SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 1, 1999
GEOKINETICS INC.
(Exact name of Registrant as specified in charter)
DELAWARE 0-9268 94-1690082
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(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
5555 SAN FELIPE, SUITE 780, HOUSTON, TEXAS 77056
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (713) 850-7600
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On October 1, 1999, Registrant entered into a Securities Purchase
Agreement (the "PURCHASE AGREEMENT") with DLJ Investment Partners,
L.P. ("DLJ") and certain additional investors (collectively, the
"PURCHASERS"), pursuant to which Registrant (i) completed a
restructuring of its $40,000,000 in 12% Senior Subordinated Notes
Due April 2005 (the "PRIOR NOTES"), and (ii) received $4,000,000 in
additional senior secured debt financing from the Purchasers and
$1,000,000 from three other investors, including Steven A. Webster
and William R. Ziegler, two of the Registrant's directors (the
"SECURED LOAN"). Pursuant to the Purchase Agreement, Registrant (A)
exchanged the Prior Notes for its 13.5% Senior Secured Notes due
2005 in the aggregate principal amount of $45,358,000 issued to the
Purchasers (the "2005 NOTES"), (B) issued the Purchasers its 13.5%
Senior Secured Notes due 2002 in the aggregate principal amount of
up to $6,000,000 (the "2002 NOTES"), (C) granted security interests
covering substantially all of the Company's assets as security for
the 2005 Notes and the 2002 Notes, (D) caused certain of the
Corporation's wholly-owned subsidiaries to execute guarantees of the
2005 Notes and the 2002 Notes, (E) issued warrants to the Purchasers
of the 2002 Notes (the "2002 WARRANTS") to purchase 23,250,000
shares of Registrant's Common Stock, $0.01 par value per share (the
"COMMON STOCK") at a price of $0.56 per share, and (F) issued
warrants to the Purchasers of the 2005 Notes (the "2005 WARRANTS")
to purchase 26,818,594 shares of Common Stock at a price of $0.56
per share (the 2005 Warrants, together with the 2002 Warrants, being
the "WARRANTS"). Registrant issued 7,618,594 of the 2005 Warrants in
exchange for 7,618,594 warrants issued to the Purchasers of the
Prior Notes in April 1998. The Warrants were issued in accordance
with an Amended and Restated Warrant Agreement executed among the
Registrant and the Purchasers. As a result of the issuance of the
Warrants, the Purchasers, collectively, have the right to acquire
51.6% of Registrant's outstanding Common Stock on a fully diluted
basis.
ITEM 5. OTHER EVENTS.
Concurrently with the transactions contemplated by the Purchase
Agreement, (i) Registrant completed a refinancing of its debt
obligations to the principal equipment supplier for Registrant's
seismic acquisition operations, and (ii) Steven A. Webster was
elected non-executive Chairman of the Executive Committee of the
Registrant's Board of Directors.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
None Required.
(b) Pro Forma Financial Information
None Required.
(c) Exhibits
4.1 Securities Purchase Agreement dated as of October 1,
1999, among Registrant, DLJ Investment Partners, L.P.
and certain additional investors.
4.2 Amended and Restated Warrant Agreement dated as of
October 1, 1999, among Registrant, DLJ Investment
Partners, L.P. and certain additional investors.
4.3 Indenture dated as of October 1, 1999, executed by
the Registrant, Geokinetics Production Co., Inc.,
Quantum Geophysical, Inc., Geoscience Software
Solutions, Inc., Signature Geophysical Services, Inc.,
Reliable Exploration, Incorporated, and Geophysical
Development Corporation.
4.4 Amended and Restated Tag Along-Drag Along Agreement
dated as of September 30, 1999, among Registrant, DLJ
Investment Partners, L.P. and certain additional
investors.
99 Restructure Agreement dated October 1, 1999, among
Registrant, Geophysical Services, Inc., Quantum
Geophysical Services, Inc., Input/Output, Inc. and
Global Charter Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned herein to duly authorized.
Dated: October 18, 1999
GEOKINETICS INC.
By: /s/ THOMAS J. CONCANNON
Thomas J. Concannon, Vice President
and Chief Financial Officer
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EXHIBIT 4.1
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GEOKINETICS INC.,
THE GUARANTORS NAMED HEREIN
and
THE PURCHASERS NAMED HEREIN
SECURITIES PURCHASE AGREEMENT
Senior Secured Notes
Warrants to Purchase Common Stock
Dated as of October 1, 1999
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TABLE OF CONTENTS
(Not Part of Agreement)
PAGE
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PARAGRAPH 1. AUTHORIZATION OF ISSUE OF SECURITIES.....................1
PARAGRAPH 2. ACQUISITION OF SECURITIES................................2
PARAGRAPH 3. CONDITIONS PRECEDENT.....................................3
PARAGRAPH 4. COVENANTS................................................6
PARAGRAPH 5. REPRESENTATIONS AND WARRANTIES..........................10
PARAGRAPH 6. REPRESENTATIONS AND AGREEMENT OF THE
PURCHASERS..............................................18
PARAGRAPH 7. DEFINITIONS.............................................19
PARAGRAPH 8. MISCELLANEOUS...........................................24
Schedule I - Subsidiaries
EXHIBITS
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Exhibit A-1 - Form of 2005 Note
Exhibit A-2 - Form of 2002 Note
Exhibit B - Form of Warrant Agreement
Exhibit C-1 - Certificate of Incorporation
Exhibit C-2 - Tag-Drag Agreement
Exhibit D-1 - Closing Documents
Exhibit D-2 - Forms of Opinion of Counsel
Exhibit E - Capitalization of the Company
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GEOKINETICS INC.
SECURITIES PURCHASE AGREEMENT
Ladies and Gentlemen:
Each of undersigned, Geokinetics Inc., a Delaware corporation (the
"Company"), and each of the Guarantors listed on the signature pages hereto,
hereby agrees with the parties named on the signature pages hereto
(collectively, the "Purchasers") as follows:
PARAGRAPH 1. AUTHORIZATION OF ISSUE OF SECURITIES.
1A. GENERAL. The 2005 Notes and 26,818,594 Warrants are being issued
in connection with a "plan of reorganization" under Section 368(a)(1)(E) of the
Internal Revenue Code of 1986, as amended, in exchange for all of the Senior
Subordinated Notes (including accrued and unpaid interest) and the 1998
Warrants. The 2002 Notes and 23,250,000 Warrants are being issued and sold in
connection with (i) the funding of the tax payment of Geophysical Development
Corporation, a Texas corporation ("GDC"), of approximately $800,000; (ii) the
funding of GDC's employee stay bonuses of approximately $1.1 million; and (iii)
the provision of funds for working capital and general corporate purposes.
Capitalized terms used herein and not otherwise defined have the meanings
specified in Paragraph 7.
1B. AUTHORIZATION OF NOTES. The Company has authorized the issuance
of (i) its 13 1/2% Senior Secured Notes due 2005 (the "2005 Notes") in tHe
aggregate principal amount of up to $45,358,000 originally issued, to be dated
the date of issuance thereof, to mature on September 15, 2005, and to be in the
form of EXHIBIT A-1 attached hereto, and (ii) its 13 1/2% Senior Secured Notes
duE 2002 (the "2002 Notes" and, together with the 2005 Notes, the "Notes") in
the aggregate principal amount of up to $6,000,000 originally issued, to be
dated the date of issuance thereof, to mature on September 15, 2002, and to be
in the form of EXHIBIT A-2 attached hereto. The term "Notes" as used in this
agreement (the "Agreement") shall include the promissory notes delivered
pursuant to this Agreement, addi-
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tional Notes which may be issued as interest in accordance with the terms
thereof, and each such promissory note delivered in substitution or exchange for
any other Note pursuant to any such provision hereof, of such Note or of the
Indenture governing such Note.
1C. AUTHORIZATION OF WARRANTS. In connection with the transactions
described in Paragraph 1A, the Company has authorized the issuance and delivery
to the Purchasers of the 2002 Notes an aggregate of 23,250,000 warrants (the
"2002 Warrants"), and to the Purchasers of the 2005 Notes an aggregate of
26,818,594 warrants (the "2005 Warrants" and, together with the 2002 Warrants,
the "Warrants"), each Warrant to purchase one share (collectively, the "Warrant
Shares") of its common stock, par value $.01 per share (the "Common Stock"), at
an exercise price of $.56 per share, such Warrants to be in the form contained
in the Warrant Agreement attached hereto as EXHIBIT B and such Common Stock
having the rights, restrictions, privileges and preferences set forth in the
Certificate of Incorporation of the Company in the form of EXHIBIT C-1 attached
hereto (the "Certificate of Incorporation") and being subject to the provisions
of the agreement among the Company, Blackhawk Investors, L.L.C., Steven A.
Webster, William R. Ziegler and the Holders (the "Tag/Drag Agreement") in the
form of EXHIBIT C-2 attached hereto. The Warrants will have the benefit of the
registration rights set forth in the Warrant Agreement.
1D. AUTHORIZATION OF GUARANTEES. In connection with the transactions
described in Paragraph 1A, each of the Guarantors has authorized the issuance of
its unconditional senior guarantee of the 2005 Notes and the 2002 Notes, and in
the form of Guarantee attached to EXHIBIT A-1 and EXHIBIT A-2 hereto,
respectively (collectively, the "Guarantees").
PARAGRAPH 2. ACQUISITION OF SECURITIES.
2A. ACQUISITION OF SECURITIES. Subject to and upon the terms and
conditions herein set forth, each Purchaser agrees, severally and not jointly,
to (i) exchange with the Company the Senior Subordinated Notes (including rights
to accrued but unpaid interest thereunder) and 1998 Warrants held by such
Purchaser, if any, for the principal amount of 2005 Notes and number of 2005
Warrants and (ii) purchase from the Company
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the principal amount of 2002 Notes and number of 2002 Warrants for an aggregate
purchase price equal to the principal amount of such 2002 Notes, in each case as
set forth on the signature page hereto of such Purchaser, on October 1, 1999
(the "Date of Closing").
2B. PURCHASE PRICE ALLOCATION. The Company and the Purchasers agree
that the issue prices of the 2002 Notes and the 2002 Warrants for U.S. federal
income tax purposes are $628.00 per $1,000 principal amount of 2002 Notes and
$.08 per Warrant.
2C. TAG/DRAG AGREEMENT. Each Purchaser by executing its signature
page hereto shall be deemed to have executed the Tag/Drag Agreement.
PARAGRAPH 3. CONDITIONS PRECEDENT.
3. CONDITIONS TO CLOSING. The obligation of each Purchaser to
purchase and pay for the Notes and Warrants to be purchased by it is subject to
the satisfaction of the following conditions:
3A. DOCUMENTS TO BE DELIVERED. On or before the Date of Closing, the
Purchasers shall have received all of the following, duly executed and
delivered:
(i) the Notes being exchanged and/or purchased by each Purchaser in
the name and denomination set forth on the signature page hereto of such
Purchaser;
(ii) the Warrants being exchanged and/or purchased by each Purchaser
in the name and denomination set forth on the signature page hereto of
such Purchaser;
(iii) certificates of the Secretary and of the Chairman of the Board
or President of the Company and each Guarantor dated the Date of Closing,
which shall contain the names and signatures of the officers of the
Company and each Guarantor authorized to execute this Agreement and which
shall certify to the truth, correctness and completeness of the following
exhibits attached hereto as EXHIBIT D-1: (a) a copy of resolutions duly
adopted by the Board of Directors of the Company and each Guarantor, in
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each case in full force and effect at the time this Agreement is entered
into, authorizing the execution of this Agreement and the other
Transaction Documents delivered or to be delivered in connection herewith
on the part of the Company and the Guarantors and the consummation of the
transactions contemplated herein and therein, (b) a copy of the charter
documents of the Company and each Guarantor and all amendments thereto,
certified by the appropriate official of the state of organization, and
(c) a copy of the bylaws of the Company and each Guarantor in effect on
the Date of Closing;
(iv) a certificate (or certificates) as to the valid existence and
good standing of the Company and each Guarantor in its respective state of
organization, issued by the appropriate authorities of such jurisdiction;
(v) a certificate of the President of the Company dated the Date of
Closing, in which such officer certifies to the satisfaction of the
conditions set out in subsections (i) and (ii) of Paragraph 3B;
(vi) favorable opinions of (x) Chamberlain, Hrdlicka, White, Williams
& Martin, counsel to the Company, (y) The Bayard Firm, special Delaware
counsel to the Company, and (z) local counsel to the Company each dated
the Date of Closing and substantially in the form set forth in EXHIBIT
D-2, subject only to such qualifications, limitations or exceptions as may
be acceptable to each of the Purchasers; and
(vii) certificates of the Company's and the Guarantors' good standing
and due qualification to do business, issued by appropriate officials in
any states where the Company's and the Guarantors' ownership or leasing of
their respective properties or the conduct of their respective business
requires such qualification.
On or before the Date of Closing, the Purchasers and Cahill Gordon &
Reindel, counsel for the Purchasers, shall have received such further documents,
opinions, certificates and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and its Subsidiaries as
they shall reasonably request.
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3B. REPRESENTATIONS; NO DEFAULT.
(i) All representations and warranties made by the Company in this
Agreement shall be true and correct on and as of the Date of Closing as if such
representations and warranties had been made on and as of such date, unless such
representation and warranty expressly indicates that it is being made as of any
other specific date in which case on and as of such other date.
(ii) The Company shall have performed and complied with all
agreements and conditions required in this Agreement to be performed or complied
with by it on or prior to the Date of Closing.
3C. PURCHASE PERMITTED BY APPLICABLE LAWS. On the Date of Closing,
the offer by the Company of, and the purchase of and payment for, the Warrants
and the Notes, respectively, on the terms and conditions herein provided
(including the use of the proceeds of the sale of such Securities by the
Company) shall not violate any applicable law or governmental regulation
(including, without limitation, section 5 of the Securities Act or Regulation U,
T or X of the Board of Governors of the Federal Reserve System) and shall not
subject any Purchaser to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation.
3D. PROCEEDINGS. On the Date of Closing, all corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in substance and form to the Purchasers, and the Purchasers shall
have received all such counterpart originals or certified or other copies of
such documents as they or their counsel may reasonably request.
3E. OBLIGATIONS. The Company shall have satisfied any other
obligations to the Purchasers required to be paid or complied with by it on or
prior to the Date of Closing.
3F. IO AGREEMENT. The Company shall have received from Input Output,
Inc. ("IO") an agreement on terms and in form and substance satisfactory to the
Purchasers to refinance the obligations of the Company to IO.
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3G. BOARD OF DIRECTORS. Steven Webster shall have been elected
Chairman of the Executive Committee of the Board of the Company and shall have
agreed to become Chairman of the Executive Committee the Board of the Company on
terms in form and substance satisfactory to the Purchasers.
3H. SECURITY DOCUMENTS. The Company and the Guarantors shall have
duly authorized, executed and delivered the General Security Agreement and all
other Security Documents and shall have delivered to the collateral agent
thereunder, all of the collateral referred to therein and all annotations and
all other documents necessary to grant such security interest in such collateral
pursuant to the terms of the Security Documents; the Holders shall have a
perfected security interest on the collateral pledged under the Security
Documents with such priority in interest on such collateral as required
thereunder.
PARAGRAPH 4. COVENANTS.
4. COVENANTS. To induce the Purchasers to enter into this Agreement
and acquire the Notes and the Warrants, the Company warrants, covenants and
agrees as follows:
4A. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The Company will
furnish, or will cause to be furnished, to the Holders copies of the following
financial statements, reports, notices and information, at the Company's
expense:
(i) as soon as available and in any event within 45 days after the
end of each Fiscal Quarter of each Fiscal Year of the Company,
consolidated balance sheets of the Company as of the end of such Fiscal
Quarter and consolidated statements of operations and cash flow of the
Company for such Fiscal Quarter and for the period commencing at the end
of the previous Fiscal Year and ending with the end of such Fiscal Quarter
(which may be the Company's Form 10-QSB), certified by the chief financial
officer of the Company, in each case with prior period comparisons and a
management's discussion and analysis of financial condition and results of
operations;
(ii) as soon as available and in any event within 90 days after the
end of each Fiscal Year, a copy of the
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annual audit report for such Fiscal Year for the Company and its
Subsidiaries, including therein consolidated balance sheets of the Company
as of the end of such Fiscal Year and consolidated statements of
operations and cash flow of the Company for such Fiscal Year (which may be
the Company's Form 10-KSB), certified in a manner reasonably acceptable to
the Holders by Fitts, Roberts & Co., Inc., P.C. or other independent
public accountants acceptable to the Holders, with a management's
discussion and analysis of financial condition and results of operations;
(iii) promptly after (a) the sending or filing thereof, copies of all
reports which the Company or any of its Subsidiaries send to any lenders
and (b) the sending or filing thereof, all reports and registration
statements which the Company or any of its Subsidiaries file with the
Securities and Exchange Commission or any national securities exchange;
and
(iv) upon request by any Holder, as soon as available and in any
event within 30 days after the end of each month, monthly financial
reports and such other information respecting the condition or operations,
financial or otherwise, of the Company and each of its Subsidiaries as
such Holder may reasonably request.
In the event that, pursuant to the terms of the Notes, an indenture is qualified
under the Trust Indenture Act of 1939, as amended, with respect to the Notes,
the information required to be furnished pursuant to this Paragraph 4A shall be
provided pursuant hereto only to Holders of Warrants.
4B. INFORMATION REQUIRED BY RULE 144A. The Company will, upon the
request of any Holder, provide such Holder, and any qualified institutional
buyer designated by such Holder, such financial and other information as such
Holder may reasonably determine to be necessary in order to permit compliance
with the information requirements of Rule l44A under the Securities Act in
connection with the resale of Notes or Warrants. For the purpose of this
Paragraph 4B, the term "qualified institutional buyer" shall have the meaning
specified in Rule l44A under the Securities Act. At the request of holders of
25% or more of the aggregate principal amount of the Notes, the Company will use
its best efforts to cause the Notes to be eligible for participation in the
book-entry system of The Depository Trust Company.
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4C. INDEMNITY. The Company agrees to indemnify each of the
Purchasers, as debtholders, shareholders, directors and officers of the Company,
as the case may be, upon demand, from and against any and all liabilities,
obligations, claims, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (including reasonable fees of attorneys,
accountants, experts and advisors) of any kind or nature whatsoever (in this
section collectively called "liabilities and costs") which to any extent (in
whole or in part) may be imposed on, incurred by, or asserted against any of the
Purchasers arising out of, resulting from or in any other way associated with
the execution, delivery or performance of the Transaction Documents or such
Purchaser's being a debtholder, shareholder, director or officer of the Company.
The foregoing indemnification shall apply whether or not such liabilities and
costs are in any way or to any extent caused, in whole or in part, by any
negligent act or omission of any kind by such holder, provided only that no
Purchaser shall be entitled under this Paragraph 4C to receive indemnification
for that portion, if any, of any liabilities and costs which is proximately
caused by such Purchaser's willful misconduct. If any Person (including the
Company or any of its Affiliates) ever alleges such willful misconduct by a
Purchaser, the indemnification provided for in this Paragraph 4C shall
nonetheless be paid upon demand, subject to later adjustment or reimbursement,
until such time as a court of competent jurisdiction enters a final judgment as
to the extent and effect of the alleged willful misconduct. As used in this
section the term "Purchaser" shall refer also to each director, officer, agent,
attorney, employee, representative and Affiliate of such Purchaser.
4D. OBSERVER RIGHTS OF HOLDERS.
From and after the Date of Closing, the Company shall take all such
action as may be necessary so as to allow two designees selected by the majority
of the Noteholders (as determined by the principal amount of the Notes held by
such Noteholders) to serve as observers for the Noteholders to attend each
meeting of the Company's Board of Directors and its committees (except when in
executive session) as nonvoting observers.
4E. PREEMPTIVE RIGHTS OF HOLDERS.
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(a) If the Company proposes to issue or sell any equity securities
(including but not limited to securities convertible into or exchangeable for
Common Stock) at any time, the Company shall give the Holders written notice of
such proposal, describing the type of equity securities and the price and the
terms upon which the Company proposes to issue the same. For a period of twenty
(20) days following the delivery of such notice by the Company, the Company
shall be deemed to have irrevocably offered to sell a PRO RATA portion of such
equity securities to the Holders, as a group, for the price and upon the terms
specified in the notice. Each Holder may exercise its right to purchase such
equity securities by giving written notice to the Company within such twenty
(20) day period and stating the quantity of equity securities to be purchased by
such Holder. Each Holder's PRO RATA portion, for purposes of this Paragraph 4E,
is the ratio of the number of Warrants (and Warrant Shares) which such Holder
then owns to the total number of shares of Common Stock plus the number of
Warrants (and Warrant Shares) then outstanding. As used herein, "issue" includes
sales or transfers by the Company of treasury shares. This Paragraph 4E shall
not apply to: (i) equity securities issued in a Public Equity Offering, (ii) the
issuance of Common Stock pursuant to convertible securities (including warrants
and stock options) of the Company outstanding on the Date of Closing, (iii)
stock options (and Common Stock issuable upon exercise thereof) that may be
granted to the Company's employees under the Company's plans so long as the sum
of (x) the number of options outstanding on the Date of Closing, (y) such
additional number of options granted after the Date of Closing and (z) the
number of options referred to in clauses (x) and (y) above which expire
unexercised, shall not exceed 11,633,775 options outstanding at any time
(subject to adjustment for stock splits, stock dividends, recapitalization,
etc.) and (iv) Common Stock (or securities convertible into Common Stock) issued
by the Company to the securityholders of another Person in connection with the
acquisition of such Person (whether the acquisition is of stock or assets of
such Person or a Subsidiary of such Person).
(b) Each Holder will have the right to transfer its rights under the
immediately preceding paragraph so long as such Holder transfers at least
250,000 Warrants or Warrant Shares to a single Person in the transaction
pursuant to which such rights would be transferred.
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(c) The preemptive rights set forth in paragraph (a) of this
Paragraph 4E shall terminate at such time as (i) (x) the Company consummates a
Public Equity Offering with gross proceeds of at least $35,000,000 and (y) the
Common Stock is traded on the NASDAQ System or any nationally registered
securities exchange, (ii) the Warrants or Warrant Shares shall have been
disposed of in accordance with a registration statement that has become
effective under the Securities Act or (iii) the Warrants or Warrant Shares shall
have been distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act.
4F. REISSUANCE OF RETURNED WARRANTS. Upon the receipt by the Company
of Warrants returned to it pursuant to Paragraph 6C hereof, the Company will
reissue, execute and deliver replacement Warrants to the Purchasers in such
amounts as are required pursuant to Paragraph 6C.
4G. AMENDMENT TO CHARTER. The Company will use its best efforts to
propose at the next shareholders' meeting of the Company an amendment to the
charter of the Company to allow for the preemptive rights described in Paragraph
4E. The Company will use its best efforts to cause its Board of Directors to
recommend such amendment for approval. Each Holder agrees to vote any Common
Stock it owns in favor of such amendment.
PARAGRAPH 5. REPRESENTATIONS AND WARRANTIES.
5. REPRESENTATIONS AND WARRANTIES. To induce the Purchasers to enter
into this Agreement and to purchase the Securities, the Company represents and
warrants as follows:
5A. ORGANIZATION AND GOOD STANDING. Each of the Company and its
Subsidiaries is duly incorporated, validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, and each has the
corporate power and authority to carry on its business as it is currently being
conducted and to own, lease and operate its properties, and each is duly
qualified and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified, individually or in the aggregate, could not
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reasonably be expected to result in a Material Adverse Effect. Each of the
Company's Subsidiaries that is a partnership has been duly formed and is
currently existing under the laws of its jurisdiction of formation and has the
partnership power and authority to carry on its business as it is currently
being conducted and to own, lease and operate its properties, and each is duly
qualified to do business in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such qualification,
except where the failure to be so qualified, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
5B. AUTHORIZATION. The Company has taken all corporate action
necessary to authorize the execution and delivery by it of each of this
Agreement and the other Transaction Documents to which it is a party and to
authorize the consummation of the transactions contemplated hereby and thereby
and the performance of its obligations hereunder and thereunder.
5C. NO CONFLICTS OR CONSENTS. The execution, delivery and
performance of the Transaction Documents, compliance by the Company with all the
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under the
securities or Blue Sky laws of the various states) and will not conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the charter or bylaws of the Company or any of its Subsidiaries or any
agreement, indenture or other instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
their respective property is bound, or violate or conflict with any laws,
administrative regulations or rulings or court decrees applicable to the Company
or any of its Subsidiaries or their respective property.
5D. ENFORCEABLE OBLIGATIONS. Each of the Transaction Documents
constitutes a valid and legally binding agreement of the Company, enforceable
against it in accordance with its terms (assuming due authorization, execution
and delivery of each Transaction Document by any other party thereto), except
that enforcement thereof may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights gener-
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ally and (b) general principles of equity (regardless of whether enforceability
is considered in a proceeding at law or in equity) and the discretion of any
court before which any proceeding therefor may be brought.
5E. WARRANTS. The Warrants have been duly and validly authorized by
the Company and, when executed by the Company in accordance with the provisions
of the Warrant Agreement, and delivered to and paid for by the Purchasers in
accordance with the terms hereof, will be entitled to the benefits of the
Warrant Agreement and will constitute valid and binding obligations of the
Company enforceable in accordance with their terms, except that the enforcement
thereof may be subject to (a) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity) and the
discretion of any court before which any proceeding therefor may be brought.
5F. WARRANT SHARES. When issued and paid for in accordance with the
terms and conditions contained in the Warrant Agreement, upon exercise of the
Warrants, the Warrant Shares will be duly authorized, validly issued, fully paid
and non-assessable and will not be subject to any preemptive or similar rights.
The Warrant Shares have been duly reserved for issuance in accordance with the
terms of the Warrants and the Warrant Agreement. The capitalization of the
Company on the Date of Closing is set forth on EXHIBIT E hereto.
5G. NOTES. The Notes have been duly and validly authorized by the
Company and, when executed by the Company in accordance with the provisions
thereof, and delivered to and paid for by the Purchasers in accordance with the
terms hereof (including Notes issued in lieu of cash interest as provided
therein), will be entitled to the benefits thereof and will constitute valid and
binding obligations of the Company enforceable in accordance with their terms,
except that the enforcement thereof may be subject to (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity) and the discretion of any court before which any proceeding
therefor may be brought.
<PAGE>
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5H. GUARANTEES. The Guarantees have been duly and validly authorized
by each of the Guarantors and, when executed by each Guarantor and affixed to
the Notes (including Notes issued in lieu of cash interest as provided therein),
will be entitled to the benefits thereof and will constitute valid and binding
obligations of each such Guarantor enforceable in accordance with their terms,
except that the enforcement thereof may be subject to (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity) and the discretion of any court before which any proceeding
therefor may be brought.
5I. NO CONFLICT. Neither the Company nor any of its Subsidiaries is
in violation of its respective charter or bylaws or in default in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any other agreement,
indenture or instrument material to the conduct of the business of the Company
and its Subsidiaries, taken as a whole, to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
property is bound except for such violations or defaults which, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
5J. FINANCIAL STATEMENTS. The financial statements, together with
related schedules and notes contained in the Exchange Act Reports, present
fairly the consolidated financial position, results of operations and changes in
financial position of the Company on the basis stated in the Exchange Act
Reports at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared in
accordance with GAAP consistently applied throughout the periods involved,
except as disclosed therein; and the other financial and statistical information
and data set forth in the Exchange Act Reports is, in all material respects,
accurately presented and prepared on a basis consistent with such financial
statements and the books and records of the Company.
5K. NO UNDISCLOSED LIABILITIES. Except as fully reflected or
reserved against in the financial statements and the notes thereto referred to
in Paragraph 5J, there are no li-
<PAGE>
-14-
abilities or obligations with respect to the Company or any of its Subsidiaries
of any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in the aggregate, would be
material to the Company and its Subsidiaries, taken as a whole. The Company does
not know of any basis for the assertion against the Company or any of its
Subsidiaries of any liability or obligation of any nature whatsoever that is not
fully reflected in such financial statements which, either individually or in
the aggregate, could reasonably be expected to be material to the Company and
its Subsidiaries, taken as a whole.
5L. FULL DISCLOSURE. No certificate, statement or other information
delivered herewith or heretofore by the Company to the Purchasers in connection
with the negotiation of this Agreement or in connection with any transaction
contemplated hereby (including without limitation the Exchange Act Reports)
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements contained herein or therein not misleading
as of the date made or deemed made. There is no fact known to the Company that
has not been disclosed to the Purchasers which, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
5M. LITIGATION. There are no legal or governmental proceedings
pending to which the Company or any of its Subsidiaries is a party or of which
any of their respective property is the subject which could reasonably be
expected to result in a Material Adverse Effect, and, to the best knowledge of
the Company, no such proceedings are threatened or contemplated.
5N. ENVIRONMENTAL AND OTHER LAWS. Neither the Company nor any of its
Subsidiaries has violated any foreign, federal, state or local law or regulation
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), nor any federal or state law relating to discrimination
in the hiring, promotion or pay of employees nor any applicable federal or state
wages and hours laws, nor any provisions of the Employee Retirement Income
Security Act or the rules and regulations promulgated thereunder, which in each
case could reasonably be expected to result in any Material Adverse Effect.
<PAGE>
-15-
5O. PERMITS. Each of the Company and its Subsidiaries has such
permits, licenses, franchises, consents, approvals, orders, certificates and
authorizations of governmental or regulatory authorities ("permits"), including,
without limitation, under any applicable Environmental Laws, as are necessary to
own, lease and operate its respective properties and to conduct its business
except for those the absence of which, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect; each of the
Company and its Subsidiaries has fulfilled and performed all of its obligations
with respect to such permits and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other impairment of the rights of the holder of any such permit,
in each case where the same, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect; each permit is in full force
and effect; each of the Company and its Subsidiaries is operating in compliance
with its permits, and there are no proceedings pending or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries that seek
to cause any permit of any of them to be revoked, withdrawn, canceled, suspended
or not renewed, except where the failure of a permit to be in full force or
effect or noncompliance with a permit could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
5P. TITLE TO PROPERTIES. Except as otherwise set forth in the
Exchange Act Reports or such as are not material to the business, prospects,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole, each of the Company and its Subsidiaries has
good and marketable title, free and clear of all Liens, claims, encumbrances and
restrictions, to all property and assets described in the Exchange Act Reports
as being owned by them. All leases to which the Company or any of its
Subsidiaries is a party are valid and binding and no default has occurred or is
continuing thereunder, which, individually or in the aggregate, could reasonably
be expected to result in any Material Adverse Effect; and the Company and its
Subsidiaries enjoy peaceful and undisturbed possession under all such leases to
which any of them is a party as lessee other than such exceptions that,
individually or in the aggregate, could not reasonably be expected to result in
any Material Adverse Effect.
<PAGE>
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5Q. INSURANCE. Each of the Company and its Subsidiaries maintains
reasonably adequate insurance.
5R. REPORTS. Except that the Company's Form 10-KSB for the fiscal
year ended December 31, 1998 did not contain the required financial statements
and management's discussion and analysis of financial condition and results of
operations, each of the Company and its Subsidiaries has timely filed all
material reports, data and other information required by any other regulatory
agency with authority to regulate the Company or its Subsidiaries, or the
business of any of them in any manner; and each of the Company and its
Subsidiaries is in compliance with all rules, regulations and requirements of
all regulatory agencies, except where such noncompliance, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
5S. INVESTMENT COMPANY. Neither the Company nor any of its
Subsidiaries is, or upon application of the proceeds from the sale of the
Securities will be, an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
5T. INTELLECTUAL PROPERTY. Each of the Company and its Subsidiaries
owns and possesses all material licenses, patents, patent rights, patent
applications, inventions, trade secrets, know-how, proprietary information and
techniques, including processes, trademarks, service marks, trade names,
computer software and copyrights described or referred to in the Exchange Act
Reports or owned or used by it or that are necessary for and/or used in the
conduct of its business as described in the Exchange Act Reports. Any
registrations covering such patents, trademarks, service marks, trade names or
copyrights owned by, or licensed to the Company or any of its Subsidiaries are
valid and subsisting, have not been cancelled, abandoned or otherwise terminated
and, if applicable, have been duly issued or filed. Neither the Company nor any
of its Subsidiaries is aware of or has received any notice of infringement of,
or conflict or claimed conflict with, asserted rights of others with respect to
any licenses, patents, patent rights, patent applications, inventions, trade
secrets, know-how, proprietary information or techniques, including processes,
trademarks, service marks, trade names, computer software or copyrights.
<PAGE>
-17-
5U. OFFERING OF NOTES OR WARRANTS. Except for solicitations to
offerees reasonably believed by the Company to be "accredited investors" as such
term is defined in Regulation D of the Securities Act, neither the Company nor
any agent acting on its behalf has, directly or indirectly, offered the Notes or
Warrants or any similar security of the Company for sale to, or solicited any
offers to buy the Notes or Warrants or any similar security of the Company from,
or otherwise approached or negotiated with respect thereto with, any Person
other than the Purchasers, and neither the Company nor any agent acting on its
behalf has taken or will take any action which would subject the issuance or
sale of the Notes or Warrants to the provisions of section 5 of the Securities
Act or to the registration provisions of any securities or Blue Sky law of any
applicable jurisdiction in such a manner as to require that the Notes or
Warrants actually be registered.
5V. USE OF PROCEEDS. Neither the Company nor any of its Subsidiaries
owns or has any present intention of acquiring any "margin stock" as defined in
Regulation U of the Board of Governors of the Federal Reserve System ("margin
stock"). The proceeds of sale of the Notes and Warrants will be used as set
forth in Paragraph 1A. None of such proceeds will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock or for the purpose of maintaining,
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any stock that is currently a margin stock or for any other purpose
which might constitute this transaction a "purpose credit" within the meaning of
such Regulation U. Neither the Company nor any agent acting on its behalf has
taken or will take any action which could reasonably be expected to cause this
Agreement or the Notes to violate Regulation U, Regulation T or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the Exchange Act, in each case as in effect now or as the same may hereafter be
in effect.
Any certificate signed by any officer of the Company and delivered
to any Purchaser or to counsel for the Purchasers shall be deemed a
representation and warranty by the Company to each Purchaser as to the matters
covered thereby.
<PAGE>
-18-
PARAGRAPH 6. REPRESENTATIONS AND AGREEMENT
OF THE PURCHASERS.
6A. ACKNOWLEDGMENTS OF THE PURCHASERS. Each Purchaser understands
and acknowledges to the Company that:
(i) the offering and sale of the Notes and Warrants is intended to
be exempt from registration under the Securities Act by virtue of the
provisions of Section 4(2) of the Securities Act;
(ii) there is no existing public or other market for the Notes and
Warrants and there can be no assurance that such Purchaser will be able to
sell or dispose of such Purchaser's Notes and Warrants;
(iii) the Notes and Warrants have not been registered under the
Securities Act and must be held indefinitely unless they are subsequently
registered under the Securities Act or such sale is permitted pursuant to
an available exemption from such registration requirement;
(iv) if any transfer of the Notes and Warrants is to be made in
reliance on an exemption under the Securities Act, the Company may require
an opinion of counsel reasonably satisfactory to it that such transfer may
be made pursuant to an exemption under the Securities Act; and
(v) that the Securities will have the legends contained on the forms
thereof attached as exhibits hereto.
6B. REPRESENTATIONS OF THE PURCHASERS. Each Purchaser, severally and
not jointly, represents and warrants to the Company that:
(i) the Securities to be acquired by it pursuant to this Agreement
are being acquired for its own account, not as a nominee or agent for any
other Person, and without a view to the distribution of such Notes and
Warrants or any interest therein in violation of the Securities Act;
(ii) it is an "Accredited Investor" as such term is defined in
Regulation D under the Securities Act and has such knowledge and
experience in financial and business matters so as to be capable of
evaluating the merits and
<PAGE>
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risks of its investment in the Securities, and such Purchaser is capable
of bearing the economic risks of such investment and is able to bear a
complete loss of its investment in the Securities;
(iii) it has been provided, to its satisfaction, the opportunity to
ask questions concerning the terms and conditions of the offering and sale
of the Securities, has had all such questions answered to its satisfaction
and has been supplied all additional information as it has requested; and
(iv) the execution, delivery, and performance of this Agreement is
within such Purchaser's powers (corporate or otherwise) and has been duly
authorized by all requisite action (corporate or otherwise).
6C. RETURN AND REALLOCATION OF WARRANTS UPON ADDITIONAL Investment.
The Purchasers agree that if within 60 days after the Date of Closing Blackhawk
or its designees shall purchase additional 2002 Notes yielding gross cash
proceeds to the Company of up to $1,000,000, (i) the PRO RATA allocation of the
2002 Warrants issued to the Purchasers pursuant to this Agreement shall be
adjusted to reflect such additional investment and (ii) each Purchaser will
return the 2002 Warrants that it received on the Date of Closing to the Company
in order that the Company may issue, execute and deliver replacement Warrants in
such amounts as are required pursuant to clause (i) above.
6D. TERMINATION OF 2005 WARRANTS. The Purchasers of the 2005 Notes
agree that 4,800,000 of the 2005 Warrants shall be terminated, on a PRO RATA
basis for each Purchaser of 2005 Notes, on each Interest Payment Date (as
defined in the 2005 Notes) through and including September 15, 2000 on which the
Company pays all interest due on the 2005 Notes on such Interest Payment Date in
cash.
PARAGRAPH 7. DEFINITIONS.
7. DEFINITIONS. For the purpose of this Agreement, the terms defined
in the indenture attached as part of EXHIBIT A-1 hereto (the "Indenture") shall
have the respective meanings set forth in the Indenture, except that terms
defined
<PAGE>
-20-
in this Agreement shall have the respective meanings specified herein, and the
following terms shall have the meanings specified with respect thereto below
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"1998 WARRANTS" means the warrants to purchase up to 7,618,594
shares of Common Stock of the Company issued to the Original Purchasers pursuant
to the Original Purchase Agreement.
"2002 NOTES" has the meaning set forth in Paragraph 1B.
"2002 WARRANTS" has the meaning set forth in Paragraph 1C.
"2005 NOTES" has the meaning set forth in Paragraph 1B.
"2005 WARRANTS" has the meaning set forth in Paragraph 1C.
"ALL OR SUBSTANTIALLY ALL" shall have the meaning given such phrase
in the Revised Model Business Corporation Act.
