FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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| X | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For Fiscal Year Ended December 31, 1998
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OR
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| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
[No Fee Required] For the transition period to .
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Commission File Number 0-14488
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SEITEL, INC.
(Exact name of registrant as specified in charter)
Delaware 76-0025431
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
50 Briar Hollow Lane
West Building, 7th Floor
Houston, Texas 77027
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(Address of principal (Zip Code)
executive offices)
(713) 881-8900
--------------
(Registrant's telephone number, including area code)
Not Applicable
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Former name, former address and former fiscal year, if
changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
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Yes X No
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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. X
---
The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 29, 1999 was approximately $321,985,638. 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 $14.625 and there were a total of 23,810,852 shares of Common Stock
outstanding.
Documents Incorporated by Reference:
Document Part
------------------------------------ --------
Definitive Proxy Statement for III
1999 Annual Stockholders Meeting
<PAGE>
ITEM 1. BUSINESS
--------
General
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Seitel, Inc. (the "Company") is a leading diversified energy company
providing seismic data and related geophysical technology used in oil and gas
exploration and production. The Company sells its proprietary
information-technology to oil and gas companies and has developed an evolving
crude oil and natural gas exploration and production company. 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 primarily 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, and
Olympic Seismic, Ltd., a wholly-owned Canadian subsidiary. The data library,
which consists of both two-dimensional ("2D") and three-dimensional ("3D") data,
is marketed to major and independent 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.
At December 31, 1998, the Company owned approximately 920,000 linear miles
of 2D and approximately 11,750 square miles of 3D seismic data which it
maintained in its library and marketed an additional 270,000 linear miles of 2D
data. Subsequent to December 31, 1998 the Company acquired the entire database
of Amoco Canada consisting of 235,000 linear miles of 2D and 2,790 square miles
of 3D seismic data. The Company's seismic data library now constitutes the
largest seismic data base marketed publicly in North America based solely on
management's knowledge and beliefs regarding the industry. The Company's U.S.
seismic surveys extend to virtually every major domestic exploration and
development region, with the majority of the seismic surveys covering onshore
and offshore the U.S. Gulf Coast. In addition, the Company's international
seismic surveys are concentrated in Western Canada and the Continental Shelf
offshore the United Kingdom and Ireland.
The Company's marketing team of 20 seismic sales specialists markets data
from its library and from newly initiated 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 energy industry exploration and development activities
through close interaction with oil and gas companies on a daily basis to
maximize seismic sales opportunities.
The Company has a 12 member staff of geotechnical professionals dedicated
to its seismic operations, who have in excess of 225 years of collective
geophysical experience. Together, the marketing team and geotechnical
professionals help clients evaluate their respective seismic requirements,
design seismic data programs to meet market demand, and supervise the
reprocessing of data in the Company's library to enhance future resales.
Three-dimensional seismic data provides 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 presents 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, uneconomic wells and non-commercial wells 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
remains 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.
<PAGE>
The Company creates data using "group shoot" programs. Prior to undertaking
a seismic survey, the Company pre-contracts a majority of the cost of the
project by arranging multi-client participation or "group shoots." In a group
shoot program, several oil and gas companies share in the expense of a survey
and thereby materially reduce their respective cost of the survey, while the
Company reduces its initial capital requirements associated with the seismic
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 is
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 contracts with selected seismic acquisition crew companies
to conduct both onshore and offshore seismic surveys.
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, its large and growing 3D data library, a processing
center and proprietary computer technology coupled with extensive geophysical
application expertise to effectively interpret 3D data.
Oil and Gas Exploration and Production Operations
- -------------------------------------------------
In addition to licensing its seismic data to customers, the Company also
utilizes its seismic expertise to participate directly in oil and gas
exploration, development and ownership of hydrocarbon reserves through
partnering relationships with oil and gas companies. The Company's strategy is
to combine its 3D and 2D seismic expertise 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.
Since its formation in 1993, the Company's wholly-owned exploration and
production subsidiary, DDD Energy, Inc. ("DDD Energy"), has entered into and
maintained cost and revenue-sharing relationships with more than 100 petroleum
companies and, in doing so, has received the benefit of these petroleum
companies' land, geological, engineering and drilling staffs. DDD Energy has
conducted over 1,900 square miles of advanced 3D surveys, located primarily in
the Gulf Coast areas of onshore Texas, Louisiana, Alabama and Mississippi, as
well as California and Arkansas. DDD Energy's working interest in these projects
ranges from approximately 10% to 90%, with an average working interest of
approximately 31%. More than 200 square miles of 3D surveys are scheduled to be
conducted in 1999 by DDD Energy and its partners. The majority of the well
locations pinpointed by the surveys that have already been completed and
interpreted should be drilled during the next three years. DDD Energy
exclusively utilizes the Company's processing and interpretation technology and
operations to provide optimum quality control and confidentiality for the
exploration and production programs in which DDD Energy participates.
Since inception, DDD Energy has participated in the drilling of 281 wells,
191 of which were commercially productive for a 68% success rate.
Customers
- ---------
The Company markets its seismic data to major and independent oil and gas
companies. No one customer accounted for as much as 10% of the Company's
revenues during the years 1998, 1997 or 1996. 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.
<PAGE>
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 decade due to
difficult industry conditions. In 1985, there were approximately 150 independent
seismic companies operating in the United States, of which approximately 15 were
significant competitors. In 1998, there were approximately 100 companies, with
approximately 10 significant competitors. With the U.S. "oil patch" collapse in
1985, many of the independent seismic companies went out of business; during the
1990's, this industry has witnessed a major consolidation. 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 and the technical proficiency and exploration
experience of its geotechnical staff. These resources enable the Company to
provide high-quality service and to create and market high-grade data.
In the oil and gas exploration and production business there are numerous
oil and gas companies competing for the acquisition of mineral properties. The
Company believes it can participate effectively in the exploration for and
development of natural gas and crude oil reserves 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 oil and gas company partners.
Seasonality and Timing Factors
- ------------------------------
The Company's results of operations can fluctuate from quarter to quarter.
The fluctuations are caused by a number of factors.
With respect to the Company's seismic licensing revenue, the Company's
results are influenced by oil and gas industry capital expenditure budgets and
spending patterns. These budgets are not necessarily spent in either equal or
progressive increments during the year, with spending patterns affected by
individual oil and gas company requirements as well as industry-wide conditions.
As a result, the Company's seismic data revenue does not necessarily flow evenly
or progressively on a sequential quarterly basis during the year. In addition,
certain weather-related events may delay the creation of seismic data for the
Company's library during any given quarter. Although the majority of the
Company's seismic resales are under $500,000 per sale, occasionally a single
data resale from the Company's library can be as large as $5 million or more.
Such large resales can materially impact the Company's results during the
quarter in which they occur, creating an impression of a trend of increasing
revenue that may not be achieved in subsequent periods.
With respect to revenue from the Company's oil and gas operations, bringing
a small number of high-production wells on line in a given quarter can
materially impact the results of such quarter since many of the wells in which
the Company participates experience high initial flow rates for the first 60 to
90 days of production and then taper off to a lower, steady rate for the
remainder of their lives. If several of such wells are brought on line in a
quarter, the results for such quarter will appear unusually strong, and then
later, when production decreases to its long-term, steady rate, the Company's
results may not be able to sustain the trend of increased performance indicated
by the strong results of the previous quarter. The Company's oil and gas
exploration and production operations also can be impacted by certain
weather-related events as well as by mechanical and equipment problems or
shortages and other factors, which may delay the hookup of successfully
completed wells and delay the resultant production revenue. Also, due to the
high percentage of gas reserves in the Company's portfolio and the seasonal
variations in gas prices, the Company's results from its oil and gas operations
also are subject to significant fluctuations due to variations in commodity
prices. In addition, some producing wells may be required periodically to go off
line for pipeline and other maintenance. The Company does not believe that these
fluctuations in quarterly results are indicative of the Company's long-term
prospects and financial performance.
See Note P to the Company's Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
<PAGE>
Employees
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As of December 31, 1998, the Company and its subsidiaries had 110 full-time
employees and three employees who devote part of their time to the Company who
are also officers of other corporations. None of the Company's employees are
covered by collective bargaining agreements. Of these employees, 72 are related
to the seismic operations and 21 are related to the oil and gas operations. The
balance provides accounting and administrative support for all operations. The
Company believes it has a favorable relationship with its employees. The Company
has employment contracts with five of its senior corporate executives.
Risk Factors
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ANY INVESTMENT IN OUR SECURITIES INVOLVES RISK. INVESTORS SHOULD CAREFULLY
CONSIDER, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS REPORT, THE
RISKS DESCRIBED BELOW BEFORE MAKING ANY INVESTMENT DECISION.
Decreases in Energy Industry Spending Could Adversely Affect Our Business.
-------------------------------------------------------------------------
Demand for our seismic data depends primarily upon the level of spending by
oil and gas companies for exploration, production and development activities.
These spending levels may increase and decrease with increases and decreases in
the commodity prices for oil and gas, so that demand for our seismic data may be
affected to some degree by market prices for natural gas and crude oil, which
have historically been very volatile. As a result of recent weakness in oil and
gas commodity prices, the level of overall oil and gas industry activity has
declined from levels experienced in recent years. If our customers' capital
spending decreases in line with overall recent industry trends, it could have a
significant adverse effect upon the demand for our services and our results of
operations and cash flow. Revenues generated by our oil and gas exploration and
development business increase and decrease with increases and decreases in the
market prices of oil and gas. Also, factors beyond our control may affect our
oil and gas operations. These factors include the level of supply of natural gas
and oil, the availability of adequate pipeline and other transportation and
processing facilities and the marketing of competitive fuels.
Drilling Hazards and Dry Holes Could Affect Our Oil and Gas Activities.
----------------------------------------------------------------------
Our oil and gas operations are subject to hazards incident to the drilling
of oil and gas wells, such as cratering, explosions, uncontrollable flows of
oil, gas or well fluids, fires, pollution, or other environmental risks, as well
as to the risk that we may not encounter any commercially productive natural gas
or oil reserves. Some of these hazards can cause personal injury and loss of
life, severe damage to and destruction of property and equipment, environmental
damage and suspension of operations. We seek to reduce dry hole risks by
utilizing 3D seismic data, where appropriate, to help us determine where to
drill. However, since we do not act as operator in our oil and gas drilling
business, we are dependent upon our petroleum company partners to conduct
operations in a manner so as to minimize these operating risks. In accordance
with industry practice, we maintain insurance against some, but not all, of
these operating risks. We cannot be sure that adequate insurance will be
available in the future, or that we will be able to maintain adequate insurance
on terms and conditions we find acceptable. As a result of the risks inherent in
oil and gas operations, the success of our oil and gas exploration, development
and production activities is uncertain.
Loss of Key Personnel Could Adversely Affect Our Business.
---------------------------------------------------------
Our operations are dependent upon a relatively small group of management
and technical personnel. The loss of one or more of these individuals could have
a material adverse effect on us. We use equity ownership and other incentives to
attract and retain our employees. In addition, we have employment agreements
with our President and Chief Executive Officer, Paul A. Frame, Executive Vice
President and Chief Operating Officer, Horace A. Calvert, and Executive Vice
President of Finance and Chief Financial Officer, Debra D. Valice.
<PAGE>
Regional Events May Affect Our Geographically Concentrated Operations.
---------------------------------------------------------------------
Most of the seismic data in our seismic data library, as well as most of
our existing interests in oil and gas properties, are located along the coast
and offshore in the U.S. Gulf of Mexico. Because of this concentration, any
regional events that increase costs, reduce availability of equipment or
supplies, reduce demand or limit production will impact us more adversely than
if we were more geographically diversified.
Extensive Governmental Regulation of Our Business Affects Our Daily
---------------------------------------------------------------------------
Operations.
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The oil and gas industry in general is subject to extensive governmental
regulation, which may be changed from time to time in response to economic or
political conditions. In particular, our oil and gas exploration and production
is subject to federal and state regulations governing environmental quality and
pollution control, state limits on allowable rates of production by well or
proration unit, and other similar regulations. State and federal regulations
generally are intended to prevent waste of natural gas and oil, protect rights
to produce natural gas and oil between owners in a common reservoir, control the
amount of natural gas and oil produced by assigning allowable rates of
production and control contamination of the environment. Environmental
regulations affect our operations on a daily basis. Also, we believe that the
trend toward more expansive and stricter environmental laws and regulations will
continue. The implementation of new, or the modification of existing, laws or
regulations affecting the oil and gas industry could have a material adverse
impact on us.
<PAGE>
Other
- -----
The Company is not dependent on any particular raw materials, patents,
trademarks or copyrights for its business operations.
The following organization chart gives an overview of the structure of the
Company:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
---------------------------
+----| Seitel Delaware, Inc. | 1%
| | 100% |----+ ----------------------------
| --------------------------- | |Seitel Data, Ltd. |
| |----| |
| --------------------------- 99%| ----------------------------
|----| Seitel Data Corp. |----+
| | 100% |----+ ----------------------------
| --------------------------- | |Seitel Offshore Corp. |
| |----|100% |
| --------------------------- | ----------------------------
|----| DDD Energy, Inc. | |
| | 100% | | ----------------------------
- ------------------ | --------------------------- | |Seitel International, Inc.|
++++++++++++++++++ | |----|100% |
+ + | --------------------------- | ----------------------------
+ SEITEL, INC. +----+----| Matrix Geophysical, Inc.| |
+ + | | 100% | | ----------------------------
++++++++++++++++++ | --------------------------- | |Datatel, Inc. |
- ------------------ | +----|100% |
| --------------------------- ----------------------------
|----| Seitel Canada Holdings, |
| | Inc. | ----------------------------
| | 100% |---------|Olympic Seismic Ltd. |
| --------------------------- |100% |
| ----------------------------
| ---------------------------
|----| Seitel Management, Inc. |
| | 100% |
| ---------------------------
|
| --------------------------- ----------------------------
|----| Seitel Geophysical, Inc.|----+----|African Geophysical, Inc. |
| | 100% | | |100% *<F1> |
| --------------------------- | ----------------------------
| |
| --------------------------- | ---------------------------- --------------------------
|----| Alternative Communica- | +----|EHI Holdings, Inc. |----| Eagle Geophysical, Inc.|
| | tions Enterprises, Inc. | |100% | | 17.3% |
| | 100% | ---------------------------- --------------------------
| | *<F1> |
| ---------------------------
|
| ---------------------------
|----| Exsol, Inc. |
| | 100% |
| | *<F1> |
| ---------------------------
|
| ---------------------------
|----| Geo-Bank, Inc. |
| | 100% |
| | *<F1> |
| ---------------------------
|
| --------------------------- ----------------------------
|----| Seitel Gas & Energy |---------|Seitel Natural Gas, Inc. |
| | Corp. | |100% *<F1> |
| | 100% *<F1> | ----------------------------
| ---------------------------
|
| ---------------------------
+----| Seitel Power Corp. |
| 100% |
| *<F1> |
---------------------------
<FN>
<F1> * Dormant
</FN>
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
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The Company, through its wholly-owned subsidiary DDD Energy, participates
in oil and gas exploration and development efforts. For estimates of the
Company's net proved and proved developed oil and gas reserves as of December
31, 1998, see Note Q to the Company's Consolidated Financial Statements. There
are numerous uncertainties inherent in estimating quantities of proved reserves
and in projecting future rates of production and timing of development
expenditures, including many factors beyond the control of the producer. The
reserve data set forth in Note Q to the Company's Consolidated Financial
statements represent only estimates. Reserve engineering is a subjective process
of estimating underground accumulations of natural gas and liquids, including
crude oil, condensate and natural gas liquids, that cannot be measured in an
exact manner. The accuracy of any reserve estimate is a function of the amount
and quality of available data and of engineering and geological interpretation
and judgment. As a result, estimates of different engineers normally vary. In
addition, results of drilling, testing and production subsequent to the date of
an estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities ultimately recovered. The
meaningfulness of such estimates is highly dependent upon the accuracy of the
assumptions upon which they were based.
In general, the volume of production from oil and gas properties owned by
the Company declines as reserves are depleted. Except to the extent that the
Company acquires additional properties containing proved reserves or conducts
successful exploration and development activities, or both, the proved reserves
of the Company will decline as reserves are produced. Volumes generated from
future activities of the Company are therefore highly dependent upon the level
of success in finding or acquiring additional reserves and the costs incurred in
so doing.
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, 1998. Gross oil and gas wells include 10
with multiple completions. All of the wells are operated by the Company's oil
and gas company partners. A "gross" well is a well in which the Company owns a
working interest. "Net" wells refer to the sum of the fractional working
interests owned by the Company in gross wells.
Gross Wells Net Wells
----------- ---------
Oil 52 12.35
Gas 114 32.05
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>
1998
- ----
Texas .57 1.68 2.25 1.10 - 1.10
Mississippi 1.00 1.00 2.00 - - -
Louisiana 1.50 1.75 3.25 .66 .33 .99
California .15 .15 .30 - - -
Arkansas - .13 .13 - - -
Michigan - .25 .25 - - -
1997
- ----
Texas 5.29 4.05 9.34 1.88 .52 2.40
Mississippi 2.64 2.00 4.64 1.24 - 1.24
Louisiana 2.35 1.05 3.40 1.05 - 1.05
1996
- ----
Texas 2.85 .90 3.75 2.91 - 2.91
Mississippi .69 2.48 3.17 - .15 .15
Louisiana .25 .26 .51 - - -
</TABLE>
As of December 31, 1998, the Company was participating in the drilling of 2
gross and .52 net wells.
<PAGE>
The following table sets forth certain information regarding the Company's
developed and undeveloped lease acreage as of December 31, 1998. The table does
not include additional acreage, which the Company may earn upon completion of
pending 3D seismic data projects. "Gross" acres refer to the number of acres in
which the Company owns a working interest. "Net" acres refer to the sum of the
fractional working interests owned by the Company in gross acres.
<TABLE>
<CAPTION>
Developed Acres Undeveloped Acres
---------------------------- -----------------------------
Gross Net Gross Net
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
California - - 138,726 41,786
Texas 25,106 11,267 88,651 24,120
Louisiana 6,864 1,446 79,672 24,164
Mississippi 4,100 1,321 26,806 16,239
Michigan 260 130 6,000 2,000
Arkansas - - 3,600 450
Alabama 160 5 1,516 270
------------- ------------ ------------- -------------
Total 36,490 14,169 344,971 109,029
============= ============ ============= =============
</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, 1998 reserves with any federal
agencies.
<TABLE>
<CAPTION>
Net Production Average Average Sales Price
--------------------- -------------------------
Year Ended Oil Gas Production Oil Gas
December 31, (Mbbls) (Mmcf) Cost per Mcfe (Bbls) (Mcf)
<S> <C> <C> <C> <C> <C>
1998 386 6,216 $.55 $11.78 $2.27
1997 420 6,926 .55 16.83 2.63
1996 363 4,902 .44 18.52 2.28
</TABLE>
The amounts in 1997 and 1996 include 56,000 and 84,000 barrels,
respectively, and 1,795 and 2,094 million cubic feet, respectively, delivered
under the terms of a volumetric production payment agreement effective July 1,
1996 at an average price of $14.04 and $14.91, respectively, per barrel and
$1.84 and $2.15 per mcf, respectively.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company is involved from time to time in ordinary, routine claims and
lawsuits incidental to its business. In the opinion of management, uninsured
losses, if any, resulting from the ultimate resolution of these matters should
not be material to the Company's financial position or results of operations.
<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 1998 and 1997 as reported by the New York Stock Exchange.
<TABLE>
<CAPTION>
1998 1997(1)<F1>
------------------------------- -------------------------------
High Low High Low
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
First Quarter $ 17.25 $ 13.19 $ 22.31 $ 15.69
Second Quarter 19.31 14.69 19.50 16.31
Third Quarter 17.25 8.69 22.81 18.44
Fourth Quarter 16.00 9.56 25.88 16.00
<FN>
<F1> (1) All stock market prices have been restated to reflect the two-for-one
stock split in December 1997.
</FN>
</TABLE>
On March 29, 1999, the closing price for the Common Stock was $14.625. To
the best of the Company's knowledge, there are approximately 1,265 record
holders of the Company's Common Stock as of March 29, 1999.
Dividend Policy
- ---------------
The Company did not pay cash dividends during 1997 or 1998, 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.
<TABLE>
<CAPTION>
Statement of Operations Data: Year Ended December 31,
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenue $ 144,857 $ 127,556 $ 106,002 $ 74,439 $ 70,902
Expenses and costs:
Depreciation, depletion and
amortization 69,890 49,679 39,249 26,872 27,181
Impairment of oil and gas
properties - 9,560 - - -
Cost of sales 4,874 17,953 19,402 13,071 10,499
Selling, general and
administrative 26,599 23,043 19,165 15,393 14,672
----------- ---------- ---------- ----------- ----------
101,363 100,235 77,816 55,336 52,352
----------- ---------- ---------- ----------- ----------
Income from operations 43,494 27,321 28,186 19,103 18,550
Interest expense, net (5,540) (3,554) (2,900) (3,078) (3,198)
Equity in earnings (loss) of
affiliate 222 146 (186) - -
Gain on sale of subsidiary
stock - 18,449 - - -
Increase (decrease) in under-
lying equity of affiliate (193) 10,750 - - -
Extinguishment of volumetric
production payment - (4,133) - - -
----------- ---------- ---------- ----------- ----------
Income from continuing
operations before provision
for income taxes and
extraordinary item 37,983 48,979 25,100 16,025 15,352
Provision for income taxes 13,623 17,422 8,863 5,898 5,681
----------- ---------- ---------- ----------- ----------
Income from continuing
operations before
extraordinary item 24,360 31,557 16,237 10,127 9,671
Loss from discontinued
operations, net of tax - - (988) (1,196) (52)
Loss on disposal of
discontinued operations,
net of tax - - - (252) -
----------- ---------- ---------- ----------- ----------
Income before extraordinary
item 24,360 31,557 15,249 8,679 9,619
Extraordinary charge on early
extinguishment of debt, net
of tax - - - - (304)
----------- ---------- ---------- ----------- ----------
Net income $ 24,360 $ 31,557 $ 15,249 $ 8,679 $ 9,315
=========== ========== ========== =========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations Data: Year Ended December 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Earnings per share: (1)<F1>
Basic:
Income from continuing
operations before
extraordinary item $ 1.07 $ 1.48 $ .83 $ .55 $ .68
Discontinued operations - - (.05) (.08) -
Extraordinary item - - - - (.02)
----------- ---------- ---------- ----------- ----------
Net income $ 1.07 $ 1.48 $ .78 $ .47 $ .66
=========== ========== ========== =========== ==========
Diluted:
Income from continuing
operations before
extraordinary item $ 1.05 $ 1.43 $ .79 $ .49 $ .55
Discontinued operations - - (.05) (.07) -
Extraordinary item - - - - (.02)
----------- ---------- ---------- ----------- ----------
Net income $ 1.05 $ 1.43 $ .74 $ .42 $ .53
=========== ========== ========== =========== ==========
Weighted average shares: (1)<F1>
- Basic 22,720 21,380 19,646 18,408 14,212
- Diluted 23,124 22,050 20,660 20,976 18,237
-----------------------------------------------------------------------------------
As of December 31,
-----------------------------------------------------------------------------------
Balance Sheet Data: 1998 1997 1996 1995 1994
----------- ----------- ----------- ------------ -----------
Data bank, net $ 262,950 $ 180,936 $ 126,998 $ 105,369 $ 95,801
Oil and gas properties, net 148,977 112,915 86,572 42,424 21,389
Total assets 495,767 365,682 294,679 209,567 166,769
Total debt 150,690 90,566 86,488 61,283 16,927
Stockholders' equity 237,587 207,273 155,641 120,378 101,329
Stockholders' equity per
common share outstanding
at December 31 $ 9.98 $ 9.19 $ 7.51 $ 6.38 $ 5.74
Common shares outstanding at
December 31 (1)<F1> 23,805 22,548 20,724 18,874 17,652
<FN>
<F1> (1) All number of shares and per share amounts have been restated to give
effect to the two-for-one stock split effected in the form of a 100%
stock dividend in December 1997.
</FN>
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
------------------------------------------------------------------------
Introduction
- ------------
The following table sets forth selected financial information (in
thousands) for the periods indicated, and should be read in conjunction with the
discussion of Results of Operations below.
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Seismic:
Revenue $ 125,863 $ 85,560 $ 67,138
Amortization 57,117 35,163 30,477
Cost of sales 191 394 448
Oil and Gas:
Revenue 18,994 25,680 18,255
Depletion 11,872 12,666 7,212
Impairment of oil and gas properties - 9,560 -
Cost of sales 4,683 5,168 3,134
Geophysical Services:
Revenue - 16,316 20,609
Depreciation - 983 951
Cost of sales - 12,391 15,820
Other depreciation 901 867 609
Selling, general and administrative 26,599 23,043 19,165
Net interest expense 5,540 3,554 2,900
Equity in earnings (loss) of affiliate 222 146 (186)
------------ ------------ ------------
Income from continuing operations before provision
for income taxes and special items (1)<F1> 38,176 23,913 25,100
Provision for income taxes 13,692 8,498 8,863
------------ ------------ ------------
Income from continuing operations before special items(1)<F1>$ 24,484 $ 15,415 $ 16,237
============ ============ ============
Net income $ 24,360 $ 31,557 $ 15,249
============ ============ ============
- ----------------------------------
<FN>
<F1> (1) Special items for the year ended December 31, 1998 include a
pre-tax loss of $193,000 related to the decrease in the
underlying equity of an affiliate. Special items for the year
ended December 31, 1997 include a pre-tax gain of $29,199,000
related to the spin-off of the Company's seismic acquisition
crew subsidiary and a pre-tax loss of $4,133,000 related to
the extinguishment of the Company's volumetric production
payment.
</FN>
</TABLE>
<PAGE>
Results of Operations
- ---------------------
Seismic
-------
Revenue from the marketing of seismic data was $125,863,000, $85,560,000
and $67,138,000 during 1998, 1997 and 1996, respectively. The increases between
years are primarily attributable to an increase in demand for high-resolution
seismic data, which is being used increasingly in oil and gas exploration and
development efforts due to the increased probability of drilling success
achieved when employing 3-D seismic data in the evaluation of drilling
prospects. The Company believes the demand for its seismic data remains strong
despite weakness in the energy sector driven by depressed oil and gas prices.
This commodity price environment requires oil and gas companies to increase
reserves and daily production at nominally lower finding costs per barrel in
order to sustain profits. By properly utilizing 3D seismic data, exploration
companies can significantly increase drilling success rates and reduce the
occurrence of dry holes. Although the acquisition of 3D seismic data does
require a greater investment compared to 2D seismic, new technology has made
multi-client 3D seismic data more economical to smaller independent oil and gas
companies. By participating in group shoots, oil and gas companies can share the
cost of expensive surveys that they could not otherwise make on their own.
Further, oil and gas companies have learned that 3D seismic can increase
recoveries of reserves from existing mature oil fields by optimizing the
drilling location of development wells while also revealing additional step-out
locations that had not been apparent using 2D seismic. Additionally, management
believes that the Company will continue to experience a steady demand for its 2D
data library as oil and gas companies initially use 2D seismic to evaluate
prospects. Although many exploration and production companies are reducing their
capital expenditures in response to low commodity prices, management believes
that seismic data expenditures will likely be one of the last areas where
reductions are made because seismic is the information tool that can allow
companies to lower exploration and development costs. Exploration and production
company employees can work for years on defining prospects to be drilled without
employing most oilfield services, but without seismic data, these geo-scientists
and engineers would not have the essential tools to generate and delineate
drilling prospects.
Data bank amortization amounted to $57,117,000, $35,163,000 and $30,477,000
for the years ended December 31, 1998, 1997 and 1996, respectively. As a
percentage of revenue from licensing seismic data, data bank amortization was
46%, 42% and 47% for 1998, 1997 and 1996, 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 and, in 1997, an increase in revenue from purchased seismic data
which is generally amortized on a straight-line basis. For a discussion of the
Company's accounting policy related to seismic data amortization refer to Note A
of the Company's Consolidated Financial Statements.
The Company's (and its industry's) seismic revenue trends are evaluated and
results are used in estimating future revenue expected to be received on its
seismic data. Pricing of seismic data is significant when it indicates a
revision to estimated future revenue. During periods of expected declines in
activity, 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, the prior write-downs are not reversed.
Management believes that the economic outlook for the Company's seismic business
is stable and the possibility for significant improvement exists.
Oil and Gas
-----------
Oil and gas revenue was $18,994,000, $25,680,000 and $18,255,000 during
1998, 1997 and 1996, respectively. The decrease in oil and gas revenue from 1997
to 1998 is primarily due to lower realized commodity prices along with lower
natural gas production. The production decline from certain of the Company's
shallow short-lived producing properties has not yet been offset by production
from new wells. Certain wells with high initial flow rates had decline curves
earlier and greater than was expected. Additionally, some development wells have
not been drilled in the time frame anticipated by the Company as a result of
some of its partners delaying plans to drill such wells due to lower commodity
prices, reallocation of budget funds and consolidations within the industry. The
increase in oil and gas revenue from 1996 to 1997 is primarily due to higher
production resulting from more wells being on line in 1997 along with higher
realized gas prices. The first year of oil and gas operations for the Company
was 1993. Since then, the Company has steadily increased its exploration and
development efforts resulting in 92 wells producing at December 31, 1996
increasing to 122 at December 31, 1997 and to 144 at December 31, 1998. Net
<PAGE>
volume and price information for the Company's oil and gas production for the
years ended December 31, 1998, 1997 and 1996 is summarized in the following
table (amounts include deliveries made under the terms of a volumetric
production payment agreement effective from July 1, 1996 to June 30, 1997):
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Natural gas volumes (mmcf) 6,216 6,926 4,902
Average natural gas price ($/mcf) $ 2.27 $ 2.63 $ 2.28
Crude oil/condensate volumes (mbbl) 386 420 363
Average crude oil/condensate price ($/bbl) $ 11.78 $ 16.83 $ 18.52
</TABLE>
Depletion of oil and gas properties, excluding the impairment in 1997
discussed below, was $11,872,000, $12,666,000 and $7,212,000 for the years ended
December 31, 1998, 1997 and 1996, respectively, which amounted to $1.39, $1.34
and $1.02, respectively, per mcfe of gas produced during such periods. The
increase in the rates between 1996, 1997 and the first three quarters of 1998
reflects the amount of exploration and development costs incurred increasing at
a higher rate than the proven reserve base. The rate in the fourth quarter of
1998 decreased to $.95 per mcfe of gas produced from $1.55 per mcfe for the
first three quarters of 1998. This decrease in the rate is due to the
significant increase in the Company's proved reserves as determined by the
Company's independent petroleum engineers resulting from both new discoveries in
1998 and positive revisions to previous reserve estimates. Management currently
anticipates that the Company's depletion rate will be less than $1.00 per mcfe
of gas produced during 1999.
