As filed with the Securities and Exchange Commission on October __, 1999
Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
GRANT GEOPHYSICAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 1382 76-0548468
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
OF INCORPORATION) CLASSIFICATION CODE
NUMBER)
16850 Park Row
Houston, Texas 77084
(281) 398-9503
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
Michael P. Keirnan
Chief Financial Officer
Grant Geophysical, Inc.
16850 Park Row
Houston, Texas 77084
(281) 398-9503
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copy to:
William B. Masters
Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P.
201 St. Charles Avenue
New Orleans, Louisiana 70170
Phone: (504) 582-8000
Fax: (504) 582-8012
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
--------------------------
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
[ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT TO OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF BE PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE FEE
<S> <C> <C> <C> <C>
Subscription Rights (1) N/A N/A None(2)
8% Convertible Preferred Stock 709,948 $ 100 $ 70,994,800 $ 19,737(3)
Common Stock (4) N/A N/A None(5)
</TABLE>
(1) Such indeterminate number of rights as may be issued to such
stockholders as specified in this Registration Statement.
(2) The subscription rights are being offered in the same registration
statement as the securities offered pursuant to the subscription
rights. Therefore, pursuant to Rule 457(g), no registration fee is
payable with respect to the rights.
(3) Registration fee calculated pursuant to Rule 457(i) based on sale
price of the 8% Convertible Preferred Stock.
(4) Pursuant to Rule 416, the number of shares to be registered hereunder
is subject to adjustment to prevent dilution resulting from stock
splits, stock dividends and similar transactions.
(5) Pursuant to Rule 457(i), no separate registration fee is payable with
respect to the Common Stock underlying the 8 % Convertible Preferred
Stock.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE
This registration statement contains two separate prospectuses. The
first prospectus relates to (a) the offer by Grant Geophysical, Inc. to
exchange $100,000,000 aggregate principal amount of its outstanding 9 3/4 %
Senior Notes due 2008 for new shares of its 8% Convertible Preferred Stock
with an aggregate liquidation value equal to 65% of the aggregate principal
amount of the notes tendered plus 100% of the accrued and unpaid interest
thereon through the date of the exchange and (b) the solicitation of
consents from the holders of the 9 3/4 % Senior Notes to modify certain
covenants in the indenture governing the notes. The second prospectus
relates to the subscription offering by Elliott Associates, L.P. to all
holders of Grant's common stock, except Elliott and Westgate International,
L.P., to purchase shares of Grant's 8% Convertible Preferred Stock owned by
Elliott. The exchange offer/consent solicitation prospectus and the
subscription offering prospectus will be substantially identical, except
for the front cover page, table of contents, summary of the offering, risk
factors relating to the particular offering, annex detailing the proposed
amendments to the indenture governing the notes and back cover page. The
prospectus for the exchange offer/consent solicitation follows immediately
after this Explanatory Note. Following the exchange offer/consent
solicitation prospectus are the alternative pages to be used in the
subscription offering prospectus. The alternative pages for the
subscription offering prospectus are each labeled "Alternative Subscription
Offering Pages."
<PAGE>
PROSPECTUS AND CONSENT SOLICITATION
GRANT GEOPHYSICAL, INC.
OFFER TO EXCHANGE AND CONSENT SOLICITATION
$100,000,000 IN PRINCIPAL AMOUNT OF
9 3/4 % SENIOR NOTES DUE 2008
FOR
SHARES OF 8% CONVERTIBLE PREFERRED STOCK
WITH A LIQUIDATION VALUE OF $65,000,000
--------------------------
THE EXCHANGE OFFER AND CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ________, 1999, UNLESS EXTENDED
--------------------------
TERMS OF THE EXCHANGE OFFER AND CONSENT SOLICITATION
* We are offering to exchange * Tenders of outstanding notes may
all of our outstanding 9 3/4 % be withdrawn at any time prior to
Senior Notes due 2008 for new the expiration of the exchange
shares of our preferred stock offer.
with an aggregate liquidation
value of $65,000,000. We will * There is currently no established
also issue to participants in trading market for either the
the exchange offer new shares preferred stock or our common
of our preferred stock with a stock into which the preferred
liquidation value equal to the stock is convertible. We do not
accrued and unpaid interest on expect that a trading market for
the notes tendered through the the preferred stock or our common
date of the exchange. stock will develop following the
completion of the exchange offer.
* At the same time as this
exchange offer, one of our * We are also seeking consents from
stockholders is conducting a holders of our outstanding notes
subscription offering of up to to make the following revisions to
23,386 shares of preferred the indenture governing the notes:
stock to holders of our common * amend certain definitions; and
stock. This exchange offer and * modify certain restrictive
the subscription offering are covenants.
not dependent on each other.
TERMS OF THE 8% CONVERTIBLE PREFERRED STOCK OFFERED IN EXCHANGE FOR THE NOTES
* DIVIDENDS
8% cumulative annual dividends, payable quarterly in arrears,
commencing on January 1, 2000, in cash or, at our option, in shares of
our preferred stock.
* LIQUIDATION PREFERENCE
$100 per share.
* VOTING RIGHTS
The shares of preferred stock will vote together, as a single class,
with shares of our common stock on an as-converted basis.
* OPTIONAL REDEMPTION
We may redeem shares of the preferred stock at any time at a
redemption price equal to the liquidation preference.
* CONVERSION PRICE
$3 per share, subject to adjustment (equal to an initial conversion
ratio of 33 1/3 shares of our common stock for each share of preferred
stock).
* CONVERSION RIGHT
The preferred stock is convertible into our common stock at any time
at the applicable conversion ratio.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE THE RISK FACTORS SECTION
BEGINNING ON PAGE 9.
--------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this prospectus is _________, 1999
<PAGE>
TABLE OF CONTENTS
Forward-Looking Statements ............................. i
Prospectus Summary ..................................... 1
Risk Factors ........................................... 9
The Exchange Offer and Consent Solicitation ............ 12
Use of Proceeds ........................................ 23
Capitalization ......................................... 24
Ratio of Earnings to Fixed Charges ..................... 25
Selected Financial Data ................................ 26
Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 28
Business ............................................... 37
Management ............................................. 43
Executive Compensation ................................. 45
Principal Stockholders ................................. 48
Certain Relationships and Related Party Transactions ... 49
Description of Capital Stock ........................... 51
Legal Matters .......................................... 54
Experts ................................................ 54
Available Information .................................. 55
Annex I - The Proposed Amendments to the Indenture
Governing the 9 3/4 % Senior Notes due 2008 ........ I-1
Index to Financial Statements .......................... F-1
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS AND
CONSENT SOLICITATION. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS MAY ONLY BE USED WHERE IT
IS LEGAL TO OFFER THESE SECURITIES.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are those that
predict or describe future events or trends and that do not relate solely
to historical matters. You can generally identify forward-looking
statements as statements containing the words "believe," "expect,"
"anticipate," "intend," "estimate," "assume" or similar expressions.
YOU SHOULD NOT RELY ON OUR FORWARD-LOOKING STATEMENTS BECAUSE THE
MATTERS THEY DESCRIBE ARE SUBJECT TO KNOWN (AND UNKNOWN) RISKS,
UNCERTAINTIES AND OTHER UNPREDICTABLE FACTORS, MANY OF WHICH ARE BEYOND OUR
CONTROL. Many relevant risks are described under the caption "Risk
Factors" in this prospectus, and you should consider the important factors
listed there as you read this prospectus.
Our actual results, performance or achievements may differ materially
from the anticipated results, performance or achievements that are
expressed or implied by our forward-looking statements. We assume no
responsibility to update our forward-looking statements.
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS TO
HELP YOU UNDERSTAND THE EXCHANGE OFFER, THE PREFERRED STOCK, AND THE
CONSENT SOLICITATION. YOU SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS TO
UNDERSTAND FULLY THE TERMS OF THE EXCHANGE OFFER, THE PREFERRED STOCK, AND
THE CONSENT SOLICITATION. THE PROSPECTUS ALSO CONTAINS CERTAIN TAX AND
OTHER CONSIDERATIONS THAT ARE IMPORTANT TO YOU IN MAKING YOUR INVESTMENT
DECISION. WE USE CERTAIN DEFINED TERMS IN THIS PROSPECTUS. "GRANT" REFERS
TO GRANT GEOPHYSICAL, INC. THE WORDS "COMPANY," "WE," "OUR" AND "OURS"
REFER TO THE COMBINED OPERATIONS OF GRANT AND ITS CONSOLIDATED
SUBSIDIARIES. YOU SHOULD PAY SPECIAL ATTENTION TO THE "RISK FACTORS"
SECTION BEGINNING ON PAGE 9 OF THIS PROSPECTUS.
THE COMPANY
We are a leading provider of seismic data acquisition in land and
transition zone environments in selected markets, including the United
States, Canada, Latin America and the Far East. Through our predecessors,
we have participated in the seismic data acquisition service business in
the United States and Latin America since the 1940s, the Far East since the
1960s and Canada since the 1970s. We have conducted operations in each of
these markets, as well as in the Middle East, in the past three years. Our
seismic data acquisition services are typically provided on an exclusive
contract basis to domestic and international oil and gas companies and
seismic data marketing companies. We also own interests in certain multi-
client seismic data covering selected areas in the United States and Canada
that are marketed broadly on a non-exclusive basis to oil and gas
companies.
We utilize sophisticated equipment to perform specialized 3D and 2D
seismic surveys. All of our seismic data acquisition crews are capable of
performing surveys in land environments, and two are equipped to perform
surveys in transition zone environments. Transition zone environments
include swamps, marshes and shallow water areas that require specialized
equipment and must be surveyed with minimal disruption to the natural
environment.
Our principal executive offices are located at 16850 Park Row,
Houston, Texas 77084 and our telephone number is 281-398-9503.
THE EXCHANGE OFFER, CONSENT SOLICITATION AND SUBSCRIPTION OFFERING
The industry downturn that began late in the third quarter of 1998
prompted us to undertake activities we believe will both preserve our
financial strength and position us to respond when market demand increases.
Those activities include a worldwide reduction in personnel, a
restructuring of our operations and marketing efforts and a restricted
capital expenditure program. Personnel reductions began in the fourth
quarter of 1998 and continued throughout the first nine months of 1999.
Overall, personnel were reduced from 863 full-time and 2,162 temporary at
September 30, 1998 to 573 full-time and 1,874 temporary personnel at
September 30, 1999. The corporate restructuring is the result of changing
market conditions and is designed to better utilize all our assets. The
restructuring of our operations and marketing efforts places a greater
emphasis on maximizing value from our multi-client data library in the
United States and Canada and refocuses the international marketing efforts
on our established foreign markets.
Our board of directors and management determined that it would be in
the best interest of the Company and our stockholders if we conducted an
offer to exchange $100,000,000 principal amount of our 9 3/4 % Senior Notes
due 2008 for shares of new preferred stock with an aggregate liquidation
value equal to 65% of the principal amount of notes tendered plus 100% of
the accrued interest on the notes tendered. In conjunction with the
exchange offer, we are seeking consents from the holders of the outstanding
notes to amend certain definitions and to modify certain restrictive
covenants in the indenture governing the outstanding notes. The consent of
holders of a majority of the outstanding principal amount of the notes held
by holders other than us, our subsidiaries and our affiliates are required
to approve the proposed amendments to the indenture. Elliott Associates,
L.P. and Westgate International, L.P., which hold a majority of the
aggregate principal amount of the notes, have advised us that they will
tender in the exchange offer all of the notes held by them only if the
proposed amendments to the indenture are approved. We will execute a
supplemental indenture with the trustee to cause the proposed amendments to
the indenture to take effect only if Elliott and Westgate tender all of
their notes in the exchange. Through the exchange offer, we will reduce
our outstanding indebtedness by converting a portion of our debt into
equity. The proposed amendments to the indenture for which we are
soliciting consents will allow us greater flexibility with respect to
future financings we may consider. We believe that the consummation of the
exchange offer and the consent solicitation will help us improve our
capital structure and preserve our financial strength.
Between August 13, 1999 and October 19, 1999, we issued a total of
90,000 shares of our 8% Exchangeable Preferred Stock to Elliott at a price
of $100 per share. The proceeds from the sale of the preferred stock totaled
an aggregate of $9,000,000, and were used to meet our cash needs. Elliott is
under no obligation to purchase any additional shares of 8% Exchangeable
Preferred Stock or otherwise provide additional financing for our operations.
The 8% Exchangeable Preferred Stock is exchangeable for any new securities
that we propose to sell or issue. Immediately prior to the consummation of
the exchange offer, we will issue to Elliott, in exchange for all of the 8%
Exchangeable Preferred Stock then held by it, shares of our 8% Convertible
Preferred Stock with an aggregate liquidation preference equal to the
liquidation preference of the 8% Exchangeable Preferred Stock plus accrued
and unpaid dividends thereon exchanged by Elliott.
Elliott has proposed a subscription offering, to be held at the same
time as the exchange offer, of 15.26% of the shares of 8% Convertible
Preferred Stock it will hold immediately prior to the consummation of the
exchange offer. In the subscription offering, Elliott will give our
stockholders, other than Elliott and Westgate International, L.P., the
opportunity to purchase from Elliott their pro rata share of the 8%
Convertible Preferred Stock that Elliott will receive in exchange for its
8% Exchangeable Preferred Stock on substantially the same terms upon which
Elliott originally acquired the 8% Exchangeable Preferred Stock. Elliott
chose to offer 15.26% of its shares of 8% Convertible Preferred Stock in
the subscription offering because that is the percentage of our common
stock held by our stockholders other than Elliott and Westgate. Elliott
has proposed the subscription offering to permit our minority stockholders
to participate, on a pro rata basis, with Elliott in its equity investment
in our 8% Convertible Preferred Stock on the same terms as Elliott's
investment in the 8% Exchangeable Preferred Stock.
<PAGE>
SUMMARY OF THE EXCHANGE OFFER
We are offering to exchange $100 million aggregate principal amount of
our outstanding 9 3/4 % Senior Notes due 2008 for shares of our 8%
Convertible Preferred Stock with an aggregate liquidation value equal to
65% of the aggregate principal amount of notes tendered plus 100% of the
accrued and unpaid interest on the notes tendered through the date of the
exchange.
The exchange offer.......... We are offering to exchange shares of new
preferred stock for the outstanding notes.
Outstanding notes may be exchanged only in
amounts which are equal to whole multiples of
$1,000. Notes representing $100,000,000
aggregate principal amount are presently
outstanding.
If you participate in the exchange offer, you
will receive shares of new preferred stock
with an aggregate liquidation value equal to
65% of the aggregate principal amount of the
notes you tendered plus 100% of the accrued
and unpaid interest through the date of the
exchange on the notes you tender.
If you tender your notes in the exchange
offer, you will be deemed to consent to the
proposed amendments to the indenture. See
"The Exchange Offer and Consent Solicitation
-- Terms of the Consent Solicitation."
Expiration of exchange offer The exchange offer will expire at 5:00 p.m.,
New York City time, November __, 1999, unless
we, in our sole discretion, choose to
terminate the exchange offer or extend the
expiration date.
Conditions to the exchange
offer...................... The exchange offer is subject to certain
conditions, which we may waive. See "The
Exchange Offer and Consent Solicitation --
Terms of the Exchange Offer -- Conditions of
the Exchange Offer." The exchange offer is
not conditioned upon any minimum aggregate
principal amount of senior notes being
tendered.
Procedures for tendering
notes...................... If you wish to participate in the exchange
offer, you must complete, sign and date the
letter of transmittal and fax, mail or
deliver the letter of transmittal, together
with the outstanding notes, to the exchange
agent. If your outstanding notes are held
through The Depository Trust Company ("DTC"),
you may deliver your outstanding notes by
book-entry transfer.
In the alternative, if your outstanding notes
are held through the DTC and you wish to
participate in an exchange offer, you may do
so instead through the automated tender offer
program of the DTC. If you tender under this
program, you will agree to be bound by the
letter of transmittal that we are providing
with this prospectus as though you had
actually signed the letter of transmittal.
Special procedures for
beneficial owners.......... If you beneficially own outstanding notes
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and you wish to tender your outstanding
notes in the exchange offer, you should
promptly contact the registered holder and
instruct it to tender the outstanding notes
on your behalf.
If you wish to tender your outstanding notes
on your own behalf, you must either arrange
to have your outstanding notes registered in
your name or obtain a properly completed bond
power from the registered hold prior to
completing and executing the letter of
transmittal and delivering your outstanding
notes. The transfer of registered ownership
may take considerable time.
Guaranteed delivery
procedures................. If you wish to tender your outstanding notes
and cannot comply with the requirement to
deliver the letter of transmittal and your
outstanding notes or use the automated tender
offer program of the DTC before the
expiration time, you must tender your
outstanding notes according to the guaranteed
delivery procedures described in the "The
Exchange Offer and Consent Solicitation --
Terms of the Exchange Offer --Guaranteed
Delivery Procedures."
Withdrawal rights........... You may withdraw the tender of your
outstanding notes at any time prior to 5:00
p.m., New York City time, on the expiration
date.
Acceptance of outstanding
notes and delivery of
preferred stock............ Subject to certain conditions as described
more fully under "The Exchange Offer and
Consent Solicitation -- Terms of the Exchange
Offer --Conditions to the Exchange Offer",
we will accept for exchange any and all
outstanding notes which are properly tendered
in the exchange offer prior to 5:00 p.m., New
York City time, on the expiration date. The
new preferred stock issued pursuant to the
exchange offer will be delivered to you
promptly following the expiration date.
Use of proceeds............. We will not receive any proceeds from the
issuance of new preferred stock pursuant to
the exchange offer.
Fees and expenses........... We will pay all expenses incident to the
exchange offer.
Concurrent offering......... One of our stockholders, Elliott Associates,
L.P., is concurrently conducting, by means of
a separate prospectus, a subscription
offering of 15.26% of the shares of 8%
Convertible Preferred Stock held by it
immediately prior to the consummation of the
exchange offer, to holders of our common
stock. The completion of the subscription
offering and this exchange offering are not
dependent on each other.
Exchange agent.............. LaSalle Bank National Association is serving
as the exchange agent in connection with the
exchange offer. The exchange agent can be
reached at 135 South LaSalle Street, Room
1960, Chicago, Illinois 60603, Attention:
Sarah H. Webb. For more information with
respect to the exchange offer, the telephone
number for the exchange agent is (312) 904-
2444 and the facsimile number for the
exchange agent is (312) 904-2236.
<PAGE>
SUMMARY OF THE CONSENT SOLICITATION
The consent solicitation.... In connection with the exchange offer, we are
soliciting consents from the holders of the
outstanding notes to approve proposed
amendments to the indenture governing the
notes.
Requisite consents.......... Consents of registered holders of a majority
of the outstanding principal amount of the
notes held by holders other than us, our
subsidiaries and our affiliates are required
to approve the proposed amendments to the
indenture. Elliott Associates, L.P. and
Westgate International, L.P., which hold a
majority of the aggregate principal amount of
the notes, have indicated that they will
tender in the exchange offer all of the notes
held by them only if the proposed amendments
are approved. We will execute a supplemental
indenture with the trustee to cause the
proposed amendments to the indenture to take
effect only if Elliott and Westgate tender
all of their notes in the exchange.
Proposed amendments......... The proposed amendments to the indenture
governing the outstanding notes will:
* amend certain definitions; and
* modify certain restrictive
covenants.
If the proposed amendments become effective,
they will apply to all outstanding notes
issued under the indenture governing the
notes. Each holder of outstanding notes not
tendered or accepted for exchange pursuant to
the exchange offer will be bound by the
proposed amendments regardless of whether the
holder consented to the proposed amendments.
Solicitation expiration
date; extensions;
amendments................. The consent solicitation will expire at 5:00
p.m., New York City time, on ________, 1999,
unless we, in our sole discretion, choose to
terminate it sooner or extend it. We also
reserve the right to delay accepting any
consents, to amend the terms of the consent
solicitation or to waive any defects or
irregularities in the furnishing of consents.
Withdrawal and revocation of
consents................... We intend to execute a supplemental indenture
to cause the proposed amendments to take
effect as soon as we receive sufficient
consents to approve the proposed amendments.
You will not be able to revoke or withdraw
your consent once we have received sufficient
consents to approve the proposed amendments,
and we notify the trustee of their receipt.
Consent solicitation agent.. Jefferies & Company, Inc. is serving as the
consent solicitation agent in connection with
the consent solicitation. The consent
solicitation agent can be reached at 909
Fannin Street, Suite 3100, Houston, Texas
77010, Attention: Joe Maly. For more
information with respect to the consent
solicitation, the telephone number for the
consent solicitation agent is (713) 651-3825
and the facsimile number for the consent
solicitation agent is (713) 308-4569.
<PAGE>
SUMMARY OF TERMS OF NEW PREFERRED STOCK
Securities offered.......... Shares of our 8% Convertible Preferred Stock.
Dividends................... Dividends on the preferred stock are payable
in cash or, at our option, in additional
shares of preferred stock, on the first
business day of each January, April, July and
October beginning January 1, 2000. Dividends
on the preferred stock will accrue at the
rate of 8% per annum of the liquidation
preference and be cumulative from the date on
which the preferred stock was originally
issued. We intend to pay dividends on the
preferred stock in additional shares of
preferred stock until further notice.
Liquidation preference...... $100 per share, plus accrued and unpaid
dividends.
Voting rights............... The shares of preferred stock will vote
together, as a single class, with shares of
our common stock on an as-converted basis.
Optional redemption......... We may redeem any of the preferred stock at
any time at a redemption price per share
equal to the liquidation preference,
including any accumulated and unpaid
dividends. Our ability to redeem the
preferred stock is subject to restrictive
covenants governing our indebtedness,
including the restricted payments test in the
indenture governing the notes.
Conversion rights........... Each share of preferred stock may be
converted at any time at the option of the
holder into that number of shares of our
common stock as is equal to the liquidation
preference of that share, which includes
accrued and unpaid dividends, divided by an
initial conversion price of $3. The
conversion price is subject to adjustment
upon the occurrence of specified events. As
a result, each share of preferred stock will
initially be convertible into 33 1/3 shares
of our common stock. See "Description of
Capital Stock -- 8% Convertible Preferred
Stock--Conversion Rights."
Ranking..................... The preferred stock will rank:
* senior to our common stock and all
of our other capital stock unless the
terms of the other capital stock
expressly provide that it ranks equally
with the preferred stock; and
* equally with any of our capital
stock, the terms of which expressly
provide that it will rank equally with
the preferred stock. After the
consummation of the exchange offer, all
of our other outstanding capital stock
would rank junior to the preferred
stock.
RISK FACTORS
See "Risk Factors" for a discussion of factors you should carefully
consider before deciding whether to exchange your notes in the exchange
offer.
<PAGE>
SUMMARY SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following historical data, insofar as it relates to the year ended
December 31, 1998, has been derived from Grant's audited consolidated financial
statements included in this prospectus. The historical data as of and for the
six months ended June 30, 1999 has been derived from unaudited consolidated
financial statements also appearing herein and which, in the opinion of
management, includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results of the unaudited
interim periods.
The pro forma statement of operations data reflect the issuance of our
8% Exchangeable Preferred Stock to Elliott and, immediately prior to the
completion of the subscription offering, the exchange of such shares,
together with accrued and unpaid dividends thereon, for shares of 8%
Convertible Preferred Stock, and the completion of the exchange offer
assuming notes representing 100% of the aggregate principal amount
outstanding are exchanged for shares of new preferred stock, as if the
transactions were completed as of January 1, 1998. The pro forma balance
sheet data is as adjusted to give effect to the issuance of our shares
of 8% Exchangeable Preferred Stock to Elliott and, immediately prior to
the completion of the subscription offering, the exchange of such shares,
together with accrued and unpaid dividends thereon, for shares of 8%
Convertible Preferred Stock, and as further adjusted to give effect to the
completion of the exchange offer assuming notes representing 100% of the
aggregate principal amount outstanding are exchanged for shares of new
preferred stock, as if the transactions were completed as of June 30, 1999.
The information should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and with
our consolidated financial statements and related notes included in this
prospectus. See also "Capitalization" and "Unaudited Pro Forma Consolidated
Statements of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 SIX MONTHS ENDED JUNE 30, 1999
-------------------------------- ----------------------------------
Historical Pro Forma Historical Pro Forma
-------------- ------------- -------------- ------------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
Revenues $ 175,512 $ 175,512 $ 33,208 $ 33,208
Operating income (loss) 6,346 6,346 (9,968) (9,968)
Income (loss) from continuing operations (7,698) 1,423 (15,269) (10,120)
Net loss applicable to common stock (8,138) (5,248) (15,269) (13,236)
INCOME (LOSS) PER COMMON SHARE -
BASIC AND DILUTED(1):
Continuing operations $ (0.54) $ 0.10 $ (1.06) $ (0.70)
Dividend requirement on pay-in-
kind preferred stock (0.03) (0.47) --- (0.22)
--------- --------- --------- ---------
Net loss per common share $ (0.57) $ (0.37) $ (1.06) $ (0.92)
========= ========= ========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic and diluted 14,257 14,257 14,426 14,426
CASH FLOW OTHER DATA:
Cash provided by operating activities $ 15,815 $ 1,212
Cash used in investing activities (31,305) (14,507)
Cash provided by financing activities 16,821 7,143
Capital expenditures 23,866 3,622
Ratio of earnings to fixed charges and
preferred dividends(2) 0.64 X 0.85 X(3) --- X(4) --- X(3)(4)
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1999
------------------------------------------------------
ACTUAL Pro Forma
-------------------- ------------------------------
As Further
As Adjusted Adjusted
-------------- -------------
(unaudited)
(in thousands)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $ 2,511 $ 11,511 $ 11,061
Total assets 149,368 158,368 154,295
Notes payable, current portion of long-
term debt and capital lease obligations 6,578 6,578 6,578
Long-term debt, subordinated debt
and capital lease obligations
excluding current portion 114,219 114,219 14,897
Total stockholders' equity 7,454 16,454 111,253
</TABLE>
_________________
(1) The pro forma earnings per share data assumes that notes representing
100% of the aggregate principal amount outstanding are exchanged for
shares of new preferred stock.
(2) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" means income before income taxes and minority interest
plus fixed charges less preferred stock dividends. Fixed charges
include interest on indebtedness, amortization of debt issue
costs and discount on senior notes, preferred stock dividends and
that portion of lease expense (one-third) that is deemed to be
representative of an interest factor. See also "Ratio of Earnings to
Fixed Charges and Preferred Dividends."
(3) The pro forma ratio of earnings to fixed charges and preferred
dividends assumes that notes representing 100% of the aggregate
principal amount outstanding are exchanged for shares of new preferred
stock.
(4) Historical and pro forma earnings were inadequate to cover fixed charges
and preferred dividends by $14.8 million and $12.8 million, respectively.
<PAGE>
RISK FACTORS
WE URGE YOU TO CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, AS WELL
AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE MAKING ANY
INVESTMENT DECISIONS REGARDING THE EXCHANGE OFFER OR THE PREFERRED STOCK.
THE RISKS DESCRIBED BELOW ARE NOT THE ONLY ONES FACING OUR COMPANY.
ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM
IMMATERIAL MAY ALSO IMPACT OUR BUSINESS OPERATIONS.
WE ARE DEPENDENT ON THE VOLATILE OIL AND GAS INDUSTRY
Our business depends in large part on the conditions of the oil and
gas industry, and specifically on the capital expenditures of our
customers. As a result of the decline in oil and gas prices beginning late
in the third quarter of 1998, the level of overall oil and gas industry
activity has declined substantially from levels experienced in recent
years. Decreases in our customers' capital spending in connection with
industry downturns have had and will likely continue to have a significant
adverse effect upon the demand for our services and the results of our
operations and cash flows.
WE ARE HIGHLY LEVERAGED AND HAVE SIGNIFICANT DEBT SERVICE REQUIREMENTS
Our balance sheet is highly leveraged given our present operating
level. If the exchange offer is not consummated, we will have significant
interest expense and principal repayment obligations under the notes and
our other debt. Our ability to meet our debt service requirements and
comply with the covenants in our various debt agreements, including the
indenture governing the notes, will depend upon our future performance,
which is subject to the volatile nature of the seismic business and
competitive, economic, financial and other factors that are beyond our
control. If we are unable to generate sufficient cash flow from operations
or obtain other financing in the future to service our debt, we may be
required to sell assets, reduce capital expenditures or refinance all or a
portion of our existing debt. There can be no assurance that any such
financing can be obtained, particularly in view of the restrictions on our
ability to incur additional debt under the indenture governing the notes,
and the fact that substantially all of our assets are pledged to secure our
term loan and working capital facility. As a result, the value of the
notes could be significantly impaired. If the exchange offer and consent
solicitation is not approved, there can be no assurance that Elliott or
Westgate will provide additional financing or otherwise guarantee or
otherwise provide credit support to enable us to obtain additional
financing.
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY INTENSE PRICE COMPETITION IN A
SLACK MARKET
Competition among seismic contractors historically is and will
continue to be intense. Competitive factors have in recent years included
price, crew experience, equipment availability, technological expertise and
reputation for quality and dependability. Certain of our competitors
operate more data acquisition crews than we do and have substantially
greater financial and other resources. These larger and better financed
operators could enjoy an advantage over us if the competitive environment
for contract awards shifts to one characterized principally by intense
price competition.
OUR MULTI-CLIENT DATA LIBRARY COULD BECOME IMPAIRED DUE TO WEAK DEMAND OR
TECHNOLOGICAL OBSOLESCENCE
We have invested significant amounts in acquiring and processing
multi-client data. There is no assurance that we will be able to recover
all of the costs of these surveys in the future. Technological, regulatory
or other industry or general economic developments could render all or
portions of our library of multi-client data obsolete or otherwise impair
its value.
WE HAVE HIGH LEVELS OF FIXED COSTS
Our business has high fixed costs, and downtime or low productivity
due to reduced demand, weather interruptions, equipment failures or other
causes can result in significant operating losses.
TECHNOLOGICAL ADVANCES MAY ADVERSELY AFFECT OUR COMPETITIVENESS
Seismic data acquisition and processing is a capital intensive
business. The development of seismic data acquisition and processing
equipment has been characterized by rapid technological advancements in
recent years and we expect this trend to continue. Manufacturers of
seismic equipment may develop new systems that have competitive advantages
over systems now in use that could render our current equipment obsolete or
require us to make significant unplanned capital expenditures to maintain
its competitive position. Under such circumstances, there can be no
assurance that we would be able to obtain necessary financing on favorable
terms.
WE ARE DEPENDENT UPON SIGNIFICANT CUSTOMERS
We derive a significant amount of our revenue from a small number of
major and independent oil and gas companies. The inability of us to
continue to perform services for a number of our large existing customers,
if not offset by sales to new or other existing customers, could have a
material adverse effect on our business and operations.
WE COMPETE IN A HIGHLY COMPETITIVE INDUSTRY
We compete in a highly competitive area of the oilfield services
industry. Our services are sold in a highly competitive market, and our
revenues and earnings may be affected by the following factors:
* fluctuations in the level of activity and major markets;
* changes in competitive prices;
* general economic conditions; and
* governmental regulation.
We compete with the oil and gas industry's largest seismic service
providers. Our management believes that the principal competitive factors
in the market areas served by us are product and service quality and
availability, technical proficiency and price.
OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO SIGNIFICANT RISKS
Our international operations are subject to risks inherent in doing
business in foreign counties. These risks include, but are not limited to:
* political changes;
* expropriation;
* currency restrictions and changes in currency exchange rates;
* taxes; and
* boycotts and other civil disturbances.
Although it is impossible to predict the likelihood of such occurrences or
their effect on our operations, our management believes that these risks
are acceptable. However, the occurrence of any one of these events could
have a material adverse effect on our operations.
WE ARE DEPENDENT ON KEY PERSONNEL
We depend on the continued services of our executive officers and
other key management personnel. If we would lose any of these officers or
other management personnel, this could adversely affect our operations.
THERE IS NO ESTABLISHED MARKET FOR OUR NEW PREFERRED STOCK OR OUR COMMON
STOCK
Although the new preferred stock may be resold or otherwise
transferred by holders who are not affiliates of our company without
compliance with the registration requirements under the Securities Act,
they will be new securities for which there is currently no established
trading market. Similarly, there is currently no established trading
market for the common stock into which the preferred stock is convertible.
We do not intend to apply for listing of the new preferred stock or our
common stock on a national securities exchange or for quotation on an
automated dealer quotation system. The liquidity of any market for the new
preferred stock or our common stock will depend upon the number of holders
of the stock, the interest of securities dealers in making a market in the
stock and other factors. Accordingly, there can be no assurance as to the
development or liquidity of any market for the stock. If an active trading
market for the new preferred stock or our common stock does not develop,
the market price and liquidity of the stock may be adversely affected. If
shares of the new preferred stock or our common stock are traded, they may
trade at a discount from their current value, depending upon the market for
similar securities, our performance and other factors.
WE DO NOT PLAN TO PAY DIVIDENDS ON OUR COMMON STOCK
Unlike the new preferred stock, the common stock into which the new
preferred stock is convertible does not give the holder a right to receive
dividends. We have paid no dividends on our common stock and we cannot
assure you that we will achieve sufficient earnings to pay cash dividends
on our common stock in the near future. Further, we intend to retain
earnings to fund our operations. Additionally, the indenture governing
the notes and our credit facility restrict our ability to pay dividends and
make other distributions. Therefore, we do not anticipate paying any cash
dividends on our common stock for the foreseeable future. See "Dividends."
OUR ABILITY TO PAY THE LIQUIDATION PREFERENCE AND DIVIDENDS ON THE
PREFERRED STOCK DEPENDS ON OUR FINANCIAL CONDITION AT THAT TIME
Our obligations to the holders of our debt and other creditors take
priority over our obligations to the holders of the preferred stock. The
indenture governing the notes and our credit facility restrict our ability
to pay dividends and make other distributions. Additionally, under
Delaware law we may not redeem the preferred stock for its stated
liquidation preference if at that time our remaining assets are not
sufficient to pay our outstanding obligations or if that redemption would
impair our capital. See "Description of Capital Stock -- Convertible
Preferred Stock."
PREFERRED STOCK COULD RESULT IN POTENTIAL DILUTION AND IMPAIR THE PRICE OF
OUR COMMON STOCK
To the extent that the preferred stock is converted into our common
stock, our existing common stockholders will experience dilution in their
percentage ownership of Grant. So long as the preferred stock is
exercisable, the holders of preferred stock will have the opportunity to
profit from a rise in the price of our common stock. The additional shares
of common stock available for sale may have a negative impact on the price
and liquidity of the common stock that is currently outstanding.
EFFECTS OF THE EXCHANGE OFFER AND CONSENT SOLICITATION ON NON-EXCHANGED
NOTES
Concurrently with the exchange offer, we are soliciting consents from
holders of outstanding notes to approved proposed amendments to the
indenture governing the notes. These amendments would modify some of the
covenants that restrict our activities and those of our subsidiaries. If
the proposed amendments to the indenture become effective, they will apply
to all notes. Each holder of notes not tendered or accepted for exchange
pursuant to the exchange offer will be bound by the amendments regardless
of whether that holder consented to them.
The tender of notes under the exchange offer will reduce the aggregate
principal amount of the notes traded or held in the market place. As a
result, it may become more difficult for holders to sell their notes. In
addition, the reduced liquidity of the notes outstanding after the exchange
offer could have the effect of reducing the market price at which the notes
may be sold.
<PAGE>
THE EXCHANGE OFFER AND CONSENT SOLICITATION
CONCURRENT SUBSCRIPTION OFFERING
Concurrently with this exchange offer, one of our stockholders, Elliott
Associates, L.P., is conducting an offering pursuant to a separate
prospectus of 15.26% of the shares of 8% Convertible Preferred Stock held
by it immediately prior to the consummation of the exchange offer, to
holders of our common stock, other than Elliott and Westgate International,
L.P. We will not receive any proceeds from the subscription offering, nor
can we assure you that Elliott will complete the concurrent subscription
offering. This exchange offer and the concurrent subscription offering are
not conditioned on each other. This prospectus relates only to the
exchange offer and not to the subscription offering.
TERMS OF THE EXCHANGE OFFER
GENERAL
Upon the terms and subject to the conditions described in this
prospectus and in the letter of transmittal, we will accept for exchange
any and all outstanding notes properly tendered and not withdrawn prior to
5:00 p.m., New York City time, on the expiration date. We will issue
shares of new preferred stock with an aggregate liquidation value equal to
65% of the aggregate principal amount of notes tendered plus 100% of the
accrued and unpaid interest through the date of exchange on the notes
tendered. Outstanding notes may be tendered only in integral multiples of
$1,000. We are not conditioning the exchange offer upon any minimum
aggregate principal amount of outstanding notes being tendered for
exchange.
As of the date of this prospectus, $100 million aggregate principal
amount of our 9 3/4 % Senior Notes due 2008 are outstanding. This
prospectus and the letter of transmittal are being sent to all registered
holders of the outstanding notes. There will be no fixed record date for
determining registered holders of outstanding notes entitled to participate
in the exchange offer.
We intend to conduct the exchange offer according to the applicable
requirements of the Securities Act of 1933 and the Securities Exchange Act
of 1934 and the rules and regulations of the Securities and Exchange
Commission. Outstanding notes that are not tendered for exchange in the
exchange offer will remain outstanding and continue to accrue interest and
will be entitled to the rights and benefits the holders have under the
indenture governing the notes, as the indenture may be amended in
connection with the consent solicitation.
We will be deemed to have accepted for exchange properly tendered
outstanding notes when we have given oral or written notice of such
acceptance to the exchange agent. The exchange agent will act as agent for
the tendering holders for the purposes of receiving the new preferred
stock. We will return any outstanding notes that we do not accept for
exchange for any reason without expense to the tendering holder as promptly
as practicable after the expiration or termination of the exchange offer.
If you tender outstanding notes in the exchange offer, you will not be
required to pay brokerage commissions or fees or, subject to the
instructions in the letter of transmittal, transfer taxes with respect to
the exchange of your outstanding notes. We will pay all charges and
expenses, other than some applicable taxes as described below, in
connection with the exchange offer. It is important for holders to read
the section labeled "--Fees and Expenses" for more details regarding fees
and expenses incurred in the exchange offer.
If you tender notes in the exchange offer, your tender will constitute
your consent to the proposed amendments to the indenture governing the
notes, as described under "--Terms of the Consent Solicitation" below.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
Unless sooner terminated, the exchange offer will expire at 5:00 p.m.,
New York City time, on _____, 1999, unless we, in our sole discretion,
extend the exchange offer, in which case the expiration date will be the
latest date and time to which the exchange offer is extended. Although we
do not intend to extend the exchange offer at this time, we expressly
reserve the right to extend the exchange offer at any time by giving oral
or written notice to the exchange agent. We will also make a public
announcement of an extension no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled expiration date.
During any extension of the exchange offer, all outstanding notes
previously tendered pursuant to the exchange offer and not withdrawn will
remain subject to the exchange offer.
If any of the conditions described below under "--Conditions to the
Exchange Offer" have not been satisfied, we reserve the right, in our sole
discretion to either:
* delay accepting for exchange any outstanding notes;
* extend the exchange offer; or
* terminate the exchange offer
by giving oral or written notice of such delay, extension or termination to
the exchange agent. We also reserve the right to amend the terms of the
exchange offer in any manner.
We will, as promptly as practicable, notify you orally or in writing
if there is any delay in acceptance, extension, termination or amendment of
the exchange offer. If we amend the exchange offer in any manner that we
determine to constitute a material change, we will promptly disclose the
amendment by means of a prospectus supplement that we will distribute to
you and, if required, a post effective amendment to the registration
statement of which this prospectus forms a part. Depending upon the
significance of the amendment to the exchange offer and the manner of
disclosure to the registered holders, we will extend the exchange offer for
a period of time if the exchange offer would otherwise expire during that
period.
CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, if in our reasonable
judgment the exchange offer, or the making of any exchange by a holder of
outstanding notes, would violate applicable law or any applicable
interpretation of the staff of the Securities and Exchange Commission:
* we will not be required to accept for exchange, or to
issue shares of new preferred stock in exchange for, any
outstanding notes; and
* we may terminate the exchange offer as provided in this
prospectus before accepting any outstanding notes for
exchange.
We expressly reserve the right to amend or terminate the exchange
offer, and to reject for exchange any outstanding notes not previously
accepted for exchange, upon the occurrence of any of the conditions to the
exchange specified above. We will give oral or written notice of any
extension, amendment, nonacceptance or termination to the exchange agent
and the holders of the outstanding notes as promptly as practicable.
These conditions are for our sole benefit, and we may assert them or
waive them in whole or in part at any time or at various times in our sole
discretion. If we fail at any time to exercise any of these rights, this
failure will not mean that we have waived our rights. Each right will be
deemed an ongoing right that we may assert at any time or at various times.
In addition, we will not accept for exchange any outstanding notes tendered
and will not issue shares of new preferred stock in exchange for any
outstanding notes if, at that time, any stop order has been threatened or
is in effect with respect to the registration statement of which this
prospectus is a part.
PROCEDURES FOR TENDERING
Only a registered holder of outstanding notes may tender their
outstanding notes in the exchange offer. To tender in the exchange offer,
a holder must either (1) comply with the procedures for manual tender or
(2) comply with the automated tender offer program procedures of DTC
described below:
To complete a manual tender you must:
* complete, sign and date the letter of transmittal or a
facsimile of the letter of transmittal;
* have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires;
* mail, fax or deliver the letter of transmittal to the
exchange agent before the expiration date; and
* deliver the outstanding notes to be tendered to the
exchange agent with the letter of transmittal prior to the
expiration date or make book-entry delivery of the outstanding
notes to the exchange agent, in which case the exchange agent
must receive, before the expiration date, a timely
confirmation of book-entry transfer of the outstanding notes
into the exchange agent's account at DTC according to the
procedure for book-entry transfer described below.
To be tendered effectively, the exchange agent must receive any
physical delivery of the letter of transmittal and other required documents
at its address provided below under "-- The Exchange Agent" before the
expiration date. The tender by a holder that is not withdrawn before the
expiration date will constitute an agreement between the holder and us
according to the terms and subject to the conditions described in this
prospectus and in the letter of transmittal.
If you wish to tender your outstanding notes and cannot comply with
the requirement to deliver the letter of transmittal and your outstanding
notes or use the automated tender offer program of the DTC before the
expiration date, you must tender your outstanding notes according to the
guaranteed delivery procedures described below.
The method of delivery of the outstanding notes, the letter of
transmittal and all other required documents to the exchange agent is at
the holder's election and risk. Except as provided in the letter of
transmittal, delivery of these items will be deemed made only when actually
received or confirmed by the exchange agent. Rather than mail these items,
we recommend that holders use an overnight or hand delivery service. In
all cases, holders should allow sufficient time to ensure delivery to the
exchange agent before the expiration date. Holders should not send the
letter of transmittal or outstanding notes to us. Holders may request
their brokers-dealers, commercial banks, trust companies or other nominees
to effect the above transactions on their behalf.
TENDERING THROUGH DTC'S AUTOMATED TENDER OFFER PROGRAM
The exchange agent and DTC have confirmed that any financial
institution that is a participant in DTC's system may use DTC's automated
tender offer program to tender outstanding notes. Instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, participants in the program may transmit their acceptance
of the exchange offer electronically. They may do so by causing DTC to
transfer the outstanding notes to the exchange agent according to its
procedures for transfer. DTC will then send an agent's message to the
exchange agent.
The term "agent's message" means a message transmitted by DTC,
received by the exchange agent and forming part of the book-entry
confirmation, stating that:
* DTC has received an express acknowledgment from a
participant in its automated tender offer program that is
tendering outstanding notes which are the subject of book-
entry confirmation;
* the participant has received and agrees to be bound by
the terms of the letter of transmittal or, in the case of an
agent's message relating to guaranteed delivery, that the
participant has received and agrees to be bound by the notice
of guaranteed delivery; and
* the agreement may be enforced against the participant.
HOW TO TENDER IF YOU ARE A BENEFICIAL OWNER
If you beneficially own outstanding notes that are registered in the
name of a broker-dealer, commercial bank, trust company or other nominee
and you wish to tender those notes, you should contact the registered
holder promptly and instruct it to tender on your behalf. If you are a
beneficial owner and wish to tender on your own behalf, you must, before
completing and executing the letter of transmittal and delivering your
outstanding notes, either:
* make appropriate arrangements to register ownership of
the outstanding notes in your name; or
* obtain a properly completed bond power from the
registered holder of your outstanding notes.
The transfer of registered ownership may take considerable time and may not
be completed before the expiration date.
SIGNATURES AND SIGNATURE GUARANTEES
You do not need to have your signature guaranteed if the tendered
notes are registered in the name of the signer of the letter of transmittal
and the shares of new preferred stock to be issued in the exchange are to
be issued to the registered holder. In any other case, you must endorse
the outstanding notes to be tendered or accompany them with written
instruments of transfer in form satisfactory to us and duly executed by the
registered holder. In addition, the signature on the endorsement or
instrument of transfer must be guaranteed by an eligible guarantor
institution that is a member of one of the following recognized signature
guarantee programs:
* The Securities Transfer Agents Medallion Program;
* The New York Stock Exchange Medallion Signature Program;
* The Stock Exchange Medallion Program; or
* an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934.
If the new preferred stock or the outstanding notes not exchanged are to be
delivered to an address other than that of the registered holder appearing
on the register for the outstanding notes the signature on the letter of
transmittal must be guaranteed by an eligible guarantor institution.
DETERMINATIONS UNDER THE EXCHANGE OFFER
We will determine in our sole discretion all questions as to the
validity, form, eligibility, time of receipt, acceptance of tendered
outstanding notes and withdrawal of tendered outstanding notes. Our
determination will be final and binding. We reserve the absolute right to
reject any and all outstanding notes not properly tendered or any
outstanding notes our acceptance of which would, in our opinion or the
opinion of our counsel, be unlawful. We also reserve the absolute right to
waive any defects, irregularities or conditions of tender as to particular
outstanding notes. Our interpretation of the terms and conditions of an
exchange offer, including the instructions in the letter of transmittal,
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of outstanding notes must be
cured within the time we will determine. Neither we, the exchange agent
nor any other person will be under any duty to give notification of defects
or irregularities in tenders of outstanding notes, or incur any liability
for failure to give any such notification. Tenders of outstanding notes
will not be deemed made until any defects or irregularities have been cured
or waived. Any outstanding notes received by the exchange agent that are
not properly tendered and the defects or irregularities of which have not
been cured or waived will be returned to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
ISSUANCE OF NEW PREFERRED STOCK
In all cases, we will issue shares of new preferred stock in
certificated form for the outstanding notes that we have accepted for
exchange under the exchange offer only after the exchange agent timely
receives both:
* the outstanding notes or a timely book-entry confirmation
of the outstanding notes into the exchange agent's appropriate
account at DTC; and
* a properly completed and duly executed letter of
transmittal and all other required documents or a properly
transmitted agent's message.
The new preferred stock issued pursuant to the exchange offer will be
delivered to you promptly following the expiration of the exchange offer.
RETURN OF OUTSTANDING NOTES NOT ACCEPTED OR EXCHANGED
If we do not accept any tendered outstanding notes for exchange for
any reason described in the terms and conditions of the exchange offer or
if outstanding notes are submitted for a greater principal amount than the
holder desires to exchange, the unaccepted or nonexchanged outstanding
notes will be returned without expense to their tendering holder. In the
case of outstanding notes tendered by book-entry transfer into the exchange
agent's account at DTC according to the procedures described below, the
outstanding notes not exchanged will be credited to an account maintained
with DTC. These actions will occur as promptly as practicable after the
expiration or termination of the exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with
respect to the outstanding notes at DTC for purposes of the exchange
promptly after the date of this prospectus. Any financial institution
participating in DTC's system may make book-entry delivery of outstanding
notes by causing DTC to transfer the outstanding notes into the exchange
agent's account at DTC according to DTC's procedures for transfer.
Holders whose outstanding notes are not immediately available or who
are unable to deliver confirmation of the book-entry tender of their
outstanding notes into the exchange agent's account at DTC or all other
documents required by the letter of transmittal to the exchange agent on or
before the expiration date must tender their outstanding notes according to
the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If you wish to tender your outstanding notes but your outstanding
notes are not immediately available or you cannot deliver your outstanding
notes, the letter of transmittal or any other required documents to the
exchange agent or comply with the applicable procedures under DTC's
automated tender offer program before the expiration date, you may tender
if, before the expiration date, the exchange agent receives from an
eligible guarantor financial institution, either a properly completed and
duly executed notice of guaranteed delivery or a properly transmitted
agent's message and notice of guaranteed delivery:
(1) stating your name and address;
(2) stating the registration number(s) of your outstanding notes
and the total principal amount of outstanding notes tendered;
(3) stating that the tender is being made; and
(4) guaranteeing that, within five business days after the
expiration date, the letter of transmittal or an agent's
message in lieu thereof, together with the outstanding notes
or a book-entry confirmation and any other documents required
by the letter of transmittal, will be deposited by the
eligible guarantor institution with the exchange agent.
Unless the exchange agent receives the properly completed and executed
letter of transmittal, as well as all tendered outstanding notes in proper
form for transfer or a book-entry confirmation and all other documents
required by the letter of transmittal, within five business days after the
expiration date, we may, at our option, reject the tender.
Upon request to the exchange agent, a notice of guaranteed delivery
will be sent to holders who wish to tender their outstanding notes
according to the guaranteed delivery procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw your
tender at any time before 5:00 p.m., New York City time, on the expiration
date. For a withdrawal to be effective:
* the exchange agent must receive a written notice of
withdrawal at the address listed below under "--Exchange Agent";
or
* you must comply with the appropriate procedures of
DTC's automated tender offer program system.
Any notice of withdrawal must:
* specify the name of the person who tendered the
outstanding notes to be withdrawn as depositor;
* identify the outstanding notes to be withdrawn,
including the registration numbers of the outstanding notes
and the total principal amount of the outstanding notes;
* contain a statement that the holder is withdrawing its
election to have such outstanding notes exchanged;
* contain the signature of the depositor in the same
manner as the original signature on the letter of
transmittal used to deposit those outstanding notes or be
accompanied by documents of transfer sufficient to permit
the trustee for the outstanding notes to register the
transfer into the name of the depositor withdrawing the
tender; and
* specify the name in which the outstanding notes are to
be registered, if different from that of the depositor.
If outstanding notes have been tendered under the procedure for book-
entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn
outstanding notes and otherwise comply with the procedures of DTC.
Under the terms of the exchange offer, if you tender your notes for
exchange, you will be deemed to have consented to the proposed amendments
to the indenture governing the notes. However, a withdrawal of your notes
will not constitute an automatic revocation or withdrawal of your consent
to the proposed amendment. Additionally, as described below under "--
Terms of the Consent Solicitation -- Revocation or Withdrawal of Consents,"
you will not be able to revoke or withdraw your consent once we have
received sufficient consents to approve the proposed amendments to the
indenture.
We will determine all questions as to the validity, form, eligibility
and time of receipt of notice of withdrawal. Our determination will be
final and binding on all parties. We will deem any outstanding notes so
withdrawn not to have been validly tendered for exchange for purposes of
the exchange offer.
Any outstanding notes that have been tendered for exchange but are not
exchanged for any reason will be returned to their holder without cost to
the holder. In the case of outstanding notes tendered by book-entry
transfer into the exchange agent's account at DTC according to the
procedures described above, the outstanding notes will be credited to an
account maintained with DTC for the outstanding notes. This return or
crediting will take place as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Holders may re-
tender properly withdrawn outstanding notes by following one of the
procedures described under the caption "--Procedures for Tendering" above
at any time on or before the expiration date.
EXCHANGE AGENT
We have appointed LaSalle Bank National Association as exchange agent
for the exchange offer. Questions and requests for assistance, requests
for additional copies of this prospectus or of the letter of transmittal
and requests for notices of guaranteed delivery should be directed to the
exchange agent addressed as follows:
LaSalle Bank National Association
Corporate Trust Administration, Room 1960
135 South LaSalle Street
Chicago, IL 60603
Attn: Sarah H. Webb
VIA FACSIMILE: CONFIRM BY TELEPHONE:
(312) 904-2236 (312) 904-2444
FEES AND EXPENSES
We will bear all fees and the expenses of soliciting tenders of the
outstanding notes. The principal solicitation is being made by mail.
However, we may make additional solicitation by telephone or in person by
our officers and regular employees and the officers and regular employees
of our affiliates. No additional compensation will be paid to any such
officers and employees who engage in soliciting tenders. We will also pay
the cash expenses to be incurred in connection with the exchange,
including:
* SEC registration fees;
* fees and expenses of the exchange agent and trustee;
* accounting and legal fees and printing costs; and
* related fees and expenses.
We have not retained any dealer-manager or other soliciting agent in
connection with the exchange offer and will not make any payments to
brokers, dealers or others soliciting acceptances of the exchange offer.
We will, however, pay the exchange agent reasonable and customary fees for
its services and reimburse it for its related reasonable out-of-pocket
expenses. We may also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this prospectus, the letter of transmittal and related
documents to the beneficial owners of the outstanding notes and in handling
or forwarding the tendered outstanding notes for exchange.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes under the exchange offer. The tendering holder, however,
will be required to pay any transfer taxes, whether imposed on the
registered holder or any other person, if:
* new preferred stock or outstanding notes for principal
amounts not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person
other than the registered holder of the outstanding notes
tendered;
* tendered outstanding notes are registered in the name of
any person other than the person signing the letter of
transmittal; or
* a transfer tax is imposed for any reason other than the
exchange of the outstanding notes under the exchange offer.
If satisfactory evidence of payment of any applicable transfer taxes or an
exemption from payment of any applicable taxes is not submitted with the
letter of transmittal, the amount of the transfer taxes will be billed
directly to such tendering holder.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion sets forth the opinion of Jones, Walker,
Waechter, Poitevent, Carrere & Denegre, L.L.P., counsel to Grant,
regarding the material United States federal income tax consequences to the
holders of the notes resulting from the exchange. The discussion assumes
that the notes are treated as debt and not equity for United States federal
income tax purposes and that the fair market value of each share of
preferred stock is its $100 liquidation preference on the date of its
issuance. This discussion does not purport to deal with all aspects of
United States federal income taxation that may be relevant to you if you
are a holder who may be subject to special federal income tax laws, such as
a dealer in securities, a financial institutions, a life insurance company,
an individual who is not a citizen or resident of the United States or a
corporation, partnership or other entity that is not organized under the
laws of the United States or any of its political subdivision, or a person
that hold the notes as part of a hedge, conversion transaction, straddle or
other risk reduction transaction. In addition, the following discussion
does not consider the effect of any applicable foreign, state or local tax
laws.
The discussion below is based upon the current provisions of the
Internal Revenue Code, existing and proposed treasury regulations
promulgated under the Internal Revenue Code, rulings of the Internal
Revenue Service and judicial decisions now in effect as of the date of this
prospectus. Such authorities may be repealed, revoked or modified,
possibly with retroactive effects, so as to result in United States federal
income tax consequences different from those described below.
As discussed below, the exchange more likely than not constitutes a
recapitalization under Section 368(a)(1)(E) of the Internal Revenue Code.
However, we will not seek a ruling from the Internal Revenue Service
regarding any of the tax issues described in this discussion, including the
tax treatment of the exchange as a recapitalization. Moreover, as noted in
the discussion, issues relevant to the federal income tax consequences of
some matters involve areas of law that are ambiguous or with respect to
which legal authority is lacking and as to which limited guidance is
available. It is possible, for example, that the Internal Revenue Service
may view the exchange as a taxable transaction because the notes do not
constitute "securities" or because of other legal positions. Consequently,
there can be no assurance that the Internal Revenue Service will not
challenge one or more of the tax consequences described below.
