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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, 20549
_____________________________
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
- ---- Act of 1934 For the fiscal year ended December 31, 1996.
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- ---- Exchange Act of 1934 For the Transition Period from __________
to __________.
Commission file number 000-18816
GRANT GEOPHYSICAL, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 84-0766570
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
16850 PARK ROW
HOUSTON, TEXAS 77084
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (281) 398-9503
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, par value $.002 per share . . . . . . . National Daily Quotation Service
$2.4375 Convertible Exchangeable
Preferred Stock, par value $.01 per share . . . . National Daily Quotation Service
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements, incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. { }
As of April 11, 1997, the aggregate market value of Common Stock held by
nonaffiliates of the registrant, based on the closing price of such stock on the
National Daily Quotation Service - Pink Sheets on such date was approximately
$821,000. Shares of Common Stock held by each officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily conclusive to determination for other
purposes. As of April 11, 1997, 21,845,660 shares of Common Stock of Grant
Geophysical, Inc. were outstanding.
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GRANT GEOPHYSICAL, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
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PART I
Page
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 3. Legal Proceedings and Regulatory Matters . . . . . . . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . 10
PART II
Item 5. Market For Registrant's Common Stock and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Financing Condition, Liquidity and Capital Resources . . . . . . . . . . . . 18
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . 19
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . 19
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . 20
Item 11. Executive Officer Compensation . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . 30
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . 31
PART IV
Item 14. Exhibits, Financial Statement Schedule and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE . . . . . . . . . . . . . . . F-1
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Investors are cautioned that certain statements in this Form 10-K Annual
Report are forward looking and involve risk and uncertainties. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates,"
and variations of such words and similar expressions are intended to identify
such forward looking statements. These statements are based on current
expectations and projections about the geophysical industry and assumptions
made by management and are not guarantees of future performance. Therefore,
actual events and results may differ materially from those expressed or
forecasted in the forward looking statements due to factors such as weather
conditions, outcome of negotiations and approval of reorganization plans,
demand for seismic data acquisition services in general and specifically for
the Company's services, and other factors identified in the Company's filings
with the Securities and Exchange Commission, including the Company's Form 10-K
Annual Report. The Company undertakes no obligation to update any forward
looking statements made in this Form 10-K Annual Report.
PART I
ITEM 1. BUSINESS
THE COMPANY
Grant Geophysical, Inc. ("Grant") was incorporated in Delaware on June 27,
1978, and is the successor to several companies as a result of mergers. The
merged companies include Norpac Geophysical Company, Seiscom Delta, Inc.,
United Geophysical Company, and Tensor Incorporated. As a result of these
transactions Grant has formerly been known as Grant- Norpac, Inc. and, later,
Grant Tensor Geophysical Corp. In 1993, after selling substantially all of its
seismic data processing assets, Grant resumed the name Grant Geophysical, Inc.
Grant has several wholly-owned subsidiaries incorporated in the United
States and certain foreign jurisdictions (the "Subsidiaries"). Grant and
certain of the Subsidiaries have branch operations in a number of foreign
jurisdictions (the "Branches"). Grant, the Subsidiaries and the Branches are
collectively referred to as the "Company".
On December 6, 1996 (the "Petition Date"), Grant filed a voluntary
petition for relief with the United States Bankruptcy Court for the District of
Delaware (the "Court") under chapter 11 of the United States Bankruptcy Code
(the "Bankruptcy Code").
The bankruptcy filing was precipitated by several factors, including rapid
expansion in the United States and Latin American markets, costs related to the
development of a proprietary data recording system and poor operational results.
These factors impaired Grant's ability to service its indebtedness, fund
essential capital spending and provide working capital for operations. Grant
explored several alternatives to improve its capital structure and increase
liquidity. Discussions were conducted with prospective lenders and investors,
including certain creditors and stockholders of Grant. However, these
discussions were not successful in procuring additional capital to adequately
fund ongoing operations. By late 1996, it became apparent that the only
feasible recourse was to commence a reorganization under bankruptcy court
protection. As of the date of this report none of the Subsidiaries or Branches
have filed for relief under the Bankruptcy Code or similar foreign laws. See
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Overview" and Note 1 of Notes to Consolidated Financial
Statements.
Generally, under chapter 11, all actions to enforce or collect pre-petition
claims against a debtor are stayed. Debtors may operate their businesses and
manage their assets in the ordinary course as debtors-in-possession, but must
obtain Court approval for transactions outside the ordinary course of business.
All liabilities of Grant outstanding at December 6, 1996, have been reclassified
from their respective current and non-current liability categories to "Pre-
petition liabilities subject to chapter 11 case."
This Form 10-K was prepared based on the status of Grant's chapter 11 case
on April 14, 1997. The case is ongoing. On March 14, 1997, Grant entered into
a term sheet ("Term Sheet") with Elliott Associates L.P. ("Elliott") pursuant to
which Elliott may make certain capital investments in connection with a plan of
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reorganization for Grant. This Term Sheet is subject to a number of material
conditions including, but not limited to, execution of a mutually agreeable
definitive agreement and the Court's approval of certain break-up fees and
bidding procedures. The Court approved the proposed break-up fees and bidding
procedures on April 9, 1997. However, there can be no assurance that the
transactions described in the Term Sheet will be consummated as described, or
at all. The Court has ordered that all parties wishing to file a proof of
claim must do so by May 7, 1997 or be barred from participating in a
distribution of the bankruptcy estate. Accordingly, Grant's consolidated
financial statements give no effect to any adjustments which might be required
as a result of the reorganization proceedings.
BUSINESS
The Company is engaged primarily in the gathering of seismic data used by
oil and gas companies in determining whether subsurface geological conditions
appear favorable for the accumulation of oil and gas reserves.
The following table sets forth the Company's revenues from continuing
operations by geographic area:
REVENUES BY GEOGRAPHIC AREA
(DOLLARS IN THOUSANDS)
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YEAR ENDED DECEMBER 31,
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1996 1995 1994
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United States . . . . . . . . . . $ 42,074 40% $47,849 52% $27,791 38%
Europe, Africa and
the Middle East(1) . . . . . . 904 1 14,994 16 24,225 33
Latin America . . . . . . . . . . 57,133 54 25,532 28 15,643 21
Far East . . . . . . . . . . . . 5,412 5 3,621 4 6,032 8
-------- ---- ------- ---- ------- ----
$105,523 100% $91,996 100% $73,691 100%
======== === ======= === ======= ===
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__________________
(1) On December 23, 1996, Grant entered into a letter of intent to sell its
Nigerian subsidiary. The Court approved the sale on March 24, 1997, and the
sale is expected to be consummated by April 30, 1997. This subsidiary
contributed substantially all of Grant's revenues from Europe, Africa and
the Middle East.
See Note 5 of Notes to Consolidated Financial Statements for further
information regarding the Company's operations including operating
profit/(loss) and identifiable assets by geographic area.
EXPLORATION SEISMOLOGY
The principles of seismology have been used in the exploration for oil and
gas reserves since about 1929. Exploration seismology encompasses the
generation and recording of reflected seismic energy which is computer
processed to produce representations of the earth's subsurface. These
processed seismic data are used by geoscientists to identify geological
conditions favorable for the accumulation of oil and gas reserves and to
optimize and monitor field production operations.
The principal components of a seismic system are the energy source device
and the recording system. The energy source device generates an impact or
vibration at or near the earth's surface which produces sonic waves. These
sonic waves travel downward through the earth's subsurface and are partially
reflected back to the surface as they pass through the subsurface rock layers.
The energy source devices typically used by the Company in its seismic data
acquisition are explosives, vibroseis, a mechanical device used to generate
input signals at desired frequencies, and airguns.
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The reflected sonic waves are detected by highly sensitive devices called
geophones, which convert the seismic reflections to electrical signals. These
electrical signals represent the time required for the waves to travel from the
earth's surface to the subsurface interfaces and be reflected back to the
surface. A reflection seismograph converts the electrical signals to digital
information ("seismic data") at remote recording locations and transmits the
seismic data by telemetric means to a central recording station where the
seismic data are stored on computer magnetic tapes. More sophisticated
reflection seismographs digitally record the seismic data at the remote
recording location, thereby eliminating the need for real-time transmission of
the data to a central recording unit. Once recorded, the seismic data are sent
to data processing centers where they are enhanced to illuminate the desired
reflected signals. The processed seismic data are then arranged for input to
imaging devices that produce representations of the survey site's subsurface.
The Company has experienced an increase in demand during the last several
years among its customers for three-dimensional ("3-D") seismic surveys.
Three-dimensional seismic surveys produce seismic data that allow the user to
view subsurface conditions with a much higher degree of resolution than those
produced using earlier two-dimensional ("2-D") seismic surveys. In known
producing areas, 3-D seismic data aids its users in more precisely positioning
step-out and development wells. Unlike 2-D seismic surveys (which typically
use between 240 and 480 remote recording locations), 3-D surveys require much
larger recording systems (1,000 to 3,000 or more recording channels arranged in
patterns at numerous locations).
CONTRACT LAND SEISMIC DATA ACQUISITION
As of April 14, 1997, the Company was operating or mobilizing 12 land
seismic crews and 2 shallow water transition zone crews, 7 of which were in the
United States and 7 of which were in Latin America and the Far East.
Seismic Crews. A seismic crew typically consists of a manager; permitting
agents who secure permission to enter landowners' properties; surveyors who
mark the locations for geophone and source placement; general laborers who
place and move the geophones and connecting cables; and either, (i) if
explosives are used as the energy source, a drill crew to drill holes and
shooters to detonate the explosives, or (ii) if vibroseis is used as the energy
source, drivers to operate the vibroseis trucks; and an observer who operates
the seismograph and controls the recording of the seismic data. A fully
staffed seismic crew in the United States typically utilizes 25 to 55
personnel. International seismic crews normally require a significantly larger
number of general laborers and support personnel because the survey sites are
often in remote locations. For example, a desert seismic crew may require 10
to 15 expatriate personnel plus 100 to 150 local personnel, while a seismic
crew operating in marsh or swamp conditions or in a remote jungle region with
limited access to roads may require a crew of 600 to 2,500 persons, all of whom
must be provided with food and shelter at the survey site.
The Company also operates shallow water transition zone seismic crews
using a radio telemetry recording system. Typically, the transition zone is a
unique area of operation in that the area to be surveyed lies either in shallow
water or in marshy grasslands where conventional land or marine seismic crew
cannot operate efficiently. This type of seismic crew utilizes an airgun barge
to create the energy source, a vessel to house the crew and various utility
boats to position the recording system. A crew of this sort will typically
utilize approximately 90 to 115 personnel.
Contracts. The Company's seismic data acquisition activities are
conducted under contracts with oil and gas exploration and production companies
which retain exclusive ownership of the acquired seismic data. Contracts,
which are usually awarded on a competitive bid basis, are either "turnkey,"
which provide for a fixed fee to be paid to the Company for each unit of data
acquired, or "term," which provide for a fixed monthly fee during the term of
the project. The majority of the Company's contracts are on a turnkey basis.
Contracts awarded for land and transition zone seismic data acquisition
outside the United States are generally denominated partially in U.S. dollars
and partially in the local currency of the country in which the seismic survey
is conducted. The portion of the contract denominated in local currency is
principally utilized to pay local
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crew-related expenses. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Other" for a discussion of foreign
exchange gains and losses.
Mobilization Costs. The costs of mobilizing seismic crews varies from
location to location. Typically, the costs tend to be higher in the foreign
locations. When possible the Company charges a mobilization fee which may be
collected in advance or over the term of the contract.
Capital Expenditures. The capital expenditures necessary to equip a new
seismic crew are primarily related to the type and quantity of energy source
devices, recording systems and logistical support equipment to be utilized in a
seismic survey. If the seismic crew is in a remote location, the Company may
also provide facilities to house members of the seismic crew. On multi-year
contracts, the Company endeavors to recover its investment over the term of the
work. The Company's capital expenditures in any given year are dependent on
the mix of its business and customer demand for certain types of geophysical
equipment.
United States Operations
The demand for contract land seismic data acquisition in the United States
has declined substantially since activity levels peaked in 1981. Beginning in
1993, however, there was an increase in bid activity relating to 3D projects.
These projects are generally a combination of new exploration, and exploitation
of existing fields. Grant believes the utilization of 3D seismic data
acquisition techniques in the United States will continue to be an important
tool used in the discovery and development of oil and gas fields because of the
value these techniques provide in assessing the production potential in known
producing areas; however, Grant cannot predict the level of future demand for
its services.
International Operations
The Company has been active in Latin America since 1940, and, in
particular, has had continuous operations in Brazil since that date. During
1996 and 1995, the Company also had seismic crews operating in Ecuador,
Colombia, Bolivia and Peru. Within the last four years, the Company has also
conducted seismic operations in Venezuela and Argentina.
The Company's first operations in the Far East and Australia region were
conducted in 1962. The Company's Far East activity in 1996 consisted of one
crew in Bangladesh.
The Company's operations in Europe, Africa and the Middle East were
centered in Nigeria during 1995 and 1994 and Abu Dhabi in 1994. During 1996
there was no significant activity in either Nigeria or any of the Middle East
countries or Emirates. On December 23, 1996, Grant entered into a letter of
intent to sell the stock of United Geophysical (Nigeria) Ltd., its subsidiary
in Nigeria. The sale was approved by the Court on March 24, 1997 and is
expected to be consummated by April 30, 1997. Within the last five years, the
Company also has operated crews in Yemen and Qatar. Although the Company does
not have a crew operating in the Middle East at the present time, management
currently plans to continue evaluating job opportunities as they develop
throughout the region and to market the Company's services where appropriate.
The Company is not currently active in Europe.
For information relating to the Company's total revenues, operating
profit/(loss) and identifiable assets attributable to its geographic area, see
Note 5 of Notes to Consolidated Financial Statements.
CUSTOMERS
The Company's major customers are multi-national oil and gas companies,
foreign national oil companies and independent oil and gas companies. Revenues
from a U.S. based international oil company were approximately $20,233,000
(19%) and $12,683,000 (14%) for the years ended December 31, 1996 and 1995,
respectively. In fiscal 1995, revenues from two affiliated nationalized oil
companies totaled approximately $10,048,000 (11%). Due to the contractual
nature of the Company's operations, it is anticipated that significant portions
of future
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consolidated revenues may continue to be attributable to a few customers,
although it is likely that the identity of such customers may change from
period to period. See Note 5 of Notes to Consolidated Financial Statements.
COMPETITION
The acquisition of seismic data for the oil and gas industry is highly
competitive worldwide. Although precise comparative figures are not available,
the Company believes that its principal competitors have financial, operating
and other resources in excess of those available to the Company.
The Company's principal competitors in its United States operations are
Western Atlas, Inc., Veritas DGC, Inc., Geco-Prakla, a subsidiary of
Schlumberger Limited and several other regional operators. Competition for
available seismic surveys is based primarily on price and availability. Other
competitive factors, including performance, technology, and dependability, may
affect the decision to award a contract to the Company or one of its
competitors.
The Company competes in Latin America with Western Atlas, Compagnie
General de Geophysique, Inc. ("CGG"), Geco-Prakla, as well as several local
companies; and in the Far East with CGG, Geco-Prakla, ELNUSA, a state owned
seismic company, and Western Atlas. Contracts awarded in the international
market are also based primarily on price and crew availability, with
consideration given to technology and contractor expertise in the area of the
project. The Company believes that its lengthy operating history and presence
in the international markets enhance its ability to compete for such contracts.
BACKLOG
The Company's total backlog of land and transition zone seismic data
acquisition contracts in the United States as of December 31, 1996 and December
31, 1995 was approximately $12,530,000 and $27,385,000, respectively. The
Company expects to complete substantially all of the December 31, 1996 United
States backlog by December 31, 1997. The total backlog of land and transition
zone seismic data acquisition contracts with respect to the Company's
international operations as of December 31, 1996 and December 31, 1995 was
approximately $58,918,000 and $46,219,000, respectively. Approximately
$11,869,000 of the backlog at December 31, 1995 was carried over to backlog at
December 31, 1996. The Company expects to complete $2,850,000 of the
international backlog in 1998.
Certain of the Company's international contracts contain provisions
providing for the reimbursement of mobilization and other costs in the event of
the cancellation of the contract by the customer. The majority of the
Company's international contracts and virtually all of its United States
contracts are terminable by the customer upon relatively short notice and
possibly without penalty. Consequently, the Company's backlog as of any
particular date is not indicative of the Company's likely operating results for
any succeeding fiscal period; and there can be no assurance that the amount of
backlog ultimately will be realized.
TECHNOLOGICAL INNOVATION
Until November of 1996, Grant maintained an engineering group aimed
primarily at the development of a proprietary data recording system. In
November 1996, Grant determined that it could not adequately fund ongoing
development of this system, and as a result, substantially all of the personnel
associated with the effort were terminated. In 1994, 1995 and 1996, Grant's
expenditures related to the system development project were approximately
$177,000, $2,559,000, and $3,614,000, respectively. All of such costs incurred
in 1994 and 1995 were capitalized while all the costs incurred in 1996 were
expensed in the fourth quarter. In connection with the decision to terminate
development, Grant wrote off a total of $5,802,000, representing all of its
capitalized costs.
In addition to the system development effort outlined above, the Company
maintains a staff of geoscientists and engineers to develop new and enhance
existing data recording techniques, to support its field operations and to
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consult with clients on the parameters of upcoming seismic projects. The costs
of all such personnel and activities are expensed as incurred.
As a matter of policy, the Company rarely applies for patents on
internally developed technology. This policy is based upon the belief that
most proprietary technology, even where regarded as patentable, can be more
effectively protected by maintaining confidentiality than through disclosure
and a patent enforcement program.
Certain of the equipment, processes and techniques used by the Company are
subject to the patent rights of others, and the Company holds non-exclusive
licenses with respect to a number of such patents. While the Company regards
as beneficial its access to others' technology through licensing, it is
believed that substantially all presently licensed technology could be replaced
without significant disruption to the business should the need arise.
EMPLOYEES
As of April 14, 1997, the Company employed approximately 2,000 persons, of
whom 1,500 were in foreign locations and 500 were in the United States. None
of the Company's United States employees are covered by collective bargaining
agreements, although certain of its foreign employees are covered by labor
agreements. The Company considers its employee relations to be satisfactory.
INFLATION AND SEASONALITY
Inflation in the United States has not had a material effect on the Company
in recent years. Revenues and earnings vary from quarter to quarter, depending
on the timing of seismic crew start-ups, isolated weather conditions and other
factors. The Company's operating results for any particular quarter may not be
indicative of the results for any future quarter or any year.
ITEM 2. PROPERTIES
The Company's primary physical properties are seismic equipment. In
addition, Grant owns a 30,000 square foot building and storage yard in Houston,
Texas which serves as its corporate headquarters, warehouse and staging
facility. Grant also owns its office and repair facility located on a two acre
tract in New Iberia, Louisiana. Further, the Company leases operations
offices, sales offices and warehouses in the United States and foreign
countries. During 1996, the Company paid rentals in the aggregate amount of
approximately $650,000 with respect to real estate leases. See Item 3. Legal
Proceedings for a description of the status of these leases under Chapter 11
proceedings.
ITEM 3. LEGAL PROCEEDINGS AND REGULATORY MATTERS
On December 6, 1996, Grant filed a voluntary petition for relief under the
Bankruptcy Code with the Court under Case No. 96-01936-HSB. Since the Petition
Date, Grant has operated its business and managed its property as debtor-in-
possession, under the authority of sections 1107(a) and 1108 of the Bankruptcy
Code.
The Court generally has jurisdiction over all of Grant's property, as
defined in section 541 of the Bankruptcy Code, held on the Petition Date or
acquired thereafter. Under sections 1107 and 1108 of the Bankruptcy Code and by
order of the Court, Grant is operating its business and managing its assets in
the ordinary course of business as debtor-in-possession. Grant may not, however,
engage in transactions outside the ordinary course of business without prior
approval of the Court. Pursuant to section 362(a) of the Bankruptcy Code and
subject to the exceptions contained in section 362(b) thereof, the commencement
of a bankruptcy proceeding operates as an automatic stay applicable to all
persons and other entities, generally prohibiting absent Court approval (i) the
commencement or continuation of any judicial, administrative or other proceeding
against Grant, (ii) any act to obtain possession of property of, or property
from, Grant, and (iii) any act to create, perfect or enforce any lien against
property of Grant. While the automatic stay applies to all of Grant's property
wherever located, Grant operates in several foreign jurisdictions, some of which
may not give effect to the automatic stay.
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Grant's bankruptcy proceeding is discussed below. For information
concerning the effect of the bankruptcy on Grant's business, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 1 of Notes to Consolidated Financial Statements.
Management's objective in the bankruptcy proceeding is to achieve the
highest possible recoveries for all of Grant's creditors and shareholders. At
December 31, 1996, liabilities of the Company exceeded its assets by
$34,213,000. It is impossible at this time to determine the actual recovery,
if any, that different classes of creditors and shareholders will realize upon
final confirmation of a plan of reorganization. Until confirmation of a plan
of reorganization for Grant which determines the amount and manner of payment
or other disposition of outstanding claims and litigation and the treatment of
Grant's debt and of its equity interests, the value of Grant's debt and of its
equity securities will continue to be uncertain. It is probable that there
will be a significant reduction in the amount of unsecured indebtedness of
Grant and there is a significant likelihood of cancellation of Grant's Common
and Preferred Stock. As a result, such securities should be considered highly
speculative investments with a very high degree of risk to any investor.
On February 4, 1997, the Court entered a Final Financing Order authorizing
Grant to enter into an agreement to obtain secured post-petition financing with
Foothill Capital Corporation (the "Lender") under which agreement the Lender
continued to advance funds to Grant for its operations. The Lender agreed to
make revolving advances not to exceed $12,500,000 through June 30, 1997. The
advances are not to exceed a borrowing base equal to a percentage of certain
trade accounts receivable and an overadvance amount. The maximum permitted
overadvance was $6,000,000 through March 30, 1997. The Final Financing Order
was amended by the Court on April 9, 1997 to approve an agreement between Grant
and the Lender increasing the overadvance amount to a constant $7,000,000 and
extending the maturity date to September 30, 1997. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operation."
Pursuant to Section 1102(a) of the Bankruptcy Code, shortly after the
Petition Date the Court appointed a committee ("Creditors' Committee") to
represent Grant's unsecured creditors. The Creditors' Committee currently
consists of the following members: BGP International, Inc.; Wells Fargo Bank
(Texas) National Association; Mitcham Industries, Inc.; NCS International;
Input/Output, Inc.; Conccesiones & Catering Industrial S.A.; Halifax Fund,
L.P.; and Westgate International, L.P.
The powers and duties of the Creditors' Committee include, among other
things, (i) consulting with Grant concerning the administration of the case;
(ii) participating in the formulation of a plan of reorganization; (iii)
investigating the acts, conduct, assets, liabilities and financial condition of
Grant, the operation of Grant's business and the desirability of the continuance
of such business and any other matters relevant to the case or the formulation
of a plan of reorganization; (iv) requesting the appointment of a trustee or
examiner, and (v) performing such other services as are in the interests of
Grant's unsecured creditors. The Creditors' Committee has the right to review
and object to certain business transactions and to retain counsel and other
approved professionals at the expense of Grant. The Creditors' Committee is
charged with the responsibility of protecting the interests of its
constituencies and assuring that the assets of Grant estate are preserved.
Pursuant to the Bankruptcy Code, under certain circumstances secured
lenders and equipment lessors may be entitled to adequate protection of their
interests in collateral pending confirmation of a plan of reorganization. Since
the Petition Date, Grant has conducted negotiations with most of its secured
lenders and equipment lessors in an effort to restructure the pre-petition
obligations. Agreements have been reached with Input/Output, Inc., OYO
Geospace, General Electric Credit Corporation, NYNEX Credit Company, Macha
Equipment, Winthrop Business Credit, Forum Financial and Leica. Each of these
agreements is subject to approval by the Court. Based on these agreements,
Grant is making payments of adequate protection in varying amounts.
All leases of real and personal property held by Grant at the Petition
Date are subject to acceptance or rejection in chapter 11. As of April 14,
1997, Grant had made decisions to accept only two lease contracts, both of
which involved the financing for certain critical items of data recording
equipment. Decisions on all remaining leases, including leases covering
Grant's office facilities, are still pending and are not expected to be made
except in connection with a plan of reorganization.
9
<PAGE> 10
The Company is a party in several lawsuits arising in the ordinary course
of the Company's business. The majority of such lawsuits are related to minor
damage claims arising from Grant's seismic activities and are stayed pursuant
to the Bankruptcy Code. While the Company cannot predict the outcome of these
lawsuits management does not believe that their ultimate resolution will have a
marked adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Annual Meeting of Stockholders
Grant held its annual meeting of stockholders on November 1, 1996.
The following persons were elected to Grant's Board of Directors to
hold office for the ensuing year.
George W. Tilley(1)
For: 11,779,055 Against: 0 Abstaining: 48,421
Harvey D. Attra
For: 11,782,749 Against: 0 Abstaining: 468,142
Orville D. Gaither, Sr.
For: 11,782,799 Against: 0 Abstaining: 468,142
The following persons continue their terms as Director for the
ensuing year:
J. Michael Adcock
Douglas K. Stewart
The results of the voting on amendments to Grant's Amended 1989
Long-Term Incentive Plan to (a) increase the number of shares
available for issuance pursuant to the Plan, (b) expand the rights of
Grant to grant shares of Restricted Stock to Former Non-Employee
directors and (c) include the Chairman of Grant's Board of Directors
under the definition of Employee in the Plan were as follows:
For: 4,350,061 Against: 652,570 Abstaining: 48,421
____________
(1) Mr. Tilley's services with Grant terminated on November 4, 1996.
10
<PAGE> 11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The common stock of Grant commenced trading on the NASDAQ National Market
System of The NASDAQ Stock MarketSM under the symbol "GRNT" on September 19,
1990. Effective January 24, 1997, Grant was delisted by NASDAQ and began
trading on the "Pink Sheets" published by the National Daily Quotation Service.
The following table sets forth the high and low sales prices for the common
stock for the periods indicated as reported by NASDAQ. Such prices reflect
inter-dealer prices and do not include retail mark-up, mark-down or commission,
and do not necessarily represent actual transactions.
<TABLE>
<CAPTION>
COMMON STOCK - NASDAQ*
------------------------
HIGH LOW
---- ---
<S> <C> <C>
1996*
First Quarter . . . . . . . . . . . . . . . . . . . . $ 3 3/8 $ 2 1/4
Second Quarter . . . . . . . . . . . . . . . . . . . . 4 5/8 3 1/8
Third Quarter . . . . . . . . . . . . . . . . . . . . 4 1 1/4
Fourth Quarter . . . . . . . . . . . . . . . . . . . 1 19/32 1/64
1995*
First Quarter . . . . . . . . . . . . . . . . . . . . $ 2 7/8 $ 1 7/8
Second Quarter . . . . . . . . . . . . . . . . . . . . 2 13/16 1 7/8
Third Quarter . . . . . . . . . . . . . . . . . . . . 2 5/8 1 7/8
Fourth Quarter . . . . . . . . . . . . . . . . . . . 2 3/4 1 7/8
</TABLE>
* Grant's stock was delisted by NASDAQ on January 24, 1997.
On April 11, 1997, the closing price for the common stock of Grant, as
reported on the National Daily Quotation Service - Pink Sheets was $0.04 per
share.
As of April 11, 1997, Grant had 21,845,660 shares of common stock
outstanding held by approximately 131 stockholders of record. The shares held
by stockholders of record include shares beneficially owned by stockholders who
have chosen to have shares held in a "nominee" or "street" name. Grant is
unable to identify accurately the number of such beneficial holders of its
common stock; however, Grant estimates such number to be approximately 2,000.
Due to the Company's financial position at December 31, 1996, there is a
likelihood that Grant's common stock and preferred stock will be canceled
pursuant to any reorganization of Grant in the bankruptcy proceeding. As a
result, such securities should be considered highly speculative investments
with a very high degree of risk to any investor.
Grant has not declared or paid any cash dividends on the common stock
during its three most recent fiscal years. Pursuant to the terms of Grant's
$2.4375 preferred stock, no dividends can be paid on the common stock until all
dividends accrued on the $2.4375 preferred stock have been paid. At December
6, 1996, $2.4375 preferred stock dividends in arrears totaled approximately
$23,451,000.
11
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, for the periods and at the dates
indicated, selected historical consolidated financial data for the Company.
The selected historical financial data set forth below should be read in
conjunction with the consolidated financial statements and the notes thereto
included in Item 8 of this Form 10-K. See also "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues . . . . . . . . . . . . . . . $ 105,523 $ 91,996 $ 73,691 $ 69,255 $ 90,556
Operating income/(loss) . . . . . . . . (65,970) 4,999 (9,241) (13,410) (21,803)
Income/(loss) from continuing
operations . . . . . . . . . . . . . (76,027) 3,162 (11,438) (16,953) (29,886)
Discontinued Operations:
Loss from operations of
discontinued business . . . . . . . (1,284) (8,189)
Loss on disposal of discontinued
business . . . . . . . . . . . . . (6,174) (1,248)
---------- ---------- ---------- ---------- ----------
Net income/(loss) . . . . . . . . . . . . $ (76,027) $ 3,162 $ (11,438) $ (24,411) $ (39,323)
========== ========== ========== ========== ==========
Net loss applicable to
common stock . . . . . . . . . . . . . $ (82,390) $ (2,096) $ (16,696) $ (29,669) $ (44,581)
========== ========== ========== ========== ==========
INCOME/(LOSS) PER COMMON SHARE--ASSUMING
FULL AND NO DILUTION:
Continuing operations . . . . . . . . . $ (5.17) $ 0.25 $ (0.92) $ (1.40) $ (2.51)
Dividend requirement on $2.4375 preferred
stock . . . . . . . . . . . . . . . (0.43) (0.42) (0.42) (0.43) (0.44)
Discontinued:
Operations . . . . . . . . . . . . . (0.10) (0.69)
Loss on Disposal . . . . . . . . . . (0.51) (0.10)
---------- ---------- ---------- ---------- ----------
Net loss per common share . . . . . . . . $ (5.60) $ (0.17) $ (1.34) $ (2.44) $ (3.74)
========== ========== ========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Primary . . . . . . . . . . . . . . . 14,699,824 12,535,352 12,470,704 12,145,100 11,929,074
Fully Diluted . . . . . . . . . . . . 14,699,824 12,571,984 12,484,093 12,145,100 11,929,074
CASH FLOW DATA:
Net cash provided by (used in)
operating activities--continued
operations. . . . . . . . . . . . . . $ (9,346) $ 2,759 $ 3,170 $ 2,133 $ 12,647
Net cash used in investing
activities . . . . . . . . . . . . . (10,181) (9,272) (9,698) (1,128) (13,923)
Net cash from (used in) financing
activities . . . . . . . . . . . . . 25,667 6,929 5,260 (3,486) 574
Capital expenditures, net . . . . . . . 10,339 13,757 9,697 6,527 15,433
RATIO:(1)
Ratio of earnings to fixed charges and
preferred dividends . . . . . . . . -- -- -- -- --
</TABLE>
(Table continued on next page)
12
<PAGE> 13
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital . . . . . . . . . . . . $ 22,421 $ 8,033 $ 3,022 $ 4,585 $ (243)
Total assets . . . . . . . . . . . . . 70,123 86,932 61,609 70,745 118,548
Pre-petition liabilities subject to
chapter 11 case . . . . . . . . . . . 90,244
Notes payable, current portion of long-term
debt and capital lease obligations . 589 18,430 14,495 8,880 18,634
Long-term debt and capital lease obligations,
excluding current portion . . . . . . 8,789 4,917 6,979 14,686
Common stock subject to put . . . . . . 1,920
Total stockholders' equity (deficit) . (34,213) 29,715 26,399 37,774 60,689
</TABLE>
- ----------------------
(1) Earnings consist of income from continuing operations before income taxes
plus fixed charges. Fixed charges consist of interest (including
amortization of debt issuance costs) and the interest component of lease
expense. The ratio of earnings to fixed charges and preferred dividends is
calculated by dividing the sum of fixed charges and pretax earnings
required to cover preferred dividends into earnings. Earnings for the
years ended December 31, 1996, 1995, 1994, 1993 and 1992 were inadequate to
cover fixed charges by approximately $81,313,000, $2,591,000, $16,610,000,
$22,121,000 and $34,544,000, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
[OVERVIEW]
On December 6, 1996, Grant filed for reorganization under chapter 11 of the
Bankruptcy Code. Since filing the petition, Grant has continued to operate its
business in the ordinary course as debtor-in-possession.
Since 1994, the Company has concentrated on providing contract land and
transition zone data acquisition services internationally. This coincided with
a surge in demand for 3D seismic services, particularly within the United
States. During the three years ending 1996, the Company's revenues from the
United States have increased 51% from $27,791,000 in 1994 to $42,074,000 in
1996. In addition, over this same period, the Company expanded its
international operations, specifically in Latin America, with the result that
revenues from Latin America increased 265% from $15,643,000 in 1994 to
$57,133,000 in 1996. This rapid expansion put a tremendous strain on the
Company's capital resources. The need for working capital to fuel this growth
and the cash and debt required to purchase new capital equipment resulted in an
ongoing liquidity problem.
In the first quarter of 1994, Grant began development of a proprietary data
recording system that became known as Citation. This system was intended to
replace an older recording system in use in marshy areas along the Texas and
Louisiana Gulf Coast. Management believed that an advantage of the system was
its relatively low cost to develop and manufacture when compared to the price of
comparable third party equipment. Original estimates ranged from savings of
one-third to one-half of a purchased system. The prototype system was planned
to cost approximately $2,500,000 to $3,000,000 with deployment in early 1996.
However, software design problems and unavailability of hardware resulted in
numerous delays and cost overruns. The ultimate cost of the system was
approximately $6,000,000 and initial deployment was not achieved until July
1996, several months behind schedule. While the system was able to successfully
acquire data, the production performance was well below expectation. Development
costs associated with Citation contributed significantly to destabilizing the
Company's financial condition during 1996.
In addition to the Citation development, several operational factors
contributed to a sudden and dramatic deterioration of the Company's financial
condition in 1996. The most costly factor was losses incurred in Peru. The
Company began operations in Peru in 1995 by mobilizing three crews in March,
April and May of that year.
13
<PAGE> 14
Revenue and operating income for 1995 were $13,719,000 and $1,205,000,
respectively. Peruvian operations were expanded in 1996 by adding a fourth crew
and increasing the equipment complement on another. However, an inability to
accurately estimate the crews' production capabilities coupled with costs that
were significantly higher than originally estimated, resulted in material and
continuing operating losses. During the year ended 1996, Peruvian operations
had revenues of $27,490,000 and an operating loss of $19,804,000, including a
loss accrual of $2,700,000 related to the shutdown of operations in and
withdrawal of equipment and personnel from the country. The Company's United
States operations also experienced significant losses, substantially all of
which were directly or indirectly related to the slow development and late
deployment of the Citation system. Two shallow water transition zone projects
in particular incurred operating losses in excess of $6,000,000. These
projects were delayed while waiting on the deployment of the Citation and were
subsequently conducted utilizing other seismic recording equipment. As a
result, the crews experienced adverse weather due to the delays and production
was severely hampered. These operations were ultimately suspended in November
1996.
All of these factors: (1) rapid expansion in the United States and Latin
American markets, (2) costly and unsuccessful deployment of a proprietary
recording system and (3) poor operational results in 1996, contributed to rapid
deterioration of the Company's financial condition. Grant explored various
alternatives to improve its capital structure and increase its liquidity.
Discussions were conducted with prospective lenders and investors, including
certain creditors and stockholders of Grant. However, these discussions were
not successful in procuring sufficient capital to adequately fund ongoing
operations. By late 1996, it became apparent to Grant that the only feasible
recourse was to commence a reorganization under bankruptcy court protection.
Since filing its voluntary petition on December 6, 1996, Grant has
continued to operate in the ordinary course of business as
debtor-in-possession. On February 4, 1997, the Court approved a Final Financing
Order authorizing Grant to enter into an agreement to obtain secured
post-petition financing with Foothill Financial Corporation (the "Lender") under
which agreement the Lender continued to advance funds to Grant for its
operations. The Lender agreed to make revolving advances not to exceed
$12,500,000 through June 30, 1997. The advances are not to exceed a borrowing
base equal to a percentage of certain trade accounts receivable and an
overadvance amount. The maximum permitted overadvance was $6,000,000 through
March 30, 1997. The Final Financing Order was amended by order of the Court on
April 9, 1997 to revise the overadvance amount to a constant $7,000,000 and to
extend the maturity date to September 30, 1997. The Final Financing Order also
includes an internal cash management and reporting system containing certain
requirements that Grant operate within an approved budget and restrictions in
the movement of cash from the Company's domestic operations to most foreign
locations. This latter restriction has not adversely affected foreign
operations.
Grant plans to file a plan of reorganization as soon as practicable. The
objective of the plan will be to achieve the highest possible recovery for all
parties at interest, consistent with its resources available for immediate
distribution and with anticipated cash flows. The plan will be structured
around the investor or buyer, if any, who best provides this objective.
The Company's indebtedness at December 31, 1996, totaled $104,336,000 and
included $90,244,000 of pre-petition liabilities subject to Grant's bankruptcy
proceeding. Grant's stockholders' deficit at that date totaled $34,213,000.
The ultimate recovery, if any, by Grant's various parties at interest will
depend on the resolution of the bankruptcy proceeding and the terms of a plan
of reorganization. Although no plan of reorganization has yet been filed, the
significant stockholders' deficit of Grant makes it unlikely that unsecured
creditors will realize full recovery of their claims or that shareholders will
realize any significant recovery.
Since the Petition Date, Grant has conducted discussions with several
parties who have indicated possible interest in funding a plan of
reorganization. On March 14, 1997, Grant announced that it had entered into a
term sheet ("Term Sheet") with Elliott to fund and jointly sponsor a plan of
reorganization. The Term Sheet calls for Elliott to invest up to $30,000,000 in
new equity capital in Grant and to provide $2,000,000 in expanded credit
facilities for the growth of the Company's international operations. In
addition, pending confirmation of the reorganization plan, Elliott has
purchased a $2,500,000 participation in Grant's current post-petition loan
facility with the Lender. The Term Sheet is subject to a number of material
conditions, including but not limited to, execution of a mutually agreeable
definitive agreement and the Court's approval of certain break-up fees and
14
<PAGE> 15
bidding procedures. The Court approved the break-up fee and bidding procedures
on April 9, 1997. Pursuant to the Term Sheet, Grant and Elliott will file a
jointly proposed reorganization plan providing for specific recoveries to
Grant's secured and unsecured creditors. Secured creditors will be paid in
full in a combination of cash and/or new promissory notes. Unsecured creditors
would be able to select from a menu of recovery options that include cash and
stock, promissory notes or credits exchangeable for Grant services performed
after consummation of the plan. In addition, the plan is expected to provide
for a $33,000,000 rights offering, $30,000,000 of which will be guaranteed by
Elliott. Under the rights offering, Grant's unsecured creditors and its
preferred and common shareholders will be granted the right to purchase shares
of Grant's new common stock at the same price per share as Elliott's
investment. The plan is expected to also provide an option for Grant's
employees to participate in the rights offering subject to any required
Securities and Exchange Commission approvals. The shares will be offered to
employees on the same basis as those offered to creditors, shareholders and
Elliott. If the plan is consummated, Elliott will own a minimum of 51% of
Grant's common stock. Consummation of the plan contained in the Term Sheet is
subject to a number of conditions including the vote of Grant's creditors and
shareholders.
The Term Sheet, as modified by the Court's order on April 9, 1997, also
provides that the Elliott proposal is subject to any higher and better offer
which may be received by Grant. Grant has retained Simmons & Company
International as its investment banker to assist it in soliciting other offers.
Other offers are due no later than the date set by the Court for the filing of
objections to the disclosure statement that Grant expects to file in connection
with the Elliott proposal. Grant will evaluate all valid offers, and will
select the proposal which, in its judgment, produces the highest and best
recovery to all parties in interest. Any valid offer must provide for the
immediate purchase of Elliott's participation in Grant's post-petition loan
facility.
RESULTS OF OPERATIONS
Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995
The Company's revenues for the year ended December 31, 1996 increased
$13,527,000 or 15% from $91,996,000 for year ended December 31, 1995 to
$105,523,000 in the most recent year. This was the result of significant
growth in the Company's international operations in Latin America and
Bangladesh, which was offset partially by a reduction in revenues earned in the
United States and Nigeria.
Revenues from United States data acquisition operations decreased 12%
(5,775,000) to $42,074,000. This reduction was the result of several factors
experienced during the fourth quarter of 1996. The filing of the chapter 11
petition on December 6, 1996 and the severe shortage of operating funds
experienced for several weeks prior to the filing caused major disruptions on
many domestic crews and resulted in lower revenues for the quarter. In
addition, the Company's Citation data acquisition recording system, which
operated for two months in the third quarter, experienced lower than
anticipated production performance. And finally, a shallow water transition
zone crew, operating along the coast of Louisiana, was hampered by severe
weather and frequent leased equipment failures. These factors, coupled with
the Company's inability to continue to adequately fund the crew, resulted in a
suspension of operations in November 1996.
Revenues from international operations increased 44% ($19,302,000) to
$63,449,000. These increases were primarily the result of a significant
increase in seismic operations in Latin America and to a lesser extent the Far
East, that were partially offset by a reduction in revenues from Nigeria.
Latin America revenue during 1996 increased 124% ($31,601,000) to
$57,133,000. During this period, the Company operated one crew in Bolivia,
Brazil and Ecuador, two crews in Colombia and four crews in Peru. In the prior
year crew activity consisted of one crew during the fourth quarter in Bolivia,
one in Brazil, one to two crews in Colombia and three crews in Peru. The most
significant increases occurred in Colombia and Peru, where revenue increased
181% ($8,187,000) to $12,722,000 and 100% ($13,771,000) to $27,490,000,
respectively. Due to the significant operating losses incurred in Peru during
1996, each of the four crews previously operating there have been discontinued
and the seismic equipment moved to other Company crews.
15
<PAGE> 16
Revenue from the Far East also increased during 1996 a total of 49%
($1,791,000) to $5,412,000. Crew activity consisted primarily of one crew in
operation for the entire year in Bangladesh. This compares to 1995 when the
Company operated one crew in Indonesia and mobilized the Bangladesh crew in the
fourth quarter. The Company is continuing to operate the Bangladesh crew and
is currently mobilizing a second crew, a shallow water transition zone crew,
with operations scheduled to commence in May, 1997. The Company is also
exploring other opportunities in Indonesia and other surrounding countries.
Revenues from Nigeria decreased 94% ($13,304,000) to $904,000. The Company
had operated three crews during most of 1995 but completed two of these
contracts in the fourth quarter of 1995 and the other in the first quarter of
1996. Although the Company participated in the bid for new contracts, all
three crews remained idle during 1996. Due to the risks involved in operating
in Nigeria, the anticipated high cost of mobilizing a new crew and the limited
resources available to Grant at the current time, a decision to sell the
Nigerian operations was made in December 1996. The sale was approved by the
Bankruptcy court on March 24, 1997 and is expected to be consummated by April
30, 1997.
The Company had no revenues from the Middle East during 1996. Middle East
revenues in 1995 were the result of various rental contracts for equipment and
personnel that expired in July 1995.
Direct operating expense as a percentage of revenue increased to 129% from
75%. This increase was due to higher than anticipated operating costs,
accelerated amortization of prepaid and deferred costs associated with certain
ongoing operations and the writedown of other Company's assets as a result of a
comprehensive review of the Company's operations. The most significant cost
increases were in United States, Peru and Nigeria. In the US, on a transition
zone crew, adverse weather conditions and the repeated breakdown of a leased
recording system combined for an increase in operating costs of approximately
$7,700,000. Also affecting the US was the slow development and late deployment
of Citation. As described above, the system was originally planned to be
completed and operational by early 1996 but was delayed until the summer of
1996. As a result, several contracts that were priced and bid with the system
were performed with other, less well-suited equipment. The result was
significantly higher operating costs of approximately $3,000,000. When the
system was finally deployed in July 1996, the production performance was well
below anticipated levels causing additional operating costs of approximately
$1,400,000. The late deployment and poor performance of the system was the cause
of a general equipment shortage during most of 1996. The shuffling of equipment
between crews resulted in inefficiencies that caused higher than anticipated
operating costs. In Peru, actual operating costs exceeded planned costs by
approximately $22,956,000. The primary cause of the increased Peruvian operating
costs was a combination of modified job parameters which were not adequately
compensated in the contract price and a general lack of effective crew
oversight. In Nigeria, certain operating costs continued despite no crew
activity during most of the year. These operating costs exceeded expectations by
$2,732,000 and were primarily related to idle assets and standby costs incurred
while pursuing new contracts.
Other operating expenses, which consist of general and administrative
expenses at corporate headquarters and in foreign locations, increased as a
percentage of revenues to 17% from 9%. This increase is attributable almost
entirely to allowances and charges incurred at the corporate headquarters that
resulted in an increase in corporate overhead of approximately $6,806,000.
This includes an increase in the reserve for doubtful trade accounts of
approximately $5,511,000 compared to no increase in the reserve for 1995.
Other one time or unusual items include severance costs of $423,000, write off
of Citation startup support costs of $824,000 and legal fees and settlements of
$367,000.
At December 31, 1996, the Company recorded a special charge for asset
impairment of $5,802,000. Management considered this special charge to be
necessary following an assessment of events and changes in circumstances that
clearly indicated that the carrying amount of certain assets was not
recoverable. This charge relates solely to the writedown of the carrying value
of the Citation system as previously discussed.
Depreciation and amortization expense increased 22% to $11,500,000. This
is due to an increased level of depreciable assets. Additions to fixed assets
during 1995 and 1996 were approximately $14,931,000 and $26,038,000,
respectively.
16
<PAGE> 17
Interest expense increased 108% to $7,558,000. The increase was the result
of approximately $1,141,000 of interest paid to finance additional equipment
purchases, a $921,000 increase resulting from higher levels of domestic working
capital borrowings, new financing evidenced by subordinated convertible
debentures caused $589,000 of the increase and $950,000 was due to an increase
in the use of foreign lines of credit.
Other income/(deductions) for 1996 consisted primarily of a $251,000 loss
on foreign exchange and a $198,000 loss on the sale of the Venezuelan and
Nigerian subsidiaries.
The income tax provision in both periods consist of taxes owed to foreign
countries based on local tax laws. No provision for US Federal income taxes was
made in either period as Grant has net operating losses available for
carryforward.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
The Company's consolidated revenues increased 25% ($18,305,000) to
$91,996,000. The revenue growth during 1995 is due to an increase in demand
for Grant's United States seismic services. This increase, however, was offset
slightly by a decrease in revenue from the Company's international operations.
Revenues from the United States data acquisition operations increased 72%
($20,058,000) to $47,849,000. This growth was fueled by strong demand for
Grant's 3D seismic data acquisition services primarily within the Gulf Coast
Region of the United States. In addition, larger and more complex projects
performed during 1995 contributed to the revenue increase. This is evidenced
by the increase in crew months from 46 to 62 and an increase in average monthly
revenue billed of approximately $604,000 to $771,000.
Revenues from international operations decreased 4% to $44,147,000 due to
the shutdown of Middle East operations in August 1994 and reduced activity in
the Far East and Nigeria during 1995. These decreases were offset by a
significant increase in Latin American operations during the 1995 fiscal year.
Middle East operations in 1994 consisted of one shallow water crew in Abu Dhabi
which was demobilized in August of that year. No revenues from seismic
services were generated in the Middle East during 1995. Middle East revenues
for 1995 resulted only from equipment rental contracts with local seismic
contractors. A decision to close the Abu Dhabi office was made in December
1994 and completed by mid-August 1995.
Revenues in the Far East were down 40% in 1995 to $3,621,000 due primarily
to the decrease in demand for the Company's services in the region and the size
of awarded contracts. The Company operated two crews throughout the majority
of 1994 with one crew operating on a sizable contract. During 1995, the
Company again operated two crews; however, the contracted jobs were of a
shorter duration and were not of the same value. Bangladesh operations were
temporarily suspended due to political unrest in that country. Operations were
resumed shortly thereafter, without any significant impact.
Nigerian revenues decreased 8% ($1,292,000) to $14,208,000 for fiscal year
1995. At October 31, 1995, two of the Company's crews had completed all
contractual backlog. The Company continued to operate one crew in the Niger
Delta; however, this crew completed its contractual backlog in February 1996
and was demobilized.
Revenues from Latin America increased 63% to $25,532,000. This increase
was primarily the result of mobilizing three seismic crews into Peru during
March, April and May of 1995. These crews had operated in Bolivia and Colombia
in 1994 but were moved into Peru during the first and second quarter of 1995 to
accommodate market demand.
Direct operating expenses as a percentage of revenue increased to 75% from
72%. The increase is a result of higher direct operating expenses in Nigeria.
Operating efficiencies achieved during 1994 were not repeated during 1995 due
to lack of available funds, equipment shortages and difficult terrain. The
overall dollar increase was the result of increased seismic activity in the
United States and Latin America.
17
<PAGE> 18
Other operating expenses, which consist of general and administrative
expenses at the corporate headquarters and in the foreign locations, decreased
as a percentage of revenues to 9% from 11%. However, the total of Other
Operating Expense increased by 9% to $8,527,000. Charges related to
termination of a proposal to reclassify Grant's preferred stock and increased
overhead costs in Peru and the United States contributed to this increase.
Depreciation and amortization expense decreased 22% to $9,424,000. This
decrease can be attributed to a lower level of depreciable assets resulting
from the special charge for asset impairment recorded in December 1994.
Interest expense increased 2% to $3,635,000. Demobilization activities for
two crews in Nigeria coupled with the lack of necessary, immediate funds
contributed to the increased usage of foreign lines of credit in that region
during the third and fourth quarter of 1995.
Other income/(deductions) for 1995 consisted primarily of a $1,247,000 gain
on an insurance settlement and a gain on the sale of miscellaneous fixed assets
of $212,000. Other income (deductions) for fiscal year 1994 was the result of
an approximately $664,000 recovery of a bad debt and a non-recurring royalty
income item of $500,000.
The income tax provision in both periods consisted of taxes owed to foreign
countries based on local tax laws. No provision for U.S. Federal income taxes
was made in either period as Grant currently has net operating losses available
for carryforward.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
For more than a year prior to filing for chapter 11, the Company as a whole,
and Grant in particular, experienced chronic liquidity problems. By the second
half of 1996 these problems had become severe. During this period, payments were
delayed to trade creditors, holders of Grant's secured and unsecured note
obligations and to lessors of capital equipment. In addition, dividends on
Grant's preferred stock had been omitted since December, 1992. Further, a lack
of funding created delays in the startup of certain operations and seriously
affected the efficiency of other ongoing projects. Exacerbating the crisis
during the second half of 1996 were significant and continuing cash flow losses
on certain crews operating in Peru and in the United States coupled with the
continuation of investment in the Citation system.
In an effort to resolve the liquidity crisis, Grant sought to obtain loans
and/or equity contributions from a number of sources. In connection with its
attempt to improve its liquidity and financial condition, Grant entered into
arrangements with a variety of lenders and investors pursuant to which loans
totaling approximately $11,000,000 (of which, about $6,000,000 was unsecured
debt) were advanced and an additional $1,573,000 of preferred stock was sold.
However, this financing was not sufficient to offset the Company's continuing
need for liquidity and additional required financing was not available. As a
result, Grant was left with no alternative except to file the chapter 11
proceeding in December 1996.
Immediately prior to and following the chapter 11 filing, the Company took
a number of steps to substantially reduce its cash outflows. The most
significant of these were the renegotiation of certain contracts in Peru and
the subsequent withdrawal of all equipment and personnel from that country, the
cessation of certain transition zone operations in the United States and a
suspension of all work on the Citation system.
Since filing for chapter 11, the Company's primary sources of liquidity are
its cash, cash flow from operations, advances from customers, available lines
of credit in a certain foreign location and Grant's postpetition working
capital line of credit.
At December 31, 1996, the Company had cash of $6,772,000, substantially all
of which was held by the Company's foreign operations and represented contract
prepayments by customers. This cash balance has been used during the period
following the chapter 11 filing in support of the specific operations for which
the prepayments had been received. In addition, at December 31, 1996, Grant's
Brazilian subsidiary had unused lines of credit aggregating approximately
$150,000 which remain available for use in supporting operations in that
location. On the Petition Date, Grant and the Lender entered into a Court
approved interim financing order which
18
<PAGE> 19
provided for the Lender to continue to make certain working capital advances to
Grant for its United States and certain foreign operations. On February 4,
1997, this interim financing order became final and such final order was
thereafter amended on April 9, 1997. Under the amended financing order, the
Lender has made available the loans as discussed earlier in this Management's
Discussion. As of April 14, 1997, Grant had borrowed $11,500,000 under the
amended financing and there was $1,000,000 available for borrowing.
For the three year period ended December 31, 1996, the Company's capital
expenditures totaled approximately $51,000,000, including $26,000,000 for the
most recent year. The Company believes that its capital spending requirements
will be approximately $3,000,000 in 1997 and that such amount will be adequate
to support its operations.
Grant believes that its available liquidity is sufficient to support its
operations and capital spending for the near term. However, the Company's
liquidity remains and is expected to remain very restricted for the foreseeable
future. Any material reduction in demand for the Company's services or any
significant operating losses would adversely affect Grant's ability to complete
any proposed plan of reorganization and would likely jeopardize the Company's
ability to continue to fund ongoing operations.