At December 31, 1997, the Company recorded a non-cash impairment of oil and
gas properties totaling $9,560,000 ($6,160,000, net of taxes) based on its
December 31, 1997, estimated proved reserves valued at March 18, 1998 market
prices. The impairment was primarily due to lower commodity prices as compared
to the December 31, 1996 and 1997 prices.
Oil and gas production costs amounted to $.55, $.55, and $.44 per mcfe of
gas produced during 1998, 1997 and 1996, respectively. The increase in the rate
from 1996 to 1997 is primarily attributable to the number of oil wells the
Company has in relation to its total wells as oil wells typically have higher
associated production costs than gas wells. Additionally, in 1997, ad valorem
taxes increased as a result of the increase in the value of reserves.
Geophysical Services
--------------------
Revenue from the acquisition of proprietary seismic data and leasing of
seismic equipment ("geophysical services") performed by the Company's former
seismic acquisition crew subsidiary, Eagle Geophysical, Inc. ("Eagle"), was
$16,316,000 and $20,609,000 for 1997 and 1996, respectively. The decrease from
1996 to 1997 is a result of the spin-off of Eagle on August 11, 1997.
Consequently, the geophysical services revenue for 1997 represents approximately
seven and one-half months, whereas 1996 represented a full year.
The decrease in cost of sales from 1996 to 1997 is due to the 1997 cost of
sales reflecting only seven and one-half months of activity as a result of the
spin-off of Eagle, whereas 1996 represented a full year. Gross profit margin
related to the acquisition of seismic data for non-affiliated parties (revenue
less cost of sales) was 19% and 21% for 1997 and 1996, respectively.
Corporate and Other
-------------------
The Company's selling, general and administrative expenses were $26,599,000
in 1998, $23,043,000 in 1997 and $19,165,000 in 1996. The increase for each year
was primarily a result of variable expenses, including commissions on revenue
and compensation tied to pre-tax profits, related to the increased volume of
business. As a percentage of total revenue, these expenses were 18% in 1996,
1997 and 1998.
The Company's interest expense was $5,963,000 in 1998, $4,609,000 in 1997
and $4,063,000 in 1996. The increase in interest expense from 1996 to 1997 was
primarily due to interest incurred on borrowings made under the Company's
revolving line of credit during 1997 along with the full amount of Senior Notes
being outstanding for all of 1997 whereas in 1996 $52.5 million was outstanding
for the entire year and $22.5 million was outstanding for approximately nine
months. The increase from 1997 to 1998 was primarily due to increased borrowings
made under the Company's revolving line of credit during 1998.
Interest income was $423,000 in 1998, $1,055,000 in 1997 and $1,163,000 in
1996. The decreases between years were primarily due to the fluctuations in cash
balances available for investment.
<PAGE>
On August 11, 1997, Eagle completed an initial public offering in which the
Company sold 1,880,000 of its 3,400,000 shares of Eagle common stock as a
selling stockholder. The Company received net proceeds of $29,723,000 from its
participation in the offering, resulting in a pre-tax gain, net of costs, of
$18,449,000 from its sale of Eagle stock in 1997. Additionally, the Company
recorded a pre-tax gain, net of costs, of $10,750,000 in 1997, representing an
increase in the Company's underlying equity of Eagle as a result of Eagle's
issuance of stock in connection with the offering. In 1998, Eagle issued stock
in connection with two acquisitions, which caused the Company to record a
pre-tax loss of $193,000. The Company's equity in earnings of Eagle was $146,000
for the period from August 11, 1997 to December 31, 1997 and was $222,000 for
the year ended December 31, 1998.
As a result of the offering, the Company now owns 1,520,000 shares of Eagle
common stock, or 17.3% of the outstanding shares of Eagle, at a book value of
$15,544,000 or $10.23 per share. The Company accounts for its investment in
Eagle using the equity method whereby such investment is based on the Company's
historical cost plus the Company's share of (i) Eagle earnings and losses and
(ii) Eagle's equity as a result of issuances of stock. In accordance with the
accounting literature, an investment in a company accounted for under the equity
method is carried on such basis rather than based on the fair market value of
the stock unless an "other than temporary" decline in the market value of the
stock has occurred. Once an "other than temporary" decline in the market value
of the stock occurs, an impairment in the carrying value of the investment
should be recorded. An "other than temporary" decline is deemed to have occurred
if the fair market value is depressed for a period of more than nine to twelve
months. Eagle's stock has been trading at a price below the Company's carrying
value since August 1998. If the weakness in commodity prices continues, and, in
turn the oilfield service sector market values remain depressed, the Company may
be required to record a non-cash, non-operating charge for impairment in the
carrying value of its investment in Eagle during 1999. At December 31, 1998, the
fair market value of the Company's investment in Eagle was $5,890,000 or $3.875
per share as quoted by NASDAQ. These shares are subject to certain trading
restrictions.
The Company entered into an agreement, which was effective July 1, 1997, to
extinguish its volumetric production payment. The cost to acquire the production
payment liability exceeded its book value. As a result of this transaction, the
Company recorded a pre-tax loss of $4,133,000 in 1997.
During a portion of 1996, the Company had a 50% ownership interest in
Energy Research International ("ERI"), a holding company which wholly owns two
marine seismic companies, Horizon Exploration Limited and Horizon Seismic Inc.
The ownership interest in ERI was reduced to 19% in late 1996. During 1996, the
Company recognized a net loss from its interest in ERI of $186,000. In May 1997,
the Company contributed its 19% ownership interest in ERI to Eagle.
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
final disposal and sale of which was completed during the third quarter of 1996.
Accordingly, the Company's consolidated financial statements present the gas
marketing operations as discontinued operations for all periods presented. The
Company decided to refocus and concentrate on its higher margin seismic
technology operations and related oil and gas exploration and production
operations in order to maximize profitability and growth opportunities. During
1996, a loss from discontinued operations was recorded totaling $988,000, which
is net of an income tax benefit of $580,000. The loss resulted from changes in
market prices to purchase gas supply. Such loss represented the final charge
related to the discontinued operations.
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company's cash flow from operations was $97,493,000, $76,161,000 and
$67,332,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
The increase from 1997 to 1998 was primarily due to (i) an increase in cash
received from customers due to higher revenue in 1998 and (ii) a decrease in
cash paid to suppliers and employees due to lower cost of sales incurred in 1998
resulting from the 1997 spin-off of the Company's crew subsidiary and increased
payable balances at December 31, 1998. The increase from 1996 to 1997 was
primarily due to an increase in cash received from customers due to higher
revenues in 1997 offset by a decrease resulting from a non-recurring volumetric
production payment that was received in 1996.
On March 16, 1998, the Company increased its $50 million unsecured
revolving line of credit facility to $75 million. The facility bears interest at
a rate determined by the ratio of the Company's debt to cash flow from
operations. Pursuant to the interest rate pricing structure, funds can currently
be borrowed at LIBOR plus 3/4%, the bank's prevailing prime rate, or the sum of
the Federal Funds effective rate for such day plus 1/2%. The facility matures on
March 16, 2001. There was no balance outstanding on the revolving line of credit
at March 29, 1999.
On December 11, 1998, the Company entered into an agreement for a one-year,
$25 million, unsecured revolving line of credit. On February 12, 1999, all
amounts outstanding under the revolving line of credit had been paid and the
line of credit was cancelled.
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%. On April 9, 1996, the
Company issued its Series C Notes, which total $22.5 million and bear interest
at a fixed rate of 7.48%. The Series A Notes mature on December 30, 2001, and
require annual principal payments of $8.3 million beginning December 30, 1999.
The Series B and Series C Notes mature on December 30, 2002, and require
combined annual principal payments of $10 million which began on December 30,
1998. Interest on all series of the notes is payable semi-annually on June 30
and December 30.
<PAGE>
On February 12, 1999, the Company completed a private placement of three
series of unsecured Senior Notes totaling $138 million. The Series D Notes total
$20 million, bear interest at a fixed rate of 7.03% and mature on February 15,
2004, with no principal payments due until maturity. The Series E Notes total
$75 million, bear interest at a fixed rate of 7.28% and mature on February 15,
2009, with annual principal payments of $12.5 million beginning February 15,
2004. The Series F Notes total $43 million, bear interest at a fixed rate of
7.43% and mature on February 15, 2009, with no principal payments due until
Maturity. Interest on all series of the notes is payable semi-annually beginning
on August 15, 1999. The Company used a portion of the proceeds to repay amounts
outstanding under its $75 million and $25 million revolving lines of credit; the
remainder will be used for capital expenditures.
The Company may 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, up to an aggregate of $41,041,600 pursuant to an
effective "shelf" registration statement filed with the Securities and Exchange
Commission.
In 1997, two of the Company's wholly-owned subsidiaries obtained two
separate three-year term loans totaling $361,000. The loans bear interest at the
rate of 7.9%. The proceeds were used for the purchase of certain property and
equipment, which secures the debt. Monthly principal and interest payments total
approximately $11,000. The balance outstanding on the loans at March 29, 1999,
was $141,000.
On October 2, 1998, the Company completed a sale of 794,300 shares of its
common stock to its employees. The Company granted five-year loans to its
employees for the purchase of which 60% of the loan amount is being paid in
equal monthly, quarterly or annual payments, as applicable, and a balloon
payment of the remaining 40% is due on October 2, 2003.
From January 1, 1998, through March 29, 1999, the Company received
$1,067,000 from the exercise of common stock purchase warrants and options and
the Company's 401(k) stock purchases. In connection with these exercises, the
Company will also receive approximately $357,000 in tax savings.
During December 1997, the Company repurchased 175,000 shares of its common
stock in the open market at a cost of $2,973,000, pursuant to a stock repurchase
program authorized by the Board of Directors on December 12, 1997. The Board has
authorized expenditures of up to $25 million towards the repurchase of its
common stock.
During 1998, gross seismic data bank additions and capitalized oil and gas
exploration and development costs amounted to $139,117,000 and $47,934,000
respectively. Included in the oil and gas exploration and development costs are
$6,323,000 for the purchase of oil and gas interests owned by certain
partnerships in exchange for 355,733 shares of the Company's common stock,
payment of $824,000 and assumption of liabilities totaling $1,555,000. The
remainder of these capital expenditures, as well as taxes, interest expenses,
cost of sales and general and administrative expenses, were funded by operations
and borrowings under the Company's revolving line of credit.
Currently, the Company anticipates capital expenditures for 1999 to total
approximately $169 million. Such expenditures include approximately $149 million
for the creation of proprietary seismic data, and approximately $20 million for
oil and gas exploration and development efforts. The Company believes its
current cash balances, revenues from operating sources and proceeds from the
exercise of common stock purchase warrants and options, combined with its
available revolving line of credit, should be sufficient to fund the 1999
capital expenditures, along with expenditures for operating and general and
administrative expenses. If these sources are not sufficient to cover the
Company's anticipated expenditures or if the Company were to increase its
planned capital expenditures for 1999, the Company could arrange for additional
debt or equity financing during 1999; however, there can be no assurance that
the Company would be able to accomplish any such debt or equity financing on
satisfactory terms. If such debt or equity financing is not available on
satisfactory terms, the Company could reduce its current capital budget or any
proposed increases to its capital budget, and fund expenditures with cash flow
generated from operating sources.
<PAGE>
Recent Accounting Pronouncements
- --------------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Statement
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. The Statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting. Statement 133 is effective for fiscal years beginning after
June 15, 1999 and cannot be applied retroactively. Statement 133 must be applied
to (a) derivative instruments and (b) certain derivative instruments embedded in
hybrid contracts that were issued, acquired, or substantively modified after
December 31, 1997 (and, at the Company's election, before January 1, 1998). The
Company has not yet quantified the impact of adopting Statement 133. However,
the Company anticipates that application of the statement will not have a
material effect on its consolidated financial statements.
Year 2000
- ---------
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies may need to be upgraded to comply
with such "Year 2000" requirements. Significant uncertainty exists concerning
the potential effects associated with such compliance, but systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
Compliance Program. In order to address the Year 2000 issue, the Company
appointed the Chief Operating Officer ("COO") to assure that key automated
systems and related processors would remain functional through the year 2000.
The COO and the Company's Information System's Manager addressed the project by
reviewing the information technology ("IT") and non-information technology
systems to determine whether they were Year 2000 compliant. Also, they prepared
a formal questionnaire for all significant suppliers, customers, and service
providers to determine the extent to which the Company was vulnerable to those
third parties' failure to remediate the Year 2000 problem.
Company's State of Readiness. A review and assessment of the information
technology and non-information technology systems was completed as of January
31, 1999 and did not identify any material systems which are not Year 2000
compliant. The Company has prepared a formal questionnaire for all significant
suppliers, customers and service providers to determine the extent to which the
Company is vulnerable to those third parties' failure to remediate the Year 2000
problem. Such questionnaire is in the process of being sent to all significant
suppliers, customers and service providers. The Company has requested that these
companies respond no later than June 30, 1999. The Company has received oral
assurances of Year 2000 compliance from many of the third parties with whom it
has relationships. The Company believes that its operations will not be
significantly disrupted even if third parties with whom the Company has
relationships are not Year 2000 compliant.
Costs to Address Year 2000 Compliance Issues. The Company believes that it
will not be required to make any material expenditures to address the Year 2000
problem as it relates to its existing systems. To date, costs incurred to
address Year 2000 compliance have been internal in nature and have been charged
to income as incurred. Such costs have been funded from cash provided by
operating activities. However, uncertainty exists concerning the potential costs
and effects associated with any Year 2000 compliance, and the Company intends to
continue to make efforts to ensure that third parties with whom it has
relationships are Year 2000 compliant. The Company is not aware of any IT
projects that have been delayed due to the Year 2000 compliance program.
<PAGE>
Risk of Non-Compliance and Contingency Plan. The goal of the Year 2000
project has been to ensure that all of the critical systems and processes, which
are under the direct control of the company, remain functional. However, because
certain systems and processes may be interrelated with systems outside of the
control of the company, there can be no assurance that all implementations will
be successful. The principal area of risk to the Company is thought to be the
contracting of seismic acquisition crews and vessels. A likely worst case
scenario is that despite the Company's efforts, there could be a failure of the
global positioning system used by seismic acquisition crews and vessels that the
Company contracts which could result in the temporary cessation of the
acquisition of seismic data. However, the Company believes that the risk of such
occurrence is low based upon its discussions concerning Year 2000 compliance
with third party seismic contractors. As part of the Year 2000 project,
contingency plans will be developed to respond to any potential failures as they
may be identified. There can be no assurance that unexpected Year 2000
compliance problems of either the Company or its vendors, customers and service
providers would not materially and adversely affect the Company's business,
financial condition or operating results. The Company will continue throughout
1999 to consider the likelihood of a material business interruption due to the
Year 2000 issue.
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, 1998.
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. See Item 1 - Business-Risk Factors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The Company is exposed to market risk, including adverse changes in
commodity prices, interest rates and foreign currency exchange rates as
discussed below.
Commodity Price Risk
- --------------------
The Company produces and sells natural gas, crude oil, condensate and
natural gas liquids. As a result, the Company's financial results can be
significantly affected as these commodity prices fluctuate widely in response to
changing market forces. The Company has a price risk management program that
utilizes derivative financial instruments, principally natural gas swaps, to
reduce the price risks associated with fluctuations in natural gas prices. These
financial instruments are designated as hedges and accounted for on the accrual
basis with gains and losses being recognized based on the type of contract and
exposure being hedged. Realized gains or losses on natural gas swaps designated
as hedges of anticipated production are treated as deferred credits or charges
and are included in other liabilities or other assets on the balance sheet. Net
gains and losses on natural gas swaps designated as hedges of anticipated
transactions, including accrued gains or losses upon maturity or termination of
the contract, are deferred and recognized in income when the associated hedged
commodities are produced. The Company did not materially hedge natural gas
prices in 1998 and as of December 31, 1998 did not have any open commodity price
hedges. The Company continually reviews and may alter its hedged positions.
Interest Rate Risk
- ------------------
The Company may enter into various financial instruments, such as interest
rate swaps, to manage the impact of changes in interest rates. Currently, the
Company has no open interest rate swap or interest rate lock agreements.
Therefore, the Company's exposure to changes in interest rates primarily results
from its short-term and long-term debt with both fixed and floating interest
rates. The following table presents principal or notional
<PAGE>
amounts (stated in thousands) and related average interest rates by year of
maturity for the Company's debt obligations and their indicated fair market
value at December 31, 1998:
<TABLE>
<CAPTION>
FAIR
1999 2000 2001 2002 TOTAL VALUE
--------- --------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Liabilities - Long-Term Debt:
Variable Rate $ 19,000 $ - $ 66,500 $ - $ 85,500 $ 85,500
Average Interest Rate 6.41% - 6.33% - 6.35% -
Fixed Rate $ 18,461 $ 18,378 $ 18,333 $ 10,000 $ 65,172 $ 65,149
Average Interest Rate 7.25% 7.25% 7.25% 7.31% 7.26% -
</TABLE>
Foreign Currency Exchange Rate Risk
- -----------------------------------
The Company conducts business in the Canadian dollar and pounds sterling
and is therefore subject to foreign currency exchange rate risk on cash flows
related to sales, expenses, financing and investing transactions. Exposure from
market rate fluctuations related to activities in Canada, where the Company's
functional currency is the Canadian dollar, and in the Cayman Islands, where the
Company's functional currency is pounds sterling, is not material at this time.
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
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 1999 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.
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, 1998 and 1997 F-2
Consolidated Statements of Operations for the
years ended December 31, 1998, 1997, and 1996 F-4
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996 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 (11)
3.6 Amendment to Certificate of Incorporation filed November 21,
1997 (23)
3.7 By-Laws of the Company (1)
3.8 Corporate Resolution reflecting an Amendment to the By-Laws
of the Company adopted January 6, 1989 (3)
3.9 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 certain employees and
one Director of the Company in December 1990 and expiring in
December 2000 (8)
4.3 Form of Promissory Note for Employee Stock Purchase dated
July 21, 1992 (10)
4.4 Form of Subscription Agreement for Employee Stock Purchase
dated July 21, 1992 (10)
4.5 Form of Pledge for Employee Stock Purchase dated July 21,
1992 (10)
4.6 Form of Warrant Certificate granted under the 1994 Warrant
Plans (14)
4.7 Form of Warrant Certificate granted under the 1995 Warrant
Reload Plan (17)
4.8 Form of Executive Warrant Certificate granted to certain
employees of the Company in November 1997 and expiring in
November 2002 (23)
4.9 Form of Bonus Warrant Certificate granted to an employee of
the Company in November 1997 and expiring in November 2002
(23)
<PAGE>
(3) Exhibits, continued...
4.10 Seitel, Inc. 1998 Employee Stock Purchase Plan including
Form of Common Stock Purchase Warrant (25)
4.11 Amendment No. 1 to the Seitel, Inc. 1998 Employee Stock
Purchase Plan (27)
4.12 Form of Departure Warrant granted to certain employees of
the Company in August 1997 (26)
4.13 Form of Employment Warrant granted to an employee of the
Company in April 1998 and expiring in April 2008 (26)
4.14 Form of Employment Warrant granted to an employee of the
Company in April 1998 and expiring in April 2008 (26)
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 (11)
10.4 Amendment No. 1 to the Seitel, Inc. 1993 Incentive Stock
Option Plan (16)
10.5 Statement of Amendments effective November 29, 1995, to the
Seitel, Inc. 1993 Incentive Stock Option Plan (19)
10.6 Statement of Amendments effective April 22, 1996, to the
Seitel, Inc. 1993 Incentive Stock Option Plan (19)
10.7 Amendment to the Seitel, Inc. 1993 Incentive Stock Option
Plan effective December 31, 1996 (21)
10.8 Amendment to Limit Options Granted to a Single Participant
under the Seitel, Inc. 1993 Incentive Stock Option Plan (23)
10.9 Amendment to Increase Number of Shares Available for
Granting Options under the Seitel, Inc. 1993 Incentive Stock
Option Plan (23)
10.10 Non-Employee Directors' Stock Option Plan of the Company
(13)
10.11 Amendment to the Seitel, Inc. Non-Employee Directors' Stock
Option Plan effective December 31, 1996 (21)
10.12 Seitel, Inc. Non-Employee Directors' Deferred Compensation
Plan (19)
10.13 Seitel, Inc. Amended and Restated 1995 Warrant Reload Plan
(20)
10.14 Amendment to the Seitel, Inc. Amended and Restated 1995
Warrant Reload Plan effective December 31, 1996 (21)
10.15 Memorandum of Understanding between the Company and
Triangle Geophysical Company dated as of June 7, 1984 (1)
10.16 Lease Agreement by and between the Company and Commonwealth
Computer Advisors, Inc. (2)
10.17 The Company's 401(k) Plan adopted February 27, 1995 (14)
<PAGE>
(3) Exhibits, continued...
10.18 The Company's 401(k) Plan adopted January 1, 1998 (23)
10.19 Executive Services Agreement dated April 3, 1990 between the
Company and Helm Resources, Inc. (7)
10.20 Employment Agreement effective as of January 1, 1991
between the Company and Paul A. Frame, Jr. (9)
10.21 Amendment to Employment Agreement dated effective as of
January 1, 1998 between the Company and Paul A. Frame, Jr.
(23)
10.22 Employment Agreement effective as of January 1, 1991
between the Company and Horace A. Calvert (9)
10.23 Amendment to Employment Agreement dated effective as of
January 1, 1998 between the Company and Horace A. Calvert
(23)
10.24 Employment Agreement effective as of January 1, 1991
between the Company and Herbert M. Pearlman (9)
10.25 Amendment to Employment Agreement dated effective as of
January 1, 1998 between the Company and Herbert M. Pearlman
(23)
10.26 Employment Agreement effective as of January 1, 1991
between the Company and David S. Lawi (9)
10.27 Amendment to Employment Agreement dated effective as of
January 1, 1998 between the Company and David S. Lawi (23)
10.28 Employment Agreement effective as of January 1, 1993
between the Company and Debra D. Valice (12)
10.29 Amendment to Employment Agreement dated effective as of
January 1, 1998 between the Company and Debra D. Valice (23)
10.30 Amendment to Employment Agreement dated effective as of
June 10, 1998 between the Company and Debra D. Valice (24)
10.31 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)
10.32 Loan and Security Agreement dated as of July 9, 1996,
between Seitel Geophysical, Inc. (Company's wholly-owned
subsidiary) and NationsBanc Leasing Corporation of North
Carolina (19)
10.33 Assumption and Consent dated December 31, 1996, among
Seitel Geophysical, Inc. (Company's wholly-owned
subsidiary), Eagle Geophysical, Inc. (Company's wholly-owned
subsidiary), NationsBanc Leasing Corporation of North
Carolina, and Seitel, Inc. (21)
10.34 Revolving Credit Agreement dated as of July 22, 1996, among
Seitel, Inc. and The First National Bank of Chicago (19)
10.35 First Amendment to Seitel, Inc. Revolving Credit Agreement
dated as of August 30, 1996 among the Company and The First
National Bank of Chicago (20)
<PAGE>
(3) Exhibits, continued...
10.36 Second Amendment to Revolving Credit Agreement dated as of
July 22, 1996, among Seitel, Inc. and The First National
Bank of Chicago (22)
10.37 Ratable Note in the amount of $20,000,000 among Seitel,
Inc. and Bank One, Texas, N.A. dated as of May 1, 1997 (22)
10.38 Ratable Note in the amount of $30,000,000 among Seitel,
Inc. and The First National Bank of Chicago dated as of May
1, 1997 (22)
10.39 Third Amendment to Revolving Credit Agreement dated as of
March 16, 1998 among Seitel, Inc. and The First National
Bank of Chicago (23)
10.40 Ratable Note in the amount of $40,000,000 among Seitel,
Inc. and The First National Bank of Chicago dated March 16,
1998 (23)
10.41 Ratable Note in the amount of $35,000,000 among Seitel,
Inc. and Bank One, Texas, N.A. dated as of March 16, 1998
(23)
10.42 Loan and Security Agreement dated as of February 6, 1997,
between Eagle Geophysical, Inc. (Company's wholly-owned
subsidiary), Seitel Geophysical, Inc., (Company's
wholly-owned subsidiary), and NationsBanc Leasing
Corporation of North Carolina (21)
10.43 Incentive Compensation Agreement (10)
10.44 Shareholder Value Bonus Agreement effective as of March 18,
1994 (13)
10.45 Amendment to Shareholder Value Bonus Agreement effective as
of March 18, 1994 (15)
10.46 Seitel, Inc. 1995 Shareholder Value Incentive Bonus Plan
(16)
10.47 Terms Agreement dated July 28, 1994, between the Company
and Bear, Stearns & Co., Inc. (13)
10.48 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 (18)
10.49 Revolving Credit Agreement dated as of December 11, 1998,
between the Company and Suntrust Bank, Atlanta *
10.50 Note Purchase Agreement dated as of February 12, 1999,
between the Company and the Series D Purchasers, the Series
E Purchasers and the Series F Purchasers *
21.1 Subsidiaries of the Registrant *
23.1 Consent of Arthur Andersen LLP *
23.2 Consent of Forrest A. Garb & Associates, Inc.*
(b) Reports on Form 8-K filed during the quarter ended December 31,
1998:
NONE
------------------
* Filed herewith
<PAGE>
(3) Exhibits, continued...
(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.
(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 Form 10-Q for the
quarter ended June 30, 1991.
(10) Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992.
(11) Incorporated by reference to the Company's Form 10-Q for the
quarter ended June 30, 1993.
(12) Incorporated by reference to the Company's Form 10-Q for the
quarter ended September 30, 1993.
(13) Incorporated by reference to the Company's Form 10-Q for the
quarter ended June 30, 1994.
(14) 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.
(15) Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
(16) Incorporated by reference to the Company's Form 10-Q for the
quarter ended June 30, 1995.
(17) 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.
(18) Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
<PAGE>
(3) Exhibits, continued...
(19) Incorporated by reference to the Company's Form 10-Q for the
quarter ended June 30, 1996.
(20) Incorporated by reference to the Company's Form 10-Q for the
quarter ended September 30, 1996.
(21) Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
(22) Incorporated by reference to the Company's Form 10-Q for the
quarter ended March 31, 1997.
(23) Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
(24) Incorporated by reference to the Company's Form 10-Q for the
quarter ended June 30, 1998.
(25) Incorporated by reference to the Company's Registration
Statement on Form S-8, No. 333-63383 as filed with the
Securities and Exchange Commission on September 15, 1998.
(26) Incorporated by reference to the Company's Registration
Statement on Form S-8, No. 333-64557 as filed with the
Securities and Exchange Commission on September 29, 1999.
(27) Incorporated by reference to Post Effective Amendment No. 2
to the Company's Registration Statement on Form S-8, No.
333-63383 as filed with the Securities and Exchange
Commission on October 2, 1998.
<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 30th of March, 1999.
SEITEL, INC.
By: /s/Paul A. Frame
------------------------------------------
Paul A. Frame
President
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 March 30, 1999
- -------------------------- Board of Directors
Herbert M. Pearlman
/s/ Paul A. Frame President and Chief March 30, 1999
- -------------------------- Executive Officer,
Paul A. Frame Director
/s/ Horace A. Calvert Executive Vice President March 30, 1999
- -------------------------- and Chief Operating
Horace A. Calvert Officer, Director
/s/ Debra D. Valice Executive Vice President- March 30, 1999
- -------------------------- Finance, Chief Financial
Debra D. Valice Officer, Secretary and
Treasurer, Director
/s/ David S. Lawi Director March 30, 1999
- --------------------------
David S. Lawi
/s/ Walter M. Craig, Jr. Director March 30, 1999
- --------------------------
Walter M. Craig, Jr.
