEDURES.
(a) NOTICE. The Party (the "INDEMNIFIED PARTY") that may be
entitled to indemnity hereunder shall give prompt notice to the Party
obligated to give indemnity hereunder (the "INDEMNIFYING PARTY") of the
assertion of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought hereunder. Any
failure on the
44
<PAGE>
part of any Indemnified Party to give the notice described in this
Section 6.5 shall relieve the Indemnifying Party of its obligations
under this Article 6 only to the extent that such Indemnifying Party
has been prejudiced by the lack of timely and adequate notice (except
that the Indemnifying Party shall not be liable for any expenses
incurred by the Indemnified Party during the period in which the
Indemnified Party failed to give such notice). Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, promptly
(and in any event within 10 days thereof) after the Indemnified Party's
receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnified Party relating to such claim,
action, suit or proceeding.
(b) LEGAL DEFENSE. The Indemnifying Party shall be responsible
for the defense or settlement of any third-party claim, suit, action or
proceeding in respect of which indemnity may be sought hereunder,
provided that (i) the Indemnified Party shall at all times have the
right, at their option, to participate fully therein, and (ii) if the
Indemnified Party does not proceed diligently to defend the third-party
claim, suit, action or proceeding within 10 days after receipt of
notice of such third-party claim, suit, action or proceeding, the
Indemnifying Party shall have the right, but not the obligation, to
undertake the defense of any such third-party claim, suit, action or
proceeding.
(c) SETTLEMENT. The Indemnifying Party shall not be required
to indemnify the Indemnified Party with respect to any amounts paid in
settlement of any third-party suit, action, proceeding or investigation
entered into without the written consent of the Indemnifying Party;
PROVIDED, HOWEVER, that if the Indemnified Party is a Buyer Indemnified
Party, such third-party claim, suit, action, proceeding or
investigation may be settled without the consent of the Indemnifying
Party on 10 days' prior written notice to the Indemnifying Party if
such third-party suit, action, proceeding or investigation is then
unreasonably interfering with the business or operations of the Company
and the settlement is commercially reasonable under the circumstances;
and PROVIDED FURTHER, that if the Indemnifying Party gives 10 days'
prior written notice to the Indemnified Party of a settlement offer
which the Indemnifying Party desires to accept and to pay all Adverse
Consequences with respect thereto ("SETTLEMENT NOTICE") and the
Indemnified Party fails or refuses to consent to such settlement within
10 days after delivery of the Settlement Notice to the Indemnified
Party, and such settlement otherwise complies with the provisions of
this Section 6.5 the Indemnifying Party shall not be liable for Adverse
Consequences arising from such third-party claim, suit, action,
proceeding or investigation in excess of the amount proposed in such
settlement offer. Notwithstanding the foregoing, no Indemnifying Party
will consent to the entry of any judgment or enter into any settlement
without the consent of the Indemnified Party, if such judgment or
settlement imposes any obligation or liability upon the Indemnified
Party other than the execution, delivery or approval thereof and
customary releases of claims with respect to the subject matter
thereof.
(d) COOPERATION. The Parties shall cooperate in defending any
such third-party claim, suit, action, proceeding or investigation, and
the defending party shall have reasonable access to the books and
records, and personnel in the possession or control of the Indemnified
Party that are pertinent to the defense. The Indemnified Party may join
the Indemnifying
45
<PAGE>
Party in any suit, action, claim or proceeding brought by a third
party, as to which any right of indemnity created by this Agreement
would or might apply, for the purpose of enforcing any right of the
indemnity granted to such Indemnified Party pursuant to this Agreement.
6.6 OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions constitute the exclusive method for compensating the other Parties
for, or indemnifying the other Parties against, claims relating to the
transactions contemplated by this Agreement.
ARTICLE 7.
MISCELLANEOUS
7.1 TERMINATION OF AGREEMENT. Certain of the Parties may terminate this
Agreement as provided below:
(a) the Buyer and the Requisite Sellers may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing (A) in the event
any of the Sellers has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, the
Buyer has notified the Seller of the breach, and the breach has
continued without cure for a period of ten (10) days after the notice
of breach or (B) if the Closing shall not have occurred on or before
April 30, 1998, by reason of the failure of any condition precedent
under Section 5.1 above (unless the failure results from the Buyer
itself breaching any representation, warranty, or covenant contained in
this Agreement); and
(c) the Requisite Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (A)
in the event the Buyer has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Requisite Sellers have notified the Buyer of the breach,
and the breach has continued without cure for a period of ten (10) days
after the notice of breach or (B) if the Closing shall not have
occurred on or before April 30, 1998, by reason of the failure of any
condition precedent under Section 5.2 hereof (unless the failure
results from any of the Sellers or the Company breaching any
representation, warranty, or covenant contained in this Agreement).
7.2 EFFECT OF TERMINATION. Subject to the provisions of Section 1.5
hereof and the Escrow Agreement, if any Party terminates this Agreement pursuant
to Section 7.1 above, all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
7.3 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
46
<PAGE>
7.4 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof including, without limitation, the Letter of Intent.
7.5 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller; PROVIDED, HOWEVER, that the Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
7.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
7.7 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.8 NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
IF TO THE SELLERS OR THE COMPANY: c/o Geophysical Development Corporation
--------------------------------
8401 Westheimer, Suite 150
Houston, Texas 77063
Attention: Fred J. Hilterman, N. Wayne
Lauritzen, Reginald N. Neale, and
John W. C. Sherwood
Copy to: Griggs & Harrison, P.C.
1301 McKinney, Suite 3200
Houston, Texas 77010-3033
Attention: Carolyn M. Campbell
IF TO BUYER: Geokinetics Inc.
5555 San Felipe, Suite 780
Houston, Texas 77056
Attention: Jay D. Haber
47
<PAGE>
Copy to: Chamberlain, Hrdlicka, White,
Williams & Martin
1200 Smith Street, Suite 1400
Houston, Texas 77002
Attention: James J. Spring, III
</TABLE>
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
7.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without giving effect to any
choice or conflict of law provision or rule that would cause the application of
the laws of any jurisdiction other than the State of Texas.
7.10 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Requisite Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresen tation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
7.11 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
7.12 EXPENSES. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
7.13 CONSTRUCTION. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
48
<PAGE>
7.14 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
7.15 SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in Section 7.16
below), in addition to any other remedy to which they may be entitled, at law or
in equity.
7.16 SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any federal or state court sitting in Houston, Texas, in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
Party with respect thereto. Each Party appoints Griggs & Harrison, P.C. (the
"PROCESS AGENT") as his or its agent to receive on his or its behalf service of
copies of the summons and complaint and any other process that might be served
in the action or proceeding. Any Party may make service on any other Party by
sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section 7.8
above. Nothing in this Section 7.16, however, shall affect the right of any
Party to serve legal process in any other manner permitted by law or at equity.
Each Party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or at equity.
7.17 JOINDER OF SPOUSE. The spouse of certain of the Sellers is
executing this Agreement to acknowledge its fairness and that it is in such
spouse's best interests to bind such spouse's community property interest, if
any, to the terms of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER:
GEOKINETICS INC.
_______________________________
MICHAEL A. DUNN, VICE PRESIDENT
49
<PAGE>
SELLERS:
_____________________________________
FRED J. HILTERMAN (INDIVIDUALLY)
____________________________
SPOUSE (IF APPLICABLE)
NAME: KATHLEEN H. HILTERMAN
_____________________________________
N. WAYNE LAURITZEN (INDIVIDUALLY)
____________________________
SPOUSE (IF APPLICABLE)
NAME: RUTHANN LAURITZEN
_____________________________________
REGINALD N. NEALE (INDIVIDUALLY)
_____________________________________
JOHN W.C. SHERWOOD (INDIVIDUALLY)
COMPANY:
GEOPHYSICAL DEVELOPMENT
CORPORATION
_____________________________________
REGINALD N. NEALE, PRESIDENT
50
<PAGE>
EXHIBIT 1.3
(TO STOCK PURCHASE AGREEMENT)
ALLOCATION OF PURCHASE PRICE
BASE CONSIDERATION NO. OF SHARES
FRED J. HILTERMAN $7,800,000 300,000
N. WAYNE LAURITZEN $2,600,000 100,000
REGINALD N NEALE $7,800,000 300,000
JOHN W. C. SHERWOOD $7,800,000 300,000
<PAGE>
EXHIBIT 1.4
(TO STOCK PURCHASE AGREEMENT)
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT 1.5
(TO STOCK PURCHASE AGREEMENT)
ESCROW AGREEMENT
<PAGE>
EXHIBIT 2.1(d)
(TO STOCK PURCHASE AGREEMENT)
ACQUIRED SHARES
NO. OF SHARES OWNED
Fred J. Hilterman 2,025
N. Wayne Lauritzen 675
Reginald N. Neale 2,025
John W. C. Sherwood 2,025
<PAGE>
EXHIBIT 4.4
(TO STOCK PURCHASE AGREEMENT)
BUYER OPTIONS
<PAGE>
EXHIBIT 5.1(f)(1)
(TO STOCK PURCHASE AGREEMENT)
HILTERMAN EMPLOYMENT AGREEMENT
<PAGE>
EXHIBIT 5.1(f)(2)
(TO STOCK PURCHASE AGREEMENT)
LAURITZEN EMPLOYMENT AGREEMENT
<PAGE>
EXHIBIT 5.1(f)(3)
(TO STOCK PURCHASE AGREEMENT)
NEALE EMPLOYMENT AGREEMENT
<PAGE>
EXHIBIT 5.1(i)
(TO STOCK PURCHASE AGREEMENT)
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT 5.1(k)
(TO STOCK PURCHASE AGREEMENT)
OPINION OF COUNSEL TO SELLERS
<PAGE>
EXHIBIT 5.2(g)
(TO STOCK PURCHASE AGREEMENT)
OPINION OF COUNSEL TO BUYER
<PAGE>
GEOPHYSICAL DEVELOPMENT CORPORATION
DISCLOSURE SCHEDULE
EXHIBIT 4.2
WARRANT AGREEMENT
AMONG
GEOKINETICS INC.
and
the parties named herein
Dated as of April 30, 1998
<PAGE>
TABLE OF CONTENTS(1)
PAGE
SECTION 1. Warrant Certificates.................................... 1
SECTION 2. Execution of Warrant Certificates....................... 1
SECTION 3. Registration............................................ 2
SECTION 4. Registration of Transfers and Exchanges................. 2
SECTION 5. Warrants; Exercise of Warrants.......................... 5
SECTION 6. Payment of Taxes........................................ 7
SECTION 7. Mutilated or Missing Warrant Certificates............... 7
SECTION 8. Reservation of Warrant Shares........................... 8
SECTION 9. Obtaining Stock Exchange Listings....................... 9
SECTION 10. Adjustment of Number of Warrant Shares
Issuable............................................. 9
SECTION 11. Fractional Interests.................................... 20
SECTION 12. Notices to Warrant Holders.............................. 20
SECTION 13. Registration Rights..................................... 22
SECTION 14. Notices to Company and Warrant Holder................... 34
SECTION 15. Supplements and Amendments.............................. 34
SECTION 16. Successors.............................................. 34
SECTION 17. Termination............................................. 34
SECTION 18. Governing Law........................................... 34
SECTION 19. Benefits of This Agreement.............................. 34
SECTION 20. Counterparts............................................ 35
- ----------------
(1) This Table of Contents does not constitute a part of this Agreement or
have any bearing upon the interpretation of any of its terms or
provisions.
<PAGE>
WARRANT AGREEMENT (the "Warrant Agreement" or this "Agreement")
dated as of April 30, 1998 (the "Issue Date") between Geokinetics Inc., a
Delaware corporation (the "Company"), and the parties named herein (together
with their successors and assigns, the "Holders").
Terms defined in the Securities Purchase Agreement (the "Securities
Purchase Agreement") dated as of April 30, 1998 between the Company and the
purchasers named therein (the "Purchasers") unless defined herein are used as
therein defined.
WHEREAS, the Company proposes to issue Warrants, as hereinafter
described (the "Warrants"), to purchase up to 7,618,594 shares of Common Stock
(the "Common Stock") of the Company (the Common Stock issuable on exercise of
the Warrants being referred to herein as the "Warrant Shares"), in connection
with a private placement of an aggregate of $40,000,000 principal amount of the
Company's 12% Senior Subordinated Notes due 2005 and each Warrant entitling the
holder thereof to purchase one Warrant Share.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. WARRANT CERTIFICATES. The certificates evidencing the
Warrants (the "Warrant Certificates") to be delivered pursuant to this Agreement
shall be in registered form only and shall be substantially in the form set
forth in Exhibit A attached hereto.
SECTION 2. EXECUTION OF WARRANT CERTIFICATES. Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board or its
President or a Vice President and by its Secretary or an Assistant Secretary
under its corporate seal. Each such signature upon the Warrant Certificates may
be in the form of a facsimile signature of the present or any future Chairman of
the Board, President, Vice President, Secretary or Assistant Secretary and may
be imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, President, Vice President, Secretary or
Assistant Secretary, notwithstanding the fact that at the time the Warrant
Certificates shall be delivered or disposed of he shall have ceased to hold such
office. The seal of the Company may be in the form of a
<PAGE>
-2-
facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as though such person
had not ceased to be such officer of the Company; and any Warrant Certificate
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate, although at the date of the execution
of this Warrant Agreement any such person was not such an officer.
SECTION 3. REGISTRATION. The Company shall number and register the
Warrant Certificates in a register as they are issued. Warrants shall be issued
in accordance with Paragraph 1B of the Securities Purchase Agreement. The
Company may deem and treat the registered holder(s) of the Warrant Certificates
as the absolute owner(s) thereof (notwithstanding any notation of ownership or
other writing thereon made by anyone), for all purposes, and shall not be
affected by any notice to the contrary. The Company shall act as the registrar
for the Warrants.
SECTION 4. REGISTRATION OF TRANSFERS AND EXCHANGES. The Company
shall from time to time register the transfer of any outstanding Warrant
Certificates in a Warrant register to be maintained by the Company upon
surrender thereof accompanied by a written instrument or instruments of transfer
in form satisfactory to the Company, duly executed by the registered holder or
holders thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney together with (if such transfer is pursuant to clause
(1)(w)(III) of the next paragraph) the opinion of counsel specified therein.
Upon any such registration of transfer, a new Warrant Certificate shall be
issued to the transferee(s) and the surrendered Warrant Certificate shall be
cancelled and disposed of by the Company.
Each Holder, severally and not jointly, acknowledges and affirms its
representations in Paragraph 6 of the Securities Purchase Agreement. The Warrant
holders and all holders of Warrant Shares, by their acceptance of Warrant
Certificates or certificates evidencing Warrant Shares, agree that any proposed
resale, pledge or other transfer (including any transfer
<PAGE>
-3-
by issuance of Warrant Shares upon exercise of a Warrant evidenced by a Warrant
Certificate in a name other than the name in which such Warrant Certificate is
registered) of any Warrant or Warrant Shares may be effected only (1) (w) inside
the United States (I) to a person who the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, (II) in
accordance with Rule 144 under the Securities Act or (III) pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably satisfactory to the Company to such
effect), (x) to the Company, (y) outside the United States to a foreign person
in a transaction meeting the requirements of Rule 904 under the Securities Act
or (z) pursuant to an effective registration statement under the Securities Act
and (2) in each case, in accordance with the applicable securities laws of any
state of the United States or any other applicable jurisdiction. Each holder of
Warrant Certificates or certificates evidencing Warrant Shares, by acceptance
thereof, agrees to, and each subsequent holder is required to, notify any
purchaser thereof of the resale restrictions set forth above. Prior to any
proposed resale, pledge or other transfer (including any transfer by issuance of
Warrant Shares upon exercise of a Warrant evidenced by a Warrant Certificate in
a name other than the name in which such Warrant Certificate is registered) of
any Warrant or Warrant Shares, the Holder thereof shall give written notice to
the Company of such Holder's intention to effect such transfer and the names and
circumstances thereof and, if the proposed transfer is pursuant to clause
(1)(w)(III) of the second preceding sentence, will, if requested by the Company,
deliver to the Company:
(1) an investment covenant reasonably satisfactory to the Company
signed by the proposed transferee;
(2) an agreement by such transferee to the impression of the
restrictive investment legend set forth below on the Warrant or the
Warrant Shares;
(3) an agreement by such transferee that the Company may place a
notation in the stock books of the Company or a "stop transfer order" with
any transfer agent or registrar with respect to the Warrant Shares; and
(4) an agreement by such transferee to be bound by the provisions of
this Section 4 relating to the transfer of such Warrant or Warrant Shares.
<PAGE>
-4-
The Warrant holders agree that each Warrant Certificate and any
certificate representing the Warrant Shares will bear the following legend:
THE SECURITY REPRESENTED BY THIS CERTIFICATE (AND ANY PREDECESSOR) WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION
5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND,
IF SUCH SECURITY EVIDENCES A WARRANT, THE WARRANT SHARES ISSUABLE
PURSUANT THERETO) MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) (W) INSIDE THE UNITED STATES (I) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (II) IN ACCORDANCE WITH RULE 144 UNDER THE
SECURITIES ACT, OR (III) PURSUANT TO ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL, IF THE COMPANY SO REQUESTS), (X) TO THE COMPANY, (Y)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (Z) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (2) IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE. THE SECURITY REPRESENTED BY THIS CERTIFICATE IS ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFERABILITY CONTAINED IN THE
TAG-ALONG DRAG-ALONG AGREEMENT DATED AS OF APRIL 30, 1998, A COPY OF
WHICH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES.
Subject to the foregoing provisions, Warrant Certificates may be
exchanged at the option of the holder(s) thereof, when surrendered to the
Company at its office for another Warrant Certificate or other Warrant
Certificates of like tenor and representing in the aggregate a like number of
Warrants. Warrant Certificates surrendered for exchange shall be cancelled and
disposed of by the Company.
<PAGE>
-5-
On delivery of the Warrants by the Company to the Warrant holder or
holders pursuant to the Securities Purchase Agreement, each Warrant holder will
have registration rights with respect to the Warrant Shares set forth in Section
13 hereof.
Every Holder of a Warrant Certificate, by accepting the same,
consents and agrees with the Company and with every subsequent holder of such
Warrant Certificate that, prior to due presentment of such Warrant Certificate
for registration of transfer, the Company may treat the person in whose name the
Warrant Certificate is registered as the owner thereof for all purposes and as
the person entitled to exercise the rights granted under the Warrants, and
neither the Company nor any agent thereof shall be affected by any notice to the
contrary.
SECTION 5. WARRANTS; EXERCISE OF WARRANTS. Subject to the terms of
this Agreement, each Warrant holder shall have the right, which may be exercised
commencing at the opening of business on the Issue Date and until 5:00 p.m., New
York City time on April 30, 2005, to receive from the Company the number of
fully paid and nonassessable Warrant Shares which the holder may at the time be
entitled to receive on exercise of such Warrants and payment of the Exercise
Price then in effect for such Warrant Shares. Each Warrant not exercised prior
to 5:00 p.m., New York City time, on April 30, 2005 shall become void and all
rights thereunder and all rights in respect thereof under this agreement shall
cease as of such time. No adjustments as to dividends will be made upon exercise
of the Warrants.
A Warrant may be exercised upon surrender to the Company at its
office designated for such purpose (the address of which is set forth in Section
14 hereof) of the Warrant Certificate or Certificates evidencing the Warrants to
be exercised with the form of election to purchase on the reverse thereof duly
filled in and signed, which signature shall be guaranteed by a bank or trust
company having an office or correspondent in the United States or a broker or
dealer which is a member of a registered securities exchange or the National
Association of Securities Dealers, Inc., together with (if such exercise
involves a transfer pursuant to clause (1)(w)(III) of the second paragraph of
Section 4) the opinion of counsel specified therein, and upon payment to the
Company of the exercise price (the "Exercise Price") which is set forth in the
form of Warrant Certificate attached hereto as Exhibit A as adjusted as herein
provided, for the number of Warrant Shares in respect of which such Warrants are
then exercised. Payment of the aggregate Exercise Price shall be made in cash or
by certified
<PAGE>
-6-
or official bank check to the order of the Company. In lieu of exercising this
Warrant by paying in full the Exercise Price plus transfer taxes (if applicable
pursuant to Section 6), if any, the Warrant holder may, from time to time,
convert this Warrant, in whole or in part, into a number of shares of Common
Stock determined by dividing (a) the aggregate current market price of the
number of shares of Common Stock represented by the Warrants converted, minus
the aggregate Exercise Price for such shares of Common Stock, minus transfer
taxes, if any, by (b) the current market price of one share of Common Stock. The
current market price shall be determined pursuant to Section 10(f).
Subject to the provisions of Section 6 hereof, upon such surrender
of Warrant Certificates and payment of the Exercise Price the Company shall
issue and cause to be delivered with all reasonable dispatch (and in any event
within 10 Business Days after such receipt) to or upon the written order of the
holder and, subject to Section 4, in such name or names as the Warrant holder
may designate, a certificate or certificates for the number of full Warrant
Shares issuable upon the exercise of such Warrants together with cash as
provided in Section 11; PROVIDED, HOWEVER, that if any consolidation, merger or
lease or sale of assets is proposed to be effected by the Company as described
in subsection (l) of Section 10 hereof, or a tender offer or an exchange offer
for shares of Common Stock of the Company shall be made, upon such surrender of
Warrant Certificates and payment of the Exercise Price as aforesaid, the Company
shall, as soon as possible, but in any event not later than two business days
thereafter, issue and cause to be delivered the full number of Warrant Shares
issuable upon the exercise of such Warrants in the manner described in this
sentence together with cash as provided in Section 11. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such Warrant Certificates and
payment of the Exercise Price.
Prior to the exercise of the Warrants, except as may be specifically
provided for herein, (i) no Holder of a Warrant Certificate, as such, shall be
entitled to any of the rights of a holder of Common Stock of the Company,
including, without limitation, the right to vote at or to receive any notice of
any meetings of stockholders; (ii) the consent of any such Holder shall not be
required with respect to any action or proceeding of the Company; (iii) except
as provided in Section 10(i), no such Holder, by reason of the ownership or
<PAGE>
-7-
possession of a Warrant or the Warrant Certificate representing the same, shall
have any right to receive any cash dividends, stock dividends, allotments or
rights or other distributions paid, allotted or distributed or distributable to
the stockholders of the Company prior to, or for which the relevant record date
preceded, the date of the exercise of such Warrant; and (iv) no such Holder
shall have any right not expressly conferred by the Warrant or Warrant
Certificate held by such Holder.
The Warrants shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part and, in the event that a
Warrant Certificate is exercised in respect of fewer than all of the Warrant
Shares issuable on such exercise at any time prior to the date of expiration of
the Warrants, a new Warrant Certificate evidencing the remaining Warrant or
Warrants will be issued and delivered pursuant to the provisions of this Section
and of Section 2 hereof.
All Warrant Certificates surrendered upon exercise of Warrants shall
be cancelled and disposed of by the Company. the Company shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by the holders during normal business hours at its office.
SECTION 6. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; PROVIDED, HOWEVER, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue of any Warrant Certificates or any certificates for Warrant Shares
in a name other than that of the registered holder of a Warrant Certificate
surrendered for registration of transfer or upon the exercise of a Warrant, and
the Company shall not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
reasonable satisfaction of the Company that such tax has been paid.
SECTION 7. MUTILATED OR MISSING WARRANT CERTIFICATES. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt
<PAGE>
-8-
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction of such Warrant Certificate and indemnity, if requested, also
reasonably satisfactory to it. Applicants for such substitute Warrant
Certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
SECTION 8. RESERVATION OF WARRANT SHARES. The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants. The Company or, if appointed, the transfer
agent for the Common Stock (the "Transfer Agent") and every subsequent transfer
agent for any shares of the Company's capital stock issuable upon the exercise
of any of the rights of purchase aforesaid will be irrevocably authorized and
directed at all times to reserve such number of authorized shares as shall be
required for such purpose. The Company will keep a copy of this Agreement on
file with the Transfer Agent and with every subsequent transfer agent for any
shares of the Company' capital stock issuable upon the exercise of the rights of
purchase represented by the Warrants. The Company will furnish such Transfer
Agent a copy of all notices of adjustments and certificates related thereto,
transmitted to each holder pursuant to Section 13 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 10 hereof to reduce the Exercise Price below the then par value (if any)
of the Warrant Shares, the Company will take any corporate action which may, in
the opinion of its counsel (which may be counsel employed by the Company), be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free
of preemptive rights and, subject to Section 6, free from all taxes, liens,
charges and security interests with respect to the issue thereof. The Company
further covenants, represents and warrants that, (a) as of the Issue Date, no
form of general solicitation or general
<PAGE>
-9-
advertising was used by the Company or, to the best of its knowledge, any other
Person acting on behalf of the Company, in respect of the Warrants or the
Warrant Shares or in connection with the issuance of the Warrants; (b) as of the
Issue Date, neither the Company nor any Person acting on behalf of the Company
has, either directly or indirectly, sold or offered for sale to any Person any
of the Warrants, the Warrant Shares or any other similar security of the Company
except as contemplated by this Agreement; and (c) neither the Company nor any
Person acting on its behalf will sell or offer for sale any such security to or
solicit any offers to buy any such security from, or otherwise approach or
negotiate in respect thereof with, any Person or Persons so as thereby to bring
the issuance or sale of any of the Warrants within the provisions of Section 5
of the Securities Act.
SECTION 9. OBTAINING STOCK EXCHANGE LISTINGS. The Company will from
time to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed on
the principal securities exchanges and markets within the United States of
America, if any, on which other shares of Common Stock are then listed.
SECTION 10. ADJUSTMENT OF NUMBER OF WARRANT SHARES ISSUABLE. The
number of Warrant Shares issuable upon the exercise of each Warrant are subject
to adjustment from time to time upon the occurrence of the events enumerated in
this Section 10. For purposes of this Section 10, "Common Stock" means shares
now or hereafter authorized of any class of common stock of the Company and any
other stock of the Company, however designated, that has the right (subject to
any prior rights of any class or series of preferred stock) to participate in
any distribution of the assets or earnings of the Company without limit as to
per share amount.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK.
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(3) combines its outstanding shares of Common Stock into a smaller
number of shares;
<PAGE>
-10-
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares of its
capital stock;
then the number and kind of shares of its capital stock issuable upon exercise
of any Warrant in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he or she would have owned immediately following such action if
such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant upon exercise of it
may receive shares of two or more classes of capital stock of the Company, the
exercise privilege of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) ADJUSTMENT FOR RIGHTS ISSUE.
If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them to purchase shares of Common Stock or
securities directly or indirectly convertible into or exchangeable for Common
Stock (or options or rights with respect to such securities) at a price per
share less than the current market price per share on that record date, the
number of Warrant Shares issuable upon exercise of one Warrant shall be adjusted
in accordance with the formula:
N' = N x (O + A)
----------
(O + (A x P))
M
where:
<PAGE>
-11-
N'= the adjusted number of Warrant Shares issuable upon exercise of
one Warrant.
N = the current number of Warrant Shares issuable upon exercise of one
Warrant.
O = the number of shares of Common Stock outstanding on the record
date.
A = the number of additional shares of Common Stock offered pursuant
to such rights issuance.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the number of Warrant Shares issuable upon exercise
of the Warrants shall be immediately readjusted to what it would have been if
"A" in the above formula had been the number of shares actually issued.
(C) ADJUSTMENT FOR OTHER DISTRIBUTIONS.
If the Company distributes to all holders of its Common Stock any of
its assets (including but not limited to cash), debt securities, preferred
stock, or any rights or warrants to purchase debt securities, preferred stock,
assets or other securities of the Company, the number of Warrant Shares issuable
upon exercise of one Warrant shall be adjusted in accordance with the formula:
N' = N x M
---
M-F
where:
N'= the adjusted number of Warrant Shares issuable upon exercise of
one Warrant.
<PAGE>
-12-
N = the current number of Warrant Shares issuable upon exercise of one
Warrant.
M = the current market price per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of Common
Stock. The Board of Directors shall determine the fair market value
in good faith.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This subsection does not apply to rights, options or warrants
referred to in subsection (b) of this Section 10.
(D) ADJUSTMENT FOR COMMON STOCK ISSUE.
If the Company issues shares of Common Stock for a consideration per
share less than the current market price per share on the date the Company fixes
the offering price of such additional shares, the number of Warrant Shares
issuable upon exercise of one Warrant shall be adjusted in accordance with the
formula:
N' = N x A
-----
O + P
-
M
where:
N'= the adjusted number of Warrant Shares issuable upon exercise of
one Warrant.
N = the then current number of Warrant Shares issuable upon exercise
of one Warrant.
O = the number of shares outstanding immediately prior to the issuance
of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
<PAGE>
-13-
M = the current market price per share on the date of sale of such
additional shares.
A = the number of shares outstanding immediately after the issuance of
such additional shares.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections (b) and (c) of
this Section 10,
(2) the exercise of Warrants, or the conversion or exchange of other
securities convertible or exchangeable for Common Stock,
(3) Common Stock issued to employees of the Company and its Wholly
Owned Subsidiaries under bona fide employee benefit plans adopted by the
Board of Directors and approved by the holders of Common Stock when
required by law, if such Common Stock would otherwise be covered by this
subsection (d) (but only to the extent that the aggregate number of shares
excluded hereby and issued on or after the date of this Warrant Agreement
shall not exceed 5% of the Common Stock outstanding at the time of the
adoption of each such plan, exclusive of antidilution adjustments under
such plan),
(4) Common Stock issued upon the exercise of warrants and stock
options outstanding on the Date of Closing, or
(5) Common Stock issued in a bona fide public offering pursuant to a
firm commitment underwriting.
(e) ADJUSTMENT FOR CONVERTIBLE SECURITIES ISSUE.
If the Company issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in subsections (b) and (c) of this Section 10) for a consideration per
share of Common Stock initially deliverable upon conversion or exchange of such
securities less than the current market price per share on the date of issuance
of such securities, the number of Warrant Shares
<PAGE>
-14-
issuable upon exercise of one Warrant shall be adjusted in accordance with this
formula:
N' = N x O + D
-----
O + P
-
M
where:
N'= the adjusted number of Warrant Shares issuable upon exercise of
one Warrant.
N = the then current number of Warrant Shares issuable upon exercise
of one Warrant.
O = the number of shares outstanding immediately prior to the issuance
of such securities.
P = the aggregate consideration received for the issuance of such
securities.
M = the current market price per share on the date of sale of such
securities.
D = the maximum number of shares deliverable upon conversion or in
exchange for such securities at the initial conversion or exchange
rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange
of such securities have not been issued when such securities are no longer
outstanding, then the number of Warrant Shares issuable upon exercise of one
Warrant shall promptly be readjusted to the number of Warrant Shares issuable
upon exercise of one Warrant which would then be in effect had the adjustment
upon the issuance of such securities been made on the basis of the actual number
of shares of Common Stock issued upon conversion or exchange of such securities.
This subsection (e) does not apply to:
(1) convertible securities issued in a bona fide public offering
pursuant to a firm commitment underwriting, or
<PAGE>
-15-
(2) convertible securities issued to employees of the Company and
its Wholly Owned Subsidiaries under bona fide employee benefit plans
adopted by the Board of Directors and approved by the holders of Common
Stock when required by law, if such convertible securities would otherwise
be covered by this subsection (e) (but only to the extent that the
aggregate number of convertible securities excluded hereby and issued on
or after the date of this Warrant Agreement shall not exceed 5% of the
Common Stock outstanding at the time of the adoption of each such plan,
exclusive of antidilution adjustments under such plan).
(f) CURRENT MARKET PRICE.
