FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For Fiscal Year Ended December 31, 1995 [Fee Required]
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required] For the transition period
to
--------------------------- --------------------------
Commission File No. 0-14488
SEITEL, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0025431
- ------------------------------------ -----------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
50 Briar Hollow Lane, West 7th Floor
Houston, Texas 77027
- ------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (713) 627-1990
---------------
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------------------------- ---------------------
Common Stock, Par Value $.01 New York
9% Convertible Debentures New York
Securities registered pursuant to Section 12(g) of the Act:
None
---------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
---
The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 28, 1996 was approximately $249,131,328 For these purposes,
the term "affiliate" is deemed to mean officers and directors of the registrant.
On such date, the closing price of the Common Stock on the New York Stock
Exchange was $27.50 and there were a total of 9,652,186 shares of Common Stock
outstanding.
Documents Incorporated by Reference:
Document Part
------------------------------ ----
Definitive Proxy Statement for III
1996 Annual Stockholders Meeting
<PAGE>
ITEM 1. BUSINESS
- -----------------
General
- -------
Seitel, Inc. (the "Company") is a leading provider of seismic data and
corollary geophysical technology used in petroleum exploration and production.
The Company sells its proprietary information-technology to petroleum companies
either for cash or in exchange for working equity-interests in exploration,
development and ownership of natural gas and crude oil reserves. See Note O to
the Company's Consolidated Financial Statements for financial information
relating to industry segments.
Seismic Operations
- ------------------
Since its inception in 1982, the Company has been engaged in the
development of a proprietary library of seismic data, created by both the
Company and others. The Company's seismic data library is owned and marketed by
Seitel Data, Ltd., a Texas limited partnership of which wholly-owned Seitel
subsidiaries constitute all of the limited and general partners. Seitel Data,
Ltd. markets the data library, which consists of both two-dimensional ("2D") and
three-dimensional ("3D") data, to oil and gas companies under license
agreements. Seismic surveys and the analysis of seismic data for the
identification and definition of underground geological structures are principal
techniques used in oil and gas exploration and development to determine the
existence and location of subsurface hydrocarbons.
In 1995, over 300 different petroleum companies entered into seismic
data license agreements with the Company. At December 31, 1995, the Company
owned approximately 880,000 linear miles of 2D and more than 5,000 square miles
of 3D seismic data which it maintained in its library, constituting the second
largest seismic data base marketed publicly in North America. While the majority
of the seismic surveys cover onshore and offshore the U.S. Gulf Coast, the
Company's data bases extend to virtually every major domestic exploration and
development region and 32 foreign countries.
The Company's marketing team of 20 seismic sales specialists markets
data from its library and the creation of new seismic surveys. The Company's
marketing philosophy is that seismic data, like most other products, must be
sold aggressively as opposed to waiting passively for customer purchases. The
marketing team monitors petroleum industry exploration and development
activities through close interaction with oil and gas companies on a daily basis
to maximize seismic sales opportunities.
The Company's 20 member staff of geotechnical professionals, who have
in excess of 400 years of collective geophysical experience, assist the
marketing team by helping clients evaluate their respective seismic
requirements, designing data creation programs to meet market demand, and
supervising the reprocessing of data in the Company's library to enhance future
resales.
The Company strives to maximize its resales of seismic data, which
require minimal incremental cash outlays by the Company and, in turn, can
generate both strong profits and cash flow. In addition to aggressive marketing
and periodic data-reprocessing refinements, the Company supplements its existing
seismic library by the acquisition of additional data.
Through its wholly-owned subsidiary Seitel Geophysical, Inc., the
Company conducts advanced 3D land seismic crew operations. The Company operates
two 1500 channel state-of-the-art telemetric systems, which the Company believes
to be among the largest and fastest real-time systems of their kind in operation
today. These systems enable the Company to efficiently record complex 3D surveys
in the difficult marsh/swamp and transition-zone areas onshore the Gulf Coast
where the Company's data creation activities are concentrated. Most seismic
recording equipment use cables to transmit data and do not operate as
efficiently in wetland areas as telemetric systems, which use radio signals for
data transmission.
<PAGE>
Three-dimensional seismic data provide a graphic geophysical depiction
of the earth's subsurface from two horizontal dimensions and one vertical
dimension, rendering a more detailed picture than 2D data which present a
cross-sectional view from one vertical and one horizontal dimension. The more
comprehensive geophysical information provided by 3D surveys significantly
enhances an interpreter's ability to evaluate the probability of the existence
and location of subsurface hydrocarbons. The proper use of 3D surveys can
significantly increase drilling success rates and reduce the occurrence of
costly dry holes and, correspondingly, significantly lower exploration and
development finding costs. However, the cost to create 3D seismic data is
significantly more than the cost to create 2D seismic data, particularly for
onshore data. As a result, 2D data remain economically more efficient for
preliminary, broad-scale exploration evaluation and to determine the location
for 3D surveys. Also, the best way to design a 3D survey is from 2D data grids
of the respective area. The 3D surveys can then be used for more site-specific
analysis to maximize actual drilling potential.
The Company conducts onshore data creation activities in three ways. It
performs "group-shoot" programs, under which several petroleum companies share
in the expense of a survey and thereby materially reduce their respective cost
of the survey. In a group-shoot survey, the Company retains ownership of the
data created and markets licenses to use the data both to the group-shoot
participants and subsequently to others who make selections after the data are
added to the Company's library. (Seismic data cannot be transferred by a
licensee to another party; each individual user must purchase a respective
license.) The Company also conducts proprietary creation programs for individual
petroleum companies, under which the Company receives revenue for creating a
seismic survey, the ownership of which is retained by the petroleum company
contracting for the survey. Seismic surveys also are conducted for the Company's
wholly-owned petroleum exploration and production subsidiary, DDD Energy, Inc.
("DDD Energy"). The DDD Energy 3D surveys are intended to assist participation
in petroleum exploration and development, whereby DDD Energy's ownership
interest in any resultant production will be accounted for as "oil and gas"
revenues and reserves. Surveys conducted for DDD Energy constitute intercompany
transactions and the Company does not record seismic revenue for those projects.
The Company contracts with selected marine seismic companies to conduct
offshore 3D seismic data surveys due to the cost inherent in operating advanced
seismic vessels. The Company's 3D marine activities are concentrated on
group-shoot programs in the Gulf of Mexico. The Company's extensive in-house
geophysical team designs the offshore surveys and supervises the marine
contractor utilized to shoot the actual survey.
The Company has developed fully-integrated 3D technology and
operations, which extend from its expansive 2D seismic library from which to
best design the parameters for 3D surveys, state-of-the-art land seismic
recording systems and crews specifically to conduct 3D surveys, a processing
center and proprietary computer technology coupled with extensive geophysical
application expertise to effectively interpret 3D data. The Company's processing
and interpretation technology and operations are utilized exclusively by DDD
Energy to provide optimum quality control and confidentiality for the
exploration and production programs in which DDD Energy participates.
Oil and Gas Exploration and Production Operations
- -------------------------------------------------
The Company formed DDD Energy, Inc., a wholly-owned subsidiary, in
March 1993 to participate directly in petroleum exploration, development and
ownership of hydrocarbon reserves through partnering relationships with oil and
gas companies, whereby the Company exchanges its proprietary seismic technology
for working interests. The Company's strategy is to combine its 3D and 2D
seismic resources and related geophysical technologies with the land position
and geology, engineering and drilling expertise of selected petroleum producers
in exploration and development programs. The Company believes that this
combination will result in higher drilling success rates, thereby allowing the
Company to participate in oil and gas exploration and development on a
relatively low cost/low risk basis, and to build an asset base of oil and gas
reserves which complement its seismic data library.
During 1995, DDD Energy entered into and maintained cost and
revenue-sharing relationships with more than 80 petroleum companies and, in
doing so, has received the benefit of these petroleum companies' land,
geological, engineering and drilling staffs. Approximately 200 qualified
exploration and development prospects have been identified, located primarily
onshore Texas and Louisiana, and also onshore Alabama, Mississippi and Arkansas.
DDD Energy's working interest in these prospects averages approximately 25%.
<PAGE>
Since inception, DDD Energy has participated in the drilling of 112
wells, 78 of which have been completed for a 70% success rate. Most of the
larger size wells completed, in terms of proved reserves and resultant
production, did not come on line commercially until the latter part of 1995 and
during the first quarter of 1996. As a result, the Company believes its revenue
and cash flow from production should increase throughout 1996, as should proved
reserves. Since the beginning of 1994, the Company has conducted, or is in the
process of conducting, in excess of 1,000 square miles of 3D seismic surveys,
covering over 250,000 gross acres, for DDD Energy and its partners. The majority
of well locations pinpointed by those surveys, including most of the larger
prospects, should be drilled in 1996-1998.
Customers
- ---------
During each of 1995, 1994 and 1993, the Company's seismic data
customers consisted of more than 300 oil and gas companies. No one customer
accounted for as much as 10% of the Company's revenues during the years 1995,
1994 or 1993. As a result, the Company does not believe that the loss of any
customer would have a material adverse impact on its seismic business. The
Company believes the size of its customer base is due to its seismic technology
and capabilities and the increasing size of its data-library base.
Competition
- -----------
The creation and resale of seismic data are highly competitive in the
United States. There are a number of independent oil-service companies that
create and market seismic data, and numerous oil and gas companies create
seismic data and maintain their own seismic data banks. Some of the Company's
competitors have longer operating histories, greater financial resources and
larger sales volumes than the Company. However, the number of independent
seismic companies has decreased significantly during the last eight years due to
difficult industry conditions. At the same time, oil and gas companies have
reduced their internal geophysical staffs and have out-sourced more for services
such as seismic data.
The Company believes it can compete favorably because of the
expansiveness of its data-library base, the expertise of its marketing staff,
the technical proficiency and exploration experience of its geotechnical staff
and the state-of-the-art technology of its seismic recording crews. These
resources enable the Company to provide high-quality service and to create and
market high-grade data.
In the exploration for and development of natural gas and crude oil
reserves, the Company believes it can participate effectively because of its
fully-integrated seismic resources and corollary geophysical expertise combined
with the geological and engineering experience and land positions of the
Company's petroleum company partners.
Seasonality
- -----------
Historically, the Company's seismic data revenues are highest in the
fourth quarter, primarily because this coincides with the year-end budgetary
periods of the Company's customers and is therefore a time when they make a
disproportionate amount of expenditures for purchases of library data.
Accordingly, the Company's seismic revenues and profits are typically higher in
the fourth quarter. However, due to certain seismic sales not closing by
December 31, 1995, as anticipated, revenues were not higher in the fourth
quarter of 1995. See Note P to the Company's Consolidated Financial Statements
and Management's Discussion and Analysis of Financial Condition and Results of
Operations. In addition to the foregoing, certain weather-related events may
delay the Company's data creation operations during any given year.
Discontinued Operations
- -----------------------
On March 22, 1996, the Company's Board of Directors unanimously adopted
a plan of disposal to discontinue the Company's gas marketing operations,
operated as a wholly-owned subsidiary, Seitel Gas & Energy Corp. The Company
decided to refocus and concentrate on its higher margin seismic technology
operations and related petroleum exploration and production operations in order
to maximize profitability and growth opportunities. Accordingly, the Company's
financial statements have been restated to reflect the discontinued operations.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note L to the Company's Consolidated Financial Statements for
further information related to the discontinued operations.
<PAGE>
Employees
- ---------
As of December 31, 1995, the Company and its subsidiaries had 74
full-time employees related to its continuing operations, and three employees
who devote part of their time to the Company who are also officers of other
corporations. Of these employees, 53 are related to the seismic operations and
six are related to the oil and gas operations. In addition, as of December 31,
1995, the Company had eight employees related to its now discontinued gas
marketing operations. None of the Company's employees are covered by collective
bargaining agreements. The Company believes it has a favorable relationship with
its employees. The Company has employment contracts with five of its senior
corporate executives.
Other
- -----
The Company is not dependent on any particular raw materials, patents,
trademarks or copyrights for its business operations.
ITEM 2. PROPERTIES
- -------------------
The Company's wholly-owned subsidiary Seitel Geophysical, Inc., owns
two 1500-channel telemetric seismic data acquisition systems which are used in
the creation of 3D seismic data.
The Company, through its wholly-owned subsidiary DDD Energy,
participates in oil and gas exploration and development efforts. The following
table sets forth the number of productive oil and gas wells (including producing
wells and wells capable of production) in which the Company owned an interest as
of December 31, 1995. All of the wells are operated by the Company's petroleum
company partners.
<TABLE>
<CAPTION>
Gross Wells Net Wells
----------- ---------
<S> <C> <C>
Oil 23 4.75
Gas 52 11.47
</TABLE>
The following table sets forth the number of net wells drilled in the
last three fiscal years in which the Company participated.
<TABLE>
<CAPTION>
Exploratory Development
---------------------------- ---------------------------
Productive Dry Total Productive Dry Total
---------- ----- ------- ---------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
1995
- ----
Texas 4.45 1.54 5.99 1.49 1.08 2.57
Alabama -- .21 .21 -- -- --
Mississippi .51 .31 .82 -- .60 .60
Louisiana .27 .96 1.23 .24 .24 .48
Arkansas -- .12 .12 -- -- --
1994
- ----
Texas 2.44 .94 3.38 1.74 .24 1.98
Alabama -- -- -- -- .05 .05
Mississippi .43 .31 .74 -- -- --
1993
- ----
Texas .50 -- .50 -- -- --
Alabama .03 -- .03 -- -- --
</TABLE>
<PAGE>
As of December 31, 1995, the Company was participating in the drilling
of one gross and .16 net well.
The following table sets forth certain information regarding the
Company's developed and undeveloped lease acreage as of December 31, 1995. The
table does not include additional acreage which the Company may earn upon
completion of pending 3D seismic data projects.
<TABLE>
<CAPTION>
Developed Acres Undeveloped Acres
--------------------------- ----------------------------
Gross Net Gross Net
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
Texas 13,856 3,543 71,460 16,159
Louisiana 920 178 57,762 13,005
Alabama 160 5 4,051 1,181
Mississippi 2,280 289 8,764 7,317
Arkansas -- -- 7,120 846
------------ ------------- ------------- ------------
Total 17,216 4,015 149,157 38,508
============ ============= ============= ============
</TABLE>
The following table describes for each of the last three fiscal years,
crude oil (including condensate and natural gas liquids) and natural gas
production for the Company, average production costs and average sales prices.
All such production comes from the U.S. Gulf Coast region. The Company has not
filed any different estimates of its December 31, 1995 reserves with any federal
agencies.
<TABLE>
<CAPTION>
Net Production Average Sales Price
--------------------- Average --------------------
Year Ended Oil Gas Production Oil Gas
December 31, (Mbbls) (Mmcf) Cost per Mcfe (Bbls) (Mcf)
- ----------- --------------------- ------------- --------------------
<S> <C> <C> <C> <C> <C>
1995 193 1,170 $ .66 $ 13.85 $ 1.55
1994 54 268 .53 12.32 1.76
1993 27 97 .44 11.32 2.09
</TABLE>
For estimates of the Company's net proved and proved developed oil and
gas reserves as of December 31, 1995, see Note Q to the Company's Consolidated
Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
On May 25, 1995, Seitel Geophysical, Inc. ("SGI"), a wholly-owned
subsidiary of the Company, filed suit in United States District Court for the
Eastern District of Louisiana against Greenhill Petroleum Corporation
("Greenhill") for breach of contract. SGI is seeking to recover approximately
$1.4 million owed by Greenhill to SGI for seismic data acquisition services
provided to Greenhill by SGI in 1994 in connection with a 3D seismic data shoot
in southern Louisiana. Greenhill has answered in this suit by generally denying
SGI's allegations and by asserting counterclaims against SGI of approximately $1
million and unspecified punitive damages. To date, Greenhill has paid SGI in
excess of $7 million under the contract at issue, and SGI has provided the
seismic data acquired pursuant to the contract to Greenhill. Active discovery is
currently ongoing and this case is set for trial during the week of May 13,
1996. While the outcome of this litigation cannot be predicted with certainty at
this stage, the Company believes it will prevail on its claims against Greenhill
and Greenhill's counterclaims are without merit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
NONE
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
- ---------------------------------------------------------
The Company's Common Stock is traded on the New York Stock Exchange.
The following table sets forth the high and low sales prices for the Common
Stock for 1995 and 1994 as reported by the New York Stock Exchange.
<TABLE>
<CAPTION>
1995 1994
------------------------------------------------
High Low High Low
------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter 33-1/2 18-7/8 26-1/2 13-3/8
Second Quarter 34-3/4 27 33-3/8 19-3/8
Third Quarter 31-1/4 23-7/8 37 24-1/4
Fourth Quarter 35-1/2 23-3/4 30-1/2 20
</TABLE>
On March 28, 1996, the closing price for the Common Stock was $27.50.
To the best of the Company's knowledge, there are approximately 1,340 record
holders of the Company's Common Stock as of March 28, 1996.
Dividend Policy
- ---------------
The Company did not pay cash dividends during 1994 or 1995, and it
intends to retain future earnings in order to provide funds for use in the
operation and expansion of its business. Because the payment of dividends is
dependent upon earnings, capital requirements, financial conditions, any
required consents of lenders and other factors, there is no assurance that
dividends, whether in the form of stock or cash, will be paid in the future.
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
- ---------------------------------------------
(in thousands, except per share data)
The following table summarizes certain historical consolidated
financial data of the Company and is qualified in its entirety by the more
detailed consolidated financial statements and notes thereto included in Item 8
hereof. Amounts in 1994 and 1993 have been restated to reflect the effects of
the discontinued operations.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------
Statement of Operations Data: 1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue $ 74,439 $ 70,902 $ 43,456 $ 28,354 $ 24,463
Expenses and costs:
Depreciation, depletion and amortization 26,872 27,181 19,852 13,486 9,165
Cost of sales 13,071 10,499 3,202 506 428
Selling, general and administrative 15,393 14,672 9,132 6,412 4,977
Net interest expense 3,078 3,198 2,126 1,470 787
-------- -------- -------- -------- --------
Total expenses and costs 58,414 55,550 34,312 21,874 15,357
Income from continuing operations
before provision for income
taxes, extraordinary item and change in
accounting principle 16,025 15,352 9,144 6,480 9,106
Provision for income taxes 5,898 5,681 3,328 2,134 3,096
-------- -------- -------- -------- --------
Income from continuing operations
before extraordinary item and
change in accounting principle 10,127 9,671 5,816 4,346 6,010
Loss from discounted operations,
net of tax (1,196) (52) (99) -- --
Loss on disposal of discontinued
operations, net of tax (252) -- -- -- --
-------- -------- -------- -------- --------
Income before extraordinary item
and change in accounting principle 8,679 9,619 5,717 4,346 6,010
Extraordinary charge on early
extinguishment of debt, net of tax -- (304) -- -- --
Cumulative effect on prior years of
change in accounting principle -- -- -- 204 --
-------- -------- -------- -------- --------
Net income $ 8,679 $ 9,315 $ 5,717 $ 4,550 $ 6,010
======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
Statement of Operations Data: 1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings per share:
Primary:
Income from continuing operations
before extraordinary item and
change in accounting principle $ 1.03 $ 1.24 $ .93 $ .76 $ 1.13
Discontinued operations (.15) (.01) (.01) -- --
Extraordinary item -- (.04) -- -- --
Change in accounting principle -- -- -- .04 --
--------- --------- --------- --------- ---------
Net income $ .88 $ 1.19 $ .92 $ .80 $ 1.13
========= ========= ========= ========= =========
Assuming full dilution:
Income from continuing operations
before extraordinary item and
change in accounting principle $ .99 $ 1.11 $ .83 $ .72 $ 1.13
Discontinued operations (.14) (.01) (.01) -- --
Extraordinary item -- (.03) -- -- --
Change in accounting principle -- -- -- .03 --
--------- --------- --------- --------- ---------
Net income $ .85 $ 1.07 $ .82 $ .75 $ 1.13
========= ========= ========= ========= =========
Weighted average shares
- Primary 9,872 7,800 6,893 5,713 5,305
- Assuming full dilution 10,358 9,001 8,279 7,645 5,305
Cash dividends per share $ -- $ -- $ -- $ .05 $ .10
As of December 31,
----------------------------------------------------------------
Balance Sheet Data: 1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
Data bank, net $ 105,369 $ 95,801 $ 58,583 $ 55,278 $ 40,432
Oil and gas properties, net 42,424 21,389 4,811 -- --
Property and equipment, net 10,126 11,035 6,985 698 335
Total assets 209,567 166,769 92,554 73,136 52,042
Total debt 57,560 11,839 31,866 26,746 11,471
Stockholders' equity 120,378 101,329 41,583 35,643 31,350
Stockholders' equity per common share
outstanding at December 31 $ 12.76 $ 11.48 $ 6.95 $ 5.96 $ 5.65
Common shares outstanding at
December 31 9,437 8,826 5,987 5,976 5,548
</TABLE>
Note: All number of shares and per share amounts have been restated to give
retroactive effect to the four 1% stock dividends in March, June,
September and December 1991, and the two 1% stock dividends in March
and June, 1992.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------
Introduction
- ------------
The following table sets forth for the periods indicated (i) the
percentage which certain items in the financial statements of the Company bear
to revenues and (ii) the percent change in the dollar amount of such items from
period to period.
<TABLE>
<CAPTION>
Percentage of Percentage of
Total Revenues Increase (Decrease)
Year Ended December 31, Years Ended December 31,
------------------------------------ ------------------------
1995 1994
vs. vs.
1995 1994 1993 1994 1993
-------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue:
Seismic 94% 98% 97% *<F1> 66%
Oil and Gas 6% 2% 1% 299% 94%
Other *<F1> *<F1> 2% (71%) (87%)
-------- -------- -------
Total revenue 100% 100% 100% 5% 63%
Expenses and costs:
Depreciation, depletion and amortization 36% 38% 46% (1%) 37%
Cost of sales 17% 15% 7% 24% 228%
Selling, general and administrative 21% 21% 21% 5% 61%
Net interest 4% 4% 5% (4%) 50%
-------- -------- -------
Total expenses and costs 78% 78% 79% 5% 62%
Provision for income taxes 8% 8% 8% 4% 71%
-------- -------- -------
Income from continuing operations 14% 14% 13% 5% 66%
======== ======== =======
<FN>
<F1> * Less than 1%
</FN>
</TABLE>
<PAGE>
Results of Operations
- ---------------------
Total revenue was $74,439,000, $70,902,000 and $43,456,000 in 1995,
1994 and 1993, respectively, representing increases of 5% from 1994 to 1995 and
63% from 1993 to 1994. Revenue primarily consists of revenue generated from the
seismic business and oil and gas production.
Seismic revenue was $69,598,000, $69,579,000, and $41,913,000 during
1995, 1994, and 1993, respectively. The slight increase in seismic revenue
between 1995 and 1994 primarily resulted from an increase in revenue generated
from the licensing of seismic data currently in the Company's library, which was
offset by a decrease in revenue generated from the creation of new seismic data.
During 1995, the Company's focus was more on generating revenue from data that
had been recently added to the library (both onshore and offshore 3D seismic
data) than on the creation of new data. The increase of $27,666,000 in seismic
revenue from 1993 to 1994 is primarily due to increased demand for 3D seismic
surveys and the increased size of the Company's 2D and 3D data library available
for licensing. The Company believes the demand for its seismic data remains
strong due to several factors: large integrated oil and gas companies have
reduced internal seismic data crew staffs and are using outside sources to
provide more of these services; the majority of the Company's seismic data is
located in the Gulf Coast region, which continues to be of particular interest
to the oil and gas industry; and the high quality of the Company's seismic data.
Additionally, management believes that the Company's 2D data library will
continue to generate significant revenue because 2D data is less expensive than
3D and 2D data is the most cost-efficient means to preliminarily identify
exploration and development leads, which are then best evaluated with 3D data.
Oil and gas revenue was $4,806,000, $1,204,000 and $621,000 during
1995, 1994 and 1993, respectively. The increases in oil and gas revenue are due
to more wells coming on line in 1994 and 1995. The first year of oil and gas
operations for the Company was 1993. Since then, the Company has steadily
increased its exploration and development efforts resulting in the number of
wells producing as of December 31, 1993 to increase from one to 23 at December
31, 1994 and to 68 at December 31, 1995. Net production of oil and gas has
increased from 27,000 barrels and 97 million cubic feet (mmcf) for the year
ended December 31, 1993 to 54,000 barrels and 268 mmcf for the year ended
December 31, 1994, and 193,000 barrels and 1,170 mmcf for the year ended
December 31, 1995. Most of the larger size wells completed, in terms of proved
reserves, did not come on line commercially until the latter part of 1995 and
during the first quarter of 1996. As a result, the Company believes its oil and
gas revenue should increase progressively during 1996.
Depreciation, depletion and amortization consist primarily of data bank
amortization. Data bank amortization amounted to $23,852,000, $25,777,000, and
$19,069,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
As a percentage of revenue from licensing seismic data, data bank amortization
was 45%, 46% and 52% for 1995, 1994 and 1993, respectively. These changes
between years are primarily due to the mix of sales of 2D and 3D data amortized
at varying percentages based on each data program's current and expected future
revenue stream. The costs of the Company's proprietary seismic data are
amortized for each project in the proportion that its revenue for a period
relates to management's estimate of its ultimate revenues. Revenue is expected
to be more evenly received over the lives of existing seismic data libraries
purchased by the Company. Accordingly, the Company amortizes the cash invested
in purchases of existing seismic data libraries evenly over ten years.
<PAGE>
Since inception, management has established guidelines regarding its
annual charge for amortization. Under these guidelines, 90% of the cost incurred
in the creation of proprietary seismic data are amortized within five years of
inception for 2D seismic data and within seven years of inception for 3D data,
and the final 10% is amortized on a straight-line basis over fifteen years.
Under these guidelines, costs of existing seismic data libraries purchased by
the Company are fully amortized within ten years from date of purchase. On a
periodic basis, the carrying value for each seismic data program is compared to
its estimated future revenue and, if appropriate, is reduced to its estimated
net realizable value. Other than adjustments to comply with the annual
amortization guidelines, there have been no material write-downs.
Trends in the Company's (and its industry's) seismic revenue are
evaluated and results are used in estimating future revenue expected to be
received on each seismic data program. Pricing of seismic data is significant
when it indicates a revision to estimated future revenue. During periods of
downturn, the Company may reduce its estimates of future revenue, causing the
amortization rate to rise and liquidity and operating results to decline. If the
Company perceives an impairment in value due to reduced, or a lack of, estimated
future revenue, a write-down of the asset is recognized. In periods of upturn,
the opposite may occur, except, however, that prior write-downs are not
reversed. Even though the price of gas was depressed at times during 1995 and
spiked during the severe cold weather experienced in the fourth quarter of 1995,
the prevailing outlook is that prices will be generally stable, and that demand
will continue to increase. Accordingly, management believes that the economic
outlook for the Company is stable and the possibility for significant
improvement exists.
Costs of sales consists of expenses associated with the acquisition of
seismic data for non-affiliated parties, seismic resale support services, oil
and gas production and, in 1993, geophysical technology services. The increase
in cost of sales from $3,202,000 to $10,499,00 from 1993 to 1994 is attributable
to the Company having a full year of operations related to acquisition of
seismic data for non-affiliated parties and oil and gas production. The increase
in cost of sales from $10,499,000 to $13,071,000 from 1994 to 1995 is due to the
Company's increasing volume of business in these areas. Revenues from these
areas increased from $5,222,000 in 1993 to $14,033,000 in 1994 to $19,773,000 in
1995. Gross profit margin related to the acquisition of seismic data for
non-affiliated parties was 22%, 20% and 30% for 1995, 1994 and 1993,
respectively. Gross profit margin related to oil and gas production was 67%, 72%
and 80% for 1995, 1994 and 1993, respectively.
The Company's selling, general and administrative expenses increased
from $9,132,000 in 1993 and $14,672,000 in 1994 to $15,393,000 in 1995. The
increase for each year was primarily a result of the addition of new employees,
marketing expenses and incentive compensation directly related to the increased
volume of business, as well as expenses related to the Company's expansions into
the 3D seismic recording and crew operation and oil and gas exploration and
production areas. As a percentage of total revenue, these expenses were 21% in
1993,1994 and 1995.
The Company's interest expense was $2,306,000 in 1993, $3,455,000 in
1994 and $3,407,000 in 1995. The increase from 1993 to 1994 was primarily due to
interest expense incurred on amounts owed to a seismic acquisition contractor as
well as interest incurred on funds (both bank and capital leases) used to
acquire the Company's two 3D seismic recording systems and seismic data
processing center. The slight decrease in interest expense in 1995 resulted from
less interest expense incurred on the 9% convertible debentures due to the
conversions and exchanges into common stock, offset by increased interest
expense being incurred primarily on amounts owed to a seismic acquisition
contractor. As of December 31, 1995, amounts owed to the seismic acquisition
contractor had been paid.
<PAGE>
On March 22, 1996, the Company's Board of Directors unanimously adopted
a plan of disposal to discontinue the Company's gas marketing operations. The
Company decided to refocus and concentrate on its higher margin seismic
technology operations and related petroleum exploration and production
operations in order to maximize profitability and growth opportunities.
Accordingly, the Company's financial statements have been restated to reflect
the discontinued operations. The loss from discontinued operations amounted to
$1,196,000, net of an income tax benefit of $703,000 for 1995. The loss from
discontinued operations in 1995 includes an estimated $2.1 million pre-tax loss
related to future contractual commitments. At December 31, 1995, the Company had
fixed price gas sales contracts which were generally below the estimated market
price at which the Company could purchase gas supply and transportation. Current
market pricing models were used to estimate the market price at which the
Company could purchase gas supply and transportation in the future, and actual
prices may differ from these estimates. Estimated effects of changes in market
prices and the actual settlement costs of these contracts will be recognized as
net gains or losses in income (loss) from discontinued operations until disposal
or termination of the Company's contracts. The loss on disposal of discontinued
operations recorded as of December 31, 1995, is estimated to be $252,000, net of
an income tax benefit of $148,000, and includes costs such as severance benefits
and estimated personnel costs to continue to honor the Company's obligations
until the contracts are transferred or terminated.
In October 1994, the company called for redemption of its 12-1/2%
subordinated debentures due 1999 totaling $3,725,000. As a result, the Company
recorded an extraordinary charge of $304,000, net of a $163,000 income tax
benefit, associated with the early extinguishment of indebtedness, which has
been reflected as an extraordinary item for the year ended December 31, 1994.
Liquidity and Capital Resources
- -------------------------------
On December 28, 1995, the Company completed a private placement of
three series of unsecured Senior Notes totaling $75 million. The Company
contemporaneously issued its Series A Notes and Series B Notes, which total
$52.5 million and bear interest at a fixed rate of 7.17%. The Series A Notes
mature on December 30, 2001, and require annual principal payments of $8.333
million beginning December 30, 1999. The Series B and Series C Notes mature on
December 30, 2002, and require annual principal payments of $10 million
beginning December 30, 1998. Interest on all series of the notes is payable
semi-annually on June 30 and December 30. The Company has scheduled the issuance
of the Series C Notes, totaling $22.5 million, for April 9, 1996. The Series C
Notes will bear interest at 1.45% above the yield of U.S. Treasury securities
with a five year maturity at the time of issuance. The Company used the majority
of the proceeds of the Series A and Series B Notes to repay amounts outstanding
under its $25 million revolving line of credit, amounts outstanding under a
wholly-owned subsidiary's $75 million reducing revolving line of credit, and
amounts owed to a seismic contractor. The proceeds of the Series C Notes will be
used primarily to fund petroleum exploration and development activities of its
wholly-owned subsidiary and for other working capital or general corporate
purposes.
<PAGE>
The Company filed a registration statement on Form S-3 (the "Shelf
Registration Statement") in June 1994 to offer from time to time in one or more
series (i) unsecured debt securities, which may be senior or subordinated, (ii)
preferred stock, par value $0.01 per share, and (iii) common stock, par value
$.01 per share, or any combination of the foregoing, at an aggregate initial
offering price not to exceed $75,000,000. The Shelf Registration Statement was
declared effective by the Securities and Exchange Commission on June 30, 1994.
In August 1994, the Company completed a public offering of 1,061,200 shares of
its common stock priced at $32 per share pursuant to the Shelf Registration
Statement. The net proceeds from the offering (after underwriting commission and
offering expenses) totaled $31,917,000. After this sale of common stock at an
initial aggregate offering price of $33,958,400, the Company may offer
additional securities in the future for up to an aggregate initial offering
price of $41,041,600 pursuant to the Shelf Registration Statement.
During 1995, the Company and a wholly-owned subsidiary obtained two
separate three year term loans totaling $716,000, which both bear interest at
the rate of 8.413%, for the purchase of certain property and equipment which
secures the debt. Monthly principal and interest payments total approximately
$22,000. The balance outstanding on the loans at March 28, 1996, was $603,000.
On July 15, 1993, a wholly-owned subsidiary of the Company obtained a
$4,300,000, five year term loan bearing interest at the rate of 7.61% for the
purchase of a 3D seismic recording system. The debt is secured by such
equipment. Monthly principal and interest payments of $86,000 began on August 1,
1993. The balance outstanding on the term loan at March 28, 1996, was
$2,205,000.
During 1994 and 1995, the Company entered into three capital leases
which relate to the purchase of a second 3D seismic recording system and a
seismic data processing center. These lease agreements are for terms of three to
five years. Monthly principal and interest payments total approximately
$125,000. The balance outstanding under these capital lease obligations was
$3,412,000 at March 28, 1996.
<PAGE>
During 1995 and 1994, the Company received $6,942,000 and $7,287,000,
respectively, from the exercise of common stock purchase warrants and options
and the Company's 401(k) stock purchases. In connection with the option and
warrant exercises in 1995 and 1994, the Company received $1,900,000 and
$1,879,000, respectively, in tax savings. From January 1, 1996, through March
28, 1996, the Company received $31,000 from the Company's 401(k) stock
purchases.
In February 1996, the Company called for the March 31, 1996 redemption
of its 9% convertible subordinated debentures, thereby eliminating future
interest and sinking fund payments. All remaining outstanding debentures
converted to common stock.
During 1995, gross seismic data bank additions and capitalized oil and
gas exploration and development costs amounted to $33,417,000 and $22,660,000,
respectively. These capital expenditures, as well as taxes, interest expenses,
cost of sales and general and administrative expenses, were funded by
operations, proceeds received from the exercise of common stock purchase
warrants and options combined with tax savings received on the exercise of the
warrants and options, and proceeds from the private placement described above.
Acquisitions of geophysical equipment and other property and equipment were
funded partially by cash from operations and the remainder through capital lease
financing and term loans.
Currently, the Company anticipates capital expenditures for 1996 to
total approximately $70 million. Such expenditures include approximately $45
million for the creation of proprietary seismic data, and approximately $25
million for oil and gas exploration and development efforts. The Company
believes its revenues from operating sources and proceeds from its Series C
Senior Notes and from the exercise of common stock purchase warrants and options
should be sufficient to fund the 1996 capital expenditures, along with
expenditures for operating and general and administrative expenses.
Additionally, the Company could arrange for additional debt or equity financing
during 1996; however, there can be no assurance that the Company would be able
to accomplish any such debt or equity financing on terms satisfactory to it. The
Company has received preliminary, non-binding proposals for a working capital
line of credit from several banks which are currently under consideration.
In March 1995, the Financial Accounting Standards Board issued a
statement establishing accounting standards for the impairment of long-lived
assets. This statement requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be realizable. The Company is required to
adopt this statement no later than its fiscal year ending December 31, 1996,
although earlier implementation is permitted. As of December 31, 1995, the
Company has not adopted this statement; however, the Company anticipates that
application of the statement will not have a material effect on its consolidated
financial statements.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, a new standard on accounting for stock based compensation. SFAS No. 123
encourages companies to account for stock-based compensation awards based on the
fair value of the awards at the date they are granted. The resulting
compensation cost would be shown as an expense in the statement of income.
Companies can choose not to apply the new accounting method and continue to
apply current accounting requirements; however, disclosure will be required as
to what net income and earnings per share would have been had the new accounting
method been followed. Adoption of the standard is required in 1996, although
earlier implementation is permitted. The Company does not intend to adopt SFAS
No. 123 for accounting purposes; however it will make annual pro forma
disclosures of its effects commencing in 1996.
<PAGE>
Impact of Inflation and Changing Prices
- ---------------------------------------
The general availability of seismic equipment and crews and the level
of exploration activity in the oil and gas industry directly affect the cost of
creating seismic data. The pricing of the Company's products and services is
primarily a function of these factors. For these reasons, the Company does not
believe inflationary trends have had any significant impact on its financial
operating results during the three years ended December 31, 1995.
Information Regarding Forward Looking Statements
- ------------------------------------------------
This Annual Report on Form 10-K includes forward looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
its goals will be achieved. Important factors that could cause actual results to
differ materially from those in the forward looking statements herein include,
but are not limited to, changes in the exploration budgets of the Company's
seismic data and related services customers, actual customer demand for the
Company's seismic data and related services, the extent of the Company's success
in acquiring oil and gas properties and in discovering, developing and producing
reserves, the timing and extent of changes in commodity prices for natural gas,
crude oil and condensate and natural gas liquids and conditions in the capital
markets and equity markets during the periods covered by the forward looking
statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The financial statements and financial statement schedules required by
this Item are set forth at the pages indicated in ITEM 14(a) (1) and (2) below.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------
NONE
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
The information required to be set forth in this Item is incorporated
by reference to a similarly titled heading in the Company's definitive proxy
statement relating to the 1996 annual meeting of its stockholders to be filed
with the Securities and Exchange Commission not later than 120 days after the
end of the fiscal year covered by this Form 10-K (hereinafter the "Proxy
Statement").
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------
The information required to be set forth in this Item is incorporated
by reference to a similarly titled heading in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
- ---------------------------------------------------------------
The information required to be set forth in this Item is incorporated
by reference to a similarly titled heading in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
The information required to be set forth in this Item is incorporated
by reference to a similarly titled heading in the Proxy Statement.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
- ---------------------------------------------------------------
(a) Documents filed as part of this Report Page
-------------------------------------- ----
(1) Financial Statements:
Report of Independent Public Accountants F-1
Consolidated Balance Sheets as of
December 31, 1995 and 1994 F-2
Consolidated Statements of Operations
for the years ended December 31,
1995, 1994, and 1993 F-4
Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1995, 1994 and 1993 F-5
Consolidated Statements of Cash Flows
for the years ended December 31, 1995,
1994 and 1993 F-6
Notes to Consolidated Financial Statements F-8
(2) All schedules are omitted because they are not applicable or
the required information is shown in the financial statements
or the notes to the financial statements.
(3) Exhibits:
3.1 Certificate of Incorporation of the Company filed May
7, 1982 and Amendment to Certificate of Incorporation
filed April 25, 1984 (1)
3.2 Amendment to Certificate of Incorporation filed August
4, 1987 (3)
3.3 Amendment to Certificate of Incorporation filed January
18, 1989 (4)
3.4 Amendment to Certificate of Incorporation filed July
13, 1989 (5)
3.5 Amendment to Certificate of Incorporation filed August
3, 1993 (12)
3.6 By-Laws of the Company (1)
3.7 Corporate Resolution reflecting an Amendment to the
By-Laws of the Company adopted January 6, 1989 (3)
3.8 Corporate Resolution reflecting an Amendment to the
By-Laws of the Company adopted May 19, 1986 (5)
4.1 Specimen of Common Stock Certificate (1)
4.2 Form of Warrant Certificate granted to employees of the
Company in February 1990 (5)
4.3 Form of Warrant Certificate granted to certain
employees and one Director of the Company in December
1990 and expiring in December 1997 (8)
4.4 Form of Warrant Certificate granted to certain
employees and one Director of the Company in December
1990 and expiring in December 2000 (8)
<PAGE>
(3) Exhibits, continued:
4.5 Indenture of Trust between the Company and United
States Trust Company of New York relating to
Convertible Subordinated Debentures due December 31,
2001, including Form of such Debenture (9)
4.6 Form of Underwriter's Warrant Certificate (9)
4.7 Form of Promissory Note for Employee Stock Purchase
dated July 21, 1992 (11)
4.8 Form of Subscription Agreement for Employee Stock
Purchase dated July 21, 1992 (11)
4.9 Form of Pledge for Employee Stock Purchase dated
July 21, 1992 (11)
4.10 Form of Warrant Certificate granted under the 1994
Warrant Plans (16)
4.11 Form of Warrant Certificate granted to certain
Debenture holders (17)
4.12 Form of Warrant Certificate granted under the 1995
Warrant Reload Plan (22)
10.1 Incentive Stock Option Plan of the Company (1)
10.2 Non-Qualified Stock Option Plan of the Company (1)
10.3 1993 Incentive Stock Option Plan of the Company (12)
10.4 Amendment No. 1 to the Seitel, Inc. 1993 Incentive
Stock Option Plan (20)
10.5 Non-Employee Directors' Stock Option Plan of the
Company (15)
10.6 Seitel, Inc. 1995 Warrant Reload Plan (20)
10.7 Memorandum of Understanding between the Company and
Triangle Geophysical Company dated as of June 7,
1984 (1)
10.8 Lease Agreement by and between the Company and
Commonwealth Computer Advisors, Inc. (2)
10.9 The Company's 401(k) Plan adopted January 29, 1988
(3)
10.10 Amendment No. 1 to the Company's 401(k) Plan (6)
10.11 Amendment No. 2 to the Company's 401(k) Plan (6)
10.12 The Company's 401(k) Plan adopted February 27, 1995
(16)
10.13 Executive Services Agreement dated April 3, 1990
between the Company and Helm Resources, Inc. (7)
10.14 Employment Agreement effective as of January 1, 1991
between the Company and Paul A. Frame, Jr. (10)
<PAGE>
(3) Exhibits, continued:
10.15 Employment Agreement effective as of January 1, 1991
between the Company and Horace A. Calvert (10)
10.16 Employment Agreement effective as of January 1, 1991
between the Company and Herbert M. Pearlman (10)
10.17 Employment Agreement effective as of January 1, 1991
between the Company and David S. Lawi (10)
10.18 Employment Agreement effective as of January 1, 1993
between the Company and Debra D. Valice (13)
10.19 Joint Venture Agreement dated April 5, 1990 by and
between Seitel Offshore Corp., a wholly-owned
subsidiary of the Company, and Digicon Data Inc., a
wholly-owned subsidiary of Digicon Geophysical Corp.
(6)
10.20 Master Revolving Credit and Security Agreement dated
March 18, 1994 (effective February 28, 1994) between
the Company, Seitel Geophysical, Inc. (Company's
wholly-owned subsidiary) and Exsol, Inc. (Company's
wholly-owned subsidiary) and Compass Bank and Bank
One, Texas, N.A. (14)
10.21 Master Revolving Promissory Note effective February
28, 1994 between the Company, Seitel Geophysical,
Inc. (Company's wholly-owned subsidiary) and Exsol,
Inc. (Company's wholly-owned subsidiary) and Compass
Bank (14)
10.22 Master Revolving Promissory Note effective February
28, 1994 between the Company, Seitel Geophysical,
Inc. (Company's wholly-owned subsidiary) and Exsol,
Inc. (Company's wholly-owned subsidiary) and Bank
One, Texas, N.A. (14)
10.23 Letter Agreement dated March 18, 1994 between the
Company, Seitel Geophysical, Inc. (Company's
wholly-owned subsidiary), Exsol, Inc. (Company's
wholly-owned subsidiary) and Seitel Offshore Corp.
(Company's wholly-owned subsidiary) and Compass Bank
and Bank One, Texas, N.A. (14)
10.24 Pledge Agreement dated March 18, 1994 (effective
February 28, 1994) from Seitel, Inc. in favor of
Compass Bank and Bank One, Texas, N.A. (14)
10.25 Loan Modification Agreement and Amendment to Loan
Documents effective as of May 19, 1994 between the
Company, Seitel Geophysical, Inc. (Company's wholly-
owned subsidiary), Exsol, Inc. (Company's
wholly-owned subsidiary) and Seitel Offshore Corp.
(Company's wholly-owned subsidiary) and Compass Bank
and Bank One, Texas, N.A. (15)
10.26 Security Agreement (Joint Venture Interest)
effective as of May 19, 1994 between Seitel Offshore
Corp. (Company's wholly-owned subsidiary) and
Compass Bank and Bank One, Texas, N.A. (15)
10.27 Second Loan Modification Agreement and Amendment to
Loan Documents effective as of August 3, 1994
between the Company, Seitel Geophysical, Inc.
(Company's wholly-owned subsidiary), Exsol, Inc.
(Company's wholly-owned subsidiary) and Seitel
Offshore Corp. (Company's wholly-owned subsidiary)
and Compass Bank and Bank One, Texas, N.A. (15)
<PAGE>
(3) Exhibits, continued:
10.28 Master Revolving Promissory Note effective December
31, 1994 between the Company, Seitel Data Corp.
(Company's wholly-owned subsidiary), Seitel
Geophysical, Inc. (Company's wholly-owned
subsidiary), Seitel Offshore Corp. (Company's
wholly-owned subsidiary) and Exsol, Inc. (Company's
wholly-owned subsidiary) and Compass Bank-Houston
(19)
10.29 Master Revolving Promissory Note effective December
31, 1994 between the Company, Seitel Data Corp.
(Company's wholly-owned subsidiary), Seitel
Geophysical, Inc. (Company's wholly-owned
subsidiary), Seitel Offshore Corp. (Company's
wholly-owned subsidiary) and Exsol, Inc. (Company's
wholly-owned subsidiary) and Bank One, Texas, N.A.
(19)
10.30 Restated Revolving Credit and Security Agreement
effective as of December 31, 1994 among the Company,
Seitel Data Corp. (Company's wholly-owned
subsidiary), Seitel Geophysical, Inc. (Company's
wholly-owned subsidiary), Seitel Offshore Corp.
(Company's wholly-owned subsidiary) and Exsol, Inc.
(Company's wholly-owned subsidiary) and Bank One,
Texas, N.A. and Compass Bank-Houston (19)
10.31 Amendment to Security Agreement (Joint Venture
Interest) effective as of December 31, 1994 among
Seitel Offshore Corp. (Company's wholly-owned
subsidiary) and Bank One, Texas, N.A. and Compass
Bank-Houston (19)
10.32 Amendment to Pledge Agreement effective as of
December 31, 1994 among the Company, Seitel
Geophysical, Inc. (Company's wholly-owned
subsidiary), Seitel Data Corp. (Company's
wholly-owned subsidiary) and Bank One, Texas, N.A.
and Compass Bank-Houston (19)
10.33 First Amendment to Restated Credit and Security
Agreement effective as of September 14, 1995 among
the Company, Seitel Data Corp. (Company's wholly-
owned subsidiary), Seitel Geophysical, Inc.