OTHER
Foreign Exchange Gains and Losses
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 periodically enters into local currency debt of a foreign
subsidiary to pay expenses incurred locally. Foreign currency transaction
gains and losses resulting from these arrangements are included in Other
income/(deductions). Presently, the Company does not use derivatives or
forward foreign exchange hedging contracts.
The Company conducts a substantial portion of its business in currencies
other than the U.S. dollar, particularly various Latin American currencies, and
its operations are subject to fluctuations in foreign currency exchange rates.
The Company's international contracts typically require payment in both U.S.
dollars and local currencies. The payments in local currencies are typically
indexed to inflationary tables and are used for local expenses. The Company's
operating results were negatively impacted by foreign exchange losses of
approximately $251,000 during 1996. Foreign exchange gains positively impacted
operating results for 1995 and 1994 by approximately $102,000 and $121,000,
respectively.
[Recent Accounting Pronouncements]
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128). SFAS
128 specifies the compilation, presentation and disclosure requirements for
earnings per share for entities with publicly held common stock or potential
common stock. The requirements of this statement will be effective for fiscal
years beginning after December 15, 1997. Management does not believe that the
implementation of SFAS 128 will have a material effect on its financial
statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the consolidated financial statements, the report
thereon, the notes thereto and financial statement schedule commencing on page
F-1 of this Form 10-K, which consolidated financial statements, report, notes
and schedule are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
19
<PAGE> 20
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The names of the directors and certain information with respect to each
are set forth below. The term of office of each person elected as a director
will continue until Grant's next Annual Meeting of Stockholders or until his
successor has been elected and qualified.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION SINCE
---------------- --- -------------------- ---------
<S> <C> <C> <C>
J. Kelly Elliott . . . . 66 Mr. Elliott was re-elected Chairman of the Board 1996
on November 20,1996. He previously served as
Chairman of the Board of Grant from June 1993
through November, 1995. Mr. Elliott has served
as Chairman, President, and Chief Executive
Officer of Sigma Electronics, Inc. from 1989 to
present. Currently he serves as a member of the
Boards of Directors of Tescorp, Inc., Oil States
Industries, Incorporated and XL Systems Inc.
He is also Chairman, President and CEO of
Omnicomp Graphics Corporation, Chairman of
Seaboard-Arval Corporation and Consultant to
the Board of Directors of Weatherford Interra.
Harvey D. Attra . . . . . 66 Served as Acting Chairman of the Board from 1993
November 4, 1996 through November 20, 1996.
Special Advisor to the United States Department of
Energy from 1990 through 1995. Mr. Attra served
as President/General Manager of Esso Egypt and
Esso Suez, Inc. from 1985 until 1989.
Orville D. Gaither, Sr. . 69 Chairman of the Board and Chief Executive Officer 1993
of Gaither Petroleum Corporation since 1991. Mr.
Gaither served as President of the Africa/Middle
East Region of Amoco Production Company from
1979 until 1991. Mr. Gaither serves as a member
of the Board of Directors of Energy Services Company,
International.
Donald G. Russell . . . . 65 Mr. Russell rejoined Grant's Board of Directors in 1997
February 1997. He previously served on the Company's
Board from July 1993 through November 1995. He
serves as Chairman of the Board and Chief Executive
Officer of Sonat Exploration Company since 1988.
</TABLE>
20
<PAGE> 21
DIRECTORS (CONTINUED)
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION SINCE
---------------- --- -------------------- ---------
<S> <C> <C> <C> <C>
J. Michael Adcock(1) . . 48 General Counsel, Ameribank Corporation. Mr. Adcock 1994
served in management positions with Hadson Corporation
from 1983 to 1993, including, Chief Executive Officer,
President and Chief Operating Officer and General
Counsel. He currently serves as a member of the
Board of Directors of United Oklahoma Bankshares,
Inc. In October 1992, Hadson Corporation filed a
Chapter 11 bankruptcy petition and plan of reorgani-
zation in the Western District Court of Oklahoma. The
bankruptcy court confirmed the plan in November 1992
and the plan was consummated in December 1992.
Douglas K. Stewart(1) . . 45 President of Stewart & Smith, Inc. for the last nine years. 1994
Prior to founding Stewart & Smith, Mr. Stewart worked
at First Boston Corporation and the Securities and
Exchange Commission.
</TABLE>
____________________
(1) Elected pursuant to the terms of Grant's $2.4375 Convertible Exchangeable
Preferred Stock (the "$2.4375 Preferred Stock"). In the event that the
dividends on the $2.4375 Preferred Stock are in arrears in an amount equal
to at least six quarterly dividends, the holders of the $2.4375 Preferred
Stock are entitled to elect two additional directors to Grant's Board of
Directors.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors of Grant held a total of twenty-five meetings during
the fiscal year ended December 31, 1996. All of Directors attended at least 75%
of all Board meetings during 1996. Gordon W. Ringoen and William C. Macdonald
resigned during 1996. Mr. George W. Tilley's service on the Board of Directors
terminated on November 4, 1996.
Through August 8, 1996, the Audit Committee of the Board of Directors
consisted of Messrs. Attra, Adcock and Macdonald. Effective August 1996, the
Audit Committee consisted of Messrs. Attra, Adcock and Gaither. Mr. Macdonald
resigned from the Audit Committee effective August 1996. The Audit Committee
considers engagement of Grant's independent auditors, and is primarily
responsible for approving the services performed by the independent auditors
and for reviewing and evaluating the Company's accounting principles and its
system of internal accounting controls. During the fiscal year 1996, the Audit
Committee met five times. All members of the Committee attended at least 75% of
the Committee's meetings.
Through August 8, 1996, the Compensation Committee of the Board of
Directors consisted of Messrs. Attra, Adcock and Macdonald. Effective August
1996, the Compensation Committee consists of Messrs. Gaither, Attra and Adcock.
The Compensation Committee reviews and approves the executive compensation
policy and makes recommendations concerning the employee benefit policies. The
Compensation Committee, with all Committee members present, met four times
during the fiscal year 1996.
The Board of Directors has no Nominating Committee nor a committee
performing the functions of a Nominating Committee.
21
<PAGE> 22
EXECUTIVE OFFICERS
The names of the current and former executive officers of Grant and
certain information with respect to each are set forth below. All Executive
Officers are elected annually by the Board of Directors to serve at the
discretion of the Board of Directors or until their successors shall have been
qualified or until their resignation or removal. None of the current executive
officers of Grant, other than J. Kelly Elliott, was employed by Grant at
December 31, 1996. As such, this Form 10-K includes a section on Former
Executive Officers. The Executive Officer Compensation section which contains
information as of December 31, 1996 with respect to the Executive Officers of
Grant, contains information on Former Executive Officers. The Board of
Directors does not presently anticipate any material changes in the manner in
which Grant compensates its executive officers. The current executive officers
of Grant are:
CURRENT EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION AND BACKGROUND INFORMATION
---- --- -----------------------------------
<S> <C> <C>
J. Kelly Elliott(1) . . . . 66 Chairman of the Board and Chief Executive Officer.
Larry E. Lenig, Jr. . . . . 48 President and Chief Operating Officer. Mr. Lenig was
appointed President and Chief Operating Officer in
January 1997. Mr. Lenig was previously engaged
in private consulting to a variety of energy and energy
services companies and financial institutions. He
served as President Chief Operating Officer
of Digicon Inc. from 1989 until 1993.
Michael P. Keirnan . . . . 45 Vice President and Chief Financial Officer. Mr. Keirnan
was appointed Vice President and Chief Financial Officer
in February 1997. He served as Manager of Treasury
Operations of Gundle/SLT Environmental from March 1996
until February 1997. Since 1986, Mr. Keirnan has served
in many senior accounting management positions at Grant,
including Controller/Treasurer 1993 through March 1996.
</TABLE>
-------------
(1) For information regarding Mr. Elliott, see "Directors" above.
22
<PAGE> 23
FORMER EXECUTIVE OFFICERS
The individuals set forth below served as the executive officers of Grant
at various dates during 1996 and terminated their employment with Grant
during 1996 as indicated.
<TABLE>
<CAPTION>
NAME AGE POSITION AND BACKGROUND INFORMATION
---- --- -----------------------------------
<S> <C> <C> <C>
Thomas B. Portwood, Jr. (1) 72 Mr. Portwood was appointed President and Chief Executive Officer of
Grant on November 12, 1996. He currently serves as a business
consultant and broker specializing in the international seismic
industry.
Gordon W. Ringoen(2) . . . 58 Mr. Ringoen was appointed Chairman of the Board of Grant on January 9,
1996. He also serves as Chairman of the Board of G. W. Ringoen and
Co., an Investment Advisor, and Chinook Concert Broadcasting.
George W. Tilley(3) . . . . 60 Mr. Tilley was President and Chief Executive Officer of Grant from 1993
until November 4, 1996. He was appointed to Grant's Board of Directors
in October 1994 and served as interim Chairman of the Board from August
8, 1996 through November 4, 1996. Mr. Tilley served as President and
Chief Executive Officer of Halliburton Geophysical Services from 1990
until 1992 and Vice President of Halliburton Geophysical Services from
1988 until 1990.
William B. Cleveland(4) . . 40 Chief Financial Officer, Vice President of Finance, Secretary and
Treasurer. Mr. Cleveland served in various positions with Halliburton
Geophysical Services from 1976 through 1993, the most recent being
Manager of International Manufacturing Accounting and Special Projects
for Halliburton Energy Services.
</TABLE>
------------------
(1) Mr. Portwood resigned from Grant effective December 4, 1996.
(2) Mr. Ringoen resigned from Grant effective August 8, 1996.
(3) Mr. Tilley's service as President and Chief Executive Officer
terminated on November 4, 1996.
(4) Mr. Cleveland resigned from Grant effective December 31, 1996.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Directors and Executive Officers, and persons who own
more than 10% of a registered class of the Company's equity securities, to file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission (the "SEC"). Directors, Executive Officers
and greater than 10% beneficial owners are required by SEC regulation to
furnish Grant with copies of all Section 16(a) Forms 3, 4 and 5 they file.
Based solely upon a review of such Forms 3, 4 and 5 and any amendments thereto
furnished to Grant, and written representations from certain reporting persons
that no Forms 5 were required, Grant believes that all such applicable filing
requirements were complied with by each of the Executive Officers, Directors
and greater than 10% shareholders, except for one report relating to an initial
Form 3 filing by Mr. Elliott which has now been filed. Mr. Elliott does not
own any securities of Grant.
23
<PAGE> 24
ITEM 11. EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------------------- ---------------------------
Name and Other Annual Awards All Other
Principal Compensation Options/SARs Compensation
Position Year Salary ($) Bonus ($) ($) (#) ($)
(a) (b) (c) (d) (e)(5) (g)(6) (I)(7)
----------------- ----- ------------ --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
J. Kelly Elliott(1) . . 1996 60,000 2,700
Chairman of the Board and 1995 60,000 45,000 50,000 1,800
Chief Executive Officer 1994 60,000 45,000 25,000 1,800
Thomas B. Portwood, Jr.(2) 1996 10,000
President and
Chief Executive Officer
George W. Tilley(3) . . 1996 175,008 225,000 6,568
Chief Executive Officer 1995 164,588 100,000 50,000 4,743
1994 150,000 60,000 25,000 2,164
William B. Cleveland(4) 1996 106,973 125,000 1,800
Chief Financial Officer 1995 92,650 35,000 10,000 2,772
</TABLE>
___________________________
(1) Mr. Elliott was elected Chairman of the Board in June 1993 until November
1995 and was elected Chairman of the Board Executive Officer December 4,
1996.
(2) Mr. Portwood served as Chief Executive Officer from November 12, 1996
through December 4, 1996. Compensation for his services are included in the
Pre-petition liabilities subject to chapter 11 case.
(3) Mr. Tilley's services as President and Chief Executive Officer terminated
on November 4, 1996.
(4) Mr. Cleveland resigned as Chief Financial Officer on December 31, 1996.
(5) No named Executive Officer received perquisites or other personal benefits
in any of the Company's three most recent years for which the aggregate
amount exceeded the lesser of either $50,000 or 10% of his total annual
salary and bonus for such year.
(6) All unexercised stock options previously awarded to Messrs. Tilley and
Cleveland have been canceled.
(7) Amounts reflect matching contributions to Grant's Savings plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------
Potential Realizable Value at
% of Total Assumed Annual Rates
Options/SARs of Stock Price Appreciation
Granted to Exercise or For Option Term (1)
Options/SARs Employees in Base Price -----------------------------
NAME Granted (#) Fiscal Year ($/SH) Expiration Date 5%($) 10% ($)
(a) (b) (c) (d) (e) (f) (g)
------- ----------- ----------- ----------- --------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
George W. Tilley(1) 100,000 25% 2.69 1/9/2006 0 0
125,000 32% 2.22 8/15/2006 0 0
William B. Cleveland(1) 50,000 13% 2.69 1/9/2006 0 0
75,000 19% 2.22 8/15/2006 0 0
</TABLE>
(1) All unexercised stock options previously awarded to Messrs. Tilley and
Cleveland have been canceled.
24
<PAGE> 25
BOARD OF DIRECTORS COMPENSATION
Effective January 1, 1994, employee and non-employee Directors of Grant,
including the Chairman of the Board, began participating in Grant's Amended
1989 Long-Term Incentive Plan which allows issuance of restricted stock of
Grant in lieu of part or all of the Directors' fees. The shares of restricted
stock will be automatically issued on the first day of each calendar quarter
following a calendar quarter of service. The fair market value of the
restricted stock will be the closing price of the Common Stock on the last
trading day of the preceding calendar quarter. During 1996, Directors of Grant
were granted 40,055 shares, with a then current market value of $127,000, of
restricted stock of Grant. Effective January 1, 1997, the compensation for
non-employee directors was changed to $1,000 per month. Employee directors are
not separately compensated for service on the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consisted of Messrs. Attra, Adcock and
Macdonald. Effective August 1996, after the resignation of Mr. Macdonald, Mr.
Gaither joined the Compensation Committee. The Committee serves the role of
setting the executive compensation philosophy and establishing compensation
levels for executive officers.
Grant had no interlocking relationships during 1996 with respect to its
Compensation Committee, the members of its Board of Directors or its Executive
Officers.
EMPLOYMENT CONTRACTS
In January 1997, Grant entered into a one-year agreement with Larry E.
Lenig, Jr. to serve as President and Chief Operating Officer, which provides
for a minimum base salary of $120,000, incentive compensation equal to $5,000
monthly until Grant's plan of reorganization is confirmed by the Court, and,
upon confirmation of a plan of reorganization, an additional one-time
compensation, not to exceed $300,000, based on the "Transaction Value," as
defined in the employment agreement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overall Compensation Philosophy and Objectives
The primary objective of Grant's executive compensation program is to
attract and retain outstanding executive talent, while concurrently motivating
these individuals to maximize stockholder value. Grant strives to accomplish
this goal by basing total compensation philosophy on the following fundamental
directives:
# Hire, retain, develop, and reward highly talented and
performance-oriented executives;
# Emphasize pay for performance by placing a significant portion of
executive compensation "at risk".
# Encourage employee stock ownership to further align the long-term
interests of the executives with the long-term interests of the
stockholders; and
# Integrate short- and long-term operating, financial, and strategic
objectives by establishing compensation plans which reward executives
for maintaining an appropriate balance.
The next section describes Grant's programs by element of compensation and
discusses how each component relates to Grant's overall compensation
philosophy. All plans mentioned pertain to the executive officer group.
25
<PAGE> 26
In reviewing this information, reference is often made to the use of
competitive market data as a criteria for establishing targeted compensation
levels. It should be noted that the market data are based on general industry
norms (i.e., market median) for companies our size. Grant did not consider
market data for the peer comparison shown in the performance graph since talent
is recruited from a broader market.
Base Salary
The objective of Grant's base salary program is to provide base pay to
executives which approximates competitive market levels. Periodic reviews of
our executive pay levels are made to assure consistency with the external
market.
In determining appropriate salary levels by individual position, Grant
looks not only at external pay practices, but also at individual performance,
level of corporate responsibility, and job experience. Accordingly, base salary
levels by individual incumbent may vary from the indicated market levels once
adjusted for these additional factors.
The base salary program serves as an effective tool to attract and retain
top quality senior management. By considering factors such as individual
performance in determining annual increases, the base salary program also
serves to motivate executives toward exemplary performance standards.
Annual Incentives
Annual Incentive (bonus) opportunities are made available to the executive
officer group and as rewards for noteworthy performance at corporate, business
unit, and individual levels. Grant's 1996 Management Incentive Plan (the
"Management Incentive Plan") was focused on accomplishing short-term to
intermediate-term financial and operating goals. The Management Incentive Plan
was also designed to emphasize a philosophy of delivering compensation for
exceptional levels of performance.
In order to gauge performance, the Compensation Committee must establish
and approve the criterion and specific financial targets to be used in the
Management Incentive Plan each year. In 1996, the Management Incentive Plan
incorporated both earnings per share and cash flow relative to budget as the
measures for setting incentive objectives at the corporate level. Net income
applicable to Common Stock is used to gauge performance at the business unit
level. Individual performance was also assessed using discretionary measures
to evaluate each participant's contribution to the overall success of the
Company.
Target award opportunities varied by individual position and were
expressed as a percent of base salary. The amount a particular executive could
earn was directly dependent on the individual's position, responsibility, and
ability to impact the Company's financial success. In order for any individual
to be eligible for award opportunities under the Management Incentive Plan, the
Company was required to achieve a threshold (minimum) cash flow performance
level which, if attained, served as a "trigger" to activate the plan. In 1996,
the Company did not reach this required level of performance and, hence, no
bonuses were awarded under the Management Incentive Plan.
Long-Term Incentives
Grant maintains the Amended 1989 Long-Term Incentive Plan (the "Incentive
Plan") which is designed to focus executive efforts on long-term goals and to
maximize total return to stockholders. Long-term incentive vehicles include
stock options, stock appreciation rights and restricted stock.
Stock options. Stock options align the interests of employees and
stockholders by providing value to the executive through stock price
appreciation only. To foster a long-term perspective, options granted under
the Incentive Plan are not fully exercisable until four years from the date of
grant, and awards cannot be made at an option price less than fair market value
on the date of grant. All options have a ten year term before expiration.
26
<PAGE> 27
Stock option awards are made on a periodic basis at the discretion of
the Compensation Committee. Stock option grant sizes, as well as appropriate
overall levels of shares reserved for such plans, are established by regularly
examining competitive market practices. The exact number of shares actually
granted to a particular participant is also based on the Grant's financial
success, its future business plans, and the individual's position and level of
responsibility.
During 1996, the Compensation Committee granted stock options to the
following executive officers: Messrs. Tilley and Cleveland were awarded options
to acquire 225,000 and 125,000 shares of common stock, respectively. These and
all other unexercised stock options awarded to Messrs. Tilley and Cleveland have
been canceled.
Under the provisions of the Incentive Plan, the Compensation Committee
maintains the ability to grant stock appreciation rights ("SARs"). SARs are
similar to stock options in the sense that they provide value to the executive
equivalent to the amount the stock price appreciates from the date of grant.
Recent changes in federal regulations regarding insider trading and new rules
allowing for broker-financed cashless option exercises have significantly
reduced the usage of SARs. The Company made no SAR grants in 1996.
Restricted stock. Restricted stock awards support the overall
compensation philosophy by delivering increased pay for enhanced performance,
aligning management interests with stockholder interests through ownership of
stock, and encouraging retention of quality executives during the restriction
period. Restricted stock represents common stock of Grant subject to
restrictions on transfer of ownership. Under the Incentive Plan, restricted
stock may be granted periodically as determined by the Compensation Committee.
No restricted stock awards were made to employees in 1995; however, restricted
stock awards were made to Grant's employee and non-employee Directors, including
the Chairman of the Board, in lieu of the Directors' fees.
Benefits and Perquisites
In addition to base salary, annual incentives and long-term incentives,
Grant provides executive benefits and perquisites to key members of senior
management. These include principally monthly automobile allowances and club
memberships. These elements of pay are not intended to be tied to performance,
rather, they serve as part of a competitive total compensation plan.
1996 Chief Executive Officer ("CEO") Pay. As previously described,
several factors are considered in developing an executive compensation
package. For the CEO, these factors include competitive pay practices,
performance level, experience, achievement of strategic goals, and
financial success of the Company. Specific actions taken by the
Compensation Committee regarding the CEO's compensation are summarized
below.
o Base Salary. Mr. Tilley's base salary for the fiscal year 1996 was
approximately $175,000.
o Severance Pay. Upon his termination from Grant, on November 4,
1996, Mr. Tilley asserted that certain severance compensation was
payable to him. Grant disputes that any severance is payable to
Mr. Tilley. No severance has been paid to Mr. Tilley and any such
compensation, if ordered by the Court to be paid, would be a
pre-petition unsecured liability subject to the chapter 11 case.
o Annual Incentives. Mr. Tilley did not receive an annual incentive
award in 1996.
o Long-Term Incentives. Mr. Tilley was awarded stock options to
acquire 225,000 shares of Common Stock during 1996. Upon his
termination from Grant, these and all other unexercised options
were canceled. Awards are made periodically at the discretion of
the Compensation Committee. Size and frequency of awards is
determined by competitive practice, financial success, future
business plans and individual level of responsibility as determined
subjectively by the Compensation Committee.
27
<PAGE> 28
o $1 Million Pay Deductibility Cap. In 1993, the U.S. Treasury
Department issued regulations that prevent publicly traded
companies from receiving a tax deduction on compensation paid to
executive officers in excess of $1 million. At this time, Grant's
executive officer compensation levels do not exceed the $1 million
pay limit and will most likely not be affected by the regulations
in the near future. Nonetheless, the Compensation Committee of the
Board of Directors plans to review the final regulations and, if
appropriate, take necessary actions in the future to avoid losing
any tax deductions related to compensation.
Conclusion
The preceding report has been compiled and presented over the names of the
Compensation Committee of the Board of Directors of Grant.
Compensation Committee Members
Harvey D. Attra
J. Michael Adcock
Orville D. Gaither, Sr.
Performance Graph
28
<PAGE> 29
PERFORMANCE GRAPH
The performance graph shown below indicates the shareholder return
on $100 invested in Grant's Common Stock from December 1991. The
performance of Grant's Common Stock is compared with shareholder returns
based on (i) the Standard & Poor's 500 Stock Index and (ii) an industry
peer group index(1). All shareholder returns are calculated assuming the
reinvestment of dividend payments.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
- ------------------------------FISCAL YEAR ENDING--------------------------------
COMPANY 1991 1992 1993 1994 1995 1996
GRANT GEOPHYSICAL 100 36.49 14.87 25.68 27.03 .97
PEER GROUP 100 109.45 151.06 247.71 528.73 423.49
BROAD MARKET 100 107.64 118.50 120.06 165.18 203.11
- -----------------------
(1) The industry peer group, reflected for all years in the performance graph
above, consists of the following companies:
Dawson Geophysical Company
Veritas DGC, Inc.
Input/Output, Inc.
Seitel, Inc.
Universal Seismic Associates, Inc.
29
<PAGE> 30
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number
of shares of common stock owned beneficially as of April 11, 1997 by: (i) each
person known to Grant to own more than 5% of any class of Grant's voting
securities; (ii) each Director and Executive Officers of Grant; and (iii) all
Directors and Officers as a group, including persons deemed to share voting and
investment power.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP(1) OF TOTAL
------------------- --------- --------
<S> <C> <C>
J. Michael Adcock(2) . . . . . . . . . . . . . . 12,494 *
128 N. Broadway
Shawnee, Oklahoma 74801
Harvey D. Attra . . . . . . . . . . . . . . . . . 18,487 *
17 Lords Highway
Weston, Connecticut 06883
J. Kelly Elliott . . . . . . . . . . . . . . . . *
Grant Geophysical, Inc.
16850 Park Row
Houston, Texas 77084
Orville D. Gaither, Sr. . . . . . . . . . . . . . 32,260 *
Gaither Petroleum Corporation
1136 North Kirkwood
Houston, Texas 77043
Larry E. Lenig, Jr. . . . . . . . . . . . . . . . *
Grant Geophysical, Inc.
16850 Park Row
Houston, Texas 77084
Michael P. Keirnan . . . . . . . . . . . . . . . *
Grant Geophysical, Inc.
16850 Park Row
Houston, Texas 77084
Donald G. Russell . . . . . . . . . . . . . . . . *
Sonat Exploration Co.
4 Greenway Plaza
Houston, Texas 77046
Douglas K. Stewart . . . . . . . . . . . . . . . 12,194 *
c/o Stewart & Smith, Inc.
1225 23rd St., N.W.
Ground Floor
Washington, D.C. 20037
Elliott Associates, L.P.(3) . . . . . . . . . . . 1,141,271 5.0%
712 Fifth Avenue, 36th Floor
New York, New York 10019
Liverpool Limited Partners(3) . . . . . . . . . . 772,740 3.5%
Cedar House
41 Cedar Avenue
Hamilton H.M. 12
Bermuda
U.S. Bancorp (4) . . . . . . . . . . . . . . . . 1,251,200 5.7%
111 S.W. Fifth Avenue
Portland, Oregon 97204
All Directors and Officers as a Group (8 persons) 75,435 *
</TABLE>
- -------------------------
*Less than one percent.
30
<PAGE> 31
(1) Unless otherwise indicated, all shares of common stock are held directly
with sole voting and investment powers. Amounts indicated do not include
shares subject to options that are not exercisable within 60 days after
March 25, 1997. There is a significant likelihood that any plan of
reorganization will cancellation of Grant's common and preferred stock.
(2) Includes (a) 300 shares of Common stock owned by his wife and (b) 273
shares of Common stock obtainable upon conversion of 100 shares of $2.4375
Preferred stock owned by his wife.
(3) The information shown above was obtained from the Schedule 13D (Amendment
No. 11) dated August 30, 1996, as filed by Elliott Associates, L.P.
("Elliott") with the Securities and Exchange Commission (the "Commission").
According to the 13D, Elliott has sole voting and dispositive powers with
respect to 1,141,271 shares of Common stock which represents the number of
shares of Common stock obtainable upon conversion of 415,564 shares of
$2.4375 Preferred stock. Does not include 772,740 shares of Common stock
obtainable upon conversion of 282,050 shares of $2.4375 Preferred stock
beneficially owned by an affiliate of Elliott, Liverpool Limited Partners
("Liverpool").
(4) The information shown above was obtained from the Schedule 13G dated
February 15, 1996, as filed with the Commission by U.S. Bancorp ("Bancorp")
and Qualivest Capital Management, Inc. ("Qualivest"). Bancorp is a Parent
Holding Company of Qualivest. According to the 13G, Bancorp has the sole
voting power with respect to 746,400 shares of Common stock, sole
dispositive power with respect to 1,163,200 shares of Common stock and
shared power to dispose of 25,000 shares of Common stock. Qualivest is the
beneficial owner of 383,200 shares of Common stock as a result of acting as
investment advisor to Qualivest Funds. The Trust Group of Bancorp holds
868,000 shares of Common stock.
CHANGE IN CONTROL
On March 14, 1997, Grant entered into a term sheet (the "Term Sheet") with
Elliott to fund and jointly sponsor a plan of reorganization. The letter of
intent calls for Elliott to invest up to $30,000,000 in new equity capital in
the Company and to provide $2,000,000 in expanded credit facilities. In
addition, pending confirmation of a reorganization plan, Elliott has purchased a
participation of $2,500,000 in loans made by Grant's existing working capital
lender. The letter of intent is subject to the negotiation and execution of
definitive agreements and to the approval by the Bankruptcy Court. A motion to
approve the Term Sheet was approved by the Court April 9, 1997. Pursuant to the
plan as presently proposed to be filed, secured creditors will be paid in full
in a combination of cash and/or new promissory notes. Unsecured creditors would
be able to select from a menu of recovery options that include cash and stock,
promissory notes or credits exchangeable for the Company's services performed
after consummation of the plan. In addition, the plan is expected to provide for
a $33,000,000 rights offering, $30,000,000 of which will be guaranteed by
Elliott. Under the rights offering, Grant's unsecured creditors and its
preferred and common shareholders are expected to be granted the right to
purchase shares of Grant's new common stock at the same price per share as
Elliott's investment. The plan is expected to provide an option for the
Company's employees to participate in the rights offering subject to any
required Securities and Exchange Commission approvals. The shares will be
offered to employees on the same basis as those offered to creditors,
shareholders and Elliott. If the plan is consummated, Elliott will own a minimum
of 51% of Grant's common stock. Consummation of the plan contained in the Term
Sheet is subject to a number of conditions including the vote of Grant's
creditors and shareholders.
The Term Sheet, as modified by the Court's order on April 9, 1997, also
provides that the Elliott proposal is subject to any higher and better offer
which may be received by Grant. Grant has retained Simmons & Company
International as its investment banker to assist it in soliciting other offers.
Other offers are due no later than the date set by the Court for the filing of
objections to the disclosure statement that Grant expects to file in connection
with the Elliott proposal. Grant will evaluate all valid offers, and will
select the proposal which, in its judgment, produces the highest and best
recovery to all parties in interest. Any valid offer must provide for the
immediate purchase of Elliott's participation in Grant's post-petition loan
facility.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1996, Grant entered into an exclusive agreement with Macdonald &
King, Incorporated, a financial services firm, for the purpose of assisting
Grant in securing additional sources of financing including equipment financing
and short-and long-term financing. Mr. William C. Macdonald, a former
director of Grant, is the Chairman of the Board and sole shareholder of
Macdonald & King, Incorporated.
31
<PAGE> 32
On April 17, 1995, Grant negotiated a $1,000,000 short-term credit facility
with Elliott, a holder of more than 5% of Grant's preferred stock. In June
1995, the loan was increased to $1,750,000 and the expiration date was extended
to February 20, 1996. The loan was repaid by Grant on the expiration date.
On March 20, 1996, Grant issued 143,000 shares of the Company's preferred
stock to Westgate International, L.P. ("Westgate"), an affiliate of Elliott,
for an aggregate purchase price of $1,573,000. Westgate subsequently sold all
of its shares of Grant's preferred stock to Liverpool.
In November 1996, Grant entered into an agreement with Westgate and Elliott
under which an aggregate of $3,149,000 was borrowed for working capital
purposes. The borrowings are in the form of unsecured promissory notes and
are outstanding at December 31, 1996 and are classified in pre-petition
liabilities subject to chapter 11 case.
CHANGE IN CONTROL
On March 14, 1997, Grant entered into a term sheet (the "Term Sheet") with
Elliott to fund and jointly sponsor a plan of reorganization. The letter of
intent calls for Elliott to invest up to $30,000,000 in new equity capital in
the Company and to provide $2,000,000 in expanded credit facilities. In
addition, pending confirmation of a reorganization plan, Elliott has purchased a
participation of $2,500,000 in loans made by Grant's existing working capital
lender. The letter of intent is subject to the negotiation and execution of
definitive agreements and to the approval by the Bankruptcy Court. A motion to
approve the Term Sheet was approved by the Court April 9, 1997. Pursuant to the
plan as presently proposed to be filed, secured creditors will be paid in full
in a combination of cash and/or new promissory notes. Unsecured creditors would
be able to select from a menu of recovery options that include cash and stock,
promissory notes or credits exchangeable for the Company's services performed
after consummation of the plan. In addition, the plan is expected to provide
for a $33,000,000 rights offering, $30,000,000 of which will be guaranteed by
Elliott. Under the rights offering, Grant's unsecured creditors and its
preferred and common shareholders are expected to be granted the right to
purchase shares of Grant's new common stock at the same price per share as
Elliott's investment. The plan is expected to provide an option for the
Company's employees to participate in the rights offering subject to any
required Securities and Exchange Commission approvals. The shares will be
offered to employees on the same basis as those offered to creditors,
shareholders and Elliott. If the plan is consummated, Elliott will own a
minimum of 51% of Grant's common stock. Consummation of the plan contained in
the Term Sheet is subject to a number of conditions including the vote of
Grant's creditors and shareholders.
The Term Sheet, as modified by the Court's order on April 9, 1997, also
provides that the Elliott proposal is subject to any higher and better offer
which may be received by Grant. Grant has retained Simmons & Company
International as its investment banker to assist it in soliciting other offers.
Other offers are due no later than the date set by the Court for the filing of
objections to the disclosure statement that Grant expects to file in connection
with the Elliott proposal. Grant will evaluate all valid offers, and will
select the proposal which, in its judgment, produces the highest and best
recovery to all parties in interest. Any valid offer must provide for the
immediate purchase of Elliott's participation in Grant's post-petition loan
facility.
32
<PAGE> 33
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a)(1) AND (2) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE.
See "Index to Financial Statements and Financial Statement
Schedule" set forth on Page F-1.
(a)(3) LIST OF EXHIBITS.
See page E-1 following the Financial Statements and Financial
Statement Schedule for an Index to the Exhibits hereto.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the quarter ended
December 31, 1996.
(C) EXHIBITS.
See page E-1 following the Financial Statements and Financial
Statement Schedule for an Index to the Exhibits hereto.
(D) FINANCIAL STATEMENT SCHEDULE.
The Consolidated Financial Statement Schedule is set forth
beginning on page S-1.
33
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf of the undersigned, thereunto duly authorized.
GRANT GEOPHYSICAL, INC.
(Registrant)
By: Larry E. Lenig, Jr.
---------------------------------
Larry E. Lenig, Jr.
(President, Chief Operating Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Larry E. Lenig, Jr. President, April 14, 1997
- ------------------------------------- Chief Operating Officer
(Larry E. Lenig, Jr.) (Principal Executive Officer)
Michael P. Keirnan Vice President, April 14, 1997
- ------------------------------------- Chief Financial Officer
(Michael P. Keirnan) (Principal Financial and
Accounting Officer)
J. Kelly Elliott Chairman of the Board, April 14, 1997
- ------------------------------------- Chief Executive Officer
(J. Kelly Elliott)
Harvey D. Attra Director April 14, 1997
- -------------------------------------
(Harvey D. Attra)
Orville D. Gaither, Sr. Director April 14, 1997
- -------------------------------------
(Orville D. Gaither)
Donald G. Russell Director April 14, 1997
- -------------------------------------
(Donald G. Russell)
J. Michael Adcock Director April 14, 1997
- -------------------------------------
(Michael Adcock)
Douglas K. Stewart Director April 14, 1997
- -------------------------------------
(Douglas K. Stewart)
</TABLE>
34
<PAGE> 35
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
Independent Auditors' Report .................................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995 .................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995, and 1994 .............................................. F-5
Consolidated Statements of Stockholders' Equity (Deficit) for the Years
Ended December 31, 1996, 1995, and 1994 ........................................ F-6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995, and 1994 .............................................. F-8
Notes to Consolidated Financial Statements ...................................... F-10
SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED) ................................. F-27
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Schedule II -- Valuation and Qualifying Accounts ............................... S-1
</TABLE>
All other schedules are omitted as the required information is inapplicable or
the information is presented in the
financial statements or notes thereto.
F-1
<PAGE> 36
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Grant Geophysical, Inc.:
We have audited the accompanying consolidated balance sheets of Grant
Geophysical, Inc. (a debtor-in-possession as of December 31, 1996) and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for
each of the years in the three-year period ended December 31, 1996. In
connection with our audit of the consolidated financial statements, we have
also audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial positions of Grant Geophysical,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming that Grant Geophysical, Inc. will continue
as a going concern which contemplates among other things, the realization of
assets and liquidation of liabilities in the ordinary course of business. As
discussed in Note 1 to the consolidated financial statements, Grant
Geophysical, Inc. (the Petitioning Company) filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code on
December 6, 1996. The Chapter 11 case of the Petitioning Company is
administered by the United States Bankruptcy Court for the District of
Delaware. The Petitioning Company is operating the business as
debtor-in-possession which requires certain of its actions to be approved by
the Court. Continuation of the Petitioning Company as a going concern and
realization of its assets and liquidation of its liabilities is dependent upon,
among other things, the confirmation of a plan of reorganization (which may,
among other things, result in significant adjustments and reclassifications in
the amount reflected as assets, liabilities and stockholders' equity (deficit)
in the accompanying financial statements) and, the Petitioning Company's
ability to generate sufficient cash from operations and obtain financing
sources to meet its obligations. These matters raise substantial doubt about
the Petitioning Company's ability to continue as a going concern. The
consolidated financial statements and financial statement schedule do not
include any adjustments relating to the recoverability and classification of
reported asset amounts or the amounts and classification of liabilities that
might result from any plans or other actions arising from this uncertainty and
the reorganization proceedings.
Houston, Texas
April 4, 1997
KPMG PEAT MARWICK LLP
F-2
<PAGE> 37
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................. $ 6,772 $ 1,047
Restricted cash ............................................ 100
Accounts receivable:
Trade (net of allowance for doubtful accounts of $5,711 and
$2,344 at December 31, 1996 and 1995, respectively) ....... 19,471 37,069
Other ..................................................... 996 1,826
Inventories ................................................ 503 1,417
Prepaids ................................................... 1,411 3,347
Mobilization costs ......................................... 1,071 6,772
------------ ------------
Total current assets .................................... 30,224 51,578
------------ ------------
Property, plant and equipment:
Land ..................................................... 231 231
Buildings and improvements ............................... 1,397 1,692
Plant facilities and store fixtures ...................... 1,703 2,723
Machinery and equipment .................................. 90,892 88,573
------------ ------------
Total property, plant and equipment .................... 94,223 93,219
Less accumulated depreciation ............................ 56,555 61,565
------------ ------------
Net property, plant and equipment ...................... 37,668 31,654
------------ ------------
Deferred costs ............................................. 334
Restricted cash ............................................ 321 315
Other assets ............................................... 1,910 3,051
------------ ------------
$ 70,123 $ 86,932
============ ============
</TABLE>
(Continued on next page)
F-3
<PAGE> 38
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable .............................................. $ 3,975 $ 19,241
Accrued expenses .............................................. 3,051 5,643
Foreign income taxes payable .................................. 188 231
Notes payable, current portion of long-term debt and capital
lease obligations ........................................... 589 18,430
------------ ------------
Total current liabilities ................................. 7,803 43,545
------------ ------------
Pre-petition liabilities subject to chapter 11 case ............. 90,244
Long-term debt and capital lease obligations,
excluding current portion ..................................... 8,789
Unearned revenue ................................................ 6,031 4,074
Other liabilities and deferred credits .......................... 258 809
Commitments and contingencies ...................................
Stockholders' equity (deficit):
$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 December 31, 1996 and 1995, respectively (liquidating
preference $25 per share, aggregating $57,500,000) .......... 23 22
Series A Convertible preferred stock, $.01 par value.
Authorized 75,000 shares; none outstanding ....................
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 20,641,765 and 12,234,151
shares at December 31, 1996 and 1995, respectively ............ 41 24
Additional paid-in capital ...................................... 124,203 112,122
Accumulated deficit ............................................. (159,970) (83,943)
------------ ------------
Total stockholders' equity (deficit) ........................ (34,213) 29,715
------------ ------------
$ 70,123 $ 86,932
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 39
GRANT GEOPHYSICAL , INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues .................................. $ 105,523 $ 91,996 $ 73,691
Expenses:
Direct operating expenses ............... 136,326 69,046 53,132
Other operating expenses ................ 17,865 8,527 7,810
Depreciation and amortization ........... 11,500 9,424 12,079
Special charge for asset impairment ..... 5,802 9,911
------------ ------------ ------------
Total costs and expenses .............. 171,493 86,997 82,932
------------ ------------ ------------
Operating income/(loss) ................. (65,970) 4,999 (9,241)
------------ ------------ ------------
Other income (deductions):
Interest expense ........................ (7,558) (3,635) (3,561)
Reorganization costs .................... (412)
Interest income ......................... 36 113 177
Other ................................... (502) 2,076 1,380
------------ ------------ ------------
Total other deductions ................ (8,436) (1,446) (2,004)
------------ ------------ ------------
Income/(loss) before income taxes ....... (74,406) 3,553 (11,245)
Income tax expense ........................ 1,621 391 193
------------ ------------ ------------
Net income/(loss) ....................... $ (76,027) $ 3,162 $ (11,438)
------------ ------------ ------------
Net loss applicable to common stock ..... $ (82,390) $ (2,096) $ (16,696)
============ ============ ============
INCOME/(LOSS) PER COMMON SHARE--
ASSUMING NO AND FULL DILUTION:
Net income/(loss) ......................... $ (5.17) $ 0.25 $ (0.92)
Dividend requirement on $2.4375
preferred stock ......................... (0.43) (0.42) (0.42)
------------ ------------ ------------
Net loss per common share ................. $ (5.60) $ (0.17) $ (1.34)
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary ................................. 14,699,824 12,535,352 12,470,704
Fully Diluted ........................... 14,699,824 12,571,984 12,484,093
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 40
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
$2.4375
CONVERTIBLE SERIES A
EXCHANGEABLE CONVERTIBLE JUNIOR ADDITIONAL TOTAL
PREFERRED PREFERRED PREFERRED COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK STOCK STOCK STOCK CAPITAL DEFICIT EQUITY (DEFICIT)
------------ ----------- --------- ------ ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1993 .......... $ 22 $ $ 1,490 $ 24 $ 111,905 $ (75,667) $ 37,774
Net loss .............................. (11,438) (11,438)
Restricted common stock
issued under the Incentive
Stock Option Plan ................... 62 62
Proceeds from sale of 11,500
shares under the Incentive
Stock Option Plan ................... 1 1
------------ ----------- --------- ------ ----------- ----------- ----------------
Balances at December 31, 1994 .......... 22 1,490 24 111,968 (87,105) 26,399
Net income ............................ 3,162 3,162
Restricted common stock
issued under the Incentive
Stock Option Plan ................... 86 86
Proceeds from sale of 15,000
shares under the Incentive
Stock Option Plan ................... 11 11
Restricted common stock
issued under the Employee
Retirement Savings Plan ............. 57 57
------------ ----------- --------- ------ ----------- ----------- ----------------
Balances at December 31, 1995 .......... 22 1,490 24 112,122 (83,943) 29,715
Net loss .............................. (76,027) (76,027)
Common stock issued in
connection with obtaining
equipment and short- and
long-term financing .................. 389 389
Issuance of 143,000 shares of $2.4375
Convertible exchangeable preferred
stock, net of non-cash issuance costs
of $171,000 .......................... 1 1,372 1,373
Issuance of 70,000 shares of
Series A convertible preferred
stock ................................ 1 6,999 7,000
Conversion of convertible debentures .. 7 2,767 2,774
Conversion of Series A convertible
preferred stock ...................... (1) 9 (8)
Proceeds from the exercise of
200,000 warrants ..................... 1 150 151
Restricted common stock
issued under the Incentive
Stock Option Plan .................... 129 129
</TABLE>
(Continued on next page)
F-6
<PAGE> 41
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
$2.4375
CONVERTIBLE SERIES A
EXCHANGEABLE CONVERTIBLE JUNIOR ADDITIONAL TOTAL
PREFERRED PREFERRED PREFERRED COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK STOCK STOCK STOCK CAPITAL DEFICIT EQUITY (DEFICIT)
------------ ----------- --------- ------ ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Proceeds from sale of 125,000
shares under the Incentive
Stock Option Plan ............ 145 145
Restricted common stock
issued under the Employee
Retirement Savings Plan ...... 138 138
------------ ----------- --------- ------ ---------- ----------- ----------------
Balances at December 31, 1996 .. $ 23 $ $ 1,490 $ 41 $ 124,203 $ (159,970) $ (34,213)
============ =========== ========= ====== ========== =========== ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 42
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income/(loss) before dividend requirement .................. $(76,027) $ 3,162 $(11,438)
Adjustments to reconcile net income/(loss) to
net cash provided by (used in) operating activities:
Special charge for asset impairment ........................... 5,802 9,911
Provision for doubtful accounts ............................... 5,511 14
Depreciation and amortization expense ......................... 11,500 9,424 12,079
Deferred costs amortization ................................... 29,528 12,550 5,824
Loss on sale of subsidiaries .................................. 198
Gain on the sale of fixed assets .............................. (25) (212) (10)
Gain on insurance claim ....................................... (1,247)
Exchange loss (gain) .......................................... 251 (102) (121)
Other non-cash items .......................................... 328 191 61
Changes in assets and liabilities, excluding
effects of divestitures:
(Increase) decrease in:
Accounts receivable ............................................ 13,346 (14,828) (4,046)
Inventories .................................................... 914 27
Prepaids ....................................................... 1,228 (1,701) (1,747)
Mobilization costs ............................................. (24,969) (18,439) (5,242)
Other assets ................................................... 1,846 (521) (589)
Increase (decrease) in:
Accounts payable ............................................... 9,328 10,637 1,659
Accrued expenses ............................................... 5,059 1,046 (619)
Foreign income taxes payable ................................... 390 122 (2)
Other liabilities and deferred credits ......................... 7,973 2,650 (2,564)
Change in pre-petition liabilities subject to
chapter 11 case:
Accrued expenses .............................................. (125)
Other liabilities and deferred credits ........................ (1,402)
-------- -------- --------
Total cash provided by (used in) operating activities ...... (9,346) 2,759 3,170
-------- -------- --------
</TABLE>
(Continued on next page)
F-8
<PAGE> 43
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from (used in) investing activities:
Capital expenditures, net ............................... (10,339) (13,757) (9,697)
Proceeds from the sale of assets ........................ 25 255 13
Proceeds from the sale of subsidiaries/businesses ....... 39 880
Insurance proceeds from arson damage, net
of losses incurred ..................................... 1,351
Restricted cash ......................................... 94 2,879 (894)
--------- --------- ---------
Net cash used in investing activities ............... (10,181) (9,272) (9,698)
--------- --------- ---------
Cash flows from (used in) financing activities:
Proceeds from the exercise of stock options
and warrants ........................................... 296 11 2
Proceeds from issuance of $2.4375 preferred stock,
net of issuance costs ................................. 1,544
Proceeds from issuance of Series A preferred stock ...... 7,000
Borrowings made during the period ....................... 122,354 89,950 77,754
Repayment on borrowings during the period ............... (105,757) (83,032) (72,496)
Pre-petition liabilities subject to chapter 11 case:
Borrowings under credit facility ...................... 3,612
Repayment on borrowings ............................... (3,382)
--------- --------- ---------
Net cash from financing activities .................. 25,667 6,929 5,260
--------- --------- ---------
Effect of exchange rate changes on cash .................. (415) (173) (720)
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents ............................................ 5,725 243 (1,988)
Cash and cash equivalents at beginning of period ......... 1,047 804 2,792
--------- --------- ---------
Cash and cash equivalents at end of period ............... $ 6,772 $ 1,047 $ 804
========= ========= =========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES.
SEE NOTE 17.
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 44
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) BASIS OF PRESENTATION
Grant Geophysical, Inc. ("Grant") was incorporated in Delaware on June 27,
1978. Grant has several wholly-owned subsidiaries incorporated in the United
States and certain foreign jurisdictions (the "Subsidiaries"). Grant and
certain of the Subsidiaries have established branch operations in various
foreign jurisdictions (the "Branches"). Grant, the Subsidiaries and the
Branches are collectively referred to as the "Company". The Company provides
the petroleum industry with seismic data acquisition. The Company operates or
has operated seismic crews in areas of oil and gas exploration in the United
States, Canada, Europe, Africa, the Middle East, Latin America, the Far East
and Australia.
On December 6, 1996 (the "Petition Date"), Grant filed a voluntary
petition in the United States Bankruptcy Court for the District of Delaware
(the "Court") for relief under chapter 11 of the United States Bankruptcy Code
("Bankruptcy Code"). The case is in its preliminary stages. Generally, upon the
commencement of a bankruptcy proceeding, all pre-petition litigation and other
acts to enforce claims against the debtor corporation are stayed. The debtor
corporation may operate its business and manage its assets in the ordinary
course as debtor-in-possession, but must obtain Court approval for transactions
outside the ordinary course of business. Based on these actions, all
liabilities of Grant outstanding at December 6, 1996 have been reclassified
from their respective current and non-current liability categories to estimated
Pre-petition liabilities subject to chapter 11 case.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern Considerations
The accompanying financial statements of the Company have been prepared on
a going concern basis, which contemplates the realization of assets and the
liquidation of liabilities in the ordinary course of business. As described
earlier, Grant has filed for reorganization under chapter 11 of the United
States Bankruptcy Code. The consolidated financial statements do not include
any adjustments relating to the recoverability and classification of reported
asset amounts or the amounts and classification of liabilities that might
result from any plan or other actions arising from this uncertainty and the
reorganization proceedings.
Grant intends to submit a plan of reorganization to the Court as soon as
practicable. Grant's exclusive period for filing a plan of reorganization
currently extends through August 4, 1997. Any plan submitted is likely to
provide for a material reduction in Grant's unsecured liabilities incurred
prior to December 7, 1996 and the elimination of present equity stockholders'
interests. If a liquidation of Grant were to occur, it is likely that no
distributions would be made to present equity shareholders, and no material
distributions would be available for holders of unsecured indebtedness of Grant
incurred prior to December 7, 1996. See Note 3 for a description of the effect
of the reorganization proceedings to date on certain of the Grant's
liabilities.
Principles of Consolidation
The consolidated financial statements include the accounts of Grant and
all of its majority-owned subsidiaries. All significant intercompany accounts
and transactions are eliminated in consolidation.
Revenues
Revenues from data acquisition are recognized based on contractual rates
set forth in the related contract. If the contract only provides a rate for the
overall service, revenue and any unearned revenue recorded is recognized based
on the percentage of the work effort completed compared with the total work
effort involved in the contract.
F-10
<PAGE> 45
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cash and Cash Equivalents
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents. Grant held investments
in Federal agency securities of zero and $701,000 at December 31, 1996 and
1995, respectively.
Restricted Cash
At December 31, 1996 and 1995, restricted cash included three certificates
of deposit ("CDs") totaling $321,000 and $315,000, respectively, which are
pledged as collateral for letters of credit. These CDs are required for Grant
to conduct business in various areas of the United States and are classified
as long-term assets.
Inventories
Inventories, which consist primarily of miscellaneous supplies, are stated
at lower of cost or market. Cost is determined using the specific
identification method.
Deferred Costs/Mobilization Costs
Fees and expenses related to the mobilization and work in progress of
seismic crews are deferred and recognized over the performance of the contract.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Plant and equipment
under capital leases are stated at the present value of future minimum lease
payments at the inception of the lease.
Depreciation is provided principally by the straight-line method over the
estimated useful lives of the various classes of assets as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements ........................ 5-10
Data processing equipment ......................... 3- 5
Office equipment .................................. 5-10
Seismic exploration and transportation equipment .. 3-10
</TABLE>
Plant and equipment held under capital leases are amortized by the
straight-line method over the shorter of the lease term or estimated useful
life of the asset. Expenditures for maintenance and repairs are charged to
operations. Betterments and major renewals are capitalized.
Capitalized Software Costs
Capitalized software costs consist of certain expenses incurred to
internally develop software. Capitalization of cost begins upon the
establishment of the software's technological feasibility. The establishment of
technological feasibility and the ongoing assessment of recoverability of
capitalized software development costs requires considerable judgment by
management with respect to certain external factors, including, but not limited
to anticipated future gross revenue, estimated economic life and changes in
software and hardware technologies.
F-11
<PAGE> 46
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1996, in conjunction with the Company's evaluation on the
recoverability of its asset carrying values, $760,000 carrying value of
capitalized software was written down to zero. See Note 4. At December 31,
1995, the Company had capitalized approximately $717,000 of software
development costs which were included in property, plant and equipment.
Asset Impairment
In the fourth quarter of 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This standard requires
that long-lived assets and certain identifiable intangibles held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. At
December 31, 1996, as a result of this review, a $5,802,000 charge for asset
impairment was recorded during the fourth quarter of 1996. See Note 4. Adoption
of SFAS No. 121 did not materially affect the Company's consolidated results of
operations or financial position at December 31, 1995. During the fourth
quarter of 1994, the Company reviewed the quantity and age of its data
acquisition equipment to ensure the carrying amount of these assets were
recoverable. While still useable, rapid technological changes which had
occurred during the preceding three years and a resultant demand for new
advanced technology equipment by the Company's customers made it unlikely that
the carrying value of certain equipment prior to the write down was recoverable
from expected future cash flows. Accordingly, the Company recorded a $9,911,000
special charge for asset impairment during 1994.
Long-lived assets and certain identifiable intangibles are written down to
their current fair value whenever events or changes in circumstances indicate
that the carrying amount of these assets are not recoverable. These events or
changes in circumstances may include but are not limited to a significant
change in the extent in which an asset is used, a significant decrease in the
market value of the asset, or a projection or forecast that demonstrates
continuing losses associated with an asset. If an impairment is determined, the
asset is written down to its current fair value and a loss is recognized.
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.
Reorganization Costs
Reorganization costs consist of professional fees and similar types of
expenditures directly related to the chapter 11 proceeding, and are expensed as
incurred. As of December 31, 1996, Grant had incurred approximately $412,000 of
reorganization costs.
Foreign Exchange Gains and Losses
In an effort 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 periodically
enters into debt denominated in the same currency as its international
contracts to pay expenses incurred locally. Foreign currency transaction gains
and losses resulting from these arrangements are included in Other
income/deductions. Presently, the Company does not use derivatives or forward
foreign exchange hedging contracts.