"BLACKHAWK" means Blackhawk Investors, L.L.C. or affiliates thereof.
"COMMON STOCK" has the meaning set forth in Paragraph 1C.
"DATE OF CLOSING" has the meaning set forth in Paragraph 2A.
"DLJ HOLDERS" means DLJ Investment Partners, L.P. and any Affiliate
thereof holding Notes or Warrants.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE ACT REPORTS" means Form 10-QSB filed on August 16, 1999
for the fiscal quarter ended June 30, 1999, Form 8-K filed on August 12, 1999,
Form 10-QSB filed on May 17,
<PAGE>
-21-
1999 for the fiscal quarter ended March 31, 1999, the Company's Annual Report on
Form 10-KSB (as supplemented by the Notification of Late Filing filed on Form NT
10-K) for the year ended December 31, 1998 and Form 8-K filed on March 4, 1999,
in each case as filed with the Securities and Exchange Commission, and any other
reports filed by the Company with the Commission and delivered to the Purchasers
prior to the Date of Closing.
"FISCAL QUARTER" shall mean a three-month period ending on March 31,
June 30, September 30 or December 31 of any year.
"FISCAL YEAR" means a twelve-month period ending on December 31 of
any year.
"GENERAL SECURITY AGREEMENT" means the Security Agreement executed
and delivered by the Company and each Guarantor substantially in the form of
EXHIBIT C to the Indenture, except for such changes as shall have been approved
by the trustee under the Indenture, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with its terms and the terms
of the Indenture.
"GUARANTEES" has the meaning set forth in Paragraph 1D.
"GUARANTORS" means, collectively, each Person named as such on the
signature pages hereto and each Person executing a Guarantee under any
Transaction Document now or hereafter.
"HOLDER" means any holder of Notes, Warrants or Warrant Shares from
time to time.
"LIEN" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Indebtedness owed to such Person or any
other arrangement with such creditor which provides for the payment of such
Indebtedness out of such property or assets or which allows such Person to have
such Indebtedness satisfied out of such property or assets prior to the general
creditors of any owner thereof, including without limitation any lien, mortgage,
security interest, pledge, deposit, production payment, rights of a vendor under
any title retention or conditional sale agreement or lease substantially
equivalent thereto, or any other charge or encumbrance for security purposes,
whether arising by law or agree-
<PAGE>
-22-
ment or otherwise, but excluding any right of offset which arises without
agreement in the ordinary course of business.
"MATERIAL ADVERSE EFFECT" means a material adverse effect to the
business, condition (financial or otherwise), assets, liabilities or results of
operations or prospects of the Company and its Subsidiaries, taken as a whole,
or the ability or obligation of the Company to perform on a timely basis its
obligations under this Agreement or the other Transaction Documents.
"NOTES" has the meaning set forth in Paragraph 1B.
"ORIGINAL PURCHASE AGREEMENT" means the Securities Purchase
Agreement dated April 30, 1998 among the Company and the Original Purchasers
relating to the issuance of and sale by the Company to the Original Purchasers
of $40,000,000 aggregate principal amount of the 12% Senior Subordinated Notes
of the Company due 2005 and warrants to purchase up to 7,618,594 shares of
Common Stock of the Company.
"ORIGINAL PURCHASERS" means the parties purchasing the 1998 Warrants
and the Senior Subordinated Notes named on the signature pages of the Original
Purchase Agreement.
"SECURITIES" means the Notes and the Warrants.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY AGREEMENTS" means and includes the General Security
Agreement and any other general security agreements delivered pursuant to
Section 4.25 or 4.26 of the Indenture.
"SECURITY DOCUMENTS" means each of the Security Agreements and any
other documents utilized to pledge as collateral for the obligations owing to
the trustee under the Indenture or any Holder pursuant to the terms of this
Indenture, the Notes, the Guarantees and each Security Document or secured by
any of the Security Documents, any property or assets of whatever kind or
nature.
"SENIOR SUBORDINATED NOTES" means the 12% Senior Subordinated Notes
due 2005 of the Company issued to the Original Purchasers pursuant to the
Original Purchase Agreement.
<PAGE>
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"SUBSIDIARIES" means, collectively, each direct and indirect
subsidiary of the Company, as set forth on SCHEDULE I attached hereto (each, a
"Subsidiary").
"TAG/DRAG AGREEMENT" has the meaning set forth in Paragraph 1C.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes, the
Guarantees, the Warrants, the Warrant Agreement, the Security Documents, the
Tag/Drag Agreement, and all other agreements, certificates, documents,
instruments and writings at any time delivered in connection herewith or
therewith.
"TRANSFEREE" means any direct or indirect transferee of all or any
part of any Security purchased under this Agreement.
"WARRANT" has the meaning set forth in Paragraph 1C.
"WARRANT AGREEMENT" means the Amended and Restated Warrant Agreement
by and among, inter alia, the Company and the Purchasers dated the Date of
Closing, in the form of EXHIBIT B hereto, as amended or supplemented from time
to time.
"WARRANT SHARES" has the meaning set forth in Paragraph 1C.
7A. TERMS AND DETERMINATIONS. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters
required to be furnished hereunder shall be prepared in accordance with GAAP as
in effect from time to time, applied on a basis consistent with the most recent
financial statements contained in the Company's Exchange Act Reports, except as
set forth in such unaudited statements.
<PAGE>
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PARAGRAPH 8. MISCELLANEOUS.
8. MISCELLANEOUS.
8A. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby or the other Transaction Documents shall be consummated, to
pay, and save the Purchasers and any Transferee harmless against liability for
the payment of, all reasonable out-of-pocket expenses arising in connection with
such transactions promptly (and, in any event, within 30 days after any invoice
or other statement or notice), including (i) all reasonable fees and expenses of
Cahill Gordon & Reindel, special counsel to the Purchasers, in connection with
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, (ii) all document production and duplication
charges and the reasonable fees and expenses of one counsel engaged by the
Purchasers or such Transferees in connection with any subsequent proposed
modification of, or proposed consent under, this Agreement or the other
Transaction Documents whether or not such proposed modification shall be
effected or proposed consent granted, and (iii) the costs and expenses,
including reasonable attorneys' fees, incurred by the Purchasers or such
Transferee in enforcing (or determining whether or how to enforce) any rights
under this Agreement or the other Transaction Documents or in responding to any
subpoena or other legal process or informal investigative demand issued in
connection with this Agreement, the other Transaction Documents or the
transactions contemplated hereby or thereby or by reason of the Purchasers' or
such Transferee's having acquired any Security, including without limitation
costs and expenses incurred in any bankruptcy case. The obligations of the
Company this Paragraph 8A shall survive the transfer of any Security or portion
thereof or interest therein by any Purchaser or any Transferee, and the payment
of any Security.
8B. CONSENT TO AMENDMENTS. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of each of
the holders of Notes and/or Warrants, as the case may be, purchased hereunder.
<PAGE>
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8C. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement, the Notes, the transfer by any Purchaser of any Note
or Warrant or portion thereof or interest therein, the payment of any Note and
the exercise of any Warrant, and may be relied upon by any Transferee,
regardless of any investigation made at any time by or on behalf of any
Purchaser or any Transferee. Subject to the preceding sentence, this Agreement
and the other Transaction Documents embody the entire agreement and
understanding between each Purchaser and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof, including,
without limitation, the provisions of Paragraph 4 (Covenants) of the Original
Purchase Agreement other than Paragraph 4C thereof.
8D. SUCCESSORS AND ASSIGNS. All covenants and other agreements in
this Agreement contained by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
8E. NOTICES. All notices or other communications provided for
hereunder shall be in writing and sent by telecopy or nationwide overnight
delivery service (with charges prepaid) and (i) if to any Purchaser, addressed
to it at the address specified for such communications on the signature pages
hereof, or at such other address as such Purchaser shall have specified to the
Company in writing, (ii) if to any other Holder, addressed to such other Holder
at such address as such other Holder shall have specified to Company in writing
or, if any such other Holder shall not have so specified an address to the
Company, then addressed to such other Holder in care of the last Holder which
shall have so specified an address to the Company and (iii) if to the Company or
the Guarantors, addressed to Geokinetics Inc. at 8401 Westheimer, Suite 150,
Houston, Texas 77063, Attention: Chairman of the Board, or at such other address
as the Company shall have specified to the holder of each Security in writing.
8F. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satis-
<PAGE>
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factory to the Holders, the determination of such satisfaction shall be made by
the Holders in the sole and exclusive judgment (exercised in good faith) of the
Person or Persons making such determination.
8G. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF DELAWARE WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. Any
legal action or proceeding with respect to this Agreement or any other
Transaction Document may be brought in the courts of the State of New York, of
the State of Delaware, of the United States for the Southern District of New
York or of the United States for the District of Delaware, and, by execution and
delivery of this Agreement, each of the Company and the Guarantors hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts. Each of
the Company and the Guarantors further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to it at its address for notices pursuant to Paragraph 8E, such service
to become effective 5 days after such mailing. Each of he Company and the
Guarantors hereby irrevocably appoints CT Corporation System and such other
persons as may hereafter be selected by CT Corporation System irrevocably
agreeing in writing to serve as its agent for service of process in respect of
any such action or proceeding. Nothing herein shall affect the right of any
Holder to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction. The Company hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Transaction Document brought in the courts referred to above and hereby further
irrevocably waive and agree not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.
8H. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the re-
<PAGE>
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maining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8I. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
8J. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company whereupon this letter shall become a binding agreement by and among the
Company, the Guarantors and each of you.
Very truly yours,
THE COMPANY:
GEOKINETICS INC.
By: /s/ THOMAS J. CONCANNON
Name: Thomas J. Concannon
Title: Vice President
THE GUARANTORS:
GEOPHYSICAL DEVELOPMENT
CORPORATION
By: /s/ MICHAEL A. DUNN
Name: Michael A. Dunn
Title: President
QUANTUM GEOPHYSICAL, INC.
By: /s/ LYNN A. TURNER
Name: Lynn A. Turner
Title: President
GEOKINETICS PRODUCTION CO.,
INC.
By: /s/ THOMAS J. CONCANNON
Name: Thomas J. Concannon
Title: Treasurer
<PAGE>
GEOSCIENCE SOFTWARE SOLUTIONS,
INC.
By: /s/ MICHAEL A. DUNN
Name: Michael A. Dunn
Title: President
RELIABLE EXPLORATION,
INCORPORATED
By: /s/ LYNN A. TURNER
Name: Lynn A. Turner
Title: President
SIGNATURE GEOPHYSICAL SERVICES,
INC.
By: /s/ THOMAS J. CONCANNON
Name: Thomas J. Concannon
Title: Treasurer
<PAGE>
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
DLJ INVESTMENT PARTNERS, L.P. Principal Amount of 2005
Notes Exchanged:
$19,243,132
By: DLJ INVESTMENT PARTNERS, INC.,
Its General Partner Number of 2005 Warrants
Exchanged: 11,377,789
By: /s/ Principal Amount of 2002
Name: Notes Purchased: $1,697,000
Title:
Number of 2002 Warrants
Purchased: 7,891,050
Address of Purchaser:
Mr. John Moriarty
DLJ Investment Funding, Inc.
277 Park Avenue
New York, NY 10172
Telecopy No.: (212) 892-7552
Designated Bank: Citibank, N.A.
ABA Number: 021-000-089
Address: 111 Wall Street
New York, NY 10005
Account No.: 4061-0209
Attention: Fran Argento
Taxpayer I.D. Number: 13-3887953
(if registered in the name of a
nominee, the nominee Taxpayer
I.D. Number)
Nominee (name in which Notes are to be registered, if different than name of
Purchaser)
<PAGE>
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
DLJ INVESTMENT FUNDING, INC. Principal Amount of 2005
Notes Exchanged:
$2,741,891
By: /s/ Number of 2005 Warrants
Name: Exchanged: 1,621,184
Title:
Principal Amount of 2002
Notes Purchased: $242,000
Number of 2002 Warrants
Purchased: 1,125,300
Address of Purchaser:
Mr. John Moriarty
DLJ Investment Funding, Inc.
277 Park Avenue
New York, NY 10172
Telecopy No.: (212) 892-7552
Designated Bank: Citibank, N.A.
ABA Number: 021-000-089
Address: 111 Wall Street
New York, NY 10005
Account No.: 4061-0209
Attention: Fran Argento
Taxpayer I.D. Number: 13-3887953
(if registered in the name of a
nominee, the nominee Taxpayer
I.D. Number)
Nominee (name in which Notes are to be registered, if different than name of
Purchaser)
__________________________________
<PAGE>
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
DLJ ESC II L.P. Principal Amount of 2005
Notes Exchanged:
$1,827,927
By: DLJ LBO PLANS MANAGEMENT
CORPORATION, its Number of 2005 Warrants
General Partner Exchanged: 1,080,789
Principal Amount of 2002
By: /s/ Notes Purchased: $161,000
Name:
Title: Number of 2002 Warrants
Purchased: 748,650
Address of Purchaser:
Mr. John Moriarty
DLJ ESC II L.P.
277 Park Avenue
New York, NY 10172
Telecopy No.: (212) 892-7552
Designated Bank: Citibank, N.A.
ABA Number: 021-000-089
Address: 111 Wall Street
New York, NY 10005
Account No.: 4061-0209
Attention: Fran Argento
Taxpayer I.D. Number: 13-3887953
(if registered in the name of a
nominee, the nominee Taxpayer
I.D. Number)
Nominee (name in which Notes are to be registered, if different than name of
Purchaser)
__________________________________
<PAGE>
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
SPINDRIFT PARTNERS, L.P. Principal Amount of 2005
Notes Exchanged:
$4,252,312.50
By: WELLINGTON MANAGEMENT
COMPANY, LLP, its Number of 2005 Warrants
Investment Advisor Exchanged: 2,514,243
Principal Amount of 2002
By: /s/ CYNTHIA M. CLARKE Notes Purchased: $375,000
Name: Cynthia M. Clarke
Title: Vice President, General Counsel Number of 2002 Warrants
Purchased: 1,743,750
Address of Purchaser:
75 State Street
Boston, MA 02109
Attention: Jonathan Ashe
Telephone No. (617) 790-8637
Telecopy No.: (617) 310-1864
Designated Bank: Citibank, New York
ABA Number: 021000089
Address: One Pierrepont Plaza
Brooklyn, NY 11201
Account No.:
Attention:
Taxpayer I.D. Number: 04-3263949
(if registered in the name of a
nominee, the nominee Taxpayer
I.D. Number)
Nominee (name in which Notes are to be registered, if different than name of
Purchaser)
__________________________________
<PAGE>
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
SPINDRIFT INVESTORS (BERMUDA) Principal Amount of 2005
L.P. Notes Exchanged:
$1,417,437.50
By: WELLINGTON MANAGEMENT Number of 2005 Warrants
COMPANY, LLP, its Exchanged: 838,081
Investment Advisor
Principal Amount of 2002
Notes Purchased: $125,000
By: /s/ CYNTHIA M. CLARKE
Name: Cynthia M. Clarke Number of 2002 Warrants
Title: Vice President, General Counsel Purchased: 581,250
Address of Purchaser:
75 State Street
Boston, MA 02109
Attention: Jonathan Ashe
Telephone No. (617) 790-8637
Telecopy No.: (617) 310-1864
Designated Bank: Citibank, New York
ABA Number: 021000089
Address: One Pierrepont Plaza
Brooklyn, NY 11201
Account No.:
Attention:
Taxpayer I.D. Number:
(if registered in the name of a
nominee, the nominee Taxpayer
I.D. Number)
Nominee (name in which Notes are to be registered, if different than name of
Purchaser)
__________________________________
<PAGE>
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
CHASE EQUITY ASSOCIATES, L.P. Principal Amount of 2005
Notes Exchanged:
$11,339,500
By: CHASE CAPITAL PARTNERS, its
General Partner Number of 2005 Warrants
Exchanged: 6,704,649
By: /s/ Principal Amount of 2002
Name: Notes Purchased: $1,000,000
Title:
Number of 2002 Warrants
Purchased: 4,650,000
Address of Purchaser:
Chase Equity Associates Direct
380 Madison Avenue, 12th Floor
New York, New York 10017
Telecopy No.:
Designated Bank: Chase Manhattan Bank
ABA Number: 021 000 021
Address: 401 Madison Avenue
New York, New York 10017
Account No.:
Attention:
Taxpayer I.D. Number: 13-3371826
(if registered in the name of a
nominee, the nominee Taxpayer
I.D. Number)
Nominee (name in which Notes are to be registered, if different than name of
Purchaser)
__________________________________
<PAGE>
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
MHR CAPITAL PARTNERS LP Principal Amount of 2005
Notes Exchanged: $3,401,850
By: MHR ADVISORS LLC
Number of 2005 Warrants
Exchanged: 2,011,395
By: /s/
Name: Principal Amount of 2002
Title: Manager Notes Purchased: $300,000
Number of 2002 Warrants
Purchased: 1,395,000
Address of Purchaser:
40 West 57th Street
New York, New York 10019
Telecopy No.: (212) 262-9356
Designated Bank: Chase Manhattan Bank
ABA Number: 021-000-021
Address: 401 Madison Avenue
New York, New York 10017
Account No.:
Attention:
Taxpayer I.D. Number: 13-3923564
(if registered in the name of a
nominee, the nominee Taxpayer
I.D. Number)
Nominee (name in which Notes are to be registered, if different than name of
Purchaser)
__________________________________
<PAGE>
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
Principal Amount of 2005
Notes Exchanged: $566,975
Number of 2005 Warrants
/s/ PAUL B. LOYD, JR. Exchanged: 335,232
Name: Paul B. Loyd, Jr.
Principal Amount of 2002
Notes Purchased: $50,000
Number of 2002 Warrants
Purchased: 232,500
Address of Purchaser:
Telecopy No.:
Designated Bank: Chase Manhattan Bank
ABA Number: 021 000 021
Address: 401 Madison Avenue
New York, New York 10017
Account No.:
Attention:
Taxpayer I.D. Number: ###-##-####
(if registered in the name of a
nominee, the nominee Taxpayer
I.D. Number)
Nominee (name in which Notes are to be registered, if different than name of
Purchaser)
__________________________________
<PAGE>
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
WHITTIER VENTURES LLC Principal Amount of 2005
Notes Exchanged: $566,975
Number of 2005 Warrants
By: /s/ DAVID A. DAHL Exchanged: 335,232
Name: David A. Dahl
Title: President Principal Amount of 2002
Notes Purchased: $50,000
Number of 2002 Warrants
Purchased: 232,500
Address of Purchaser:
Whittier Ventures LLC
c/o Whittier Trust Co.
1600 Huntington Drive
So. Pasadena, CA 91030
Telecopy No.: (626) 441-0420
Designated Bank: Union Bank of California
ABA Number: 122-000-496
Address: 445 N. Figueroa
Los Angeles, CA
Account No.:
Attention:
Taxpayer I.D. Number:
(if registered in the name of a
nominee, the nominee Taxpayer
I.D. Number)
Nominee (name in which Notes are to be registered, if different than name of
Purchaser)
__________________________________
<PAGE>
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
SOMERSET CAPITAL PARTNERS Principal Amount of 2002
Notes Purchased: $700,000
Number of 2002 Warrants
By: /s/ WILLIAM R. ZIEGLER Purchased: 3,255,000
Name: William R. Ziegler
Title: General Partner
Address of Purchaser:
Somerset Capital Partners
254 Franklin Street
Buffalo, New York 14202
Telecopy No.: (716) 842-2514
Designated Bank:
ABA Number:
Address:
Account No.:
Attention:
Taxpayer I.D. Number: 16-1506952
(if registered in the name of a
nominee, the nominee Taxpayer
I.D. Number)
Nominee (name in which Notes are to be registered, if different than name of
Purchaser)
__________________________________
<PAGE>
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
Steven A. Webster Principal Amount of 2002
Notes Purchased: $150,000
Number of 2002 Warrants
By: /s/ STEVEN A. WEBSTER Purchased: 697,500
Name: Steven A. Webster
Address of Purchaser:
Steven A. Webster
1908 River Oaks Blvd.
Houston, Texas 77019
Telecopy No.: (713) 520-0362
Designated Bank:
ABA Number:
Address:
Account No.:
Attention:
Taxpayer I.D. Number: ###-##-####
(if registered in the name of a
nominee, the nominee Taxpayer
I.D. Number)
Nominee (name in which Notes are to be registered, if different than name of
Purchaser)
__________________________________
<PAGE>
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
William R. Ziegler Principal Amount of 2002
Notes Purchased: $150,000
Number of 2002 Warrants
By: /s/ WILLIAM R. ZIEGLER Purchased: 697,500
Name: William R. Ziegler
Individually
Address of Purchaser:
William R. Ziegler
20 Pine Brook Road
Bedford, New York 10506
Telecopy No.: (914) 234-0103
Designated Bank:
ABA Number:
Address:
Account No.:
Attention:
Taxpayer I.D. Number: ###-##-####
(if registered in the name of a
nominee, the nominee Taxpayer
I.D. Number)
Nominee (name in which Notes are to be registered, if different than name of
Purchaser)
__________________________________
EXHIBIT 4.2
AMENDED AND RESTATED WARRANT AGREEMENT
AMONG
GEOKINETICS INC.
and
the parties named herein
Dated as of April 30, 1998
and Amended and Restated as of
October 1, 1999
<PAGE>
TABLE OF CONTENTS(1)
PAGE
----
SECTION 1. Warrant Certificates.................................... 2
SECTION 2. Execution of Warrant Certificates....................... 2
SECTION 3. Registration............................................ 3
SECTION 4. Registration of Transfers and Exchanges................. 3
SECTION 5. Warrants; Exercise of Warrants.......................... 6
SECTION 6. Payment of Taxes........................................ 8
SECTION 7. Mutilated or Missing Warrant Certificates............... 9
SECTION 8. Reservation of Warrant Shares........................... 9
SECTION 9. Obtaining Stock Exchange Listings....................... 10
SECTION 10. Adjustment of Number of Warrant Shares
Issuable.............................................. 10
SECTION 11. Fractional Interests.................................... 22
SECTION 12. Notices to Warrant Holders.............................. 22
SECTION 13. Registration Rights..................................... 24
SECTION 14. Notices to Company and Warrant Holder................... 37
SECTION 15. Supplements and Amendments.............................. 34
SECTION 16. Successors.............................................. 34
SECTION 17. Termination of 2005 Warrants............................ 34
SECTION 18. Termination............................................. 34
SECTION 19. Governing Law........................................... 34
SECTION 20. Benefits of This Agreement.............................. 34
SECTION 21. Counterparts............................................ 35
Exhibit A Form of Warrant
- ------------------------
(1) This Table of Contents does not constitute a part of this Agreement of
have any bearing upon the interpretation of any of its items or
provisions.
<PAGE>
WARRANT AGREEMENT (the "Warrant Agreement" or this "Agreement")
dated as of April 30, 1998 (the "Original Issue Date"), as amended and restated
as of October 1, 1999 (the "Second Issue Date"), among Geokinetics Inc., a
Delaware corporation (the "Company"), and the parties named herein (together
with their successors and assigns, the "Holders").
Unless defined herein, terms defined in the Securities Purchase
Agreement dated as of October 1, 1999 among the Company, the Guarantors named
therein and the purchasers named therein (the "Purchasers") (the "Securities
Purchase Agreement") are used as therein defined. For purposes of this Warrant
Agreement, "Original Warrants" shall mean the warrants to purchase common stock
of the Company ("Common Stock") (the Common Stock issuable upon exercise of the
Original Warrants referred to herein as "Original Warrant Shares") issued
pursuant to the Securities Purchase Agreement dated as of April 30, 1998 among
the Company and the purchasers named therein (the "Original Purchasers") and
"Warrants" shall mean the warrants to purchase Common Stock (the Common Stock
issuable upon exercise of the Warrants referred to herein as "Warrant Shares")
issued pursuant to the Securities Purchase Agreement.
WHEREAS, in connection with the issuance of 12% Senior Subordinated
Notes due 2005 of the Company (the "Subordinated Notes") on the Original Issue
Date the Company issued 7,618,594 Original Warrants to purchase Original Warrant
Shares to the Original Purchasers;
WHEREAS, as provided in the Securities Purchase Agreement, the
Company proposes to exchange the Original Warrants and the Subordinated Notes
held by the Original Purchasers for 26,818,594 Warrants and 13 1/2% Senior
Secured Notes due 2005 of the Company (the "2005 Notes") on thE Second Issue
Date, pro rata to each Original Purchaser (in proportion to the number of
Original Warrants exchanged by such Original Purchaser);
WHEREAS, as provided in the Securities Purchase Agreement, 9,600,000
of the 2005 Warrants acquired by the Purchasers of the 2005 Notes on the Second
Issue Date are subject to termination as provided in the Securities Purchase
Agreement; and
WHEREAS, as provided in the Securities Purchase Agreement, in
connection with the issuance of 13 1/2% Senior Se-
<PAGE>
-2-
cured Notes due 2002 of the Company (the "2002 Notes"), the Company proposes to
issue 23,250,000 Warrants on the Second Issue Date, pro rata to each Purchaser
of 2002 Notes (in proportion to such Purchaser's purchase of 2002 Notes) under
the Securities Purchase Agreement, which Warrants are subject to re-allocation
as provided in the Securities Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. WARRANT CERTIFICATES. The certificates evidencing the
Warrants (the "Warrant Certificates") delivered and to be delivered pursuant to
this Agreement shall be in registered form only and shall be substantially in
the form set forth in EXHIBIT A attached hereto.
SECTION 2. EXECUTION OF WARRANT CERTIFICATES. Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board or its
President or a Vice President and by its Secretary or an Assistant Secretary
under its corporate seal. Each such signature upon the Warrant Certificates may
be in the form of a facsimile signature of the present or any future President,
Vice President, Secretary or Assistant Secretary and may be imprinted or
otherwise reproduced on the Warrant Certificates and for that purpose the
Company may adopt and use the facsimile signature of any person who shall have
been Chairman of the Board, President, Vice President, Secretary or Assistant
Secretary, notwithstanding the fact that at the time the Warrant Certificates
shall be delivered or disposed of he shall have ceased to hold such office. The
seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as though such person
had not ceased to be such officer of the Company; and any Warrant Certificate
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate, although at the date of the execution
<PAGE>
-3-
of this Warrant Agreement any such person was not such an officer.
SECTION 3. REGISTRATION. The Company shall number and register the
Warrant Certificates in a register as they are issued. Warrants shall be issued
in accordance with Paragraph 1B of the Securities Purchase Agreement. The
Company may deem and treat the registered holder(s) of the Warrant Certificates
as the absolute owner(s) thereof (notwithstanding any notation of ownership or
other writing thereon made by anyone), for all purposes, and shall not be
affected by any notice to the contrary. The Company shall act as the registrar
for the Warrants.
SECTION 4. REGISTRATION OF TRANSFERS AND EXCHANGES. The Company
shall from time to time register the transfer of any outstanding Warrant
Certificates in a Warrant register to be maintained by the Company upon
surrender thereof accompanied by a written instrument or instruments of transfer
in form satisfactory to the Company, duly executed by the registered holder or
holders thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney together with (if such transfer is pursuant to clause
(1)(w)(III) of the next paragraph) the opinion of counsel specified therein.
Upon any such registration of transfer, a new Warrant Certificate shall be
issued to the transferee(s) and the surrendered Warrant Certificate shall be
cancelled and disposed of by the Company.
Each Holder, severally and not jointly, acknowledges and affirms its
respective representations in Paragraph 6 of the Securities Purchase Agreement.
The Warrant holders and all holders of Warrant Shares, by their acceptance of
Warrant Certificates or certificates evidencing Warrant Shares, agree that any
proposed resale, pledge or other transfer (including any transfer by issuance of
Warrant Shares upon exercise of a Warrant evidenced by a Warrant Certificate in
a name other than the name in which such Warrant Certificate is registered) of
any Warrant or Warrant Shares may be effected only (1) (w) inside the United
States (I) to a person who the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, (II) in accordance with
Rule 144 under the Securities Act or (III) pursuant to another exemption from
the registration requirements of the Secu-
<PAGE>
-4-
rities Act (and based upon an opinion of counsel reasonably satisfactory to the
Company to such effect), (x) to the Company, (y) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act or (z) pursuant to an effective registration statement under the
Securities Act and (2) in each case, in accordance with the applicable
securities laws of any state of the United States or any other applicable
jurisdiction. Each holder of Warrant Certificates or certificates evidencing
Warrant Shares, by acceptance thereof, agrees to, and each subsequent holder is
required to, notify any purchaser thereof of the resale restrictions set forth
above. Prior to any proposed resale, pledge or other transfer (including any
transfer by issuance of Warrant Shares upon exercise of a Warrant evidenced by a
Warrant Certificate in a name other than the name in which such Warrant
Certificate is registered) of any Warrant or Warrant Shares, the Holder thereof
shall give written notice to the Company of such Holder's intention to effect
such transfer and the names and circumstances thereof and, if the proposed
transfer is pursuant to clause (1)(w)(III) of the second preceding sentence,
will, if requested by the Company, deliver to the Company:
(1) an investment covenant reasonably satisfactory to the Company
signed by the proposed transferee;
(2) an agreement by such transferee to the impression of the
restrictive investment legend set forth below on the Warrant or the
Warrant Shares;
(3) an agreement by such transferee that the Company may place a
notation in the stock books of the Company or a "stop transfer order" with
any transfer agent or registrar with respect to the Warrant Shares; and
(4) an agreement by such transferee to be bound by the provisions of
this Section 4 relating to the transfer of such Warrant or Warrant Shares.
The Warrant holders agree that each Warrant Certificate and any
certificate representing the Warrant Shares will bear the following legend:
THE SECURITY REPRESENTED BY THIS CERTIFICATE (AND ANY PREDECESSOR) WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION
5 OF THE UNITED
<PAGE>
-5-
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND, IF SUCH SECURITY
EVIDENCES A WARRANT, THE WARRANT SHARES ISSUABLE PURSUANT THERETO) MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (W) INSIDE THE UNITED
STATES (I) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES
ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, OR (II) IN
ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR (III) PURSUANT TO
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL, IF THE COMPANY SO REQUESTS), (X) TO
THE COMPANY, (Y) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (Z) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (2) IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. THE SECURITY REPRESENTED BY
THIS CERTIFICATE IS ALSO SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFERABILITY CONTAINED IN THE AMENDED AND RESTATED TAG-ALONG DRAG-ALONG
AGREEMENT DATED AS OF SEPTEMBER 30, 1999, A COPY OF WHICH IS ON FILE AT
THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES.
Subject to the foregoing provisions, Warrant Certificates may be
exchanged at the option of the holder(s) thereof, when surrendered to the
Company at its office for another Warrant Certificate or other Warrant
Certificates of like tenor and representing in the aggregate a like number of
Warrants. Warrant Certificates surrendered for exchange shall be cancelled and
disposed of by the Company.
On delivery of the Warrants by the Company to the Warrant holder or
holders pursuant to the Securities Purchase Agreement, each Warrant holder will
have registration rights
<PAGE>
-6-
with respect to the Warrant Shares set forth in Section 13 hereof.
Every Holder of a Warrant Certificate, by accepting the same,
consents and agrees with the Company and with every subsequent holder of such
Warrant Certificate that, prior to due presentment of such Warrant Certificate
for registration of transfer, the Company may treat the person in whose name the
Warrant Certificate is registered as the owner thereof for all purposes and as
the person entitled to exercise the rights granted under the Warrants, and
neither the Company nor any agent thereof shall be affected by any notice to the
contrary.
SECTION 5. WARRANTS; EXERCISE OF WARRANTS. Subject to the terms of
this Agreement, each Warrant holder shall have the right, which may be exercised
commencing at the opening of business on the Second Issue Date and until 5:00
p.m., New York City time on the expiration date (the "Expiration Date") which is
set forth in the form of Warrant Certificate attached hereto as Exhibit A to
receive from the Company the number of fully paid and nonassessable Warrant
Shares which the holder may at the time be entitled to receive on exercise of
such Warrants and payment of the Exercise Price then in effect for such Warrant
Shares. Each Warrant not exercised prior to 5:00 p.m., New York City time, on
the Expiration Date shall become void and all rights thereunder and all rights
in respect thereof under this agreement shall cease as of such time. No
adjustments as to dividends will be made upon exercise of the Warrants.
A Warrant may be exercised upon surrender to the Company at its
office designated for such purpose (the address of which is set forth in Section
14 hereof) of the Warrant Certificate or Certificates evidencing the Warrants to
be exercised with the form of election to purchase on the reverse thereof duly
filled in and signed, which signature shall be guaranteed by a bank or trust
company having an office or correspondent in the United States or a broker or
dealer which is a member of a registered securities exchange or the National
Association of Securities Dealers, Inc., together with (if such exercise
involves a transfer pursuant to clause (1)(w)(III) of the second paragraph of
Section 4) the opinion of counsel specified therein, and upon payment to the
Company of the exercise price (the "Exercise Price") which is set forth in the
form of Warrant Certificate attached hereto as Exhibit A as adjusted as herein
provided, for the number of Warrant Shares in
<PAGE>
-7-
respect of which such Warrants are then exercised. Payment of the aggregate
Exercise Price shall be made in cash or by certified or official bank check to
the order of the Company. In lieu of exercising this Warrant by paying in full
the Exercise Price plus transfer taxes (if applicable pursuant to Section 6), if
any, the Warrant holder may, from time to time, convert this Warrant, in whole
or in part, into a number of shares of Common Stock determined by dividing (a)
the aggregate current market price of the number of shares of Common Stock
represented by the Warrants converted, minus the aggregate Exercise Price for
such shares of Common Stock, minus transfer taxes, if any, by (b) the current
market price of one share of Common Stock. The current market price shall be
determined pursuant to Section 10(f).
Subject to the provisions of Section 6 hereof, upon such surrender
of Warrant Certificates and payment of the Exercise Price the Company shall
issue and cause to be delivered with all reasonable dispatch (and in any event
within 10 Business Days after such receipt) to or upon the written order of the
holder and, subject to Section 4, in such name or names as the Warrant holder
may designate, a certificate or certificates for the number of full Warrant
Shares issuable upon the exercise of such Warrants together with cash as
provided in Section 11; PROVIDED, HOWEVER, that if any consolidation, merger or
lease or sale of assets is proposed to be effected by the Company as described
in subsection (l) of Section 10 hereof, or a tender offer or an exchange offer
for shares of Common Stock of the Company shall be made, upon such surrender of
Warrant Certificates and payment of the Exercise Price as aforesaid, the Company
shall, as soon as possible, but in any event not later than two business days
thereafter, issue and cause to be delivered the full number of Warrant Shares
issuable upon the exercise of such Warrants in the manner described in this
sentence together with cash as provided in Section 11. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such Warrant Certificates and
payment of the Exercise Price.
Prior to the exercise of the Warrants, except as may be specifically
provided for herein, (i) no Holder of a Warrant Certificate, as such, shall be
entitled to any of the rights of a holder of Common Stock of the Company,
including, without
<PAGE>
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limitation, the right to vote at or to receive any notice of any meetings of
stockholders; (ii) the consent of any such Holder shall not be required with
respect to any action or proceeding of the Company; (iii) except as provided in
Section 10(i), no such Holder, by reason of the ownership or possession of a
Warrant or the Warrant Certificate representing the same, shall have any right
to receive any cash dividends, stock dividends, allotments or rights or other
distributions paid, allotted or distributed or distributable to the stockholders
of the Company prior to, or for which the relevant record date preceded, the
date of the exercise of such Warrant; and (iv) no such Holder shall have any
right not expressly conferred by the Warrant or Warrant Certificate held by such
Holder.
The Warrants shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part and, in the event that a
Warrant Certificate is exercised in respect of fewer than all of the Warrant
Shares issuable on such exercise at any time prior to the date of expiration of
the Warrants, a new Warrant Certificate evidencing the remaining Warrant or
Warrants will be issued and delivered pursuant to the provisions of this Section
and of Section 2 hereof.
All Warrant Certificates surrendered upon exercise of Warrants shall
be cancelled and disposed of by the Company. the Company shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by the holders during normal business hours at its office.
SECTION 6. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; PROVIDED, HOWEVER, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue of any Warrant Certificates or any certificates for Warrant Shares
in a name other than that of the registered holder of a Warrant Certificate
surrendered for registration of transfer or upon the exercise of a Warrant, and
the Company shall not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
reasonable satisfaction of the Company that such tax has been paid.
<PAGE>
-9-
SECTION 7. MUTILATED OR MISSING WARRANT CERTIFICATES. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant Certificate and
indemnity, if requested, also reasonably satisfactory to it. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
SECTION 8. RESERVATION OF WARRANT SHARES. The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or, if appointed, the transfer agent for the Common
Stock (the "Transfer Agent") and every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of any of the rights
of purchase aforesaid will be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company' capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Company will furnish such Transfer Agent a copy
of all notices of adjustments and certificates related thereto, transmitted to
each holder pursuant to Section 13 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 10 hereof to reduce the Exercise Price below the then par value (if any)
of the Warrant Shares, the Company will take any corporate action which may, in
the opinion of its counsel (which may be counsel employed by the Com-
<PAGE>
-10-
pany), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free
of preemptive rights and, subject to Section 6, free from all taxes, liens,
charges and security interests with respect to the issue thereof. The Company
further covenants, represents and warrants that, (a) as of the date of issuance
of any of the Warrants, no form of general solicitation or general advertising
was used by the Company or, to the best of its knowledge, any other Person
acting on behalf of the Company, in respect of the Warrants or the Warrant
Shares or in connection with the issuance of the Warrants; (b) as of the date of
issuance of any of the Warrants, neither the Company nor any Person acting on
behalf of the Company has, either directly or indirectly, sold or offered for
sale to any Person any of the Warrants, the Warrant Shares or any other similar
security of the Company except as contemplated by this Agreement; and (c)
neither the Company nor any Person acting on its behalf will sell or offer for
sale any such security to or solicit any offers to buy any such security from,
or otherwise approach or negotiate in respect thereof with, any Person or
Persons so as thereby to bring the issuance or sale of any of the Warrants
within the provisions of Section 5 of the Securities Act.
SECTION 9. OBTAINING STOCK EXCHANGE LISTINGS. The Company will from
time to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed on
the principal securities exchanges and markets within the United States of
America, if any, on which other shares of Common Stock are then listed.