(Company's wholly-owned subsidiary), Seitel Offshore
Corp. (Company's wholly-owned subsidiary), Exsol,
Inc. (Company's wholly-owned subsidiary), and Bank
One, Texas, National Association and Compass Bank -
Houston (21)
10.34 Termination and Release Agreement dated as of
December 28, 1995, between the Company and various
of its subsidiaries and Bank One, Texas, National
Association and Compass Bank-Houston *
10.35 Term Note dated July 15, 1993 between Seitel
Geophysical, Inc. (Company's wholly- owned
subsidiary) and Central Bank of the South (12)
10.36 Term Credit and Security Agreement dated July 15,
1993 between Seitel Geophysical, Inc. (Company's
wholly-owned subsidiary) and Central Bank of the
South (12)
10.37 Continuing Guaranty dated July 15, 1993 between the
Company and Central Bank of the South (12)
10.38 Side Letter Agreement dated July 15, 1993 between
the Company and Central Bank of the South (12)
10.39 Loan Modification Agreement and Amendment to Loan
Documents effective as of December 28, 1995, between
Seitel Geophysical, Inc. (Company's wholly-owned
subsidiary) and Compass Bank*
<PAGE>
(3) Exhibits, continued:
10.40 Master Equipment Lease Agreement dated May 20, 1994,
between Seitel Geophysical, Inc. (Company's
wholly-owned subsidiary) and MetLife Capital,
Limited Partnership (15)
10.41 Credit Agreement dated June 14, 1995, between DDD
Energy, Inc. (Company's wholly-owned subsidiary) and
Bank One, Texas, National Association, as a Bank and
the Agent and Compass Bank- Houston (20)
10.42 Promissory Note dated June 14, 1995, in the face
amount of $37,500,000, executed by DDD Energy, Inc.
(Company's wholly-owned subsidiary) and payable to
the order of Bank One, Texas, National Association
(20)
10.43 Promissory Note dated June 14, 1995, in the face
amount of $37,500,000, executed by DDD Energy, Inc.
(Company's wholly-owned subsidiary) and payable to
the order of Compass Bank- Houston (20)
10.44 Guaranty dated June 14, 1995, by Seitel, Inc. in
favor of Bank One, Texas, National Association,
Individually and as Agent and Compass Bank-Houston
(20)
10.45 Security Agreement (Stock Pledge) dated June 14,
1995, by Seitel, Inc. in favor of Bank One, Texas,
National Association, as Agent (20)
10.46 Termination and Release Agreement dated as of
December 28, 1995 between DDD Energy, Inc.
(Company's wholly-owned subsidiary) and Bank One,
Texas, National Association and Compass
Bank-Houston*
10.47 Incentive Compensation Agreement (11)
10.48 Shareholder Value Bonus Agreement effective as of
March 18, 1994 (15)
10.49 Amendment to Shareholder Value Bonus Agreement
effective as of March 18, 1994 (18)
10.50 Seitel, Inc. 1995 Shareholder Value Incentive Bonus
Plan (20)
10.51 Terms Agreement dated July 28, 1994, between the
Company and Bear, Stearns & Co., Inc. (15)
10.52 Note Purchase Agreement dated as of December 28,
1995, between the Company and the Series A
Purchasers, the Series B Purchasers and the Series C
Purchasers*
21.1 Subsidiaries of the Registrant *
23.1 Consent of Arthur Andersen LLP *
23.2 Consent of Forrest A. Garb & Associates, Inc.*
- ----------------------
* Filed herewith
(1) Incorporated by reference to the Company's
Registration Statement, as amended, on Form S-1, No.
2-92572 as filed with the Securities and Exchange
Commission on August 3, 1984.
<PAGE>
(3) Exhibits, continued:
(2) Incorporated by reference to Post-Effective
Amendment No. 2 to the Company's Registration
Statement on Form S-2, File No. 33-32838, as filed
with the Securities and Exchange Commission on
October 10, 1991.
(3) Incorporated by reference to the Company's
Registration Statement, as amended, on Form S-2, No.
33-21300 as filed with the Securities and Exchange
Commission on April 18, 1988.
(4) Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1988.
(5) Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1989.
(6) Incorporated by reference to the Company's Form 8
amending the Company's Annual Report on Form 10-K
for the year ended December 31, 1989.
(7) Incorporated by reference to the Company's
Registration Statement, as amended, on Form S-2, No.
33-34217 as filed with the Commission on April 6,
1990.
(8) Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1990.
(9) Incorporated by reference to the Company's
Registration Statement, as amended, on Form S-2, No.
33-44430 as filed with the Commission on December
12, 1991.
(10) Incorporated by reference to the Company's Form 10-Q
for the quarter ended June 30, 1991.
(11) Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992.
(12) Incorporated by reference to the Company's Form 10-Q
for the quarter ended June 30, 1993.
(13) Incorporated by reference to the Company's Form 10-Q
for the quarter ended September 30, 1993.
(14) Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1993.
(15) Incorporated by reference to the Company's Form 10-Q
for the quarter ended June 30, 1994.
(16) Incorporated by reference to the Company's
Registration Statement on Form S-8, No. 33-89934 as
filed with the Securities and Exchange Commission on
March 2, 1995.
(17) Incorporated by reference to the Company's
Registration Statement on Form S-3, No. 33-89890 as
filed with the Securities and Exchange Commission on
March 2, 1995.
(18) Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994.
<PAGE>
(3) Exhibits, continued:
(19) Incorporated by reference to the Company's Form 10-Q
for the quarter ended March 31, 1995.
(20) Incorporated by reference to the Company's Form 10-Q
for the quarter ended June 30, 1995.
(21) Incorporated by reference to the Company's Form 10-Q
for the quarter ended September 30, 1995.
(22) Incorporated by reference to the Company's
Registration Statement on Form S-8, No. 333-01271 as
filed with the Securities and Exchange Commission on
February 28, 1996.
(b) Reports on Form 8-K filed during the quarter ended
December 31, 1995:
-------------------------------------------------------------
NONE
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Act of
1934, the Registrant has duly caused this report on Form 10-K to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on the 29th of March 1996.
SEITEL, INC.
By: /s/ Paul A. Frame
---------------------------------------------
Paul A. Frame, President, Chief Executive
Officer and Director
By: /s/ Debra D. Valice
---------------------------------------------
Debra D. Valice, Chief Financial Officer
By: /s/ Marcia H. Kendrick
---------------------------------------------
Marcia H. Kendrick, Chief Accounting Officer
Pursuant to the requirements of the Securities Act of 1934, this Report on Form
10-K has been signed below by the following persons in the capacities and on the
date indicated.
Signature Title Date
--------- ----- ----
/s/ Herbert M. Pearlman Chairman of the Board of March 29 , 1996
- ------------------------ Directors
Herbert M. Pearlman
/s/ Paul A. Frame President and Chief Executive March 29, 1996
- ------------------------ Officer, Director
Paul A. Frame
/s/ Horace A. Calvert Executive Vice President and March 29 , 1996
- ------------------------ Chief Operating Officer, Director
Horace A. Calvert
/s/ Debra D. Valice Senior Vice President-Finance, March 29, 1996
- ------------------------ Chief Financial Officer, Secretary
Debra D. Valice and Treasurer, Director
/s/ Jesse R. Marion President - Seitel Delaware, Inc. March 29, 1996
- ------------------------ and Seitel Data, Ltd., Director
Jesse R. Marion
/s/ David S. Lawi Director March 29, 1996
- ------------------------
David S. Lawi
/s/ William Lerner Director March 29, 1996
- ------------------------
William Lerner
/s/ Walter M. Craig, Jr. Director March 29, 1996
- ------------------------
Walter M. Craig, Jr.
/s/ John Stieglitz Director March 29, 1996
- ------------------------
John Stieglitz
/s/ William L. Lurie Director March 29, 1996
- ------------------------
William L. Lurie
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Seitel, Inc.:
We have audited the accompanying consolidated balance sheets of Seitel, Inc. (a
Delaware corporation) and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Seitel, Inc. and subsidiaries
as of December 31, 1995 and 1994 and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Houston, Texas
March 29, 1996
F-1
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Cash and equivalents $ 6,242 $ 846
Receivables
Trade, less allowance for doubtful accounts
of $650 and $100 at December 31, 1995 and
1994, respectively 40,992 35,405
Notes and other 1,289 329
Net assets of discontinued operations -- 529
Data bank 232,704 199,287
Less: Accumulated amortization (127,335) (103,486)
--------- ---------
Net data bank 105,369 95,801
Property and equipment, at cost:
Oil and gas properties, full cost method
of accounting, including $20,862 and
$13,748 not being amortized at
December 31, 1995 and 1994, respectively 44,684 22,024
Geophysical equipment 12,531 11,862
Furniture, fixtures and other 4,404 2,953
--------- ---------
61,619 36,839
Less: Accumulated depreciation, depletion
and amortization (9,069) (4,415)
--------- ---------
Net property and equipment 52,550 32,424
Prepaid expenses, deferred charges and
other assets 3,125 1,435
--------- ---------
TOTAL ASSETS $ 209,567 $ 166,769
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-2
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- continued
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 9,830 $ 23,861
Accrued liabilities 6,243 4,769
Employee compensation payable 2,349 2,069
Income taxes payable 227 933
Net liabilities of discontinued operations 1,105 --
Debt
Senior Notes 52,500 --
Subordinated debentures 1,989 3,523
Line of Credit -- 5,085
Term loans 3,071 3,231
Obligations under capital leases 3,723 5,088
Deferred contractor payable -- 9,698
Contingent payables 279 3,152
Deferred income taxes 6,472 3,502
Deferred revenue 1,401 529
--------- ---------
TOTAL LIABILITIES 89,189 65,440
--------- ---------
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share;
authorized 5,000,000 shares; none issued -- --
Common stock, par value $.01 per share;
authorized 20,000,000 shares; issued
and outstanding 9,436,854 and 8,825,619
at December 31, 1995 and 1994, respectively 94 88
Additional paid-in capital 85,821 75,611
Retained earnings 35,936 27,257
Treasury stock, 414 shares at cost at
December 31, 1995 and 1994 (4) (4)
Notes receivable from officers and employees (1,395) (1,551)
Cumulative translation adjustment (74) (72)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 120,378 101,329
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 209,567 $ 166,769
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-3
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
REVENUE $ 74,439 $ 70,902 $ 43,456
EXPENSES
Depreciation, depletion and amortization 26,872 27,181 19,852
Cost of sales 13,071 10,499 3,202
Selling, general and administrative expenses 15,393 14,672 9,132
Interest expense 3,407 3,455 2,306
Interest income (329) (257) (180)
-------- -------- --------
58,414 55,550 34,312
-------- -------- --------
Income from continuing operations before provision for
income taxes and extraordinary item 16,025 15,352 9,144
Provision for income taxes 5,898 5,681 3,328
-------- -------- --------
Income from continuing operations before extraordinary item 10,127 9,671 5,816
Loss from discontinued operations, net of income tax
benefit of $703 for 1995, $30 for 1994 and
$57 for 1993 (1,196) (52) (99)
Loss on disposal of discontinued operations, net of income
tax benefit of $148 (252) -- --
-------- -------- --------
Income before extraordinary item 8,679 9,619 5,717
Extraordinary charge on early extinguishment of debt, net of
income tax benefit of $163 -- (304) --
-------- -------- --------
NET INCOME $ 8,679 $ 9,315 $ 5,717
======== ======== ========
Earnings per share:
Primary:
Income from continuing operations before extraordinary item $ 1.03 $ 1.24 $ .93
Loss from discontinued operations (.12) (.01) (.01)
Loss on disposal of discontinued operations (.03) -- --
Extraordinary item -- (.04) --
-------- -------- --------
Net income $ .88 $ 1.19 $ .92
======== ======== ========
Assuming full dilution:
Income from continuing operations before extraordinary item $ .99 $ 1.11 $ .83
Loss from discontinued operations (.12) (.01) (.01)
Loss on disposal of discontinued operations (.02) -- --
Extraordinary item -- (.03) --
-------- -------- --------
Net income $ .85 $ 1.07 $ .82
======== ======== ========
Weighted average number of common and common equivalent shares:
Primary 9,872 7,800 6,893
======== ======== ========
Assuming full dilution 10,358 9,001 8,279
======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-4
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Notes
Receivables
Common Stock Additional Treasury Stock from Cumulative
------------------ Paid-in Retained ----------------- Officers Translation
Shares Amount Capital Earnings Shares Amount & Employees Adjustments
--------- -------- ---------- ---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 5,976,472 $ 60 $ 25,672 $ 12,225 -- $ -- $ (2,150) $ (164)
Proceeds from issuance of common stock 10,916 -- 37 -- -- -- -- --
Payments received on notes receivable from
officers and employees -- -- -- -- (414) (4) 111 --
Foreign currency translation adjustment -- -- -- -- -- -- -- 79
Net income -- -- -- 5,717 -- -- -- --
--------- -------- ---------- ---------- -------- -------- ---------- ----------
BALANCE, DECEMBER 31, 1993 5,987,388 60 25,709 17,942 (414) (4) (2,039) (85)
Sale of common stock through public offering 1,061,200 11 31,906 -- -- -- -- --
Proceeds from issuance of common stock 770,364 7 7,280 -- -- -- -- --
Tax reduction from exercise of stock options -- -- 1,879 -- -- -- -- --
Conversions and exchanges of subordinated
debentures 1,006,667 10 8,837 -- -- -- -- --
Payments received on notes receivable from
officers and employees -- -- -- -- -- -- 488 --
Foreign currency translation adjustment -- -- -- -- -- -- -- 13
Net income -- -- -- 9,315 -- -- -- --
--------- -------- ---------- ---------- -------- -------- ---------- ----------
BALANCE, DECEMBER 31, 1994 8,825,619 88 75,611 27,257 (414) (4) (1,551) (72)
Proceeds from issuance of common stock 445,939 4 6,894 -- -- -- -- --
Tax reduction from exercise of stock options -- -- 1,900 -- -- -- -- --
Conversions and exchanges of subordinated
debentures 165,296 2 1,416 -- -- -- -- --
Payments received on notes receivable from
officers and employees -- -- -- -- -- -- 156 --
Foreign currency translation adjustment -- -- -- -- -- -- -- (2)
Net income -- -- -- 8,679 -- -- -- --
--------- -------- ---------- ---------- -------- -------- ---------- ----------
BALANCE, DECEMBER 31, 1995 9,436,854 $ 94 $ 85,821 $ 35,936 (414)$ (4) $ (1,395) $ (74)
========= ======== ========== ========== ======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 80,981 $ 51,312 $ 33,235
Cash paid to suppliers and employees (38,563) (24,540) (9,649)
Interest paid (4,551) (2,543) (2,259)
Interest received 320 265 185
Income taxes paid (2,218) (517) (2,927)
-------- -------- --------
Net cash provided by operating activities 35,969 23,977 18,585
-------- -------- --------
Cash flows from investing activities:
Cash invested in seismic data (59,286) (36,761) (17,841)
Cash invested in oil and gas properties (21,737) (15,269) (3,309)
Cash paid to acquire property and equipment (1,416) (615) (5,127)
Advances made to oil and gas joint venture
partner (1,142) -- --
Collections on loans made 108 -- 134
-------- -------- --------
Net cash used in investing activities (83,473) (52,645) (26,143)
-------- -------- --------
Cash flows from financing activities:
Borrowings under line of credit agreement 75,101 79,767 42,142
Principal payments under line of credit
agreement (80,186) (85,745) (40,534)
Borrowings under term loans 387 -- 4,300
Principal payments on term loans (876) (759) (310)
Principal payments under capital lease
obligations (1,375) (551) (4)
Redemption of subordinated debentures -- (3,911) --
Payments on notes receivable from officers
and employees 156 488 107
Proceeds from issuance of senior notes 52,500 -- --
Proceeds from issuance of common stock 6,942 41,290 37
Costs of debt and equity transactions (202) (2,135) --
Other -- -- 6
-------- -------- --------
Net cash provided by financing activities 52,447 28,444 5,744
-------- -------- --------
Effect of exchange rate changes (8) 6 80
-------- -------- --------
Net increase (decrease) in cash and equivalents 4,935 (218) (1,734)
Cash and equivalents at beginning of period:
Continuing operations 846 1,759 3,493
Discontinued operations 695 -- --
-------- -------- --------
Total cash and equivalents at beginning
of period 1,541 1,759 3,493
-------- -------- --------
Cash and equivalents at end of period:
Continuing operations 6,242 846 1,759
Discontinued operations 234 695 --
-------- -------- --------
Total cash and equivalents at end of period $ 6,476 $ 1,541 $ 1,759
======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-6
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--continued
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
Reconciliation of net income to net cash
provided by operating activities:
<S> <C> <C> <C>
Net income $ 8,679 $ 9,315 $ 5,717
-------- -------- --------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and amortization 27,663 27,929 20,217
Deferred income tax provision 2,970 2,455 760
Loss on discontinued operations,
net of tax 1,448 52 99
Extraordinary loss on extinguishment
of debt, net of tax -- 304 --
Non-cash sales (1,534) (3,162) (3,768)
Warrants issued in debenture exchange -- 180 --
Loss on foreign currency transactions -- -- 87
Increase in receivables (5,514) (17,322) (6,832)
Decrease (increase) in other assets (1,189) (476) 7
Increase in accounts payable and
other liabilities 3,722 4,588 2,483
-------- -------- --------
Total adjustments 27,566 14,548 13,053
-------- -------- --------
Net cash provided by (used in) operating
activities of:
Continuing operations 36,245 23,863 18,770
Discontinued operations (276) 114 (185)
-------- -------- --------
Net cash provided by operating activities $ 35,969 $ 23,977 $ 18,585
======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-7
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Seitel, Inc. (the "Company") is a leading provider of
seismic data and corollary geophysical services to the petroleum industry and
directly participates in exploration, development and ownership of natural gas
and crude oil reserves. The majority of the Company's seismic surveys cover
onshore and offshore the U.S. Gulf Coast region. The Company's oil and gas
exploration, development and production activities are on properties located
primarily onshore Texas and Louisiana, and also onshore Alabama, Mississippi and
Arkansas.
Use of Estimates: The preparation of these consolidated financial
statements require the use of certain estimates by management in determining the
Company's assets, liabilities, revenues and expenses. Actual results could
differ from estimates. Data bank amortization is determined using estimates of
ultimate revenues from licensing of the seismic data. Refer to the data bank
discussion below for additional information on data bank amortization.
Depreciation, depletion and amortization of oil and gas properties and the
impairment of oil and gas properties are determined using estimates of proved
oil and gas reserves. There are numerous uncertainties in estimating the
quantity of proved reserves and in projecting the future rates of production and
timing of development expenditures. Refer to Note Q, "Supplemental Oil and Gas
information" for additional information regarding the process of estimating
proved reserve quantities. Estimates have been used to determine the loss on
future contractual commitments of the discontinued operations. Refer to Note L,
"Discontinued Operations" for additional information on management's estimate.
Basis of Presentation: The accompanying consolidated financial statements
include the accounts of Seitel, Inc., the accounts of its wholly-owned
subsidiaries and the Company's pro rata share of its investments in joint
ventures. All material intercompany accounts and transactions have been
eliminated in consolidation. Certain reclassifications have been made to the
amounts in the prior years' financial statements to conform to the current
year's presentation.
The Company presents its consolidated balance sheets on an unclassified
basis. Because the portion of seismic data acquisition costs to be amortized
during the next year cannot be classified as a current asset, and classification
of all of these costs as noncurrent would be misleading to the reader because it
would not indicate the level of assets expected to be converted into cash in the
next year, the Company believes that the use of an unclassified balance sheet
results in improved financial reporting.
Data Bank: Costs incurred in the creation of proprietary seismic data,
including the direct costs of Company personnel dedicated to project management
and design, are capitalized. Seismic data costs are amortized for each project
in the proportion that its revenue for a period relates to management's estimate
of its ultimate revenues. Since inception, management has established guidelines
regarding its annual charge for amortization. Under these guidelines, 90% of the
cost incurred in the creation of proprietary seismic data are amortized within
five years of inception for two-dimensional seismic data and within seven years
of inception for three-dimensional data, and the final 10% is amortized on a
straight-line basis over fifteen years. Under these guidelines, costs of
existing seismic data libraries purchased by the Company are fully amortized
within ten years from date of purchase. Using these guidelines, the Company
would expect the percentage of net data bank as of December 31, 1995 to be
amortized to be 26%, 17%, 12%, 10%, 13%, and 22%, for the years ending December
31, 1996, 1997, 1998, 1999, 2000 and thereafter, respectively. On a periodic
basis, the carrying value of each seismic data program is compared to its
estimated future revenue and, if appropriate, is reduced to its estimated net
realizable value.
F-8
<PAGE>
Net data bank at December 31, 1995 and 1994 was comprised of the following
(in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1994
-------------- ---------------
<S> <C> <C>
2D data created by the Company $ 23,607 $ 27,610
3D data created by the Company 70,069 56,888
Data purchased by the Company 11,693 11,303
--------------- --------------
Net data bank $ 105,369 $ 95,801
=============== ==============
</TABLE>
Property and Equipment: The Company accounts for its oil and gas
exploration and production activities using the full-cost method of accounting.
Under this method, all costs associated with acquisition, exploration and
development of oil and gas reserves are capitalized, including directly related
overhead costs, and interest costs related to its unevaluated properties and
certain properties under development which are not currently being amortized.
For the three years ended December 31, 1995, general and administrative costs of
$861,000, $707,000 and $252,000, respectively, have been capitalized to oil and
gas properties. For the year ended December 31, 1995, interest costs of $835,000
have been capitalized to oil and gas properties.
Provisions for depreciation, depletion and amortization are calculated
using the units-of-production method. Estimated future site restoration,
dismantlement and abandonment costs, net of salvage value, are taken into
consideration. Such costs are not currently expected to be material. Capitalized
costs associated with the acquisition and evaluation of unproved properties and
certain properties under development are not currently amortized. Amortization
of the costs associated with these properties will commence when the properties
or projects are evaluated.
Capitalized costs are limited to the present value, discounted at 10
percent, of future net revenues calculated using current prices from estimated
proved reserves plus the lower of cost or market value of unevaluated
properties, adjusted for the effects of related income taxes.
Depreciation of other property and equipment is calculated using the
straight-line method over the estimated useful lives of the assets of three to
five years.
Income Taxes: The Company and all of its subsidiaries file a consolidated
federal income tax return. The Company does not provide deferred taxes (benefit)
on the undistributed earnings (loss) of its foreign subsidiary, which amounted
to $(3,000), $1,000, and $(125,000) for the years ended December 31, 1995, 1994
and 1993, respectively, as such earnings are intended to be permanently
reinvested in those operations.
Income Recognition: Revenue from seismic data licensing agreements are
recognized when each seismic data program is available for use by the licensees
and are presented net of revenue shared with other entities. Revenue from the
acquisition of seismic data for non-affiliated parties are recognized on the
percentage-of-completion method based on the work effort completed compared with
the total work effort estimated for the contract. Revenue received in advance of
being earned is deferred until earned.
Cost of Sales: Cost of sales consists of expenses associated with the
acquisition of seismic data for non-affiliated parties, oil and gas production,
data resale support services and geophysical technology services. Cost of sales
related to the acquisition of seismic data for non-affiliated parties includes
all direct material and labor costs and indirect costs related to the
acquisition such as supplies, tools, repairs and depreciation.
Earnings per Share: Earnings per share is based on the weighted average
number of outstanding shares of common stock during the respective years,
including common equivalent shares applicable to assumed exercise of stock
options and warrants when such common stock equivalents are dilutive, and the
Company's other potentially dilutive securities.
F-9
<PAGE>
Earnings per share was determined by dividing net income, as adjusted
below, by applicable shares outstanding (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Net income as reported $ 8,679 $ 9,315 $ 5,717
Interest earned on application of assumed proceeds from exercise
of options and warrants in excess of 20% limitation, net of tax -- -- 640
------- ------- -------
Total income used for primary earnings per share $ 8,679 $ 9,315 $ 6,357
======= ======= =======
Net income as reported $ 8,679 $ 9,315 $ 5,717
Interest eliminated on assumed conversion of 9% convertible
subordinated debentures, net of tax 95 329 621
Interest earned on application of assumed proceeds from exercise
of options and warrants in excess of 20% limitation, net of tax -- -- 432
------- ------- -------
Total income used for fully diluted earnings per share $ 8,774 $ 9,644 $ 6,770
======= ======= =======
Weighted average number of common and common equivalent shares 9,872 7,800 6,893
======= ======= =======
Weighted average number of common shares assuming full dilution 10,358 9,001 8,279
======= ======= =======
</TABLE>
If the current year conversions and exchanges of the Company's 9%
debentures had occurred at the beginning of the year, primary earnings per share
for 1995 would have remained $.88.
Subsequent to December 31, 1995, the Company's remaining 9% debentures
converted into approximately 214,000 shares of common stock (see Note C). Had
the conversion occurred on January 1, 1995, primary earnings per share for 1995
would have been $.87.
Statement of Cash Flows: For purposes of the statement of cash flows,
the Company considers all highly liquid investments or debt instruments with
original maturity of three months or less to be cash equivalents.
Operating cash flows reported in the consolidated financial statements
of cash flows do not reflect effects of changes in inventory levels because the
Company reports no inventories and classifies cash expenditures for its seismic
data library as an investing, rather than an operating, activity.
Fair Value of Financial Instruments: Statement of Financial Accounting
Standards ("SFAS") No. 107 "Disclosures About Fair Value of Financial
Instruments," requires disclosure of the fair value of certain financial
instruments. The estimated fair value amounts have been determined by the
Company using available market data and valuation methodologies. The book values
of cash and equivalents, receivables and accounts payable approximate their fair
value as of December 31, 1995 and 1994, because of the short-term maturity of
these instruments. Based upon the rates available to the Company, the fair value
of the Senior Notes, the line of credit, and the term loans approximates the
carrying value of this debt as of December 31, 1995 and 1994. Based on the
quoted market price, the fair value of the 9% convertible subordinated
debentures at December 31, 1995 and 1994 was $6,962,000 and $12,330,000,
respectively.
Impairment of Long-Lived Assets: In March 1995, the Financial
Accounting Standards Board ("FASB") issued a statement establishing accounting
standards for the impairment of long-lived assets. This statement requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
realizable. The Company is required to adopt this statement no later than its
fiscal year ending December 31, 1996, although earlier implementation is
permitted. As of December 31, 1995, the Company has not adopted this statement;
however, the Company anticipates that application of the statement will not have
a material effect on its consolidated financial statements.
F-10
<PAGE>
NOTE B--INCOME TAXES
- --------------------
The discussion of income taxes herein does not include the income tax
effects of the discontinued operations or the extraordinary item explained in
Note L and Note M, respectively, of these consolidated financial statements.
The provision (benefit) for income taxes for each of the three years
ended December 31, 1995, are comprised of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Current - Federal $ 2,753 $ 2,706 $ 2,366
- State 153 225 111
- Foreign 22 295 91
------- ------- -------
2,928 3,226 2,568
------- ------- -------
Deferred - Federal 3,001 2,429 751
- State (31) 26 9
------- ------- -------
2,970 2,455 760
------- ------- -------
Tax provision - Federal 5,754 5,135 3,117
- State 122 251 120
- Foreign 22 295 91
------- ------- -------
$ 5,898 $ 5,681 $ 3,328
======= ======= =======
</TABLE>
The differences between the U.S. Federal income taxes computed at the
statutory rate (34.6% for 1995, 34.4% for 1994 and 34% for 1993) and the
Company's income taxes for financial reporting purposes are as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Statutory Federal income tax $5,540 $5,280 $3,109
State income tax, less Federal benefit 79 163 79
Other, net 279 238 140
------ ------ ------
Income tax expense $5,898 $5,681 $3,328
====== ====== ======
</TABLE>
F-11
<PAGE>
The components of the net deferred income tax liability reflected in
the Company's consolidated balance sheets at December 31, 1995 and 1994 were as
follows (in thousands):
<TABLE>
<CAPTION>
Deferred Tax Assets
(Liabilities)
at December 31,
--------------------
1995 1994
------- -------
<S> <C> <C>
Alternative minimum tax credit carry forward $ 958 $ 735
Partnership earnings 217 176
Investment tax credits 44 44
Other 820 106
------- -------
Total deferred tax assets 2,039 1,061
Less: Valuation allowance (44) (44)
------- -------
Deferred tax assets, net of
valuation allowance 1,995 1,017
------- -------
Depreciation, depletion and amortization (8,370) (4,391)
Other (97) (128)
------- -------
Total deferred tax liabilities (8,467) (4,519)
------- -------
Net deferred tax liability $(6,472) $(3,502)
======= =======
</TABLE>
F-12
<PAGE>
As of December 31, 1995, the Company has an alternative minimum tax
(AMT) credit carryforward of approximately $958,000 which can be used to offset
regular Federal income taxes payable in future years. The AMT credit has an
indefinite carryforward period.
In connection with the exercise of non-qualified stock options and
common stock purchase warrants by employees during 1995 and 1994, the Company
received $1,900,000 and $1,879,000, respectively, in Federal income tax savings
which has been reflected as a credit to additional paid-in capital.
NOTE C--DEBT
- ------------
The following is a summary of the Company's debt at December 31, 1995
and 1994 (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
------- -------
<S> <C> <C>
Senior notes $52,500 $ --
Subordinated debentures 1,989 3,523
Borrowings under line of credit -- 5,085
Term loans 3,071 3,231
------- -------
$57,560 $11,839
======= =======
</TABLE>
Senior Notes: On December 28, 1995, the Company completed a private
placement of three series of unsecured Senior Notes totaling $75,000,000. The
Company contemporaneously issued its Series A Notes and Series B Notes, which
total $52,500,000 and bear interest at the fixed rate of 7.17%. The Series A
Notes mature on December 30, 2001, and require annual principal payments of
$8,333,000 beginning December 30, 1999. The Series B Notes mature on December
30, 2002, and require annual principal payments of $5,500,000 beginning December
30, 1998. The Series C Notes were not issued at December 31, 1995. Interest on
the Senior Notes is payable semi-annually on June 30 and December 30.
Subordinated Debentures: The Company's convertible subordinated
debentures due March 31, 2002, carry an interest rate of 9% and a conversion
price of $9.28 per share. During the years ended December 31, 1995 and 1994, the
Company issued 165,296 and 1,006,667, respectively, shares of common stock upon
conversion and exchange of $1,534,000 and $9,342,000, respectively, principal
amount of debentures, leaving $1,989,000 outstanding as of December 31, 1995.
Subsequent to December 31, 1995, all remaining outstanding debentures were
converted into approximately 214,000 shares of common stock.
Term Loans: On July 15, 1993, a wholly-owned subsidiary of the Company
obtained a $4,300,000, five year term loan bearing interest at the rate of 7.61%
for the purchase of a telemetry seismic data acquisition system and auxiliary
equipment. The debt is secured by such equipment. Monthly principal and interest
payments total approximately $86,000.
During 1995, the Company and one of its wholly-owned subsidiaries
obtained two separate three year term loans totaling $716,000, which both bear
interest at the rate of 8.413%, for the purchase of certain property and
equipment. The debt is secured by such equipment. Monthly principal and interest
payments total approximately $22,000.
Certain of the borrowings described above contain requirements as to
the maintenance of minimum net worth and limitations on liens, total debt, debt
issuance and disposition of assets.
Aggregate maturities of the Company's debt over the next five years are
as follows: $1,103,000 in 1996; $1,193,000 in 1997; $6,275,000 in 1998; and
$13,833,000 in 1999; and $13,833,000 in 2000. Aggregate maturities reflect the
conversion of the convertible debentures.
F-13
<PAGE>
NOTE D--LEASE OBLIGATIONS
- -------------------------
Property and equipment in the accompanying consolidated balance sheets
includes the following assets held under capital leases (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
------- -------
<S> <C> <C>
Geophysical equipment $ 5,298 $ 5,315
Furniture, fixtures and other 324 324
------- -------
Assets under capital lease 5,622 5,639
Accumulated amortization (1,641) (509)
------- -------
Assets under capital lease, net $ 3,981 $ 5,130
======= =======
</TABLE>
The Company also leases office space under operating leases. Rental expense
for 1995, 1994 and 1993 was approximately $571,000, $473,000 and $418,000,
respectively.
Future minimum lease payments for the five years subsequent to December 31,
1995 and in the aggregate are as follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------ ------
<S> <C> <C>
1996 $1,455 $ 478
1997 1,186 430
1998 943 450
1999 442 340
2000 -- 54
------ ------
Total minimum lease payments 4,026 $1,752
======
Less amount representing interest (303)
------
Present value of net minimum
lease payments $3,723
======
</TABLE>
F-14
<PAGE>
NOTE E--CONTINGENCIES AND COMMITMENTS
- -------------------------------------
At December 31, 1995 and 1994, $279,000 and $284,000, respectively, of
charges for seismic surveys which are payable to joint venture partners only
from the collection of sales proceeds from those seismic surveys are included in
contingent payables.
On July 21, 1992, the Company's Board of Directors approved payment of
a one-time $2,500,000 bonus to be divided among five key employees upon the
event of the market price of the Company's stock maintaining or exceeding $20
per share for at least 90 consecutive days (the "Target Date" ) at any time
before July 21, 1997. The Target Date was achieved in June 1994. The bonus vests
equally over the 12 quarters following the Target Date, contingent upon
continued full-time employment, except in the event of death or disability in
which case the balance of the bonus will be due and payable immediately. The
bonus expense will be recognized over the vesting period. For the years ended
December 31, 1995 and 1994, $833,000 and $625,000, respectively, was charged to
expense for this bonus. Interest, at the prevailing prime rate, is paid
quarterly on the total outstanding bonus. As of December 31, 1995, $1,042,000 of
the bonus payment remains unpaid.
On January 27, 1995, the Company's Board of Directors approved a
shareholder value incentive bonus under which a cash bonus aggregating
$4,000,000 would be paid to all salaried employees if the market price of the
Company's stock reaches $60 per share on or before April 30, 1998, and maintains
that price for at least 90 consecutive days. This bonus would be shared by all
salaried employees on a basis proportionate to their respective compensation
ranking in the Company, and it would vest and be paid out in escalating
quarterly installments over a three-year period, subject to continued employment
with the Company. As of March 28, 1996, the market price of the Company's common
stock was $27.50 per share.
F-15
<PAGE>
NOTE F--STOCK OPTIONS AND WARRANTS
- ----------------------------------
On July 7, 1984, the Company's Board of Directors adopted an Incentive
Stock Option Plan and a Non-Qualified Stock Option Plan. As of December 31,
1995, 115,600 shares have been reserved for issuance under the Incentive Stock
Option Plan and 270,900 shares have been reserved under the Non-Qualified Stock
Option Plan, of which all options have been issued under both original plans. On
July 28, 1993, the Company's Board of Directors adopted the 1993 Incentive Stock
Option Plan and on July 18, 1995, approved an amendment to that plan to increase
the number of shares issuable under the option plan by 405,000 to 700,000. As of
December 31, 1995, 582,166 options have been issued under the plan. As of
December 31, 1995, all options issued under these plans have been issued at or
above the market price of the Company's common stock as of the date of issuance
and have a term of ten years. On June 17, 1994, the Company's Board of Directors
adopted the Non-Employee Directors Stock Option Plan which reserves 75,000
shares for issuance. As of December 31, 1995, 17,000 options have been issued at
the market price of the Company's common stock as of the date of issuance and
have a term of five years. The following summarizes information with regard to
the stock option plans for the years ended December 31, 1995, 1994 and 1993 (in
thousands):
<TABLE>
<CAPTION>
Number of Shares
Under Option
------------------------
Year Ended December 31,
------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Outstanding at beginning of year 356 288 146
Granted ($6.88 to $40.00 per share) 337 112 153
Surrendered ($5.57 to $14.75 per share) (1) (1) --
Exercised ($1.22 to $20.25 per share) (52) (43) (11)
----- ----- -----
Outstanding at end of year 640 356 288
===== ===== =====
Exercisable at end of year 186 136 124
===== ===== =====
</TABLE>
At December 31, 1995, outstanding warrants to purchase the Company's
common stock were as follows (in thousands):
<TABLE>
<CAPTION>
Number of Range of Expiration
Shares Exercise Prices Date
--------- --------------- ----------
<S> <C> <C> <C>
Issued to employees and directors 31 $ 11.25 2/27/97
Issued to employees and directors 526 13.19 - 32.00 12/10/97
Issued to employees and directors 562 24.00 - 32.00 4/11/99
Issued to employees and directors 19 30.13 5/4/99
Issued to employees and directors 526 13.05 - 32.00 12/10/00
Issued to an employee 10 5.38 7/21/02
Issued to underwriters in connection
with 9% convertible
subordinated debentures 20 9.28 3/26/97
Issued in debenture exchange 96 29.92 11/28/97
</TABLE>
F-16
<PAGE>
In October 1995, the FASB issued SFAS No. 123, a new standard on
accounting for stock based compensation. SFAS No. 123 encourages companies to
account for stock-based compensation awards based on the fair value of the
awards at the date they are granted. The resulting compensation cost would be
shown as an expense in the statement of income. Companies can choose not to
apply the new accounting method and continue to apply current accounting
requirements; however, disclosure will be required as to what net income and
earnings per share would have been had the new accounting method been followed.
Adoption of the standard is required in 1996, although earlier implementation is
permitted. The Company does not intend to adopt SFAS No. 123 for accounting
purposes; however, it will make annual pro forma disclosures of its effects
commencing in 1996.
NOTE G--COMMON STOCK
- --------------------
The Company filed a registration statement on Form S-3 (the "Shelf
Registration Statement") in June 1994 to offer from time to time in one or more
series (i) unsecured debt securities, which may be senior or subordinated, (ii)
preferred stock, par value $0.01 per share, and (iii) common stock, par value
$.01 per share, or any combination of the foregoing, at an aggregate initial
offering price not to exceed $75,000,000. The Shelf Registration Statement was
declared effective by the Securities and Exchange Commission on June 30, 1994.
In August 1994, the Company completed a public offering of 1,061,200 shares of
its common stock priced at $32 per share pursuant to the Shelf Registration
Statement. The net proceeds from the offering (after underwriting commission and
offering expenses) totaled $31,917,000. After this sale of common stock at an
initial aggregate offering price of $33,958,400, the Company may offer
additional securities in the future for up to an aggregate initial offering
price of $41,041,600 pursuant to the Shelf Registration Statement.
On July 21, 1992, the Company granted ten year loans at an interest
rate of 4% to most of its employees for purchases of the Company's common stock
at the then market price of $5.375 per share. The Company recorded related
compensation expense of $56,000, $64,000 and $79,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. Payments of 5% of the original
principal balance plus accrued interest are due annually August 1, with a
balloon payment of the remaining principal and accrued interest due August 1,
2002. During 1995 and 1994, the Company received $156,000 and $488,000,
respectively, as principal payments on these notes. During 1993, the Company
received $107,000 and 414 shares of its common stock with a then market value of
$4,000 as principal payments on these notes. The stock certificates are held by
the Company as collateral until payment is received.
NOTE H--PREFERRED STOCK
- -----------------------
The Company is authorized by its Amended Certificate of Incorporation
to issue 5,000,000 shares of preferred stock, the terms and conditions to be
determined by the Board of Directors in creating any particular series. As of
December 31, 1995, no preferred stock had been issued.
F-17
<PAGE>
NOTE I--RELATED PARTY TRANSACTIONS
- ----------------------------------
The Company owed Helm Resources, Inc. and its subsidiaries ("Helm"), a
company that has three executive officers that are directors of the Company,
$51,000 and $11,000 as of December 31, 1995 and 1994, respectively, for sales of
seismic data they jointly own and for expenses paid by Helm on behalf of the
Company. The Company incurred charges of $78,000, $84,000 and $84,000 for these
expenses during 1995, 1994 and 1993, respectively. Management believes that
these expenses, which were specifically related to the Company's business,
represented costs which would have been incurred, in the same amount, by the
Company if such services that were performed by Helm were performed by an
unaffiliated entity.
Certain employees and directors of the Company contributed cash to
partnerships in 1995 and 1994 which invest in the exploration and development of
oil and gas properties on a working interest basis along with DDD Energy, Inc.
Each partnership's working interest amounts to 5% of the total investment made
by such partnership and DDD Energy, Inc. Each partnership invests in projects
and prospects undertaken by DDD Energy, Inc. in the year such partnership is
formed and all subsequent development of those projects and prospects. The terms
of each partnership require the participants to contribute their share of
required capital contributions at the beginning of the year and any future cash
calls, as required. All transactions between the partnerships and DDD Energy,
Inc. are at arms length.
NOTE J--MAJOR CUSTOMERS
- -----------------------
No customers accounted for 10% or more of revenues during the years
1995, 1994 or 1993.
The Company extends credit to various companies in the oil and gas
industry for the purchase of their seismic data, which results in a
concentration of credit risk. This concentration of credit risk may be affected
by changes in economic or other conditions and may accordingly impact the
Company's overall credit risk. However, management believes that the risk is
mitigated by the number, size, reputation and diversified nature of the
companies to which they extend credit. Historical credit losses incurred on
receivables by the Company have been immaterial.
NOTE K--PROFIT-SHARING PLAN
- ---------------------------
The Company has an Incentive Compensation Agreement for certain
employees under which annual contributions, ranging from 2.5% to 5% of revenues
generated on certain seismic programs, are required. Contributions amounted to
$263,000, $652,000 and $404,000, for 1995, 1994 and 1993, respectively.
NOTE L--DISCONTINUED OPERATIONS
- -------------------------------
On March 22, 1996, the Company's Board of Directors unanimously adopted
a plan of disposal to discontinue the Company's gas marketing operations.
Accordingly, the Company's consolidated financial statements have been restated
to reflect the discontinued operations.
The method of disposal of the gas marketing operations shall be to sell
and assign or otherwise transfer in an orderly fashion all contracts to supply
natural gas to the Company's customers along with the related gas supply and
transportation contracts to one or more purchasers or transferees. In the event
that the Company has not been able to sell or otherwise transfer all such
contracts within a reasonable period of time, the Company shall commence
negotiations to terminate the remaining contracts. Pending disposal or
termination of the contracts, the Company plans to continue to honor its
obligations under the contracts, and may enter into additional contracts for gas
supply and transportation required to honor existing customer contracts;
however, the Company will not enter into any new customer contracts. Disposal of
all of the contracts is expected to be completed within one year.
F-18
<PAGE>
The loss from discontinued operations amounted to $1,196,000, $52,000
and $99,000 for the three years ended December 31, 1995, net of an income tax
benefit of $703,000 for 1995, $30,000 for 1994 and $57,000 for 1993. The loss
from discontinued operations in 1995 includes an estimated $2.1 million pre-tax
loss related to future contractual commitments. At December 31, 1995, the
Company had fixed price gas sales contracts which were generally below the
estimated market price at which the Company could purchase gas supply and
transportation. Current market pricing models were used to estimate the market
price at which the Company could purchase gas supply and transportation in the
future, and actual prices may differ from these estimates. Estimated effects of
changes in market prices and the actual settlement costs of these contracts will
be recognized as net gains or losses in income (loss) from discontinued
operations until disposal or termination of the Company's contracts. The loss on
disposal of discontinued operations recorded as of December 31, 1995, is
estimated to be $252,000, net of an income tax benefit of $148,000, and includes
costs such as severance benefits and estimated personnel costs to continue to
honor the Company's obligations until the contracts are transferred or
terminated.
Revenue from the discontinued operations was $13,116,000 and $2,864,000
for the years ended December 31, 1995 and 1994, respectively. There was no
revenue for the year ended December 31, 1993. The net liabilities of
discontinued operations at December 31, 1995, consist primarily of accounts
payable and accrued liabilities offset by trade receivables and income tax
benefits.
NOTE M--EARLY EXTINGUISHMENT OF DEBT
- ------------------------------------
In October 1994, the Company called for redemption of its 12-1/2%
subordinated debentures due 1999 totaling $3,725,000, which was funded by
proceeds from the public offering of common stock in 1994. As a result, the
Company recorded a charge of $304,000, net of a $163,000 income tax benefit,
associated with the early extinguishment of indebtedness, which has been
reflected in the Company's consolidated statement of operations as an
extraordinary item for the year ended December 31, 1994. This charge includes
the write-off of unamortized bond discount totaling $176,000.
F-19
<PAGE>
NOTE N--SUPPLEMENTAL CASH FLOW INFORMATION
- ------------------------------------------
Significant non-cash investing and financing activities are as follows:
1. During 1995 and 1994, the Company issued 165,296 and 1,006,667,
respectively, shares of its common stock upon the conversion and
exchange of $1,534,000 and $9,342,000, respectively, of its 9%
convertible subordinated debentures. In connection with these
conversions and exchanges, unamortized bond issue costs totaling
$98,000 and $626,000 during 1995 and 1994, respectively, have been
charged to additional paid-in capital.
2. During 1995, 1994 and 1993, the Company licensed seismic data valued
at $1,534,000, $3,162,000 and $3,768,000, respectively, in exchange
for the purchase of property and equipment, oil and gas properties and
seismic data for its library.
3. During 1995 and 1994, capital lease obligations totaling $10,000 and
$5,639,000, respectively, were incurred when the Company entered into
leases for property and equipment.
4. During 1995, the Company acquired $330,000 of property and equipment
by incurring a directly related term loan.
F-20
<PAGE>
NOTE O--INDUSTRY SEGMENTS
- -------------------------
Financial information by industry segment for the years ended December
31, 1995 and 1994 was as follows (in thousands):
<TABLE>
<CAPTION>
Exploration Corporate
and and Consolidating
Seismic Production Other Eliminations Consolidated
---------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1995
- ----
Unaffiliated revenue $ 69,598 $ 4,806 $ 35 $ -- $ 74,439
Intersegment revenue (a)<F1> 10,877 -- -- (10,877) --
-------- -------- --------- -------- --------
Total revenue $ 80,475 $ 4,806 $ 35 $(10,877) $ 74,439
======== ======== ========= ======== ========
Depreciation, depletion
and amortization $ 24,384 $ 1,625 $ 863 $ -- $ 26,872
======== ======== ========= ======== ========
Operating income (loss) $ 25,465 $ 838 $ (4,840) $ (2,360) $ 19,103
Interest expense, net -- -- (3,078) -- (3,078)
-------- -------- --------- -------- --------
Income from continuing
operations before
income taxes $ 25,465 $ 838 $ (7,918) $ (2,360) $ 16,025
======== ======== ========= ======== ========
Identifiable assets $164,886 $ 46,092 $ 9,466 $(10,877) $209,567
======== ======== ========= ======== ========
Capital expenditures $ 34,137 $ 23,075 $ 985 $ -- $ 58,197
======== ======== ========= ======== ========
1994
- ----
Unaffiliated revenue $ 69,579 $ 1,204 $ 119 $ -- $ 70,902
Intersegment revenue(a)<F1> 9,755 -- -- (9,755) --
-------- -------- --------- -------- --------
Total revenue $ 79,334 $ 1,204 $ 119 $ (9,755) $ 70,902
======== ======== ========= ======== ========
Depreciation, depletion
and amortization $ 25,777 $ 296 $ 1,108 $ -- $ 27,181
======== ======== ========= ======== ========
Operating income (loss) $ 19,797 $ 229 $ (6) $ (1,470) $ 18,550
Interest expense, net -- -- (3,198) -- (3,198)
-------- -------- --------- -------- --------
Income from continuing
operations before
income taxes and
extraordinary item $ 19,797 $ 229 $ (3,204) $ (1,470) $ 15,352
======== ======== ========= ======== ========
Identifiable assets $151,614 $ 22,164 $ 2,746(b)<F2> $ (9,755) $166,769
======== ======== ========= ======== ========
Capital expenditures $ 69,095 $ 16,874 $ 134 $ -- $ 86,103
======== ======== ========= ======== ========
<FN>
<F1> (a) Intersegment sales are made at prices comparable to those received from
unaffiliated customers.
