SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-9268
GEOKINETICS INC.
(Exact name of small business issuer as specified in its charter)
Delaware 94-1690082
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|
Issuer's revenues for its most recent fiscal year were $9,647,931.
As of December 31, 1997, 16,589,483 shares of the Registrant's Common
Stock were outstanding, and the aggregate market value of the Common Stock held
by non-affiliates was approximately [$_________________] based on the last
reported sales price of such stock on that date.
ITEMS OMITTED: Items 1, 2 and 6 of Form 10-KSB are omitted and will be
filed as an amendment hereto on or before April 15, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference: Portions of the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on May 27, 1998, are
incorporated by reference into Part III of this Form 10-KSB.
<PAGE>
GEOKINETICS INC.
FORM 10-KSB
YEAR ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I
<S> <C> <C>
Item 3. Legal Proceedings...........................................................1
Item 4. Submission of Matters to a Vote of Security Holders.........................1
PART II
Item 5. Market for Common Equity and Related Stockholder Matters....................2
Item 7. Financial Statements........................................................2
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..........................................................2
PART III
Item 13. Exhibits and Reports on Form 8-K...........................................3
</TABLE>
i
<PAGE>
PART I
ITEM 3. LEGAL PROCEEDINGS.
As of this date, neither the Company nor either of its subsidiaries is a
party to any pending legal proceedings. Moreover, the Company is not aware of
any such legal proceedings that are contemplated by governmental authorities
with respect to the Company, any of its subsidiaries, or any of their respective
properties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The following matters were submitted to a vote of the stockholders of
the Company during the 1997 Annual Meeting of Stockholders held on November 20,
1997:
1. The amendment to the Company's 1995 Stock Option Plan was
approved by the stockholders of the Company; the number of votes
"for" was 12,350,757, the number of votes "against" was 1,550 and
the number of votes abstaining was 800.
2. The Company's 1997 Stock Awards Plan was approved by the
stockholders of the Company; the number of votes "for" was
12,313,784, the number of votes "against" was 38,523 and the
number of votes abstaining was 800.
3. The amendment to the Company's Certificate of Incorporation (i)
increasing the number of authorized shares of the Company's
Common Stock from 15,000,000 to 100,000,000 shares and (ii)
changing the par value of the Company's Common Stock from $.20 to
$.01 par value per share, was approved by the stockholders of the
Company; the number of votes "for" was 12,315,184, the number of
votes "against" was 37,423 and the number of votes abstaining was
500.
4. The ratification of the appointment of Tsakopulos, Brown, Schott
& Anchors as the Company's independent public accountants was
approved by the stockholders of the Company; the number of votes
"for" was 12,352,807, the number of votes "against" was 0 and the
number of votes abstaining was 300.
1
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock, $.01 par value per share (the "Common
Stock"), is traded in the "pink sheets" of various NASD broker-dealers under the
trading symbol GEOK. As of December 31, 1997, the Company had 376 stockholders
of record.
The following table sets forth the range of high and low bid and asked
prices for the Common Stock during the Company's last two fiscal years as
reported by the National Association of Security Dealers. These quotations
reflect prices between dealers, without adjustment for retail markups, markdowns
or commissions, and may not necessarily reflect actual transactions.
Bid Ask
LOW HIGH LOW HIGH
--- ---- --- ----
Fiscal 1996 (ended 12/31/96)
1st quarter ........................ 1 3 1/8 1 1/2 3 3/4
2nd quarter ........................ 1 1/8 2 5/8 1 3/8 3 1/8
3rd quarter ........................ 3/4 2 1/4 1 1/16 2 5/8
4th quarter ........................ 1/2 2 1/8 3/4 2 1/2
Fiscal 1997 (ended 12/31/97)
1st quarter ........................ 13/16 1 1/4 29/32 1 9/16
2nd quarter ........................ 21/32 1 5/16 31/32 1 3/4
3rd quarter ........................ 21/32 6 1/4 1 3/32 6 1/2
4th quarter ........................ 3 15/32 5 3/8 3 3/4 5 11/16
- ---------------
The Company has not paid any dividends to holders of Common Stock during
its last two fiscal years and does not anticipate paying any such dividends in
the foreseeable future.
ITEM 7. FINANCIAL STATEMENTS.
See page F-0 for Index to Financial Statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
2
<PAGE>
PART III
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
The following documents are included as exhibits to this Form 10-KSB.
Exhibits incorporated by reference are indicated as such by the information
supplied thereafter. Exhibits being filed herewith are identified in the
parenthetical appearing after each such exhibit.
(A) EXHIBITS.
3.1 Certificate of Incorporation of the Company. Reference is made to
Exhibit 3(a) to Amendment No. 1 to the Company's Registration
Statement on Form S-3, filed with the Securities and Exchange
Commission on March 25, 1980.
3.2 Certificate of Amendment of Certificate of Incorporation of the
Company. Reference is made to Exhibit 3.2 to Form 10-KSB filed
with the Securities and Exchange Commission on April 24, 1996.
3.3 Certificate of Amendment of Certificate of Incorporation of the
Company filed with the Secretary of State of Delaware on July 14,
1997.
3.4 Certificate of Amendment of Certificate of Incorporation of the
Company filed with the Secretary of State of Delaware on November
24, 1997.
3.5 Bylaws of the Company. Reference is made to Exhibit 3(b) to
Amendment No. 1 to the Company's Registration Statement on Form
S-3, filed with the Securities and Exchange Commission on March
25, 1980.
3.6 Amended and Restated Bylaws of the Company.
8.1 Tax Opinion of David E. Hammer, P.C. concerning the deductibility
of the Company's net operating loss carryforwards following the
Company's acquisition of certain oil and gas properties effective
August 1, 1994. Reference is made to Exhibit 8.1 to Form 10-KSB
filed with the Securities and Exchange Commission on May 19,
1995.
10.1 Agreement and Plan of Merger dated as of August 1, 1994, between
the Company, HOC Acquisition Corp., HLX Acquisition Corp., HOC
Operating Co., Inc., Hale Exploration Corporation, Jay D. Haber,
and Michael Hale. Reference is made to Exhibit 1 to Form 8-K
filed with the Securities and Exchange Commission on August 15,
1994.
10.2 Four common stock warrants issued to Wm. H. Murphy & Co., Inc.,
entitling the holder to purchase an aggregate of 443,492 shares
of the Company's common stock par value $.20 per share, for
purchase prices ranging from $1.00 to $1.75 per share. Reference
is made to Exhibit 10.2 to Form 10-KSB filed with the Securities
and Exchange Commission on May 19, 1995.
10.3* Employment Agreement dated as of August 1, 1994 between the
Company and Jay D. Haber. Reference is made to Exhibit 10.2 to
Form 10-KSB filed with the Securities and Exchange Commission on
May 19, 1995.
3
<PAGE>
10.4* Employment Agreement dated as of August 1, 1994 between the
Company and Michael Hale. Reference is made to Exhibit 10.2 to
Form 10-KSB filed with the Securities and Exchange Commission on
May 19, 1995.
10.5 Employment Agreement dated as of July 15, 1997 between the
Company and Lynn A. Turner.
10.6 Employment Agreement dated as of July 15, 1997 between the
Company and Michael A. Dunn.
10.7 Employment Agreement dated as of July 15, 1998 between the
Company and Thomas J. Concannon.
10.8 Lease Agreement dated April 29, 1988, between Marathon Oil
Company and Lexington Oil Co., Inc. concerning office space
leased in Houston, Texas. Reference is made to Exhibit 10.2 to
Form 10-KSB filed with the Securities and Exchange Commission on
May 19, 1995.
10.9 Post-Closing Adjustment Agreement dated as of August 31, 1995
between the Company, Jay D. Haber and Michael Hale. Reference is
made to Exhibit 10.7 to Form 10-KSB filed with the Securities and
Exchange Commission on April 24, 1996.
4
<PAGE>
22 Following is a list of the Company's Subsidiaries:
OTHER NAME UNDER
WHICH SUBSIDIARY JURISDICTION OF
NAME OF SUBSIDIARY CONDUCTS BUSINESS INCORPORATION
HOC Operating Co., Inc. None Texas
(formerly HOC Acquisition Corp.)
Geokinetics Production Co., Inc. None Texas
(formerly HLX Acquisition Corp.)
Quantum Geophysical Services, Inc. None Texas
(formerly Quantum Geophysical, Inc.)
Geoscience Software Solutions, Inc. None Texas
Quantum Geophysical, Inc. None Texas
Following is a list of the subsidiaries of Quantum Geophysical, Inc.:
Other Name Under
Which Subsidiary Jurisdiction of
NAME OF SUBSIDIARY CONDUCTS BUSINESS INCORPORATION
Signature Geophysical, Inc. None Michigan
Reliable Exploration, Incorporated None Montana
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit hereto.
(B) REPORTS ON FORM 8-K FILED DURING THE LAST QUARTER OF THE PERIOD COVERED BY
THIS FORM 10-KSB.
None
5
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GEOKINETICS INC.
Date: March 31, 1998 By: Jay D. Haber
Chief Executive Officer
(Principal Executive Officer)
By: Paul Miles
(Controller)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities* and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Jay D. Haber Director and Chief March 31, 1998
Jay D. Haber Executive Officer
/s/ Thomas J. Concannon Vice President and March 31, 1998
Thomas J. Concannon Chief Financial Officer
/s/ Steven A. Webster Director March 31 , 1998
Steven A. Webster
/s/ William R. Ziegler Director March 31, 1998
William R. Ziegler
/s/ Christopher M. Harte Director March 31, 1998
Christopher M. Harte
6
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
3.1 Certificate of Incorporation of the Company. Reference is made to
Exhibit 3(a) to Amendment No. 1 to the Company's Registration
Statement on Form S-3, filed with the Securities and Exchange
Commission on March 25, 1980.
3.2 Certificate of Amendment of Certificate of Incorporation of the
Company. Reference is made to Exhibit 3.2 to Form 10-KSB filed
with the Securities and Exchange Commission on April 24, 1996.
3.3 Certificate of Amendment of Certificate of Incorporation of the
Company filed with the Secretary of State of Delaware on July 14,
1997.
3.4 Certificate of Amendment of Certificate of Incorporation of the
Company filed with the Secretary of State of Delaware on November
24, 1997.
3.5 Bylaws of the Company. Reference is made to Exhibit 3(b) to
Amendment No. 1 to the Company's Registration Statement on Form
S-3, filed with the Securities and Exchange Commission on March
25, 1980.
3.6 Amended and Restated Bylaws of the Company.
8.1 Tax Opinion of David E. Hammer, P.C. concerning the deductibility
of the Company's net operating loss carryforwards following the
Company's acquisition of certain oil and gas properties effective
August 1, 1994. Reference is made to Exhibit 8.1 to Form 10-KSB
filed with the Securities and Exchange Commission on May 19,
1995.
10.5 Agreement and Plan of Merger dated as of August 1, 1994, between
the Company, HOC Acquisition Corp., HLX Acquisition Corp., HOC
Operating Co., Inc., Hale Exploration Corporation, Jay D. Haber,
and Michael Hale. Reference is made to Exhibit 1 to Form 8-K
filed with the Securities and Exchange Commission on August 15,
1994.
10.6 Four common stock warrants issued to Wm. H. Murphy & Co., Inc.,
entitling the holder to purchase an aggregate of 443,492 shares
of the Company's common stock par value $.20 per share, for
purchase prices ranging from $1.00 to $1.75 per share. Reference
is made to Exhibit 10.2 to Form 10-KSB filed with the Securities
and Exchange Commission on May 19, 1995.
10.7 Employment Agreement dated as of August 1, 1994 between the
Company and Jay D. Haber. Reference is made to Exhibit 10.2 to
Form 10-KSB filed with the Securities and Exchange Commission on
May 19, 1995.
10.8 Employment Agreement dated as of August 1, 1994 between the
Company and Michael Hale. Reference is made to Exhibit 10.2 to
Form 10-KSB filed with the Securities and Exchange Commission on
May 19, 1995.
10.5 Employment Agreement dated as of July 15, 1997 between the
Company and Lynn A. Turner.
10.6 Employment Agreement dated as of July 15, 1997 between the
Company and Michael A. Dunn.
7
<PAGE>
10.7 Employment Agreement dated as of July 15, 1998 between the
Company and Thomas J. Concannon.
10.8 Lease Agreement dated April 29, 1988, between Marathon Oil
Company and Lexington Oil Co., Inc. concerning office space
leased in Houston, Texas. Reference is made to Exhibit 10.2 to
Form 10-KSB filed with the Securities and Exchange Commission on
May 19, 1995.
10.9 Post-Closing Adjustment Agreement dated as of August 31, 1995
between the Company, Jay D. Haber and Michael Hale. Reference
is made to Exhibit 10.7 to Form 10-KSB filed with the
Securities and Exchange Commission on April 24, 1996.
8
<PAGE>
GEOKINETICS INC. AND SUBSIDIARIES
ANNUAL CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 1997
<PAGE>
TABLE OF CONTENTS
GEOKINETICS INC. AND SUBSIDIARIES
DECEMBER 31, 1997 AND 1996
INDEPENDENT AUDITORS' REPORT...............................................F-1
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS........................................F-2
CONSOLIDATED STATEMENTS OF OPERATIONS..............................F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)..........F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS..............................F-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.....................F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
March 7, 1998
To the Board of Directors and Stockholders
Geokinetics Inc. and subsidiaries
We have audited the accompanying consolidated balance sheets of
Geokinetics Inc. (a Delaware corporation) and subsidiaries as of December 31,
1997 and 1996 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Geokinetics
Inc. and subsidiaries as of December 31, 1997 and 1996 and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Tsakopulos Brown Schott & Anchors
F - 1
<PAGE>
CONSOLIDATED BALANCE SHEETS
GEOKINETICS INC. AND SUBSIDIARIES
ASSETS
December 31, December 31,
1997 1996
------------ ------------
CURRENT ASSETS
Cash ............................................... $ 2,212,681 $ 413,935
Accounts receivable - trade ........................ 3,654,829 199,150
Accounts receivable - officers and employees ....... 182,480 --
Work in progress ................................... 380,925 --
Oil and gas leases held for resale ................. -- 597,822
Prepaid expenses ................................... 367,687 13,347
Accrued interest ................................... 11,221 --
----------- ----------
Total Current Assets ........................... 6,809,823 1,224,254
PROPERTY AND EQUIPMENT, net .......................... 17,314,325 3,881,648
OTHER ASSETS
Deferred loan cost ................................. 60,316 76,317
Deferred tax asset ................................. 2,292,430 1,620,000
Restricted investments ............................. 71,700 21,700
Deposits ........................................... 4,776 180,357
Goodwill and other intangibles, net of $87,614
amortization ................................... 1,949,626 --
----------- ----------
Total Other Assets ............................. 4,378,848 1,898,374
----------- ----------
TOTAL ASSETS .............................. $28,502,996 $7,004,276
=========== ==========
The Accompanying Notes Are an Integral Part of These Consolidated
Financial Statements
F-2
<PAGE>
CONSOLIDATED BALANCE SHEETS
GEOKINETICS INC. AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ -----------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt ................ $ 3,463,660 $ 331,825
Accounts payable - trade ............................ 2,282,037 721,535
Accrued liabilities ................................. 1,049,119 434,526
Customer deposits ................................... -- 10,000
Notes payable ....................................... 896,686 1,028,733
Due to officers and shareholders .................... 164,206 152,223
Advances for lease bank ............................. 260,500 360,500
Site restoration costs payable ...................... 6,418 6,418
------------ -----------
Total Current Liabilities ....................... 8,122,626 3,045,760
LONG-TERM LIABILITIES
Long-term debt, net of current maturities ........... 12,129,420 4,860,123
------------ -----------
TOTAL LIABILITIES .......................... 20,252,046 7,905,883
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, Series B, $10 par value, 100,000
shares authorized, issued and outstanding
at December 31, 1997, automatically convertible
into 1,333,333 shares
common stock on January 1, 1998 ................. 1,000,000 --
Common stock, $.01 par value, 100,000,000 shares
authorized, 16,589,483 shares outstanding at
December 31, 1997, and $.20 par value, 15,000,000
shares authorized, 4,953,288 outstanding at
December 31, 1996 ............................... 165,985 990,657
Additional paid-in capital .......................... 14,017,394 3,924,345
Retained deficit .................................... (6,932,429) (5,816,609)
------------ -----------
TOTAL STOCKHOLDERS'
EQUITY (DEFICIT) ....................... 8,250,950 (901,607)
------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) ......... $ 28,502,996 $7,004,276
============ ===========
</TABLE>
The Accompanying Notes Are an Integral Part of These Consolidated
Financial Statements
F - 3
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
GEOKINETICS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------------
1997 1996
----------- ------------
<S> <C> <C>
REVENUES
Seismic revenue ........................................ $ 8,848,842 $ --
Oil and gas sales ...................................... 431,533 560,481
Operator overhead fees ................................. 242,556 248,358
Sale of oil and gas leases ............................. 125,000 4,011
----------- -----------
Total Revenues ..................................... 9,647,931 812,850
EXPENSES
Seismic operating expenses ............................. 5,563,525 --
General and administrative ............................. 2,441,581 1,297,474
Depletion, depreciation and amortization ............... 1,207,812 91,608
Lease abandonments ..................................... 364,481 1,450
Lease operating expenses ............................... 248,686 288,992
Cost of oil and gas leases sold ........................ 168,735 61,924
Non-recovery of advances ............................... -- 494,460
Pre-operating expenses ................................. -- 327,580
Impairment of equipment and vehicles ................... -- 224,451
Delay rentals .......................................... -- 22,086
----------- -----------
Total Expenses ..................................... 9,994,820 2,810,025
----------- -----------
Loss from Operations .......................... (346,889) (1,997,175)
OTHER INCOME (EXPENSE)
Interest income ........................................ 66,309 10,545
Interest expense ....................................... (1,210,240) (606,187)
----------- -----------
Total Other Income (Expense) ....................... (1,143,931) (595,642)
----------- -----------
Net Loss Before Income Tax Expense ............ (1,490,820) (2,592,817)
=========== ===========
INCOME TAX BENEFIT
Deferred income tax benefit ............................ 375,000 820,000
----------- -----------
NET LOSS ................................................. $(1,115,820) $(1,772,817)
=========== ===========
Loss per common share .................................... $ (.14) $ (0.36)
=========== ===========
Weighted average common shares and equivalents outstanding $ 8,091,336 $ 4,949,635
=========== ===========
</TABLE>
The Accompanying Notes Are an Integral Part of These Consolidated
Financial Statements
F - 4
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
GEOKINETICS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Stockholders' Equity (Deficit)
------------------------------------------------------------------
Preferred Common Preferred Common Additional Accumulated
Shares Issued Shares Issued Stock Stock Paid In Capital Deficit Total
--------------- ------------- ------------ ----------- ---------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 ........... -- 4,869,955 $ -- $ 973,991 $ 3,815,179 $(4,043,792) $ 745,378
Net Loss ............................. -- -- -- -- -- (1,772,817) (1,772,817)
Private placement offering ........... -- 83,333 -- 16,666 109,166 -- 125,832
-------- ---------- ----------- ----------- ------------ ----------- -----------
Balance at December 31, 1996 ......... -- 4,953,288 -- 990,657 3,924,345 (5,816,609) (901,607)
Net Loss ............................. -- -- -- -- -- (1,115,820) (1,115,820)
Private placement offerings:
July 18, 1997 ................... 187,500 5,500,000 1,875,000 1,100,000 3,025,000 -- 6,000,000
July 24, 1997 ................... 100,000 -- 1,000,000 -- -- -- 1,000,000
Costs of placements .................. -- -- -- -- (80,728) -- (80,728)
Employee stock options ............... -- 7,500 -- 1,500 7,953 -- 9,453
Acquisition of Signature
Geophysical, Inc. ............... -- 400,000 -- 80,000 944,800 -- 1,024,800
Exercise of warrants ................. -- 1,732,139 -- 132,834 2,182,756 -- 2,315,590
Exercise of non-cash warrants ........ -- 1,505,556 -- 15,056 (15,056) -- --
Purchase of warrants ................. -- -- -- -- (738) -- (738)
Reduction of common par
value ........................... -- -- -- (2,179,062) 2,179,062 -- --
Conversion of Series A
Preferred Stock ................. (187,500) 2,500,000 (1,875,000) 25,000 1,850,000 -- --
-------- ---------- ----------- ----------- ------------ ----------- -----------
Balance at December 31, 1997 ......... 100,000 16,598,483 $ 1,000,000 $ 165,985 $ 14,017,394 $(6,932,429) $ 8,250,950
======== ========== =========== =========== ============ =========== ===========
</TABLE>
The Accompanying Notes Are an Integral Part of These Consolidated
Financial Statements
F - 5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
GEOKINETICS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
INFLOWS
CASH RECEIVED FROM CUSTOMERS ....................................... $ 6,567,888 $ 879,059
CASH RECEIVED FROM SALE OF LEASES .................................. 125,000 4,011
INTEREST AND DIVIDENDS RECEIVED .................................... 55,088 10,798
----------- -----------
6,747,976 893,868
OUTFLOWS
CASH PAID TO SUPPLIERS AND EMPLOYEES ............................... 8,607,458 2,349,037
CASH PAID FOR OIL AND GAS LEASES ................................... 16,115 101,080
INTEREST PAID ...................................................... 1,224,910 472,588
CASH PAID FOR SITE RESTORATION COSTS ............................... -- 29,767
----------- -----------
9,848,483 2,952,472
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES ....................... (3,100,507) (2,058,604)
CASH FLOWS FROM INVESTING ACTIVITIES
INFLOWS
REDEMPTION OF CERTIFICATE OF DEPOSIT ............................... -- 79,639
OUTFLOWS
CASH PAYMENTS FOR THE PURCHASE OF PROPERTY ......................... 904,725 3,255,773
PURCHASE OF CERTIFICATE OF DEPOSIT ................................. 50,000 --
----------- -----------
954,725 3,255,773
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES ....................... (954,725) (3,176,134)
CASH FLOWS FROM FINANCING ACTIVITIES
INFLOWS
PROCEEDS FROM LONG-TERM DEBT ....................................... -- 5,000,000
PROCEEDS FROM SHORT-TERM DEBT ...................................... 500,000 798,732
PROCEEDS FROM PRIVATE PLACEMENT OFFERING, NET OF STOCK ISSUE
COSTS OF $80,728 ............................................ 5,419,272 125,833
PROCEEDS FROM EXERCISE OF WARRANTS ................................. 1,899,661
PROCEEDS FROM EXERCISE OF OPTIONS .................................. 9,453
ADVANCES FROM OFFICERS ............................................. -- 15,501
PROCEEDS FROM ISSUANCE OF SERIES B PREFERRED STOCK ................. 1,000,000 --
----------- -----------
8,828,386 5,940,066
OUTFLOWS
PAYMENTS ON LONG-TERM DEBT ......................................... 2,036,589 228,298
PAYMENTS ON SHORT-TERM DEBT ........................................ 778,104 --
PAYMENTS TO OFFICERS ............................................... 159,715 --
PAYMENT OF LOAN FEE ................................................ -- 80,000
----------- -----------
2,974,408 308,298
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................... 5,853,978 5,631,768
----------- -----------
NET INCREASE IN CASH .............................................................. 1,798,746 397,030
CASH, BEGINNING OF YEAR ........................................................... 413,935 16,905
----------- -----------
CASH, END OF YEAR ................................................................. $ 2,212,681 $ 413,935
=========== ===========
</TABLE>
The Accompanying Notes Are an Integral Part of These Consolidated
Financial Statements
F - 6
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
GEOKINETICS INC. AND SUBSIDARIES
DECEMBER 31, 1997 AND 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF THE ORGANIZATION
Geokinetics Inc., a Delaware corporation, (the Company) is based in
Houston, Texas. The Company has repositioned itself from an oil and gas
exploration and production company into a technologically advanced
provider of three dimensional ("3-D") seismic acquisition services to
the U.S. land-based oil and gas industry. Through equipment purchases
and acquisition of other companies, the Company currently operates four
seismic crews in the Rocky Mountain region and on the Gulf Coast.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Geokinetics Inc. and its wholly-owned subsidiaries, HOC Operating Co.,
Inc. (HOC), Geokinetics Production Co., Inc. (GPCI), Quantum
Geophysical, Inc. (Quantum), Quantum Geophysical Services, Inc. (QGS)
and Signature Geophysical Services, Inc. (Signature). All inter-company
items and transactions have been eliminated in the consolidation.
BASIS OF ACCOUNTING
The consolidated financial statements of the Company have been prepared
on the accrual basis of accounting and, accordingly, reflect all
significant receivables, payables and other liabilities.
USE OF ESTIMATES IN PREPARING CONSOLIDATED FINANCIAL STATEMENTS
Management uses estimates and assumptions in preparing consolidated
financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and
liabilities and the reported revenues and expenses. Actual results could
vary from the estimates that were used.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts
receivable, accounts payable and notes payable. The carrying amounts
reported in the consolidated balance sheets for cash, accounts
receivable and accounts payable approximate fair values due to the short
maturity of those instruments. The fair value of debt was determined
based upon the present value of expected cash flows considering expected
maturities and using interest rates currently available to the Company
for long-term borrowings with similar terms. The carrying amount of debt
reported in the consolidated balance sheets approximates fair value.
F - 7
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
WORK IN PROGRESS
In order to properly match revenue and expenses, the Company records
amounts due from customers but not invoiced at the end of each
accounting period, based upon the contractual agreement in effect with
each customer for services. These calculations are based upon daily
progress reports provided by field supervisors.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and
amortization are provided using the straight-line method over the
estimated useful lives of the respective assets. Repairs and
maintenance, which are not considered betterments and do not extend the
useful life of property, are charged to expense as incurred. When
property and equipment are retired or otherwise disposed of, the asset
and accumulated depreciation are removed from the accounts and the
resulting gain or loss is reflected in income.