/s/ William Lerner Director March 30, 1999
- --------------------------
William Lerner
/s/ John Stieglitz Director March 30, 1999
- --------------------------
John Stieglitz
/s/ Fred S. Zeidman Director March 30, 1999
- --------------------------
Fred S. Zeidman
<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, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 25, 1999
F-1
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1997
---------- -----------
<S> <C> <C>
ASSETS
Cash and equivalents $ 3,161 $ 4,881
Receivables
Trade, less allowance for doubtful accounts of $936 and $561
at December 31, 1998 and 1997, respectively 59,244 45,482
Notes and other 581 1,202
Data bank 513,037 373,920
Less: Accumulated amortization (250,087) (192,984)
---------- -----------
Net data bank 262,950 180,936
Property and equipment, at cost:
Oil and gas properties, full-cost method of accounting,
including $53,458 and $39,436 not being amortized at
December 31, 1998 and 1997, respectively 194,576 146,642
Furniture, fixtures and other 6,237 5,442
---------- -----------
200,813 152,084
Less: Accumulated depreciation, depletion and amortization (49,542) (36,820)
---------- -----------
Net property and equipment 151,271 115,264
Investment in affiliate 15,544 15,054
Prepaid expenses, deferred charges and other assets 3,016 2,863
---------- -----------
TOTAL ASSETS $ 495,767 $ 365,682
========== ===========
</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,
------------------------------------
1998 1997
----------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 31,839 $ 22,423
Accrued liabilities 6,882 5,330
Employee compensation payable 5,717 261
Payable to affiliate 27,117 12,500
Income taxes payable 1,056 1,242
Debt
Senior Notes 65,000 75,000
Line of credit 85,500 15,000
Term loans 172 477
Obligations under capital leases 18 89
Contingent payables 274 274
Deferred income taxes 28,039 18,050
Deferred revenue 6,566 7,763
----------- ------------
TOTAL LIABILITIES 258,180 158,409
----------- ------------
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
50,000,000 shares; issued and outstanding 23,804,508 and
22,548,408 at December 31, 1998 and 1997, respectively 238 225
Additional paid-in capital 141,826 128,406
Retained earnings 107,102 82,742
Treasury stock, 175,818 shares at cost at December 31,
1998 and 1997 (2,977) (2,977)
Notes receivable from officers and employees (8,651) (1,109)
Accumulated other comprehensive income (loss) 49 (14)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 237,587 207,273
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 495,767 $ 365,682
=========== ============
</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,
-----------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE $ 144,857 $ 127,556 $ 106,002
EXPENSES
Depreciation, depletion and amortization 69,890 49,679 39,249
Impairment of oil and gas properties - 9,560 -
Cost of sales 4,874 17,953 19,402
Selling, general and administrative expenses 26,599 23,043 19,165
----------- ----------- -----------
101,363 100,235 77,816
----------- ----------- -----------
INCOME FROM OPERATIONS 43,494 27,321 28,186
Interest expense (5,963) (4,609) (4,063)
Interest income 423 1,055 1,163
Equity in earnings (loss) of affiliate 222 146 (186)
Gain on sale of subsidiary stock - 18,449 -
Increase (decrease) in underlying equity of affiliate (193) 10,750 -
Extinguishment of volumetric production payment - (4,133) -
----------- ----------- -----------
Income from continuing operations before provision for
income taxes 37,983 48,979 25,100
Provision for income taxes 13,623 17,422 8,863
----------- ----------- -----------
Income from continuing operations 24,360 31,557 16,237
Loss from discontinued operations, net of income tax
benefit of $580 for 1996 - - (988)
----------- ----------- -----------
NET INCOME $ 24,360 $ 31,557 $ 15,249
=========== =========== ===========
Earnings per share:
Basic:
Income from continuing operations $ 1.07 $ 1.48 $ .83
Loss from discontinued operations - - (.05)
----------- ----------- -----------
Net income $ 1.07 $ 1.48 $ .78
=========== =========== ===========
Diluted:
Income from continuing operations $ 1.05 $ 1.43 $ .79
Loss from discontinued operations - - (.05)
----------- ----------- -----------
Net income $ 1.05 $ 1.43 $ .74
=========== =========== ===========
Weighted average number of common and common equivalent shares:
Basic 22,720 21,380 19,646
=========== =========== ===========
Diluted 23,124 22,050 20,660
=========== =========== ===========
</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
Receivable Accumulated
Common Stock Additional Treasury Stock from Other
Comprehensive------------------ Paid-In Retained --------------- Officers & Comprehensive
Income Shares Amount Capital Earnings Shares Amount Employees Income
-------- ---------- ------ ------- ------- ------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 9,436,854 $ 94 $ 85,821 $ 35,936 (414)$ (4) $ (1,395) $ (74)
Net proceeds from
issuance
of common stock 578,869 7 11,142 - 5 - - -
Acquisition of equity
interest in affiliate 132,075 1 3,499 - - - - -
Tax reduction from
exercise
of stock options - - 3,204 - - - - -
Conversions and
exchanges of sub-
ordinated debentures 214,304 2 1,878 - - - - -
Payments received on
notes receivable from
officers and employees - - - - - - 190 -
Net income $ 15,249 - - - 15,249 - - - -
Foreign currency
translation
adjustments 91 - - - - - - - 91
--------
Comprehensive income $ 15,340
======== ---------- ------ ------- ------- ------- ------ -------- ----------
Balance, December 31, 1996 10,362,102 104 105,544 51,185 (409) (4) (1,205) 17
Net proceeds from
issuance
of common stock 912,472 8 17,318 - - - - -
Two-for-one stock split 11,273,834 113 (113) - (409) - - -
Tax reduction from
exercise
of stock options - - 5,657 - - - - -
Treasury stock
purchased - - - - (175,000) (2,973) - -
Payments received on
notes receivable from
officers and employees - - - - - - 96 -
Net income $ 31,557 - - - 31,557 - - - -
Foreign currency
translation
adjustments (31) - - - - - - - (31)
--------
Comprehensive income $ 31,526
======== ---------- ------ ------- ------- -------- ------ -------- ----------
Balance, December 31, 1997 22,548,408 225 128,406 82,742 (175,818) (2,977) (1,109) (14)
Net proceeds from
issuance
of common stock 106,067 1 983 - - - - -
Tax reduction from
exercise
of stock options - - 344 - - - - -
Sale of common stock to
officers and employees 794,300 8 8,183 - - - (8,191) -
Acquisition of oil and
gas properties 355,733 4 3,910 - - - - -
Payments received on
notes receivable from
officers and employees - - - - - - 649 -
Net income $ 24,360 - - - 24,360 - - - -
Foreign currency
translation
adjustments net of
income tax expense
of $67 63 - - - - - - - 63
--------
Comprehensive income $ 24,423
======== ---------- ------ ------- ------- ------- ------ -------- ----------
Balance, December 31, 1998 23,804,508 $ 238 $141,826 $107,102 (175,818)$(2,977) $ (8,651) $ 49
========== ====== ======= ======= ======= ====== ======== ==========
</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
<TABLE>
<CAPTION>
(In thousands) Year Ended December 31,
------------------------------------------
1998 1997 1996
---------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 128,747 $ 123,795 $ 93,119
Proceeds from volumetric production payment - - 19,000
Cash paid to suppliers and employees (22,549) (41,652) (40,066)
Interest paid (5,792) (4,584) (4,148)
Interest received 398 955 1,181
Income taxes paid (3,311) (2,353) (1,754)
---------- --------- ----------
Net cash provided by operating activities 97,493 76,161 67,332
---------- --------- ----------
Cash flows from investing activities:
Cash invested in seismic data (119,267) (76,616) (49,716)
Cash invested in oil and gas properties (40,929) (55,480) (48,429)
Cash paid to acquire property and equipment (839) (8,772) (8,224)
Cash from disposal of property and equipment 17 28 59
Proceeds from sale of stock of subsidiary - 29,723 -
Costs related to sale of stock of subsidiary - (5,435) -
Cash received from affiliate for advances - 2,094 -
Collections on loans made - 5,415 327
Loan made to unconsolidated affiliate - - (2,000)
Cost of investment made in unconsolidated affiliate - - (109)
---------- --------- ----------
Net cash used in investing activities (161,018) (109,043) (108,092)
---------- --------- ----------
Cash flows from financing activities:
Borrowings under line of credit agreement 108,812 63,500 -
Principal payments under line of credit
agreement (38,312) (48,500) -
Borrowings under term loans - 7,925 7,697
Principal payments on term loans (305) (2,301) (1,743)
Principal payments under capital lease
obligations (71) (828) (1,301)
Proceeds from issuance of senior notes - - 22,500
Principal payments under senior notes (10,000) - -
Proceeds from issuance of common stock 1,063 17,361 11,184
Costs of debt and equity transactions (79) (35) (860)
Repurchase of common stock - (2,735) -
Payments on notes receivable from officers
and employees 649 96 190
---------- --------- ----------
Net cash provided by financing activities 61,757 34,483 37,667
---------- --------- ----------
Effect of exchange rate changes 48 (60) (43)
---------- --------- ----------
Net increase (decrease) in cash and equivalents (1,720) 1,541 (3,136)
Cash and equivalents at beginning of period 4,881 3,340 6,476
---------- --------- ----------
Cash and equivalents at end of period $ 3,161 $ 4,881 $ 3,340
========== ========= ==========
</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,
----------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Reconciliation of net income to net cash provided
by operating activities:
Net income $ 24,360 $ 31,557 $ 15,249
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of subsidiary stock - (18,449) -
Decrease (increase) in underlying equity of affiliate 193 (10,750) -
Extinguishment of volumetric production payment - 4,133 -
Loss from discontinued operations, net of tax - - 988
Equity in loss (earnings) of affiliate (222) (146) 186
Depreciation, depletion and amortization 69,890 62,293 40,229
Deferred income tax provision 9,989 8,257 3,321
Non-cash sales (1,140) - -
Gain on sale of property and equipment (32) (16) (40)
Amortization of deferred revenue - (4,079) (5,740)
Increase in receivables (14,706) (3,544) (12,155)
Increase in other assets (314) (849) (1,143)
Discount on note receivable - (198) 198
Proceeds from volumetric production payment - - 19,000
Increase in accounts payable and other liabilities 9,475 7,952 10,996
----------- ----------- -----------
Total adjustments 73,133 44,604 55,840
----------- ----------- -----------
Net cash provided by (used in) operating activities of:
Continuing operations 97,493 76,161 71,089
Discontinued operations - - (3,757)
----------- ----------- -----------
Net cash provided by operating activities $ 97,493 $ 76,161 $ 67,332
=========== =========== ===========
</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, 1998
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Seitel, Inc. (the "Company") is a leading diversified
energy company providing seismic data and related geophysical services to the
oil and gas 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 in the onshore Gulf Coast areas of Texas,
Louisiana, Alabama and Mississippi, as well as California and Arkansas.
In the course of its operations, the Company is subject to certain risk
factors, including but not limited to the following: competition, industry
conditions, volatility of oil and gas prices, operating risks, dependence of key
personnel, geographic concentration of operations and compliance with
governmental regulations.
Use of Estimates: The preparation of these consolidated financial
statements requires 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 oil and gas reserve quantities.
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. Investments in less than majority owned companies over which the
Company has the ability to exercise significant influence are accounted for
using the equity method. 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 and incremental costs of Company personnel engaged in
project management and design, are capitalized. Substantially all (greater than
90%) of the costs incurred to develop the Company's data bank have been for
programs created by the Company. The Company uses the income forecast method to
amortize the costs of seismic data programs it creates. Under the income
forecast method, seismic data costs are amortized in the proportion that revenue
for a period relates to management's estimate of ultimate revenues. Since
inception, management has established guidelines regarding its annual charge for
amortization. Under these guidelines, seismic data created by the Company is
amortized in a set period of time based on historical experience with both the
timing and amount of revenue. Management estimates that 90% of the costs
incurred in the creation of seismic data is amortized within five years of such
data becoming available for resale for two-dimensional seismic data and within
seven years of such data becoming available for resale for three-dimensional
seismic data. If anticipated sales fall below the benchmark guidelines,
amortization is accelerated. Depending on actual sales performance, the costs of
the Company's seismic data are fully amortized within 20 years or less. The
Company also purchases existing seismic data programs from other companies. The
costs of purchased seismic data programs are generally amortized on a
straight-line basis over ten years; however, the costs of a significant purchase
(greater than 5% of the net book value of the data bank), are amortized using
the greater of the income forecast method or ten-year straight-line method.
Under these amortization policies, the Company would expect the percentage of
net data bank as of December 31, 1998 to be amortized to be 13%, 15%, 16%, 14%,
12%, and 30% for the years ending December 31, 1999,
F-8
<PAGE>
2000, 2001, 2002, 2003 and all periods thereafter, respectively. On a periodic
basis, the carrying value of seismic data is compared to its estimated future
revenue and, if appropriate, is reduced to its estimated net realizable value.
Net data bank at December 31, 1998 and 1997 was comprised of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
2D data created by the Company $ 14,269 $ 17,625
3D data created by the Company 230,163 151,247
Data purchased by the Company 18,518 12,064
------------ ------------
Net data bank $ 262,950 $ 180,936
============ ============
</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, 1998, exploration and development related
overhead costs of $1,795,000, $1,431,000 and $1,146,000, respectively, have been
capitalized to oil and gas properties. For the three years ended December 31,
1998, interest costs of $2,486,000, $2,105,000 and $1,525,000, respectively,
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 values, 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 depleted. Depletion 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 from estimated proved reserves, based on current
economic and operating conditions, plus the lower of cost or fair value of
unevaluated properties, adjusted for the effects of related income taxes. If
capitalized costs exceed this limit, the excess is charged to depreciation,
depletion and amortization. Based on the Company's December 31, 1997 estimated
proved reserves valued at March 18, 1998 market prices, the Company recorded a
non-cash impairment of oil and gas properties of $9,560,000 ($6,160,000 net of
taxes) in the fourth quarter of 1997. No such charges were recorded in 1998.
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 on the
undistributed earnings of its foreign subsidiaries, which amounted to
$1,601,000, $207,000 and $445,000 for the years ended December 31, 1998, 1997
and 1996, respectively, as such earnings are intended to be permanently
reinvested in foreign operations.
Income Recognition: Revenue from seismic data licensing agreements is
recognized when each seismic data program is available for use by the licensees,
and is presented net of revenue shared with other entities. Revenue from the
acquisition of seismic data for non-affiliated parties is recognized on the
percentage-of-completion method based on the work effort completed compared with
the total work effort estimated for the contract. These contracts generally
provide that the customer accepts work completed throughout the performance
period and owes the Company, based on pricing provisions, amounts for job
completion, measured in terms of performance progress. Revenue received in
advance of being earned is deferred until earned.
In certain cases, the Company grants seismic licenses to third parties for
data to be used in their operations (not for resale) in exchange for exclusive
ownership of seismic data from the third party. The Company recognizes revenue
for the licenses granted and records a data library asset for the seismic data
acquired. These transactions are accounted for as non-monetary exchanges and are
valued at the fair market value of such licenses based on values realized in
cash transactions to other parties for similar seismic data.
Cost of Sales: Cost of sales consists of expenses associated with oil and
gas production, seismic resale support services and the acquisition of seismic
data for non-affiliated parties (until August 11, 1997). The cost of
F-9
<PAGE>
acquiring 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.
Foreign Currency Translation: For subsidiaries whose functional currency is
deemed to be other than the U. S. dollar, asset and liability accounts are
translated at period-end exchange rates and revenue and expenses are translated
at the current exchange rates as of the dates on which they are recognized.
Translation adjustments are included as a separate component of stockholders'
equity. Any gains or losses on transactions or monetary assets or liabilities in
currencies other than the functional currency are included in net income in the
current period.
Use of Derivatives: The Company has a price risk management program that
utilizes derivative financial instruments, principally natural gas swaps, to
reduce the price risks associated with fluctuations in natural gas prices. These
financial instruments are designated as hedges and accounted for on the accrual
basis with gains and losses being recognized based on the type of contract and
exposure being hedged. Realized gains or losses on natural gas swaps designated
as hedges of anticipated production are treated as deferred credits or charges
and are included in other liabilities or other assets on the balance sheet. Net
gains and losses on natural gas swaps designated as hedges of anticipated
transactions, including accrued gains or losses upon maturity or termination of
the contract, are deferred and recognized in income when the associated hedged
commodities are produced. In order for natural gas swaps to qualify as a hedge
of an anticipated transaction, the derivative contract must identify the
expected date of the transaction, the commodity involved, and the expected
quantity to be purchased or sold. In the event that a hedged transaction does
not occur, future gains and losses, including termination gains or losses, are
included in the income statement when incurred. As of December 31, 1998, the
Company did not have any open commodity price hedges. The estimated fair value
of open commodity price hedges as of December 31, 1997 was a gain of $183,000.
In the statement of cash flows, cash receipts or payments related to
financial instruments are classified consistent with the cash flows from the
transaction being hedged.
Earnings per Share: In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share," basic earnings per share is
computed based on the weighted average shares of common stock outstanding during
the periods. Diluted earnings per share is computed based on the weighted
average shares of common stock plus the assumed issuance of common stock for all
potentially dilutive securities. Earnings per share computations to reconcile
basic and diluted income from continuing operations for the years 1998, 1997 and
1996 consist of the following (in thousands except per share amounts):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Income from continuing operations $ 24,360 $ 31,557 $ 16,237
========== ========== ==========
Basic weighted average shares 22,720 21,380 19,646
Effect of dilutive securities: (1)<F1>
Options and warrants 404 670 932
Convertible subordinated debentures - - 82
---------- ---------- ----------
Diluted weighted average shares 23,124 22,050 20,660
========== ========== ==========
Per share income from continuing operations:
Basic $ 1.07 $ 1.48 $ .83
Diluted $ 1.05 $ 1.43 $ .79
- -------------------
<FN>
<F1> (1) A weighted average year-to-date number of options and warrants to
purchase 187,000, 1,007,000 and 20,000 shares of common stock were
outstanding during 1998, 1997 and 1996, respectively, but were not
included in the computation of diluted per share income from
continuing operations because their exercise prices were greater than
the average market price of the common shares.
</FN>
</TABLE>
Stock-Based Compensation: The Company accounts for employee stock-based
compensation using the intrinsic value method prescribed by Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." Reference is made to Note G, "Stock Options and Warrants," for a
summary of the pro forma effect of SFAS No. 123, "Accounting for Stock-Based
Compensation" on the Company's results of operations in 1998, 1997 and 1996.
F-10
<PAGE>
Fair Value of Financial Instruments: 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, 1998 and 1997, because
of the short-term maturity of these instruments. Based upon the rates available
to the Company, the fair value of the Senior Notes and the term loans
approximates $65,149,000 and $75,440,000 as of December 31, 1998 and 1997,
respectively. The book value of the Company's revolving lines of credit
approximates fair value due to the variable interest rates under the lines.
Impairment of Long-Lived Assets: In accordance with SFAS No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," the Company reviews long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying value of an asset
may not be realizable. There were no impairments recorded under SFAS No. 121 in
1998, 1997 or 1996.
Accounting For Sales of Stock By Subsidiary Companies: The Company
recognizes gains or losses on sales of stock by its subsidiary companies when
such sales are not made as part of a larger plan of corporate reorganization.
Such gains or losses are based upon the difference between the book value of the
Company's investment in the subsidiary immediately after the sale and the
historical book value of the Company's investment immediately prior to the sale.
Comprehensive Income: In accordance with SFAS No. 130, "Reporting
Comprehensive Income," the Company has reported comprehensive income in the
consolidated statements of stockholders' equity for the three years ended
December 31, 1998. Accumulated other comprehensive income consists of foreign
currency translation adjustments.
Allowance for Doubtful Accounts: Activity in the Company's allowance for
doubtful accounts receivable consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Balance at beginning of period $ 561 $ 336
Additions to costs and expenses 400 225
Deductions for uncollectible receivables written off and recoveries (25) -
------------ ------------
Balance at end of period $ 936 $ 561
============ ============
</TABLE>
Recent Accounting Pronouncements: In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. Statement 133 is effective for
fiscal years beginning after June 15, 1999 and cannot be applied retroactively.
Statement 133 must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued, acquired,
or substantively modified after December 31, 1997 (and, at the Company's
election, before January 1, 1998). The Company has not yet quantified the impact
of adopting Statement 133. However, the Company anticipates that application of
the statement will not have a material effect on its consolidated financial
statements.
NOTE B--INCOME TAXES
The discussion of income taxes herein does not include the income tax
effects of the discontinued operations explained in Note M of these consolidated
financial statements.
F-11
<PAGE>
The provision (benefit) for income taxes for each of the three years ended
December 31, 1998, are comprised of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Current - Federal $ 3,018 $ 8,709 $ 5,214
- State 165 314 246
- Foreign 451 142 82
---------- ---------- ----------
3,634 9,165 5,542
---------- ---------- ----------
Deferred - Federal 9,463 8,256 3,321
- State - 1 -
- Foreign 526 - -
---------- ---------- ----------
9,989 8,257 3,321
---------- ---------- ----------
Tax provision - Federal 12,481 16,965 8,535
- State 165 315 246
- Foreign 977 142 82
---------- ---------- ----------
$ 13,623 $ 17,422 $ 8,863
========== ========== ==========
</TABLE>
The differences between the U.S. Federal income taxes computed at the
statutory rate (35% for 1998, 35% for 1997 and 34.7% for 1996) and the Company's
income taxes for financial reporting purposes are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Statutory Federal income tax $ 13,294 $ 17,143 $ 8,716
State income tax, less Federal benefit 107 206 162
Other, net 222 73 (15)
------- ------- -------
Income tax expense $ 13,623 $ 17,422 $ 8,863
======= ======= =======
</TABLE>
The components of the net deferred income tax liability reflected in the
Company's consolidated balance sheets at December 31, 1998 and 1997 were as
follows (in thousands):
<TABLE>
<CAPTION>
Deferred Tax Assets
(Liabilities) at December 31,
-----------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Alternative minimum tax credit carryforward $ 4,324 $ 3,541
Partnership earnings 945 499
Investment tax credits 44 44
Other 1,407 1,021
---------- ----------
Total deferred tax assets 6,720 5,105
Less: Valuation allowance (44) (44)
---------- ----------
Deferred tax assets, net of
valuation allowance 6,676 5,061
---------- ----------
Depreciation, depletion and amortization (30,615) (20,617)
Financial gain on sale of subsidiary stock (2,934) (2,494)
Other (1,166) -
---------- ----------
Total deferred tax liabilities (34,715) (23,111)
---------- ----------
Net deferred tax liability $ (28,039) $ (18,050)
========== ==========
</TABLE>
As of December 31, 1998, the Company has an alternative minimum tax (AMT)
credit carryforward of approximately $4,324,000 which can be used to offset
regular Federal income taxes payable in future years. The AMT credit has an
indefinite carryforward period.
F-12
<PAGE>
In connection with the exercise of non-qualified stock options and
common stock purchase warrants by employees during 1998, 1997 and 1996, the
Company received $344,000, $5,657,000 and $3,204,000, 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, 1998 and
1997 (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
---------- ---------
<S> <C> <C>
Senior notes $ 65,000 $ 75,000
Borrowings under lines of credit 85,500 15,000
Term loans 172 477
---------- ---------
$ 150,672 $ 90,477
========== =========
</TABLE>
Senior Notes: 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 the fixed rate of 7.17%. On April 9,
1996, the Company issued its Series C Notes, which total $22.5 million and bear
interest at a fixed rate of 7.48%. The Series A Notes mature on December 30,
2001, and require annual principal payments of $8.3 million beginning December
30, 1999. The Series B and Series C Notes mature on December 30, 2002, and
require combined annual principal payments of $10 million which began on
December 30, 1998. Interest on the Senior Notes is payable semi-annually on June
30 and December 30.
Lines of Credit: The Company has a $75 million unsecured revolving line of
credit facility that matures on March 16, 2001. The facility bears interest at a
rate determined by the ratio of the Company's debt to cash flow from operations.
Pursuant to the interest rate pricing structure, funds can currently be borrowed
at LIBOR plus 3/4%, the bank's prevailing prime rate, or the sum of the Federal
Funds effective rate for such day plus 1/2%. At December 31, 1998 and 1997,
$66.5 million and $15 million, respectively, was outstanding on this line of
credit at an average interest rate of 6.33% and 6.69%, respectively.
On December 11, 1998, the Company entered into an agreement for a $25
million unsecured revolving line of credit that matures on December 11, 1999.
The facility bears interest at a rate determined by the ratio of the Company's
debt to cash flow from operations. The interest rate pricing structure is the
same as in the Company's $75 million line of credit. At December 31, 1998, $19
million was outstanding on this line of credit at an average interest rate of
6.41%. Subsequent to December 31, 1998, the Company paid all amounts outstanding
under its $25 million line of credit and on February 12, 1999 the Company
cancelled its $25 million line of credit.
Term Loans: In 1997, two of the Company's wholly-owned subsidiaries
obtained two separate three-year term loans totaling $361,000. The loans bear
interest at the rate of 7.9%. The proceeds were used for the purchase of certain
property and equipment which secures the debt. Monthly principal and interest
payments total approximately $11,000.
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. The Company was in compliance with the
financial convenants at December 31, 1998.
Aggregate maturities of the Company's debt over the next four years are as
follows: $37,461,000 in 1999; $18,378,000 in 2000; $84,833,000 in 2001 and
$10,000,000 in 2002.
NOTE D--LEASE OBLIGATIONS
Assets recorded under capital leases obligations of $17,000 and $81,000 at
December 31, 1998 and 1997, respectively, are included in property and
equipment.
F-13
<PAGE>
The Company leases office space under operating leases. Rental expense for
1998, 1997 and 1996 was approximately $757,000, $606,000 and $619,000,
respectively.
Future minimum lease payments for the five years subsequent to December 31,
1998 and in the aggregate are as follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
----------- -----------
<S> <C> <C>
1999 $ 19 $ 780
2000 - 740
2001 - 524
2002 - 265
2003 - -
----------- -----------
Total minimum lease payments 19 $ 2,309
===========
Less amount representing interest (1)
-----------
Present value of net minimum
lease payments $ 18
===========
</TABLE>
NOTE E--VOLUMETRIC PRODUCTION PAYMENT
In June 1996, the Company sold a volumetric production payment for $19
million to certain limited partnerships. Under the terms of the production
payment agreements, the Company conveyed a mineral property interest of
approximately 7.6 billion cubic feet of certain natural gas and approximately
363,000 barrels of other hydrocarbons to the purchasers. The Company retained
responsibility for its working interest share of the cost of operations. The
Company accounted for the proceeds received in the transaction as deferred
revenue which was amortized into revenue and income as natural gas and other
hydrocarbons were produced and delivered.
The Company entered into an agreement to extinguish the remaining portion
of its volumetric production payment which was effective July 1, 1997. The cost
to acquire the production payment liability exceeded its book value. As a result
of this transaction, the Company recorded a pre-tax loss of $4,133,000 in the
accompanying consolidated statement of operations for the year ended December
31, 1997.
NOTE F--CONTINGENCIES AND COMMITMENTS
At both December 31, 1998 and 1997, $274,000 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.
The Company has employment agreements with certain of its key employees and
other incentive compensation arrangements that commit it to commissions based on
revenue, bonuses based on pre-tax profits, and other amounts based on seismic
data program profitability. Part III of the Company's Form 10-K contains a more
complete discussion of these contractual obligations.
The Company guarantees borrowings up to $750,000 made by its president
under a line of credit. The Company is only obligated to make payment in the
event of default by its president. The Company has a contractual right of offset
against any salary, bonus, commission or other amounts due from the Company to
its president for any amounts paid by the Company pursuant to this guaranty. At
December 31, 1998, $600,000 was outstanding on this line of credit, which
represented the maximum amount outstanding on this line of credit for the year.
The Company did not make any payments under this guaranty during 1998.
NOTE G--STOCK OPTIONS AND WARRANTS
The Company presently maintains four stock option plans under which the
Company's officers, directors and employees may be granted options or warrants
to purchase the Company's common stock. The exercise price, term and other
conditions applicable to each option granted under the Company's plans are
generally determined by the Compensation Committee at the time of grant and may
vary with each option granted. All options issued under the Company's plans are
issued at or above the market price of the Company's common stock as of the date
of issuance, have a term of no more than ten years and vest under varying
schedules in accordance with the terms of the respective option agreements.
F-14
<PAGE>
On December 3, 1998, the Company's Board of Directors approved a repricing
of the Company's then outstanding options whereby all options and warrants held
by employees with an exercise price greater than $13.94 ($2 above the market
price of the Company's common stock) were repriced to $13.94.
The following summarizes information with regard to the stock option and
warrant plans for the years ended December 31, 1998, 1997 and 1996 (shares in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
----------------------- ----------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 5,659 $ 16.33 4,758 $ 11.50 4,860 $ 9.96
Granted 5,015 13.75 3,444 20.18 1,137 16.30
Exercised (102) 9.74 (1,809) 9.26 (1,145) 9.63
Cancelled (3,804) 19.00 (734) 20.53 (94) 12.55
-------- -------- --------
Outstanding at end of year 6,768 12.99 5,659 16.33 4,758 11.50
======== ======== ========
Options exercisable at end of year 5,363 4,147 4,125
======== ======== ========
Available for grant at end of year 1,170 1,256 2,849
======== ======== ========
</TABLE>
The following table summarizes information for the options and warrants
outstanding at December 31, 1998 (shares in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- -----------------------------
Number of Weighted Weighted Number of Weighted
Options Average Average Options Average
Outstanding Contractual Exercise Exercisable Exercise
Range of Exercise Prices at 12/31/98 Life in Years Price at 12/31/98 Price
- ------------------------ ------------- ------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 2.69 - $ 11.94 1,387 4.07 $ 9.58 1,293 $ 9.41
$ 12.00 - $ 13.56 1,386 3.86 12.37 1,295 12.35
$ 13.75 - $ 13.75 36 5.96 13.75 - -
$ 13.94 - $ 13.94 3,772 4.61 13.94 2,610 13.94
$ 20.34 - $ 25.31 187 6.02 23.49 165 23.38
------------- -------------
$ 2.69 - $ 25.31 6,768 12.99 5,363 12.75
============= =============
</TABLE>
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock-based compensation plans. APB Opinion No. 25 generally
does not require compensation costs to be recorded on options which have
exercise prices at least equal to the market price of the stock on the date of
grant. Accordingly, no compensation cost has been recognized for the Company's
stock-based plans. Had compensation cost for the Company's stock-based
compensation plans been determined based on the fair value at the grant dates
for awards under those plans consistent with the optional accounting method
prescribed by SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below (in thousands, except per share data):
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net income As reported $ 24,360 $ 31,557 $ 15,249
Pro forma $ 15,159 $ 17,039 $ 10,050
Basic earnings per share As reported $ 1.07 $ 1.48 $ .78
Pro forma $ .67 $ .80 $ .51
Diluted earnings per share As reported $ 1.05 $ 1.43 $ .74
Pro forma $ .66 $ .78 $ .49
</TABLE>
F-15
<PAGE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions for
1998, 1997 and 1996, respectively: (1) risk-free interest rates ranging from
4.44% to 5.03%, 5.79% to 6.79% and 5.9% to 7.03%; (2) dividend yield of 0%, 0%
and 0%; (3) stock price volatility ranging from 44.34% to 57.10%, 37.23% to
45.77% and 46.49% to 62.62%, and (4) expected option lives ranging from .42 to
10 years, 1.67 to 10 years and 5 to 10 years. The weighted-average fair value of
options granted during 1998, 1997 and 1996 was $11.94, $9.98 and $11.20 per
option, respectively, for options granted at fair market value and $13.75 and
$10.15 per option for options granted above fair market value in 1998 and 1997,
respectively. The pro forma amounts shown above may not be representative of
future results because the SFAS No. 123 method of accounting has not been
applied to options granted prior to January 1, 1995.