<F2> (b) Includes net assets of discontinued operations of $529,000.
</FN>
</TABLE>
F-21
<PAGE>
For the year ended December 31, 1993, seismic operations accounted for
in excess of 90% of the Company's revenue, operating profit and identifiable
assets. Accordingly, no industry segment information has been presented.
NOTE P--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations for the years ended December 31, 1995 and 1994. Certain amounts have
been restated to reflect the effect of the discontinued operations.
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------
(In thousands, except per share amounts) March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
<S> <C> <C> <C> <C>
1995
- ----
Revenue $16,608 $22,143 $17,873 $17,815
Gross profit 9,338 10,808 8,289 7,456
Provision for income taxes 1,637 1,891 1,226 1,144
Income from continuing operations 2,787 3,221 2,088 2,031
Net income 2,974 3,341 2,182 182
Earnings per share:
- Primary:
Income from continuing operations .29 .33 .21 .20
Income (loss) from discontinued
operations .02 .01 .01 (.16)
Loss on disposal of discontinued
operations - - - (.02)
Net Income .31 .34 .22 .02
- Assuming full dilution:
Income from continuing operations .27 .32 .21 .20
Income (loss) from discontinued
operations .02 .01 .01 (.16)
Loss on disposal of discontinued
operations - - - (.02)
Net Income .29 .33 .22 .02
1994
- ----
Revenue $12,556 $16,005 $18,466 $23,875
Gross profit 6,152 8,106 7,630 12,442
Provision for income taxes 913 1,240 1,086 2,442
Income from continuing operations
before extraordinary item 1,695 2,303 2,016 3,657
Net income 1,647 2,203 1,768 3,697
Earnings per share:
- Primary:
Income from continuing operations
before extraordinary item .26 .31 .24 .41
Income (loss) from discontinued
operations (.01) (.01) .01 -
Extraordinary item - - (.04) -
Net income .25 .30 .21 .41
- Assuming full dilution:
Income from continuing operations
before extraordinary item .23 .28 .22 .38
Income (loss) from discontinued
operations (.01) (.01) .01 -
Extraordinary item - - (.03) -
Net income .22 .27 .20 .38
</TABLE>
F-22
<PAGE>
NOTE Q--SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)
The following information concerning the Company's oil and gas operations
is made in accordance with SFAS No. 69, "Disclosures About Oil and Gas Producing
Activities."
Oil and Gas Reserves: Proved reserves represent estimated quantities of
crude oil, condensate, natural gas and natural gas liquids that geological and
engineering data demonstrate, with reasonable certainty, to be recoverable in
future years from known reservoirs under economic and operating conditions
existing at the time the estimates were made. Proved developed reserves are
proved reserves expected to be recovered through wells and equipment in place
and under operating methods being utilized at the time the estimates were made.
The following table sets forth estimates of proved reserves and proved
developed reserves of crude oil (including condensate and natural gas liquids)
and natural gas attributable to the Company's interest in oil and gas
properties. All reserve estimates presented herein were prepared by Forrest A.
Garb & Associates, Inc., independent petroleum reserve engineers. It should be
noted that these reserve quantities are estimates and may be subject to
substantial upward or downward revisions. The estimates are based on the most
current and reliable information available; however, additional information
obtained through future production and experience and additional development of
existing reservoirs may significantly alter previous estimates of proved
reserves.
<TABLE>
<CAPTION>
Oil Gas
(Mbbl) (MMcf)
------- -------
<S> <C> <C>
Proved reserves at December 31, 1992 - -
Purchases of reserves in place 169 1,007
Extensions and discoveries 56 87
Production (27) (97)
------- -------
Proved reserves at December 31, 1993 198 997
Revisions of previous estimates (25) 520
Extensions and discoveries 1,355 14,128
Production (54) (268)
------- -------
Proved reserves at December 31, 1994 1,474 15,377
Revisions of previous estimates (964) (9,075)
Purchases of reserves in place 782 1,851
Extensions and discoveries 413 7,028
Production (193) (1,170)
------- -------
Proved reserves at December 31, 1995 1,512 14,011
======= =======
Proved developed reserves -
December 31, 1993 168 974
======= =======
December 31, 1994 487 7,315
======= =======
December 31, 1995 1,178 10,219
======= =======
</TABLE>
In addition to the proved reserves disclosed above, the Company owned
proved sulfur reserves of 239,000 long tons, 261,000 long tons and 70,000 long
tons at December 31, 1995, 1994 and 1993, respectively.
F-23
<PAGE>
Capitalized Costs of Oil and Gas Properties: As of December 31, 1995 and
1994, the Company's capitalized costs of oil and gas properties were as follows
(in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
-------- ---------
<S> <C> <C>
Unproved properties $ 20,862 $ 13,748
Proved properties 23,822 8,276
-------- ---------
Total capital costs 44,684 22,024
Less: Accumulated depreciation,
depletion and amortization (2,260) (635)
-------- ---------
Net capitalized costs $ 42,424 $ 21,389
======== =========
</TABLE>
F-24
<PAGE>
Of the total costs excluded from the amortization calculation as of
December 31, 1995, $12,321,000 were incurred during 1995, $6,594,000 were
incurred during 1994 and $1,947,000 were incurred during 1993. The Company
cannot accurately predict when these costs will be included in the amortization
base, but it is expected that these costs will be evaluated in the next three
years.
Costs Incurred in Oil and Gas Activities: The following table sets
forth the Company's costs incurred for oil and gas activities for the years
ended December 31, 1995, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Acquisition of properties:
Proved $ 3,643 $ -- $ 1,715
Unproved 5,549 3,676 2,640
Exploration costs 11,963 10,853 463
Development costs 1,505 2,345 332
------- ------- -------
Total costs incurred $22,660 $16,874 $ 5,150
======= ======= =======
</TABLE>
Results of Operations for Oil and Gas Producing Activities: The
following table sets forth the results of operations for oil and gas producing
activities for the years ended December 31, 1995, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Revenue $ 4,482 $ 1,137 $ 508
Production costs (1,553) (316) (113)
Depreciation, depletion and amortization (1,625) (296) (339)
------- ------- -------
Income before income taxes 1,304 525 56
Income tax expense (456) (179) (19)
------- ------- -------
Results of operations $ 848 $ 346 $ 37
======= ======= =======
</TABLE>
In addition to the revenues and production costs disclosed above, the
Company had revenues from sulfur sales and related production costs of $324,000
and $19,000, respectively, for the year ended December 31, 1995, $67,000 and
$24,000, respectively for the year ended December 31, 1994, and $113,000 and
$10,000, respectively, for the year ended December 31, 1993.
Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Oil and Gas Reserves: The following table sets forth the standardized
measure of the discounted future net cash flows attributable to the Company's
proved oil and gas reserves as prescribed by SFAS No. 69. Future cash inflows
were computed by applying year-end prices of oil and gas to the estimated future
production of proved oil and gas reserves. Future prices actually received may
differ from the estimates in the standardized measure.
F-25
<PAGE>
Future production and development costs represent the estimated future
expenditures (based on current costs) to be incurred in developing and producing
the proved reserves, assuming continuation of existing economic conditions.
Future income tax expenses were computed by applying statutory income tax rates
to the difference between pre-tax net cash flows relating to the Company's
proved oil and gas reserves and the tax basis of proved oil and gas properties,
adjusted for tax credits and allowances. The resulting annual net cash flows
were then discounted to present value amounts by applying a 10 percent annual
discount factor.
Although the information presented is based on the Company's best
estimates of the required data, the methods and assumptions used in preparing
the data were those prescribed by the Financial Accounting Standards Board
("FASB"). Although not market sensitive, they were specified in order to achieve
uniformity in assumptions and to provide for the use of reasonably objective
data. It is important to note here that this information is neither fair market
value nor the present value of future cash flows and it does not reflect changes
in oil and gas prices experienced since the respective year end. It is primarily
a tool designed by the FASB to allow for a reasonable comparison of oil and gas
reserves and changes therein through the use of a standardized method.
Accordingly, the Company cautions that this data should not be used for other
than its intended purpose.
Management does not rely upon the following information in making
investment and operating decisions. The Company, along with its partners, base
such decisions upon a wide range of factors, including estimates of probable as
well as proved reserves, and varying price and cost assumptions considered more
representative of a range of possible economic conditions that may be
anticipated.
<TABLE>
<CAPTION>
(in thousands)
December 31,
--------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Future gross revenue $ 43,724 $ 35,910 $ 3,182
Future production costs (8,951) (7,100) (1,036)
Future development costs (3,393) (6,998) (267)
Future income taxes (9,266) (6,024) (299)
--------- --------- ---------
Future net cash flows 22,114 15,788 1,580
10 percent annual discount for
estimated timing of cash flows (6,056) (4,958) (289)
--------- --------- ---------
Standardized measure of discounted
future net cash flows $ 16,058 $ 10,830 $ 1,291
========= ======== =========
</TABLE>
The above table excludes future net cash flows before income taxes of
$5,061,000, $3,884,000 and $1,038,000, and discounted future net cash flows
before income taxes of $3,926,000, $2,939,000 and $804,000, as of December 31,
1995, 1994 and 1993, respectively, related to proved sulfur reserves.
F-26
<PAGE>
The following are the principal sources of changes in the standardized
measure of discounted future net cash flows for the years ended December 31,
1995, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Standardized measure, beginning of year $ 10,830 $ 1,291 $ --
Extensions and discoveries, net of related costs 13,714 14,344 536
Sales of oil and gas produced, net of production costs (2,929) (821) (395)
Net changes in prices and production costs 77 (276) --
Change in future development costs 4,010 74 --
Development costs incurred during the period
that reduced future development costs 421 -- --
Revision of previous quantity estimates (12,192) 201 --
Purchases of reserves in place 5,583 -- 1,400
Accretion of discount 1,525 154 --
Net change in income taxes (2,583) (4,174) (250)
Change in production rates and other (2,398) 37 --
-------- -------- --------
Standardized measure, end of year $ 16,058 $ 10,830 $ 1,291
======== ======== ========
</TABLE>
F-27
<PAGE>
EXHIBIT
INDEX
- --------------------------------------------------------------------------------
Exhibit Title
- --------------------------------------------------------------------------------
10.34 Termination and Release Agreement dated as
of December 28, 1995, between the
Company and various of its subsidiaries
and Bank One, Texas, National Association
and Compass Bank-Houston
10.39 Loan Modification Agreement and Amendment
to Loan Documents effective
December 28, 1995, between Seitel
Geophysical, Inc.(Company's wholly-owned
subsidiary) and Compass Bank
10.46 Termination and Release Agreement dated as
of December 28, 1995, between DDD Energy,
Inc. (Company's wholly-owned subsidiary)
and Bank One, Texas, National Association
and Compass Bank-Houston
10.52 Note Purchase Agreement dated as of
December 28, 1995, between the Company
and the Series A Purchasers, the Series B
Purchasers and the Series C Purchasers
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Forrest A. Garb & Associates
Exhibit 10.34
TERMINATION AND RELEASE AGREEMENT
This Termination and Release Agreement ("Agreement") is made this 28th day
of December, 1995, by and between Seitel, Inc., a Delaware corporation
("Seitel"), Seitel Geophysical, Inc., a Delaware corporation ("SGI"), Exsol,
Inc., a Delaware corporation ("Exsol"), Seitel Data Corp., a Delaware
corporation ("SDC"), and Seitel Offshore Corp., a Delaware corporation ("SOC,"
and collectively with Seitel, SGI, Exsol, and SDC, the "Borrowers") and Bank
One, Texas, National Association ("Bank One") and Compass Bank - Houston
("Compass," and collectively with Bank One, "Lenders").
WHEREAS, Lenders loaned certain sums to Borrowers (the "Loan") pursuant to
that certain Restated Revolving Credit and Security Agreement (the "Credit and
Security Agreement") between Borrowers and Lenders dated effective as of
December 31, 1994, and those certain promissory notes of even date therewith,
each in the original principal amount of $12,500,000, payable to Bank One (the
"Bank One Note") and to Compass (the "Compass Note", and collectively with the
Bank One Note, the "Notes");
WHEREAS, SOC pledged certain joint venture interests to Lenders as security
for the Loan pursuant to that certain Security Agreement (Joint Venture
Interest) dated effective May 19, 1994 between SOC and Lenders, as amended by
that certain Amendment to Security Agreement (Joint Venture Interest) dated
effective December 31, 1995 between SOC and Lenders (the "Joint Venture Security
Agreement");
WHEREAS, Seitel, SGI and SDC pledged certain shares of stock of their
subsidiaries to Lenders as security for the Loan pursuant to the terms of that
certain Pledge Agreement dated effective February 28, 1994, between Seitel and
Lenders, as amended by that certain Amendment to Pledge Agreement dated
effective December 31, 1995 among Seitel, SGI, SDC, and Lenders (the "Pledge");
WHEREAS, Borrowers desire to repay all indebtedness under the Loan and
terminate the Credit and Security Agreement, and the Notes are hereby being
repaid in full by Borrowers; and
WHEREAS, Borrowers and Lenders enter into this Agreement to evidence
receipt of payment in full of the Notes, termination of the Credit and Security
Agreement and all rights of Borrowers to borrow from Lenders thereunder,
termination of the various other security documents securing payment of the
Notes, and release of all security interests of Lenders securing repayment of
the Loan.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Payment. Lenders hereby acknowledge receipt of the sum of $19,215,689.45
as payment in full of all outstanding principal and interest due under the
Notes, and contemporaneously with the execution hereof, have returned the
original Notes marked "Paid In Full" to Borrowers.
<PAGE>
2. Termination of Credit and Security Agreement. Borrowers and Lenders
hereby terminate the Credit and Security Agreement. Borrowers and Lenders hereby
acknowledge and agree that Borrowers shall have no further rights to borrow
funds under the Credit and Security Agreement, and shall have no further
liabilities to pay any amounts to Lenders thereunder.
3. Release of Security Interests under Credit and Security Agreement.
Lenders hereby release all security interests in any and all Collateral (as such
term is defined in the Credit and Security Agreement) granted in or otherwise
arising under the Credit and Security Agreement or otherwise securing the Loan.
Nothing herein shall be deemed to affect in any manner the rights of Compass
Bank (formerly Central Bank of the South) ("Compass Alabama") under that certain
Term Credit and Security Agreement dated July 15, 1993 between Compass Alabama
and SGI, the Term Note in the original principle amount of $4,300,000 of even
date therewith made by SGI payable to the order of Compass Alabama, or the
Continuing Guaranty of even date therewith made by Seitel to Compass Alabama to
secure the payment obligations of SGI thereunder.
4. Termination of Joint Venture Security Agreement. Lenders hereby release
the security interests in the joint venture interests and other collateral
granted in or otherwise arising under the Joint Venture Security Agreement, and
terminate the Joint Venture Security Agreement.
5. Termination of Pledge. Lenders hereby release the security interests in
the stock and other collateral granted in or otherwise arising under the Pledge,
and terminate the Pledge. Lenders shall promptly return to Borrowers all
original share certificates delivered to Lenders under the Pledge, or shall
deliver lost share certificate affidavits reasonably satisfactory to Borrowers
for any such certificates as Lenders may have lost or as may have been
destroyed.
6. UCC-3s. Lenders have, contemporaneously with the execution hereof,
executed, and as soon as practicable, will cause to be filed with the Secretary
of State of the State of Texas and all other jurisdictions where financing
statements may have been filed in connection with the Loan, UCC-3 Termination
Statements terminating the UCC-1 Financing Statements filed with such
jurisdictions in connection with the Loan and the various security documents
relating thereto.
7. Payment of Expenses. Notwithstanding anything herein to the contrary,
Borrowers shall pay Lenders' reasonable legal fees and expenses incurred in
connection this Agreement and the releases contemplated hereunder, including any
expenses arising under Section 8 hereof.
8. Further Assurances. The parties hereto agree to perform such other acts
and deliver such other documents as may be reasonably necessary in the opinion
of the parties to further effect and evidence the releases and terminations
provided for herein.
9. Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
<PAGE>
EXECUTED as of the date first above written.
BANK ONE, TEXAS, NATIONAL ASSOCIATION
BY: /s/ Gary L. Stone
---------------------------------
NAME: Gary L. Stone
TITLE: Senior Vice President
COMPASS BANK - HOUSTON
BY: /s/ Kathleen J. Bowen
---------------------------------
NAME: Kathleen J. Bowen
TITLE: Vice President
SEITEL, INC.
BY: /s/ Debra D. Valice
---------------------------------
DEBRA D. VALICE, Sr. Vice President
of Finance and Chief Financial
Officer
SEITEL GEOPHYSICAL, INC.
BY: /s/ Debra D. Valice
---------------------------------
DEBRA D. VALICE, Vice President
EXSOL, INC.
BY: /s/ Debra D. Valice
---------------------------------
DEBRA D. VALICE, Vice President
SEITEL DATA CORP.
BY: /s/ Debra D. Valice
---------------------------------
DEBRA D. VALICE, Vice President
SEITEL OFFSHORE CORP.
BY: /s/ Debra D. Valice
---------------------------------
DEBRA D. VALICE, Vice President
EXHIBIT 10.39
LOAN MODIFICATION AGREEMENT
---------------------------
AND AMENDMENT TO LOAN DOCUMENTS
-------------------------------
THIS LOAN MODIFICATION AGREEMENT AND AMENDMENT TO LOAN DOCUMENTS (this
"Agreement") is being entered into effective as of the 28th day of December,
1995, by and between COMPASS BANK, an Alabama state banking corporation ("Bank")
and SEITEL GEOPHYSICAL, INC., a Delaware corporation ("Borrower").
P R E A M B L E
---------------
In July, 1993, Bank and Borrower executed that certain Term Credit and
Security Agreement (the "Agreement") governing Borrower's $4,300,000 term loan
(the "Term Loan"). In connection with the Term Loan, Borrower executed in favor
of Bank that certain Term Note in the principal amount of FOUR MILLION THREE
HUNDRED THOUSAND AND NO/100 DOLLARS ($4,300,000.00) (the "Note"), along with
other loan documents and instruments evidencing, securing, relating to,
guaranteeing or otherwise executed or delivered in connection with the Term Loan
(jointly and severally with the Agreement and the Note, the "Loan Documents").
Effective as of the date set forth above, Borrower requested, and Bank
agreed, to modify certain financial covenants relating to the Term Loan as more
specifically set forth below.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the premises, the mutual agreements of
the parties as set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and to induce Bank
to modify certain financial covenants relating to the Term Loan, the parties,
intending to be legally bound hereby, agree as follows:
1. Amendment of Agreement. The Agreement shall be and the same hereby is
amended as follows:
(i) Section 7.4 of the Agreement shall be deleted and replaced as follows:
"7.4 Reserved for Future Use."
(ii) Section 7.5 of the Agreement shall be deleted and replaced as follows:
"7.5 Reserved for Future Use."
(iii) Section 7.6 of the Agreement shall be deleted and replaced as
follows: "7.6 Reserved for Future Use."
(iv) Section 8.5 of the Agreement shall be deleted and replaced as follows:
"8.5 Reserved for Future Use."
(v) New Section 8.7 of the Agreement shall be inserted after existing
Section 8.6 and read in its entirety as follows:
"8.7 The Borrower shall not cause, allow or suffer the Company nor any
Subsidiary of the Company to incur any Debt if after giving effect
thereto, the ratio of the Company's Consolidated Debt to Total
Capitalization would exceed fifty percent (50%)."
(vi) New Section 8.8 of the Agreement shall be inserted thereafter and read
in its entirety as follows:
"8.8 The Borrower shall not cause, allow or suffer to occur at any
time the Company's Consolidated Net Worth to be less than the sum of
(a) Ninety Million Dollars ($90,000,000) plus (b) an aggregate amount
equal to fifty percent (50%) of Consolidated Net Income (but, in each
case, only if a positive number) for each completed fiscal year of the
Company beginning with the fiscal year ending December 31, 1995."
<PAGE>
(vii) New Section 8.9 of the Agreement shall be inserted thereafter and
read in its entirety as follows:
"8.9 The Borrower shall not cause, allow or suffer to occur at any
time (a) EBITDA for the period of four consecutive fiscal quarters of
the Company then most recently ended to be less than (b) five hundred
percent (500%) of Consolidated Interest Expense for such period."
(viii) New Section 8.10 shall be inserted thereafter and read in its
entirety as follows:
"8.10 As used in Sections 8.7, 8.8 and 8.9, capitalized terms shall
have the meaning attributed to the same in Schedule B hereto."
(ix) By adding Schedule B hereto as Schedule B to the Agreement.
2. Effect on Loan Documents. Each of the Loan Documents shall be deemed
amended as set forth hereinabove and to the extent necessary to carry out the
intent of this Agreement. Without limiting the generality of the foregoing, each
reference in the Loan Documents to the Agreement or any other Loan Documents
shall be deemed to be references to said documents, as amended hereby. Except as
is expressly set forth herein, all of the Loan Documents shall remain in full
force and effect in accordance with their respective terms and shall continue to
evidence, secure, guarantee or relate to, as the case may be, the Term Loan.
3. Representations and Warranties. Each representation and warranty
contained in the Loan Documents is hereby reaffirmed as of the date hereof, and
Borrower hereby represents that Borrower has no offsets or claims against Bank
arising under, related to, or connected with the Term Loan or any of the Loan
Documents.
4. Additional Documentation; Expenses. If Bank shall request, Borrower
shall provide to Bank certified copies of resolutions properly authorizing the
transactions contemplated hereby and the execution of this Agreement, all other
documents and instruments being executed in connection herewith and all other
documents and instruments required by Bank, all in form and substance
satisfactory to Bank. Borrower shall pay any recording fees and all other
expenses (including, without limitation, legal fees) incurred by Bank and
Borrower in connection with the modification of the Term Loan and any other
transactions contemplated hereby.
5. Execution and Effectiveness. This Agreement has been negotiated, and is
being executed and delivered, in the State of Alabama, or, if executed
elsewhere, shall become effective upon Bank's receipt and acceptance of the
original of this Agreement (or a facsimile thereof) in the State of Alabama;
provided, however, that Bank shall have no obligation to give, nor shall
Borrower be entitled to receive, any notice of such acceptance for this
Agreement to become a binding obligation of Borrower.
IN WITNESS WHEREOF, the undersigned have caused this instrument to be
duly executed effective as of the date first set forth above.
BORROWER:
--------
WITNESS: SEITEL GEOPHYSICAL, INC.
/s/ Marcia H. Kendrick By /s/ Debra D. Valice
- -------------------------- ----------------------------
Its Vice President and
Secretary/Treasurer
BANK:
----
WITNESS: COMPASS BANK
/s/ Anne Chandler By /s/ Jay P. Ackley
- -------------------------- ----------------------------
Its Assistant Vice President
<PAGE>
STATE OF TEXAS )
)
COUNTY OF HARRIS )
I, the undersigned, Notary Public in and for said County in said State,
hereby certify that Debra D. Valice, whose name as Vice President and
Secretary/Treasurer of SEITEL GEOPHYSICAL, INC., a corporation, is signed to the
foregoing instrument and who is known to me, acknowledged before me on this day
that, being informed of the contents of the instrument, she, as such officer,
and with full authority, executed the same voluntarily for and as the act of
said corporation.
Given under my hand this the 7th day of February, 1996.
/s/ Jon R. Fontenot
---------------------------------
Notary Public
[NOTARIAL SEAL]
My Commission Expires:
April 13, 1999
STATE OF ALABAMA )
)
COUNTY OF JEFFERSON )
I, the undersigned, Notary Public in and for said County in said State,
hereby certify that Jay P. Ackley, whose name as Assistant Vice President of
COMPASS BANK, an Alabama banking corporation, is signed to the foregoing
instrument and who is known to me, acknowledged before me on this day that,
being informed of the contents of the instrument, he, as such officer, and with
full authority, executed the same voluntarily for and as the act of said
corporation.
Given under my hand this the 13th day of February, 1996.
/s/ Anne H. Chandler
---------------------------------
Notary Public
[NOTARIAL SEAL]
My Commission Expires:
April 13, 1998
<PAGE>
SCHEDULE B
----------
DEFINED TERMS
-------------
As used in Sections 8.7, 8.8, and 8.9 of the Agreement, the following terms
have the respective meanings set forth below:
Bank -- means Compass Bank, an Alabama state banking corporation.
Board of Directors -- means the Board of Directors of the Company.
Borrower -- means Seitel Geophysical, Inc., a Delaware corporation.
Capital Lease -- means a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.
Capital Lease Obligation -- means, with respect to any Person and a Capital
Lease, the amount of the obligation of such Person as the lessee under such
Capital Lease which would, in accordance with GAAP, appear as a liability on a
balance sheet of such Person.
Company -- means Seitel, Inc., a Delaware corporation and the parent
corporation of Borrower.
Consolidated Debt -- means, as of any date of determination, the total of
all Debt of the Company and the Restricted Subsidiaries outstanding on such
date, after eliminating all offsetting debits and credits between the Company
and the Restricted Subsidiaries and all other items required to be eliminated in
the course of the preparation of consolidated financial statements of the
Company and the Restricted Subsidiaries in accordance with GAAP.
Consolidated Interest Expense -- means, with respect to any period, the sum
(without duplication) of the following (in each case, eliminating all offsetting
debits and credits between the Company and the Restricted Subsidiaries and all
other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and the Restricted Subsidiaries
in accordance with GAAP):
(a) all interest in respect of Debt of the Company and the Restricted
Subsidiaries (including imputed interest on Capital Lease Obligations)
deducted in determining Consolidated Net Income for such period, and
(b) all debt discount and expense amortized or required to be
amortized in the determination of Consolidated Net Income for such period.
Consolidated Net Income -- means, with reference to any period, the net
income (or loss) of the Company and the Restricted Subsidiaries for such period
(taken as a cumulative whole), as determined in accordance with GAAP, after
eliminating all offsetting debits and credits between the Company and the
Restricted Subsidiaries and all other items required to be eliminated in the
course of the preparation of consolidated financial statements of the Company
and the Restricted Subsidiaries in accordance with GAAP, provided, that there
shall be excluded:
(a) any gains resulting from any write-up of any assets (but not any
loss resulting from any write-down of any assets),
(b) the income (or loss) of any Person accrued prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or a Restricted Subsidiary, and the income (or loss) of any Person,
substantially all of the assets of which have been acquired in any manner
by the Company or any Restricted Subsidiary, realized by such other Person
prior to the date of acquisition,
<PAGE>
(c) in the case of a successor to the Company by consolidation or
merger or as a transferee of its assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets,
(d) any aggregate net gain (but not any aggregate net loss) during
such period arising from the sale, conversion, exchange or other
disposition of capital assets (such term to include, without limitation,
(i) all non-current assets and, without duplication, (ii) the following,
whether or not current: all fixed assets, whether tangible or intangible,
all inventory sold in conjunction with the disposition of fixed assets, and
all securities),
(e) any portion of such net income that cannot be freely converted
into United States Dollars,
(f) the income (or loss) of any Person (other than a Restricted
Subsidiary) in which the Company or any Restricted Subsidiary has an
ownership interest, except to the extent that any such income has been
actually received by the Company or such Restricted Subsidiary in the form
of cash dividends or similar cash distributions,
(g) any gain arising from the acquisition of any security, or the
extinguishment, under GAAP, of any Debt of the Company or any Restricted
Subsidiary,
(h) any net income or gain or any net loss during such period from (i)
any change in accounting principles in accordance with GAAP or (ii) any
prior period adjustments resulting from any change in accounting principles
in accordance with GAAP, and
(i) any net income or gain (but not any net loss) during such period
from (i) any extraordinary items or (ii) any discontinued operations or the
disposition thereof.
Consolidated Net Worth -- means, at any time, the total stockholders'
equity which would be shown in consolidated financial statements of the Company
and the Restricted Subsidiaries prepared at such time in accordance with GAAP.
Debt -- means, with respect to any Person, without duplication,
(a) its obligations for borrowed money;
(b) its obligations in respect of banker's acceptances, other
acceptances, letters of credit and other instruments serving a similar
function issued or accepted by banks and other financial institutions for
the account of such Person (whether or not incurred in connection with the
borrowing of money);
(c) its obligations that are evidenced by bonds, notes, debentures or
similar instruments;
(d) its obligations for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including, without limitation, all obligations
created or arising under any conditional sale or other title retention
agreement with respect to any such property);
(e) its Capital Lease Obligations;
(f) its obligations in respect of all mandatorily redeemable preferred
stock of such Person;
(g) its obligations for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed
or otherwise become liable for such obligations); and
(h) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (g) hereof.
Debt of any Person shall include all obligations of such Person of the
character described in clauses (a) through (h) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
<PAGE>
EBITDA -- means, in respect of any period, Consolidated Net Income for such
period minus
(a) to the extent added in the computation of such Consolidated Net
Income, each of the following:
(i) extraordinary gains net of extraordinary losses, and
(ii) gains, net of losses, arising from the disposition of
property other than in the ordinary course of business, plus
(b) to the extent deducted in the computation of such Consolidated Net
Income, each of the following:
(i) Consolidated Interest Expense, net of interest and other
investment income,
(ii) taxes imposed on or measured by income or excess profits of
the Company and the Restricted Subsidiaries,
(iii) the amount of all depreciation, depletion and amortization
allowances and other non-cash expenses of the Company and the
Restricted Subsidiaries,
(iv) extraordinary losses, net of extraordinary gains, and
(v) losses, net of gains, arising from the disposition of
property other than in the ordinary course of business.
<PAGE>
Equity Interest -- means
(a) the outstanding Voting Stock of a corporation or other business
entity,
(b) the interest in the capital or profits of a corporation, limited
liability company, partnership or joint venture, or
(c) the beneficial interest in a trust or estate.
GAAP -- means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
Guaranty -- means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
Person -- means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
<PAGE>
Restricted Subsidiary -- means and includes each and every Subsidiary other
than any Subsidiary which, at the time of any determination hereunder, has been
designated by the Board of Directors and by written notice to the Bank to be an
Unrestricted Subsidiary; provided in any event, that each of the following shall
at all times constitute a Restricted Subsidiary:
(a) each Subsidiary of the Company as of December 28, 1995; and
(b) each Subsidiary which owns, directly or indirectly, more than
fifty percent (50%) of the Equity Interest of a Restricted Subsidiary.
Subsidiary -- means, as to any Person, any corporation, limited liability
company, partnership, joint venture, trust or estate in which such Person or one
or more of the Subsidiaries or such Person and one or more of the Subsidiaries
own more than fifty percent (50%) of the Equity Interest. Unless the context
otherwise clearly requires, any reference to a "Subsidiary" is a reference to a
Subsidiary of the Company.
Total Capitalization -- means, at any time, the sum of Consolidated Debt
plus Consolidated Net Worth, in each case at such time.
Unrestricted Subsidiary -- means each Subsidiary other than a Restricted
Subsidiary.
Voting Stock -- shall mean the capital stock or similar interest of any
class or classes (however designated) of a corporation or other business entity,
the holders of which are ordinarily, in the absence of contingencies, entitled
to vote for the election of the members of the board of directors (or Persons
performing similar functions) of a corporation or other business entity.
Exhibit 10.46
TERMINATION AND RELEASE AGREEMENT
(DDD Energy Loan)
This Termination and Release Agreement ("Agreement") is made this 28th day
of December, 1995, by and between DDD Energy, Inc., a Delaware corporation
("Borrower"), Seitel, Inc., a Delaware corporation ("Guarantor"), Seitel
Geophysical, Inc., a Delaware corporation ("SGI") and Bank One, Texas, National
Association ("Bank One") and Compass Bank - Houston ("Compass," and collectively
with Bank One, "Lenders").
WHEREAS, Lenders loaned certain sums to Borrower (the "Loan") pursuant to
that certain Credit Agreement (the "Credit Agreement") between Borrower and
Lenders dated June 14, 1995, and those certain promissory notes of even date
therewith, each in the original principal amount of $37,500,000, payable to Bank
One (the "Bank One Note") and to Compass (the "Compass Note", and collectively
with the Bank One Note, the "Notes");
WHEREAS, Borrower granted a Deed of Trust, Security Agreement, Financing
Statement and Assignment of Production (the "First Deed of Trust") to Arthur R.
Gralla, Jr., Trustee for the benefit of Bank One, as Agent for the Lenders dated
June 14, 1995 as security for the Loan;
WHEREAS, Borrower granted a Deed of Trust, Security Agreement, Financing
Statement and Assignment of Production (the "Second Deed of Trust," and
collectively with the First Deed of Trust, the "Deeds of Trust") to Arthur R.
Gralla, Jr., Trustee for the benefit of Bank One, as Agent for the Lenders dated
September 21, 1995 as security for the Loan;
WHEREAS, Borrower granted certain security interests in certain collateral
to Bank One, as Agent for Lenders, pursuant to those certain Non-Standard
Financing Statements (the "Financing Statements") relating to the Deeds of
Trust;
WHEREAS, Borrower pledged certain joint venture interests to Lenders as
security for the Loan pursuant to that certain Assignment of Joint Venture
Interests (Security Agreement) dated June 14, 1995 between Borrower and Bank
One, as Agent for the Lenders (the "Assignment of Joint Venture Interests");
WHEREAS, Borrower collaterally assigned certain interests to Bank One, as
Agent for the Lenders, as security for the Loan pursuant to that certain
Collateral Assignment of Notes, Liens and Security Interests (Security
Agreement) (the "Collateral Assignment") dated June 14, 1995 between Borrower
and Bank One, as Agent for the Lenders ,
WHEREAS, Guarantor guaranteed the obligations of Borrower under the Credit
Agreement pursuant to the terms of that certain Guaranty by Guarantor in favor
of Lenders dated June 14, 1995 (the "Guaranty");
<PAGE>
WHEREAS, Guarantor pledged all of the shares of stock of Borrower to
Lenders as security for its obligations under the Guaranty pursuant to the terms
of that certain Security Agreement (Stock Pledge) dated June 14, 1995, between
Guarantor and Lenders (the "Pledge");
WHEREAS, Guarantor, SGI and Lenders entered into a Subordination Agreement
(the "Subordination Agreement") dated June 14, 1995 in connection with the Loan;
WHEREAS, Borrower desires to repay all indebtedness under the Loan and
terminate the Credit Agreement, and the Notes are hereby being repaid in full by
Borrower; and
WHEREAS, Borrower and Lenders enter into this Agreement to evidence receipt
of payment in full of the Notes, termination of the Credit Agreement and all
rights of Borrower to borrow from Lenders thereunder, termination of the various
security documents securing payment of the Notes, and release of all security
interests of Lenders securing repayment of the Loan.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Payment. Lenders hereby acknowledge receipt of the sum of $7,767,155.29
as payment in full of all outstanding principal and interest due under the
Notes, and contemporaneously with the execution hereof, have returned the
original Notes marked "Paid In Full" to Borrower.
2. Termination of Credit Agreement. Borrower and Lenders hereby terminate
the Credit Agreement. Borrower and Lenders hereby acknowledge and agree that
Borrower shall have no further rights to borrow funds under the Credit
Agreement, and shall have no further liabilities to pay any amounts to Lenders
thereunder. Lenders hereby release all security interests in any and all
collateral granted in connection with or otherwise securing repayment of the
Loan. Nothing in this Agreement shall be deemed to affect in any manner the
rights of Compass Bank (formerly Central Bank of the South) ("Compass Alabama")
under that certain Term Credit and Security Agreement dated July 15, 1993
between Compass Alabama and Seitel Geophysical, Inc. ("SGI"), the Term Note in
the original principle amount of $4,300,000 of even date therewith made by SGI
payable to the order of Compass Alabama, or the Continuing Guaranty of even date
therewith made by Seitel to Compass Alabama to secure the payment obligations of
SGI thereunder.
3. Termination and Release of Security Interests under Deeds of Trust.
Without limiting the generality of paragraph 2 above, Lenders hereby release all
security interests in any and all Mortgaged Property (as such term is defined in
the Deeds of Trust) granted in or otherwise arising under the Deeds of Trust,
and in all collateral under the Financing Statements. Lenders shall execute and
file with all required governmental offices formal documents (including but not
limited to releases of mortgages and UCC-3s) evidencing such releases as soon as
reasonably practicable, which documents shall be prepared and filed at
Borrower's expense.
4. Termination of Assignment of Joint Venture Interests. Without limiting
the generality of paragraph 2 above, Lenders hereby release the security
interests in the joint venture interests and other collateral granted in or
otherwise arising under the Assignment of Joint Venture Interests, and terminate
the Assignment of Joint Venture Interests.
<PAGE>
5. Termination of Collateral Assignment. Without limiting the generality of
paragraph 2 above, Lenders hereby release the security interests created by the
Collateral Assignment, and terminate the Collateral Assignment. As soon as
reasonably practicable, Lenders shall return to Borrower all documents and
instruments delivered to Lenders in connection with the Collateral Assignment.
6. Termination of Guaranty. Without limiting the generality of paragraph 2
above, Lenders hereby release Guarantor from its obligations under the Guaranty,
and terminate the Guaranty.
7. Termination of Pledge. Without limiting the generality of paragraph 2
above, Lenders hereby release the security interests in the stock and other
collateral granted in or otherwise arising under the Pledge, and terminate the
Pledge. Lenders shall promptly return to Guarantor all original share
certificates delivered to Lenders under the Pledge, or shall deliver lost share
certificate affidavits reasonably satisfactory to Guarantor for any such
certificates as Lenders may have lost or as may have been destroyed.
8. Termination of Subordination Agreement. Without limiting the generality
of paragraph 2 above, Lenders, Guarantor and SGI hereby terminate the
Subordination Agreement.
9. Payment of Expenses. Notwithstanding anything herein to the contrary,
Borrowers shall pay Lenders' reasonable legal fees and expenses incurred in
connection this Agreement and the releases contemplated hereunder, including any
expenses arising under paragraph 10 hereof.
10. Further Assurances. The parties hereto agree to perform such other acts
and deliver such other documents as may be reasonably necessary in the opinion
of the parties to further effect and evidence the releases and terminations
provided for herein.
11. Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
EXECUTED as of the date first above written.
BANK ONE, TEXAS, NATIONAL ASSOCIATION
BY: /s/ Gary L. Stone
---------------------------------
NAME: Gary L. Stone
TITLE: Senior Vice President
COMPASS BANK - HOUSTON
BY: /s/ Kathleen J. Bowen
---------------------------------
NAME: Kathleen J. Bowen
TITLE: Vice President
<PAGE>
SEITEL, INC.
BY: /s/ Debra D. Valice
---------------------------------
DEBRA D. VALICE, Sr. Vice President
of Finance and Chief Financial
Officer
DDD ENERGY, INC.
BY: /s/ Debra D. Valice
---------------------------------
DEBRA D. VALICE, Vice President
SEITEL GEOPHYSICAL, INC.
BY: /s/ Debra D. Valice
---------------------------------
DEBRA D. VALICE, Vice President
SEITEL, INC.
NOTE PURCHASE AGREEMENT
DATED AS OF DECEMBER 28, 1995
$25,000,000 7.17% SERIES A SENIOR NOTES DUE DECEMBER 30, 2001
$27,500,000 7.17% SERIES B SENIOR NOTES DUE DECEMBER 30, 2002
$22,500,000 SERIES C SENIOR NOTES DUE DECEMBER 30, 2002
<PAGE>
TABLE OF CONTENTS
Section Page
1. AUTHORIZATION OF NOTES ............................................. 1
2. SALE AND PURCHASE OF NOTES ......................................... 2
3. CLOSINGS ........................................................... 2
3.1 The Series A and B Closing ................................. 2
3.2 The Series C Closing ....................................... 3
3.3 Failure of the Company to Deliver .......................... 3
3.4 Failure by You to Deliver .................................. 3
4. YOUR CONDITIONS TO CLOSINGS ........................................ 4
4.1 Representations and Warranties ............................. 4
4.2 Performance; No Default .................................... 4
4.3 Compliance Certificates .................................... 4
4.4 Opinions of Counsel ........................................ 4
4.5 Purchases Permitted By
Applicable Law, etc ........................................ 5
4.6 Sale of Other Notes ........................................ 5
4.7 Payment of Special Counsel Fees ............................ 5
4.8 Private Placement Number ................................... 5
4.9 Changes in Corporate Structure ............................. 5
4.10 Subsidiary Guaranty ........................................ 6
4.11 Rating ..................................................... 6
4.12 Proceedings and Documents .................................. 6
4A. COMPANY'S CLOSING CONDITIONS ....................................... 6
4A.1 Representations and Warranties .......................... 6
4A.2 Sales Permitted by Applicable Law, etc .................. 6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ...................... 7
5.1 Organization; Power and Authority .......................... 7
5.2 Authorization, etc ......................................... 7
5.3 Disclosure ................................................. 8
5.4 Organization and Ownership of Shares
of Restricted Subsidiaries; Affiliates ..................... 8
5.5 Financial Statements ....................................... 9
5.6 Compliance with Laws, Other Instruments,
etc ........................................................ 9
5.7 Governmental Authorizations, etc ........................... 10
5.8 Litigation; Observance of Agreements,
Statutes and Orders ........................................ 10
5.9 Taxes ...................................................... 10
5.10 Title to Property; Leases .................................. 11
5.11 Licenses, Permits, etc ..................................... 11
5.12 Compliance with ERISA ...................................... 11
5.13 Private Offering by the Company ............................ 12
<PAGE>
5.14 Use of Proceeds; Margin Regulations ........................ 13
5.15 Existing Debt; Future Liens ................................ 13
5.16 Foreign Assets Control Regulations, etc .................... 13
5.17 Status under Certain Statutes .............................. 14
5.18 Environmental Matters ...................................... 14
6. REPRESENTATIONS OF THE PURCHASER ................................... 14
6.1 Purchase for Investment .................................... 14
6.2 Legend ..................................................... 15
6.3 ERISA ...................................................... 15
6.4 Organization; Power and Authority;
Compliance with Laws ........................................ 16
6.5 Authorization, etc ......................................... 17
7. INFORMATION AS TO COMPANY .......................................... 17
7.1 Financial and Business Information ......................... 17
7.2 Officer's Certificate ...................................... 21
7.3 Inspection ................................................. 21
8. PREPAYMENT OF THE NOTES ............................................ 22
8.1 Required Prepayments ....................................... 22
8.2 Optional Prepayments with Make-Whole
Amount; Rescission .......................................... 22
8.3 Allocation of Partial Prepayments .......................... 24
8.4 Maturity; Surrender, etc ................................... 24
8.5 Purchase of Notes .......................................... 24
8.6 Make-Whole Amount .......................................... 24
9. AFFIRMATIVE COVENANTS .............................................. 26
9.1 Compliance with Law ........................................ 26
9.2 Insurance .................................................. 26
9.3 Maintenance of Properties .................................. 26
9.4 Payment of Taxes and Claims ................................ 27
9.5 Corporate Existence, etc ................................... 27
9.6 Pari Passu ................................................. 27
9.7 Subsidiary Guaranty ........................................ 28
9.8 Application of Proceeds; Releases .......................... 28
10. NEGATIVE COVENANTS ................................................. 29
10.1 Net Worth ................................................. 29
10.2 Interest Coverage ......................................... 29
10.3 Debt Incurrence ........................................... 29
10.4 Liens ..................................................... 30
10.5 Mergers and Consolidations ................................ 32
10.6 Sale of Assets ............................................ 33
10.7 Restricted Payments and Restricted
Investments ............................................... 36
10.8 Limitations on Certain Restricted
Subsidiary Actions ........................................ 37
10.9 Affiliate Transactions .................................... 38
10.10 Line of Business .......................................... 38
<PAGE>
11. EVENTS OF DEFAULT .................................................. 38
12. REMEDIES ON DEFAULT, ETC ........................................... 40
12.1 Acceleration .............................................. 40
12.2 Other Remedies ............................................ 40
12.3 Rescission ................................................ 41
12.4 No Waivers or Election of Remedies,
Expenses, etc ............................................. 41
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES ...................... 41
13.1 Registration of Notes ..................................... 41
13.2 Transfer and Exchange of Notes ............................ 42
13.3 Replacement of Notes ...................................... 42
14. PAYMENTS ON NOTES .................................................. 43
14.1 Place of Payment .......................................... 43
14.2 Home Office Payment ....................................... 43
15. EXPENSES, ETC ...................................................... 43
15.1 Transaction Expenses ...................................... 43
15.2 Survival .................................................. 44
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
ENTIRE AGREEMENT ................................................... 44
17 AMENDMENT AND WAIVER ............................................... 44
17.1 Requirements .............................................. 44
17.2 Solicitation of Holders ................................... 45
17.3 Binding Effect, etc ....................................... 45
17.4 Notes held by Company, etc ................................ 45
18. NOTICES ............................................................ 46
19. REPRODUCTION OF DOCUMENTS .......................................... 46
20. CONFIDENTIAL INFORMATION ........................................... 47
21. SUBSTITUTION OF PURCHASER .......................................... 48
22. MISCELLANEOUS ...................................................... 48
22.1 Successors and Assigns .................................... 48
22.2 Payments Due on Non-Business Days ......................... 48
22.3 Severability .............................................. 48
22.4 Construction .............................................. 49
22.5 Counterparts .............................................. 49
22.6 Governing Law ............................................. 49
22.7 Consent to Jurisdiction;
Appointment of Agent ...................................... 49
22.8 Defeasance ................................................ 50
22.9 GAAP ...................................................... 53
22.10 Usury ..................................................... 53
<PAGE>
SCHEDULE A -- INFORMATION RELATING TO PURCHASERS
SCHEDULE B -- DEFINED TERMS
SCHEDULE 4.9 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of
Subsidiary Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.12 -- ERISA
SCHEDULE 5.15 -- Existing Debt
SCHEDULE 10.8 -- Certain Agreements by Restricted Subsidiaries
EXHIBIT 1A -- Form of 7.17% Series A Senior Note due
December 30, 2001
EXHIBIT 1B -- Form of 7.17% Series B Senior Note due
December 30, 2002
EXHIBIT 1C -- Form of Series C Senior Note due December 30, 2002
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers
EXHIBIT 4.10 -- Form of Subsidiary Guaranty
<PAGE>
SEITEL, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
$25,000,000 7.17% SERIES A SENIOR NOTES DUE DECEMBER 30, 2001
$27,500,000 7.17% SERIES B SENIOR NOTES DUE DECEMBER 30, 2002
$22,500,000 SERIES C SENIOR NOTES DUE DECEMBER 30, 2002
As of December 28, 1995
Separately Addressed to each of the Purchasers Listed on Schedule A hereto:
Ladies and Gentlemen:
SEITEL, INC., a Delaware corporation (together with any Person who succeeds
to all, or substantially all, of the assets and business of Seitel, Inc., the
"Company"), agrees with you as follows:
1. AUTHORIZATION OF NOTES
The Company will authorize the issue and sale of
(a) Twenty-Five Million Dollars ($25,000,000) aggregate principal amount
of its seven and seventeen hundredths percent (7.17%) Series A Senior
Notes due December 30, 2001 (the "Series A Notes," such term to
include any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement or the Other Agreements (as hereinafter
defined)),
(b) Twenty-Seven Million Five Hundred Thousand Dollars ($27,500,000)
aggregate principal amount of its seven and seventeen hundredths
percent (7.17%) Series B Senior Notes due December 30, 2002 (the
"Series B Notes," such term to include any such notes issued in
substitution therefor pursuant to Section 13 of this Agreement or the
Other Agreements), and
(c) Twenty-Two Million Five Hundred Thousand Dollars ($22,500,000)
aggregate principal amount of its Series C Senior Notes due December
30, 2002 (the "Series C Notes," such term to include any such notes
issued in substitution therefor pursuant to Section 13 of this
Agreement or the Other Agreements).