The Company uses the successful efforts method of accounting for oil and
gas producing activities. Costs to acquire mineral interests in oil and
gas properties, to drill and equip exploratory wells that find proved
reserves and to drill and equip development wells are capitalized. Costs
to drill exploratory wells that do not find proved reserves, geological
and geophysical costs and costs of carrying and retaining unproved
properties are expensed.
Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value and a loss is recognized
at the time of impairment by providing an impairment allowance.
Capitalized costs of producing oil and gas properties, after considering
estimated dismantlement and abandonment costs and estimated salvage
values, are depreciated and depleted by the unit-of-production method.
On the sale or retirement of a complete unit of a proved property, the
cost and related accumulated depreciation, depletion and amortization
are eliminated from the property accounts and the resultant gain or loss
is recognized. On the retirement or sale of a partial unit of proved
property, the cost is charged to accumulated depreciation, depletion and
amortization with a resulting gain or loss recognized in income.
On the sale of an interest in an unproved property for cash or cash
equivalent, gain or loss on the sale is recognized, taking into
consideration the amount of any recorded impairment if the property had
been assessed individually.
F - 8
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED LOAN COST
The deferred loan cost is the unamortized balance of bank fees that were
incurred to obtain long-term financing with a guaranty from the Farmers
Home Administration. These costs are amortized over the life of the term
loan using the effective interest rate method. The amortized amount for
the years ended December 31, 1997 and 1996 was $16,000 and $3,684,
respectively.
RESTRICTED INVESTMENTS AND SITE RESTORATION COSTS
Restricted investments represent investments carried at cost which
approximates market. Such investments are to be used in the future to
fund site restoration as required by the state of Utah. Site restoration
costs are based upon an estimate of the cost of restoration prepared by
the Utah State agency responsible for site restoration. Expenditures
made for site restoration are subtracted from the estimate.
CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents. There were no cash
equivalents at December 31, 1997 and 1996, respectively.
INCOME TAX
The Company follows Statement of Financial Accounting Standards No. 109
entitled "Accounting for Income Taxes" which requires recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the consolidated
financial statements or tax returns. Under this method, deferred tax
assets and liabilities are computed using the liability method based on
the differences between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse.
Deferred income tax is provided in the accompanying consolidated
financial statements as a result of differences related to reporting of
depreciation and depletion for income tax purposes and consolidated
financial statement purposes.
A valuation allowance account is maintained to estimate the amount of
net operating loss carryforwards and tax credit carryforwards which the
Company may not be able to use as a result of the expiration of maximum
carryover periods allowed under Internal Revenue tax codes.
F - 9
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Company follows Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." The Statement established accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles and goodwill related to those assets. There was no material
effect on the consolidated financial statements from the adoption
because the Company's prior impairment recognition practice was
consistent with the major provisions of the Statement. Under provisions
of the Statement, impairment losses are recognized when expected future
cash flows are less than the assets' carrying value. Accordingly, when
indicators of impairment are present, the Company evaluates the carrying
value of property and equipment and intangibles in relation to the
operating performance and future undiscounted cash flows of the
underlying business. The Company adjusts the net book value of the
underlying assets if the sum of expected future cash flows is less than
book value.
PRE-OPERATING COSTS
It is the Company's policy to expense non-recoverable pre-operating
costs as they are incurred.
LOSS PER COMMON SHARE
Loss per common share is computed based on the weighted average number
of common shares outstanding during the respective years. Stock warrants
and common stock subscribed have not been included in the calculation as
their effect would be antidilutive.
F - 10
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2. PROPERTY AND EQUIPMENT
A summary of property and equipment follows:
December 31, December 31,
1997 1996
----------- ----------
Field operating equipment ......................... $18,383,515 $2,669,169
Proved oil and gas properties ..................... 919,285 1,032,509
Vehicles .......................................... 377,043 253,025
Buildings ......................................... 128,106 128,106
Furniture and equipment ........................... 80,186 26,854
----------- ----------
19,888,135 4,109,663
Less accumulated depletion, depreciation and
amortization .............................. 2,597,260 251,465
----------- ----------
17,290,875 3,858,198
Land .............................................. 23,450 23,450
----------- ----------
Net Property and Equipment ......... $17,314,325 $3,881,648
=========== ==========
NOTE 3. ACCRUED LIABILITIES
A summary of accrued liabilities follows:
December 31, December 31,
1997 1996
----------- ----------
Sales tax payable ........................... $ 398,656 $ --
Royalties payable ........................... 270,205 245,685
Accrued payroll ............................. 158,736 --
Accrued interest payable .................... 142,868 157,538
Payroll taxes payable ....................... 78,654 21,718
Other ....................................... -- 9,585
----------- ----------
$ 1,049,119 $ 434,526
=========== ==========
F - 11
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 4. NOTES PAYABLE
A summary of notes payable follows:
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Note representing an amount due under the - terms of
an agreement for payment of funds in settlement
of a claim, dated May 7, 1997, with no interest,
payable directly out of funds to be received by
an operating subsidiary in the performance of
seismic data acquisition services
under an existing contract with a customer $ 472,000 $ --
Notes representing financing of insurance
premiums for operating subsidiaries over
periods of nine to eleven months at
interest rates varying from 6.67% to
6.9% final payment due November 14,
1998 313,370 --
Notes representing refinancing arrangements
with certain suppliers of an operating
subsidiary for accounts payable invoices
outstanding beyond normal industry
payment terms 86,316 --
Note in default dated December 18, 1990 due
December 1, 1992 payable to unrelated
corporation with interest accruing at
10% per annum; secured by certain oil
and gas leases 25,000 25,000
Note to an unrelated corporation dated
January 8, 1996 with principal and
interest at 10% (18% default rate)
originally due February 5, 1996; after
default, note was extended to July 31,
1996 and then to October 1, 1997;
secured by certain oil
and gas leases -- 306,708
</TABLE>
F - 12
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 4. NOTES PAYABLE (CONTINUED)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
-------------------- ---------------------
<S> <C>
Notes representing refinancing of defaulted 697,025
lease bank notes; dated March 31, 1997 with
interest at 4% plus prime due monthly and
principal and unpaid accrued interest due on
June 30, 1997; secured by certain oil and
gas leases $ -- $
-------------------- ---------------------
$ 896,686 $ 1,028,733
==================== =====================
</TABLE>
NOTE 5. LEASE BANK
The Company has a revolving credit facility to provide funds to acquire,
package and sell oil and gas properties. Total borrowings under this
facility (Lease Bank) are guaranteed by the Company and may not exceed
$1,200,000. Funds are provided from individual investors. Notes issued
under this agreement are payable upon demand one year from the date of
the individual notes. If there is no demand, the notes automatically
renew on a quarterly basis. In no event will the notes extend beyond
December 31, 1999. Interest is payable quarterly based on the prime rate
as of the first day of each quarter plus 4.0%. In addition to interest,
the depositors will receive either (a) a proportionate share of a .25%
after prospect payout overriding royalty interest in prospects acquired
through the Lease Bank and sold by the Company or (b) a common stock
purchase warrant for each full year of deposit numerically equal to the
amount of deposit with a purchase price per share equal to twenty-five
percent over the average of the daily closing high bid and low asked
quotation for the sixty (60) day period immediately preceding the yearly
anniversary date for which such warrant is issued. The outstanding
balances on the Advances for Lease Bank were $260,500 and $360,500 at
December 31, 1997 and 1996, respectively.
F - 13
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 6. LONG-TERM DEBT
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, December 31,
1997 1996
-------------------- ---------------------
Note to a financial institution dated March 1,
1996 payable in 120 monthly
installments of principal and interest
adjusted quarterly based on interest at
prime plus 1.5% through March 1, 2006
when all unpaid principal and accrued
interest is due (monthly payments at
December 31, 1997 were $66,043
including principal and interest at
10.0%), secured by first security interest
in accounts receivable, inventory,
property and equipment, oil and gas
leases, intangibles, life insurance policies
on key officers, guaranty of the
Company and a $4,000,000 guaranty of
the Farmers Home Administration of the
United States Department of Agriculture $ 4,440,077 $ 4,771,702
Note to an equipment vendor dated September 30, 1997
payable in 36 monthly installments of $106,237
including principal and interest at 10%, due
September 30, 2007, secured by equipment, unpaid
principal and interest balances subject to
certain mandatory prepayment amounts if the
Company receives proceeds from the sale of
common stock other than under employee benefit
plans or currently outstanding warrants 3,054,050 --
</TABLE>
F - 14
<PAGE>
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 6. LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
-------------------- ---------------------
<S> <C>
Note to an equipment vendor dated August 31,
1997 payable in 4 installments of
$360,000 including principal and
interest at 12%, beginning August 31,
1997, and 45 monthly installments of
$220,599 including principal and
interest at 12%, beginning December 31,
1997, due August 31, 2001, secured by
equipment, and corporate guaranty of the
parent company, unpaid principal and
interest balances subject to certain
mandatory prepayment amounts if the
Company receives proceeds from the sale
of common stock other than under
employee benefit plans or currently
outstanding warrants $ 8,098,953 --
Notes dated March 15, 1995 payable to
individuals for purchase of oil and gas
interests with 8% interest payable
quarterly, principal and unpaid accrued
interest due September 30, 1999;
collateralized by guarantee agreement
with the Company -- 420,246
-------------------- --------------
15,593,080 5,191,948
Less Current Maturities 3,463,660 331,825
-------------------- --------------
$ 12,129,420 $ 4,860,123
==================== ==============
A summary of long-term debt principal maturities follows:
FOR THE YEARS ENDING DECEMBER 31, Amount
------------
1998 $ 3,463,660
1999 3,560,111
2000 3,655,967
2001 2,180,227
2002 543,841
Thereafter 2,189,274
------------
$ 15,593,080
============
</TABLE>
F - 15
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. IMPAIRMENT OF EQUIPMENT AND VEHICLES
As a result of improper unauthorized actions exercised by former Company
personnel, an accumulation of costs in excess of the amount originally
expected to acquire field equipment and vehicles was experienced during
1996. Management has physically examined the acquisitions and determined
their fair market value based on current market prices and on recent
arms-length transactions involving similar assets. The write-down to
fair market value resulted in a charge to income of $224,451 for the
year ended December 31, 1996.
NOTE 8. INCOME TAX
Income tax benefit is deferred tax arising from temporary differences
between income for financial reporting and income for tax purposes.
For the Years Ended
---------------------------
December 31, December 31,
1997 1996
----------- -----------
Income tax benefit at statutory rate ........... $ 3,308,145 $ 2,591,850
Valuation allowance ............................ (1,015,715) (971,850)
----------- -----------
Deferred Tax Asset ..................... $ 2,292,430 $ 1,620,000
=========== ===========
Deferred tax asset, beginning of year .......... $ 1,620,000 $ 800,000
Deferred tax asset, subsidiary acquired ........ 297,430 --
Deferred tax asset, end of year ................ 2,292,430 1,620,000
----------- -----------
Deferred Tax Benefit ................... $ (375,000) $ (820,000)
=========== ===========
Deferred tax assets at December 31, 1997 and 1996 are comprised
primarily of net operating loss carryfoward and differences in reporting
pre-operating expenses and amortization. A valuation allowance has been
provided for deferred tax assets that the Company has not yet determined
to be more likely than not to be realizable at this time. The Company
will continue to review this valuation allowance and make adjustments
when deemed appropriate.
At December 31, 1997, the Company had net operating loss carryforwards
of $9,244,955 and tax credit carryforwards of $245,769 that expire in
1999 through 2012.
F - 16
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. RELATED PARTY TRANSACTIONS
The Chairman of the Company has made advances totaling $88,500 to the
Company at December 31, 1997. The advances are payable upon demand.
Interest is payable quarterly based on the prime rate as of the first
day of each quarter plus 4%. Included in accrued interest at December
31, 1997 is $2,503 interest payable on the officer advances.
The father of a Vice-President of the Company is a participant in the
Lease Bank with a note balance of $110,500 at December 31, 1997.
Included in long-term debt at December 31, 1996 are notes payable
totaling $47,357 to a member of the board directors who resigned on July
18, 1997. The notes were paid in full during October 1997. Interest of
$2,844 and $3,799 was paid to this director in 1997 and 1996,
respectively, on the notes payable. In addition to the notes, this
former director exercised 107,231 stock warrants to purchase common
stock of the Company at an exercise price of $1.50 per warrant, for a
total purchase price of $160,846.
Another former member of the board of directors who resigned on July 18,
1997 held a total of 852,959 warrants to purchase common stock of the
Company at prices ranging from $.415 to $1.25 per share. On December 31,
1997, this individual entered into an agreement with the Company to
exchange these warrants for 635,000 warrants to acquire common stock of
the Company at no cost, exercised the 635,000 warrants and was issued
635,000 shares of common stock.
On April 25, 1997, the Company obtained a $500,000 private short-term
financing from two individuals who were subsequently elected directors
at the annual shareholders meeting on November 20, 1997. The Company
issued 12% senior notes to the individuals, which were exchanged on July
18, 1997, in connection with the Securities Purchase and Exchange
Agreement described in Note 12, for 458,333 shares of the Company's
common stock, 15,625 shares of Series A preferred stock and 592,009
shadow warrants. As part of this financing transaction, the Company
entered into a consulting agreement with one of the individuals,
pursuant to which, in consideration of certain strategic planning and
other consulting services to be provided to the Company and its
subsidiaries by that individual, he will be paid a quarterly consulting
fee equal to one half of 1% of the total investment made by him and
certain other persons in debt and equity securities of the Company that
is outstanding as of the end of each quarter during the three-year term
of such agreement. As of December 31, 1997, the Company owed the
director $63,207 in consulting fees under the terms of the agreement,
which is included as an amount due to officers and shareholders in the
Company's balance sheet. In addition, pursuant to the purchase agreement
and in satisfaction of the Company's obligation under the consulting
agreement, the Company and the director entered into an option agreement
providing for the grant of options to purchase 50,000 shares of common
stock of the Company to the Director.
F - 17
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. RELATED PARTY TRANSACTIONS (CONTINUED)
Inconnection with the private placement offering described in Note 12 to
the consolidated financial statements, the Company entered into an
investment monitoring agreement, under which the Company will pay the
investment group an annual fee of $25,000. A director of the Company is
one of two partners of the sole managing member of the investment group.
The Company owed the investment group $12,500 as of December 31, 1997
under the terms of the agreement, which is included as an amount due to
officers and shareholders on the Company's balance sheet.
NOTE 10.ACQUISITION OF WHOLLY-OWNED SUBSIDIARIES
A wholly-owned subsidiary corporation was formed under the name of
Quantum Geophysical, Inc. (Quantum) in November 1994. Quantum was formed
to provide 3-D geophysical data acquisition services and business
operations commenced in October 1997.
Since the inception of Quantum through September 30, 1997, the Company
has expensed $673,959 for non-recoverable pre-operating costs. It is the
Company's policy to expense non-recoverable pre-operating costs as
incurred. In addition, interest expense of $463,417 and $403,492 for the
nine months ended September 30, 1997 and for the year ended December 31,
1996, respectively, has been incurred.
A new wholly-owned subsidiary, Quantum Geophysical, Inc. was formed in
September 1997 to conduct the field operations for 3-D seismic data
acquisition commencing October 1, 1997. The name of the original Quantum
was simultaneously changed to Quantum Geophysical Services, Inc.
On July 18, 1997, the Company acquired all of the outstanding capital
stock of Signature Geophysical Services, Inc. (SGS), a Michigan
corporation, from Gallant Energy, Inc. (GEI), a Texas corporation,
pursuant to the terms of a Stock Purchase Agreement (the SGS Agreement)
among the Company, SGS, GEI and the sole shareholder of GEI. SGS, based
in Houston, Texas, is engaged in the business of providing 2-D and 3-D
seismic surveys of oil and gas properties, focusing on the Permian Basin
and the U.S. Gulf Coast, with special emphasis on coastal swamp
operations. Pursuant to the SGS Agreement, the Company acquired 500
shares of the outstanding common stock of SGS in exchange for 400,000
newly-issued shares of the Company's common stock. The Company also
entered into an Employment Agreement with the sole shareholder of GEI
granting options to purchase up to 400,000 shares of the Company's
common stock at an exercise price of $.75 per share depending on the
financial performance of SGS during the period from July 18, 1997 to
September 30, 1999.
F - 18
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. ACQUISITION OF WHOLLY-OWNED SUBSIDIARIES (CONTINUED)
The acquisition by the Company of Signature Geophysical Services, Inc.
is accounted for as a purchase, with results of SGS operations included
in the Company's financial statements from July 18, 1997 forward. The
cost of the Company's investment in SGS is $1,024,800 and the goodwill
of $1,834,159 acquired in the purchase is being amortized on a straight
line basis over a forty-year period. Amortization expense from the date
of acquisition through December 31, 1997 was $21,016.
NOTE 11. STOCK OPTION PLANS
The 1995 Stock Option Plan (the "Plan") was approved by stockholders of
the Company on August 9, 1995 with an effective date of August 1, 1994.
On August 1, 1997, the Board approved amendments to the plan (Option
Amendment), which were approved by the stockholders of the Company on
November 20, 1997 in order to increase the total number of shares of
common stock available for grant under the 1995 Plan from 500,000 to
2,687,500, to increase the period in which a non-qualified stock option
under the 1995 Plan can be exercisable from five years to ten years
after the date of grant and to extend the date on which the 1995 Plan
will automatically terminate from July 31, 2004 to July 31, 2007. The
purpose of the Option Amendment is to allow the Company to meet
contractual commitments to certain directors, key management employees
and persons affiliated with the Company. The purpose of the 1995 Plan is
to secure for the Company and its stockholders the benefits that flow
from providing certain directors, key management employees and persons
affiliated with the Company (the "Participants") with additional
incentive to further the business of the Company by increasing their
proprietary interest in the success of the Company. The 1995 Plan
provides for the granting of options to purchase shares of the Company's
common stock. Under the 1995 Plan, the Participants may be granted
Nonqualified Stock Options, Nonqualified Stock Options with Stock
Appreciation Rights, Incentive Stock Options and Incentive Stock Options
with Stock Appreciation Rights.
Stock options may be granted for the purchase of common stock at a price
determined by the Stock Option Committee. Incentive stock options may be
granted for the purchase of common stock at a price not less than the
fair market value of the stock on the date of grant.
At December 31, 1997, 2,687,500 stock options have been awarded under
the Plan, 2,672,500 are outstanding, 7,500 have been exercised and 7,500
have been forfeited and are again available for grant under the Plan.
F - 19
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. STOCK OPTION PLANS (CONTINUED)
On August 1, 1997, the Board authorized the adoption of the Company's
1997 Stock Awards Plan (the "1997 Plan"), which was approved by the
stockholders of the Company on November 20, 1997, because the shares
available under the 1995 Plan would become depleted once the Company met
its contractual commitments to certain directors, key management
employees and persons affiliated with the Company, and certain directors
of the Company are not eligible to receive awards under the 1995 Plan.
Unlike the 1995 Plan, however, the 1997 Plan permits directors who are
not employees or consultants of the Company or of a subsidiary to be
eligible to participate and takes advantage of recent amendments to Rule
16b-3.
A total of 5,000,000 shares of common stock are reserved for issuance
under the 1997 Plan, which will be used primarily to grant stock options
in the future to certain employees, members of the Board or any persons
affiliated with the Company.
The purpose of the 1997 Plan is to provide a means by which the Company
and its subsidiaries may attract, retain and motivate employees, members
of the Board or other persons affiliated with the Company (the "1997
Plan Participants") and to provide a means whereby such 1997 Plan
Participants can acquire and maintain stock ownership, thereby
strengthening their concern for the welfare of the Company. Accordingly,
the 1997 Plan provides for granting Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock
Awards, Phantom Stock Awards or any combination of the foregoing, as is
best suited to the particular circumstances.
The 1997 Plan is to be administered by the Board or, in the discretion
of the Board, a committee appointed by the Board (the "1997 Plan
Committee"), which will have sole authority, to determine which 1997
Plan Participant shall receive an Award, the time or times when such
Award shall be made, the number of shares of common stock which may be
issued under each Incentive Stock Option, Nonqualified Stock Option,
Stock Appreciation Right or Restricted Stock Award and the value of each
Phantom Stock Award.
Incentive Stock Options may only be granted to employees of the Company
and its affiliates at a price which shall be determined by the Board or
the 1997 Plan Committee, but such purchase price shall not be less than,
in the case of Incentive Stock Options, the fair market value of common
stock subject to the stock options on the date the stock option is
granted. At December 31, 1997, 210,000 stock options have been awarded
and are outstanding under the plan.
F - 20
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. PRIVATE PLACEMENT OFFERINGS
In December 1995, the Company completed a private offering of 332,968
shares of its common stock for the purpose of raising funds for
operations. Net proceeds received from the private offering during 1996,
after deduction of associated expenses, were $125,832. The 332,968
shares were sold at $1.50 per share and with 332,968 accompanying
warrants sold at $.01 per warrant.
On July 18, 1997, the Company entered into a Securities Purchase and
Exchange Agreement (the Purchase Agreement) with an investment limited
liability company (Investment Group). Pursuant to the Purchase
Agreement, the Company received $5,500,000 in cash and the exchange of
certain indebtedness in the principal amount of $500,000 owed by the
Company for the issuance of the following securities to the Investment
Group: (i) 5,500,000 newly-issued shares of the Company's common stock,
par value $.20 per share, (ii)187,500 newly-issued shares of the
Company's Series A convertible preferred stock, (which was converted
into an aggregate of 2,500,000 shares of common stock on November 20,
1997) and (iii) shadow warrants to purchase up to an additional
7,104,103 shares (subject to adjustment) of common stock at a price of
$.20 per share. As a result of the Purchase Agreement, certain changes
to the membership of the Company's board of directors and officers were
made effective July 18, 1997.
Pursuant to a Letter Agreement, the Investment Group invested an
additional $1,000,000 in cash for 100,000 shares of the Company's
newly-issued Series B preferred stock on July 24, 1997. The Series B
preferred stock is automatically convertible into an aggregate of
1,333,333 shares of common stock on January 1, 1998.
As set forth in Note 9, the Investment Group will oversee its
investments in the Company pursuant to an Investment Monitoring
Agreement agreed to by both parties. The Company will pay the Investment
Group $25,000 annually under the Investment Monitoring Agreement.
F - 21
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. OUTSTANDING OPTIONS AND WARRANTS
A summary of outstanding options and warrants issued in connection with
notes payable, private placement offerings, the 1995 Stock Option Plan
and the 1997 Stock Awards Plan are as follows:
EMPLOYEE STOCK OPTIONS
Shares Exercise Price
---------- -------------
1995 Stock Option Plan:
Outstanding at December 31, 1996 ....... 212,500 $0.875-$2.26
Employee stock options forfeited ....... (7,500) $ 1.03125
Employee stock options exercised ....... (7,500) $0.875-$1.875
Employee stock options granted ......... 2,475,000 $0.75-$1.00
-------------
Outstanding at December 31, 1997 ....... 2,672,500 $0.75-$1.875
=============
1997 Stock Awards Plan:
Employee stock options granted ......... 210,000 $0.75-$2.25
-------------
Outstanding at December 31, 1997 ....... 210,000 $0.75-$2.25
=============
WARRANTS
Outstanding at December 31, 1996 ............... 1,486,626 $1.50-$2.26
Warrants issued ................................ 5,660,589 $0.26-$2.26
Warrants exercised, surrendered or called ...... (3,521,470) $0.00-$1.50
-------------
Outstanding at December 31, 1997 ............... 3,625,745 $0.26-$2.26
=============
SHADOW WARRANTS
Outstanding at December 31, 1997 ............... 7,497,832 $ 0.20
=============
Exercisable at December 31, 1997 ............... 6,100,692
=============
F - 22
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. COMMITMENTS
OPERATING LEASES
The Company leases office space for its corporate headquarters under a
lease which expires July 30, 1998. The lease provides for a base rental
of $24,104 per year. In addition, the Company pays for its share of the
basic operating costs of the building. The Company's share of these
costs has averaged $41,357 for the past three years. Additional space
has been leased under a lease which expires November 30, 2002 at a base
rental of $37,080 per year, plus its share of basic operating costs,
currently $24,120 per year. Rental expense under these leases recorded
in the consolidated financial statements amounted to $65,578 and $60,338
for the years ended December 31, 1997 and 1996. Aggregate future minimum
rentals under the lease agreements including the base rent and the
average operating cost follows:
FOR THE YEARS ENDING DECEMBER 31, AMOUNT
-------------
1998 $ 99,386
1999 61,200
2000 61,200
2001 61,200
2002 56,100
-------------
$ 339,086
=============
EMPLOYMENT AGREEMENTS
Beginning June 19, 1997, the Company entered into new employment
agreements with officers of the Company. The compensation payable under
these agreements consists of: (1) annual base salaries, (2) an incentive
cash bonus in accordance with the Company's bonus plan to be established
for its senior executives, (3) the Company's agreement to grant options
to purchase shares of common stock under stock option plans adopted by
the Company for the benefit of its directors, officers and employees and
(4) eligibility to participate in the Company's employee benefits plans
which may be adopted. The employment agreements have terms of three to
five years and are terminable by the Company upon its good faith
determination that there has been a willful violation of the terms of
the agreements.
Under the 1995 Stock Option Plan, there were 2,410,000 and 130,000 stock
options granted to officers which were outstanding and exercisable at
December 31, 1997 and 1996, respectively.