This discussion does not purport to deal with all aspects of United
States federal income taxation that, because of specific circumstances
applicable to you, might be relevant to your decision to participate in the
exchange. You are strongly urged to consult your tax advisors concerning
the United States federal income tax considerations that may be specific to
you as well as any tax consequences arising under the laws of any other
taxing jurisdiction.
TAX CONSEQUENCES UPON THE EXCHANGE OF THE NOTES
IMPORTANCE OF WHETHER THE NOTES CONSTITUTE "SECURITIES."
The federal income tax consequences to you will depend, in part, on
whether the notes constitute "securities" for federal income tax purposes.
The term "security" is not defined in the Internal Revenue Code or in the
treasury regulations and has not been clearly defined in court decisions.
Although there are a number of factors that may affect the determination of
whether a debt instrument is a "security," one of the most important
factors is the original term of the instrument, or the length of time
between the issuance of the instrument and its maturity. In general,
instruments with an original term of more than ten years are likely to be
treated as "securities," and instruments with an original term of less than
five years are unlikely to be treated as "securities." Because the term of
the notes originally exceeded ten years, the notes likely constitute
"securities" for federal income tax purposes. BECAUSE THE ISSUE IS
UNCERTAIN, YOU ARE URGED TO CONSULT WITH YOUR OWN TAX ADVISORS AS TO THE
PROPER TREATMENT OF THE NOTES.
IMPORTANCE OF WHETHER THE PREFERRED STOCK CONSTITUTES "NON-QUALIFIED
PREFERRED STOCK."
The federal income tax consequences to you could also depend on
whether the convertible preferred stock constitutes "non-qualified
preferred stock." Non-qualified preferred stock is "preferred stock" that
has one of several features, including a right on behalf of the issuer to
redeem the stock if, as of the issue date, it is more likely than not that
such right will be exercised. The term "preferred stock" means stock which
is limited and preferred as to dividends and does not participate in
corporate growth to any significant extent. Regulations have not been
issued on this standard. Moreover, the legislative history is unclear as
to the affect of the conversion privilege on the classification of stock as
"preferred stock." Finally, regulations have not been issued with respect
to the more likely than not standard for redemption exercise. As a result,
the status of the preferred stock as "non-qualified preferred stock" is
uncertain.
Legislative history indicates that an exchange of non-qualified
preferred stock for debt securities having the same or greater value can
qualify as a tax-free reorganization. As a result, use of the preferred
stock does not appear to preclude tax-free reorganization treatment even if
such stock constitutes non-qualified preferred stock. BECAUSE THE ISSUE IS
UNCERTAIN, YOU ARE URGED TO CONSULT WITH YOUR TAX ADVISORS AS TO THE PROPER
TREATMENT OF THE EXCHANGE.
TREATMENT OF THE EXCHANGE AS A RECAPITALIZATION UNDER INTERNAL REVENUE CODE
SECTION 368.
Assuming that the notes are treated as securities and the use of
preferred stock is not precluded under the non-qualified preferred stock
provisions, the exchange more likely than not constitutes a
recapitalization under Section 368(a)(1)(E) of the Internal Revenue Code.
In that event, you will not recognize gain or loss on the exchange, except
to the extent that preferred stock is received for accrued interest. Your
basis in the preferred stock received (exclusive of shares received for
accrued interest) will equal your basis in the notes. The basis in the
preferred stock received for accrued interest will equal the fair market
value of those shares.
Regardless of the treatment of the purchase and exchange as described,
you will recognize ordinary income attributable to any consideration
received as payment for accrued interest on the notes that was not
previously included in your income. If you have already included the
accrued interest in income, you will not recognize any additional income as
a result of the consideration received as payment for the accrued interest
on the notes.
<PAGE>
TERMS OF THE CONSENT SOLICITATION
GENERAL
In connection with the exchange offer, we are also soliciting consents
from the holders of outstanding notes to approve proposed amendments to the
indenture governing the notes. Consents from a majority of the outstanding
aggregate principal amount of the notes are required to approve the
proposed amendments to the indenture. According to the indenture, an
outstanding note is one that is not held by us, by one of our subsidiaries
or by one of our affiliates. We believe that notes held by Elliott
Associates, L.P. and Westgate International, L.P. would be, under the
indenture, considered to be notes that are held by our affiliates.
Therefore, in order to approve the proposed amendments to the notes
indenture, we must receive consents representing a majority of the
outstanding notes that are not held by either Elliott or Westgate. Elliott
and Westgate, which hold a majority of the aggregate principal amount of
the notes, have advised us that they will tender in the exchange offer all
of the notes held by them only if the proposed amendments to the indenture
are approved.
We have fixed October 21, 1999 as the record date for determining
record holders of outstanding notes entitled to participate in the consent
solicitation. You may only participate in the consent solicitation if you
were a record holder of outstanding notes on the record date. This
prospectus and the letter of transmittal and consent form are being sent to
all registered holders of the outstanding notes as of the record date. If
you were a record holder of outstanding notes on the record date, you may
participate in the consent solicitation even if you have subsequently
transferred your notes.
You may deliver consents to the proposed amendments without tendering
your notes in the exchange offer. However, if you tender your notes in the
exchange offer, your tender will constitute your consent to the proposed
amendments to the indenture.
REVOCATION OR WITHDRAWAL OF CONSENTS
We intend to execute a supplemental indenture with the trustee to
cause the proposed amendments to take effect as soon as we receive
sufficient consents to approve the proposed amendments and each of Elliott
and Westgate tender all of the outstanding notes held by them and agree not
to withdraw their tendered notes, even if those events occur prior to the
expiration date for the consent solicitation. We will promptly notify the
trustee as soon as we receive sufficient consents to approve the proposed
amendments. You will not be able to revoke or withdraw your consent once
we have received sufficient consents to approve the proposed amendments and
we notify the trustee of their receipt.
PROPOSED AMENDMENTS
If the requisite consents are received from the holders of the
outstanding notes and Elliott and Westgate tender all of the outstanding
notes held by them, the indenture governing the notes will be revised as
specified below. The following is a brief summary of the proposed
amendments to the indenture governing the notes. It does not purport to be
a comprehensive or definitive listing of the proposed amendments. A
complete listing of the proposed amendments is included in this prospectus
as "Annex I - The Proposed Amendments to the Indenture Governing the 9
3/4 Senior Notes due 2008."
The proposed amendments to the indenture governing the notes would:
(a) amend the definition of "Affiliate" to modify the minimum
beneficial ownership deemed to constitute control for purposes of
the definition of Affiliate;
(b) amend the definition of "Consolidated EBITDA Coverage Ratio" so
that pro forma effect is given to interest expense reductions
arising from debt redemption or extinguishment;
(c) amend the definition of "Consolidated Interest Expense" to
clarify that deductions are permitted in the calculation thereof
for non-cash dividends paid or accrued on preferred stock;
(d) amend clause (i) of the definition of "Permitted Indebtedness"
to increase the amount of allowed Indebtedness under certain
conditions to $50 million, delete the phrase "under one or more
credit facilities with banks and other financial institutions"
and modify certain reductions in the calculation of allowed
Indebtedness;
(e) amend clause (xi) of the definition of "Permitted Indebtedness"
to increase the amount of any additional Indebtedness allowed
from $7.5 million to $10 million;
(f) amend Section 5.2 to increase the allowable time periods to cure
any default on Indebtedness other than a default on the notes;
(g) amend Section 8.1(a) to eliminate the requirement that any
surviving entity in a merger or consolidation be a U.S.
corporation;
(h) delete Sections 8.1(c) and (d) relating to certain restrictions
on any consolidation or merger of the Company or its Restricted
Subsidiaries;
(i) modify Section 10.10 to restart the Consolidated Net Income
basket as of January 1, 2000; and
(j) modify Section 10.12(b) to exclude Permitted Indebtedness from
the prohibition on the Company or any Subsidiary Guarantor
incurring any new Indebtedness that is subordinated to any
existing Indebtedness.
The proposed amendments to the indenture governing the notes will also
include other conforming amendments that comport to the changes outlined
above.
SOLICITATION EXPIRATION DATE; EXTENSIONS; AMENDMENTS
Unless sooner terminated, the consent solicitation will expire at 5:00
p.m., New York City time on _____, 1999, unless we, in our sole discretion,
extend the consent solicitation, in which case the expiration date will be
the latest date and time to which the consent solicitation is extended.
Although we do not intend to extend the consent solicitation at this time,
we expressly reserve the right to extend the solicitation at any time by
giving oral or written notice to the consent solicitation agent. We will
also make a public announcement of an extension no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration date.
We reserve the right, in our sole discretion,
* to delay accepting any consents;
* to extend the consent solicitation;
* to terminate the consent solicitation;
* to amend the terms of the consent solicitation in any
manner by giving oral or written notice of the delay,
extension, termination or modification to the consent
solicitation agent; or
* to waive any defects or irregularities in the furnishing
of the consents.
If the consent solicitation is amended in a manner that we determine
constitutes an adverse change to the holders of the outstanding notes, we
will promptly disclose the amendment by means of a public announcement or a
supplement to this prospectus that will be distributed to the registered
holders of the notes.
CONSENT SOLICITATION AGENT
We have appointed Jefferies & Company, Inc. as consent solicitation
agent for the consent solicitation. Questions and requests for assistance,
requests for additional copies of this prospectus or consents should be
directed to the consent solicitation agent addressed as follows:
Jefferies & Company, Inc.
909 Fannin Street
Suite 3100
Houston, Texas 77010
Attn: Joe Maly
VIA FACSIMILE: CONFIRM BY TELEPHONE:
(713) 308-4569 (713) 651-3825
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new
preferred stock in the exchange offer. In consideration for issuing the
new preferred stock, we will receive in exchange our outstanding notes. We
will issue new preferred stock with an aggregate liquidation value equal to
65% of the aggregate amount of notes tendered plus 100% of the accrued and
unpaid interest on the notes tendered through the date of the exchange.
<PAGE>
CAPITALIZATION
We have provided our capitalization (i) as of June 30, 1999, (ii) as
adjusted to give effect to the issuance of our 8% Exchangeable Preferred
Stock to Elliott and, immediately prior to the completion of the subscription
offering, the exchange of such shares, together with accrued and unpaid
dividends thereon, for shares of our 8% Convertible Preferred Stock, and
(iii) as further adjusted to give effect to the completion of the exchange
offer assuming notes representing 100% of the aggregate principal amount
outstanding are exchanged for shares of new preferred stock. The consummation
of the subscription offering will not affect our consolidated debt or
consolidated capitalization.
You should read this table in conjunction with the Unaudited Consolidated
Pro Forma Statement of Operations, Management's Discussion and Analysis
of Financial Condition and Results of Operations and the consolidated
financial statements of the Company and GGI Liquidating Corporation
and the related notes, included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AT JUNE 30, 1999
-----------------------------------------------------------------
ACTUAL PRO FORMA
---------- ---------------------------------------------------
AS
AS FURTHER
ADJUSTED ADJUSTED
------------ ------------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 2,140 $9,000 (c) $ 11,140 ($ 450)(g) $ 10,690
========= ========= =========
Notes payable, current portion
of long-term debt and capital
lease obligations $ 6,578 $ 6,578 $ 6,578
--------- --------- ---------
Long-term debt, excluding
current indebtedness:
9 3/4 % Senior Notes due
2008 99,322 99,322 (100,000)(d) 0
678 (e)
Other 14,897 14,897 14,897
--------- --------- ---------
Total long-term debt $ 114,219 $ 114,219 $ 14,897
--------- --------- ---------
Stockholders' equity:
Preferred stock, $.001
par value per share:
8% Convertible
Preferred Stock(a) -- 9,246 (c) 9,246 68,656 (d) 77,902
Common stock, $.001 par
value per share(b) 14 14 14
Additional Paid-in
capital 41,757 41,757 * (d) *
* (e)
* (f)
Accumulated (deficit)
earnings (32,522) (246)(c) (32,768) * (d) *
* (d)
* (e)
* (f)
(450)(g)
Accumulated other comprehensive
loss (1,795) (1,795) (1,795)
--------- --------- ---------
Total stockholders'
equity $ 7,454 $ 16,454 $ 111,253
--------- --------- ---------
Total capitalization $ 128,251 $ 137,251 $ 132,728
========= ========= =========
</TABLE>
________________
* Amounts to be determined upon consummation of the exchange offer.
(a) Actual: 0 shares authorized, 0 shares outstanding; as adjusted: 1,000,000
shares authorized, 92,456 shares outstanding; as further adjusted:
1,000,000 shares authorized, 779,019 shares outstanding. Between August
13, 1999 and October 19, 1999, the Company issued 90,000 shares of 8%
Exchangeable Preferred Stock at a price of $100 per share. The Company
also issued 677 shares of 8% Exchangeable Preferred Stock to Elliott as of
October 1, 1999 as dividends on the 8% Exchangeable Preferred Stock payable
on that date. The Company expects that an additional 1,779 shares of 8%
Exchangeable Preferred Stock will be payable as accumulated dividends on
the 8% Exchangeable Preferred Stock at December 31, 1999. The Company
further expects that all shares of 8% Exchangeable Preferred Stock owned
by Elliott will be exchanged immediately prior to the subscription offering
for shares of 8% Convertible Preferred Stock with a liquidation preference
equal to that of the 8% Exchangeable Preferred Stock plus any accrued and
unpaid dividends on the shares exchanged.
(b) 50,000,000 shares authorized, 14,426,055 shares outstanding.
(c) Adjustment to reflect the issuance of 92,456 shares of 8% Exchangeable
Preferred Stock and, immediately prior to the completion of the
subscription offering, the exchange of such shares, together with accrued
and unpaid dividends thereon, for shares of 8% Convertible Preferred Stock.
(d) Adjustment to reflect the exchange of 100% of the outstanding notes (net
of unamortized original issue discount), together with accrued and unpaid
interest thereon through the date of exchange, for shares of 8% Convertible
Preferred Stock.
(e) Adjustment for the write-off of the remaining original debt issue discount.
(f) Adjustment for the write-off of the remaining debt issuance costs.
(g) Adjustment to record estimated expenses of the exchange offer, consent
solicitation and subscription offering.
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
GGI Grant
------------------------------------- --------------------------------------------------------------------
Pro Forma
------------------------
Nine Months Three Months Six Months Six Months
Ended Ended Year Ended Ended Year Ended Ended
Years Ended December 31, September 30, December 31, December 31, June 30, December 31 June 30,
------------------------ ------------- ------------ ------------ ----------- ----------- ----------
1994 1995 1996 1997 1997 1998 1999 1998 1999
------ ------ ------- ------------- ------------ ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges(1) --(2) 0.82x(3) --(2) 1.41 x --(2) 0.64x(3) --(2) 0.85x(3) --(2)
</TABLE>
(1) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" means income before income taxes and minority interest plus
fixed charges less preferred stock dividends. Fixed charges include
interest on indebtedness, amortization of debt issue costs and discount
on senior notes, preferred stock dividends and that portion of lease
expense (one-third) that is deemed to be representative of an interest
factor.
(2) Earnings were inadequate to cover fixed charges by $16.5 million, $80.8
million, $8.1 million, $14.8 million and $12.8 million for the years
ended December 31, 1994 and 1996, the three months ended December 31,
1997, the six months ended June 30, 1999 and the pro forma six months
ended June 30, 1999, respectively. Earnings for the year ended December
31, 1994 include a $9.9 million charge for asset impairment. In December
1996, GGI filed for bankruptcy protection under the United States
Bankruptcy Code. The filing was precipitated by a number of factors,
including the Company's overly rapid expansion in the United States and
Latin America, which contributed to poor operational results in those
markets, and the development of a proprietary data recording system, which
did not meet expectations. See "Management's Discussion and Analysis
of Financial Conditions and Results of Operations." Earnings for the
three months ended December 31, 1997 include a $6.4 million charge for
asset impairment. The earnings for the six months ended June 30, 1999
and pro forma six months ended June 30, 1999 were affected by the downturn
in the oil and gas industry.
(3) For the year ended December 31, 1995 and 1998 and the pro forma year
ended December 31, 1998 the coverage ratio was less than 1:1. The Company
would need to generate additional earnings of $1.7 million, $4.2 million
and $1.3 million, respectively, to achieve a coverage of 1:1 in these
periods.
<PAGE>
SELECTED HISTORICAL AND UNAUDITED CONSOLIDATED FINANCIAL DATA
Following table presents selected consolidated financial data for the
Company and its predecessor, Grant Liquidating Corporation ("GGI"). The
following GGI data and the following Company data, insofar as it relates to (i)
the three-month period ended December 31, 1997, (ii) the year ended December
31, 1998, and (iii) the balance sheet at each of those respective dates, has
been derived from audited consolidated financial statements, including those
appearing elsewhere in this prospectus. The selected consolidated financial
data as of and for the six-month periods ended June 30, 1999 and 1998 has been
derived from unaudited financial statements also appearing herein and which,
in the opinion of management, include all adjustments, consisting of
normal recurring adjustments, that the Company considers necessary for a
fair presentation of its financial position and results of the unaudited
interim periods. The selected historical financial data set forth below
should be read in conjunction with the consolidated financial statements
and the related notes included in this prospectus. See also "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
GGI GRANT
----------------------------------------------- ----------------------------
NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1994 1995 1996 1997 1997 1998
-------- -------- -------- ------------- ------------- ------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 73,691 $ 91,996 $105,523 $ 92,705 $ 37,868 $175,512
Operating income (loss) (9,241) 4,999 (65,970) 6,794 (5,033) 6,346
Income (loss) from continuing
operations (11,438) 3,162 (76,027) (425) (5,666) (7,698)
Net loss applicable to common stock (6,143) (8,138)
LOSS PER COMMON SHARE -
ASSUMING BASIC AND DILUTED:
Continuing operations $ (1.18) $ (.54)
Dividend requirement on pay-in-
kind preferred stock (.10) (.03)
-------- --------
Net loss per common share $ (1.28) $ (.57)
======== ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic and diluted 4,798 14,257
CASH FLOW AND OTHER DATA:
Cash provided by (used in)
operating activities $ 3,170 $ 2,759 $ (9,346) $ 4,526 $ 5,386 $ 15,815
Cash used in investing activities (9,698) (9,272) (10,181) (6,731) (19,715) (31,305)
Cash provided by financing
activities 5,260 6,929 25,667 1,289 15,072 16,821
Capital expenditures 8,463 14,921 25,799 4,154 12,400 23,866
Ratio of earnings to fixed charges
and preferred dividends(1) ---(2) 0.82x ---(2) 1.41x ---(2) 0.64x
BALANCE SHEET DATA:
(at end of period)
Working capital $ 3,022 $ 8,033 $ 22,421 $ 16,190 $ 14,373
Total assets 61,609 86,932 70,123 155,704 166,441
Pre-petition liabilities subject to
chapter 11 case -- -- 90,244 -- --
Notes payable, current portion of
long-term debt and capital lease
obligations 14,495 18,430 589 1,158 2,522
Long-term debt, subordinated debt
and capital lease obligations
excluding current portion 4,917 8,789 -- 75,195 110,817
Total stockholders' equity 26,399 29,715 (34,213) 41,992 22,002
</TABLE>
<TABLE>
<CAPTION>
GRANT
----------------------
SIX MONTHS ENDED
JUNE 30,
----------------------
1998 1999
-------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 96,362 $ 33,208
Operating income (loss) 8,931 (9,968)
Income (loss) from continuing
operations 1,938 (15,269)
Net income (loss) applicable to
common stock $ 1,498 $ (15,269)
INCOME (LOSS) PER SHARE
Continuing operations $ 0.14 $ (1.06)
Dividend requirement on pay-in- kind
preferred stock (0.03) --
--------- ---------
Net income (loss) per share $ 0.11 $ (1.06)
========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic and diluted 14,171 14,426
CASH FLOW AND OTHER DATA:
Cash provided by operating
activities $ 7,131 $ 1,212
Cash used in investing activities (10,817) (14,507)
Cash provided by financing
activities 10,558 7,143
Capital expenditures 12,161 3,622
Ratio of earnings to fixed charges
and preferred dividends(1) 1.71x ---(2)
BALANCE SHEET DATA:
(at end of period)
Working capital 28,305 $ 2,511
Total assets 181,946 149,368
Notes payable, current portion of
long-term debt and capital lease
obligations 934 6,578
Long-term debt, revolving line of
credit-affiliate and
capital lease obligations excluding
current portion 101,211 114,219
Total stockholders' equity 32,720 7,454
</TABLE>
(1) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" means income before income taxes and minority interest plus
fixed charges less preferred stock dividends. Fixed charges include
interest on indebtedness, amoritization of debt issue costs and
discount on senior notes, preferred stock dividends and that portion of
lease expense (one-third) that is deemed to be representative of an
interest factor. See also "Ratio of Earnings to Fixed Charges and
Preferred Dividends."
(2) Earnings were inadequate to cover fixed charges and preferred dividends
by $16.5 million, $80.8 million, $8.1 million and $14.8 million for the
years ended December 31, 1994 and 1996, the three months ended December
31, 1997 and the six months ended June 30, 1999.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was formed in September 1997. On September 30, 1997,
Grant acquired substantially all of the assets and assumed certain
liabilities of GGI pursuant to GGI's Second Amended Plan of
Reorganization (the "Plan"), which was confirmed by the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court")
on September 15, 1997. On December 23, 1997, Grant, through a wholly
owned Canadian subsidiary, acquired all of the outstanding shares of
Solid State Geophysical, Inc. ("Solid State").
The Company's business activities involve the performance of land and
transition zone seismic data acquisition services in selected markets
worldwide, including the United States, Canada, Latin America and the
Far East. The Company generally acquires seismic data on an exclusive
contract basis for oil and gas companies on (i) a turnkey basis, which
provides a fixed fee for each project (ii) a term basis, which
provides for a periodic fee during the term of the project or (iii) a
cost-plus basis, which provides that the costs of a project, plus a
percentage fee, are borne by the customer. In addition, the Company
acquires and owns certain multi-client seismic data that is marketed
broadly on a non-exclusive basis to oil and gas companies.
In December 1996, GGI filed for protection under the United States
Bankruptcy Code and began its reorganization under the supervision of
the Bankruptcy Court. The filing was precipitated by a number of
factors, including an overly rapid expansion in the United States and
Latin American markets, which contributed to poor operational results
in those markets, particularly in Peru, the attempted development of a
proprietary data recording system, which did not meet operating
expectations and a lack of available capital, which led to a severe
working capital shortage. These factors impaired GGI's ability to
service its indebtedness, finance its existing capital expenditure
requirements and meet its working capital needs. In addition, GGI was
unable to raise additional equity, causing a disproportionate reliance
on debt financing and equipment leasing. In connection with its
reorganization, GGI replaced its senior management, disposed of
unprofitable operations, operated as debtor in possession and
developed the Plan which was confirmed by the Bankruptcy Court on
September 15, 1997 and consummated on September 30, 1997, with Grant's
purchase of substantially all of the assets and assumption of certain
liabilities of GGI.
As of October 22, 1999, the Company was operating or mobilizing a
total of four land crews in the United States, four land crews in
Canada, three land and one transition zone crew in Latin America, and
one land crew in the Far East. For the six months ended June 30,
1999, the Company's total revenues were $33.2 million, with
approximately 55% from the United States, 7% from Latin America, 19%
from the Far East and 19% from Canada.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH THE SIX MONTHS ENDED JUNE 30,
1998
REVENUES. Consolidated revenues decreased $63.2 million, or 66%, from
$96.4 million for the six months ended June 30, 1998 to $33.2 million for
the six months ended June 30, 1999. This decrease was the result of lower
demand for the Company's seismic acquisition services in both the domestic
and international markets. Demand for the Company's services has been
adversely affected by the significant decrease in the price of oil and gas
that occurred between the fourth quarter of 1997 and the first quarter of
1999.
Revenues from the United States data acquisition operations decreased
$21.6 million, or 56%, from $38.4 million for the six months ended June 30,
1998 to $16.8 million for the six months ended June 30, 1999. This decrease
was attributable to the Company operating six to seven seismic data
acquisition crews continuously in the United States during the six months
ended June 30, 1998 compared with approximately five crews during the first
quarter of 1999 and decreasing to one to two crews during the second
quarter of 1999.
Revenues from data processing were $883,000 for the six months ended
June 30, 1999. The Company purchased its data processing operations in
July 1998; therefore, there are no comparable results for the six months
ended June 30, 1998. The Company operated processing centers in Houston,
Midland and Dallas, Texas for the entire six- month period.
Revenues from Canada data acquisition operations decreased $3.8 million,
or 40%, from $9.7 million for the six months ended June 30, 1998 to $5.8
million for the six months ended June 30, 1999. This decrease was due
almost entirely to a decrease in activity experienced during the first
quarter of 1999. These winter months are the traditional busy season in
Canada. During the first quarter of 1998, the Company operated six crews
continuously compared to only three crews during the same period in 1999.
The Company began its multi-client data acquisition activities in the
United States and Canada during the second quarter of 1998. At June 30,
1999 the Company had completed all or a portion of fourteen data library
projects totaling approximately 1,361 square miles in Texas, California,
Wyoming and Canada. This library consists of 853 square miles completed in
1998, 222 square miles completed during the first quarter of 1999 and 286
square miles completed during the second quarter of 1999. In addition, 487
square miles are scheduled to be completed by November 30, 1999. The
Company will continue its strategy of building a multi-client data library
and has identified and is currently evaluating projects totaling an
additional 706 square miles for possible acquisition in 1999 and beyond.
Revenues associated with the underwriters' portion of multi-client data
programs are recognized as part of the data acquisition revenues discussed
above in the southern United States, northern United States and Canada.
Revenue from sales of the data library for the six months ended June 30,
1999 was $1.2 million compared to $246,000 for the same period in 1998.
Revenues from Latin America data acquisition decreased $29.4 million, or
93%, from $31.7 million for the six months ended June 30, 1998 to $2.3
million for the six months ended June 30, 1999. During the first half of
1998, the Company operated, from time to time, as many as eight seismic
crews in Latin America, including three in Colombia, two in Bolivia and one
each in Guatemala, Brazil and Ecuador. During the first half of 1999, the
Company was operating or mobilizing four seismic crews in the region: one
each in Ecuador, Guatemala, Mexico and Brazil. The Ecuador and Guatemala
projects were completed in March and May of 1999, respectively.
Revenues from the Far East decreased $10.2 million, or 62%, from $16.4
million for the six months ended June 30, 1998 to $6.2 million for the six
months ended June 30, 1999. During the first half of 1998, the Company
operated, from time to time, three crews in Bangladesh and two crews in
Indonesia. During the first half of 1999, the Company operated one crew
for approximately one month in Bangladesh. That project was completed
during the first week of May 1999 and there is currently no operating
activity in the region.
EXPENSES. Direct operating expenses of the Company as a percentage of
revenues increased to 74% for the six months ended June 30, 1999 from 72%
for the six months ended June 30, 1998. This percentage increase can be
attributed to an overall decrease in operating efficiency occurring during
the first quarter resulting from the completion of contracts and the
demobilization of crews in the Company's international locations. Direct
operating expenses during the six months ended June 30, 1999 decreased
$44.9 million to $24.6 million compared to $69.5 million for the same
period in 1998. This decrease is a result of the revenue decreases
experienced throughout all of the Company's operating regions as described
above.
Selling, general and administrative expenses decreased $1.0 million, or
13%, to $6.7 million for the six months ended June 30, 1999 from $7.7
million for the six months ended June 30, 1998. Beginning in the fourth
quarter of 1998 and continuing through the first and second quarters of
1999, the Company has reduced support and overhead personnel in all
operating regions and in its corporate office. The effects of these cost
reductions are expected to be realized in reduced selling, general and
administrative expenses throughout the remainder of 1999. Selling, general
and administrative expenses increased as a percentage of revenue to 20% in
the first half of 1999 from 8% in the same period in 1998. This decrease
is a result of the revenue decreases experienced throughout all of the
Company's operating regions as described above.
Depreciation and amortization increased $1.7 million, or 17%, to $11.9
million for the six months ended June 30, 1998 from $10.2 million for the
six months ended June 30, 1999. Contributing to the increase was
depreciation on new assets purchased by the Company during the second,
third and fourth quarters of 1998.
OTHER INCOME (EXPENSE). Net interest expense increased $1.5 million, or
35%, to $5.8 million for the six months ended June 30, 1999 from $4.3
million for the six months ended June 30, 1998. This increase was the
result of an increase in the Company's overall debt level during the six
months ended June 30, 1999 as compared to the six months ended June 30,
1998.
TAX PROVISION. The income tax provision for the Company consists of
income taxes in foreign countries. For the six months ended June 30, 1998
this includes provisions for taxes in Colombia, Ecuador, Guatemala,
Bangladesh and Indonesia. For the six months ended June 30, 1999 the
provision for taxes relates primarily to Guatemala, Bangladesh and Canada.
No benefit for United States federal income taxes was made for either
period given the uncertainty of realization of such tax benefits.
THE COMPANY FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1998 COMPARED
WITH THE COMPANY AND GGI COMBINED TWELVE-MONTH PERIOD ENDED DECEMBER 31,
1997
The following analysis compares the operating results of the Company for
the twelve-month period ended December 31, 1998 with combined operating
results of the Company for the three-month period ended December 31, 1997
(including the operating results of Solid State for such period) and the
operating results of GGI for the nine-month period ended September 30,
1997. As described above, Grant began operations immediately following its
acquisition of substantially all of the assets and certain liabilities of
GGI on September 30, 1997 and Grant acquired Solid State in December 1997.
Because of the significant changes in Grant's control and management and
scope of operations following the consummation of the Plan, comparisons may
not be meaningful.
REVENUES. Revenues of the Company for the twelve months ended December
31, 1998 were $175.5 million compared with $130.6 million of combined
revenue for GGI and the Company for the twelve months ended December 31,
1997. The increase of $44.9 million, or 34.4%, was the result of growth in
revenues in both the United States and the Far East and the inclusion of a
full year of Solid State's results of operations in 1998 compared to only
three months in 1997.
Revenues from the United States operations increased $24.9 million, or
46.4%, from $53.7 million to $78.7 million in 1998. Revenues from the
United States data acquisition operations increased $24.0 million, or
44.7%, from $53.7 million in 1997 to $77.8 million in 1998. This increase
was due primarily to the addition of two Solid State crews in the northern
United States for the entire year versus only one crew for three months in
1997 and the addition of new and more efficient recording instrumentation.
Productivity was enhanced by increasing the seismic recording channel count
per crew and, whenever possible, utilizing a twenty-four hour recording
schedule. During 1998 there were as many as eight seismic crews
operational in the United States versus only six to seven crews operational
in 1997. Beginning late in the third quarter of 1998, due primarily to the
low oil and gas prices, demand for data acquisition recording services in
the United States and elsewhere began to decline. By the end of December
1998 there were six crews operating or mobilizing in the U.S.
Revenues from data processing were $957,000 for 1998. The Company
purchased the data processing operations in July 1998; therefore, there are
no comparable results for 1997. The Company operated processing centers in
Midland and Dallas, Texas for the entire six months and began operations in
a newly established Houston, Texas center during the fourth quarter of
1998.
Revenues from the Canadian data acquisition operations increased $9.7
million, or 217.3%, from $4.5 million in 1997 to $14.2 million in 1998.
The Company acquired these operations from Solid State effective September
30, 1997. The increase in 1998 is the result, therefore, of including a
full year of operations in the results of 1998 versus only three months in
1997. From time to time during 1998, the Company operated as many as six
land seismic crews throughout Canada.
The Company began its multi-client data acquisition activities in the
United States and Canada during 1998. Crew operations began in the second
quarter with significant activity occurring in both the third and fourth
quarters. The Company has completed or is conducting eleven data library
projects totaling approximately 1,237 square miles in Texas, California,
Wyoming and Canada. At December 31, 1998, 624 square miles had been
completed and an additional 246 square miles are scheduled to be completed
by March 31, 1999. The remaining 367 square miles are to be completed
later in 1999. The Company and GGI had no multi-client data activity in
1997. Revenues associated with the underwriters' portion of multi-client
data programs are recognized as part of the data acquisition revenues
discussed above in the southern United States, northern United States and
Canada.
Revenues in Latin America decreased $5.9 million, or 10.2%, from $58.6
million in 1997 to $52.6 million in 1998. During 1998, the Company
operated as many as eight land seismic crews in Brazil, Guatemala,
Colombia, Ecuador and Bolivia. During 1997, combined Latin American
operations for GGI and the Company, while operating in the same countries,
consisted of as many as ten land seismic data acquisition crews. The
Brazilian operations were completed in March 1998 and the equipment was
moved to work in Guatemala. The Colombian operations were completed in the
third quarter of 1998 and both the Guatemalan and Bolivian contracts were
finished in the fourth quarter of 1998. Ecuadorian operations were
completed in February 1999. The Company currently has one land crew
mobilizing to a project in Guatemala and one transition zone crew
mobilizing in Brazil. There are currently no active crews operating in
Latin America.
Revenues from the Far East increased $16.6 million, or 123.1%, from
$13.5 million in 1997 to $30.1 million in 1998. During 1998, the Company
operated as many as five crews in the region: one land and two transition
zone crews in Bangladesh and one land and one transition zone crew in
Indonesia. During 1997, in Bangladesh, GGI and the Company operated one
crew for the entire year and mobilized one additional transition zone crew
that began operations in July 1997. By December 1998 there were three
active crews in the region. As of March 26, 1999 the Company's Far East
operations consisted of one land crew operating in Bangladesh.
EXPENSES. Direct operating expenses for the twelve months ended
December 31, 1998 increased $29.5 million, or 29.7%, to $129.0 million
compared with $99.4 million for the twelve months ended December 31, 1997.
Direct operating expenses as a percentage of revenues decreased to 73.5% in
1998 from 76.2% in 1997. The overall dollar increase was the result of
increased crew activity in the southern United States and the Far East and
the inclusion of a full year of Solid State's results in 1998 versus only
three months in 1997. The percentage decrease is the result of improvements
in operating efficiencies primarily in the United States. These improvements
were the results of upgrading and expanding the Company's seismic data recording
equipment, careful and detailed project cost analysis and management's ability
to properly assess operating risk.
Selling, general and administrative expenses for the twelve months ended
December 31, 1998 increased $4.2 million to $14.2 million from $10.0
million in 1997. Selling, general and administrative expenses as a
percentage of revenue increased only marginally to 8.1% in 1998 from 7.6%
in 1997. The overall dollar increase was primarily due to an approximate
$1.5 million increase as a result of the inclusion of Solid State for a
full year in 1998 versus only three months in 1997, $1.1 million of
additional costs incurred to develop international and domestic markets and
$537,000 for corporate provisions for doubtful accounts and incentive
bonuses and the remainder related to a general increase in corporate
support services.
Depreciation and amortization increased $9.3 million to $22.3 million in
1998 from $13.0 million for 1997. The increase was due to an increase of
approximately $3.8 million due to the inclusion of Solid State for a full
year in 1998 versus only three months in 1997, $1.5 million for the
amortization of goodwill and $3.8 million of depreciation on newly
purchased assets.
The charge for asset impairment was $3.8 million for 1998 compared to $6.4
million in 1997. At December 31, 1998 the Company recorded a special charge
of $3.2 million to reduce the carrying value of its multi-client data,
acquired through the purchase of Solid State during the fourth quarter of
1997, to its net realizable value based on current estimates of future
licensing prospects for such data. The charge for asset impairment
recorded in 1997 included a special charge of $5.9 million to write down
the acquired Solid State multi-client data to its then estimated net
realizable value. Also included in 1998 was a charge of $564,000 relating
to the write-down in the carrying value of certain non-operating
depreciable fixed assets to salvage value. The remaining 1997 charge
relates to a $247,000 write-down in the carrying value of certain non-
operating depreciable fixed assets to salvage value and a $253,000 write-
down in the carrying value of certain other investments and joint ventures.
OTHER INCOME (EXPENSES). Interest expense, net, increased $4.2 million to
$9.3 million in 1998 from $5.1 million in 1997. This increase was the
result of interest on debt both incurred and assumed by the Company as a
result of the Solid State acquisition and from the sale on February 18,
1998 of $100 million of 9 3/4 % Senior Notes due 2008. Proceeds from the
sale were used to retire substantially all of the Company's outstanding
indebtedness, to fund capital expenditures and to provide working capital
for general corporate purposes.
Reorganization costs of $3.5 million in 1997 related to charges incurred in
connection with GGI's reorganization, which began in December 1996 and was
completed in September 1997. No comparable reorganization charges were
incurred by the Company in the three months ended December 1997 or for the
twelve months ended December 31, 1998. No comparable reorganization costs
are expected to be incurred in the future.
Other income of $1.0 million for 1997 was the result of settlement of a
longstanding dispute between one of GGI's Brazilian subsidiaries and a
former customer relating to services rendered on contracts dating back to
1983. In settlement of all claims, GGI received payment, net of related
costs and expenses, of approximately $2.4 million in July 1997. Income
from that settlement was offset by approximately $767,000 in costs
associated with the Acquisition and approximately $289,000 of foreign
currency exchange losses, primarily related to US dollar based loans owed
by Solid State prior to the Acquisition. In 1998, the Company recorded
$635,000 in litigation expense associated with the settlement, representing
the cash paid by Elliott and the $0.25 discount permitted the plaintiffs to
purchase Grant common stock in the subscription offering (see Note 13 to
the Consolidated Financial Statements).
TAX PROVISION. The income tax provision in both periods consisted of
income taxes in foreign countries. The increase in 1998 compared with 1997
is a result of higher taxable income in Indonesia and Guatemala. No
provision for United States federal income tax was made in 1997 as GGI and
the Company each had taxable losses for which no benefit was recorded under
FAS 109. In 1998, the Company provided for approximately $100,000 of
alternative minimum tax in the United States.
THE COMPANY AND GGI COMBINED TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1997
COMPARED WITH GGI'S YEAR ENDED DECEMBER 31, 1996
The following analysis compares the combined operating results of the
Company for the three-month period ended December 31, 1997 (including the
operating results of Solid State for such period) and the operating results
of GGI for the nine-month period ended September 30, 1997 with the
operating results of GGI for the twelve months ended December 31, 1996. As
described above, Grant began operations immediately following its
acquisition of substantially all of the assets and certain liabilities of
GGI, and Grant acquired Solid State in December 1997. Because of the
significant changes in Grant's corporate structure and scope of operations
and the consummation of the Plan, comparisons may not be meaningful.
REVENUES. Combined revenue of GGI and the Company for the twelve months
ended December 31, 1997 were $130.6 million compared with $105.5 million of
revenue realized by GGI for the twelve months ended December 31, 1996. The
increase of $25.1 million, or 23.7%, was the result of growth in revenues
in both the United States and Bangladesh and the inclusion of Solid State's
results of operations for the quarter ended December 31, 1997.
Revenues from the United States data acquisition operations increased $11.6
million, or 27.6%, from $42.1 million in 1996 to $53.7 million in 1997.
This increase was primarily attributed to two transition zone crews
operating along the Gulf Coast and the addition of two Solid State crews
for the quarter ended December 31, 1997. From time to time during each
period, GGI and the Company operated as many as seven seismic data
acquisition crews in the United States compared with a peak of 8 crews in
1996.
Revenues in Latin America increased $1.4 million, or 2.5%, from $57.1
million in 1996 to $58.6 million in 1997. During 1997, combined Latin
American operations for GGI and the Company consisted of as many as ten
land seismic data acquisition crews operating in Colombia, Ecuador, Brazil,
Guatemala, Bolivia, and Venezuela. The Company completed operations in
Venezuela in early October 1997 and transferred personnel and equipment to
Canada. From time to time during 1996, GGI operated as many as nine
seismic crews in the region, including four in Peru, two in Colombia and
one in each of Bolivia, Brazil and Ecuador.
Revenues from the Far East increased $8.1 million, or 149%, from $5.4
million in 1996 to $13.5 million in 1997. During 1997, GGI and the Company
operated one crew for the entire year and mobilized one additional
transition zone crew that began operations in Bangladesh in July 1997. GGI
mobilized and operated one land seismic data acquisition crew in Bangladesh
during 1996.
Revenues from Canadian data acquisition operations were $4.5 million in
1997 compared to zero in 1996. The Company (through Solid State) operated
as many as five land seismic crews in Canada during 1997 while GGI had no
operations in Canada during 1996.
EXPENSES. The combined direct operating expenses for GGI and the Company
for the twelve months ended December 31, 1997 decreased $36.9 million to
$99.4 million compared with $136.3 million for GGI's twelve months ended
December 31, 1996. Direct operating expenses as a percentage of revenues
decreased to 76.2% in 1997 from 129.2% in 1996. During 1996 GGI
experienced significant cost overruns, which increased direct operating
expenses on several crews operating in the United States. Most notable
were higher than anticipated costs incurred by a transition zone crew as a
result of adverse weather conditions and costs associated with the
unsuccessful deployment of a proprietary data recording system. The
proprietary data recording system was abandoned in November 1996. Also in
1996, GGI's Peruvian operations experienced crew costs significantly higher
than originally projected primarily due to a combination of modified job
parameters that were not accurately reflected in the turnkey contract price
and a lack of effective crew oversight.
Selling, general and administrative expenses for GGI and the Company for
the twelve months ended December 31, 1997 decreased $7.9 million to $10.0
in 1997 from $17.9 million in 1996. Selling, general and administrative
expenses also decreased as a percentage of revenue to 7.6% in 1997 from
17.0% in 1996. The decrease was primarily the result of general expense
reduction initiatives in 1997 and the accrual of certain nonrecurring
charges and allowances in 1996, including an approximate $5.5 million
increase in reserves for doubtful accounts.
Depreciation and amortization increased $1.5 million to $13.0 in 1997 from
$11.5 million for 1996. This increase was the result of depreciation on
the Solid State assets for the quarter ended December 31, 1997.
The charge for asset impairment was $6.4 million for 1997 compared to $5.8
million in 1996. At December 31, 1997 the Company recorded a special
charge of $5.9 million to reduce the carrying value of its multi-client
data to net realizable value based on future licensing prospects for such
data. The remaining 1997 charge relates to a $247,000 write-down in the
carrying value of certain non-operating depreciable fixed assets to salvage
value and a $253,000 write-down in the carrying value of certain other
investments and joint ventures. At December 31, 1996, GGI recorded a
special charge for asset impairment of $5.8 million. The charge relates
solely to the write-down of the carrying value of a proprietary data
recording system that GGI was developing for use by its seismic data
acquisition crews, but which was abandoned in November of 1996.
OTHER INCOME (EXPENSES). Interest expense, net, decreased $2.4 million to
$5.1 million in 1997 from $7.5 million in 1996. This was the result of a
$3.3 million decrease due to a reduction in the use of credit facilities in
Latin America during all of 1997 and in the United States during the
quarter ended December 31, 1997. This decrease was partially offset by
$981,000 of interest expense incurred by Solid State during the quarter
ended December 31, 1997.
Reorganization costs of $412,000 in 1996 and $3.5 million for 1997 related
to charges incurred in connection with GGI's reorganization, which began in
December 1996 and was completed in September 1997. The Company incurred no
reorganization charges in the three months ended December 1997.
Other income for 1997 of $1.0 million was the result of the aforementioned
settlement of a longstanding dispute between one of GGI's Brazilian
subsidiaries and a former customer relating to services rendered on
contracts dating back to 1983. In settlement of all claims, GGI received
payment, net of related costs and expenses, of approximately $2.4 million
in July 1997. Income from that settlement was offset by approximately
$767,000 costs associated with the Acquisition and approximately $289,000
of foreign currency exchange losses, primarily related to US dollar based
loans owed by Solid State prior to the Acquisition.
TAX PROVISION. The income tax provision in both periods consisted of
income taxes in foreign countries. The increase in 1997 compared with 1996
is a result of higher taxable income in Colombia and Ecuador. No provision
for United States federal income tax was made in either period as GGI and
the Company each had taxable losses for which no benefit was recorded under
FAS 109.
LIQUIDITY AND CAPITAL RESOURCES
As detailed elsewhere in this prospectus, demand for the Company's
seismic acquisition services has been and continues to be adversely
affected by the current industry downturn. Moreover, the Company continues
to require substantial cash flow to maintain operations on a satisfactory
basis, complete its capital expenditure program, fully implement its
business strategy and meet its principal and interest obligations with
respect to the Notes and its other indebtedness.
Between August 13, 1999 and October 19, 1999, the Company issued a total
of 90,000 shares of its 8% Exchangeable Preferred Stock to Elliott at a
price of $100 per share. This equity financing was required to augment the
Company's available cash, cash flow generated from operations and
borrowings under the Foothill credit facility to provide sufficient
liquidity to fund the Company's cash requirements. However, Elliott is
under no obligation to purchase any additional shares of 8% Exchangeable
Preferred Stock or otherwise provide additional financing for our
operations.
In order to improve the Company's liquidity, the Company has proposed to
exchange all of its outstanding Notes for new shares of 8% Convertible
Preferred Stock with an aggregate liquidation value equal to 65% of the
aggregate principal amount of the Notes tendered in the exchange offer plus
100% of the accrued and unpaid interest on the Notes tendered. Through the
proposed exchange offer, the Company will reduce its outstanding
indebtedness by converting a portion of its debt into equity. If the
exchange offer is consummated, management believes this will increase the
Company's liquidity by reducing its principal payment obligations with
respect to the Notes and reducing the negative cash flow impact of its
interest payment obligations on the Notes.
The Company's ability to meet its debt service and other obligations
will depend on its future performance, which in turn is subject to general
economic conditions and other factors beyond the Company's control. If the
Company is unable to consummate the proposed exchange offer, generate
sufficient cash flow from operations or otherwise comply with the terms of
the Indenture, the Foothills credit facility or its other debt instruments,
it may be required to refinance all or a portion of its existing debt or
obtain additional financing. There can be no assurance that such
refinancing or additional financing will be available on terms acceptable
to the Company.
The Company's internal sources of liquidity are its cash balances
($432,000 at October 22, 1999) and cash flow from operations. External
sources include the unutilized portion of the Company's credit facility
($88,000 at October 22, 1999) under a Loan and Security Agreement with
Foothill Capital Corporation and Elliott, equipment financing and trade
credit. Under the terms of the credit facility, the Company may borrow up
to $6 million through a revolving credit facility and term loans of up to
$19 million. The credit facility has a three year term and provides for
borrowings at an interest rate per annum of the prime rate plus 2%, secured
by liens on substantially all of the assets of the Company. In addition,
the Company periodically enters into equipment financing agreements with
sellers of seismic data acquisition equipment to pay all or a portion of
the purchase price of such equipment and regularly utilizes normal trade
credit in connection with certain of its purchases of goods and services to
support its ongoing field crew activities.
The Company has outstanding $100 million aggregate principal amount of 9
3/4 % Senior Notes due 2008 (the "Notes"). The Notes are governed by an
indenture, dated February 18, 1998, between the Company, its subsidiary
guarantors and LaSalle National Bank, as trustee (the "Indenture"). The
Notes bear interest at 9 3/4 % per annum, payable semiannually, and were
sold at a discount to yield 9 7/8% per annum. The net proceeds from the
sale of the Notes were used to retire substantially all of Grant's then-
outstanding indebtedness, purchase certain leased equipment and provide for
working capital.
As of October 22, 1999, the Company's total indebtedness was
approximately $128.2 million. The Company's total indebtedness is
comprised of $99.3 million aggregate principal amount of the Notes, $23.9
million outstanding on the Foothill credit facility and $5.0 million of
combined loans and capitalized leases primarily incurred for the purpose of
financing capital expenditures.
The Company's principal uses of liquidity will be to provide working
capital, finance capital expenditures, make principal and interest payments
required by the terms of its indebtedness and fund expenses associated with
the implementation of its business strategy, including the acquisition and
processing of multi-client data. Because of the traditionally longer
period required to collect receivables and the high costs associated with
equipping and operating crews outside of the United States and Canada, the
Company requires significant levels of working capital to fund its
international operations. These operations accounted for 26% of total
revenues for the six months ended June 30, 1999.
Capital expenditures for the six months ended June 30, 1999 were $3.6
million. Capital expenditures are used to upgrade and expand the
Company's seismic data acquisition and recording equipment. The remaining
projected capital budget for 1999 is estimated to be $6.2 million with
approximately 50% of that amount dependent on future crew activity. For
the six months ended June 30, 1999, the Company committed approximately
$20.2 million of expenditures for seven multi-client data acquisition
projects principally located in Texas, California, Wyoming and Canada.
Customer commitments for those projects were approximately 58% of the
project costs. Net investment by the Company for these projects was $8.5
million. Throughout the remainder of 1999, the Company expects to commit
approximately $35.5 million, before customer commitments, for eight multi-
client data acquisition projects located in Texas, California, Wyoming and
Canada. The Company has committed to these projects and has designed its
more significant projects so that acquisition of the data can be performed
in as many as three phases. The Company's continued commitment at each
phase is dependent on securing adequate initial customer underwriting or
other suitable private financing in order to continue operations.
EFFECT OF INFLATION
Current economic conditions indicate that the costs of exploration and
production for oil and gas are increasing. The oil and gas industry
historically has experienced periods of rapid cost increases within short
periods of time as demand for drilling rigs, drilling pipe and other
materials and supplies increases. The oil and gas industry is currently
experiencing such increases in demand, which have historically led to rapid
increases in costs. Increases in exploration and production costs could
lead to a decrease in such activities by oil and gas companies, which would
have an adverse effect on the demand for the Company's services.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards requiring that every
derivative financial instrument be recorded in the balance sheet as either
an asset or a liability measured at its fair value, with certain changes in
fair value recognized currently in earnings. On July 7, 1999, the FASB
delayed the effective date of SFAS No. 133 for one year. The delay,
published as SFAS No. 137, applies to quarterly and annual financial
statements. SFAS No. 133, as revised by SFAS No. 137, is effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. The
Company has not yet determined the impact of adoption.
YEAR 2000 COMPLIANCE
The Company has developed a formal plan to address Year 2000 ("Y2K")
issues as they relate to the Company's business and its operations. In
accordance with that plan, the Company is taking inventory of, assessing,
testing and remediating where necessary, all hardware and software used in
its business. The Company is similarly identifying all external
relationships, including vendors, suppliers and customers, and will contact
all of those entities considered important or critical to its ongoing
operations, to determine their own level of Y2K readiness. In addition,
the Company is preparing contingency plans to address failures in
unidentified systems or temporary disturbances in local utilities and
infrastructure. The Company estimates that it will complete its plan,
including remedial action, during the fourth quarter of 1999.
Incremental out-of-pocket costs incurred through June 30, 1999 to
address the Y2K issue amount to approximately $1.2 million. The Company
anticipates that up to an additional $800,000 will be expended during the
third and fourth quarters of 1999 relating to this issue. These costs have
been, and are expected to continue to be, funded by cash flows from
operations.
To date, all critical items have been inventoried and assessed,
primarily by third party vendors. Internal assessment, testing and
remediation of critical components is effectively complete, with the exception
of some business applications, which are expected to be tested and deployed
by the end of the fourth quarter 1999. It is anticipated that contingency
planning and change control procedures will continue until the end of 1999.
Inventory and assessment of critical vendors / suppliers is complete.
While the Company believes that it has a readiness plan that will
mitigate the risk that the Y2K issue will have a material adverse effect on
its business, the ultimate impact of this issue on the Company is
uncertain. Long term interruptions in suppliers' ability to deliver
critical components, third parties' ability to supply utilities or
telecommunications to the Company's offices or field locations; or the
Company's failure to complete, in a timely manner, the remediation of its
non-compliant computer-controller equipment, could result in delayed
delivery of products to customers, resulting in a material adverse effect
on earnings and cash flow. Therefore, there can be no assurance that the
Y2K issue will not have a material effect on the Company's financial
position, results of operations or cash flows.
<PAGE>
BUSINESS
OVERVIEW
Grant is a leading provider of seismic data acquisition services in land
and transition zone environments in selected markets, including the United
States, Canada, Latin America and the Far East. Through its predecessors
and its subsidiaries, the Company has participated in the seismic data
acquisition services business in the United States and Latin America since
the 1940s, the Far East since the 1960s and Canada since the 1970s. The
Company has conducted operations in each of these markets, as well as in
the Middle East and Africa, in the past three years. The Company's seismic
data acquisition services typically are provided on an exclusive contract
basis to domestic and international oil and gas companies and seismic data
marketing companies. The Company also owns interests in certain multi-
client seismic data covering selected areas in the United States and Canada
that is marketed broadly on a non-exclusive basis to oil and gas companies.
The Company utilizes sophisticated equipment to perform specialized 3D
and 2D seismic surveys. All of the Company's seismic data acquisition
crews are capable of performing surveys in land environments, and two are
equipped to perform surveys in transition zone environments. Transition
zone environments include swamps, marshes and shallow water areas that
require specialized equipment and must be surveyed with minimal disruption
to the natural environment.
The Company also provides seismic data processing through offices
located in Midland, Dallas and Houston, Texas. Services are provided on an
exclusive contract basis to oil and gas companies and to the Company's own
multi-client projects.
Due to the volatility of the price of oil and gas over the past year,
capital spending by oil and gas companies on oilfield related activities,
including seismic data acquisition and processing, has decreased
substantially. As a result, beginning late in the third quarter of 1998
and continuing throughout the first and second quarters of 1999, the
Company's global seismic crew count, which includes both U.S. and foreign
contracts, decreased significantly. As of October 22, 1999 the Company was
operating or mobilizing 13 seismic data acquisition crews utilizing
approximately 25,000 seismic recording channels. Due to the current
availability of seismic recording channels within the Company, a typical
seismic crew is utilizing a significantly higher channel count today than a
year ago. The Company's current seismic recording channel capacity is
slightly more than 32,000. By contrast, as of September 27, 1998, the
Company was operating or mobilizing 18 seismic data acquisition crews
utilizing approximately 30,000 seismic recording channels.
The industry downturn that began late in the third quarter of 1998
prompted the Company to undertake activities it believed would both
preserve financial strength and position itself to respond when market
demand increases. Those activities included a worldwide reduction in
personnel, a restructuring of the Company's operations and marketing
efforts and a restricted capital expenditure program. Personnel reductions
began in the fourth quarter of 1998 and have continued throughout the first
nine months of 1999. Overall, personnel were reduced from 863 full-time
and 2,162 temporary at September 30, 1998 to 573 full-time and 1,874
temporary personnel at September 30, 1999. The corporate restructuring is
the result of changing market conditions and is designed to better utilize
all the Company's assets. The restructuring of the Company's operations
and marketing efforts places a greater emphasis on maximizing the value of
our multi-client data library in the United States and Canada and refocuses
the international marketing efforts on the Company's established foreign
markets.
Grant's principal executive offices are located at 16850 Park Row,
Houston, Texas 77084 and its telephone number is 281-398-9503.
THE INDUSTRY
Oil and gas companies regularly use seismic data acquisition services to
image and identify underground geological structures likely to trap
hydrocarbons, both to aid in the exploration for and development of new
hydrocarbon reservoirs and to enhance production from existing reservoirs.