In Sections 5 and 11 and in subsections (b), (c), (d) and (e) of
this Section 10 the current market price per share of Common Stock on any date
is the average of the Quoted Prices of the Common Stock for 30 consecutive
trading days commencing 45 trading days before the date in question. The "Quoted
Price" of the Common Stock is the last reported sales price of the Common Stock
as reported by NASDAQ, National Market System, or if the Common Stock is listed
on a securities exchange, the last reported sales price of the Common Stock on
such exchange which shall be for consolidated trading if applicable to such
exchange, or if neither so reported or listed, the last reported bid price of
the Common Stock. In the absence of one or more such quotations, the Board of
Directors of the Company shall determine the current market price (i) based on
the most recently completed arm's-length transaction between the Company and a
person other than an Affiliate of the Company and the closing of which occurs on
such date or shall have occurred within the six months preceding such date, (ii)
if no such transaction shall have occurred on such date or within such six-month
period, the value of the security most recently determined as of a date within
the six months preceding such date by a nationally recognized investment banking
firm or appraisal firm which is not an Affiliate of the Company (an "Independent
Financial Advisor") or (iii) if neither clause (i) nor (ii) is applicable, the
value of the security determined as of such date by an Independent Financial
Advisor.
(g) CONSIDERATION RECEIVED.
For purposes of any computation respecting consideration received
pursuant to subsections (d) and (e) of this Section 10, the following shall
apply:
<PAGE>
-16-
(1) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided that in no
case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors (irrespective of the
accounting treatment thereof), whose determination shall be conclusive,
and described in a Board resolution;
(3) in the case of the issuance of securities convertible into or
exchangeable for shares, the aggregate consideration received therefor
shall be deemed to be the consideration received by the Company for the
issuance of such securities plus the additional minimum consideration, if
any, to be received by the Company upon the conversion or exchange thereof
(the consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this subsection).
(h) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED.
No adjustment in the number of Warrant Shares issuable upon exercise
of one Warrant need be made unless the adjustment would require an increase or
decrease of at least 1% in the number of Warrant Shares issuable upon exercise
of one Warrant. Any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment.
All calculations under this Section shall be made to the nearest
1/100th of a share.
(i) WHEN NO ADJUSTMENT REQUIRED.
No adjustment need be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no par
value of the Common Stock.
<PAGE>
-17-
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(j) NOTICE OF ADJUSTMENT.
Whenever the number of Warrant Shares issuable upon exercise of one
Warrant is adjusted, the Company shall provide the notices required by Section
12 hereof.
(k) NOTICE OF CERTAIN TRANSACTIONS.
If:
(1) The Company takes any action that would require an adjustment in
the number of Warrant Shares issuable upon exercise of one Warrant
pursuant to subsection (a), (b), (c), (d) or (e) of this Section 10 and if
the Company does not arrange for Warrant holders to participate pursuant
to subsection (i) of this Section 10;
(2) The Company takes any action that would require a supplemental
Warrant Agreement pursuant to subsection (l) of this Section 10; or
(3) there is a liquidation or dissolution of the Company,
The Company shall mail to Warrant holders a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the notice at least 15
days before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
(l) REORGANIZATION OF COMPANY.
If the Company consolidates or merges with or into, or transfers or
leases all or substantially all its assets to, any person, upon consummation of
such transaction the Warrants shall automatically become exercisable for the
kind and amount of securities, cash or other assets which the holder of a
Warrant would have owned immediately after the consolidation, merger, transfer
or lease if the holder had exercised the Warrant immediately before the
effective date of the transaction. Concurrently with the consummation of such
transaction, the corporation formed by or surviving any such consolidation or
<PAGE>
-18-
merger if other than the Company, or the person to which such sale or conveyance
shall have been made, shall enter into a supplemental Warrant Agreement so
providing and further providing for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this Section.
The successor company shall mail to Warrant holders a notice describing the
supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of Warrants
under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement.
If this subsection (l) applies, subsections (a), (b), (c), (d) and
(e) of this Section 10 do not apply.
(m) COMPANY DETERMINATION FINAL.
Any determination that the Company or the Board of Directors must
make pursuant to subsection (a), (c), (d), (e), (f), (g) or (i) of this Section
10 which is made in good faith shall be conclusive.
(n) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED.
In any case in which this Section 10 shall require that an
adjustment in the number of Warrant Shares issuable upon exercise of one Warrant
be made effective as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event (i) issuing to the holder of
any Warrant exercised after such record date the Warrant Shares and other
capital stock of the Company, if any, issuable upon such exercise over and above
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise on the basis of the current number of Warrant Shares issuable upon
exercise of one Warrant and (ii) paying to such holder any amount in cash in
lieu of a fractional share pursuant to Section 11; PROVIDED, HOWEVER, that the
Company shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional Warrant Shares, other
capital stock and cash upon the occurrence of the event requiring such
adjustment.
(o) ADJUSTMENT IN EXERCISE PRICE.
Upon each adjustment of the number of Warrant Shares pursuant to
this Section 10, the Exercise Price for each Warrant
<PAGE>
-19-
outstanding prior to the making of the adjustment in the number of Warrant
Shares shall thereafter be adjusted to the Exercise Price (calculated to the
nearest hundredth) obtained from the following formula:
E'= E x N
-
N'
where:
E'= the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
N'= the adjusted number of Warrant Shares issuable up onexercise of a
Warrant.
N = the number or Warrant Shares previously issuable upon exercise of
a Warrant prior to adjustment.
(p) FORM OF WARRANTS.
Irrespective of any adjustments in the number or kind of shares
purchasable upon the exercise of the Warrants, Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
(q) NO DILUTION OR IMPAIRMENT.
If any event shall occur as to which the provisions of this Section
10 are not strictly applicable but the failure to make any adjustment would
adversely affect the purchase rights represented by the Warrants in accordance
with the essential intent and principles of this Section, then, in each such
case, the Company shall appoint an investment banking firm of recognized
national standing, or any other financial expert that does not (or whose
directors, officers, employees, affiliates or stockholders do not) have a direct
or material indirect financial interest in the Company or any of its
subsidiaries, who has not been, and, at the time it is called upon to give
independent financial advice to the Company, is not (and none of its directors,
officers, employees, affiliates or stockholders are) a promoter, director or
officer of the Company or any of its subsidiaries, which shall give their
opinion upon the adjustment, if any, on a basis consistent with the essential
intent and principles established in this Section 10, necessary to preserve,
without dilution, the purchase rights represented
<PAGE>
-20-
by this Warrant. Upon receipt of such opinion, the Company will promptly mail a
copy thereof to the holders of the Warrants and shall make the adjustments
described therein.
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Warrants, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of the Warrants against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (1) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock on the exercise of the Warrants from time
to time outstanding and (2) will not take any action which results in any
adjustment of the number of Warrant Shares issuable upon exercise of one Warrant
if the total number of Warrant Shares issuable after the action upon the
exercise of all of the Warrants would exceed the total number of shares of
Common Stock then authorized by the Company's certificate of incorporation and
available for the purposes of issue upon such exercise. A consolidation, merger,
reorganization or transfer of assets involving the Company covered by Section
10(l) shall not be prohibited by or require any adjustment under this subsection
(q).
SECTION 11. FRACTIONAL INTERESTS. Any one Warrant may be exercised
only in full and not in part. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise at the same time by the same holder, the number
of full Warrant Shares which shall be issuable upon the exercise thereof shall
be computed on the basis of the aggregate number of Warrant Shares purchasable
on exercise of the Warrants so requested to be exercised. If any fraction of a
Warrant Share would, except for the provisions of this Section 11, be issuable
on the exercise of any Warrants (or specified portion thereof), the Company
shall pay an amount in cash equal to the product of (i) such fraction of a
Warrant Share and (ii) the difference between the current market price of a
share of Common Stock and the Exercise Price.
SECTION 12. NOTICES TO WARRANT HOLDERS. Upon any adjustment of the
number of Warrant Shares issuable upon exercise of one Warrant pursuant to
Section 10, the Company shall
<PAGE>
-21-
promptly thereafter (i) cause to be filed with the Company a certificate which
includes the report of a firm of independent public accountants of recognized
standing selected by the Board of Directors of the Company (who may be the
regular auditors of the Company) setting forth the number of Warrant Shares
issuable upon exercise of one Warrant after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, and (ii) cause to be given to each
of the registered holders of the Warrant Certificates at his or her address
appearing on the Warrant register written notice of such adjustments by
first-class mail, postage prepaid. Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under the
other provisions of this Section 12.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants; or
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other
than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in shares of Common Stock
or distributions referred to in subsection (a) of Section 10 hereof); or
(c) of any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change
in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or a tender
offer or exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action (other than actions of
the character described in Section 10(a)) which would require an
adjustment of the number of Warrant Shares issuable upon exercise of one
Warrant pursuant to Section 10;
then the Company shall cause to be given to each of the registered holders of
the Warrant Certificates at his or her address appearing on the Warrant
register, at least 20 days (or 10 days in any case specified in clauses (a) or
(b) above) prior to the applicable record date hereinafter specified, or
promptly in the case of events for which there is no record date, by first class
mail, postage prepaid, a written notice stating (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
rights, options, warrants or distribution are to be determined, or (ii) the
initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock, or (iii) the date on which any such consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up is expected
to become effective or consummated, and the date as of which it is expected that
holders of record of shares of Common Stock shall be entitled to exchange such
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up. The failure to give the notice required by this
Section 12 or any defect therein shall not affect the legality or validity of
any distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.
SECTION 13. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION.
(1) REQUEST FOR REGISTRATION. At any time after the first
anniversary of the Issue Date, the Holder or Holders of in excess of 25% of the
outstanding Warrant Shares issued or issuable upon exercise of the Warrants may
make a written request for registration under the Securities Act ("Demand
<PAGE>
-23-
Registration") of all or part of its or their Registrable Securities; PROVIDED
that the Company shall not be obligated to effect more than three Demand
Registrations in respect of the Registrable Securities. Such request will
specify the number of Registrable Securities proposed to be sold and will also
specify the intended method of disposition thereof. Within 10 Business Days
after receipt of such request, the Company will give written notice of such
registration request to all other Holders of the Warrants and include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein from the Holders thereof within
15 Business Days after receipt by the applicable Holder of the Company's notice.
Each such request will also specify the aggregate number of Registrable
Securities to be registered and the intended method of disposition thereof.
(2) EFFECTIVE REGISTRATION AND EXPENSES. A registration will not
count as a Demand Registration until it has become effective (unless the Holders
demanding such registration withdraw the Registrable Securities, in which case
such demand will count as a Demand Registration unless the Holders of such
Warrants agree to pay all Registration Expenses (as hereinafter defined)
relating to such registration). Except as provided above, the Company will pay
all Registration Expenses in connection with any registration initiated as a
Demand Registration, whether or not it becomes effective.
(3) PRIORITY ON DEMAND REGISTRATIONS. If the Holders of a majority
of the Registrable Securities to be registered in a Demand Registration so
elect, the offering of such Registrable Securities pursuant to such Demand
Registration shall be in the form of an underwritten offering. In such event, if
the managing underwriter or underwriters (the "Underwriters") of such offering
advise the Company and the Holders in writing that in their opinion the
Registrable Securities requested to be included in such offering is sufficiently
large to materially and adversely affect the success of such offering, then (i)
the Holders of Registrable Securities shall be entitled to participate in such
Demand Registration (PRO RATA on the basis of the amount of Registrable
Securities requested to be included in such registration by each such Holder)
first; and (ii) the Company and other equity security holders of the Company
entitled to participate will be entitled to participate in such registration
(with the holders of such securities being entitled to participate in accordance
with the relative priorities, if any, as shall exist among them), in each case
with further PRO RATA allocations to the extent any such person has requested
registration of fewer securities than such person is
<PAGE>
-24-
entitled to have registered so that the number of securities to be included in
such registration will not exceed that amount that can, in the opinion of such
Managing Underwriter or Underwriters, be sold without any such material adverse
effect. To the extent Registrable Securities so requested to be registered are
excluded from the offering, the Holders of Registrable Securities, as a group,
shall have the right to one additional Demand Registration under this section
with respect to Registrable Securities for the number of shares so excluded (but
in no event shall such additional Demand Registration be for less than 250,000
shares).
(4) SELECTION OF UNDERWRITERS. If any Demand Registration is in the
form of an underwritten offering, the Holders of a majority of the aggregate
number of the outstanding Registrable Securities shall designate the Underwriter
or a group of Underwriters to be utilized in connection with the public offering
of such Registrable Securities, which selection shall be reasonably acceptable
to the Company. The Company shall enter into an underwriting agreement in
customary form with such Underwriter or Underwriters, which shall include, among
other provisions, indemnities to the effect and to the extent provided in
Section 13(d). The holders of Registrable Securities to be distributed 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 also be made to and for their benefit and that any and all of the
conditions precedent to the obligations of such Underwriters under such
underwriting agreement also be conditions precedent to their obligations. No
holder of Registrable Securities shall 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 holder and its
ownership of the Registrable Securities being registered on its behalf and such
holder's intended method of distribution and any other representation required
by law.
(5) DEFERRAL. Notwithstanding anything to the contrary contained
herein, the Company shall not be obligated to prepare and file, or cause to
become effective, any registration statement pursuant to this Section 13(a)
hereof at any time when, in the good faith judgment of its Board of Directors,
the filing thereof at the time requested or the effectiveness thereof after
filing should be delayed to permit the Company to include in the registration
statement the Company's financial statements (and any required audit opinion
thereon)
<PAGE>
-25-
for the then immediately preceding fiscal year or fiscal quarter, as the case
may be. The filing of a registration statement by the Company cannot be deferred
pursuant to the provisions of the immediately preceding sentence beyond the time
that such financial statements (or any required audit opinion thereon) would be
required to be filed with the Commission as part of the Company's Annual Report
on Form 10-K or Quarterly Report on Form 10-Q, as the case may be, if the
Company were then obligated to file such reports. Notwithstanding anything to
the contrary contained herein, the Company shall not be obligated to cause a
registration statement previously filed pursuant to this Section 13 to become
effective, and may suspend sales by the Holders of Registrable Securities under
any registration that has previously become effective, at any time when, in the
good faith judgment of its Board of Directors, it reasonably believes that the
effectiveness of such registration statement or the offering of securities
pursuant thereto would materially adversely affect a pending or proposed
acquisition, merger, recapitalization, consolidation, reorganization or similar
transaction or negotiations, discussions or pending proposals with respect
thereto; PROVIDED that deferrals pursuant to this sentence shall not exceed, in
the aggregate, 180 days in any calendar year. The filing of a registration
statement, or any amendment or supplement thereto, by the Company cannot be
deferred, and the rights of Holders of Registrable Securities to make sales
pursuant to an effective registration statement cannot be suspended, pursuant to
the provisions of the immediately preceding sentence for more than 15 days after
the abandonment or 30 days after the consummation of any of the foregoing
proposals or transactions or, in any event, for more than 30 days after the date
of the Board's determination pursuant to the immediately preceding sentence of
this Section 13(a)(5).
(6) FURTHER DEMANDS. The Company agrees that after the Issue Date,
it shall not grant any Person registration rights of the type set forth in
Section 13(a) hereof with respect to any equity securities of the Company
without the consent of the Holders of a majority of the Registrable Securities,
which consent shall not be unreasonably withheld. The Company and the Holders
agree that the Holders shall be entitled to the consent right set forth in the
immediately preceding sentence so long as the Holders continue to hold 25% of
the Warrants (or Warrant Shares) acquired by them on the Date of Closing.
<PAGE>
-26-
(b) PIGGY-BACK REGISTRATION.
(1) If the Company proposes to file a registration statement under
the Securities Act with respect to an offering by the Company for its own
account or for the account of any of its security holders of any class of equity
security (other than a registration statement on Form S-4 or S-8 (or any
substitute form that may be adopted by the Commission) or a registration
statement in connection with an exchange offer or offering to the Company's
existing security holders), then the Company shall give written notice of such
proposed filing to the Holders of Registrable Securities as soon as practicable
(but in no event less than 20 Business Days before the anticipated filing date),
and such notice shall offer such Holders the opportunity to register such number
of Registrable Securities as each such Holder may request (a "Piggy-Back
Registration").
(2) The Company shall use its best efforts to cause the managing
Underwriter or Underwriters of a proposed underwritten offering to permit the
Registrable Securities requested to be included in the registration statement
for such offering to be included on the same terms and conditions as any similar
securities of the Company or of such other security holders included therein.
Notwithstanding the foregoing, if the managing Underwriter or Underwriters of
such offering deliver a written opinion to the Company that either because of
(i) the kind or combination of securities which the Holders, the Company and any
other persons or entities intend to include in such offering or (ii) the size of
the offering which the Holders, the Company and such other persons intend to
make, are such that the success of the offering would be materially and
adversely affected by inclusion of the Registrable Securities requested to be
included, then (a) in the event that the size of the offering is the basis of
such managing Underwriter's opinion, the amount of securities to be offered for
the accounts of Non-Priority Persons (as defined below) shall be reduced pro
rata (according to the Registrable Securities and other securities proposed for
registration by Persons ("Non-Priority Persons") other than the Company (if such
registration was initially to be filed for the account of the Company) or the
other Persons for whose account such registration was initially to be filed) to
the extent necessary to reduce the total amount of securities to be included in
such offering to the amount recommended by such managing Underwriter or
Underwriters; PROVIDED that if securities are being offered for the account of
Non-Priority Persons other than holders of Registrable Securities, then with
respect to the Registrable Securities intended to be offered by
<PAGE>
-27-
Holders, the proportion by which the amount of such class of securities intended
to be offered by Holders is reduced shall not exceed the proportion by which the
amount of such class of securities intended to be offered by Non-Priority
Persons other than holders of Registrable Securities is reduced; and (b) in the
event that the kind (or combination) of securities to be offered is the basis of
such managing Underwriter's opinion, (x) the Registrable Securities to be
included in such offering shall be reduced as described in clause (a) above
(subject to the proviso in clause (a)) or (y) if the actions described in clause
(x) would, in the judgment of the managing Underwriter, be insufficient to
substantially eliminate the adverse effect that inclusion of the Registrable
Securities requested to be included would have on such offering, such
Registrable Securities will be excluded from such offering.
The Company will pay all Registration Expenses (as defined herein)
in connection with each registration of Registrable Securities.
(c) REGISTRATION PROCEDURES.
If and whenever the Company is required to use its best efforts to
effect the registration of any Registrable Securities under the Securities Act,
the Company will promptly:
(1) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such securities, make all required
filings with the NASD and use commercially reasonable efforts to cause
such registration statement to become effective;
(2) prepare and file with the Securities and Exchange 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 securities covered
by such registration statement until such time as all of such securities
have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such
registration statement, but in no event for a period of more than one year
after such registration statement becomes effective;
(3) furnish to counsel (if any) elected by holders of a majority (by
number of shares) of the Registrable
<PAGE>
-28-
Securities covered by such registration statement copies of all documents
proposed to be filed with the Securities and Exchange Commission in
connection with such registration, which documents will be subject to the
review of such counsel;
(4) furnish to each seller of such securities such number of
conformed copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits, except that
the Company shall not be obligated to furnish any seller of securities
with more than two copies of such exhibits), such number of copies of the
prospectus included in such registration statement (including such
preliminary prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request in order to facilitate the disposition of
the securities owned by such seller;
(5) use its commercially reasonable efforts to register or qualify
such securities covered by such registration statement under such other
securities or Blue Sky Laws of such jurisdictions as each seller shall
request, and do any and all other acts and things which may be necessary
or advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, 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 is not
so qualified, or to consent to general service of process in any such
jurisdiction;
(6) furnish to each seller a signed counterpart, addressed to the
sellers, of
(i) an opinion of counsel for the Company, dated the effective
date of the registration statement, reasonably satisfactory in form
and substance to such holders' counsel referred to in Section
13(c)(3), and
(ii) subject to the accountants obtaining the necessary
representations as specified in Statement on Auditing Standards No.
72, a "comfort" letter signed by the independent public accountants
who have certified the Company's financial statements included in
the registration statement,
<PAGE>
-29-
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to changes subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the Underwriters
in underwritten public offerings of securities;
(7) notify each seller of any securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of 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 light of the
circumstances then existing, and at the request of any such seller prepare
and furnish to such seller 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 then
existing;
(8) otherwise use its commercially reasonable efforts to comply with
all applicable rules and regulations of the Securities and Exchange
Commission, and 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 month after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act;
(9) use its best efforts to list such securities on any securities
exchange on which the Common Stock is then listed, if such securities are
not already so listed and if such listing is then permitted under the
rules of such exchange, and to provide a transfer agent and registrar for
such Registrable Securities not later than the effective date of such
registration statement;
<PAGE>
-30-
(10) in any underwritten offering, use its best efforts to cause the
indemnity and contribution terms between the sellers and the Underwriters
to be no more burdensome to the sellers than the indemnity and
contribution terms between the sellers and the Company set forth in
Section 13(d) hereof; and
(11) promptly notify each holder and the Underwriter or
Underwriters, if any:
(i) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has
been filed and, with respect to such registration statement or any
post-effective amendment thereto, when the same has become
effective;
(ii) of any written comments from the Securities and Exchange
Commission with respect to any filing referred to in clause (i) and
of any written request by the Securities and Exchange Commission for
amendments or supplements to such registration statement or
prospectus;
(iii) of the notification to the Company by the Securities and
Exchange Commission of its initiation of any proceeding with respect
to the issuance by the Securities and Exchange Commission of, or of
the issuance by the Securities and Exchange Commission of, any stop
order suspending the effectiveness of such registration statement;
and
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the applicable securities or blue sky laws
of any jurisdiction.
The Company may require each seller of any securities as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law
in connection therewith. Each such holder agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such holder not materially
misleading.
<PAGE>
-31-
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 13(c)(7) hereof, such holder will promptly discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 13(c)(7)
hereof. If so directed by the Company, each holder of Registrable Securities
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
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the period
mentioned in Section 13(c)(2) hereof shall be extended by the number of days
during the period from and including the date of the giving of such notice to
and including the date when each seller of any Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 13(c)(7) hereof.
In connection with any underwritten offering, all Registrable
Securities to be included in such registration shall be subject to the related
underwriting agreement and no person may participate in such registration unless
such person agrees to sell such person's securities on the basis provided in the
underwriting arrangement approved by the persons for whose account such
underwritten registration is initially filed and completes and executes all
customary questionnaires, indemnities, underwriting agreements and other
reasonable documents which must be executed under the terms of such underwriting
arrangements.
(d) INDEMNIFICATION.
(1) INDEMNIFICATION. The Company agrees to indemnify and hold
harmless each Holder of Registrable Securities, its officers, directors,
employees and agents and each Person who controls such Holder within the meaning
of either Section 15 of the Securities Act or Section 20(a) of the Exchange Act
(each such person being sometimes hereinafter referred to as an "Indemnified
Holder") from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation and legal expenses) arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus or
<PAGE>
-32-
in any amendment or supplement thereto or in any preliminary prospectus, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
allegation thereof based upon information relating to such Indemnified Holder
and furnished in writing to the Company by such Indemnified Holder expressly for
use therein. This indemnity will be in addition to any liability which the
Company may otherwise have.
If any action or proceeding (including any governmental
investigation or inquiry) shall be brought or asserted against an Indemnified
Holder in respect of which indemnity may be sought from the Company, such
Indemnified Holder shall promptly notify the Company in writing, and the Company
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Holder and the payment of all expenses. Such
Indemnified Holder shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Holder except that the
Company shall be responsible for the reasonable fees and expenses of such
counsel if (but only if) (a) the Company has agreed to pay such fees and
expenses or (b) the Company shall have failed to assume the defense of such
action or proceeding and has failed to employ counsel reasonably satisfactory to
such Indemnified Holder in any such action or proceeding or (c) the named
parties to any such action or proceeding (including any impleaded parties)
include both such Indemnified Holder and the Company, and there are one or more
legal defenses available to such Indemnified Holder which are different from or
additional to those available to the Company (in which case, if such Indemnified
Holder notifies the Company in writing that it elects to employ separate counsel
at the expense of the Company, the Company shall not have the right to assume
the defense of such action or proceeding on behalf of such Indemnified Holder,
it being understood, however, that the Company shall not, in connection with any
one such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys at any time for such Indemnified Holder and any
other Indemnified Holders, which firm shall be designated in writing by such
Indemnified Holders). The Company shall not be liable for
<PAGE>
-33-
any settlement of any such action or proceeding effected without its written
consent, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such action or proceeding, the Company agrees
to indemnify and hold harmless such Indemnified Holders from and against any
loss or liability by reason of such settlement or judgment.
(2) CONTRIBUTION. If the indemnification provided for in Section
13(d)(1) is unavailable to an Indemnified Holder in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then the Company,
in lieu of indemnifying such Indemnified Holder, shall contribute to the amount
paid or payable by such Indemnified Holder as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and of the Indemnified Holder
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of the Indemnified Holder on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Indemnified Holder and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 1(d)(1), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Company and each Holder of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 1(d)(2)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
13(d)(2), an Indemnified Holder shall not be required to contribute any amount
in excess of the amount by which the total net proceeds received by such
Indemnified Holder or its affiliated Indemnified Holders from the sale to the
public of Registrable Securities exceeds the amount of any damages which such
Indemnified Holder, or its affiliated Indemnified Holders, has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged
<PAGE>
-34-
omission. 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.
(3) CERTAIN DEFINITIONS.
(i) The term "Registrable Securities" shall mean the Warrant Shares
and any other securities issued or issuable upon exercise of the Warrants.
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
disposition of them shall not require registration or qualification of
them under the Securities Act or any similar state law then in force, or
(D) they shall have ceased to be outstanding.
(ii) The term "Registration Expenses" shall mean all expenses
incident to the Company's performance of or compliance with Section 13
hereof, including, without limitation, all registration and filing fees,
all fees and expenses of complying with securities or blue sky laws, fees
and other expenses associated with filings with the National Association
of Securities Dealers, Inc. (including, if required, the reasonable fees
and expenses of any "qualified independent underwriter" and its counsel),
all printing expenses, the reasonable fees and disbursements of counsel
for the Company and of its independent public accountants, the fees and
disbursements of one counsel retained by the holders of Registrable
Securities, the expenses of any special audits made by such accountants
required by or incident to such performance and compliance, but not
including (a) fees and disbursements of more than one counsel retained by
the holders of Registrable Securities, or (b) such holders' proportionate
share of underwriting discounts and commissions.
SECTION 14. NOTICES TO COMPANY AND WARRANT HOLDER. Any notice or
demand authorized by this Agreement to be given
<PAGE>
-35-
or made by the registered holder of any Warrant Certificate to or on the Company
shall be sufficiently given or made when and if deposited in the mail, first
class or registered, postage prepaid, addressed to the office of the Company
expressly designated by the Company at its office for purposes of this Agreement
(until the Warrant holders are otherwise notified in accordance with this
Section by the Company), as follows:
Geokinetics Inc.
Marathon Oil Tower
5555 San Felipe
Suite 780
Houston, Texas 77056
Attention: Chairman of the Board
Any notice pursuant to this Agreement to be given by the Company to
the registered holder(s) of any Warrant Certificate shall be sufficiently given
when and if deposited in the mail, first class or registered, postage prepaid,
addressed (until the Company is otherwise notified in accordance with this
Section by such holder) to such holder at the address appearing on the Warrant
register of the Company.
SECTION 15. SUPPLEMENTS AND AMENDMENTS. The Company may from time to
time supplement or amend this Agreement without the approval of any holders of
Warrant Certificates in order to cure any ambiguity or to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or desirable
and which shall not in any way adversely affect the interests of the holders of
Warrant Certificates. Any amendment or supplement to this Agreement that has an
adverse effect on the interests of holders shall require the written consent of
registered holders of two-thirds of the then outstanding Warrant Shares issued
or issuable upon exercise of the Warrants (excluding Warrant Shares held by the
Company or any of its Affiliates). The consent of each holder of a Warrant
affected shall be required for any amendment pursuant to which the number of
Warrant Shares purchasable upon exercise of Warrants would be decreased (other
than in accordance with Section 10 or 11 hereof).
SECTION 16. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its respective successors and assigns hereunder.
<PAGE>
-36-
SECTION 17. TERMINATION. This Agreement (except for Section 13(d)
and for the restrictions on transfer of Warrant Shares specified in Section 4)
shall terminate at 5:00 p.m., New York City time on April 30, 2005.
SECTION 18. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE.
SECTION 19. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the registered holders of the Warrant Certificates or Warrant Shares any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company and the
registered holders of the Warrant Certificates and the Warrant Shares. Nothing
herein shall prohibit or limit the Company from entering into an agreement
providing holders of securities which may hereafter be issued by the Company
with such registration rights exercisable at such time or times and in such
manner as the Board of Directors shall deem in the best interests of the Company
so long as the performance by the Company of its obligations under such other
agreement will not cause the Company to breach its obligations hereunder to the
Holders.
SECTION 20. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[Signature Page Follows]
<PAGE>
[Signature Page of Warrant Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
GEOKINETICS INC.
By:
Name:
Title:
DLJ INVESTMENT PARTNERS, L.P.
By: DLJ INVESTMENT PARTNERS,
INC.
Managing General Partner
By:
Name:
Title:
DLJ INVESTMENT FUNDING, INC.
By:
Name:
Title:
DLJ ESC II L.P.
By: DLJ LBO PLANS MANAGEMENT
CORPORATION, its
General Partner
By:
Name:
Title:
<PAGE>
-2-
[Signature Page of Warrant Agreement]
By:
Name:
Title:
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
[Face]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE (AND ANY PREDECESSOR)
WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5
OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
GEOKINETICS INC. (THE "COMPANY") THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED, ONLY (1) (W) INSIDE THE UNITED STATES (I) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (II) IN ACCORDANCE WITH RULE 144 UNDER THE
SECURITIES ACT, OR (III) PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL, IF THE
COMPANY SO REQUESTS), (X) TO THE COMPANY, (Y) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (Z) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (2) IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE. THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFERABILITY CONTAINED IN THE TAG-ALONG
DRAG-ALONG AGREEMENT DATED AS OF APRIL 30, 1998, A COPY OF WHICH IS ON FILE AT
THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES.
A-1
<PAGE>
EXERCISABLE ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME ON APRIL 30, 2005
No. ____ Warrants
Warrant Certificate
Geokinetics Inc.
This Warrant Certificate certifies that _____________, or registered
assigns, is the registered holder of Warrants expiring April 30, 2005 (the
"Warrants") to purchase Common Stock, $.0l par value (the "Common Stock"), of
Geokinetics Inc., a Delaware corporation (the "Company"). Each Warrant entitles
the holder upon exercise to receive from the Company on or before 5:00 p.m. New
York City Time on April 30, 2005, one fully paid and nonassessable share of
Common Stock (a "Warrant Share") at the exercise price (the "Exercise Price") of
$2.00 payable in lawful money of the United States of America upon surrender of
this Warrant Certificate and payment of the Exercise Price at the office of the
Company designated for such purpose, but only subject to the conditions set
forth herein and in the Warrant Agreement referred to on the reverse hereof. In
lieu of exercising this Warrant by paying in full the Exercise Price minus
transfer taxes (if applicable pursuant to Section 6 of the Warrant Agreement),
if any, the Warrant holder may, from time to time, convert this Warrant, in
whole or in part, into a number of shares of Common Stock determined by dividing
(a) the aggregate current market price of the number of shares of Common Stock
represented by the Warrants converted, minus the aggregate Exercise Price for
such shares of Common Stock, minus transfer taxes, if any, by (b) the current
market price of one share of Common Stock. The current market price shall be
determined pursuant to Section 10(f) of the Warrant Agreement.
The number of Warrant Shares issuable upon exercise of the Warrants
is subject to adjustment upon the occurrence of certain events set forth in the
Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City Time on
April 30, 2005, and to the extent not exercised by such time such Warrants shall
become void.
A-2
<PAGE>
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, Geokinetics Inc. has caused this Warrant
Certificate to be signed by its President and by its Secretary, each by a
facsimile of his signature, and has caused a facsimile of its corporate seal to
be affixed hereunto or imprinted hereon.
Dated:
GEOKINETICS INC.