F - 23
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. COMMITMENTS (CONTINUED)
Under the 1997 Stock Awards Plan, a total of 5,000,000 shares of the
Company's common stock has been reserved for issuance to certain
directors and key management employees. There were 50,000 stock options
outstanding for officers or directors of the Company at December 31,
1997 under the 1997 Stock Awards Plan.
NOTE 15. MAJOR CUSTOMERS
Revenues from major customers which exceeded ten percent of total
revenues are as follows:
For the Years Ended
---------------------------------------------
December 31, December 31,
1997 1996
-------------------- ---------------------
Customer A $ 6,891,867 $ --
==================== =====================
Customer B $ 950,608 $ --
==================== =====================
Customer C $ -- $ 137,885
==================== =====================
NOTE 16. CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of unsecured trade
receivables. In the normal course of business, the
Company provides credit terms to its customers. Accordingly, the Company
performs ongoing credit evaluations of its customers and maintains
allowances for possible losses which, when realized, have been within
the range of management's expectations. The Company's customer base
consists primarily of oil and gas companies. Although the Company is
directly affected by the well-being of the oil and gas industry,
management does not believe significant credit risk exists at December
31, 1997.
The Company has cash in bank and short-term investments which, at times,
may exceed federally insured limits. The Company has not experienced any
losses in such accounts. The Company believes it is not exposed to any
significant credit risk on cash and short-term investments.
F - 24
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. SUBSEQUENT EVENTS
On January 26, 1998, the Company acquired, effective January 1, 1998,
all of the outstanding capital stock of Reliable Exploration
Incorporated, a Montana corporation ("Reliable"), pursuant to the terms
of a Stock Purchase Agreement dated as of December 3, 1997, by and among
the Company, Reliable and the holders of all of the outstanding capital
stock of Reliable. Reliable, based in Billings, Montana, is engaged in
the business of providing 2-D and 3-D seismic surveys to the oil and gas
industry, specifically focusing on the Rocky Mountain region of the
United States.
The consideration paid by the Company for the Reliable acquisition
included $1,300,000 in cash and 375,000 newly-issued shares of the
Company's common stock. On the closing date, Reliable restructured
$1,487,500 of indebtedness to a former stockholder of Reliable by paying
$900,000 in cash and refinancing the balance of $587,500 in a promissory
note, which bears interest at the rate of 10% per annum beginning on
January 8, 1998. The promissory note matures on January 8, 2001. The
Company has guaranteed payment of Reliable's indebtedness due under the
promissory note and advanced Reliable $900,000 on the closing date in
order to permit the refinancing. The Company also entered into two-year
employment agreements with the three former stockholders of Reliable.
F - 25
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. CASH FLOWS
A reconciliation of net loss to net cash used by operating activities as
follows:
For the Years Ended
-------------------------
December 31, December 31,
1997 1996
----------- -----------
Net Loss ......................................... $(1,115,820) $(1,772,817)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depletion, depreciation and amortization ......... 1,207,812 91,608
Loss on disposal of property ..................... 511,735 --
Deferred income tax benefit ...................... (375,000) (820,000)
(Increase) decrease in current assets, net of
effects of acquisition of Signature
Accounts receivable - trade .............. (2,955,672) 60,220
Work in progress ......................... 347,414 --
Oil and gas leases held for resale ....... -- (15,620)
Prepaid expenses ......................... (233,252) (572)
Interest ................................. (11,221) --
Increase (decrease) in current liabilities, net of
effects of acquisition of Signature
Accounts payable - trade ................. (522,132) 179,024
Accrued liabilities ...................... 55,629 235,636
Site restoration costs payable ........... -- (29,767)
Customer deposits ........................ (10,000) 10,000
----------- -----------
Net Cash Used by Operating Activities .... $(3,100,507) $(2,062,288)
=========== ===========
F - 26
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company's financial
instruments are determined as described in Note 1, Summary of
Significant Accounting Policies, Fair Values of Financial Instruments
and are summarized as follows:
December 31, 1997 December 31, 1996
-------------------------- ------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ----------- ---------- ----------
Cash ................. $ 2,212,681 $ 2,212,681 $ 413,935 $ 413,935
Accounts receivable .. 3,654,829 3,654,829 199,150 199,150
Accounts payable ..... 2,282,037 2,282,037 721,535 721,535
Indebtedness ......... 16,914,472 16,914,472 6,733,404 6,733,404
NOTE 20. SUPPLEMENTAL OIL AND GAS INFORMATION
Information with respect to the Company's oil and gas producing
activities is presented in the following tables. Estimates of reserve
quantities, as well as future production and discounted cash flows, were
determined by R. T. Garcia & Co., Inc., Petroleum Engineering-
Management Consulting, as of December 31, 1997.
OIL AND GAS RELATED COSTS
The following table sets forth information concerning costs related to
the Company's oil and gas property acquisition, exploration and
development activities in the United States during the years ended
December 31, 1997 and 1996:
For the Years Ended
-------------------------------
December 31, December 31,
1997 1996
----------- ----------
Property acquisition costs ....... $ 91,162 $ --
Exploration costs, net ........... -- --
Development costs, net ........... -- --
F - 27
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20. SUPPLEMENTAL OIL AND GAS INFORMATION (CONTINUED)
RESULTS OF OPERATIONS FROM OIL AND GAS PRODUCING ACTIVITIES
The following table sets forth the Company's results of operations from
oil and gas producing activities:
For the Years Ended
------------------------
December 31, December 31,
1997 1996
--------- ---------
Revenues ........................................ $ 431,533 $ 560,481
Production costs and taxes ...................... (248,686) (288,992)
Depletion, depreciation and amortization ........ (14,763) (91,608)
--------- ---------
Results of operations from oil and gas
producing activities .................... $ 168,084 $ 179,881
========= =========
In the presentation above, no deduction has been made for direct costs
such as corporate overhead or interest expense. No income taxes are
reflected due to the fact that the Company is not currently in a
taxpaying position. The depletion, depreciation and amortization rate
per barrel of oil equivalent of production was $.57 and $2.33 for the
years ended December 31, 1997 and 1996, respectively.
F - 28
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20. SUPPLEMENTAL OIL AND GAS INFORMATION (CONTINUED)
OIL AND GAS RESERVES (UNAUDITED)
The following table sets forth the Company's net proved oil and gas
reserves at December 31, 1997 and 1996 and the changes in net proved oil
and gas reserves for the years then ended. Proved reserves represent the
estimated quantities of crude oil and natural gas which geological and
engineering data demonstrate with reasonable certainty to be recoverable
in future years from known reservoirs under existing economic and
operating conditions. The reserve information indicated below requires
substantial judgement on the part of the reserve engineers, resulting in
estimates which are not subject to precise determination. Accordingly,
it is expected that the estimates of reserves will change as future
production and development information becomes available and that
revisions in these estimates could be significant.
Oil (BBLS) Gas (MCF)
-------- ----------
Proved reserves:
Balance at December 31, 1996 ................. 533,000 3,438,000
Change in previous estimates .......... (43,000) 21,000
Production ............................ (17,000) (74,000)
-------- ----------
Balance at December 31, 1997 ................. 473,000 3,385,000
======== ==========
Oil (BBLS) Gas (MCF)
-------- ----------
Proved developed reserves at December 31:
1996 ............................... 323,000 1,061,000
======== ==========
1997 ............................... 265,000 947,000
======== ==========
All of the Company's reserves are located in Texas.
F - 29
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20. SUPPLEMENTAL OIL AND GAS INFORMATION (CONTINUED)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (UNAUDITED)
The standardized measure of discounted future net cash flows from the
Company's proved oil and gas reserves is presented in the following
table:
December 31, December 31,
1997 1996
------------ ------------
Future cash inflows ............................ $ 14,717,000 $ 23,069,000
Future production costs and taxes .............. (3,898,000) (5,315,000)
Future development costs ....................... (1,812,000) (1,750,000)
Future income tax expense ...................... -- --
------------ ------------
Net Future Cash Flows .................. 9,007,000 16,004,000
Discounted at 10% for timing of cash flows ..... (4,813,000) (8,913,000)
------------ ------------
Discounted future net cash flows from proved
reserves at December 31 ................ $ 4,194,000 $ 7,091,000
============ ============
The following table sets forth the changes in the standardized measure
of discounted future net cash flows from proved reserves:
For the Years Ended
---------------------------
December 31, December 31,
1997 1996
----------- -----------
Balance at beginning of year ................... $ 7,091,000 $ 3,286,000
Sales, net of production costs and taxes ....... (183,000) (171,000)
Net changes in prices, production costs and
previous estimates ..................... (2,714,000) 3,976,000
Purchase of reserves in place .................. -- --
----------- -----------
Balance at end of year ......................... $ 4,194,000 $ 7,091,000
=========== ===========
F - 30
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20. SUPPLEMENTAL OIL AND GAS INFORMATION (CONTINUED)
Estimated future net cash flows represent an estimate of future net
revenues from the production of proved reserves using current sales
prices, along with estimates of the production costs, ad valorem and
production taxes and future development (and abandonment) costs
necessary to produce such reserves. The average prices used at December
31, 1997 and 1996 were $15.68 and $24.25, respectively, per barrel of
oil and $2.07 and $2.98, respectively, per mcf of gas. No deduction has
been made for depletion, depreciation or any indirect costs such as
general corporate overhead or interest expense.
Operating costs and ad valorem and production taxes are estimated based
on current costs with respect to producing oil and gas properties.
Future development costs are based on the best estimate of such costs
assuming current economic and operating conditions.
Income tax expense is computed based on applying the appropriate
statutory tax rate to the excess of future cash inflows less future
production and development costs over the current tax basis of the
properties involved, less applicable net operating loss and tax credit
carryforwards, for both regular and alternative minimum tax (AMT). On
such bases, no regular tax or AMT results.
The future net revenues information assumes no escalation of costs or
prices, except for gas sales made under terms of contracts which include
fixed and determinable escalation. Future costs and prices could
significantly vary from current amounts and, accordingly, revisions in
the future could be material.
F - 31
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF GEOKINETICS INC.
GEOKINETICS INC., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), does hereby certify that, in
accordance with Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation adopted the following
resolutions establishing a new class of capital stock consisting of 2,500,000
shares of Preferred Stock, $10.00 par value per share (the "Preferred Stock"):
FIRST: That by the unanimous written consent of the Board of Directors of
the Corporation, the directors adopted resolutions setting forth,
among other things, a proposed amendment to the Certificate of
Incorporation of the Corporation and declaring such amendment to be
advisable and calling a meeting of the stockholders of the
Corporation for consideration thereof. The resolution setting forth
the proposed amendment is as follows:
FURTHER RESOLVED, that it is in the best interest of the
Corporation that the Certificate of Incorporation of the Corporation
be amended by changing the fourth Article thereof pursuant to the
authority conferred on the Board of Directors of this Corporation by
Section 151 of the Delaware General Corporation Act, such that, as
amended, Article Four shall read as follows:
"The total number of shares of stock which the corporation shall
have authority to issue is Seventeen Million Five Hundred Thousand
(17,500,000) shares, consisting of Two Million Five Hundred
(2,500,000) shares of Preferred Stock, $10.00 par value per share
(the "PREFERRED STOCK"), and Fifteen Million (15,000,000) shares of
Common Stock, $.20 par value per share (the "COMMON STOCK"). A
description of the designations, preferences, and relative rights of
each class is as follows:
PREFERRED STOCK
Section 1. The Preferred Stock may be issued from time to time
in one or more series. All shares of Preferred Stock shall be of
equal rank and shall be identical, except in respect of the matters
that may be fixed by the Corporation's directors as hereinafter
provided, and each share of each series shall be identical with all
other shares of such series, except that in the case of series on
which dividends are cumulative the dates from which dividends are
cumulative may vary to reflect differences in the date of issue.
Subject to the provisions of this Section, which provisions shall
apply to all Preferred Stock,
1
<PAGE>
the directors hereby are authorized to cause such shares to be
issued in one or more series and with respect to each such series
prior to the issuance thereof to fix:
(a) The designation of the series which may be by
distinguishing number, letter or title.
(b) The number of shares of the series, which number the
directors may (except where otherwise provided in the creation
of the series) increase or decrease (but not below the number
of shares thereof then outstanding).
(c) The dividend rate of the series.
(d) The dates at which dividends, if declared, shall be
payable, whether such dividends shall be cumulative or
non-cumulative and, if cumulative, the dates from which
dividends shall be cumulative.
(e) The redemption rights and price or prices, if any,
for shares of the series.
(f) The terms and amount of any sinking fund provided
for the purchase or redemption of shares of the series.
(g) The amounts payable on shares of the series in the
event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation.
(h) Whether the shares of the series shall be
convertible into shares of any other class or series of the
Corporation, and, if so, the specification of such other class
or series, the conversion price or prices, any adjustments
thereof, the date or dates as of which such shares shall be
convertible, and other terms and conditions upon which such
conversion may be made.
(i) Restrictions on the issuance of shares of the same
series or of any other class or series.
The Corporation's directors are authorized to adopt from time
to time amendments to this Article Four fixing, with respect to each
such series, the matters described in clauses (a) to (i), inclusive,
of this Section.
2
<PAGE>
Section 2. The holders of Preferred Stock of each series, in
preference to the holders of Common Stock and of any other class of
shares ranking junior to the Preferred Stock, shall be entitled to
receive out of any funds legally available and when and as declared
by the Corporation's directors, dividends in cash at the rate for
such series fixed in accordance with the provisions of Section 1 of
this Article Four and no more, payable on the dates fixed for such
series. In the event dividends for a series are determined to be
cumulative in accordance with the provisions of Section 1 of this
Article Four, such dividends shall be cumulative, in the case of
shares of each particular series, from and after the date or dates
fixed with respect to such series. No dividends may be paid upon or
declared or set apart for any of the Preferred Stock for any
dividend period unless:
(a) as to each series of Preferred Stock entitled to
cumulative dividends, dividends for all past dividend periods
shall have been paid or shall have been declared and a sum
sufficient for the payment thereof set apart; and
(b) as to all series of Preferred Stock, dividends for
the current dividend period shall have been paid or be or have
been declared and a sum sufficient to the payment thereof set
apart ratably in accordance with the amounts which would be
payable as dividends on the shares of the respective series
for the current dividend period if all dividends for the
current dividend period were declared and paid in full.
No dividend in respect of past dividend periods shall be paid
upon or declared and set apart for payment on any of the Preferred
Stock entitled to cumulative dividends unless there shall be or have
been declared and set apart for payment on all outstanding shares of
Preferred Stock entitled to cumulative dividends, dividends for past
dividend periods ratably in accordance with the amounts which would
be payable on the shares of the series entitled to cumulative
dividends if all dividends due for all past dividend periods were
declared and paid in full.
Section 3. In no event, so long as any Preferred Stock shall
be outstanding, shall any dividends, except a dividend payable in
Common Stock or other shares ranking junior to the Preferred Stock,
be paid or declared or any distribution be made except as aforesaid
on the Common Stock or any other shares ranking junior to the
Preferred Stock, nor shall any Common Stock or any other shares
ranking junior to the Preferred Stock be purchased, retired or
otherwise acquired by the Corporation unless in each case:
3
<PAGE>
(a) all accrued and unpaid dividends on Preferred Stock,
including the full dividends for the current dividend period,
shall have been declared and paid or a sum sufficient for
payment thereof set apart; and
(b) there shall be no arrearage with respect to the
redemption of Preferred Stock of any series from any sinking
fund provided for shares of such series in accordance with the
provisions of Section 1 of this Article Four.
Section 4.
(a) The holders of Preferred Stock of any series, in the
event of voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, shall be
entitled to receive in full out of the assets of the
Corporation, including its capital, before any amount shall be
paid or distributed among the holders of the Common Stock or
any other shares ranking junior to the Preferred Stock, the
amounts fixed with respect to such series in accordance with
Section 1 of this Article Four, plus an amount equal to all
dividends accrued and unpaid thereon to the date of payment of
the amount due pursuant to such liquidation, dissolution or
winding up of the affairs of the Corporation. In case the net
assets of the Corporation legally available therefor are
insufficient to permit the payment upon all outstanding shares
of Preferred Stock of the full preferential amount to which
they are respectively entitled, then such net assets shall be
distributed ratably upon outstanding shares of Preferred Stock
in proportion to the full preferential amount to which each
such share is entitled.
After payment to holders of Preferred Stock of the full
preferential amounts as aforesaid, holders of Preferred Stock
as such shall have no right or claim to any of the remaining
assets of the Corporation.
(b) The merger or consolidation of the Corporation into
or with any other corporation, or the merger of any other
corporation into the Corporation, or the sale, lease or
conveyance of all or substantially all of the property or
business as of the Corporation shall not be deemed to be a
dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this Section 4.
4
<PAGE>
Section 5. Except as otherwise expressly provided herein or as
required by law, the holders of Preferred Stock shall be entitled to
vote on all matters upon which holders of Common Stock have the
right to vote and, with respect to such right to vote, shall be
entitled to notice of any stockholders' meeting in accordance with
the Corporation's Bylaws, and shall be entitled to a number of votes
equal to the number of shares of Common Stock into which such shares
of Preferred Stock could then be converted, at the record date for
the determination of stockholders entitled to vote on such matters
or, if no such record date is established, at the date such vote is
taken or any written consent of stockholders is solicited. Except as
otherwise expressly provided herein, or to the extent class or
series voting is otherwise required by law or agreement, the holders
of Preferred Stock or Common Stock shall vote together as a single
class and not as separate classes.
Section 6. For the purpose of this Article Four, whenever
reference is made to shares "ranking junior to the Preferred Stock,"
such reference shall mean and include all shares of the Corporation
in respect of which the rights of the holders thereof as to the
payment of dividends and as to distributions in the event of a
voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation are junior and subordinate to the
rights of the holders of Preferred Stock.
COMMON STOCK
The Common Stock shall be subject to the express terms of the
Preferred Stock and of any series thereof. The terms and provisions
of each share of Common Stock shall be identical to every other
share of Common Stock. The holders of shares of Common Stock shall
be entitled to one vote for each share of such stock upon all
matters presented to the stockholders."
5
<PAGE>
SECOND: That, thereafter, pursuant to resolution of the Board of Directors
of the Corporation, the annual meeting of stockholders of the
Corporation was duly called and held, upon notice in accordance with
Section 222 of the General Corporation Law of the State of Delaware
at which meeting the necessary number of shares as required by
statute were voted in favor of the amendment.
THIRD: That the amendment was duly adopted in accordance with the
applicable provisions of Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, GEOKINETICS INC. has caused this certificate to be
signed by JAY D. HABER, its President, this ____________ day of July, 1997.
GEOKINETICS INC.
By: ________________________________
Jay D. Haber, President
STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
This instrument was acknowledged before me on the ______ day of July,
1997, by JAY D. HABER, President of GEOKINETICS INC., a corporation, on behalf
of said corporation.
---------------------------------
Notary Public in and for
the State of T E X A S
6
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF GEOKINETICS INC.
GEOKINETICS INC., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), does hereby certify that, in
accordance with Section 242 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation adopted the following
resolutions increasing the number of authorized shares of the Corporation's
Common Stock from 15,000,000 to 100,000,000 shares and reducing the par value of
the Common Stock from $.20 to $.01 per share:
FIRST: That, by unanimous written consent of the Board of Directors of the
Corporation, the directors adopted resolutions setting forth, among
other things, a proposed amendment to the Certificate of
Incorporation of the Corporation and declaring such amendment to be
advisable and calling a meeting of the stockholders of the
Corporation for consideration thereof. The resolution setting forth
the proposed amendment is as follows:
FURTHER RESOLVED, that it is in the best interest of the
Corporation that the Certificate of Incorporation of the Corporation
be amended by changing the fourth Article thereof pursuant to the
authority conferred on the Board of Directors of this Corporation,
such that, as amended, Article Four shall read as follows:
"The total number of shares of stock which the corporation
shall have authority to issue is One Hundred Two Million five
Hundred Thousand (102,500,000) shares, consisting of Two
Million Five Hundred Thousand (2,500,000) shares of Preferred
Stock, $10.00 par value per share (the "PREFERRED STOCK"), and
One Hundred Million (100,000,000) shares of Common Stock, $.01
par value per share (the "COMMON STOCK"). A description of the
designations, preferences, and relative rights of each class
is as follows:"
SECOND: That, thereafter, pursuant to resolution of the Board of Directors
of the Corporation, the annual meeting of stockholders of the
Corporation was duly called and held, upon notice in accordance with
Section 222 of the General Corporation Law of the State of Delaware,
at which meeting the necessary number of shares as required by
statute was voted in favor of the amendment.
THIRD: That the amendment was duly adopted in accordance with the
applicable provisions of Section 242 of the General Corporation Law
of the State of Delaware.
1
<PAGE>
IN WITNESS WHEREOF, GEOKINETICS INC. has caused this certificate to be
signed by JAY D. HABER, its Chairman and Chief Executive Officer, this _________
day of November, 1997.
GEOKINETICS INC.
By:________________________________
Name: Jay D. Haber
Title:Chairman and Chief Executive Officer
STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
This instrument was acknowledged before me on the ______ day of November,
1997, by JAY D. HABER, Chairman and Chief Executive Officer of GEOKINETICS INC.,
a corporation, on behalf of said corporation.
---------------------------------
Notary Public in and for
the State of T E X A S
2
EXHIBIT 3.6
AMENDED AND RESTATED
BYLAWS
OF
GEOKINETICS INC.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1. Offices..........................................................1
Section 1.1 Principal Offices..........................................1
Section 1.2 Registered Offices.........................................1
Section 1.3 Other Offices..............................................1
ARTICLE 2. Stockholder's Meetings...........................................1
Section 2.1 Annual Meeting.............................................1
Section 2.2 Special Meetings...........................................1
Section 2.3 Notices of Meetings and Adjourned Meetings.................2
Section 2.4 Voting Lists...............................................2
Section 2.5 Quorum.....................................................2
Section 2.6 Organization...............................................3
Section 2.7 Voting.....................................................3
Section 2.8 Stockholders Entitled to Vote..............................3
Section 2.9 Order of Business..........................................4
Section 2.10Action by Written Consent..................................4
Section 2.11Authorization of Proxies...................................4
Section 2.12Inspectors and Voting Procedures...........................5
ARTICLE 3. Directors........................................................5
Section 3.1 Management.................................................5
Section 3.2 Number and Term............................................5
Section 3.3 Quorum and Manner of Action................................6
Section 3.4 Vacancies..................................................6
Section 3.5 Resignations...............................................6
Section 3.6 Removals...................................................6
Section 3.7 Annual Meetings............................................7
Section 3.8 Regular Meetings...........................................7
Section 3.9 Special Meetings...........................................7
Section 3.10Organization of Meetings...................................7
Section 3.11Place of Meetings..........................................7
Section 3.12Compensation of Directors..................................8
Section 3.13Action by Unanimous Written Consent........................8
Section 3.14Participation in Meetings by Telephone.....................8
ARTICLE 4. Committees of the Board..........................................8
Section 4.1 Membership and Authorities.................................8
Section 4.2 Minutes....................................................9
Section 4.3 Vacancies..................................................9
Section 4.4 Telephone Meetings.........................................9
Section 4.5 Action Without Meeting.....................................9
<PAGE>
SECTION 5. Officers.........................................................9
Section 5.1 Number and Title...........................................9
Section 5.2 Term of Office; Vacancies.................................10
Section 5.3 Removal of Elected officers...............................10
Section 5.4 Resignations..............................................10
Section 5.5 The Chairman of the Board.................................10
Section 5.6 Chief Executive Officer...................................10
Section 5.7 President.................................................11
Section 5.8 Vice Presidents...........................................11
Section 5.9 Secretary.................................................11
Section 5.10Assistant Secretaries.....................................11
Section 5.11Treasurer.................................................11
Section 5.12Assistant Treasurers......................................12
Section 5.13Subordinate Officers......................................12
Section 5.14Salaries and Compensation.................................12
ARTICLE 6. Indemnification.................................................12
Section 6.1 Indemnification of Directors and Officers.................12
ARTICLE 7. Capital Stock...................................................13
Section 7.1 Certificates of Stock.....................................13
Section 7.2 Lost Certificates.........................................14
Section 7.3 Fixing Date for Determination of Stockholders of Record
for Certain Purposes......................................14
Section 7.4.Dividends. ...............................................15
Section 7.5.Registered Stockholders...................................15
Section 7.6.Transfer of Stock. .......................................15
ARTICLE 8. Miscellaneous Provisions........................................15
Section 8.1.Corporate Seal. ..........................................15
Section 8.2.Fiscal Year...............................................15
Section 8.3.Checks, Drafts, Notes. ...................................16
Section 8.4.Notice and Waiver of Notice...............................16
Section 8.5.Examination of Books and Records..........................16
ARTICLE 9. Amendments......................................................17
Section 9.1.Amendment. ...............................................17
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
GEOKINETICS INC.
ARTICLE 1.
OFFICES
Section 1.1 PRINCIPAL OFFICES.
The principal office of the Corporation shall be in the City of Houston,
Texas.
Section 1.2 REGISTERED OFFICES.
The registered office of the Corporation required to be maintained in the
State of Delaware by the General Corporation Laws of the State of Delaware may
be, but need not be, identical with the Corporation's principal office, and the
address of the registered office may be changed from time to time by the Board
of Directors.
Section 1.3 OTHER OFFICES.
The Corporation may also have offices at such other places both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE 2.
STOCKHOLDER'S MEETINGS
Section 2.1 ANNUAL MEETING.