Seismic data has been used in the exploration for oil and gas since the
late 1920s, and the application of seismic technology frequently has led to
significant discoveries of new oil and gas reservoirs. Seismology
encompasses the generation and recording of reflected or refracted seismic
energy that, when computer processed, produces 3D images or 2D cross
sections of the earth's subsurface structures. The computer processed
seismic data is used by geoscientists to identify geological
characteristics favorable for the accumulation of oil and gas and to
evaluate the potential for commercial production of oil and gas. More
recently, seismic data has been used to monitor and optimize the production
of existing oil and gas reservoirs. During the last fifty years,
seismology has become the leading method used by oil and gas companies to
identify and image underground geological structures favorable for
hydrocarbon accumulation.
Seismic data acquisition services companies acquire seismic data in land
and transition zone environments by deploying thousands of seismic sensors,
called geophones, over a portion of the area to be covered by the survey.
An energy source, such as a small explosive charge or mechanical vibrating
unit, is used to generate seismic energy that moves through the earth's
subsurface and is reflected by various underlying rock layers to the
surface, where it is detected by the geophones. For 2D seismic data
acquisition, the typical configuration of geophones and energy sources is a
single line with an energy source and small groups or strings of geophones
placed at even intervals every few hundred feet along the line. A geophone
string typically consists of six to twelve geophones connected by a cable.
For 3D seismic data acquisition the typical configuration is generally a
grid of perpendicular lines spaced a few hundred to a few thousand feet
apart, with geophone strings spaced at intervals every few hundred feet
along one set of parallel lines and energy sources spaced at intervals
every few hundred feet along the perpendicular lines. Recording
configurations must be carefully designed to provide optimal imaging of the
targeted subsurface structures, while taking into account surface
obstructions such as oil and gas wells and pipelines, or restricted areas
where permits to enter cannot be obtained.
As many as eight geophone strings are connected to a field recording box,
which collects the seismic data from those geophones. The electrical
output of each geophone string becomes the electrical input for one
recording channel, or "trace," of seismic data. Once the geophones and
field recording boxes are deployed over a portion of the survey area, an
energy source is activated, the reflected seismic energy is detected by the
geophones, and the signals from the geophones are collected and digitized
by the field recording boxes. These boxes in turn transmit the seismic
data by cable, radio telemetry or through hand-held data collection units
to a central recording system. The geophones and field recording boxes
from one end of the single recording line in the case of 2D seismic data,
or an area of multiple recording lines in the case of 3D seismic data, are
then removed and relocated elsewhere in the survey area. The seismic
energy source is again activated and the entire process is repeated, moving
a few hundred feet at a time, until the entire survey area is covered.
Historically, the acquisition of 2D seismic data was the principal seismic
data acquisition technique. However, with the advancement and
miniaturization of seismic data recording equipment and the improvement of
computer technology in the past ten years, high-density surveys, or 3D
seismic data, which provide a much more comprehensive subsurface image,
have become the industry standard. Recent technical advances in seismic
data acquisition and computer processing have also resulted in the
acquisition of higher-resolution surveys using three-component geophones,
known as 3C-3D, which permit the recording of shear wave information, in
addition to conventional vertical profile seismic data. In addition, the
industry is increasingly utilizing time-lapse 3D, or 4D, seismic data
acquisition techniques, where surveys are periodically reacquired to
monitor and optimize production of existing reservoirs.
Technical advances in the seismic services industry have increased the
probability of oil and gas exploration success and improved the delineation
of subsurface geological structures, which have in turn lowered overall
exploration and development costs and increased worldwide demand for
seismic services. In addition, the industry is experiencing growing demand
for non-exclusive multi-client seismic data due to the high cost and risk
of drilling exploration wells and the relatively high cost of acquiring and
processing 3D seismic data. Multi-client data allows numerous oil and gas
companies to purchase the same seismic data, thereby expanding the overall
market for such data while lowering the price charged each customer.
LAND AND TRANSITION ZONE SEISMIC DATA ACQUISITION
A land or transition zone seismic data acquisition crew typically consists
of a surveying crew that lays out the lines to be recorded and marks the
sites for energy source or geophone placement and equipment location, an
explosives or mechanical vibrating or compressed air unit crew, and a
recording crew that lays out the geophones and field recording boxes,
directs shooting operations and records the seismic energy reflected from
subsurface structures. A land seismic data acquisition crew utilizing an
explosives unit is supported by several drill crews, generally furnished by
third parties under short-term contracts. Drill crews operate in advance
of the seismic data acquisition crew and bore shallow holes for small
explosive charges that, when detonated, produce the necessary seismic
impulse. In locations where conditions dictate or where the use of
explosives is precluded due to regulatory, topographical or ecological
factors, a mechanical vibrating unit or compressed air unit is substituted
for explosives as the seismic energy source. The Company also employs
specialized crew mobilization equipment to improve productivity in certain
applications, including helicopters for rugged terrain or in agricultural
areas, small watercraft for transition zone applications, and man-portable
equipment in jungle and other environments where vehicular access is
limited. Depending on the size of the seismic survey, the location and
other logistical factors, a seismic data acquisition crew operated by the
Company may involve from as few as 30 to as many as 1,500 employees.
One of the challenges inherent in land seismic data acquisition is
operating in challenging logistical environments without disrupting the
sensitive ecosystems in which surveys are frequently located. The Company
currently operates approximately 10,000 channels of remote digital seismic
equipment, which can be deployed without the use of conventional seismic
cables, thereby allowing access to such environments. Remote digital
seismic equipment, which uses radio signals to transmit data, is typically
used in transition zone and other logistically challenging environments
such as highly populated regions with numerous topographic obstructions and
areas where conventional cable-based recording systems are impractical.
The Company has over 20 years of experience operating in transition zone
environments in the Gulf Coast region of the United States, the Far East
and Africa.
Once recorded by the seismic data acquisition crew, seismic data is
computer processed to enhance the recorded signal by reducing noise and
distortion and improving resolution to produce a representation of the
survey site's subsurface structures. The Company presently has three data
processing centers at which it performs seismic data processing services.
These centers are located in Houston, Dallas and Midland, Texas.
The Company markets its seismic data acquisition and processing services
from its Houston and Calgary corporate offices and its regional and
international administrative centers by personnel whose duties include
technical, supervisory or executive responsibilities. The Company
generally acquires seismic data on an exclusive contract basis for oil and
gas companies on (i) a turnkey basis, which provides a fixed fee for each
project, (ii) a term basis, which provides for a periodic fee during the
term of the project or (iii) a cost-plus basis, which provides that the
costs of a project, plus a percentage fee, are borne by the customer. In
addition, in the United States and Canada, the Company acquires and owns
certain multi-client seismic data that is marketed broadly on a non-
exclusive basis to oil and gas companies. Over the past year, as oil and
gas companies have moved toward multi-client surveys to reduce finding
costs, Grant has significantly increased its participation in the activity
and has expanded its library of multi-client data to include projects
located in Texas, California, Wyoming and the Canadian provinces of British
Columbia and Ontario.
The Company conducts a substantial portion of its business in currencies
other than the U.S. or Canadian dollars, particularly various Latin
American currencies, and its operations are subject to fluctuations in
foreign currency exchange rates. Accordingly, certain of the Company's
international contracts could be significantly affected by fluctuations in
exchange rates. The Company's international contracts requiring payment in
currency other than U.S. or Canadian dollars typically are indexed to
inflationary tables and generally are used for local expenses. The Company
attempts to structure the majority of its international contracts to be
billed and paid at a certain U.S. dollar conversion rate.
MARKET AREAS
In 1998, the Company conducted seismic operations in the United States,
Canada, Latin America and the Far East and has conducted activities in the
Middle East and West Africa within the last three years. The following
table sets forth the Company's revenues by geographic area, on a pro forma
basis for the years ended December 31, 1996 and 1997 and on an actual
basis for the year ended December 31, 1998, for the periods shown:
YEAR ENDED DECEMBER 31,
-------------------------------------
PRO FORMA
------------------------
1996(1) 1997(1) 1998
--------- ---------- ----------
(dollars in thousands)
United States $ 53,485 $ 61,630 $ 78,659
Canada 15,824 19,591 14,175
Latin America 60,688 69,877 52,604
Far East 5,412 13,482 30,074
West Africa and Middle East 2,746 9,285 -
--------- --------- ----------
$ 138,155 $ 173,865 $ 175,512
========= ========= ==========
______________
(1) Solid State's fiscal year end was August 31 prior to December 31, 1998
when it was changed to a calendar year. For pro forma purposes,
revenues for Solid State have been adjusted to reflect the periods
December 1 through November 30 for the year ended 1996 and to reflect
the period December 1, 1996 through August 31, 1997 to combine with
GGI's year ended 1996 and the nine months ended September 30, 1997 and
the Company's three months ended December 31, 1997. The revenues for
the three months ended December 31, 1997 include the combined operations
of Solid State and Grant. See Notes 1 and 4 to the Consolidated
Financial Statements of the Company and GGI for additional geographic
information.
BACKLOG
The Company's backlog for seismic data acquisition services represents the
revenues anticipated to be received by the Company in connection with
commitments for contracted services received from its customers. As of
September 30, 1999, the Company estimates that its backlog was
approximately $26 million. Most of the Company's contracts are terminable
by the customer upon relatively short notice and, in some cases, without
penalty. The Company's backlog as of any particular date is not indicative
of the likely operating results for any succeeding period, and there can be
no assurance that any amount of backlog will ultimately be realized as
revenue.
CAPITAL EXPENDITURES AND TECHNOLOGY
The Company's ability to compete and maintain a significant market
position in the land and transition zone seismic data acquisition business
is partially driven by its ability to provide technology comparable to that
of its primary competitors. Accordingly, the Company continually maintains
and periodically upgrades its seismic data acquisition equipment to
maintain its competitive position. The Company spent approximately $36.3
million on capital expenditures for the fifteen-month period ending
December 31, 1998. This included approximately $12.4 million in the fourth
quarter of 1997 and approximately $23.9 million during 1998. These
expenditures were used principally to upgrade and expand the Company's
seismic data acquisition equipment. Capital expenditures for the six-month
period ended June 30, 1999 were $3.6 million. The remaining projected capital
budget for 1999 is estimated to be $6.2 million with approximately 50% of that
amount dependent on future crew activity. The level of future capital
expenditures will depend on the availability of funding and market
requirements as dictated by industry activity levels.
Over the past several years, the Company has focused its efforts on
developing operating procedures and acquiring equipment that will enhance
the efficiency of its seismic data acquisition crews and reduce the time
required to complete projects. The Company's strategy does not contemplate
the development of proprietary seismic data acquisition equipment, but
instead relies on the use of third-party equipment suppliers to provide
such equipment, although certain equipment will be customized to the
Company's specifications to enhance operating efficiency. 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 third party technology through licensing, the
Company believes that substantially all presently licensed technology could
be replaced without significant disruption to its business.
LICENSING OF MULTI-CLIENT DATA
The Company acquires and processes seismic data for its own account by
conducting surveys, either partially or wholly funded by multiple
customers. In this mode of operation, the Company retains ownership of the
data and licenses the data on a non-exclusive basis. The Company has
budgeted approximately $2.8 million of expenditures, before customer
commitments, for costs expected to be incurred in the multi-client data
acquisition projects that remain to be completed in 1999.
Factors considered by the Company when determining whether to undertake a
multi-client survey include the availability of customer commitments to
offset a percentage of the project cost, the number of potential customers
for the completed data, the location to be surveyed, the probability and
timing of future lease, concession, exploration and development activity in
the area, and the availability, quality and price of competing data.
Although the Company anticipates obtaining commitments for a substantial
majority of the cost of any future multi-client data survey and conducts
thorough market and cost analyses to determine the market demand and
necessary funding prior to undertaking a project, the Company still may not
be able to fully recoup its costs if it substantially underestimates the
cost or overestimates market demand for such multi-client data survey.
CUSTOMERS AND PROJECTS
The Company's customers consist of domestic and international oil and gas
companies and seismic data marketing companies. As is the case for many
service companies in the oil and gas industry, a relatively small number of
customers or a limited number of significant projects may account for a
large percentage of the Company's net revenues in any given year.
Moreover, such customers and projects may, and often do, vary from year to
year. During 1998, the five largest customers of the Company accounted for
approximately 28.8% of the Company's net sales, and no single customer
accounted for 10% or more of the Company's revenues. In the first nine
months of 1997, GGI had revenues from a foreign national oil company of
approximately $14.0 million (15%) and also from a U.S. based exploration
company of approximately $9.9 million (11%). During 1997, on a pro forma
basis, the five largest customers of the Company accounted for
approximately 31.9% of the Company's net sales. During 1997, on a pro
forma basis, no customer accounted for 10% or more of the Company's
combined revenues. During 1996, GGI's five largest customers accounted for
approximately 42.3% of net sales. GGI, during 1996, had revenues from a
U.S. based international oil company of approximately $14.8 million (14%).
The Company has had long-term relationships with numerous customers. The
continuation of these relationships is primarily dependent on the
customers' needs for the Company's services and the customers' ongoing
satisfaction with the price, quality, dependability and availability of the
Company's services.
COMPETITION
The acquisition and processing of proprietary and multi-client seismic
data for the oil and gas industry is highly competitive worldwide.
However, as a result of changing technology and increased capital
requirements, the seismic industry has consolidated substantially since the
late 1980s, thereby reducing the number of competitors. The Company's
principal competitors in North America are Baker Atlas, Inc. ("Baker
Atlas"), a subsidiary of Baker Hughes, Inc., Veritas DGC, Inc., Geco-Prakla
Inc. ("Geco-Prakla"), a subsidiary of Schlumberger Limited, and several
regional competitors. In Latin America and the Far East, the Company
competes with Baker Atlas, Compagnie General de Geophysique, Geco-Prakla,
and several other local competitors. Competition is based primarily on
price, crew availability, prior performance, technology, safety, quality,
dependability and the contractor's expertise in the particular area where
the survey is to be conducted.
EMPLOYEES
As of September 30, 1999 the Company employed approximately 573 full-time
and 1,874 temporary contract personnel worldwide. None of the Company's
employees is subject to collective bargaining agreements. The Company
considers its relations with its employees to be good.
ENVIRONMENTAL MATTERS/GOVERNMENTAL REGULATION
The Company's domestic operations are subject to a variety of federal,
state and local laws and regulations relating to the protection of human
health and the environment, the violation of which may result in civil or
criminal penalties. The Company invests financial and managerial resources
to comply with such laws and regulations and management believes that it is
in compliance in all material respects with applicable environmental laws
and regulations. Although such environmental expenditures by the Company
historically have not been significant, there can be no assurance that
these laws and regulations will not change in the future or that the
Company will not incur significant costs in the future performance of its
operations. The Company is not involved in any legal proceedings
concerning environmental matters and is not aware of any claims or
potential liability concerning environmental matters that could have a
material adverse impact on the Company's financial position, cash flows or
results of operations.
The Company's operations outside of the United States are subject to
similar environmental regulation in a number of foreign locations,
including Canada, Latin America, and the Far East. Management believes
that the Company is in material compliance with the existing environmental
requirements of these foreign governmental bodies. The Company has not
incurred any significant environmental cost in connection with the
performance of its foreign operations; however, any regulatory changes that
impose additional environmental restrictions or requirements on the Company
or its customers could adversely affect the Company through increased
operating costs and decreased demand for the Company's services.
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The name, age and current principal position of each of our directors,
executive officers and significant employees as of October 10, 1999 are as
follows:
NAME AGE POSITION
- --------------------- ------- --------------------------------------
Donald W. Wilson 51 Chairman of the Board
Richard H. Ward 56 President, Chief Executive Officer,
and Director
Stephen H. Wood 58 Vice President and Chief Operating
Officer
Michael P. Keirnan 47 Vice President and Chief Financial
Officer
G. Matt McCarroll 42 Vice President - Business Development
W. Richard Anderson 45 Director
James R. Brock 39 Director
J. Kelly Elliott 68 Director
Jonathan D. Pollock 35 Director
Donald G. Russell 67 Director
Our executive officers are elected by and serve at the discretion of
our Board of Directors until their successors are duly elected and
qualified. There are no family relationships between or among any of our
directors or executive officers. See "Certain Relationships and Related
Transactions" for a description of certain other relationships between or
among our directors and executive officers.
DONALD H. WILSON has served as our Chairman of the Board since April 28,
1998 and as one of our directors since January 1998. Since October 1998,
Mr. Wilson has served as President and Chief Operating Officer of Odyssea
Marine, Inc., a marine services and power generation company controlled by
Elliott and Westgate. Mr. Wilson served as President and Chief Executive
Officer of Prime Natural Resources, Inc., an oil and gas exploration and
production company controlled by Elliott and Westgate, from January 1996
until October 1998. From January 1995 through December 1995, Mr. Wilson
served as Executive Vice President - Worldwide Operations of J. Ray
McDermott, S.A., a marine engineering and construction company. From
December 1992 through December 1994, Mr. Wilson served as President of OPI
International, Inc., a subsidiary of Offshore Pipelines, Inc., an
international marine construction company.
RICHARD H. WARD has served as our President and Chief Executive Officer
since February 1999. From October 1998 until January 1999, Mr. Ward was
General Manager of Canadian Hunter Argentina S.A., an oil and gas company
operating in Argentina, and was also a business consultant in Argentina
from January 1998 to September 1998. Mr. Ward served as Vice President -
Latin America of Landmark Graphics, a computer graphics company
specializing in petroleum exploration, from June 1996 until December 1997
and served as Manager - Geophysical Department of YPF S.A., the former
national oil company of Argentina, from June 1994 to May 1996. He was also
the General Manager of Latin American Operations of Veritas Geophysical
from January 1994 until May 1994. Previously, Mr. Ward held key management
positions from 1989 to 1993 at Western Atlas International, an
international geophysical services company, and from 1970 to 1989 at
Geosource, an oilfield services contractor that was acquired by Halliburton
in 1988.
STEPHEN H. WOOD has served as our Vice President and Chief Operating
Officer since February 1999. From November 1997 to February 1998, Mr. Wood
was the President of Universal Seismic Acquisition and Technologies, Inc.
and Chief Operating Officer of its parent company, Universal Seismic
Associates. From 1993 through November 1997, Mr. Wood was President of
Vortex Geophysical Operations, a consulting company specializing in
geophysical data and survey processing. He was previously employed by
Halliburton Geophysical Services, and its predecessor companies, from 1965
until 1992.
MICHAEL P. KEIRNAN has served as Vice President and Chief Financial
Officer since May 1999. Mr. Keirnan previously served as Vice President
and Assistant to President from August 1998 to May 1999 and as our Vice
President and Chief Financial Officer from September 30, 1997 until August
1998. He was Vice President and Chief Financial Officer of GGI from
February 1997 until September 30, 1997. From March 1996 until February
1997, Mr. Keirnan served as Manager of Treasury Operations of Gundle/SLT
Environmental, Inc., a plastic lining manufacturing company. Mr. Keirnan
also served as Controller and Treasurer of GGI from June 1993 through March
1996 and held other senior financial management positions with GGI dating back
to 1988.
G. MATT MCCARROLL has served as our Vice President - Business
Development since July 1999. Mr. McCarroll previously served as President
of Augusta Petroleum Partners, L.L.C., a petroleum exploration and
acquisition company, from 1997 until July 1999. He was employed by Plains
Resources Inc., an oil and gas exploration and production company, as Vice
President - Land and Exploration, from 1988 to 1997.
W. RICHARD ANDERSON has served as one of our directors since January
1998. Mr. Anderson previously served as a director of Solid State from
December 1996 through December 1997. He has served as a partner, and later
as a managing partner, of Hein & Associates LLP, a certified public
accounting firm. He is currently the Executive Vice President, Chief
Financial Officer and a director of Prime Natural Resources.
JAMES R. BROCK has served as one of our directors since January 1998.
Since October 1998, Mr. Brock has served as Executive Vice President and
Chief Financial Officer of Odyssea Marine. From January 1995 through
October 1998, Mr. Brock served as Executive Vice President and Chief
Financial Officer of Prime Natural Resources. He has also served as a
director of Prime Natural Resources through February 1998. From January
1993 until January 1995, Mr. Brock served as Vice President-Treasurer of
Offshore Pipelines and also as its Corporate Controller and Chief
Accounting Officer from 1990. He was employed by Arthur Andersen & Co.
from 1981 to 1990.
J. KELLY ELLIOTT has served as one of our directors since September 30,
1997. Previously, Mr. Elliott was Chairman of the Board of GGI from June
1993 through November 1995 and from November 1996 to September 1997. Mr.
Elliott has served as Chairman, President and Chief Executive Officer of
Sigma Electronics, Inc., an electronics and manufacturing company, since
1991. Mr. Elliott is also Chairman of Seaboard International, a wellhead
and valve manufacturing company.
JONATHAN D. POLLOCK has served as one of our directors since September
30, 1997 and served as our Chairman of the Board from September 30, 1997
until April 28, 1998. Mr. Pollock has served as a Portfolio Manager with
Stonington Management Corporation, the management company of Elliott and
Westgate, since 1993. Mr. Pollock is also Chairman of the Board of Prime
Natural Resources, a director of Horizon Offshore, Inc., an offshore oil
and gas pipeline construction company controlled by Elliott and Westgate,
and Chairman of the Board of Odyssea Marine.
DONALD G. RUSSELL has served as one of our directors since September 30,
1997. He also served as a director of GGI from February 1997 until
September 30, 1997 and from July 1993 through November 1995. Mr. Russell
served as Chairman of the Board and Chief Executive Officer of Sonat
Exploration Company, an oil and gas exploration company, from 1988 until
May 1998, and served as a director of Sonat, Inc., a diversified energy
company, from 1994 until May 1998. He has been Chairman of the Russell
Companies since May 1998.
DIRECTOR COMPENSATION
We pay each of our nonemployee directors a monthly retainer of $1,000 as
well as $500 for each board or committee meeting that they attend. Under
our 1997 Equity and Performance Incentive Plan (the "Incentive Plan"),
nonemployee directors will receive 3,000 restricted shares of common stock
on the date that the director is first elected (after the adoption of the
Incentive Plan) and again upon the date of each subsequent reelection to
the Board of Directors. Nonemployee directors are also eligible to receive
other awards under the Incentive Plan. See "-- 1997 Equity and Performance
Incentive Plan."
On April 28, 1998, we entered into a consulting agreement with Donald W.
Wilson that pays Mr. Wilson an annual consulting fee of $100,000 for as
long as he remains our Chairman of the Board. The consulting agreement
also required us to grant an option to Mr. Wilson to purchase 50,000 shares
of our common stock under the Incentive Plan which vests annually in equal
one-third increments, the first vesting having occurred on December 31,
1998, and which has an average exercise price of $5.76 per share.
EXECUTIVE COMPENSATION
The following table summarizes all compensation earned by or paid to our
previous Chief Executive Officer and to each of the two other most highly
compensated executive officers presently in our employ whose total annual
salary and bonus exceeded $100,000 for all services rendered in all
capacities to us during the fiscal year ended December 31, 1998. We did
not, in that fiscal year, have any other executive offers whose total
annual salary and bonus exceeded $100,000. We were organized in September
1997 and did not conduct any operations or have any employees before that
time. As a result, we do not have any executive officers with respect to
whom disclosure of executive compensation is required under the Securities
Act of 1933 or the rules and regulations promulgated thereunder for 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- -------------
NAME AND OTHER ANNUAL AWARDS ALL OTHER
PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS COMPENSATION
- ---------------------- ------ --------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Larry E. Lenig, Jr.(1) 1998 $180,000 340,000 $ 8,700
Chief Executive Officer
Michael P. Keirnan(2) 1998 $ 97,000 36,000 $ 1,391
Vice President and
Assistant to the
President
D. Hugh Fraser(3) 1998 $104,400 36,000 $ 8,727
Vice President,
Southern U.S.
Operations
</TABLE>
_______________
(1) Mr. Lenig became President and Chief Executive Officer effective
September 30, 1997. In conjunction with his appointment, Mr. Lenig was
awarded stock options. Mr. Lenig resigned as President and Chief
Executive Officer on January 27, 1999.
(2) Mr. Keirnan was Chief Financial Officer from September 30, 1997 to
August 25, 1998, when he became Assistant to the President. Mr. Keirnan
became Vice President and Chief Financial Officer of the Company
effective in May 1999.
(3) Mr. Fraser became the Director of Sales and Marketing effective March
12, 1999.
Richard H. Ward became President and Chief Executive Officer effective
February 3, 1999. Mr. Ward's compensation includes a base salary of
$225,000 and a bonus, awarded by our Board of Directors in its sole
discretion. Mr. Ward was also granted options to purchase 600,000 shares
of our common stock.
Stephen H. Wood became Vice President and Chief Operating Officer
effective February 24, 1999. Mr. Wood's compensation includes a base
salary of $200,000 and a bonus, awarded by our Board of Directors in its
sole discretion. Mr. Wood was also granted options to purchase 200,000
shares of our common stock.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the information regarding options granted
to our executive officers listed in the Summary Compensation Table during
the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL
GRANTS
----------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT
OPTIONS ASSUMED ANNUAL RATES
GRANTED TO EXERCISE OF STOCK PRICE
EMPLOYEES OR APPRECIATION
IN BASE FOR OPTION TERM
OPTIONS FISCAL PRICE ---------------------
NAME GRANTED YEAR ($/SH) EXPIRATION DATE 5% 10%
- ------------------- ------- ---------- ---------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Larry E. Lenig, Jr. 240,000 15.3% 5.76 February 18, 2008 $391,000 $622,000
100,000 6.4% 4.75 September 22, 2000 110,000 121,000
Michael P. Keirnan 36,000 2.3% 5.76 February 18, 2008 59,000 93,000
D. Hugh Fraser 36,000 2.3% 5.76 February 18, 2008 59,000 93,000
</TABLE>
AGGREGATED OPTION EXERCISES IN 1998
AND 1998 YEAR-END OPTION VALUES
The following table sets forth information with respect to the
unexercised options to purchase shares of our common stock that were
granted in 1998 or a prior year under our Incentive Plan to the executive
officers listed in the Summary Compensation Table and held by them on
December 31, 1998. None of the named executive officers exercised any
stock options during 1998.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTION
OPTIONS AT YEAR-END AT YEAR-END (1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Larry E. Lenig, Jr. 80,000 160,000 $ -- $ --
Michael P. Keirnan 12,000 24,000 -- --
D. Hugh Fraser 12,000 24,000 -- --
</TABLE>
(1) There is no trading market for the Common Stock.
EMPLOYMENT AGREEMENTS
On January 27, 1999, we entered into a separation agreement and release
with Larry E. Lenig, Jr. in connection with his resignation as our
President and Chief Executive Officer. This agreement replaced and
superseded our earlier employment agreement with Mr. Lenig. Under the
terms of the separation agreement, Mr. Lenig will receive $15,000 per
month, plus health benefits, from March 1999 through December 2001 and
$7,500 per month, plus health benefits, from January 2002 through December
2003. Mr. Lenig also received a bonus of $180,000, which was earned
pursuant to his employment agreement with us based upon our 1998 results.
He was also allowed to retain 80,000 of the stock options awarded to him
under our Incentive Plan. Mr. Lenig's retained options are exercisable
until February 2002. Mr. Lenig agreed that until December 31, 2003, he
would not compete with us, contact our customers or solicit any of our
employees to leave our employ.
Effective February 3, 1999, we entered into an employment agreement with
Richard H. Ward in which he has agreed to serve as our President and Chief
Executive Officer. The employment agreement has an initial term through
February 3, 2002 and provides for an annual base salary of $225,000. In
the event Mr. Ward is terminated without cause (as defined in his
employment agreement), then we must make base salary payments to him for
the remainder of the term of the agreement. In the event that we terminate
Mr. Ward's employment because our Board of Directors reasonably determines
that Mr. Ward has failed to perform his obligations under his employment
agreement in a manner consistent with our Board's expectations, we must
make payments of 50% of his base salary for the remainder of the term of
the agreement. Mr. Ward has agreed not to compete against us throughout
the term of his employment and for two years after. He has also agreed not
to disclose any confidential information during or after the term of his
employment.
Effective February 24, 1999, we entered into an employment agreement
with Stephen H. Wood in which he has agreed to serve as our Chief Operating
Officer. The employment agreement has an initial term through February 24,
2002 and provides for an annual base salary of $200,000. In the event that
Mr. Wood is terminated without cause (as defined in his employment
agreement), we must make payments to him of 50% of his base salary for the
remainder of the term of the agreement. Mr. Wood has agreed not to compete
against us throughout the term of his employment and for two years after.
He has also agreed not to disclose any confidential information during or
after the term of his employment. *
1997 EQUITY AND PERFORMANCE INCENTIVE PLAN
Our 1997 Equity and Performance Incentive Plan was adopted by our Board
of Directors and approved by our stockholders in December 1997. We have
amended our Incentive Plan on two occasions to increase the numbers of
shares of our common stock reserved for issuance, which presently numbers
2,000,000 shares. The Incentive Plan provides for grants to our officers
(including officers who are also directors), employees, consultants and
nonemployee directors. These individuals may be granted awards of
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, nonstatutory stock options, stock appreciation rights
and restricted shares and deferred shares of our common stock.
Our Board of Directors, or a committee of our Board of Directors
consisting of at least two nonemployee directors, is required to administer
our Incentive Plan. The administrator will decide to whom awards may be
granted, the type of award to be granted and determine, as applicable, the
number of shares to be subject to each award, the exercise price and the
vesting. In making such determinations, the administrator will take into
account the employee's present and potential contributions to our success
and other relevant factors. As of September 15, 1999, our Board of
Directors had granted outstanding awards covering 1,802,500 shares.
Options awarded to Richard H. Ward and Stephen H. Wood (covering a total of
800,000 shares) have an average exercise price of $4.25 and will vest
annually in equal one-third increments beginning on February 1, 2000. All
other options awarded have an average exercise price of $5.05 per share
(range of $4.75 to $6.84 per share), subject to adjustment in certain
circumstances, and vest annually in one-third increments, the first third
having vested on December 31, 1998. In addition, 6,000 restricted shares
(36,000 total restricted shares) were granted to each non-employee
director. As of February 18, 1999, all shares granted to non-employee
directors were unrestricted, subject to the satisfaction of certain
conditions set forth under the Incentive Plans.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table summarizes information regarding beneficial
ownership of our common stock as of October 20, 1999 by our directors, our
5% stockholders and executive officers still in our employ. Also listed is
the percentage of our total common stock all executive officers and
directors own as a group. We believe, unless otherwise indicated, that
each person listed below has sole voting power and investment power with
respect to the shares attributed to them.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF COMMON
NAME OF BENEFICIAL OWNER OWNERSHIP STOCK
- ------------------------------- ------------- --------
<S> <C> <C>
Elliott Associates, L.P.(1) 6,154,667 42.4%
Westgate International, L.P.(2) 6,154,666 42.4%
Richard H. Ward -- *
Steven H. Wood -- *
Michael P. Keirnan 24,000(3) *
D. Hugh Fraser 24,000(3) *
Donald W. Wilson 39,333(3) *
W. Richard Anderson 6,000 *
James R. Brock 6,000 *
J. Kelly Elliott 6,000 *
Jonathan D. Pollock 6,000 *
Donald G. Russell 6,000 *
All executive officers and
directors as a group (10 persons) 117,333(4) *
</TABLE>
_______________
* Less than 1%.
(1) Paul E. Singer and Braxton Associates L.P., which is controlled by
Mr. Singer, are the general partners of Elliott. The business address of
Elliott is 712 Fifth Avenue, 36th Floor, New York, New York 10019.
(2) Hambledon, Inc., which is controlled by Mr. Singer, is the sole
general partner of Westgate. Martley International, Inc., which is
controlled by Mr. Singer, is the investment manager for Westgate.
Martley expressly disclaims equitable ownership of and pecuniary
interest in any shares of common stock. The business address of
Westgate is Westgate International, L.P. c/o Midland Bank Trust
Corporation (Cayman) Limited, P.O. Box 1109, Mary Street, Grand
Cayman, Cayman Islands, British West Indies.
(3) Includes option grants covering the following number of shares that
are exercisable by December 31, 1999: Mr. Keirnan 12,000;
Mr. Fraser 12,000; Mr. Wilson 16,667.
(4) Includes 40,667 shares subject to options that are exercisable by
December 31, 1999 held by executive officers and directors.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
REGISTRATION RIGHTS AGREEMENT
On September 19, 1997, we entered into a Registration Rights Agreement
with Elliott and Westgate. Pursuant to that agreement, Elliott and Westgate
have the right to require or "demand" the registration of all common stock
that they beneficially own. Such demand rights are subject to the
condition that we would not be required to effect more than a total of five
demand registrations. The registration rights agreement also provides that
no more than three demand registrations can be made in one twelve-month
period. Covered stockholders also have the right to participate, or
"piggyback," in equity offerings if we propose to register any of our
equity securities under the Securities Act of 1933 for our own account or
for the account of other stockholders. This participation is subject to a
reduction of the size of such offering on the advice of the underwriters.
We are required to pay all expenses in connection with such demand and
piggyback registrations and are required to indemnify the selling
stockholders against certain liabilities, including liabilities under the
Securities Act. The rights provided in the registration rights agreement
are transferable to transferees of all covered securities.
LOAN AND SECURITY AGREEMENT WITH ELLIOTT
On October 1, 1997, we entered in to a credit facility with Elliott
under which we could borrow up to $5 million in principal amount of
revolving loans at an annual interest rate equal to the prime rate plus 2%.
Loans to us under the credit facility were secured by liens on most of our
and our subsidiaries' assets, as well as by guarantees of our subsidiaries
in favor of Elliott. Under that credit facility, Elliott advanced us $1.6
million in revolving loans and $15.8 million under a term note (which was
satisfied upon the issuance of the 9 3/4 % Senior Notes as described
below) to fund the acquisition of Solid State Geophysical, Inc. On June 5,
1998, in connection with the redemption of 10,000 shares of preferred stock
held by Westgate, we amended the credit facility to increase our borrowing
capacity to $15 million and we extended the term of the facility to March
31, 2000. We satisfied all of our obligations under this credit facility
with proceeds from our new credit facility with Foothill and Elliott.
THE ACQUISITION OF SOLID STATE GEOPHYSICAL, INC.
In connection with our acquisition of Solid State Geophysical, Inc.,
the principal stockholders of Solid State transferred their shares to us
for 4,652,555 shares of our common stock. Elliott and Westgate then
advanced us the funds to consummate our tender offer for Solid State. As a
result of the acquisition, we, through our acquisition subsidiary, SSGI,
assumed $36.4 million of debt of Solid State, of which $16.7 million was
held by Elliott and Westgate. We used a portion of the proceeds from the
offering of our senior notes to repay substantially all of this assumed
indebtedness.
THE REORGANIZATION OF GRANT GEOPHYSICAL, INC.
In connection with the Second Amended Plan of Reorganization of Grant
Geophysical, Inc. and in exchange for the satisfaction of certain claims
against our predecessor corporation, GGI, by Oyo Geospace Corporation,
Foothill Capital Corporation and Madeleine, L.L.C., we issued 19,571.162
shares of our preferred stock to Elliott and Westgate.
On December 19, 1997, we exchanged 9,571.162 shares of preferred stock
held by Elliott for a subordinated note. Elliott had previously loaned
$10.2 million to us on November 26, 1997, under a demand promissory note
with interest at a rate per annum equal to the prime rate plus 2%. On
December 30, 1997, we paid, utilizing funds provided by Elliott and
Westgate, the remainder of the cash purchase price, approximately $34.8
million, which included the satisfaction of the Madeleine claim and the
cancellation of the demand promissory note. In return, we issued 9.5
million shares of our common stock to Elliott and Westgate.
Pursuant to the reorganization plan of Grant, we were required to
conduct a rights offering of shares of our common stock to certain holders
of claims against us. Elliott and Westgate exercised their right to
acquire 100% of the stock of Grant on the date the reorganization was
consummated and conducted a subscription offering of their shares at a
later date in lieu of the rights offering. In 1998, we registered
3,459,414 shares of our common stock held by Elliott and Westgate pursuant
to a subscription offering conducted by them in order to satisfy their
subscription offering obligations under the reorganization plan. A total
of 2,080,722 shares (14.6%) of our common stock were subscribed for and in
exchange, Elliott and Westgate received proceeds of approximately $9.9
million. In addition, upon the consummation of the subscription offering,
we issued 237,500 shares of our common stock to Elliott.
SENIOR NOTE OFFERING
On February 18, 1998, we issued $100 million aggregate principal
amount of 9 3/4 % Senior Notes due 2008, which are guaranteed by certain
of our subsidiaries. The proceeds from the senior note issuance were used
to repay indebtedness of Solid State (which we assumed in the acquisition)
plus other indebtedness held by Elliott, for capital expenditures and for
working capital purposes.
OPTION GRANT OF OUR COMMON STOCK BY ELLIOTT
On April 28, 1998, Elliott granted to Donald W. Wilson an option to
purchase 100,000 shares of our common stock from Elliott. This option
vests annually in equal one-third increments beginning on December 31,
1998, and has an average exercise price of $5.76 per share.
REDEMPTION OF PREFERRED STOCK HELD BY WESTGATE
On June 5, 1998, we redeemed 10,000 shares of preferred stock held by
Westgate, representing all of our outstanding preferred stock at the time,
for a redemption price of $10.7 million. This price was a total of the
liquidation amount of the preferred stock plus all accumulated, accrued and
unpaid dividends We canceled and retired the shares after their
redemption.
LOAN AND SECURITY AGREEMENT WITH FOOTHILL AND ELLIOTT
On May 11, 1999, we entered into a Loan and Security Agreement with
Foothill Capital Corporation and Elliott. Under the terms of the
agreement, we may borrow up to $6 million through a revolving credit
facility and up to $19 million through two term loans. We must pay
interest on any such borrowing at annual rate equal to the prime rate plus
1 1/2 %. Proceeds from the loans made under this loan agreement were
used to repay all of our $14.8 million outstanding indebtedness to Elliott
under our previous credit facility and to provide us with additional
liquidity and working capital to support our operations. On August 12,
1999, the loan agreement was amended to modify components of our earnings
calculations under the agreement and to allow interest payments on portions
of our subordinated indebtedness purchased by Elliott. On September 23,
1999, the loan agreement was amended to increase the maximum principal
amount of indebtedness under the Foothill term loan to $11.67 million and
to revise the repayment schedule of that loan.
SALES OF OUR 8% EXCHANGEABLE PREFERRED STOCK TO ELLIOTT
Between August 13, 1999 and October 20, 1999, we issued a total of
90,000 shares of our 8% Exchangeable Preferred Stock to Elliott at a price
of $100 per share. The proceeds from the sale of the preferred stock
totaled an aggregate of $9,000,000 and were used to provide us with
additional working capital. Additionally, we issued 677 shares of our 8%
Exchangeable Preferred Stock to Elliott as of October 1, 1999 as dividends
on the 8% Exchangeable Preferred Stock payable on that date.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of our
common stock, $0.001 par value per share, and 5,000,000 shares of our
preferred stock, $ 0.001 par value per share. As of October 22, 1999,
there were 14,526,055 shares of our common stock and 90,000 shares of our
preferred stock outstanding. The following summary description of our
capital stock may not be complete and is qualified in its entirety by
reference to our Amended and Restated Certificate of Incorporation and our
Amended and Restated Bylaws. Copies of these documents are filed as
exhibits to the registration statement, of which this prospectus forms a
part.
COMMON STOCK
All outstanding shares of our common stock are fully paid and
nonassessable. All holders of our common stock have full voting rights and
are entitled to one vote for each share held of record on all matters
submitted to a vote of our stockholders. The holders of our 8% Convertible
Preferred Stock will be entitled to vote together with the holders of our
common stock as a class on any matter on which the holders of our common
stock are entitled to vote. Votes may not be cumulated in the election of
our directors. Stockholders have no preemptive or subscription rights
other than the rights offered under this offering. Our common stock is
neither redeemable nor convertible, and there are no sinking fund
provisions. Holders of our common stock are entitled to dividends when, as
and if declared by our Board of Directors from funds legally available
therefor and are entitled, upon liquidation, to share ratably in all assets
remaining after payment of our liabilities. The rights of holders of our
common stock will be subject to any of our preferential rights of any
preferred stock that is issued and outstanding or that may be issued in the
future.
PREFERRED STOCK
Our Board of Directors has the authority, without approval of our
stockholders, to issue shares of preferred stock in one or more series and
to fix the number of shares, rights, preferences and limitations of each
series. Among the specific matters with respect to the preferred stock
that may be determined by our Board of Directors are the dividend rights,
the redemption price, if any, the terms of a sinking fund, if any, the
amount payable in the event of any voluntary liquidation, dissolution or
winding up of our affairs, conversion rights, if any, and voting powers, if
any.
THE 8% EXCHANGEABLE PREFERRED STOCK
VOTING RIGHTS
Except as otherwise required by Delaware law, holders of our 8%
Exchangeable Preferred Stock shall not be entitled to vote on any matter
submitted to a vote of our stockholders. In all cases where Delaware law
provides that the holders of our 8% Exchangeable Preferred Stock are
entitled to vote, holders shall have one vote for each share of our 8%
Exchangeable Preferred Stock that they hold.
DIVIDENDS
The holders of our 8% Exchangeable Preferred Stock are entitled to
receive cumulative dividends at the annual rate of 8% of the liquidation
value per share. If our Board of Directors so decides, any dividend may be
paid in kind with additional shares of our 8% Exchangeable Preferred Stock.
LIQUIDATION PREFERENCE
In the event of our liquidation, dissolution, sale or winding up,
holders of our 8% Exchangeable Preferred Stock are entitled to receive $100
per share (as adjusted from time to time for any stock dividends,
combinations or splits) plus all accrued or declared but unpaid dividends.
If our assets and funds legally available for distribution to the holders
of our 8% Exchangeable Preferred Stock are insufficient to permit payment
of their full preferential amount, then such holders will be entitled to
share ratably the entire amount of such assets or funds legally available
for distribution.
REDEMPTION
We have the right to redeem the shares of our 8% Exchangeable
Preferred Stock upon 60 days notice, at a price per share of the
liquidation value (initially $100, but which may have been adjusted for any
stock dividends, combinations or splits) plus all accrued or declared but
unpaid dividends.
EXCHANGE RIGHTS
As long as any shares of our 8% Exchangeable Preferred Stock are
outstanding, holders of the 8% Exchangeable Preferred Stock may exchange
them for any new securities that we may propose to sell or issue. Holders
who elect to exchange will receive new securities having a purchase price
equal to the total liquidation value of our 8% Exchangeable Preferred Stock
exchanged, plus all accumulated and unpaid dividends thereon.
THE 8% CONVERTIBLE PREFERRED STOCK
Upon completion of the exchange offer, up to 839,808 shares of our 8%
Convertible Preferred Stock will be outstanding.
VOTING RIGHTS
The holders of our 8% Convertible Preferred Stock shall vote together
as a single class with all other classes of our capital stock on all
matters submitted to a vote of our stockholders. Each share of 8%
Convertible Preferred Stock is entitled to the number of votes equal to the
number of shares of full shares of our common stock into which it is
convertible. In all cases where Delaware law provides that the holders of
our 8% Convertible Preferred Stock are entitled to vote separately as a
class, holders shall have one vote for each share of our 8% Convertible
Preferred Stock that they hold.
DIVIDENDS
The holders of our 8% Convertible Preferred Stock are entitled to
receive cumulative dividends at the annual rate of 8% of the liquidation
value per share. Dividends will be paid on the first business day of each
January, April, July and October beginning January 1, 2000. If our Board
of Directors so decides, any dividend may be paid in kind with additional
shares of our 8% Convertible Preferred Stock. We intend to pay dividends
on the 8% Convertible Preferred Stock in additional shares at the present
time.
LIQUIDATION PREFERENCE
In the event of our liquidation, dissolution, sale or winding up,
holders of our 8% Convertible Preferred Stock are entitled to receive $100
per share (as adjusted from time to time for any stock dividends,
combinations or splits) plus all accrued or declared but unpaid dividends.
If our assets and funds legally available for distribution to the holders
of our 8% Convertible Preferred Stock are insufficient to permit payment of
their full preferential amount, then such holders will be entitled to share
ratably the entire amount of such assets or funds legally available for
distribution.
RANKING
The 8% Convertible Preferred Stock will rank as follows:
* senior to our common stock and all of our other capital stock
unless the terms of the other capital stock expressly provide
that it ranks equally with the 8% Convertible Preferred Stock;
and
* equally to any of our capital stock that have terms that
expressly provide that it will rank equally with the 8%
Convertible Preferred Stock. At the time of the closing of the
subscription offering and the exchange offer, all of our
outstanding capital stock will rank junior to the 8% Convertible
Preferred Stock.
REDEMPTION
We have the right to redeem the shares of our 8% Convertible Preferred
Stock, upon 60 days notice, at any time at a price per share equal to the
liquidation value (initially $100, but which may have been adjusted for any
stock dividends, combinations or splits) plus all accrued or declared but
unpaid dividends. Any 8% Convertible Preferred Stock that we redeem shall
cease to be outstanding and the holders' right to dividends shall end at
that time.
CONVERSION RIGHTS
At the option of the holder, shares of our 8% Convertible Preferred
Stock may converted into shares of our common stock. The number of shares
of our common stock received upon conversion shall be determined by
dividing the liquidation preference plus all accrued or declared but unpaid
dividends by the conversion price then applicable to our 8% Convertible
Preferred Stock. The initial conversion price of $3.00 may from time to
time be adjusted for stock dividends, combinations, splits or other
distributions.
If the conversion price is adjusted, we will issue each holder of our
8% Convertible Preferred Stock a certificate detailing such adjustments.
We will not issue any fractional shares upon any conversion into our common
stock, all fractional shares shall be rounded up to the nearest whole
share.
<PAGE>
LEGAL MATTERS
The validity of the issuance of the rights offered by us in the
Subscription Offering and the preferred stock offered by us in the exchange
offering will be passed upon for us by Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P.
EXPERTS
The consolidated financial statements of Grant Geophysical, Inc. as of
December 31, 1998 and for the year then ended included in this prospectus
have been so included in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The consolidated financial statements of GGI as of December 31, 1996
and the nine-month period ended September 30, 1997 and the consolidated
financial statements of Grant Geophysical, Inc. as of December 31, 1997
have been included in this prospectus in reliance upon the report of KPMG
LLP, independent certified public accountants, and upon the authority of
KPMG as experts in accounting and auditing.
The report of KPMG LLP covering the December 31, 1996 financial
statements of GGI contains an explanatory paragraph that states that GGI's
recurring losses from operations and net capital deficiency raise substantial
doubt about the entity's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 with
respect to the rights and the preferred stock offered hereby. This
prospectus, which constitutes a part of the registration statement, does
not contain all of the information set forth in the registration statement.
Certain items may have been omitted from the prospectus as permitted by the
rules and regulations promulgated by the SEC. For further information with
respect to Grant Geophysical, Inc., the rights and the preferred stock
offered, please refer to the registration statement and its accompanying
exhibits. Statements made in this prospectus as to the provisions of any
contract, agreement or other document referred to are not necessarily
complete. With respect to each such statement as to a contract, agreement
or other document filed as an exhibit to the registration statement, please
refer to the exhibit for a more complete description of the matter
involved.
You may read and copy the registration statement and the exhibits, as
well as any reports and other information that we must file with the SEC,
at the public reference facilities of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may also read and copy such information at the
SEC's regional offices located at 7 World Trade Center, Suite 1300, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Additionally, our SEC filings are available to the
public from the SEC's website at http://www.sec.gov.
<PAGE>
ANNEX I - THE PROPOSED AMENDMENTS TO THE INDENTURE GOVERNING
THE 9 3/4 SENIOR NOTES DUE 2008
Set forth below are the proposed amendments to the indenture governing
the 9 3/4 Senior Notes due 2008. The provisions of the indenture set
forth below are qualified in their entirety by reference to the full and
complete terms contained in the indenture. Capitalized terms used herein
without definition have the same meanings as set forth in the indenture.
If the proposed amendments become effective, we propose that provisions
substantially in the form of the DOUBLE UNDERLINED clauses below will be
added to the indenture and that provisions which are in strikethrough text
will be deleted from the indenture. The actual amended provisions may
differ from the proposed amendments set forth below, provided the substance
remains the same.
(NOTE: DOUBLE UNDERLINED TEXT IS CAPITALIZED ON THE ELECTRONIC FILING OF
THIS DOCUMENT).
(NOTE: STRIKETHROUGH TEXT IS ENCLOSED BY ## ON THE ELECTRONIC FILING OF THIS
DOCUMENT).
Section 1.1 DEFINITIONS shall be amended as follows:
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meaning correlative to the foregoing. For purposes of this definition,
beneficial ownership of ##10% or more## MORE THAN 50% of the voting common
equity (on a fully diluted basis) or options or warrants to purchase such
equity (but only if exercisable at the date of determination or within 60
days thereof) of a Person shall be deemed to constitute control of such
Person.
"Consolidated EBITDA Coverage Ratio" means, for any period, the ratio
on a pro forma basis of (a) the sum of Consolidated Net Income,
Consolidated Interest Expense, Consolidated Income Tax Expense and
Consolidated Non-cash Charges deducted in computing Consolidated Net
Income, in each case, for such period, of the Company and its Restricted
Subsidiaries on a consolidated basis, all determined in accordance with
GAAP, to (b) the sum of such Consolidated Interest Expense for such period;
provided, however, that (i) the Consolidated EBITDA Coverage Ratio shall be
calculated on a pro forma basis assuming that (A) the Indebtedness to be
incurred (and all other Indebtedness incurred after the first day of such
period of four full fiscal quarters referred to in Section 10.12(a) hereof
through and including the date of determination), and (if applicable) the
application of the net proceeds therefrom (and from any other such
Indebtedness), including to refinance other Indebtedness, had been incurred
on the first day of such four-quarter period and, in the case of Acquired
Indebtedness, on the assumption that the related transaction (whether by
means of purchase, merger or otherwise) also had occurred on such date with
the appropriate adjustments with respect to such acquisition being included
in such pro forma calculation and (B) any acquisition or disposition by the
Company or any Restricted Subsidiary of any Properties outside the ordinary
course of business, or any repayment, REDEMPTION OR EXTINGUISHMENT of any
principal amount of any Indebtedness of the Company or any Restricted
Subsidiary prior to the Stated Maturity thereof, in either case since the
first day of such period of four full fiscal quarters through and including
the date of determination, had been consummated on such first day of such
four-quarter period, (ii) in making such computation, the Consolidated
Interest Expense attributable to interest on any Indebtedness required to
be computed on a pro forma basis in accordance with Section 10.12(a) hereof
and (A) bearing a floating interest rate shall be computed as if the rate
in effect on the date of computation had been the applicable rate for the
entire period and (B) which was not outstanding during the period for which
the computation is being made but which bears, at the option of the
Company, a fixed or floating rate of interest, shall be computed by
applying, at the option of the Company, either the fixed or floating rate,
(iii) in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness under a revolving credit
facility required to be computed on a pro forma basis in accordance with
Section 10.12(a) hereof shall be computed based upon the average daily
balance of such Indebtedness during the applicable period, provided that
such average daily balance shall be reduced by the amount of any repayment
of Indebtedness under a revolving credit facility during the applicable
period, which repayment permanently reduced the commitments or amounts
available to be reborrowed under such facility, (iv) notwithstanding
clauses (ii) and (iii) of this proviso, interest on Indebtedness determined
on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Rate Protection Obligations, shall be
deemed to have accrued at the rate per annum resulting after giving effect
to the operation of such agreements, and (v) if after the first day of the
period referred to in clause (a) of this definition the Company has
permanently retired any Indebtedness out of the Net Cash Proceeds of the
issuance and sale of shares of Qualified Capital Stock of the Company,
Consolidated Interest Expense shall be calculated on a proforma basis as if
such Indebtedness had been retired on the first day of such period.
"Consolidated Interest Expense" means, for any period, without
duplication, (i) the sum of (a) the interest expense of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (A) any
amortization of debt discount, (B) the net cost under Interest Rate
Protection Obligations (including any amortization of discounts), (C) the
interest portion of any deferred payment obligation constituting
Indebtedness, (D) all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing
and (E) all accrued interest, in each case to the extent attributable to
such period, (b) to the extent any Indebtedness of any Person (other than
the Company or a Restricted Subsidiary) is guaranteed by the Company or any
Restricted Subsidiary, the aggregate amount of interest paid (to the extent
not accrued in a prior period) or accrued by such other Person during such
period attributable to any such Indebtedness, in each case to the extent
attributable to that period, (c) the aggregate amount of the interest
component of Capitalized Lease Obligations paid (to the extent not accrued
in a prior period), accrued or scheduled to be paid or accrued by the
Company and its Restricted Subsidiaries during such period and (d) the
aggregate amount of CASH dividends paid ##(to the extent not accrued in a
prior period) or accrued## on Preferred Stock or ON Disqualified Capital
Stock of the Company and its Restricted Subsidiaries, to the extent such
Preferred Stock or Disqualified Capital Stock is owned by Persons other
than the Company or any Restricted Subsidiary, less (ii), to the extent
included in clause (i) above, amortization of capitalized debt issuance
costs of the Company and its Restricted Subsidiaries during such period.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness (and any guarantee thereof) ##under one or more
credit facilities with banks and other financial institutions## in
an aggregate principal amount at any one time outstanding not to
exceed (a) the greater of (x) ##$25,000,000## $50,000,000 at any time
outstanding or (y) the sum of 85% of the amount of Eligible
Receivables of the Company and its Restricted Subsidiaries and
50% of the amount of Eligible Inventory of the Company and its
Restricted Subsidiaries, less (b) any amounts derived from Asset
Sales, EXCEPT FOR AN ASSET SALE CONSISTING OF A SALE OF THE
MULTI-CLIENT SEISMIC DATA OWNED BY, OR GATHERED FOR THE ACCOUNT
OF, THE COMPANY and applied to the permanent reduction of the
Indebtedness under any such credit facilities as contemplated by
Section 10.17 hereof (the "Maximum Bank Credit Amount"), and any
renewals, amendments, extensions, supplements, modifications,
deferrals, refinancings or replacements (each, for purposes of
this clause (i), a "refinancing") thereof, including any
successive refinancing thereof, so long as the aggregate
principal amount of any such new Indebtedness, together with the
aggregate principal amount of all other Indebtedness outstanding
pursuant to this clause (i), shall not at any one time exceed the
Maximum Bank Credit Amount;.