By: ____________________________
Chairman and Chief Executive
Officer
By: ____________________________
Assistant Secretary
A-3
<PAGE>
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring April 30, 2005, entitling the holder
on exercise to receive shares of Common Stock, $.0l par value, of the Company
(the "Common Stock"), and are issued or to be issued pursuant to a Warrant
Agreement dated as of April 30, 1998 (the "Warrant Agreement"), duly executed
and delivered by the Company, which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants. A
copy of the Warrant Agreement may be obtained by the holder hereof upon written
request to the Company.
Warrants may be exercised at any time on or before April 30, 2005.
The holder of Warrants evidenced by this Warrant Certificate may exercise them
by surrendering this Warrant Certificate, with the form of election to purchase
set forth hereon properly completed and executed, together with payment of the
Exercise Price in cash at the office of the Company designated for such purpose.
In lieu of exercising this Warrant by paying in full the Exercise Price and
transfer taxes (if applicable pursuant to Section 6 of the Warrant Agreement),
if any, the Warrant holder may, from time to time, convert this Warrant, in
whole or in part, into a number of shares of Common Stock determined by dividing
(a) the aggregate current market price of the number of shares of Common Stock
represented by the Warrants converted, minus the aggregate Exercise Price for
such shares of Common Stock and transfer taxes, if any, by (b) the current
market price of one share of Common Stock. The current market price shall be
determined pursuant to Section 10(f) of the Warrant Agreement. In the event that
upon any exercise of Warrants evidenced hereby the number of Warrants exercised
shall be less than the total number of Warrants evidenced hereby, there shall be
issued to the holder hereof or his assignee a new Warrant Certificate evidencing
the number of Warrants not exercised. No adjustment shall be made for any
dividends on any Common Stock issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the number of Warrant Shares issuable upon exercise of one Warrant set
forth on the face hereof may, subject to certain conditions, be adjusted. No
fractions of a share of Common Stock will be issued upon the exercise of any
A-4
<PAGE>
Warrant, but the Company will pay the cash value thereof determined as provided
in the Warrant Agreement.
The holders of the Warrants are entitled to certain registration
rights with respect to the Common Stock purchasable upon exercise thereof. Said
registration rights are set forth in Section 13 of the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Company
by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Company a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company may deem and treat the registered holder(s) thereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entities any holder hereof to
any rights of a stockholder of the Company.
A-5
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Warrant, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Warrant to:
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to
transfer this Warrant on the books of the Company. The agent may
substitute another to act for him.
Date: _____________________ Signed: ___________________
(Signed exactly as your name
appears on the other side
of this Warrant)
Signature Guarantee: ____________________________
In connection with any transfer of this Warrant occurring prior to
the date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of 1933,
as amended (the "Securities Act") covering resales of this Warrant (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) April 30, 2000, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Warrant is being transferred:
A-6
<PAGE>
[CHECK ONE]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Company a signed letter containing certain
representations and agreements (the form of which appears
below); or
(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act; or
(5) __ pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or
(6) __ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Company will refuse to register any of
the Warrants evidenced by this certificate in the name of any person other than
the registered Holder thereof; PROVIDED that if box (3), (4), (5) or (6) is
checked, the Company may require, prior to registering any such transfer of the
Notes, in its sole discretion, such legal opinions, certifications (including an
investment letter in the case of box (3) or (4)) and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Company shall not be obligated to
register this Note in the name of any person other than the Holder hereof unless
and until the conditions to any such transfer of registration set forth herein
shall have been satisfied.
Date: _____________________ Signed: ___________________
(Sign exactly as your
name appears on the
other side of this
Note)
Signature Guarantee: ______________________________________
A-7
<PAGE>
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED]
The undersigned represents and warrants that it is purchasing this
Warrant for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: _____________________ _____________________________
NOTICE: To be executed by an
executive officer
A-8
<PAGE>
[FORM OF LETTER TO BE COMPLETED
BY PURCHASER IF (3) ABOVE IS CHECKED]
Ladies and Gentlemen:
1. The undersigned understands that any subsequent transfer of the
Warrants is subject to certain restrictions and conditions set forth in the
Warrants and in the Warrant Agreement and the undersigned agrees to be bound by,
and not to resell, pledge or otherwise transfer the Warrants except in
compliance with, such restrictions and conditions and the Securities Act.
2. The undersigned understands that the offer and sale of the
Warrants have not been registered under the Securities Act, and that the
Warrants may not be offered or sold except as permitted in the following
sentence. The undersigned agrees, on its own behalf and on behalf of any
accounts for which it is acting as hereinafter stated, that if it should sell,
pledge or otherwise transfer any Warrants it will do so only (1) (w) inside the
United States to a person who the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, or in accordance with Rule
144 under the Securities Act, or pursuant to another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel, if the company so requests), (x) to the Company, (y) outside the United
States to a foreign person in a transaction meeting the requirements of Rule 904
under the Securities Act or (z) pursuant to an effective registration statement
under the Securities Act and (2) in each case, in accordance with the applicable
securities laws of any state of the United States or any other applicable
jurisdiction, and the undersigned further agrees to provide to any person
purchasing any of the Warrants from us a notice advising such purchaser that
resales of the Warrants are restricted as stated herein.
3. The undersigned understands that, on any proposed resale of any
Warrants, it may be required to furnish the Company such certification and other
information as the Company may reasonably require to confirm that the proposed
sale complies with the foregoing restrictions. The undersigned further
understands that the Warrants purchased by it will bear a legend to the
foregoing effect.
4. The undersigned is an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating
A-9
<PAGE>
the merits and risks of our investment in the Warrants, and the undersigned and
any accounts for which it is acting are each able to bear the economic risk of
our or its investment, as the case may be.
5. The undersigned is acquiring the Warrants purchased by us for our
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which the undersigned exercises sole
investment discretion.
Date: _____________________ _____________________________________
NOTICE: To be signed by an
executive officer
A-10
<PAGE>
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the Warrant,
represented by this Warrant Certificate, to receive shares of Common
Stock and herewith (check item)
(i) tenders payment for such shares to the order of Geokinetics Inc.
in the amount of $ in accordance with the terms hereof; or
(ii) converts this Warrant, in whole or in part, into a number of
shares of Common Stock determined by dividing (a) the aggregate current
market price of the number of shares of Common Stock represented by this
Warrant, minus the aggregate Exercise Price for such shares of Common
Stock and transfer taxes, if any, by (b) the current market price of one
Share.
The undersigned requests that a certificate for such shares be
registered in the name of , whose address is
, and that such shares be delivered to , whose address
is .
If said number of shares is less than all of the shares of Common
Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of ,whose address is,
and that such Warrant Certificate be delivered to,
whose address is .
Signature:
Date:
Signature Guaranteed:
A-11
EXHIBIT 4.3
NOTE REGISTRATION RIGHTS AGREEMENT
AMONG
GEOKINETICS INC.
and
the parties named herein
Dated as of April 30, 1998
<PAGE>
NOTE REGISTRATION RIGHTS AGREEMENT (the "Note Registration Rights
Agreement" or this "Agreement") dated as of April 30, 1998 (the "Issue Date")
among Geokinetics Inc., a Delaware corporation (the "Company"), and the parties
named herein (together with their respective successors and assigns, the
"Holders").
Terms defined in the Securities Purchase Agreement (the "Securities
Purchase Agreement") dated as of April 30, 1998 between the Company and the
purchasers named therein (the "Purchasers") unless defined herein are used as
therein defined.
WHEREAS, the Company proposes to issue an aggregate principal amount
of $40,000,000 of its 12% Senior Subordinated Notes due 2005 (the "Notes").
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. REGISTRATION RIGHTS.
(A) DEMAND REGISTRATION.
(1) REQUEST FOR REGISTRATION. At any time on or after the first
anniversary of the Issue Date, the Holder or Holders of in excess of 25% of the
aggregate principal amount of the outstanding Notes may make a written request
for registration under the Securities Act ("Demand Registration") of all or part
of its or their Registrable Securities; PROVIDED that the Company shall not be
obligated to effect more than two Demand Registrations in respect of the
Registrable Securities. Such request will specify the number of Registrable
Securities proposed to be sold and will also specify the intended method of
disposition thereof. Within 10 Business Days after receipt of such request, the
Company will give written notice of such registration request to all other
Holders of Notes and include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein from the Holders thereof within 15 Business Days after receipt by the
applicable Holder of the Company's notice. Each such request will also specify
the aggregate number of Registrable Securities to be registered and the intended
method of disposition thereof. Unless the Holder or Holders of a majority in
aggregate number of the Registrable Securities to be registered in such Demand
Registration shall consent in writing, no other party, including the Company
(but excluding another Holder of a Note), shall be permitted to offer securities
under any such Demand Registration.
1
<PAGE>
(2) EFFECTIVE REGISTRATION AND EXPENSES. A registration will not
count as a Demand Registration until it has become effective (unless the Holders
demanding such registration withdraw the Registrable Securities, in which case
such demand will count as a Demand Registration unless the Holders of such
Registrable Securities agree to pay all Registration Expenses (as hereinafter
defined) relating to such registration). Except as provided above, the Company
will pay all Registration Expenses in connection with any registration initiated
as a Demand Registration, whether or not it becomes effective.
(3) PRIORITY ON DEMAND REGISTRATIONS. If the Holders of a majority
of the Registrable Securities to be registered in a Demand Registration so
elect, the offering of such Registrable Securities pursuant to such Demand
Registration shall be in the form of an underwritten offering. In such event, if
the managing underwriter or underwriters (the "Underwriters") of such offering
advise the Company and the Holders in writing that in their opinion the
Registrable Securities requested to be included in such offering is sufficiently
large to materially and adversely affect the success of such offering, then (i)
the Holders of Registrable Securities shall be entitled to participate in such
Demand Registration (PRO RATA on the basis of the amount of Registrable
Securities requested to be included in such registration by each such Holder)
first; and (ii) the Company and other equity security holders of the Company
entitled to participate will be entitled to participate in such registration
(with the holders of such securities being entitled to participate in accordance
with the relative priorities, if any, as shall exist among them), in each case
with further PRO RATA allocations to the extent any such person has requested
registration of fewer securities than such person is entitled to have registered
so that the number of securities to be included in such registration will not
exceed that amount that can, in the opinion of such Managing Underwriter or
Underwriters, be sold without any such material adverse effect. To the extent
Registrable Securities so requested to be registered are excluded from the
offering, the Holders of Registrable Securities, as a group, shall have the
right to one additional Demand Registration under this section with respect to
Registrable Securities for the number of securities so excluded (but in no event
shall such additional Demand Registration be for less than $1,000,000 principal
amount of Registrable Securities).
(4) SELECTION OF UNDERWRITERS. If any Demand Registration is in the
form of an underwritten offering, the Holders of a majority of the aggregate
number of the outstanding Registrable Securities shall designate the Underwriter
or a group of Underwriters to be utilized in connection with the public offering
of such Registrable Securities, which selection shall be
2
<PAGE>
reasonably acceptable to the Company. The Company shall enter into an
underwriting agreement in customary form with such Underwriter or Underwriters,
which shall include, among other provisions, indemnities to the effect and to
the extent provided in Section 1(d). The holders of Registrable Securities to be
distributed 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 also be made to and for their benefit and that
any and all of the conditions precedent to the obligations of such Underwriters
under such underwriting agreement also be conditions precedent to their
obligations. No holder of Registrable Securities shall 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
holder and its ownership of the Registrable Securities being registered on its
behalf and such holder's intended method of distribution and any other
representation required by law.
(5) DEFERRAL. Notwithstanding anything to the contrary contained
herein, the Company shall not be obligated to prepare and file, or cause to
become effective, any registration statement pursuant to this Section 1(a)
hereof at any time when, in the good faith judgment of its Board of Directors,
the filing thereof at the time requested or the effectiveness thereof after
filing should be delayed to permit the Company to include in the registration
statement the Company's financial statements (and any required audit opinion
thereon) for the then immediately preceding fiscal year or fiscal quarter, as
the case may be. The filing of a registration statement by the Company cannot be
deferred pursuant to the provisions of the immediately preceding sentence beyond
the time that such financial statements (or any required audit opinion thereon)
would be required to be filed with the Commission as part of the Company's
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be,
if the Company were then obligated to file such reports. Notwithstanding
anything to the contrary contained herein, the Company shall not be obligated to
cause a registration statement previously filed pursuant to this Section 1(a) to
become effective, and may suspend sales by the Holders of Registrable Securities
under any registration that has previously become effective, at any time when,
in the good faith judgment of its Board of Directors, it reasonably believes
that the effectiveness of such registration statement or the offering of
securities pursuant thereto would materially adversely affect a pending or
proposed acquisition, merger, recapitalization, consolidation, reorganization or
similar transaction or negotiations, discussions or pending proposals with
respect thereto; provided that deferrals pursuant to this sentence shall
3
<PAGE>
not exceed, in the aggregate, 180 days in any calendar year. The filing of a
registration statement, or any amendment or supplement thereto, by the Company
cannot be deferred, and the rights of Holders of Registrable Securities to make
sales pursuant to an effective registration statement cannot be suspended,
pursuant to the provisions of the immediately preceding sentence for more than
15 days after the abandonment or 30 days after the consummation of any of the
foregoing proposals or transactions or, in any event, for more than 30 days
after the date of the Board's determination pursuant to the immediately
preceding sentence of this Section 1(a)(5).
(6) The Company agrees that after the Issue Date, it shall not grant
any Person registration rights of the type set forth in Section 1(a) hereof with
respect to any class of debt security of the Company without the consent of the
Holders of a majority of the Registrable Securities, which consent shall not be
unreasonably withheld. The Company and the Holders agree that the Holders shall
be entitled to the consent right set forth in the immediately preceding sentence
so long as the Holders continue to hold 25% of the Registrable Securities
acquired by them on the Date of Closing.
(B) PIGGY-BACK REGISTRATION.
(1) If the Company proposes to file a registration statement under
the Securities Act with respect to an offering by the Company for its own
account or for the account of any of its security holders of any class of debt
security, then the Company shall give written notice of such proposed filing to
the Holders of Registrable Securities as soon as practicable (but in no event
less than 20 Business Days before the anticipated filing date), and such notice
shall offer such Holders the opportunity to register such number of Registrable
Securities as each such Holder may request (a "Piggy-Back Registration").
(2) The Company shall use its best efforts to cause the managing
Underwriter or Underwriters of a proposed underwritten offering to permit the
Registrable Securities requested to be included in the registration statement
for such offering to be included on the same terms and conditions as any similar
securities of the Company or of such other security holders included therein.
Notwithstanding the foregoing, if the managing Underwriter or Underwriters of
such offering deliver a written opinion to the Company that either because of
(i) the kind or combination of securities which the Holders, the Company and any
other persons or entities intend to include in such offering or (ii) the size of
the offering which the Holders, the Company and such other persons intend to
make, are such that the success of the offering would be
4
<PAGE>
materially and adversely affected by inclusion of the Registrable Securities
requested to be included, then (a) in the event that the size of the offering is
the basis of such managing Underwriter's opinion, the amount of securities to be
offered for the accounts of Non-Priority Persons (as defined below) shall be
reduced pro rata (according to the Registrable Securities and other securities
proposed for registration by Persons ("Non-Priority Persons") other than the
Person or Persons for whose account such registration was initially to be filed)
to the extent necessary to reduce the total amount of securities to be included
in such offering to the amount recommended by such managing Underwriter or
Underwriters; PROVIDED that if securities are being offered for the account of
Non-Priority Persons other than holders of Registrable Securities, then with
respect to the Registrable Securities intended to be offered by Holders, the
proportion by which the amount (taking into account the initial net proceeds to
the Company on issuance of such securities and not the face amount thereof) of
such class of securities intended to be offered by Holders is reduced shall not
exceed the proportion by which the amount of such class of securities intended
to be offered by Non-Priority Persons other than holders of Registrable
Securities is reduced; and (b) in the event that the kind (or combination) of
securities to be offered is the basis of such managing Underwriter's opinion,
(x) the Registrable Securities to be included in such offering shall be reduced
as described in clause (a) above (subject to the proviso in clause (a)) or (y)
if the actions described in clause (x) would, in the judgment of the managing
Underwriter, be insufficient to substantially eliminate the adverse effect that
inclusion of the Registrable Securities requested to be included would have on
such offering, such Registrable Securities will be excluded from such offering.
The Company will pay all Registration Expenses (as defined herein)
in connection with each registration of Registrable Securities.
(C) REGISTRATION PROCEDURES.
If and whenever the Company is required to use its best efforts to
effect the registration of any Registrable Securities under the Securities Act,
the Company will promptly:
(1) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such securities, make all required
filings with the NASD and use commercially reasonable efforts to cause
such registration statement to become effective;
5
<PAGE>
(2) prepare and file with the Securities and Exchange 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 securities covered
by such registration statement until such time as all of such securities
have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such
registration statement, but in no event for a period of more than one year
after such registration statement becomes effective;
(3) furnish to counsel (if any) elected by holders of a majority (by
aggregate principal amount) of the Registrable Securities covered by such
registration statement copies of all documents proposed to be filed with
the Securities and Exchange Commission in connection with such
registration, which documents will be subject to the review of such
counsel;
(4) furnish to each seller of such securities such number of
conformed copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits, except that
the Company shall not be obligated to furnish any seller of securities
with more than two copies of such exhibits), such number of copies of the
prospectus included in such registration statement (including such
preliminary prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request in order to facilitate the disposition of
the securities owned by such seller;
(5) use its commercially reasonable efforts to register or qualify
such securities covered by such registration statement under such other
securities or Blue Sky Laws of such jurisdictions as each seller shall
request, and do any and all other acts and things which may be necessary
or advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, 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 is not
so qualified, or to consent to general service of process in any such
jurisdiction;
(6) furnish to each seller a signed counterpart, addressed to the
sellers, of
6
<PAGE>
(i) an opinion of counsel for the Company, dated the effective date
of the registration statement, reasonably satisfactory in form and
substance to such holders' counsel referred to in Section 1(c)(3),
and
(ii) subject to the accountants obtaining the necessary
representations as specified in Statement on Auditing Standards No.
72, a "comfort" letter signed by the independent public accountants
who have certified the Company's financial statements included in
the registration statement,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to changes subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the Underwriters
in underwritten public offerings of securities;
(7) notify each seller of any securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of 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 light of the
circumstances then existing, and at the request of any such seller prepare
and furnish to such seller 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 then
existing;
(8) otherwise use its commercially reasonable efforts to comply with
all applicable rules and regulations of the Securities and Exchange
Commission, and 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 month after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act;
7
<PAGE>
(9) use its best efforts to list such securities on any securities
exchange on which the Common Stock is then listed, if such securities are
not already so listed and if such listing is then permitted under the
rules of such exchange, and to provide a trustee, transfer agent and
registrar and paying agent for such Registrable Securities not later than
the effective date of such registration statement;
(10) in any underwritten offering, use its best efforts to cause the
indemnity and contribution terms between the sellers and the Underwriters
to be no more burdensome to the sellers than the indemnity and
contribution terms between the sellers and the Company set forth in
Section 1(d) hereof;
(11) cause the Indenture relating to the Notes to be qualified under
the Trust Indenture Act of 1939, as amended; and
(12) promptly notify each Holder and the Underwriter or
Underwriters, if any:
(i) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has
been filed and, with respect to such registration statement or any
post-effective amendment thereto, when the same has become
effective;
(ii) of any written comments from the Securities and Exchange
Commission with respect to any filing referred to in clause (i) and
of any written request by the Securities and Exchange Commission for
amendments or supplements to such registration statement or
prospectus;
(iii) of the notification to the Company by the Securities and
Exchange Commission of its initiation of any proceeding with respect
to the issuance by the Securities and Exchange Commission of, or of
the issuance by the Securities and Exchange Commission of, any stop
order suspending the effectiveness of such registration statement;
and
(iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of any Registrable Securities
for sale under the applicable securities or blue sky laws of any
jurisdiction.
The Company may require each seller of any securities as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution
8
<PAGE>
of such securities as the Company may from time to time reasonably request in
writing and as shall be required by law in connection therewith. Each such
holder agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such holder not materially misleading.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 1(c)(7) hereof, such holder will promptly discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 1(c)(7)
hereof. If so directed by the Company, each holder of Registrable Securities
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
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the period
mentioned in Section 1(c)(2) hereof shall be extended by the number of days
during the period from and including the date of the giving of such notice to
and including the date when each seller of any Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 1(c)(7) hereof.
In connection with any underwritten offering, all Registrable
Securities to be included in such registration shall be subject to the related
underwriting agreement and no person may participate in such registration unless
such person agrees to sell such person's securities on the basis provided in the
underwriting arrangement approved by the persons for whose account such
underwritten registration is initially filed and completes and executes all
customary questionnaires, indemnities, underwriting agreements and other
reasonable documents which must be executed under the terms of such underwriting
arrangements.
9
<PAGE>
(D) INDEMNIFICATION AND CONTRIBUTION.
(1) INDEMNIFICATION. The Company agrees to indemnify and hold
harmless each Holder of Registrable Securities, its officers, directors,
employees and agents and each Person who controls such Holder within the meaning
of either Section 15 of the Securities Act or Section 20(a) of the Exchange Act
(each such person being sometimes hereinafter referred to as an "Indemnified
Holder") from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation and legal expenses) arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus or in any amendment
or supplement thereto or in any preliminary prospectus, or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any such untrue statement or omission or allegation
thereof based upon information relating to such Indemnified Holder and furnished
in writing to the Company by such Indemnified Holder expressly for use therein.
This indemnity will be in addition to any liability which the Company may
otherwise have.
If any action or proceeding (including any governmental
investigation or inquiry) shall be brought or asserted against an Indemnified
Holder in respect of which indemnity may be sought from the Company, such
Indemnified Holder shall promptly notify the Company in writing, and the Company
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Holder and the payment of all expenses. Such
Indemnified Holder shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Holder except that the
Company shall be responsible for the reasonable fees and expenses of such
counsel if (but only if) (a) the Company has agreed to pay such fees and
expenses or (b) the Company shall have failed to assume the defense of such
action or proceeding and has failed to employ counsel reasonably satisfactory to
such Indemnified Holder in any such action or proceeding or (c) the named
parties to any such action or proceeding (including any impleaded parties)
include both such Indemnified Holder and the Company, and there are one or more
legal defenses available to such Indemnified Holder which are different from or
additional to those available to the Company (in which case, if such Indemnified
Holder notifies the Company in writing that it elects to employ separate counsel
at the expense of the Company, the Company shall not have the right to assume
the
10
<PAGE>
defense of such action or proceeding on behalf of such Indemnified Holder, it
being understood, however, that the Company shall not, in connection with any
one such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys at any time for such Indemnified Holder and any
other Indemnified Holders, whic firm shall be designated in writing by such
Indemnified Holders). The Company shall not be liable for any settlement of any
such action or proceeding effected without its written consent, but if settled
with its written consent, or if there be a final judgment for the plaintiff in
any such action or proceeding, the Company agrees to indemnify and hold harmless
such Indemnified Holders from and against any loss or liability by reason of
such settlement or judgment.
(2) CONTRIBUTION. If the indemnification provided for in Section
1(d)(1) is unavailable to an Indemnified Holder in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then the Company,
in lieu of indemnifying such Indemnified Holder, shall contribute to the amount
paid or payable by such Indemnified Holder as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and of the Indemnified Holder
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of the Indemnified Holder on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Indemnified Holder and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 1(d)(1), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Company and each Holder of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 1(d)(2)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
1(d)(2), an Indemnified Holder shall not be required
11
<PAGE>
to contribute any amount in excess of the amount by which the total net proceeds
received by such Indemnified Holder or its affiliated Indemnified Holders from
the sale to the public of Registrable Securities exceeds the amount of any
damages which such Indemnified Holder, or its affiliated Indemnified Holders,
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. 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.
(3) CERTAIN DEFINITIONS.
(i) The term "Registrable Securities" shall mean the Notes and Guarantees
and any other securities issued or issuable in exchange for the Notes and
Guarantees. 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 disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law
then in force, or (D) they shall have ceased to be outstanding.
(ii) The term "Registration Expenses" shall mean all expenses incident to
the Company's performance of or compliance with Section 1 hereof,
including, without limitation, all registration and filing fees, all fees
and expenses of complying with securities or blue sky laws, fees and other
expenses associated with filings with the National Association of
Securities Dealers, Inc. (including, if required, the reasonable fees and
expenses of any "qualified independent underwriter" and its counsel), all
printing expenses, the fees and disbursements of counsel for the Company
and of its independent public accountants, the fees and disbursements of
one counsel retained by the holders of Registrable Securities, the
expenses of any special audits made by such accountants required by or
incident to such performance and compliance, but not including (a) fees
and disbursements of more than one counsel retained by the holders of
Registrable Securities, or (b) such holders' proportionate share of
underwriting discounts and commissions.
12
<PAGE>
SECTION 2. NOTICES TO COMPANY AND NOTE HOLDERS. Any notice or demand
authorized by this Agreement to be given or made by the registered holder of any
Note to or on the Company shall be sufficiently given or made when and if
deposited in the mail, first class or registered, postage prepaid, addressed to
the office of the Company expressly designated by the Company at its office for
purposes of this Agreement (until the Note holders are otherwise notified in
accordance with this Section by the Company), as follows:
Geokinetics Inc.
Marathon Oil Tower
5555 San Felipe
Suite 780
Houston, Texas 77056
Attention: Chairman of the Board
Any notice pursuant to this Agreement to be given by the Company to
the registered holder(s) of any Note shall be sufficiently given when and if
deposited in the mail, first class or registered, postage prepaid, addressed
(until the Company is otherwise notified in accordance with this Section by such
holder) to such holder at the address appearing on the Note register of the
Company.
SECTION 3. SUPPLEMENTS AND AMENDMENTS. This Agreement may not be
amended without the consent of the Company and each Holder of Notes.
SECTION 4. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its respective successors and assigns hereunder.
SECTION 5. TERMINATION. This Agreement (except for Section 1(d))
shall terminate at 5:00 p.m., New York City time, on April 30, 2005.
SECTION 6. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL
BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE.
SECTION 7. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the registered holders of the Notes any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company and the registered holders of the Notes.
13
<PAGE>
Nothing herein shall prohibit or limit the Company from entering into an
agreement providing holders of securities which may hereafter be issued by the
Company with such registration rights exercisable at such time or times and in
such manner as the Board of Directors shall deem in the best interests of the
Company so long as the performance by the Company of its obligations under such
other agreement will not cause the Company to breach its obligations hereunder
to the Holders.
SECTION 8. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[Signature Page Follows]
14
<PAGE>
[Signature Page of Note Registration Rights Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
GEOKINETICS INC.
By:
Name: Jay Haber
Title: Chairman and Chief
Executive Officer
DLJ INVESTMENT PARTNERS, L.P.
By: DLJ INVESTMENT PARTNERS, INC.
Managing General Partner
By:
Name:
Title:
DLJ INVESTMENT FUNDING, INC.
By:
Name:
Title:
DLJ ESC II L.P.
By: DLJ LBO PLANS MANAGEMENT
CORPORATION, its General
Partner
By:
Name:
Title:
15
<PAGE>
[Signature Page of Note Registration Rights Agreement]
By:
Name:
Title:
16
EXHIBIT 4.4
[Exhibit A to 12% Senior
Subordinated Notes due 2005
of Geokinetics Inc.
Issued on April 30, 1998]
GEOKINETICS INC.,
as Issuer,
--------------------
THE GUARANTORS PARTY HERETO
and
--------------------
[ ],
as Trustee
INDENTURE
Dated as of April 30, 1998
$40,000,000
12% Senior Subordinated Notes due 2005
<PAGE>
CROSS-REFERENCE TABLE
TIA INDENTURE
SECTION SECTION
- ------- ---------
310(a)(1).......................................... 7.10
(a)(2)......................................... 7.10
(a)(3)......................................... N.A.
(a)(4)......................................... N.A.
(a)(5)......................................... 7.08; 7.10
(b)............................................ 7.08; 7.10; 12.02
(c)............................................ N.A.
311(a)............................................. 7.11
(b)............................................ 7.11
(c)............................................ N.A.
312(a)............................................. 2.05
(b)............................................ 12.03
(c)............................................ 12.03
313(a)............................................. 7.06
(b)(1)......................................... N.A.
(b)(2)......................................... 7.06
(c)............................................ 7.06; 12.02
(d)............................................ 7.06
314(a)............................................. 4.07; 4.08; 12.02
(b)............................................ N.A.
(c)(1)......................................... 12.04
(c)(2)......................................... 12.04
(c)(3)......................................... N.A.
(d)............................................ N.A.
(e)............................................ 12.05
(f)............................................ N.A.
315(a)............................................. 7.01(b)
(b)............................................ 7.05; 12.02
(c)............................................ 7.01(a)
(d)............................................ 7.01(c)
(e)............................................ 6.11
316(a)(last sentence).............................. 2.09
(a)(1)(A)...................................... 6.05
(a)(1)(B)...................................... 6.04
(a)(2)......................................... N.A.
