<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
(MARK ONE)
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
or
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended June 30, 1996
Commission file number
000-18816
GRANT GEOPHYSICAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-0766570
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16850 PARK ROW
HOUSTON, TEXAS 77084
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 398-9503
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of August 8, 1996, 13,437,869 shares of common stock, par value $.002
per share, were issued and outstanding.
<PAGE> 2
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30,
1996 (Unaudited) and December 31, 1995 .................. 3-4
Consolidated Statements of Operations for the
Six Months Ended June 30, 1996 (Unaudited)
and 1995 (Unaudited) .................................... 5
Consolidated Statements of Operations for the
Three Months Ended June 30, 1996 (Unaudited)
and 1995 (Unaudited) .................................... 6
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1996 (Unaudited)
and 1995 (Unaudited) .................................... 7
Notes to Consolidated Financial Statements (Unaudited) .. 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ........... 12
PART II. OTHER INFORMATION
Item 2. Change in Securities ............................. 17
Item 5. Other Information ................................ 17
Item 6. Exhibits and Reports on Form 8-K ................. 17
PART III. SIGNATURES ......................................... 18
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................ $ -- $ 1,047
Restricted cash ................................. -- 100
Accounts receivable:
Trade (net of allowance for doubtful accounts
of $1,904 and $2,344 at June 30, 1996 and
December 31, 1995, respectively) ................ 34,216 37,069
Other ........................................... 1,430 1,826
Inventories ...................................... 1,011 1,417
Prepaids ......................................... 4,722 4,823
Mobilization costs ............................... 15,286 5,296
-------- --------
Total current assets ............................ 56,665 51,578
-------- --------
Property, plant and equipment, at cost ........... 109,990 92,502
Less accumulated depreciation .................... 66,445 61,565
-------- --------
Net property, plant and equipment ............... 43,545 30,937
-------- --------
Deferred costs ................................... 2,071 334
Restricted cash .................................. 316 315
Other assets ..................................... 4,128 3,768
-------- --------
Total assets .................................... $106,725 $ 86,932
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
--------- ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, current portion of long-term
debt and capital lease obligations ........................... $ 23,094 $ 18,430
Accounts payable ............................................... 21,220 19,241
Accrued expenses ............................................... 5,062 5,643
Foreign income taxes payable ................................... 347 231
--------- ---------
Total current liabilities ....................................... 49,723 43,545
--------- ---------
Long-term debt and capital lease obligations,
excluding current portion ...................................... 16,100 8,789
Other liabilities and deferred credits .......................... 3,054 4,883
Stockholders' equity:
$2.4375 Convertible exchangeable preferred stock, $.01 par
value. Authorized 2,300,000 shares; issued and outstanding
2,300,000 and 2,157,000 shares at June 30, 1996 and
December 31, 1995, respectively (liquidating preference
$25 per share, aggregating $53,925,000) ....................... 23 22
Series A Convertible preferred stock, $100 par value ...........
Authorized 75,000 shares; issued and outstanding
70,000 shares and none at June 30, 1996 and
December 31, 1995, respectively ............................... 7,000 --
Junior preferred stock, $100 par value. Authorized 15,000
shares; issued and outstanding 14,904 shares .................. 1,490 1,490
Serial preferred stock, $100 par value. Authorized 250,000
shares, none issued ........................................... -- --
Common stock, $.002 par value. Authorized 40,000,000 shares;
issued and outstanding 12,721,219 and 12,234,151 shares
at June 30, 1996 and December 31, 1995, respectively .......... 25 24
Additional paid-in capital ..................................... 114,446 112,122
Accumulated deficit ............................................ (85,136) (83,943)
--------- ---------
Total stockholders' equity ................................... 37,848 29,715
Commitments and contingencies
--------- ---------
Total liabilities and stockholders' equity ................... $ 106,725 $ 86,932
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
----------------------------
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenues ................................................ $ 54,759 $ 39,118
Expenses:
Direct operating expense ............................... 43,036 28,371
Other operating expenses ............................... 4,722 3,749
Depreciation and amortization .......................... 4,986 4,665
------------ ------------
Total costs and expenses ............................. 52,744 36,785
------------ ------------
Operating income ..................................... 2,015 2,333
------------ ------------
Other income (deductions):
Interest expense ....................................... (2,518) (1,544)
Interest income ........................................ 20 65
Other .................................................. (10) 415
------------ ------------
Total other deductions ............................... (2,508) (1,064)
------------ ------------
Income (loss) before income taxes .................... (493) 1,269
Income tax expense ...................................... 700 146
------------ ------------
Net income (loss) .................................... (1,193) $ 1,123
------------ ------------
Net loss applicable to common stock .................. $ (5,129) $ (1,506)
============ ============
INCOME (LOSS) PER COMMON SHARE - ASSUMING NO
AND FULL DILUTION:
Net income (loss) ...................................... $ (0.09) $ 0.09
Dividend requirement on $2.4375 preferred stock ........ (0.31) (0.21)
------------ ------------
Net loss per common share .............................. $ (0.40) $ (0.12)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary and Fully Diluted .............................. 12,884,808 12,524,654
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JUNE 30,
----------------------------
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenues ................................................. $ 26,951 $ 20,712
Expenses:
Direct operating expense ................................ 20,924 14,458
Other operating expenses ................................ 2,456 1,940
Depreciation and amortization ........................... 2,616 2,277
------------ ------------
Total costs and expenses .............................. 25,996 18,675
------------ ------------
Operating income ...................................... 955 2,037
------------ ------------
Other income (deductions):
Interest expense ........................................ (1,188) (819)
Interest income ......................................... 12 24
Other ................................................... (97) (113)
------------ ------------
Total other deductions ................................ (1,273) (908)
------------ ------------
Income (loss) before income taxes ..................... (318) 1,129
Income tax expense ....................................... 303 46
------------ ------------
Net income (loss) ..................................... $ (621) $ 1,083
------------ ------------
Net loss applicable to common stock ................... $ (2,023) $ (231)
============ ============
INCOME (LOSS) PER COMMON SHARE - ASSUMING NO AND
FULL DILUTION:
Net income (loss) ....................................... $ (0.05) $ 0.09
Dividend requirement on $2.4375 preferred stock ......... (0.10) (0.10)
------------ ------------
Net loss per common share ............................... $ (0.15) $ (0.01)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary and Fully Diluted ............................... 13,056,760 12,530,825
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
--------------------
1996 1995
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) before dividend requirement ..................... $ (1,193) $ 1,123
Adjustments to reconcile net income/(loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization expense ........................... 4,986 4,665
Deferred costs amortization ..................................... 6,455 4,885
Gain on the sale of fixed assets ................................ (10) (225)
Exchange gain ................................................... 39 (85)
Other non-cash items ............................................ 302 37
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable ............................................. 3,249 (5,356)
Inventories ..................................................... 406 17
Prepaids ........................................................ 101 169
Other current assets ............................................ -- (1,309)
Deferred costs .................................................. (18,182) (6,882)
Other assets .................................................... (360) 81
Increase (decrease) in:
Accounts payable ................................................ 1,979 3,565
Accrued expenses ................................................ (581) 97
Foreign income taxes payable .................................... 116 45
Other liabilities and deferred credits .......................... (1,829) 1,156
-------- --------
Net cash provided by (used in) operating activities ............ (4,522) 1,983
-------- --------
Cash flows from (used in) investing activities:
Capital expenditures, net ......................................... (7,083) (6,917)
Proceeds from the sale of assets .................................. 10 225
Restricted cash ................................................... 99 2,294
-------- --------
Net cash flows used in investing activities .................... (6,974) (4,398)
-------- --------
Cash flows from (used in) financing activities:
Proceeds from exercise of stock options and warrants .............. 295 11
Proceeds from issuance of $2.4375 Preferred Stock ................. 1,573 --
Proceeds from issuance of Series A Convertible Preferred stock .... 7,000 --
Borrowings made during the period ................................. 56,665 40,497
Repayment on borrowings during the period ......................... (55,086) (38,875)
-------- --------
Net cash from financing activities ............................. 10,447 1,633
-------- --------
Effect of exchange rate changes on cash ............................ 2 (22)
Net decrease in cash and cash equivalents ...................... (1,047) (804)
Cash and cash equivalents at beginning of period ................... 1,047 804
-------- --------
Cash and cash equivalents at end of period ......................... $ -- $ --
======== ========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES. SEE NOTE 7.
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The balance sheet of Grant Geophysical, Inc. and subsidiaries (the
"Company") as of June 30, 1996, and the related statements of operations
and cash flows for the six months ended June 30, 1996 and 1995 and for the
three months ended June 30, 1996 and 1995 are unaudited. The consolidated
financial statements should be read in conjunction with the audited
financial statements and footnotes for the year ended December 31, 1995,
included in the Company's Form 10-K, as filed with the Securities and
Exchange Commission.
In the opinion of management, the unaudited consolidated financial
statements include normal recurring adjustments considered necessary to
present fairly the Company's consolidated financial position and results of
operations for the periods presented. The Company's operating results for
any particular interim period may not be indicative of results for a full
year.
Reclassifications
Certain amounts previously reported have been reclassified in order to
ensure comparability between the periods reported.
Use of Estimates
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Income (Loss) Per Common Share
Income (loss) per common share is computed based upon the weighted
average number of common shares outstanding during the period. For
purposes of this calculation, outstanding stock options and warrants are
considered common stock equivalents. Fully diluted income (loss) per
common share is determined based upon the weighted average number of common
shares, calculated using the ending market price of the common shares for
the period. The income/loss is decreased/increased by undeclared, unpaid
cumulative preferred stock dividends in calculating net income/loss
attributable to the common shareholder.
2. LIQUIDITY
The Company continues to experience constrained liquidity. The factors
driving these constraints are a result of the growth curve the Company has
undertaken which requires substantial immediate cash outflow for startups,
crew mobilizations and capital expenditures for new equipment which are paid
in cash. Additional cash constraints are being experienced in the first and
second quarter of 1996 as North American crews have been hampered by
repetitive adverse weather conditions and permitting delays and some Latin
American crews have not been able to obtain in a timely manner additional
equipment in order to perform contracted work efficiently.
Management anticipates that the Company may be able to generate
sufficient cash flow from operations over the balance of 1996 to fulfill
most cash requirements; however, this cannot be completely assured to occur
on a timely basis. In case of a continued short fall in cash, the Company
may undertake additional funding from external sources. The cost of these
funds may be higher than typical lending rates due to the Company's current
outstanding debt structure. Issuance of additional equity is being
considered as well.
8
<PAGE> 9
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
3. SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
As of June 30, 1996, the Company had approximately $1,334,000 in net
receivables from Nigerian customers. Historically, collection of payments
from Nigerian customers has exceeded the Company's average collection
period. Since mid-1993, the Company has encountered additional delays in
receiving cash remittances from its Nigerian customers due to the political
and social turmoil experienced in that country. The Company has received
several cash payments from its Nigerian customers during the first half of
1996 and indications are that payments will continue; however, Management
cannot predict the exact timing and magnitude of such payments.
4. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
A summary of notes payable, long-term debt, and capital lease
obligations of the Company at June 30, 1996 and December 31, 1995 follows
(dollars in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- -----------
(UNAUDITED)
<S> <C> <C>
Revolving lines of credit:
15.0% due February 20, 1996 ..................................... $ -- $ 1,750
11.50% due February 17, 1997 .................................... 6,197 8,045
Convertible Debentures -- 8%, due 1999 ............................ 2,960 --
Equipment notes payable -- 7.35% - 12%, due 1996-2000 ............. 14,793 5,178
Other notes payable -- 6.0% to 34.0%, due 1996-2005 ............... 8,742 6,579
Capital lease obligations -- 10.46% to 37.0%, due 1996-2000 ....... 6,020 5,667
------- -------
38,712 27,219
Less current portion .............................................. 22,612 18,430
------- -------
Notes payable, long-term debt and capital lease obligations,
excluding current portion ...................................... $16,100 $ 8,789
======= =======
</TABLE>
On July 28, 1994, the Company entered into a $3,000,000 credit facility
with a holder of the Company's $2.4375 preferred stock. The credit facility
was secured by certain foreign receivables. On April 17, 1995, the credit
facility was amended to provide the Company with a $1,000,000 short-term
credit facility for substantially the same terms and conditions. In June
1995, the short-term credit facility was increased by $750,000 and the
expiration date was succeedingly extended to February 20, 1996. The entire
loan of $1,750,000 plus accrued interest was repaid on the expiration date.
As of April 26, 1993, the Company entered into a $12,000,000 revolving
credit facility (the "Credit Facility") with a credit corporation. The
Credit Facility is secured by domestic and certain foreign U.S. dollar
denominated accounts receivable, a first lien on all unencumbered assets of
the Company and a second lien on all other assets as available. The terms of
the Credit Facility permit the Company to borrow up to the sum of (A) 80% of
eligible domestic accounts receivable; (B) 65% to 80% of eligible insured
international accounts receivable (not to exceed $8,000,000); (C) 45% of
eligible uninsured international accounts receivable; and (D) 10% of
eligible other accounts receivable. Nigerian U.S. dollar receivables are not
eligible under the terms of the Credit Facility. As of June 30, 1996,
approximately $6,197,000 had been borrowed and no letters of credit had been
issued under the Credit Facility. The term of the Credit Facility is three
years with an option to terminate at its annual anniversary date with at
least 90 days notice by either party. The Credit Facility has been extended
through February 17, 1997. The Credit Facility contains a number of
affirmative and negative covenants, the most restrictive of which are
financial covenants which require maintenance of: (i) a minimum current
ratio; (ii) a maximum ratio of debt to tangible net worth; (iii) a minimum
level of tangible net worth and (iv) a minimum level of working
9
<PAGE> 10
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
capital. At June 30, 1996, the Company was in compliance with the financial
covenants contained in the Credit Facility.