On July 25, 1996, the Company's Board of Directors adopted the Non-Employee
Directors' Deferred Compensation Plan which permits each non-employee director
to elect to receive annual director fees in the form of stock options and to
defer receipt of any directors fees in a deferred cash account or as deferred
shares. As of December 31, 1998, 60,000 shares have been reserved for issuance
under this plan and directors have accumulated 1,643 deferred shares in their
accounts of which 328 shares have been distributed and 1,315 will be distributed
in annual equal installments from January 1999 to January 2002.
NOTE H--COMMON STOCK
On November 20, 1997, the shareholders of the Company approved an increase
in the Company's authorized common stock to 50,000,000 shares to facilitate a
two-for-one stock split, effected in the form of a 100% stock dividend, which
was approved by the Board of Directors on October 7, 1997. The two-for-one stock
split was paid in the form of a stock dividend to shareholders of record as of
December 3, 1997. All numbers of shares and per share amounts in the
accompanying consolidated financial statements and footnotes have been restated
to give effect to the two-for-one stock split except where noted.
In December 1997, the Company's Board of Directors approved the expenditure
of up to $25 million to repurchase the Company's common stock. As of December
31, 1998, the Company has repurchased 175,000 shares of common stock at a cost
of $2,973,000 under this plan.
The Company may 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, up to an aggregate of $41,041,600 pursuant to an
effective shelf registration statement filed with the Securities and Exchange
Commission.
On July 21, 1992, the Company granted ten-year loans at an interest rate of
4% to most of its employees for the purchase of 800,000 shares of the Company's
common stock at the then market price of $2.69 per share. Payment of 5% of the
original principal balance plus accrued interest are due annually August 1, with
a balloon payment of the remaining principal and interest due August 1, 2002. On
October 2, 1998, the Company granted five-year loans at an interest rate of 4%
to most of its employees for the purchase of 794,300 shares of the Company's
common stock at the then market price of $10.31 per share. Payment of 60% of the
loan amount plus accrued interest is being made in equal monthly, quarterly or
annual payments, as applicable, and a balloon payment of the remaining 40% is
due on October 2, 2003. The Company recorded related compensation expense due to
the below market interest rate on these loans of $54,000, $43,000 and $48,000
for the years ended December 31, 1998, 1997 and 1996, respectively. During 1998,
1997 and 1996, the Company received $649,000, $96,000 and $190,000 respectively,
as principal payments on these notes. The stock certificates are held by the
Company as collateral until payment is received.
NOTE I--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, 1998, no preferred stock had been issued.
F-16
<PAGE>
NOTE J--INVESTMENT IN EAGLE GEOPHYSICAL, INC.
On August 11, 1997, the Company's wholly-owned seismic data acquisition
crew subsidiary, Eagle Geophysical, Inc. ("Eagle"), completed an initial public
offering ("Offering") in which the Company sold 1,880,000 of its 3,400,000
shares of Eagle common stock as a selling stockholder. The Company received net
proceeds of $29,723,000 from its participation in the Offering, resulting in a
pre-tax gain, net of costs of $18,449,000 on the sale of Eagle common stock in
1997. Additionally, the Company recorded a pre-tax gain, net of costs, of
$10,750,000 in 1997 representing an increase in the Company's underlying equity
of Eagle as a result of Eagle's issuance of stock in connection with the
Offering.
In 1998, Eagle issued stock in connection with two acquisitions which
caused the Company to record a pre-tax loss of $193,000 for the year ended
December 31, 1998.
As a result of the Offering, the Company now owns 1,520,000 shares of Eagle
common stock or 17.3% of the outstanding shares of Eagle, at a book value of
$15,544,000 or $10.23 per share. The Company accounts for its investment in
Eagle using the equity method whereby such investment is based on the Company's
historical cost plus the Company's share of (i) Eagle earnings and losses and
(ii) Eagle's equity as a result of issuances of stock. In accordance with the
accounting literature, an investment in a company accounted for under the equity
method is carried on such basis rather than based on the fair market value of
the stock unless an "other than temporary" decline in the market value of the
stock has occurred. Once an "other than temporary" decline in the market value
of the stock occurs, an impairment in the carrying value of the investment
should be recorded. An "other than temporary" decline is deemed to have occurred
if the fair market value is depressed for a period of more than nine to twelve
months. Eagle's stock has been trading at a price below the Company's carrying
value since August 1998. If the weakness in commodity prices continues, and, in
turn the oilfield service sector market values remain depressed, the Company may
be required to record a non-cash, non-operating charge for impairment in the
carrying value of its investment in Eagle during 1999. At December 31, 1998, the
fair market value of the Company's investment in Eagle was $5,890,000 or $3.875
per share as quoted by NASDAQ.
NOTE K--RELATED PARTY TRANSACTIONS
The Company owed Eagle and its subsidiaries $27,117,000 and $12,500,000 at
December 31, 1998 and 1997, respectively, for seismic data acquisition services
provided to the Company and its subsidiaries subsequent to the Offering date.
The Company incurred charges of $79,900,000 and $22,200,000 for these services
for the year ended December 31, 1998 and from the period August 11, 1997 through
December 31, 1997, respectively. Costs incurred from these services were based
on agreed upon contractual amounts and terms similar to contracts with third
party contractors.
The Company and Eagle entered into a Master Separation Agreement ("the
Agreement") for the purpose of defining their continuing relationship after the
Offering. The Agreement provided for the Company and Eagle to enter into a
Sublease, a Registration Rights Agreement and a Tax Indemnity Agreement. Under
the Agreement, the Company and Eagle have indemnified each other with respect to
liabilities arising in connection with the operations of their respective
businesses prior to and after the date of consummation of the Offering including
liabilities under the Securities Act with respect to the Offering. Under the
Sublease Agreement, the Company subleased a portion of its principal corporate
offices to Eagle and allowed Eagle to utilize certain shared office equipment
from August 1997 until September 1998. The Company received $88,000 and $47,000
for this sublease for the year ended December 31, 1998 and from the period from
August 11, 1997 through December 31, 1997, respectively. Pursuant to the
Registration Rights Agreement, Eagle registered the offer and sale by the
Company on a delayed and continuous basis from time to time of the shares of
common stock owned by the Company after the Offering at the expense of Eagle.
Pursuant to the Tax Indemnity Agreement, Eagle paid the Company its share of
federal income taxes prior to the date of consummation of the Offering, and is
responsible for federal income taxes from its operations on and after the date
of the Offering. Any subsequent refunds, additional taxes or penalties or other
adjustments relating to Eagle's federal income taxes for periods prior to the
date of consummation of the Offering shall be for the benefit of or be borne by
the Company. Similar provisions apply under the Tax Indemnity Agreement to other
taxes, such as state and local taxes.
The Company owed Helm Resources, Inc. and its subsidiaries ("Helm"), a
company that has three executive officers who are directors of the Company,
$2,000 and $76,000 as of December 31, 1998 and 1997,
F-17
<PAGE>
respectively, for sales of seismic data they jointly own and for general and
administrative expenses paid by Helm on behalf of the Company. The Company
incurred charges of $99,000, $76,000 and $80,000, for these general and
administrative expenses during 1998, 1997 and 1996, respectively. Management
believes that these expenses, which were specifically related to the Company's
business, represented costs which would have been incurred in similar amounts 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 1994 through 1997 which invested in the exploration and
development of oil and gas properties on a working interest basis along with DDD
Energy, Inc. ("DDD Energy"). Each partnership's working interest amounted to
2.5% of the total investment made by such partnership and DDD Energy for the
partnership formed in 1997, 3% for the partnership formed in 1996 and 5% for the
partnerships formed in 1995 and 1994. On October 1, 1998, DDD Energy purchased
the oil and gas interests owned by each of the partnerships in exchange for
355,733 shares of the Company's common stock, payment of $824,000 and assumption
of each partnership's liabilities totaling $1,555,000.
NOTE L--MAJOR CUSTOMERS
No customers accounted for 10% or more of revenues during the years 1998,
1997 or 1996.
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 M--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 present the gas
marketing operations as discontinued operations for all periods presented.
Effective August 1, 1996, the Company assigned substantially all of its
contracts to purchase and supply natural gas to a retail energy marketer.
The loss from discontinued operations amounted to $988,000 for the year
ended December 31, 1996, net of an income tax benefit of $580,000. 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. Then current market pricing models were used to estimate the
market price at which the Company could purchase gas supply and transportation
in the future. Such models were used to estimate the loss related to future
contractual commitments at December 31, 1995. During the first seven months of
1996, the Company continued to deliver gas to customers under its existing
contracts. Effective August 1, 1996, the gas marketing operations were disposed
of. As a result of changes in market prices to purchase gas supply, an
additional $988,000 was recognized as a loss from discontinued operations in
1996. Such loss represented the final charge related to the discontinued
operations. No assets or liabilities relating to the discontinued operations
remained at December 31, 1998.
NOTE N--STATEMENT OF CASH FLOW INFORMATION
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 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.
F-18
<PAGE>
Significant non-cash investing and financing activities are as follows:
1. During 1998, the Company issued 355,733 shares of its common stock
valued at $3,914,000 to acquire interests in certain oil and gas
properties and assumed liabilities totaling $1,555,000.
2. During 1998, the Company issued 794,300 shares of its common stock to
its officers and employees in exchange for notes receivable of
$8,191,000.
3. During 1996, the Company issued 428,608, shares of its common stock
upon the conversion and exchange of $1,989,000, of its 9% convertible
subordinated debentures. In connection with these conversions and
exchanges, unamortized bond issue costs totaling $109,000 have been
charged to additional paid-in capital.
4. During 1996, the Company issued 264,150 shares of its common stock in
exchange for a 50% equity interest in a marine seismic company.
5. During 1996, the Company redeemed a portion of its equity interest in
a marine seismic company in exchange for a note totaling $2,680,000.
6. During 1997 and 1996, capital lease obligations totaling $374,000 and
$41,000, respectively, were incurred when the Company entered into
leases for property and equipment.
NOTE O--INDUSTRY SEGMENTS
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" in 1998 which changes the way the Company
reports information about its operating segments. The information for 1997 and
1996 has been restated from the prior year's presentation in order to conform to
the current year's presentation.
The Company operates in two reportable segments - seismic and exploration
and production. In 1997 and 1996, the Company had an additional reporting
segment - geophysical services. The long-term financial performance of each of
the reportable segments is affected by similar economic conditions. The
accounting policies of the segments are the same as those described in Footnote
A to these consolidated financial statements. Intersegment sales are accounted
for at prices comparable to those received from unaffiliated customers. The
Company evaluates performance of each reportable segment based on operating
income (loss) before selling, general and administrative expenses, interest
income and expense, income taxes, non-recurring items and accounting changes.
Financial information by reportable segment for the three years ended
December 31, 1998, was as follows (in thousands):
<TABLE>
<CAPTION>
Exploration
and Total
Seismic Production Segments
----------- ------------ ------------
<S> <C> <C> <C>
1998
Revenue from external purchasers $ 125,863 $ 18,994 $ 144,857
Depreciation, depletion
and amortization 57,117 11,872 68,989
Cost of sales 191 4,683 4,874
Segment operating income 68,555 2,439 70,994
Assets 317,292 156,623 473,915
Capital expenditures (a)<F1> 139,167 48,173 187,340
<FN>
<F1> (a) Includes other ancillary equipment.
</FN>
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
Exploration
and Geophysical Total
Seismic Production Services Segments
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
1997
Revenue from external purchasers $ 85,560 $ 25,680 $ 16,316 $ 127,556
Intersegment revenue - - 18,456 18,456
Depreciation, depletion and
amortization 35,163 12,666 983 48,812
Impairment of oil and gas
properties - 9,560 - 9,560
Cost of sales 394 5,168 26,855 32,417
Segment operating income (loss) 50,003 (1,714) 6,934 55,223
Assets 219,288 122,930 - 342,218
Capital expenditures (a)<F1> 89,472 64,418 8,478 162,368
1996
Revenue from external purchasers $ 67,138 $ 18,255 $ 20,609 $ 106,002
Intersegment revenue - - 27,217 27,217
Depreciation, depletion
and amortization 30,477 7,212 951 38,640
Cost of sales 448 3,134 42,278 45,860
Segment operating income 36,213 7,909 4,597 48,719
Assets 164,547 93,565 24,810 282,922
Capital expenditures (a)<F1> 52,217 51,428 7,669 111,314
<FN>
<F1> (a) Includes other ancillary equipment.
</FN>
</TABLE>
The following geographic information for the three years ended December 31,
1998 pertains to the Company's seismic segment (in thousands):
<TABLE>
<CAPTION>
Other
United Foreign
States Canada Countries Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998
Revenue from external customers $ 117,623 $ 7,370 $ 870 $ 125,863
Assets 301,704 13,797 1,791 317,292
1997
Revenue from external customers $ 82,228 $ 2,748 $ 584 $ 85,560
Assets 215,273 1,986 2,029 219,288
1996
Revenue from external customers $ 64,508 $ 1,502 $ 1,128 $ 67,138
Assets 160,566 1,899 2,082 164,547
</TABLE>
All exploration and production activities are conducted in the United
States.
F-20
<PAGE>
The following table reconciles segment information to consolidated totals:
(in thousands)
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1998 1997 1996
----------- ----------- ------------
<S> <C> <C> <C>
Revenue:
Revenue from external purchasers $ 144,857 $ 127,556 $ 106,002
Intersegment revenue - 18,456 27,217
Intercompany eliminations - (18,456) (27,217)
----------- ----------- ------------
Total consolidated revenue $ 144,857 $ 127,556 $ 106,002
=========== =========== ============
Depreciation, depletion and amortization:
Total reportable segment depreciation,
depletion and amortization $ 68,989 $ 48,812 $ 38,640
Corporate and other 901 867 609
----------- ----------- ------------
Total consolidated depreciation,
depletion and amortization $ 69,890 $ 49,679 $ 39,249
=========== =========== ============
Cost of Sales:
Total reportable segment cost of sales $ 4,874 $ 32,417 $ 45,860
Intercompany eliminations - (14,464) (26,458)
----------- ----------- ------------
Total consolidated cost of sales $ 4,874 $ 17,953 $ 19,402
=========== =========== ============
Income from continuing operations
before income taxes:
Total reportable segment operating
income $ 70,994 $ 55,223 $ 48,719
Selling general and
administrative expense (26,599) (23,043) (19,165)
Interest expense, net (5,540) (3,554) (2,900)
Equity in earnings (loss) of affiliate 222 146 (186)
Gain on sale of subsidiary stock - 18,449 -
Increase (decrease) in underlying
equity of affiliate (193) 10,750 -
Extinguishment of volumetric
production payment - (4,133) -
Eliminations and other (901) (4,859) (1,368)
----------- ----------- ------------
Income from continuing operations
before income taxes $ 37,983 $ 48,979 $ 25,100
=========== =========== ============
Assets:
Total reportable segment assets $ 473,915 $ 342,218 $ 282,922
Corporate and other 21,852 23,464 11,757
----------- ----------- ------------
Total consolidated assets $ 495,767 $ 365,682 $ 294,679
=========== =========== ============
</TABLE>
F-21
<PAGE>
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, 1998 and 1997.
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------
(In thousands, except per share amounts) March 31 June 30 Sept. 30 Dec. 31
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1998
Revenue $ 30,927 $ 36,976 $ 38,332 $ 38,622
Gross profit(1)<F1> 14,851 18,123 17,825 20,195
Provision for income taxes 2,873 3,741 3,693 3,316
Net income 4,865 6,369 6,288 6,838
Earnings per share: (2)<F2>
Basic .22 .28 .28 .29
Diluted .21 .28 .28 .29
1997
Revenue $ 27,219 $ 34,673 $ 30,793 $ 34,871
Gross profit(1)<F1> 12,682 16,338 15,166 6,000
Provision for income taxes 2,228 3,040 12,002 152
Net income 4,084 5,404 21,696 373
Earnings per share: (2)<F2>
Basic .20 .26 1.00 .02
Diluted .19 .25 .98 .02
<FN>
<F1> (1) Gross profit represents revenue less data bank amortization, depletion
of oil and gas properties, impairment of oil and gas properties and
cost of sales.
<F2> (2) The sum of the individual quarterly earnings per share may not agree
with the year to date earnings per share as each period's computation
is based on the weighted average number of common shares outstanding
during the period.
</FN>
</TABLE>
NOTE Q--SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)
The following information concerning the Company's oil and gas operations
is presented 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.
F-22
<PAGE>
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. The reserve estimates presented herein were prepared by the
independent petroleum engineering firms of Forrest A. Garb & Associates, Inc. at
December 31, 1998, Miller and Lents, Ltd. and Forrest A. Garb & Associates, Inc.
at December 31, 1997 and Miller and Lents, Ltd. at December 31, 1996. 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, 1995 1,512 14,011
Revisions of previous estimates 249 1,966
Purchases of reserves in place 68 7,896
Extensions and discoveries 1,107 10,322
Sale of volumetric production payment (363) (7,626)
Production (279) (2,808)
------------ ------------
Proved reserves at December 31, 1996 2,294 23,761
Revisions of previous estimates (500) (3,863)
Repurchase of volumetric production payment 98 3,736
Extensions and discoveries 1,110 28,491
Production (364) (5,131)
------------ ------------
Proved reserves at December 31, 1997 2,638 46,994
Revisions of previous estimates 2,374 12,698
Purchases of reserves in place 284 2,898
Extensions and discoveries 2,428 17,685
Production (386) (6,216)
------------ ------------
Proved reserves at December 31, 1998 7,338 74,059
============ ============
Proved developed reserves -
December 31, 1995 1,178 10,219
============ ============
December 31, 1996 902 11,563
============ ============
December 31, 1997 1,744 18,483
============ ============
December 31, 1998 5,265 37,844
============ ============
</TABLE>
In addition to the proved reserves disclosed above, the Company owned
proved sulfur reserves of 420,000 long tons, 174,000 long tons and 197,000 long
tons at December 31, 1998, 1997 and 1996, respectively. In addition to the
production indicated above, in 1997 and 1996 the Company delivered 56,000 and
84,000 barrels, respectively, and 1,795 and 2,094 million cubic feet,
respectively, under the terms of a volumetric production payment agreement.
Capitalized Costs of Oil and Gas Properties: As of December 31, 1998 and
1997, the Company's capitalized costs of oil and gas properties were as follows
(in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
---------- ---------
<S> <C> <C>
Unevaluated properties $ 53,458 $ 39,436
Evaluated properties 141,118 107,206
---------- ---------
Total capitalized costs 194,576 146,642
Less: Accumulated depreciation,
depletion and amortization (45,599) (33,727)
---------- ---------
Net capitalized costs $ 148,977 $ 112,915
========== =========
</TABLE>
F-23
<PAGE>
Of the total costs excluded from the amortization calculation as of
December 31, 1998, $25,329,000 was incurred during 1998, $12,916,000 was
incurred during 1997, $8,793,000 was incurred during 1996, $3,748,000 was
incurred during 1995 and $2,672,000 was incurred during 1994. 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 to five
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, 1998, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> <C>
Acquisition of properties:
Evaluated $ 4,701 $ 13,813 $ 23,090
Unevaluated 15,207 10,857 7,000
Exploration costs 22,708 26,961 17,358
Development costs 5,318 12,318 3,913
----------- ----------- ----------
Total costs incurred $ 47,934 $ 63,949 $ 51,361
=========== =========== ==========
</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, 1998, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenue $ 18,663 $ 25,282 $ 17,921
Production costs (4,673) (5,155) (3,124)
Depreciation, depletion and amortization (11,872) (12,666) (7,212)
Impairment of oil and gas properties - (9,560) -
----------- ----------- -----------
Income (loss) before income taxes 2,118 (2,099) 7,585
Income tax benefit (expense) (741) 735 (2,655)
----------- ----------- -----------
Results of operations $ 1,377 $ (1,364) $ 4,930
=========== =========== ===========
</TABLE>
In addition to the revenues and production costs disclosed above, the
Company had revenues from sulfur sales and related production costs of $331,000
and $10,000 respectively, for the year ended December 31, 1998, $398,000 and
$13,000 respectively, for the year ended December 31, 1997 and $334,000 and
$10,000, respectively, for the year ended December 31, 1996.
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.
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 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.
F-24
<PAGE>
Management does not rely upon the following information in making
investment and operating decisions. The Company, along with its partners, bases
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>
December 31,
----------------------------------------
1998 1997 1996
---------- --------- ----------
(in thousand)
<S> <C> <C> <C>
Future gross revenue $ 248,608 $ 162,762 $ 127,905
Future production costs (43,065) (21,417) (21,913)
Future development costs (17,131) (21,659) (10,101)
Future income taxes (47,541) (27,453) (26,524)
---------- --------- ----------
Future net cash flows 140,871 92,233 69,367
10 percent annual discount for estimated timing of cash flows (59,328) (27,636) (17,277)
---------- --------- ----------
Standardized measure of discounted future net cash flows $ 81,543 $ 64,597 $ 52,090
========== ========= ==========
</TABLE>
The above table excludes future net cash flows before income taxes of
$9,167,000, $3,187,000 and $3,495,000, and discounted future net cash flows
before income taxes of $4,310,000, $2,350,000 and $2,427,000, as of December 31,
1998, 1997 and 1996, respectively, related to proved sulfur reserves.
Natural gas prices have declined and oil prices have increased since
December 31, 1998. Accordingly, the discounted future net cash flows shown above
could be different if the standardized measure were calculated using prices in
effect at the end of the first quarter.
The following are the principal sources of changes in the standardized
measure of discounted future net cash flows for the years ended December 31,
1998, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
--------- ---------- ----------
<S> <C> <C> <C>
Standardized measure, beginning of year $ 64,597 $ 52,090 $ 16,058
Extensions and discoveries, net of related costs 34,102 45,193 26,690
Sales of oil and gas produced, net of production costs (13,990) (16,035) (9,057)
Net changes in prices and production costs (25,385) (28,384) 24,561
Change in future development costs 3,626 (2,650) (355)
Development costs incurred during the period that reduced
future development costs 4,330 7,802 2,042
Revision of previous quantity estimates 31,358 (8,927) 3,077
Repurchase of volumetric production payment - 8,319 -
Purchases of reserves in place 4,609 - 18,309
Sale of volumetric production payment - - (17,763)
Accretion of discount 8,328 7,276 2,532
Net change in income taxes (7,422) 1,988 (11,406)
Change in production rates and other (22,610) (2,075) (2,598)
--------- ---------- ----------
Standardized measure, end of year $ 81,543 $ 64,597 $ 52,090
========= ========== ==========
</TABLE>
NOTE R - SUBSEQUENT EVENT
On February 12, 1999, the Company completed a private placement of three
series of unsecured Senior Notes totaling $138 million. The Series D Notes total
$20 million, bear interest at a fixed rate of 7.03% and mature on February 15,
2004, with no principal payments due until maturity. The Series E Notes total
$75 million, bear interest at a fixed rate of 7.28% and mature on February 15,
2009, with annual principal payments of $12.5 million beginning February 15,
2004. The Series F Notes total $43 million, bear interest at a fixed rate of
7.43% and mature on February 15, 2009, with no principal payments due until
maturity. Interest on all series of the notes is payable semi-annually beginning
on August 15, 1999. The Company used a portion of the proceeds to repay amounts
outstanding under its $75 million and $25 million revolving lines of credit; the
remainder will be used for capital expenditures.
F-25
<PAGE>
EXHIBIT
INDEX
- --------------------------------------------------------------------------------
Exhibit Title Page
Number
- --------------------------------------------------------------------------------
10.49 Revolving Credit Agreement dated as of December 11, 1998,
between the Company and SunTrust Bank, Atlanta 53
10.50 Note Purchase Agreement dated as of February 12, 1999,
between the Company and the Series D Purchasers, the Series
E Purchasers and the Series F Purchasers 80
21.1 Subsidiaries of the Registrant 222
23.1 Consent of Arthur Andersen LLP 224
23.2 Consent of Forrest A. Garb & Associates, Inc. 226
EXHIBIT 10.49
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (the "AGREEMENT"), dated as of
December 11, 1998, is between SEITEL, INC., a Delaware corporation (the
"BORROWER"), and SUNTRUST BANK, ATLANTA, a Georgia banking corporation (the
"BANK").
RECITALS:
WHEREAS, the Borrower has requested the Bank to establish a revolving
credit facility for advances up to an aggregate principal amount outstanding not
to exceed $25,000,000;
WHEREAS, the Bank is willing to establish such revolving credit
facility to the Borrower upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. TERMS OF COMMITMENT
(a) ADVANCES. Subject to the terms and conditions of this Agreement,
the Bank agrees to make one or more Advances to the Borrower from time to time
from the date hereof to the Termination Date in an aggregate principal amount at
any time outstanding not to exceed the Commitment. Subject to the foregoing
limitations, and the other terms and conditions of this Agreement, the Borrower
may borrow, repay, and reborrow under the Commitment; PROVIDED, that the
Borrower may neither borrow nor reborrow (but can continue, prior to
acceleration, any Advance pursuant to paragraph (c)(iii) below hereof) if a
Potential Default or an Event of Default exists.
(b) INTEREST. The outstanding principal amount of the Advances shall
bear interest prior to maturity at the following rates per annum which may be
selected by the Borrower subject to and in accordance with the terms of this
Agreement:
(i) the Base Rate, PLUS the Applicable Margin; or
(ii) LIBOR for the applicable Interest Period, PLUS the
Applicable Margin.
Accrued and unpaid interest on the outstanding Advances shall be due
and payable (i) with respect to all Base Rate Advances, on the last Business Day
of each March, June, September and December, (ii) with respect to all LIBOR
Advances, on the last day of the applicable Interest Period, (iii) on the date
of any prepayment in accordance with SECTION 1(E) hereof and (iv) on the
Termination Date. Notwithstanding the foregoing, upon the occurrence of a
Potential Default or Event of Default hereunder, at the Bank's option, all
outstanding Advances shall bear interest at the Default Rate, which interest
shall be payable from time to time on demand.
(c) BORROWING PROCEDURE. (i) The Borrower shall give the Bank notice by
means of a borrowing notice for each requested Advance by not later than 11: 00
A.M. (Atlanta, Georgia time), in the case of LIBOR Advances two (2) Business
Days prior to the date of such Advance, and in the case of Base Rate Advances,
on the same day as such Advance, specifying: (i) the requested date of such
Advance (which shall be a Business Day), (ii) the amount of such Advance, and
(iii) in the case of a LIBOR Advance, the duration of the initial Interest
Period. The Bank at its option may accept telephonic requests for Advances,
provided that such acceptance shall not constitute a waiver of the Bank's right
to delivery of a borrowing notice in connection with subsequent Advances. Any
telephonic request for an Advance by the Borrower shall be promptly confirmed by
submission of a properly completed borrowing notice to the Bank. Each Advance
shall be in a minimum principal amount of $1,000,000 or a greater integral
multiple of $100,000. Subject to the other terms and conditions of this
Agreement, not later than 2:00 P.M. (Atlanta, Georgia time) on the date
specified for each Advance, the Bank will make such Advance available to the
Borrower by depositing the same, in immediately available funds, into an account
of the Borrower at the Bank or by wire transfer into an account at another
financial institution designated by the Borrower. All notices under this
paragraph shall be irrevocable. Any notice under this paragraph received by the
Bank after the prescribed times set forth above shall be deemed to have been
received on the next Business Day.
(ii) The Borrower shall give the Bank notice by not later
than 11:00 A.M. (Atlanta, Georgia time) two (2) Business Days prior to
the end of any Interest Period of its intention to continue any
outstanding LIBOR Advance for a new Interest Period and the duration
of such new Interest Period. All such notices shall be irrevocable. If
the Borrower shall fail to give the Bank notice as specified herein,
such LIBOR Advance shall be automatically continued for an Interest
Period of one (1) month. All Base Rate Advances shall automatically
continue as Base Rate Advances unless the Borrower shall give notice
to the Bank that it wishes to convert a Base Rate Advance to a LIBOR
Advance, in which case the Borrower shall comply with the procedures
specified in paragraph (i) above. The Borrower may also convert any
LIBOR Advance to a Base Rate Advance at the end of an Interest Period.
(iii) Notwithstanding the foregoing, if a Potential Default
or an Event of Default exists, all Advances shall, if not repaid or
accelerated, be continued as Base Rate Advances after the expiration
of the then current Interest Period.
(d) USE OF PROCEEDS. The proceeds of all Advances shall be used by the
Borrower for general working capital needs.
(e) OPTIONAL PREPAYMENTS. The Borrower may, upon at least two (2)
Business Day's prior notice to the Bank, prepay any Advance, in whole at any
time or from time to time in part without premium or penalty but with accrued
interest to the date of prepayment on the amount so prepaid; PROVIDED, that an
Advance may be prepaid only on the last day of the Interest Period unless the
Bank consents and the Borrower pays to the Bank any amount due under paragraph
(i) hereunder, and each partial prepayment shall be in the principal amount of
$1,000,000 or a greater integral multiple of $100,000. All notices hereunder
shall be irrevocable.
