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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1997
Commission File No 0-19971
UNIVERSAL SEISMIC ASSOCIATES, INC.
(Name of Small Business Issuer in Its Charter)
DELAWARE 76-0256086
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
16420 PARK TEN PLACE, SUITE 300, HOUSTON, TEXAS 77084-5051
(Address of Principal Executive Offices Including Zip Code)
(281) 578-8081
(Issuer's Telephone Number Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $.0001 PAR VALUE
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- ------
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $31,287,329
As of October 10, 1997, there were outstanding 5,234,109 shares of the
registrant's common stock, par value $.0001, which is the only class of common
or voting stock of the registrant. As of that date, the aggregate market value
of the shares of common stock or voting stock held by non-affiliates of the
registrant (based on the closing price for the common stock on the NASDAQ
National Market System on October 10, 1997) was approximately $9,181,160.
Transitional Small Business Disclosure Format (check one) Yes No X
--- ---
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UNIVERSAL SEISMIC ASSOCIATES, INC.
ANNUAL REPORT ON FORM 10-KSB
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
P A R T I
ITEM 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 13
P A R T I I
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . . . 15
ITEM 7. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . 17
P A R T I I I
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 10. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . 21
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
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P A R T I
ITEM 1. DESCRIPTION OF BUSINESS
Universal Seismic Associates, Inc. (hereinafter referred to together
with its subsidiaries as "the Company") was incorporated in Delaware in July
1988. Prior to May 1994, the Company was exclusively a seismic data
acquisition company providing services through its subsidiary, Universal
Seismic Acquisition, Inc. ("Acquisition"). In May 1994, the Company acquired a
data processing services company and renamed it Universal Seismic Technologies,
Inc. ("UST"). In January 1996 the Company formed a new wholly owned
subsidiary, UNEXCO, Inc. ("UNEXCO") to conduct oil and gas exploration and
production activities.
The Company is a provider of three-dimensional ("3-D") seismic
acquisition and processing services to the energy industry in the United States
("U.S.") and also participates in carefully selected oil and gas projects
through UNEXCO. Oil and gas companies utilize seismic data in determining
suitable locations for drilling wells, in the development of oil and gas
reserves and, increasingly, in reservoir management. The Company acquires, on
a contract basis, seismic data for energy and energy service companies, which
typically have exclusive ownership of the data. The Company also processes
seismic data for both acquisition clients and energy customers that have
acquired data from other sources.
In September 1991, the Company obtained its first data acquisition
system with 3-D capability. The system, an Input/Output, Inc. ("I/O") SYSTEM
TWO ("SYSTEM TWO") employs a 24 bit analog-to-digital converter using advanced
delta sigma technology. The Company presently has the equipment capability of
operating up to five such I/O systems.
The Company uses state-of-the-art seismic recording systems and
experienced crews, both of which are necessary in order to provide 3-D seismic
services to the oil and gas community. The Company has further enhanced its
traditional acquisition business by offering 3-D processing and analysis along
with global position system ("GPS") surveys. The Company began operating in
swamp and shallow water environments in conjunction with the addition of its
I/O SYSTEM TWO Remote Seismic Recorder crews in October 1995 and June 1996.
DATA ACQUISITION
Seismic Crews. A seismic crew typically consists of a supervisor,
crew chief, assistant crew chief, an observer who operates the seismograph and
controls the recording of seismic data, and general laborers who place and move
the geophones and related equipment. A seismic crew typically uses general
laborers who are part of either (i) a drill crew that drills holes for
explosives and shooters who detonate the explosives or (ii) a vibroseis crew
that operates the vibroseis trucks. A fully staffed seismic crew typically
consists of 35 to 55 people. The Company has the ability to staff its
acquisition crews according to specific client requirements. The Company
operated three crews during most of the quarter ended September 30, 1997, and
if all of its equipment were placed in operation the Company would have to hire
and train additional personnel. The market for experienced personnel is
presently very tight.
Contracts. The Company's Data Acquisition activities are conducted
under contracts with customers who typically retain exclusive ownership of the
acquired seismic data. Contracts, which are awarded on a competitive bid
basis, are either "turnkey" contracts which provide for a fixed fee to be paid
to the Company for each unit of data acquired or "term" contracts which provide
for a fixed monthly fee and bonuses for production during the term of a
project. Turnkey contracts generally can provide more profit potential for the
Company, but involve more risk because of potential down time for weather and
other types of delays.
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DATA PROCESSING
The Company's Data Processing center located in Houston, Texas is a
high technology provider of seismic data processing and analysis. Data
Processing combines raw data collected in the field and enhances it through
various processes into a form ready for interpretation by customers in the oil
and gas industry. The Company has added externally developed software and
hardware operating on a Unix based platform to enhance its 3-D processing
capabilities. The center utilizes its internally developed, PC-based,
interactive workstations for smaller 3-D projects and two-dimensional ("2-D")
processing.
The Company also reprocesses older existing data using current
techniques in order to enhance the usefulness of that data.
OIL AND GAS
The Company participates in oil and gas exploration projects through
its wholly owned subsidiary, UNEXCO. The Company earns or purchases carried
and working interests in carefully selected 3-D seismic projects with the goal
of creating substantial oil and gas reserves and a revenue stream from these
interests.
The Company typically earns a working interest in a prospect by
acquiring the 3-D seismic data using its own acquisition and processing
resources. Partners in the prospect typically contribute the oil and gas
leases and/or options, geological and engineering expertise and operating
capability. UNEXCO maintains a state-of-the-art interpretation workstation,
and together with the Company's partners, jointly interprets the 3-D seismic
data. After interpreting the 3-D data and integrating the geological and
engineering data, the Company and its partners will decide whether to drill the
prospect themselves or try to sell their interests for cash or a carried
interest to oil and gas industry participants.
As of September 30, 1997, the Company had participated in ten
completed 3-D seismic programs (nine in fiscal year 1997) totaling
approximately two hundred twenty square miles of 3-D program. The Company
earned an interest in one additional project by reprocessing an existing 3-D
data set and is currently permitting an additional program. For additional
information on oil and gas activities, see "Oil and Gas" under Item 2.
SEASONALITY
The Company has the opportunity to generate its highest Data
Acquisition revenues during the summer months, primarily because this period
typically provides for more recording hours due to longer days. Although
certain seasons during the year generally provide better working conditions,
adverse weather conditions may impact Data Acquisition revenue at any time
throughout the year.
CUSTOMERS
The Company's Data Acquisition customers include major and independent
oil and gas exploration companies and service companies. The following table
sets forth the Company's Data Acquisition
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customers who accounted for 10% or more of the Company's revenues in either of
the past two fiscal years:
<TABLE>
<CAPTION>
Year Ended June 30
-------------------------
1997 1996
-------- ---------
<S> <C> <C>
Customer A 30% 0
B 13% 0
C * % 11%
</TABLE>
-------
*Less than 1%
The Company's mix of customers changes yearly as contracts are awarded
and completed. The Company is unable to anticipate whether significant
portions of its future revenues may be attributable to a few customers,
although it is likely the customer mix will change from year to year.
COMPETITION
The acquisition and processing of seismic data for the oil and gas
exploration industry is highly competitive. Although reliable comparative
figures are not available, the Company believes, and it should be assumed, that
some of its principal competitors have more extensive and diversified
operations and some also have financial, operating and other resources
substantially in excess of those available to the Company.
The Company's competitors for seismic Data Acquisition and Data
Processing contracts include Western Atlas, Veritas DGC, Inc., the GECO
division of Schlumberger, Inc., Grant Geophysical, Boone Geophysical, Inc.,
Tidelands Geophysical Co., Inc. and several other companies. Competitive
factors that affect the decision on who is awarded a 3-D Data Acquisition
contract include past performance, dependability, reputation, price and
availability of equipment. For Data Processing, industry reputation,
turnaround time, and price are the critical factors in receiving a job.
The Company operates in the highly competitive areas of oil and gas
exploration, development and production. The Company's competitors include
major integrated oil and gas companies and substantial independent energy
companies, many of which possess greater financial and other resources than the
Company.
BACKLOG
On June 30, 1997, the Company had a backlog of Data Acquisition
contracts of approximately $15.0 million. In most cases, the agreements may be
terminated by the customer upon 30 days written notice without substantial
penalty. For this and other reasons, the Company's backlog at any particular
date may not be indicative of the Company's revenues or other operating results
for any succeeding fiscal period. The Company can not, therefore, assure that
the backlog will be realized as revenue. At June 30, 1997 the Company's Data
Processing center had contracted backlog of approximately $182,000. These
contracts are generally terminable by the customer at any time prior to the
actual work being done and, therefore, may not be indicative of future revenues
or operating results.
On September 30, 1997, the Company had a Data Acquisition backlog of
$4.8 million and a Data Processing Backlog of $116,000.
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SUPPLIERS
The Company's primary supplier of seismic data acquisition equipment
is I/O. This equipment and related replacement parts are readily available
from I/O and other industry suppliers and can be obtained under leasing or
purchasing arrangements. Management believes that its relationship with I/O and
other various equipment suppliers is satisfactory.
EMPLOYEES
On June 30, 1997, the Company employed 244 people, all of whom are
full time employees, and none of whom is covered by a collective bargaining
agreement. The Company considers its employee relations to be satisfactory.
SIGNIFICANT DEVELOPMENTS SINCE JUNE 30, 1996
Business Expansion. In fiscal 1997 the Company continued the
expansion of its operations. Data Acquisition activity increased due to a full
year of operation from the two most recently added 3-D acquisition crews. The
Company began operating in swamp and shallow water environments in conjunction
with the addition of these crews in October 1995 and June 1996. This
represented the Company's first significant Data Acquisition effort in these
environments. The Company's data acquisition crews experienced reduced gross
margins that when combined with indirect overhead, depreciation and interest
expenses lead to fiscal 1997 operational losses. The reduced gross margins
also resulted from less than full utilization of the Company's crews and
operational difficulties incurred on several significant projects. The
Company's oil and gas exploration and production operation recognized its first
revenues in the current fiscal year and reported proved reserves with an SEC
PV10 value of $8,002,300.
Aborted Merger, Proxy Fight, and Shareholder Suit. During fiscal 1997
the Company was involved in an aborted merger that led to a proxy fight with a
group of shareholders. This same group of shareholders filed a suit against
the Company and its directors in United States District Court in Delaware. The
proxy fight was resolved at the annual shareholders meeting held in February
1997 at which management's slate of directors was reelected and all proposals
in opposition to management were defeated. The shareholder suit was settled
and received final court approval on October 1, 1997. For additional
information, see Item 3 "Legal Proceedings". The Company incurred significant
costs related to the aborted merger, proxy fight and shareholder suit. These
costs significantly impacted fiscal 1997 operating losses.
The Company restated its financial statements for the three month
periods ended September 30, 1996 and December 31, 1996. This action was taken
as a result of an internal review by the Audit Committee of the Company's Board
of Directors, which had been commenced in February 1997 in response to
allegations made by a stockholder who pursued litigation against the Company.
The review identified that certain seismic acquisition start-up costs had been
deferred to be amortized over subsequent periods. Some companies within the
seismic industry utilize an accounting policy which defers and amortizes such
crew start-up costs. The Company, after consulting with its independent
accountants, determined that the historical policy of expensing start-up costs
should be utilized for accounting for such costs. Additionally, it was
determined that the Company mistakenly recognized revenue related to a project
involving UNEXCO, when such revenues should have offset capitalized costs.
Accordingly, the previously reported financial results for the three month
periods ended September 30, 1996 and December 31, 1996 were restated. Previously
reported results of operations were overstated by $865,447 for the three months
ended September 30, 1996 and understated by $162,537 for the three months ended
December 31, 1996.
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Financing Activities and Debt Covenants. On December 20, 1996 the
Company entered into a financing agreement with RIMCO Partners, L.P., RIMCO
Partners II, L.P., RIMCO Partners III, L.P. and RIMCO Partners IV, L.P.
(collectively, the "RIMCO Partnerships") to provide $4,000,000 (increased to
$5,500,000 on March 27, 1997) under a revolving credit facility for the
expansion of the Company's exploration and production activities. On March 27,
1997 the Company borrowed an additional $2,000,000 from the RIMCO Partnerships
for general working capital purposes. In August 1997 the Company borrowed an
additional $2,000,000 from the RIMCO Partnerships with proceeds being utilized
to fund the shareholder litigation settlement and legal and accounting fees
incurred as a result of such litigation. The liability for borrowing from the
RIMCO Partnerships was $18,182,516 as of September 30, 1997.
The RIMCO Partnerships have waived the covenants under the various
financing agreements until July 1, 1998. They have also agreed to defer
payments of interest and principal due after June 30, 1997 until December 1,
1997. Also, the Company is presently not in compliance with several covenants
related to its revolving line of credit agreement on accounts receivable from
another financial institution. The Company was unable to obtain a waiver, but
still receives advances under the agreement.
Unusual Charge. The Company leases a 720 channel OPSEIS 5586
telemetry acquisition system under an operating lease through March 2000. Due
to the recording limitations of this system, the Company believes it has become
non-competitive in the 3-D data acquisition market. The system has not
operated since October 1996 and the Company recognized the remaining $929,121
lease payments in the fourth quarter of fiscal 1997.
Additional Recent Developments. In August 1997 the Company's Board of
Directors engaged Morgan Keegan & Company, Inc. ("Morgan Keegan") to assist in
exploring, developing and recommending various strategic alternatives designed
to enhance shareholder value. These alternatives may include the possible
merger or business combination of the Company with another entity as well as
capital raising or recapitalization or reorganization strategies.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases corporate office facilities in Houston, Texas,
consisting of approximately 19,779 square feet, under a 120 month lease
expiring on June 14, 2005, subject to the Company's option to cancel on, but
not before or after, the 60th month, or the 84th month, with monthly rental of
$18,011. The Company, from time to time, also leases temporary offices for its
field crews, the terms of such leases being dependent on the size and term of
the project. All real property leased by the Company is in good condition.
DATA ACQUISITION
The Company has the equipment capability of operating up to five 3-D
Data Acquisition crews utilizing I/O SYSTEM TWO equipment. The Company's
approximately 8,100 channels of I/O data recording equipment are
interchangeable among its crews, allowing for the combination of crews when
necessary. This provides the Company with flexibility in designing recording
programs to meet the specific requirements of each project. Up to three I/O
Systems can be operated using cable technology to link remote signal
conditioners to the central electronics unit or control center. Up to two I/O
RSR crews can be operated using radio telemetry technology to link the system.
This telemetry technology allows the Company to operate in environmentally
sensitive areas such as swamp/marsh areas along the Gulf Coast
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and in other challenging geographic areas. The crews typically operate along
the Gulf Coast, from Texas to Florida, and have the ability to use dynamite,
airgun and vibroseis energy sources.
In addition, the Company has a 720 channel OPSEIS 5586 telemetry
acquisition system under an operating lease. This system was in operation for
approximately four months during the fiscal year ended June 30, 1997. Due to
the recording limitations of this system, the Company believes it has become
non-competitive in the 3-D data acquisition market. The Company, therefore,
expensed the remaining portion of the related operating lease in fiscal 1997
and does not anticipate significant operation of this system in the future.
DATA PROCESSING
The Company operates a Silicon Graphics Power Challenge system as its
primary hardware source. This system delivers up to 5.4 gygaflops (transfer
rate of one million floating point numbers per second) of maximum performance
and has a 64-bit architecture which enables its servers to support the large
memory and file size requirements of supercomputing environments. The Company
primarily utilizes Seis Up software under a license with Geocenter, Inc. Seis
Up is a fully interactive, standards compliant, seismic processing system
designed specifically for processing large volume land and marine 2-D and 3-D
seismic surveys. Seis Up also offers optimized 3-D parallel processing on
networks or clusters of segregated workstations.
OIL AND GAS
The following terms have the meaning indicated when used in this
report.
Bbl. - a standard barrel of 42 U.S. gallons
Gross - acre or well in which a working interest is owned
Mbbl - one thousand barrels
Mcf - thousand cubic feet of gas
MMbtu - one million british thermal units
MMcf - one million cubic feet of gas
MMcfe - one million cubic feet equivalent with one barrel of
oil or condensate converted to six thousand cubic
feet of gas based on the estimated relative energy
content
Net - acres or wells obtained by multiplying the gross
acres or wells by the Company's working interest
Proved
Reserves - those estimated quantities of crude oil, condensate
and natural gas that geological and engineering data
demonstrate with reasonable certainty to be
recoverable in future years from known oil and gas
reservoirs under existing economic and operating
conditions
PROVED RESERVES
The Company holds interests in oil and gas properties, all of which
are located in Texas and Louisiana.
The following table summarizes the Company's proved reserves as of
July 1, 1997, as reflected by the report of the independent oil and gas
engineering firm of Netherland, Sewell & Associates, Inc. The
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present value of the estimated future cash flows are before income tax, with
constant prices and costs and discounted at 10 percent (SEC PV10 Value). The
Company did not have any proved reserves prior to this year.
<TABLE>
<CAPTION>
Oil and Natural Natural Gas
Condensate Gas Equivalents SEC PV10
(Mbbl) (MMcf) (MMcfe) Value
---------- ------- ----------- -----------
<S> <C> <C> <C> <C>
Developed 15 797 887 $1,267,000
Undeveloped 169 8,761 9,775 6,735,300
--- ----- ------ -----------
184 9,558 10,662 $8,002,300
=== ===== ====== ==========
</TABLE>
In general, estimates of economically recoverable oil and natural gas
reserves or the future net cash flows therefrom are based upon a number of
variable factors and assumptions, such as historical production from the
properties, assumptions concerning future oil and natural gas prices and future
operating costs and the assumed effects of regulation by governmental agencies,
all of which may vary considerably from actual results. Estimates of the
economically recoverable oil and natural gas reserves attributable to any
particular group of properties based on risk of recovery and estimates of
future net cash flows expected therefrom prepared by different engineers or by
the same engineers at different times, may vary substantially. The Company's
actual production, revenues, severance and excise taxes and development and
operating expenditures with respect to its reserves will vary from such
estimates, and such variances could be material.
Estimates with respect to proved reserves that may be developed and
produced in the future are often based upon volumetric calculations and upon
analogy to similar types of reserves rather than actual production history.
Estimates based on these methods are generally less reliable than those based
on actual production history. Subsequent evaluation of the same reserves based
upon production history will result in variations, which may be substantial, in
the estimated reserves.
In accordance with applicable requirements of the Securities and
Exchange Commission ("SEC"), the estimated discounted future net cash flows
from estimated proved reserves are based on prices and costs as of the date of
the estimate unless such prices or costs are contractually determined at such
date. The Company used $17.75 per Bbl of oil and condensate and $2.25 per
MMbtu for natural gas, representing the posted price for West Texas
Intermediate at June 30, 1997, and the average Vinton spot price for June,
respectively. Actual future prices and costs may be materially higher or
lower. The June 1997 prices realized averaged $17.48 per Bbl for oil and
condensate and $2.15 per Mcf for gas. Actual future net cash flows also will
be affected by factors such as actual production, supply and demand for oil and
natural gas, curtailments or increases in consumption by natural gas
purchasers, changes in governmental regulations or taxation and the impact or
inflation on costs.
Since July 1, 1997, no oil or gas reserve information has been filed
with, or included in any report to, any U.S. authority or agency other than the
SEC and the Energy Information Administration ("EIA"). The basis of reporting
reserves to the EIA for the Company's reserves is identical to that set forth
in the foregoing table.
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PRODUCTION AND PRICING
The Company recognized its first revenues from its oil and gas
operations in fiscal 1997. Since this was the first production it may not be
indicative of future costs or prices. Production, average sales prices and
production costs for fiscal 1997 are as follows:
<TABLE>
<S> <C>
Production
Oil and condensate (Bbls) 418
Natural gas (Mcf) 48,331
Natural gas equivalents (Mcfe) 50,839
Average sales price
Oil and condensate, per Bbl $20.38
Natural gas, per Mcf $ 2.17
Production costs, including production tax,
per Mcfe $ 0.47
</TABLE>
PRODUCTIVE WELLS
The number of productive wells in which the Company had an interest at
June 30, 1997 is set forth below. All of the wells are operated by others.
<TABLE>
<CAPTION>
Gross Net
----- ---
<S> <C> <C>
Oil 1 .1
Gas 10 2.9
---
11 3.0
== ===
</TABLE>
ACREAGE
The table below sets forth the acreage in which the Company had an
interest at June 30, 1997. As of June 30, 1996 the Company held 2,480 gross
undeveloped acres and 289 net undeveloped acres. Developed acreage includes
that assigned to the existing productive wells reflected above. Undeveloped
acreage is considered to be those leased acres on which wells have not been
drilled or completed to a point that would permit the production of commercial
quantities of oil or gas regardless of whether or not such acreage contains
proved reserves. The Company's acreage is entirely in Texas and Louisiana.
<TABLE>
<CAPTION>
Acreage
------------------------
Gross Net
------- -------
<S> <C> <C>
Developed 6,305 2,352
Undeveloped 24,471 8,085
------ ------
30,776 10,437
====== ======
</TABLE>
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DRILLING ACTIVITY
A summary of the wells in which the Company participated that were
completed in fiscal 1997 is set forth below. A productive well is a well which
was producing or which was capable of commercial production at June 30, 1997.
<TABLE>
<CAPTION>
Gross Net
------- -----
<S> <C> <C>
Exploratory
Productive 9 2.1
Dry 3 1.0
Under evaluation 2 .6
--- ----
14 3.7
=== ====
Development
Productive 2 .9
Under evaluation 1 .1
--- ----
3 1.0
--- ----
17 4.7
=== ====
</TABLE>
CAPITAL REQUIREMENTS
The Company will require substantial capital expenditures for the
exploration, exploitation and development of its existing properties and any
new ones the Company acquires. The Company's current level of indebtedness
limits its ability to fully recognize the potential of its existing properties
and to expand its oil and gas operations. While oil and gas reserves are
expected to increase in fiscal 1998, cash flow from operations will not be
sufficient to fund required capital expenditures. There can be no assurance
that additional debt or equity financing will be available.
SHORTAGES OF RIGS, EQUIPMENT, SUPPLIES AND PERSONNEL
There is a general shortage of drilling rigs, equipment and supplies
which the Company believes may intensify. The costs and delivery times of
rigs, equipment and supplies are substantially greater than in prior periods
and are currently escalating. Shortages of drilling rigs, equipment or
supplies could delay and adversely affect the Company's exploration and
development operations.
The demand for, and wage rates of, qualified rig crews have begun to
rise in the drilling industry in response to the increasing number of active
rigs in service. Such shortages have in the past occurred in the industry in
times of increasing demand for drilling services. If the number of active rigs
continues to increase, the oil and gas industry may experience shortages of
qualified personnel to operate drilling rigs, which could delay the Company's
planned drilling operations.
REGULATION OF OIL AND NATURAL GAS EXPLORATION AND PRODUCTION
Exploration and production operations of the Company are subject to
various types of regulation at the federal, state and local levels. Such
regulation includes requiring permits for the drilling of wells, maintaining
bonding requirements in order to drill or operate wells, and regulating the
location of wells, the method of drilling and casing wells, the surface use and
restoration of properties upon which wells are
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drilling and the plugging and abandonment of wells. The Company's operations
are also subject to various conservation laws and regulations. These include
the regulation of the size of drilling and spacing units or proration units and
the density of wells which may be drilled and unitization or pooling of oil and
gas properties. In this regard, some states allow the forced pooling or
integration of tracts to facilitate exploration while other states rely on
voluntary pooling of lands and leases. In addition, some state laws establish
maximum rates of production and some prorate production to market demand.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local laws
and regulation governing the discharge of materials into the environment or
otherwise relating to environmental protection. Numerous governmental
departments issue rules and regulations to implement and enforce such laws
which are often difficult and costly to comply with and which carry substantial
penalties for failure to comply. These laws and regulations may require the
acquisition of a permit before drilling commences, restrict the types,
quantities and concentration of various substances that can be released into
the environment in connection with drilling and production activities, limit or
prohibit drilling activities on certain lands lying within wilderness, wetlands
and other protected areas, and impose substantial liabilities for pollution
resulting from the Company's operations. In addition, these laws, rules and
regulations may restrict the rate of oil and natural gas production below the
rate that would otherwise exist.
RECENT ACTIVITIES
In the three months ended September 30, 1997 the Company participated
in the drilling of 7 (3.3 net) wells of which 3 (1.3 net) were productive, 3
(1.0 net) were dry and 1 (.1 net) was still being drilled.
In August 1997 the Company sold 45% of its interest in the Lake Boeuf
prospect for $1,012,500 and a carried interest to casing point in the first 3
wells in that prospect. This sale reduced the Company's proved undeveloped
reserves by approximately 2,981 MMcfe and the SEC PV10 value by approximately
$1,981,000.
Substantially all of the Company's assets, including all its oil and
gas properties, are pledged under terms of various financing arrangements. See
Note 4 to the consolidated financial statements.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company and its subsidiaries are defendants or
parties in lawsuits or other proceedings arising in the ordinary course of the
Company's business. Such lawsuits typically relate to claims arising from the
Company's seismic activities. The Company is not aware of any such proceedings
which it deems to be potentially material.
The Company was involved in an aborted merger earlier in fiscal 1997
that led to a proxy fight with a group of shareholders that styled themselves
"The Universal Seismic Stockholders' Protective Committee" (the "Stockholders'
Committee"). The proxy fight was resolved at the reconvened Annual Meeting of
Shareholders on February 11, 1997, at which management's slate of directors was
reelected and all of the Stockholders' Committee's proposals were defeated.
12
<PAGE> 13
Thereafter, Michael T. Kanarellis, one of the members of the
Stockholders' Committee, submitted letters to various members of the Audit
Committee of the Company, alleging that "the Company's financial statements for
the fiscal year ended June 30, 1996 and the fiscal quarters ended September 30,
1996 and December 31, 1996 were false and materially misstated" and alleging
certain specific terms of misstatement. The group also filed a suit against the
Company and its directors styled The Universal Seismic Associates, Inc.,
Stockholders' Protective Committee, Michael T. Kanarellis, and Robert J.
Kecseg v. Michael J. Pawelek, Ronald L. England, Calvin G. Cobb, Gary Milavec,
Steven Oakes, Rick Trapp, Rimco Associates, L.P. and Resource Investors
Management Company, L.P. v. Universal Seismic Associates, Inc., in the United
States District Court of Delaware.
All parties entered into a stipulation of Settlement which was
tendered to the Court on August 7, 1997, whereby the RIMCO Partnerships and
their general partner, Resource Investors Management Company Limited
Partnership and its general partner RIMCO Associates, Inc.(all collectively
"RIMCO") agreed to purchase all of the shares of the Company Common Stock owned
by the Stockholders' Committee for an aggregate purchase price of $650,000, or
$3.17 per share. Also in connection with the settlement, RIMCO entered into a
$2 million loan agreement with the Company, with the proceeds being used to
fund the immediate costs of settlement and to pay other expenses associated
with the lawsuit. The settlement was approved by the Court on October 1, 1997,
at which time the Court entered judgment dismissing all claims with prejudice.
The Company believes that it will recover a substantial portion of its costs
and expenses associated with the settlement of the lawsuit from its directors'
and officers' liability insurance carrier.
See Item 6. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a description of the effects of this
lawsuit on the Company in the last fiscal year.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
13
<PAGE> 14
P A R T II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION FOR COMMON STOCK
The Company's common stock trades on the NASDAQ National Market System
under the symbol "USAC". The following table sets forth, for the periods
indicated, the high and low closing sale prices for the Company's common stock
on the NASDAQ National Market System during the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------
1997 1996
-------------------------- -----------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $8 7/8 $5 1/4 $5 $2 7/8
Second Quarter 8 3/8 2 3/4 3 13/16 2 1/8
Third Quarter 5 7/16 2 1/2 4 9/16 2 3/4
Fourth Quarter 4 3/16 1 9/16 5 7/8 3 7/8
</TABLE>
HOLDERS
On October 10, 1997, the last reported sales price of a share of the
Company's common stock on the NASDAQ National Market System was $2.875. On
October 10, 1997 there were approximately 48 shareholders of record of the
Company's common stock.
DIVIDENDS
The Company has never declared any dividends on its common stock and
does not anticipate paying dividends for the foreseeable future. The
provisions of certain of its financing agreements would prohibit the payment of
dividends.
RECENT SALES OF UNREGISTERED SECURITIES
On August 14, 1996, the Company exercised its right to convert
$500,000 in 5% Convertible Notes due February 1, 1998 and issued to the RIMCO
Partnerships on January 19, 1996, into 145,208 shares of Common Stock at a
conversion price of $3.45 per share. On September 30, 1996, the Company
exercised its right to convert $3,000,000 in 10% Senior Secured Exchangeable
General Obligation Notes and issued to the RIMCO Partnerships on January 19,
1996, into 795,754 shares of Common Stock at a conversion price of $3.77 per
share. On March 17, 1997, the Company issued 5,000 shares to Calvin G. Cobb,
a director of the Company, pursuant to the exercise of a stock option issued
under the Company's Stock Incentive Plan. All of these shares of Common Stock
were issued in transactions exempt from registration under Section 3(a)(9) or
Section 4(2) of the Securities Act of 1933, as amended.
14
<PAGE> 15
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OPERATING REVENUE AND COSTS
The fiscal 1997 revenues of $31,287,329 represent an increase of
approximately 22% over fiscal 1996 revenues of $25,599,121. The increased
revenues reflect gains in Data Acquisition activities. Data Acquisition
revenues increased by approximately 23% to $30,015,185 in 1997 due primarily to
a full year of operation of the Company's two most recently added 3-D
acquisition crews. These crews were placed in service in October 1995 and June
1996, respectively. Data processing revenues remained relatively constant at
$1,166,100 in fiscal 1996 as compared to $1,158,830 in fiscal 1997. Oil and
gas revenues for fiscal 1997 were $113,314, which was the first year that the
Company had oil and gas revenues. The Company does expect oil and gas revenues
to increase in fiscal 1998, although such increase is likely to be limited
because the Company currently lacks sufficient cash to conduct its drilling
activities.
Operating expenses increased from $25,302,906 to $36,661,381, or
approximately 45%, in fiscal 1997. Direct costs of Data Acquisition increased
by approximately 36%, from $19,921,200 in 1996 to $27,034,915 in 1997, due to
the Company's expanded crew operations. Direct costs of Data Processing
increased slightly from $893,715 in 1996 to $905,992 in 1997 as no significant
changes in Data Processing operations took place. Gross margins before
depreciation for Data Acquisition operations declined to approximately 10% in
fiscal 1997 from approximately 18% in fiscal 1996, due primarily to operational
difficulties with certain seismic crews, increased provision for doubtful
accounts and continued competitive pressure on seismic data acquisition
pricing. Selling, general and administrative expenses increased approximately
11% from $2,247,845 in 1996 to $2,488,787 in 1997 due primarily to increased
costs of insurance and corporate office operating expenses associated with the
Company's expanded operations. In 1997 the Company incurred $2,146,313 in
non-recurring expenses related to the aborted Suelopetrol merger and related
proxy contest and shareholder litigation. The expenses incurred were as
follows: (i) $301,230 relating to the aborted Suelopetrol merger and (ii)
$1,845,083 of legal, accounting and other costs related to the proxy contest
and subsequent litigation initiated by a shareholder, including uninsured
settlement costs. Also, in 1997 the Company decided to expense the remaining
portion of the operating lease for its obsolete Opseis 5586 data acquisition
system totaling $929,191. Depreciation and amortization increased by
approximately 40% from $2,240,146 in 1996 to $3,132,242 due primarily to
equipment additions related to the Company's crew expansion made during fiscal
year 1996.
Interest expense increased by approximately 24%, from $1,121,969 in
1996 to $1,389,961 in 1997. The increased interest resulted primarily from
equipment financing for the Company's Data Acquisition expansion and borrowings
for working capital for the expanded operations.
The Company reported a net loss of $6,171,539, or $(1.23) per share,
for fiscal 1997 as compared to a net loss of $808,857, or $(0.19) per share in
fiscal 1996. The net loss for fiscal 1997 is after a $559,461 gain on a sale
of leasehold interests by UNEXCO. The current period net loss was primarily
the result of (i) lower gross margins from Data Acquisition activities that
resulted from less than full utilization of the Company's crews and operational
difficulties on several significant projects, that combined with indirect
overhead, depreciation and interest expenses lead to operating losses, (ii) the
extraordinary expenses associated with the aborted merger and related proxy
fight and shareholder litigation, (iii) the provision for doubtful accounts and
(iv) the obsolescence of the Opseis system. The proxy fight and shareholder
litigation put additional downward pressure on profits as substantial
management resources were diverted to manage the proxy fight and litigation.
Management also believes that, in some instances, the proxy fight and
shareholder litigation may have resulted in damage to customer and other
relationships which may have resulted in lost business or required the Company
to bid seismic projects more
15
<PAGE> 16
aggressively than in the past to obtain a project. The proxy fight and
litigation also increased the difficulty of hiring crew personnel which also put
additional pressure on operational efficiency. Although the Company is
attempting to reduce its operating losses by increasing Data Acquisition
marketing efforts, improving Company and crew management and staffing and
otherwise attempting to increase the efficiency of its seismic crews, it is
anticipated that operations will continue to be conducted at a loss in the near
term.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1997 the Company's cash and cash equivalents increased
by $877,246. This increase resulted from cash provided by operations of
$1,740,163, proceeds from the sale of assets of $1,494,457 and the proceeds
from a working capital loan totaling $2,000,000. Capital expenditures of
$7,022,835 during fiscal 1997 include $6,157,051 invested in oil and gas
properties, $606,389 for miscellaneous Data Acquisition equipment and $259,395
for Data Processing equipment. The Company increased long term debt
obligations by $5,381,685 during 1997. The Company incurred expenses relating
to the aborted merger, proxy contest and shareholder litigation of $2,146,313
in 1997 of which approximately $602,000 was paid in fiscal 1997 and the
remainder of which will be paid in fiscal 1998.
In December 1996 UNEXCO entered into a $4,000,000 revolving line of
credit facility with RIMCO. In March 1997 the agreement was amended
increasing the revolving line to $5,500,000. Borrowings under the credit
facility bear interest at 12% per year and mature on December 1, 1999. On
September 30, 1997 the outstanding balance under this facility was $5,350,000.
In March 1997 the Company borrowed an additional $2,000,000 from RIMCO
for general working capital purposes. The facility bears interest at 12% per
year and matures on December 1, 1999.
In August 1997 the Company borrowed an additional $2,000,000 from
RIMCO. The proceeds were utilized to fund the shareholder litigation
settlement and legal and accounting fees incurred as of a result of such
litigation. The Company expects to recover a substantial portion of its costs
of the settlement and expenses associated with the lawsuit from its directors'
and officers' liability insurance carrier. Any and all proceeds from insurance
reimbursements related to the litigation are required to be applied to amounts
outstanding from the borrowing. The facility bears interest at 12% per year
and matures on December 1, 1999.
Also, in August 1997, UNEXCO received $1,012,500 in exchange for the
reduction of its working interest in its Lake Boeuf Prospect from 37.5% to
20.625%.
The Company's other current liabilities balance increased by
$1,660,388 in the fiscal 1997. The increase is primarily attributed to a
provision for the shareholder litigation settlement and related expenses in the
amount of $1,205,000 net of the expected recovery from the Company's directors'
and officers' liability insurance carrier and provision for other unresolved
disputes and various other pending litigation. At June 30, 1997 the Company
had approximately $1,559,000 in trade accounts receivable over 90 days past
due, which as of September 30, 1997 had been reduced to $1,540,000. The
Company increased its allowance for doubtful accounts receivable to $721,697 in
fiscal year ended June 1997 as compared to $55,000 in fiscal year 1996,
primarily because of unresolved billings with two customers.
At June 30, 1997 the Company had cash balances of $1,859,677. As of
September 30, 1997, such cash balances were $698,807. If losses from
operations continue (as is anticipated), the Company does not believe this
cash, along with anticipated cash flow from its seismic and exploration and
production
16
<PAGE> 17
operations and funds available under its credit facilities, will be adequate
for its overall working capital requirements. The Company was in default under
certain provisions of its financing agreement for its trade receivables and has
been unsuccessful in obtaining a waiver but is still receiving advances under
the agreement. The loss of this financing would further aggravate the working
capital situation. The Company was also in default under covenants in its
RIMCO financing agreements, and RIMCO has waived such defaults until July 1,
1998 and has deferred payments of interest and principal due after June 30,
1997 until December 1, 1997. The Company also believes that it could generate
substantial cash flow from its oil and gas properties if it had sufficient
funding of its drilling program. As a result, the Company has engaged Morgan
Keegan to assist it in exploring, developing and recommending various strategic
alternatives to meet its working capital requirements and maximize shareholder
value. The alternatives may include the possible merger or business
combination of the Company with another entity as well as capital raising or
recapitalization or reorganization strategies. The Company and Morgan Keegan
are in the process of soliciting and evaluating proposals for such strategic
alternatives.
ITEM 7. FINANCIAL STATEMENTS
UNIVERSAL SEISMIC ASSOCIATES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheet as of June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statement of Operations for the years ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statement of Stockholders' Equity for the years ended June 30, 1997 and 1996 . . . . . . . . . . . . . . F-4
Consolidated Statement of Cash Flows for the years ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
</TABLE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
current members of the Board of Directors and executive officers of the Company
as of October 10, 1997. Each of the directors is elected to serve until the
next annual meeting of stockholders or until his successor has been elected or
qualified. The executive officers have been elected to serve until his or her
successor is elected and qualified.
17
<PAGE> 18
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH COMPANY SINCE
- ---- --- --------------------- --------
<S> <C> <C> <C>
Michael J. Pawelek 39 President, Chief Executive Officer and Director 1992
Ronald L. England 39 Chief Financial Officer, Treasurer and Director 1994
Calvin G. Cobb 40 Director* 1993
Stephen F. Oakes 48 Director* 1996
Gary J. Milavec 35 Director* 1996
Peter B. Spooner 48 Senior Vice President
Patrick A. Donais 40 Vice President
Joe T. Rye 59 Chief Accounting Officer
</TABLE>
- ----------------------
*Members of the Audit Committee
MICHAEL J. PAWELEK has served as President and a director of the
Company since January 1992 and was named Chief Executive Officer in December
1994. Mr. Pawelek is a director, President and CEO of Kentex Holdings, Inc.
("Kentex"), whose principal asset consists of all of the outstanding capital
stock of Sierra Management, Inc. ("Sierra"), of which he is also a director,
President and CEO. Sierra's principal asset is 1,170,000 shares of the
Company.
RONALD L. ENGLAND has served as Chief Financial Officer and Treasurer
of the Company since January 1994 and has served as a director of the Company
since November 1994. Mr. England joined the Company in December 1992 and served
as Controller until January 1994. Between 1984 and 1992, Mr. England held
financial management positions with various seismic companies, including
Fairfield Industries, Inc. and PGI/Seis Pros. Mr. England is also a director
and Vice President and Secretary of Kentex and Sierra.
CALVIN G. COBB has served as a director of the Company since March
1993. Mr. Cobb also served as Chief Financial Officer and Treasurer of the
Company, on a temporary basis, from March through December 1993. Mr. Cobb is a
Managing Director of Corstone Corporation, a private merchant banking firm,
with whom he has been employed since August 1996. From September 1991 until
July 1996, Mr. Cobb was a Senior Managing Director of The London Manhattan
Company, an investment banking firm.
STEPHEN F. OAKES has been a director of the Company since May 1996.
From 1989 to 1992, he served as managing director of Robert Fleming, Inc., an
investment banking company. He has been associated with Resource Investors
Management Company Limited Partnership, a full service investment management
company specializing in the energy industry and the general partner of each of
the RIMCO Partnerships, since 1992. Mr. Oakes also serves as a director of
Dawson Production Services, Inc.
GARY J. MILAVEC has served as a director of the Company since February
1996. Since 1990, he has been associated with RIMCO, first as a Vice President
and presently as Managing Director. Mr. Milavec also serves as a director of
Texoil, Inc. and Brigham Exploration Company, both of which are in the oil and
gas exploration and production business similar to that of the Company.
PETER B. SPOONER has served as Senior Vice President, in charge of the
Company's seismic operations since May 1996. From December 1994 through April
1996, Mr. Spooner was Managing Director of Ozbo Exploration Services Pty. Ltd.,
during which time work was done for the Company on a
18
<PAGE> 19
project in Northwestern Australia. From March 1986 until November 1994, Mr.
Spooner was Director and Joint General Manager of Digital Exploration Limited
in Australia.
PATRICK A. DONAIS has served as Vice President - Geophysics of the
Company since July 1995. In January 1996 he also assumed the title of Vice
President - Exploration and Production of UNEXCO. Prior to joining the
Company, Mr. Donais was a staff geophysicist with Energy Development
Corporation from May 1985 until April 1995. From April 1995 until July 1995 he
was a consulting geophysicist with the KelJor Group.
JOE T. RYE has served as Chief Accounting Officer of the Company since
August 1997. Prior to joining the Company, Mr. Rye served as a director and
Chief Financial Officer of Seagull Energy Corporation from June 1982 through
February 1992. From 1992 until joining the Company, Mr. Rye was a consultant
to energy and petrochemical companies and operated family businesses. Mr. Rye
also serves as a director of Penn Virginia Corporation, a company engaged in
oil and gas and coal leasing activities in Appalachia.
SECTION 16 (a) COMPLIANCE
Under Section 16 (a) of the Securities Exchange Act of 1934,
directors, certain officers and beneficial owners of 10% or more of the
Company's Common Stock are required from time to time to file with the SEC
reports on Form 3, 4 or 5, relating principally to transactions in Company
securities by such persons. Based solely upon review of Forms 3 and 4 and
amendments thereto furnished to the Company during its fiscal year 1996 and
thereafter, Forms 5 and amendments thereto furnished to the Company with
respect to its fiscal year 1996, and any written representations received by
the Company from a director, officer or beneficial owner of more than 10% of
the Common Stock by the Company ("reporting persons") that no Form 5 is
required, the Company believes that the following reporting persons failed to
file on a timely basis the following reports required by Section 16(a) of the
Securities and Exchange Act of 1934 during the Company's fiscal 1997 or prior
years. Mr. Oakes was elected a director in May 1996, and Mr. Spooner was
elected an executive officer in May 1996, and neither filed the Form 3
reporting such event within ten days after his election. Mr. Cobb received a
warrant to purchase 15,000 shares on January 16, 1996, which was not reported
on a Form 4 due February 10, 1996. In addition, Mr. Donais received options to
purchase 25,000 shares on February 19, 1996 and sold 1,500 shares of stock on
October 10, 1996, neither of which was reported on a Form 4 due March 10, 1996
and November 10, 1996, respectively. Mr. England assigned warrants to purchase
105,000 shares of Company stock to Kentex on January 16, 1996, and neither
party filed Form 4 for this change in beneficial ownership.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table reflects the aggregate compensation paid to the
Chief Executive Officer of the Company and to each of the Company's current
executive officers whose compensation exceeded $100,000 for services rendered
during any of the three fiscal years ended June 30, 1997.
19
<PAGE> 20
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------------
OTHER
ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael J. Pawelek 1997 $156,174 $ -0- $8,250
President and Chief Executive
Officer 1996 $144,375 $20,681 $8,250
1995 $120,000 $ -0- $8,250
Ronald L. England 1997 $ 93,704 $ -0- $7,750
Chief Financial Officer and
Treasurer 1996 $ 89,625 $12,948 $7,750
1995 $ 67,750 $ -0- $7,750
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into written employment contracts with Michael
J. Pawelek and Ronald L. England for a term of two years beginning March 1,
1995, with automatic renewals for additional terms of two years unless Mr.
Pawelek or Mr. England or the Company give notice at least 60 days prior to the
expiration of the initial term or any renewal term. These contracts, which
were automatically renewed in accordance with their respective aforedescribed
terms provide for minimum annual salaries of $120,000 for Mr. Pawelek and
$72,000 for Mr. England and annual discretionary incentive bonuses to be
determined by the Board of Directors. Salaries may be increased, but not
decreased during the term of the contract. If either is terminated for any
reason other than "For Cause," as defined, or either individual terminates his
employment for "Good Reason," as defined, the Company will (i) continue to pay
his then current salary and annual bonus until the next succeeding December 31
on which the Company could have terminated the term of the contract and (ii)
pay immediately a lump sum equal to the individual's then current annual salary
and the amount of incentive bonus paid or payable for the immediately preceding
year. Each of the individuals is also provided an automobile under the terms
of their contract.
DIRECTORS' COMPENSATION
The Company pays each director who is not an officer or employee of
the Company a $5,000 annual fee and an attendance fee of $500 for each meeting
of the Board of Directors or any committee thereof that such director actually
attends. In addition, the Company reimburses directors for their reasonable
expenses incurred in attending meetings of the Board of Directors and its
committees. Messrs. Oakes and Milavec have waived director fees through June
30, 1997. Directors' compensation may be changed at any time by the Board of
Directors.
Directors are eligible for the grant of options to purchase shares of
common stock of the Company under the 1995 Non-Employee Directors' Stock Option
Plan. As of October 10, 1997 options to purchase 10,000 shares at $4.06 per
share issued to Calvin G. Cobb were the only options outstanding.
20
<PAGE> 21
The Company maintains directors' and officers' liability insurance,
and its Bylaws provide for mandatory indemnification of directors and officers
to the fullest extent permitted by Delaware law.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table reflects the beneficial ownership of the Company
Common Stock as of October 10, 1997 with respect to (i) all persons known by
the Company to be the beneficial owner of more than five percent of the Company
Common Stock, (ii) directors and nominees for director of the Company and (iii)
directors and officers of the Company as a group:
<TABLE>
<CAPTION>
Beneficial Ownership (1)
As of October 10, 1997
---------------------------------
Name and Address of Beneficial Number Percent
Owner, Identity of Group of Shares of Class
- -------------------------- --------- --------
<S> <C> <C>
RIMCO Associates, Inc. 1,384,612 (2) 24.39%
600 Travis Street, Suite 6875
Houston, Texas 77002
Kentex Holdings, Inc. 1,170,000 (3) 21.91%
16420 Park Ten Place
Suite 300
Houston, Texas 77084-5051
Rick E. Trapp 1,190,700 (4) 22.30%
P.O. Box 3715
Egg Harbor City, New Jersey 08215
Directors
Michael J. Pawelek 1,172,000 (5) 21.95%
Calvin G. Cobb 35,000 (6) *
Ronald L. England 1,172,000 (7) 21.95%
Stephen F. Oakes 1,384,612 (8) 24.39%
Gary J. Milavec 0 (9) -
Directors and Executive Officers
as a group (8 persons) 2,773,612 46.32% (10)
</TABLE>
- ----------------------------------
* Indicates less than one percent.
1) Unless otherwise noted each shareholder has sole voting and
dispositive power with respect to the shares of Common Stock.
2) Includes (i) 50,823 shares held of record, and 233,300 shares
purchasable within 60 days upon the exercise of warrants, by RIMCO
Partners, L.P., (ii) 488,488 shares held of record, and 89,516 shares
purchasable within 60 days upon the exercise of warrants, by RIMCO
Partners, L.P. II, (iii) 61,510 shares held of record, and 6,600
shares purchasable within 60 days upon the exercise of warrants, by
RIMCO Partners, L.P. III, and (iv) 340,141 shares held of record, and
114,234 shares purchasable within 60 days upon the exercise of
warrants, by RIMCO Partners, L.P. IV. RIMCO Associates, Inc. is the
sole general partner of Resource Investors Management Company Limited
Partnership, which is the sole general partner of each of the RIMCO
Partnerships, and may therefore be deemed to beneficially own all of
the Company's common stock owned by the
21
<PAGE> 22
RIMCO Partnerships. After the transfer of the 205,300 shares of the
Company Common Stock pursuant to the settlement dated August 7, 1997
and described in Item 3. "Legal Proceedings", RIMCO Associates, Inc.
will have beneficial ownership of 1,589,912 shares, or 28%, of the
Company's outstanding Common Stock. The transfer of those shares is
subject to certain conditions.
3) Includes 1,065,000 shares owned beneficially and of record by Sierra,
wholly owned by Kentex, and 105,000 shares purchasable within sixty
days pursuant to warrants immediately exercisable, 100,000 of which
are exercisable at a price of $3.75 per share and 5,000 of which are
at a price of $2.50 per share.
4) Includes 20,700 shares owned beneficially and of record by Mr. Trapp
and 1,170,000 shares owned beneficially by Kentex. Mr. Trapp owns 40%
of Kentex's outstanding voting securities and is a director and
officer of Kentex, and may, therefore, be deemed to beneficially own
all of the Common Stock owned by Kentex.
5) Includes 2,000 shares owned beneficially and of record by Mr. Pawelek
and 1,170,000 shares owned beneficially by Kentex. Mr. Pawelek owns
40% of Kentex's outstanding voting securities and is a director and
officer of Kentex and may, therefore, be deemed to beneficially own
all of the Company's common stock owned by Kentex.
6) Includes 5,000 shares owned beneficially and of record by Mr. Cobb and
5,000 shares purchasable within sixty days under options granted to
employees pursuant to the 1992 Stock Incentive Plan, 10,000 shares
purchasable within sixty days under options granted to directors
pursuant to the 1995 Non-Employee Directors' Stock Option Plan and
15,000 shares purchasable within sixty days under a warrant.
7) Includes 2,000 shares owned beneficially and of record by Mr. England
and 1,170,000 shares owned beneficially by Kentex. Mr. England owns
20% of Kentex's outstanding voting securities and is a director and
officer of Kentex and may, therefore, be deemed to beneficially own
all of the Company's common stock owned by Kentex.
8) Includes 1,384,612 shares beneficially owned by RIMCO Associates, Inc.
and the RIMCO Partnerships with respect to which Mr. Oakes shares
voting rights.
9) Excludes 1,384,612 shares beneficially owned by RIMCO Associates, Inc.
and the RIMCO Partnerships with respect to which Mr. Milavec has
disclaimed beneficial ownership.
10) Includes 310,000 shares of Common Stock purchasable within 60 days
under options and warrants granted to various directors and officers,
1,384,612 shares beneficially owned by RIMCO Associates, Inc. with
respect to which Mr. Oakes shares voting rights (443,650 purchasable
within 60 days pursuant to warrants immediately exercisable) and
1,170,000 shares owned beneficially by Kentex (105,000 purchasable
within 60 days pursuant to warrants immediately exercisable). Mr.
Pawelek and Mr. England collectively own 60% of the outstanding voting
securities of Kentex and are each executive officers and directors of
Kentex and may, therefore, be deemed to beneficially own all of the
Company's common stock owned by Kentex. After the transfer of the
205,300 shares of the Company Common Stock pursuant to the settlement
dated August 7, 1997 and described in Item 3. "Legal Proceedings",
Directors and Officers as a group will have beneficial ownership of
2,978,912 shares, or 49.75%, of the Company's outstanding Common
Stock. The transfer of those shares is subject to certain conditions.
The address for each of the officers and directors of the Company is
16420 Park Ten Place, Suite 300, Houston, Texas 77084-5051.
22
<PAGE> 23
CHANGE IN CONTROL
A number of events have occurred in fiscal 1997 and thereafter which
may effect or have effected a change in control of the Company. Because the
Company has defaulted on substantially all of its credit facilities, incurred
large operating losses from its data acquisition operation, lacks sufficient
funding for its oil and gas and seismic operations, and has limitations on
sources of additional capital, the Company has retained Morgan Keegan to assist
it in determining its strategic alternatives and developing recommendations to
attempt to maximize shareholder value. Those recommendations may include the
merger or business combination of the Company with another entity, as well as
capital raising, recapitalization or reorganization alternatives, any of which
may result in a change in control of the Company.
Since January 1996, RIMCO has been a principal shareholder and lender
and has had two nominees serving on the Board of Directors of the Company. As
a result of the agreed purchase by RIMCO of 205,300 shares of Common Stock in
connection with the settlement of the shareholder litigation and the conversion
by the Company of $3,500,000 in debt owed by the Company to RIMCO into an
aggregate of 940,962 shares of Common Stock, RIMCO has or will have record
ownership of 1,146,262 shares of Common Stock, or 22% of the issued and
outstanding Common Stock of the Company on October 10, 1997. RIMCO also has
the right to acquire at an aggregate price of $1,911,350 up to an additional
443,650 shares of Common Stock under currently exercisable warrants, which
could increase RIMCO's holdings to 28% of the issued and outstanding Common
Stock of the Company. In addition, since June 30, 1996 the Company has
entered into three new credit facilities with RIMCO for an aggregate of
$9,500,000, which when combined with prior RIMCO loans aggregated $18,182,516
at September 30, 1997, or in excess of 90% of the Company's debt at such date.
RIMCO's debt is secured by substantially all of the assets of the Company. The
Company is in default on numerous material covenants in its credit facilities
with RIMCO, including payment covenants. RIMCO has waived the Company's
defaults under the covenants (other than payment covenants) until July 1, 1998.
RIMCO has also deferred payments of interest and principal due after June 30,
1997 until December 1, 1997. RIMCO has waived or modified these covenants to
give the Company additional time and flexibility to pursue the strategic
alternatives described above.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions between the Company and its officers, directors and
principal stockholders or affiliates of any of them have been and will be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties. Approval of a majority of disinterested members of the Board of
Directors will be required for any transaction between the Company and its
officers, directors or affiliates. Any future loans from the Company to its
officers, directors, key employees or their affiliates will be approved by a
majority of the independent and disinterested directors.
The Company has performed seismic services for Energy Arrow, for which
Matthew R. Bob, a former director of the Company, is President and an owner.
In fiscal 1996, the Company received approximately $1,683,000 for seismic
services performed for Energy Arrow under various contracts.
The Company had net unpaid advances of $76,440 due from Sierra
Management, Inc., a company partially owned by Messrs. Pawelek and England, as
of July 1, 1995. This amount was repaid by payments of $48,000 and $28,440 on
September 30, 1995 and 1996, respectively. Payments were without interest.