On February 20, 1996, the Company entered into a two-year term loan
agreement with a subordinated lender for $3,843,750. The term loan principal
is payable beginning March 1, 1997 in eleven equal monthly installments of
$64,063 and a final installment of $3,139,063 due on February 20, 1998. A
mandatory prepayment provision requires the Company to prepay the
outstanding term loan balance with 50% of all U.S. Dollar payments made on
the Nigerian accounts receivable balance as of February 20, 1996. The term
loan bears interest at 14% per annum payable monthly beginning on March 1,
1996. The Company paid a non-refundable loan fee of $93,750 and is subject
to a quarterly administration fee of $75,000 commencing August 1996. The
term loan contains a number of affirmative and negative covenants, the most
restrictive of which are financial covenants which require maintenance of:
(i) a minimum current ratio; (ii) a maximum ratio of debt to tangible net
worth; (iii) a minimum level of tangible net worth and (iv) a minimum level
of working capital. At June 30, 1996, the Company was in compliance with the
financial covenants contained in the term loan.
On March 27, 1996, the Company issued $3,000,000 of its 8% Convertible
Debentures ("Debentures") due December 31, 1999. The Debentures are
convertible, at the option of the purchaser, into shares of the Company's
Common Stock at a conversion price of 80% of the five day average low
trading price prior to the conversion election of the Common Stock, provided
that such 80% figure is increased to 100% if the Debentures are converted
within 45 days of the Closing Date. Under certain circumstances, the Company
can redeem Debentures submitted for conversion at 120% of the par value of
the Debentures. Additionally, the Company may redeem the Debentures on or
after March 27, 1997 at a rate of 120% of the par value of the Debenture,
and on or after March 27, 1999, at a rate of 100% of the par value. Interest
of 8% per annum is payable quarterly.
At June 30, 1996, the Company was in default of certain covenants
related to delays in payment on its equipment notes payable. Payment
acceleration of these equipment notes was waived by the Company's creditors.
5. PREFERRED STOCK ISSUANCE
On March 20, 1996, the Company issued 143,000 shares of the Company's
$2.4375 Convertible Exchangeable Preferred Stock (the "$2.4375 Preferred
Stock"). The purchaser of the $2.4375 Preferred Stock is entitled to all
unpaid, undeclared dividends in arrears through March 31, 1996 totaling
$1,220,000. The net proceeds from the issuance was $1,573,000. The
cumulative adjustment for these prior unpaid, undeclared dividends is shown
in the results for the six months ended June 30, 1996.
Also, during May, 1996 the Board of Directors of the Company authorized
the issuance of 75,000 shares of a new series of Series A Convertible
Preferred Stock. A total of 70,000 shares were issued resulting in proceeds
of $7,000,000.
6. DIVIDENDS IN ARREARS
The quarterly dividend payments for the first and second quarters of
1996, the four quarters of 1995, 1994 and 1993 and one quarterly dividend
payment for 1992 on the $2.4375 Preferred Stock were deferred by the
Company's Board of Directors. As of June 30, 1996, $2.4375 Preferred Stock
dividends in arrears amounted to approximately $21,024,000. This amount
relates to the total of 2,300,000 shares now outstanding.
10
<PAGE> 11
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
7. SUPPLEMENTAL CASH FLOW INFORMATION
(a) During the six months ended June 30, 1996, the Company entered into new
debt instruments for equipment totaling approximately $12,713,000.
Payments of approximately $2,256,000 on equipment debt instruments have
been included in the statement of cash flows.
(b) Cash paid during the periods for income taxes, net of refunds and
interest is as follows (dollars in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
---------------
1996 1995
------ ------
(UNAUDITED)
<S> <C> <C>
Cash paid during the period for income taxes,
net of refunds ................................... $1,606 $ 290
Cash paid during the period for interest .......... $2,901 $1,643
====== ======
</TABLE>
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the historical financial condition and results
of operations of the Company should be read in conjunction with the financial
statements and notes thereto, included elsewhere in this Form 10-Q.
RESULTS OF OPERATIONS
The Company's operating profitability is dependent upon the mix of
contracts in effect during any given period.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30,
1995
The Company's consolidated revenues increased 30% ($6,239,000) to
$26,951,000. This increase is primarily due to increased crew capacity and crew
months in Latin America and North America, partially offset by decreased
activity in Nigeria.
Revenues from United States operations increased 14% ($1,379,000) to
$11,491,000. Crew capacity in the United States was increased to seven crews
from six crews in the prior year with the introduction of a Telseis instrument
shallow water transition zone crew. This crew had previously operated in the
Company's Middle East operations in 1993 and 1994. Total crew months for the
United States in the 1996 period were twenty as compared to eighteen for the
same period last year. The region has contracted work for the majority of its
crews through the fourth quarter of 1996 with some crews contracted into early
1997.
Revenues from international operations increased 46% ($4,862,000) to
$15,460,000. This increase is largely due to both increased crew capacity and
active crew months in Latin America. The Nigerian operations had no active crew
months in this period as compared to prior year since all contracted work was
completed by the end of the first quarter in this period. The Far East
experienced revenues comparable to prior year with one crew active in both
periods. The Middle East region had no activity as compared to last year when
there were minimal revenues from equipment rentals during the time the region
was being demobilized.
Latin America revenues increased 306% ($11,064,000) to $14,684,000. The
number of active crews increased to seven in 1996 as compared to four in the
prior year, and active crew months increased to eighteen from six,
respectively. During this period, the Company operated one crew in Bolivia,
two crews in Colombia, three crews in Peru, and began operation of a new
Input/Output System II 3D crew in Brazil where the Company had previously
operated a smaller 2D crew under contract for three years. In the prior year's
period the Company operated one crew in Brazil and two crews in Peru with a
third being mobilized late in the quarter. The region generally has contracted
backlog extending into the fourth quarter of 1996 with Brazil backlog extending
into early 1998.
Nigeria generated no revenues in the current period as compared to
$5,777,000 for the same period last year. The active crew months in 1996 are
zero and were nine in the prior year. This decrease is due to the completion
of contracted work as of the end of the first quarter of 1996. The region
currently has no contracted work in backlog, but the Company has several bids
currently outstanding, and current expectations are that the Company will be
awarded at least one of these contracts. The Company is currently preparing
for this anticipated work and is actively marketing its services in the region;
however, there is no assurance that the Company will be awarded any of such
work.
Revenues in the Far East were $786,000, comparable to the prior period,
and active crew months were two in both periods. The crew in Bangladesh was
temporarily suspended in the early part of this period due to political unrest
in the region, but returned to work in late April. The contracted work was
expanded and extended into the first quarter of 1997.
Direct operating expenses as a percentage of revenue increased to 78% from
70%. The increase is a result of higher operating costs on some crews in the
United States from adverse weather conditions and permitting delays and
equipment delays to Latin America which did not allow some crews to operate
efficiently. The overall dollar
12
<PAGE> 13
increase is primarily due to increased seismic activity in Latin America and
the United States with a partial reduction resulting from decreased activity in
Nigeria.
Other operating expenses, which consist of general and administrative
expenses at corporate headquarters and in foreign locations, remained constant
as a percentage of revenues at 9%. The increase in the dollar amount of other
operating expenses is primarily due to increased Latin America regional and
country general and administrative expenses consistent with the significantly
increased operations and revenues. North America costs are increased due to
increased regional activities. An increase in the general bad debt reserve
recorded at the corporate headquarters is to maintain the doubtful allowance
account for accounts receivables commensurate with the Company's experience.
Depreciation and amortization expense increased to $2,616,000 as compared
to the prior year of $2,277,000. The Company has purchased and mobilized
several new seismic data acquisition systems over the past year.
Operating income of $955,000 is lower compared to prior year of
$2,037,000. This decrease is mainly due to reduced crew activity in Nigeria
impacting comparative operating income by $1,673,000, offset partially by
improved results in Latin America $720,000.
Interest expense increased from prior year by 45% to $1,188,000 as the
Company experienced increased levels of financing at higher interest rates,
particularly in the foreign areas of operation to support working capital
requirements. Also, the increased level of financed capital equipment
contributed to this increase.
Other income (deduction) was comparable to prior year.
The income tax provision in both periods consisted of taxes owed to
foreign countries based on local tax laws. The level of foreign taxes has
increased from the prior year due to the increased activity of international
operations. No provision for U.S. Federal income taxes was made in either
period as the Company currently has net operating losses available for
carryforward.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
The Company's consolidated revenues increased 40% ($15,641,000) to
$54,759,000. This increase is primarily due to increased crew capacity and crew
months in Latin America, North America, and the Far East, reduced partially by
decreased activity in Nigeria and the Middle East.
Revenues from the United States increased 14% ($2,936,000) to $24,147,000
for the six months ended June 30, 1996 as compared to 1995. Beginning in early
1994, the Company experienced a surge in demand for the Company's 3D land
seismic surveys. Revenues have consistently increased since 1994. The 1996
period included $1,200,000 of revenues resulting from a sale of the Company's
interests under two specific revenue sharing agreements. The impact of this
transaction on operating income was $1,098,359. Transactions of this nature may
occur on a periodic basis as the Company continues to grow and is able to
capitalize on such opportunities. The Company operated seven seismic crews
during the first six months of 1996 as compared to six in the prior period.
Total crew months during this period were thirty-six as compared to thirty-six
in the prior period. In addition to the increased crew count, the projects have
become larger and more complex since 1994 with the increased use of 3D data
acquisition techniques. This increased project size and complexity of
operations tends to drive an increase in revenues per crew month. This is
particularly evident in the Louisiana Gulf Coast region where access to these
seismic projects is hampered by low marshland and survey parameters which
require the use of more instrumentation.
Revenues from international operations increased 71% ($12,707,000) to
$30,612,000. This increase is primarily due to increased crew capacity and
active crew months in Latin America and the Far East, partially reduced by
decreased activity in Nigeria and the Middle East.
Latin America revenues increased 296% ($20,923,000) to $27,990,000. The
number of active crews increased to seven during the first six months of 1996
as compared to four during the same period in 1995. Total crew months in 1996
are thirty-three as compared to thirteen in 1995. As in the United States,
Latin America projects have increased in size and complexity that tends to
increase the quantities of equipment needed to successfully and optimally carry
out operations and would tend to increase the revenue generated per crew month.
13
<PAGE> 14
Far East revenues increased 64% ($664,000) to $1,694,000. This increase
reflects one crew operating for five crew months as compared to three crew
months during the prior period.
Revenues from Nigeria decreased $8,144,000 to $928,000 for the six months
ended June 30, 1996. This decrease is the result of the completion of
contracted work during the first quarter of 1996. Total crew months in 1996
were three as compared to sixteen in 1995 for the six months ended.
Middle East revenues are zero for the period in 1996 as compared to
$736,000 in the prior period. The area was demobilized in 1995 and the
revenues generated were related to minimal equipment rental activities.
Direct operating expenses as a percentage of revenue are 78% compared to
73% for the same period last year. The increase is a result of higher than
anticipated operating costs on some crews. Adverse weather conditions and
permitting delays in the United States and equipment delays to some Latin
America crews did not allow them to operate efficiently and increased the
mobilization time on several crew startups. The overall dollar increase is
mainly due to the increased levels of seismic activity in Latin America and the
United States, with a partial reduction resulting from reduced activity in
Nigeria.
Other operating expenses, which consist of general and administrative
expenses at the corporate headquarters and foreign locations, decreased as a
percentage of revenues to 9% from 10%. This decrease represents a more
effective utilization of support costs for increased operating activities
worldwide. The dollar increase in other operating expenses of $973,000
primarily represents added support operations to match the increased crew
capacity and operations.
Depreciation and amortization expense increased 7% to $4,986,000. This is
a reduction as a percentage of revenues mainly reflecting improved utilization
of new and upgraded equipment that has been added to the Company.
Operating income is $2,015,000 as compared to $2,333,000 for the prior
year. The decrease is mainly due to reduced crew activity in Nigeria impacting
comparative operating income by $2,086,000, offset partially by improved
results in Latin America $1,580,000.
Interest expense increased 63% ($974,000) to $2,518,000. This increase is
mainly due to increased levels of borrowings to support working capital
required in international operations as a result of increased activity.
Additionally, the level of interest expense has increased as a result of
capital equipment acquired by the Company which mostly has been financed
through capital leases and long-term equipment notes payable.
Other income (deduction) has decreased due to the non-recurrence of a gain
on the sale of fixed assets that occurred in the prior period, $225,000, and
reduced foreign exchange gains $127,000 mainly resulting from the favorable
fluctuation of the Nigerian Naira in the first six months of 1995.
The income provision in both periods consisted of taxes owed to foreign
countries based on local tax laws. The level of foreign tax expense has
increased as a result of the increased foreign activity of international
operations. No provision for U.S. Federal income taxes was made in either
period as the Company has net operating losses available for carryforward.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company's short-term and long-term liquidity position
remains restricted. As of August 7, 1996, the Company's level of available cash
was approximately $1,043,000 as compared to the December 31, 1995 balance of
approximately $1,047,000. Net cash used in operating activities during the
first six months of 1996 was approximately $4,522,000 compared to net cash
provided by operating activities of approximately $1,983,000 for the same
period in 1995. The primary factors influencing this liquidity issue are the
(i) increases in cash outflows for startups and crew mobilizations; (ii)
increases in the level of capital expenditures which are not financed that are
required to keep pace with the growth in the United States and Latin American
markets; (iii) the level of investment required for the Company's proprietary
seismic data acquisition system; and (iv) the continued delays in receiving
cash remittances from Nigeria and a certain domestic customer. Additional cash
constraints were experienced in the first and second quarter of 1996 as North
American crews have been hampered by
14
<PAGE> 15
repetitive adverse weather conditions and permitting delays and some Latin
American crews were not able to obtain additional equipment timely in order to
perform contracted work efficiently.
Since mid-1993, the Company has encountered additional delays in
receiving cash remittances from its Nigerian customers due to the political
and social turmoil experienced in that country. During the first quarter of
1995, these delays increased. These delays caused the Company to intensify
its collection efforts. The net receivable balance from Nigerian customers has
decreased from $7,896,000 at December 31, 1994 to $1,334,000 at June 30, 1996
due primarily to increased collection efforts and reduced crew operations.
There have been cash payments received during the first half of 1996, and
indications are that payments will continue; however, management cannot
predict the exact timing and magnitude of such payments. Also, during the
second quarter of 1995, the Company was notified by one of its domestic
customers that payment on services performed primarily during the first
quarter of 1995 would be delayed. Payments totaling approximately $588,000
have been received through August 7, 1996, and the Company is continuing to
take steps to attempt to recover the balance of such receivable, which totaled
$1,723,000 on August 7, 1996. Although the Company believes that such
receivable balance is collectible, there can be no assurance of the exact
magnitude or timing of such recovery, or the success of any recovery at all,
with respect to such receivable.