<PAGE>
The Series A Notes shall be substantially in the form set out in Exhibit 1A, the
Series B Notes shall be substantially in the form set out in Exhibit 1B, and the
Series C Notes shall be substantially in the form set out in Exhibit 1C, in each
case, with such changes therefrom, if any, as may be approved by you and the
Company. The Series A Notes, the Series B Notes and the Series C Notes are
herein referred to collectively as the "Notes," and individually as a "Note".
Certain capitalized terms used in this Agreement are defined in Schedule B;
references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a
Schedule or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, in accordance with
the provisions hereof, at the Closings provided for in Section 3, Notes of the
Series and in the principal amounts specified opposite your name in Schedule A
at the purchase price of one hundred percent (100%) of the principal amount
thereof; provided, however, that you may change such information on Schedule A
(other than the aggregate principal amount of your commitment) by written notice
delivered to the Company prior to the relevant Closing (except that one or more
(but not more than three) of your Affiliates shall be the purchaser or
purchasers of the principal amount of the Notes specified opposite your name on
Schedule A). Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Purchase Agreements (the "Other Agreements")
identical with this Agreement with each of the other purchasers named in
Schedule A (the "Other Purchasers"), providing for the sale at such Closing to
each of the Other Purchasers of Notes of the Series and in the principal amounts
specified opposite its name in Schedule A. Your obligation hereunder and the
obligations of the Other Purchasers under the Other Agreements are several and
not joint obligations and you shall have no obligation under any Other Agreement
and no liability to any Person for the performance or non-performance by any
Other Purchaser thereunder.
3. CLOSINGS
3.1 The Series A and B Closing
The sale and purchase of the Series A Notes and the Series B Notes to be
purchased by the purchasers thereof (the "Series A Purchasers" and the "Series B
Purchasers," respectively) shall occur at the offices of Hebb & Gitlin, One
State Street, Hartford, Connecticut 06103, at 10:00 a.m., eastern standard time,
at a closing (the "Series A and B Closing") on December 28, 1995 (the "Series A
and B Closing Date"). At the Series A and B Closing the Company will deliver to
each Series A Purchaser and Series B Purchaser the Series A Notes or Series B
Notes, as the case may be, to be purchased by it in the form of, respectively, a
single Series A Note or a single Series B Note (or such greater number of Series
A Notes or Series B Notes in denominations of at least One Hundred Thousand
Dollars ($100,000) as such Series A Purchaser or Series B Purchaser,
respectively, may request), dated the Series A and B Closing Date and registered
in its name (or in the name of its nominee), against delivery by such Series A
Purchaser or Series B Purchaser, as the case may be, to the Company or its order
of immediately available funds in the amount of the purchase price therefor by
wire transfer of immediately available funds for the account of the Company to
account number 30052530 at Compass Bank-Houston, 24 Greenway Plaza, Houston,
Texas 77002, ABA # 113010547.
<PAGE>
3.2 The Series C Closing
(a) Notice. Subsequent to the date hereof, the Company shall deliver
to you and the Other Purchasers an irrevocable written notice specifying a
date no later than June 28, 1996 as the date of purchase of the Series C
Notes (the "Series C Closing Date," the Series A and B Closing Date and the
Series C Closing Date being sometimes referred to herein, individually, as
a "Closing Date"). Such notice shall be given not less than thirty (30) nor
more than forty-five (45) days prior to the Series C Closing Date.
(b) Interest Rate. The interest rate per annum on the Series C Notes
(the "Series C Interest Rate") shall be equal to the sum of (i) one and
forty-five hundredths percent (1.45%) plus (ii) the Relevant Treasury
Yield.
(c) The Series C Closing. The sale and purchase of the Series C Notes
to be purchased by the purchasers thereof (the "Series C Purchasers") shall
occur at the offices of Hebb & Gitlin, One State Street, Hartford,
Connecticut 06103, at 10:00 a.m., eastern standard time, at a closing (the
"Series C Closing," the Series A and B Closing and the Series C Closing
being sometimes referred to herein collectively as the "Closings" and
individually as a "Closing") on the Series C Closing Date. At the Series C
Closing the Company will deliver to each of the Series C Purchasers the
Series C Notes to be purchased by it, in the form of a single Series C Note
(or such greater number of Series C Notes in denominations of at least One
Hundred Thousand Dollars ($100,000) as such Series C Purchaser may
request), dated the Series C Closing Date and registered in its name (or in
the name of its nominee), against delivery by such Series C Purchaser to
the Company or its order of immediately available funds in the amount of
the purchase price therefor by wire transfer of immediately available funds
for the account of the Company to the account number set forth in Section
3.1.
3.3 Failure of the Company to Deliver
If on the Series A and B Closing Date or on the Series C Closing Date the
Company fails to tender to you the Notes to be acquired by you on such date or
if the conditions specified in Section 4 have not been fulfilled on either such
date, you may thereupon elect to be relieved of all further obligations under
this Agreement with respect to the Notes to be purchased by you on such date.
Nothing in this Section shall operate to relieve the Company from any of its
obligations under this Agreement or to waive any of your rights against the
Company.
3.4 Failure by You to Deliver
If on the Series A and B Closing Date or on the Series C Closing Date you
fail to deliver the full amount of funds to be delivered by you on such date or
if the conditions specified in Section 4A have not been fulfilled on either such
date, the Company may thereupon elect to return immediately any funds delivered
by you on such date and to be relieved of all further obligations under this
Agreement with respect to the Notes to be purchased by you on such date. Nothing
in this Section shall operate to relieve you from any of your obligations to the
Company under this Agreement or to waive any of the Company's rights against
you.
<PAGE>
4. YOUR CONDITIONS TO CLOSINGS
Your obligation to purchase and pay for the Notes to be sold to you on each
Closing Date is subject to the fulfillment to your satisfaction, prior to or on
such Closing Date (except as otherwise specified), of the following conditions:
4.1 Representations and Warranties
The representations and warranties of the Company in this Agreement shall
be correct when made and on such Closing Date.
4.2 Performance; No Default
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or on such Closing Date and after giving effect to the issue and
sale of the Notes (and the application of the proceeds thereof as contemplated
by Schedule 5.14), no Default or Event of Default shall have occurred and be
continuing.
4.3 Compliance Certificates
(a) Officer's Certificate. The Company shall have delivered to you an
Officer's Certificate, dated such Closing Date, certifying that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.
(b) Company Secretary's Certificate. The Company shall have delivered
to you a certificate, dated such Closing Date, signed by the Secretary or
an Assistant Secretary of the Company, and certifying as to the
resolutions, the bylaws and the certificate of incorporation attached
thereto and as to other corporate proceedings relating to the
authorization, execution and delivery of the Notes and the Agreements.
(c) Secretary's Certificates of Restricted Subsidiaries. Each
Restricted Subsidiary shall have delivered to you a certificate, dated such
Closing Date, signed by the Secretary or an Assistant Secretary of such
Restricted Subsidiary, and certifying as to the resolutions, the bylaws and
the certificate or articles of incorporation attached thereto and as to
other corporate proceedings relating to the authorization, execution and
delivery of the Subsidiary Guaranty.
4.4 Opinions of Counsel
You shall have received from
(a) Gardere Wynne Sewell & Riggs, L.L.P., counsel for the Company, and
(b) Hebb & Gitlin, your special counsel,
closing opinions, each dated as of such Closing Date, substantially in the
respective forms set forth in Exhibits 4.4(a) and 4.4(b), and as to such other
matters as you may reasonably request. This Section 4.4 shall constitute
direction by the Company to such counsel named in the immediately preceding
subsection (a) to deliver such closing opinion to you.
<PAGE>
4.5 Purchases Permitted By Applicable Law, etc.
On such Closing Date your purchase of Notes shall (a) be permitted by
the laws and regulations of each jurisdiction to which you are subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation (including, without limitation, Regulation G, T or X of the
Board of Governors of the Federal Reserve System) and (c) not subject you to any
tax, penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect on the date hereof. If requested by
you, you shall have received an Officer's Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine whether
such purchase is so permitted.
4.6 Sale of Other Notes
Contemporaneously with such Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at such Closing as specified in Schedule A.
4.7 Payment of Special Counsel Fees
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before such Closing the reasonable fees, charges and disbursements of
your special counsel referred to in Section 4.4(b) to the extent reflected in a
statement of such counsel rendered to the Company at least one (1) Business Day
prior to such Closing.
4.8 Private Placement Numbers
Private Placement numbers issued by Standard & Poor's CUSIP Service Bureau
(in cooperation with the Securities Valuation Office of the National Association
of Insurance Commissioners) shall have been obtained for each Series.
4.9 Changes in Corporate Structure
Except as specified in Schedule 4.9, the Company shall not have changed its
jurisdiction of incorporation or been a party to any merger or consolidation and
shall not have succeeded to all or any substantial part of the liabilities of
any other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.
<PAGE>
4.10 Subsidiary Guaranty; Consent
You shall have received
(a) the Guaranty, duly executed and delivered by each Restricted
Subsidiary, substantially in the form of Exhibit 4.10 (the "Subsidiary
Guaranty"), which Guaranty shall be in full force and effect; and
(b) a consent, duly executed by Compass Bank (formerly Central Bank of
the South), to the execution of the Subsidiary Guaranty by Seitel
Geophysical, Inc.
4.11 Rating
You shall have received a copy of a letter from Duff & Phelps Credit Rating
Co. to the Company assigning a rating to the Notes of at least BBB and such
rating shall continue to be in force and effect (not having been withdrawn) as
of such Closing Date.
4.12 Proceedings and Documents
All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be reasonably satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
4A. COMPANY'S CLOSING CONDITIONS
The Company's obligation to sell the Notes to be purchased by you on each
Closing Date is subject to the fulfillment to the Company's satisfaction, prior
to or on such Closing Date (except as otherwise specified), of the following
conditions:
4A.1 Representations and Warranties.
The representations and warranties made by you in Section 6 shall be
correct when made and on such Closing Date.
4A.2 Sales Permitted by Applicable Law, etc.
On such Closing Date the Company's sale of the Notes and the granting of
the Subsidiary Guaranty by the Restricted Subsidiaries shall (a) be permitted by
the laws and regulations of each jurisdiction to which the Company and the
Restricted Subsidiaries are subject, and (b) not violate any applicable law or
regulation.
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to you that:
5.1 Organization; Power and Authority
(a) The Company
(i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware;
(ii) is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure to be
so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect;
and
(iii) has the corporate power and authority to own or hold under
lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to
execute and deliver this Agreement and the Other Agreements and the
Notes and to perform the provisions hereof and thereof.
(b) Each Restricted Subsidiary
(i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(ii) is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure to be
so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect;
and
(iii) has the corporate power and authority to own or hold under
lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to
execute and deliver the Subsidiary Guaranty and to perform the
provisions hereof and thereof.
5.2 Authorization, etc.
(a) This Agreement and the Other Agreements and the Notes have been
duly authorized by all necessary corporate action on the part of the
Company, and this Agreement constitutes, and upon execution and delivery
thereof each Note will constitute, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
<PAGE>
(b) The Subsidiary Guaranty has been duly authorized by all necessary
corporate action on the part of each Restricted Subsidiary and constitutes
a legal, valid and binding obligation of each Restricted Subsidiary
enforceable against such Restricted Subsidiary in accordance with its
terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5.3 Disclosure
The Company, through its agent, Bear, Stearns & Co. Inc., has delivered to
you and each Other Purchaser a copy of a Confidential Private Placement
Memorandum, dated October 1995 (the "Memorandum"), relating to the transactions
contemplated hereby. The Memorandum fairly describes, in all material respects,
the general nature of the business and principal properties of the Company and
the Restricted Subsidiaries. Except as disclosed in Schedule 5.3, this
Agreement, the Memorandum, the documents, certificates or other writings
delivered to you by or on behalf of the Company in connection with the
transactions contemplated hereby and the financial statements listed in Schedule
5.5, taken as a whole, do not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made. All
projections and forward-looking statements contained in the Memorandum are based
upon assumptions that the Company believes to be reasonable and were made in
good faith, although no assurances can be given that the results set forth in
such projections or forward-looking statements will be achieved. Except as
disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one
of the documents, certificates or other writings identified therein, or in the
financial statements listed in Schedule 5.5, since December 31, 1994, there has
been no change in the financial condition, operations, business, properties or
prospects of the Company or any Restricted Subsidiary except changes that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. There is no fact known to the Company that could
reasonably be expected to have a Material Adverse Effect that has not been set
forth herein or in the Memorandum or in the other documents, certificates and
other writings delivered to you by or on behalf of the Company specifically for
use in connection with the transactions contemplated hereby.
5.4 Organization and Ownership of Shares of Restricted Subsidiaries;
Affiliates
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists of (i) the Restricted Subsidiaries, showing, as to each
Restricted Subsidiary, the correct name thereof, the jurisdiction of its
organization and the percentage of shares of each class of its outstanding
capital stock or similar equity interests owned by the Company and each
other Restricted Subsidiary, and (ii) the Company's Affiliates (other than
Restricted Subsidiaries).
<PAGE>
(b) All of the outstanding shares of capital stock or similar equity
interests of each Restricted Subsidiary shown in Schedule 5.4 as being
owned by the Company and the Restricted Subsidiaries have been validly
issued, are fully paid and nonassessable and are owned by the Company or
another Restricted Subsidiary free and clear of any Lien (except as
otherwise disclosed in Schedule 5.4).
(c) Each Restricted Subsidiary identified in Schedule 5.4 is a
corporation or other legal entity duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, and is
duly qualified as a foreign corporation or other legal entity and is in
good standing in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each such
Restricted Subsidiary has the corporate or other power and authority to own
or hold under lease the properties it purports to own or hold under lease
and to transact the business it transacts and proposes to transact.
(d) No Restricted Subsidiary is a party to, or otherwise subject to
any legal restriction or any agreement (other than this Agreement, the
agreements listed on Schedule 5.4 and customary limitations imposed by
corporate law statutes) restricting the ability of such Restricted
Subsidiary to pay dividends out of profits or make any other similar
distributions of profits to the Company or any of the Restricted
Subsidiaries that owns outstanding shares of capital stock or similar
equity interests of such Restricted Subsidiary.
5.5 Financial Statements
The Company has delivered to each Purchaser copies of the financial
statements of the Company and the Restricted Subsidiaries listed on Schedule
5.5. All of said financial statements (including in each case the related
schedules and notes) present fairly, in all material respects, the consolidated
financial position of the Company and the Restricted Subsidiaries as of the
respective dates specified in such Schedule and the consolidated results of
their operations and cash flows for the respective periods so specified and have
been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments).
5.6 Compliance with Laws, Other Instruments, etc.
Neither the execution, delivery and performance by the Company of this
Agreement and the Notes, nor the execution, delivery and performance by any
Restricted Subsidiary of the Subsidiary Guaranty, will (a) contravene, result in
any breach of, or constitute a default under, or result in the creation of any
Lien in respect of any property of the Company or any Restricted Subsidiary
under, any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, corporate charter or by-laws, or any other agreement or
instrument to which the Company or any Restricted Subsidiary is bound or by
which the Company or any Restricted Subsidiary or any of their respective
properties may be bound or affected, (b) conflict with or result in a breach of
any of the terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority applicable to the
Company or any Restricted Subsidiary or (c) violate any provision of any statute
or other rule or regulation of any Governmental Authority applicable to the
Company or any Restricted Subsidiary.
<PAGE>
5.7 Governmental Authorizations, etc.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance (a) by the Company of this Agreement or the
Notes or (b) by any Restricted Subsidiary of the Subsidiary Guaranty.
5.8 Litigation; Observance of Agreements, Statutes and Orders
(a) Except as disclosed in Schedule 5.8, there are no actions, suits
or proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company or any Restricted Subsidiary or any
property of the Company or any Restricted Subsidiary in any court or before
any arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(b) Neither the Company nor any Restricted Subsidiary is in default
under any term of any agreement or instrument to which it is a party or by
which it is bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority or is in violation of any applicable
law, ordinance, rule or regulation (including without limitation
Environmental Laws) of any Governmental Authority, which default or
violation, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
5.9 Taxes
The Company and the Restricted Subsidiaries have filed all tax returns that
are required to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (a) the amount of
which is not individually or in the aggregate Material or (b) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Restricted
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP. The Company knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Company and the Restricted
Subsidiaries in respect of Federal, state or other taxes for all fiscal periods
are adequate. The Federal income tax liabilities of the Company and the
Restricted Subsidiaries have been determined by the Internal Revenue Service and
paid for all fiscal years up to and including the fiscal year ended December 31,
1989.
<PAGE>
5.10 Title to Property; Leases
The Company and the Restricted Subsidiaries have good and sufficient title
to their respective properties that individually or in the aggregate are
Material, including all such properties reflected in the most recent audited
balance sheet referred to in Section 5.5 or purported to have been acquired by
the Company or any Restricted Subsidiary after said date (except as sold or
otherwise disposed of in the ordinary course of business), in each case free and
clear of Liens prohibited by this Agreement. All leases that individually or in
the aggregate are Material are valid and subsisting and are in full force and
effect in all material respects.
5.11 Licenses, Permits, etc
Except as disclosed in Schedule 5.11,
(a) the Company and the Restricted Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents, copyrights, service
marks, trademarks and trade names, or rights thereto, with respect to the
business of the Company and/or any Restricted Subsidiary as currently
conducted, that individually or in the aggregate are Material, without
known conflict with the rights of others;
(b) to the best knowledge of the Company, no product of the Company or
any Restricted Subsidiary infringes in any material respect upon any
license, permit, franchise, authorization, patent, copyright, service mark,
trademark, trade name or other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no violation by any
Person of any right of the Company or any Restricted Subsidiary with
respect to any patent, copyright, service mark, trademark, trade name or
other right owned or used by the Company or any Restricted Subsidiary
which, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
5.12 Compliance with ERISA
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for
such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and
no event, transaction or condition has occurred or exists that could
reasonably be expected to result in the incurrence of any such liability by
the Company or any ERISA Affiliate, or in the imposition of any Lien on any
of the rights, properties or assets of the Company or any ERISA Affiliate,
in either case pursuant to Title I or IV of ERISA or to such penalty or
excise tax provisions or to Section 401(a)(29) or 412 of the Code, other
than such liabilities or Liens as would not be individually or in the
aggregate Material.
<PAGE>
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of
such Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan's most recent
actuarial valuation report, did not exceed the aggregate current value of
the assets of such Plan allocable to such benefit liabilities. The term
"benefit liabilities" has the meaning specified in section 4001 of ERISA
and the terms "current value" and "present value" have the meaning
specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities)
under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance
with Financial Accounting Standards Board Statement No. 106, without regard
to liabilities attributable to continuation coverage mandated by section
4980B of the Code) of the Company and the Restricted Subsidiaries is not
Material.
(e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is
subject to the prohibitions of section 406 of ERISA or in connection with
which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the
Code. The representation by the Company in the first sentence of this
Section 5.12(e) is made in reliance upon and subject to the accuracy of
your representation in Section 6.3 as to the sources of the funds used to
pay the purchase price of the Notes to be purchased by you.
(f) Schedule 5.12 lists all ERISA Affiliates that are Restricted
Subsidiaries and that maintain one or more Plans and any employee
organizations in respect of any Multiemployer Plan or Plan. Schedule 5.12
sets forth all ERISA Affiliates and all "employee benefit plans" with
respect to which the Company or any "affiliate" of the Company is a
"party-in-interest" or in respect of which the Notes could constitute an
"employer security" ("employee benefit plan," "party-in-interest" and
"employee organization" have the meanings specified in section 3 of ERISA,
"affiliate" has the meaning specified in section 407(d) of ERISA and
Section V of the Department of Labor Prohibited Transaction Exemption 95-60
(60 FR 35925, July 12, 1995) and "employer security" has the meaning
specified in section 407(d) of ERISA).
5.13 Private Offering by the Company
Neither the Company nor anyone acting on its behalf has offered the Notes
or any similar Securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than you, the Other Purchasers and not more than fifty-four (54)
other Institutional Investors, each of which has been offered the Notes at a
private sale for investment. In reliance upon the accuracy of your
representations and warranties and the representations and warranties of the
Other Purchasers, neither the Company nor anyone acting on its behalf has taken,
or will take, any action that would subject the issuance or sale of the Notes to
the registration requirements of Section 5 of the Securities Act.
<PAGE>
5.14 Use of Proceeds; Margin Regulations
The Company will apply the proceeds of the sale of the Notes to repay
existing Debt and for general corporate purposes (including, without limitation,
the repayment of certain accounts payable, as more fully described on Schedule
5.3, if an acceptable agreement with the payee is concluded). No part of the
proceeds from the sale of the Notes hereunder will be used, directly or
indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation G of the Board of Governors of the Federal Reserve System
(12 CFR 207), or for the purpose of buying or carrying or trading in any
Securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than one percent (1%) of the value of the consolidated assets of
the Company and the Restricted Subsidiaries and the Company does not have any
present intention that margin stock will constitute more than five percent (5%)
of the value of such assets. As used in this Section, the terms "margin stock"
and "purpose of buying or carrying" shall have the meanings assigned to them in
said Regulation G.
5.15 Existing Debt; Future Liens
(a) Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Debt (in excess of $100,000
outstanding) of the Company and the Restricted Subsidiaries as of December
15, 1995, since which date there has been no material change in the
amounts, interest rates, sinking funds, installment payments or maturities
of the Debt of the Company or the Restricted Subsidiaries. Neither the
Company nor any Restricted Subsidiary is in default, and no waiver of
default is currently in effect, in the payment of any principal of or
interest on any Debt of the Company or such Restricted Subsidiary and no
event or condition exists with respect to any Debt of the Company or any
Restricted Subsidiary that would permit (or that with notice or the lapse
of time, or both, would permit) one or more Persons to cause such Debt to
become due and payable before its stated maturity or before its regularly
scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Restricted Subsidiary has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien
not permitted by Section 10.4.
5.16 Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
<PAGE>
5.17 Status under Certain Statutes
Neither the Company nor any Restricted Subsidiary is subject to regulation
under the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Transportation Acts (49 U.S.C.), as
amended, or the Federal Power Act, as amended.
5.18 Environmental Matters
Neither the Company nor any Restricted Subsidiary has knowledge of any
claim or has received any notice of any claim, and no proceeding has been
instituted raising any claim against the Company or any of the Restricted
Subsidiaries or any of their respective real properties now or formerly owned,
leased or operated by any of them or other assets, alleging any damage to the
environment or violation of any Environmental Laws, except, in each case, such
as could not reasonably be expected to result in a Material Adverse Effect.
Except as otherwise disclosed to you in writing,
(a) neither the Company nor any of the Restricted Subsidiaries has
knowledge of any facts which would give rise to any claim, public or
private, of violation of Environmental Laws or damage to the environment
emanating from, occurring on or in any way related to real properties now
or formerly owned, leased or operated by any of them or to other assets or
their use, except, in each case, such as could not reasonably be expected
to result in a Material Adverse Effect;
(b) neither the Company nor any of the Restricted Subsidiaries has
stored any Hazardous Materials on real properties now or formerly owned,
leased or operated by any of them or has disposed of any Hazardous
Materials in a manner contrary to any Environmental Laws in each case in
any manner that could reasonably be expected to result in a Material
Adverse Effect; and
(c) all buildings on all real properties now owned, leased or operated
by the Company or any of the Restricted Subsidiaries are in compliance with
applicable Environmental Laws, except where failure to comply could not
reasonably be expected to result in a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASER
6.1 Purchase for Investment
You represent that you are purchasing the Notes for your own account or for
one or more separate accounts maintained by you or for the account of one or
more pension or trust funds and not with a view to the distribution thereof or
with any present intention of offering or selling any of the Notes in a
transaction that would violate the Securities Act or the securities laws of any
State of the United States or any other applicable jurisdiction, provided that
the disposition of your or their property shall at all times be within your or
their control. You represent and warrant that you and any Person for whose
account you are purchasing the Notes are either a Qualified Institutional Buyer
or an Accredited Institution, in either case with such knowledge and experience
in financial and business matters as are necessary in order to evaluate the
merits and risks of an investment in the Notes. You also understand that the
Company and, for purposes of the opinions to be delivered to you pursuant to
Section 4.4, counsel to the Company and your special counsel, will rely upon the
accuracy and truth of the foregoing representations and you hereby consent to
such reliance. You understand that the Notes have not been registered under the
Securities Act and may be resold only if registered pursuant to the provisions
of the Securities Act or if an exemption from registration is available, except
under circumstances where neither such registration nor such an exemption is
required by law, and that the Company is not required to register the Notes.
<PAGE>
6.2 Legend
You agree that the Notes shall contain the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY ONLY BE REOFFERED AND SOLD IN COMPLIANCE WITH THE
REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN EXEMPTION THEREFROM."
The legend requirements imposed by this Section 6.2 shall cease and terminate as
to any particular Note if the Notes represented thereby have been:
(a) effectively registered under the Securities Act (the Company
having no obligation to effect the registration of such Notes) and disposed
of in accordance with the registration statement covering such Notes,
(b) distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, or
(c) otherwise transferred in accordance herewith and the subsequent
disposition of such Notes shall not require the registration or
qualification of such Notes under the Securities Act or any similar state
law then in force.
Whenever such restrictions shall terminate as to any Notes, the holder thereof
shall be entitled to receive from the Company, without expense to such holder
(except for stamp taxes or governmental charges, if any, payable in connection
with a transfer of such Notes, as required by Section 13.2), a new Note of like
tenor not bearing the legend set forth in this Section 6.2.
6.3 ERISA. You represent:
(a) if you are acquiring the Notes for your own account with funds
from or attributable to your general account, and in reliance upon the
Company's representations set forth in Section 5.12 and the related
disclosures set forth in Schedule 5.12, that the amount of the reserves and
liabilities for the general account contracts (as defined by the annual
statement for life insurance companies approved by the National Association
of Insurance Commissioners (the "NAIC Annual Statement")) held by or on
behalf of any Plan together with the amount of the reserves and liabilities
for the general account contracts held by or on behalf of any other Plans
maintained by the same employer (or affiliate thereof, as such term is
defined in section V of DOL Prohibited Transaction Exemption 95-60 (60 FR
35925, July 12, 1995)) or by the same employee organization (as defined in
ERISA) in the general account do not exceed 10% of the total reserves and
liabilities of the general account (exclusive of separate account
liabilities) plus surplus as set forth in the NAIC Annual Statement filed
with the state of domicile of the insurance company; for purposes of the
percentage limitation in this clause (a), the amount of reserves and
liabilities for the general account contracts held by or on behalf of a
Plan shall be determined before reduction for credits on account of any
reinsurance ceded on a coinsurance basis; or
<PAGE>
(b) if any part of the funds being used by you to purchase the Notes
shall come from assets of an employee benefit plan (as defined in section 3
of ERISA) or a plan (as defined in section 4975(e)(1) of the Code), that:
(i) if such funds are attributable to a "separate account" (as
defined in section 3 of ERISA), then
(A) all requirements for an exemption under DOL Prohibited
Transaction Exemption 90-1 (issued January 29, 1990) are met with
respect to the use of such funds to purchase the Notes, or
(B) the employee benefit plans with an interest in such
separate account have been identified in a writing delivered by
you to the Company;
(ii) if such funds are attributable to a "separate account" (as
defined in section 3 of ERISA) that is maintained solely in connection
with fixed contracted obligations of an insurance company, any amounts
payable, or credited, to any employee benefit plan having an interest
in such account and to any participant or beneficiary of such plan
(including an annuitant) are not affected in any manner by the
investment performance of the separate account;
(iii) if such funds are attributable to an "investment fund"
managed by a "qualified plan asset manager" (as such terms are defined
in Part V of DOL Prohibited Transaction Exemption 84-14, issued March
13, 1984), all requirements for an exemption under such Exemption are
met with respect to the use of such funds to purchase the Notes; or
(iv) such employee benefit plan is excluded from the provisions
of section 406 of ERISA by virtue of section 4(b) of ERISA.
6.4 Organization; Power and Authority; Compliance with Laws
You represent and warrant that:
(a) you are a corporation duly organized, validly existing, and in
good standing under the laws of the state of your incorporation,
<PAGE>
(b) you have the corporate power and authority to execute and deliver
this Agreement and to perform the provisions hereof, and
(c) the execution, delivery and performance of this Agreement by you
will not violate any provision of any statute or other rule or regulation
of any Governmental Authority applicable to you.
6.5 Authorization, etc
You represent and warrant that this Agreement has been duly authorized by
all necessary corporate action on your part, and this Agreement constitutes your
legal, valid and binding obligation enforceable against you in accordance with
its terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
7. INFORMATION AS TO COMPANY
7.1 Financial and Business Information
The Company shall deliver to each holder that is an Institutional Investor:
(a) Quarterly Statements -- within forty-five (45) days after the end
of each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year), duplicate
copies of,
(i) consolidated balance sheets of the Company and its
consolidated Subsidiaries, and of the Company and its Restricted
Subsidiaries, as at the end of such quarter, and
(ii) consolidated statements of operations, stockholders' equity
and cash flows of the Company and its consolidated Subsidiaries, and
of the Company and its Restricted Subsidiaries, for such quarter and
(in the case of the second and third quarters) for the portion of the
fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial Officer as fairly
presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments, provided that, so
long as the Company shall not have any Unrestricted Subsidiaries, delivery
within the time period specified above of copies of the Company's Quarterly
Report on Form 10-Q prepared in compliance with the requirements therefor
and filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this Section 7.1(a);
<PAGE>
(b) Annual Statements -- within ninety (90) days after the end of
each fiscal year of the Company, duplicate copies of,
(i) consolidated balance sheets of the Company and its
consolidated Subsidiaries, and of the Company and its Restricted
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of operations, stockholders'
equity and cash flows of the Company and its consolidated
Subsidiaries, and of the Company and its Restricted Subsidiaries,
for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by
(A) an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall
state that such financial statements present fairly, in all
material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and
have been prepared in conformity with GAAP (except for the
exclusion of Unrestricted Subsidiaries, if any, from the
financial statements of the Company and the Restricted
Subsidiaries), and that the examination of such accountants in
connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that
such audit provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making
their audit, they have become aware of any condition or event
that then constitutes a Default or an Event of Default, and, if
they are aware that any such condition or event then exists,
specifying the nature and period of the existence thereof (it
being understood that such accountants shall not be liable,
directly or indirectly, for any failure to obtain knowledge of
any Default or Event of Default unless such accountants should
have obtained knowledge thereof in making an audit in accordance
with generally accepted auditing standards or did not make such
an audit),
provided that, so long as the Company shall not have any Unrestricted
Subsidiaries, the delivery within the time period specified above of
the Company's Annual Report on Form 10-K for such fiscal year (together
with the Company's annual report to shareholders, if any, prepared
pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance
with the requirements therefor and filed with the Securities and
Exchange Commission, together with the accountants' certificates
described in clauses (A) and (B) above, shall be deemed to satisfy the
requirements of this Section 7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming
available, one copy of
<PAGE>
(i) each financial statement, report, notice or proxy
statement sent by the Company or any Restricted Subsidiary to
public securities holders generally, and
(ii) (A) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by such
holder), and each prospectus and all amendments thereto filed by
the Company or any Restricted Subsidiary with the Securities and
Exchange Commission and (B) by facsimile only, all press releases
and other statements made available generally by the Company or
any Restricted Subsidiary to the public concerning developments
that are Material;
(d) Audit Reports -- as soon as practicable after receipt thereof
by the Company or any Subsidiary, a copy of each other report
submitted to the Company or any Subsidiary by its independent
accountants in connection with any interim or special audit made by
them of the books of the Company or any Subsidiary;
(e) Litigation -- within five (5) days after the Company obtains
knowledge thereof, written notice of any pending or threatened (in
writing) (i) litigation not fully covered by insurance or as to which
an insurance company has not accepted liability or (ii) governmental
proceeding, in each case against the Company or any Restricted
Subsidiary, in which the damages sought exceed One Million Dollars
($1,000,000), individually or in the aggregate, or which otherwise
could reasonably be expected to have a Material Adverse Effect;
(f) Notice of Default or Event of Default -- promptly, and in any
event within five (5) days after a Responsible Officer shall become
aware of the existence of any Default or Event of Default or that any
Person has given any notice or taken any action with respect to a
claimed default hereunder or that any Person has given any notice or
taken any action with respect to a claimed default of the type
referred to in Section 11(f), a written notice specifying the nature
and period of existence thereof and what action the Company is taking
or proposes to take with respect thereto;
(g) Oil and Gas Reserve Reports -- promptly, and in any event no
later than April 1 in each year, engineering reports in form and
substance reasonably satisfactory to the Required Holders, certified
by Forrest A. Garb & Associates, Inc. (or any other nationally or
regionally recognized independent consulting petroleum engineers) as
fairly and accurately setting forth
(i) the proven and producing, shut-in, behind-pipe, and
undeveloped oil and gas reserves (separately classified as such)
of the Company and its Restricted Subsidiaries as of January 1 of
the year for which such reserve reports are furnished,
(ii) the aggregate present value of the future net income
with respect to such reserves discounted at a stated per annum
annual discount rate,
<PAGE>
(iii) projections of the annual rate of production, gross
income, and net income with respect to such proven and producing
reserves, and
(iv) information with respect to the "take-or-pay,"
"prepayment," and gas-balancing liabilities of the Company and
its Restricted Subsidiaries;
(h) ERISA Matters -- promptly, and in any event within five (5)
days after a Responsible Officer shall become aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to
take with respect thereto:
(i) with respect to any Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived pursuant
to such regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan, or the receipt by the
Company or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan; or
(iii) any event, transaction or condition that could result
in the incurrence of any liability by the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any
other such liabilities or Liens then existing, could reasonably
be expected to have a Material Adverse Effect;
(i) Notices from Governmental Authority -- promptly, and in any
event within thirty (30) days of receipt thereof, copies of any notice
to the Company or any Subsidiary from any Federal or state
Governmental Authority relating to any order, ruling, statute or other
law or regulation that could reasonably be expected to have a Material
Adverse Effect; and
(j) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of the Restricted Subsidiaries or relating to the ability of the
Company to perform its obligations hereunder and under the Notes as
from time to time may be reasonably requested by any such holder
including, without limitation, information required by 17 C.F.R.
ss.230.144A, as amended from time to time.
<PAGE>
7.2 Officer's Certificate
Each set of financial statements delivered to a holder pursuant to Section
7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a
Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Sections 10.1 through 10.7, inclusive,
during the quarterly or annual period covered by the statements then being
furnished (including with respect to each such Section, where applicable,
the calculations of the maximum or minimum amount, ratio or percentage, as
the case may be, permissible under the terms of such Sections, and the
calculation of the amount, ratio or percentage then in existence); and
(b) Event of Default -- a statement that such officer has reviewed the
relevant terms hereof and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions of the Company and
the Subsidiaries from the beginning of the quarterly or annual period
covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or
an Event of Default or, if any such condition or event existed or exists
(including, without limitation, any such event or condition resulting from
the failure of the Company or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof
and what action the Company shall have taken or proposes to take with
respect thereto.
7.3 Inspection
The Company shall permit the representatives of each holder that is an
Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at
the expense of such holder and upon reasonable prior notice to the Company,
to visit the principal executive office of the Company, to discuss the
affairs, finances and accounts of the Company and the Subsidiaries with the
Company's officers, and (with the consent of the Company, which consent
will not be unreasonably withheld) its independent public accountants and
its independent petroleum engineers, and (with the consent of the Company,
which consent will not be unreasonably withheld) to visit the other offices
and properties of the Company and each Subsidiary, all at such reasonable
times as may be reasonably requested in writing, provided that you shall be
permitted to make only two inspections per calendar year pursuant to the
provisions of this subsection (a) (without limitation of the inspection
rights of any Other Purchaser); and
(b) Default -- if a Default or an Event of Default then exists, at the
expense of the Company to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers, independent public
accountants and independent petroleum engineers (and by this provision the
Company authorizes said accountants and engineers to discuss the affairs,
finances and accounts of the Company and the Subsidiaries), all at such
times and as often as may be requested.
<PAGE>
8. PREPAYMENT OF THE NOTES
8.1 Required Prepayments
Regardless of the amount of the Notes which may be outstanding from time to
time, the Company shall prepay or, in the case of principal amounts due at the
maturity of any Note, pay, and there shall become due and payable on the
respective dates specified below, the respective aggregate principal amounts of
each Series of Notes hereinafter set forth opposite such dates (or such lesser
amount as would constitute payment in full of the Notes of such Series):
<TABLE>
<CAPTION>
=========================== ========================== =========================== ==========================
Date: Principal Amount Principal Amount Principal Amount
of Series A Notes of Series B Notes of Series C Notes
to be prepaid or to be prepaid or to be prepaid or
paid: paid: paid:
=========================== ========================== =========================== ==========================
<S> <C> <C> <C>
December 30, $0 $5,500,000 $4,500,000
1998
- --------------------------- -------------------------- --------------------------- --------------------------
December 30, $8,333,333 $5,500,000 $4,500,000
1999
- --------------------------- -------------------------- --------------------------- --------------------------
December 30, $8,333,333 $5,500,000 $4,500,000
2000
- --------------------------- -------------------------- --------------------------- --------------------------
December 30, $8,333,334 $5,500,000 $4,500,000
2001
- --------------------------- -------------------------- --------------------------- --------------------------
December 30, $0 $5,500,000 $4,500,000
2002
=========================== ========================== =========================== ==========================
Totals $25,000,000 $27,500,000 $22,500,000
=========================== ========================== =========================== ==========================
</TABLE>
The principal amount of any Note remaining outstanding at the maturity thereof
shall be paid at such maturity. Each such prepayment or payment shall be at a
price of 100% of the principal amount prepaid or paid, together with interest
accrued thereon to (but not including) the date of prepayment or payment. No
Make-Whole Amount shall be payable in connection with any mandatory prepayment
or payment made pursuant to this Section 8.1.
<PAGE>
8.2 Optional Prepayments with Make-Whole Amount; Rescission
(a) Optional Prepayments with Make-Whole Amount. The Company may, at
its option, upon notice as provided below, prepay at any time all, or from
time to time any part of, the Notes, in a principal amount of not less than
(i) in the case of a partial prepayment other than a Contingent Optional
Prepayment, Five Million Dollars ($5,000,000), or (ii) in the case of a
partial prepayment which is a Contingent Optional Prepayment, Two Million
Dollars ($2,000,000), or, in either case, such lesser amount as shall then
be outstanding, at one hundred percent (100%) of the principal amount so
prepaid, plus the Make-Whole Amount determined for the prepayment date with
respect to such principal amount. The Company will give each holder written
notice (an "Optional Prepayment Notice") of each optional prepayment under
this Section 8.2 not less than thirty (30) days and not more than sixty
(60) days prior to the date fixed for such prepayment (the "Optional
Prepayment Date"). Each such Optional Prepayment Notice shall
(i) specify the Optional Prepayment Date,
(ii) state whether such prepayment is contingent upon the
completion of an asset disposition by the Company or a Restricted
Subsidiary or the consummation of a new credit facility with another
creditor or group of creditors (a "Contingent Optional Prepayment")
and describe in reasonable detail the terms thereof,
(iii) specify the aggregate principal amount of each Series to be
prepaid on such date,
(iv) specify the principal amount of each Note held by such
holder to be prepaid (determined in accordance with Section 8.3),
(v) specify the interest to be paid on the prepayment date with
respect to such principal amount being prepaid, and
(vi) be accompanied by a certificate of a Senior Financial
Officer as to the estimated Make-Whole Amount due in connection with
such prepayment (calculated as if the date of such notice were the
date of the prepayment), setting forth the details of such
computation.
Two (2) Business Days prior to such prepayment, the Company shall deliver
to each holder a certificate of a Senior Financial Officer specifying the
calculation of such Make-Whole Amount as of the specified prepayment date.
(b) Rescission. In the event that the Company shall give an Optional
Prepayment Notice of any Contingent Optional Prepayment pursuant to Section
8.2(a), the Company thereafter shall have the right to rescind such
Optional Prepayment Notice by giving each holder written notice of such
rescission (a "Rescission Notice") not less than ten (10) Business Days
prior to the Optional Prepayment Date specified in such Optional Prepayment
Notice. Upon delivery of such Rescission Notice in accordance with this
Section 8.2(b), the Company shall be relieved of any obligation to make the
Contingent Optional Prepayment on the Optional Prepayment Date in respect
of which such Rescission Notice was delivered.
<PAGE>
8.3 Allocation of Partial Prepayments
All partial prepayments of the Series A Notes, the Series B Notes and the
Series C Notes pursuant to Section 8.1 shall be allocated to all outstanding
Notes of the relevant Series ratably in accordance with the unpaid principal
amounts thereof. All partial prepayments of the Notes pursuant to Section 8.2
shall be allocated to all outstanding Notes (without distinguishing among the
different Series) ratably in accordance with the unpaid principal amounts
thereof. Any partial prepayment of the Series A Notes, the Series B Notes and
the Series C Notes pursuant to Section 8.2 shall reduce the principal amount of
each required prepayment of such Series becoming due under Section 8.1 on and
after the date of such prepayment in the inverse order of the maturity thereof.
8.4 Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.5 Purchase of Notes
The Company will not and will not permit any Restricted Subsidiary or
Affiliate to purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except upon the payment or prepayment
of the Notes in accordance with the terms of this Agreement and the Notes. The
Company will promptly cancel all Notes acquired by it or any Restricted
Subsidiary or Affiliate pursuant to any payment or prepayment of Notes pursuant
to any provision of this Agreement and no Notes may be issued in substitution or
exchange for any such Notes.
8.6 Make-Whole Amount
The term "Make-Whole Amount" means, with respect to any Series A Note,
Series B Note or Series C Note, an amount equal to the excess, if any, of the
Discounted Value of the Remaining Scheduled Payments with respect to the Called
Principal of such Note over the amount of such Called Principal, provided that
the Make-Whole Amount may in no event be less than zero. For the purposes of
determining the Make-Whole Amount, the following terms have the following
meanings:
"Called Principal" means, with respect to any Series A Note, Series B
Note, or Series C Note, the principal of such Note that is to be prepaid
pursuant to Section 8.2 or has become or is declared to be immediately due
and payable pursuant to Section 12.1, as the context requires.
<PAGE>
"Discounted Value" means, with respect to the Called Principal of any
Series A Note, Series B Note, or Series C Note, the amount obtained by
discounting all Remaining Scheduled Payments with respect to such Called
Principal from their respective scheduled due dates to the Settlement Date
with respect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (applied on the same periodic
basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
any Series A Note, Series B Note, or Series C Note, the sum of one half
percent (.5%) per annum plus the yield to maturity implied by (i) the
yields reported, as of 10:00 a.m. (New York City time) on the second (2nd)
Business Day preceding the Settlement Date with respect to such Called
Principal, on the display designated as "Page 678" on the Telerate Access
Service (or such other display as may replace Page 678 on the Telerate
Access Service) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Average Life of such Called Principal as of
such Settlement Date, or (ii) if such yields are not reported as of such
time or the yields reported as of such time are not ascertainable, the
Treasury Constant Maturity Series Yields reported, for the latest day for
which such yields have been so reported as of the second (2nd) Business Day
preceding the Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a constant
maturity equal to the Remaining Average Life of such Called Principal as of
such Settlement Date. Such implied yield will be determined, if necessary,
by (a) converting U.S. Treasury bill quotations to bond-equivalent yields
in accordance with accepted financial practice and (b) interpolating
linearly between (1) the actively traded U.S. Treasury security with the
duration closest to and greater than the Remaining Average Life and (2) the
actively traded U.S. Treasury security with the duration closest to and
less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Series A Note, Series B Note, or Series C Note, all
payments of such Called Principal and interest thereon that would be due
after the Settlement Date with respect to such Called Principal if no
payment of such Called Principal were made prior to its scheduled due date,
provided that if such Settlement Date is not a date on which interest
payments are due to be made under the terms of the Notes of such Series,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.2 or
12.1.
<PAGE>
"Settlement Date" means, with respect to the Called Principal of any
Series A Note, Series B Note, or Series C Note, the date on which such
Called Principal is to be prepaid pursuant to Section 8.2 or has become or
is declared to be immediately due and payable pursuant to Section 12.1, as
the context requires.