F-12
<PAGE> 47
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
The Financial Accounting Standards Board issued SFAS No. 109, "Accounting
for Income Taxes." Under the asset and liability method of Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Post Employment Benefits
The Company adopted SFAS No. 112 effective January 1, 1994. SFAS No. 112
requires companies to account for benefits to former or inactive employees
after employment but before retirement on the accrual basis of accounting.
Post-employment benefits include every form of benefit provided to former or
inactive employees, their beneficiaries and covered dependents. Benefits
include, but are not limited to, salary continuation, supplemental unemployment
benefits, severance benefits, disability-related benefits (including workers'
compensation), job training and counseling, and continuation of benefits such
as health care benefits and life insurance coverage. Adoption of SFAS No. 112
did not materially affect the Company's consolidated results of operations or
financial position.
Income (Loss) Per Common Share
Income (loss) per common share is computed based upon the weighted average
number of common shares outstanding during each 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 common shares for the period if that market price is higher
than the average market price used in computing primary earnings per share. The
income/loss is decreased/increased by undeclared, unpaid cumulative preferred
stock dividends in calculating net income/loss attributable to the common
shareholder.
Stock Based Compensation
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation" which establishes a fair value
method for accounting for stock-based compensation plans either through
recognition or disclosure. Grant has elected to continue to follow the
intrinsic value method of accounting prescribed by Accounting Principles
Board Opinion No. 25 "Accounting for Stock Issued to Employees", where
compensation costs are not recognized in connection with Grant's stock option
plans.
However, had Grant adopted SFAS No. 123 for options granted after January
1, 1995, the Company's net income (loss) and net income (loss) per common share
for the years ended December 31, 1996 and 1995 would have been increased as
follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1996 1995
-------------------- -------------------
AS AS
REPORTED PROFORMA REPORTED PROFORMA
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) .......... $(82,390) $(82,612) $(2,096) $(2,215)
Net loss per common share .. $(5.60) $(5.62) $(0.17) $(0.18)
</TABLE>
For purposes of determining compensation costs using the provisions of SFAS
123, the fair value of option grants were determined using the Black-Scholes
option-valuation model. The key input variables used in valuing the options
were: risk-free interest rate of 8.5%; dividend yield of zero; stock price
volatility of 70%; expected option lives of four years.
F-13
<PAGE> 48
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Reclassifications
Certain amounts previously reported have been reclassified in order to
ensure comparability between the periods reported.
Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards 128, Earnings per Share (SFAS 128). SFAS
128 specifies the compilation, presentation and disclosure requirements for
earnings per share for entities with publicly held common stock or potential
common stock. The requirements of this statement will be effective for fiscal
years beginning after December 15, 1997. Management does not believe that the
implementation of SFAS 128 will have a material effect on its financial
statements.
(3) PRE-PETITION LIABILITIES SUBJECT TO CHAPTER 11 CASE
As a result of Grant's Chapter 11 reorganization proceedings, all
pre-petition liabilities of Grant outstanding at December 31, 1996 have been
classified as pre-petition liabilities subject to chapter 11 case. The terms
and amounts due are subject to the outcome of the reorganization proceedings.
Grant's secured and unsecured debt is as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------
PRE-PETITION
ACCRUED
AMOUNT INTEREST TOTAL
------- -------- -------
<S> <C> <C> <C>
SECURED DEBT:
Revolving line of credit, 12.7%-14.7%(A) ....... $11,774 $ $11,774
Equipment notes payable, 7.3%-12.0%(A) ......... 16,594 557 17,151
Other notes payable, 10.7%-15.0%(A) ............ 5,560 302 5,862
Capital lease obligations, 9.0%-27.0%(A) ....... 8,971 198 9,169
Other claims .................................... 1,662 1,662
------- ------- -------
44,561 1,057 45,618
======= ======= =======
UNSECURED DEBT:
Convertible debentures, 8%(A) ................... 350 350
Other notes payable, 6%-22%(A) .................. 11,266 158 11,424
Capital lease obligations, 12%-37%(A) ........... 687 37 724
Trade accounts payable .......................... 23,718 23,718
Accrued expenses ................................ 2,956 2,956
Other liabilities and deferred credits .......... 5,454 5,454
------- ------- -------
44,431 195 $44,626
------- ------- -------
TOTAL ............................. $88,992 $ 1,252 $90,244
======= ======= =======
</TABLE>
- ---------------
(A) Represents contractual stated interest rates.
On February 4, 1997, the Court approved a Financing Order that authorized
Grant to enter into an agreement to obtain secured post-petition financing with
its primary working capital lender (the "Lender") under which agreement the
Lender continued to advance funds to Grant for its operations. The Financing
Order was amended
F-14
<PAGE> 49
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
by order of the Court on April 9, 1997. Pursuant to the Amended Financing
Order, the Lender agreed to make revolving advances not to exceed $12,500,000.
The advances are not to exceed a borrowing base equal to a percentage of
certain trade accounts receivable and an overadvance amount. The maximum
permitted overadvance is $7,000,000 through September 30, 1997 when the Amended
Financing Order expires. A $125,000 fee was paid to the Lender. Interest
accrues at prime plus 3.75% on the advance funds and prime plus 7.25% on the
overadvance funds.
The Amended Financing Order also includes an approved budget, an internal
cash management and reporting system and contains certain restrictions in the
movement of cash from Grant's US operations to certain of the Company's foreign
locations.
On August 22, 1996, Grant amended a two-year term loan agreement with a
secured lender to increase the principal amount to $5,000,000. Interest on such
debt at the rate of 13.5% has been accruing since the petition date.
Agreements with certain lenders and lessors have been reached and are
subject to approval by the Court. Based on these agreements, Grant is making
payments of adequate protection in varying amounts.
On March 27, 1996, Grant 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 Grant'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, Grant 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.
As of December 31, 1996, approximately $2,650,000 of the Debentures had been
converted into 3,400,261 shares of Grant's common stock.
Grant borrowed an aggregate of $3,149,000 from Westgate International,
L.P. ("Westgate") and Elliott Associates, L.P. ("Elliott") for working capital
purposes. This amount remained outstanding at December 31, 1996.
Prior to the Petition Date, interest was accrued on all debt instruments
based on contractual rates. Interest has continued to accrue on all secured
equipment notes payable and capital leases based on renegotiated rates of 7% to
11.09% since December 7, 1996. All unsecured and undersecured debt have not
been entitled to accrue interest since the Petition Date. Interest expense,
based on contractual rates of debt instruments, would have been approximately
$7,667,000 for the year ended December 31, 1996.
(4) SPECIAL CHARGE FOR ASSET IMPAIRMENT
In accordance with SFAS 121, the Company has continually performed an
evaluation of asset groups and their respective future cash flows. As a result
of this evaluation at December 31, 1996, the Company reduced the carrying value
of a proprietary data recording system which was not expected to generate
future cash flows adequate to support current carrying values. Accordingly, a
$5,802,000 charge for asset impairment was recorded during the fourth quarter
of 1996.
During the fourth quarter of 1994, the Company reviewed the quantity and
age of its data acquisition equipment to ensure the carrying amount of these
assets were recoverable. While still useable, rapid technological changes which
had occurred during the preceding three years and a resultant demand for new
advanced technology equipment by the Company's customers made it unlikely that
the carrying value of certain equipment prior to the write down was recoverable
from expected future cash flows. Accordingly, the Company recorded a $9,911,000
special charge for asset impairment during 1994. The majority of the 1994
impairment, approximately 75%, relates to assets located in Nigeria. The
remainder is associated with equipment in the Middle East, Far East and United
States, which was deemed to be overvalued due to the decline in demand for that
equipment's technology.
F-15
<PAGE> 50
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) SUMMARY OF OPERATIONS
A summary of operations by geographical area follows (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Total revenues:
U.S. .................................. $ 42,074 $ 47,849 $ 27,791
Middle East ........................... 786 8,725
Africa ................................ 904 14,208 15,500
Colombia .............................. 12,722 4,535 5,557
Peru .................................. 27,490 13,719
Other Latin America ................... 16,921 7,278 10,086
Far East .............................. 5,412 3,621 6,032
--------- --------- ---------
$ 105,523 $ 91,996 $ 73,691
========= ========= =========
Operating income/(loss):
United States ......................... (35,920) 4,575 (1,112)
Middle East ........................... (144) 285 (1,182)
Africa ................................ (4,281) 1,130 (6,164)
Europe ................................ (922) (821) (617)
Colombia .............................. (94) (271) (346)
Peru .................................. (19,804) 1,205 106
Other Latin America ................... (4,744) (714) 439
Far East .............................. (61) (390) (365)
--------- --------- ---------
$ (65,970) $ 4,999 $ (9,241)
========= ========= =========
Foreign currency exchange gains (losses):
Africa ................................ 15 265 (80)
Europe ................................ (16) (8) (26)
Middle East ........................... (13) (21)
Colombia .............................. (26) 99 (63)
Peru .................................. (2) 2 (6)
Other Latin America ................... (197) (184) 324
Far East .............................. (25) (59) (7)
--------- --------- ---------
$ (251) $ 102 $ 121
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Identifiable assets:
U.S ........................................ $ 36,956 $ 42,738
Europe and the Middle East ................. 41 567
Africa ..................................... 15,536
Peru ....................................... 10,354 11,722
Colombia ................................... 9,233 4,507
Brazil ..................................... 7,271 2,036
Other Latin America ........................ 1,803 5,277
Far East ................................... 2,701 2,107
Other ...................................... 136 136
-------- --------
Total identifiable assets ................. 68,495 84,626
Corporate assets ........................... 1,628 2,306
-------- --------
$ 70,123 $ 86,932
======== ========
</TABLE>
F-16
<PAGE> 51
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenues from a U.S. based international oil company were approximately
$20,233,000 (19%) and $12,683,000 (14%) for the years ended December 31, 1996
and 1995, respectively. In fiscal 1995 and 1994, revenues from two affiliated
nationalized oil companies totaled approximately $10,048,000 (11%) and
$8,902,000 (12%), respectively.
(6) DIVESTITURES
During the fourth quarter of 1996, Grant sold the stock of its Venezuela
subsidiary and also entered into an agreement to sell the stock of its Nigeria
subsidiary. Proceeds from these sales are approximately $380,000. Other than a
$198,000 loss recognized on these sales, these transactions did not have a
significant impact on the Company's operating results.
(7) PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION
-------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
December 31, 1996
Land .......................................... $ 231 $
Buildings and improvements .................... 1,397 202
Plant facilities and store fixtures ........... 1,703 1,041
Machinery and equipment ....................... 90,892 55,312
-------- --------
$ 94,223 $ 56,555
======== ========
December 31, 1995
Land .......................................... $ 231 $
Buildings and improvements .................... 1,692 345
Plant facilities and store fixtures ........... 2,723 1,766
Machinery and equipment ....................... 88,573 59,454
-------- --------
$ 93,219 $ 61,565
======== ========
</TABLE>
(8) INCOME TAXES
The composition of the income tax expense follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
State .......................... $ $ $
Federal ........................
Foreign ........................ 1,621 391 193
Deferred:
State ..........................
Federal ........................
Foreign ........................
------ ------ ------
Income tax expense ............. $1,621 $ 391 $ 193
====== ====== ======
</TABLE>
At December 31, 1996, Grant had net operating losses ("NOLs") of
approximately $173,000,000 available for carryforward for U.S. Federal income
tax purposes. The NOLs, if unused, will expire between 1997 and 2011. Grant's
NOLs will decrease the income tax expense of Grant only if Grant generates
income from United States operations which would be subject to U.S. Federal
income tax.
F-17
<PAGE> 52
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The portion of NOLs, which existed prior to July 1991 and expire between
1997 and 2006 are subject to annual utilization limitations imposed by the
Internal Revenue Bankruptcy Code under section 382. Based on the ownership
changes to date, the NOLs would be limited by a minimum of $23,000,000. In
addition, there is a significant probability that any plan of reorganization
which may be confirmed by the Court will result in a "change of ownership" of
Grant. In such event, the future utilization of Grant's U.S. NOL's would be
further restricted.
The total income tax expense is different from the amount computed by
applying the U.S. Federal income tax rate to income before income taxes. The
reasons for these differences were as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
U.S. Federal income tax expense (benefit)
at statutory rate ........................... $(25,298) $ 1,208 $ (3,823)
Increases (reductions) in taxes from:
Foreign income tax rate more (less) than
U.S. rate on foreign income ................. 4,712 110 1,987
Losses of the U.S. return group from
which no benefit is expected ................ 22,207 2,029
Utilization of prior year losses for which
no benefit was recognized .................. (927)
-------- -------- --------
Income tax expense recorded .................. $ 1,621 $ 391 $ 193
======== ======== ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
Deferred tax asset:
Plant and equipment, principally due to differences in depreciation ... $ 3,841 $ 1,890
Allowance for doubtful accounts and other accruals..................... 3,042
Net operating loss carryforwards ...................................... 58,795 36,519
Less valuation allowance .............................................. (65,678) (38,409)
-------- --------
Net deferred tax asset ................................................ $ $
-------- --------
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1995 was
$39,039,000. The net change in the total valuation allowance for the years
ended December 31, 1996 and 1995 was an increase of $27,269,000 and a decrease
of $630,000, respectively.
F-18
<PAGE> 53
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
A summary of notes payable, long-term debt, and capital lease obligations
was as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Revolving lines of credit:
15.0%, due February 20, 1996 ............................ $ $ 1,750
11.0%, due February 17, 1997 ............................ (B) 8,045
Equipment notes payable -- 6.93%-12%, due 1996-1999 ....... (B) 5,178
Other notes payable -- 10.0% to 34.0%, due 1996-2005 ...... 589 6,579
Capital lease obligations -- 10.0% to 28.0%,
due 1996-2000 ........................................... (B) 5,667
-------- --------
589 27,219
Less current portion ...................................... 589 18,430
-------- --------
Notes payable, long-term debt and capital
lease obligations, excluding current portion ............ $ (B) $ 8,789
======== ========
</TABLE>
At December 31, 1996, other notes payable consisted of a revolving line of
credit maintained by a foreign subsidiary.
- ---------------
(B) Certain balances have been reclassified to Pre-petition liabilities
subject to chapter 11 case (see Note 3).
(10) LEASES
The future minimum rental payments under the Company's various capital and
noncancelable operating leases at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
MINIMUM RENTALS
OF NON-FILING MINIMUM RENTALS
SUBSIDIARIES OF GRANT*
--------------- ---------------
OPERATING OPERATING CAPITAL
LEASES LEASES* LEASES*
--------- --------- -------
(DOLLARS IN THOUSANDS)
<C> <C> <C> <C>
1997 ................................ $163 $ 634 $ 3,358
1998 ................................ 460 2,707
1999 ................................ 225 2,210
2000 ................................ 55 2,722
2001 ................................ 1,321
---- ------ -------
1,374 12,318
Less amount representing interest ... 2,660
---- ------ -------
Present value of future minimum
lease payments ................... $163 $1,374 $ 9,658
==== ====== =======
</TABLE>
* Substantially all of the minimum rentals of Grant shown are subject to
affirmation or rejection pursuant to provisions of the Bankruptcy Code.
F-19
<PAGE> 54
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The total rental expenses for each of the periods was as follows (dollars
in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
$2,089 $1,880 $2,758
</TABLE>
(11) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments.
Cash and short-term financial instruments
The carrying amount approximates fair value due to the short maturity of
these instruments.
Long-term notes receivable
The fair value has been estimated using the expected future cash flows
discounted at market interest rates which approximate its carrying value.
Long-term debt
At December 31, 1996, liabilities exceeded the Company's assets; thus,
long-term debt claims against Grant may be settled at less than 100 percent of
their value. However, until confirmation of a plan of reorganization, the
manner of payment or other disposition of these claims will continue to be
uncertain.
For December 31, 1995, the fair value of the Company's long-term debt has
been estimated based on quoted market prices for the same or similar issues, or
on the current rates offered to the Company for debt of the same remaining
maturities.
(12) EMPLOYEE BENEFIT PLANS
Incentive Stock Option Plan
On November 1, 1996, the Amended 1989 Long-Term Incentive Plan (the
"Plan") was amended to increase the shares of common stock reserved to cover
the granting of options to purchase shares of Common Stock ("Options"), issuing
of shares of Common Stock which are subject to vesting requirements or other
restrictions ("Restricted Stock") and issuing of Stock Appreciation Rights
("SAR") to employees to 2,803,930 shares.
Options are awarded at an option price determined by the Board of
Directors, which shall not be less than 100% of fair market value or 110% of
fair market value for employees already owning more than 10% of the voting
power of all classes of stock. The options may be exercised either by the
purchase of shares at the option price or as stock appreciation rights by which
the employee receives cash or stock equivalent in value of the difference
between the option price and the market value of the stock at the exercise
date. These options expire ten
F-20
<PAGE> 55
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
years from the date of grant and are exercisable as defined by the stock option
plan. No stock appreciation rights have been granted. Transactions for Options
under the plan are summarized as follows:
<TABLE>
<CAPTION>
OPTION
SHARES PRICE
-------- -------------
<S> <C> <C>
Outstanding, December 31, 1993:
14,500 $ 0.10
212,000 0.938-1.125
108,750 7.00
--------
335,250
Granted ................................ 70,000 1.313-2.500
Exercised .............................. (11,500) 0.10
-------- -------------
Outstanding, December 31, 1994:
3,000 $ 0.10
262,000 0.938-1.313
20,000 2.50
108,750 7.00
--------
393,750
Granted ................................ 150,000 2.31
Exercised .............................. (15,000) 0.10-0.938
-------- -------------
Outstanding, December 31, 1995:
250,000 $0.938-131
170,000 2.310-2.50
108,750 7.00
--------
528,750
Granted ................................ 784,000 2.219-2.688
Exercised .............................. (125,000) 1.125-1.313
Canceled ............................... (125,000) 0.938-1.313
Canceled ............................... (700,000) 2.219-2.688
Canceled ............................... (45,000) 7.00
-------- -------------
Outstanding, December 31, 1996 ............. 254,000 $2.219-2.688
Outstanding, December 31, 1996 ............. 63,750 7.00
=============
Exercisable, December 31, 1996 ............. 56,000 $ 2.310
Exercisable, December 31, 1996 ............. 63,750 7.00
=============
</TABLE>
Additionally, a Plan amendment was approved, effective January 1, 1996, by
the stockholders which allows current and former non-employee directors of
Grant to participate in the Plan solely for the purpose of receiving Restricted
Stock of Grant in lieu of part or all of the directors' fees. The shares of
Restricted Stock will be automatically issued on the first day of each calendar
quarter following a calendar quarter of service. The fair market value of the
Restricted Stock will be the closing price of the common stock on the last
trading day of the preceding calendar quarter. In 1996, 1995 and 1994, 40,055,
41,711, and 28,108 shares of Restricted Stock were issued. The charges to
income totaled $127,000, $103,000, and $62,000 in 1996, 1995 and 1994,
respectively.
At December 31, 1996, 1,974,306 shares are available for future grants. It
is likely that all options to acquire Grant's common stock and all stock
appreciation rights will be canceled in connection with any plan of
reorganization for Grant.
F-21
<PAGE> 56
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Employee Retirement Savings Plan
Grant has established a defined contribution plan covering substantially
all U.S. employees whereby participants may elect to contribute between 1% and
12% of their annual salary. Participants may not make contributions in excess
of $9,240 per year (as adjusted annually by the cost of living adjustment
factor). Under this plan, Grant may contribute, on a discretionary basis,
one-half of the participant's contribution percentage up to 6% (limited to 3%
of any employee's annual salary). Beginning in August 1995, Grant's
contribution could be made in the form Grant common stock. Contributions made
by Grant for the years ended December 31, 1996, 1995, and 1994 were 58,395
shares of Grant stock with a market value of $138,000; $154,000, which included
24,466 shares of Grant common stock with a market value of $56,838, and a cash
contribution of $93,000, respectively. At December 31, 1996 and 1995, the plan
held 82,861 and 24,466 shares of Grant common stock.
Other Postretirement Benefits
Grant sponsors a defined contribution postretirement plan which provides
medical coverage for eligible retirees and their dependents (as defined in the
plan). The Company adopted SFAS 106 - "Employers' Accounting for Postretirement
Benefits Other Than Pensions" requiring companies to account for these. The
following sets forth the plan's funded status reconciled with the amount shown
in the consolidated statement of operations on an accrual basis rather than a
pay-as-you-go (cash) basis as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995 1994
----- ----- -----
(dollars in thousands)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and dependents ........................... $ (17) $ (16) $ (18)
Fully eligible active plan participants ........... (42) (27) (11)
Other active plan participants .................... (308) (211) (138)
----- ----- -----
(367) (254) (167)
Unrecognized net loss (gain) ...................... 17 (19) (65)
Unrecognized transition obligation ................ 118 126 133
----- ----- -----
Accrued postretirement benefit cost ............. $(232) $(147) $ (99)
===== ===== =====
</TABLE>
Net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
---- ---- ----
(dollars in thousands)
<S> <C> <C> <C>
Service cost - benefits attributed to service during the period ... $ 66 $ 41 $ 32
Interest cost on accumulated postretirement benefit obligation .... 21 13 12
Amortization of transition obligation over 20 years ............... 7 7 7
Amortization of gain .............................................. (2) (1)
Other amortizations ............................................... 11
---- ---- ----
Net periodic postretirement benefit cost ..................... $ 94 $ 59 $ 61
==== ==== ====
</TABLE>
For measurement purposes, a 7.25% annual rate of increase in the per
capita cost of medical benefits was assumed for 1996 with a 10% and 12% assumed
annual rate for 1995 and 1994, respectively; the rate was assumed to decrease
gradually to 5% for 2001 and remain at that level thereafter. The medical cost
trend rate assumption
F-22
<PAGE> 57
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
has a significant effect on the amounts reported. To illustrate, increasing the
assumed medical cost trend rates by 1% point in each year would increase the
accumulated postretirement benefit obligations as of December 31, 1996, 1995
and 1994 by approximately $56,000, $43,000 and $22,000, respectively, and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the years ended December 31, 1996, 1995 and
1994 by $15,000, $10,000 and $7,000, respectively.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% for December 31, 1996, and 1995. A
rate of 8.5% was used for 1994.
(13) STOCKHOLDERS' EQUITY (DEFICIT)
$2.4375 Convertible Exchangeable Preferred Stock
Grant has authorized 2,300,000 shares of $2.4375 convertible exchangeable
preferred stock ($0.01 par value, $25.00 liquidation preference) of which
2,157,000 was outstanding through March 20, 1996. The remaining 143,000 shares
were issued on March 20, 1996. The purchaser of the remaining shares is
entitled to all unpaid, undeclared dividends in arrears through March 31, 1996,
totaling $1,220,000. The $2.4375 preferred stock bears annual cumulative
dividends of $2.4375 per share accruing from July 26, 1991, payable quarterly
on each March 31, June 30, September 30 and December 31, commencing September
30, 1991. It is convertible at any time at the option of the holder, unless
previously redeemed, into common stock ($.002 par value) of Grant at the
initial conversion rate of 2.739726 shares of common stock for each share of
$2.4375 preferred stock. It is exchangeable, at the option of Grant, in whole
but not in part, on any dividend payment date commencing September 30, 1993,
for Grant's 9 3/4% Convertible Subordinated Debentures (the "subordinated
debentures") due 2016, at the rate of $25.00 principal amount of subordinated
debentures for each share of $2.4375 preferred stocks provided that all
accumulated and unpaid dividends through the date of exchange have been paid.
Series A Convertible Preferred Stock
Grant has authorized 75,000 shares of Series A Convertible Preferred
Stock, $0.01 par value. A total of 70,000 shares were issued in May 1996, all
of which have been converted into 4,428,404 shares of Grant Common Stock by
December 31, 1996.
Junior Preferred Stock
Grant has authorized 15,000 shares and has issued and outstanding 14,904
shares of nonvoting, redeemable junior preferred stock with a $100 par value
("Junior Preferred"). The shares are redeemable at any time by Grant upon
30-day written notice to holders of such shares. No dividends have been
declared or paid on the Junior Preferred stock.
Serial Preferred Stock
Grant has authorized 250,000 shares of Serial Preferred Stock, $100 par
value, none of which were issued and outstanding.
Dividends in Arrears
The quarterly dividend payments for the periods of 1993 through December
6, 1996 and one quarterly dividend payment for 1992 on the $2.4375 preferred
stock were deferred by Grant's Board of Directors.
As of December 31, 1996 and 1995, preferred dividends in arrears on the
$2.4375 preferred stock amounted to approximately $23,451,000 and $17,088,000,
respectively. The December 31, 1996 amount relates to the total of 2,300,000
shares now outstanding.
F-23
<PAGE> 58
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Common Stock
The changes in common stock were as follows (dollars in thousands):
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------
SHARES AMOUNT
---------- ----------
<S> <C> <C>
Balance, December 31, 1993 ......................... 12,113,366 $ 24
Restricted common stock issued (note 12) ........ 28,108
Stock options exercised ......................... 11,500
---------- ----------
Balance, December 31, 1994 ......................... 12,152,974 24
Restricted common stock issued (note 12) ........ 41,711
Restricted common stock issued under the
Employee Retirement Savings Plan (note 12) ... 24,466
Stock options exercised ......................... 15,000
---------- ----------
Balance, December 31, 1995 ......................... 12,234,151 24
Warrants exercised .............................. 200,000 1
Conversion of debentures ........................ 3,400,261 7
Conversion of Series A Preferred Stock .......... 4,428,404 9
Payment in connection with equipment
and short- and long-term financing ............. 155,499
Restricted common stock issued (note 12) ........ 40,055
Restricted common stock issued under the
Employee Retirement Savings Plan (note 12) ... 58,395
Stock options exercised ......................... 125,000
---------- ----------
Balance, December 31, 1996 ......................... 20,641,765 $ 41
========== ==========
</TABLE>
(14) CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
ordinary course of business.
The Court generally has jurisdiction over all of Grant's property, as
defined in section 541 of the Bankruptcy Code, held on the Petition Date or
acquired thereafter. Under sections 1107 and 1108 of the Bankruptcy Code and by
order of the Court, Grant is operating its business and managing its assets in
the ordinary course of business as debtor-in-possession. Grant may not,
however, engage in transactions outside the ordinary course of business without
prior approval of the Court. Pursuant to section 362(a) of the Bankruptcy Code
and subject to the exceptions contained in section 362(b) thereof, the
commencement of a bankruptcy proceeding operates as an automatic stay
applicable to all persons and other entities, generally prohibiting absent
Court approval (i) the commencement or continuation of any judicial,
administrative or other proceeding against Grant, (ii) any act to obtain
possession of property of, or property from, Grant, and (iii) any act to
create, perfect or enforce any lien against property of Grant. While the
automatic stay applies to all of Grant's property wherever located, Grant
operates in several foreign jurisdictions, some of which may not give effect to
the automatic stay.
F-24
<PAGE> 59
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is subjected to review by various taxing authorities for the
purpose of verifying compliance with numerous local tax laws and regulations. As
a result of one of these reviews, the Company was notified that, during 1995, it
had neglected to collect a certain tax from several clients and remit those
collections to the local government. The total amount of the potential
assessment, including penalties and interest, is approximately $6,000,000. The
Company believes the tax authority's claim is without merit and, as such, has
made no provision for payment. The Company intends to vigorously protest
enforcement of the claim within the local legal system. However, there can be no
assurances that the outcome of those protests will be favorable.
(15) RELATED PARTY TRANSACTIONS
During 1996, Grant entered into an exclusive agreement with Macdonald &
King, Incorporated, a financial services firm, for the purpose of assisting
Grant in securing additional sources of financing including equipment financing
and short and long-term financing. Mr. William C. Macdonald, a former director
of Grant, is the Chairman of the Board and sole shareholder of Macdonald &
King, Incorporated. Pursuant to the terms of the agreement, Grant issued
155,499 shares of Grant Common Stock with a market value of approximately
$388,748 to Macdonald & King, Incorporated in connection with financing
obtained by Grant prior to Mr. Macdonald's resignation from Grant's Board of
Directors effective August 8, 1996.
On March 20, 1996, Grant issued 143,000 shares of Grant's $2.4375
Preferred Stock to Westgate, an affiliate of Elliott, a holder of more than 5%
of Grant's $2.4375 Preferred Stock, for an aggregate purchase price of
$1,573,000. Westgate subsequently sold its shares of $2.4375 Preferred Stock to
Liverpool Limited Partners, who is also an affiliate of Elliott.
In November 1996, Grant borrowed an aggregate of $3,149,000 from Westgate
and Elliott for working capital purposes. The borrowings are in the form of
unsecured promissory notes and remain outstanding at December 31, 1996, and are
classified in pre-petition liabilities subject to the chapter 11 case.
(16) OTHER INCOME (DEDUCTIONS)
Other Income (Deductions) consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Gain on the sale of fixed assets .............. $ 25 $ 212 $ 10
Net gain/(loss) on foreign exchange ........... (251) 102 121
Loss on sale of subsidiaries .................. (198)
Foreign credit insurance ...................... (8) (73) (137)
Recovery of bad debts ......................... 664
Gain on insurance settlement .................. 1,247
Nonrecurring royalty income ................... 500
Miscellaneous ................................. (70) 588 222
------- ------- -------
Total ...................................... $ (502) $ 2,076 $ 1,380
======= ======= =======
</TABLE>
F-25
<PAGE> 60
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(17) SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------- ------- -------
(dollars in thousands)
<S> <C> <C> <C>
CASH PAID FOR INTEREST AND TAXES WAS AS FOLLOWS:
Taxes, net of refunds ........................... $ 3,496 $ 968 $ 1,044
Interest, net of amounts capitalized ............ 6,106 3,524 3,704
NONCASH INVESTING AND FINANCING ACTIVITIES:
Property, plant and equipment debt additions ... 19,718 8,106 5,899
Property, plant and equipment debt payments .... 4,258 6,942 7,133
Debenture conversion ........................... 2,774
Fair value of divestitures, net of cash held ... 493
Receivables acquired in connection with
divestitures ................................... 255
</TABLE>
(18) SUBSEQUENT EVENTS (UNAUDITED)
Since the Petition Date, Grant has conducted discussions with several
parties who have indicated possible interest in funding a plan of
reorganization. On March 14, 1997, Grant announced that it had entered into a
term sheet ("Term Sheet") with Elliott to fund and jointly sponsor a plan of
reorganization. The Term Sheet calls for Elliott to invest up to $30,000,000 in
new equity capital in Grant and to provide $2,000,000 in expanded credit
facilities for the growth of the Company's international operations. In
addition, pending confirmation of the reorganization plan, Elliott purchased a
$2,500,000 participation in Grant's current post-petition loan facility with
its Lender. The Term Sheet is subject to a number of material conditions,
including but not limited to, execution of a mutually agreeable definitive
agreement and the Court's approval of certain break-up fees and bidding
procedures. The Court approved the break-up fee and bidding procedures on April
9, 1997. Pursuant to the Term Sheet, Grant and Elliott will file a jointly
proposed reorganization plan providing for specific recoveries to Grant's
secured and unsecured creditors. Secured creditors will be paid in full in a
combination of cash and/or new promissory notes. Unsecured creditors would be
able to select from a menu of recovery options that include cash and stock,
promissory notes or credits exchangeable for Grant services performed after
consummation of the plan. In addition, the plan is expected to provide for a
$33,000,000 rights offering, $30,000,000 of which will be guaranteed by
Elliott. Under the rights offering, Grant's unsecured creditors and its
preferred and common shareholders will be granted the right to purchase shares
of Grant's new common stock at the same price per share as Elliott's
investment. The plan is expected to also provide an option for Grant's
employees to participate in the rights offering subject to any required
Securities and Exchange Commission approvals. The shares will be offered to
employees on the same basis as those offered to creditors, shareholders and
Elliott. If the plan is consummated, Elliott will own a minimum of 51% of
Grant's common stock. Consummation of the plan contained in the Term Sheet is
subject to a number of conditions including the vote of Grant's creditors and
shareholders.
The Term Sheet, as modified by the Court's order on April 9, 1997
approving certain break-up fees and bidding procedures, also provides that the
Elliott proposal is subject to any higher and better offer which may be
received by Grant. Grant has retained Simmons & Company International as its
investment banker to assist it in soliciting other offers. Other offers are due
no later than the date set by the Court for the filing of objections to the
disclosure statement the Grant expects to file in connection with the Elliott
proposal. Grant will evaluate all valid offers, and will select the proposal
which, in its judgment, produces the highest and best recovery to all parties
in interest. Any valid offer must provide for the purchase of Elliott's
participation in Grant's post-petition loan facility.
F-26
<PAGE> 61
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
SUPPLEMENTARY FINANCIAL INFORMATION
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Quarterly financial information is summarized as follows:
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER(2) QUARTER(3) YEAR ENDED
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1996
Revenues ....................................... $ 27,808 $ 26,951 $ 26,166 $ 24,598 $ 105,523
Operating income/(loss) ........................ 1,060 955 (21,518) (46,467) (65,970)
Net loss ....................................... (572) (621) (23,655) (51,179) (76,027)
Net loss applicable to common stock ............ (3,106)(1) (2,023) (25,056) (52,205) (82,390)
LOSS PER COMMON SHARE--ASSUMING
NO AND FULL DILUTION:
Net loss per common share ...................... $ (0.25) $ (0.15) $ (1.72) $ (2.70) $ (5.60)
========= ========= ========= ========= =========
1995
Revenues ....................................... $ 18,406 $ 20,712 $ 24,763 $ 28,115 $ 91,996
Operating income ............................... 296 2,037 1,484 1,182 4,999
Net income ..................................... 40 1,083 1,713 326 3,162
Net income/(loss) applicable to common stock ... (1,275) (231) 398 (988) (2,096)
INCOME/(LOSS) PER COMMON SHARE--ASSUMING
NO AND FULL DILUTION:
Net income/(loss) per common share ............. $ (0.10) $ (0.01) $ 0.03 $ (0.08) $ (0.17)
========= ========= ========= ========= =========
</TABLE>
____________
(1) Includes $1,220 cumulative adjustment for the prior unpaid, undeclared
dividends associated with the issuance of 143,000 shares of Grant's
$2.4375 Preferred Stock.
(2) Includes $8,374 recognition of anticipated contract losses.
(3) Includes $5,802 special charge for asset impairment (see Note 4 of Notes
to the Consolidated Financial Statements), $5,511 reserve for accounts
receivable determined to be uncollectible, $2,700 demobilization charge
for closed operations, $1,206 related to future estimated contract losses
and $412 of reorganization costs.
F-27
<PAGE> 62
SCHEDULE II
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
CLASSIFICATION OF PERIOD EXPENSES DEDUCTIONS OTHER OF PERIOD
-------------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for doubtful accounts
receivable ...................... $ (2,344) $ (5,511) $ 1,529(1) $ 615 $ (5,711)
Year ended December 31, 1995
Allowance for doubtful accounts
receivable ...................... (3,841) 1,257(1) 240 (2,344)
Year ended December 31, 1994
Allowance for doubtful accounts
receivable ...................... (3,955) (14) 39 89 (3,841)
</TABLE>
- --------------
(1) Principally write off of uncollectible/disputed amounts.
S-1
<PAGE> 63
EXHIBIT INDEX
Exhibits not filed herewith have been previously filed with the Securities and
Exchange Commission and are incorporated by reference herein from the document
indicated.
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
3.01 - By-laws of Grant, as amended (filed as Schedule 3.02 to
Grant's 1995 Form 10-K, File No. 000-18816).
3.02 - Fourth Restated Certificate of Incorporation of Grant, as
amended (filed as Exhibit 3.01 to Grant's Form 10-Q for the
quarter ended June 30, 1996, File No. 000-18816).
4.01 - Specimen of Common Stock Certificate (filed as Exhibit 4.01 to
Grant's Registration Statement on Form S-1; Reg. No. 33-36291).
4.02 - Copies of instruments relating to long-term debt in authorized
amounts that do not exceed 10% of the consolidated assets of the
Company and its subsidiaries have not been filed and will be
furnished to the Commission upon request.
4.03 - Form of Certificate for $2.4375 Convertible Exchangeable
Preferred Stock (filed as an Exhibit 4.03 to Grant's
Registration Statement on Form S-1; Reg. No. 33-43899.)
4.04 - Form of Indenture between Grant and The Bank of New York, as
Trustee, relating to Grant's 9-3/4% Convertible Subordinated
Debentures due 2016 (filed as Exhibit 4.05 to Grant's
Registration Statement on Form S-1; Reg. No. 33-41316).
4.05 - Form of 9-3/4% Convertible Subordinated Debenture due 2016
(incorporated by reference to pages 12 to 19 of Exhibit 4.05 to
Grant's Registration Statement on Form S-1; Reg. No. 33-41316).
10.01 - Amended 1989 Long-Term Incentive Plan of Grant (filed as
Exhibit 10.08 to Grant's 1994 Form 10-K; File No. 000-18816).
10.02 - Employee Retirement Savings Plan of Grant (filed as Exhibit
10.03 to Grant's Registration Statement on Form S-1; Reg. No.
33-36291).
10.03 - Stock Registration Rights Agreement, dated August 10, 1989
(filed as Exhibit 10.16 to Grant's Registration Statement on
Form S-1; Reg. No. 33-36291).
10.04 - Management Incentive Plan (filed as Exhibit 10.27 to Grant's
Registration Statement on Form S-1; Reg. No. 33-36291).
10.05 - Loan and Security Agreement dated as of February 17, 1993, by
and between Grant and Foothill Capital Corporation (filed as
Exhibit 10.11 to Grant's 1992 Form 10-K; File No. 000-18816).
10.06 - Amended and Restated Purchase and Sale Agreement dated July 6,
1993, by and among Grant, Grant Geophysical, Inc., U.K. and
Petroleum Geo-Services A/S (filed as Exhibit 2.1 to Grant's Form
8-K dated July 20, 1993; File No. 000-18816).
10.07 - Loan and Security Agreement dated as of April 26, 1993, by and
between Grant and Foothill Capital Corporation (filed as Exhibit
10.11 to Grant's 1993 Form 10K; File No. 000-18816).
10.08 - Loan Agreement dated July 28, 1994, by and between Grant and
Elliott Associates, L.P. (filed as Exhibit 10.08 to Grant's 1994
Form 10-K; File No. 000-18816)
10.09 - Loan and Security Agreement dated February 20, 1996 between
Grant and its subordinated lender (filed as Exhibit 10.01 to
Grant's 10-Q for the quarter ended March 31, 1996, File No.
000-18816).
10.10 - Second Amendment to Term Loan Agreement Dated February 20,
1996 By and Between Grant and Its Subordinated Lender (filed as
Exhibit 10.01 to Grant's Form 10-Q for the quarter ended
September 30, 1996, File No. 000-18816).
10.11* - Final Financing Order dated February 4, 1997 By and Between
Grant and Foothill Capital Corporation, including attachments
thereto.
10.12* - Amended Final Financing Order dated April 9, 1997 By and
Between Grant and Foothill Capital Corporation, including
attachments thereto.
10.13* - Bankruptcy Voluntary Petition dated December 5, 1996 by Grant
Geophysical, Inc.
</TABLE>
E-1
<PAGE> 64
EXHIBIT INDEX (CONTINUED)
<TABLE>
<S> <C>
10.14* - Employment Contract dated January 28, 1997 By and Between
Grant and Larry E. Lenig, Jr.
10.15* - Letter of Intent dated March 14, 1997 By and Between Grant and
Elliott Associates L.P.
10.16* - Sale of United Geophysical (Nigeria) Ltd. Proposal dated
December 23, 1996 By and Between Grant and Orbier Ltd. or Its
Assignee.
10.17* - Promissory Note of Grant dated October 31, 1996, payable to
the order of Westgate International, L.P. in the original
principal amount of $550,000.
10.18* - Promissory Note of Grant dated November 1, 1996, payable to
the order of Elliott Associates, L.P. in the original principal
amount of $325,000.
10.19* - Promissory Note of Grant dated November 5, 1996, payable to
the order of Elliott Associates, L.P. in the original principal
amount of $840,000.
10.20* - Promissory Note of Grant dated November 5, 1996, payable to
the order of Westgate International, L.P. in the original
principal amount of $560,000.
10.21* - Promissory Note of Grant Dated November 7, 1996, payable to
the order of Elliott Associates, L.P. in the original principal
amount of $489,000.
10.22* - Promissory Note of Grant dated November 8, 1996, payable to
the order of Westgate International, L.P. in the original
principal amount of $385,000.
11.01* - Computation of Income (Loss) Per Common and Common Equivalent
Share.
12.01* - Computation of Ratios of Earnings to Fixed Charges and
Preferred Dividends and Computation of Deficiency of Earnings
Available to Cover Fixed Charges and Preferred Dividends.
18.01 - Letter from independent certified public accountants regarding
preferability of change in accounting principle (filed as
Exhibit 18.01 to Grant's 10-Q for the quarter ended March 31,
1991; File No. 000-18816).
21.01* - Subsidiaries of Grant.
23.01* - Consent of KPMG Peat Marwick, independent certified public
accountant, to incorporation by reference of 1996 financial
statements contained in this Report on Form 10-K into the
Company's Registration Statement on Form S-8.
27* - Financial Data Schedule
</TABLE>
- --------------
* Filed herewith
E-2
<PAGE> 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
)
IN RE: ) CHAPTER 11
)
GRANT GEOPHYSICAL, INC., ) CASE NO. 96-1936 (HSB)
)
DEBTOR. )
)
JOINT STIPULATION AND AGREED ORDER AUTHORIZING FINAL
FINANCING, GRANTING SENIOR LIENS AND PRIORITY
ADMINISTRATIVE EXPENSE STATUS, PROVIDING FOR
ADEQUATE PROTECTION, MODIFYING THE AUTOMATIC
STAY, AND AUTHORIZING DEBTOR TO ENTER INTO
AGREEMENTS WITH FOOTHILL CAPITAL CORPORATION
THIS MATTER came before the Court on January __, 1997, upon the
Verified Motion For An Order Authorizing Debtor To Obtain Secured Post-Petition
Financing Pursuant To 11 U.S.C. Section 364 (b) and (c), of Grant Geophysical,
Inc., Debtor and Debtor-in-Possession (the "Debtor"), dated December 6, 1996
(the "Financing Motion"), seeking, inter alia, (i) authority pursuant to
Sections 364(c)(1), 364(c)(2), and 364(c)(3) of the United States Bankruptcy
Code, 11 U.S.C. Sections 101, et seq. (the "Code"), and Rules 4001 and 9014
of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules") for the
Debtor to obtain post-petition loans and advances of up to the aggregate
outstanding amount from time to time of $12,500,000, inclusive of the amount of
all pre-petition indebtedness owed from time to time by the Debtor to Foothill
Capital Corporation ("Foothill"), the debtor-in-possession financier, secured
by (A) except as otherwise set forth herein, first-priority security interests
in and liens upon all of the Collateral (as hereinafter defined) and (B)
security interests in and liens upon all of the Collateral, pursuant
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 1 -
<PAGE> 2
to Sections 364(c)(2) and 364(c)(3) of the Code, (ii) authority for the Debtor
to ratify, extend, assume, adopt, amend, and perform under the existing loan,
financing, and security agreements by and between the Debtor and Foothill,
pursuant to the terms of the Loan Documents (as defined hereinafter) and the
Ratification and Amendment Agreement (together with any amendment thereto, the
"Ratification Agreement"), filed as an Addendum to the Financing Motion (the
"Addendum") and incorporated herein for all purposes, (iii) approval of the
terms and conditions of the loan, financing, and security agreements by and
between the Debtor and Foothill, as so ratified, extended, assumed, adopted and
amended, (iv) the modification of the automatic stay to the extent provided
below, (v) granting of adequate protection to Foothill for the Pre-Petition
Collateral (as defined hereinafter), inclusive of "cash collateral" derived
therefrom within the meaning of Section 363(a) of the Code, and (vi) the
granting to Foothill of its super-priority administrative claim status pursuant
to Section 364(c)(1) of the Code. The Debtor has represented to the Court that
it will comply with the terms of this Joint Stipulation And Agreed Order
Authorizing Final Financing, Granting Senior Liens And Priority Administrative
Expense Status, Providing For Adequate Protection, Modifying The Automatic
Stay, And Authorizing Debtor To Enter Into Agreements With Foothill Capital
Corporation (this "Final Financing Order"). Various creditors appeared by and
through their respective counsel and announced to the Court that they had no
objections to the Financing Motion, to the extent of the final financing sought
therein, based on the changes now reflected in this Final Financing Order and
Amendment Number One to Ratification and Amendment Agreement ("Amendment No.
One") attached hereto and incorporated herein for all purposes. All remaining
objections to the Financing Motion have been overruled by this Court. The
Court finds notice to have been sufficient and adequate under the particular
circumstances of this case. The parties hereto have
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 2 -
<PAGE> 3
stipulated and agreed as follows, and based upon the pleadings and the proffers
of evidence and representations of counsel, the Court hereby adopts said
stipulation and agreement as findings of fact and conclusions of law(1) to
permit financing of the Debtor on a final basis.
I. FINDINGS OF FACT
1. Adequate notice and opportunity for hearing have been given
for the Financing Motion, to the extent of the final financing sought therein,
in accordance with the provisions of 11 U.S.C. Sections 102, 361, 362, 363 and
364, and Bankruptcy Rules 4001(c) and (d) and 9006. This is a core proceeding
as defined in 28 U.S.C. Sections 157(b)(2)(A),(D),(G),(K),(M), and (O).
2. The Debtor filed its Voluntary Petition for reorganization
under Chapter 11 of the Code on December 6, 1996 (such date, and the specific
time of filing on such date, being referred to as the "Petition Date"), and
thereafter continued in the management and possession of its business and
properties as Debtor-in-Possession pursuant to Sections 1107 and 1108 of the
Code.
3. Foothill has agreed to provide post-petition loans and
advances to or for the benefit of the Debtor pursuant to the terms of certain
loan, financing, and security agreements executed and delivered by the Debtor
with, to, or in favor of Foothill, including, without limitation, the
agreements set forth in the Exhibit annexed to the Addendum and the Uniform
Commercial Code financing statements filed or to be filed by Foothill against
the Debtor set forth in an Exhibit annexed to the Addendum (all of such
documents, security agreements, and financing statements, and all other related
agreements, documents (including, without limitation, the Intercreditor
Agreements (i) by and between Foothill and Madeleine LLC, f/k/a Madeline,
L.L.C. ("Madeleine") and (ii) between and among Foothill, Input/Output, Inc.
("Input/Output") and Global Charter Corporation, (all as more fully described
in Paragraph 9 of Part III of this Final Financing Order; collectively, the
"Intercreditor Agreements"), notes, instruments, and guarantees creating or
evidencing indebtedness of the Debtor to Foothill or granting collateral
security of the Debtor in favor of Foothill, as the same now exist or may
hereafter be amended, modified, supplemented, ratified, assumed, extended,
renewed, restated, or replaced, being referred to herein collectively as the
"Loan Documents").
4. The Debtor admits, acknowledges, and stipulates that the
principal amount of all obligations, liabilities, and indebtedness of the
Debtor to Foothill, both absolute and contingent, existing prior to the
commencement of the above-referenced Chapter 11 case (the "Case"), together
with all interest, fees, commissions, costs, and expenses accrued and accruing
with respect thereto (collectively, the "Pre-Petition Lender Debt") is
$11,500,946, as of December 5, 1996. The Debtor stipulates (but not the
Creditors' Committee) that the Pre-Petition Lender Debt is fully secured
pursuant to the Loan Documents by the following (collectively, the
- ----------------------------
(1) To the extent any finding of fact is mischaracterized as a conclusion of
law, it shall be deemed a finding of fact, and vice versa.
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 3 -
<PAGE> 4
"Pre-Petition Collateral"): (i) perfected and valid security interests in, and
liens upon, all of the Debtor's property constituting the pre-petition
collateral of Foothill and other security for the Pre-Petition Lender Debt as
provided in the pre-petition Loan Documents; and (ii) all profits, income, and
proceeds derived therefrom, and all accessions, substitutions, renewals,
improvement, replacements, and additions thereof, now owned or hereafter
acquired by the Debtor, and all rights and property of any kind forming the
subject matter of any of the foregoing existing as of the Petition Date,
together with all post-petition proceeds and products thereof under 11 U.S.C.
Section 552(b). The preceding admissions of the Debtor are without prejudice
to the rights of the Creditors' Committee (as defined below) or other parties
in interest to file a complaint with respect to, or otherwise object to, the
Pre-Petition Lender Debt and the liens with respect to same as provided for
below.
5. The Debtor further admits, acknowledges, and stipulates that
the Pre-Petition Lender Debt is valid and enforceable and is not subject to
offset, credit, or counterclaim, and that the liens on the Pre-Petition
Collateral securing repayment of the Pre-Petition Lender Debt are valid,
perfected, and unavoidable. The preceding admissions of the Debtor are without
prejudice to the rights of the Creditors' Committee or other parties in
interest to file a complaint with respect to, or otherwise object to, the
Pre-Petition Lender Debt and the liens with respect to same as provided for
below.
6. Without the proposed financing, the Debtor will suffer
immediate and irreparable harm insofar as it will not have the funds necessary
to pay its post-petition payroll, payroll taxes, inventory suppliers,
overhead, and other expenses necessary for the continued operation of the
Debtor's business and the management and preservation of its assets and
properties.
7. The Debtor has requested that Foothill make loans and advances
to or for the benefit of the Debtor to provide funds, inter alia, to be used
for such purposes described in Paragraph 6 above.
8. All such loans and advances by Foothill will benefit the
Debtor and its estate.
9. Foothill is willing to make such loans and advances on a
secured basis, as more particularly described herein and subject to the terms
and conditions contained herein and in the Loan Documents.
10. The ability of the Debtor to continue in business and remain a
viable entity and thereafter reorganize under Chapter 11 of the Code depends
upon obtaining such financing from Foothill. Nevertheless, the financing from
Foothill is intended to "bridge" the financing of the Debtor's operations until
the Debtor can consummate a Recapitalization (as such term is defined in
Amendment No. One). The Debtor covenants that it shall exercise its best
efforts to immediately market and, as soon as reasonably practicable,
consummate a Recapitalization. The Debtor acknowledges that such
Recapitalization is the principal means of satisfying the claims of creditors
in this Case. In addition, the Debtor has filed applications to retain the
services of an investment banker, a real estate broker, and an experienced
executive to manage the Debtor, all
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 4 -
<PAGE> 5
in an effort to facilitate this process and expedite the marketing and
Recapitalization of the Debtor, as required under the Loan Documents and
Interim Financing Order (as defined below).
11. The relief requested in the Financing Motion is necessary,
essential, and appropriate for the continued operation of the Debtor's business
and the management and preservation of its assets and properties.
12. The Debtor is unable to obtain unsecured credit allowable
under Section 503(b)(1) of the Code, or pursuant to Sections 364(a) and (b) of
the Code.
13. No practical source of financing exists other than Foothill
since the Debtor acknowledges that (a) all of its cash is "cash collateral" of
Foothill under Section 363(a) of the Code (the "Cash Collateral"), and (b)
Foothill does not consent to the Debtor's use of such Cash Collateral.
Moreover, the uncertainty of the Debtor's ability to obtain the use of Cash
Collateral over the objections of Foothill would lead to uncertainty by other
trade creditors and would not be beneficial to the Debtor's reorganization
efforts. In addition, Cash Collateral alone would not be sufficient to allow
the Debtor to continue in business and remain a viable entity and reorganize
under Chapter 11 of the Code. The Debtor's only means of obtaining funding is
a debtor-in-possession loan facility pursuant to Section 364 of the Code.
14. The Financing Motion (seeking interim and final financing
therein) was filed on December 6, 1996, and the Debtor provided actual notice
of the terms of the Financing Motion, and the relief requested thereunder by
first- class mail, postage prepaid, or overnight courier on December 6, 1996,
to (a) the Office of the United States Trustee, (b) the attorneys for Foothill,
(c) the attorneys for Madeleine, (d) the 20 largest unsecured creditors of the
Debtor, (e) the Creditors' Committee, (f) all creditors known to the Debtor who
may have liens against the Debtor's assets, (g) all factors and vendors as of
the Petition Date who have deposits or other security that exceeds the amount
owed to such factor and/or vendor, to the extent known, (h) all parties in
interest who have filed a notice of appearance in the Case from and after the
date of the Financing Motion, and (i) all parties in interest who have
requested such information.
15. On December 6, 1996, this Court granted the Financing Motion
(to the extent of the interim financing sought therein), and the Court entered
a certain Joint Stipulation and Agreed Order Authorizing Interim Financing,
Granting Senior Liens And Priority Administrative Expense Status, Providing For
Adequate Protection, Modifying The Automatic Stay, And Authorizing Debtor To
Enter Into Agreements With Foothill Capital Corporation (the "Interim Financing
Order"). Pursuant to the terms of the Interim Financing Order, the Debtor was
authorized to enter into the debtor-in-possession loan facility pursuant to the
terms and conditions of the Loan Documents and borrow from Foothill, on an
interim basis, an amount not to exceed the aggregate principal amount of
$12,500,000, inclusive of the Pre- Petition Lender Debt outstanding as of the
Petition Date. Foothill thereafter made advances to the Debtor through and
including the date of the entry of this Final Financing Order. By virtue of
the Interim Financing Order, Foothill is entitled to all of the rights,
priorities, liens, and protections provided to Foothill under the terms of the
Interim Financing Order; provided, however, that nothing contained in the
Interim Financing Order (or, for that matter, the Final Financing Order)
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 5 -
<PAGE> 6
should be construed to authorize or otherwise grant to Foothill a priming lien
under Section 364(d) of the Code.