The Company has a revolving credit facility with its principal lender, a
credit corporation, for $12,000,000, secured by domestic and certain foreign
U.S. dollar denominated accounts receivable other than those originating from
Nigerian customers, a first lien on all unencumbered assets of the Company and
a second lien on all other assets as available. The Company entered into this
credit facility on February 17, 1993 for the portion secured by the domestic
receivables and on April 26, 1993 for the portion secured by the foreign U.S.
dollar denominated receivables. The credit facility has been extended through
February 17, 1997. As of June 30, 1996 approximately $6,197,000 had been
borrowed and no letters of credit had been issued under the credit facility.
The terms of the agreement permit the Company to borrow up to the sum of (A)
80% of its eligible United States accounts receivable; (B) 65% to 80% of the
eligible insured international accounts receivable (not to exceed $8,000,000);
(C) 45% of the eligible uninsured international accounts receivable; and (D)
10% of eligible other accounts receivable. The credit facility contains a
number of affirmative and negative covenants, the most restrictive of which are
financial covenants which require maintenance of: (i) a minimum current ratio;
(ii) a maximum ratio of debt to tangible net worth; (iii) a minimum level of
tangible net worth and (iv) a minimum level of working capital. Subsequent to
December 31, 1994, an amendment to the Credit Facility was executed, which
principally provided additional flexibility with respect to certain covenants.
At June 30, 1996, the Company was in compliance with the covenants. At August
7, 1996, approximately $8,985,000 had been borrowed under this credit facility.
All of the Company's eligible accounts receivable are currently pledged to
secure this line of credit and the Company's current level of cash represents
amounts borrowed under the credit facility.
On March 1, 1995, the Company entered into a long-term financing agreement
with a credit company for $5,000,000. The facility contains a bargain purchase
option at the end of the lease term and is secured by the leased equipment. At
July 31, 1996, the Company had borrowed approximately $4,130,000 under the
facility for equipment purchases. At June 30, 1996, the Company was in default
of certain covenants for this and other financing agreements related to delays
in payment on its equipment notes payable. Payment acceleration of these
equipment notes was waived by the Company's creditors.
On February 20, 1996, the Company entered into a two-year term loan
agreement with a subordinated lender for $3,843,750. The term loan principal
is payable beginning March 1, 1997 in eleven equal monthly installments of
$64,063 and a final installment of $3,139,063 due on February 20, 1998. A
mandatory prepayment provision requires the Company to prepay the outstanding
term loan balance with 50% of all U.S. Dollar payments made on the Nigerian
accounts receivable balance as of February 20, 1996. The term loan bears
interest at 14% per annum payable monthly beginning on March 1, 1996. The
Company paid a non-refundable loan fee of $93,750 and is subject to a
quarterly administration fee of $75,000 commencing August 1996. The term loan
contains a number of affirmative and negative covenants, the most restrictive
of which are financial covenants which require maintenance of: (i) a minimum
current ratio; (ii) a maximum ratio of debt to tangible net worth; (iii) a
minimum level of tangible net worth and (iv) a minimum level of working
capital. At June 30, 1996, the Company was in compliance with the covenants.
On March 20, 1996, the Company issued 143,000 shares of the Company's
$2.4375 Convertible Exchangeable Preferred Stock. The purchaser of the
Preferred Stock is entitled to all undeclared, unpaid dividends in arrears
through March 20, 1996. The net proceeds from the issuance was $1,573,000.
Additionally
15
<PAGE> 16
on March 27, 1996, the Company issued $3,000,000 of its 8% Convertible
Debentures ("Debentures") due December 31, 1999. The Debentures are
convertible, at the option of the purchaser, into shares of the Company's
Common Stock at a conversion price of 80% of the five day average low trading
price prior to the conversion election of the Common Stock, provided that such
80% figure is increased to 100% if the Debentures are converted within 45 days
of the Closing Date. Under certain circumstances, the Company can redeem
Debentures submitted for conversion at 120% of the par value of the
Debentures. Additionally, the Company may redeem the Debentures on or after
March 27, 1997 at a rate of 120% of the par value of the Debentures, and on or
after March 27, 1999, at a rate of 100% of the par value. Interest of 8% per
annum is payable quarterly.
In May 1996, the Company's Board of Directors authorized the issuance of
up to 75,000 shares of a new series of Series A Preferred Stock. A total of
70,000 shares of the Series A Preferred Stock have been issued by the Company
resulting in proceeds of $7,000,000.
While the financing transactions entered into in the first half of 1996
provided funding for certain obligations, the Company continues to experience
constrained liquidity. The Company will continue to consider additional
sources of working capital to help improve its liquidity position. Management
anticipates that the Company may be able to generate sufficient cash flow from
operations over the balance of 1996 to fulfill most of its cash requirements;
however, this cannot be completely assured to occur on a timely basis. In
case of a continued short fall in cash, the Company may undertake additional
funding from external sources. The cost of these funds may be higher than
typical lending rates due to the Company's current outstanding debt structure.
Issuance of additional equity is being considered as well.
As a result of the continued short-term liquidity situation, the Company
has elected to defer the fifteenth quarterly dividend payment for June 30, 1996
on the $2.4375 preferred stock. See Note 6 of Notes to Consolidated Financial
Statements.
Capital Expenditures. Capital expenditures were approximately $17,665,000
and $10,020,000 for the six months ended June 30, 1996 and 1995, respectively.
The expenditures in the first six months of 1996 were for the purchase of one
complete seismic acquisition recording system and additional equipment
necessitated by the Company's increased seismic operations in Latin America and
the United States and other equipment necessary for the completion of the
Company's new seismic data acquisition system. The majority of these purchases
are being financed utilizing leases and long-term notes payable from a credit
corporation and equipment manufacturers.
The Company has assembled a new proprietary seismic data acquisition
system. This system is a radio frequency telemetry system specifically
designed to be used on large 3D surveys where cables are undesirable. The
Company completed the deployment phase of the first system as of July 1996 and
is currently working on a contracted job with two additional jobs in backlog.
Currently, there are no plans to market or sell this technology to any third
parties.
The Company's capital expenditures for the remainder of 1996, which are
estimated at amounts similar to the prior year, are contingent on the Company's
ability to obtain short- and long-term financing and on the generation of
sufficient cash flows from operations.
Long-Term Obligations. The long-term obligations of the Company as of
June 30, 1996 consisted primarily of the 8% Convertible Debentures, notes
payable and capital lease obligations related to the acquisition of
geophysical equipment and the Corporate headquarters and notes payable to the
former Tensor shareholders related to the Settlement and Release Agreement
effective January 1, 1994.
OTHER
Foreign Exchange Gains and Losses. In order to mitigate foreign exchange
rate fluctuations, the Company attempts to structure the majority of its
international contracts to be billed and paid at a certain U.S. Dollar rate.
Additionally, the Company enters into same currency debt of a foreign
subsidiary to pay expenses incurred locally. Foreign currency
transaction/translation gains and losses resulting from these arrangements are
included in other income. Presently, the Company does not use derivatives or
forward foreign exchange hedging contracts.
16
<PAGE> 17
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
The Board of Directors of the Company has designated 75,000 shares
of Preferred Stock as Series A Preferred Stock. Holders of the Series A
Preferred Stock are not entitled to dividends. The Series A Preferred
Stock is convertible into shares of Common Stock at a rate equal to the
purchase price of the shares to be converted divided by the lesser of
(i) the average of the lowest daily sales price of the Company's Common
Stock (the "Trading Price") for the ten-day period immediately preceding
the date of issuance of such stock multiplied by a factor of 105% or
(ii) the Trading Price for the ten-day period immediately preceding the
conversion multiplied by a factor of 80%. Holders of Series A Preferred
Stock do not have any voting rights, except as may be required by law.
In the event of any liquidation, dissolution or winding up of the
Company, the holders of Series A Preferred Stock are entitled to
distributions in preference to all holders of the Company's stock except
for holders of the Company's $2.3475 Convertible Exchangeable Preferred
Stock. The amount due to holders of the Series A Preferred Stock in
liquidation, to the extent available, would be equal to $100 per share
plus an amount equal to 4% per annum from the date of issuance of such
Series A Preferred Stock through the date of liquidation.
ITEM 5. OTHER INFORMATION.
The Company's Chairman of the Board, Gordon W. Ringoen, and another
Director, William C. Macdonald, both of whom joined the board in November
1995, resigned effective August 8, 1996. George W. Tilley, President and
CEO of the company, was named interim Chairman by the Board of Directors,
in addition to his current responsibilities.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits
Exhibit No.
-----------
3.01 - Certificate of Incorporation of the Company, as amended.
11.01 - Computation of Income (Loss) Per Common and Common
Equivalent Share for the Six Months Ended June 30, 1996 and
1995.
11.02 - Computation of Income (Loss) Per Common and Common
Equivalent Share for the Three Months Ended June 30, 1996
and 1995.
27.01 - Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
1996.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRANT GEOPHYSICAL, INC.
(REGISTRANT)
Date August 14, 1996 By George W. Tilley
------------------ ----------------------------------------------
George W. Tilley
Chief Executive Officer,
President and Director
(Principal Executive Officer)
Date August 14, 1996 By William B. Cleveland
------------------ ----------------------------------------------
William B. Cleveland
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
18
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.01 - Certificate of Incorporation of the Company, as amended.
11.01 - Computation of Income (Loss) Per Common and Common
Equivalent Share for the Six Months Ended June 30, 1996 and
1995.
11.02 - Computation of Income (Loss) Per Common and Common
Equivalent Share for the Three Months Ended June 30, 1996
and 1995.
27.01 - Financial Data Schedule.
</TABLE>
<PAGE> 1
CERTIFICATE OF DESIGNATIONS
of
SERIES A PREFERRED STOCK
of
GRANT GEOPHYSICAL, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
GRANT GEOPHYSICAL, INC., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), does hereby certify that,
pursuant to the authority conferred on the Board of Directors of the
Corporation by the Certificate of Incorporation, as amended, of the Corporation
and in accordance with Section 151 of the General Corporation Law of the State
of Delaware, the Board of Directors of the Corporation adopted the following
resolution establishing a series of 75,000 shares of Preferred Stock of the
Corporation designated as, "Series A Preferred Stock":
RESOLVED, that pursuant to the authority conferred on the Board of
Directors of this Corporation by the Certificate of Incorporation, a
series of Preferred Stock, par value $.01 per share, of the Corporation be
and hereby is established and created, and that the designation and number
of shares thereof and the voting and other powers, preferences and
relative, participating, optional or other rights of the shares of such
series and the qualifications, limitations and restrictions thereof are as
follows:
Section 1. Designation.
The designation of the series of Preferred Stock fixed by this
resolution shall be "Series A Preferred Stock" (hereinafter referred to as
the "Convertible Preferred Stock") and the number of shares constitutes
such series shall be 75,000.
Section 2. Conversion Rights.
(a) Right to Convert. Each share of Convertible Preferred Stock may
be converted at the option of the holder thereof at any time from and after
the fortieth (40th) day following the Closing Date thereof (which shall
mean the date of the closing of the offering and issuance of the
Convertible Preferred Stock by
<PAGE> 2
the Corporation), and without the payment of any additional consideration
therefor, into that number of fully paid and nonassessable shares of
Common Stock, $.002 per value per share, of the Corporation (the "Common
Stock") as is determined by the following calculation (the "Conversion
Rate") for each share of Preferred Stock that is converted:
$100
Conversion Price
where,
$100 Face amount per share of Convertible Preferred Stock
Conversion Price = the lesser of (a) 105% of the average of the lowest
daily sales price as reported by the NASDAQ Stock Market of the Company's
Common Stock (the "Trading Price") for the ten (10) trading days
immediately preceding the Closing Date or (b) 80% of the Trading Price
for the ten (10) trading days immediately preceding the Date of
Conversion (as defined below in Section 2(c) herein);
(b) Automatic Conversion. Each share of Convertible Preferred Stock
shall automatically be converted into shares of Common Stock at the
then effective Conversion Price on the date which is eighteen (18) months
after the Closing Date;
(c) Mechanics of Conversion. In order to convert the shares of some
or all of his Convertible Preferred Stock into Common Stock, the holder
shall surrender the certificate or certificates therefor, duly endorsed,
by either overnight courier or 2-day courier, to the office of the
Corporation or of any transfer agent for the Convertible Preferred Stock,
and shall give written notice via facsimile to the Corporation at such
office that he elects to convert the same, the number of shares of
Convertible Preferred Stock so converted and a calculation of the
Conversion Rate. The date on which notice of conversion is given (the
"Date of Conversion") shall be deemed to be the date set forth in such
notice of conversion provided the original shares of Convertible Preferred
Stock to be converted are received by the Company or the Transfer Agent
within four (4) business days thereafter, provided, however, that the
Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon conversion unless certificates
evidencing such shares of Convertible Preferred Stock are delivered to the
Corporation or its transfer agent as provided above, or the holder
notifies the Corporation or its transfer agent that such certificates have
been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it
in connection with such certificates. If the certificates for the
-2-
<PAGE> 3
shares of Convertible Preferred Stock to be converted are not received
by the Transfer Agent within four (4) business days after the Date of
Conversion, the notice of conversion shall become null and void, without
prejudice to the holder's right to elect another Conversion Date for some
or all of his Convertible Preferred Stock. No fractional shares of Common
Stock shall be issued upon conversion of Convertible Preferred Stock. In
lieu of any fractional share to which the holder would otherwise be
entitled, the Corporation shall round up to the nearest whole share. In
the case of a dispute as to the calculation of the Conversion Rate, the
Corporation's calculation shall be deemed conclusive absent manifest
error.
The Corporation shall use reasonable efforts to issue and deliver
within three (3) business days after delivery to the Corporation of such
certificates, or after such agreement and indemnification to such holder
of Convertible Preferred Stock at the address of the holder on the stock
books of the Corporation, a certificate or certificates for the number of
shares of unlegended Common Stock to which he shall be entitled as
aforesaid.
Section 3. Corporate Events.