(b)............................................ 6.07
(c)............................................ 9.05
317(a)(1).......................................... 6.08
(a)(2)......................................... 6.09
(b)............................................ 2.04
318(a)............................................. 12.01
(c)............................................ 12.01
- ------------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed
to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions............................................1
SECTION 1.02. Incorporation by Reference of TIA.....................26
SECTION 1.03. Rules of Construction.................................26
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.......................................27
SECTION 2.02. Execution and Authentication; Aggregate
Principal Amount....................................27
SECTION 2.03. Registrar and Paying Agent............................28
SECTION 2.04. Paying Agent To Hold Assets in Trust..................29
SECTION 2.05. Noteholder Lists......................................29
SECTION 2.06. Transfer and Exchange.................................30
SECTION 2.07. Replacement Notes.....................................30
SECTION 2.08. Outstanding Notes.....................................31
SECTION 2.09. Treasury Notes........................................31
SECTION 2.10. Temporary Notes.......................................32
SECTION 2.11. Cancellation..........................................32
SECTION 2.12. Payment of Interest; Defaulted Interest...............32
SECTION 2.13. CUSIP Number..........................................33
SECTION 2.14. Deposit of Moneys.....................................33
SECTION 2.15. Persons Deemed Owners.................................33
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee....................................34
SECTION 3.02. Selection of Notes To Be Redeemed.....................34
SECTION 3.03. Notice of Redemption..................................35
SECTION 3.04. Effect of Notice of Redemption........................36
SECTION 3.05. Deposit of Redemption Price...........................36
SECTION 3.06. Notes Redeemed in Part................................36
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes......................................36
SECTION 4.02. Maintenance of Office or Agency.......................37
SECTION 4.03. Corporate Existence...................................37
SECTION 4.04. Payment of Taxes and Other Claims.....................38
SECTION 4.05. Maintenance of Properties and Insurance...............38
SECTION 4.06. Compliance Certificate; Notice of Default.............39
SECTION 4.07. Compliance with Laws..................................40
SECTION 4.08. SEC Reports...........................................40
SECTION 4.09. Waiver of Stay, Extension or Usury Laws...............41
SECTION 4.10. Limitation on Restricted Payments.....................41
SECTION 4.11. Limitation on Transactions with Affiliates............44
SECTION 4.12. Limitation on Incurrence of Additional
Indebtedness and Issuance of Disqualified
Capital Stock.......................................45
SECTION 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.................45
SECTION 4.14. Prohibition on Incurrence of Senior Subordinated
Debt................................................46
SECTION 4.15. Change of Control.....................................46
SECTION 4.16. Limitation on Asset Sales.............................47
SECTION 4.17. Limitation on Preferred Stock of Subsidiaries.........52
SECTION 4.18. Limitation on Liens...................................52
SECTION 4.19. Additional Guarantors.................................52
SECTION 4.20. Limitation on Issuance of Shares of Subsidiaries......53
SECTION 4.21. Non-Guarantor Subsidiary..............................53
SECTION 4.22. Conduct of Business...................................53
SECTION 4.23. Consummation of Acquisition...........................53
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets..............54
SECTION 5.02. Successor Corporation Substituted.....................56
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.....................................56
SECTION 6.02. Acceleration..........................................58
SECTION 6.03. Other Remedies........................................59
SECTION 6.04. Waiver of Past Defaults...............................60
SECTION 6.05. Control by Majority...................................60
SECTION 6.06. Limitation on Suits...................................60
SECTION 6.07. Rights of Holders To Receive Payment..................61
SECTION 6.08. Collection Suit by Trustee............................61
SECTION 6.09. Trustee May File Proofs of Claim......................61
SECTION 6.10. Priorities............................................62
SECTION 6.11. Undertaking for Costs.................................63
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.....................................63
SECTION 7.02. Rights of Trustee.....................................64
SECTION 7.03. Individual Rights of Trustee..........................66
SECTION 7.04. Trustee's Disclaimer..................................66
SECTION 7.05. Notice of Default.....................................66
SECTION 7.06. Reports by Trustee to Holders.........................67
SECTION 7.07. Compensation and Indemnity............................67
SECTION 7.08. Replacement of Trustee................................68
SECTION 7.09. Successor Trustee by Merger, Etc......................69
SECTION 7.10. Eligibility; Disqualification.........................70
SECTION 7.11. Preferential Collection of Claims Against
Company.............................................70
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations..............70
SECTION 8.02. Legal Defeasance and Covenant Defeasance..............72
SECTION 8.03. Conditions to Legal Defeasance or Covenant
Defeasance..........................................74
SECTION 8.04. Application of Trust Money............................76
SECTION 8.05. Repayment to the Company..............................76
SECTION 8.06. Reinstatement.........................................77
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders............................77
SECTION 9.02. With Consent of Holders...............................78
SECTION 9.03. Effect on Senior Debt.................................80
SECTION 9.04. Compliance with TIA...................................80
SECTION 9.05. Revocation and Effect of Consents.....................80
SECTION 9.06. Notation on or Exchange of Notes......................81
SECTION 9.07. Trustee To Sign Amendments, Etc.......................81
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Debt.....................82
SECTION 10.02. No Payment on Notes in Certain Circumstances..........82
SECTION 10.03. Payment Over of Proceeds upon Dissolution, Etc........84
SECTION 10.04. Payments May Be Paid Prior to Dissolution.............85
SECTION 10.05. Subrogation..........................................86
SECTION 10.06. Obligations of the Company Unconditional..............86
SECTION 10.07. Notice to Trustee....................................87
SECTION 10.08. Reliance on Judicial Order or Certificate of
Liquidating Agent...................................87
SECTION 10.09. Trustee's Relation to Senior Debt.....................88
SECTION 10.10. Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior
Debt................................................88
SECTION 10.11. Noteholders Authorize Trustee To Effectuate
Subordination of Notes..............................89
SECTION 10.12. This Article Ten Not To Prevent Events of
Default.............................................90
SECTION 10.13. Trustee's Compensation Not Prejudiced.................90
ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. Unconditional Guarantee...............................90
SECTION 11.02. Subordination of Guarantee............................91
SECTION 11.03. Severability..........................................91
SECTION 11.04. Release of a Guarantor................................92
SECTION 11.05. Limitation of Guarantor's Liability...................92
SECTION 11.06. Guarantors May Consolidate, Etc. on Certain
Terms...............................................92
SECTION 11.07. Contribution..........................................94
SECTION 11.08. Waiver of Subrogation.................................94
SECTION 11.09. Execution of Guarantee................................94
SECTION 11.10. No Payment on Guarantees in Certain
Circumstances.......................................95
SECTION 11.11. Payment Over of Proceeds upon Dissolution, Etc........97
SECTION 11.12. Payments May Be Paid Prior to Dissolution.............98
SECTION 11.13. Subrogation...........................................99
SECTION 11.14. Obligations of Each Guarantor Unconditional...........99
SECTION 11.15. Notice to Trustee....................................100
SECTION 11.16. Reliance on Judicial Order or Certificate of
Liquidating Agent..................................100
SECTION 11.17. Trustee's Relation to Guarantor Senior Debt..........101
SECTION 11.18. Subordination Rights Not Impaired by Acts or
Omissions of a Guarantor or Holders of
Guarantor Senior Debt..............................101
SECTION 11.19. Noteholders Authorize Trustee To Effectuate
Subordination of Guarantees........................102
SECTION 11.20. This Article Eleven Not To Prevent Events of
Default............................................103
SECTION 11.21. Trustee's Compensation Not Prejudiced................103
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls.........................................103
SECTION 12.02. Notices..............................................103
SECTION 12.03. Communications by Holders with Other Holders.........104
SECTION 12.04. Certificate and Opinion as to Conditions
Precedent..........................................105
SECTION 12.05. Statements Required in Certificate or Opinion........105
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar............106
SECTION 12.07. Legal Holidays.......................................106
SECTION 12.08. Governing Law........................................106
SECTION 12.09. No Adverse Interpretation of Other Agreements........106
SECTION 12.10. No Recourse Against Others...........................106
SECTION 12.11. Successors...........................................107
SECTION 12.12. Duplicate Originals..................................107
SECTION 12.13. Severability.........................................107
Signatures
Schedule I - Existing Debt
Schedule II - Permitted Transactions
Exhibit A - Form of Note...............................................A-1
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
<PAGE>
INDENTURE, dated as of April 30, 1998, between Geokinetics Inc., a
Delaware corporation (the "Company"), the Guarantors signatory hereto (the
"Guarantors") and [ ], a [ ], as
Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 12%
Senior Subordinated Notes due 2005 (the "Notes") and, to provide therefor, the
Company has duly authorized the execution and delivery of this Indenture. All
things necessary to make the Notes, when duly issued and executed by the
Company, and authenticated and delivered hereunder, the valid obligations of the
Company, and to make this Indenture a valid and binding agreement of the
Company, have been done.
Each party hereto agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACCELERATION NOTICE" has the meaning provided in Section 6.02(a).
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries (a) existing at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or any of its
Subsidiaries or (b) assumed in connection with the acquisition of assets from
such Person and in each case not incurred by such Person in connection with, or
in anticipation or contemplation of, such Person becoming a Subsidiary of the
Company or such acquisition, merger or consolidation.
"ACQUISITION" means the transactions contemplated by the Stock
Purchase Agreement on the Issue Date.
"AFFILIATE" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"AFFILIATE TRANSACTION" has the meaning provided in Section 4.11.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"ASSET ACQUISITION" means (a) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or any Subsidiary of the Company or
shall be merged with or into the Company or any Subsidiary of the Company, or
(b) the acquisition by the Company or any Subsidiary of the Company of the
assets of any Person (other than a Subsidiary of the Company) which constitute
all or substantially all of the assets of such Person or comprise any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"ASSET SALE" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Subsidiary
of the Company of (a) any Capital Stock of any Subsidiary of the Company or (b)
any other property or assets of the Company or any Subsidiary of the Company
other than in the ordinary course of business; PROVIDED, HOWEVER, that Asset
Sales shall not include (i) a transaction or series of related transactions for
which the Company or its Subsidiaries receive aggregate consideration of less
than $1,000,000, (ii) the sale, lease, conveyance, disposition or other transfer
of all or substantially all of the assets of the Company as permitted under
Section 5.01, and (iii) the creation (but not the foreclosure) of any Lien not
prohibited by Section 4.18.
"AUTHENTICATING AGENT" has the meaning provided in Section 2.02.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"BLOCKAGE PERIOD" has the meaning provided in Section 10.02.
"BOARD OF DIRECTORS" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"BUSINESS DAY" means a day that is not a Legal Holiday.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations that is included on a balance sheet of such Person at
such date, determined in accordance with GAAP.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of such Person's corporate stock,
including each class of Common Stock and Preferred Stock of such Person and (ii)
with respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Service ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of this
Indenture); (ii) the approval by the holders of Capital Stock of the Company of
any plan or proposal for the liquidation or dissolution of the Company (whether
or not otherwise in compliance with the provisions of this Indenture); (iii) any
Person or Group (other than the Permitted Holders, Blackhawk Capital Partners or
Blackhawk Investors, L.L.C.) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing more than 40% of the aggregate
ordinary voting power represented by the issued and outstanding Capital Stock
(the "Voting Stock") of the Company; (iv) either of the Permitted Holders ceases
to beneficially own, directly or indirectly, in the aggregate at least 80% of
the Capital Stock of the Company owned by such Permitted Holder as of the Issue
Date (other than Capital Stock owned of record by Blackhawk Capital Partners);
(v) either Steven A. Webster or William R. Ziegler ceases to be a member of the
Board of Directors of the Company other than by reason of death or disability;
or (vi) the replacement of a majority of the Board of Directors of the Company
over a two-year period from the directors who constituted the Board of Directors
of the Company at the beginning of such period, and such replacement shall not
have been approved by a vote of at least a majority of the Board of Directors of
the Company then still in office who either were members of such Board of
Directors at the beginning of such period or whose election as a member of such
Board of Directors was previously so approved or who were nominated by, or
designees of, any of the Permitted Holders.
"CHANGE OF CONTROL DATE" has the meaning provided in Section 4.15.
"CHANGE OF CONTROL OFFER" has the meaning provided in Section 4.15.
"COMMON STOCK" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"COMPANY" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"CONSOLIDATED EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Subsidiaries paid or accrued in accordance with
GAAP for such period, (B) Consolidated Interest Expense and (C) Consolidated
Non-cash Charges LESS any non-cash items increasing Consolidated Net Income for
such period, all as determined on a consolidated basis for such Person and its
Subsidiaries in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to
any Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal Quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a PRO
FORMA basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital facilities, occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of such Person or one of its Subsidiaries
(including any Person who becomes a Subsidiary as a result of the Asset
Acquisition) incurring, assuming or otherwise becoming liable for Acquired
Indebtedness and also including any Consolidated EBITDA (including any PRO FORMA
expense and cost reductions calculated on a basis consistent with Regulation S-X
under the Securities Act) attributable to the assets which are the subject of
the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition (including the incurrence, assumption or becoming
liable for any such Indebtedness or Acquired Indebtedness) occurred on the first
day of the Four Quarter Period. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date and (2) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for
any period, the sum, without duplication, of (i) Consolidated Interest Expense
(excluding amortization of debt discount or amortization or write-off of
deferred financing costs), plus (ii) the product of (x) the amount of all
dividend payments on any Preferred Stock of such Person (other than dividends
paid in Qualified Capital Stock) paid in cash or, without duplication and with
respect to Disqualified Capital Stock, accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated federal, state and local tax rate
of such Person, expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person
for any period, the sum of, without duplication: (i) the aggregate of the
interest expense of such Person and its Subsidiaries for such period determined
on a consolidated basis in conformity with GAAP, including, without limitation,
(a) any amortization of debt discount and amortization or write-off of deferred
financing costs, (b) the net costs under Interest Swap Obligations, (c) all
capitalized interest and (d) the interest portion of any deferred payment
obligation; and (ii) without duplication of any amount in clause (i), the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued (in each case, without duplication) by such
Person and its Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
PROVIDED that there shall be excluded therefrom (a) after-tax gains and losses
from Asset Sales (without regard to the exclusions set forth in the proviso to
the definition thereof), (b) after-tax items classified as extraordinary or
non-recurring gains, (c) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Subsidiary of the
referent Person or is merged or consolidated with the referent Person or any
Subsidiary of the referent Person, (d) the net income (but not loss) of any
Subsidiary of the referent Person to the extent that the declaration of
dividends or similar distributions by that Subsidiary of that income is
restricted by contract, operation of law or otherwise, except to the extent of
cash dividends or distributions paid to the referent Person or a Wholly Owned
Subsidiary of the referent Person by such Person, (e) the net income of any
Person, other than a Subsidiary of the referent Person, except to the extent of
cash dividends or distributions paid to the referent Person or a Wholly Owned
Subsidiary of the referent Person by such Person, (f) any restoration to income
of any contingency reserve, except to the extent that provision for such reserve
was made out of Consolidated Net Income accrued at any time following the Issue
Date, (g) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued) and (h) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, the aggregate net income (or loss) of the
successor corporation prior to such consolidation, merger or transfer of assets.
"CONSOLIDATED NET WORTH" means, with respect to any Person for any
date of determination, the sum of (i) stated capital with respect to Capital
Stock of such Person and additional paid-in capital, and (ii) retained earnings
(or minus accumulated deficit) of such Person and its Subsidiaries, less, to the
extent included in the foregoing, amounts attributable to Disqualified Capital
Stock, each item determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person,
for any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries reducing Consolidated Net Income of
such Person and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP (excluding any such non-cash charge which requires
an accrual of or a reserve for cash charges for any future period).
"COVENANT DEFEASANCE" has the meaning provided in Section 8.02.
"CREDIT AGREEMENT" means one or more revolving credit or term loan
agreements to be entered into after the Issue Date with one or more banks or
other financial institutions, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring all or any portion of the Indebtedness
under such agreement or any successor or replacement agreement and whether by
the same or any other agent, lender or group of lenders; PROVIDED that no such
amendment, supplement or other modification shall increase the amount of
available borrowings or letter of credit exposure thereunder, except to the
extent otherwise permitted under clause (ii) of the definition of "Permitted
Indebtedness," to any amount in excess of that which is available in the absence
of any such amendment, supplement or other modification.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Subsidiary of the Company against fluctuations in currency
values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"DEFAULT NOTICE" has the meaning provided in Section 10.02.
"DEPOSITORY" means The Depository Trust Company, its nominees and
successors.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the Notes.
"EVENT OF DEFAULT" has the meaning provided in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"EXISTING DEBT" means Indebtedness of the Company and its
Subsidiaries outstanding on the Issue Date, as set forth on SCHEDULE I hereto.
"FAIR MARKET VALUE" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of the
Board of Directors of the Company delivered to the Trustee.
"FUNDING GUARANTOR" has the meaning provided in Section 11.07.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession of the United States, which are in effect as of December
31, 1997.
"GUARANTEE" means, with respect to any Person, any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such other Person (whether by agreement to
keep-well or to maintain financial condition or otherwise); provided that the
term "guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business.
"GUARANTEE" means the guarantee of the Company's Obligations
hereunder made by a Guarantor in favor of the Holders pursuant to the terms of
Article 11 hereof.
"GUARANTOR" means all of the Subsidiaries of the Company (other than
(y) Quantum Geophysical Services, Inc. and (z) in the Company's discretion, any
Subsidiary the assets of which have a book value of not more than $1,000,000)
existing on the date hereof and any Person who becomes a Guarantor pursuant to
Section 4.19.
"GUARANTOR BLOCKAGE PERIOD" has the meaning set forth in Section
11.10.
"GUARANTOR DEFAULT NOTICE" has the meaning set forth in Section
11.10.
"GUARANTOR SENIOR DEBT" means, with respect to any Guarantor, the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of, or which would have accrued but for the filing of,
a petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (x) all monetary
obligations (including guarantees thereof) of every nature of such Guarantor
under the Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, and (y) all Interest Swap Obligations (including
guarantees thereof) to the extent incurred in connection with the such
Guarantor's obligations under the Credit Agreement, in each case whether
outstanding on the Issue Date or thereafter incurred, and all renewals,
extensions, modifications, amendments and refinancings thereof. Notwithstanding
the foregoing, Senior Debt shall not include that portion of any Indebtedness
incurred in violation of the provisions set forth under clause (ii) of the
definition of "Permitted Indebtedness" (but, as to any such obligation, no such
violation shall be deemed to exist for purposes of this clause if the holder(s)
of such obligation or their representative and the Trustee shall have received
an Officers' Certificate of the Company to the effect that the incurrence of
such Indebtedness does not (or, in the case of revolving credit Indebtedness,
that the incurrence of the entire committed amount thereof at the date on which
the initial borrowing thereunder is made would not) violate such provisions of
this Indenture).
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is
registered on the Registrar's books.
"INCUR" has the meaning provided in Section 4.12.
"INDEBTEDNESS" means with respect to any Person, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
(iv) all obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all obligations under
any title retention agreement, (v) all obligations for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the obligation
so secured, (viii) all net obligations under Currency Agreements and Interest
Swap Obligations of such Person and (ix) all Disqualified Capital Stock issued
by such Person with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any. Indebtedness shall in any event exclude trade
accounts payable and other accrued liabilities arising in the ordinary course of
business that are not overdue by 90 days or more or are being contested in good
faith by appropriate proceedings promptly instituted and diligently conducted.
For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital
Stock.
"INDENTURE" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect material financial interest in the Company and (ii) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"INTEREST PAYMENT DATE" means the stated maturity of an installment
of interest on the Notes.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person,
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"INVESTMENT" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude (i) extensions of trade credit
by the Company and its Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Subsidiary, as the
case may be, and (ii) any transaction involving the purchase or other
acquisition (including by way of merger) of Capital Stock of any Person by the
Company and its Subsidiaries to the extent such purchase or other acquisition is
in exchange for Qualified Capital Stock of the Company. For the purposes of
Section 4.10, the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by the Company or any of
its Subsidiaries, without any adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment, reduced
by any repayment of principal or a return of capital, as the case may be, and by
the payment of dividends or distributions in connection with such Investment or
any other amounts received in respect of such Investment; PROVIDED that no such
repayment of principal, return of capital, payment of dividends or distributions
or receipt of any such other amounts shall reduce the amount of any Investment
if such repayment of principal, return of capital, payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Common Stock of any direct or indirect Subsidiary of the Company
such that, after giving effect to any such sale or disposition, the Company no
longer owns, directly or indirectly, 100% of the outstanding Common Stock of
such Subsidiary, the Company shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Common Stock of such Subsidiary not sold or disposed of.
"ISSUE DATE" means April 30, 1998.
"JUNIOR SECURITY" means any Qualified Capital Stock, any Qualified
Rights and any Indebtedness of the Company that is (i) subordinated in right of
payment to Senior Debt at least to the same extent as the Notes, as applicable,
(ii) has no scheduled installment of principal due, by redemption, sinking fund
payment or otherwise, on or prior to the stated maturity of the Notes and (iii)
has no terms more beneficial in the aggregate to the holders thereof than those
in effect with respect to the Notes on the Issue Date.
"LEGAL DEFEASANCE" has the meaning provided in Section 8.02.
"LEGAL HOLIDAY" has the meaning provided in Section 11.07.
"LIEN" means, with respect to any property, any lien, mortgage, deed
of trust, pledge, security interest, charge or encumbrance of any kind thereon
(including any conditional sale or other title retention agreement, any lease in
the nature thereof and any agreement to give any security interest) and any
assignment or other conveyance of a right to receive income or profits
therefrom.
"MATURITY DATE" means April 15, 2005.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking into
account any reduction in consolidated tax liability due to available tax credits
or deductions and any tax sharing arrangements, (c) repayment of Indebtedness
that is required to be repaid in connection with such Asset Sale, (d)
appropriate amounts to be provided by the Company or any Subsidiary, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, and (e) all distributions and other payments
made to minority interest holders in Subsidiaries or joint ventures as a result
of such Asset Sale.
"NET PROCEEDS OFFER" has the meaning provided in Section 4.16.
"NET PROCEEDS OFFER PAYMENT DATE" has the meaning provided in
Section 4.16.
"NET PROCEEDS OFFER TRIGGER DATE" has the meaning provided in
Section 4.16.
"NOTES" has the meaning provided in the preamble to this Indenture.
"NOTE REGISTRATION RIGHTS AGREEMENT" means the Note Registration
Rights Agreement dated April 30, 1998 among the Company and the parties named
therein, as the same may be amended or modified from time to time in accordance
with the terms thereof.
"OBLIGATIONS" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing or otherwise relating to
any Indebtedness, including with respect to any rights to rescission.
"OFFICER" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller, or the Secretary of such
Person, or any other officer designated by the Board of Directors serving in a
similar capacity.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such Person and otherwise complying with
the requirements of Sections 12.04 and 12.05, as they relate to the making of an
Officers' Certificate.
"OPINION OF COUNSEL" means a written opinion from legal counsel, who
may be counsel for the Company, and who is reasonably acceptable to the Trustee
and not rendered by any employee of the Company or any of its Affiliates or
Subsidiaries complying with the requirements of Sections 12.04 and 12.05, as
they relate to the giving of an Opinion of Counsel.
"PAYING AGENT" has the meaning provided in Section 2.03.
"PERMITTED HOLDERS" means each of Steven A. Webster and William R.
Ziegler.
"PERMITTED INDEBTEDNESS" means, without duplication, each of the
following:
(i) Indebtedness under the Notes, Guarantees and this
Indenture;
(ii) Indebtedness incurred pursuant to the Credit Agreement in
an aggregate principal amount at any time outstanding not to exceed the
sum of (y) 80% of accounts receivable plus (z) 40% of inventory, each as
determined in accordance with GAAP, less proceeds from Asset Sales applied
to reduce the amount of Senior Debt pursuant to Section 4.16(a)(iii)(A);
(iii) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any of its Subsidiaries and Interest Swap
Obligations of any Subsidiary of the Company covering Indebtedness of such
Subsidiary; PROVIDED, HOWEVER, that such Interest Swap Obligations are
entered into to protect the Company and its Subsidiaries from fluctuations
in interest rates on Indebtedness incurred in accordance with this
Indenture to the extent the notional principal amount of such Interest
Swap Obligation does not exceed the principal amount of the Indebtedness
to which such Interest Swap Obligation relates;
(iv) Indebtedness of a Wholly Owned Subsidiary of the Company
to the Company or to a Subsidiary of the Company for so long as such
Indebtedness is held by the Company or a Wholly Owned Subsidiary of the
Company, in each case subject to no Lien held by a Person other than the
Company or a Wholly Owned Subsidiary of the Company; PROVIDED that if as
of any date any Person other than the Company or a Wholly Owned Subsidiary
of the Company owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(v) Indebtedness of the Company to a Wholly Owned Subsidiary
of the Company for so long as such Indebtedness is held by a Wholly Owned
Subsidiary of the Company, in each case subject to no Lien; PROVIDED that
(a) any Indebtedness of the Company to any Wholly Owned Subsidiary of the
Company is unsecured and subordinated, pursuant to a written agreement, to
the Company's obligations under this Indenture and the Notes and (b) if as
of any date any Person other than a Wholly Owned Subsidiary of the Company
owns or holds any such Indebtedness or any Person holds a Lien in respect
of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the Company;
(vi) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (including in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; PROVIDED, HOWEVER,
that such Indebtedness is extinguished within five Business Days of
incurrence;
(vii) Indebtedness of the Company or any of its Subsidiaries
represented by letters of credit for the account of the Company or such
Subsidiary, as the case may be, in order to provide security for workers'
compensation claims, payment obligations in connection with
self-insurance, performance bonds, surety bonds or similar requirements in
the ordinary course of business;
(viii) Refinancing Indebtedness;
(ix) Purchase Money Indebtedness and Capitalized Lease
Obligations incurred to acquire property in the ordinary course of
business which Purchase Money Indebtedness and Capitalized Lease
Obligations do not in the aggregate exceed $5,000,000;
(x) guarantees by the Company and its Wholly Owned
Subsidiaries of each other's Indebtedness; PROVIDED that such Indebtedness
is permitted to be incurred under this Indenture;
(xi) Existing Debt;
(xii) Indebtedness of the Company and its Wholly-Owned
Subsidiaries under insurance premium finance contracts (with terms of
twelve months or less) incurred in the ordinary course of business which
Indebtedness does not in the aggregate exceed $500,000; and
(xiii) additional Indebtedness of the Company in an aggregate
principal amount not to exceed $2,000,000 at any one time outstanding.
For the purpose of determining compliance with Section 4.12, (A) in the event
that an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described in the above clauses, the Company, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses, (B) the
amount of Indebtedness issued at a price which is less than the principal amount
thereof shall be equal to the amount of the liability in respect thereof
determined in accordance with GAAP and (C) so as to avoid duplication in
determining the amount of Permitted Indebtedness under any clause of this
definition, guarantees of, or obligations in respect of letters of credit
supporting, Indebtedness otherwise included in the determination of such amount
shall not also be included.
"PERMITTED INVESTMENTS" means: (i) Investments by the Company or any
Subsidiary of the Company in any Person that is or will become immediately after
such Investment a Wholly Owned Subsidiary of the Company or that will merge or
consolidate into the Company or a Wholly Owned Subsidiary of the Company,
PROVIDED that such Wholly Owned Subsidiary is not restricted from making
dividends or similar distributions by contract, operation of law or otherwise;
(ii) Investments in the Company by any Subsidiary of the Company; PROVIDED that
any Indebtedness evidencing such Investment is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under the Notes
and this Indenture; (iii) Investments in cash and Cash Equivalents; (iv) loans
and advances to employees and officers of the Company and its Subsidiaries in
the ordinary course of business for bona fide business purposes not in excess of
$250,000 at any one time outstanding; (v) Currency Agreements and Interest Swap
Obligations entered into in the ordinary course of the Company's or its
Subsidiaries' businesses and otherwise in compliance with this Indenture; (vi)
Investments (x) constituting accounts receivable if credited or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms, PROVIDED that nothing in this clause shall prevent the
Company or any Subsidiary from providing such concessionary trade terms as
management deems reasonable in the circumstances, (y) resulting from settlements
or compromises of accounts receivable or trade payables in the ordinary course
of business, and (z) in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers; and (vii)
Investments consisting of non-cash proceeds, or made by the Company or its
Subsidiaries as a result of consideration, received in connection with an Asset
Sale made in compliance with Section 4.16.
"PERMITTED LIENS" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Subsidiaries shall have set aside
on its books such reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money), including, in any
such case, any Lien securing letters of credit issued in the ordinary course of
business consistent with past practice in connection therewith;
(iv) judgment Liens not giving rise to an Event of Default so long
as such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceedings may be initiated
shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property or minor irregularities of
title incident thereto in each case not interfering in any material respect with
the ordinary conduct of the business of the Company or any of its Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; PROVIDED that such Liens do not extend to any property or assets
which is not leased property subject to such Capitalized Lease Obligation;
(vii) Liens securing Capitalized Lease Obligations and Purchase Money
Indebtedness which may be incurred under clause (ix) of the definition of
"Permitted Indebtedness"; PROVIDED, HOWEVER, that in the case of Purchase Money
Indebtedness (A) the Indebtedness shall not exceed the cost of such property or
assets being acquired or constructed and shall not be secured by any property or
assets of the Company or any Subsidiary of the Company other than the property
and assets being acquired or constructed and (B) the Lien securing such
Indebtedness shall be created within 180 days of such acquisition or
construction;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Subsidiaries, including rights of offset and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in accordance
with Section 4.12; PROVIDED that (A) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Subsidiary of the Company and were not granted
in connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Subsidiary of the Company and (B) such Liens do
not extend to or cover any property or assets of the Company or of any of its
Subsidiaries other than the property or assets that secured the Acquired
Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of
the Company or a Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Subsidiary of the
Company; and
(xiv) additional Liens securing obligations in an aggregate amount
not exceeding $2,000,000.
"PERSON" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, or a governmental agency or
political subdivision thereof.
"PREFERRED STOCK" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"PRINCIPAL" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"PROCEEDS PURCHASE DATE" has the meaning provided in Section 4.16.
"PRO FORMA" means, with respect to any calculation made or required
to be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors of the Company.
"PUBLIC EQUITY OFFERING" means an underwritten public offering of
Qualified Capital Stock of the Company pursuant to a registration statement
filed with the SEC in accordance with the Securities Act.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company and
its Subsidiaries incurred in the normal course of business for the purpose of
financing all or any part of the purchase price, or the cost of installation,
construction or improvement, of property.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.
"QUALIFIED RIGHTS" means options, warrants or other rights to
purchase Capital Stock (other than Disqualified Capital Stock), other than any
such rights that, by their terms or upon the happening of any event, are
mandatorily redeemable or redeemable at the sole option of the holder thereof on
or prior to the final maturity date of the Notes.
"QUARTER" means, with respect to any Person, a fiscal quarterly
period of such Person. If during the 45-day period immediately following the
completion of any Quarter (or, if the Quarter is the last Quarter of the fiscal
year, then the 90-day period immediately following the completion of such
Quarter), a calculation is required to be made under Article Four and financial
statements of such Person for such Quarter are unavailable, any calculation for
the immediately preceding four Quarters (or, if fewer, all Quarters as shall
have ended after the Issue Date and prior to the Quarter for which such
financial statements are unavailable) required under Article Four shall be based
instead upon the four Quarters (or, if fewer, all Quarters as shall have ended
after the Issue Date and prior to the Quarter for which such financial
statements are unavailable) immediately preceding the Quarter for which such
financial statements are not available (giving effect to all adjustments
required under Article Four in respect of events occurring subsequent to the
close of such Quarters on which such calculation is to be based).
"RECORD DATE" means the Record Dates specified in the Notes, whether
or not a Legal Holiday.
"REDEMPTION DATE," when used with respect to any Note to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Notes.
"REDEMPTION PRICE," when used with respect to any Note to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Notes.
"REFERENCE DATE" has the meaning provided in Section 4.10.
"REFINANCE" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or
any Subsidiary of the Company of Indebtedness incurred in accordance with
Section 4.12 (other than pursuant to clauses (ii)-(x) and clauses (xii) and
(xiii) of the definition of "Permitted Indebtedness"), in each case that does
not (1) result in an increase in the aggregate principal amount of Indebtedness
of such Person as of the date of such proposed Refinancing (plus the amount of
any premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
in connection with such Refinancing) or (2) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; PROVIDED that (x)
if such Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Notes, then
such Refinancing Indebtedness shall be subordinate to the Notes at least to the
same extent and in the same manner as the Indebtedness being Refinanced.
"REGISTRAR" has the meaning provided in Section 2.03.
"REPLACEMENT ASSETS" has the meaning provided in Section 4.16.
"REPRESENTATIVE" means the administrative agent or other
representative in respect of the Credit Agreement or any successor Person
appointed pursuant to the terms of such agreement; PROVIDED that if, and for so
long as, the Credit Agreement lacks such a representative, then the
Representative shall be the holders of a majority in outstanding principal
amount of such Indebtedness.
"RESTRICTED PAYMENT" has the meaning provided in Section 4.10.
"RESTRICTED SECURITY" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; PROVIDED that the Trustee shall be entitled
to request and conclusively rely on an Opinion of Counsel with respect to
whether any Note constitutes a Restricted Security.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Subsidiary of any property, whether owned by
the Company or any Subsidiary at the Issue Date or later acquired, which has
been or is to be sold or transferred by the Company or such Subsidiary to such
Person or to any other Person from whom funds have been or are to be advanced by
such Person on the security of such Property.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any successor statute or statutes thereto.
"SECURITIES PURCHASE AGREEMENT" means the Securities Purchase
Agreement dated April 30, 1998 among the Company and the parties named therein,
as the same may be amended or modified from time to time in accordance with the
terms thereof.
"SENIOR DEBT" means the principal of, premium, if any, interest
(including any interest accruing subsequent to the filing of, or which would
have accrued but for the filing of, a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, (x) all monetary obligations (including guarantees thereof)
of every nature of the Company under the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement obligations
under letters of credit, fees, expenses and indemnities, and (y) all Interest
Swap Obligations (including guarantees thereof) to the extent incurred in
connection with the Company's obligations under the Credit Agreement, in each
case whether outstanding on the Issue Date or thereafter incurred, and all
renewals, extensions, modifications, amendments and refinancings thereof.
Notwithstanding the foregoing, Senior Debt shall not include that portion of any
Indebtedness incurred in violation of the provisions set forth under clause (ii)
of the definition of "Permitted Indebtedness" (but, as to any such obligation,
no such violation shall be deemed to exist for purposes of this clause if the
holder(s) of such obligation or their representative and the Trustee shall have
received an Officers' Certificate of the Company to the effect that the
incurrence of such Indebtedness does not (or, in the case of revolving credit
Indebtedness, that the incurrence of the entire committed amount thereof at the
date on which the initial borrowing thereunder is made would not) violate such
provisions of this Indenture).
"SIGNIFICANT SUBSIDIARY" shall have the meaning set forth in Rule
1.02(w) of Regulation S-X under the Securities Act.
"STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement dated
March 24, 1998 by and among the Company, Geophysical Development Corporation and
the other parties named therein.