SECTION 10. ADJUSTMENT OF NUMBER OF WARRANT SHARES ISSUABLE. The
number of Warrant Shares issuable upon the exercise of each Warrant are subject
to adjustment from time to time upon the occurrence of the events enumerated in
this Section 10. For purposes of this Section 10, "Common Stock" means shares
now or hereafter authorized of any class of common stock of the Company and any
other stock of the Company, however designated, that has the right (subject to
any prior rights of any class or series of preferred stock) to participate in
any dis-
<PAGE>
-11-
tribution of the assets or earnings of the Company without limit as to per share
amount.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK.
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(3) combines its outstanding shares of Common Stock into a smaller
number of shares;
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares of its
capital stock;
then the number and kind of shares of its capital stock issuable upon exercise
of any Warrant in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he or she would have owned immediately following such action if
such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant upon exercise of it
may receive shares of two or more classes of capital stock of the Company, the
exercise privilege of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section.
Such adjustment shall be made successively whenever any event listed
above shall occur.
<PAGE>
-12-
(b) ADJUSTMENT FOR RIGHTS ISSUE.
If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them to purchase shares of Common Stock or
securities directly or indirectly convertible into or exchangeable for Common
Stock (or options or rights with respect to such securities) at a price per
share less than the current market price per share on that record date, the
number of Warrant Shares issuable upon exercise of one Warrant shall be adjusted
in accordance with the formula:
N' = N x (O + A)
-------------
(O + (A x P/M))
where:
N' = the adjusted number of Warrant Shares issuable upon exercise of
one Warrant.
N = the current number of Warrant Shares issuable upon exercise of one
Warrant.
O = the number of shares of Common Stock outstanding on the record
date.
A = the number of additional shares of Common Stock offered pursuant
to such rights issuance.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the number of Warrant Shares issuable upon exercise
of the Warrants
<PAGE>
-13-
shall be immediately readjusted to what it would have been if "A" in the above
formula had been the number of shares actually issued.
(c) ADJUSTMENT FOR OTHER DISTRIBUTIONS.
If the Company distributes to all holders of its Common Stock any of
its assets (including but not limited to cash), debt securities, preferred
stock, or any rights or warrants to purchase debt securities, preferred stock,
assets or other securities of the Company, the number of Warrant Shares issuable
upon exercise of one Warrant shall be adjusted in accordance with the formula:
N' = N x M
---
M-F
where:
N' = the adjusted number of Warrant Shares issuable upon exercise of
one Warrant.
N = the current number of Warrant Shares issuable upon exercise of one
Warrant.
M = the current market price per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date of the assets, securities,
rights or warrants applicable to one share of Common Stock. The
Board of Directors shall determine the fair market value in good
faith.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This subsection does not apply to rights, options or warrants
referred to in subsection (b) of this Section 10.
<PAGE>
-14-
(d) ADJUSTMENT FOR COMMON STOCK ISSUE.
If the Company issues shares of Common Stock for a consideration per
share less than the current market price per share on the date the Company fixes
the offering price of such additional shares, the number of Warrant Shares
issuable upon exercise of one Warrant shall be adjusted in accordance with the
formula:
N' = N x A
-------
O + P/M
where:
N' = the adjusted number of Warrant Shares issuable upon exercise of
one Warrant.
N = the then current number of Warrant Shares issuable upon exercise
of one Warrant.
O = the number of shares outstanding immediately prior to the issuance
of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
M = the current market price per share on the date of sale of such
additional shares.
A = the number of shares outstanding immediately after the issuance of
such additional shares.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections (b) and (c) of
this Section 10,
(2) the exercise of Warrants, or the conversion or exchange of other
securities convertible or exchangeable for Common Stock,
<PAGE>
-15-
(3) Common Stock issued to employees of the Company and its Wholly
Owned Subsidiaries under bona fide employee benefit plans adopted by the
Board of Directors and approved by the holders of Common Stock when
required by law, if such Common Stock would otherwise be covered by this
subsection (d) (but only to the extent that the aggregate number of shares
excluded hereby and issued on or after the Original Issue Date shall not
exceed 11,633,775 shares of Common Stock or options exercisable into
shares of Common Stock outstanding at any time (subject to adjustment for
stock splits, stock dividends, recapitalization, etc.)).
(4) Common Stock issued upon the exercise of warrants and stock
options outstanding on the Second Issue Date, or
(5) Common Stock issued in a bona fide public offering pursuant to a
firm commitment underwriting.
(e) ADJUSTMENT FOR CONVERTIBLE SECURITIES ISSUE.
If the Company issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in subsections (b) and (c) of this Section 10) for a consideration per
share of Common Stock initially deliverable upon conversion or exchange of such
securities less than the current market price per share on the date of issuance
of such securities, the number of Warrant Shares issuable upon exercise of one
Warrant shall be adjusted in accordance with this formula:
N' = N x O + D
-------
O + P/M
where:
N' = the adjusted number of Warrant Shares issuable upon exercise of
one Warrant.
N = the then current number of Warrant Shares issuable upon exercise
of one Warrant.
<PAGE>
-16-
O = the number of shares outstanding immediately prior to the issuance
of such securities.
P = the aggregate consideration received for the issuance of such
securities.
M = the current market price per share on the date of sale of such
securities.
D = the maximum number of shares deliverable upon conversion or in
exchange for such securities at the initial conversion or exchange
rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange
of such securities have not been issued when such securities are no longer
outstanding, then the number of Warrant Shares issuable upon exercise of one
Warrant shall promptly be readjusted to the number of Warrant Shares issuable
upon exercise of one Warrant which would then be in effect had the adjustment
upon the issuance of such securities been made on the basis of the actual number
of shares of Common Stock issued upon conversion or exchange of such securities.
This subsection (e) does not apply to:
(1) convertible securities issued in a bona fide public offering
pursuant to a firm commitment underwriting, or
(2) convertible securities issued to employees of the Company and
its Wholly Owned Subsidiaries under bona fide employee benefit plans
adopted by the Board of Directors and approved by the holders of Common
Stock when required by law, if such convertible securities would otherwise
be covered by this subsection (e) (but only to the extent that the
aggregate number of convertible securities excluded hereby and issued on
or after the Original Issue Date shall not exceed 11,633,775 shares of
Common Stock or options exercisable into shares of Common Stock
outstanding at any time (subject to adjustment for stock splits, stock
dividends, recapitalization, etc.)).
<PAGE>
-17-
(f) CURRENT MARKET PRICE.
In Sections 5 and 11 and in subsections (b), (c), (d) and (e) of
this Section 10 the current market price per share of Common Stock on any date
is the average of the Quoted Prices of the Common Stock for 30 consecutive
trading days commencing 45 trading days before the date in question. The "Quoted
Price" of the Common Stock is the last reported sales price of the Common Stock
as reported by NASDAQ, National Market System, or if the Common Stock is listed
on a securities exchange, the last reported sales price of the Common Stock on
such exchange which shall be for consolidated trading if applicable to such
exchange, or if neither so reported or listed, the last reported bid price of
the Common Stock. In the absence of one or more such quotations, the Board of
Directors of the Company shall determine the current market price (i) based on
the most recently completed arm's-length transaction between the Company and a
person other than an Affiliate of the Company and the closing of which occurs on
such date or shall have occurred within the six months preceding such date, (ii)
if no such transaction shall have occurred on such date or within such six-month
period, the value of the security most recently determined as of a date within
the six months preceding such date by a nationally recognized investment banking
firm or appraisal firm which is not an Affiliate of the Company (an "Independent
Financial Advisor") or (iii) if neither clause (i) nor (ii) is applicable, the
value of the security determined as of such date by an Independent Financial
Advisor.
(g) CONSIDERATION RECEIVED.
For purposes of any computation respecting consideration received
pursuant to subsections (d) and (e) of this Section 10, the following shall
apply:
(1) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, PROVIDED that in no
case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to
<PAGE>
-18-
be the fair market value thereof as determined in good faith by the Board
of Directors (irrespective of the accounting treatment thereof), whose
determination shall be conclusive, and described in a Board resolution;
(3) in the case of the issuance of securities convertible into or
exchangeable for shares, the aggregate consideration received therefor
shall be deemed to be the consideration received by the Company for the
issuance of such securities plus the additional minimum consideration, if
any, to be received by the Company upon the conversion or exchange thereof
(the consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this subsection).
(h) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED.
No adjustment in the number of Warrant Shares issuable upon exercise
of one Warrant need be made unless the adjustment would require an increase or
decrease of at least 1% in the number of Warrant Shares issuable upon exercise
of one Warrant. Any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment.
All calculations under this Section shall be made to the nearest
1/100th of a share.
(i) WHEN NO ADJUSTMENT REQUIRED.
No adjustment need be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no par
value of the Common Stock.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(j) NOTICE OF ADJUSTMENT.
Whenever the number of Warrant Shares issuable upon exercise of one
Warrant is adjusted, the Company shall provide the notices required by Section
12 hereof.
<PAGE>
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(k) NOTICE OF CERTAIN TRANSACTIONS.
If:
(1) The Company takes any action that would require an adjustment in
the number of Warrant Shares issuable upon exercise of one Warrant
pursuant to subsection (a), (b), (c), (d) or (e) of this Section 10 and if
the Company does not arrange for Warrant holders to participate pursuant
to subsection (i) of this Section 10;
(2) The Company takes any action that would require a supplemental
Warrant Agreement pursuant to subsection (l) of this Section 10; or
(3) there is a liquidation or dissolution of the Company,
The Company shall mail to Warrant holders a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the notice at least 15
days before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
(l) REORGANIZATION OF COMPANY.
If the Company consolidates or merges with or into, or transfers or
leases all or substantially all its assets to, any person, upon consummation of
such transaction the Warrants shall automatically become exercisable for the
kind and amount of securities, cash or other assets which the holder of a
Warrant would have owned immediately after the consolidation, merger, transfer
or lease if the holder had exercised the Warrant immediately before the
effective date of the transaction. Concurrently with the consummation of such
transaction, the corporation formed by or surviving any such consolidation or
merger if other than the Company, or the person to which such sale or conveyance
shall have been made, shall enter into a supplemental Warrant Agreement so
providing and further providing for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this Section.
The successor company shall mail to Warrant holders a notice describing the
supplemental Warrant Agreement.
<PAGE>
-20-
If the issuer of securities deliverable upon exercise of Warrants
under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement.
If this subsection (l) applies, subsections (a), (b), (c), (d) and
(e) of this Section 10 do not apply.
(m) COMPANY DETERMINATION FINAL.
Any determination that the Company or the Board of Directors must
make pursuant to subsection (a), (c), (d), (e), (f), (g) or (i) of this Section
10 which is made in good faith shall be conclusive.
(n) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED.
In any case in which this Section 10 shall require that an
adjustment in the number of Warrant Shares issuable upon exercise of one Warrant
be made effective as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event (i) issuing to the holder of
any Warrant exercised after such record date the Warrant Shares and other
capital stock of the Company, if any, issuable upon such exercise over and above
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise on the basis of the current number of Warrant Shares issuable upon
exercise of one Warrant and (ii) paying to such holder any amount in cash in
lieu of a fractional share pursuant to Section 11; PROVIDED, HOWEVER, that the
Company shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional Warrant Shares, other
capital stock and cash upon the occurrence of the event requiring such
adjustment.
(o) ADJUSTMENT IN EXERCISE PRICE.
Upon each adjustment of the number of Warrant Shares pursuant to
this Section 10, the Exercise Price for each Warrant outstanding prior to the
making of the adjustment in the number of Warrant Shares shall thereafter be
adjusted to the Exercise Price (calculated to the nearest hundredth) obtained
from the following formula:
<PAGE>
-21-
E'= E x N/N'
where:
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
N' = the adjusted number of Warrant Shares issuable up on exercise of a
Warrant.
N = the number or Warrant Shares previously issuable upon exercise of
a Warrant prior to adjustment.
(p) FORM OF WARRANTS.
Irrespective of any adjustments in the number or kind of shares
purchasable upon the exercise of the Warrants, Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
(q) NO DILUTION OR IMPAIRMENT.
If any event shall occur as to which the provisions of this Section
10 are not strictly applicable but the failure to make any adjustment would
adversely affect the purchase rights represented by the Warrants in accordance
with the essential intent and principles of this Section, then, in each such
case, the Company shall appoint an investment banking firm of recognized
national standing, or any other financial expert that does not (or whose
directors, officers, employees, affiliates or stockholders do not) have a direct
or material indirect financial interest in the Company or any of its
subsidiaries, who has not been, and, at the time it is called upon to give
independent financial advice to the Company, is not (and none of its directors,
officers, employees, affiliates or stockholders are) a promoter, director or
officer of the Company or any of its subsidiaries, which shall give their
opinion upon the adjustment, if any, on a basis consistent with the essential
intent and principles established in this Section 10, necessary to preserve,
without dilution, the purchase rights represented by this Warrant. Upon receipt
of such opinion, the Company will promptly mail a copy thereof to the holders of
the Warrants and shall make the adjustments described therein.
<PAGE>
-22-
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Warrants, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of the Warrants against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (1) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock on the exercise of the Warrants from time
to time outstanding and (2) will not take any action which results in any
adjustment of the number of Warrant Shares issuable upon exercise of one Warrant
if the total number of Warrant Shares issuable after the action upon the
exercise of all of the Warrants would exceed the total number of shares of
Common Stock then authorized by the Company's certificate of incorporation and
available for the purposes of issue upon such exercise. A consolidation, merger,
reorganization or transfer of assets involving the Company covered by Section
10(l) shall not be prohibited by or require any adjustment under this subsection
(q).
SECTION 11. FRACTIONAL INTERESTS. Any one Warrant may be exercised
only in full and not in part. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise at the same time by the same holder, the number
of full Warrant Shares which shall be issuable upon the exercise thereof shall
be computed on the basis of the aggregate number of Warrant Shares purchasable
on exercise of the Warrants so requested to be exercised. If any fraction of a
Warrant Share would, except for the provisions of this Section 11, be issuable
on the exercise of any Warrants (or specified portion thereof), the Company
shall pay an amount in cash equal to the product of (i) such fraction of a
Warrant Share and (ii) the difference between the current market price of a
share of Common Stock and the Exercise Price.
SECTION 12. NOTICES TO WARRANT HOLDERS. Upon any adjustment of the
number of Warrant Shares issuable upon exercise of one Warrant pursuant to
Section 10, the Company shall promptly thereafter (i) cause to be filed with the
Company a
<PAGE>
-23-
certificate which includes the report of a firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company (who may be the regular auditors of the Company) setting forth the
number of Warrant Shares issuable upon exercise of one Warrant after such
adjustment and setting forth in reasonable detail the method of calculation and
the facts upon which such calculations are based, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein, and
(ii) cause to be given to each of the registered holders of the Warrant
Certificates at his or her address appearing on the Warrant register written
notice of such adjustments by first-class mail, postage prepaid. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 12.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants; or
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other
than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in shares of Common Stock
or distributions referred to in subsection (a) of Section 10 hereof); or
(c) of any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change
in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or a tender
offer or exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
<PAGE>
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(e) the Company proposes to take any action (other than actions of
the character described in Section 10(a)) which would require an
adjustment of the number of Warrant Shares issuable upon exercise of one
Warrant pursuant to Section 10;
then the Company shall cause to be given to each of the registered holders of
the Warrant Certificates at his or her address appearing on the Warrant
register, at least 20 days (or 10 days in any case specified in clauses (a) or
(b) above) prior to the applicable record date hereinafter specified, or
promptly in the case of events for which there is no record date, by first class
mail, postage prepaid, a written notice stating (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
rights, options, warrants or distribution are to be determined, or (ii) the
initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock, or (iii) the date on which any such consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up is expected
to become effective or consummated, and the date as of which it is expected that
holders of record of shares of Common Stock shall be entitled to exchange such
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up. The failure to give the notice required by this
Section 12 or any defect therein shall not affect the legality or validity of
any distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.
SECTION 13. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION.
(1) REQUEST FOR REGISTRATION. At any time the Holder or Holders of
in excess of 25% of the outstanding Warrant Shares issued or issuable upon
exercise of the Warrants
<PAGE>
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may make a written request for registration under the Securities Act ("Demand
Registration") of all or part of its or their Registrable Securities; PROVIDED
that the Company shall not be obligated to effect more than three Demand
Registrations in respect of the Registrable Securities. Such request will
specify the number of Registrable Securities proposed to be sold and will also
specify the intended method of disposition thereof. Within 10 Business Days
after receipt of such request, the Company will give written notice of such
registration request to all other Holders of the Warrants and include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein from the Holders thereof within
15 Business Days after receipt by the applicable Holder of the Company's notice.
Each such request will also specify the aggregate number of Registrable
Securities to be registered and the intended method of disposition thereof.
(2) EFFECTIVE REGISTRATION AND EXPENSES. A registration will not
count as a Demand Registration until it has become effective (unless the Holders
demanding such registration withdraw the Registrable Securities, in which case
such demand will count as a Demand Registration unless the Holders of such
Warrants agree to pay all Registration Expenses (as hereinafter defined)
relating to such registration). Except as provided above, the Company will pay
all Registration Expenses in connection with any registration initiated as a
Demand Registration, whether or not it becomes effective.
(3) PRIORITY ON DEMAND REGISTRATIONS. If the Holders of a majority
of the Registrable Securities to be registered in a Demand Registration so
elect, the offering of such Registrable Securities pursuant to such Demand
Registration shall be in the form of an underwritten offering. In such event, if
the managing underwriter or underwriters (the "Underwriters") of such offering
advise the Company and the Holders in writing that in their opinion the
Registrable Securities requested to be included in such offering is sufficiently
large to materially and adversely affect the success of such offering, then (i)
the Holders of Registrable Securities shall be entitled to participate in such
Demand Registration (PRO RATA on the basis of the amount of Registrable
Securities requested to be included in such registration by each such Holder)
first; and (ii) the Company and other equity security holders of the Company
entitled to participate will be entitled to participate in such registration
(with the holders of such securities being
<PAGE>
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entitled to participate in accordance with the relative priorities, if any, as
shall exist among them), in each case with further PRO RATA allocations to the
extent any such person has requested registration of fewer securities than such
person is entitled to have registered so that the number of securities to be
included in such registration will not exceed that amount that can, in the
opinion of such Managing Underwriter or Underwriters, be sold without any such
material adverse effect. To the extent Registrable Securities so requested to be
registered are excluded from the offering, the Holders of Registrable
Securities, as a group, shall have the right to one additional Demand
Registration under this section with respect to Registrable Securities for the
number of shares so excluded (but in no event shall such additional Demand
Registration be for less than 250,000 shares).
(4) SELECTION OF UNDERWRITERS. If any Demand Registration is in the
form of an underwritten offering, the Holders of a majority of the aggregate
number of the outstanding Registrable Securities shall designate the Underwriter
or a group of Underwriters to be utilized in connection with the public offering
of such Registrable Securities, which selection shall be reasonably acceptable
to the Company. The Company shall enter into an underwriting agreement in
customary form with such Underwriter or Underwriters, which shall include, among
other provisions, indemnities to the effect and to the extent provided in
Section 13(d). The holders of Registrable Securities to be distributed by such
Underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
Underwriters also be made to and for their benefit and that any and all of the
conditions precedent to the obligations of such Underwriters under such
underwriting agreement also be conditions precedent to their obligations. No
holder of Registrable Securities shall be required to make any representations
or warranties to or agreements with the Company or the Underwriters other than
representations, warranties or agreements regarding such holder and its
ownership of the Registrable Securities being registered on its behalf and such
holder's intended method of distribution and any other representation required
by law.
(5) DEFERRAL. Notwithstanding anything to the contrary contained
herein, the Company shall not be obligated to
<PAGE>
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prepare and file, or cause to become effective, any registration statement
pursuant to this Section 13(a) hereof at any time when, in the good faith
judgment of its Board of Directors, the filing thereof at the time requested or
the effectiveness thereof after filing should be delayed to permit the Company
to include in the registration statement the Company's financial statements (and
any required audit opinion thereon) for the then immediately preceding fiscal
year or fiscal quarter, as the case may be. The filing of a registration
statement by the Company cannot be deferred pursuant to the provisions of the
immediately preceding sentence beyond the time that such financial statements
(or any required audit opinion thereon) would be required to be filed with the
Commission as part of the Company's Annual Report on Form 10-K or Quarterly
Report on Form 10-Q, as the case may be, if the Company were then obligated to
file such reports. Notwithstanding anything to the contrary contained herein,
the Company shall not be obligated to cause a registration statement previously
filed pursuant to this Section 13 to become effective, and may suspend sales by
the Holders of Registrable Securities under any registration that has previously
become effective, at any time when, in the good faith judgment of its Board of
Directors, it reasonably believes that the effectiveness of such registration
statement or the offering of securities pursuant thereto would materially
adversely affect a pending or proposed acquisition, merger, recapitalization,
consolidation, reorganization or similar transaction or negotiations,
discussions or pending proposals with respect thereto; PROVIDED that deferrals
pursuant to this sentence shall not exceed, in the aggregate, 180 days in any
calendar year. The filing of a registration statement, or any amendment or
supplement thereto, by the Company cannot be deferred, and the rights of Holders
of Registrable Securities to make sales pursuant to an effective registration
statement cannot be suspended, pursuant to the provisions of the immediately
preceding sentence for more than 15 days after the abandonment or 30 days after
the consummation of any of the foregoing proposals or transactions or, in any
event, for more than 30 days after the date of the Board's determination
pursuant to the immediately preceding sentence of this Section 13(a)(5).
(6) FURTHER DEMANDS. The Company agrees that after the Second Issue
Date, it shall not grant any Person registration rights of the type set forth in
Section 13(a) hereof with respect to any equity securities of the Company
without the
<PAGE>
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consent of the Holders of a majority of the Registrable Securities, which
consent shall not be unreasonably withheld. The Company and the Holders agree
that the Holders shall be entitled to the consent right set forth in the
immediately preceding sentence so long as the Holders continue to hold 25% of
the Warrants (or Warrant Shares) held by them on the Second Issue Date.
(b) PIGGY-BACK REGISTRATION.
(1) If the Company proposes to file a registration statement under
the Securities Act with respect to an offering by the Company for its own
account or for the account of any of its security holders of any class of equity
security (other than a registration statement on Form S-4 or S-8 (or any
substitute form that may be adopted by the Commission) or a registration
statement in connection with an exchange offer or offering to the Company's
existing security holders), then the Company shall give written notice of such
proposed filing to the Holders of Registrable Securities as soon as practicable
(but in no event less than 20 Business Days before the anticipated filing date),
and such notice shall offer such Holders the opportunity to register such number
of Registrable Securities as each such Holder may request (a "Piggy-Back
Registration").
(2) The Company shall use its best efforts to cause the managing
Underwriter or Underwriters of a proposed underwritten offering to permit the
Registrable Securities requested to be included in the registration statement
for such offering to be included on the same terms and conditions as any similar
securities of the Company or of such other security holders included therein.
Notwithstanding the foregoing, if the managing Underwriter or Underwriters of
such offering deliver a written opinion to the Company that either because of
(i) the kind or combination of securities which the Holders, the Company and any
other persons or entities intend to include in such offering or (ii) the size of
the offering which the Holders, the Company and such other persons intend to
make, are such that the success of the offering would be materially and
adversely affected by inclusion of the Registrable Securities requested to be
included, then (a) in the event that the size of the offering is the basis of
such managing Underwriter's opinion, the amount of securities to be offered for
the accounts of Non-Priority Persons (as defined below) shall be reduced pro
rata
<PAGE>
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(according to the Registrable Securities and other securities proposed for
registration by Persons ("Non-Priority Persons") other than the Company (if such
registration was initially to be filed for the account of the Company) or the
other Persons for whose account such registration was initially to be filed) to
the extent necessary to reduce the total amount of securities to be included in
such offering to the amount recommended by such managing Underwriter or
Underwriters; PROVIDED that if securities are being offered for the account of
Non-Priority Persons other than holders of Registrable Securities, then with
respect to the Registrable Securities intended to be offered by Holders, the
proportion by which the amount of such class of securities intended to be
offered by Holders is reduced shall not exceed the proportion by which the
amount of such class of securities intended to be offered by Non-Priority
Persons other than holders of Registrable Securities is reduced; and (b) in the
event that the kind (or combination) of securities to be offered is the basis of
such managing Underwriter's opinion, (x) the Registrable Securities to be
included in such offering shall be reduced as described in clause (a) above
(subject to the proviso in clause (a)) or (y) if the actions described in clause
(x) would, in the judgment of the managing Underwriter, be insufficient to
substantially eliminate the adverse effect that inclusion of the Registrable
Securities requested to be included would have on such offering, such
Registrable Securities will be excluded from such offering.
The Company will pay all Registration Expenses (as defined herein)
in connection with each registration of Registrable Securities.
(c) REGISTRATION PROCEDURES.
If and whenever the Company is required to use its best efforts to
effect the registration of any Registrable Securities under the Securities Act,
the Company will promptly:
(1) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such securities, make all required
filings with the NASD and use commercially reasonable efforts to cause
such registration statement to become effective;
(2) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such
<PAGE>
-30-
registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until
such time as all of such securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof
set forth in such registration statement, but in no event for a period of
more than one year after such registration statement becomes effective;
(3) furnish to counsel (if any) elected by holders of a majority (by
number of shares) of the Registrable Securities covered by such
registration statement copies of all documents proposed to be filed with
the Securities and Exchange Commission in connection with such
registration, which documents will be subject to the review of such
counsel;
(4) furnish to each seller of such securities such number of
conformed copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits, except that
the Company shall not be obligated to furnish any seller of securities
with more than two copies of such exhibits), such number of copies of the
prospectus included in such registration statement (including such
preliminary prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request in order to facilitate the disposition of
the securities owned by such seller;
(5) use its commercially reasonable efforts to register or qualify
such securities covered by such registration statement under such other
securities or Blue Sky Laws of such jurisdictions as each seller shall
request, and do any and all other acts and things which may be necessary
or advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it is not
so qualified, or to consent to general service of process in any such
jurisdiction;
<PAGE>
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(6) furnish to each seller a signed counterpart, addressed to the
sellers, of
(i) an opinion of counsel for the Company, dated the effective
date of the registration statement, reasonably satisfactory in form
and substance to such holders' counsel referred to in Section
13(c)(3), and
(ii) subject to the accountants obtaining the necessary
representations as specified in Statement on Auditing Standards No.
72, a "comfort" letter signed by the independent public accountants
who have certified the Company's financial statements included in
the registration statement,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to changes subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the Underwriters
in underwritten public offerings of securities;
(7) notify each seller of any securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and at the request of any such seller prepare
and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
<PAGE>
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(8) otherwise use its commercially reasonable efforts to comply with
all applicable rules and regulations of the Securities and Exchange
Commission, and make available to its Security holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the
first month after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act;
(9) use its best efforts to list such securities on any securities
exchange on which the Common Stock is then listed, if such securities are
not already so listed and if such listing is then permitted under the
rules of such exchange, and to provide a transfer agent and registrar for
such Registrable Securities not later than the effective date of such
registration statement;
(10) in any underwritten offering, use its best efforts to cause the
indemnity and contribution terms between the sellers and the Underwriters
to be no more burdensome to the sellers than the indemnity and
contribution terms between the sellers and the Company set forth in
Section 13(d) hereof; and
(11) promptly notify each holder and the Underwriter or
Underwriters, if any:
(i) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has
been filed and, with respect to such registration statement or any
post-effective amendment thereto, when the same has become
effective;
(ii) of any written comments from the Securities and Exchange
Commission with respect to any filing referred to in clause (i) and
of any written request by the Securities and Exchange Commission for
amendments or supplements to such registration statement or
prospectus;
(iii) of the notification to the Company by the Securities and
Exchange Commission of its initiation of any proceeding with respect
to the issuance by the
<PAGE>
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Securities and Exchange Commission of, or of the issuance by the
Securities and Exchange Commission of, any stop order suspending the
effectiveness of such registration statement; and
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the applicable securities or blue sky laws
of any jurisdiction.
The Company may require each seller of any securities as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law
in connection therewith. Each such holder agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such holder not materially
misleading.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 13(c)(7) hereof, such holder will promptly discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 13(c)(7)
hereof. If so directed by the Company, each holder of Registrable Securities
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the period
mentioned in Section 13(c)(2) hereof shall be extended by the number of days
during the period from and including the date of the giving of such notice to
and including the date when each seller of any Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 13(c)(7) hereof.
<PAGE>
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In connection with any underwritten offering, all Registrable
Securities to be included in such registration shall be subject to the related
underwriting agreement and no person may participate in such registration unless
such person agrees to sell such person's securities on the basis provided in the
underwriting arrangement approved by the persons for whose account such
underwritten registration is initially filed and completes and executes all
customary questionnaires, indemnities, underwriting agreements and other
reasonable documents which must be executed under the terms of such underwriting
arrangements.
(d) INDEMNIFICATION.
(1) INDEMNIFICATION. The Company agrees to indemnify and hold
harmless each Holder of Registrable Securities, its officers, directors,
employees and agents and each Person who controls such Holder within the meaning
of either Section 15 of the Securities Act or Section 20(a) of the Exchange Act
(each such person being sometimes hereinafter referred to as an "Indemnified
Holder") from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation and legal expenses) arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus or in any amendment
or supplement thereto or in any preliminary prospectus, or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any such untrue statement or omission or allegation
thereof based upon information relating to such Indemnified Holder and furnished
in writing to the Company by such Indemnified Holder expressly for use therein.
This indemnity will be in addition to any liability which the Company may
otherwise have.
If any action or proceeding (including any governmental
investigation or inquiry) shall be brought or asserted against an Indemnified
Holder in respect of which indemnity may be sought from the Company, such
Indemnified Holder shall promptly notify the Company in writing, and the Company
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Holder and the pay-
<PAGE>
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ment of all expenses. Such Indemnified Holder shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Holder except that the Company shall be responsible for the
reasonable fees and expenses of such counsel if (but only if) (a) the Company
has agreed to pay such fees and expenses or (b) the Company shall have failed to
assume the defense of such action or proceeding and has failed to employ counsel
reasonably satisfactory to such Indemnified Holder in any such action or
proceeding or (c) the named parties to any such action or proceeding (including
any impleaded parties) include both such Indemnified Holder and the Company, and
there are one or more legal defenses available to such Indemnified Holder which
are different from or additional to those available to the Company (in which
case, if such Indemnified Holder notifies the Company in writing that it elects
to employ separate counsel at the expense of the Company, the Company shall not
have the right to assume the defense of such action or proceeding on behalf of
such Indemnified Holder, it being understood, however, that the Company shall
not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys at any time for
such Indemnified Holder and any other Indemnified Holders, which firm shall be
designated in writing by such Indemnified Holders). The Company shall not be
liable for any settlement of any such action or proceeding effected without its
written consent, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such action or proceeding, the Company agrees
to indemnify and hold harmless such Indemnified Holders from and against any
loss or liability by reason of such settlement or judgment.
(2) CONTRIBUTION. If the indemnification provided for in Section
13(d)(1) is unavailable to an Indemnified Holder in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then the Company,
in lieu of indemnifying such Indemnified Holder, shall contribute to the amount
paid or payable by such Indemnified Holder as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and of the Indemnified Holder
on the other in connection with the statements or omissions which re-
<PAGE>
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sulted in such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The relative fault of the Company on
the one hand and of the Indemnified Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Indemnified Holder and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 1(d)(1), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Company and each Holder of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 1(d)(2)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
13(d)(2), an Indemnified Holder shall not be required to contribute any amount
in excess of the amount by which the total net proceeds received by such
Indemnified Holder or its affiliated Indemnified Holders from the sale to the
public of Registrable Securities exceeds the amount of any damages which such
Indemnified Holder, or its affiliated Indemnified Holders, has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(3) CERTAIN DEFINITIONS.
(i) The term "Registrable Securities" shall mean the Warrant Shares
and any other securities issued or issuable upon exercise of the Warrants.
As to any particular Registrable Securities, once issued such securities
shall cease to be Registrable Securities when (A) a registration statement
with respect to the sale of such securities shall have become effective
under the Securities Act and
<PAGE>
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such securities shall have been disposed of in accordance with such
registration statement, (B) they shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) under the Securities
Act, (C) they shall have been otherwise transferred, new certificates for
them not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or
any similar state law then in force, or (D) they shall have ceased to be
outstanding.
(ii) The term "Registration Expenses" shall mean all expenses
incident to the Company's performance of or compliance with Section 13
hereof, including, without limitation, all registration and filing fees,
all fees and expenses of complying with securities or blue sky laws, fees
and other expenses associated with filings with the National Association
of Securities Dealers, Inc. (including, if required, the reasonable fees
and expenses of any "qualified independent underwriter" and its counsel),
all printing expenses, the reasonable fees and disbursements of counsel
for the Company and of its independent public accountants, the fees and
disbursements of one counsel retained by the holders of Registrable
Securities, the expenses of any special audits made by such accountants
required by or incident to such performance and compliance, but not
including (a) fees and disbursements of more than one counsel retained by
the holders of Registrable Securities, or (b) such holders' proportionate
share of underwriting discounts and commissions.
SECTION 14. NOTICES TO COMPANY AND WARRANT HOLDER. Any notice or
demand authorized by this Agreement to be given or made by the registered holder
of any Warrant Certificate to or on the Company shall be sufficiently given or
made when and if deposited in the mail, first class or registered, postage
prepaid, addressed to the office of the Company expressly designated by the
Company at its office for purposes of this Agreement (until the Warrant holders
are otherwise notified in accordance with this Section by the Company), as
follows:
<PAGE>
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Geokinetics Inc.
8401 Westheimer
Suite 150
Houston, Texas 77063
Attention: Chairman of the Board
Any notice pursuant to this Agreement to be given by the Company to
the registered holder(s) of any Warrant Certificate shall be sufficiently given
when and if deposited in the mail, first class or registered, postage prepaid,
addressed (until the Company is otherwise notified in accordance with this
Section by such holder) to such holder at the address appearing on the Warrant
register of the Company.
SECTION 15. SUPPLEMENTS AND AMENDMENTS. The Company may from time to
time supplement or amend this Agreement without the approval of any holders of
Warrant Certificates in order to cure any ambiguity or to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or desirable
and which shall not in any way adversely affect the interests of the holders of
Warrant Certificates. Any amendment or supplement to this Agreement that has an
adverse effect on the interests of holders shall require the written consent of
registered holders of two-thirds of the then outstanding Warrant Shares issued
or issuable upon exercise of the Warrants (excluding Warrant Shares held by the
Company or any of its Affiliates). The consent of each holder of a Warrant
affected shall be required for any amendment pursuant to which the number of
Warrant Shares purchasable upon exercise of Warrants would be decreased (other
than in accordance with Section 10 or 11 hereof).
SECTION 16. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its respective successors and assigns hereunder.
SECTION 17. TERMINATION OF 2005 WARRANTS. Pursuant to Paragraph 6D
of the Securities Purchase Agreement, 9,600,000 2005 Warrants are subject to
termination. Warrants subject to termination will contain a reference to the
possible termination thereof on the face of each warrant certificate
representing such Warrants.
<PAGE>
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SECTION 18. TERMINATION. This Agreement (except for Section 13(d)
and for the restrictions on transfer of Warrant Shares specified in Section 4)
shall terminate at 5:00 p.m., New York City time on September 15, 2006.
SECTION 19. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF DELAWARE AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE. THE COMPANY AND EACH GUARANTOR
AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE. THE
COMPANY AND EACH GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS FOR NOTICES PURSUANT TO
SECTION 14, SUCH SERVICE TO BECOME EFFECTIVE 5 DAYS AFTER SUCH MAILING.
SECTION 20. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the registered holders of the Warrant Certificates or Warrant Shares any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company and the
registered holders of the Warrant Certificates and the Warrant Shares. Nothing
herein shall prohibit or limit the Company from entering into an agreement
providing holders of securities which may hereafter be issued by the Company
with such registration rights exercisable at such time or times and in such
manner as the Board of Directors shall deem in the best interests of the Company
so long as the performance by the Company of its obligations under such other
agreement will not cause the Company to breach its obligations hereunder to the
Holders.
SECTION 21. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[Signature Page Follows]
<PAGE>
[Signature Page of Warrant Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
GEOKINETICS INC.
By:THOMAS J. CONCANNON
Name: Thomas J. Concannon
Title:Vice President
DLJ INVESTMENT PARTNERS, L.P.
By: DLJ INVESTMENT PARTNERS,
INC.
Managing General Partner
By:/s/
Name:
Title:
DLJ INVESTMENT FUNDING, INC.
By:/s/
Name:
Title:
DLJ ESC II L.P.
By: DLJ LBO PLANS MANAGEMENT
CORPORATION, its
General Partner
By:/s/
Name:
Title:
<PAGE>
-2-
[Signature Page of Warrant Agreement]
SPINDRIFT PARTNERS, L.P.
By: WELLINGTON MANAGEMENT
COMPANY, its
Investment Advisor
By: /s/ CYNTHIA M. CLARK
Name: Cynthia M. Clark
Title: Vice President, General Counsel
SPINDRIFT INVESTORS (BERMUDA)
L.P.
By: WELLINGTON MANAGEMENT
COMPANY, its
Investment Advisor
By: /s/ CYNTHIA M. CLARK
Name: Cynthia M. Clark
Title: Vice President, General Counsel
CHASE EQUITY ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS, its
General Partner
By: /s/
Name:
Title:
MHR CAPITAL PARTNERS LP
By: MHR ADVISORS LLC
By: /s/
<PAGE>
-3-
Name:
Title:
<PAGE>
-4-
[Signature Page of Warrant Agreement]
WHITTIER VENTURES LLC
By: /s/ DAVID A. DAHL
Name: David A. Dahl
Title: President
PAUL B. LOYD, JR.
By: /s/ Paul B. Loyd, Jr.
Name: Paul B. Loyd, Jr.
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
[Face]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE (AND ANY PREDECESSOR)
WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5
OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
GEOKINETICS INC. (THE "COMPANY") THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED, ONLY (1) (W) INSIDE THE UNITED STATES (I) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (II) IN ACCORDANCE WITH RULE 144 UNDER THE
SECURITIES ACT, OR (III) PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL, IF THE
COMPANY SO REQUESTS), (X) TO THE COMPANY, (Y) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (Z) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (2) IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE. THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFERABILITY CONTAINED IN THE AMENDED AND
RESTATED TAG-ALONG DRAG-ALONG AGREEMENT DATED AS OF SEPTEMBER 30, 1999, A COPY
OF WHICH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES.