(a) Notices of Record Date. In the event of (i) any declaration by
the Corporation of a record date of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to
receive any dividend or other distribution or (ii) any capital
reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, and any transfer of all or substantially
all of the assets of the Corporation to any other Corporation, or any
other entity or person, or any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the Corporation shall mail
to each holder of Convertible Preferred Stock at least 20 days prior to
the record date specified therein, a notice specifying (A) the date on
which any such record date is to be declared for the purpose of such
dividend or distribution and a description of such dividend or
distribution, (B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective, and (C) the
time, if any, that is to be fixed, as to when the holders of record of
Common Stock (or other securities) become eligible to receive securities
or other property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution or winding up, together with
a description in reasonable detail of any of the aforesaid events.
(b) Corporate Changes. The Trading Price used to determine the
Conversion Price shall be appropriately adjusted to reflect, as deemed
equitable and appropriate by the Corporation, any stock dividend, stock
split or share
-3-
<PAGE> 4
combination of the Common Stock. In the event of a merger,
reorganization, recapitalization or similar event of or with respect
to the Company (a "Corporate Change") (other than a Corporate Change
in which all or substantially all of the consideration received by the
holders of the Company's equity securities upon such Corporate Change
consists of cash or assets other than securities issued by the
acquiring entity or any affiliate thereof), the Convertible Preferred
Stock shall be assumed by the acquiring entity and thereafter the
Convertible Preferred Stock shall be convertible into such class and
type of securities as the Holder would have received had the Holder
converted the Convertible Preferred Stock immediately prior to such
Corporate Change, as appropriately adjusted to equitably reflect the
Conversion Price and any stock dividend, stock split or share
combination of the Common Stock after such corporate event.
Section 4. Reservation of Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock solely for the purpose
of effecting the conversion of the shares of the Convertible Preferred
Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all then outstanding shares
of the Convertible Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Convertible
Preferred Stock, the Corporation will take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock
to such number of shares as shall be sufficient for such purpose.
Section 5. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of shares of
Convertible Preferred Stock shall be entitled to receive, immediately
after any distributions to holders of the $2.4375 Convertible Exchangeable
Preferred Stock or any other class or series of the Corporation's capital
stock ranking senior as to liquidation rights to the Convertible Preferred
Stock (the "Senior Securities") and prior and in preference to any
distribution to holders of the Common Stock, Serial Preferred Stock,
Non-Voting Junior Preferred Stock or any other class or series of the
Corporation's capital stock ranking junior as to liquidation rights to the
Convertible Preferred Stock (the "Junior Securities"), but in parity with
any distribution to any class or series of the Corporation's capital stock
ranking in parity with the Convertible Preferred Stock (the "Parity
Securities"), an amount per Share equal to the sum of (i) $100 for each
outstanding share of Convertible Preferred Stock (the "Original
Convertible Issue Price") and (ii) an amount equal to 4% of the Original
Convertible Issue Price per annum for the period that has
-4-
<PAGE> 5
passed since the Closing Date (such amount being referred to herein as
the "Premium"). If upon the occurrence of such event, the assets and
funds thus distributed among the holders of the Convertible Preferred
Stock and Parity Securities shall be insufficient to permit the payment to
such holders of the full preferential amounts due to the holders of the
Convertible Preferred Stock and the Parity Securities, respectively, then
the entire assets and funds of the Corporation legally available for
distribution shall be distributed among the holders of the Convertible
Preferred Stock and the Parity Securities, pro rata, based on the
respective liquidation amounts to which each such series of stock is
entitled by the Corporation's Certificate of Incorporation and any
certificate of designation of preferences.
(b) Upon the completion of the distribution required by subsection
5(a), if assets remain in this Corporation, they shall be distributed
to holders of Parity Securities (unless holders of Parity Securities have
received distributions pursuant to subsection (a) above) and Junior
Securities in accordance with the Corporation's Certificate of
Incorporation including any duly adopted certificate(s) of designation of
preferences.
(c) A consolidation or merger of the Corporation with or into any
other corporation or corporations, or a sale, conveyance or disposition
of all or substantially all of the assets of the Corporation or the
effectuation by the Corporation of a transaction or series of related
transactions in which more than 50% of the voting power of the Corporation
is disposed of, shall not be deemed to be a liquidation, dissolution or
winding up within the meaning of this Section 5, but shall instead be
treated pursuant to Section 3 hereof.
Section 6. Voting Rights.
The Holders of Convertible Preferred Stock will not have any voting
rights except as set forth below or as otherwise from time to time
required by law. The affirmative vote or consent of the holders of at
least a majority of the outstanding shares of the Convertible Preferred
Stock, voting separately as a class, will be required for any amendment,
alteration or repeal of the Corporation's Certificate of Incorporation
(including any Certificate of Designation of Preferences) if, and only if,
the amendment, alteration or repeal adversely affects the powers,
preferences, priorities or special rights of the Convertible Preferred
Stock.
To the extent that under Delaware law the vote of the holders of the
Convertible Preferred Stock, voting separately as a class, is required
to authorize a given action of the Corporation, the affirmative vote or
consent of the holders of at least a majority of the outstanding shares of
the Convertible Preferred Stock shall constitute the approval of such
action by the class. To the extent that under Delaware law the holders of
the Convertible Preferred Stock are entitled to vote
-5-
<PAGE> 6
on a matter with holders of Common Stock, voting together as one class,
each share of Convertible Preferred Stock shall be entitled to a number of
votes equal to the number of shares of Common Stock into which it is then
convertible using the record date for the taking of such vote of
stockholders as the date as of which the Conversion Price is calculated.
Holders of the Convertible Preferred Stock shall be entitled to notice of
all shareholder meetings or written consents (whether or not they are
entitled to vote on the matters to be considered therein), which notice
shall be no shorter than that would be provided pursuant to the
Corporation's by-laws and applicable statutes to holders of the
Corporation's voting securities.
Section 7. Protective Provisions.
So long as shares of Convertible Preferred Stock are outstanding, the
Corporation shall not take any action that would impair the rights of
the holders of the Convertible Preferred Stock set forth herein and shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least a majority of the then
outstanding shares of Convertible Preferred Stock:
(a) alter or change the rights, preferences, priorities or privileges
of the shares of Convertible Preferred Stock or any other securities so
as to affect adversely the holders of the Convertible Preferred Stock;
(b) create any new class or series of equity security having a
preference over, or being on a parity with, the Convertible Preferred
Stock with respect to Distributions (as defined in Section 5 above); or
(c) do any act or thing which would result in taxation of the
holders of shares of the Convertible Preferred Stock under Section 305
of the Internal Revenue Code of 1986, as amended (or any comparable
provision of the Internal Revenue Code as hereafter from time to time
amended).
IN WITNESS WHEREOF, Grant Geophysical, Inc. has caused this
certificate to be signed on its behalf by William B. Cleveland, its Vice
President, this 15th day of May, 1996.
GRANT GEOPHYSICAL, INC.
By: /s/ William B. Cleveland
------------------------------------
William B. Cleveland
Vice President
-6-
<PAGE> 7
FOURTH RESTATED CERTIFICATE OF INCORPORATION
OF
GRANT GEOPHYSICAL, INC.
GRANT GEOPHYSICAL, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies as follows:
1. The name of the corporation is GRANT GEOPHYSICAL, INC. The date of
filing of its original Certificate of Incorporation with the Secretary
of State was the 27th day of June, 1978 and the name under which the
Corporation was originally incorporated is Norpac Exploration Services,
Inc.
2. This Fourth Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of
Incorporation of this Corporation as heretofore restated, amended or
supplemented by adding PART "D" ($2.4375 Convertible Exchangeable
Preferred Stock) to Article FOURTH of the Certificate of Incorporation
as previously restated and amended.
3. The text of the Certificate of Incorporation of this Corporation as
heretofore restated, amended or supplemented is hereby restated in its
entirety to read as herein set forth in full:
FIRST: The name of the Corporation is GRANT GEOPHYSICAL, INC.
SECOND: The address of its registered office in the State of
Delaware is : Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is the Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: (a) The total number of shares which the Corporation
is authorized to issue is 45,265,000 shares of which two hundred fifty thousand
(250,000) shares shall be Serial Preferred Stock, $100 par value, fifteen
thousand (15,000) shares shall be Non-Voting Junior Preferred Stock, $100 par
value, five million (5,000,000) shares shall be Preferred Stock, $.01 par
value, and forty million (40,000,000) shares shall be Common Stock, $.002 par
value.
The description of the different classes of capital stock of the
Corporation and the designations and the powers, preferences and rights, and
the qualifications, limitations or restrictions thereof are as follows:
Fourth Restated Certificate of Incorporation 1
Grant Geophysical, Inc. - 04/24/95
<PAGE> 8
PART A
SERIAL PREFERRED STOCK
The Serial Preferred Stock may be divided into and issued in one or
more series as herein provided, each series to be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
The Board of Directors is hereby vested with the authority to establish and
designate such series from time to time and, within the limitations prescribed
by law or set forth herein, to fix and determine the number and the relative
rights and preferences of the authorized shares of any series so established,
and to increase or decrease the number of shares within each such series;
provided, however, that the Board of Directors may not decrease the number of
shares within a series below the number of shares within such series that is
then issued. The Board of Directors shall exercise such authority by the
adoption of a resolution or resolutions as prescribed by law. The Serial
Preferred Stock of all series shall be identical, except as to the following
relative rights and preferences, as to which there may be variations between
different series:
(1) The rate at which dividends, if any, are to accrue with
respect to the shares of such series and the dates, terms and other conditions
on which such dividends shall be payable;
(2) The nature of dividends payable with respect to the shares of
such series as cumulative, non-cumulative or partially cumulative;
(3) Whether the shares of such series shall be subject to
redemption by the Corporation, and, if made subject to such redemption, the
price at and the terms and conditions on which the shares of such series may be
redeemed;
(4) The rights and preferences, if any, of the holders of the
shares of such series upon the liquidation, dissolution or winding up of the
affairs of, or upon any distribution of the assets of, the Corporation, which
amount may vary depending upon whether such liquidation, dissolution or winding
up is voluntary or involuntary and, if voluntary, may vary at different dates,
and the status of the shares of such series as participating or non-
participating after the satisfaction of any such rights and preferences;
provided, however, no shares of Serial Preferred Stock shall rank on a parity
with or senior to the shares of Non-Voting Junior Preferred Stock or Preferred
Stock with respect to distribution of assets upon liquidation, as herein
provided;
(5) Any requirements as to, and the terms and amount of, any
sinking fund or purchase fund for, or the redemption, purchase or other
retirement by the Corporation of, the shares of such series;
(6) The right, if any, to exchange or convert the shares of such
series into (i) shares of any other series of the Serial Preferred Stock or, to
the extent permitted by law, into shares of any other class of capital stock of
the Corporation ranking on a parity with or junior to the Serial Preferred
Stock as to dividends or distribution of assets upon liquidation or into other
securities of the Corporation or (ii) shares of capital stock or other
securities of another corporation, and the rate or basis, time, manner and
conditions of exchange or conversion or the method by which the same shall be
determined;
Fourth Restated Certificate of Incorporation 2
Grant Geophysical, Inc. - 04/24/95
<PAGE> 9
(7) The extent, if any, to which the holders of the shares of such
series shall be entitled to vote as a class or otherwise with respect to any
matter presented for that purpose to the shareholders of the Corporation;
(8) Any obligation of the Corporation to repurchase any of shares
of such series; and
(9) Any other relative rights and preferences of the shares of
such series consistent with this Restated Certificate of Incorporation and
applicable law.
The terms of any series of Serial Preferred Stock may be
amended without consent of the holders of any other series of Serial Preferred
Stock or of the Common Stock, provided such amendment does not adversely affect
the holders of such other series of Serial Preferred Stock or the Common Stock.
Shares of any series of Serial Preferred Stock which have been issued and
reacquired in any manner and are not held as treasury shares, including shares
redeemed by purchase (whether through the operation of a retirement or sinking
fund or otherwise), will have the status of authorized and unissued Serial
Preferred Stock and may be reissued as a part of the series of which they were
originally a part or may be reclassified into and reissued as a part of a new
series.
PART B
NON-VOTING JUNIOR PREFERRED STOCK
The Non-Voting Junior Preferred Stock shall have the following rights
and preferences:
(1) The holders of the Non-Voting Junior Preferred Stock shall not
be entitled to receive any dividends on such Non-Voting Junior Preferred Stock;
(2) The shares of Non-Voting Junior Preferred Stock shall be
redeemable at the par value thereof, in whole or in part, by the Corporation in
its discretion at any time upon thirty (30) days prior written notice to the
holders of such shares. Written notice shall be mailed by first class mail,
postage prepaid, to each holder of record of Non-Voting Junior Preferred Stock
to be redeemed, at such holder's post office address last known on the records
of the Corporation, notifying such holder that the Corporation will redeem such
shares, specifying the date of such redemption and calling upon such holder to
surrender to the Corporation in the manner and at the place designated, his
certificate or certificates representing the shares to be redeemed. On or
after the date of such redemption, each holder of Non-Voting Junior Preferred
Stock shall surrender his certificate or certificates representing such shares
to the Corporation, in the manner and at the place designated, and thereupon
the redemption price of such shares shall be paid to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. From and after the date of
such redemption, all rights of the holders of shares of Non-Voting Junior
Preferred Stock shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of the Corporation or be deemed
outstanding for any purpose whatsoever;
(3) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of
Non-Voting Junior Preferred Stock shall be
Fourth Restated Certificate of Incorporation 3
Grant Geophysical, Inc. - 04/24/95
<PAGE> 10
entitled, before any distribution or payment is made upon shares of Common
Stock or any other shares of capital stock that may be issued by the
Corporation (other than shares of Preferred Stock), to be paid in an amount per
share equal to the par value of each such share, and no more, before any amount
shall be paid to the holders of Common Stock; provided, however, that if upon
any dissolution, liquidation or winding up of the Corporation, the net assets
available for distribution to the Corporation's stockholders shall be
insufficient to permit payment to the holders of shares of Non-Voting Junior
Preferred Stock of the amount distributable as provided above, the entire net
assets of the Corporation to be so distributed shall be distributed ratably
among the holders of the shares of Non-Voting Junior Preferred Stock. Upon any
such liquidation, dissolution or winding up, after the holders of shares of
Non-Voting Junior Preferred Stock have been paid in full, the amount to which
they shall be entitled hereunder, the remaining assets of the Corporation may
be distributed to the holders of any other shares of capital stock that may be
issued by the Corporation. Written notice of such liquidation, dissolution or
winding up, setting a payment date, the amount of the payment, the holders of
shares of Non-Voting Junior Preferred Stock, and the place where said amount
shall be payable shall be given not less than twenty (20) days prior to the
payment date stated therein, to each holder of record of shares of Non-Voting
Junior Preferred Stock. A consolidation, merger, or the reduction of capital
stock of the Corporation shall not be deemed to be a liquidation, dissolution
or winding up of the Corporation within the meaning of this section; provided,
however, the rights of the Non-Voting Junior Preferred Stock are assumed by the
resulting entity. For the purposes of this section, the sale, lease or
conveyance of all or substantially all of the Corporation's assets shall be
deemed to be a liquidation, dissolution or winding up of the Corporation;
(4) Except as required by law, the holders of shares of the
Non-Voting Junior Preferred Stock shall not be entitled to vote with respect of
such shares. In all cases where the holders of shares of Non-Voting Junior
Preferred Stock shall have the right to vote separately as a class, such
holders shall be entitled to one vote for each share of Non-Voting Junior
Preferred Stock held by them; and
(5) Other shares of capital stock of the Corporation may, with the
unanimous consent of the holders of Non-Voting Junior Preferred Stock, rank on
parity with or be senior to the shares of Non-Voting Junior Preferred Stock
with respect to the distribution of assets upon liquidation, as provided
herein.