On February 1, 1996, the Company entered into a consulting agreement
with Mr. Billy E. Trapp, the former President of the Company who retired from
full time employment in March 1991 (the "Billy
23
<PAGE> 24
Trapp Consulting Agreement"). Pursuant to the Billy Trapp Consulting
Agreement, the Company pays Mr. Trapp $4,000 per month for his services as a
consultant to the Company for a term of ten years, provided that the Company
may terminate the agreement for good cause. In connection with the Billy Trapp
Consulting Agreement, Mr. Trapp and his wife executed a release agreement
whereby each jointly and severally released the Company, Sierra and their
respective affiliates, officers, directors, employees and representatives from
any liabilities or claims related to a certain letter agreement regarding
advisory and consulting services dated February 14, 1992 between Mr. Trapp and
the Company, a certain letter agreement for consulting services, stock
assignment, termination of stock options and group life insurance coverages
dated February 14, 1992 by Mr. Trapp, with a joinder by Mrs. Trapp, and any
other agreements or relationships between Mr. Trapp and/or Mrs. Trapp and the
Company and/or Sierra. In connection with amending the consulting agreement,
the Company issued Mr. Trapp warrants to purchase 37,500 shares of common stock
at $3.75 per share. Billy E. Trapp is the father of Rick E. Trapp, the
Company's former Chief Executive Officer and Chairman of the Board.
On December 15, 1994, the Company entered into a consulting agreement
with Rick E. Trapp, the former Chief Executive Officer and Chairman of the
Board of Directors, for a term of three years (the "Rick Trapp Consulting
Agreement"). The Rick Trapp Consulting Agreement provided for (i) a monthly
fee of $10,000 to be paid to Mr. Trapp, and (ii) a covenant not to engage in
certain activities in competition with the Company for a period of six months
following termination of the agreement. On September 22, 1996, Mr. Trapp and
the Company agreed to terminate the Rick Trapp Consulting Agreement. In
connection therewith (i) the Company agreed to pay to Mr. Trapp the sum of
$40,000, payable in four equal monthly installments commencing on October 1,
1996, and (ii) Mr. Trapp executed a release and waiver agreement pursuant to
which Mr. Trapp agreed to release the Company and its affiliates, officers,
directors, employees and representatives from any and all liability and claims
related to Mr. Trapp's employment with the Company, the termination of Mr.
Trapp's employment, the Rick Trapp Consulting Agreement and any other
agreements and relationships between the Company and Mr. Trapp. The Company
has agreed to pay up to $40,000 for income tax planning related to Kentex and
Sierra in connection with the termination of Mr. Trapp's consulting agreement.
The release and waiver agreement further provided that Mr. Trapp not compete
with the Company nor solicit any employee, agent or representative of the
Company for a period of one year thereafter. The Company paid Mr. Trapp for
four additional months as a result of work performed by him (a total of
$110,000 in fiscal 1997).
On January 19, 1996, the Company entered into a financing arrangement
with RIMCO providing up to $7,000,000, of which $4,000,000 was immediately
funded, to restructure existing debt. Messrs. Oakes and Milavec are employees
of RIMCO. The debt restructure consisted of (i) $3,500,000 in 10% Senior
Secured General Obligation Notes payable in 48 equal monthly installments of
principal plus interest (payments due after June 30, 1997, extended to December
1, 1997), and (ii) $500,000 in 5% Convertible Notes maturing on February 1,
1998, with monthly payments of interest, convertible into common stock of the
Company (the "Convertible Notes") at a conversion price of $3.45 per share,
subject to adjustment. The remaining $3,000,000 was subsequently funded under
10% Senior Secured Exchangeable General Obligation Notes, which were
exchangeable for common stock of the Company (the "Exchangeable Notes") at an
exchange price of $3.77 per share, subject to adjustment. The proceeds were
used to finance the Company's exploration and production activities. In
connection with this financing arrangement, the Company issued to RIMCO
warrants to purchase 165,000 shares of the Company's common stock at a purchase
price of $3.14 per share, subject to adjustment. On August 14, 1996, the
Company exercised its right to convert the Convertible Notes into 145,208
shares of the common stock of the Company. On September 30, 1996, the Company
exercised its right to exchange the Exchangeable Notes for 795,754 shares of
the Company's common stock.
On May 28, 1996, the Company entered into an additional credit
facility with RIMCO pursuant to which the Company issued 10% Senior Secured
General Obligation Notes in the aggregate principal
24
<PAGE> 25
amount of $6,500,000. The proceeds were used to acquire new seismic equipment
and retire some existing debt. The notes provide for monthly payments of
interest only until December 1, 1996 (all payments after June 30, 1997 have
been extended to December 1, 1997), then $138,106, including interest, with the
balance due December 1, 1999, and are secured by the Company's seismic
equipment. In connection with this credit facility, the Company issued to
RIMCO warrants to purchase 278,650 shares of the Company's common stock at a
purchase price of $5.00 per share, subject to adjustment.
On December 20, 1996, the Company entered into another financing
agreement with RIMCO to provide $4,000,000 (increased to $5,500,000 on March
27, 1997) under a revolving credit facility for the expansion of the Company's
exploration and production activities ($5,350,000 outstanding at June 30,
1997). RIMCO has the right of approval on any property that funds are advanced
toward. In connection with this revolving credit facility, the Company issued
12% Senior Secured General Obligation Notes with interest payable monthly
(interest due after June 30, 1997 has been extended to December 1, 1997) and
the principal due December 1, 1999. The notes are secured by the Company's oil
and gas properties.
On March 27, 1997 the Company borrowed an additional $2,000,000 from
RIMCO under new 12% Senior Secured General Obligation Notes with interest
payable monthly (interest due after June 30, 1997 has been deferred to December
1, 1997) and principal due December 1, 1999. The proceeds were used for
working capital. The notes are secured by the Company's seismic equipment.
On August 6, 1997 the Company borrowed an additional $2,000,000 from
RIMCO under another 12% Senior Secured General Obligation Note, also secured by
the Company's seismic equipment, with interest payable monthly (extended to
December 1, 1997) and principal due December 1, 1999. The proceeds were used
to fund the shareholder settlement described under "Legal Proceedings".
Employees of RIMCO introduced the Company to the operator of the Lake
Boeuf and East Holly Beach prospects, and on April 17, 1996, the Company
entered into agreements to acquire an interest in both prospects. On May 14,
1996 the Company and RIMCO entered into an agreement for RIMCO to pay the
Company for 25% of its costs incurred and to participate on the same basis as
the Company as to 25% of the Company's then interest in the two prospects. In
August the Company sold a portion of its remaining interest in the Lake Boeuf
prospect to an unaffiliated party. The Company and affiliates of RIMCO also
participate in the West Refugio prospect as non-operator, on similar terms.
RIMCO has waived the Company's defaults under the covenants in its
various financing agreements until July 1, 1998. It has also deferred payments
of interest and principal due after June 30, 1997 until December 1, 1997. As
of September 30, 1997 the Company was indebted to RIMCO under the various
financing agreements for $18,182,516 principal and $501,830 accrued interest.
The Company and Brigham Exploration Company both participate in the
Southwest Danbury prospect. Mr. Milavec is a director of both companies.
As of March 1, 1997 the Company entered into an agreement with
Corstone Corporation ("Corstone"), a business in which Calvin G. Cobb is a
managing director, to provide investor relations and corporate communication
services. The term of the agreement is one year and provides for a monthly fee
of $9,500.
The shareholder litigation described in Item 3. "Legal Proceedings"
involved claims against the individual directors, in addition to the Company
itself, all of which were settled by the Company on behalf of itself and its
directors. The Company paid approximately $1.85 million in legal, accounting
and other costs to defend the lawsuit, a portion of which it believes may
eventually be recovered from its directors' and officers' liability insurance
carrier.
25
<PAGE> 26
FORWARD-LOOKING STATEMENTS
Statements included in this report which are not historical facts
(including any statements concerning plans and objectives of management for
future operations or economic performance, or assumptions related thereto) are
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and Section 27A of the Securities Act of
1933, as amended. In addition, the Company and its representatives may from
time to time make other oral or written statements which are also
forward-looking statements.
Such forward-looking statements include, among other things,
statements regarding development activities, capital expenditures, acquisitions
and dispositions, drilling and exploration programs, projected quantities of
future oil and gas production, costs and expenditures as well as projected
demand for seismic acquisition and processing services and oil and gas, which
will affect sales levels, prices and margins realized by the Company.
These forward-looking statements are made based upon management's
current plans, expectations, estimates, assumptions and beliefs concerning
future events impacting the Company and, therefore, involve a number of risks
and uncertainties. The Company cautions that forward-looking statements are
not guarantees and that actual results could differ materially from those
expressed or implied in the forward-looking statements.
Important factors that could cause the actual results of operations or
financial condition of the Company to differ include, but are not necessarily
limited to: the cost of finding and successfully developing oil and gas
reserves, production levels of its seismic crews, the demand for the Company's
3-D seismic data acquisition and processing services, the price for which such
reserves and services can be sold, the volatility of commodity prices for oil
and gas, the inability to raise new capital through financings or sale of
interests in its oil and gas properties, unanticipated geological problems, the
occurrence of unusual weather or operating conditions including force majeure,
the failure of equipment or processes to operate in accordance with
specifications or expectations, delays in anticipated start-up dates,
environmental risks affecting the drilling and producing of oil and gas wells,
the timing of receipt of necessary governmental permits, labor relations and
costs, accidents, changes in governmental regulation or enforcement practices,
risks and uncertainties relating to general domestic and international economic
(including inflation and interest rates) and political conditions, the
experience and financial condition of joint venture partners and changes in
financial market conditions. Many of such factors are beyond the Company's
ability to control or predict. Readers are cautioned not to put undue reliance
on forward-looking statements.
While the Company periodically reassesses material trends and
uncertainties affecting the Company's results of operations and financial
condition in connection with the preparation of Management's Discussion and
Analysis of Results of Operations and Financial Condition and certain other
sections contained in the Company's quarterly, annual and other reports filed
with the Securities and Exchange Commission, the Company does not intend to
publicly review or update any particular forward-looking statement, whether as
a result of new information, future events or otherwise.
26
<PAGE> 27
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The right hand column reflects the filing in which the
exhibits have heretofore been filed with the Securities and
Exchange Commission. The left-hand column reflects the
exhibit number in these filings except where noted in
parenthesis by them. Exhibits so referenced are incorporated
herein by reference.
<TABLE>
<CAPTION>
Exhibit
Number File No.
------ --------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Company 33-46235
3.2 Amended and Restated Bylaws of the Company 33-57994
4.1 Form of Stock Certificate 33-46235
10.2 Employment Agreement between the Company and Michael
J. Pawelek effective March 1, 1995 33-46235
10.3 Form of Indemnification Agreement between the Company
and directors and certain officers 33-46235
10.4 Stock Incentive Plan 33-46235
10.5 1994 Employee Stock Option Plan (Ex. 4.2) 33-79448
10.6 1995 Non-Employee Directors' Stock Option Plan 96-10KSB
10.13 Office space lease between Park Ten No. 1, Ltd. and
Universal Seismic Associates, Inc. 96-10KSB
10.14 Loan and Security Agreement between Fidelity Funding, Inc.
and the Company 96-10KSB
10.15 Note Purchase Agreement dated as of January 19, 1996 by
and between the Company, RIMCO Partners, L.P., RIMCO
Partners, L.P.II, RIMCO Partners, L.P.III and RIMCO Partners,
L.P.IV, ("RIMCO")(RIMCO #1) 96-10KSB
10.15.1 First Amendment to RIMCO #1 Note Purchase Agreement
dated as of May 28, 1996 by and between the Company and
RIMCO 96-10KSB/A
10.15.2 Second Amendment to RIMCO #1 Note Purchase Agreement
dated as of August 13, 1996 *
10.15.3 Third Amendment to RIMCO #1 Note Purchase Agreement 12/31/96 -
dated as of December 20, 1996 10QSB
10.15.4 Fourth Amendment to RIMCO #1 Note Purchase Agreement 03/31/97 -
dated as of March 27, 1997 (Ex.1.4) 10QSB
10.15.5 Fifth Amendment to RIMCO #1 Note Purchase Agreement
dated as of August 6, 1997 *
10.16 Note Purchase Agreement dated as of January 19, 1996 by and
between UNEXCO and RIMCO Partners, L.P.II, RIMCO
Partners L.P.III. and RIMCO Partners, L.P.IV 96-10KSB
10.16.1 First Amendment to Note Purchase Agreement dated as of May
28, 1996 by and between UNEXCO and RIMCO Partners,
L.P. II, RIMCO Partners L.P.III, RIMCO Partners L.P.IV 96-10KSB/A
10.17 Stock Ownership and Registration Rights Agreement by and
between the Company, UNEXCO and RIMCO 96-10KSB
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
Exhibit
Number File No.
------ --------
<S> <C> <C>
10.17.1 First Amendment to Stock Ownership and Registration Rights
Agreement, dated as of May 28, 1996 96-10KSB/A
10.18 Warrant Agreement dated January 19, 1996 by and between the
Company and RIMCO 96-10KSB
10.19 Guaranty and Exchange Agreement dated January 19, 1996 by
and between UNEXCO and RIMCO 96-10KSB/A
10.19.1 First Amendment to Guaranty and Exchange Agreement dated
May 28, 1996 by and between UNEXCO and RIMCO 96-10KSB
10.20 Common Stock Purchase Warrant executed January 19, 1996
by the Company in favor of RIMCO partners, L.P. for the
purchase of 57,750 shares of the Company's Common Stock 96-10KSB
10.21 Common Stock Purchase Warrant executed January 19, 1996
by the Company in favor of RIMCO Partners, L.P.II for the
purchase of 57,750 shares of the Company's Common Stock 96-10KSB
10.22 Common Stock Purchase Warrant executed January 19, 1996
by the Company in favor of RIMCO Partners, L.P.III for the
purchase of 6,600 shares of the Company's Common Stock 96-10KSB
10.23 Common Stock Purchase Warrant executed January 19, 1996
by the Company in favor of RIMCO Partners, L.P.IV for the
purchase of 42,900 shares of the Company's Common Stock 96-10KSB
10.24 Note Purchase Agreement dated as of May 28, 1996 by and
between the Company and RIMCO (RIMCO #2) 96-10KSB
10.24.1 First Amendment to RIMCO #2 Note Purchase Agreement 12/31/96 -
dated as of December 20, 1996 10QSB
10.24.2 Second Amendment to RIMCO #2 Note Purchase Agreement 03/31/97 -
dated as of March 27, 1997 (Ex.1.5) 10QSB
10.24.3 Third Amendment to RIMCO #2 Note Purchase Agreement
dated as of August 6, 1997 *
10.25 Warrant Agreement dated May 28, 1996 by and between the
Company and RIMCO 96-10KSB
10.26 Common Stock Purchase Warrant executed May 28, 1996 by
the Company in favor of RIMCO Partners, L.P. for the
purchase of 175,550 shares of the Company's Common Stock 96-10KSB
10.27 Common Stock Purchase Warrant executed May 28, 1996 by
the Company in favor of RIMCO Partners, L.P.II for the
purchase of 31,766 shares of the Company's Common Stock 96-10KSB
10.28 Common Stock Purchase Warrant executed May 28, 1996 by
the Company in favor of RIMCO Partners, L.P.III for the
purchase of 71,334 shares of the Company's Common Stock 96-10KSB
10.29 Amended and Restated Note Purchase Agreement dated March 03/31/97 -
27, 1997 between UNEXCO and RIMCO (Ex.1.1) 10QSB
10.30 Amended and Restated Note Purchase Agreement dated March 03/31/97 -
27, 1997 between UNEXCO and RIMCO (Ex.1.2) 10QSB
</TABLE>
28
<PAGE> 29
<TABLE>
<CAPTION>
Exhibit
Number File No.
------ --------
<S> <C> <C>
10.31 Amended and Restated Pledge Agreement dated March 27, 03/31/97 -
1997 between the Company and RIMCO (Ex.1.3) 10QSB
10.32 Note Purchase Agreement dated as of March 27, 1997 between 03/31/97 -
the Company and RIMCO (Ex. 1.6) 10QSB
10.32.1 First Amendment to Note Purchase Agreement dated as of
August 6, 1997 *
10.32.2 Note Purchase Agreement dated as of August 6, 1997 between
the Company and RIMCO *
10.33 Employment Agreement between the Company and Ronald L.
England effective March 1, 1995 *
10.34 Employment Agreement between the Company and Peter B.
Spooner effective March 31, 1996 *
10.35 Employment Agreement between the Company and Patrick
A. Donais effective August 1, 1997 *
10.36 Employment Agreement between the Company and Joe T. Rye
dated August 7, 1997 *
10.37 Warrant to Purchase Shares of Common Stock executed
January 12, 1996 in favor of Ronald L. England for purchase
of 5,000 shares of the Company's Common Stock *
10.38 Warrant to Purchase Shares of Common Stock executed
January 12, 1996 in favor of Ronald L. England for purchase
of 100,000 shares of the Company's Common Stock *
10.39 Warrant to Purchase Shares of Common Stock executed
January 16, 1996 in favor of Calvin G. Cobb for purchase of
15,000 shares of the Company's Common Stock *
10.40 Seismic equipment lease between NYNEX Credit Company
and the Company dated as of October 2, 1995 *
10.41 Settlement Agreement and General Release dated effective
August 5, 1997 by and among The Universal Seismic
Associates, Inc. Stockholders' Protective Committee, Michael
T. Kanarellis, and Robert J. Kecseg, Michael J. Pawelek, Ronald
L. England, Calvin G. Cobb, Gary Milavec, Stephen Oakes,
Rick E. Trapp, Universal Seismic Associates, Inc., RIMCO
Associates, Inc. and Resource Investors Management Company
Limited Partnership. *
21.1 Subsidiaries of the Company *
23.1 Consent of Coopers & Lybrand L.L.P. *
23.2 Consent of Netherland, Sewell & Associates, Inc. *
27 Financial Data Schedule (included only in the electronic
filing of this document)
</TABLE>
- ----------------
*Filed with this report.
(b) REPORTS ON FORM 8-K
No current report on Form 8-K was filed during the fiscal
quarter ended June 30, 1997.
29
<PAGE> 30
SIGNATURES
IN ACCORDANCE WITH SECTION 13 OR 15(d) OF THE EXCHANGE ACT, THE REGISTRANT
CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED.
UNIVERSAL SEISMIC ASSOCIATES, INC.
By: /s/ Michael J. Pawelek
-----------------------------------------
Michael J. Pawelek,
President and Chief Executive Officer
Date: October 20, 1997
----------------------------
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE DATE
--------- ----
<S> <C>
/s/ Michael J. Pawelek October 20, 1997
- ------------------------------------------------------------ ----------------
Michael J. Pawelek, President, Chief Executive Officer,
and Director
/s/ Ronald L. England October 20, 1997
- ------------------------------------------------------------ ----------------
Ronald L. England, Chief Financial Officer, Treasurer
and Director
October 20, 1997
- ------------------------------------------------------------ ----------------
Calvin G. Cobb, Director
/s/ Gary J. Milavec October 20, 1997
- ------------------------------------------------------------ ----------------
Gary J. Milavec, Director
/s/ Stephen F. Oakes October 20, 1997
- ------------------------------------------------------------ ----------------
Stephen F. Oakes, Director
/s/ Joe T. Rye October 20, 1997
- ------------------------------------------------------------ ----------------
Joe T. Rye, Chief Accounting Officer
</TABLE>
30
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number File No.
------ --------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Company 33-46235
3.2 Amended and Restated Bylaws of the Company 33-57994
4.1 Form of Stock Certificate 33-46235
10.2 Employment Agreement between the Company and Michael
J. Pawelek effective March 1, 1995 33-46235
10.3 Form of Indemnification Agreement between the Company
and directors and certain officers 33-46235
10.4 Stock Incentive Plan 33-46235
10.5 1994 Employee Stock Option Plan (Ex. 4.2) 33-79448
10.6 1995 Non-Employee Directors' Stock Option Plan 96-10KSB
10.13 Office space lease between Park Ten No. 1, Ltd. and
Universal Seismic Associates, Inc. 96-10KSB
10.14 Loan and Security Agreement between Fidelity Funding, Inc.
and the Company 96-10KSB
10.15 Note Purchase Agreement dated as of January 19, 1996 by
and between the Company, RIMCO Partners, L.P., RIMCO
Partners, L.P.II, RIMCO Partners, L.P.III and RIMCO Partners,
L.P.IV, ("RIMCO")(RIMCO #1) 96-10KSB
10.15.1 First Amendment to RIMCO #1 Note Purchase Agreement
dated as of May 28, 1996 by and between the Company and
RIMCO 96-10KSB/A
10.15.2 Second Amendment to RIMCO #1 Note Purchase Agreement
dated as of August 13, 1996 *
10.15.3 Third Amendment to RIMCO #1 Note Purchase Agreement 12/31/96 -
dated as of December 20, 1996 10QSB
10.15.4 Fourth Amendment to RIMCO #1 Note Purchase Agreement 03/31/97 -
dated as of March 27, 1997 (Ex.1.4) 10QSB
10.15.5 Fifth Amendment to RIMCO #1 Note Purchase Agreement
dated as of August 6, 1997 *
10.16 Note Purchase Agreement dated as of January 19, 1996 by and
between UNEXCO and RIMCO Partners, L.P.II, RIMCO
Partners L.P.III. and RIMCO Partners, L.P.IV 96-10KSB
10.16.1 First Amendment to Note Purchase Agreement dated as of May
28, 1996 by and between UNEXCO and RIMCO Partners,
L.P. II, RIMCO Partners L.P.III, RIMCO Partners L.P.IV 96-10KSB/A
10.17 Stock Ownership and Registration Rights Agreement by and
between the Company, UNEXCO and RIMCO 96-10KSB
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
Exhibit
Number File No.
------ --------
<S> <C> <C>
10.17.1 First Amendment to Stock Ownership and Registration Rights
Agreement, dated as of May 28, 1996 96-10KSB/A
10.18 Warrant Agreement dated January 19, 1996 by and between the
Company and RIMCO 96-10KSB
10.19 Guaranty and Exchange Agreement dated January 19, 1996 by
and between UNEXCO and RIMCO 96-10KSB/A
10.19.1 First Amendment to Guaranty and Exchange Agreement dated
May 28, 1996 by and between UNEXCO and RIMCO 96-10KSB
10.20 Common Stock Purchase Warrant executed January 19, 1996
by the Company in favor of RIMCO partners, L.P. for the
purchase of 57,750 shares of the Company's Common Stock 96-10KSB
10.21 Common Stock Purchase Warrant executed January 19, 1996
by the Company in favor of RIMCO Partners, L.P.II for the
purchase of 57,750 shares of the Company's Common Stock 96-10KSB
10.22 Common Stock Purchase Warrant executed January 19, 1996
by the Company in favor of RIMCO Partners, L.P.III for the
purchase of 6,600 shares of the Company's Common Stock 96-10KSB
10.23 Common Stock Purchase Warrant executed January 19, 1996
by the Company in favor of RIMCO Partners, L.P.IV for the
purchase of 42,900 shares of the Company's Common Stock 96-10KSB
10.24 Note Purchase Agreement dated as of May 28, 1996 by and
between the Company and RIMCO (RIMCO #2) 96-10KSB
10.24.1 First Amendment to RIMCO #2 Note Purchase Agreement 12/31/96 -
dated as of December 20, 1996 10QSB
10.24.2 Second Amendment to RIMCO #2 Note Purchase Agreement 03/31/97 -
dated as of March 27, 1997 (Ex.1.5) 10QSB
10.24.3 Third Amendment to RIMCO #2 Note Purchase Agreement
dated as of August 6, 1997 *
10.25 Warrant Agreement dated May 28, 1996 by and between the
Company and RIMCO 96-10KSB
10.26 Common Stock Purchase Warrant executed May 28, 1996 by
the Company in favor of RIMCO Partners, L.P. for the
purchase of 175,550 shares of the Company's Common Stock 96-10KSB
10.27 Common Stock Purchase Warrant executed May 28, 1996 by
the Company in favor of RIMCO Partners, L.P.II for the
purchase of 31,766 shares of the Company's Common Stock 96-10KSB
10.28 Common Stock Purchase Warrant executed May 28, 1996 by
the Company in favor of RIMCO Partners, L.P.III for the
purchase of 71,334 shares of the Company's Common Stock 96-10KSB
10.29 Amended and Restated Note Purchase Agreement dated March 03/31/97 -
27, 1997 between UNEXCO and RIMCO (Ex.1.1) 10QSB
10.30 Amended and Restated Note Purchase Agreement dated March 03/31/97 -
27, 1997 between UNEXCO and RIMCO (Ex.1.2) 10QSB
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
Exhibit
Number File No.
------ --------
<S> <C> <C>
10.31 Amended and Restated Pledge Agreement dated March 27, 03/31/97 -
1997 between the Company and RIMCO (Ex.1.3) 10QSB
10.32 Note Purchase Agreement dated as of March 27, 1997 between 03/31/97 -
the Company and RIMCO (Ex. 1.6) 10QSB
10.32.1 First Amendment to Note Purchase Agreement dated as of
August 6, 1997 *
10.32.2 Note Purchase Agreement dated as of August 6, 1997 between
the Company and RIMCO *
10.33 Employment Agreement between the Company and Ronald L.
England effective March 1, 1995 *
10.34 Employment Agreement between the Company and Peter B.
Spooner effective March 31, 1996 *
10.35 Employment Agreement between the Company and Patrick
A. Donais effective August 1, 1997 *
10.36 Employment Agreement between the Company and Joe T. Rye
dated August 7, 1997 *
10.37 Warrant to Purchase Shares of Common Stock executed
January 12, 1996 in favor of Ronald L. England for purchase
of 5,000 shares of the Company's Common Stock *
10.38 Warrant to Purchase Shares of Common Stock executed
January 12, 1996 in favor of Ronald L. England for purchase
of 100,000 shares of the Company's Common Stock *
10.39 Warrant to Purchase Shares of Common Stock executed
January 16, 1996 in favor of Calvin G. Cobb for purchase of
15,000 shares of the Company's Common Stock *
10.40 Seismic equipment lease between NYNEX Credit Company
and the Company dated as of October 2, 1995 *
10.41 Settlement Agreement and General Release dated effective
August 5, 1997 by and among The Universal Seismic
Associates, Inc. Stockholders' Protective Committee, Michael
T. Kanarellis, and Robert J. Kecseg, Michael J. Pawelek, Ronald
L. England, Calvin G. Cobb, Gary Milavec, Stephen Oakes,
Rick E. Trapp, Universal Seismic Associates, Inc., RIMCO
Associates, Inc. and Resource Investors Management Company
Limited Partnership. *
21.1 Subsidiaries of the Company *
23.1 Consent of Coopers & Lybrand L.L.P. *
23.2 Consent of Netherland, Sewell & Associates, Inc. *
27 Financial Data Schedule (included only in the electronic
filing of this document)
</TABLE>
- ----------------
*Filed with this report.
<PAGE> 34
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and
Board of Directors of
Universal Seismic Associates, Inc.:
We have audited the accompanying consolidated balance sheet of Universal
Seismic Associates, Inc. and Subsidiaries as of June 30, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. The 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 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 misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Universal Seismic Associates, Inc. and Subsidiaries as of June 30, 1997 and
1996, and the consolidated results of their operations and their cash flows for
each of the two years in the period ended June 30, 1997, in conformity with
general accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company has incurred significant losses and has a
working capital deficit that raise substantial doubt about its ability to
continue as a going concern. Management's plan in regard to these matters is
also described in Note 10. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Houston, Texas Coopers & Lybrand L.L.P.
October 10, 1997
F-1
<PAGE> 35
UNIVERSAL SEISMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS JUNE 30,
1997 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,859,677 $ 982,431
Accounts receivable, net 6,007,340 8,046,961
Costs and estimated earnings in excess of billings on uncompleted contracts 274,602 1,537,957
Prepaid expenses and other current assets 498,982 626,254
------------ ------------
Total current assets 8,640,601 11,193,603
Property and equipment, net
Seismic property and equipment 15,896,535 17,953,678
Oil and gas properties, full cost method 6,909,316 1,722,847
------------ ------------
Total property and equipment, net 22,805,851 19,676,525
Other assets:
Goodwill, net 601,694 652,538
Other 228,088 427,612
------------ ------------
Total assets $ 32,276,234 $ 31,950,278
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term obligations $ 2,198,856 $ 5,473,870
Billings in excess of costs and estimated earnings on uncompleted contracts 470,690 1,990,358
Accounts payable 5,912,647 5,578,646
Other current liabilities 2,798,278 1,137,890
------------ ------------
Total current liabilities $ 11,380,471 $ 14,180,764
Long-term obligations, net of current maturities 15,616,255 9,870,689
------------ ------------
Total liabilities 26,996,726 24,051,453
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.0001 par value; 20,000,000 shares authorized; 5,239,109
shares issued at June 30, 1997 and 4,283,147 shares at June 30, 1996 524 428
Additional paid in capital 17,105,443 13,553,317
Accumulated deficit (11,806,459) (5,634,920)
Less: Treasury stock, at cost; 5,000 shares (20,000) (20,000)
------------ ------------
Total stockholders' equity 5,279,508 7,898,825
------------ ------------
Total liabilities and stockholders' equity $ 32,276,234 $ 31,950,278
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE> 36
UNIVERSAL SEISMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
For the years ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Operating revenues:
Data acquisition $ 30,015,185 $ 24,433,021
Data processing 1,158,830 1,166,100
Oil and gas 113,314 --
------------ ------------
Total operating revenues 31,287,329 25,599,121
Operating expenses:
Cost of data acquisition 27,034,915 19,921,200
Cost of data processing 905,992 893,715
Oil and gas operating expenses 23,941
Selling, general and administrative expenses 2,488,787 2,247,845
Cost of aborted merger, proxy contest and shareholder litigation 2,146,313
Operating lease recognition (Note 4) 929,191
Depreciation and amortization 3,132,242 2,240,146
------------ ------------
Total operating expenses 36,661,381 25,302,906
Gain on sale of oil & gas property 559,461 --
------------ ------------
Total operating (loss) income (4,814,591) 296,215
Interest expense (1,389,961) (1,121,969)
Other income 33,013 16,897
------------ ------------
Net loss $ (6,171,539) $ (808,857)
============ ============
Net loss per share $ (1.23) $ (0.19)
============ ============
Average common shares outstanding 5,012,732 4,211,129
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 37
UNIVERSAL SEISMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the years ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock Additional Total
---------------------------- Paid In Treasury Accumulated Stockholder's
Shares Amount Capital Stock Deficit Equity
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance July 1, 1995 4,202,498 $ 421 $ 13,183,172 $ (20,000) $ (4,826,063) $ 8,337,530
Net loss (808,857) (808,857)
Issuance of detachable
stock warrants 100,000 100,000
Exercise of stock
options 75,649 7 270,145 270,152
------------ ------------ ------------ ------------ ------------ ------------
Balance June 30, 1996 4,278,147 428 13,553,317 (20,000) (5,634,920) 7,898,825
Net loss (6,171,539) (6,171,539)
Issuance of common stock:
Employee stock options 15,000 2 51,248 51,250
Convertible notes 940,962 94 3,500,878 3,500,972
------------ ------------ ------------ ------------ ------------ ------------
Balance June 30, 1997 5,234,109 $ 524 $ 17,105,443 $ (20,000) $(11,806,459) $ 5,279,508
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 38
UNIVERSAL SEISMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,171,539) $ (808,857)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 3,225,409 2,409,530
(Gain) Loss on disposal of assets (559,461) 1,333
Accrued loss on operating lease 929,121 --
Changes in operating assets and liabilities:
Accounts receivable, net 2,039,621 (4,255,136)
Costs and estimated earnings in excess of billings on uncompleted
contracts 1,263,355 (1,501,274)
Prepaid expenses and other current assets 798,743 513,582
Accounts payable 334,001 3,617,767
Billings in excess of costs and estimated earnings on uncompleted
contracts (1,519,668) 1,657,512
Other current liabilities 1,322,570 255,082
Other 78,011 (316,861)
------------ ------------
Net cash provided by operating activities 1,740,163 1,572,678
------------ ------------
Cash flows from investing activities:
Capital expenditures (7,022,835) (2,855,902)
Proceeds from sale of assets 1,494,457 29,838
Proceeds from receivable from stockholder 28,440 48,000
------------ ------------
Net cash used in investing activities (5,499,938) (2,778,064)
------------ ------------
Cash flows from financing activities:
Proceeds from debt and obligations 30,323,387 32,751,801
Payments on debt and obligations (25,725,116) (32,142,493)
Proceeds from issuance of common stock 38,750 270,152
Proceeds from issuance of stock warrants - 100,000
------------ ------------
Net cash provided by financing activities 4,637,021 979,460
------------ ------------
Net increase (decrease) in cash and cash equivalents 877,246 (225,926)
Cash and cash equivalents at beginning of period 982,431 1,208,357
------------ ------------
Cash and cash equivalents at end of period $ 1,859,677 $ 982,431
============ ============
Supplemental disclosures:
Cash paid for interest $ 1,531,750 $ 1,047,077
Equipment acquired in exchange for notes payable 122,885 7,403,621
Prepaid expenses financed by notes payable 671,471 568,530
Conversion of long-term obligations to common stock 3,500,972 --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 39
UNIVERSAL SEISMIC ASSOCIATES, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:
Organization and Principles of Consolidation
Universal Seismic Associates, Inc. and subsidiaries (the "Company")
are engaged primarily in land geophysical services. These services
include the contract acquisition of three-dimensional seismic data,
the processing and reproduction of seismic data and survey services.
The Company also participates in oil and gas exploration, development,
and production activities. The consolidated financial statements are
presented after all significant intercompany accounts and transactions
have been eliminated.
Revenue Recognition
The Company recognizes revenue on fixed price contracts on the basis
of percentage of completion with no profit recognized until sufficient
progress has been made to adequately assess the estimate of profit
recognition. When estimated total costs on any contract indicates a
loss, the entire amount of the loss is recognized immediately.
Property and Equipment
Property and equipment, other than oil and gas properties, are stated
at cost and are depreciated on the straight-line method over the
estimated useful lives of the assets, which range from three to ten
years. Equipment under capital leases is stated at the present value
of future minimum lease payments at the inception of the lease and is
amortized on the straight-line method over the shorter of the
estimated useful life of the assets, which range from five to ten
years, or the term of the lease. Maintenance and repairs are charged
against income when incurred, and renewals or betterments are
capitalized. Upon retirement or other disposal of fixed assets, the
cost and related accumulated depreciation are removed from the
respective accounts, and any gains or losses are included in results
of operations. The Company had fully depreciated property and
equipment which was still being utilized in the amounts of $543,000
and $502,000 at June 30, 1997 and June 30, 1996, respectively.
The Company uses the full cost method of accounting for oil and gas
activities. Under this method of accounting, all costs incurred in the
acquisition, exploration, and development of oil and gas properties,
including costs incurred by the Company's own data acquisition
subsidiary, are capitalized. Such capitalized costs and estimated
future development and dismantlement costs are amortized on a
unit-of-production method based on proved reserves. Net capitalized
costs of oil and gas properties are limited to the lower of unamortized
costs or the cost center ceiling, defined as the sum of the present
value (10% discount rate) of estimated unescalated future net revenues
from proved reserves; plus the cost of properties not being amortized,
if any; plus the lower of cost or estimated fair value of unproved
properties included in the costs being amortized, if any; less related
income tax effects. Disposition of oil and gas properties are recorded
as adjustments to capitalized costs, with no gain or loss recognized
unless such adjustments would significantly alter the relationship
between capitalized costs and proved reserves. A large portion of the
capitalized costs related to the Company's oil and gas activities are
created by the Company's data acquisition business. All intercompany
profit has been eliminated. During the first quarter of fiscal 1997,
the Company sold a portion of its only property with proved reserves,
at the time, and recognized a gain of $559,461.
F-6
<PAGE> 40
Unevaluated properties and associated costs not being amortized and
included in oil and gas properties were $3,791,033 and $1,722,847 at
June 30, 1997 and 1996, respectively. The properties represented by
these costs were at such dates undergoing exploration or development
activities, or are properties on which the Company intends to commence
such activities in the future, assuming sufficient funding is
available. The Company believes that the unevaluated properties at
June 30, 1997 will be substantially evaluated and therefore subject to
amortization in 12 to 24 months. During fiscal 1997, the Company had
$245,203 of capitalized interest relating to unevaluated properties.
Goodwill
The excess of the purchase price over the estimated fair value of net
assets acquired is included in goodwill and is amortized on a
straight-line basis over fifteen years. At each balance sheet date,
management assesses whether there has been a permanent impairment in
the value of goodwill by comparing anticipated undiscounted future
cash flows from operating activities with the carrying value of the
goodwill. Other factors considered by management in this assessment
include operating results, trends and prospects, as well as the
effects of obsolescence, demand, competition, and other economic
factors. All goodwill is related to the Company's data processing
operation.
Deferred Financing Costs
Costs incurred in connection with the issuance of the Company's
long-term debt and notes payable are capitalized and amortized over
the terms of the respective borrowings using a method which
approximates the interest method. Accumulated amortization relating to
deferred financing costs totaled $125,480 and $67,313 at June 30, 1997
and 1996 respectively.
Income Taxes
The Company follows the asset and liability method in accounting for
income taxes. Under this method, deferred tax assets and liabilities
are recorded for the estimated future tax consequences attributable to
the difference between the financial carrying amounts of existing
assets and liabilities and their respective tax basis. Deferred tax
assets and liabilities are measured using the tax rate in effect for
the year in which those temporary differences are expected to turn
around. The effect of a change in tax rates on deferred tax assets and
liabilities is recognized in the year of the enacted rate change.
Earnings Per Share
Primary earnings per share are based upon the weighted average number
of outstanding shares of common stock during the respective years.
Fully diluted earnings per share is not presented because such amounts
would be antidilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per
Share, ("SFAS 128"). This Statement specifies the computation,
presentation and disclosure requirements for Earnings Per Share. This
statement is effective for financial statements for both interim and
annual periods ending after December 15, 1997. The Company does not
expect the adoption of SFAS 128 to have a significant impact on its
calculation of earnings per share.
Management 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 as of
the date of the financial statements and the reported amounts of
revenues and expenses during the reported
F-7
<PAGE> 41
period. The Company's most significant estimates are based on
uncompleted seismic acquisition contracts and remaining proved oil
and gas reserves. See Supplemental Oil and Gas Disclosures in Note
11. While it is believed that such estimates are reasonable, actual
results could differ from those estimates due to uncertainties
inherent in the estimation process.
Reclassifications
Certain reclassifications for the prior year have been made to conform
with the current year presentation, but the net loss for fiscal 1996
did not change.
Stock Based Compensation
In October 1995, the FASB issued Statement of Accounting Standards No.
123 ("SFAS No. 123"), "Accounting for Stock-Based Compensation" which
is effective for the Company beginning July 1, 1996. SFAS No. 123
permits, but does not require, a fair-value-based method of accounting
for employee stock option plans which results in compensation expense
being recognized in the results of operations when stock options are
granted. The Company plans to continue to use the current
intrinsic-value-based method of accounting for such plans where no
compensation expense is recognized. See Note 6 for the pro forma
disclosure of net income and earnings per share as if the
fair-value-based method of accounting had been applied.
Concentration of Credit Risk
The Company maintains deposits in a bank which may exceed the amount
of federal deposit insurance available. Management periodically
assesses the financial condition of the institution and believes that
any possible deposit loss is minimal. The Company has not experienced
such losses in the past.
The Company operates primarily in the southern United States and
grants credit to substantially all of its customers, which are
primarily independent oil and gas exploration, production and service
companies. The Company performs on-going credit evaluations of its
customers and generally does not require collateral for accounts
receivable. The Company recorded allowances for doubtful accounts
totaling $721,697 and $55,000 at June 30, 1997 and 1996, respectively.
The increase at June 30, 1997 was primarily the result of unresolved
billings with two customers.
Four customers accounted for approximately 63% of gross accounts
receivable at June 30, 1997 compared to the three largest accounting
for 42% at June 30, 1996. No other customer accounted for more than
10% of receivables at either date.
Major Customers
The Company's mix of customers changes yearly as contracts are awarded
and completed. The Company is unable to anticipate whether significant
portions of its future revenues may be attributable to a few
customers, although it is likely the customer mix will change from
year to year. In fiscal 1997 one customer accounted for 30% of the
Company's revenues while another accounted for 14%. In fiscal 1996 the
Company had no revenue from the above customers but 11% of its revenue
was from one customer with less than 1% of fiscal 1997 revenues.
F-8
<PAGE> 42
2. SEISMIC PROPERTY AND EQUIPMENT:
The following is a summary of seismic property and equipment:
<TABLE>
<CAPTION>
June 30,
1997 1996
<S> <C> <C>
Recording instruments and field equipment $ 22,992,987 $ 22,318,510
Furniture and fixtures 728,973 450,929
Vehicles 1,508,895 1,493,171
Software 441,174 419,429
Leasehold improvements 26,939 26,939
------------ ------------
25,698,968 24,708,978
Less: accumulated depreciation and
amortization (9,802,433) (6,755,300)
------------ ------------
$ 15,896,535 $ 17,953,678
============ ============
</TABLE>
Seismic property and equipment includes the following items acquired
under capital lease agreements:
<TABLE>
<CAPTION>
June 30,
1997 1996
<S> <C> <C>
Recording instruments and field equipment $ 3,294,932 $ 3,287,836
Vehicles 406,481 406,481
----------- -----------
$ 3,701,413 $ 3,694,317
Less: accumulated amortization (2,323,029) (1,887,273)
----------- -----------
$ 1,378,384 $ 1,807,044
=========== ===========
</TABLE>
3. UNCOMPLETED SEISMIC ACQUISITION CONTRACTS:
Costs, estimated earnings and billings on uncompleted seismic
acquisition contracts consisted of the following:
<TABLE>
<CAPTION>
June 30,
1997 1996
<S> <C> <C>
Costs incurred $ 6,839,729 $ 4,028,505
Estimated earnings (313,122) 891,035
Billings to date (6,722,695) (5,371,941)
----------- -----------
$ (196,088) $ (452,401)
=========== ===========
</TABLE>
F-9
<PAGE> 43
Included in the accompanying balance sheet under the following
captions:
<TABLE>
<S> <C> <C>
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 274,602 $ 1,537,957
Billings in excess of costs and estimated
earnings on uncompleted contracts (470,690) (1,990,358)
----------- -----------
$ (196,088) $ (452,401)
=========== ===========
</TABLE>
4. DEBT AND OBLIGATIONS:
The following is a summary of debt and obligations:
<TABLE>
<CAPTION>
June 30,
1997 1996
<S> <C> <C>
Note payable to RIMCO, with 10% interest only paid monthly until
December 1, 1997, then monthly installments of $138,106, including
interest with balance due December 1, 1999; collateralized by
seismic equipment, net of $50,917 unamortized
discount $ 6,449,083 $ 6,415,000
Revolving line of credit of $5,500,000 to RIMCO
with 12% interest paid monthly and principal due
December 1, 1999; collateralized by oil and gas
properties 5,350,000 --
Note payable to RIMCO, with monthly installments
of $72,917, plus interest at 10% through February
2000; collateralized by seismic equipment, net of
$22,604 unamortized discount 2,309,911 3,193,333
Note payable to RIMCO, 12% interest paid monthly
balance due December 1, 1999; collateralized by
seismic equipment 2,000,000 --
Revolving line of credit of $5,000,000 to a financial
institution with interest due monthly at a base rate plus .5% (9% at
June 30, 1997); collateralized by accounts
receivable; maturing August 31, 1998 635,525 3,571,010
Non-current portion of operating lease for equipment not
expected to be utilized in the future 591,303 --
Exchangeable note payable to RIMCO with interest paid
monthly at 10% and principal due February 1, 2002;
converted to shares of the Company's common stock on
September 30, 1996 -- 1,151,600
Convertible note payable to RIMCO with interest paid
monthly at 5% and principal due February 1, 1998;
converted to shares of the Company's common
stock on August 14, 1996 -- 500,000
Notes payable to finance insurance policies with varying
monthly installments and interest rates, matures within
one year 426,968 418,297
Other notes payable 52,321 95,319
------------ ------------
17,815,111 15,344,559
Less: current maturities (2,198,856) (5,473,870)
------------ ------------
$ 15,616,255 $ 9,870,689
============ ============
</TABLE>
F-10
<PAGE> 44
Scheduled maturities of debt and obligations are as follows:
Year ending June 30,
<TABLE>
<S> <C>
1998 $ 2,198,856
1999 2,301,874
2000 13,314,381
------------
$ 17,815,111
============
</TABLE>
On January 19, 1996, the Company entered into a financing arrangement
with Resource Investors Management Company and four partnerships of
which it is the general partner (collectively "RIMCO") providing up to
$7,000,000, of which $4,000,000 was immediately funded to restructure
existing debt. The debt restructure consisted of (i) $3,500,000 in 10%
Senior Secured General Obligation Notes payable in 48 equal monthly
installments of principal plus interest, and (ii) $500,000 in 5%
Convertible Notes maturing on February 1, 1998, with monthly payments
of interest, convertible into common stock of the Company (the
"Convertible Notes") at a conversion price of $3.45 per share, subject
to adjustment. The remaining $3,000,000 was subsequently funded under
10% Senior Secured Exchangeable General Obligation Notes, which were
exchangeable for common stock of the Company (the "Exchangeable
Notes") at an exchange price of $3.77 per share, subject to
adjustment. The proceeds were used to finance the Company's
exploration and production activities. In connection with this
financing arrangement, the Company issued to RIMCO warrants to
purchase 165,000 shares of the Company's common stock at a purchase
price of $3.14 per share, subject to adjustment. On August 14, 1996,
the Company exercised its right to convert the Convertible Notes into
145,208 shares of the common stock of the Company. On September 30,
1996, the Company exercised its right to exchange the Exchangeable
Notes for 795,754 shares of the Company's common stock.
On May 28, 1996, the Company entered into an additional credit
facility with RIMCO pursuant to which the Company issued 10% Senior
Secured General Obligation Notes in the aggregate principal amount
$6,500,000. The proceeds were used to acquire new seismic equipment
and retire some existing debt. The notes provide for monthly payments
of interest only until December 1, 1996 (extended to December 1,
1997), then $138,106, including interest, with the balance due
December 1, 1999. In connection with this credit facility, the Company
issued to RIMCO warrants to purchase 278,650 shares of the Company's
common stock at a purchase price of $5.00 per share, subject to
adjustment.
On December 20, 1996, the Company entered into another financing
agreement with RIMCO to provide $4,000,000 (increased to $5,500,000 on
March 27, 1997) under a revolving credit facility for the expansion of
the Company's exploration and production activities ($5,350,000
outstanding at June 30, 1997). RIMCO has the right of approval on any
property that funds are advanced toward. In connection to this
revolving credit facility, the Company issued 12% Senior Secured
General Obligation Notes with interest payable monthly (interest due
after June 30, 1997 has been extended to December 1, 1997) and the
principal due December 1, 1999. The notes are secured by the Company's
oil and gas properties.
On March 27, 1997 the Company borrowed an additional $2,000,000 from
RIMCO under new
F-11
<PAGE> 45
12% Senior Secured General Obligation Notes with interest payable
monthly (interest due after June 30, 1997 has been deferred to
December 1, 1997) and principal due December 1, 1999. The proceeds
were used for working capital. The notes are secured by the Company's
seismic equipment.
On August 6, 1997 the Company borrowed an additional $2,000,000 from
RIMCO under another 12% Senior Secured General Obligation Note, also
secured by the Company's seismic equipment, with interest payable
monthly (extended to December 1, 1997) and principal due December 1,
1999. The proceeds were used to fund the shareholder settlement
described in Note 9.
These loan agreements obtained from RIMCO described above have
numerous covenants, the most restrictive of which require the Company
to maintain earnings before depreciation, amortization and interest of
greater than $2,000,000 through August 31, 1996, and greater than
$2,500,000 thereafter. The Company must also maintain a current ratio,
as defined by the note agreements, greater than 0.75 to 1.0 through
September 30, 1996, and 1.00 to 1.00 thereafter. In addition, the
Company must maintain a tangible net worth, as defined by the note
agreements, of greater than $6,000,000 through September 30, 1996, and
$7,000,000 thereafter. As of June 30, 1997, the Company was not in
compliance with several of the covenants. RIMCO has waived the
Company's defaults under the covenants in the various financing
agreements until July 1, 1998. It has also agreed to defer payments of
interest and principal due after June 30, 1997 until December 1, 1997.
As of September 30, 1997 the Company was indebted to RIMCO under the
various financing agreements for $18,182,516 principal and $501,830
accrued interest.
The Company has a $5,000,000 revolving line of credit with a financial
institution for the financing of its trade receivables. This agreement
provides the Company must maintain a minimum net worth of $3,000,000
and annual earnings before interest, taxes, depreciation and
amortization of at least $500,000, plus certain other covenants. The
Company was not in compliance with certain provisions of the agreement
and has been unsuccessful in obtaining a waiver; however, the Company
still receives advances under the arrangement.
The Company leases a 720 channel OPSEIS 5586 telemetry acquisition
system under an operating lease through March 2000. Due to the
recording limitations of this system, the Company believes it has
become non-competitive in the 3-D data acquisition market. The system
has not operated since October 1996 and the Company recognized the
remaining $929,121 of lease payments in the fourth quarter of fiscal
1997. The current portion of this obligation is included in other
current liabilities.
The weighted average interest rate on short-term borrowings at June
30, 1997 was approximately 8.21%.
5. COMMITMENTS AND CONTINGENCIES:
Lease Commitments
The Company leases certain seismic equipment, vehicles and office
facilities under operating leases. The future minimum lease payments
under the Company's noncancelable operating leases are as follows:
F-12
<PAGE> 46
<TABLE>
<S> <C>
Year ending June 30,
1998 $ 1,514,903
1999 1,417,732
2000 216,132
2001 216,132
2002 216,132
Thereafter 612,374
</TABLE>
Total rental expense under the Company's various operating leases for
the years ended June 30, 1997 and 1996 were $2,480,271 and $2,291,746,
respectively.
Contingencies
The Company has in dispute approximately $850,000 of charges from a
supplier of services. The supplier billed for approximately $1,075,000
in fiscal 1997 and $3,090,000 in fiscal 1996. The Company believes
certain of the charges are inappropriate and that it has substantial
offsets for additional costs the Company incurred when the supplier
left a job before it was complete. The Company believes that it has
provided sufficient liability in its financial statements to cover the
disputed amounts.
The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's consolidated financial condition. The
resolution in any reporting period of one or more of these matters in
a manner adverse to the Company could have a material impact on the
Company's results of operations and cash flows for that period.
The Company has employment contracts with certain of its officers and
key employees for periods up to two years that generally provide for
automatic renewals unless notice is given within a specified period.
Some of the contracts provide for a one year period of continued
employment with no reduction in compensation or benefits in the event
of a merger, sale of substantially all of the assets or a change in
control.
As of January 1, 1996 the Company adopted a 401 (k) qualified
retirement plan. The Company makes matching contributions in an amount
equal to 50% of an employee's contribution up to 6%. The Company's
expense was $55,600 in fiscal 1997 and $15,883 in fiscal 1996.
See Note 9 regarding a shareholder suit brought during fiscal 1997 and
settled subsequent to June 30, 1997.
6. STOCKHOLDERS' EQUITY:
Stock Option Plans
The Company has three stock option plans, two for employees and one
for non-employee Directors (the "Plans") under which an aggregate of
555,000 shares of common stock are reserved for issuance pursuant to
the Plans. The Plans are administered by the Board of Directors or a
committee appointed by the Board of Directors (the "Plan
Administrator"). The Plan Administrator determines, subject to the
provisions of the Plan, the employees to whom options
F-13
<PAGE> 47
are granted and the number of options to be granted. The Plan
Administrator may grant (i) "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986 and (ii)
"non-qualified stock options" (options which do not meet the
requirements of Section 422).
Incentive stock options and non-qualified options granted under the
Plans must have an exercise price equal to at least the fair market
value of the common stock at the date the option is granted. Each
option granted under the Plans may have a term of up to ten years,
except that incentive stock options granted to a stockholder who, at
the time of the grant, owns more than 10% of the voting stock of the
Company, may have a term of up to only five years. The exercise price
of options granted to stockholders possessing more than 10% of the
total combined voting power of all classes of stock of the Company
must not be less than 110% of the fair market value of such stock on
the date of grant and options granted under the non-employee plan
provides that the price of grants be 125% of the fair market value on
the date of grant. Options granted under the plans have generally been
fully exercisable after the grant.
A summary of stock option transactions during the two years ended June
30, 1997 is as follows:
<TABLE>
<CAPTION>
Number of Weighted Average
Shares Exercise Price
<S> <C> <C>
Options outstanding at
June 30, 1995 258,500 $ 3.82
Granted in 1996 375,000 $ 4.09
Forfeited in 1996 (196,500) $ 3.80
Exercised in 1996 (80,000) $ 3.66
--------
Options outstanding at
June 30, 1996 357,000 $ 4.11
Forfeited in 1997 (94,500) $ 3.77
Exercised in 1997 (15,000) $ 3.42
--------
Options outstanding at June 30, 1997 247,500 $ 4.29
========
</TABLE>
All the options outstanding were exercisable at each year-end.
The following table summarizes certain information regarding stock
options at June 30, 1997:
F-14
<PAGE> 48
<TABLE>
<CAPTION>
Options Outstanding and Exercisable
-------------------------------------------------------------
Range of Number Weighted Average Weighted Average
Exercise Outstanding Remaining Exercise
Price at 6/30/97 Contractual Life Price
----- ---------- ---------------- ----------------
<S> <C> <C> <C>
$3.75 132,500 8.3 years $3.75
4.06 10,000 8.4 4.06
4.95 100,000 8.8 4.95
6.00 5,000 5.4 6.00
</TABLE>
Warrants
As of June 30, 1997 there were 783,650 Common Share warrants
outstanding all of which are exercisable at June 30, 1997 at prices
ranging from $2.50 to $9.11. Of this, 120,000 warrants are held by
directors and are, therefore, included in the following pro forma
disclosure.