(f) COMPUTATION OF INTEREST AND ALL FEES. Interest hereunder shall be
computed on the basis of a year of 360 days and the actual number of days
elapsed (including the first day but excluding the last day).
(g) CHANGE IN CIRCUMSTANCES. Sections 3.1, 3.2, 3.3 and 3.5 of the
First Chicago Credit Agreement are hereby incorporated by reference herein and
made applicable to the Advances hereunder.
(h) SUBSTITUTE BASE RATE BORROWINGS. If the obligation of the Bank to
make LIBOR Advances shall be suspended pursuant to paragraph (g) hereof, the
Borrower shall have the option to repay or prepay all affected Advances or to
convert such LIBOR Advances to Base Rate Advances until such time as such
conditions causing such suspension shall no longer be effective in the sole
discretion of the Bank.
(i) FUNDING INDEMNIFICATION. If any payment of an LIBOR Advance occurs
on a date which is not the last day of the applicable Interest Period, whether
because of prepayment, acceleration or otherwise, or a LIBOR Advance is not made
on the date specified by the Borrower for any reason other than a default by the
Bank, the Borrower will indemnify the Bank for any loss or cost incurred by it
resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain such LIBOR
Advance.
2. CONDITIONS PRECEDENT
(a) INITIAL ADVANCE. The obligation of the Bank to make the initial
Advance is subject to the following condition precedents:
(i) the receipt on or before the day of such Advance all of
the following, each dated (unless otherwise indicated) the date
hereof, in form and substance satisfactory to the Bank:
(1) This Agreement and the Revolving Credit Note,
each duly executed by the Borrower.
(2) A certificate of good standing for the
Borrower and each Restricted Subsidiary which is a
corporation, and a certificate of existence for each
Restricted Subsidiary which is a partnership, each certified
by the appropriate governmental officer in its jurisdiction
of incorporation or organization, as the case may be.
(3) Copies (x) certified by the Secretary or
Assistant Secretary of the Borrower and of each Restricted
Subsidiary which is a corporation, respectively, of its
articles of incorporation (together with all amendments
thereto) and its by-laws and of its Board of Directors'
resolutions (and resolutions of other bodies, if any are
deemed necessary by counsel for the Bank) authorizing the
execution of the Loan Documents to which such entity is a
party and (u) certified by the Secretary or Assistant
Secretary of the general partner of each Restricted
Subsidiary which is a partnership of its partnership
agreement and any partnership certificate or other
significant governing document, and of any partnership
actions authorizing the execution of the Loan Documents to
which such entity is a party.
(4) Incumbency certificates, executed by the
Secretary or Assistant Secretary of the Borrower and of each
Restricted Subsidiary, which shall identify by name and
title and bear the signature of the officers of such entity
authorized to sign the Loan Documents to which it is a party
and (in the case of the Borrower) to make borrowings
hereunder, upon which certificates the Bank shall be
entitled to rely until informed of any change in writing by
the Borrower or by a Restricted Subsidiary, as the case may
be.
(5) A certificate, signed by a Senior Financial
Officer of the Borrower, stating that on the initial
borrowing date no Event of Default or Potential Default has
occurred and is continuing and demonstrating compliance, on
and as of the initial Borrowing Date, with the financial
covenants set forth in paragraph (f) under the heading
"COVENANTS" herein and with Section 6.20 of the First
Chicago Credit Agreement.
(6) A written opinion of counsel to the Borrower
and the Restricted Subsidiaries in form and substance
satisfactory to the Bank.
(7) Written money transfer instructions addressed
to the Bank and signed by an Authorized Officer, together
with such other related money transfer authorization as the
Bank may have reasonably requested.
(8) The Subsidiary Guaranty duly executed by each
Restricted Subsidiary.
(9) A copy of the most recent reserve report of
the type described in Section 6.1(g) of the First Chicago
Credit Agreement.
(10) A copy of the notice delivered to the Agent
pursuant to Section 6.1(j) of the First Chicago Credit
Agreement.
(11) Such other documents as the Bank or its
counsel may have reasonably requested.
(ii) CLOSING FEE. The payment to the Bank of a closing fee
equal to $135,000.
(b) ALL ADVANCES. The obligation of the Bank to make any Advance
(including the initial Advance) is subject to the following additional
conditions precedent:
(i) NO DEFAULT. No Event of Default or Potential Default
shall have occurred and be continuing or would result from such
Advance;
(ii) REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties contained in the Loan Documents shall
be true and correct on and as of the date of such Advance with the
same force and effect as if such representations and warranties had
been made on and as of such date; and
(iii) ADDITIONAL DOCUMENTATION. The Bank shall have received
such additional approvals, opinions, or documents as the Bank or its
legal counsel may reasonably request.
3. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Bank that:
(a) ORGANIZATION; POWER AND AUTHORITY. (i) the Borrower (1) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware; (2) 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 (3) 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 to perform its obligations hereunder.
(ii) Each Restricted Subsidiary (1) is a corporation or a
partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization;
(2) is duly qualified as a foreign corporation or partnership 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 (3) has the corporate or partnership 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.
(b) AUTHORIZATION AND VALIDITY. (i) The execution and delivery of this
Agreement and the Revolving Credit Note and the performance by the Borrower of
its obligations hereunder and thereunder have been duly authorized by all
necessary corporate action on the part of the Borrower, and this Agreement and
the Revolving Credit Note constitute the legal, valid and binding obligations of
the Borrower enforceable against the Borrower 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).
(ii) The execution and delivery of the Subsidiary Guaranty
and the performance by each Restricted Subsidiary of its obligations
thereunder has been duly authorized by all necessary corporate or
partnership action on the part of each Restricted Subsidiary, and the
Subsidiary Guaranty 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 (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).
(c) ACCURACY OF INFORMATION. No information, exhibit or report
furnished by the Borrower or any of its Subsidiaries to the Bank in connection
with the negotiation of, or compliance with, this Agreement or the Subsidiary
Guaranty contained, as of the date of such information, exhibit or report, any
material misstatement of fact or omitted to state a material fact necessary to
make the statements contained therein no misleading, or any other material fact
required pursuant to the terms of this Agreement to be contained therein.
(d) ORGANIZATION AND OWNERSHIP OF SHARES OF RESTRICTED SUBSIDIARIES;
AFFILIATES. (i) Schedule 1 contains (except as noted therein) complete and
correct lists of (1) 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 Borrower and each other Restricted
Subsidiary, and (2) the Borrower's Affiliates (other than Restricted
Subsidiaries).
(ii) All of the outstanding shares of capital stock or
similar equity interests of each Restricted Subsidiary shown in
Schedule 1 as being owned by the Borrower and the Restricted
Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Borrower or another Restricted
Subsidiary free and clear of any Lien (except as otherwise disclosed
in Schedule 1).
(iii) No Restricted Subsidiary is a party to, or otherwise
subject to any legal restriction or any agreement (other than this
Agreement, the First Chicago Credit Agreement, the agreements listed
on Schedule 2 and customary limitations imposed by corporate or
partnership 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 Borrower or any of the Restricted
Subsidiaries that owns outstanding shares of capital stock or similar
equity or partnership interests of such Restricted Subsidiary.
(e) FINANCIAL STATEMENTS. The December 31, 1997 audited consolidated
financial statements of the Borrower and the Restricted Subsidiaries heretofore
delivered to the Bank (including in each case the related schedules and notes)
present fairly, in all material respects, the consolidated financial position of
the Borrower and the Restricted Subsidiaries as of the respective dates
specified therein and the consolidated results of their operations and cash
flows for the respective periods so specified and have been prepared in
accordance with generally accepted accounting principles in effect on the date
such statements were prepared 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).
(f) MATERIAL ADVERSE CHANGE. Since December 31, 1997, there has been no
change in the business, Property, prospects, condition (financial or otherwise)
or results of operations of the Borrower and the Restricted Subsidiaries which
could reasonably be expected to have a Material Adverse Effect.
(g) NO CONFLICT OR VIOLATION. Neither the execution, delivery and
performance by the Borrower of the Agreement, nor the execution, delivery and
performance by any Restricted Subsidiary of the Subsidiary Guaranty, will (i)
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 Borrower or any
Restricted Subsidiary under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-laws, partnership
agreement or other significant governing document, or any other agreement or
instrument to which the Borrower or any Restricted Subsidiary is bound or by
which the Borrower or any Restricted Subsidiary or any of their respective
properties may be bound or affected, (ii) 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
Borrower or any Restricted Subsidiary or (iii) violate any provision of any
statute or other rule or regulation of any Governmental Authority applicable to
the Borrower or any Restricted Subsidiary.
(h) GOVERNMENTAL AUTHORIZATIONS. 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 (i) by the
Borrower of this Agreement or (ii) by any Restricted Subsidiary of the
Subsidiary Guaranty.
(i) INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM FIRST CHICAGO
CREDIT AGREEMENT. The Borrower hereby makes and reaffirms to the Bank each of
the representations and warranties set forth in Sections 5.9 through 5.14,
5.15(b) and 5.17 of the First Chicago Credit Agreement, all of which are
incorporated in this Agreement by this reference, with the same force and effect
as if such representations and warranties had been set forth in their entirety
in this Agreement.
4. COVENANTS
In order further to induce the Bank to establish the Commitment and to
make Advances to the Borrower thereunder, the Borrower agrees with the Bank that
it will observe and perform the following covenants and obligations during the
term of this Agreement:
(a) FINANCIAL REPORTING. (i) The Borrower shall deliver to the Bank the
financial statements and other financial reports required pursuant to Section
6.1, and the officer's certificate required pursuant to Section 6.2, of the
First Chicago Credit Agreement at the same time that such documents are
delivered to the Agent or any Lender thereunder; PROVIDED, that the officer's
certificate referenced in Section 6.2 shall include all financial covenants set
forth in paragraph (f) hereof as well as Section 6.20 of the First Chicago
Credit Agreement incorporated by reference herein and the statement referenced
in paragraph (b) thereof shall refer instead to "Potential Default" and "Event
of Default" hereunder.
(ii) Promptly, and in any case within 5 Business Days after
the Borrower becomes aware of any material issues or events which
would cause the Borrower not to be Year 2000 Compliant and Ready (as
defined in paragraph (h) under the heading "COVENANTS"), a statement
of the chief executive officer, chief financial officer, or chief
technology officer of the Borrower setting forth the details thereof
and the action which the Borrower is taking or proposes to take with
respect thereto, and promptly upon the receipt thereof, a copy of any
third party assessments of the Borrower's Y2K Plan together with any
recommendations made by such third party with respect to Year 2000
compliance.
(b) PARI PASSU. The Borrower covenants that its Obligations under this
Agreement do and will rank at least PARI PASSU with the indebtedness under the
First Chicago Credit Agreement and all other present and future unsecured Senior
Debt.
(c) SUBSIDIARY GUARANTY. The Borrower will cause each Subsidiary which
becomes a Restricted Subsidiary after the date of this Agreement to execute and
deliver to the Bank a joinder agreement substantially similar to the joinder
agreement in the First Chicago Credit Agreement, duly executed by such
Subsidiary, together with an opinion of counsel satisfactory to the Bank
addressing with respect to such Subsidiary the issues relating to Subsidiaries
and the Subsidiary Guaranty in the form of opinion attached to the First Chicago
Credit Agreement as Exhibit "K".
(d) EXPENSES; INDEMNITY. The Borrower agrees to pay promptly all costs
and expenses incurred by the Bank in connection with any amendments, waivers or
consents in respect of this Agreement and any other Loan Document. In addition,
the Borrower agrees to indemnify the Bank and its affiliates, directors,
officers, employees and agents against all costs, losses, liabilities, damages
and expenses incurred in connection with this Agreement and the Advances
evidenced by the Revolving Credit Note and the use by the Borrower of the
proceeds hereof, unless caused by the gross negligence or willful misconduct of
any such indemnified party.
(e) INCORPORATION OF COVENANTS FROM FIRST CHICAGO CREDIT AGREEMENT. The
Borrower agrees to observe and perform each of the covenants and agreements set
forth in Sections 6.7 through 6.17 and Section 6.20 of the First Chicago Credit
Agreement, all of which covenants and agreements are incorporated in this
Agreement by this reference, all with the same force and effect as if such
covenants and agreements had been set forth in their entirety in this Agreement;
PROVIDED, that any reference to "Agent" or "each Lender" shall refer to the
Bank; and PROVIDED FURTHER, that the last paragraph of Section 6.15 of the First
Chicago Credit Agreement shall also apply to the Obligations under this
Agreement and the Revolving Credit Note, so that the Commitment and all Advances
made under the Revolving Credit Note shall at all times be equally secured on a
PARI PASSU basis with the lenders under the First Chicago Credit Agreement. Any
violation of Section 6.15 of the First Chicago Credit Agreement as incorporated
by reference herein shall constitute a Potential Default hereunder, whether or
not any such provision is made or any equitable Lien is created pursuant hereto
or thereto.
(f) FINANCIAL COVENANTS.
(i) Consolidated Net Worth shall not be less than $108
Million PLUS 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 beginning with the fiscal year ending
12/31/98.
(ii) EBITDA for the period of four consecutive fiscal
quarters of the Borrower then most recently ended shall not be less
than five hundred percent (500%) of Consolidated Interest Expense for
such period.
(iii) Consolidated Debt shall not exceed fifty per cent
(50%) of Total Capitalization for any fiscal quarter of the Borrower
and its Restricted Subsidiaries on a consolidated basis.
(g) EFFECT OF TERMINATION OF FIRST CHICAGO CREDIT AGREEMENT. The
Borrower agrees that, if the First Chicago Credit Agreement is terminated or
otherwise ceases to be in force and effect prior to the Termination Date, the
representations and warranties, covenants, and the Events of Default set forth
therein that are incorporated in this Agreement by reference or otherwise
referred to in this Agreement, shall nevertheless be deemed to survive and
continue in full force and effect for all purposes of this Agreement. In such
event, the Borrower agrees, upon request by the Bank, to enter into an amendment
to this Agreement to set forth specifically in this Agreement all such
representations and warranties, covenants, and Events of Default, but no such
action shall be required in order to effect the survival and continuation of
such provisions.
(h) YEAR 2000 COMPLIANCE. The Borrower has developed a comprehensive
working plan (the "Y2K PLAN") to insure that the Borrower's software and
hardware systems which impact or affect in any material way the business
operations of the Borrower will be Year 2000 Compliant and Ready (defined below)
by not later than June 30, 1999. Upon request of the Bank, the Borrower will
deliver to the Bank a copy of such Y2K Plan and a copy of any third party
assessment of the Y2K Plan (if available). The Borrower has met the Y2K Plan
milestones such that all hardware and software systems will be Year 2000
Compliant and Ready in accordance with the Y2K Plan, except for any such failure
to meet such milestones which would not have a Material Adverse Effect. As used
herein, "YEAR 2000 COMPLIANT AND READY" means that the Borrower's hardware and
software systems with respect to the operation of its business and its general
business plan will: (i) handle date information involving any and all dates
before, during and/or after January 1, 2000, including accepting input,
providing output and performing date calculations in whole or in part; (ii)
operate accurately without interruption on and in respect of any and all dates
before, during and/or after January 1, 2000 and without any change in
performance; (iii) respond to and process two digit year input without creating
any ambiguity as to the century; and (iv) store and provide date input
information without creating any ambiguity as to the century.
5. EVENTS OF DEFAULTS; REMEDIES.
Each of the following events shall constitute an "Event of Default"
under this Agreement:
(a) Failure by the Borrower to pay any principal when due; or failure
by the Borrower to pay any interest or any other amount under this Agreement
within five (5) days after the same becomes due; or
(b) Failure by the Borrower to perform or observe any covenant or
agreement set forth in paragraph (f) under the heading "COVENANTS" hereinabove
or any of the covenants incorporated by reference under paragraph (e) under the
heading "COVENANTS" hereinabove which constitute immediate Defaults under
Section 7.3 of the First Chicago Credit Agreement; or
(c) Failure by the Borrower to perform or observe any covenant or
agreement set forth in paragraphs (b), (c), (d) or (h) under the heading
"COVENANTS" hereinabove or any of the covenants incorporated by reference under
paragraph (e) under the heading "COVENANTS" hereinabove which are not included
in paragraph (b) above, which failure remains unremedied for 30 days after the
earlier of its discovery by the Borrower or written notice thereof to the
Borrower by the Bank;
(d) Any representation or warranty made or deemed made by or on behalf
of the Borrower or any of its Subsidiaries to the Bank under or in connection
with this Agreement or any certificate or information delivered in connection
with the Agreement or the Subsidiary Guaranty shall be materially false on the
date as of which made; or
(e) The Borrower or any Restricted Subsidiary shall fail to pay its
debts generally as they come due, or shall file any petition or action for
relief under any bankruptcy, reorganization, insolvency or moratorium law, or
any other law or laws for the relief of, or relating to, debtors; or
(f) An involuntary petition shall be filed under any bankruptcy statute
against the Borrower or any Restricted Subsidiary, or a custodian, receiver,
trustee, assignee for the benefit of creditors (or other similar official) shall
be appointed to take possession, custody, or control of the properties of the
Borrower or any Restricted Subsidiary, unless such petition or appointment is
set aside or withdrawn or ceases to be in effect within 60 days after the date
of said filing or appointment; or
(g) The Subsidiary Guaranty shall fail to remain in full force or
effect or any action shall be taken to discontinue or assist the invalidity or
unenforceability of the Subsidiary Guaranty, or any Restricted Subsidiary shall
fail to comply with any of the terms or provisions of the Subsidiary Guaranty,
or any Restricted Subsidiary denies that it has any further liability under the
Subsidiary Guaranty, or gives notice to such effect.
(h) The occurrence of any "Default" as set forth in Article VII of the
First Chicago Credit Agreement (other than those Defaults which are included in
paragraphs (b) or (c) above.
Upon the occurrence of any such Event of Default, the Bank may, in its
sole discretion, by notice to the Borrower, declare all amounts payable by the
Borrower under this Agreement and/or under the Revolving Credit Note to be
forthwith due and payable, and the same shall thereupon immediately become due
and payable without demand, presentment, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower.
No remedy conferred on or reserved to the Bank in this Agreement is
intended to be exclusive of any other available remedy or remedies, but each and
every such remedy shall be cumulative and shall be in addition to every other
remedy given under this Agreement or now or hereafter existing at law or in
equity or by statute. No delay or omission to exercise any right or power
accruing upon any default, omission or failure of performance hereunder shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right or power may be exercised from time to time and as often as may
be deemed expedient. In order to exercise any remedy reserved to the Bank in
this Agreement, it shall not be necessary to give any notice, other than such
notice as may be herein expressly required. If any provision contained in this
Agreement shall be breached by the Borrower and thereafter duly waived by the
Bank, such waiver shall be limited to the particular breach so waived and shall
not be deemed to waive any other breach hereunder. No waiver, amendment, release
or modification of this Agreement shall be established by conduct, custom or
course of dealing, but solely by an instrument in writing duly executed by the
parties thereunto duly authorized by this Agreement. Any waiver, amendment,
release or modification executed by the Borrower, the Agent and the Lenders
under the First Chicago Credit Agreement that waives, amends, releases or
modifies any of the representations and warranties, covenants, or Defaults
incorporated in this Agreement from the First Chicago Credit Agreement shall not
be effective as a waiver, amendment, release, or modification of such provision
as incorporated in this Agreement unless the Bank expressly consents thereto in
a writing duly executed by the Bank.
6. SELECTED DEFINITIONS
CAPITALIZED TERMS USED HEREIN WITHOUT DEFINITION AND WHICH ARE DEFINED IN THE
FIRST CHICAGO CREDIT AGREEMENT SHALL HAVE THE SAME MEANINGS HEREIN AS IN THE
FIRST CHICAGO CREDIT AGREEMENT.
"ADVANCE" shall mean any advance of funds under the Commitment pursuant to the
terms of this Agreement. An Advance may be either a "Base Rate Advance" or a
"LIBOR Advance".
"APPLICABLE MARGIN" shall mean (i) during any Level 1 Period, 0.625% per annum
with respect to LIBOR Advances and 0.00% with respect to Base Rate Advances,
(ii) during any Level 2 Period, 0.75% per annum with respect to LIBOR Advances
and 0.00% with respect to Base Rate Advances, (iii) during any Level 3 Period,
1.0% per annum with respect to LIBOR Advances and 0.00% with respect to Base
Rate Advances and (iv) during any Level 4 Period, 1.50% per annum with respect
to LIBOR Advances and 0.50% with respect to Base Rate Advances, PROVIDED that
all adjustments to the Applicable Margin shall be effective commencing on the
fifth Business DAY after (x) the delivery of financial statements showing the
required ratio for the applicable Level or (y) the Bank becomes aware that the
Borrower or any Subsidiary has incurred additional Indebtedness which would
affect the calculation of the Debt to Cash Flow from Operations Ratio, and
PROVIDED FURTHER that in the event that the Borrower shall at any time fail to
furnish to the Bank the financial statements required to be delivered pursuant
to Sections 6.1(a) and (b) of the First Chicago Credit Agreement or fail to
notify the Bank, pursuant to Section 6.1(j) of the First Chicago Credit
Agreement, of the incurrence of any such Indebtedness, the maximum Applicable
Margin shall apply until such time as such financial statements are so delivered
or the Bank is notified of the incurrence of such Indebtedness, as the case may
be. From the closing date to the next determination date in accordance with this
definition, the Applicable Margin shall be 0.75% per annum.
"BASE RATE" shall mean the higher of (i) the Prime Rate and (ii) the Federal
Funds Effective Rate plus 0.50% per annum. Each change in any interest rate
provided for herein based upon the Base Rate resulting from a change in the Base
Rate shall take effect at the time of such change in the Base Rate.
"BASE RATE ADVANCE" shall mean any Advance that bears interest at the Base Rate.
"BORROWING DATE" shall mean a date on which an Advance is made hereunder.
"COMMITMENT" shall mean the commitment of the Bank to make Advances to the
Borrower in a principal amount up to $25,000,000 on the terms and conditions set
forth in this Agreement.
"DEFAULT RATE" shall mean for all outstanding LIBOR Advances until the end of
the applicable Interest Period, 2% per annum above the then existing interest
rate for such Interest Period, and thereafter and with respect to Base Rate
Advances, the Base Rate, PLUS the Applicable Margin, PLUS 2% per annum.
"EVENT OF DEFAULT" shall mean those events set forth under the heading "Events
of Default" hereinabove.
"FIRST CHICAGO CREDIT AGREEMENT" shall mean the Revolving Credit Agreement dated
as of July 22, 1996 among Seitel, Inc., the Lenders Party thereto, and The First
National Bank of Chicago, as Agent, as such Agreement has been amended,
restated, supplemented or otherwise modified as of the date hereof.
"INTEREST PERIOD" shall mean, with respect to any LIBOR Advance, such period
commencing on the date such Advance is made or, in the case of each subsequent,
successive Interest Period, the last day of the next preceding Interest Period,
and ending on the numerically corresponding day in the first, second, or third
calendar month thereafter, as the Borrower may select as provided in SECTION
1(B) hereof; PROVIDED, that: (i) the first day of an Interest Period must be a
Business Day, (ii) any Interest Period that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day, unless
such Business Day falls in the next calendar month, in which case the Interest
Period shall end on the next preceding Business Day, (iii) any Interest Period
which begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of an
Interest Period) shall end on the last Business Day of a calendar month, and
(iv) no Interest Period shall extend beyond the Termination Date.
"LEVEL 1 PERIOD" shall mean any period during which the Debt to Cash Flow from
Operations Ratio measured as of the end of the most recent fiscal quarter was
less than 1.0 to 1.0.
"LEVEL 2 PERIOD" shall mean any period which does not qualify as a Level 1
Period during which the Debt to Cash Flow from Operations Ratio measured as of
the end of the most recent fiscal quarter was less than 2.0 to 1.0.
"LEVEL 3 PERIOD" shall mean any period which does not qualify as a Level 1
Period or a Level 2 Period during which the Debt to Cash Flow from Operations
Ratio measured as of the end of the most recent fiscal quarter was less than 2.5
to 1.0.
"LEVEL 4 PERIOD" shall mean any period which does not qualify as a Level 1
Period, a Level 2 Period or a Level 3 Period.
"LIBOR" shall mean the rate per annum for deposits in U.S. dollars of amounts
equal or comparable to the principal amount of such advance offered for a term
comparable to such interest period, which rate appears on the Telerate Page 3750
as of 11:00 A.M. (London, England time), two (2) business days prior to the
beginning of such interest period; PROVIDED, that if no such offered rates
appear on such page, the rate used for such interest period will be the
arithmetic average (rounded upwards, if necessary, to the next higher 1/100th of
1%) of rates offered by the Bank to not less than two major banks in New York,
New York at approximately 10:00 A.M. (Atlanta, Georgia time) two (2) business
days prior to the beginning of such interest period for deposits in U.S. dollars
in the London interbank market for a period comparable to the principal amount
of such advance, as the case may be, DIVIDED BY a number equal to 1.00 MINUS the
LIBOR Reserve Percentage. The rate so determined in accordance herewith shall be
rounded upwards to the nearest multiple of 1/100th of 1%. TELERATE PAGE 3750
shall mean the display designated as "Page 3750" on the Dow Jones Market Service
(or such other page as may replace Page 3750 on that service or another service
as may be nominated by the British Bankers' Association as the information
vendor for the purpose of displaying British Bankers' Association Interest
Settlement Rates for Dollars). LIBOR RESERVE PERCENTAGE shall mean the reserve
percentage applicable to such interest period (or if more than one such
percentage shall be so applicable, the daily average of such percentages for
those days in such interest period during which any such percentage shall be so
applicable) under regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency, supplemental,
or other marginal reserve requirement) for the Bank with respect to liabilities
or assets consisting of or including "eurocurrency liabilities" (as defined in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time) having a term equal to such interest period.
"LIBOR ADVANCE" shall mean any Advance that bears interest based on a rate
determined by reference to LIBOR.
"LOAN DOCUMENTS" shall mean this Agreement, the Revolving Credit Note, the
Subsidiary Guaranty, and certificates and other documents delivered in
connection therewith, either as originally executed or as may be amended,
supplemented or otherwise modified.
"OBLIGATIONS" shall mean all unpaid principal of and accrued and unpaid interest
on the Revolving Credit Note, all accrued and unpaid fees and all expenses,
reimbursements indemnities and other obligations of the Borrower to the Bank
hereunder and under the Revolving Credit Note.
"POTENTIAL DEFAULT" shall mean any event which, with the passage of time or the
giving of notice or both, would constitute an Event of Default.
"PRIME RATE" shall mean the rate of interest per annum designated from time to
time by the Bank at its principal office in Atlanta, Georgia to be its prime
rate, which rate of interest may not be the lowest rate available to customers
of the Bank, with any change in the Prime Rate to be effective as of the date of
such change.
"REVOLVING CREDIT NOTE" shall mean the promissory note dated the date hereof in
the principal amount of $25,000,000 executed by the Borrower and payable to the
order to the Bank, either as originally executed or as it may be amended,
supplemented or otherwise modified.
"SUBSIDIARY GUARANTY" shall mean the guaranty agreement substantially in the
form of Exhibit "J" of the First Chicago Credit Agreement executed and delivered
by the existing Restricted Subsidiaries in favor of the Bank.
7. MISCELLANEOUS
(a) SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the Borrower and the Bank, and their respective successors and
assigns; PROVIDED, that the Borrower shall have no right to assign its rights or
obligations hereunder to any Person. The Bank may assign its rights and delegate
its obligations under this Agreement and the other Loan Documents and further
may assign all or any part of its Commitment and any Advances under the
Revolving Credit Note, or any other interest herein or in any other Loan
Document to other financial institutions and accredited investors, with the
prior written consent of the Borrower (which consent will not be unreasonably
withheld); PROVIDED, that such consent shall not be required if a Potential
Default or Event of Default exists at the time of such assignment. Any assignee
shall have, to the extent of such assignment unless otherwise provided therein,
the same rights, obligations and benefits as it would have if it were the Bank
hereunder and under the other Loan Documents. The Bank may sell participations
in the Commitment and/or any Advances under the Revolving Credit Note to other
financial institutions and accredited investors without the consent of the
Borrower; PROVIDED, that no participant shall have any right to deal directly
with the Borrower and no participant shall have any voting rights under this
Agreement except with respect to any proposed increase in the Commitment, any
extension of the Termination Date, any decrease in the interest rate margin or
any release of any guarantor or any collateral.
(b) ENTIRE AGREEMENT. This Agreement, the Revolving Credit Note, and
the other Loan Documents embody the final, entire agreement among the parties
hereto and supersede any and all prior commitments, agreements, representations,
and understandings, whether written or oral, relating to the subject matter
hereof and may not be contradicted or varied by evidence of prior,
contemporaneous, or subsequent oral agreements or discussions of the parties
hereto. There are no oral agreements among the parties hereto.
(c) AMENDMENTS, ETC. No amendment or waiver of any provision of this
Agreement, the Revolving Credit Note, or any other Loan Document to which the
Borrower is a party, nor any consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be agreed or consented to
by the Bank and the Borrower, and each such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
(d) NOTICES. All notices and other communications provided for in this
Agreement and the other Loan Documents shall be given or made by telecopy, or in
writing and telecopied, mailed by certified mail return receipt requested, or
delivered to the intended recipient at the following addresses:
If to Bank: SunTrust Bank, Atlanta
25 Park Place, N.E./24th Floor
Atlanta, Georgia 30303
Attn: Mr. John Fields
First Vice President
Tel: (404) 724-3667
Fax: (404) 827-6270
If to Borrower: Seitel, Inc.