(ii) Indebtedness under the Original Securities and any Series B
Securities issued in exchange for Original Securities of an equal
principal amount;
(iii) Indebtedness outstanding or in effect on the date of
this Indenture (and not repaid or defeased with the proceeds of
the offering of the Original Securities);
(iv) Indebtedness under Interest Rate Protection Obligations, provided
that (1) such Interest Rate Protection Obligations are related to
payment obligations on Permitted Indebtedness or Indebtedness
otherwise permitted by Section 10.12(a) hereof, and (2) the
notional principal amount of such Interest Rate Protection
Obligations does not exceed the principal amount of such
Indebtedness to which such Interest Rate Protection Obligations
relate;
(v) Indebtedness under Currency Hedge Obligations, provided that (1)
such Currency Hedge Obligations are related to payment
obligations on Permitted Indebtedness or Indebtedness otherwise
permitted by Section 10.12(a) hereof, or to the foreign currency
cash flows reasonably expected to be generated by the Company and
its Restricted Subsidiaries, and (2) the notional principal
amount of such Currency Hedge Obligations does not exceed the
principal amount of such Indebtedness and the amount of such
foreign currency cash flows to which such Currency Hedge
Obligations relate;
(vi) the Subsidiary Guarantees of the Original Securities (and any
assumption of the obligations guaranteed thereby);
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary and Indebtedness of any Restricted Subsidiary to the
Company or a Wholly Owned Restricted Subsidiary; provided,
however, that upon any subsequent issuance or transfer of any
Capital Stock or any other event which results in any such Wholly
Owned Restricted Subsidiary ceasing to be a Wholly Owned
Restricted Subsidiary or any other subsequent transfer of any
such Indebtedness (except to the Company or a Wholly Owned
Restricted Subsidiary), such Indebtedness shall be deemed, in
each case, to be incurred and shall be treated as an incurrence
for purposes of Section 10.12(a) hereof at the time the Wholly
Owned Restricted Subsidiary in question ceased to be a Wholly
Owned Restricted Subsidiary or the time such subsequent transfer
occurred;
(viii) Indebtedness in respect of bid, performance or surety bonds
issued for the account of the Company or any Restricted
Subsidiary in the ordinary course of business, including
guaranties or obligations of the Company or any Restricted
Subsidiary with respect to letters of credit supporting such bid,
performance or surety obligations (in each case other than for an
obligation for money borrowed);
(ix) Non-Recourse Indebtedness;
(x) any renewals, substitutions, refinancings or replacements (each,
for purposes of this clause (x), a "refinancing") by the Company
or a Restricted Subsidiary of any Indebtedness incurred pursuant
to clause (iii) of this definition, including any successive
refinancing by the Company or such Restricted Subsidiary, so long
as (A) any such new Indebtedness shall be in a principal amount
that does not exceed the principal amount (or, if such new
Indebtedness being refinanced provides for an amount less than
the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the
date of determination) so refinanced plus the amount of any
premium required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness refinanced or the
amount of any premium reasonably determined by the Company or
such Restricted Subsidiary as necessary to accomplish such
refinancing, plus the amount of expenses of the Company or such
Restricted Subsidiary incurred in connection with such
refinancing, (B) in the case of any refinancing of Indebtedness
that is pari passu with or subordinated in right of payment to
either the Securities or any Subsidiary Guarantees, then such new
Indebtedness is either pari passu with or subordinated in right
of payment to the Securities or any Subsidiary Guarantees, as the
case may be, at least to the same extent as the Indebtedness
being refinanced and (C) such new Indebtedness has an Average
Life equal to or longer than the Average Life of the Indebtedness
being refinanced and a final Stated Maturity that is at least 91
days later than the final Stated Maturity of the Indebtedness
being refinanced; and
(xi) any additional Indebtedness in an aggregate principal amount not
in excess of ##$7,500,000## $10,000,000 at any one time outstanding
and any guarantee thereof.
Section 5.2 Acceleration of Maturity; Rescission and Annulment shall be
amended as follows:
The last paragraph of Section 5.2 shall be amended as follows:
No such rescission shall affect any subsequent default or impair any
right consequent thereon. Notwithstanding the foregoing, if an Event of
Default specified in Section 5.1(e) hereof shall have occurred and be
continuing, such Event of Default and any consequential acceleration of the
Securities shall be automatically rescinded if the Indebtedness that is the
subject of such Event of Default has been repaid, or if the default
relating to such Indebtedness is waived or cured and if such Indebtedness
has been accelerated, then the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness (provided, in
each case, that such repayment, waiver, cure or rescission is effected
within a period of ##10## 30 days from the continuation of such default beyond
the applicable grace period or the occurrence of such acceleration), and
written notice of such repayment, or cure or waiver and rescission, as the
case may be, shall have been given to the Trustee by the Company and
countersigned by the holders of such Indebtedness or a trustee, fiduciary
or agent for such holders or other evidence satisfactory to the trustee of
such events is provided to the Trustee, within 30 days after any such
acceleration in respect of the Securities, and so long as such rescission
of any such acceleration of the Securities does not conflict with any
judgment or decree as certified to the Trustee by the Company.
Section 8.1 Company May Consolidate, Etc., Only On Certain Terms shall be
amended as follows:
The Company shall not, in any single transaction or a series of
related transactions, merge or consolidate with or into any other Person,
or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all the Properties of the Company and its Restricted
Subsidiaries on a consolidated basis to any Person or group of Affiliated
Persons, and the Company shall not permit any of its Restricted
Subsidiaries to enter into any such transaction or series of transactions
if such transaction or series of transactions, in the aggregate, would
result in the sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the Properties of the Company
and its Restricted Subsidiaries on a consolidated basis to any other Person
or group of Affiliated Persons, unless at the time and after giving effect
thereto:
(a) ##either## (i) if the transaction is a merger or consolidation, the
Company shall be the surviving Person of such merger or
consolidation, or (ii) the Person (if other than the Company)
formed by such consolidation or into which the Company is merged
or to which the Properties of the Company or its Restricted
Subsidiaries, as the case may be, are sold, assigned, conveyed,
transferred, leased or otherwise disposed of (any such surviving
Person or transferee Person being called the "Surviving Entity")
shall ##be a corporation organized and existing under the laws of
the United States of America, any state thereof or the District
of Columbia and shall,## in either case, expressly assume by a
supplemental indenture to this Indenture executed and delivered
to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this
Indenture, and, in each case, this Indenture shall remain in full
force and effect;
(b) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (and
treating any Indebtedness not previously an obligation of the
Company or any of its Restricted Subsidiaries which becomes the
obligation of the Company or any of its Restricted Subsidiaries
in connection with or as a result of such transaction or
transactions as having been incurred at the time of such
transaction or transactions), no Default or Event of Default
shall have occurred and be continuing;
(c) ## except in the case of the consolidation or merger of any
Restricted Subsidiary with or into the Company, immediately after
giving effect to such transaction or transactions on a pro forma
basis, the Consolidated Net Worth of the Company (or the
Surviving Entity if the Company is not the continuing obligor
under this Indenture) is at least equal to the Consolidated Net
Worth of the Company immediately before such transaction or
transactions;
(d) except in the case of the consolidation or merger of the Company
with or into a Restricted Subsidiary or any Restricted Subsidiary
with or into the Company or another Restricted Subsidiary,
immediately before and immediately after giving effect to such
transaction or transactions on a pro forma basis (assuming that
the transaction or transactions occurred on the first day of the
period of four full fiscal quarters ending immediately prior to
the consummation of such transaction or transactions, with the
appropriate adjustments with respect to the transaction or
transactions being included in such pro forma calculation), the
Company (or the Surviving Entity if the Company is not the
continuing obligor under this Indenture) could incur $1.00 of
additional Indebtedness (excluding Permitted Indebtedness) under
Section 10.12(a) hereof;##
##(e)## (C) if the Company is not the continuing obligor under this
Indenture, then each Subsidiary Guarantor then in existence,
unless it is the Surviving Entity, shall have by supplemental
indenture confirmed that its Subsidiary Guarantee of the
Securities shall apply to the Surviving Entity's obligations
under this Indenture and the Securities; and
##(f)## (D)the Company (or the Surviving Entity if the Company is not the
continuing obligor under this Indenture) shall have delivered
to the Trustee, in form and substance reasonably satisfactory to
the Trustee, (i) an Officers' Certificate stating that such
consolidation, merger, conveyance, transfer, lease or other
disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture,
comply with the requirements under this Indenture and (ii) an
Opinion of Counsel stating that the requirements of Section
8.1(a) have been satisfied.
Section 10.10 Limitation On Restricted Payments shall be amended as
follows:
Section 10.10(a)(iv)(1) shall be amended as follows:
(1) 50% of the Consolidated Net Income of the Company accrued
on a cumulative basis during the period beginning on January
1, ##1998## 2000 and ending on the last day of the Company's
last fiscal quarter ending prior to the date of such
proposed Restricted Payment (or, if such Consolidated Net
Income shall be a loss, minus 100% of such loss), plus
Section 10.12 Limitation On Indebtedness And Disqualified Capital Stock
shall be amended as follows:
Section 10.12(b) shall be amended as follows:
(b) Neither the Company nor any Subsidiary Guarantor shall incur
any Indebtedness (OTHER THAN PERMITTED INDEBTEDNESS) that is
expressly subordinated to any other Indebtedness of the
Company or such Subsidiary Guarantor, as the case may be,
unless such Indebtedness, by its terms or the terms of any
agreement or instrument pursuant to which such Indebtedness
is issued or outstanding, is also expressly made subordinate
to the Securities or the Subsidiary Guarantee of such
Subsidiary Guarantor, as the case may be, at least to the
extent it is subordinated to such other Indebtedness.
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
GRANT GEOPHYSICAL, INC. PAGE
Consolidated Balance Sheets:
Grant Geophysical, Inc. as of December 31, 1998
and as of June 30, 1999 (unaudited)....................................F-1
Consolidated Statements of Operations:
Grant Geophysical, Inc. for the six-month period ended June 30, 1998
(unaudited) and the six-month period ended June 30, 1999 (unaudited)...F-3
Consolidated Statements of Cash Flows:
Grant Geophysical, Inc. for the six-month period ended
June 30, 1998 (unaudited) and the six-month period ended June 30, 1999
(unaudited)............................................................F-4
Notes to Consolidated Financial Statements..................................F-5
GRANT GEOPHYSICAL, INC. AND GGI LIQUIDATING CORPORATION
Report of Independent Accountants:
Grant Geophysical, Inc...................................................F-7
Independent Auditors' Report:
Grant Geophysical, Inc...................................................F-8
GGI Liquidating Corporation..............................................F-9
Consolidated Balance Sheets:
Grant Geophysical, Inc. as of December 31, 1997 and 1998.................F-10
Consolidated Statements of Operations:
GGI Liquidating Corporation for the year ended December 31, 1996 and for
the nine-month period ended September 30, 1997.........................F-12
Grant Geophysical, Inc. for the three-month period ended December 31,
1997 and the year ended December 31, 1998..............................F-12
Consolidated Statement of Stockholders' Equity (Deficit):
GGI Liquidating Corporation for the year ended December 31, 1996.........F-13
Grant Geophysical, Inc. for the three-month period ended December 31,
1997 and the year ended December 31, 1998..............................F-14
Consolidated Statements of Cash Flows:
GGI Liquidating Corporation for the years ended December 31, 1996 and
for the nine-month period ended September 30, 1997.....................F-16
Grant Geophysical, Inc. for the three-month period ended December 31,
1997 and for the year ended December 31, 1998..........................F-16
Notes to Consolidated Financial Statements..................................F-18
Supplementary Financial Information.........................................F-42
Grant Geophysical, Inc. Unaudited Pro Forma Consolidated Financial
Statements:
Introduction.............................................................F-43
Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1998......................................................F-44
Pro Forma Consolidated Statement of Operations for the six months
ended June 30, 1999....................................................F-45
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
----------- -----------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,921 $ 2,140
Restricted cash 106 509
Accounts receivable:
Trade (net of allowance for doubtful accounts of $86
and $390 at December 31, 1998 and June 30, 1999,
respectively) 25,918 13,695
Other 1,663 1,190
Inventories 512 510
Prepaids 4,639 1,900
Work in process 4,062 4,534
-------- --------
Total current assets 44,821 24,478
Property, plant and equipment 93,264 93,716
Less: accumulated depreciation 27,359 35,530
-------- --------
Net property, plant and equipment 65,905 58,186
Multi-client data, net 10,899 21,025
Goodwill, net 36,592 36,337
Debt issue costs, net 4,297 4,073
Other assets 3,927 5,269
-------- --------
Total assets $166,441 $149,368
======== ========
</TABLE>
(CONTINUED ON NEXT PAGE)
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ -----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable, current portion of long-term debt and
capital lease obligations $ 2,522 $ 6,578
Accounts payable 15,316 6,396
Accrued expenses 6,621 4,371
Accrued interest 3,798 3,860
Foreign income taxes payable 2,191 762
-------- --------
Total current liabilities 30,448 21,967
Revolving line of credit-affiliate 8,000 1,650
Long-term debt and capital lease obligations 102,817 112,569
Unearned revenue 2,115 2,346
Other liabilities and deferred credits 1,059 3,382
Stockholders' equity:
Common stock, $.001 par value. Authorized
25,000,000 shares; issued and outstanding
14,426,055 shares at December 31, 1998 and
June 30, 1999 14 14
Additional paid-in capital 41,727 41,757
Accumulated deficit (17,253) (32,522)
Accumulated other comprehensive loss (2,486) (1,795)
-------- --------
Total stockholders' equity 22,002 7,454
-------- --------
Total liabilities and stockholders' equity $166,441 $149,368
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
------------------
1998 1999
-------- --------
(unaudited)
<S> <C> <C>
Revenues $ 96,362 $ 33,208
Expenses:
Direct operating expenses 69,532 24,584
Selling, general and administrative expenses 7,684 6,683
Depreciation and amortization 10,215 11,909
-------- --------
Total costs and expenses 87,431 43,176
-------- --------
Operating income (loss) 8,931 (9,968)
Other income (expense):
Interest, net (4,304) (5,808)
Other (181) 928
-------- --------
Total other expense (4,485) (4,880)
-------- --------
Income (loss) before taxes 4,446 (14,848)
Income tax expense 2,508 421
-------- --------
Net income (loss) $ 1,938 $(15,269)
Dividend required on pay-in-kind
preferred stock (440) -
-------- --------
Net income (loss) applicable to common stock $ 1,498 $(15,269)
======== ========
INCOME PER COMMON SHARE - BASIC
AND DILUTED:
Net income (loss) $ 0.14 $ (1.06)
Dividend requirement on pay-in-kind
preferred stock (0.03) --
-------- --------
Net income (loss) per common share $ 0.11 $ (1.06)
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted 14,171 14,426
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1998 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 1,938 $(15,269)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization expense 10,215 11,909
(Gain) loss on sale of fixed assets (90) 72
Provision for doubtful accounts 300 300
Exchange (gain) loss 473 (554)
Multi-client data amortization - 425
Directors' stock compensation expense - 30
Other non-cash items 27 39
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN:
Accounts receivable (12,341) 12,396
Inventories 2 2
Prepaids (674) 2,739
Work in process (2,755) (472)
Other assets 147 (1,106)
INCREASE (DECREASE) IN:
Accounts payable 6,442 (8,920)
Accrued expenses 2,480 (1,504)
Foreign income tax payable 1,262 (1,429)
Other liabilities and deferred credits (295) 2,554
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,131 1,212
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (12,161) (3,622)
Multi-client data 829 (10,490)
Proceeds from sale of assets 515 8
Restricted cash - (403)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (10,817) (14,507)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issue costs (4,585) (12)
Borrowings made 100,279 32,643
Repayment on borrowings (74,397) (25,488)
Common stock issue costs (16) -
Redemption of preferred stock (10,000) -
Dividends paid (723) -
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,558 7,143
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (265) 371
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,607 (5,781)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,093 7,921
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,700 $ 2,140
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The balance sheet of Grant Geophysical, Inc. and subsidiaries (the
"Company") as of June 30, 1999 and the related statements of operations and
cash flows for the six months ended June 30, 1998 and 1999 are unaudited. In
the opinion of management, the accompanying unaudited condensed financial
statements of Grant and its consolidated subsidiaries contain all adjustments
necessary to present fairly the financial position as of June 30, 1999 and the
results of operations for the six months ended June 30, 1999. The consolidated
financial statements should be read in conjunction with the audited financial
statements and footnotes included herein.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and all majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
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.
The more significant areas requiring the use of management estimates
relate to expected future sales associated with the Company's multi-client data
library, estimated future cash flows related to long-lived assets and valuation
allowances for deferred tax assets. Actual results could differ materially
from these estimates making it reasonably possible that a change in these
estimates could occur in the near future.
INCOME (LOSS) PER COMMON SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings per Share," basic income (loss) per common share is computed based
upon the weighted average number of common shares outstanding during each
period without any dilutive effects considered. Diluted income (loss) per
common share reflects dilution for all potentially dilutive securities
including warrants and convertible securities. The income (loss) is adjusted
for cumulative preferred stock dividends in calculating net income (loss)
applicable to the common stockholders.
(2) DEBT
On May 11, 1999, the Company entered into a Loan and Security Agreement
(the "Credit Facility") with Foothill Capital Corporation and Elliott
Associates L.P. ("Elliott"), the "Lenders", pursuant to which the Company may
borrow up to $6.0 million through a revolving facility and up to $19.0 million
through two term loans. Proceeds were used to repay all of the Company's
outstanding indebtedness to Elliott ($14.8 million) and will be used to provide
additional liquidity and working capital to support the Company's operations.
The Credit Facility imposes certain limitations on the ability of the Company
and its subsidiaries to, among other things, incur additional indebtedness,
incur liens, pay dividends or make other distributions in cash or certain
property, consummate certain asset sales, enter into certain transactions with
affiliates, merge or consolidate with any other persons or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
assets of the Company or its subsidiaries, make Investments (as defined in the
Credit Facility) and maintain a minimum EBITDA (earnings before interest, tax,
depreciation and amortization) level.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(3) SUPPLEMENTAL SCHEDULE TO CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30,
------------------
1998 1999
-------- --------
(DOLLARS IN THOUSANDS)
CASH PAID FOR INTEREST AND TAXES WAS AS FOLLOWS:
Taxes, net of refunds $ 976 $ 536
Interest, net of amounts capitalized 1,507 6,133
(4) COMPREHENSIVE INCOME (LOSS)
Effective January 1, 1998, Grant adopted Statement of Accounting Standards
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting and display of comprehensive income and its components. Comprehensive
loss for Grant consists solely of foreign currency translation adjustment for
the periods presented.
Accumulated other comprehensive loss at December 31, 1998 $ (2,486)
Foreign currency translation adjustment for the six-month
period ended June 30, 1999 691
-----------
Accumulated other comprehensive loss at June 30, 1999 $ (1,795)
===========
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Grant Geophysical, Inc.
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of stockholders' equity
(deficit) and of cash flows present fairly, in all material respects, the
financial position of Grant Geophysical, Inc. and its subsidiaries at
December 31, 1998 and the results of their operations and their cash flows
for the year then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
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, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
April 6, 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Grant Geophysical, Inc.
We have audited the accompanying consolidated balance sheet of Grant
Geophysical, Inc. and subsidiaries as of December 31, 1997 and the related
consolidated statement of operations, stockholders' equity, and cash flows
for the three-month period then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
presents fairly, in all material respects, the financial position of Grant
Geophysical, Inc. and subsidiaries, as of December 31, 1997, and the
results of their operations and their cash flows for the three-month
period then ended in conformity with generally accepted accounting
principles.
KPMG LLP
Houston, Texas
March 18, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
GGI Liquidating Corporation
We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit), and cash flows of GGI Liquidating
Corporation (a debtor-in-possession as of December 31, 1996) (formerly
Grant Geophysical, Inc.) and subsidiaries for the year ended December 31,
1996 and the nine month period ended September 30, 1997. These
consolidated financial statements are the responsibility of GGI
Liquidating Corporation's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe 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 results of operations and
cash flows of GGI Liquidating Corporation and subsidiaries for the year
ended December 31, 1996, and the nine month period ended September 30,
1997, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements and financial
statement schedule have been prepared assuming that GGI Liquidating
Corporation 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, GGI Liquidating Corporation (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 "Court"). The
Petitioning Company is operating the business as debtor-in-possession
which requires certain of its actions to be approved by the Court. In
September 1997 the Court approved the "Second Amended Plan of
Reorganization" (the "Plan") filed by GGI Liquidating Corporation. The
Plan was consummated on September 30, 1997, with the purchase by Grant
Geophysical, Inc. of substantially all of the assets and the assumption of
certain liabilities of GGI Liquidating Corporation. GGI Liquidating
Corporation is currently in liquidation and will distribute all of its
assets pursuant to the Plan. Upon the completion of its asset
distribution, GGI Liquidating Corporation will dissolve and cease to
exist. 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 the Plan and the distribution of
assets pursuant thereto.
KPMG LLP
Houston, Texas
December 22, 1997
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,093 $ 7,921
Restricted cash 321 106
Accounts receivable:
Trade (net of allowance for doubtful accounts of $158 and
$86 at December 31, 1997 and 1998, respectively) 29,495 25,918
Other 2,487 1,663
Inventories 530 512
Prepaids 4,190 4,639
Work in process 2,779 4,062
-------- --------
Total current assets 46,895 44,821
Property, plant and equipment:
Land 427 411
Buildings and improvements 1,548 1,932
Plant facilities and store fixtures 876 1,142
Machinery and equipment 70,151 89,779
-------- --------
Total property, plant and equipment 73,002 93,264
Less accumulated depreciation 8,498 27,359
-------- --------
Net property, plant and equipment 64,504 65,905
Multi-client data, net 5,736 10,899
Goodwill, net 36,304 36,592
Other assets 2,265 8,224
-------- --------
Total assets $155,704 $166,441
======== ========
</TABLE>
(CONTINUED ON NEXT PAGE)
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable, current portion of long-term debt and
capital lease obligations $ 1,158 $ 2,522
Accounts payable 16,422 15,316
Accrued expenses 10,168 6,621
Accrued interest 150 3,798
Foreign income taxes payable 2,807 2,191
-------- --------
Total current liabilities 30,705 30,448
Revolving line of credit - affiliate 800 8,000
Long-term debt and capital lease obligations 64,609 102,817
Unearned revenue 5,443 2,115
Other liabilities and deferred credits 2,369 1,059
Subordinated note 9,786 --
Stockholders' equity:
Cumulative pay-in-kind preferred stock, $.001 par value.
Authorized 20,000 shares; issued and outstanding 10,000 shares
at December 31, 1997. Authorized, issued and outstanding zero
at December 31, 1998 10,000 --
Common stock, $.001 par value. Authorized 25,000,000
shares; issued and outstanding 14,152,555 and 14,426,055
shares at December 31, 1997 and 1998, respectively 14 14
Additional paid-in capital 41,278 41,727
Accumulated deficit (8,833) (17,253)
Accumulated other comprehensive loss (467) (2,486)
-------- --------
Total stockholders' equity 41,992 22,002
-------- --------
Total liabilities and stockholders' equity $155,704 $166,441
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
GGI GRANT
--------------------------- ----------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ ------------- ------------ ------------
1996 1997 1997 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 105,523 $ 92,705 $ 37,868 $ 175,512
Expenses:
Direct operating expenses 136,326 71,006 28,431 128,962
Selling, general and administrative expenses 17,865 6,473 3,507 14,156
Depreciation and amortization 11,500 8,432 4,594 22,286
Charge for asset impairment 5,802 -- 6,369 3,762
--------- --------- --------- ---------
Total costs and expenses 171,493 85,911 42,901 169,166
--------- --------- --------- ---------
Operating income (loss) (65,970) 6,794 (5,033) 6,346
Other income (expense):
Interest expense (7,558) (4,037) (1,431) (10,380)
Reorganization costs (412) (3,543) -- --
Interest income 36 279 69 1,080
Other (502) 2,266 (1,262) (820)
--------- --------- --------- ---------
Total other expense (8,436) (5,035) (2,624) (10,120)
--------- --------- --------- ---------
Income (loss) before taxes and minority
interest (74,406) 1,759 (7,657) (3,774)
Income tax expense (1,621) (2,184) (856) (3,924)
--------- --------- --------- ---------
Loss before minority interest (76,027) (425) (8,513) (7,698)
Minority interest -- -- 2,847 --
--------- --------- --------- ---------
Net loss $ (76,027) $ (425) $ (5,666) $ (7,698)
Dividend requirement on pay-in-kind preferred
stock (6,353) -- (477) (440)
--------- --------- --------- ---------
Net loss applicable to common stock $ (82,390) $ (425) $ (6,143) $ (8,138)
========= ========= ========= =========
LOSS PER COMMON SHARE - BASIC
AND DILUTED:
Net loss $ (1.18) $ (.54)
Dividend requirement on pay-in-kind
preferred stock (.10) (.03)
--------- ---------
Net loss per common share $ (1.28) $ (.57)
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GGI
------------------------------------------------------------------------------------------
$2.4375
CONVERTIBLE SERIES A CUMULATIVE TOTAL
EXCHANGEABLE CONVERTIBLE JUNIOR PAY-IN-KIND ADDITIONAL STOCKHOLDERS'
PREFERRED PREFERRED PREFERRED PREFERRED COMMON PAID-IN ACCUMULATED EQUITY
STOCK STOCK STOCK STOCK STOCK CAPITAL DEFICIT DEFICIT)
------------ ------------ --------- ----------- ------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
Proceeds from sale of
125,000 shares under
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.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GRANT
-----------------------------------------------------------------------
CUMULATIVE ACCUMULATED
PAY-IN-KIND ADDITIONAL OTHER TOTAL
PREFERRED COMMON PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT LOSS EQUITY
---------- ------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Beginning balances $ -- $ -- $ -- $ -- $ -- $ --
Net loss -- -- -- (5,666) -- (5,666)
Common stock, one share issued -- -- -- -- -- --
Cumulative preferred stock issued 19,571 -- -- -- -- 19,571
Effective issuance of 4,590,055
shares of common stock for
majority investment in
Solid State -- 5 7,195 -- -- 7,200
"As if" pooling effect of Solid
State -- -- -- (2,952) -- (2,952)
Common stock, one share issued -- -- -- -- -- --
Issuance of 62,500 shares of
common stock for principal
shareholders' exchange of
warrants in Solid State -- -- 144 -- -- 144
Issuance of 9,499,998 shares to
principal stockholders in
accordance with the Plan -- 9 33,939 -- -- 33,948
Conversion of 9,571 preferred
shares to Subordinated Note (9,571) -- -- -- -- (9,571)
Payment of preferred stock
dividend -- -- -- (215) -- (215)
Accumulated other
comprehensive loss -- -- -- -- (467) (467)
------- ---- ------- ------- ----- -------
Balances at December 31, 1997 $10,000 $ 14 $41,278 $(8,833) $(467) $41,992
======= ==== ======= ======= ===== =======
</TABLE>
(CONTINUED ON NEXT PAGE)
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GRANT
-----------------------------------------------------------------------
CUMULATIVE ACCUMULATED
PAY-IN-KIND ADDITIONAL OTHER TOTAL
PREFERRED COMMON PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT LOSS EQUITY
---------- ------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1997 $ 10,000 $ 14 $ 41,278 $ (8,833) $ (467) $ 41,992
Net loss -- -- -- (7,698) -- (7,698)
Redemption of cumulative
pay-in-kind preferred stock (10,000) -- -- -- -- (10,000)
Issuance of 237,500 shares of
common stock to principal
shareholders in satisfaction of the
Registration Rights Agreement -- -- -- -- -- --
Payment of dividends -- -- -- (722) -- (722)
Stock issue costs for registration
rights -- -- (336) -- -- (336)
Issuance of 36,000 shares of
common stock to non-employee
directors -- -- 150 -- -- 150
Non-cash litigation costs -- -- 635 -- -- 635
Accumulated other
comprehensive loss -- -- -- -- (2,019) (2,019)
-------- ---- -------- -------- ------- --------
Balances at December 31, 1998 $ -- $ 14 $ 41,727 $(17,253) $(2,486) $ 22,002
======== ==== ======== ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GGI GRANT
-------------------------- ---------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------- ------------
1996 1997 1997 1998
----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(76,027) $ (425) $(5,666) $ (7,698)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Charge for asset impairment 5,802 -- 6,369 3,762
Provision for doubtful accounts 5,511 -- -- 194
Depreciation and amortization expense 11,500 8,432 4,594 22,286
Deferred costs amortization 29,528 -- -- --
Loss on sale of subsidiaries 198 -- -- --
(Gain) loss on the sale of fixed assets (25) 39 132 (189)
Exchange loss (gain) 251 98 (77) 485
Non-cash litigation costs -- -- -- 635
Other non-cash items 328 225 (2,544) 68
Changes in assets and liabilities,
excluding effects of divestitures:
Accounts receivable 13,346 2,375 694 3,046
Inventories 914 (27) -- 18
Prepaids 1,228 (538) (1,220) 737
Work-in-process (24,969) (268) (1,101) (1,283)
Other assets 1,846 (1,031) 983 (414)
Accounts payable 9,328 3,143 (1,237) (1,149)
Accrued expenses 5,059 830 1,759 331
Foreign income taxes payable 390 1,767 487 (616)
Other liabilities and deferred credits 7,973 (2,320) 2,213 (4,398)
Change in pre-petition liabilities subject
to Chapter 11 case:
Accounts payable -- (2,226) -- --
Accrued expenses (125) (1,732) -- --
Foreign income tax payable -- (194) -- --
Other liabilities and deferred costs (1,402) (3,622) -- --
-------- ------- ------- --------
Net cash provided by (used in) operating
activities (9,346) 4,526 5,386 15,815
</TABLE>
(CONTINUED ON NEXT PAGE)
<PAGE>
GRANT GEOPHYSICAL INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GGI GRANT
-------------------------- ---------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------- ------------
1996 1997 1997 1998
----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash flows from investing activities:
Capital expenditures $ (10,339) $ (6,751) $ (3,994) $ (20,666)
Multi-client data -- -- -- (8,500)
Proceeds from the sale of assets 25 20 182 634
Proceeds from the sale of subsidiaries/
businesses 39 -- -- --
Acquisition of the minority interest in
Solid State -- -- (15,903) --
Acquisition of Interactive Seismic Imaging -- -- -- (2,988)
Restricted cash 94 -- -- 215
Net cash used in investing activities (10,181) (6,731) (19,715) (31,305)
Cash flows from financing activities:
Debt issue costs -- -- -- (4,629)
Common stock issue costs -- -- -- (336)
Issuance of common stock -- -- -- 150
Redemption of preferred stock -- -- -- (10,000)
Dividends paid -- -- -- (722)
Proceeds from the exercise of stock options
and warrants 296 -- -- --
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 4,207 31,270 119,335
Repayment on borrowings during the period (105,757) (1,838) (15,363) (86,977)
Proceeds from the issuance of common stock -- -- 33,948 --
Repayment of debt due to GGI -- -- (34,783) --
Pre-petition liabilities subject to Chapter
11 case:
Borrowings under credit facility 3,612 49,385 -- --
Repayment on borrowings (3,382) (50,465) -- --
Net cash provided by financing activities 25,667 1,289 15,072 16,821
Effect of exchange rate changes on cash (415) (238) 160 (503)
Net increase (decrease) in cash and cash
equivalents 5,725 (1,154) 903 828
Cash and cash equivalents at beginning of period 1,047 6,772 6,190 7,093
--------- --------- --------- ----------
Cash and cash equivalents at end of period $ 6,772 $ 5,618 $ 7,093 $ 7,921
========= ========= ========= ==========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES. SEE
NOTE 18.
See accompanying notes to consolidated financial statements
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997, AND 1998
(1) BASIS OF PRESENTATION
Effective September 30, 1997 ("the Effective Date"), in connection
with the plan of reorganization (the "Plan"), Grant Geophysical, Inc.
("Grant"), which was formerly known as Grant Acquisition Corporation,
acquired substantially all of the assets and assumed certain liabilities of
GGI Liquidating Corporation ("GGI"), which was formerly known as Grant
Geophysical, Inc. Elliott Associates L.P. ("Elliott") and Westgate
International, L.P. ("Westgate") ("collectively known as "the Principal
Stockholders") own 85.4% of the issued and outstanding common stock of
Grant at December 31, 1998. Westgate owned all of the preferred stock that
had been outstanding during 1997 and 1998. This preferred stock was
redeemed on June 5, 1998 and all authorized shares have been canceled. The
general partners of Elliott are Paul E. Singer and Braxton Associates, L.P.
The general partner of Westgate is Hambledon, Inc., a corporation
controlled by Braxton Associates, L.P. Elliott and Westgate are each
managed by Stonington Management Corporation, a corporation controlled by
Mr. Singer. For financial statement purposes, the purchase of GGI's assets
by Grant was accounted for as a purchase acquisition. The purchase price
was allocated between the fair value of the GGI assets purchased and
liabilities assumed, and Grant recorded goodwill of approximately $21.3
million. The effects of the acquisition are reflected in Grant's assets
and liabilities at that date.
At September 30, 1997, Elliott held 5,888,565 shares or 40.7% and
Westgate held 3,291,544 shares, or 23.3% of the outstanding common shares
of Solid State Geophysical, Inc. ("Solid State Stock"). As of September
30, 1997, Elliott and Westgate combined owned a controlling interest in
both Solid State Geophysical, Inc. ("Solid State") and Grant. As such, as
of that date, Elliott and Westgate were deemed to have transferred their
ownership in Solid State to Grant in exchange for 4,590,055 shares of Grant
Common Stock. This transaction was accounted for as an exchange of
ownership interests between entities under common control and the assets
and liabilities transferred were accounted for at historical cost in a
manner similar to a pooling-of-interests. In November 1997, Grant, through
a wholly owned Canadian subsidiary, initiated a tender offer (the "Tender
Offer") for all of the outstanding common shares of Solid State not held by
Grant. In connection with the tender offer, Elliott and Westgate
transferred their ownership in Solid State to Grant in exchange for
4,652,555 shares of Grant Common Stock and agreed to loan Grant $15.8
million to pay for shares tendered in the Tender Offer and costs incurred
in connection with the Tender Offer. Upon the expiration of the Tender
Offer on December 19, 1997, Grant held approximately 99% of the outstanding
shares of Solid State Stock. Because Grant acquired over 90% of the
outstanding shares of Solid State Stock not previously held, Grant
qualified to exercise its statutory right under Canadian law to acquire the
remaining shares of Solid State Stock on the same terms and at the same
price as the Tender Offer. Grant completed such acquisition on December
23, 1997, after which Solid State became an indirect wholly owned
subsidiary of Grant. The acquisition of the unaffiliated minority interest
under the Tender Offer was accounted for under the purchase method of
accounting at the date of acceptance. Grant recorded goodwill of
approximately $15.3 million in connection with the acquisition of the
unaffiliated minority interest.
As a result of the aforementioned transactions, Grant's consolidated
balance sheet as of December 31, 1997 and December 31, 1998 and statement
of operations and cash flows for the three-months ended December 31, 1997
and the year ended December 31, 1998 are presented using Grant's new basis
of accounting, while the consolidated statements of operations and cash
flows for the year ended December 31, 1996 and the nine-months ended
September 30, 1997 are presented using GGI's historical cost basis of
accounting.
Grant purchased, effective July 1, 1998, all of the outstanding
partnership interests in Interactive Seismic Imaging ("ISI"), a seismic
data processing company, for $3.6 million in cash. Grant had been a 10%
owner of ISI since its formation in 1994 and will integrate the ISI
operation into its domestic operational entity. The following working
capital items were acquired in the purchase: cash and cash equivalents -
$628,000 accounts receivable - $364,000 accounts payable - $43,000 and
accrued expenses - $36,000.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Presented below is the unaudited pro forma effect of the combination
of Solid State and Grant. Pro forma adjustments have been made to record
the consummation of the Plan and certain related transactions, the issuance
of a subordinated note in exchange for 9,571.162 shares of Grant preferred
stock (see Note 7 for a discussion of the subordinated note), the
Acquisition, which includes the transfer of shares of Solid State Stock to
Grant by the Principal Stockholders, which has been accounted for as an
exchange of ownership interest between entities under common control (an
"as-if-pooling") and the acquisition of the unaffiliated minority interest
of Solid State, which has been accounted for as a purchase. The unaudited
pro forma information gives effect to the aforementioned transactions as if
they were completed as of January 1, 1996.
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues $ 138,155 $ 173,865
========= =========
Net Loss $ (84,569) $ (8,522)
========= =========
Net Loss applicable to common stock $ (85,619) $ (9,572)
========= =========
Basic loss per share $ (5.95) $ (0.67)
========= =========
On December 6, 1996, (the "Petition Date") GGI filed for protection
under the United States Bankruptcy Code and began its reorganization under
the supervision of the Bankruptcy Court. The reorganization was
precipitated by several factors, including overly rapid and underfinanced
expansion in the United States and Latin American markets, costs related
to the development of a proprietary data recording system and poor
operational results in the United States and certain international markets.
These factors impaired GGI's ability to service its indebtedness, finance
its existing capital expenditure requirements and meet its working capital
needs. In addition, GGI was unable to raise additional equity, causing a
disproportionate reliance on debt financing and equipment leasing. In
connection with the reorganization, GGI replaced its senior management,
disposed of unprofitable operations and developed the Plan, which was
consummated on September 30, 1997 (the "Effective Date") with the purchase
by Grant of substantially all of the assets and the assumption of certain
liabilities of GGI. GGI is currently in liquidation and will distribute
all of its assets pursuant to the Plan. Upon the completion of its asset
distribution, GGI will dissolve and cease to exist.
Grant is a holding company with no independent operations other than
its investments in its subsidiaries. Grant Geophysical Corp., Grant
Geophysical do Brasil Ltda., Grant Geophysical (Int'l), Inc., P.T. Grant
Geophysical Indonesia, Recuros Energeticos Ltda., Advanced Seismic
Technology, Inc., Solid State Geophysical Inc., Solid State Internacional
Ingenieria C.A., Solid State Geophysical Corp., and SSGI Acquisition Corp.
(the "Subsidiary Guarantors") represent all of the indirect and direct
wholly owned subsidiaries of Grant. Grant conducts all of its operations
through its subsidiaries. The Notes (see Note 7) are fully,
unconditionally, jointly and severally guaranteed by the Subsidiary
Guarantors, and therefore, separate financial statements of the Subsidiary
Guarantors will not be presented. Management has determined that the
information presented by such separate financial statements of the
Subsidiary Guarantors is not material to investors.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GOING CONCERN CONSIDERATIONS-GGI
The accompanying financial statements of GGI 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, GGI is in the process of distributing its assets
pursuant to the Plan and will be dissolved. 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 may result from the Plan and the
distribution of assets pursuant thereto.
PRINCIPLES OF CONSOLIDATION
Each of the consolidated financial statements include the accounts of
GGI or Grant and all of their respective majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
MINORITY INTEREST
The minority interest calculated on the Consolidated Statement of
Operations was computed based on the minority ownership percentage in Solid
State during the fourth quarter of 1997. This minority interest was
extinguished by the Tender Offer which resulted in Solid State becoming a
wholly owned subsidiary of Grant.
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 completed 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.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statement of cash flows, all highly
liquid investments with an original maturity of three months or less are
considered to be cash equivalents. Such investments totaled $510,000 and
$2,880,000 at December 31, 1997 and 1998, respectively.
RESTRICTED CASH
At December 31, 1997 and 1998, restricted cash included certificates
of deposit totaling $321,000 and $106,000, respectively, which were pledged
as collateral for letters of credit.
INVENTORIES
Inventories, which consist primarily of miscellaneous supplies, are
stated at lower of cost or market. Cost is determined using the specific
identification method.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
WORK IN PROCESS
Expenses related to the 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:
YEARS
-----
Buildings and improvements 5-20
Data processing equipment 3-5
Office equipment 5-10
Seismic exploration and transportation equipment 3-10
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.
MULTI-CLIENT DATA LIBRARY
The costs incurred in acquiring and processing multi-client seismic
data owned by the Company are capitalized. During the twelve-month period
beginning at the completion of the acquisition and processing of each
multi-client survey, costs are amortized based on revenues from such survey
as a percentage of total estimated revenues to be realized from such
survey. Thereafter, amortization of remaining capitalized costs is
provided at the greater of the percentage of realized revenues to total
estimated revenues or straight line over four years. As of December 31,
1997 and 1998, accumulated amortization related to the Company's multi-
client data library was zero and $1.3 million, respectively.
On a quarterly basis, management estimates the residual value of each
survey, and additional amortization is provided if the remaining revenues
reasonably expected to be obtained from any survey are less than the
carrying value of such survey. See Note 3.
ASSET IMPAIRMENT
In accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", 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 to
the extent in which an assets 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. See Note 3.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
GOODWILL
Goodwill, which represents the excess of purchase price over fair
value of net assets acquired, is amortized on a straight-line basis over
the expected periods to be benefited. Accumulated amortization was
approximately $175,000 and $1,723,000 as of December 31, 1997 and 1998,
respectively. Grant assesses the recoverability of this intangible asset
by determining whether the amortization of the goodwill balance over its
remaining life can be recovered through undiscounted future operating cash
flows of the acquired operation. The amount of goodwill impairment, if
any, is measured based on projected discounted future operating cash flows
using a discount rate reflective of Grant's average cost of funds. The
assessment of the recoverability of goodwill will be impacted if estimated
future operating cash flows are not achieved. The goodwill created in the
purchase of GGI's assets and the purchase of the remaining interest in ISI
is being amortized over 30 years and the goodwill created in the
acquisition of Solid State is being amortized over 20 years.
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.
The more significant areas requiring the use of management estimates
relate to expected future sales associated with the Company's multi-client
data library, estimated future net cash flows related to long-lived assets
and valuation allowances for deferred tax assets. Actual results could
differ materially from these estimates making it reasonably possible that a
change in these estimates could occur in the near term.
REORGANIZATION COSTS
Reorganization costs consisting of professional fees and similar types
of expenditures directly related to GGI's chapter 11 bankruptcy proceeding
were expensed as incurred. During 1996 and the nine months ended September
30, 1997, GGI incurred approximately $412,000 and $3,543,000 of
reorganization costs.
FOREIGN EXCHANGE GAINS AND LOSSES
Grant has determined that the United States ("U.S.") dollar is its
primary functional currency in all foreign locations with the exception of
its Canadian subsidiaries. Accordingly, those foreign entities (other than
Canada) translate property and equipment (and related depreciation) and
inventories into U.S. dollars at the exchange rate in effect at the time of
their acquisition while other assets and liabilities are translated at
year-end rates. Operating results (other than depreciation) are translated
at the average rates of exchange prevailing during the year. Remeasurement
gains and losses are included in the determination of net income and are
reflected in other income (deductions) (See Note 15). The Canadian
subsidiaries use the Canadian dollar as their functional currency and
translate all assets and liabilities at year-end exchange rates and
operating results at average exchange rates prevailing during the year.
Adjustments resulting from the translation of assets and liabilities are
recorded in the accumulated other comprehensive loss account in
stockholders' equity. Grant is presently using a forward contract to hedge
the value of the U.S. dollar on a 30 to 60 day basis. The notional amount
hedged is approximately $427,000 at December 31, 1998.
INCOME TAXES
Under the asset and liability method of SFAS No. 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 SFAS No. 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.
The Company considers the undistributed earnings of its foreign
subsidiaries to be permanently reinvested. The Company has not provided
deferred U.S. income tax on those earnings, as it is not practicable to
estimate the amount of additional tax that might be payable should these
earnings be remitted or deemed remitted as dividends or if the Company
should sell its stock in the subsidiaries.
POST-EMPLOYMENT BENEFITS
SFAS No. 112, "Employer's Accounting for Post-Employment Benefits,"
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.
INCOME (LOSS) PER COMMON SHARE
In accordance with Statement of Financial Accounting Standards No.
128, "Earnings per Share," basic income (loss) per common share is computed
based upon the weighted average number of common shares outstanding during
each period without any dilutive effects considered. Diluted income (loss)
per common share reflects dilution for all potentially dilutive securities
including warrants and convertible securities. The income (loss) is
adjusted for cumulative preferred stock dividends in calculating net income
(loss) attributable to the common shareholder. Earnings per share data
have not been presented for GGI as this information is not meaningful.
STOCK BASED COMPENSATION
As allowed by SFAS No. 123, the Company has elected to continue to
follow the accounting prescribed by Accounting Principles Board Opinion No.
25 "Accounting for Stock Issued to Employees," whereby compensation costs
are recognized only in situations where stock compensation plans award
intrinsic value to recipients at the date of grant, rather than the fair
value method of SFAS No. 123. Pro forma disclosure of the estimated
effects on net income and earnings per share had the fair value method
prescribed by SFAS No. 123 been followed are included in Note 10.
RECLASSIFICATIONS
Certain amounts previously reported have been reclassified in order to
ensure comparability between the periods reported.
CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
The Company competes in a highly competitive sector of the oil field
services industry. The Company's business depends in large part on the
conditions of the oil and gas industry, and specifically on the capital
expenditures of the Company's customers. As a result of the recent decline
in oil and gas prices, the level of overall oil and gas industry activity
has declined from levels experienced in recent years. The Company's
results of operations and cash flows could be adversely affected by
continued decreased capital spending levels and depressed oil and gas
prices.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) CHARGE FOR ASSET IMPAIRMENT
GGI
In 1994 GGI began development of a proprietary data recording system,
which was intended to replace an older recording system used in transition
zone areas. Problems with software design and hardware availability
resulted in numerous delays and substantial cost overruns. In addition,
the completed system did not meet performance expectations. Consequently,
at December 31, 1996, GGI reduced the carrying value of the proprietary
data recording systems 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.
GRANT
In the fourth quarter of 1997 certain assets of Solid State were
written down to reflect their fair value in accordance with the Company's
asset impairment policy. Fair market value was determined by discounting
the assets' projected future cash flows. Accordingly, Grant recorded a
$6,369,000 special charge for asset impairment in the fourth quarter of
1997. This charge primarily consisted of $5,869,000 relating to the multi-
client data library and $500,000 relating to miscellaneous assets held by
Solid State.
In the fourth quarter of 1998, the Company wrote down certain non-
productive fixed assets to fair market value in the amount of $564,000 and
certain multi-client data surveys in the amount of $3.2 million. The
impairment of the multi-client data in 1997 and 1998 was due to reductions
in estimates of future licensing prospects for such data due to reduced
interest in the area by oil and gas companies and the current downturn in
the industry.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) SUMMARY OF OPERATIONS
All of the Company's operations consist of geophysical services which
are grouped by major geographical areas. A summary of operations by
geographical area follows (dollars in thousands):
<TABLE>
<CAPTION>
GGI GRANT
------------------------------- ----------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ ------------- ------------ ------------
1996 1997 1997 1998
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Total revenues
United States $ 42,074 $ 41,267 $ 12,458 $ 78,659
Canada -- -- 4,468 14,175
Colombia 12,722 19,797 2,836 17,948
Guatemala -- 300 2,277 12,765
Bolivia 6,364 -- 4,262 10,491
Ecuador 2,840 10,878 2,491 8,337
Brazil 7,717 8,896 2,852 3,063
Peru 27,490 2,696 -- --
Other Latin America -- -- 1,265 --
Bangladesh 5,076 8,871 4,611 15,775
Indonesia 336 -- -- 14,299
Europe, Middle East and
Africa 904 -- 348 --
--------- --------- --------- ---------
$ 105,523 $ 92,705 $ 37,868 $ 175,512
========= ========= ========= =========
Operating income (loss):
United States $ (35,920) $ (1,924) $ (7,634) $ (2,741)
Canada -- -- (1,488) (2,076)
Colombia (94) 4,750 137 3,591
Guatemala -- 69 370 3,208
Bolivia 39 (429) 613 2,003
Ecuador (1,012) 2,283 904 1,390
Brazil (2,783) (15) 89 (1,863)
Peru (19,804) 4 -- --
Other Latin America (988) (289) 371 (15)
Bangladesh 1,034 2,800 1,822 1,204
Indonesia (1,095) (455) (148) 1,623
Europe, Middle East and
Africa (5,347) -- (69) 22
--------- --------- --------- ---------
$ (65,970) $ 6,794 $ (5,033) $ 6,346
========= ========= ========= =========
</TABLE>
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
GRANT
---------------------
DECEMBER 31,
---------------------
1997 1998
---------- ---------
Identifiable assets:
United States $ 79,089 $ 103,265
Canada 35,278 25,811
Colombia 9,750 6,526
Guatemala 2,572 3,071
Bolivia 6,533 2,451
Ecuador 3,919 4,705
Brazil 6,564 685
Other Latin America 1,942 220
Bangladesh 5,688 10,258
Indonesia 1,663 6,736
Europe, Middle East and Africa 965 --
--------- ---------
Total identifiable assets 153,963 163,728
Corporate assets 1,741 2,713
--------- ---------
$ 155,704 $ 166,441
========= =========
Revenues from a U.S. based international oil company was approximately
$20,233,000 (19%) for the year ended December 31, 1996. For the nine months
ended September 30, 1997, revenues from three oil companies, one domestic
and two international, were approximately $14,008,000 (15%), $9,924,000
(11%), $8,895,000 (10%). During 1998, the Company did not derive more than
10% of its revenue from any single customer.
(5) PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
ACCUMULATED
COST DEPRECIATION
-------- ------------
(DOLLARS IN THOUSANDS)
December 31, 1997
Land $ 427 $ -
Buildings and improvements 1,548 42
Plant facilities and store fixtures 876 170
Machinery and equipment 70,151 8,286
-------- ---------
$ 73,002 $ 8,498
======== =========
ACCUMULATED
COST DEPRECIATION
-------- ------------
(DOLLARS IN THOUSANDS)
December 31, 1998
Land $ 411 $ -
Buildings and improvements 1,932 175
Plant facilities and store fixtures 1,142 434
Machinery and equipment 89,779 26,750
-------- ---------
$ 93,264 $ 27,359
======== =========
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
and
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(6) INCOME TAXES
The composition of income tax expense follows (dollars in thousands):
<TABLE>
<CAPTION>
GGI GRANT
---------------------------- ---------------------------
NINE MONTHS THREE MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ -------------- ------------- ------------
1996 1997 1997 1998
------------ -------------- ------------- ------------
<S> <C> <C> <C> <C>
Current:
State $ -- $ -- $ -- $ --
Federal -- -- -- 100
Foreign 1,621 2,184 856 3,824
Deferred:
State -- -- -- --
Federal -- -- -- --
Foreign -- -- -- --
--------- --------- -------- --------
Income tax expense $ 1,621 $ 2,184 $ 856 $ 3,924
========= ========= ======== ========
</TABLE>
At December 31, 1996, GGI had net operating losses ("NOLs") of
approximately $173,000,000 available for carryforward for U.S. Federal
income tax purposes. Since GGI will, in accordance with the Plan, be
liquidated, approximately $150,000,000 of these NOLs will not be used and
will expire at such time as GGI ceases to exist.
Grant acquired approximately $23,000,000 of GGI's U.S. NOLs on
September 30, 1997. At December 31, 1998, $1,977,950 of these NOLs have
expired unused and the remainder, if unused, will expire between 1999 and
2011. Future utilization of these NOLs will be restricted due to the
change of ownership resulting from the Plan. Based on current valuations,
use of these NOLs would be limited to approximately $704,000 annually.
Grant also acquired approximately $13,536,000 of Solid State's U.S.
NOLs on December 30, 1997. At December 31, 1998, none of these NOLs have
expired or been utilized. If unused, they will expire between 1999 and
2011. Future utilization of approximately $9,760,000 of these NOLs will be
restricted due to a change of ownership which occurred on February 25,
1997. Based on current valuations, the restriction would be approximately
$125,000 annually.
In addition, Grant acquired approximately $7,800,000 of Solid State's
Canadian NOLs on December 30, 1997. The NOLs, if unused, will expire
between 2000 and 2005. Future utilization of these NOLs is restricted to
income arising in Canada from the same type of business operations that
generated them.
All of these acquired NOLs, when utilized, will first reduce goodwill
and other noncurrent intangible assets related to the acquisition to zero,
with any remaining tax benefits recognized as a reduction of income tax
expense.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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>
GGI GRANT
-------------------------- --------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------ ------------
1996 1997 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income tax expense (benefit)
at U.S. Federal rate $(25,298) $ 616 $ (2,680) $ (810)
Increases (reductions) in taxes from:
Foreign income taxed at more (less)
than U.S. rate 4,712 741 1,648 (79)
Losses with no tax benefit is expected 22,207 827 1,888 4,813
-------- ------- -------- ---------
Income tax expense recorded $ 1,621 $ 2,184 $ 856 $ 3,924
======== ======= ======== =========
</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>
GGI GRANT
-------------------------- --------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------ ------------
1996 1997 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Deferred tax asset:
Plant and equipment, principally due to
differences in depreciation $ 3,841 $ 5,042 $ 666 $ 1,190
Financing costs -- -- 244 127
Research and development costs -- -- 499 466
Allowance for doubtful accounts and
other accruals 3,042 -- 58 146
Net operating loss carryforwards 58,795 8,026 10,720 11,311
Total 65,678 13,068 12,187 13,240
Deferred tax liability:
Plant and equipment, principally due
to differences in depreciation -- -- (339) (88)
-------- -------- -------- ---------
Net deferred tax asset 65,678 13,068 11,848 13,152
Valuation allowance (65,678) (13,068) (11,848) (13,152)
-------- -------- -------- ---------
Net deferred tax asset (liability) $ -- $ -- $ -- $ --
======== ======== ======== =========
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1996
was $38,409,000. The net change in the total valuation allowance for the
year ended December 31, 1996, the nine months ended September 30, 1997, the
three months ended December 31, 1997 and the year ended December 31, 1998,
was an increase of $27,269,000, a decrease of $52,610,000, a decrease of
$1,220,000 and an increase of $1,304,000, respectively. A full valuation
allowance was applied against the $3,152,234 in NOLs generated in 1998, due
to the uncertainty of their realization under SFAS No. 109.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) DEBT
A summary of notes payable, long-term debt, and capital lease
obligations was as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
-------- --------
<S> <C> <C>
Revolving lines of credit - affiliate:
Prime plus 2%, due March 31, 2000 at December 31, 1998 9.75% $ 800 $ 8,000
======== ========
Revolving lines of credit:
Term note - prime plus 2% at December 31, 1997 10.5% 15,800 --
Prime plus .75%, due February 17, 1998 at December 31, 1997
6.75% 2,565 --
Senior Notes - 9.75%, due February 15, 2008 -- 99,283
Equipment notes payable-10.02%, due 2001 13,989 2,810
Other notes payable-6.74% to 10.38%, due 1999-2005 25,051 994
Capital lease obligations-10.46% to 11.09%, due 1999-2000 8,362 2,252
Subordinated Note-10.5% due March 31, 1999 9,786 --
-------- --------
Total long-term debt 75,553 105,339
Less current portion (1,158) (2,522)
-------- --------
Notes payable, long-term debt, capital lease obligations
and subordinated note, excluding current portion $ 74,395 $102,817
======== ========
</TABLE>
On March 18, 1998, all of the then-outstanding debt of Grant, with the
exception of approximately $3.6 million relating to one capital lease
obligation and one note payable, was paid off with the proceeds of the
Senior Notes (see below).
On October 1, 1997, Grant and Elliott entered into a credit facility
providing for a revolving loan facility under which Grant could borrow up
to an aggregate principal amount of $5 million (at December 31, 1997, $4.2
million was available for borrowing). Grant is required to pay interest on
the outstanding principal balance of revolving loans at a rate per annum
equal to the prime rate plus 2%. On December 18, 1997, the credit facility
was amended to provide for a term loan of $15.8 million in addition to the
revolving loans. The proceeds of the term loan were used by Grant to
purchase all of the stock of Solid State not already owned by Grant (see
Note 1). This original credit facility was due to expire on March 31, 1999
at which time all obligations of Grant under the credit facility were due
and payable. In connection with the redemption of the cumulative pay-in-
kind preferred stock, par value $.001 per share ("Preferred Stock") (see
Note 12), held by Westgate, on June 5, 1998, Elliott agreed to amend the
Credit Facility to increase the maximum borrowing capacity from $5 million
to $15 million and to extend the term of the facility from March 31, 1999
to March 31, 2000. In April 1999, the Credit Facility was further extended
to $20.0 million. At December 31, 1998, there was $7 million available for
borrowing. The loans under the credit facility are collateralized by all
of Grant's assets and a pledge by Grant of certain notes and all the
outstanding shares of capital stock of its subsidiaries. Each subsidiary
of Grant has executed a guaranty in favor of Elliott, each of which
guarantees payment of all Grant's obligations owed to Elliott under the
credit facility. Each subsidiary has pledged its assets in favor of
Elliott to secure its obligations under its respective guaranty. The
credit facility contains restrictions which, among other things, prohibit
Grant's right to pay dividends and limit its right to borrow money,
purchase fixed assets or engage in certain types of transactions without
the consent of the lender. The $15.8 million term loan was paid in full on
February 18, 1998 with the proceeds of the Senior Notes. (See below) At
December 31, 1998, the Company had violated a covenant in the Credit
Facility which limited the capital expenditures for any one year to a
maximum of $14 million. The Company obtained a consent and waiver to the
default from Elliott effective December 31, 1998.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1997, a foreign credit facility between Solid State
and its subsidiaries and a Canadian bank was in effect. Under this
revolving facility Grant could borrow up to a principal amount of $3.6
million, collateralized by substantially all the assets of Solid State and
by assignment of receivables and bearing interest at Canadian prime rate
plus .75%. There was approximately $2.6 million outstanding at December
31, 1997. This facility was paid in full on February 18, 1998 and was
terminated. Following repayment of this note, the Solid State assets have
been pledged by Grant to collateralize the loans from Elliott described
above and each Solid State subsidiary has executed a guaranty in favor of
Elliott in the form described above.