The Company applies the intrinsic value method for reporting
compensation expense pursuant to Accounting Principles Board Option
No. 25 "Accounting for Stock Issued to Employees" to its stock-based
compensation plans (including certain warrants). Accordingly, no
compensation expense has been recognized for awards granted under
these plans. Had compensation expense for the Company's stock-based
compensation plans been determined in accordance with the fair value
method pursuant to SFAS No. 123 "Accounting for Stock-based
Compensation", the Company's pro forma net income and earnings per
share for the years ended June 30, 1997 and 1996, would have been as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net loss (in thousands) $ (6,172) $ (1,477)
Loss per share $ (1.23) $ (0.35)
</TABLE>
The fair value of the options and warrants granted during fiscal 1996
(none granted in fiscal 1997) is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-
average assumptions: a) no dividends paid, b) expected volatility of
51.21%, c) risk-free interest rate ranges from 5.13% to 6.25% and d)
expected life of options is 5 years for 10-year options and 2.5 years
for 5-year warrants.
The effects of applying SFAS No. 123 in this pro forma disclosure are
not indicative of future amounts. SFAS No. 123 does not apply to
awards prior to fiscal 1996.
7. INCOME TAXES:
Deferred tax assets (liabilities) as of June 30, 1997 and 1996
consisted of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net operating loss carryforwards $ 5,225,000 $ 2,963,000
Property and equipment (2,162,000) (1,809,000)
Shareholder litigation payable 525,000 --
Obsolete equipment payable 316,000 --
Other, net -- --
----------- -----------
3,904,000 1,154,000
Less valuation allowances (3,904,000) (1,154,000)
----------- -----------
Net deferred tax assets $ -- $ --
=========== ===========
</TABLE>
F-15
<PAGE> 49
The Company has tax net operating loss carryforwards of approximately
$15,367,000 available to offset future federal taxable income which
will expire if not used in fiscal years 2007 through 2012.
Under federal tax law, the amount of availability of loss
carryforwards (and certain other tax attributes) are subject to a
variety of interpretations and restrictive tests applicable to the
Company and its subsidiaries. The utilization of such carryforwards
could be limited or effectively lost upon certain changes in
ownership. Accordingly, while the Company believes substantial loss
carryforwards are available to it, no assurance can be given
concerning such loss carryforwards or whether such loss carryforwards
will be available in the future.
The Company has provided for a full valuation allowance as it is
uncertain as to whether the Company will be able to utilize all of its
net operating loss carryforwards. The Company has not provided for
federal income taxes for 1997 and 1996 due to the lack of taxable
income in the carryback period and the fully reserved net deferred tax
asset related to the net operating loss carryforwards.
8. RELATED PARTY TRANSACTIONS:
The Company has a consulting agreement with its founder, which
requires payments to such individual of $4,000 per month through
February 1, 2006. In connection with the consulting agreement, the
Company issued the founders warrants to purchase 37,500 shares of the
Company's Common Stock at $3.75 per share. The Company also had an
agreement with its former chairman of the board, which required
payments to such individual of $10,000 per month, which terminated in
fiscal 1997. The Company has agreed to pay up to $40,000 for income
tax planning related to former chairman's common stock holdings of the
Company.
The Company has entered into various contracts to perform seismic
services for a company whose president and owner is a former director
of the Company. Approximately $1,683,000 in seismic services were
provided to this company during fiscal 1996. In March 1997 the Company
entered into a one year agreement with the employer of a director to
provide investor relations and corporate communication services for a
monthly fee of $9,500.
The Company has several transactions with RIMCO as set forth in the
following paragraphs.
Two of the Company's directors are employees of RIMCO, in accordance
with terms of financing agreements with RIMCO they have the right to
designate two directors.
As of June 30, 1997 the Company owed RIMCO an aggregate of $16,182,516
under various financing arrangements as described in Note 4, plus
$24,518 of accrued interest. Subsequent to June 30, 1997 RIMCO loaned
the Company an additional $2,000,000 in connection with the settlement
of a shareholder lawsuit described in Note 9.
The Company and RIMCO participate in three oil and gas prospects on
similar terms. RIMCO may approve all oil and gas prospects to which
the Company commits under terms of certain of the financing
arrangements.
According to information furnished to the Company by RIMCO, they owned
940,963 shares of the Company's common stock at June 30, 1997 (18% of
the shares outstanding). In the
F-16
<PAGE> 50
settlement of the shareholder lawsuit described in Note 9, RIMCO has
the obligation to acquire, under certain conditions, 205,300
additional shares. RIMCO also holds warrants to purchase 443,650
additional shares (see Note 4). If the shares were acquired and the
warrants were exercised RIMCO could increase its holding to 28% of the
shares outstanding.
9. SHAREHOLDER LITIGATION AND SUBSEQUENT EVENT:
The Company was involved in an aborted merger earlier in fiscal 1997
that led to a proxy fight with a group of shareholders that styled
themselves "The Universal Seismic Stockholders' Protective Committee"
(the "Stockholders' Committee"). The proxy fight was resolved at the
reconvened Annual Meeting of Shareholders on February 11, 1997, at
which management's slate of directors was reelected and all of the
Stockholders' Committee's proposals were defeated.
Thereafter, Michael T. Kanarellis, one of the members of the
Stockholders' Committee, submitted letters to various members of the
Audit Committee of the Company, alleging that "the Company's financial
statements for the fiscal year ended June 30, 1996 and the fiscal
quarters ended September 30, 1996 and December 31, 1996 were false and
materially misstated" and alleging certain specific items of
misstatement. The groups also filed a suit against the Company and its
directors styled The Universal Seismic Associates, Inc. Stockholders'
Protective Committee, Michael T. Kanarellis, and Robert J. Kecseg v.
Michael J. Pawelek, Ronald L. England, Calvin G. Cobb, Gary Milavec,
Steven Oakes, Rick Trapp, Rimco Associates, L.P. and Resource
Investors Management Company, L.P. v. Universal Seismic Associates,
Inc., in the United States District Court in Delaware.
All parties entered into a stipulation of Settlement which was
tendered to the Court on August 7, 1997, whereby affiliates of RIMCO
agreed to purchase all of the shares of the Company Common Stock owned
by the Stockholders' Committee for an aggregate purchase price of
$650,000, or $3.17 per share. Also in connection with the settlement,
affiliates of RIMCO entered into a $2 million loan agreement with the
Company, with the proceeds being used to fund the immediate costs of
settlement and to pay other expenses associated with the lawsuit. The
settlement was approved by the Court on October 1, 1997, at which time
the Court entered judgment dismissing all claims with prejudice. The
Company believes that it will recover a substantial portion of its
costs of settlement and expenses associated with the lawsuit from its
directors' and officers' liability insurance carrier.
10. LIQUIDITY:
The financial statements have been prepared assuming the Company will
continue as a going concern. A number of events have occurred in
fiscal 1997 and thereafter which raise doubt about the Company's
ability to continue as a going concern and may effect or have effected
a change in control of the Company. Because the Company has defaulted
on substantially all of its credit facilities, see Note 4, incurred
large operating losses from its data acquisition operation, has a
working capital deficit of approximately $2.3 million, lacks
sufficient funding for its oil and gas and seismic operations, and has
limitations on sources of additional capital, the Company has retained
Morgan Keegan to assist the Company in determining its strategic
alternatives and developing recommendations to attempt to maximize
shareholder value. Those recommendations may include the merger or
business combination of the Company with another entity, as well as
capital raising, recapitalization or reorganization alternatives, any
of which may result in a change in control of the Company. There is no
assurance that the Company will be successful in these efforts.
F-17
<PAGE> 51
11. SUPPLEMENTAL OIL AND GAS DISCLOSURES (UNAUDITED):
The supplementary information regarding the Company's oil and gas
activities is presented in accordance with the requirements of the
Securities and Exchange Commission ("SEC") and the Statement of
Financial Standards No. 69.
Reserve quantities and future production are based primarily upon the
reserve report of the independent oil and gas engineering firm of
Netherland, Sewell & Associates, Inc. based on data supplied to them
by the Company.
Reserve quantities and future production are based primarily upon the
reserve report of the independent oil and gas engineering firm of
Netherland, Sewell & Associates, Inc.
Proved oil and gas reserves are the estimated quantities of crude oil,
condensate and natural gas that geological and engineering data
demonstrate with reasonable certainty to be recoverable in future
years from known reservoirs under existing economic and operating
conditions at the end of the respective years. Proved developed oil
and gas reserves are those reserves expected to be recovered through
existing equipment and operating methods. All reserves are located in
the United States.
Oil and Gas Reserves
The following schedule presents the Company's estimated oil and gas
proved reserves.
<TABLE>
<CAPTION>
Oil and Natural
Condensate Gas
Bbls Mcf
----------- -----------
<S> <C> <C>
June 30, 1996 -- --
Extensions, discoveries and other additions 279,288 10,558,508
Sales of properties (95,231) (952,324)
Production (42) (48,331)
----------- -----------
June 30, 1997 184,015 9,557,853
=========== ===========
Proved developed reserves, June 30, 1997 14,910 797,317
=========== ===========
</TABLE>
The calculation of estimated future net cash flows in the following
table assumed the continuation of existing economic conditions and
applied year-end prices (except for future price changes as allowed by
contract) of gas and condensate to the expected future production of
such reserves, less estimated future expenditures (based on current
costs) to be incurred in developing and producing those proved
reserves.
The standardized measure of discounted future net cash flows does not
purport, nor should it be interpreted, to present the fair market
value of a company's gas and oil reserves. These estimates reflect
proved reserves only and ignore, among other things, changes in prices
and costs, revenues that could result from probable reserves which
could become proved reserves in fiscal 1998 or later years, and the
risks inherent in reserve estimates.
F-18
<PAGE> 52
Discounted Future Net Cash Flows
The standardized measure of discounted future net cash flows relating
to proved oil and gas reserves are shown below (in thousands):
<TABLE>
<CAPTION>
June 30, 1997
-------------
<S> <C>
Future cash inflows $ 24,816
Less future:
Production costs (3,993)
Development costs (4,348)
-----------
Future net cash flows before income taxes 16,475
10% annual discount of future net cash
flows before income taxes (8,473)
-----------
Standardized measure of discounted future
net cash flows before income taxes 8,002
Future income tax expense -0-
-----------
Standardized measure of discounted future
net cash flows $ 8,002
===========
</TABLE>
The realization of the discounted cash flows associated with Company's
proved reserves are dependent on, among other things, the availability
of financing to complete development activities.
The following are the principal sources of change in standardized
measure of discounted future net cash flows:
For the year ended June 30, 1997 (in thousands):
<TABLE>
<S> <C>
Sales of oil and gas, net of production costs $ (89)
Extensions, discoveries and additions, net of costs 8,772
Sales of reserves (681)
-----------
Net increase $ 8,002
===========
</TABLE>
Year-end wellhead prices received by the Company from the sale of oil
and natural gas were $17.48 and $2.15, respectively.
Capitalized Costs
The following table sets forth the capitalized costs relating to oil
and gas activities and the related accumulated depreciation, depletion
and amortization (in thousands). The Company began its oil and gas
activities in fiscal 1996 and had capitalized $1,722,847 as of June
30, 1996, all of which was classified as unproved properties.
F-19
<PAGE> 53
<TABLE>
<S> <C>
Proved properties $ 3,154
Unproved properties 3,791
-----------
6,945
Accumulated depreciation, depletion and amortization (36)
-----------
$ 6,909
===========
</TABLE>
All costs incurred for oil and gas capital expenditures for the year
ending June 30, 1997 were for exploration activities.
F-20
<PAGE> 1
EXHIBIT 10.15.2
SECOND AMENDMENT TO
NOTE PURCHASE AGREEMENT
SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT dated as of August
13, 1996 among UNIVERSAL SEISMIC ASSOCIATES, INC., a Delaware corporation (the
"Company") and RIMCO PARTNERS, L.P., a Delaware limited partnership, RIMCO
PARTNERS, L.P. II, a Delaware limited partnership, RIMCO PARTNERS, L.P. III, a
Delaware limited partnership, and RIMCO PARTNERS, L.P. IV, a Delaware limited
partnership (collectively, the "Noteholders").
Preliminary Statement. The Company and the Noteholders entered
into that certain Note Purchase Agreement, dated January 19, 1996 as amended by
that Certain First Amendment to Note Purchase Agreement, dated as of May 28,
1996 (as so amended, the "Note Purchase Agreement"). The Company and the
Noteholders desire to amend the Note Purchase Agreement as follows:
Section 7.05 of the Note Purchase Agreement is hereby amended
and restated in its entirety to read as follows:
"Section 7.05. Purchase of Notes. The Company will not, and will
not permit any Affiliate to, purchase, redeem, prepay or otherwise
acquire, directly or indirectly, any of the outstanding Notes except
upon the conversion, payment or prepayment of the Notes in accordance
with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to
any conversion payment, prepayment or purchase of Notes pursuant to
any provision of this Agreement or the Notes and no Notes may be
issued in substitution or exchange for any such Notes."
Except as amended hereby, the Note Purchase Agreement shall
remain in full force and effect and the parties hereby ratify the Note Purchase
Agreement as amended hereby.
IN WITNESS WHEREOF, the Company has caused this Second Amendment
to Note Purchase Agreement to be executed by their respective duly authorized
representatives as of the date first above written.
UNIVERSAL SEISMIC ASSOCIATES, INC.
By: /s/ MICHAEL J. PAWELEK
--------------------------------
Name: Michael J. Pawelek
Title: President
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III, and
RIMCO PARTNERS, L.P. IV
By: Resource Investors Management Company
Limited Partnership, their general partner
By: RIMCO Associates, Inc.,
its general partner
By: /s/ GARY MILAVEC
--------------------------------
Name: Gary Milavec
Title: Vice President
<PAGE> 1
EXHIBIT 10.15.5
FIFTH AMENDMENT TO NOTE PURCHASE AGREEMENT
This Fifth Amendment to Note Purchase Agreement (this "Fifth Amendment")
dated as of August 6, 1997 is between Universal Seismic Associates, Inc., a
Delaware corporation (the "Company"), and RIMCO Partners, L.P., a Delaware
limited partnership, RIMCO Partners, L.P. II, a Delaware limited partnership,
RIMCO Partners, L.P. III, a Delaware limited partnership, and RIMCO Partners,
L.P. IV, a Delaware limited partnership (collectively, the "Noteholders").
Preliminary Statements
A. The Company and the Noteholders have heretofore entered into
that certain Note Purchase Agreement, dated January 19, 1996, as amended by that
certain First Amendment dated May 28, 1996, that certain Second Amendment dated
August 13, 1996, that certain Third Amendment dated December 20, 1996 and that
certain Fourth Amendment dated March 27, 1997 (as so amended, the "Note
Agreement").
B. The Company and the Noteholders now desire to amend the Note
Agreement with respect to the matters set forth herein.
C. Capitalized terms used herein shall have the respective
meanings described thereto in the Note Agreement unless herein defined or the
context shall otherwise require.
Agreements
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the Company and the Noteholders agree as follows:
Section 1. Amendments.
The following defined terms in Annex A of the Note Agreement are amended
in their entirety to read as follows:
"New Company Note Agreement" means that certain Note Purchase
Agreement, dated May 28, 1996, among the Company and the Noteholders
(other than RIMCO Partners, L.P. III), as amended or modified from time to
time, that certain Note Purchase Agreement, dated August 6, 1997, among the
Company and the Noteholders, as amended or modified from time to time and
any other note purchase agreement among the Company and any of the
Noteholders entered into from time to time in the future.
<PAGE> 2
"New Senior Notes" means the 1O% Senior Secured General
Obligation Notes, in the maximum aggregate principal amount of $6,500,000
issued by the Company under the New Company Note Agreement, dated May 28,
1996, the 12% Senior Secured General Obligation Notes, in the maximum
aggregate principal amount of $2,000,000 issued by the Company under the
New Company Note Agreement dated March 27, 1997 and the 12% Senior Secured
General Obligation Notes, in the maximum aggregate principal amount of
$2,000,000 issued by the Company under the New Company Note Agreement
dated August 6, 1997 and any other notes issued by the Company to any of
the Noteholders under any New Company Note Agreement.
Section 2. Representations and Warranties of the Company.
2.1 The Company represents and warrants to the Noteholders that:
(a) this Fifth Amendment has been duly authorized, executed
and delivered by it and this Fifth Amendment constitutes the legal,
valid and binding obligation of the Company enforceable against it in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights
generally;
(b) The Note Agreement as amended by this Fifth Amendment,
constitutes the legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
(c) the execution, delivery and performance by the Company
of this Fifth Amendment (i) has been duly authorized by all requisite
corporate action and, if required, shareholder action, (ii) does not
require the consent or approval of any governmental or regulatory
body or agency, and (iii) will not (A) violate (1) any provision of
law, statute, rule or regulation or its certificate of incorporation
or bylaws, (2) any order of any court or any rule, regulation or
order of any other agency or government binding upon it, or (3) any
provision of any material indenture, agreement or other instrument to
which it is a party or by which its properties or assets are or may
be bound, or (B) result in a breach or constitute (alone or with due
notice or lapse of time or both) a default under any such indenture,
agreement or other instrument;
(d) as of the date hereof and after giving effect to this
Fifth Amendment, no Default or Event of Default has occurred which is
continuing; and
(e) all representations and warranties contained in Article
V of the Note Agreement and in the other Transaction Documents are
true and correct in all material respects with the same force and
effect as if made by the Company on and as of the date hereof.
-2-
<PAGE> 3
Section 3. Conditions to Effectiveness of This Fifth Amendment.
3.1 This Fifth Amendment shall not become effective until, and shall
become effective when, each of the following conditions shall have been
satisfied:
(a) executed counterparts of this Fifth Amendment, duly
executed by the Company and the Noteholders, shall have been
delivered to the Noteholders;
(b) the Noteholders shall have received a copy of the
resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance by the Company of this Fifth
Amendment, certified by its Secretary or an Assistant Secretary;
(c) the representations and warranties of the Company
set forth in Section 2 hereof are true and correct on and as of the
date hereof; and
(d) the Noteholders shall have received the favorable
opinion of counsel to the Company as to the matters set forth in
Sections 2.1(a), 2.1(b) and 2.1(c) hereof, which opinion shall be in
form and substance satisfactory to the Noteholders.
Section 4. Payment of Noteholders' Counsel Fees and Expenses.
4.1 The Company agrees to pay upon demand, the reasonable fees and
expenses of Andrews & Kurth L.L.P., counsel to the Noteholders, in connection
with the negotiation, preparation, approval, execution and delivery of this
Fifth Amendment.
Section 5. Miscellaneous.
5.1 This Fifth Amendment shall be construed in connection with and as
part of the Note Agreement, and except as modified and expressly amended by
this Fifth Amendment, all terms, conditions, and covenants contained in the
Note Agreement, the Notes and the other Transaction Documents are hereby
ratified and shall be and remain in full force and effect.
5.2 Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this Fifth Amendment
may refer to the Note Agreement without making specific reference to this Fifth
Amendment but nevertheless all such references shall include this Fifth
Amendment unless the context otherwise requires.
5.3 The descriptive headings of the various Sections or parts of this
Fifth Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
5.4 This Fifth Amendment shall be governed by and construed in
accordance with New York law.
-3-
<PAGE> 4
UNIVERSAL SEISMIC ASSOCIATES, INC.
By: /s/ RONALD L. ENGLAND
----------------------------
Name: Ronald L. England
Title: Chief Financial Officer
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III, and
RIMCO PARTNERS, L.P. IV
By: Resource Investors Management Company
Limited Partnership, their general partner
By: RIMCO Associates, Inc.,
its general partner
By: /s/ A. L. JORDEN
----------------------------
Name: A. L. Jorden
Title: Vice President
-4-
<PAGE> 1
EXHIBIT 10.24.3
THIRD AMENDMENT TO NOTE PURCHASE AGREEMENT
This Third Amendment to Note Purchase Agreement (this "Third
Amendment") dated as of August 6, 1997 is between Universal Seismic Associates,
Inc., a Delaware corporation (the "Company"), and RIMCO Partners, L.P., a
Delaware limited partnership, RIMCO Partners, L.P. II, a Delaware limited
partnership, and RIMCO Partners, L.P. IV, a Delaware limited partnership
(collectively, the "Noteholders").
Preliminary Statements
A. The Company and the Noteholders have heretofore entered into that
certain Note Purchase Agreement, dated May 28, 1996 as amended by that certain
First Amendment dated December 20, 1996 and that certain Second Amendment dated
March 27, 1997 (as so amended the "Note Agreement").
B. The Company and the Noteholders now desire to further amend the
Note Agreement with respect to the matters set forth herein and to amend the
Notes issued pursuant to the terms thereof.
C. Capitalized terms used herein shall have the respective meanings
described thereto in the Note Agreement unless herein defined or the context
shall otherwise require.
Agreements
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the Company and the Noteholders agree as follows:
Section 1. Amendments.
1.1 Section 10.01 of the Note Agreement is amended in its entirety to
read as follows:
"Section 10.01. Restrictions on Indebtedness. The Company will
not, and will not permit any Subsidiary to, create, incur, assume,
Guaranty or permit to exist an Indebtedness except:
(a) the Notes;
(b) the Existing Senior Notes;
(c) the Subsidiary Notes;
(d) the New Senior Notes; and
(e) Indebtedness outstanding under the Fidelity Funding
Agreement."
<PAGE> 2
1.2 The following defined terms shall be added in alphabetical order
to Annex A of the Note Agreement:
"New Company Note Agreement" means that certain Note Purchase
Agreement dated March 27, 1997 among the Company and the Noteholders,
as amended or modified from time to time, that certain Note Purchase
Agreement dated August 6,1997, among the Company and the Noteholders,
as amended or modified from time to time and any other note purchase
agreement among the Company and any of the Noteholders entered into
from time to time in the future.
"New Senior Notes" means the 12% Senior Secured General
Obligation Notes, in the maximum aggregate principal amount of
$2,000,000 issued by the Company under the New Company Note Agreement
dated March 27, 1997, the 12% Senior Secured General Obligation
Notes, in the maximum aggregate principal amount of $2,000,000 issued
by the Company under the New Company Note Agreement dated August 6,
1997 and any other notes issued by the Company to any of the
Noteholders under any New Company Note Agreement.
Section 2. Representations and Warranties of the Company.
2.1 The Company represents and warrants to the Noteholders that:
(a) this Third Amendment has been duly authorized, executed
and delivered by it and this Third Amendment constitutes the legal,
valid and binding obligation of the Company enforceable against it in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights
generally;
(b) The Note Agreement and the Notes, as amended by this Third
Amendment, constitute the legal, valid and binding obligations of the
Company enforceable against it in accordance with their respective
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally;
(c) the execution, delivery and performance by the Company of
this Third Amendment (i) has been duly authorized by all requisite
corporate action and, if required, shareholder action, (ii) does not
require the consent or approval of any governmental or regulatory body
or agency, and (iii) will not (A) violate (1) any provision of law,
statute, rule or regulation or its certificate of incorporation or
bylaws, (2) any order of any court or any
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<PAGE> 3
rule, regulation or order of any other agency or government binding
upon it, or (3) any provision of any material indenture, agreement or
other instrument to which it is a party or by which its properties or
assets are or may be bound, or (B) result in a breach or constitute
(alone or with due notice or lapse of time or both) a default under
any such indenture, agreement or other instrument;
(d) as of the date hereof and after giving effect to this Third
Amendment, no Default or Event of Default has occurred which is
continuing; and
(e) all representations and warranties contained in Article
V of the Note Agreement and in the other Transaction Documents are
true and correct in all material respects with the same force and
effect as if made by the Company on and as of the date hereof.
Section 3. Conditions to Effectiveness of This Third Amendment.
3.1 This Third Amendment shall not become effective until, and shall
become effective when, each of the following conditions shall have been
satisfied:
(a) executed counterparts of this Third Amendment, duly executed
by the Company and the Noteholders, shall have been delivered to the
Noteholders;
(b) the Noteholders shall have received a copy of the
resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance by the Company of this Third
Amendment, certified by its Secretary or an Assistant Secretary;
(c) the representations and warranties of the Company set forth
in Section 2 hereof are true and correct on and as of the date hereof;
and
(d) the Noteholders shall have received the favorable opinion of
counsel to the Company as to the matters set forth in Sections 2.1(a),
2.1(b) and 2.1(c) hereof, which opinion shall be in form and substance
satisfactory to the Noteholders.
Section 4. Payment of Noteholders' Counsel Fees and Expenses.
4.1 The Company agrees to pay upon demand, the reasonable fees and
expenses of Andrews & Kurth L.L.P., counsel to the Noteholders, in connection
with the negotiation, preparation, approval, execution and delivery of the Third
Amendment.
Section 5. Miscellaneous
5.1 This Third Amendment shall be construed in connection with and as
part of the Note Agreement, and except as expressly amended by this Third
Amendment, all terms, conditions and
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<PAGE> 4
covenants contained in the Note Agreement, the Notes and the other Transaction
Documents are hereby ratified and shall be and remain in full force and effect.
5.2 Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this Third Amendment
may refer to the Note Agreement and the Notes without making specific reference
to this Third Amendment but nevertheless all such references shall include this
Third Amendment unless the context otherwise requires.
5.3 The descriptive headings of the various Sections or parts of this
Third Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
5.4 This Third Amendment shall be governed by and construed in
accordance with New York law.
UNIVERSAL SEISMIC ASSOCIATES, INC.
By: /s/ RONALD L. ENGLAND
--------------------------
Name: Ronald L. England
Title: Chief Financial 0fficer
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, L.P. 11, and
RIMCO PARTNERS, L.P. IV
By: Resource Investors Management Company
Limited Partnership, their general partner
By: RIMCO Associates, Inc.,
its general partner
By: /s/ A. L. JORDEN
--------------------------
Name: A. L. Jorden
Title: Vice President
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<PAGE> 1
EXHIBIT 10.32.1
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT
This First Amendment to Note Purchase Agreement (this "First Amendment")
dated as of August 6, 1996 is between Universal Seismic Associates, Inc., a
Delaware corporation (the "Company"), and RIMCO Partners, L.P., a Delaware
limited partnership, RIMCO PARTNERS, L.P. II, a Delaware limited partnership,
RIMCO PARTNERS, L.P. III, a Delaware limited partnership, and RIMCO Partners,
L.P. IV, a Delaware limited partnership (collectively, the "Noteholders").
PRELIMINARY STATEMENTS
A. The Company and the Noteholders have heretofore entered into that
certain Note Purchase Agreement, dated March 27, 1997 (the "Note Agreement").
B. The Company and the Noteholders now desire to amend the Note Agreement
with respect to the matters set forth herein,
C. Capitalized terms used herein shall have the respective meanings
described thereto in the Note Agreement unless herein defined or the context
shall otherwise require.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the Company and the Noteholders agree as follows:
SECTION 1. AMENDMENTS.
1.1 Section 10.01 of the Note Agreement is amended in its entirety to
read as follows:
"SECTION 10.01. RESTRICTIONS ON INDEBTEDNESS. The Company will
not, and will not permit any Subsidiary to, create, incur, assume, Guaranty or
permit to exist any Indebtedness, except:
(a) the Notes;
(b) the Existing Senior Notes;
(c) the Subsidiary Notes;
(d) the New Senior Notes; and
(e) Indebtedness outstanding under the Fidelity Funding Agreement."
<PAGE> 2
1.2 The following defined terms shall be added in alphabetical order to
Annex A of the Note Agreement:
"New Company Note Agreement" means that certain Note Purchase
Agreement dated August 6, 1997, among the Company and the Noteholders,
as amended or modified from time to time and any other note purchase
agreement among the Company and any of the Noteholders entered into
from time to time in the future.
"New Senior Notes" means the 12% Senior Secured General Obligation
Notes, in the maximum aggregate principal amount of $2,000,000 issued
by the Company under the New Company Note Agreement dated August 6,
1997 and any other notes issued by the Company to any of the
Noteholders under any New Company Note Agreement.
Section 2. Representations and Warranties of the Company.
2.1 The Company represents and warrants to the Noteholders that:
(a) this First Amendment has been duly authorized, executed and
delivered by it and this First Amendment constitutes the legal, valid
and binding obligation of the Company enforceable against it in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights
generally;
(b) The Note Agreement, as amended by this First Amendment,
constitutes the legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
(c) the execution, delivery and performance by the Company of
this First Amendment (i) has been duly authorized by all requisite
corporate action and, if required, shareholder action, (ii) does not
require the consent or approval of any governmental or regulatory body
or agency, and (iii) will not (A) violate (1) any provision of law,
statute, rule or regulation or its certificate of incorporation or
bylaws, (2) any order of any court or any rule, regulation or order of
any other agency or government binding upon it, or (3) any provision of
any material indenture, agreement, or other instrument to which it is
a party or by which its properties or assets are or may be bound, or
(B) result in a breach or constitute (alone or with due notice or lapse
of time or both) a default under any such indenture, agreement or other
instrument;
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<PAGE> 3
(alone or with due notice or lapse of time or both)a default under any
such indenture, agreement or other instrument;
(d) as of the date hereof and after giving effect to this First
Amendment, no Default or Event of Default has occurred which is
continuing; and
(e) all representations and warranties contained in Article V
of the Note Agreement and in the other Transaction Documents are true
and correct in all material respects with the same force and effect as
if made by the Company on and as of the date hereof.
Section 3. Conditions to Effectiveness of this First Amendment.
3.1 This First Amendment shall not become effective until, and shall
become effective when, each of the following conditions shall have been
satisfied:
(a) executed counterparts of this First Amendment, duly executed
by the Company and the Noteholders, shall have been delivered to the
Noteholders;
(b) the Noteholders shall have received a copy of the resolutions
of the Board of Directors of the Company authorizing the execution,
delivery and performance by the Company of this First Amendment,
certified by its Secretary or an Assistant Secretary;
(c) the representations and warranties of the Company set forth
in Section 2 hereof are true and correct on and as of the date hereof,
and
(d) the Noteholders shall have received the favorable opinion of
counsel to the Company as to the matters set forth in Sections 2.1(a),
2.1(b) and 2.1(c) hereof, which opinion shall be in form and substance
satisfactory to the Noteholders.
Section 4. Payment of Noteholders' Counsel Fees and Expenses.
4.1 The Company agrees to pay upon demand, the reasonable fees and
expenses of Andrews & Kurth L.L.P., counsel to the Noteholders, in connection
with the negotiation, preparation, approval, execution and delivery of this
First Amendment.
Section 5. Miscellaneous.
5.1 This First Amendment shall be construed in connection with and as
part of the Note Agreement, and except as modified and expressly amended by
this First Amendment, all terms, conditions, and covenants contained in the
Note Agreement, the Notes and the other Transaction Documents are hereby
ratified and shall be and remain in full force and effect.
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<PAGE> 4
without making specific reference to this First Amendment but nevertheless all
such references shall include this First Amendment unless the context otherwise
requires.
5.3 The descriptive headings of the various Sections or parts of this
First Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
5.4 This First Amendment shall be governed by and construed in
accordance with New York law.
UNIVERSAL SEISMIC ASSOCIATES, INC.
By: /s/ RONALD L. ENGLAND
----------------------------------
Name: Ronald L. England
Title: Chief Financial Officer
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III, AND
RIMCO PARTNERS, L.P. IV
By: RESOURCE INVESTORS MANAGEMENT COMPANY
LIMITED PARTNERSHIP, THEIR GENERAL PARTNER
By: RIMCO ASSOCIATES, INC.,
ITS GENERAL PARTNER
By: /s/ A. L. JORDEN
----------------------------------
Name: A. L. Jorden
Title: Vice President
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<PAGE> 1
EXHIBIT 10.32.2
================================================================================
UNIVERSAL SEISMIC ASSOCIATES, INC.
$2,000,000
12% Senior Secured General Obligation Notes
---------------
NOTE PURCHASE AGREEMENT
---------------
Dated as of August 6, 1997
================================================================================
<PAGE> 2
NOTE PURCHASE AGREEMENT
Note Purchase Agreement dated as of August 6, 1997 among UNIVERSAL SEISMIC
ASSOCIATES, INC., a Delaware corporation (the "Company"), and RIMCO PARTNERS,
L.P., a Delaware limited partnership, RIMCO PARTNERS, L.P. 11, a Delaware
limited partnership, RIMCO PARTNERS, L.P. 111, a Delaware limited partnership,
and RIMCO PARTNERS, L.P. IV, a Delaware limited partnership (collectively, the
"Noteholders").
In consideration of the mutual covenants herein contained, the Company and
the Noteholders agree as follows:
ARTICLE I
DEFINITIONS, ETC.
Section 1.01. Certain Defined Terms. Capitalized terms used in this
Agreement and not otherwise defined herein shall have the respective meanings
set forth in Annex A attached hereto (such meanings to be equally applicable to
both singular and plural forms of the terms defined).
Section 1.02. Covenant Construction. Each covenant contained herein shall
be construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
Section 1.03. Other Rules of Construction. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. All references herein to articles, sections, annexes, exhibits and
schedules shall, unless the context requires a different construction, be
deemed to be references to the articles and sections of this Agreement and the
annexes, exhibits and schedules attached hereto and made a part hereof. In this
Agreement, unless a clear contrary intention appears, the word "including" (and
with correlative meaning "include") means including, without limiting the
generality of any description preceding such term. The headings of the various
articles and sections of this Agreement are for convenience only and shall not
affect the meaning of the terms and conditions of this Agreement. No provision
of this Agreement shall be interpreted or construed against any party solely
because that party or its legal representative drafted such provision.
<PAGE> 3
ARTICLE II
SALE OF NOTES
Section 2.01. Notes. The Company will authorize the issue and sale of
$2,000,000 aggregate principal amount of its 12% Senior Secured General
Obligation Notes (the "Notes"). Subject to the terms and conditions of this
Agreement, at the Closing provided for in Article 111, the Company will issue
and sell to the Noteholders, and the Noteholders will purchase from the
Company, Notes in the principal amount specified opposite such Noteholder's
name in Schedule A at the purchase price of 100% of the principal amount
thereof. The Notes shall be substantially in the form set out in Exhibit 2.01,
with such changes therefrom, if any, as may be approved by the Noteholders and
the Company.
ARTICLE III
CLOSING
The sale and purchase of the Notes to be purchased by the Noteholders
shall occur at the offices of Andrews & Kurth, L.L.P., 600 Travis, Houston,
Texas 77002, at 1 0:00 a.m., Houston time, at a closing (the "Closing") on
August 6, 1997. At the Closing the Company will deliver to each Noteholder the
Note to be purchased by such Noteholder, registered in such Noteholder's name,
against delivery by such Noteholder to or for the account of the Company of
immediately available funds in the amount of the purchase price therefor by
wire transfer to the Company or to such other Person designated by the Company
for the account of the Company. If at the Closing the Company shall fail to
tender such Notes to the Noteholders as provided above in this Article III, or
any of the conditions specified in Article IV shall not have been fulfilled to
the Noteholders' satisfaction, the Noteholders shall, at the Noteholders'
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights the Noteholders may have by reason of such failure
or such nonfulfillment.
ARTICLE IV
CONDITIONS TO CLOSING
The Noteholders' obligation to purchase and pay for the Notes to be sold
to the Noteholders at the Closing is subject to the fulfillment to the
Noteholders' satisfaction, prior to or at the Closing, of the following
conditions:
Section 4.01. Execution of Documents. The Noteholders shall have received
the following agreements (together with this Agreement, collectively, the
"Transaction Documents"), in such number of counterparts as the Noteholders
may reasonably request, each dated the date of the Closing and duly executed
by the Persons indicated below:
(a) the Notes duly executed by the Company;
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<PAGE> 4
(b) the Security Documents duly executed by the Company and Universal
Seismic Acquisition, Inc. as appropriate; and
(c) amendments to such of the Prior Transaction Documents as the
Noteholders shall deem appropriate to permit the purchase and sale of the
Notes, such amendments to be in a form reasonably satisfactory to the
Noteholders.
Section 4.02. Perfection of Liens. The Noteholders shall have received
evidence, in form and substance satisfactory to the Noteholders, that the
Liens contemplated by the Security Documents have been duly perfected in
accordance with applicable law and constitute a first priority Lien on the
Collateral, including (a) acknowledgment copies of UCC financing statements
filed with the Secretaries of State of Texas, Alabama, California, Florida,
Louisiana, Mississippi, New Mexico and Ohio and the Oklahoma County Clerk, (b)
a search of the lien records of the Secretaries of State of Texas, Alabama,
California, Florida, Louisiana, Mississippi, New Mexico and Ohio and the
Oklahoma County Clerk and (c) notation of the Noteholders' Lien on each
certificate of title pertaining to the Collateral.
Section 4.03. Certificates. The Company shall have delivered to the
Noteholders:
(a) an Officer's Certificate, dated the date of the Closing,
certifying that the conditions specified in Section 4.05 and Section 4.06
have been fulfilled; and
(b) a certificate certifying as to the resolutions attached thereto
and other corporate proceedings relating to the authorization, execution
and delivery of the Notes and the other Transaction Documents.
Section 4.04. Opinion of Counsel. The Noteholders shall have received
opinions in form and substance satisfactory to the Noteholders, dated the date
of the Closing from Boyer, Ewing & Harris, Incorporated, counsel for the
Company, covering the matters set forth in Exhibit 4.04 and covering such other
matters incident to the transactions contemplated hereby as the Noteholders or
the Noteholders' counsel may reasonably request (and the Company hereby
instructs its counsel to deliver such opinion to the Noteholders).
Section 4.05. Representations and Warranties. The representations
and warranties of the Company in this Agreement and the other Transaction
Documents shall be correct when made and at the time of the Closing.
Section 4.06. Performance; No Default. The Company shall have
performed and complied with all agreements and conditions contained in this
Agreement or the other Transaction Documents required to be performed or
complied with by it prior to or at the closing and after giving effect to the
issue and sale of the Notes (and the application of the proceeds thereof as
contemplated by Section 5.14) no Default or Event of Default shall have
occurred and be continuing.
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<PAGE> 5
Section 4.07 Payment of Special Counsel Fees. Without limiting the
provisions of SECTION 13.01, the Company shall have paid on or before the
Closing the reasonable fees, charges and disbursements of the Noteholders'
special counsel to the extent reflected in a statement of such counsel rendered
to the Company at least one Business Day prior to the Closing.
Section 4.08 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
reasonably satisfactory to the Noteholders and the Noteholders' special
counsel, and the Noteholders and the Noteholders' special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as the Noteholders or they may reasonably request.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Noteholders that:
Section 5.01. Organization; Power and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and is duly qualified as a foreign corporation
and is in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the failure to be
so qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Company has the
corporate power and authority to own or hold under lease the properties it
purports to own or hold under lease, to transact the business it transacts and
proposes to transact, to execute and deliver this Agreement mid the other
Transaction Documents and to perform the provisions hereof and thereof.
Section 5.02. Authorization, etc. This Agreement and the other
Transaction Documents have been duly authorized by all necessary corporate
action on the part of the Company, and this Agreement constitutes, and upon
execution and delivery thereof each other Transaction Document will constitute,
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
(b) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 5.03. Compliance With Laws, Other Instruments, etc. The
execution, delivery and performance by the Company of this Agreement and the
other Transaction Documents will not (a) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect
of any property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of their
respective properties may be bound or affected, (b)
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<PAGE> 6
conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator
or Governmental Authority applicable to the Company or any Subsidiary or (c)
violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary.
SECTION 5.04. Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the other Transaction Documents.
SECTION 5.05. Subsidiaries. Schedule 5.05 contains complete and correct
lists of the Company's Subsidiaries, showing, as to each Subsidiary, the
correct name thereof, the jurisdiction of its organization, and the percentage
of shares of each class of its capital stock or similar equity interests
outstanding owned by the Company and each other Subsidiary. No Subsidiary is a
party to, or otherwise subject to any legal restriction or any agreement (other
than this Agreement and customary limitations imposed by corporate law
statutes) restricting the ability of such Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to the Company or
any of its Subsidiaries that owns outstanding shares of capital stock or
similar equity interests of such Subsidiary.
SECTION 5.06. Financial Statements. The consolidated balance sheet of the
Company and its Subsidiaries as at June 30, 1996, and the related consolidated
statements of income, retained earnings and cash flows for the 12-month period
then ended, copies of which the Company has delivered to each Noteholder,
fairly present in all material respects the consolidated financial position of
the Company and its Subsidiaries as of such date and the consolidated results
of their operations and cash flows for such period and have been prepared in
accordance with GAAP consistently applied throughout the periods involved
except as set forth in the notes thereto.
SECTION 5.07. Disclosure. This Agreement, the documents, certificates or
other writings delivered to the Noteholders by or on behalf of the Company in
connection with the transactions contemplated hereby, the financial statements
referred to in Section 5.06 and the Form 10-Qs filed by the Company with the
Securities Exchange Commission since June 30, 1996, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading. Since June 30,
1996, except as otherwise disclosed in writing to the Noteholders there has
been no change in the financial condition, operations, business, properties or
prospects of the Company or any Subsidiary except changes that individually
or in the aggregate could not reasonably be expected to have a Material Adverse
Effect. There is no fact known to the Company that could reasonably be
expected to have a Material Adverse Effect that has not been set forth herein
or in the other documents, certificates and other writings (including the
financial statements referred to in Section 5.06) delivered to the Noteholders
by or on behalf of the Company specifically for use in connection with the
transactions contemplated hereby.
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<PAGE> 7
Section 5.08. Litigation. Except as disclosed in Schedule 5.08, there are
no actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary or any property
of the Company or any Subsidiary in any court or before any arbitrator of any
kind or before or by any Governmental Authority that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.09. Observance of Agreements, Statutes and Orders. Neither the
Company nor any Subsidiary is in default under any term of any agreement or
instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority
or is in violation of any applicable law, ordinance, rule or regulation
(including without limitation Environmental Laws) of any Governmental
Authority, which default or violation, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
Section 5.10. Taxes. The Company and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the
amount of which is not individually or in the aggregate Material or (ii) the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP. The Company knows of no basis for any other tax or assessment that,
if imposed, could reasonably be expected to have a Material Adverse Effect. The
charges, accruals and reserves on the books of the Company and its Subsidiaries
in respect of Federal, state or other taxes for all fiscal periods are adequate
in all material respects. The Federal income tax liabilities of the Company and
its Subsidiaries have been determined by the Internal Revenue Service and paid
for all fiscal years up to and including the fiscal year ended June 30, 1996.
Section 5.11. Title to Property. The Company and its Subsidiaries have
good and sufficient title to their respective properties that individually or
in the aggregate are Material, including all such properties reflected in the
most recent audited balance sheet referred to in Section 5.06 or purported to
have been acquired by the Company or any Subsidiary after said date, in each
case free and clear of Liens other than those permitted by this Agreement. All
leases that individually or in the aggregate are Material are valid and
subsisting and are in full force and effect in all material respects.
Section 5.12. Licenses, Permits, etc. The Company and its subsidiaries own
or possess all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known conflict with
the rights of others. To the best knowledge of the Company, (a) no product of
the Company infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademarks, trade name or other
right owned by any
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other Person; and (b) there is no Material violation by any Person of any right
of the Company or any of its Subsidiaries with respect to any patent,
copyright, service mark, trademark, trade name or other right owned or used by
the Company or any of its Subsidiaries.
Section 5.13. Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and administered
each Plan, if any, in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV or ERISA
or the penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in Section 3 of ERISA), and no event, transaction or
condition has occurred or exists that could reasonably be expected to result in
the incurrence of any such liability by the Company or any ERISA Affiliate, or
in the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each of
the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "benefit liabilities" has the
meaning specified in section 4001 of ERISA and the terms "current value" and
"present value" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation (determined as of the
last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material.
Section 5.14. Use of Proceeds; Margin Regulations. The Company will apply
the proceeds of the sale of the Notes to pay for the settlement of that certain
lawsuit styled The Universal Seismac Associates, Inc. Stockholders' Protective
Committee, Michael T. Kanarellis, and Robert J. Kecseg vs. Michael J. Pawelek,
Ronald L. England, Calvin G. Cobb, Gary Milavec, Steven Oakes, Rick Trapp,
Universal Seismic Associates, Inc., RIMCO Associates, Inc.; and Resource
Investors Management Co., L.P.; CA No. 97-22 (RRM) in the United States District
Court of the District of Delaware and for legal fees and accounting fees related
thereto. No part of the proceeds from the sale
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of the Notes hereunder will be used, directly or indirectly, for the purpose of
buying or carrying any margin stock within the meaning of Regulation G of the
Board of Governors of the Federal Reserve System (12 CFR 207), or for the
purpose of buying or carrying or trading in any securities under such
circumstances as to involve the Company in a violation of Regulation X of said
Board (12 CFR 224) or to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR 220).
Section 5.15. Status under Certain Statutes. Neither the Company nor any
Subsidiary is subject to regulation under the Investment Company Act of 1940,
as amended, the Public Utility Holding Company Act of 1935, as amended, the
Interstate Commerce Act, as amended, or the Federal Power Act, as amended.
Section 5.16. Capitalization. The authorized capital stock of the Company
consists solely of 20,000,000 shares of $.0001 par common stock, of which
5,234,109 shares are issued and outstanding.
Section 5.17. Securities Matters. Other than offers to Accredited
Investors, neither the Company nor anyone acting on its behalf has directly or
indirectly offered the Notes or any part thereof or any similar securities for
sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, anyone other than the
Noteholders named in Schedule A. Neither the Company nor anyone acting on its
behalf has taken or will take any action which would subject the issuance and
sale of the Notes to the registration and prospectus delivery provisions of the
Securities Act.
Section 5.18. Environmental Matters. Neither the Company nor any
Subsidiary has knowledge of any claim or has received any notice of any claim,
and no proceeding has been instituted raising any claim against the Company or
any of its Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets, alleging any
damage to the environment or violation of any Environmental Laws, except, in
each case, such as could not reasonably be expected to result in a Material
Adverse Effect. Except as otherwise disclosed to the Noteholders in writing,
(a) neither the Company nor any Subsidiary has knowledge of any facts which
would give rise to any claim, public or private, of violation of Environmental
Laws or damage to the environment emanating from, occurring on or in any way
related to real properties now or formerly owned, leased or operated by any of
them or to other assets or their use, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect; (b) neither the
Company nor any of its Subsidiaries has stored any Hazardous Materials on real
properties now or formerly owned, leased or operated by any of them and has not
disposed of any Hazardous Materials in a manner contrary to any Environmental
Laws in each case in any manner that could reasonably be expected to result in
a Material Adverse Effect; and (c) all buildings on all real properties now
owned, leased or operated by the Company or any of its Subsidiaries are in
compliance with applicable Environmental Laws, except where failure to comply
could not reasonably be expected to result in a Material Adverse Effect.
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ARTICLE VI
REPRESENTATIONS OF THE PURCHASER
Section 6.01. Purchase for Investment. Each Noteholder represents that it
is acquiring its Notes for its own account or for one of its separate accounts
(or for the account of trusts for which it is trustee) for investment with no
intention of presently distributing or reselling the same, subject,
nevertheless, to its right to dispose of, in compliance with applicable
securities laws, its respective Notes, or any part of any thereof held by it,
if at some future time in its sole discretion it deems it advisable so to do.
Each Noteholder hereby agrees that it will not sell, transfer or otherwise
dispose of its Notes in violation of the Securities Act.
Section 6.02. Status; No Registration. Each Noteholder represents that it
is an Accredited Investor. Each Noteholder acknowledges that the Notes have not
been registered under the Securities Act, and that such Notes must be held
indefinitely unless they are subsequently registered under the Securities Act
or an exemption from such registration is available.
ARTICLE VII
PAYMENT OF THE NOTES
Section 7.01. Place of Payment. The Company will pay all sums becoming due
to any Noteholder under any Transaction Document by the method and at the
address specified for such purpose below such Noteholder's name in Schedule A,
or by such other method or at such other address as such Noteholder shall have
from time to time specified to the Company in writing for such purpose, without
the presentation or surrender of such Note or the making of any notation
thereon, except that upon written request of the Company made concurrently with
or reasonably promptly after payment or prepayment in full of any Note, the
Noteholders shall surrender such Note for cancellation, reasonably promptly
after any such request, to the Company at its principal executive office.
Section 7.02. Payments Due on Non-business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of
principal of or interest on any Note that is due on a date other than a
Business Day shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of the interest
payable on such next succeeding Business Day.
Section 7.03. Optional Prepayments of Notes. (a) The Company may, at its
option, without notice, penalty, premium or fee, prepay at any time all, or
from time to time any part of, the Notes, in an amount not less than $75,000 in
the case of a partial prepayment, at 100% of the principal amount so prepaid,
plus accrued interest on such principal amount.
(b) In the case of each partial prepayment of the Notes, the principal
amount of the Notes to be prepaid shall be allocated among all of the Notes at
the time of outstanding in
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proportion, as nearly as practicable, to the respective unpaid principal
amounts thereof not theretofore called for prepayment.
(c) Any Note paid or prepaid in full shall be surrendered to the Company
and canceled and shall not be reissued, and no Note shall be issued in lieu of
any prepaid principal amount of any Note.
Section 7.04. Purchase of Notes. The Company will not, and will not permit
any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except upon the payment or prepayment
of the Notes in accordance with the terms of this Agreement and the Notes. The
Company will promptly cancel all Notes acquired by it or any Affiliate pursuant
to any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.
ARTICLE VIII
INFORMATION AS TO COMPANY
Section 8.01. Financial and Business Information. The Company shall
deliver to each of the Noteholders:
(a) Within 45 days after the end of each quarterly fiscal period in each
fiscal year of the Company, copies of (i) a consolidated balance sheet of the
Company and its Subsidiaries as at the end of such quarter, and (ii)
consolidated statements of income, changes in shareholders' equity and cash
flows of the Company and its Subsidiaries, for such quarter and for the portion
of the fiscal year ending with such quarter, setting forth in each case in
comparative form the figures for the corresponding periods in the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP
applicable to quarterly financial statements generally, and certified by a
Senior Financial Officer as fairly presenting, in all material respects, the
financial position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments.
(b) Within 90 days after the end of each fiscal year of the Company,
copies of (i) a consolidated balance sheet of the Company and its Subsidiaries,
as at the end of such year, and (ii) consolidated statements of income, changes
in shareholders' equity and cash flows of the Company and its Subsidiaries, for
such year, setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance with
GAAP, and accompanied (A) by an opinion thereon of independent certified public
accounts of recognized national standing, which opinion shall state that such
financial statements present fairly, in all material respects, the financial
position of the companies being reported upon and their results of operations
and cash flows and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing standards, and
that such audit provides a reasonable basis for such opinion in the
circumstances, and (B) a certificate of such accountants stating that they
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have reviewed this Agreement and stating further whether, in making their
audit, they have become aware of any condition or event that then constitutes a
Default or an Event of Default, and, if they are aware that any such condition
or event then exists, specifying the nature and period of the existence
thereof.
(c) Within 25 days after the end of each calendar month, copies of (i) a
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such month, and (ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its Subsidiaries, for
such month and for the portion of the fiscal year ending with such month,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable detail,
prepared in accordance with GAAP applicable to monthly financial statements
generally, and certified by a Senior Financial Officer as fairly presenting, in
all material respects, the financial position of the companies being reported
on and their results of operations and cash flows, subject to changes resulting
from year-end adjustments.
(d) Within 60 days after the end of each calendar year, an appraisal
report, prepared by an independent appraisal firm reasonably acceptable to the
Noteholders, covering the Collateral and calculating the Collateral Liquidation
Value as of the end of such calendar year, all in form and substance
satisfactory to the Noteholders.
(e) Promptly upon their becoming available, one copy of (i) each financial
statement, report, notice or proxy statement sent by the Company or any
Subsidiary to public securities holders generally, and (ii) each regular or
periodic report, each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus and all amendments
thereto filed by the Company or any Subsidiary with the Securities and Exchange
Commission and of all press releases and other statements made available
generally by the Company or any Subsidiary to the public concerning
developments that are Material.
(f) Promptly, and in any event within five days after a Responsible
Officer becoming aware of the existence of any Default or Event of Default or
that any Person has given any notice or taken any action with respect to a
claimed default hereunder or that any Person has given any notice or taken any
action with respect to a claimed default of the type referred to in Section
11.01, a written notice specifying the nature and period of existence thereof
and what action the Company is taking or proposes to take with respect thereto;
(g) Promptly, and in any event within five days after a Responsible
Officer becoming aware of the following, a written notice setting forth the
nature thereof and the action, if any, that the Company or an ERISA Affiliate
proposes to take with respect thereto: (i) with respect to any Plan, any
reportable event, as defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof; or (ii) the taking by the PBGC of
steps to institute, or the threatening by the PBGC of the institution of,
proceeding under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by the Company
or any ERISA
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Affiliate of a notice from a Multiemployer Plan that such action has been taken
by the PBGC with respect to such Multiemployer Plan; or (iii) any event,
transaction or condition that could result in the incurrence of any liability
by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions, if such liability or Lien, taken
together with any other such liabilities or Liens then existing, could
reasonably be expected to be Material.
(h) Promptly, and in any event within 30 days of receipt thereof, copies
of any notice to the Company or any Subsidiary from any Federal or state
Governmental Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse Effect;
and
(i) With reasonable promptness, such other data and information relating
to the business, operations, affairs, financial condition, assets or properties
of the Company or any of its Subsidiaries or relating to the ability of the
Company to perform its obligations hereunder and under the Notes as from time
to time may be reasonably requested by any of Noteholder.