9. AFFIRMATIVE COVENANTS
The Company covenants that so long as any of the Notes are outstanding:
9.1 Compliance with Law
The Company will and will cause each of the Subsidiaries to comply with all
laws, ordinances or governmental rules or regulations to which each of them is
subject, including, without limitation, Environmental Laws, and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
9.2 Insurance
The Company will and will cause each of the Subsidiaries to maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated,
except to the extent that the failure to maintain such insurance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
9.3 Maintenance of Properties
The Company will and will cause each of the Subsidiaries to maintain and
keep, or cause to be maintained and kept, their respective properties in good
repair, working order and condition (other than ordinary wear and tear), so that
the business carried on in connection therewith may be properly conducted at all
times, provided that
(a) no violation of this Section 9.3 shall be deemed to have occurred
with respect to any property of the Company or any Subsidiary damaged or
destroyed by a casualty occurrence, so long as the Company or such
Restricted Subsidiary is proceeding diligently to repair or replace such
property, and
(b) this Section shall not prevent the Company or any Subsidiary from
discontinuing the operation and the maintenance of any of its properties if
such discontinuance is desirable in the conduct of its business and the
Company has concluded that such discontinuance could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect
(which term shall not, for the purpose of this clause (b) only, include the
discontinuance of the operation and maintenance of a Restricted
Subsidiary's properties that would render such Restricted Subsidiary unable
to perform its obligations under the Subsidiary Guaranty, and therefore
result in a Material Adverse Effect only under clause (c) of the definition
of such term).
<PAGE>
9.4 Payment of Taxes and Claims
The Company will and will cause each of the Subsidiaries to file all tax
returns required to be filed in any jurisdiction and to pay and discharge all
taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (a) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or such Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (b) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
9.5 Corporate Existence, etc.
The Company will at all times preserve and keep in full force and effect
its corporate existence. Subject to Sections 10.5 and 10.6, the Company will at
all times preserve and keep in full force and effect the corporate existence of
each of the Subsidiaries (unless merged into the Company or a Subsidiary) and
all rights and franchises of the Company and the Subsidiaries unless, in the
good faith judgment of the Company, the termination of or failure to preserve
and keep in full force and effect such corporate existence, right or franchise
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect (which term shall not (for the purpose of this Section
9.5 only) include, with respect to any Restricted Subsidiary, the termination of
or failure to preserve and keep in full force and effect such corporate
existence, right or franchise that would render such Restricted Subsidiary
unable to perform its obligations under the Subsidiary Guaranty, and therefore
result in a Material Adverse Effect only under clause (c) of the definition of
such term).
9.6 Pari Passu
The Company covenants that its obligations under the Notes and under this
Agreement and the Other Agreements do and will rank at least pari passu with all
its other present and future unsecured Senior Debt.
<PAGE>
9.7 Subsidiary Guaranty
The Company will cause each Subsidiary which becomes a Restricted
Subsidiary after the Series A and B Closing Date to execute and deliver to the
holders a copy of the Joinder Agreement in the form attached to the Subsidiary
Guaranty as Annex 2, duly executed by such Subsidiary, together with an opinion
of counsel satisfactory to the Required Holders addressing with respect to such
Subsidiary the issues relating to Subsidiaries and the Subsidiary Guaranty in
the form of opinion attached hereto as Exhibit 4.4(a).
9.8 Application of Proceeds; Releases
The Company will
(a) not later than December 29, 1995,
(i) cause all Debt outstanding under the Revolving Facility and
the DDD Facility to be paid in full with the proceeds of the sale of
the Series A Notes and Series B Notes, and
(ii) deliver to the holders of the Notes
(A) with respect to the Revolving Facility, copies of (I) a
written statement, executed by the Revolving Facility Lenders,
terminating the Revolving Facility, and (II) such UCC-3
termination statements, executed by the Revolving Facility
Lenders, and such other releases executed by the Revolving
Facility Lenders, as shall be deemed necessary or appropriate by
the Company to terminate the Revolving Facility Lenders' security
interest in any and all properties of the Company and the
Restricted Subsidiaries, and
(B) with respect to the DDD Facility, copies of (I) a
written statement, executed by the DDD Facility Lenders,
terminating the DDD Facility, and (II) a written statement,
executed by the DDD Facility Lenders, providing further
assurances to execute and deliver such acknowledgements, mortgage
releases and other releases as shall be necessary to permit the
Company to comply with the provisions of clause (b) of this
Section 9.8,
(b) not later than January 5, 1996, deliver to the holders of the
Notes an acknowledgement by the Company of receipt of all stock of the
Restricted Subsidiaries pledged as security to the Revolving Facility
Lenders and the DDD Facility Lenders, and
(c) not later than January 15, 1996, with respect to the DDD Facility,
deliver to the holders of the Notes copies of such mortgage releases and
such other releases executed by the DDD Facility Lenders as shall be deemed
necessary or appropriate by the Company to terminate the DDD Facility
Lenders' security interest in any and all properties of DDD.
<PAGE>
10. NEGATIVE COVENANTS
The Company covenants that so long as any of the Notes are outstanding:
10.1 Net Worth
The Company will not, at any time, permit Consolidated Net Worth to be less
than the sum of (a) Ninety Million Dollars ($90,000,000), plus (b) an aggregate
amount equal to fifty percent (50%) of Consolidated Net Income (but, in each
case, only if a positive number) for each completed fiscal year of the Company
beginning with the fiscal year ending December 31, 1995.
10.2 Interest Coverage
The Company will not, at any time, permit (a) EBITDA for the period of four
consecutive fiscal quarters of the Company then most recently ended to be less
than (b) five hundred percent (500%) of Consolidated Interest Expense for such
period.
10.3 Debt Incurrence
(a) Company Debt. The Company will not, directly or indirectly,
create, incur, assume, guarantee, or otherwise become directly or
indirectly liable with respect to, any Debt (including, without limitation,
any extension, renewal or refunding of Debt), unless on the date the
Company becomes liable with respect to any such Debt and immediately after
giving effect thereto and the concurrent retirement of any other Debt,
(i) no Default or Event of Default exists, and
(ii) Consolidated Debt does not exceed fifty percent (50%) of
Total Capitalization.
(b) Restricted Subsidiary Debt. The Company will not permit any of the
Restricted Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee, or otherwise become directly or indirectly liable with respect
to, any Debt (including, without limitation, any extension, renewal or
refunding of Debt), unless on the date such Restricted Subsidiary becomes
liable with respect to any such Debt and immediately after giving effect
thereto and the concurrent retirement of any Debt,
(i) no Default or Event of Default exists,
(ii) the aggregate amount of Priority Debt does not exceed ten
percent (10%) of Consolidated Tangible Assets, and
(iii) Consolidated Debt does not exceed fifty percent (50%) of
Total Capitalization.
<PAGE>
(c) Time of Incurrence of Debt. For the purposes of this Section 10.3,
any Person becoming a Restricted Subsidiary after the date hereof shall be
deemed, at the time it becomes a Restricted Subsidiary, to have incurred
all of its then outstanding Debt, and any Person extending, renewing or
refunding any Debt shall be deemed to have incurred such Debt at the time
of such extension, renewal or refunding.
10.4 Liens
The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly create, incur, assume or permit to exist
(upon the happening of a contingency or otherwise) any Lien on or with respect
to any property (including, without limitation, any document or instrument in
respect of goods or accounts receivable) of the Company or any Restricted
Subsidiary, whether now owned or held or hereafter acquired, or any income or
profits therefrom (whether or not provision is made for the equal and ratable
securing of the Notes in accordance with the last paragraph of this Section
10.4), or assign or otherwise convey any right to receive income or profits,
except:
(a) Liens for taxes, assessments or other governmental charges the
payment of which is not at the time required by Section 9.4;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other similar Liens, in each case, incurred in
the ordinary course of business for sums not yet due or the payment of
which is not at the time required by Section 9.4;
(c) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business (i) in connection with workers'
compensation, unemployment insurance and other types of social security or
retirement benefits, or (ii) to secure (or to obtain letters of credit that
secure) the performance of tenders, statutory obligations, surety bonds,
appeal and supersedeas bonds (not in excess of Two Million Dollars
($2,000,000)), bids, leases (other than Capital Leases), performance bonds,
purchase, construction or sales contracts and other similar obligations, in
each case not incurred or made in connection with the borrowing of money,
the obtaining of advances or credit or the payment of the deferred purchase
price of property;
<PAGE>
(d) leases or subleases granted to others, easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case
incidental to, and not interfering with, the ordinary conduct of the
business of the Company or any of the Restricted Subsidiaries, provided
that such Liens do not, in the aggregate, materially detract from the value
of such property with respect to its then current use;
(e) Liens on property of the Company or any of the Restricted
Subsidiaries securing Debt owing to the Company or to a Wholly-Owned
Restricted Subsidiary;
(f) Liens existing on the date of this Agreement and securing the Debt
of the Company and the Restricted Subsidiaries identified as secured Debt
in Schedule 5.15, but not any refinancing of such Debt;
(g) Liens on property acquired or constructed by the Company or any
Restricted Subsidiary after the date of this Agreement to secure Debt of
the Company or such Restricted Subsidiary incurred in connection with or
related to such acquisition or construction, and Liens existing on such
property at the time of acquisition thereof, provided that
(i) no such Lien shall extend to or cover any property other than
the property being acquired or constructed (including contractual and
other rights related thereto and proceeds thereof),
(ii) the amount of Debt secured by any such Lien shall not exceed
an amount equal to the lesser of the total purchase or construction
price or Fair Market Value (as determined in good faith by the Board
of Directors or the board of directors of such Restricted Subsidiary)
of the property being acquired or constructed, determined at the time
of such acquisition or at the time of substantial completion of such
construction,
(iii) such Lien shall be created concurrently with or within
twelve months after such acquisition or substantial completion of such
construction, and
(iv) no Default or Event of Default shall exist at the time of
creation, incurrence or assumption of such Lien;
(h) Liens existing on property of a corporation at the time it becomes
a Restricted Subsidiary or is merged or consolidated with the Company or a
Restricted Subsidiary, provided that
(i) no such Lien shall extend to or cover any property other than
the property subject to such Lien at the time of any such transaction,
(ii) the amount of Debt secured by any such Lien shall not exceed
the Fair Market Value (as determined in good faith by the Board of
Directors or the board of directors of such Restricted Subsidiary) of
the property subject thereto, determined at the time of such
transaction,
(iii) such Lien was not created in contemplation of any such
transaction, and
(iv) no Default or Event of Default shall exist at the time of
any such transaction;
(i) Liens incidental to the conduct of the business referred to in
Section 10.10 (including, without limitation, licenses, participation
rights, rebate or revenue sharing obligations, or similar encumbrances),
provided that such Liens have not arisen in connection with the incurrence
of Debt; and
<PAGE>
(j) Liens, not otherwise permitted by the provisions of this Section
10.4, on property of the Company or any Restricted Subsidiary, provided
that on the date the Company or such Restricted Subsidiary becomes liable
with respect to the Debt secured by such Liens, and immediately after
giving effect thereto and the concurrent retirement of any other Debt
constituting Priority Debt,
(i) no Default or Event of Default exists, and
(ii) the aggregate amount of Priority Debt does not exceed ten
percent (10%) of Consolidated Tangible Assets.
In case any property shall be subjected to a Lien in violation of this
Section 10.4, the Company will forthwith make or cause to be made, to the
fullest extent permitted by applicable law, provision whereby the Notes will be
secured equally and ratably as to such property with all other obligations
secured thereby pursuant to such agreements and instruments as shall be approved
by the Required Holders, and the Company will promptly cause to be delivered to
each holder of a Note an opinion, reasonably satisfactory to the Required
Holders, of Gardere Wynne Sewell & Riggs, L.L.P. or other independent counsel
satisfactory to the Required Holders to the effect that such agreements and
instruments are enforceable in accordance with their terms, and in any event the
Notes shall have the benefit, to the full extent that, and with such priority
as, the holders of Notes may be entitled under applicable law, of an equitable
Lien on such property (and any proceeds thereof) securing the Notes. Such
violation of this Section 10.4 will constitute an Event of Default hereunder,
whether or not any such provision is made or any equitable Lien is created
pursuant to this Section 10.4.
10.5 Mergers and Consolidations
The Company will not, and will not permit any of the Restricted
Subsidiaries to, consolidate with or merge with any other corporation or convey,
transfer, spin-off or lease substantially all of its assets in a single
transaction or series of transactions to any Person (except that a Restricted
Subsidiary may (x) consolidate with or merge with, or convey, transfer, spin-off
or lease substantially all of its assets in a single transaction or series of
transactions to, another Restricted Subsidiary or the Company and (y) convey,
transfer, spin-off or lease all of its assets in compliance with the provisions
of Section 10.6), provided that the foregoing restriction does not apply to the
consolidation or merger of the Company with, or the conveyance, transfer,
spin-off or lease of substantially all of the assets of the Company in a single
transaction or series of transactions to, any Person so long as:
(a) the successor formed by such consolidation or the survivor of such
merger or the Person that acquires by conveyance, transfer, spin-off or
lease substantially all of the assets of the Company as an entirety, as the
case may be (the "Successor Corporation"), shall be a solvent corporation
organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia and shall conduct substantially
all of its business in one or more of such jurisdictions;
(b) if the Company is not the Successor Corporation, such corporation
shall have executed and delivered to each holder its assumption of the due
and punctual performance and observance of each covenant and condition of
this Agreement and the Notes (pursuant to such agreements and instruments
as shall be reasonably satisfactory to the Required Holders), and the
Company shall have caused to be delivered to each holder an opinion,
reasonably satisfactory to the Required Holders, of Gardere Wynne Sewell &
Riggs, L.L.P. or other nationally recognized independent counsel
satisfactory to the Required Holders, to the effect that all agreements or
instruments effecting such assumption are enforceable in accordance with
their terms and comply with the terms hereof;
<PAGE>
(c) immediately prior to, and immediately after giving effect to, such
transaction, no Default or Event of Default would exist; and
(d) immediately after giving effect to such transaction, the Successor
Corporation would be permitted, pursuant to the provisions of Section 10.3,
to incur at least One Dollar ($1) of additional Debt owing to a Person
other than a Restricted Subsidiary of the Successor Corporation.
No such conveyance, transfer, spin-off or lease of substantially all of the
assets of the Company shall have the effect of releasing the Company or any
Successor Corporation from its liability under this Agreement or the Notes.
10.6 Sale of Assets
(a) Sale of Assets. The Company will not, and will not permit any of
the Restricted Subsidiaries to, make any Transfer, provided that the
foregoing restriction does not apply to a Transfer if:
(i) the property that is the subject of such Transfer constitutes
either (A) inventory held for sale, or (B) equipment, fixtures,
supplies or materials no longer required in the operation of the
business of the Company or such Restricted Subsidiary or that is
obsolete, and, in the case of any Transfer described in clause (A) or
clause (B), such Transfer is in the ordinary course of business (an
"Ordinary Course Transfer");
(ii) either
(A) such Transfer is from a Restricted Subsidiary to the
Company or a Wholly-Owned Restricted Subsidiary, or
<PAGE>
(B) such Transfer is from the Company to a Wholly-Owned
Restricted Subsidiary,
so long as immediately before and immediately after the consummation
of such transaction, and after giving effect thereto, no Default or
Event of Default exists or would exist (each such Transfer, an
"Intergroup Transfer," and, collectively with any Ordinary Course
Transfers, "Excluded Transfers"); or
(iii) such Transfer is not an Excluded Transfer and all of the
following conditions shall have been satisfied with respect thereto:
(A) such Transfer does not involve a Substantial Portion of
the property of the Company and the Restricted Subsidiaries,
(B) in the good faith opinion of the Company, the Transfer
is in exchange for consideration with a Fair Market Value at
least equal to that of the property exchanged, and is in the best
interests of the Company, and
(C) immediately after giving effect to such transaction no
Default or Event of Default would exist.
(b) Debt Prepayment Transfers and Reinvested Transfers.
(i) Notwithstanding the provisions of Section 10.6(a), the
determination of whether a Transfer involves a Substantial Portion of
the property of the Company and the Restricted Subsidiaries, as
provided in Section 10.6(a)(iii)(A), shall be made without taking into
account the same proportion of the book value attributable to the
property subject to such Transfer as shall be equal to the proportion
of the Net Asset Sale Proceeds Amount (the "Designated Portion") to be
applied to either a prepayment of the Notes pursuant to Section 8.2 (a
"Prepayment Transfer") or the acquisition of assets similar to the
assets which were the subject of such Transfer (a "Reinvested
Transfer") within one hundred eighty (180) days of the consummation of
such Transfer, as specified in an Officer's Certificate delivered to
each holder prior to, or contemporaneously with, the consummation of
such Transfer.
(ii) If, notwithstanding the certificate referred to in the
foregoing clause (i), the Company shall fail to apply the entire
amount of the Designated Portion as specified in such certificate
within the period stated in Section 10.6(b)(i), the computation of
whether such Transfer involved a Substantial Portion of the property
of the Company and the Restricted Subsidiaries shall be recomputed, as
of the date of such Transfer, by taking into account the same
proportion of the book value attributable to the property subject to
such Transfer as shall be equal to the proportion of the Net Asset
Sale Proceeds Amount actually applied to either a Prepayment Transfer
or a Reinvested Transfer within such period. If, upon the
recomputation provided for in the preceding sentence, such Transfer
involved a Substantial Portion of the property of the Company and the
Restricted Subsidiaries, an Event of Default shall be deemed to have
existed as of the expiration of such period.
(c) Certain Definitions. The following terms have the following
meanings:
(i) Disposition Value -- means, at any time, with respect to any
Transfer of property,
(A) in the case of property that does not constitute capital
stock of a Restricted Subsidiary, the book value thereof, valued
at the amount taken into account (or which would be taken into
account) in the consolidated balance sheet of the Company then
most recently required to have been delivered to the holders
pursuant to Section 7.1, and
<PAGE>
(B) in the case of property that constitutes capital stock
of a Restricted Subsidiary, an amount equal to that percentage of
the book value of the assets of the Restricted Subsidiary that
issued such capital stock as is equal to the percentage that the
book value of such capital stock represents of the book value of
all of the outstanding capital stock of such Restricted
Subsidiary (assuming, in making such calculations, that all
Securities convertible into such capital stock are so converted
and giving full effect to all transactions that would occur or be
required in connection with such conversion), determined as of
the date of the balance sheet referred to in the foregoing clause
(A).
(ii) Substantial Portion -- means, at any time, any property
subject to a Transfer if
(A) the Disposition Value of such property, when added to
the Disposition Value of all other property of the Company and
the Restricted Subsidiaries that has been the subject of a
Transfer (other than an Excluded Transfer and subject, with
respect to both such property and all such other property, to the
provisions of Section 10.6(b)) during the then current fiscal
year of the Company, exceeds an amount equal to ten percent (10%)
of Consolidated Total Assets as reflected (or as would be
reflected) in the consolidated balance sheet of the Company then
most recently required to have been delivered to the holders
pursuant to Section 7.1, or
(B) the Disposition Value of such property, when added to
the Disposition Value of all other property of the Company and
the Restricted Subsidiaries that has been the subject of a
Transfer (other than an Excluded Transfer and subject, with
respect to both such property and all such other property, to the
provisions of Section 10.6(b)) during the period beginning on the
Series A and B Closing Date and ending on and including the date
of the consummation of such Transfer, exceeds an amount equal to
twenty percent (20%) of Consolidated Total Assets as reflected
(or as would be reflected) in the consolidated balance sheet of
the Company then most recently required to have been delivered to
the holders pursuant to Section 7.1 hereof.
(iii) Transfer -- means, with respect to any Person, any
transaction in which such Person sells, conveys, transfers or leases
(as lessor) any of its property, including, without limitation,
capital stock of any other Person.
<PAGE>
10.7 Restricted Payments and Restricted Investments
(a) Limitation. The Company will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly, declare, make or incur
any liability to make any Restricted Payment or make or authorize any
Restricted Investment unless immediately after giving effect to such
action:
(i) the sum of (x) the aggregate amount of outstanding Restricted
Investments (valued immediately after such action), plus (y) the
aggregate amount of Restricted Payments of the Company and the
Restricted Subsidiaries declared or made during the period commencing
on the Series A and B Closing Date, and ending on the date such
Restricted Payment or Restricted Investment is declared or made,
inclusive, would not exceed the sum of
(A) Ten Million Dollars ($10,000,000), plus
(B) fifty percent (50%) of Consolidated Net Income for the
period commencing July 1, 1995 and ending on the date such
Restricted Payment or such Restricted Investment is declared or
made (or minus 100% of Consolidated Net Income for such period if
Consolidated Net Income for such period is a loss), plus
(C) the aggregate amount of Net Proceeds of Common Stock of
the Company for such period; and
(ii) the Company could incur, pursuant to Section 10.3, at least
One Dollar ($1) of additional Debt owing to a Person other than a
Restricted Subsidiary; and
(iii) no Default or Event of Default would exist.
(b) Time of Payment. The Company will not, nor will it permit any of
the Restricted Subsidiaries to, authorize a Restricted Payment that is not
payable within sixty (60) days of authorization.
(c) Investments of Subsidiaries. Each Person which becomes a
Restricted Subsidiary after the Series A and B Closing Date will be deemed
to have made, on the date such Person becomes a Restricted Subsidiary, all
Restricted Investments of such Person in existence on such date.
Investments in any Person that ceases to be a Restricted Subsidiary after
the Series A and B Closing Date (but in which the Company or another
Restricted Subsidiary continues to maintain an Investment) will be deemed
to have been made on the date on which such Person ceases to be a
Restricted Subsidiary.
<PAGE>
10.8 Limitations on Certain Restricted Subsidiary Actions
The Company will not, and will not permit any of the Restricted
Subsidiaries to, enter into any agreement which would restrict any Restricted
Subsidiary's legal ability or right to:
(a) pay dividends or make any other distributions on its common stock;
(b) pay any Debt owing to the Company or another Restricted Subsidiary
(other than waivers of subrogation);
(c) make any Investment in the Company or another Restricted
Subsidiary;
(d) transfer its property to the Company or another Restricted
Subsidiary (except that any such agreement may (i) prohibit the assignment
of contractual rights, (ii) include grants of contractual rights of first
refusal, and (iii) include similar contractual obligations not unusual in
the course of such Restricted Subsidiary's business); or
(e) Guaranty the Notes or any renewals or refinancings thereof;
provided, however, that
(i) the restrictions of this Section 10.8 shall not apply to
(A) any such agreement in existence on the Series A and B Closing
Date and set forth in Schedule 10.8,
(B) this Agreement, or
(C) other agreements relating to the creation of Senior Debt
incurred in accordance with the terms of this Agreement, and
(ii) the restrictions of clause (d) of this Section 10.8 shall not
apply to any agreement relating to the creation of Priority Debt or Debt of
Restricted Subsidiaries secured by Liens permitted by Section 10.4(a) to
Section 10.4(i), inclusive, to the extent that such restrictions limit the
ability of any Restricted Subsidiary to transfer the Property that secures
such Priority Debt or such other Debt;
provided further that, in the case of the foregoing clauses (i) and (ii), such
agreement does not impose any limitations on any Restricted Subsidiary's ability
to perform its obligations under the Subsidiary Guaranty.
<PAGE>
10.9 Affiliate Transactions
The Company will not, and will not permit any of the Restricted
Subsidiaries to, enter into any transaction (other than transactions among the
Company and its wholly-owned Unrestricted Subsidiaries that are not,
individually or in the aggregate, Material), including, without limitation, the
purchase, sale or exchange of property or the rendering of any service, with any
Affiliate, except in the ordinary course of business of the Company or such
Restricted Subsidiary and upon fair and reasonable terms no less favorable to
the Company or such Restricted Subsidiary than it would obtain in a comparable
arm's-length transaction with a Person not an Affiliate.
10.10 Line of Business
The Company will not, and will not permit any of the Subsidiaries to,
engage in any business if, as a result, the Company and the Subsidiaries, taken
as a whole, would not be engaged primarily in the provision of (a) seismic data
services, (b) exploration for, and development and ownership of, gas and oil
reserves, (c) gas marketing and (d) businesses related to the foregoing
businesses.
11. EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal of or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five (5) Business Days after the same becomes due and
payable; or
(c) the Company defaults in the performance of or compliance with any
term contained in Sections 10.1 through 10.9, inclusive, except as set
forth in paragraph 11(d) below with respect to Section 10.4; or
(d) the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a), (b)
and (c) of this Section 11) or incurs at any time Liens of the types
described in paragraphs (a), (b) and (c) of Section 10.4 for obligations
then due aggregating less than Two Million Five Hundred Thousand Dollars
($2,500,000), and such default is not remedied within thirty (30) days
after the earlier of (i) a Responsible Officer obtaining actual knowledge
of such default and (ii) the Company receiving written notice of such
default from any holder (any such written notice to be identified as a
"notice of default" and to refer specifically to this Section 11(d)); or
(e) any representation or warranty made in writing by or on behalf of
the Company or any Restricted Subsidiary or by any officer of the Company
or any Restricted Subsidiary in this Agreement or the Subsidiary Guaranty
or in any writing furnished in connection with the transactions
contemplated hereby proves to have been false or incorrect in any material
respect on the date as of which made; or
<PAGE>
(f) (i) the Company or any Restricted Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal
of or premium or make-whole amount or interest on any one or more issues of
outstanding Debt in an aggregate principal amount of at least Ten Million
Dollars ($10,000,000) beyond any period of grace provided with respect
thereto, or (ii) the Company or any Restricted Subsidiary is in default in
the performance of or compliance with any term of any evidence of any one
or more issues of Debt in an aggregate outstanding principal amount of at
least Ten Million Dollars ($10,000,000) or of any mortgage, indenture or
other agreement relating thereto or any other condition exists, and the
effect of such default or condition is to cause, or the holder or holders
of such obligation (or a trustee on behalf of such holder or holders) as a
result of such default or condition actually cause, such obligation to
become due prior to any originally stated maturity, or to be repurchased by
the Company or any Restricted Subsidiary prior to any originally scheduled
maturity; or
(g) the Company or any Restricted Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing against
it of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law of
any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the Company or any of the
Subsidiaries, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for
relief or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or liquidation of the
Company or any of the Subsidiaries, or any such petition shall be filed
against the Company or any of the Subsidiaries and such petition shall not
be dismissed within sixty (60) days; or
(i) a final judgment or judgments for the payment of money aggregating
in excess of One Million Dollars ($1,000,000) are rendered against one or
more of the Company and the Subsidiaries and such judgments are not, within
forty-five (45) days after entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within forty-five (45) days after the
expiration of such stay; or
(j) (i) the Subsidiary Guaranty shall cease to be in full force and
effect or shall be declared by a court or governmental authority of
competent jurisdiction to be void, voidable or unenforceable against any
Restricted Subsidiary,
<PAGE>
(ii) the validity or enforceability of the Subsidiary Guaranty against
any Restricted Subsidiary shall be contested by such Restricted Subsidiary,
the Company or any Affiliate, or
(iii) any Restricted Subsidiary, the Company or any Affiliate shall
deny that such Restricted Subsidiary has any further liability or
obligation under the Subsidiary Guaranty.
12. REMEDIES ON DEFAULT, ETC
12.1 Acceleration
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default
described in clause (i) of paragraph (g) or described in clause (vi) of
paragraph (g) by virtue of the fact that such clause encompasses clause (i)
of paragraph (g)) has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the
Required Holders may at any time at its or their option, by notice or
notices to the Company, declare all the Notes then outstanding to be
immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes
at the time outstanding affected by such Event of Default may at any time,
at its or their option, by notice or notices to the Company, declare all
the Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest
thereon and (y) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder has the right to
maintain its investment in the Notes free from repayment by the Company (except
as herein specifically provided for) and that the provision for payment of a
Make-Whole Amount by the Company in the event that the Notes are prepaid or are
accelerated as a result of an Event of Default is intended to provide
compensation for the deprivation of such right under such circumstances.
<PAGE>
12.2 Other Remedies
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
12.3 Rescission
At any time after any Notes have been declared due and payable pursuant to
clause (b) or (c) of Section 12.1, the Required Holders, by written notice to
the Company, may rescind and annul any such declaration and its consequences if
(a) the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
12.4 No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder in exercising
any right, power or remedy shall operate as a waiver thereof or otherwise
prejudice such holder's rights, powers or remedies. No right, power or remedy
conferred by this Agreement or by any Note upon any holder thereof shall be
exclusive of any other right, power or remedy referred to herein or therein or
now or hereafter available at law, in equity, by statute or otherwise. Without
limiting the obligations of the Company under Section 15, the Company will pay
to each holder on demand such further amount as shall be sufficient to cover all
costs and expenses of such holder incurred in any enforcement or collection
under this Section 12, including, without limitation, reasonable attorneys'
fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
13.1 Registration of Notes
The Company shall keep at its principal executive office a register for the
registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder that
is an Institutional Investor promptly upon request therefor, a complete and
correct copy of the names and addresses of all registered holders.
<PAGE>
13.2 Transfer and Exchange of Notes
Upon surrender of any Note at the principal executive office of the Company
for registration of transfer or exchange (and in the case of a surrender for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered holder of such Note or his attorney
duly authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof, and subject to compliance with all
restrictions on transfer set forth herein and in such Note), the Company shall
execute and deliver, at the Company's expense (except as provided below),
promptly and, in any event, within ten (10) days of the surrender of such Note
by the registered holder thereof, one or more new Notes (as requested by the
holder thereof) in exchange therefor, in an aggregate principal amount equal to
the unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially in
the form of Exhibit 1A, Exhibit 1B or Exhibit 1C, as the case may be. Each such
new Note shall be dated and bear interest from the date to which interest shall
have been paid on the surrendered Note or dated the date of the surrendered Note
if no interest shall have been paid thereon. The Company may require payment of
a sum sufficient to cover any stamp tax or governmental charge imposed in
respect of any such transfer of Notes. Notes shall not be transferred in
denominations of less than One Hundred Thousand Dollars ($100,000), provided
that if necessary to enable the registration of transfer by a holder of its
entire holding of Notes, one Note may be in a denomination of less than One
Hundred Thousand Dollars ($100,000). Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be deemed to have
made the representations set forth in Section 6.1 (unless such transfer is
effected pursuant to a transaction in which the representation set forth in such
Section is not required in order to comply with the securities laws applicable
to such transfer) and Section 6.3.
13.3 Replacement of Notes
Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if a Qualified Institutional Buyer is the
holder of such Note, the unsecured agreement of indemnity of such holder
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and, within ten (10) days after
such receipt, deliver, in lieu thereof, a new Note, dated and bearing interest
from the date to which interest shall have been paid on such lost, stolen,
destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or
mutilated Note if no interest shall have been paid thereon.
<PAGE>
14. PAYMENTS ON NOTES
14.1 Place of Payment
The Company will punctually pay, or cause to be paid, the principal of and
interest (and Make-Whole Amount, if any) on the Notes, as and when the same
shall become due and payable according to the terms hereof and of the Notes.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and
interest becoming due and payable on the Notes shall be made at the principal
office of the Company. The Company may at any time, by notice to each holder,
change the place of payment of the Notes so long as such place of payment shall
be either the principal office of the Company in such jurisdiction or the
principal office of a bank or trust company in such jurisdiction.
14.2 Home Office Payment
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement.
15. EXPENSES, ETC
15.1 Transaction Expenses
Whether or not the transactions contemplated hereby are consummated, the
Company will pay all reasonable attorneys' fees of Hebb & Gitlin, special
counsel to you and the Other Purchasers, in connection with such transactions,
and will pay all costs and expenses (including reasonable attorneys' fees of a
special counsel and, if reasonably required, local or other counsel) incurred by
you and each Other Purchaser or holder in connection with the consideration,
evaluation, analysis, assessment, negotiation, preparation and/or execution of
any amendments, waivers or consents under or in respect of this Agreement or the
Notes (whether or not any such amendment, waiver or consent becomes effective),
or in connection with any controversy or potential controversy thereunder,
including, without limitation: (a) the costs and expenses incurred in enforcing
or defending (or determining whether or how to enforce or defend) any rights
<PAGE>
under this Agreement or the Notes or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with this
Agreement or the Notes, or by reason of being a holder, and (b) the costs and
expenses, including financial advisors' fees, incurred in connection with the
insolvency or bankruptcy of the Company or any Subsidiary or in connection with
any work-out or restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save you and each other holder harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by you).
15.2 Survival
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note (but not the payment in full of all of the Notes), and may be relied upon
by any subsequent holder of a Note, regardless of any investigation made at any
time by or on behalf of you or any other holder. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this Agreement. Subject to the preceding sentence, this Agreement
and the Notes embody the entire agreement and understanding between you and the
Company and supersede all prior agreements and understandings relating to the
subject matter hereof.
17. AMENDMENT AND WAIVER
17.1 Requirements
This Agreement and the Notes may be amended, and the observance of any term
hereof or of the Notes may be waived (either retroactively or prospectively),
with (and only with) the written consent of the Company and the Required
Holders, except that (a) no amendment or waiver of any of the provisions of
Section 1 to Section 6, inclusive, or Section 21, or any defined term as it is
used therein, will be effective as to you unless consented to by you in writing,
and (b) no such amendment or waiver may, without the written consent of the
holder of each Note at the time outstanding affected thereby, (i) subject to the
provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or
20.
<PAGE>
17.2 Solicitation of Holders
(a) Solicitation. The Company will provide each holder (irrespective
of the amount of Notes then owned by it) with sufficient information,
sufficiently far in advance of the date a decision is required, to enable
such holder to make an informed and considered decision with respect to any
proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and
correct copies of each amendment, waiver or consent effected pursuant to
the provisions of this Section 17 to each holder promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders.
(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder as
consideration for or as an inducement to the entering into by any holder of
any waiver or amendment of any of the terms and provisions hereof unless
such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder then outstanding even if
such holder did not consent to such waiver or amendment.
(c) Scope of Consent. Any consent made pursuant to this Section 17.2
by a holder of Notes that has transferred or has agreed to transfer its
Notes to the Company, any Subsidiary or any Affiliate and has provided or
has agreed to provide such written consent as a condition to such transfer
shall be void and of no force and effect except solely as to such holder,
and any amendments effected or waivers granted or to be effected or granted
that would not have been or would not be so effected or granted but for
such consent (and the consents of all other holders of Notes that were
acquired under the same or similar conditions) shall be void and of no
force and effect, retroactive to the date such amendment or waiver
initially took or takes effect, except solely as to such holder.
17.3 Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17 applies
equally to all holders and is binding upon them and upon each future holder of
any Notes and upon the Company without regard to whether such Note has been
marked to indicate such amendment or waiver. No such amendment or waiver will
extend to or affect any obligation, covenant, agreement, Default or Event of
Default not expressly amended or waived or impair any right consequent thereon.
No course of dealing between the Company and the holder of any Note nor any
delay in exercising any rights hereunder or under any Note shall operate as a
waiver of any rights of any holder of such Note. As used herein, the term "this
Agreement" and references thereto shall mean this Agreement as it may from time
to time be amended or supplemented.
<PAGE>
17.4 Notes held by Company, etc.
Solely for the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding have
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company, any Wholly-Owned
Restricted Subsidiary or any of the Company's Affiliates shall be deemed not to
be outstanding.
18. NOTICES
All notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy
of such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Company in writing,
(ii) if to any other holder, to such holder at such address as such
other holder shall have specified to the Company in writing, or
(iii) if to the Company, to the Company at its address set forth at
the beginning hereof to the attention of the Company's Chief Financial
Officer, or at such other address as the Company shall have specified to
each of the holders in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closings (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder from contesting any such
reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
<PAGE>
20. CONFIDENTIAL INFORMATION
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any Person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you and will use such Confidential Information only for the
purposes of evaluating and administering your investment in the Notes, provided
that you may deliver or disclose Confidential Information to
(i) your directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes),
(ii) your financial advisors and other professional advisors who agree
to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 20,
(iii) any other holder,
(iv) any Institutional Investor to which you sell or offer to sell
such Note or any part thereof or any participation therein (if such Person
has agreed in writing prior to its receipt of such Confidential Information
to be bound by the provisions of this Section 20),
(v) any Institutional Investor from which you offer to purchase any
Security of the Company (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions of
this Section 20),
(vi) any federal or state regulatory authority having jurisdiction
over you,
(vii) the National Association of Insurance Commissioners or any
similar organization, or any nationally recognized rating agency that
requires access to information about your investment portfolio, or
(viii) any other Person to which such delivery or disclosure may be
necessary or appropriate (w) to effect compliance with any law, rule,
regulation or order applicable to you, (x) in response to any subpoena or
other legal process, (y) in connection with any litigation to which you are
<PAGE>
a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the
rights and remedies under your Notes and this Agreement.
Each holder, by its acceptance of a Note, will be deemed to have agreed to be
bound by and to be entitled to the benefits of this Section 20 as though it were
a party to this Agreement.
21. SUBSTITUTION OF PURCHASER
You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder under this
Agreement.
22. MISCELLANEOUS
22.1 Successors and Assigns
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and permitted assigns (including, without limitation, any
subsequent holder of a Note) whether so expressed or not.
22.2 Payments Due on Non-Business Days
If any payment due on, or with respect to, any Note shall fall due on a day
other than a Business Day, then such payment shall be made on the first (1st)
Business Day following the day on which such payment shall have so fallen due,
provided that if all or any portion of such payment shall consist of a payment
of interest, for purposes of calculating such interest, such payment shall be
deemed to have been originally due on such first (1st) following Business Day,
such interest shall accrue and be payable to (but not including) the actual date
of payment and the amount of the next succeeding interest payment shall be
adjusted accordingly.
22.3 Severability
Any provision of this Agreement that 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 remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
<PAGE>
22.4 Construction
Each covenant contained herein shall be construed (absent express provision
to the contrary) as being independent of each other covenant contained herein,
so that compliance with any one covenant shall not (absent such an express
contrary provision) be deemed to excuse compliance with any other covenant.
Where any provision herein refers to action to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person.
22.5 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.
Each counterpart may consist of a number of copies hereof, each signed by less
than all, but together signed by all, of the parties hereto.
22.6 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 NEW YORK
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
22.7 Consent to Jurisdiction; Appointment of Agent
(a) Consent to Jurisdiction. THE COMPANY HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE NOTES, OR ANY ACTION OR PROCEEDING TO
EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH
HEREUNDER OR THEREUNDER, BROUGHT BY ANY HOLDER OF NOTES AGAINST THE COMPANY
OR ANY OF ITS PROPERTY, MAY BE BROUGHT BY SUCH HOLDER OF NOTES IN ANY
FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK OR ANY NEW YORK
STATE COURT SITTING IN NEW YORK CITY, NEW YORK, AS SUCH HOLDER OF NOTES MAY
IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE
NON-EXCLUSIVE IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND THE COMPANY
IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY
TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS
NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION,
THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
<PAGE>
IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTY BROUGHT IN ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED
TO LIMIT THE ABILITY OR RIGHT OF ANY HOLDER OF NOTES TO OBTAIN JURISDICTION
OVER THE COMPANY IN SUCH OTHER JURISDICTION AS MAY BE PERMITTED BY
APPLICABLE LAW.
(b) Agent for Service of Process. THE COMPANY HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT PROCESS SERVED EITHER PERSONALLY OR BY
REGISTERED MAIL SHALL CONSTITUTE, TO THE EXTENT PERMITTED BY LAW, ADEQUATE
SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE NOTES, OR ANY ACTION OR PROCEEDING TO
EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH
HEREUNDER OR THEREUNDER, BROUGHT BY ANY HOLDER OF NOTES AGAINST THE COMPANY
OR ANY OF ITS PROPERTY. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY
PRESUMED AS EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES
POSTAL SERVICE OR ANY COMMERCIAL DELIVERY SERVICE. WITHOUT LIMITING THE
FOREGOING, THE COMPANY HEREBY APPOINTS, IN THE CASE OF ANY SUCH ACTION OR
PROCEEDING BROUGHT IN THE COURTS OF OR IN THE STATE OF NEW YORK:
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
TO RECEIVE, FOR IT AND ON ITS BEHALF, SERVICE OF PROCESS. THE COMPANY SHALL
AT ALL TIMES MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN NEW YORK CITY, NEW
YORK AND MAY FROM TIME TO TIME APPOINT SUCCEEDING AGENTS FOR SERVICE OF
PROCESS BY NOTIFYING EACH HOLDER OF NOTES OF SUCH APPOINTMENT, WHICH AGENTS
SHALL BE ATTORNEYS, OFFICERS OR DIRECTORS OF THE COMPANY, OR CORPORATIONS
WHICH IN THE ORDINARY COURSE OF BUSINESS ACT AS AGENTS FOR SERVICE OF
PROCESS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OR
RIGHT OF ANY HOLDER OF NOTES TO SERVE ANY WRITS, PROCESS OR SUMMONSES IN
ANY MANNER PERMITTED BY APPLICABLE LAW.
22.8 Defeasance
(a) Option of Company. Anything to the contrary contained herein
notwithstanding, the Company may, in its sole discretion and at any time
upon not less than thirty (30) days' prior written notice to all holders,
elect to establish a trust (the "Trust"), solely in favor of all holders of
the Notes then outstanding, and irrevocably and absolutely assign,
transfer, and convey to, and deposit into, said Trust an amount of United
States Governmental Securities having interest and principal payments
sufficient to pay in full all remaining principal and interest payments
and, if any principal is to be repaid on a date other than the date
scheduled therefor in Section 8.1, together with the Make-Whole Amount, if
any, as the same shall fall due, in respect of all Notes then outstanding.
<PAGE>
(b) Discharge. Provided that
(i) the Trust, the trustee thereof, and the terms and conditions
(as well as the form and substance) of the indenture whereby the Trust
shall have been established shall be reasonably satisfactory to the
Required Holders,
(ii) the purchase price of the United States Governmental
Securities to be deposited into the Trust shall have been fully paid
by the Company, and such United States Governmental Securities shall
have been so deposited into the Trust (and each holder shall have
received written verification thereof by the trustee of the Trust) and
shall, as so deposited, be unencumbered by any Lien and sufficient to
pay all principal, interest and Make-Whole Amount, if any, to fall due
on the Notes then outstanding as provided in Section 22.8(a) (and each
holder shall have received written verification of such sufficiency by
the independent certified public accountants of recognized national
standing selected by the Company),
(iii) the Company shall have (A) paid in full all fees, costs and
expenses of the trustee of the Trust and of all holders incurred in
connection with the preparation of the trust indenture and the
establishment of the Trust, including, without limitation, all
reasonable attorneys' fees and disbursements, and (B) prepaid in full
any and all fees, costs and expenses of the trustee of the Trust for
the entire term of the Trust (and the holders of the Notes shall have
received written confirmation from the trustee confirming its receipt
of the payments required to be made to it pursuant to this clause
(iii)),
(iv) the Company shall have no continuing legal or equitable
interest in the Trust or the United States Governmental Securities
deposited into the Trust (other than a reversionary interest in any
such United States Governmental Securities or the proceeds therefrom,
remaining after the full, final and indefeasible payment of the
principal amount of the Notes and all interest and Make-Whole Amount,
if any, thereon) and shall have no right to direct or instruct the
trustee of the Trust, or to remove such trustee, or otherwise to
require such trustee to take any action with respect to such United
States Governmental Securities or otherwise,
(v) no Event of Default shall have occurred and be continuing at
the time of such deposit,
(vi) the Company shall have delivered the written notice referred
to in Section 22.8(a) hereof to the holders and a legal opinion of
Gardere Wynne Sewell & Riggs, L.L.P. or other independent counsel to
the Company, reasonably satisfactory to the Required Holders stating,
among other things which the Required Holders may reasonably request,
that (A) the Trust is validly created and duly constituted and that
the sole beneficiaries thereof are the holders, (B) the United States
Governmental Securities deposited therein were validly contributed to
the Trust and constitute a legal and valid res of the Trust, (C) the
Company's actions in creating the Trust and contributing the United
<PAGE>
States Governmental Securities thereto were duly authorized and valid,
(D) the Company, as the settlor of the Trust, has no right, title or
interest in and to the Trust or the res thereof (other than a
reversionary interest in any United States Governmental Securities, or
the proceeds thereof, remaining after the full, final and indefeasible
payment of the principal amount of the Notes and all interest and
Make-Whole Amount, if any, thereon) and has no power of direction, or
right of removal, with respect to the trustee of the Trust, (E) if any
of the events described in clause (g) or clause (h) of Section 11 were
to occur, the Trust and the res thereof would not be part of the
estate of the Company and (F) the creation of the Trust and the
depositing of the United States Governmental Securities therein shall
not, for purposes of the Code with respect to any holder, result in a
taxable event whereby (I) such holder may become liable to pay a tax
on any gain deemed to have arisen with respect to such transaction or
(II) such holder shall have been deemed to have suffered a loss with
respect to such transaction,
(vii) all principal, interest costs, expenses and other sums due
and payable to the holders under the this Agreement, the Other
Agreements and the Notes on the date the Trust is created shall have
been paid in full, and
(viii) either (A) the Company shall have delivered to the holders
an opinion of independent certified public accountants of recognized
national standing selected by the Company, reasonably satisfactory to
the Required Holders, or (B) at the option of the Company at its
expense (provided that the Company shall have the right to negotiate
with such accountants regarding the cost of furnishing such opinion),
the holders shall have received an opinion of independent certified
public accountants of recognized national standing, reasonably
satisfactory to the Required Holders, stating that under GAAP the
creation of the Trust and the depositing of the United States
Governmental Securities therein shall not result, with respect to any
holder, in an exchange of the Note or Notes of such holder for all or
part of such United States Governmental Securities which exchange
would result in a gain or loss being realized by such holder under
GAAP in respect of such transaction,
then, and in that case, all obligations of the Company under this
Agreement, the Other Agreements and the Notes shall be discharged;
provided, however, if the contribution to the Trust of any United States
Governmental Securities is invalidated, declared to be fraudulent or
preferential, set aside, or if any such United States Governmental
Securities are required to be returned or redelivered to the Company, or
any custodian, trustee, receiver or any other Person under any bankruptcy
act, state or federal law, common law or equitable cause, then, to the
extent of such invalidation, return or redelivery, the obligations under
this Agreement, the Other Agreements and the Notes (less any payments,
which shall not have been themselves invalidated, returned or redelivered,
made thereon from or in respect of the United States Governmental
Securities so invalidated, returned or redelivered) shall be revived and
restored.
<PAGE>
22.9 GAAP.
Where the character or amount of any asset or liability or item of income
or expense, or any consolidation or other accounting computation is required to
be made for any purpose hereunder, it shall be done in accordance with GAAP as
in effect on the date of, or at the end of the period covered by, the financial
statements from which such asset, liability, item of income, or item of expense,
is derived, or, in the case of any such computation, as in effect on the date as
of which such computation is required to be determined, provided, that if any
term defined herein includes or excludes amounts, items or concepts that would
not be included in or excluded from such term if such term was defined with
reference solely to generally accepted accounting principles, such term will be
deemed to include or exclude such amounts, items or concepts as set forth
herein.