The annual meeting of the holders of shares of each class or series of
stock as are entitled to notice thereof and to vote thereat pursuant to
applicable law and the Corporation's Certificate of Incorporation for the
purpose of electing directors and transacting such other proper business as may
come before it shall be held in each year, at such time, on such day and at such
place, within or without the State of Delaware, as may be designated by the
Board of Directors.
Section 2.2 SPECIAL MEETINGS.
In addition to such special meetings as are provided by law or the
Corporation's Certificate of Incorporation, special meetings of the holders of
any class or series or of all classes or series of the Corporation's stock for
any purpose or purposes, may be called at any time by the Board of Directors
1
<PAGE>
or the President of the Corporation and may be held on such day, at such time
and at such place, within or without the State of Delaware, as shall be
designated by the Board of Directors or the President of the Corporation.
Section 2.3 NOTICES OF MEETINGS AND ADJOURNED MEETINGS.
Except as otherwise provided by law, written notice of any meeting of
Stockholders (i) shall be given either by personal delivery or by mail to each
Stockholder of record entitled to vote thereat, (ii) shall be in such forms as
approved by the Board of Directors, and (iii) shall state the date, place and
hour of the meeting, and, in the case of a special meeting, the purpose for
which the meeting is called. Unless otherwise provided by law, such written
notice shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting. Except when a Stockholder attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting is not lawfully
called or convened, presence in person or by proxy of a Stockholder shall
constitute a waiver of notice of such meeting. Further, a written waiver of any
notice required by law or by these Bylaws, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Except as otherwise provided by law, the business that may
be transacted at any such meeting shall be limited to and consist of the purpose
or purposes stated in such notice. If a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken;
PROVIDED, HOWEVER, that if the adjournment is for more than thirty (30) days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each Stockholder of record
entitled to vote at the meeting.
Section 2.4 VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares
of the Corporation shall keep a complete list of Stockholders entitled to vote
at meetings or any adjournments thereof, arranged in alphabetical order, in
accordance with applicable law and shall make same available prior to and during
each Stockholders' meeting for inspection by the Corporation's Stockholders as
required by law. The Corporation's original stock transfer books shall be PRIMA
FACIE evidence as to who are the Stockholders entitled to examine such list or
transfer books or to vote at any meeting of Stockholders.
Section 2.5 QUORUM.
Except as otherwise provided by law or by the Corporation's Certificate of
Incorporation, the holders of a majority of the Corporation's stock issued and
outstanding and entitled to vote at a meeting, present in person or represented
by proxy, without regard to class or series, shall constitute a quorum at all
meetings of the Stockholders for the transaction of business. If, however, such
quorum shall not be present or represented at any meeting of the Stockholders,
the holders of a majority of such shares of stock, present in person or
represented by proxy, may adjourn any meeting from time to time without notice
other than announcement at the meeting, except as otherwise required by these
Bylaws, until a quorum shall be present or represented. At any such adjourned
2
<PAGE>
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally called.
Section 2.6 ORGANIZATION.
Meetings of the Stockholders shall be presided over by the Chairman of the
Board of Directors, if one shall be elected, or in his absence, by the President
or by any Vice President, or, in the absence of any such officers, by a chairman
to be chosen by a majority of the Stockholders entitled to vote at the meeting
who are present in person or by proxy. The Secretary, or, in his absence, any
Assistant Secretary or any person appointed by the individual presiding over the
meeting, shall act as secretary at meetings of the Stockholders.
Section 2.7 VOTING.
Each Stockholder of record, as determined pursuant to SECTION 2.8, who is
entitled to vote in accordance with the terms of the Corporation's Certificate
of Incorporation and in accordance with the provisions of these Bylaws, shall be
entitled to one vote, in person or by proxy, for each share of stock registered
in his name on the books of the Corporation. Every Stockholder entitled to vote
at any Stockholders' meeting may authorize another person or persons to act for
him by proxy pursuant to SECTION 2.11, provided that no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A Stockholder's
attendance at any meeting shall not have the effect of revoking a previously
granted proxy unless such Stockholder shall in writing so notify the Secretary
of the meeting prior to the voting of the proxy. Unless otherwise provided by
law, no vote on the election of directors or any question brought before the
meeting need be by ballot unless the chairman of the meeting shall determine
that it shall be by ballot or the holders of a majority of the shares of stock
present in person or by proxy and entitled to participate in such vote shall so
demand. In a vote by ballot, each ballot shall state the number of shares voted
and the name of the Stockholder or proxy voting. Except as otherwise provided by
law, by the Corporation's Certificate of Incorporation or these Bylaws, all
elections of directors and all other matters before the Stockholders shall be
decided by the vote of the holders of a majority of the shares of stock present
in person or by proxy at the meeting and entitled to vote in the election or on
the question. In the election of directors, votes may not be cumulated.
Section 2.8 STOCKHOLDERS ENTITLED TO VOTE.
The Board of Directors may fix a date not more than sixty (60) days nor
less than ten (10) days prior to the date of any meeting of Stockholders, or, in
the case of corporate action by written consent in accordance with the terms of
SECTION 2.10, not more than sixty (60) days prior to such action, as a record
date for the determination of the Stockholders entitled to notice of and to vote
at such meeting and any adjournment thereof, or to act by written consent, and
in such case such Stockholders and only such Stockholders as shall be
Stockholders of record on the date so fixed shall be entitled to notice of and
to vote at such meeting and any adjournment thereof, or to act by written
3
<PAGE>
consent, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after such record date fixed as aforesaid.
Section 2.9 ORDER OF BUSINESS.
The order of business at all meetings of Stockholders shall be as
determined by the chairman of the meeting or as is otherwise determined by the
vote of the holders of a majority of the shares of stock present in person or by
proxy and entitled to vote without regard to class or series at the meeting.
Section 2.10 ACTION BY WRITTEN CONSENT.
Unless otherwise provided by law or the Corporation's Certificate of
Incorporation, any action required or permitted to be taken by the Stockholders
of the Corporation may be taken without prior notice and an actual meeting if a
consent in writing setting forth the action so taken shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Except as provided
above, no action shall be taken by the Stockholders by written consent. Prompt
notice of the taking of any corporate action without a meeting by less than
unanimous written consent shall be given to those Stockholders who have not
consented in writing.
Section 2.11 AUTHORIZATION OF PROXIES.
Without limiting the manner in which a Stockholder may authorize another
person or persons to act for him as proxy, the following are valid means of
granting such authority. A Stockholder may execute a writing authorizing another
person or persons to act for him as proxy. Execution may be accomplished by the
Stockholder or his authorized officer, director, employee or agent signing such
writing or causing his or her signature to be affixed to such writing by any
reasonable means including, but not limited to, by facsimile signature. A
Stockholder may also authorize another person or persons to act for him as proxy
by transmitting or authorizing the transmission of a telegram, cablegram, or
other means of electronic transmission to the person who will be the holder of
the proxy or to a proxy solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the holder of the proxy to
receive such transmission, provided that any such telegram or other means of
electronic transmission must either set forth or be submitted with information
from which it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the Stockholder. If it is determined that such
telegrams, cablegrams or other electronic transmissions are valid, the
inspectors or, if there are no inspectors, such other persons making that
determination shall specify the information upon which they relied. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission created pursuant to this Section may be substituted or used in lieu
of the original writing or transmission for any and all purposes for which the
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
4
<PAGE>
Section 2.12 INSPECTORS AND VOTING PROCEDURES.
(a) The Corporation shall, in advance of any meeting of
Stockholders, appoint one or more inspectors to act at the meeting and
make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of Stockholders,
the person presiding at the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before entering upon the discharge
of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of
his ability.
(b) The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the shares
represented at a meeting and the validity of proxies and ballots, (iii)
count all votes and ballots, (iv) determine and retain for a reasonable
period a record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their determination of
the number of shares represented at the meeting, and their count of all
votes and ballots. The inspectors may appoint or retain other persons or
entities to assist the inspectors in the performance of the duties of the
inspectors.
(c) The date and time of the opening and closing of the polls for
each matter upon which the Stockholders will vote at a meeting shall be
announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the inspectors after the
closing of the polls unless the Court of Chancery upon application by a
Stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies and ballots,
the inspectors may examine and consider such records or factors as allowed
by the General Corporation Laws of the State of Delaware.
ARTICLE 3.
DIRECTORS
Section 3.1 MANAGEMENT.
The property, affairs and business of the Corporation shall be managed by
or under the direction of the Board of Directors.
Section 3.2 NUMBER AND TERM.
The number of directors may be fixed from time to time by resolution of
the Board of Directors adopted by the affirmative vote of a majority of the
members of the entire Board of Directors, but shall consist of not less than one
(1) member who shall be elected annually by the Stockholders except as provided
in SECTION 3.4. Directors need not be Stockholders. No decrease
5
<PAGE>
in the number of directors shall have the effect of shortening the term of
office of any incumbent director.
Section 3.3 QUORUM AND MANNER OF ACTION.
At all meetings of the Board of Directors a majority of the total number
of directors holding office shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law, by the Corporation's Certificate
of Incorporation or these Bylaws. When the Board of Directors consists of one
director, the one director shall constitute a majority and a quorum. If at any
meeting of the Board of Directors there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time until a
quorum is obtained, and no further notice thereof need be given other than by
announcement at such adjourned meeting. Attendance by a director at a meeting
shall constitute a waiver of notice of such meeting except where a director
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
Section 3.4 VACANCIES.
Except as otherwise provided by law or the Corporation's Certificate of
Incorporation, in the case of any increase in the authorized number of directors
or of any vacancy in the Board of Directors, however created, the additional
director or directors may be elected, or, as the case may be, the vacancy or
vacancies may be filled by majority vote of the directors remaining on the whole
Board of Directors although less than a quorum, or by a sole remaining director.
In the event one or more directors shall resign, effective at a future date,
such vacancy or vacancies shall be filled by a majority of the directors who
will remain on the whole Board of Directors, although less than a quorum, or by
a sole remaining director. Any director elected or chosen as provided herein
shall serve until the sooner of: (i) the unexpired term of the directorship to
which he is appointed; (ii) until his successor is elected and qualified; or
(iii) until his earlier resignation or removal.
Section 3.5 RESIGNATIONS.
A director may resign at any time upon written notice of resignation to
the Corporation. Any resignation shall be effective immediately unless a certain
effective date is specified therein, in which event it will be effective upon
such date and acceptance of any resignation shall not be necessary to make it
effective.
Section 3.6 REMOVALS.
Any director or the entire Board of Directors may be removed, with cause,
and another person or persons may be elected to serve for the remainder of his
or their term by the holders of a majority of the shares of the Corporation
entitled to vote in the election of directors. In case any vacancy so created
shall not be filled by the Stockholders at such meeting, such vacancy may be
filled by the directors as provided in SECTION 3.4.
6
<PAGE>
Section 3.7 ANNUAL MEETINGS.
The annual meeting of the Board of Directors shall be held, if a quorum be
present, immediately following each annual meeting of the Stockholders at the
place such meeting of Stockholders took place, for the purpose of organization
and transaction of any other business that might be transacted at a regular
meeting thereof, and no notice of such meeting shall be necessary. If a quorum
is not present, such annual meeting may be held at any other time or place that
may be specified in a notice given in the manner provided in SECTION 3.9 for
special meetings of the Board of Directors or in a waiver of notice thereof.
Section 3.8 REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held without notice at
such places and times as shall be determined from time to time by resolution of
the Board of Directors. Except as otherwise provided by law, any business may be
transacted at any regular meeting of the Board of Directors.
Section 3.9 SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by the President,
or by the Secretary on the written request of one-third (1/3) of the members of
the whole Board of Directors stating the purpose or purposes of such meeting.
Notices of special meetings, if mailed, shall be mailed to each director not
later than two (2) days before the day of the meeting is to be held or if
otherwise given in the manner permitted by these Bylaws, not later than the day
before such meeting. Neither the business to be transacted at, nor the purpose
of, any special meetings need be specified in any notice or written waiver of
notice unless so required by the Corporation's Certificate of Incorporation or
by these Bylaws. Any and all business may be transacted at a special meeting,
unless limited by law, the Corporation's Certificate of Incorporation or by
these Bylaws.
Section 3.10 ORGANIZATION OF MEETINGS.
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as such Board of Directors may from time to time
determine, and all matters shall be determined by the vote of a majority of the
directors present at any meeting at which there is a quorum, except as otherwise
provided by these Bylaws or required by law.
Section 3.11 PLACE OF MEETINGS.
The Board of Directors may hold their meetings and have one or more
offices, and keep the books of the Corporation, outside the State of Delaware,
at any office or offices of the Corporation, or at any other place as they may
from time to time by resolution determine.
7
<PAGE>
Section 3.12 COMPENSATION OF DIRECTORS.
Directors shall not receive any stated salary for their services as
directors, but by resolution of the Board of Directors a fixed honorarium or
fees and expenses, if any, of attendance may be allowed for attendance at each
meeting. Nothing herein contained shall be construed to preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending such committee meetings.
Section 3.13 ACTION BY UNANIMOUS WRITTEN CONSENT.
Unless otherwise restricted by law, the Corporation's Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board of Directors or of such committee,
as the case may be, consent thereto in writing and the writing or writings are
filed with the minutes of proceedings of the Board of Directors of the
committee.
Section 3.14 PARTICIPATION IN MEETINGS BY TELEPHONE.
Unless otherwise restricted by the Corporation's Certificate of
Incorporation or these Bylaws, members of the Board of Directors or of any
committee thereof may participate in a meeting of such Board of Directors or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation in a meeting in such manner shall constitute presence in person at
such meeting, except where a person participates in the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business on the grounds that the meeting is not lawfully called or convened.
ARTICLE 4.
COMMITTEES OF THE BOARD
Section 4.1 MEMBERSHIP AND AUTHORITIES.
The Board of Directors may, by resolution or resolutions passed by a
majority of the whole Board of Directors, designate one(1) or more Directors to
constitute an Executive Committee and such other committees as the Board of
Directors may determine, each of which committees to the extent provided in said
resolution or resolutions or in these Bylaws, shall have and may exercise all
the powers of the Board of Directors in the management of the business and
affairs of the Corporation, except in those cases where the authority of the
Board of Directors is specifically denied to the Executive Committee or such
other committee or committees by law, the Corporation's Certificate of
Incorporation or these Bylaws, and may authorize the seal of the Corporation to
be affixed to all papers that may require it. The designation of an Executive
Committee or other committee and the delegation thereto of authority shall not
operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed upon it or him by law.
8
<PAGE>
Section 4.2 MINUTES.
Each committee designated by the Board of Directors shall keep regular
minutes of its proceedings and report the same to the Board of Directors when
required.
Section 4.3 VACANCIES.
The Board of Directors may designate one (1) or more of its members as
alternate members of any committee who may replace any absent or disqualified
member at any meeting of such committee. If no alternate members have been
appointed, the committee member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. The Board of
Directors shall have the power at any time to fill vacancies in, to change the
membership of, and to dissolve, any committee.
Section 4.4 TELEPHONE MEETINGS.
Members of any committee designated by the Board of Directors may
participate in or hold a meeting by use of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this SECTION
4.4 shall constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the ground that
the meeting is not lawfully called or convened.
Section 4.5 ACTION WITHOUT MEETING.
Any action required or permitted to be taken at a meeting of any committee
designated by the Board of Directors may be taken without a meeting if a consent
in writing, setting forth the action so taken, is signed by all the members of
the committee and filed with the minutes of the committee proceedings. Such
consent shall have the same force and effect as a unanimous vote at a meeting.
SECTION 5.
OFFICERS
Section 5.1 NUMBER AND TITLE.
The elected officers of the Corporation shall be chosen by the Board of
Directors and shall be a Chief Executive Officer, a President, a Vice President,
a Secretary and a Treasurer. The Board of Directors may also choose a Chairman
of the Board, who must be a Board member of the Board of Directors, and
additional Vice Presidents, Assistant Secretaries and/or Assistant Treasurers.
One person may hold any two or more of these offices and any one or more of the
Vice Presidents may be designated as an Executive Vice President or Senior Vice
President.
9
<PAGE>
Section 5.2 TERM OF OFFICE; VACANCIES.
So far as is practicable, all elected officers shall be elected by the
Board of Directors at the annual meeting of the Board of Directors each year,
and except as otherwise provided in this ARTICLE 5, shall hold office until the
next such meeting of the Board of Directors in the subsequent year and until
their respective successors are elected and qualified or until their earlier
resignation or removal. All appointed officers shall hold office at the pleasure
of the Board of Directors. If any vacancy shall occur in any office, the Board
of Directors may elect or appoint a successor to fill such vacancy for the
remainder of the term.
Section 5.3 REMOVAL OF ELECTED OFFICERS.
Any elected officer may be removed at any time, with or without cause, by
affirmative vote of a majority of the whole Board of Directors, at any regular
meeting or at any special meeting called for such purpose.
Section 5.4 RESIGNATIONS.
Any officer may resign at any time upon written notice of resignation to
the President, Secretary or Board of Directors of the Corporation. Any
resignation shall be effective immediately unless a date certain is specified
for it to take effect, in which event it shall be effective upon such date, and
acceptance of any resignation shall not be necessary to make it effective,
irrespective of whether the resignation is tendered subject to such acceptance.
Section 5.5 THE CHAIRMAN OF THE BOARD.
The Chairman of the Board, if one shall be elected, shall preside at all
meetings of the Stockholders and Board of Directors. In addition, the Chairman
of the Board shall perform whatever duties and shall exercise all powers that
are given to him by the Board of Directors.
Section 5.6 CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer shall be the most senior executive officer of
the Corporation; shall (in the absence of the Chairman of the Board, if one be
elected) preside at meetings of the Stockholders and Board of Directors; shall
be EX OFFICIO a member of all standing committees; shall have general and active
management of business of the Corporation; shall implement the general
directives, plans and policies formulated by the Board of Directors; and shall
further have such duties, responsibilities and authorities as may be assigned to
him by the Board of Directors. He may sign, with any other proper officer,
certificates for shares of the Corporation and any deeds, bonds, mortgages,
contracts and other documents which the Board of Directors has authorized to be
executed, except where required by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors or these Bylaws, to some other officer or agent of the
corporation. In the absence of the Chief Executive Officer, his duties shall be
performed and his authority may be exercised by the President of the
Corporation.
10
<PAGE>
Section 5.7 PRESIDENT.
The President shall, after the Chief Executive Officer, be the most senior
executive officer of the corporation and shall, subject to the authority of the
Chief Executive Officer, implement the general plans and directives of the Board
of Directors and perform such other duties as may be assigned to him by the
Board of Directors.
Section 5.8 VICE PRESIDENTS.
The several Vice Presidents shall have such powers and duties as may be
assigned to them by these Bylaws and as may from time to time be assigned to
them by the Board of Directors and may sign, with any other proper officer,
certificates for shares of the Corporation.
Section 5.9 SECRETARY.
The Secretary, if available, shall attend all meetings of the Board of
Directors and all meetings of the Stockholders and record the proceedings of the
meetings in a book to be kept for that purpose and shall perform like duties for
any committee of the Board of Directors as shall designate him to serve. He
shall give, or cause to be given, notice of all meetings of the Stockholders and
meetings of the Board of Directors and committees thereof and shall perform such
other duties incident to the office of secretary or as may be prescribed by the
Board of Directors or the President, under whose supervision he shall be. He
shall have custody of the corporate seal of the Corporation and he, or any
Assistant Secretary, or any other person whom the Board of Directors may
designate, shall have authority to affix the same to any instrument requiring
it, and when so affixed it may be attested by his signature or by the signature
of any Assistant Secretary or by the signature of such other person so affixing
such seal.
Section 5.10 ASSISTANT SECRETARIES.
Each Assistant Secretary shall have the usual powers and duties pertaining
to his office, together with such other powers and duties as may be assigned to
him by the Board of Directors, the President or the Secretary. The Assistant
Secretary or such other person as may be designated by the President shall
exercise the powers of the Secretary during that officer's absence or inability
to act.
Section 5.11 TREASURER.
The Treasurer shall have the custody of and be responsible for the
corporate funds and securities, shall keep full and separate accounts of
receipts and disbursements in the books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
He shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all his transactions as Treasurer
and of the financial condition of the Corporation and he shall perform all other
duties
11
<PAGE>
incident to the position of Treasurer, or as may be prescribed by the Board of
Directors or the President. If required by the Board of Directors, he shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation
Section 5.12 ASSISTANT TREASURERS.
Each Assistant Treasurer shall have the usual powers and duties pertaining
to his office, together with such other powers and duties as may be assigned to
him by the Board of Directors, the President or the Treasurer. The Assistant
Treasurer or such other person designated by the President shall exercise the
power of the Treasurer during that officer's absence or inability to act.
Section 5.13 SUBORDINATE OFFICERS.
The Board of Directors may (i) appoint such other subordinate officers and
agents as it shall deem necessary who shall hold their offices for such terms,
have such authority and perform such duties as the Board of Directors may from
time to time determine, or (ii) delegate to any committee or officer the power
to appoint any such subordinate officers or agents.
Section 5.14 SALARIES AND COMPENSATION.
The salary or other compensation of officers shall be fixed from time to
time by the Board of Directors. The Board of Directors may delegate to any
committee or officer the power to fix from time to time the salary or other
compensation of subordinate officers and agents appointed in accordance with the
provisions of SECTION 5.13.
ARTICLE 6.
INDEMNIFICATION
Section 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The corporation shall indemnify its current or former directors, officers,
employees and agents or any person who served or is serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise from and
against any and all expenses, liabilities or other matters to the fullest extent
permitted by the General Corporation Law of Delaware, as the same exists or may
hereafter be amended. Such indemnification shall not be deemed exclusive of any
other rights to which such person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall inure to the benefit of the heirs, executors and
administrators of such person.
12
<PAGE>
ARTICLE 7.
CAPITAL STOCK
Section 7.1 CERTIFICATES OF STOCK.
Certificates of stock shall be issued to each Stockholder certifying the
number of shares owned by him in the Corporation and shall be in a form not
inconsistent with the Certificate of Incorporation and as approved by the Board
of Directors. The certificates shall be signed by the Chairman of the Board, the
President or a Vice President and by the Secretary or an Assistant Secretary, or
the Treasurer or an Assistant Treasurer and may be sealed with the seal of the
Corporation or a facsimile thereof. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
Section 7.2 LOST CERTIFICATES.
The Board of Directors may direct a new certificate to be issued in place
of any certificate theretofore issued by the Corporation alleged to have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
owner of such certificate, or his legal representative. When authorizing the
issuance of a new certificate, the Board of Directors may in its discretion, as
a condition precedent to the issuance thereof, require the owner, or his legal
representative, to give a bond in such form and substance with such surety as it
may direct, to indemnify the Corporation against any claim that may be made on
account of the alleged loss, theft or destruction of such certificate or the
issuance of such new certificate.
Section 7.3 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD FOR
CERTAIN PURPOSES.
(a) In order that the Corporation may determine the Stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of capital stock or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a
record date, which shall not be more than sixty (60) days prior to the
date of payment of such dividend or other distribution or allotment of
such rights or the date when any such rights in respect of any change,
conversion or exchange of stock may be exercised or the date of such other
action. In such a case, only Stockholders of record on the date so fixed
shall be entitled to receive any such dividend or other distribution or
allotment of rights or to exercise such rights or for any other purpose,
as the case may be, notwithstanding any transfer of any stock on the books
of the Corporation after any such record date fixed as aforesaid.
(b) If no record date is fixed, the record date for determining
Stockholders for any such purpose shall be at the close of business on the
day on which the Board of Directors adopts the resolution relating
thereto.
13
<PAGE>
Section 7.4.DIVIDENDS.
Subject to the provisions of the Corporation's Certificate of
Incorporation, if any, and except as otherwise provided by law, the directors
may declare dividends upon the capital stock of the Corporation as and when they
deem it to be expedient. Such dividends may be paid in cash, in property or in
shares of the Corporation's capital stock. Before declaring any dividend there
may be set apart out of the funds of the Corporation available for dividends,
such sum or sums as the directors from time to time in their discretion think
proper for working capital or as a reserve fund to meet contingencies or for
equalizing dividends, or for such other purposes as the directors shall think
conducive to the interests of the Corporation and the directors may modify or
abolish any such reserve in the manner in which it was created.
Section 7.5.REGISTERED STOCKHOLDERS.
Except as expressly provided by law, the Corporation's Certificate of
Incorporation or these Bylaws, the Corporation shall be entitled to treat
registered Stockholders as the only holders and owners in fact of the shares
standing in their respective names and the Corporation shall not be bound to
recognize any equitable or other claim to or interest in such shares on the part
of any other person, regardless of whether it shall have express or other notice
thereof.
Section 7.6.TRANSFER OF STOCK.
Transfers of shares of the capital stock of the Corporation shall be made
only on the books of the Corporation by the registered owners thereof, or by
their legal representatives or their duly authorized attorneys. Upon any such
transfers the old certificates shall be surrendered to the Corporation by the
delivery thereof to the person in charge of the stock transfer books and
ledgers, by whom they shall be canceled and new certificates shall thereupon be
issued.
ARTICLE 8.
MISCELLANEOUS PROVISIONS
Section 8.1.CORPORATE SEAL.
If one is adopted, the corporate seal shall have inscribed thereon the
name of the Corporation and shall be in such form as may be approved by the
Board of Directors. Said seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any manner reproduced.
Section 8.2.FISCAL YEAR.
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
14
<PAGE>
Section 8.3.CHECKS, DRAFTS, NOTES.
All checks, drafts or other orders tor the payment of money, notes or
other evidences of indebtedness issued in the name of the Corporation shall be
signed by such officer or officers, agent or agents of the Corporation, and in
such manner as shall from time to time be determined by resolution (whether
general or special) of the Board of Directors or may be prescribed by any
officer or officers, or any officer and agent jointly, thereunto duly authorized
by the Board of Directors.