Section 8.02. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 8.01(a), Section 8.01(b) or
Section 8.01(c) shall be accompanied by a certificate of a Senior Financial
Officer setting forth: (a) the information (including detailed calculations)
required in order to establish whether the Company was in compliance with the
requirements of Section 10.03 hereof during the monthly, quarterly or annual
period covered by the statements then being furnished (including with respect
to each such Section, where applicable, the calculations of the maximum or
minimum amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or percentage
then in existence); and (b) a statement that such officer has reviewed the
relevant terms hereof and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions of the Company and its
Subsidiaries from the beginning of the monthly, quarterly or annual period
covered by the statements then being furnished to the date of the certificate
and that such review shall not have disclosed the existence during such period
of any condition or event that constitutes a Default or an Event of Default or,
if any such condition or event existed or exists (including, without
limitation, any such event or condition resulting from the failure of the
Company or any Subsidiary to comply with any Environmental Law), specifying the
nature and period of existence thereof and what action the Company shall have
taken or proposes to take with respect thereto.
Section 8.03. Inspection. The Company shall permit the representatives of
each Noteholder, at the expense of the Company and upon reasonable prior notice
to the Company, to visit and inspect any of the offices or properties of the
Company or any Subsidiary, to examine all their respective books of account,
records, reports and other papers, to make copies and extracts therefrom, and
to discuss their respective affairs, finances and accounts with their
respective officers
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and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts of
the Company and its Subsidiaries), all at such times and as often as may be
requested.
ARTICLE IX
AFFIRMATIVE COVENANTS
The Company covenants that so long as any of the Notes are outstanding:
Section 9.01. Compliance with Law; Contracts. The Company will, and will
cause each of its Subsidiaries to, comply with all laws, ordinances or
governmental rules or regulations to which each of them is subject, including,
without limitation, Environmental Laws, and will obtain and maintain in effect
all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent
necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company will, and will cause
each of its Subsidiaries to, comply with, and perform their respective
obligations under, each contract or agreement to which each is a party, unless,
in the good faith judgment of the Company, the failure to so comply or perform
could not reasonably be expected to have a Material Adverse Effect.
Section 9.02. Insurance. The Company will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated, including the insurance described in Schedule 9.02.
Section 9.03. Maintenance of Properties. The Company will, and will cause
each of its Subsidiaries to, maintain and keep, or cause to be maintained and
kept, their respective properties in good repair, working order and condition
(other than ordinary wear and tear), so that the business carried on in
connection therewith may be properly conducted at all times, provided that this
Section shall not prevent the Company or any Subsidiary from discontinuing the
operation and the maintenance of any of its properties if such discontinuance
is desirable in the conduct of its business and the Company has concluded that
such discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 9.04. Payment of Taxes and Claims. The Company will, and will
cause each of its Subsidiaries to, file all tax returns required to be filed in
any jurisdiction and to pay and discharge all taxes shown to be due and
payable on such returns and all other taxes, assessments,
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governmental charges, or levies imposed on them or any of their properties,
assets, income or franchises, to the extent such taxes and assessments have
become due and payable and before they have become delinquent and all claims
for which sums have become due and payable that have or might become a Lien on
properties or assets of the Company or any Subsidiary, provided that neither
the Company nor any Subsidiary need pay any such tax or assessment or claims if
(i) the amount, applicability or validity thereof is contested by the Company
or such Subsidiary on a timely basis in good faith and in appropriate
proceedings, and the Company or a Subsidiary has established adequate reserves
therefor in accordance with GAAP on the books of the Company or such Subsidiary
or (ii) the nonpayment of all such taxes and assessments in the aggregate could
not reasonably be expected to have a Material Adverse Effect.
Section 9.05. Corporate Existence, etc. The Company will at all times
preserve and keep in full force and effect its corporate existence. The Company
will at all times preserve and keep in full force and effect the corporate
existence of each of its Subsidiaries and all rights and franchises of the
Company and its Subsidiaries unless, in the good faith judgment of the Company,
the termination of or failure to preserve and keep in full force and effect
such corporate existence, right or franchise could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
ARTICLE X
NEGATIVE COVENANTS
The Company covenants that so long as any of the Notes are outstanding:
Section 10.01. Restrictions on Indebtedness. The Company will not, and
will not permit any Subsidiary to, create, incur, assume, Guaranty or permit to
exist any Indebtedness, except:
(a) the Notes;
(b) the Existing Senior Notes and any other notes issued by the Company in
favor of any of the Noteholders pursuant to a note purchase agreement
entered into by the Company and such Noteholders in the future;
(c) the Subsidiary Notes; and
(d) Indebtedness outstanding under the Fidelity Funding Agreement.
Section 10.02. Restrictions on Liens. The Company will not, and will not
permit any Subsidiary to, create, incur, assume, or permit to exist any Lien
with respect to any asset now owned or hereafter acquired, except:
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(a) Liens in favor of the Noteholders;
(b) Liens existing on the date hereof and permitted under the Existing
Transaction Documents;
(c) encumbrances consisting of easements of ingress or egress over real
property, where the same do not materially detract from the use or enjoyment of
such property by, or the value of such property to, the Company;
(d) Liens for taxes or assessments or governmental charges or levies, if
payment shall not at the time be required to be made in accordance with the
provisions of Section 9.04;
(e) any judgment lien, unless the judgment it secures shall not, within
30 days after the entry thereof, have been discharged or execution thereof
stayed pending appeal, or shall not have been discharged within 30 days after
the expiration of any such stay;
(f) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, laborers and materialmen incurred in the ordinary course of business
for sums not yet due or being contested in good faith; and
(g) Liens (other than liens created by section 4068 of ERISA) incurred on
pledges or deposits made in the ordinary course of business in connection with
workmen's compensation, unemployment insurance, social security laws or similar
legislation.
Section 10.03. Financial Covenants. The Company will not permit:
(a) its Current Assets at any time to be less than the sum of (i) its
Current Liabilities as at such date, minus (ii) any portion of such Current
Liabilities consisting of amounts under the Fidelity Funding Agreement that are
not due within one year of such date;
(b) its Tangible Net Worth at any time to be less than $7,000,000;
(c) the sum, determined as of the last day of each calendar month
beginning August 1997, of (i) its Net Income for the twelve month period then
ended, plus (i) any interest expense deducted in the calculation of Net Income
for such twelve month period, plus (iii) any depreciation and amortization
expense deducted in the calculation of Net Income for such twelve month period,
plus (v) any Federal income taxes deducted in the calculation of Net Income for
such twelve month period, to be less than $2,500,000; and
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(d) the ratio of (i) the Collateral Liquidation Value to (ii) the
aggregate outstanding principal balance of the Notes and the Existing
Senior Notes, to be less than 1.5 to 1.0 at any time.
Section 10.04. Restricted Payments. Except as contemplated by
the Transaction Documents and the Existing Transaction Documents, the Company
will not, and will not permit any Subsidiary, directly or indirectly, to make
or pay (a) any dividend or other distribution on any shares of the Company's
capital stock (including any dividends payable in shares of capital stock), (b)
any payment on account of the purchase, redemption, retirement or acquisition
of any shares of the Company's capital stock or any option, warrant or other
right to acquire such shares, or (c) any payments or other distributions to
Sierra Management, Inc.
Section 10.05. Merger, Consolidation, etc. The Company shall not
consolidate with or merge with any other Person or convey, transfer or lease
all or substantially all of its assets in a single transaction or series of
transactions to any Person.
Section 10.06. Restrictions on Asset Sales. Without the
Noteholders' prior written consent, the Company will not, and will not permit
any Subsidiary to, sell, transfer, assign, convey or otherwise dispose of an
interest in any asset now owned or hereafter acquired, except sales of assets
during each calendar year that have an aggregate Collateral Liquidation Value
of $150,000 or less.
Section 10.07. Transactions with Affiliates. The Company will
not, and will not permit any Subsidiary to, enter into directly or indirectly
any Material transaction or Material group of related transactions (including
without limitation the purchase, lease, sale or exchange of properties of any
kind or the rendering of any service) with any Affiliate (other than the
Company or another Subsidiary), except in the ordinary course and pursuant to
the reasonable requirements of the Company's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would be obtainable in a comparable arm's-length transaction
with a Person not an Affiliate,
Section 10.08. Change in Business. Except for oil and gas
exploration and production operations to be conducted by UNEXCO, the Company
will not, and will not permit any of its Subsidiaries to, directly or
indirectly engage to a material extent in any business other than those in
which it is presently engaged or that are directly related thereto, or
discontinue any of its existing lines of business or substantially alter its
method of doing business. Without limiting the generality of the foregoing,
the Company and its Subsidiaries (other than UNEXCO) shall not engage in any
oil and gas exploration and production operations or business.
Section 10.09. Fidelity Funding Agreement. Without the prior
written consent of the Noteholders, the Company will not, and will not permit
any of its Subsidiaries to amend, modify, or extend the Fidelity Funding
Agreement.
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Section 10.10. Restriction on Investment. Other than (a) the
common stock of UNEXCO owned by the Company on the date hereof, (b) Oil and Gas
Properties transferred to UNEXCO prior to the date hereof and (c) capital
contributions to UNEXCO that are applied directly to pay the Indebtedness owing
on the Subsidiary Notes, the Company will not, and will not permit any of its
Subsidiaries to, make any Investment in UNEXCO without the Noteholders' prior
written consent.
ARTICLE XI
DEFAULT AND REMEDIES
Section 11.01. Events of Default. An "Event of Default" shall
exist if any of the following conditions or events shall occur and be
continuing:
(a) the Company defaults in the payment of any principal or
interest on any Note when the same becomes due and payable, whether at
maturity, by declaration or otherwise; or
(b) the Company defaults in the performance of or compliance with
any term contained in Article X; or
(c) the Company defaults in the performance of or compliance with
any term contained herein (other than those referred to in paragraphs
(a) and (b) of this Section 11.01) and such default is not remedied
within 30 days after the earlier of (i) a Responsible Officer obtains
actual knowledge of such default or (ii) the Company receives written
notice of such default from any holder of a Note; or
(d) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this Agreement
or in any writing furnished in connection with the transactions
contemplated hereby proves to have been false or incorrect in any
Material respect on the date as of which made; or
(e) (i) the Company or any Subsidiary is in default (as principal
or as guarantor or other surety) in the payment of any principal of or
premium or interest on any Indebtedness that is outstanding in an
aggregate principal amount of at least $100,000 beyond any period of
grace provided with respect thereto, or (ii) the Company or any
Subsidiary is in default in the performance of or compliance with any
term of any evidence of any Indebtedness in an aggregate outstanding
principal amount of at least $100,000 or of any mortgage, indenture or
other agreement relating thereto or any other condition exists, and as
a consequence of such default or condition such Indebtedness has become,
or has been declared (or one or more Persons are entitled to declare
such Indebtedness to be), due and payable before its stated maturity or
before its regularly scheduled dates of payment, or (iii) as a
consequence of the occurance or continuation of any event or condition
(other than the passage of time or the right of the holder of
Indebtedness to convert such Indebtedness into
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equity interests), (x) the Company or any Subsidiary has become
obligated to purchase or repay Indebtedness before its regular maturity
or before its regularly scheduled dates of payment in an aggregate
outstanding principal amount of at least $100,000, or (y) one or more
Persons have the right to require the Company or any Subsidiary to
purchase or repay such Indebtedness; or
(f) the Company or any Subsidiary (i) is generally not paying, or
admits in writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the filing against it
of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law
of any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(g) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of its
Subsidiaries, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in
bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company or any of its Subsidiaries, or
any such petition shall be filed against the Company or any of its
Subsidiaries and such petition shall not be dismissed within 60 days; or
(h) a final judgment or judgments for the payment of money
aggregating in excess of $250,000 are rendered against one or more of
the Company and its Subsidiaries and such judgments are not, within 60
days after entry thereof, bonded, discharged or stayed pending appeal,
or are not discharged within 60 days after the expiration of such stay;
or
(i) an "Event of Default" exists under the Existing Company Note
Agreements or the Subsidiary Note Agreement; or
(j) the Company fails to own (both beneficially and of record)
100% of the common stock and other equity securities of UNEXCO; or
(k) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (ii) a notice of intent
to terminate any plan shall have been or is reasonably expected to be
filed with the PBGC or the PBGC shall have instituted proceedings under
ERISA section 4042 to terminate or appoint a trustee to administer any
Plan or the PBGC shall have notified the Company or
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<PAGE> 20
any ERISA Affiliate that a Plan may become a subject to any such
proceedings (iii) the aggregate "amount of unfunded benefit liabilities"
(within the meaning of section 4001 (a)(18) of ERISA) under all Plans,
determined in accordance with Title IV of ERISA, shall exceed $25,000,
(iv) the Company or any ERISA Affiliate shall have incurred or is
reasonably expected to incur any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans, (v) the Company or any ERISA Affiliate withdraws
from any Multiemployer Plan, (vi) the Company or any ERISA Affiliate
fails to make any contribution due, or payment to, any employee benefit
plan, or (vii) the Company or any Subsidiary establishes or amends any
employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of the Company or
any Subsidiary thereunder, and any such event or events described in
clauses (i) through (vii) above, either individually or together with
any other such event or events, could reasonably be expected to have a
Material Adverse Effect,
As used in this Section 11.0(j); the terms "employee benefit plan" and
"employee welfare benefit plan" shall have the respective meanings
assigned to such terms in Section 3 of ERISA.
Section 11.02. Acceleration.
(a) If an Event of Default with respect to the Company described
in paragraph (f) or (g) of Section 11.01 (other than an Event of
Default described in clause (i) of paragraph (f) or described in clause
(vi) of paragraph (f) by virtue of the fact that such clause encompasses
clause (i) of paragraph (f)) has occurred, all the Notes then
outstanding shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing,
the Required Holders at any time at its or their option, by notice or
notices to the Company, declare all the Notes then outstanding to be
immediately due and payable.
(c) If any Event of Default described in paragraph (a) of Section
11.01 has occurred and is continuing, any holder or holders of Notes at
the time outstanding affected by such Event of Default may at any time,
at its or their option, by notice or notices to the Company, declare all
the Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 11.02,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus all accrued and unpaid
interest thereon, shall all be immediately due and payable, in each and every
case without presentment, demand, notice of default, notice of intent to
accelerate, notice of acceleration, protest or further notice, all of which are
hereby waived.
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<PAGE> 21
Section 11.03. Other Remedies. If any Default or Event of
Default has occurred and is continuing, and irrespective of whether any Notes
have become or have been declared immediately due and payable under Section
11.02, the holder of any Note at the time outstanding may proceed to protect
and enforce the rights of such holder by an action at law, suit in equity or
other appropriate proceeding, whether for the specific performance of any
agreement contained herein or in any Note, or for an injunction against a
violation of any of the terms hereof or thereof, or in aid of the exercise of
any power granted hereby or thereby or by law or otherwise.
Section 11.04. No Waivers or Election of Remedies, Expenses,
etc. No course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 13.01,
the Company will pay to the holder of each Note on demand such further amount
as shall be sufficient to cover all reasonable costs and expenses of such
holder incurred in any enforcement or collection under this Article XI,
including, without limitation, reasonable attorneys' fees, expenses and
disbursements, together with interest on such amounts at the Default Rate
accruing from the date of demand.
ARTICLE XII
REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
Section 12.01. Registration of Notes. The Company shall keep at
its principal executive office a register for the registration and registration
of transfers of Notes. The name and address of each holder of one or more
Notes, each transfer thereof and the name and address of each transferee of one
or more Notes shall be registered in such register. Prior to due presentment
for registration of transfer, the Person in whose name any Note shall be
registered shall be deemed and treated as the owner and holder thereof for all
purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary. The Company shall give to any holder of a Note
promptly upon request therefor, a complete and correct copy of the names and
addresses of all registered holders of Notes.
Section 12.02. Transfer and Exchange of Notes. Subject to
compliance with all applicable securities laws, upon surrender of any Note at
the principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by
the registered holder of such Note or his attorney duly authorized in writing
and accompanied by the address for notices of each transferee of such Note or
part thereof), the Company shall execute and deliver, at the Company's expense,
one or more new Notes (as requested by the holder thereof) in exchange
therefor, in an aggregate principal amount equal to the unpaid principal amount
of the surrendered Note. Each such new Note shall be payable to such Person as
such holder may request and shall be substantially in the form specified
herein. Each such new Note shall be dated and bear
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<PAGE> 22
interest from the date to which interest shall have been paid on the
surrendered Note or dated the date of the surrendered Note if no interest shall
have been paid thereon.
Section 12.03. Replacement of Notes. Upon receipt by the Company
of evidence reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of any Note, and (a) in the case of loss,
theft or destruction, of indemnity reasonably satisfactory to it (provided that
if the holder of such Note is, or is a nominee for, an original Noteholder,
such Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or (b) in the case of mutilation, upon surrender and
cancellation thereof, the Company at its own expense shall execute and deliver,
in lieu thereof, a new Note, dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated Note
or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Transaction Expenses. Whether or not the
transactions contemplated hereby are consummated, the Company will pay all
reasonable costs and expenses (including reasonable attorneys' fees of a
special counsel and any local or other counsel) incurred by the Noteholders or
holder of a Note in connection with such transactions and in connection with
any amendments, waivers or consents under or in respect of this Agreement or
the other Transaction Documents (whether or not such amendment, waiver or
consent becomes effective), including, without limitation: (a) the reasonable
costs and expenses incurred in enforcing or defending (or determining whether
or how to enforce or defend) any rights under this Agreement or the other
Transaction Documents or in responding to any subpoena or other legal process
or informal investigative demand issued in connection with this Agreement or
the other Transaction Documents, or by reason of being a holder of any Note,
(b) the reasonable costs and expenses of negotiation, preparation and execution
of this Agreement and the other Transaction Documents, and (c) the reasonable
costs and expenses, including reasonable financial advisors' fees, incurred in
connection with the insolvency or bankruptcy of the Company or any Subsidiary
or in connection with any work-out or restructuring of the transactions
contemplated hereby and by the Notes. The Company will pay, and will save the
Noteholders and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by the Noteholders). The obligations of the Company under
this Section 13.01 will survive the payment or transfer of any Note, the
enforcement, amendment or waiver of any provision of this Agreement or the
other Transaction Documents, and the termination of this Agreement.
Section 13.02. Survival of Representations and Warranties. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the Notes, the purchase or transfer by the
Noteholders of any Note or portion thereof or interest therein and the payment
of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of the
Noteholders or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of
-21-
<PAGE> 23
the Company pursuant to this Agreement shall be deemed representations and
warranties of the Company under this Agreement.
Section 13.03. Amendment and Waiver. This Agreement and the
Notes may be amended, and the observance of any term hereof or of the Notes may
be waived (either retroactively or prospectively), with (and only with) the
written consent of the Company and the Required Holders, except that (a) no
amendment or waiver of any of the provisions of Articles II, III, IV or V, or
any defined term (as it is used therein), will be effective as to the
Noteholders unless consented to by all of the Noteholders in writing, and (b)
no such amendment or waiver may, without the written consent of the holder of
each Note at the time outstanding affected thereby, (i) subject to the
provisions of Article XI relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest on, the
Notes, or (ii) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver. Any
amendment or waiver consented to as provided in this Section 13.03 applies
equally to all holders of Notes and is binding upon them and upon each future
holder of any Note and upon the Company without regard to whether such Note has
been marked to indicate such amendment or waiver. No such amendment or waiver
will extend to or affect any obligation, covenant, agreement, Default or Event
of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note
nor any delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any holder of such Note.
Section 13.04. Notices. All notices and communications provided
for hereunder shall be in writing and sent (a) by telecopy if the sender on the
same day sends a confirming copy of such notice by a recognized overnight
delivery service (charges prepaid), or (b) by registered or certified mail with
return receipt requested (postage prepaid), or (c) by a recognized overnight
delivery service (with charges prepaid). Any such notice must be sent (i) if
to a Noteholder, to its address specified for such communications in Schedule
A, or at such other address as it shall have specified to the Company in
writing, (ii) if to the Company, to the Company at 16420 Park Ten Place, Suite
300, Houston, Texas 77084, Telecopy No.: 281-578-7091, or at such other address
as the Company shall have specified to the holder of each Note in writing.
Notices under this Section 13.04 will be deemed given only when actually
received.
Section 13.05. Limitation on Interest. Each provision in this
Agreement and each other Transaction Document is expressly limited so that in
no event whatsoever shall the amount paid, or otherwise agreed to be paid, by
the Company for the use, forbearance or detention of the money to be loaned
under this Agreement or any other Transaction Document or otherwise (including
any sums paid as required by any covenant or obligation contained herein or in
any other Transaction Document which is for the use, forbearance or detention
of such money), exceed that amount of money which would cause the effective rate
of interest thereon to exceed the Highest Lawful Rate, and all amounts owed
under this agreement and each other Transaction Document shall be held to be
subject to reduction to the effect that such amounts so paid or agreed to be
paid which are for the use, forbearance or detention of money under this
Agreement or such Transaction
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<PAGE> 24
Document shall in no event exceed that amount of money which would cause the
effective rate of interest thereon to exceed the Highest Lawful Rate.
Notwithstanding the provisions of Section 13.14, to the extent that the Highest
Lawful Rate applicable to a Noteholder is at any time determined by Texas law,
such rate shall be the "indicated rate ceiling" described in Section (a)(1) of
Article 1.04 of Chapter 1, Title 79, of the Revised Civil Statutes of Texas,
1925, as amended; provided, however, to the extent permitted by such Article,
the Noteholders from time to time by notice to Company may revise the aforesaid
election of such interest rate ceiling as such ceiling affects the then-current
or future balances of the loans outstanding under the Notes. Notwithstanding
any provision in this Agreement or any other Transaction Document to the
contrary, if the maturity of the Notes or the obligations in respect of the
other Transaction Documents are accelerated for any reason, or in the event of
prepayment of all or any portion of the Notes or the obligations in respect of
the other Transaction Documents by the Company or in any other event, earned
interest on the Notes and such other obligations of the Company may never
exceed the maximum amount permitted by applicable law, and any unearned
interest otherwise payable under the Notes or the obligations in respect of the
other Transaction Documents that is in excess of the maximum amount permitted
by applicable law shall be canceled automatically as of the date of such
acceleration or prepayment or other such event and, if theretofore paid, shall
be credited on the principal of the Notes or, if the principal of the Notes has
been paid in full, refunded to the Company. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the Highest
Lawful Rate, the Company and the Noteholders shall, to the maximum extent
permitted by applicable law, amortize, prorate, allocate and spread, in equal
parts during the period of the actual term of this Agreement, all interest at
any time contracted for, charged, received or reserved in connection with the
Transaction Documents.
Section 13.06. Indemnification. The Company agrees to indemnify,
defend and hold each Noteholder, their partners and their respective officers,
employees, agents, directors, partners, affiliates and shareholders
(collectively, "Indemnified Persons") harmless from and against any and all
loss, liability, damage, judgment, claim, deficiency or reasonable expense
(including interest, penalties, reasonable attorneys' fees and amounts paid in
settlement) incurred by or asserted against any Indemnified Person arising out
of, in any way connected with, or as a result of (a) the execution and delivery
of this Agreement and the other documents contemplated hereby, the performance
by the parties hereto and thereto of their respective obligations hereunder and
thereunder and consummation of the transactions contemplated hereby and
thereby, (b) the actual or proposed use of the proceeds of the loans
contemplated hereby, (c) any violation by the Company or any of its
Subsidiaries of any requirement of law, including but not limited to
Environmental Laws, (d) any Noteholder being deemed an operator of any real or
personal property of the Company in circumstances in which no Noteholder is
generally operating or generally exercising control over such property, to the
extent such losses, liabilities, damages, judgments, claims, deficiencies or
expenses arise out of or result from any Hazardous Materials located in, on or
under such property or (e) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not any Indemnified Person is a
party thereto; provided that such indemnity shall not apply to any such losses,
claims, damages, liabilities or related expenses that result from the gross
negligence or willful misconduct of, or willful violation of the Transaction
Documents by,
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<PAGE> 25
such Indemnified Person. WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR
ANY OF THE OTHER TRANSACTION DOCUMENTS, IT IS THE EXPRESS INTENTION OF THE
PARTIES THAT EACH INDEMNIFIED PERSON SHALL BE INDEMNIFIED AND HELD HARMLESS
AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DEFICIENCIES, JUDGMENTS AND
REASONABLE EXPENSES ARISING OUT OF OR RESULTING FROM THE ORDINARY NEGLIGENCE
(WHETHER SOLE OR CONTRIBUTORY) OF SUCH INDEMNIFIED PERSON. Each Indemnified
Person will attempt to consult with the Company prior to entering into any
settlement of any lawsuit or proceeding that could give rise to a claim for
indemnity under this Section 13.06, although nothing herein shall give the
Company the right to direct, or control any such settlement negotiations or
any related lawsuit or proceeding on behalf of such Indemnified Party. The
obligations of the Company under this Section 13.06 shall survive the
termination of this Agreement and repayment of the Notes.
Section 13.07. Successors and Assigns. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.
Section 13.08. Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall (to the full
extent permitted by law) not invalidate or render unenforceable such provision
in any other jurisdiction.
Section 13.09. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.
Section 13.10. Confidentiality. In connection with the
negotiation and administration of this Agreement and the other Transaction
Documents, the Company has furnished and will from time to time furnish the
Noteholders certain written information (such information, other than any such
information which (i) was publicly available, or otherwise known to the
Noteholders, at the time of disclosure,(ii)subsequently becomes publicly
available other than through any act or omission by the Noteholders or (iii)
otherwise subsequent becomes known to the Noteholders, being hereinafter
referred to as "Confidential Information"). The Noteholders will maintain the
confidentiality of any Confidential Information in accordance with such
procedures as the Noteholders apply generally to information of that nature.
Subject to the prohibitions and restrictions imposed on the Noteholders with
respect to the Confidential Information under applicable securities laws, it is
understood that the foregoing will not restrict the Noteholders' ability to
exchange such Confidential Information with their current or prospective
investors, assignees of the Notes and advisors. It is further understood that
the foregoing will not prohibit the disclosure
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<PAGE> 26
of any or all Confidential Information if and to the extent that such
disclosure may be required or requested (w) by a Governmental Authority, (x)
pursuant to court order, subpoena or other legal process or in connection with
any pending or threatened litigation hereunder, (y) otherwise as required by
law, or (z) in order to protect its interests or its rights or remedies
hereunder or under the other Transaction Documents; in the event of any
required disclosure under clause (w), (x), or (y) above, the Noteholders agree
to use reasonable efforts to inform the Company as promptly as practicable.
Section 13.11. Final Agreement of the Parties. THIS AGREEMENT AND
THE OTHER TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND 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.
Section 13.12. Jury Waiver. THE COMPANY AND THE NOTEHOLDERS
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 13.13. Choice of Forum. THE COMPANY AND THE NOTEHOLDERS
AGREE THAT ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT IN THE FEDERAL OR STATE
COURTS OF HARRIS COUNTY, TEXAS, OTHER THAN LEGAL PROCEEDINGS INSTITUTED BY THE
NOTEHOLDERS WITH RESPECT TO THEIR RIGHTS AND REMEDIES UNDER THE SECURITY
DOCUMENTS, WHICH PROCEEDINGS MAY BE BROUGHT IN THE FEDERAL OR STATE COURTS OF
HARRIS COUNTY, TEXAS OR THE COURTS OF ANY OTHER JURISDICTION DEEMED APPROPRIATE
BY THE NOTEHOLDERS TO ENFORCE THEIR RIGHTS AND REMEDIES UNDER THE SECURITY
DOCUMENTS.
Section 13.14. Governing Law. This Agreement and the Notes shall
be construed and enforced in accordance with, and the rights of the parties
shall be governed by, the law of the State of New York excluding choice-of-law
principles of the law of such State that would require the application of the
laws of a jurisdiction other than such State.
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<PAGE> 27
IN WITNESS WHEREOF, the Company and the Noteholders have caused this
Agreement to be executed by their respective representatives thereunto duly
authorized effective as of the date first above written.
UNIVERSAL SEISMIC ASSOCIATES, INC.
BY: /s/ RONALD L. ENGLAND
--------------------------------
Name: Ronald L. England
Title: Chief Financial Officer
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III, and
RIMCO PARTNERS, L.P. IV
By: Resource Investors Management Company
Limited Partnership, their general partner
By: RIMCO Associates, Inc.,
its general partner
By: /s/ A. L. JORDEN
--------------------------------
Name: A. L. Jorden
Title: Vice President
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<PAGE> 28
SCHEDULE A
INFORMATION RELATING TO NOTEHOLDERS
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Noteholder Notes to be Purchased
- ------------------------------ ---------------------
<S> <C>
RIMCO PARTNERS, L.P. $ 712,000
RIMCO PARTNERS, L.P. 11 $ 576,000
RIMCO PARTNERS, L.P. III $ 112,000
RIMCO PARTNERS, L.P. IV $ 600,000
----------
$2,000,000
==========
</TABLE>
(1) All payments by wire transfer
of immediately available
funds to:
Fleet Bank, N.Y.
ABA No. 021404465
Account Name: Universal Seismic Associates, Inc,
Automatic Clearing Account
Account No. 9390641743
with sufficient information to identify the source and
application of such funds.
(2) All notices of payments and
written confirmations of such
wire transfers:
Resource Investors Management Company
22 Waterville Road
Avon, Connecticut 06001
Attn: Doug Skelley
Telecopy No.: 860-678-9382
Schedule A Page I
<PAGE> 29
(3) All other communications:
Resource Investors Management Company
Suite 6875
600 Travis Street
Houston, Texas 77002
Attn: Gary Milavec
Telecopy No.: 713-247-0730
with a copy to
Resource Investors Management Company
22 Waterville Road
Avon, Connecticut 06001
Attn: David R. Whitney
Telecopy No.: 860-678-9382
Schedule A Page 2
<PAGE> 30
ANNEX A
DEFINED TERMS
"Accredited Investor" means an "accredited investor" as such term is
defined in Regulation D, Rule 501, promulgated by the Securities and Exchange
Commission.
"Affiliate" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 1O% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or
indirectly, 10% or more of any class of voting or equity interests. As used in
this definition, "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. Unless the context otherwise clearly requires, any reference to an
"Affiliate" is a reference to an Affiliate of the Company.
"Agreement" means this Note Purchase Agreement, as amended or modified
from time to time.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which commercial banks in Houston, Texas or New York, New York are required or
authorized to be closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.
"Change of Control" means any of (a) the acquisition by any Person or two
or more Persons (excluding underwriters in the course of their distribution of
voting stock in an underwritten public offering) acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Security Exchange Act of 1934, as amended) of 35% or more of the outstanding
shares of voting stock of the Company, (b) 50% or more of the members of the
Board of Directors of the Company on any date shall not have been (i) members
of the Board of Directors of the Company on the date 12 months prior to such
date or (ii) approved (by recommendation, nomination, election or otherwise) by
Persons who constitute at least a majority of the members of the Board of
Directors of the Company as constituted on the date 12 months prior to such
date, (c) all or substantially all of the assets of the Company are sold in a
single transaction or series or related transactions to any Person or (d) the
Company merges with or consolidates with any other Person.
"Closing" is defined in Article III.
<PAGE> 31
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Collateral" means the equipment and other property described as
collateral under the Security Documents.
"Collateral Liquidation Value" means, at any time, while the Existing
Senior Notes or the Notes are outstanding, the value that would be received for
the Collateral in a sale of the Collateral by a seller who is compelled to sell
the Collateral on an "as is," "where is" basis with only a limited time to find
a purchaser, such value to be determined in a manner consistent with the most
recent appraisal report delivered to the Noteholders under Section 8.01(d), as
adjusted from time to time by the Noteholders, in their sole discretion, for
any Collateral that is lost, damaged, destroyed or disposed of by the Company.
"Company" is defined in the introduction to this Agreement.
"Current Assets" means, as of any date, all assets of the Company and its
Subsidiaries that would be reflected as current assets on a consolidated
balance sheet of the Company and its Subsidiaries prepared on such date in
accordance with GAAP consistently applied.
"Current Liabilities" means, as of any date, all liabilities of the
Company and its Subsidiaries that would be reflected as current liabilities on
a consolidated balance sheet of the Company and its Subsidiaries prepared on
such date in accordance with GAAP consistently applied.
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
"Default Rate" means (i) as to any amount owing with respect to a Note,
the rate of interest stated in clause (b) of the first paragraph of such Note
and (ii) as to any other amount fifteen percent (15%) per annum, but in no
event to exceed the Highest Lawful Rate.
"Environmental Laws" means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges
to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
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<PAGE> 32
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"Escrow Agreement" means that certain Escrow Agreement dated as of August
5, 1997 among Michael T. Kanarellis, et al. and Texas Commerce Bank National
Association as the Escrow Agent, as amended from time to time.
"Event of Default" is defined in Section 11.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Note Agreements" means that certain Note Purchase Agreement,
dated January 19, 1996, among the Company, the Noteholders, as amended or
modified from time to time, that certain Note Purchase Agreement, dated May 28,
1996, among the Company and the Noteholders (other than RIMCO Partners, L.P.
III), as amended or modified from time to time and that certain Note Purchase
Agreement, dated March 27, 1997, among the Company and the Noteholders, as
amended or modified from time to time.
"Existing Senior Notes" means the 1O% Senior Secured General Obligation
Notes, in the maximum aggregate principal amount of $12,000,000 issued by the
Company under the Existing Note Agreements.
"Existing Transaction Documents" means, collectively, (i) the Existing
Note Agreements and the other agreements and promissory notes described or
referred to therein, and (ii) the Subsidiary Note Agreement and the other
agreements and promissory notes described or referred to therein.
"Fidelity Funding Agreement" means, collectively, that certain Loan and
Security Agreement, dated as of August 31, 1995, between Universal Seismic
Acquisition, Inc. and Fidelity Funding, Inc. and that certain Loan and Security
Agreement, dated August 31, 1995, between Universal Seismic Technologies, Inc.
and Fidelity Funding, Inc.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Governmental Authority" means (a) the government of (i) the United States
of America or any State or other political subdivision thereof, or (ii) any
jurisdiction in which the Company or any Subsidiary conducts all or any part of
its business, or which asserts jurisdiction over any properties of the Company
or any Subsidiary, or (b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to, any such
government.
"Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection)
-3-
<PAGE> 33
of such Person guaranteeing or in effect guaranteeing any indebtedness,
dividend or other obligation of any other Person in any manner, whether
directly or indirectly, including (without limitation) obligations incurred
through an agreement, contingent or otherwise, by such Person: (a) to purchase
such indebtedness or obligation or any property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person
or otherwise to advance or make available funds for the purchase or payment of
such indebtedness or obligation; (c) to lease properties or to purchase
properties or services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of any other Person to make payment
of the indebtedness or obligation; or (d) otherwise to assure the owner of such
indebtedness or obligation against loss in respect thereof In any computation
of the indebtedness or other liabilities of the obligor under any Guaranty, the
indebtedness or other obligations that are the subject of such Guaranty shall
be assumed to be direct obligations of such obligor.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety,
the removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage or filtration of which
is or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).
"Highest Lawful Rate" means with respect to any indebtedness owed to any
Noteholder under any Transaction Document, the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received by such Noteholder with respect to such
indebtedness under law applicable to such Noteholder.
"Holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to
Section 12.01.
"Indebtedness" with respect to any Person means, at any time, without
duplication, (a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock; (b) its
liabilities for the deferred purchase price of property acquired by such Person
(excluding accounts payable arising in the ordinary course of business but
including all liabilities created or arising under any conditional sale or
other title retention agreement with respect to any such property); (c) all
liabilities appearing on its balance sheet in accordance with GAAP in respect
of Capital Leases; (d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities); (e) all its
liabilities in respect of letters of credit or instruments serving a similar
function issued or accepted for its account by banks and other financial
institutions (whether or not representing obligations for borrowed money); (f)
Swaps of such Person; and (g) any Guaranty of such Person with respect to
liabilities of a type described in any of clauses (a) through (f) hereof
Indebtedness of any Person shall include all obligations of such Person of the
character
-4-
<PAGE> 34
described in clauses (a) through (g) to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is deemed to
be extinguished under GAAP.
"Indemnified Person" is defined in Section 13.06.
"Insurance Proceeds" means all insurance proceeds paid to the Company or
on its behalf by any insurance company in connection with or as a result of
that certain lawsuit styled The Universal Seismic Associates, Inc.
Stockholders' Protective Committee, Michael T. Kanarellis, and Robert J. Kecseg
vs. Michael J. Pawelek, Ronald L. England, Calvin G. Cobb, Gary Milavec, Steven
Oakes, Rick Trapp, Universal Seismic Associates, Inc., RIMCO Associates, Inc.,
and Resource Investors Management Co., L.P.; CA No. 97-22 (RRM) in the United
States District Court for the District of Delaware, including any such proceeds
paid as reimbursement for attorneys fees and other costs and expenses.
"Investment" means, with respect to any Person, any direct or indirect
purchase or other acquisition by such Person of stock or other securities of
any other Person, or any direct or indirect loan, advance or capital
contribution by such Person to any other Person, and any other item which would
be classified as an "investment" on a balance sheet of such Person prepared in
accordance with GAAP.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance of any kind (whether voluntary
or involuntary), or any interest or title of any vendor, lessor, lender or
other secured party to or of such Person under any conditional sale or other
title retention agreement or Capital Lease, upon or with respect to any
property or asset of such Person (including in the case of stock, stockholder
agreements, voting trust agreements and all similar arrangements).
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the
Company to perform its obligations under this Agreement and the other
Transaction Documents, or (c) the validity or enforceability of this Agreement
or the other Transaction Documents.
"Multiemployer Plan" means any Plan that is a multiemployer plan" (as such
term is defined in section 4001(a)(3) of ERISA).
"Net Income" means, for any period, the consolidated net earnings of the
Company and its Subsidiaries for such period, determined in accordance with
GAAP.
"Noteholders"' is defined in the introduction to this Agreement.
-5-
<PAGE> 35
"Notes" is defined in Section 2.01.
"Officer's Certificate" means a certificate of a Senior Financial Officer
or of any other officer of the Company whose responsibilities extend to the
subject matter of such certificate.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any
liability.
"Preferred Stock" means any class of capital stock of a corporation that
is preferred over any other class of capital stock of such corporation as to
the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Required Holders" means, at any time, the holder or holders of at least
51% in principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by the Company or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Security Agreement" means that certain Third Amended and Restated
Security Agreement of even date herewith granting a first Lien on the
collateral described therein executed by the Company in favor of the
Noteholders, as the same may be supplemented or amended from time to time.
"Security Documents" means the Security Agreement, the Subsidiary Security
Agreement and such other security agreements, guaranties, pledges, instruments,
financing statements or other documents which may be executed to secure the
obligations of the Company with respect to the Notes and this Agreement.
"Senior Financial Officer" means any of the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
-6-
<PAGE> 36
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person
or one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of
its Subsidiaries). Unless the context otherwise clearly requires, any reference
to a "Subsidiary" is a reference to a Subsidiary of the Company.
"Subsidiary Note Agreement" means that certain Amended and Restated Note
Purchase Agreement, dated March 27, 1997, among UNEXCO and the Noteholders, as
amended or modified from time to time.
"Subsidiary Notes" means the Amended and Restated 12% Senior Secured
General Obligation Notes, in the maximum aggregate principal amount of
$5,500,000, issued by UNEXCO under the Subsidiary Note Agreement.
"Subsidiary Security Agreement" means that certain Third Amended and
Restated Security Agreement of even date herewith granting a first Lien on the
Collateral described therein executed by Universal Seismic Acquisition, Inc. in
favor of the Noteholders, as same may be supplemented or amended from time to
time.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"Tangible Net Worth" means, as of any date, the total shareholder's equity
(including capital stock, additional paid-in capital and retained earnings
after deducting treasury stock) which would appear on a consolidated balance
sheet of the Company and its Subsidiaries prepared as of such date in
accordance with GAAP, minus (i) the amount of any assets resulting from
capitalization of goodwill, organizational expenses, research and development
expenses, trademarks, trade names, copyrights patents, patent applications,
licenses and rights in any thereof, and other similar intangibles, (ii) cash
held in a sinking or other analogous fund established for the
-7-
<PAGE> 37
purpose of redemption, retirement or prepayment of capital stock or
Indebtedness, and (iii) the amount of any other items which are treated as
intangible assets in accordance with GAAP.
"TRANSACTION DOCUMENTS" is defined in SECTION 4.01.
"UNEXCO" means UNEXCO, Inc., a Delaware corporation and wholly owned
Subsidiary of the Company.
-8-
<PAGE> 38
Exhibit 2.01
UNIVERSAL SEISMIC ASSOCIATES, INC.
12% SENIOR SECURED GENERAL OBLIGATION NOTE
No. SN-12 August 6, 1997
$____________
FOR VALUE RECEIVED, the undersigned, UNIVERSAL SEISMIC
ASSOCIATES, INC., a Delaware corporation (the "Company"), hereby promises to
pay to ______________, a Delaware limited partnership, or registered assigns,
the principal sum of _______________and NO/100 DOLLARS ($___________), together
with interest (computed on the basis of a 360-day year of twelve 30-day months)
(a) on the unpaid principal balance hereof at the rate of twelve percent (12%)
per annum from the date hereof, until the principal hereof shall have become
due and payable, and (b) on any overdue payment of principal or interest, at a
rate per annum from time to time equal to fifteen percent (15%); provided,
however, in no event shall such rate of interest ever exceed the Highest Lawful
Rate (as defined in the Note Purchase Agreement referred to below).
This Note shall be due and payable as follows:
(a) commencing on September 1, 1997, on the first day of each
month through and including November 1, 1999, a payment equal to all
accrued but unpaid interest thereon;
(b) on December 1, 1999, the entire unpaid principal balance
hereof, together with all accrued, but unpaid interest hereon, shall be
fully and finally due and payable;
(c) on each day following the receipt by the Company of any
Insurance Proceeds (as defined in the Note Purchase Agreement referred
to below), a payment equal to _____% of such Insurance Proceeds received
by the Company shall be due and payable;
(d) on each day following the receipt by the Company of any
amount distributed to the Company under Section 4(b) of the Escrow
Agreement (as defined in the Note Purchase Agreement referred to below),
a payment equal to _____% of such distributed amount shall be due and
payable; and
<PAGE> 39
(e) if a Change of Control (as defined in the Note Purchase
Agreement referred to below) shall occur, the entire unpaid principal
balance hereof, together with all accrued, but unpaid interest hereon,
shall be fully and finally due and payable on the date one day after
such Change of Control occurs.
This Note is one of a series of 12% Senior Secured General
Obligation Notes issued pursuant to the Note Purchase Agreement dated of even
date herewith (as from time to time amended, the "Note Purchase Agreement")
between the Company and the Noteholders named therein and is entitled to the
benefits, and otherwise subject to the provisions, thereof, including, without
limitation, the limitations on interest set forth in Section 13.05 thereof. This
Note is secured by the Security Documents referred to in the Note Purchase
Agreement.
All payments made by the Company on this Note shall be applied
first, to the accrued, but unpaid interest hereon, and the remainder, if any,
shall be applied to the principal balance hereof. This Note is subject to
optional prepayment, in whole or from time to time in part, without notice,
premium, fee or penalty, at the times and on the terms specified in the Note
Purchase Agreement, but not otherwise.
Payments of principal of and interest on this Note are to be made
in lawful money of the United States of America at places designated in the
Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly
executed, by the registered holder hereof or such holder's attorney duly
authorized in writing, a new Note for a like principal amount will be issued
to, and registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
If an Event of Default as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price and with the
effect provided in the Note Purchase Agreement.
Page 2
<PAGE> 40
This Note shall be governed by and construed in accordance with
the laws of the State of New York, excluding the choice of law rules thereof.
UNIVERSAL SEISMIC ASSOCIATES, INC.
By:________________________________
Name: Ronald L. England
Title: Chief Financial Officer
Page 3
<PAGE> 41
SCHEDULE 5.05
To the Universal Seismic Associates, Inc.
Note Purchase Agreement
Subsidiaries
<TABLE>
<CAPTION>
Jurisdiction Percentage
Subsidiary of Incorporation Ownership
- ---------- ---------------- ---------
<S> <C> <C>
Universal Seismic Acquisition, Inc. Texas 100%
Universal Seismic Technologies, Inc. Texas 100%
Marine Automated Surveys, Inc. Texas 100%
Unexco, Inc. Delaware 100%
</TABLE>
<PAGE> 42
SCHEDULE 5.08
To the Universal Seismic Associates Note Purchase Agreement
1. No. 95-09-462; The Shamrock Pipe Line Corporation vs. Mitchell Energy
Corporation, Universal Seismic Acquisition, Inc., Buford Drilling, Inc.
and Marine Automated Surveys, Inc.; In the 271st Judicial District Court
of Wise County, Texas ("Shamrock Pipe").
Universal Seismic Associates, Inc. ("USA") and Marine Automated Surveys, Inc.
("MAS") are defendants in the above action in which the plaintiffs have alleged
that one or more of the defendants caused the plaintiffs' pipe to rupture as a
result of negligent conduct of seismic testing, resulting in down time and lost
gasoline. Presently USA's insurance company has assumed the defense and has
hired counsel to represent it in the case. MAS is a wholly-owned subsidiary of
USA which was formed for the purpose of acquiring the assets, including the
tradename, of a now dissolved corporation. The asset acquisition occurred after
the alleged incident giving rise to this suit. Accordingly. plaintiff's counsel
believes that the former owner of the corporate name Marine Automated Surveys,
now known as JBX Corporation, will be joined and that all claims with respect
to MAS will be dismissed.
2. No. 95-12-630; Dessie Schluter, et al. v. Mitchell Energy Corp., et al.;
In the 271st Judicial District Court of Wise County, Texas.
This action, which arose out of the same set of facts as Shamrock Pipe, was
brought by the owners of the real property upon which the pipeline in Shamrock
Pipe lies for recovery of damages to such property.
3. Michael T. Kanarellis, Robert J Kecseg and the Universal Seismic
Associates, Inc. Shareholders' Protective Committee v. Universal Seismic
Associates, Inc., et al.; Civil Action No. 97-22 in United States
District Court for the District of Delaware.
This is a case brought by dissident shareholders which originally sought
revocation of proxies submitted in favor of existing management-sponsored
members of the Board of Directors of the Company. The Directors sponsored by
management were elected by a substantial majority of the voting shares and the
District Court declined to overturn the result. The suit was then amended to
add claims against the Company and all of its Board members sounding in
fraudulent misrepresentation and non-disclosure of financial information
relevant to the Company.
4. Universal Seismic Associates v. Michael T. Kanarellis and Robert T.
Kecseg; Cause No. 97-12684 in the 334th District Court of Harris County,
Texas.
This is a case brought against the defendants jointly for breaches of fiduciary
duty, disclosure of confidential information and tortious interference
resulting from the defendants' disclosure of various confidential information
of the Company to the public. The defendants have not answered the suit at this
time.
<PAGE> 43
5. Cause No. 90352; James W. Mitchell v. Universal Seismic Associates
Incorporated (formerly known as Trapp Geophysical Incorporated); In the
268th District Court of Fort Bend County, Texas
6. Cause No. 95-0119; Sherry S. Wyatt v. Universal Seismic Acquisition,
Inc.; In the Circuit Court of Smith County, Mississippi.
Land damage - case transferred to Mississippi counsel.
7. No. 17-159687-95; Mason Bristol and JBW Land & Minerals, Inc. v. Placid
Oil Company, et al; In the 17th District Court of Tarrant County, Texas
Mineral trespass
8. Gerald H. Jaye & Mary Ann Jaye
Surface trespass
9. Cabot
Mineral trespass - seismic damage
10. Henderson
Mineral trespass - seismic damage-$215,000.00
11. No. C97-6C; Ladshaw Explosives, Inc. v. Universal Seismic Acquisition,
Inc.; In the 274th Judicial District Court of Comal County, Texas.
Suit on a promissory note issued for a trade payable, with a current
outstanding balance of approximately $15,000.
12. Edwin A. Epstein, Jr. Operating Co., Inc.
Seismic trespass
13. Century Offshore Management Corp.
Breach of seismic contract claim, in response to suit by USA to collect
a receivable.
<PAGE> 44
TO UNIVERSAL SEISMIC NOTE PURCHASE AGREEMENT
UNIVERSAL SEISMIC ACQUISITION, INC.
SCHEDULE OF INSURANCE
<TABLE>
<CAPTION> POLICY EFFECTIVE
COVERAGE COMPANY NUMBER DATES SUMMARIZED CONDITIONS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Liability Ranger Lloyds GL0705047 4/27/97 2,000,000 Bodily Injury and Property Damage
Insurance Company to Combined Single Limit General
4/27/98 Aggregate - Per Project
2,000,000 Bodily Injury and Property Damage
Combined Single Limit Products/
Completed Operations Aggregate
1,000,000 Bodily Injury and Property Damage
Combined Single Limit - Per Occurence
1,000,000 Personal and Advertising Injury - Any One
Person or Organization
50,000 Fire Damage Liability - Any One
Occurrence
1,000,000 Employee Benefits Liability - Each
Employee
1,000,000 Employee Benefits Liability - Annual
Aggregate
Deductible:
1,000 Employee Benefits Liability - Each Claim
- --------------------------------------------------------------------------------------------------------------------------
Business Automobile Ranger TBA045040 4/27/97 1,000,000 Bodily Injury and Property Damage
Insurance Company to Combined Single Limit - Each Accident
4/27/98 100,000 Bodily Injury and Property Damage
Combined Single Limit
Uninsured/Underinsured Motorist
2,500 Personal Injury Protection - Per Person
Deductible:
1,000 Comprehensive - Specified Vehicles
25 Specified Causes of Loss - Specified
Vehicles
1,000 Collision - Specified Vehicles
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Insurance described herein is intended to be a summary and in no way
extends, amends, or alters the polices in force.
Page 1 of 3
<PAGE> 45
TO UNIVERSAL SEISMIC NOTE PURCHASE AGREEMENT
UNIVERSAL SEISMIC ACQUISITION, INC.
SCHEDULE OF INSURANCE
<TABLE>
<CAPTION>
POLICY EFFECTIVE
COVERAGE COMPANY NUMBER DATES SUMMARIZED CONDITIONS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Workers' Compensation American Home WC888826 4/27/97 1,000,000 Bodily Injury by Accident - Each Accident
& Employer's Liability Assurance Company to 1,000,000 Bodily Injury by Disease - Policy Limit
4/27/98 1,000,000 Bodily Injury by Disease - Each Employee
1,000,000 Maritime Coverage
- ----------------------------------------------------------------------------------------------------------------------------
Umbrella Liability National Union Fire BE9325794 4/27/97 10,000,000 Bodily Injury and Property Combined
Insurance Company to Single Limit - Per Occurence
4/27/98 10,000,000 Bodily Injury and Property Damage
Combined Single Limit Products/Completed
Operations Aggregate
10,000,000 Bodily Injury, Property Damage Combined
Single Limit Policy Aggregate (Except
Products/Completed Operations and
Automobile which is not subject to an
aggregate)
Self Insured Relention:
10,000 Each Ocurrence, Applicable to Losses
covered in the Excess but not covered in
the Primary and when underlying aggregates
are exhausted
- ----------------------------------------------------------------------------------------------------------------------------
Foreign Package Cigna PFF051008 4/27/97 Foreign Commercial General Liability
Insurance Company to 2,000,000 Each Occurrence
4/28/97 2,000,000 Products/Completed Ops Aggregate
1,000,000 Personal & Advertising Injury Aggregate
1,000,000 Premises Damage Limit - Each Occurence
10,000 Medical Expense Limit
Employee Benefits Liability
1,000,000 Each Claim (Claims Made)
1,000,000 Annual Aggregate (Claims Made)
10,000 Medical Expense Limit
Contingent Auto Liability
1,000,000 Each Accident
Employers Liability
1,000,000 Bodily Injury by Accident
1,000,000 Bodily Injury by Disease (Policy Limits)
1,000,000 Bodily Injury by Disease (Each Employee)
1,000,000 Maritime Coverage
250,000 Repatriation Policy Limit
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Insurance described herein is intended to be a summary and in no way
extends, amends, or alters the polices in force.
Page 2 of 3
<PAGE> 46
TO UNIVERSAL SEISMIC NOTE PURCHASE AGREEMENT
UNIVERSAL SEISMIC ACQUISITION, INC.
SCHEDULE OF INSURANCE
<TABLE>
<CAPTION>
POLICY EFFECTIVE
COVERAGE COMPANY NUMBER DATES SUMMARIZED CONDITIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Property Commonwealth CE6088000 11/3/96 Commercial Property Including Electronic Equipment
Insurance Company to 225,000 Office Contents - Park Ten Place
11/3/97 75,000 Extra Expense Office
10,000 Contents - Jess Pirtle
50,000 Contents - Off Premises
290,000 Equipment - Park Ten Place
50,000 Extra Expense
Deductible:
1,000 Per Occurence Except
25,000 Per Occurence as respects to Flood &
Earthquake
Contractors Equipment
22,000,000 Contractors Equipment Blanket Limit
3,500,000 Contractors Equipment Any One Item
250,000 Waterborne Equipment
6,000,000 Leased/Rented Equipment Any One Loss/
Any One Item
Deductible:
25,000 Per Occurence - Theft
10,000 Per Occurence - All Other Perils
Cargo
10,000,000 Any One Shipment as Per Schedule to be
Agreed
Deductible:
10,000 Any One Accident or Occurence
- ------------------------------------------------------------------------------------------------------------------------------------
Directors & Officers Executive Re 75L004659-95 9/19/96 2,000,000 Each Claim and Aggregate
Liability Indemnity Inc. to Retention:
9/19/97 0 D&O Section
50,000 Corporate Reimbursement Section
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 3
The insurance described herein is intended to be a summary and in no way
extends, amends, or alters the policies in force.
<PAGE> 1
EXHIBIT 10.33
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
effective as of the 1st day of March, 1995, by and between Universal Seismic
Associates, Inc., a Delaware corporation (the "Company"), and Ronald L.
England, now residing at 1534 Morning Park Drive, Katy, Texas 77494 (the
"Employee").