22.10 Usury.
It is the intention of the parties hereto to comply with all applicable
usury laws; accordingly, it is agreed that notwithstanding any provision to the
contrary herein or in the Notes, or in any of the documents securing payment
thereof or otherwise relating hereto, no such provision shall require the
payment or permit the collection of interest in excess of the highest rate
allowed by applicable law (the "Maximum Rate"). If any excess of interest in
such respect is provided for, or shall be adjudicated to be so provided for,
herein or in the Notes or in any of the documents securing payment thereof or
otherwise relating hereto, then in such event
(a) the provisions of this Section 22.10 shall govern and control,
(b) neither the Company, endorsers or Restricted Subsidiaries, nor
their heirs, legal representatives, successors or assigns nor any other
party liable for the payment on the Notes, shall be obligated to pay the
amount of such interest to the extent that it is in excess of the Maximum
Rate,
(c) any such excess with respect to any such Note which may have been
collected shall, at the election of the holder of such Note, be either
applied as a credit against the then unpaid principal amount on such Note
or refunded to the Company, and
(d) the provisions hereof and of the Notes and any documents securing
payment thereof shall be automatically reformed so that the effective rate
of interest shall be reduced to the Maximum Rate. For the purpose of
determining the Maximum Rate, all interest payments with respect hereto
shall be amortized, prorated and spread throughout the full term of the
Notes so that the effective rate of interest thereunder is uniform
throughout the term thereof.
[Next page is the signature page.]
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
SEITEL, INC.
By /s/Debra D. Valice
---------------------------------------
Name: Debra D. Valice
Title: Senior Vice President-Finance
and Chief Financial Officer
The foregoing is hereby
agreed to as of the
date thereof.
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By /s/Warren Shank
----------------------------------
Name: Warren Shank
Title: Counsel
By /s/Clint Woods
----------------------------------
Name: Clint Woods
Title: Counsel
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By /s/Richard C. Morrison
----------------------------------
Name: Richard C. Morrison
Title: Vice President
JOHN ALDEN LIFE INSURANCE
By /s/Michael E. Halligan
----------------------------------
Name: Michael E. Halligan
Title: Vice President
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By /s/Peter W. Oliver
----------------------------------
Name: Peter W. Oliver
Title: Managing Director
MONY LIFE INSURANCE COMPANY OF AMERICA
By /s/Peter W. Oliver
----------------------------------
Name: Peter W. Oliver
Title: Authorized Agent
UNITED OF OMAHA LIFE INSURANCE COMPANY
By /s/Victor N. Hanson
----------------------------------
Name: Victor N. Hanson
Title: First Vice President
PAN-AMERICAN LIFE INSURANCE COMPANY
By /s/F. Anderson Stone
----------------------------------
Name: F. Anderson Stone
Title: Vice President, Corporate Securities
<PAGE>
Schedule A-15
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
================================================================================
Purchaser Name PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
================================================================================
Registered Name Principal Mutual Life Insurance Company
================================================================================
Note Registration Number; Principal RA-1; $21,000,000
Amount
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information Norwest Bank Iowa, N.A.
7th and Walnut Street
Des Moines, IA 50304
For credit to Principal Mutual Life
Insurance Company
General Account No. 014752
Reference: Bond No. 1-B-60639
================================================================================
Accompanying Information Seitel, Inc.; 7.17% Series A
Senior Notes due December 30, 2001 PPN:
816074 A* 9; [due date and application
(as among principal, Make-Whole Amount
and interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
ATTN: Investment Department - Securities
Division
Fax: 515-248-2643
================================================================================
Address/Fax # for Other Notices Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392
ATTN: Investment Department - Securities
Division
Fax: 515-248-2490
================================================================================
Other Instructions (if any) 2 signature lines required
================================================================================
Instructions re Delivery of Notes Law Department of Purchaser
================================================================================
Tax Identification Number 42-0127290
================================================================================
<PAGE>
================================================================================
Purchaser Name PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
================================================================================
Registered Name Principal Mutual Life Insurance Company
================================================================================
Note Registration Number; Principal RA-2; $4,000,000
Amount
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information Norwest Bank Iowa, N.A.
7th and Walnut Street
Des Moines, IA 50304
For credit to Principal Mutual Life
Insurance Company
Separate Account No. 032395
Reference: Bond No. 16-B-60639
================================================================================
Accompanying Information Seitel, Inc.; 7.17% Series A
Senior Notes due December 30, 2001 PPN:
816074 A* 9; [due date and application
(as among principal, Make-Whole Amount
and interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
ATTN: Investment - Accounting & Treasury
- Securities
Fax: 515-248-2643
================================================================================
Address/Fax # for Other Notices Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392
ATTN: Investment Department - Securities
Division
Fax: 515-248-2490
================================================================================
Other Instructions (if any) 2 signature lines required
================================================================================
Instructions re Delivery of Notes Law Department of Purchaser
================================================================================
Tax Identification Number 42-0127290
================================================================================
<PAGE>
================================================================================
Purchaser Name MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
================================================================================
Registered Name Massachusetts Mutual Life Insurance
Company
================================================================================
Note Registration Number; Principal RB-1; $4,000,000
Amount RC-1; $4,000,000
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
New York, NY 10081
ABA No. 021000021
For MassMutual IFM Traditional
Account No. 910-1388131
================================================================================
Accompanying Information Seitel, Inc.; 7.17% Series B Senior
Notes due December 30, 2002
PPN: 816074 A@ 7;
Seitel, Inc.; Series C Senior Notes due
December 30, 2002
PPN: 816074 A# 5;
[due date and application (as among
principal, Make-Whole Amount and
interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
ATTN: Securities Custody and Collection
Department
With telephone advice of payment to:
Securities Custody and Collection
Department at 413-744-3878
================================================================================
Address/Fax # for Other Notices Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
ATTN: Securities Investment Division,
Richard C. Morrison,
Vice President
Telephone: 413-788-8411
Fax: 413-744-6127
================================================================================
Other Instructions (if any) [None]
================================================================================
Instructions re Delivery of Notes Law Department of Purchaser
================================================================================
Tax Identification Number 04-1590850
================================================================================
<PAGE>
================================================================================
Purchaser Name MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
================================================================================
Registered Name Massachusetts Mutual Life Insurance
Company
================================================================================
Note Registration Number; Principal RB-2; $3,000,000
Amount RC-2; $3,000,000
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
New York, NY 10081
ABA No. 021000021
For MassMutual IFM Non-Traditional
Account No. 910-2509073
================================================================================
Accompanying Information Seitel, Inc.; 7.17% Series B Senior
Notes due December 30, 2002
PPN: 816074 A@ 7;
Seitel, Inc.; Series C Senior Notes due
December 30, 2002
PPN: 816074 A# 5;
[due date and application (as among
principal, Make-Whole Amount and
interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
ATTN: Securities Custody and Collection
Department
With telephone advice of payment to:
Securities Custody and Collection
Department at 413-744-3878
================================================================================
Address/Fax # for Other Notices Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
ATTN: Securities Investment Division,
Richard C. Morrison,
Vice President
Telephone: 413-788-8411
Fax: 413-744-6127
================================================================================
Other Instructions (if any) [None]
================================================================================
Instructions re Delivery of Notes Law Department of Purchaser
================================================================================
Tax Identification Number 04-1590850
================================================================================
<PAGE>
================================================================================
Purchaser Name MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
================================================================================
Registered Name Massachusetts Mutual Life Insurance
Company
================================================================================
Note Registration Number; Principal RB-3; $3,000,000
Amount RC-3; $3,000,000
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
New York, NY 10081
ABA No. 021000021
For MassMutual Pension Management
Account No. 910-2594018
================================================================================
Accompanying Information Seitel, Inc.; 7.17% Series B Senior
Notes due December 30, 2002
PPN: 816074 A@ 7;
Seitel, Inc.; Series C Senior Notes due
December 30, 2002
PPN: 816074 A# 5;
[due date and application (as among
principal, Make-Whole Amount and
interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
ATTN: Securities Custody and Collection
Department
With telephone advice of payment to:
Securities Custody and Collection
Department at 413-744-3878
================================================================================
Address/Fax # for Other Notices Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
ATTN: Securities Investment Division,
Richard C. Morrison,
Vice President
Telephone: 413-788-8411
Fax: 413-744-6127
================================================================================
Other Instructions (if any) [None]
================================================================================
Instructions re Delivery of Notes Law Department of Purchaser
================================================================================
Tax Identification Number 04-1590850
================================================================================
<PAGE>
================================================================================
Purchaser Name JOHN ALDEN LIFE INSURANCE COMPANY
================================================================================
Registered Name Atwell & Co.
================================================================================
Note Registration Number; Principal RB-4; $2,500,000
Amount
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information The Chase Manhattan Bank, N.A.
ABA #021 000 021
Chase Account No. 900-9-002206
BBK: Chase Manhattan Bank, N.A.
Account Name: JALIC SPREAD PRODUCT
Account No.: 89922410
================================================================================
Accompanying Information Seitel, Inc.; 7.17% Series B
Senior Notes due December 30, 2002 PPN:
816074 A@ 7; [due date and application
(as among principal, Make-Whole Amount
and interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices The Chase Manhattan Bank, N.A.
770 Broadway
New York, NY 10005-9598
Attn: Larry Seidel
ABA #021 000 021
Account Name: JALIC SPREAD PRODUCT
Account No.: 89922410
Tax ID# 41-0999752
================================================================================
Address/Fax # for Other Notices Investment Accounting
John Alden Asset Management Company
P.O. Box 020270 - 3rd Floor
Miami, Florida 33102-0270
================================================================================
Other Instructions (if any) Signature Block:
JOHN ALDEN LIFE INSURANCE COMPANY
By
Name: Michael E. Halligan
Title: Vice President
================================================================================
Instructions re Delivery of Notes The Chase Manhattan Bank, N.A.
Securities Services & Trust Operations
Two Chase Manhattan Plaza - Fourth Floor
Securities Window
New York, NY 10081
Reference: JALIC SPREAD PRODUCT
Reference: Account No. 89922410
Tax ID# 41-0999752
================================================================================
Tax Identification Number ATWELL & CO. 13-6050547
================================================================================
<PAGE>
================================================================================
Purchaser Name JOHN ALDEN LIFE INSURANCE COMPANY OF
NEW YORK
================================================================================
Registered Name Atwell & Co.
================================================================================
Note Registration Number; Principal RB-5; $2,500,000
Amount
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information The Chase Manhattan Bank, N.A.
ABA #021 000 021
Chase Account No. 900-9-002206
BBK: Chase Manhattan Bank, N.A.
Account Name: JANY SPREAD PRODUCT
Account No.: 89922403
================================================================================
Accompanying Information Seitel, Inc.; 7.17% Series B
Senior Notes due December 30, 2002 PPN:
816074 A@ 7; [due date and application
(as among principal, Make-Whole Amount
and interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices The Chase Manhattan Bank, N.A.
770 Broadway
New York, NY 10005-9598
Attn: Larry Seidel
ABA #021 000 021
Account Name: JANY SPREAD PRODUCT
Account No.: 89922403
Tax ID# 13-6178234
================================================================================
Address/Fax # for Other Notices Investment Accounting
John Alden Asset Management Company
P.O. Box 020270 - 3rd Floor
Miami, Florida 33102-0270
================================================================================
Other Instructions (if any) Signature Block:
JOHN ALDEN LIFE INSURANCE COMPANY OF
NEW YORK
By
Name: Michael E. Halligan
Title: Vice President
================================================================================
Instructions re Delivery of Notes The Chase Manhattan Bank, N.A.
Securities Services & Trust Operations
Two Chase Manhattan Plaza - Fourth Floor
Securities Window
New York, NY 10081
Reference: JANY SPREAD PRODUCT
Reference: Account No. 89922403
Tax ID# 13-6178234
================================================================================
Tax Identification Number ATWELL & CO. 13-6050547
================================================================================
<PAGE>
================================================================================
Purchaser Name THE MUTUAL LIFE INSURANCE COMPANY OF
NEW YORK
================================================================================
Registered Name The Mutual Life Insurance Company of
New York
================================================================================
Note Registration Number; Principal RB-6; $5,000,000
Amount
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information Chemical Bank
ABA# 021000128
For credit to: The Mutual Life
Insurance Company of
New York's Security
Remittance Account No. 321-023803
================================================================================
Accompanying Information Seitel, Inc.; 7.17% Series B
Senior Notes due December 30, 2002 PPN:
816074 A@ 7; [due date and application
(as among principal, Make-Whole Amount
and interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices Telecopy Confirms and Notices:
(201) 907-6979
Attention: Securities Custody
Mailing Confirms and Notices:
Glenpointe Marketing &
Operations Center - MONY
Glenpointe Center West
500 Frank W. Burr Blvd.
Teaneck, NJ 07666-6888
Attention: Securities Custody
================================================================================
Address/Fax # for Other Notices The Mutual Life Insurance Company of
New York
1740 Broadway
New York, NY 10019
Attention: MONY Capital Management Unit
Fax: 212-708-2491
================================================================================
Other Instructions (if any) [None]
================================================================================
Instructions re Delivery of Notes Law Department of Purchaser
================================================================================
Tax Identification Number 13-1632487
================================================================================
<PAGE>
================================================================================
Purchaser Name THE MUTUAL LIFE INSURANCE COMPANY OF
NEW YORK
================================================================================
Registered Name The Mutual Life Insurance Company of
New York
================================================================================
Note Registration Number; Principal RC-4; $5,000,000
Amount
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information Chemical Bank
ABA# 021000128
For credit to: The Mutual Life
Insurance Company of
New York's Security
Remittance Account No. 321-023803
================================================================================
Accompanying Information Seitel, Inc.; Series C
Senior Notes due December 30, 2002 PPN:
816074 A# 5; [due date and application
(as among principal, Make-Whole Amount
and interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices Telecopy Confirms and Notices:
(201) 907-6979
Attention: Securities Custody
Mailing Confirms and Notices:
Glenpointe Marketing &
Operations Center - MONY
Glenpointe Center West
500 Frank W. Burr Blvd.
Teaneck, NJ 07666-6888
Attention: Securities Custody
================================================================================
Address/Fax # for Other Notices The Mutual Life Insurance Company of
New York
1740 Broadway
New York, NY 10019
Attention: MONY Capital Management Unit
Fax: 212-708-2491
================================================================================
Other Instructions (if any) [None]
================================================================================
Instructions re Delivery of Notes Law Department of Purchaser
================================================================================
Tax Identification Number 13-1632487
================================================================================
<PAGE>
================================================================================
Purchaser Name MONY LIFE INSURANCE COMPANY OF AMERICA
================================================================================
Registered Name MONY Life Insurance Company of America
================================================================================
Note Registration Number; Principal RB-7; $2,500,000
Amount
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information Chemical Bank
ABA# 021000128
For credit to: MONY Life Insurance
Company of America
Account No. 323-161243
================================================================================
Accompanying Information Seitel, Inc.; 7.17% Series B
Senior Notes due December 30, 2002 PPN:
816074 A@ 7; [due date and application
(as among principal, Make-Whole Amount
and interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices Telecopy Confirms and Notices:
(201) 907-6979
Attention: Securities Custody
Mailing Confirms and Notices:
Glenpointe Marketing &
Operations Center - MONY
Glenpointe Center West
500 Frank W. Burr Blvd.
Teaneck, NJ 07666-6888
Attention: Securities Custody
================================================================================
Address/Fax # for Other Notices MONY Life Insurance Company of America
c/o The Mutual Life Insurance Company of
New York
1740 Broadway
New York, NY 10019
Attention: MONY Capital Management Unit
Fax: 212-708-2491
================================================================================
Other Instructions (if any) [None]
================================================================================
Instructions re Delivery of Notes Law Department of Purchaser
================================================================================
Tax Identification Number 86-0222062
================================================================================
<PAGE>
================================================================================
Purchaser Name MONY LIFE INSURANCE COMPANY OF AMERICA
================================================================================
Registered Name MONY Life Insurance Company of America
================================================================================
Note Registration Number; Principal RC-5; $2,500,000
Amount
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information Chemical Bank
ABA# 021000128
For credit to: MONY Life Insurance
Company of America
Account No. 323-161243
================================================================================
Accompanying Information Seitel, Inc.; Series C
Senior Notes due December 30, 2002 PPN:
816074 A# 5; [due date and application
(as among principal, Make-Whole Amount
and interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices Telecopy Confirms and Notices:
(201) 907-6979
Attention: Securities Custody
Mailing Confirms and Notices:
Glenpointe Marketing &
Operations Center - MONY
Glenpointe Center West
500 Frank W. Burr Blvd.
Teaneck, NJ 07666-6888
Attention: Securities Custody
================================================================================
Address/Fax # for Other Notices MONY Life Insurance Company of America
c/o The Mutual Life Insurance Company of
New York
1740 Broadway
New York, NY 10019
Attention: MONY Capital Management Unit
Fax: 212-708-2491
================================================================================
Other Instructions (if any) [None]
================================================================================
Instructions re Delivery of Notes Law Department of Purchaser
================================================================================
Tax Identification Number 86-0222062
================================================================================
<PAGE>
================================================================================
Purchaser Name UNITED OF OMAHA LIFE INSURANCE COMPANY
================================================================================
Registered Name United of Omaha Life Insurance Company
================================================================================
Note Registration Number; Principal RB-8; $3,500,000
Amount
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information FirsTier Bank - Omaha
ABA #1040-0002-9
17th & Farnam Streets
Omaha, NE 68102
For credit to United of Omaha Life
Insurance Company
Account #144-7-076
================================================================================
Accompanying Information Seitel, Inc.; 7.17% Series B
Senior Notes due December 30, 2002 PPN:
816074 A@ 7; [due date and application
(as among principal, Make-Whole Amount
and interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices United of Omaha Life Insurance Company
Attention: Investments / Securities
Accounting
Mutual of Omaha Plaza
Omaha, NE 68175
================================================================================
Address/Fax # for Other Notices United of Omaha Life Insurance Company
Attention: Investment Division
Mutual of Omaha Plaza
Omaha, NE 68175
================================================================================
Other Instructions (if any) [None]
================================================================================
Instructions re Delivery of Notes United of Omaha Life Insurance Company
Attention: Investments / Securities
Accounting
Mutual of Omaha Plaza
Omaha, NE 68175
================================================================================
Tax Identification Number 47-0322111
================================================================================
<PAGE>
================================================================================
Purchaser Name UNITED OF OMAHA LIFE INSURANCE COMPANY
================================================================================
Registered Name United of Omaha Life Insurance Company
================================================================================
Note Registration Number; Principal RC-6; $3,500,000
Amount
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information FirsTier Bank - Omaha
ABA #1040-0002-9
17th & Farnam Streets
Omaha, NE 68102
For credit to United of Omaha Life
Insurance Company
Account #144-7-076
================================================================================
Accompanying Information Seitel, Inc.; Series C
Senior Notes due December 30, 2002 PPN:
816074 A# 5; [due date and application
(as among principal, Make-Whole Amount
and interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices United of Omaha Life Insurance Company
Attention: Investments / Securities
Accounting
Mutual of Omaha Plaza
Omaha, NE 68175
================================================================================
Address/Fax # for Other Notices United of Omaha Life Insurance Company
Attention: Investment Division
Mutual of Omaha Plaza
Omaha, NE 68175
================================================================================
Other Instructions (if any) [None]
================================================================================
Instructions re Delivery of Notes United of Omaha Life Insurance Company
Attention: Investments / Securities
Accounting
Mutual of Omaha Plaza
Omaha, NE 68175
================================================================================
Tax Identification Number 47-0322111
================================================================================
<PAGE>
================================================================================
Purchaser Name PAN-AMERICAN LIFE INSURANCE COMPANY
================================================================================
Registered Name Pan-American Life Insurance Company
================================================================================
Note Registration Number; Principal RB-9; $1,500,000
Amount
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information First National Bank of Commerce
210 Baronne Street
New Orleans, LA 70112
ABA No. 065-000-029
For credit to Pan-American Life
Insurance Company
Account No. 1100-29496
================================================================================
Accompanying Information Seitel, Inc.; 7.17% Series B
Senior Notes due December 30, 2002 PPN:
816074 A@ 7; [due date and application
(as among principal, Make-Whole Amount
and interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices Pan-American Life Insurance Company
Pan American Life Center
601 Poydras Street
New Orleans, LA 70130
Attn: Investment Department -
28th Floor,
Bond & Stock Accounting
================================================================================
Address/Fax # for Other Notices Pan-American Life Insurance Company
Pan American Life Center
601 Poydras Street
New Orleans, LA 70130
Attn: Investment Department -
28th Floor,
Fixed Income Securities
================================================================================
Other Instructions (if any) [None]
================================================================================
Instructions re Delivery of Notes Pan-American Life Insurance Company
Pan American Life Center
601 Poydras Street
New Orleans, LA 70130
Attn: Marylyn Andree,
Investment Department -
28th Floor
================================================================================
Tax Identification Number 72-0281240
================================================================================
<PAGE>
================================================================================
Purchaser Name PAN-AMERICAN LIFE INSURANCE COMPANY
================================================================================
Registered Name Pan-American Life Insurance Company
================================================================================
Note Registration Number; Principal RC-7; $1,500,000
Amount
================================================================================
Method of Payment Federal Funds Wire Transfer
================================================================================
Account Information First National Bank of Commerce
210 Baronne Street
New Orleans, LA 70112
ABA No. 065-000-029
For credit to Pan-American Life
Insurance Company
Account No. 1100-29496
================================================================================
Accompanying Information Seitel, Inc.; Series C
Senior Notes due December 30, 2002 PPN:
816074 A# 5; [due date and application
(as among principal, Make-Whole Amount
and interest) of the payment being made;
[contact name at Company] and [telephone
number]
================================================================================
Address/Fax # for Payment Notices Pan-American Life Insurance Company
Pan American Life Center
601 Poydras Street
New Orleans, LA 70130
Attn: Investment Department -
28th Floor,
Bond & Stock Accounting
================================================================================
Address/Fax # for Other Notices Pan-American Life Insurance Company
Pan American Life Center
601 Poydras Street
New Orleans, LA 70130
Attn: Investment Department -
28th Floor,
Fixed Income Securities
================================================================================
Other Instructions (if any) [None]
================================================================================
Instructions re Delivery of Notes Pan-American Life Insurance Company
Pan American Life Center
601 Poydras Street
New Orleans, LA 70130
Attn: Marylyn Andree,
Investment Department -
28th Floor
================================================================================
Tax Identification Number 72-0281240
================================================================================
<PAGE>
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
Accredited Institution -- means any Person who is an "accredited investor"
within the meaning of such term set forth in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
Affiliate -- means, at any time,
(a) with respect to any Person other than the Company, any other
Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control
with, such Person, and
(b) with respect to the Company, a Person (other than a Wholly-Owned
Restricted Subsidiary),
(i) that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common
Control with, the Company,
(ii) that at such time beneficially owns or holds, directly or
indirectly, ten percent (10%) or more of the Voting Stock of the
Company, or
(iii) ten percent (10%) or more of the Voting Stock of which is
at such time beneficially owned or held by the Company or any one or
more of the Subsidiaries.
As used in this definition, "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.
Agreement -- is defined in Section 17.3.
Board of Directors -- at any time means the board of directors of the
Company or any committee thereof which, in the instance, shall have the lawful
power to exercise the power and authority of such board of directors.
Business Day -- means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York,
New York are required or authorized to be closed, and (b) for the purposes of
any other provision of this Agreement, any day other than a Saturday, a Sunday
or a day on which commercial banks in Houston, Texas or New York, New York are
required or authorized to be closed.
Capital Lease -- means a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.
<PAGE>
Capital Lease Obligation -- means, with respect to any Person and a Capital
Lease, the amount of the obligation of such Person as the lessee under such
Capital Lease which would, in accordance with GAAP, appear as a liability on a
balance sheet of such Person.
Closing Date -- is defined in Section 3.2.
Closings -- is defined in Section 3.2.
Code -- means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
Company -- is defined in the introductory paragraph of this Agreement.
Confidential Information -- is defined in Section 20.
Consolidated Debt -- means, as of any date of determination, the total of
all Debt of the Company and the Restricted Subsidiaries outstanding on such
date, after eliminating all offsetting debits and credits between the Company
and the Restricted Subsidiaries and all other items required to be eliminated in
the course of the preparation of consolidated financial statements of the
Company and the Restricted Subsidiaries in accordance with GAAP.
Consolidated Interest Expense -- means, with respect to any period, the sum
(without duplication) of the following (in each case, eliminating all offsetting
debits and credits between the Company and the Restricted Subsidiaries and all
other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and the Restricted Subsidiaries
in accordance with GAAP):
(a) all interest in respect of Debt of the Company and the Restricted
Subsidiaries (including imputed interest on Capital Lease Obligations)
deducted in determining Consolidated Net Income for such period, and
(b) all debt discount and expense amortized or required to be
amortized in the determination of Consolidated Net Income for such period.
Consolidated Net Income -- means, with reference to any period, the net
income (or loss) of the Company and the Restricted Subsidiaries for such period
(taken as a cumulative whole), as determined in accordance with GAAP, after
eliminating all offsetting debits and credits between the Company and the
Restricted Subsidiaries and all other items required to be eliminated in the
course of the preparation of consolidated financial statements of the Company
and the Restricted Subsidiaries in accordance with GAAP, provided that there
shall be excluded:
(a) any gains resulting from any write-up of any assets (but not any
loss resulting from any write-down of any assets),
(b) the income (or loss) of any Person accrued prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or a Restricted Subsidiary, and the income (or loss) of any Person,
substantially all of the assets of which have been acquired in any manner
<PAGE>
by the Company or any Restricted Subsidiary, realized by such other Person
prior to the date of acquisition,
(c) in the case of a successor to the Company by consolidation or
merger or as a transferee of its assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets,
(d) any aggregate net gain (but not any aggregate net loss) during
such period arising from the sale, conversion, exchange or other
disposition of capital assets (such term to include, without limitation,
(i) all non-current assets and, without duplication, (ii) the following,
whether or not current: all fixed assets, whether tangible or intangible,
all inventory sold in conjunction with the disposition of fixed assets, and
all securities),
(e) any portion of such net income that cannot be freely converted
into United States Dollars,
(f) the income (or loss) of any Person (other than a Restricted
Subsidiary) in which the Company or any Restricted Subsidiary has an
ownership interest, except to the extent that any such income has been
actually received by the Company or such Restricted Subsidiary in the form
of cash dividends or similar cash distributions,
(g) any gain arising from the acquisition of any security, or the
extinguishment, under GAAP, of any Debt, of the Company or any Restricted
Subsidiary,
(h) any net income or gain or any net loss during such period from (i)
any change in accounting principles in accordance with GAAP or (ii) any
prior period adjustments resulting from any change in accounting principles
in accordance with GAAP, and
(i) any net income or gain (but not any net loss) during such period
from (i) any extraordinary items or (ii) any discontinued operations or the
disposition thereof.
Consolidated Net Worth -- means, at any time, the total stockholders'
equity which would be shown in consolidated financial statements of the Company
and the Restricted Subsidiaries prepared at such time in accordance with GAAP.
Consolidated Tangible Assets -- means, at any time, Consolidated Total
Assets at such time, minus
(a) deferred assets, other than prepaid expenses which are refundable;
(b) patents, copyrights, trademarks, trade names, service marks, brand
names, franchises, goodwill, experimental expenses and other similar
intangibles;
(c) unamortized debt discount and expense; and
(d) all other property which would be classified as intangible under
GAAP.
<PAGE>
Consolidated Total Assets -- means, at any time, the amount at which the
total assets of the Company and the Restricted Subsidiaries would be shown in
consolidated financial statements of the Company and the Restricted Subsidiaries
prepared at such time in accordance with GAAP, after deduction of depreciation,
amortization and all other properly deductible valuation reserves.
Contingent Optional Prepayment -- is defined in Section 8.2.
DDD -- means DDD Energy, Inc., a Delaware corporation.
DDD Facility -- means the Credit Agreement dated June 14, 1995, among DDD
and the DDD Facility Lenders, as amended.
DDD Facility Lenders -- means Bank One, Texas, National Association, as
agent and as a lender, and Compass Bank-Houston, as a lender, in each case under
the DDD Facility.
Debt -- means, with respect to any Person, without duplication,
(a) its obligations for borrowed money;
(b) its obligations in respect of banker's acceptances, other
acceptances, letters of credit and other instruments serving a similar
function issued or accepted by banks and other financial institutions for
the account of such Person (whether or not incurred in connection with the
borrowing of money);
(c) its obligations that are evidenced by bonds, notes, debentures or
similar instruments;
(d) its obligations for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including, without limitation, all obligations
created or arising under any conditional sale or other title retention
agreement with respect to any such property);
(e) its Capital Lease Obligations;
(f) its obligations in respect of all mandatorily redeemable preferred
stock of such Person;
(g) its obligations for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed
or otherwise become liable for such obligations); and
(h) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (g) hereof.
Debt of any Person shall include all obligations of such Person of the character
described in clauses (a) through (h) to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is deemed to
be extinguished under GAAP.
<PAGE>
Default -- means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
Default Rate -- means the rate of interest for overdue payments as stated
in the first paragraph of the relevant Series of Notes.
Designated Portion -- is defined in Section 10.6(b)(i).
Disposition Value -- is defined in Section 10.6(c)(i).
EBITDA -- means, in respect of any period, Consolidated Net Income for such
period minus
(a) to the extent added in the computation of such Consolidated Net
Income, each of the following:
(i) extraordinary gains, net of extraordinary losses, and
(ii) gains, net of losses, arising from the disposition of
property other than in the ordinary course of business, plus
(b) to the extent deducted in the computation of such Consolidated Net
Income, each of the following:
(i) Consolidated Interest Expense, net of interest and other
investment income,
(ii) taxes imposed on or measured by income or excess profits of
the Company and the Restricted Subsidiaries,
(iii) the amount of all depreciation, depletion and amortization
allowances and other non-cash expenses of the Company and the
Restricted Subsidiaries,
(iv) extraordinary losses, net of extraordinary gains, and
(v) losses, net of gains, arising from the disposition of
property other than in the ordinary course of business.
Environmental Laws -- means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
<PAGE>
Equity Interest -- means
(a) the outstanding Voting Stock of a corporation or other business
entity,
(b) the interest in the capital or profits of a corporation, limited
liability company, partnership or joint venture, or
(c) the beneficial interest in a trust or estate.
ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
ERISA Affiliate -- means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
Event of Default -- is defined in Section 11.
Exchange Act -- means the Securities Exchange Act of 1934, as amended.
Excluded Transfer -- is defined in Section 10.6.
Fair Market Value -- means, at any time and with respect to any property,
the sale value of such property that would be realized in an arm's-length sale
at such time between an informed and willing buyer and an informed and willing
seller (neither being under a compulsion to buy or sell, respectively).
GAAP -- means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
Governmental Authority -- means
(a) the government of
(i) the United States of America or any State or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial, regulatory
or administrative functions of, or pertaining to, any such government.
<PAGE>
Guaranty -- means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
Hazardous Material -- means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
holder -- means, at any time and with respect to any Note, the Person in
whose name such Note is registered at such time in the register maintained by
the Company pursuant to Section 13.1.
Institutional Investor -- means (a) any original purchaser of a Note or an
Affiliate thereof, (b) any holder of more than five percent (5%) in aggregate
principal amount of the Notes then outstanding, and (c) any Accredited
Institution.
Intergroup Transfer -- is defined in Section 10.6.
Investment -- means any investment, made in cash or by delivery of
property, by the Company or any of the Subsidiaries in any Person, whether by
acquisition of stock, indebtedness or other obligation or Security (including,
without limitation, any interests in any partnership or joint venture), or by
<PAGE>
loan, Guaranty, advance, capital contribution or otherwise; provided that
"Investment" does not include trade credit to the extent extended in the
ordinary course of business.
Lien -- means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
Make-Whole Amount -- is defined in Section 8.6.
Material -- means material in relation to the business, operations,
affairs, financial condition, assets or properties of the Company and the
Restricted Subsidiaries taken as a whole.
Material Adverse Effect -- means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and the Restricted Subsidiaries, taken as a whole, (b) the ability of
the Company to perform its obligations under this Agreement and the Notes, (c)
the ability of any Restricted Subsidiary to perform its respective obligations
under the Subsidiary Guaranty, or (d) the validity or enforceability of this
Agreement, the Subsidiary Guaranty or the Notes.
Maximum Rate -- is defined in Section 22.10.
Memorandum -- is defined in Section 5.3.
Multiemployer Plan -- means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
NAIC Annual Statement -- is defined in Section 6.3.
Net Asset Sale Proceeds Amount -- means, with respect to any Transfer of
any property by any Person, an amount equal to the difference of
(a) the aggregate amount of the consideration (valued at the Fair
Market Value of such consideration at the time of the consummation of such
Transfer) received by such Person in respect of such Transfer, minus
(b) all ordinary and reasonable out-of-pocket costs and expenses
actually incurred by such Person in connection with such Transfer.
Net Proceeds of Common Stock -- means, with respect to any period, cash
proceeds (net of all costs and out-of-pocket expenses incurred in connection
therewith, including, without limitation, placement, underwriting and brokerage
fees and expenses) received by the Company and the Restricted Subsidiaries
during such period from the sale of all common stock of the Company, including
in such net proceeds:
<PAGE>
(a) the net amount paid upon issuance and exercise during such period
of any right to acquire any common stock, or paid during such period to
convert a convertible debt Security to common stock (but excluding any
amount paid to the Company upon issuance of such convertible debt
Security); and
(b) any amount paid to the Company upon issuance of any convertible
debt Security that is converted to common stock during such period.
Notes -- is defined in Section 1.
Officer's Certificate -- means a certificate of a Senior Financial Officer
or of any other officer of the Company whose responsibilities extend to the
subject matter of such certificate.
Optional Prepayment Date -- is defined in Section 8.2.
Optional Prepayment Notice -- is defined in Section 8.2.
Ordinary Course Transfer -- is defined in Section 10.6.
Other Agreements -- is defined in Section 2.
Other Purchasers -- is defined in Section 2.
PBGC -- means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
Person -- means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
Plan -- means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
Prepayment Transfer -- is defined in Section 10.6.
Priority Debt -- means, without duplication, the sum of (a) all Debt of the
Company secured by a Lien permitted only by Section 10.4(j) and (b) all Debt of
Restricted Subsidiaries (except (i) Debt held by the Company or a Wholly-Owned
Restricted Subsidiary, (ii) Debt of a Restricted Subsidiary that is an unsecured
guaranty of Senior Debt and that ranks pari passu with the obligations of the
Restricted Subsidiaries under the Subsidiary Guaranty, and (iii) Debt of a
Restricted Subsidiary secured by a Lien permitted by the provisions of Section
10.4(a) through (i), inclusive).
property or properties -- means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.
<PAGE>
Purchaser -- means any Person that is a Series A Purchaser and/or a Series
B Purchaser and/or a Series C Purchaser.
Qualified Institutional Buyer -- means you, each of the Other Purchasers,
and any Person who is a "qualified institutional buyer," within the meaning of
such term as set forth in Rule 144A(a)(1) under the Securities Act.
Reinvested Transfer -- is defined in Section 10.6.
Relevant Treasury Yield -- means the yield to maturity implied by
(i) the yields reported, as of 10:00 A.M. (New York City time) on the
fifth (5th) Business Day preceding the Series C Closing Date, on the
display designated as "Page 678" on the Telerate Access Service (or such
other display as may replace Page 678 on the Telerate Access Service) for
actively traded U.S. Treasury securities having a maturity of five (5)
years, or if such yields are not reported as of such time or the yields
reported as of such time are not ascertainable,
(ii) the Treasury Constant Maturity Series Yields reported, for the
latest day for which such yields have been so reported as of the fifth
(5th) Business Day preceding the Series C Closing Date, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication)
for actively traded U.S. Treasury securities having a constant maturity
equal to five (5) years. Such implied yield will be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to
bond-equivalent yields in accordance with accepted financial practice and
(b) interpolating linearly between (1) the actively traded U.S. Treasury
security with the duration closest to and greater than five (5) years and
(2) the actively traded U.S. Treasury security with the duration closest to
and less than five (5) years.
Required Holders -- means, at any time, the holders of at least a majority
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).
Rescission Notice -- is defined in Section 8.2.
Responsible Officer -- means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this agreement.
Restricted Investments -- means all Investments except the following:
(a) cash;
(b) Investments in one or more Restricted Subsidiaries or any Person
engaged in the business referred to in Section 10.10 that concurrently with
such Investment becomes a Wholly-Owned Restricted Subsidiary;
(c) Investments in United States Governmental Securities, provided
that such obligations mature within 365 days from the date of acquisition
thereof;
<PAGE>
(d) Investments in certificates of deposit or banker's acceptances
issued by an Acceptable Bank, provided that such obligations mature within
365 days from the date of acquisition thereof;
(e) Investments in commercial paper given the highest rating by a
credit rating agency of recognized national standing and maturing not more
than 270 days from the date of creation thereof; and
(f) Investments in money market mutual funds that invest solely in
so-called "money market" instruments maturing not more than one year after
the acquisition thereof, which funds have assets in excess of Five Hundred
Million Dollars ($500,000,000).
For purposes of this Agreement, an Investment shall be valued at the lesser of
(i) cost and (ii) the value at which such Investment is to be shown on the books
of the Company and the Restricted Subsidiaries in accordance with GAAP.
As used in this definition of "Restricted Investments":
Acceptable Bank -- means any bank or trust company (i) which is
organized under the laws of the United States of America or any State
thereof and (ii) which has capital, surplus and undivided profits
aggregating at least Five Hundred Million Dollars ($500,000,000).
Restricted Payment -- means
(a) any Distribution in respect of the Company or any Restricted
Subsidiary (other than on account of capital stock or other equity
interests of a Restricted Subsidiary owned legally and beneficially by
the Company or another Restricted Subsidiary), including, without
limitation, any Distribution resulting in the acquisition by the
Company of Securities which would constitute treasury stock; and
(b) any payment, repayment, redemption, retirement, repurchase or
other acquisition, direct or indirect, by the Company or any
Restricted Subsidiary of, on account of, or in respect of, the
principal of any Subordinated Debt (or any installment thereof) prior
to the regularly scheduled maturity date thereof (as in effect on the
date such Subordinated Debt was originally incurred).
For purposes of this Agreement, the amount of any Restricted Payment made in
property shall be the greater of (x) the Fair Market Value of such property (as
determined in good faith by the board of directors (or equivalent governing
body) of the Person making such Restricted Payment) and (y) the net book value
thereof on the books of such Person, in each case determined as of the date on
which such Restricted Payment is made.
Distribution -- means, in respect of any corporation, association or other
business entity:
<PAGE>
(a) dividends or other distributions or payments on capital stock or
other equity interest of such corporation, association or other business
entity (except distributions in such stock or other equity interest); and
(b) the redemption or acquisition of such stock or other equity
interests or of warrants, rights or other options to purchase such stock or
other equity interests (except when solely in exchange for such stock or
other equity interests).
Restricted Subsidiary -- means and includes each and every Subsidiary other
than any Subsidiary which, at the time of any determination hereunder, has been
designated by the Board of Directors and by written notice of the Company to all
of the holders to be an Unrestricted Subsidiary; provided, in any event, that
each of the following shall at all times constitute a Restricted Subsidiary:
(a) each Subsidiary identified on Schedule 5.4; and
(b) each Subsidiary which owns, directly or indirectly, more than
fifty percent (50%) of the Equity Interest of a Restricted Subsidiary.
Revolving Facility -- means the Restated Revolving Credit and Security
Agreement dated effective as of December 31, 1994, among the Company and certain
Restricted Subsidiaries, as borrowers, and the Revolving Facility Lenders, as
amended.
Revolving Facility Lenders -- means Bank One, Texas, National Association,
as agent and as a lender, and Compass Bank-Houston, as a lender, in each case
under the Revolving Facility.
Securities Act -- means the Securities Act of 1933, as amended from time to
time.
Security -- means "security" as defined by section 2(1) of the Securities
Act.
Senior Debt -- means any Debt of the Company that is not in any manner
subordinated in right of payment or security in any respect to the Debt
evidenced by the Notes or to any other Debt of the Company.
Senior Financial Officer -- means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
Series -- means any one or more of the series of Notes issued hereunder.
Series A and B Closing -- is defined in Section 3.1.
Series A and B Closing Date -- is defined in Section 3.1.
Series A Notes -- is defined in Section 1.
Series A Purchasers -- is defined in Section 3.1.
<PAGE>
Series B Notes -- is defined in Section 1.
Series B Purchasers -- is defined in Section 3.1.
Series C Closing -- is defined in Section 3.2.
Series C Closing Date -- is defined in Section 3.2.
Series C Interest Rate -- is defined in Section 3.2.
Series C Notes -- is defined in Section 1.
Series C Purchasers -- is defined in Section 3.2.
Subordinated Debt -- mean any Debt of the Company other than Senior Debt.
Subsidiary -- means, as to any Person, any corporation, limited liability
company, partnership, joint venture, trust or estate in which such Person or one
or more of the Subsidiaries or such Person and one or more of the Subsidiaries
own more than fifty percent (50%) of the Equity Interest. Unless the context
otherwise clearly requires, any reference to a "Subsidiary" is a reference to a
Subsidiary of the Company.
Subsidiary Guaranty -- is defined in Section 4.10.
Substantial Portion -- is defined in Section 10.6(c)(ii).
Successor Corporation -- is defined in Section 10.5.
Total Capitalization -- means, at any time, the sum of Consolidated Debt
plus Consolidated Net Worth, in each case at such time.
Transfer -- is defined in Section 10.6(c)(iii).
Trust -- is defined in Section 22.8.
United States Governmental Security -- means any direct obligation of, or
obligation guaranteed by, the United States of America, or any agency controlled
or supervised by or acting as an instrumentality of the United States of America
pursuant to authority granted by the Congress of the United States of America,
so long as such obligation or guarantee shall have the benefit of the full faith
and credit of the United States of America which shall have been pledged
pursuant to authority granted by the Congress of the United States of America.
Unrestricted Subsidiary -- means each Subsidiary other than a Restricted
Subsidiary.
<PAGE>
Voting Stock -- shall mean the capital stock or similar interest of any
class or classes (however designated) of a corporation or other business entity,
the holders of which are ordinarily, in the absence of contingencies, entitled
to vote for the election of the members of the board of directors (or Persons
performing similar functions) of a corporation or other business entity.
Wholly-Owned Restricted Subsidiary -- means, at any time, any Restricted
Subsidiary one hundred percent (100%) of all of the Equity Interests (except
directors' qualifying shares) and voting interests of which are owned by any one
or more of the Company and the Company's other Wholly-Owned Restricted
Subsidiaries at such time.
<PAGE>
Schedule 4.9-1
SCHEDULE 4.9
CHANGES IN CORPORATE STRUCTURE
NONE
<PAGE>
SCHEDULE 5.3
DISCLOSURE MATERIALS
SEE ATTACHED LETTER FROM SEITEL, INC. TO PURCHASERS
DATED DECEMBER 15, 1995
<PAGE>
SCHEDULE 5.4
SUBSIDIARIES OF THE COMPANY
AND OWNERSHIP OF SUBSIDIARY STOCK
A.
I. Restricted Subsidiaries
Name of Restricted Jurisdiction of
Subsidiary Incorporation 100% of Stock Owned By:
- ------------------------- --------------- ------------------------
Seitel Data Corp. Delaware Seitel, Inc.
Seitel Geophysical, Inc. Delaware Seitel, Inc.
DDD Energy, Inc. Delaware Seitel, Inc.
Seitel Gas & Energy Corp. Delaware Seitel, Inc.
Seitel Power Corp. Delaware Seitel, Inc.
Seitel Natural Gas, Inc. Delaware Seitel Gas & Energy Corp.
Matrix Geophysical, Inc. Delaware Seitel, Inc.
Exsol, Inc. Delaware Seitel, Inc.
Datatel, Inc. Delaware Seitel Data Corp.
Seitel Offshore Corp. Delaware Seitel Data Corp.
Polymer Dynamics, Inc. Delaware Seitel, Inc.
Seitel International, Inc. Cayman Islands Seitel Data Corp.
African Geophysical, Inc. Cayman Islands Seitel Geophysical, Inc.
Geo-Bank, Inc. Texas Seitel, Inc.
Alternative Communication
Enterprises, Inc. Texas Seitel, Inc.
II. Affiliates
Affiliate Name Owner and Type of Interest Owned
- ----------------------------- --------------------------------
TGC/SEI Joint Venture Seitel Data Corp. - 50%
Joint Venture Interest
SSC/SEI Joint Venture Seitel Data Corp. - 41%
Joint Venture Interest
Marsh Joint Venture Seitel Data Corp. - 50%
Joint Venture Interest
Digitel Data Joint Venture Seitel Offshore Corp. -
50% Joint Venture Interest
Spectrum/SII Joint Venture Seitel International, Inc. -
50% Joint Venture Interest
Redman/Smackover Joint Venture DDD Energy, Inc. - 38%
Joint Venture Interest
B. All stock of the Restricted Subsidiaries is currently pledged as security
under the DDD Facility described in Item 1 of Schedule 5.15 or the
Revolving Facility described in Item 2 of Schedule 5.15, which loans shall
be paid in full with the proceeds of the sale of the Series A Notes and
Series B Notes immediately upon funding thereof. The DDD Facility and the
Revolving Facility and all security interests granted in connection
therewith, including but not limited to the pledges of such stock, will be
terminated immediately upon receipt by such banks of such payments.
C. Reference is hereby made to each of the agreements described in Items 1
through 9 inclusive of Schedule 5.15 hereof.
<PAGE>
SCHEDULE 5.5
FINANCIAL STATEMENTS
1. Financial Statements contained in the Company's Form 10-K for the twelve
months ended December 31, 1994.
2. Financial Statements contained in the Company's Form 10-Q for the quarterly
period ended June 30, 1995.
3. Financial Statements contained in the Company's Form 10-Q for the quarterly
period ended September 30, 1995.
<PAGE>
SCHEDULE 5.8
CERTAIN LITIGATION
NONE
<PAGE>
SCHEDULE 5.11
PATENTS, ETC.
NONE
<PAGE>
SCHEDULE 5.12
ERISA
A. The following Restricted Subsidiaries are ERISA Affiliates that maintain
one or more Plans. There are no employee organizations in respect of any
Plan or Multiemployer Plan.
Datatel, Inc.
DDD Energy, Inc.
Matrix Geophysical, Inc.
Seitel Data Corp.
Seitel Gas & Energy Corp.
Seitel Geophysical, Inc.