On December 19, 1997 Elliott and Westgate exchanged 9,571.162 shares
of preferred stock with a liquidation value of $9,571,162, plus accrued
dividends of $215,000, for a subordinated note which bears interest at an
annual rate of 10.5%. The subordinated note was paid in full on February
18, 1998 with the proceeds of the Senior Notes. (See below)
The Company's equipment notes payable and capital lease obligations
represent installment loans or capital lease obligations primarily related
to the acquisition of seismic recording equipment. These instruments, with
the exception of the $3.6 million noted above, were paid in full on
February 18, 1998 with the proceeds of the Senior Notes. (See below)
At December 31, 1997, other notes payable included approximately $16.7
million due to Elliott from term loans entered into by Solid State during
the period February 1997 through October 1997. An additional $6.5 million
note was due from Solid State to the same Canadian bank that has the
revolver. The remainder of the other notes payable consists of local
short-term credit lines in certain foreign subsidiaries. These instruments
were paid in full on February 18, 1998 with the proceeds of the Senior
Notes. (See below)
On February 18, 1998, Grant completed an offering of $100 million face
value 9 3/4% Senior Notes due and payable in a lump sum on February 15,
2008. The Notes bear interest from February 18, at a rate per annum set
forth above payable semi-annually on February 15 and August 15 of each
year, commencing August 15, 1998. The net proceeds to Grant from the sale
of the Notes was approximately $95.2 million after deducting the Initial
Purchaser's discount and certain other estimated fees and expenses. Grant
used the proceeds to repay approximately $74.5 million of the outstanding
balance of debt ($73.0 million) and interest ($1.5 million) existing at
December 31, 1997. Total debt issue costs of $4.3 million were incurred in
connection with the offering and are being amortized over the term of the
notes.
The Notes were issued under an indenture (the "Indenture") entered
into among the Company, as issuer, the Subsidiary Guarantors, and LaSalle
National Bank, as trustee dated as of February 18, 1998. The Indenture
imposes certain limitations on the ability of the Company and its
Restricted Subsidiaries (as defined in the Indenture) to, among other
things, incur additional indebtedness (including capital leases), incur
liens, pay dividends or make certain other restricted payments, consummate
certain asset sales, enter into certain transactions with affiliates, issue
preferred stock, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company or any of its Restricted
Subsidiaries. In addition, the Credit Facility limits the Company from
taking, without the consent of the lender, certain actions, including
creating indebtedness in excess of specified amounts and declaring and
paying dividends.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) LEASES
Grant has entered into various non-cancelable operating leases which
provide for future minimum rental payments as follows:
1999($449; 2000($347; 2001($208; 2002($208; and 2003($104.
Rental expense for each of the periods included in the accompanying
financial statements was as follows (dollars in thousands):
GGI GRANT
-------------------------- ---------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------ ------------
1996 1997 1997 1998
-------- -------- -------- --------
$2,089 $830 $996 $2,556
(9) 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
maturities 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
The carrying values of the Company's long-term debt instruments
approximate their fair values. Grant's long-term debt has been estimated
based on current quoted market prices for the same or similar issues, or on
the current rates offered to Grant for debt of the same remaining
maturities.
(10) STOCK-BASED COMPENSATION
The 1997 Equity and Performance Incentive Plan (the "Incentive
Plan") was adopted by the Board of Directors and approved by Grant's
stockholders in December 1997. The Incentive Plan was amended in September
1998 to increase the number of shares reserved for issuance under the
Incentive Plan from 1,450,000 shares of Grant Common Stock to 1,900,000
shares of Grant Common Stock and subsequently, in February 1999, to
2,000,000 shares of Grant Common Stock. The Incentive Plan provides for
the grant to officers (including officers who are also directors),
employees, and non-employee directors of Grant and its subsidiaries, of
"incentive stock options" (within the meaning of Section 422 of the
Internal Revenue Code of 1986 (the "Code")), nonstatutory stock options,
stock appreciation rights and restricted shares. The Incentive Plan is
not a deferred compensation plan under Section 401(a) of the Code and is
not subject to the provisions of the Employee Retirement Income Security
Act of 1974.
The Incentive Plan is required to be administered by the Board of
Directors or by a committee of the Board of Directors consisting of at
least two nonemployee directors. The Board of Directors or its designated
committee will select the employees and non-employee directors to whom
Awards may be granted and the type of Award to be granted and determine, as
applicable, the number of shares to be subject to each Award, the exercise
price and the vesting. In making such determinations, the Board of
Directors or its designated committee will take into account the employee's
present and potential contributions to the success of the Company and other
relevant factors. As of December 31, 1998, Awards covering 1,662,300
shares have been made by the Board of Directors. During 1998, there were
57,600 option cancellations due to terminations. The Awards consist of
1,568,700 nonstatutory stock options that will vest annually in equal one-
third increments beginning on December 31, 1998. All such options were
granted at a price equal to or in excess of the fair market value of the
Company's stock at the date of grant. Such options have an average
exercise price of $5.76 per share (range of $4.75 to $6.84 per share),
subject to adjustment in certain circumstances. In addition, 6,000
restricted shares (36,000 total restricted shares) were granted to each
non-employee director. One-half (or 3,000) of such shares became
restricted on August 18, 1998 and the remaining 3,000 will become
unrestricted on February 18, 1999, subject to the satisfaction of certain
conditions set forth under the Incentive Plan. The Company recognized
approximately $150,000 in compensation expense in 1998 in relation to such
restricted shares, based on its estimate of fair market value pursuant to
SFAS No. 123.
The Company applies Accounting Principles Board Opinion 25 in
accounting for its share-based compensation plans and has adopted the
disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized under
these plans, with the exception noted above, because as of the measurement
date, which in this case is the grant date, the exercise price of granted
options is equal to or in excess of the fair value of the underlying
shares. Had compensation cost for the Company's share-based compensation
plans been determined based on the fair values of the options awarded at
the grant dates, consistent with the provisions of SFAS No. 123, the
Company's net loss and loss per share would have been reduced to the pro
forma amounts indicated below.
GGI
Had GGI adopted SFAS No. 123 for options granted after January 1,
1995, GGI's net loss for the year ended December 31, 1996 would have been
increased as follows (in thousands):
GGI
----------------------
1996
----------------------
AS
REPORTED PROFORMA
---------- ----------
Net loss applicable to common stock $ (82,390) $ (82,612)
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
Pursuant to the Plan, GGI's capital stock was canceled on the
Effective Date. As a result, GGI's Amended 1989 Long-Term Incentive Plan
was also canceled. Therefore, the effects of SFAS No. 123 for the nine
months ended September 30, 1997 have not been presented.
GRANT
During the three months ended December 31, 1997 Grant did not grant
any awards under the 1997 Equity and Performance Plan. Therefore, the
effects of SFAS No. 123 for the three months ended December 31, 1997 have
not been presented.
Had Grant adopted SFAS No. 123 for options granted after January 1,
1998, Grant's net loss for the year ended December 31, 1998 would have
increased as follows:
GRANT
----------------------
1998
----------------------
AS
REPORTED PROFORMA
---------- ----------
Net loss applicable to common stock $ (8,138) $ (11,293)
Loss per common share - basic and diluted $ (0.57) $ (0.79)
The weighted average fair value of options granted during 1998 was
$1.94. The fair value of each option award is estimated on the grant date
using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1998: expected volatility of zero,
risk-free interest rate of 5.5%, an expected life of nine years and a
dividend yield of zero.
(11) EMPLOYEE BENEFIT PLANS
EMPLOYEE RETIREMENT SAVINGS PLAN
GGI had established a defined contribution plan covering substantially
all U.S. and certain foreign employees whereby participants could elect to
contribute between 1% and 15% of their annual salary. Participants could
not make contributions in excess of $10,000 per year (as adjusted annually
by the cost of living adjustment factor). On the Effective Date, GGI
assumed and assigned the plan to Grant. Under the plan, the employer 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). The plan was amended in June 1997 to eliminate the employer's
option to contribute common stock so that discretionary contributions may
be made only in the form of cash. Contributions made by GGI for the year
ended December 31, 1996 consisted of 58,395 shares of GGI Common Stock with
a market value of $138,000. At December 31, 1996, the plan held 82,861
shares of GGI Common Stock. Due to the cancellation of GGI's Common Stock
on the Effective Date, the plan administrator reduced the carrying value of
the shares held by the plan to zero and the trustee returned the
certificates to GGI. Cash contributions to the plan by Grant for the
three-month period ended December 31, 1997 and the twelve-month period
ended December 31, 1998 totaled $39,000 and $188,000, respectively.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OTHER POSTRETIREMENT BENEFITS
GGI sponsored a defined contribution postretirement plan which,
pursuant to the Plan, was assumed by GGI and
assigned to Grant on the Effective Date. The plan provides medical
coverage for eligible retirees and their dependents (as defined in the
plan).
Following is a reconciliation of the changes in the plan's benefit
obligations and fair values of assets during 1997 and 1998 and a statement
of the funded status of this plan as of December 31 of each year.
GRANT
-------------------
1997 1998
-------- --------
(thousands of dollars)
CHANGE IN BENEFIT OBLIGATION
Accumulated postretirement benefit
obligation, beginning of year $ (368) $ (453)
Service cost (69) (74)
Interest cost (26) (32)
Participant contributions -- --
Amendments -- --
Actuarial (loss)/gain -- (36)
Benefits paid 10 10
------ ------
Accumulated postretirement benefit
obligation at end of year $ (453) $ (585)
====== ======
GRANT
-------------------
1997 1998
-------- --------
(thousands of dollars)
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning
of year $ -- $ --
Actual return on plan assets -- --
Employer contribution 10 10
Participant contributions -- --
Benefits paid (10) (10)
------ ------
Fair value of plan assets at end of year $ -- $ --
====== ======
Funded status at end of year $ (453) $ (585)
Unrecognized net actuarial (loss)/gain 17 53
Unrecognized prior service cost -- --
Unrecognized net transition obligation 111 103
------ ------
Accrued postretirement benefit cost $ (325) $ (429)
====== ======
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
GGI GRANT
--------------------------- --------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ ------------- ------------- ------------
1996 1997 1997 1998
------------ ------------- ------------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Service cost $ 66 $ 52 $ 17 $ 74
Interest cost 21 20 6 32
Amortization of transition
obligation over 20 years 7 5 2 7
Amortization of gain -- -- -- --
Other amortization -- -- -- --
------ ------ ----- -----
Net periodic
postretirement benefit
cost $ 94 $ 77 $ 25 $ 113
====== ====== ===== =====
</TABLE>
For measurement purposes, a 6.5% annual rate of increase in the per
capita cost of medical benefits was assumed for the year ended 1996. The
rate was assumed to decrease gradually to 5% for 2001 and remain at that
level thereafter.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% and 6.75% as of December 31,
1997, and 1998, respectively.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the retiree health care plan. A one-percentage-point
change in assumed health care cost trend rates would have the following
effects:
1-PERCENTAGE- 1-PERCENTAGE-
POINT INCREASE POINT DECREASE
-------------- --------------
(thousands of dollars)
Effect on total of service and interest cost $ 19 $ (16)
Effect on postretirement benefit obligation 88 (76)
(12) STOCKHOLDERS' EQUITY
GRANT
CUMULATIVE PREFERRED STOCK
Grant had authorized 20,000 shares of cumulative pay-in-kind preferred
stock (the "Cumulative Preferred Stock"), par value $0.001 per share, with
a liquidation preference of $1,000 per share of which 10,000 shares were
outstanding as of December 31, 1997. Dividends accrued and were cumulative
from September 30, 1997, the date on which such shares were issued.
Dividends accrued at an annual rate of 10.5% of the liquidation value and
were payable annually on September 30 of each year. Unpaid dividends
associated with the Cumulative Preferred Stock, at December 31, 1997 and at
June 5, 1998, were approximately $262,000 and $440,000, respectively.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On June 5, 1998 the Company redeemed the 10,000 shares of Cumulative
Preferred Stock, held by Westgate, representing all such outstanding
shares, in the aggregate amount of $10.7 million, representing the
liquidation amount of such shares of Cumulative Preferred Stock, together
with all accumulated, accrued and unpaid dividends. Upon redemption, the
Cumulative Preferred Stock was canceled, retired and eliminated from the
shares that the Company is authorized to issue.
COMMON STOCK
At December 31, 1998, Grant has authorized 25,000,000 shares of common
stock, par value $.001 per share, of which 14,426,055 shares are issued and
outstanding. The changes in common stock for the three months ended
December 31, 1997 and the year ended December 31, 1998 are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------
SHARES AMOUNT
---------- ----------
<S> <C> <C>
Balance September 30, 1997 4,590,056 $ 5
Common stock issued to directors 1 -
Common stock issued in exchange for warrants in Solid State 62,500 -
Common stock issued in connection with the reorganization plan 99,998 9
---------- -----
Balance December 31, 1997 14,152,555 $ 14
Common stock issued to directors 36,000 -
Common stock issued in connection with the underwriting of the
subscription offering 237,500 -
---------- -----
Balance, December 31, 1998 14,426,055 $ 14
========== =====
</TABLE>
(13) CONTINGENCIES
On December 11, 1997, certain holders of interests under the Plan,
acting through an "ad hoc" committee (the "Plaintiffs") commenced a lawsuit
in the Bankruptcy Court against Grant, GGI, Elliott, Westgate and Solid
State. The lawsuit alleged that (i) GGI and Elliott breached their
obligations under the Plan by seeking to complete the Acquisition prior to
commencing an offering of the Company's common stock, par value $.001 per
share ("Common Stock"), to certain holders of claims and other interests
under the Plan (the "Subscription Offering"), (ii) the Acquisition and
certain related transactions were unfair to the Plaintiffs because they
diluted the value of the common Stock to be issued to them under the
Subscription Offering and impaired the Company's equity value and (iii) the
Acquisition and certain related transactions could and should have been,
but were not, adequately disclosed in the disclosure statement filed with
the Bankruptcy Court regarding the Plan. The Plaintiffs requested (i)
compensatory and punitive damages in an unstated amount and (ii) revocation
of the Plan.
In addition, the Plaintiffs sought to enjoin completion of the
Acquisition and certain related transactions pending a trial on the merits.
This request for injunctive relief was denied by the Bankruptcy Court on
December 16, 1997, and was denied on appeal by the United States District
Court for the District of Delaware on December 19, 1997. During the
discovery process for the lawsuit, the parties began to discuss a
settlement. These discussions led to a settlement of the lawsuit on June
19, 1998 (the "Settlement"). Under the terms of the Settlement, in
exchange for a full and complete release of all of the Plaintiffs' claims
against Elliott, Westgate, the Company and their respective officers,
directors, partners, employees, agents, subsidiaries, affiliates,
successors and assigns relating to or arising out of the bankruptcy
proceedings of GGI and a dismissal of the lawsuit, Elliott paid the
Plaintiffs $150,000 for reimbursement of legal expenses, and permitted the
Plaintiffs to purchase Grant Common Stock in the Subscription Offering at a
discounted subscription purchase price of $ 4.75 per share. The Company
recorded $635,000 in litigation expense associated with the Settlement,
representing the cash paid by Elliott and the $0.25 discount permitted the
Plaintiffs to purchase Grant Common Stock in the Subscription Offering. In
addition, Elliott has agreed to indemnify Grant against any liability that
they may incur in connection with the lawsuit. Nevertheless, other
eligible subscribers in the Subscription Offering who did not execute a
release in connection with the Subscription Offering could commence other
lawsuits related to the Plan, which may not be subject to indemnification
by Elliott, and which could have an adverse effect on Grant's business,
reputation, financial position, results of operations or cash flows.
In October 1998, Zurich American Insurance Company ("Zurich") made a
demand on Grant for the payment of $694,000 claimed to be due Zurich under
the terms of certain insurance policies issued by Zurich to GGI in 1996,
which policies were allegedly assumed by Grant at the conclusion of its
bankruptcy reorganization in 1997. Subsequent to December 31, 1998, a
settlement has been agreed to by the parties subject only to the execution
of a definitive Settlement Agreement and funding of the settlement at a
cost to Grant of $290,000. This amount has been accrued at December 31,
1998.
Grant is involved in various claims and legal actions arising in the
ordinary course of business. GGI is involved in various claims and legal
actions arising in the bankruptcy and related to the Plan. Other than the
Plan and actions commenced pursuant thereto or in connection therewith,
management of GGI and management of Grant are of the opinion that none of
the claims and actions are likely to have a material adverse impact on
GGI's or Grant's financial position, results of operations or cash flow.
The Court generally has jurisdiction over all of GGI's property, as
defined in section 541 of the Bankruptcy Code, held on the Petition Date or
acquired thereafter. GGI may not engage in transactions except pursuant to
the Plan without prior approval of the Court.
GGI and Grant are subject 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, GGI 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. GGI believes the tax authority's claim is
without merit. Moreover, such assessment was not filed as a claim in GGI's
chapter 11 case. As a result, GGI has made no provision for payment on the
assessment. GGI intends to vigorously protest any attempted enforcement of
the assessment; however, there can be no assurances regarding the outcome
of any such protest.
(14) RELATED PARTY TRANSACTIONS
During 1996, GGI entered into an exclusive agreement with Macdonald &
King, Incorporated, a financial services firm, for the purpose of assisting
GGI in securing additional sources of financing, including equipment
financing and short and long-term financing. Mr. William C. Macdonald, a
former director of GGI, is the Chairman of the Board and sole shareholder
of Macdonald & King, Incorporated. Pursuant to the terms of the agreement,
GGI issued 155,499 shares of GGI Common Stock with a market value of
approximately $388,748 to Macdonald & King, Incorporated in connection with
financing obtained by GGI prior to Mr. Macdonald's resignation from GGI's
Board of Directors effective August 8, 1996.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On March 20, 1996, GGI issued 143,000 shares of GGI's $2.4375
Preferred to Westgate, an affiliate of Elliott, a holder of more than 5% of
the $2.4375 Preferred, for an aggregate purchase price of $1,573,000.
Westgate subsequently sold its shares of $2.4375 Preferred to Liverpool
Limited Partners, which also is an affiliate of Elliott.
In November 1996, GGI borrowed an aggregate of $3,149,000 from
Westgate and Elliott for working capital purposes. The borrowings were in
the form of unsecured promissory notes and remained outstanding at December
31, 1996, and are therefore classified in pre-petition liabilities subject
to the chapter 11 case.
A former senior vice-president of Grant loaned approximately CDN
$500,000 for a two-year term at 10% interest to an entity in which the
Company held, at the time, an 18% common equity interest. Additionally,
Grant owned $268,000 of redeemable, cumulative preferred shares in the same
entity. Currently, the Company holds a 14.5% common equity and no
preferred shares. During 1998, Grant recorded a $271,000 write-down to
reduce the carrying value of its investment in this entity to zero due to
the entity's uncertain financial condition. The Company used this entity
periodically to perform survey services. The senior vice president resigned
in January 1998. During the three months ended December 31, 1997, Grant
paid approximately $364,000 to this entity.
The Company's Chairman of the Board ("Chairman") is an officer of an
affiliate of the Principal Stockholders of Grant. On April 28, 1998,
Elliott granted to the Chairman options to purchase 100,000 shares of
Common Stock from Elliott. Additionally, the Chairman has entered into a
consulting agreement, dated April 28, 1998, with Grant (the "Consulting
Agreement") which provides for an annual consulting fee of $100,000 for as
long as he remains Chairman. Under the Consulting Agreement, the Chairman
was also granted options by the Company to purchase 50,000 shares of Common
Stock under the Incentive Plan at exercise prices equal to or in excess of
the fair market value of the Company's stock on date of grant. These
options will vest annually in equal one-third increments beginning on
December 31, 1998, and have an average exercise price of $6.07 per share.
See the discussion of debt financing with Elliott in Notes 7 and 12.
See discussion of the Subscription Offering in Note 19.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(15) OTHER INCOME (EXPENSE)
Other Income (Expense) consisted of the following:
<TABLE>
<CAPTION>
GGI GRANT
--------------------------- --------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ ------------- ------------ ------------
1996 1997 1997 1998
------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Gain (loss) on the sale of fixed assets $ 25 $ (67) $ 50 $ 189
Net gain (loss) on foreign exchange (251) (98) (289) (485)
Loss on sale of subsidiaries (198) -- -- --
Foreign credit insurance (8) -- -- --
Gain on insurance settlement -- 11 -- --
Merger costs -- -- (767) --
Investment income -- -- 46 99
Legal settlements -- 2,359(1) (66) (635)
Canadian investment write-off -- -- -- (271)
GGI administrative fee - -- -- 60
Miscellaneous (70) 61 (236) 223
------- ------- -------- ------
Total $ (502) $ 2,266 $ (1,262) $ (820)
======= ======= ======== ======
</TABLE>
_______________
(1) On July 15, 1997, GGI's Brazilian subsidiary finalized an agreement
with a former customer that resolved a long-standing dispute relating to
services rendered on contracts dating back to 1983. In settlement of all
claims, GGI received payment, net of related costs and expenses, of
approximately $2,359,000.
(16) LOSS PER SHARE
Loss per common share-basic and diluted is computed as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
GGI GRANT
------------------------- -------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ ------------- ------------ ------------
1996 1997 1997 1998
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net loss applicable to common stock $ (82,390) $ (425) $ (6,143) $ (8,138)
========= ======== ========= ========
Weighted average common shares 4,798 14,257
========= ========
Loss per common share - basic and
diluted $ (1.28) $ (.57)
========= ========
</TABLE>
Loss per share data for GGI have not been presented as this information
is not meaningful.
Dividends on GGI's $2.4375 convertible exchangeable preferred stock were
$6.4 million for the year ended December 31, 1996. Dividends on Grant's
pay-in-kind preferred stock were $477,000 and $440,000 in the three months
ended December 31, 1997 and the year ended December 31, 1998, respectively.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(17) COMPREHENSIVE INCOME (LOSS)
Effective January 1, 1998, Grant adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," which
establishes standards for reporting and display of comprehensive income and
its components, including foreign currency translation adjustments and
unrealized gains (losses) on marketable securities classified as available-
for-sale. Grant's and GGI's total comprehensive loss is as follows for the
periods presented.
<TABLE>
<CAPTION>
GGI GRANT
--------------------------- -------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------ -----------
1996 1997 1997 1998
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net loss applicable to common stock $ (82,390) $ (425) $ (6,143) $ (8,138)
Other comprehensive loss - foreign
currency translation adjustments -- -- (467) (2,019)
--------- ------ --------- --------
Total comprehensive loss $ (82,390) $ (425) $ (6,610) $(10,157)
========= ====== ========= ========
</TABLE>
(18) SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Non Cash investing and financing activities consisted of the following
(in thousands):
<TABLE>
<CAPTION>
GGI GRANT
--------------------------- -------------------------
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------ -----------
1996 1997 1997 1998
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
CASH PAID FOR INTEREST AND TAXES WAS AS FOLLOWS:
Taxes, net of refunds $ 3,496 $ 2,037 $ 785 $ 3,624
Interest, net of amounts capitalized 6,106 3,742 595 7,822
NONCASH INVESTING AND FINANCING ACTIVITIES:
Property, plant and equipment acquired
through debt issuance 19,718 1,483 8,406 3,200
Common Stock issued in exchange of warrants
in Solid State -- -- 144 --
Converted 9,571 Preferred Shares to A
Subordinated Note -- -- 9,571 --
Dividend - Preferred Stock -- -- 215 --
Debenture conversion 2,774 -- -- --
Fair value of divestitures, net of cash held 493 -- -- --
Receivables acquired in connection with
divestitures 255 -- -- --
Prepaid insurance debt additions $ -- $ -- $ -- $ 1,186
</TABLE>
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(19) SUBSCRIPTION OFFERING
Pursuant to the Plan, the Company was required to conduct a
subscription offering (the "Subscription Offering") of 4,750,000 shares of
Grant Common Stock to certain holders of claims and other interests under
the Plan for an aggregate purchase price of $23,750,000. The Plan provided
that (i) Eligible Class 5 Claim Holders; (ii) Eligible Class 7 Interest
Holders; and (iii) Eligible Class 8 Interest Holders, each as defined in
the Plan (Collectively, the "Eligible Subscribers") could participate in
the Subscription Offering. Because Elliott and certain of its affiliates,
as interest holders under the Plan, were entitled to purchase 1,356,231
shares of Grant Common Stock in an offering by the Company, the Principal
Stockholders offered the balance of such shares of Grant Common Stock to
the Eligible Subscribers pursuant to the Subscription Offering. The
Company registered the shares of Grant Common Stock with the Commission
pursuant to the Subscription Offering. The registration statement became
effective on July 7, 1998, and rights to subscribe for shares of Common
Stock pursuant to the Subscription Offering expired if not exercised on
August 24, 1998. As a result of the Subscription Offering a total of
2,080,722 of shares were subscribed. The total purchase price for these
shares received by the Principal Shareholders was approximately $9,918,000.
(20) SUBSEQUENT EVENTS
On January 27, 1999, the Company's then President and CEO, resigned.
The former president's termination agreement provides for him to continue
employment through February 26, 1999 ("Termination Date") at which time he
would begin a five-year non-compete period during which the Company would
pay him $15,000 per month plus benefits from March 1999 through December
2001 and $7,500 per month plus benefits per month from January 2002 through
December 2003. In addition, the former President was paid a one-time cash
bonus of $180,000 and was allowed to keep-one-third (80,000) of the stock
options awarded to him under the 1997 Equity and Performance Incentive
Plan. The options are exercisable for a three-year period after
Termination Date.
<PAGE>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
AND
GGI LIQUIDATING CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Quarterly financial information of GGI is summarized as follows:
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
1997
Revenues $ 30,295 $ 36,873 $ 25,537
Operating income 2,070 3,532 1,192
Net income (loss) (275) 138 (287)
Net income (loss) applicable to
common stock (275) 138 (287)
Quarterly financial information of Grant is summarized as follows:
1997
Revenues $ -- $ -- $ -- $ 37,868
Operating income -- -- -- (5,033)(1)
Net income (loss) -- -- -- (5,666)
Net income (loss) applicable to
common stock -- -- -- (6,143)
INCOME (LOSS) PER COMMON SHARE-
BASIC AND DILUTED:
Net income (loss) per common
stock -- -- -- $ (1.28)
1998
Revenues $ 47,895 $ 48,467 $ 50,995 $ 28,155
Operating income 4,064 4,867 3,485 (6,070)(2)
Net income (loss) 733 1,205 157 (9,793)
Net income (loss) applicable to
common stock 469 1,029 157 (9,793)
INCOME (LOSS) PER COMMON SHARE-
BASIC AND DILUTED:
Net income (loss) per common
stock $ .03 $ .08 $ .01 $ (.69)
______________
(1) Includes a $6,369 charge for asset impairment (see Note 3 of Notes to
the Consolidated Financial Statements). $5,869 is related to the impaired
multi-client data library and $500 is related to miscellaneous assets held
by Solid State.
(2) Includes a $3,762 charge for asset impairment (see Note 3 of Notes to
the Consolidated Financial Statements). $3,198 is related to the impaired
multi-client data library and $564 is related to non-productive asset
write-downs.
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
The following unaudited pro forma consolidated statements of operation
for the year ended December 31, 1998 and for the six months ended June 30,
1999 have been prepared from the consolidated statements of operations of
Grant Geophysical, Inc. for the year ended December 31, 1998 and the six
months ended June 30, 1999, included elsewhere within this prospectus. The
pro forma financial statements give effect to the following transactions, as
if such transactions were completed as of January 1, 1998: (i) the issuance
of the Company's 8% Exchangeable Preferred Stock to Elliott immediately prior
to the completion of the subscription offering, (ii) the exchange of such
shares, together with accrued and unpaid dividends thereon, for shares of 8%
Convertible Preferred Stock and (iii) the completion of the exchange offer,
assuming notes representing 100% of the aggregate principal amount outstanding
are exchanged for shares of new preferred stock.
The pro forma adjustments are based on certain assumptions and adjustments
described in the notes set forth below and should be read in conjunction with
those notes. Actual adjustments may differ from the pro forma adjustments;
however, management believes that the assumptions provide a reasonable basis
for presenting the significant effects of the transactions as contemplated and
that the pro forma adjustments give appropriate effect to those assumptions
and are properly applied in the pro forma consolidated statements of
operations. The pro forma consolidated statements of operations do not purport
to present the Company's results of operations had the transactions been
completed on January 1, 1998, nor are they necessarily indicative of results of
operations that may be achieved in the future. The unaudited pro forma
financial information should be read in conjunction with the Company's
historical consolidated financial statements and the related notes appearing
elsewhere in this prospectus. See also "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
----------------------------------------
PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
---------- ------------- -----------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Revenues $ 175,512 $ -- $ 175,512
Expenses:
Direct operating expenses 128,962 128,962
Selling, general and administrative expenses 14,156 14,156
Depreciation and amortization 22,286 22,286
Charge for asset impairment 3,762 3,762
--------- --------- ---------
Total costs and expenses 169,166 -- 169,166
--------- --------- ---------
Operating income 6,346 -- 6,346
Other income (expense):
Interest expense (10,380) 9,121(a) (1,259)
Interest income 1,080 1,080
Other (820) (820)
--------- --------- ---------
Total other expense (10,120) 9,121 (999)
--------- --------- ---------
Income (loss) before taxes (3,774) 9,121 5,347
Income tax expense 3,924 --(b) 3,924
--------- --------- ---------
Net income (loss) (7,698) 9,121 1,423
Preferred dividends 440 6,232(c) 6,672
--------- --------- ---------
Net loss applicable to
common stock $ (8,138) $ 2,889 $ (5,249)
========= ========= =========
Loss per common share -
basic and diluted
Net income (loss) $ (0.54) $ 0.10
Dividend requirement on pay-in-kind
preferred stock 0.03 (0.47)
--------- --------- ---------
Net loss per common share $ (0.57) $ (0.37)
========= =========
</TABLE>
________________
(a) Interest on notes of $8,721 and amortization of debt issue cost and
discount on notes in the amounts of $332 and $68, respectively.
(b) No income tax is computed on pro forma adjustment due to our net
operating loss position.
(c) Preferred stock dividends related to 779,023 shares of 8% Convertible
Stock issued with liquidation preference of $100 per share.
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
----------------------------------------
PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
---------- ------------- -----------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Revenues $ 33,208 $ 33,208
Expenses:
Direct operating expenses 24,584 24,584
Selling, general and administrative
expenses 6,683 6,683
Depreciation and amortization 11,909 11,909
--------- --------- ---------
Total costs and expenses 43,176 -- 43,176
--------- --------- ---------
Operating loss (9,968) -- (9,968)
Other income (expense):
Interest expense (6,133) 5,149(a) (984)
Interest income 325 325
Other 928 928
--------- --------- ---------
Total other income (expense) (4,880) 5,149 269
--------- --------- ---------
Loss before taxes (14,848) 5,149 (9,699)
Income tax expense 421 -- (b) 421
--------- --------- ---------
Net loss (15,269) 5,149 (10,120)
Preferred dividends -- 3,116(c) 3,116
--------- --------- ---------
Net loss applicable to
common stock $ (15,269) $ 2,033 $ (13,236)
========= ========= =========
Loss per common share -
basic and diluted
Net loss $ (1.06) $ (0.70)
Dividend requirement on pay-in-kind
preferred stock -- (0.22)
--------- ---------
Net loss per common share $ (1.06) $ (0.92)
========= =========
</TABLE>
________________
(a) Interest on notes of $4,875 and amortization of debt issue cost and
discount on notes in the amounts of $235 and $39, respectively.
(b) No income tax is computed on pro forma adjustments due to our net
operating loss position.
(c) Preferred stock dividends related to 779,023 shares of 8% Convertible
Preferred Stock issued with a liquidation preference of $100 per share.
<PAGE>
PROSPECTUS Alternative Subscription Offering Pages
GRANT GEOPHYSICAL, INC.
SUBSCRIPTION OFFERING OF _________ SHARES OF
8% CONVERTIBLE PREFERRED STOCK
AT $100 PER SHARE
--------------------------------------
THE SUBSCRIPTION OFFERING WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON __________, 1999 UNLESS EXTENDED
TERMS OF THE SUBSCRIPTION OFFERING
* One of our stockholders, * The subscription rights expire
Elliott Associates, L.P., at 5:00 p.m., New York City
is offering up to 23,386 time, on ______, 1999, if not
shares of our preferred properly exercised before that
stock to all holders of date.
our common stock (except
Elliott and Westgate * We will not receive any
International, L.P.) as proceeds from the subscription
of _____________, 1999. offering.
* The selling stockholder * We will pay all expenses of
has granted to you the the subscription offering,
right to subscribe for estimated at $_________.
one share of preferred
stock for every ____ * There is currently no
shares of common stock, established trading market for
or fraction thereof you either the preferred stock or
hold on _________, 1999. our common stock into which
the preferred stock is
* You may purchase one convertible. We do not expect
share of preferred stock that a trading market for the
for every right granted preferred stock or our common
to you. stock will develop following
the completion of the
* The selling stockholder subscription offering.
will not issue fractional
subscription rights and
will not pay cash in lieu
of subscription rights.
* The subscription rights
are non-transferrable and
will not trade on any
exchange or market.
Terms of the 8% Convertible Preferred Stock Offered in the Subscription Offering
* DIVIDENDS
8% cumulative annual dividends, payable quarterly in arrears,
commencing on January 1, 2000, in cash or, at our option, in shares of
our preferred stock.
* LIQUIDATION PREFERENCE
$100 per share.
* OPTIONAL REDEMPTION
We may redeem shares of the preferred stock at any time at a
redemption price equal to the liquidation preference (plus accumulated
and unpaid dividends).
* VOTING RIGHTS
The shares of preferred stock will vote together, as a single class,
with shares of our common stock on an as-converted basis.
* CONVERSION PRICE
$3 per share, subject to adjustment (equal to an initial conversion
ratio of 33 1/3 shares of our common stock for each share of preferred
stock).
* CONVERSION RIGHT
The preferred stock is convertible into our common stock at any time
at the applicable conversion ratio.
--------------------------------------
PER SHARE TOTAL
Proceeds to selling stockholder $ 100 $______
--------------------------------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE THE RISK FACTORS
SECTION BEGINNING ON PAGE 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is ________ __, 1999
<PAGE>
TABLE OF CONTENTS
Forward-Looking Statements ...........................................
Prospectus Summary ...................................................
Risk Factors .........................................................
The Subscription Offering ............................................
Use of Proceeds ......................................................
Capitalization ......................................................
Ratio of Earnings to Fixed Charges ...................................
Selected Financial Data ..............................................
Management's Discussion and Analysis of Financial
Condition and Results of Operations ...............................
Business .............................................................
Management ...........................................................
Executive Compensation ...............................................
Principal Stockholders ...............................................
Certain Relationships and Related Party Transactions .................
Description of Capital Stock .........................................
Legal Matters ........................................................
Experts ..............................................................
Available Information ................................................
Index to Financial Statements ........................................
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT. THIS PROSPECTUS MAY ONLY BE USED WHERE IT IS LEGAL TO OFFER
THESE SECURITIES.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are those that
predict or describe future events or trends and that do not relate solely
to historical matters. You can generally identify forward-looking
statements as statements containing the words "believe," "expect,"
"anticipate," "intend," "estimate," "assume" or similar expressions.
YOU SHOULD NOT RELY ON OUR FORWARD-LOOKING STATEMENTS BECAUSE THE
MATTERS THEY DESCRIBE ARE SUBJECT TO KNOWN (AND UNKNOWN) RISKS,
UNCERTAINTIES AND OTHER UNPREDICTABLE FACTORS, MANY OF WHICH ARE BEYOND OUR
CONTROL. Many relevant risks are described under the caption "Risk
Factors" in this prospectus, and you should consider the important factors
listed there as you read this prospectus.
Our actual results, performance or achievements may differ materially
from the anticipated results, performance or achievements that are
expressed or implied by our forward-looking statements. We assume no
responsibility to update our forward-looking statements.
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS TO
HELP YOU UNDERSTAND THE EXCHANGE OFFER AND THE PREFERRED STOCK. YOU SHOULD
CAREFULLY READ THE ENTIRE PROSPECTUS TO UNDERSTAND FULLY THE TERMS OF THE
EXCHANGE OFFER AND THE PREFERRED STOCK, AS WELL AS THE TAX AND OTHER
CONSIDERATIONS THAT ARE IMPORTANT TO YOU IN MAKING YOUR INVESTMENT
DECISION. WE USE CERTAIN DEFINED TERMS IN THIS PROSPECTUS. "GRANT" REFERS
TO GRANT GEOPHYSICAL, INC. THE WORDS "COMPANY," "WE," "OUR" AND "OURS"
REFER TO THE COMBINED OPERATIONS OF GRANT AND ITS CONSOLIDATED
SUBSIDIARIES. YOU SHOULD PAY SPECIAL ATTENTION TO THE "RISK FACTORS"
SECTION BEGINNING ON PAGE __ OF THIS PROSPECTUS.
THE COMPANY
We are a leading provider of seismic data acquisition in land and
transition zone environments in selected markets, including the United
States, Canada, Latin America and the Far East. Through our predecessors,
we have participated in the seismic data acquisition service business in
the United States and Latin America since the 1940s, the Far East since the
1960s an Canada since the 1970s. We have conducted operations in each of
these markets, as well as in the Middle East and Africa, in the past three
years. Our seismic data acquisition services are typically provided on an
exclusive contract basis to domestic and international oil and gas
companies and seismic data marketing companies. We also own interests in
certain multi-client seismic data covering selected areas in the United
States and Canada that are marketed broadly on a non-exclusive basis to oil
and gas companies.
We utilize sophisticated equipment to perform specialized 3D and 2D
seismic surveys. All of our seismic data acquisition crews are capable of
performing surveys in land environments, and four are equipped to perform
surveys in transition zone environments. Transition zone environments
include swamps, marshes and shallow water areas that require specialized
equipment and must be surveyed with minimal disruption to the natural
environment.
Our principal executive offices are located at 16850 Park Row,
Houston, Texas 77084 and our telephone number is 281-398-9503.
THE EXCHANGE OFFER, CONSENT SOLICITATION AND SUBSCRIPTION OFFERING
The industry downturn that began late in the third quarter of 1998
prompted us to undertake activities we believe will both preserve our
financial strength and position us to respond when market demand increases.
Those activities include a worldwide reduction in personnel, a
restructuring of our operations and marketing efforts and a restricted
capital expenditure program. Personnel reductions began in the fourth
quarter of 1998 and continued throughout the first nine months of 1999.
Overall, personnel were reduced from 863 full-time and 2,162 temporary at
September 30, 1998 to 573 full-time and 1,874 temporary personnel at
September 30, 1999. The corporate restructuring is the result of changing
market conditions and is designed to better utilize all our assets. The
restructuring of our operations and marketing efforts places a greater
emphasis on maximizing value from our multi-client data library in the
United States and Canada and refocuses the international marketing efforts
on our established foreign markets.
Our board of directors and management determined that it would be in
the best interest of the Company and our stockholders if we conducted an
offer to exchange $100,000,000 principal amount of our 9 3/4 % Senior Notes
due 2008 for shares of new preferred stock with an aggregate liquidation
value equal to 65% of the principal amount of notes tendered plus 100% of
the accrued interest on the notes tendered. In conjunction with the
exchange offer, we are seeking consents from the holders of the outstanding
notes to amend certain definitions and to modify certain restrictive
covenants in the indenture governing the outstanding notes. The consent of
holders of a majority of the outstanding principal amount of the notes held
by holders other than us, our subsidiaries and our affiliates are required
to approve the proposed amendments to the indenture. Elliott Associates,
L.P. and Westgate International, L.P., which hold a majority of the
aggregate principal amount of the notes, have advised us that they will
tender in the exchange offer all of the notes held by them only if the
proposed amendments to the indenture are approved. We will execute a
supplemental indenture with the trustee to cause the proposed amendments to
the indenture to take effect only if Elliott and Westgate tender all of
their notes in the exchange. Through the exchange offer, we will reduce
our outstanding indebtedness by converting a portion of our debt into
equity. The proposed amendments to the indenture for which we are
soliciting consents will allow us greater flexibility with respect to
future financings we may consider. We believe that the consummation of the
exchange offer and the consent solicitation will help us improve our
capital structure and preserve our financial strength.
Between August 13, 1999 and October 19, 1999, we issued a total of
90,000 shares of our 8% Exchangeable Preferred Stock to Elliott Associates,
L.P. at a price of $100 per share. The proceeds from the sale of the
preferred stock total an aggregate of $9,000,000, and were used to meet our
cash needs. Elliott is under no obligation to purchase any additional
shares of 8% Exchangeable Preferred Stock or otherwise provide additional
financing for our operations. The 8% Exchangeable Preferred Stock is
exchangeable for any new securities that we propose to sell or issue.
Immediately prior to the consummation of the exchange offer, we will issue
to Elliott, in exchange for all of the 8% Exchangeable Preferred Stock then
held by it, shares of our 8% Convertible Preferred Stock with an aggregate
liquidation preference equal to the liquidation preference of the 8%
Exchangeable Preferred Stock plus accrued and unpaid dividends thereon
exchanged by Elliott.
Elliott has proposed a subscription offering, to be held at the same
time as the exchange offer, of 15.26% of the shares of 8% Convertible
Preferred Stock it will hold immediately prior to the consummation of the
exchange offer. In the subscription offering, Elliott will give our
stockholders, other than Elliott and Westgate International, L.P., the
opportunity to purchase from Elliott their pro rata share of the 8%
Convertible Preferred Stock that Elliott will receive in exchange for its
8% Exchangeable Preferred Stock on substantially the same terms upon which
Elliott originally acquired the 8% Exchangeable Preferred Stock. Elliott
chose to offer 15.26% of its shares of 8% Convertible Preferred Stock in
the subscription offering because that is the percentage of our common
stock held by our stockholders other than Elliott and Westgate. Elliott
has proposed the subscription offering to permit our minority stockholders
to participate, on a pro rata basis, with Elliott in its equity investment
in our 8% Convertible Preferred Stock on the same terms as Elliott's
investment in the 8% Exchangeable Preferred Stock.
<PAGE>
SUMMARY OF THE SUBSCRIPTION OFFERING
One of our stockholders, Elliott Associates, L.P., is offering 14.67%
of the shares of 8% Convertible Preferred Stock held by it, which is
expected to be 23,386 shares, to all holders of our common stock, other
than Elliott and Westgate International, L.P., who held our common stock on
_________, 1999.
Securities offered.......... One of our stockholders, Elliott Associates,
L.P., is offering 15.26% of the shares of our
8% Convertible Preferred Stock held by it
immediately prior to the consummation of the
concurrent exchange offer, to be issued upon
exercise of the subscription rights.
Record date................. _______, 1999
Expiration date............. The rights expire at 5:00 p.m., New York City
time, _______, 1999, unless properly
exercised before that time.
Basic subscription privilege The selling stockholder has granted each
person who was a record holder of common
stock on the record date, other than the
selling stockholder, Westgate International,
L.P. and their affiliates, the right to
purchase one share of new preferred stock for
each ___ shares of common stock, held on the
record date.
Oversubscription privilege.. If you exercise the basic subscription
privilege, you may also purchase additional
shares of new preferred stock that are not
purchased by other stockholders. If there
are not enough shares available to fill all
subscription for additional shares, the
available shares will be allocated pro rata
based on the number of shares each subscriber
for additional shares has purchased under the
basic subscription privilege.
Subscription price.......... $100 per share, payable in cash. Payment by
personal check must clear payment on or
before the expiration date and may require
five or more business days in which to clear
payment. We recommend that stockholders pay
the subscription price by certified or
cashier's check drawn on a U.S. bank, U.S.
postal money order or wire transfer of funds.
Transferability of
subscription rights........ The subscription rights are not transferable.
No revocation............... If you exercise any subscription rights, you
are not allowed to revoke or change the
exercise or request a refund of monies paid.
Procedure for exercising
subscription rights........ To exercise subscription rights, you must
complete the subscription exercise notice
and deliver it to the subscription agent
with full payment under both the basic and
oversubscription privileges you elect to
exercise. The subscription agent must
receive the proper forms and payments on
or before the expiration date.
You may deliver the documents and payments by
mail or commercial courier. If regular mail
is used for this purpose, we recommend using
insured, registered mail. You may use an
alternative "Guaranteed Delivery Procedure"
if you are unable to deliver the subscription
exercise notice before the expiration date,
subject to the requirements for this
procedure described under "The Subscription
Offering -- Terms of the Subscription
Offering -- Guaranteed Delivery Procedures."
Payment adjustments......... If you send a payment that is insufficient to
purchase the number of shares requested, or
if the number of shares requested is not
specified in the subscription exercise
notice, the payment received will be applied
to exercise the subscription right to the
extent of the payment. If the payment
exceeds the amount required to exercise the
subscription right, the excess will be
refunded as soon as practicable. The selling
stockholder will not pay interest on any
payments received under the subscription
offering.
Nominee accounts............ If you wish to purchase shares in this
offering and your shares are held by a
securities broker, bank, trust company or
other nominee, you should promptly contact
those record holders and request them to
exercise subscription rights on your behalf.
If you are a record holder who wishes an
institution such as a broker or bank to
exercise your subscription rights for you,
you should contact that institution promptly
to arrange that method of exercise.
You are responsible for the payment of any
fees that brokers or other persons holding
your shares may charge.
Stock certificates.......... The subscription agent will deliver stock
certificates representing the new preferred
stock purchased by the exercise of
subscription rights as soon as practicable
after the expiration date.
Amendment, extension and
termination................ The selling stockholder may amend, extend or
terminate the subscription offering at any
time prior to the expiration date at its sole
discretion. The selling stockholder will
issue a press release with respect to any
amendment, extension or termination of the
subscription rights of offering.
Concurrent offering......... We are concurrently offering, by means of a
separate prospectus, to exchange $100,000,000
in principal amount of our 9 3/4 % Senior
Notes due 2008 for shares of our preferred
stock with an aggregate liquidation value
equal to 65% of the aggregate principal
amount of notes tendered plus 100% of the
accrued interest on the notes tendered.
Subscription agent.......... LaSalle Bank National Association is serving
as the subscription agent in connection with
the subscription offering. The exchange
agent can be reached at 135 South LaSalle
Street, Room 1960, Chicago, Illinois 60603,
Attention: Sarah H. Webb. For more
information with respect to the subscription
offering, the telephone number for the
subscription agent is (312) 904-2444 and the
facsimile number for the subscription agent
is (312) 904-2236.
<PAGE>
SUMMARY OF TERMS OF NEW PREFERRED STOCK
Securities offered.......... Shares of our 8% Convertible Preferred Stock.
Dividends................... Dividends on the preferred stock are payable
in cash or, at our option, in additional
shares of preferred stock, on the first
business day of each January, April, July and
October beginning January 1, 2000. Dividends
on the preferred stock will accrue at the
rate of 8% per annum of the liquidation
preference and be cumulative from the date on
which the preferred stock was originally
issued. We intend to pay dividends on the
preferred stock in additional shares of
preferred stock until further notice.
Liquidation preference...... $100 per share, plus accrued and unpaid
dividends.
Voting rights............... The shares of preferred stock will vote
together, as a single class, with shares of
our common stock on an as-converted basis.
Optional redemption......... We may redeem any of the preferred stock at
any time at a redemption price per share
equal to the liquidation preference,
including any accumulated and unpaid
dividends. Our ability to redeem the
preferred stock is subject to restrictive
covenants governing our indebtedness,
including the restricted payments test in the
indenture governing the notes.
Conversion rights........... Each share of preferred stock may be
converted at any time at the option of the
holder into that number of shares of our
common stock as is equal to the liquidation
preference of that share, which includes
accrued and unpaid dividends, divided by an
initial conversion price of $3. The
conversion price is subject to adjustment
upon the occurrence of specified events. As
a result, each share of preferred stock will
initially be convertible into 33 1/3 shares
of our common stock. See "Description of
Capital Stock -- 8% Convertible Preferred
Stock--Conversion Rights."
Ranking..................... The preferred stock will rank:
* senior to our common stock and all
of our other capital stock unless the
terms of the other capital stock
expressly provide that it ranks equally
with the preferred stock; and
* equally with any of our capital
stock, the terms of which expressly
provide that it will rank equally with
the preferred stock. As of the
completion of the subscription offering,
all of our other outstanding capital
stock would rank junior to the preferred
stock.
RISK FACTORS
See "Risk Factors" for a discussion of factors you should carefully
consider before deciding whether to participate in the subscription
offering.
<PAGE>
RISK FACTORS
WE URGE YOU TO CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, AS WELL
AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE MAKING ANY
INVESTMENT DECISIONS REGARDING THE SUBSCRIPTION OFFERING OR THE PREFERRED
STOCK. THE RISKS DESCRIBED BELOW ARE NOT THE ONLY ONES FACING OUR COMPANY.
ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM
IMMATERIAL MAY ALSO IMPACT OUR BUSINESS OPERATIONS.
WE ARE DEPENDENT ON THE VOLATILE OIL AND GAS INDUSTRY
Our business depends in large part on the conditions of the oil and
gas industry, and specifically on the capital expenditures of our
customers. As a result of the decline in oil and gas prices beginning late
in the third quarter of 1998, the level of overall oil and gas industry
activity has declined from levels experienced in recent years. Decreases
in our customers' capital spending in connection with industry downturns
have had and will likely continue to have a significant adverse effect upon
the demand for our services and the results of our operations and cash
flows.
WE ARE HIGHLY LEVERAGED AND HAVE SIGNIFICANT DEBT SERVICE REQUIREMENTS
Our balance sheet is highly leveraged given our present operating
level. If the exchange offer is not consummated, we will have significant
interest expense and principal repayment obligations under the notes and
our other debt. Our ability to meet our debt service requirements and
comply with the covenants in our various debt agreements, including the
indenture governing the notes, will depend upon our future performance,
which is subject to the volatile nature of the seismic business and
competitive, economic, financial and other factors that are beyond our
control. If we are unable to generate sufficient cash flow from operations
or obtain other financing in the future to service our debt, we may be
required to sell assets, reduce capital expenditures or refinance all or a
portion of our existing debt. There can be no assurance that any such
financing can be obtained, particularly in view of the restrictions on our
ability to incur additional debt under the indenture governing the notes,
and the fact that substantially all of our assets are pledged to secure our
term loan and working capital facility. As a result, the value of the
notes could be significantly impaired. If the exchange offer and consent
solicitation is not approved, there can be no assurance that Elliott or
Westgate will provide additional financing or otherwise guarantee or
otherwise provide credit support to enable us to obtain additional
financing.
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY INTENSE PRICE COMPETITION IN A
SLACK MARKET
Competition among seismic contractors historically is and will
continue to be intense. Competitive factors have in recent years included
price, crew experience, equipment availability, technological expertise and
reputation for quality and dependability. Certain of our competitors
operate more data acquisition crews than we do and have substantially
greater financial and other resources. These larger and better financed
operators could enjoy an advantage over us if the competitive environment
for contract awards shifts to one characterized principally by intense
price competition.
OUR MULTI-CLIENT DATA LIBRARY COULD BECOME IMPAIRED DUE TO WEAK DEMAND OR
TECHNOLOGICAL OBSOLESCENCE
We have invested significant amounts in acquiring and processing
multi-client data, and we expect to continue doing so for the foreseeable
future. There is no assurance that we will be able to recover all of the
costs of these surveys in the future. Technological, regulatory or other
industry or general economic developments could render all or portions of
our library of multi-client data obsolete or otherwise impair its value.
WE HAVE HIGH LEVELS OF FIXED COSTS
Our business has high fixed costs, and downtime or low productivity
due to reduced demand, weather interruptions, equipment failures or other
causes can result in significant operating losses.
OUR BUSINESS IS SUBJECT TO SIGNIFICANT TECHNOLOGY RISKS
Seismic data acquisition and processing is a capital intensive
business. The development of seismic data acquisition and processing
equipment has been characterized by rapid technological advancements in
recent years and we expect this trend to continue. Manufacturers of
seismic equipment may develop new systems that have competitive advantages
over systems now in use that could render our current equipment obsolete or
require us to make significant unplanned capital expenditures to maintain
its competitive position. Under such circumstances, there can be no
assurance that we would be able to obtain necessary financing on favorable
terms.
WE ARE DEPENDENT UPON SIGNIFICANT CUSTOMERS
We derive a significant amount of our revenue from a small number of
major and independent oil and gas companies. The inability of us to
continue to perform services for a number of our large existing customers,
if not offset by sales to new or other existing customers, could have a
material adverse effect on our business and operations.
WE COMPETE IN A HIGHLY COMPETITIVE INDUSTRY
We compete in a highly competitive area of the oilfield services
industry. Our services are sold in a highly competitive market, and its
revenues and earnings may be affected by the following factors:
* fluctuations in the level of activity and major markets;
* changes in competitive prices;
* general economic conditions; and
* governmental regulation.
We compete with the oil and gas industry's largest seismic service
providers. Our management believes that the principal competitive factors
in the market areas served by us are product and service quality and
availability, technical proficiency and price.
OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO SIGNIFICANT RISKS
Our international operations are subject to risks inherent in doing
business in foreign counties. These risks include, but are not limited to:
* political changes;
* expropriation;
* currency restrictions and changes in currency exchange
rates;
* taxes; and
* boycotts and other civil disturbances.
Although it is impossible to predict the likelihood of such
occurrences or their effect on our operations, our management believes that
these risks are acceptable. However, the occurrence of any one of these
events could have a material adverse effect on our operations.
WE ARE DEPENDENT ON KEY PERSONNEL
We depend on the continued services of our executive officers and
other key management personnel. If we would lose any of these officers or
other management personnel, this could adversely affect our operations.
THERE IS NO ESTABLISHED MARKET FOR OUR NEW PREFERRED STOCK OR OUR COMMON
STOCK
Although the new preferred stock may be resold or otherwise
transferred by holders who are not affiliates of our company without
compliance with the registration requirements under the Securities Act,
they will be new securities for which there is currently no established
trading market. Similarly, there is currently no established trading
market for the common stock into which the preferred stock is convertible.