"SUBSIDIARY," with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"SURVIVING ENTITY" has the meaning provided in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 77aaa-77bbbb), as amended, as in effect on the date of this Indenture,
except as otherwise provided in Section 9.04.
"TRUST OFFICER" means any officer of the Trustee assigned by the
Trustee to administer this Indenture, or in the case of a successor trustee, an
officer assigned to the department, division or group performing the corporation
trust work of such successor and assigned to administer this Indenture.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of
which the full faith and credit of the United States of America is pledged.
"U.S. LEGAL TENDER" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness or Disqualified Capital Stock, as the case may be, at any date, the
number of years obtained by dividing (a) the then outstanding aggregate
principal amount of such Indebtedness into (b) the sum of the total of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"WHOLLY OWNED SUBSIDIARY" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities (other than in the case of
a foreign Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law) are
owned by such Person or any Wholly Owned Subsidiary of such Person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any
other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP as in effect on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular; and
(5) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or depository rule
or usage. The Company and the Trustee shall approve the form of the Notes and
any notation, legend or endorsement on them. Each Note shall be dated the date
of its issuance and shall show the date of its authentication.
The terms and provisions contained in the Notes, annexed hereto as
Exhibit A, shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
SECTION 2.02. Execution and Authentication;
AGGREGATE PRINCIPAL AMOUNT.
Two Officers, or an Officer and an Assistant Secretary, shall sign,
or one Officer shall sign and one Officer or an Assistant Secretary (each of
whom shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature. The Company's seal shall also be reproduced on the Notes. Each
Guarantor, if any, shall execute the Guarantee in the manner set forth in
Section 11.09.
If an Officer or Assistant Secretary whose signature is on a Note
was an Officer or Assistant Secretary at the time of such execution but no
longer holds that office or position at the time the Trustee authenticates the
Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate Notes for original issue, upon
written orders of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of Notes to be authenticated, the
date on which the Notes are to be authenticated and the aggregate principal
amount of Notes outstanding on the date of authentication. The aggregate
principal amount of Notes outstanding at any time may not exceed $40,000,000,
except as provided in Section 2.07.
The Trustee shall not be required to authenticate Notes if the
issuance of such Notes pursuant to this Indenture will affect the Trustee's own
rights, duties or immunities under the Notes and this Indenture in a manner
which is not reasonably acceptable to the Trustee.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company and Affiliates of the Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New York)
where (a) Notes may be presented or surrendered for registration of transfer or
for exchange ("Registrar"), (b) Notes may be presented or surrendered for
payment ("Paying Agent") and (c) notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Registrar shall keep
a register of the Notes and of their transfer and exchange. The Company, upon
prior written notice to the Trustee, may have one or more co-Registrars and one
or more additional paying agents reasonably acceptable to the Trustee. The term
"Paying Agent" includes any additional Paying Agent. Neither the Company nor any
Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee, in advance, of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such.
The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of demands and notices in connection with the Notes,
until such time as the Trustee has resigned or a successor has been appointed.
The Paying Agent or Registrar may resign upon 30 days notice to the Company.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that each Paying Agent shall hold in trust for the benefit
of the Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, or interest on, the Notes (whether such assets have
been distributed to it by the Company or any other obligor on the Notes), and
the Company and the Paying Agent shall notify the Trustee of any Default by the
Company (or any other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent shall have no further liability for such assets.
SECTION 2.05. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Company shall furnish or
cause the Registrar to furnish to the Trustee before each Record Date and at
such other times as the Trustee may request in writing a list as of such date
and in such form as the Trustee may reasonably require of the names and
addresses of the Holders, which list may be conclusively relied upon by the
Trustee.
SECTION 2.06. TRANSFER AND EXCHANGE.
When Notes are presented to the Registrar or a co-Registrar with a
request to register the transfer of such Notes or to exchange such Notes for an
equal principal amount of Notes of other authorized denominations, the Registrar
or co-Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; PROVIDED, HOWEVER, that the Notes
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Company and the Registrar or co-Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. To permit registrations of
transfer and exchanges, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's or co-Registrar's request. No service
charge shall be made for any registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Sections 2.10, 3.06, 4.15, 4.16 or 9.06, in which event
the Company shall be responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Note being redeemed in part.
SECTION 2.07. REPLACEMENT NOTES.
If a mutilated Note is surrendered to the Trustee or if the Holder
of a Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements are met. If required by the Trustee or the Company, such
Holder must provide an affidavit of lost certificate and an indemnity bond or
other indemnity, sufficient in the judgment of both the Company and the Trustee,
to protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Note is replaced. The Company may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Note, including reasonable
fees and expenses of counsel. Every replacement Note shall constitute an
additional obligation of the Company, and shall be entitled to the benefits of
this Indenture.
SECTION 2.08. OUTSTANDING NOTES.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to the provisions of Section 2.09, a Note does not cease to be outstanding
because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives an Opinion of Counsel that the replaced Note is held by a
BONA FIDE purchaser. A mutilated Note ceases to be outstanding upon surrender of
such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver, consent or notice, Notes owned
by the Company or any of its Affiliates shall be considered as though they are
not outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which a Trust Officer of the Trustee actually knows are so owned shall be
so considered. The Company shall notify the Trustee, in writing, when it or any
of its Affiliates repurchases or otherwise acquires Notes, of the aggregate
principal amount of such Notes so repurchased or otherwise acquired.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon receipt of a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Notes to be
authenticated and the date on which the temporary Notes are to be authenticated.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate upon receipt of a written order of the Company pursuant to Section
2.02 definitive Notes in exchange for temporary Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Company, shall dispose
of all Notes surrendered for transfer, exchange, payment or cancellation.
Subject to Section 2.07, the Company may not issue new Notes to replace Notes
that it has paid or delivered to the Trustee for cancellation. If the Company
shall acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Notes unless
and until the same are surrendered to the Trustee for cancellation pursuant to
this Section 2.11.
SECTION 2.12. Payment of Interest; Defaulted INTEREST.
Interest on any Note which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Note is registered in the register maintained by the Registrar
at the close of business on the Record Date for such interest.
If the Company defaults in a payment of interest on the Notes, such
interest shall forthwith cease to be payable to the Holder on the relevant
Record Date by virtue of having been such Holder, and the Company shall pay the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest to the Persons who are Holders on a subsequent special record
date, which date shall be the fifteenth day next preceding the date fixed by the
Company for the payment of defaulted interest or the next succeeding Business
Day if such date is not a Business Day. At least 15 days before the subsequent
special record date, the Company shall mail to each Holder, as of a recent date
selected by the Company, with a copy to the Trustee, a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number, and if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; PROVIDED that no representation is hereby deemed to
be made by the Trustee as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 11:00 a.m. New York City time on each Interest Payment Date
and on the Maturity Date, the Company shall have deposited with the Paying Agent
in immediately available funds money sufficient to make cash payments, if any,
due on such Interest Payment Date or Maturity Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date or Maturity Date, as the case may be.
SECTION 2.15. PERSONS DEEMED OWNERS.
Prior to due presentment of a Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Note is registered in the register maintained by the
Registrar as the owner of such Note for the purpose of receiving payment of
principal of and (subject to Section 2.12) interest on such Note and for all
other purposes whatsoever, whether or not such Note be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to Paragraph 7 of the
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01
at least 60 days before the Redemption Date (unless a shorter notice period
shall be satisfactory to the Trustee, as evidenced in a writing signed on behalf
of the Trustee), together with an Officers' Certificate stating that such
redemption shall comply with the conditions contained herein and in the Notes.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If fewer than all of the Notes are to be redeemed, selection of the
Notes to be redeemed will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not then listed on a national securities
exchange, on a PRO RATA basis, by lot or in such other fair and reasonable
manner chosen at the discretion of the Trustee; PROVIDED, HOWEVER, that if a
partial redemption is made with the proceeds of a Public Equity Offering,
selection of the Notes or portion thereof for redemption shall be made by the
Trustee only on a PRO RATA basis, unless such method is otherwise prohibited.
The Company shall promptly notify the Trustee and the Paying Agent in writing of
the date of listing and the name of the securities exchange if and when the
Notes are listed on a principal national securities exchange. The Trustee shall
make the selection from the Notes outstanding and not previously called for
redemption and shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes in denominations
of $1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Notes that have denominations larger than $1,000. Provisions of this Indenture
that apply to Notes called for redemption also apply to portions of Notes called
for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail, postage prepaid, to each Holder whose Notes are to be redeemed, with
a copy to the Trustee and any Paying Agent. At the Company's written request,
the Trustee shall give the notice of redemption in the Company's name and at the
Company's expense.
Each notice for redemption shall identify the Notes to be redeemed
and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest,
if any, to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such
redemption is being made;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(6) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date, and the only remaining right of the Holders of
such Notes is to receive payment of the Redemption Price plus accrued
interest, if any, to the Redemption Date, upon surrender to the Paying
Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes in
the aggregate principal amount equal to the unredeemed portion thereof
will be issued; and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption become due and payable on the Redemption Date and at
the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption shall be paid at the
Redemption Price (which shall include accrued interest thereon to the Redemption
Date), but installments of interest, the maturity of which is on or prior to the
Redemption Date, shall be payable to Holders of record at the close of business
on the relevant record dates referred to in Section 2.12.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before 11:00 a.m. New York City time on the Redemption Date,
the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the Redemption Price plus accrued interest, if any, of all Notes to be
redeemed on that date. The Paying Agent shall promptly return to the Company any
U.S. Legal Tender so deposited which is not required for that purpose, except
with respect to monies owed as obligations to the Trustee pursuant to Article
Seven.
If the Company complies with the preceding paragraph, then, unless
the Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Notes to be redeemed will cease to accrue on
and after the applicable Redemption Date, whether or not such Notes are
presented for payment.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is to be redeemed in part, the Company
shall execute and the Trustee shall authenticate for the Holder a new Note or
Notes equal in principal amount to the unredeemed portion of the Note
surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes and in this Indenture. An
installment of principal of or interest on the Notes shall be considered paid on
the date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate of the Company) holds on that date U.S. Legal Tender designated for
and sufficient to pay the installment in full and is not prohibited from paying
such money to the Holders pursuant to the terms of this Indenture.
The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
borne by the Notes plus 2% per annum. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain the office or agency required under
Section 2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 12.02.
SECTION 4.03. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five and Section 4.16, the
Company shall do or cause to be done, at its own cost and expense, all things
necessary to preserve and keep in full force and effect its corporate existence
and the corporate existence of each of its Subsidiaries in accordance with the
respective organizational documents of each such Subsidiary and the material
rights (charter and statutory) and franchises of the Company and each such
Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to
preserve any such right or franchise, or the corporate, partnership or other
existence of the Company or any Subsidiary of the Company, if the Board of
Directors of the Company shall determine in good faith (which such determination
shall be evidenced by a Board Resolution) that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
respective Subsidiaries taken as a whole and the loss thereof is not adverse in
any material respect to the Holders; and PROVIDED FURTHER that any Subsidiary of
the Company may consolidate with, merge into, or transfer or distribute all or
part of its properties and assets to, the Company or any Wholly Owned Subsidiary
of the Company.
SECTION 4.04. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all taxes, assessments
and governmental charges (including withholding taxes and any penalties,
interest and additions to taxes) levied or imposed upon it or any of its
Subsidiaries or properties of it or any of its Subsidiaries and (ii) all lawful
claims for labor, materials and supplies that, if unpaid, might by law become a
Lien upon the property of it or any of its Subsidiaries; PROVIDED, HOWEVER, that
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim (y) whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings properly instituted and diligently conducted for which adequate
reserves have been taken or (z) the failure to pay or discharge, or cause to be
paid or discharged such tax, assessment, charge or claim would not reasonably be
expected to result in a material adverse effect on the business operations or
financial condition of the Company.
SECTION 4.05. Maintenance of Properties and INSURANCE.
(a) The Company shall, and shall cause each of its
Subsidiaries to, maintain its material properties in good working order and
condition (subject to ordinary wear and tear) and make all necessary repairs,
renewals, replacements, additions, betterments and improvements thereto and
actively conduct and carry on its business; PROVIDED, HOWEVER, that nothing in
this Section 4.05 shall prevent the Company or any of its Subsidiaries from
discontinuing the operation and maintenance of any of its properties, if such
discontinuance is, in the good faith judgment of the Board of Directors of the
Company or the Subsidiary, as the case may be, desirable in the conduct of their
respective businesses and is not disadvantageous in any material respect to the
Holders.
(b) The Company shall provide or cause to be provided, for
itself and each of its Subsidiaries, insurance against loss or damage of the
kinds that, in the good faith judgment of the Board of Directors of the Company,
are adequate and appropriate for the conduct of the business of the Company and
such Subsidiaries in a prudent manner, with reputable insurers or with the
government of the United States of America or an agency or instrumentality
thereof, in such amounts, with such deductibles, and by such methods as shall be
customary, in the good faith judgment of the Board of Directors of the Company,
for companies similarly situated in the industry.
SECTION 4.06. Compliance Certificate; Notice of DEFAULT.
(a) The Company shall deliver to the Trustee, within 90 days
after the end of the Company's fiscal year, an Officers' Certificate stating
that a review of its activities and the activities of its Subsidiaries during
the preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, that to the best of
such Officer's knowledge the Company during such preceding fiscal year has kept,
observed, performed and fulfilled each and every such covenant and no Default or
Event of Default occurred during such year and at the date of such certificate
there is no Default or Event of Default that has occurred and is continuing or,
if such signers do know of such Default or Event of Default, the certificate
shall describe the Default or Event of Default and its status with
particularity. The Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year end.
(b) The annual financial statements delivered pursuant to
Section 4.08 shall be accompanied by a written report of the Company's
independent accountants (who shall be a firm of established national reputation)
that in conducting their audit of such financial statements nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four, Five or Six of this Indenture insofar as they
relate to accounting matters or, if any such violation has occurred, specifying
the nature and period of existence thereof.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 12.02 hereof,
by registered or certified mail or by telegram, telex or facsimile transmission
followed by hard copy by registered or certified mail an Officers' Certificate
specifying such event, notice or other action within five Business Days of its
becoming aware of such occurrence.
SECTION 4.07. COMPLIANCE WITH LAWS.
The Company shall comply, and shall cause each of its Subsidiaries
to comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as are not in the aggregate
reasonably likely to have a material adverse effect on the financial condition
or results of operations of the Company and its Subsidiaries, taken as a whole.
SECTION 4.08. SEC REPORTS.
(a) So long as the Notes are outstanding, if the Company is
required to file annual or quarterly reports with the SEC under Section 13 or
15(d) of the Exchange Act, the Company (at its own expense) shall file with the
SEC and shall file with the Trustee within 15 days after it files them with the
SEC copies of the quarterly and annual reports and of the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) required to be filed pursuant
to Section 13 or 15(d) of the Exchange Act. Upon qualification of this Indenture
under the TIA, the Company shall also comply with the provisions of TIA ss.
314(a).
(b) At the Company's expense, the Company shall cause an
annual report, if furnished by it to its stockholders generally and each
quarterly or other financial report if furnished by it to its stockholders
generally to be filed with the Trustee and mailed to the Holders at their
addresses appearing in the register of Notes maintained by the Registrar at the
time of such mailing or furnishing to stockholders.
(c) If the Company is not required to file annual or quarterly
reports with the SEC under Section 13 or 15(d) of the Exchange Act for any
fiscal period ending after the Issue Date, the Company shall cause its
consolidated financial statements, including any notes thereto (and, in the case
of a fiscal year end, an auditor's report by an accounting firm of nationally
established reputation), and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" comparable to that which would
have been required to appear in annual or quarterly reports filed under Section
13 or 15(d) of the Exchange Act if the Company had a class of securities listed
on a national securities exchange, to be so filed with the Trustee and mailed to
the Holders at their addresses appearing in the register of Notes maintained by
the Registrar within 90 days after the end of each fiscal year and within 45
days after the end of each of the Company's first three fiscal quarters in each
fiscal year.
(d) The Company shall provide to any Holder any information
reasonably requested by such Holder concerning the Company (including financial
statements) necessary in order to permit such Holder to sell or transfer Notes
in compliance with Rule 144A under the Securities Act.
SECTION 4.09. Waiver of Stay, Extension or USURY LAWS.
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or any such Guarantor, as the case may be, from paying all or any
portion of the principal of or interest on the Notes or performing its
Guarantee, as the case may be and as contemplated herein, wherever enacted, now
or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company and each Guarantor, if any, hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not hinder, delay or
impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.10. LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or make
any distribution (other than dividends or distributions payable (y) to the
Company or a Wholly Owned Subsidiary of the Company or (z) in Qualified Capital
Stock or Qualified Rights of the Company) on or in respect of shares of its
Capital Stock to holders of such Capital Stock, (b) purchase, redeem or
otherwise acquire or retire for value any Capital Stock of the Company or any
warrants, rights or options to purchase or acquire shares of any class of such
Capital Stock, (c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Indebtedness of the Company that is subordinate or junior in right of
payment to the Notes or (d) make any Investment (other than Permitted
Investments) (each of the foregoing actions set forth in clauses (a), (b) (c)
and (d) being referred to as a "Restricted Payment"), if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default shall have occurred and be continuing or (ii) the Company is
not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.12 or (iii) the aggregate
amount of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property) shall exceed the sum
of: (x) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company
earned subsequent to the Issue Date and on or prior to the date the Restricted
Payment occurs (the "Reference Date") (treating such period as a single
accounting period); plus (y) 100% of (1) the aggregate net cash proceeds
received by the Company from any Person (other than a Subsidiary of the Company)
from the issuance and sale subsequent to the Issue Date and on or prior to the
Reference Date of Qualified Capital Stock of the Company and (2) the aggregate
net proceeds (as defined below) received by the Company from any Person (other
than a Subsidiary of the Company) from the issuance subsequent to the Issue Date
and on or prior to the Reference Date of Qualified Capital Stock of the Company
upon conversion or exchange of Indebtedness of the Company (other than such
Indebtedness that is subordinate or junior in right of payment to the Notes);
plus (z) without duplication and to the extent amounts would not be included in
Consolidated Net Income, the sum of (1) the aggregate amount returned in cash on
or with respect to Investments (other than Permitted Investments) made
subsequent to the Issue Date, and (2) the net cash proceeds received by the
Company or any Subsidiary from the disposition of all or any portion of such
Investments (other than to the Company or a Subsidiary of the Company),
PROVIDED, HOWEVER, that with respect to all Investments, the sum of clauses (1)
and (2) above with respect to such Investments shall not exceed the aggregate
amount of all such Investments made subsequent to the Issue Date.
For the purposes of this Section 4.10, the net proceeds from the
issuance of shares of Qualified Capital Stock of the Company upon conversion or
exchange of Indebtedness shall be deemed to be an amount equal to the net book
value of such Indebtedness (plus the additional amount required to be paid upon
such conversion, if any), less any cash payment on account of fractional shares;
the "net book value" of Indebtedness shall be the amount received by the Company
on the incurrence of such Indebtedness, as adjusted on the books of the Company
to the date of conversion or exchange.
Notwithstanding the foregoing, clauses (ii) and (iii) set forth in
the first paragraph of this Section do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if the
dividend would have been permitted on the date of declaration; (2) the
acquisition or retirement for value of any shares of Capital Stock of the
Company or warrants, rights or options to purchase or acquire shares of any
class of such Capital Stock, either (i) solely in exchange for shares of
Qualified Capital Stock or Qualified Rights of the Company or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Subsidiary of the Company) of shares of Qualified Capital Stock or
Qualified Rights of the Company; (3) the acquisition or retirement for value of
any Indebtedness of the Company that is subordinate or junior in right of
payment to the Notes solely in exchange for shares of Qualified Capital Stock or
Qualified Rights of the Company; (4) the purchase, redemption, acquisition or
other retirement for value of shares of Capital Stock of the Company held by
directors, officers or employees of the Company or options on any such shares or
related stock appreciation rights or similar securities owned by such directors,
officers or employees upon death, disability, retirement, termination of
employment or pursuant to the terms of such stock option plan or any other
agreement under which such shares of Capital Stock, options, related rights or
similar securities were issued in an aggregate amount not to exceed $2,000,000
in the aggregate or (5) Restricted Payments not to exceed $25,000 in the
aggregate. In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of the first
paragraph of this Section, (y) amounts expended pursuant to clauses (1),
(2)(ii), (4) and (5) shall be included in such calculation and (z) amounts
expended pursuant to clauses (2)(i) and (3) shall be excluded from such
calculation.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal quarterly
financial statements.
SECTION 4.11. Limitation on Transactions with AFFILIATES.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an "Affiliate
Transaction"), other than (x) Affiliate Transactions permitted under paragraph
(b) below and (y) Affiliate Transactions conducted in good faith, the terms of
which are fair and reasonable to the Company or such Subsidiary and which are no
less favorable to the Company or such Subsidiary than those that might
reasonably have been obtained in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate of the Company or such
Subsidiary; PROVIDED, HOWEVER, that notwithstanding anything to the contrary
contained herein, the transactions set forth on SCHEDULE II hereto are hereby
permitted. All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $250,000 shall
be approved by the Board of Directors of the Company or such Subsidiary, as the
case may be, including a majority of the disinterested Directors, if any, such
approval to be evidenced by a Board Resolution stating that such Board of
Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Subsidiary of the Company enters into an
Affiliate Transaction (or a series of related Affiliate Transactions related to
a common plan) that involves an aggregate fair market value or payments to an
Affiliate, as the case may be, of more than $1,000,000, the Company or such
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Subsidiary, as the case may be, from
a financial point of view, from an Independent Financial Advisor and file the
same with the Trustee.
(b) The foregoing restrictions shall not apply to (i)
reasonable fees, compensation and out-of-pocket expenses paid to and indemnity
provided on behalf of, officers, directors, employees or consultants of the
Company or any Subsidiary of the Company as determined in good faith by the
Company's Board of Directors or senior management; (ii) transactions between or
among the Company and any of its Subsidiaries or exclusively between or among
such Subsidiaries, provided that such transactions are not otherwise prohibited
by this Indenture; and (iii) Restricted Payments and Permitted Investments
permitted by this Indenture.
SECTION 4.12. Limitation on Incurrence of Additional
Indebtedness and Issuance OF DISQUALIFIED
CAPITAL STOCK.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume, guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur") any Indebtedness (other than
Permitted Indebtedness) nor issue any shares of Disqualified Capital Stock, nor
permit any of its Subsidiaries to issue any shares of Disqualified Capital
Stock; PROVIDED, HOWEVER, that if no Default or Event of Default shall have
occurred and be continuing at the time or as a consequence of the incurrence of
any such Indebtedness, the Company may incur Indebtedness (including, without
limitation, Acquired Indebtedness) or issue shares of Disqualified Capital Stock
and the Subsidiaries of the Company may incur Acquired Indebtedness in each case
if on the date of the incurrence of such Indebtedness or the issuance of such
Disqualified Stock, after giving effect to the incurrence thereof, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.00 to
1.0 if such Indebtedness is incurred prior to April 30, 1999 and 2.50 to 1 if
such Indebtedness is incurred on or after April 30, 1999.
SECTION 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting SUBSIDIARIES.
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary of the Company to (a) pay dividends or make any other distributions
on or in respect of its Capital Stock; (b) make loans or advances or to pay any
Indebtedness or other obligation owed to the Company or any other Subsidiary of
the Company; or (c) transfer any of its property or assets to the Company or any
other Subsidiary of the Company, except for such encumbrances or restrictions
existing under or by reason of: (1) applicable law; (2) this Indenture; (3)
customary non-assignment provisions of any contract or lease governing a
leasehold or ownership interest of any Subsidiary of the Company; (4) any
instrument governing Acquired Indebtedness, which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired or
relating to any property acquired by the Company or any of its Subsidiaries
after the Issue Date, PROVIDED that such encumbrance or restriction exists of
the time such property is acquired, relates only to the property which is
acquired and was not incurred in connection with, or in anticipation or
contemplation of, such acquisition; (5) agreements existing on the Issue Date to
the extent and in the manner such agreements are in effect on the Issue Date;
(6) an agreement governing Indebtedness incurred to Refinance the Indebtedness
issued, assumed or incurred pursuant to an agreement referred to in clause (2),
(4) or (5) above; PROVIDED, HOWEVER, that the provisions relating to such
encumbrance or restriction contained in any such Indebtedness are no less
favorable to the Company in any material respect than the provisions relating to
such encumbrance or restriction contained in agreements referred to in such
clause (2), (4) or (5); or (7) agreements restricting the sale or other
disposition of any property securing Indebtedness which constitutes a Permitted
Lien on such property.
SECTION 4.14. Prohibition on Incurrence of
SENIOR SUBORDINATED DEBT.
The Company shall not, and shall not permit any Guarantor to, incur
or suffer to exist Indebtedness that is senior in right of payment to the Notes
or any Guarantee and subordinate in right of payment to any other Indebtedness
of the Company or any Guarantor.
SECTION 4.15. CHANGE OF CONTROL.
The Company shall make an offer to purchase no later than the date
upon which a Change of Control occurs (the "Change of Control Date") all
outstanding Notes (the "Change of Control Offer") at a purchase price equal to
101% of the principal amount thereof plus accrued interest, if any, to the date
of purchase, but installments of interest, the maturity of which is on or prior
to the Change of Control Date, shall be payable to Holders of record at the
close of business on the relevant record dates referred to in Section 2.12. The
Company may utilize such procedures in connection with the Change of Control
Offer as the Board of Directors deems appropriate; PROVIDED, HOWEVER, that at
least 10 Business Days prior to the Change of Control Date, the Holders shall
have received all information concerning such Change of Control as is reasonably
available to the Company.
On or before the Change of Control Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient
to pay the purchase price plus accrued interest, if any, of all Notes so
tendered and (iii) forward to the Trustee Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued interest,
if any, and the Trustee shall promptly authenticate and mail to such Holders new
Notes equal in principal amount to any unpurchased portion of the Notes
surrendered. Any Notes not so accepted shall be promptly mailed by the Company
to the Holder thereof. For purposes of this Section 4.15, the Trustee shall act
as the Paying Agent.
Any amounts remaining after the purchase of Notes pursuant to a
Change of Control Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent the
provisions of any securities laws or regulations conflict with this Section
4.15, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.15 by virtue thereof. The Company's obligation to purchase the Notes
pursuant to the Change of Control Offer is conditioned upon the Change of
Control being effected.
SECTION 4.16. LIMITATION ON ASSET SALES.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company or the
applicable Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value of the assets sold or
otherwise disposed of (as determined in good faith by the Company's Board of
Directors); (ii) at least 75% of the consideration received by the Company or
the Subsidiary, as the case may be, from such Asset Sale shall be in the form of
cash or Cash Equivalents (PROVIDED that the amount of any liabilities (as shown
on the Company's or such Subsidiary's most recent balance sheet) of the Company
or any such Subsidiary (other than liabilities that are by their terms
subordinated to the Notes) that are assumed by the transferee of any such assets
shall be deemed to be cash for the purposes of this provision); and (iii) upon
the consummation of an Asset Sale, the Company shall apply, or cause such
Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within
365 days of receipt thereof either (A) to prepay any Senior Debt and, in the
case of any Indebtedness under any revolving credit facility, effect a permanent
reduction in the availability under such revolving credit facility, (B) to make
an investment in properties and assets that replace the properties and assets
that were the subject of such Asset Sale or in properties and assets that will
be used in the business of the Company and its Subsidiaries as existing on the
Issue Date or in businesses the same, similar or reasonably related thereto
("Replacement Assets"), or (C) a combination of prepayment and investment
permitted by the foregoing clauses (iii)(A) and (iii)(B). Subject to the last
sentence of this paragraph, on the 366th day after an Asset Sale or such earlier
date, if any, as the Board of Directors of the Company or of such Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clause (iii)(A), (iii)(B) or (iii)(C) of the next preceding sentence
(each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Company or such Subsidiary to make an offer to purchase (the "Net Proceeds
Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor
more than 45 days following the applicable Net Proceeds Offer Trigger Date, from
all Holders on a PRO RATA basis, that amount of Notes equal to the Net Proceeds
Offer Amount at a price equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest thereon, if any, to the date of
purchase, but installments of interest, the maturity of which is on or prior to
the Proceeds Purchase Date, shall be payable to Holders of record at the close
of business on the relevant record dates referred to in Section 2.12; PROVIDED,
HOWEVER, that if at any time any non-cash consideration received by the Company
or any Subsidiary of the Company, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant.
The Company may defer the Net Proceeds Offer until there is an
aggregate unutilized Net Proceeds Offer Amount equal to or in excess of
$1,000,000 resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of
$1,000,000, shall be applied as required pursuant to the preceding paragraph).
In the event of the transfer of substantially all (but not all) of
the property and assets of the Company and its Subsidiaries as an entirety to a
Person in a transaction permitted under Section 5.01, the successor entity shall
be deemed to have sold such portion, if any, of the properties and assets of the
Company and its Subsidiaries not so transferred the fair market value of which
exceeds the fair market value (as determined in good faith by the Company's
Board of Directors) of the property and assets of such successor entity
immediately prior to consummation of such transaction for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale. In addition, the fair market value
of such properties and assets of the Company or its Subsidiaries deemed to be
sold as aforesaid shall be deemed to be Net Cash Proceeds for purposes of this
Section 4.16.
Each Net Proceeds Offer will be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in this Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly tender
Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering
Holders will be purchased on a PRO RATA basis (based on amounts tendered). To
the extent that the aggregate amount of Notes tendered pursuant to a Net
Proceeds Offer is less than the Net Proceeds Offer Amount, the Company may use
such excess Net Proceeds Offer Amount for general corporate purposes or for any
other purpose not prohibited by this Indenture. Upon completion of any such Net
Proceeds Offer, the Net Proceeds Offer Amount shall be reset at zero. A Net
Proceeds Offer shall remain open for a period of 20 Business Days or such longer
period as may be required by law.
(b) Subject to the deferral of the Net Proceeds Offer Trigger
Date contained in the second paragraph of subsection (a) above, each notice of a
Net Proceeds Offer pursuant to this Section 4.16 shall be mailed or caused to be
mailed, by first class mail, by the Company not more than 25 days after the Net
Proceeds Offer Trigger Date to all Holders at their last registered addresses as
of a date within 15 days of the mailing of such notice, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Net Proceeds Offer and shall
state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to
Section 4.16 and that all Notes tendered will be accepted for payment;
PROVIDED, HOWEVER, that if the aggregate principal amount of Notes
tendered in a Net Proceeds Offer exceeds the aggregate amount of the Net
Proceeds Offer, the Company shall select the Notes to be purchased on a
PRO RATA basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000 or multiples thereof
shall be purchased);
(2) the purchase price (including the amount of accrued
interest) and the purchase date (which shall be 20 Business Days from the
date of mailing of notice of such Net Proceeds Offer, or such longer
period as required by law) (the "Proceeds Purchase Date");
(3) that any Note not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Net Proceeds Offer
shall cease to accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to
a Net Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than two Business Days prior to
the Proceeds Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such Holder
is withdrawing his election to have such Note purchased; and
(7) that Holders whose Notes are purchased only in part will
be issued new Notes in a principal amount equal to the unpurchased portion
of the Notes surrendered; PROVIDED that each Note purchased and each new
Note issued shall be in an original principal amount of $1,000 or integral
multiples thereof.
On or before the Proceeds Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (b)(1) above,
(ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price plus accrued interest, if any, of all Notes to be purchased and
(iii) deliver to the Trustee Notes so accepted together with an Officers'
Certificate stating the Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued interest,
if any. For purposes of this Section 4.16, the Trustee shall act as the Paying
Agent.
Any amounts remaining after the purchase of Notes pursuant to a Net
Proceeds Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
4.16, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.16 by virtue thereof.
SECTION 4.17. Limitation on Preferred Stock of SUBSIDIARIES.
The Company shall not permit any of its Subsidiaries to issue any
Preferred Stock (other than to the Company or to a Wholly Owned Subsidiary of
the Company) or permit any Person (other than the Company or a Wholly Owned
Subsidiary of the Company) to own any Preferred Stock of any Subsidiary of the
Company.