50 Briar Hollow Lane, 7th Floor W.
Houston, Texas 77027
Attn: Debra D. Valice
Senior Vice President of
Finance, Chief Financial
Officer, Treasurer &
Secretary
Tel: (713) 627-1990
Fax: (713) 627-1114
or, as to any party at such other address as shall be designated by such party
in a notice to each other party given in accordance with this paragraph. Except
as otherwise provided in this Agreement, all such communications shall be deemed
to have been duly given when transmitted by telecopy, subject to telephone
confirmation of receipt, or when personally delivered or, in the case of a
mailed notice, when duly deposited in the mails, in each case given or addressed
as aforesaid.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
(f) SEVERABILITY. Any provision of this Agreement held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
(g) CONSTRUCTION. The Borrower and the Lender acknowledge that each of
them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement and the other Loan Documents
with its legal counsel and that this Agreement and the other Loan Documents
shall be construed as if jointly drafted by the parties hereto.
(h) CONFIDENTIALITY. The Bank agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to its Affiliates, (ii) to legal counsel,
accountants, and other professional advisors to the Bank or to any assignee or
participant, (iii) to regulatory officials, (iv) to any Person required by law,
regulation or legal process and (v) to any participant or assignee which agrees
to be bound by this paragraph.
(i) MAXIMUM RATE. 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 and in the Revolving Credit Note, or in any
of the documents securing payment thereof or other wise relating hereto, no such
provision shall require the payment or permit the collection of interest in
excess of the highest rate allowed under 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 Revolving Credit Note or in any of the
documents securing payment thereof or otherwise relating hereto, then in such
event:
(i) the provisions of this paragraph shall govern and
control,
(ii) neither the Borrower, the Restricted Subsidiaries, nor
their heirs, legal representatives, successors or assigns nor any
party liable for the payment on the Advances, shall be obligated to
pay the amount of interest to the extent that it is in excess of the
Maximum Rate,
(iii) any such excess with respect to any Advance which may
have been collected shall, at the election of the Bank, be either
applied as a credit against the then unpaid principal amount of
Advances or refunded to the Borrower, and
(iv) the provisions hereof and of the Revolving Credit Note
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 this Agreement so that the
effective rate of interest charged hereunder is uniform throughout the
term hereof.
(j) GOVERNING LAW; JURISDICTION. (i) THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF).
(ii) THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL COURT SITTING
IN THE NORTHERN DISTRICT OF GEORGIA OR IN ANY GEORGIA STATE COURT
SITTING IN FULTON COUNTY, GEORGIA, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND/OR THE REVOLVING CREDIT NOTE,
AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN
SHALL LIMIT THE RIGHT OF THE BANK TO BRING PROCEEDINGS AGAINST THE
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL
PROCEEDING BY THE BORROWER AGAINST BANK INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT AND/OR THE REVOLVING CREDIT NOTE SHALL
BE BROUGHT ONLY IN A FEDERAL COURT SITTING IN THE NORTHERN DISTRICT OF
GEORGIA OR IN A GEORGIA STATE COURT SITTING IN FULTON COUNTY, GEORGIA.
(k) WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK EACH HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT AND/OR THE REVOLVING CREDIT
NOTE.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be executed and delivered under seal (of the Borrower only) by
their respective duly authorized officers as of the date first above written.
SEITEL, INC.
By:/s/ Debra D. Valice
----------------------------------------
Name: Debra D. Valice
Title: Senior Vice President
Attest:/s/ Marcia H. Kendrick
------------------------------------
Name: Marcia H. Kendrick
Title: Assistant Secretary
[CORPORATE SEAL]
SUNTRUST BANK, ATLANTA
By:/s/ F. McClellan Deaver, III
----------------------------------------
Name: F. McClellan Deaver, III
Title: Group Vice President
By:/s/ David J. Edge
----------------------------------------
Name: David J. Edge
Title: Vice President
<PAGE>
REVOLVING CREDIT NOTE
$25,000,000.00 December 11, 1998
FOR VALUE RECEIVED, the undersigned SEITEL, INC., a Delaware
corporation ("MAKER"), hereby promises to pay to the order of SUNTRUST BANK,
ATLANTA ("PAYEE"), at its offices at 25 Park Place, N.E., Atlanta, Georgia, in
Dollars, the principal sum of TWENTY FIVE MILLION DOLLARS ($25,000,000), or so
much thereof as may be advanced and outstanding hereunder and under the Credit
Agreement (as hereinafter defined), together with interest on the outstanding
principal balance from day to day remaining, at varying rates per annum as set
forth in the Credit Agreement (as hereinafter defined).
Interest on the indebtedness evidenced by this Revolving Credit Note
shall be computed on the basis of a year of 360 days and the actual number of
days elapsed (including the first day but excluding the last day).
All principal of and accrued and unpaid interest on this Revolving
Credit Note shall be due and payable as specified in the hereafter defined
Credit Agreement. Upon the occurrence of a Potential Default or an Event of
Default, interest may accrue, at the Payee's option, at the Default Rate.
This Revolving Credit Note is the Revolving Credit Note provided for
in that certain Revolving Credit Agreement dated as of December 11, 1998 between
Maker and the Payee (as the same may be amended from time to time herein, the
"CREDIT AGREEMENT"). Capitalized terms not otherwise defined herein shall have
the same meaning as in the Credit Agreement. Reference is hereby made to the
Credit Agreement for provisions affecting this Revolving Note, including without
limitation, the terms and conditions under which this Revolving Credit Note may
be prepaid or its maturity date accelerated. This Revolving Credit Note is
guaranteed pursuant to the Subsidiary Guaranty dated the date hereof, all as
more specifically described in the Credit Agreement, and reference is made
thereto for a statement of the terms and provisions thereof.
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
TIME IS OF THE ESSENCE UNDER THIS REVOLVING CREDIT NOTE. In addition
to and in limitation of the foregoing, the Maker further promises to pay all
costs and expenses of collection, including without limitation, reasonable
attorneys' fees, if this Revolving Credit Note is collected by or through an
attorney at law or in bankruptcy or any other judicial proceeding.
Maker expressly waives any presentment, demand, protest, or notice in
connection with this Revolving Credit Note, now or hereafter otherwise required
applicable law.
IN WITNESS WHEREOF, the Maker has caused this Revolving Credit Note to
be executed and delivered under seal by its duly authorized officers as of the
date first above written.
SEITEL, INC.
By:/s/ Debra D. Valice
----------------------------------------
Name: Debra D. Valice
Title: Senior Vice President
Attested By:/s/ Marcia H. Kendrick
-------------------------------
Name: Marcia H. Kendrick
Title: Assistant Secretary
(CORPORATE SEAL)
<PAGE>
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY (this "Guaranty") is made as of the 11th day
of December, 1998, by SEITEL DATA CORP., SEITEL DELAWARE, INC., SEITEL
MANAGEMENT, INC., SEITEL GEOPHYSICAL, INC., DDD ENERGY, INC., SEITEL GAS &
ENERGY CORP., SEITEL POWER CORP., SEITEL NATURAL GAS, INC., MATRIX GEOPHYSICAL,
INC., EXSOL, INC., DATATEL, INC., SEITEL OFFSHORE CORP., all Delaware
corporations, GEO-BANK, INC. and ALTERNATIVE COMMUNICATION ENTERPRISES, INC.,
each a Texas corporation, SEITEL INTERNATIONAL, INC. and AFRICAN GEOPHYSICAL,
INC., each a Cayman Islands corporation, and SEITEL DATA LTD., a Texas limited
partnership (collectively, the "SUBSIDIARY GUARANTORS") in favor of SunTrust
Bank, Atlanta, and its successors and permitted assigns (the "BANK"), under the
Credit Agreement referred to below.
W I T N E S S E T H:
WHEREAS, Seitel, Inc., a Delaware corporation (the "PRINCIPAL"), and
the Bank have entered into the Revolving Credit Agreement dated the date hereof
(as same may be amended or modified from time to time, the "CREDIT AGREEMENT"),
providing, subject to the terms and conditions thereof, for extensions of credit
to be made by the Bank to the Principal;
WHEREAS, it is a condition precedent to the Bank establishing the
Commitment and making Advances under the Credit Agreement and the Revolving
Credit Note that each of the Subsidiary Guarantors execute and deliver this
Guaranty, whereby each of the Subsidiary Guarantors shall guarantee the payment
when due, subject to Section 9 hereof, of all principal, interest and other
Obligations that shall be at any time payable by the Principal under the Credit
Agreement and the Revolving Credit Note; and
WHEREAS, in consideration of the financial and other support that the
Principal has provided, and such financial and other support as the Principal
may in the future provide, to the Subsidiary Guarantors, and in order to induce
the Bank to establish the Commitment and to make Advances to the Principal under
the Credit Agreement and the Revolving Credit Note, each of the Subsidiary
Guarantors is willing to guarantee the Obligations of the Principal under the
Credit Agreement and the Revolving Credit Note;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.
SECTION 2. REPRESENTATIONS AND WARRANTIES. Each of the Subsidiary
Guarantors represents and warrants (which representations and warranties shall
be deemed to have been renewed upon each Borrowing Date) that:
(a) such Subsidiary Guarantor (i) is a corporation or a
partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization;
(ii) is duly qualified as a foreign corporation or partnership 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 count not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect; and (iii) has the corporate or partnership 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 Guaranty and to perform the
provisions hereof;
(b) the execution and delivery of this Guaranty and the
performance by such Subsidiary Guarantor of its obligations hereunder
have been duly authorized by all necessary corporate or partnership
action and this Guaranty constitutes a legal, valid and binding
obligation of such Subsidiary Guarantor enforceable against it in
accordance with its terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar haws 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 a law);
(c) the execution, delivery and performance by such
Subsidiary Guarantor of this Guaranty will not (i) 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 Borrower or any
Restricted Subsidiary under, any indenture, mortgage, deed of trust,
loan, purchase or credit agreement, lease, corporate charter or
by-laws, partnership agreement or other significant governing
document, or any other agreement or instrument to which the Borrower
or any Restricted Subsidiary is bound or by which the Borrower or any
Restricted Subsidiary or any of their respective properties may be
bound or affected, (ii) 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 Borrower or any Restricted Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Borrower or any Restricted
Subsidiary;
(d) after giving effect to the transactions contemplated by
the Credit Agreement and this Guaranty and as of the date of its
execution and delivery of this Guaranty (i) the fair salable value of
the assets of such Subsidiary Guarantor, taken as a whole, exceeds its
liabilities, taken as a whole, (ii) such Subsidiary Guarantor is able
to pay and discharge all of its debts (including, without limitation,
its current liabilities) as they become due; (iii) such Subsidiary
Guarantor will not be insolvent and will not be engaged in any
business or transaction for which it has unreasonably small assets or
capital and (iv) such Subsidiary Guarantor has no intent to hinder,
delay or defraud any entity to which it is, or will become, indebted,
or to incur debts that would be beyond its ability to pay as they
mature.
SECTION 3. THE GUARANTY. Subject to Section 9 hereof, each of the
Subsidiary Guarantors hereby unconditionally guarantees the full and punctual
payment (whether at stated maturity, upon acceleration or otherwise) of the
principal of and interest on all Advances, and the full and punctual payment of
all other amounts payable by the Principal under the Credit Agreement,
including, without limitation, the Obligations (all of the foregoing, subject to
the provisions of Section 9 hereof, being referred to collectively as the
"GUARANTEED OBLIGATIONS"). Upon failure by the Principal to pay punctually any
such amount, each of the Subsidiary Guarantors agrees that it shall forthwith on
demand pay the amount not so paid at the place and in the manner specified in
the Credit Agreement.
SECTION 4. GUARANTY UNCONDITIONAL. Subject to Section 9 hereof, the
obligations of each of the Subsidiary Guarantors hereunder shall be
unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver
or release in respect of any obligation of the Principal under the
Credit Agreement or any other Loan Document, by operation of law or
otherwise or any obligation of any other guarantor of any of the
Obligations;
(ii) any modification or amendment of or supplement to the
Credit Agreement or any other Loan Document;
(iii) any release, nonperfection or invalidity of any direct
or indirect security for any obligation of the Principal under the
Credit Agreement, any other Loan Document, or any obligations of any
other guarantor of any of the Obligations;
(iv) any change in the corporate or partnership existence,
structure or ownership of the Principal or any other guarantor of any
of the Obligations, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Principal, or any other
guarantor of the Obligations, or its assets or any resulting release
or discharge of any obligation of the Principal, or any other
guarantor of any of the Obligations;
(v) the existence of any claim, setoff or other rights which
the Subsidiary Guarantors may have at any time against the Principal,
any other guarantor of any of the Obligations, the Bank or any other
Person, whether in connection herewith or any unrelated transactions;
(vi) any invalidity or unenforceability relating to or
against the Principal or any other guarantor of any of the
Obligations, for any reason related to the Credit Agreement, any other
Loan Document, or any provision of applicable law or regulation
purporting to prohibit the payment by the Principal, or any other
guarantor of the Obligations, of the principal of or interest on any
Advance or any other amount payable by the Principal under the Credit
Agreement or any other Loan Document; or
(vii) any other act or omission to act or delay of any kind
by the Principal, any other guarantor of the Obligations, the Bank or
any other Person or any other circumstance whatsoever which might, but
for the provisions of this Section, constitute a legal or equitable
discharge of any Subsidiary Guarantor's obligations hereunder.
SECTION 5. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. Each of the Subsidiary Guarantors' obligations hereunder
shall remain in full force and effect until all Guaranteed Obligations shall
have been paid in full and the Commitment under the Credit Agreement shall have
terminated. If at any time any payment of the principal of or interest on any
Advance or any other amount payable by the Principal or any other party under
the Credit Agreement or any other Loan Document is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or reorganization
of the Principal or otherwise, each of the Subsidiary Guarantors' obligations
hereunder with respect to such payment shall be reinstated as though such
payment had been due but not made at such time.
SECTION 6. WAIVER OF NOTICE. Each of the Subsidiary Guarantors
irrevocably waives acceptance hereof, presentment, demand, protest and, to the
fullest extent permitted by law, any notice not provided for herein, as well as
any requirement that at any time any action be taken by any Person against the
Principal, any other guarantor of the Obligations, or any other Person.
SECTION 7. SUBROGATION. Each of the Subsidiary Guarantors hereby
agrees not to assert any right, claim or cause of action, including, without
limitation, a claim for subrogation, reimbursement, indemnification or
otherwise, against the Principal arising out of or by reason of this Guaranty or
the obligations hereunder, including, without limitation, the payment or
securing or purchasing of any of the Obligations by any of the Subsidiary
Guarantors unless and until the Guaranteed Obligations are paid in full and any
commitment to lend under the Credit Agreement and other Loan Documents is
terminated.
SECTION 8. STAY OF ACCELERATION. If acceleration of the time for
payment of any amount payable by the Principal under the Credit Agreement or any
other Loan Document is stayed upon the insolvency, bankruptcy or reorganization
of the Principal, all such amounts otherwise subject to acceleration under the
terms of the Credit Agreement or any other Loan Document shall nonetheless be
payable by each of the Subsidiary Guarantors hereunder forthwith on demand by
the Bank.
SECTION 9. LIMITATION ON OBLIGATIONS. (a) It is the intention of each of
the Subsidiary Guarantors and the Bank that each of the Subsidiary Guarantor's
obligations hereunder shall be in, but not in excess of, as of any date, the
greater of the following (such greater amount determined hereunder being the
relevant Subsidiary Guarantor's "Maximum Liability"): (i) the aggregate amount
of all monies received by the Subsidiary Guarantor from the Principal after the
date hereof (whether by loan, capital infusion or other means), or (ii) the
maximum amount (such amount being the Subsidiary Guarantor's "Alternative
Limitation") not subject to avoidance under Title 11 of the United States Code,
as same may be amended from time to time, or any applicable state law
(collectively, the "Bankruptcy Code"). To that end, but as to the Alternative
Limitation of the Subsidiary Guarantors, only to the extent such obligations
would otherwise be subject to avoidance under the Bankruptcy Code if the
Subsidiary Guarantor is not deemed to have received valuable consideration, fair
value or reasonably equivalent value for its obligations hereunder, any
Subsidiary Guarantor's obligations hereunder shall be reduced to that amount
which, after giving effect thereto, would not render such Subsidiary Guarantor
insolvent, or leave such Subsidiary Guarantor with an unreasonably small capital
to conduct its business, or cause such Subsidiary Guarantor to have incurred
debts (or intended to have incurred debts) beyond its ability to pay such debts
as they mature, at the time such obligations are deemed to have been incurred
under the Bankruptcy Code. As used herein, the terms "insolvent" and
"unreasonably small capital" shall likewise be determined in accordance with the
Bankruptcy Code. This Section 9(a) with respect to the Alternative Limitation of
the Subsidiary Guarantor is intended solely to preserve the rights of the Bank
hereunder to the maximum extent not subject to avoidance under the Bankruptcy
Code, and neither the Subsidiary Guarantor nor any other person or entity shall
have any right or claim under this Section 9(a) with respect to the Alternative
Limitation, except to the extent necessary so that the obligations of the
Subsidiary Guarantor hereunder shall not be rendered voidable under the
Bankruptcy Code.
(b) Each of the Subsidiary Guarantors agrees that the
Guaranteed Obligations may at any time and from time-to-time exceed
the Maximum Liability of each Subsidiary Guarantor, and may exceed the
aggregate Maximum Liability of all other Subsidiary Guarantors,
without impairing this Guaranty or affecting the rights and remedies
of the Bank hereunder. Nothing in this Section 9(b) shall be construed
to increase any Subsidiary Guarantor's obligations hereunder beyond
its Maximum Liability.
(c) In the event any Subsidiary Guarantor (a "Paying
Subsidiary Guarantor") shall make any payment or payments under this
Guaranty or shall suffer any loss as a result of any realization upon
any collateral granted by it to secure its obligations under this
Guaranty, each other Subsidiary Guarantor (each a "Non-Paying
Subsidiary Guarantor") shall contribute to such Paying Subsidiary
Guarantor an amount equal to such Non-Paying Subsidiary Guarantor's
"Pro Rata Share" of such payment or payments made, or losses suffered,
by such Paying Subsidiary Guarantor. For the purposes hereof, each
Non-Paying Subsidiary Guarantor's "Pro Rata Share" with respect to any
such payment or loss by a Paying Subsidiary Guarantor shall be
determined as of the date on which such payment or loss was made by
reference to the ratio of (i) such Non-Paying Subsidiary Guarantor's
Maximum Liability as of such date (without giving effect to any right
to receive, or obligation to make, any contribution hereunder) to (ii)
the aggregate Maximum Liability of all Subsidiary Guarantors hereunder
(including such Paying Subsidiary Guarantor) as of such date (without
giving effect to any right to receive, or obligation to make, any
contribution hereunder). Nothing in this Section 9(c) shall affect any
Subsidiary Guarantor's several liability for the entire amount of the
Guaranteed Obligations (up to such Subsidiary Guarantor's Maximum
Liability). Each of the Subsidiary Guarantors covenants and agrees
that its right to receive any contribution under this Guaranty from a
Non-Paying Subsidiary Guarantor shall be subordinate and junior in
right of payment to all the Guaranteed Obligations. The provisions of
this Section 9(c) are for the benefit of both the Bank and the
Subsidiary Guarantors and may be enforced by any one, or all of them
in accordance with the terms hereof.
SECTION 10. NOTICES. All notices, requests and other communications to
any party hereunder shall be given or made by telecopier or other writing and
telecopied, or mailed or delivered to the intended recipient at its address or
telecopier number set forth on the signature pages hereof or such other address
or telecopy number as such party may hereafter specify for such purpose by
notice to the Bank in accordance with the provisions of paragraph 7(d) of the
Credit Agreement. Except as otherwise provided in this Guaranty, all such
communications shall be deemed to have been duly given when transmitted by
telecopier, or personally delivered or, in the case of a mailed notice sent by
certified mail return-receipt requested, on the date set forth on the receipt
(provided, that any refusal to accept any such notice shall be deemed to be
notice thereof as of the time of any such refusal), in each case given or
addressed as aforesaid.
SECTION 11. NO WAIVERS. No failure or delay by the Bank in exercising
any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies provided in this Guaranty, the Credit Agreement, and the
other Loan Documents shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 12. SUCCESSORS AND ASSIGNS. This Guaranty is for the benefit
of the Bank and its successors and permitted assigns and in the event of an
assignment of any amounts payable under the Credit Agreement, or the other Loan
Documents, the rights hereunder, to the extent applicable to the indebtedness so
assigned, may be transferred with such indebtedness. This Guaranty shall be
binding upon each of the Subsidiary Guarantors and their respective successors
and permitted assigns.
SECTION 13. CHANGES IN WRITING. Neither this Guaranty nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by each of the Subsidiary Guarantors and the Bank.
SECTION 14. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF GEORGIA. EACH OF THE SUBSIDIARY GUARANTORS HEREBY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF GEORGIA AND OF ANY GEORGIA STATE COURT SITTING IN FULTON
COUNTY, GEORGIA AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS GUARANTY (INCLUDING, WITHOUT LIMITATION, ANY OF THE OTHER LOAN
DOCUMENTS) OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE SUBSIDIARY
GUARANTORS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE SUBSIDIARY GUARANTORS, AND THE BANK ACCEPTING THIS GUARANTY, HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY TO THE EXTENT PERMITTED BY APPLICABLE LAW.
SECTION 15. AGENT FOR SERVICE OR PROCESS. EACH SUBSIDIARY 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
THE BANK AGAINST SUCH SUBSIDIARY 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 SUBSIDIARY GUARANTOR HEREBY
APPOINTS, IN THE CASE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN THE COURTS OR
IN THE STATE OF GEORGIA:
CT Corporation System
1201 Peachtree Street, N. E.
Atlanta, Georgia 30361
TO RECEIVE, FOR IT AND ON ITS BEHALF, SERVICE OR PROCESS. EACH SUBSIDIARY
GUARANTOR SHALL AT ALL TIMES MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN
ATLANTA, GEORGIA AND MAY FROM TIME TO TIME APPOINT SUCCEEDING AGENTS FOR SERVICE
OF PROCESS BY NOTIFYING THE BANK OF SUCH APPOINTMENT, WHICH AGENTS SHALL BE
ATTORNEYS, OFFICERS OR DIRECTORS OF SUCH SUBSIDIARY 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 THE
BANK TO SERVE ANY WRIT, PROCESS OR SUMMONS IN ANY MANNER PERMITTED BY APPLICABLE
LAW.
SECTION 16. TAXES, ETC. All payments required to be made by any of the
Subsidiary Guarantors hereunder shall be made without setoff or counterclaim and
free and clear of and without deduction or withholding for or on account of, any
present or future taxes, levies, imposts, duties or other charges of whatsoever
nature imposed by any government or any political or taxing authority thereof,
provided, however, that if any of the Subsidiary Guarantors is required by law
to make such deduction or withholding, such Subsidiary Guarantor shall forthwith
pay to the Bank, as applicable, such additional amount as results in the net
amount received by the Bank equaling the full amount which would have been
received by the Bank, had no such deduction or withholding been made.
IN WITNESS WHEREOF, each of the Subsidiary Guarantors has caused this
Guaranty to be duly executed, under seal, by its authorized officer as of the
day and year first above written.
SEITEL DATA CORP.
By:/s/ Barbara Steen
----------------------------------------
Name: Barbara Steen
Title: Vice President
SEITEL DELAWARE, INC.
By:/s/ Debra D. Valice
----------------------------------------
Name: Debra D. Valice
Title: Vice President
SEITEL MANAGEMENT, INC.
By:/s/ Debra D. Valice
----------------------------------------
Name: Debra D. Valice
Title: Vice President
SEITEL GEOPHYSICAL, INC.
By:/s/ Debra D. Valice
----------------------------------------
Name: Debra D. Valice
Title: Vice President
DDD ENERGY, INC.
By:/s/ Debra D. Valice
----------------------------------------
Name: Debra D. Valice
Title: Vice President
SEITEL GAS & ENERGY CORP.
By:/s/ Debra D. Valice
----------------------------------------
Name: Debra D. Valice
Title: Vice President
SEITEL POWER CORP.
By:/s/ Debra D. Valice
----------------------------------------
Name: Debra D. Valice
Title: Vice President
SEITEL NATURAL GAS, INC.
By:/s/ Debra D. Valice
----------------------------------------
Name: Debra D. Valice
Title: Vice President
MATRIX GEOPHYSICAL, INC.
By:/s/ Debra D. Valice
----------------------------------------
Name: Debra D. Valice
Title: Vice President
EXSOL, INC.
By:/s/ Debra D. Valice
----------------------------------------
Title: Vice President
DATATEL, INC.
By:/s/ Debra D. Valice
----------------------------------------
Title: Vice President
SEITEL OFFSHORE CORP.
By:/s/ Debra D. Valice
----------------------------------------
Title: Vice President
GEO-BANK, INC.
By:/s/ Debra D. Valice
----------------------------------------
Title: Vice President
ALTERNATIVE COMMUNICATION ENTERPRISES, INC.
By:/s/ Debra D. Valice
----------------------------------------
Title: Vice President
SEITEL INTERNATIONAL, INC.
By:/s/ Debra D. Valice
----------------------------------------
Title: Vice President
AFRICAN GEOPHYSICAL, INC.
By:/s/ Debra D. Valice
----------------------------------------
Title: Vice President
SEITEL DATA LTD.
By: SEITEL DELAWARE, INC.
By:/s/ Debra D. Valice
----------------------------------------
Title: Vice President
EXHIBIT 10.50
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEITEL, INC.
-----------------------
NOTE PURCHASE AGREEMENT
-----------------------
DATED AS OF FEBRUARY 12, 1999
$20,000,000 7.03% SERIES D SENIOR NOTES DUE FEBRUARY 15, 2004
$75,000,000 7.28% SERIES E SENIOR NOTES DUE FEBRUARY 15, 2009
$43,000,000 7.43% SERIES F SENIOR NOTES DUE FEBRUARY 15, 2009
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- -----
1. AUTHORIZATION OF NOTES.................................................1
2. SALE AND PURCHASE OF NOTES.............................................2
3. CLOSING................................................................2
3.1 The Closing...................................................2
3.2 Failure of the Company to Deliver.............................3
3.3 Failure by You to Deliver.....................................3
4. YOUR CONDITIONS TO CLOSINGS............................................3
4.1 Representations and Warranties................................3
4.2 Performance; No Default.......................................3
4.3 Compliance Certificates.......................................3
4.4 Opinions of Counsel...........................................4
4.5 Purchases Permitted By Applicable Law, etc....................4
4.6 Sale of Other Notes...........................................4
4.7 Payment of Special Counsel Fees...............................5
4.8 Private Placement Numbers.....................................5
4.9 Changes in Corporate Structure................................5
4.10 Subsidiary Guaranty...........................................5
4.11 Proceedings and Documents.....................................5
4A. COMPANY'S CLOSING CONDITIONS...........................................5
4A.1 Representations and Warranties................................5
4A.2 Sales Permitted by Applicable Law, etc........................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................6
5.1 Organization; Power and Authority.............................6
5.2 Authorization, etc............................................7
5.3 Disclosure....................................................7
5.4 Organization and Ownership of Shares of
Subsidiaries; Affiliates......................................8
5.5 Financial Statements..........................................8
5.6 Compliance with Laws, Other Instruments, etc..................9
5.7 Governmental Authorizations, etc..............................9
5.8 Litigation; Observance of Agreements, Statutes and
Orders........................................................9
5.9 Taxes.........................................................9
5.10 Title to Property; Leases....................................10
5.11 Licenses, Permits, etc.......................................10
5.12 Compliance with ERISA........................................10
5.13 Private Offering by the Company..............................12
<PAGE>
5.14 Use of Proceeds; Margin Regulations..........................12
5.15 Existing Debt; Future Liens..................................12
5.16 Foreign Assets Control Regulations, etc......................13
5.17 Status under Certain Statutes................................13
5.18 Environmental Matters........................................13
5.19 Year 2000 Problem............................................13
6. REPRESENTATIONS OF THE PURCHASER......................................14
6.1 Purchase for Investment......................................14
6.2 Legend.......................................................14
6.3 ERISA........................................................15
6.4 Organization; Power and Authority; Compliance with
Laws.........................................................16
6.5 Authorization, etc...........................................16
7. INFORMATION AS TO COMPANY.............................................16
7.1 Financial and Business Information...........................16
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............................23
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..........................................27
10. NEGATIVE COVENANTS....................................................28
10.1 Net Worth....................................................28
10.2 Interest Coverage............................................28
10.3 Debt Incurrence..............................................28
10.4 Liens........................................................29
10.5 Mergers and Consolidations...................................31
10.6 Sale of Assets...............................................32
10.7 Restricted Payments and Restricted Investments...............35
10.8 Limitations on Certain Restricted Subsidiary
Actions......................................................36
10.9 Affiliate Transactions.......................................37
10.10 Line of Business.............................................37
<PAGE>
11. EVENTS OF DEFAULT.....................................................37
12. REMEDIES ON DEFAULT, ETC..............................................39
12.1 Acceleration.................................................39
12.2 Other Remedies...............................................40
12.3 Rescission...................................................40
12.4 No Waivers or Election of Remedies, Expenses, etc............40
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.........................40
13.1 Registration of Notes........................................40
13.2 Transfer and Exchange of Notes...............................41
13.3 Replacement of Notes.........................................41
14. PAYMENTS ON NOTES.....................................................42
14.1 Place of Payment.............................................42
14.2 Home Office Payment..........................................42
15. EXPENSES, ETC.........................................................42
15.1 Transaction Expenses.........................................42
15.2 Survival.....................................................43
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT..........43
17. AMENDMENT AND WAIVER..................................................43
17.1 Requirements.................................................43
17.2 Solicitation of Holders......................................44
17.3 Binding Effect, etc..........................................44
17.4 Notes held by Company, etc...................................44
18. NOTICES...............................................................45
19. REPRODUCTION OF DOCUMENTS.............................................45
20. CONFIDENTIAL INFORMATION..............................................45
21. SUBSTITUTION OF PURCHASER.............................................47
22. MISCELLANEOUS.........................................................47
22.1 Successors and Assigns.......................................47
22.2 Payments Due on Non-Business Days............................47
22.3 Severability.................................................47
22.4 Construction.................................................48
22.5 Counterparts.................................................48
<PAGE>
22.6 Governing Law................................................48
22.7 Consent to Jurisdiction; Appointment of Agent................48
22.8 Defeasance...................................................49
22.9 GAAP.........................................................52
22.10 Usury........................................................52
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 1D -- Form of 7.03% Series D Senior Note due
February 15, 2004
EXHIBIT 1E -- Form of 7.28% Series E Senior Note due
February 15, 2009
EXHIBIT 1F -- Form of 7.43% Series F Senior Note due
February 15, 2009
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
$20,000,000 7.03% SERIES D SENIOR NOTES DUE FEBRUARY 15, 2004
$75,000,000 7.28% SERIES E SENIOR NOTES DUE FEBRUARY 15, 2009
$43,000,000 7.43 % SERIES F SENIOR NOTES DUE FEBRUARY 15, 2009
As of February 12, 1999
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 Million Dollars ($20,000,000) aggregate principal amount of
its seven and three hundredths percent (7.03%) Series D Senior Notes due
February 15, 2004 (the "SERIES D 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) Seventy-Five Million Dollars ($75,000,000) aggregate principal
amount of its seven and twenty-eight hundredths percent (7.28%) Series E
Senior Notes due February 15, 2009 (the "SERIES E 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) Forty-Three Million Dollars ($43,000,000) aggregate principal
amount of its seven and forty-three hundredths percent (7.43%) Series F
Senior Notes due February 15, 2009 (the "SERIES F 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 D Notes shall be substantially in the form set out in Exhibit 1D, the
Series E Notes shall be substantially in the form set out in Exhibit 1E, and the
Series F Notes shall be substantially in the form set out in Exhibit 1F, in each
case, with such changes therefrom, if any, as may be approved by you and the
Company (the Series D Notes, the Series E Notes and the Series F Notes are
herein referred to collectively as the "Notes," and each 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 Closing 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 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 the 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. CLOSING.