W I T N E S S E T H
WHEREAS, the Employee is employed by the Company in an executive capacity,
and the Company desires to ensure that the Employee will be available to
provide executive services to the Company in the future, which services are
significant to the Company's long range prospects; and
WHEREAS, to induce the Employee to agree to provide such services, the
Company is offering to provide the Employee with the compensation, benefits and
security provided for in this Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree as follows:
1. Employment; Capacity: Term. The Company agrees to and does hereby
employ the Employee, and the Employee agrees to and does hereby enter into the
employ of the Company upon the terms and conditions set forth in this
Agreement. Such employment shall be as Chief Financial officer of the Company
with all powers and authority as are normally incident to such position,
subject to the supervision of the Board of Directors of the Company. Such
employment shall commence on the date hereof and shall continue through the
last day of February, 1997, and shall extend and renew automatically for
successive two (2) year terms unless the Employee or the Company shall
terminate such employment by written notice of termination given to the other
party at least 60 days prior to the expiration of the two (2) year term then in
effect. Termination by either party, in accordance with the provisions of the
preceding sentence, shall not require a statement of the reason or cause for
such termination and shall not be deemed a breach or violation of the Agreement
by the party giving such notice. As used in this Agreement, the phrase "term of
this Agreement" shall be deemed to include the period subsequent to the date
hereof and prior to termination of this Agreement; provided, however, such
phrase shall not be construed as limiting the enforceability by either party of
any rights which survive termination of this Agreement.
2. Time and Effort; Absences. During the term of this Agreement, the
Employee shall devote his time and attention during normal business hours to
the business of the Company. The Employee shall not be restricted from
performing services as a member of the Board of Directors, Board of Trustees or
the like for non-profit or for profit entity whether or not the Employee
receives compensation therefor or from investing his assets in such
<PAGE> 2
form or manner that may require some participation in the operation of the
business of the entity in which such investments are made, provided that such
services and participation do not unreasonably interfere with the ability of
the Employee to perform the services and discharge the responsibilities
required of him pursuant to this Agreement. The Employee shall be excused from
rendering his services during reasonable vacation periods and during other
reasonable temporary absences, all as authorized from time to time by the Board
of Directors of the Company. At the date hereof, the Employee maintains his
residence in Katy, Texas and performs services for the Company in Sugar Land,
Texas; it is understood that without his consent the Employee will not be
required to relocate to a different location to discharge his responsibilities
under this Agreement.
3. Corporate Offices. If elected, the Employee will serve, without
additional compensation (except as otherwise provided by the Board of Directors
of the Company), as an officer and director (or in either capacity) of the
Company, its subsidiary Universal Seismic Acquisition, Inc., or any other
subsidiary of the Company. It is anticipated that during the term of this
Agreement Employee will serve as a director of the Company and its
subsidiaries.
4. Salary; Bonus; other Benefits. In consideration of the services and
duties to be rendered and performed by the Employee during the term of this
Agreement, including the assumption of the duties and responsibilities as an
executive officer of the Company, the Company agrees to pay and provide for the
Employee the compensation and benefits described below:
(a) An annual salary, payable in equal semi-monthly installments, in the
amount of not less than $72,000.00 or in such greater amount as may from time
to tine be fixed by the Board of Directors of the Company. The annual salary
shall never be reduced.
(b) An annual incentive bonus in such amount as may from time to time be
fixed by the Board of Directors.
(c) An automobile of Employee's choosing which is reasonable and customary
for the chief financial officer of a company of the size and nature of the
Company, which the Company shall insure, maintain, service and fuel.
(d) All payments and/or benefits under any pensions, profit-sharing,
thrift, bonus, incentive, stock option or stock appreciation or other employee
benefit plan, including any life insurance, accident, medical, disability,
health or relocation plan or policy (all of which are included by reference to
the term "Plan") maintained by the Company for its employees, generally, or for
its senior executives, in particular, on the same basis and subject to the same
requirements and limitations as may be made
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<PAGE> 3
applicable to other senior executive employees of the Company. Nothing herein,
however, shall be construed as limiting the right of the Employee to additional
or other and greater benefits if the provisions of this Agreement obligate the
Company to provide such other or greater benefits. In addition, the Company
agrees that where credited service of the Employee for the Company is relevant
in determining eligibility for or benefits under any Plan, the Employee's
credited service for the Company shall be determined to include service for any
parent, subsidiary or affiliate of the Company or for a predecessor of the
Company.
(e) Company shall provide directors and officers liability insurance
coverages of the Employee with coverages and limits which are reasonable and
customary for the chief financial officer of a company of the size and nature
of the Company, and shall provide indemnification of the Employee to the
maximum extent permitted by applicable law.
5. Expenses. The Employee shall be reimbursed for out-of-pocket expenses
reasonably incurred from time to time on behalf of the Company or any
subsidiary or in the performance of his duties under this Agreement, upon the
presentation of such supporting documents and forms as the Company shall
reasonably request.
6. Disability; Disability Benefit. In the event that the Employee is
incapable because of physical or mental illness of rendering services of the
character contemplated hereby, for a period of two consecutive months, the
Board of Directors of the Company may determine that the Employee has become
disabled. In the event of such a determination of disability, the Company shall
have the continuing right and option while such disability continues by notice
in writing to the Employee to terminate this Agreement effective 30 days after
such notice of termination is so given, unless within such 30 day period, the
Employee resumes rendering full-time services of the character contemplated
hereby. The incapacity due to physical or mental illness to render the services
of the character contemplated hereby shall not constitute a breach of this
Agreement by the Employee.
7. Death. If the Employee dies during the term of this Agreement, this
Agreement will terminate.
8. Severance Pay. If the employment of the Employee is terminated any
time (a) by the Employee for Good Reason (as defined in Section 9) or (b) by
the company for any reason other than for Cause (as hereafter defined) the
Company shall (i) continue to pay to the Employee the full amount of Employee's
then current annual salary and annual incentive bonus until the next succeeding
December 31 as of which the Company could have terminated the Employee's
employment pursuant to Section 1 without such termination constituting a breach
or violation of this Agreement and, in addition, (ii) upon such termination,
pay immediately to
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<PAGE> 4
Employee an amount in cash equal to Employee's then current annual salary
pursuant to Section 4(a) and the amount of the incentive bonus paid or payable
for the immediately preceding year pursuant to Section 4(b). The Employer and
the Employee agree that the purpose of these payments is to reinforce and
encourage the continued loyalty, attention and dedication of the Employee to
the Company's business and affairs without the concerns that normally arise
from the possibility of a loss of employment security. Termination of the
Employee's employment on account of his death or Retirement (as hereafter
defined) will not be considered a termination of the Employee's employment by
the Company and will not require the Company to pay and provide any severance
pay or benefits pursuant to this Section 8. As used herein, the Terms
"Retirement" and "Cause" shall have the following meanings, respectively:
(a) Retirement. Termination of the Employee's employment on account of
"Retirement" shall mean termination on the Employee's normal retirement date in
accordance with the terms of any Employer maintained Plan (or any successor or
substitute plan or plans of the Company or of any subsidiary of the Company
under which the Employee may be a participant); and
(b) Cause. Termination by the Company of the Employee's employment for
"Cause" shall mean termination as a result of (i) the willful and continued
failure by the Employee to perform substantially the services contemplated by
this Agreement (other than any such failure resulting from the Employee's
incapacity due to physical or mental illness), or (ii) the willful engaging by
the Employee in gross misconduct which is materially and demonstrably injurious
to the company; provided that no act, or failure to act, on the Employee's part
shall be considered "willful" unless done, or omitted to be done, in bad faith
and without reasonable belief that such action or omission was in, or not
opposed to, the best interests of the company, or (iii) for a serious conduct
violation specifically listed in Article IV., Conduct, page 9, of the Universal
Seismic Associates, Inc. Employee Handbook in effect on January 1, 1995. It is
also expressly understood that the Employee's attention to or engagement in
matters not directly related to the business of the Company shall not provide a
basis for termination for Cause if such attention or engagement is authorized
by the terms of this Agreement or has otherwise been approved by the Board of
Directors of the Company. Anything in this Agreement to the contrary
notwithstanding the Employee's employment may not be terminated for Cause (1)
unless the Employee shall have failed to have corrected the failure or
misconduct constituting such Cause within 30 days after having received written
notice from not less than two (2) members of the Board of Directors of the
Company specifying such failure or misconduct and the action that the Company
requests the Employee take to remedy such failure or misconduct, and (2) unless
and until there shall have been delivered to the Employee a copy of a
resolution duly
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<PAGE> 5
adopted by the affirmative vote of not less than three quarters of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to the Employee and an opportunity for the
Employee, together with his counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Employee was guilty of the
conduct set forth in clause (i), (ii) or (iii) of this subparagraph (b),
specifying the particulars thereof in detail, that the Employee was given
written notice to correct such failure or misconduct as provided above, and
that Employee failed to have corrected such failure or misconduct within the 30
day period provided above.
9. Termination by the Employee for Good Reason. The termination by the
Employee of his employment for "Good Reason" shall be deemed a justifiable
termination of his employment and shall excuse the Employee from the obligation
to render services as provided in Section 2 hereof. As used herein, the terms
"Good Reason" shall mean:
(a) a change in the Employee's status, title or positions) as an officer
of the Company which, in his reasonable judgment, does not represent a
promotion from or enhancement of his status, title and position as an executive
officer, or the assignment by the Board of Directors of the Company to the
Employee of any duties or responsibilities which, in his reasonable judgment,
are inconsistent with such status, title or position, or any removal of the
Employee from or any failure to reappoint or reelect him to such position,
except in connection with a justifiable termination by the Company of the
Employee's employment for Cause or on account of disability, the Retirement or
death of the Employee or the termination by the Employee of his employment
other than for Good Reason;
(b) a reduction in the employee's annual salary or a failure by the
Company to pay to the Employee any installment of the annual salary or
incentive bonus required pursuant to Section 4, which failure continues for a
period of 20 days after written notice thereof is give by the Employee to the
Company;
(c) the failure by the Company to adopt, continue or maintain in effect,
any Plan or benefit which is required to be provided by the Company pursuant to
this Agreement (unless the Company provides the Employee with the equivalent or
at lease substantially similar benefits under one or more other Plans) other
than as a result of the normal expiration of such Plan; or the taking of any
action or the failure to act by the Company, which could adversely affect the
Employee's continued participation in any such Plan(s) or the ability of the
Employee to enjoy or realize upon any material benefit intended, or which could
materially reduce the Employee's benefits under any such Plan(s) or deprive him
of any material benefit then enjoyed by the Employee;
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<PAGE> 6
(d) the Company's requiring the Employee to be based anywhere other than
in Sugar Land, Texas or an area within a radius of 25 miles thereof, except for
required travel on the Company's business to an extent substantially consistent
with the business travel obligations which the Employee undertook on behalf of
the Company prior to such required change;
(e) the failure by the Company to obtain the assumption of this Agreement
by any successor (other than by merger or consolidation) as contemplated in
Section 12;
(f) the Company sells all or substantially all of the assets of the
Company or the purchase of a majority of the issued and outstanding stock of
the Company (other than the sale of assets to or purchase of stock by
subsidiaries, affiliates, employees or then existing stockholders of the
Company), or a change in effective control of the Company;
(g) any purported termination by the Company of the Employee's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 10, or which is not justified as a termination of the
Employee's employment based on Cause; and for purposes of this Agreement, no
such purported termination shall be effective; or
(h) any refusal by the Company to allow the Employee to attend to matters
or engage in activities not directly related to the business of the Company
which is permitted by this Agreement or which, prior thereto, was permitted by
the Board of Directors of the Company.
10. Notice of Termination. Any purported notice of termination of the
Employee's employment (other than a notice given by either party pursuant to
Section 1) shall be communicated in a writing delivered to the other party as
provided in Section 14 (hereinafter a "Notice of Termination"). For purposes of
this Agreement a "Notice of Termination" shall mean a notice which specifies
the termination provision relied upon by the party giving such notice and shall
set forth in detail such facts and circumstances claimed by such party to
provide a justified basis for termination of the Employee's employment under
the provisions) so indicated.
11. Certain Proprietary Rights. Employee agrees to and hereby does assign
to the Company all his right, title and interest in and to all inventions,
whether or not patentable, which are made or conceived solely or jointly by
him:
(a) At any time during the term of his employment by the Company it such
inventions were made or conceived while Employee was employed in an executive,
managerial, planning, technical research or engineering capacity (including
development, manufacturing systems, applied science and sales) with the Company;
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<PAGE> 7
(b) During the course of or in connection with his duties during the term
of this Agreement; or
(c) With the use of time or materials of the Company.
Employee agrees to communicate to the Company or its representatives all
facts known to him concerning such inventions, to sign all rightful papers,
make all rightful oaths and generally to do everything possible to aid the
Company in obtaining and enforcing proper patent protection for all such
inventions in all countries and in vesting title to such invention and patents
in the company. For the purpose of this Agreement, the subject matter of any
application for patent naming Employee as a sole or joint inventor filed during
the course of employment or within one year subsequent to the termination
thereof shall be deemed to be an invention made or conceived by him during the
course of his employment by the Company and assignable to the Company
hereunder, unless the Employee established by a preponderance of the evidence
that such invention was made or conceived by him subsequent to termination of
his employment hereunder. At the Company's request (during or after the term of
this Agreement) and expense, the Employee will promptly execute a specific
assignment of title to the Company, and perform any other acts reasonable
necessary to implement the foregoing assignment.
12. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of:
(a) The Company, and any successors or assigns of the Company, whether by
way of a merger or consolidation, or liquidation of the Company, or by way of
the Company selling all or substantially all of the assets of the Company, or a
division thereof, to a successor entity; however, in the event of the
assignment by the company of this Agreement, the Company shall nevertheless
remain liable and obligated to the Employee in accordance with the terms
hereof; and
(b) The Employee, his estate, his executors, administrators, heirs and
beneficiaries.
13. Expenses Relating to Enforcement of Rights. If either party shall
successfully seek to enforce any provision of this Agreement or to collect any
amount claimed to be due hereunder, such successful party shall be entitled to
be reimbursed by the other party for any and all out-of pocket expenses,
including reasonable attorneys' fees, incurred in connection with such
enforcement and/or collection.
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<PAGE> 8
14. Notices. Any notice or other communication required or permitted
hereunder shall be in writing or by telex, telephone or facsimile transmission
with subsequent written confirmation, and may be personally served or sent by
United States mail, certified mail return receipt requested, addressed to the
respective parties at the addresses stated opposite each party's name on the
signature page hereof or to such other addresses as they shall designate
hereafter in writing from time to time.
15. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Texas.
16. Disputes; Arbitration. All disputes of any nature whatsoever arising
out of or relating to this Agreement, whether in contract or in tort, shall be
submitted to binding arbitration at Houston, Texas under the Texas General
Arbitration Law. All arbitration proceedings shall be heard and determined by a
panel of three arbitrators. Each party shall appoint one arbitrator and the two
arbitrators so appointed shall select the third. The arbitrators shall hold
oral hearings at the request of either party. The prevailing party in any
arbitration proceedings may be awarded its or his costs and reasonable
attorneys' fees. Any award of the arbitrators shall be final, and may be entered
in any court having jurisdiction.
17. Entire Agreement. This document contains or refers to the entire
arrangement or understanding between the parties relating to the Employee or
the Company. This Agreement contains the entire arrangement or understanding
between the Employee and the Company relating to the employment of the Employee
by the Company. No provision of the Agreement may be modified or amended except
by an instrument in writing signed by or for both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
The address of the Company is: COMPANY:
12999 Jess Pirtle Blvd.
Sugar Land, Texas 77478-2851
By: /s/ MICHAEL J. PAWELEK
--------------------------------
Name: Michael J. Pawelek
Title: President
Signed by Direction of the
Board of Directors by
Resolution dated effective
March 1, 1995
the Address of Employee is: EMPLOYEE:
1534 Morning Park Drive
Katy, Texas 77494 /s/ RONALD L. ENGLAND
-----------------------------------
Ronald L. England
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<PAGE> 1
EXHIBIT 10.34
EMPLOYMENT AGREEMENT
This Employment Agreement executed by and between Universal Seismic
Associates, Inc., a Delaware corporation ("Company") and Peter B. Spooner now
residing in Brisbane, Australia ("Employee").
W I T N E S S E T H
WHEREAS, the Employee desires to be employed by the Company in an executive
capacity; and
WHEREAS, the company desires to obtain the services of Employee in such
capacity.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree as follows:
1. The Company agrees to and does hereby employ the Employee, and the
Employee agrees to and does hereby enter into the employ of the Company upon
the terms and conditions set forth in this Agreement. Such employment shall be
a Vice President of the Company with all powers and authority as are normally
incident to such position, subject to the supervision of the President and
Board of Directors of the Company. It is anticipated Employee's duties will
include some international responsibilities. Such employment shall commence on
May 1, 1996 and shall continue through April 30, 1998, and shall extend and
renew automatically for successive one (1) year terms unless the Employee or
the Company shall terminate such employment by written notice of termination
given to the other party at least 60 days prior to the expiration of the one
(1) year term then in effect. Termination by either party, in accordance with
the provisions of the preceding sentence, shall not require a statement of the
reason or cause for such termination and shall not be deemed a breach or
violation of the Agreement by the party giving such notice. As used in this
Agreement, the phrase "term of this Agreement" shall be deemed to include the
period subsequent to the date hereof and prior to termination of this
Agreement; provided, however, such phrase shall not be construed as limiting
the enforceability by either party of any rights which survive termination of
this Agreement. Subsequent to the execution of this Agreement, Company will pay
the reasonably and necessary costs of travel (economy class or equivalent) and
transportation of household goods and furnishings (excluding vehicles and
boats) of the Employee, his spouse and dependent children from Brisbane,
Australia to Houston, Texas.
2. In consideration of the services and duties to be rendered and
performed by the Employee during the term of this Agreement, including the
assumption Of the duties and responsibilities as an executive officer of the
Company, the Company agrees to pay and provide for the Employee the
compensation and benefits described below:
<PAGE> 2
(a) An annual salary, payable in equal semi-monthly installments, in the
amount of not less than $90,000.00 or in such greater amount as may from time
to time be fixed by the Board of Directors of the Company. Annual salary will
be reviewed by the Board of Directors at least once in every 12 month period.
(b) Stock options as set forth in Exhibit A.
(c) All payments and/or benefits under any pensions, profit-sharing,
thrift, bonus, incentive, stock option or stock appreciation or other employee
benefit plan, including any life insurance, accident, medical, disability,
health or relocation plan or policy (all of which are included by reference to
the term "Plan") maintained by the Company for its employees, generally.
Nothing herein, however, shall be construed as limiting the right of the
Employee to additional or other and greater benefits if the provisions of this
Agreement obligate the Company to provide such other or greater benefits.
3. The employee's location of employment will be at Houston, Texas. The
employee may be required, however, to work in such other locations as may be
designated from time to time by the Company. In such circumstances the company
will meet all reasonable and necessary expenses associated with the transfer or
travel to the other location in accordance with the Company's relocation and/or
travel policies, including expenses relating to the employee's spouse or
dependent children. In addition, except where the transfer is of a permanent
nature, the Company will provide adequate accommodation to a standard no less
than the employee's own accommodation in Houston, for the duration of any such
transfer. In the event of cessation of employment for whatever reason the
Company will immediately pay the reasonable and necessary costs of travel
(economy class or equivalent) and the cost of transportation of household goods
and furnishings (excluding vehicles and boats) of the employee, his spouse and
dependent children from the location where the employee is employed at the time
that employment ceases or this Agreement otherwise expires to Brisbane,
Australia. Should employment cease due to the death of the employee the Company
will pay the costs of the travel and transportation of goods of the employee's
spouse and dependent children to Brisbane.
4. The Employee shall be reimbursed for out-of-pocket expenses reasonably
incurred from time to time on behalf of the Company or any subsidiary or in the
performance of his duties under this Agreement, upon the presentation of such
supporting documents and forms as required by the policies and procedures of
the Company.
5. In the event Employee receives any advance payment or
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<PAGE> 3
"draw" on any compensation, expense, benefit, bonus or commission, or receives
payment for or charges to Company any improper expense or other improper
payment or charge, such payment, draw or charge shall be repaid by Employee on
demand of Company or, at Company's sole discretion and option, be offset at any
time against any salary, bonus, commission or any other payment owed by Company
to Employee. At no time, however, will the amount of the offset reduce the
employee's periodic salary below 50% of the salary prior to the offset."
6. Employee shall not, during the period of employment herein provided,
directly or indirectly invest (other than ownership of securities of publicly
held corporations of which Employee owns less than one percent (1%) of any
class of outstanding securities) or engage in any business which is competitive
with that of the Company or accept employment with or render services to a
competitor as a director, officer, agent, employee or consultant, or take any
action inconsistent with the fiduciary or other relationship of an employee to
an employer.
7. In the event that the employment of Employee hereunder shall terminate
for any reason, Employee agrees that during the period of twelve (12) months
following the termination of such employment Employee will not, directly or
indirectly, either through any kind of ownership (other than ownership of
securities of publicly held corporations of which Employee owns less than one
percent (1%) of any class of outstanding securities) or as a director, officer,
agent, employee or consultant, engage in any business which is competitive with
the Company or its subsidiaries or affiliates at the time such employment is
terminated within the United States of America. In addition, during employment
and for twelve (12) months following termination, Employee shall not solicit
any employee, agent or representative of the Company to terminate or breach any
employment, contract or any other relationship or duty to or with the Company.
It is expressly agreed that the remedy at law for breach of this covenant is
inadequate and that injunctive relief shall be available to prevent the breach
thereof. Employee hereby acknowledges and agrees that the limitations as to
time, geographical area, and scope of activity to be restrained are reasonable
and do not impose a greater restraint than is necessary to protect the goodwill
or other business interest of Company.
8. All information relating to the identity of the customers and
suppliers of the Company or its subsidiaries or affiliates, their arrangements
with such suppliers and customers, pricing methods and policies, technical,
scientific and financial information, data, designs, processes, procedures,
formulas and improvements relating to Company's or its subsidiary or affiliates
products and services (hereinafter "Confidential Information"), shall be treated
as confidential by Employee both during and after
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<PAGE> 4
the termination of Employee's employment under this Agreement. Employee
understands and acknowledges that the Confidential Information, including
without limitation customer lists, accounts and information, are valuable,
special and unique assets and trade secrets of the Company and that the Company
has taken measures to prevent Confidential Information from becoming available
to persons other than those selected by the Company to have access to such
Confidential Information for limited purposes. Employee further acknowledges
that prior to Employee's employment by company Employee had no knowledge of any
of the Confidential Information. Except with the prior approval of the Company,
Employee shall not disclose any of such Confidential Information at any time to
any person except personnel of the Company or its subsidiary or affiliated
corporations authorized by the Company to receive such Confidential
Information. In the event of a breach or threatened breach by the Employee of
the provisions of this paragraph, the Company shall, in addition to any other
available remedies, be entitled to any injunction restraining Employee from
disclosing, in whole or in part, any such information or from rendering any
services to any person, firm or corporation to whom any of such Confidential
Information may be disclosed or is threatened to be disclosed.
9. All data, designs, processes, procedures, formulas, improvements,
drawings, software, photographs, copies and other records and written material
prepared, compiled or conceived by Employee, solely or jointly, during the
course of or in connection with Employee's duties with the Company, or with the
use of the time or materials of the Company, or which relates to the business
of the Company, or furnished to Employee while in the employ of the Company
shall be the sole and exclusive property of the Company, none of such, data,
designs, processes, procedures, formulas, improvements, drawings, software or
other records, or copies thereof shall be retained by Employee upon termination
of Employee's employment and shall be returned to the Company upon such
termination or at such other time the Company requests such return.
10. Employee shall promptly disclose to the Company any and all
inventions, designs, improvements, and discoveries which Employee may now or
hereafter have, whether developed or conceived by Employee alone or with
others. All inventions, designs, improvements and discoveries which Employee,
alone or with others, develops or conceives during working hours, or with the
use of the Company property or assets, or which pertain or are related to the
business of the Company shall be the exclusive property of the Company.
Employee shall assist the Company to obtain patent, trademark, copyrights or
other rights, including executing documents necessary to vest full title
thereto in Company, and to protect such rights against infringement or
unauthorized disclosure.
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11. The provisions of Sections 7, 8, 9 and 10 of this Agreement shall
continue to be binding upon Employee in accordance with their terms,
notwithstanding termination of Employee's employment hereunder for any reason;
provided, however, the non-competition provision (but not the prohibition
against solicitation of employees, agents and representatives) set forth in
Section 7 above shall be null and void in the event Employer breaches the
provisions of Section 13(a) or (b) below.
12. Employee's employment may be terminated without notice by the Company
for good cause. Termination for good cause shall include, without limitation,
the following causes:
(a) Except as otherwise provided by law, upon the expiration of any sick
leave or medical leave provided by Company policies or applicable laws or
regulations Employee by reason of injury or illness is for more than sixty
(60) consecutive days unable with any required reasonable accommodation to
perform the essential functions of Employee's duties as an employee under
this Agreement;
(b) Death of Employee;
(c) Except as otherwise provided by Company policies or applicable laws or
regulations, Employee for reasons other than illness or injury being
absent from Employee's duties without the consent of the Company for more
than ten (10) consecutive days;
(d) Employee being adjudicated as bankrupt or being charged with a crime
punishable by imprisonment;
(e) Employee engaging in any activity that would in the opinion of the
Board of Directors of the Company constitute a conflict of interest with
the Company;
(f) Employee failing to substantially perform Employee's duties hereunder,
or otherwise substantially failing to comply with the terms and conditions
of this Agreement and does not correct any such failure within seven (7)
days of being requested by the Company to do so; or
(g) Employee engaging in serious conduct violation specifically listed in
Article IV, Conduct, page 9, of the Universal Seismic Associates, Inc.
Employee Handbook in effect on January 1, 1995.
13. Notwithstanding any other provision of this Agreement, in the event
the Company sells all or substantially all of the assets of the Company or the
purchase of a majority of the issued and outstanding stock of the Company
(other than the sale of assets
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<PAGE> 6
to or purchase of stock by subsidiaries, affiliates, employees or then existing
stockholders of the Company or by a public stock offering), or a change in
effective control of the Company:
(a) Employee will not be terminated without good cause within twelve (12)
months from the date of such sale, purchase or change of control or before
April 30, 1998, whichever last occurs;
(b) Employee's total compensation and benefits will not be reduced for a
period of twelve (12) months from the date of such sale, purchase or
change of ownership, other than any reduction of any incentive bonus plan
benefits resulting from the failure of the Company to meet plan
performance requirements that existed on the date of such sale, purchase
or change of control or Employee's employment is terminated for good
cause; and
(c) Employee shall be paid the total compensation and benefits Employee
would have otherwise received during the above period(s) in the event
Employee is terminated without good cause in violation of (a) above or
Employee's total compensation and benefits are reduced in violation of (b)
above.
14. Employee represents and warrants that Employee has not previously
assumed any obligations inconsistent with those of this Agreement.
15. This Agreement supersedes all previous agreements, written or oral,
relating to Employee's employment by the Company, and shall not be changed
orally, but only by a written instrument to which the Company and the Employee
are both parties.
16. Nothing herein shall limit or restrict any rights or remedies that
Company or Employee might have at law or equity.
17. The invalidity or unenforceability of any provision hereof shall be
deemed severable and shall in no way affect the validity or enforceability of
any other provision hereof.
18. This Agreement shall be deemed to be made, entered into and shall be
construed according to the laws of the State of Texas.
19. All disputes of any nature whatsoever arising out of or relating to
this Agreement or Employee's employment with the Company, whether in contract
or in tort, shall be submitted to binding arbitration at Houston, Texas under
the Texas General Arbitration Law. All arbitration proceedings shall be heard
and determined by a panel of three arbitrators. Each party shall appoint one
arbitrator and the two arbitrators so appointed shall
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select the third. The arbitrators shall hold oral hearings at the request of
either party. The prevailing party in any arbitration proceedings may be
awarded its or his costs and reasonable attorneys fees. Any award of the
arbitrators shall be final, and may be entered in any court having
jurisdiction.
20. This Agreement and the rights and obligations hereunder shall be
binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, and shall also bind and inure to the benefit
of any successor of the Company by merger or consolidation or any assignee of
any or substantially all of its properties or assets. Neither this Agreement
nor any rights or benefits hereunder may be assigned by either party hereto,
except it may be assigned by the Company to an above successor or assignee and
to any subsidiary or affiliate of the Company.
Executed this 31 day of March 1996.
COMPANY:
UNIVERSAL SEISMIC ASSOCIATES, INC.
BY: /s/ RONALD L. ENGLAND /s/ PETER B. SPOONER
--------------------------------- --------------------------------
TITLE: CFO EMPLOYEE
------------------------------- --------------------------------
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EXHIBIT A
Defined terms used herein shall have the meaning ascribed to them under the
Employment Agreement to which this Exhibit B is attached.
1. Options
1.1 On the date Employee commences employment with Company, Company will grant
to Employee an option (the "Initial Option") to purchase 100,000 common
shares of Company at an option price of 1.2 times the fair market value
of such shares on April 1, 1996, such fair market value being the closing
price per share of such stock on the NASDAQ National Market Issues on such
date.
1.2 Company will also grant Employee options ("Additional Options") to
purchase additional common shares of Company based upon performance as
provided in the Employee Stock option Plan of the Company.
1.3 If Employee ceases to be employed by Company for any reason, all
outstanding options may only be exercised within ninety (90) days of the
date of such cessation of employment or within such other time as
permitted by the applicable Stock Option Plan. Any options which are not
exercised by such date will be absolutely forfeited on the next day
following such date and Employee shall have no right to receive a grant of
any further option hereunder after he ceases to be employed by Company.
1.4 Notwithstanding the provisions of this Section 1, the granting of all
options hereunder is subject to the approval of the shareholders of
Company and any other necessary approvals, if such approvals have not
previously been given.
COMPANY: EMPLOYEE:
BY: /s/ RONALD L. ENGLAND /s/ PETER B. SPOONER
-------------------------------- ---------------------------------
Title: CFO
------------------------------
<PAGE> 1
EXHIBIT 10.35
EMPLOYMENT AGREEMENT
This Employment Agreement executed by and between Universal Seismic
Associates, Inc., a Delaware corporation ("Company") and Patrick A. Donais now
residing in Spring, Texas ("Employee").
W I T N E S S E T H
WHEREAS, the Employee is employed by the Company in a managerial or
executive capacity and desires to continue such employment; and
WHEREAS, the Company desires to retain the services of Employee in such
capacity.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree as follows:
1. The Company agrees to employ the Employee, and the Employee agrees to
render Employee's exclusive and full time service to the Company upon the terms
and conditions set forth in this Agreement. Such employment shall be initially
as Vice President, Exploration and Production, of the UNEXCO subsidiary of the
Company and with such duties as assigned from time to time by the Company. Such
employment shall commence on August 1, 1997 and shall continue through July 31,
1998, and shall extend and renew automatically for successive one (1) year
terms unless the Employee or the Company shall terminate such employment by
written notice of termination given to the other party at least 60 days prior
to the expiration of the one (1) year term then in effect. Termination by
either party, in accordance with the provisions of the preceding sentence,
shall not require a statement of the reason or cause for such termination and
shall not be deemed a breach or violation of the Agreement by the party giving
such notice. As used in this Agreement, the phrase "term of this Agreement"
shall be deemed to include the period subsequent to the date hereof and prior
to termination of this Agreement; provided, however, such phrase shall not be
construed as limiting the enforceability by either party of any rights which
survive termination of this Agreement.
2. In consideration of the services and duties to be rendered and
performed by the Employee during the term of this Agreement, including the
assumption of the duties and responsibilities as a manager or executive of the
Company, its affiliates and/or subsidiaries, the Company agrees to pay and
provide for the Employee the compensation and benefits described below:
(a) An annual salary, payable in the amount of not less than $3,846.15
every two (2) weeks, or in such greater amount as may from time to time be
fixed by the Board of Directors of the Company.
<PAGE> 2
(b) An automobile which is reasonable and customary for the position held
by Employee in a company of the size and nature of the Company, which the
Company shall insure, maintain, service and fuel. In lieu of providing such
automobile, the Company may, at its sole option and discretion, pay Employee an
automobile allowance in accordance with the Company's policies for such
allowances.
(c) All payments and/or benefits under any pensions, profit-sharing,
thrift, bonus, incentive, stock option or stock appreciation or other employee
benefit plan, including any life insurance, accident, medical, disability,
health or relocation plan or policy (all of which are included by reference to
the term "Plan") maintained by the Company for its employees, generally.
Nothing herein, however, shall be construed as limiting the right of the
Employee to additional or other and greater benefits if the provisions of this
Agreement obligate the Company to provide such other or greater benefits.
(d) Company shall provide directors and officers liability insurance
coverages of the Employee as an officer and director of the Company and of any
of its subsidiaries or affiliates, and Company shall provide indemnification of
the Employee as an officer and director of the Company as permitted by
applicable law and the applicable provisions of the Company's Articles of
Incorporation and By-laws, as amended from time to time.
(e) Any and all of Employee's service as an employee, officer or director
of any subsidiary or other affiliate of the Company shall be performed without
additional compensation.
3. Employee's location of employment will be at Houston, Texas and/or at
such other locations as may be designated from time to time by the Company;
provided, however, in the event Employee while employed outside Texas is
terminated without good cause or due to a general reduction in force by
Employer or the expiration of this Agreement, Employer will pay the reasonable
and necessary cost of travel (economy class or equivalent) and transportation
of household goods and furnishings (excluding vehicles and boats) of the
Employee, his spouse and dependent children from the location where employed at
the time of such termination or expiration to Spring, Texas.
4. The Employee shall be reimbursed for out-of-pocket expenses reasonably
incurred from time to time on behalf of the Company or any subsidiary or in the
performance of his duties under this Agreement, upon the presentation of such
supporting documents and forms as required by the policies and procedures of
the Company.
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5. In the event Employee receives any advance payment or "draw" on any
compensation, expense, benefit, bonus or commission, or receives payment for or
charges to Company any improper expense or other improper payment or charge,
such payment, draw or charge shall be repaid by Employee on demand of Company
or, at Company's sole discretion and option, be off set at any time against any
salary, bonus, commission or any other payment owed by company to Employee.
6. Employee shall not, during the period of employment herein provided,
directly or indirectly invest or engage in any business which is competitive
with that of the Company or accept employment with or render services to a
competitor as a director, officer, agent, employee or consultant, or take any
action inconsistent with the fiduciary or other relationship of an employee to
an employer.
7. In the event that the employment of Employee hereunder shall be
terminated by the Company for cause, Employee agrees that during the period of
twelve (12) months following the termination of such employment Employee will
not, directly or indirectly, either through any kind of ownership (other than
ownership of securities of publicly held corporations of which Employee owns
less than one percent (1%) of any class of outstanding securities) or as a
director, officer, agent, employee or consultant, engage in any business within
the State of Texas which is competitive with the Company or its subsidiaries or
affiliates at the time such employment is terminated. Employee agrees the
foregoing covenant not to compete will also extend for a period of twelve (12)
months following termination of Employee's employment by the Company without
cause or by the Employee for other than cause if the Company elects, at its
sole option and discretion, at the time of such termination to so extend such
covenant and continues to pay Employee his salary in accordance with Section
2(a) during the time such covenant is in force. During employment and for
twelve (12) months following termination for any reason, Employee shall not
solicit any employee, agent or representative of the Company to terminate or
breach any employment, contract or any other relationship or duty to or with
the Company. It is expressly agreed that the remedy at law for breach of this
covenant is inadequate and that injunctive relief shall be available to prevent
the breach thereof. Employee hereby acknowledges and agrees that the
limitations as to time, geographical area, and scope of activity to be
restrained are reasonable and do not impose a greater restraint than is
necessary to protect the goodwill or other business interest of Company.
8. All information relating to the identity of the customers and suppliers
of the Company or its subsidiaries or affiliates, their arrangements with such
suppliers and customers, pricing methods and policies, technical, scientific
and financial information, data, designs, processes, procedures, formulas and
improvements relating to Company's or its subsidiary or affiliates
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<PAGE> 4
products and services (hereinafter "Confidential Information"), shall be
treated as confidential by Employee both during and after the termination of
Employee's employment under this Agreement. Employee understands and
acknowledges that the Confidential Information, including without limitation
customer lists, accounts and information, are valuable, special and unique
assets and trade secrets of the Company and that the Company has taken measures
to prevent Confidential Information from becoming available to persons other
than those selected by the Company to have access to such Confidential
Information for limited purposes. Employee further acknowledges that prior to
Employee's employment by Company Employee had no knowledge of any of the
Confidential Information. Except with the prior approval of the Company,
Employee shall not disclose any of such Confidential Information at any time to
any person except personnel of the Company or its subsidiary or affiliated
corporations authorized by the Company to receive such Confidential
Information. In the event of a breach or threatened breach by the Employee of
the provisions of this paragraph, the Company shall, in addition to any other
available remedies, be entitled to any injunction restraining Employee from
disclosing, in whole or in part, any such information or from rendering any
services to any person, firm or corporation to whom any of such Confidential
Information may be disclosed or is threatened to be disclosed.
9. All data, designs, processes, procedures, formulas, improvements,
drawings, software, photographs, copies and other records and written material
prepared, compiled or conceived by Employee, solely or jointly, during the
course of or in connection with Employee's duties with the Company, or with the
use of the time or materials of the Company, or which relates to the business
of the Company, or furnished to Employee while in the employ of the Company
shall be the sole and exclusive property of the Company, none of such, data,
designs, processes, procedures, formulas, improvements, drawings, software or
other records, or copies thereof shall be retained by Employee upon termination
of Employee's employment and shall be returned to the Company upon such
termination or at such other time the Company requests such return.
10. Employee shall promptly disclose to the Company any and all
inventions, designs, improvements, and discoveries which Employee may now or
hereafter have, whether developed or conceived by Employee alone or with
others. All inventions, designs, improvements and discoveries which Employee,
alone or with others, develops or conceives during working hours, or with the
use of the Company property or assets, or which pertain or are related to the
business of the Company shall be the exclusive property of the Company.
Employee shall assist the Company to obtain patent, trademark, copyrights or
other rights, including executing documents necessary to vest full title
thereto in Company, and to protect such rights against infringement or
unauthorized disclosure.
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11. The provisions of Sections 7, 8, 9 and 10 of this Agreement shall
continue to be binding upon Employee in accordance with their terms,
notwithstanding termination of Employee's employment hereunder for any reason;
provided, however, the non-competition provision (but not the prohibition
against solicitation of employees, agents and representatives) set forth in
Section 7 above shall be null and void in the event Employer breaches the
provisions of Section 13(a) or (b) below.
12. Employee's employment may be terminated without notice by the
Company for good cause. Termination for good cause shall include, without
limitation, the following causes:
(a) Except as otherwise provided by law, upon the expiration of any sick
leave or medical leave provided by Company policies or applicable laws or
regulations Employee by reason of injury or illness is unable with any
required reasonable accommodation to perform the essential functions of
Employee's duties as an employee under this Agreement;
(b) Death of Employee;
(c) Except as otherwise provided by Company policies or applicable laws or
regulations, Employee for reasons other than illness or injury being
absent from Employee's duties without the consent of the Company for more
than ten (10) consecutive days;
(d) Employee being adjudicated a bankrupt or being charged with a crime
punishable by imprisonment;
(e) Employee engaging in any activity that would in the opinion of the
Board of Directors of the Company constitute a conflict of interest with
the Company;
(f) Employee negligently or inefficiently performing Employee's duties
hereunder, or otherwise failing to comply with the terms and conditions of
this Agreement; or
(g) Employee engaging in serious conduct violation specifically listed in
Article IV, Conduct, page 11, of the Universal Seismic Associates, Inc.
Employee Handbook attached hereto.
13. Notwithstanding any other provision of this Agreement, in the event
the Company sells all or substantially all of the assets of the Company or the
purchase of a majority of the issued and outstanding stock of the Company
(other than the sale of assets to or purchase of stock by subsidiaries,
affiliates, employees or then existing stockholders of the Company or by a
public stock offering), or a change in effective control of the Company:
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<PAGE> 6
(a) Employee will not be terminated without good cause within twelve (12)
months from the date of such sale, purchase or change of control;
(b) Employee's total compensation and benefits will not be reduced for a
period of twelve (12) months from the date of such sale, purchase or
change of control, other than any reduction of any incentive bonus plan
benefits resulting from the failure of the Company to meet plan
performance requirements that existed on the date of such sale, purchase
or change of control or Employee's employment is terminated for good
cause; and
(c) Employee shall be paid the total compensation and benefits Employee
would have otherwise received during the above period(s) in the event
Employee is terminated without good cause in violation of (a) above or
Employee's total compensation and benefits are reduced in violation of (b)
above.
14. Employee represents and warrants that Employee has not previously
assumed any obligations inconsistent with those of this Agreement.
15. This Agreement supersedes all previous agreements, written or oral,
relating to Employee's employment by the Company, and shall not be changed
orally, but only by a written instrument to which the Company and the Employee
are both parties.
16. Nothing herein shall limit or restrict any rights or remedies that
Company might have at law or equity.
17. The invalidity or unenforceability of any provision hereof shall be
deemed severable and shall in no way affect the validity or enforceability of
any other provision hereof.
18. Any notice or other communication required or permitted hereunder
shall be in writing or by telex, telephone or facsimile transmission with
subsequent written conformation, and may be personally served or sent by United
States mail, certified mail return receipt requested or registered mail,
addressed to the respective parties at the addresses stated opposite each
parties name on the signature page hereof or to such other addresses as the
shall designate hereafter in writing from time to time.
19. This Agreement shall be deemed to be made, entered into and shall be
construed according to the laws of the State of Texas.
20. All disputes of any nature whatsoever arising out of or relating to
this Agreement or breach hereof or Employee's employment, whether in contract
or in tort, shall be submitted to binding arbitration at Houston, Texas under
the Texas General Arbitration Law. All arbitration proceedings shall be heard
and
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determined by a panel of three arbitrators. Each party shall appoint one
arbitrator and the two arbitrators so appointed shall select the third. The
arbitrators shall hold oral hearings at the request of either party. The
prevailing party in any arbitration proceedings may be awarded its or his costs
and reasonable attorneys fees. Any award of the arbitrators shall be final, and
may be entered in any court having jurisdiction.
21. This Agreement and the rights and obligations hereunder shall be
binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, and shall also bind and inure to the benefit
of any successor of the Company by merger or consolidation or any assignee of
any or substantially all of its properties or assets. Neither this Agreement
nor any rights or benefits hereunder may be assigned by either party hereto,
except it may be assigned by the Company to an above successor or assignee and
to any subsidiary or affiliate of the Company.
Executed effective the this 1st day of August, 1997.
The address of the Company is: COMPANY:
16420 Park Ten Place, Suite 300 Universal Seismic Associates,
Houston, Texas 77084 Inc.
Attn: President
By: /s/ Michael J. Pawelek
------------------------------
TITLE: President & CEO
---------------------------
The address of the Employee is: /s/ Patrick A. Donais
---------------------------------
EMPLOYEE
19510 Enchanted Oaks Drive
Spring, Texas 77388
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EXHIBIT 10.36
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as
of the 7 day of August, 1997, by and among Universal Seismic Associates, Inc.,
a Delaware corporation (the "Company"), and Joe T. Rye ("Executive").
WHEREAS, the Company desires to employ Executive as its Chief Accounting
Officer, and Executive desires to accept such employment, on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, the parties agree as follows:
SECTION 1. Employment.
The Company hereby employs Executive, and Executive hereby accepts
employment with the Company, on the terms and conditions set forth in this
Agreement.
SECTION 2. Term.
Subject to the provisions of Section 5, this Agreement shall be for a term
commencing on the date hereof and expiring six months thereafter (the "Term").
SECTION 3. Executive's Duties.
3.1 Duties. Executive shall hold the position of the Company's Chief
Accounting Officer. As such, Executive's duties shall be, in general, to (i)
oversee the completion of the Company's current audit, including, without
limitation, working with the Company's independent accountants on finalizing
such audit, and (ii) evaluate the Company's financial controls and make a
report with respect thereto. Executive shall be subject solely to the control
of, and shall report solely to, the Audit Committee of the Board of Directors
of the Company (the "Board").
3.2 Performance of Duties. Executive shall perform Executive's duties and
responsibilities during the Company's normal business hours and at all other
times reasonably necessary to comply with the terms and conditions of this
Agreement. Executive shall devote the time and attention required to the
performance of Executive's duties and responsibilities hereunder. Executive
currently serves on the board of a company and performs consulting services for
certain other companies. It is agreed by the parties that Executive may
continue to provide such other services provided that such other services do
not unreasonably interfere with the performance of Executive's duties
hereunder.
3.3 Place of Employment. Executive's place of employment shall be at the
location of the Company's executive offices on the date of this Agreement or at
any other location within the
<PAGE> 2
Houston, Texas metropolitan area to which the Company may relocate its
executive offices. The Company shall provide Executive, at such place of
employment, with a private office, secretarial services and such other
facilities and support services as are appropriate to the position of Chief
Accounting Officer and necessary or appropriate in the performance of
Executive's assigned duties.
SECTION 4. Compensation and Other Benefits.
Executive shall be entitled to receive from the Company the following
compensation and benefits for the services to be rendered by Executive
hereunder:
4.1 Salary. During the Term, the Company shall pay Executive a monthly
base salary ("Base Salary") of $17,500, payable in advance on the first of each
month, but prorated for any partial month of employment.
4.2 Stock Options. Executive will be granted as of the above effective
date of this Agreement 50,000 nonqualified stock options substantially in the
form of the grant agreement attached hereto as Attachment A. The Corporation
shall file a registration statement on a Form S-8 with the Securities and
Exchange Commission registering the shares to be issued pursuant to the
exercise of the above option within 10 business days of the date of this
Agreement.
4.3 Participation in Benefit Plans. Except as provided below, during the
Term Executive shall be eligible to participate in all employee benefit plans
and arrangements now in effect or which may hereafter be established that are
generally applicable to other senior executives of the Company, as long as any
such plan or arrangement remains generally applicable to other senior
executives of the Company. Notwithstanding the foregoing, Executive shall not
participate in any group health plan of the Company and, to the extent
Executive is eligible to participate therein by the terms of such plan,
Executive hereby waives such eligibility and participation.
4.4 Reimbursement of Expenses. The Company shall reimburse Executive for
reasonable expenses incurred by Executive in the performance of Executive's
duties hereunder in accordance with the policy of the Company for reimbursement
of expenses as adopted by the Board from time to time and generally applicable
to senior executives of the Company. Executive shall furnish the Company with
the supporting documentation required under the Company's policy in connection
with the reimbursement of such expenses. In addition, the Company shall
reimburse Executive for the reasonable and ordinary costs of temporary housing
incurred by Executive during the Tenn, but not to exceed $1,140 in any calendar
month (or the pro rata portion thereof for any partial calendar month).
SECTION 5. Termination.
5.1 Termination by the Company Without Cause. The Company may terminate
Executive's employment other than for Cause or Executive becoming Disabled (as
such terms are defined below) at any time during the Term if the Board
determines, in its sole discretion, that the continued employment of Executive
is not in the continued interests of the Company. In the event the Company
terminates Executive's employment pursuant to this Section 5. 1, then Executive
shall
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be paid on termination (i) any unpaid Base Salary earned hereunder prior to the
termination date (the "Earned Amount"), and (ii) an amount equal to the amount
of Base Salary that Executive would receive if Executive's employment had
continued without change through the remainder of the original Term.
5.2 Termination by the Company for Cause. The Company may terminate this
Agreement at any time, in the discretion of the Board, in the event of "Cause",
which shall mean (i) any conviction of Executive for a felony, (ii) any
material breach of any material provision of this Agreement by Executive, (iii)
any willful conduct by Executive materially injurious to the Company, (iv) any
willful failure by Executive to comply with any material policies, procedures,
or directives of the Audit Committee of the Board that are consistent with the
terms of this Agreement, (v) any fraud, misappropriation of funds,
embezzlement, or other similar acts of misconduct by Executive with respect to
the Company, or (vi) the failure by Executive to sign the Company's management
representation letter to the Company's auditors or the Company's Form 10-K, in
a form reasonably satisfactory to the Audit Committee; provided, however, Cause
shall exist with respect to a matter described in (ii), (iii) or (iv) above
that is capable of being corrected only if Executive shall first be given
notice from the Audit Committee of such failure and such failure shall not have
been cured within five days after such notice or, if such failure is not
capable of being cured within five days, Executive shall not have commenced and
be diligently pursuing in good faith efforts to cure such default. In the event
the Company terminates Executive's employment pursuant to this Section 5.2 for
Cause, then Executive shall be paid on termination the Earned Amount and the
Company shall have no further liability or obligations to Executive pursuant to
this Agreement.
5.3 Termination Upon Death or Disability of Executive. This Agreement shall
terminate upon the death of Executive or upon Executive becoming Disabled (as
defined below). In the event of a termination of this Agreement pursuant to
this Section 5.3, Executive (or Executive's estate, if applicable) shall be
paid on termination the Earned Amount and the Company shall have no further
liability or obligations to Executive pursuant to this Agreement. For purposes
of this Agreement, "Disabled" shall mean that Executive shall have incurred a
mental or physical disability that has prevented Executive from substantially
performing his duties under this Agreement for a period of 30 days within any 45
day period.
5.4 Voluntary Resignation for Good Reason. Executive may resign
Executive's employment with the Company at any time and, if such resignation is
for "Good Reason" (as defined below), Executive shall be entitled to the same
payments that Executive would receive under Section 5.1 if Executive's
employment were being terminated by the Company other than for Cause or
Executive becoming Disabled. "Good Reason" shall mean: (i) the failure by the
Company to pay when due any portion of the Base Salary payable to Executive
hereunder, (ii) any material breach by the Company of any material provision of
this Agreement, (iii) the Company's failure at any time to cause Executive to
be covered as an insured under a policy or contract that insures directors and
officers of the Company against personal liability for acts or omissions or
alleged acts or omissions in connection with such individual's service as an
officer or director of the Company or service in other capacities at the
request of the Company ("D&O Policy") on terms and conditions that are
substantially the same as the coverages provided to officers and directors of
the Company as of the date of this Agreement, (iv) the failure of the Company
to provide Executive a written binding
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commitment by September 17, 1997 that the Company will maintain coverage for
Executive under the Company's D&O Policy for a period of three years
following the Term of this Agreement for claims arising from acts or omissions
or alleged acts or omission occurring during the Term of this Agreement, or (v)
the failure of Resource Investors Management Company Limited Partnership (or
its affiliates) to provide the Company with a written binding commitment by
September 17, 1997 to finance the costs of such coverage referred to in clause
(iv) immediately above; provided, however, Good Reason shall exist with respect
to a matter that is capable of being corrected by the Company only if such
matter is not corrected by the Company within a reasonable period, not to
exceed 30 days, following its receipt of written notice of such matter from
Executive, and in no event shall a termination by Executive occurring more
than 35 days following any such written notice of the event described above be
for Good Reason.
SECTION 6. Covenant Not to Compete; Confidentiality.
6.1 Noncompetition. Unless granted written permission by the Board, while
employed by the Company and for a period of 12 months after the termination of
such employment, Executive covenants that Executive shall not (i) own (as a
proprietor, partner, or stockholder of greater than one percent of outstanding
equity securities, interests or otherwise) an interest in, or (ii) participate
(as an officer, director, or in any other capacity) in the management,
operation, or control of, or (iii) perform services as or act in the capacity
of any employee, independent contractor, consultant, or agent of any business
which engages in activities that are competitive with the three-dimensional
seismic acquisition and processing services of the Company or its subsidiaries
in an area within North America in which the Company is then conducting
business and in which the Company commenced conducting such business prior to
the commencement of such activities therein by Executive.
6.2 Confidentiality. Executive acknowledges that in the course of
Executive's employment by the Company, Executive will be furnished and have
access to certain information concerning the business, financial condition,
operations, assets and liabilities of the Company that is confidential or
proprietary in nature. All such information (irrespective of the form of
communication) is hereinafter collectively referred to as the "Information."
Executive agrees to keep the Information confidential and agrees that Executive
will use the Information solely for the purpose of performing Executive's
duties hereunder or as otherwise authorized by the Board. This Agreement shall
be inoperative as to such portions of the Information which (a) are or become
generally available to the public other than as a result of a disclosure by
Executive in violation of this Agreement, (b) become available to Executive on
a non-confidential basis from a source other than the Company that is not bound
by an obligation of confidentiality to such entity or entities, or (c) are
required to be disclosed by an order or decree of a court or other tribunal of
competent jurisdiction, provided the Company is given prompt notice of, and the
opportunity to contest disclosure under, such order or decree. Upon termination
of this Agreement, Executive will return all Information furnished by the
Company and any documents that contain, reflect, or are based upon, in whole or
in part, the Information.
6.3 Equitable Relief. Executive acknowledges and agrees that it would be
difficult to measure damage to the Company from any breach by Executive of
Section 6.1 or 6.2 and that
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monetary damages would be an inadequate remedy for any such breach.
Accordingly, Executive agrees that if Executive shall breach Section 6.1 or
6.2, the Company shall be entitled, in addition to all other remedies it may
have at law or in equity, to an injunction or other appropriate orders or
equitable relief to restrain any such breach, without showing or proving any
actual damage sustained by the Company.
6.4 Executive's Acknowledgment. Executive hereby expressly acknowledges and
agrees that (i) the restrictions and obligations set forth in and imposed by
this Section 6 will not prevent Executive from obtaining gainful employment in
Executive's field of expertise or cause Executive undue hardship, and (ii) in
view and consideration of the substantial benefits Executive will receive from
the Company pursuant to this Agreement, the restrictions and obligations
imposed on Executive under this Section 6 are reasonable and necessary to
protect the legitimate business interests of the Company.
Section 7. Indemnification.
(a) During the Term, the Company shall cause Executive to be covered by
and named as an insured under any policy or contract of insurance obtained by
it to insure its directors and officers against personal liability for acts or
omissions in connection with service as an officer or director of the Company
or service in other capacities at the request of the Company. The coverage
provided to Executive pursuant to this Section 7 shall be of a scope and on
terms and conditions at least as favorable as the coverage (if any) provided to
any other officer or director of the Company.