SECTION 4.18. LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Subsidiaries
to, create, incur, assume or suffer to exist any Liens of any kind against or
upon any of its property or assets of the Company or any of its Subsidiaries
whether owned on the Issue Date or acquired after the Issue Date, or any
proceeds therefrom, unless, except in the case of Liens securing Indebtedness
that is subordinate or junior in right of payment to the Notes which shall not
be permitted, the Notes are equally and ratably secured, except for (i) Liens
existing as of the Issue Date to the extent and in the manner such Liens are in
effect as of the Issue Date; (ii) Liens securing Senior Debt and Guarantor
Senior Debt; (iii) Liens securing the Notes or the Guarantees; (iv) Liens of the
Company or a Wholly Owned Subsidiary of the Company on assets of any Subsidiary
of the Company; (v) Liens securing Refinancing Indebtedness which is incurred to
Refinance Indebtedness which has been secured by a Lien permitted under this
Indenture and which has been incurred in accordance with the provisions of this
Indenture; PROVIDED, HOWEVER, that such Liens (y) are no less favorable to the
Holders and are no more favorable to the lienholders with respect to such Liens
than the Liens in respect of the Indebtedness being Refinanced and (z) do not
extend to or cover any property or assets of the Company or any of its
Subsidiaries not securing the Indebtedness so Refinanced; and (vi) Permitted
Liens.
SECTION 4.19. ADDITIONAL GUARANTORS.
The Company shall cause any Subsidiary (other than Quantum
Geophysical Services, Inc.) with a net book value greater than $1,000,000 to
execute and deliver (i) a supplemental indenture to this Indenture providing for
the guarantee of payment of the Notes by such Subsidiary pursuant to the terms
of Article Eleven hereof and (ii) a guarantee in the form attached to the Note
hereto.
SECTION 4.20. Limitation on Issuance of Shares OF SUBSIDIARIES.
The Company shall not permit any of its Subsidiaries to issue shares
of Capital Stock (other than director's qualifying shares) to any Person other
than the Company or a Wholly Owned Subsidiary of the Company; PROVIDED that (i)
if the issuing Subsidiary is not a Wholly Owned Subsidiary, the issuing
Subsidiary may also simultaneously issue additional shares of Capital Stock of
the same class to other shareholders of the issuing Subsidiary so long as such
issuance will not reduce the percentage of Capital Stock of the issuing
Subsidiary which was owned by the Company or its Subsidiaries immediately prior
to such issuance; and (ii) a Subsidiary may issue Capital Stock to any Person to
the extent that and subject to the conditions under which the Company or another
Subsidiary of the Company holding the Capital Stock of such issuing Subsidiary
would be permitted to sell, transfer or otherwise dispose of such Capital Stock
in an Asset Sale pursuant to Section 4.16.
SECTION 4.21. NON-GUARANTOR SUBSIDIARY.
The Company shall not permit Quantum Geophysical Services,
Inc. to engage in any business other than the leasing of equipment owned
or leased by it on the Issue Date to the Company or a Guarantor.
SECTION 4.22. CONDUCT OF BUSINESS.
The Company shall not, and shall not permit its Subsidiaries to,
engage in any businesses which are not the same as, similar or reasonably
related to the businesses in which the Company and its Subsidiaries are engaged
on the Issue Date.
SECTION 4.23. CONSUMMATION OF ACQUISITION.
No provision of this Indenture shall prevent the Company from
consummating the Acquisition and the transactions contemplated thereby.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of ASSETS.
(a) The Company shall not, in a single transaction or a series
of related transactions, consolidate with or merge with or into any Person
(other than the merger of a Wholly Owned Subsidiary of the Company into the
Company), or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Subsidiary of the Company to sell, assign, transfer, lease,
convey or otherwise dispose of) all or substantially all of the Company's
properties and assets (determined on a consolidated basis for the Company and
its Subsidiaries) to any Person whether as an entirety or substantially as an
entirety unless:
(1) either (A) the Company shall be the surviving or
continuing corporation or (B) the Person (if other than the Company)
formed by such consolidation or into which the Company is merged or the
Person which acquires by sale, assignment, transfer, lease, conveyance or
other disposition the properties and assets of the Company and its
Subsidiaries substantially as an entirety (the "Surviving Entity") (x)
shall be a corporation, partnership, limited liability company or business
trust organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly
assume, by supplemental indenture (in form and substance reasonably
satisfactory to the Trustee), executed and delivered to the Trustee, the
due and punctual payment of the principal of and premium, if any, and
interest on all of the Notes and the performance of every covenant of the
Notes, this Indenture and, if applicable, the Note Registration Rights
Agreement on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and
the assumption contemplated by clause (1)(B)(y) above (including giving
effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be,
(i) shall be able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.12 and
(ii) shall have a Consolidated Net Worth at least equal to the
Consolidated Net Worth of the Company immediately prior to such
transaction;
(3) immediately before and immediately after giving effect to
such transaction and the assumption contemplated by clause (1)(B)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default
or Event of Default shall have occurred and be continuing; and
(4) the Company or the Surviving Entity, as the case may be,
shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with the applicable provisions of this
Indenture and that all conditions precedent in this Indenture relating to
such transaction have been satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties and assets of one or
more Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
(c) Each Guarantor (other than any Guarantor whose Guarantee
is to be released in accordance with the terms of the Guarantee and this
Indenture in connection with any transaction complying with the provisions of
Section 4.16) shall not, and the Company shall not cause or permit any Guarantor
to, consolidate with or merge with or into any Person other than the Company or
any other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia; (ii) such entity expressly assumes by supplemental
indenture all of the obligations of the Guarantor on the Guarantee; (iii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (iv) immediately after giving
effect to such transaction and the use of any net proceeds therefrom on a pro
forma basis, the Company could satisfy the provisions of clause (2) of Section
5.01(a). Any merger or consolidation of a Guarantor with and into the Company
(with the Company being the surviving entity) or another Guarantor that is a
Wholly Owned Subsidiary of the Company need only comply with clause (4) of
Section 5.01(a).
Notwithstanding the foregoing, this Section shall not prohibit a
transaction, the principal purpose of which is (as determined in good faith by
the Board of Directors of the Company) to change the state of incorporation of
the Company and such transaction does not have as one of its purposes the
evasion of the limitations imposed by this Section.
When a successor assumes all of the obligations of the Company under
the Notes and this Indenture in a transaction permitted by this Section 5.01,
the Company will be deemed to be released from those obligations.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with the
foregoing, in which the Company is not the continuing corporation, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Notes with the same effect as if such surviving entity
had been named as such.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an "Event of Default":
(1) failure to pay interest on any Notes when the same becomes
due and payable and the Default continues for a period of five days
(whether or not such payment shall be prohibited by Article Ten of this
Indenture); or
(2) failure to pay the principal on any Notes when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by Article Ten); or
(3) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default continues
for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Notes (except in the case of a failure to comply with
Section 4.10, Section 4.12, Section 4.15 or Section 5.01, which shall
constitute Events of Default upon notice but without passage of time); or
(4) the Company fails to pay at final stated maturity (giving
effect to any applicable grace periods and any extensions thereof) the
principal amount of any Indebtedness for borrowed money of the Company or
any Subsidiary of the Company or interest thereon, or the acceleration of
the final stated maturity of any such Indebtedness if the aggregate
principal amount of such Indebtedness, together with the principal amount
of any other such Indebtedness not paid at final stated maturity or which
has been accelerated aggregates $500,000 or more at any time; or
(5) one or more judgments for the payment of money in an
aggregate amount in excess of $500,000 shall have been rendered against
the Company or any of its Subsidiaries and such judgments remain
undischarged, unpaid or unstayed for a period of 30 days after such
judgment or judgments become final and non-appealable; or
(6) the Company or any Significant Subsidiary of the Company
(A) commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (B) consents to the entry of a judgment, decree or
order for relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (C) consents to the appointment of a Custodian of it or
for substantially all of its property, (D) consents to or acquiesces in
the institution of a bankruptcy or an insolvency proceeding against it,
(E) makes a general assignment for the benefit of its creditors, or (F)
takes any corporate action to authorize or effect any of the foregoing; or
(7) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company or any Significant
Subsidiary of the Company in an involuntary case or proceeding under any
Bankruptcy Law, which shall (A) approve as properly filed a petition
seeking reorganization, arrangement, adjustment or composition in respect
of the Company or any such Significant Subsidiary, (B) appoint a Custodian
of the Company or any such Significant Subsidiary or for substantially all
of its property or (C) order the winding-up or liquidation of its affairs;
and such judgment, decree or order shall remain unstayed and in effect for
a period of 60 consecutive days; or
(8) the lenders under the Credit Agreement commence
proceedings to foreclose upon any assets of the Company or any of its
Subsidiaries as a result of a default with respect to Obligations of at
least $500,000; or
(9) any Guarantee ceases to be in full force and effect or any
Guarantee is declared to be null and void and unenforceable or any
Guarantee is found to be invalid or any guarantor denies its liability
under its Guarantee (other than by reason of release of a Guarantee in
accordance with Section 11.06); or
(10) any material breach by the Company of a representation or
warranty (as of the Issue Date) or covenant contained in the Securities
Purchase Agreement.
SECTION 6.02. ACCELERATION.
(a) If an Event of Default (other than an Event of Default
specified in Section 6.01(6) or (7) with respect to the Company) occurs and is
continuing and has not been waived pursuant to Section 6.04, then the Trustee or
the Holders of at least 25% in principal amount of outstanding Notes may declare
the principal of and accrued interest on all the Notes to be due and payable by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"), and the same shall become immediately due and payable. Upon any such
declaration, but subject to the immediately preceding sentence, such amount
shall be immediately due and payable.
(b) If an Event of Default specified in Section 6.01(6) or (7)
occurs and is continuing with respect to the Company, all unpaid principal of
and premium, if any, and accrued and unpaid interest on all of the outstanding
Notes shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
(c) At any time after a declaration of acceleration with
respect to the Notes in accordance with Section 6.02(a), the Holders of a
majority in principal amount of the Notes may, on behalf of the Holders of all
of the Notes, rescind and cancel such declaration and its consequences (i) if
the rescission would not conflict with any judgment or decree, (ii) if all
existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of the acceleration,
(iii) to the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due otherwise
than by such declaration of acceleration, has been paid, (iv) if the Company has
paid the Trustee its reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances and (v) in the event of the cure or waiver
of an Event of Default of the type described in Section 6.01(6) or (7), the
Trustee shall have received an Officers' Certificate and an Opinion of Counsel
that such Event of Default has been cured or waived. No such rescission shall
affect any subsequent Default or impair any right consequent thereto. The
Holders of a majority in principal amount of the Notes may waive any existing
Default or Event of Default under this Indenture, and its consequences, except a
default in the payment of the principal of or interest on any Notes.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative to the extent permitted by
law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 2.09, 6.07 and 9.02, the Holders of a majority
in principal amount of the outstanding Notes by notice to the Trustee may waive
an existing Default or Event of Default and its consequences, except a Default
in the payment of principal (other than principal due by reason of acceleration)
of or interest on any Note as specified in clauses (1) and (2) of Section 6.01.
When a Default or Event of Default is waived, it is cured and ceases.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to Section 2.09, the Holders of a majority in principal
amount of the outstanding Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it, including, without limitation, any remedies
provided for in Section 6.03. Subject to Section 7.01, however, the Trustee may
refuse to follow any direction that the Trustee reasonably believes conflicts
with any law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of another Holder, or that may involve the Trustee in
personal liability; PROVIDED that the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such direction; and
PROVIDED further that this provision shall not affect the rights of the Trustee
set forth in Section 7.01(d).
SECTION 6.06. LIMITATION ON SUITS.
A Holder, other than a state of the United States of America or a
political subdivision thereof, may not pursue any remedy with respect to this
Indenture or the Notes unless:
(1) the Holder gives to the Trustee written notice of
a continuing Event of Default;
(2) Holders of at least 25% in principal amount of the
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holders offer to the Trustee indemnity in its sole
discretion satisfactory to the Trustee against any loss, liability or
expense to be incurred in compliance with such request, PROVIDED, that
this Section 6.06(3) shall not apply to a Holder that is a State of the
United States of America or a political subdivision thereof;
(4) the Trustee does not comply with the request within 45
days after receipt of the request and the offer of satisfactory indemnity;
and
(5) during such 45-day period the Holders of a majority in
principal amount of the outstanding Notes do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Note, on or
after the respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company, any Guarantor, if any, or any other obligor on the Notes for the whole
amount of principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest at the rate set forth in
Section 4.01 and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents, consultants and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any other
obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, taxes, disbursements and advances of the Trustee, its
agents, consultants and counsel, and any other amounts due the Trustee under
Section 7.07. The Company's payment obligations under this Section 6.09 shall be
secured in accordance with the provisions of Section 7.07 hereunder. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: if the Holders are forced to proceed against the
Company directly without the Trustee, to Holders for their
collection costs;
Third: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Notes for
principal and interest, respectively; and
Fourth: to the Company, the Guarantors, if any, or any other
obligor on the Notes, as their interests may appear, or as a court
of competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
Such costs shall not apply to, and such costs shall not be assessed in
connection with, a suit by the Trustee, a suit by a Holder pursuant to Section
6.07, or a suit by a Holder or Holders of more than 10% in principal amount of
the outstanding Notes.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
thereof as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or obligations
shall be implied in this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) Notwithstanding anything to the contrary herein contained,
the Trustee may not be relieved from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not herein expressly provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money
or assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate, an Opinion
of Counsel or both, which shall conform to Sections 12.04 and 12.05. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of
Counsel.
(c) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or indirectly or
by or through agents or attorneys and the Trustee shall not be responsible
for the misconduct or negligence of any agent or attorney appointed with
due care.
(d) The Trustee shall not be liable for any action that it
takes or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, notice, request, direction, consent,
order, bond, debenture, or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled, upon
reasonable notice to the Company, to examine the books, records, and
premises of the Company, personally or by agent or attorney and to consult
with the officers and representatives of the Company, including the
Company's accountants and attorneys.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee
security or indemnity satisfactory to the Trustee in its sole discretion
against the costs, expenses and liabilities which may be incurred by it in
compliance with such request, order or direction.
(g) The Trustee shall not be required to give any bond or
surety in respect of the performance of its powers and duties hereunder.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The recitals contained herein and in the Notes shall be taken as
statements of the Company and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Notes, and it shall not be accountable for the
Company's use of the proceeds from the Notes, and it shall not be responsible
for any statement of the Company in this Indenture or the Notes other than the
Trustee's certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, or interest on, any Note, including an accelerated
payment and the failure to make payment on the Change of Control Date pursuant
to a Change of Control Offer or on the Proceeds Purchase Date pursuant to a Net
Proceeds Offer and, except in the case of a failure to comply with Article Five
hereof, the Trustee may withhold the notice if and so long as its Board of
Directors, the executive committee of its Board of Directors or a committee of
its directors and/or Trust Officers in good faith determines that withholding
the notice is in the interest of the Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15, the Trustee shall, to the extent
that any of the events described in TIA ss. 313(a) occurred within the previous
twelve months, but not otherwise, mail to each Holder a brief report dated as of
such date that complies with TIA ss. 313(a). The Trustee also shall comply with
TIA ss.ss. 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any, on
which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes become
listed on any stock exchange and the Trustee shall comply with TIA ss. 313(d).
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable fees and expenses,
including reasonable out-of-pocket expenses incurred or made by it in connection
with the performance of its duties under this Indenture. Such expenses shall
include the reasonable fees and expenses of the Trustee's agents, consultants
and counsel.
The Company shall indemnify the Trustee and its agents, employees,
stockholders and directors and officers for, and hold them harmless against, any
loss, liability or expense incurred by them except for such actions to the
extent caused by any negligence, bad faith or willful misconduct on their part,
arising out of or in connection with the administration of this trust including
the reasonable costs and expenses of defending themselves against any claim or
liability in connection with the exercise or performance of any of their rights,
powers or duties hereunder. The Trustee shall notify the Company promptly of any
claim asserted against the Trustee for which it may seek indemnity. At the
Trustee's sole discretion, the Company shall defend the claim and the Trustee
shall cooperate and may participate in the defense; PROVIDED that any settlement
of a claim shall be approved in writing by the Trustee. Alternatively, the
Trustee may at its option have separate counsel of its own choosing and the
Company shall pay the reasonable fees and expenses of such counsel; PROVIDED
that the Company will not be required to pay such fees and expenses if it
assumes the Trustee's defense and there is no conflict of interest between the
Company and the Trustee in connection with such defense as reasonably determined
by the Trustee. The Company need not pay for any settlement made without its
written consent. The Company need not reimburse any expense or indemnify against
any loss or liability to the extent incurred by the Trustee through its
negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes. The Trustee's
right to receive payment of any amounts due under this Section 7.07 shall not be
subordinate to any other liability or indebtedness of the Company (even though
the Notes may be subordinate to such other liability or indebtedness).
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(6) or (7) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law; PROVIDED, HOWEVER, that this shall not
affect the Trustee's rights as set forth in the preceding paragraph or Section
6.10.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.08.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee by
so notifying the Company and the Trustee and may appoint a successor Trustee.
The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee in connection with the rights and duties
hereunder prior to such replacement.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; PROVIDED that such
corporation shall be otherwise qualified and eligible under this Article Seven.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss. 310(a)(1), (2) and (5). The Trustee (or, in the case
of a corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least $100
million as set forth in its most recent published annual report of condition. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA ss. 310(a)(2). The Trustee shall comply with TIA ss.
310(b); PROVIDED, however, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met. The provisions of TIA ss. 310 shall apply to the Company, as
obligor of the Notes.
SECTION 7.11. Preferential Collection of Claims AGAINST COMPANY.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein. The
provisions of TIA ss. 311 shall apply to the Company, as obligor on the Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's OBLIGATIONS.
The Company may terminate its obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph of
this Section 8.01, if all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes which have been replaced or paid or Notes
for whose payment U.S. Legal Tender has theretofore been deposited with the
Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid to the Company, as provided in Section 8.05) have
been delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, a notice of
redemption to each Holder of the redemption of all of the Notes shall be
given within three months under arrangements satisfactory to the Trustee
for the giving of such notice or (ii) all Notes have otherwise become due
and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to
be deposited with the Trustee or a trustee satisfactory to the Trustee,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, U.S. Legal Tender in such amount
as is sufficient without consideration of reinvestment of such interest,
U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their terms,
will provide, not later than one day before the due date of any payment on
the Notes, U.S. Legal Tender, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay principal of, premium, if any, and
interest on the outstanding Notes, on the dates on which such payments are
due and payable in accordance with the terms of this Indenture, to
maturity or redemption; PROVIDED that the Trustee shall have been
irrevocably instructed to apply such U.S. Legal Tender to the payment of
said principal, premium, if any, and interest with respect to the Notes
and, PROVIDED, FURTHER, that from and after the time of deposit, the money
deposited shall not be subject to the rights of holders of Senior Debt
pursuant to the provisions of Article Ten;
(c) no Default or Event of Default with respect to this
Indenture or the Notes shall have occurred and be continuing on the date
of such deposit or shall occur as a result of such deposit and such
deposit will not result in a breach or violation of, or constitute a
default under, any other instrument to which the Company is a party or by
which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent providing for or relating to the termination of the
Company's obligations under the Notes and this Indenture have been
complied with. Such Opinion of Counsel shall also state that such
satisfaction and discharge does not result in a default under the Credit
Agreement (if then in effect) or any other agreement or instrument then
known to such counsel that binds or affects the Company.
Notwithstanding the foregoing paragraph, the Company's obligations
in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall
survive until the Notes are no longer outstanding pursuant to the last paragraph
of Section 2.08. After the Notes are no longer outstanding, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations specified
above.
SECTION 8.02. Legal Defeasance and Covenant DEFEASANCE.
(a) The Company may, at its option by Board Resolution of the
Board of Directors of the Company, at any time, elect to have either paragraph
(b) or (c) below be applied to all outstanding Notes upon compliance with the
conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (b), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.04 hereof and the other Sections of this Indenture
referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), and Holders of the Notes and any amounts deposited
under Section 8.03 hereof shall cease to be subject to any obligations to, or
the rights of, any holder of Senior Debt under Article Ten or otherwise, except
for the following provisions, which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of and interest
on such Notes when such payments are due, (ii) the Company's obligations with
respect to such Notes under Article Two and Section 4.02 hereof, (iii) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (iv) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this paragraph (b) notwithstanding the prior exercise of its option
under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03 hereof, be released
from its obligations under the covenants contained in Sections 4.03 through 4.21
and Article Five hereof with respect to the outstanding Notes on and after the
date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes) and Holders of the Notes and any amounts deposited under Section 8.03
hereof shall cease to be subject to any obligations to, or the rights of, any
holder of Senior Debt under Article Ten or otherwise. For this purpose, such
Covenant Defeasance means that, with respect to the outstanding Notes, the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply shall not constitute a
Default or an Event or Default under Section 6.01(3) hereof, but, except as
specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby. In addition, upon the Company's exercise under paragraph (a)
hereof of the option applicable to this paragraph (c), subject to the
satisfaction of the conditions set forth in Section 8.03 hereof, Sections
6.01(3), 6.01(4), 6.01(5), 6.01(6) (solely with respect to Persons other than
the Company) or 6.01(7) (solely with respect to Persons other than the Company)
shall not constitute Defaults or Events of Default.
SECTION 8.03. Conditions to Legal Defeasance or COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02(b) or 8.02(c) hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, U.S. Legal Tender or U.S.
Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms, will
provide, not later than one day before the due date of any payment on the
Notes, U.S. Legal Tender, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest on the Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be, of such principal or
installment of principal of or interest on the Notes; PROVIDED that the
Trustee shall have received an irrevocable written order from the Company
instructing the Trustee to apply such U.S. Legal Tender or the proceeds of
such U.S. Government Obligations to said payments with respect to the
Notes;
(b) in the case of an election under Section 8.02(b) hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that (A)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this Indenture,
there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel
shall confirm that, the Holders of the Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.02(c) hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that the
Holders of the Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(d) no Default or Event of Default or event which with notice
or lapse of time or both would become a Default or an Event of Default
with respect to the Notes shall have occurred and be continuing (x) on the
date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of
which will be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or (y) insofar as Sections 6.01(6) and
6.01(7) hereof are concerned, at any time in the period ending on the 91st
day after the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of or constitute a default under this
Indenture or any other material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company
with the intent of preferring the Holders over any other creditors of the
Company or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or
the Covenant Defeasance have been complied with (other than the condition
in clause (d)(y)); and
(h) the Company shall have delivered to the Trustee an Opinion
of Counsel substantially to the effect that (i) the trust funds will not
be subject to any rights of any holders of Senior Debt, including, without
limitation, those arising under this Indenture, and (ii) assuming no
intervening bankruptcy or insolvency of the Company between the date of
deposit and the 91st day following the deposit and that no Holder is an
insider of the Company, after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable Bankruptcy
Law.
SECTION 8.04. APPLICATION OF TRUST MONEY.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Article Eight, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of principal of and
interest on the Notes. The Trustee shall be under no obligation to invest said
U.S. Legal Tender or U.S. Government Obligations except as it may agree with the
Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.03 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any U.S. Legal Tender or U. S. Government Obligations held by it as
provided in Section 8.03 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof that would
then be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
SECTION 8.05. REPAYMENT TO THE COMPANY.
Subject to Article Eight, the Trustee and the Paying Agent shall
promptly pay to the Company, or if deposited with the Trustee by any Guarantor,
to such Guarantor, upon request any excess U.S. Legal Tender or U.S. Government
Obligations held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall pay
to the Company, or if deposited with the Trustee by any Guarantor, to such
Guarantor, upon request any money held by them for the payment of principal or
interest that remains unclaimed for two years; PROVIDED that the Trustee or such
Paying Agent, before being required to make any payment, may at the expense of
the Company cause to be published once in a newspaper of general circulation in
the City of New York or mail to each Holder entitled to such money notice that
such money remains unclaimed and that after a date specified therein which shall
be at least 30 days from the date of such publication or mailing any unclaimed
balance of such money then remaining will be repaid to the Company or a
Guarantor. After payment to the Company or a Guarantor, Holders entitled to such
money must look to the Company for payment as general creditors unless an
applicable law designates another Person.
SECTION 8.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Article Eight by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Article
Eight until such time as the Trustee or Paying Agent is permitted to apply all
such U.S. Legal Tender or U.S. Government Obligations in accordance with Article
Eight; PROVIDED that if the Company has made any payment of interest on or
principal of any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the U.S. Legal Tender or U.S. Government Obligations
held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Guarantors, when authorized by a Board
Resolution, and the Trustee, together, may amend or supplement this Indenture or
the Notes without notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; PROVIDED
that such amendment or supplement does not, in the opinion of the Trustee,
adversely affect the rights of any Holder in any material respect;
(2) to comply with Article Five;
(3) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(4) to comply with any requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA;
(5) to make any change that would provide any additional
benefit or rights to the Holders or that does not adversely affect the
rights of any Holder;
(6) to make any other change that does not, in the opinion of
the Trustee, adversely affect in any material respect the rights of any
Holders hereunder; or
(7) to reflect a Guarantor ceasing to be liable on the
Guarantees because it is no longer a Subsidiary of the Company or to
reflect additional Guarantors;
PROVIDED that the Company has delivered to the Trustee an Opinion of Counsel
stating that such amendment or supplement complies with the provisions of this
Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
(a) Subject to Section 6.07, the Company and the Guarantors,
when authorized by a Board Resolution, and the Trustee, together, with the
written consent of the Holder or Holders of at least a majority in aggregate
principal amount of the outstanding Notes, may amend or supplement this
Indenture, the Notes or any Guarantee, without notice to any other Holders.
Subject to Section 6.07, the Holder or Holders of a majority in aggregate
principal amount of the outstanding Notes may waive compliance by the Company or
the Guarantors with any provision of this Indenture, the Notes or the Guarantees
without notice to any other Holder.
(b) No amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, shall, without the consent of each Holder of each Note
affected thereby:
(1) reduce the amount of Notes whose Holders must consent to
an amendment;
(2) reduce the rate of or change or have the effect of
changing the time for payment of interest, including defaulted interest,
on any Notes;
(3) reduce the principal of or change or have the effect of
changing the fixed maturity of any Notes, or change the date on which any
Notes may be subject to redemption or repurchase, or reduce the redemption
or repurchase price therefor;
(4) make any Notes payable in money other than that stated in
the Notes;
(5) make any change in provisions of this Indenture protecting
the right of each Holder to receive payment of principal of and interest
on such Note or Guarantee on or after the due date thereof or to bring
suit to enforce such payment, or permitting Holders of a majority in
principal amount of Notes to waive Defaults or Events of Default, other
than ones with respect to the payment of principal of or interest on the
Notes;
(6) amend, modify, change or waive any provision of this
Section 9.02;
(7) amend, modify or change in any material respect the
obligation of the Company to make or consummate a Change of Control Offer
in the event of a Change of Control or make and consummate a Net Proceeds
Offer in respect of any Asset Sale that has been consummated or modify any
of the provisions or definitions with respect thereto after a Change of
Control has occurred or the subject Asset Sale has been consummated;
(8) release any Guarantor from any of its obligations under
its Guarantee or this Indenture otherwise than in accordance with the
terms hereof; or
(9) modify Article Ten or Eleven or the definitions used in
Article Ten or Eleven to adversely affect the Holders of the Notes in any
material respect.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. EFFECT ON SENIOR DEBT.
No amendment of this Indenture shall adversely affect the rights of
any holder of Senior Debt under Article Ten of this Indenture or Guarantor
Senior Debt under Article Eleven of this Indenture, without the consent of such
holder.
SECTION 9.04. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall, except as may otherwise be provided in any order of the SEC pursuant to
TIA ss. 304(d), comply with the TIA as then in effect.
SECTION 9.05. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (10) of Section 9.02(b), in which case, the amendment, supplement or
waiver shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note.
SECTION 9.06. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment, supplement or waiver changes the terms of a Note,
the Trustee may require the Holder of such Note to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Note about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Any such notation
or exchange shall be made at the sole cost and expense of the Company.
SECTION 9.07. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized or permitted pursuant to this Article Nine; PROVIDED that the Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture. Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
SUBORDINATION
SECTION 10.01. NOTES SUBORDINATED TO SENIOR DEBT.
The Company covenants and agrees, and each Holder of the Notes, by
its acceptance thereof, likewise covenants and agrees, that all Notes shall be
issued subject to the provisions of this Article Ten; and each Person holding
any Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that the payment of all Obligations on the Notes by
the Company shall, to the extent and in the manner herein set forth, be
subordinated and junior in right of payment to the prior payment in full in cash
or Cash Equivalents of all Obligations on the Senior Debt; that the
subordination is for the benefit of, and shall be enforceable directly by, the
holders of Senior Debt, and that each holder of Senior Debt whether now
outstanding or hereafter created, incurred, assumed or guaranteed shall be
deemed to have acquired Senior Debt in reliance upon the covenants and
provisions contained in this Indenture and the Notes; PROVIDED, HOWEVER, that
the Indebtedness represented by the Notes shall cease to be so subordinate,
junior and subject in right of payment upon any defeasance thereof in accordance
with Article Eight.
SECTION 10.02. No Payment on Notes in Certain CIRCUMSTANCES.
(a) Unless Section 10.03 shall be applicable, if any default
occurs and is continuing in the payment when due, whether at maturity, upon
redemption, by declaration or otherwise, of any principal of, interest on,
unpaid drawings for letters of credit issued in respect of, or regularly
accruing fees with respect to, any Senior Debt, and such default shall not have
ceased to exist or have been cured or waived by or on behalf of the holders of
such Senior Debt, no payment of any kind or character (other than payments by a
trust previously established pursuant to Article Eight), by set-off or
otherwise, shall be made by, or on behalf of, the Company or any other Person on
its or their behalf with respect to any Obligations on the Notes, or to acquire
any of the Notes for cash or property or otherwise, in each case, other than
payments in Junior Securities. In addition, unless Section 10.03 shall be
applicable, if any other event of default occurs and is continuing with respect
to any Senior Debt, as such event of default is defined in the instrument
creating or evidencing such Senior Debt, permitting the holders of such Senior
Debt then outstanding to accelerate the maturity thereof and if the
Representative for the Senior Debt gives notice of the event of default to the
Trustee (a "Default Notice"), then, unless and until all events of default have
been cured or waived or have ceased to exist or the Trustee receives notice
thereof from the Representative for the respective issue of Senior Debt
terminating the Blockage Period (as defined below), during the 179 days after
the delivery of such Default Notice (the "Blockage Period"), neither the Company
nor any other Person on its behalf shall (x) make any payment of any kind or
character (other than payments by a trust previously established pursuant to
Article Eight), by set-off or otherwise, with respect to any Obligations on the
Notes or (y) acquire any of the Notes for cash or property or otherwise, in each
case, other than payments in Junior Securities. Notwithstanding anything herein
to the contrary, in no event will a Blockage Period extend beyond 179 days from
the date the payment on the Notes was due and only one such Blockage Period may
be commenced within any 360 consecutive days. No event of default which existed
or was continuing on the date of the commencement of any Blockage Period with
respect to the Senior Debt shall be, or be made, the basis for the commencement
of a second Blockage Period by the Representative of the Senior Debt whether or
not within a period of 360 consecutive days, unless such event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 10.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior Debt
(pro rata to such holders on the basis of the respective amount of Senior Debt
held by such holders) or their respective Representatives, as their respective
interests may appear. The Trustee shall be entitled to rely on information
regarding amounts then due and owing on the Senior Debt, if any, received from
the holders of Senior Debt (or their Representatives) or, if such information is
not received from such holders or their Representatives, from the Company and
only amounts included in the information provided to the Trustee shall be paid
to the holders of Senior Debt.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder.