B. All of the Restricted Subsidiaries may be considered ERISA Affiliates. The
following Plans constitute all "employee benefit plans" with respect to
which the Company or any "affiliate" of the Company is a
"party-in-interest" or in respect of which the Notes could constitute an
"employer security." All plans apply to all ERISA Affiliates listed in A.
above except as specifically set forth below.
Seitel, Inc. 401(k) Plan
Medical Insurance through New York Life Insurance Company
Dental Insurance through New York Life Insurance Company
Life Insurance through Guarantee Mutual Life Company (Seitel
Geophysical, Inc. does not participate in this insurance)
Accidental Death and Dismemberment Insurance through
Guarantee Mutual Life Company (Seitel Geophysical, Inc. does
not participate in this insurance)
Disability Insurance through Guarantee Mutual Life Company
<PAGE>
SCHEDULE 5.15
EXISTING DEBT IN EXCESS OF $100,000
1. Credit Agreement dated June 14, 1995, between DDD Energy, Inc. as borrower
and Bank One, Texas, N.A. and Compass Bank-Houston as lenders relating to a
loan of up to $75 Million secured primarily by oil and gas interests and a
pledge of the stock of DDD Energy, Inc., the outstanding balance of which
as of December 15, 1995 was approximately $8.1 Million, and related
agreements. Copies of these agreements have been provided to Purchasers'
special counsel, Hebb & Gitlin. The credit facility evidenced by these
agreements will be paid in full with the proceeds of the sale of the Series
A Notes and Series B Notes immediately upon funding thereof, and this
credit facility and all security interests granted in connection therewith
will be terminated immediately upon receipt by such Banks of such payments.
2. Restated Revolving Credit and Security Agreement dated effective as of
December 31, 1994, between Seitel, Inc., Seitel Geophysical, Inc., Exsol,
Inc., Seitel Data Corp., and Seitel Offshore Corp. as borrowers and Compass
Bank-Houston and Bank One, Texas, N.A. as lenders relating to a revolving
line of credit of up to $25 Million secured primarily by accounts
receivable, seismic data, and a pledge of the stock of all of the
Restricted Subsidiaries other than DDD Energy, Inc., the outstanding
balance of which as of December 15, 1995 was approximately $18.9 Million,
and related agreements. Copies of these agreements have been provided to
Purchasers' special counsel, Hebb & Gitlin. The credit facility evidenced
by these agreements will be paid in full with the proceeds of the sale of
the Series A Notes and Series B Notes immediately upon funding thereof, and
this credit facility and all security interests granted in connection
therewith will be terminated immediately upon receipt by such banks of such
payments.
3. Term Credit and Security Agreement dated July 15, 1993, between Seitel
Geophysical, Inc. and Compass Bank (formerly Central Bank of the South)
relating to a term loan in the original principal amount of $4,300,000
secured primarily by certain equipment, and related agreements. As of
December 15, 1995, the outstanding balance of this debt was approximately
$2.4 Million. The consent required by Section 4.10(b) amended certain
covenants under the Term Credit and Security Agreement. Copies of these
agreements have been provided to Purchasers' special counsel, Hebb &
Gitlin.
<PAGE>
4. Master Equipment Lease Agreement dated May 20, 1994, and amendments
thereto, between Seitel Geophysical, Inc. and METLIFE CAPITAL, Limited
Partnership relating to the lease by Seitel Geophysical, Inc. of certain
equipment. As of December 15, 1995, the outstanding balance under this
lease was approximately $3.5 Million. Copies of these agreements have been
provided to Purchasers' special counsel, Hebb & Gitlin.
5. Master Equipment Lease Agreement dated February 2, 1994, and amendments
thereto, between Seitel Geophysical, Inc. and Gelco Corporation, dba
McCullagh Leasing, a unit of GE Capital Fleet Services, relating to the
lease by Seitel Geophysical, Inc. of certain vehicles and related
equipment. As of December 15, 1995, the outstanding balance under this
lease was approximately $128,000.
6. Master Equipment Lease Agreement dated March 4, 1994, and amendments
thereto, between Seitel, Inc. and NationsBanc Leasing Corporation relating
to the lease by Seitel, Inc. of certain geophysical computer processing
equipment and related furniture and fixtures. As of December 15, 1995, the
outstanding balance under this lease was approximately $210,000.
7. Note and Security Agreement dated July 7, 1995, between DDD Energy, Inc.
and CoreStates Bank, N.A. relating to a term loan in the original principal
amount of $329,701.36 secured primarily by certain computer equipment, and
related agreements. As of December 15, 1995, the outstanding balance of
this debt was approximately $278,000.
8. Note and Security Agreement dated November 29, 1995, between Seitel, Inc.
and CoreStates Bank, N.A. relating to a term loan in the original principal
amount of $386,663.62 secured primarily by a Marathon Coach Bus, and
related agreements. As of December 15, 1995, the outstanding balance of
this debt was approximately $375,000.
9. Seitel, Inc. and Seitel Data Corp.'s accounts payable incurred in the
ordinary course of business to PGS Exploration (U.S.), Inc. for PGS'
services in connection with conducting 3D seismic surveys in the U.S. Gulf
of Mexico, the current balance of which is approximately $19.4 Million, of
which approximately $1.5 Million is secured by the seismic data acquired by
one of such surveys. The Company currently intends to pay such payables in
full with the proceeds of the sale of the Series A Notes and Series B
Notes, as described in the letter attached to Schedule 5.3 hereof, and to
obtain the release of such security interest in such seismic data.
10. Seitel, Inc. 9% Convertible Subordinated Debentures due March 31, 2002,
which are convertible into Seitel, Inc. common stock at a conversion rate
of one share/$9.28. As of December 15, 1995, the outstanding balance due
under these debentures is approximately $2.0 Million.
<PAGE>
SCHEDULE 10.8
CERTAIN AGREEMENTS BY RESTRICTED SUBSIDIARIES
Reference is hereby made to each of the agreements described in Items 1 through
9 inclusive of Schedule 5.15 hereof.
<PAGE>
EXHIBIT 1A
FORM OF SERIES A SENIOR NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY ONLY BE REOFFERED AND SOLD IN COMPLIANCE WITH THE REGISTRATION
PROVISIONS OF SUCH ACT OR PURSUANT TO AN EXEMPTION THEREFROM.
SEITEL, INC.
7.17% Series A Senior Note Due December 30, 2001
No. , 19
----- ----------- --
$ PPN: 816074 A* 9
---------
SEITEL, INC. (the "Company"), a Delaware corporation, for value received,
hereby promises to pay to or registered assigns the principal sum of
------
DOLLARS ($ ) on December 30, 2001 and to pay interest (computed on
- ------ ------
the basis of a 360-day year of twelve 30-day months) on the unpaid principal
balance thereof from the date of this Note at the rate of seven and seventeen
hundredths percent (7.17%) per annum, semiannually on the thirtieth (30th) day
of June and December in each year, commencing on the later of June 30, 1996 or
the payment date next succeeding the date hereof, until the principal amount
hereof shall become due and payable; and to pay on demand interest on any
overdue principal (including any overdue prepayment of principal) and Make-Whole
Amount, if any, and (to the extent permitted by applicable law) on any overdue
installment of interest, at a rate equal to the lesser of (a) the highest rate
allowed by applicable law or (b) the greater of (i) nine and seventeen
hundredths percent (9.17%) per annum and (ii) two percent (2%) over the rate of
interest publicly announced by Morgan Guaranty Trust Company of New York in New
York, New York as its "base" or "prime" rate.
Payments of principal, Make-Whole Amount, if any, and interest shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts to the
registered holder hereof at the address shown in the register maintained by the
Company for such purpose, in the manner provided in the Note Purchase Agreement
(defined below).
This Note is one of an issue of Series A Notes of the Company issued in an
aggregate principal amount limited to Twenty-Five Million Dollars ($25,000,000)
pursuant to the Company's separate Note Purchase Agreements (collectively, the
"Note Purchase Agreement"), each dated as of December 28, 1995, with the
purchasers listed on Schedule A thereto, and is entitled to the benefits
thereof. Capitalized terms used herein and not otherwise defined herein have the
meanings specified in the Note Purchase Agreement. As provided in the Note
<PAGE>
Purchase Agreement, this Note is subject to prepayment, in whole or in part, in
certain cases without a Make-Whole Amount and in other cases with a Make-Whole
Amount. The Company agrees to make required prepayments on account of such Notes
in accordance with the provisions of the Note Purchase Agreement.
The Notes and all other obligations of the Company under the Note Purchase
Agreement have been unconditionally guarantied by the Restricted Subsidiaries
pursuant to the Guaranty, dated as of December 28, 1995, entered into by such
Restricted Subsidiaries.
This Note is a registered Note and is transferable, subject to the
restrictions set forth in the Note Purchase Agreement and in the legend above,
only by surrender thereof at the principal office of the Company as specified in
the Note Purchase Agreement, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of this Note or
his attorney duly authorized in writing.
Under certain circumstances, as specified in the Note Purchase Agreement,
the principal of this Note (together with any applicable Make-Whole Amount) may
be declared due and payable in the manner and with the effect provided in the
Note Purchase Agreement.
It is the intention of the parties hereto to comply with all applicable
usury laws; accordingly, it is agreed that notwithstanding any provision to the
contrary herein or in the Note Purchase Agreement, or in any of the documents
securing payment hereof or otherwise relating hereto, no such provision shall
require the payment or permit the collection of interest in excess of the
highest rate allowed by applicable law (the "Maximum Rate"). If any excess of
interest in such respect is provided for, or shall be adjudicated to be so
provided for, herein or in the Note Purchase Agreement or in any of the
documents securing payment hereof or otherwise relating hereto, then in such
event (a) the provisions of this paragraph shall govern and control, (b) neither
the Company, endorsers or Restricted Subsidiaries, nor their heirs, legal
representatives, successors or assigns nor any other party liable for the
payment hereof, shall be obligated to pay the amount of such interest to the
extent that it is in excess of the Maximum Rate, (c) any such excess which may
have been collected shall, at the election of the holder of this Note, be either
applied as a credit against the then unpaid principal amount hereof or refunded
to the Company, and (d) the provisions hereof and of the Note Purchase Agreement
and any documents securing payment hereof shall be automatically reformed so
that the effective rate of interest shall be reduced to the Maximum Rate. For
the purpose of determining the Maximum Rate, all interest payments with respect
hereto shall be amortized, prorated and spread throughout the full term hereof
so that the effective rate of interest hereunder is uniform throughout the term
hereof.
THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW.
SEITEL, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT 1B
FORM OF SERIES B SENIOR NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY ONLY BE REOFFERED AND SOLD IN COMPLIANCE WITH THE REGISTRATION
PROVISIONS OF SUCH ACT OR PURSUANT TO AN EXEMPTION THEREFROM.
SEITEL, INC.
7.17% Series B Senior Note Due December 30, 2002
No. , 19
----- ------------ --
$ PPN:816074 A@ 7
---------
SEITEL, INC. (the "Company"), a Delaware corporation, for value received,
hereby promises to pay to or registered assigns the principal sum of
------
DOLLARS ($ ) on December , 2002 and to pay interest (computed on
- ------ ------ --
the basis of a 360-day year of twelve 30-day months) on the unpaid principal
balance thereof from the date of this Note at the rate of seven and seventeen
hundredths percent (7.17%) per annum, semiannually on the thirtieth (30th) day
of June and December in each year, commencing on the later of June 30, 1996 or
the payment date next succeeding the date hereof, until the principal amount
hereof shall become due and payable; and to pay on demand interest on any
overdue principal (including any overdue prepayment of principal) and Make-Whole
Amount, if any, and (to the extent permitted by applicable law) on any overdue
installment of interest, at a rate equal to the lesser of (a) the highest rate
allowed by applicable law or (b) the greater of (i) nine and seventeen
hundredths percent (9.17%) per annum and (ii) two percent (2%) over the rate of
interest publicly announced by Morgan Guaranty Trust Company of New York in New
York, New York as its "base" or "prime" rate.
Payments of principal, Make-Whole Amount, if any, and interest shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts to the
registered holder hereof at the address shown in the register maintained by the
Company for such purpose, in the manner provided in the Note Purchase Agreement
(defined below).
This Note is one of an issue of Series B Notes of the Company issued in an
aggregate principal amount limited to Twenty-Seven Million Five Hundred Thousand
Dollars ($27,500,000) pursuant to the Company's separate Note Purchase
Agreements (collectively, the "Note Purchase Agreement"), each dated as of
December 28, 1995, with the purchasers listed on Schedule A thereto, and is
entitled to the benefits thereof. Capitalized terms used herein and not
otherwise defined herein have the meanings specified in the Note Purchase
Agreement. As provided in the Note Purchase Agreement, this Note is subject to
prepayment, in whole or in part, in certain cases without a Make-Whole Amount
and in other cases with a Make-Whole Amount. The Company agrees to make required
prepayments on account of such Notes in accordance with the provisions of the
Note Purchase Agreement.
<PAGE>
The Notes and all other obligations of the Company under the Note Purchase
Agreement have been unconditionally guarantied by the Restricted Subsidiaries
pursuant to the Guaranty, dated as of December 28, 1995, entered into by such
Restricted Subsidiaries.
This Note is a registered Note and is transferable, subject to the
restrictions set forth in the Note Purchase Agreement and in the legend above,
only by surrender thereof at the principal office of the Company as specified in
the Note Purchase Agreement, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of this Note or
his attorney duly authorized in writing.
Under certain circumstances, as specified in the Note Purchase Agreement,
the principal of this Note (together with any applicable Make-Whole Amount) may
be declared due and payable in the manner and with the effect provided in the
Note Purchase Agreement.
It is the intention of the parties hereto to comply with all applicable
usury laws; accordingly, it is agreed that notwithstanding any provision to the
contrary herein or in the Note Purchase Agreement, or in any of the documents
securing payment hereof or otherwise relating hereto, no such provision shall
require the payment or permit the collection of interest in excess of the
highest rate allowed by applicable law (the "Maximum Rate"). If any excess of
interest in such respect is provided for, or shall be adjudicated to be so
provided for, herein or in the Note Purchase Agreement or in any of the
documents securing payment hereof or otherwise relating hereto, then in such
event (a) the provisions of this paragraph shall govern and control, (b) neither
the Company, endorsers or Restricted Subsidiaries, nor their heirs, legal
representatives, successors or assigns nor any other party liable for the
payment hereof, shall be obligated to pay the amount of such interest to the
extent that it is in excess of the Maximum Rate, (c) any such excess which may
have been collected shall, at the election of the holder of this Note, be either
applied as a credit against the then unpaid principal amount hereof or refunded
to the Company, and (d) the provisions hereof and of the Note Purchase Agreement
and any documents securing payment hereof shall be automatically reformed so
that the effective rate of interest shall be reduced to the Maximum Rate. For
the purpose of determining the Maximum Rate, all interest payments with respect
hereto shall be amortized, prorated and spread throughout the full term hereof
so that the effective rate of interest hereunder is uniform throughout the term
hereof.
<PAGE>
THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW.
SEITEL, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT 1C
FORM OF SERIES C SENIOR NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY ONLY BE REOFFERED AND SOLD IN COMPLIANCE WITH THE REGISTRATION
PROVISIONS OF SUCH ACT OR PURSUANT TO AN EXEMPTION THEREFROM.
SEITEL, INC.
Series C Senior Note Due December 30, 2002
No. , 19
----- ------------ --
$ PPN: 816074 A# 5
--------
SEITEL, INC. (the "Company"), a Delaware corporation, for value received,
hereby promises to pay to or registered assigns the principal sum of
------
DOLLARS ($ ) on December 30, 2002 and to pay interest (computed on
- ------ ------
the basis of a 360-day year of twelve 30-day months) on the unpaid principal
balance thereof from the date of this Note at the rate
of percent ( %) per annum, semiannually on
-------------------------------- ----
the thirtieth (30th) day of June and December in each year, commencing on the
later of June 30, 1996 or the payment date next succeeding the date hereof,
until the principal amount hereof shall become due and payable; and to pay on
demand interest on any overdue principal (including any overdue prepayment of
principal) and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest, at a rate equal to the
lesser of (a) the highest rate allowed by applicable law or (b) the greater of
(i) percent ( %) per annum and (ii) two percent
-------------------------- ---
(2%) over the rate of interest publicly announced by Morgan Guaranty Trust
Company of New York in New York, New York as its "base" or "prime" rate.
Payments of principal, Make-Whole Amount, if any, and interest shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts to the
registered holder hereof at the address shown in the register maintained by the
Company for such purpose, in the manner provided in the Note Purchase Agreement
(defined below).
This Note is one of an issue of Series C Notes of the Company issued in an
aggregate principal amount limited to Twenty-Two Million Five Hundred Thousand
Dollars ($22,500,000) pursuant to the Company's separate Note Purchase
Agreements (collectively, the "Note Purchase Agreement"), each dated as of
December 28, 1995, with the purchasers listed on Schedule A thereto, and is
entitled to the benefits thereof. Capitalized terms used herein and not
otherwise defined herein have the meanings specified in the Note Purchase
<PAGE>
Agreement. As provided in the Note Purchase Agreement, this Note is subject to
prepayment, in whole or in part, in certain cases without a Make-Whole Amount
and in other cases with a Make-Whole Amount. The Company agrees to make required
prepayments on account of such Notes in accordance with the provisions of the
Note Purchase Agreement.
The Notes and all other obligations of the Company under the Note Purchase
Agreement have been unconditionally guarantied by the Restricted Subsidiaries
pursuant to the Guaranty, dated as of December 28, 1995, entered into by such
Restricted Subsidiaries.
This Note is a registered Note and is transferable, subject to the
restrictions set forth in the Note Purchase Agreement and in the legend above,
only by surrender thereof at the principal office of the Company as specified in
the Note Purchase Agreement, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of this Note or
his attorney duly authorized in writing.
Under certain circumstances, as specified in the Note Purchase Agreement,
the principal of this Note (together with any applicable Make-Whole Amount) may
be declared due and payable in the manner and with the effect provided in the
Note Purchase Agreement.
It is the intention of the parties hereto to comply with all applicable
usury laws; accordingly, it is agreed that notwithstanding any provision to the
contrary herein or in the Note Purchase Agreement, or in any of the documents
securing payment hereof or otherwise relating hereto, no such provision shall
require the payment or permit the collection of interest in excess of the
highest rate allowed by applicable law (the "Maximum Rate"). If any excess of
interest in such respect is provided for, or shall be adjudicated to be so
provided for, herein or in the Note Purchase Agreement or in any of the
documents securing payment hereof or otherwise relating hereto, then in such
event (a) the provisions of this paragraph shall govern and control, (b) neither
the Company, endorsers or Restricted Subsidiaries, nor their heirs, legal
representatives, successors or assigns nor any other party liable for the
payment hereof, shall be obligated to pay the amount of such interest to the
extent that it is in excess of the Maximum Rate, (c) any such excess which may
have been collected shall, at the election of the holder of this Note, be either
applied as a credit against the then unpaid principal amount hereof or refunded
to the Company, and (d) the provisions hereof and of the Note Purchase Agreement
and any documents securing payment hereof shall be automatically reformed so
that the effective rate of interest shall be reduced to the Maximum Rate. For
the purpose of determining the Maximum Rate, all interest payments with respect
hereto shall be amortized, prorated and spread throughout the full term hereof
so that the effective rate of interest hereunder is uniform throughout the term
hereof.
<PAGE>
THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW.
SEITEL, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT 4.4(a)
FORM OF OPINION OF SPECIAL COUNSEL FOR THE COMPANY
[Letterhead of Company Counsel]
[Closing Date]
To the Persons Listed on
Annex 1 hereto
Re: Seitel, Inc. (the "Company")
Our File No. 979275/086
Ladies and Gentlemen:
Reference is made to the separate Note Purchase Agreements, each dated as
of December 28, 1995 (collectively, the "Note Purchase Agreement"), between the
Company and each of the purchasers listed on Schedule A attached hereto (the
"Purchasers"), which provide, among other things, for the issuance and sale by
the Company of its
(a) 7.17% Series A Senior Notes due December 30, 2001, in the
aggregate principal amount of Twenty-Five Million Dollars ($25,000,000),
(b) 7.17% Series B Senior Notes due December 30, 2002, in the
aggregate principal amount of Twenty-Seven Million Five Hundred Thousand
Dollars ($27,500,000), and
(c) Series C Senior Notes due December 30, 2002, in the aggregate
principal amount of Twenty-Two Million Five Hundred Thousand Dollars
($22,500,000).
The capitalized terms used herein and not defined herein have the meanings
specified in the Note Purchase Agreement.
We have acted as special counsel to the Company in connection with the
transactions contemplated by Note Purchase Agreement. We advise you that we have
previously represented the Company and certain Restricted Subsidiaries only with
respect to specific matters referred to us. Consequently, there are matters of a
legal nature concerning the Company and the Restricted Subsidiaries of which we
have no knowledge. This opinion is delivered to you pursuant to Section 4.4(a)
of the Note Purchase Agreement. In acting as such counsel, we have examined:
(a) the Note Purchase Agreement;
<PAGE>
(b) the Company's 7.17% Series A Senior Notes due December 30, 2001,
dated the date hereof, in the form set forth in Exhibit 1A to the Note
Purchase Agreement, and in the principal amounts, and with the registration
numbers set forth on Schedule A to the Note Purchase Agreement (the "Series
A Notes");
(c) the Company's 7.17% Series B Senior Notes due December 30, 2002,
dated the date hereof, in the form set forth in Exhibit 1B to the Note
Purchase Agreement, and in the principal amounts, and with the registration
numbers set forth on Schedule A to the Note Purchase Agreement (the "Series
B Notes");
(d) the Subsidiary Guaranty executed and delivered by each Restricted
Subsidiary;
(e) the compliance certificates of the Company and the Restricted
Subsidiaries required by Section 4.3 of the Note Purchase Agreement (which
compliance certificates, together with the Note Purchase Agreement, the
Series A Notes, the Series B Notes, and the Subsidiary Guaranty, are
referred to herein collectively as the "Documents");
(f) the bylaws and minute books of the Company and each Restricted
Subsidiary incorporated under the laws of any jurisdiction within the
United States, and a certified copy of the certificate or articles of
incorporation of the Company and each such Restricted Subsidiary, as in
effect on the date hereof;
(g) a long-form good standing certificate from the state of
incorporation of the Company and each Restricted Subsidiary incorporated
under the laws of any jurisdiction within the United States, and foreign
good standing certificates for each of such corporations from each of the
states set forth on Annex 2 hereto;
(h) a letter to Hebb & Gitlin and Gardere Wynne Sewell & Riggs from
Bear, Stearns & Co., Inc., describing the manner of the offering of the
Notes (the "Offeree Letter");
(i) the opinion of Hebb & Gitlin, counsel to the Purchasers, dated the
date hereof;
(j) certificate of officer of the Company and the Restricted
Subsidiaries, a copy of which is attached hereto as Annex 3 (the "Officer's
Certificate"); and
(k) originals, or copies certified or otherwise identified to our
satisfaction, of such other documents, records, instruments and
certificates of public officials as we have deemed necessary or appropriate
to enable us to render this opinion.
In rendering our opinion, we have relied, to the extent we deem necessary
and proper, on:
<PAGE>
(a) warranties and representations as to factual matters contained in
the Note Purchase Agreement and the Subsidiary Guaranty;
(b) the Officer's Certificate;
(c) the Offeree Letter; and
(d) said opinion of Hebb & Gitlin with respect to all matters governed
by New York law.
We have no actual knowledge of any material inaccuracies in any of the
facts contained in the Note Purchase Agreement or the Subsidiary Guaranty. We
have made no independent investigations as to the accuracy or completeness of
any factual representation, warranty, data or other information, whether written
or oral, that may have been made by or on behalf of the parties to the
Documents. We have not made any examination of any accounting or financial
matters and express no opinion with respect thereto.
By accepting this opinion, you are agreeing that in rendering this opinion
we may assume (i) the genuineness of all signatures (except for the signatures
of the Company and the Restricted Subsidiaries), (ii) the authenticity of all
documents submitted to us as originals and the conformity to original documents
of all documents submitted to us as certified or photostatic copies, (iii) the
correctness of all statements set forth in certificates or written documents of
governmental officials and certificates or written documents of the Company or
the Restricted Subsidiaries or representatives of the Company or the Restricted
Subsidiaries as to corporate proceedings, incumbency of officers and other
corporate matters (which statements, to our knowledge, are correct), (iv) that
none of the parties upon whom we have relied for purposes of this opinion has
perpetuated a fraud upon any of the parties to the transactions evidenced by the
Documents or any of the attorneys representing any of such parties, (v) that all
of the terms and conditions of, or relating to, the purchase and sale of the
Notes are correctly and completely embodied in the Note Purchase Agreement and
the Schedules thereto, (vi) that the Purchasers will comply with all the terms
and provisions of the Documents including, without limitation, the usury savings
clause contained therein, (vii) that no attorney representing any Purchaser has
any opinion regarding the subject matter of this letter which is contrary to or
inconsistent with any of the opinions expressed herein, and (viii) that the
Purchasers have disbursed or advanced the entire amount due upon issuance of the
Series A Notes and the Series B Notes to the account specified by the Company to
the Purchasers.
Based on the foregoing, we are of the following opinions:
1. (a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own its property and
carry on its business as currently conducted.
<PAGE>
(b) Each Restricted Subsidiary incorporated under the laws of any
jurisdiction within the United States is a corporation duly
incorporated, validly existing and in good standing under the laws of
its state of incorporation and has all requisite corporate power and
authority to own its property and carry on its business as currently
conducted.
2. Each of the Company and the Restricted Subsidiaries that are
incorporated under the laws of any jurisdiction within the United
States has duly qualified and is in good standing as a foreign
corporation in each jurisdiction where it is shown to be so qualified
and in good standing in Annex 2 hereto, which jurisdictions, to our
knowledge, are the only jurisdictions in which the character or
location of the properties of each such entity (owned, leased or
licensed) or the nature or conduct of its business makes such
qualification necessary, except for where the failure to be so
qualified or in good standing will not in the aggregate have a
Material Adverse Effect on the Company and the Restricted Subsidiaries
taken as a whole.
3. To the best of our knowledge, in reliance on the Officer's Certificate
and after inquiry of the lawyers at this firm identified in the third
from last paragraph of this letter, there is no judgment, order,
action, suit, proceeding, inquiry, order or investigation, at law or
in equity, before any court or Governmental Authority, arbitration
board or tribunal, pending or threatened against the Company or any
one or more of the Restricted Subsidiaries, except for the actions,
suits, and proceedings listed on Annex 4 hereto.
4. (a) The Company has the requisite corporate power and authority to
execute and deliver the Note Purchase Agreement, the Series A Notes,
and the Series B Notes, and the Company's obligations under the Note
Purchase Agreement, the Series A Notes and the Series B Notes may be
performed in a manner which is within the Company's corporate power
and authority.
(b) Each Restricted Subsidiary incorporated under the laws of any
jurisdiction within the United States has the requisite corporate
power and authority to execute and deliver the Subsidiary Guaranty and
each such Restricted Subsidiary's obligations under the Subsidiary
Guaranty may be performed in a manner which is within such Restricted
Subsidiary's corporate power and authority.
5. (a) Each of the Note Purchase Agreement, the Series A Notes and the
Series B Notes has been duly authorized by all necessary corporate
action on the part of the Company (no action on the part of the
stockholders of the Company being required in respect thereof), has
been executed and delivered by duly authorized officers of the
Company, and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms.1
(b) The Subsidiary Guaranty has been duly authorized by all necessary
corporate action on the part of each of the Restricted Subsidiaries
incorporated under the laws of any jurisdiction within the United
<PAGE>
States (no action on the part of the stockholders of any such
Restricted Subsidiary being required in respect thereof), has been
executed and delivered by duly authorized officers of each Restricted
Subsidiary, and constitutes a legal, valid and binding obligation of
each Restricted Subsidiary, enforceable against each such Restricted
Subsidiary in accordance with its terms.
6. (a) The execution and delivery of the Note Purchase Agreement, the
Series A Notes and the Series B Notes, and the issue and sale of the
Series A Notes and the Series B Notes, by the Company will not and the
obligations of the Company thereunder may be performed in a manner
which will not conflict with, constitute a violation of, result in a
breach of any provision of, constitute a default under, or result in
the creation or imposition of any Lien or encumbrance upon any of the
property of the Company pursuant to, the certificate of incorporation
or by-laws of the Company, any applicable statute, rule or regulation
to which the Company is subject, or, to the best of our knowledge
based on the Officer's Certificate, any agreement or instrument known
to us to which the Company is a party or by which its properties may
be bound, except for (i) such conflicts, violations, breaches,
defaults or encumbrances under agreements and instruments as may have
been waived by the other party thereto, or (ii) such conflicts,
violations, breaches, defaults or encumbrances under agreements and
instruments which would not have, alone or in the aggregate, a
Material Adverse Effect on the Company and the Restricted Subsidiaries
taken as a whole.
(b) The execution and delivery of the Subsidiary Guaranty by each of
the Restricted Subsidiaries that are incorporated under the laws of
any jurisdiction within the United States will not, and the
obligations of each such Restricted Subsidiary thereunder may be
performed in a manner which will not, conflict with, constitute a
violation of, result in a breach of any provision of, constitute a
default under, or result in the creation or imposition of any Lien or
encumbrance upon any of the property of any such Restricted
Subsidiaries pursuant to the certificate or articles of incorporation
or by-laws of any such Restricted Subsidiary, any applicable statute,
rule or regulation to which any such Restricted Subsidiary is subject,
or, to the best of our knowledge based on the Officer's Certificate,
any agreement or instrument known to us to which any such Restricted
Subsidiary is a party or by which its respective properties may be
bound, except for (i) such conflicts, violations, breaches, defaults
or encumbrances under agreements and instruments as may have been
waived by the other party thereto, or (ii) such conflicts, violations,
breaches, defaults or encumbrances under agreements and instruments
which would not have, alone or in the aggregate, a Material Adverse
Effect on the Company and the Restricted Subsidiaries taken as a
whole.
7. All consents, approvals and authorizations of, and all designations,
declarations, filings, registrations, qualifications and recordations
with, Governmental Authorities required on the part of the Company and
the Restricted Subsidiaries incorporated under the laws of any
jurisdiction within the United States have been obtained in connection
with the execution and delivery of the Note Purchase Agreement and the
Subsidiary Guaranty and the issue and sale of the Series A Notes and
the Series B Notes, except for such informational filings as may be
required to be made after the issue and sale of the Series A Notes and
the Series B Notes.
<PAGE>
8. The offering, issuance and sale by the Company of the Series A Notes
and the Series B Notes are exempt from the registration requirements
under the Securities Act, and the Company is not required to qualify
an indenture with respect thereto under the Trust Indenture Act of
1939, as amended.2
9. Neither the issuance of the Series A Notes or the Series B Notes, nor
the intended use of the proceeds of such Notes (as set forth in
Section 5.14 of the Note Purchase Agreement), will violate Regulations
G, T or X of the Federal Reserve Board.3
10. Neither the Company nor any Restricted Subsidiary
(a) is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or
(b) is a "holding company" or an "affiliate" of a "holding company,"
or a "subsidiary company" of a "holding company," or a "public
utility" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
11. All of the outstanding shares of capital stock of each Restricted
Subsidiary incorporated under the laws of any jurisdiction within the
United States listed in Schedule 5.4 to the Note Purchase Agreement as
being owned by the Company and the Restricted Subsidiaries have been
validly issues and are fully paid and nonassessable. To the best of
our knowledge in reliance on the Officer's Certificate, such shares
are free and clear in each case of any perfected security interest or
any other Lien, except as set forth in Schedule 5.4 to the Note
Purchase Agreement.
The foregoing opinions are subject to and are qualified in all respect
by the following:
(i) The enforceability of the Documents may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium and similar laws
from time to time in effect and affecting creditors' rights or the
collection of debtors' obligations generally (including, without
limitation, laws generally defining and restricting fraudulent
conveyances), (b) principles of equity, (c) principles of public
policy and (d) requirements of commercial reasonableness and good
faith.
(ii) We express no opinion as to the availability or
enforceability of certain provisions or remedies set forth in the
Documents, including but not limited to those (a) that purport to
provide access to or restrict legal or equitable remedies such as
specific performance and the appointment of a receiver, (b) that
purport to establish evidentiary standards, (c) that relate to
<PAGE>
waivers, or to delays or omissions of enforcement of remedies or
severance, (d) that attempt to prohibit or restrict the transfer,
alienation, mortgaging, encumbering or hypothecation of any property
described in the Documents, (e) that relate to subrogation rights or
the waiver thereof and (f) that attempt to establish proper venue for
the filing and maintenance of any claim, suit or action with respect
to the Documents; provided, however, that such limitations on the
availability of remedies under the Documents or the legality,
validity, binding effect or enforceability of the Documents will not,
in our opinion, substantially interfere with the practical realization
of the benefits expressed in the Documents except for the economic
consequences of any procedural delay which may result from such laws.
(iii) We express no opinion as to the enforceability of
provisions in the Documents attempting to establish choice of laws.
(iv) We express no opinion as to whether the investment in the
Notes complies with any statutory, regulatory or other loan limits
applicable to any Purchaser or complies with any other statutes, laws,
rules or regulations which prescribe permissible and lawful
investments for the Purchasers (either as to type, amount, percentage
of total investments or other).
(v) With respect to the opinion expressed in 8 above, we have
specifically assumed (without limiting the generality of our
assumptions elsewhere herein) that (A) in reliance on the
representations and warranties of the Purchasers in the Note Purchase
Agreement, each Purchaser is an "accredited investor" within the
meaning of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act, (B) in reliance on the Company's
representations and warranties in the Note Purchase Agreement and on
Bear, Stearns & Co. Inc.'s representations in the Offeree Letter, the
Company and Bear, Stearns & Co. Inc. have complied, as applicable,
with the requirements of paragraphs (b)(2)(v) and (c) of Rule 502 of
Regulation D in connection with the issuance of the Notes, and (C) the
issuance by the Company of the Notes will not be integrated with the
offer or sale of any other securities.
We acknowledge that this opinion is being issued at the request of the
Company pursuant to Section 4.4(a) of the Note Purchase Agreement and we agree
that the parties listed on Annex 1 hereto may rely and are relying hereon in
connection with the consummation of the transactions contemplated by the Note
Purchase Agreement. Hebb & Gitlin, special counsel to the Purchasers, may rely
on this opinion for the sole purpose of rendering their opinion to be rendered
pursuant to Section 4.4(b) of the Note Purchase Agreement.
Our "knowledge" as to any matters in connection with this opinion is
limited to the actual knowledge of the lawyers in our firm who have participated
in the negotiation and preparation of the Documents and such other lawyers in
the firm who have represented the Company and the Restricted Subsidiaries that
the lawyer in charge of the matter reasonably believes should be consulted, and
does not include constructive or imputed knowledge.
<PAGE>
We are admitted to the Bar in the State of Texas. This opinion is limited
to United States federal law, laws of the State of Texas, and general corporate
law of the State of Delaware, all as now in effect, and we disclaim any
responsibility to inform you of any change thereto after the date hereof. No
opinion is expressed as to any matter that may be governed by the laws of any
other jurisdiction; provided, however, to the extent that the laws of any state
other than Texas govern the Documents, you may rely on our opinion to the extent
that the laws of such state or states are the same as the laws of the State of
Texas, as to which sameness we express no opinion.
Subsequent holders of the Notes may rely on this opinion as if it were
addressed to them.
Very truly yours,
<PAGE>
ANNEX 1
Addressees
Seitel, Inc.
50 Briar Hollow Lane, 7th Floor West
Houston, TX 77027
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
John Alden Life Insurance Company
P.O. Box 020270 - 3rd Floor
Miami, Florida 33102-0270
John Alden Life Insurance Company of New York
P.O. Box 020270 - 3rd Floor
Miami, Florida 33102-0270
The Mutual Life Insurance Company of New York
1740 Broadway
New York, NY 10019
MONY Life Insurance Company of America
1740 Broadway
New York, NY 10019
United of Omaha Life Insurance Company
Mutual of Omaha Plaza
Omaha, NE 68175
Pan-American Life Insurance Company
Pan American Life Center
601 Poydras Street
New Orleans, LA 70130
<PAGE>
ANNEX 2
Foreign Good Standing Certificates
Corporation State
- ----------- -----
Seitel, Inc. Alabama, Louisiana, Texas
Seitel Data Corp. Louisiana, Texas
Seitel Geophysical, Inc. Louisiana, Texas, Mississippi, Alabama
DDD Energy, Inc. Louisiana, Texas, Alabama
Seitel Gas & Energy Corp. Texas, Massachusetts, Connecticut, New Jersey,
Pennsylvania, New York
Seitel Offshore Corp. Texas
Datatel, Inc. Colorado, Louisiana, Texas
Exsol, Inc. Texas
<PAGE>
ANNEX 3
Officer's Certificate
[To be provided.]
<PAGE>
1 For the second closing, reference would be made to the Series C Notes
in this paragraph in lieu of the Series A Notes and the Series B
Notes.
2 For the second closing, reference would be made to the Series C Notes
in this paragraph in lieu of the Series A Notes and the Series B
Notes.
3 For the second closing, reference would be made to the Series C Notes
in this paragraph in lieu of the Series A Notes and the Series B
Notes.
<PAGE>
EXHIBIT 4.4(b)
FORM OF OPINION OF SPECIAL COUNSEL FOR THE PURCHASERS
[Letterhead of Hebb & Gitlin]
[Closing Date]
To the Persons Listed on
Annex 1 hereto
Re: Seitel, Inc. (the "Company")
Ladies and Gentlemen:
Reference is made to the separate Note Purchase Agreements, each dated as
of December 28, 1995 (collectively, the "Note Purchase Agreement"), between the
Company and each of the purchasers listed on Schedule A attached thereto (the
"Purchasers"), which provide, among other things, for the issuance and sale by
the Company of its
(a) 7.17% Series A Senior Notes due December 30, 2001, in the
aggregate principal amount of Twenty-Five Million Dollars ($25,000,000),
(b) 7.17% Series B Senior Notes due December 30, 2002, in the
aggregate principal amount of Twenty-Seven Million Five Hundred Thousand
Dollars ($27,500,000), and
(c) Series C Senior Notes due December 30, 2002, in the aggregate
principal amount of Twenty-Two Million Five Hundred Thousand Dollars
($22,500,000).
The capitalized terms used herein and not defined herein have the meanings
assigned to them by or pursuant to the terms of the Note Purchase Agreement.
We have acted as special counsel to the Purchasers in connection with the
transactions contemplated by the Note Purchase Agreement. This opinion is
delivered to you pursuant to Section 4.4(b) of the Note Purchase Agreement. In
acting as such counsel, we have examined:
(a) the Note Purchase Agreement;
(b) the Company's 7.17% Series A Senior Notes due December 30, 2001,
dated the date hereof, in the form set forth in Exhibit 1A to the Note
Purchase Agreement, and in the principal amounts and with the registration
numbers set forth on Schedule A to the Note Purchase Agreement (the "Series
A Notes");
<PAGE>
(c) the Company's 7.17% Series B Senior Notes due December 30, 2002,
dated the date hereof, in the form set forth in Exhibit 1B to the Note
Purchase Agreement, and in the principal amounts and with the registration
numbers set forth on Schedule A to the Note Purchase Agreement (the "Series
B Notes");4
(d) the Subsidiary Guaranty executed and delivered by each Restricted
Subsidiary;
(e) an Officer's Certificate of the Company, dated the date hereof;
(f) a certificate of the Secretary of the Company, dated the date
hereof;
(g) a certificate of the Secretary of each Restricted Subsidiary
incorporated under the laws of any state of the United States (each, a
"U.S. Restricted Subsidiary"), dated the date hereof;
(h) a letter to Hebb & Gitlin and Gardere Wynne Sewell & Riggs from
Bear, Stearns & Co., Inc. dated the date hereof, making certain
representations with respect the manner in which the Notes were offered
(the "Offeree Letter");
(i) the opinion of Gardere Wynne Sewell & Riggs, counsel to the
Company and the U.S. Restricted Subsidiaries, dated the date hereof; and
(j) originals, or copies certified or otherwise identified to our
satisfaction, of such other documents, records, instruments and
certificates of public officials as we have deemed necessary or appropriate
to enable us to render this opinion.
In rendering our opinion, we have assumed that all signatures are genuine,
that all documents submitted to us as originals are genuine, that all copies
submitted to us conform to the originals, that all natural Persons have legal
capacity, and as to documents executed by or on behalf of Persons other than the
Company and the Restricted Subsidiaries,
(i) that each such Person executing documents had the power to enter
into and perform its obligations under such documents, and
(ii) that such documents have been duly authorized, executed and
delivered by, and are binding upon and enforceable against, such Persons.
<PAGE>
In addition, we have assumed that each U.S. Restricted Subsidiary received
fair consideration and reasonably equivalent value in exchange for executing the
Subsidiary Guaranty.
In rendering our opinion, we have relied, to the extent we deem necessary
and proper, on:
(a) warranties and representations as to certain factual matters
contained in the Note Purchase Agreement;
(b) the Offeree Letter; and
(c) said opinion of Gardere Wynne Sewell & Riggs with respect to all
questions governed by Delaware law and with respect to all questions
concerning the due incorporation, valid existence and good standing of, and
the authorization, execution and delivery of instruments by, the Company
and each U.S. Restricted Subsidiary (except that we have made an
independent examination of a certified copy of the certificate or articles
of incorporation of the Company and each U.S. Restricted Subsidiary, and
certificates of officers of the Company and each U.S. Restricted Subsidiary
setting forth their respective by-laws and corporate resolutions
authorizing the participation by such entities in the transactions
contemplated by the Note Purchase Agreement and the Subsidiary Guaranty);
based on such investigation as we have deemed appropriate, said opinion is
satisfactory in form and scope to us and in our opinion the Purchasers and
we are justified in relying thereon. As to such opinion and the matters
therein upon which we are relying, we incorporate herein the assumptions
and qualifications to such opinion set forth therein.
Based on the foregoing, we are of the following opinions:
1. (a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
(b) Each U.S. Restricted Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of
its jurisdiction of incorporation.
2. (a) The Company has all requisite corporate power and authority to
execute and deliver the Note Purchase Agreement, the Series A Notes
and the Series B Notes, to issue and sell the Series A Notes and the
Series B Notes, and to perform its obligations set forth in each of
the Note Purchase Agreement, the Series A Notes and the Series B
Notes.5
<PAGE>
(b) Each U.S. Restricted Subsidiary has all requisite corporate power
and authority to execute and deliver the Subsidiary Guaranty and to
perform its obligations set forth in the Subsidiary Guaranty.6
3. (a) Each of the Note Purchase Agreement, the Series A Notes and the
Series B Notes has been duly authorized by all necessary corporate
action on the part of the Company, has been executed and delivered by
duly authorized officers of the Company, and constitutes a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.7
(b) The Subsidiary Guaranty has been duly authorized by all necessary
corporate action on the part of each of the U.S. Restricted
Subsidiaries, has been executed and delivered by duly authorized
officers of each U.S. Restricted Subsidiary, and constitutes a legal,
valid and binding obligation of each U.S. Restricted Subsidiary,
enforceable against such U.S. Restricted Subsidiary in accordance with
its terms.
4. (a) The execution and delivery of the Note Purchase Agreement, the
Series A Notes and the Series B Notes, and the issue and sale of the
Series A Notes and the Series B Notes, by the Company and the
performance by the Company of its obligations thereunder will not
conflict with, result in a breach of any provision of, constitute a
default under, or result in the creation or imposition of any Lien
upon any of its properties pursuant to, the certificate of
incorporation or bylaws of the Company.8
<PAGE>
(b) The execution and delivery of the Subsidiary Guaranty by each of
the U.S. Restricted Subsidiaries, and the performance by each such
U.S. Restricted Subsidiary of its obligations thereunder will not
conflict with, result in a breach of any provision of, constitute a
default under, or result in the creation or imposition of any Lien
upon any of the properties pursuant to, the certificate or articles of
incorporation or bylaws of such U.S. Restricted Subsidiary.9
5. No consents, approvals or authorizations of governmental authorities
are required on the part of the Company under the laws of the United
States of America or the State of New York in connection with the
execution and delivery of each of the Note Purchase Agreement, the
Series A Notes and the Series B Notes, and the offer, issue, sale and
delivery of the Series A Notes and the Series B Notes.10 Our opinion
in this paragraph 5 is based solely on a review of generally
applicable laws of the United States of America and New York, and not
on any search with respect to, or review of, any orders, decrees,
judgments or other determinations specifically applicable to the
Company.
6. Under existing law, the Series A Notes and the Series B Notes are not
subject to the registration requirements under the Securities Act of
1933, as amended or the "Blue Sky" laws of the State of New York, and
the Company is not required to qualify an indenture with respect
thereto under the Trust Indenture Act of 1939, as amended.11
All opinions herein contained with respect to the enforceability of
documents and instruments are qualified to the extent that:
<PAGE>
(a) the availability of equitable remedies, including without limitation,
specific enforcement and injunctive relief, is subject to the discretion of
the court before which any proceedings therefor may be brought; and
(b) the enforceability of certain terms provided in the Note Purchase
Agreement and the Notes may be limited by
(i) applicable bankruptcy, reorganization, arrangement, insolvency,
moratorium or similar laws affecting the enforcement of creditors'
rights generally as at the time in effect, and
(ii) common law or statutory requirements with respect to commercial
reasonableness.
We express no opinion as to the law of any jurisdiction other than the law
of New York, United States federal law and, in reliance on the opinion of
Gardere Wynne Sewell & Riggs, the law of Delaware and Texas. Gardere Wynne
Sewell & Riggs may rely on this opinion for the sole purpose of rendering their
opinion to be rendered pursuant to Section 4.4(a) of the Note Purchase
Agreement.
Subsequent holders of the Notes may rely on this opinion as if it were
addressed to them.
Very truly yours,
<PAGE>
ANNEX 1
Addressees
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
John Alden Life Insurance Company
P.O. Box 020270 - 3rd Floor
Miami, Florida 33102-0270
John Alden Life Insurance Company of New York
P.O. Box 020270 - 3rd Floor
Miami, Florida 33102-0270
The Mutual Life Insurance Company of New York
1740 Broadway
New York, NY 10019
MONY Life Insurance Company of America
1740 Broadway
New York, NY 10019
United of Omaha Life Insurance Company
Mutual of Omaha Plaza
Omaha, NE 68175
Pan-American Life Insurance Company
Pan American Life Center
601 Poydras Street
New Orleans, LA 70130
<PAGE>
4 Paragraphs (b) and (c) would be replaced by the following for the
second closing:
[the Company's % Series C Senior Notes due December 30, 2002,
----
dated the date hereof, in the form set forth in Exhibit 1C to
the Note Purchase Agreement, and in the principal amounts, and
with the registration numbers set forth on Schedule A to the Note
Purchase Agreement (the "Series C Notes")]
5 Paragraph 2(a) would read as follows for the second closing:
The Company had the requisite corporate power and authority to
execute and deliver the Note Purchase Agreement at the time of
its execution and delivery thereof. The Company has the requisite
corporate power and authority to execute, deliver, issue and sell
the Series C Notes, and to perform its obligations set forth in
each of the Note Purchase Agreement and the Series C Notes.