[THIS WARRANT IS SUBJECT TO TERMINATION AS PROVIDED IN PARAGRAPH 6D
OF THE SECURITIES PURCHASE AGREEMENT DATED AS OF OCTOBER 1, 1999, A COPY OF
WHICH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES.]
A-1
<PAGE>
EXERCISABLE ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME ON SEPTEMBER 15, 2006
No. ____ Warrants
Warrant Certificate
Geokinetics Inc.
This Warrant Certificate certifies that _____________, or registered
assigns, is the registered holder of Warrants (the "Warrants") expiring
September 15, 2006 (the "Expiration Date") to purchase Common Stock, $.0l par
value (the "Common Stock"), of Geokinetics Inc., a Delaware corporation (the
"Company"). Each Warrant entitles the holder upon exercise to receive from the
Company on or before 5:00 p.m. New York City Time on the Expiration Date, one
fully paid and nonassessable share of Common Stock (a "Warrant Share") at the
exercise price (the "Exercise Price") of $.56 payable in lawful money of the
United States of America upon surrender of this Warrant Certificate and payment
of the Exercise Price at the office of the Company designated for such purpose,
but only subject to the conditions set forth herein and in the Warrant Agreement
referred to on the reverse hereof. In lieu of exercising this Warrant by paying
in full the Exercise Price minus transfer taxes (if applicable pursuant to
Section 6 of the Warrant Agreement), if any, the Warrant holder may, from time
to time, convert this Warrant, in whole or in part, into a number of shares of
Common Stock determined by dividing (a) the aggregate current market price of
the number of shares of Common Stock represented by the Warrants converted,
minus the aggregate Exercise Price for such shares of Common Stock, minus
transfer taxes, if any, by (b) the current market price of one share of Common
Stock. The current market price shall be determined pursuant to Section 10(f) of
the Warrant Agreement.
The number of Warrant Shares issuable upon exercise of the Warrants
is subject to adjustment upon the occurrence of certain events set forth in the
Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City Time on
the Expiration Date, and to the extent not exercised by such time such Warrants
shall become void.
A-2
<PAGE>
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, Geokinetics Inc. has caused this Warrant
Certificate to be signed by the officers set forth below, each by a facsimile of
his signature, and has caused a facsimile of its corporate seal to be affixed
hereunto or imprinted hereon.
Dated:
GEOKINETICS INC.
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
A-3
<PAGE>
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring September 15, 2006, entitling the
holder on exercise to receive shares of Common Stock, $.0l par value, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to a
Warrant Agreement dated as of April 30, 1998, as amended and restated as of
October 1, 1999 (the "Warrant Agreement"), duly executed and delivered by the
Company, which Warrant Agreement is hereby incorporated by reference in and made
a part of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of
the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. A copy of the Warrant
Agreement may be obtained by the holder hereof upon written request to the
Company.
Warrants may be exercised at any time on or before the Expiration
Date. The holder of Warrants evidenced by this Warrant Certificate may exercise
them by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon properly completed and executed, together with payment
of the Exercise Price in cash at the office of the Company designated for such
purpose. In lieu of exercising this Warrant by paying in full the Exercise Price
and transfer taxes (if applicable pursuant to Section 6 of the Warrant
Agreement), if any, the Warrant holder may, from time to time, convert this
Warrant, in whole or in part, into a number of shares of Common Stock determined
by dividing (a) the aggregate current market price of the number of shares of
Common Stock represented by the Warrants converted, minus the aggregate Exercise
Price for such shares of Common Stock and transfer taxes, if any, by (b) the
current market price of one share of Common Stock. The current market price
shall be determined pursuant to Section 10(f) of the Warrant Agreement. In the
event that upon any exercise of Warrants evidenced hereby the number of Warrants
exercised shall be less than the total number of Warrants evidenced hereby,
there shall be issued to the holder hereof or his assignee a new Warrant
Certificate evidencing the number of Warrants not exercised. No adjustment shall
be made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
A-4
<PAGE>
The Warrant Agreement provides that upon the occurrence of certain
events the number of Warrant Shares issuable upon exercise of one Warrant set
forth on the face hereof may, subject to certain conditions, be adjusted. No
fractions of a share of Common Stock will be issued upon the exercise of any
Warrant, but the Company will pay the cash value thereof determined as provided
in the Warrant Agreement.
The holders of the Warrants are entitled to certain registration
rights with respect to the Common Stock purchasable upon exercise thereof. Said
registration rights are set forth in Section 13 of the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Company
by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Company a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company may deem and treat the registered holder(s) thereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entities any holder hereof to
any rights of a stockholder of the Company.
A-5
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Warrant, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Warrant to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint___________________________________________, agent to
transfer this Warrant on the books of the Company. The agent may
substitute another to act for him.
Date: _____________________ Signed: ___________________
(Signed exactly as your name
appears on the other side of this
Warrant)
Signature Guarantee: ____________________________
In connection with any transfer of this Warrant occurring prior to
the date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), covering resales of this Warrant (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) October 1, 2001, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Warrant is being transferred:
A-6
<PAGE>
[CHECK ONE]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Company a signed letter containing certain
representations and agreements (the form of which appears
below); or
(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act; or
(5) __ pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or
(6) __ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Company will refuse to register any of
the Warrants evidenced by this certificate in the name of any person other than
the registered Holder thereof; PROVIDED that if box (3), (4), (5) or (6) is
checked, the Company may require, prior to registering any such transfer of the
Notes, in its sole discretion, such legal opinions, certifications (including an
investment letter in the case of box (3) or (4)) and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Company shall not be obligated to
register this Note in the name of any person other than the Holder hereof unless
and until the conditions to any such transfer of registration set forth herein
shall have been satisfied.
Date: _____________________ Signed: ___________________
(Signed exactly as your name appears
on the other side of this Note)
Signature Guarantee: ______________________________________
A-7
<PAGE>
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED]
The undersigned represents and warrants that it is purchasing this
Warrant for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: _____________________ _____________________________
NOTICE: To be executed by an
executive officer
A-8
<PAGE>
[FORM OF LETTER TO BE COMPLETED
BY PURCHASER IF (3) ABOVE IS CHECKED]
Ladies and Gentlemen:
1. The undersigned understands that any subsequent transfer of the
Warrants is subject to certain restrictions and conditions set forth in the
Warrants and in the Warrant Agreement and the undersigned agrees to be bound by,
and not to resell, pledge or otherwise transfer the Warrants except in
compliance with, such restrictions and conditions and the Securities Act.
2. The undersigned understands that the offer and sale of the
Warrants have not been registered under the Securities Act, and that the
Warrants may not be offered or sold except as permitted in the following
sentence. The undersigned agrees, on its own behalf and on behalf of any
accounts for which it is acting as hereinafter stated, that if it should sell,
pledge or otherwise transfer any Warrants it will do so only (1) (w) inside the
United States to a person who the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, or in accordance with Rule
144 under the Securities Act, or pursuant to another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel, if the company so requests), (x) to the Company, (y) outside the United
States to a foreign person in a transaction meeting the requirements of Rule 904
under the Securities Act or (z) pursuant to an effective registration statement
under the Securities Act and (2) in each case, in accordance with the applicable
securities laws of any state of the United States or any other applicable
jurisdiction, and the undersigned further agrees to provide to any person
purchasing any of the Warrants from us a notice advising such purchaser that
resales of the Warrants are restricted as stated herein.
3. The undersigned understands that, on any proposed resale of any
Warrants, it may be required to furnish the Company such certification and other
information as the Company may reasonably require to confirm that the proposed
sale complies with the foregoing restrictions. The undersigned further
understands that the Warrants purchased by it will bear a legend to the
foregoing effect.
A-9
<PAGE>
4. The undersigned is an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Warrants, and the
undersigned and any accounts for which it is acting are each able to bear the
economic risk of our or its investment, as the case may be.
5. The undersigned is acquiring the Warrants purchased by us for our
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which the undersigned exercises sole
investment discretion.
Date:________________________________ _____________________________________
NOTICE: To be signed by an
executive officer
A-10
<PAGE>
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the Warrant,
represented by this Warrant Certificate, to receive __________shares of Common
Stock and herewith (check item)
(i) tenders payment for such shares to the order of Geokinetics Inc.
in the amount of $ _________ in accordance with the terms hereof; or
(ii) converts this Warrant, in whole or in part, into a number of
shares of Common Stock determined by dividing (a) the aggregate current
market price of the number of shares of Common Stock represented by this
Warrant, minus the aggregate Exercise Price for such shares of Common
Stock and transfer taxes, if any, by (b) the current market price of one
Share.
The undersigned requests that a certificate for such shares be
registered in the name of __________, whose address is ___________, and that
such shares be delivered to ____________, whose address is ___________________
__________ .
If said number of shares is less than all of the shares of Common
Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of __________,whose address is,________________________________________
and that such Warrant Certificate be delivered to, _____________________________
__________ whose address is __________________________________________________.
Signature:______________________________
Date:
Signature Guaranteed:
A-11
EXHIBIT 4.3
[Exhibit A to Senior
Secured Notes due 2005
and Senior Secured Notes
due 2002 of Geokinetics
Inc. issued on
October 1, 1999]
================================================================================
GEOKINETICS INC.,
as Issuer,
THE GUARANTORS PARTY HERETO
and
[ ],
as Trustee
-------------------------
INDENTURE
Dated as of [ ]
-------------------------
up to $51,358,000 Originally Issued
Senior Secured Notes due 2005
Senior Secured Notes due 2002
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions............................................1
SECTION 1.02. Incorporation by Reference of TIA.....................27
SECTION 1.03. Rules of Construction.................................27
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.......................................28
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount..........................28
SECTION 2.03. Registrar and Paying Agent............................29
SECTION 2.04. Paying Agent To Hold Assets in Trust..................30
SECTION 2.05. Noteholder Lists......................................31
SECTION 2.06. Transfer and Exchange.................................31
SECTION 2.07. Replacement Notes.....................................32
SECTION 2.08. Outstanding Notes.....................................32
SECTION 2.09. Treasury Notes........................................33
SECTION 2.10. Temporary Notes.......................................33
SECTION 2.11. Cancellation..........................................33
SECTION 2.12. Payment of Interest; Defaulted Interest...............34
SECTION 2.13. CUSIP Number..........................................34
SECTION 2.14. Deposit of Moneys.....................................35
SECTION 2.15. Persons Deemed Owners.................................35
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee....................................35
SECTION 3.02. Selection of Notes To Be Redeemed.....................36
SECTION 3.03. Notice of Redemption..................................36
SECTION 3.04. Effect of Notice of Redemption........................37
SECTION 3.05. Deposit of Redemption Price...........................38
SECTION 3.06. Notes Redeemed in Part................................38
<PAGE>
-ii-
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes......................................38
SECTION 4.02. Maintenance of Office or Agency.......................39
SECTION 4.03. Corporate Existence...................................39
SECTION 4.04. Payment of Taxes and Other Claims.....................40
SECTION 4.05. Maintenance of Properties and Insurance...............40
SECTION 4.06. Compliance Certificate; Notice of Default.............41
SECTION 4.07. Compliance with Laws..................................42
SECTION 4.08. SEC Reports...........................................42
SECTION 4.09. Waiver of Stay, Extension or Usury Laws...............43
SECTION 4.10. Limitation on Restricted Payments.....................43
SECTION 4.11. Limitation on Transactions with Affiliates............46
SECTION 4.12. Limitation on Incurrence of Additional
Indebtedness and Issuance of Disqualified
Capital Stock.......................................47
SECTION 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.................48
SECTION 4.14. Payments on 2002 Notes................................49
SECTION 4.15. Change of Control.....................................49
SECTION 4.16. Limitation on Asset Sales.............................50
SECTION 4.17. Limitation on Preferred Stock of Subsidiaries.........54
SECTION 4.18. Limitation on Liens...................................54
SECTION 4.19. Additional Guarantors.................................55
SECTION 4.20. Limitation on Issuance of Shares of Subsidiaries......55
SECTION 4.21. Non-Guarantor Subsidiary..............................56
SECTION 4.22. Conduct of Business...................................56
SECTION 4.23. Limitation on Seismic Operations......................56
SECTION 4.24. Equal Security for Notes and Guarantees; No
Further Negative Pledges............................56
SECTION 4.25. Pledge of Additional Collateral.......................57
SECTION 4.26. Security Interests....................................58
SECTION 4.27. Cash Maintenance......................................58
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets..............59
<PAGE>
-iii-
SECTION 5.02. Successor Corporation Substituted.....................61
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.....................................62
SECTION 6.02. Acceleration..........................................64
SECTION 6.03. Other Remedies........................................65
SECTION 6.04. Waiver of Past Defaults...............................65
SECTION 6.05. Control by Majority...................................65
SECTION 6.06. Limitation on Suits...................................66
SECTION 6.07. Rights of Holders To Receive Payment..................67
SECTION 6.08. Collection Suit by Trustee............................67
SECTION 6.09. Trustee May File Proofs of Claim......................67
SECTION 6.10. Priorities............................................68
SECTION 6.11. Undertaking for Costs.................................69
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.....................................69
SECTION 7.02. Rights of Trustee.....................................70
SECTION 7.03. Individual Rights of Trustee..........................72
SECTION 7.04. Trustee's Disclaimer..................................72
SECTION 7.05. Notice of Default.....................................73
SECTION 7.06. Reports by Trustee to Holders.........................73
SECTION 7.07. Compensation and Indemnity............................73
SECTION 7.08. Replacement of Trustee................................75
SECTION 7.09. Successor Trustee by Merger, Etc......................76
SECTION 7.10. Eligibility; Disqualification.........................76
SECTION 7.11. Preferential Collection of Claims Against the
Company.............................................77
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations..............77
SECTION 8.02. Legal Defeasance and Covenant Defeasance..............79
SECTION 8.03. Conditions to Legal Defeasance or Covenant
Defeasance..........................................80
SECTION 8.04. Application of Trust Money............................83
SECTION 8.05. Repayment to the Company..............................83
SECTION 8.06. Reinstatement.........................................84
<PAGE>
-iv-
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders............................84
SECTION 9.02. With Consent of Holders...............................85
SECTION 9.03. Releases of Collateral................................87
SECTION 9.04. Compliance with TIA...................................87
SECTION 9.05. Revocation and Effect of Consents.....................87
SECTION 9.06. Notation on or Exchange of Notes......................88
SECTION 9.07. Trustee To Sign Amendments, Etc.......................88
ARTICLE TEN
[INTENTIONALLY OMITTED]
ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. Unconditional Guarantee...............................89
SECTION 11.02. [Intentionally Omitted]...............................90
SECTION 11.03. Severability..........................................90
SECTION 11.04. [Intentionally Omitted]...............................90
SECTION 11.05. Limitation of Guarantor's Liability...................90
SECTION 11.06. Guarantors May Consolidate, Etc. on Certain
Terms...............................................91
SECTION 11.07. Contribution..........................................92
SECTION 11.08. Waiver of Subrogation.................................92
SECTION 11.09. Execution of Guarantee................................93
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls..........................................94
SECTION 12.02. Notices...............................................94
SECTION 12.03. Communications by Holders with Other Holders..........95
SECTION 12.04. Certificate and Opinion as to Conditions
Precedent...........................................95
SECTION 12.05. Statements Required in Certificate or Opinion.........96
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar.............96
<PAGE>
-v-
SECTION 12.07. Legal Holidays........................................96
SECTION 12.08. GOVERNING LAW.........................................97
SECTION 12.09. No Adverse Interpretation of Other Agreements.........97
SECTION 12.10. No Recourse Against Others............................97
SECTION 12.11. Successors............................................97
SECTION 12.12. Duplicate Originals...................................98
SECTION 12.13. Severability..........................................98
Signatures
Schedule I - Existing Debt
Schedule II - Permitted Transactions
Schedule III - Budget
Exhibit A - Form of Note due 2005........................................A-1
Exhibit B - Form of Note due 2002........................................B-1
Exhibit C - Form of General Security Agreement...........................C-1
Exhibit D - Form of Collateral Agency Agreement..........................D-1
Note: This Table of Contents shall not, for any purpose, be deemed
to be part of the Indenture.
<PAGE>
INDENTURE, dated as of October 1, 1999, between Geokinetics Inc., a
Delaware corporation (the "Company"), as issuer, the Guarantors signatory hereto
(the "Guarantors") and [ ], a [ ], as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 13 1/2%
Senior Secured Notes due 2002 (the "2002 Notes") and an issue of 13 1/2% Senior
Secured Notes due 2005 (the "2005 Notes" and, together with thE 2002 Notes, the
"Notes"), and to provide therefor, the Company has duly authorized the execution
and delivery of this Indenture. All things necessary to make the Notes, when
duly issued and executed by the Company, and authenticated and delivered
hereunder, the valid obligations of the Company, and to make this Indenture a
valid and binding agreement of the Company, have been done.
Each party hereto agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"2002 MATURITY DATE" means September 15, 2002.
"2005 MATURITY DATE" means September 15, 2005.
"2002 NOTE" has the meaning provided in the preamble to this
Indenture, and shall be substantially in the form of EXHIBIT B attached hereto.
"2005 NOTE" has the meaning provided in the preamble to this
Indenture, and shall be substantially in the form of EXHIBIT A attached hereto.
"ACCELERATION NOTICE" has the meaning provided in Section
6.02(a).
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"ACCELERATION NOTICE" has the meaning provided in
Section 6.02(a).
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries (a) existing at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or any of its
Subsidiaries or (b) assumed in connection with the acquisition of assets from
such Person and in each case not incurred by such Person in connection with, or
in anticipation or contemplation of, such Person becoming a Subsidiary of the
Company or such acquisition, merger or consolidation.
"ADDITIONAL COLLATERAL" has the meaning provided in
Section 4.25.
"AFFILIATE" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing. For the purposes of this Indenture, none of the Institutional
Purchasers (as defined in the Securities Purchase Agreement) will be deemed
Affiliates of the Company or its Subsidiaries.
"AFFILIATE TRANSACTION" has the meaning provided in Section
4.11.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"ASSET ACQUISITION" means (a) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or any Subsidiary of the Company or
shall be merged with or into the Company or any Subsidiary of the Company, or
(b) the acquisition by the Company or any Subsidiary of the Company of the
assets of any Person (other than a Subsidiary of the Company) which constitute
all or substantially all of the assets of such Person or comprise any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
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"ASSET SALE" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Subsidiary
of the Company of (a) any Capital Stock of any Subsidiary of the Company or (b)
any other property or assets of the Company or any Subsidiary of the Company
other than in the ordinary course of business; PROVIDED, HOWEVER, that Asset
Sales shall not include (i) a transaction or series of related transactions for
which the Company or its Subsidiaries receive aggregate consideration of less
than $1,000,000, (ii) the sale, lease, conveyance, disposition or other transfer
of all or substantially all of the assets of the Company as permitted under
Section 5.01, and (iii) the creation (but not the foreclosure) of any Lien not
prohibited by Section 4.18.
"AUTHENTICATING AGENT" has the meaning provided in
Section 2.02.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"BUSINESS DAY" means a day that is not a Legal Holiday.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations that is included on a balance sheet
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of such Person at such date, determined in accordance with GAAP.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of such Person's corporate stock,
including each class of Common Stock and Preferred Stock of such Person and (ii)
with respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Service ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"CASH INTEREST" means cash interest payable on (i) all outstanding
2002 Notes at a rate of 13 1/2% per annum, and (ii) all outstanding 2005 Notes
at a rate of 13 1/2% per annum.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or
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other transfer (in one transaction or a series of related transactions) of all
or substantially all of the assets of the Company to any Person or group of
related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"),
together with any Affiliates thereof (whether or not otherwise in compliance
with the provisions of this Indenture); (ii) the approval by the holders of
Capital Stock of the Company of any plan or proposal for the liquidation or
dissolution of the Company (whether or not otherwise in compliance with the
provisions of this Indenture); (iii) any Person or Group (other than the
Permitted Holders) shall become the owner, directly or indirectly, beneficially
or of record, of shares representing more than 40% of the aggregate ordinary
voting power represented by the issued and outstanding Capital Stock (the
"Voting Stock") of the Company; (iv) either Steven A. Webster or William R.
Ziegler ceases to beneficially own, directly or indirectly, in the aggregate at
least 80% of the Capital Stock of the Company owned by such Person as of the
Issue Date (other than Capital Stock owned of record by Blackhawk Capital
Partners or Blackhawk Investors, L.L.C.); (v) either Steven A. Webster or
William R. Ziegler ceases to be a member of the Board of Directors of the
Company other than by reason of death or disability; or (vi) the replacement of
a majority of the Board of Directors of the Company over a two-year period from
the directors who constituted the Board of Directors of the Company at the
beginning of such period, and such replacement shall not have been approved by a
vote of at least a majority of the Board of Directors of the Company then still
in office who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors was
previously so approved or who were nominated by, or designees of, any of the
Permitted Holders.
"CHANGE OF CONTROL DATE" has the meaning provided in
Section 4.15.
"CHANGE OF CONTROL OFFER" has the meaning provided in
Section 4.15.
"COLLATERAL" means all of the Pledged Collateral, (including all
Pledged Securities) and any Mortgaged Real Property.
"COLLATERAL AGENCY AGREEMENT" means the Collateral Agency Agreement
by and among the Collateral Agent and the initial Holders substantially in the
form of EXHIBIT D hereto, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
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"COLLATERAL AGENT" means Firstar Bank, N.A., in its capacity as
collateral agent for the Holders.
"COMMON STOCK" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"COMPANY" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"CONSOLIDATED EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Subsidiaries paid or accrued in accordance with
GAAP for such period, (B) Consolidated Interest Expense and (C) Consolidated
Non-cash Charges LESS any non-cash items increasing Consolidated Net Income for
such period, all as determined on a consolidated basis for such Person and its
Subsidiaries in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to
any Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a PRO
FORMA basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital facilities, occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter Period
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and on or prior to the Transaction Date, as if such incurrence or repayment, as
the case may be (and the application of the proceeds thereof), occurred on the
first day of the Four Quarter Period and (ii) any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of such Person or one of its
Subsidiaries (including any Person who becomes a Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise becoming liable for Acquired
Indebtedness and also including any Consolidated EBITDA (including any PRO FORMA
expense and cost reductions calculated on a basis consistent with Regulation S-X
under the Securities Act) attributable to the assets which are the subject of
the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition (including the incurrence, assumption or becoming
liable for any such Indebtedness or Acquired Indebtedness) occurred on the first
day of the Four Quarter Period. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date and (2) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for
any period, the sum, without duplication, of (i) Consolidated Interest Expense
(excluding amortization of debt discount or amortization or write-off of
deferred financing costs), plus (ii) the product of (x) the amount of all
dividend payments on any Preferred Stock of such Person (other than dividends
paid in Qualified Capital Stock) paid in cash or, without duplication and with
respect to Disqualified Capital Stock, accrued during such period times (y) a
fraction, the numerator of which is one
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and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed as a
decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person
for any period, the sum of, without duplication: (i) the aggregate of the cash
and non-cash interest expense of such Person and its Subsidiaries for such
period determined on a consolidated basis in conformity with GAAP, including,
without limitation, (a) any amortization of debt discount and amortization or
write-off of deferred financing costs, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation; and (ii) without duplication of any amount in
clause (i), the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued (in each case, without
duplication) by such Person and its Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
PROVIDED that there shall be excluded therefrom (a) after-tax gains and losses
from Asset Sales (without regard to the exclusions set forth in the proviso to
the definition thereof), (b) after-tax items classified as extraordinary or
non-recurring gains, (c) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Subsidiary of the
referent Person or is merged or consolidated with the referent Person or any
Subsidiary of the referent Person, (d) the net income (but not loss) of any
Subsidiary of the referent Person to the extent that the declaration of
dividends or similar distributions by that Subsidiary of that income is
restricted by contract, operation of law or otherwise, except to the extent of
cash dividends or distributions paid to the referent Person or a Wholly Owned
Subsidiary of the referent Person by such Person, (e) the net income of any
Person, other than a Subsidiary of the referent Person, except to the extent of
cash dividends or distributions paid to the referent Person or a Wholly Owned
Subsidiary of the referent Person by such Person, (f) any restoration to income
of any contingency reserve, except to the extent that provision for such reserve
was made out of Consolidated Net Income accrued at any time following the Issue
Date, (g) income or loss attributable to discon-
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tinued operations (including, without limitation, operations disposed of during
such period whether or not such operations were classified as discontinued) and
(h) in the case of a successor to the referent Person by consolidation or merger
or as a transferee of the referent Person's assets, the aggregate net income (or
loss) of the successor corporation prior to such consolidation, merger or
transfer of assets.
"CONSOLIDATED NET WORTH" means, with respect to any Person for any
date of determination, the sum of (i) stated capital with respect to Capital
Stock of such Person and additional paid-in capital, and (ii) retained earnings
(or minus accumulated deficit) of such Person and its Subsidiaries, less, to the
extent included in the foregoing, amounts attributable to Disqualified Capital
Stock, each item determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person,
for any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries reducing Consolidated Net Income of
such Person and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP (excluding any such non-cash charge which requires
an accrual of or a reserve for cash charges for any future period).
"COVENANT DEFEASANCE" has the meaning provided in Section 8.02.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Subsidiary of the Company against fluctuations in currency
values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"DEPOSITORY" means The Depository Trust Company, its nominees
and successors.
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"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the Notes.
"EVENT OF DEFAULT" has the meaning provided in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"EXISTING DEBT" means Indebtedness of the Company and its
Subsidiaries outstanding on the Issue Date, as set forth on SCHEDULE I hereto.
"FAIR MARKET VALUE" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of the
Board of Directors of the Company delivered to the Trustee.
"FUNDING GUARANTOR" has the meaning provided in Section 11.07.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession of the United States, which are in effect as of December
31, 1998.
"GDC" means Geophysical Development Corporation, a Texas
corporation.
"GENERAL SECURITY AGREEMENT" means the Security Agreement executed
and delivered by the Company and each Guarantor substantially in the form of
EXHIBIT C hereto, except for
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such changes as shall have been approved by the Trustee, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
its terms and the terms hereof.
"GUARANTEE" means, with respect to any Person, any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such other Person (whether by agreement to
keep-well or to maintain financial condition or otherwise); PROVIDED that the
term "guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business.
"GUARANTEE" means the guarantee of the Company's Obligations
hereunder made by a Guarantor in favor of the Holders pursuant to the terms of
Article 11 hereof.
"GUARANTORS" means all of the Subsidiaries of the Company (other
than (x) Quantum Geophysical Services, Inc. and (y) in the Company's discretion,
any Subsidiary the assets of which have a book value of not more than
$1,000,000) existing on the date hereof and any Person who becomes a Guarantor
pursuant to Section 4.19.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is
registered on the Registrar's books.
"INCUR" has the meaning provided in Section 4.12.
"INDEBTEDNESS" means with respect to any Person, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
(iv) all obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all obligations under
any title retention agreement, (v) all obligations for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through
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(v) above and clause (viii) below, (vii) all obligations of any other Person of
the type referred to in clauses (i) through (vi) which are secured by any lien
on any property or asset of such Person, the amount of such obligation being
deemed to be the lesser of the fair market value of such property or asset or
the amount of the obligation so secured, (viii) all net obligations under
Currency Agreements and Interest Swap Obligations of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of Indebtedness
represented by such Disqualified Capital Stock being equal to the greater of its
voluntary or involuntary liquidation preference and its maximum fixed repurchase
price, but excluding accrued dividends, if any. Indebtedness shall in any event
exclude trade accounts payable and other accrued liabilities arising in the
ordinary course of business that are not overdue by 90 days or more or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted. For purposes hereof, the "maximum fixed repurchase price"
of any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.
"INDENTURE" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect material financial interest in the Company and (ii) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"INTEREST PAYMENT DATE" means the stated maturity of an
installment of interest on the Notes.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person,
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by apply-
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ing either a floating or a fixed rate of interest on a stated notional amount in
exchange for periodic payments made by such other Person calculated by applying
a fixed or a floating rate of interest on the same notional amount and shall
include, without limitation, interest rate swaps, caps, floors, collars and
similar agreements.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"INVESTMENT" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude (i) extensions of trade credit
by the Company and its Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Subsidiary, as the
case may be, and (ii) any transaction involving the purchase or other
acquisition (including by way of merger) of Capital Stock of any Person by the
Company and its Subsidiaries to the extent such purchase or other acquisition is
in exchange for Qualified Capital Stock of the Company. For the purposes of
Section 4.10, the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by the Company or any of
its Subsidiaries, without any adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment, reduced
by any repayment of principal or a return of capital, as the case may be, and by
the payment of dividends or distributions in connection with such Investment or
any other amounts received in respect of such Investment; PROVIDED that no such
repayment of principal, return of capital, payment of dividends or distributions
or receipt of any such other amounts shall reduce the amount of any Investment
if such repayment of principal, return of capital, payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Common Stock of any direct or indirect Subsidiary of the Company
such that, after giving effect to any such sale or dispo-
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sition, the Company no longer owns, directly or indirectly, 100% of the
outstanding Common Stock of such Subsidiary, the Company shall be deemed to have
made an Investment on the date of any such sale or disposition equal to the fair
market value of the Common Stock of such Subsidiary not sold or disposed of.
"ISSUE DATE" means October 1, 1999.
"LEGAL DEFEASANCE" has the meaning provided in Section 8.02.
"LEGAL HOLIDAY" has the meaning provided in Section 11.07.
"LIEN" means, with respect to any property, any lien, mortgage, deed
of trust, pledge, security interest, charge or encumbrance of any kind thereon
(including any conditional sale or other title retention agreement, any lease in
the nature thereof and any agreement to give any security interest) and any
assignment or other conveyance of a right to receive income or profits
therefrom.
"MATURITY DATE" means the 2002 Maturity Date and the 2005 Maturity
Date, as either may be applicable.
"MORTGAGE" means a term loan and revolving credit mortgage or deed
of trust, assignment of rents, security agreement and fixture filing creating
and evidencing a Lien on each Mortgaged Real Property, which shall be in form
and substance reasonably acceptable to the Collateral Agent, in any event
containing such schedules and including such additional provisions and other
deviations as shall be necessary to conform such document to applicable or local
law or as shall be customary under local law and made and which shall be dated
the date of delivery thereof by the owner of the Mortgaged Real Property
described therein for the benefit of the Collateral Agent, as mortgagee,
assignee and secured party, as the same may at any time be amended or
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
"MORTGAGED REAL PROPERTY" means each Real Property pledged pursuant
to Section 4.25 and all other mortgaged property under each Mortgage.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents in-
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cluding payments in respect of deferred payment obligations when received in the
form of cash or Cash Equivalents (other than the portion of any such deferred
payment constituting interest) received by the Company or any of its
Subsidiaries from such Asset Sale net of (a) reasonable out-of-pocket expenses
and fees relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees and sales commissions), (b) taxes paid or
payable after taking into account any reduction in consolidated tax liability
due to available tax credits or deductions and any tax sharing arrangements, (c)
repayment of Indebtedness secured by such asset that is required to be repaid in
connection with such Asset Sale, (d) appropriate amounts to be provided by the
Company or any Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, and (e) all
distributions and other payments made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Sale.
"NET PROCEEDS OFFER" has the meaning provided in Section 4.16.
"NET PROCEEDS OFFER PAYMENT DATE" has the meaning provided in
Section 4.16.
"NET PROCEEDS OFFER TRIGGER DATE" has the meaning provided in
Section 4.16.
"NOTES" has the meaning provided in the preamble to this
Indenture.
"OBLIGATIONS" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing or otherwise relating to
any Indebtedness, including with respect to any rights to rescission.
"OFFICER" means, with respect to any Person, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Treasurer, the Controller, or the
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Secretary of such Person, or any other officer designated by the Board of
Directors serving in a similar capacity.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such Person and otherwise complying with
the requirements of Sections 12.04 and 12.05, as they relate to the making of an
Officers' Certificate.
"OPINION OF COUNSEL" means a written opinion from legal counsel, who
may be counsel for the Company, and who is reasonably acceptable to the Trustee
and not rendered by any employee of the Company or any of its Affiliates or
Subsidiaries complying with the requirements of Sections 12.04 and 12.05, as
they relate to the giving of an Opinion of Counsel.
"PAYING AGENT" has the meaning provided in Section 2.03.
"PERMITTED HOLDERS" means Steven A. Webster, William R.
Ziegler, Blackhawk Capital Partners, Blackhawk Investors, L.L.C., the
initial institutional Purchasers (as defined in the Securities Purchase
Agreement) and their respective Affiliates.
"PERMITTED INDEBTEDNESS" means, without duplication, each of
the following:
(i) Indebtedness under the Notes, Guarantees and this Indenture;
(ii) Interest Swap Obligations of the Company covering Indebtedness
of the Company or any of its Subsidiaries and Interest Swap Obligations of
any Subsidiary of the Company covering Indebtedness of such Subsidiary;
PROVIDED, HOWEVER, that such Interest Swap Obligations are entered into to
protect the Company and its Subsidiaries from fluctuations in interest
rates on Indebtedness incurred in accordance with this Indenture to the
extent the notional principal amount of such Interest Swap Obligation does
not exceed the principal amount of the Indebtedness to which such Interest
Swap Obligation relates;
(iii) Indebtedness of a Wholly Owned Subsidiary of the Company to
the Company or to a Subsidiary of the Company for so long as such
Indebtedness is held by the Company or
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a Wholly Owned Subsidiary of the Company, in each case subject to no Lien
held by a Person other than the Company or a Wholly Owned Subsidiary of
the Company; PROVIDED that if as of any date any Person other than the
Company or a Wholly Owned Subsidiary of the Company owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness;
(iv) Indebtedness of the Company to a Wholly Owned Subsidiary of the
Company for so long as such Indebtedness is held by a Wholly Owned
Subsidiary of the Company, in each case subject to no Lien; PROVIDED that
(a) any Indebtedness of the Company to any Wholly Owned Subsidiary of the
Company is unsecured and subordinated, pursuant to a written agreement, to
the Company's obligations under this Indenture and the Notes and (b) if as
of any date any Person other than a Wholly Owned Subsidiary of the Company
owns or holds any such Indebtedness or any Person holds a Lien in respect
of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the Company;
(v) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (including in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; PROVIDED, HOWEVER,
that such Indebtedness is extinguished within five Business Days of
incurrence;
(vi) Indebtedness of the Company or any of its Subsidiaries
represented by letters of credit for the account of the Company or such
Subsidiary, as the case may be, in order to provide security for workers'
compensation claims, payment obligations in connection with
self-insurance, performance bonds, surety bonds or similar requirements in
the ordinary course of business;
(vii) Refinancing Indebtedness;
(viii) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Purchase Money Indebted-
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ness and Capitalized Lease Obligations do not in the aggregate exceed
$500,000;
(ix) guarantees by the Company and its Wholly Owned Subsidiaries of
each other's Indebtedness; PROVIDED that such Indebtedness is permitted to
be incurred under this Indenture;
(x) Existing Debt;
(xi) Indebtedness of the Company or any Wholly-Owned Subsidiary
under insurance premium finance contracts (with terms of twelve months or
less) incurred in the ordinary course of business which Indebtedness does
not in the aggregate exceed $500,000; and
(xii) additional Indebtedness of the Company in an aggregate
principal amount not to exceed $500,000 at any one time outstanding.
For the purpose of determining compliance with Section 4.12, (A) in the event
that an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described in the above clauses, the Company, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses, (B) the
amount of Indebtedness issued at a price which is less than the principal amount
thereof shall be equal to the amount of the liability in respect thereof
determined in accordance with GAAP and (C) so as to avoid duplication in
determining the amount of Permitted Indebtedness under any clause of this
definition, guarantees of, or obligations in respect of letters of credit
supporting, Indebtedness otherwise included in the determination of such amount
shall not also be included.
"PERMITTED INVESTMENTS" means: (i) Investments by the Company or any
Subsidiary of the Company in any Person that is or will become immediately after
such Investment a Wholly Owned Subsidiary of the Company or that will merge or
consolidate into the Company or a Wholly Owned Subsidiary of the Company,
PROVIDED that such Wholly Owned Subsidiary is not restricted from making
dividends or similar distributions by contract, operation of law or otherwise;
(ii) Investments in the Company by any Subsidiary of the Company; PROVIDED that
any Indebtedness evidencing such Investment is unsecured and subordinated,
pursuant to a written agreement, to the Company's obli-
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gations under the Notes and this Indenture; (iii) Investments in cash and Cash
Equivalents; (iv) loans and advances to employees and officers of the Company
and its Subsidiaries in the ordinary course of business for BONA FIDE business
purposes not in excess of $250,000 at any one time outstanding; (v) Currency
Agreements and Interest Swap Obligations entered into in the ordinary course of
the Company's or its Subsidiaries' businesses and otherwise in compliance with
this Indenture; (vi) Investments (x) constituting accounts receivable if
credited or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms, PROVIDED that nothing in
this clause shall prevent the Company or any Subsidiary from providing such
concessionary trade terms as management deems reasonable in the circumstances,
(y) resulting from settlements or compromises of accounts receivable or trade
payables in the ordinary course of business, and (z) in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; and (vii) Investments consisting of non-cash proceeds, or made by the
Company or its Subsidiaries as a result of consideration, received in connection
with an Asset Sale made in compliance with Section 4.16.