SECTION 10.03. Payment Over of Proceeds upon DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any total or partial liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash or Cash Equivalents, or such payment duly provided
for to the satisfaction of the holders of Senior Debt, before any payment or
distribution of any kind or character (other than payments by a trust previously
established pursuant to Article Eight) is made on account of any Obligations on
the Notes, or for the acquisition of any of the Notes for cash or property or
otherwise, other than payments or distributions in Junior Securities. Upon any
such dissolution, winding-up, liquidation, reorganization, receivership or
similar proceeding, any payment or distribution of assets of the Company of any
kind or character (other than payments by a trust previously established
pursuant to Article Eight), whether in cash, property or securities, other than
payments or distributions in Junior Securities, to which the Holders of the
Notes or the Trustee under this Indenture would be entitled, except for the
provisions of this Article Ten, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the Holders or by the Trustee under this
Indenture if received by them, directly to the holders of Senior Debt (pro rata
to such holders on the basis of the respective amounts of Senior Debt held by
such holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Debt may have been
issued, as their respective interests may appear, for application to the payment
of Senior Debt remaining unpaid until all such Senior Debt has been paid in full
in cash or Cash Equivalents after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Debt or part thereof originally intended to
be satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character (other
than payments by a trust previously established pursuant to Article Eight),
whether in cash, property or securities, other than in Junior Securities, shall
be received by any Holder when such payment or distribution is prohibited by
Section 10.03(a), such payment or distribution shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior Debt
(pro rata to such holders on the basis of the respective amount of Senior Debt
held by such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of Senior Debt remaining unpaid until all such Senior Debt has been paid
in full in cash or Cash Equivalents, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of such Senior
Debt.
(d) The consolidation of the Company with, or the merger of
the Company with or into, another corporation or the liquidation or dissolution
of the Company following the conveyance or transfer of all or substantially all
of its assets, to another corporation upon the terms and conditions provided in
Article Five hereof and as long as permitted under the terms of the Senior Debt
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assume the Company's obligations
hereunder in accordance with Article Five hereof.
SECTION 10.04. Payments May Be Paid Prior to DISSOLUTION.
Nothing contained in this Article Ten or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Sections
10.02 and 10.03, from making payments at any time for the purpose of making
payments of principal of and interest on the Notes, or from depositing with the
Trustee any moneys for such payments, or (ii) in the absence of actual knowledge
by the Trustee that a given payment would be prohibited by Section 10.02 or
10.03, the application by the Trustee of any moneys deposited with it for the
purpose of making such payments of principal of, and interest on, the Notes to
the Holders entitled thereto unless at least one Business Day prior to the date
upon which such payment would otherwise become due and payable a Trust Officer
shall have actually received the written notice provided for in the second
sentence of Section 10.02(a) or in Section 10.07. The Company shall give prompt
written notice to the Trustee of any dissolution, winding-up, liquidation or
reorganization of the Company.
SECTION 10.05. SUBROGATION.
Subject to the payment in full in cash or Cash Equivalents of all
Senior Debt, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Debt until the Notes shall be
paid in full; and, for the purposes of such subrogation, no such payments or
distributions to the holders of the Senior Debt by or on behalf of the Company
or by or on behalf of the Holders by virtue of this Article Ten which otherwise
would have been made to the Holders shall, as between the Company and the
Holders of the Notes, be deemed to be a payment by the Company to or on account
of the Senior Debt, it being understood that the provisions of this Article Ten
are and are intended solely for the purpose of defining the relative rights of
the Holders of the Notes, on the one hand, and the holders of the Senior Debt,
on the other hand.
SECTION 10.06. Obligations of the Company UNCONDITIONAL.
Nothing contained in this Article Ten or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Debt, and the Holders, the obligation
of the Company, which is absolute and unconditional, to pay to the Holders the
principal of and any interest on the Notes as and when the same shall become due
and payable in accordance with their terms, or is intended to or shall affect
the relative rights of the Holders and creditors of the Company other than the
holders of the Senior Debt, nor shall anything herein or therein prevent the
Holder of any Note or the Trustee on its behalf from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.
SECTION 10.07. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Notes pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Debt or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company, or from a holder of Senior Debt or a
Representative therefor, together with proof satisfactory to the Trustee of such
holding of Senior Debt or of the authority of such Representative, and, prior to
the receipt of any such written notice, the Trustee shall be entitled to assume
(in the absence of actual knowledge to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Ten, and if such evidence is not furnished the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
SECTION 10.08. Reliance on Judicial Order or CERTIFICATE OF
LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred
to in this Article Ten, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders of the Notes shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which any insolvency,
bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization
or similar case or proceeding is pending, or upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, receiver, assignee for the benefit
of creditors, agent or other person making such payment or distribution,
delivered to the Trustee or the Holders of the Notes, for the purpose of
ascertaining the persons entitled to participate in such payment or
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Ten.
SECTION 10.09. TRUSTEE'S RELATION TO SENIOR DEBT.
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article Ten with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt.
Whenever a distribution is to be made or a notice given to holders
or owners of Senior Debt, the distribution may be made and the notice may be
given to their Representative, if any.
SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions
of the Company or HOLDERS OF SENIOR DEBT.
No right of any present or future holders of any Senior Debt to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Ten or the obligations
hereunder of the Holders of the Notes to the holders of the Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt, or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (iii) release any Person liable in any manner
for the payment or collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 10.11. Noteholders Authorize Trustee To EFFECTUATE
SUBORDINATION OF NOTES.
Each Holder of Notes by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior Debt
and the Holders of Notes, the subordination provided in this Article Ten, and
appoints the Trustee its attorney-in-fact for such purposes, including, in the
event of any dissolution, winding-up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business and assets of the
Company, the filing of a claim for the unpaid balance of its Notes and accrued
interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Debt or their
Representative are or is hereby authorized to have the right (but not the
obligation) to file and are or is hereby authorized to file an appropriate claim
for and on behalf of the Holders of said Notes. Nothing herein contained shall
be deemed to authorize the Trustee or the holders of Senior Debt or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee or the holders of Senior Debt or their Representative to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 10.12. This Article Ten Not To Prevent EVENTS OF DEFAULT.
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
SECTION 10.13. Trustee's Compensation Not PREJUDICED.
Nothing in this Article Ten will apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. UNCONDITIONAL GUARANTEE.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns that: (i) the principal of and
interest on the Notes will be promptly paid in full when due, subject to any
applicable grace period, whether at maturity, by acceleration or otherwise and
interest on the overdue principal, if any, and interest on any interest, to the
extent lawful, of the Notes and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in full,
all in accordance with the terms hereof and thereof; and (ii) in case of any
extension of time of payment or renewal of any Notes or of any such other
obligations, the same will be promptly paid in full when due in accordance with
the terms of the extension or renewal, subject to any applicable grace period,
whether at stated maturity, by acceleration or otherwise, subject, however, in
the case of clauses (i) and (ii) above, to the limitations set forth in Section
11.05. Each Guarantor hereby agrees that its Obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstances which might otherwise constitute
a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that this Guarantee will not be discharged except by complete
performance of the obligations contained in the Notes, this Indenture and in
this Guarantee. If any Noteholder or the Trustee is required by any court or
otherwise to return to the Company, any Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to the Company or any
Guarantor, any amount paid by the Company or any Guarantor to the Trustee or
such Noteholder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect as to such amount only. Each Guarantor
further agrees that, as between each Guarantor, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the Obligations
guaranteed hereby may be accelerated as provided in Article Six for the purposes
of this Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the Obligations guaranteed hereby,
and (y) in the event of any acceleration of such obligations as provided in
Article Six, such Obligations (whether or not due and payable) shall forthwith
become due and payable by each Guarantor for the purpose of this Guarantee.
SECTION 11.02. SUBORDINATION OF GUARANTEE.
Each Guarantor agrees, and each Holder by accepting a Guarantee
agrees, that all Obligations owed under and in respect of such Guarantees are,
to the extent and in the manner herein set forth, subordinated and junior in
right of payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Guarantor Senior Debt of such Guarantor, that the subordination
is for the benefit of, and shall be enforceable directly by, the holders of
Guarantor Senior Debt, and that each holder of Guarantor Senior Debt whether now
outstanding or hereafter created, incurred, assumed or guaranteed shall be
deemed to have acquired Guarantor Senior Debt in reliance upon the covenants and
provisions contained in this Indenture.
SECTION 11.03. SEVERABILITY.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.04. RELEASE OF A GUARANTOR.
Upon the sale or disposition of a Guarantor (or all or substantially
all of its assets) to an entity which is not a Subsidiary of the Company in
compliance with this Indenture, such Guarantor shall be deemed released from all
its obligations under this Article Eleven and its Guarantee; PROVIDED, HOWEVER,
that any such termination shall occur only to the extent that all Obligations of
such Guarantor under all of its guarantees of, and under all of its pledges of
assets or other security interests which secure, Indebtedness of the Company
shall also terminate upon such release, sale or transfer. The Trustee shall
deliver an appropriate instrument evidencing such release upon receipt of a
written request by the Company accompanied by an Officers' Certificate
certifying as to the compliance with this Section 11.04 and the other provisions
of this Indenture. Any Guarantor not so released remains liable for the full
amount of principal of and interest on the Notes as provided in this Article
Eleven.
SECTION 11.05. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To
effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the Obligations of such Guarantor under its Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 11.07, result in the Obligations of such Guarantor under its
Guarantee not constituting such fraudulent transfer or conveyance.
SECTION 11.06. Guarantors May Consolidate, Etc. on CERTAIN TERMS.
(a) Nothing contained in this Indenture or in any of the Notes
shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor or shall prevent any sale or conveyance of the
assets of a Guarantor to the Company or another Guarantor. Upon any such
consolidation, merger, sale or conveyance, the Guarantee given by such Guarantor
shall no longer have any force or effect.
(b) Except as set forth in Article Four, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation or merger
of a Guarantor with or into a corporation or corporations other than the Company
or another Guarantor (whether or not affiliated with the Guarantor), or
successive consolidations or mergers in which a Guarantor or its successor or
successors shall be a party or parties, or shall prevent any sale or conveyance
of all or substantially all of the assets of a Guarantor to a corporation other
than the Company or another Guarantor (whether or not affiliated with the
Guarantor); PROVIDED, HOWEVER, that, subject to Sections 11.04 and 11.06(a),
either (x) the transaction is an Asset Sale consummated in accordance with
Section 4.16, or (y) (i) immediately after such transaction, and giving effect
thereto, no Default or Event of Default shall have occurred as a result of such
transaction and be continuing, and (ii) each Guarantor hereby covenants and
agrees that, upon any such consolidation, merger, sale or conveyance, the
Guarantee of such Guarantor set forth in this Article Eleven, and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed by such Guarantor, shall be expressly assumed (in
the event that the Guarantor is not the surviving corporation in such
transaction), by supplemental indenture satisfactory in form to the Trustee,
executed and delivered to the Trustee, together with an Officers' Certificate of
the Company and an Opinion of Counsel stating that the transaction and such
supplemental indenture comply with this Indenture, by the corporation formed by
such consolidation, or into which the Guarantor shall have merged, or by the
corporation that shall have acquired such property. In the case of any such
consolidation, merger, sale or conveyance that is not an Asset Sale consummated
in accordance with Section 4.16, upon the assumption by the successor
corporation, by supplemental indenture executed and delivered to the Trustee and
satisfactory in form to the Trustee of the due and punctual performance of all
of the covenants and conditions of this Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and be substituted for
the Guarantor with the same effect as if it had been named herein as a
Guarantor.
SECTION 11.07. CONTRIBUTION.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, INTER SE, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under this
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a PRO RATA amount based on the Consolidated Net Worth of
each Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Notes or any other Guarantor's Obligations with
respect to this Guarantee.
SECTION 11.08. WAIVER OF SUBROGATION.
Each Guarantor hereby irrevocably waives any claim or other rights
which it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Guarantor's Obligations
under this Guarantee and this Indenture, including, without limitation, any
right of subrogation, reimbursement, exoneration, indemnification, and any right
to participate in any claim or remedy of any Holder of Notes against the
Company, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Company, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim or other rights. If any amount shall be paid to any Guarantor in
violation of the preceding sentence and the Notes shall not have been paid in
full, such amount shall have been deemed to have been paid to such Guarantor for
the benefit of, and held in trust for the benefit of, the Holders of the Notes,
and shall forthwith be paid to the Trustee for the benefit of such Holders to be
credited and applied upon the Notes, whether matured or unmatured, in accordance
with the terms of this Indenture. Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
11.08 is knowingly made in contemplation of such benefits.
SECTION 11.09. EXECUTION OF GUARANTEE.
To evidence their guarantee to the Noteholders specified in Section
11.01, the Guarantors hereby agree to execute the Guarantee in substantially the
form of Exhibit A recited to be endorsed on each Note ordered to be
authenticated and delivered by the Trustee. Each Guarantor hereby agrees that
its Guarantee set forth in Section 11.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Guarantee. Each such Guarantee shall be signed on behalf of each Guarantor by
one Officer (each of whom shall, in each case, have been duly authorized by all
requisite corporate actions) prior to the authentication of the Note on which it
is endorsed, and the delivery of such Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of such
Guarantee on behalf of such Guarantor. Such signatures upon the Guarantee may be
by manual or facsimile signature of such officers and may be imprinted or
otherwise reproduced on the Guarantee, and in case any such officer who shall
have signed the Guarantee shall cease to be such officer before the Note on
which such Guarantee is endorsed shall have been authenticated and delivered by
the Trustee or disposed of by the Company, such Note nevertheless may be
authenticated and delivered or disposed of as though the person who signed the
Guarantee had not ceased to be such officer of the Guarantor.
SECTION 11.10. No Payment on Guarantees in Certain CIRCUMSTANCES.
(a) Unless Section 11.11 shall be applicable, if any default
occurs and is continuing in the payment when due, whether at maturity, upon
redemption, by declaration or otherwise, of any principal of, interest on,
unpaid drawings for letters of credit issued in respect of, or regularly
accruing fees with respect to, any Guarantor Senior Debt or any Senior Debt
guaranteed by a Guarantor (which Guarantee constitutes Guarantor Senior Debt of
such Guarantor), no payment of any kind or character (other than payments by a
trust previously established pursuant to Article Eight), by set-off or
otherwise, shall be made by or on behalf of the Guarantor or any other Person on
its behalf with respect to any Obligations on the Notes or any of the
Obligations of such Guarantor on its Guarantee, or to acquire any of the Notes
for cash or property or otherwise, in each case other than payments in Junior
Securities.
In addition, unless Section 11.11 shall be applicable, if any other
event of default occurs and is continuing with respect to the Senior Debt of a
Guarantor, as such event of default is defined in the instrument creating or
evidencing such Senior Debt permitting the holders of such Senior Debt then
outstanding to accelerate the maturity thereof and if the Representative for the
respective issue of Senior Debt gives written notice of the event of default to
the Trustee (a "Guarantor Default Notice"), then, unless and until all events of
default have been cured or waived or have ceased to exist or the Trustee
receives notice from the Representative for the respective issue of Senior Debt
terminating the Guarantor Blockage Period (as defined below), during the 179
days after the delivery of such Guarantor Default Notice (the "Guarantor
Blockage Period"), no Guarantor or any other Person on its behalf shall (x) make
any payment of any kind or character (other than payments by a trust previously
established pursuant to Article Eight), by set-off or otherwise, with respect to
any Obligations on the Notes or under its Guarantee or (y) acquire any of the
Notes for cash or property or otherwise, in each case, other than payments in
Junior Securities. Notwithstanding anything herein to the contrary, in no event
will a Guarantor Blockage Period extend beyond 179 days from the date the
payment on the Notes was due and only one such Guarantor Blockage Period may be
commenced within any 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Guarantor Blockage Period
with respect to the Senior Debt shall be, or be made, the basis for the
commencement of a second Guarantor Blockage Period by the Representative of such
Senior Debt whether or not within a period of 360 consecutive days, unless such
event of default shall have been cured or waived for a period of not less than
90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 11.10(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Guarantor
Senior Debt (PRO RATA to such holders on the basis of the respective amount of
Guarantor Senior Debt held by such holders) or their respective Representatives,
as their respective interests may appear. The Trustee shall be entitled to rely
on information regarding amounts then due and owing on the Guarantor Senior
Debt, if any, received from the holders of Guarantor Senior Debt (or their
Representatives) or, if such information is not received from such holders or
their Representatives, from such Guarantor and only amounts included in the
information provided to the Trustee shall be paid to the holders of Guarantor
Senior Debt.
Nothing contained in this Article Eleven shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Section 6.02 or to pursue any rights or
remedies hereunder.
SECTION 11.11. Payment Over of Proceeds upon DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets of any
Guarantor of any kind or character, whether in cash, property or securities, to
creditors upon any total or partial liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors or marshaling of assets
of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership
or other similar proceeding relating to any Guarantor or its property, whether
voluntary or involuntary, all Obligations due or to become due upon all
Guarantor Senior Debt shall first be paid in full in cash or Cash Equivalents,
or such payment duly provided for to the satisfaction of the holders of Senior
Debt, before any payment or distribution of any kind or character (other than
payments by a trust previously established pursuant to Article Eight) is made on
account of any Obligations on the Notes, or for the acquisition of any of the
Notes for cash or property or otherwise, other than payments or distributions in
Junior Securities. Upon any such dissolution, winding-up, liquidation,
reorganization, receivership or similar proceeding, any payment or distribution
of assets of any Guarantor of any kind or character (other than payments by a
trust previously established pursuant to Article Eight), whether in cash,
property or securities, other than payments or distributions in Junior
Securities, to which the Holders of the Notes or the Trustee under this
Indenture would be entitled, except for the provisions of this Article Eleven,
shall be paid by such Guarantor or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
or by the Holders or by the Trustee under this Indenture if received by them,
directly to the holders of Guarantor Senior Debt (PRO RATA to such holders on
the basis of the respective amounts of Guarantor Senior Debt held by such
holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Guarantor Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of Guarantor Senior Debt remaining unpaid until all such Guarantor
Senior Debt has been paid in full in cash or Cash Equivalents after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of Guarantor Senior Debt.
(b) To the extent any payment of Guarantor Senior Debt
(whether by or on behalf of such Guarantor, as proceeds of security or
enforcement of any right of setoff or otherwise) is declared to be fraudulent or
preferential, set aside or required to be paid to any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar person under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then, if such payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar person, the Guarantor
Senior Debt or part thereof originally intended to be satisfied shall be deemed
to be reinstated and outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of a Guarantor of any kind or character (other
than payments by a trust previously established pursuant to Article Eight),
whether in cash, property or securities, other than in Junior Securities, shall
be received by any Holder when such payment or distribution is prohibited by
Section 11.11(a), such payment or distribution shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Guarantor
Senior Debt (PRO RATA to such holders on the basis of the respective amount of
Guarantor Senior Debt held by such holders) or their respective Representatives,
or to the trustee or trustees under any indenture pursuant to which any of such
Guarantor Senior Debt may have been issued, as their respective interests may
appear, for application to the payment of Guarantor Senior Debt remaining unpaid
until all such Guarantor Senior Debt has been paid in full in cash or Cash
Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Guarantor Senior Debt.
SECTION 11.12. Payments May Be Paid Prior to DISSOLUTION.
Nothing contained in this Article Eleven or elsewhere in this
Indenture shall prevent (i) any Guarantor, except under the conditions described
in Sections 11.10 and 11.11, from making payments at any time for the purpose of
making payments of principal of and interest on the Notes, or from depositing
with the Trustee any moneys for such payments, or (ii) in the absence of actual
knowledge by the Trustee that a given payment would be prohibited by Section
11.10 or 11.11, the application by the Trustee of any moneys deposited with it
for the purpose of making such payments of principal of and interest on the
Notes to the Holders entitled thereto unless at least one Business Day prior to
the date upon which such payment would otherwise become due and payable, a Trust
Officer shall have received the written notice provided for in the second
sentence of Section 11.10(a) or in Section 11.15. Each Guarantor shall give
prompt written notice to the Trustee of any dissolution, winding-up, liquidation
or reorganization of any Guarantor.
SECTION 11.13. SUBROGATION.
Subject to the payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt, the Holders of the Notes shall be subrogated to the
rights of the holders of Guarantor Senior Debt to receive payments or
distributions of cash, property or securities of such Guarantor applicable to
the Guarantor Senior Debt of such Guarantor until the Notes shall be paid in
full; and, for the purposes of such subrogation, no such payments or
distributions to the holders of the Guarantor Senior Debt by or on behalf of
such Guarantor or by or on behalf of the Holders by virtue of this Article
Eleven which otherwise would have been made to the Holders shall, as between the
Guarantors and the Holders of the Notes, be deemed to be a payment by such
Guarantor to or on account of the Guarantor Senior Debt, it being understood
that the provisions of this Article Eleven are and are intended solely for the
purpose of defining the relative rights of the Holders of the Notes, on the one
hand, and the holders of the Guarantor Senior Debt, on the other hand.
SECTION 11.14. Obligations of Each Guarantor UNCONDITIONAL.
Nothing contained in this Article Eleven or elsewhere in this
Indenture or in the Notes or the Guarantees is intended to or shall impair, as
among any Guarantor, its creditors other than the holders of Guarantor Senior
Debt, and the Holders of the Notes, the obligation of such Guarantor, which is
absolute and unconditional, to pay to the Holders of the Notes the principal of
and any interest on the Notes as and when the same shall become due and payable
in accordance with the terms of the Guarantees, or is intended to or shall
affect the relative rights of the Holders of the Notes and creditors of any
Guarantor other than the holders of Guarantor Senior Debt, nor shall anything
herein or therein prevent the Holder of any Note or the Trustee on its behalf
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, in respect of cash,
property or securities of any Guarantor received upon the exercise of any such
remedy.
SECTION 11.15. NOTICE TO TRUSTEE.
The Company or any Guarantor shall give prompt written notice to the
Trustee of any fact known to the Company or any such Guarantor which would
prohibit the making of any payment to or by the Trustee in respect of the
Guarantees pursuant to the provisions of this Article Eleven. Regardless of
anything to the contrary contained in this Article Eleven or elsewhere in this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any default or event of default with respect to any Guarantor Senior Debt or of
any other facts which would prohibit the making of any payment to or by the
Trustee unless and until the Trustee shall have received notice in writing from
the Company or a Guarantor, or from a holder of Guarantor Senior Debt or a
Representative therefor, together with proof satisfactory to the Trustee of such
holding of Guarantor Senior Debt or of the authority of such Representative,
and, prior to the receipt of any such written notice, the Trustee shall be
entitled to assume (in the absence of actual knowledge to the contrary) that no
such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any person as a holder of
Guarantor Senior Debt to participate in any payment or distribution pursuant to
this Article Eleven, the Trustee may request such person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amounts of Guarantor Senior
Debt held by such person, the extent to which such person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such person under this Article Eleven, and if such evidence is not
furnished the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 11.16. Reliance on Judicial Order or CERTIFICATE OF
LIQUIDATING AGENT.
Upon any payment or distribution of assets of any Guarantor referred
to in this Article Eleven, the Trustee, subject to the provisions of Article
Seven hereof, and the Holders of the Notes shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or upon certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, delivered to the
Trustee or the holders of the Notes, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Guarantor
Senior Debt and other Indebtedness of such Guarantor, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Eleven.
SECTION 11.17. Trustee's Relation to Guarantor SENIOR DEBT.
The Trustee and any agent of any Guarantor or the Trustee shall be
entitled to all the rights set forth in this Article Eleven with respect to any
Guarantor Senior Debt which may at any time be held by it in its individual or
any other capacity to the same extent as any other holder of Guarantor Senior
Debt and nothing in this Indenture shall deprive the Trustee or any such agent
of any of its rights as such holder.
With respect to the holders of Guarantor Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Eleven, and no implied covenants
or obligations with respect to the holders of Guarantor Senior Debt shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Guarantor Senior Debt.
Whenever a distribution is to be made or a notice given to holders
or owners of Guarantor Senior Debt, the distribution may be made and the notice
given to their Representative, if any.
SECTION 11.18. Subordination Rights Not Impaired by Acts
or Omissions of a Guarantor or HOLDERS OF
GUARANTOR SENIOR DEBT.
No right of any present or future holders of any Guarantor Senior
Debt to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Guarantor
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by such Guarantor with the terms of this Indenture, regardless of
any knowledge thereof which any such holder may have or otherwise be charged
with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Guarantor Senior Debt may, at any time and from time
to time, without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Eleven or the
obligations hereunder of the Holders of the Notes to the holders of the
Guarantor Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Guarantor Senior Debt, or otherwise amend or supplement in any manner
Guarantor Senior Debt, or any instrument evidencing the same or any agreement
under which Guarantor Senior Debt is outstanding; (ii) sell, exchange, release
or otherwise deal with any property pledged, mortgaged or otherwise securing
Guarantor Senior Debt; (iii) release any person liable in any manner for the
payment or collection of Guarantor Senior Debt; and (iv) exercise or refrain
from exercising any rights against such Guarantor and any other Person.
SECTION 11.19. Noteholders Authorize Trustee To Effectuate
Subordination of GUARANTEES.
Each Holder of Notes by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Guarantor
Senior Debt and the Holders of Notes, the subordination provided in this Article
Eleven, and appoints the Trustee its attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of any Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business as assets of such Guarantor, the filing of a claim for the unpaid
balance of its or his Notes and accrued interest in the form required in those
proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Guarantor Senior Debt
or their Representative are or is hereby authorized to have the right to file
and are or is hereby authorized to file an appropriate claim for and on behalf
of the Holders of said Notes. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Guarantor Senior Debt or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holders any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee or the holders of Guarantor Senior Debt or their Representative to vote
in respect of the claim of any Holder in any such proceeding.
SECTION 11.20. This Article Eleven Not To Prevent EVENTS OF DEFAULT.
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article Eleven will not be
construed as preventing the occurrence of an Event of Default.
SECTION 11.21. Trustee's Compensation Not PREJUDICED.
Nothing in this Article Eleven will apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA CONTROLS.
Except as may otherwise be provided in any order of the SEC pursuant
to TIA ss. 304(d), if any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
SECTION 12.02. NOTICES.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by commercial courier service, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
if to the Company or any Guarantor:
Geokinetics Inc.
Marathon Oil Tower
5555 San Felipe
Suite 780
Houston, Texas 77056
Facsimile No.: (713) 850-7330
Attn: Chairman of the Board
if to the Trustee:
[ ]
Facsimile No.: [ ]
Attn: Corporate Trust Department
Each of the Company, the Guarantors, if any, and the Trustee by
written notice to each other such Person may designate additional or different
addresses for notices to such Person. Any notice or communication to the
Company, the Guarantors, if any, or the Trustee shall be deemed to have been
given or made as of the date so delivered if personally delivered; when receipt
is confirmed if delivered by commercial courier service; when answered back, if
telexed; when receipt is acknowledged, if faxed; and five (5) calendar days
after mailing if sent by registered or certified mail, postage prepaid (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to
him by first class mail or other equivalent means at his address as it appears
on the registration books of the Registrar and shall be sufficiently given to
him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 12.03. Communications by Holders with Other HOLDERS.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, if any, the Trustee, the Registrar and any other Person
shall have the protection of TIA ss. 312(c).
SECTION 12.04. Certificate and Opinion as to CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the signers,
all conditions precedent to be performed by the Company, if any, provided
for in this Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action have
been complied with.
SECTION 12.05. Statements Required in Certificate or OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition and the definitions relating
thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is reasonably necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been complied with.
SECTION 12.06. Rules by Trustee, Paying Agent, REGISTRAR.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 12.07. LEGAL HOLIDAYS.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 12.08. GOVERNING LAW.
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS (OTHER THAN NEW YORK GENERAL OBLIGATIONS LAW SS.
5-1401). EACH OF THE COMPANY AND EACH GUARANTOR AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE.
SECTION 12.09. No Adverse Interpretation of OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 12.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorporator, as such,
of the Company, the Guarantors, if any, or the Trustee shall not have any
liability for any obligations of the Company under the Notes or this Indenture
or for any claim based on, in respect of or by reason of such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Notes.
SECTION 12.11. SUCCESSORS.
All agreements of the Company and the Guarantors, if any, in this
Indenture, the Notes and the Guarantees, if any, shall bind their successors.
All agreements of the Trustee in this Indenture shall bind its successors.
SECTION 12.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 12.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or in
the Notes or the Guarantees, if any, shall be 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 shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
Issuer:
GEOKINETICS INC.
By:____________________
Name:
Title:
Guarantors:
HOC OPERATING CO., INC.
By:___________________
Name:
Title:
GEOKINETICS PRODUCTION
CO., INC.
By:___________________
Name:
Title:
QUANTUM GEOPHYSICAL, INC.
By:___________________
Name:
Title:
<PAGE>
GEOSCIENCE SOFTWARE
SOLUTIONS, INC.
By:___________________
Name:
Title:
SIGNATURE GEOPHYSICAL SERVICES, INC.
By:___________________
Name:
Title:
RELIABLE EXPLORATION,
INCORPORATED
By:___________________
Name:
Title:
GEOPHYSICAL DEVELOPMENT
CORPORATION
By:___________________
Name:
Title:
<PAGE>
Trustee:
[ ],
as Trustee
By:___________________
Name:
Title:
<PAGE>
SCHEDULE I
[Existing Debt]
<PAGE>
SCHEDULE II
[Permitted Transactions]
<PAGE>
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS
SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL
AMOUNT OF THIS SECURITY, (1) THE ISSUE PRICE IS $ ; (2) THE AMOUNT OF ORIGINAL
ISSUE DISCOUNT IS $ ; (3) THE ISSUE DATE IS APRIL 30, 1998; AND (4) THE YIELD
TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS %.
CUSIP No.:
GEOKINETICS INC.
12% SENIOR SUBORDINATED NOTE DUE 2005
No. $
GEOKINETICS INC., a Delaware corporation (the "Company," which term
includes any successor entity), for value received promises to pay to or
registered assigns, the principal sum of Dollars on April 15, 2005.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Note contained
on the reverse hereof or elsewhere herein, which will for all purposes have the
same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
GEOKINETICS INC.
By:
Name:
Title:
By:
Name:
Dated: [ ] Title:
<PAGE>
Certificate of Authentication
This is one of the 12% Senior Subordinated Notes due 2005 referred
to in the within-mentioned Indenture.
[ ],
as Trustee
Dated: [ ] By:
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
12% SENIOR SUBORDINATED NOTE DUE 2005
1. INCORPORATION BY REFERENCE OF PROVISIONS OF THE Indenture.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings set forth in the Indenture referred to below.
2. INTEREST. GEOKINETICS INC., a Delaware corporation (the
"Company," which term includes any successor entity), promises to pay interest
on the principal amount of this Note at the rate per annum shown above. Interest
on the Notes will accrue from the most recent date on which interest has been
paid or, if no interest has been paid, from April 30, 1998. The Company will pay
interest semi-annually in arrears on each Interest Payment Date, commencing
October 15, 1998. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes plus 2% per annum and on overdue installments of interest (without regard
to any applicable grace periods) to the extent lawful.
3. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
4. PAYING AGENT AND REGISTRAR. Initially, [ ], a [ ] (the
"Trustee"), will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-Registrar without notice to the Holders.
5. INDENTURE. The Company issued the Notes under an Indenture, dated
as of [ ] (the "Indenture"), between the Company and the Trustee. This
Note is one of a duly authorized issue of Notes of the Company designated as its
12% Senior Subordinated Notes due 2005 (the "Notes"). The Notes are limited in
aggregate principal amount to $40,000,000. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and said Act for a statement of them. The Notes are
general unsecured obligations of the Company.
6. SUBORDINATION. The Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Debt of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. The Guarantees in respect of the Notes will be
subordinated in right of payment, in the manner and to the extent set forth in
the Indenture, to the prior payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt of each Guarantor, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by
his or her acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Trustee, on his behalf, to take such action
as may be necessary or appropriate to effectuate the subordination provided for
in the Indenture and appoints the Trustee his attorney-in-fact for such
purposes.