PART C
PREFERRED STOCK
The Preferred Stock may be divided into and issued in one or more
series as herein provided, each series to be so designated as to distinguish
the shares thereof from the shares of all other series and classes. The Board
of Directors is hereby vested with the authority to establish and designate
such series from time to time and, within the limitations prescribed by law or
set forth herein, to fix and determine the number and the relative rights and
preferences of the authorized shares of any series so established, and to
increase or decrease the number of shares within each such series; provided,
however, that the Board of Directors may not decrease the number of shares
within a series below the number of shares within such series that is then
issued. The Board of Directors shall exercise such authority by the adoption
of a resolution or resolutions as prescribed by law. The Preferred Stock of
all series shall be identical, except as to the
Fourth Restated Certificate of Incorporation 4
Grant Geophysical, Inc. - 04/24/95
<PAGE> 11
following relative rights and preferences, as to which there may be variations
between different series:
(1) The rate at which dividends, if any, are to accrue with
respect to the shares of such series and the dates, terms and other conditions
on which such dividends shall be payable;
(2) The nature of dividends payable with respect to the shares of
such series as cumulative, non-cumulative or partially cumulative;
(3) Whether the shares of such series shall be subject to
redemption by the Corporation, and, if made subject to such redemption, the
price at and the terms and conditions on which the shares of such series may be
redeemed;
(4) The rights and preferences, if any, of the holders of the
shares of such series upon the liquidation, dissolution or winding up of the
affairs of, or upon any distribution of the assets of, the Corporation, which
amount may vary depending upon whether such liquidation, dissolution or winding
up is voluntary or involuntary and, if voluntary, may vary at different dates,
and the status of the shares of such series as participating or non-
participating after the satisfaction of any such rights and preferences;
provided, however, the shares of Preferred Stock are senior to the shares of
Non-Voting Junior Preferred Stock with respect to distribution of assets upon
liquidation, as herein provided;
(5) Any requirements as to, and the terms and amount of, any
sinking fund or purchase fund for, or the redemption, purchase or other
retirement by the Corporation of, the shares of such series;
(6) The right, if any, to exchange or convert the shares of such
series into (i) shares of any other series of the Preferred Stock or, to the
extent permitted by law, into shares of any other class of capital stock of the
Corporation ranking on a parity with or junior to the Preferred Stock as to
dividends or distribution of assets upon liquidation or into other securities
of the Corporation or (ii) shares of capital stock or other securities of
another corporation, and the rate or basis, time, manner and conditions of
exchange or conversion or the method by which the same shall be determined;
(7) The extent, if any, to which the holders of the shares of such
series shall be entitled to vote as a class or otherwise with respect to any
matter presented for that purpose to the shareholders of the Corporation;
(8) Any obligation of the Corporation to repurchase any or all
shares of such series; and
(9) Any other relative rights and preferences of the shares of
such series consistent with this Restated Certificate of Incorporation and
applicable law.
The terms of any series of Preferred Stock may be amended
without consent of the holders of any other series of Preferred Stock or of the
Common Stock, provided such amendment does not adversely affect the holders of
such other series of Preferred Stock or the
Fourth Restated Certificate of Incorporation 5
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<PAGE> 12
Common Stock. Shares of any series of Preferred Stock which have been issued
and reacquired in any manner and are not held as treasury shares, including
shares redeemed by purchase (whether through the operation of a retirement or
sinking fund or otherwise), will have the status of authorized and unissued
Preferred Stock and may be reissued as a part of the series of which they were
originally a part or may be reclassified into an reissued as a part of a new
series.
PART D
$2.4375 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
(1) Designation and Amount. There shall be a series of Preferred
Stock designated as "$2.4375 Convertible Exchangeable Preferred Stock" and the
number of shares constituting such series shall be 2,300,000. Such series is
referred to herein as the "Convertible Exchangeable Preferred Stock".
(2) Par Value. The par value of each share of Convertible
Exchangeable Preferred Stock shall be $.01.
(3) Rank. All shares of Convertible Exchangeable Preferred Stock
shall rank prior, both as to payment of dividends and as to distributions of
assets upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, to all of the Corporation's now or hereafter issued
(i) Common Stock, par value $.002 per share (the "Common Stock"), (ii) Serial
Preferred Stock, par value $100 per share ("Serial Preferred") and (iii) Non-
Voting Junior Preferred Stock, par value $100 per share ("Junior Preferred").
(4) Dividends. The holders of Convertible Exchangeable Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds at the time legally available therefor, dividends at the
rate of $2.4375 per annum per share, and no more, which shall be fully
cumulative, shall accrue without interest from the date of first issuance of
any shares of Convertible Exchangeable Preferred Stock and shall be payable in
cash quarterly in arrears on March 31, June 30, September 30 and December 31 of
each year commencing September 30, 1991 (except that if any such date is a
Saturday, Sunday or legal holiday, then such dividend shall be payable on the
next day that is not a Saturday, Sunday or legal holiday) to holders of record
as they appear on the stock books of the Corporation on such record dates, not
more than 60 nor less than 10 days preceding the payment dates for such
dividends, as are fixed by the Board of Directors. For purposes hereof, the
term "legal holiday" shall mean any day on which banking institutions are
authorized to close in New York City, New York or in Houston, Texas. Subject
to the next paragraph of this Section 4, dividends on account of arrears for
any past dividend period may be declared and paid at any time, without
reference to any regular dividend payment date. The amount of dividends
payable per share of Convertible Exchangeable Preferred Stock for each
quarterly dividend period shall be computed by dividing the annual dividend
amount by four. The amount of dividends payable for the initial dividend
period and any period shorter than a full quarterly dividend period shall be
computed on the basis of a 360-day year of twelve 30-day months.
No dividends or other distributions, other than dividends
payable solely in shares of Common Stock or other capital stock of the
Corporation ranking junior as to dividends and as to liquidation rights to the
Convertible Exchangeable Preferred Stock, shall be declared, paid or
Fourth Restated Certificate of Incorporation 6
Grant Geophysical, Inc. - 04/24/95
<PAGE> 13
set apart for payment on, and no purchase, redemption or other acquisition
shall be made by the Corporation of, any shares of Common Stock or other
capital stock of the Corporation ranking junior as to dividends to the
Convertible Exchangeable Preferred Stock (the "Junior Dividend Stock") unless
and until all accrued and unpaid dividends on the Convertible Exchangeable
Preferred Stock, including the full dividend for the then-current quarterly
dividend period, shall have been paid or declared and set apart for payment.
If at any time any dividend on any capital stock of the
Corporation ranking senior as to dividends to the Convertible Exchangeable
Preferred Stock (the "Senior Dividend Stock") shall be in default, in whole or
in part, then (except to the extent allowed by the terms of such Senior
Dividend Stock) no dividend shall be paid or declared and set apart for payment
on the Convertible Exchangeable Preferred Stock unless and until all accrued
and unpaid dividends with respect to the Senior Dividend Stock, including the
full dividends for the then-current dividend period, shall have been paid or
declared and set apart for payment, without interest. No full dividends shall
be paid or declared and set apart for payment on any class or series of the
Corporation's capital stock ranking, as to dividends, on a parity with the
Convertible Exchangeable Preferred Stock (the "Parity Dividend Stock") for any
period unless full cumulative dividends have been, or contemporaneously are,
paid or declared and set apart for such payment on the Convertible Exchangeable
Preferred Stock for all dividend payment periods terminating on or prior to the
date of payment of such full cumulative dividends. No full dividends shall be
paid or declared and set apart for payment on the Convertible Exchangeable
Preferred Stock for any period unless full cumulative dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such full cumulative dividends. When dividends are not paid in full
upon the Convertible Exchangeable Preferred Stock and the Parity Dividend
Stock, all dividends paid or declared and set aside for payment upon shares of
Convertible Exchangeable Preferred Stock and the Parity Dividend Stock shall be
paid or declared and set aside for payment pro rata so that the amount of
dividends paid or declared and set aside for payment per share on the
Convertible Exchangeable Preferred Stock and the Parity Dividend Stock shall in
all cases bear to each other the same ratio that accrued and unpaid dividends
per share on the shares of Convertible Exchangeable Preferred Stock and the
Parity Dividend Stock bear to each other.
Any reference to "distribution" contained in this Section 4
shall not be deemed to include any distribution made in connection with any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary.
(5) Liquidation Preference. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Convertible Exchangeable Preferred Stock shall be entitled to
receive out of the assets of the Corporation, whether such assets are stated
capital or surplus of any nature, an amount equal to the dividends accrued and
unpaid thereon to the date of final distribution to such holders, whether or
not declared, without interest, and a sum equal to $25 per share, and no more,
before any payment shall be made or any assets distributed to the holders of
Common Stock, Serial Preferred Stock, Non-Voting Junior Preferred Stock or any
other class or series of the Corporation's capital stock ranking junior as to
liquidation rights to the Convertible Exchangeable Preferred Stock (the "Junior
Liquidation Stock"); provided, however, that such rights shall accrue to the
holders of Convertible Exchangeable Preferred Stock only in the event that the
Corporation's payments with respect to
Fourth Restated Certificate of Incorporation 7
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<PAGE> 14
the liquidation preferences of the holders of capital stock of the Corporation
ranking senior as to liquidation rights to the Convertible Exchangeable
Preferred Stock (the "Senior Liquidation Stock") are fully met. The entire
assets of the Corporation available for distribution after the liquidation
preferences of the Senior Liquidation Stock are fully met shall be distributed
ratably among the holders of Convertible Exchangeable Preferred Stock and any
other class or series of the Corporation's capital stock which may hereafter be
created having parity as to liquidation rights with the Convertible
Exchangeable Preferred Stock in proportion to the respective preferential
amounts to which each is entitled (but only to the extent of such preferential
amounts). Neither a consolidation or merger of the Corporation with another
corporation nor a sale or transfer of all or part of the Corporation's assets
for cash, securities or other property will be considered a liquidation,
dissolution or winding up of the Corporation.
(6) Redemption at Option of the Corporation. The Corporation may
not redeem the Convertible Exchangeable Preferred Stock prior to September 30,
1994. The Corporation, at its option, may at any time after September 30, 1994
redeem in whole at any time, or from time to time in part, the Convertible
Exchangeable Preferred Stock on any date set by the Board of Directors, at the
following cash redemption prices per share if redeemed during the twelve-month
period beginning September 30, of the year specified below:
Year Redemption Price
---- ----------------
1994 $26.7063
1995 26.4625
1996 26.2188
1997 25.9750
1998 25.7313
1999 25.4875
2000 25.2438
and thereafter at $25 per share, plus, in each case, an amount in cash equal to
all dividends on the Convertible Exchangeable Preferred Stock accrued and
unpaid thereon, whether or not declared, pro rata to the date fixed for
redemption, such sum being hereinafter referred to as the "Redemption Price".
In case of the redemption of less than all of the then
outstanding Convertible Exchangeable Preferred Stock, the Corporation shall
designate by lot, or in such other manner as the Board of Directors may
determine, the shares to be redeemed, or shall effect such redemption pro rata.
Notwithstanding the foregoing, the Corporation shall not redeem less than all
of the Convertible Exchangeable Preferred Stock at any time outstanding until
all dividends accrued and in arrears upon all Convertible Exchangeable
Preferred Stock then outstanding shall have been paid for all past dividend
periods.
Not more than 60 nor less than 20 days prior to the redemption
date, notice by first class mail, postage prepaid, shall be given to the
holders of record of the Convertible Exchangeable Preferred Stock to be
redeemed, addressed to such stockholders at their last addresses as shown on
the books of the Corporation. Each such notice of redemption shall specify the
date fixed for redemption, the Redemption Price, the place or places of
payment, that
Fourth Restated Certificate of Incorporation 8
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<PAGE> 15
payment will be made upon presentation and surrender of the shares of
Convertible Exchangeable Preferred Stock, that on and after the redemption
date, dividends will cease to accumulate on such shares, the then-effective
conversion rate pursuant to Section 7 and that the right of holders to convert
shall terminate at the close of business on the fifth business day prior to the
redemption date (unless the Company defaults in the payment of the Redemption
Price).
Any notice which is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of the
Convertible Exchangeable Preferred Stock receives such notice; and failure to
give such notice by mail, or any defect in such notice, to the holders of any
shares designated for redemption shall not affect the validity of the
proceedings for the redemption of any other shares of Convertible Exchangeable
Preferred Stock. On or after the date fixed for redemption as stated in such
notice, each holder of the shares called for redemption shall surrender the
certificate evidencing such shares to the Corporation at the place designated
in such notice and shall thereupon be entitled to receive payment of the
Redemption Price. If less than all the shares represented by any such
surrendered certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. If, on the date fixed for redemption,
funds necessary for the redemption shall be available therefor and shall have
been irrecoverably deposited or set aside, then, notwithstanding that the
certificates evidencing any shares so called for redemption shall not have been
surrendered, the dividends with respect to the shares so called shall cease to
accrue after the date fixed for redemption, the shares shall no longer be
deemed outstanding, the holders thereof shall cease to be stockholders, and all
rights whatsoever with respect to the shares so called for redemption (except
the right of the holders to receive the Redemption Price without interest upon
surrender of their certificates therefor) shall terminate.