"PERMITTED LIENS" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims either (a)
not delinquent or (b) contested in good faith by appropriate proceedings and as
to which the Company or its Subsidiaries shall have set aside on its books such
reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
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return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money), including, in any such case, any Lien
securing letters of credit issued in the ordinary course of business consistent
with past practice in connection therewith;
(iv) judgment Liens not giving rise to an Event of Default so long as such Lien
is adequately bonded and any appropriate legal proceedings which may have been
duly initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceedings may be initiated shall
not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property or minor irregularities of title
incident thereto in each case not interfering in any material respect with the
ordinary conduct of the business of the Company or any of its Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease Obligation;
PROVIDED that such Liens do not extend to any property or assets which is not
leased property subject to such Capitalized Lease Obligation;
(vii) Liens securing Capitalized Lease Obligations and Purchase Money
Indebtedness which may be incurred under clause (viii) of the definition of
"Permitted Indebtedness"; PROVIDED, HOWEVER, that in the case of Purchase Money
Indebtedness (A) the Indebtedness shall not exceed the cost of such property or
assets being acquired or constructed and shall not be secured by any property or
assets of the Company or any Subsidiary of the Company other than the property
and assets being acquired or constructed and (B) the Lien securing such
Indebtedness shall be created within 180 days of such acquisition or
construction;
(viii) Liens upon specific items of inventory or other goods and proceeds of any
Person securing such Person's obligations in respect of bankers' acceptances
issued or created for the account of such Person to facilitate the purchase,
shipment or storage of such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to commercial letters
of credit which encumber documents and other property relating to such letters
of credit and products and proceeds thereof;
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(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company or
any of its Subsidiaries, including rights of offset and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap Obligations
relate to Indebtedness that is otherwise permitted under this Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in accordance with Section
4.12; PROVIDED that (A) such Liens secured such Acquired Indebtedness at the
time of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Subsidiary of the Company and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by the Company or
a Subsidiary of the Company and (B) such Liens do not extend to or cover any
property or assets of the Company or of any of its Subsidiaries other than the
property or assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Subsidiary of the
Company and are no more favorable to the lienholders than those securing the
Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by
the Company or a Subsidiary of the Company; and
(xiv) Liens securing obligations pursuant to the Security Documents.
"PERSON" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, or a governmental agency or
political subdivision thereof.
"PIK INTEREST" means pay-in-kind interest payable on all outstanding
Notes for which Cash Interest is not paid pursuant to Section 2.12 in the form
of the issuance of (x) with respect to the 2002 Notes, additional 2002 Notes at
the rate of 13 1/2% per annum, and (y) with respect to the 2005 Notes,
additional 2005 Notes at the rate of 13 1/2% per annum, in each case payable
semi-annually, on the principal amount of such outstanding Notes.
"PLEDGED COLLATERAL" means all the Pledged Collateral as
defined in each of the Security Agreements.
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"PLEDGED SECURITIES" means all Pledged Securities as defined
in each of the Security Agreements.
"PREFERRED STOCK" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"PRINCIPAL" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"PROCEEDS PURCHASE DATE" has the meaning provided in
Section 4.16.
"PRO FORMA" means, with respect to any calculation made or required
to be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors of the Company.
"PUBLIC EQUITY OFFERING" means an underwritten public offering of
Qualified Capital Stock of the Company pursuant to a registration statement
filed with the SEC in accordance with the Securities Act.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company and
its Subsidiaries incurred in the normal course of business for the purpose of
financing all or any part of the purchase price, or the cost of installation,
construction or improvement, of property.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.
"QUALIFIED RIGHTS" means options, warrants or other rights to
purchase Capital Stock (other than Disqualified Capital Stock), other than any
such rights that, by their terms or upon the happening of any event, are
mandatorily redeemable or redeemable at the sole option of the holder thereof on
or prior to the final maturity date of the Notes.
"QUARTER" means, with respect to any Person, a fiscal quarterly
period of such Person. If during the 45-day period immediately following the
completion of any Quarter (or, if the Quarter is the last Quarter of the fiscal
year, then the 90-day
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period immediately following the completion of such Quarter), a calculation is
required to be made under Article Four and financial statements of such Person
for such Quarter are unavailable, any calculation for the immediately preceding
four Quarters (or, if fewer, all Quarters as shall have ended after the Issue
Date and prior to the Quarter for which such financial statements are
unavailable) required under Article Four shall be based instead upon the four
Quarters (or, if fewer, all Quarters as shall have ended after the Issue Date
and prior to the Quarter for which such financial statements are unavailable)
immediately preceding the Quarter for which such financial statements are not
available (giving effect to all adjustments required under Article Four in
respect of events occurring subsequent to the close of such Quarters on which
such calculation is to be based).
"REAL PROPERTY" means all right, title and interest of the Company
or any Guarantor or its respective Subsidiaries (including, without limitation,
any leasehold estate) in and to a parcel of real property acquired by the
Company or any Guarantor together with, in each case, all improvements and
appurtenant fixtures, equipment, personal property, easements and other property
and rights incidental to the ownership, lease or operation thereof.
"RECORD DATE" means the Record Dates specified in the Notes, whether
or not a Legal Holiday.
"REDEMPTION DATE," when used with respect to any Note to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Notes.
"REDEMPTION PRICE," when used with respect to any Note to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Notes.
"REFERENCE DATE" has the meaning provided in Section 4.10.
"REFINANCE" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
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"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or
any Subsidiary of the Company of Indebtedness incurred in accordance with
Section 4.12 (other than pursuant to clauses (ii)-(ix), clause (xi) and clause
(xii) of the definition of "Permitted Indebtedness"), in each case that does not
(1) result in an increase in the aggregate principal amount of Indebtedness of
such Person as of the date of such proposed Refinancing (plus the amount of any
premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
in connection with such Refinancing) or (2) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; PROVIDED that (x)
if such Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Notes, then
such Refinancing Indebtedness shall be subordinate to the Notes at least to the
same extent and in the same manner as the Indebtedness being Refinanced.
"REGISTRAR" has the meaning provided in Section 2.03.
"REPLACEMENT ASSETS" has the meaning provided in Section 4.16.
"RESTRICTED PAYMENT" has the meaning provided in Section 4.10.
"RESTRICTED SECURITY" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; PROVIDED that the Trustee shall be entitled
to request and conclusively rely on an Opinion of Counsel with respect to
whether any Note constitutes a Restricted Security.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Subsidiary of the Company of any property,
whether owned by the Company or any Subsidiary of the Company at the Issue Date
or later acquired, which has been or is to be sold or transferred by the Company
or such Subsidiary to such Person or to any other Person from whom funds have
been or are to be advanced by such Person on the security of such Property.
<PAGE>
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"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any successor statute or statutes thereto.
"SECURITIES PURCHASE AGREEMENT" means the Securities Purchase
Agreement dated October 1, 1999 among the Company, the Guarantors and the
parties named therein, as the same may be amended or modified from time to time
in accordance with the terms thereof.
"SECURITY AGREEMENTS" means and includes the General Security
Agreement and any other general security agreements delivered pursuant to
Section 4.25 or 4.26.
"SECURITY DOCUMENTS" means each of the Security Agreements, the
Mortgages and any other documents utilized to pledge as Collateral for the
Obligations owing to the Trustee or any Holder pursuant to the terms of this
Indenture, the Notes, the Guarantees and each Security Document or secured by
any of the Security Documents any property or assets of whatever kind or nature.
"SEISMIC OPERATIONS" means the seismic acquisition services of the
Company and its Subsidiaries, as described in the Company's Exchange Act
Reports.
"SIGNIFICANT SUBSIDIARY" shall have the meaning set forth in Rule
1.02(w) of Regulation S-X under the Securities Act; PROVIDED that GDC shall be a
Significant Subsidiary.
"SUBSIDIARY," with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"SURVIVING ENTITY" has the meaning provided in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 77aaa-77bbbb), as amended, as in effect on the
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date of this Indenture, except as otherwise provided in Section 9.04.
"TRUST OFFICER" means any officer of the Trustee assigned by the
Trustee to administer this Indenture, or in the case of a successor trustee, an
officer assigned to the department, division or group performing the corporation
trust work of such successor and assigned to administer this Indenture.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of
which the full faith and credit of the United States of America is pledged.
"U.S. LEGAL TENDER" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness or Disqualified Capital Stock, as the case may be, at any date, the
number of years obtained by dividing (a) the then outstanding aggregate
principal amount of such Indebtedness into (b) the sum of the total of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"WHOLLY OWNED SUBSIDIARY" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities (other than in the case of
a foreign Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law) are
owned by such Person or any Wholly Owned Subsidiary of such Person.
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SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company or any
other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP as in effect on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular; and
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
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ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of EXHIBIT A and EXHIBIT B hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Company and the Trustee shall approve the form of
the Notes and any notation, legend or endorsement on them. Each Note shall be
dated the date of its issuance and shall show the date of its authentication.
The terms and provisions contained in the 2005 Notes and the 2002
Notes, annexed hereto as EXHIBIT A and EXHIBIT B, respectively, shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.02. EXECUTION AND AUTHENTICATION;
AGGREGATE PRINCIPAL AMOUNT.
Two Officers, or an Officer and an Assistant Secretary, shall sign,
or one Officer shall sign and one Officer or an Assistant Secretary (each of
whom shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature. The Company's seal shall also be reproduced on the Notes. Each
Guarantor, if any, shall execute the Guarantee in the manner set forth in
Section 11.09.
If an Officer or Assistant Secretary whose signature is on a Note
was an Officer or Assistant Secretary at the time of such execution but no
longer holds that office or position at the time the Trustee authenticates the
Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
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The Trustee shall authenticate Notes for original issue, upon
written orders of the Company in the form of an Officers' Certificate in an
aggregate principal amount not to exceed $58,525,331; PROVIDED that, except as
provided in Section 2.07, (a) (i) the sum of the aggregate principal amount of
(x) 2002 Notes issued on the Issue Date and (y) 2002 Notes issued pursuant to an
additional investment in the 2002 Notes of up to $1,000,000 made on or prior to
the 60th day after the Issue Date, shall not exceed $6,000,000 and (ii)
additional 2002 Notes issued as PIK Interest pursuant to Section 2.12 in lieu of
Cash Interest shall not exceed $837,338 and (b) additional 2005 Notes issued as
PIK Interest pursuant to Section 2.12 in lieu of Cash Interest shall not exceed
$6,329,993. The Officers' Certificate shall specify the amount of Notes to be
authenticated, the date on which the Notes are to be authenticated and the
aggregate principal amount of Notes outstanding on the date of authentication.
The Trustee shall not be required to authenticate Notes if the
issuance of such Notes pursuant to this Indenture will affect the Trustee's own
rights, duties or immunities under the Notes and this Indenture in a manner
which is not reasonably acceptable to the Trustee.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company and Affiliates of the Company.
The Notes shall be issuable in fully registered form only, without
coupons.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New York)
where (a) Notes may be presented or surrendered for registration of transfer or
for exchange ("Registrar"), (b) Notes may be presented or surrendered for
payment ("Paying Agent") and (c) notices and demands to or upon the Company in
respect of the Notes and this Indenture may be
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served. The Registrar shall keep a register of the Notes and of their transfer
and exchange. The Company, upon prior written notice to the Trustee, may have
one or more co-Registrars and one or more additional paying agents reasonably
acceptable to the Trustee. The term "Paying Agent" includes any additional
Paying Agent. Neither the Company nor any Affiliate of the Company may act as
Paying Agent.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee, in advance, of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such.
The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of demands and notices in connection with the Notes,
until such time as the Trustee has resigned or a successor has been appointed.
The Paying Agent or Registrar may resign upon 30 days notice to the Company.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that each Paying Agent shall hold in trust for the benefit
of the Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, or interest on, the Notes (whether such assets have
been distributed to it by the Company or any other obligor on the Notes), and
the Company and the Paying Agent shall notify the Trustee of any Default by the
Company (or any other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent shall have no further liability for such assets.
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SECTION 2.05. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Company shall furnish or
cause the Registrar to furnish to the Trustee before each Record Date and at
such other times as the Trustee may request in writing a list as of such date
and in such form as the Trustee may reasonably require of the names and
addresses of the Holders, which list may be conclusively relied upon by the
Trustee.
SECTION 2.06. TRANSFER AND EXCHANGE.
When Notes are presented to the Registrar or a co-Registrar with a
request to register the transfer of such Notes or to exchange such Notes for an
equal principal amount of the same series of Notes of other authorized
denominations, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
PROVIDED, HOWEVER, that the Notes presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing. To permit registrations of transfer and exchanges, the
Company shall execute and the Trustee shall authenticate Notes at the
Registrar's or co-Registrar's request. No service charge shall be made for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchanges or transfers pursuant to Sections
2.10, 3.06, 4.15, 4.16 or 9.06, in which event the Company shall be responsible
for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Note being redeemed in part.
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SECTION 2.07. REPLACEMENT NOTES.
If a mutilated Note is surrendered to the Trustee or if the Holder
of a Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note of the
same series if the Trustee's requirements are met. If required by the Trustee or
the Company, such Holder must provide an affidavit of lost certificate and an
indemnity bond or other indemnity, sufficient in the judgment of the Company and
the Trustee, to protect the Company, the Trustee or any Agent from any loss
which any of them may suffer if a Note is replaced. The Company may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Note, including
reasonable fees and expenses of counsel. Every replacement Note shall constitute
an additional obligation of the Company, and shall be entitled to the benefits
of this Indenture.
SECTION 2.08. OUTSTANDING NOTES.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section 2.08 as not outstanding.
Subject to the provisions of Section 2.09, a Note does not cease to be
outstanding because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives an Opinion of Counsel that the replaced Note is held by a
BONA FIDE purchaser. A mutilated Note ceases to be outstanding upon surrender of
such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
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SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver, consent or notice, Notes owned
by the Company or any of its Affiliates shall be considered as though they are
not outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which a Trust Officer of the Trustee actually knows are so owned shall be
so considered. The Company shall notify the Trustee, in writing, when it or any
of its Affiliates repurchases or otherwise acquires Notes, of the aggregate
principal amount of such Notes so repurchased or otherwise acquired.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon receipt of a
written order of the Company in the form of an Officers' Certificate. Such
Officers' Certificate shall specify the amount of temporary Notes to be
authenticated and the date on which the temporary Notes are to be authenticated.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate upon receipt of a written order of the Company pursuant to Section
2.02 definitive Notes in exchange for temporary Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Company, shall dispose
of all Notes surrendered for transfer, exchange, payment or cancellation.
Subject to Section 2.07, the Company may not issue new Notes to replace Notes
that they have paid or delivered to the Trustee for cancellation. If the Company
shall acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Notes unless
and until the same are surren-
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dered to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. PAYMENT OF INTEREST; DEFAULTED INTEREST.
Interest on any Note which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Note is registered in the register maintained by the Registrar
at the close of business on the Record Date for such interest. On each Interest
Payment Date through and including September 15, 2000, the Company, at its
option, may pay interest on the Notes in the form of Cash Interest or PIK
Interest; thereafter the Company shall pay Cash Interest on each Interest
Payment Date.
If the Company defaults in a payment of interest on the Notes, such
interest shall forthwith cease to be payable to the Holder on the relevant
Record Date by virtue of having been such Holder, and the Company shall pay the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest to the Persons who are Holders on a subsequent special record
date, which date shall be the fifteenth day next preceding the date fixed by the
Company for the payment of defaulted interest or the next succeeding Business
Day if such date is not a Business Day. At least 15 days before the subsequent
special record date, the Company shall mail to each Holder, as of a recent date
selected by the Company, with a copy to the Trustee, a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number, and if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; PROVIDED that no representation is hereby deemed to
be made by the Trustee as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any change in the CUSIP number.
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SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 11:00 a.m. New York City time on each Interest Payment Date
that Cash Interest is paid or due and on the Maturity Date, the Company shall
have deposited with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date or
Maturity Date, as the case may be, in a timely manner which permits the Paying
Agent to remit payment to the Holders on such Interest Payment Date or Maturity
Date, as the case may be.
SECTION 2.15. PERSONS DEEMED OWNERS.
Prior to due presentment of a Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Note is registered in the register maintained by the
Registrar as the owner of such Note for the purpose of receiving payment of
principal of and (subject to Section 2.12) interest on such Note and for all
other purposes whatsoever, whether or not such Note be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to Paragraph 6 of the
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01
at least 60 days before the Redemption Date (unless a shorter notice period
shall be satisfactory to the Trustee, as evidenced in a writing signed on behalf
of the Trustee), together with an Officers' Certificate of the Company stating
that such redemption shall comply with the conditions contained herein and in
the Notes.
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SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If fewer than all of the Notes are to be redeemed, selection of the
Notes to be redeemed will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not then listed on a national securities
exchange, on a PRO RATA basis, by lot or in such other fair and reasonable
manner chosen at the discretion of the Trustee; PROVIDED, HOWEVER, that if a
partial redemption is made with the proceeds of a Public Equity Offering,
selection of the Notes or portion thereof for redemption shall be made by the
Trustee only on a PRO RATA basis, unless such method is otherwise prohibited;
PROVIDED, FURTHER, HOWEVER, that all 2002 Notes must be redeemed before any 2005
Notes may be redeemed without the prior written consent of all Holders of 2002
Notes. The Company shall promptly notify the Trustee and the Paying Agent in
writing of the date of listing and the name of the securities exchange if and
when the Notes are listed on a principal national securities exchange. The
Trustee shall make the selection from the Notes outstanding and not previously
called for redemption and shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail, postage prepaid, to each Holder whose Notes are to be redeemed, with
a copy to the Trustee and any Paying Agent. At the Company's written request,
the Trustee shall give the notice of redemption in the Company's name and at the
Company's expense.
Each notice for redemption shall identify the Notes to be redeemed
and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
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(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption
is being made;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(6) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date, and the only remaining right of the Holders of
such Notes is to receive payment of the Redemption Price plus accrued
interest, if any, to the Redemption Date, upon surrender to the Paying
Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes in
the aggregate principal amount equal to the unredeemed portion thereof
will be issued; and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption become due and payable on the Redemption Date and at
the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption shall be paid at the
Redemption Price (which shall include accrued interest thereon to the Redemption
Date), but installments of interest, the maturity of which is on or prior to the
Redemption Date, shall be payable to Holders of record at the close of business
on the relevant record dates referred to in Section 2.12.
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SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before 11:00 a.m. New York City time on the Redemption Date,
the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the Redemption Price plus accrued interest, if any, of all Notes to be
redeemed on that date. The Paying Agent shall promptly return to the Company any
U.S. Legal Tender so deposited which is not required for that purpose, except
with respect to moneys owed as obligations to the Trustee pursuant to Article
Seven.
If the Company complies with the preceding paragraph, then, unless
the Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Notes to be redeemed will cease to accrue on
and after the applicable Redemption Date, whether or not such Notes are
presented for payment.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is to be redeemed in part, the Company
shall execute and the Trustee shall authenticate for the Holder a new Note or
Notes of the same series equal in principal amount to the unredeemed portion of
the Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes and in this Indenture. An
installment of principal of or interest on the Notes shall be considered paid on
the date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate of the Company) holds on that date (i) U.S. Legal Tender designated
for and sufficient to pay the installment in full and is not prohibited from
paying such money to the Holders pursuant to the terms of this Indenture or (ii)
additional Notes representing PIK Interest in accordance with Section 2.12
hereof.
<PAGE>
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The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
borne by the Notes plus 2% per annum. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain the office or agency required under
Section 2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 12.02.
SECTION 4.03. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five and Section 4.16, the
Company shall do or cause to be done, at its own cost and expense, all things
necessary to preserve and keep in full force and effect its corporate existence
and the corporate existence of each of its Subsidiaries in accordance with the
respective organizational documents of each such Subsidiary and the material
rights (charter and statutory) and franchises of the Company and each such
Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to
preserve any such right or franchise, or the corporate, partnership or other
existence of the Company or any Subsidiary of the Company, if the Board of
Directors of the Company shall determine in good faith (which such determination
shall be evidenced by a Board Resolution) that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
respective Subsidiaries taken as a whole and the loss thereof is not adverse in
any material respect to the Holders; and PROVIDED FURTHER that any Subsidiary of
the Company may consolidate with, merge into, or transfer or distribute all or
part of its properties and assets to, the Company or any Wholly Owned Subsidiary
of the Company.
<PAGE>
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SECTION 4.04. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all taxes, assessments
and governmental charges (including withholding taxes and any penalties,
interest and additions to taxes) levied or imposed upon it or any of its
Subsidiaries or properties of it or any of its Subsidiaries and (ii) all lawful
claims for labor, materials and supplies that, if unpaid, might by law become a
Lien upon the property of it or any of its Subsidiaries; PROVIDED, HOWEVER, that
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim (y) whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings properly instituted and diligently conducted for which adequate
reserves have been taken or (z) the failure to pay or discharge, or cause to be
paid or discharged such tax, assessment, charge or claim would not reasonably be
expected to result in a material adverse effect on the business operations or
financial condition of the Company.
SECTION 4.05. MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall, and shall cause each of its Subsidiaries to,
maintain its material properties in good working order and condition (subject to
ordinary wear and tear) and make all necessary repairs, renewals, replacements,
additions, betterments and improvements thereto and actively conduct and carry
on its business; PROVIDED, HOWEVER, that nothing in this Section 4.05 shall
prevent the Company or any of its Subsidiaries from discontinuing the operation
and maintenance of any of its properties, if such discontinuance is, in the good
faith judgment of the Board of Directors of the Company or such Subsidiary, as
the case may be, desirable in the conduct of their respective businesses and is
not disadvantageous in any material respect to the Holders.
(b) The Company shall provide or cause to be provided, for itself
and each of its Subsidiaries, insurance against loss or damage of the kinds
that, in the good faith judgment of the Board of Directors of the Company, are
adequate and appropriate for the conduct of the business of the Company and such
Subsidiaries in a prudent manner, with reputable insurers or with the government
of the United States of America
<PAGE>
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or an agency or instrumentality thereof, in such amounts, with such deductibles,
and by such methods as shall be customary, in the good faith judgment of the
Board of Directors of the Company, for companies similarly situated in the
industry.
SECTION 4.06. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of the Company's fiscal year, an Officers' Certificate stating that a
review of their activities and the activities of its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, that to the best of
such Officer's knowledge the Company during such preceding fiscal year has kept,
observed, performed and fulfilled each and every such covenant and no Default or
Event of Default occurred during such year and at the date of such certificate
there is no Default or Event of Default that has occurred and is continuing or,
if such signers do know of such Default or Event of Default, the certificate
shall describe the Default or Event of Default and its status with
particularity. The Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year end.
(b) The annual financial statements delivered pursuant to Section
4.08 shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article Four, Five or Six of this Indenture insofar as they relate
to accounting matters or, if any such violation has occurred, specifying the
nature and period of existence thereof.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 12.02 hereof,
by registered or certified mail or by telegram, telex or fac-
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simile transmission followed by hard copy by registered or certified mail an
Officers' Certificate specifying such event, notice or other action within five
Business Days of its becoming aware of such occurrence.
SECTION 4.07. COMPLIANCE WITH LAWS.
The Company shall comply, and shall cause each of its Subsidiaries
to comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as are not in the aggregate
reasonably likely to have a material adverse effect on the financial condition
or results of operations of the Company and its Subsidiaries, taken as a whole.
SECTION 4.08. SEC REPORTS.
(a) So long as the Notes are outstanding, if the Company is required
to file annual or quarterly reports with the SEC under Section 13 or 15(d) of
the Exchange Act, the Company (at its own expense) shall file with the SEC and
shall file with the Trustee within 15 days after it files them with the SEC
copies of the quarterly and annual reports and of the information, documents,
and other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) required to be filed pursuant to Section
13 or 15(d) of the Exchange Act. Upon qualification of this Indenture under the
TIA, the Company shall also comply with the provisions of TIA ss. 314(a).
(b) At the Company's expense, the Company shall cause an annual
report, if furnished by it to its stockholders generally and each quarterly or
other financial report if furnished by it to its stockholders generally to be
filed with the Trustee and mailed to the Holders at their addresses appearing in
the register of Notes maintained by the Registrar at the time of such mailing or
furnishing to stockholders.
(c) If the Company is not required to file annual or quarterly
reports with the SEC under Section 13 or 15(d) of the Exchange Act for any
fiscal period ending after the Issue Date,
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the Company shall cause its consolidated financial statements, including any
notes thereto (and, in the case of a fiscal year end, an auditor's report by an
accounting firm of nationally established reputation), and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
comparable to that which would have been required to appear in annual or
quarterly reports filed under Section 13 or 15(d) of the Exchange Act if the
Company had a class of securities listed on a national securities exchange, to
be so filed with the Trustee and mailed to the Holders at their addresses
appearing in the register of Notes maintained by the Registrar within 90 days
after the end of each fiscal year and within 45 days after the end of each of
the Company's first three fiscal quarters in each fiscal year.
(d) The Company shall provide to any Holder any information
reasonably requested by such Holder concerning the Company (including financial
statements) necessary in order to permit such Holder to sell or transfer Notes
in compliance with Rule 144A under the Securities Act.
SECTION 4.09. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or any such Guarantor, as the case may be, from paying all or any
portion of the principal of or interest on the Notes or performing its
Guarantee, as the case may be, and as contemplated herein, wherever enacted, now
or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company and each Guarantor, if any, hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not hinder, delay or
impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.10. LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, (a) declare
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or pay any dividend or make any distribution (other than dividends or
distributions payable (y) to the Company or a Wholly Owned Subsidiary of the
Company or (z) in Qualified Capital Stock or Qualified Rights of the Company) on
or in respect of shares of its Capital Stock to holders of such Capital Stock,
(b) purchase, redeem or otherwise acquire or retire for value any Capital Stock
of the Company or any warrants, rights or options to purchase or acquire shares
of any class of such Capital Stock, (c) make any principal payment on, purchase,
defease, redeem, prepay, decrease or otherwise acquire or retire for value,
prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, any Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes or (d) make any Investment (other than Permitted
Investments) (each of the foregoing actions set forth in clauses (a), (b) (c)
and (d) being referred to as a "Restricted Payment"), if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default shall have occurred and be continuing or (ii) the Company is
not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.12 or (iii) the aggregate
amount of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property) shall exceed the sum
of: (x) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company
earned subsequent to the Issue Date and on or prior to the date the Restricted
Payment occurs (the "Reference Date") (treating such period as a single
accounting period); plus (y) 100% of (1) the aggregate net cash proceeds
received by the Company from any Person (other than a Subsidiary of the Company)
from the issuance and sale subsequent to the Issue Date and on or prior to the
Reference Date of Qualified Capital Stock of the Company and (2) the aggregate
net proceeds (as defined below) received by the Company from any Person (other
than a Subsidiary of the Company) from the issuance subsequent to the Issue Date
and on or prior to the Reference Date of Qualified Capital Stock of the Company
upon conversion or exchange of Indebtedness of the Company (other than such
Indebtedness that is subordinate or junior in right of payment to the Notes);
plus (z) without duplication and to the extent amounts would not be included in
Consolidated Net Income, the sum of (1) the aggregate amount returned in cash on
or with respect to Investments
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(other than Permitted Investments) made subsequent to the Issue Date, and (2)
the net cash proceeds received by the Company or any Subsidiary from the
disposition of all or any portion of such Investments (other than to the Company
or a Subsidiary of the Company), PROVIDED, HOWEVER, that with respect to all
Investments, the sum of clauses (1) and (2) above with respect to such
Investments shall not exceed the aggregate amount of all such Investments made
subsequent to the Issue Date.
For the purposes of this Section 4.10, the net proceeds from the
issuance of shares of Qualified Capital Stock of the Company upon conversion or
exchange of Indebtedness shall be deemed to be an amount equal to the net book
value of such Indebtedness (plus the additional amount required to be paid upon
such conversion, if any), less any cash payment on account of fractional shares;
the "net book value" of Indebtedness shall be the amount received by the Company
on the incurrence of such Indebtedness, as adjusted on the books of the Company
to the date of conversion or exchange.
Notwithstanding the foregoing, clauses (ii) and (iii) set forth in
the first paragraph of this Section do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if the
dividend would have been permitted on the date of declaration; (2) the
acquisition or retirement for value of any shares of Capital Stock of the
Company or warrants, rights or options to purchase or acquire shares of any
class of such Capital Stock, either (i) solely in exchange for shares of
Qualified Capital Stock or Qualified Rights of the Company or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Subsidiary of the Company) of shares of Qualified Capital Stock or
Qualified Rights of the Company; (3) the acquisition or retirement for value of
any Indebtedness of the Company that is subordinate or junior in right of
payment to the Notes solely in exchange for shares of Qualified Capital Stock or
Qualified Rights of the Company; (4) the purchase, redemption, acquisition or
other retirement for value of shares of Capital Stock of the Company held by
directors, officers or employees of the Company or options on any such shares or
related stock appreciation rights or similar securities owned by such directors,
officers or employees upon death, disability, retirement, termination of
employment or pursuant to the terms of such stock option plan or any other
agreement under which such shares of Capital Stock, options, related rights or
similar securities were issued in an aggregate amount not to exceed $2,000,000
in the aggregate or (5) Restricted Payments not to
<PAGE>
exceed $25,000 in the aggregate. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date in accordance with clause
(iii) of the first paragraph of this Section, (y) amounts expended pursuant to
clauses (1), (2)(ii), (4) and (5) shall be included in such calculation and (z)
amounts expended pursuant to clauses (2)(i) and (3) shall be excluded from such
calculation.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal quarterly
financial statements.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an "Affiliate
Transaction"), other than (x) Affiliate Transactions permitted under paragraph
(b) below and (y) Affiliate Transactions conducted in good faith, the terms of
which are fair and reasonable to the Company or such Subsidiary and which are no
less favorable to the Company or such Subsidiary than those that might
reasonably have been obtained in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate of the Company or such
Subsidiary; PROVIDED, HOWEVER, that notwithstanding anything to the contrary
contained herein, the transactions set forth on SCHEDULE II hereto are hereby
permitted. All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $250,000 shall
be approved by the Board of Directors of the Company or such Subsidiary, as the
case may be, including a majority of the disinterested Directors, if any, such
approval to be evidenced by a Board Resolution stating that such Board of
Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Subsidiary of the Company enters into an
Affiliate Transaction (or a series of related
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Affiliate Transactions related to a common plan) that involves an aggregate fair
market value or payments to an Affiliate, as the case may be, of more than
$1,000,000, the Company or such Subsidiary, as the case may be, shall, prior to
the consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee.
(b) The foregoing restrictions shall not apply to (i) reasonable
fees, compensation and out-of-pocket expenses paid to and indemnity provided on
behalf of, officers, directors, employees or consultants of the Company or any
Subsidiary of the Company as determined in good faith by the Company's Board of
Directors or senior management; (ii) transactions between or among the Company
and any of its Subsidiaries or exclusively between or among such Subsidiaries,
PROVIDED that such transactions are not otherwise prohibited by this Indenture;
(iii) Restricted Payments and Permitted Investments permitted by this Indenture;
and (iv) the issuance of Notes and warrants in connection with the transaction
described in the Securities Purchase Agreement.
SECTION 4.12. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND
ISSUANCE OF DISQUALIFIED CAPITAL STOCK.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume, guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur") any Indebtedness (other than
Permitted Indebtedness) nor issue any shares of Disqualified Capital Stock, nor
permit any of its Subsidiaries to issue any shares of Disqualified Capital
Stock; PROVIDED, HOWEVER, that if no Default or Event of Default shall have
occurred and be continuing at the time or as a consequence of the incurrence of
any such Indebtedness, the Company may incur Indebtedness (including, without
limitation, Acquired Indebtedness) or issue shares of Disqualified Capital Stock
and the Subsidiaries of the Company may incur Acquired Indebtedness in each case
if on the date of the incurrence of such Indebtedness or the issuance of such
Disqualified Stock, after giving effect to the incur-
<PAGE>
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rence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company is
greater than 2.50 to 1.0.
SECTION 4.13. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary of the Company to (a) pay dividends or make any other distributions
on or in respect of its Capital Stock; (b) make loans or advances or to pay any
Indebtedness or other obligation owed to the Company or any other Subsidiary of
the Company; or (c) transfer any of its property or assets to the Company or any
other Subsidiary of the Company, except for such encumbrances or restrictions
existing under or by reason of: (1) applicable law; (2) this Indenture; (3)
customary non-assignment provisions of any contract or lease governing a
leasehold or ownership interest of any Subsidiary of the Company; (4) any
instrument governing Acquired Indebtedness, which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired or
relating to any property acquired by the Company or any of its Subsidiaries
after the Issue Date, PROVIDED that such encumbrance or restriction exists of
the time such property is acquired, relates only to the property which is
acquired and was not incurred in connection with, or in anticipation or
contemplation of, such acquisition; (5) agreements existing on the Issue Date to
the extent and in the manner such agreements are in effect on the Issue Date;
(6) an agreement governing Indebtedness incurred to Refinance the Indebtedness
issued, assumed or incurred pursuant to an agreement referred to in clause (2),
(4) or (5) above; PROVIDED, HOWEVER, that the provisions relating to such
encumbrance or restriction contained in any such Indebtedness are no less
favorable to the Company in any material respect than the provisions relating to
such encumbrance or restriction contained in agreements referred to in such
clause (2), (4) or (5) above; or (7) agreements restricting the sale or other
disposition of any property securing Indebtedness which constitutes a Permitted
Lien on such property.
<PAGE>
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SECTION 4.14. PAYMENTS ON 2002 NOTES.
The Company shall not pay Cash Interest on the 2002 Notes on an
Interest Payment Date if the Company does not concurrently pay Cash Interest on
all outstanding 2005 Notes on such Interest Payment Date.
SECTION 4.15. CHANGE OF CONTROL.
The Company shall make an offer to purchase no later than the date
upon which a Change of Control occurs (the "Change of Control Date") all
outstanding Notes (the "Change of Control Offer") at a purchase price equal to
101% of the principal amount of all outstanding Notes plus accrued interest
thereon, if any, to the date of purchase, but installments of interest, the
maturity of which is on or prior to the Change of Control Date, shall be payable
to Holders of record at the close of business on the relevant record dates
referred to in Section 2.12.
The Company may utilize such procedures in connection with the
Change of Control Offer as the Company' Board of Directors deems appropriate;
PROVIDED, HOWEVER, that at least 10 Business Days prior to the Change of Control
Date, the Holders shall have received all information concerning such Change of
Control as is reasonably available to the Company.
On or before the Change of Control Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient
to pay the purchase price plus accrued interest, if any, of all Notes so
tendered and (iii) forward to the Trustee Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued interest,
if any, and the Trustee shall promptly authenticate and mail to such Holders new
Notes equal in principal amount to any unpurchased portion of the Notes
surrendered; PROVIDED that no 2005 Notes may be so purchased until all 2002
Notes so tendered have been purchased. Any Notes not so accepted shall be
promptly mailed by the Company to the Holder thereof. For purposes of this
Section 4.15, the Trustee shall act as the Paying Agent.
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Any amounts remaining after the purchase of Notes pursuant to a
Change of Control Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent the
provisions of any securities laws or regulations conflict with this Section
4.15, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.15 by virtue thereof. The Company's obligation to purchase the Notes
pursuant to the Change of Control Offer is conditioned upon the Change of
Control being effected.
SECTION 4.16. LIMITATION ON ASSET SALES.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company or the
applicable Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value of the assets sold or
otherwise disposed of (as determined in good faith by the Company's Board of
Directors); (ii) at least 75% of the consideration received by the Company or
such Subsidiary, as the case may be, from such Asset Sale shall be in the form
of cash or Cash Equivalents (PROVIDED that the amount of any liabilities (as
shown on the Company's or such Subsidiary's most recent balance sheet) of the
Company or any such Subsidiary (other than liabilities that are by their terms
subordinated to the Notes) that are assumed by the transferee of any such assets
shall be deemed to be cash for the purposes of this provision); and (iii) upon
the consummation of an Asset Sale, the Company shall apply, or cause such
Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within
365 days of receipt thereof to make an investment in properties and assets that
replace the properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in the business of the Company and its
Subsidiaries as existing on the Issue Date or in businesses the same, similar or
reasonably related thereto ("Replacement Assets"). Subject to the last sentence
of this paragraph, on the 366th day after an Asset Sale or such earlier date, if
any, as the Board of Directors of the Company or of
<PAGE>
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such Subsidiary determines not to apply the Net Cash Proceeds relating to such
Asset Sale as set forth in the next preceding sentence (each, a "Net Proceeds
Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which have not
been applied on or before such Net Proceeds Offer Trigger Date as permitted in
the next preceding sentence (each a "Net Proceeds Offer Amount") shall be
applied by the Company or such Subsidiary to make an offer to purchase (the "Net
Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than
30 nor more than 45 days following the applicable Net Proceeds Offer Trigger
Date, from all Holders on a PRO RATA basis, that amount of Notes equal to the
Net Proceeds Offer Amount at a price equal to 100% of the principal amount of
the Notes to be purchased, plus accrued interest thereon, if any, to the date of
purchase, but installments of interest, the maturity of which is on or prior to
the Proceeds Purchase Date, shall be payable to Holders of record at the close
of business on the relevant record dates referred to in Section 2.12; PROVIDED,
HOWEVER, that if at any time any non-cash consideration received by the Company
or any Subsidiary of the Company, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant.
The Company may defer the Net Proceeds Offer until there is an
aggregate unutilized Net Proceeds Offer Amount equal to or in excess of
$1,000,000 resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of
$1,000,000, shall be applied as required pursuant to the preceding paragraph).
In the event of the transfer of substantially all (but not all) of
the property and assets of the Company and its Subsidiaries as an entirety to a
Person in a transaction permitted under Section 5.01, the successor entity shall
be deemed to have sold such portion, if any, of the properties and assets of the
Company and its Subsidiaries not so transferred the fair market value of which
exceeds the fair market value (as determined in good faith by the Company's
Board of Directors) of the property and assets of such successor entity
immediately prior to consummation of such transaction for purposes of this
cove-
<PAGE>
-52-
nant, and shall comply with the provisions of this covenant with respect to such
deemed sale as if it were an Asset Sale. In addition, the fair market value of
such properties and assets of the Company or its Subsidiaries deemed to be sold
as aforesaid shall be deemed to be Net Cash Proceeds for purposes of this
Section 4.16.
Each Net Proceeds Offer will be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in this Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly tender
Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering
Holders will be purchased on a PRO RATA basis (based on amounts tendered). To
the extent that the aggregate amount of Notes tendered pursuant to a Net
Proceeds Offer is less than the Net Proceeds Offer Amount, the Company may use
such excess Net Proceeds Offer Amount for general corporate purposes or for any
other purpose not prohibited by this Indenture. Upon completion of any such Net
Proceeds Offer, the Net Proceeds Offer Amount shall be reset at zero. A Net
Proceeds Offer shall remain open for a period of 20 Business Days or such longer
period as may be required by law.