3.1 THE CLOSING.
The sale and purchase of the Notes to be purchased by the purchasers listed
on Schedule A hereto (the "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 "CLOSING") on February 12, 1999 (the "CLOSING
DATE"). At the Closing the Company will deliver to each Purchaser the Notes to
be purchased by it in the form of, respectively, a single Series D Note, Series
E Note, or Series F Note, as the case may be (or such greater number of Series D
Notes, Series E Notes, or Series F Notes, in denominations of at least One
Hundred Thousand Dollars ($100,000) as such Purchaser may request), dated the
Closing Date and registered in its name (or in the name of its nominee), against
delivery by such 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 account number
1820760377 AT BANK ONE-HOUSTON, 910 TRAVIS, HOUSTON, TEXAS 77002, ABA #
111000614.
3.2 Failure of the Company to Deliver.
If on the 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 to your satisfaction on the Closing 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.
3.3 Failure by You to Deliver.
If on the 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 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. Except as described herein and in accordance with
applicable law, 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.
4. YOUR CONDITIONS TO CLOSINGS.
Your obligation to purchase and pay for the Notes to be sold to you on the
Closing Date is subject to the fulfillment to your satisfaction, prior to or on
the 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 true and correct when made and on the 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 the 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 the Closing Date, certifying that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.
<PAGE>
(b) Company Secretary's Certificate. The Company shall have delivered
to you a certificate, dated the 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, this Agreement and any other agreement or instrument
related thereto.
(c) Secretary's Certificates of Restricted Subsidiaries. Each
Restricted Subsidiary shall have delivered to you a certificate dated the
Closing Date (separately executed or executed jointly by one or more
Restricted Subsidiaries), 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 of such Restricted
Subsidiary attached thereto and as to other corporate proceedings relating
to the authorization, execution and delivery by such Restricted Subsidiary
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
the Restricted Subsidiaries, and
(b) Hebb & Gitlin, your special counsel,
closing opinions satisfactory to you in form, scope and substance, each dated as
of the Closing Date, substantially in the respective forms set forth in Exhibits
4.4(a) and 4.4(b), and opining 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.
4.5 Purchases Permitted By Applicable Law, etc.
On the 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 T, U 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 the Closing, the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the 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 the Closing the 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 the 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.
4.10 Subsidiary Guaranty.
You shall have received the Guaranty, duly executed and delivered by each
Restricted Subsidiary, substantially in the form of Exhibit 4.10 (the
"SUBSIDIARY GUARANTY"), satisfactory to you in form and substance, which
Guaranty shall be in full force and effect.
4.11 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 the
Closing Date is subject to the fulfillment to the Company's satisfaction, prior
to or on the 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 the Closing Date.
<PAGE>
4A.2 SALES PERMITTED BY APPLICABLE LAW, ETC.
On the 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.
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 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, and, in
the case of the Restricted Subsidiaries, to execute and deliver the
Subsidiary Guaranty and to perform the provisions hereof and thereof.
<PAGE>
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).
(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, Prudential Securities Incorporated, has
delivered to you and each Other Purchaser a copy of a Confidential Private
Placement Memorandum, dated January 1999 (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 Subsidiaries. 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 in the financial statements listed in Schedule 5.5, since December
31, 1997, there has been no change in the financial condition, operations,
business, properties or prospects of the Company or any 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 Subsidiaries; Affiliates.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists of (i) the Subsidiaries, showing, as to each 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 Subsidiary,
and whether such Subsidiary is a Restricted Subsidiary, and (ii) the
Company's Affiliates (other than Subsidiaries).
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the
Company and the Subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable and are owned by the Company or another
Subsidiary free and clear of any Lien (except as otherwise disclosed in
Schedule 5.4).
(c) Each 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 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 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 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).
<PAGE>
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.
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 Subsidiary or any property of the
Company or any 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 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.
<PAGE>
5.9 Taxes.
The Company and the 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 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 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 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, 1996.
5.10 Title to Property; Leases.
The Company and the 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 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 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 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 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 Subsidiary with respect to any
patent, copyright, service mark, trademark, trade name or other right owned
or used by the Company or any Subsidiary which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.12 Compliance with ERISA.
<PAGE>
(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.
(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 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).
<PAGE>
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 seventy-two (72)
other Institutional Investors, each of which has been offered the Notes at a
private sale for investment pursuant to a valid exemption from the registration
requirements of Section 5 of the Securities Act. 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.
5.14 Use of Proceeds; Margin Regulations.
The Company will apply the proceeds of the sale of the Notes to refinance
existing Debt and to fund capital expenditures primarily associated with the
acquisition of seismic data and investment in working interests of exploration
and production projects. 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 U of the Board of
Governors of the Federal Reserve System (12 CFR 221), 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 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 U.
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 Subsidiaries as of February 10, 1999,
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 Subsidiaries. Neither the Company nor 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 Subsidiary
and no event or condition exists with respect to any Debt of the Company or
any 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.
<PAGE>
(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.
5.17 Status under Certain Statutes.
Neither the Company nor any 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 Subsidiary has knowledge of any claim or has
received any notice of any claim, and no action or proceeding of any kind has
been instituted raising any claim against the Company or any of the 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 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 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 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.
5.19 Year 2000 Problem.
<PAGE>
The Company and the Subsidiaries are implementing measures to have all
critical business and computer systems Year 2000 Compliant and Ready in a timely
manner and the advent of the year 2000 and its impact on said critical business
and computer systems are not reasonably expected to have 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.
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
<PAGE>
(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.
6.2 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
(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;
<PAGE>
(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,
(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:
<PAGE>
(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);
(b) Annual Statements -- within ninety (90) days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such year,
(ii) consolidated statements of operations, stockholders' equity
and cash flows of the Company and its consolidated Subsidiaries for
such year, and
(iii) a condensed consolidating balance sheet, and condensed
consolidating statements of operations and cash flows of the Company
and its Subsidiaries setting forth, in each case, consolidating
information sufficient to show the financial position and results of
operations and cash flows of the Company and the Restricted
Subsidiaries,
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
<PAGE>
(A) in the case of the financial statements identified in
the foregoing clauses (i) and (ii), 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, 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
(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;
<PAGE>
(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,
(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
<PAGE>
(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) Audited Financial Statements for Restricted Group -- with respect
to any fiscal year of the Company as to which both of the following
conditions would be satisfied:
(i) the assets of all Unrestricted Subsidiaries, determined on a
combined basis as of the last day of such year, exceed 20% of the
consolidated total assets of the Company and its consolidated
Subsidiaries, and
(ii) the revenues of all Unrestricted Subsidiaries, determined on
a combined basis for such fiscal year, exceed 20% of the consolidated
revenues of the Company and its consolidated Subsidiaries,
upon the written request of the Required Holders, the Company will deliver to
each holder that is an Institutional Investor the same financial statements and
opinion with respect to the Company and its Restricted Subsidiaries as is
provided pursuant to clauses (i) and (ii) of Section 7.1(b) with respect to the
Company and its consolidated Subsidiaries (such delivery to be made no later
than the later of (x) the time delivery is made of the financial statements
referred to in such clauses, if such request is made at least 60 days before
such time, or (y) 60 days after such request is made).
(k) 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 (including, without limitation, information
regarding the impact of the occurrence of the year 2000 on the Company and
the Restricted Subsidiaries and plans of the Company to address any such
impact) 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 (with respect to its travel and other
out-of-pocket costs and compensation expenses of its representatives) 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
<PAGE>
(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.
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):
================================================================================
DATE: | PRINCIPAL AMOUNT | PRINCIPAL AMOUNT | PRINCIPAL AMOUNT
| OF SERIES D NOTES|OF SERIES E NOTES | OF SERIES F NOTES
| TO BE PREPAID OR | TO BE PREPAID OR | TO BE PREPAID OR
| PAID: | PAID: | PAID:
==================|==================|====================|=====================
February 15, 2004 | $20,000,000 | $12,500,000 | $0
- ------------------|------------------|--------------------|---------------------
February 15, 2005 | $0 | $12,500,000 | $0
- ------------------|------------------|--------------------|---------------------
February 15, 2006 | $0 | $12,500,000 | $0
- ------------------|------------------|--------------------|---------------------
February 15, 2007 | $0 | $12,500,000 | $0
- ------------------|------------------|--------------------|---------------------
February 15, 2008 | $0 | $12,500,000 | $0
- ------------------|------------------|--------------------|---------------------
February 15, 2009 | $0 | $12,500,000 | $43,000,000
==================|==================|====================|=====================
Totals | $20,000,000 | $75,000,000 | $43,000,000
================================================================================
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.
8.2 Optional Prepayments with Make-Whole Amount; Rescission.
<PAGE>
(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.
8.3 Allocation of Partial Prepayments.
<PAGE>
All partial prepayments of the Series D Notes, the Series E Notes and the
Series F 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 D Notes, the Series E Notes and
the Series F 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 D Note,
Series E Note or Series F 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 D Note, Series E
Note, or Series F 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 D Note, Series E Note, or Series F 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 D Note, Series E Note, or Series F 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 Dow Jones Market
Service (or such other display as may replace Page 678 on the Dow Jones
Market 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
constant maturity closest to and greater than the Remaining Average Life
and (2) the actively traded U.S. Treasury security with the constant
maturity 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 D Note, Series E Note, or Series F 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.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Series D Note, Series E Note, or Series F 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.
<PAGE>
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, rules or regulations of Governmental Authorities 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 authorizations of Governmental Authorities necessary to the ownership
and operation 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 authorizations of Governmental Authorities 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
<PAGE>
(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).
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.
Subject to Section 10.5, 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, franchises, licenses and permits 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, franchise, license or permit 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, franchise,
license or permit 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.
9.7 Subsidiary Guaranty.
<PAGE>
The Company will cause each Subsidiary which becomes a Restricted
Subsidiary after the 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).
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) One Hundred Eighty Million Dollars ($180,000,000), 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, 1999.
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,
<PAGE>
(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.
(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 being contested in accordance with the general procedures
described in Section 9.4 relating to tax matters;
(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 Five Million Dollars
($5,000,000)), 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,
<PAGE>
(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
(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.
<PAGE>
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;
(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");
<PAGE>
(ii) either
(A) such Transfer is from a Restricted Subsidiary to the
Company or a Wholly-Owned Restricted Subsidiary, or
(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 (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.
<PAGE>
(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
(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
<PAGE>
(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
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.
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 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) Thirty-Five Million Dollars ($35,000,000), PLUS
(B) fifty percent (50%) of Consolidated Net Income for the
period commencing January 1, 1999 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.
<PAGE>
(c) Investments of Subsidiaries. Each Person which becomes a
Restricted Subsidiary after the 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 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.
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 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;
<PAGE>
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.
10.9 Affiliate Transactions.
The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, 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 of the Company or any of its Restricted
Subsidiaries, 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
<PAGE>
(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 Five Million Dollars ($5,000,000), 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
(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
<PAGE>
(i) a final judgment or judgments for the payment of money aggregating
in excess of Five Million Dollars ($5,000,000) 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,
(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.
<PAGE>
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.
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.
<PAGE>
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.
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 1D, Exhibit 1E or Exhibit 1F, 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 an original Purchaser or another
holder of Notes that is 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,
<PAGE>
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.
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 in Texas. 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.
<PAGE>
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
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.
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, as an inducement to, or otherwise in connection with 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.
17.4 Notes held by Company, etc.
<PAGE>
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 Closing (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.
20. CONFIDENTIAL INFORMATION.
<PAGE>
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
<PAGE>
(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 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.
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.
<PAGE>
(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
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 OR CERTIFIED MAIL WITH RETURN RECEIPT REQUESTED (POSTAGE
PREPAID) 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),
(ii) 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,
<PAGE>
(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
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) 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 and prepared at the expense of the Company (PROVIDED
that the Company shall have the right to negotiate with such
accountants regarding the cost of furnishing such opinion), 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.
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: Executive Vice President of Finance
The foregoing is hereby
agreed to as of the
date thereof.
[Separately executed by each of the
following Purchasers.]
PRINCIPAL LIFE INSURANCE COMPANY,
By Principal Capital Management, LLC,
a Delaware limited liability company,
its authorized signatory
By /s/ Jon C. Heiny
-----------------------------------
Name: Jon C. Heiny
Its: Counsel
By /s/ James C. Fifield
-----------------------------------
Name: James C. Fifeld
Its: Counsel
<PAGE>
PRINCIPAL LIFE INSURANCE COMPANY,
ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS,
By Principal Capital Management, LLC,
a Delaware limited liability company,
its authorized signatory
By /s/ Jon C. Heiny
-----------------------------------
Name: Jon C. Heiny
Its: Counsel
By /s/ James C. Fifield
-----------------------------------
Name: James C. Fifeld
Its: Counsel
COMMERCIAL UNION LIFE INSURANCE
COMPANY OF AMERICA,
a Delaware Corporation, by its attorney in fact,
Principal Life Insurance Company,
an Iowa corporation
By /s/ Jon C. Heiny
-----------------------------------
Name: Jon C. Heiny
Its: Counsel
By /s/ James C. Fifield
-----------------------------------
Name: James C. Fifeld
Its: Counsel
ALLSTATE LIFE INSURANCE COMPANY
By /s/ Charles D. Mires
-----------------------------------
Name: Charles D. Mires
By /s/ Patricia W. Wilson
-----------------------------------
Name: Patricia W. Wilson
Authorized Signatories
PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY
By: Provident Investment Management, LLC
Its Agent
By /s/ David Fussell
-----------------------------------
Name: David Fussell
Title: Vice President
THE PAUL REVERE LIFE INSURANCE COMPANY
By: Provident Investment Management, LLC
Its Agent
By /s/ David Fussell
-----------------------------------
Name: David Fussell
Title: Vice President
C.M. LIFE INSURANCE COMPANY
By /s/ Richard C. Morrison
-----------------------------------
Name: Richard C. Morrison
Title: Investment Officer
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By /s/ Richard C. Morrison
-----------------------------------
Name: Richard C. Morrison
Title: Managing Director
UNITED OF OMAHA LIFE INSURANCE COMPANY
By /s/ Edwin H. Garrison Jr.
-----------------------------------
Name: Edwin H. Garrison Jr.
Title: First Vice President
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
By /s/ Laurence P. Fleming
-----------------------------------
Name: Laurence P. Fleming
Title: Vice President
RELIASTAR LIFE INSURANCE COMPANY
By /s/ James V. Wittich
-----------------------------------
Name: James V. Witich
Title: Authorized Representative
NORTHERN LIFE INSURANCE COMPANY
By /s/ James V. Wittich
-----------------------------------
Name: James V. Wittich
Title: Assistant Treasurer
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
By /s/ James V. Wittich
-----------------------------------
Name: James V. Witich
Title: Vice President, Investments
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
By /s/ James V. Wittich
-----------------------------------
Name: James V. Witich
Title: Assistant Treasurer
THE TRAVELERS INSURANCE COMPANY
By /s/ John F. Gilsenan
-----------------------------------
Name: John F. Gilsenan
Title: Second Vice President
TRUSTMARK LIFE INSURANCE CO.
By /s/ Jerry Hitpas
-----------------------------------
Name: Jerry Hitpas
Title: Sr. Vice President
PAN-AMERICAN LIFE INSURANCE COMPANY
By /s/ F.A. Stone
-----------------------------------
Name: F. Anderson Stone
Title: Vice President Corporate Securities
REPUBLIC WESTERN INSURANCE COMPANY
By /s/ Kristin Spears
-----------------------------------
Name: Kristin Spears
Title: Asst. Vice President Investments
OXFORD LIFE INSURANCE COMPANY
By /s/ Larry D. Goodyear
-----------------------------------
Name: Larry D. Goodyear
Title: Sr. Vice President
UNITED LIFE INSURANCE COMPANY
By /s/ J. Scott McIntyre, Jr.
-----------------------------------
Name: J. Scott McIntyre, Jr.
Title: Chairman
<PAGE>
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
- ---------------------------------------- ---------------------------------------
PURCHASER NAME PRINCIPAL LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered PRINCIPAL LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RD-1; $6,900,000
Principal Amount RD-2; $1,000,000
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information ABA #073000228
Norwest Bank Iowa, N.A.
7th and Walnut Streets
Des Moines, Iowa 50309
For credit to Principal Life Insurance
Company
Account No. 0000014752
Bond No. 1-B-62003
OBI PFGSE (S) B0062003()Seitel
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.03% Series D
Senior Notes due
2004
Security Number: 816074 B* 8
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0960
Attn: Investment Accounting -
Securities
Fax: (515) 248-2643
Tel: (515) 247-0689
- ---------------------------------------- ---------------------------------------
Address for All other Notices Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0800
Attn: Investment - Securities
Fax: (515) 248-2490
Tel: (515) 248-3495
- ---------------------------------------- ---------------------------------------
Other Instructions PRINCIPAL LIFE INSURANCE COMPANY
By Principal Capital Management, LLC,
a Delaware limited liability
company, its authorized signatory
By_______________________
Its:
By_______________________
Its:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Jon C. Heiny, Esq.
Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0301
Tel: 515-246-7522
- ---------------------------------------- ---------------------------------------
Tax Identification Number 42-0127290
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME PRINCIPAL LIFE INSURANCE COMPANY ON
BEHALF OF ONE OR MORE SEPARATE
ACCOUNTS
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered PRINCIPAL LIFE INSURANCE COMPANY ON
BEHALF OF ONE OR MORE SEPARATE
ACCOUNTS
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RD-3; $2,100,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Citibank New York
ABA #021000089 To Credit Account No.
36858201
For Further Credit to Principal Life-
Dupont Separate Account No. 847958
Bond No. 800-B-62003
OBI PFGSE (S) B0062043()Seitel
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.03% Series D
Senior Notes due
2004
Security Number: 816074 B* 8
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0960
Attn: Investment Accounting -
Securities
Fax: (515) 248-2643
Tel: (515) 247-0689
- ---------------------------------------- ---------------------------------------
Address for All other Notices Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0800
Attn: Investment - Securities
Fax: (515) 248-2490
Tel: (515) 248-3495
- ---------------------------------------- ---------------------------------------
Other Instructions PRINCIPAL LIFE INSURANCE
COMPANY, ON BEHALF OF ONE OR MORE
SEPARATE ACCOUNTS, By Principal Capital
Management, LLC, a Delaware limited
liability company, its authorized
signatory
By_______________________
Its:
By_______________________
Its:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Jon C. Heiny, Esq.
Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0301
Tel: 515-246-7522
- ---------------------------------------- ---------------------------------------
Tax Identification Number 42-0127290
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME PRINCIPAL LIFE INSURANCE COMPANY ON
BEHALF OF ONE OR MORE SEPARATE
ACCOUNTS
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered PRINCIPAL LIFE INSURANCE COMPANY
ON BEHALF OF ONE OR MORE SEPARATE
ACCOUNTS
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-1; $8,500,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information ABA #073000228
Norwest Bank Iowa, N.A.
7th and Walnut Streets
Des Moines, IA 50309
For credit to Principal Life Insurance
Company
Account No. 0000032395
Bond No. 16-B-62004
OBI PFGSE (S) B0062004()Seitel
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0960
Attn: Investment Accounting -
Securities
Fax: (515) 248-2643
Tel: 515-247-0689
- ---------------------------------------- ---------------------------------------
Address for All other Notices Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0800
Attn: Investment - Securities
Fax: (515) 248-2490
Tel: 515-248-3495
- ---------------------------------------- ---------------------------------------
Other Instructions PRINCIPAL LIFE INSURANCE
COMPANY, ON BEHALF OF ONE OR MORE
SEPARATE ACCOUNTS, By Principal Capital
Management, LLC, a Delaware limited
liability company, its authorized
signatory
By_______________________
Its:
By_______________________
Its:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Jon C. Heiny, Esq.
Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0301
Tel: 515-246-7522
- ---------------------------------------- ---------------------------------------
Tax Identification Number 42-0127290
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME COMMERCIAL UNION LIFE INSURANCE COMPANY
OF AMERICA
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered COMMERCIAL UNION LIFE INSURANCE COMPANY
OF AMERICA
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-2; $1,500,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information First Union (Philadelphia)
ABA #031201467
1500 Market Street
Philadelphia, PA 19102-2509
Attn: Joe Aman
DDA 5000012398064
Bond No. 400-B-62004
For further credit to Account No.
060073-02-4 (Commercial Union Life
Insurance Company of America/Principal)
- --------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Commercial Union Life Insurance Company
of America
c/o Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0960
Attn: Investment Accounting -
Securities
Fax: (515) 248-2643
Tel: (515) 247-0689
- ---------------------------------------- ---------------------------------------
Address for All other Notices Commercial Union Life Insurance Company
of America
c/o Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0800
Attn: Investment - Securities - Jon
Davidson
Fax: (515) 248-2490
Tel: 515-248-3495
- ---------------------------------------- ---------------------------------------
Other Instructions COMMERCIAL UNION LIFE INSURANCE COMPANY
OF AMERICA,
a Delaware corporation, by its attorney
in fact, Principal Life Insurance
Company of America, an Iowa corporation
By_______________________
Its:
By_______________________
Its:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Jon C. Heiny, Esq.
Commercial Union Life Insurance Company
of America
c/o Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0301
Tel: 515-246-7522
- ---------------------------------------- ---------------------------------------
Tax Identification Number 42-0127290
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME PRINCIPAL LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered PRINCIPAL LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RF-1; $12,000,000
Principal Amount RF-2; $1,000,000
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information ABA #073000228
Norwest Bank Iowa, N.A.
7th and Walnut Streets
Des Moines, Iowa 50309
For credit to Principal Life Insurance
Company
Account No. 0000014752
Bond No. 1-B-62005
OBI PFGSE (S) B0062005()Seitel
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.43% Series F
Senior Notes due
2009
Security Number: 816074 B# 4
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0960
Attn: Investment Accounting -
Securities
Fax: (515) 248-2643
Tel: (515) 247-0689
- ---------------------------------------- ---------------------------------------
Address for All other Notices Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0800
Attn: Investment - Securities
Fax: (515) 248-2490
Tel: (515) 248-3495
- ---------------------------------------- ---------------------------------------
Other Instructions PRINCIPAL LIFE INSURANCE COMPANY,
By Principal Capital Management, LLC,
a Delaware limited liability
company, its authorized signatory
By_______________________
Its:
By_______________________
Its:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Jon C. Heiny, Esq.
Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0301
Tel: (515) 246-7522
- ---------------------------------------- ---------------------------------------
Tax Identification Number 42-0127290
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME PRINCIPAL LIFE INSURANCE COMPANY ON
BEHALF OF ONE OR MORE SEPARATE
ACCOUNTS
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered PRINCIPAL LIFE INSURANCE COMPANY ON
BEHALF OF ONE OR MORE SEPARATE
ACCOUNTS
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RF-3; $2,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information ABA #073000228
Norwest Bank Iowa, N.A.
7th and Walnut Streets
Des Moines, Iowa 50309
For credit to Principal Life Insurance
Company
Account No. 0000032395
Bond No. 16-B-62005
OBI PFGSE (S) B0062005()Seitel
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.43% Series F
Senior Notes due
2009
Security Number: 816074 B# 4
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0960
Attn: Investment Accounting -
Securities
Fax: (515) 248-2643
Tel: (515) 247-0689
- ---------------------------------------- ---------------------------------------
Address for All other Notices Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0800
Attn: Investment - Securities
Fax: (515) 248-2490
Tel: (515) 248-3495
- ---------------------------------------- ---------------------------------------
Other Instructions PRINCIPAL LIFE INSURANCE
COMPANY, ON BEHALF OF ONE OR MORE
SEPARATE ACCOUNTS, By Principal Capital
Management, LLC, a Delaware limited
liability company, its authorized
signatory
By_______________________
Its:
By_______________________
Its:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Jon C. Heiny, Esq.
Principal Capital Management, LLC
801 Grand Avenue
Des Moines, Iowa 50392-0301
Tel: (515) 246-7522
- ---------------------------------------- ---------------------------------------
Tax Identification Number 42-0127290
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME ALLSTATE LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered ALLSTATE LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RD-4; $5,000,000
Principal Amount RE-3; $5,000,000
RF-4; $5,000,000
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information BBK - Harris Trust and Savings Bank
ABA #071000288
BNF - Allstate Life Insurance
Company
Collection Account #168-117-0
ORG - Seitel, Inc.
OBI - DPP - (Enter Private
Placement No., if available)
Payment Due Date (MM/DD/YY)
P___ (Enter "P" & amount of
principal being remitted, for
example, P5000000.00) I__
(Enter "I" & amount of
interest being remitted, for
example, I225000.00)
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.03% Series D
Senior Notes due
2004
Security Number: 816074 B* 8
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Description of
Security: 7.43% Series F
Senior Notes due
2009
Security Number: 816074 B# 4
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Allstate Insurance Company
Investment Operations - Private
Placements
3075 Sanders Road, STE G4A
Northbrook, IL 60062-7127
Tel: (847) 402-2769
Fax: (847) 326-5040
- ---------------------------------------- ---------------------------------------
Address for All other Notices Allstate Life Insurance Company
Private Placements Department
3075 Sanders Road, STE G3A
Northbrook, IL 60062-7127
Tel: (847) 402-4394
Fax: (847) 402-3092
- ---------------------------------------- ---------------------------------------
Other Instructions ALLSTATE LIFE INSURANCE COMPANY
By_______________________
Name:
By_______________________
Name:
Authorized Signatories
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Citibank, Federal Savings Bank
U.S. Custody & Employee Benefit Trust
500 W. Madison Street, Floor 6, Zone 4
Chicago, IL 60661-2591
Attention: Ellen Lorden
For Allstate Life Insurance Company/
Safekeeping Account No. 846627
- ---------------------------------------- ---------------------------------------
Tax Identification Number 36-2554642
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME ALLSTATE LIFE INSURANCE COMPANY/
NORTHBROOK LIFE INSURANCE COMPANY -
TRUST
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered CITIBANK,
FEDERAL SAVINGS BANK AS COLLATERAL
AGENT AND TRUSTEE UNDER THE SECURITY
AND TRUST AGREEMENT DATED AS OF
SEPTEMBER 1, 1993 (NORTHBROOK LIFE
INSURANCE COMPANY, SECURED PARTY AND
BENEFICIARY)
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RD-5; $5,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information BBK - Harris Trust and Savings Bank
ABA #071000288
BNF - Allstate Life Insurance
Company
Collection Account #168-124-6
ORG - Seitel, Inc.
OBI - DPP - (Enter Private
Placement No., if available)
Payment Due Date (MM/DD/YY)
P___ (Enter "P" & amount of
principal being remitted, for
example, P5000000.00) I__
(Enter "I" & amount of
interest being remitted, for
example, I225000.00)
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.03% Series D
Senior Notes due
2004
Security Number: 816074 B* 8
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Allstate Insurance Company
Investment Operations - Private
Placements
3075 Sanders Road, STE G4A
Northbrook, IL 60062-7127
Tel: (847) 402-2769
Fax: (847) 326-5040
- ---------------------------------------- ---------------------------------------
Address for All other Notices Allstate Life Insurance Company
Private Placements Department
3075 Sanders Road, STE G3A
Northbrook, IL 60062-7127
Tel: (847) 402-4394
Fax: (847) 402-3092
- ---------------------------------------- ---------------------------------------
Other Instructions ALLSTATE LIFE INSURANCE COMPANY
By_______________________
Name:
By_______________________
Name:
Authorized Signatories
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Citibank, Federal Savings Bank
U.S. Custody & Employee Benefit Trust
500 W. Madison Street, Floor 6, Zone 4
Chicago, IL 60661-2591
Attention: Ellen Lorden
For Allstate Life Insurance Company/
Safekeeping Account No. 846635
- ---------------------------------------- ---------------------------------------
Tax Identification Number 36-2554642
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME PROVIDENT LIFE AND ACCIDENT INSURANCE
COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered CUDD & CO.