6 Paragraph 2(b) would read as follows for the second closing:
Each U.S. Restricted Subsidiary had the requisite corporate power
and authority to execute and deliver the Subsidiary Guaranty at
the time of its execution and delivery thereof. Each U.S.
Restricted Subsidiary has the requisite corporate power and
authority to perform its obligations set forth in the Subsidiary
Guaranty.
7 For the second closing, reference would be made to the Series C Notes
in this paragraph in lieu of the Series A Notes and the Series B
Notes.
8 Paragraph 4(a) would read as follows for the second closing:
The execution and delivery of the Note Purchase Agreement, the
Series A Notes and the Series B Notes by the Company did not, and
the execution, delivery, issue and sale of the Series C Notes by
the Company and the performance by the Company of its obligations
under the Note Purchase Agreement and the Notes will not,
conflict with, constitute a violation of, result in a breach of
any provision of, constitute a default under, or result in the
creation or imposition of any Lien or encumbrance upon any of the
property of the Company pursuant to, the certificate of
incorporation or by-laws of the Company.
9 Paragraph 4(b) would read as follows for the second closing:
The execution and delivery of the Subsidiary Guaranty by each
U.S. Restricted Subsidiary did not, and the performance by each
U.S. Restricted Subsidiary of its obligations thereunder will
not, conflict with, constitute a violation of, result in a breach
of any provision of, constitute a default under, or result in the
creation or imposition of any Lien or encumbrance upon any of the
property of such U.S. Restricted Subsidiary pursuant to, the
certificate of incorporation or by-laws of such U.S. Restricted
Subsidiary.
10 For the second closing, reference would be made to the Series C Notes
in this paragraph in lieu of the Series A Notes and the Series B
Notes.
11 For the second closing, reference would be made to the Series C Notes
in this paragraph in lieu of the Series A Notes and the Series B
Notes.
<PAGE>
EXHIBIT 4.10
FORM OF SUBSIDIARY GUARANTY
GUARANTY
THIS GUARANTY, dated as of December 28, 1995 (as amended or restated from
time to time, this "Guaranty"), by SEITEL DATA CORP., a Delaware corporation
(together with its successors and assigns, "SDC"), SEITEL GEOPHYSICAL, INC., a
Delaware corporation (together with its successors and assigns, "SG"), DDD
ENERGY, INC., a Delaware corporation (together with its successors and assigns,
"DDD"), SEITEL GAS & ENERGY CORP., a Delaware corporation (together with its
successors and assigns, "SG&E"), SEITEL POWER CORP., a Delaware corporation
(together with its successors and assigns, "SPC"), SEITEL NATURAL GAS, INC., a
Delaware corporation (together with its successors and assigns, "SNG"), MATRIX
GEOPHYSICAL, INC., a Delaware corporation (together with its successors and
assigns, "MG"), EXSOL, INC., a Delaware corporation (together with its
successors and assigns, "EXSOL"), DATATEL, INC., a Delaware corporation
(together with its successors and assigns, "DATATEL"), SEITEL OFFSHORE CORP., a
Delaware corporation (together with its successors and assigns, "SOC"), POLYMER
DYNAMICS, INC., a Delaware corporation (together with its successors and
assigns, "PD"), SEITEL INTERNATIONAL, INC., a Cayman Islands corporation
(together with its successors and assigns, "SI"), AFRICAN GEOPHYSICAL, INC., a
Cayman Islands corporation (together with its successors and assigns, "AG"),
GEO-BANK, INC., a Texas corporation (together with its successors and assigns,
"GB"), and ALTERNATIVE COMMUNICATION ENTERPRISES, INC., a Texas corporation
(together with its successors and assigns, "ACE" and ACE, SDC, SG, DDD, SG&E,
SPC, SNG, MG, Exsol, Datatel, SOC, PD, SI, AG and GB, and each other corporation
which becomes a party hereto, each a "Guarantor" and, collectively, the
"Guarantors"), in favor of each of the Noteholders (as such term is hereinafter
defined).
1. PRELIMINARY STATEMENT.
1.1 SEITEL, INC. (together with its successors and assigns, the "Company"),
a Delaware corporation, has authorized the issuance of (i) its Series A Senior
Notes due December 30, 2001 (as may be amended or restated from time to time,
the "Series A Notes"), in the aggregate principal amount of Twenty-Five Million
Dollars ($25,000,000), (ii) its Series B Senior Notes due December 30, 2002 (as
may be amended or restated from time to time, the "Series B Notes,"), in the
aggregate principal amount of Twenty-Seven Million Five Hundred Thousand Dollars
($27,500,000), and (iii) its Series C Senior Notes due December 30, 2002 (as may
be amended or restated from time to time, the "Series C Notes," and, together
with the Series A Notes and the Series B Notes, the "Notes"), in the aggregate
principal amount of Twenty-Two Million Five Hundred Thousand Dollars
($22,500,000), pursuant to those certain Note Purchase Agreements (collectively,
as may be amended or restated from time to time, the "Note Purchase Agreement"),
each dated as of December 28, 1995, entered into separately between the Company
and, respectively, each of the purchasers of the Notes named on Schedule A to
the Note Purchase Agreement (the "Purchasers").
<PAGE>
1.2 In order to induce the Purchasers to purchase the Notes, the Company
has agreed, pursuant to the Note Purchase Agreement, that the Restricted
Subsidiaries (including each of the Guarantors) will be required to jointly and
severally guaranty unconditionally all of the obligations of the Company under
and in respect of the Notes and the Note Purchase Agreement pursuant to the
terms and provisions hereof.
1.3 Each Guarantor will receive direct and indirect economic, financial and
other benefits from the indebtedness incurred under the Note Purchase Agreement
and the Notes by the Company, and under this Guaranty, and the incurrence of
such indebtedness is in the best interests of each Guarantor. The Company and
the Guarantors have explicitly induced the Purchasers to purchase the Notes
based upon and in reliance upon the consolidated financial condition of the
Company and its subsidiaries, including the Guarantors.
1.4 All acts and proceedings required by law and by the certificate or
articles of incorporation, as the case may be, and by-laws of each Guarantor
necessary to constitute this Guaranty a valid and binding agreement for the uses
and purposes set forth herein in accordance with its terms have been done and
taken, and the execution and delivery hereof has been in all respects duly
authorized.
2. GUARANTY AND OTHER RIGHTS AND UNDERTAKINGS
2.1 Guarantied Obligations.
Each Guarantor, in consideration of the execution and delivery of the Note
Purchase Agreement and the purchase of the Notes by the Purchasers, hereby
irrevocably, unconditionally, absolutely, jointly and severally guarantees, on a
continuing basis, to each Noteholder, as and for the Guarantor's own debt, until
final and indefeasible payment has been made:
(a) the due and punctual payment by the Company of the principal of,
and interest, and the Make-Whole Amount (if any) on, the Notes at any time
outstanding and the due and punctual payment of all other amounts payable,
and all other indebtedness owing, by the Company to the Noteholders under
the Note Purchase Agreement and the Notes, in each case when and as the
same shall become due and payable, whether at maturity, pursuant to
mandatory or optional prepayment, by acceleration or otherwise, all in
accordance with the terms and provisions hereof and thereof; it being the
intent of the Guarantors that the guaranty set forth herein shall be a
continuing guaranty of payment and not a guaranty of collection; and
(b) the punctual and faithful performance, keeping, observance, and
fulfillment by the Company of all duties, agreements, covenants and
obligations of the Company contained in the Note Purchase Agreement and the
Notes.
All of the obligations set forth in subsection (a) and subsection (b) of this
Section 2.1 are referred to herein as the "Guarantied Obligations" and the
guaranty thereof contained herein is a primary, original and immediate
obligation of each Guarantor and is an absolute, unconditional, continuing and
irrevocable guaranty of payment and performance and shall remain in full force
and effect until the full, final and indefeasible payment of the Guarantied
Obligations.
<PAGE>
2.2 Performance Under the Note Purchase Agreement.
In the event the Company fails to pay, perform, keep, observe, or fulfill
any Guarantied Obligation in the manner provided in the Notes or in the Note
Purchase Agreement, the Guarantors shall cause forthwith to be paid the moneys,
or to be performed, kept, observed, or fulfilled each of such obligations, in
respect of which such failure has occurred in accordance with the terms and
provisions of the Note Purchase Agreement and the Notes. In furtherance of the
foregoing, if an Event of Default shall exist, all of the Guarantied Obligations
shall, in the manner and subject to the limitations provided in the Note
Purchase Agreement for the acceleration of the Notes, forthwith become due and
payable without notice, regardless of whether the acceleration of the Notes
shall be stayed, enjoined, delayed or otherwise prevented.
2.3 Undertakings in Note Purchase Agreement.
The Guarantors will comply with each of the undertakings of the Company in
the Note Purchase Agreement in respect of which the Company undertakes to cause
the Guarantors (in their capacities, respectively, as a Guarantor and as a
Restricted Subsidiary) to comply with such undertakings, as if such undertakings
(as they apply to the Guarantors) were set forth at length herein as the
undertakings of the Guarantors.
2.4 Releases.
Each Guarantor consents and agrees that, without any notice whatsoever to
or by such Guarantor and without impairing, releasing, abating, deferring,
suspending, reducing, terminating or otherwise affecting the obligations of such
Guarantor hereunder, each Noteholder, by action or inaction, may:
(a) compromise or settle, renew or extend the period of duration or
the time for the payment, or discharge the performance of, or may refuse
to, or otherwise not, enforce, or may, by action or inaction, release all
or any one or more parties to, any one or more of the Notes, the Note
Purchase Agreement, any other guaranty or agreement or instrument related
thereto or hereto;
(b) assign, sell or transfer, or otherwise dispose of, any one or more
of the Notes;
(c) grant waivers, extensions, consents and other indulgences of any
kind whatsoever to the Company or any Other Guarantor in respect of any one
or more of the Notes, the Note Purchase Agreement, any other guaranty or
any agreement or instrument related thereto or hereto;
(d) amend, modify or supplement in any manner whatsoever and at any
time (or from time to time) any one or more of the Notes, the Note Purchase
Agreement, any other guaranty or any agreement or instrument related
hereto;
(e) release or substitute any one or more of the endorsers or
guarantors of the Guarantied Obligations whether parties hereto or not; and
<PAGE>
(f) sell, exchange, release, surrender or enforce, by action or
inaction, any property at any time pledged or granted as security in
respect of the Guarantied Obligations, whether so pledged or granted by the
Company, such Guarantor or any Other Guarantor, or pursuant to any other
guaranty or any agreement or instrument related hereto.
2.5 Waivers.
To the fullest extent permitted by law, each Guarantor does hereby
waive:
(a) any notice of
(i) acceptance of this Guaranty;
(ii) any purchase of the Notes under the Note Purchase
Agreement, or the creation, existence or acquisition of any of
the Guarantied Obligations, or the amount of the Guarantied
Obligations, subject to such Guarantor's right to make inquiry of
each Noteholder to ascertain the amount of the Guarantied
Obligations owing to such Noteholder at any reasonable time,
provided that such Guarantor will look solely to the Company for
the determination of the identities of the Noteholders;
(iii) any transfer of Notes from one Noteholder to another;
(iv) any adverse change in the financial condition of the
Company or any other fact that might increase, expand or affect
such Guarantor's risk hereunder;
(v) presentment for payment, demand, protest, and notice
thereof as to the Notes or any other instrument;
(vi) any Default or Event of Default; and
(vii) any kind or nature whatsoever to which such Guarantor
might otherwise be entitled other than those specifically
required to be given to such Guarantor pursuant to the terms of
this Guaranty);
(b) the right by statute or otherwise to require any Noteholder
to institute suit against the Company or any Other Guarantor or to
exhaust the rights and remedies of any Noteholder against the Company
or any Other Guarantor;
(c) the benefit of any stay (except in connection with a pending
appeal), valuation, appraisal, redemption or extension law now or at
any time hereafter in force which, but for this waiver, might be
applicable to any sale of property of the Guarantor made under any
judgment, order or decree based on this Guaranty, and the Guarantor
covenants that it will not at any time insist upon or plead, or in any
manner claim or take the benefit or advantage of such law;
<PAGE>
(d) any defense or objection to the absolute, primary, continuing
nature, or the validity or enforceability of, or the amount guaranteed
pursuant to, this Guaranty, including, without limitation, any defense
based on (and the primary, continuing nature, and the validity,
enforceability and amount, of this Guaranty shall be unaffected by),
any of the following:
(i) any change in future conditions;
(ii) any change of law;
(iii) any invalidity or irregularity with respect to the
issuance or assumption of any obligations (including, without
limitation, the Note Purchase Agreement, the Notes or any
agreement or instrument related hereto) by the Company or any
other Person;
(iv) the execution and delivery of any agreement at any time
hereafter (including, without limitation, the Note Purchase
Agreement, the Notes or any agreement or instrument related
hereto) by the Company or any other Person;
(v) the genuineness, validity, regularity or enforceability
of any of the Guarantied Obligations;
(vi) any default, failure or delay, willful or otherwise, in
the performance of any obligations by the Company or such
Guarantor;
(vii) any creditors' rights, bankruptcy, receivership or
other insolvency proceeding of the Company or such Guarantor, or
sequestration or seizure of any property of the Company or such
Guarantor, or any merger, consolidation, reorganization,
dissolution, liquidation or winding up or change in corporate
constitution or corporate identity or loss of corporate identity
of the Company or such Guarantor;
(viii) any disability or other defense of the Company or
such Guarantor to payment and performance of all Guarantied
Obligations other than the defense that the Guarantied
Obligations shall have been fully and finally performed and
indefeasibly paid;
(ix) the cessation from any cause whatsoever of the
liability of the Company or such Guarantor in respect of the
Guarantied Obligations;
(x) impossibility or illegality of performance on the part
of the Company or such Guarantor under the Note Purchase
Agreement, the Notes or this Guaranty;
<PAGE>
(xi) any change of the circumstances of the Company, such
Guarantor or any other Person, whether or not foreseen or
foreseeable, whether or not imputable to the Company or such
Guarantor, including, without limitation, impossibility of
performance through fire, explosion, accident, labor disturbance,
floods, droughts, embargoes, wars (whether or not declared),
civil commotions, acts of God or the public enemy, delays or
failure of suppliers or carriers, inability to obtain materials,
economic or political conditions, or any other causes affecting
performance, or any other force majeure, whether or not beyond
the control of the Company or such Guarantor and whether or not
of the kind hereinbefore specified;
(xii) any attachment, claim, demand, charge, Lien, order,
process, encumbrance or any other happening or event or reason,
similar or dissimilar to the foregoing, or any withholding or
diminution at the source, by reason of any taxes, assessments,
expenses, indebtedness, obligations or liabilities of any
character, foreseen or unforeseen, and whether or not valid,
incurred by or against any Person, or any claims, demands,
charges or Liens of any nature, foreseen or unforeseen, incurred
by any Person, or against any sums payable under the Note
Purchase Agreement or the Notes or any agreement or instrument
related hereto so that such sums would be rendered inadequate or
would be unavailable to make the payment as herein provided;
(xiii) any change in the ownership of the equity securities
of the Company, such Guarantor or any other Person liable in
respect of the Notes; or
(xiv) any other action, happening, event or reason
whatsoever that shall delay, interfere with, hinder or prevent,
or in any way adversely affect, the performance by the Company or
such Guarantor of any of its obligations under the Note Purchase
Agreement, the Notes or this Guaranty.
2.6 Waivers of Subrogation, Reimbursement and Indemnity.
No Guarantor shall have any right of subrogation, reimbursement or
indemnity whatsoever in respect of the Guarantied Obligations, or any right of
recourse to or with respect to any assets or property of the Company.
2.7 Invalid Payments.
To the extent the Company makes a payment or payments to any Noteholder,
which payment or payments or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required, for any of the
foregoing reasons or for any other reason, to be repaid or paid over to a
custodian, trustee, receiver or any other party or officer under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, state or federal law, or any common law or
equitable cause, then to the extent of such payment or repayment, the obligation
or part thereof intended to be satisfied shall be revived and continued in full
force and effect as if said payment had not been made and each Guarantor shall
be primarily liable for such obligation.
<PAGE>
2.8 Marshaling.
Neither any Noteholder nor any Person acting for the benefit of any
Noteholder shall be under any obligation to marshal any assets in favor of any
Guarantor or against or in payment of any or all of the Guarantied Obligations.
2.9 Setoff, Counterclaim or Other Deductions.
Except as otherwise required by law, each payment by any Guarantor shall be
made without setoff, counterclaim or other deduction.
2.10 Election by Guarantors to Perform Obligations.
Any election by the Guarantor to pay or otherwise perform any of the
obligations of the Company under the Notes, the Note Purchase Agreement or any
agreement or instrument related hereto shall not release the Company, the
Guarantor or any Other Guarantor from such obligations or any of such Person's
other obligations under the Notes, the Note Purchase Agreement or any agreement
or instrument related hereto.
2.11 No Election of Remedies by Noteholders.
To the extent provided in the Note Purchase Agreement, each Noteholder
shall, individually or collectively, have the right to seek recourse against
each Guarantor to the fullest extent provided for herein for such Guarantor's
obligations under this Guaranty in respect of the Guarantied Obligations. No
election to proceed in one form of action or proceeding, or against any party,
or on any obligation, shall constitute a waiver of such Noteholder's right to
proceed in any other form of action or proceeding or against other parties
(including, without limitation, any Other Guarantor) unless such Noteholder has
expressly waived such right in writing. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by any Noteholder against
the Company or any Guarantor under any document or instrument evidencing
obligations of the Company or such Guarantor to such Noteholder shall serve to
diminish the liability of such Guarantor under this Guaranty, except to the
extent that such Noteholder finally and unconditionally shall have realized
payment by such action or proceeding in respect of the Guarantied Obligations.
2.12 Separate Action; Other Enforcement Rights.
Each of the rights and remedies granted under this Guaranty to each
Noteholder in respect of the Notes held by such Noteholder may be exercised by
such Noteholder without notice by such Noteholder to, or the consent of or any
other action by, any other Noteholder. Each Noteholder may proceed to protect
and enforce this Guaranty by suit or suits or proceedings in equity, at law or
in bankruptcy, and whether for the specific performance of any covenant or
agreement contained herein or in execution or aid of any power herein granted or
for the recovery of judgment for the obligations hereby guarantied or for the
enforcement of any other proper, legal or equitable remedy available under
applicable law.
2.13 Noteholder Setoff.
Each Noteholder shall have, to the fullest extent permitted by law and this
Guaranty, a right of set-off against any and all credits and any and all other
property of each or all of the Guarantors, now or at any time whatsoever, with
or in the possession of, such Noteholder, or anyone acting for such Noteholder,
to ensure the full performance of any and all obligations of the Guarantors
hereunder.
<PAGE>
2.14 Delay or Omission; No Waiver.
No course of dealing on the part of any Noteholder and no delay or failure
on the part of any such Person to exercise any right hereunder shall impair such
right or operate as a waiver of such right or otherwise prejudice such Person's
rights, powers and remedies hereunder. Every right and remedy given by this
Guaranty or by law to any Noteholder may be exercised from time to time as often
as may be deemed expedient by such Person.
2.15 Restoration of Rights and Remedies.
If any Noteholder shall have instituted any proceeding to enforce any right
or remedy under this Guaranty or under any Note held by such Noteholder, and
such proceeding shall have been dismissed, discontinued or abandoned for any
reason, or shall have been determined adversely to such Noteholder, then and in
every such case each such Noteholder, the Company and each Guarantor shall,
except as may be limited or affected by any determination (including, without
limitation, any determination in connection with any such dismissal) in such
proceeding, be restored severally and respectively to its respective former
positions hereunder and thereunder, and thereafter, subject as aforesaid, the
rights and remedies of such Noteholders shall continue as though no such
proceeding had been instituted.
2.16 Cumulative Remedies.
No remedy under this Guaranty, the Note Purchase Agreement or the Notes is
intended to be exclusive of any other remedy, but each and every remedy shall be
cumulative and in addition to any and every other remedy given pursuant to this
Guaranty, the Note Purchase Agreement or the Notes.
2.17 Limitation on Guarantied Obligations.
It is the intention of each Guarantor and each Noteholder that the maximum
amount of the obligations of any Guarantor hereunder shall be equal to, but not
in excess of, the amount equal to the lesser of
(a) the Guarantied Obligations, and
(b) the maximum amount permitted by applicable law.
To that end, with respect to the determination of the "maximum amount permitted
by applicable law," but only to the extent such obligations would otherwise be
avoidable, the obligations of each Guarantor hereunder shall be limited to the
maximum amount that, after giving effect to the incurrence thereof, would not
render such Guarantor insolvent or unable to pay its debts (within the meaning
of Title 11 of the United States Code or as defined in the analogous applicable
law) as they mature or leave such Guarantor with an unreasonably small capital.
The need for any such limitation shall be determined, and any such needed
limitation shall be effective, at the time or times that such Guarantor is
deemed, under applicable law, to incur obligations hereunder. Any such
limitation shall be apportioned among the Guarantied Obligations owed to the
Noteholders pro rata. This Section 2.17 is intended solely to preserve the
rights of each Noteholder hereunder to the maximum extent permitted by
applicable law, and neither the Guarantors nor any other Person shall have any
rights under this Section 2.17 that it would not otherwise have under applicable
law. For the purposes of this Section 2.17, "insolvency", "unreasonably small
capital" and "inability to pay debts (as so defined) as they mature" shall be
determined in accordance with applicable law.
<PAGE>
2.18 Maintenance of Offices.
The Guarantors will maintain an office at the address set forth in Section
5.3 where notices, presentations and demands in respect of this Guaranty may be
made upon them. Such office will be maintained at such address until such time
as any Guarantor shall notify the Noteholders of any change of location of such
office.
2.19 Further Assurances.
Each Guarantor will cooperate with the Noteholders and execute such further
instruments and documents as the Required Holders shall reasonably request to
carry out, to the reasonable satisfaction of the Required Holders, the
transactions contemplated by the Note Purchase Agreements, the Notes, this
Guaranty and the documents and instruments related thereto.
2.20 Pari Passu.
Each Guarantor covenants that its obligations under this Guaranty do and
will rank at least pari passu with all its other present and future unsecured
Senior Debt.
3. INTERPRETATION OF THIS GUARANTY
3.1 Terms Defined.
As used in this Guaranty, the capitalized terms have the meaning specified
in the Note Purchase Agreement unless otherwise specified below or set forth in
the section of this Guaranty referred to immediately following such term (such
definitions, unless otherwise expressly provided, to be equally applicable to
both the singular and plural forms of the terms defined):
AC&E -- has the meaning assigned to such term in the first paragraph
hereof.
AG -- has the meaning assigned to such term in the first paragraph hereof.
Company -- Section 1.1.
Datatel -- has the meaning assigned to such term in the first paragraph
hereof.
DDD -- has the meaning assigned to such term in the first paragraph hereof.
Debt -- has the meaning assigned to such term in the Note Purchase
Agreement.
Exsol -- has the meaning assigned to such term in the first paragraph
hereof.
<PAGE>
GB -- has the meaning assigned to such term in the first paragraph hereof.
Guarantied Obligations -- Section 2.1.
Guarantor -- has the meaning assigned to such term in the first paragraph
hereof.
Guaranty, this -- has the meaning assigned to such term in the first
paragraph hereof.
MG -- has the meaning assigned to such term in the first paragraph hereof.
Note Purchase Agreement -- Section 1.1.
Noteholder -- means, at any time, each Person that is the holder of any
Note at such time.
Notes -- Section 1.1.
Other Guarantors -- means, at any time with respect to any Guarantor, each
other Guarantor and all other guarantors of the Company's obligations under the
Note Purchase Agreement and the Notes at such time.
PD -- has the meaning assigned to such term in the first paragraph hereof.
Purchasers -- Section 1.1.
SDC -- has the meaning assigned to such term in the first paragraph hereof.
Senior Debt -- means, with respect to any Guarantor, any Debt of such
Guarantor that is not in any manner subordinated in right of payment or security
in any respect to the Debt evidenced by this Guaranty or to any other Debt of
such Guarantor.
Series A Notes -- Section 1.1.
Series B Notes -- Section 1.1.
Series C Notes -- Section 1.1.
SG -- has the meaning assigned to such term in the first paragraph hereof.
SG&E -- has the meaning assigned to such term in the first paragraph
hereof.
SI -- has the meaning assigned to such term in the first paragraph hereof.
SNG -- has the meaning assigned to such term in the first paragraph hereof.
SOC -- has the meaning assigned to such term in the first paragraph hereof.
SPC -- has the meaning assigned to such term in the first paragraph hereof.
<PAGE>
3.2 Section Headings and Construction.
(a) Section Headings, etc. The titles of the Sections appear as a
matter of convenience only, do not constitute a part hereof and shall not
affect the construction hereof. The words "herein," "hereof," "hereunder"
and "hereto" refer to this Guaranty as a whole and not to any particular
Section or other subdivision.
(b) Construction. Each covenant contained herein shall be construed
(absent an express contrary provision herein) as being independent of each
other covenant contained herein, and compliance with any one covenant shall
not (absent such an express contrary provision) be deemed to excuse
compliance with one or more other covenants.
4. WARRANTIES AND REPRESENTATIONS
Each Guarantor represents and warrants to each Purchaser, as of the date of
effectiveness hereof, as follows:
4.1 Generally.
(a) Such Guarantor is fully aware of the financial condition of the
Company. Such Guarantor delivers this Guaranty based solely upon its own
independent investigation and in no part upon any representation or
statement of any one or more Noteholders with respect thereto. Such
Guarantor is in a position to obtain, and hereby assumes full
responsibility for obtaining, any additional information concerning the
financial condition of the Company as such Guarantor may deem material to
its obligations hereunder, and such Guarantor is not relying upon, nor
expecting, any Noteholder to furnish it any information concerning the
financial condition of the Company.
(b) As of the date of the execution and delivery of this Guaranty, the
fair salable value of the assets of such Guarantor, taken as a whole,
exceeds its liabilities, taken as a whole; such Guarantor is able to pay
and discharge all of its debts (including, without limitation, its current
liabilities) as they become due and after giving effect to the transactions
contemplated by this Guaranty, such Guarantor will not become unable to pay
and discharge such debts as they become due; there are no presently pending
material court or administrative proceedings or undischarged judgments
against such Guarantor; and no tax liens have been filed or threatened
against such Guarantor, nor is such Guarantor in default or claimed default
under any agreement for borrowed money.
(c) Such Guarantor is a corporation duly organized and validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Such Guarantor has the corporate power to own its properties
and carry on its business as it is now being conducted. Such Guarantor has
the valid authority and the corporate power to enter into and perform, and
has taken all necessary action to authorize its entry into, and the
performance and delivery of, this Guaranty and the transactions
contemplated hereby.
<PAGE>
(d) This Guaranty has been duly authorized by all necessary action on
the part of such Guarantor, has been duly executed and delivered by duly
authorized officers of such Guarantor, and constitutes a legal, valid and
binding obligation of such Guarantor.
(e) The entry into and performance of this Guaranty and the
transactions contemplated hereby do not and will not conflict with any
applicable law or regulation or official or judicial order, conflict with
the articles or certificate of incorporation, as the case may be, or
by-laws, of such Guarantor, conflict with any agreement or document to
which such Guarantor is a party or that is binding upon it or any of its
properties, or result in the creation or imposition of any Lien on any of
its properties pursuant to the provisions of any agreement or document.
4.2 Nature of Business of Company and Restricted Subsidiaries.
The Company and the Restricted Subsidiaries have sought and obtained
the Note Purchase Agreement, the sale of the Notes and the related
transactions based upon their consolidated financial position and the
Company and the Restricted Subsidiaries understand that the Purchasers are
relying upon the consolidated financial condition of the Company and the
Restricted Subsidiaries in purchasing the Notes. Nothing herein shall be
deemed to prohibit any transfer by the Company or any Restricted Subsidiary
of any of its or a Subsidiary's stock otherwise permitted under the terms
and provisions of the Note Purchase Agreement.
4.3 Solvency.
The fair value of the business and assets of each of the Company and
the Guarantors exceeds the amount that will be required to pay its
liabilities (including, without limitation, contingent, subordinated,
unmatured and unliquidated liabilities on existing debts, as such
liabilities may become absolute and matured), in each case after giving
effect to the transactions contemplated by the Note Purchase Agreement, the
Notes and this Guaranty, including, without limitation, the provisions of
Section 2.17. None of the Guarantors nor the Company, after giving effect
to the transactions contemplated by the Note Purchase Agreement, the Notes
and this Guaranty, will be insolvent or will be engaged in any business or
transaction, or about to engage in any business or transaction, for which
such Person has unreasonably small assets or capital (within the meaning of
the Uniform Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act
and Section 548 of Title 11 of the United States Code), and none of the
Guarantors nor the Company has any intent to hinder, delay or defraud any
entity to which it is, or will become, on or after the date of the Closing,
indebted or incur debts that would be beyond its ability to pay as they
mature.
5. MISCELLANEOUS
5.1 Successors and Assigns.
(a) Whenever any Guarantor or any of the parties to the Note Purchase
Agreement is referred to, such reference shall be deemed to include the
successors and assigns of such party, and all the covenants, promises and
<PAGE>
agreements contained in this Guaranty by or on behalf of such Guarantor
shall bind the successors and assigns of such Guarantor and shall inure to
the benefit of each of the Noteholders from time to time whether so
expressed or not and whether or not an assignment of the rights hereunder
shall have been delivered in connection with any assignment or other
transfer of Notes.
(b) Each Guarantor agrees to take such action as may be reasonably
requested by any Noteholder to confirm such Guarantor's Guaranty of the
Guarantied Obligations in connection with the transfer of the Notes of such
Noteholder.
5.2 Partial Invalidity.
The unenforceability or invalidity of any provision or provisions
hereof shall not render any other provision or provisions contained herein
unenforceable or invalid.
5.3 Communications.
(a) Method; Address. All communications hereunder shall be in writing,
shall be delivered in the manner required by the Note Purchase Agreement,
and shall be addressed, if to the Guarantors, at the address set forth on
Annex 1 hereto, and if to any of the Noteholders:
(A) if such Noteholder is a Purchaser, at the address set forth
on Schedule A to the Note Purchase Agreement for such Noteholder, and
further including any parties referred to on such Schedule A which are
required to receive notices in addition to such Noteholder, and
(B) if such Noteholder is not a Purchaser, at the address set
forth in the register for the registration and transfer of Notes
maintained pursuant to Section 13.1 of the Note Purchase Agreement for
such Noteholder,
or to any such party at such other address as such party may designate
by notice duly given in accordance with this Section 5.3.
(b) When Given. Any communication addressed and delivered as herein
provided shall be deemed to be received when actually delivered to the
address of the addressee (whether or not delivery is accepted) or received
by the telecopy machine of the recipient. Any communication not so
addressed and delivered shall be ineffective.
5.4 Governing Law.
THIS GUARANTY SHALL BE CONSTRUED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW
YORK.
5.5 Effective Date.
This Guaranty shall be effective as of the date hereof.
<PAGE>
5.6 Benefits of Guaranty Restricted to Noteholders.
Nothing express or implied in this Guaranty is intended or shall be
construed to give to any Person other than the Guarantors and the
Noteholders any legal or equitable right, remedy or claim under or in
respect hereof or any covenant, condition or provision therein or herein
contained, and all such covenants, conditions and provisions are and shall
be held to be for the sole and exclusive benefit of the Guarantors and the
Noteholders.
5.7 Survival of Representations and Warranties; Entire Agreement.
All representations and warranties contained herein or made in writing
by the Guarantors in connection herewith shall survive the execution and
delivery hereof.
5.8 Expenses.
(a) The Guarantors shall pay when billed the reasonable costs and
expenses (including reasonable attorneys' fees) incurred by the Noteholders
in connection with the consideration, negotiation, preparation or execution
of any amendments, waivers, consents, standstill agreements and other
similar agreements with respect hereto (whether or not any such amendments,
waivers, consents, standstill agreements or other similar agreements are
executed).
(b) At any time when any one or more of the Company or the Guarantors
and the Noteholders are conducting restructuring or workout negotiations in
respect hereof, or a Default or Event of Default exists, the Guarantors
shall pay when billed the reasonable costs and expenses (including
reasonable attorneys' fees and the reasonable fees of professional
advisors) incurred by the Noteholders in connection with the assessment,
analysis or enforcement of any rights or remedies that are or may be
available to the Noteholders.
(c) If the Guarantors shall fail to pay when due any principal of, or
Make-Whole Amount or interest on, any Note, the Guarantors shall pay to
each Noteholder, to the extent permitted by law, such amounts as shall be
sufficient to cover the costs and expenses, including but not limited to
reasonable attorneys' fees, incurred by such Noteholder in collecting any
sums due on such Notes.
5.9 Amendment.
This Guaranty may be amended only in a writing executed by the
Guarantors and the Required Holders.
5.10 Consent to Jurisdiction; Appointment of Agent.
(a) Consent to Jurisdiction. EACH GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS GUARANTY, OR ANY ACTION OR PROCEEDING TO EXECUTE OR
OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER, BROUGHT
BY ANY NOTEHOLDER AGAINST SUCH GUARANTOR OR ANY OF ITS PROPERTY, MAY BE
BROUGHT BY SUCH NOTEHOLDER IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW
YORK CITY, NEW YORK OR ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY,
NEW YORK, AS SUCH NOTEHOLDER MAY IN ITS SOLE DISCRETION ELECT, AND BY THE
<PAGE>
EXECUTION AND DELIVERY OF THIS GUARANTY, SUCH GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF
EACH SUCH COURT, AND SUCH GUARANTOR IRREVOCABLY WAIVES AND AGREES NOT TO
ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE IN PERSONAM
JURISDICTION OF ANY SUCH COURT. IN ADDITION, SUCH GUARANTOR HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY BROUGHT IN
ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE
ABILITY OR RIGHT OF ANY NOTEHOLDER TO OBTAIN JURISDICTION OVER SUCH
GUARANTOR IN SUCH OTHER JURISDICTION AS MAY BE PERMITTED BY APPLICABLE LAW.
(b) Agent for Service of Process. EACH GUARANTOR HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT PROCESS SERVED EITHER PERSONALLY OR BY
REGISTERED MAIL SHALL CONSTITUTE, TO THE EXTENT PERMITTED BY LAW, ADEQUATE
SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS GUARANTY, OR ANY ACTION OR PROCEEDING TO EXECUTE OR
OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER, BROUGHT
BY ANY NOTEHOLDER AGAINST SUCH GUARANTOR OR ANY OF ITS PROPERTY. RECEIPT OF
PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A DELIVERY
RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY COMMERCIAL
DELIVERY SERVICE. WITHOUT LIMITING THE FOREGOING, SUCH GUARANTOR HEREBY
APPOINTS, IN THE CASE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN THE
COURTS OF OR IN THE STATE OF NEW YORK:
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
TO RECEIVE, FOR IT AND ON ITS BEHALF, SERVICE OF PROCESS. EACH GUARANTOR
SHALL AT ALL TIMES MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN NEW YORK
CITY, NEW YORK AND MAY FROM TIME TO TIME APPOINT SUCCEEDING AGENTS FOR
SERVICE OF PROCESS BY NOTIFYING EACH NOTEHOLDER OF SUCH APPOINTMENT, WHICH
AGENTS SHALL BE ATTORNEYS, OFFICERS OR DIRECTORS OF SUCH GUARANTOR, OR
CORPORATIONS WHICH IN THE ORDINARY COURSE OF BUSINESS ACT AS AGENTS FOR
SERVICE OF PROCESS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE
ABILITY OR RIGHT OF ANY NOTEHOLDER TO SERVE ANY WRITS, PROCESS OR SUMMONSES
IN ANY MANNER PERMITTED BY APPLICABLE LAW.
<PAGE>
5.11 Survival.
So long as the Guarantied Obligations and all payment obligations of
the Guarantors hereunder shall not have been fully and finally performed
and indefeasibly paid, the obligations of the Guarantors hereunder shall
survive the transfer and payment of any Note and the payment in full of all
the Notes.
5.12 Entire Agreement.
This Guaranty Agreement constitutes the final written expression of
all of the terms hereof and is a complete and exclusive statement of those
terms.
5.13 Duplicate Originals, Execution in Counterpart.
Two or more duplicate originals hereof may be signed by the parties,
each of which shall be an original but all of which together shall
constitute one and the same instrument. This Guaranty may be executed in
one or more counterparts and shall be effective as to each party hereto
when at least one counterpart shall have been executed by such party, and
each set of counterparts that, collectively, show execution by each party
hereto shall constitute one duplicate original.
5.14 Additional Guarantors.
In addition to SDC, SG, DDD, SG&E, SPC, SNG, MG, Exsol, Datatel, SOC,
PD, SI, GB and AC&E, other Restricted Subsidiaries may become Guarantors
hereunder in accordance with the terms of the Note Purchase Agreement, by
execution of the form of Joinder Agreement attached hereto as Annex 2.
5.15 Release of Guarantors.
Without any action required of any Noteholder but subject to Section
2.7, any Guarantor shall be released from its obligations under this
Guaranty upon
(a) the designation of such Guarantor as an Unrestricted
Subsidiary by the Company pursuant to the provisions of the Note
Purchase Agreement, or
(b) the disposition of such Guarantor pursuant to the Section
10.5 or Section 10.6 of the Note Purchase Agreement,
provided that immediately after giving effect to such designation or
disposition, as the case may be, no Default or Event of Default under the
Note Purchase Agreement would exist. The Noteholders shall, at the expense
of the Company or said Guarantor, execute and deliver such documents as may
be reasonably necessary to evidence such release.
[Next page is signature page.]
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed on its behalf by one of its duly authorized officers.
SEITEL DATA CORP.
By
Name:
Title:
SEITEL GEOPHYSICAL, INC.
By
Name:
Title:
DDD ENERGY, INC.
By
Name:
Title:
SEITEL GAS & ENERGY CORP.
By
Name:
Title:
<PAGE>
SEITEL POWER CORP.
By
Name:
Title:
SEITEL NATURAL GAS, INC.
By
Name:
Title:
MATRIX GEOPHYSICAL, INC.
By
Name:
Title:
EXSOL, INC.
By
Name:
Title:
<PAGE>
DATATEL, INC.
By
Name:
Title:
SEITEL OFFSHORE CORP.
By
Name:
Title:
POLYMER DYNAMICS, INC.
By
Name:
Title:
SEITEL INTERNATIONAL, INC.
By
Name:
Title:
<PAGE>
AFRICAN GEOPHYSICAL, INC.
By
Name:
Title:
GEO-BANK, INC.
By
Name:
Title:
ALTERNATIVE COMMUNICATION
ENTERPRISES, INC.
By
Name:
Title:
<PAGE>
Annex 1
Address of Guarantors
The Address of each Guarantor is:
50 Briar Hollow Lane
West Building, 7th Floor
Houston, Texas 77027
<PAGE>
Annex 2
[FORM OF JOINDER AGREEMENT]
[DATE]
To each of the Noteholders (as defined in the Guaranty
Agreement hereinafter referred to)
Ladies and Gentlemen:
Reference is made to the Guaranty dated as of December 28, 1995 (as amended
or restated from time to time, the "Guaranty"), among SEITEL DATA CORP., a
Delaware corporation (together with its successors and assigns, "SDC"), SEITEL
GEOPHYSICAL, INC., a Delaware corporation (together with its successors and
assigns, "SG"), DDD ENERGY, INC., a Delaware corporation (together with its
successors and assigns, "DDD"), and SEITEL GAS & ENERGY CORP., a Delaware
corporation (together with its successors and assigns, "SG&E"), SEITEL POWER
CORP., a Delaware corporation (together with its successors and assigns, "SPC"),
SEITEL NATURAL GAS, INC., a Delaware corporation (together with its successors
and assigns, "SNG"), MATRIX GEOPHYSICAL, INC., a Delaware corporation (together
with its successors and assigns, "MG"), EXSOL, INC., a Delaware corporation
(together with its successors and assigns, "EXSOL"), DATATEL, INC., a Delaware
corporation (together with its successors and assigns, "DATATEL"), SEITEL
OFFSHORE CORP., a Delaware corporation (together with its successors and
assigns, "SOC"), POLYMER DYNAMICS, INC., a Delaware corporation (together with
its successors and assigns, "PD"), SEITEL INTERNATIONAL, INC., a Cayman Islands
corporation (together with its successors and assigns, "SI"), AFRICAN
GEOPHYSICAL, INC., a Cayman Islands corporation (together with its successors
and assigns, "AG"), GEO-BANK, INC., a Texas corporation (together with its
successors and assigns, "GB"), and ALTERNATIVE COMMUNICATION ENTERPRISES, INC.,
a Texas corporation (together with its successors and assigns, "ACE" and ACE,
SDC, SG, DDD, SG&E, SPC, SNG, MG, Exsol, Datatel, SOC, PD, SI, AG and GB, and
each other corporation which becomes a party hereto, each a "Guarantor" and,
collectively, the "Guarantors"), in favor of each of the Noteholders (as defined
in the Guaranty). Capitalized terms used herein and not otherwise defined have
the meanings ascribed to such terms in the Guaranty.
[NEW GUARANTOR], a [jurisdiction of incorporation] corporation (the
"Company"), agrees with you as follows:
1. Guaranty. The Company hereby unconditionally and expressly agrees to
become a party to the Guaranty and to perform and observe each and every one of
the covenants, agreements, terms, conditions, obligations, duties and
liabilities of a Guarantor thereunder, and that all references to the Guarantors
in the Guaranty or any document, instrument or agreement executed and delivered
or furnished, or to be executed and delivered or furnished, in connection
therewith shall be deemed to be references which include the Company, as a
Guarantor.
<PAGE>
2. Warranties and Representations. The Company hereby warrants and
represents that each of the warranties and representations set forth in Sections
4.1 through 4.3, inclusive, of the Guaranty, are true and correct with respect
to the Company as of the date hereof and such warranties and representations are
incorporated by reference herein in their entirety. Such representations and
warranties shall survive the execution and delivery hereof.
3. Further Assurances. The Company agrees to cooperate with the Noteholders
and execute such further instruments and documents as the Required Holders shall
reasonably request to effect, to the reasonable satisfaction of the Required
Holders, the purposes of this Agreement.
4. Amendment. This Agreement may be amended only in a writing executed by
the Company and the Required Holders.
5. Binding Effect. This Agreement shall be binding upon the Company and
shall inure to the benefit of the Noteholders and their respective successors
and assigns.
6. Governing Law; Submission to Jurisdiction; Agent for Service of Process.
This Agreement shall be construed, interpreted and enforced in accordance with,
and governed by, the internal laws of the State of New York. The provisions of
Section 5.10 of the Guaranty shall apply to this Agreement as if each reference
to "this Guaranty" therein was a reference to this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by one of its duly authorized officers.
[NEW GUARANTOR]
By
Name:
Title:
EXHIBIT 21.1
SEITEL, INC.
LIST OF SUBSIDIARIES OF THE REGISTRANT
*** African Geophysical, Inc. (incorporated in Cayman Islands)
*** Alternative Communication Enterprises, Inc. (incorporated in Texas)
Datatel, Inc. (incorporated in Delaware)
DDD Energy, Inc. (incorporated in Delaware)
Exsol, Inc. (incorporated in Delaware)
*** GEO-BANK, INC. (incorporated in Texas)
Matrix Geophysical, Inc. (incorporated in Delaware)
Seitel Data Corp. (incorporated in Delaware)
** Seitel Delaware, Inc. (incorporated in Delaware)
Seitel Gas & Energy Corp. (incorporated in Delaware)
Seitel Geophysical Inc. (incorporated in Delaware)
(dba Eagle Geophysical)
Seitel International, Inc. (incorporated in Cayman Islands)
* Seitel Management, Inc. (incorporated in Delaware)
(formerly Polymer Dynamics, Inc.)
* Seitel Natural Gas, Inc. (incorporated in Delaware)
Seitel Offshore Corp. (incorporated in Delaware)
Seitel Power Corp. (incorporated in Delaware)
* Incorporated in 1995
** Incorporated in 1996
*** Dormant
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated March 29, 1996, included in this Form 10-K, into
the Seitel, Inc. previously filed Form S-3 Registration Statements File Nos.
33-80574, 33-89890, 33-71968, 33-78554, and Form S-8 Registration Statements
File Nos. 33-78560, 33-89934 and 333-01271.
/s/ Arthur Andersen LLP
Houston, Texas
March 29, 1996
EXHIBIT 23.2
FORREST A. GARB & ASSOCIATES, INC.
PETROLEUM CONSULTANTS
5310 Harvest Hill Road, Suite 160 - LB 152
Dallas, Texas 75230-5805
(214)788-1110
March 29, 1996
CONSENT OF EXPERT
-----------------
Ms. Debra D. Valice
Seitel, Inc.
50 Briar Hollow Lane, 7th Floor West
Houston, Texas 77027
Dear Ms. Valice:
Forrest A. Garb & Associates, Inc., petroleum consultants, hereby
consent to the incorporation by reference in any registration statement or other
document filed with the Securities and Exchange Commission by Seitel, Inc., of
our reserve report dated January 1, 1996 and to all references to our firm
included therein.
Forrest A. Garb & Associates, Inc.
By: /s/ Ronald D. Wade
--------------------------------
Name: Ronald D. Wade
Title: Executive Vice President
Dallas, Texas
March 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,242
<SECURITIES> 0
<RECEIVABLES> 42,931
<ALLOWANCES> 650
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 61,619<F2>
<DEPRECIATION> 9,069
<TOTAL-ASSETS> 209,567
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 61,283
0
0
<COMMON> 94
<OTHER-SE> 120,284
<TOTAL-LIABILITY-AND-EQUITY> 209,567
<SALES> 74,439
<TOTAL-REVENUES> 74,439
<CGS> 13,071
<TOTAL-COSTS> 13,071
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,407
<INCOME-PRETAX> 16,025
<INCOME-TAX> 5,898
<INCOME-CONTINUING> 10,127
<DISCONTINUED> (1,448)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,679
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.85
<FN>
<F1> The Company does not present a classified balance sheet; therefore, current
assets and current liabilities are not reflected in the Company's financial
statement.
<F2> PP&E does not include seismic data bank assets with a cost of $232,704,000
and related accumulated amortization of $127,335,000.
</FN>
</TABLE>