16. The Court originally set a deadline to object to the Financing
Motion (as to the final financing sought therein) for January 3, 1997 at 4:00
p.m. E.S.T.
17. On December 18, 1996, an Official Committee of Unsecured
Creditors (the "Creditors' Committee") was appointed in the Case. On December
24, 1996, the U.S. Trustee's office appointed an additional member to the
Creditors' Committee.
18. Various objections were timely filed to the Financing Motion
and these objections have either been resolved by the form of this Final
Financing Order or are otherwise overruled by this Court.
19. Sufficient and adequate notice of the Financing Motion (as to
the final financing sought therein) and the hearing with respect thereto have
been given pursuant to Bankruptcy Rules 2002, 4001(c) and 9014 and Section
102(1) of the Code as required by Section 364(c) of the Code, and no further
notice of, or hearing on, the relief sought in the Financing Motion (as the
final financing sought therein) is necessary or required.
20. Consideration of the Financing Motion constitutes a "core
proceeding" as defined in 28 U.S.C. Sections 157(b)(2)(A), (D), (G), (K), (M),
and (O). This Final Financing Order is subject to, and Foothill is entitled to
the benefits of, the provisions of Section 364(e) of the Code. This Court has
jurisdiction over this proceeding and the parties and property affected hereby
pursuant to 28 U.S.C. Sections 157(b)(2)(A), (D), (G), and (M) and 1334.
21. The terms of the Loan Documents by and between the Debtor and
Foothill, pursuant to which post-petition loans and advances may be made to or
for the benefit of the Debtor by Foothill, have been negotiated at arms' length
and in good faith, as that term is used in Section 364(e) of the Code, and are
in the best interests of the Debtor. Foothill shall be given all the
protections of entities that have extended credit in good faith under Section
364(e) of the Code.
22. Good, adequate, and sufficient cause has been shown to justify
the granting of the relief requested herein.
WHEREUPON, this Court makes the following conclusions of law:
II. CONCLUSIONS OF LAW
A. Foothill is entitled to the liens and protections of a
good-faith lender under Sections 364(c)(1), (c)(2), and (c)(3) and 364(e) of
the Code, as provided herein.
B. Foothill, as the holder of a secured claim against the Debtor,
is entitled to adequate protection of its interests in the Pre-Petition
Collateral under Sections 361, 362, and
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 6 -
<PAGE> 7
363 of the Code and the provisions of Section 506(b) of the Code as a
consequence of the value of the Collateral (as hereinafter defined).
C. The entry of this Final Financing Order is in the best
interest of the Debtor, its creditors, and its bankruptcy estate.
D. Good and sufficient notice of the Financing Motion, with
respect to the request therein for the entry of this Final Financing Order, and
of the hearing thereon has been provided in accordance with Sections 102(1) and
364(c)(1), (2), and (3) of the Code, Bankruptcy Rule 2002, and any requests for
other and further notice shall be and are hereby dispensed with and waived.
E. The relief granted by this Court pursuant to this Final
Financing Order is necessary to the continued operations of the Debtor's
business and is in the best interests of its estate.
III. ORDERS OF THE COURT
BASED UPON THE FOREGOING, it is therefore ORDERED as follows:
1. The Financing Motion (as to the final financing sought
therein, as modified herein) is granted, and it is hereby approved.
2. The Debtor is hereby authorized and empowered to borrow from
Foothill on a revolving basis in accordance with the Loan Documents, pursuant
to the terms of this Final Financing Order and the terms and conditions set
forth in the Loan Documents, in such amount or amounts as may be made
available to or for the benefit of the Debtor from Foothill, which shall for
such period not exceed the aggregate principal amount of $12,500,000, inclusive
of the Pre-Petition Lender Debt outstanding as of the Petition Date subject to
the terms of the Loan Documents. To the extent the terms and conditions of the
Loan Documents are in conflict with the terms and conditions of this Final
Financing Order, the terms and conditions of this Final Financing Order shall
control.
3. During the term of this Final Financing Order, the Debtor
shall use the proceeds of the loans solely to fund the Debtor's working capital
needs, issue commercial or standby letters of credit and for other general
corporate purposes.
4. The Debtor is authorized and directed to execute, deliver,
perform, and comply with the terms and conditions of the Loan Documents
(inclusive of the Ratification Agreement), pursuant to which (a) the Debtor
ratified, extended, assumed, adopted and amended the Loan Documents, and agreed
to be bound thereby, and (b) the Debtor agreed to perform and comply with the
terms and conditions of the Loan Documents.
5. The terms and conditions of the Loan Documents, as so
ratified, extended, assumed, adopted and amended, shall be deemed to be
incorporated into the terms and conditions
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 7 -
<PAGE> 8
of this Final Financing Order and shall be sufficient and conclusive evidence
of the borrowing arrangements by and between the Debtor and Foothill, and of
the Debtor's assumption and adoption of the terms and conditions of the Loan
Documents, for all purposes, including the payment of all interest, closing
fees, commitment fees, servicing fees, letter of credit fees, facility fees,
additional commitment fees, early termination fees, other fees, and expenses as
more fully set forth in the Loan Documents.
6. The Debtor hereby acknowledges and agrees (and this Court
hereby finds for all purposes in this Case, subject only to the rights of a
Creditors' Committee and other parties in interest as hereinafter set forth in
Paragraph 7 below), that as of the Petition Date: (a) the Loan Documents are
valid and binding agreements and obligations of the Debtor to Foothill, (b) the
Debtor owes to Foothill pursuant to the Loan Documents as of December 5, 1996,
the approximate amount of $11,500,946, consisting of: (i) unpaid principal,
(ii) interest continuing to accrue on the foregoing obligations at the
pre-default rate of interest provided under the Loan Documents, and (iii) the
expenses of Foothill which are still accruing, (c) the security interests in
and liens upon the Pre-Petition Collateral of Foothill are valid, perfected,
enforceable and non-avoidable, (d) the pre-petition claims of Foothill against
the Debtor and the estate of the Debtor are allowable and are valid,
enforceable and non-avoidable (in the amount set forth above), (e) the Debtor
does not possess and may not assert any claim, counterclaim, setoff or defense
of any kind or nature which would in any way affect the validity,
enforceability or non-avoidability of the amount set forth above, Foothill's
security interests in and liens upon the Pre-Petition Collateral, or reduce or
affect the obligation of the Debtor to pay the amount set forth above, and (f)
Foothill and its agents and employees are released and discharged from all
claims and causes of action arising out of the Loan Documents or Foothill's
relationship with the Debtor prior to the entry of this Final Financing Order.
7. The extent, validity, priority, perfection, and enforceability
of the pre-petition liens or any other claims of Foothill, whatsoever against
the Debtor, are for all purposes subject only to the rights of a duly appointed
Creditors' Committee in the Debtor's Case and any party in interest for a
period of ninety (90) days from the formation of the Creditors' Committee in
this Case, to file a complaint pursuant to Bankruptcy Rule 7001 to invalidate,
set aside, or subordinate the Pre-Petition Lender Debt and/or to object to the
extent, validity, priority, or perfection of Foothill's pre-petition security
interests and liens or to pursue the pre-petition claims against Foothill
described in Paragraphs 6(e) and 6(f) of Part III immediately above. To the
extent that Foothill's pre-petition security interests and liens are avoided,
the replacement liens and security interests granted to Foothill under
Paragraph 8 below are likewise avoided. If such complaint is not so timely
filed, the Pre-Petition Lender Debt and Foothill's pre-petition security
interests and liens shall be recognized as valid, binding, allowed and in full
force and effect with respect to all parties in the Debtor's Case, including,
without limitation, any Trustee or successor Trustee appointed hereafter, and
as a fully secured claim pursuant to Sections 506(a) and (b) of the Code. The
entry of this Order shall constitute an authorization of the Creditors'
Committee to file an adversary proceeding to determine the validity, priority
and extent of the Pre-Petition Lender Debt and liens with respect thereto of
Foothill, to seek recovery of avoided pre- petition transfers from Foothill, to
seek subordination of Foothill's Pre-Petition Lender Debt, or to pursue any
other pre-petition claims against Foothill that the estate might have.
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 8 -
<PAGE> 9
8. Pursuant to Sections 364(c)(2) and (3) of the Code in
connection with the Post-Petition Lender Debt (as hereinafter defined) and as
adequate protection replacement liens pursuant to Sections 361 and 363(e) of
the Code in connection with any diminution in the value of the Pre-Petition
Collateral, to secure the prompt payment and performance of any and all
obligations, liabilities, and indebtedness of the Debtor to Foothill, of
whatever kind or nature or description, consisting of all post-petition
obligations, liabilities, and indebtedness of the Debtor arising under the Loan
Documents, as amended by the Ratification Agreement, Foothill shall have and is
hereby granted, effective on and after the date of this Final Financing Order,
valid and perfected first-priority security interests and liens, superior to
all other creditors of the estates of the Debtor (except with respect to
(i) the collateral for which Madeleine holds a valid
first-priority lien and security interest as recognized in the
Madeleine Intercreditor Agreement and as set forth in
Paragraph 9A below, and
(ii) the collateral for which Input/Output holds a valid
first-priority lien and security interest as recognized in the
IOG Intercreditor Agreement (as defined below) and the
Ratification Agreement, any valid purchase money security
interests with respect to any valid purchase money security
interests with respect to any equipment sold by Input/Output
to the Debtor, and as set forth in Paragraph 9B below)
in and upon all of the properties and assets of the Debtor, real or personal,
including but not limited to those assets described in the Loan Documents and
hereafter-acquired real and personal property of the Debtor and its bankruptcy
estate, whether acquired prior to or after the filing of the petition
commencing the Case, whether now owned and existing or hereafter acquired,
created or arising, and all products and proceeds thereof (including without
limitation, claims of the Debtor against third parties for loss or damage to
such property), including all accessions thereto, substitutions and
replacements thereof, and wherever located, including, but not limited to, the
following (collectively, the "Collateral"):
(a) all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to
the Debtor arising out of the sale or lease of goods or the rendition
of services by the Debtor, irrespective of whether earned by
performance, and any and all credit insurance, guaranties, or security
therefor (collectively, the "Accounts");
(b) all of the Debtor's present and future general
intangibles and other personal property (including contract rights,
rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents (including, but not limited to,
all of the "Patent Collateral", as defined in that certain Patent
Collateral Assignment, dated April 26, 1993, by and between Foothill
and the Debtor), trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, monies due under any
royalty or
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 9 -
<PAGE> 10
licensing agreements, infringements, claims, computer programs,
computer discs, computer tapes, seismic data, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds,
and tax refund claims, as well as all cash collateral that is
hypothecated to secure letters of credit or bonding obligations) other
than goods and Accounts (collectively, the "General Intangibles");
(c) all of the Debtor's present and future letters of
credit, notes, drafts, instruments, certificated securities (including
the shares of stock of any Subsidiary, as defined in the Loan
Agreement), documents, personal property leases (wherein the Debtor is
the lessor), chattel paper, and the Debtor's Books (as defined below)
relating to any of the foregoing (collectively, the "Negotiable
Collateral");
(d) all present and future inventory in which the Debtor
has any interest, including goods (including seismic data to the
extent the same is characterized as a good) held for sale or lease or
to be furnished under a contract of service and all of the Debtor's
present and future raw materials, work in process, finished goods, and
packing and shipping materials, wherever located, and any documents of
title representing any of the above (collectively, the "Inventory");
(e) all of the Debtor's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools,
parts, dies, jigs, goods (other than consumer goods, farm products, or
the Inventory), and any interest in any of the foregoing, wherever
located, and all attachments, accessories, replacements,
substitutions, additions, and improvements to any of the foregoing,
wherever located (collectively, the "Equipment");
(f) all of the Debtor's books and records including:
ledgers; records indicating, summarizing, or evidencing the Debtor's
assets or liabilities, or the Collateral; all information relating to
the Debtor's business operations or financial condition; and all
computer programs, disc or tape files, printouts, runs, or other
computer prepared information, and the equipment containing such
information (collectively, the "Debtor's Books"). Upon the written
request by the Creditors' Committee to the Debtor and Foothill and
subject to confidentiality, the Creditors' Committee shall be entitled
to all or a portion of a copy of the Debtor's Books at the sole
expense of the Creditors' Committee with due regard to cost - benefit
concerns and reserving to the Court the right to resolve disputes, if
any, regarding cost - benefit concerns;
(g) Notwithstanding anything to the contrary herein,
expressly excluded from Foothill's collateral are all proceeds of
claims of the Debtor for recovery or avoidance, as the case may be, of
obligations, transfers of property, or interests in property, offsets,
lawful currency of its equivalents, and other types or kinds of
property (or the value thereof) recoverable or avoidable under Chapter
5 of the Code (collectively, the "Avoidance Recoveries"), exclusive of
any Avoidance Recoveries against Foothill; but Foothill's collateral
shall include Avoidance Recoveries against Foothill, recoveries on the
Debtor's insurance policies for coverage of, inter alia, officers and
directors, or other
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 10 -
<PAGE> 11
causes of action or proceeds thereof, not arising from the Debtor's
avoidance powers under Chapter 5 of the Code. Foothill's lien on any
such causes of action and insurance recoveries shall not be construed
to divest the representatives of the estate of the Debtor from control
over the prosecution of such causes of action, and Foothill agrees
that it may not foreclose on same and that it shall subordinate its
liens (except as to Avoidance Recoveries against Foothill) to the
payment of the reasonable attorneys' fees, costs and expenses
necessary to the prosecution of same;
(h) All of the Debtor's shares of stock, including, but
not limited to, 1000 shares of common stock of Grant Tensor
Geophysical Corporation U.K., a Texas corporation, 50,000 shares of
common stock of Seiscom Delta United (International) Corporation, a
California corporation, 10,000 shares of common stock of Oklahoma
Seismic Corporation, which pledged shares constitute 100% of the fully
diluted issued and outstanding shares of stock of each of these
companies, together with all "Proceeds" (as defined in that certain
Stock Pledge Agreement, dated April 26, 1993, by and between the
Debtor and Foothill) (collectively, the "Stock");
(i) All real properties owned or leased by the Debtor,
subject to valid and enforceable mortgages, if any, of third parties
(collectively, the "Real Property");
(j) All of the Debtor's lock box accounts, collection
accounts, deposit accounts, concentration accounts and asset sale
accounts containing cash proceeds of the Collateral or advances made
to the Debtor, all funds now or hereto held therein, all present or
future claims, demands, and choses in action in respect thereof
(collectively, the "Special Accounts"); and
(k) substitutions, replacements, additions, accessions,
proceeds, products to or of any of the foregoing, including, but not
limited to, proceeds of insurance covering any of the foregoing, or
any portion thereof, and any and all Accounts, General Intangibles,
Negotiable Collateral, Inventory, Equipment, Stock, Real Property,
Special Accounts, money, or other tangible or intangible property
resulting from the sale or other disposition of the Accounts, General
Intangibles, Negotiable Collateral, Inventory, Equipment, Stock, the
Real Property, the Special Accounts or any portion thereof or interest
therein and the proceeds thereof.
9. Notwithstanding anything to the contrary set forth in
Paragraph 8 above, the security interests in and liens of Foothill upon the
Collateral shall not have priority over the following liens and security
interests (the "Existing Liens") and other interests described below:
(a) the prior liens on the Debtor's property described on
Exhibit B to Amendment No. One and incorporated herein for all
purposes and any other existing liens on or interests in the Debtor's
property (including such property listed thereon or otherwise
encumbered and such proceeds thereof), so long as (i) such liens are
valid, perfected, purchase money, and non-avoidable in accordance with
applicable law, and (ii) the foregoing is without prejudice to the
rights of the Debtor, any Creditors' Committee
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 11 -
<PAGE> 12
in the Case, or any other party in interest, including Foothill, to
object to the validity, priority, or extent of such liens, or the
allowance of such debts secured thereby, described on such Exhibit B,
or institute any actions or adversary proceedings with respect
thereto;
(b) the prior liens in favor of Banco Wiese Ltdo. on
certain of Debtor's contracts described on Exhibit C to Amendment No.
One and incorporated herein for all purposes), so long as (i) such
liens are valid, perfected, and non-avoidable security interests, in
accordance with applicable law, and (ii) the foregoing is without
prejudice to the rights of the Debtor, any Creditors' Committee in the
Case, or any other party in interest, including Foothill, to object to
the validity, priority, or extent of liens, or the allowance of such
debts secured thereby, described on such Exhibit B, or institute any
actions or adversary proceedings with respect thereto;
(c) the quarterly fees payable to the United States
Trustee pursuant to 28 U.S.C. Section 1930 or fees of the Clerk of
the Court;
(d) liens and security interests in favor of Wells Fargo
Bank (Texas), National Association ("Wells Fargo"), which cover
deposits and funds held by Wells Fargo securing reimbursement
obligations of the Debtor relating to letters of credit issued for the
benefit of any surety in conjunction with certain bonded operations of
the Debtor's business, such as explosive permits, highway use,
hole-plugging obligations, etc., so long as (i) such liens are valid,
perfected, and non-avoidable security interests, in accordance with
applicable law, and (ii) the foregoing is without prejudice to the
rights of the Debtor, any Creditors' Committee in the Case, or any
other party in interest, including Foothill, to object to the
validity, priority, or extent of such liens, or the allowance of such
debts secured thereby, or to institute any actions or adversary
proceedings with respect thereto;
(e) interests of other parties claiming ownership of
property under leases of such property to the Debtor; and
(f) the prior liens in favor of Teachers Insurance and
Annuity Association of America on the Houston Facility, so long as (i)
such lien is valid, perfected, and non-avoidable, in accordance with
applicable law, and (ii) the foregoing is without prejudice to the
rights of the Debtor, any Creditors' Committee in the Case, or any
other party in interest, including Foothill, to object to the
validity, priority, or extent of such liens, or the allowance of such
debts secured thereby, or to institute any actions or adversary
proceedings with respect thereto.
Notwithstanding the foregoing, to the extent that the interests of
lessor-parties listed in Exhibit B or of any other party claiming ownership of
property leased to the Debtor or other parties subrogated to such parties'
rights are not leases but are, in fact, determined by the Court, after notice
and a hearing, to be disguised financing transactions and, furthermore, that
such interests are not valid, perfected, non-avoidable purchase money security
interests, Foothill's liens shall be prior to such interests.
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 12 -
<PAGE> 13
9A. In furtherance of the foregoing, and as adequate protection to
Madeleine to the extent of the amount of diminution in the value of the
Madeline Collateral (as defined in the Intercreditor Agreement, dated February
20, 1996), as amended, between Foothill and Madeleine (the "Madeleine
Intercreditor Agreement"), including diminution from the use thereof, Madeleine
shall have a second priority lien on and security interest in the Foothill
Collateral (as defined in the Madeleine Intercreditor Agreement), to the
extent, and only to the extent, such collateral was pre-petition collateral
subject to valid Madeleine liens, junior in all respects to the lien and
security interest of Foothill therein, and a first priority lien on and
security interest in the Madeline Collateral (as defined in the Madeleine
Intercreditor Agreement); provided, however, that nothing in this Final
Financing Order shall in any way abrogate or limit the terms of the Madeleine
Intercreditor Agreement or affect or change the intercreditor relationship
between Foothill and Madeleine as created pursuant to the Madeleine
Intercreditor Agreement.
9B. In furtherance of the foregoing, and as adequate protection to
Input/Output and Global Charter, to the extent of the amount of the diminution
in the value of the IOG Collateral (as defined in the IOG Intercreditor
Agreement dated July 8, 1994), as amended, between and among Foothill,
Input/Output, and Global Charter Corporation (the "IOG Intercreditor
Agreement"), as well as any valid purchase money security interests with
respect to any equipment sold by Input/Output to the Debtor, including
diminution from the use thereof, to the extent, and only to the extent, such
collateral was pre-petition collateral subject to valid Input/Output and Global
Charter liens, Input/Output shall have a first-priority lien against the IOG
Collateral (as defined in the IOG Intercreditor Agreement) and any valid
purchase money security interest with respect to any equipment sold by
Input/Output to the Debtor; provided, however, that nothing in this Final
Financing Order shall in any way abrogate or limit the terms of the IOG
Intercreditor Agreement or affect or change the intercreditor relationship
between and among Foothill, Input/Output and Global Charter Corporation as
created pursuant to the IOG Intercreditor Agreement.
9C. Notwithstanding anything to the contrary in this Final
Financing Order, no pre-petition secured creditor is entitled to any
replacement liens except as follows: to the extent a pre-petition secured
lender had a valid and perfected lien on the Debtor's property pre-petition,
such lender is entitled to a post-petition replacement lien in only the same
types of collateral.
10. Foothill shall have all rights and remedies with respect to
the Debtor, the Post-Petition Lender Debt, and the Collateral as are set forth
in the Loan Documents and this Final Financing Order.
11. The Loan Documents shall be subject to termination at
Foothill's option as to any future loans, advances, and other credit
accommodations to be made or provided by Foothill to the Debtor immediately
upon such written notice as provided in the Loan Documents following the
occurrence of any Event of Default (as hereinafter defined) or immediately upon
the expiration or termination of the Debtor's authorization to borrow from
Foothill, pursuant to this Final Financing Order and the Loan Documents.
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 13 -
<PAGE> 14
12. Foothill shall apply the proceeds of the Pre-Petition
Collateral, first to Pre-Petition Lender Debt, until such Pre-Petition Lender
Debt is paid and satisfied in full under the Loan Documents. Thereafter, the
Pre- Petition Collateral shall be applied in reduction of the Post-Petition
Lender Debt. The proceeds of all Collateral arising from and after the
Petition Date, to the extent that such Collateral does not constitute
Pre-Petition Collateral (the "Post-Petition Collateral") shall be applied to
the payment of the Post-Petition Lender Debt.
13. The value, if any, of the Pre-Petition Collateral in excess of
the amount of the Pre-Petition Lender Debt secured by such collateral shall
constitute additional security for the repayment of the Pre-Petition Lender
Debt. In this regard, the amount by which the value of the Pre-Petition
Collateral exceeds the amount of the Pre-Petition Lender Debt, i.e., the equity
cushion, which provides a source for payment of allowed amounts under 11 U.S.C.
Section 506(b), constitutes an interest of Foothill in the Pre-Petition
Collateral that is itself subject to adequate protection under 11 U.S.C.
Sections 361 and 363. To the extent a decrease in the value of the
Pre-Petition Collateral renders the Pre-Petition Collateral insufficient to pay
the Pre-Petition Lender Debt (including post-petition interest, fees, costs,
and expenses) (i.e., the adequate protection provided herein fails), Foothill
shall be entitled to a super-priority administrative expense claim under 11
U.S.C. Section 503(b) and Section 507(a)(1) and (b).
14. This Final Financing Order shall be sufficient and conclusive
evidence of the priority, perfection, and validity of all of the security
interests in and liens upon the property of the estate of the Debtor granted to
Foothill as set forth herein, and the liens and security interests granted and
created herein shall, by virtue of this Final Financing Order, constitute valid
and perfected security interests without the necessity of creating, filing,
recording, or serving any financing statements or other documents that might
otherwise be required under federal or state law in any jurisdiction or the
taking of any other action to validate or perfect the security interests and
liens granted to Foothill in this Final Financing Order and the Loan Documents.
Such security interests and liens granted to Foothill shall be prior and senior
to all security interests, liens, claims, and encumbrances of all other
creditors in and to such property, except as otherwise set forth in Paragraphs
8 and 9 of Part III of this Final Financing Order. If Foothill shall, in its
discretion, elect for any reason to file any such financing statements or other
documents with respect to such security interests and liens, the Debtor is
authorized and directed to execute, or cause to be executed, all such financing
statements or other documents upon Foothill's reasonable request, and the
filing, recording, or service thereof (as the case may be) of such financing
statements or similar documents shall be deemed to have been made at the time
of and on the Petition Date, and the signature(s) of any person(s) designated
by the Debtor, whether by letter to Foothill or by appearing on any one or more
of the agreements or other documents respecting the security interest and lien
of Foothill in and upon the Collateral, shall bind the Debtor and its estate.
Foothill may, in its discretion, file a certified copy of this Final Financing
Order in any filing or recording office in any county or other jurisdiction in
which the Debtor has real or personal property, and, in such event, subject to
applicable law, the subject filing or recording officer is authorized and
directed to file or record such certified copy of this Final Financing Order.
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 14 -
<PAGE> 15
15. The Debtor has submitted to Foothill, and Foothill has
approved, a cash forecast and operating budget (the "Approved Budget"),
covering the period (the "Budget Period") from January 12, 1997 through June
30, 1997, setting forth projected cash receipts and disbursements for the
respective periods indicated thereon. A summary of the Budget is attached as
Exhibit A to Amendment No. One and is incorporated herein for all purposes.
The Debtor shall provide to Foothill and the Creditor's Committee, on a
bi-weekly basis (i.e., once every two weeks) no later than five (5) business
days following the end of each Bi-Weekly Period (as defined below), beginning
with the Bi-Weekly Period beginning February 23, 1997, a schedule in
substantially the same form as the Approved Budget, reflecting actual cash
receipts and disbursements for the Budget Period from inception through the
most recently ended Reporting Period. In addition, the Debtor shall, for
information purposes only, unless otherwise requested by the Debtor, update the
Approved Budget on a monthly basis, setting forth projected cash receipts and
disbursements for the remainder of the Budget Period. The Debtor shall submit
the updated budget to Foothill and the Creditor's Committee not later than five
(5) business days prior to the beginning of each succeeding month, beginning
March, 1997. If any of the following occur:
(a) the Debtor's Overadvance Advances (as such term is
defined in Amendment No. One) for any period set forth below, exceed
the Maximum Permitted Overadvance Amount set forth below for the
corresponding period:
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 15 -
<PAGE> 16
<TABLE>
<CAPTION>
Maximum Permitted
-----------------
Period Overadvance Amount
------ ------------------
<S> <C>
From the date hereof through and
including March 30, 1997: $6,000,000
From March 3l, 1997 through and
including April 29, 1997: $5,400,000
From April 30, 1997 through and
including May 30, 1997: $5,100,000
From May 31, 1997 through and
including June 29, 1997: $4,800,000
On June 30, 1997: $4,500,000
</TABLE>
Further, from and after the consummation of a sale of the
Houston Facility (as such term is defined in Amendment No. One), the
Maximum Permitted Overadvance Amounts set forth above shall be reduced
by an amount equal to the Houston Facility Proceeds Facility (as such
term is defined in Amendment No. One). All Houston Facility Proceeds
shall be applied to the reduction of the Obligations, in general, but
first in reduction of the Overadvance Amount, in particular.
(b) the Debtor's actual cumulative total expenses for any
period beginning with the inception of the Approved Budget and ending
on or after March 2, 1997, as reported on the line item designated as
"Total Disbursements" on the Borrower's financial reports, as reduced
by the Debtor's payments to Foothill, as reported on the line items
designated as "Foothill Payments", is greater by ten percent (10%) or
more of the projected total expenses, as designated on the line item
styled "Total Disbursements" on the latest Approved Budget for the
corresponding period, as reduced by the Debtor's payments to Foothill,
as reported on the line items designated as "Foothill Payments";
(c) the sum of actual cumulative cash collected from
sales and from trade accounts receivable for any period beginning with
the inception of the Approved Budget and ending on or after March 2,
1997 is 15% less than the projected cumulative "Collections Received"
as set forth in the Approved Budget for the corresponding period;
(d) the Debtor otherwise breaches the terms of this Final
Financing Order; or
(e) an Event of Default occurs as defined in Paragraph
28;
then, the Debtor shall be in default of this Final Financing Order. Foothill's
right to cease making advances and exercise its rights and remedies shall both
be subject to Paragraph 28
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 16 -
<PAGE> 17
below. As used herein, "Bi-Weekly Period" shall mean (i) initially, the period
from the Order Entry Date, through February 10, 1997, and (ii) thereafter, each
succeeding two-week period beginning on a Tuesday and ending on the Monday that
occurs fourteen (14) days later. Upon the terms and subject to the conditions
and limitations set forth in this Final Financing Order, the Loan Agreement and
the Loan Documents, Foothill will make funds available to the Debtor in
accordance with this Final Financing Order, and the Approved Budget, including
without limitation, funds in the amount of the item styled "Estimated Overline
Amount" on the Approved Budget for the periods identified as corresponding to
such amount, notwithstanding the absence of availability under the Borrowing
Base, as defined in the Loan Agreement.
16. The Debtor is hereby authorized and directed to perform all
acts, and execute and comply with the terms of such other documents,
instruments, and agreements in addition to the above Loan Documents, as
Foothill may reasonably require as evidence of and for the protection of the
Lender Debt (as defined below) and the Collateral or which may be otherwise
deemed necessary by Foothill to effectuate the terms and conditions of this
Final Financing Order and the Loan Documents, each of such documents,
instruments, and agreements being included in the definition of "Loan
Documents" contained herein. The Debtor shall provide to the Creditors'
Committee's counsel (under confidentiality) any proposed "Approved Budget" for
its prior approval only with respect to such proposed Approved Budgets which
are materially different from the initial Approved Budget. If no objection is
served on counsel to Foothill and the Debtor within three (3) business days of
receipt of the proposed Approved Budget by counsel to the Creditors' Committee,
the Creditors' Committee will be deemed to have approved the proposed Approved
Budget.
17. The Debtor is authorized and directed, at Foothill's request,
to remit immediately to Foothill all payments received from its account debtors
and other parties now or hereafter obligated to pay the Debtor for inventory or
other property of the estate or for services rendered by the Debtor. Foothill
is authorized to apply such payments and proceeds (subject to the provisions of
the Intercreditor Agreements) received by Foothill to the Lender Debt (of
Foothill) as set forth in this Final Financing Order and the Loan Documents
(but subject to the Intercreditor Agreements), and the automatic stay is
modified to the extent necessary to permit the same.
18. The Debtor is authorized and directed, at Foothill's request,
(a) to continue the existing collection account agreements, lock-box account
agreements and concentration account agreements as set forth in the Loan
Documents with Wells Fargo Bank (Texas), National Association, formerly known
as First Interstate Bank of Texas, N.A., or such other banks mutually
acceptable to Foothill and the Debtor, consistent with the Loan Documents, (b)
to establish and maintain all of its debtor-in-possession disbursement accounts
with Southwest Bank of Texas, N.A. (the "Bank Accounts"), with payroll
withholding to be deposited directly into a separate payroll disbursement
account; (c) to exercise its reasonable best efforts to collect all proceeds of
the Collateral; (d) to immediately deposit all proceeds of the Collateral,
whether received in the ordinary course of business or not, received by the
Debtor into the lock-boxes or collection accounts established for the benefit
of Foothill for subsequent transfer to the concentration account established
for the benefit of Foothill and further application in accordance
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 17 -
<PAGE> 18
with the terms of the Loan Documents; (e) to instruct all account debtors and
other parties, now or hereafter obligated to pay the Debtor for goods and
services provided by the Debtor to it, or for inventory or other property of
the estate of the Debtor in which Foothill has a security interest or lien, to
remit such payments to the lock-boxes or the collection accounts, or, at
Foothill's election, directly to Foothill; and (f) to enter into such
agreements as may be necessary to effectuate such arrangements. By this Final
Financing Order, Foothill is granted a first-priority, perfected security
interest in and lien on the Bank Accounts and all deposits therein (subject to
paragraph 9(d) above), together with all funds in the lockbox, collection
accounts, and disbursement accounts (except for the payroll and medical benefit
disbursement accounts), and further subject to the provisions of the
Intercreditor Agreements.
19. If at any time the Bank Accounts terminate, the Debtor is
authorized and directed, at Foothill's request, to remit immediately to
Foothill all payments received from its account debtors and other parties then
or thereafter obligated to pay the Debtor for inventory or other property of
the estate or for services rendered by the Debtor, before depositing said
payment. Foothill is authorized to apply such payments and proceeds received
by Foothill to the Lender Debt as set forth in this Final Financing Order and
the Loan Documents (except for the payroll and medical benefit disbursement
accounts), and further subject to the provisions of the Intercreditor
Agreements.
20. The Debtor is authorized and directed, without further order
of this Court, to pay or reimburse Foothill promptly for all present and future
reasonable fees, costs and expenses charged, paid or incurred by Foothill to
effectuate the financing transactions as provided in this Final Financing Order
and the Loan Documents, all of which unpaid fees, commissions, costs, and
expenses shall be and are included as part of the principal amount of the
Lender Debt. The Creditors' Committee will have the right to review
professional fees of Foothill that are to be paid by the Debtor and the right
to seek Court review of such fees for reasonableness.
21. In making decisions to permit advances under the Loan
Documents or the collection of the Lender Debt of the Debtor, the Debtor
stipulates that Foothill shall not be deemed to be in control of the operations
of the Debtor or to be acting as a "responsible person" or "owner or operator"
with respect to the operation or management of the Debtor (as such terms, or
any similar terms, are used in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, or any similar Federal or state
statute) by virtue of the interests, rights, and remedies granted to or
conferred upon Foothill under the Loan Documents or this Final Financing Order,
including, without limitation, such rights and remedies as may be exercisable
by Foothill in the making (or causing to be made), administration, or
collection of the loans, advances, and other financial accommodations to be
provided thereunder.
22. The automatic stay arising under Section 362 of the Code is
vacated and modified to the extent necessary to permit Foothill to implement
the financing of the Debtor, the provisions of the Loan Documents and this
Final Financing Order.
23. The Debtor is authorized and directed to provide to Foothill
and the Creditors' Committee (under confidentiality), unless there is a written
waiver by Foothill, all of the
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 18 -
<PAGE> 19
documentation, reports, schedules, assignments, financial statements, insurance
policies, endorsements, access, inspection, audits, information, and other
rights that the Debtor are required to provide to Foothill under the Loan
Documents.
24. Any and all funds advanced by Foothill post-petition to or on
behalf of the Debtor and the "Obligations" (as defined in the Loan Documents),
including all amounts approved or advanced post-petition by Foothill before the
entry of this Final Financing Order, shall be defined hereinafter as the
"Post-Petition Lender Debt" and shall be treated as advances hereunder and
under existing Loan Documents and other documentation between the Debtor and
Foothill (and shall accrue interest as provided thereunder). As adequate
protection to Foothill and to secure the repayment of the Post-Petition Lender
Debt, Foothill is hereby granted, pursuant to Section 364(c)(1) of the Code, an
allowed super-priority administrative claim having priority in right of payment
over any and all other unsecured obligations, liabilities, and indebtedness of
the Debtor, now in existence or hereafter incurred by the Debtor, and over any
and all administrative expenses or priority claims of the kind specified in, or
ordered pursuant to, Sections 105, 326, 330, 331, 503(b), 506(c), and 507(a)
and (b) of the Code, subject to the following:
(a) the Trustee Fees (as defined in Paragraph 25 below),
(b) the Creditors' Committee and the counsel retained by
the Creditors' Committee in an amount not to exceed the Creditors'
Committee Counsel Carve-Out Amount (as hereinafter defined),
(c) the accountants retained by the Creditors' Committee
in an amount not to exceed the Creditors' Committee Accountants
Carve-Out Amount (as hereinafter defined), and
(d) the professionals retained by the Debtor in an amount
not to exceed the Debtor's Carve-Out Amount (as hereinafter defined),
and in each case to the extent that such payments fall within the Professional
Fees Exception and are in amounts not to exceed such respective carve-outs set
forth in Paragraph 24A of this Part III, below.
24A. The term "Debtor's Carve-Out Amount" means an amount,
inclusive of the amount of the Retainers (as hereinafter defined) which shall
not exceed $400,000 in the aggregate, and which shall be subject to the further
limitations set forth in Paragraphs 24B through 24E of this Part III, below.
Notwithstanding anything else contained herein, upon an Event of Default (as
hereinafter defined), the Debtor's Carve-Out Amount shall be fixed at the then
Debtor's Carve-Out Amount incurred, inclusive of all amounts that have been
paid or are currently outstanding (in no event to exceed $400,000) on the date
of such Event of Default. The term "Creditors' Committee Counsel Carve-Out
Amount" means an amount not to exceed $450,000 in the aggregate, and which
shall be subject to the further limitations set forth in Paragraphs 24B through
24E of this Part III, below. Notwithstanding anything else contained herein,
upon an Event of Default, the Creditors' Committee Counsel Carve-Out Amount
shall be
JOINT STIPULATION AND AGREED
ORDER AUTHORIZING FINAL, ETC. - 19 -
<PAGE> 20
fixed at the Creditors' Committee Counsel Carve-Out Amount incurred, inclusive
of all amounts that have been paid or are currently outstanding (in no event to
exceed $450,000) on the date of such Event of Default. The term "Creditors'
Committee Accountants Carve-Out Amount" means an amount not to exceed $90,000
in the aggregate, and which shall be subject to the further limitations set
forth in Paragraphs 24B through 24E of this Part III, below. Notwithstanding
anything else contained herein, upon an Event of Default, the Creditors'
Committee Accountants Carve-Out Amount shall be fixed at the Creditors'
Committee Accountants Carve-Out Amount incurred, inclusive of all amounts that
have been paid or are currently outstanding (in no event to exceed $90,000) on
the date of such Event of Default.
24B. In consideration of the foregoing, each of the following
professionals or constituencies have agreed to, and by the terms of this Final
Financing Order shall hereafter, limit their fees and expenses, inclusive of
their respective retainers (the "Retainers"), if any, to the following amounts,
as limited in the aggregate and as further limited with respect to the monthly
periods of time specified below, but such limits shall be only to the extent
that the Professionals (as defined below) seek payment from Foothill's
collateral, subject to the Permitted Fees Exception:
(a) Sprouse & Winn, L.P., Scott, Douglass, Luton &
McConnico, L.L.P., and Young, Conaway, Stargatt & Taylor, collectively
$400,000, in the aggregate, from February 23, 1997 through the
termination of the Loan Agreement; and, on a monthly basis, beginning
with the first payment on February 23, 1997 and continuing on the 23rd
day of each month thereafter through the termination of the Loan
Agreement, $80,000 per month (which represents 80% of fees and 100% of
expenses);
(b) Andrews & Kurth, L.L.P., Williams, Hershman, &
Wisler, P.A., and the Creditors' Committee, collectively, $450,000, in
the aggregate, from February 23, 1997 through the termination of the
Loan Agreement; and, on a monthly basis, beginning with the first
payment on February 23, 1997 and continuing on the 23rd day of each
month thereafter through the termination of the Loan Agreement,
$90,000 per month (which represents 80% of fees and 100% of expenses);
and
(c) Price Waterhouse, L.L.P., $90,000 in the aggregate,
from February 9, 1997 through the termination of the Loan Agreement;
and, on a monthly basis, beginning with the first payment on February
9, 1997, the second payment to be made on February 23, 1997, and
continuing on the 23rd day of each month thereafter through the
termination of the Loan Agreement, $15,000 per month (which represents
80% of fees and 100% of expenses);
provided, further, that such professionals and constituencies shall have no
right to seek payment of their fees and expenses from any excess amounts from
other professionals or constituencies who have not used the full amount of such
amounts set forth above. With respect to each set of Professionals specified
as a group within the respective clauses (a) through (c) above, any excess or
unused amounts remaining for such Professionals' monthly carve-out amount may
be applied to any deficiency or insufficiency existing in a prior month and, if
not applied to a prior month's
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<PAGE> 21
deficiency or insufficiency, may be credited to the amount of such
Professionals' carve-out amount for a following month. By way of illustration,
prior to February 23, 1997, the Creditors' Committee Counsel Carve-Out Amount
is zero; and, consequently, the amount of the reserve for Unpaid Amounts,
contemplated in Paragraph 24E, below, is likewise zero. By way of further
illustration, on February 23, 1997, the Creditors' Committee Counsel Carve-Out
Amount is $90,000; and, consequently, the amount of the reserve for Unpaid
Amounts, contemplated in Paragraph 24E, below, likewise may be as high as
$90,000, and the Debtor would pay $90,000 to the Creditors' Committee Counsel
for services rendered and expenses incurred in December 1996, subject to the
terms of a certain Administrative Fees Order dated on or about December 6,
1996.
24C. All fees and expenses paid to
(a) the Debtor's counsel after giving credit to the
Retainers,
(b) to the other Court retained professionals for the
Debtor (after giving credit to their respective retainers, if any), or
(c) the Creditors' Committee or the other Court retained
professionals for the Creditors' Committee
(collectively, the "Professionals") on an interim or a final basis, shall be
applied and reduce the available Debtor's Carve-Out Amount, the Creditors'
Committee Counsel Carve-Out Amount, and the Creditors' Committee Accountants
Carve-Out Amount, respectively, then in effect. Any such exceptions to the
super-priority claim of Foothill will only be allowed to the extent that
(a) the fees are allowed and awarded by the Court
pursuant to Sections 326, 330 or 331 of the Code;
(b) the fees are consistent with the Approved Budget
provided under this Final Financing Order that is attached to
Amendment No. 1;
(c) the allowed fees and expenses were incurred prior to
an Event of Default under the Loan Documents or Final Financing Order
and such Event of Default is continuing; and
(d) such fees and expenses are not subject to the further
limitations set forth in the following Paragraph 24D (collectively,
the "Professional Fees Exception").
24D. Foothill shall not be responsible for the funding, financing,
payment or reimbursement of any fees or disbursements of any of the
Professionals under the Loan Documents or otherwise incurred in connection with
the assertion or joinder in, or review or analysis of, any claim,
counter-claim, action, proceeding, application, motion, objection, defense or
other contested matter, the purpose of which is to seek any order, judgment,
determination or similar relief:
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(a) invalidating, setting aside, avoiding, subordinating
in whole or in part the Lender Debt, Foothill's liens and security
interests in any of the Collateral; or
(b) preventing, hindering, or delaying, whether directly
or indirectly, Foothill's assertion, enforcement, or realization upon
any Collateral.
24E. To the extent that the Debtor does not currently satisfy
accrued but unpaid fees and expenses of the Professionals otherwise payable
pursuant to the Professional Fees Exception (the "Unpaid Amounts"), Foothill
shall have the right to establish a reserve, which shall reduce the Debtor's
loan availability pursuant to the Loan Documents in the amount equal to the
Unpaid Amounts. Except as provided for above, nothing in this paragraph shall
be construed to obligate Foothill, in any way, to pay compensation or expense
reimbursements to the Professionals or to assure that the Debtor has sufficient
funds on hand to pay such compensation or expense reimbursement, and Foothill
shall not be deemed to have subordinated any security interest in or lien upon
any of the Collateral, or its super-priority claim under Section 364(c)(1) of
the Code, in favor of any Professional, nor shall anything in this Final
Financing Order be construed to limit the applications of the Professionals to
seek payments of amounts beyond or outside the Professional Fees Exception from
any unencumbered assets of the Debtor's estate. Moreover, the Debtor and its
estate shall not cause any costs or expenses of administration to be incurred
in this Case, or in any proceeding related hereto, and no pre-petition
priority claims are or will be prior to or on a parity with secured claims of
Foothill against the Debtor and its estate arising out of the Pre-Petition
Lender Debt and the Post-Petition Lender Debt (collectively, the "Lender Debt")
and Foothill's liens and security interests described herein. The Professional
Fees Exception relates only to the administrative priority of the Foothill's
administrative claims, and does not effect, diminish, prime, or surcharge the
priority of Foothill's security interests and liens on the Collateral; except
that so long as the above conditions are satisfied for the making of payments
under the Professional Fees Exception, such payments may be made from cash or
cash equivalents constituting Collateral notwithstanding the liens and security
interests of Foothill therein, and Foothill authorizes the making of such
payments in such circumstances free of its liens and security interests, but
reserving the right to object to the reasonableness of such fees and expenses.
25. Foothill's super-priority administrative expense claim shall
be subject to the fees and expenses of the Office of the United States Trustee
and the Clerk of the United States Bankruptcy Court for the District of
Delaware (collectively, the "Trustee Fees"). Except as provided in this
paragraph (or as otherwise provided under the Intercreditor Agreements or under
Paragraphs 24 through 24E above), the Debtor and its estate shall not cause any
claim to be incurred that is superior or pari passu to that granted by this
Final Financing Order to Foothill until all Post- Petition Lender Debt has been
indefeasibly paid and Foothill's obligations under the Loan Documents have
terminated.
26. No operating costs or costs or expenses of administration that
have been or may be incurred in the Debtor's Chapter 11 Case, or in any
subsequent Chapter 7 case of the Debtor or other proceedings related hereto,
shall be charged against Foothill (or its claims or the
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<PAGE> 23
Collateral) pursuant to Section 506(c) of the Code or otherwise, without the
prior express written consent of Foothill; no such consent shall be inferred
from any other action, inaction, or acquiescence by Foothill; and no
obligations incurred or payments or other transfers made by or on behalf of the
Debtor on account of the financing arrangements with Foothill shall be
avoidable or recoverable from Foothill under Sections 547, 548, 550, or 553 or
any other provision of the Code.
27. The Debtor shall not sell, transfer, lease, encumber, or
otherwise dispose of any material portion of the Collateral without the prior
consent of Foothill or, upon Court order, after notice and a hearing to
Foothill, and no such consent shall be inferred except for sale of the Debtor's
inventory, if any, in the ordinary course of its business.
28. In the event of the occurrence of any of the following: (a)
the Debtor's violation of any of the terms of this Final Financing Order, (b)
the occurrence of any "Event of Default" under the Loan Documents, (c) the
termination or non-renewal of the Loan Documents as provided for in Paragraphs
11 and 45 herein, (d) conversion of the Chapter 11 Case of the Debtor to a case
under Chapter 7 of the Code, (e) the appointment of a Trustee pursuant to
Section 1104(a)(1) or (a)(2) of the Code in the Case, (f) dismissal of the
Debtor's Chapter 11 Case, (g) the entry of any order modifying, reversing,
revoking, staying, rescinding, vacating, or amending this Final Financing Order
without the express prior written consent of Foothill (and no such consent
shall be inferred from any other action, inaction, or acquiescence by
Foothill), or (h) the filing by the Debtor or the Creditors' Committee of a
plan of reorganization that does not provide for the indefeasible payment in
full of the Post-Petition Lender Debt on the effective date of a plan of
reorganization (any of the foregoing being referred to in this Final Financing
Order, individually, as an "Event of Default" and, collectively, as "Events of
Default"); then (unless such Event of Default is specifically waived in writing
by Foothill, which waiver shall not be inferred from any other action,
inaction, or acquiescence by Foothill) upon or after the occurrence of any of
the foregoing, and at all times thereafter, after giving five (5) business
days' notice, served by overnight delivery service or telefax upon the Debtor,
the Debtor's counsel, counsel to the Creditors' Committee, a Trustee, if
appointed, and the United States Trustee: (1) all of the Post-Petition Lender
Debt shall become immediately due and payable, (2) the Automatic Stay provided
for pursuant to Section 362 of the Code shall be automatically and completely
vacated as to Foothill, without further order of the Court, except that nothing
herein shall prohibit the Debtor or the Creditors' Committee from seeking entry
of an injunction, and (3) Foothill, without further notice, hearing, or
approval of the Court, shall be and is hereby authorized, in its discretion, to
take any and all actions and remedies that Foothill may deem appropriate to
proceed against, take possession of, protect, and realize upon the Collateral
and any other property of the estate of the Debtor upon which Foothill has been
or may hereafter be granted liens and security interests to obtain repayment of
the Lender Debt, except that nothing herein shall prohibit the Debtor or the
Creditors' Committee from seeking entry of an injunction.
Foothill shall immediately serve notices of all defaults and Events of
Default to the Debtor and the Creditors' Committee's counsel by telefax. Upon
or after the occurrence of an Event of Default, (a) Foothill shall have no
obligation to lend or advance any additional funds to the Debtor or provide
other financial accommodations to the Debtor and (b) the Debtor shall not use
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<PAGE> 24
Foothill's Cash Collateral without further order of the Court. Notwithstanding
the foregoing, the protections afforded to Foothill in this Final Financing
Order and the Interim Financing Order shall survive the term of the financing
provided herein. In the event that the Court allows the Debtor to use
Foothill's Cash Collateral, notwithstanding the lifting of the automatic stay
as provided above under such circumstances, the Debtor and the Creditors'
Committee stipulate that they shall provide to Foothill substantially
comparable provisions as contained herein to be included as adequate protection
of Foothill's interest in its Cash Collateral sought to be used by the Debtor,
with such advance rates on classes of collateral as provided in the Loan
Documents to govern adequate protection levels to be maintained by the Debtor
going forward thereafter.
29. Unless an Event of Default set forth in Paragraph 28 above,
and subject to the provisions of Paragraph 28 above, occurs sooner, upon the
expiration of the Debtor's authority to borrow from Foothill and obtain other
credit accommodations from Foothill pursuant to this Final Financing Order, all
of the Lender Debt shall immediately become due and payable, and Foothill shall
be automatically and completely delivered from the effect of any stay,
including, without limitation, any stay under Section 362 of the Code or any
other restriction on the enforcement of the liens and security interests or any
other rights granted to Foothill pursuant to the terms and conditions of the
Loan Documents or this Final Financing Order, and Foothill shall be and is
hereby authorized, in its discretion, to take any and all actions and remedies
that Foothill may deem appropriate and to proceed against, take possession of,
protect, and realize upon the Collateral and any other property of the estate
of the Debtor upon which it now has been or may hereafter be granted liens and
security interests to obtain repayment of the Post-Petition Lender Debt
including, without limitation, all such actions and remedies set forth in the
Loan Documents (except if the authority of the Debtor to borrow from Foothill
shall be extended by a subsequent order of the Court with the prior written
consent of Foothill, which consent shall not be inferred from any other
action, inaction, or acquiescence by Foothill).
30. Until all of the Post-Petition Lender Debt shall have been
indefeasibly paid and satisfied in full and without further order of the Court:
(a) no other party shall foreclose or otherwise seek to enforce any junior lien
or other right such other party may have in and to any property of the estate
of the Debtor upon which Foothill holds or asserts a senior lien or security
interest, i.e., the Collateral defined at Paragraph 8 above and subject to the
exceptions in Paragraph 9 above (exclusive of the Madeline Collateral, the IOG
Collateral, and any valid purchase money security interests with respect to any
equipment sold by Input/Output to the Debtor); and (b) Debtor shall not,
without prior written consent from Foothill and Court approval, engage in any
transaction that is not in the ordinary course of the Debtor's business;
provided, no consent by Foothill shall be necessary if Foothill's interests are
first adequately protected as determined by the Court or if such transaction is
permitted by the Loan Documents.
31. The Debtor shall be bound to provide Foothill not less than
monthly and also provide to the Creditor's Committee's counsel (subject to
confidentiality, to the extent applicable) with all reports reasonably
requested by Foothill and the Creditors' Committee's counsel, including,
without limitation: (i) the Debtor's actual performance and results of
operations as compared to its Budget; (ii) management's report and explanation
of the variance, if any, between its Budget; (iii) copies of the Debtor's check
register, together with copies of all
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<PAGE> 25
reports made to the United States Trustee, and (iv) any financial records or
statements regularly generated in the normal course of its business. From time
to time, Foothill and the Creditors' Committee's counsel (subject to
confidentiality, to the extent applicable) shall have the right to visit the
Debtor's offices after reasonable notice and accompanied by an officer of the
Debtor.
32. The Debtor shall be bound to provide to Foothill, and is
hereby authorized and directed by the Court to execute and deliver, any and all
documents or instruments to effect the purposes of this Final Financing Order.
33. Upon the indefeasible payment in full of all Lender Debt to
Foothill, and upon termination of any and all obligations of Foothill to make
any financial accommodations (including letters of credit) available to the
Debtor, Foothill and the Debtor shall be released from any and all obligations
pursuant to the terms of this Final Financing Order and/or the Loan Documents
(other than its obligations to execute and to deliver to the Debtor appropriate
releases of its pre-petition liens and its post-petition liens on the
Collateral). To the extent that the estate or any party in interest (including
the Creditors' Committee) maintains any claims against Foothill or its
collateral proceeds, Foothill has not been indefeasibly paid.
34. The Debtor shall continue to maintain, insure, and otherwise
preserve and protect the Collateral as provided in the Loan Documents.
35. The Debtor shall be responsible for discharging currently all
of its post-petition obligations to all taxing authorities, or currently
escrowing sufficient amounts for same as provided in the Loan Documents.
36. Foothill shall be entitled to the full protections of Section
364(e) of the Code with respect to debts, obligations, liens, security
interests, and other rights created or authorized in this Final Financing Order
if this Final Financing Order or any authorization contained herein is vacated,
reversed, or modified on appeal or otherwise by any court of competent
jurisdiction.
37. All post-petition advances under the Loan Documents are made
in reliance on this Final Financing Order; and the Court shall not enter any
order in the Case which (a) authorizes the use of Cash Collateral of the Debtor
in which Foothill has an interest, or the sale, lease, or other disposition of
property of the estate of the Debtor in which Foothill has a lien or security
interest, (b) authorizes the obtaining of credit or the incurring of
indebtedness secured by a lien or security interest that is equal or senior to
a lien or security interest in property in which Foothill holds liens or
security interests, or (c) grants priority administrative claim status to any
administrative claim that is equal or superior to that granted to Foothill
herein; unless, in each instance: (i) Foothill shall have given its express
prior written consent thereto, no such consent being inferred from any other
action, inaction, or acquiescence by Foothill, (ii) such other order requires
that Foothill's Post-Petition Lender Debt shall first be indefeasibly paid in
full, including, without limitation, all debts and obligations of the Debtor to
Foothill which arise or result from the obligations, loans, security interests,
and liens authorized herein, or (iii) the use of Cash Collateral is permitted
under such circumstances as may be permitted in Paragraph 28 above. The
security interests and liens granted to Foothill hereunder and the rights of
Foothill
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<PAGE> 26
pursuant to this Final Financing Order with respect to the Post-Petition Lender
Debt and the Collateral shall not be altered, modified, extended, impaired, or
affected by any plan of reorganization of the Debtor and, if Foothill shall
give its express prior written consent that the Lender Debt shall not be repaid
in full upon confirmation thereof (which consent shall not be inferred from any
other action, inaction, or acquiescence by Foothill), shall continue after
confirmation and consummation of any such plan.