Section 8.4.NOTICE AND WAIVER OF NOTICE.
Whenever notice is required to be given to any director or Stockholder
under the provisions of applicable law, the Corporation's Certificate of
Incorporation or these Bylaws, such notice shall be in writing and delivered
whether (i) personally, or (ii) by registered or certified mail, or (iii) by
telegram, telecopy, or similar facsimile means (delivered during the recipient's
regular business hours). Such notice shall be sent to such director or
Stockholder at the address or telecopy number as it appears on the records of
the Corporation, unless prior to the sending of such notice he has designated,
in a written request to the Secretary of the Corporation, another address or
telecopy number to which notices are to be sent. Notices shall be deemed given
when received, if sent by telegram, telex, telecopy or similar facsimile means
(confirmation of such receipt by confirmed facsimile transmission being deemed
receipt of communications sent by telex, telecopy or other facsimile means); and
when delivered and receipted for (or upon the date of attempted delivery where
delivery is refused), if hand delivered, sent by express courier or delivery
service, or sent by certified or registered mail. Whenever notice is required to
be given under any provision of law, the Corporation's Certificate of
Incorporation or these Bylaws, a waiver thereof in writing, by telegraph, cable
or other form of recorded communication, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business on the grounds that the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Stockholders, directors, or
members of a committee of directors need be specified in any written waiver of
notice unless so required by the Corporation's Certificate of Incorporation or
these Bylaws.
Section 8.5.EXAMINATION OF BOOKS AND RECORDS.
The Board of Directors shall determine from time to time whether, and if
allowed, when and under what conditions and regulations the accounts and books
of the Corporation (except such as may be statute be specifically opened to
inspection) or any of them shall be open to inspection by the Stockholders, and
the Stockholders' rights in this respect are and shall be restricted and limited
accordingly.
15
<PAGE>
ARTICLE 9.
AMENDMENTS
Section 9.1.AMENDMENTS.
In furtherance and not in limitation of the powers conferred by the laws
of the State of Delaware, the Board of Directors of the corporation is expressly
authorized to adopt, amend or repeal the bylaws of the corporation subject to
the power of the stockholders of the corporation to alter or repeal any bylaw
whether adopted by them or otherwise.
16
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (this "AGREEMENT") is made as of July __, 1997
by GEOKINETICS INC, a Delaware corporation (the "EMPLOYER"), and LYNN TURNER, an
individual resident of the State of Texas (the "EXECUTIVE").
INTRODUCTION
Employer, directly or through one or more subsidiaries, is engaged in the
business of (i) conducting 2-D and 3-D seismic surveys of oil and gas prospects
and (ii) exploring for and producing oil and gas in the United States. The
Employer desires to employ the Executive, and the Executive wishes to accept
such employment, upon the terms and conditions set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
Section 1. DEFINITIONS. For the purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section 1.
1.1 "AFFILIATE" or "AFFILIATES" -- any Person that, directly or
indirectly, controls, or is controlled by or under common control with, the
Employer, including the Employer. For the purposes of this definition, "CONTROL"
(including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the
power to direct or cause the direction of the management and policies of any
Person, directly or indirectly, through ownership of voting securities, by
contract, or otherwise.
1.2 "AGREEMENT" -- this Employment Agreement, including all Exhibits
attached hereto, as amended from time to time.
1.3 "BASIC COMPENSATION" -- Salary and Benefits.
1.4 "BENEFITS" -- as defined in Section 3.1(c).
1.5 "BOARD OF DIRECTORS" -- the board of directors of the Employer.
1.6 "CONFIDENTIAL INFORMATION" -- any and all:
(a) trade secrets concerning the business and affairs of any
Affiliate, product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions and ideas, past,
current, and planned research and development, current and
planned manufacturing or distribution methods and processes,
customer lists, current and anticipated customer requirements,
price lists, market studies, business plans, seismic data
bases, computer software and programs (including object code
and source code), computer software and database technologies,
systems, structures, and architectures (and related formulae,
compositions,
1
<PAGE>
processes, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and
information), and any other information, however documented,
that is a trade secret within the meaning of the common law of
the State of Texas; and
(b) information concerning the business and affairs of any
Affiliate (which includes historical financial statements,
financial projections and budgets, historical and projected
sales, capital spending budgets, exploration prospects and
plans, the names and backgrounds of key personnel, personnel
training and techniques and materials), however documented;
and
(c) notes, analysis, compilations, studies, summaries, and other
material prepared by or for any Affiliate containing or based,
in whole or in part, on any information included in the
foregoing.
1.7 "DISABILITY" -- as defined in Section 5.2.
1.8 "EFFECTIVE DATE" -- the date stated in the first paragraph of the
Agreement.
1.9 "EMPLOYEE INVENTION" -- any idea, invention, technique, modification,
process, or improvement (whether patentable or not), any industrial design
(whether registerable or not), any mask work, however fixed or encoded, that is
suitable to be fixed, embedded or programmed in a semiconductor product (whether
recordable or not), and any work of authorship (whether or not copyright
protection may be obtained for it) created, conceived, or developed by the
Executive, either solely or in conjunction with others, during the Employment
Period, or a period that includes a portion of the Employment Period, that
relates in any way to, or is useful in any manner in, the business then being
conducted or proposed to be conducted by the Employer or the Affiliates, and any
such item created by the Executive, either solely or in conjunction with others,
following termination of the Executive's employment with the Employer, that is
based upon or uses Confidential Information.
1.10 "EMPLOYMENT PERIOD" -- the term of the Executive's employment under
this Agreement.
1.11 "FISCAL YEAR" -- the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
1.12 "FOR CAUSE" -- as defined in Section 5.3.
1.13 "INCENTIVE COMPENSATION" -- as defined in Section 3.2.
1.14 "OPTION PLAN" -- the Geokinetics Inc. 1995 Employee Stock Option
Plan.
1.15 "NONINCENTIVE COMPENSATION" -- as defined in Section 3.3.
2
<PAGE>
1.16 "PERSON" -- any individual, general or limited partnership, joint
venture, corporation (including any non-profit corporation), limited liability
company, bank, estate, trust, association, entity, unincorporated organization,
or government body.
1.17 "POST-EMPLOYMENT PERIOD" -- as defined in Section 7.2.
1.18 "PROPRIETARY ITEMS" -- as defined in Section 6.2(a)(iv).
1.19 "SALARY" -- as defined in Section 3.1(a).
1.20 "SIGNING BONUS" -- as defined in Section 3.1(b).
Section 2. EMPLOYMENT TERMS AND DUTIES.
2.1 EMPLOYMENT. The Employer hereby employs the Executive, and the
Executive hereby accepts employment by the Employer, upon the terms and
conditions set forth in this Agreement.
2.2 TERM. Subject to the provisions of Section 5, the term of the
Executive's employment under this Agreement will be five (5) years, beginning on
the Effective Date and ending on the fifth anniversary of the Effective Date.
Thereafter, the term may continue for additional one (1) year periods upon the
mutual written agreement of the Executive and the Employer.
2.3 DUTIES. The Executive will have such duties as are assigned or
delegated to the Executive by the Board of Directors (which duties shall be of a
senior management or executive level) and will initially serve as President and
Chief Operating Officer of the Employer, with overall responsibility for
geophysical operations. The Executive will devote substantially all of his
entire business time, attention, skill, and energy exclusively to the business
of the Employer, will use his best efforts to promote the success of the
Employer's business, and will cooperate fully with the Board of Directors in the
advancement of the best interests of the Employer. For the Executive's service
as a director of the Employer or as a director or officer of any of its
Affiliates, the Executive will fulfill his duties as such director or officer
without additional compensation.
Section 3. COMPENSATION.
3.1 BASIC COMPENSATION.
(a) SALARY. The Executive will be paid an annual salary of
$135,000.00, subject to adjustment as provided below (the
"SALARY"), which will be payable in equal periodic
installments according to the Employer's customary payroll
practices, but no less frequently than monthly. The Salary
will be reviewed by the Board of Directors not less frequently
than annually, and may be adjusted upward or downward in the
sole discretion of the Board of Directors, but in no event
will the Salary be less than $135,000.00 per year.
3
<PAGE>
(b) SIGNING BONUS. In order to induce the Executive to accept
employment with the Employer, the Employer agrees to pay the
Executive a bonus of $150,000.00 ("SIGNING BONUS"). Subject to
the Executive's employment by the Employer, such bonus shall
be paid to the Executive on the date he commences employment
hereunder.
(c) BENEFITS. The Executive will, during the Employment Period, be
permitted to participate in such pension, profit sharing,
bonus, life insurance, hospitalization, major medical, and
other employee benefit plans of the Employer that may be in
effect from time to time, to the extent the Executive is
eligible under the terms of those plans (collectively, the
"BENEFITS").
3.2 INCENTIVE COMPENSATION. As additional compensation (the "INCENTIVE
COMPENSATION") for the services to be rendered by the Executive pursuant to this
Agreement, the Executive will be entitled to participate in the following plans,
in the manner described below:
(a) The Executive shall be entitled to receive an annual bonus
("BONUS") based upon the amount of the Employer's earnings
before interest, taxes, depreciation and amortization
("EBITDA") in accordance with the terms of the Bonus Plan
attached hereto as Exhibit "A". The Employer's earnings before
EBITDA shall be computed by Geokinetics, for purposes of
calculation of the Bonus, for each twelve-month period
beginning on July 1 and ending on June 30 during the term
hereof, and shall be determined in accordance with generally
accepted accounting principles, consistently applied.
3.3 NONINCENTIVE COMPENSATION. As additional compensation (the
"NONINCENTIVE COMPENSATION") for the services to be rendered by the Executive
pursuant to this Agreement, the Executive shall be permitted to participate in
the Option Plan. Upon the commencement of Executive's employment hereunder, the
Executive shall be granted one, seven-year option to purchase an aggregate of
500,000 shares of Common Stock on the terms and conditions set forth below:
(a) The Executive will have one option (the "Option") to purchase
500,000 shares of Common Stock and will become eligible to
exercise 100,000 shares of the Option on and after each of
July 15, 1998, 1999, 2000, 2001 and 2002, provided the
Executive continues to be employed by the Employer hereunder
on such dates, and the Executive exercises such Option prior
to or on July 15, 2004; and
(b) The Option shall be exercisable at a price per share of Common
Stock of $.75.
3.4 VACATIONS AND HOLIDAYS. The Executive will be entitled to three weeks'
paid vacation each Fiscal Year in accordance with the vacation policies of the
Employer in effect for its executive officers from time to time. Vacation must
be taken by the Executive at such time or times as approved by the Chairman of
the Board of Directors. The Executive will also be entitled to the paid holidays
and other paid leave set forth in the Employer's policies. Vacation days and
holidays during
4
<PAGE>
any Fiscal Year that are not used by the Executive during such Fiscal Year may
not be used in any subsequent Fiscal Year, but Executive shall be paid at the
end of each Fiscal Year for any vacation days which Executive was unable to use
as a result of a request for approval of a vacation having been denied by the
Chairman of the Board of Directors.
3.5 AUTOMOBILE. During the Employment Period, the Executive shall be
entitled to a monthly automobile allowance of $400.00. The Employer will
reimburse the Executive for reasonable expenses incurred by the Executive for
the operation, repair and maintenance of such automobile in the performance of
the Executive's duties pursuant to this Agreement, in accordance with the
Employer's employment policies, at a rate of $.35 per mile. The Executive shall
file expense reports with respect to such expenses in accordance with the
Employer's policies.
Section 4. FACILITIES AND EXPENSES. The Employer will furnish the
Executive office space, equipment, supplies, and such other facilities and
personnel as the Employer deems necessary or appropriate for the performance of
the Executive's duties under this Agreement and as are commensurate with
Executive's duties under Section 2.3. The Employer will pay the Executive's dues
in such professional societies and organizations as the Chairman of the Board of
Directors of the Employer deems appropriate, and will pay on behalf of the
Executive (or reimburse the Executive for) reasonable expenses incurred by the
Executive at the request of, or on behalf of, the Employer in the performance of
the Executive's duties pursuant to this Agreement, and in accordance with the
Employer's employment policies, including reasonable expenses incurred by the
Executive in attending conventions, seminars, and other business meetings, in
appropriate business entertainment activities, and for promotional expenses. The
Executive must file expense reports with respect to such expenses in accordance
with the Employer's policies.
Section 5. TERMINATION.
5.1 EVENTS OF TERMINATION. The Employment Period, the Executive's Basic
Compensation, Incentive Compensation, Nonincentive Compensation, and any and all
other rights of the Executive under this Agreement or otherwise as an employee
of the Employer will terminate (except as otherwise provided in this Section 5):
(a) upon the death of the Executive;
(b) upon the Disability of the Executive (as defined in Section
5.2) immediately upon notice from either party to the other;
(c) For Cause (as defined in Section 5.3), immediately upon notice
from the Employer to the Executive, or at such later time as
such notice may specify; or
(d) upon Executive's voluntary termination of employment, which
termination shall be effective thirty (30) days after
Employer's receipt of Executive's written resignation.
5
<PAGE>
5.2 DISABILITY. For purposes of this Section 5, the Executive will be
deemed to have a "DISABILITY" if, for physical or mental reasons, the Executive
is unable to perform the Executive's duties under this Agreement for 120
consecutive days, or 180 days during any twelve month period, as determined in
accordance with this Section 5.2. The Disability of the Executive will be
determined by a medical doctor selected by written agreement of the Employer and
the Executive upon the request of either party by notice to the other. If the
Employer and the Executive cannot agree on the selection of a medical doctor,
each of them will select a medical doctor and the two medical doctors will
select a third medical doctor who will determine whether the Executive has a
Disability. The determination of the medical doctor selected under this Section
5.2 will be binding on both parties. The Executive must submit to a reasonable
number of examinations by the medical doctor making the determination of
Disability under this Section 5.2, and the Executive hereby authorizes the
disclosure and release to the Employer of such determination and all supporting
medical records. If the Executive is not legally competent, the Executive's
legal guardian or duly authorized attorney-in-fact will act on behalf of the
Executive, under this Section 5.2, for the purposes of submitting the Executive
to the examinations, and providing the authorization of disclosure, required
under this Section 5.2.
5.3 FOR CAUSE. For purposes of Section 5.1, the phrase "FOR CAUSE" means
any conduct or behavior by the Executive that, in the good faith judgment of the
Employer's Board of Directors, is materially detrimental to or materially
harmful to the business or reputation of the Employer including, without
limitation: (a) the Executive's breach of a material provisions of this
Agreement, which breach is not substantially cured within thirty (30) days after
Executive's receipt of written notice thereof from Employer; (b) the Executive's
repeated failure to adhere to any written Employer policy and Executive's
failure to cure such noncompliance within thirty (30) days after receipt of
written notice thereof from Employer; (c) the appropriation (or attempted
appropriation) of a material business opportunity of the Employer, including
attempting to secure or securing any personal profit in connection with any
transaction entered into on behalf of the Employer; (d) the misappropriation (or
attempted misappropriation) of any of the Employer's funds or property; or (e)
the conviction of, the indictment for (or its procedural equivalent), or the
entering of a guilty plea or plea of no contest with respect to, a felony (other
than involving the misuse of alcohol) or the equivalent thereof.
5.4 TERMINATION PAY. Effective upon the termination of this Agreement, the
Employer will be obligated to pay the Executive (or, in the event of his death,
his designated beneficiary as defined below) only such compensation as is
provided in this Section 5.4, and in lieu of all other amounts and in settlement
and complete release of all claims the Executive may have against the Employer
under this Agreement. For purposes of this Section 5.4, the Executive's
designated beneficiary will be such individual beneficiary or trust, located at
such address, as the Executive may designate by notice to the Employer from time
to time or, if the Executive fails to give notice to the Employer of such a
beneficiary, the Executive's estate. Notwithstanding the preceding sentence, the
Employer will have no duty, in any circumstances, to attempt to open an estate
on behalf of the Executive, to determine whether any beneficiary designated by
the Executive is alive or to ascertain the address of any such beneficiary, to
determine the existence of any trust, to determine whether any person or entity
purporting to act as the Executive's personal representative (or the trustee of
a trust established by the Executive) is duly authorized to act in that
capacity, or to locate or attempt to locate any beneficiary, personal
representative, or trustee.
6
<PAGE>
(a) TERMINATION BY THE EMPLOYER FOR CAUSE. If the Employer
terminates this Agreement For Cause, the Executive will be
entitled to receive his Salary and Benefits through the date
such termination is effective and the vested portion of any
Incentive Compensation and any Nonincentive Compensation.
(b) TERMINATION UPON DISABILITY. If this Agreement is terminated
by either party as a result of the Executive's Disability, as
determined under Section 5.2, the Employer will pay the
Executive his Salary and Benefits through the remainder of the
calendar month during which such termination is effective and
for the lesser of (i) six consecutive months thereafter, or
(ii) the period until Disability insurance benefits commence
under the Disability insurance coverage, if any, furnished by
the Employer to the Executive. The Executive shall be entitled
to the vested portions of his Incentive Compensation and
Nonincentive Compensation and to a pro rata portion of his
Incentive Compensation and Nonincentive Compensation for the
year during which such Disability occurs, but shall not be
entitled to any other Incentive Compensation or Nonincentive
Compensation. Executive shall be entitled to continue to
participate in Employer's group health insurance (if such
participation is permitted by the insurance company providing
such insurance coverage) after Disability occurs, provided
Executive reimburses Employer for the costs of such coverage.
Executive shall also be entitled to acquire from Employer any
life insurance policy in effect on Executive's life at the
date of Disability, provided Executive reimburses Employer the
cash surrender value, if any, accumulated in such life
insurance policy and assumes the obligation to make payments
to maintain such insurance policy in effect.
(c) TERMINATION UPON DEATH. If this Agreement is terminated
because of the Executive's death, the Executive will be
entitled to receive his Salary and Benefits through the end of
the calendar month in which his death occurs. The Executive
shall be entitled to receive the vested portions of his
Incentive Compensation and Nonincentive Compensation and to a
pro rata portion of his Incentive Compensation and
Nonincentive Compensation for the year during which the
Executive's death occurs, but shall not be entitled to any
other Incentive Compensation or Nonincentive Compensation for
or any subsequent year. Executive's family shall be entitled
to continue to participate in Employer's group health
insurance (if such participation is permitted by the insurance
company providing such insurance coverage) after Executive's
occurs, provided Executive's family reimburses Employer for
the costs of such coverage.
(d) TERMINATION UPON RESIGNATION. If this Agreement is terminated
because of the voluntary resignation of the Executive
hereunder, the Executive shall be entitled to receive his
Salary and Benefits through the effective date of his
termination and any vested portions of his Incentive
Compensation or
7
<PAGE>
Nonincentive Compensation. The Executive shall not be entitled
to any other Incentive Compensation or to any other
Nonincentive Compensation.
(e) TERMINATION BY THE EMPLOYER NOT FOR CAUSE. If the Employer
terminates this Agreement not For Cause, the Executive, at the
option of the Employer, will be entitled to either: (i)
receive all of the compensation and Benefits provided by
Section 3.1, and the Incentive Compensation provided by
Section 3.2 and the Nonincentive Compensation provided by
Section 3.3 for the remainder of the Employment Term, and the
Executive shall be subject to the provisions of Section 7.2
hereof; or (ii) the Executive shall be entitled to receive all
of the compensation and Benefits provided by Section 3.1 and
the vested portions of any Incentive Compensation provided by
Section 3.2 and Nonincentive Compensation provided by Section
3.3 through the end of the calendar month in which such
termination occurs, and the Executive shall not be subject to
the provisions of Section 7.2.
(f) BENEFITS. The Executive's accrual of, or participation in
plans providing for, the Benefits will cease at the effective
date of the termination of this Agreement, and the Executive
will be entitled to accrued Benefits pursuant to such plans
only as provided in such plans. The Executive will not
receive, as part of his termination pay pursuant to this
Section 5, any payment or other compensation for any vacation,
holiday, sick leave, or other leave unused on the date the
notice of termination is given under this Agreement.
(g) EXPIRATION OF EMPLOYMENT. Employer agrees to notify the
Executive not less than sixty (60) days prior to the
expiration of the initial term of this Agreement or any
subsequent continuation thereof as to whether Employer desires
to extend the Employment Period of this Agreement.
5.5 TERMINATION UPON BREACH BY EMPLOYER. This Agreement may be terminated
by Executive, by written notice to Employer, in the event of the Employer's
breach of a material provision of this Agreement, which breach is not
substantially cured within thirty (30) days after Employer's receipt of written
notice thereof from Executive. If this Agreement is terminated by Executive as a
result of Employer's breach, Executive shall not be subject to the provisions of
Section 7.2 hereof.
Section 6. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS.
6.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. The Executive acknowledges that
during the Employment Period and as a part of his employment, the Executive will
be afforded access to Confidential Information; public disclosure of such
Confidential Information could have an adverse effect on the Employer and its
business; because the Executive possesses substantial technical expertise and
skill with respect to the Employer's business, the Employer desires to obtain
exclusive ownership of each Employee Invention, and the Employer will be at a
substantial competitive disadvantage if it fails to acquire exclusive ownership
of each Employee Invention; and the provisions
8
<PAGE>
of this Section 6 are reasonable and necessary to prevent the improper use or
disclosure of Confidential Information and to provide the Employer with
exclusive ownership of all Employee Inventions.
6.2 AGREEMENTS OF THE EXECUTIVE. In consideration of the compensation and
benefits to be paid or provided to the Executive by the Employer under this
Agreement, the Executive covenants as follows:
(a) CONFIDENTIALITY.
(i) During and for a period of three (3) years following the
Employment Period, the Executive will hold in confidence
the Confidential Information and will not disclose it to
any person except with the specific prior written
consent of the Employer or except as otherwise expressly
permitted by the terms of this Agreement.
(ii) Any trade secrets of any Affiliate will be entitled to
all of the protections and benefits under the common law
of the State of Texas and any other applicable law. If
any information that the Employer deems to be a trade
secret is found by a court of competent jurisdiction not
to be a trade secret for purposes of this Agreement,
such information will, nevertheless, be considered
Confidential Information for purposes of this Agreement.
The Executive hereby waives any requirement that the
Employer submit proof of the economic value of any trade
secret or post a bond or other security.
(iii) None of the foregoing obligations and restrictions
applies to any part of the Confidential Information that
the Executive demonstrates either (x) was known by
Executive prior to the date of his employment by the
Employer, (y) was or became generally available to the
public other than as a result of a disclosure by the
Executive, or (z) was made known to Executive on a
nonconfidential basis from a source other than Employer
or its representatives or agents, provided that such
source is not bound by a confidentiality agreement with,
or other obligation of secrecy to, Employer or another
party.
(iv) The Executive will not remove from the premises of the
Employer or any Affiliate (except to the extent such
removal is for purposes of the performance of the
Executive's duties at home or while traveling, or except
as otherwise specifically authorized by the Employer or
such Affiliate) any document, record, notebook, plan,
model, component, device, or computer software or code,
whether embodied in a disk or in any other form
(collectively, the "PROPRIETARY ITEMS"). The Executive
recognizes that, as between the Employer or any
Affiliate and the Executive, all of the Proprietary
Items, whether or not
9
<PAGE>
developed by the Executive, are the exclusive property
of the Employer or the Affiliates. Upon termination of
this Agreement by either party, or upon the request of
the Employer or any Affiliate during the Employment
Period, the Executive will return to the Employer or the
Affiliates all of the Proprietary Items in the
Executive's possession or subject to the Executive's
control, and the Executive shall not retain any copies,
abstracts, sketches, or other physical embodiment of any
of the Proprietary Items.
(b) EMPLOYEE INVENTIONS. Each Employee Invention will belong
exclusively to the Employer. The Executive acknowledges that
all of the Executive's writing, works of authorship, specially
commissioned works, and other Employee Inventions are works
made for hire and the property of the Employer, including any
copyrights, patents, or other intellectual property rights
pertaining thereto. If it is determined that any such works
are not works made for hire, the Executive hereby assigns to
the Employer all of the Executive's right, title, and
interest, including all rights of copyright, patent, and other
intellectual property rights, to or in such Employee
Inventions. The Executive covenants that he will promptly:
(i) disclose to the Employer in writing any Employee
Invention;
(ii) assign to the Employer or to a party designated by
the Employer, at the Employer's request and
without additional compensation, all of the
Executive's right to the Employee Invention for
the United States and all foreign jurisdictions;
(iii) execute and deliver to the Employer such
applications, assignments, and other documents as
the Employer may request in order to apply for and
obtain patents or other registrations with respect
to any Employee Invention in the United States and
any foreign jurisdictions;
(iv) sign all other papers necessary to carry out the
above obligations; and
(v) give testimony and render any other assistance in
support of the Employer's rights to any Employee
Invention.
6.3 DISPUTES OR CONTROVERSIES. The Executive recognizes that should a
dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Employer, the Executive, and
10
<PAGE>
their respective attorneys and experts, who will agree, in advance and in
writing, to receive and maintain all such information in secrecy, except as may
be limited by them in writing.
Section 7. NON-COMPETITION AND NON-INTERFERENCE.
7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. The Executive acknowledges and
agrees that the limitations set forth in this Section 7 are a necessary part of
and ancillary to the Executive's agreement not to disclose Confidential
Information, reasonable and do not impose a greater restraint on the activities
of the Executive than is necessary to protect the business interest of the
Employer. In the event that any such territorial, scope, or time limitation are
deemed to be unreasonable by a court of competent jurisdiction, the Executive
agrees to the reduction of the territorial, scope or time limitation to the
area, scope or time which such court shall have deemed reasonable.