We do not intend to apply for listing of the new preferred stock or our
common stock on a national securities exchange or for quotation on an
automated dealer quotation system. The liquidity of any market for the new
preferred stock or our common stock will depend upon the number of holders
of the stock, the interest of securities dealers in making a market in the
stock and other factors. Accordingly, there can be no assurance as to the
development or liquidity of any market for the stock. If an active trading
market for the new preferred stock or our common stock does not develop,
the market price and liquidity of the stock may be adversely affected. If
shares of the new preferred stock or our common stock are traded, they may
trade at a discount from their current value, depending upon the market for
similar securities, our performance and other factors.
NO DIVIDENDS ON OUR COMMON STOCK
Unlike the new preferred stock, the common stock into which the new
preferred stock is convertible does not give the holder a right to receive
dividends. We have paid no dividends on our common stock and we cannot
assure you that we will achieve sufficient earnings to pay cash dividends
on our common stock in the near future. Further, we intend to retain
earnings to fund our operations. Additionally, the indenture governing
the notes and our credit facility restrict our ability to pay dividends and
make other distributions. Therefore, we do not anticipate paying any cash
dividends on our common stock for the foreseeable future. See "Dividends."
RISKS RELATED TO THE SUBSCRIPTION OFFERING
DILUTION: The selling stockholder is offering subscription rights to
give our stockholders, other than the selling stockholder, Westgate
International, L.P. and their affiliates, an opportunity to participate in
an equity investment in the Company on the same terms as the selling
shareholder's investment in our 8% Convertible Preferred Stock. If you
choose not to exercise your subscription rights, you will lose your
opportunity to make an equity investment in the Company on those terms.
Additionally, to the extent that holders of our outstanding notes
participate in the exchange offer being conducted at the same time as the
subscription offering, all of our stockholders, including those who
exercise their subscription rights, will own a smaller percentage of our
outstanding capital stock.
NO REVOCATION: You are not allowed to revoke or change your exercise
of subscription rights after you send in your subscription exercise notice
and payment. If the subscription offering is canceled, the selling
stockholder is obligated only to refund payments actually received, without
interest.
NEED TO ACT PROMPTLY AND FOLLOW SUBSCRIPTION INSTRUCTIONS:
Stockholders who desire to purchase shares of preferred stock in the
subscription offering must act promptly to ensure that all required forms
and payments are actually received by the subscription agent prior to the
expiration date. If you fail to complete and sign the required
subscription forms, send an incorrect payment amount, or otherwise fail to
follow the subscription procedures, the subscription agent may, depending
on the circumstances, reject your subscription or accept it to the full
extent of the payment received. Neither we, the selling stockholder, nor
the subscription agent undertakes to contact you concerning, or to attempt
to correct, an incomplete or incorrect subscription form. The selling
stockholder has the sole discretion to determine whether a subscription
exercise properly follows the subscription procedure.
RISK OF PERSONAL CHECKS: Any personal check used to pay for shares of
preferred stock must clear prior to the expiration date of the subscription
offering, and the clearing process may require five or more business days.
<PAGE>
THE SUBSCRIPTION OFFERING
CONCURRENT EXCHANGE OFFER
Concurrently with this subscription offering by the selling stockholder,
Grant, offering to exchange $100,000,000 in principal amount of our 9 3/4
Senior Notes due 2008 for shares of our 8% Convertible Preferred Stock with
an aggregate liquidation value equal to 65% of the aggregate principal
amount of notes tendered plus 100% of the accrued interest on the notes
tendered. The Company is conducting the exchange offer pursuant to a
separate prospectus. We will not receive any proceeds from the exchange
offer, nor can we assure you that we will complete the concurrent exchange
offer. This subscription offering and the concurrent exchange offer are
not conditioned on each other. This prospectus relates only to the
subscription offering and not to the exchange offer.
TERMS OF THE SUBSCRIPTION OFFERING
THE RIGHTS
Upon the terms and subject to the conditions described in this
prospectus and in the subscription exercise notice, one of our
stockholders, Elliott Associates, L.P., is distributing non-transferable
subscription rights to stockholders other than Elliott, Westgate
International, L.P. and their affiliates, who owned shares of our common
stock on November __, 1999, at no cost to the stockholders. The selling
shareholder will distribute subscription rights for 14.67% of the shares of
8% Convertible Preferred Stock held by it immediately prior to the
consummation of the exchange offer. The selling stockholder will give you
one subscription right for each ___ shares of common stock that you owned
on November __, 1999. You will not receive fractional subscription rights
during the subscription offering, but instead we will round your number of
subscription rights up to the nearest whole number. Each subscription
right will entitle you to purchase one share of our 8% Convertible
Preferred Stock for $100. If you wish to exercise your subscription
rights, you must do so before 5:00 p.m., New York City time, on the
expiration date. After that date, the subscription rights will expire and
will no longer be exercisable. You are not required to purchase any shares
of preferred stock in the subscription offering.
SUBSCRIPTION RIGHTS
BASIC SUBSCRIPTION PRIVILEGE. Each subscription right will entitle you
to receive, upon payment of $100, one share of our 8% Convertible Preferred
Stock. The subscription agent will send you certificates representing the
shares of new preferred stock that you purchase pursuant to your
subscription right as soon as practicable after the expiration date,
whether you exercise your subscription rights immediately prior to that
date or earlier.
OVER-SUBSCRIPTION PRIVILEGE. Subject to the allocation below, each
subscription right also grants you an over-subscription privilege to
purchase additional shares of our 8% Convertible Preferred Stock that are
not purchased by other stockholders under their basic subscription
privilege. You are entitled to exercise your over-subscription privilege
only if you exercise your basic subscription privilege in full. If you
wish to exercise your over subscription privilege, you should indicate the
number of additional shares that you would like to purchase in the space
provided on your subscription exercise notice. When you send in your
subscription exercise notice, you must also send the full purchase price
for the number of additional shares that you have requested to purchase (in
addition to the payment due for shares purchased through your basic
subscription privilege). If the number of shares remaining after the
exercise of all basic subscription privileges is not sufficient to satisfy
all over-subscription privileges, you will be allocated shares pro rata
(subject to elimination of fractional shares), in proportion to the number
of shares you purchased through your basic subscription privilege.
However, if your pro rata allocation exceeds the number of shares you
requested on your subscription exercise notice, then you will receive only
the number of shares that you requested, and the remaining shares from your
pro rata allocation will be divided among other stockholders exercising
their over-subscription privileges.
Banks, brokers and other nominees who exercise the over-subscription
privilege on behalf of beneficial owners of shares must report certain
information to the subscription agent and the selling shareholder and
certain other information received from each beneficial owner exercising
subscription rights. Generally, banks, brokers and other nominees must
report (1) the number of shares held on the record date on behalf of each
beneficial owner, (2) the number of subscription rights as to which the
basic subscription privilege has been exercised on behalf of each
beneficial owner, (3) that each beneficial owner's basic subscription
privilege held in the same capacity has been exercised in full, and (4) the
number of shares that are being requested through the over-subscription
privilege by each beneficial owner.
EXPIRATION DATE
The subscription rights will expire at 5:00 p.m., New York City time, on
_______, 1999, unless the selling stockholder, in its sole discretion,
extends the subscription offering, in which case the expiration date will
be the latest date and time to which the subscription offering is extended.
Although the selling stockholder has informed us that it does not intend to
extend the subscription offering at this time, it expressly reserves the
right to extend the subscription offering at any time by giving oral or
written notice to the subscription agent. The selling stockholder will
also make a public announcement of an extension no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration date. If you do not exercise your subscription rights on or
prior to that time, your subscription rights will be null and void. The
selling stockholder will not be required to sell shares of preferred stock
to you if the subscription agent receives your subscription exercise notice
or your payment after expiration date, regardless of when you sent the
subscription exercise notice and payment, unless you send the documents in
compliance with the guaranteed delivery procedures described below.
WITHDRAWAL RIGHT
The selling stockholder may withdraw the subscription offering at any
time prior to 5:00 p.m., New York City time, on the expiration date, for
any reason. If the selling stockholder withdraws the subscription
offering, any funds you paid with be promptly refunded, without interest or
penalty.
SUBSCRIPTION PRICE
The subscription price is $100 per share of preferred stock subscribed
for, payable in cash.
NON-TRANSFERABILITY OF SUBSCRIPTION RIGHTS
Only you may exercise the subscription right. You may not sell, give
away or otherwise transfer the subscription right.
EXERCISE OF SUBSCRIPTION RIGHTS
Please do not send subscription exercise notices or related forms to the
selling stockholder or to us. Please send the properly completed and
executed form of subscription exercise notice with full payment to the
subscription agent.
You should read carefully the forms of subscription exercise notice and
related instructions and forms which accompany this prospectus. You should
call the subscription agent at (312) 904-2553 promptly with any questions
you may have.
You may exercise your subscription rights by delivering to the
subscription agent, at the address specified under the heading
"Subscription Agent", on or prior to the expiration date:
* a properly completed and duly executed subscription exercise
notice; and
* payment in full of the subscription price for each share of
preferred stock you wish to purchase through the subscription
right.
If you are not a broker, bank or other eligible institution, you must
obtain a signature guarantee on the subscription exercise notice from a
broker, bank or other institution eligible to guarantee signatures in order
to exercise your subscription rights.
METHOD OF PAYMENT
If you exercise any subscription rights, you must deliver full payment
for the shares in the form of:
* a check or bank draft (cashier's check) drawn upon a United
States bank or a postal, telegraphic or express money order payable
to "LaSalle Bank National Association, as Subscription Agent"; or
* by wire transfer of immediately available funds to the account
maintained by the subscription agent for this subscription offering
at ____________ (please contact the subscription agent for specific
instructions).
In order for you to timely exercise your rights, the subscription agent
must actually receive the subscription price before the expiration of the
rights in the form of:
* a personal check which must have timely cleared payment;
* a certified check or bank draft drawn upon a U.S. bank or of any
postal, telegraphic or express money order; or
* collected funds in the subscription agent's account designated
above.
Please note that funds paid by uncertified personal check may take at
least five business days to clear. Accordingly, if you wish to pay by
means of an uncertified person check, you should make payment sufficiently
in advance of _____, 1999, to ensure that the payment is received and
clears before that date. The selling stockholder is not responsible for
any delay in payment by you and we suggest that you consider payment by
means of a certified or cashier's check, money order or wire transfer of
funds.
GUARANTEED DELIVERY PROCEDURES
If you wish to exercise your subscription rights but cannot ensure that
the subscription agent will actually receive the executed subscription
exercise notice before the expiration date, you may alternatively exercise
your subscription rights by causing all of the following to occur within
the time prescribed:
* Full payment must be received by the subscription agent prior to
the expiration date for all shares of preferred stock you desire to
purchase under your subscription right.
* A properly executed notice of guaranteed delivery, substantially
in the form provided with your subscription exercise notice must be
received by the subscription agent on or prior to the expiration
date.
* The notice of guaranteed delivery must be executed by both you
and a member firm of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc., or
a commercial bank or trust company having an office or
correspondent in the United States or other eligible guarantor
institution. The notice of guaranteed delivery must state your
name, the number of subscription rights that you hold and the
number of shares of new preferred stock that you wish to purchase
pursuant to the subscription privilege. The notice of guaranteed
delivery must guarantee the delivery of your subscription exercise
notice to the subscription agent within three business days
following the date of the notice of guaranteed delivery.
* The properly completed subscription exercise notice, with any
required signature guarantees, must be received by the subscription
agent within three business days following the date of your notice
of guaranteed delivery.
The notice of guaranteed delivery may be delivered to the subscription
agent in the same manner as your subscription exercise notice at the
addresses set forth under the heading "Subscription Agent," or may be
transmitted to the subscription agent by facsimile transmission, to
facsimile number (312) 904-2236. To confirm facsimile deliveries, please
call (312)904-2444.
Additional copies of the form of notice of guaranteed delivery are
available upon request from the subscription agent, at the address set
forth under the heading "Subscription Agent."
SIGNATURE GUARANTEES
Signatures on the subscription exercise notice do not need to be
guaranteed if either the subscription exercise notice provides that the
shares of preferred stock to be purchased are to be delivered directly to
the record owner of such subscription rights, or the subscription exercise
notice is submitted for the account of a member firm of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States. In any other case, the
signatures on the subscription exercise notice must be guaranteed by an
eligible guarantor institution that is a member of one of the following
recognized signature guarantee programs:
* The Securities Transfer Agents Medallion Program;
* The New York Stock Exchange Medallion Signature Program;
* The Stock Exchange Medallion Program; or
* an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934.
SHARES HELD FOR OTHERS
If you are a broker, a trustee or a depository for securities, or you
otherwise hold shares of common stock for the account of a beneficial owner
of common stock, you should notify the beneficial owner of such shares as
soon as possible to obtain instructions with respect to their subscription
rights. If you are a beneficial owner of common stock held by a holder of
record, such as a broker, trustee or a depository for securities, you
should contact the holder and ask him or her to effect transactions in
accordance with your instructions.
AMBIGUITIES IN EXERCISE OF SUBSCRIPTION RIGHTS
If you do not specify the number of subscription rights being exercised
on your subscription exercise notice, or if your payment is not sufficient
to pay the total purchase price for all of the shares that you indicated
you wished to purchase, you will be deemed to have exercised the maximum
number of subscription rights that could be exercised for the amount of the
payment that the subscription agent receives from you. If your payment
exceeds the total purchase price for all of the subscription rights shown
on your subscription exercise notice, your payment will be applied, until
depleted, to subscribe for shares of new preferred stock in the following
order:
(1) to subscribe for the number of shares, if any, that you indicated
on the subscription exercise notice that you wished to purchase
through your subscription privilege;
(2) to subscribe for shares of new preferred stock until your
subscription privilege has been fully exercised. Any excess
payment remaining after the foregoing allocation will be returned
to you as soon as practicable by mail, without interest or
deduction.
REGULATORY LIMITATION
The selling stockholder will not be required to issue you shares of
preferred stock pursuant to the subscription offering if, in its opinion,
you would be required to obtain prior clearance or approval from any state
or federal regulatory authorities to own or control such shares if, at the
time the subscription rights expire, you have not obtained such clearance
or approval.
DETERMINATIONS UNDER THE SUBSCRIPTION OFFERING
All questions concerning the timeliness, validity, form and eligibility
of any exercise of subscription rights will be determined by the selling
stockholder, and its determinations will be final and binding. The selling
stockholder may, in its sole discretion, waive any defect or irregularity,
or permit a defect or irregularity to be corrected within such time as it
may determine, or reject the purported exercise of any subscription right
by reason of any defect or irregularity.
Subscriptions will not be deemed to have been received or accepted until
all irregularities have been waived or cured within such time as the
selling stockholder determines, in its sole discretion. Neither the
selling stockholder, the subscription agent, Grant nor any other person
will be under any duty to notify you of any defect or irregularity in
connection with the submission of a subscription exercise notice, or incur
any liability for failure to give any such notification.
NO REVOCATION
After you have exercised your subscription privilege, YOU MAY NOT REVOKE
THAT EXERCISE. You should not exercise your subscription rights unless you
are certain that you wish to purchase shares of preferred stock.
FEES AND EXPENSES
We will pay all fees charged by the subscription agent. You are
responsible for paying any other commissions, fees, taxes or other expenses
incurred in connection with the exercise of the subscription rights.
Neither Grant nor the subscription agent will pay such expenses.
SUBSCRIPTION AGENT
The selling stockholder has appointed LaSalle Bank National Association
as subscription agent for the subscription offering. The subscription
agent's address for packages sent by mail or overnight delivery is:
LaSalle Bank National Association
Corporate Trust Administrator, Room 1960
135 South LaSalle Street
Chicago, IL 60603
Attn: Sarah H. Webb
The Subscription Agent's telephone number is 312-904-2444 and its
facsimile number is 312-904-2236. You should deliver your subscription
exercise notice, payment of the subscription price and notice of guaranteed
delivery (if any) to the subscription agent. We will pay the fees and
certain expenses of the subscription agent, which we estimate will total
$_______. We have also agreed to indemnify the subscription agent from any
liability which it may incur in connection with the subscription offering.
IMPORTANT
Please carefully read the instructions accompanying the subscription
exercise notice and follow those instructions in detail. Do not send
subscription exercise notices directly to the selling stockholder or to us.
You are responsible for choosing the payment and delivery method for your
subscription exercise notice, and you bear the risks associated with such
delivery. If you choose to deliver your subscription exercise notice and
payment by mail, you should use registered mail, properly insured, with
return receipt requested. You should also allow a sufficient number of
days to ensure delivery to the subscription agent and clearance of payment
prior to 5:00 p.m., New York City Time, on the expiration date. Because
uncertified personal checks may take at least five business days to clear,
we strongly urge you to pay, or arrange for payment, by means of certified,
cashier's check, money order or wire transfer.
IF YOU HAVE QUESTIONS
If you have questions or need assistance concerning the procedure for
exercising subscription rights, or if you would like additional copies of
this prospectus, the instructions, or the notice of guaranteed delivery,
you should contact us at:
Grant Geophysical, Inc.
16850 Park Row
Houston, Texas 77084
Attention: Michael P. Keirnan, Chief Financial Officer
Telephone: 281-398-9503
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by the
Company in connection with the issuance and distribution of the securities
being registered hereby. All amounts are estimated except for the
Securities and Exchange Commission registration fee.
Securities and Exchange Commission registration fee. $______
Printing costs...................................... $______
Accounting fees and expenses........................ $______
Legal fees and expenses............................. $______
Miscellaneous expenses.............................. $______
Total............................................... $
======
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law ("DGCL") allows a
corporation to eliminate the personal liability of directors of a
corporation to the corporation or to any of its stockholders for monetary
damage for a breach of the director's fiduciary duty as a director, except
in the case where the director breached the duty of loyalty, failed to act
in good faith, engaged in intentional misconduct, knowingly violated a law,
authorized the payment of a dividend, approved a stock repurchase in
violation of Delaware corporate law or obtained an improper personal
benefit. The Registrant's Amended and Restated Certificate of
Incorporation (the "Charter") contains a provision that eliminates the
personal liability of the directors of the Registrant as set forth above.
Section 145 of the DGCL empowers a Delaware corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in
the right of such corporation) by reason of the fact that such person is or
was a director, officer, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. A corporation may
indemnify such person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. A Delaware corporation may indemnify officers
and directors in an action by or in the right of the corporation to procure
a judgment in its favor under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses (including attorneys' fees) which he actually and reasonably
incurred in connection therewith. The indemnification provided is not
deemed to be exclusive of any other rights to which an officer or director
may be entitled under any corporation's by-law, agreement, vote or
otherwise.
In accordance with Section 145 of the DGCL, the Registrant has adopted a
by-law that provides that, to the fullest extent permitted by DGCL, the
Registrant shall indemnify any person serving as a director or officer of
the Registrant and every such director or officer serving at the request of
the Registrant as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise for
expenses incurred in the defense of, or in connection with, any threatened,
pending or completed action, suit or proceeding whether civil, criminal,
administrative or investigative. Under Section 145 of the DGCL and the
Registrant's by-laws, such indemnification shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled
under any law, the Charter, any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 145(g) also empowers a Delaware corporation to purchase and
maintain insurance on behalf of its directors, officers, employees or
agents against liabilities asserted or incurred by the individuals in those
capacities, whether or not the corporation would have the power under
Section 145 to indemnify them against such liability. The Registrant has
purchased and maintains insurance to protect persons entitled to
indemnification pursuant to its by-laws and the DGCL against expenses,
judgments, fines and amounts paid in settlement, to the fullest extent
permitted by the DGCL. The Registrant has also entered into an agreement
with each of its directors requiring the Registrant to indemnify the
director to the fullest extent allowed by Delaware law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The sales of the following securities were deemed to be exempt from
registration under the Securities Act of 1933, as amended, in reliance on
Section 4(2) or Section 4(6) of the Securities Act, or Rule 506 or Rule 701
promulgated thereunder. In each such transaction, the recipients of
securities represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the securities
issued in such transactions.
On October 11, 1999, the Company issued 100,000 shares of the Company's
Common Stock to The Andrews Group International, Inc., ("Andrews") pursuant
to an Asset Purchase Agreement dated as of the date thereof, between
Andrews and the Company.
On October 1, 1999, the Company issued 677 shares of its 8% Exchangeable
Preferred Stock to Elliott Associates, L.P. ("Elliott") as payment in-kind
for dividends payable on that date on the 8% Exchangeable Preferred Stock
held by Elliott.
Between August 13, 1999 and October 19, 1999, the Company issued 90,000
shares of 8% Exchangeable Preferred Stock to Elliott in exchange for an
aggregate of $9,000,000.
On February 24, 1999, Stephen H. Wood, Chief Operating Officer of the
Company, was granted an option to purchase 200,000 shares of the Company's
Common Stock at a purchase price of $4.25 per share. The exercisability of
the options granted to Mr. Wood are subject to certain vesting
requirements.
On February 3, 1999, Richard H. Ward, President and Chief Executive
Officer of the Company, was granted an option to purchase 600,000 shares of
the Company's Common Stock at a purchase price of $4.25 per share. The
exercisability of the options granted to Mr. Ward are subject to certain
vesting requirements.
Between February 18, 1998 and June 30, 1998, pursuant to the Grant
Geophysical, Inc. 1997 Equity and Performance Incentive Plan, as amended,
employees of the Company were granted options to purchase an aggregate of
1,287,100 shares of the Company's Common Stock at an average purchase price
of $5.05 per share (range between $4.75 and $6.84). The exercisability of
the options granted to employees of the Company are subject to certain
vesting requirements.
On February 18, 1998, the Company issued $100 million aggregate
principal amount of its 9 3/4 % Senior Notes due 2008, Series A to
Jefferies & Company, Inc.
On December 30, 1997, the Company issued 4,094,494 shares of Common
Stock to Elliott and 5,405,504 shares of Common Stock to Westgate
International, L.P. ("Westgate") in exchange for an aggregate of
$33,953,054 in various consideration.
On December 19, 1997, in connection with the acquisition of Solid State
Geophysical Inc. ("Solid State"), Elliott and Westgate transferred their
shares of Solid State to the Company in exchange for 4,652,555 shares of
Common Stock.
On December 18, 1997, the Company exchanged 9,571.162 shares of
Preferred Stock held by Elliott, together with accrued dividends thereon,
for a 10.5% Subordinated Note due March 31, 1999 in the principal amount of
$9,786,114.35.
On September 30, 1997, the Company issued 9,785.581 shares of Preferred
Stock to each of Elliott and Westgate in exchange for an aggregate of
$19,571,162 in cash and/or satisfaction of indebtedness of the Company.
The following transaction was conducted in reliance upon the exemption
from registration for securities issued pursuant to a plan ofreorganization
provided in section 1145 of the Bankruptcy Code.
In connection with the consummation of GGI Liquidating Corporation's
Second Amended Plan of Reorganization, on September 30, 1997, the Company
issued one share of Common Stock to Elliott in exchange for $1.00. On
December 19, 1997, the Company effected a two-to-one stock split in the
form of a stock dividend of shares to Elliott.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following Exhibits are filed herewith and made a part
hereof:
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 of the
Registrant's Current Report on Form 8-K filed with the
Commission on August 19, 1999).
3.2 Articles of Amendment to the Amended and Restated
Certificate of Incorporation of the Registrant.*
3.3 Amended and Restated By-Laws of the Registrant (incorporated
by reference to Exhibit 3.2 of the Registrant's Current
Report on Form 8-K filed with the Commission on August 19,
1999).
4.1 Certificate of Designations of 8% Exchangeable Preferred
Stock of the Registrant (incorporated by reference to
Exhibit 4.1 of the Registrant's Current Report on Form 8-K
filed with the Commission on August 19, 1999).
4.2 Certificate of Designations of 8% Convertible Preferred
Stock of the Registrant.**
4.3 Specimen Certificate for the Common Stock, par value $.001
per share, of the Registrant (incorporated by reference to
Exhibit 4.1 of the Registrant's Registration Statement on
Form S-1, File No. 333-43219, originally filed with the
Commission on December 24, 1997).
4.4 Specimen Certificate for the 8% Exchangeable Preferred
Stock, par value $.001 per share, of the Registrant.*
4.5 Specimen Certificate for the 8% Convertible Preferred Stock,
par value $.001 per share, of the Registrant.*
4.6 Indenture dated as of February 18, 1998, by and among the
Registrant, LaSalle National Bank, as trustee, and the
subsidiary guarantors, as defined therein (incorporated by
reference to Exhibit 4.6 of the Registrant's Registration
Statement on Form S-1, File No. 333-43219, originally filed
with the Commission on December 24, 1997).
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P. regarding legality of securities being
registered.**
8.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P. regarding tax matters.**
10.1 Registration Rights Agreement between the Registrant and
Elliott dated September 19, 1997 (incorporated by reference
to Exhibit 4.2 of the Registrant's Registration Statement on
Form S-1, File No. 333-43219, originally filed with the
Commission on December 24, 1997).
10.2 Amendment No. 1 to Registration Rights Agreement between the
Registrant and Elliott, dated October 1, 1997 (incorporated
by reference to Exhibit 4.3 of the Registrant's Registration
Statement on Form S-1, File No. 333-43219, originally filed
with the Commission on December 24, 1997).
10.3 Amendment No. 2 to Registration Rights Agreement between the
Registrant and Elliott, dated December 17, 1997
(incorporated by reference to Exhibit 4.4 of the
Registrant's Registration Statement on Form S-1, File No.
333-43219, originally filed with the Commission on December
24, 1997).
10.4 Amendment No. 3 to Registration Rights Agreement between the
Registrant and Elliott, dated October 25, 1999.*
10.5 Executive Employment Agreement between Solid State and
Mitchell L. Peters, dated November 24, 1997 (incorporated by
reference to Exhibit 10.7 of the Registrant's Registration
Statement on Form S-1, File No. 333-43219, originally filed
with the Commission on December 24, 1997).
10.6 Grant Geophysical, Inc. 1997 Equity and Performance
Incentive Plan, as amended.*
10.7 Consulting Agreement between the Registrant and Donald W.
Wilson, dated April 28, 1998 (incorporated by reference to
Exhibit 10.16 of Amendment No. 1 to the Registrant's
Registration Statement on Form S-4, File No. 33-48799, filed
with the Commission on May 8, 1998).
10.8 Letter Agreement between the Registrant and Larry E. Lenig,
Jr., dated January 27, 1999 (incorporated by reference to
Exhibit 10.16 of the Registrant's Annual Report on Form 10-
K for the fiscal year ended December 31, 1998, filed with
the Commission on April 8, 1999).
10.9 Employment Agreement between the Registrant and Richard H.
Ward, dated February 3, 1999 (incorporated by reference to
Exhibit 10.17 of the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, filed with the
Commission on April 8, 1999).
10.10 Loan and Security Agreement dated as of May 11, 1999 by and
among the Registrant, Elliott and Foothill Capital
Corporation (incorporated by reference to Exhibit 4.1 of the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999, filed with the Commission on August 13,
1999).
10.11 Amendment No. 1 to Loan and Security Agreement dated as of
August 12, 1999 by and among the Registrant, Elliott and
Foothill Capital Corporation.*
10.12 Amendment No. 2 to Loan and Security Agreement by and among
the Registrant, Elliott and Foothill Capital Corporation
dated as of September 23, 1999.*
10.13 Employment Agreement between the Registrant and Stephen H.
Wood, dated February 24, 1999 (incorporated by reference to
Exhibit 10.18 of the Registrant's Annual Report on Form 10-K
for fiscal year ended December 31, 1998, filed with the
Commission on April 8, 1999).
10.14 Form of Indemnity Agreement between the Registrant and its
directors (incorporated by reference to Exhibit 10.1 of
the Registrant's Current Report on Form 8-K filed with the
Commission on August 19, 1999).
12.1 Statement of Computation of Ratio of Earnings to Fixed
Charges.*
16.1 Letter from KPMG LLP, dated November 30, 1999, regarding
change in certifying accountant (incorporated by reference
to Exhibit 16 of the Registrant's Current Report on Form
8-K filed with the Commission on December 1, 1998.
21.1 Subsidiaries of the Registrant.*
23.1 Consent of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P. (included in Exhibits 5.1 and 8.1).
23.2 Consent of KPMG LLP to GGI Liquidating Corporation.*
23.3 Consent of KPMG LLP to Grant Geophysical, Inc.*
23.4 Consent of PricewaterhouseCoopers LLP*
24.1 Power of Attorney (included in the Signature Page to this
Registration Statement).
99.1 Form of Subscription Exercise Notice.*
99.2 Form of Notice of Guaranteed Delivery for Subscription
Exercise Notice.*
99.3 Form of Letter of Transmittal and Consent Form.*
99.4 Form of Notice of Guaranteed Delivery for Letter of
Transmittal and Consent Form.*
(b) Financial Statement Schedules.
All schedules have been omitted because they are not applicable, not
required or the required information is included in the financial
statements and notes thereto.
* Filed herewith
** To be filed by amendment
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on the 28 day of October, 1999.
GRANT GEOPHYSICAL, INC.
By: /s/ Richard H. Ward
--------------------------------
Richard H. Ward
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Richard H. Ward and Michael P.
Keirnan, or any one of them, his true and lawful attorney-in-fact and
agent, with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Richard H. Ward President, Chief Executive Officer October 27,1999
- --------------------- and Director
Richard H. Ward (Principal Executive Officer)
/s/ Michael P. Keirnan Chief Financial Officer, October 27, 1999
- --------------------- Treasurer and Secretary
Michael P. Keirnan (Principal Financial and
Accounting Officer)
/s/ Donald W. Wilson Chairman of the Board October 27, 1999
- ---------------------
Donald W. Wilson
/s/ W. Richard Anderson Director October 27, 1999
- ---------------------
W. Richard Anderson
/s/ James R. Brock Director October 27, 1999
- ---------------------
James R. Brock
/s/ J. Kelly Elliott Director October 27, 1999
- ---------------------
J. Kelly Elliott
/s/ Jonathan D. Pollock Director October 27, 1999
- -----------------------
Jonathan D. Pollock
/s/ Donald G. Russell Director October 27, 1999
- ---------------------
Donald G. Russell
Exhibit 3.2
AMENDMENT TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GRANT GEOPHYSICAL, INC.
Grant Geophysical, Inc. (the "Company"), a corporation organized and
existing under the laws of the State of Delaware, does hereby certify as
follows:
1. The Company's original certificate of incorporation was filed with the
Secretary of State of Delaware on September 18, 1997, amended and
restated on December 18, 1997, amended on June 8, 1998, and amended
and restated on August 12, 1999. The Company was originally
organized under the name "Grant Acquisition Corporation," and the
Company's name was changed to "Grant Geophysical, Inc." by the
amendment dated September 30, 1997.
2. Pursuant to Section 242 of the Delaware General Corporation Law (the
"DGCL"), the Amendment to the Amended and Restated Certificate of
Incorporation of the Company contained herein has been duly adopted by
resolution of the Board of Directors of the Company and approved by
written consent of the holders of a majority of the outstanding common
stock and voting power of the Company and approved by written consent
of the holders of all of the outstanding preferred stock of the
Company.
3. The Amendment to the Amended and Restated Certificate of Incorporation
of the Company shall read as follows:
FOURTH. Section 1. AUTHORIZED STOCK. The Company has the authority
to issue an aggregate of 55,000,000 shares of capital stock, of which
50,000,000 shares shall be designated Common Stock, $0.001 par value per
share, and 5,000,000 shares shall be designated Preferred Stock, $0.001 par
value per share (the "Preferred Stock").
Section 2. PREFERRED STOCK. Preferred Stock may be issued
from time to time in one or more series or classes as shall be determined
from time to time by the Board of Directors. Preferred Stock, and each
series or class thereof, shall have such voting rights, designations,
preferences and relative, participating, optional and other special rights,
qualifications, limitations or restrictions as shall be stated and
expressed in the resolution or resolutions providing for the issue of such
stock adopted by the Board of Directors.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amendment to the
Amended and Restated Certificate of Incorporation of the Company to be
executed in its corporate name by Richard H. Ward, its duly authorized
President and Chief Executive Officer, this 25th day of October, 1999.
GRANT GEOPHYSICAL, INC.
By: /S/ RICHARD H. WARD
Richard H. Ward
President and Chief Executive Officer
Exhibit 4.4
NUMBER SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
GRANT GEOPHYSICAL, INC.
8% EXCHANGEABLE PREFERRED STOCK
$0.001 PAR VALUE PER SHARE
THIS CERTIFIES THAT _______________________________ is the owner of
______________________ fully paid and non-assessable Shares of the above
Corporation transferable only on the books of the Corporation by the
holder hereof in person or by duly authorized Attorney upon surrender of
this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate
to be signed by its duly authorized officers and to be sealed with the
Seal of the Corporation.
Dated __________________
_________________________ ________________________
Secretary President
<PAGE>
The Corporation will furnish without charge to each stockholder who
so requests, the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
Exhibit 4.5
NUMBER SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
GRANT GEOPHYSICAL, INC.
8% CONVERTIBLE PREFERRED STOCK
$0.001 PAR VALUE PER SHARE
THIS CERTIFIES THAT _______________________________ is the owner of
______________________ fully paid and non-assessable Shares of the above
Corporation transferable only on the books of the Corporation by the
holder hereof in person or by duly authorized Attorney upon surrender of
this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate
to be signed by its duly authorized officers and to be sealed with the
Seal of the Corporation.
Dated __________________
_________________________ ________________________
Secretary President
<PAGE>
The Corporation will furnish without charge to each stockholder who
so requests, the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
Exhibit 10.4
AMENDMENT NO. 3 TO
COMMON STOCK
REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT NO. 3 TO COMMON STOCK REGISTRATION RIGHTS AGREEMENT
(this "Amendment") is entered into as of this 25th day of October, 1999,
among GRANT GEOPHYSICAL, INC., a Delaware corporation ("Grant"), ELLIOTT
ASSOCIATES, L.P., a Delaware limited partnership ("Elliott"), and WESTGATE
INTERNATIONAL, L.P., a Cayman Islands exempted limited partnership
("Westgate").
WHEREAS, the Company, Elliott, and Westgate are parties to a Common
Stock Registration Rights Agreement dated September 19, 1997, as amended by
Amendment Nos. 1 and 2 thereto dated October 1, 1997 and December 17, 1997,
respectively (as amended, the "Agreement"), pursuant to which Grant granted
to Elliott and Westgate certain registration rights with respect to
Registrable Shares (as defined in the Agreement);
WHEREAS, the parties now desire to amend the Agreement in the
respects, but only in the respects, hereinafter set forth; and
WHEREAS, capitalized terms used herein shall have the respective
meanings ascribed thereto in the Agreement unless defined herein or the
context shall otherwise require;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. AMENDMENTS.
1.1 The definition of "Registrable Shares" in Section 1 of the
Agreement is hereby amended and restated in its entirety to read as
follows:
"Registrable Shares" shall mean, at any time, any shares of
Common Stock which are owned beneficially or of record by
Purchaser or Westgate, whether owned on the date hereof or
acquired hereafter by any means; PROVIDED, HOWEVER, that as to
any Registrable Shares, such securities shall cease to be
Registrable Shares for the purposes of this Agreement if and when
(i) such securities have been registered pursuant to the
Securities Act and such securities have been sold pursuant to
such registration; (ii) such securities have been sold in
satisfaction of all applicable resale provisions of Rule 144
under the Securities Act; (iii) as expressed in an opinion of
counsel delivered to and satisfactory to the Company and the
transfer agent, such securities no longer constitute "restricted
securities" within the meaning of Rule 144 under the Securities
Act and the transfer of such securities neither requires
registration under the Securities Act or qualification under any
state securities or "blue sky" laws then in effect; or (iv) such
securities cease to be issued and outstanding for any reason.
2. MISCELLANEOUS
2.1 This Amendment shall be construed in connection with and as
part of the Agreement, and except as modified and expressly amended by this
Amendment, all terms, conditions, and covenants contained in the Agreement
are hereby ratified and shall be and remain in full force and effect.
2.2 Any and all notices, requests, certificates, and other
instruments executed and delivered after the execution and delivery of this
Amendment may refer to the Agreement without making specific reference to
this Amendment, but nevertheless all such references shall include this
Amendment unless the context requires otherwise.
2.3 The descriptive headings of the various sections or parts of
this Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
2.4 This Amendment and the Agreement is made pursuant to and
shall be construed in accordance with the laws of the State of New York,
without regard to that state's conflicts of laws principles. The parties
hereto submit to the non-exclusive jurisdiction of the courts of the State
of New York in any action or proceeding arising out of, or relating to,
this Amendment or the Agreement.
2.5 This Amendment may be executed in one or more counterparts,
each of which shall be deemed an original and all of which, taken together,
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective authorized officers as of the date
aforesaid.
GRANT GEOPHYSICAL, INC.
By: /S/ RICHARD H. WARD
Richard H. Ward
President and Chief Executive Officer
ELLIOTT ASSOCIATES, L.P.
By: /S/ PAUL SINGER
Paul Singer
General Partner
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.,
its attorney-in-fact
By: /S/ PAUL SINGER
Paul Singer
President
Exhibit 10.6
GRANT GEOPHYSICAL, INC.
1997 EQUITY AND PERFORMANCE INCENTIVE PLAN
1. PURPOSE. The purpose of the 1997 Equity and Performance
Incentive Plan is to attract and retain consultants, directors, officers
and other key employees for Grant Geophysical, Inc., a Delaware
corporation, and its subsidiaries and to provide to such persons incentives
and rewards for superior performance.
2. DEFINITIONS. As used in this Plan,
"Appreciation Right" means a right granted pursuant to Section 5
of this Plan, and shall include both Tandem Appreciation Rights and Free-
Standing Appreciation Rights.
"Base Price" means the price to be used as the basis for
determining the Spread upon the exercise of a Free-Standing Appreciation
Right and a Tandem Appreciation Right.
"Board" means the Board of Directors of the Company and, to the
extent of any delegation by the Board to a committee (or subcommittee
thereof) pursuant to Section 16 of this Plan, such committee (or
subcommittee).
"Change in Control" shall have the meaning provided in Section 12
of this Plan.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Common Shares" means shares of the common stock, par value $
.001 per share, of the Company or any security into which such shares may
be changed by reason of any transaction or event of the type referred to in
Section 11 of this Plan.
"Company" means Grant Geophysical, Inc., a Delaware corporation.
"Date of Grant" means the date specified by the Board on which a
grant of Option Rights, Appreciation Rights, Performance Shares or
Performance Units or a grant or sale of Restricted Shares or Deferred
Shares shall become effective, which shall not be earlier than the date on
which the Board takes action with respect thereto.
"Deferral Period" means the period of time during which preferred
Shares are subject to deferral limitations under Section 7 of this Plan.
"Deferred Shares" means an award made pursuant to Section 7 of
this Plan of the right to receive Common Shares at the end of a specified
Deferral Period.
"Director" means a member of the Board of Directors of the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, as such law, rules and
regulations may be amended from time to time.
"Free-Standing Appreciation Right" means an Appreciation Right
granted pursuant to Section 5 of this Plan that is not granted in tandem
with an Option Right.
"Incentive Stock Options" means Option Rights that are intended
to qualify as "incentive stock options" under Section 422 of the Code or
any successor provision.
"Management Objectives" means the achievement or performance
objectives established pursuant to this Plan for Participants who have
received grants of Performance Shares or Performance Units or, when so
determined by the Board, Option Rights, Appreciation Rights, Restricted
Shares or dividend credits pursuant to this Plan.
"Market Value per Share" means, as of any particular date, (i)
the closing sale price per Common Share as reported on the principal
exchange on which Common Shares are then trading (or, if applicable, the
NASDAQ National Market System) on the Date of Grant or the date of
exercise, as the case may be, or, if there shall have been no sales on the
Date of Grant, on the next preceding trading day during which a sale shall
have occurred, or (ii) if clause (i) does not apply, the fair market value
of the Common Shares as determined by the Board.
"Nonemployee Director" means a Director who is not an employee of
the Company or any subsidiary.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable on exercise of an
Option Right.
"Option Right" means the right to purchase Common Shares upon
exercise of an option granted pursuant to Section 4 of this Plan.
"Participant" means (i) a person who is selected by the Board to
receive benefits under this Plan and is at that time a consultant or an
officer (including an officer who is also a Director) or other key employee
of the Company or one or more subsidiaries or has agreed to commence
serving in any of such capacities within 90 days of the Date of Grant and
(ii) a Nonemployee Director who has received one or more automatic grants
of Restricted Shares pursuant to Section 9 of this Plan.
"Performance Period" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 8 of
this Plan within which the Management Objectives relating to such
Performance Share or Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 8 of this plan.
"Performance Unit" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 8 of this Plan.
"Plan" means this Grant Geophysical, Inc. 1997 Equity and
Performance Incentive Plan.
"Reload Option Rights" means additional Option Rights granted
automatically to an Optionee upon the exercise of Option Rights pursuant to
Section 4(f) of this Plan.
"Restricted Shares" means Common Shares granted or sold pursuant
to Section 6 or Section 9 of this Plan as to which neither the substantial
risk of forfeiture nor the prohibition on transfers referred to in such
Section 6 has expired.
"Rule 16b-3" means Rule 16b-3 under the Exchange Act (or any
successor rule to the same effect) as in effect from time to time.
"Spread" means the excess of the Market Value per Share on the
date when an Appreciation Right is exercised, or on the date when Option
Rights are surrendered in payment of the Option Price of other Option
Rights, over the Option Price or Base Price provided for in the related
Option Right or Free-Standing Appreciation Right, respectively.
"Subsidiary" means a corporation or other entity in which the
company now or hereafter directly or indirectly owns or controls more than
50 percent of the outstanding shares or other securities (representing the
right to vote for the election of directors or other managing authority)
issued by such corporation or other entity or, in the case of a partnership
or other entity that does not have outstanding shares or other securities,
in which the Company now or hereafter has a direct or indirect ownership
interest (representing the right generally to make decisions for such
partnership or other entity) of more than 50 percent; provided, however,
for the purposes of determining whether any person may be a Participant for
the purposes of any grant of Incentive Stock Options, "Subsidiary" means
any corporation in which the Company then directly or indirectly owns or
controls more than 50 percent of the total combined voting power
represented by all classes of stock issued by such corporation.
"Tandem Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is granted in tandem with an Option
Right.
"Voting Power" means, at any time, the total votes relating to
the then-outstanding securities entitled to vote generally in the election
of Directors.
3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as
provided in Section 3(b) and Section 11, the number of Common Shares that
may be issued or transferred upon the exercise of Option Rights or
Appreciation Rights, as Restricted Shares and thereafter released from
substantial risks of forfeiture, as Deferred Shares, in payment of
Performance Shares or Performance Units that have been earned, or in
payment of dividend equivalents paid with respect to awards made under this
Plan, shall not exceed in the aggregate 2,000,000 Common Shares. Such
shares may be shares of original issuance or treasury shares or a
combination thereof.
(b) The number of Common Shares available in Section 3(a) shall
be adjusted to account for Common Shares relating to awards that expire,
are forfeited or are transferred, surrendered or relinquished upon the
payment of any Option Price by the transfer to the Company of outstanding
Common Shares or upon satisfaction of any withholding amount. Upon payment
in cash of the benefit provided by any award granted under this Plan, any
Common Shares that were covered by that award shall again be available for
issue or transfer hereunder.
4. OPTION RIGHTS. The Board may from time to time authorize the
grant to Participants of options to purchase Common Shares upon such terms
and conditions as the Board may determine consistent with this Plan. Each
grant of Option Rights may utilize any or all of the authorizations, and
shall be subject to all of the requirements, contained in the following
provisions:
(a) Each grant shall specify the number of Common Shares to
which it pertains, subject to the Limitations set forth in Section 3 of
this Plan.
(b) Each grant shall specify an Option Price per share, which
shall be determined by the Board; provided, however, that if the Common
Shares are listed on a national securities exchange (or the NASDAQ National
Market System) on the Date of Grant, the Option Price per share shall not
be less than the Market Value per Share on the Date of Grant.
(c) Each grant shall specify whether the Option Price shall be
payable (i) in cash or by check acceptable to the Company, (ii) by the
actual or constructive transfer to the Company of outstanding Common Shares
owned by the Optionee, or other consideration authorized pursuant to
Section 4(d), having value at the time of exercise equal to the total
Option Price or (iii) by a combination of such methods of payment.
(d) The Board may at or after the Date of Grant determine that
payment of the Option Price of any Option Right (other than an Incentive
Stock Option) may also be made in whole or in part in the form of
Restricted Shares or other Common Shares that are forfeitable or subject to
restrictions on transfer, Deferred Shares, Performance Shares (based, in
each case, on the Market Value per Share on the date of exercise), other
Option Rights (based on the Spread on the date of exercise) or Performance
Units. Unless otherwise determined by the Board at or after the Date of
Grant, whenever any Option Price is paid in whole or in part by means of
any of the forms of consideration specified in this Section 4(d), the
Common Shares received upon the exercise of the Option Rights shall be
subject to such risks of forfeiture or restrictions on transfer as may
correspond to any that apply to the consideration surrendered, but such
risks and restrictions shall apply to Common Shares received only to the
extent of (i) the number of Restricted Shares or other Common Shares,
Deferred Shares or Performance Shares surrendered, (ii) the Spread of any
unexercisable portion of Option Rights surrendered or (iii) the stated
value of Performance Units surrendered.
(e) Any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a broker on a date satisfactory to
the Company of some or all of the shares to which the subject exercise
relates.
(f) Any grant may, at or after the Date of Grant, provide for
the automatic grant of Reload Option Rights to an Optionee upon the
exercise of Option Rights (including Reload Option Rights) using Common
Shares or other consideration specified in Section 4(d). Reload Option
Rights shall cover up to the number of Common Shares, Deferred Shares,
Option Rights or Performance Shares (or the number of Common Shares having
a value equal to the value of any Performance Units) surrendered to the
Company upon any such exercise in payment of the Option Price or to meet
any withholding obligations. Reload Option Right shall not have an Option
Price that is less than the applicable Market Value per Share at the time
of exercise and shall be on such other terms as may be specified by the
Board, which may be the same as or different from those of the original
Option Rights.
(g) Successive grants may be made to the same Participant
whether or not any Option Rights previously granted to such Participant
remain unexercised.
(h) Each grant shall specify the period or periods of continuous
service by the Optionee with the Company or any Subsidiary that is
necessary before the Option Rights or installments thereof will become
exercisable and may provide for the earlier exercise of such Option Rights
in the event of a Change in Control.
(i) Any grant of Option Rights may specify Management Objectives
that must be achieved as a condition to the exercise of such rights.
(j) Option Rights granted under this Plan may be (i) options,
including but not limited to Incentive Stock Options, that are intended to
qualify under particular provisions of the Code, (ii) options that are not
intended so to qualify or (iii) combinations of the foregoing.
(k) At or after the Date of Grant of any Option Right other than
an Incentive Stock Option, the Board may provide for the payment of
dividend equivalents to the Optionee on a current, deferred or contingent
basis or may provide that such equivalents shall be credited against the
Option Price.
(l) The exercise of an Option Right shall result in the
cancellation on a share-for-share basis of any Tandem Appreciation Right
authorized under Section 5 of this Plan.
(m) No Option Right shall be exercisable more than 10 years from
the Date of Grant.
(n) Each grant of Option Rights shall be evidenced by an
agreement, which shall be executed on behalf of the Company by an officer
and delivered to the Optionee and shall contain such terms and provisions,
consistent with this Plan, as the Board may approve.
5. APPRECIATION RIGHTS. (a) The Board may from time to time
authorize the grant of Tandem Appreciation Rights to any Optionee in
respect of Option Rights granted hereunder, and may from time to time
authorize the grant of Free-Standing Appreciation Rights to any
Participant, upon such terms and conditions as the Board may determine
consistent with this Plan. A Tandem Appreciation Right shall be a right of
the Optionee, exercisable by surrender of the related Option Right, to
receive from the Company an amount determined by the Board, which shall be
expressed as a percentage of the Spread (not exceeding 100 percent) at the
time of exercise. Tandem Appreciation Rights may be granted at any time
prior to the exercise or termination of the related Option Rights;
provided, however, that a Tandem Appreciation Right awarded in relation to
an Incentive Stock Option must be granted concurrently with such Incentive
Stock Option. A FreeStanding Appreciation Right shall be a right of the
Participant to receive from the Company an amount determined by the Board,
which shall be expressed as a percentage of the Spread (not exceeding 100
percent) at the time of exercise.
(b) Each grant of Appreciation Rights my utilize any or all of
the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(i) Any grant may specify that the amount payable on
exercise of the subject Appreciation Right may be paid by the Company in
cash, in Common Shares or in any combination thereof and may either grant
to the Participant or retain in the Board the right to elect among those
alternatives.
(ii) Any grant may specify that the amount payable on
exercise of the subject Appreciation Right may not exceed a maximum
specified by the Board at the Date of Grant.
(iii) Any grant may specify waiting periods before exercise
and permissible exercise dates or periods.
(iv) Any grant may specify that the subject Appreciation
Right may be exercised only in the event of, or earlier in the event of, a
Change in Control.
(v) Any grant may provide for the payment to the
Participant of dividend equivalents thereon in cash or Common Shares on a
current, deferred or contingent basis.
(vi) Any grant may specify Management Objectives that must
be achieved as a condition of the exercise of the subject Appreciation
Right.
(vii) Each grant shall be evidenced by an agreement, which
shall be executed on behalf of the Company by an officer and delivered to
and accepted by the Participant and shall describe the subject Appreciation
Right, identify any related Option Right and contain such other terms and
provisions, consistent with this Plan, as the Board may approve.
(c) Any grant of a Tandem Appreciation Right shall provide that
the subject Tandem Appreciation Right may be exercised only at a time when
the related Option Right is also exercisable and the Spread is positive and
by surrender of the related Option Right for cancellation.
(d) Regarding Free-Standing Appreciation Rights only:
(i) Each grant shall specify a Base Price, which shall be
equal to or greater than the Market Value per Share on the Date of Grant;
(ii) Successive grants may be made to the same Participant
regardless of whether any Free-standing Appreciation Rights previously
granted to the Participant remain unexercised; and
(iii) No Free-standing Appreciation Right granted under this
Plan may be exercised more than 10 years from the Date of Grant.
6. RESTRICTED SHARES. The Board may from time to time authorize the
grant or sale of Restricted Shares to Participants upon such terms and
conditions as the Board may determine consistent with this Plan. Each
grant or sale of Restricted Shares may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained
in the following provisions:
(a) Each grant or sale shall constitute an immediate transfer of
the ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to voting, dividend and
other ownership rights, subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each grant or sale may be made without additional
consideration or in consideration of a payment by the Participant that is
less than the Market Value per Share at the Date of Grant.
(c) Each grant or sale shall provide that the Restricted Shares
covered thereby shall be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code and may provide for the
earlier termination of such period in the event of a Change in Control.
(d) Each grant or sale shall provide that, during the period for
which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares shall be prohibited or restricted
in the manner and to the extent prescribed by the Board at the Date of
Grant (which may include, without limitation, rights of repurchase or first
refusal in the Company or provisions subjecting the Restricted Shares to a
continuing substantial risk of forfeiture in the hands of any transferee).
(e) Any grant may specify Management Objectives that, if
achieved, will result in termination or early termination of the
restrictions applicable to such shares. Any grant may specify in respect
of such Management Objectives a minimum acceptable level of achievement and
may set forth a formula for determining the number of Restricted Shares on
which restrictions will terminate if performance is at or above the minimum
level but falls short of full achievement of the specified Management
Objectives.
(f) Any grant or sale may require that any or all dividends or
other distributions paid on the Restricted Shares covered thereby during
the period of such restrictions be automatically deferred and reinvested in
additional Restricted Shares, which may be subject to the same restrictions
as the underlying award.
(g) Each grant or sale shall be evidenced by an agreement, which
shall be executed on behalf of the Company by an officer and delivered to
and accepted by the Participant and shall contain such terms and
provisions, consistent with this Plan, as the Board may approve. Unless
otherwise directed by the Board, all certificates representing Restricted
Shares (together with a stock power or powers endorsed in blank by the
Participant in whose name such certificates are registered) shall be held
in custody by the Company until all restrictions thereon shall have lapsed.
7. DEFERRED SHARES. The Board may from time to time authorize the
grant or sale of Deferred Shares to Participants upon such terms and
conditions as the Board may determine consistent with this Plan. Each
grant or sale may utilize any or all of the authorizations, and shall be
subject to all of the requirements, contained in the following provisions:
(a) Each grant or sale shall constitute the agreement by the
Company to deliver Common Shares to the Participant in the future in
consideration of the performance of services, subject to the fulfillment of
such conditions during the Deferral Period as the Board may specify.
(b) Any grant or sale may be made without additional
consideration or in consideration of a payment by the Participant that is
less than the Market Value per Share at the Date of Grant.
(c) Each grant or sale shall be subject to a Deferral Period,
which shall be determined by the Board at the Date of Grant, and may
provide for the earlier termination of the Deferral Period in the event of
a Change in Control.
(d) During the Deferral Period, the Participant shall have no
right to transfer any rights under the award and shall have no ownership or
voting rights with respect to the Deferred Shares covered thereby, but the
Board may at or after the Date of Grant authorize the payment of dividend
equivalents on such Deferred Shares covered thereby, but the Board may at
or after the Date of Grant authorize the payment of dividend equivalents on
such Deferred Shares on a current, deferred or contingent basis in cash or
additional Common Shares.
(e) Each grant or sale shall be evidenced by an agreement, which
shall be executed on behalf of the Company by an officer and delivered to
and accepted by the Participant and shall contain such terms and
provisions, consistent with this Plan, as the Board may approve.
8. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Board may from
time to time authorize the grant of Performance Shares and Performance
Units that will become payable to a Participant upon achievement of
specified Management Objectives. Each grant may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained
in the following provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which may be subject to adjustment
to reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Performance
Share or Performance Unit shall be determined by the Board on the Date of
Grant and may be subject to earlier termination in the event of a Change in
Control.
(c) Each grant shall specify Management Objectives that, if
achieved, will result in payment or early payment of the subject
Performance Shares or Performance Units, and any grant may specify in
respect of such Management Objectives a minimum acceptable level of
achievement and shall set forth a formula for determining the number of
Performance Shares or Performance Units that will be earned if performance
is at or above the minimum level but falls short of full achievement of the
specified Management Objectives. Each grant shall specify that, before the
subject Performance Shares or Performance Units shall be earned and paid,
the Board must certify that the specified Management Objectives have been
satisfied.
(d) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that have been earned. Any grant
may specify that the amount payable with respect thereto may be paid by the
Company in cash or Common Shares or any combination thereof and may either
grant to the Participant or retain in the Board the right to elect among
those alternatives.
(e) Any grant of Performance Shares may specify that the amount
payable with respect thereto may not exceed a maximum specified by the
Board at the Date of Grant. Any grant of Performance Units may specify
that the amount payable or the number of Common Shares issued with respect
thereto may not exceed maximums specified by the Board at the Date of
Grant.
(f) At or after the date of Grant of Performance Shares, the
Board may provide for the payment of dividend equivalents thereon in cash
or additional Common Shares on a current, deferred or contingent basis.
(g) Each grant shall be evidenced by an agreement, which shall
be executed on behalf of the Company by an officer and delivered to and
accepted by the Participant and shall contain such other terms and
provisions, consistent with this Plan, as the Board may approve.
9. AUTOMATIC GRANTS OF RESTRICTED SHARES TO NONEMPLOYEE DIRECTORS.
On the date that he or she is first elected or reelected as a Nonemployee
Director following the adoption of this Plan by the Board, and on the date
of each annual meeting of the stockholders of the Company thereafter at
which he or she is reelected as a Nonemployee Director, each Nonemployee
Director shall automatically receive a grant of 3,000 Restricted Shares,
subject to the terms and conditions set forth in the form of Restricted
Shares Agreement attached hereto as Exhibit A.