7. REDEMPTION.
(a) OPTIONAL REDEMPTION. The Notes will be redeemable, at the
Company's option, in whole at any time or in part from time to time after April
15, 2001, at the following redemption prices (expressed as percentages of the
principal amount thereof) if redeemed during the twelve-month period commencing
on April 15 of the year set forth below, plus, in each case, accrued and unpaid
interest thereon, if any, to the date of redemption:
YEAR PERCENTAGE
---- ----------
2001....................... 106.857%
2002....................... 105.143%
2003....................... 103.429%
2004....................... 101.714%
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any time,
or from time to time prior to April 15, 2001, the Company may, at its option,
use the net cash proceeds of one or more Public Equity Offerings (as defined in
the Indenture) to redeem up to 100% but no less than 50% of the aggregate
principal amount of Notes originally issued at a redemption price equal to
112.0% of the principal amount thereof plus, in each case, accrued and unpaid
interest to the date of redemption.
In order to effect the foregoing redemption with the proceeds of any
Public Equity Offering, the Company shall make such redemption not more than 60
days after the consummation of any such Public Equity Offering.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such Redemption Date, then, unless the Company defaults
in the payment of such Redemption Price plus accrued and unpaid interest, if
any, the Notes called for redemption will cease to bear interest from and after
such Redemption Date and the only right of the Holders of such Notes will be to
receive payment of the Redemption Price plus accrued and unpaid interest, if
any.
9. OFFERS TO PURCHASE. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and prior
to the occurrence of a Change of Control (as defined in the Indenture), and
subject to further limitations contained therein, the Company will make an offer
to purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
10. REGISTRATION RIGHTS. Pursuant to the Note Registration Rights
Agreement (as defined in the Indenture), in certain instances, the Company will
be obligated to register this Note under the Securities Act.
11. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
12. PERSONS DEEMED OWNERS. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
13. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
14. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions set
forth in Section 9.02(b) of the Indenture, the Indenture or the Notes may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Notes then outstanding, and any
existing Default or Event of Default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the Company, and the Guarantors, when authorized by a Board
Resolution, may amend or supplement the Indenture or the Notes to cure any
ambiguity, defect or inconsistency, provide for uncertificated Notes in addition
to or in place of certificated Notes, or comply with Article Five of the
Indenture, comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA, make any change that
would provide any additional benefit or rights to the Holders, make any other
change that does not adversely affect in any material respect the rights of any
Holder of a Note or add or remove Guarantors as provided in the Indenture.
15. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, enter into transactions with Affiliates, create dividend
or other payment restrictions affecting Subsidiaries, merge or consolidate with
any other Person, sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its assets or adopt a plan of liquidation. Such
limitations are subject to a number of important qualifications and exceptions.
The Company must annually report to the Trustee on compliance with such
limitations.
16. SUCCESSORS. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
17. DEFAULTS AND REMEDIES. Events of Default shall be as set forth
in the Indenture. If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Notes then
outstanding may declare all the Notes to be due and payable in the manner, at
the time and with the effect provided in the Indenture, except that in the case
of an Event of Default arising from certain events of bankruptcy or insolvency,
all outstanding Notes become due and payable immediately without further action
or notice. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interest.
18. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
19. NO RECOURSE AGAINST OTHERS. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
20. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN
THIS NOTE AND THE INDENTURE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS
(OTHER THAN NEW YORK GENERAL OBLIGATIONS LAW ss. 5-1401).
21. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. PROVISIONS OF INDENTURE. Each Holder, by accepting a Note,
agrees to be bound by all of the terms and provisions of the Indenture, as the
same may be amended from time to time.
23. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
24. AUTHENTICATION. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
25. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note in larger type. Requests may be made to: Geokinetics Inc., Marathon Oil
Tower, 5555 San Felipe, Suite 780, Houston, Texas 77056, Attn: President.
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:.________________ Signed: ________________________
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee: ____________________________
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) April 30, 2000, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
<PAGE>
[CHECK ONE]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Company a signed letter containing certain
representations and agreements (the form of which is attached
below); or
(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act; or
(5) __ pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or
(6) __ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Company will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; PROVIDED that if box (3), (4), (5) or (6) is checked,
the Company may require, prior to registering any such transfer of the Notes, in
its sole discretion, such legal opinions, certifications (including an
investment letter in the case of box (3) or (4)) and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Company shall not be obligated to
register this Note in the name of any person other than the Holder hereof unless
and until the conditions to any such transfer of registration set forth herein
shall have been satisfied.
Date: _____________________ Signed: ___________________
(Sign exactly as your
name appears on the
other side of this
Note)
Signature Guarantee: ______________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: _____________________ _____________________________
NOTICE: To be executed by an
executive officer
<PAGE>
[FORM OF LETTER TO BE COMPLETED
BY PURCHASER IF (3) ABOVE IS CHECKED]
Ladies and Gentlemen:
1. The undersigned understands that any subsequent transfer of
the Notes is subject to certain restrictions and conditions set forth in the
Notes and in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Notes except in compliance with, such
restrictions and conditions and the Securities Act.
2. The undersigned understands that the offer and sale of the
Notes have not been registered under the Securities Act, and that the Notes may
not be offered or sold except as permitted in the following sentence. The
undersigned agrees, on its own behalf and on behalf of any accounts for which it
is acting as hereinafter stated, that if it should sell, pledge or otherwise
transfer any Notes it will do so only (1) (w) inside the United States to a
person who the seller reasonably believes is a qualified institutional buyer
within the meaning of Rule 144A under the Securities Act in a transaction
meeting the requirements of Rule 144A, or in accordance with Rule 144 under the
Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel, if the
Company so requests), (x) to the Company, (y) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act or (z) pursuant to an effective registration statement under the
Securities Act and (2) in each case, in accordance with the applicable
securities laws of any state of the United States or any other applicable
jurisdiction, and the undersigned further agrees to provide to any person
purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
3. The undersigned understands that, on any proposed resale of
any Notes, it may be required to furnish the Company such certification and
other information as the Company may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. The undersigned further
understands that the Notes purchased by it will bear a legend to the foregoing
effect.
4. The undersigned is an institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act) and
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
the undersigned and any accounts for which it is acting are each able to bear
the economic risk of our or its investment, as the case may be.
5. The undersigned is acquiring the Notes purchased by us for
our account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which the undersigned exercises sole
investment discretion.
Date: _____________________ _____________________________
NOTICE: To be signed by an
executive officer
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$___________________
Dated: __________________ ____________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee: ____________________________________
<PAGE>
SENIOR SUBORDINATED GUARANTEE
HOC Operating Co., Inc., Geokinetics Production Co., Inc., Quantum
Geophysical, Inc., Geoscience Software Solutions, Inc., Signature Geophysical
Services, Inc., Reliable Exploration, Incorporated and Geophysical Development
Corporation (the "Guarantors") have unconditionally guaranteed on a senior
subordinated basis (such guarantee by each Guarantor being referred to herein as
the "Guarantee") (i) the due and punctual payment of the principal of and
interest on the Notes, whether at maturity, by acceleration or otherwise and the
due and punctual payment of interest on the overdue principal and interest, if
any, on the Notes, to the extent lawful, all in accordance with the terms set
forth in Article Eleven of the Indenture and (ii) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of each Guarantor to the Holders and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth and are
expressly subordinated and subject in right of payment to the prior payment in
full in cash or Cash Equivalents of all Guarantor Senior Debt of such Guarantor,
to the extent and in the manner provided, in Article Eleven of the Indenture,
and reference is hereby made to such Indenture for the precise terms of the
Guarantee therein made. This Guarantee is limited under the Indenture to the
extent necessary not to constitute a fraudulent conveyance.
No past, present or future stockholder, officer, director, employee
or incorporator, as such, of any of the Guarantors shall have any liability
under the Guarantees by reason of such person's status as stockholder, officer,
director, employee or incorporator. Each holder of a Note by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Guarantees.
<PAGE>
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
HOC OPERATING CO., INC.
By:___________________
Name:
Title:
GEOKINETICS PRODUCTION
CO., INC.
By:___________________
Name:
Title:
QUANTUM GEOPHYSICAL, INC.
By:___________________
Name:
Title:
GEOSCIENCE SOFTWARE
SOLUTIONS, INC.
By:___________________
Name:
Title:
SIGNATURE GEOPHYSICAL SERVICES, INC.
By:___________________
Name:
Title:
<PAGE>
RELIABLE EXPLORATION,
INCORPORATED
By:___________________
Name:
Title:
GEOPHYSICAL DEVLOPMENT
CORPORATION
By:___________________
Name:
Title:
TAG-ALONG DRAG-ALONG AGREEMENT
This Tag-Along Drag-Along Agreement (this "AGREEMENT") is made and entered
into as of April 30, 1998, among Geokinetics Inc., a Delaware corporation (the
"COMPANY"), Blackhawk Investors, L.L.C., a Delaware limited liability company
("BLACKHAWK"), William R. Ziegler ("ZIEGLER") and Steven A. Webster ("WEBSTER")
(Blackhawk, Ziegler and Webster being sometimes referred to collectively as the
"BLACKHAWK GROUP") and the Warrant Holders (as defined below).
WHEREAS, (i) Blackhawk is the record and beneficial owner of
8,666,667shares of Common Stock, $0.01 par value per share ("Common Stock"), of
the Company, representing approximately 44.8% of the 19,326,816 shares of Common
Stock of the Company issued and outstanding as of the date hereof and (ii)
Blackhawk is the record and beneficial owner of certain Shadow Warrants that
currently represent the right to acquire up to a maximum of 6,998,311 shares of
Common Stock (subject to adjustment as provided therein), at an exercise price
of $0.20 per share, which Shadow Warrants are presently exercisable for an
aggregate of 5,664,929 shares of Common Stock, with the exercisability of the
remaining Shadow Warrants to acquire up to 1,333,382 shares of Common Stock
(subject to adjustment) being subject to the satisfaction of conditions that are
not within the control of Blackhawk;
WHEREAS, (i) Webster and Ziegler are the record and beneficial owners of
333,326 and 333,340 shares of Common Stock, respectively, each representing
approximately 1.7% (and collectively representing approximately 3.4%), of the
19,326,816 shares of Common Stock of the Company issued and outstanding as of
the date hereof and (ii) (A) Webster is the record and beneficial owner of
certain (x) warrants to purchase 1,482,512 shares of Common Stock and (y) Shadow
Warrants that currently represent the right to acquire up to a maximum of
269,160 shares of Common Stock (subject to adjustment as provided therein), at
an exercise price of $0.20 per share, which Shadow Warrants are presently
exercisable for an aggregate of 217,877 shares of Common Stock, with the
exercisability of the remaining Shadow Warrants to acquire up to 51,283 shares
of Common Stock (subject to adjustment) being subject to the satisfaction of
conditions that are not within the control of Webster and (B) Ziegler is the
record and beneficial owner of certain (x) options to acquire 50,000 shares of
Common Stock, (y) warrants to purchase 1,482,512 shares of Common Stock and (z)
Shadow Warrants that currently represent the right to acquire up to a maximum of
269,171 shares of Common Stock (subject to adjustment as provided therein), at
an exercise price of $0.20 per share, which Shadow Warrants are presently
exercisable for an aggregate of 217,886 shares of Common Stock, with the
exercisability of the remaining Shadow Warrants to acquire up to 51,285 shares
of Common Stock (subject to adjustment) being subject to the satisfaction of
conditions that are not within the control of Ziegler;
WHEREAS, the Company has agreed to issue warrants entitling DLJ Investment
Partners, L.P., together with its successors and assigns ("DLJ") and certain
other warrant holders to purchase up to 7,618,594 shares of Common Stock
pursuant to the terms and conditions of that certain Warrant Agreement, of even
date herewith (the "WARRANT AGREEMENT"), between the Company and the Warrant
Holders, in connection with a private placement of an aggregate of $40,000,000
principal amount of the Company's 12% Senior Subordinated Notes due in 2005;
<PAGE>
WHEREAS, it is a material inducement and a precondition to the entering
into of the Warrant Agreement by the Warrant Holders that the Company and the
Blackhawk Group enter into this Agreement;
NOW, THEREFORE, in consideration of the premises, and the mutual
agreements set forth herein, the parties hereto agree as follows:
Section 1. CERTAIN DEFINITIONS.
(a) Capitalized terms not otherwise defined herein, shall have the
meanings assigned to them in the Warrant Agreement.
(b) As used herein:
"CONTROL DISPOSITION" means a Disposition which would have the
effect of transferring to any transferee or a "group" of persons (as "group" is
defined for purposes of Section 13(d)(3) of the Exchange Act and the rules and
regulations thereunder ("GROUP")) beneficial ownership (as defined in Rule 13d-3
of the Exchange Act) of a number of shares of outstanding Common Stock held by
the Blackhawk Group constituting, in the aggregate, at least 80 percent of the
then outstanding shares of Common Stock held by the Blackhawk Group.
"DISPOSITION" means any direct or indirect transfer,
assignment, sale, gift, pledge, hypothecation or other encumbrance, or any
disposition of Common Stock (or any interest therein or right thereto) or of all
or part of the voting power associated with the Common Stock (or any interest
therein) whatsoever, or any other transfer of beneficial ownership of Common
Stock whether voluntary or involuntary; PROVIDED, that (i) the transfer of
Common Stock by Blackhawk to its members shall not be deemed a Disposition
hereunder, (ii) all public sales properly conducted by the Blackhawk Group or
any of the Warrant Holders pursuant to Rule 144 under the Securities Act shall
not be deemed Dispositions hereunder, (iii) no transfer by either Blackhawk,
Ziegler or Webster of less than 10% of their respective holdings of Common Stock
in a single transaction or series of related transactions shall be deemed a
Disposition hereunder, and (iv) the participation by the Blackhawk Group or any
of the Warrant Holders in a proposed underwritten public offering of Common
Stock (including the entering into an underwriting agreement, a custody
agreement and other agreements customarily executed by selling shareholders in
connection therewith) or the participation by the Blackhawk Group or any of the
Warrant Holders in any other registration pursuant to any demand or piggyback
registration rights that any of them may have pursuant to any registration
rights or similar agreement with the Company and the consummation thereof, shall
not constitute a Disposition, it being understood that, if such proposed
underwritten public offering is terminated or abandoned prior to consummation or
is not consummated or such other registration is terminated or abandoned prior
to consummation or its not consummated, the Common Stock, Warrants and Warrant
Shares held by the parties hereto shall remain subject to this Agreement. The
term Disposition shall include a Control Disposition.
-2-
<PAGE>
"WARRANT HOLDERS" shall mean each of the persons identified as
Warrant Holders on EXHIBIT A hereto, and any other persons or entities who
become parties to this Agreement as "Warrant Holders" pursuant to the terms of
this Agreement, and their respective heirs, legal representatives,
administrators and successors.
Section 2. TAG-ALONG DISPOSITIONS. Subject to the provisions of Section 3,
if either Blackhawk, Zeigler or Webster desires to effect a Disposition (or a
series of related Dispositions to a single transferee or Group) of at least 25%
of the issued and outstanding shares of Common Stock owned by such entity or
person to any transferee or Group (a "TAG-ALONG DISPOSITION"), such entity or
person shall give written notice to the Warrant Holders describing the material
terms of the proposed Tag-Along Disposition and identifying the contemplated
transferee or Group (a "TAG-ALONG NOTICE"). Each such Warrant Holder may, by
written notice to Blackhawk, Ziegler or Webster, as the case may be, delivered
within 15 days following the date of the Tag-Along Notice (each such Warrant
Holder delivering such notice being a "TAG-ALONG WARRANT HOLDER"), elect to
participate in the Tag-Along Disposition, and require, as a condition to the
closing of the Tag-Along Disposition, that the proposed transferee or Group
purchase, at the same price per share and on the same terms and conditions as
are described in the Tag-Along Notice, a portion of the total number of Warrant
Shares then held or obtainable by each Warrant Holder equal to a fraction
thereof, the numerator of which is the total number of shares of Common Stock
held by either Blackhawk, Ziegler or Webster, as the case may be, to be
transferred in the Tag-Along Disposition and the denominator of which is the
total number of shares of Common Stock then held by either Blackhawk, Ziegler or
Webster, as the case may be, (the "TAG-ALONG SHARES"). If any Warrant Holder
receiving the Tag-Along Notice timely elects to be a Tag-Along Warrant Holder,
neither Blackhawk, Ziegler or Webster, as the case may be, shall effect the
Tag-Along Disposition described in the Tag-Along Notice unless the proposed
transferee or Group agrees to purchase all of the Tag-Along Shares of all of the
Tag-Along Warrant Holders at the same price and on the same terms and conditions
described in the Tag-Along Notice, except that to the extent the transferee or
Group purchases any Warrant, the Exercise Price shall be deducted from the price
payable for the Warrant. Upon the closing of the sale of any sale of the Warrant
or the Warrant Shares pursuant to this Section, each Tag-Along Warrant Holder
shall deliver at such closing, against payment of the purchase price therefor,
certificates representing the Warrant or Warrant Shares, as the case may be, to
be sold, duly endorsed for transfer or accompanied by duly endorsed stock
powers, and evidence of good title to the Warrant or Warrant Shares to be sold
and the absence of liens, encumbrances and adverse claims with respect thereto
and such other matters as are deemed necessary by the Company for the proper
transfer of such Warrant or Warrant Shares on the books of the Company.
Section 3. DRAG-ALONG IN CONTROL DISPOSITIONS. If the Blackhawk Group
desires to effect a Control Disposition, then, in lieu of complying with the
requirements of Section 2, the Blackhawk Group at its option (the "DRAG-ALONG
OPTION"), shall have the right to require all of the Warrant Holders to sell the
same percentage of such holder's Warrant and/or the Warrant Shares as the shares
-3-
<PAGE>
being disposed by the Blackhawk Group to such transferee or Group selected by
the Blackhawk Group at the same price and on the same terms and conditions as
apply to the shares of Common Stock sold by the Blackhawk Group in the Control
Disposition, except that to the extent the transferee or Group purchases any
Warrant, the Exercise Price shall be deducted from the price payable for the
Warrant. Upon the closing of the sale of any Warrant or Warrant Shares pursuant
to this paragraph, each Warrant Holder shall deliver at such closing, against
payment of the purchase price therefor, certificates representing the Warrant or
Warrant Shares, as the case may be, to be sold, duly endorsed for transfer or
accompanied by duly endorsed stock powers, and evidence of good title to the
shares to be sold and the absence of liens, encumbrances and adverse claims with
respect thereto and such other matters as are deemed necessary by the Company
for the proper transfer of such Warrants or Warrant Shares on the books of the
Company provided that in connection with any such transaction (x) each Warrant
Holder shall not be required to make any representations or warranties except
those relating to (i) its own due organization and execution and delivery of the
relevant agreement, (ii) the enforceability of the relevant agreement against it
and absence of conflicts with agreements and laws applicable to it and (iii) its
ownership of securities being sold by it and (y) the Warrant Holders shall not
be required to provide any post-closing indemnities except as provided in clause
(z) below and (z) in the event that a portion of the purchase price is placed in
escrow to support purchase price adjustment obligations post-closing (including
indemnification for breaches of representations or warranties relating to the
Company and its subsidiaries), the Warrant Holders will have a pro rata portion
of their purchase price placed in such escrow to be utilized to pay any such
indemnification obligations.
Section 4. LEGEND ON CERTIFICATES. The Company will cause to appear on all
certificates representing the Warrant or the Warrant Shares a conspicuous legend
in such form as the Company's Board of Directors may determine, stating that
such securities are subject to an agreement which restricts the transferability
thereof and otherwise circumscribes the rights which may be exercised by the
holder thereof.
Section 5. SPECIFIC ENFORCEMENT. In view of the inadequacy of money
damages, if either the Blackhawk Group or any Warrant Holder (a "BREACHING
PARTY") or other person shall fail to comply with the provisions of Section 2 or
3 hereof, the Company and the other non-breaching parties shall be entitled, to
the extent permitted by applicable law, to injunctive relief in the case of the
violation, or attempted or threatened violation, by a Breaching Party or other
person of any of the provisions of such Sections, or to a decree compelling
specific performance by a Breaching Party or other person of any such
provisions, or to any other remedy legally allowed to them.
Section 6. VOID TRANSFERS. If the Warrant, the Warrant Shares or any
shares of Common Stock subject to the terms of this Agreement shall be
transferred in a Disposition in violation of the terms and conditions of this
Agreement, such Disposition shall be void. In addition to, and without prejudice
to, any and all other rights or remedies which may be available to the parties
hereto, the Blackhawk Group and each of the Warrant Holders agree that the
Company may, but shall have no obligation to, hold and refuse to recognize a
Disposition of any such securities (or any certificate therefor) tendered to it
for transfer if the Disposition violates the provisions of this Agreement.
-4-
<PAGE>
Section 7. NOTICES. All notices, offers, requests, consents and
communications required or permitted to be given or made under this Agreement
shall be given or made in writing and shall be deemed to have been duly given or
made when sent by mail, postage prepaid,
a. if to the Company, 5555 San Felipe, Suite 780, Houston, Texas
77056, Attention: Chief Financial Officer; and
b. if to Blackhawk or Ziegler, c/o Parson & Brown, LLP, 666 Third
Avenue, 9th Floor, New York, New York 20027, Attention: William R. Ziegler; and
c. if to Webster, 3662 Piping Rock, Houston, Texas 77027; and
d. if to any Warrant Holder, to the address as last shown on the
stock record books of the Company.
Any such notice shall be effective and deemed received three days after
proper deposit in the mails, but actual notice shall be effective however and
whenever received. The Company, Blackhawk, Ziegler, Webster or any Warrant
Holder may effect a change of address for purposes of this Agreement by giving
notice of such change to the other parties, with specific reference to this
Section.
Section 8. AMENDMENT, SEVERABILITY, SUBSEQUENT PARTIES.
a. Except as expressly provided herein, neither this Agreement nor
any term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the Company, the Blackhawk Group and a majority of
the holders of Warrant Shares issued or issuable upon exercise of the Warrants.
In the event that any provisions hereof are held to be invalid, illegal or
against public policy, the remaining provisions hereof shall not be affected
thereby. In such event, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible with respect to those provisions which were held to be
invalid, illegal or against public policy.
b. Notwithstanding anything herein to the contrary, the parties
hereto agree that this Agreement shall be amended to include any person or
entity that acquires a Warrant or Warrant Shares or otherwise becomes entitled
to purchase the Warrant Shares of the Company pursuant to the Warrant Agreement.
In such instance, such persons or entities, the Blackhawk Group and the Company
shall execute an Adoption Agreement in the form of EXHIBIT B hereto adding such
persons or entities. Each Warrant Holder hereby constitutes and appoints
Blackhawk as such Warrant Holder's agent and attorney-in-fact with full power
and authority, in the name, place and stead of such Warrant Holder to execute
such Adoption Agreement on behalf of such Warrant Holder to evidence such
Warrant Holder's approval of such additional parties to this Agreement. The
foregoing power of attorney is hereby declared to be irrevocable and a power
coupled with an interest. Upon execution by the Company, the Blackhawk Group and
the additional party of such Adoption
-5-
<PAGE>
Agreement, the additional party shall be considered a Warrant Holder hereunder,
and the Warrant and the Warrant Shares acquired by such additional party shall
be deemed to be subject to the terms of this Agreement, and legended
accordingly, for all purposes of this Agreement.
Section 9. AGREEMENTS BY COMPANY. The Company, insofar as is proper or
required, consents to this Agreement. It shall not issue, transfer or reissue
any of its shares of stock, warrants or other securities in violation of this
Agreement or without requiring proof of compliance with this Agreement.
Section 10. EFFECTIVENESS; TERMINATION. This Agreement shall become
effective at such time as it is executed by the Company, the Blackhawk Group
and, with respect to a Warrant Holder, by such Warrant Holder. Except as
otherwise provided herein, this Agreement shall terminate upon the earlier to
occur of (i) the dissolution of the Company; (ii) the written approval of the
Company, the Blackhawk Group and a majority of the holders of Warrant Shares
issued or issuable upon exercise of the Warrants; (iii) the date on which the
Warrant Holders, in the aggregate, hold less than 25% of the number of Warrant
Shares originally purchasable under the Warrant Agreement; (iv) the date on
which the Blackhawk Group no longer owns any shares of Common Stock, whether
pursuant to a Disposition or otherwise pursuant to one or more transactions that
do not constitute Dispositions hereunder; (v) the first date on which the Common
Stock is traded on the NASDAQ system or any nationally registered securities
exchange, or (vi) 5:00 P.M. New York City time on April 30, 2005.
Any Warrant Holder who disposes of all of its Warrant or Warrant Shares in
conformity with the terms of this Agreement shall cease to be a party to this
Agreement and shall have no further rights hereunder.
Section 11. CONSTRUCTION. Each party to this Agreement has had the
opportunity to review this Agreement with legal counsel. This Agreement shall
not be construed or interpreted against any party on the basis that such party
drafted or authored a particular provision, parts of or the entirety of this
Agreement.
Section 12. MISCELLANEOUS. This Agreement (a) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, (b) may
be executed in several counterparts, each of which shall be deemed an original,
and all of which shall constitute one and the same instrument, (c) shall inure
to the benefit of and be binding upon, the successors, assigns, legatees,
distributees, legal representatives and heirs of each party and is not intended
to confer upon any person, other than the parties and their permitted successors
and assigns, any rights or remedies hereunder, and (d) SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. The captions
in this Agreement are for convenience of reference only and shall not affect its
interpretation in any respect.
Section 13. SPOUSAL CONSENT. The spouses, if applicable, of the Warrant
Holders fully consent and agree to the provisions of this Agreement and its
binding effect upon any community property interest, if any, they may now or
hereafter own. The spouses hereby acknowledge the
-6-
<PAGE>
fairness of this Agreement and that it is in such spouse's best interests to
bind such spouse's community interest, if any, in the Warrant and the Warrant
Shares, to the terms of this Agreement.
[SIGNATURES APPEAR ON THE FOLLOWING THREE PAGES]
-7-
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
COMPANY:
GEOKINETICS INC.
By: _______________________________
Lynn A. Turner, President
BLACKHAWK GROUP:
BLACKHAWK INVESTORS, L.L.C.
By: Blackhawk Capital Partners,
its Managing Member
By: _______________________________
William R. Ziegler, General Partner
___________________________________
William R. Ziegler, Individually
___________________________________
Steven A. Webster, Individually
WARRANT HOLDERS:
DLJ INVESTMENT PARTNERS, L.P.
By: _______________________________
Ivy Dodes,_____________________
-8-
<PAGE>
CHASE EQUITY ASSOCIATES, L.P.
By: _______________________________
John O'Connor, General Partner
DLJ INVESTMENT FUNDING, INC.
By: _______________________________
Ivy Dodes,_____________________
DLJ ESC II, L.P.
By: DLJ LBO PLANS Management Corporation,
its General Partner
By: _______________________________
Ivy Dodes,_____________________
SPINDRIFT PARTNERS, L.P.
BY: Wellington Management Company, LLP, its
Investment Advisor
By: ___________________________
Peter L. Curry, Vice President
SPINDRIFT INVESTORS (BERMUDA) L.P.
BY: Wellington Management Company, LLP, its
Investment Advisor
By: ___________________________
Peter L. Curry, Vice President
-9-
<PAGE>
MHR CAPITAL PARTNERS, LP
BY: MHR Advisors LLC, General Partner
By: _______________________________
Mark Rachesky, Manager
WHITTIER VENTURES, L.L.C.
By: _______________________________
David Dahl, President
___________________________________
PAUL B. LOYD, JR. (individually)
_______________________________
(spouse, if applicable)
-10-
<PAGE>
EXHIBIT A
List of Warrant Holders
DLJ Investment Partners, L.P.
DLJ Investment Funding, Inc.
DLJ ESC II, L.P.
Chase Equity Associates, L.P.
Spindrift Partners, L.P.
Spindrift Investors (Bermuda) L.P.
MHR Capital Partners LP
Whittier Ventures, L.L.C.
Paul B. Loyd, Jr.
-11-
<PAGE>
EXHIBIT B
Adoption Agreement
This Adoption Agreement ("ADOPTION") is executed pursuant to the terms of
that certain Tag-Along Drag-Along Agreement dated as of April 30, 1998
("TAG-DRAG AGREEMENT"), by and among Geokinetics Inc., a Delaware corporation,
Blackhawk Investors, L.L.C,, a Delaware limited liability company ("BLACKHAWK"),
and the Warrant Holders (as defined therein) (the "WARRANT HOLDERS"). By the
execution of this Adoption Agreement, the undersigned agrees as follows:
1. ACKNOWLEDGMENT. The undersigned acknowledges that it is acquiring
certain Warrants to purchase shares of the Common Stock, par value $0.01, of the
Company and/or Warrant Shares, subject to the terms and conditions of the
Tag-Drag Agreement.
2. AGREEMENT. The undersigned (i) agrees that the Warrant Shares and the
Warrants to purchase the shares of the Common Stock of the Company acquired by
it shall be bound by and subject to the terms of the Tag-Drag Agreement, and
(ii) hereby adopts the Tag-Drag Agreement with the same force and effect as if
it were originally a party thereto and named as a Warrant Holder therein.
3. NOTICE. Any notice required as permitted by the Tag-Drag Agreement
shall be given to the undersigned at the address listed beside the undersigned's
signature below.
4. JOINDER. The spouse of the undersigned, if applicable, executes this
Adoption Agreement to acknowledge its fairness and that it is in such spouse's
best interests to bind such spouse's community interest, if any, in the Warrant
and/or the Warrant Shares, to the terms of the Tag-Drag Agreement.
EXECUTED and DATED as of ______________, 19___.
PURCHASER OR TRANSFEREE:
By:
Name:
Address:
SPOUSE (IF APPLICABLE):
By:
Name:
Address:
-12-
<PAGE>
Agreed to on behalf of the Company, Blackhawk, Ziegler, Webster and all
Warrant Holders pursuant to Section 8b. of the Tag-Drag Agreement.
GEOKINETICS INC.
By: ___________________________
_______________________________
William R. Ziegler (individually)
_______________________________
Steven A. Webster (individually)
BLACKHAWK INVESTORS, L.L.C.
(for itself-and as Attorney-in-Fact for the Warrant
Holders)
By: ______________________
Name: ____________________
Title: ___________________
-13-
EXHIBIT 99
CONTACT: JAY D. HABER, CHAIRMAN & CEO
THOMAS J. CONCANNON, CFO
GEOKINETICS INC.
(713) 850-7600
(713) 850-7330 FAX
FOR IMMEDIATE RELEASE
- --------------------------------------------------------------------------------
GEOKINETICS CLOSES FINANCING AND ACQUISITION
- --------------------------------------------------------------------------------
HOUSTON, MAY 1, 1998 - GEOKINETICS (NASDAQ: GEOK) announced today that it had
obtained $40,000,000 in seven year senior subordinated debt financing from an
investment group led by DLJ Investment Partners, L. P., an affiliate of
Donaldson Lufkin & Jenrette Securities Corporation. As additional consideration,
the investment group also received warrants to purchase GEOKINETICS common
stock.
GEOKINETICS also announced today that it has completed the previously announced
acquisition of Geophysical Development Corporation (GDC), a Houston based
provider of seismic data processing, well log processing and consultation
services. The acquisition was made for a combination of cash and shares of
GEOKINETICS common stock.
GEOKINETICS, through its wholly owned subsidiary, Quantum Geophysical, Inc.,
will use a portion of the proceeds to increase the number of recording channels
available to its existing crews and to equip the Company's fifth onshore seismic
acquisition crew. It is anticipated that the crew will begin operations later
this month in the Gulf Coast Region.
Michael A. Dunn, Vice President and Chief Technology Officer of GEOKINETICS,
stated that "the acquisition of GDC continues our strategy of becoming a
technology focused seismic data service provider to the oil and gas industry. We
are extremely excited by the diversification and future expansion opportunities
this acquisition creates for our Company."
GEOKINETICS INC., based in Houston, Texas is a US provider of 3D seismic
acquisition services through its subsidiaries, Quantum Geophysical, Signature
Geophysical and Reliable Exploration.
GEOKINETICS INC. (NASDAQ: GEOK)
Marathon Oil Tower 5555 San Felipe Ste. 780 Houston, Texas 77056
(713) 850-7600 (713) 850-7330 FAX