The shares of Convertible Exchangeable Preferred Stock shall
not be subject to the operation of any purchase, retirement or sinking fund.
(7) Conversion Privilege.
(a) Right of Conversion. Each share of Convertible Exchangeable
Preferred Stock shall be convertible at the option of the holder thereof, at
any time prior to the close of business on the fifth business day prior to the
date fixed for redemption of such share as herein provided, into fully paid and
non assessable shares of Common Stock and such other securities and property as
hereinafter provided, initially at the rate of 2.739726 shares of Common Stock
for each full share of Convertible Exchangeable Preferred Stock (equivalent to
an initial conversion price of $9.125 for each share of Common Stock).
For the purpose of this Section 7, the term "Common Stock"
shall initially mean the class designated as Common Stock, par value $.002 per
share, of the Corporation as of July 26, 1991, subject to adjustment as
hereinafter provided.
(b) Conversion Procedures. Any holder of shares of Convertible
Exchangeable Preferred Stock desiring to convert such shares into Common Stock
shall surrender the certificate or certificates for such shares of Convertible
Exchangeable Preferred Stock at the office of the transfer agent for the
Convertible Exchangeable Preferred Stock, which certificate or certificates, if
the Corporation shall so require, shall be duly endorsed to the Corporation or
in blank, or accompanied by proper instruments of transfer to the Corporation
or in blank, accompanied by
Fourth Restated Certificate of Incorporation 9
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<PAGE> 16
irrevocable written notice to the Corporation that the holder elects so to
convert such shares of Convertible Exchangeable Preferred Stock and specifying
the name or names (with address) in which a certificate or certificates for
Common Stock are to be issued.
No adjustments in respect of dividends on shares surrendered
for conversion or any dividend on the Common Stock issued upon conversion shall
be made upon the conversion of any shares of Convertible Exchangeable Preferred
Stock.
The Corporation will, as soon as practicable after such
deposit of certificates for Convertible Exchangeable Preferred Stock
accompanied by the written notice and compliance with any other conditions
herein contained, deliver at such office of such transfer agent to the person
for whose account such shares of Convertible Exchangeable Preferred Stock were
so surrendered, or to his nominee or nominees, certificates for the number of
full shares of Common Stock to which he shall be entitled as aforesaid,
together with a cash adjustment of any fraction of a share as hereinafter
provided. Subject to the following provisions of this paragraph, such
conversion shall be deemed to have been made as of the date of such surrender
of the shares of Convertible Exchangeable Preferred Stock to be converted, and
the person or person entitled to receive the Common Stock deliverable upon
conversion of such Convertible Exchangeable Preferred Stock shall be treated
for all purposes as the record holder or holders of such Common Stock on such
date; provided, however, that the Corporation shall not be required to convert
any shares of Convertible Exchangeable Preferred Stock while the stock transfer
books of the Corporation are closed for any purpose, but the surrender of
Convertible Exchangeable Preferred Stock for conversion during any period while
such books are so closed shall become effective for conversion immediately upon
the reopening of such books as if the surrender had been made on the date of
such reopening, and the conversion shall be at the conversion rate in effect on
such date.
(c) Adjustment of Conversion Rate. The number of shares of Common
Stock and number or amount of any other securities and property as hereinafter
provided into which a share of Convertible Exchangeable Preferred Stock is
convertible (the "conversion rate") shall be subject to adjustment from time to
time as follows:
(i) In case the Corporation shall (1) pay a dividend or
make a distribution on its Common Stock that is paid or made (A) in
other shares of stock of the Corporation or (B) in rights to purchase
stock or other securities if such rights are not separable from the
Common Stock except upon the occurrence of a contingency, (2)
subdivide its outstanding shares of Common Stock into a greater number
of shares or (3) combine its outstanding shares of Common Stock into a
smaller number of shares, then in each such case the conversion rate
in effect immediately prior thereto shall be adjusted retroactively so
that the holder of any shares of Convertible Exchangeable Preferred
Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock of the Corporation and
other shares and rights to purchase stock or other securities (or, in
the event of the redemption of any such shares or rights, any cash,
property or securities paid in respect of such redemption) which such
holder would have owned or have been entitled to receive after the
happening of any of the events described above had such shares of
Convertible Exchangeable Preferred Stock been converted immediately
prior to the happening of such event. An adjustment made pursuant to
this subparagraph (i) shall become effective immediately after the
record date in the case of a
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<PAGE> 17
dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision or combination.
(ii) In case the Corporation shall issue rights or warrants
to all holders of its Common Stock entitling them (for a period
expiring within 45 days after the date fixed for determination
mentioned below) to subscribe for or purchase shares of Common Stock
at a price per share less than the current market price per share
(determined as provided below) of the Common Stock on the date fixed
for the determination of stockholders entitled to receive such rights
or warrants, then the conversion rate in effect at the opening of
business on the day following the date fixed for such determination
shall be increased by multiplying such conversion rate by a fraction
of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase and the denominator shall be the number of
shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common
Stock which the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or purchase would
purchase at such current market price, such increase to become
effective immediately after the opening of business on the day
following the date fixed for such determination; provided, however, in
the event that all the shares of Common Stock offered for subscription
or purchase are not delivered upon the exercise of such rights or
warrants, upon the expiration of such rights or warrants the
conversion rate shall be readjusted to the conversion rate which would
have been in effect had the numerator and the denominator of the
foregoing fraction and the resulting adjustment been made based upon
the number of shares of Common Stock actually delivered upon the
exercise of such rights or warrants, rather than upon the number of
shares of Common Stock offered for subscription or purchase. For the
purposes of this subparagraph (ii), the number of shares of Common
Stock at any time outstanding shall not include shares held in the
treasury of the Corporation.
(iii) In case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock evidences of
its indebtedness, cash (excluding ordinary cash dividends paid out of
retained earnings of the Corporation), other assets or rights or
warrants to subscribe for or purchase any security (excluding those
referred to in subparagraphs (i) and (ii) above), then in each such
case the conversion rate shall be adjusted retroactively so that the
same shall equal the rate determined by multiplying the conversion
rate in effect immediately prior to the close of business on the date
fixed for the determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be the current
market price per share (determined as provided below) of the Common
Stock on the date fixed for such determination and the denominator
shall be such current market price per share of the Common Stock less
the amount of cash and the then fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) of the portion of
the assets, rights or evidences of indebtedness so distributed
applicable to one share of Common Stock, such adjustment to become
effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders
entitled to receive such distribution.
(iv) For the purpose of any computation under subparagraphs
(ii) and (iii), the current market price per share of Common Stock on
any date shall be deemed to be the average of the
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<PAGE> 18
daily closing prices for the 20 consecutive trading days commencing
with the 30th trading day before the day in question. The closing
price for each day shall be the reported last sales price regular way
or, in case no such reported sale takes place on such day, the average
of the reported closing bid and asked prices regular way, in either
case on the New York Stock Exchange or, if the Common Stock is not
listed or admitted to trading on such Exchange, on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading (based on the aggregate dollar value of all
securities listed or admitted to trading) or, if not listed or
admitted to trading on any national securities exchange, on the NASDAQ
National Market System or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on
the NASDAQ National Market System, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any New
York Stock Exchange member firm selected from time to time by the
Corporation for that purpose, or, if such prices are not available,
the fair market value set by, or in a manner established by, the Board
of Directors of the Corporation in good faith. "Trading day" shall
mean a day on which the national securities exchange or the NASDAQ
National Market System used to determine the closing price is open for
the transaction of business or the reporting of trades or, if the
closing price is not so determined, a day on which the New York Stock
Exchange is open for the transaction of business.
(v) No adjustment in the conversion rate shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such rate; provided, however, that the Corporation may
make any such adjustment at its election; and provided, further, that
any adjustments which by reason of this subparagraph (v) are not
required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 7
shall be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be.
(vi) Whenever the conversion rate is adjusted as provided in
any provision of this Section 7:
(1) the Corporation shall compute the adjusted
conversion rate in accordance with this Section 7 and shall
prepare a certificate signed by the principal financial
officer of the Corporation setting forth the adjusted
conversion rate and showing in reasonable detail the facts
upon which such adjustment is based, and such certificate
shall forthwith be filed with the transfer agent of the
Convertible Exchangeable Preferred Stock; and
(2) a notice stating that the conversion rate has
been adjusted and setting forth what adjusted conversion rate
shall forthwith be required, and as soon as practicable after
it is required, such notice shall be mailed by the Corporation
to all record holders of Convertible Exchangeable Preferred
Stock at their last addresses as they shall appear in the
stock transfer books of the Corporation.
(vii) In the event that at any time, as a result of any
adjustment made pursuant to this Section 7, the holder of any shares
of Convertible Exchangeable Preferred Stock thereafter surrendered for
conversion shall become entitled to receive any shares of the
Corporation other than shares of Common Stock or to receive any other
securities, the number of such other
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<PAGE> 19
shares or securities so receivable upon conversion of any share of
Convertible Exchangeable Preferred Stock shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions contained in this Section
7 with respect to the Common Stock.
(d) No Fractional Shares. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon conversion
of Convertible Exchangeable Preferred Stock. If more than one certificate
representing shares of Convertible Exchangeable Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of Convertible Exchangeable Preferred Stock so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any shares of Convertible Exchangeable
Preferred Stock, the Corporation will pay a cash adjustment in respect of such
fractional interest in an amount equal to the same fraction of the market price
per share of Common Stock (as determined by the Board of Directors or in any
manner prescribed by the Board of Directors, which, so long as the Common Stock
is listed on the NASDAQ National Market System, shall be the reported last sale
price on the NASDAQ National Market System) at the close of business on the day
of conversion.
(e) Reclassification, Consolidation, Merger or Sale of Assets. In
case of any reclassification of the Common Stock, any consolidation of the
Corporation with, or merger of the Corporation into, any other person, any
merger of another person into the Corporation (other than a merger which does
not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Corporation), any sale or transfer of
all or substantially all of the assets of the Corporation or any compulsory
share exchange, pursuant to which share exchange the Common Stock is converted
into other securities, cash or other property, then lawful provision shall be
made as part of the terms of such transaction whereby the holder of each share
of Convertible Exchangeable Preferred Stock then outstanding shall have the
right thereafter, during the period such share shall be convertible, to convert
such share only into the kind and amount of securities, cash and other property
receivable upon such reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock of the
Corporation into which such share of Convertible Exchangeable Preferred Stock
might have been converted immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange. The Corporation, the
person formed by such consolidation or resulting from such merger or which
acquires such assets or which acquires the Corporation's shares, as the case
may be, shall make provisions in its certificate or articles of incorporation
or other constituent document to establish such right. Such certificate or
articles of incorporation or other constituent document shall provide for
adjustments which, for events subsequent to the effective date of such
certificate or articles of incorporation or other constituent document, shall
be as nearly equivalent as may be practicable to the adjustments provided for
in this Section 7. The above provisions shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
(f) Reservation of Shares; Transfer Taxes; Etc. The Corporation
shall at all times reserve and keep available, out of its authorized and
unissued stock, solely for the purpose of effecting the conversion of the
Convertible Exchangeable Preferred Stock, such number of shares of its Common
Stock free of preemptive rights as shall from time to time be sufficient to
effect the conversion of all shares of Convertible Exchangeable Preferred Stock
from time to time outstanding. The Corporation shall from time to time, in
accordance with the laws of the State of Delaware, increase the authorized
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<PAGE> 20
number of shares of Common Stock if at any time the number of shares of Common
Stock not outstanding shall not be sufficient to permit the conversion of all
the then-outstanding shares of Convertible Exchangeable Preferred Stock.
If any shares of Common Stock required to be reserved for
purposes of conversion of the Convertible Exchangeable Preferred Stock
hereunder require registration with or approval of any governmental authority
under any Federal or State law before such shares may be issued upon
conversion, the Corporation will in good faith and as expeditiously as possible
endeavor to cause such shares to be duly registered or approved, as the case
may be. If the Common Stock is listed on the New York Stock Exchange or any
other national securities exchange, the Corporation will, if permitted by the
rules of such exchange, list and keep listed on such exchange, upon official
notice of issuance, all shares of Common Stock issuable upon conversion of the
Convertible Exchangeable Preferred Stock.
The Corporation will pay any and all issue or other taxes that
may be payable in respect of any issue or delivery of shares of Common Stock on
conversion of the Convertible Exchangeable Preferred Stock. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue or delivery of Common Stock (or other
securities or assets) in a name other than that in which the shares of
Convertible Exchangeable Preferred Stock so converted were registered, and no
such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
Before taking any action which would cause an adjustment
reducing the conversion rate, such that the effective conversion price (for all
purposes an amount equal to $25 divided by the conversion rate applicable to
one share of Convertible Exchangeable Preferred Stock as in effect at such
time) would be below the then stated value of the Common Stock, the Corporation
will take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Corporation may validly and legally issue fully
paid and non assessable shares of Common Stock at the conversion rate as so
adjusted.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) declare any dividend (or
any other distribution) on its Common Stock, other than (A) a dividend
payable in shares of Common Stock or (B) a dividend payable in cash
out of its retained earnings other than any special or non-recurring
or other extraordinary dividend or (2) declare or authorize a
redemption or repurchase of in excess of 10% of the then-outstanding
shares of Common Stock; or
(ii) the Corporation shall authorize the granting to the
holders of Common Stock of rights or warrants to subscribe for or
purchase any shares of stock of any class or of any other rights or
warrants (other than any rights specified in paragraph (c)(i)(1)(B) of
this Section 7); or
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a
change in par value, or from par value to no par value, or from no par
value to par value), or of any consolidation or merger to which
Fourth Restated Certificate of Incorporation 14
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<PAGE> 21
the Corporation is a party and for which approval of any stockholders
of the Corporation shall be required, or of the sale or transfer of
all or substantially all of the assets of the Corporation or of any
compulsory share exchange whereby the Common Stock is converted into
other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed with the transfer agent for the
Convertible Exchangeable Preferred Stock, and shall cause to be mailed to the
holders of record of the Convertible Exchangeable Preferred Stock, at their
last address as they shall appear upon the stock transfer books of the
Corporation, at least 15 days prior to the applicable record date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption or granting of rights or
warrants or, if a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such dividend, distribution,
redemption, rights or warrants are to be determined, or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up (but no
failure to mail such notice or any defect therein or in the mailing thereof
shall affect the validity of the corporate action required to be specified in
such notice).