(b) To the maximum extent permitted under applicable law, the Company
shall indemnify Executive against and hold Executive harmless from any costs,
liabilities, losses and exposures ("Liabilities") for an act or omission or
alleged act or omission of Executive as an officer or employee, of the Company.
In addition, to the maximum extent permitted by applicable law, the Company
shall advance to Executive all reasonable fees and expenses Executive may incur
in connection with any such Liability; provided, however, that Executive shall
be required to reimburse the Company for all sums advanced to Executive to the
extent it is determined such advanced amounts may not be properly paid by the
Company.
SECTION 8. Representations and Warranties.
8.1 By the Executive. Executive represents and warrants to the Company
that (i) Executive is under no contractual or other restriction or obligation
which would prevent the performance of Executive's duties hereunder or
interfere with the rights of the Company hereunder and (ii) this Agreement has
been duly executed and delivered by Executive, is the legal, valid and binding
obligation of Executive, and is enforceable against Executive in accordance
with its terms.
8.2 By the Company. The Company represents and warrants to Executive that
(i) it has all requisite corporate power and authority to execute, deliver and
perform this Agreement, (ii) all necessary proceedings of the Company have been
duly taken to authorize the execution, delivery and performance of this
Agreement, and (iii) this Agreement has been duly authorized, executed and
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<PAGE> 6
delivered by the Company, is the legal, valid and binding obligation of the
Company, and is enforceable against the Company in accordance with its terms.
SECTION 9. Notices.
Any notice given pursuant to this Agreement shall be in writing and shall
be deemed given on the earlier of the date (i) the notice is personally
delivered to the party to be notified, (ii) that is three days after the notice
is mailed, postage prepaid, certified with return receipt requested, addressed
as follows, or at such other address as a party may from time to time designate
by notice to the other party, (iii) the notice is delivered at the party's
address via courier service, or (iv) the notice is received by fax or
telecopier:
To the Company: Universal Seismic Associates, Inc.
16420 Park Ten Place, Suite 300
Houston, TX 77084-5051
Attn: Chairman, Board of Directors
Facsimile No: 281-578-7091
To Executive: Joe T. Rye
158 April Waters West
Montgomery, TX 77356
Facsimile No: 409-588-4115
SECTION 10. General Provisions.
10.1 Remedies on Default. In the event either party breaches this
Agreement, the other party shall be entitled to pursue all remedies available
at law or in equity. Except as otherwise provided herein, in the event this
Agreement is breached by either party, the non-breaching party shall not
terminate this Agreement without notice and a reasonable opportunity to cure
such breach.
10.2 Assignment; Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company, by merger
or otherwise. The Company will require any successor, by agreement in form and
substance reasonably acceptable to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place
and following such assumption all references to the Company herein shall be
deemed to mean such successor. Except as provided in the preceding sentence,
this Agreement, and the rights and obligations of the parties hereunder, are
personal and neither this Agreement, nor any right, benefit, or obligation of
either party hereto, shall be subject to voluntary or involuntary assignment,
alienation or transfer, whether by operation of law or otherwise, without the
prior written consent
6
<PAGE> 7
of the other party. Subject to the foregoing, the provisions of this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective heirs, personal representatives, administrators, successors, and
permitted assigns.
10.3 Waiver. Failure of any party at any time to require performance
of any provision of this Agreement shall not limit such party's right to
enforce such provision, nor shall any waiver of any breach of any provision of
this Agreement constitute a waiver of any succeeding breach of such provision
or a waiver of such provision itself. No attempted or purported waiver of any
provision of this Agreement shall be effective unless set forth in writing and
signed by the party to be bound.
10.4 Amendment. This Agreement may not be modified or amended except
by the written agreement of the parties.
10.5 Severability. The agreements and covenants contained in this
Agreement are severable, and in the event any of the agreements and covenants
contained in this Agreement should be held to be invalid by any court or
tribunal of competent jurisdiction, this Agreement shall be interpreted as if
such invalid agreements and covenants were not contained herein; provided,
however, that if in any legal proceeding a court shall hold unenforceable the
covenants contained in Section 6 by reason of their extent or duration or
otherwise, any such covenant shall be reduced in scope to the extent required
by law and enforced in its reduced form.
10.6 Integration. This Agreement contains the entire agreement and
understanding of the parties with respect to the employment of Executive by the
Company and supersedes all prior and Contemporaneous agreements (oral or
written) between them with respect to such subject matter.
10.7 Attorneys' Fees. The Company shall reimburse Executive for the
reasonable attorney's fees and expenses Executive incurs in the negotiation of
this Agreement.
10.8 Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement.
10.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
10.10 Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Houston, Texas in accordance with the Expedited Procedures of the Commercial
Arbitration Rules of the American Arbitration Association. Judgment may be
entered on the arbitrators' award in any court having jurisdiction. All costs
and expenses (including attorneys' fees) arising in connection with any
arbitration or other proceeding to enforce the rights awarded in the
arbitration proceeding shall be allocated among the parties by the court or
arbitrator, as applicable.
10.11 Withholding. All payments made by the Company under this
Agreement shall be reduced by any tax or other amounts required to be withheld
by the Company under applicable law.
7
<PAGE> 8
10.12 Survival. In the event of termination of this Agreement by
either party, this Agreement shall become void and there shall be no liability
on the part of Executive or the Company except to the extent such termination
results from the breach by a party hereto of its obligations hereunder (in
which case Section 10.1 shall apply); provided that Sections 5.1, 5.2, 5.3,
5.4, 6, 7, 9 and 10.7 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective for
all purposes as of the date first above written.
UNIVERSAL SEISMIC ASSOCIATES, INC.
By: /s/ RONALD L. ENGLAND
----------------------------------------
Name: Ronald L. England
--------------------------------------
Title: Chief Financial Officer
-------------------------------------
/s/ JOE T. RYE
---------------------------------------
Joe T. Rye
8
<PAGE> 1
EXHIBIT 10.37
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
CAN BE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND SUCH SHARES OF
COMMON STOCK MAY NOT BE SOLD, TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN THE OPINION OF COUNSEL TO THE
COMPANY, SUCH REGISTRATION IS NOT THEN REQUIRED
This Warrant will be void after January 15, 2001
WARRANT
To Purchase Shares of Common Stock of
UNIVERSAL SEISMIC ASSOCIATES, INC.
THIS CERTIFIES THAT, for value received, RONALD L. ENGLAND, whose address
is 16420 Park Ten Place, Suite 300, Houston, Texas 77084-5051 (the "Holder"), is
entitled to purchase from UNIVERSAL SEISMAC ASSOCIATES, INC., a Delaware
corporation, whose address is 16420 Park Ten Place, Suite 300, Houston, Texas
77084-5051 (the "Company"), at any time from and after the date hereof, and
prior to midnight (Houston, Texas time) on January 15, 2001 (the "Exercise
Period"), 5,000 fully paid and nonassessable shares of the Company's common
stock, $0.0001 par value (the "Common Stock"), at the price of $2.50 per Share
("Share Purchase Price"); subject, however, to the provisions and upon the
terms and conditions herinafter set forth in this Warrant ("Warrant"). The
shares of Common Stock deliverable upon exercise of this Warrant shall be
referred to hereinafter collectively as the "Shares."
1. Exercise: Issuance of Certificates: Payment for Shares. The rights
represented by this Warrant may be exercised by the Holder, in whole or in
part, at any time or from time to time during the Exercise Period, upon
presentation and surrender of This Warrant to the Company, at its principal
office as set forth above, or at such other place as the Company may designate
written notice from the Holder stating that the Holder is exercising this
Warrant and specifying the number of Shares that the Holder desires to purchase
(the "Notice") and accompanied by payment of the applicable Share Purchase
Price for each Share so purchased and all federal and state taxes or other
governmental charge applicable to such exercise and issuance of the Shares.
Such payment shall be made, in cash or by certified, bank or cashier's check,
payable to the order of the Company. The Shares so purchased shall be deemed to
have been issued to the Holder as of the close of business on the business day
next following the date on which this Warrant shall have been surrendered to
the Company, along with the Notice and full payment for the Shares purchased.
Subject to the provisions of Section 8, certificates for the Shares so
purchased and, unless this Warrant shall have expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been
<PAGE> 2
exercised, shall be delivered to the Holder within a reasonable time after the
Holder has complied with the provisions of this Section 1.
2. Restrictions on Exercise or Transfer of Warrant. The Holder may not
sell, assign, transfer or hypothecate this Warrant or any interest herein
except as set forth in the last sentence of this Section, and any attempt by
the Holder to do so shall be void. Neither this Warrant nor any interest herein
may be sold, assigned, transferred or hypothecated involuntarily or by
operation of law. The Company specifically understands and agrees that the
Warrant shall be fully transferable to any corporation of which the Holder is a
director or affiliate and has a 10% or more equity interest therein, provided
that the transferee specifically agrees to comply with the foregoing and the
Holder has a bona fide interest in such corporation and such transfer has not
been made to such corporation for the primary purpose of avoiding the foregoing
transfer restrictions.
3. Reservation of Shares. The Company hereby agrees that at all times
during the Exercise Period there shall be reserved for issuance and delivery
upon exercise of this Warrant such number of Shares as shall be required for
issuance and delivery on exercise of this Warrant.
4. Loss of Warrant. The Company will execute and deliver a new Warrant of
like tenor and date upon receipt by the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (i) in the
case of loss, theft or destruction, upon receipt by the Company of indemnity
satisfactory to the Company, or (ii) in the case of mutilation, upon
presentation, surrender, and cancellation of this Warrant. The Holder shall pay
all federal and state taxes or other governmental charge applicable to any
issuance of new Warrants under this Section 4.
5. Rights of the Holder. The Holder shall not, by virtue of this Warrant,
be entitled to any rights of a shareholder in the Company, either at law or
equity. The rights of the Holder are limited to those expressed in the Warrant
and are not enforceable against the Company except to the extent set forth
herein.
6. Adjustment and Other Events.
(a) Definition. As used in this Section 6, "Stock" shall mean
shares of the Company's capital stock of any class, whether now or hereafter
authorized, that has the right to participate in the distribution of earnings
and assets of the Company without limit as to amount or percentage. As of the
date hereof, Stock consists of 20,000,000 authorized shares of the Company's
common stock, $0.0001 par value per share.
(b) Stock Dividend or Distribution. If the Company shall declare
any dividend or other distribution upon its outstanding Stock payable in Stock,
or shall subdivide its outstanding shares of Stock into a greater number of
shares, then, on the effective date of such dividend, distribution or
subdivision, the number of Shares that may thereafter be purchased
- 2 -
<PAGE> 3
upon the exercise of the rights represented hereby shall be increased in
proportion to the increase through such dividend, distribution or subdivision,
and the Share Purchase Price shall be decreased in such proportion. In case the
Company shall at any time combine the outstanding shares of its Stock into a
smaller number of shares, then, on the effective date of such combination, the
number of Shares that may thereafter be purchased upon the exercise of the
rights represented hereby shall be decreased in proportion to the decrease
through such combination, and the Share Purchase Price shall be increased in
such proportion.
(c) Notice of Adjustment and-Other Events. The Company shall
give the Holder notice of any event requiring an adjustment as provided in
Subsection 6(b) at least ten days prior to the effective date of such event;
provided, however, that failure to give such notice shall not in any way
invalidate or otherwise limit or affect the validity or effectiveness of such
event.
(d) Fractional Shares. No fractional shares of Common Stock or
scrip representing fractional shares of Common Stock shall be issued upon the
exercise of this Warrant, and the Company shall have no obligation to make any
cash payment with respect thereto.
(e) Company-Held Stock. The number of shares of Stock of any
class at any time outstanding shall include all shares of Stock of that class
then owned or held by or for the account of the Company.
7. Registration Rights.
(a) Registrable Stock. As used in this Section 7, the term
"Registrable Stock" shall mean all Shares issued pursuant to the provisions of
this Warrant, but shall not include the Warrant.
(b) Incidental Registration. In the event that the Company
proposes, at any time during the Exercise Period, to file a registration
statement on a general form of registration under the Securities Act of 1933,
as amended (the "Securities Act"), and relating to shares of Common Stock
issued or to be issued by it (other than a registration effected solely to
implement an employee benefit plan or solely with respect to a transaction to
which Rule 145 under the Securities Act is applicable), then it shall give
written notice of such proposal to all holders of Registrable Stock and any
other holders of securities of the Company having any rights to include
securities in such registration. Upon the written request of a holder or
holders of any shares of Registrable Stock given within ten days after receipt
of any such notice (stating the number of shares of Registrable Stock to be
disposed of and the intended method of disposition of such shares by such
holder or holders), the Company will use its best efforts to promptly cause all
such shares intended to be disposed of, the holder or holders of which shall
have so requested registration thereof, to be registered under the Securities
Act so as to permit the sale or other disposition (in accordance with the
intended methods thereof as aforesaid) by the holder or holders of the shares
so registered, subject to the limitations set forth in Section 7(c). The
- 3 -
<PAGE> 4
Company specifically covenants and agrees that it will use all reasonable
efforts to include such shares in any registration statement filed at the
request of Resource investors Management Company ("RIMCO") Or any affiliate
thereof filed by reason Of any registration rights granted Pursuant to the
contemplated investment in various debt instruments and related securities by
various limited partnerships affiliated with RIMCO (the "RIMCO Partnerships").
To the extent that the RIMCO Partnerships do not make such investment or no
registration statement is filed on their behalf within 24 months of the
execution date hereof, the Company shall, if permitted under applicable rules
and regulations of the Securities and Exchange Commission promptly cause the
Stock to be included on a registration statement on Form S-8, or if not so
permitted, on the next registration statement filed by the Company (other than
a registration effected solely to implement an employee benefit plan or solely
with respect to a transaction to which Rule 145 under the Securities Act is
applicable).
(c) Limitations on Registration. If the Company gives notice
Pursuant to Section 7(b) for the purpose of permitting registration (whether
involving an underwritten or other offering) of Shares, the Company shall have
the right to determine the aggregate size of the offering and to limit the
number of Shares to be registered by the holders of Registrable Stock pursuant
to Section 7(b), including the right to exclude all shares to be sold on behalf
of holders of Registrable Stock if the Company's underwriters or financial
advisers determine such exclusion is necessary or advisable to insure a
successful offering of the Company securities. If the Company limits the number
of (but does not exclude) shares sold by selling shareholders, the maximum
number of shares to be registered on behalf of any holder of Registrable Stock
shall be determined by multiplying the number of shares of Registrable Stock
such holder has properly requested be registered by a fraction, the numerator
of which shall be the number of shares of Common Stock to be included in such
registration by all shareholders, and the denominator of which is the number of
shares of Common Stock validly requested to be included in such registration by
all holders of Common Stock having registration rights. All registration rights
with respect to any shares of Registrable Stock shall lapse and terminate at the
earlier of (i) such time as such shares have been actually registered once on a
registration statement on Form S-3 or S-8, (ii) such time as the holder thereof
has had the opportunity to register such shares hereunder and has declined or
failed to so register such shares, or (iii) such time as counsel for the
Company makes a good faith determination that all of the shares of Registrable
Stock may be sold into public markets under Rule 144 promulgated under the
Securities Act, or otherwise, in a period of nine months or less and that any
restrictive legend set forth on the shares of Registrable Shares pertaining to
securities law compliance may be removed. In addition, to the extent that any
existing registration rights of the Company conflict with the provisions of
this Section 7, the registration rights provided herein shall be subject to any
previously granted registration rights with respect to the Company securities
and shall be delayed or otherwise equitably subordinated to such prior rights
until such prior rights are satisfied. The foregoing limitations shall not
apply to the first registration statement filed on behalf of RIMCO or any of
the RIMCO Partnerships, provided that RIMCO consents to such inclusion.
- 4 -
<PAGE> 5
(d) Registration Procedures. If and when the Company is required
by the provisions Of this Section 7 to use its best efforts to effect promptly
the registration of shares of Registrable Stock under the Securities Act, the
Company will:
(i) Prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement with respect to such shares and use
its best efforts to cause such registration statement to become and remain
effective as provided herein for a period of not less than six (6) months,
except that the Company shall not be required to conduct any special audit and
if such an audit would be required, the Company may delay such registration
statement until such time as such special audit is no longer required;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
current and to comply with the provisions of the Securities Act with respect to
the sale or other disposition of all shares covered by such registration
statement, including such amendments and supplements as may be necessary to
reflect the intended method of disposition from time to time of the prospective
seller or sellers of such shares for a period of not less than six (6) months;
(iii) furnish to each prospective seller such number of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or other disposition
of the shares owned by such seller; and
(iv) use its best efforts to register or qualify the shares
covered by such registration statement under such other securities or blue sky
or other applicable laws of such jurisdictions within the United States, as
each prospective seller shall reasonably request, to enable such prospective
seller to consummate the public sale or other disposition in such jurisdictions
of the shares owned by such seller.
Each prospective seller of Registrable Stock, and each
underwriter designated by such seller, shall be required to furnish to the
Company such information as the Company may reasonably require from such seller
or underwriter for inclusion in the registration statement (and the prospectus
included therein).
The holders of shares included in the registration statement
will not (until further notice) effect sales thereof after receipt of
telegraphic or written notice from the Company to suspend sales in order to
permit the Company to correct or update a registration statement or prospectus;
but the obligations of the Company with respect to maintaining any registration
statement current and effective shall be extended by a period of days equal to
the period such suspension is in effect.
(e) Registration Expenses. All expenses incurred in effecting
any registration pursuant to this Section 7 including, without limitation, all
registration and filing fees, printing
- 5 -
<PAGE> 6
expenses, expenses of compliance with blue sky laws and fees and disbursements
of counsel for the Company, shall be borne by the Company. Notwithstanding the
foregoing, however, all underwriting discounts and commissions and fees and
disbursements for special counsel to the holders of the securities to be
registered shall be paid out of the proceeds of the sale of Common Stock
occurring in connection with such registration.
(f) Indemnification by Company. The Company to indemnify each
holder requesting or joining in a registration, each person or entity who
controls such holder within the meaning of Section 15 Of the Securities Act,
and each underwriter and selling broker of the securities so registered, and
their respective successors, against any claims, losses, damages, liabilities,
fines and penalties (or actions in respect thereof) arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related registration
statement, notification or the like) or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation by the Company
of any rule or regulation promulgated under the Securities Act applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and agrees
to reimburse each such holder, each person or entity who controls such holder
within the meaning of Section 15 of the Securities Act, and each such
underwriter, and their respective successors, for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, provided, however, that the
Company will not be liable in any such case if (and to the extent that) such
statement or omission was made in reliance upon information (including, without
limitation written negative responses to inquiries) furnished to the Company by
an instrument duly executed by such holder or underwriter and stated to be
specifically for use in such prospectus, offerring circular or other document
(or related registration statement, notification or the like) or any amendment
or supplement thereto.
(g) Indemnification by Holders. Each holder requesting or
joining in a registration and each underwriter of the securities so registered
will indemnify the Company and its officers and directors and each person, if
any, who controls any thereof within the meaning of Section 15 of the
Securities Act and their respective successors against all claims, losses,
damages, liabilities, fines and penalties (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any prospectus, offering circular or other
document incident to any registration, qualification or compliance (or in any
related registration statement, notification or the like) or any omission (or
alleged omission) to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, and will reimburse the
Company, as applicable, and each other person indemnified pursuant to this
Section 7(g) for. any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, provided, however, that this Section 7(g) shall apply only
if (and only to the extent that) such statement or omission was made in
reliance upon information (including, without limitation, written negative
responses to inquiries) furnished to the Company by an
- 6 -
<PAGE> 7
instrument duly executed by such holder or underwriter and stated to be
specifically for use in such prospectus, offering circular or other document
(or related registration statement, notification or the like) or any amendment
or supplement thereto.
8. Transfer to Comply with the Securities Act of 1933. In addition to the
prohibitions and restrictions contained in Paragraph 2 above, this Warrant and
any Shares issued or issuable upon exercise hereof may not be offered or sold
except in conformity with the Securities Act, and then only against receipt of
a written agreement of such person to whom such offer or sale is made to comply
with the provisions of this Paragraph 8 with respect to any resale or other
disposition of such securities; except that no such agreement shall be required
from any person purchasing Shares issued or issuable upon exercise of this
Warrant pursuant to a registration statement effective under the Securities
Act. The Holder agrees that, prior to the disposition of any Shares purchased
pursuant to the exercise hereof under circumstances that might require
registration of such Shares under the Securities Act, or any similar federal or
state statute then in force, the Holder shall give written notice to the
Company expressing his intention as to the disposition to be made of such
Shares. Promptly upon receiving such notice, the Company shall present copies
thereof to its counsel. If, in the opinion of the Company's counsel, the
proposed disposition does not require registration of such Shares under the
Securities Act, or any similar federal or state statute then in force, the
Company shall, as promptly as practicable, notify the Holder of such opinion,
and the Holder shall then be entitled to dispose of such Shares, but only
strictly in accordance with the terms of the notice delivered by the Holder to
the Company and any qualifications or limitations contained in the opinion of
the Company's counsel.
9. Further Assurances. The Company will take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Shares upon the exercise of this Warrant.
10. Reservation of Shares. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
all shares of Common Stock from time to time issuable upon the exercise of this
Warrant.
11. Applicable Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Texas.
12. Notice. Any notices or certificates by the Company to the Holder or by
the Holder to the Company shall be deemed delivered if in writing and delivered
personally or sent by registered or certified mail, return receipt requested,
to such party at the address set forth on page 1 of this Warrant, or to such
other address as the party may designate by notice given in accordance with
this Paragraph 12.
13. Arbitration. Any and all disputes between the parties hereto arising
under or related to this Warrant shall be settled by binding arbitration in
Houston, Texas, under the Texas General Arbitration Act, and the determination
in any such arbitration may be entered in any
- 7 -
<PAGE> 8
court having jurisdiction. The arbitration shall be conducted by a panel of
three arbitrators, one chosen by each party and the third by the two
arbitrators so chosen. If the two arbitrators cannot agree on a third, then the
third shall be appointed by the Presiding Judge of the United States District
Court for the Southern District of Texas-Houston Division, upon the application
of either party with notice to the other.
14. Descriptive Headings. The descriptive headings of the several
Sections of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
IN WITNESS WHEREOF, this Warrant has been executed and delivered to be
effective as of January 12, 1996.
UNIVERSAL SEISMIC ASSOCIATES, INC.,
a Delaware corporation
By: /s/ MICHAEL J. PAWELEK
-------------------------------------
Michael J. Pawelek, President
- 8 -
<PAGE> 1
EXHIBIT 10.38
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
CAN BE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND SUCH SHARES OF
COMMON STOCK MAY NOT BE SOLD, TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN THE OPINION OF COUNSEL TO THE
COMPANY, SUCH REGISTRATION IS NOT THEN REQUIRED.
This Warrant will be void after January 15, 2001
WARRANT
To Purchase Shares of Common Stock of
UNIVERSAL SEISMIC ASSOCIATES, INC.
THIS CERTIFIES THAT, for value received, RONALD L. ENGLAND, whose address
is 16420 Park Ten Place, Suite 300, Houston, Texas 77084-5051 (the "Holder"), is
entitled to purchase from UNIVERSAL SEISMIC ASSOCIATES, INC., a Delaware
corporation, whose address is 16420 Park Ten Place, Suite 300, Houston, Texas
77084-5051 (the "Company"), at any time from and after the date hereof, and
prior to midnight (Houston, Texas time) on January 15, 2001 (the "Exercise
Period"), 100,000 fully paid and nonassessable shares of the Company's common
stock, $0.0001 par value (the "Common Stock"), at the price of $3.75 per Share
("Share Purchase Price"); subject, however, to the provisions and upon the
terms and conditions hereinafter set forth in this Warrant ("Warrant"). The
shares of Common Stock deliverable upon exercise of this Warrant shall be
referred to hereinafter collectively as the "Shares."
1. Exercise; Issuance of Certificates; Payment for Shares. The rights
represented by this Warrant may be exercised by the Holder, in whole or in
part, at any time or from time to time during the Exercise Period, upon
presentation and surrender of this Warrant to the Company, at its principal
office as set forth above, or at such other place as the Company may designate
written notice from the Holder stating that the Holder is exercising this
Warrant and specifying the number of Shares that the Holder desires to purchase
(the "Notice") and accompanied by payment of the applicable Share Purchase
Price for each Share so purchased and all federal and state taxes or other
governmental charge applicable to such exercise and issuance of the Shares.
Such payment shall be made, in cash or by certified, bank or cashier's check,
payable to the order of the Company. The Shares so purchased shall be deemed to
have been issued to the Holder as of the close of business on the business day
next following the date on which this Warrant shall have been surrendered to
the Company, along with the Notice and full payment for the Shares purchased.
Subject to the provisions of Section 8, certificates for the Shares so
purchased and, unless this Warrant shall have expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been
<PAGE> 2
exercised, shall be delivered to the Holder within a reasonable time after the
Holder has complied with the provisions of this Section 1.
2. Restrictions on Exercise or Transfer of Warrant The Holder may not sell,
assign, transfer or hypothecate this Warrant or any interest herein except as
set forth in the last sentence of this Section, and any attempt by the Holder
to do so shall be void. Neither this Warrant nor any interest herein may be
sold, assigned, transferred or hypothecated involuntarily or by operation of
law. The Company specifically understands and agrees that the Warrant shall be
fully transferable to any corporation of which the Holder is a director or
affiliate and has a 10% or more equity interest therein, provided that the
transferee specifically agrees to comply with the foregoing and the Holder has
a bona fide interest in such corporation and such transfer has not been made to
such corporation for the primary purpose of avoiding the foregoing transfer
restrictions.
3. Reservation of Shares. The Company hereby agrees that at all times
during the Exercise Period there shall be reserved for issuance and delivery
upon exercise of this Warrant such number of Shares as shall be required for
issuance and delivery on exercise of this Warrant.
4. Loss of Warrant. The Company will execute and deliver a new Warrant of
like tenor and date upon receipt by the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (i) in the
case of loss, theft or destruction, upon receipt by the Company of indemnity
satisfactory to the Company, or (ii) in the case of mutilation, upon
presentation, surrender, and cancellation of this Warrant. The Holder shall pay
all federal and state taxes or other governmental charge applicable to any
issuance of new Warrants under this Section 4.
5. Rights of the Holder. The Holder shall not, by virtue of this Warrant,
be entitled to any rights of a shareholder in the Company, either at law or
equity. The rights of the Holder are limited to those expressed in the Warrant
and are not enforceable against the Company except to the extent set forth
herein.
6. Adjustment and Other Events.
(a) Definition. As used in this Section 6, "Stock" shall mean
share of the Company's capital stock of any class, whether now or hereafter
authorized, that has the right to participate in the distribution of earnings
and assets of the Company without limit as to amount or percentage. As of the
date hereof, Stock consists of 20,000,000 authorized shares of the Company's
common stock, $0.0001 par value per share.
(b) Stock Dividend or Distribution. If the Company shall declare
any dividend or other distribution upon its outstanding Stock payable in Stock,
or shall subdivide its outstanding shares of Stock into a greater number of
shares, then, on the effective date of such dividend, distribution or
subdivision, the number of Shares that may thereafter be purchased
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<PAGE> 3
upon the exercise of the rights represented hereby shall be in proportion to
the increase through such dividend, distribution or subdivision, and the Share
Purchase Price shall be decreased in such proportion. In case the Company shall
at any time combine the outstanding shares of its Stock into a smaller number
of shares, then, on the effective date of such combination, the number of Shares
that may thereafter be purchased upon the exercise of the rights represented
hereby shall be decreased in proportion to the decrease through such
combination, and the Share Purchase Price shall be increased in such
proportion.
(c) Notice of Adjustment and Other Events. The Company shall
give the Holder notice of any event requiring an adjustment as provided in
Subsection 6(b) at least ten days prior to the effective date of such event;
provided, however, that failure to give such notice shall not in any way
invalidate or otherwise limit or affect the validity or effectiveness of such
event.
(d) Fractional Shares. No fractional shares of Common Stock or
scrip representing fractional shares of Common Stock shall be issued upon the
exercise of this Warrant, and the Company shall have no obligation to make any
cash payment with respect thereto.
(e) Company-Held Stock. The number of shares of Stock of any
class at any time outstanding shall include all shares of Stock of that class
then owned or held by or for the account of the Company.
7. Registration Rights.
(a) Registrable Stock. As used in this Section 7, the term
"Registrable Stock" shall mean all Shares issued pursuant to the provisions of
this Warrant, but shall not include the Warrant.
(b) Incidental Registration. In the event that the Company
proposes, at any time during the Exercise Period, to file a registration
statement on a general form of registration under the Securities Act of 1933,
as amended (the "Securities Act"), and relating to shares of Common Stock
issued or to be issued by it (other than a registration effected solely to
implement an employee benefit plan or solely with respect to a transaction to
which Rule 145 under the Securities Act is applicable), then it shall give
written notice of such proposal to all holders of Registrable Stock and any
other holders of securities of the Company having any rights to include
securities in such registration. Upon the written request of a holder or
holders of any shares of Registrable Stock given within ten days after receipt
of any such notice (stating the number of shares of Registrable Stock to be
disposed of and the intended method of disposition of such shares by such
holder or holders), the Company will use its best efforts to promptly cause all
such shares intended to be disposed of, the holder or holders of which shall
have so requested registration thereof, to be registered under the Securities
Act so as to permit the sale or other disposition (in accordance with the
intended methods thereof as aforesaid) by the holder or holders of the shares
so registered, subject to the limitations set forth in Section 7(c). The
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<PAGE> 4
Company specifically covenants and agrees that it will use all reasonable
efforts to include such shares in any registration statement filed at the
request of Resource Investors Management Company ("RIMCO") or any affiliate
thereof filed by reason of any registration rights granted pursuant to the
contemplated investment in various debt instruments and related securities by
various limited partnerships affiliated with RIMCO (the "RIMCO Partnerships").
To the extent that the RIMCO Partnerships do not make such investment or no
registration statement is filed on their behalf within 24 months of the
execution date hereof, the Company shall, if permitted under applicable rules
and regulations of the Securities and Exchange Commission promptly cause the
Stock to be included on a registration statement on form S-8, or if not so
permitted, on the next registration statement filed by the Company (other than
a registration effected solely to implement an employee benefit plan or solely
with respect to a transaction to which Rule 145 under the Securities Act is
applicable).
(c) Limitations on Registration. If the Company gives notice
pursuant to Section 7(b) for the purpose of permitting registration (whether
involving an underwritten or other offering) of Shares, the Company shall have
the right to determine the aggregate size of the offering and to limit the
number of Shares to be registered by the holders of Registrable Stock pursuant
to Section 7(b), including the right to exclude all shares to be sold on behalf
of holders of Registrable Stock if the Company's underwriters or financial
advisers determine such exclusion is necessary or advisable to insure a
successful offering of the Company securities. If the Company limits the number
of (but does not exclude) shares sold by selling shareholders, the maximum
number of shares to be registered on behalf of any holder of Registrable Stock
shall be determined by multiplying the number of shares of Registrable Stock
such holder has properly requested be registered by a fraction, the numerator
of which shall be the number of shares of Common Stock to be included in such
registration by all selling shareholders, and the denominator of which is the
number of shares of Common Stock validly requested to be included in such
registration by all holders of Common Stock having registration rights. All
registration rights with respect to any shares of Registrable Stock shall lapse
and terminate at the earlier of (i) such time as such shares have been actually
registered once on a registration statement on Form S-3 or S-8, (ii) such time
as the holder thereof has had the opportunity to register such shares hereunder
and has declined or failed to so register such shares, or (iii) such time as
counsel for the Company a good faith determination that all of the shares of
Registrable Stock may be sold into public markets under Rule 144 promulgated
under the Securities Act, or otherwise, in a period of nine months or less and
that any restrictive legend set forth on the shares of Registrable Shares
pertaining to securities law compliance may be removed. In addition, to the
extent that any existing registration rights of the Company conflict with the
provisions of this Section 7, the registration rights provided herein shall be
subject to any previously granted registration rights with respect to the
Company securities and shall be delayed or otherwise equitably subordinated to
such prior rights until such prior rights are satisfied. The foregoing
limitations shall not apply to the first registration statement filed on behalf
of RIMCO or any of the RIMCO Partnerships, provided that RIMCO consents to such
inclusion.
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<PAGE> 5
(d) Registration Procedures. If and when the Company is required
by the provisions of this Section 7 to use its best efforts to effect promptly
the registration Of Shares of Registrable Stock under the Securities Act, the
Company will:
(i) prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement with respect to such shares and use
its best efforts to cause such registration statement to become and remain
effective as provided herein for a period of not less than six (6) months,
except that the Company shall not be required to conduct any special audit and
if such an audit would be required, the Company may delay such registration
statement until such time as such special audit is no longer required;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
current and to comply with the provisions of the Securities Act with respect to
the sale or other disposition of all shares covered by such registration
statement, including such amendments and supplements as may be necessary to
reflect the intended method of disposition from time to time of the prospective
seller or sellers of such shares for a period of not less than six (6) months;
(iii) furnish to each prospective seller such number of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or other disposition
of the shares owned by such seller; and
(iv) use its best efforts to register or qualify the shares
covered by such registration statement under such other securities or blue sky
or other applicable laws of such jurisdictions within the United States, as
each prospective seller shall reasonably request, to enable such prospective
seller to consummate the public sale or other disposition in such jurisdictions
of the shares owned by such seller.
Each prospective seller of Registrable Stock, and each
underwriter designated by such seller, shall be required to furnish to the
Company such information as the Company may reasonably require from such seller
or underwriter for inclusion in the registration statement (and the prospectus
included therein).
The holders of shares included in the registration statement
will not (until notice) effect sales thereof after receipt of telegraphic or
written notice from the Company to suspend sales in order to permit the Company
to correct or update a registration statement or prospectus; but the obligations
of the Company with respect to maintaining any registration statement current
and effective shall be extended by a period of days equal to the period such
suspension is in effect.
(e) Registration Expenses. All expenses incurred in effecting any
registration pursuant to this Section 7 including, without limitation, all
registration and filing fees, printing
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<PAGE> 6
expenses, expenses of compliance with blue sky laws and fees and disbursements
of counsel for the Company, shall be borne by the Company. Notwithstanding the
foregoing, however, all underwriting discounts and commissions and fees and
disbursements for special counsel to the holders of the securities to be
registered shall be paid out of the proceeds of the sale of Common Stock
occurring in connection with such registration.
(f) Indemnification by Company. The Company agrees to indemnify
each holder requesting or joining in a registration, each person or entity who
controls such holder within the meaning of Section 15 of the Securities Act,
and each underwriter and selling broker of the securities so registered, and
their respective successors, against all claims, losses, damages, liabilities,
fines and penalties (or actions in respect thereof) arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related registration
statement, notification or the like) or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements not misleading, or any violation by the Company of any rule
or regulation promulgated under the Securities Act applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and agrees to reimburse
each such holder, each person or entity who controls such holder within the
meaning of Section 15 of the Securities Act, and each such underwriter, and
their respective successors, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, provided, however, that the Company will not be
liable in any such case if (and to the extent that) such statement or omission
was made in reliance upon information (including, without limitation written
negative responses to inquiries) furnished to the Company by an instrument duly
executed by such holder or underwriter and stated to be specifically for use in
such prospectus, offering circular or other document (or related registration
statement, notification or the like) or any amendment or supplement thereto.
(g) Indemnification by Holders. Each holder requesting or
joining in a registration and each underwriter of the securities so registered
will indemnify the Company and its officers and directors and each person, if
any, who controls any thereof within the meaning of Section 15 of the
Securities Act and their respective successors against all claims, losses,
damages, liabilities, fines and penalties (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any prospectus, offering circular or other
document incident to any registration, qualification or compliance (or in any
related registration statement, notification or the like) or any omission (or
alleged omission) to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, and will reimburse the
Company, as applicable, and each other person indemnified pursuant to this
Section 7(g) for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, provided, however, that this Section 7(g) shall apply only
if (and only to the extent that) such statement or omission was made in
reliance upon information (including, without limitation, written negative
responses to inquiries) furnished to the Company by an
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<PAGE> 7
instrument duly executed by such holder or underwriter and stated to be
specifically for use in such prospectus, offering circular or other document
(or related registration statement, notification or the like) or any
amendment or supplement thereto.
8. Transfer to Comply with the Securities Act of 1933. In addition to the
prohibitions and restrictions contained in Paragraph 2 above, this Warrant and
any Shares issued or issuable upon exercise hereof may not be offered or sold
except in conformity with the Securities Act, and then only against receipt of
a written agreement of such person to whom such offer or sale is made to comply
with the provisions of this Paragraph 8 with respect to any resale or other
disposition of such securities; except that no such agreement shall be required
from any person purchasing Shares issued or issuable upon exercise of this
Warrant pursuant to a registration statement effective under the Securities
Act. The Holder agrees that, prior to the disposition of any Shares purchased
pursuant to the exercise hereof under circumstances that might require
registration of such Shares under the Securities Act, or any similar federal or
state statute then in force, the Holder shall give written notice to the
Company expressing his intention as to the disposition to be made of such
Shares. Promptly upon receiving such notice, the Company shall present copies
thereof to its counsel. If, in the opinion of the Company's counsel, the
proposed disposition does not require registration of such Shares under the
Securities Act, or any similar federal or state statute then in force, the
Company shall, as promptly as practicable, notify the Holder of such opinion,
and the Holder shall then be entitled to dispose of such Shares, but only
strictly in accordance with the terms of the notice delivered by the Holder to
the Company and any qualifications or limitations contained in the opinion of
the Company's counsel.
9. Further Assurances. The Company will take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Shares upon the exercise of this Warrants.
10. Reservation of Shares. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
all shares of Common Stock from time to time issuable upon the exercise of this
Warrant.
11. Applicable Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Texas.
12. Notice. Any notices or certificates by the Company to the Holder or by
the Holder to the Company shall be deemed delivered if in writing and delivered
personally or sent by registered or certified mail, return receipt requested,
to such party at the address set forth on page 1 of this Warrant, or to such
other address as the party may designate by notice given in accordance with
this Paragraph 12.
13. Arbitration. Any and all disputes between the parties hereto arising
under or related to this Warrant shall be settled by binding arbitration in
Houston, Texas, under the Texas General Arbitration Act, and the determination
in any such arbitration may be entered in any
7
<PAGE> 8
court having jurisdiction. The arbitration shall be conducted by a panel of
three arbitrators, one chosen by each party and the third by the two
arbitrators so chosen. If the two arbitrators cannot agree on a third, then the
third shall be appointed by the Presiding Judge of the United States District
Court for the Southern District of Texas-Houston Division, upon the application
of either party with notice to the other.
14. Descriptive Headings. The descriptive headings of the several Sections
of this Warrant are inserted for convenience only and do not constitute a part
of this Warrant.
IN WITNESS WHEREOF, this Warrant has been executed and delivered to be
effective as of January 12, 1996.
UNIVERSAL SEISMIC ASSOCIATES, INC.,
a Delaware corporation
By: /s/ MICHAEL J. PAWELEK
----------------------------------
Michael J. Pawelek, President
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<PAGE> 1
EXHIBIT 10.39
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
CAN BE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND SUCH SHARES OF
COMMON STOCK MAY NOT BE SOLD, TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN THE OPINION OF COUNSEL TO THE
COMPANY, SUCH REGISTRATION IS NOT THEN REQUIRED.
This Warrant will be void after January 16, 2001
WARRANT
To Purchase Shares of Common Stock of
UNIVERSAL SEISMIC ASSOCIATES, INC.
THIS CERTIFIES THAT, for value received, CALVIN G. COBB, whose address is
16420 Park Ten Place, Suite 300, Houston, Texas 77084-5051 (the "Holder"), is
entitled to purchase from UNIVERSAL SEISMIC ASSOCIATES, INC., a Delaware
corporation, whose address is 16420 Park Ten Place, Suite 300, Houston, Texas
77084-5051 (the "Company"), at any time from and after the date hereof, and
prior to midnight (Houston, Texas time) on January 16, 2001 (the "Exercise
Period"), 15,000 fully paid and nonassessable shares of the Company's common
stock, $0.0001 par value (the "Common Stock"), at the price of $3.75 per Share
("Share Purchase Price"); subject, however, to the provisions and upon the
terms and conditions hereinafter set forth in this Warrant ("Warrant"). The
shares of Common Stock deliverable upon exercise of this Warrant shall be
referred to hereinafter collectively as the "Shares."
1. Exercise: Issuance of Certificates; Payment for Shares. The rights
represented by this Warrant may be exercised by the Holder, in whole or in
part, at any time or from time to time during the Exercise Period, upon
presentation and surrender of this Warrant to the Company, at its principal
office as set forth above, or at such other place as the Company may designate
written notice from the Holder stating that the Holder is exercising this
Warrant and specifying the number of Shares that the Holder desires to purchase
(the "Notice") and accompanied by payment of the applicable Share Purchase
Price for each Share so purchased and all federal and state taxes or other
governmental charge applicable to such exercise and issuance of the Shares.
Such payment shall be made, in cash or by certified, bank or cashier's check,
payable to the order of the Company. The Shares so purchased shall be deemed to
have been issued to the Holder as of the close of business on the business day
next following the date on which this Warrant shall have been surrendered to
the Company, along with the Notice and full payment for the Shares purchased.
Subject to the provisions of Section 8, certificates for the Shares so
purchased and, unless this Warrant shall have expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been exercised, shall be delivered to the Holder within a
reasonable time after the Holder has complied with the provisions of this
Section 1.
2. Restrictions on Exercise or Transfer of Warrant. The Holder may not
sell, assign, transfer or hypothecate this Warrant or any interest herein, and
any attempt by the Holder to do so
<PAGE> 2
shall be void, Neither this Warrant nor any interest herein may be sold,
assigned, transferred or hypothecated involuntarily or by operation of law.
This Warrant and the Exercise Period shall automatically expire and terminate
immediately upon the Holder's death.
3. Reservation of Shares. The Company hereby agrees that at all times
during the Exercise Period there shall be reserved for issuance and delivery
upon exercise of this Warrant such number of Shares as shall be required for
issuance and delivery on exercise of this Warrant.
4. Loss of Warrant. The Company will execute and deliver a new Warrant of
like tenor and date upon receipt by the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (i) in the
case of loss, theft or destruction, upon receipt by the Company of indemnity
satisfactory to the Company, or (ii) in the case of mutilation, upon
presentation, surrender, and cancellation of this Warrant. The Holder shall pay
all federal and state taxes or other governmental charge applicable to any
issuance of new Warrants under this Section 4.
5. Rights of the Holder. The Holder shall not, by virtue of this Warrant,
be entitled to any rights of a shareholder in the Company, either at law or
equity. The rights of the Holder are limited to those expressed in the Warrant
and are not enforceable against the Company except to the extent set forth
herein.
6. Adjustment and Other Events.
(a) Definition. As used in this Section 6, "Stock" shall mean
shares of the Company's capital stock of any class, whether now or hereafter
authorized, that has the right to participate in the distribution of earnings
and assets of the Company without limit as to amount or percentage. As of the
date hereof, Stock consists of 20,000,000 authorized shares of the Company's
common stock, $0.0001 par value per share.
(b) Stock Dividend or Distribution. If the Company shall declare
any dividend or other distribution upon its outstanding Stock payable in Stock,
or shall subdivide its outstanding shares of Stock into a greater number of
shares, then, on the effective date of such dividend, distribution or
subdivision, the number of Shares that may thereafter be purchased upon the
exercise of the rights represented hereby shall be increased in proportion to
the increase through such dividend, distribution or subdivision, and the Share
Purchase Price shall be decreased in such proportion. In case the Company shall
at any time combine the outstanding shares of its Stock into a smaller number
of shares, then, on the effective date of such combination, the number of
Shares that may thereafter be purchased upon the exercise of the rights
represented hereby shall be decreased in proportion to the decrease through
such combination, and the Share Purchase Price shall be increased in such
proportion.
(c) Notice of Adjustment and Other Events. The Company shall
give the Holder notice of any event requiring an adjustment as provided in
Subsection 6(b) at least ten days prior to the effective date of such event;
provided, however, that failure to give such notice shall not in any way
invalidate or otherwise limit or affect the validity or effectiveness of such
event.
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<PAGE> 3
(d) Fractional Shares. No fractional shares of Common Stock or
scrip representing fractional shares of Common Stock shall be issued upon the
exercise of this Warrant, and the Company shall have no obligation to make any
cash payment with respect thereto.
(e) Company-Held Stock. The number of shares of Stock of any
class at any time outstanding shall include all shares of Stock of that class
then owned or held by or for the account of the Company.
7. Registration Rights.
(a) In the event that the Company proposes, at any time during
the Exercise Period, to file a registration statement on a general form of
registration under the Securities Act of 1933, as amended (the "Securities
Act") and relating to shares of Common Stock issued or to be issued by it, then
it shall give written notice of such proposal to the Holder and to record
owners of any Shares issued hereunder, If, within 10 days after the giving of
such notice, the Holder or record owners of any Shares issued or issuable
hereunder shall request in writing that this Warrant or any portion of the
Shares be included in such proposed registration, the Company will, at its own
expense (except as set forth in Section 7(c) hereof), also register such
securities as shall have been so requested in writing; provided, however, that
the Holder and such owners shall cooperate with the Company in the preparation
of such registration statement to the extent required to furnish information
concerning the Holder and such owners as the Securities and Exchange Commission
or its rules and regulations may require.
(b) In connection with the filing of a registration statement
pursuant to Section 7(a) hereof, the Company shall:
(i) notify the Holder and such owners as to the
filing thereof and of all amendments thereto filed prior to the
effective date of said registration statement;
(ii) notify the Holder and such owners, promptly after
it shall have received notice thereof, of the time when the
registration statement becomes effective or any supplement to any
prospectus forming a part of the registration statement has been
filed;
(iii) prepare and file without expense to the Holder
and such owners any necessary amendment or supplement to such
registration statement or prospectus as may be necessary to comply
with Section 10(a)(3) of the Securities Act or advisable in
connection with the proposed distribution of the Shares by the Holder
or such owners; unless the provisions of Section 7(c) are applicable;
(iv) take all reasonable steps to qualify the Warrant
and the Shares being so registered for sale under the securities or
blue sky laws in such reasonable number of states as such registered
owners may designate in writing and to register or obtain the
approval of any federal or state authority which may be required in
connection with the proposed distribution, except, in each case, in
jurisdictions in which the Company must either qualify
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<PAGE> 4
to do business or file a general consent to service of process as a
condition to the qualification of such securities;
(v) notify the Holder and such owners of any stop
order suspending the effectiveness of the registration statement and
use its reasonable best efforts to remove such stop order;
(vi) undertake to keep said registration statement
and prospectus effective for a reasonable period of time; and
(vii) furnish to the Holder and such owners, as soon
as available, copies of any such registration statement and each
preliminary or final prospectus and any supplement or amendment
required to be prepared pursuant to the foregoing provisions of this
Section 7, all in such quantities as such owners may from time to
time reasonably request. Upon written request, the Company shall also
furnish to each owner, without cost, one set of the exhibits to such
registration statement.
(c) Limitations on Registration. If the Company gives notice
pursuant to this Section 7 for the purpose of permitting registration (whether
involving an underwritten or other offering) of Shares, the Company shall have
the right to determine the aggregate size of the offering and to limit the
number of shares to be registered at the request of Holder or any record owners
of Shares issued hereunder ("Registrable Stock") pursuant to Section 7(a),
including the right to exclude all shares to be to be registered at the request
of Holder or any record owners of Registrable Stock if the Company's
underwriters or financial advisers determine such exclusion is necessary or
advisable to insure a successful offering of the Company securities. If the
Company limits the number of (but does not exclude) such Shares, the maximum
number of shares to be registered on behalf of any holder of Registrable Stock
shall be determined by multiplying the number of shares of Registrable Stock
such holder has properly requested be registered by a fraction, the numerator
of which shall be the number of shares of Common Stock to be included in such
registration by all selling shareholders, and the denominator of which is the
number of shares of Common Stock validly requested to be included in such
registration by all holders of Common Stock having registration rights. All
registration rights with respect to any shares of Registrable Stock shall lapse
and terminate at the earlier of (i) such time as such shares have been actually
registered once on a registration statement on Form S-3 or S-8, (ii) such time
as the holder thereof has had the opportunity to register such shares hereunder
and has declined or failed to so register such shares, or (iii) such time as
counsel for the Company makes a good faith determination that all of the shares
of Registrable Stock may be sold into public markets under Rule 144 promulgated
under the Securities Act, or otherwise, in a period of nine months or less and
that any restrictive legend set forth on the shares of Registrable Shares
pertaining to securities law compliance may be removed. In addition, to the
extent that any existing registration rights of the Company conflict with the
provisions of this Section 7, the registration rights provided herein shall be
subject to any previously granted registration rights with respect to the
Company securities and shall be delayed or otherwise equitably subordinated to
such prior rights until such prior rights are satisfied.
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<PAGE> 5
(d) The Holder and the record owners of any Shares being
registered under this Section 7 agree to pay all of the underwriting discounts
and commissions and their own counsel fees with respect to the securities owned
by them and being registered.
(e) The Company agrees to use reasonable efforts to negotiate
and enter into a usual and customary appropriate cross-indemnity agreement with
any underwriter (as defined in the Securities Act) for the Holder and such
registered owners in connection with the filing of a registration statement
pursuant to Section 7 hereof.
(f) The Company agrees to use reasonable efforts to negotiate
and enter into a usual and customary appropriate cross-indemnity agreement with
the Holder and such registered owners.
(g) Notwithstanding the provisions of Section 7 hereof, if, at
the time of the pendency of any request of the registration of this Warrant or
Shares, such securities may be publicly sold by the holder thereof without
registration under the Securities Act pursuant to Rule 144 promulgated
thereunder or otherwise, such holder shall not be entitled to require the
Company to register such securities pursuant to the Securities Act.
8. Transfer to Comply with the, Securities Act of 1933. In addition
to the prohibitions and restrictions contained in Section 2 above, this Warrant
and any Shares issued or issuable upon exercise hereof may not be offered or
sold except in conformity with the Securities Act, and then only against
receipt of a written agreement of such person to whom such offer or sale is
made to comply with the provisions of this Section 8 with respect to any resale
or other disposition of such securities; except that no such agreement shall be
required from any person purchasing Shares issued or issuable upon exercise of
this Warrant pursuant to a registration statement effective under the
Securities Act. The Holder agrees that, prior to the disposition of any Shares
purchased pursuant to the exercise hereof under circumstances that might
require registration of such Shares under the Securities Act, or any similar
federal or state statute then in force, the Holder shall give written notice to
the Company expressing his intention as to the disposition to be made of such
Shares. Promptly upon receiving such notice, the Company shall present copies
thereof to its counsel. If, in the opinion of the Company's counsel, the
proposed disposition does not require registration of such Shares under the
Securities Act, or any similar federal or state statute then in force, the
Company shall, as promptly as practicable, notify the Holder of such opinion,
and the Holder shall then be entitled to dispose of such Shares, but only
strictly in accordance with the terms of the notice delivered by the Holder to
the Company and any qualifications or limitations contained in the opinion of
the Company's counsel.
9. Further Assurances. The Company will take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Shares upon the exercise of this
Warrant.
10. Reservation of Shares. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the exercise of this
Warrant, all shares of Common Stock from time to time issuable upon the
exercise of this Warrant.
- 5 -
<PAGE> 6
11. Applicable Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of Texas.
12. Notice. Any notices or certificates by the Company to the Holder
or by the Holder to the Company shall be deemed delivered if in writing and
delivered personally or sent by registered or certified mail, return receipt
requested, to such party at the address set forth on page 1 of this Warrant, or
to such other address as the party may designate by notice given in accordance
with this Section 12.
13. Arbitration. Any and all disputes between the parties hereto
arising under or related to this Warrant shall be settled by binding
arbitration in Houston, Texas, under the Texas General Arbitration Act, and the
determination in any such arbitration may be entered in any court having
jurisdiction. The arbitration shall be conducted by a panel of three
arbitrators, one chosen by each party and the third by the two arbitrators so
chosen. If the two arbitrators cannot agree on a third, then the third shall be
appointed by the Presiding Judge of the United States District Court for the
Southern District of Texas--Houston Division, upon the application of either
party with notice to the other.
14. Descriptive Headings. The descriptive headings of the several
Sections of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
IN WITNESS WHEREOF, this Warrant has been executed and delivered to be
effective as of January 16, 1996.
UNIVERSAL SEISMIC ASSOCIATES, INC.,
a Delaware corporation
By: /s/ MICHAEL J. PAWELEK
-------------------------------------
Michael J. Pawelek, President
- 6 -
<PAGE> 1
EXHIBIT 10.40
NYNEX CREDIT COMPANY
MASTER LEASE AGREEMENT
This MASTER LEASE AGREEMENT ("Agreement") dated as of October 2, 1995 is
between NYNEX Credit Company, 200 Park Avenue, New York, New York 10166, a
Delaware corporation ("Lessor") and Universal Seismic Associates, Inc., a
Delaware corporation ("Parent") and Universal Seismic Acquisition, Inc., a
Texas corporation ("Subsidiary"), each having an address at 16420 Park Ten
Place, Suite 300, Houston, Texas 77084, (each and collectively, the "Lessee").
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PARAGRAPH PAGE NUMBER
--------- -----------
<S> <C>
1. LEASE OF EQUIPMENT 1
2. TERM; ACCEPTANCE 1
3. RENT; TAXES; LATE CHARGES 2
4. CHARACTERISTICS OF LEASE 3
5. OPERATION AND MAINTENANCE 4
6. INSURANCE 5
7. RISK OF LOSS OR DAMAGE 5
8. DISCLAIMER OF WARRANTY; LIMITATION OF LIABILITY 6
9. REPRESENTATIONS AND WARRANTIES OF LESSEE 7
10. FINANCIAL INFORMATION; OFFICER'S CERTIFICATE 8
11. GENERAL INDEMNITY 8
12. TAX INDEMNITY 9
13. DEFAULT 10
14. REMEDIES 11
15. END-OF-TERM OPTIONS 13
16. GENERAL 13
</TABLE>
1. LEASE OF EQUIPMENT. The Agreement establishes the general terms and
conditions for Lessee to lease equipment from Lessor. The Agreement will
be incorporated into each individual lease ("Lease") executed by Lessor
and Lessee. A Lease lists the equipment to be leased ("Equipment") and
includes other information particular to that Lease. If a provision of a
Lease conflicts with a provision of the Agreement, the Lease prevails.