(b) Subject to the deferral of the Net Proceeds Offer Trigger Date
contained in the second paragraph of subsection (a) above, each notice of a Net
Proceeds Offer pursuant to this Section 4.16 shall be mailed or caused to be
mailed, by first class mail, by the Company not more than 25 days after the Net
Proceeds Offer Trigger Date to all Holders at their last registered addresses as
of a date within 15 days of the mailing of such notice, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Net Proceeds Offer and shall
state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.16 and that all Notes tendered will be accepted for payment; PROVIDED,
HOWEVER, that if the aggregate principal amount of Notes tendered in a Net
Proceeds Offer exceeds the aggregate amount of the Net Proceeds Offer, the
Company shall select the Notes to be pur-
<PAGE>
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chased on a PRO RATA basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000
or multiples thereof shall be purchased);
(2) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be 20 Business Days from the date of
mailing of notice of such Net Proceeds Offer, or such longer period as
required by law) (the "Proceeds Purchase Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than two Business Days prior to the
Proceeds Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such Holder
is withdrawing his election to have such Note purchased; and
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; PROVIDED that each Note purchased and each new Note
issued shall be in an original principal amount of $1,000 or integral
multiples thereof.
On or before the Proceeds Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in
<PAGE>
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accordance with item (b)(1) above, (ii) deposit with the Paying Agent U.S. Legal
Tender sufficient to pay the purchase price plus accrued interest, if any, of
all Notes to be purchased and (iii) deliver to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or portions thereof
being purchased by the Company; PROVIDED that no 2005 Notes may be so purchased
until all 2002 Notes so tendered have been purchased. The Paying Agent shall
promptly mail to the Holders of Notes so accepted payment in an amount equal to
the purchase price plus accrued interest, if any. For purposes of this Section
4.16, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Notes pursuant to a Net
Proceeds Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
4.16, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.16 by virtue thereof.
SECTION 4.17. LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES.
The Company shall not permit any of its Subsidiaries to issue any
Preferred Stock (other than to the Company or to a Wholly Owned Subsidiary of
the Company) or permit any Person (other than the Company or a Wholly Owned
Subsidiary of the Company) to own any Preferred Stock of any Subsidiary of the
Company.
SECTION 4.18. LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Subsidiaries
to, create, incur, assume or suffer to exist any Liens of any kind against or
upon any of its property or assets of the Company or any of its Subsidiaries
whether owned on the Issue Date or acquired after the Issue Date, or any
proceeds therefrom, unless, except in the case of Liens securing Indebtedness
that is subordinate or junior in right of payment
<PAGE>
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to the Notes which shall not be permitted, the Notes are equally and ratably
secured, except for (i) Liens existing as of the Issue Date to the extent and in
the manner such Liens are in effect as of the Issue Date; (ii) Liens securing
the Notes or the Guarantees; (iii) Liens of the Company or a Wholly Owned
Subsidiary of the Company on assets of any Subsidiary of the Company; (iv) Liens
securing Refinancing Indebtedness which is incurred to Refinance Indebtedness
which has been secured by a Lien permitted under this Indenture and which has
been incurred in accordance with the provisions of this Indenture; PROVIDED,
HOWEVER, that such Liens (y) are no less favorable to the Holders and are no
more favorable to the lienholders with respect to such Liens than the Liens in
respect of the Indebtedness being Refinanced and (z) do not extend to or cover
any property or assets of the Company or any of its Subsidiaries not securing
the Indebtedness so Refinanced; and (v) with respect to items of Collateral,
Liens permitted by the applicable Security Document and with respect to all
other property, Permitted Liens.
SECTION 4.19. ADDITIONAL GUARANTORS.
The Company shall cause any Subsidiary (other than Quantum
Geophysical Services, Inc.) with a net book value greater than $1,000,000 to
execute and deliver (i) a supplemental indenture to this Indenture providing for
the guarantee of payment of the Notes by such Subsidiary pursuant to the terms
of Article Eleven hereof and (ii) a guarantee in the form attached to the Note
hereto.
SECTION 4.20. LIMITATION ON ISSUANCE OF SHARES OF SUBSIDIARIES.
The Company shall not permit any of its Subsidiaries to issue shares
of Capital Stock (other than director's qualifying shares) to any Person other
than the Company or a Wholly Owned Subsidiary of the Company; PROVIDED that (i)
if the issuing Subsidiary is not a Wholly Owned Subsidiary, the issuing
Subsidiary may also simultaneously issue additional shares of Capital Stock of
the same class to other shareholders of the issuing Subsidiary so long as such
issuance will not reduce the percentage of Capital Stock of the issuing
Subsidiary which was owned by the Company or its Subsidiaries immediately prior
to such issuance; and (ii) a Subsidiary may issue Capital Stock to any Person to
the extent that and subject to the conditions un-
<PAGE>
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der which the Company or another Subsidiary of the Company holding the Capital
Stock of such issuing Subsidiary would be permitted to sell, transfer or
otherwise dispose of such Capital Stock in an Asset Sale pursuant to Section
4.16.
SECTION 4.21. NON-GUARANTOR SUBSIDIARY.
The Company shall not permit Quantum Geophysical Services,
Inc. to engage in any business other than the leasing of equipment owned
or leased by it on the Issue Date to the Company or a Guarantor.
SECTION 4.22. CONDUCT OF BUSINESS.
The Company shall not, and shall not permit its Subsidiaries to,
engage in any businesses which are not the same as, similar or reasonably
related to the businesses in which the Company and its Subsidiaries are engaged
on the Issue Date.
SECTION 4.23. LIMITATION ON SEISMIC OPERATIONS.
The Company shall, and shall cause its Subsidiaries to, (a) cease
entering into new contracts to provide, and proceed to complete or terminate (if
termination can be effected without material monetary penalty) all existing
contracts to provide, Seismic Acquisition Services within 10 Business Days
following the end of any period the Consolidated EBITDA of the Company resulting
from Seismic Operations as of the last day of any calendar month ending during
such period, commencing October 1, 1999, on a cumulative basis, is at least
$100,000 less than the amount for such period shown on Schedule III hereto, and
(b) terminate all businesses relating to Seismic Operations as soon as
practicable thereafter.
SECTION 4.24. EQUAL SECURITY FOR NOTES AND GUARANTEES; NO FURTHER NEGATIVE
PLEDGES.
(a) If the Company or any Guarantor shall create or assume any Lien
upon any of its property or assets, whether now owned or hereafter acquired and
whether or not such property or assets constitutes Collateral, other than Liens
permitted by the applicable Security Document (unless prior written consent to
the creation or assumption thereof shall have been obtained from the majority of
the Holders), the Company shall, and shall cause GDC or any applicable Guarantor
to, make or cause to be
<PAGE>
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made effective provisions whereby the Obligations owing to the Trustee (if at
the time there is a Trustee) or any Holder pursuant to the terms of this
Indenture, the Notes, the Guarantees and each Security Document will be secured
by such Lien equally and ratably with any and all other Indebtedness thereby
secured as long as any such Indebtedness shall be secured; PROVIDED that this
covenant shall not be construed as consent by the majority of the Holders to any
violation by the Company of the provisions of Section 4.18.
(b) Except with respect to prohibitions against other encumbrances
on specific property encumbered to secure payment of particular Indebtedness
permitted hereunder (which Indebtedness relates solely to the acquisition or
improvement of such specific property), neither the Company nor any Guarantor
shall take or omit to take any action which action or omission would have the
result of adversely affecting or impairing the security interest granted under
any Security Documents, or shall enter into any agreement prohibiting the
creation or assumption of any Lien upon its properties or assets, whether now
owned or hereafter acquired.
SECTION 4.25. PLEDGE OF ADDITIONAL COLLATERAL.
Subject to Section 4.24(b), and in any event within 30 days after
the acquisition by the Company or any Guarantor of (i) Real Property, (ii)
assets of the type that would have constituted Collateral pursuant to the
appropriate Security Document on the Issue Date or (iii) capital stock or other
equity interests of any Guarantor (whether by capital contribution or
acquisition) (collectively, the property described in clauses (i), (ii), (iii)
above and the assets of any Guarantor described in clause (iii) above, the
"Additional Collateral"), the Company will, and will cause each Guarantor to,
take all necessary action, including the filing of appropriate financing
statements under the provisions of the UCC, applicable foreign, domestic or
local laws, rules or regulations in each of the offices where such filing is
necessary or appropriate, entering into or amending Security Documents or, in
the case the Company or any Guarantor creates or acquires a Subsidiary, entering
into such additional pledge agreements and security agreements in form and
substance satisfactory to the Collateral Agent to grant to the Collateral Agent
a perfected first priority Lien in such Collateral pursuant to and to the full
extent required by the Security Documents, this Indenture, the Notes and the
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Guarantees. All actions taken by the parties in connection with the pledge of
Additional Collateral, including, without limitation, costs of counsel for the
Collateral Agent, shall be for the account of the Company, which shall pay all
sums due on demand.
SECTION 4.26. SECURITY INTERESTS.
The Company will, and will cause the Guarantors to, perform any and
all acts and execute any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement) for filing in any appropriate jurisdiction under the
provisions of the UCC, local law or any statute, rule or regulation of any
applicable jurisdiction which are necessary in order to maintain or confirm in
favor of the Collateral Agent for the benefit of the Holders a valid and
perfected Lien on the Collateral and any Additional Collateral, subject to no
Liens except for Liens expressly permitted by the applicable Security Document.
The Company shall, as promptly as practicable after the filing of any financing
statements, deliver or cause to be delivered to the Trustee acknowledgment
copies of, or copies of lien search reports confirming the filing of, financing
statements duly filed under the UCC in all jurisdictions as may be necessary or,
in the reasonable judgment of the Collateral Agent, desirable to perfect the
Lien created, or purported or intended to be created, by each Security Document.
SECTION 4.27. CASH MAINTENANCE.
The Company shall maintain cash or Cash Equivalents balances of at
least the amount set forth below during each calendar month ending on each date
listed below:
Minimum Cash or Cash
Calendar Month Equivalents Balance
- -------------- --------------------
October 31, 1999 ..................................... $2,064,000
November 30, 1999 .................................... $1,834,000
December 31, 1999 .................................... $1,650,000
January 31, 2000 ..................................... $1,355,000
February 29, 2000 .................................... $1,095,000
March 31, 2000 ....................................... $848,000
April 30, 2000 ....................................... $601,000
May 31, 2000 ......................................... $439,000
<PAGE>
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June 30, 2000 ........................................ $334,000
July 31, 2000 ........................................ $459,000
August 31, 2000 ...................................... $584,000
September 30, 2000 ................................... $569,000
October 31, 2000 ..................................... $554,000
November 30, 2000 .................................... $539,000
December 31, 2000 .................................... $524,000
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. MERGER, CONSOLIDATION AND SALE OF ASSETS.
(a) The Company shall not, in a single transaction or a series of
related transactions, consolidate with or merge with or into any Person (other
than the merger of a Wholly Owned Subsidiary of the Company into the Company),
or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or
permit any Subsidiary of the Company to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's properties and
assets (determined on a consolidated basis for the Company and its Subsidiaries)
to any Person whether as an entirety or substantially as an entirety unless:
(1) either (A) the Company shall be the surviving or continuing
corporation or (B) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and its Subsidiaries
substantially as an entirety (the "Surviving Entity") (x) shall be a
corporation, partnership, limited liability company or business trust
organized and validly existing under the laws of the United States or any
State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance reasonably satisfactory
to the Trustee), executed and delivered to the Trustee, the due and
punctual payment of the principal of and premium, if any, and interest on
all of the Notes and the performance of every covenant of the Notes, this
Indenture and the Secu-
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rity Documents on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and the
assumption contemplated by clause (1)(B)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred or anticipated to
be incurred in connection with or in respect of such transaction), (i) the
Company or the Surviving Entity, as the case may be, shall be able to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with Section 4.12 and (ii) the Company or the
Surviving Entity, as the case may be, shall have a Consolidated Net Worth
at least equal to the Consolidated Net Worth of the Company immediately
prior to such transaction;
(3) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(B)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default
or Event of Default shall have occurred and be continuing; and
(4) the Company or the Surviving Entity, as the case may be, shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this
Indenture and that all conditions precedent in this Indenture relating to
such transaction have been satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties and assets of one or
more Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
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(c) Each Guarantor (other than any Guarantor whose Guarantee is to
be released in accordance with the terms of the Guarantee and this Indenture in
connection with any transaction complying with the provisions of Section 4.16)
shall not, and the Company shall not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Company or any
other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia; (ii) such entity expressly assumes by supplemental
indenture all of the obligations of the Guarantor on the Guarantee; (iii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (iv) immediately after giving
effect to such transaction and the use of any net proceeds therefrom on a PRO
FORMA basis, the Company could satisfy the provisions of clause (2) of Section
5.01(a). Any merger or consolidation of a Guarantor with and into the Company
(with the Company being the surviving entity) or another Guarantor that is a
Wholly Owned Subsidiary of the Company need only comply with clause (4) of
Section 5.01(a).
Notwithstanding the foregoing, this Section 5.01 shall not prohibit
a transaction, the principal purpose of which is (as determined in good faith by
the Board of Directors of the Company) to change the state of incorporation of
the Company and such transaction does not have as one of its purposes the
evasion of the limitations imposed by this Section.
When a successor assumes all of the obligations of the Company under
the Notes and this Indenture in a transaction permitted by this Section 5.01,
the Company will be deemed to be released from those obligations.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with the
foregoing, in which the Company is not the continuing corporation, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed
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to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an "Event of Default":
(1) failure to pay interest on any Notes when the same becomes due
and payable and the Default continues for a period of five days; or
(2) failure to pay the principal on any Notes when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered
pursuant to a Change of Control Offer or a Net Proceeds Offer); or
(3) a default in the observance or performance of any other covenant
or agreement contained in this Indenture which default continues for a
period of 10 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Notes (except in the case of a failure to comply with Section 4.10,
Section 4.12, Section 4.15, Section 4.23, Section 4.24, Section 4.25,
Section 4.26, Section 4.27 or Section 5.01, which shall constitute Events
of Default upon notice but without passage of time); or
(4) the Company fails to pay at final stated maturity (giving effect
to any applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness for borrowed money of the Company or any
Subsidiary of the Company or interest thereon, or the acceleration of the
final stated maturity of any such Indebtedness if the aggregate principal
amount of such Indebtedness, together
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with the principal amount of any other such Indebtedness not paid at final
stated maturity or which has been accelerated aggregates $500,000 or more
at any time; or
(5) one or more judgments for the payment of money in an aggregate
amount in excess of $500,000 shall have been rendered against the Company
or any of its Subsidiaries and such judgments remain undischarged, unpaid
or unstayed for a period of 30 days after such judgment or judgments
become final and non-appealable; or
(6) the Company or any Significant Subsidiary of the Company (A)
commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (B) consents to the entry of a judgment, decree or
order for relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (C) consents to the appointment of a Custodian of it or
for substantially all of its property, (D) consents to or acquiesces in
the institution of a bankruptcy or an insolvency proceeding against it,
(E) makes a general assignment for the benefit of its creditors, or (F)
takes any corporate action to authorize or effect any of the foregoing; or
(7) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any Significant Subsidiary
of the Company in an involuntary case or proceeding under any Bankruptcy
Law, which shall (A) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Company or any such Significant Subsidiary, (B) appoint a Custodian of the
Company or any such Significant Subsidiary or for substantially all of its
property or (C) order the winding-up or liquidation of its affairs; and
such judgment, decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or
(8) any Guarantee ceases to be in full force and effect or any
Guarantee is declared to be null and void and unenforceable or any
Guarantee is found to be invalid or any guarantor denies its liability
under its Guarantee (other than by reason of release of a Guarantee in
accordance with Section 11.06); or
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(9) any material breach by the Company of a representation or
warranty (as of the Issue Date) or covenant contained in the Securities
Purchase Agreement.
SECTION 6.02. ACCELERATION.
(a) If an Event of Default (other than an Event of Default specified
in Section 6.01(6) or (7) with respect to the Company) occurs and is continuing
and has not been waived pursuant to Section 6.04, then the Trustee or the
Holders of at least 25% in principal amount of outstanding Notes may declare the
principal of and accrued interest on all the Notes to be due and payable by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"), and the same shall become immediately due and payable. Upon any such
declaration, but subject to the immediately preceding sentence, such amount
shall be immediately due and payable.
(b) If an Event of Default specified in Section 6.01(6) or (7)
occurs and is continuing with respect to the Company, all unpaid principal of
and premium, if any, and accrued and unpaid interest on all of the outstanding
Notes shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
(c) At any time after a declaration of acceleration with respect to
the Notes in accordance with Section 6.02(a), the Holders of a majority in
principal amount of the Notes may, on behalf of the Holders of all of the Notes,
rescind and cancel such declaration and its consequences (i) if the rescission
would not conflict with any judgment or decree, (ii) if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration, (iii) to the extent the
payment of such interest is lawful, interest on overdue installments of interest
and overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in Section 6.01(6) or (7), the Trustee
shall have received an Officers' Certificate and an Opinion of Counsel from the
Company that such Event
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of Default has been cured or waived. No such rescission shall affect any
subsequent Default or impair any right consequent thereto. The Holders of a
majority in principal amount of the Notes may waive any existing Default or
Event of Default under this Indenture, and its consequences, except a default in
the payment of the principal of or interest on any Notes.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes, this Indenture or the Security Documents.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative to the extent permitted by
law.
Each Holder, by accepting a Note, acknowledges that the exercise of
remedies by the Collateral Agent with respect to the Collateral is subject to
the terms and conditions of the Security Documents and the proceeds received
upon realization of the Collateral shall be applied by the Collateral Agent in
accordance with Section 6.10 hereof.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 2.09, 6.07 and 9.02, the Holders of a majority
in principal amount of the outstanding Notes by notice to the Trustee may waive
an existing Default or Event of Default and its consequences, except a Default
in the payment of principal (other than principal due by reason of acceleration)
of or interest on any Note as specified in clauses (1) and (2) of Section 6.01.
When a Default or Event of Default is waived, it is cured and ceases.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to Section 2.09, the Holders of a majority in principal
amount of the outstanding Notes may direct the time,
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method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on it, including, without
limitation, any remedies provided for in Section 6.03. Subject to Section 7.01,
however, the Trustee may refuse to follow any direction that the Trustee
reasonably believes conflicts with any law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of another Holder, or that
may involve the Trustee in personal liability; PROVIDED that the Trustee may
take any other action deemed proper by the Trustee which is not inconsistent
with such direction; and PROVIDED further that this provision shall not affect
the rights of the Trustee set forth in Section 7.01(d).
SECTION 6.06. LIMITATION ON SUITS.
A Holder, other than a state of the United States of America or a
political subdivision thereof, may not pursue any remedy with respect to this
Indenture or the Notes unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) Holders of at least 25% in principal amount of the outstanding
Notes make a written request to the Trustee to pursue the remedy;
(3) such Holders offer to the Trustee indemnity in its sole
discretion satisfactory to the Trustee against any loss, liability or
expense to be incurred in compliance with such request, PROVIDED, that
this Section 6.06(3) shall not apply to a Holder that is a State of the
United States of America or a political subdivision thereof;
(4) the Trustee does not comply with the request within 45 days
after receipt of the request and the offer of satisfactory indemnity; and
(5) during such 45-day period the Holders of a majority in principal
amount of the outstanding Notes do not give the Trustee a direction which,
in the opinion of the Trustee, is inconsistent with the request.
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A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Note, on or
after the respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company, GDC, any Guarantor, if any, or any other obligor on the Notes for the
whole amount of principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest at the rate set forth in
Section 4.01 and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents, consultants and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any other
obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders,
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to pay to the Trustee any amount due to it for the reasonable compensation,
expenses, taxes, disbursements and advances of the Trustee, its agents,
consultants and counsel, and any other amounts due the Trustee under Section
7.07. The Company's payment obligations under this Section 6.09 shall be secured
in accordance with the provisions of Section 7.07 hereunder. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money in the following order:
First: to the Trustee and the Collateral Agent for amounts
due under Section 7.07 and for amounts due under the Security
Documents;
Second: if the Holders are forced to proceed against the
Company directly without the Trustee, to Holders for their
collection costs;
Third: to Holders of 2002 Notes until all 2002 Notes are
repaid for amounts due and unpaid on 2002 Notes for principal and
interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on 2002 Notes for principal
and interest, respectively;
Fourth: to Holders of 2005 Notes until all 2005 Notes are
repaid for amounts due and unpaid on 2005 Notes for principal and
interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on 2005 Notes for principal
and interest, respectively; and
Fifth: to the Company, the Guarantors, if any, or any other
obligor on the Notes, as their interests may appear, or as a court
of competent jurisdiction may direct.
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The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
Such costs shall not apply to, and such costs shall not be assessed in
connection with, a suit by the Trustee, a suit by a Holder pursuant to Section
6.07, or a suit by a Holder or Holders of more than 10% in principal amount of
the outstanding Notes.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
thereof as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed
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therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee
shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not herein expressly provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
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(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, note or other paper or document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificates, Opinions of
Counsel or both, which shall conform to Sections 12.04 and 12.05. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificates or Opinions of
Counsel.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or indirectly or by or
through agents or attorneys and the Trustee shall not be responsible for
the misconduct or negligence of any agent or attorney appointed with due
care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled, upon reasonable
notice to the Company, to examine the books, records, and premises of the
Company, personally or by agent or attorney and to consult with the
officers and representatives of the Company, including the Company's
accountants and attorneys.
(f) The Collateral Agent may (but shall not be obligated to) without
the consent of the Holders, give any
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waiver or approval required under the Security Documents or by the terms
hereof with respect to the Collateral, but shall not without the consent
of the Holders of not less than a majority in aggregate principal amount
of the Notes at the time outstanding (i) give any consent, waiver or
approval or (ii) agree to any amendment or modification of the Security
Documents, in each case, that shall have a material adverse effect on the
interests of any Holder. The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Indenture or the
Security Documents at the request, order or direction of any of the
Holders pursuant to the provisions of this Indenture, unless such Holders
shall have offered to the Trustee security or indemnity satisfactory to
the Trustee in its sole discretion against the costs, expenses and
liabilities which may be incurred by it in compliance with such request,
order or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The recitals contained herein and in the Notes shall be taken as
statements of the Company and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representation as to the validity or adequacy
of this Indenture, the Notes or the Security Documents, and it shall not be
accountable for the Company's use of the proceeds from the Notes, and it shall
not be responsible for any statement of the Company in this Indenture or the
Notes other than the Trustee's certificate of authentication. The Trustee shall
not be responsible for and makes no representation as to the value or condition
of the Collateral or any part thereof, or as to the title of the Company or any
Guarantor thereto, or as to the security afforded thereby or hereby, or as to
the validity or
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genuineness of any Collateral pledged and deposited with the Collateral Agent.
The Trustee makes no representation with respect to the validity or perfection,
if any, of Liens granted under this Indenture or the Security Documents.
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, or interest on, any Note, including an accelerated
payment and the failure to make payment on the Change of Control Date pursuant
to a Change of Control Offer or on the Proceeds Purchase Date pursuant to a Net
Proceeds Offer and, except in the case of a failure to comply with Article Five
hereof, the Trustee may withhold the notice if and so long as its Board of
Directors, the executive committee of its Board of Directors or a committee of
its directors and/or Trust Officers in good faith determines that withholding
the notice is in the interest of the Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each December 15, the Trustee shall, to the
extent that any of the events described in TIA ss. 313(a) occurred within the
previous twelve months, but not otherwise, mail to each Holder a brief report
dated as of such date that complies with TIA ss. 313(a). The Trustee also shall
comply with TIA ss.ss. 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any, on
which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes become
listed on any stock exchange and the Trustee shall comply with TIA ss. 313(d).
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of
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a trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable fees and expenses, including reasonable out-of-pocket
expenses incurred or made by it in connection with the performance of its duties
under this Indenture. Such expenses shall include the reasonable fees and
expenses of the Trustee's agents, consultants and counsel.
The Company shall indemnify the Trustee and its agents, employees,
stockholders and directors and officers for, and hold them harmless against, any
loss, liability or expense incurred by them except for such actions to the
extent caused by any negligence, bad faith or willful misconduct on their part,
arising out of or in connection with the administration of this trust and its
duties under this Indenture and the Security Documents including the reasonable
costs and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their rights, powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. At the Trustee's
sole discretion, the Company shall defend the claim and the Trustee shall
cooperate and may participate in the defense; PROVIDED that any settlement of a
claim shall be approved in writing by the Trustee. Alternatively, the Trustee
may at its option have separate counsel of its own choosing and the Company
shall pay the reasonable fees and expenses of such counsel; PROVIDED that the
Company will not be required to pay such fees and expenses if it assumes the
Trustee's defense and there is no conflict of interest between the Company and
the Trustee in connection with such defense as reasonably determined by the
Trustee. The Company need not pay for any settlement made without their written
consent. The Company need not reimburse any expense or indemnify against any
loss or liability to the extent incurred by the Trustee through its negligence,
bad faith or willful misconduct.
To secure the Company' payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes. The Trustee's
right to receive payment of any amounts due under this Section 7.07 shall not be
subordinate to any other liability or indebtedness of the Company (even though
the Notes may be subordinate to such other liability or indebtedness).
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When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(6) or (7) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law; PROVIDED, HOWEVER, that this shall not
affect the Trustee's rights as set forth in the preceding paragraph or Section
6.10.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.08.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee by
so notifying the Company and the Trustee and may appoint a successor Trustee.
The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, pow-
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ers and duties of the Trustee under this Indenture. A successor Trustee shall
mail notice of its succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee in connection with the rights and duties
hereunder prior to such replacement.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; PROVIDED that such
corporation shall be otherwise qualified and eligible under this Article Seven.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss. 310(a)(1), (2) and (5). The Trustee (or, in the case
of a corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least $100
million as set forth in its most recent published annual report of condition. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA ss. 310(a)(2). The Trustee shall comply with TIA ss.
310(B); PROVided, however, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures
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under which other securities, or certificates of interest or participation in
other securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA ss. 310(b)(1) are met. The provisions of TIA ss. 310
shall apply to the Company, as obligor of the Notes.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee, in its capacity as Trustee hereunder, and the
Collateral Agent, in its capacity as Collateral Agent under the Security
Documents, each shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein. The
provisions of TIA ss. 311 shall apply to the Company, as obligor on the Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. TERMINATION OF THE COMPANY'S OBLIGATIONS.
The Company may terminate its obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph of
this Section 8.01, if all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes which have been replaced or paid or Notes
for whose payment U.S. Legal Tender has theretofore been deposited with the
Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid to the Company, as provided in Section 8.05) have
been delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, a notice of
redemption to each Holder of the redemption of all of the Notes shall be
given within three months under arrangements satisfactory to the Trustee
for the giving of such notice or (ii) all Notes have otherwise become due
and payable hereunder;
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(b) the Company shall have irrevocably deposited or caused to
be deposited with the Trustee or a trustee satisfactory to the Trustee,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, U.S. Legal Tender in such amount
as is sufficient without consideration of reinvestment of such interest,
U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their terms,
will provide, not later than one day before the due date of any payment on
the Notes, U.S. Legal Tender, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay principal of, premium, if any, and
interest on the outstanding Notes, on the dates on which such payments are
due and payable in accordance with the terms of this Indenture, to
maturity or redemption; PROVIDED that the Trustee shall have been
irrevocably instructed to apply such U.S. Legal Tender to the payment of
said principal, premium, if any, and interest with respect to the Notes;
(c) no Default or Event of Default with respect to this
Indenture or the Notes shall have occurred and be continuing on the date
of such deposit or shall occur as a result of such deposit and such
deposit will not result in a breach or violation of, or constitute a
default under, any other instrument to which the Company is a party or by
which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent providing for or relating to the termination of the
Issuers' obligations under the Notes and this Indenture have been complied
with. Such Opinion of Counsel shall also state that such satisfaction and
discharge does not result in a default under any agreement or instrument
then known to such counsel that binds or affects the Company.
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Notwithstanding the foregoing paragraph, the Company's obligations
in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall
survive until the Notes are no longer outstanding pursuant to the last paragraph
of Section 2.08. After the Notes are no longer outstanding, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations specified
above.
SECTION 8.02. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) The Company may, at its option by Board Resolution of its Board
of Directors, at any time, elect to have either paragraph (b) or (c) below be
applied to all outstanding Notes upon compliance with the conditions set forth
in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.04 hereof and the other Sections of this Indenture
referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions, which shall
survive until otherwise terminated or discharged hereunder: (i) the rights of
Holders of outstanding Notes to receive solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of and interest on such Notes when such payments are
due, (ii) the Company's obligations with respect to such Notes under Article Two
and Section 4.02 hereof, (iii) the rights, powers, trusts, duties and immunities
of the Trustee hereunder
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and the Company' obligations in connection therewith and (iv) this Article
Eight. Subject to compliance with this Article Eight, the Company may exercise
its option under this paragraph (b) notwithstanding the prior exercise of their
option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03 hereof, be released
from their obligations under the covenants contained in Sections 4.03 through
4.27 and Article Five hereof with respect to the outstanding Notes on and after
the date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event or Default under Section
6.01(3) hereof, but, except as specified above, the remainder of this Indenture
and such Notes shall be unaffected thereby. In addition, upon the Company's
exercise under paragraph (a) hereof of the option applicable to this paragraph
(c), subject to the satisfaction of the conditions set forth in Section 8.03
hereof, Sections 6.01(3), 6.01(4), 6.01(5), 6.01(6) (solely with respect to
Persons other than the Company) or 6.01(7) (solely with respect to Persons other
than the Company) shall not constitute Defaults or Events of Default.
SECTION 8.03. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02(b) or 8.02(c) hereof to the outstanding Notes:
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In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, U.S. Legal Tender or U.S. Government
Obligations which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms, will provide, not later
than one day before the due date of any payment on the Notes, U.S. Legal
Tender, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be, of such principal or installment of
principal of or interest on the Notes; PROVIDED that the Trustee shall
have received an irrevocable written order from the Company instructing
the Trustee to apply such U.S. Legal Tender or the proceeds of such U.S.
Government Obligations to said payments with respect to the Notes;
(b) in the case of an election under Section 8.02(b) hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that (A)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this Indenture,
there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel
shall confirm that, the Holders of the Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.02(c) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the
Holders of the Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the
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same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default or event which with notice or
lapse of time or both would become a Default or an Event of Default with
respect to the Notes shall have occurred and be continuing (x) on the date
of such deposit (other than a Default or Event of Default resulting from
the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or (y) insofar as Sections 6.01(6) and
6.01(7) hereof are concerned, at any time in the period ending on the 91st
day after the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of or constitute a default under this Indenture or
any other material agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company
or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with (other than the condition in clause
(d)(y)); and
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel substantially to the effect that, assuming no intervening
bankruptcy or insolvency of the Company between the date of deposit and
the 91st day following the deposit and that no Holder is an insider of the
Company, after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable Bankruptcy Law.
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SECTION 8.04. APPLICATION OF TRUST MONEY.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Article Eight, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of principal of and
interest on the Notes. The Trustee shall be under no obligation to invest said
U.S. Legal Tender or U.S. Government Obligations except as it may agree with the
Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.03 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any U.S. Legal Tender or U. S. Government Obligations held by it as
provided in Section 8.03 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof that would
then be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
SECTION 8.05. REPAYMENT TO THE COMPANY.
Subject to Article Eight, the Trustee and the Paying Agent shall
promptly pay to the Company, or if deposited with the Trustee by any Guarantor,
to such Guarantor, upon request any excess U.S. Legal Tender or U.S. Government
Obligations held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall pay
to the Company, or if deposited with the Trustee by any Guarantor, to such
Guarantor, upon request any money held by them for the payment of principal or
interest that remains unclaimed for two years; PROVIDED that the Trustee or such
Paying Agent, before being required to make any payment, may at the expense of
the Company cause to be published once in a newspaper of general circulation in
The City of New York or mail to each Holder entitled to such money notice that
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such money remains unclaimed and that after a date specified therein which shall
be at least 30 days from the date of such publication or mailing any unclaimed
balance of such money then remaining will be repaid to the Company or such
Guarantor. After payment to the Company or such Guarantor, Holders entitled to
such money must look to the Company for payment as general creditors unless an
applicable law designates another Person.
SECTION 8.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Article Eight by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Article
Eight until such time as the Trustee or Paying Agent is permitted to apply all
such U.S. Legal Tender or U.S. Government Obligations in accordance with Article
Eight; PROVIDED that if the Company has made any payment of interest on or
principal of any Notes because of the reinstatement of their obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the U.S. Legal Tender or U.S. Government Obligations
held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Guarantors, when authorized by a Board
Resolution, and the Trustee, together, may amend or supplement this Indenture or
the Notes without notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; PROVIDED that
such amendment or supplement does not, in the opinion of the Trustee,
adversely affect the rights of any Holder in any material respect;
(2) to comply with Article Five;
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(3) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(4) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(5) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder;
(6) to make any other change that does not, in the opinion of the
Trustee, adversely affect in any material respect the rights of any
Holders hereunder or under the Security Documents; or
(7) to reflect a Guarantor ceasing to be liable on the Guarantees
because it is no longer a Subsidiary of the Company or to reflect
additional Guarantors;
PROVIDED that Company has delivered to the Trustee an Opinion of Counsel stating
that such amendment or supplement complies with the provisions of this Section
9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
(a) Subject to Section 6.07, the Company and the Guarantors, when
authorized by a Board Resolution, and the Trustee, together, with the written
consent of the Holder or Holders of at least a majority in aggregate principal
amount of the outstanding Notes, may amend or supplement this Indenture, the
Notes, any Guarantee or any Security Document, without notice to any other
Holders. Subject to Section 6.07, the Holder or Holders of a majority in
aggregate principal amount of the outstanding Notes may waive compliance by the
Company or the Guarantors with any provision of this Indenture, the Notes, the
Guarantees or the Security Documents without notice to any other Holder.
(b) No amendment, supplement or waiver, including a waiver pursuant
to Section 6.04, shall, without the consent of each Holder of each Note affected
thereby:
(1) reduce the amount of Notes whose Holders must consent to an
amendment;
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(2) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes;
(3) reduce the principal of or change or have the effect of changing
the fixed maturity of any Notes, or change the date on which any Notes may
be subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor;
(4) make any Notes payable in money other than that stated in the
Notes;
(5) make any change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Note or Guarantee on or after the due date thereof or to bring suit
to enforce such payment, or permitting Holders of a majority in principal
amount of Notes to waive Defaults or Events of Default, other than ones
with respect to the payment of principal of or interest on the Notes;
(6) amend, modify, change or waive any provision of this Section
9.02;
(7) amend, modify or change in any material respect the obligation
of the Company to make or consummate a Change of Control Offer in the
event of a Change of Control or make and consummate a Net Proceeds Offer
in respect of any Asset Sale that has been consummated or modify any of
the provisions or definitions with respect thereto after a Change of
Control has occurred or the subject Asset Sale has been consummated;
(8) release any Guarantor from any of its obligations under its
Guarantee or this Indenture otherwise than in accordance with the terms
hereof;
(9) modify Article Eleven or the definitions used in Article Eleven
to adversely affect the Holders of the Notes in any material respect; or
(10) after the original issuance date of the Notes, amend, modify,
change or waive the priority in right of payment of the Holders of the
2002 Notes set forth in Sections 3.02, 4.15, 4.16 and 6.10.
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It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. RELEASES OF COLLATERAL.
(a) None of the Collateral under any Security Document or this
Indenture may be released without the consent of Holders of 662/3% of the
aggregate principal amount of Notes then outstanding, except as set forth in
Section 9.03(b).
(b) Collateral may be released or otherwise disposed without the
consent of the Holders if such releases or dispositions are permitted under the
terms of this Indenture.
(c) If Collateral or proceeds from the sale of Collateral is paid or
delivered to Holders of 2005 Notes in contravention of the priority provisions
of Sections 3.02, 4.15, 4.16 or 6.10, such Holders will be deemed to hold such
Collateral or proceeds in trust for the benefit of Holders of 2002 Notes.
SECTION 9.04. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall, except as may otherwise be provided in any order of the SEC pursuant to
TIA ss. 304(d), comply with the TIA as then in effect.
SECTION 9.05. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subse-
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quent Holder may revoke the consent as to such Holder's Note or portion of such
Note by notice to the Trustee or Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (10) of Section 9.02(b), in which case, the amendment, supplement or
waiver shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note.
SECTION 9.06. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment, supplement or waiver changes the terms of a Note,
the Trustee may require the Holder of such Note to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Note about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Any such notation
or exchange shall be made at the sole cost and expense of the Company.
SECTION 9.07. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized or permitted pursuant to this Article Nine; PROVIDED that the Trustee
may, but shall not be obligated
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to, execute any such amendment, supplement or waiver which affects the Trustee's
own rights, duties or immunities under this Indenture. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel and an Officers' Certificate each stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Nine is
authorized or permitted by this Indenture. Such Opinion of Counsel shall not be
an expense of the Trustee.
ARTICLE TEN
[INTENTIONALLY OMITTED]
ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. UNCONDITIONAL GUARANTEE.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns that: (i) the principal of and
interest on the Notes will be promptly paid in full when due, subject to any
applicable grace period, whether at maturity, by acceleration or otherwise and
interest on the overdue principal, if any, and interest on any interest, to the
extent lawful, of the Notes and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in full,
all in accordance with the terms hereof and thereof; and (ii) in case of any
extension of time of payment or renewal of any Notes or of any such other
obligations, the same will be promptly paid in full when due in accordance with
the terms of the extension or renewal, subject to any applicable grace period,
whether at stated maturity, by acceleration or otherwise, subject, however, in
the case of clauses (i) and (ii) above, to the limitations set forth in Section
11.05. Each Guarantor hereby agrees that its Obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof,
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the recovery of any judgment against the Company, any action to enforce the same
or any other circumstances which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenants
that this Guarantee will not be discharged except by complete performance of the
obligations contained in the Notes, this Indenture and in this Guarantee. If any
Noteholder or the Trustee is required by any court or otherwise to return to the
Company, any Guarantor, or any custodian, trustee, liquidator or other similar
official acting in relation to the Company or any Guarantor, any amount paid by
the Company or any Guarantor to the Trustee or such Noteholder, this Guarantee,
to the extent theretofore discharged, shall be reinstated in full force and
effect as to such amount only. Each Guarantor further agrees that, as between
each Guarantor, on the one hand, and the Holders and the Trustee, on the other
hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated
as provided in Article Six for the purposes of this Guarantee, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the Obligations guaranteed hereby, and (y) in the event of any
acceleration of such obligations as provided in Article Six, such Obligations
(whether or not due and payable) shall forthwith become due and payable by each
Guarantor for the purpose of this Guarantee.