(h) Other Changes in Conversion Rate. The Corporation from time
to time may increase the conversion rate by any amount for any period of time
if the period is at least 20 days and if the increase is irrevocable during the
period. Whenever the conversion rate is so increased, the Corporation shall
mail to holders of record of the Convertible Exchangeable Preferred Stock a
notice of the increase at least 15 days before the date the increased
conversion rate takes effect, and such notice shall state the increased
conversion rate and the period it will be in effect.
The Corporation may make such increases in the conversion
rate, in addition to those required or allowed by this Section 7, as shall be
determined by it, as evidenced by a resolution of the Board of Directors, to be
advisable in order to avoid or diminish any income tax to holders of Common
Stock resulting from any dividend or distribution of stock or issuance of
rights or warrants to purchase or subscribe for stock or from any event treated
as such for income tax purposes.
(8) Special Conversion Rights Upon Corporate Change or Ownership
Change.
(a) Corporate Change. Upon the occurrence of a Corporate Change
(as defined in (e) below) with respect to the Corporation, each holder of
Convertible Exchangeable Preferred Stock shall have the right, at the holder's
option, for a period of 45 days after the mailing of a notice by the
Corporation that a Corporate Change has occurred, to convert all, but not less
than all, of such holder's Convertible Exchangeable Preferred Stock into
Marketable Stock (as defined in (e) below) with an aggregate Applicable Value
(as defined in (e) below) equal to the aggregate Stated Value (as defined in
(e) below) of the Convertible Exchangeable Preferred Stock for which conversion
is elected. If a Corporate Change will result in no Marketable Stock being
outstanding following its occurrence, each holder of Convertible Exchangeable
Preferred Stock shall have the special conversion right, if he so
Fourth Restated Certificate of Incorporation 15
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<PAGE> 22
elects, to receive an amount of the securities, cash or other property
distributed to holders of Common Stock in the Corporate Change, the value of
which equals the Adjusted Value (as defined in (e) below) per share of
Convertible Exchangeable Preferred Stock, and, in the event each share of
Common Stock entitles its holder to more than one type of consideration, in the
same relative proportion of each type of consideration per share of Common
Stock. The Corporation or the successor corporation, as the case may be, may,
at its option, in lieu of providing Marketable Stock or such other appropriate
consideration as required above upon any such conversion, provide the holder
with cash equal to the Adjusted Value of the shares of the Convertible
Exchangeable Preferred Stock for which conversion was elected. Convertible
Exchangeable Preferred Stock which becomes convertible pursuant to the special
conversion right will, unless so converted, remain convertible into the kind
and amount of securities, cash or other assets that the holders of the
Convertible Exchangeable Preferred Stock would have owned immediately after the
Corporate Change if the holders had converted the Convertible Exchangeable
Preferred Stock immediately before the effective date of the Corporate Change.
The Corporation shall mail a notice to the registered holders of Convertible
Exchangeable Preferred Stock of any pending Corporate Change at least 30 days
in advance of the effective date of any such Corporate Change in order to allow
such holders an opportunity to exercise their other conversion rights prior to
the effective date of such Corporate Change and before the special conversion
right commences.
(b) Ownership Change. Upon the occurrence of an Ownership Change
(as defined in (e) below) with respect to the Corporation, each holder of
Convertible Exchangeable Preferred Stock shall have the right, at the holder's
option, for a period of 45 days after the mailing of a notice by the
Corporation that an Ownership Change has occurred, to convert all, but not less
than all, of such holder's Convertible Exchangeable Preferred Stock into Common
Stock of the Corporation with an aggregate Applicable Value equal to the
aggregate Stated Value of the Convertible Exchangeable Preferred Stock for
which conversion is elected. The Corporation may, at its option, in lieu of
providing Common Stock upon any such special conversion, provide the holder
with cash equal to the Adjusted Value of the shares of the Convertible
Exchangeable Preferred Stock for which conversion was elected. The special
conversion right arising upon an Ownership Change shall only be applicable with
respect to the first Ownership Change that occurs after the first date of
issuance of any shares of Convertible Exchangeable Preferred Stock.
(c) Notice. At least 30 days prior to the proposed effective date
of a Corporate Change, the Corporation shall mail to each registered holder of
Convertible Exchangeable Preferred Stock a notice setting forth the details of
the proposed Corporate Change and the special conversion right. Upon the
occurrence of a Corporate Change or an Ownership Change with respect to the
Corporation, within 30 days after such occurrence, the Corporation shall mail
to each registered holder of Convertible Exchangeable Preferred Stock a notice
of such occurrence (the "Special Conversion Notice") setting forth the
following:
(i) the event constituting the Corporate Change or
Ownership Change;
(ii) the conversion date upon exercise of the special
conversion right;
(iii) the Applicable Value;
(iv) the Conversion Price then in effect under Section 7
and the continuing conversion rights, if any, under Section 7;
Fourth Restated Certificate of Incorporation 16
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<PAGE> 23
(v) the name and address of the paying agent and
conversion agent;
(vi) that holders who want to convert shares of
Convertible Exchangeable Preferred Stock must satisfy the
requirements of Section 7(b) and must exercise such
conversion right within the 45-day period after the mailing
of such notice by the Corporation;
(vii) that exercise of such conversion right shall be
irrevocable and no dividends on shares of Convertible
Exchangeable Preferred Stock (or portions thereof) tendered
for conversion shall accrue from and after the conversion
date; and
(viii) that the Corporation may, at its option, pay cash
equal to the Adjusted Value of all shares of Convertible
Exchangeable Preferred Stock for which the special conversion
was elected.
(d) Exercise Procedures. A holder of Convertible Exchangeable
Preferred Stock must exercise the special conversion right within the 45-day
period after the mailing of the Special Conversion Notice by the Corporation or
such special conversion right shall expire. Such right must be exercised in
accordance with Section 7(b) to the extent the procedures in Section 7(b) are
consistent with the special provisions of this Section 8. Exercise of such
conversion right shall be irrevocable and dividends on Convertible Exchangeable
Preferred Stock tendered for conversion shall cease to accrue from and after
the conversion date. The conversion date with respect to the exercise of a
special conversion right arising upon a Corporate Change or Ownership Change
shall be the 45th day after the mailing of the notice by the Corporation that a
Corporate Change or Ownership Change, as the case may be, has occurred.
(e) Definitions. The following definitions shall apply to terms
used in this Section 8:
(i) a "Corporate Change" with respect to the Corporation
means (i) the occurrence of any transaction or event in connection
with which all or substantially all the Common Stock of the
Corporation shall be exchanged for, converted into, acquired for or
constitute solely the right to receive cash, securities, property or
other assets (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
re-capitalization or otherwise) or (ii) the conveyance, sale, lease,
assignment, transfer or other disposal of all or substantially all of
the Corporation's property, business or assets. The phrase "all or
substantially all" as used in this definition in reference to the
Common Stock shall include, but not in all instances be limited to,
two-thirds or more of the aggregate outstanding amount;
(ii) an "Ownership Change" with respect to the Corporation
shall be deemed to have occurred at such time as any person together
with any of its Affiliates or Associates (as defined below) becomes
the beneficial owner, directly or indirectly, of more than 50% of the
outstanding Common Stock of the Corporation pursuant to a transaction
that does not constitute a Corporate Change with respect to the
Corporation. An "Affiliate" of a specified person is a person that
directly or indirectly controls, or is controlled by, or is under
common control with, the person specified. An "Associate" of a person
means (1) any corporation or
Fourth Restated Certificate of Incorporation 17
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<PAGE> 24
organization, other than the Corporation or any subsidiary of the
Corporation, of which the person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any
class of equity securities; (2) any trust or estate in which the
person has a substantial beneficial interest or as to which the person
serves as trustee or in a similar fiduciary capacity; and (3) any
relative or spouse of the person or any relative of the spouse, who
has the same home as the person or who is a director or officer of the
person or any of its parents or subsidiaries. As used herein, a
person shall be deemed to have "beneficial ownership" with respect to,
and shall be deemed to "beneficially own," any securities of the
Corporation in accordance with Section 13 of the Exchange Act and the
rules and regulations (including Rule 13d-3, Rule 13d-5 and any
successor rules) promulgated by the Securities and Exchange Commission
thereunder; provided that a person shall be deemed to have beneficial
ownership of all securities that any such person has a right to
acquire whether such right is exercisable immediately or only after
the passage of time and without regard to the 60-day limitation
referred to in Rule 13d-3;
(iii) the "Adjusted Value" of a share of Convertible
Exchangeable Preferred Stock is an amount equal to the Stated Value;
provided, however, that if the Reference Value of a share of Common
Stock (determined without giving effect to any adjustment for
successor corporation stock) exceeds the Market Value of a share of
Common Stock, the Adjusted Value shall be determined by multiplying
the Market Value of a share of Common Stock by the quotient of the
Stated Value of a share of Convertible Exchangeable Preferred Stock
divided by the Reference Value per share of Common Stock;
(iv) the "Applicable Value" of a share of the Common Stock
or a share of common stock of a corporation that is the successor to
all or substantially all of the business and assets of the Corporation
as a result of a Corporate Change, shall be the higher of the Market
Value or the Reference Value;
(v) the "Market Value" of the Common Stock of the
Corporation or the common stock of the corporation that is the
successor to all or substantially all of the business and assets of
the Corporation as the result of a Corporate Change, shall be the
average of the market price of such common stock for the five business
days ending on the last business day preceding the date of the
Corporate Change or Ownership Change;
(vi) "Marketable Stock" shall mean Common Stock or common
stock of any corporation that is the successor to all or substantially
all of the business or assets of the Corporation as a result of a
Corporate Change, which is (or will, upon distribution thereof, be)
listed on the New York Stock Exchange, the American Stock Exchange or
approved for quotation in the NASDAQ National Market System or any
similar system of automated dissemination of quotations of securities
prices in the United States;
(vii) "Stated Value" of a share of Convertible Exchangeable
Preferred Stock converted during the 45- day period following the
occurrence of a Corporate Change or an Ownership Change shall mean,
until September 30, 1994, the price the Company would be required to
pay if it exercised its option to redeem such shares on September 30,
1994, and after September 30, 1994, the Stated Value shall be the
price per share the Corporation would be required to pay if it
exercised its option to redeem such shares on the conversion date; and
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(viii) "Reference Value" shall initially mean $5.25 per
share; provided, however, that in the event of any adjustment to the
conversion price, the Reference Value shall also be adjusted so that
the ratio of the Reference Value to the conversion price, after giving
effect to any such adjustment, shall always be the same as the ratio
of $5.25 to the initial conversion price (without giving effect to any
adjustment); provided, further, that if the Market Value of a share of
common stock of a corporation that is the successor to all or
substantially all of the business and assets of the Corporation as the
result of a Corporate Change is less than the Reference Value (as
calculated above), then the Reference Value shall be equal to the
amount determined by multiplying the Market Value per share of such
successor corporation's common stock by a fraction of which the
numerator shall be the Reference Value of a share of Common Stock (as
calculated above) and the denominator shall be the greater of the
Market Value of a share of Common Stock or the Market Value of a share
of the successor corporation stock.
(9) Voting Rights
(a) General. The holders of Convertible Exchangeable Preferred
Stock will not have any voting rights except as set forth below or as otherwise
from time to time required by law. In connection with any right to vote, each
holder of Convertible Exchangeable Preferred Stock will have one vote for each
share held. Any shares of Convertible Exchangeable Preferred Stock held by the
Corporation or any entity controlled by the Corporation shall not have voting
rights hereunder and shall not be counted in determining the presence of a
quorum.
(b) Default Voting Rights. Whenever dividends on the Convertible
Exchangeable Preferred Stock or any other class or series of Parity Dividend
Stock shall be in arrears in an amount equal to at least six quarterly
dividends (whether or not consecutive), (i) the number of members of the Board
of Directors of the Corporation shall be increased by two, effective as of the
time of election of such directors as hereinafter provided, and (ii) the
holders of the Convertible Exchangeable Preferred Stock (voting separately as a
class with all other affected classes or series of the Parity Dividend Stock
upon which like voting rights have been conferred and are exercisable) will
have the exclusive right to vote for and elect such two additional directors of
the Corporation at any meeting of stockholders of the Corporation at which
directors are to be elected held during the period such dividends remain in
arrears. The right of the holders of the Convertible Exchangeable Preferred
Stock to vote for such two additional directors shall terminate when all
accrued and unpaid dividends on the Convertible Exchangeable Preferred Stock
have been declared and paid or set apart for payment. The term of office of
all directors so elected shall terminate immediately upon the termination of
the right of the holders of the Convertible Exchangeable Preferred Stock and
such Parity Dividend Stock to vote for such two additional directors.
The foregoing right of the holders of the Convertible
Exchangeable Preferred Stock with respect to the election of two directors may
be exercised at any annual meeting of stockholders or, at any special meeting
of stockholders held for such purpose. If the right to elect directors shall
have accrued to the holders of the Convertible Exchangeable Preferred Stock
more than 90 days preceding the date established for the next annual meeting of
stockholders, the President of the Corporation shall, within 20 days after the
delivery to the Corporation at its principal office of a written request for a
special meeting signed by the holders of at least 10% of the Convertible
Exchangeable Preferred Stock then outstanding, call a special meeting of the
holders of the Convertible Exchangeable Preferred Stock
Fourth Restated Certificate of Incorporation 19
Grant Geophysical, Inc. - 04/24/95
<PAGE> 26
to be held within 60 days after the delivery of such request for the purpose of
electing such additional directors.
The holders of the Convertible Exchangeable Preferred Stock and
any Parity Dividend Stock referred to above voting as a class shall have the
right to remove without cause at any time and replace any directors such
holders have elected pursuant to this Section 9.