2. TERM; ACCEPTANCE.
(a) The term of the Lease ("Lease Term"), unless terminated earlier,
consists of an Interim Lease Term, a Base Lease Term, and any Renewal
Term, all as specified in the Lease.
(b) Lessee -- not Lessor -- is responsible for selecting the Equipment
and assuring that it is delivered and properly installed. The Equipment
is considered irrevocably accepted by Lessee on the date the
Lessor /s/
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Lessee /s/
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<PAGE> 2
2
Lease Term begins. "Acceptance" means that the Lessee represents and
warrants that the Equipment: (i) has been delivered to and is in the
possession of Lessee; (ii) has been fully inspected by Lessee or its
qualified agent; (iii) is suitable for the purpose intended by Lessee;
(iv) is in good order, operating condition, and repair and has been
properly installed (subject to minor undischarged obligations of
suppliers, manufacturers, or installers under their agreements and
warranties); (v) meets all recommended or applicable safety and
environmental laws, regulations, and standards; (vi) is clear of Lessee
Liens (as defined in Paragraph 4); and (vii) has been insured as required
by Paragraph 6.
(c) Lessor is not obligated to purchase the Equipment and enter into a
Lease unless, as of the beginning of the Lease Term: (i) there are no
Lessee Liens (as defined in Paragraph 4) on the Equipment; (ii) all
Lessee's Representations and Warranties in Paragraph 9 are true and
correct; (iii) no Event of Default (as defined in Paragraph 13) would
exist upon signing the Lease, and no Event of Default exists as to other
Leases under the Agreement; (iv) there has been no material adverse change
in Parent's financial condition since June 30, 1995; (v) Lessor's due
diligence has been completed to its satisfaction; and (vi) all documents
attached to the Lease are satisfactory in form and substance to Lessor.
The Total Equipment Cost (as specified in the Lease) may not exceed
$4,300,000, and Acceptance of all Equipment must occur before December 31,
1995.
3. RENT; TAXES; LATE CHARGES.
(a) Rent. Lessee promises to pay Lessor, throughout the Lease Term, the
rental payments ("Rent") in the amounts and on the dates specified in the
Lease. Rent is due and payable whether or not Lessee receives written
notice from Lessor. Lessor intends to send monthly Rent invoices to
Lessee, but Lessee's obligation to pay Rent on time does not depend on its
receipt of monthly invoices. If an individual Rent payment or other amount
due under the Lease is greater than $50,000, Lessee will make the payment
by bank transfer of immediately available funds.
(b) Taxes. Lessor will pay, and Lessee promises to reimburse Lessor, for
all taxes, fees, duties, imposts, assessments, or other charges ("Taxes")
that are imposed on Lessor or its affiliates, now or in the future, in
connection with the Equipment (including its purchase by Lessor and,
during the Lease Term, its ownership, leasing, use, and possession), and
Lessor will make the necessary filings for Taxes. Taxes include interest,
penalties, and fines (unless caused solely by the act or omission of
Lessor), but Taxes exclude taxes on or measured by Lessor's net income or
gross receipts. Taxes include those imposed by federal, state, local, and
foreign authorities, whether imposed directly on Lessor, on Lessee, on the
Equipment, or on a Lease. For purposes of the Agreement, Taxes are
included within the meaning of the term "Rent."
(c) Late Charges. If Lessee is late in paying Rent or any other amount
under the Lease, Lessee will pay Lessor, as additional Rent, a late charge
at a rate of 1.5 percent of the unpaid sum for each full or partial month
that the sum remains unpaid. Payments will be applied first to late
charges, then to Rent or other amounts owed by Lessee.
Lessor /s/
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Lessee /s/
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<PAGE> 3
3
4. CHARACTERISTICS OF LEASE.
(a) Non-Terminable Net Lease. The Lease is a net lease and cannot be
terminated by Lessee. Lessee's obligation to pay Rent and other amounts
due under the Lease is ABSOLUTE AND UNCONDITIONAL, not subject to set-off,
counterclaim, delay, or modification for any reason, including failure of
the Equipment to perform as specified by a supplier or manufacturer.
(b) Title; UCC Article 2A. The Equipment is separately identifiable
personal property and is not considered a fixture or affixed to real
estate. Title to the Equipment remains with Lessor. The Lease is a true
lease for tax purposes and is a "finance lease" as defined in Article 2-A
- Leases of the Uniform Commercial Code ("UCC Article 2A"); this is not a
sale. If Lessor provides tags or labels indicating Lessor's ownership of
the Equipment, Lessee will affix and maintain the tags or labels on the
Equipment.
(c) Liens. Lessee at its expense will take actions Lessor deems reasonably
necessary to prevent third persons from acquiring or maintaining a right
or interest in the Equipment. Lessee will not place, or allow to be
placed, a mortgage, pledge, lien, security interest, or encumbrance of any
kind on the Equipment (a "Lessee Lien"). Lessee is not responsible for a
Lessor Lien, which arises out of a transaction unrelated to the Agreement,
to which Lessor is a party and to which Lessee is not a party. If a Lessee
Lien is placed on the Equipment, Lessee will promptly notify Lessor and at
Lessee's expense clear the Lessee Lien within 30 days after learning of it
or sooner if necessary to prevent losing possession of the Equipment or to
prevent a diminution or change of Lessor's rights in the Equipment;
provided however, so long as no Event of Default is continuing, if Lessee
within such 30 day period initiates and at all times diligently pursues
the appropriate court or administrative action seeking to clear the Lessee
Lien, Lessee will have an additional 90 days from the end of such 30 day
period to clear it.
(d) Lessor's Rights; UCC Financing Statements. Lessee at its expense will
promptly take action as Lessor reasonably requests to protect Lessor's
rights under the Agreement, including without limitation the signing of
UCC financing statements in jurisdictions Lessor considers necessary.
Lessor will prepare the UCC financing statements and present them to
Lessee for its signature. Return of the executed statements to Lessor is a
condition prior to closing, and Lessee agrees to sign continuing
statements, as necessary. Lessor may choose to file the UCC financing
statements, and Lessee will reimburse Lessor for the filing fees and the
outside service and administration fees. The execution and filing of such
statements is precautionary (except where the Equipment is considered a
fixture for UCC purposes) and does not affect the true lease character of
the Lease for tax purposes or the "finance lease" character of the Lease
under UCC Article 2A.
(e) Quiet Possession. So long as no Event of Default is continuing,
neither Lessor nor a third person claiming through Lessor will interfere
with Lessee's right of quiet possession of the Equipment.
Lessor /s/
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Lessee /s/
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<PAGE> 4
4
5. OPERATION AND MAINTENANCE.
(a) Use. Lessee will maintain sole possession and control of the
Equipment. Lessee will use the Equipment solely in the normal conduct of
its business in a careful manner according to the supplier's and
manufacturer's instructions and in compliance with laws, regulations, and
insurance requirements. Lessee will pay all costs, claims, damages, fees,
and other amounts arising out of the possession, use, or maintenance of
the Equipment. Lessee has the right and the obligation to assert directly
against the supplier or manufacturer of the Equipment all claims regarding
the Equipment, and Lessee will give Lessor prompt written notice of the
terms of any settlement. Lessee at its expense will maintain the Equipment
in good working order and repair to maintain the utility, operating
efficiency, value, and remaining useful life of the Equipment, reasonable
wear and tear resulting solely from proper use excepted; the Equipment
must remain capable of performing its intended function efficiently and
according to the supplier's and manufacturer's specifications. All
replacement parts must meet the specifications of the supplier or
manufacturer and have at least the utility and value of those replaced.
Lessee will maintain accurate maintenance and inspection records on the
Equipment and provide copies of such records to Lessor upon request. After
the supplier's or manufacturer's warranty ends, Lessee at its expense
will, unless waived by Lessor, enter into a maintenance agreement with the
supplier or manufacturer (or another maintenance contractor approved by
Lessor) for maintenance of the Equipment during the remainder of the Lease
Term.
(b) Modifications. Upon Lessor's prior written consent which will not be
unreasonably withheld, Lessee at its expense has the right to make
modifications, alterations, renovations, or improvements to the Equipment
("Modifications"), so long as such Modifications (i) do not damage or
impair the utility, operating efficiency, value, or remaining useful life
of the Equipment and (ii) may be removed without damaging the Equipment.
Lessee at its expense will make Modifications during the Lease Term that
are required by law, regulation, or insurance policy. A Modification that
is not a Severable Modification (as defined below) becomes the property of
Lessor and constitutes Equipment for all purposes under the Lease. A
Severable Modification is a Modification that is readily removable and
severable, is not a replacement or substitution for part of the Equipment,
and is not required by law, regulation, or insurance policy. Lessee may
remove a Severable Modification during or at the end of the Lease Term. A
Severable Modification that is not removed at the end of the Lease Term
becomes the property of Lessor, except that upon Lessor's request Lessee
at its expense will remove a Severable Modification and return the
Equipment to the condition required by the Lease.
(c) Inspection. Upon two business days advance notice and during
reasonable business hours but without disruption to Lessee's business,
Lessee will allow Lessor or its representative to inspect the Equipment,
to observe its operation with the assistance of Lessee's personnel, and to
examine and copy maintenance and inspection records.
(d) Movement of Equipment. Lessee may move all items of Equipment within
the continental United States by giving Lessor 30 days prior notice. On
January 31 of each year throughout the Lease Term, Lessee will provide
Lessor with a written, monthly report detailing the number of days
Lessor /s/
-----
Lessee /s/
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<PAGE> 5
5
in the month that the Equipment spent at any location (by county and
state).
6. INSURANCE.
(a) Property. Throughout the Lease Term, Lessee will purchase and maintain
an all risk physical damage policy insuring the Equipment against loss and
damage in an amount not less than the greater of full replacement value of
the Equipment or the Stipulated Loss Value as calculated under Paragraph
7(b). The deductible or self-insurance retention applicable to the policy
may not exceed the amount specified in the Lease. Lessor will be named as
loss payee.
(b) Liability. Throughout the Lease Term, Lessee will purchase and
maintain a commercial general liability insurance policy relating to the
Equipment protecting against claims alleging bodily injury (including
personal injury) and property damage with a combined single limit per
occurrence not less than the amount specified in the Lease. The deductible
or self-insurance retention applicable to the policy may not exceed the
amount specified in the Lease. The policy will be on an occurrence form,
and Lessor will be named as additional insured.
(c) Policies and Premiums. Lessee will deliver proof of insurance coverage
to Lessor before the beginning of the Lease Term and at least 30 days
before expiration of insurance coverage during the Lease Term. Proof of
insurance coverage consists of a certificate of insurance and, at Lessor's
option, the complete insurance policy. The insurance company selected by
Lessee must be reasonably acceptable to Lessor, and the insurance policy
must be in form and substance reasonably satisfactory to Lessor. Insurance
policies will provide that (i) Lessor will be given 30 days prior written
notice of any alteration or cancellation of the coverage, and (ii)
Lessor's status as loss payee and additional insured will not be
invalidated by action or inaction by Lessee. Regarding all insurance,
Lessee will pay the premiums. Lessee agrees that Lessor may obtain a
security interest in the proceeds of all insurance policies directly
relating to the Equipment.
7. RISK OF LOSS OR DAMAGE.
(a) Loss. Lessee assumes all risk of loss, theft, and damage to the
Equipment from any cause ("Loss"). A Loss does not relieve Lessee of its
obligation to pay Rent or to perform other obligations under the Lease.
Lessor incurs no liability to Lessee or third persons for loss of
business, loss of profits, or other direct or consequential damages
relating to a Loss. Lessee will immediately give Lessor notice of a Loss
(except that no notice is required for cosmetic damage that does not
affect the operating performance of the Equipment); if notice is given
orally, it will be confirmed in writing within 15 days. If less than a
Total Loss (as defined below) occurs, Lessee will promptly restore the
Equipment to the condition required by Paragraph 5.
(b) Total Loss. After receiving Lessee's notice of a Loss or upon Lessor's
inspection, if Lessor determines that all or substantially all the
Equipment is damaged beyond repair, lost, stolen, condemned, or
confiscated ("Total Loss"), Lessor will notify Lessee in writing that a
Total Loss has occurred and that Lessee is obligated to continue paying
Rent until Lessee pays to Lessor a
Lessor /s/
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Lessee /s/
-------
<PAGE> 6
6
Total Loss Payment. The Total Loss Payment will be due on the next Rent
payment date following the earlier of (i) receipt of insurance proceeds
relating to the Total Loss or (ii) 90 days from the date of the Total
Loss. The Total Loss Payment will equal the Rent and other amounts due
Lessor up to and including such next Rent payment date plus the Stipulated
Loss Value. The Stipulated Loss Value, which represents liquidated damages
for loss of a bargain, consists of: (i) the Total Equipment Cost specified
in the Lease for the Equipment subject to the Total Loss, multiplied by
(ii) the percentage factor for the next Rent payment date shown on the
Table of Stipulated Loss Values attached to the Lease, plus (iii) Taxes
imposed on Lessor relating to the Total Loss, if any.
After Lessor receives the Total Loss Payment, the Lease on the Equipment
subject to the Total Loss will terminate, and Lessor will transfer the
Equipment to Lessee on an "as is, where is" basis without recourse and
without representation or warranty (express or implied), except that the
Equipment will be clear of Lessor Liens.
(c) Insurance Proceeds. Proceeds received at any time by Lessor or Lessee
from Lessee's insurer on a Total Loss or Loss will be distributed promptly
as follows.
(i) Proceeds on a Total Loss will be distributed to Lessor, and Lessee
irrevocably appoints Lessor as Lessee's attorney-in-fact to endorse
checks directly relating to such proceeds. Such proceeds will reduce
or discharge Lessee's obligation to pay the Total Loss Payment, and
any excess of such proceeds over the Total Loss Payment will be
retained by Lessor.
(ii) Proceeds on a Loss other than a Total Loss will be distributed
to Lessee to reimburse it for the expense it actually incurs to
restore the Equipment (Lessee will provide Lessor with satisfactory
documentation of the actual restoration costs); provided however if
an Event of Default is continuing, the proceeds will be distributed
to Lessor, and Lessee irrevocably appoints Lessor as Lessee's
attorney-in-fact to endorse checks directly relating to such proceeds,
which will be applied against the Default Payment, if any, under
Paragraph 14.
8. DISCLAIMER OF WARRANTY; LIMITATION OF LIABILITY.
(a) LESSOR LEASES THE EQUIPMENT TO LESSEE "AS IS". LESSEE SELECTED THE
EQUIPMENT USING ITS OWN JUDGMENT AND EXPRESSLY DISCLAIMS RELIANCE UPON ANY
STATEMENTS, REPRESENTATIONS, OR WARRANTIES MADE BY OR ON BEHALF OF LESSOR.
EXCEPT FOR LESSEE'S RIGHT OF QUIET POSSESSION, LESSOR MAKES NO WARRANTY OR
REPRESENTATION (EXPRESS OR IMPLIED) RELATING TO, WITHOUT LIMITATION: THE
DESIGN, QUALITY, OR CONDITION OF THE EQUIPMENT; MERCHANTABILITY OR FITNESS
OF THE EQUIPMENT FOR ANY PARTICULAR PURPOSE; TITLE TO THE EQUIPMENT;
INFRINGEMENT OR INTERFERENCE WITH INTELLECTUAL PROPERTY RIGHTS;
ACCOUNTING, FINANCIAL, OR TAX TREATMENT OR THE LIKE RELATING TO THE
EQUIPMENT OR THE LEASE; OR ANY OTHER WARRANTY OR REPRESENTATION ARISING
FROM
Lessor /s/
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Lessee /s/
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<PAGE> 7
7
COURSE OF DEALING OR USAGE OF TRADE LESSEE EXPRESSLY WAIVES ANY RIGHT TO
MAKE CLAIMS AGAINST LESSOR BASED ON BREACH OF WARRANTY OR BASED ON
MISREPRESENTATION.
(b) LESSOR IS NOT LIABLE FOR ANY LOSS OR DAMAGE DIRECTLY OR INDIRECTLY
ARISING FROM LESSEE'S POSSESSION, OPERATION, MAINTENANCE, OR REPAIR OF THE
EQUIPMENT. IN ANY EVENT, LESSOR IS NOT LIABLE FOR CONSEQUENTIAL, SPECIAL,
OR INCIDENTAL DAMAGES.
(c) Lessor assigns to Lessee (to the extent assignable) rights Lessor has
under warranties of a supplier or manufacturer of the Equipment, and such
rights will be automatically reassigned to Lessor upon return of the
Equipment to Lessor or upon repossession of the Equipment by Lessor.
(d) If more than one Lessee is named in a Lease, the liability of each is
joint and several.
9. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee represents and warrants
the following to Lessor.
(a) Legal Corporation. Lessee is a duly organized corporation under the
laws of its state of incorporation and is in good standing under the laws
of each jurisdiction in which it conducts business. Lessee has taken all
corporate actions and has obtained all necessary corporate approvals to
execute the Agreement, the Lease, and related documents.
(b) Legal Agreement. The Agreement and the Lease are legal, binding
obligations of Lessee and are enforceable against Lessee for the benefit
of Lessor and its successors and assigns. Lessee's performance of its
obligations do not and will not contravene (i) any law, regulation, or the
like or (ii) the provisions of, or constitute a default under, any other
agreement of Lessee.
(c) Legal Actions and Defaults. On the dates Lessee executes the Agreement
and the Lease, Lessee
(i) is not a party to pending actions (and knows of no threatened
actions) before a court, arbitrator, or government agency,
(ii) is not in default under an obligation of borrowed money, for the
deferred purchase price of property, or for the payment of rent under
any lease agreement, and
(iii) complies with all environmental laws, regulations, and standards
that either individually or in the aggregate would adversely and
materially affect Lessee's financial condition or its ability to perform
its obligations under the Agreement and the Lease.
(d) Financial Information. The financial information that Parent provided
and will provide to
Lessor /s/
-----
Lessee /s/
-----
<PAGE> 8
8
Lessor was and will be materially true and complete. As of the beginning
of the Lease Term, there has been no material adverse change in Parent's
financial condition since Lessor reviewed Parent's financial information
prior to execution of the Agreement. In the two preceding sentences, the
concept of "material" is defined under Generally Accepted Accounting
Principles ("GAAP").
10. FINANCIAL INFORMATION; OFFICER'S CERTIFICATE.
(a) Parent will provide Lessor the following financial information during
the Lease Term:
(i) within 120 days of the end of Parent's fiscal year, a consolidated
balance sheet of Parent (and its subsidiaries) and related statements
of income and cash flow, prepared under GAAP, and certified by Parent's
independent certified public accountant (or Form 10K if filed with the
Securities and Exchange Commission ("SEC"));
(ii) within 60 days of the end of each of Parent's first three fiscal
quarters, a consolidated balance sheet of Parent (and its subsidiaries)
and related statements of income and cash flow, prepared under GAAP,
and certified by, Parent's comptroller, chief financial officer, or
president (or Form 10Q if filed with the SEC);
(iii) within 30 days after filing, all reports, forms, and other
filings, if any, Parent makes to the SEC (or comparable government
agency in a foreign country); and
(iv) other financial information regarding the creditworthiness of
Parent as Lessor may reasonably request.
(b) Within 60 days of the end of each of Lessee's first three fiscal
quarters and within 120 days of the end of Lessee's fiscal year, Lessee
will provide a certificate of an authorized officer of Lessee stating: (i)
there exists no Event of Default under Paragraph 13; and (ii) there exists
no event with the lapse of time or the giving of notice or both would
constitute an Event of Default under Paragraph 13.
11. GENERAL INDEMNITY. Lessee agrees to defend, indemnify on an after-tax
basis, and hold harmless Lessor (including its officers, directors,
employees, agents, successors, and assigns) against claims and losses
(including reasonable legal expenses) related in any way to the Agreement,
the Lease, or the Equipment unless such claims or losses are directly
caused by the gross negligence or willful misconduct of Lessor. Lessor
will give Lessee prompt notice of a claim or action brought against Lessor
related to an indemnifiable event. Lessee at its expense will control the
defense of the claim or action, provided that: (i) no Event of Default is
continuing; (ii) Lessor must reasonably approve defense counsel selected
by Lessee (unless counsel is appointed by Lessee's insurer or
underwriter); (iii) Lessor must approve of any settlement, which approval
will not be unreasonably delayed or withheld; and (iv) Lessor at its
expense may elect to participate with Lessee in the defense.
Lessor /s/
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Lesse /s/
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<PAGE> 9
9
12. TAX INDEMNITY.
(a) Definitions for this Paragraph.
(i) "Lessor" includes Lessor's consolidated federal taxpayer group.
(ii) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or its successor.
(iii) "MACRS Deductions" means the deductions under Section 168 of the
Code determined by the modified Accelerated Cost Recovery System on the
total invoice cost of any item of Equipment for its property class,
using the accelerated method in Section 168(b)(1) of the Code.
(iv) "Tax Loss" means, regarding the computation of Lessor's federal,
state, local, or foreign taxes:
(1) the benefits of MACRS Deductions are lost, delayed, disallowed,
or recaptured;
(2) Lessor becomes liable for additional tax because of a
prepayment of Rent or because a Modification is made to the
Equipment; or
(3) the statutory full-year marginal federal tax rate (including
any surcharge) for corporations increases above 35 percent (if such
tax rate decreases from 35 percent, Lessor will adjust accordingly
the Rent and Stipulated Loss Value).
(v) "Lessor's Net Return" means the originally contemplated after-tax
net return assumed in Lessor's economics with the same periodicity.
(vi) "Tax Indemnification Payment" means the tax adjustment (taking
into account applicable interest, penalties, additions, and taxes)
discounted at a rate necessary to maintain Lessor's Net Return
following a Tax Loss throughout the Lease Term.
(b) Representations and Warranties. Lessee represents and warrants that:
(i) the reasonably estimated useful life of the Equipment at the beginning
of the Lease Term exceeds the sum of the Interim and Base Lease Terms (and
any Renewal Term with fixed rent) by the greater of one year or 20 percent
of the estimated useful life; (ii) the reasonably estimated fair market
value of the Equipment at the end of the Base Lease Term (or at the end of
any Renewal Term with fixed rent) is at least 20 percent of the Total
Equipment Cost (as specified in the Lease), without considering any
increase or decrease for inflation or deflation during the Lease Term;
(iii) the Equipment will be used only in the United States as part of
Lessee's normal business operations; and (iv) the Equipment is, and will
be used by Lessee so as to remain during the Lease Term, property eligible
for MACRS Deductions, for so long as MACRS deductions are available under
the Code.
Lessor /s/
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Lessee /s/
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<PAGE> 10
10
(c) Tax Indemnification Payment. If a Tax Loss occurs, Lessor will notify
Lessee in writing, and Lessee will pay Lessor the required Tax
Indemnification Payment within 30 days of the notice. A Tax Loss occurs
upon the earliest of: (i) the occurrence of an event (such as a
disposition or change in use of the Equipment) that causes the Tax Loss;
(ii) Lessor's payment of the tax increase resulting from the Tax Loss;
(iii) the date on which the Tax Loss is realized by Lessor; or (iv) the
adjustment of Lessor's tax return to reflect the Tax Loss. Lessee has no
obligation to make a Tax Indemnification Payment on a Tax Loss arising
solely as a direct result of: (i) Lessor's failure to timely and properly
claim Tax Benefits in its tax return other than as a result of a change in
the Code or applicable regulations, unless in the opinion of Lessor's tax
counsel there is no reasonable basis for such claim; or (ii) Lessor's
failure to have sufficient taxable income before application of MACRS
Deductions to offset the full amount of such deductions, other than as a
result of a change in the Code or applicable regulations.
13. DEFAULT. An Event of Default means any of the following:
(a) Failure to Pay, Lessee fails to pay Rent or any other amount as it
becomes due under any Lease or under any other agreement between Lessor
and Lessee, and full payment is not received by Lessor within 5 days of
Lessor's written notice to Lessee.
(b) Liens; Insurance. Lessee fails to perform under Paragraphs 4(c)
[Lessee Liens], or Lessee fails to obtain and maintain throughout the
Lease Term the insurance required by Paragraph 6.
(c) Misrepresentation. Lessee's representations and warranties in
Paragraphs 2(b), 9, or 12(b) were materially inaccurate or misleading when
made.
(d) Assignments; Transfer. Lessee makes an unauthorized assignment of the
Agreement or the Lease, or Lessee makes an unauthorized transfer,
sublease, pledge, or the like of the Equipment.
(e) Corporate Existence. Lessee ceases to be an ongoing concern; Lessee
ceases to be in good standing under the laws of each jurisdiction in which
it conducts business, and such lack of good standing is not cured within
15 days of written notice from Lessor; Lessee terminates its corporate
existence or enters into a merger or consolidation in which it is not the
surviving entity; or Lessee transfers all or substantially all of its
assets (unless the entity acquiring the assets assumes all duties and
obligations of Lessee under the Lease, and Lessor is satisfied in its sole
discretion with the creditworthiness of the new entity).
(f) Insolvency; Bankruptcy. Lessee becomes insolvent; Lessee consents to
the appointment of a receiver, trustee, or the like for a substantial part
of its property; Lessee makes a general assignment for the benefit of
creditors; Lessee admits in writing its general inability to pay its debts
when due; Lessee takes action seeking relief under bankruptcy or any
insolvency law; or an action under bankruptcy or any insolvency law is
begun against Lessee, and the action is not dismissed within 30 days.
Lessor /s/
--------------
Lessee /s/
--------------
<PAGE> 11
11
(g) Cross Default. Lessee does not cure within 30 days a default with
respect to third persons under an obligation in excess of $500,000 for
borrowed money, for the deferred purchase price of property, or for the
payment of rent under any lease agreement.
(h) Financial Covenants.
1) Parent's leverage ratio exceeds 2:1 during the Lease Term.
Leverage means Total Liabilities to Total Shareholders' Equity, as
such terms are defined by GAAP.
2) Parent makes a payment of dividends,
3) Rick E. Trapp and Michael J. Pawelek fail to directly or
indirectly maintain an aggregate of at least 25% ownership of
Parent during the Lease Term.
(i) Compliance Certificate. Lessee fails to provide the officer's
certificate required under Paragraph 10(b) within ten days of written
notice from Lessor.
(j) Other Failure. Lessee fails to perform or observe any other
obligation, condition, or requirement under the Lease or under any other
agreement between Lessor and Lessee, and the failure is not cured within
30 days after the earlier of (i) the date on which Lessee learns of the
failure or (ii) the date of notice by Lessor to Lessee.
14. REMEDIES. If an Event of Default occurs, Lessor may declare a default
("Default") by written notice to Lessee. Lessor may declare a Default on
all Leases under the Agreement or, alternatively, on some or all of the
Equipment or Leases. If Lessor declares a Default, Lessor may pursue one
or more of the following remedies.
(a) Default Payment. Without seeking return of the Equipment and upon
written notice to Lessee specifying a payment date not earlier than 10
days, Lessor may demand that Lessee pay a Default Payment to Lessor.
Lessee acknowledges that the Default Payment represents liquidated damages
necessary to compensate Lessor for the loss of a bargain caused by
Lessee's Default and does not constitute a penalty. The Default Payment is
an amount equal to the Rent and other amounts due Lessor up to and
including the next Rent payment date plus the higher of:
(i) the Stipulated Loss Value defined in Paragraph 7(b); or
(ii) the present value of future Rents to the end of the Base Lease
Term (or, as applicable, a Renewal Term) plus Lessor's reasonable then
current assessment of the Fair Market Value of the Equipment at the end
of the Base Lease Term (or, as applicable, a Renewal Term), both
discounted at six percent. Fair Market Value means the price that a
willing, knowledgeable buyer would pay for the Equipment in an arm's
length transaction to a willing, knowledgeable seller under no
compulsion to sell, assuming that the Equipment is installed and in use
and is in the condition required by Paragraph 5 of the Agreement.
<PAGE> 12
12
If Lessee fails to make the Default Payment by the specified payment date,
Lessee will pay to Lessor late charges as calculated in Paragraph 3(c).
After Lessor receives the full amount of the Default Payment (including
any late charges and any Taxes imposed on Lessor related to the transfer
of the Equipment to Lessee), the Lease (or part of it) subject to the
Default will terminate, and Lessor will transfer the applicable Equipment
to Lessee on an "as is, where is" basis without recourse and without
representation or warranty (express or implied), except that the Equipment
will be clear of Lessor Liens.
(b) Return or Repossession of Equipment.
(1) Upon written notice to Lessee, Lessor may require Lessee at
Lessee's expense to promptly return the Equipment according to the
return provisions of the Lease. Alternatively, Lessor may require
Lessee at its expense to place the Equipment in the condition
required by the return provisions of the Lease and to gather the
Equipment at the location or locations where the Equipment was
originally delivered (or at a location or locations designated by
Lessor in reasonable proximity to the original delivery points);
Lessor may then take immediate possession of the Equipment by
summary proceedings or otherwise and may remove it from Lessee's
location, with no liability to Lessor.
(2) Upon return or repossession of the Equipment, Lessor may sell
or re-lease the Equipment in a commercially reasonable manner at a
public or private sale. Lessor will use commercially reasonably
efforts in good faith to mitigate the damages caused by Lessee's
Default. Lessor's entire obligation to attempt to mitigate damages
is stated in this subparagraph, and Lessee waives whatever
additional rights it might have under laws or regulations to
require mitigation.
(3) If after making commercially reasonable efforts Lessor is not
able to sell or re-lease the Equipment, Lessee will pay to Lessor,
upon 10 days written notice, the Default Payment defined in
Paragraph 14(a), and the Equipment will be transferred to Lessee
according to Paragraph 14(a).
(4) If Lessor is able to sell or re-lease the Equipment, Lessee
will pay Lessor, upon 10 days written notice, the Default Payment
defined in Paragraph 14(a) minus the Net Proceeds. The Net Proceeds
of a sale are: (i) the total consideration received by Lessor on
the sale; (ii) minus Lessor's incidental damages associated
directly or indirectly with the sale (including reasonable charges
and expenses for repair and restoration of the Equipment and of the
landlord's premises, storage, freight, advertising, legal services,
appraisal services, financing, sales commissions, and rent or other
fees paid to a landlord). The Net Proceeds of a re-lease are: (i)
the present value of aggregate rents on the re-leased equipment
throughout the remainder of the Lease Term under this Agreement
(discounted at six percent); (ii) minus Lessor's incidental damages
associated directly or indirectly with the re-lease (including
reasonable charges and expenses of the type described in the
previous sentence). In no event will Lessor be required to make a
payment to Lessee under this subparagraph (b)(4).
Lessor /s/
----------
Lessee /s/
----------
<PAGE> 13
13
(c) Cure By Lessor. Lessor may cure a Default or Event of Default (without
relieving Lessee of its other obligations under the Agreement or the
Lease), and Lessee will reimburse Lessor for all expenses incurred
(including reasonable attorney fees).
(d) Other Remedies. Lessor may pursue remedies available to it at law or
in equity, including those under UCC Article 2A and suits for damages and
for specific performance.
(e) Election of Remedies. Lessor's remedies are cumulative. Lessor may
pursue one or more remedies separately or concurrently. Lessor may pursue
the same or different remedies with respect to individual items of
Equipment within a Lease and with respect to individual Leases under the
Agreement. Lessor's election of one remedy does not bar its pursuit of
other remedies, provided that Lessor is not entitled to place itself in a
better position than it would have been in had Lessee fully performed
under the Lease.
(f) Expenses; Agency. Lessee will pay Lessor's commercially reasonable
charges, expenses, commissions, and the like (including reasonable
attorney fees and any resulting Taxes) to pursue remedies under this
paragraph. Lessee irrevocably appoints Lessor as Lessee's agent to execute
and file documents necessary for Lessor to pursue remedies under this
paragraph, except for those documents relating to actions at law or in
equity.
(g) Continuing Obligations. While Lessor is pursuing its remedies under
this paragraph, Lessee remains liable under the Agreement and all Leases
for all obligations that are not subject to the Default.
15. END-OF-TERM OPTIONS.
Provisions, if any, for renewal of a Lease, purchase of the Equipment, and
return of the Equipment are specified in the Lease.
16. GENERAL.
(a) Assignment. Without Lessor's prior written consent, Lessee may not
assign a Lease in whole or in part, nor may Lessee transfer, sublease, or
pledge the Equipment in whole or in part; except that with 30 days prior
notice to Lessor, Lessee may assign a Lease to a wholly-owned subsidiary
of Lessee. In all cases of Lessee's assignment, transfer, sublease, and
pledge (including an assignment to a wholly-owned subsidiary), Lessee will
remain obligated under the Lease unless specifically released by Lessor.
Lessor may assign a Lease in whole or in part without the consent of, or
prior notice to, Lessee.
(b) Timeliness. Time is of the essence regarding the Agreement and the
Lease.
(c) Non-Waiver. No course of dealing or failure to strictly enforce a
provision of the Agreement or any Lease constitutes a waiver of the future
performance of that provision.
Lessor /s/
-----------
Lessee /s/
-----------
<PAGE> 14
14
(d) Severability. If a provision of the Agreement or the Lease is held
unenforceable, all other provisions remain in force.
(e) Governing Law; Venue; Jury Trial. The Agreement and the Lease are
being delivered in and will be performed in the State of New York, and the
Agreement and the Lease are governed by New York State law, without giving
effect to principles of conflicts of law. Lessor and Lessee consent to the
exclusive jurisdiction of the New York State courts in New York County and
the United States courts for the Southern District of New York. Lessor and
Lessee waive any right to a jury trial.
(f) Waiver of Certain Sections of UCC Article 2A. Lessee waives all
rights and remedies conferred upon it under Sections 303 and 508 through
522 of UCC Article 2A.
(g) Survival of Obligations. After termination of the Lease, the
obligations in the Agreement of Paragraphs 3 (b)[Taxes], 11 [General
Indemnity], and 12[Tax Indemnity] remain in effect for Taxes, claims,
losses, and Tax Losses that arise during or relate to the Lease Term.
(h) Notices. Notices will be in writing and addressed to the person
indicated on the Lease, and the parties may change the names and addresses
from time to time by prior written notice. A notice may be delivered by
one of the following methods and will be considered given on the date
indicated: (i) by personal delivery, on the date delivered; (ii) by
overnight courier, on the date shown on the delivery receipt; (iii) by
fax, on the date receipt is confirmed by return fax; or (iv) by certified
or registered mail, on the date shown on the return receipt.
(i) Execution. The Agreement and the Lease may be executed in
counterparts. If executed in counterparts, all counterparts constitute one
and the same instrument. The Agreement and the Lease are not effective
unless and until accepted and executed by Lessor.
<PAGE> 15
15
(j) Entire Agreement. The Agreement and the Lease contain the entire
understanding of Lessor and Lessee and supersede all prior or
contemporaneous negotiations and representations (written or oral) between
Lessor and Lessee and any broker, supplier, salesman, or the like. Lessor
and Lessee may amend the Agreement or the Lease only in writing signed by
authorized persons.
NYNEX CREDIT COMPANY UNIVERSAL SEISMIC ASSOCIATES, INC.
/s/ DANA J. PASTERNAK /s/ RONALD L. ENGLAND
- ----------------------------------- --------------------------------------
(Signature) (Signature)
Dana J. Pasternak Ronald L. England
- ----------------------------------- --------------------------------------
(Typed Name) (Typed Name)
Vice President - Marketing Chief Financial Officer
- ----------------------------------- --------------------------------------
(Title) (Title)
November 8, 1995 October, 19, 1995
- ----------------------------------- --------------------------------------
(Date) (Date)
UNIVERSAL SEISMIC ACQUISITION, INC.
/s/ RONALD L. ENGLAND
--------------------------------------
(Signature)
Ronald L. England
--------------------------------------
(Typed Name)
Chief Financial Officer
--------------------------------------
(Title)
October 19, 1995
--------------------------------------
(Date)
Lessor /s/
-----
Lessee /s/
-----
<PAGE> 16
LEASE #95-15a
This Lease dated October 2, 1995 is made under the Master Lease Agreement
("Agreement") dated October 2, 1995 between NYNEX Credit Company ("Lessor") and
the Lessee identified below.
I. LESSEE
Name, Address Lessee Contact:
------------- ---------------
Universal Seismic Associates, Inc. Name: Mr. Ron England
Universal Seismic Acquisition, Inc. Title: Chief Financial Officer
16420 Park Ten Place, Suite 300 Tel#: (713) 578-8081
Houston, Texas 77084 Fax#: (713) 578-7091
Federal I.D. #'s:
-----------------
Universal Sisnmic Associates, Inc.: 76-0256086
Universal Seismic Acquisition, Inc.: 76-0318336
II. NOTICES (Agreement, Paragraph 16(g))
Lessor Lessee
------ ------
NYNEX Credit Company Universal Seismic Associates, Inc.
200 Park Avenue Universal Seismic Acquisition, Inc.
New York, New York 10166 16420 Park Ten Place, Suite 300
Attn: Asset Administrator Houston, Texas 77084
Attn: Mr. Dan Calloway
III. EQUIPMENT (Agreement, Paragraph 1)
SUPPLIER: Input/Output, Inc.
--------- 12300 Parc Crest Drive
Stafford, Texas 77477
LOCATION: Within the continental United States
---------
Lessor /s/
-----
Lessee /s/
-----
<PAGE> 17
2
EQUIPMENT DESCRIPTION:
<TABLE>
<CAPTION>
Serial Make,
Quantity No. Manufacturer Model No. Cost
- --------------------------------------------------------------------------------
<S> <C>
See attached Detailed Equipment List
Total Equipment Cost $4,279,874.00
</TABLE>
IV. LEASE TERM (Agreement, Paragraph 2)
Interim Lease Term Base Lease Term
begins: November 2, 1995 begins: December 1, 1995
ends: December 1, 1995 ends: December 1, 1999
V. RENT (Agreement, Paragraph 3)
During Interim Lease Term:
Per Diem Rent Factor: 0.072044%
Rent per day: $3,083.40
Sales Tax per day: $*
During Base Lease Term:
Monthly Rent Factor: 2.16323%
Rent ( X monthly; quarterly): $92,501.90
Sales Tax ( X monthly; quarterly): $*
Payable in X advance; in arrears
VI. INSURANCE
Property Insurance (Agreement, Paragraph 6(a))
Amount: (see Paragraph 6(a))
Maximum Deductible/Self-Insurance: $100,000
General Liability Insurance (Agreement Paragraph 6(b))
Amount: $5,000,000
Maximum Deductible/Self-Insurance: $100,000
* Sales tax to be calculated at time of billing.
/s/ Lessor
-----
/s/ Lessee
-----
<PAGE> 18
3
VII. ACCEPTANCE: REPRESENTATIONS AND WARRANTIES
(a) Lessee irrevocably accepts the Equipment described above according to
Paragraph 2(b) of the Agreement.
(b) Lessee confirms, as of the execution date of this Lease, its
representations and warranties in Paragraphs 9 and 12 of the Agreement.
VIII. END-OF-TERM OPTIONS
(a) At the end of the Base Lease Term, so long as no Event of Default is
continuing, Lessee must elect one of the following options:
(i) purchase all the Equipment; or
(ii) renew the Lease for one or more terms, after which time either
purchase or return all the Equipment.
(b) If Lessee fails to give timely notice (as specified below) of its election
of the purchase or return option, Lessee will be deemed to have elected the
renewal option.
(c) Lessor and Lessee anticipate that they will execute additional Leases
(Lease # 95-15b, Lease # 95-15c, and so forth) for multiple takedowns of
Equipment. Lessee's election of an end-of-term option for this Lease # 95-15a
will govern the end-of-term options for all Leases under Lease # 95-15. That
is, the end-of-term option for Lease # 95-15b, Lease # 95-15c, and so forth
will be the same end-of-term option that Lessee elects for this Lease # 95-15a.
1. RENEWAL OPTION.
(a) To exercise its renewal option, Lessee must give Lessor irrevocable written
notice at least 180 days before the end of the Base Lease Term or, if
applicable, a Renewal Term.
(b) Lessee's first renewal option is for a period of one year ("First Renewal
Term") at a monthly Rent equal to 1.720005 percent of the Total Equipment Cost
specified in the Lease. At the end of the First Renewal Term, so long as no
Event of Default is continuing, Lessee has the option to renew the Lease for
successive periods of one year (each a "Successive Renewal Term") at the then
Fair Market Rent. "Fair Market Rent" means the rent that the Equipment would
command on the open market, assuming the Equipment is installed and in use and
is in the condition required by Paragraph 5 of the Agreement. Fair Market Rent
will be determined by mutual agreement between Lessor and Lessee. If Lessor and
Lessee are unable to reach agreement, Lessor will select an appraiser
reasonably acceptable to Lessee.
/s/ Lessor
----------
/s/ Lessee
----------
<PAGE> 19
4
The valuation of the appraiser will become the binding Fair Market Rent. Lessee
will pay the appraiser's fees and expenses.
2. PURCHASE OPTION.
(a) To exercise its option to purchase all Equipment listed on a Lease, Lessee
must give Lessor irrevocable written notice at least 180 days before the end of
the Base Lease Term or, if applicable, a Renewal Term.
(b) The purchase price at the end of the Base, Lease Term will be the greater
of: (i) 20 percent of the Total Equipment Cost (as specified in the Lease); or
(ii) the then Fair Market Value of the Equipment. The purchase price at the end
of a Renewal Term will be the then Fair Market Value. In addition to this
purchase price, Lessee will reimburse Lessor for all Taxes imposed on Lessor
(excluding taxes on any gain on the sale), plus all costs and expenses
(including reasonable attorney fees) payable by Lessor on the sale. Fair Market
Value means the price that a willing, knowledgeable buyer would pay for the
Equipment in an arm's length transaction to a willing, knowledgeable seller
under no compulsion to sell, assuming that the Equipment is installed and in
use and is in the condition required by Paragraph 5 of the Agreement. Fair
Market Value will be determined by mutual agreement between Lessor and Lessee.
If Lessor and Lessee are unable to reach agreement, Lessor will select an
appraiser reasonably acceptable to Lessee. The valuation of the appraiser will
become the binding Fair Market Value. Lessee will pay the appraiser's fees and
expenses.
(c) Upon receipt of the full purchase price and all other amounts then due
under the Lease, Lessor will transfer title to the Equipment to Lessee on an
"as is, where is" basis, without recourse and without representation or
warranty (express or implied), except Lessor warrants that the Equipment is
clear of Lessor Liens.
3. RETURN OF THE EQUIPMENT.
(a) To exercise its option to return all Equipment listed on a Lease at the end
of a Renewal Term, Lessee must give Lessor irrevocable written notice at least
180 days before the end of a Renewal Term.
(b) Show Rights. Upon receiving reasonable notice from Lessor in the period 180
days before expiration or earlier termination of the Lease and without
disruption to Lessee's business, Lessee will make the Equipment available for
on-site operational inspections by potential purchasers, and Lessee will
provide personnel, power, and other operational requirements necessary to
demonstrate the electrical, mechanical, and operating systems of each item of
the Equipment.
(c) Restoration of the Equipment. By the end of the Lease Term, Lessee will at
its expense:
/s/ Lessee
-----
/s/ Lessee
-----
<PAGE> 20
5
(i) remove all markings placed by Lessee on the Equipment that are not
necessary for the future installation, use, maintenance, or repair of the
Equipment; (ii) ensure that the Equipment meets legal and regulatory
requirements necessary for the sale and continued commercial use of the
Equipment; (iii) ensure that the Equipment is clear of all Lessee Liens; and
(iv) restore the Equipment to its original condition as of the beginning of the
Lease Term (reasonable wear and tear resulting solely from proper use excepted)
in accordance with Paragraph 5(a) of the Agreement, including but not limited
to the following:
- ensure that the Equipment is clean, cosmetically
acceptable, and structurally sound with no noticeable
cracks, scratches or other visual, electrical or
mechanical damage. The Equipment must be in good
operating order, repair and condition free of any
hazardous waste material, and free from all rust and
corrosion, with no missing or damaged parts;
- ensure that all of the Equipment's systems, including
its electrical and telemetry systems, are able to
operate as designed in accordance with manufacturer's
specifications and within designed tolerances.
(d) Return. Lessee at its expense will:
(1) At least 120 days before end of the Lease Term, provide to Lessor
a detailed inventory of all components of the Equipment. The
inventory should include, but not be limited to, a listing of model
and serial numbers for all components.
(2) At least 90 days before the end of the Lease Term, provide (or
cause the suppliers or manufacturers to provide) to Lessor the
following documents: (i) one set of service, operating, and software
manuals including replacements and additions, such that all
documentation is completely up-to-date; and (ii) one set of documents
detailing configuration, operating requirements, maintenance and
inspection records, and other technical data concerning the set-up
and operation of the Equipment, including replacements and additions,
such that all documentation is completely up-to-date.
(3) At least 90 days before the end of the Lease Term, cause the
manufacturer's representative or a qualified equipment maintenance
provider acceptable to Lessor to perform a comprehensive physical
inspection to test all material and workmanship of the Equipment and
provide an in-depth field report to Lessor; if during the inspection,
the authorized inspector finds that any of the Equipment is defective
(reasonable wear and tear resulting solely from proper use excepted)
or does not operate within the supplier's or manufacturer's
specifications, Lessee will make repairs or replace all defects with
supplier or manufacturer approved parts; and after corrective
measures are completed, Lessee will arrange for a follow-up
inspection of the Equipment by the same inspector, with a copy of the
follow-up inspection report provided to Lessor.
/s/ Lessor
-----
/s/ Lessee
-----
<PAGE> 21
6
(4) At least 30 days before the end of the Lease Term, provide for an
inspection and Fair Market Value appraisal to be performed by an
appraiser selected by Lessor (and, if no Event of Default is
continuing, reasonably acceptable to Lessee) and send the results of
the inspection and appraisal to Lessor.
(5) Return each item of Equipment with an in-depth field service
report detailing the inspection outlined in subparagraph 3 above. The
report will certify that the Equipment has been properly inspected,
examined, and tested and that it operates within the supplier's and
manufacturer's specifications.
(6) Return the equipment with a certificate from the manufacturer that
the Equipment (including any software): i) has been tested and is
functioning properly; has an operating system at the current level;
and ii) is qualified for manufacturer maintenance at standard rates
without any reconditioning, initial set-up, or license charges. If
Lessee does not provide the certificate, Lessor has the right to have
the Equipment tested, and Lessee will promptly pay for the cost of:
i) such testing; ii) any parts, shipping materials, or repairs
necessary to bring the Equipment to its original performance
condition (ordinary wear and tear resulting solely from proper use
excepted); and iii) any updates necessary to bring the operating
system to current level.
(7) Ensure that all inspections, overhauls, rebuilding, or
certifications known to be or expected to be due within 12 months are
completed prior to return.
(8) Disassemble and pack the Equipment according to the supplier's
and manufacturer's specifications and recommendations, to include the
following: (i) remove all process fluids from the Equipment and
dispose of them in accordance with then-current waste disposal laws
and regulations (at no time are materials which could be considered
hazardous waste by any regulatory authority to be shipped with the
Equipment); and (ii) fill all internal fluids (such as lube oil and
hydraulic fluid) to operating levels and secure filler caps and seal
all disconnect hoses to avoid spillage.
(9) Within 10 days of the end of the Lease Term, transport the
Equipment to not more than ten individual locations in the
continental United States selected by Lessor, and provide the
insurance required by Paragraph 6 of the Agreement prior to and
during transport of the Equipment.
(10) If requested by Lessor, provide insurance and safe, secure
storage for the Equipment for 90 days after the end of the Lease
Term.
(e) Failure to Return. In addition to Lessor's other remedies in Paragraph 14 of
the Agreement, if Lessee fails to return the Equipment within the required time
period or fails to restore the Equipment to the proper condition specified in
subparagraph (b) above, Lessee will
/s/ Lessor
-----
/s/ Lessee
-----
<PAGE> 22
7
continue to pay Rent at the last prevailing rate for the period of delay in
returning the Equipment or for the period of time reasonably necessary for
Lessor (at Lessee's expense) to restore the Equipment to its proper condition.
Lessor's acceptance of this continuing Rent does not constitute a renewal of
the Lease or a waiver of Lessor's right to prompt return of the Equipment in
proper condition.
IX. ATTACHMENTS
Attached to and included in this Lease are the following:
-- Detailed Equipment List
-- Table of Stipulated Loss Values
-- Assignment of Purchase Agreement and Consent
-- Opinion of Lessees' Counsel
-- Secretary's Certificates
-- Guaranty
-- Opinion of Guarantor's Counsel
-- UCC Financing Statements
NYNEX CREDIT COMPANY UNIVERSAL SEISMIC ASSOCIATES, INC.
/s/ DANA L. PASTERNAK /s/ RONALD L. ENGLAND
- ------------------------------------- ------------------------------------
(Signature) (Signature)
Dana L. Pasternak Ronald L. England
- ------------------------------------- ------------------------------------
(Typed Name) (Typed Name)
Vice President - Marketing Chief Financial Officer
- ------------------------------------- ------------------------------------
(Title) (Title)
November 8. 1995 October 19, 1995
- ------------------------------------- ------------------------------------
(Date) (Date)
UNIVERSAL SEISMIC ACQUISITION, INC.
/s/ RONALD L. ENGLAND
------------------------------------
(Signature)
Ronald L. England
------------------------------------
(Typed Name)
Chief Financial Officer
------------------------------------
(Title)
October 19, 1995
------------------------------------
(Date)
<PAGE> 23
page l of l
LEASE #95-15a
LESSOR: NYNEX CREDIT COMPANY
LESSEE: UNIVERSAL SEISMIC ASSOCIATES, INC.
DETAILED EQUIPMENT LISTING
Vendor:
Input / Output, Inc.
12300 Parc Crest Drive
Stafford, TX 77477
<TABLE>
<CAPTION>
Serial
Item# Quantity Description Number
================================================================================
<S> <C> <C>
1 1 Data Transcriber Unit (DTU) See attached SIN Listing
for all Equipment
2 1 Tape Transport Module (TTM)
3 1 Sentry Workstation & Software
4 1 OSO GS612 Plotter & Rasterizing Software
5 2 Truck Mount Power Supply Module
6 2 Truck Mount Power Inverter Module
7 1 Central Transmitter Receiver (CTR)
8 300 Remote Seismic Recorder (RSR) RSR-24
9 400 Solar Battery Pack (SBP)
10 6 Remote Deployment Terminal (RDT)
11 6 Battery Charger (BCM)
12 14 Data Collector Unit (DCU)
</TABLE>
Lessor: /s/
------
Lessee: /s/
------
<PAGE> 24
<TABLE>
<CAPTION>
EQUIPMENT LISTING SERIAL NUMBERS
- ----------------- --------------
<S> <C> <C> <C> <C> <C>
1 Data Transcriber Unit N/A
1 Tape Transport Module 62
1 Sentry Workstation S7012 2682939
& Software 26-R2863, 103841
1 OTO GS612 Plotter 101300/374
& Raterizing Software
2 Truck Mount Power Supply 95290S6747 9S30056759
2 Truck Mount Power Inverter Module F0405 F0435
1 Central Transmitter Receiver 1
300 RSR-24's See attached Exhibit A
400 Solar Battery Packs See attached Exhibit a
6 Battery Chargers 54 83 112 116 153
162
14 Data Collector Units 5 6 7 8 9
12 13 14 15 16
20 21 17 19
3 Remote Deployment Terminals (RDT)
3 Laptop Deployment Terminals (ROT) 23740 23742
1 Spectrum Analyzer
</TABLE>
<PAGE> 25
EXHIBIT A
300 RSR SERIAL NUMBERS
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0001 0024 0046 0069 0090 0113 0133 0153 0173 0193
0002 0025 0047 0070 0091 0114 0134 0154 0174 0194
0003 0026 0048 0071 0093 0115 0135 0155 0175 0195
0004 0027 0049 0072 0094 0116 0136 0156 0176 0196
0006 0028 0050 0073 0095 0117 0137 0157 0177 0197
0007 0029 0051 0075 0096 0118 0138 0158 0178 0198
0008 0030 0052 0076 0097 0119 0139 0159 0179 0199
0009 0031 0053 0077 0098 0120 0104 0160 0180 0200
0011 0032 0054 0078 0101 0121 0141 0161 0181 0201
0013 0034 0055 0079 0102 0122 0142 0162 0182 0202
0014 0035 0057 0080 0103 0123 0143 0163 0183 0203
0015 0036 0058 0081 0104 0124 0144 0164 0184 0204
0016 0037 0059 0082 0105 0125 0145 0165 0185 0205
0017 0038 0061 0083 0106 0126 0146 0166 0186 0206
0018 0040 0062 0084 0107 0127 0147 0167 0187 0207
0019 0041 0063 0085 0108 0128 0148 0168 0188 0208
0020 0042 0064 0086 0109 0129 0149 0169 0189 0209
0021 0043 0065 0087 0110 0130 0150 0170 0190 0210
0022 0044 0067 0088 0111 0131 0151 0171 0191 0211
0023 0045 0068 0089 0112 0132 0152 0172 0192 0212
16134 16160 16186 16211
16135 16161 16187 16212
16136 16162 16188 16213
16137 16163 16189 16214
16138 16164 16190 16215
16139 16165 16191 16216
16140 16166 16192 16217
16141 16167 16193 16218
16142 16168 16194 16220
16143 16169 16195 16221
16144 16170 16196 16222
16145 16171 16197 16223
16146 16172 16198 16224
16147 16173 16199 16225
16148 16175 16200 16226
16149 16176 16201 16227
16150 16177 16202 16228
16151 16178 16203 16229
16152 16179 16204 16230
16153 16180 16205 16231
16154 16182 16206 16232
16155 16183 16207 16233
16156 16184 16208 16234
16157 16185 16209 16235
16158 16210 16236
16159
</TABLE>
<PAGE> 26
Exhibit B
400 Solar Battery Packs Serial Numbers
<TABLE>
<S> <C> <C> <C> <C>
22404 22406 22412 22417 22443
22409 22415 22408 24162 24163
24153 24161 24144 24152 24160
24136 24151 24154 24138 24145
24139 24141 24133 24137 24140
24150 24132 24155 24129 24127
24128 24135 24125 24131 24126
24159 24149 24148 24156 24157
24158 24164 24165 22432 22451
22453 22457 22452 22433 22430
22431 22428 22411 22405 22403
22410 22416 22407 22402 22397
22448 22361 23998 23999 23989
23997 23980 23988 23990 23996
23981 23987 23979 23991 23995
24000 23978 23986 23969 23970
23994 24001 23992 23993 22429
23985 22426 22438 22425 22437
22434 22455 22414 22456 22388
22413 24147 24146 24142 24143
24130 24134 23951 23952 23968
23971 23977 23976 23983 23984
23965 23975 23966 23982 23963
23972 23964 23957 23974 23973
23980 23959 23953 23954 23952
23951 23958 23957 23945 23936
23955 23956 23953 23948 23950
24375 24376 23857 24385 24393
24374 24411 23929 24402 24394
24377 24383 24384 24392 24395
24382 24373 24403 24404 24401
24391 24396 24386 24372 24378
24400 24397 24410 24387 24381
24406 24409 24405 24379 24380
24407 24399 24390 24389 24388
24408 22790 24371 22575 22749
22506 23214 24398 23213 22482
23222 22781 22767 22743 23215
22476 22751 22795 22481 22762
23227 22768 22748 22752 22789
22472 22759 23223 22761 22487
22760 22483 22769 22485 22501
22798 22786 22788 22468 22787
22754 18320 22758 26726 26743
26767 26753 22477 26740 26744
26748 26746 26717 26745 26731
26749 26755 26756 26764 26739
26724 26763 26725 26757 26742
26735 26760 26752 26736 26733
26785 26751 26773 26758 26732
26759 26788 26762 26738 26761
26765 26727 26734 23912 23911
26750 23892 26754 23901 23902
23884 23918 23919 23910 23903
23883 23885 23893 23894 23900
23882 23904 23913 23890 23881
23909 23905 23891 23914 23917
23899 23887 23895 23880 23916
23895 23898 23908 23907 23915
22897 23888 23886 24490 24489
23889 24468 23906 24480 24481
24455 24457 23879 24488 24482
24458 24465 24474 24475 24479
24459 24487 24491 Z4469 24460
24456 24483 24467 24492 24455
24477 24471 24478 24461 24453
24473 24476 24486 24485 24493
24472 24463 24464 24454 24416
24470 24434 24484 24425 24417
24435 24445 24462 24419 24418
24444 24438 24426 24427 24424
24443 24452 24451 24423 24432
24446 24419 24433 24442 24437
24422 24431 24414 24441 24448
24428 24421 24413 24412 24450
26876 26905 24438 24430 24439
26879 24429 24420 24447 24440
26908 26909 26872 26898 26890
26907 26871 24449 26881 26889
26906 26884 26899 26900 26882
26880
26923
</TABLE>
<PAGE> 27
ASSIGNMENT OF PURCHASE AGREEMENT
AND
CONSENT
1. DEFINITIONS.
(a) Assignment Agreement: this Assignment of Purchase Agreement and Consent.