7.2 COVENANTS OF THE EXECUTIVE. In consideration of the acknowledgments by
the Executive, and in consideration of the compensation and benefits to be paid
or provided to the Executive by the Employer in the event this Agreement is
terminated pursuant to Section 5.4(a), 5.4(d) or 5.4(e)(i), the Executive
covenants that he will not, directly or indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period
(as defined below), engage or invest in, own, manage, operate,
finance, control, or participate in the ownership, management,
operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend the
Executive's name or any similar name to, lend Executive's
credit to or render services or advice to, any business whose
products or activities compete in whole or in part with the
products or activities of the Employer or any Affiliate of
Employer anywhere within the geographic areas in which the
Employer or any such Affiliate now or hereafter conducts its
business; provided, however, that the Executive may purchase
or otherwise acquire up to (but not more than) one percent of
any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise)
if such securities are listed on any national or regional
securities exchange or have been registered under Section
12(g) of the Securities Exchange Act of 1934;
(b) whether for the Executive's own account or for the account of
any other person, at any time during the Employment Period and
the Post-Employment Period, solicit business of the same or
similar type being carried on by the Employer or any Affiliate
of Employer, from any person known by the Executive to be a
customer of the Employer or any such Affiliate, whether or not
the Executive had personal contact with such person during and
by reason of the Executive's employment with the Employer;
(c) whether for the Executive's own account or the account of any
other person at any time during the Employment Period and the
Post-Employment Period, (i) solicit, employ, or otherwise
engage as an employee, independent
11
<PAGE>
contractor, or otherwise, any person who is or was an employee
of the Employer or any Affiliate of Employer at any time
during the Employment Period or in any manner induce or
attempt to induce any employee of the Employer and any such
Affiliate to terminate his employment with the Employer; or
(ii) interfere with the Employer's or any Affiliate's
relationship with any person, including any person who at any
time during the Employment Period was an employee, contractor,
supplier, or customer of the Employer or any such Affiliate;
or
(d) at any time during or after the Employment Period, disparage
the Employer or any of its shareholders, directors, officers,
employees, or agents.
For purposes of this Section 7.2, the term (x) "POST-EMPLOYMENT PERIOD"
means the two-year period beginning on the date of termination of the
Executive's employment with the Employer and (y) "AFFILIATE" shall not include
Falcon Drilling Company, Inc.
If any covenant in this Section 7.2 is held to be unreasonable, arbitrary,
or against public policy, such covenant will be considered to be divisible with
respect to scope, time, and geographic area, and such lesser scope, time, or
geographic area, or all of them, as a court of competent jurisdiction may
determine to be reasonable, not arbitrary, and not against public policy, will
be effective, binding, and enforceable against the Executive.
The Executive will, while the covenant under this Section 7.2 is in
effect, give notice to the Employer, within ten days after accepting any other
employment, of the identity of the Executive's new employer. The Employer may
notify such new employer that the Executive is bound by this Agreement.
Notwithstanding the foregoing to the contrary, the Executive will not be
subject to any covenant under this Section 7.2 in the event:
(i) the term of the Executive's employment under this Agreement is not
renewed pursuant to Section 2.2;
(ii) Employer voluntarily files a bankruptcy or insolvency proceeding (or
an involuntary bankruptcy or insolvency proceeding is filed against
Employer, which proceedings have not been dismissed within ninety
(90) days from the filing thereof); or
(iii) Executive is removed or not reelected the President of Employer
after (x) Steven A. Webster and William R. Ziegler are no longer
members of the Board of Directors of Employer or (y) Steven A.
Webster, William R. Ziegler and Blackhawk Investors, L.L.C. own or
control, directly or indirectly, less than ten (10%) percent of the
combined voting power of the then outstanding voting securities of
Employer.
12
<PAGE>
Section 8. GENERAL PROVISIONS.
8.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. The Executive acknowledges
that the injury that would be suffered by the Employer as a result of a breach
of the provisions of this Agreement (including any provision of Sections 6 and
7) would be irreparable and that an award of monetary damages to the Employer
for such a breach would be an inadequate remedy. Consequently, the Employer will
have the right, in addition to any other rights it may have, to obtain
injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce any provision of this Agreement, and the Employer will not
be obligated to post bond or other security in seeking such relief. Any such
remedy shall be in addition to any damages which the Employer may be legally
entitled to recover as a result of any breach by the Employee of any provision
of this Agreement. The Employer may pursue any of the remedies described in this
Section concurrently or consecutively and in any order as to such breach or
violation, and the pursuit of any one of such remedies at any time will not be
deemed an election of remedies or a waiver of the right to pursue any other
available remedy.
8.2 ESSENTIAL AND INDEPENDENT COVENANTS. The covenants by the Executive in
Sections 6 and 7 are essential elements of this Agreement supported by the
payment of $10.00 and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Executive, and without the
Executive's agreement to comply with such covenants, the Employer would not have
entered into this Agreement or employed or continued the employment of the
Executive. The Employer and the Executive have independently consulted their
respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenants, with specific regard to the
nature of the business conducted by the Employer.
If the Executive's employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Executive in Sections 6 and 7.
8.3 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE. The Executive
represents and warrants to the Employer that the execution and delivery by the
Executive of this Agreement do not, and the performance by the Executive of the
Executive's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: violate any judgment, writ, injunction, or
order of any court, arbitrator, or governmental agency applicable to the
Executive; or conflict with, result in the breach of any provisions of or the
termination of, or constitute a default under, any agreement to which the
Executive is a party or by which the Executive is or may be bound. The Executive
further represents and warrants to the Employer that no agreements or
understandings, whether written or oral, are currently in force and effect
between the Executive and the Employer, or any other Person concerning the
subject matter of this Agreement.
8.4 OBLIGATIONS CONTINGENT ON PERFORMANCE. The obligations of the Employer
hereunder, including its obligation to pay the compensation provided for herein,
are contingent upon the Executive's performance of the Executive's obligations
hereunder.
13
<PAGE>
8.5 WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
no claim or right arising out of this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; no waiver that may be given by a party will
be applicable except in the specific instance for which it is given; and no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
8.6 NOTICES. All notices pertaining to this Agreement must be in writing,
must be sent to the addressee at the address set forth in this Section, or at
such other address as the addressee has designated by a notice given in the
manner set forth in this Section, and must be sent by telegram, telex,
facsimile, electronic mail, courier, or prepaid, certified U.S. Mail. Notices
will be deemed given when received, if sent by telegram, telex, electronic mail
or facsimile and if received between the hours of 8:00 a.m. and 5:00 p.m., local
time of the destination address, on a business day (with confirmation of
completed transmission sufficing as prima facie evidence of receipt of a notice
sent by telex, telecopy, electronic mail, or facsimile), and when delivered and
receipted for (or when attempted delivery is refused at the address where sent)
if sent by courier or by certified U.S. Mail. Notices sent by telegram, telex,
electronic mail, or facsimile and received between 12:01 a.m. and 7:59 a.m.,
local time of the destination address, on a business day will be deemed given at
8:00 a.m. on that same day. Notices sent by telegram, telex, electronic mail, or
facsimile and received at a time other than between the hours of 12:01 a.m. and
5:00 p.m., local time of the destination address, on a business day will be
deemed given at 8:00 a.m. on the next following business day after the day of
receipt. The addresses for notice are as follows:
If to Employer: Geokinetics Inc.
5555 San Felipe, Suite 780
Houston, Texas 77056
Attention: President
Facsimile No.: (713) 850-7330
With a copy to: Chamberlain, Hrdlicka, White, Williams & Martin
1200 Smith Street, Suite 1400
Houston, Texas 77002
Attention: Mr. James J. Spring, III
Facsimile No.: (713) 658-2553
and
If to the Executive: Lynn Turner
23030 S. Waterlily
Richmond, Texas 77469
14
<PAGE>
With a copy to: Jack E. Eidman, Jr.
11 Greenway Plaza, Suite 2930
Houston, Texas 77046
Facsimile No.: (713) 871-2498
8.7 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This Agreement shall
inure to the benefit of, and shall be binding upon, the parties hereto and their
respective successors, assigns, heirs, and legal representatives, including any
entity with which the Employer may merge or consolidate or to which all or
substantially all of its assets may be transferred. The duties and covenants of
the Executive under this Agreement, being personal, may not be delegated.
8.8 INTERPRETATION. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. A determination that any provision of this Agreement is
unenforceable or invalid shall not affect the enforceability or validity of any
other provision.
8.9 HEADINGS. The section headings appearing in this Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this Agreement.
8.10 ENTIRE AGREEMENT. This Agreement constitutes the final and entire
agreement and understanding between the parties to this Agreement concerning the
subject matter of this Agreement, and this Agreement supersedes and replaces all
prior agreements and understandings, whether written or oral, between such
parties concerning the subject matter of this Agreement. No alleged
representation, warranty, promise, inducement, or statement of intention not
expressly set forth in this Agreement is binding on any party to this Agreement.
8.11 ACKNOWLEDGMENT AND RELEASE BY THE EXECUTIVE. By his execution of this
Agreement, the Executive acknowledges that this Agreement supersedes and
replaces all other agreements and understandings, whether written or oral,
between the Executive and any other Person concerning the subject matter of this
Agreement. In consideration for the rights and obligations arising under this
Agreement, the Executive hereby voluntarily, knowingly, fully, finally,
completely, and forever releases, relinquishes, and forever discharges the
Employer and its Affiliates, their officers, directors, employees, and agents,
from any and all claims, actions, demands, and causes of action of whatever kind
or character, whether known or unknown, joint or several, which the Executive
might have or might claim to have against the Employer for any and all injuries,
harm, damages, penalties, costs, losses, expenses, attorneys' fees, liabilities,
or other detriments, if any, whatsoever and whenever incurred, suffered, or
claimed by the Executive arising from any prior agreement or understanding,
whether written or oral, between the Executive and the Employer, or any other
Person concerning the subject matter of this Agreement.
8.12 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Texas without regard to conflicts of laws principles.
15
<PAGE>
8.13 JURISDICTION. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against either of the parties in the courts of the State of Texas,
County of Harris, or, if it has or can acquire jurisdiction, in the United
States District Court for the District of Texas, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on either party anywhere in the world.
8.14 CASHLESS EXERCISE OF OPTIONS. The Executive shall be entitled to
exercise the options granted pursuant to Section 3.3: (i) in cash or by
certified or cashier's check payable to Employer; or (ii) by delivery to
Employer of certificates representing the number of shares of Common Stock then
owned by the Executive, the Designated Value of which equals the option price of
the shares of Common Stock purchased pursuant to the option or options being
exercised. (For purposes of this Agreement, the Designated Value of any shares
of Common Stock delivered in payment of the option price payable upon exercise
of any option granted hereunder shall be the Designated Value as of the exercise
date, and the exercise date shall be the date of delivery of the certificates
for the Common Stock used as payment of such option price. The "Designated
Value" of the shares of Common Stock on a given date shall mean the average of
the closing prices of the Common Stock on the principal market or registered
exchange on which the Common Stock is traded (or the average of the closing bid
and asked prices, if a single closing price is not reported for such market) on
the ten (10) consecutive trading days preceding the date for the determination
of such value, provided that the Common Stock is then traded on the
over-the-counter market or on the NASDAQ National Market System or any
registered securities exchange.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EMPLOYER:
GEOKINETICS INC.
BY:
JAY D. HABER, PRESIDENT
EXECUTIVE:
LYNN TURNER
16
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (this "AGREEMENT") is made as of July __, 1997
by GEOKINETICS INC, a Delaware corporation (the "EMPLOYER"), and MICHAEL A.
DUNN, an individual resident of the State of Texas (the "EXECUTIVE").
INTRODUCTION
Employer, directly or through one or more subsidiaries, is engaged in the
business of (i) conducting 2-D and 3-D seismic surveys of oil and gas prospects
and (ii) exploring for and producing oil and gas in the United States. The
Employer desires to employ the Executive, and the Executive wishes to accept
such employment, upon the terms and conditions set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
Section 1. DEFINITIONS. For the purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section 1.
1.1 "AFFILIATE" or "AFFILIATES" -- any Person that, directly or
indirectly, controls, or is controlled by or under common control with, the
Employer, including the Employer. For the purposes of this definition, "CONTROL"
(including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the
power to direct or cause the direction of the management and policies of any
Person, directly or indirectly, through ownership of voting securities, by
contract, or otherwise.
1.2 "AGREEMENT" -- this Employment Agreement, including all Exhibits
attached hereto, as amended from time to time.
1.3 "BASIC COMPENSATION" -- Salary and Benefits.
1.4 "BENEFITS" -- as defined in Section 3.1(c).
1.5 "BOARD OF DIRECTORS" -- the board of directors of the Employer.
1.6 "CONFIDENTIAL INFORMATION" -- any and all:
(a) trade secrets concerning the business and affairs of any
Affiliate, product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions and ideas, past,
current, and planned research and development, current and
planned manufacturing or distribution methods and processes,
customer lists, current and anticipated customer requirements,
price lists, market studies, business plans, seismic data
bases, computer software and programs (including object code
and source code), computer software and database technologies,
systems, structures, and architectures (and related formulae,
compositions,
1
<PAGE>
processes, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and
information), and any other information, however documented,
that is a trade secret within the meaning of the common law of
the State of Texas; and
(b) information concerning the business and affairs of any
Affiliate (which includes historical financial statements,
financial projections and budgets, historical and projected
sales, capital spending budgets, exploration prospects and
plans, the names and backgrounds of key personnel, personnel
training and techniques and materials), however documented;
and
(c) notes, analysis, compilations, studies, summaries, and other
material prepared by or for any Affiliate containing or based,
in whole or in part, on any information included in the
foregoing.
1.7 "DISABILITY" -- as defined in Section 5.2.
1.8 "EFFECTIVE DATE" -- the date on which Executive actually commences his
employment herewith (but not later than September 1, 1997).
1.9 "EMPLOYEE INVENTION" -- any idea, invention, technique, modification,
process, or improvement (whether patentable or not), any industrial design
(whether registerable or not), any mask work, however fixed or encoded, that is
suitable to be fixed, embedded or programmed in a semiconductor product (whether
recordable or not), and any work of authorship (whether or not copyright
protection may be obtained for it) created, conceived, or developed by the
Executive, either solely or in conjunction with others, during the Employment
Period, or a period that includes a portion of the Employment Period, that
relates in any way to, or is useful in any manner in, the business then being
conducted or proposed to be conducted by the Employer or the Affiliates, and any
such item created by the Executive, either solely or in conjunction with others,
following termination of the Executive's employment with the Employer, that is
based upon or uses Confidential Information.
1.10 "EMPLOYMENT PERIOD" -- the term of the Executive's employment under
this Agreement.
1.11 "FISCAL YEAR" -- the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
1.12 "FOR CAUSE" -- as defined in Section 5.3.
1.13 "INCENTIVE COMPENSATION" -- as defined in Section 3.2.
1.14 "OPTION PLAN" -- the Geokinetics Inc. 1995 Employee Stock Option
Plan.
1.15 "NONINCENTIVE COMPENSATION" -- as defined in Section 3.3.
2
<PAGE>
1.16 "PERSON" -- any individual, general or limited partnership, joint
venture, corporation (including any non-profit corporation), limited liability
company, bank, estate, trust, association, entity, unincorporated organization,
or government body.
1.17 "POST-EMPLOYMENT PERIOD" -- as defined in Section 7.2.
1.18 "PROPRIETARY ITEMS" -- as defined in Section 6.2(a)(iv).
1.19 "SALARY" -- as defined in Section 3.1(a).
1.20 "SIGNING BONUS" -- as defined in Section 3.1(b).
Section 2. EMPLOYMENT TERMS AND DUTIES.
2.1 EMPLOYMENT. The Employer hereby employs the Executive, and the
Executive hereby accepts employment by the Employer, upon the terms and
conditions set forth in this Agreement.
2.2 TERM. Subject to the provisions of Section 5, the term of the
Executive's employment under this Agreement will be five (5) years, beginning on
the Effective Date and ending on the fifth anniversary of the Effective Date.
Thereafter, the term may continue for additional one (1) year periods upon the
mutual written agreement of the Executive and the Employer.
2.3 DUTIES. The Executive will have such duties as are assigned or
delegated to the Executive by the Board of Directors (which duties shall be of a
senior management or executive level) and will initially serve as Vice President
and Chief Technology Officer of the Employer, with overall responsibility for
Employer's technology development and acquisition programs. The Executive will
devote his entire business time, attention, skill, and energy exclusively to the
business of the Employer, will use his best efforts to promote the success of
the Employer's business, and will cooperate fully with the Board of Directors in
the advancement of the best interests of the Employer. For the Executive's
service as a director of the Employer or as a director or officer of any of
Employer's Affiliates, the Executive will fulfill his duties as such director or
officer without additional compensation.
Section 3. COMPENSATION.
3.1 BASIC COMPENSATION.
(a) SALARY. The Executive will be paid an annual salary of
$150,000.00, subject to adjustment as provided below (the
"SALARY"), which will be payable in equal periodic
installments according to the Employer's customary payroll
practices, but no less frequently than monthly. The Salary
will be reviewed by the Board of Directors not less frequently
than annually, and may be adjusted upward or downward in the
sole discretion of the Board of Directors, but in no event
will the Salary be less than $150,000.00 per year.
3
<PAGE>
(b) SIGNING BONUS. In order to induce the Executive to accept
employment with the Employer, the Employer agrees to pay the
Executive a bonus of $90,000.00 ("SIGNING BONUS"). Subject to
the Executive's employment by the Employer, such bonus shall
be paid to the Executive on the Effective Date.
(c) BENEFITS. The Executive will, during the Employment Period, be
permitted to participate in such pension, profit sharing,
bonus, life insurance, hospitalization, major medical, and
other employee benefit plans of the Employer that may be in
effect from time to time, to the extent the Executive is
eligible under the terms of those plans (collectively, the
"BENEFITS").
3.2 INCENTIVE COMPENSATION. As additional compensation (the "INCENTIVE
COMPENSATION") for the services to be rendered by the Executive pursuant to this
Agreement, the Executive will be entitled to participate in the following plans,
in the manner described below:
(a) The Executive shall be entitled to receive an annual bonus
("BONUS") based upon the amount of the Employer's earnings
before interest, taxes, depreciation and amortization
("EBITDA") in accordance with the terms of the Bonus Plan
attached hereto as Exhibit "A". The Employer's earnings before
EBITDA shall be computed by Geokinetics, for purposes of
calculation of the Bonus, for each twelve-month period
beginning on July 1 and ending on June 30 during the term
hereof, and shall be determined in accordance with generally
accepted accounting principles, consistently applied.
3.3 NONINCENTIVE COMPENSATION. As additional compensation (the
"NONINCENTIVE COMPENSATION") for the services to be rendered by the Executive
pursuant to this Agreement, the Executive shall be permitted to participate in
the Option Plan. Upon the commencement of Executive's employment hereunder, the
Executive shall be granted two options to purchase an aggregate of 550,000
shares of Common Stock, at a price of $.75 per share, on the terms and
conditions set forth below:
(a) The Executive will have one option (the "First Option") to
purchase 500,000 shares of Common Stock and will become
eligible to exercise 100,000 shares of the First Option on and
after each of July 15, 1998, 1999, 2000, 2001 and 2002,
provided the Executive continues to be employed by the
Employer hereunder on such dates, and the Executive exercises
such First Option prior to or on July 15, 2004.
(b) The Executive will have a second option (the "Second Option")
to purchase 50,000 shares of Common Stock and will be eligible
to exercise all or any part of the Second Option on and after
the Effective Date hereof, and, provided the Executive
continues to be employed by the Employer hereunder, prior to
or on July 15, 2002.
4
<PAGE>
3.4 VACATIONS AND HOLIDAYS. The Executive will be entitled to four weeks'
paid vacation each Fiscal Year in accordance with the vacation policies of the
Employer in effect for its executive officers from time to time. Vacation must
be taken by the Executive at such time or times as approved by the Chairman of
the Board of Directors. The Executive will also be entitled to the paid holidays
and other paid leave set forth in the Employer's policies. Vacation days and
holidays during any Fiscal Year that are not used by the Executive during such
Fiscal Year may not be used in any subsequent Fiscal Year, but Executive shall
be paid at the end of each Fiscal Year for any vacation days which Executive was
unable to use as a result of a request for approval of a vacation having been
denied by the Chairman of the Board of Directors.
Section 4.1 FACILITIES AND EXPENSES. The Employer will furnish the
Executive office space, equipment, supplies, and such other facilities and
personnel as the Employer deems necessary or appropriate for the performance of
the Executive's duties under this Agreement and as are commensurate with
Executive's duties under Section 2.3. The Employer will pay the Executive's dues
in such professional societies and organizations as the Chairman of the Board of
Directors of the Employer deems appropriate, and will pay on behalf of the
Executive (or reimburse the Executive for) reasonable expenses incurred by the
Executive at the request of, or on behalf of, the Employer in the performance of
the Executive's duties pursuant to this Agreement, and in accordance with the
Employer's employment policies, including reasonable expenses incurred by the
Executive in attending conventions, seminars, and other business meetings, in
appropriate business entertainment activities, and for promotional expenses. The
Executive must file expense reports with respect to such expenses in accordance
with the Employer's policies.
Section 4.2 AUTOMOBILE. The Executive will own his own automobile, and
maintain and insure it at his own expense for his business use in connection
with his employment under this Agreement. The Executive will, at his own
expense, maintain liability insurance on any automobile used in connection with
the Employer's business, including excess liability (umbrella) insurance
coverage in an amount not less than $1,000,000 per occurrence with underlying
insurance coverage as required by such excess liability insurance policy. The
Executive will furnish proof of such insurance to the Employer as requested by
the Employer. The Employer will reimburse the Executive for reasonable expenses
incurred by the Executive for the operation, repair and maintenance of
Executive's automobile in the performance of the Executive's duties pursuant to
this Agreement, in accordance with the Employer's employment policies, at a rate
of $.35 per mile. The Executive shall file expense reports with respect to such
expenses in accordance with Employer's policies.
Section 5. TERMINATION.
5.1 EVENTS OF TERMINATION. The Employment Period, the Executive's Basic
Compensation, Incentive Compensation, Nonincentive Compensation, and any and all
other rights of the Executive under this Agreement or otherwise as an employee
of the Employer will terminate (except as otherwise provided in this Section 5):
(a) upon the death of the Executive;
5
<PAGE>
(b) upon the Disability of the Executive (as defined in Section
5.2) immediately upon notice from either party to the other;
(c) For Cause (as defined in Section 5.3), immediately upon notice
from the Employer to the Executive, or at such later time as
such notice may specify; or
(d) upon Executive's voluntary termination of employment, which
termination shall be effective thirty (30) days after
Employer's receipt of Executive's written resignation.
5.2 DISABILITY. For purposes of this Section 5, the Executive will be
deemed to have a "DISABILITY" if, for physical or mental reasons, the Executive
is unable to perform the Executive's duties under this Agreement for 120
consecutive days, or 180 days during any twelve month period, as determined in
accordance with this Section 5.2. The Disability of the Executive will be
determined by a medical doctor selected by written agreement of the Employer and
the Executive upon the request of either party by notice to the other. If the
Employer and the Executive cannot agree on the selection of a medical doctor,
each of them will select a medical doctor and the two medical doctors will
select a third medical doctor who will determine whether the Executive has a
Disability. The determination of the medical doctor selected under this Section
5.2 will be binding on both parties. The Executive must submit to a reasonable
number of examinations by the medical doctor making the determination of
Disability under this Section 5.2, and the Executive hereby authorizes the
disclosure and release to the Employer of such determination and all supporting
medical records. If the Executive is not legally competent, the Executive's
legal guardian or duly authorized attorney-in-fact will act on behalf of the
Executive, under this Section 5.2, for the purposes of submitting the Executive
to the examinations, and providing the authorization of disclosure, required
under this Section 5.2.
5.3 FOR CAUSE. For purposes of Section 5.1, the phrase "FOR CAUSE" means
any conduct or behavior by the Executive that, in the good faith judgment of the
Employer's Board of Directors, is materially detrimental to or materially
harmful to the business or reputation of the Employer including, without
limitation: (a) the Executive's breach of a material provision of this
Agreement, which breach is not substantially cured within ten (10) days after
Executive's receipt of written notice thereof from Employer; (b) the Executive's
repeated failure to adhere to any written Employer policy and Executive's
failure to cure such noncompliance within ten (10) days after receipt of written
notice thereof from Employer; (c) the appropriation (or attempted appropriation)
of a material business opportunity of the Employer, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Employer; (d) the misappropriation (or attempted
misappropriation) of any of the Employer's funds or property; or (e) the
conviction of, the indictment for (or its procedural equivalent), or the
entering of a guilty plea or plea of no contest with respect to, a felony (other
than involving the misuse of alcohol) or the equivalent thereof.
5.4 TERMINATION PAY. Effective upon the termination of this Agreement, the
Employer will be obligated to pay the Executive (or, in the event of his death,
his designated beneficiary as defined below) only such compensation as is
provided in this Section 5.4, and in lieu of all other amounts and
6
<PAGE>
in settlement and complete release of all claims the Executive may have against
the Employer under this Agreement. For purposes of this Section 5.4, the
Executive's designated beneficiary will be such individual beneficiary or trust,
located at such address, as the Executive may designate by notice to the
Employer from time to time or, if the Executive fails to give notice to the
Employer of such a beneficiary, the Executive's estate. Notwithstanding the
preceding sentence, the Employer will have no duty, in any circumstances, to
attempt to open an estate on behalf of the Executive, to determine whether any
beneficiary designated by the Executive is alive or to ascertain the address of
any such beneficiary, to determine the existence of any trust, to determine
whether any person or entity purporting to act as the Executive's personal
representative (or the trustee of a trust established by the Executive) is duly
authorized to act in that capacity, or to locate or attempt to locate any
beneficiary, personal representative, or trustee.