38. The provisions of this Final Financing Order and any actions
taken pursuant hereto shall survive entry of any order that may be entered
converting the Debtor's Chapter 11 Case to a Chapter 7 case or any order that
may be entered confirming or consummating any plan of reorganization of the
Debtor, and the terms and provisions of this Final Financing Order as well as
the priorities in payment, liens, and security interests granted pursuant to
this Final Financing Order and the Loan Documents shall continue in this or any
superseding case under the Code, and such priorities in payment, liens and
security interests shall maintain their priority as provided by this Final
Financing Order until all Lender Debt (of Foothill) is indefeasibly satisfied
and discharged and Foothill have no further obligation or financial
accommodation (including any issued and outstanding letters of credit) to the
Debtor; provided, that, all obligations and duties of Foothill hereunder, under
the Loan Documents, or otherwise with respect to any future loans and advances
or otherwise shall terminate immediately upon the earlier of the date of any
Event of Default or the date that a plan for the Debtor becomes effective,
unless Foothill has given its express prior written consent thereto, no such
consent being inferred from any other action, inaction, or acquiescence by
Foothill.
39. The provisions of this Final Financing Order shall inure to
the benefit of the Debtor and Foothill, and shall be binding upon the Debtor
and its successors and assigns, and shall also be binding upon all creditors of
the Debtor and other parties in interest.
40. Nothing contained herein shall preclude Foothill from making
appropriate application or request to the Court for such other relief as shall
be necessary to protect adequately Foothill's interests, including, without
limitation, asking the Court to lift the automatic stay as against Foothill for
"cause" for reasons in addition to the Debtor's violation of the terms of this
Final Financing Order.
41. If an order is entered, whether sua sponte by the Court or
otherwise, dismissing or converting the Debtor's Chapter 11 Case, such order
shall recognize that such dismissal or conversion shall not affect or diminish
Foothill's rights, priorities, or remedies hereunder. If any or all of the
provisions of this Final Financing Order are hereafter modified, vacated, or
stayed, such modification, vacation, or stay shall not affect (a) the validity
of any obligation, indebtedness, or liability incurred by the Debtor to
Foothill before the effective date of such modification, vacation, or stay, or
(b) the validity or enforceability of any security interest, lien, priority, or
other protection authorized or created hereby or pursuant to the Loan
Documents. Notwithstanding any such modification, vacation, or stay, any
indebtedness, obligations, or liabilities incurred by the Debtor to Foothill
before the effective date of such modification, vacation, or stay shall be
governed in all respects by the original provisions of this Final Financing
Order, and Foothill shall be entitled to all the rights, remedies, privileges,
and benefits
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<PAGE> 27
granted herein and pursuant to the Loan Documents with respect to all such
indebtedness, obligations, or liabilities. The obligations and indebtedness of
the Debtor to Foothill under the Loan Documents or this Final Financing Order
shall not be discharged by the entry of an order confirming a plan or plans of
reorganization in the Case, and, pursuant to Section 1141(d)(4) of the Code,
unless and until Foothill is indefeasibly paid in full and all obligations of
Foothill to make loans or other financial accommodations (including issued and
outstanding letters of credit) are terminated prior to or concurrently with the
entry of such order, the Debtor has waived such discharge with the approval of
the Court.
42. The Debtor irrevocably waives any right to seek any
modifications or extensions of this Final Financing Order without the prior
written consent of Foothill.
43. To the extent the terms and conditions of the Loan Documents
are in conflict with the terms and conditions of this Final Financing Order,
the terms and conditions of this Final Financing Order shall control. From and
after the entry of this Final Financing Order, the Final Financing Order shall
supersede the Interim Financing Order.
44. Except as otherwise provided in this Paragraph, the terms of
this Final Financing Order shall be valid and binding upon the Debtor, all
creditors of the Debtor, and all other parties in interest from and after the
date of the signing of this Final Financing Order by this Court. In the event
this Court modifies any of the provisions of this Final Financing Order and the
Loan Documents following such further hearing, such modifications shall not
affect the rights and priorities of Foothill pursuant to this Final Financing
Order with respect to the Collateral and any portion of the Post-Petition
Lender Debt that arises, is incurred or is advanced before such modifications,
and this Final Financing Order shall remain in full force and effect.
45. Notwithstanding anything to the contrary stated herein or in
the Loan Documents, the term of this post-petition financing shall expire, and
all Post-Petition Lender Debt shall be due and payable, on June 30, 1997, but
Foothill may not exercise its rights and remedies except as provided above.
46. The Debtor's counsel shall serve this Final Financing Order by
first-class mail, postage prepaid to the following parties: (a) the Office of
the United States Trustee, (b) the attorneys for Foothill, (c) all creditors
known to Debtor who may have liens against the Debtor's assets, (d) the United
States Internal Revenue Service, (e) the United States Environmental Protection
Agency, (f) the Texas Attorney General's Office - Sales Tax Division; (g) the
20 largest unsecured creditors of the Debtor, (h) all other interested third
parties in possession of any of the Debtor's inventory, (i) all factors and
vendors as of the Petition Date who have deposits or other security that
exceeds the amount owed to such factor and/or vendor, and (j) all parties in
interest who have filed a notice of appearance in the Case.
47. This Final Financing Order shall be effective upon signature
by the Court, without the necessity of entry into the docket sheet of this
Case.
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<PAGE> 28
48. This Court hereby expressly retains jurisdiction over all
persons and entities, co-extensive with the powers granted to the United States
Bankruptcy Court under the Bankruptcy Code, to enforce the terms of this Final
Financing Order and to adjudicate any and all disputes in connection therewith.
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<PAGE> 29
49. The entry of this Final Financing Order shall constitute a
waiver by Foothill, as more fully described in Amendment One attached hereto,
of all Events of Default existing prior to the Order Entry Date; however,
nothing herein constitutes a waiver by Foothill of any Events of Default that
may occur from and after the Order Entry Date.
Dated: January ___, 1997
______________________________
UNITED STATES BANKRUPTCY JUDGE
AGREED AS TO FORM AND SUBSTANCE:
SCOTT, DOUGLASS, LUTON & MCCONNICO, L.L.P.
By:_________________________________________________________
Christopher Fuller
Texas State Bar No. _________________
Greg Pierce
Texas State Bar No. _________________
600 Congress Avenue, 15th Floor
Austin, Texas 78701-3234
(512) 495-6300
FAX: (512) 474-0731
700 Louisiana Street
Suite 4000
Houston, Texas 77002-2758
(713) 225-8400
FAX: (713) 225-8488
- AND -
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<PAGE> 30
YOUNG, CONAWAY, STARGATT & TAYLOR
By:_________________________________________________________
Laura Davis Jones (#2436)
Scott Cousins (#3079)
Eleventh Floor, Rodney Square North
Post Office Box 391
Wilmington, Delaware 19899-0391
(302) 571-6684
FAX: (302) 571-1253
ATTORNEYS FOR THE DEBTOR,
GRANT GEOPHYSICAL, INC.
HUGHES & LUCE, L.L.P.
By:________________________________________________
David Weitman
Texas State Bar No. 21116200
Howard Spector
Texas State Bar No. 00785023
1717 Main Street, Suite 2800
Dallas, Texas 75201
(214) 939-5500
FAX: (214) 939-6100
- AND -
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<PAGE> 31
RICHARDS, LAYTON & FINGER
By:_________________________________________________________
Thomas L. Ambro (#677)
Mark D. Collins (#2981)
One Rodney Square
Wilmington, Delaware 19899
(302) 651-7531
FAX: (302) 658-6548
ATTORNEYS FOR
FOOTHILL CAPITAL CORPORATION
ANDREWS & KURTH, L.L.P.
By:_________________________________________________________
James Donnell, Esq.
Texas State Bar No. ___________________
600 Travis Street, Suite 4200
Houston, Texas 77002
(713) 220-4200
FAX: (713) 220-4285
- AND -
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<PAGE> 32
Van Oliver, Esq.
ANDREWS & KURTH, L.L.P.
4400 Thanksgiving Tower
1611 Elm Street
Dallas, Texas 75201
(214) 979-4400
FAX: (214) 979-4401
- AND -
WILLIAMS, HERSHMAN & WISLER, P.A.
By:_________________________________________________________
Jeff Wisler (#2795)
Suite 600, One Commerce Street
Wilmington, Delaware 19899-0511
(302) 575-0873
FAX: (302) 575-1642
ATTORNEYS FOR THE
OFFICIAL UNSECURED CREDITORS' COMMITTEE
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<PAGE> 33
AMENDMENT NUMBER ONE
TO
RATIFICATION AND AMENDMENT AGREEMENT
This AMENDMENT NUMBER ONE TO RATIFICATION AND AMENDMENT AGREEMENT
(this "Amendment") is entered into as of January ____, 1997, by and between the
following parties:
(a) GRANT GEOPHYSICAL, INC., a Delaware corporation,
formerly known as GRANT TENSOR GEOPHYSICAL CORP. ("Borrower"), as
Debtor and Debtor-in-Possession; and
(b) FOOTHILL CAPITAL CORPORATION ("Foothill").
R E F E R E N C E S:
Reference is made to the following documents:
(a) that certain Loan and Security Agreement, dated as of
April 26, 1993, by and between Borrower and Foothill, and any
extensions, riders, supplements, notes, amendments, or modifications
to or in connection therewith, as amended by the Ratification
Agreement (hereinafter defined) and as further amended, modified,
supplemented or restated from time to time (the "Loan Agreement"); and
(b) that certain Ratification and Amendment Agreement,
dated as of December 6, 1996, by and between Borrower and Foothill,
and any extensions, riders, supplements, notes, amendments, or
modifications to or in connection therewith, and as further amended,
modified, supplemented or restated from time to time (the
"Ratification Agreement").
All capitalized terms used and not otherwise defined or amended herein shall
have the respective meanings assigned to such terms in the Loan Agreement and
the Ratification Agreement.
W I T N E S S E T H:
WHEREAS, Borrower commenced its case under Chapter 11 of the Code in
the Bankruptcy Court on December 6, 1996 (such date, and the specific time of
filing on such date, being referred to as the "Petition Date"); and Borrower
has retained possession of its assets and is authorized under the Code to
continue the operation of its business as debtor- in-possession; and
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT - Page 1
<PAGE> 34
WHEREAS, prior to the commencement of the Case, Foothill made loans
and advances to Borrower secured by the assets and properties of Borrower as
set forth in the Loan Documents; and
WHEREAS, the Bankruptcy Court entered its Final Financing Order for a
period of financing through June 30, 1997, pursuant to which Foothill may make
post-petition loans and advances to Borrower as set forth in the Final
Financing Order and the Loan Documents; and
WHEREAS, the Final Financing Order provides that, as a condition to
the making of such post-petition loans and advances, Borrower shall execute and
deliver this Amendment; and
WHEREAS, Borrower reaffirmed its obligations pursuant to the Loan
Documents and acknowledged its continuing liabilities to Foothill thereunder in
order to induce Foothill to make post-petition loans and advances to Borrower,
as evidenced by the Ratification Agreement; and
WHEREAS, Borrower again desires to reaffirm its obligations pursuant
to the Loan Documents and acknowledge its continuing liabilities to Foothill in
order to induce Foothill to make post-petition loans and advances to Borrower
contemplated by the Final Financing Order.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Foothill and Borrower mutually agree to the recitals above and further mutually
covenant, warrant and agree as follows:
1. DEFINITIONS.
1.1 Additional Definitions. As used herein, the following terms
shall have the respective meanings given to them below, and the Loan Documents
shall be deemed and are hereby amended to include, in addition to and not in
limitation of, the other defined terms used therein (except where the
definitions set forth below are identical to defined terms used therein, in
which case the definitions set forth below shall be inserted in place of the
corresponding defined terms therein), each of the following definitions:
(a) "Approved Budget" shall mean a proposed cash forecast
and operating budget covering the Budget Period, and setting forth projected
cash receipts and disbursements for the Budget Period, as a whole, and the
respective bi-weekly and monthly periods indicated therein. The initial
Approved Budget will be delivered to Foothill prior to or simultaneously with
the execution and delivery of Amendment Number One to the Ratification and
Amendment Agreement, under cover of a separate certificate of the Borrower. A
summary of the initial Approved Budget is attached hereto as Exhibit A. If
Borrower requests any revisions to a then-existing Approved Budget, and if, and
only if, Foothill, at its option, approves, in writing, such revisions, then
the Approved Budget, as revised, will constitute the Approved Budget for the
remainder of the Budget Period.
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 2
<PAGE> 35
(b) "Budget Period" shall mean the period from January
12, 1997 through June 30, 1997.
(c) "Houston Facility" shall mean the real estate and
improvements located thereon, owned by the Borrower and more fully described on
Exhibit D attached hereto.
(d) "Houston Facility Proceeds" shall mean the net sale
proceeds from the sale of the Houston Facility, after deduction for the
payments of existing mortgages thereon, sales commissions, and related closing
costs.
(e) "Overadvance Advances" shall mean advances made by
Foothill to the Borrower that are attributable to the revolving advances under
the Borrowing Base attributable to the Overadvance Amount.
(f) "Overadvance Amount" shall mean, from time to time
and at any time, for the specific period of time indicated on the Approved
Budget, the amount indicated below for the period of time correspondingly
indicated below:
<TABLE>
<CAPTION>
Maximum Permitted
-----------------
Period Overadvance Amount
------ ------------------
<S> <C>
From the date hereof through and
including March 30, 1997: $6,000,000
From March 3l, 1997 through and
including April 29, 1997: $5,400,000
From April 30, 1997 through and
including May 30, 1997: $5,100,000
From May 31, 1997 through and
including June 29, 1997: $4,800,000
On June 30, 1997: $4,500,000
</TABLE>
Further, from and after the consummation of a sale of the Houston
Facility, the Maximum Permitted Overadvance Amounts set forth above shall be
reduced by an amount equal to the Houston Facility Proceeds. All Houston
Facility Proceeds shall be applied to the reduction of the Obligations, in
general, but first in reduction of the Overadvance Amount, in particular.
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 3
<PAGE> 36
(e) "Recapitalization" shall mean any transaction
constituting a recapitalization of the Borrower, a sale of the Borrower's
enterprise as a going concern, a sale of substantially of all of the assets of
the Borrower, or other similarly significant transaction, the proceeds of which
shall be used, at least in part, to pay the Obligations, in full, in cash, upon
the closing of the transaction.
1.2 Interpretation.
(a) For purposes of this Amendment, all capitalized terms
used and not otherwise defined or amended herein shall have the respective
meanings assigned to such terms in the Loan Agreement and the Ratification
Agreement.
(b) All references to any term in the singular shall
include the plural and all references to any term in the plural shall include
the singular.
(c) All terms not specifically defined herein, which are
defined in the California Uniform Commercial Code (the "UCC"), shall have the
meaning set forth therein.
2. ACKNOWLEDGMENTS.
2.1 Pre-Petition Obligations. Borrower hereby acknowledges,
confirms and agrees that Borrower is indebted to Foothill for the Pre-Petition
Lender Debt, as of January 27, 1997, in respect of the Obligations owed
pursuant to the Loan Documents in the unpaid principal amount of Three Million
Six Hundred Nine Thousand Three Hundred Seventy Three and 72/100 Dollars
($3,609,373.72), on account of application of the proceeds of Pre-Petition
Collateral to Pre-Petition Lender Debt, all as contemplated by and provided for
in the Interim Financing Order, which amount represents unpaid principal on
borrowings, together with interest accrued and accruing thereon, and costs,
expenses, fees (including attorneys' fees) and other charges now or hereafter
owed by Borrower to Foothill, all of which are unconditionally owing by
Borrower to Foothill, without offset, defense or counterclaim of any kind,
nature and description whatsoever.
2.2 Acknowledgment of Security Interests. Subject to the
provisions of Section 2.3 below, Borrower hereby acknowledges, confirms and
agrees that Foothill has and shall continue to have valid, enforceable and
perfected first priority and senior liens upon and security interests in all
Pre-Petition Collateral heretofore granted to Foothill pursuant to the Loan
Documents as in effect immediately prior to the Petition Date to secure all of
the Pre-Petition Lender Debt, except with respect to the IOG Collateral and the
Madeline Collateral, but only to the extent provided otherwise in the IOG
Intercreditor Agreement and the Madeline Intercreditor Agreement, as
appropriate, as well as valid and enforceable first priority and senior liens
upon and in all Pre-Petition Collateral and all Post-Petition Collateral
granted to Foothill under the Financing Orders or hereunder or under any of the
other Loan Documents or otherwise granted to or held by Foothill to secure the
Post-Petition Lender Debt, except with respect to the IOG Collateral and
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 4
<PAGE> 37
the Madeline Collateral, but only to the extent provided otherwise in the IOG
Intercreditor Agreement and the Madeline Intercreditor Agreement, as
appropriate.
2.3 Prior Liens. Notwithstanding anything to the contrary set
forth in Section 2.2 above, the security interests in and liens of Foothill
upon the Collateral shall not have priority over the following liens and
security interests (the "Existing Liens"):
(a) the prior liens on Borrower's property described on a
Exhibit B attached hereto, so long as (i) such liens are valid,
perfected, and non-avoidable purchase money security interests, in
accordance with applicable law, and (ii) the foregoing is without
prejudice to the rights of Borrower, any Creditors' Committee in the
Case, or any other party in interest, including Foothill, to object to
the validity, priority, or extent of liens, or the allowance of such
debts secured thereby, described on such Exhibit B, or institute any
actions or adversary proceedings with respect thereto;
(b) the prior liens in favor of Banco Wiese Ltdo. on
certain of Borrower's contracts described on a Exhibit B attached
hereto, so long as (i) such liens are valid, perfected, and
non-avoidable security interests, in accordance with applicable law,
and (ii) the foregoing is without prejudice to the rights of Borrower,
any Creditors' Committee in the Case, or any other party in interest,
including Foothill, to object to the validity, priority, or extent of
such liens, or the allowance of such debts secured thereby, or to
institute any actions or adversary proceedings with respect thereto;
(c) the quarterly fees payable to the United States
Trustee pursuant to 28 U.S.C. Section 1930 or fees of the Clerk of
the Bankruptcy Court;
(d) liens and security interests in favor of Wells Fargo
Bank (Texas), National Association ("Wells Fargo"), which cover
deposits and funds held by Wells Fargo securing reimbursement
obligations of the Borrower relating to letters of credit issued for
the benefit of any surety in conjunction with certain bonded
operations of the Borrower's business, such as explosive permits,
highway use, hole-plugging obligations, etc., so long as (i) such
liens are valid, perfected, and non-avoidable security interests, in
accordance with applicable law, and (ii) the foregoing is without
prejudice to the rights of Borrower, any Creditors' Committee in the
Case, or any other party in interest, including Foothill, to object to
the validity, priority, or extent of such liens, or the allowance of
such debts secured thereby, or to institute any actions or adversary
proceedings with respect thereto;
(e) interests of other parties claiming ownership of
property under leases of such property to the Debtor; and
(f) the prior liens in favor of Teachers Insurance and
Annuity Association of America on the Houston Facility, so long as (i)
such lien is valid, perfected, and non-avoidable, in accordance with
applicable law, and (ii) the foregoing is without
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 5
<PAGE> 38
prejudice to the rights of Borrower, any Creditors' Committee in the
Case, or any other party in interest, including Foothill, to object to
the validity, priority, or extent of such liens, or the allowance of
such debts secured thereby, or to institute any actions or adversary
proceedings with respect thereto.
Notwithstanding the foregoing, to the extent that the interests of parties
listed in Exhibit B as lessor-parties or of any other party claiming ownership
of property leased to the Borrower are not leases but are in fact determined by
the Bankruptcy Court to be disguised financing transactions and, furthermore,
that such interests are not valid, perfected, non-avoidable purchase money
security interests, then Foothill's liens shall be prior to such interests.
2.4 Binding Effect of Documents. Borrower hereby acknowledges,
confirms and agrees that: (a) each of the Loan Documents to which Borrower is a
party has been duly executed and delivered to Foothill by Borrower and is in
full force and effect as of the date hereof, (b) the agreements and obligations
of Borrower contained in the Loan Documents constitute the legal, valid and
binding obligations of Borrower, and Borrower has no valid defense, offset or
counterclaim to the enforcement of such obligations, and (c) Foothill is and
shall be entitled to all of the rights, remedies and benefits provided for in
the Loan Documents and the Financing Orders.
3. ADOPTION AND RATIFICATION.
Borrower hereby (a) ratifies, assumes, adopts and agrees to be bound
by the Loan Documents, and (b) agrees to pay all of the Lender Debt in
accordance with the terms of the Loan Documents and the Financing Orders. All
of the Loan Documents are hereby incorporated herein by reference and hereby
are and shall be deemed adopted and assumed in full by Borrower, as Debtor and
Debtor-in-Possession, and considered as agreements between Borrower and
Foothill. Borrower hereby ratifies, affirms and confirms all of the terms and
conditions of the Loan Documents, as amended and supplemented pursuant hereto
and pursuant to the Interim Financing Order, and agrees to be fully bound, as
Debtor and Debtor-in- Possession, by the terms of the Loan Documents to which
Borrower is a party.
4. GRANT OF SECURITY INTEREST.
As security for the prompt performance, observance and payment in full
of all of the Lender Debt, Borrower, as Debtor-in-Possession, hereby grants,
pledges and assigns to Foothill, and also confirms, reaffirms and restates the
prior grant to Foothill, of a continuing security interest in and liens upon,
and rights of setoff against, all of the Collateral; provided, however, that,
in any event, Foothill's security interests in and liens upon the Pre-Petition
Collateral shall secure the Lender Debt, and Foothill's security interests in
and liens upon the Post-Petition Collateral shall secure only the Post-Petition
Lender Debt. All Loan Documents are hereby modified and amended as necessary
to effectuate the foregoing grant, pledge and assignment of,
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 6
<PAGE> 39
and confirmation, reaffirmation and restatement of, a continuing security
interest in and lien upon the Collateral and the other modifications effected
herein.
5. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS.
In addition to the continuing representations, warranties and
covenants heretofore and hereafter made by Borrower to Foothill, whether
pursuant to the Loan Documents or otherwise, and not in limitation thereof,
Borrower hereby represents and warrants to, and covenants with, Foothill as
follows (all of which representations, warranties and covenants shall survive
the execution and delivery of this Amendment and the material truth and
material accuracy of which, or compliance with which, representations,
warranties and covenants shall be a continuing condition of the making of
advances under the Loan Agreement by Foothill):
5.1 Final Financing Order. The Final Financing Order has been
duly entered, is valid, subsisting and continuing, and has not been vacated,
modified, reversed on appeal, or vacated or modified by any order of the
Bankruptcy Court, and is not subject to any pending appeal or stay.
5.2 Use of Proceeds. All advances provided by Foothill to
Borrower pursuant to the Financing Orders, the Loan Documents or otherwise,
shall be used by the Borrower for, inter alia, Borrower's working capital needs
and for other general corporate purposes of Borrower consistent with the terms
of the Financing Orders and the Loan Documents.
5.3 Other Indebtedness. Neither Borrower nor any other Person
liable for the Lender Debt is in default in the payment of any amounts at any
time due on any material Indebtedness owed by Borrower or in the performance of
any other material terms or covenants of any evidence of such Indebtedness or
of any mortgage, security agreement, indenture, pledge or other agreement
relating thereto or securing such Indebtedness, except for defaults (the
"Existing Defaults") either (a) described in the Forbearance Agreement, (b)
created by the filing of the Case, (c) existing on or before the Petition Date,
or (d) existing under real or personal property leases or equipment financing
obligations of the Borrower.
6. AMENDMENTS.
6.1 Eligible Domestic Accounts Owed by Amoco. Subsection (a) of
the definition of "Eligible Domestic Accounts" in Section 1.1 of the Agreement
is hereby amended in its entirety to read as follows:
(a) Accounts which the Account Debtor
has failed to pay within ninety (90) days, or more, of invoice date;
provided, however, during the period beginning on the date of
Amendment Number One to the Ratification and Amendment Agreement
through February 28, 1997, and with regard to Accounts on which the
Account Debtor is Amoco, such Accounts shall not be ineligible unless
Amoco has failed to pay within one hundred twenty (120) days, or more,
of invoice date;
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 7
<PAGE> 40
6.2 Borrowing Base. Section 2.1(a) of the Loan Agreement is
hereby amended and restated in its entirety to read in full as follows:
(a) Subject to the terms and conditions
of this Agreement, and so long as no Event of Default has occurred and
is continuing, Foothill agrees to make revolving advances to Borrower
in an amount not to exceed the Borrowing Base. For purposes of this
Agreement, "Borrowing Base" shall mean an amount equal to the sum of
the following:
(A) eighty percent (80%) of the amount of
Eligible Domestic Accounts,
(B) the lesser of Eight Million Dollars
($8,000,000) and sixty-five percent (65%) of the amount of
Eligible Insured International Accounts,
(C) forty-five percent (45%) of the amount of
Eligible Uninsured International Accounts, and
(D) the Overadvance Amount.
6.3 Interest. Section 2.4 of the Loan Agreement is hereby amended
and restated in its entirety, so as to provide, among other things, that the
Overadvance Amount will accrue interest at the "Default Rate" and will continue
to accrue until the earliest to occur of the end of the Budget Period, the
Termination Date, or the closing of the Recapitalization:
(a) Interest Rate. All Obligations,
except for undrawn L/Cs, L/C Guarantees and Overadvance Advances,
shall bear interest, on the average Daily Balance, at a rate (the
"Contract Rate") of three and one quarter (3.25) percentage points
above the Reference Rate.
(b) Default Rate. All Obligations,
except for undrawn L/Cs, L/C Guarantees and Overadvance Advances,
shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to seven and
one-quarter (7.25) percentage points above the Reference Rate (the
"Default Rate"). From and after the occurrence and during the
continuance of an Event of Default, the fee provided in Section 2.2(d)
shall be increased to a fee equal to seven percent (7%) per annum
times the average Daily Balance of the undrawn L/Cs and L/C Guarantees
that were outstanding during the immediately preceding calendar month.
Overadvance Advances shall bear interest, on the average Daily Balance
thereof, at the Default Rate.
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 8
<PAGE> 41
(c) Foothill shall have no obligation to
make advances hereunder to the extent they would cause the outstanding
Obligations to exceed Twelve Million Five Hundred Thousand Dollars
($12,500,000) (the "Maximum Amount").
(d) Payments. Interest hereunder, other
than interest on the Overadvance Amount that accrues at the rate (the
"Marginal Rate") determined by subtracting the Contract Rate from the
Default Rate, shall be due and payable on the first day of each
calendar month during the term hereof. Foothill shall, at its option,
charge such interest (other than interest on the Overadvance Amount
that accrues at the Marginal Rate), all Foothill Expenses, all
Periodic Payments, and all installments due under any note payable to
Foothill to Borrower's loan account, which amounts shall thereafter
accrue interest at the rate then applicable hereunder. Any interest
not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the
rate then applicable hereunder. Interest on the Overadvance Amount
that accrues at the Marginal Rate shall be due and payable on the
first day of each calendar month during the term hereof, but shall be
compounded by becoming a part of the Obligations, and such interest on
the Overadvance Amount shall thereafter accrue interest at the rate
then applicable hereunder. Without limiting Borrower's obligation to
pay fees, Foothill Expenses, or any other Obligations, Borrower
promises to pay to Foothill, on or before the Termination Date, the
principal amount of Twelve Million Five Hundred Thousand and no/100
Dollars ($12,500,000) or the aggregate unpaid advances made hereunder,
whichever is the lesser, in legal and lawful money of the United
States of America, together with interest on the outstanding amount
thereof, as herein specified.
(e) Interest at the Marginal Rate. The
portion of the Obligations constituting interest that was calculated
at the Marginal Rate shall specifically be excluded from the
calculations and determinations of the Borrowing Base and the
Overadvance Amount.
6.4 Advances. Section 2.9 of the Loan Agreement is hereby amended
and restated in its entirety as follows:
2.9 ADVANCES. Subject to the terms and conditions of
this Agreement, and so long as no Event of Default has occurred and is
continuing, other than the Existing Defaults (as such term is defined
in the Final Financing Order), Foothill agrees to make advances up to
$12,500,000, inclusive of the Pre-Petition Lender Debt, in the
aggregate at any time outstanding, in accordance with the Final
Financing Order and the Approved Budget, as such Approved Budget
exists from time to time, for a period beginning on the date of entry
of the Final Financing Order and ending on the Termination Date.
6.5 Term. The first sentence of Section 3.4 of the Loan Agreement
is hereby amended and restated in its entirety to read in full as follows:
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 9
<PAGE> 42
This Agreement shall become effective upon the execution and delivery
hereof by Borrower and Foothill and shall continue in full force and
effect for a term ending on the date (the "Termination Date") that is
June 30, 1997, unless sooner terminated pursuant to the terms hereof.
6.6 Early Termination Premium. Section 3.6 of the Loan Agreement,
pertaining to early termination of the Loan Agreement by the Borrower, is
hereby deleted in its entirety.
6.7 Representations and Warranties. Section 5 of the Loan
Agreement, pertaining to representations and warranties of the Borrower, is
amended by deleting the following representations and warranties:
a. Material Adverse Change in Financial Condition. The
last sentence of Section 5.9 is hereby deleted in its entirety.
b. Solvency. The first sentence of Section 5.10 is
hereby deleted in its entirety.
6.8 Monthly Financial Statements. Section 6.4(a) of the Loan
Agreement is amended to provide for the delivery by Borrower to Foothill of a
company prepared balance sheet, income statement, and cash flow statement
covering Borrower's operations in accordance with the following schedule:
<TABLE>
<CAPTION>
For the Month Ended Due Date:
------------------- ---------
<S> <C>
October, 1996: Waived.
November, 1996: February 15, 1997
December, 1996: February 28, 1997
January, 1997, and thereafter: Within 45 days after the end
of the applicable month.
</TABLE>
6.9 Financial Covenants. Section 6.13 of the Loan Agreement,
pertaining to financial covenants of the Borrower, is hereby deleted in its
entirety.
6.10 Sale of Borrower's Assets. Section 6 of the Loan Agreement is
hereby amended by amending and re- stating the following subsections, which had
been added to the Loan Agreement previously by the Ratification Agreement:
6.16 BUSINESS BROKER. Borrower shall provide to Simmons &
Company International ("Simmons"), as soon as available and in any
event not later than February 10, 1997, any and all information
requested by Simmons necessary for the preparation by Simmons of the
offering and sale brochure referenced in Section 6.17 below. Such
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 10
<PAGE> 43
information includes, without limitation, Borrower's preliminary,
unaudited financial statements for the month and calendar year ended
December 31, 1996 and an analysis of the Borrower's operations for the
year 1996. Borrower shall diligently seek approval from the
Bankruptcy Court of Borrower's motion (the "Retention Motion") to
retain Simmons as Borrower's business broker/investment banker for a
Recapitalization. Further, upon approval of the Retention Motion,
Borrower shall immediately engage Simmons for the purposes of
investigating and developing offers and inquiries in connection with
the Recapitalization. Borrower also shall provide Foothill with a
copy of the letter or other agreement evidencing such engagement
immediately upon execution by Borrower and Simmons.
6.17 OFFERING AND SALE BROCHURE. Borrower shall deliver
to Foothill, as soon as available and in any event not later than
March 10, 1997, an offering and sale brochure prepared by Simmons,
soliciting a Recapitalization.
6.18 RECAPITALIZATION. On or before May 31, 1997, the
Borrower shall enter into a definitive agreement, subject to
Bankruptcy Court approval, for the consummation of a Recapitalization
of Borrower, subject to prior submission to Foothill.
6.11 Negative Covenants. Section 7 of the Loan Agreement,
pertaining to negative covenants of the Borrower, is amended as follows:
a. Restrictions on Fundamental Changes. The last
sentence of Section 7.3 is hereby amended by adding the following
clause:
"and Borrower may enter into and consummate a
Recapitalization".
b. Extraordinary Transactions and Disposal of Assets.
The last sentence of Section 7.4 is hereby amended by adding the
following clause:
"and Borrower may enter into and consummate a
Recapitalization".
7. MISCELLANEOUS.
7.1 Amendments and Waivers. Neither this Amendment nor any other
instrument or document referred to herein or therein may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or
termination is sought.
7.2 Further Assurances. Borrower shall, at its expense, at any
time or times duly execute and deliver, or shall cause to be duly executed and
delivered, such further agreements,
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 11
<PAGE> 44
instruments and documents, including, without limitation, additional security
agreements, collateral assignments, Uniform Commercial Code financing
statements or amendments or continuations thereof, landlord's or mortgagee's
waivers of liens and consents to the exercise by Foothill of all the rights and
remedies hereunder or under any of the other Loan Documents and do or cause to
be done such further acts as may be necessary or proper in Foothill's opinion
to evidence, perfect, maintain and enforce the security interest and the
priority thereof in the Collateral and to otherwise effectuate the provisions
or purposes of this Amendment, any of the other Loan Documents or the Financing
Orders. Upon the request of Foothill, at any time and from time to time,
Borrower shall, at its cost and expense, do, make, execute, deliver and record,
register or file, financing statements, mortgages, deeds of trust, deeds to
secure debt, and other instruments, acts, pledges, assignments and transfers
(or cause the same to be done) and will deliver to Foothill such instruments
evidencing items of Collateral as may be requested by Foothill.
7.3 Headings. The headings used herein are for convenience only
and do not constitute matters to be considered in interpreting this Amendment.
7.4 Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall together constitute one and the same agreement.
7.5 Waiver of Defaults; Additional Events of Default. Foothill
hereby acknowledges the existence, as of the date of this Amendment, of the
Existing Defaults; and Foothill hereby waives all such Existing Defaults to the
extent not previously waived; provided, however, that such waiver shall extend
only to the foregoing specific Existing Defaults and not to any other Events of
Default existing as of the date of this Amendment. The parties hereto
acknowledge, confirm and agree that the failure of Borrower to comply with any
of the covenants, conditions and agreements contained herein or in any other
agreement, document or instrument at any time executed by Borrower in
connection herewith shall constitute an Event of Default under the Loan
Documents.
7.6 Costs and Expenses. Borrower shall pay to Foothill on demand
all reasonable costs and expenses that Foothill pays or incurs in connection
with the negotiation, preparation, consummation, administration, enforcement,
and termination of this Amendment, the Financing Orders and the other Loan
Documents including, without limitation: (a) costs and expenses (including
attorneys' and paralegals' fees and disbursements) of counsel to Foothill; (b)
costs and expenses (including attorneys' and paralegals' fees and
disbursements) for any amendment, supplement, waiver, consent, or subsequent
closing in connection with this Amendment, the other Loan Documents, the
Financing Orders and the transactions contemplated thereby; (c) costs and
expenses of lien searches; (d) fees and other charges incurred in connection
with the filing of Uniform Commercial Code financing statements and
continuations, and other actions to perfect, protect, and continue the security
interests and liens of Foothill in the Collateral; (e) sums paid or incurred to
pay any amount or take any action required of Borrower under the
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 12
<PAGE> 45
Loan Documents or the Financing Orders that the Borrower fails to pay or take;
(f) costs of appraisals, inspections and verifications of the Collateral
including, without limitation, travel, lodging, and meals for inspections of
the Collateral and the Borrower's operations by Foothill or its agents and to
attend court hearings or otherwise in connection with the Case; (g) costs and
expenses of preserving and protecting the Collateral; and (h) costs and
expenses (including attorneys' and paralegals' fees and disbursements) paid or
incurred to obtain payment of the Lender Debt, enforce the security interests
and liens of Foothill, sell or otherwise realize upon the Collateral, and
otherwise enforce the provisions of this Amendment, the other Loan Documents
and the Financing Orders, or to defend any claims made or threatened against
Foothill arising out of the transactions contemplated hereby (including,
without limitation, preparations for and consultations concerning any such
matters). The foregoing shall not be construed to limit any other provisions
of the Loan Documents regarding costs and expenses to be paid by Borrower. All
sums provided for in this Section 7.6 shall be part of the Post-Petition Lender
Debt, shall be payable on demand, and shall accrue interest from the date paid
or incurred at the highest rate of interest then payable under the Loan
Documents. Foothill is hereby irrevocably authorized to charge any amounts
payable hereunder directly to the accounts maintained by Foothill with respect
to Borrower.
7.7 Effectiveness. This Amendment shall become effective upon the
execution hereof by Borrower and Foothill and the entry of the Final Financing
Order.
7.8 Notices. All notices, requests and other communications
required to be given hereunder or under any of any of the Loan Documents in
writing will be deemed to have been duly given if delivered in accordance with
the provisions of Section 12 of the Loan Agreement.
7.9 Ratification Agreement. This Amendment is the "Amendment
Number One to Ratification and Amendment Agreement" referred to in the Final
Financing Order, the provisions of which are incorporated into this Amendment
by reference for all purposes. This Amendment is entitled to all of the
benefits of the Final Financing Order.
7.10 Conflicts. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the Loan Agreement
or any of the other Loan Documents, the terms of this Amendment shall govern.
In all respects, the Loan Agreement and each of the other Loan
Documents, as amended and supplemented hereby, shall remain in full force and
effect.
7.11 Successors and Assigns. This Amendment shall bind and inure
to the benefit of the respective successors and assigns of each of the parties
and, in the case of Borrower, including, without limitation, any trustees or
other fiduciaries hereafter appointed as Borrower's legal representatives or
with respect to the property of Borrower's bankruptcy estate, whether under
Chapter 11 of the Code or any subsequent Chapter 7 case, and Borrower's
respective successors upon conclusion of the Case.
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 13
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the day and year first above written.
BORROWER:
GRANT GEOPHYSICAL, INC.,
Debtor and Debtor-in-Possession
By:
----------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
FOOTHILL:
FOOTHILL CAPITAL CORPORATION
By:
---------------------------------------
Thomas Sigurdson, Vice President
Exhibits:
A - Summary of Approved Budget
B - Alleged Prior Liens
C - Peruvian Contracts
D - Houston Facility
AMENDMENT NUMBER ONE TO
RATIFICATION AND AMENDMENT AGREEMENT -Page 14
<PAGE> 47
EXHIBIT A
TO
AMENDMENT NUMBER ONE
TO
RATIFICATION AND AMENDMENT AGREEMENT
SUMMARY OF INITIAL APPROVED BUDGET
(Attached.)
EXHIBIT A -Page 1
<PAGE> 48
EXHIBIT A -- GRANT GEOPHYSICAL US CASH FORECAST
<TABLE>
<CAPTION>
Period Beginning 1/12/97 0/00/97 0/00/97 0/00/97 0/00/97 2/10/97 2/00/97
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
******** (ILLEGIBLE COPY) ************
Period Beginning March April May June July August
------- ------- ------- ------- ------- -------
******** (ILLEGIBLE COPY) ************
</TABLE>
<PAGE> 49
EXHIBIT B
TO
AMENDMENT NUMBER ONE
TO
RATIFICATION AND AMENDMENT AGREEMENT
ALLEGED PRIOR LIENS
(Attached.)
EXHIBIT B -Page 1
<PAGE> 50
EXHIBIT B
TO
AMENDMENT NUMBER ONE
TO
RATIFICATION AND AMENDMENT AGREEMENT
ALLEGED PRIOR LIENS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION DATE COLLATERAL DESCRIPTION FILING NO.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Madeline L.L.C. Sec. of State - Arkansas 2/23/96 All equipment listed in Schedule A, attached to 1003318
Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - Arkansas 6/19/96 All equipment (leased to Grant by Global Charter 1023661
Corporation Corp.) as described in the Schedule A, attached to
the Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Input/Output, Inc. Clerk of Court, 7/13/92 All equipment listed in Schedule A, attached to 09-907729
Caddo Parish, Louisiana Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Chrysler Systems Clerk of Court, 7/31/92 The following equipment pursuant to Lease 26-176489
Leasing, Inc. Jefferson Parish, Agreement No. 10894: 20 -- EXA 8500 8MM Cartridge
Louisiana Tape Drive; 2 -- SIBMA SAH17-3 4 Devise Enclosure;
and 1 -- CMD CDU720-7 Unibus/SCSI Controller CDU
720/T
(On 10/11/93, Collateral transferred to Tensor
Geophysical, Inc.)
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/23/96 All equipment listed in Schedule A, attached to 09-935309
Caddo Parish, Louisiana Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/23/96 All equipment listed in Schedule A, attached to 12-244535
Cameron Parish, Financing Statement
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/23/96 All equipment listed in Schedule A, attached to 14-01892
Claiborne Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/23/96 All equipment listed in Schedule A, attached to 23-96-0295
Iberia Parish, Louisiana Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/23/96 All equipment listed in Schedule A, attached to 29-793157
Lafourche Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/23/96 All equipment listed in Schedule A, attached to 36-103002
Orleans Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/23/96 All equipment listed in Schedule A, attached to 36-103003
Orleans Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT B - PAGE 1
<PAGE> 51
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION DATE COLLATERAL DESCRIPTION FILING NO.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Madeline L.L.C. Clerk of Court, 2/23/96 All equipment listed in Schedule A, attached to 39-267808
Pointe Coupee Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/23/96 All equipment listed in Schedule A, attached to 45-072842
St. Charles Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/23/96 All equipment listed in Schedule A, attached to 45-072843
St. Charles Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/23/96 All equipment listed in Schedule A, attached to 50-96-211
St. Martin Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/26/96 All equipment listed in Schedule A, attached to 10-2287157
Calcasieu Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/26/96 All equipment listed in Schedule A, attached to 17-1115754
East Baton Rouge Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/26/96 All equipment listed in Schedule A, attached to 19-29957
East Faliciana Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/26/96 All equipment listed in Schedule A, attached to 26-206073
Jefferson Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/26/96 All equipment listed in Schedule A, attached to 26-206074
Jefferson Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/26/96 All equipment listed in Schedule A, attached to 28-366721
Lafayette Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/27/96 All equipment listed in Schedule A, attached to 51-8364
St. Mary Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 2/27/96 All equipment listed in Schedule A, attached to 51-8365
St. Mary Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 3/1/96 All equipment listed in Schedule A, attached to 61-1996000062
West Baton Rouge Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Clerk of Court, 3/5/96 All equipment listed in Schedule A, attached to 55-971578
Terrebonne Parish, Financing Statement.
Louisiana
- ----------------------------------------------------------------------------------------------------------------------------------
Oyo Geospace Clerk of Court, 3/27/96 All Debtor's Goods (defined to mean geophones and 17-1116818
Corporation East Baton Rouge Parish, other equipment manufactured by Oyo Geospace
Louisiana Corporation), etc.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT B - PAGE 2
<PAGE> 52
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION DATE COLLATERAL DESCRIPTION FILING NO.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Charter Clerk of Court, 6/19/96 All equipment (leased to Grant by Global Charter 36-107423
Corporation Orleans Parish, Corp.) as described in the Schedule A, attached to
Louisiana the Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - 9/21/93 All equipment (issued pursuant to Sales Agreement 00743645
Corporation Mississippi between Grant and Global.) as described in the
Schedule A, attached to the Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Newcourt Financial Sec. of State - 12/1/94 All equipment including without limitation, 00849167
USA, Inc. Mississippi seismic equipment, computers and other equipment
described in Schedule A (attached to Financing
Statement) issued pursuant to a conditional sales
agreement between Grant and Global.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - 5/26/95 All equipment (issued pursuant to a lease/purchase 00895256
Corporation Mississippi agreement between Grant and Global.) as described
in the Schedule A, attached to the Financing
Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - 6/19/96 All equipment as described in the Schedule A, 01010419
Corporation Mississippi attached to the Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Input/Output, Inc. Sec. of State - 6/22/92 See Schedule A attached to Financing Statement. 92-0622075
New Mexico (SEE EXHIBIT "D")
- ----------------------------------------------------------------------------------------------------------------------------------
First Interstate Sec. of State - 12/1/94 All equipment including without limitation, 94-1201017
Bank of Texas, N.A. New Mexico seismic equipment, computers and other equipment
described in Schedule A (attached to Financing
Statement) issued pursuant to a conditional sales
agreement between Grant and Global.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - 5/30/95 All equipment (issued pursuant to a conditional 95-0530097
Corporation New Mexico sales agreement between Grant and Global.) as
described in the Schedule A, attached to the
Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Sec. of State - 2/27/96 All equipment listed in Schedule A, attached to 96-0227032
New Mexico Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - 6/26/96 All equipment as described in the Schedule A, 96-0626051
Corporation New Mexico attached to the Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
First Interstate Oklahoma County Clerk, 6/8/92 Perfection of " ... a purchase money security N002828
Bank of Texas, N.A. Oklahoma interest in the following: (1) I/O SYSTEM ONE
Seismic Recording System per attached Exhibit "A"
'and its proceeds, including all goods, accounts,
chattel paper, documents, instruments and contact
rights.
- ----------------------------------------------------------------------------------------------------------------------------------
Input/Output, Inc. Oklahoma County Clerk, 6/19/92 All equipment listed in Schedule A, attached to N002254
Oklahoma Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
First Interstate Oklahoma County Clerk, 12/1/94 All equipment including without limitation, N003546
Bank of Texas, N.A. Oklahoma seismic equipment, computers and other equipment
described in Schedule A (attached to Financing
Statement) issued pursuant to a conditional sales
agreement between Grant and Global.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT B - PAGE 3
<PAGE> 53
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION DATE COLLATERAL DESCRIPTION FILING NO.
==================================================================================================================================
<S> <C> <C> <C> <C>
Global Charter Oklahoma County Clerk, 5/26/95 All equipment (issued pursuant to a lease/purchase N001753
Corporation Oklahoma agreement between Grant and Global.) as described
in the Schedule A, attached to the Financing
Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Oklahoma County Clerk, 2/23/96 All equipment listed in Schedule A, attached to 009879
Oklahoma Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Oklahoma County Clerk, 6/19/96 All equipment as described in the Schedule A, N002248
Corporation Oklahoma attached to the Financing Statement.
==================================================================================================================================
Master Lease Sec. of State -Texas 2/12/92 1 -- Newbridge 3624 Channel Bank (24 Channel; 1 92-00027261
Division of Tokai Basic Unit; 1 LGS Card; 1 CSU; and 2 LGS Modules
Financial Services, (Six Pack)).
Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
Mark Products a Sec. of State -Texas 5/7/92 179 210 Meter Variable Interval RSC to RSC I/O 92-00090398
Division of Shaw Cable and related Cables and accessories as per
Resource Services, Sales Order 3-003844.
Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
First Interstate Sec. of State -Texas 6/19/92 All equipment listed in Schedule A, attached to 92-00122288
Bank of Texas, N.A. Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Chrysler Systems Sec. of State - Texas 9/3/92 The following equipment pursuant to Lease 92-00177672
Leasing, Inc. Agreement No. 10894: 1 -- OMNI 8000 Model 30C2-
TDV System Including: Software and License; Add-On
Plotter Upgrade with V80 Interface; and
Integration Fee and Plot Software.
- ----------------------------------------------------------------------------------------------------------------------------------
Mark Products a Sec. of State -Texas 9/16/92 720 P-44 Hydrophone arrays, 10 HZ, 70% damped with 92-00184491
Division of Shaw 75 meter lead-in and U-299 connector and related
Resource Services, cables and accessories as per sales order 3-
Inc. 003227.
- ----------------------------------------------------------------------------------------------------------------------------------
Input/Output, inc. Sec. of State - Texas 10/27/92 1 ALT-XL, ASSY P/N 136000, S/N 02050 92-00212202
- ----------------------------------------------------------------------------------------------------------------------------------
Chrysler Systems Sec. of State - Texas 12/21/92 As per Schedule A, attached to Financing 92-00245495
Leasing, Inc. Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Master Lease Sec. of State - Texas 1/5/93 Newbridge 3624 Phone Systems Equipment/Lease 93-00002217
Division of Tokai Number 24055368 6144
Financial Services,
Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
First Interstate Sec. of State -Texas 3/22/93 All equipment listed in Schedule A, attached to 93-00055229
Bank of Texas, N.A. Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Fairfield Sec. of State - Texas 6/30/93 All collateral on the Exhibit A attached to 93-00126955
Industries, Financing Statement.
Incorporated
- ----------------------------------------------------------------------------------------------------------------------------------
Geo Capital Corp. Sec. of State - Texas 11/19/93 510--CA-1454 Sercel Cables; 100--CA-1474 Sercel 93-00222730
Cables - 40 meters long; 900--CA1464 55 meter
Sercel Cables; 10--CA-1445 200 meter Sercel
Cables; 225--CA1414 35 meter Sercel Cables; 6600
feet of bulk Sercel Cables; 32--CA-1658 Bay
Cables; 95--11A-18 Hydrophone Arrays; and 8--
CA1659 Bay Cable Adapters.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - Texas 4/21/94 All equipment (issued pursuant to a lease/purchase 94-00077795
Corporation agreement between Grant and Global) as described
in the Schedule A, attached to the Financing
Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT B - PAGE 4
<PAGE> 54
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION DATE COLLATERAL DESCRIPTION FILING NO.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Newcourt Financial Sec. of State - Texas 5/20/94 All equipment including without limitation, 94-00100317
USA, Inc. seismic equipment, computers and other equipment
described in Schedule A (attached to Financing
Statement) issued pursuant to a conditional sales
agreement between Grant and Global.
- ----------------------------------------------------------------------------------------------------------------------------------
Tricon Capital Sec. of State - Texas 7/11/94 1 -- SUN SPARC 10/51 to Include: 64MB Ram; 20" 94-00135669
Corp. Sun Color Monitor; Integrated SCSI Controller;
Integrated Ethernet Controller; Floppy Disk;
Speaker Box; AVI Adaptor Cable; Solaris 1.1; 2--
1.05 GB Internal Disks; Ethernet; 644MB CD-ROM;
and Sun Answer Book License & Media & Doc.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - Texas 11/28/94 All equipment (issued pursuant to a conditional 94-00227406
Corporation sales agreement 940927 between Grant and Global)
described as follows: 145 -- MRX/MRX Cables; 6 --
ALX ALX Cables, 600 meters; and 6 -- ALX near MRX
Cables, 2 meters.
- ----------------------------------------------------------------------------------------------------------------------------------
Newcourt Financial Sec. of State - Texas 11/29/94 All equipment including without limitation, 94-00227866
USA, Inc. seismic equipment, computers and other equipment
described in Schedule A (attached to Financing
Statement) issued pursuant to a conditional sales
agreement between Grant and Global.
- ----------------------------------------------------------------------------------------------------------------------------------
Newcourt Financial Sec. of State - Texas 11/29/94 All equipment (issued pursuant to a conditional 94-00227867
USA, Inc. sales agreement 940927 between Grant and Global)
described as follows: 145 -- MRX/MRX Cables; 6 --
ALX ALX Cables, 600 meters; and 6 -- ALX near MRX
Cables, 2 meters.
- ----------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Sec. of State - Texas 1/13/95 1-- GEODOLITE 506; 1 -- GEODAT 500; 1 -- Tripod; 1 95-00009001
Laserplane, Inc., -- Prism Pole; 1 -- Prism; 1 -- HD-Battery; and 1
d/b/a Spectra- -- Power Cable (Lease # 200613)
Physics Credit
Corp.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - Texas 5/26/95 All equipment (issued pursuant to a lease/purchase 95-00105654
Corporation agreement between Grant and Global.) as described
in the Schedule A, attached to the Financing
Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
NYNEX Credit Sec. of State - Texas 7/21/95 Certain equipment leased by NYNEX Credit Company 95-00141638
Company to Grant Geophysical, Inc. pursuant to master
Lease Agreement dated as of March 1, 1995,
together with all proceeds thereof, including
without limitation, proceeds of insurance, which
equipment is described in Exhibit A attached
hereto and made a part thereof.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - Texas 12/8/95 Ten (10) Remote Signal Coordinators (issued 95-00235187
Corporation pursuant to a conditional sales agreement between
Grant and Global.).
- ----------------------------------------------------------------------------------------------------------------------------------
Oyo Geospace Sec. of State - Texas 1/8/96 All Debtor's Goods (defined to mean geophones and 96-00005859
Corporation other equipment manufactured by Oyo Geospace
Corporation), etc.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT B - PAGE 5
<PAGE> 55
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION DATE COLLATERAL DESCRIPTION FILING NO.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Charter Sec. of State - Texas 1/19/96 All equipment (leased pursuant to a lease/purchase 96-00012974
Corporation agreement between Grant and Global.) as described
in the Schedule A, attached to the Financing
Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - Texas 1/25/96 All equipment (leased pursuant to a lease/purchase 96-00016665
Corporation agreement between Grant and Global.) as described
in the Schedule A, attached to the Financing
Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
FINOVA Capital Sec. of State - Texas 1/25/96 All equipment as described in the Schedule A, 96-00016814
Corporation attached to the Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - Texas 2/8/96 All equipment (leased by Global to Grant) 96-00025571
Corporation described as follows: 80 -- RSC/RSC Cables w/6
Takeouts at 70 meters.