SECTION 11.02. [Intentionally Omitted].
SECTION 11.03. SEVERABILITY.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.04. [Intentionally Omitted].
SECTION 11.05. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such
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parties that the guarantee by such Guarantor pursuant to its Guarantee not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar Federal or state law. To effectuate the foregoing intention, the
Holders and such Guarantor hereby irrevocably agree that the Obligations of such
Guarantor under its Guarantee shall be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to Section 11.07, result in the
Obligations of such Guarantor under its Guarantee not constituting such
fraudulent transfer or conveyance.
SECTION 11.06. GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) Nothing contained in this Indenture or in any of the Notes shall
prevent any consolidation or merger of a Guarantor with or into the Company or
another Guarantor or shall prevent any sale or conveyance of the assets of a
Guarantor to the Company or another Guarantor. Upon any such consolidation,
merger, sale or conveyance, the Guarantee given by such Guarantor shall no
longer have any force or effect.
(b) Except as set forth in Article Four, nothing contained in this
Indenture or in any of the Notes shall prevent any consolidation or merger of a
Guarantor with or into a corporation or corporations other than the Company or
another Guarantor (whether or not affiliated with the Guarantor), or successive
consolidations or mergers in which a Guarantor or its successor or successors
shall be a party or parties, or shall prevent any sale or conveyance of all or
substantially all of the assets of a Guarantor to a corporation other than the
Company or another Guarantor (whether or not affiliated with the Guarantor);
PROVIDED, HOWEVER, that, subject to Sections 11.06(a), either (x) the
transaction is an Asset Sale consummated in accordance with Section 4.16, or (y)
(i) immediately after such transaction, and giving effect thereto, no Default or
Event of Default shall have occurred as a result of such transaction and be
continuing, and (ii) each Guarantor hereby covenants and agrees that, upon any
such consolidation, merger, sale or conveyance, the Guarantee of such Guarantor
set
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forth in this Article Eleven, and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture to be
performed by such Guarantor, shall be expressly assumed (in the event that the
Guarantor is not the surviving corporation in such transaction), by supplemental
indenture satisfactory in form to the Trustee, executed and delivered to the
Trustee, together with an Officers' Certificate of the Company and an Opinion of
Counsel stating that the transaction and such supplemental indenture comply with
this Indenture, by the corporation formed by such consolidation, or into which
the Guarantor shall have merged, or by the corporation that shall have acquired
such property. In the case of any such consolidation, merger, sale or conveyance
that is not an Asset Sale consummated in accordance with Section 4.16, upon the
assumption by the successor corporation, by supplemental indenture executed and
delivered to the Trustee and satisfactory in form to the Trustee of the due and
punctual performance of all of the covenants and conditions of this Indenture to
be performed by the Guarantor, such successor corporation shall succeed to and
be substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor.
SECTION 11.07. CONTRIBUTION.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, INTER SE, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under this
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a PRO RATA amount based on the Consolidated Net Worth of
each Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Notes or any other Guarantor's Obligations with
respect to this Guarantee.
SECTION 11.08. WAIVER OF SUBROGATION.
Each Guarantor hereby irrevocably waives any claim or other rights
which it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Guarantor's Obligations
under this Guarantee and this Indenture, including, without limitation, any
right of subrogation, reimbursement, exoneration, indemnification, and any right
to participate in any claim or remedy of
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any Holder of Notes against the Company, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Guarantor in violation of the preceding sentence and the
Notes shall not have been paid in full, such amount shall have been deemed to
have been paid to such Guarantor for the benefit of, and held in trust for the
benefit of, the Holders of the Notes, and shall forthwith be paid to the Trustee
for the benefit of such Holders to be credited and applied upon the Notes,
whether matured or unmatured, in accordance with the terms of this Indenture.
Each Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Indenture and that the
waiver set forth in this Section 11.08 is knowingly made in contemplation of
such benefits.
SECTION 11.09. EXECUTION OF GUARANTEE.
To evidence their guarantee to the Noteholders specified in Section
11.01, the Guarantors hereby agree to execute the Guarantee in substantially the
form of EXHIBIT A recited to be endorsed on each Note ordered to be
authenticated and delivered by the Trustee. Each Guarantor hereby agrees that
its Guarantee set forth in Section 11.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Guarantee. Each such Guarantee shall be signed on behalf of each Guarantor by
one Officer (each of whom shall, in each case, have been duly authorized by all
requisite corporate actions) prior to the authentication of the Note on which it
is endorsed, and the delivery of such Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of such
Guarantee on behalf of such Guarantor. Such signatures upon the Guarantee may be
by manual or facsimile signature of such officers and may be imprinted or
otherwise reproduced on the Guarantee, and in case any such officer who shall
have signed the Guarantee shall cease to be such officer before the Note on
which such Guarantee is endorsed shall have been authenticated and delivered by
the Trustee or disposed of by the Company, such Note nevertheless may be
authenticated and delivered or disposed of as though the person who signed the
Guarantee had not ceased to be such officer of the Guarantor.
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ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA CONTROLS.
Except as may otherwise be provided in any order of the SEC pursuant
to TIA ss. 304(d), if any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
SECTION 12.02. NOTICES.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by commercial courier service, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
if to the Company or any Guarantor:
Geokinetics Inc.
8401 Westheimer
Suite 150
Houston, Texas 77063
Facsimile No.: (713) 850-7330
Attn: Chairman of the Board
if to the Trustee:
[ ]
Facsimile No.: [ ]
Attn: Corporate Trust Department
The Company, the Guarantors, if any, and the Trustee by written
notice to each other such Person may designate additional or different addresses
for notices to such Person. Any notice or communication to the Company, the
Guarantors, if any, or the Trustee shall be deemed to have been given or made as
of the date so delivered if personally delivered; when receipt is confirmed if
delivered by commercial courier service; when answered back, if telexed; when
receipt is acknowledged, if
<PAGE>
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faxed; and five (5) calendar days after mailing if sent by registered or
certified mail, postage prepaid (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to
him by first class mail or other equivalent means at his address as it appears
on the registration books of the Registrar and shall be sufficiently given to
him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 12.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, if any, the Trustee, the Registrar and any other Person
shall have the protection of TIA ss. 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate of the Company, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the signers,
all conditions precedent to be performed by the Company, if any, provided
for in this Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action have
been complied with.
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SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition and the definitions relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is reasonably necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
SECTION 12.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 12.07. LEGAL HOLIDAYS.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
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SECTION 12.08. GOVERNING LAW.
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF DELAWARE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS. THE COMPANY AND EACH GUARANTOR AGREES TO SUBMIT
TO THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE. THE COMPANY AND EACH
GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO IT AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 12.02.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any of their Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 12.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorporator, as such,
of the Company, the Guarantors, if any, or the Trustee shall not have any
liability for any obligations of the Company under the Notes or this Indenture
or for any claim based on, in respect of or by reason of such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Notes.
SECTION 12.11. SUCCESSORS.
All agreements of the Company and the Guarantors, if any, in this
Indenture, the Notes and the Guarantees, if any, shall bind their successors.
All agreements of the Trustee in this Indenture shall bind its successors.
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SECTION 12.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 12.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or in
the Notes or the Guarantees, if any, shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
<PAGE>
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
Company:
GEOKINETICS INC.
By:____________________
Name:
Title:
Guarantors:
GEOKINETICS PRODUCTION
CO., INC.
By:___________________
Name:
Title:
QUANTUM GEOPHYSICAL, INC.
By:___________________
Name:
Title:
GEOSCIENCE SOFTWARE
SOLUTIONS, INC.
By:___________________
Name:
Title:
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S-2
SIGNATURE GEOPHYSICAL SERVICES,
INC.
By:___________________
Name:
Title:
RELIABLE EXPLORATION,
INCORPORATED
By:___________________
Name:
Title:
GEOPHYSICAL DEVELOPMENT
CORPORATION
By:____________________
Name:
Title:
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Trustee:
[ ],
as Trustee
By:____________________
Name:
Title:
<PAGE>
SCHEDULE I
[Existing Debt]
<PAGE>
SCHEDULE II
[Permitted Transactions]
<PAGE>
SCHEDULE III
[Budget]
<PAGE>
CUSIP No.:
GEOKINETICS INC.
GEOPHYSICAL DEVELOPMENT CORPORATION
13 1/2% SENIOR SECURED NOTE DUE 2005
No. $
GEOKINETICS INC., a Delaware corporation (the "Company," which term
includes any successor entity), for value received promises to pay to or
registered assigns, the principal sum of Dollars ($ )
on September 15, 2005.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Reference is made to the further provisions of this Note contained
on the reverse hereof or elsewhere herein, which will for all purposes have the
same effect as if set forth at this place.
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IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
GEOKINETICS INC.
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
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<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the 13 1/2% Senior Secured Notes due 2005 referred to
in the within-mentioned Indenture.
[ ],
as Trustee
Dated: [ ] By:_________________________________
Authorized Signatory
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<PAGE>
(REVERSE OF SECURITY)
13 1/2% SENIOR SECURED NOTE DUE 2005
1. INCORPORATION BY REFERENCE OF PROVISIONS OF THE Indenture.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings set forth in the Indenture referred to below.
2. INTEREST. GEOKINETICS INC., a Delaware corporation (the
"Company," which term includes any successor entity), promises to pay interest
on the principal amount of this 13 1/2% Senior Secured Note due 2005 (i) on each
Interest Payment Date through and including September 15, 2000, at the option of
the Company, in the form of Cash Interest or PIK Interest and (ii) on each
Interest Payment Date thereafter, in the form of Cash Interest. Interest on the
Notes will accrue from the most recent date on which interest has been paid or,
if no interest has been paid, from October 1, 1999. The Company will pay
interest semi-annually in arrears on each Interest Payment Date, commencing
March 15, 2000. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes plus 2% per annum and on overdue installments of interest (without regard
to any applicable grace periods) to the extent lawful.
3. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are canceled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and Cash
Interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and Cash Interest by its check payable (in
immediately available funds) in U.S. Legal Tender or, at the request of a
Holder, by wire transfer in immediately available funds to an account specified
in writing by a Holder. The Company may deliver any such interest payment to the
Holder's registered address or such other address or account as the Holder may
designate in writing.
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4. PAYING AGENT AND REGISTRAR. Initially, [ ], a
[ ] (the "Trustee"), will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar without notice to
the Holders.
5. INDENTURE. The Company issued the Notes and up to $6,837,338
aggregate principal amount of 13 1/2% Senior Secured Notes due 2002 under an
Indenture, dated as of [ ] (the "Indenture"), between the Company, the
Guarantors and the Trustee. This Note is one of a duly authorized issue of Notes
of the Company designated as the 13 1/2% Senior Secured Notes due 2005 of the
Company. The Notes are limited in aggregate principal amount to $51,687,993;
PROVIDED that (a) the aggregate principal amount of Notes issued on the Issue
Date shall be limited to $45,358,000 and (b) the aggregate principal amount of
additional Notes issued as PIK Interest shall be limited to $6,329,993. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the TIA as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Notes are subject to all
such terms, and Holders of Notes are referred to the Indenture and said Act for
a statement of them. The Notes are secured obligations of the Company and are
entitled to the benefit of the Security Documents and the Collateral.
6. REDEMPTION.
(a) OPTIONAL REDEMPTION. The Notes will be redeemable, subject to
Section 3.02 of the Indenture, at the Company's option, in whole at any time or
in part from time to time after September 15, 2001, at the following redemption
prices (expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period commencing on September 15 of the year set forth
below, plus, in each case, accrued interest thereon to the date of redemption:
YEAR PERCENTAGE
---- ----------
2001................................... 106.750%
2002................................... 105.063%
2003................................... 103.375%
2004................................... 101.680%
2005 and thereafter.................... 100.000%
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any time,
or from time to time prior to September 15, 2001, the Company may, at its
option, use the net cash proceeds
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of one or more Public Equity Offerings (as defined in the Indenture) to redeem
up to 100% but not less than 50% of the aggregate principal amount of Notes
originally issued at a redemption price equal to 113.5% of the principal amount
thereof, plus, in each case, accrued interest to the date of redemption.
In order to effect the foregoing redemption with the proceeds of any
Public Equity Offering, the Company shall make such redemption not more than 60
days after the consummation of any such Public Equity Offering.
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if moneys for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such Redemption Date, then, unless the Company defaults
in the payment of such Redemption Price plus accrued and unpaid interest, if
any, the Notes called for redemption will cease to bear interest from and after
such Redemption Date and the only right of the Holders of such Notes will be to
receive payment of the Redemption Price plus accrued and unpaid interest, if
any.
8. OFFERS TO PURCHASE. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and prior
to the occurrence of a Change of Control (as defined in the Indenture), and
subject to further limitations contained therein, the Company will make an offer
to purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture; PROVIDED that no Notes may be so purchased until all
2002 Notes so tendered have been purchased.
9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in registered
form, without coupons. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
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10. PERSONS DEEMED OWNERS. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
11. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
12. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions set
forth in Section 9.02(b) of the Indenture, the Indenture or the Notes may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Notes and 2002 Notes
(collectively, the "Notes Issue") then outstanding, and any existing Default or
Event of Default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in aggregate principal amount of
the Notes Issue then outstanding. Without notice to or consent of any Holder,
the Company, and the Guarantors, when authorized by a Board Resolution, may
amend or supplement the Indenture or the Notes to cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture, comply with
any requirements of the SEC in order to effect or maintain the qualification of
this Indenture under the TIA, make any change that would provide any additional
benefit or rights to the Holders, make any other change that does not adversely
affect in any material respect the rights of any Holder of a Note or add or
remove Guarantors as provided in the Indenture.
13. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, enter into transactions with Affiliates, create dividend
or other payment restrictions affecting Subsidiaries, merge or consolidate with
any other Person, sell, assign, transfer, lease, convey, otherwise dispose of
all or substantially all of its assets or adopt a plan of liquidation, or
continue its Seismic Operations. The Indenture also requires the Company to
maintain certain levels of cash or Cash Equivalents. Such limitations are
subject to a number of important
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<PAGE>
qualifications and exceptions. The Company must annually report on compliance
with such limitations.
14. SUCCESSORS. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
15. DEFAULTS AND REMEDIES. Events of Default shall be as set forth
in the Indenture. If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Notes Issue then
outstanding may declare all the Notes to be due and payable in the manner, at
the time and with the effect provided in the Indenture, except that in the case
of an Event of Default arising from certain events of bankruptcy or insolvency,
all outstanding Notes become due and payable immediately without further action
or notice. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes Issue then outstanding to
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default or Event of
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in their interest.
16. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or its
respective Affiliates as if it were not the Trustee.
17. NO RECOURSE AGAINST OTHERS. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
18. GOVERNING LAW. THE LAWS OF THE STATE OF DELAWARE SHALL
GOVERN THIS NOTE AND THE INDENTURE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
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19. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
20. PROVISIONS OF INDENTURE, THE GENERAL SECURITY AGREEMENT AND THE
COLLATERAL AGENCY AGREEMENT. Each Holder, by accepting a Note, agrees to be
bound by all of the terms and provisions of each of the Indenture, the General
Security Agreement and the Collateral Agency Agreement, as the same may be
amended from time to time.
21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
22. AUTHENTICATION. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
23. PRIORITIES UPON ACCELERATION AND LIQUIDATION. Pursuant to
Section 6.10 of the Indenture, holders of 2002 Notes have priority in right of
payment to Holders of Notes upon acceleration of principal and accrued interest
on the Notes and upon liquidation of the Company so long as any 2002 Notes are
outstanding.
24. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of
this Note in larger type. Requests may be made to: Geokinetics Inc.,
8401 Westheimer, Suite 150, Houston, Texas 77063, Attn: President.
A-9
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint_____________________________________ , agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:.________________ Signed: _________________________
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee: ____________________________
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) October 1, 2001, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
A-10
<PAGE>
[CHECK ONE]
(1) __ the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Company a signed letter containing certain
representations and agreements (the form of which is attached
below); or
(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act; or
(5) __ pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or
(6) __ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Company will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; PROVIDED that if box (3), (4), (5) or (6) is checked,
the Company may require, prior to registering any such transfer of the Notes, in
its sole discretion, such legal opinions, certifications (including an
investment letter in the case of box (3) or (4)) and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Company shall not be obligated to
register this Note in the name of any person other than the Holder hereof unless
and until the conditions to any such transfer of registration set forth herein
shall have been satisfied.
Date: _____________________ Signed: ___________________
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee: ______________________________________
A-11
<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: _____________________ _____________________________
NOTICE: To be executed by an
executed officer
A-12
<PAGE>
[FORM OF LETTER TO BE COMPLETED
BY PURCHASER IF (3) ABOVE IS CHECKED]
Ladies and Gentlemen:
1. The undersigned understands that any subsequent transfer of the
Notes is subject to certain restrictions and conditions set forth in the Notes
and in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Notes except in compliance with, such
restrictions and conditions and the Securities Act.
2. The undersigned understands that the offer and sale of the Notes
have not been registered under the Securities Act, and that the Notes may not be
offered or sold except as permitted in the following sentence. The undersigned
agrees, on its own behalf and on behalf of any accounts for which it is acting
as hereinafter stated, that if it should sell, pledge or otherwise transfer any
Notes it will do so only (1) (w) inside the United States to a person who the
seller reasonably believes is a qualified institutional buyer within the meaning
of Rule 144A under the Securities Act in a transaction meeting the requirements
of Rule 144A, or in accordance with Rule 144 under the Securities Act, or
pursuant to another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel, if the Company so
requests), (x) to the Company, (y) outside the United States to a foreign person
in a transaction meeting the requirements of Rule 904 under the Securities Act
or (z) pursuant to an effective registration statement under the Securities Act
and (2) in each case, in accordance with the applicable securities laws of any
state of the United States or any other applicable jurisdiction, and the
undersigned further agrees to provide to any person purchasing any of the Notes
from us a notice advising such purchaser that resales of the Notes are
restricted as stated herein.
3. The undersigned understands that, on any proposed resale of any
Notes, it may be required to furnish the Company such certification and other
information as the Company may reasonably require to confirm that the proposed
sale complies with the foregoing restrictions. The undersigned further
understands that the Notes purchased by it will bear a legend to the foregoing
effect.
4. The undersigned is an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act) and has
such knowledge and experience in
A-13
<PAGE>
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Notes, and the undersigned and any accounts for
which it is acting are each able to bear the economic risk of our or its
investment, as the case may be.
5. The undersigned is acquiring the Notes purchased by us for our
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which the undersigned exercises sole
investment discretion.
Date:________________________________ _____________________________________
NOTICE: To be executed by an
executed officer
A-14
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$___________________
Dated: __________________ ____________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee: ____________________________________
A-15
<PAGE>
SENIOR SECURED GUARANTEE
Geokinetics Production Co., Inc., Quantum Geophysical, Inc.,
Geoscience Software Solutions, Inc., Signature Geophysical Services, Inc.,
Reliable Exploration, Incorporated and Geophysical Development Corporation (the
"Guarantors") have unconditionally guaranteed on a senior secured basis (such
guarantee by each Guarantor being referred to herein as the "Guarantee") (i) the
due and punctual payment of the principal of and interest on the Notes, whether
at maturity, by acceleration or otherwise and the due and punctual payment of
interest on the overdue principal and interest, if any, on the Notes, to the
extent lawful, all in accordance with the terms set forth in Article Eleven of
the Indenture and (ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of each Guarantor to the Holders and to the Trustee
pursuant to the Guarantee, the Indenture and the Security Documents are
expressly set forth in Article Eleven of the Indenture and the Security
Documents, and reference is hereby made to such Indenture and the Security
Documents for the precise terms of the Guarantee therein made. This Guarantee is
limited under the Indenture and the Security Documents to the extent necessary
not to constitute a fraudulent conveyance.
No past, present or future stockholder, officer, director, employee
or incorporator, as such, of any of the Guarantors shall have any liability
under the Guarantees by reason of such person's status as stockholder, officer,
director, employee or incorporator. Each holder of a Note by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Guarantees.
A-16
<PAGE>
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
GEOKINETICS PRODUCTION
CO., INC.
By:___________________
Name:
Title:
QUANTUM GEOPHYSICAL, INC.
By:___________________
Name:
Title:
GEOSCIENCE SOFTWARE
SOLUTIONS, INC.
By:___________________
Name:
Title:
SIGNATURE GEOPHYSICAL SERVICES,
INC.
By:___________________
Name:
Title:
A-17
<PAGE>
RELIABLE EXPLORATION,
INCORPORATED
By:___________________
Name:
Title:
GEOPHYSICAL DEVELOPMENT
CORPORATION
By:____________________
Name:
Title:
A-18
<PAGE>
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS
SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL
AMOUNT OF THIS SECURITY, (1) THE ISSUE PRICE IS $628.00; (2) THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT IS $372.00; (3) THE ISSUE DATE IS OCTOBER 1, 1999; AND
(4) THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 28.382%.
CUSIP No.:
GEOKINETICS INC.
13 1/2% SENIOR SECURED NOTE DUE 2002
No. $
GEOKINETICS INC., a Delaware corporation (the "Company," which term
includes any successor entity), for value received promises to pay to or
registered assigns, the principal sum of Dollars
($ ) on September 15, 2002.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Reference is made to the further provisions of this Note contained
on the reverse hereof or elsewhere herein, which will for all purposes have the
same effect as if set forth at this place.
B-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
GEOKINETICS INC.
By: _____________________________
Name:
Title:
By: _____________________________
Name:
Title:
B-2
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the 13 1/2% Senior Secured Notes due 2002 referred to
in the within-mentioned Indenture.
[ ],
as Trustee
Dated: [ ] By:_____________________________________
Authorized Signatory
B-3
<PAGE>
(REVERSE OF SECURITY)
13 1/2% SENIOR SECURED NOTE DUE 2002
1. INCORPORATION BY REFERENCE OF PROVISIONS OF THE Indenture.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings set forth in the Indenture referred to below.
2. INTEREST. GEOKINETICS INC., a Delaware corporation (the
"Company," which term includes any successor entity), promises to pay interest
on the principal amount of this 13 1/2% Senior Secured Note due 2002 (i) on each
Interest Payment Date through and including September 15, 2000, at the option of
the Company, in the form of Cash Interest or PIK Interest and (ii) on each
Interest Payment Date thereafter, in the form of Cash Interest; PROVIDED that
any payment of Cash Interest will be subject to Section 4.14 of the Indenture.
Interest on the Notes will accrue from the most recent date on which interest
has been paid or, if no interest has been paid, from October 1, 1999. The
Company will pay interest semi-annually in arrears on each Interest Payment
Date, commencing March 15, 2000. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes plus 2% per annum and on overdue installments of interest (without regard
to any applicable grace periods) to the extent lawful.
3. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are canceled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. All payments of Cash Interest on the Notes
are subject to Section 4.14 of the Indenture. The Company shall pay principal
and Cash Interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and Cash Interest by its check payable
(in immediately available funds) in U.S. Legal Tender or, at the request of a
Holder, by wire transfer in immediately available funds to
B-4
<PAGE>
an account specified in writing by a Holder. The Company may deliver any such
interest payment to the Holder's registered address or such other address or
account as the Holder may designate in writing.
4. PAYING AGENT AND REGISTRAR. Initially, [ ], a
[ ] (the "Trustee"), will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar without notice to
the Holders.
5. INDENTURE. The Company issued the Notes and up to $51,687,993
aggregate principal amount of 13 1/2% Senior Secured Notes due 2005 under an
Indenture, dated as of [ ] (the "Indenture"), between the Company, the
Guarantors and the Trustee. This Note is one of a duly authorized issue of Notes
of the Company designated as the 13 1/2% Senior Secured Notes due 2002 of the
Company. The Notes are limited in aggregate principal amount to $6,837,338;
PROVIDED that (a) the sum of the aggregate principal amount of (x) Notes issued
on the Issue Date and (y) Notes issued pursuant to an additional investment of
in the Notes of up to $1,000,000 made on or prior to the 60th day after the
Issue Date, shall be limited in aggregate principal amount to $6,000,000 and (b)
the aggregate principal amount of additional Notes issued as PIK Interest shall
be limited to $837,338. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the TIA as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and said Act for a statement of them. The Notes are
secured obligations of the Company and are entitled to the benefit of the
Security Documents and the Collateral.
6. REDEMPTION.
(a) OPTIONAL REDEMPTION. The Notes will be redeemable, subject to
Section 3.02 of the Indenture, at the Company' option, in whole at any time or
in part from time to time after September 15, 2001, at redemption price equal to
113.5% of the principal amount thereof plus, in each case, accrued interest to
the date of redemption.
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any time,
or from time to time prior to September 15, 2001, the Company may, at its
option, use the net cash proceeds of one or more Public Equity Offerings (as
defined in the In-
B-5
<PAGE>
denture) to redeem up to 100% but not less than 50% of the aggregate principal
amount of Notes originally issued at a redemption price equal to 113.5% of the
principal amount thereof plus, in each case, accrued interest to the date of
redemption.
In order to effect the foregoing redemption with the proceeds of any
Public Equity Offering, the Company shall make such redemption not more than 60
days after the consummation of any such Public Equity Offering.
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if moneys for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such Redemption Date, then, unless the Company defaults
in the payment of such Redemption Price plus accrued and unpaid interest, if
any, the Notes called for redemption will cease to bear interest from and after
such Redemption Date and the only right of the Holders of such Notes will be to
receive payment of the Redemption Price plus accrued and unpaid interest, if
any.
8. OFFERS TO PURCHASE. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and prior
to the occurrence of a Change of Control (as defined in the Indenture), and
subject to further limitations contained therein, the Company will make an offer
to purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in registered
form, without coupons. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
B-6
<PAGE>
11. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
12. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions set
forth in Section 9.02(b) of the Indenture, the Indenture or the Notes may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Notes and 2005 Notes
(collectively, the "Notes Issue") then outstanding, and any existing Default or
Event of Default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in aggregate principal amount of
the Notes Issue then outstanding. Without notice to or consent of any Holder,
the Company, and the Guarantors, when authorized by a Board Resolution, may
amend or supplement the Indenture or the Notes to cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture, comply with
any requirements of the SEC in order to effect or maintain the qualification of
this Indenture under the TIA, make any change that would provide any additional
benefit or rights to the Holders, make any other change that does not adversely
affect in any material respect the rights of any Holder of a Note or add or
remove Guarantors as provided in the Indenture.
13. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, enter into transactions with Affiliates, create dividend
or other payment restrictions affecting Subsidiaries, merge or consolidate with
any other Person, sell, assign, transfer, lease, convey, otherwise dispose of
all or substantially all of its assets or adopt a plan of liquidation, or
continue its Seismic Operations. The Indenture also requires the Company to
maintain certain levels of cash or Cash Equivalents. Such limitations are
subject to a number of important qualifications and exceptions. The Company must
annually report on compliance with such limitations.
B-7
<PAGE>
14. SUCCESSORS. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
15. DEFAULTS AND REMEDIES. Events of Default shall be as set forth
in the Indenture. If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Notes Issue then
outstanding may declare all the Notes to be due and payable in the manner, at
the time and with the effect provided in the Indenture, except that in the case
of an Event of Default arising from certain events of bankruptcy or insolvency,
all outstanding Notes become due and payable immediately without further action
or notice. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes Issue then outstanding to
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default or Event of
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in their interest.
16. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or its
respective Affiliates as if it were not the Trustee.
17. NO RECOURSE AGAINST OTHERS. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
18. GOVERNING LAW. THE LAWS OF THE STATE OF DELAWARE SHALL
GOVERN THIS NOTE AND THE INDENTURE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
19. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (=
B-8
<PAGE>
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. PROVISIONS OF INDENTURE, THE GENERAL SECURITY AGREEMENT AND THE
COLLATERAL AGENCY AGREEMENT. Each Holder, by accepting a Note, agrees to be
bound by all of the terms and provisions of each of the Indenture, the General
Security Agreement and the Collateral Agency Agreement, as the same may be
amended from time to time.
21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
22. AUTHENTICATION. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
23. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of
this Note in larger type. Requests may be made to: Geokinetics Inc.,
8401 Westheimer, Suite 150, Houston, Texas 77063, Attn: President.
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<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint_______________________________________________________,
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date: ________________ Signed: ________________________
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee: ____________________________
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) October 1, 2001, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
B-10
<PAGE>
[CHECK ONE]
(1) __ the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Company a signed letter containing certain
representations and agreements (the form of which is attached
below); or
(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act; or
(5) __ pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or
(6) __ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Company will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; PROVIDED that if box (3), (4), (5) or (6) is checked,
the Company may require, prior to registering any such transfer of the Notes, in
its sole discretion, such legal opinions, certifications (including an
investment letter in the case of box (3) or (4)) and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Company shall not be obligated to
register this Note in the name of any person other than the Holder hereof unless
and until the conditions to any such transfer of registration set forth herein
shall have been satisfied.
Date: _____________________ Signed: ___________________
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee: ______________________________________
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<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: _____________________ _____________________________
NOTICE: To be executed by an
executive officer
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<PAGE>
[FORM OF LETTER TO BE COMPLETED
BY PURCHASER IF (3) ABOVE IS CHECKED]
Ladies and Gentlemen:
1. The undersigned understands that any subsequent transfer of the
Notes is subject to certain restrictions and conditions set forth in the Notes
and in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Notes except in compliance with, such
restrictions and conditions and the Securities Act.
2. The undersigned understands that the offer and sale of the Notes
have not been registered under the Securities Act, and that the Notes may not be
offered or sold except as permitted in the following sentence. The undersigned
agrees, on its own behalf and on behalf of any accounts for which it is acting
as hereinafter stated, that if it should sell, pledge or otherwise transfer any
Notes it will do so only (1) (w) inside the United States to a person who the
seller reasonably believes is a qualified institutional buyer within the meaning
of Rule 144A under the Securities Act in a transaction meeting the requirements
of Rule 144A, or in accordance with Rule 144 under the Securities Act, or
pursuant to another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel, if the Company so
requests), (x) to the Company, (y) outside the United States to a foreign person
in a transaction meeting the requirements of Rule 904 under the Securities Act
or (z) pursuant to an effective registration statement under the Securities Act
and (2) in each case, in accordance with the applicable securities laws of any
state of the United States or any other applicable jurisdiction, and the
undersigned further agrees to provide to any person purchasing any of the Notes
from us a notice advising such purchaser that resales of the Notes are
restricted as stated herein.
3. The undersigned understands that, on any proposed resale of any
Notes, it may be required to furnish the Company such certification and other
information as the Company may reasonably require to confirm that the proposed
sale complies with the foregoing restrictions. The undersigned further
understands that the Notes purchased by it will bear a legend to the foregoing
effect.
4. The undersigned is an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act) and has
such knowledge and experience in
B-13
<PAGE>
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Notes, and the undersigned and any accounts for
which it is acting are each able to bear the economic risk of our or its
investment, as the case may be.
5. The undersigned is acquiring the Notes purchased by us for our
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which the undersigned exercises sole
investment discretion.
Date:________________________________ _____________________________________
NOTICE: To be signed by an
executive officer
B-14
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$_________________
Dated: __________________ ____________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee: ____________________________________
B-15
<PAGE>
SENIOR SECURED GUARANTEE
Geokinetics Production Co., Inc., Quantum Geophysical, Inc.,
Geoscience Software Solutions, Inc., Signature Geophysical Services, Inc.,
Reliable Exploration, Incorporated and Geophysical Development Corporation (the
"Guarantors") have unconditionally guaranteed on a senior secured basis (such
guarantee by each Guarantor being referred to herein as the "Guarantee") (i) the
due and punctual payment of the principal of and interest on the Notes, whether
at maturity, by acceleration or otherwise and the due and punctual payment of
interest on the overdue principal and interest, if any, on the Notes, to the
extent lawful, all in accordance with the terms set forth in Article Eleven of
the Indenture and (ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of each Guarantor to the Holders and to the Trustee
pursuant to the Guarantee, the Indenture and the Security Documents are
expressly set forth in Article Eleven of the Indenture and the Security
Documents, and reference is hereby made to such Indenture and the Security
Documents for the precise terms of the Guarantee therein made. This Guarantee is
limited under the Indenture and the Security Documents to the extent necessary
not to constitute a fraudulent conveyance.
No past, present or future stockholder, officer, director, employee
or incorporator, as such, of any of the Guarantors shall have any liability
under the Guarantees by reason of such person's status as stockholder, officer,
director, employee or incorporator. Each holder of a Note by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Guarantees.
B-16
<PAGE>
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
GEOKINETICS PRODUCTION
CO., INC.
By:___________________
Name:
Title:
QUANTUM GEOPHYSICAL, INC.
By:___________________
Name:
Title:
GEOSCIENCE SOFTWARE
SOLUTIONS, INC.
By:___________________
Name:
Title:
SIGNATURE GEOPHYSICAL SERVICES,
INC.
By:___________________
Name:
Title:
B-17
<PAGE>
RELIABLE EXPLORATION,
INCORPORATED
By:___________________
Name:
Title:
GEOPHYSICAL DEVELOPMENT
CORPORATION
By:____________________
Name:
Title:
B-18
EXHIBIT 4.4
AMENDED AND RESTATED
TAG-ALONG DRAG-ALONG AGREEMENT
This Amended and Restated Tag-Along Drag-Along Agreement (this
"AGREEMENT") is made and entered into as of September 30, 1999, among
Geokinetics Inc., a Delaware corporation (the "COMPANY"), Blackhawk Investors,
L.L.C., a Delaware limited liability company ("BLACKHAWK"), William R. Ziegler
("ZIEGLER") and Steven A. Webster ("WEBSTER") (Blackhawk, Ziegler and Webster
being sometimes referred to collectively as the "BLACKHAWK GROUP") and the
Warrant Holders (as defined below), and amends, replaces and restates the
Agreement executed among the parties hereto as of April 30, 1998 (the "ORIGINAL
AGREEMENT").
WHEREAS, as of September 30, 1999 (i) Blackhawk is the record and
beneficial owner of 8,666,667 shares of Common Stock, $0.01 par value per share
("Common Stock"), of the Company, representing approximately 44.7% of the
19,367,156 shares of Common Stock of the Company issued and outstanding and (ii)
Blackhawk is the record and beneficial owner of certain Shadow Warrants that
currently represent the right to acquire up to a maximum of 6,359,990 shares of
Common Stock (subject to adjustment as provided therein), at an exercise price
of $0.20 per share, which Shadow Warrants are presently exercisable for an
aggregate of 5,735,511 shares of Common Stock, with the exercisability of the
remaining Shadow Warrants to acquire up to 624,479 shares of Common Stock
(subject to adjustment) being subject to the satisfaction of conditions that are
not within the control of Blackhawk;
WHEREAS, as of September 30, 1999 (i) Webster and Ziegler are the record
and beneficial owners of 333,326 and 333,340 shares of Common Stock,
respectively, each representing approximately 1.7% (and collectively
representing approximately 3.4%), of the 19,367,156 shares of Common Stock of
the Company issued and outstanding and (ii) (A) Webster is the record and
beneficial owner of certain (x) warrants to purchase 1,482,512 shares of Common
Stock and (y) Shadow Warrants that currently represent the right to acquire up
to a maximum of 244,610 shares of Common Stock (subject to adjustment as
provided therein), at an exercise price of $0.20 per share, which Shadow
Warrants are presently exercisable for an aggregate of 220,592 shares of Common
Stock, with the exercisability of the remaining Shadow Warrants to acquire up to
24,018 shares of Common Stock (subject to adjustment) being subject to the
satisfaction of conditions that are not within the control of Webster and (B)
Ziegler is the record and beneficial owner of certain (x) options to acquire
50,000 shares of Common Stock, (y) warrants to purchase 1,482,512 shares of
Common Stock and (z) Shadow Warrants that currently represent the right to
acquire up to a maximum of 244,619 shares of Common Stock (subject to adjustment
as provided therein), at an exercise price of $0.20 per share, which Shadow
Warrants are presently exercisable for an aggregate of 220,601 shares of Common
Stock, with the exercisability of the remaining Shadow Warrants to acquire up to
24,018 shares of Common Stock (subject to adjustment) being subject to the
satisfaction of conditions that are not within the control of Ziegler;
WHEREAS, pursuant to the transactions contemplated by that certain
Securities Purchase Agreement of even date herewith (the "SECURITIES PURCHASE
AGREEMENT") among the Company and the Warrant Holders, the Company has agreed to
issue warrants entitling the Warrant Holders to purchase up to an aggregate of
50,068,594 shares of Common Stock subject to the terms and conditions set forth
in that certain Amended and Restated Warrant Agreement, of even date herewith
(the RESTATED WARRANT AGREEMENT"), among the Company and the Warrant Holders;
<PAGE>
WHEREAS, members of Blackhawk, including Blackhawk Capital Partners,
Webster and Ziegler and their affiliates, may acquire warrants to purchase up to
7,750,000 shares of Common Stock pursuant to the Securities Purchase Agreement;
WHEREAS, it is a material inducement and a precondition to the entering
into of the Securities Purchase Agreement and the Restated Warrant Agreement by
the Warrant Holders that the Company and the Blackhawk Group enter into this
Agreement;
NOW, THEREFORE, in consideration of the premises, and the mutual
agreements set forth herein, the parties hereto agree as follows:
Section 1. CERTAIN DEFINITIONS.
(a) Capitalized terms not otherwise defined herein, shall have the
meanings assigned to them in the Restated Warrant Agreement.
(b) As used herein:
"CONTROL DISPOSITION" means a Disposition which would have the
effect of transferring to any transferee or a "group" of persons (as "group" is
defined for purposes of Section 13(d)(3) of the Exchange Act and the rules and
regulations thereunder ("GROUP")) beneficial ownership (as defined in Rule 13d-3
of the Exchange Act) of a number of shares of outstanding Common Stock held by
the Blackhawk Group constituting, in the aggregate, at least 80 percent of the
then outstanding shares of Common Stock held by the Blackhawk Group.