(a) TERMINATION BY THE EMPLOYER FOR CAUSE. If the Employer
terminates this Agreement For Cause, the Executive will be
entitled to receive his Salary and Benefits through the date
such termination is effective and the vested portion of any
Incentive Compensation and any Nonincentive Compensation.
(b) TERMINATION UPON DISABILITY. If this Agreement is terminated
by either party as a result of the Executive's Disability, as
determined under Section 5.2, the Employer will pay the
Executive his Salary and Benefits through the remainder of the
calendar month during which such termination is effective and
for the lesser of (i) six consecutive months thereafter, or
(ii) the period until Disability insurance benefits commence
under the Disability insurance coverage, if any, furnished by
the Employer to the Executive. The Executive shall be entitled
to the vested portions of his Incentive Compensation and
Nonincentive Compensation and to a pro rata portion of his
Incentive Compensation and Nonincentive Compensation for the
year during which such Disability occurs, but shall not be
entitled to any other Incentive Compensation or Nonincentive
Compensation.
(c) TERMINATION UPON DEATH. If this Agreement is terminated
because of the Executive's death, the Executive will be
entitled to receive his Salary and Benefits through the end of
the calendar month in which his death occurs. The Executive
shall be entitled to receive the vested portions of his
Incentive Compensation and Nonincentive Compensation and to a
pro rata portion of his Incentive Compensation and
Nonincentive Compensation for the year during which the
Executive's death occurs, but shall not be entitled to any
other Incentive Compensation or Nonincentive Compensation for
or any subsequent year.
(d) TERMINATION UPON RESIGNATION. If this Agreement is terminated
because of the voluntary resignation of the Executive
hereunder, the Executive shall be entitled to receive his
Salary and Benefits through the effective date of his
termination and any vested portions of his Incentive
Compensation or
7
<PAGE>
Nonincentive Compensation. The Executive shall not be entitled
to any other Incentive Compensation or to any other
Nonincentive Compensation.
(e) TERMINATION BY THE EMPLOYER NOT FOR CAUSE. If the Employer
terminates this Agreement not For Cause, the Executive, at the
option of the Employer, will be entitled to either: (i)
receive all of the compensation and Benefits provided by
Section 3.1, and the Incentive Compensation provided by
Section 3.2 and the Nonincentive Compensation provided by
Section 3.3 for the remainder of the Employment Term, and the
Executive shall be subject to the provisions of Section 7.2
hereof; or (ii) the Executive shall be entitled to receive all
of the compensation and Benefits provided by Section 3.1 and
the vested portions of any Incentive Compensation provided by
Section 3.2 and Nonincentive Compensation provided by Section
3.3 through the end of the calendar month in which such
termination occurs, and the Executive shall not be subject to
the provisions of Section 7.2.
(f) BENEFITS. The Executive's accrual of, or participation in
plans providing for, the Benefits will cease at the effective
date of the termination of this Agreement, and the Executive
will be entitled to accrued Benefits pursuant to such plans
only as provided in such plans. The Executive will not
receive, as part of his termination pay pursuant to this
Section 5, any payment or other compensation for any vacation,
holiday, sick leave, or other leave unused on the date the
notice of termination is given under this Agreement.
(g) EXPIRATION OF EMPLOYMENT. Employer agrees to notify the
Executive not less than sixty (60) days prior to the
expiration of the initial term of this Agreement or any
subsequent continuation thereof as to whether Employer desires
to extend the Employment Period of this Agreement.
Section 6. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS.
6.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. The Executive acknowledges that
during the Employment Period and as a part of his employment, the Executive will
be afforded access to Confidential Information; public disclosure of such
Confidential Information could have an adverse effect on the Employer and its
business; because the Executive possesses substantial technical expertise and
skill with respect to the Employer's business, the Employer desires to obtain
exclusive ownership of each Employee Invention, and the Employer will be at a
substantial competitive disadvantage if it fails to acquire exclusive ownership
of each Employee Invention; and the provisions of this Section 6 are reasonable
and necessary to prevent the improper use or disclosure of Confidential
Information and to provide the Employer with exclusive ownership of all Employee
Inventions.
6.2 AGREEMENTS OF THE EXECUTIVE. In consideration of the compensation and
benefits to be paid or provided to the Executive by the Employer under this
Agreement, the Executive covenants as follows:
8
<PAGE>
(a) CONFIDENTIALITY.
(i) During and for a period of three (3) years following the
Employment Period, the Executive will hold in confidence
the Confidential Information and will not disclose it to
any person except with the specific prior written
consent of the Employer or except as otherwise expressly
permitted by the terms of this Agreement.
(ii) Any trade secrets of any Affiliate will be entitled to
all of the protections and benefits under the common law
of the State of Texas and any other applicable law. If
any information that the Employer deems to be a trade
secret is found by a court of competent jurisdiction not
to be a trade secret for purposes of this Agreement,
such information will, nevertheless, be considered
Confidential Information for purposes of this Agreement.
The Executive hereby waives any requirement that the
Employer submit proof of the economic value of any trade
secret or post a bond or other security.
(iii) None of the foregoing obligations and restrictions
applies to any part of the Confidential Information that
the Executive demonstrates either (x) was known by
Executive prior to the date of his employment by the
Employer, (y) was or became generally available to the
public other than as a result of a disclosure by the
Executive, or (z) was made known to Executive on a
nonconfidential basis from a source other than Employer
or its representatives or agents, provided that such
source is not bound by a confidentiality agreement with,
or other obligation of secrecy to, Employer or another
party.
(iv) The Executive will not remove from the premises of the
Employer or any Affiliate (except to the extent such
removal is for purposes of the performance of the
Executive's duties at home or while traveling, or except
as otherwise specifically authorized by the Employer or
such Affiliate) any document, record, notebook, plan,
model, component, device, or computer software or code,
whether embodied in a disk or in any other form
(collectively, the "PROPRIETARY ITEMS"). The Executive
recognizes that, as between the Employer or any
Affiliate and the Executive, all of the Proprietary
Items, whether or not developed by the Executive, are
the exclusive property of the Employer or the
Affiliates. Upon termination of this Agreement by either
party, or upon the request of the Employer or any
Affiliate during the Employment Period, the Executive
will return to the Employer or the Affiliates all of the
Proprietary Items in the Executive's possession or
subject to the Executive's control, and the Executive
shall not retain any copies, abstracts, sketches, or
other physical embodiment of any of the Proprietary
Items.
9
<PAGE>
(b) EMPLOYEE INVENTIONS. Each Employee Invention will belong
exclusively to the Employer. The Executive acknowledges that
all of the Executive's writing, works of authorship, specially
commissioned works, and other Employee Inventions are works
made for hire and the property of the Employer, including any
copyrights, patents, or other intellectual property rights
pertaining thereto. If it is determined that any such works
are not works made for hire, the Executive hereby assigns to
the Employer all of the Executive's right, title, and
interest, including all rights of copyright, patent, and other
intellectual property rights, to or in such Employee
Inventions. The Executive covenants that he will promptly:
(i) disclose to the Employer in writing any Employee
Invention;
(ii) assign to the Employer or to a party designated by
the Employer, at the Employer's request and
without additional compensation, all of the
Executive's right to the Employee Invention for
the United States and all foreign jurisdictions;
(iii) execute and deliver to the Employer such
applications, assignments, and other documents as
the Employer may request in order to apply for and
obtain patents or other registrations with respect
to any Employee Invention in the United States and
any foreign jurisdictions;
(iv) sign all other papers necessary to carry out the
above obligations; and
(v) give testimony and render any other assistance in
support of the Employer's rights to any Employee
Invention.
(c) COMPENSATION FOR EMPLOYEE INVENTIONS. In the event that any
Employee Invention results in the issuance to the Employer of
a patent or copyright for the United States or any foreign
jurisdiction, Executive shall be entitled to receive from the
Employer a royalty equal to 2.0% of Employer's revenues
directly arising from the sale or licensing of one or more
products utilizing the Employee Invention covered by such
patent or copyright. Such royalty shall be payable to
Executive annually, within one hundred and twenty (120) days
after the end of each Fiscal Year during the Employment
Period.
6.3 DISPUTES OR CONTROVERSIES. The Executive recognizes that should a
dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Employer, the Executive, and
10
<PAGE>
their respective attorneys and experts, who will agree, in advance and in
writing, to receive and maintain all such information in secrecy, except as may
be limited by them in writing.
Section 7. NON-COMPETITION AND NON-INTERFERENCE.
7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. The Executive acknowledges and
agrees that the limitations set forth in this Section 7 are a necessary part of
and ancillary to the Executive's agreement not to disclose Confidential
Information, reasonable and do not impose a greater restraint on the activities
of the Executive than is necessary to protect the business interest of the
Employer. In the event that any such territorial, scope, or time limitation are
deemed to be unreasonable by a court of competent jurisdiction, the Executive
agrees to the reduction of the territorial, scope or time limitation to the
area, scope or time which such court shall have deemed reasonable.
7.2 COVENANTS OF THE EXECUTIVE. In consideration of the acknowledgments by
the Executive, and in consideration of the compensation and benefits to be paid
or provided to the Executive by the Employer in the event this Agreement is
terminated pursuant to Section 5.4(a), 5.4(d) or 5.4(e)(i), the Executive
covenants that he will not, directly or indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period
(as defined below), engage or invest in, own, manage, operate,
finance, control, or participate in the ownership, management,
operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend the
Executive's name or any similar name to, lend Executive's
credit to or render services or advice to, any business whose
products or activities compete in whole or in part with the
products or activities of the Employer or any Affiliate of
Employer anywhere within the geographic areas in which the
Employer or any such Affiliate now or hereafter conducts its
business; provided, however, that the Executive may purchase
or otherwise acquire up to (but not more than) one percent of
any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise)
if such securities are listed on any national or regional
securities exchange or have been registered under Section
12(g) of the Securities Exchange Act of 1934;
(b) whether for the Executive's own account or for the account of
any other person, at any time during the Employment Period and
the Post-Employment Period, solicit business of the same or
similar type being carried on by the Employer or any Affiliate
of Employer, from any person known by the Executive to be a
customer of the Employer or any such Affiliate, whether or not
the Executive had personal contact with such person during and
by reason of the Executive's employment with the Employer;
(c) whether for the Executive's own account or the account of any
other person at any time during the Employment Period and the
Post-Employment Period, (i) solicit, employ, or otherwise
engage as an employee, independent
11
<PAGE>
contractor, or otherwise, any person who is or was an employee
of the Employer or any Affiliate of Employer at any time
during the Employment Period or in any manner induce or
attempt to induce any employee of the Employer and any such
Affiliate to terminate his employment with the Employer; or
(ii) interfere with the Employer's or any Affiliate's
relationship with any person, including any person who at any
time during the Employment Period was an employee, contractor,
supplier, or customer of the Employer or any such Affiliate;
or
(d) at any time during or after the Employment Period, disparage
the Employer or any of its shareholders, directors, officers,
employees, or agents.
For purposes of this Section 7.2, the term "POST-EMPLOYMENT PERIOD" means
the two-year period beginning on the date of termination of the Executive's
employment with the Employer.
If any covenant in this Section 7.2 is held to be unreasonable, arbitrary,
or against public policy, such covenant will be considered to be divisible with
respect to scope, time, and geographic area, and such lesser scope, time, or
geographic area, or all of them, as a court of competent jurisdiction may
determine to be reasonable, not arbitrary, and not against public policy, will
be effective, binding, and enforceable against the Executive.
The period of time applicable to any covenant in this Section 7.2 will be
extended by the duration of any violation by the Executive of such covenant.
The Executive will, while the covenant under this Section 7.2 is in
effect, give notice to the Employer, within ten days after accepting any other
employment, of the identity of the Executive's new employer. The Employer may
notify such new employer that the Executive is bound by this Agreement.
Section 8. GENERAL PROVISIONS.
8.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. The Executive acknowledges
that the injury that would be suffered by the Employer as a result of a breach
of the provisions of this Agreement (including any provision of Sections 6 and
7) would be irreparable and that an award of monetary damages to the Employer
for such a breach would be an inadequate remedy. Consequently, the Employer will
have the right, in addition to any other rights it may have, to obtain
injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce any provision of this Agreement, and the Employer will not
be obligated to post bond or other security in seeking such relief. Any such
remedy shall be in addition to any damages which the Employer may be legally
entitled to recover as a result of any breach by the Employee of any provision
of this Agreement. The Employer may pursue any of the remedies described in this
Section concurrently or consecutively and in any order as to such breach or
violation, and the pursuit of any one of such remedies at any time will not be
deemed an election of remedies or a waiver of the right to pursue any other
available remedy.
12
<PAGE>
8.2 ESSENTIAL AND INDEPENDENT COVENANTS. The covenants by the Executive in
Sections 6 and 7 are essential elements of this Agreement supported by the
payment of $10.00 and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Executive, and without the
Executive's agreement to comply with such covenants, the Employer would not have
entered into this Agreement or employed or continued the employment of the
Executive. The Employer and the Executive have independently consulted their
respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenants, with specific regard to the
nature of the business conducted by the Employer.
If the Executive's employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Executive in Sections 6 and 7.
8.3 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE. The Executive
represents and warrants to the Employer that the execution and delivery by the
Executive of this Agreement do not, and the performance by the Executive of the
Executive's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: violate any judgment, writ, injunction, or
order of any court, arbitrator, or governmental agency applicable to the
Executive; or conflict with, result in the breach of any provisions of or the
termination of, or constitute a default under, any agreement to which the
Executive is a party or by which the Executive is or may be bound. The Executive
further represents and warrants to the Employer that no agreements or
understandings, whether written or oral, are currently in force and effect
between the Executive and the Employer, or any other Person concerning the
subject matter of this Agreement.
8.4 OBLIGATIONS CONTINGENT ON PERFORMANCE. The obligations of the Employer
hereunder, including its obligation to pay the compensation provided for herein,
are contingent upon the Executive's performance of the Executive's obligations
hereunder.
8.5 WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
no claim or right arising out of this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; no waiver that may be given by a party will
be applicable except in the specific instance for which it is given; and no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
8.6 NOTICES. All notices pertaining to this Agreement must be in writing,
must be sent to the addressee at the address set forth in this Section, or at
such other address as the addressee has designated by a notice given in the
manner set forth in this Section, and must be sent by telegram, telex,
facsimile, electronic mail, courier, or prepaid, certified U.S. Mail. Notices
will be deemed given when received, if sent by telegram, telex, electronic mail
or facsimile and if received between the
13
<PAGE>
hours of 8:00 a.m. and 5:00 p.m., local time of the destination address, on a
business day (with confirmation of completed transmission sufficing as prima
facie evidence of receipt of a notice sent by telex, telecopy, electronic mail,
or facsimile), and when delivered and receipted for (or when attempted delivery
is refused at the address where sent) if sent by courier or by certified U.S.
Mail. Notices sent by telegram, telex, electronic mail, or facsimile and
received between 12:01 a.m. and 7:59 a.m., local time of the destination
address, on a business day will be deemed given at 8:00 a.m. on that same day.
Notices sent by telegram, telex, electronic mail, or facsimile and received at a
time other than between the hours of 12:01 a.m. and 5:00 p.m., local time of the
destination address, on a business day will be deemed given at 8:00 a.m. on the
next following business day after the day of receipt. The addresses for notice
are as follows:
If to Employer: Geokinetics Inc.
5555 San Felipe, Suite 780
Houston, Texas 77056
Attention: President
Facsimile No.: (713) 850-7330
With a copy to: Chamberlain, Hrdlicka, White, Williams & Martin
1200 Smith Street, Suite 1400
Houston, Texas 77002
Attention: Mr. James J. Spring, III
Facsimile No.: (713) 658-2553
and
If to the Executive: Michael A. Dunn
3323 Sunset
Houston, Texas 77005
8.7 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This Agreement shall
inure to the benefit of, and shall be binding upon, the parties hereto and their
respective successors, assigns, heirs, and legal representatives, including any
entity with which the Employer may merge or consolidate or to which all or
substantially all of its assets may be transferred. The duties and covenants of
the Executive under this Agreement, being personal, may not be delegated.
8.8 INTERPRETATION. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. A determination that any provision of this Agreement is
unenforceable or invalid shall not affect the enforceability or validity of any
other provision.
8.9 HEADINGS. The section headings appearing in this Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this Agreement.
14
<PAGE>
8.10 ENTIRE AGREEMENT. This Agreement constitutes the final and entire
agreement and understanding between the parties to this Agreement concerning the
subject matter of this Agreement, and this Agreement supersedes and replaces all
prior agreements and understandings, whether written or oral, between such
parties concerning the subject matter of this Agreement. No alleged
representation, warranty, promise, inducement, or statement of intention not
expressly set forth in this Agreement is binding on any party to this Agreement.
8.11 ACKNOWLEDGMENT AND RELEASE BY THE EXECUTIVE. By his execution of this
Agreement, the Executive acknowledges that this Agreement supersedes and
replaces all other agreements and understandings, whether written or oral,
between the Executive and any other Person concerning the subject matter of this
Agreement. In consideration for the rights and obligations arising under this
Agreement, the Executive hereby voluntarily, knowingly, fully, finally,
completely, and forever releases, relinquishes, and forever discharges the
Employer and its Affiliates, their officers, directors, employees, and agents,
from any and all claims, actions, demands, and causes of action of whatever kind
or character, whether known or unknown, joint or several, which the Executive
might have or might claim to have against the Employer for any and all injuries,
harm, damages, penalties, costs, losses, expenses, attorneys' fees, liabilities,
or other detriments, if any, whatsoever and whenever incurred, suffered, or
claimed by the Executive arising from any prior agreement or understanding,
whether written or oral, between the Executive and the Employer, or any other
Person concerning the subject matter of this Agreement.
8.12 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Texas without regard to conflicts of laws principles.
8.13 JURISDICTION. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against either of the parties in the courts of the State of Texas,
County of Harris, or, if it has or can acquire jurisdiction, in the United
States District Court for the District of Texas, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on either party anywhere in the world.
8.14 CASHLESS EXERCISE OF OPTIONS. The Executive shall be entitled to
exercise the options granted pursuant to Section 3.3: (i) in cash or by
certified or cashier's check payable to Employer; or (ii) by delivery to
Employer of certificates representing the number of shares of Common Stock then
owned by the Executive, the Designated Value of which equals the option price of
the shares of Common Stock purchased pursuant to the option or options being
exercised. (For purposes of this Agreement, the Designated Value of any shares
of Common Stock delivered in payment of the option price payable upon exercise
of any option granted hereunder shall be the Designated Value as of the exercise
date, and the exercise date shall be the date of delivery of the certificates
for the Common Stock used as payment of such option price. The "Designated
Value" of the shares of Common Stock on a given date shall mean the average of
the closing prices of the Common Stock on the principal market or registered
exchange on which the Common Stock is traded (or the average of the closing bid
and asked prices, if a single closing price is not reported for such market) on
the ten (10) consecutive trading days preceding the date for the determination
of such value, provided
15
<PAGE>
that the Common Stock is then traded on the over-the-counter market or on the
NASDAQ National Market System or any registered securities exchange.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EMPLOYER:
GEOKINETICS INC.
BY:
JAY D. HABER, PRESIDENT
EXECUTIVE:
MICHAEL A. DUNN
16
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement (this "AGREEMENT") is made as of July __, 1997
by GEOKINETICS INC, a Delaware corporation (the "EMPLOYER"), and THOMAS J.
CONCANNON, an individual resident of the State of New Jersey (the "EXECUTIVE").
INTRODUCTION
Employer, directly or through one or more subsidiaries, is engaged in the
business of (i) conducting 2-D and 3-D seismic surveys of oil and gas prospects
and (ii) exploring for and producing oil and gas in the United States. The
Employer desires to employ the Executive, and the Executive wishes to accept
such employment, upon the terms and conditions set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
Section 1. DEFINITIONS. For the purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section 1.
1.1 "AFFILIATE" or "AFFILIATES" -- any Person that, directly or
indirectly, controls, or is controlled by or under common control with, the
Employer, including the Employer. For the purposes of this definition, "CONTROL"
(including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the
power to direct or cause the direction of the management and policies of any
Person, directly or indirectly, through ownership of voting securities, by
contract, or otherwise.
1.2 "AGREEMENT" -- this Employment Agreement, including all Exhibits
attached hereto, as amended from time to time.
1.3 "BASIC COMPENSATION" -- Salary and Benefits.
1.4 "BENEFITS" -- as defined in Section 3.1(b).
1.5 "BOARD OF DIRECTORS" -- the board of directors of the Employer.
1.6 "CONFIDENTIAL INFORMATION" -- any and all:
(a) trade secrets concerning the business and affairs of any
Affiliate, product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions and ideas, past,
current, and planned research and development, current and
planned manufacturing or distribution methods and processes,
customer lists, current and anticipated customer requirements,
price lists, market studies, business plans, seismic data
bases, computer software and programs (including object code
and source code), computer software and database technologies,
systems, structures, and architectures (and related formulae,
compositions,
1
<PAGE>
processes, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and
information), and any other information, however documented,
that is a trade secret within the meaning of the common law of
the State of Texas; and
(b) information concerning the business and affairs of any
Affiliate (which includes historical financial statements,
financial projections and budgets, historical and projected
sales, capital spending budgets, exploration prospects and
plans, the names and backgrounds of key personnel, personnel
training and techniques and materials), however documented;
and
(c) notes, analysis, compilations, studies, summaries, and other
material prepared by or for any Affiliate containing or based,
in whole or in part, on any information included in the
foregoing.
1.7 "DISABILITY" -- as defined in Section 5.2.
1.8 "EFFECTIVE DATE" -- the date stated in the first paragraph of the
Agreement.
1.9 "EMPLOYEE INVENTION" -- any idea, invention, technique, modification,
process, or improvement (whether patentable or not), any industrial design
(whether registerable or not), any mask work, however fixed or encoded, that is
suitable to be fixed, embedded or programmed in a semiconductor product (whether
recordable or not), and any work of authorship (whether or not copyright
protection may be obtained for it) created, conceived, or developed by the
Executive, either solely or in conjunction with others, during the Employment
Period, or a period that includes a portion of the Employment Period, that
relates in any way to, or is useful in any manner in, the business then being
conducted or proposed to be conducted by the Employer or the Affiliates, and any
such item created by the Executive, either solely or in conjunction with others,
following termination of the Executive's employment with the Employer, that is
based upon or uses Confidential Information.
1.10 "EMPLOYMENT PERIOD" -- the term of the Executive's employment under
this Agreement.
1.11 "FISCAL YEAR" -- the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
1.12 "FOR CAUSE" -- as defined in Section 5.3.
1.13 "INCENTIVE COMPENSATION" -- as defined in Section 3.2.
1.14 "OPTION PLAN" -- the Geokinetics Inc. 1995 Employee Stock Option
Plan.
1.15 "NONINCENTIVE COMPENSATION" -- as defined in Section 3.3.
2
<PAGE>
1.16 "PERSON" -- any individual, general or limited partnership, joint
venture, corporation (including any non-profit corporation), limited liability
company, bank, estate, trust, association, entity, unincorporated organization,
or government body.
1.17 "POST-EMPLOYMENT PERIOD" -- as defined in Section 7.2.
1.18 "PROPRIETARY ITEMS" -- as defined in Section 6.2(a)(iv).
1.19 "SALARY" -- as defined in Section 3.1(a).
Section 2. EMPLOYMENT TERMS AND DUTIES.
2.1 EMPLOYMENT. The Employer hereby employs the Executive, and the
Executive hereby accepts employment by the Employer, upon the terms and
conditions set forth in this Agreement.
2.2 TERM. Subject to the provisions of Section 5, the term of the
Executive's employment under this Agreement will be three (3) years, beginning
on the Effective Date and ending on the third anniversary of the Effective Date.
Thereafter, the term may continue for additional one (1) year periods upon the
mutual written agreement of the Executive and the Employer.
2.3 DUTIES. The Executive will have such duties as are assigned or
delegated to the Executive by the Board of Directors (which duties shall be of a
senior management or executive level) and will initially serve as Vice President
and Chief Financial Officer of the Employer. The Executive will devote
substantially all of his entire business time, attention, skill, and energy
exclusively to the business of the Employer, will use his best efforts to
promote the success of the Employer's business, and will cooperate fully with
the Board of Directors in the advancement of the best interests of the Employer.
For the Executive's service as a director of the Employer or as a director or
officer of any of its Affiliates, the Executive will fulfill his duties as such
director or officer without additional compensation.
Section 3. COMPENSATION.
3.1 BASIC COMPENSATION.
(a) SALARY. The Executive will be paid an annual salary of
$120,000.00, subject to adjustment as provided below (the
"SALARY"), which will be payable in equal periodic
installments according to the Employer's customary payroll
practices, but no less frequently than monthly. The Salary
will be reviewed by the Board of Directors not less frequently
than annually, and may be adjusted upward or downward in the
sole discretion of the Board of Directors, but in no event
will the Salary be less than $120,000.00 per year.
(b) BENEFITS. The Executive will, during the Employment Period, be
permitted to participate in such pension, profit sharing,
bonus, life insurance, hospitalization, major medical, and
other employee benefit plans of the
3
<PAGE>
Employer that may be in effect from time to time, to the
extent the Executive is eligible under the terms of those
plans (collectively, the "BENEFITS").