10. TRANSFERABILITY. (a) Except as otherwise determined by the
Board, no Option Right, Appreciation Right or either derivative security
granted under this Plan shall be transferable by a Participant other than
by will or the laws of descent and distribution. Except as otherwise
determined by the Board, Option Rights and Appreciation Rights shall be
exercisable during a Participant's lifetime only the Participant or his or
her guardian or legal representative.
(b) The Board may specify at the Date of Grant that part of all
of the Common Shares that are to be issued or transferred by the Company
upon the exercise of Option Rights or Appreciation Rights, upon the
termination of the Deferral Period applicable to Deferred Shares or upon
payment under any grant of Performance Shares or Performance Units, or are
no longer subject to the substantial risk of forfeiture and restrictions on
transfer referred to in Section 6 of this Plan, shall be subject to further
restrictions on transfer.
11. ADJUSTMENTS. The Board may, in its sole discretion, make or
provide for such adjustments in the numbers of Common Shares covered by
Option Rights, Appreciation Rights, Deferred Shares and Performance Share
outstanding hereunder, in the Option Price and Base Price provided in
Option Rights and Appreciation Rights outstanding hereunder, and in the
kind of shares covered thereby, as the Board may in good faith determine is
equitably required to prevent dilution or expansion of the rights of
Participants that otherwise would result from (a) any stock dividend, stock
split, combination of shares, recapitalization or other change in the
capital structure of the Company, (b) any merger, consolidation, spin-off,
split-off, spin-out, split-up, reorganization, partial or complete
liquidation or other distribution of assets or issuance of rights or
warrants to purchase securities or (c) any other corporate transaction or
event having an effect similar to any of the foregoing; provided, however,
that any such adjustments to an Incentive Stock Option may be made only if
and to the extent that such adjustments would not cause the Incentive Stock
Option to cease to qualify as such. In the event of any transaction or
event referred to in the preceding sentence, the Board may also, in its
sole discretion, provide in substitution for any or all outstanding awards
under this Plan such alternative consideration as the Board may in good
faith determine to be equitable in the circumstances and may require in
connection therewith the surrender of all awards so replaced. The Board
may also, in its sole discretion, make or provide for such adjustments in
the number of shares specified in Section 3 of this Plan as the Board may
in good faith determine is appropriate to reflect any transaction or event
described in the first sentence of this Section 11.
12. CHANGE IN CONTROL. For the purposes of this Plan, a "Change in
Control" shall mean the occurrence of one or more of the following events:
(a) The Company is merged, consolidated or reorganized into or
with another corporation or other legal person, and as a result of such
merger, consolidation or reorganization, less than a majority of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such transaction is held in the
aggregate by the holders of securities entitled to vote generally in the
election of Directors immediately prior to such transaction;
(b) The Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or other legal
person, and less than a majority of the combined voting power of the then-
outstanding securities of such corporation or person immediately after such
sale or transfer is held in the aggregate by the holders of Common Shares
immediately prior to such sale or transfer;
(c) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), as promulgated pursuant to the
Exchange Act, disclosing that any "person" (as defined in Sections 3(a)(9)
and 13(d)(3) or 14(d)(2) of the Exchange Act) has become the "beneficial
owner" (as defined in Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing more than 30
percent of the Voting Power;
Notwithstanding the provisions of this Section 12, a "Change in
Control" shall not be deemed to have occurred for purposes of this Plan
solely because (i) the Company, a Subsidiary, Elliott Associates, L.P.
("Elliott"), Westgate International, L.P. ("Westgate"), an Elliott or
Westgate affiliate, or any Company-sponsored employee stock ownership plan
or other employee benefit plan of the Company either files or becomes
obligated to file with the Securities and Exchange Commission a report or
proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form
8-K or Schedule 14A (or any successor schedule, form or report or item
therein) pursuant to the Exchange Act, disclosing beneficial ownership by
it of shares, whether in excess of 30 percent of the Voting Power or
otherwise, or because the Company reports that a change in control of the
Company has or may have occurred, or will or may occur in the future, by
reason of such beneficial ownership; (ii) of a change in control of any
Subsidiary; or (iii) the Company effects a registered public equity
offering, after which offering less than a majority of the combined voting
power of the then-outstanding securities of the Company is held in the
aggregate by the holders of securities entitled to vote generally in the
election of Directors immediately prior to such offering.
13. FRACTIONAL SHARES. The Company shall not be required to issue
any fractional Common Shares pursuant to this Plan. The Board may provide
for the elimination of fractions or for the settlement of fractions in
cash.
14. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any
payment to be made or benefit to be realized by a Participant or other
person under this Plan, and the amounts available to the Company for such
withholding are insufficient, it shall be a condition to the receipt of
such payment or the realization of such benefit that the Participant or
such other person make arrangements satisfactory to the Company for payment
of the balance of such taxes required to be withheld, which may in the
discretion of the Board include relinquishment of a portion of such payment
or benefit. The Company and a Participant or such other person may also
make similar arrangements with respect to the payment of any taxes with
respect to which withholding is not required.
15. FOREIGN EMPLOYEES. In order to facilitate the making of any
grant or combination of grants under this Plan, the Board may provide for
such special terms for awards to Participants who are foreign nationals or
who are employed by the Company or any Subsidiary outside of the United
States of America as the Board may consider necessary or appropriate to
accommodate differences in local law, tax policy or custom. The Board may
also approve such supplements to or amendments, restatements or alternative
versions of this Plan as it may consider necessary or appropriate for such
purposes, without thereby affecting the terms of this Plan as in effect for
any other purpose, and the Secretary or other appropriate officer of the
Company may certify any such document as having been approved and adopted
in the same manner as this Plan. No such special terms, supplements,
amendments or restatements, however, shall include any provisions that are
inconsistent with the terms of this Plan as then in effect, unless this
Plan could have been amended to eliminate such inconsistency without
further approval by the shareholders of the Company.
16. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by
the Board, which may from time to time delegate all or any part of its
authority under this Plan to a committee of the Board (or subcommittee
thereof) consisting of not less than two Nonemployee Directors appointed by
the Board. A majority of the committee (or subcommittee) shall constitute
a quorum, and the action of the members of the committee (or subcommittee)
present at any meeting at which a quorum is present, or acts unanimously
approved in writing, shall be the acts of the committee (or subcommittee).
To the extent of any such delegation, references in this Plan to the Board
shall be deemed to be references to any such committee (or subcommittee).
(b) The interpretation and construction by the Board of any
provision of this Plan or of any agreement, notification or document
evidencing the grant of Option Rights, Appreciation Rights, Restricted
Shares, Deferred Shares, Performance Shares or Performance Units, and any
determination by the Board pursuant to any provision of this Plan or any
such agreement, notification or document, shall be final and conclusive.
No member of the Board shall be liable for any such action or determination
made in good faith.
17. AMENDMENTS, ETC. (a) The Board may at any time and from time
to time amend the Plan in whole or in part; provided, however, that (i) any
amendment that must be approved by the stockholders of the Company in order
to comply with applicable law or the rules of any national securities
exchange upon which the Common Shares are traded or quoted shall not be
effective unless and until such approval has been obtained and (ii) to the
extent that any amendment would adversely affect the rights of Participants
who then hold outstanding awards under this Plan, such amendment shall be
of no force or effect insofar as such awards then outstanding under this
Plan are concerned. Presentation of this Plan or any amendment hereof for
stockholder approval shall not be construed to limit the Company's
authority to offer similar or dissimilar benefits under other plans without
stockholder approval.
(b) With the concurrence of the affected Participant, the Board
may cancel any agreement evidencing an Option Right or any other award
granted under this Plan. In the event of any such cancellation, the Board
may authorize the grant of new Option Rights or other awards hereunder,
which may or may not cover the same number of Common Shares as had been
covered by the canceled Option Right or other award, at such Option Price,
in such manner and subject to such other terms, conditions and discretion
as would have been permitted under this Plan had the canceled Option Right
or other award not been granted.
(c) The Board may grant under this Plan any award or combination
of awards authorized under this Plan in exchange for the cancellation of an
award that was not granted under this Plan, including but not limited to
any award that was granted prior to the adoption of this Plan by the Board,
and any such award or combination of awards so granted under this Plan may
or may not cover the same number of Common Shares as had been covered by
the canceled award and shall be subject to such other terms, conditions and
discretion as would have been permitted under this Plan had the canceled
award not been granted.
(d) The Board also may permit Participants to elect to defer the
issuance of Common Shares or the settlement of awards in cash under the
Plan pursuant to such rules, procedures or programs as it may establish for
purposes of this Plan. The Board also may provide that deferred issuances
and settlements include the payment or crediting of dividend equivalents or
interest on the deferral amounts.
(e) The Board may condition the grant of any award or
combination of awards authorized under this Plan on the surrender or
deferral by the Participant of his or her right to receive a cash bonus or
other compensation otherwise payable by the Company or a Subsidiary to the
Participant.
(f) In case of termination of employment by reason of death,
disability or normal or early retirement, or in the case of hardship or
other special circumstances, of a Participant who holds an Option Right or
Appreciation Right that is not then immediately exercisable in full, or any
Restricted Shares as to which the substantial risk of forfeiture or the
prohibition or restriction or transfer has not then lapsed, or any Deferred
Shares as to which the Deferral Period has not then ended, or any
Performance Shares or Performance Units that have not been fully earned, or
who holds Common Shares subject to any transfer restriction imposed
pursuant to Section 10(b) of this Plan, the Board may in its sole
discretion accelerate the time at which such Option Right or Appreciation
Right may be exercised or the time at which substantial risk of forfeiture
or prohibition or restriction on transfer will lapse or the time when such
Deferral Period will end or the time at which such Performance Shares or
Performance Units will be deemed to have been fully earned or the time when
such transfer restriction will terminate or may waive any other limitation
or requirement under any such award.
(g) This Plan shall not confer upon any Participant any right
with respect to continuance of employment or other service with the Company
or any Subsidiary and shall not interfere in any way with any right the
Company or any Subsidiary would otherwise have to terminate such
Participant's employment or other service at any time.
(h) To the extent that any provision of this Plan would prevent
any Option Right that was intended to qualify as an Incentive Stock Option
from qualifying as such, such provision shall be null and void with respect
to such Option Right. Such provision, however, shall remain in effect for
other Option Rights and there shall be no further effect on any provision
of this Plan.
18. TERMINATION. No grant shall be made under this Plan more than
15 years after the date on which this Plan is first approved by the
stockholders of the Company, but all grants made on or prior to such date
shall continue in effect thereafter subject to the terms thereof and of
this Plan.
Exhibit 10.11
AMENDMENT NUMBER ONE
TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), dated effective as of August 12, 1999 is entered into by and
among Grant Geophysical, Inc., a Delaware corporation ("Borrower"),
Foothill Capital Corporation, a California corporation ("Foothill"), and
Elliott Associates, L.P., a Delaware limited partnership ("EALP"), in light
of the following:
WHEREAS, Borrower, EALP and Foothill are parties to that certain Loan
and Security Agreement (the "Loan and Security Agreement") dated as of May
11, 1999; and
WHEREAS, Borrower and EALP have requested that certain provisions of
the Loan and Security Agreement be amended, and Foothill has agreed to
amend such provisions in accordance with the terms hereof, so as to provide
for the following:
(a) the inclusion of cash proceeds from issuance of preferred
stock in the calculation of EBITDA of Borrower, and
(b) the allowance of EALP to receive interest payments on
subordinated indebtedness of Borrower purchased by EALP.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, conditions, and provisions as hereinafter set forth, the parties
hereto agree as follows:
1. DEFINITIONS. Initially capitalized terms used herein have the
meanings defined in the Loan and Security Agreement unless otherwise
defined herein.
"SUBORDINATED NOTES" means the 9-3/4% Senior Notes due
2008 issued by Borrower on February 18, 1998, in the aggregate
principal amount of $100,000,000.
2. AMENDMENT TO THE DEFINITION OF EBITDA. SECTION 1.1 of the Loan
and Security Agreement is hereby amended by amending the definition of
"EBITDA" to read in full as follows:
"EBITDA" of any Person for any period shall mean the
sum of:
(a) the net income (or net loss) from operations of
such Person and its Subsidiaries on a consolidated basis (determined
in accordance with GAAP) for such period, without giving effect to any
extraordinary or unusual gains (losses) or gains (losses) from the
sale of assets (other than the sale of assets in the ordinary course
of business) or unrealized currency gains (losses); PLUS
(b) the amount of any cash equity investment in such
Person for such period, including any cash equity investment made in
consideration for the issuance of preferred stock of such Person; PLUS
(c) to the extent that any of the items referred to in
any of clauses (i) through (iii) below were deducted in calculating
such net income:
(i) consolidated interest expense of such Person
for such period;
(ii) income tax expense of such Person and its
Subsidiaries with respect to their operations for such period;
and
(iii) the amount of all non-cash charges
(including, without limitation, depreciation and amortization),
if any, of such Person and its Subsidiaries for such period.
3. AMENDMENT TO CERTAIN PROVISIONS REGARDING SUBORDINATION BY EALP.
SECTION 17.16 of the Loan and Security Agreement is hereby amended by
deleting subsection (d) thereof in its entirety and adding and inserting in
its place the following new subsection (d):
(d) If any money or other property (except for payments
of interest on the EALP Term Note and interest on the Subordinated
Notes owned and held by EALP, as such interest accrues and becomes due
and payable prior to the occurrence of a Default) is received by EALP
for application on the EALP Obligations before the Foothill
Obligations are paid in full, in cash, EALP will hold such money and
other property in trust for Foothill and, promptly after receipt,
deliver such money and other property to Foothill. After the
occurrence and during the continuance of a Default, then the exception
for payments of interest on the EALP Term Note and on the Subordinated
Notes owned and held by EALP, which exception is set forth
parenthetically in the preceding sentence, shall not apply. Upon cure
of the Default within the period(s) of time provided for in Article 8,
above, then EALP may receive payments of interest on the EALP Term
Note and interest on the Subordinated Notes owned and held by EALP, as
such interest accrues and becomes due and payable.
4. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Foothill as follows:
(a) The execution, delivers and performance by Borrower of this
Amendment have been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval or. notice to or action be, any Person in order to be effective
and enforceable.
(b) The Loan and Security Agreement, as amended by this
Amendment, constitutes the legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms, without defense,
counterclaim or offset.
5. CONSENT REGARDING RISING STAR RECEIVABLE. Reference is made to
that certain Account (the "Rising Star Receivable") owing to Borrower by
Rising Star Energy, Limited Partnership #1 ("Rising Star") on a geological
survey in Midland and Upton Counties, Texas, involving phases of a survey
identified as "Azalea," "South Azalea," and "Azalea Extension," all as more
further described in Supplemental Agreement No. 1, dated September 24,
1998, between Borrower and Rising Star. Foothill and EALP agree to
subordinate the security interest in the Rising Star Receivable granted
under the Loan and Security Agreement to the interest of a transferee
and/or factor of the Rising Star Receivable, who provides value to Borrower
in exchange for such transfer and or factoring of the Rising Star
Receivable.
6. MISCELLANEOUS.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Loan and Security Agreement are and shall remain in full
force and effect and all references therein to the Loan and Security
Agreement shall henceforth refer to the Loan and Security Agreement as
amended by this Amendment. This Amendment shall be deemed incorporated
into, and a part of, the Loan and Security Agreement.
(b) This Amendment shall be governed by, and construed and
enforced in accordance with, the laws of the Commonwealth of Massachusetts.
(c) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
(d) This Amendment, together with the Loan and Security
Agreement and the other Loan Documents, contains the entire and exclusive
agreement of the parties hereto with reference to the matters discussed
herein and therein. This Amendment supersedes all prior drafts and
communications with respect thereto. This Amendment may not be amended
except in writing executed by both of the parties hereto.
(e) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or
the Loan and Security Agreement, respectively.
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<PAGE>
IN WITNESS HEREOF, this Amendment has been executed and delivered as
of the date first set forth above.
GRANT GEOPHYSICAL, INC.,
a Delaware corporation
By: /S/ MIKE KIERNAN
Mike Kiernan,
Vice President
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent and
as a Lender
By:___________________________________
Name:_________________________________
Title:__________________________________
ELLIOTT ASSOCIATES, L.P.
a Delaware limited partnership
By: /S/ PAUL E. SINGER
Paul E. Singer,
General Partner
Exhibit 10.12
AMENDMENT NUMBER TWO
TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER TWO TO LOAN AND SECURITY AGREEMENT (this
"AMENDMENT"), dated effective as of September 23, 1999, is entered into by
and among Grant Geophysical, Inc., a Delaware corporation ("BORROWER"),
Foothill Capital Corporation, a California corporation ("FOOTHILL"), and
Elliott Associates, L.P., a Delaware limited partnership ("EALP"), in light
of the following:
WHEREAS, Borrower, EALP and Foothill are parties to that certain Loan
and Security Agreement (the "LOAN AND SECURITY AGREEMENT"), dated as of May
11, 1999, as amended by Amendment Number One to Loan and Security
Agreement, dated to be effective as of August 13, 1999, by and among
Borrower, Foothill and EALP; and
WHEREAS, Borrower has acquired seven seismic vibrator buggies
(collectively, the "ACQUIRED EQUIPMENT") in accordance with the terms of
the Loan and Security Agreement and has requested that certain provisions
of the Loan and Security Agreement be amended, so as to provide for the
following:
(a) an increase in the principal amount of the FCC Term Loan to
$11,673,500, and provide a revised payment schedule for the repayment
of the FCC Term Loan; and
(b) the amendment and restatement of the FCC Term Note to reflect
the changes of referenced above.
WHEREAS, subject to the conditions set forth in this Amendment,
Foothill and EALP have agreed to amend the Loan and Security Agreement as
set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, conditions, and provisions as hereinafter set forth, the parties
hereto agree as follows:
1. DEFINITIONS. Initially capitalized terms used herein have the
meanings defined in the Loan and Security Agreement unless otherwise
defined herein.
2. AMENDMENTS.
2.01 AMENDMENT TO THE SECTION 1.1 OF THE LOAN AND SECURITY AGREEMENT.
SECTION 1.1 of the Loan and Security Agreement is hereby amended by adding
the following definition of "Second Amendment to Loan and Security
Agreement" to such section in the appropriate alphabetical order, such
definition to read in its entirety as follows:
"'SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT' means that
certain Second Amendment to Loan and Security Agreement, dated to be
effective as of September 23, 1999, by and among Borrower, Foothill
and EALP."
2.02 AMENDMENT AND RESTATEMENT OF SECTION 2.3 OF THE LOAN AND SECURITY
AGREEMENT. Effective as of the date hereof, SECTION 2.3 of the Loan and
Security Agreement is hereby amended and restated in its entirety to read
as follows:
"2.3 FCC TERM LOAN.
(a) GENERAL. Foothill has agreed to make a term loan
(the "FCC TERM LOAN") to Borrower in the stated principal amount not
to exceed Eleven Million Six Hundred Seventy-three Thousand Five
Hundred Dollars ($11,673,500.00). The FCC Term Loan shall be repaid
in thirty-two monthly installments, and one final installment, of
principal in the following amounts:
Month Installment Amount
------------------------------------- ------------------------------
October 1, 1999 $287,500.00
November 1, 1999, through May 1, 2002 $313,400.00/month
May 11, 2002 The outstanding principal
balance of the FCC Term Loan
Each such principal installment shall be due and payable on the first
day of each month commencing October 1, 1999, and continuing on the
first day of each succeeding month until and including the date on
which the unpaid balance of the FCC Term Loan is paid in full. The
outstanding principal balance and all accrued and unpaid interest
under the FCC Term Loan shall be due and payable upon the termination
of this Agreement, whether by its terms, by prepayment, by
acceleration, or otherwise. Subject to SECTION 3.6, the unpaid
principal balance of the FCC Term Loan may be prepaid in whole or in
part at any time during the term of this Agreement upon 30 days prior
written notice by Borrower to Foothill, all such prepaid amounts to be
applied to the installments due on the FCC Term Loan in the inverse
order of their maturity. All amounts outstanding under the FCC Term
Loan shall constitute Obligations.
(b) PREPAYMENT UPON DISPOSITION OF ELIGIBLE EQUIPMENT.
Except as otherwise expressly permitted by SECTION 7.4 of this
Agreement, Borrower shall prepay the FCC Term Loan in an amount equal
to the net proceeds of any disposition of Eligible Equipment,
regardless of whether such disposition is permitted under SECTION 7.4
of this Agreement (but without approving any such disposition not
otherwise expressly permitted under SECTION 7.4 of this Agreement).
The mandatory prepayment shall be due and payable immediately upon the
corresponding disposition of Eligible Equipment. Mandatory
prepayments shall be applied to installments under the FCC Term Loan
in inverse order of maturity.
(c) FCC TERM NOTE. The FCC Term Loan shall be
evidenced by that certain Amended and Restated Secured Promissory
Note, dated September 23, 1999, in the original principal amount of
$11,673,500.00, executed by Borrower, payable to the order of
Foothill, the form of which is attached as EXHIBIT A to the Second
Amendment to Loan and Security Agreement (together with any and all
renewals, extensions and modifications thereof, the "FCC TERM NOTE")."
3. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective upon fulfillment of the following conditions, in each case to the
satisfaction of Foothill:
(a) a counterpart of this Amendment shall be executed by
Borrower and delivered to Foothill;
(b) a counterpart of this Amendment shall be executed by EALP
and delivered to Foothill;
(c) each of AST, GGC and GGII shall reaffirm its obligations
under the applicable Subsidiary Guaranty, pursuant to an instrument in
form and substance satisfactory to Foothill;
(d) Borrower shall execute and deliver to Foothill an amended
and restated secured promissory note in the form attached hereto as
EXHIBIT A; and
(e) Borrower shall pay all fees and expenses required to be paid
by Borrower pursuant to SECTION 6.03 of this Amendment.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.
4.01 REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower hereby
represents and warrants to Foothill as follows:
(a) the execution, delivery and performance by Borrower of this
Amendment have been duly authorized by all necessary corporate action
of Borrower and do not and will not require any registration with,
consent or approval of, notice to or action by, any Person in order to
be effective and enforceable;
(b) the execution, delivery and performance by Borrower of this
Amendment will not violate the articles of incorporation, bylaws or
any other agreement to which Borrower is a party or by which the
property of Borrower may be bound;
(c) the Loan and Security Agreement, as amended by this
Amendment, constitutes the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms,
without defense, counterclaim or offset;
(d) the representations and warranties contained in the Loan and
Security Agreement (as amended by this Amendment) and each other Loan
Document are true and correct on and as of the date hereof as though
made on and as of the date hereof, except to the extent such
representations and warranties relate to an earlier date;
(e) Borrower is in full compliance with all covenants and
agreements contained in the Loan and Security Agreement, as amended by
this Amendment, and all such covenants and agreements are, and shall
remain, in full force and effect;
(f) an indication of the Agent's security interests on
certificates of title issued with respect to the Acquired Equipment is
not required to perfect the security interests of the Agent in the
Acquired Equipment; and
(g) the security interests of the Agent granted by the Loan and
Security Agreement in the Acquired Equipment constitute perfected,
first-priority security interests in the Acquired Equipment.
4.02 COVENANTS OF BORROWER. Within fifteen days of the date hereof,
Borrower shall, or shall cause each of GGBL, PTGI and SSGI to, take the
following actions:
(a) each of GGBL, PTGI and SSGI shall reaffirm their respective
obligations under the applicable Subsidiary Guaranties, pursuant to an
instrument in form and substance satisfactory to Foothill; and
(b) provide Foothill with evidence satisfactory to Foothill of
the filing of a duly executed and completed "Application for
Registration of Water Well Drilling or Construction Machinery"
(collectively, the "APPLICATIONS") with the Texas Department of
Transportation with respect to each of the seven pieces of Acquired
Equipment.
Upon receipt of the approved copies of the Applications, Borrower promptly
shall forward copies of same to Foothill, and Borrower promptly shall
proceed to purchase the requested plates from the appropriate county tax
assessor-collector in accordance with the requirements of the Applications.
The failure of Borrower to comply with any portion of the requirements of
this SECTION 4.02 shall constitute an "Event of Default" pursuant to
SECTION 8 of the Loan and Security Agreement, as amended by this Amendment.
5. AGREEMENT OF EALP. EALP hereby joins in this Amendment for the
purpose of consenting to the terms hereof. EALP hereby agrees that all
terms, covenants and provisions of the Loan and Security Agreement and the
other Loan Documents are, and shall remain, in full force and effect,
including (without limitation) the subordination provisions set forth at
SECTION 17.16 of the Loan and Security Agreement and EALP's guaranty of the
Obligations of Borrower (other than the EALP Term Loan) pursuant to the
EALP Guaranty, which EALP Guaranty is hereby acknowledged and reaffirmed
with respect to all Obligations of Borrower (other than the EALP Term Loan)
arising pursuant to the Loan and Security Agreement and other Loan
Documents, as amended by this Amendment.
6. MISCELLANEOUS.
6.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made herein and in the Loan and Security Agreement shall
survive the execution and delivery of this Amendment, and no investigation
by Foothill or any closing shall affect the representations and warranties
or the right of Foothill to rely upon them.
6.02 REFERENCE TO LOAN AGREEMENT. The Loan and Security Agreement, as
amended hereby, and all other Loan Documents, whether now or hereafter
executed and delivered, are hereby amended so that any reference to the
Loan and Security Agreement shall mean a reference to the Loan and Security
Agreement, as amended by this Amendment.
6.03 EXPENSES OF FOOTHILL AND WAIVER FEE. In consideration of
Foothill's execution and delivery of this Amendment, Borrower shall pay to
Foothill an amendment fee in the amount of $10,000, which fee shall be
earned by Foothill and shall be due and payable upon the execution by
Foothill of a counterpart of this Amendment. In addition to such waiver
fee and as provided in the Loan and Security Agreement, Borrower agrees to
pay on demand all costs and expenses incurred by Foothill in connection
with the preparation, negotiation and execution of this Amendment,
including, without limitation, the costs and fees of Foothill's legal
counsel and appraiser, and all costs and expenses incurred by Foothill in
connection with the enforcement or preservation of any rights under the
Loan and Security Agreement, as amended hereby, or any other Loan Document.
6.04 SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall
inure to the benefit of Foothill and Borrower and their respective
successors and assigns, except Borrower may not assign or transfer any of
its rights or obligations hereunder without the prior written consent of
Foothill.
6.06 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the
same instrument.
6.07 HEADINGS. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
6.08 SCHEDULE C-1. Notwithstanding the execution of this Amendment,
Schedule C-1 to the Loan and Security Agreement shall not be changed or
modified, and the percentages and limitations set forth in such schedule
shall be applied by the parties to the Loan and Security Agreement without
change or modification as a result of this Amendment.
6.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
6.10 FINAL AGREEMENT. THE LOAN AND SECURITY AGREMENT, AS AMENDED
HEREBY, AND THE OTHER LOAN DOCUMENTS REPRESENT THE ENTIRE EXPRESSION OF THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF ON THE DATE
THIS AMENDMENT IS EXECUTED. THE LOAN AND SECURITY AGREEMENT, AS AMENDED
HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER,
RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE,
EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER AND FOOTHILL.
6.11 RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR
NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY
PART OF ITS LIABILITY TO REPAY THE OBLIGATIONS (AS DEFINED IN THE LOAN AND
SECURITY AGREEMENT) OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR
NATURE FROM FOOTHILL. BORROWER HEREBY VOLUNTARILY AND KNOWINGLY RELEASES
AND FOREVER DISCHARGES FOOTHILL, ITS PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES
OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR
UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED,
CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN
PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE BORROWER
MAY NOW OR HEREAFTER HAVE AGAINST FOOTHILL, ITS PREDECESSORS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY
SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS,
OR OTHERWISE, AND ARISING FROM ANY OBLIGATIONS (AS DEFINED IN THE LOAN
AGREEMENT), INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING,
TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE
MAXIMUM RATE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AND
SECURITY AGREEMENT OR ANY AGREEMENT, DOCUMENT OR INSTRUMENT ENTERED INTO IN
CONNECTION THEREWITH.
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<PAGE>
IN WITNESS HEREOF, this Amendment has been executed and delivered as
of the date first set forth above.
GRANT GEOPHYSICAL, INC.,
a Delaware corporation
By: /S/ MIKE KIERNAN
Mike Kiernan,
Vice President
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent and
as a Lender
By:___________________________________
Name:_________________________________
Title:________________________________
ELLIOTT ASSOCIATES, L.P.
a Delaware limited partnership
By: /S/ PAUL E. SINGER
Paul E. Singer,
General Partner
<PAGE>
EXHIBIT A
(FORM OF FCC TERM NOTE)
AMENDED AND RESTATED
SECURED PROMISSORY NOTE
$11,673,500.00 Boston, Massachusetts
September 23, 1999
FOR VALUE RECEIVED, GRANT GEOPHYSICAL, INC., a Delaware
corporation ("BORROWER"), promises to pay to the order of FOOTHILL CAPITAL
CORPORATION, a California corporation ("FOOTHILL"), at its offices at 11111
Santa Monica Boulevard, Suite 1500, California 90025-3333, or at such other
place or places as Foothill may from time to time designate in writing, the
principal sum of Eleven Million Six Hundred Seventy-three Thousand Five
Hundred and No/100 Dollars ($11,673,500.00), plus interest in the manner
and upon the terms and conditions set forth below. This Amended and
Restated Secured Promissory Note (this "NOTE") is made pursuant to that
certain Loan and Security Agreement (the "LOAN AGREEMENT"), dated as of May
11, 1999, among Borrower, the lending entities from time to time party
thereto (together with their respective successors and assigns, the
"LENDERS"), and Foothill, as agent for the Lenders (the "AGENT"), the
provisions of which are incorporated herein by this reference, and
evidences the FCC Term Loan, as defined and described in the Loan
Agreement. Capitalized terms herein, unless otherwise noted, shall have
the meaning set forth in the Loan Agreement.
1.0 SCHEDULE OF PAYMENTS; RATE AND PAYMENT OF INTEREST; PREPAYMENT.
1.1 Except to the extent this Note may become due and payable
earlier in accordance with the Loan Agreement, this Note shall be due and
payable as follows:
(a) a principal installment in the amount of Two Hundred Eighty-
Seven Thousand Five Hundred Dollars ($287,500.00) on the first day
of October, 1999;
(b) thirty-one (31) equal successive monthly installments of
principal of Three Hundred Thirteen Thousand Four Hundred Dollars
($313,400.00) each on the first day of each month, beginning November
1, 1999, and continuing through and including May 1, 2002;
(c) accrued interest on the principal balance from time to time
remaining unpaid, payable monthly on the first day of each and every
month, beginning October 1, 1999; and
(d) a final principal installment equal to the unpaid principal
balance of this Note on May 11, 2002, together with accrued interest
on the principal balance remaining unpaid.
1.2 Prepayment may be made under this Note in whole or in part,
subject to the provisions of Section 3.6 set forth in the Loan Agreement.
Notwithstanding anything herein to the contrary, in the event that the Loan
Agreement is terminated by Borrower, by Foothill or by any other person at
any time, then the entire unpaid principal balance of this Note, together
with all accrued and unpaid interest hereon, shall become immediately due
and payable in full on the effective date of such termination, without
presentment, notice or demand of any kind.
1.3 Interest shall be computed on the basis of a 360-day year
for the actual number of days elapsed, and shall be at the rate of one and
one-half (1- 1/2 ) percentage points above the Reference Rate (as
hereinafter defined), computed on the basis of a 360-day year; provided,
however, upon the occurrence and during the continuance of an Event of
Default (as hereinafter defined), interest shall accrue on the outstanding
principal balance of this Note at a default rate (the "DEFAULT RATE") of
five and one-half (5- 1/2 ) percentage points above the Reference Rate, and
shall be payable on demand. "REFERENCE RATE" means, for any day, the rate
of interest per annum (over a year of 360 days) announced by Norwest Bank
Minnesota, National Association, or any successor thereto (the "BANK"),
from time to time, as its "base rate" (or any successor thereto) in effect
on such day. The Reference Rate is not necessarily the lowest rate charged
by the Bank. As of the date of this Note, the Reference Rate is seven and
three-quarters percent (7- 3/4 %) per annum. The applicable rate of
interest assessed hereunder will be increased or decreased from time to
time hereafter in an amount equal to any increase or decrease hereafter
made by the Bank in the Reference Rate. A change in the Reference Rate
shall be effective automatically and immediately on the occurrence of such
change.
2.0 EVENTS OF DEFAULTS; REMEDIES.
2.1 The occurrence of an Event of Default under the Loan
Agreement shall constitute a default by Borrower under this Note
(hereinafter an "EVENT OF DEFAULT").
2.2 Upon the occurrence of any Event of Default hereunder, the
Lenders and the Agent shall have all rights and remedies as may be provided
under the Loan Agreement or applicable law.
3.0 GENERAL PROVISIONS.
3.1 Borrower warrants and represents to the Agent and the
Lenders that Borrower has used and will continue to use the loans and
advances represented by this Note solely for proper business purposes, and
consistent with all applicable laws and statutes.
3.2 This Note is secured by the Collateral described in the Loan
Agreement.
3.3 Borrower waives presentment, demand and protest, notice of
protest, notice of presentment, notice of intention to accelerate, notice
of acceleration, and all other notices and demands in connection with the
enforcement of the Lenders', Foothill's or the Agent's rights hereunder or
under the Loan Agreement, except as specifically provided and called for by
this Note or the Loan Agreement, and hereby consents to, and waives notice
of, the release, addition, or substitution, with or without consideration,
of any collateral or of any person liable for payment of this Note or any
other Obligation. Any failure of the Lenders or the Agent to exercise any
right available hereunder, under the Loan Agreement or otherwise shall not
be construed as a waiver of the right to exercise the same or as a waiver
of any other right at any other time.
3.4 If this Note is not paid when due or upon the occurrence of
an Event of Default, Borrower further promises to pay all costs of
collection, foreclosure fees, attorneys' fees and expert witness fees
incurred by the Lenders or the Agent, whether or not suit is filed hereon,
and the fees, costs and expenses as provided in the Loan Agreement.
3.5 It is the intent of the parties to comply with applicable
usury laws (the "APPLICABLE USURY LAW"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or in any of
the documents securing payment hereof or otherwise relating hereto, in no
event shall this Note or such documents require the payment or permit the
collection of interest in excess of the Maximum Interest Rate, then in any
such event (1) the provisions of the paragraph shall govern and control,
(2) neither Borrower nor any other person or entity now or hereafter liable
for the payment hereof shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Maximum Interest Rate,
(3) any such excess which may have been collected shall be either applied
as a credit against the then unpaid principal amount hereof or refunded to
Borrower, at Foothill's option, and (4) the effective rate of interest
shall be automatically reduced to the Maximum Interest Rate. It is further
agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of
interest which are made for the purpose of determining whether such rate
would exceed the Maximum Interest Rate shall be made by amortizing,
prorating, allocating and spreading during the period of the full stated
term of the loan evidenced hereby, all interest at any time contracted for,
charged or received from Borrower or otherwise in connection with such
loan; and (y) in the event that the effective rate of interest on the loan
should at any time exceed the Maximum Interest Rate, such excess interest
that would otherwise have been collected had there been no ceiling imposed
by the Applicable Usury Law shall be paid to Foothill from time to time, if
and when the effective interest rate on the loan otherwise fall below the
Maximum Interest Rate, until the entire amount of interest which would
otherwise have been collected had there been no ceiling imposed by the
Applicable Usury Law has been paid in full. Borrower further agrees that
should the Maximum Interest Rate be increased at any time hereafter because
of a change in the Applicable Usury Law, then to the extent not prohibited
by the Applicable Usury Law, such increases shall apply to all indebtedness
evidenced hereby regardless of when incurred; but, again to the extent not
prohibited by the Applicable Usury Law, should the Maximum Interest Rate be
decreased because of a change in the Applicable Usury Law, such decreases
shall not apply to the indebtedness evidenced hereby regardless of when
incurred.
3.6 Subject to the applicable provisions of the Loan Agreement,
Foothill may at any time transfer this Note and Foothill's rights in any or
all collateral securing this Note, and Foothill thereafter shall be
relieved from all liability with respect to such collateral arising after
the date of such transfer.
3.7 This Note shall be binding upon Borrower and its legal
representatives, successors and assigns. Wherever possible, each provision
of this Note shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of the Note shall be
prohibited by or invalid under such law, such provision shall be severable,
and be ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provision of this Note.
THIS NOTE HAS BEEN DELIVERED FOR ACCEPTANCE BY FOOTHILL IN
BOSTON, MASSACHUSETTS AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF
THE COMMONWEALTH OF MASSACHUSETTS, AS THE SAME MAY FROM TIME TO TIME BE IN
EFFECT, INCLUDING, WITHOUT LIMITATION, THE UNIFORM COMMERCIAL CODE AS
ADOPTED IN MASSACHUSETTS. BORROWER HEREBY (i) IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN SUFFOLK COUNTY,
MASSACHUSETTS OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER
ARISING FROM OR RELATED TO THIS NOTE; (ii) IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING;
(iii) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST
FOOTHILL OR ANY OF FOOTHILL'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS NOTE IN
ANY COURT OTHER THAN ONE LOCATED IN SUFFOLK COUNTY, MASSACHUSETTS; AND (iv)
IRREVOCABLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING UNDER
OR IN CONNECTION WITH THIS NOTE. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR
IMPAIR FOOTHILL'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY
LAW OR FOOTHILL'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER
OR BORROWER'S PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
This Note amends, modifies, restates and replaces, but does not
extinguish the indebtedness evidenced by, that certain Secured Promissory
Note, dated May 11, 1999, executed by Borrower and payable to the order of
Foothill in the original stated principal amount of $11,500,000.00 (the
"PRIOR NOTE").
GRANT GEOPHYSICAL, INC.
a Delaware corporation
By:
Mike Kiernan,
Vice President
"Borrower"
Federal Taxpayer Identification
Number: 76-0548468
Address:
16850 Park Row
Houston, Texas 77084
<TABLE>
<CAPTION>
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
(dollars in thousands)
Pro Forma Pro Forma
Year ended Year ended Year ended 9 Mos ended 3 Mos ended Year ended 6 Mos ended Year ended 6 Mos ended
31-Dec-94 31-Dec-95 31-Dec-96 30-Sep-97 31-Dec-97 31-Dec-98 30-Jun-99 31-Dec-98 30-Jun-99
---------- ---------- ---------- ----------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest expense 3,561 3,635 7,558 4,037 1,431 10,380 6,133 1,259 984
Estimated interest
within rental expense 919 627 696 277 332 852 426 852 426
Dividends on preferred stock 5,258 5,258 6,383 -- 477 440 -- 6,672 3,116
------ ------ ------ ------ ------ ------ ------ ------ ------
Total fixed charges and
preferred dividends 9,738 9,520 14,617 4,314 2,240 11,672 6,559 8,783 4,526
------ ------ ------ ------ ------ ------ ------ ------ ------
Pre-tax income (loss) before
minority interests (11,245) 3,553 (74,406) 1,759 (7,657) (3,774) (14,848) 5,347 (9,699)
Add: Fixed charges and
preferred dividends 9,738 9,520 14,617 4,314 2,240 11,672 6,559 8,783 4,526
------ ------ ------ ------ ------ ------ ------ ------ ------
Sub-total (1,507) 13,073 (59,789) 6,073 (5,417) 7,898 (8,289) 14,130 (5,173)
Less: Dividends on
preferred stock 5,258 5,258 6,363 -- 477 440 -- 6,672 3,116
------ ------ ------ ------ ------ ------ ------ ------ ------
Earnings (6,765) 7,815 (66,152) 6,073 (5,894) 7,458 (8,289) 7,458 (8,289)
------ ------ ------ ------ ------ ------ ------ ------ ------
Earnings inadequate to
cover combined fixed
charges/dividends ratio (16,503) (1,705) (80,769) -- (8,134) (4,214) (14,848) (1,325) (12,815)
COMPUTATION OF RATIO
Earnings/Combined fixed
charges and preferred
dividends (0.69)x 0.82x (4.53)x 1.41x (2.63)x 0.64x (1.26)x 0.85x (1.83)x
======== ======= ======== ======= ======== ======= ======== ======= ========
</TABLE>
Exhibit 21
SUBSIDIARIES OF GRANT GEOPHYSICAL, INC.
<TABLE>
<CAPTION>
State or Jurisdiction
Name of Subsidiary of Incorporation
____________________________________ _______________________
<S> <C>
Grant Geophysical Corp.(1) Texas
Grant Geophysical (Int'l), Inc. Texas
Advanced Seismic Technology, Inc. Texas
Recursos Energeticos Ltda. Columbia
Grant Geophysical do Brasil Ltda. Brazil
P.T. Grant Geophysical Indonesia Indonesia
Solid State Geophysical, Inc. Canada
Solid State Internacional Ingeneria, C.A.(2) Venezuela
Saudi Solid State Co. Ltd.(2) Saudi Arabia
</TABLE>
(1) Includes the Interactive Seismic Imaging (ISI) Division
(2) Dormant; in dissolution
Exhibit 23.2
The Board of Directors
GGI Liquidating Corporation
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
Our report dated December 22, 1997, contains an explanatory paragraph that
states that the Company has suffered recurring losses from operations and
has a net capital deficiency, which raise substantial doubt about its
ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the
outcome of that uncertainty. In September 1997 the Court approved the
"Second Amended Plan of Reorganization" (the "Plan") filed by GGI
Liquidating Corporation. The Plan was consummated on September 30, 1997,
with the purchase by Grant Geophysical, Inc. of substantially all of the
assets and the assumption of certain liabilities of GGI Liquidation
Corporation. GGI Liquidating Corporation is currently in liquidation and
will distribute all of its assets pursuant to the Plan.
/s/ KPMG LLP
-----------------------------
KPMG LLP
Houston, Texas
October 27, 1999
Exhibit 23.3
The Board of Directors
Grant Geophysical, Inc.
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
------------------------------
KPMG LLP
Houston, Texas
October 27, 1999
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated April 6, 1999, relating to the consolidated financial
statements of Grant Geophysical, Inc., which appear in such Registration
Statement. We also consent to the reference to us under the heading "Experts"
in such Registration Statement.
/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Houston, Texas
October 27, 1999
Exhibit 99.1
SUBSCRIPTION EXERCISE NOTICE
TO EXERCISE SUBSCRIPTION RIGHTS TO PURCHASE SHARES OF
8% CONVERTIBLE PREFERRED STOCK OF
GRANT GEOPHYSICAL, INC.
EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON ____________,
1999,
UNLESS EXTENDED BY THE COMPANY
On the terms and subject to the conditions set forth in the prospectus
dated _________, 1999 (the "Prospectus") and in this Subscription Exercise
Notice, Elliott Associates, L.P. (the "Selling Stockholder") is hereby
offering the holder of the common stock (the "Common Stock") of Grant
Geophysical, Inc. (the "Company") listed below subscription rights (the
"Subscription Rights") to purchase from the Selling Stockholder one share
of 8% Convertible Preferred Stock (the "Preferred Stock") per Subscription
Right held.
Each Subscription Right entitles the holder thereof to subscribe for
and purchase one share of Preferred Stock (the "Basic Subscription
Privilege") of the Company from the Selling Stockholder at a subscription
price of $100.00 per share (the "Subscription Price"). If any shares of
Preferred Stock are not purchased by Subscription Rights holders pursuant
to such Subscription Rights holders' Basic Subscription Privilege (the
"Excess Shares"), any Subscription Rights holder fully exercising such
Subscription Rights holders' Basic Subscription Privilege may purchase from
the Selling Stockholder an additional number of Excess Shares, if so
specified by Subscription Rights holder on Form 1 pursuant to the terms and
conditions of the Subscription Offering (or if the aggregate subscription
price delivered or transmitted by such Subscription Rights holder exceeds
the aggregate Subscription Price for all shares for which such Subscription
Rights holder would be entitled to subscribe pursuant to such Subscription
Rights holder's Basic Subscription Privilege), subject to proration (the
"Over-Subscription Privilege") as described in the Prospectus and herein.
All numbers of fractional Subscription Rights in excess of one will be
rounded up to the next whole number. No fractional Subscription Rights or
cash in lieu thereof will be issued or paid. Set forth below is the number
of Subscription Rights evidenced by this Subscription Exercise Notice that
the Subscription Rights holder is entitled to exercise pursuant to the
Subscription Offering.
For a more complete description of the terms and conditions of the
Subscription Offering, please refer to the Prospectus, which is
incorporated herein by reference. Copies of the Prospectus are available
upon request from the Company at:
Grant Geophysical, Inc.
Attn: Michael P. Keirnan, Chief Financial Officer
16850 Park Row
Houston, Texas 77084
This Subscription Exercise Notice must be received by the subscription
agent, LaSalle Bank National Association (the "Subscription Agent"), or
guaranteed delivery requirements must be complied with, with payment in
full by 5:00 p.m., New York City time, on _______, 1999, unless extended in
the sole discretion of the Company (as it may be extended, the "Expiration
Time"). Any Subscription Rights not exercised at or prior to the
Expiration Time will be null and void. Any subscription for shares of
Preferred Stock in the Subscription Offering made hereby is irrevocable.
The Subscription Agent will issue certificates representing shares of
Preferred Stock purchased pursuant to the Subscription Offering as soon as
practicable following the Expiration Date.
[Subscription Right holder's Name]
[Subscription Right holder's Agent]
Number of Subscription Rights Represented
Some or all of the Subscription Rights may be exercised by duly
completing Forms 1 and 2. Subscription Rights holders are advised to
review the Prospectus and the instructions contained in this Subscription
Exercise Notice before exercising Subscription Rights.
Only the registered owner whose name is inscribed hereon is entitled
to subscribe for shares of Preferred Stock upon the terms and subject to
the conditions set forth in the Prospectus and the instructions contained
in the Subscription Exercise Notice.
THIS SUBSCRIPTION EXERCISE NOTICE IS NON-TRANSFERABLE.
<PAGE>
FORM 1
I hereby exercise one or more Subscription Rights to subscribe for
shares of Preferred Stock as indicated below, on the terms and subject
to the conditions specified in the Prospectus, receipt of which is
hereby acknowledged.
(a) Number of shares of Preferred Stock subscribed for pursuant to
the Basic Subscription Privilege.
________ shares X $100.00 per share = $________.00 payment.
(a) Number of shares of Preferred Stock subscribed for pursuant to
the Over-Subscription Privilege.
________ shares X $100.00 per share = $________.00 payment.
By exercising this Over-Subscription Privilege, I represent and
certify that I have fully exercised my Basic Subscription Privilege
received in respect of the shares of Preferred Stock described on the
face of this Subscription Exercise Notice.
(b) Total Subscription (total number of shares on lines (a) and (b)
multiplied by the
Subscription Price) = $ _________.00 payment
(d) Method of payment (check and complete appropriate box(es)):
[ ] Check, bank draft or postal, telegraphic or express money
order payable to "LaSalle Bank National Association, as
Subscription Agent"; or
[ ] Wire transfer of immediately available funds to the account
maintained by the Subscription Agent for this Subscription
Offering at LaSalle Bank National Association, Chicago, IL,
[___________________].
(e) [ ] Check here if Subscription Rights are being exercised
pursuant to the Notice of Guaranteed Delivery delivered to
the Subscription Agent prior to the date hereof and complete
the following:
Name(s) of Registered holder(s): ________________________________
Window Ticket Number (if any): __________________________________
Date of Execution of Notice
of Guaranteed Delivery:__________________________________________
Name of Institution Which
Guaranteed Delivery:_____________________________________________
SIGNATURE OF SUBSCRIPTION RIGHTS HOLDER: _____________________________
DATE: _______________
<PAGE>
FORM 2
SUBCRIPTION RIGHTS HOLDERS MUST SIGN BELOW
AND COMPLETE SUBSTITUTE FORM W-9
SIGNATURE AND SPECIAL DELIVERY INSTRUCTIONS:
Please sign and provide the address for mailing of certificates
representing shares of Preferred Stock or any refund payment in accordance
with the Prospectus:
Name: _______________________________________________________________
Address: ____________________________________________________________
Subscription Rights holder's Signature(s): __________________________
Subscription Rights holder's Signature(s):___________________________
(If held jointly)
(Must be signed by registered holder(s) exactly as name(s) appear(s)
on the face of the Subscription Exercise Notice). If signature is by
trustee, executor, administrator, guardian, attorney-in-fact, agent,
officer of a corporation or another acting in a fiduciary or
representative capacity, please provide the following information.
See Instructions.)
Name(s): _____________________________________________________________
Capacity (full title):________________________________________________
Address: _____________________________________________________________
Area Code and Telephone Number:_______________________________________
Tax Identification or Social Security Number:_________________________
COMPLETE SUBSTITUTE FORM W-9
GUARANTEE OF SIGNATURES
If the addressee above is not an eligible guarantor institution (as
specified in "Terms of the Subscription Offering - Signatures and Signature
Guarantees") or the Subscription Rights holder named on this Subscription
Exercise Notice, then the Subscription Rights holder completing this Form 2
must have an eligible guarantor institution guarantee such Subscription
Rights holder's signature.
Authorized Signature:_________________________________________________
Name:_________________________________________________________________
Title:________________________________________________________________
Name of Firm:_________________________________________________________
Address:______________________________________________________________
Area Code and Telephone Number:_______________________________________
<PAGE>
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE SUBSCRIPTION
OFFERING
1. SUBSCRIPTION PRIVILEGE.
Each Subscription Right entitles the holder thereof to subscribe for
and purchase one share of Preferred Stock of the Company from the Selling
Stockholder at a subscription price of $100.00 per share. Subject to the
allocation described below, each Subscription Right holder who exercises
the Basic Subscription Privilege in full may also exercise an Over-
Subscription Privilege to purchase additional shares of Preferred Stock
that are not purchased by other Subscription Right holders under their
Basic Subscription Privilege, if so specified by the Subscription Right
holder on Form 1 pursuant to the terms and conditions as described in the
Prospectus and herein. If the number of shares remaining after the
exercise of all Basic Subscription Privileges is not sufficient to satisfy
all Over-Subscription Privileges, Subscription Right holders will be
allocated shares pro rata (subject to elimination of factional shares), in
proportion to the number of shares of Preferred Stock purchased through
each Subscription Right holder's Basic Subscription Privilege. However, if
this pro rata allocation exceeds the number of shares of Preferred Stock
that a Subscription Right holder requested on the Subscription Exercise
Notice, then that Subscription Right holder will receive only the number of
shares that that Subscription Rights holder requested, and the remaining
shares from the Subscription Right holder's pro rata allocation will be
divided among other Subscription Right holders exercising their Over-
Subscription Privileges.
To exercise Subscription Rights, complete Form 1 and send this
properly completed Subscription Exercise Notice, together with payment in
full of the Subscription Price for each share of Preferred Stock subscribed
for pursuant to the Basic Subscription Privilege and the Over-Subscription
Privilege, to the Subscription Agent. All payments must be made in United
States dollars by (i) check or bank draft drawn upon a United States bank
or postal, telegraphic or express money order payable to "LaSalle Bank
National Association, as Subscription Agent" or (ii) wire transfer of
immediately available funds to the account maintained by the Subscription
Agent for such purpose at LaSalle Bank National Association, Chicago, IL,
[________________] Payments will be deemed to have been received by the
Subscription Agent only upon the (a) clearance of any uncertified check,
(b) receipt by the Subscription Agent of any certified check or bank draft
drawn upon a United States bank or postal, telegraphic or express money
order, or (c) the receipt of good funds in the Subscription Agent's account
designated above.
IF PAYING BY UNCERTIFIED PERSONAL CHECK, PLEASE NOTE THAT THE FUNDS
PAID THEREBY MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR. ACCORDINGLY,
HOLDERS OF SUBSCRIPTION RIGHTS WHO WISH TO PAY THE SUBSCRIPTION PRICE BY
MEANS OF UNCERTIFIED PERSONAL CHECK ARE URGED TO MAKE PAYMENT SUFFICIENTLY
IN ADVANCE OF THE EXPIRATION DATE TO ENSURE THAT SUCH PAYMENT IS RECEIVED
AND CLEARS BY SUCH DATE, AND ARE URGED TO CONSIDER PAYMENT BY MEANS OF
CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
You may cause a written guarantee substantially in the form available
from the Subscription Agent (the "Notice of Guaranteed Delivery") from a
member firm of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office, branch or correspondent in the United
States, or a member in good standing of a recognized signature guarantee
medallion program (each of the foregoing being an "Eligible Institution"),
to be received by the Subscription Agent on or prior to the Expiration Date
guaranteeing delivery of this properly completed and executed Subscription
Exercise Notice within three business days following the date of the Notice
of Guaranteed Delivery. If this procedure is followed, this Subscription
Exercise Notice must be received by the Subscription Agent within three
business days of the Notice of Guaranteed Delivery. Additional copies of
the Notice of Guaranteed Delivery may be obtained upon request from the
Subscription Agent at the address, or by calling the telephone number,
indicated below.
<PAGE>
The address and telecopier numbers of the Subscription Agent are as
follows:
LaSalle Bank National Association
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
LaSalle Bank National Association
Corporate Trust Administrator, Room 1960
Attention: Sarah K. Webb
135 South LaSalle Street
Chicago, IL 60603
FACSIMILE: CONFIRM BY TELEPHONE:
(312) 904-2236 (312) 904-2444
FOR INFORMATION CALL:
(312) 904-2444
2. DELIVERY OF STOCK CERTIFICATES.
The following deliveries and payments will be made to the address shown
on the face of this Subscription Exercise Notice unless you provide
instructions to the contrary in Form 2 of this Subscription Exercise
Notice.
(a) BASIC SUBSCRIPTION PRIVILEGE. As soon as practicable after the
valid exercise of Subscription Rights and full payment for the shares have
been received and cleared, the Subscription Agent will mail to each
exercising Subscription Rights holder certificates representing shares of
Preferred Stock purchased pursuant to the Basic Subscription Privilege.
(b) OVER-SUBSCRIPTION PRIVILEGE. As soon as practicable after the
Expiration Date and after all prorations and adjustments contemplated by
the terms of the Subscription Offering have been effected, the Subscription
Agent will mail to each Subscription Rights holder who validly exercises
the Over-Subscription Privilege, certificates representing the number of
shares of Preferred Stock allocated to such Subscription Rights holder
pursuant to the Over-Subscription Privilege.
(c) EXCESS PAYMENTS. As soon as practicable after the Expiration Date
and after all prorations and adjustments contemplated by the terms of the
Subscription Offering have been effected, the Subscription Agent will mail
to each Subscription Rights holder who exercises the Over-Subscription
Privilege any excess funds received in payment of the Subscription Price
for Excess Shares that are subscribed for by such Subscription Rights
holder but not allocated to such Subscription Rights holder pursuant to the
Over-Subscription Privilege.
3. EXECUTION
(a) EXECUTION BY REGISTERED HOLDER. The signature on this Subscription
Exercise Notice must correspond with the name of the registered holder
exactly as it appears on the face of this Subscription Exercise Notice
without any alteration or change whatsoever. Persons who sign this
Subscription Exercise Notice in a representative or other fiduciary
capacity must indicate their capacity when signing and, unless waived by
the Subscription Agent in its sole and absolute discretion, must present to
the Subscription Agent satisfactory evidence of their authority so to act.