(b) Lessor: NYNEX Credit Company, 200 Park Avenue, New York, NY 10166, a
Delaware corporation, and its successors and assigns.
(c) Lessee: Universal Seismic Associates, Inc. and Universal Seismic
Acquisition, Inc., 16420 Park Ten Place, Suite 300, Houston, TX 77084.
(d) Lease: Lease #95-15a under the Master Lease Agreement between Lessor and
Lessee, dated as of October 2, 1995.
(e) Vendor: Input/Output, Inc., 12300 Parc Crest Drive, Stafford, TX 77477.
(f) Purchase Agreement: Letter Agreement dated August 29, 1995 between Global
Charter Corporation and Lessee and attached Quotation Number 5212-C dated July
21, 1995 between Vendor and Lessee.
(g) Equipment: as identified in the Purchase Agreement.
(h) Acceptance of the Equipment: means that the Lessee represents and warrants
that the Equipment: (i) has been delivered to and is in the possession of
Lessee; (ii) has been fully inspected by Lessee or its qualified agent; (iii)
is suitable for the purpose intended by Lessee; (iv) is in good order,
operating condition, and repair and has been properly installed (subject to
minor undischarged obligations of suppliers, manufacturers, or installers under
their agreements and warranties); (v) meets all recommended or applicable
safety and environmental laws, regulations, and standards; (vi) is clear of
Lessee Liens (as defined in Paragraph 4 of the Master Lease Agreement); and
(vii) has been insured as required by Paragraph 6 of the Master Lease
Agreement.
2. ASSIGNMENT.
(a) Lessee assigns to Lessor all Lessee's right, title, and interest in
the Purchase Agreement (including any warranties and guarantees), and Lessor
accepts the assignment; provided that, other than Lessor's obligation to pay
the purchase price for the Equipment in accordance with Paragraph 3 below,
Lessee agrees that none of the duties or obligations of Lessee under the
Purchase Agreement (or other agreements of any nature between Vendor and
Lessee) have been assigned to or assumed by Lessor. Lessee remains liable to
the Vendor to
<PAGE> 28
- 2 -
perform all duties of the "purchaser" under the Purchase Agreement as if this
Assignment Agreement had not been executed.
(b) Lessee will promptly execute and deliver further documents and take
further actions that Lessor reasonably requests to obtain the full benefits of
this Assignment Agreement.
(c) Lessee will not enter into an agreement with the Vendor that would
amend or terminate in any way the Purchase Agreement without the prior written
consent of Lessor.
(d) During the Lease Term under the Lease, so long as no Event of Default
continues under the Lease, Lessee at its expense is authorized in Lessor's
name to demand and accept the service on the Equipment that the Vendor is
obligated to provide under the Purchase Agreement.
3. ACCEPTANCE OF EQUIPMENT; PAYMENT; TITLE.
(a) Lessee will immediately inspect the Equipment upon delivery to ensure
conformance with Vendor's obligations under the Purchase Agreement. According
to the Lease, title to the Equipment will vest in Lessor upon Lessee's
Acceptance of the Equipment, and at that time Lessor will pay Vendor the
purchase price specified in the Purchase Agreement. (If Lessee has made partial
payments of the purchase price to Vendor, Lessor will reimburse Lessee for the
partial payments and pay to Vendor the balance of the purchase price, up to the
Total Equipment Cost specified in the Lease.)
(b) Lessor's obligation to purchase and pay for the Equipment is
conditioned on Lessee's compliance with the Lease. If Lessee does not comply to
Lessor's satisfaction, Lessor's obligation to purchase the Equipment will
terminate without further action and without liability of Lessor to Lessee or
to Vendor, and Lessee will defend, indemnify, and hold harmless Lessor against
all claims and losses (including reasonable legal expenses) arising out of
Lessor's execution of this Assignment Agreement.
4. LESSEE'S REPRESENTATIONS AND WARRANTIES.
Lessee represents and warrants that: (i) the Purchase Agreement is now
fully in effect and is enforceable in accordance with its terms, a true and
complete execution copy of which Lessee has delivered to Lessor; (ii) the
Purchase Agreement constitutes the entire understanding between Lessee and
Vendor regarding the purchase of the Equipment; (iii) neither Lessee nor Vendor
is in default under the Purchase Agreement; (iv) Lessee has the legal right and
has obtained all necessary corporate approvals to assign the Purchase Agreement
to Lessor; and (v) it will defend Lessor's title to the Equipment against any
person (except title claims arising as a direct result of Lessor's actions).
<PAGE> 29
- 3 -
5. LESSEE'S INDEMNITY.
Lessee agrees to defend, indemnify, and hold harmless Lessor (its agents,
successors and assigns) against all claims and losses (including reasonable
legal expenses) arising out of or relating to Lessee's obligations under this
Assignment Agreement.
6. VENDOR'S CONSENT.
(a) Vendor consents to the assignment by Lessee to Lessor of all of the
Lessee's right, title, and interest in the Purchase Agreement.
(b) Other than Lessor's obligation to pay the purchase price for the
Equipment in accordance with Paragraph 3 above, Vendor agrees that none of the
duties or obligations of Lessee under the Purchase Agreement (or other
agreements of any nature between Vendor and Lessee) have been assigned to or in
any manner assumed by Lessor.
(c) Vendor agrees that, on Acceptance of the Equipment and payment of the
full purchase price, title to the Equipment vests in Lessor, and at that time
Vendor will deliver to Lessor the following documents:
(i) an original bill of sale signed by Vendor in the form of
Attachment A to this Assignment Agreement for each item of
Equipment, warranting good title clear of all liens, claims, and
encumbrances;
(ii) a certificate of origin for each item of Equipment (if
transportation equipment or if the Equipment is not "U.S.
made"); and
(iii) an invoice for each item of Equipment, reflecting Lessor
as purchaser, in an amount equal to the purchase price of the
Equipment.
7. VENDOR'S INDEMNITY.
Vendor agrees to defend, indemnify, and hold harmless Lessor and Lessee
(their agents, successors and assigns) against all claims and losses (including
reasonable legal expenses) relating to patent, copyright, or trade secret
infringement on the Equipment.
8. GENERAL.
(a) Assignment. Without Lessor's prior written consent, Lessee may not
assign this Assignment Agreement in whole or in part; except that with 30 days
prior notice to Lessor,
<PAGE> 30
- 4 -
Lessee may assign this Assignment Agreement to a wholly-owned subsidiary of
Lessee. In all cases of Lessee's assignment (including an assignment to a
wholly-owned subsidiary), Lessee will remain obligated under this Assignment
Agreement unless specifically released by Lessor. Lessor may assign this
Assignment Agreement in whole or in part without the consent of, or prior
notice to, Lessee.
(b) Non-Waiver. No course of dealing by Lessor nor Lessor's failure to
strictly enforce a provision of this Assignment Agreement constitutes a waiver
of the future performance of that provision.
(c) Severability. If a provision of this Assignment Agreement is held
unenforceable, all other provisions remain in force.
(d) Governing Law; Venue; Jury Trial. This Assignment Agreement is being
delivered in and will be performed in the State of New York, and this
Assignment Agreement is governed by New York State law. Lessor and Lessee
consent to the exclusive jurisdiction of the New York State courts in New York
County and the United States courts for the Southern District of New York.
Lessor and Lessee waive any right to a jury trial.
(e) Amendment. This Assignment Agreement cannot be amended orally, but
only in writing executed by authorized representatives of the parties.
(f) Execution. This Assignment Agreement is being executed in conjunction
with the Lease, and it may be signed in counterparts.
Lessor: Lessee:
NYNEX CREDIT COMPANY UNIVERSAL SEISMIC ASSOCIATES, INC.
By: /s/ DANA J. PASTERNAK By: /s/ RONALD L. ENGLAND
------------------------------ --------------------------------
Printed Name: Dana J. Pasternak Printed Name: Ronald L. England
-------------------- ----------------------
Title: Vice President - Marketing Title: Chief Financial Officer
--------------------------- -----------------------------
Date: November 8, 1995 Date: October 19, 1995
---------------------------- ------------------------------
Vendor: Lessee:
INPUT/OUTPUT, INC. UNIVERSAL SEISMIC ACQUISITION, INC.
By: By: /s/ RONALD L. ENGLAND
------------------------------ --------------------------------
Printed Name: Printed Name: Ronald L. England
-------------------- ----------------------
Title: Title: Chief Financial Officer
--------------------------- -----------------------------
Date: Date: October 19, 1995
---------------------------- ------------------------------
<PAGE> 31
- 4 -
Lessee may assign this Assignment Agreement to a wholly-owned subsidiary of
Lessee. In all cases of Lessee's assignment (including an assignment to a
wholly-owned subsidiary), Lessee will remain obligated under this Assignment
Agreement unless specifically released by Lessor. Lessor may assign this
Assignment Agreement in whole or in part without the consent of, or prior
notice to, Lessee.
(b) Non-Waiver. No course of dealing by Lessor nor Lessor's failure to
strictly enforce a provision of this Assignment Agreement constitutes a waiver
of the future performance of that provision.
(c) Severability. If a provision of this Assignment Agreement is held
unenforceable, all other provisions remain in force.
(d) Governing Law; Venue; Jury Trial. This Assignment Agreement is being
delivered in and will be performed in the State of New York, and this
Assignment Agreement is governed by New York State law. Lessor and Lessee
consent to the exclusive jurisdiction of the New York State courts in New York
County and the United States courts for the Southern District of New York.
Lessor and Lessee waive any right to a jury trial.
(e) Amendment. This Assignment Agreement cannot be amended orally, but
only in writing executed by authorized representatives of the parties.
(f) Execution. This Assignment Agreement is being executed in conjunction
with the Lease, and it may be signed in counterparts.
Lessor: Lessee:
NYNEX CREDIT COMPANY UNIVERSAL SEISMIC ASSOCIATES, INC.
By: /s/ DANA J. PASTERNAK By:
------------------------------ -------------------------------
Printed Name: Printed Name:
-------------------- ---------------------
Title: Title:
--------------------------- ----------------------------
Date: Date:
---------------------------- -----------------------------
Vendor: Lessee:
INPUT/OUTPUT, INC. UNIVERSAL SEISMIC ACQUISITION, INC.
By: /s/ ROBERT P. BRINDLEY By:
------------------------------ -------------------------------
Printed Name: Robert P. Brindley Printed Name:
-------------------- ---------------------
Title: Sr. VP., CFO, and Secretary Title:
--------------------------- ----------------------------
Date: 10/23/95 Date:
---------------------------- -----------------------------
<PAGE> 32
Attachment A
Assignment of Purchase Agreement and Consent
BILL OF SALE
1. DEFINITIONS.
(a) Vendor: Input/Output, Inc., 12300 Parc Crest Drive, Stafford, TX
77477.
(b) Buyer: NYNEX Credit Company, 200 Park Avenue, New York, NY 10166, a
Delaware corporation, and its successors and assigns.
(c) Equipment: as specified on the attached Detailed Equipment List.
(d) Sale date: October 25, 1995.
----------------
2. SALE.
On the Sale Date, Vendor for sufficient consideration (the receipt of
which is acknowledged) sells and delivers to Buyer all of Vendor's right,
title, and interest in and to the Equipment and assigns to Buyer any and all
licenses in software associated with the Equipment.
3. VENDOR'S WARRANTY.
Vendor warrants to Buyer that: (i) Vendor is conveying good and marketable
title to the Equipment, clear of liens, claims, and encumbrances; and (ii)
Vendor is selling the Equipment by its sole act and has taken all corporate
action required and advisable to complete the sale.
INPUT/OUTPUT, INC.
(Vendor)
By: /s/ ROBERT P. BRINDLEY
-----------------------------------
Typed Name: Robert P. Brindley
---------------------------
Title: Senior Vice President, Chief
--------------------------------
Financial officer and Secretary
--------------------------------
Date: 10/23/95
<PAGE> 33
CERTIFICATE OF SECRETARY
The undersigned hereby certifies that she is the duly elected and
qualified Secretary of UNIVERSAL SEISMIC ASSOCIATES, INC., a Delaware
corporation (the "Corporation"). The undersigned further certifies that:
A. As Secretary of the Corporation, she is authorized to execute
this Certificate on behalf of the Corporation.
B. The Corporation is duly incorporated, validly existing, and is
in good standing under the laws of the State of Delaware.
C. The Corporation has the power and authority to enter into the
Master Least Agreement, dated as of October 2, 1995, all Leases
#95-15, and related documents (the "Documents") between the
Corporation and NYNEX Credit Company. This corporate power and
authority is shown by the resolutions of the Board of Directors
of the Corporation, attached hereto as Attachment A, which
resolutions were adopted in a unanimous written consent dated
October 19, 1995 and have not been amended or revoked in any
manner and remain in full force, and effect.
D. The individuals whose names appear below are the duly elected,
qualified and acting officers of the Corporation as noted below,
and that the signatures appearing opposite their names below are
their respective true and genuine signatures:
Name Office Signature
---- ------ ---------
Rick E. Trapp Chairman of the Board /s/ RICK E. TRAPP
----------------------
Michael J. Pawelek President and Chief /s/ MICHAEL J. PAWELEK
Executive Officer ----------------------
Ronald L. England Chief Financial Officer /s/ RONALD L. ENGLAND
and Treasurer ----------------------
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this 19
day of October, 1995.
/s/ VICKI D. HUMPHREY
-----------------------------
VICKI D. HUMPHREY, Secretary
-3-
<PAGE> 34
ATTACHMENT A
WHEREAS, the Corporation desires to lease a I/O SYSTEM TWO RSR System
(the "System");
WHEREAS, each of the directors of the Corporation has reviewed the
most recent draft of the Master Lease Agreement, dated as of October 2, 1995
(the "Master Lease Agreement"), by and between the Corporation and Universal
Seismic Associates, Inc., as Lessee, and NYNEX Credit Company, as Lessor
("NYNEX"), the most recent draft of the Lease #95-15a with NYNEX, dated as of
October 2, 1995, setting forth the terms and conditions of the lease of the
System from NYNEX under the Master Lease Agreement (the "Lease"), and the most
recent draft of the Assignment of Purchase Agreement and Consent, assigning
to NYNEX all of the Corporation's right, title, and interest in the letter
agreement, dated August 29, 1995, between Universal Seismic Associates, Inc.
and Global Charter Corporation regarding the purchase of the System (the
"Assignment"), and believe that the execution of the Master Lease Agreement,
the Lease, the Assignment and all other documents contemplated thereby, is in
the best interests of the Corporation;
NOW, THEREFORE, BE IT RESOLVED, that the form, terms and
provisions of the proposed Master Lease Agreement, the Lease and
the Assignment are hereby in all respects ratified, confirmed
and approved, and the President of the Corporation shall be and
is hereby authorized, empowered and directed to enter into,
execute and deliver the Master Lease Agreement, the Lease, the
Assignment and all other documents contemplated therein in the
name and on behalf of the Corporation, with such changes in the
terms thereof as such officer shall, in his sole discretion,
deem necessary or desirable and in the best interest of the
Corporation; and
RESOLVED FURTHER, that the President or the Chief Financial
Officer is hereby authorized, empowered and directed to do and
perform such acts and things, to sign such documents and
certificates and to take all such other action, including the
securing of all necessary and advisable waivers, consents and
permits, as such officer shall deem necessary, advisable or
proper to carry out the intents and purposes of the foregoing
resolutions and to perform all obligations of the Corporation
under the terms of the Master Lease Agreement, the Lease and all
other documents entered into thereunder, and all actions
heretofore taken, and all instruments and documents heretofore
executed, by any officer of the Corporation in connection with
or relating to any of the matters which are the subject of the
foregoing resolutions are hereby in all respects authorized,
adopted, ratified, confirmed and approved.
- 4 -
<PAGE> 35
CERTIFICATE OF SECRETARY
The undersigned hereby certifies that she is the duly elected and
qualified Secretary of UNIVERSAL SEISMIC ACQUISITION, INC., a Texas corporation
(the "Corporation"). The undersigned further certifies that:
A. As Secretary of the Corporation, she is authorized to execute
this Certificate on behalf of the Corporation.
B. The Corporation is duly incorporated, validly existing, and is
in good standing under the laws of the State of Texas,
C. The Corporation has the power and authority to enter into the
Master Lease Agreement, dated as of October 2, 1995, all Leases
#95-15, and related documents (the "Documents") between the
Corporation and NYNEX Credit Company. This corporate power and
authority is shown by the resolutions of the Board of Directors
of the Corporation, attached hereto as Attachment A, which
resolutions were adopted in a unanimous written consent dated
October 19, 1995 and have not been amended or revoked in any
manner and remain in full force and effect.
D. The individuals whose names appear below are the duly elected,
qualified and acting officers of the Corporation as noted below,
and that the signatures appearing opposite their names below are
their respective true and genuine signatures:
Name Office Signature
---- ------ ---------
Rick E. Trapp Chairman of the Board /s/ RICK E. TRAPP
----------------------
Michael J. Pawelek President and /s/ MICHAEL J. PAWELEK
Treasurer ----------------------
Ronald L. England Chief Financial Officer /s/ RONALD L. ENGLAND
----------------------
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this
19 day of October, 1995.
/s/ VICKY D. HUMPHREY
-----------------------------
VICKY D. HUMPHREY, Secretary
<PAGE> 36
ATTACHMENT A
WHEREAS, the Board of Directors of the Corporation has previously
approved the purchase or lease of a I/O SYSTEM TWO RSR System (the "System");
WHEREAS, each of the directors of the Corporation has reviewed the
most recent draft of the Master Lease Agreement, dated as of October 2, 1995
(the "Master Lease Agreement"), by and between the Corporation and Universal
Seismic Acquisition, Inc., as Lessee, and NYNEX Credit Company, as Lessor
("NYNEX"), the most recent draft of the Lease #95-15a with NYNEX, dated as of
October 2, 1995, setting forth the terms and conditions of the lease of the
System from NYNEX under the Master Lease Agreement (the "Lease"), and the most
recent draft of the Assignment of Purchase Agreement and Consent, assigning to
NYNEX all of the Corporation's right, title, and interest in the letter
agreement, dated August 29, 1995, between the Corporation and Global Charter
Corporation regarding the purchase of the System (the "Assignment"), and
believe that the execution of the Master Lease Agreement, the Lease, the
Assignment and all other documents contemplated thereby, is in the best
interests of the Corporation;
NOW, THEREFORE, BE IT RESOLVED, that the form, terms and provisions
of the proposed Master Lease Agreement, the Lease and the Assignment
are hereby in all respects ratified, confirmed and approved, and the
President or the Chief Financial Officer of the Corporation shall be
and is hereby authorized, empowered and directed to enter into,
execute and deliver the Master Lease Agreement, the Lease, the
Assignment and all other documents contemplated therein in the name
and on behalf of the Corporation, with such changes in the terms
thereof as such officer shall, in his sole discretion, deem necessary
or desirable and in the best interest of the Corporation; and
RESOLVED FURTHER, that the President or the Chief Financial Officer
is hereby authorized, empowered and directed to do and perform such
acts and things, to sign such documents and certificates and to take
all such other action, including the securing of all necessary and
advisable waivers, consents and permits, as such officer shall deem
necessary, advisable or proper to carry out the intents and purposes
of the foregoing resolutions and to perform all obligations of the
Corporation under the terms of the Master Lease Agreement, the Lease
and all other documents entered into thereunder, and all actions
heretofore taken, and all instruments and documents heretofore
executed, by any officer of the Corporation in connection with or
relating to any of the matters which are the subject of the foregoing
resolutions are hereby in all respects authorized, adopted, ratified,
confirmed and approved.
<PAGE> 37
UNIVERSAL SEISMIC ASSOCIATES, INC.
UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS
IN LIEU OF SPECIAL MEETING
October 19, 1995
We, the undersigned, being all of the directors of UNIVERSAL SEISMIC
ASSOCIATES, INC., a Delaware corporation (herein the "Corporation"), do hereby
unanimously consent to the following action of this Corporation with the same
force and effect as though the following resolutions were adopted at a Special
Meeting of the Board of Directors duly called and held:
WHEREAS, the Board of Directors of the Corporation has previously
approved the purchase or lease of a I/O SYSTEM TWO RSR System (the "System");
WHEREAS, each of the directors of the Corporation has reviewed the
most recent draft of the Master Lease Agreement, dated as of October 2, 1995
(the "Master Lease Agreement"), by and between the Corporation and Universal
Seismic Acquisition, Inc., as Lessee, and NYNEX Credit Company, as Lessor
("NYNEX"), the most recent draft of the Lease #95-15a with NYNEX, dated as of
October 2, 1995, setting forth the terms and conditions of the lease of the
System from NYNEX under the Master Lease Agreement (the "Lease"), and the most
recent draft of the Assignment of Purchase Agreement and Consent, assigning to
NYNEX all of the Corporation's right, title, and interest in the letter
agreement, dated August 29, 1995, between the Corporation and Global Charter
Corporation regarding the purchase of the System (the "Assignment"), and
believe that the execution of the Master Lease Agreement, the Lease, the
Assignment and all other documents contemplated thereby, is in the best
interests of the Corporation;
NOW, THEREFORE, BE IT RESOLVED, that the form, terms and provisions
of the proposed Master Lease Agreement, the Lease and the Assignment
are hereby in all respects ratified, confirmed and approved, and the
President or the Chief Financial Officer of the Corporation shall be
and is hereby authorized, empowered and directed to enter into,
execute and deliver the Master Lease Agreement, the Lease, the
Assignment and all other documents contemplated therein in the name
and on behalf of the Corporation, with such changes in the terms
thereof as such officer shall, in his sole discretion, deem necessary
or desirable and in the best interest of the Corporation; and
RESOLVED FURTHER, that the President or the Chief Financial Officer
is hereby authorized, empowered and directed to do and perform such
acts and things, to sign such documents and
<PAGE> 38
certificates and to take all such other action, including the
securing of all necessary and advisable waivers, consents and
permits, as such officer shall deem necessary, advisable or proper to
carry out the intents and purposes of the foregoing resolutions and
to perform all obligations of the Corporation under the terms of the,
Master Lease Agreement, the Lease and all other documents entered
into thereunder, and all actions heretofore taken, and all
instruments and documents heretofore executed, by any officer of the
Corporation in connection with or relating to any of the matters
which are the subject of the foregoing resolutions are hereby in all
respects authorized, adopted, ratified, confirmed and approved.
IN WITNESS WHEREOF, the undersigned have executed this Consent
effective as of the date first above written.
DIRECTORS OF
UNIVERSAL SEISMIC ASSOCIATES, INC.
/s/ RICK E. TRAPP /s/ MICHAEL J. PAWELEK
- --------------------------------- ----------------------------------
RICK E. TRAPP MICHAEL J. PAWELEK
/s/ RONALD L. ENGLAND /s/ CALVIN G. COBB
- --------------------------------- ----------------------------------
RONALD L. ENGLAND CALVIN G. COBB
/s/ MATTHEW R. BOB
- ---------------------------------
MATTHEW R. BOB
<PAGE> 1
EXHIBIT 10.41
SETTLEMENT AGREEMENT AND GENERAL RELEASE
THIS SETTLEMENT AGREEMENT AND GENERAL RELEASE (hereinafter
Settlement Agreement) is made, entered into and effective as of August 5, 1997
by and among The Universal Seismic Associates, Inc. Stockholders' Protective
Committee, Michael T. Kanarellis, and Robert J. Kecseg (Plaintiffs) and Michael
J. Pawelek, Ronald L. England, Calvin G. Cobb, Gary Milavec, Stephen Oakes,
Rick Trapp, Universal Seismic Associates, Inc. (Universal), RIMCO Associates,
Inc. (RIMCO), and Resource Investors Management Company Limited Partnership
(Defendants), as follows:
W I T N E S S E T H:
WHEREAS, Plaintiffs filed a lawsuit (hereinafter the Federal
Court Case), styled The Universal Seismic Associates, Inc. Stockholders'
Protective Committee, Michael T. Kanarellis, and Robert J. Kecseg (Plaintiffs)
vs. Michael J. Pawelek, Ronald L. England, Calvin G. Cobb, Gary Milavec,
Steven(sp) Oakes, Rick Trapp, Universal Seismic Associates, Inc., RIMCO
Associates, Inc., and Resource Investors Management Co., L.P. (Defendants); CA
No. 97-22 (RRM); In the United States District Court for the District of
Delaware (the Federal Court) alleging, among other things, certain violations
of the securities laws, and through this action sought damages as compensation
for loss of value in respect of shares of the common stock of the Company held
by them;
<PAGE> 2
WHEREAS, Universal filed a counterclaim against Michael
Kanarellis and Robert Kecseg in the Federal Court Case also alleging, among
other things, certain violations of the securities laws (the Counterclaim);
WHEREAS, Defendants have denied all the allegations of
violations in the complaints filed by Plaintiffs, including the allegation that
the Plaintiffs have suffered a loss of value of their shares of the Company's
stock;
WHEREAS, Plaintiffs have denied all the allegations of
violations in the Counterclaim;
WHEREAS, Universal has filed a lawsuit (the Astute Court Case)
styled Universal Seismic Associates, Inc. v. Michael T. Kanarellis and Robert
L. Kecseg, Cause No. 97-12684, the District Court of Harris County, Texas,
334th Judicial District (the Astute Court) against Michael Kanarellis and
Robert Kecseg alleging, among other things, breach of contract;
WHEREAS, Michael Kanarellis and Robert Kecseg, each a
stockholder of Universal, deny all the allegations of improper actions in the
State Court Case;
WHEREAS, Plaintiffs and Defendants now desire to reach a full
and final settlement and compromise of all (with limited exceptions set forth
herein) matters, claims and causes of action that the Plaintiffs have or may
have against Defendants and which the Defendants have or may have against the
Plaintiffs, whether known or unknown, including but not limited to any claims
(1) that were asserted or could have been asserted in the Federal Court Case
(including the Counterclaim) or the State Court Case, and (2) relating to any
purchase or sale of the stock of Universal. For the purposes of this
Settlement Agreement, the term Affiliate of an entity or person shall mean any
other person or entity controlling, controlled by or under common control with
that entity or person.
-2-
<PAGE> 3
NOW, THEREFORE, for and in consideration of the covenants,
promises and agreements herein contained, and acting in the interest of
settling the controversies between them, and intending hereby to be legally
bound, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Plaintiffs and Defendants hereby agree and
stipulate as follows:
1. On or before the first business day (which shall mean
any day that is not a Saturday or a Sunday and on which national banks in
Houston, Texas are generally open) following the date hereof, Michael J.
Pawelek, Ronald L. England, Calvin G. Cobb, Gary Milavec, and Stephen Oakes,
jointly and severally, agree to and shall deliver or cause to be delivered to
the escrow agent, Texas Commerce Bank National Association, the sum of One
Million Seven Hundred Fifty Thousand Dollars ($1,750,000.00) by wire transfer
(to be sent directly by RIMCO or one of its Affiliates) (hereinafter the
Settlement Sum). On or before the first business day following the Closing
Date, and provided that the event described in section 4(a) of the Escrow
Agreement, a copy of which is attached hereto as Exhibit 1, has occurred, the
Settlement Sum shall be disbursed to Plaintiffs.
2. In addition to any release to be made in this
Settlement Agreement, Plaintiffs agree not to seek an award of attorneys' fees,
expenses, or professional fees which they may have incurred or paid in
connection with the Federal Court Case or the State Court Case, including
without limitation, attorneys' fees, expenses, or professional fees relating
to: (i) any proxy statement or other filing with the Securities and Exchange
Commission, (ii) the prosecution or defense of any of the claims made by the
parties in the Federal Court Action, and (iii) any request made to the Audit
Committee of Universal to investigate certain accounting practices of
Universal.
-3-
<PAGE> 4
3. Contemporaneously herewith, the parties have executed
and exchanged to be held in trust by the parties hereto subject to the approval
by the Federal Court of the settlement of the Plaintiffs' derivative claims and
receipt by Plaintiffs of the amount referred to in paragraph 1 hereto: (A) a
Stipulation of Settlement in respect of all non-derivative claims of Plaintiffs
in the form annexed hereto as Exhibit 2 (the Federal Court Stipulation); (B)
additional documentation required to obtain the necessary Federal Court
approval of the settlement of the derivative claims in the Federal Court Case,
upon the terms set forth in this Settlement Agreement; and (C) a Nonsuit with
Prejudice of the State Court Case (the Astute Court Nonsuit) in the form
annexed hereto as Exhibit 3.
4. Each Plaintiff and Defendant acknowledges and agrees
that the respective agreements, covenants, releases, representations and
warranties of Plaintiffs and Defendants in this Settlement Agreement are for
and in consideration of the action taken and to be taken pursuant to this
Settlement Agreement, which constitute good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each Plaintiff and
Defendant.
5. Plaintiffs, jointly and severally, represent and
warrant to each of the Defendants, which representations and warranties each
Plaintiff acknowledges are material, are relied on by Defendants in entering
into this Settlement Agreement and shall survive the execution and delivery of
this Settlement Agreement, as follows:
(i) Except for the derivative causes of action asserted
in the Federal Court Case, each of Plaintiffs is the legal and
beneficial owner of any right, title or interest in the Claims (as
hereinafter defined) to be released hereby by Plaintiffs;
-4-
<PAGE> 5
(ii) Each of Plaintiffs has not sold, assigned, conveyed
or in any way transferred or otherwise disposed of any interest in the
Claims (as hereinafter defined) to be released hereby by Plaintiffs;
(iii) The execution, delivery and performance by The
Universal Seismic Associates, Inc. Stockholders' Protective Committee
of this Settlement Agreement, have been duly authorized by all
requisite authorities, corporate or otherwise, and the Settlement
Agreement has been duly and validly executed and delivered on behalf
of The Universal Seismic Associates, Inc. Stockholders' Protective
Committee and is a legal, valid and binding obligation of The
Universal Seismic Associates, Inc. Stockholders' Protective Committee
enforceable against The Universal Seismic Associates, Inc.
Stockholders' Protective Committee in accordance with the terms of
the Settlement Agreement; and
(iv) Plaintiffs have the full authority, power and right
to accept the consideration for this Settlement Agreement and to make
the agreements, covenants, releases, representations and warranties
set forth herein.
6. Defendants, jointly and severally, represent and
warrant to each of the Plaintiffs, which representations and warranties each
Defendant acknowledges are material, are relied on by Plaintiffs in entering
into this Settlement Agreement and shall survive the execution and delivery of
this Settlement Agreement, as follows:
(i) each of Defendants is the legal and beneficial owner
of any right, title or interest in the Claims to be released hereby by
Defendants;
(ii) each of Defendants has not sold, assigned, conveyed
or in any way transferred or otherwise disposed of any interest in the Claims
to be released hereby by Defendants;
-5-
<PAGE> 6
(iii) the execution, delivery and performance by Universal,
RIMCO and Resource Investors Management Company Limited Partnership of this
Settlement Agreement have been duly authorized by all requisite authorities,
corporate or otherwise, and the Settlement Agreement has been duly and validly
executed and delivered on behalf of each of them and is a legal, valid and
binding obligation of each of them enforceable against each of them in
accordance with the terms of the Settlement Agreement; and
(iv) each of Defendants has the full authority, power and
right to accept the consideration for this Settlement Agreement and to make the
agreements, covenants, releases, representations and warranties set forth
herein.
7. Upon, and subject to, their receipt of the Settlement
Sum in accordance with paragraph 1 above, Plaintiffs, jointly and severally,
for themselves, and for their respective predecessors, successors, assigns,
heirs, beneficiaries and personal representatives, as well as their respective
present, former and future officers, directors, shareholders, employees,
agents, representatives, attorneys, parent corporations, subsidiary
corporations and Affiliates (including Technoflex, Inc. and The Offshore Group,
Inc.) (all such specified persons and entities collectively hereinafter the
Plaintiff Releasing Parties), shall hereby forever fully release, waive,
relieve, acquit and discharge each of the Defendants, and their respective
predecessors, successors and assigns, as well as their respective present,
former and future officers, directors, shareholders, partners, employees,
agents, representatives and attorneys, insurers, accountants, parent
corporations, subsidiary corporations and Affiliates (all such specified
persons and entities so released collectively hereinafter the Defendant
Released Parties) of and from any and all claims, demands, actions, causes of
action, suits, damages, liabilities, obligations, costs, expenses (including
but not limited
-6-
<PAGE> 7
to attorneys' fees) and other remedies of whatever nature and with respect to
any matter whatsoever, known or unknown, whether based on contract, tort,
common law, civil law, equity, statute, regulation or otherwise (all such
claims and other specified matters collectively herein claims), that any of the
Plaintiff Releasing Parties may have had, now have, may hereafter have, or that
could have been asserted against any of the Defendant Released Parties, arising
out of or relating to any act or failure to act that shall have occurred before
the execution of this Settlement Agreement, including but not limited to any
Claim arising out of or relating to (i) the matters alleged or that could have
been alleged in the Federal Court Case or (ii) the purchase or sale of the
securities of Universal; provided, however, that the foregoing shall not
release or discharge any Claims that the Plaintiff Releasing Parties may have
against any of the Defendant Released Parties arising out of or relating to
this Settlement Agreement, the letter agreement between the Plaintiffs and
Defendants (except Rick Trapp) dated July 1, 1997 (the Abetter Agreement), the
Stock Purchase Agreement (as hereinafter defined), or that certain agreement in
respect of the Welder Ranch Prospect, by and between The Offshore Group, Inc.
and UNEXCO, Inc. The Plaintiff Releasing Parties, jointly and severally,
acknowledge that the foregoing is a general release intended to be interpreted
broadly.
8. Upon dismissal with prejudice of the Federal Court
Case, Defendants, jointly and severally, for themselves, and for their
respective predecessors, successors, assigns, heirs, beneficiaries and personal
representatives, as well as their respective present, former and future
officers, directors, shareholders, employees, agents, representatives,
attorneys, parent corporations, subsidiary corporations and Affiliates (all
such specified persons and entities collectively hereinafter the Defendant
Releasing Parties), shall hereby forever fully release, waive, relieve, acquit
and discharge each of the Plaintiffs, Technoflex, Inc. and The Offshore Group,
Inc., and their respective
-7-
<PAGE> 8
predecessors, successors, heirs, beneficiaries and personal representatives,
and assigns, as well as their respective present, former and future officers,
directors, shareholders, partners, employees, agents, representatives and
attorneys, accountants, insurers, parent corporations, subsidiary corporations
and Affiliates (all such specified persons and entities so released
collectively hereinafter the Plaintiff Released Parties) of and from any and
all Claims, that any of the Defendant Releasing Parties may have had, now have,
may hereafter have, or that could have been asserted against any of the
Plaintiff Released Parties, arising out of or relating to any act or failure to
act that shall have occurred before the execution of this Settlement Agreement,
including but not limited to any Claim arising out of or relating to (i) the
matters alleged or that could have been alleged in the Federal Court Case
(including by counterclaim) or the State Court Case or (ii) the purchase or
sale of the securities of Universal; provided, however, that the foregoing
shall not release or discharge any Claims that the Defendant Releasing Parties
may have against any of the Plaintiff Released Parties arising out or relating
to this Settlement Agreement, the Letter Agreement, the Stock Purchase
Agreement, or that certain agreement in respect of the Welder Ranch Prospect,
by and between The Offshore Group, Inc. and UNEXCO, Inc. The Defendant
Releasing Parties, jointly and severally, acknowledge that the foregoing is a
general release intended to be interpreted broadly.
9. Upon, and subject to, their receipt of the Settlement
Sum in accordance with paragraph 1 above, Plaintiffs, jointly and severally,
shall hereby agree to and shall indemnify, defend, protect and hold harmless
the Defendant Released Parties from and against any and all Claims (even if
such Claims are based upon any Plaintiffs' express negligence, whether sole or
concurrent, gross negligence, breach of contract, breach of express or implied
warranty, or breach of a duty allegedly imposed by statute or regulation)
directly or indirectly arising out of or relating to (i) any breach of
-8-
<PAGE> 9
any agreement, covenant, representation or warranty of any one or more of
Plaintiffs set forth in this Settlement Agreement, or (ii) any nonperformance
by any one or more of Plaintiffs of any obligation of any one or more of
Plaintiffs under this Settlement Agreement. Plaintiffs, jointly and severally,
acknowledge that the foregoing indemnity provisions are intended to be
interpreted broadly.
10. Upon, and subject to, the dismissal of the Federal
Court Case with prejudice, Defendants, jointly and severally, shall hereby
agree to and shall indemnify, defend, protect and hold harmless the Plaintiff
Released Parties from and against any and all Claims (even if such Claims are
based upon any Defendants' express negligence, whether sole or concurrent,
gross negligence, breach of contract, breach of express or implied warranty, or
breach of a duty allegedly imposed by statute or regulation) directly or
indirectly arising out of or relating to (i) any breach of any agreement,
covenant, representation or warranty of any one or more of Defendants set forth
in this Settlement Agreement, or (ii) any nonperformance by any one or more of
Defendants of any obligation of any one or more of Defendants under this
Settlement Agreement. Defendants, jointly and severally, acknowledge that the
foregoing indemnity provisions are intended to be interpreted broadly.
11. Plaintiffs agree to refrain from purchasing, or
advising others to purchase or sell, through their Affiliates, nominees or by
any other means, any shares of stock of Universal, or any successor company or
entity, for 365 days from the date that the Federal Court Case is dismissed
with prejudice.
-9-
<PAGE> 10
12. Plaintiffs and Defendants agree to take all steps
necessary promptly to dismiss the Federal Court Case with prejudice (including
all counterclaims), and obtain any necessary court approval of the settlement
of the derivative causes of action.
13. Each of Plaintiffs and Defendants agree promptly to
withdraw all pending motions made by any of them in the Federal Court Case and
the State Court Case.
14. Upon the approval of the settlement of the derivative
claims by the Federal Court, the State Court Case shall immediately be
nonsuited with prejudice.
15. Plaintiffs and Defendants agree that no consideration
paid pursuant to this Settlement Agreement is to be construed as a payment made
to settle the common law fraud count in the Verified Supplemental and Amended
Complaint, nor is it to be construed as a payment to settle any claims relating
to any alleged intentional misconduct on the part of the Defendants.
16. This Settlement Agreement shall extend to, be binding
upon, and inure to the benefit of the parties and their respective successors,
heirs, beneficiaries, personal representatives and assigns; provided, however,
that any assignment shall not release a party from any of its obligations under
this Settlement Agreement. This Settlement Agreement is solely for the benefit
of the parties hereto, the Plaintiff Released Parties, Defendant Released
Parties, and their respective heirs, beneficiaries, personal representatives,
successors and assigns and no provision of this Settlement Agreement is
intended or shall be deemed to confer any rights or remedies on any other
person or entity.
17. This Settlement Agreement, subject to the provisions
of paragraph 20 below, embodies the complete and entire agreement among the
parties concerning its subject matter and supersedes any prior oral or written
representations, agreements or understandings or any
-10-
<PAGE> 11
contemporaneous oral understandings, representations or agreements. This
Settlement Agreement may not be amended except in a writing signed by all
parties. Each party shall bear its own costs and attorneys' fees in connection
with the preparation, negotiation, review and documentation of this Settlement
Agreement. The parties may execute this Agreement in counterparts by telecopy,
which they shall confirm by promptly furnishing written originals to each of
the other parties. Counterparts when executed by all parties shall constitute
a complete Settlement Agreement as if each party had executed a single
document. This Settlement Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware without regard to conflict of
law rules. Venue for any claim arising out of this Settlement Agreement shall
be Harris County, Texas, in light of the fact that the consideration will be
paid in Harris County, Texas. This is a negotiated agreement between the
parties hereto and the parties acknowledge that any rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Settlement Agreement. As used
herein, pronouns of any gender shall include the other genders, and the
singular and the plural shall include the other.
18. Nothing in this Settlement Agreement shall (i) in any
way constitute an admission of liability by Defendants or Plaintiffs with
respect to the Federal Court Case (including the Counterclaim) or the State
Court Case, or (ii) in any way constitute an admission against interest of any
of Defendants or Plaintiffs.
19. The Closing Date of this Settlement Agreement shall
occur upon approval of the settlement of the derivative claims by the Federal
Court in the Federal Court Case. Only upon receipt by Plaintiffs of the
Settlement Sum in accordance with paragraph 1, counsel may file the Federal
Stipulation and the State Court Nonsuit.
-11-
<PAGE> 12
20. Contemporaneously herewith the Company shall pay
Michael Kanarellis the sum of $130,000.00 in complete satisfaction of all
obligations arising under the July 1, 1997, letter, a true and correct copy of
which is attached hereto as Exhibit 4. In addition, that certain Stock
Purchase Agreement, dated August 5, 1997, by and between the Plaintiffs and
Resource Investors Management Company Limited Partnership and certain of its
Affiliates (the Stock Purchase Agreement) shall remain in full force and effect
unaffected by this Settlement Agreement. To the extent that it is referred to
herein, the Letter Agreement shall remain in full force and effect.
21. The parties agree that any state or federal income
tax liability of the Plaintiffs arising from this Settlement Agreement, or any
payment of money to Plaintiffs pursuant to this Settlement Agreement, shall be
the sole responsibility of the Plaintiffs.
22. Plaintiffs agree not to solicit, actively participate
with, join with, or provide financial assistance to any third party in
connection with the prosecution of any pending or future action or proceeding
against any of the Defendants, provided however, that Plaintiffs shall not
violate this agreement to the extent they are required by law (including,
without limitation, by subpoena, court order, or other legal process) to
testify, produce documents, or otherwise disclose information. Defendants
agree not to solicit, actively participate with, join with, or provide
financial assistance to any third party in connection with the prosecution of
any pending or future action or proceeding against any of the Plaintiffs,
provided, however, that Defendants shall not violate this agreement to the
extent they are required by law (including, without limitation, by subpoena,
court order, or other legal process) to testify, produce documents, or
otherwise disclose information.
23. The parties acknowledge that this is an arms' length
settlement and the matters being settled hereby have been subject to
significant litigation, discovery and contention, each party
-12-
<PAGE> 13
is commercially sophisticated and represented by experienced and able counsel,
and each party is thoroughly familiar with the implications of this Settlement
Agreement in all respects. Except for the terms expressly set forth herein, no
party has made any promises, agreements, representations, statements or
warranties with respect to this settlement, and no party has relied upon any
promises, agreements, representations, statements or warranties by another
party. Each party is entering into this Settlement Agreement voluntarily
without duress, with the consultation and advice of legal counsel, and with a
full understanding of its terms. None of the parties hereto shall later seek
to overturn or invalidate any respect of this Agreement on the ground of
duress, unconscionability, oppression or any similar reason.
This Agreement is executed as of the date first written above.
THE UNIVERSAL SEISMIC ASSOCIATES, INC.
STOCKHOLDERS' PROTECTIVE COMMITTEE
By:
-----------------------------------------
- --------------------------------------------
MICHAEL KANARELLIS
- --------------------------------------------
ROBERT KECSEG
-13-
<PAGE> 14
UNIVERSAL SEISMIC ASSOCIATES, INC.
By:
-----------------------------------------
- --------------------------------------------
MICHAEL PAWELEK
- --------------------------------------------
RONALD ENGLAND
- --------------------------------------------
CALVIN COBB
- --------------------------------------------
RICHARD TRAPP
- --------------------------------------------
GARY MILAVEC
- --------------------------------------------
STEPHEN OAKES
RESOURCE INVESTORS MANAGEMENT
COMPANY LIMITED PARTNERSHIP
By: RIMCO Associates, Inc.
Its General Partner
By:
----------------------------------------
RIMCO ASSOCIATES, INC.
By:
----------------------------------------
-14-
<PAGE> 15
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On this _____ day of ___________________, 1997, before me,
appeared Michael Kanarellis, to me known, being duly sworn, did say that he is
Michael Kanarellis of The Universal Seismic Associates, Inc. Stockholders
Protective Committee, and said instrument was signed on behalf of said
Committee and acknowledged said instrument to be the free act and deed of said
Committee.
NOTARY PUBLIC, State of Texas
-----------------------------
-----------------------------
Notary's Printed Name
My Commission Expires:
- ------------------------------
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On this _____ day of ___________________, 1997, before me,
appeared _____________________, to me known, being duly sworn, did say that he
is Michael Kanarellis, and said instrument was signed by him, and acknowledged
said instrument to be his free act and deed.
NOTARY PUBLIC, State of Texas
-----------------------------
-----------------------------
Notary's Printed Name
My Commission Expires:
- ------------------------------
-15-
<PAGE> 16
STATE OF TEXAS )
)
COUNTY OF _________ )
On this _____ day of ___________________, 1997, before me,
appeared _____________________, to me known, being duly sworn, did say that he
is Robert Kecseg, and said instrument was signed by him, and acknowledged said
instrument to be his free act and deed.
NOTARY PUBLIC, State of Texas
-----------------------------
-----------------------------
Notary's Printed Name
My Commission Expires:
- ------------------------------
STATE OF TEXAS )
)
COUNTY OF _________ )
On this _____ day of ___________________, 1997, before me,
appeared _____________________, to me known, being duly sworn, did say that he
is Michael Pawelek, and said instrument was signed by him, and acknowledged
said instrument to be his free act and deed.
NOTARY PUBLIC, State of Texas
-----------------------------
-----------------------------
Notary's Printed Name
My Commission Expires:
- ------------------------------
-16-
<PAGE> 17
STATE OF TEXAS )
)
COUNTY OF _________ )
On this _____ day of ___________________, 1997, before me,
appeared _____________________, to me known, being duly sworn, did say that he
is Ronald England, and said instrument was signed by him, and acknowledged
said instrument to be his free act and deed.
NOTARY PUBLIC, State of Texas
-----------------------------
-----------------------------
Notary's Printed Name
My Commission Expires:
- ------------------------------
STATE OF TEXAS )
)
COUNTY OF _________ )
On this _____ day of ___________________, 1997, before me,
appeared _____________________, to me known, being duly sworn, did say that he
is Calvin Cobb, and said instrument was signed by him, and acknowledged said
instrument to be his free act and deed.
NOTARY PUBLIC, State of Texas
-----------------------------
-----------------------------
Notary's Printed Name
My Commission Expires:
- ------------------------------
-17-
<PAGE> 18
STATE OF TEXAS )
)
COUNTY OF _________ )
On this _____ day of ___________________, 1997, before me,
appeared _____________________, to me known, being duly sworn, did say that he
is Richard Trapp, and said instrument was signed by him, and acknowledged said
instrument to be his free act and deed.
NOTARY PUBLIC, State of Texas
-----------------------------
-----------------------------
Notary's Printed Name
My Commission Expires:
- ------------------------------
STATE OF TEXAS )
)
COUNTY OF _________ )
On this _____ day of ___________________, 1997, before me,
appeared _____________________, to me known, being duly sworn, did say that he
is Gary Milavec, and said instrument was signed by him, and acknowledged said
instrument to be his free act and deed.
NOTARY PUBLIC, State of Texas
-----------------------------
-----------------------------
Notary's Printed Name
My Commission Expires:
- ------------------------------
-18-
<PAGE> 19
STATE OF TEXAS )
)
COUNTY OF _________ )
On this _____ day of ___________________, 1997, before me,
appeared _____________________, to me known, being duly sworn, did say that he
is Stephen Oakes, and said instrument was signed by him, and acknowledged said
instrument to be his free act and deed.
NOTARY PUBLIC, State of Texas
-----------------------------
-----------------------------
Notary's Printed Name
My Commission Expires:
- ------------------------------
STATE OF TEXAS )
)
COUNTY OF _________ )
On this _____ day of ___________________, 1997, before me,
appeared _____________________, to me known, being duly sworn, did say that he
is Vice President of RIMCO Associates Inc., and said instrument was signed on
behalf of said corporation by authority of its Board of Directors and
acknowledged said instrument to be the free act and deed of said corporation.
NOTARY PUBLIC, State of Texas
-----------------------------
-----------------------------
Notary's Printed Name
My Commission Expires:
- ------------------------------
-19-
<PAGE> 20
STATE OF TEXAS )
)
COUNTY OF _________ )
On this _____ day of ___________________, 1997, before me,
appeared Paul McCollam, to me known, being duly sworn, did say that he is Vice
President of RIMCO Associates, Inc., general partner of Resource Investors
Management Co., L.P., and said instrument was signed on behalf of said
corporation by authority of its Board of Directors and acknowledged said
instrument to be the free act and deed of said corporation.
NOTARY PUBLIC, State of Texas
-----------------------------
-----------------------------
Notary's Printed Name
My Commission Expires:
- ------------------------------
-20-
<PAGE> 1
EXHIBIT 21.1
UNIVERSAL SEISMIC ASSOCIATES, INC.
SUBSIDIARIES OF THE COMPANY
Name Percentage State
---- ---------- -----
Universal Seismic Acquisition, Inc. 100% Texas
Universal Seismic Technologies, Inc. 100% Texas
Marine Automated Surveys, Inc. 100% Texas
UNEXCO, Inc. 100% Delaware
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Universal Seismic Associates, Inc. and Subsidiaries on Form S-8 (File No.
0-19971) filed May 27, 1994, on our audits of the consolidated financial
statements of Universal Seismic Associates, Inc. and Subsidiaries as of June
30, 1997 and 1996, and for the years ended June 30, 1997 and 1996, which report
is included in this Annual Report on Form 10-KSB.
COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Houston, Texas
October 20, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF NETHERLAND, SEWELL ASSOCIATES, INC.
As independent oil and gas reserve engineers, we hereby consent to
the reference to our reserve report entitled "Estimate of Reserves and Future
Revenue to the UNEXCO, Inc. Interest in Certain oil and gas properties located
in Louisiana and Texas as of July 1, 1997," and to all references to our firm
included in or made a part of the Universal Seismic Associates, Inc. Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1997, to be filed with
the Securities and Exchange Commission.
NETHERLAND, SEWELL ASSOCIATES, INC.
October 20, 1997 By: /s/ Danny D. Simmons
-------------------------------
Danny D. Simmons
Senior Vice President
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-1-1996
<PERIOD-END> JUN-30-1997
<CASH> 1,859,677
<SECURITIES> 0
<RECEIVABLES> 6,729,037
<ALLOWANCES> (721,697)
<INVENTORY> 0
<CURRENT-ASSETS> 8,640,601
<PP&E> 32,643,870
<DEPRECIATION> (9,838,019)
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<CURRENT-LIABILITIES> 11,380,471
<BONDS> 15,616,255
0
0
<COMMON> 524
<OTHER-SE> 5,278,984
<TOTAL-LIABILITY-AND-EQUITY> 32,276,234
<SALES> 0
<TOTAL-REVENUES> 31,287,329
<CGS> 0
<TOTAL-COSTS> 33,585,877
<OTHER-EXPENSES> 3,075,504
<LOSS-PROVISION> 666,697
<INTEREST-EXPENSE> 1,389,961
<INCOME-PRETAX> (6,171,539)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,171,539)
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