"DISPOSITION" means any direct or indirect transfer,
assignment, sale, gift, pledge, hypothecation or other encumbrance, or any
disposition of Common Stock (or any interest therein or right thereto) or of all
or part of the voting power associated with the Common Stock (or any interest
therein) whatsoever, or any other transfer of beneficial ownership of Common
Stock whether voluntary or involuntary; PROVIDED, that (i) no transfer of the
Warrants or the Warrant Shares issued to Ziegler or Webster pursuant to the
Securities Purchase Agreement shall be deemed a Disposition hereunder, (ii) the
transfer of Common Stock by Blackhawk to its members shall not be deemed a
Disposition hereunder, (iii) all public sales properly conducted by the
Blackhawk Group or any of the Warrant Holders pursuant to Rule 144 under the
Securities Act shall not be deemed Dispositions hereunder, (iv) no transfer by
either Blackhawk, Ziegler or Webster of less than 10% of their respective
holdings of Common Stock in a single transaction or series of related
transactions shall be deemed a Disposition hereunder, and (v) the participation
by the Blackhawk Group or any of the Warrant Holders in a proposed underwritten
public offering of Common Stock (including the entering into an underwriting
agreement, a custody agreement and other agreements customarily executed by
selling shareholders in connection therewith) or the participation by the
Blackhawk Group or any of the Warrant Holders in any other registration pursuant
to any demand or piggyback registration rights that any of them may have
pursuant to any registration rights or similar agreement with the Company and
the consummation thereof, shall not constitute a Disposition, it being
understood that, if such proposed underwritten public offering is terminated or
abandoned prior to consummation or is not consummated or such other registration
is terminated or abandoned prior to consummation or its not consummated, the
Common Stock, Warrants and Warrant Shares held by
-2-
<PAGE>
the parties hereto shall remain subject to this Agreement. The term Disposition
shall include a Control Disposition.
"WARRANT HOLDERS" shall mean each of the persons (including Webster
and Ziegler) identified as Warrant Holders on EXHIBIT A hereto, and any other
persons or entities who become parties to this Agreement as "Warrant Holders"
pursuant to the terms of this Agreement, and their respective heirs, legal
representatives, administrators and successors.
Section 2. RESTATEMENT OF ORIGINAL AGREEMENT. The Original Agreement
executed as of April 30, 1998 is hereby terminated pursuant to Section 10
thereof, it being understood and agreed that this Agreement amends, replaces and
restates the Original Agreement.
Section 3. TAG-ALONG DISPOSITIONS. Subject to the provisions of Section
4, if either Blackhawk, Ziegler or Webster desires to effect a Disposition (or a
series of related Dispositions to a single transferee or Group) of at least 25%
of the issued and outstanding shares of Common Stock owned by such entity
(excluding the Warrants and Warrant Shares issued to Webster and Ziegler
pursuant to the Securities Purchase Agreement) to any transferee or Group (a
"TAG-ALONG DISPOSITION"), such entity or person shall give written notice to the
Warrant Holders describing the material terms of the proposed Tag-Along
Disposition and identifying the contemplated transferee or Group (a "TAG-ALONG
NOTICE"). Each such Warrant Holder may, by written notice to Blackhawk, Ziegler
or Webster, as the case may be, delivered within 15 days following the date of
the Tag-Along Notice (each such Warrant Holder delivering such notice being a
"TAG-ALONG WARRANT HOLDER"), elect to participate in the Tag-Along Disposition,
and require, as a condition to the closing of the Tag-Along Disposition, that
the proposed transferee or Group purchase, at the same price per share and on
the same terms and conditions as are described in the Tag-Along Notice, a
portion of the total number of Warrant Shares then held or obtainable by each
Warrant Holder equal to a fraction thereof, the numerator of which is the total
number of shares of Common Stock held by either Blackhawk, Ziegler or Webster,
as the case may be, to be transferred in the Tag-Along Disposition and the
denominator of which is the total number of shares of Common Stock then held by
either Blackhawk, Ziegler or Webster, as the case may be, (the "TAG-ALONG
SHARES"). If any Warrant Holder receiving the Tag-Along Notice timely elects to
be a Tag-Along Warrant Holder, neither Blackhawk, Ziegler or Webster, as the
case may be, shall effect the Tag-Along Disposition described in the Tag-Along
Notice unless the proposed transferee or Group agrees to purchase all of the
Tag- Along Shares of all of the Tag-Along Warrant Holders at the same price and
on the same terms and conditions described in the Tag-Along Notice, except that
to the extent the transferee or Group purchases any Warrant, the Exercise Price
shall be deducted from the price payable for the Warrant. Upon the closing of
the sale of any sale of the Warrant or the Warrant Shares pursuant to this
Section, each Tag-Along Warrant Holder shall deliver at such closing, against
payment of the purchase price therefor, certificates representing the Warrant or
Warrant Shares, as the case may be, to be sold, duly endorsed for transfer or
accompanied by duly endorsed stock powers, and evidence of good title to the
Warrant or Warrant Shares to be sold and the absence of liens, encumbrances and
adverse claims with respect thereto and such other matters as are deemed
necessary by the Company for the proper transfer of such Warrant or Warrant
Shares on the books of the Company.
Section 4. DRAG-ALONG IN CONTROL DISPOSITIONS. If the Blackhawk Group
desires to effect a Control Disposition, then, in lieu of complying with the
requirements of Section 3, the Blackhawk Group at its option (the "DRAG-ALONG
OPTION"), shall have the right to require all of the Warrant
-3-
<PAGE>
Holders to sell the same percentage of such holder's Warrant and/or the Warrant
Shares as the shares being disposed by the Blackhawk Group to such transferee or
Group selected by the Blackhawk Group at the same price and on the same terms
and conditions as apply to the shares of Common Stock sold by the Blackhawk
Group in the Control Disposition, except that to the extent the transferee or
Group purchases any Warrant, the Exercise Price shall be deducted from the price
payable for the Warrant. Upon the closing of the sale of any Warrant or Warrant
Shares pursuant to this paragraph, each Warrant Holder shall deliver at such
closing, against payment of the purchase price therefor, certificates
representing the Warrant or Warrant Shares, as the case may be, to be sold, duly
endorsed for transfer or accompanied by duly endorsed stock powers, and evidence
of good title to the shares to be sold and the absence of liens, encumbrances
and adverse claims with respect thereto and such other matters as are deemed
necessary by the Company for the proper transfer of such Warrants or Warrant
Shares on the books of the Company provided that in connection with any such
transaction (x) each Warrant Holder shall not be required to make any
representations or warranties except those relating to (i) its own due
organization and execution and delivery of the relevant agreement, (ii) the
enforceability of the relevant agreement against it and absence of conflicts
with agreements and laws applicable to it and (iii) its ownership of securities
being sold by it and (y) the Warrant Holders shall not be required to provide
any post-closing indemnities except as provided in clause (z) below and (z) in
the event that a portion of the purchase price is placed in escrow to support
purchase price adjustment obligations post-closing (including indemnification
for breaches of representations or warranties relating to the Company and its
subsidiaries), the Warrant Holders will have a pro rata portion of their
purchase price placed in such escrow to be utilized to pay any such
indemnification obligations.
Section 5. LEGEND ON CERTIFICATES. The Company will cause to appear on
all certificates representing the Warrant or the Warrant Shares a conspicuous
legend in such form as the Company's Board of Directors may determine, stating
that such securities are subject to an agreement which restricts the
transferability thereof and otherwise circumscribes the rights which may be
exercised by the holder thereof.
Section 6. SPECIFIC ENFORCEMENT. In view of the inadequacy of money
damages, if either the Blackhawk Group or any Warrant Holder (a "BREACHING
PARTY") or other person shall fail to comply with the provisions of Section 3 or
4 hereof, the Company and the other non-breaching parties shall be entitled, to
the extent permitted by applicable law, to injunctive relief in the case of the
violation, or attempted or threatened violation, by a Breaching Party or other
person of any of the provisions of such Sections, or to a decree compelling
specific performance by a Breaching Party or other person of any such
provisions, or to any other remedy legally allowed to them.
Section 7. VOID TRANSFERS. If the Warrant, the Warrant Shares or any
shares of Common Stock subject to the terms of this Agreement shall be
transferred in a Disposition in violation of the terms and conditions of this
Agreement, such Disposition shall be void. In addition to, and without prejudice
to, any and all other rights or remedies which may be available to the parties
hereto, the Blackhawk Group and each of the Warrant Holders agree that the
Company may, but shall have no obligation to, hold and refuse to recognize a
Disposition of any such securities (or any certificate therefor) tendered to it
for transfer if the Disposition violates the provisions of this Agreement.
-4-
<PAGE>
Section 8. NOTICES. All notices, offers, requests, consents and
communications required or permitted to be given or made under this Agreement
shall be given or made in writing and shall be deemed to have been duly given or
made when sent by mail, postage prepaid,
a. if to the Company, 8401 Westheimer, Suite 150, Houston, Texas
77063, Attention: Chief Financial Officer; and
b. if to Blackhawk or Ziegler, c/o Saterlee Stephens Burke &
Burke LLP, 230 Park Avenue, New York, New York 10169-0079, Attention: William R.
Ziegler; and
c. if to Webster, 1908 River Oaks Blvd., Houston, Texas 77019;
and
d. if to any Warrant Holder, to the address as last shown on the
stock record books of the Company.
Any such notice shall be effective and deemed received three days after
proper deposit in the mails, but actual notice shall be effective however and
whenever received. The Company, Blackhawk, Ziegler, Webster or any Warrant
Holder may effect a change of address for purposes of this Agreement by giving
notice of such change to the other parties, with specific reference to this
Section.
Section 9. AMENDMENT, SEVERABILITY, SUBSEQUENT PARTIES.
a. Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the Company, the Blackhawk Group and a
majority of the holders of Warrant Shares issued or issuable upon exercise of
the Warrants. In the event that any provisions hereof are held to be invalid,
illegal or against public policy, the remaining provisions hereof shall not be
affected thereby. In such event, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible with respect to those provisions which were held
to be invalid, illegal or against public policy.
b. Notwithstanding anything herein to the contrary, the parties
hereto agree that this Agreement shall be amended to include any person or
entity that acquires a Warrant or Warrant Shares or otherwise becomes entitled
to purchase the Warrant Shares of the Company pursuant to the Warrant Agreement.
In such instance, such persons or entities, the Blackhawk Group and the Company
shall execute an Adoption Agreement in the form of EXHIBIT B hereto adding such
persons or entities. Each Warrant Holder hereby constitutes and appoints
Blackhawk as such Warrant Holder's agent and attorney-in-fact with full power
and authority, in the name, place and stead of such Warrant Holder to execute
such Adoption Agreement on behalf of such Warrant Holder to evidence such
Warrant Holder's approval of such additional parties to this Agreement. The
foregoing power of attorney is hereby declared to be irrevocable and a power
coupled with an interest. Upon execution by the Company, the Blackhawk Group and
the additional party of such Adoption Agreement, the additional party shall be
considered a Warrant Holder hereunder, and the Warrant and the Warrant Shares
acquired by such additional party shall be deemed to be subject to the terms of
this Agreement, and legended accordingly, for all purposes of this Agreement.
-5-
<PAGE>
Section 10. AGREEMENTS BY COMPANY. The Company, insofar as is proper or
required, consents to this Agreement. It shall not issue, transfer or reissue
any of its shares of stock, warrants or other securities in violation of this
Agreement or without requiring proof of compliance with this Agreement.
Section 11. EFFECTIVENESS; TERMINATION. This Agreement shall become
effective at such time as it is executed by the Company, the Blackhawk Group
and, with respect to a Warrant Holder, by such Warrant Holder. Except as
otherwise provided herein, this Agreement shall terminate upon the earlier to
occur of (i) the dissolution of the Company; (ii) the written approval of the
Company, the Blackhawk Group and a majority of the holders of Warrant Shares
issued or issuable upon exercise of the Warrants; (iii) the date on which the
Warrant Holders, in the aggregate, hold less than 25% of the number of Warrant
Shares originally purchasable under the Restated Warrant Agreement; (iv) the
date on which the Blackhawk Group no longer owns any shares of Common Stock,
whether pursuant to a Disposition or otherwise pursuant to one or more
transactions that do not constitute Dispositions hereunder; (v) the first date
on which the Common Stock is traded on the NASDAQ system or any nationally
registered securities exchange, or (vi) 5:00 P.M. New York City time on the
Expiration Date. Any Warrant Holder who disposes of all of its Warrant or
Warrant Shares in conformity with the terms of this Agreement shall cease to be
a party to this Agreement and shall have no further rights hereunder.
Section 12. CONSTRUCTION. Each party to this Agreement has had the
opportunity to review this Agreement with legal counsel. This Agreement shall
not be construed or interpreted against any party on the basis that such party
drafted or authored a particular provision, parts of or the entirety of this
Agreement.
Section 13. MISCELLANEOUS. This Agreement (a) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, (b) may
be executed in several counterparts, each of which shall be deemed an original,
and all of which shall constitute one and the same instrument, (c) shall inure
to the benefit of and be binding upon, the successors, assigns, legatees,
distributees, legal representatives and heirs of each party and is not intended
to confer upon any person, other than the parties and their permitted successors
and assigns, any rights or remedies hereunder, and (d) SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. The captions
in this Agreement are for convenience of reference only and shall not affect its
interpretation in any respect.
Section 14. SPOUSAL CONSENT. The spouses, if applicable, of the Warrant
Holders fully consent and agree to the provisions of this Agreement and its
binding effect upon any community property interest, if any, they may now or
hereafter own. The spouses hereby acknowledge the fairness of this Agreement and
that it is in such spouse's best interests to bind such spouse's community
interest, if any, in the Warrant and the Warrant Shares, to the terms of this
Agreement.
[SIGNATURES APPEAR ON THE FOLLOWING THREE PAGES]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
COMPANY:
GEOKINETICS INC.
By: /s/ THOMAS J. CONCANNON
Name: Thomas J. Concannon
Title: Vice President
BLACKHAWK GROUP:
BLACKHAWK INVESTORS, L.L.C.
By: Blackhawk Capital Partners,
its Managing Member
By: /s/ WILLIAM R. ZIEGLER
William R. Ziegler, General Partner
/s/ WILLIAM R. ZIEGLER
William R. Ziegler, Individually
/s/ STEVEN A. WEBSTER
Steven A. Webster, Individually
WARRANT HOLDERS:
DLJ INVESTMENT PARTNERS, L.P.
By: /s/
Name:
Title:
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<PAGE>
DLJ INVESTMENT FUNDING, INC.
By: /s/
Name:
Title:
DLJ ESC II, L.P.
By: DLJ LBO PLANS Management Corporation,
its General Partner
By: /s/
Name:
Title:
SPINDRIFT PARTNERS, L.P.
BY: Wellington Management Company, LLP,
its Investment Advisor
By: /s/ DONNA M. BROWN
Name: Donna M. Brown
Title: Assistant Vice President
SPINDRIFT INVESTORS (BERMUDA) L.P.
BY: Wellington Management Company, LLP,
its Investment Advisor
By: /s/ DONNA M. BROWN
Name: Donna M. Brown
Title: Assistant Vice President
-8-
<PAGE>
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners, its General
Partner
By: /s/
Name:
Title:
MHR CAPITAL PARTNERS, LP
BY: MHR Advisors LLC, General Partner
By: /s/
Name:
Title:
WHITTIER VENTURES, L.L.C.
By: /s/ DAVID A. DAHL
Name: David A. Dahl
Title: President
/s/ PAUL B. LOYD, JR.
PAUL B. LOYD, JR. (individually)
_____________________________________
(spouse, if applicable)
SOMERSET CAPITAL PARTNERS
By: /s/ WILLIAM R. ZIEGLER
Name: William R. Ziegler
Title: Partner
/s/ STEVEN A. WEBSTER
Steven A. Webster, Individually
/s/ WILLIAM R. ZIEGLER
William R. Ziegler, Individually
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<PAGE>
EXHIBIT A
List of Warrant Holders
DLJ Investment Partners, L.P.
DLJ Investment Funding, Inc.
DLJ ESC II, L.P.
Spindrift Partners, L.P.
Spindrift Investors (Bermuda) L.P.
Chase Equity Associates, L.P.
MHR Capital Partners LP
Whittier Ventures, L.L.C.
Paul B. Loyd, Jr.
Somerset Capital Partners
Steven A. Webster
William R. Ziegler
<PAGE>
EXHIBIT B
Adoption Agreement
This Adoption Agreement ("ADOPTION") is executed pursuant to the terms of
that certain Amended and Restated Tag-Along Drag-Along Agreement dated as of
September __, 1999 ("TAG-DRAG AGREEMENT"), by and among Geokinetics Inc., a
Delaware corporation, Blackhawk Investors, L.L.C., a Delaware limited liability
company ("BLACKHAWK"), and the Warrant Holders (as defined therein) (the
"WARRANT HOLDERS"). By the execution of this Adoption Agreement, the undersigned
agrees as follows:
1. ACKNOWLEDGMENT. The undersigned acknowledges that it is acquiring
certain Warrants to purchase shares of the Common Stock, par value $0.01, of the
Company and/or Warrant Shares, subject to the terms and conditions of the
Tag-Drag Agreement.
2. AGREEMENT. The undersigned (i) agrees that the Warrant Shares and the
Warrants to purchase the shares of the Common Stock of the Company acquired by
it shall be bound by and subject to the terms of the Tag-Drag Agreement, and
(ii) hereby adopts the Tag-Drag Agreement with the same force and effect as if
it were originally a party thereto and named as a Warrant Holder therein.
3. NOTICE. Any notice required as permitted by the Tag-Drag Agreement
shall be given to the undersigned at the address listed beside the undersigned's
signature below.
4. JOINDER. The spouse of the undersigned, if applicable, executes this
Adoption Agreement to acknowledge its fairness and that it is in such spouse's
best interests to bind such spouse's community interest, if any, in the Warrant
and/or the Warrant Shares, to the terms of the Tag-Drag Agreement.
EXECUTED and DATED as of ______________, 19___.
PURCHASER OR TRANSFEREE:
By:_____________________________________
Name:___________________________________
Address:________________________________
SPOUSE (IF APPLICABLE):
By:_____________________________________
Name:___________________________________
Address:________________________________
<PAGE>
Agreed to on behalf of the Company, Blackhawk, Ziegler, Webster and all
Warrant Holders pursuant to Section 9b. of the Tag-Drag Agreement.
GEOKINETICS INC.
By:______________________________
_________________________________
William R. Ziegler (individually)
_________________________________
Steven A. Webster (individually)
BLACKHAWK INVESTORS, L.L.C.
(for itself-and as Attorney-in-Fact for the
Warrant Holders)
By:__________________________________
Name:________________________________
Title:_______________________________
EXHIBIT 99
RESTRUCTURE AGREEMENT
THIS RESTRUCTURE AGREEMENT ("Agreement") is entered into this 1st day of
October, 1999, by and between GEOKINETICS INC., a Delaware corporation, and its
subsidiaries, SIGNATURE GEOPHYSICAL SERVICES, INC. (a Michigan corporation) and
QUANTUM GEOPHYSICAL, INC. (a Texas corporation), collectively the "Geokinetics
Entities," and INPUT/OUTPUT, INC. (a Delaware corporation) and its subsidiary
Global Charter Corporation (a Delaware corporation), collectively the "I/O
Entities."
RECITALS:
WHEREAS, Geokinetics Inc. ("Geokinetics") and Input/Output, Inc. ("I/O")
are parties to that certain Conditional Sales Agreement No. 970915 executed by
Geokinetics and I/O on or about September 26, 1997 and September 29, 1997,
respectively ("CSA I"), whereby I/O agreed to sell certain equipment to
Geokinetics;
WHEREAS, Signature Geophysical Services, Inc. ("Signature"), and I/O are
parties to that certain Conditional Sales Agreement No. 970916 executed by
Signature and I/O on or about September 26, 1997 and September 29, 1997,
respectively ("CSA II"), whereby I/O agreed to sell certain equipment to
Signature;
WHEREAS, I/O is the owner and holder of that certain Promissory Note dated
November 11, 1998 in the principal sum of $1,621,782.02 between Quantum
Geophysical, Inc. ("Quantum"), and Geokinetics, as makers, and I/O, as payee
("Note");
WHEREAS, I/O has assigned to Global Charter Corporation ("Global"), all of
its rights, title and interest to the Sales Price and any interest payable under
CSA I and CSA II and has thereafter assigned to Global all of I/O's right, title
and interest in CSA I, CSA II, the Note and any related security and other
documents signed herewith;
WHEREAS, subsidiaries or affiliated companies of Geokinetics, Signature or
Quantum may have used equipment that is the subject of or represents collateral
under CSA I, CSA II or the Note;
WHEREAS, the Geokinetics Entities, being in default and unable to perform
under CSA I, CSA II and the Note, have requested I/O to restructure their
obligations thereunder;
WHEREAS, I/O has agreed to such restructure with Geokinetics, Signature
and Quantum whereby the parties, among other things, will enter
contemporaneously herewith into an assignment in lieu of foreclosure and a
leaseback transaction involving equipment subject to, covered by or pledged to
I/O as collateral under CSA I, CSA II or the Note (defined below as the
"Equipment".)
WHEREAS, the parties hereto agree and acknowledge that the principal
outstanding as of the date hereof on CSA I, CSA II and the Note is
$2,127,323.85, $6,174,430.47 and $1,621,782.02, respectively; and
<PAGE>
WHEREAS, the parties to this Restructure Agreement have contemporaneously
herewith entered into or will enter into various agreements, including but not
limited to a Lease Agreement between I/O and Geokinetics of this same date, to
accommodate and effect the restructure described above (collectively, all such
agreements including this Agreement are referred to as the "Transaction
Documents");
NOW, THEREFORE, for and in consideration of the premises herein set forth
and the warranties, representations, covenants and agreements herein contained,
the parties to this Agreement hereby warrant, represent, covenant and agree as
follows:
ARTICLE 1
ASSIGNMENT IN LIEU OF FORECLOSURE
1.1 ASSIGNMENT IN LIEU OF FORECLOSURE. On the terms and conditions
contained in this Agreement, the Geokinetics Entities shall assign, convey and
transfer to I/O at the Closing all of the Geokinetics Entities' right, title and
interest in and to the assets more particularly described in CSA I, CSA II, the
Note and the related documents signed therewith (collectively, the "Equipment")
in lieu of I/O's exercising its rights of foreclosure on the Equipment.
ARTICLE 2
ADDITIONAL CONSIDERATION
2.1 ADDITIONAL CONSIDERATION. As additional consideration to I/O,
Geokinetics, for itself and the other Geokinetics Entities, agrees to pay to the
I/O Entities at Closing all non-default interest accrued to date under CSA I,
CSA II and the Note, and all attorney's fees (and expenses) incurred by I/O
negotiating, documenting and otherwise accomplishing this restructuring
transaction, which payments are conditions precedent to I/O's commitment to
lease the Equipment back to Geokinetics.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE GEOKINETICS ENTITIES
The Geokinetics Entities represent and warrant to I/O as follows:
3.1 AUTHORITY. The Geokinetics Entities have the full right and power to
execute, deliver and perform this Agreement. This Agreement is a valid and
legally binding obligation of the Geokinetics Entities enforceable against them
in accordance with its terms, subject, however, to bankruptcy, insolvency,
reorganization, and other laws affecting creditors' rights generally and, with
regard to any equitable remedies, to the discretion of the court before which
proceedings to obtain such remedies may be pending. The Geokinetics Entities
have obtained all requisite director approval and have performed all other
corporate action required in connection with the execution and delivery of this
Agreement and the consummation of transactions contemplated hereby.
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<PAGE>
3.2 DUE INCORPORATION AND GOOD STANDING. Each Geokinetics Entity is duly
organized, validly existing and in good standing under the laws of its State of
incorporation.
3.3 EQUIPMENT. The Geokinetics Entities own and hold title to the
Equipment, free and clear of any and all liens, security interests,
encumbrances, options, charges or assessments, except liens in favor of
Input/Out, Inc. The Equipment is in good repair and working condition and has
been designed, installed and maintained in accordance with good industry
standards and all applicable legal requirements, subject to ordinary wear and
tear.
3.4 NO DEFAULTS OR OTHER VIOLATIONS. The execution and delivery of this
Agreement by the Geokinetics Entities and the consummation of the restructuring
transaction contemplated by this Agreement will not result in the breach of or
default under (i) any of the Geokinetics Entities' certificates of
incorporation, bylaws or other constituent documents and (ii) any indenture,
mortgage, material agreement, law, rule, regulation or any order, judgment or
decree to which any of the Geokinetics Entities is a party or to which any of
the Geokinetics Entities may be subject.
3.5 LITIGATION AND CLAIMS. No claim, demand, filing, cause of action,
administrative proceeding, lawsuit or other litigation is pending or, to the
best knowledge of the Geokinetics Entities, threatened that could now or
hereafter affect the ownership or operation of any of the Equipment.
3.6 COMPLIANCE WITH LAWS. The Equipment has been operated in accordance
with all laws, orders, rules and regulations of all governmental authorities
having or asserting jurisdiction relating to the ownership and operation
thereof. All necessary governmental certificates, consents, permits, licenses or
other authorizations with regard to the ownership or operation of the Equipment
have been obtained and no violations exist or have been recorded in respect of
such licenses, permits or authorizations.
3.7 ENVIRONMENTAL. The Geokinetics Entities warrant that the Geokinetics
Entities have not, and to the Geokinetics Entities' knowledge and belief no
third party operator has received notice of, and the Geokinetics Entities do not
know of, any violation of or investigation relating to any federal, state or
local laws with respect to pollution or protection of the environment relating
to the Equipment. The Geokinetics Entities have furnished I/O copies of any and
all environmental studies and reports prepared or obtained by the Geokinetics
Entities relating to the Equipment.
3.8 BROKERS. No broker or finder is entitled to any brokerage or finder's
fee, or to any commission, based in any way on agreements, arrangements or
understandings made by or on behalf of the Geokinetics Entities for which I/O
has or will have any liabilities or obligations (contingent or otherwise).
ARTICLE 4
CONDITIONS TO OBLIGATIONS OF I/O
The obligations of I/O to consummate the transactions provided for herein
are subject to the fulfillment on or prior to the Closing Date of each of the
following conditions, unless waived by I/O:
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<PAGE>
4.1 ACCURACY OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE
GEOKINETICS ENTITIES. All representations and warranties of the Geokinetics
Entities contained herein or in any document delivered pursuant hereto shall be
true and correct in all material respects.
4.2 PERFORMANCE. The Geokinetics Entities shall have performed all
material obligations, covenants and agreements contained in this Agreement to be
performed or complied with by any of them at or prior to the Closing.
4.3 PENDING MATTERS. No suit, action or other proceeding shall be pending
or threatened that seeks to restrain, enjoin or otherwise prohibit the
consummation of the transactions contemplated by this Agreement.
ARTICLE 5
REPRESENTATIONS OF I/O
5.1 AUTHORITY. I/O has the full right and power to execute, deliver and
perform this Agreement. This Agreement is a valid and legally binding obligation
of I/O enforceable against it in accordance with its terms, subject, however, to
bankruptcy, insolvency, reorganization, and other laws affecting creditors'
rights generally and, with regard to any equitable remedies, to the discretion
of the court before which proceedings to obtain such remedies may be pending.
I/O has obtained all requisite director approval to execute this Agreement and
perform its obligations hereunder and has performed all other corporate action
required in connection with the execution and delivery of this Agreement and the
consummation of transactions contemplated hereby.
5.2 DUE INCORPORATION AND GOOD STANDING. I/O is duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.3 NO DEFAULTS OR OTHER VIOLATIONS. The execution and delivery of this
Agreement by I/O and the consummation of the transaction contemplated by this
Agreement will not result in the breach of or default under (i) I/O's articles
of incorporation, bylaws or other constituent documents and (ii) any indenture,
mortgage, material agreement, law, rule, regulation or any order, judgment or
decree to which I/O is a party or to which I/O may be subject.
5.4 BROKERS. No broker or finder is entitled to any brokerage or finder's
fee, or to any commission, based in any way on agreements, arrangements or
understandings made by or on behalf of I/O for which the Geokinetics Entities
have or will have any liabilities or obligations (contingent or otherwise).
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF THE GEOKINETICS ENTITIES
The obligations of the Geokinetics Entities to consummate the transaction
provided for herein are subject to the fulfillment on or prior to the Closing
Date of each of the following conditions, unless waived by the Geokinetics
Entities:
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<PAGE>
6.1 REPRESENTATIONS. The covenants and representations of I/O herein
contained shall be true and correct in all material respects.
6.2 PERFORMANCE. The Geokinetics Entities shall have performed all
material obligations, covenants and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing.
6.3 PENDING MATTERS. No suit, action or other proceeding shall be pending
or threatened that seeks to restrain, enjoin, or otherwise prohibit the
consummation of the transactions contemplated by this Agreement.
ARTICLE 7
CLOSING DOCUMENTS AND DELIVERIES
7.1 TIME AND PLACE OF CLOSING. The transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Vinson & Elkins
L.L.P., by September 24, 1999 (the "Closing Date").
7.2 DELIVERY. At the Closing, the Geokinetics Entities shall deliver to
I/O a Bill of Assignment in substantially the form of Exhibit "B" attached
hereto executed by the Geokinetics Entities conveying the Equipment to I/O. At
the Closing, the Geokinetics Entities shall deliver to I/O by wire transfer to
an account designated by I/O to the Geokinetics Entities in writing, the sums of
money due at closing under any of the Transaction Documents.
ARTICLE 8
SURVIVAL, INDEMNITIES
8.1 SURVIVAL. The representations, warranties, covenants and agreements
contained herein shall survive the Closing and the consummation of the
assignment and leaseback of the Equipment as herein provided.
8.2 INDEMNIFICATION BY I/O. I/O agrees to indemnify, release, defend and
hold harmless the Geokinetics Entities, its officers, directors, employees,
owners, agents, representatives, affiliates, subsidiaries, successors and
assigns (collectively, the "Geokinetics Entities Indemnitees") from and against
any and all Claims (as hereinafter defined) (including, without limitation,
damage to property, or injury to persons or death, and court costs and
reasonable attorneys' fees) caused by, arising from, or attributable to (1) the
ownership of the Equipment, from and after the Closing Date, subject, however to
the certain Lease Agreement between Input/Output, Inc. and Geokinetics Inc.
dated as of this same date, or (2) the breach by I/O of any of its
representations, warranties, covenants or agreements hereunder. The term
"Claims" as used in this Agreement shall mean all claims, liabilities, losses,
damages, costs and expenses.
8.3 INDEMNIFICATION BY THE GEOKINETICS ENTITIES. The Geokinetics Entities
agree to indemnify, release, defend and hold harmless I/O, its officers,
directors, employees, owners, agents,
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<PAGE>
representatives, affiliates, subsidiaries and successors from and against any
and all Claims (including, without limitation, damage to property or injury to
persons or death, and court costs and reasonable attorneys' fees) caused by,
arising from or attributable to (1) the ownership and operation of the Equipment
prior to the Closing Date, or (2) the breach by any of the Geokinetics Entities
of any of their representations, warranties, covenants or agreements hereunder.
8.4 EXCLUSIVE REMEDY. Each of the parties hereto acknowledges and agrees
that its sole and exclusive remedy with respect to (i) any and all Claims, (ii)
any other claims pursuant to or in connection with this Agreement or the
transactions contemplated thereby, or (iii) any other claims relating to the
Equipment and the assignment of same by I/O and the Geokinetics Entities,
respectively, shall be limited to the provisions set forth in this Agreement and
the Transaction Documents.
8.5 NEGLIGENCE AND FAULT. AN INDEMNIFIED PARTY SHALL BE ENTITLED TO
INDEMNIFICATION HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF WITH RESPECT TO
THE EQUIPMENT, REGARDLESS OF WHETHER THE LOSS OR CLAIM GIVING RISE TO SUCH
INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR COMPARATIVE
NEGLIGENCE, STRICT LIABILITY OR VIOLATION OF ANY LAW OF OR BY SUCH INDEMNIFIED
PARTY. THE PARTIES AGREE THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
ARTICLE 9
RELEASES
9.1 RELEASE OF I/O AND GLOBAL. In consideration for I/O entering into the
restructure as evidenced by the Transaction Documents and hereby agreeing to the
restructure and the release granted herein, the Geokinetics Entities do hereby
release, remise, relinquish and forever discharge I/O and Global and their
respective beneficiaries, employees, agents, representatives, attorneys,
directors, officers, owners, successors and assigns from any and all claims,
rights, demands, debts, liabilities, controversies, or causes of action, known
or unknown, asserted or unasserted, liquidated or unliquidated, fixed or
contingent, of any nature whatsoever arising out of or in connection with (i)
the transactions evidenced by CSA I, CSA II or the Note and this restructuring
thereof or (ii) the use by any entity of the Equipment, which claims, causes of
action, etc., any of the Geokinetics Entities, their affiliates, subsidiaries,
successors or assigns, or any person, firm, agency, body, entity, company, or
corporation claiming by, through or under any of them, directly or indirectly,
presently have or have ever owned, claimed, or may be entitled to the benefit
of, but excepted from this release of I/O and Global, are the obligations
created under the Transaction Documents.
9.2 RELEASE OF GEOKINETICS, SIGNATURE AND QUANTUM. Subject to the
following provisions of this Section 9.2, I/O and Global hereby do release,
remise, relinquish, and forever discharge Geokinetics, Signature and Quantum and
their respective beneficiaries, employees, agents, representatives, attorneys,
directors, officers, owners, successors and assigns, from any and all claims,
rights, demands, debts, liabilities, controversies or causes of action, known or
unknown, asserted or unasserted, liquidated or unliquidated, fixed or
contingent, of any nature whatsoever arising out of CSA I, CSA II or the Note.
The parties hereto agree and acknowledge that, pursuant to the Transaction
Documents, the Equipment will be assigned to I/O encumbered by and subject to
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<PAGE>
the liens and security interests securing the amounts and obligations owed under
CSA I, CSA II and the Note, and under any security documents creating or
perfecting such liens and security interests; thus, the preceding provision of
this Section 9.2 shall not constitute termination of such liens, security
interests, or security documents. The obligations of any of the Geokinetics
Entities under the Transaction Documents shall be excepted from the release
granted herein.
ARTICLE 10
MISCELLANEOUS
10.1 OWNERSHIP OF CLAIMS. By execution hereof, each of the parties hereby
represents, covenants, and warrants that no claim released herein has previously
been conveyed, assigned, or in any manner transferred, in whole or in part, to
any individual or entity that is not a party to this Restructure Agreement.
10.2 EXPENSES. Each of the parties hereto shall bear and pay all costs,
expenses and fees incurred by him or it or on his or its behalf in the
preparation and execution of this Agreement and compliance herewith, whether or
not the transaction herein provided for shall, in fact, be effectuated,
including, without limiting the generality of the foregoing, fees and expenses
of financial consultants, accountants, and counsel, unless otherwise expressly
provided herein.
10.3 NOTICES. All notices, requests, demands or other communications
pursuant to this Agreement shall be in writing, and shall be deemed to have been
duly given if delivered personally or sent by registered or certified mail,
postage prepaid, to the parties as follows:
IF TO THE I/O ENTITIES:
Input/Output, Inc.
11104 W. Airport Boulevard
Stafford, Texas 77477
Attention: Rex Reavis
WITH A COPY TO:
D. Bobbitt Noel, Jr.
Vinson & Elkins L.L.P.
1001 Fannin Street
2300 First City Tower
Houston, Texas 77002-6760
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<PAGE>
IF TO THE GEOKINETICS ENTITIES:
Geokinetics Inc.
Marathon Oil Tower
5500 San Felipe, Suite 780
Houston, Texas 77056
Attention: Chief Financial Officer
WITH A COPY TO:
Chamberlain, Hrdlicka, White, Williams & Martin
1400 Two Allen Center
1200 Smith Street
Houston, Texas 77002-4310
Attention: James J. Spring, III
or to such other addresses as may have been furnished in writing by such party
to the other parties to this Agreement.
10.4 PRIOR AGREEMENTS, MODIFICATIONS AND WAIVERS. This Agreement shall
supersede any and all other prior negotiations, agreements, documents or other
instruments with respect to the restructure matters covered hereby. This
Agreement may be amended or modified at any time only by agreement in writing
signed by the parties hereto. No waiver of any provision of this Agreement shall
be deemed to be a continuing waiver of such provision in the event the same or
similar conditions giving rise to such waiver thereafter occur.
10.5 BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
10.6 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas.
10.7 ATTORNEY FEES. If either party breaches this Agreement as determined
by a court of competent jurisdiction, the breaching party shall be obligated to
reimburse the non-breaching party for the reasonable attorney fees incurred as a
result of such breach.
10.8 FURTHER COOPERATION. After the Closing Date, each Party at the
request of the other and without additional consideration, shall execute and
deliver, or shall cause to be executed and delivered from time to time such
further instruments of conveyance and transfer and shall take such other action
as the other Party may reasonably request to convey and deliver the Equipment to
I/O and to accomplish the orderly transfer of the Equipment to I/O in the manner
contemplated by this Agreement.
10.9 CONFIDENTIALITY. Except as required by law, regulation, financial
accounting or reporting requirements, or order of a court or other governmental
authority, or upon written consent of the other parties hereto, each party and
its respective agents, employees, affiliates, officers,
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<PAGE>
directors, and attorneys shall keep and maintain this Restructure Agreement and
the Lease Agreement referenced herein, and the terms and provisions thereof, in
strict confidence, and shall not transmit, reveal, disclose or otherwise
communicate any of the terms or provisions of this Restructure Agreement and the
Lease Agreement referenced herein to any person or otherwise publish same. This
subsection 10.9 shall not be construed to prevent the parties from disclosing to
any court or otherwise as necessary in any litigation or resolution of disputes
under this Restructure Agreement or the Lease Agreement referenced herein.
IN WITNESS WHEREOF, each of the parties to this Agreement has caused this
Agreement to be executed as of the date set forth in the first sentence hereof.
"THE GEOKINETICS ENTITIES"
GEOKINETICS INC.
By: /s/ THOMAS J. CONCANNON
Name: Thomas J. Concannon
Title: Vice President
SIGNATURE GEOPHYSICAL
SERVICES, INC.
By: /s/ THOMAS J. CONCANNON
Name: Thomas J. Concannon
Title: Treasurer
QUANTUM GEOPHYSICAL, INC.
By: /s/ LYNN A. TURNER
Name: Lynn A. Turner
Title: President
"THE I/O ENTITIES"
INPUT/OUTPUT, INC.
By: /s/ REX K. REAVIS
Name: Rex K. Reavis
Title: V-P Land Division
GLOBAL CHARTER CORPORATION
By: /s/ AXEL M. SIGMAR
Name: Axel M. Sigmar
Title: Director
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