3.2 INCENTIVE COMPENSATION. As additional compensation (the "INCENTIVE
COMPENSATION") for the services to be rendered by the Executive pursuant to this
Agreement, the Executive will be entitled to participate in the following plans,
in the manner described below:
(a) The Executive shall be entitled to receive an annual bonus
("BONUS") based upon the amount of the Employer's earnings
before interest, taxes, depreciation and amortization
("EBITDA") in accordance with the terms of the Bonus Plan
attached hereto as Exhibit "A". The Employer's earnings before
EBITDA shall be computed by Geokinetics, for purposes of
calculation of the Bonus, for each twelve-month period
beginning on July 1 and ending on June 30 during the term
hereof, and shall be determined in accordance with generally
accepted accounting principles, consistently applied.
3.3 NONINCENTIVE COMPENSATION. As additional compensation (the
"NONINCENTIVE COMPENSATION") for the services to be rendered by the Executive
pursuant to this Agreement, the Executive shall be permitted to participate in
the Option Plan. Upon the commencement of Executive's employment hereunder, the
Executive shall be granted two options to purchase an aggregate of 300,000
shares of Common Stock at a price of $.75 per share on the terms set forth
below:
(a) The Executive will have one option (the "First Option") to
purchase 150,000 shares of Common Stock and will become
eligible to exercise 50,000 shares of the First Option on and
after each of July 15, 1998, 1999 and 2000, provided the
Executive continues to be employed by the Employer hereunder
on such dates, and the Executive exercises such Option prior
to or on July 15, 2002.
(b) The Executive will have a second option (the "Second Option")
to purchase 150,000 shares of Common Stock and will be
eligible to exercise all or any part of the Second Option
during the period beginning on the Effective Date hereof and
ending on July 15, 2002.
3.4 VACATIONS AND HOLIDAYS. The Executive will be entitled to four weeks'
paid vacation each Fiscal Year in accordance with the vacation policies of the
Employer in effect for its executive officers from time to time. Vacation must
be taken by the Executive at such time or times as approved by the Chairman of
the Board of Directors. The Executive will also be entitled to the paid holidays
and other paid leave set forth in the Employer's policies. Vacation days and
holidays during any Fiscal Year that are not used by the Executive during such
Fiscal Year may not be used in any subsequent Fiscal Year, but Executive shall
be paid at the end of each Fiscal Year for any vacation days which Executive was
unable to use as a result of a request for approval of a vacation having been
denied by the Chairman of the Board of Directors.
4
<PAGE>
Section 4. FACILITIES AND EXPENSES. The Employer will furnish the
Executive office space, equipment, supplies, and such other facilities and
personnel as the Employer deems necessary or appropriate for the performance of
the Executive's duties under this Agreement and as are commensurate with
Executive's duties under Section 2.3. The Employer will pay the Executive's dues
in such professional societies and organizations as the Chairman of the Board of
Directors of the Employer deems appropriate, and will pay on behalf of the
Executive (or reimburse the Executive for) reasonable expenses incurred by the
Executive at the request of, or on behalf of, the Employer in the performance of
the Executive's duties pursuant to this Agreement, and in accordance with the
Employer's employment policies, including reasonable expenses incurred by the
Executive in attending conventions, seminars, and other business meetings, in
appropriate business entertainment activities, and for promotional expenses. The
Executive must file expense reports with respect to such expenses in accordance
with the Employer's policies.
Section 5. TERMINATION.
5.1 EVENTS OF TERMINATION. The Employment Period, the Executive's Basic
Compensation, Incentive Compensation, Nonincentive Compensation, and any and all
other rights of the Executive under this Agreement or otherwise as an employee
of the Employer will terminate (except as otherwise provided in this Section 5):
(a) upon the death of the Executive;
(b) upon the Disability of the Executive (as defined in Section
5.2) immediately upon notice from either party to the other;
(c) For Cause (as defined in Section 5.3), immediately upon notice
from the Employer to the Executive, or at such later time as
such notice may specify; or
(d) upon Executive's voluntary termination of employment, which
termination shall be effective thirty (30) days after
Employer's receipt of Executive's written resignation.
5.2 DISABILITY. For purposes of this Section 5, the Executive will be
deemed to have a "DISABILITY" if, for physical or mental reasons, the Executive
is unable to perform the Executive's duties under this Agreement for 120
consecutive days, or 180 days during any twelve month period, as determined in
accordance with this Section 5.2. The Disability of the Executive will be
determined by a medical doctor selected by written agreement of the Employer and
the Executive upon the request of either party by notice to the other. If the
Employer and the Executive cannot agree on the selection of a medical doctor,
each of them will select a medical doctor and the two medical doctors will
select a third medical doctor who will determine whether the Executive has a
Disability. The determination of the medical doctor selected under this Section
5.2 will be binding on both parties. The Executive must submit to a reasonable
number of examinations by the medical doctor making the determination of
Disability under this Section 5.2, and the Executive hereby authorizes the
disclosure and release to the Employer of such determination and all supporting
medical records. If
5
<PAGE>
the Executive is not legally competent, the Executive's legal guardian or duly
authorized attorney-in-fact will act on behalf of the Executive, under this
Section 5.2, for the purposes of submitting the Executive to the examinations,
and providing the authorization of disclosure, required under this Section 5.2.
5.3 FOR CAUSE. For purposes of Section 5.1, the phrase "FOR CAUSE" means
any conduct or behavior by the Executive that, in the good faith judgment of the
Employer's Board of Directors, is materially detrimental to or materially
harmful to the business or reputation of the Employer including, without
limitation: (a) the Executive's breach of a material provisions of this
Agreement, which breach is not substantially cured within ten (10) days after
Executive's receipt of written notice thereof from Employer; (b) the Executive's
repeated failure to adhere to any written Employer policy and Executive's
failure to cure such noncompliance within ten (10) days after receipt of written
notice thereof from Employer; (c) the appropriation (or attempted appropriation)
of a material business opportunity of the Employer, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Employer; (d) the misappropriation (or attempted
misappropriation) of any of the Employer's funds or property; or (e) the
conviction of, the indictment for (or its procedural equivalent), or the
entering of a guilty plea or plea of no contest with respect to, a felony (other
than involving the misuse of alcohol) or the equivalent thereof.
5.4 TERMINATION PAY. Effective upon the termination of this Agreement, the
Employer will be obligated to pay the Executive (or, in the event of his death,
his designated beneficiary as defined below) only such compensation as is
provided in this Section 5.4, and in lieu of all other amounts and in settlement
and complete release of all claims the Executive may have against the Employer
under this Agreement. For purposes of this Section 5.4, the Executive's
designated beneficiary will be such individual beneficiary or trust, located at
such address, as the Executive may designate by notice to the Employer from time
to time or, if the Executive fails to give notice to the Employer of such a
beneficiary, the Executive's estate. Notwithstanding the preceding sentence, the
Employer will have no duty, in any circumstances, to attempt to open an estate
on behalf of the Executive, to determine whether any beneficiary designated by
the Executive is alive or to ascertain the address of any such beneficiary, to
determine the existence of any trust, to determine whether any person or entity
purporting to act as the Executive's personal representative (or the trustee of
a trust established by the Executive) is duly authorized to act in that
capacity, or to locate or attempt to locate any beneficiary, personal
representative, or trustee.
(a) TERMINATION BY THE EMPLOYER FOR CAUSE. If the Employer
terminates this Agreement For Cause, the Executive will be
entitled to receive his Salary and Benefits through the date
such termination is effective and the vested portion of any
Incentive Compensation and any Nonincentive Compensation.
(b) TERMINATION UPON DISABILITY. If this Agreement is terminated
by either party as a result of the Executive's Disability, as
determined under Section 5.2, the Employer will pay the
Executive his Salary and Benefits through the remainder of the
calendar month during which such termination is effective and
for the lesser of (i) six consecutive months thereafter, or
(ii) the period until Disability insurance benefits commence
under the Disability insurance
6
<PAGE>
coverage, if any, furnished by the Employer to the Executive.
The Executive shall be entitled to the vested portions of his
Incentive Compensation and Nonincentive Compensation and to a
pro rata portion of his Incentive Compensation and
Nonincentive Compensation for the year during which such
Disability occurs, but shall not be entitled to any other
Incentive Compensation or Nonincentive Compensation.
(c) TERMINATION UPON DEATH. If this Agreement is terminated
because of the Executive's death, the Executive will be
entitled to receive his Salary and Benefits through the end of
the calendar month in which his death occurs. The Executive
shall be entitled to receive the vested portions of his
Incentive Compensation and Nonincentive Compensation and to a
pro rata portion of his Incentive Compensation and
Nonincentive Compensation for the year during which the
Executive's death occurs, but shall not be entitled to any
other Incentive Compensation or Nonincentive Compensation for
or any subsequent year.
(d) TERMINATION UPON RESIGNATION. If this Agreement is terminated
because of the voluntary resignation of the Executive
hereunder, the Executive shall be entitled to receive his
Salary and Benefits through the effective date of his
termination and any vested portions of his Incentive
Compensation or Nonincentive Compensation. The Executive shall
not be entitled to any other Incentive Compensation or to any
other Nonincentive Compensation.
(e) TERMINATION BY THE EMPLOYER NOT FOR CAUSE. If the Employer
terminates this Agreement not For Cause, the Executive, at the
option of the Employer, will be entitled to either: (i)
receive all of the compensation and Benefits provided by
Section 3.1, and the Incentive Compensation provided by
Section 3.2 and the Nonincentive Compensation provided by
Section 3.3 for the remainder of the Employment Term, and the
Executive shall be subject to the provisions of Section 7.2
hereof; or (ii) the Executive shall be entitled to receive all
of the compensation and Benefits provided by Section 3.1 and
the vested portions of any Incentive Compensation provided by
Section 3.2 and Nonincentive Compensation provided by Section
3.3 through the end of the calendar month in which such
termination occurs, and the Executive shall not be subject to
the provisions of Section 7.2.
(f) BENEFITS. The Executive's accrual of, or participation in
plans providing for, the Benefits will cease at the effective
date of the termination of this Agreement, and the Executive
will be entitled to accrued Benefits pursuant to such plans
only as provided in such plans. The Executive will not
receive, as part of his termination pay pursuant to this
Section 5, any payment or other compensation for any vacation,
holiday, sick leave, or other leave unused on the date the
notice of termination is given under this Agreement.
7
<PAGE>
(g) EXPIRATION OF EMPLOYMENT. Employer agrees to notify the
Executive not less than sixty (60) days prior to the
expiration of the initial term of this Agreement or any
subsequent continuation thereof as to whether Employer desires
to extend the Employment Period of this Agreement.
Section 6. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS.
6.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. The Executive acknowledges that
during the Employment Period and as a part of his employment, the Executive will
be afforded access to Confidential Information; public disclosure of such
Confidential Information could have an adverse effect on the Employer and its
business; because the Executive possesses substantial technical expertise and
skill with respect to the Employer's business, the Employer desires to obtain
exclusive ownership of each Employee Invention, and the Employer will be at a
substantial competitive disadvantage if it fails to acquire exclusive ownership
of each Employee Invention; and the provisions of this Section 6 are reasonable
and necessary to prevent the improper use or disclosure of Confidential
Information and to provide the Employer with exclusive ownership of all Employee
Inventions.
6.2 AGREEMENTS OF THE EXECUTIVE. In consideration of the compensation and
benefits to be paid or provided to the Executive by the Employer under this
Agreement, the Executive covenants as follows:
(a) CONFIDENTIALITY.
(i) During and for a period of two (2) years following the
Employment Period, the Executive will hold in confidence
the Confidential Information and will not disclose it to
any person except with the specific prior written
consent of the Employer or except as otherwise expressly
permitted by the terms of this Agreement.
(ii) Any trade secrets of any Affiliate will be entitled to
all of the protections and benefits under the common law
of the State of Texas and any other applicable law. If
any information that the Employer deems to be a trade
secret is found by a court of competent jurisdiction not
to be a trade secret for purposes of this Agreement,
such information will, nevertheless, be considered
Confidential Information for purposes of this Agreement.
The Executive hereby waives any requirement that the
Employer submit proof of the economic value of any trade
secret or post a bond or other security.
(iii) None of the foregoing obligations and restrictions
applies to any part of the Confidential Information that
the Executive demonstrates either (x) was known by
Executive prior to the date of his employment by the
Employer, (y) was or became generally available to the
public other than as a result of a disclosure by the
Executive, or (z) was
8
<PAGE>
made known to Executive on a nonconfidential basis from
a source other than Employer or its representatives or
agents, provided that such source is not bound by a
confidentiality agreement with, or other obligation of
secrecy to, Employer or another party.
(iv) The Executive will not remove from the premises of the
Employer or any Affiliate (except to the extent such
removal is for purposes of the performance of the
Executive's duties at home or while traveling, or except
as otherwise specifically authorized by the Employer or
such Affiliate) any document, record, notebook, plan,
model, component, device, or computer software or code,
whether embodied in a disk or in any other form
(collectively, the "PROPRIETARY ITEMS"). The Executive
recognizes that, as between the Employer or any
Affiliate and the Executive, all of the Proprietary
Items, whether or not developed by the Executive, are
the exclusive property of the Employer or the
Affiliates. Upon termination of this Agreement by either
party, or upon the request of the Employer or any
Affiliate during the Employment Period, the Executive
will return to the Employer or the Affiliates all of the
Proprietary Items in the Executive's possession or
subject to the Executive's control, and the Executive
shall not retain any copies, abstracts, sketches, or
other physical embodiment of any of the Proprietary
Items.
(b) EMPLOYEE INVENTIONS. Each Employee Invention will belong
exclusively to the Employer. The Executive acknowledges that
all of the Executive's writing, works of authorship, specially
commissioned works, and other Employee Inventions are works
made for hire and the property of the Employer, including any
copyrights, patents, or other intellectual property rights
pertaining thereto. If it is determined that any such works
are not works made for hire, the Executive hereby assigns to
the Employer all of the Executive's right, title, and
interest, including all rights of copyright, patent, and other
intellectual property rights, to or in such Employee
Inventions. The Executive covenants that he will promptly:
(i) disclose to the Employer in writing any Employee
Invention;
(ii) assign to the Employer or to a party designated by
the Employer, at the Employer's request and
without additional compensation, all of the
Executive's right to the Employee Invention for
the United States and all foreign jurisdictions;
(iii) execute and deliver to the Employer such
applications, assignments, and other documents as
the Employer may request in order to apply for and
obtain patents or other
9
<PAGE>
registrations with respect to any Employee
Invention in the United States and any foreign
jurisdictions;
(iv) sign all other papers necessary to carry out the
above obligations; and
(v) give testimony and render any other assistance in
support of the Employer's rights to any Employee
Invention.
6.3 DISPUTES OR CONTROVERSIES. The Executive recognizes that should a
dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Employer, the Executive, and their respective attorneys and experts, who will
agree, in advance and in writing, to receive and maintain all such information
in secrecy, except as may be limited by them in writing.
Section 7. NON-COMPETITION AND NON-INTERFERENCE.
7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. The Executive acknowledges and
agrees that the limitations set forth in this Section 7 are a necessary part of
and ancillary to the Executive's agreement not to disclose Confidential
Information, reasonable and do not impose a greater restraint on the activities
of the Executive than is necessary to protect the business interest of the
Employer. In the event that any such territorial, scope, or time limitation are
deemed to be unreasonable by a court of competent jurisdiction, the Executive
agrees to the reduction of the territorial, scope or time limitation to the
area, scope or time which such court shall have deemed reasonable.
7.2 COVENANTS OF THE EXECUTIVE. In consideration of the acknowledgments by
the Executive, and in consideration of the compensation and benefits to be paid
or provided to the Executive by the Employer in the event this Agreement is
terminated pursuant to Section 5.4(a), 5.4(d) or 5.4(e)(i), the Executive
covenants that he will not, directly or indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period
(as defined below), engage or invest in, own, manage, operate,
finance, control, or participate in the ownership, management,
operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend the
Executive's name or any similar name to, lend Executive's
credit to or render services or advice to, any business whose
products or activities compete in whole or in part with the
products or activities of the Employer or any Affiliate of
Employer anywhere within the geographic areas in which the
Employer or any such Affiliate now or hereafter conducts its
business; provided, however, that the Executive may purchase
or otherwise acquire up to (but not more than) one percent of
any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise)
if such securities are listed on
10
<PAGE>
any national or regional securities exchange or have been
registered under Section 12(g) of the Securities Exchange Act
of 1934;
(b) whether for the Executive's own account or for the account of
any other person, at any time during the Employment Period and
the Post-Employment Period, solicit business of the same or
similar type being carried on by the Employer or any Affiliate
of Employer, from any person known by the Executive to be a
customer of the Employer or any such Affiliate, whether or not
the Executive had personal contact with such person during and
by reason of the Executive's employment with the Employer;
(c) whether for the Executive's own account or the account of any
other person at any time during the Employment Period and the
Post-Employment Period, (i) solicit, employ, or otherwise
engage as an employee, independent contractor, or otherwise,
any person who is or was an employee of the Employer or any
Affiliate of Employer at any time during the Employment Period
or in any manner induce or attempt to induce any employee of
the Employer and any such Affiliate to terminate his
employment with the Employer; or (ii) interfere with the
Employer's or any Affiliate's relationship with any person,
including any person who at any time during the Employment
Period was an employee, contractor, supplier, or customer of
the Employer or any such Affiliate; or
(d) at any time during or after the Employment Period, disparage
the Employer or any of its shareholders, directors, officers,
employees, or agents.
For purposes of this Section 7.2, the term "POST-EMPLOYMENT PERIOD" means
the two-year period beginning on the date of termination of the Executive's
employment with the Employer.
If any covenant in this Section 7.2 is held to be unreasonable, arbitrary,
or against public policy, such covenant will be considered to be divisible with
respect to scope, time, and geographic area, and such lesser scope, time, or
geographic area, or all of them, as a court of competent jurisdiction may
determine to be reasonable, not arbitrary, and not against public policy, will
be effective, binding, and enforceable against the Executive.
The period of time applicable to any covenant in this Section 7.2 will be
extended by the duration of any violation by the Executive of such covenant.
The Executive will, while the covenant under this Section 7.2 is in
effect, give notice to the Employer, within ten days after accepting any other
employment, of the identity of the Executive's new employer. The Employer may
notify such new employer that the Executive is bound by this Agreement.
11
<PAGE>
Section 8. GENERAL PROVISIONS.
8.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. The Executive acknowledges
that the injury that would be suffered by the Employer as a result of a breach
of the provisions of this Agreement (including any provision of Sections 6 and
7) would be irreparable and that an award of monetary damages to the Employer
for such a breach would be an inadequate remedy. Consequently, the Employer will
have the right, in addition to any other rights it may have, to obtain
injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce any provision of this Agreement, and the Employer will not
be obligated to post bond or other security in seeking such relief. Any such
remedy shall be in addition to any damages which the Employer may be legally
entitled to recover as a result of any breach by the Employee of any provision
of this Agreement. The Employer may pursue any of the remedies described in this
Section concurrently or consecutively and in any order as to such breach or
violation, and the pursuit of any one of such remedies at any time will not be
deemed an election of remedies or a waiver of the right to pursue any other
available remedy.
8.2 ESSENTIAL AND INDEPENDENT COVENANTS. The covenants by the Executive in
Sections 6 and 7 are essential elements of this Agreement supported by the
payment of $10.00 and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Executive, and without the
Executive's agreement to comply with such covenants, the Employer would not have
entered into this Agreement or employed or continued the employment of the
Executive. The Employer and the Executive have independently consulted their
respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenants, with specific regard to the
nature of the business conducted by the Employer.
If the Executive's employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Executive in Sections 6 and 7.
8.3 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE. The Executive
represents and warrants to the Employer that the execution and delivery by the
Executive of this Agreement do not, and the performance by the Executive of the
Executive's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: violate any judgment, writ, injunction, or
order of any court, arbitrator, or governmental agency applicable to the
Executive; or conflict with, result in the breach of any provisions of or the
termination of, or constitute a default under, any agreement to which the
Executive is a party or by which the Executive is or may be bound. The Executive
further represents and warrants to the Employer that no agreements or
understandings, whether written or oral, are currently in force and effect
between the Executive and the Employer, or any other Person concerning the
subject matter of this Agreement.
8.4 OBLIGATIONS CONTINGENT ON PERFORMANCE. The obligations of the Employer
hereunder, including its obligation to pay the compensation provided for herein,
are contingent upon the Executive's performance of the Executive's obligations
hereunder.
12
<PAGE>
8.5 WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
no claim or right arising out of this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; no waiver that may be given by a party will
be applicable except in the specific instance for which it is given; and no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
8.6 NOTICES. All notices pertaining to this Agreement must be in writing,
must be sent to the addressee at the address set forth in this Section, or at
such other address as the addressee has designated by a notice given in the
manner set forth in this Section, and must be sent by telegram, telex,
facsimile, electronic mail, courier, or prepaid, certified U.S. Mail. Notices
will be deemed given when received, if sent by telegram, telex, electronic mail
or facsimile and if received between the hours of 8:00 a.m. and 5:00 p.m., local
time of the destination address, on a business day (with confirmation of
completed transmission sufficing as prima facie evidence of receipt of a notice
sent by telex, telecopy, electronic mail, or facsimile), and when delivered and
receipted for (or when attempted delivery is refused at the address where sent)
if sent by courier or by certified U.S. Mail. Notices sent by telegram, telex,
electronic mail, or facsimile and received between 12:01 a.m. and 7:59 a.m.,
local time of the destination address, on a business day will be deemed given at
8:00 a.m. on that same day. Notices sent by telegram, telex, electronic mail, or
facsimile and received at a time other than between the hours of 12:01 a.m. and
5:00 p.m., local time of the destination address, on a business day will be
deemed given at 8:00 a.m. on the next following business day after the day of
receipt. The addresses for notice are as follows:
If to Employer: Geokinetics Inc.
5555 San Felipe, Suite 780
Houston, Texas 77056
Attention: President
Facsimile No.: (713) 850-7330
With a copy to: Chamberlain, Hrdlicka, White, Williams & Martin
1200 Smith Street, Suite 1400
Houston, Texas 77002
Attention: Mr. James J. Spring, III
Facsimile No.: (713) 658-2553
and
If to the Executive: Thomas J. Concannon
34 Willow Drive
Chester, New Jersey 07930
13
<PAGE>
8.7 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This Agreement shall
inure to the benefit of, and shall be binding upon, the parties hereto and their
respective successors, assigns, heirs, and legal representatives, including any
entity with which the Employer may merge or consolidate or to which all or
substantially all of its assets may be transferred. The duties and covenants of
the Executive under this Agreement, being personal, may not be delegated.
8.8 INTERPRETATION. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. A determination that any provision of this Agreement is
unenforceable or invalid shall not affect the enforceability or validity of any
other provision.
8.9 HEADINGS. The section headings appearing in this Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this Agreement.
8.10 ENTIRE AGREEMENT. This Agreement constitutes the final and entire
agreement and understanding between the parties to this Agreement concerning the
subject matter of this Agreement, and this Agreement supersedes and replaces all
prior agreements and understandings, whether written or oral, between such
parties concerning the subject matter of this Agreement. No alleged
representation, warranty, promise, inducement, or statement of intention not
expressly set forth in this Agreement is binding on any party to this Agreement.
8.11 ACKNOWLEDGMENT AND RELEASE BY THE EXECUTIVE. By his execution of this
Agreement, the Executive acknowledges that this Agreement supersedes and
replaces all other agreements and understandings, whether written or oral,
between the Executive and any other Person concerning the subject matter of this
Agreement. In consideration for the rights and obligations arising under this
Agreement, the Executive hereby voluntarily, knowingly, fully, finally,
completely, and forever releases, relinquishes, and forever discharges the
Employer and its Affiliates, their officers, directors, employees, and agents,
from any and all claims, actions, demands, and causes of action of whatever kind
or character, whether known or unknown, joint or several, which the Executive
might have or might claim to have against the Employer for any and all injuries,
harm, damages, penalties, costs, losses, expenses, attorneys' fees, liabilities,
or other detriments, if any, whatsoever and whenever incurred, suffered, or
claimed by the Executive arising from any prior agreement or understanding,
whether written or oral, between the Executive and the Employer, or any other
Person concerning the subject matter of this Agreement.
8.12 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Texas without regard to conflicts of laws principles.
8.13 JURISDICTION. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against either of the parties in the courts of the State of Texas,
County of Harris, or, if it has or can acquire jurisdiction, in the United
States District Court for the District of Texas, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any
14
<PAGE>
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on either party anywhere in the world.
8.14 CASHLESS EXERCISE OF OPTIONS. The Executive shall be entitled to
exercise the options granted pursuant to Section 3.3: (i) in cash or by
certified or cashier's check payable to Employer; or (ii) by delivery to
Employer of certificates representing the number of shares of Common Stock then
owned by the Executive, the Designated Value of which equals the option price of
the shares of Common Stock purchased pursuant to the option or options being
exercised. (For purposes of this Agreement, the Designated Value of any shares
of Common Stock delivered in payment of the option price payable upon exercise
of any option granted hereunder shall be the Designated Value as of the exercise
date, and the exercise date shall be the date of delivery of the certificates
for the Common Stock used as payment of such option price. The "Designated
Value" of the shares of Common Stock on a given date shall mean the average of
the closing prices of the Common Stock on the principal market or registered
exchange on which the Common Stock is traded (or the average of the closing bid
and asked prices, if a single closing price is not reported for such market) on
the ten (10) consecutive trading days preceding the date for the determination
of such value, provided that the Common Stock is then traded on the
over-the-counter market or on the NASDAQ National Market System or any
registered securities exchange.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EMPLOYER:
GEOKINETICS INC.
BY:
JAY D. HABER, PRESIDENT
EXECUTIVE:
THOMAS J. CONCANNON
15