- ----------------------------------------------------------------------------------------------------------------------------------
Madeline L.L.C. Sec. of State - Texas 2/23/96 All equipment listed in Schedule A, attached to 96-00035359
Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - Texas 2/29/96 All equipment as described in the Schedule A, 96-00039666
Corporation attached to the Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Leica, Inc. Sec. of State - Texas 3/15/96 "All inventory of goods and merchandise now held 96-00047985
or hereafter acquired by DEBTOR bearing the
tradename(s) and/or trademark(s) 'LEICA' and/or
'CAMBRIDGE INSTRUMENTS' and/or 'WILD LEITZ' either
singly or in combination with any other word or
words, together with all additions and accessions
thereto and all accounts, contact rights,
documents, instruments, general intangibles and
chattel papers of DEBTOR now existing or hereafter
arising out of or with respect to such inventory
and all proceeds of the foregoing."
- ----------------------------------------------------------------------------------------------------------------------------------
NYNEX Credit Sec. of State - Texas 3/31/96 Certain equipment leased by NYNEX Credit Company 95-00062178
Company to Grant Geophysical, Inc. pursuant to master
Lease Agreement dated as of March 1, 1995,
together with all proceeds thereof, including
without limitation, proceeds of insurance, which
equipment is described in Exhibit A attached
hereto and made a part thereof.
- ----------------------------------------------------------------------------------------------------------------------------------
Forum Financial Sec. of State - Texas 5/10/96 Equipment Schedule 3300-01: 75 -- Mark Products 96-00092990
Group, Inc. Telemetry Cables for I/O System, 420 Meters Long
w(6) KCJ-2M Right Angle Takeouts Terminated
w/Amphib 20P-16S Connectors serial numbers SC3342-
001 thru SC3342-075; and 2-- Mark Products SC
Drawings.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT B - PAGE 6
<PAGE> 56
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION DATE COLLATERAL DESCRIPTION FILING NO.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Forum Financial Sec. of State - Texas 6/10/96 Equipment Schedule 3300-03: 670 -- Mark Products 96-00114802
Group, Inc. Telemetry 388 Line Cables 726' long with (e) LPM-
4M Right Angle Takeouts at 242' Intervals &
Terminated Each End with Amphib 165 connectors
serial numbers 9748-01-001 thru 9748-01-190, 9748-
03-001 thru 9748-03-190, 9748-04-001 thru 9748-04-
290; 4 -- Mark Products SC Drawings; and 32 --
Mark Products telemetry 388 Transverse Cables
1000' Long Terminated Each End with Amphib 16S
Connectors.
- ----------------------------------------------------------------------------------------------------------------------------------
Forum Financial Sec. of State - Texas 6/17/96 All equipment listed in Attachment A to Financing 96-00118906
Group, Inc. Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
Global Charter Sec. of State - Texas 6/18/96 All equipment as described in the Schedule A, 96-00120781
Corporation attached to the Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
General Electric Sec. of State - Texas 7/2/96 Equipment described on Schedule to UCC-1 attached 96-00128745
Capital Corporation to Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
LINC Anthem Sec. of State - Texas 10/9/96 All equipment as described in the Schedule A, 96-00201223
Corporation attached to the Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
AT&T Capital Sec. of State - Texas 10/9/96 All equipment as described in the Schedule A, 96-00201224
Leasing Corporation attached to the Financing Statement.
- ----------------------------------------------------------------------------------------------------------------------------------
WINR Business Sec. of State - Texas 10/26/96 100 - Telemetry 388 Line Cable 726' Long with (3) 96-00212336
Credit Corporation LPM-4M-RA Takeout at 247' Intervals Terminated
with Amphib 16S Connectors; S/N 3-000138-001 thru
3-000138-100; 2 -- SC Drawings (Lease Agreement
Number: 020-0002021001
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT B - PAGE 7
<PAGE> 57
EXHIBIT C
TO
AMENDMENT NUMBER ONE
TO
RATIFICATION AND AMENDMENT AGREEMENT
PERUVIAN CONTRACTS
1. Contrato Ndegrees PER-13-12, suscrito el 29.03.96 con Mobil
Exploration and Producing Peru Inc., Sucursal Peruana.
2. Contrato Ndegrees PER-16-12, suscrito el 29.03.96 con Mobil
Exploration and Producing Peru Inc., Sucursal Peruana.
3. Contrato de fecha 27.02.96, con Chevron Overseas Petroleum (Peru)
Limited, Sucursal del Peru.
4. Contrato de fecha 27.06.96 con Pluspetrol Peru Corp., Sucursal del
Peru.
EXHIBIT C -Page 1
<PAGE> 58
EXHIBIT D
TO
AMENDMENT NUMBER ONE
TO
RATIFICATION AND AMENDMENT AGREEMENT
HOUSTON FACILITY
(ATTACHED.)
EXHIBIT D -Page 1
<PAGE> 59
EXHIBIT D
All that certain tract or parcel containing 3.001 acres (130,740 square feet)
of land in the W.C.R.R. Co. Survey, A-902, Harrison County, Texas, being a
portion of Block 2, Unrestricted Reserve "B", Park Ten, Section One, a
subdivision of record in Volume 214, Page 66, of the Harris County Map Records,
said 3.001 acres (130,740 square feet) being more particularly described by
metes and bounds as follows, basing all bearings upon the Texas Coordinate
System, South Central Zone, to-wit:
COMMENCING FOR REFERENCE at a 5/8" iron rod found marking the intersection of
the north right of way (R-O-W) line of Park Row (65' wide) with the west line
of said Park Ten, Section One;
THENCE N. 88 degrees 42' 43" E, 37.04 feet along the north R-O-W line of Park
Row to a 5/8" iron rod marking the southwest corner and PLACE OF BEGINNING of
the tract herein described;
THENCE N 1 degree 50' 57" W, 375.01 feet to a 5/8" iron rod found in the fenced
north line of said Park Ten, Section One;
THENCE N 88 degrees 39' 36" E, 248.86 feet along said fenced north line to a
U.S. Engineering Department concrete monument for corner;
THENCE S 2 degrees 38' 16" E, 32.59 feet along a fence to a U.S. Engineering
Department concrete monument for corner;
THENCE N 88 degrees 38' 58" E, 108.39 feet along the fenced north line of Park
Ten, Section One, to a 5/8" iron rod found for northeast corner;
THENCE S 1 degeree 55' 33" E, 342.77 feet to a 5/8" iron rod found for
southeast corner in the north R-O-W line of Park Row;
THENCE S 88 degrees 42' 43" W, 358.17 feet along the north R-O-W line of Park
Row to the PLACE OF BEGINNING and containing 3.001 acres (130,740 square feet)
of land.
<PAGE> 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
)
IN RE: )
) Chapter 11
GRANT GEOPHYSICAL, INC. )
) Case No. 96-1936 (HSB)
DEBTOR. )
)
ORDER AUTHORIZING THE DEBTOR TO ENTER INTO
A FIRST AMENDMENT TO THE FINAL FINANCING ORDER
THIS MATTER came before the Court on April 9, 1997, upon the Motion For
Order Authorizing The Debtor To Enter Into A First Amendment To The Final
Financing Order, dated March 21, 1997 (the "Financing Amendment Motion"),
seeking authority to amend and perform under the existing loan, financing, and
security agreements by and between the Debtor and Foothill, pursuant to the
changes reflected in the Amendment Number Two To Ratification And Amendment
Agreement ("Amendment No. Two"), attached hereto and incorporated herein for
all purposes, including inter alia authority to (a) extend the maturity of the
Joint Stipulation And Agreed Order Authorizing Final Financing, Granting Senior
Liens and Priority Administrative Expense Status, Providing For Adequate
Protection, Modifying The Automatic Stay, And Authorizing Debtor To Enter Into
Agreements With Foothill Capital Corporation (as amended by this First
Amendment to Final Financing Order (as hereinafter defined), the "Final
Financing Order") from June 30, 1997, to September 30, 1997, and (b) increase
the overadvance provided for in the Final Financing Order from the amounts
stated in the Final Financing Order (ranging from $6.0 million to $4.5
million), to $7 million). The Debtor has represented to the Court it
ORDER AUTHORIZING THE DEBTOR TO ENTER INTO A
FIRST AMENDMENT TO THE FINAL FINANCING ORDER-Page-1-
<PAGE> 2
will comply with the terms of this Order Authorizing The Debtor To Enter Into A
First Amendment To The Final Financing Order (this "First Amendment To Final
Financing Order"). Various creditors appeared by and through their respective
counsel and announced to the Court that they had no objections to this
Financing Amendment Motion based on the changes now reflected in this First
Amendment To Final Financing Order and Amendment No. Two; as to any remaining
objections to the Financing Amendment Motion, the Court overruled such
objections. The Court finds notice to have been sufficient and adequate. The
parties hereto have stipulated and agreed as follows, and based upon the
pleadings and the proffers of evidence and representations of counsel, the
Court hereby adopts said stipulation and agreement as findings of fact and
conclusions of law(1) to amend financing of the Debtor. (All defined terms not
defined herein have the meanings given in the Final Financing Order.)
WHEREUPON, this Court makes the following findings of fact and conclusions
of law:
I. FINDINGS OF FACT AND CONCLUSIONS OF LAW
A. The entry of this First Amendment to Final Financing Order is in
the best interest of the Debtor, its creditors, and its bankruptcy estate.
B. Good and sufficient notice of the Financing Amendment Motion, with
respect to the request therein for the entry of this First Amendment To Final
Financing Order, and of the hearing thereon has been provided in accordance
with Sections 102(1) and 364(c)(1), (2) and (3) of the Code, Bankruptcy Rule
2002.
C. The relief granted by this Court pursuant to this First Amendment
To Final Financing Order is necessary to the continued operations of the
Debtor's business and is in the best interests of its estate.
D. The terms of the Loan Documents, as amended by Amendment No. Two, by
and between the Debtor and Foothill, pursuant to which post-petition loans and
advances have been or will be made to or for the benefit of the Debtor by
Foothill, have been negotiated at arms'
- --------------
1 To the extent any finding of fact is mischaracterized as a conclusion of
law. It shall be deemed a finding of fact, and vice versa.
ORDER AUTHORIZING THE DEBTOR TO ENTER INTO A
FIRST AMENDMENT TO THE FINAL FINANCING ORDER-Page-2-
<PAGE> 3
length and in good faith, as that term is used in the Code, and are in the best
interests or the Debtor. Foothill shall be given all the protections of
entities that have extended credit in good faith under Section 364(e) of the
Code.
II. ORDERS OF THE COURT
BASED UPON THE FOREGOING, it is therefore ORDERED as follows:
1. The relief requested in the Financing Amendment Motion is
granted, and it is hereby approved in all respects.
2. Foothill shall be entitled to all of the benefits, rights,
protections, and benefits of the Final Financing Order and the Loan Agreement,
and the terms and provisions of the Final Financing Order are hereby
incorporated for all purposes herein, except as modified by the specific terms
hereof.
3. The Final Financing Order is hereby amended as follows:
(a) In paragraph 15, the term "Approved Budget" is hereby
amended to refer to the Exhibit A attached to Amendment No. Two, and all
references to the "Maximum Permitted Overadvance Amount" are hereby
amended to mean $7 million.
(b) Paragraph 24A is amended in its entirety to read as follows:
24A. The term Debtor's Carve-Out Amount" means an amount,
inclusive of the amount of the Retainers (as hereinafter defined) which
shall not exceed $640,000 in the aggregate, and which shall be subject
to the further limitations set forth in Paragraphs 24B through 24E of
this Part III, below: Notwithstanding anything else contained herein,
upon an Event of Default (as hereinafter defined), the Debtor's
Carve-Out Amount shall be fixed at the then Debtor's Carve-Out Amount
incurred, inclusive of all amounts that have been paid or are currently
outstanding (in no event to exceed $640,000) on the date of such Event
of Default. The term "Creditors' Committee Counsel Carve-Out Amount"
means an amount not to exceed $720,000 in the aggregate, and which shall
be subject to the further limitations set forth in Paragraphs 24B
through 24E of this Part III, below. Notwithstanding anything else
contained herein, upon an Event of Default, the Creditors' Committee
Counsel Carve-Out Amount shall be fixed at the Creditors' Committee
Counsel Carve-Out Amount incurred inclusive of all amounts that have
been paid or are currently outstanding (in no event to exceed $720,000)
on the date of such Event of Default. The term "Creditors' Committee
Accountants Carve-Out Amount" means an amount not to exceed $135,000 in
the aggregate, and which shall be subject to the further limitations set
forth in Paragraphs 24B through 24E of this Part III, below.
Notwithstanding anything else contained herein, upon an Event of
Default, the Creditors' Committee Accountants Carve-Out Amount shall be
fixed at the Creditors'
ORDER AUTHORIZING THE DEBTOR TO ENTER INTO A
FIRST AMENDMENT TO THE FINAL FINANCING ORDER-Page-3-
<PAGE> 4
Committee Accountants Carve-Out Amount incurred, inclusive of
all amounts that have been paid or are currently outstanding
(in no event to exceed $135,000) on the date of such Event of
Default.
(b) Clauses (a), (b) and (c) of Paragraph 24B are amended
in their entirety to read as follows:
(a) Sprouse & Winn, L.P., Scott, Douglass, Luton &
McConnico, L.L.P., and Young, Conaway, Stargatt & Taylor,
collectively $640,000, in the aggregate, from February 23, 1997
through the termination of the Loan Agreement; and, on a monthly
basis, beginning with the first payment on February 23, 1997 and
continuing on the 23rd day of each month thereafter through the
termination of the Loan Agreement, $80,000 per month (which
represents 80% of fees and 100% of expenses);
(b) Andrews & Kurth, L.L.P., Williams, Hershman, &
Wisler, P.A., and the Creditors' Committee, collectively,
$720,000, in the aggregate, from February 23, 1997 through the
termination of the Loan Agreement; and, on a monthly basis,
beginning with the first payment on February 23, 1997 and
continuing on the 23rd day of each month thereafter through the
termination of the Loan Agreement, $90,000 per month (which
represents 80% of fees and 100% of expenses); and
(c) Price Waterhouse, L.L.P., $135,000 in the
aggregate, from February 9, 1997 through the termination of the
Loan Agreement; and, on a monthly basis, beginning with the
first payment on February 9, 1997, the second payment to be
made on February 23, 1997, and continuing on the 23rd day of
each month thereafter through the termination of the Loan
Agreement, $15,000 per month (which represents 80% of fees and
100% of expenses);
(c) Paragraph 45 is herby amended in its entirety to read
as follows:
45. Notwithstanding anything to the contrary state
herein or in the Loan Documents, the term of this post-
petition financing shall expire, and all Post-Petition Lender
Debt shall be due and payable, on September 30, 1997, but
Foothill may not exercise its rights and remedies except as
provided above.
4. Foothill (and Elliott Associates, L.P. to the extent Elliott
Associates, L.P. is deemed to be a lender) shall be entitled to the full
protection of Section 364(c) of the Code with respect to debts, obligations,
liens, security interests, and other rights created or authorized in this First
Amendment to Final Financing Order (and the Final Financing Order),
notwithstanding the purchase of a certain participation in such financing by
Elliott Associates, L.P.
5. Nothing in this Order shall alter, modify, impair, abrogate, or
affect any of the Creditors' Committee rights, protections, and benefits
afforder to the Creditors'
ORDER AUTHORIZING THE DEBTOR TO ENTER INTO A
FIRST AMENDMENT TO THE FINAL FINANCING ORDER-Page-4-
<PAGE> 5
Committee under the Final Financing Order, including inter alia, the right to
challenge Foothill's liens and claims and the reasonableness of attorneys'
fees, and the requirement that the Debtor obtain Creditors' Committee consent
before amending its budget, etc.
SIGNED this 9th day of April, 1977
/s/ HELISE S. BALICHS
--------------------------------
UNITED STATES BANKRUPTCY JUDGE
AGREED AS TO FORM AND SUBSTANCE:
SCOTT, DOUGLASS, LUTON & MCCONNICO, L.L.P.
By: _____________________________________
Christopher Fuller, Esq.
Texas State Bar No. __________
Greg Pierce, Esq.
Texas State Bar No. __________
600 Congress Avenue, 15th Floor
Austin, Texas 78701-3234
(512) 495-6300
FAX: (512) 474-0731
700 Louisiana
Suite 4000
Houston, Texas 77002-2758
(713) 225-8400
FAX: (713) 225-8488
-AND-
ORDER AUTHORIZING THE DEBTOR TO ENTER INTO A
FIRST AMENDMENT TO THE FINAL FINANCING ORDER -5-
<PAGE> 6
YOUNG, CONAWAY, STARGATT & TAYLOR
By: /s/ LAURA DAVIS JONES
----------------------------------
Laura Davis Jones, Esq. (#2436)
Scott Cousins, Esq. (#3079)
Eleventh Floor, Rodney Square North
Post Office Box 391
Wilmington, Delaware 19899-0391
(302) 571-1253
ATTORNEYS FOR THE DEBTOR,
GRANT GEOPHYSICAL, INC.
HUGHES & LUCE, L.L.P.
By: /s/ DAVID WEITMAN
----------------------------------
David Weitman, Esq.
Texas State Bar No. 21116200
Howard Spector, Esq.
Texas State Bar No. 00785023
1717 Main Street, Suite 2800
Dallas, Texas 75201
(214) 939-5500
FAX: (214) 939-6100
--AND--
RICHARDS, LAYTON & FINGER
By: /s/ THOMAS L. AMBRO
----------------------------------
Thomas L. Ambro, Esq. (#677)
Mark D. Collins, Esq. (#2981)
One Rodney Square
Wilmington, Delaware 19899
(302) 651-7531
FAX: (302) 658-6548
ATTORNEYS FOR
FOOTHILL CAPITAL CORPORATION
ORDER AUTHORIZING THE DEBTOR TO ENTER INTO A
FIRST AMENDMENT TO THE FINAL FINANCING ORDER -Page-6-
<PAGE> 7
ANDREWS & KURTH, L.L.P.
By: JAMES DONNELL, ESQ.
------------------------------------
James Donnell, Esq.
Texas State Bar No. 05981300
600 Travis Street, Suite 4200
Houston, Texas 77002
(713) 220-4200
FAX: (713) 220-4285
-AND-
Van Oliver, Esq.
ANDREWS & KURTH, L.L.P.
4400 Thanksgiving Tower
1611 Elm Street
Dallas, Texas 75201
(214) 979-4400
FAX: (214) 979-4401
-AND-
Jeffrey C. Wisler, Esq.
WILLIAMS, HERSHMAN & WISLER, P.A.
Suite 600, One Commerce Center
Wilmington, Delaware 19899-0511
(302) 575-0873
FAX: (302) 575-1642
ATTORNEYS FOR THE
OFFICIAL UNSECURED CREDITORS' COMMITTEE
ORDER AUTHORIZING THE DEBTOR TO ENTER INTO A
FIRST AMENDMENT TO THE FINAL FINANCING ORDER -7-
<PAGE> 8
AMENDMENT NUMBER TWO
TO
RATIFICATION AND AMENDMENT AGREEMENT
This AMENDMENT NUMBER TWO TO RATIFICATION AND AMENDMENT AGREEMENT (this
"Amendment") is entered into as of April __, 1997, by and between the following
parties:
(a) GRANT GEOPHYSICAL, INC., a Delaware corporation, formerly
known as GRANT TENSOR GEOPHYSICAL CORP. ("Borrower"), as Debtor and
Debtor-in-Possession and;
(b) FOOTHILL CAPITAL CORPORATION ("Foothill").
R E F E R E N C E S
Reference is made to the following documents:
(a) that certain Loan and Security Agreement, dated as of April
26, 1993, by and between Borrower and Foothill, and any extensions, riders,
supplements, notes, amendments, or modifications to or in connection therewith,
as amended by the Ratification Agreement (hereinafter defined) and as further
amended, modified, supplemented or restated from time to time (collectively,
the "Loan Agreement"); and
(b) that certain Ratification and Amendment Agreement, dated as
of December 6, 1996, by and between Borrower and Foothill, as amended by that
certain Amendment Number One to Ratification and Amendment Agreement
("Amendment No. One"), dated as of January 27, 1997, by and between Borrower
and Foothill, and any extensions, riders, supplements, notes, amendments, or
modifications to or in connection therewith, and as further amended, modified,
supplemented or restated from time to time (collectively, the "Ratification
Agreement").
All capitalized terms used and not otherwise defined or amended herein shall
have the respective meanings assigned to such terms in the Loan Agreement and
the Ratification Agreement.
W I T N E S S E T H :
WHEREAS, Borrower commenced its case under Chapter 11 of the Code in
the Bankruptcy Court on December 6, 1996 (such date, and the specific time of
filing on such date, being referred to as the "Petition Date"); and Borrower
has retained possession of its assets and is authorized under the Code to
continue the operation of its business as debtor-in-possession; and
AMENDMENT NUMBER TWO TO
RATIFICATION AND AMENDMENT AGREEMENT - Page 1
<PAGE> 9
WHEREAS, prior to the commencement of the Case, Foothill made loans and
advances to Borrower secured by the assets and properties of Borrower as set
forth in the Lon Documents; and
WHEREAS, Borrower has requested that Foothill increase the Overadvance
Amounts (ranging from $6.0 million to $4.5 million) to $7,000,000 and allow
Borrower to defer the periodic reductions to the Overadvance Amount, as
previously required pursuant to Amendment No. One; and
WHEREAS, Foothill has agreed to Borrower's request, subject to certain
terms and conditions set forth in this Amendment, including, without limitation,
the purchase and funding by Elliott Associates, L.P., a limited
partnership ("EALP"), of a "back-end," "last-out," participation in the
Obligations in the amount of Two Million Five Hundred Thousand Dollars
($2,500,000); and
WHEREAS, Foothill and Borrower have requested the Bankruptcy Court to
enter the First Amendment to Final Financing Order (as hereinafter defined),
which provides for a period of financing through September 30, 1997, pursuant
to which Foothill may make post-petition loans and advances to Borrower as set
forth in the Amended Final Financing Order and the Loan Documents; and
WHEREAS, Borrower reaffirmed its obligations pursuant to the Loan
Documents and acknowledged its continuing liabilities to Foothill thereunder in
order to induce Foothill to make post-petition loans and advances to Borrower,
as evidenced by this Amendment; and
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Foothill and Borrower
mutually agree to the recitals above and further mutually covenant, warrant
and agree as follows:
1. DEFINITIONS.
1.1 Additional Definitions. As used herein, the following terms
shall have the respective meanings given to them below, and the Loan Documents
shall be deemed and are hereby amended to include, in addition to and not in
limitation of, the other defined terms used therein (except where the
definitions set forth below are identical to defined terms used therein, in
which case the definitions set forth below shall be inserted in place of the
corresponding defined terms therein), each of the following definitions:
(a) "Amended final Financing Order" shall mean the final Financing
Order, as amended by the First Amendment to Final Financing Order.
AMENDMENT NUMBER TWO TO
RATIFICATION AND AMENDMENT AGREEMENT - Page 2
<PAGE> 10
(b) "First Amendment to Final Financing Order" shall mean the
Order Authorizing The Debtor To Enter Into a First Amendment to the Final
Financing Order, to be entered by the Bankruptcy Court as a condition precedent
to the effectiveness of Amendment Number Two to Ratification and Amendment
Agreement.
(c) "EALP" shall mean Elliott Associates, L.P.
1.2 Interpretation.
(a) For purposes of this Amendment, all capitalized terms used
and not otherwise defined or amended herein shall have the respective meanings
assigned to such terms in the Loan Agreement and the Ratification Agreement.
(b) All references to any term in the singular shall include
the plural and all references to any term in the plural shall include the
singular.
(c) All terms not specifically defined herein, which are
defined in the California Uniform Commercial Code (the "UCC"), shall have the
meaning set forth therein.
2. ACKNOWLEDGMENTS.
2.1 Pre-Petition Obligations, Security Interests, and Prior Liens.
Borrower hereby reacknowledges, reconfirms, agrees and ratifies, in each case,
as of the date of this Amendment, the acknowledgments, confirmations, and
agreements of Borrower set forth in Amendment No. One in Sections 2.1, 2.2 and
2.3 thereof.
2.2 Binding Effect of Documents. Borrower hereby acknowledges,
confirms and agrees that: (a) each of the Loan Documents to which Borrower is a
party has been duly executed and delivered to Foothill by Borrower and is in
full force and effect as of the date hereof, (b) the agreements and obligations
of Borrower contained in the Loan Documents constitute the legal, valid and
binding obligations of Borrower, and Borrower has no valid defense, offset or
counterclaim to the enforcement of such obligations, and (c) Foothill is and
shall be entitled to all of the rights, remedies and benefits provided for in
the Loan Documents and the Financing Orders.
3. ADOPTION AND RATIFICATION.
Borrower hereby ratifies, affirms and confirms all of the terms and
conditions of the Loan Documents, as amended and supplemented pursuant hereto
and pursuant to the Amended Final Financing Order. Borrower agrees to be fully
bound, as Debtor and Debtor-in-Possession, by the terms of the Loan Documents
to which Borrower is a party.
AMENDMENT NUMBER TWO TO
RATIFICATION AND AMENDMENT AGREEMENT - Page 3
<PAGE> 11
4. CONFIRMATION OF SECURITY INTEREST.
As security for the prompt performance, observance and payment in full
of all of the Lender Debt (including specifically, but without limitation, the
Overadvance Amount, as amended and increased hereby), Borrower, as
Debtor-in-Possession, confirms, reaffirms and restates the prior grant to
Foothill, of a continuing security interest in and liens upon, and rights of
setoff against, all of the Collateral; provided, however, that, in any event,
Foothill's security interests in and liens upon the Pre-Petition Collateral
shall secure the Lender Debt, and Foothill's security interests in and liens
upon the Post-Petition Collateral shall secure only the Post-Petition Lender
Debt. All Loan Documents are hereby modified and amended as necessary to
effectuate the foregoing grant, pledge and assignment of, and confirmation,
reaffirmation and restatement of, a continuing security interest in and lien
upon the Collateral and the other modifications effected herein.
5. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS.
In addition to the continuing representations, warranties and covenants
heretofore and hereafter made by Borrower to Foothill, whether pursuant to the
Loan Documents or otherwise, and not in limitation thereof, Borrower hereby
represents and warrants to, and covenants with, Foothill as follows (all of
which representations, warranties and covenants shall survive the execution and
delivery of this Amendment and the material truth and material accuracy of
which, or compliance with which, representations, warranties and covenants
shall be a continuing condition of the making of advances under the Loan
Agreement by Foothill):
5.1 Use of Proceeds. All advances provided by Foothill to Borrower
pursuant to the Financing Orders, the Loan Documents or otherwise, shall be
used by the Borrower, for inter alia, Borrower's working capital needs and for
other general corporate purposes of Borrower consistent with the terms of the
Financing Orders and the Loan Documents.
5.2 Other Indebtedness. Neither Borrower nor any other Person
liable for the Lender Debt is in default in the payment of any amounts at any
time due on any material indebtedness owed by Borrower or in the performance of
any other material terms or covenants of any evidence of such Indebtedness or
of any mortgage, security agreement, indenture, pledge or other agreement
relating thereto or security such Indebtedness, except for defaults (the
"Existing Defaults") either (a) described in the Forbearance Agreement, (b)
created by the filing of the Case, (c) existing on or before the Petition Date,
or (d) existing under real or personal property leases or equipment financing
obligations of the Borrower.
6. AMENDMENTS.
6.1 Amendments to Section 1.1: Amendment of Certain Definitions.
Effective as of the date hereof, the definitions of "Budget Period" and
"Overadvance Amount" contained in
AMENDMENT NUMBER TWO TO
RATIFICATION AND AMENDMENT AGREEMENT - Page 4
<PAGE> 12
Section 1.1 of the Loan Agreement are hereby deleted in their entirety, and the
following shall be substituted therefor, respectively.
"Budget Period shall mean the period from January 12, 1997, through
September 30, 1997."
"Overadvance Amount shall mean the total amount, from time to time and
at any time, of Overadvance Advances, with such amount limited to a
maximum total amount at any point in time of Seven Million Dollars
($7,000,000)."
6.2 Term. The first sentence of Section 3.4 of the Loan Agreement is
hereby amended and restated in its entirety to read in full as follows:
This Agreement shall become effective upon the execution and delivery
hereof by Borrower and Foothill and shall continue in full force and
effect for a term ending on the date (the "Termination Date") that is
September 30, 1997, unless sooner terminated pursuant to the terms
hereof.
6.3 Exhibit A. Exhibit A attached to Amendment No. One is hereby
superseded and replaced by Exhibit A. Summary of the Revised Approved Budget,
attached hereto and incorporated herein for all purposes.
7. CONDITIONS PRECEDENT. The effectiveness of this Amendment is subject to
the fulfillment, to the satisfaction of Foothill and its counsel, in their sole
discretion, of each of the following conditions not later than April 10, 1997:
7.1 Participation Agreement. Execution and delivery to Foothill by EALP
of a Participation Agreement, in form and substance satisfactory to Foothill,
providing for EALP's purchase of a participation in the Overadvance Amount to
the extent of $2,500,000, and funding by EALP to Foothill of the full purchase
price of the participation; and
7.2 First Amendment to Final Financing Order. Entry by the Bankruptcy
Court of the First Amendment to Final Financing Order.
8. MISCELLANEOUS.
8.1 Amendments and Waivers. Neither this Amendment nor any other
instrument or document referred to herein or therein may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or
termination is sought.
8.2 Further Assurances. Borrower shall, at its expense, at any time or
times duly execute and deliver, or shall cause to be duly executed and
delivered, such further agreements,
AMENDMENT NUMBER TWO TO
RATIFICATION AND AMENDMENT AGREEMENT - Page 5
<PAGE> 13
instruments and documents, including, without limitation, additional security
agreements, collateral assignments, Uniform Commercial Code financing
statements or amendments or continuations thereof, landlord's or mortgagee's
waivers of liens and consents to the exercise by Foothill of all the rights and
remedies hereunder or under any of the other Loan Documents and do or cause to
be done such further acts as may be necessary or proper in Foothill's opinion
to evidence, perfect, maintain and enforce the security interest and the
priority thereof in the Collateral and to otherwise effectuate the provisions
or purposes of this Amendment, any of the other Loan Documents or the Financing
Orders. Upon the request of Foothill, at any time and from time to time,
Borrower shall, at its cost and expense, do, make, execute, deliver and record,
register or file, financing statements, mortgages, deeds of trust, deeds to
secure debt, and other instruments, acts, pledges, assignments and transfers
(or cause the same to be done) and will deliver to Foothill such instruments
evidencing items of Collateral as may be requested by Foothill.
8.3 Headings. The headings used herein are for convenience only and do
not constitute matters to be considered in interpreting this Amendment.
8.4 Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall together constitute one and the same agreement.
8.5 Waiver of Defaults; Additional Events of Default. Foothill hereby
acknowledges the existence, as of the date of this Amendment, of the Existing
Defaults; and Foothill hereby waives all such Existing Defaults to the extent
not previously waived; provided, however, that such waiver shall extend only to
the foregoing specific Existing Defaults and not to any other Events of Default
existing as of the date of this Amendment. The parties hereto acknowledge,
confirm and agree that the failure of Borrower to comply with any of the
covenants, conditions and agreements contained herein or in any other
agreement, document or instrument at any time executed by Borrower in
connection herewith shall constitute an Event of Default under the Loan
Documents.
8.6 Costs and Expenses. Borrower shall pay to Foothill on demand all
reasonable costs and expenses that Foothill pays or incurs in connection with
the negotiation, preparation, consummation, administration, enforcement, and
termination of this Amendment, the Financing Orders and the other Loan
Documents including, without limitation: (a) costs and expenses (including
attorneys' and paralegals' fees and disbursements) of counsel to Foothill; (b)
costs and expenses (including attorneys' and paralegals' fees and
disbursements) for any amendment, supplement, waiver, consent, or subsequent
closing in connection with this Amendment, the other Loan Documents, the
Financing Orders and the transactions contemplated thereby; (c) costs and
expenses of lien searches; (d) fees and other charges incurred in connection
with the filing of Uniform Commercial Code financing statements and
continuations, and other actions to perfect, protect, and continue the security
interests and liens of Foothill in the Collateral; (e) sums paid or incurred to
pay any amount or take any action required of Borrower under the
AMENDMENT NUMBER TWO TO
RATIFICATION AND AMENDMENT AGREEMENT - Page 6
<PAGE> 14
Loan Documents or the Financing Orders that the Borrower fails to pay or take;
(f) costs of appraisals, inspections and verifications of the Collateral
including, without limitation, travel, lodging, and meals for inspections of
the Collateral and the Borrower's operations by Foothill or its agents and to
attend court hearings or otherwise in connection with the Case; (g) costs and
expenses of preserving and protecting the Collateral; and (h) costs and
expenses (including attorneys' and paralegals' fees and disbursements) paid or
incurred to obtain payment of the Lender Debt, enforce the security interests
and liens of Foothill, sell or otherwise realize upon the Collateral, and
otherwise enforce the provisions of this Amendment, the other Loan Documents
and the Financing Orders, or to defend any claims made or threatened against
Foothill arising out of the transactions contemplated hereby (including,
without limitation, preparations for and consultations concerning any such
matters). The foregoing shall not be construed to limit any other provisions of
the Loan Documents regarding costs and expenses to be paid by Borrower. All
sums provided for in this Section 8.6 shall be part of the Post-Petition Lender
Debt, shall be payable on demand, and shall accrue interest from the date paid
or incurred at the highest rate of interest then payable under the Loan
Documents. Foothill is hereby irrevocably authorized to charge any amounts
payable hereunder directly to the accounts maintained by Foothill with respect
to Borrower.
8.7 Effectiveness. The Amendment shall become effective upon the
execution hereof by Borrower and Foothill, the entry of the First Amendment to
Final Financing Order, and the conditions precedent set forth at Section 7
above.
8.8 Notices. All notices, requests and other communications required to
be given hereunder or under any of any of the Loan Documents in writing will be
deemed to have been duly given if delivered in accordance with the provisions
of Section 12 of the Loan Agreement.
8.9 Ratification Agreement. This Amendment is the "Amendment Number Two
to Ratification and Amendment Agreement" referred to in the Amended Final
Financing Order, the provisions of which are incorporated into this Amendment
by reference for all purposes. This Amendment is entitled to all of the
benefits of the amended Final Financing Order.
8.10 Conflicts. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the Loan Agreement
or any of the other Loan Documents, the terms of this Amendment shall govern.
In all respects, the Loan Agreement and each of the other Loan Documents, as
amended and supplemented hereby, shall remain in full force and effect.
8.11 Successors and Assigns. This Amendment shall bind and inure to the
benefit of the respective successors and assigns of each of the parties and, in
the case of Borrower, including, without limitation, any trustees or other
fiduciaries hereafter appointed as borrower's legal representatives or with
respect to the property of Borrower's bankruptcy estate, whether under Chapter
11 of the code or any subsequent Chapter 7 case, and Borrower's respective
successors upon conclusion of the Case.
AMENDMENT NUMBER TWO TO
RATIFICATION AND AMENDMENT AGREEMENT - Page 7
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
BORROWER:
GRANT GEOPHYSICAL, INC.
Debtor and Debtor-in-Possession
By: [ILLEGIBLE]
------------------------------------
Name: [ILLEGIBLE]
----------------------------------
Title: President
---------------------------------
FOOTHILL:
FOOTHILL CAPITAL CORPORATION
By:
------------------------------------
Kevin M. Coyle, Senior Vice President
Exhibits
- --------
A -- Summary of Revised Approved Budget
AMENDMENT NUMBER TWO TO
RATIFICATION AND AMENDMENT AGREEMENT - Page 8
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
BORROWER:
GRANT GEOPHYSICAL, INC.,
Debtor and Debtor-in-Possession
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
FOOTHILL:
FOOTHILL CAPITAL CORPORATION
By: /s/ THOMAS SIGURDSON
-----------------------------------
Thomas Sigurdson,
Vice President
Exhibits
A -- Summary of Revised Approved Budget
AMENDMENT NUMBER TWO TO
RATIFICATION AND AMENDMENT AGREEMENT - Page 8
<PAGE> 17
Exhibit A
to
Amendment Number Two
to
Ratification and Amendment Agreement
Summary of Revised Approved Budget
(Attached.)
Exhibit A - Page 1
<PAGE> 18
Grant Geophysical -- Domestic Cash Budget -- Summary
Through September 1997
<TABLE>
<CAPTION>
Period
Beginning 1/12/97 1/19/97 1/26/97 2/2/97 2/9/97 2/16/97 3/2/97 3/9/97 3/16/97 3/16/97 3/23/97 4/1/97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Cash 272 322 55 106 762 22 77 445 50 294 247 176
Total Foreign
Transfers in 32 70 17 142 69 33 517 47 2 - 61 200
Misc. Cash
Deposits 4 12 22 431 4 72 5 5
Total Trade
Collections 2,157 836 15 1,531 2,705 - 1,514 557 730 2,685 234 141
Total Cash 2,465 1,240 109 2,210 3,526 55 2,112 1,050 782 3,051 547 522
Disbursements:
Total Foothill
Payments: 2,177 837 15 1,654 2,706 - 1,514 620 730 2,685 242 280
Total Payment
Costs 157 439 210 422 122 515 280 352 143 408 69 393
Total Debt &
Lease Payments: 39 25 9 124 50 8 423 89 80 54 139 314
Total Crew
Expenses: 391 305 408 421 439 316 262 381 243 428 481 453
Total Overhead 222 90 123 49 186 195 79 48 255 45 409 73
Total Foreign
Transfers Out 173 90 100 140 150 139 117 126 150 210 196 256
Total Capital
Spending - - - - - - - - 17 - 192 106
Total
Distributions 3,159 1,786 869 2,810 3,652 1,174 2,655 1,594 1,618 3,630 1,707 1,855
Preliminary Ending
Cash (694) (546) (755) (600) (127) (1,119) (543) (544) (836) (779) (1,160) (1,353)
Total Pledges and
Advances 721 952 899 884 1,121 411 303 959 535 1,655 507 1,178
Ending Cash 27 406 133 284 594 (708) (204) 415 (301) 877 (653) ( 155)
Loan Analysis:
Beginning
Balance 11,339 10,245 10,095 10,895 10,394 8,734 9,323 8,402 9,121 9,365 7,700 6,792
Collections
Applied to
Loan (2,157) (836) (15) (1,531) 2,709 - (1,514) (557) (730) (2,655) (234) (141)
Pledges &
Advances 721 952 889 884 1,121 411 303 959 535 1,655 507 1,178
Ending Cash
Borrowed
(Repay) (27) (405) (133) (284) (994) 706 240 415 301 (667) 653 155
Borrow Beg. Cash
Balance
Other (to adjust
loan to actual) 369 141 58 430 919 (630) 50 732 138 241 165 28
Ending Loan
Balance 10,245 10,096 10,895 10,394 8,734 9,323 8,402 9,121 9,365 7,700 8,792 10,012
Estimated
Overadvance
Amount 4,000 3,956 3,654 5,595 5,264 5,748 5,441 5,339 5,510 5,579 5,433 5,529
</TABLE>
<PAGE> 19
Grant Geophysical -- Domestic Cash Budget -- Summary
Through September 1997
<TABLE>
<CAPTION>
Period
Beginning 4/1/97 4/6/97 4/13/97 4/28/97 4/27/97 5/4/97 5/11/97 5/18/97 5/25/97 June July August Sept.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Cash 176 200 200 200 200 200 200 200 200 200 200 200 200
Total Foreign
Transfers In 200 75 - 100 75 100 - - - 275 275 275 275
Misc Cash
Deposits 5
Total Trade
Collections 141 100 1,801 613 1,668 890 2,676 550 1,425 5,646 6,393 7,122 3,800
Total Cash 522 375 2,001 913 1,943 1,190 2,876 760 1,625 6,121 6,858 7,597 4,275
Disbursements:
Total Foothill
Payments 260 100 1,801 613 1,808 890 2,676 550 1,545 5,766 6,513 7,242 3,920
Total Payroll
Costs 393 500 110 550 110 550 110 550 110 1,840 1,310 1,310 1,310
Total Debt &
Lease Payments 314 - 252 - 389 17 212 - 10 594 621 621 621
Total Crew
Expenses 453 450 690 480 130 810 150 810 810 2,365 2,065 1,140 1,140
Total Overhead 73 61 249 248 61 61 249 148 72 429 638 429 429
Total Foreign
Transfer Out 255 200 150 150 150 150 200 200 200 750 750 750 750
Total Capital
Spending 105 150 150 - - - - - - - - - -
Total
Disbursements 1,855 1,701 3,402 2,009 3,268 2,178 4,197 2,058 2,447 11,944 11,889 11,792 8,370
Preliminary
Ending Cash (1,333) (1,326) (1,401) (1,096) (1,325) (998) (1,321) (1,306) (822) (5,923) (5,020) (4,195) (4,095)
Total Pledges
and Advances 1,178 1,230 890 1,168 1,474 1,274 1,595 1,100 2,115 6,178 6,839 5,292 3,840
Ending Cash (155) (96) (541) 72 149 285 274 (206) 1,293 355 1,819 1,097 (255)
Loan Analysis:
Beginning
Balance 8,792 10,012 11,430 11,238 11,921 11,778 12,076 10,921 11,677 11,474 11,851 10,678 7,951
Collection
Applied
to Loan (141) (100) (1,801) (613) (1,668) (890) (2,676) (550) (1,425) (5,646) (6,393) (7,122) (3,800)
Pledges and
Advances 1,178 1,230 860 1,168 1,474 1,274 1,595 1,100 2,115 6,170 6,839 6,292 3,640
Ending Cash
Borrowed
(Repay) 155 96 541 (72) (149) (286) (274) 206 (1,293) (355) (1,819) (1,097) 255
Borrow Beg.
Cash Balance 200 200 200 200 200 200 200 200 200 200 200 200
Other (to adjust
loan to actual) 28
Ending Loan
Balance 10,012 11,430 11,238 11,921 11,770 12,076 10,921 11,877 11,478 11,851 10,676 7,951 8,446
Estimated
Overadvance
Amount 5,529 5,825 6,555 6,694 6,746 6,660 6,585 6,991 5,898 5,743 4,125 3,227 3,692
</TABLE>
<PAGE> 1
UNITED STATES BANKRUPTCY COURT
District of Delaware
- --------------------------------------------------------------------------------
IN RE (Name of Debtor-if individual, enter Last, First, Middle)
Grant Geophysical, Inc.
- --------------------------------------------------------------------------------
ALL OTHER NAMES used by debtor in the last 6 years
(include married, maiden and trade names)
Grant Tensor Geophysical Corp.
Grant-Norpac, Inc.
- --------------------------------------------------------------------------------
SOC. SEC./TAX I.D. NO. (if more than one, state all)
84-0766570
- --------------------------------------------------------------------------------
STREET ADDRESS OF DEBTOR (No. and street, city, state, zip)
16850 Park Row
Houston, Texas 77084
(Delaware Corporation) ----------------------------
COUNTY OF RESIDENCE OR
PRINCIPAL PLACE OF BUSINESS
Harris County
- --------------------------------------------------------------------------------
MAILING ADDRESS OF DEBTOR (if different from street address)
P.O. Box 219950
Houston, Texas 77218-9950
- --------------------------------------------------------------------------------
LOCATION OF PRINCIPAL ASSETS OF BUSINESS DEBTOR
(If different from addresses listed above)
VOLUNTARY
PETITION
- --------------------------------------------------------------------------------
NAME OF JOINT DEBTOR (Spouse) (Last, First, Middle)
- --------------------------------------------------------------------------------
ALL OTHER NAMES used by the joint debtor in the last 6 years
(include married, maiden and trade names)
- --------------------------------------------------------------------------------
SOC. SEC./TAX I.D. NO. (if more than one, state all)
- --------------------------------------------------------------------------------
STREET ADDRESS OF JOINT DEBTOR (No. and street, city, state, zip)
---------------------------
COUNTY OF RESIDENCE OR
PRINCIPAL PLACE OF BUSINESS
- --------------------------------------------------------------------------------
MAILING ADDRESS OF DEBTOR (if different from street address)
- --------------------------------------------------------------------------------
[x] Debtor has been domiciled or has had a residence, principal place of
business or principal assets in this District for 180 days immediately
preceding the date of this petition or for a longer part of such 180
days than in any other District
[ ] There is a bankruptcy case concerning debtor's affiliate, general
partner or partnership pending in this District.
- --------------------------------------------------------------------------------
INFORMATION REGARDING DEBTOR (Check applicable boxes)
- --------------------------------------------------------------------------------
TYPE OF DEBTOR
[ ] Individual [X] Corporation Publicly Held
[ ] Joint (H&W) [ ] Corporation Not Publicly Held
[ ] Partnership [ ] Municipality
[ ] Other_________________________________________________________________
NATURE OF DEBT
[ ] Non-Business Consumer [X] Business - Complete A&B below
A. TYPE OF BUSINESS (check one box)
[ ] Farming [ ] Transportation [ ] Commodity Broker
[ ] Professional [ ] Manufacturing/ [ ] Construction
[ ] Retail/Wholesale Mining [ ] Retail/Wholesale
[ ] Railroad [ ] Stockbroker [X] Other Business
B. BRIEFLY DESCRIBE NATURE OF BUSINESS
The debtor provides geophysical data acquisition services to energy
exploration industry.
- --------------------------------------------------------------------------------
CHAPTER OR SECTION OF BANKRUPTCY CODE UNDER WHICH THE PETITION IS FILED
(Check one box)
[ ] Chapter 7 [X] Chapter 11
[ ] Chapter 13
[ ] Chapter 9 [ ] Chapter 12
[ ] Section 304-Case
Ancillary to Foreign
FILING FEE (Check one box) Proceeding
[X] Filing fee attached.
- --------------------------------------------------------------------------------
[ ] Filing fee to be paid in installments. (Applicable to individuals only)
Must attach signed application for the court's consideration certifying
that the debtor is unable to pay fee except in installments. Rule
1006(b). See Official Form No. 3
NAME AND ADDRESS OF LAW FIRM OR ATTORNEY
- --------------------------------------------------------------------------------
See Schedule 1 annexed hereto
- --------------------------------------------------------------------------------
Telephone No.
NAME(S) OF ATTORNEY(S) DESIGNATED TO REPRESENT TO DEBTOR
See Schedule 1 annexed hereto
- --------------------------------------------------------------------------------
[ ] Debtor is not represented by an attorney
- --------------------------------------------------------------------------------
STATISTICAL ADMINISTRATIVE INFORMATION (28 U.S.C. SECTION 604) THIS SPACE FOR
(Estimate only) (Check applicable boxes) COURT USE ONLY
- ------------------------------------------------------------------
[X] Debtor estimates that funds will be available for
distribution to unsecured creditors.
[ ] Debtor estimates that after any exempt property is
excluded and administrative expenses paid, there
will be no funds available for distribution to unsecured
creditors.
- --------------------------------------------------------------------------------
ESTIMATED NUMBER OF CREDITORS
[ ] 1-15 [ ] 16-49 [ ] 50-99 [ ] 100-199 [ ] 200-999 [X] 1000-Over
- --------------------------------------------------------------------
ESTIMATED ASSETS (in thousands of dollars)
[ ] Under 50 [ ] 50-99 [ ] 100-499 [ ] 500-999 [ ] 1000-9999
[ ] 10,000-over [X] 100,000-over
- --------------------------------------------------------------------------------
ESTIMATED LIABILITIES (in thousands of dollars)
[ ] Under 50 [ ] 50-99 [ ] 100-499 [ ] 500-999 [ ] 1000-9999
[X] 10,000-over [ ] 100,000-over
- --------------------------------------------------------------------------------
ESTIMATED NUMBER OF EMPLOYERS - CH 11 & 12 ONLY
[ ] 0 [ ] 1-19 [ ] 20-99 [ ] 100-0999 [X] 1000-over
- --------------------------------------------------------------------------------
<PAGE> 2
Name of Debtor Grant Geophysical, Inc. Case No. 96- (Court use only)
-----------------------
FILING OF PLAN
For Chapter 9, 11, 12 and 13 cases only. Check appropriate box.
/ / A copy of debtor's proposed plan dated
is attached
/ X / Debtor intends to file a plan within the time allowed
by statute, rule, order of the court.
PRIOR BANKRUPTCY CASE FILED WITHIN LAST 6 YEARS
(if more than one, attached additional sheet)
Location Where Filed Case Number Date Filed
None
PENDING BANKRUPTCY CASE FILED BY ANY SPOUSE, PARTNER, OR AFFILIATE OF THIS
DEBTOR (if more than one, attach additional sheet.)
Name of Debtor Case Number Date
N/A
Relationship District Judge
REQUEST FOR RELIEF
Debtor requests relief in accordance with the chapter of title 11, United
States Code, specified in this petition.
SIGNATURES
ATTORNEY
X
Signature /s/ EDWARD DAVID JONES Date 12/5/96
---------------------------
INDIVIDUAL/JOINT DEBTOR(S) CORPORATE OR PARTNERSHIP DEBTOR
I declare under penalty of perjury I declare under penalty of perjury
that the information provided in this that the information provided in this
petition is true and correct. petition is true and correct, and that
the filing of this petition on behalf
of the debtor has been authorized.
X X /s/ WILLIAM B. CLEVELAND
---------------------------------- -----------------------------------
Signature of Debtor Signature of Authorized Individual
Date William B. Cleveland
Print or Type Name of Authorized
Individual
X Vice President and Chief Financial
Officer
Signature of Joint Debtor Title of Individual Authorized by
Debtor to File this Petition
Date Date December 5, 1996
EXHIBIT "A" (To be completed if debtor is a corporation
requesting relief under Chapter 11.)
/ X / Exhibit "A" is attached and made a part of this petition.
TO BE COMPLETED BY INDIVIDUAL CHAPTER 7 DEBTOR WITH PRIMARILY CONSUMER DEBTS
(See P.L. 98-353 & 322)
I am aware that I may proceed under chapter 7, 11, 12 or 13 of title 11,
United States Code, understand the relief available under each such chapter,
and choose to proceed under Chapter 7 of such title.
If I am represented by an attorney, exhibit "B" has been completed.
X
Signature of Debtor Date
X
Signature of Joint Debtor Date
EXHIBIT "B" (To be completed by attorney for individual chapter 7 debtor(s)
with primarily consumer debts.)
I, the attorney for the debtor(s) named in the foregoing petition, declare
that I have informed the debtor(s) that (he, she or they) may proceed under
chapter 7, 11, 12 or 13 of title 11, United States Code, and have explained the
relief available under each such chapter.
X
Signature of Attorney Date
Schedule 1
<PAGE> 3
EXHIBIT A
<PAGE> 4
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
In re Grant Geophysical, Inc.,
Debtor. Case No._______________
Chapter 11
EXHIBIT "A" TO VOLUNTARY PETITION
1. Debtor's employer identification number is 84-0766570.
2. If any of debtor's securities are registered under section 12
of the Securities and Exchange Act of 1934, the SEC file number is 000-18816.
3. The following financial data is the latest available
information and refers to debtor's condition on 9/30/96.
<TABLE>
<CAPTION> <S> <C> <C>
($000)
a. Total assets $105,982
b. Total liabilities $ 90,290
Approximate
number of
holders
Fixed, liquidated secured debt $51,684 36
Contingent secured debt -- --
Disputed secured claims -- --
Unliquidated secured debt -- --
Approximate
number of
holders
Fixed, liquidated unsecured debt -- --
Contingent unsecured debt -- --
Disputed unsecured claims -- --
Unliquidated unsecured debt $ 4,515 6
Number of shares of preferred stock
11/20/96 2,300,000 32
Number of shares of common stock
11/20/96 19,219,953 126
</TABLE>
<PAGE> 5
Comments, if any: None.
4. Brief description of debtor's business: International
geophysical services company headquartered in Houston, Texas operating seismic
and transition zone crews worldwide on 2-D and 3-D projects.
5. List the name of any person who directly or indirectly owns,
controls, or holds, with power to vote 20% or more of the voting securities of
debtor: None
6. List the names of all corporations 20% or more of the
outstanding voting securities of which are directly or indirectly owned,
controlled, or held, with power to vote by debtor: None.
DECLARATION UNDER PENALTY OF PERJURY
ON BEHALF OF A CORPORATION OR PARTNERSHIP
I, William B. Cleveland [the president or other officer or an authorized agent
of the corporation] [or a member or an authorized agent of the partnership]
named as the debtor in this case, declare under penalty of perjury that I have
read the foregoing Exhibit "A" and that it is true and correct to the best of
my information and belief.
Date 12/5/96
Signature /s/ WM B. CLEVELAND
------------------------
William B. Cleveland
Chief Financial Officer, Secretary and Treasurer
(Print Name and Title)
-2-
<PAGE> 1
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of January 28, 1997, by
Grant Geophysical Inc., debtor-in-possession, a Delaware corporation (the
"Employer"), and Larry E. Lenig, Jr. an individual resident in Harris County
(the "Executive").
AGREEMENT
The parties, intending to be legally bound, agree as follows:
- -------------------------------------------------------------------------------
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.
"AGREEMENT" -- this Employment Agreement, including any Exhibits
hereto, as amended from time to time.
"BASIC COMPENSATION" -- Salary and Benefits.
"BENEFITS" -- as defined in Section 3.1(B).
"BOARD OF DIRECTORS" -- the board of directors of the Employer.