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RF-5; $10,000,000
Principal Amount RF-6; $5,000,000
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information CUDD & Co.
c/o The Chase Manhattan Bank
New York, NY
ABA No. 021 000 021
SSG Private Income Processing
A/C #900-9-000200
Custodial Account No. G06704
Please reference: Issuer
PPN
Coupon
Maturity
Principal - $________
Interest - $_________
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.43% Series F
Senior Notes due
2009
Security Number: 816074 B# 4
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Provident Investment Management, LLC
Private Placements
One Fountain Square
Chattanooga, Tennessee 37402
Tel: (423) 755-1365
Fax: (423) 755-3351
- ---------------------------------------- ---------------------------------------
Address for All other Notices Provident Investment Management, LLC
Private Placements
One Fountain Square
Chattanooga, Tennessee 37402
Tel: (423) 755-1365
Fax: (423) 755-3351
- ---------------------------------------- ---------------------------------------
Other Instructions PROVIDENT LIFE AND ACCIDENT INSURANCE
COMPANY
By: PROVIDENT INVESTMENT MANAGEMENT,LLC
Its: Agent
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes R. Brendan Olin, Esq.
Provident Companies, Inc.
Law Department
One Fountain Square
Chattanooga, Tennessee 37402
Tel: (423) 755-7282
- ---------------------------------------- ---------------------------------------
Tax Identification Number 13-6022143 (CUDD & CO.)
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME THE PAUL REVERE LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered CUDD & CO.
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RF-7; $5,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information CUDD & Co.
c/o The Chase Manhattan Bank
New York, NY
ABA No. 021 000 021
SSG Private Income Processing
A/C #900-9-000200
Custodial Account No. G06992
Please reference: Issuer
PPN
Coupon
Maturity
Principal - $________
Interest - $_________
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.43% Series F
Senior Notes due
2009
Security Number: 816074 B# 4
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Provident Investment Management, LLC
Private Placements
One Fountain Square
Chattanooga, Tennessee 37402
Tel: (423) 755-1365
Fax: (423) 755-3351
- ---------------------------------------- ---------------------------------------
Address for All other Notices Provident Investment Management, LLC
Private Placements
One Fountain Square
Chattanooga, Tennessee 37402
Tel: (423) 755-1365
Fax: (423) 755-3351
- ---------------------------------------- ---------------------------------------
Other Instructions THE PAUL REVERE LIFE INSURANCE COMPANY
By: PROVIDENT INVESTMENT MANAGEMENT,
LLC
Its: Agent
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes R. Brendan Olin, Esq.
Provident Companies, Inc.
Law Department
One Fountain Square
Chattanooga, Tennessee 37402
Tel: (423) 755-7282
- ---------------------------------------- ---------------------------------------
Tax Identification Number 13-6022413 (CUDD & CO.)
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-4; $5,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Citibank, N.A.
111 Wall Street
New York, NY 10043
ABA No. 021000089
For MassMutual Long-Term Pool
Account No. 4067-3488
with telephonic advice of payment to
the Securities Custody and
Collection Department of Massachusetts
Mutual Life Insurance Company at
(413) 744-3561
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
Attn: Securities and Custody
Collection Department, F381
- ---------------------------------------- ---------------------------------------
Address for All other Notices Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
- ---------------------------------------- ---------------------------------------
Other Instructions MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Elliot S. Cohen, Esq.
Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111-0001
Tel: 413-744-5847
- ---------------------------------------- ---------------------------------------
Tax Identification Number 04-1590850
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-5; $2,500,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Chase Manhattan Bank, N.A.
4 MetroTech Center
New York, NY 10081
ABA No. 021000021
For MassMutual Pension Management
Account No. 910-2594018
with telephonic advice of payment to
the Securities Custody and
Collection Department of Massachusetts
Mutual Life Insurance Company at
(413) 744-3561
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
Attn: Securities and Custody
Collection Department, F381
- ---------------------------------------- ---------------------------------------
Address for All other Notices Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
- ---------------------------------------- ---------------------------------------
Other Instructions MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Elliot S. Cohen, Esq.
Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111-0001
Tel: 413-744-5847
- ---------------------------------------- ---------------------------------------
Tax Identification Number 04-1590850
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-6; $2,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method 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
with telephonic advice of payment to
the Securities Custody and
Collection Department of Massachusetts
Mutual Life Insurance Company at
(413) 744-3561
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
Attn: Securities and Custody
Collection Department, F381
- ---------------------------------------- ---------------------------------------
Address for All other Notices Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
- ---------------------------------------- ---------------------------------------
Other Instructions MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Elliot S. Cohen, Esq.
Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111-0001
Tel: 413-744-5847
- ---------------------------------------- ---------------------------------------
Tax Identification Number 04-1590850
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME C.M. LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered C.M. LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-7; $500,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Citibank, N.A.
111 Wall Street
New York, NY 10043
ABA No. 021000089
For Segment 43 - Universal Life
Account No. 4068-6561
with telephonic advice of payment to
the Securities Custody and
Collection Department of Massachusetts
Mutual Life Insurance Company at
(413) 744-3561
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments C.M. Life Insurance Company
c/o Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
Attn: Securities and Custody
Collection Department, F381
- ---------------------------------------- ---------------------------------------
Address for All other Notices C.M. Life Insurance Company
c/o Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
- ---------------------------------------- ---------------------------------------
Other Instructions C.M. LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Elliot S. Cohen, Esq.
Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111-0001
Tel: 413-744-5847
- ---------------------------------------- ---------------------------------------
Tax Identification Number 06-1041383
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME UNITED OF OMAHA LIFE INSURANCE COMPANY
Name in Which Note is Registered UNITED OF OMAHA LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-8; $10,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Chase Manhattan Bank
ABA #021000021
Private Income Processing
For credit to: United of Omaha Life
Insurance Company
Account #900-9000200
a/c: G07097
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments The Chase Manhattan Bank
4 New York Plaza, 13th Floor
New York, NY 10004
Attn: Income Processing - J. Pipperato
a/c: G07097
- ---------------------------------------- ---------------------------------------
Address for All other Notices United of Omaha Life Insurance Company
4 - Investment Loan Administration
Mutual of Omaha Plaza
Omaha, NE 68175-1011
- ---------------------------------------- ---------------------------------------
Other Instructions UNITED OF OMAHA LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes The Chase Manhattan Bank
North America Insurance - 6th Floor
Attn: Ann Marie Mazza
3 Chase Metrotech Center
Brooklyn, NY 11245
- ---------------------------------------- ---------------------------------------
Tax Identification Number 47-0322111
- --------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-9; $10,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information ABA No. 021 000 021
Chase Manhattan Bank, N.A.
New York, NY
Account No.: 900 9000 200
Account Name: Income Processing
Reference: Phoenix Home Life Acct.
#G05413
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Phoenix Home Life Mutual Insurance
Company
c/o Phoenix Investment Partners, Ltd.
56 Prospect Street
P.O. Box 1504080
Hartford, Connecticut 06115-0480
Attention: Private Placements Division
Fax: (860) 403-5451
- ---------------------------------------- ---------------------------------------
Address for All other Notices Phoenix Home Life Mutual Insurance
Company
c/o Phoenix Investment Partners, Ltd.
56 Prospect Street
P.O. Box 1504080
Hartford, Connecticut 06115-0480
Attention: Private Placements Division
Fax: (860) 403-5451
- ---------------------------------------- ---------------------------------------
Other Instructions PHOENIX HOME LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes John T. Mulrain, Esq.
Phoenix Home Life Mutual Insurance
Company
One American Row
Hartford, CT 06115
Tel: 860-403-5799
- ---------------------------------------- ---------------------------------------
Tax Identification Number 06-0493340
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME RELIASTAR LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered RELIASTAR LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-10; $1,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information US Bank N.A./Mpls
601 2nd Ave. S., Mpls, MN
Bank ABA # 091000022
Acct Name: ReliaStar Life Insurance Co
Acc. #110240014461
Attn: Securities Accounting
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments ReliaStar Investment Research
100 Washington Avenue South
Suite 800
Minneapolis, MN 55401-2121
Ref: Private Placements
Tel: (612) 372-5257
Fax: (612) 372-5368
- ---------------------------------------- ---------------------------------------
Address for All other Notices ReliaStar Investment Research
100 Washington Avenue South
Suite 800
Minneapolis, MN 55401-2121
Ref: Private Placements
Tel: (612) 372-5257
Fax: (612) 372-5368
- ---------------------------------------- ---------------------------------------
Other Instructions RELIASTAR LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Attn: Bret Brunner
- ---------------------------------------- ---------------------------------------
Tax Identification Number 41-0451140
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME NORTHERN LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered NORTHERN LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-11; $5,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information US Bank N.A./Mpls
601 2nd Ave. S.
Act. #160232376105
Bank ABA # 091000022
Attn: Securities Accounting
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Private Placements
Tel: (612) 372-5773
Fax: (612) 372-5368
- ---------------------------------------- ---------------------------------------
Address for All other Notices ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Private Placements
Tel: (612) 372-5773
Fax: (612) 372-5368
- ---------------------------------------- ---------------------------------------
Other Instructions NORTHERN LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Attn: Bret Brunner
- ---------------------------------------- ---------------------------------------
Tax Identification Number 41-1295933
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME RELIASTAR LIFE INSURANCE COMPANY OF NEW
YORK
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered SIGLER & CO.
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-12; $2,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Chase Manhattan Bank
New York, NY
A/C #900-9-000200
F/F/C #G53095 ReliaStar Life of New
York
Bank ABA #021000021
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Private Placements
Tel: (612) 372-5257
Fax: (612) 372-5368
- ---------------------------------------- ---------------------------------------
Address for All other Notices ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Private Placements
Tel: (612) 372-5257
Fax: (612) 372-5368
- ---------------------------------------- ---------------------------------------
Other Instructions RELIASTAR LIFE INSURANCE COMPANY OF NEW
YORK
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Attn: Bret Brunner
- ---------------------------------------- ---------------------------------------
Tax Identification Number 53-0242530
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME SECURITY CONNECTICUT LIFE INSURANCE
COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered SIGLER & CO.
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-13; $2,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Chase Manhattan Bank
New York, New York
ABA #: 021-000-021
Beneficiary Account #: 544755102
Reference: Sigler & Co. (Nominee Name)
Tax I.D. #: 13-3641527
F/C #G54426
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Private Placements
Tel: (612) 372-5257
Fax: (612) 372-5368
- ---------------------------------------- ---------------------------------------
Address for All other Notices ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Private Placements
Tel: (612) 372-5257
Fax: (612) 372-5368
- ---------------------------------------- ---------------------------------------
Other Instructions SECURITY CONNECTICUT LIFE INSURANCE
COMPANY
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Attn: Bret Brunner
- ---------------------------------------- ---------------------------------------
Tax Identification Number 35-1468921
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME THE TRAVELERS INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered TRAL & CO.
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-14; $10,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Chase Manhattan Bank
NY, NY
ABA Number 021-0000-21
REF: Travelers Private Placement Acct.
Account Number 910-2-587434
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments The Travelers Insurance Company
1 Tower Square 10PB
Hartford, Conn. 06183-2030
Contact: John J. Console
(860) 277-0940
Fax: (860) 277-2299
- ---------------------------------------- ---------------------------------------
Address for All other Notices The Travelers Insurance Company
1 Tower Square 9PB
Hartford, Conn. 06183-2030
Contact: Allen Cantrell (860) 954-2396
Fax: (860) 954-5243
- ---------------------------------------- ---------------------------------------
Other Instructions THE TRAVELERS INSURANCE COMPANY
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Law Department of Purchaser
- ---------------------------------------- ---------------------------------------
Tax Identification Number 06-0566090
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME TRUSTMARK LIFE INSURANCE CO.
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered GERLACH & CO.
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-15; $5,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Citibank, NYC/CUST.
ABA #021-000-089
Customer A/C #846607
Attn: ADCOM 657-9174
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Citibank N.A.
20 Exchange Place
Level C
New York, NY 10043
Account #846607
Attn: Keith Whyte
Tel: (212) 825-6548
with a copy to:
Trustmark Life Insurance Co.
Attn: Judy Simms, Treasury
400 Field Drive
Lake Forest, Illinois 60045-2581
- ---------------------------------------- ---------------------------------------
Address for All other Notices Trustmark Life Insurance Co.
Attn: Jerry Hitpas
400 Field Drive
Lake Forest, Illinois 60045-2581
- ---------------------------------------- ---------------------------------------
Other Instructions TRUSTMARK LIFE INSURANCE CO.
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Trustmark Life Insurance Co.
Attn: Jerry Hitpas
400 Field Drive
Lake Forest, Illinois 60045-2581
- ---------------------------------------- ---------------------------------------
Tax Identification Number 36-3421358
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME PAN-AMERICAN LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered PAN-AMERICAN LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RF-8; $3,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Bank One, Louisiana, NA
ABA #065400137
201 St. Charles Avenue
New Orleans, LA 70170
For the account of: Pan-American Life
Insurance Company
Account No.: 5520110029496
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.43% Series F
Senior Notes due
2009
Security Number: 816074 B# 4
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Pan-American Life Insurance Company
Attn: Bond & Stock Accounting 28th
Floor
601 Poydras Street
New Orleans, LA 70130
Fax: (504) 566-3459
- --------------------------------------- ---------------------------------------
Address for All other Notices Pan-American Life Insurance Company
Attn: Investment Department 28h Floor
601 Poydras Street
New Orleans, LA 70130
- ---------------------------------------- ---------------------------------------
Other Instructions PAN-AMERICAN LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Pan-American Life Insurance Company
Attn: Marylyn Andree 28th Floor
601 Poydras Street
New Orleans, LA 70130
- ---------------------------------------- ---------------------------------------
Tax Identification Number 72-0281240
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME OXFORD LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered OXFORD LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-16; $2,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information B One Col
BK One Tr Col/CUST
ABA: 044000804
FAO: #0482068650
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments OLIC
Attn: Investments
2721 North Central Ave.
Phoenix, AZ 85004
- ---------------------------------------- ---------------------------------------
Address for All other Notices OLIC
Attn: Investments
2721 North Central Ave.
Phoenix, AZ 85004
- ---------------------------------------- ---------------------------------------
Other Instructions OXFORD LIFE INSURANCE COMPANY
By_______________________
Name: Mark Haydukovich
Title: President
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Bank One #2255
c/o New York Window
3rd Floor Plaza Level
55 Water Street
New York, NY 10041
- ---------------------------------------- ---------------------------------------
Tax Identification Number 860216483
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME REPUBLIC WESTERN INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered REPUBLIC WESTERN INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-17; $1,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Norwest Bank Minnesota NA
ABA 091000019
BNF: Norwest Trust Clearing Mpls
BNFA: 0840245
OBI-FFC to: Acct #13440000 Republic
Western Ins. Co.
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28 % Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments RWIC
Attn: Investments
2721 North Central Ave.
Phoenix, AZ 85004
- ---------------------------------------- ---------------------------------------
Address for All other Notices RWIC
Attn: Investments
2721 North Central Ave.
Phoenix, AZ 85004
- ---------------------------------------- ---------------------------------------
Other Instructions REPUBLIC WESTERN INSURANCE COMPANY
By_______________________
Name: Kristin Spears
Title: Assistant Vice President
Investments/Corporate Treasurer
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes Bankers Trust Company
16 Wall Street, 4th Floor
Attention: Window 42
A/C Norwest Bank Minnesota Trust
Department
Account #092192
New York, NY 10015
Norwest Client Account #133440000
Norwest Client Account Name: Republic
Western Ins. Co.
- ---------------------------------------- ---------------------------------------
Tax Identification Number 86074508
- ---------------------------------------- ---------------------------------------
<PAGE>
- ---------------------------------------- ---------------------------------------
PURCHASER NAME UNITED LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------
Name in Which Note is Registered BOOTH & CO.
- ---------------------------------------- ---------------------------------------
Series; Note Registration Number; RE-18; $2,000,000
Principal Amount
- ---------------------------------------- ---------------------------------------
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Northern Trust Company
ABA#: 071000152
Account No.: 5186041000
OBI-FFC to 05-02808
Seitel
Attn: MBS P&I
- ---------------------------------------- ---------------------------------------
Accompanying Information Name of Company: SEITEL, INC.
Description of
Security: 7.28% Series E
Senior Notes due
2009
Security Number: 816074 B@ 6
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- ---------------------------------------- ---------------------------------------
Address for Notices Related to Payments Kevin L. Kubik, Chief Investment
Officer
United Fire & Casualty Company
118 Second Avenue SE
P.O. Box 73909
Cedar Rapids, IA 52407-3909
- ---------------------------------------- ---------------------------------------
Address for All other Notices Kevin L. Kubik, Chief Investment
Officer
United Fire & Casualty Company
118 Second Avenue SE
P.O. Box 73909
Cedar Rapids, IA 52407-3909
- ---------------------------------------- ---------------------------------------
Other Instructions UNITED LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
- ---------------------------------------- ---------------------------------------
Instructions re Delivery of Notes The Northern Trust Company of New York
40 Broad Street, 8th Floor
New York, NY 10004
Ref: 05-02808/United Life Insurance
Company
- ---------------------------------------- ---------------------------------------
Tax Identification Number 36-6033750
- ---------------------------------------- ---------------------------------------
<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.
<PAGE>
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.
CLOSING -- is defined in Section 3.1.
CLOSING DATE -- is defined in Section 3.1.
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:
<PAGE>
(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,
(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;
<PAGE>
(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.
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.
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.
<PAGE>
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.
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.
<PAGE>
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 Materials or wastes, air emissions and discharges to
waste or public systems.
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.
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.
<PAGE>
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
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:
(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, partnership, association, joint venture, 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.
PURCHASER -- is defined in Section 3.1.
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.
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;
(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, whether effected directly or indirectly,
(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:
(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 as a Restricted Subsidiary 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.
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 D NOTES -- is defined in Section 1.
SERIES E NOTES -- is defined in Section 1.
SERIES F NOTES -- is defined in Section 1.
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.
VOTING STOCK -- means 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.
YEAR 2000 COMPLIANT AND READY -- means:
(a) satisfactorily handling date information involving any and all
dates before, during and/or after January 1, 2000, including accepting
input, providing output and performing date calculations in whole or in
part, and operating accurately, without Material interruption, on and in
respect of any and all dates before, during and/or after January 1, 2000
and without any Material change in performance; and
(b) the Company has developed alternative plans to ensure business
continuity in all Material respects in the event of the failure to comply
with the items identified in the foregoing clause (a).
<PAGE>
EXHIBIT 1D
FORM OF SERIES D 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.
7.03% Series D Senior Note Due February 15, 2004
No. __ February ___, 1999
$________ PPN: 816074 B* 8
SEITEL, INC. (the "COMPANY"), a Delaware corporation, for value received,
hereby promises to pay to ______ or registered assigns the principal sum of
______ DOLLARS ($______) on February 15, 2004 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 three
hundredths percent (7.03%) PER ANNUM, semiannually on the fifteenth day of
February and August in each year, commencing on the later of August 15, 1999 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 three hundredths
percent (9.03%) 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 D Notes of the Company issued in an
aggregate principal amount limited to Twenty Million Dollars ($20,000,000)
pursuant to the separate Note Purchase Agreements (collectively, the "NOTE
PURCHASE AGREEMENT"), each dated as of February 12, 1999, between the Company
and each of 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 may be prepaid, in whole or in part, together
with a Make-Whole Amount.
<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 February 12, 1999, 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 as specified in Section 13.2 of the Note Purchase
Agreement. 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, and the Company shall not be affected by any notice or
knowledge to the contrary.
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 1E
FORM OF SERIES E 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.
7.28% Series E Senior Note Due February 15, 2009
No. __ February ___ 1999
$________ PPN: 816074 B@ 6
SEITEL, INC. (the "COMPANY"), a Delaware corporation, for value received,
hereby promises to pay to ______ or registered assigns the principal sum of
______ DOLLARS ($______) on February 15, 2009 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 twenty-eight
hundredths percent (7.28%) PER ANNUM, semiannually on the fifteenth day of
February and August in each year, commencing on the later of August 15, 1999 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 twenty-eight
hundredths percent (9.28%) 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).
<PAGE>
This Note is one of an issue of Series E Notes of the Company issued in an
aggregate principal amount limited to Seventy-Five Million Dollars ($75,000,000)
pursuant to separate Note Purchase Agreements (collectively, the "NOTE PURCHASE
AGREEMENT"), each dated as of February 12, 1999, between the Company and each of
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.
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 February 12, 1999, 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 as specified in Section 13.2 of the Note Purchase
Agreement. 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, and the Company shall not be affected by any notice or
knowledge to the contrary.
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 1F
FORM OF SERIES F 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.
7.43% Series F Senior Note Due February 15, 2009
No. __ February ___, 1999
$________ PPN: 816074 B# 4
SEITEL, INC. (the "COMPANY"), a Delaware corporation, for value received,
hereby promises to pay to ______ or registered assigns the principal sum of
______ DOLLARS ($______) on February 15, 2009 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 forty-three
hundredths percent (7.43%) PER ANNUM, semiannually on the fifteenth day of
February and August in each year, commencing on the later of August 15, 1999 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 forty-three
hundredths percent (9.43%) 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 F Notes of the Company issued in an
aggregate principal amount limited to Forty-Three Million Dollars ($43,000,000)
pursuant to the separate Note Purchase Agreements (collectively, the "NOTE
PURCHASE AGREEMENT"), each dated as of February 12, 1999, between the Company
and each of 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 may be prepaid, in whole or in part, together
with a Make-Whole Amount.
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 February 12, 1999, 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 as specified in Section 13.2 of the Note Purchase
Agreement. 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, and the Company shall not be affected by any notice or
knowledge to the contrary.
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.
<PAGE>
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 4.10
FORM OF GUARANTY
THIS GUARANTY, dated as of February 12, 1999 (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"), SEITEL
MANAGEMENT, INC., a Delaware corporation (together with its successors and
assigns, "SMI"), SEITEL DELAWARE, INC., a Delaware corporation (together with
its successors and assigns, "SDI"), 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"), ALTERNATIVE COMMUNICATION ENTERPRISES, INC., a
Texas corporation (together with its successors and assigns, "ACE") and SEITEL
DATA, LTD., a Texas limited partnership (together with its successors and
assigns, "SDL" and SDC, SG, DDD, SG&E, SPC, SNG, MG, Exsol, Datatel, SOC, SMI,
SDI, SI, AG, GB and ACE 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 D Senior
Notes due February 15, 2004 (as may be amended or restated from time to time,
the "SERIES D NOTES"), in the aggregate principal amount of Twenty Million
Dollars ($20,000,000), (ii) its Series E Senior Notes due February 15, 2009 (as
may be amended or restated from time to time, the "SERIES E NOTES,"), in the
aggregate principal amount of Seventy-Five Million Dollars ($75,000,000), and
(iii) its Series F Senior Notes due February 15, 2009 (as may be amended or
restated from time to time, the "SERIES F NOTES,"), in the aggregate principal
amount of Forty-Three Million Dollars ($43,000,000) (together with the Series D
Notes and the Series E Notes, the "NOTES"), 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 February 12, 1999,
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").
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.
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, subject to the applicable grace and/or notice and cure periods provided
in the Note Purchase Agreement, 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
(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 solely 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;
(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;
(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.
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, indefeasibly 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.
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.
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):
ACE -- 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.
EXSOL -- has the meaning assigned to such term in the first paragraph
hereof.
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.
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 D NOTES -- Section 1.1.
SERIES E NOTES -- Section 1.1.
SERIES F NOTES -- Section 1.1.
SD -- has the meaning assigned to such term in the first paragraph hereof.
SDI -- has the meaning assigned to such term in the first paragraph
hereof.
SDL -- has the meaning assigned to such term in the first paragraph hereof.
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.
SMI -- 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.
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.
<PAGE>
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.
(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
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.
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, the Noteholders and
the Noteholders' successors and assigns 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, the
Noteholders and the Noteholders' successors and assigns.
<PAGE>
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 except that no release of any Guarantor from its
obligations hereunder shall be effected without the consent of all of the
Noteholders.
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 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 OR CERTIFIED MAIL WITH RETURN RECEIPT
REQUESTED (POSTAGE PREPAID) 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.
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, SI,
SMI, SDI, GB, ACE and SDL, 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 /s/ Kurt Krahnke
---------------------------------
Name: Kurt Krahnke
Title: Vice President
SEITEL GEOPHYSICAL, INC.;
DDD ENERGY, INC.;
SEITEL GAS & ENERGY CORP.;
SEITEL POWER CORP.;
SEITEL NATURAL GAS, INC.;
MATRIX GEOPHYSICAL, INC.;
EXSOL, INC.;
DATATEL, INC.;
SEITEL OFFSHORE CORP.;
SEITEL INTERNATIONAL, INC.;
AFRICAN GEOPHYSICAL, INC.;
GEO-BANK, INC.;
ALTERNATIVE COMMUNICATION
ENTERPRISES, INC.; AND
SEITEL DELAWARE, INC.
By /s/ DEBRA D. VALICE
---------------------------------
Name: Debra D. Valice
Title: Vice President
SEITEL MANAGEMENT, INC.
By /s/ DEBRA D. VALICE
---------------------------------
Name: Debra D. Valice
Title: President
SEITEL DATA, LTD.
BY: Seitel Delaware, Inc.,
general partner
By /s/ DEBRA D. VALICE
---------------------------------
Name: Debra D. Valice
Title: Vice President
<PAGE>
ANNEX 1
ADDRESS OF GUARANTORS
SEITEL DATA CORP.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
SEITEL GEOPHYSICAL, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
DDD ENERGY, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
SEITEL GAS & ENERGY CORP.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
SEITEL POWER CORP.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
SEITEL NATURAL GAS, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
MATRIX GEOPHYSICAL, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
EXSOL, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
<PAGE>
DATATEL, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
SEITEL OFFSHORE CORP.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
SEITEL INTERNATIONAL, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
AFRICAN GEOPHYSICAL, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
GEO-BANK, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
ALTERNATIVE COMMUNICATION
ENTERPRISES, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
SEITEL DELAWARE, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
SEITEL MANAGEMENT, INC.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
SEITEL DATA, LTD.
West Building, 7th Floor
50 Briar Hollow Lane
Houston, Texas 77027
<PAGE>
E 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 February 12, 1999 (as
amended or restated from time to time, the "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"), SEITEL MANAGEMENT, INC., a Delaware corporation (together with
its successors and assigns, "SMI"), SEITEL DELAWARE, INC., a Delaware
corporation (together with its successors and assigns, "SDI"), 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"), ALTERNATIVE
COMMUNICATION ENTERPRISES, INC., a Texas corporation (together with its
successors and assigns, "ACE") and SEITEL DATA, LTD., a Texas limited liability
partnership (together with its successors and assigns, "SDL" and SDC, SG, DDD,
SG&E, SPC, SNG, MG, Exsol, Datatel, SOC, SMI, SDI, SI, AG, GB and ACE 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 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.
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)
EHI Holdings, Inc. (incorporated in Delaware)
** Exsol, Inc. (incorporated in Delaware)
** GEO-BANK, INC. (incorporated in Texas)
Matrix Geophysical, Inc. (incorporated in Delaware)
* Olympic Seismic Ltd. (incorporated in Alberta, Canada)
Seitel Canada Holdings, 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)
Seitel International, Inc. (incorporated in Cayman Islands)
Seitel Management, Inc. (incorporated in Delaware)
** Seitel Natural Gas, Inc. (incorporated in Delaware)
Seitel Offshore Corp. (incorporated in Delaware)
** Seitel Power Corp. (incorporated in Delaware)
* Incorporated in 1998
** Dormant
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report included in this Form 10-K, into the Seitel, Inc.
previously filed Form S-3 Registration Statements File Nos. 33-71968, 33-78554,
33-80574, 33-89890, and 333-71545, and Form S-8 Registration Statements File
Nos. 33-36914, 33-78560, 33-89934, 333-01271, 333-12549 33,63383, and 333-64557.
ARTHUR ANDERSEN LLP
Houston, Texas
March 30, 1999
EXHIBIT 23.2
FORREST A. GARB & ASSOCIATES, INC.
PETROLEUM CONSULTANTS
5310 HARVEST HILL ROAD, SUITE 160-LB 152
DALLAS, TEXAS 75230-5805
TEL: 972.788.1110 FAX: 972.991.3160
email: [email protected]
March 30, 1999
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, 1999, and to all references to our firm included
therein.
Forrest A. Garb & Associates, Inc.
By: /s/ Forrest A. Garb
-------------------------
Name: Forrest A. Garb
-------------------------
Title: Chairman of the Board
-------------------------
Dallas, Texas
March 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,161
<SECURITIES> 0
<RECEIVABLES> 60,761
<ALLOWANCES> 936
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 200,813<F2>
<DEPRECIATION> 49,542
<TOTAL-ASSETS> 495,767
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 150,690
0
0
<COMMON> 238
<OTHER-SE> 237,349
<TOTAL-LIABILITY-AND-EQUITY> 495,767
<SALES> 144,857
<TOTAL-REVENUES> 144,857
<CGS> 4,874
<TOTAL-COSTS> 4,874
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,963
<INCOME-PRETAX> 37,983
<INCOME-TAX> 13,623
<INCOME-CONTINUING> 24,360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,360
<EPS-PRIMARY> 1.07<F3>
<EPS-DILUTED> 1.05
<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 $513,037,000
and related accumulated amortization of $250,087,000.
<F3> Reflects basic earnings per share.
</FN>
</TABLE>