(c) Class Voting Rights. So long as the Convertible Exchangeable
Preferred Stock is outstanding, the Corporation shall not, without the
affirmative vote or consent of the holders of at least 66-2/3% of all
outstanding Convertible Exchangeable Preferred Stock voting separately as a
class, (i) amend, alter or repeal (by merger or otherwise) any provision of the
Certificate of Incorporation or the By-Laws of the Corporation, as amended, so
as adversely to affect the relative rights, preferences, qualifications,
limitations or restrictions of the Convertible Exchangeable Preferred Stock,
(ii) authorize or issue, or increase the authorized amount of, any additional
class or series of stock, or any security convertible into stock of such class
or series, ranking prior to the Convertible Exchangeable Preferred Stock in
respect of the payment of dividends or upon liquidation, dissolution or winding
up of the Corporation or (iii) effect any reclassification of the Convertible
Exchangeable Preferred Stock. A class vote on the part of the Convertible
Exchangeable Preferred Stock shall, without limitation, specifically not be
deemed to be required (except as otherwise required by law or resolution of the
Corporation's Board of Directors) in connection with: (a) the authorization,
issuance or increase in the authorized amount of any shares of any other class
or series of stock which ranks junior to, or on a parity with, the Convertible
Exchangeable Preferred Stock in respect of the payment of dividends and
distributions upon liquidation, dissolution or winding up of the Corporation;
or (b) the authorization, issuance or increase in the amount of any bonds,
mortgages, debentures or other obligations of the Corporation.
(10) Exchange. The shares of Convertible Exchangeable Preferred
Stock are exchangeable at the option only of the Corporation in whole,
but not in part, on any dividend payment date beginning September 30, 1993 for
the Corporation's 9-3/4% Convertible Subordinated Debentures due 2016 (the
"Debentures"), to be issued under an Indenture (the "Indenture") between the
Corporation and The Bank of New York, as trustee, or such other party as may
then act as trustee under the Indenture (the "Trustee"), which shall be in
substantially the form filed as an exhibit to the Corporation's Registration
Statement on Form S-1 (Registration No. 33-41316) as filed with the Securities
and Exchange Commission and as amended as of July 26, 1991, completed as set
forth therein and with such changes as may be required by law or usage. Such
exchange, if any, shall be a redemption of the Convertible Exchangeable
Preferred Stock in exchange for the Debentures. Holders of the outstanding
shares of Convertible Exchangeable Preferred Stock will be entitled to receive
$25 principal amount of the Debentures in exchange for each share of
Convertible Exchangeable Preferred Stock held by them at the time of exchange
plus an amount in cash equal to all dividends on the Convertible Exchangeable
Preferred Stock accrued and unpaid to the date of such exchange.
No such exchange of Debentures for shares of Convertible
Exchangeable Preferred Stock shall be made unless on or prior to the dividend
payment date on which such exchange is to be made (i) the Indenture shall have
been executed and delivered by the Corporation and the Trustee and (ii) the
Trustee shall have received an Opinion of Counsel (as such term is defined in
the Indenture), dated such dividend payment date, substantially to the
following effect, with such changes therein as such Trustee shall approve:
Fourth Restated Certificate of Incorporation 20
Grant Geophysical, Inc. - 04/24/95
<PAGE> 27
(1) the Corporation has duly authorized the exercise of
its right to redeem the Convertible Exchangeable Preferred Stock in
exchange for the Debentures and has exercised such option; (2) the
Corporation has full corporate power and authority to enter into the
Indenture and to perform its obligations under the Indenture and to
issue and deliver the Debentures; (3) the Indenture has been duly
authorized, executed and delivered and is a legal, valid and binding
obligation of the Corporation enforceable against the Corporation in
accordance with its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other
laws affecting creditors' rights generally from time to time in
effect); (4) the Debentures will, when issued in accordance with the
terms of the Indenture, constitute legal, valid and binding
obligations of the Company enforceable against the Company in
accordance with their terms (subject, as to enforcement of remedies,
to applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting creditors' rights generally from time to time in
effect) and entitled to the benefits of the Indenture; (5) no consent,
approval, authorization or order of any court or governmental agency
or body is required in connection with the issuance of the Debentures,
except such as may be required under the blue sky laws of any
jurisdiction and such other approvals (specified in such opinion) as
have been obtained; and (6) the issuance of the Debentures and the
performance by the Corporation of its obligations under the Indenture
will not be in conflict with or constitute a breach of or a default
(with the passage of time or otherwise) under (w) the Certificate of
Incorporation or By-Laws of the Corporation in effect at the date of
such opinion, (x) the certificate of incorporation or by-laws of any
subsidiary of the Corporation (which conflict, breach or default is
material to the Corporation and its subsidiaries taken as a whole) in
effect at the date of such opinion, (y) any agreement or instrument
(which is, individually or in the aggregate, material to the
Corporation and its subsidiaries taken as a whole) to which the
Corporation or any of its subsidiaries is a party or by which it or
any of its subsidiaries is bound or (z) any statute, law or regulation
in effect at the date of such opinion to which the Corporation or any
of its subsidiaries or any of their respective properties may be
subject to or any judgment, decree or order, known to such counsel, of
any court or governmental agency or authority then in effect and
applicable to the Corporation or any of its subsidiaries (which
conflict, breach or default is, in the case of this clause (z),
individually or in the aggregate, material to the Corporation and its
subsidiaries taken as a whole).
Upon such exchange, the rights of the holders of Convertible
Exchangeable Preferred Stock as stockholders of the Corporation shall cease
(except the right to receive on the date of exchange an amount equal to the
amount of accrued and unpaid dividends on the Convertible Exchangeable
Preferred Stock to the date of exchange and the Debentures), and the person or
persons entitled to receive the Debentures issuable upon such redemption and
exchange shall be treated for all purposes as the registered holder or holders
of such Debentures. The Corporation will mail to each record holder of the
Convertible Exchangeable Preferred Stock written notice of its intention to
exchange the Convertible Exchangeable Preferred Stock not less than 30 nor more
than 60 days prior to the exchange date. Such notice shall state: (i) the
exchange date; (ii) the place or places where certificates for such shares are
to be surrendered for exchange for Debentures; and (iii) that dividends on the
shares to be exchanged will cease to accrue on such exchange date. Upon
surrender in accordance with said notice of the certificates for any shares so
exchanged (properly endorsed or assigned for transfer, if the Corporation shall
so require and the notice shall so state), the Corporation will cause the
Debentures to be authenticated and issued in exchange for such shares of
Convertible Exchangeable Preferred Stock to be mailed to the holder of the
shares of Convertible Exchangeable
Fourth Restated Certificate of Incorporation 21
Grant Geophysical, Inc. - 04/24/95
<PAGE> 28
Preferred Stock at such holder's address of record or such other address as the
holder shall specify upon such surrender of such certificates.
If on the exchange date the Corporation shall be in default
in the payment of any dividends (including cumulative dividends, if applicable)
on Convertible Exchangeable Preferred Stock or on any shares of Preferred Stock
ranking, as to dividends, prior to or on a parity with the Convertible
Exchangeable Preferred Stock, or if such exchange shall on such date be
prohibited by applicable law, then no shares of the Convertible Exchangeable
Preferred Stock shall be exchanged.
(11) Outstanding Shares. All shares of Convertible Exchangeable
Preferred Stock shall be deemed outstanding except (i) from the date fixed for
redemption pursuant to Section 6 hereof, all shares of Convertible Exchangeable
Preferred Stock that have been so called for redemption under Section 6; (ii)
from the date of exchange determined pursuant to Section 10 hereof, all shares
of Convertible Exchangeable Preferred Stock so called for exchange for
Debentures if an amount equal to all accrued and unpaid dividends on such
shares has been set apart for payment and the Debentures are issuable upon
surrender of such shares; (iii) from the date of surrender of certificates
representing shares of Convertible Exchangeable Preferred Stock, all shares of
Convertible Exchangeable Preferred Stock converted into Common Stock; and (iv)
from the date of registration of transfer, all shares of Convertible
Exchangeable Preferred Stock held of record by the Corporation or any
subsidiary of the Corporation.
(12) Partial Payments. Upon an optional redemption by the
Corporation, if at any time the Corporation does not pay amounts sufficient to
redeem all Convertible Exchangeable Preferred Stock, then such funds which are
paid shall be applied to redeem such Convertible Exchangeable Preferred Stock
as the Corporation may designate by lot.
(13) Status of Acquired Shares. Shares of Convertible Exchangeable
Preferred Stock redeemed by the Corporation, received upon conversion pursuant
to Section 7, Section 8 or upon exchange pursuant to Section 10 or otherwise
acquired by the Corporation will be restored to the status of authorized but
unissued shares of Preferred Stock, without designation as to class, and may
thereafter be issued, but not as shares of Convertible Exchangeable Preferred
Stock.
(14) Preemptive Rights. The Convertible Exchangeable Preferred
Stock is not entitled to any preemptive or subscription rights in respect of
any securities of the Corporation.
(15) Severability of Provisions. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid
under applicable law.
(b) At each election for directors every stockholder entitled to
vote at such election shall have the right to vote in person or by proxy, the
number of shares owned by him for as many
Fourth Restated Certificate of Incorporation 22
Grant Geophysical, Inc. - 04/24/95
<PAGE> 29
persons as there are directors to be elected and for whose election he has a
right to vote. A stockholder may not cumulate his votes in any election of
directors.
FIFTH: The number of directors of the Corporation shall be as
specified in, or determined in the manner provided by, the Bylaws. The
directors may be removed at any time, with or without cause, in the manner
provided by the Bylaws. Election of directors need not be by written ballot.
SIXTH: The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal Bylaws of the Corporation.
SEVENTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
any improper personal benefit. In addition to the circumstances in which a
director of the Corporation is not personally liable as set forth in the
preceding sentence, a director shall not be liable to the fullest extent
permitted by any amendment to the Delaware General Corporation Law hereafter
enacted that further limits the liability of a director.
Any repeal of modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
EIGHTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees
in dissolution or of any receiver or receivers appointed for this Corporation
under Section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
4. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors in accordance with Section 245 of the General Corporation
Law of the State of Delaware.
Fourth Restated Certificate of Incorporation 23
Grant Geophysical, Inc. - 04/24/95
<PAGE> 30
5. This Fourth Restated Certificate of Incorporation shall be effective
on the 1st day of May, 1995.
IN WITNESS WHEREOF, said GRANT GEOPHYSICAL, INC. has caused this
Certificate to be signed by GEORGE W. TILLEY, its President and Chief Executive
Officer, and attested by WILLIAM B. CLEVELAND, its Secretary, this 26th day of
April, 1995.
GRANT GEOPHYSICAL, INC.
By /s/ GEORGE W. TILLEY
------------------------------------
George W. Tilley President
and Chief Executive Officer
ATTEST:
By /s/ WILLIAM B. CLEVELAND
---------------------------
William B. Cleveland
Secretary
Fourth Restated Certificate of Incorporation 24
Grant Geophysical, Inc. - 04/24/95
<PAGE> 1
EXHIBIT 11.01
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
COMPUTATION OF INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
----------------------------
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE:
Net income (loss) ........................................... $ (1,193) $ 1,123
Dividend requirement on $2.4375 preferred stock* ............ (3,936) (2,629)
------------ ------------
Net loss applicable to common stock,
net of preferred dividends* ............................... $ (5,129) $ (1,506)
============ ============
INCOME (LOSS) PER COMMON SHARE--ASSUMING NO AND FULL DILUTION:
Net income (loss) ........................................... $ (0.09) $ 0.09
Dividend requirement on $2.4375 preferred stock* ............ (0.31) (0.21)
------------ ------------
Net loss per common share, net of preferred dividends* ...... $ (0.40) $ (0.12)
============ ============
COMPUTATION OF WEIGHTED AVERAGE COMMON SHARES--PRIMARY AND
FULLY DILUTED:
Weighted average number of common shares outstanding ........ 12,480,518 12,178,985
Common shares issuable for warrants and under incentive
stock option plan ......................................... 890,250 680,750
Less shares assumed repurchased with proceeds ............... (485,960) (335,081)
------------ ------------
12,884,808 12,524,654
============ ============
</TABLE>
* The income/loss is decreased/increased by the undeclared, unpaid
cumulative preferred stock dividends in calculating net income/loss
attributable to the common shareholders.
<PAGE> 1
EXHIBIT 11.02
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
COMPUTATION OF INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JUNE 30,
----------------------------
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE:
Net income (loss)............................................................. $ (621) $ 1,083
Dividend requirement on $2.4375 preferred stock* ............................. (1,402) (1,314)
------------ ------------
Net loss applicable to common stock, net of preferred dividends* ............. $ (2,023) $ (231)
============ ============
INCOME (LOSS) PER COMMON SHARE--ASSUMING NO AND FULL DILUTION:
Net income (loss)............................................................. $ (0.05) $ 0.09
Dividend requirement on $2.4375 preferred stock* ............................. (0.10) (0.10)
------------ ------------
Net loss per common share, net of preferred dividends* ....................... $ (0.15) $ (0.01)
============ ============
COMPUTATION OF WEIGHTED AVERAGE COMMON SHARES--
PRIMARY AND FULLY DILUTED:
Weighted average number of common shares outstanding .......................... 12,666,545 12,184,029
Common shares issuable for warrants and under incentive stock option plan ..... 890,250 680,750
Less shares assumed repurchased with proceeds ................................. (500,035) (333,954)
------------ ------------
13,056,760 12,530,825
============ ============
</TABLE>
* The income/loss is decreased/increased by the undeclared, unpaid
cumulative preferred stock dividends in calculating net income/loss
attributable to the common shareholders.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996 (UNAUDITED) AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 37,550
<ALLOWANCES> 1,904
<INVENTORY> 1,011
<CURRENT-ASSETS> 56,665
<PP&E> 109,990
<DEPRECIATION> 66,445
<TOTAL-ASSETS> 106,725
<CURRENT-LIABILITIES> 49,723
<BONDS> 0
<COMMON> 25
0
8,513
<OTHER-SE> 29,310
<TOTAL-LIABILITY-AND-EQUITY> 106,725
<SALES> 0
<TOTAL-REVENUES> 54,759
<CGS> 0
<TOTAL-COSTS> 52,744
<OTHER-EXPENSES> (10)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,498)
<INCOME-PRETAX> (493)
<INCOME-TAX> 700
<INCOME-CONTINUING> (1,193)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,193)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