(b) EXECUTION BY PERSON OTHER THAN REGISTERED HOLDER. If this
Subscription Exercise Notice is executed by a person other than the holder
named on the face of this Subscription Exercise Notice, proper evidence of
authority of the person executing this Subscription Exercise Notice must
accompany the same unless the Subscription Agent, in its discretion,
dispenses with proof of authority.
<PAGE>
(c) SIGNATURE GUARANTEES. Your signature must be guaranteed by an
Eligible Institution if you specify special payment or delivery
instructions on Form 2
4. SUBSTITUTE FORM W-9
Each Subscription Rights holder who elects to exercise Subscription
Rights must provide the Subscription Agent with a correct Taxpayer
Identification Number ("TIN") on Substitute Form W-9, substantially in the
form provided with these instructions. A copy of Substitute Form W-9 may
be obtained upon request from the Subscription Agent at the address
indicated above. Failure to provide the information on the form may
subject such holder to a $50.00 penalty and to 31% back-up federal income
tax withholding with respect to dividends that may be paid by the Company
on shares of Preferred Stock purchased upon the exercise of Rights.
The box in Part 3 of the Substitute Form W-9 may be checked if the
Subscription Rights holder has not been issued a TIN and has applied for a
TIN or intends to apply for a TIN in the near future. If the box in Part 3
is checked, the Subscription Rights holder or other payee must also
complete the Certificate of Awaiting Taxpayer Identification Number below
in order to avoid backup withholding. Notwithstanding that the box in Part
3 is checked and the Certificate of Awaiting Taxpayer Identification Number
is completed, the Subscription Agent will withhold 31% of all payments made
prior to the time a properly certified TIN is provided to the Subscription
Agent. The Subscription Agent will retain such amounts withheld during the
60 day period following the date of the Substitute Form W-9. If the
Subscription Rights holder furnishes the Subscription Agent with its TIN
within 60 days after the date of the Substitute Form W-9, the amounts
retained during the 60 day period will be remitted to the Subscription
Rights holder and no further amounts shall be retained or withheld from
payments made to the Subscription Rights holder thereafter. If, however,
the Subscription Rights holder has not provided the Subscription Agent with
its TIN within such 60 day period, amounts withheld will be remitted to the
IRS as backup withholding. In addition, 31% of all payments made
thereafter will be withheld and remitted to the IRS until a correct TIN is
provided.
The Subscription Rights holder is required to give the Subscription
Agent the TIN (e.g., social security number or employer identification
number) of the person whose name appears inscribed on the face of this
Subscription Exercise Notice. If this Subscription Exercise Notice is
registered in more than one name or is not in the name of the actual owner,
consult the enclosed "Instructions for Certification of Taxpayer
Identification Number" for additional guidance on which number to report.
Certain Subscription Right holders (including, among others,
corporations, financial institutions and certain foreign persons) may not
be subject to these backup withholding and reporting requirements. Such
Subscription Right holders should nevertheless complete the attached
Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid
possible erroneous backup withholding. A foreign person may qualify as an
exempt recipient by submitting a properly completed IRS Form W-8, signed
under penalties of perjury, attesting to that Subscription Right holder's
exempt status. Please consult the enclosed "Instructions for
Certification of Taxpayer Identification Number" for additional guidance on
which holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax.
Rather, the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
PAYER'S NAME:
Substitute Part 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX Social
AT RIGHT AND CERTIFY BY SIGNING AND DATING Security
Form W-9 BELOW: Number
or
Employer
Identification
DEPARTMENT OF Number
THE PART 2 -- Certification -- Under the
TREASURY penalties of perjury, I certify that: _____________
INTERNAL (1) The number shown on this form is my
REVENUE correct Taxpayer Identification Number
SERVICE. (or I am waiting for a number to be
issued to me), and
(2) I am not subject to backup withholding
because (a) I am exempt from backup
PAYEE'S withholding, or (b) I have not been
REQUEST FOR notified by the Internal Revenue Service
TAXPAYER (the "IRS") that I am subject to backup
IDENTIFICATION withholding as a result of a failure to
NUMBER ("TIN") report all interest or dividends, or (c)
the IRS has notified me that I am no
longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross
out item (2) above if you have been notified
by the IRS that you are currently subject to
backup withholding because of under-reporting
interest or dividends on your tax return.
However, if after being notified by the IRS
that you were subject to backup withholding
you received another notification from the
IRS that you were subject to backup
withholding, do not cross out such item (2).
SIGN HERE * Signature _______________________ Part 3 --
Date _______________ 1999 Awaiting TIN <square>
</TABLE>
NOTE:FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office, or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all reportable
payments made to me will be withheld.
Signature _____________________ Date ___________________, 1999
INSTRUCTIONS FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER (THE
"GUIDELINES")
PURPOSE OF FORM.-A person who If you are a sole proprietor, you
is required to file an must furnish your INDIVIDUAL name
information return with the and either your SSN or Employer
IRS must obtain your correct Identification Number ("EIN"). You
Taxpayer Identification Number may also enter your business name
("TIN") to report income paid or "doing business as" name on the
to you, real estate business name line. Enter your
transactions, mortgage name(s) as shown on your social
interest you paid, the security card and/or as it was used
acquisition or abandonment of to apply for your EIN on Form SS-4.
secured property, or
contributions you made to an You must sign the certification or
IRA. For most individuals, backup withholding will apply.
your taxpayer identification
number will be your Social HOW TO OBTAIN A TIN.-If you do not
Security Number ("SSN"). Use have a TIN, apply for one
the form provided to furnish immediately. To apply, get FORM
your correct TIN and, when SS-5, Application for a Social
applicable, (1) to certify Security Card (for individuals),
that the TIN you are from your local office of the
furnishing is correct (or that Social Security Administration, or
you are waiting for a number FORM SS-4, Application for Employer
to be issued), (2) to certify Identification Number (for
that you are not subject to businesses and all other entities),
backup withholding, and (3) to from your local IRS office.
claim exemption from backup
withholding if you are an Once you receive your TIN, complete
exempt payee. Furnishing your the enclosed form and return it to
correct TIN and making the us. Please note that you will be
appropriate certifications subject to backup withholding at a
will prevent certain payments 31% rate until we receive your TIN.
from being subject to backup
withholding.
If you are an individual, you
must generally provide the
name shown on your social
security card. However, if you
have changed your last name,
for instance, due to marriage,
without informing the Social
Security Administration of the
name change, please enter your
first name, the last name
shown on your social security
card, and your new last name.
<TABLE>
<CAPTION>
FOR THIS TYPE OF ACCOUNT: GIVE NAME AND FOR THIS TYPE GIVE NAME
SSN OF: OF ACCOUNT: AND EIN OF:
<S> <C> <C> <C>
1. Individual The individual 6. Sole
proprietorship The owner{3}
2. Two or more individuals The actual owner 7. A valid Legal entity{4}
(joint account) of the account trust, estate,
or, if combined or pension
funds, the first trust
individual on
the account
3. Custodian account of a The minor{2} 8. Corporate The corporation
minor (Uniform Gift to Minors
Act)
4. a. The usual revocable The grantor- 9. Association, The organization
savings trust (grantor trustee{1} club,
is also trustee) religious,
charitable,
education, or
other tax-
exempt
organization
b. So-called trust account The actual 10. Partnership The partnership
that is not a legal or owner{1}
valid trust under
state law
5. Sole proprietorship The owner{3} 11. A broker The broker or nominee
or registered
nominee
12. Account The public entity
with the
Department of
Agriculture in
the name of a
public entity
(such as a
state or local
government,
school
district, or
prison) that
receives
agricultural
program
payments
</TABLE>
{1} List first and circle the name of the person whose number you furnish
{2} Circle the minor's name and furnish the minor's SSN
{3} Show your individual name. You may also enter your business name. You
may use your SSN or EIN.
{4} List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title.)
NOTE: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
<PAGE>
WHAT IS BACKUP WITHHOLDING?-Persons making dividend payments to you
after 1992 are required to withhold and pay to the IRS 31% of such
payments under certain conditions. This is called "backup
withholding."
If you give the requester your correct TIN, make the
appropriate certifications, and report all your taxable interest and
dividends on your tax return, your payments will not be subject to backup
withholding. Payments you receive will be subject to backup withholding
if:
1. You do not furnish your TIN to the requester;
2. The IRS notifies the requester that you furnished an
incorrect TIN;
3. You are notified by the IRS that you are subject to
backup withholding because you failed to report all our interest and
dividends on your tax return;
4. You do not certify to the requester that you are to
subject to backup withholding under 3 above; or
5. You do not certify your TIN.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING.-The following is a
list of payees exempt from backup withholding and for which no information
reporting is required.
(1) A corporation. (2) An organization exempt from tax
under section 501(a), or an IRA, or a custodial account under section
403(b)(7). (3) The United States or any of its agencies or
instrumentalities. (4) A state, the District of Columbia, a possession of
the United States, or any of their political subdivisions or
instrumentalities. (5) A foreign government or any of its political
subdivisions, agencies, or instrumentalities. (6) An international
organization or any of its agencies or instrumentalities. (7) A foreign
central bank of issue. (8) A dealer in securities or commodities required
to register in the United States or a possession of the United States. (9)
A real estate reinvestment trust. (10) An entity registered at all times
during the tax year under the Investment Company Act of 1940. (11) A common
trust fund operated by a bank under section 584(a). (12) A financial
institution. (13) A middleman known in the investment community as a
nominee or listed in the most recent publication of the American Society of
Corporate Secretaries, Inc., Nominee List. (14) A trust exempt from tax
under section 664 or described in section 4947.
Payments of dividends generally not subject to backup withholding include
the following:
* Payments to nonresident aliens that are subject to withholding
under section 1441.
* Payments to partnerships not engaged in a trade or business in
the United States and that have at least one nonresident partner.
* Payments of patronage dividends not paid in money.
* Payments made by certain foreign organizations.
PENALTIES
FAILURE TO FURNISH TIN.-If you fail to furnish your correct TIN, you are
subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.-If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
MISUSE OF TINS.-If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR SUBSCRIPTION OFFERING OF SHARES OF
8% CONVERTIBLE PREFERRED STOCK AT $100.00 PER SHARE
OF
GRANT GEOPHYSICAL, INC.
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to exercise non-transferrable subscription rights
(the "Subscription Rights") pursuant to the subscription offering (the
"Subscription Offering") described in the Prospectus dated _________, 1999
(the "Prospectus") relating to 23,386 shares of 8% Convertible Preferred
Stock (the "Preferred Stock") of Grant Geophysical, Inc. (the "Company") if
a Subscription Rights holder cannot deliver the Subscription Exercise
Notice(s) evidencing the Subscription Rights and all required documents to
LaSalle Bank National Association (the "Subscription Agent") at or prior to
the Expiration Time (as defined in the Prospectus). This Notice of
Guaranteed Delivery may be delivered by hand, overnight courier or mail, or
transmitted by facsimile transmission to the Subscription Agent, and must
be received by the Subscription Agent at or prior to the Expiration Date.
In addition, in order to utilize the guaranteed delivery procedures to
exercise Subscription Rights pursuant to the Subscription Offering, a
Subscription Rights holder must also (i) tender to the Subscription Agent,
prior to the Expiration Time, full payment for all shares of 8% Convertible
Preferred Stock subscribed for under the Subscription Offering and (ii)
deliver a properly completed Subscription Exercise Notice to the
Subscription Agent within three business days following the date of this
Notice of Guaranteed Delivery. See "The Subscription Offering - Terms of
the Subscription Offering - Guaranteed Delivery Procedures" in the
Prospectus.
THE SUBSCRIPTION AGENT FOR THE SUBSCRIPTION OFFERING IS:
LaSalle Bank National Association
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
LaSalle Bank National Association
Corporate Trust Administrator, Room 1960
Attention: Sarah H. Webb
135 South LaSalle Street
Chicago, IL 60603
FACSIMILE: CONFIRM BY TELEPHONE:
(312) 904-2236 (312) 904-2444
FOR INFORMATION CALL:
(312) 904-2444
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED
DELIVERY VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A SUBSCRIPTION EXERCISE NOTICE IS REQUIRED TO
BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO,
SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN
THE SIGNATURE BOX ON THE SUBSCRIPTION EXERCISE NOTICE.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby represents that he or she is the holder of
Subscription Exercise Notice(s) representing _____ Subscription Rights and
that the Subscription Exercise Notice(s) required to exercise Subscription
Rights cannot be delivered to the Subscription Agent at or before the
Expiration Time. Upon the terms and subject to the conditions set forth in
the Prospectus, the receipt of which is hereby acknowledged, the
undersigned hereby elects to exercise Subscription Rights as follows:
_________ Number of shares of Preferred Stock subscribed for
pursuant to the Subscription Rights holder's Basic
Subscription Privilege.
_________ Number of shares of Preferred Stock subscribed for
pursuant to the Subscription Rights holder's Over-
Subscription Privilege.
(By exercising this Over-Subscription Privilege, the
Subscription Rights holder certifies that such holder
has fully exercised the Basic Subscription Privilege
received pursuant to the Subscription Offering.)
All authority herein conferred or agreed to be conferred by this
Notice of Guaranteed Delivery shall survive the death or incapacity of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees
in bankruptcy and other legal representatives of the undersigned.
PLEASE SIGN AND COMPLETE
Signature(s):____________________ Name(s):____________________________
_________________________________ ____________________________________
Address:_________________________ Capacity (full title), if signing
_________________________________ in a representative
(Zip Code) capacity:___________________________
Area Code and Telephone Number:
_________________________________ Taxpayer Identification or Social
Security Number:
Dated:___________________________ ___________________________________
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, as an "eligible
guarantor institution," including (as such terms are defined therein): (i)
a bank; (ii) a broker, dealer, municipal securities broker, municipal
securities dealer, government securities broker, government securities
dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or learning agency; or (v) a savings
association that is a participant in a Securities Transfer Association
recognized program (each of the foregoing being referred to as an "Eligible
Institution"), hereby guarantees to deliver to the Subscription Agent, at
the address set forth above, the Subscription Exercise Notice(s)
representing the Subscription Rights being exercised hereby, along with any
required signature guarantees and any other required documents, all within
three business days after the date of execution of this Notice of
Guaranteed Delivery.
The undersigned acknowledges that it must communicate the guarantee to
the Subscription Agent and must deliver the Subscription Exercise Notice(s)
and full payment for all shares of 8% Convertible Preferred Stock
subscribed for under the Subscription Offering within the time period set
forth above and that failure to do so could result in a financial loss to
the undersigned.
______________________________________________
(Name of Firm)
Sign here:____________________________________
(Authorized Signature)
Name: ______________________________________
(Please type or print)
Title: ______________________________________
______________________________________________
(Area Code and Telephone Number)
______________________________________________
Dated: ___________, 1999 ______________________________________________
Address Zip Code
Exhibit 99.3
LETTER OF TRANSMITTAL AND CONSENT FORM
TO TENDER FOR EXCHANGE
$100,000,000 IN PRINCIPAL AMOUNT OF
9 3/4 % SENIOR NOTES DUE 2008
FOR
SHARES OF 8% CONVERTIBLE PREFERRED STOCK
WITH A LIQUIDATION VALUE OF $65,000,000
AND
TO CONSENT TO CERTAIN INDENTURE AMENDMENTS
WITH RESPECT TO THE 9 3/4 % SENIOR NOTES DUE 2008
THE EXCHANGE OFFER AND THE CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ___________, 1999, UNLESS EXTENDED BY THE COMPANY.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER/CONSENT SOLICITATION IS:
LASALLE BANK NATIONAL ASSOCIATION
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
LaSalle Bank National Association
Corporate Trust Administration, Room 1960
135 South LaSalle Street
Chicago, IL 60603
Attn: Sarah H. Webb
VIA FACSIMILE:
(312) 904-2236
CONFIRM BY TELEPHONE:
(312) 904-2444
FOR INFORMATION CALL:
(312) 904-2444
DELIVERY OF THIS LETTER OF TRANSMITTAL AND CONSENT FORM TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL AND
CONSENT FORM VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
The undersigned acknowledges that he or she has received the Prospectus,
dated ______, 1999 (the "Prospectus"), of Grant Geophysical, Inc., a
Delaware corporation (the "Company"), and this Letter of Transmittal and
Consent Form, relating to:
(A) the Company's offer (the "Exchange Offer"), upon the terms and subject
to the conditions set forth in the Prospectus and in this Letter of
Transmittal and Consent Form, to exchange an aggregate principal amount
of up to $100 million of 9 3/4 % Senior Notes due 2008 (the "Notes"),
together with all accrued and unpaid interest thereon, of the Company
for shares of 8% Convertible Preferred Stock (the "Preferred Stock") at
an exchange rate of:
(1) $.65 of liquidation value of Preferred Stock for every $1.00 in
principal amount of Notes tendered under the Exchange Offer; and
(2) $1.00 of liquidation value of Preferred Stock for every $1.00 of
accrued and unpaid interest on the Notes tendered under the
Exchange Offer; and
(B) the solicitation by the Company (the "Consent Solicitation") of consents
("Consents"), upon the terms and subject to the conditions set forth in
the Prospectus and in this Letter of Transmittal and Consent Form, from
registered holders of the Notes to certain amendments (the "Proposed
Amendments") to the indenture (the "Indenture") under which the Notes
are outstanding, as more fully described in the Prospectus.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS
HEREIN CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL AND CONSENT FORM IS
COMPLETED.
This Letter of Transmittal and Consent Form is to be completed by
holders of Notes if either (a) certificates representing Notes
("Certificates") are to be forwarded herewith or (b) tenders of Notes are to
be made by book-entry transfer to an account maintained by LaSalle Bank
National Association (the "Exchange Agent") at The Depository Trust
Company (the "Book-Entry Transfer Facility" or "DTC") pursuant to the
procedures set forth in "The Exchange Offer and Consent Solicitation - Terms
of the Exchange Offer" section of the Prospectus. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the
Exchange Agent.
Holders of Notes whose Certificates for such Notes are not immediately
available or who cannot deliver their Certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date (as
defined in the Prospectus) or who cannot complete the procedures for book-
entry transfer on a timely basis, must tender their Notes according to the
guaranteed delivery procedures set forth in "The Exchange Offer and Consent
Solicitation - Terms of the Exchange Offer - Guaranteed Delivery Procedures"
section of the Prospectus.
The Exchange Offer and the Consent Solicitation are not being made to
(nor will the surrender of Notes or Consents be accepted from or behalf of)
holders in any jurisdiction in which the making or accepting of the Exchange
Offer or Consent Solicitation would not be in compliance with the laws of
such jurisdiction.
IMPORTANT PROCEDURES TO BE FOLLOWED IN COMPLETING THIS LETTER OF TRANSMITTAL
AND CONSENT FORM
Holders may choose to tender under the Exchange Offer, the Consent
Solicitation or both as indicated below.
(A) Holders who wish to tender their Notes in the Exchange Offer must:
(1) complete the box entitled "Description of Notes Tendered" and
(2) sign where indicated below.
By doing so, the undersigned will have tendered the Notes upon and
subject to the terms and conditions described in the Prospectus and
herein. The undersigned acknowledges and understands that it may not
participate in the Exchange Offer without delivering corresponding
Consents to the Proposed Amendments, and that the valid tender of Notes
in accordance with the terms of the Exchange Offer and this Letter of
Transmittal and Consent Form shall constitute the automatic Consent of
the undersigned thereto in accordance with the terms of the Consent
Solicitation. Tenders of Notes may be withdrawn prior to 5:00 p.m., New
York City time, on _______, 1999 (the "Expiration Date").
(B) Holders who wish to tender Consents to the Proposed Amendments
must:
(1) complete the box entitled "Description of Consents Tendered"
and
(2) sign where indicated below.
By doing so, the undersigned will have consented to the Proposed
Amendments upon and subject to the terms and conditions described in the
Prospectus and herein. Only registered holders of Notes are entitled to
consent to the Proposed Amendments.
ELLIOTT ASSOCIATES, L.P. ("ELLIOTT") AND WESTGATE INTERNATIONAL, L.P.
("WESTGATE"), WHICH TOGETHER HOLD APPROXIMATELY $56.3 MILLION AGGREGATE
PRINCIPAL AMOUNT OF THE NOTES, HAVE INDICATED THAT THEY WILL TENDER ALL
OF THEIR NOTES UNDER THE EXCHANGE OFFER ONLY IF CONSENTS ARE RECEIVED IN
THE CONSENT SOLICITATION BY A MAJORITY OF NOTEHOLDERS OTHER THAN ELLIOTT
AND WESTGATE.
<PAGE>
List below in "Description of Notes Tendered" the Notes to be tendered
under the Exchange Offer to which this Letter of Transmittal and Consent
Form relates. If the space below is inadequate, list the registered numbers
and principal amount on a separate signed schedule and affix the list to
this Letter of Transmittal and Consent Form.
DESCRIPTION OF NOTES TENDERED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name(s) and Address(es) of
Registered Owner(s) as
(it/they) appear(s)on the 9
3/4 % Senior Notes due 2008
Aggregate
Principal
Amount
Certificate Represented
Numbers by Principal
of Notes(1) Notes Amount Tendered(2)
$___________________
Total Principal
Amount Tendered(3)
(If additional space is
required, attach a continuation
sheet in substantially the
above form.)
</TABLE>
(1) Need not be completed if Notes are being tendered by book-entry
holders.
(2) Credit will also be given at a rate of $1.00 of liquidation value of
Preferred Stock for every $1.00 of accrued and unpaid interest on tendered
Notes.
(3) Unless otherwise indicated in the column, a holder will be deemed to
have tendered all Notes represented by the Notes indicated.
List below in "Description of Consents Tendered" the Notes for which
Consents are being tendered under the Consent Solicitation and to which this
Letter of Transmittal and Consent Form relates. If the space below is
inadequate, list the registered numbers and principal amount on a separate
signed schedule and affix the list to this Letter of Transmittal and Consent
Form.
DESCRIPTION OF CONSENTS TENDERED
NOTE: A VALID TENDER OF NOTES UNDER THE EXCHANGE OFFER SHALL CONSTITUTE THE
AUTOMATIC CONSENT TO THE PROPOSED AMENDMENTS BY A PRINCIPAL AMOUNT OF NOTES
EQUAL TO THE AMOUNT TENDERED IN THE EXCHANGE OFFER REGARDLESS IF CONSENTS FOR
NOTES ARE TENDERED SEPARATELY BELOW.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name(s) and Address(es) of
Registered Owner(s) as (it/they)
appear(s)on the 9 3/4 % Senior
Notes due 2008
Aggregate
Principal
Amount
Certificate Represented
Numbers by Principal
of Notes Notes Amount Tendered
$___________________
Total Principal
Amount Tendered(1)
(If additional space is required,
attach a continuation sheet in
substantially the above form.)
</TABLE>
(1) Unless otherwise indicated in the column, a holder will be deemed to have
tendered Consents for all Notes represented by the Notes indicated.
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
<square> CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-
ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:______________________________
Account Number:_____________________________________________
Transaction Code Number:____________________________________
<square> CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF
GUARANTEED DELIVERY IF TENDERED NOTES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT
TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):_______________________________
Window Ticket Number (if any):______________________________
Date of Execution of Notice
of Guaranteed Delivery:___________________________________
Name of Institution which Guaranteed
Delivery:_________________________________________________
IF GUARANTEED DELIVERY IS TO BE MADE BY BOOK ENTRY TRANSFER:
Name of Tendering Institution:_____________________________
Account Number:____________________________________________
Transaction Code Number:___________________________________
<square> CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-
EXCHANGED NOTES ARE TO BE RETURNED BY CREDITING THE BOOK-
ENTRY TRANSFER FACILITY ACCOUNT NUMBER SET FORTH ABOVE.
<PAGE>
LADIES AND GENTLEMEN:
Upon the terms and subject to the conditions of the Exchange Offer and/or
the Consent Solicitation, the undersigned hereby tenders to the Company one or
both of the following:
(a) the above described aggregate principal amount of Notes indicated in
the box entitled "Description of Notes Tendered"and/or
(b) Consents to the Proposed Amendments representing the above described
principal amount of Notes indicated in the box entitled "Description
of Consents Tendered."
The undersigned acknowledges that the valid tender of Notes in accordance
with the terms of the Exchange Offer and this Letter of Transmittal and
Consent Form shall constitute the undersigned's automatic Consent to the
Proposed Amendments contemplated by the Consent Solicitation.
Subject to, and effective upon, the acceptance of all or any portion of
the Notes and Consents tendered hereby, the undersigned hereby assigns and
transfers to or upon the order of the Company all right, title and interest in
and to such Notes, and hereby irrevocably constitutes and appoints the
Exchange Agent as its agent and attorney-in-fact (with full knowledge that the
Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer and the Consent Solicitation) with respect to the tendered
Notes and Consents, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest) subject only
to the right of withdrawal described in the Prospectus, to (i) deliver the
certificates representing such Notes and deliver the Consents contained herein
to the Company together with all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company, upon receipt by the
Exchange Agent of the Notes and Consents, (ii) present the Notes for transfer
on the books of the Company and (iii) receive for the account of the Company
all benefits and otherwise exercise all rights of beneficial ownership of such
Notes, all in accordance with the terms and conditions of the Exchange Offer
and/or the Consent Solicitation.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT (I) THE UNDERSIGNED
ACCEPTS THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER AND THE CONSENT
SOLICITATION, (II) THE UNDERSIGNED HAS FULL POWER AND AUTHORITY TO TENDER,
EXCHANGE, SELL, ASSIGN AND TRANSFER THE NOTES TENDERED HEREBY AND THAT, WHEN
THE SAME ARE ACCEPTED FOR EXCHANGE, THE COMPANY WILL ACQUIRE GOOD, MARKETABLE
AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS,
CHARGES AND ENCUMBRANCES, AND THAT THE NOTES TENDERED HEREBY ARE NOT SUBJECT
TO ANY ADVERSE CLAIMS OR PROXIES AND (III) THE UNDERSIGNED HAS FULL POWER AND
AUTHORITY TO TENDER THE CONSENTS TENDERED HEREBY. THE UNDERSIGNED WILL, UPON
REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY OR
THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE,
ASSIGNMENT AND TRANSFER OF THE NOTES TENDERED HEREBY.
The name(s) and address(es) of the registered holder(s) of the Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Notes. The certificate number(s) and the Notes
that the undersigned wishes to tender should be indicated in the appropriate
boxes above.
If any tendered Notes are not exchanged pursuant to the Exchange Offer for
any reason, or if Certificates are submitted for more Notes than are tendered
or accepted for exchange, Certificates for such nonexchanged or nontendered
Notes will be returned (or, in the case of Notes tendered by book-entry
transfer, such Notes will be credited to an account maintained at DTC),
without expense to the tendering holder, promptly following the expiration or
termination of the Exchange Offer.
The undersigned understands that tenders of Notes and Consents pursuant to
any one of the procedures described in "The Exchange Offer and Consent
Solicitation - Terms of the Exchange Offer" section of the Prospectus and in
the instructions, attached hereto will, upon the Company's acceptance for
exchange of such tendered Notes or acceptance of Consents, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer and the Consent Solicitation.
The undersigned recognizes that, under certain circumstances set forth in the
Prospectus, the Company may not be required to accept any Notes or Consents,
and also agrees that tenders of Notes or of Consents may only be revoked under
the circumstances and procedures detailed in the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Preferred Stock
be issued in the name(s) of the undersigned. If applicable, substitute
Certificates representing Notes not exchanged or not accepted for exchange
will be issued to the undersigned or, in the case of a book-entry transfer of
Notes, will be credited to the account indicated above maintained at DTC.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
the Preferred Stock will be delivered to the undersigned at the address shown
below the undersigned's signature.
BY TENDERING NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL AND CONSENT
FORM, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) ANY PREFERRED
STOCK TO BE RECEIVED BY THE UNDERSIGNED IS BEING ACQUIRED IN THE ORDINARY
COURSE OF ITS BUSINESS, (II) THE UNDERSIGNED HAS NO ARRANGEMENT OR
UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF PREFERRED STOCK TO BE RECEIVED IN THE
EXCHANGE OFFER AND (III) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE
UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH PREFERRED
STOCK.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Notes tendered hereby. All authority
herein conferred or agreed to be conferred in this Letter of Transmittal and
Consent Form shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING EITHER OR BOTH OF THE BOXES ENTITLED
"DESCRIPTION OF NOTES TENDERED" AND "DESCRIPTION OF CONSENTS TENDERED" ABOVE
AND SIGNING THIS LETTER OF TRANSMITTAL AND CONSENT FORM, WILL BE DEEMED TO
HAVE TENDERED THE NOTES AND/OR CONSENTS SET FORTH IN SUCH BOX.
<PAGE>
HOLDER(S) SIGN HERE
(See Instructions 2 and 5)
Please Complete Substitute Form W-9.
Note: Signature(s) Must Be Guaranteed If Required by Instruction
2
Must be signed by registered holder(s) exactly as name(s)
appear(s) on Certificate(s) for the Notes hereby tendered or on
the register of holders maintained by the Company, or by any
person(s) authorized to become the registered holder(s) by
endorsements and documents transmitted herewith (including any
such opinions of counsel, certifications and other information as
may be required by the Company to comply with any restrictions on
transfer applicable to the Notes). If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian,
agent, officer of a corporation or another acting in a fiduciary
capacity or representative capacity, please set forth the
signer's full title. See Instruction 5.
_______________________________________________________________
(Signature(s) of Holder(s))
Date: ________________, 1999
Name(s):_______________________________________________________
_______________________________________________________________
(Please Print)
Capacity (full title):_________________________________________
Address:_______________________________________________________
(Include Zip Code)
Area Code and Telephone Number:________________________________
(Tax Identification or Social
Security Number(s)):___________________________________________
GUARANTEE OF SIGNATURE(S)
(See Instructions 2 and 5)
_______________________________________________________________
(Authorized Signature)
Date: ________________, 1999
Name of Firm:__________________________________________________
Capacity (full title):_________________________________________
(Please Print)
Address:_______________________________________________________
(Include Zip Code)
Area Code and Telephone Number:________________________________
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY
(SEE INSTRUCTIONS 5 AND 6) INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if
Notes in a principal amount not To be completed ONLY if
tendered, or Preferred Stock the Preferred Stock is to be
issued in exchange for Notes issued or sent to someone
accepted for exchange, are to be other than the undersigned or
issued in the name of someone to the undersigned at an
other than the undersigned, or address other than as
(ii) if Notes tendered by book- indicated above.
entry transfer which are not
exchanged are to be returned by [ ]Mail [ ]Issue (check
credit to an account maintained appropriate boxes)
at the Book-Entry Transfer certificates to:
Facility. Issue Preferred Stock
and/or Notes to:
Name:___________________________ Name:__________________________
(Type or Print) (Type or Print)
Address: _______________________ Address:_______________________
________________________________ _______________________________
________________________________ _______________________________
(Zip Code) (Zip Code)
________________________________ _______________________________
(Tax Identification or Social (Tax Identification or Social
Security Number) Security Number)
(Complete Substitute Form W-9) (Complete Substitute Form W-9)
Credit nonexchanged Notes
delivered by book-entry transfer
to the Book-Entry Transfer
Facility set forth below:
Book-Entry Transfer Account
Number:
________________________________
<PAGE>
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER AND THE CONSENT SOLICITATION
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CONSENT FORM AND CERTIFICATES;
GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal and Consent Form
is to be completed either if (a) Certificate(s) representing Notes are to be
forwarded herewith or (b) tenders of Notes are to be made pursuant to the
procedures for tender by book-entry transfer set forth in "The Exchange Offer
and Consent Solicitation - Terms of the Exchange Offer" in the Prospectus. In
order to tender Notes, such Certificate(s) representing Notes or timely
confirmation of a book-entry transfer of such Notes into the Exchange Agent's
account at DTC, as well as this Letter of Transmittal and Consent Form (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and any other documents required by this Letter of
Transmittal and Consent Form, must be received by the Exchange Agent at its
address set forth herein on or prior to the Expiration Date.
Holders who wish to tender their Notes and (i) whose Certificate(s)
representing Notes are not immediately available; (ii) who cannot tender their
Certificate(s), this Letter of Transmittal and Consent Form and all other
required documents to the Exchange Agent on or prior to the Expiration Date or
(iii) who cannot complete the procedures for delivery by book-entry transfer
on a timely basis, may tender their Notes by properly completing and duly
executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set forth in "The Exchange Offer and Consent Solicitation - Terms
of the Exchange Offer - Guaranteed Delivery Procedures" in the Prospectus.
Pursuant to such procedures: (i) such tender must be made by or through an
Eligible Institution (as defined below); (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made
available by the Company, must be received by the Exchange Agent on or prior
to the Expiration Date and (iii) the Certificate(s) (or a book-entry
confirmation (as defined in the Prospectus)) representing all tendered Notes,
in proper form for transfer and the Consents, together with a Letter of
Transmittal and Consent Form (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees and any other documents
required by this Letter of Transmittal and Consent Form, must be received by
the Exchange Agent within five business days after the date of execution of
such Notice of Guaranteed Delivery, all as provided in "The Exchange Offer and
Consent Solicitation -Terms of the Exchange Offer" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice. For Notes to be
properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the
Expiration Date. As used herein and in the Prospectus, "Eligible Institution"
means a firm or other entity identified in Rule 17Ad-15 under the Exchange Act
as "an eligible guarantor institution," including (as such terms are defined
therein) (i) a bank; (ii) a broker, dealer, municipal securities broker or
dealer or government securities broker or dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities association or clearing
agency; or (v) a savings association that is a participant in a Securities
Transfer Association.
THE METHOD OF DELIVERY OF NOTES AND CONSENTS, THIS LETTER OF TRANSMITTAL
AND CONSENT FORM AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE
RISK OF THE TENDERING HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY
SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal and
Consent Form (or facsimile thereof), waives any right to receive any notice of
the acceptance of such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal and Consent Form is required if:
(i) this Letter of Transmittal and Consent Form is signed by the
registered holder (which term, for purposes of this document, shall
include any participant in DTC whose name appears on the register of
holders maintained by the Company as the owner of the Notes) of Notes
tendered herewith, unless such holder(s) has completed either the box
entitled "Special Issuance Instructions" or the box entitled "Special
Delivery Instructions" above or
(ii) such Notes and/or Consents are tendered for the account of a firm
that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature(s) on this Letter of Transmittal and Consent Form. See Instruction
5.
3. INADEQUATE SPACE. If the space provided in the box captioned "Description
of Notes Tendered" and/or "Description of Consents Tendered" is inadequate,
the certificate number(s) and/or the principal amount of Notes and/or Consents
and any other required information should be listed on a separate signed
schedule which is attached to this Letter of Transmittal and Consent Form.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Notes and/or Consents
will be accepted only in the principal amount of $1,000 and integral multiples
of $1,000 in excess thereof. If less than all the Notes evidenced by any
Certificate(s) submitted are to be tendered, new Certificate(s) for the
remainder of the Notes that were evidenced by your old Certificate(s) will be
sent to the holder of the Notes promptly after the Expiration Date. All Notes
represented by Certificate(s) delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated.
Upon the receipt by the Exchange Agent of tendered Consents representing a
majority of the outstanding principal amount of the Notes, other than those
Notes held by Elliott and Westgate (the "Required Majority"), the Required
Majority will be accepted to approve the Proposed Amendments to the Indenture
even if the Required Majority is received by the Exchange Agent prior to the
Expiration Date. Tenders of Consents may only be withdrawn before such time
as the Required Majority is received by the Exchange Agent. All attempted
withdrawals after the receipt of the Required Majority shall be null and
ineffective.
Tenders of Notes may be withdrawn at any time if such withdrawal is in
accordance with the terms provided herein or in the Prospectus. Tenders of
Consents received by the Exchange Agent before such time as the Required
Majority is received by the Exchange Agent may be withdrawn only if such
withdrawal is in accordance with the terms provided herein or in the
Prospectus.
In order to properly withdraw a tender of Notes or to properly withdraw a
tender of Consents that was tendered before the Exchange Agent has received
the Required Majority, a written or facsimile transmission of such notice of
withdrawal must be timely received by the Exchange Agent at one of its
addresses set forth above or in the Prospectus at or prior to the Expiration
Time. Any such notice of withdrawal must (i) specify the name of the person
who tendered the Notes and/or Consents to be withdrawn; (ii) identify the
Notes and/or Consents to be withdrawn ( including the registration numbers of
the Notes and the total principal amount of the Notes); (iii) state that such
holder is withdrawing his election to have such Notes exchanged and/or such
Consents tendered; (iv) contain the signature of the tenderer in the same
manner as the signature on the Letter of Transmittal and Consent Form, and (if
Certificate(s)s for Notes have been tendered) the name of the registered
holder of the Notes as set forth on the Certificate(s)e for the Notes, if
different from that of the person who tendered such Notes. If Certificate(s)
for the Notes have been delivered or otherwise identified to the Exchange
Agent, then prior to the physical release of such Certificate(s) for the
Notes, the tendering holder must submit the serial numbers shown on the
particular Certificate(s) for the Notes to be withdrawn and the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution (except
in the case of Notes tendered for the account of an Eligible Institution).
If Notes have been tendered pursuant to the procedures for book entry
transfer set forth in the Prospectus under "The Exchange Offer and Consent
Solicitation - Terms of the Exchange Offer," the notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawal of Notes, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written or facsimile transmission.
Withdrawals of tenders of Notes may not be rescinded. Notes properly
withdrawn will not be deemed validly tendered for purposes of the Exchange
Offer, but may be retendered at any subsequent time at or prior to the
Expiration Time by following any of the procedures described in the Prospectus
under "The Exchange Offer and Consent Solicitation - Terms of the Exchange
Offer."
All questions as to the validity, form and eligibility (including time of
receipt) of withdrawal notices will be determined by the Company, in its sole
discretion, whose determination shall be final and binding on all parties.
None of the Company, any affiliates or assigns of the Company, the Exchange
Agent or any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Notes which have been tendered but
which are withdrawn will be returned to the holder thereof without cost to
such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL AND CONSENT FORM, ASSIGNMENTS AND
ENDORSEMENTS. If this Letter of Transmittal and Consent Form is signed by the
registered holder(s) of the Notes tendered hereby, the signatures must
correspond exactly with the name(s) as written on the face of the
Certificate(s) without alteration, enlargement or any change whatsoever.
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal and Consent
Form.
If any tendered Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal and Consents (or facsimiles thereof) as there
are different registrations of Certificates.
If this Letter of Transmittal and Consent Form or any Certificate(s) or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing and must
submit proper evidence satisfactory to the Company, in its sole discretion, of
each such person's authority so to act.
When this Letter of Transmittal and Consent Form is signed by the
registered owner(s) of the Notes listed and transmitted hereby, no
endorsement(s) of Certificate(s) or separate bond power(s) are required unless
Preferred Stock is to be issued in the name of a person other than the
registered holder(s), in which case the Certificate(s) must be endorsed or
accompanied by appropriate bond powers(s), in either case signed exactly as
the name(s) of the registered holder(s) appears on such Certificate(s).
Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal and Consent Form is signed by a person other
than the registered owner(s) of the Notes listed, the Notes must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information
as the Company or any trustee for the Notes may require in accordance with the
restrictions on transfer applicable to the Notes. Signatures on such Notes or
bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Preferred Stock is to be
issued in the name of a person other than the signer of this Letter of
Transmittal and Consent Form, or if Preferred Stock is to be sent to someone
other than the signer of this Letter of Transmittal and Consent Form or to an
address other than that shown above, the appropriate boxes on this Letter of
Transmittal and Consent Form should be completed. Certificates for Notes not
exchanged will be returned by mail or, if tendered by book-entry transfer, by
crediting the account indicated above maintained at DTC. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Notes and/or
Consents, which determination shall be final and binding on all parties. The
Company reserves the absolute right to reject any and all tenders not in
proper form or the acceptance of which, or exchange for which, may, in the
opinion of counsel to the Company, be unlawful. The Company also reserves
the absolute right, subject to applicable law, to waive any of the conditions
of the Exchange Offer and/or the Consent Solicitation set forth in the
Prospectus under "The Exchange Offer and Consent Solicitation - Terms of the
Exchange Offer" or "The Exchange Offer and Consent Solicitation - Terms of the
Consent Solicitation." The Company may waive any defects or irregularities in
any tender of Notes and/or Consents of any particular holder whether or not
similar defects or irregularities are waived in the case of other holders. The
Company's interpretation of the terms and conditions of the Exchange Offer and
the Consent Solicitation (including this Letter of Transmittal and Consent
Form and the instructions hereto) will be final and binding. No tender of
Notes or Consents will be deemed to have been validly made until all defects
and irregularities with respect to such tender have been cured or waived.
None of the Company, any affiliates or assigns of the Company, the Exchange
Agent or any other person will be under any duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal and
Consent Form. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal and Consent Form may be obtained from
the Exchange Agent.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Notes are accepted for exchange is required
to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the holder or other payee to a $50 penalty. In addition,
payments to such holders or other payees with respect to Preferred Stock
received pursuant to the Exchange Offer may be subject to 31% backup
withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the holder
has not been issued a TIN and has applied for a TIN or intends to apply for a
TIN in the near future. If the box in Part 3 is checked, the holder or other
payee must also complete the Certificate of Awaiting Taxpayer Identification
Number below in order to avoid backup withholding. Notwithstanding that the
box in Part 3 is checked and the Certificate of Awaiting Taxpayer
Identification Number is completed, the Exchange Agent will withhold 31% of
all payments made prior to the time a properly certified TIN is provided to
the Exchange Agent. The Exchange Agent will retain such amounts withheld
during the 60 day period following the date of the Substitute Form W-9. If
the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In
addition, 31% of all payments made thereafter will be withheld and remitted to
the IRS until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Notes or of the last transferee appearing on the transfers attached to, or
endorsed on, the Notes. If the Notes are registered in more than one name or
are not in the name of the actual owner, consult the enclosed "Instructions
for Certification of Taxpayer Identification Number" for additional guidance
on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the
face thereof, to avoid possible erroneous backup withholding. A foreign
person may qualify as an exempt recipient by submitting a properly completed
IRS Form W-8, signed under penalties of perjury, attesting to that holder's
exempt status. Please consult the enclosed "Instructions for Certification
of Taxpayer Identification Number" for additional guidance on which holders
are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right, subject to
applicable law, to waive satisfaction of any or all conditions of the Exchange
Offer or the Consent Solicitation set forth in the Prospectus.
11. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Notes and/or
Consents, by execution of this Letter of Transmittal and Consent Form, shall
waive any right to receive notice of the acceptance of their Notes for
exchanges.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of
Notes nor shall any of them incur any liability for failure to give any such
notice.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s) representing
Notes have been lost, destroyed or stolen, the holder should promptly notify
the Exchange Agent. The holder will then be instructed as to the steps that
must be taken in order to replace the Certificate(s). This Letter of
Transmittal and Consent Form and related documents cannot be processed until
the procedures for replacing lost, destroyed or stolen Certificate(s) have
been followed.
13. SECURITY TRANSFER TAXES. Holders who tender their Notes for exchange will
not be obligated to pay any transfer taxes in connection therewith. If,
however, Preferred Stock is to be delivered to, or is to be issued in the
name of, any person other than the registered holder of the Notes tendered, or
if a transfer tax is imposed for any reason other than the exchange of Notes
in connection with the Exchange Offer, then the amount of any such transfer
tax (whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal
and Consent Form, the amount of such transfer taxes will be billed directly to
such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL AND CONSENT FORM (OR FACSIMILE THEREOF)
AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT AT OR
PRIOR TO THE EXPIRATION TIME.
<PAGE>
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS
(SEE INSTRUCTION 9)
SUBSTITUTE PART 1 - PLEASE PROVIDE YOUR Social
TIN IN THE BOX AT RIGHT AND Security
FORM W-9 CERTIFY BY SIGNING AND DATING Number
BELOW OR
Employer
Identification
Number
DEPARTMENT OF THE TREASURY PART 2 - Certification - PART3
INTERNAL REVENUE SERVICE Under penalties
of perjury, I -
certify that:
(1) The number shown Awaiting
on this form is TIN <square>
my correct
PAYER'S REQUEST FOR TAXPAYER Taxpayer
IDENTIFICATION NUMBER (TIN) Identification
Number (or I am
waiting for a Please
number to be complete
issued to me) and the
Certificate
(2) I am not subject of
to backup Awaiting
withholding Taxpayer
either because I Identification
have not been Number
notified by the below.
Internal Revenue
Service ("IRS")
that I am subject
to backup
withholding as a
result of failure
to report all
interest or
dividends, or the
IRS has notified
me that I am no
longer subject to
backup
withholding.
Certificate Instructions - You
must cross out item (2) in Part
2 above if you have been
notified by the IRS that you
are subject to backup
withholding because of under
reporting interest or dividends
on your tax return. However,
if after being notified by the
IRS that you were subject to
backup withholding you received
another notification from the
IRS stating that you are no
longer subject to backup
withholding, do not cross out
item (2).
SIGNATURE______________________ DATE_______, 1999
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number to the
payor within 60 days, 31% of all reportable payments made to me thereafter
will be withheld until I provide a number.
_________________________ _______________, 1999
Signature Date
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States
citizen or resident (or I am signing for a foreign corporation, partnership,
estate or trust).
_________________________ _______________, 1999
Signature Date
<PAGE>
INSTRUCTIONS FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER (THE
"GUIDELINES")
"GUIDELINES")
PURPOSE OF FORM.-A person who If you are a sole proprietor, you
is required to file an must furnish your INDIVIDUAL name
information return with the and either your SSN or Employer
IRS must obtain your correct Identification Number ("EIN"). You
Taxpayer Identification Number may also enter your business name
("TIN") to report income paid or "doing business as" name on the
to you, real estate business name line. Enter your
transactions, mortgage name(s) as shown on your social
interest you paid, the security card and/or as it was used
acquisition or abandonment of to apply for your EIN on Form SS-4.
secured property, or
contributions you made to an You must sign the certification or
IRA. For most individuals, backup withholding will apply.
your taxpayer identification
number will be your Social HOW TO OBTAIN A TIN.-If you do not
Security Number ("SSN"). Use have a TIN, apply for one
the form provided to furnish immediately. To apply, get FORM
your correct TIN and, when SS-5, Application for a Social
applicable, (1) to certify Security Card (for individuals),
that the TIN you are from your local office of the
furnishing is correct (or that Social Security Administration, or
you are waiting for a number FORM SS-4, Application for Employer
to be issued), (2) to certify Identification Number (for
that you are not subject to businesses and all other entities),
backup withholding, and (3) to from your local IRS office.
claim exemption from backup
withholding if you are an Once you receive your TIN, complete
exempt payee. Furnishing your the enclosed form and return it to
correct TIN and making the us. Please note that you will be
appropriate certifications subject to backup withholding at a
will prevent certain payments 31% rate until we receive your TIN.
from being subject to backup
withholding.
If you are an individual, you
must generally provide the
name shown on your social
security card. However, if you
have changed your last name,
for instance, due to marriage,
without informing the Social
Security Administration of the
name change, please enter your
first name, the last name
shown on your social security
card, and your new last name.
<TABLE>
<CAPTION>
FOR THIS TYPE OF ACCOUNT: GIVE NAME AND FOR THIS TYPE GIVE NAME
SSN OF: OF ACCOUNT: AND EIN OF:
<S> <C> <C> <C>
1. Individual The individual 6. Sole
proprietorship The owner{3}
2. Two or more individuals The actual owner 7. A valid Legal entity{4}
(joint account) of the account trust, estate,
or, if combined or pension
funds, the first trust
individual on
the account
3. Custodian account of a The minor{2} 8. Corporate The corporation
minor (Uniform Gift to Minors
Act)
4. a. The usual revocable The grantor- 9. Association, The organization
savings trust (grantor trustee{1} club,
is also trustee) religious,
charitable,
education, or
other tax-
exempt
organization
b. So-called trust account The actual 10. Partnership The partnership
that is not a legal or owner{1}
valid trust under
state law
5. Sole proprietorship The owner{3} 11. A broker The broker or nominee
or registered
nominee
12. Account The public entity
with the
Department of
Agriculture in
the name of a
public entity
(such as a
state or local
government,
school
district, or
prison) that
receives
agricultural
program
payments
</TABLE>
{1} List first and circle the name of the person whose number you furnish
{2} Circle the minor's name and furnish the minor's SSN
{3} Show your individual name. You may also enter your business name. You
may use your SSN or EIN.
{4} List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title.)
NOTE: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
<PAGE>
WHAT IS BACKUP WITHHOLDING?-Persons making dividend payments to you
after 1992 are required to withhold and pay to the IRS 31% of such
payments under certain conditions. This is called "backup
withholding."
If you give the requester your correct TIN, make the
appropriate certifications, and report all your taxable interest and
dividends on your tax return, your payments will not be subject to backup
withholding. Payments you receive will be subject to backup withholding
if:
1. You do not furnish your TIN to the requester;
2. The IRS notifies the requester that you furnished an
incorrect TIN;
3. You are notified by the IRS that you are subject to
backup withholding because you failed to report all our interest and
dividends on your tax return;
4. You do not certify to the requester that you are to
subject to backup withholding under 3 above; or
5. You do not certify your TIN.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING.-The following is a
list of payees exempt from backup withholding and for which no information
reporting is required.
(1) A corporation. (2) An organization exempt from tax
under section 501(a), or an IRA, or a custodial account under section
403(b)(7). (3) The United States or any of its agencies or
instrumentalities. (4) A state, the District of Columbia, a possession of
the United States, or any of their political subdivisions or
instrumentalities. (5) A foreign government or any of its political
subdivisions, agencies, or instrumentalities. (6) An international
organization or any of its agencies or instrumentalities. (7) A foreign
central bank of issue. (8) A dealer in securities or commodities required
to register in the United States or a possession of the United States. (9)
A real estate reinvestment trust. (10) An entity registered at all times
during the tax year under the Investment Company Act of 1940. (11) A common
trust fund operated by a bank under section 584(a). (12) A financial
institution. (13) A middleman known in the investment community as a
nominee or listed in the most recent publication of the American Society of
Corporate Secretaries, Inc., Nominee List. (14) A trust exempt from tax
under section 664 or described in section 4947.
Payments of dividends generally not subject to backup withholding include
the following:
* Payments to nonresident aliens that are subject to withholding
under section 1441.
* Payments to partnerships not engaged in a trade or business in
the United States and that have at least one nonresident partner.
* Payments of patronage dividends not paid in money.
* Payments made by certain foreign organizations.
PENALTIES
FAILURE TO FURNISH TIN.-If you fail to furnish your correct TIN, you are
subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.-If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
MISUSE OF TINS.-If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
Exhibit 99.4
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
$100,000,000 IN PRINCIPAL AMOUNT OF
9 3/4 % SENIOR NOTES DUE 2008
(PRINCIPAL AMOUNT $1,000 PER 9 3/4 % SENIOR NOTE)
OF
GRANT GEOPHYSICAL, INC.
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to tender under the Exchange Offer (as defined
below) if (i) certificates for the Company's (as defined below) 9 3/4 %
Senior Notes due 2008 (the "Notes") are not immediately available, (ii)
Notes, the Letter of Transmittal and Consent Form and all other required
documents cannot be delivered to LaSalle Bank National Association (the
"Exchange Agent") at or prior to the Expiration Time (as defined in the
Prospectus referred to below) or (iii) the procedures for delivery by book-
entry transfer cannot be completed on a timely basis. This Notice of
Guaranteed Delivery may be delivered by hand, overnight courier or mail, or
transmitted by facsimile transmission to the Exchange Agent. See "The
Exchange Offer and Consent Solicitation - Terms of the Exchange Offer -
Guaranteed Delivery Procedures" in the Prospectus. In addition, in order
to utilize the guaranteed delivery procedure to tender Notes, a completed,
signed and dated Letter of Transmittal and Consent Form relating to the
Notes (or facsimile thereof) must also be received by the Exchange Agent
within five business days after the Expiration Date. Capitalized terms not
defined herein have the meanings assigned to them in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER AND CONSENT SOLICITATION IS:
LaSalle Bank National Association
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
LaSalle Bank National Association
Corporate Trust Administrator, Room 1960
135 South LaSalle Street
Chicago, IL 60603
Attn: Sarah K. Webb
VIA FACSIMILE:
(312) 904-2236
CONFIRM BY TELEPHONE:
(312) 904-2444
FOR INFORMATION CALL:
(312) 904-2444
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED
DELIVERY VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO,
SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN
THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Grant Geophysical, Inc., a Delaware
company (the "Company"), upon the terms and subject to the conditions of
the offer to exchange $100,000,000 in principal amount of 9 3/4 % Senior
Notes due 2008, plus accrued and unpaid interest thereon, for shares of 8%
Convertible Preferred Stock with a liquidation value of $65,000,000 plus
accrued and unpaid interest on the Notes (the "Exchange Offer"), as set
forth in the Prospectus dated ______, 1999 and the related Letter of
Transmittal and Consent Form, the aggregate principal amount of Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer - Terms of the Exchange
Offer - Guaranteed Delivery Procedures."
The undersigned understands and acknowledges that the Exchange Offer
will expire at 5:00 p.m., New York City time, on ______, 1999 (the
"Expiration Time"), unless extended by the Company.
All authority herein conferred or agreed to be conferred by this
Notice of Guaranteed Delivery shall survive the death or incapacity of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees
in bankruptcy and other legal representatives of the undersigned.
DESCRIPTION OF NOTES TENDERED
AGGREGATE
PRINCIPAL
CERTIFICATE NUMBER(S) (IF KNOWN) AMOUNT PRINCIPAL
OF NOTES OR ACCOUNT REPRESENTED AMOUNT
NUMBER AT THE BOOK-ENTRY TRANSFER FACILITY BY NOTES TENDERED
TOTAL:
PLEASE SIGN AND COMPLETE
Signature(s):____________________ Name(s):____________________________
_________________________________ ____________________________________
Address:_________________________ Capacity (full title), if signing
_________________________________ in a representative
(Zip Code) capacity:___________________________
Area Code and Telephone Number:
_________________________________ Taxpayer Identification or Social
Security Number:
Dated:___________________________ ___________________________________
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, as an "eligible
guarantor institution," including (as such terms are defined therein): (i)
a bank; (ii) a broker, dealer, municipal securities broker, municipal
securities dealer, government securities broker, government securities
dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or learning agency; or (v) a savings
association that is a participant in a Securities Transfer Association
recognized program (each of the foregoing being referred to as an "Eligible
Institution"), hereby guarantees to deliver to the Exchange Agent, at one
of its addresses set forth above, the Notes tendered hereby in proper form
for transfer, or confirmation of the book-entry transfer of such Notes to
the Exchange Agents account at The Depository Trust Company, pursuant to
the procedures for book-entry transfer set forth in the Prospectus, in
either case together with one or more properly completed and duly executed
Letter(s) of Transmittal and Consent Form (or facsimile thereof) and any
other required documents within five business days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and Consent Form and the Notes tendered hereby to the Exchange
Agent within the time period set forth above and that failure to do so
could result in a financial loss to the undersigned.
______________________________________________
(Name of Firm)
Sign here:____________________________________
(Authorized Signature)
Name: ______________________________________
(Please type or print)
Title: ______________________________________
______________________________________________
(Area Code and Telephone Number)
______________________________________________
Dated: ___________, 1999 ______________________________________________
Address Zip Code
NOTE: DO NOT SEND CERTIFICATES FOR NOTES WITH THIS FORM. CERTIFICATES FOR
NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL AND
CONSENT FORM.