"CONFIDENTIAL INFORMATION" -- any and all:
(a) trade secrets concerning the business and affairs of the Employer,
product specifications, data, know-how, formulae, compositions, processes,
designs, sketches, photographs, graphs, drawings, samples, inventions and
ideas, past, current, and planned research and development, current and planned
manufacturing or distribution methods and processes, customer lists, current
and anticipated customer requirements, nature and location of any pending or
proposed work for any current or prospective customer, price lists and bids,
market studies, business plans, computer software and programs (including
object code and source code), computer software and database technologies
systems, structures, and architectures (and related formulae, compositions,
processes, improvements, devices, know-how, inventions, discoveries, concepts,
ideas, designs, methods and information, and any other information, however
documented, that is a trade secret within the meaning of applicable state or
federal trade secret law; and
(b) information concerning the business and affairs of the Employer
(which includes historical financial statements, financial projections and
budgets, historical and projected sales, capital spending budgets and plans,
the names and backgrounds of key personnel, personnel training and techniques
and materials, however documented; and
<PAGE> 2
(c) notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Employer containing or based, in whole or in
part, on any information included in the foregoing.
"DISABILITY" -- as defined in Section 6.2.
"EFFECTIVE DATE" -- the date stated in the first paragraph of the
Agreement.
"EMPLOYMENT PERIOD" -- the term of the Executive's employment under
this Agreement.
"FISCAL YEAR" -- the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
"FOR CAUSE" -- as defined in Section 6.3.
"FOR GOOD REASON" -- as defined in Section 6.4.
"INCENTIVE COMPENSATION" -- as defined in Section 3.2.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or governmental body.
"PLAN OF REORGANIZATION" -- any plan for the sale, reorganization or
liquidation of the Employer which is confirmed by the Bankruptcy Court.
"PROPRIETARY ITEMS" -- AS DEFINED IN SECTION 7.2(A)(iv).
"SALARY" -- as defined in Section 3.1(A).
================================================================================
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT
The Employer hereby employs the Executive, and the Executive hereby accepts
employment by the Employer, upon the terms and conditions set forth in this
Agreement.
2.2 TERM
Subject to the provisions of Section 6, the term of the Executive's employment
under this Agreement will be one year, beginning on the Effective Date and
ending on the first anniversary of the Effective Date.
2
<PAGE> 3
2.3 DUTIES
The Executive will have such duties as are assigned or delegated to the
Executive by the Board of Directors or Chief Executive Officer, and will
initially serve as President and Chief Operating Officer of the Employer. The
Executive will devote his entire business time, attention, skill, and energy
exclusively to the business of the Employer, will use his best efforts to
promote the success of the Employer's business, and will cooperate fully with
the Board of Directors in the advancement of the best interests of the
Employer. If the Executive is elected as a director of the Employer or as a
director or officer of any of its affiliates, the Executive will fulfill his
duties as such director or officer without additional compensation.
==============================================================================
3. COMPENSATION
3.1 BASIC COMPENSATION
(A) Salary. The Executive will be paid an annual salary of ONE HUNDRED
TWENTY THOUSAND DOLLARS $120,000, subject to the adjustment as provided below
(the "Salary"), which will be payable in equal periodic installments according
to the Employer's customary payroll practices, but no less frequently than
monthly. The Salary will be reviewed by the Chief Executive Officer and the
Board of Directors not less frequently than annually, and may be adjusted
upward or downward in the sole discretion of the Chief Executive Officer with
the approval of the Board of Directors, but in no event will the Salary be less
than $120,000 per year.
(B) Benefits. The Executive will, during the Employment Period, be
permitted to participate in such pension, profit sharing, bonus, life
insurance, hospitalization, major medical, and other employee benefit plans of
the Employer that may in effect from time to time, to the extent the Executive
is eligible under the terms of those plans (collectively, the "Benefits").
3.2 INCENTIVE COMPENSATION
As additional compensation (the "Incentive Compensation") for the services to
be rendered by the Executive pursuant to this Agreement, the Employer will pay
the Executive upon the Confirmation of a Plan of Reorganization of the Debtor
the following:
(a) An amount equal to Five Thousand Dollars ($5,000.00) per month for
each month in which the Executive is employed under this Agreement beginning
with January 1997 and ending with the month in which a Plan of Reorganization
is confirmed by the United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court").
(b) In addition to the amount provided in (a) above, the Employer will
also pay to the Executive as additional compensation upon confirmation of a
Plan of Reorganization an amount based on the Transaction Value, as defined in
that certain contract between Employer and Simmons & Company International
dated _____________, as follows:
3
<PAGE> 4
(i) If the Transaction Value is less than $60 million, then
the Executive shall not be entitled to any additional compensation hereunder.
(ii) If the Transaction Value is greater than or equal to $60
million, then the Executive shall be entitled to (A) additional compensation of
$150,000.00 plus (B) an amount equal to $150,000.00 multiplied by a fraction
(which shall in no event be greater than 1) whose numerator shall be the
difference between the Transaction Value and $60 million and whose denominator
shall be $30 million.
(iii) In no event shall the Executive be entitled to additional
compensation under this paragraph (b) greater than $300,000.00.
================================================================================
4. FACILITIES AND EXPENSES
4.1 GENERAL
The Employer will furnish the Executive office space, equipment, supplies, and
such other facilities and personnel as the Employer deems necessary or
appropriate for the performance of the Executive's duties under this Agreement.
The Employer will pay the Executive's dues in such professional societies and
organizations as the Chief Executive Officer deems appropriate, and will pay on
behalf of the Executive (or reimburse the Executive for) reasonable expenses
incurred by the Executive at the request of, or on behalf of, the Employer in
the performance of the Executive's duties pursuant to this Agreement, and in
accordance with the employer's employment policies, including reasonable
expenses incurred by the Executive in attending conventions, seminars, and
other business meetings, in appropriate business entertainment activities, and
for promotional expenses. The Executive must file expense reports with respect
to such expenses in accordance with the Employer's policies.
================================================================================
5. VACATIONS AND HOLIDAYS
The Executive will be entitled to three weeks' paid vacation each Fiscal Year
in accordance with the vacation policies of the Employer in effect for its
executive officers from time to time. Vacation must be taken by the Executive
at such time or times as approved by the Chief Executive Officer. The
Executive will also be entitled to the paid holidays and other paid leave set
forth in the Employer's policies. Vacation days and holidays during any Fiscal
Year that are not used by the Executive during such Fiscal Year may not be used
in any subsequent Fiscal Year.
================================================================================
6. TERMINATION
6.1 EVENTS OF TERMINATION
The Employment Period, the Executive's Basic Compensation and Incentive
Compensation, and any and all other rights of the Executive under this
Agreement or otherwise as an employee of the Employer will terminate (except as
otherwise provided in this Section 6):
4
<PAGE> 5
(a) upon the death of the Executive;
(b) upon the disability of the Executive (as defined in Section 6.2)
immediately upon notice from either party to the other;
(c) for cause (as defined in Section 6.3), immediately upon notice from
the Employer to the Executive, or at such later time as such notice may
specify; or
(d) for good reason (as defined in Section 6.4) upon not less than ten
days' prior notice from the Executive to the Employer.
6.2 DEFINITION OF DISABILITY
For purposes of Section 6.1, the Executive will be deemed to have a
"disability" if, for physical or mental reasons, the Executive is unable to
perform the Executive's duties under this Agreement for 120 consecutive days,
or 180 days during any twelve month period, as determined in accordance with
this Section 6.2. The disability of the Executive will be determined by a
medical doctor selected by written agreement of the Employer and the Executive
upon the request of either party by notice to the other. If the Employer and
the Executive cannot agree on the selection of the medical doctor, each of them
will select a medical doctor and the two medical doctors will select a third
medical doctor who will determine whether the Executive has a disability. The
determination of the medical doctor selected under this Section 6.2 will be
binding on both parties. The Executive must submit to a reasonable number of
examinations by the medical doctor making the determination of disability
under this Section 6.2, and the Executive hereby authorizes the disclosure and
release to the Employer of such determination and all supporting medical
records. If the Executive is not legally competent, the Executive's legal
guardian or duly authorized attorney-in-fact will act in the Executive's stead,
under this Section 6.2, for the purposes of submitting the Executive to the
examinations, and providing the authorization of disclosure, required under this
Section 6.2.
6.3 DEFINITION OF "FOR CAUSE"
For purposes of Section 6.1, the phrase "for cause" means: (a) the Executive's
breach of this Agreement (b) the Executive's failure to adhere to any written
Employer policy if the Executive has been given a reasonable opportunity to
comply with such policy or cure his failure to comply (which reasonable
opportunity must be granted during the ten-day period preceding termination of
this Agreement); (c) the appropriation (or attempted appropriation) of a
material business opportunity of the Employer, including attempting to secure
or securing any personal profit in connection with any transaction entered into
on behalf of the Employer; (d) the misappropriation (or attempted
misappropriation) of any of the Employer's funds or property; or (e) the
conviction of, the indictment for (or its procedural equivalent), or the
entering of a guilty plea or plea of no contest with respect to, a felony, the
equivalent thereof, or any other crime with respect to which imprisonment is a
possible punishment.
<PAGE> 6
6.4 DEFINITION OF "FOR GOOD REASON"
For purposes of Section 6.1, the phrase "for good reason" means any of the
following: (a) the Employer's material breach of this Agreement; (b) the
assignment of the Executive without his consent to a position,
responsibilities, or duties of a materially lesser status or degree of
responsibility than his position, responsibilities, or duties at the Effective
Date; or (c) the requirement by the Employer that the Executive be based
anywhere other than the Employer's principal executive offices, in either case
without the Executive's consent.
6.5 TERMINATION PAY
Effective upon the termination of this Agreement, the Employer will be
obligated to pay the Executive (or, in the event of his death, his designated
beneficiary as defined below) only such compensation as is provided in this
Section 6.5, which compensation shall be in lieu of all other amounts and in
settlement and complete release of all claims the Executive may have against
the Employer. For purposes of this Section 6.5, the Executive's designated
beneficiary will be such individual beneficiary or trust, located at such
address, as the Executive may designate by notice to the Employer from time to
time or, if the Executive fails to give notice to the Employer of such a
beneficiary, the Executive's estate. Notwithstanding the preceding sentence,
the Employer will have no duty, in any circumstances, to attempt to open an
estate on behalf of the Executive, to determine whether any beneficiary
designated by the Executive is alive or to ascertain the address of any such
beneficiary, to determine the existence of any trust, to determine whether any
person or entity purporting to act as the Executive's personal representative
(or the trustee of a trust established by the Executive) is duly authorized to
act in that capacity, or to locate or attempt to locate any beneficiary,
personal representative, or trustee.
(A) Termination by the Executive for Good Reason. If the Executive
terminates this Agreement for good reason, the Employer will pay the
Executive's Salary for the remainder, if any, of the Employment Period as if
this Agreement had not terminated, provided, however, that Incentive
Compensation pursuant to Sections 3.2(A) and (B) shall be payable if, as of the
date of termination, there is then pending before the Bankruptcy Court a Plan
of Reorganization which is thereafter confirmed by such Court.
(B) Termination by the Employer for Cause. If the Employer
terminates this Agreement for cause, the Executive will be entitled to receive
his Salary only through the date such termination is effective, but will not be
entitled to any Incentive Compensation for the Fiscal Year during which such
termination occurs or any subsequent Fiscal Year.
(C) Termination upon Disability. If this Agreement is terminated
by either party as a result of the Executive's disability, as determined under
Section 6.2, the Employer will pay the Executive his Salary through the
remainder of the calendar month during which such termination is effective and
for the lesser of (i) the remainder, if any, of the Employment Period, or (ii)
the period until disability insurance benefits commence under the disability
insurance coverage furnished by the Employer to the Executive. However, the
Executive will not be entitled to any Incentive Compensation for any period
subsequent to the date on which termination is effective, provided, however,
that Incentive Compensation pursuant to Sections 3.2(A) and (B) shall be
payable if, as of the date of termination,
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<PAGE> 7
there is then pending between the Bankruptcy Court a Plan of Reorganization
which is thereafter confirmed by such Court.
(D) Termination upon Death. If this Agreement is terminated because of
the Executive's death, the Executive will be entitled to receive his Salary
through the end of the calendar month in which his death occurs. However, the
Executive will not be entitled to any Incentive Compensation for any period
subsequent to the date on which termination is effective, provided, however,
that Incentive Compensation pursuant to Sections 3.2(A) and (B) shall be
payable if, as of the date of termination, there is then pending before the
Bankruptcy Court a Plan of Reorganization which is thereafter confirmed by such
Court.
(E) Benefits. The Executive's accrual of, or participation in plans
providing for, the Benefits will cease at the effective date of the termination
of this Agreement, and the Executive will be entitled to accrued Benefits
pursuant to such plans only as provided in such plans. The Executive will not
receive, as part of his termination pay pursuant to this Section 6, any payment
or other compensation for any vacation, holiday, sick leave, or other leave
unused on the date the notice of termination is given under this Agreement.
================================================================================
7. NON-DISCLOSURE COVENANT
7.1 ACKNOWLEDGEMENTS BY THE EXECUTIVE
The Executive acknowledges that (a) during the Employment Period and as a part
of his employment, the Executive will be afforded access to Confidential
Information; (b) public disclosure of such Confidential Information could have
an adverse effect on the Employer and its business; (c) the Employer has
required that the Executive make the covenants in this Section 7 as a condition
to its employment of the Executive, and (d) the provisions of this Section 7
are reasonable and necessary to prevent the improper use or disclosure of
Confidential Information.
7.2 AGREEMENTS OF THE EXECUTIVE
In consideration of the compensation and benefits to be paid or provided to the
Executive by the Employer under this Agreement, the Executive covenants as
follows:
(A) Confidentiality.
(i) During and following the Employment Period, the Executive
will hold in confidence the Confidential Information and will not disclose it
to any person except with the specific prior written consent of the Employer or
except as otherwise expressly permitted by the terms of this Agreement.
(ii) Any trade secrets of the Employer will be entitled to all
of the protections and benefits under applicable state or federal trade secret
law and any other applicable law. If any information that the Employer deems to
be a trade secret is found by a court of competent jurisdiction not to be a
trade secret for purposes of this Agreement, such information will,
nevertheless, be
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<PAGE> 8
considered Confidential Information for purposes of this Agreement. The
Executive hereby waives any requirement that the Employer submit proof of the
economic value of any trade secret or post a bond or other security.
(iii) None of the foregoing obligations and restrictions applies to any
part of the Confidential Information that the Executive demonstrates was or
became generally available to the public other than as a result of a disclosure
by the Executive.
(iv) The Executive will not remove from the Employer's premises (except
to the extent such removal is for purposes of the performance of the
Executive's duties at home or while traveling, or except as otherwise
specifically authorized by the Employer) any document, record, notebook, plan,
model, component, device, or computer software or code, whether embodied in a
disk or in any other form (collectively, the "Proprietary Items"). The
Executive recognizes that, as between the Employer and the Executive, all of
the Proprietary Items, whether or not developed by the Executive, are the
exclusive property of the Employer. Upon termination of this Agreement by
either party, or upon the request of the Employer during the Employment Period,
the Executive will return to the Employer all of the Proprietary Items in the
Executive's possession or subject to the Executive's control, and the Executive
shall not retain any copies, abstracts, sketches, or other physical embodiment
of any of the Proprietary Items.
7.3 DISPUTES OR CONTROVERSIES
The Executive recognizes that should a dispute or controversy arising from or
relating to this Agreement be submitted for adjudication to any court,
arbitration panel, or other third party, the preservation of the secrecy of
Confidential Information may be jeopardized. All pleadings, documents,
testimony, and records relating to any such adjudication will be maintained in
secrecy and will be available for inspection by the Employer, the Executive,
and their respective attorneys and experts, who will agree, in advance and in
writing to receive and maintain all such information in secrecy, except as may
be limited by them in writing.
===============================================================================
8. NON-COMPETITION AND NON-INTERFERENCE
8.1 ACKNOWLEDGMENTS BY THE EXECUTIVE
The Executive acknowledges that: (a) the services to be performed by him under
this Agreement are of a special, unique, unusual, extraordinary, and
intellectual character; (b) the Employer's business is national in scope and
its products are marketed throughout the United States; (c) the Employer
competes with other businesses that are or could be located in any part of the
United States; (d) the Employer has required that the Executive make the
covenants set forth in this Section 8 as a condition to the Employer's
agreement to provide the Executive with the trade secrets and other
Confidential Information related to such employment, and (e) the provisions of
this Section 8 are reasonable and necessary to protect the Employer's business.
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<PAGE> 9
8.2 COVENANTS OF THE EXECUTIVE
The parties hereto agree that the covenants, agreements and restrictions
(hereinafter "this covenant") contained herein are necessary to protect the
business goodwill, business interests and proprietary rights of the Employer
and that the parties hereto have independently discussed, reviewed and had the
opportunity of legal counsel to consider this agreement and now hereby agree
and stipulate the following:
(a) This covenant is an integral part of an enforceable employment
agreement and the covenants contained herein were made at the time this
agreement was consummated by the parties hereto.
(b) This covenant is fair and reasonable in its:
1. geographical area;
2. length of time; and
3. scope of activity being restrained.
In consideration of the acknowledgments by the Executive, and in consideration
of the compensation and benefits to be paid or provided to the Executive by the
Employer, the Executive covenants that he will not, directly or indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder or as provided in Exhibit A to this Agreement, engage or
invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend the Executive's name or
any similar name to, lend Executive's credit to or render services or advice
to, any business whose products or activities compete in whole or in part with
the products or activities of the Employer anywhere within the United States;
provided, however, that the Executive may purchase or otherwise acquire up to
(but not more than) 4.9% of any class of securities of any enterprise (but
without otherwise participating in the activities of such enterprise) if such
securities are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934;
(b) whether for the Executive's own account or for the account of any
other person, at any time during the Employment Period solicit business of the
same or similar type being carried on by the Employer, from any person known by
the Executive to be a customer of the Employer, whether or not the Executive
had personal contact with such person during and by reason of the Executive's
employment with the Employer; or
(c) at any time during or after the Employment Period, disparage the
Employer or any of its shareholders, directors, officers, employees, or agents.
The parties hereby agree and acknowledge that the Employer has spent
considerable sums of money and time in developing good customer contact and
rapport and that the client list or customer list developed by the Employer is
worth a considerable amount of money and therefore is a benefit which the
Employer seeks to protect. Such protection is hereby agreed and acknowledged by
both parties as being reasonable consideration for establishing this
restrictive covenant.
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<PAGE> 10
If any covenant in this Section 8.2 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the
Executive.
The period of time applicable to any covenant in this Section 8.2 will
be extended by the duration of any violation by the Executive of such covenant.
The Executive will, while the covenant under this Section 8.2 is in
effect, give notice to the Employer, within ten days after accepting any other
employment, of the identity of the Executive's employer. The Employer may
notify any such subsequent employer that the Executive is bound by this
Agreement and, at the Employer's election, furnish such employer with a copy of
this Agreement or relevant portions thereof.
================================================================================
9. GENERAL PROVISIONS
9.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY
The Executive acknowledges that the injury that would be suffered by the
Employer as a result of breach of the provisions of this Agreement (including
any provision of Sections 7 and 8) would be irreparable and that an award of
monetary damages to the Employer for such a breach would be an inadequate
remedy. Consequently, the employer will have the right, in addition to any
other rights it may have, to obtain injunctive relief to restrain any breach or
threatened breach or otherwise to specifically enforce any provision of this
Agreement, and the Employer will not be obligated to post bond or other
security in seeking such relief. Without limiting the Employer's rights under
this Section 9 or any other remedies of the Employer, if the Executive breaches
any of the provisions of Section 7 or 8, the Employer will have the right to
cease making any payments otherwise due to the Executive under this Agreement.
9.2 COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT COVENANTS
The covenants by the Executive in Sections 7 and 8 are essential elements of
this Agreement, and without the Executive's agreement to comply with such
covenants, the Employer would not have entered into this Agreement or employed
or continued the employment of the Executive. The Employer and the Executive
have independently consulted their respective counsel and have been advised in
all respects concerning the reasonableness and proprietary of such covenants,
with specific regard to the nature of the business conducted by the Employer.
The Executive's covenants in Sections 7 and 8 are independent covenants
and the existence of any claim by the Executive against the Employer under this
Agreement or otherwise will not excuse the Executive's breach of any covenant
in Section 7 or 8.
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<PAGE> 11
If the Executive's employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Executive in Sections 7 and 8.
9.3 OFFSET
The Employer will be entitled to offset against any and all amounts owing to
the Executive under this Agreement the amount of any and all valid claims that
the Employer may have against the Executive under the Noncompetition Agreement.
9.4 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE
The Executive represents and warrants to the Employer that the execution and
delivery by the Executive of this Agreement do not, and the performance by the
Executive of the Executive's obligations hereunder will not, with or without
the giving of notice or the passage of time, or both: (a) violate any judgment,
writ, injunction, or order of any court, arbitrator, or governmental agency
applicable to the Executive, or (b) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any
agreement to which the Executive is a party or by which the Executive is or may
be bound.
9.5 OBLIGATIONS CONTINGENT ON PERFORMANCE
The obligations of the Employer hereunder, including its obligation to pay the
compensation provided for herein, are contingent upon the Executive's
performance of the Executive's obligations hereunder.
9.6 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by either party in exercising
any right, power, or privilege under this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement.
9.7 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
This Agreement shall inure to the benefit of, and shall be binding upon, the
parties hereto and their respective successors, assigns, heirs, and legal
representatives, including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets may be
transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated.
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<PAGE> 12
9.8 NOTICES
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by facsimile
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
If to Employer: Grant Geophysical, Inc.
16850 Park Row
Houston, Texas 77084
Attention: J. Kelly Elliott
Facsimile No.: (281) 647-5286
With a copy to: C. Robert Bunch
Scott, Douglass, Luton & McConnico, L.L.P.
700 Louisiana, Suite 4000
Houston, Texas 77002
Facsimile No.: (713) 225-8488
If to the Executive: Larry E. Lenig, Jr.
131 Plantation
Houston, Texas 77024
Phone/Facsimile No.: (281) 973-2594
9.9 ENTIRE AGREEMENT; AMENDMENTS
This Agreement contains the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, between the parties hereto with respect to the
subject matter hereof. This Agreement may not be amended orally, but only by an
agreement in writing signed by the parties hereto.
9.10 GOVERNING LAW
This Agreement will be governed by the laws of the State of Texas without
regard to conflicts of laws principles.
9.11 JURISDICTION
Any action or proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against either of the
parties in the courts of the State of Texas, County of Harris, or, if it has or
can acquire jurisdiction, in the United States District Court for the Southern
District of Texas, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to
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venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on either party anywhere in the world.
9.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience only
and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
9.13 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.
9.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
9.15 WAIVER OF JURY TRIAL
THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL IN ANY LITIGATION WITH RESPECT TO
THIS AGREEMENT.
9.16 APPROVAL OF BANKRUPTCY COURT
This Agreement is subject to the approval of the Bankruptcy Court. The parties
agree to use their best efforts to serve secure such approval as soon as
practicable.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.
EMPLOYER: EXECUTIVE:
By: /s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
------------------------------ ---------------------------------
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<PAGE> 14
EXHIBIT A TO EMPLOYMENT AGREEMENT
1. Employment Agreement, as amended by and between Digicon Inc. (now known
as Veritas DGC, Inc.) and Larry E. Lenig, Jr. Under the terms of such
employment contract, Lenig is no longer required and does not expect
to provide services to Veritas DGC, Inc., is not subject to any
non-compete restrictions, but is entitled to certain continuing
compensation and other benefits and incentives.
2. Periodic consulting to CogniSeis Development, Inc. with respect to the
installation and setup of a management information/accounting system
project. Any such consulting would be for less than five hours per week
and would be performed at times which do not interfere with Mr. Lenig's
duties to Employer under the Employment Agreement. CogniSeis
Development does not compete with the Employer.
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<PAGE> 1
TERM SHEET
DATED MARCH 14, 1997
FOR TRANSACTION BETWEEN ELLIOTT ASSOCIATES, L.P.
AND
GRANT GEOPHYSICAL, INC.
This term sheet sets forth our mutual intentions that, subject to the
successful negotiation and execution of a definitive agreement covering the
transaction and the other matters referred to in this term sheet, Elliott
Associates, L.P. ("EALP") will sponsor a plan of reorganization for Grant
Geophysical, Inc. (the "Debtor") and provide related financing. The
contemplated transactions include, as more fully set forth below, (a) debtor in
possession financing, (b) a rights offering guaranteed by EALP and (c) a
reorganization plan for the Debtor proposed jointly by the Debtor and EALP in
the Debtor's currently-pending chapter 11 case before the U.S. Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court").
The matters set forth in this term sheet constitute an expression of
our mutual interest only and are contingent on the satisfaction of certain
conditions, including, without limitation, the negotiation, execution and
delivery of definitive agreements between the Debtor and EALP setting forth in
detail the terms, provisions and conditions for the proposed transactions (the
"Agreement") and the satisfaction of certain other closing conditions described
therein.
1. Debtor in Possession Financing. Upon (a) the Debtor and EALP
executing this term sheet and (b) entry of an order by the Bankruptcy Court,
after requisite notice and a hearing, approving the Break-Up Fee Provisions
(defined below) and the financing arrangement described in this paragraph, EALP
shall provide a $2.5 million of debtor in possession financing to the Debtor.
This financing shall be in the form of a "last-out" participation in the
Debtor's existing debtor in possession financing facility with Foothill Capital
Corporation (the "Existing DIP Facility"); and shall become fully due and
payable on the earliest of (i) June 30, 1997 or such later date (not later than
September 30, 1997) to which Foothill Capital Corporation agrees to extend the
maturity of the Existing DIP Facility (ii) approval by the Bankruptcy Court of
any transaction pursuant to which the Debtor reorganizes or sells its stock or
assets inconsistent with the provisions of this term sheet, (iii) any event of
default under the Existing DIP Facility and (iv) the occurrence of any event
that would render the Debtor unable to proceed with the transactions outlined
herein or the failure of any condition set forth in Section 3 below that is not
duly waived by EALP.
2. The Plan. If the Break-Up Fee Provisions are approved by the
Bankruptcy Court, pursuant to a plan of reorganization for the Debtor
(a "Plan"):
a. Rights Offering: A rights offering ("Rights Offering")
shall be made pursuant to which shares of stock of the reorganized
Debtor constituting 100% of such shares minus the sum of (x) shares
elected to be distributed to general unsecured creditors pursuant to
section 2.c below, plus (y) shares granted to EALP as a "put premium,"
if any,
<PAGE> 2
as set forth below (the "Rights Offering Shares"), may be purchased for an
aggregate price of up to $33 million. The Rights Offering Shares shall be
offered as follows:
(i) $10.5 million of Rights Offering Shares shall be
purchased by EALP;
(ii) $16.5 million of Rights Offering Shares may be
purchased by holders of the Debtor's preferred stock on a pro rata
basis;
(iii) $3 million of Rights Offering Shares may be
purchased by holders of allowed general unsecured claims against the
Debtor (except for holders of claims that elect the Credits as set
forth in Section 2.c.(i)(2) below) on a pro rata basis. Rights Offering
Shares that are offered to, but not purchased by, holders of general
unsecured claims against the Debtor may be purchased by holders of the
Debtor's preferred stock on a pro rata basis;
(iv) $2 million of Rights Offering Shares may be
purchased by holders of the Debtor's common stock on a pro rata basis.
Rights Offering Shares not purchased by common stock holders shall not
be made available to any other party and shall not be guaranteed by
EALP; and
(v) $1 million of the Rights Offering Shares may be
purchased by the Debtor's current employees as mutually agreed upon by
the Debtor and EALP. Rights Offering Shares not purchased by employees
shall not be made available to any other party and shall not be
guaranteed by EALP.
EALP shall purchase all Rights Offering Shares available to it under
the Rights Offering on account of its holdings of the Debtor's preferred stock.
In addition, if, after consummation of the Rights Offering, EALP does not own
51% or more of the reorganized Debtor's common stock,the Debtor shall sell to
EALP, at the Rights Offering price, additional shares such that EALP owns 51%
of the reorganized Debtor's common stock. As compensation for its agreement to
purchase for cash any shares not sold pursuant to the Rights Offering, EALP
shall receive a "put premium" equal to 5% of the net proceeds of the purchase
of all Rights Offering Shares other than those set forth in Sections 2.a.(i),
2.a.(iv) and 2.a.(v), payable in cash or common stock of the reorganized Debtor
at EALP's election.
b. Secured Claims: The secured claims against the Debtor ("Secured
Claims") shall be paid in full in cash and/or new promissory notes in amounts
and with maturities, amortization schedules interest rates and secured by
collateral mutually acceptable to the Secured Claim holders, the Debtor and
EALP.
c. Unsecured Claims.
(i) Pool for recoveries: The Plan shall provide for pro rata
recoveries from a fixed asset pool (i.e., a "pot" plan). Creditors
shall have the right to elect
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<PAGE> 3
to receive either New Unsecured Notes (defined below), Credits (defined
below) or the Cash/Stock Distribution (defined below):
(1) The Cash/Stock Distribution shall be comprised
of a combination of cash and stock (valued on the same basis as
the Rights Offering) with a combined value of 40% of the allowed
claims electing the Cash/Stock Distribution. The ratio of stock
to cash in each Cash/Stock Distribution shall be 4 to 1. The
Cash/Stock Distribution shall be limited to 50% of the amount of
total allowed general unsecured claims minus the amount of
claims electing the Credits, and shall not exceed $7.1 million
in value ($1.42 million in cash and $5.68 million in stock).
EALP, on account of all general unsecured claims it holds shall
elect the Cash/Stock Distribution;
(2) the Credits shall be non-transferable
instruments giving the holder thereof the right to receive
credit from the reorganized Debtor against the contract price
for services to be provided by the reorganized Debtor in the
full amount of such creditor's allowed claim, provided that use
of the credit is limited to 20% of the amount thereof per
contract with the reorganized Debtor. The aggregate amount of
Credits elected shall not exceed $5 million; and
(3) the New Unsecured Notes shall be unsecured
promissory notes in the aggregate principal amount of $14.2
million minus the Cash/Stock Distribution. In addition, if
aggregate allowed unsecured claims minus the aggregate amount of
claims electing the Credits are less than $35.5 million, the
aggregate principal amount of the New Unsecured Notes shall be
reduced by the amount of Credits multiplied by .40. The New
Unsecured Notes shall mature in five years; have no principal
amortization for the first year; amortize at the rate of 25% per
year for years 2-5 (payable in arrears at year end); and bear
interest at the rate of 7% per annum.
(ii) Election Provisions: Creditors shall have the right to
elect either the Cash/Stock Distribution, the Credits or the New
Unsecured Notes.
(1) Creditors electing the Cash/Stock Distribution
shall receive a pro rata share of cash and stock (in the same
proportion as the total cash to the total stock in the pool).
Pro rata means that the ratio of cash and stock to be
distributed on account of a particular claim to the amount of
such claim is the same as the ratio of 14,200,000 (subject to
adjustment, if any, based on Credit elections and pursuant to
Section 2.c.(iv) below) to the aggregate amount of all allowed
general unsecured claims.
(2) Creditors electing the New Unsecured Notes shall
receive a pro rata share of the New Unsecured Notes. Pro rata
means that the ratio
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<PAGE> 4
of New Unsecured Notes to be distributed on account of a
particular claim to the amount of such claim is the same
as the ratio of 14,200,000 (subject to adjustment, if
any, based on Credit elections and pursuant to Section
2.c.(iv) below) to the aggregate amount of all allowed
general unsecured claims.
(3) Creditors electing the Credits shall
receive Credits equalling the face amount of their
claims.
(iii) Limit on Cash/Stock Distribution and Credits:
If the Cash/Stock Distribution or Credit election is
oversubscribed, creditors electing the oversubscribed treatment
shall receive a partial distribution of the type elected in
proportion to their respective allowed claim amounts and the
balance of their distribution in New Unsecured Notes.
(iv) Adjustment based on Claims Results: The amount
of cash, stock and New Unsecured Notes to be contributed to the
pool as described in Section 2.c.(i) above assumes that
aggregate allowed general unsecured claims are not less than
$35.5 million. If such aggregate claims are less than $35.5
million, the amount of cash, stock and New Unsecured Notes
contributed to the pool shall be reduced proportionately, by an
amount such that the value of each creditor's recovery (with the
New Unsecured Notes valued at par) does not exceed 40% of such
creditor's claim; provided, however, that there shall be no
further reduction in the amount of cash, common stock and New
Unsecured Notes placed in the pool once aggregate allowed claims
are reduced to $29 million (other than reduction in cash, common
stock and New Unsecured Notes as a result of election of
Credits).
d. If mutually agreed upon by EALP and the Debtor, the
Plan shall contain a "convenience class," with terms and conditions
acceptable to EALP.
e. Other Plan Provisions: All other Plan provisions,
including without limitation, releases, provisions regarding contracts
and leases and conditions to effectiveness, shall be in form and
substance satisfactory to EALP and the Debtor.
f. Plan Modification: If the Debtor and EALP believe it to
be necessary under the circumstances, the provisions set forth herein
shall be modified in a manner acceptable to EALP and the Debtor to
ensure that the Plan is confirmable pursuant to section 1129(b) of the
Bankruptcy Code.
g. Disclosure Statement: The disclosure statement
accompanying the Plan shall be in form and substance satisfactory to
EALP and the Debtor.
3. Conditions. It is recognized that the Agreement will be subject
to completion of satisfactory due diligence and the following conditions and
actions, among others, each of which may be waived with the consent of EALP:
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<PAGE> 5
a. Prior to the execution and delivery of the Agreement, the Board
of Directors of the Debtor shall have approved the transactions, agreed to
recommend the transactions to all creditors and shareholders and authorize
their consummation;
b. The Official Committee of Unsecured Creditors of the Debtor
shall have agreed to recommend the Plan to creditors;
c. All required notices shall have been given and filings made,
and, as the case may be, applicable waiting periods shall have expired without
adverse action by, or favorable orders, consents and approvals in the form
required to consummate the transactions shall have been received (if required)
from, necessary governmental agencies and third parties. Without limiting the
foregoing, (i) all filings, if any, required to be made under applicable
securities laws shall have been made and the waiting period thereunder or any
extension thereof shall have expired and (ii) all requisite approvals of the
Plan shall have been obtained.
d. Any and all equity securities of the Debtor and any and all
options (including employee stock options), warrants or other rights to acquire
any such equity securities shall have been cancelled.
e. There shall be no injunction or court order restraining
consummation of the transactions and there shall not have been adopted any law
or regulation making all or any portion of the transactions illegal.
f. The aggregate amount of administrative claims shall not exceed
$3.5 million, including fees and expenses payable pursuant to Section 9 below.
g. The aggregate amount of priority claims, including priority
tax claims, shall not exceed $2.875 million.
h. The Debtor shall have no liability for the "Nigerian
Liabilities" (to be defined as mutually agreed upon between the Debtor and
EALP), other than as general unsecured claims subject to the provisions of
Section 2.c above.
i. The reorganized Debtor shall enter into a new working capital
financing facility with EALP providing for $2 million of availability. The
working capital facility advances shall be secured by international accounts
receivable (other than those in Bangladesh) and equipment, and shall contain
terms and conditions acceptable to EALP.
j. There shall be no payment due to Simmons and Co. pursuant to its
agreement with the Debtor, other than (i) the original retainer, (ii) monthly
advisory fees and, (iii) if agreed upon by the Debtor and EALP, a reasonable
fee to obtain a fairness opinion.
-5-
<PAGE> 6
k. There shall have been no material adverse change in the
Debtor's financial or operational condition from the date hereof through
the closing of the transactions described herein.
l. EALP shall be granted demand registration rights for the
common stock of the reorganized Debtor, on terms and conditions
satisfactory to EALP.
m. Within 7 days of the execution of this Term Sheet, the
Debtor shall file a motion to establish a claims bar date, in form and
substance satisfactory to EALP, which bar date shall be 45 days after
entry of the order granting the motion.
n. The Plan and accompanying disclosure statement, both in form
and substance acceptable to EALP, shall be filed with the Bankruptcy
Court not later than May 15, 1997.
o. An order confirming the Plan, in form and substance
acceptable to EALP, shall have been entered not later than August 15,
1997.
4. SECURITIES LAW ISSUES. The structure of the proposed transactions
shall be adjusted, as necessary, to resolve any securities law issues in a
manner satisfactory to EALP. Resolution of securities law issues to EALP's
satisfaction is a condition to the Agreement.
5. BOARD OF DIRECTORS. After the closing, the Board of Directors of
the reorganized Debtor shall consist of directors designated by EALP.
6. ORDINARY COURSE. Prior to the closing, the Debtor shall carry on
its business diligently and in the ordinary course only, and shall use its best
efforts to preserve its present business organization intact, to keep available
the services of its present officers, agents or employees unless EALP consents
otherwise, and to preserve its present relationships with customers and other
persons having business dealings with it. Except in connection with the
transactions on the terms set forth herein, without the prior written consent
of EALP, the Debtor and any of its affiliates shall not (a) issue any shares of
stock or stock equivalents (other than upon exercise of stock options or
pursuant to employee benefit plans), (b) engage in any transactions except in
the ordinary course of business (or as otherwise permitted by this Paragraph
6), (c) incur any liabilities except in the ordinary course of business, (d)
subject its assets to any liens or mortgages, (e) make any dividend or other
distributions to shareholders, (f) dispose of any fixed assets, unless such
assets were worn-out or obsolete, (g) make any capital expenditures except in
the ordinary course of business, or (h) enter into any sale leaseback
transactions except in the ordinary course of business. EALP shall consent to
the sale contemplated by the Debtor as of the date hereof of its Nigerian
assets.
7. BREAK-UP FEE. Immediately after execution of this term sheet by the
Debtor and EALP, the Debtor shall file a motion with the Bankruptcy Court
seeking approval of the following "Break-Up Fee Provisions" in favor of EALP:
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<PAGE> 7
The Bankruptcy Court shall not approve any transfer of the
Debtor's assets or stock or any reorganization plan other than as
contemplated by this term sheet, so long as EALP is prepared to
consummate the transactions outlined herein, unless such other
transaction provides an aggregate present value to the Debtor's
creditors and shareholders of at least $5 million higher than the
present value of the transactions contemplated by this term sheet to the
Debtor's creditors and shareholders. For purposes of this provision, the
aggregate present value of the transactions set forth herein to the
Debtor's creditors and shareholders shall be deemed to be $95 million.
In addition, upon the closing of any such third-party transfer or
alternative plan, EALP shall be paid, if it is prepared to consummate
the transactions as outlined in this term sheet, in addition to the
amounts required by Section 9 below, $1.75 million in cash as
compensation for the time incurred and value to the Debtor in pursuing
the transactions contemplated by this term sheet, and such payment shall
be granted administrative expense priority in the Debtor's estate.
Provisions regarding procedures for the Debtor to receive and evaluate
competing offers shall be mutually agreed to by the Debtor and EALP.
8. EFFECT. The parties are executing this term sheet to evidence their
agreement to proceed in mutual good faith to carry out the transactions
substantially in the manner outlined. Except as expressly provided in paragraph
1, 7 and 9 of this term sheet (the provisions of which are intended to be
binding on the parties subject to the conditions contained in such paragraph),
the matters set forth in this term sheet represent only a nonbinding summary of
terms of the Agreement and this term sheet is not intended to be binding on or
create any rights in any person. Neither the Debtor nor EALP shall have any
liability or obligation with respect to the transactions contemplated herein,
hereunder or otherwise, unless and until the Agreement is executed and delivered
by the parties thereto, except as provided in paragraphs, 1, 7 and 9.
9. EXPENSES. The Debtor shall reimburse EALP for all reasonable legal
and due diligence costs and expenses, which amounts shall be granted
administrative expense priority in the Debtor's estate. These costs and
expenses shall be paid by the Debtor (a) if the transactions set forth herein
are consummated, (b) if the transactions set forth herein are not consummated
for any reason and EALP is prepared to so consummate or (c) if EALP determines
not to consummate the transactions set forth herein because of the failure of
any of the conditions set forth in Section 3 above. Upon the funding by EALP of
the $2.5 million debtor in possession loan as provided in Section 1 above, the
Debtor shall advance to EALP a retainer for expenses of $150,000.
10. GOVERNING LAW. This term sheet shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.
11. PUBLIC ANNOUNCEMENTS. All public announcements or statements
concerning the transactions contemplated herein shall be jointly approved by
EALP and the Debtor. However, in the event the parties are unable to agree on a
public statement or announcement following the announcement of this term sheet
and the Debtor or EALP determines, after consultation with counsel, that such
statement or announcement is required by law, then the Debtor or EALP, as the
case may be, may issue such statement or announcement.
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<PAGE> 8
ELLIOTT ASSOCIATES, L.P.
By: (ILLEGIBLE)
-----------------------
Its:
----------------------
GRANT GEOPHYSICAL, INC.
By: (ILLEGIBLE)
-----------------------
Its: President
----------------------
-8-
<PAGE> 1
Term Sheet
Proposed Sale of United Geophysical (Nigeria) Ltd. by Grant Geophysical, Inc.
to
Orbier Ltd. or Its Assignee
1. The form of transaction is intended to be a sale of 100% of the capital
stock of United Geophysical (Nigeria) Ltd. ("UGNL"). At the option of
the Purchaser, the form of the transaction may be amended to a sale of
substantially all of the assets. The assets of UGNL which are to be
sold pursuant to the sale are listed on Exhibit 1 hereto and are to be
sold "AS IS WHERE IS" without any warranties of any kind.
Notwithstanding anything to the contrary herein, the assets of UGNL to
be sold and transferred hereunder shall not include any obligation of
Grant to pay money or render services to UGNL or any other Grant
subsidiary or affiliate whether such obligations are pursuant to loans,
advances, intercompany accounts or otherwise, all of which obligations
shall be canceled. At any time prior to the closing, the Purchaser may
elect to purchase all of the assets of Grant which are located in
Windsor, England and which are specifically related to UGNL's
operations.
2. At the closing and as consideration for the stock of UGNL (or the
assets thereof, if the form of the transaction is modified), Orbier,
Ltd. or its assignee ("Orbier") will issue to Grant a promissory note in
the original principal amount of US $225,000 (the "Note"). The Note
will be payable in 25 equal monthly installments of US $9,000 each
beginning thirty days following the closing, provided however, that
prepayments of the note shall be required to the extent and in the
amount that UGNL receives payment on any US dollar denominated
receivables held by UGNL as of the date hereof. Orbier's obligation to
timely pay the Note shall be secured by a standby letter of credit in
form and substance and issued by a financial institution acceptable to
Grant. Interest on the Note shall be charged at the same non-default
rate (not to exceed 12% per annum) charged Grant by its primary lenders.
3. In addition to the cash payment above, Orbier will or will cause UGNL
assume all liabilities and obligations of UGNL and those liabilities
and obligations, if any, of Grant which are due to any entity in Nigeria
and are specifically related to the assets and prior or future
operations of UGNL other than Grant's indebtedness to Madelline L.L.C.
(Cerberus) and Foothill Capital Corporation. If required by counsel to
Grant, Orbier will obtain releases in favor of Grant from all
liabilities so assumed. Without limiting the generality of the
preceding sentence, shown on Exhibit 1 are certain of the liabilities
which are to be assumed by Orbier. In the event that, Orbier elects to
purchase Grant's assets in Windsor, England, then Orbier will, in
addition to all other consideration to be paid to Grant hereunder,
<PAGE> 2
assume all of Grant's liabilities and obligations with respect to such
assets and for all Windsor based employees of Grant.
4. The consummation of the transactions contemplated hereby are subject to
the preparation and execution of definitive agreements and to the prior
approval of the Boards of Directors of Grant Geophysical, Inc. and of
Orbier International. Each of Grant and Orbier agree to submit the
proposed transactions to their respective Boards not later than Tuesday,
December 30, 1996.
5. The consummation of the transactions contemplated hereby is also
subject to the release of liens on the assets of UGNL by each of
Foothill Capital Corporation and Madelline L.L.C. (Cerberus) and to the
issuance of a final, non-appealable order of the US Bankruptcy Court.
6. Each party shall be responsible for its own costs and expenses incurred
in completing the transactions.
7. Neither party has employed a broker, mediator or intermediary in
negotiating or arranging the transactions contemplated hereby.
8. The parties will use all reasonable efforts to close the transactions
not later than January 31, 1997, provided that the closing date will be
automatically extended if necessary to permit the parties to obtain the
approvals or releases required. The parties will use good faith efforts
to obtain the approvals and releases required as expeditiously as
possible.
9. The parties agree to advise each other at least two business days in
advance of making any announcement regarding the transactions, and
neither party shall make any announcement until the transactions have
first been presented to each of the parties (other than the US
Bankruptcy Court) required to approve the transactions or to provide
releases.
The parties have executed this Term Sheet to indicate their agreement to the
foregoing.
Grant Geophysical, Inc. Orbier International
By: /s/ J. Kelly Elliott By: /s/ H. Morley
------------------------------- ----------------------------------
Date: 12/31/96 Date: 23 December 1996
<PAGE> 3
Exhibit 1
Assets Included in Sale
1. All assets located in Nigeria.
2. At the option of the Purchaser, all assets located in Windsor, England
which are specifically and exclusively related to Grant's or UGNL's
operations in Nigeria.
3. Approximately 700 line boxes of Sercel 368 recording equipment
which is located at Grant's Houston, Texas facility and at Grant's
Equador facility. It shall be Grant's responsibility to prepare such
items and ship them to a location to be designated by Orbier. Actual
freight charges from Houston to the point designated by Orbier shall be
for Orbier's account.
4. SM 4 geophone strings originally used by the UGNL seismic crews and
currently located at Grant's Houston facility. It shall be Grant's
responsibility to prepare such items and ship them to a location to be
designated by Orbier. Actual freight charges from Houston to the point
designed by Orbier shall be for Orbier's account.
5. One Sparc computer workstation and one each of the associated seismic
QC and 3D design software licenses currently utilized by Grant.
6. All original books and records of UGNL wherever located.
Liabilities Included in Those To Be Assumed
1. All debt to any bank or other financial institution in Nigeria.
2. All accounts payable of UGNL.
3. All amounts payable to current or former agents or employees of UGNL or
to those employees of Grant whose primary duties are related to the
operations of UGNL, other than those employees which remain employed by
Grant following the closing of the transaction.
4. All liabilities for taxes, penalties or costs to any governmental
agency of Nigeria or any political subdivision thereof.
5. All liabilities, if any, of UGNL or Grant for claims of damages to
property or for personal injury or otherwise related to the prior or
future operations of UGNL or of Grant in Nigeria.
<PAGE> 1
PROMISSORY NOTE
U.S.$550,000 Dated: October 31, 1996
FOR VALUE RECEIVED, the undersigned GRANT GEOPHYSICAL, INC., a Delaware
corporation with offices at 16850 Park Row, Houston, Texas 77084 ("Borrower"),
promises to pay to the order of WESTGATE INTERNATIONAL, L.P., a Cayman Islands
exempted limited partnership ("Lender"), at c/o Midland Bank Trust Corporation
(Cayman) Limited, P.O. Box 1109, Mary Street, Grand Cayman, Cayman Islands,
BWI, in lawful money of the United States, the principal sum of Five Hundred
Fifty Thousand United States Dollars (U.S.$550,000) on demand, but in no event
later than the date which is sixty (60) days from the date of this promissory
note (the "Note") indicated above and to pay interest on the principal sum
outstanding under this Note at the rate of 15% per annum, also due and payable
on the date upon which the outstanding principal balance hereunder is required
to be paid (the "Maturity Date"). Accrual of interest shall commence on the
first day to occur after the date hereof and shall continue until payment in
full of the principal sum and all other amounts due hereunder have been made.
The principal of, and interest on, this Note are payable in such currency of
the United States of America as of the time of payment is legal tender for
payment of public and private debts.
This Note is subject to the following additional provisions:
1. INTEREST AND PAYMENT APPLICATION. Interest shall be calculated on
a 360 day year simple interest basis and paid for the actual number of days
elapsed. All interest due hereunder shall be payable at the Maturity Date.
Notwithstanding anything contained herein, the outstanding principal balance and
interest due hereunder shall bear interest, from and after the occurrence and
during the continuance of a default hereunder, at the rate equal to the lower
of twenty-five percent (25%) per annum or the highest rate permitted by law.
Unless otherwise agreed or required by applicable law, payments will be applied
first to any unpaid collection costs, then to unpaid interest and fees and any
remaining amount to principal.
2. PREPAYMENT. Borrower may pre-pay all or any part of this Note
at any time, without penalty, provided that no pre-payment shall be less than
$100,000.
3. TAXES. All payments on account of the principal of and interest
on this Note and all other amounts payable under this Note (whether made by
Borrower or any other person) to or for the account of Lender hereunder shall
be made free and clear of and without reduction by reason of any and all
present and future income, stamp, registration and other taxes, levies, duties,
costs and charges whatsoever imposed, assessed, levied or collected by the
United States or any political subdivision or taxing authority thereof or
therein, on or in respect of this Note (all such taxes, levies, duties, costs
and charges, together with interest thereon and penalties with respect thereto,
if any, being herein collectively called "United States Taxes"), all of which
will be for the account of and paid by Borrower. Should any such payment be
subject to any United States Taxes and the provisions of the preceding sentence
of this Section 3 either cannot be effected or do not result in the Lender
actually receiving free and clear of all United States Taxes an amount equal to
the full amount provided for under this Note, Borrower shall pay to Lender such
additional amounts as may be necessary to ensure that Lender receives a net
amount equal to the full amount which it would have received had such payment
not been made subject to United States Taxes. In addition to the United States
Taxes paid by Borrower
<PAGE> 2
or additional amounts paid to Lender, in each case pursuant to the preceding
provisions of this Section 3 ("Additional Payments"), Borrower shall also pay
to Lender upon demand such additional amounts as may be necessary to compensate
Lender, on an after-tax basis, for any tax or levy imposed or assessed by any
jurisdiction on or with respect to any such Additional Payments (including any
income taxes payable by Lender with respect to Additional Payments pursuant to
the income tax laws of the jurisdiction of its principal office or lending or
of any political subdivision or taxing authority thereof).
4. NO IMPAIRMENT. Borrower shall not intentionally take any action
which would impair the rights of Lender hereunder.
5. OBLIGATIONS ABSOLUTE. No provision of this Note shall alter or
impair the obligation of Borrower, which is absolute and unconditional, to pay
the principal of, and interest on, this Note at the time, place and rate, and
in the manner, herein prescribed.
6. WAIVERS OF DEMAND, ETC. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, hereby
expressly waives demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, notice of acceleration or
intent to accelerate, all other notices whatsoever and bringing of suit and
diligence in taking any action to collect amounts called for hereunder, and
will be directly and primarily liable for the payment of all sums owing and to
be owing hereon, regardless of and without any notice, diligence, act or
omission as or with respect to the collection of any amount called for
hereunder.
7. REPLACEMENT NOTE. In the event that Lender notifies Borrower
that this Note has been lost, stolen, or destroyed, a replacement Note
identical in all respects to the original Note (except for the outstanding
principal amount, if different than that shown on the original Note), shall be
delivered to Lender, provided that the Lender executes and delivers to Borrower
an agreement reasonably satisfactory to Borrower to indemnify Borrower from any
loss incurred by it in connection with this Note.
8. PAYMENT OF EXPENSES. Borrower agrees to pay all debts and expenses,
including reasonable attorneys' fees and expenses, which may be incurred by the
Lender in preparing, administering or enforcing this Note and/or collecting any
amount due under this Note or the Loan Agreement.
9. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants that (i) Borrower is a corporation duly incorporated and existing in
good standing under the laws of the State of Delaware and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted; (ii) Borrower has the requisite corporate power and authority to
enter into and perform this Note in accordance with the terms hereof; (iii) the
execution and delivery of this Note has been duly authorized by the Borrower's
Board of Directors and any other necessary corporate action, and no further
consent or authorization of Borrower or its stockholders is required; (iv) this
Note has been duly executed and delivered by Borrower, (v) this Note
constitutes the valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to
general principles of equity; and (vi) the execution, delivery and performance
of this Note by Borrower will not result in a violation of the charter or the
by-laws of Borrower, or result in a violation of any applicable law,
-2-
<PAGE> 3
rule, regulation, order, judgment or decree applicable to Borrower or by which
its assets may be bound or affected.
10. SAVINGS CLAUSE. In Case any provision of this Note is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not
in any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected
in excess of the applicable maximum rate, the excess collected shall be applied
to reduce the principal debt. If the interest actually collected hereunder is
still in excess of the applicable maximum rate, the interest rate shall be
reduced so as not to exceed the maximum amount allowable under law.
11. AMENDMENT. Neither this Note nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
Borrower and Lender.
12. ASSIGNMENT, ETC. Lender may without notice transfer or assign
this Note or any interest herein and may mortgage, encumber or transfer any of
its rights or interest in and to this Note or any part hereof and, without
limitation, each assignee, transferee and mortgagee (which may include any
affiliate of the Lender) shall have the right to transfer or assign its
interest. Each such assignee, transferee and mortgagee shall have all of the
rights of Lender under this Note. This Note shall be binding upon Borrower and
its successors and shall inure to the benefit of the Lender and its successors
and assigns.
13. NO WAIVER. No failure on the part of Lender to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Lender of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to Lender or allowed it by law or other agreement shall be cumulative
and not exclusive of any other, and may be exercised by Lender from time to
time.
14. MISCELLANEOUS. Unless otherwise provided herein, any notice or
other communication to Borrower hereunder shall be sufficiently given if in
writing and personally delivered or mailed to Borrower by certified mail,
return receipt requested, at its address set forth above or such other address
as it may designate for itself in such notice to Lender, and communications
shall be deemed to have been received when delivered personally or, if sent by
mail or facsimile, then when actually received by the party to whom it is
addressed. Whenever the sense of this Note requires, words in the singular
shall be deemed to include the plural and words in the plural shall be deemed
to include the singular. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may (1) renew, extend (repeatedly
and for any length of time) or modify this Note, or release any party or any
guarantor or collateral, (2) impair, fail to realize upon or perfect any
security interest lender may have from time to time in collateral, or modify
this Note, or release any party or any guarantor or collateral, or (3) take
any other action deemed necessary by Lender, in each case without the consent
of or notice to anyone and without releasing Borrower or any guarantor from
any liability.
15. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL. THIS NOTE SHALL BE
CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
-3-
<PAGE> 4
TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. Borrower hereby agrees that
all actions or proceedings arising directly or indirectly from or in
connection with this Note shall, at Lender's sole option, be litigated only in
the Supreme Court of the State of New York or the United States District Court
for the Southern District of New York located in New York County, New York.
Borrower consents to the exclusive jurisdiction and venue of the foregoing
courts and consents that any process or notice of motion or other application
to either of said courts or a judge thereof may be served inside or outside the
State of New York or the Southern District of New York by certified or
registered mail, return receipt requested, directed to Borrower at its address
set forth in this Note (and service so made shall be deemed "personal service"
and be deemed complete five (5) days after the same has been posted as
aforesaid) or by personal service or in such other manner as may be permissible
under the rules of said courts. Borrower hereby waives any right to a jury
trial in connection with any litigation pursuant to this Note.
IN WITNESS WHEREOF, Borrower has caused this instrument to be duly
executed by an officer thereunto duly authorized.
GRANT GEOPHYSICAL, INC.
By: /s/ WILLIAM B. CLEVELAND
----------------------------
Print Name: William B. Cleveland
-----------------------
Print Title: Vice Pres. Finance
Secretary and Treasurer
-----------------------
ATTEST
/s/ D. HUGH FRASER, JR.
- -----------------------
D. HUGH FRASER, JR.
VICE PRESIDENT
NORTH AMERICA
-4-
<PAGE> 1
PROMISSORY NOTE
U.S.$325,000.00 Dated: November 1, 1996
FOR VALUE RECEIVED, the undersigned, GRANT GEOPHYSICAL, INC., a Delaware
corporation with offices at 16850 Park Row, Houston, Texas 77084 ("Borrower"),
promises to pay to the order of ELLIOTT ASSOCIATES, L.P., a Delaware limited
partnership ("Lender"), at 712 Fifth Avenue, New York, New York 10019, in lawful
money of the United States, the principal sum of Three Hundred-Twenty-Five
Thousand United States Dollars (U.S.$325,000) on demand, but in no event later
than the date which is sixty (60) days from the date of this promissory note
(the "Note") indicated above and to pay interest on the principal sum
outstanding under this Note at the rate of 15% per annum, also due and payable
on the date upon which the outstanding principal balance hereunder is required
to be paid (the "Maturity Date"). Accrual of interest shall commence on the
first day to occur after the date hereof and shall continue until payment in
full of the principal sum and all other amounts due hereunder have been made.
The principal of, and interest on, this Note are payable in such currency of the
United States of America as of the time of payment is legal tender for payment
of public and private debts.
This Note is subject to the following additional provisions:
1. INTEREST AND PAYMENT APPLICATION. Interest shall be calculated on
a 360 day year simple interest basis and paid for the actual number of days
elapsed. All interest due hereunder shall be payable at the Maturity Date.
Notwithstanding anything contained herein, the outstanding principal balance and
interest due hereunder shall bear interest, from and after the occurrence and
during the continuance of a default hereunder, at the rate equal to the lower
of twenty-five percent (25%) per annum or the highest rate permitted by law.
Unless otherwise agreed or required by applicable law, payments will be applied
first to any unpaid collection costs, then to unpaid interest and fees and any
remaining amount to principal.
2. PREPAYMENT. Borrower may pre-pay all or any part of this Note
at any time, without penalty, provided that no pre-payment shall be less than
$100,000.
3. TAXES. All payments on account of the principal of and interest
on this Note and all other amounts payable under this Note (whether made by
Borrower or any other person) to or for the account of Lender hereunder shall
be made free and clear of and without reduction by reason of any and all
present and future income, stamp, registration and other taxes, levies, duties,
costs and charges whatsoever imposed, assessed, levied or collected by the
United States or any political subdivision or taxing authority thereof or
therein, on or in respect of this Note (all such taxes, levies, duties, costs
and charges, together with interest thereon and penalties with respect thereto,
if any, being herein collectively called "United States Taxes"), all of which
will be for the account of and paid by Borrower. Should any such payment be
subject to any United States Taxes and the provisions of the preceding sentence
of this Section 3 either cannot be effected or do not result in the Lender
actually receiving free and clear of all United States Taxes an amount equal to
the full amount provided for under this Note, Borrower shall pay to Lender such
additional amounts as may be necessary to ensure that Lender receives a net
amount equal to the full amount which it would have received had such payment
not been made subject to United States Taxes. In addition to the United States
Taxes paid by Borrower or additional amounts paid to Lender, in each case
pursuant to the preceding provisions of this Section
<PAGE> 2
3 ("Additional Payments"), Borrower shall also pay to Lender upon demand such
additional amounts as may be necessary to compensate Lender, on an after-tax
basis, for any tax or levy imposed or assessed by any jurisdiction on or with
respect to any such Additional Payments (including any income taxes payable by
Lender with respect to Additional Payments pursuant to the income tax laws of
the jurisdiction of its principal office or lending office or of any political
subdivision or taxing authority thereof).
4. NO IMPAIRMENT. Borrower shall not intentionally take any action
which would impair the rights of Lender hereunder.
5. OBLIGATIONS ABSOLUTE. No provision of this Note shall alter or
impair the obligation of Borrower, which is absolute and unconditional, to pay
the principal of, and interest on, this Note at the time, place and rate, and
in the manner, herein prescribed.
6. WAIVERS OF DEMAND, ETC. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, hereby
expressly waives demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, notice of acceleration or
intent to accelerate, all other notices whatsoever and bringing of suit and
diligence in taking any action to collect amounts called for hereunder, and
will be directly and primarily liable for the payment of all sums owing and to
be owing hereon, regardless of and without any notice, diligence, act or
omission as or with respect to the collection of any amount called for
hereunder.
7. REPLACEMENT NOTE. In the event that Lender notifies Borrower
that this Note has been lost, stolen, or destroyed, a replacement Note
identical in all respects to the original Note (except for the outstanding
principal amount, if different than that shown on the original Note), shall be
delivered to Lender, provided that the Lender executes and delivers to Borrower
an agreement reasonably satisfactory to Borrower to indemnify Borrower from any
loss incurred by it in connection with this Note.
8. PAYMENT OF EXPENSES. Borrower agrees to pay all debts and expenses,
including reasonable attorneys' fees and expenses, which may be incurred by the
Lender in preparing, administering or enforcing this Note and/or collecting any
amount due under this Note or the Loan Agreement.
9. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants that (i) Borrower is a corporation duly incorporated and existing in
good standing under the laws of the State of Delaware and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted; (ii) Borrower has the requisite corporate power and authority to
enter into and perform this Note in accordance with the terms hereof; (iii) the
execution and delivery of this Note has been duly authorized by the Borrower's
Board of Directors and any other necessary corporate action, and no further
consent or authorization of Borrower or its stockholders is required; (iv) this
Note has been duly executed and delivered by Borrower, (v) this Note
constitutes the valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to
general principles of equity; and (vi) the execution, delivery and performance
of this Note by Borrower will not result in a violation of the charter or the
by-laws of Borrower, or result in a violation of any applicable law, rule,
regulation, order, judgment or decree applicable to Borrower or by which its
assets may be bound or affected.
-2-
<PAGE> 3
10. SAVINGS CLAUSE. In case any provision of this Note is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not
in any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected
in excess of the applicable maximum rate, the excess collected shall be applied
to reduce the principal debt. If the interest actually collected hereunder is
still in excess of the applicable maximum rate, the interest rate shall be
reduced so as not to exceed the maximum amount allowable under law.
11. AMENDMENT. Neither this Note nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
Borrower and Lender.
12. ASSIGNMENT, ETC. Lender may without notice transfer or assign
this Note or any interest herein and may mortgage, encumber or transfer any of
its rights or interest in and to this Note or any part hereof and, without
limitation, each assignee, transferee and mortgagee (which may include any
affiliate of the Lender) shall have the right to transfer or assign its
interest. Each such assignee, transferee and mortgagee shall have all of the
rights of Lender under this Note. This Note shall be binding upon Borrower and
its successors and shall inure to the benefit of the Lender and its successors
and assigns.
13. NO WAIVER. No failure on the part of Lender to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Lender of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to Lender or allowed it by law or other agreement shall be cumulative
and not exclusive of any other, and may be exercised by Lender from time to
time.
14. MISCELLANEOUS. Unless otherwise provided herein, any notice or
other communication to Borrower hereunder shall be sufficiently given if in
writing and personally delivered or mailed to Borrower by certified mail,
return receipt requested, at its address set forth above or such other address
as it may designate for itself in such notice to Lender, and communications
shall be deemed to have been received when delivered personally or, if sent by
mail or facsimile, then when actually received by the party to whom it is
addressed. Whenever the sense of this Note requires, words in the singular
shall be deemed to include the plural and words in the plural shall be deemed
to include the singular. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may (1) renew, extend (repeatedly
and for any length of time) or modify this Note, or release any party or any
guarantor or collateral, (2) impair, fail to realize upon or perfect any
security interest Lender may have from time to time in collateral, or (3) take
any other action deemed necessary by Lender, in each case without the consent
of or notice to anyone and without releasing Borrower or any guarantor from
any liability.
15. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL. THIS NOTE SHALL BE
CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW OR CHOICE OF LAW. Borrower hereby agrees that all actions or
proceedings arising directly or indirectly from or in connection with this Note
shall, at Lender's sole option, be litigated only in the Supreme Court of the
State of New York or the United
-3-
<PAGE> 4
States District Court for the Southern District of New York located in New York
County, New York. Borrower consents to the exclusive jurisdiction and venue of
the foregoing courts and consents that any process or notice of motion or other
application to either of said courts or a judge thereof may be served inside or
outside the State of New York or the Southern District of New York by certified
or registered mail, return receipt requested, directed to Borrower at its
address set forth in this Note (and service so made shall be deemed "personal
service" and be deemed complete five (5) days after the same has been posted as
aforesaid) or by personal service or in such other manner as may be permissible
under the rules of said courts. Borrower hereby waives any right to a jury trial
in connection with any litigation pursuant to this Note.
IN WITNESS WHEREOF, Borrower has caused this instrument to be duly
executed by an officer thereunto duly authorized.
GRANT GEOPHYSICAL, INC.
By: /s/ WILLIAM B. CLEVELAND
----------------------------
Print Name: William B. Cleveland
-----------------------
Print Title: Vice Pres. Finance
Secretary and Treasurer
-----------------------
ATTEST
/s/ D. HUGH FRASER, JR.
- -------------------------
D. HUGH FRASER, JR.
VICE PRESIDENT
NORTH AMERICA
-4-
<PAGE> 1
PROMISSORY NOTE
U.S.$840,000.00 Dated: November 5, 1996
FOR VALUE RECEIVED, the undersigned GRANT GEOPHYSICAL, INC., a Delaware
corporation with offices at 16850 Park Row, Houston, Texas 77084 ("Borrower"),
promises to pay to the order of ELLIOTT ASSOCIATES, L.P., a Delaware limited
partnership ("Lender"), at 712 Fifth Avenue, New York, New York 10019, in lawful
money of the United States, the principal sum of Eight Hundred Forty Thousand
United States Dollars (U.S.$840,000) on demand, but in no event later than the
date which is sixty (60) days from the date of this promissory note (the "Note")
indicated above and to pay interest on the principal sum outstanding under this
Note at the rate of 15% per annum, also due and payable on the date upon which
the outstanding principal balance hereunder is required to be paid (the
"Maturity Date"). Accrual of interest shall commence on the first day to occur
after the date hereof and shall continue until payment in full of the principal
sum and all other amounts due hereunder have been made. The principal of, and
interest on, this Note are payable in such currency of the United States of
America as of the time of payment is legal tender for payment of public and
private debts.
This Note is subject to the following additional provisions:
1. INTEREST AND PAYMENT APPLICATION. Interest shall be calculated on
a 360 day year simple interest basis and paid for the actual number of days
elapsed. All interest due hereunder shall be payable at the Maturity Date.
Notwithstanding anything contained herein, the outstanding principal balance and
interest due hereunder shall bear interest, from and after the occurrence and
during the continuance of a default hereunder, at the rate equal to the lower
of twenty-five percent (25%) per annum or the highest rate permitted by law.
Unless otherwise agreed or required by applicable law, payments will be applied
first to any unpaid collection costs, then to unpaid interest and fees and any
remaining amount to principal.
2. PREPAYMENT. Borrower may pre-pay all or any part of this Note
at any time, without penalty, provided that no pre-payment shall be less than
$100,000.
3. TAXES. All payments on account of the principal of and interest
on this Note and all other amounts payable under this Note (whether made by
Borrower or any other person) to or for the account of Lender hereunder shall
be made free and clear of and without reduction by reason of any and all
present and future income, stamp, registration and other taxes, levies, duties,
costs and charges whatsoever imposed, assessed, levied or collected by the
United States or any political subdivision or taxing authority thereof or
therein, on or in respect of this Note (all such taxes, levies, duties, costs
and charges, together with interest thereon and penalties with respect thereto,
if any, being herein collectively called "United States Taxes"), all of which
will be for the account of and paid by Borrower. Should any such payment be
subject to any United States Taxes and the provisions of the preceding sentence
of this Section 3 either cannot be effected or do not result in the Lender
actually receiving free and clear of all United States Taxes an amount equal to
the full amount provided for under this Note, Borrower shall pay to Lender such
additional amounts as may be necessary to ensure that Lender receives a net
amount equal to the full amount which it would have received had such payment
not been made subject to United States Taxes. In addition to the United States
Taxes paid by Borrower or additional amounts paid to Lender, in each case
pursuant to the preceding provisions of this Section
<PAGE> 2
3 ("Additional Payments"), Borrower shall also pay to Lender upon demand such
additional amounts as may be necessary to compensate Lender, on an after-tax
basis, for any tax or levy imposed or assessed by any jurisdiction on or with
respect to any such Additional Payments (including any income taxes payable by
Lender with respect to Additional Payments pursuant to the income tax laws of
the jurisdiction of its principal office or lending or of any political
subdivision or taxing authority thereof).
4. NO IMPAIRMENT. Borrower shall not intentionally take any action
which would impair the rights of Lender hereunder.
5. OBLIGATIONS ABSOLUTE. No provision of this Note shall alter or
impair the obligation of Borrower, which is absolute and unconditional, to pay
the principal of, and interest on, this Note at the time, place and rate, and
in the manner, herein prescribed.
6. WAIVERS OF DEMAND, ETC. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, hereby
expressly waives demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, notice of acceleration or
intent to accelerate, all other notices whatsoever and bringing of suit and
diligence in taking any action to collect amounts called for hereunder, and
will be directly and primarily liable for the payment of all sums owing and to
be owing hereon, regardless of and without any notice, diligence, act or
omission as or with respect to the collection of any amount called for
hereunder.
7. REPLACEMENT NOTE. In the event that Lender notifies Borrower
that this Note has been lost, stolen, or destroyed, a replacement Note
identical in all respects to the original Note (except for the outstanding
principal amount, if different than that shown on the original Note), shall be
delivered to Lender, provided that the Lender executes and delivers to Borrower
an agreement reasonably satisfactory to Borrower to indemnify Borrower from any
loss incurred by it in connection with this Note.
8. PAYMENT OF EXPENSES. Borrower agrees to pay all debts and expenses,
including reasonable attorneys' fees and expenses, which may be incurred by the
Lender in preparing, administering or enforcing this Note and/or collecting any
amount due under this Note or the Loan Agreement.
9. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants that (i) Borrower is a corporation duly incorporated and existing in
good standing under the laws of the State of Delaware and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted; (ii) Borrower has the requisite corporate power and authority to
enter into and perform this Note in accordance with the terms hereof; (iii) the
execution and delivery of this Note has been duly authorized by the Borrower's
Board of Directors and any other necessary corporate action, and no further
consent or authorization of Borrower or its stockholders is required; (iv) this
Note has been duly executed and delivered by Borrower, (v) this Note
constitutes the valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to
general principles of equity; and (vi) the execution, delivery and performance
of this Note by Borrower will not result in a violation of the charter or the
by-laws of Borrower, or result in a violation of any applicable law, rule,
regulation, order, judgment or decree applicable to Borrower or by which its
assets may be bound or affected.
-2-
<PAGE> 3
10. SAVINGS CLAUSE. In case any provision of this Note is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not
in any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected
in excess of the applicable maximum rate, the excess collected shall be applied
to reduce the principal debt. If the interest actually collected hereunder is
still in excess of the applicable maximum rate, the interest rate shall be
reduced so as not to exceed the maximum amount allowable under law.
11. AMENDMENT. Neither this Note nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
Borrower and Lender.
12. ASSIGNMENT, ETC. Lender may without notice transfer or assign
this Note or any interest herein and may mortgage, encumber or transfer any of
its rights or interest in and to this Note or any part hereof and, without
limitation, each assignee, transferee and mortgagee (which may include any
affiliate of the Lender) shall have the right to transfer or assign its
interest. Each such assignee, transferee and mortgagee shall have all of the
rights of Lender under this Note. This Note shall be binding upon Borrower and
its successors and shall inure to the benefit of the Lender and its successors
and assigns.
13. NO WAIVER. No failure on the part of Lender to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Lender of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to Lender or allowed it by law or other agreement shall be cumulative
and not exclusive of any other, and may be exercised by Lender from time to
time.
14. MISCELLANEOUS. Unless otherwise provided herein, any notice or
other communication to Borrower hereunder shall be sufficiently given if in
writing and personally delivered or mailed to Borrower by certified mail,
return receipt requested, at its address set forth above or such other address
as it may designate for itself in such notice to Lender, and communications
shall be deemed to have been received when delivered personally or, if sent by
mail or facsimile, then when actually received by the party to whom it is
addressed. Whenever the sense of this Note requires, words in the singular
shall be deemed to include the plural and words in the plural shall be deemed
to include the singular. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may (1) renew, extend (repeatedly
and for any length of time) or modify this Note, or release any party or any
guarantor or collateral, (2) impair, fail to realize upon or perfect any
security interest lender may have from time to time in collateral, or modify
this Note, or release any party or any guarantor or collateral, or (3) take
any other action deemed necessary by Lender, in each case without the consent
of or notice to anyone and without releasing Borrower or any guarantor from
any liability.
15. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL. THIS NOTE SHALL BE
CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW OR CHOICE OF LAW. Borrower hereby agrees that all actions or
proceedings arising directly or indirectly from or in connection with this Note
shall, at Lender's sole option, be litigated only in the Supreme Court of the
State of New York or the United
-3-
<PAGE> 4
States District Court for the Southern District of New York located in New York
County, New York. Borrower consents to the exclusive jurisdiction and venue of
the foregoing courts and consents that any process or notice of motion or other
application to either of said courts or a judge thereof may be served inside or
outside the State of New York or the Southern District of New York by certified
or registered mail, return receipt requested, directed to Borrower at its
address set forth in this Note (and service so made shall be deemed "personal
service" and be deemed complete five (5) days after the same has been posted as
aforesaid) or by personal service or in such other manner as may be permissible
under the rules of said courts. Borrower hereby waives any right to a jury trial
in connection with any litigation pursuant to this Note.
IN WITNESS WHEREOF, Borrower has caused this instrument to be duly
executed by an officer thereunto duly authorized.
GRANT GEOPHYSICAL, INC.
By: /s/ WILLIAM B. CLEVELAND
----------------------------
Print Name: William B. Cleveland
-----------------------
Print Title: Vice Pres. Finance
Secretary and Treasurer
-----------------------
ATTEST
/s/ D. HUGH FRASER, JR.
- --------------------------
D. HUGH FRASER, JR.
VICE PRESIDENT
NORTH AMERICA
-4-
<PAGE> 1
PROMISSORY NOTE
U.S.$560,000.00 Dated: November 5, 1996
FOR VALUE RECEIVED, the undersigned, GRANT GEOPHYSICAL, INC., a Delaware
corporation with offices at 16850 Park Row, Houston, Texas 77084 ("Borrower"),
promises to pay to the order of WESTGATE INTERNATIONAL, L.P., a Cayman Islands
exempted limited partnership ("Lender"), at c/o Midland Bank Trust Corporation
(Cayman) Limited, P.O. Box 1109, Mary Street, Grand Cayman, Cayman Islands, BWI,
in lawful money of the United States, the principal sum of Five Hundred Sixty
Thousand United States Dollars (U.S.$560,000) on demand, but in no event later
than the date which is sixty (60) days from the date of this promissory note
(the "Note") indicated above and to pay interest on the principal sum
outstanding under this Note at the rate of 15% per annum, also due and payable
on the date upon which the outstanding principal balance hereunder is required
to be paid (the "Maturity Date"). Accrual of interest shall commence on the
first day to occur after the date hereof and shall continue until payment in
full of the principal sum and all other amounts due hereunder have been made.
The principal of, and interest on, this Note are payable in such currency of the
United States of America as of the time of payment is legal tender for payment
of public and private debts.
This Note is subject to the following additional provisions:
1. INTEREST AND PAYMENT APPLICATION. Interest shall be calculated on
a 360 day year simple interest basis and paid for the actual number of days
elapsed. All interest due hereunder shall be payable at the Maturity Date.
Notwithstanding anything contained herein, the outstanding principal balance and
interest due hereunder shall bear interest, from and after the occurrence and
during the continuance of a default hereunder, at the rate equal to the lower
of twenty-five percent (25%) per annum or the highest rate permitted by law.
Unless otherwise agreed or required by applicable law, payments will be applied
first to any unpaid collection costs, then to unpaid interest and fees and any
remaining amount to principal.
2. PREPAYMENT. Borrower may pre-pay all or any part of this Note
at any time, without penalty, provided that no pre-payment shall be less than
$100,000.
3. TAXES. All payments on account of the principal of and interest
on this Note and all other amounts payable under this Note (whether made by
Borrower or any other person) to or for the account of Lender hereunder shall
be made free and clear of and without reduction by reason of any and all
present and future income, stamp, registration and other taxes, levies, duties,
costs and charges whatsoever imposed, assessed, levied or collected by the
United States or any political subdivision or taxing authority thereof or
therein, on or in respect of this Note (all such taxes, levies, duties, costs
and charges, together with interest thereon and penalties with respect thereto,
if any, being herein collectively called "United States Taxes"), all of which
will be for the account of and paid by Borrower. Should any such payment be
subject to any United States Taxes and the provisions of the preceding sentence
of this Section 3 either cannot be effected or do not result in the Lender
actually receiving free and clear of all United States Taxes an amount equal to
the full amount provided for under this Note, Borrower shall pay to Lender such
additional amounts as may be necessary to ensure that Lender receives a net
amount equal to the full amount which it would have received had such payment
not been made subject to United States Taxes. In addition to the United States
Taxes paid by Borrower
<PAGE> 2
or additional amounts paid to Lender, in each case pursuant to the preceding
provisions of this Section 3 ("Additional Payments"), Borrower shall also pay to
Lender upon demand such additional amounts as may be necessary to compensate
Lender, on an after-tax basis, for any tax or levy imposed or assessed by any
jurisdiction on or with respect to any such Additional Payments (including any
income taxes payable by Lender with respect to Additional Payments pursuant to
the income tax laws of the jurisdiction of its principal office or lending or of
any political subdivision or taxing authority thereof).
4. NO IMPAIRMENT. Borrower shall not intentionally take any action
which would impair the rights of Lender hereunder.
5. OBLIGATIONS ABSOLUTE. No provision of this Note shall alter or
impair the obligation of Borrower, which is absolute and unconditional, to pay
the principal of, and interest on, this Note at the time, place and rate, and
in the manner, herein prescribed.
6. WAIVERS OF DEMAND, ETC. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, hereby
expressly waives demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, notice of acceleration or
intent to accelerate, all other notices whatsoever and bringing of suit and
diligence in taking any action to collect amounts called for hereunder, and
will be directly and primarily liable for the payment of all sums owing and to
be owing hereon, regardless of and without any notice, diligence, act or
omission as or with respect to the collection of any amount called for
hereunder.
7. REPLACEMENT NOTE. In the event that Lender notifies Borrower
that this Note has been lost, stolen, or destroyed, a replacement Note
identical in all respects to the original Note (except for the outstanding
principal amount, if different than that shown on the original Note), shall be
delivered to Lender, provided that the Lender executes and delivers to Borrower
an agreement reasonably satisfactory to Borrower to indemnify Borrower from any
loss incurred by it in connection with this Note.
8. PAYMENT OF EXPENSES. Borrower agrees to pay all debts and expenses,
including reasonable attorneys' fees and expenses, which may be incurred by the
Lender in preparing, administering or enforcing this Note and/or collecting any
amount due under this Note or the Loan Agreement.
9. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants that (i) Borrower is a corporation duly incorporated and existing in
good standing under the laws of the State of Delaware and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted; (ii) Borrower has the requisite corporate power and authority to
enter into and perform this Note in accordance with the terms hereof; (iii) the
execution and delivery of this Note has been duly authorized by the Borrower's
Board of Directors and any other necessary corporate action, and no further
consent or authorization of Borrower or its stockholders is required; (iv) this
Note has been duly executed and delivered by Borrower, (v) this Note
constitutes the valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to
general principles of equity; and (vi) the execution, delivery and performance
of this Note by Borrower will not result in a violation of the charter or the
by-laws of Borrower, or result in a violation of any applicable law,
-2-
<PAGE> 3
rule, regulation, order, judgment or decree applicable to Borrower or by which
its assets may be bound or affected.
10. SAVINGS CLAUSE. In case any provision of this Note is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not
in any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected
in excess of the applicable maximum rate, the excess collected shall be applied
to reduce the principal debt. If the interest actually collected hereunder is
still in excess of the applicable maximum rate, the interest rate shall be
reduced so as not to exceed the maximum amount allowable under law.
11. AMENDMENT. Neither this Note nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
Borrower and Lender.
12. ASSIGNMENT, ETC. Lender may without notice transfer or assign
this Note or any interest herein and may mortgage, encumber or transfer any of
its rights or interest in and to this Note or any part hereof and, without
limitation, each assignee, transferee and mortgagee (which may include any
affiliate of the Lender) shall have the right to transfer or assign its
interest. Each such assignee, transferee and mortgagee shall have all of the
rights of Lender under this Note. This Note shall be binding upon Borrower and
its successors and shall inure to the benefit of the Lender and its successors
and assigns.
13. NO WAIVER. No failure on the part of Lender to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Lender of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to Lender or allowed it by law or other agreement shall be cumulative
and not exclusive of any other, and may be exercised by Lender from time to
time.
14. MISCELLANEOUS. Unless otherwise provided herein, any notice or
other communication to Borrower hereunder shall be sufficiently given if in
writing and personally delivered or mailed to Borrower by certified mail,
return receipt requested, at its address set forth above or such other address
as it may designate for itself in such notice to Lender, and communications
shall be deemed to have been received when delivered personally or, if sent by
mail or facsimile, then when actually received by the party to whom it is
addressed. Whenever the sense of this Note requires, words in the singular
shall be deemed to include the plural and words in the plural shall be deemed
to include the singular. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may (1) renew, extend (repeatedly
and for any length of time) or modify this Note, or release any party or any
guarantor or collateral, (2) impair, fail to realize upon or perfect any
security interest Lender may have from time to time in collateral, or (3) take
any other action deemed necessary by Lender, in each case without the consent
of or notice to anyone and without releasing Borrower or any guarantor from
any liability.
15. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL. THIS NOTE SHALL BE
CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
-3-
<PAGE> 4
TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. Borrower hereby agrees that
all actions or proceedings arising directly or indirectly from or in connection
with this Note shall, at Lender's sole option, be litigated only in the Supreme
Court of the State of New York or the United States District Court for the
Southern District of New York located in New York County, New York. Borrower
consents to the exclusive jurisdiction and venue of the foregoing courts and
consents that any process or notice of motion or other application to either of
said courts or a judge thereof may be served inside or outside the State of New
York or the Southern District of New York by certified or registered mail,
return receipt requested, directed to Borrower at its address set forth in this
Note (and service so made shall be deemed "personal service" and be deemed
complete five (5) days after the same has been posted as aforesaid) or by
personal service or in such other manner as may be permissible under the rules
of said courts. Borrower hereby waives any right to a jury trial in connection
with any litigation pursuant to this Note.
IN WITNESS WHEREOF, Borrower has caused this instrument to be duly
executed by an officer thereunto duly authorized.
GRANT GEOPHYSICAL, INC.
By: /s/ WILLIAM B. CLEVELAND
---------------------------------
Print Name: William B. Cleveland
------------------------
Print Title: Vice Pres. Finance
Secretary and Treasurer
------------------------
ATTEST
/s/ D. HUGH FRASER, JR.
- --------------------------
D. HUGH FRASER, JR.
VICE PRESIDENT
NORTH AMERICA
-4-
<PAGE> 1
PROMISSORY NOTE
U.S.$489,000.00 Dated: November 7, 1996
FOR VALUE RECEIVED, the undersigned GRANT GEOPHYSICAL, INC., a Delaware
corporation with offices at 16850 Park Row, Houston, Texas 77084 ("Borrower"),
promises to pay to the order of ELLIOTT ASSOCIATES, L.P., a Delaware limited
partnership ("Lender"), at 712 Fifth Avenue, New York, New York 10019, in lawful
money of the United States, the principal sum of Four Hundred Eighty-Nine
Thousand United States Dollars (U.S.$489,000) on demand, but in no event later
than the date which is sixty (60) days from the date of this promissory note
(the "Note") indicated above and to pay interest on the principal sum
outstanding under this Note at the rate of 15% per annum, also due and payable
on the date upon which the outstanding principal balance hereunder is required
to be paid (the "Maturity Date"). Accrual of interest shall commence on the
first day to occur after the date hereof and shall continue until payment in
full of the principal sum and all other amounts due hereunder have been made.
The principal of, and interest on, this Note are payable in such currency of the
United States of America as of the time of payment is legal tender for payment
of public and private debts.
This Note is subject to the following additional provisions:
1. INTEREST AND PAYMENT APPLICATION. Interest shall be calculated on
a 360 day year simple interest basis and paid for the actual number of days
elapsed. All interest due hereunder shall be payable at the Maturity Date.
Notwithstanding anything contained herein, the outstanding principal balance and
interest due hereunder shall bear interest, from and after the occurrence and
during the continuance of a default hereunder, at the rate equal to the lower
of twenty-five percent (25%) per annum or the highest rate permitted by law.
Unless otherwise agreed or required by applicable law, payments will be applied
first to any unpaid collection costs, then to unpaid interest and fees and any
remaining amount to principal.
2. PREPAYMENT. Borrower may pre-pay all or any part of this Note
at any time, without penalty, provided that no pre-payment shall be less than
$100,000.
3. TAXES. All payments on account of the principal of and interest
on this Note and all other amounts payable under this Note (whether made by
Borrower or any other person) to or for the account of Lender hereunder shall
be made free and clear of and without reduction by reason of any and all
present and future income, stamp, registration and other taxes, levies, duties,
costs and charges whatsoever imposed, assessed, levied or collected by the
United States or any political subdivision or taxing authority thereof or
therein, on or in respect of this Note (all such taxes, levies, duties, costs
and charges, together with interest thereon and penalties with respect thereto,
if any, being herein collectively called "United States Taxes"), all of which
will be for the account of and paid by Borrower. Should any such payment be
subject to any United States Taxes and the provisions of the preceding sentence
of this Section 3 either cannot be effected or do not result in the Lender
actually receiving free and clear of all United States Taxes an amount equal to
the full amount provided for under this Note, Borrower shall pay to Lender such
additional amounts as may be necessary to ensure that Lender receives a net
amount equal to the full amount which it would have received had such payment
not been made subject to United States Taxes. In addition to the United States
Taxes paid by Borrower or additional amounts paid to Lender, in each case
pursuant to the preceding provisions of this Section
<PAGE> 2
3 ("Additional Payments"), Borrower shall also pay to Lender upon demand such
additional amounts as may be necessary to compensate Lender, on an after-tax
basis, for any tax or levy imposed or assessed by any jurisdiction on or with
respect to any such Additional Payments (including any income taxes payable by
Lender with respect to Additional Payments pursuant to the income tax laws of
the jurisdiction of its principal office or lending or of any political
subdivision or taxing authority thereof).
4. NO IMPAIRMENT. Borrower shall not intentionally take any action
which would impair the rights of Lender hereunder.
5. OBLIGATIONS ABSOLUTE. No provision of this Note shall alter or
impair the obligation of Borrower, which is absolute and unconditional, to pay
the principal of, and interest on, this Note at the time, place and rate, and
in the manner, herein prescribed.
6. WAIVERS OF DEMAND, ETC. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, hereby
expressly waives demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, notice of acceleration or
intent to accelerate, all other notices whatsoever and bringing of suit and
diligence in taking any action to collect amounts called for hereunder, and
will be directly and primarily liable for the payment of all sums owing and to
be owing hereon, regardless of and without any notice, diligence, act or
omission as or with respect to the collection of any amount called for
hereunder.
7. REPLACEMENT NOTE. In the event that Lender notifies Borrower
that this Note has been lost, stolen, or destroyed, a replacement Note
identical in all respects to the original Note (except for the outstanding
principal amount, if different than that shown on the original Note), shall be
delivered to Lender, provided that the Lender executes and delivers to Borrower
an agreement reasonably satisfactory to Borrower to indemnify Borrower from any
loss incurred by it in connection with this Note.
8. PAYMENT OF EXPENSES. Borrower agrees to pay all debts and expenses,
including reasonable attorneys' fees and expenses, which may be incurred by the
Lender in preparing, administering or enforcing this Note and/or collecting any
amount due under this Note or the Loan Agreement.
9. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants that (i) Borrower is a corporation duly incorporated and existing in
good standing under the laws of the State of Delaware and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted; (ii) Borrower has the requisite corporate power and authority to
enter into and perform this Note in accordance with the terms hereof; (iii) the
execution and delivery of this Note has been duly authorized by the Borrower's
Board of Directors and any other necessary corporate action, and no further
consent or authorization of Borrower or its stockholders is required; (iv) this
Note has been duly executed and delivered by Borrower, (v) this Note
constitutes the valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to
general principles of equity; and (vi) the execution, delivery and performance
of this Note by Borrower will not result in a violation of the charter or the
by-laws of Borrower, or result in a violation of any applicable law, rule,
regulation, order, judgment or decree applicable to Borrower or by which its
assets may be bound or affected.
-2-
<PAGE> 3
10. SAVINGS CLAUSE. In case any provision of this Note is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not
in any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected
in excess of the applicable maximum rate, the excess collected shall be applied
to reduce the principal debt. If the interest actually collected hereunder is
still in excess of the applicable maximum rate, the interest rate shall be
reduced so as not to exceed the maximum amount allowable under law.
11. AMENDMENT. Neither this Note nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
Borrower and Lender.
12. ASSIGNMENT, ETC. Lender may without notice transfer or assign
this Note or any interest herein and may mortgage, encumber or transfer any of
its rights or interest in and to this Note or any part hereof and, without
limitation, each assignee, transferee and mortgagee (which may include any
affiliate of the Lender) shall have the right to transfer or assign its
interest. Each such assignee, transferee and mortgagee shall have all of the
rights of Lender under this Note. This Note shall be binding upon Borrower and
its successors and shall inure to the benefit of the Lender and its successors
and assigns.
13. NO WAIVER. No failure on the part of Lender to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Lender of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to Lender or allowed it by law or other agreement shall be cumulative
and not exclusive of any other, and may be exercised by Lender from time to
time.
14. MISCELLANEOUS. Unless otherwise provided herein, any notice or
other communication to Borrower hereunder shall be sufficiently given if in
writing and personally delivered or mailed to Borrower by certified mail,
return receipt requested, at its address set forth above or such other address
as it may designate for itself in such notice to Lender, and communications
shall be deemed to have been received when delivered personally or, if sent by
mail or facsimile, then when actually received by the party to whom it is
addressed. Whenever the sense of this Note requires, words in the singular
shall be deemed to include the plural and words in the plural shall be deemed
to include the singular. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may (1) renew, extend (repeatedly
and for any length of time) or modify this Note, or release any party or any
guarantor or collateral, (2) impair, fail to realize upon or perfect any
security interest Lender may have from time to time in collateral, or (3) take
any other action deemed necessary by Lender, in each case without the consent
of or notice to anyone and without releasing Borrower or any guarantor from
any liability.
15. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL. THIS NOTE SHALL BE
CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW OR CHOICE OF LAW. Borrower hereby agrees that all actions or
proceedings arising directly or indirectly from or in connection with this Note
shall, at Lender's sole option, be litigated only in the Supreme Court of the
State of New York or the United
-3-
<PAGE> 4
States District Court for the Southern District of New York located in New York
County, New York. Borrower consents to the exclusive jurisdiction and venue of
the foregoing courts and consents that any process or notice of motion or other
application to either of said courts or a judge thereof may be served inside or
outside the State of New York or the Southern District of New York by certified
or registered mail, return receipt requested, directed to Borrower at its
address set forth in this Note (and service so made shall be deemed "personal
service" and be deemed complete five (5) days after the same has been posted as
aforesaid) or by personal service or in such other manner as may be permissible
under the rules of said courts. Borrower hereby waives any right to a jury trial
in connection with any litigation pursuant to this Note.
IN WITNESS WHEREOF, Borrower has caused this instrument to be duly
executed by an officer thereunto duly authorized.
GRANT GEOPHYSICAL, INC.
By: /s/ WILLIAM B. CLEVELAND
---------------------------------
Print Name: William B. Cleveland
------------------------
Print Title: Vice Pres. Finance
Secretary and Treasurer
------------------------
ATTEST
/s/ D. HUGH FRASER, JR.
- -----------------------
D. HUGH FRASER, JR.
VICE PRESIDENT
NORTH AMERICA
-4-
<PAGE> 1
PROMISSORY NOTE
U.S.$385,000.00 Dated: November 8, 1996
FOR VALUE RECEIVED, the undersigned GRANT GEOPHYSICAL, INC., a Delaware
corporation with offices at 16850 Park Row, Houston, Texas 77084 ("Borrower"),
promises to pay to the order of WESTGATE INTERNATIONAL, L.P., a Cayman Islands
exempted limited partnership ("Lender"), at c/o Midland Bank Trust Corporation
(Cayman) Limited, P.O. Box 1109, Mary Street, Grand Cayman, Cayman Islands, BWI,
in lawful money of the United States, the principal sum of Three Hundred
Eighty-Five Thousand United States Dollars (U.S.$385,000) on demand, but in no
event later than the date which is sixty (60) days from the date of this
promissory note (the "Note") indicated above and to pay interest on the
principal sum outstanding under this Note at the rate of 15% per annum, also due
and payable on the date upon which the outstanding principal balance hereunder
is required to be paid (the "Maturity Date"). Accrual of interest shall commence
on the first day to occur after the date hereof and shall continue until payment
in full of the principal sum and all other amounts due hereunder have been made.
The principal of, and interest on, this Note are payable in such currency of the
United States of America as of the time of payment is legal tender for payment
of public and private debts.
This Note is subject to the following additional provisions:
1. INTEREST AND PAYMENT APPLICATION. Interest shall be calculated on
a 360 day year simple interest basis and paid for the actual number of days
elapsed. All interest due hereunder shall be payable at the Maturity Date.
Notwithstanding anything contained herein, the outstanding principal balance and
interest due hereunder shall bear interest, from and after the occurrence and
during the continuance of a default hereunder, at the rate equal to the lower
of twenty-five percent (25%) per annum or the highest rate permitted by law.
Unless otherwise agreed or required by applicable law, payments will be applied
first to any unpaid collection costs, then to unpaid interest and fees and any
remaining amount to principal.
2. PREPAYMENT. Borrower may pre-pay all or any part of this Note
at any time, without penalty, provided that no pre-payment shall be less than
$100,000.
3. TAXES. All payments on account of the principal of and interest
on this Note and all other amounts payable under this Note (whether made by
Borrower or any other person) to or for the account of Lender hereunder shall
be made free and clear of and without reduction by reason of any and all
present and future income, stamp, registration and other taxes, levies, duties,
costs and charges whatsoever imposed, assessed, levied or collected by the
United States or any political subdivision or taxing authority thereof or
therein, on or in respect of this Note (all such taxes, levies, duties, costs
and charges, together with interest thereon and penalties with respect thereto,
if any, being herein collectively called "United States Taxes"), all of which
will be for the account of and paid by Borrower. Should any such payment be
subject to any United States Taxes and the provisions of the preceding sentence
of this Section 3 either cannot be effected or do not result in the Lender
actually receiving free and clear of all United States Taxes an amount equal to
the full amount provided for under this Note, Borrower shall pay to Lender such
additional amounts as may be necessary to ensure that Lender receives a net
amount equal to the full amount which it would have received had such payment
not been made subject to United States Taxes. In addition to the United States
Taxes paid by Borrower
<PAGE> 2
or additional amounts paid to Lender, in each case pursuant to the preceding
provisions of this Section 3 ("Additional Payments"), Borrower shall also pay to
Lender upon demand such additional amounts as may be necessary to compensate
Lender, on an after-tax basis, for any tax or levy imposed or assessed by any
jurisdiction on or with respect to any such Additional Payments (including any
income taxes payable by Lender with respect to Additional Payments pursuant to
the income tax laws of the jurisdiction of its principal office or lending or of
any political subdivision or taxing authority thereof).
4. NO IMPAIRMENT. Borrower shall not intentionally take any action
which would impair the rights of Lender hereunder.
5. OBLIGATIONS ABSOLUTE. No provision of this Note shall alter or
impair the obligation of Borrower, which is absolute and unconditional, to pay
the principal of, and interest on, this Note at the time, place and rate, and
in the manner, herein prescribed.
6. WAIVERS OF DEMAND, ETC. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, hereby
expressly waives demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, notice of acceleration or
intent to accelerate, all other notices whatsoever and bringing of suit and
diligence in taking any action to collect amounts called for hereunder, and
will be directly and primarily liable for the payment of all sums owing and to
be owing hereon, regardless of and without any notice, diligence, act or
omission as or with respect to the collection of any amount called for
hereunder.
7. REPLACEMENT NOTE. In the event that Lender notifies Borrower
that this Note has been lost, stolen, or destroyed, a replacement Note
identical in all respects to the original Note (except for the outstanding
principal amount, if different than that shown on the original Note), shall be
delivered to Lender, provided that the Lender executes and delivers to Borrower
an agreement reasonably satisfactory to Borrower to indemnify Borrower from any
loss incurred by it in connection with this Note.
8. PAYMENT OF EXPENSES. Borrower agrees to pay all debts and expenses,
including reasonable attorneys' fees and expenses, which may be incurred by the
Lender in preparing, administering or enforcing this Note and/or collecting any
amount due under this Note or the Loan Agreement.
9. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants that (i) Borrower is a corporation duly incorporated and existing in
good standing under the laws of the State of Delaware and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted; (ii) Borrower has the requisite corporate power and authority to
enter into and perform this Note in accordance with the terms hereof; (iii) the
execution and delivery of this Note has been duly authorized by the Borrower's
Board of Directors and any other necessary corporate action, and no further
consent or authorization of Borrower or its stockholders is required; (iv) this
Note has been duly executed and delivered by Borrower, (v) this Note
constitutes the valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to
general principles of equity; and (vi) the execution, delivery and performance
of this Note by Borrower will not result in a violation of the charter or the
by-laws of Borrower, or result in a violation of any applicable law,
-2-
<PAGE> 3
rule, regulation, order, judgment or decree applicable to Borrower or by which
its assets may be bound or affected.
10. SAVINGS CLAUSE. In case any provision of this Note is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not
in any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected
in excess of the applicable maximum rate, the excess collected shall be applied
to reduce the principal debt. If the interest actually collected hereunder is
still in excess of the applicable maximum rate, the interest rate shall be
reduced so as not to exceed the maximum amount allowable under law.
11. AMENDMENT. Neither this Note nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
Borrower and Lender.
12. ASSIGNMENT, ETC. Lender may without notice transfer or assign
this Note or any interest herein and may mortgage, encumber or transfer any of
its rights or interest in and to this Note or any part hereof and, without
limitation, each assignee, transferee and mortgagee (which may include any
affiliate of the Lender) shall have the right to transfer or assign its
interest. Each such assignee, transferee and mortgagee shall have all of the
rights of Lender under this Note. This Note shall be binding upon Borrower and
its successors and shall inure to the benefit of the Lender and its successors
and assigns.
13. NO WAIVER. No failure on the part of Lender to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Lender of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to Lender or allowed it by law or other agreement shall be cumulative
and not exclusive of any other, and may be exercised by Lender from time to
time.
14. MISCELLANEOUS. Unless otherwise provided herein, any notice or
other communication to Borrower hereunder shall be sufficiently given if in
writing and personally delivered or mailed to Borrower by certified mail,
return receipt requested, at its address set forth above or such other address
as it may designate for itself in such notice to Lender, and communications
shall be deemed to have been received when delivered personally or, if sent by
mail or facsimile, then when actually received by the party to whom it is
addressed. Whenever the sense of this Note requires, words in the singular
shall be deemed to include the plural and words in the plural shall be deemed
to include the singular. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may (1) renew, extend (repeatedly
and for any length of time) or modify this Note, or release any party or any
guarantor or collateral, (2) impair, fail to realize upon or perfect any
security interest Lender may have from time to time in collateral, or (3) take
any other action deemed necessary by Lender, in each case without the consent
of or notice to anyone and without releasing Borrower or any guarantor from
any liability.
15. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL. THIS NOTE SHALL BE
CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
-3-
<PAGE> 4
TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. Borrower hereby agrees that
all actions or proceedings arising directly or indirectly from or in connection
with this Note shall, at Lender's sole option, be litigated only in the Supreme
Court of the State of New York or the United States District Court for the
Southern District of New York located in New York County, New York. Borrower
consents to the exclusive jurisdiction and venue of the foregoing courts and
consents that any process or notice of motion or other application to either of
said courts or a judge thereof may be served inside or outside the State of New
York or the Southern District of New York by certified or registered mail,
return receipt requested, directed to Borrower at its address set forth in this
Note (and service so made shall be deemed "personal service" and be deemed
complete five (5) days after the same has been posted as aforesaid) or by
personal service or in such other manner as may be permissible under the rules
of said courts. Borrower hereby waives any right to a jury trial in connection
with any litigation pursuant to this Note.
IN WITNESS WHEREOF, Borrower has caused this instrument to be duly
executed by an officer thereunto duly authorized.
GRANT GEOPHYSICAL, INC.
By: /s/ WILLIAM B. CLEVELAND
------------------------------------
Print Name: William B. Cleveland
------------------------
Print Title: Vice Pres. Finance
Secretary and Treasurer
------------------------
ATTEST
/s/ D. HUGH FRASER, JR.
- ---------------------------
D. HUGH FRASER, JR.
VICE PRESIDENT
NORTH AMERICA
-4-
<PAGE> 1
EXHIBIT 11.01
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
COMPUTATION OF INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE:
Net income/(loss) ............................................. $ (76,027) $ 3,162
Dividend requirement on $2.4375 preferred stock ............... (6,363) (5,258)
------------ ------------
Net loss applicable to common stock ............................. $ (82,390) $ (2,096)
============ ============
INCOME/(LOSS) PER COMMON SHARE--ASSUMING NO
AND FULL DILUTION:
Net income/(loss) ............................................. $ (5.17) $ 0.25
Dividend requirement on $2.4375 preferred stock ............... (0.43) (0.42)
------------ ------------
Net loss per common share ....................................... $ (5.60) $ (0.17)
============ ============
COMPUTATION OF WEIGHTED AVERAGE COMMON SHARES--
PRIMARY:
Weighted average number of common shares outstanding .......... 14,699,824 12,194,463
Common shares issuable under incentive stock option plan ...... 828,750
Less shares assumed repurchased with proceeds ................. (487,861)
------------ ------------
14,699,824 12,535,352
============ ============
COMPUTATION OF WEIGHTED AVERAGE COMMON SHARES--
FULLY DILUTED:
Weighted average number of common shares outstanding .......... 14,699,824 12,194,463
Common shares issuable under incentive stock option plan ...... 828,750
Less shares assumed repurchased with proceeds ................. (451,229)
------------ ------------
14,699,824 12,571,984
============ ============
</TABLE>
<PAGE> 1
EXHIBIT 12.01
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
(DEBTOR IN POSSESSION)
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS AND
COMPUTATION OF DEFICIENCY OF EARNINGS AVAILABLE TO COVER FIXED CHARGES AND
PREFERRED DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income/(loss) from continuing
operations before income taxes ....... $(74,406) $ 3,553 $(11,245) $(16,810) $(28,378)
Adjustments:
Minority interest earnings
of consolidated subsidiary
with fixed charges
(Income)/loss of unconsolidated
subsidiary .......................... (689)
Add:
Portion of rents representative
of the interest factor (20%) ........ 418 376 552 743 427
Interest on Indebtedness ............. 7,558 3,635 3,561 3,894 3,028
Amortization of debt expense
and premium
-------- -------- -------- -------- --------
Income/(loss) as adjusted .......... $(66,430) $ 7,564 $ (7,132) $(12,173) $(25,612)
======== ======== ======== ======== ========
Preferred dividends:
Preferred dividend requirements ...... $ 6,363 $ 5,258 $ 5,258 $ 5,258 $ 5,258
Income tax rate ...................... 2.20% 11.00% 2.00% 1.00% 4.00%
Preferred dividend factor on
pre-tax basis ....................... 6,506 5,908 5,365 5,311 5,477
Fixed charges:
Interest on Indebtedness ............. 7,558 3,635 3,561 3,894 3,028
Amortization of debt expense
and premium
Portion of rents representative
of the interest factor (20%) ........ 418 376 552 743 427
Capitalized interest ................. 401 236
-------- -------- -------- -------- --------
Fixed charges and preferred
dividends ......................... $ 14,883 $ 10,155 $ 9,478 $ 9,948 $ 8,932
======== ======== ======== ======== ========
Ratio of earnings to fixed charges
and preferred dividends
======== ======== ======== ======== ========
Deficiency of earnings available
to cover fixed charges
and preferred dividends .............. $(81,313) $ (2,591) $(16,610) $(22,121) $(34,544)
======== ======== ======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 21.01
GRANT GEOPHYSICAL, INC.
SUBSIDIARIES OF GRANT
<TABLE>
<CAPTION>
Grant Geophysical, Inc. Parent Delaware June 27, 1978
PERCENT JURISDICTION OF DATE CREATED
SUBSIDIARY NAME OWNED INCORPORATION OR ACQUIRED
--------------- ----- ------------- -----------
<S> <C> <C> <C>
Grant Geophysical Services Corp. 100% Texas Dec. 1987
Norpac International, Inc. (Nevada) 100% Nevada Feb. 1982
Exploraciones Geofisicas Grant-Norpac Chile Ltda
(Inactive) 100% Chile Jan. 1988
Grant Geophysical Ltd. (Inactive) 100% Canada Mar. 1978
Grant Geophysical (Int'l) Inc. 100% California Apr. 1955
Far East Petroleum Exploration B.V 100% Holland Dec. 1987
Grant Geophysical Unida S.A 100% Costa Rica Dec. 1987
Instrumentos Tecnicos E Pesquisas Ltda 100% Brazil Dec. 1987
* United Geophysical (Nigeria) Ltd. 100% Nigeria Dec. 1987
Sociedad Corporacion Ultramar de Colocaciones S.A 100% Uruguay Dec. 1991
Grant Geophysical do Brasil, Ltda 100% Brazil Dec. 1984
Seiscom Products Corp. (Inactive) 100% California Dec. 1987
</TABLE>
* Expected to be sold by April 30, 1997
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to incorporation by reference in the Registration Statement
No. 33-43040 of Grant Geophysical, Inc. on Form S-8 of our report dated April
4, 1997, relating to the consolidated balance sheets of Grant Geophysical, Inc.
and Subsidiaries as of December 31, 1996 and 1995 and the related consolidated
statements of operations, changes in shareholders' equity and cash flows for
each of the years in the three year period ended December 31, 1996, the year
then ended, and the related financial statement schedule, which report appears
in the December 31, 1996 annual report on Form 10-K of Grant Geophysical, Inc.
KPMG Peat Marwick LLP
Houston, Texas
April 15, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,772
<SECURITIES> 0
<RECEIVABLES> 25,182
<ALLOWANCES> 5,711
<INVENTORY> 503
<CURRENT-ASSETS> 30,224
<PP&E> 94,223
<DEPRECIATION> 56,555
<TOTAL-ASSETS> 70,123
<CURRENT-LIABILITIES> 7,803
<BONDS> 0
<COMMON> 41
0
1,513
<OTHER-SE> (35,767)
<TOTAL-LIABILITY-AND-EQUITY> 70,123
<SALES> 0
<TOTAL-REVENUES> 105,523
<CGS> 0
<TOTAL-COSTS> 165,982
<OTHER-EXPENSES> 878
<LOSS-PROVISION> 5,511
<INTEREST-EXPENSE> 7,558
<INCOME-PRETAX> (74,406)
<INCOME-TAX> 1,621
<INCOME-CONTINUING> (76,027)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (76,027)
<EPS-PRIMARY> (5.17)
<EPS-DILUTED> (5.17)
</TABLE>
