-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IyqoVrPPmcKf0tTF3GbEixwiV7snhDyf6OtvSRsUf1EsfcAAi8tAPThgOd1xqPBo XG++ypmsKBCNDEvj7hgkgA== 0000890566-97-001712.txt : 19970806 0000890566-97-001712.hdr.sgml : 19970806 ACCESSION NUMBER: 0000890566-97-001712 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970708 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970805 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEOKINETICS INC CENTRAL INDEX KEY: 0000314606 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 941690082 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-09268 FILM NUMBER: 97651878 BUSINESS ADDRESS: STREET 1: MARATHON OIL TOWER STREET 2: 5555 SAN FELIPE SUITE 780 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7138507600 MAIL ADDRESS: STREET 1: MARATHON OIL TOWER STREET 2: 5555 SAN FELIPE, ST 780 CITY: HOUSTON STATE: TX ZIP: 77056 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 - ------------------------------------------------------------------------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 18, 1997 GEOKINETICS INC. (Exact name of Registrant as specified in charter) Delaware 0-9268 94-1690082 (State or other jurisdiction of (Commission (IRS Employer incorporation) File Number) Identification No.) 5555 San Felipe, Suite 780, Houston, Texas 77056 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (713) 850-7600 ITEM 1. CHANGES IN CONTROL OF REGISTRANT. On July 18, 1997, Geokinetics Inc., a Delaware corporation ("Registrant") entered into a Securities Purchase and Exchange Agreement (the "Purchase Agreement") with Blackhawk Investors, L.L.C. ("Blackhawk"), William R. Ziegler, an individual resident of the state of New York ("Ziegler"), and Steven A. Webster, an individual resident of the State of Texas ("Webster") (Blackhawk, Ziegler and Webster being sometimes referred to collectively as the "Blackhawk Group"). Pursuant to the Purchase Agreement, the Blackhawk Group acquired from Registrant (i) 5,500,000 newly-issued shares of Registrant's Common Stock, par value $.20 per share ("Common Stock"), (ii) 187,500 newly-issued shares of Registrant's Series A Preferred Stock (convertible into an aggregate of 2,500,000 shares of Common Stock), and (iii) Shadow Warrants to purchase up to an additional 7,104,103 shares of Common Stock at a price of $.20 per share, in exchange for (x) an aggregate of $5,500,000 in cash paid to the Registrant and (y) the exchange of certain indebtedness in the principal amount of $500,000 owed by Registrant to Ziegler and Webster. The shares of Common Stock acquired by the Blackhawk Group, pursuant to the Purchase Agreement, represent 62.2% of the Registrant's outstanding Common Stock. The Shadow Warrants issued to the Blackhawk Group are only exercisable in the event that certain warrants previously issued by the Registrant are exercised in the future. On July 24, 1997, Registrant entered into a Letter Agreement re Additional Investment pursuant to which the Blackhawk Group invested an additional $1,000,000 in cash in Registrant and the Registrant will issue 100,000 shares of Registrant's Series B Preferred Stock (convertible into an aggregate of 1,333,333 shares of Common Stock). The terms of the Series B Preferred Stock are identical to the terms of the Series A Preferred Stock except that the Series B Preferred Stock will automatically be converted into shares of Common Stock on January 1, 1998. Blackhawk is an investment limited liability company. The members of Blackhawk, including Ziegler and Webster, provided the funds for the acquisition of Registrant's securities and the other transactions contemplated by the Purchase Agreement. As an inducement to the consummation of the transactions contemplated by the Purchase Agreement, Registrant entered into an Investment Monitoring Agreement with Blackhawk and Blackhawk Capital Partners, L.P., the managing member of Blackhawk ("Blackhawk Capital") pursuant to which Blackhawk Capital was appointed to oversee Blackhawk's investments in Registrant pursuant to the Purchase Agreement. Blackhawk Capital will be paid a fee of $25,000 per year by Registrant under the Investment Monitoring Agreement. -2- Reference is made to the information set forth under Item 5 below regarding certain resignations of members of the Registrant's Board of Directors and the appointment of two new members of Registrant's Board of Directors. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On July 18, 1997, Registrant acquired all of the outstanding capital stock of Signature Geophysical Services, Inc., a Michigan corporation ("SGS") from Gallant Energy, Inc., a Texas corporation ("GEI") pursuant to the terms of a Stock Purchase Agreement (the "SGS Agreement") among Registrant, SGS, GEI and James V. Gallant, an individual resident of the State of Texas and sole shareholder of GEI ("Gallant"). Pursuant to the SGS Agreement, Registrant acquired 500 shares of the outstanding common stock of SGS (the "SGS shares") in exchange for 400,000 newly-issued shares of Registrant's Common Stock to GEI. Effective July 18, 1997, the Registrant also entered into an Employment Agreement with Gallant, pursuant to which Gallant was granted options to purchase up to 400,000 shares of Common Stock at an exercise price of $0.75 per share depending on the financial performance of SGS during the period from July 18, 1997 to September 30, 1999. The amount of consideration paid by Registrant to GEI for the acquisition of the SGS Shares was determined as a result of arms-length negotiations and agreement between unrelated parties. SGS, based in Houston, Texas, is engaged in the business of providing 2-D and 3-D seismic surveys of oil and gas properties, focusing on the Permian Basin and the U. S. Gulf Coast, with a special emphasis on coastal swamp operations. The description contained herein of Registrant's acquisition of the SGS Shares is qualified in its entirety by reference to the SGS Agreement, which is attached hereto as Exhibit 2.2 and incorporated herein by reference. ITEM 5. OTHER EVENTS. Certain changes in the directors and officers of Registrant were announced in the Press Release dated July 18, 1997 which is attached hereto as Exhibit 99 and incorporated herein by reference. Effective July 18, 1997, Michael D. Hale, William H. Murphy and Herbert H. Hedick tendered their respective resignations as members of Registrant's Board of Directors, and William R. Ziegler, a partner of the New York law firm of Parson & Brown and Steven A. Webster, Chairman and Chief Executive Officer of Falcon Drilling Company, Inc., were appointed to be two of the three members of the Board of Directors. In addition, the Board of Directors named (i) Jay D. Haber as Chairman and Chief Executive Officer, (ii) Lynn Turner as President and Chief Operating Officer of Registrant and (iii) Thomas J. Concannon as Vice President and Chief Financial Officer. -3- ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Business Acquired As of the date of filing of this Current Report on Form 8-K, it is impracticable to provide the financial statements required by this Item 7(a) with respect to the acquisition of Signature Geophysical Services, Inc. In accordance with Item 7(a)(4) of Form 8-K, such financial statements shall be filed by amendment to this Form 8-K no later than 60 days after August 4, 1997. (b) Pro Forma Financial Information As of the date of filing of this Current Report on Form 8-K, it is impracticable to provide the financial information by this Item 7(b). In accordance with Item 7(b) of Form 8-K, such financial information shall be filed by amendment to this Form 8-K no later than 60 days after August 4, 1997. (c) Exhibits (2.1) Securities Purchase and Exchange Agreement dated as of July 18, 1997 among Registrant, Blackhawk Investors, L.L.C., William R. Ziegler, and Steven A. Webster. Registrant hereby agrees to furnish supplementally to the Securities and Exchange Commission upon request a copy of any omitted Schedule, all of which are listed on the last page of the Securities Purchase and Exchange Agreement. (2.2) Stock Purchase Agreement dated as of June 25, 1997 among Registrant, Signature Geophysical Services, Inc., Gallant Energy, Inc. and James Gallant. (Registrant hereby agrees to furnish supplementally to the Securities and Exchange Commission upon request a copy of any omitted Schedule to the Signature Geophysical Services, Inc. Disclosure Schedule.) (2.3) Letter Agreement re Additional Investment dated July 24, 1997, between Registrant and Blackhawk Investors, L.L.C. (4) Statement of Designation of Series A Preferred Stock (10.1) Employment Agreement dated July 15, 1997, among the Registrant, Signature Geophysical Services, Inc., and James V. Gallant (10.2) Investment Monitoring Agreement dated July 18, 1997, between the Registrant and Blackhawk Capital Partners, L.P. (99) Press Release Dated July 18, 1997 -4- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned herein to duly authorized. Dated: August 4, 1997 GEOKINETICS INC. By: /s/ JAY D. HABER Jay D. Haber, President -5- EX-2.1 2 EXHIBIT 2.1 - -------------------------------------------------------------------------------- GEOKINETICS INC. ------------------------------------------------------------ SECURITIES PURCHASE AND EXCHANGE AGREEMENT DATED AS OF JULY 18, 1997 ------------------------------------------------------------ COMMON STOCK AND SERIES A CONVERTIBLE PREFERRED STOCK AND SHADOW WARRANTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE ---- ARTICLE I PURCHASE AND SALE OR EXCHANGE OF COMMON STOCK, SERIES A PREFERRED STOCK AND SHADOW WARRANTS 1.1 Authorization and Description of Common Stock, Series A Preferred Stock and Shadow Warrants...................... 2 1.2 Sale and Purchase of Securities............................ 2 1.3 Exchange of Senior Notes for Securities.................... 2 1.5 Application of Proceeds.................................... 3 1.6 Purchaser's Conditions of Closing.......................... 3 1.7 Company's Conditions of Closing............................ 5 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2.1 Organization, Authority and Capitalization of the Company; Stock Ownership................................... 6 2.2 Subsidiaries............................................... 7 2.3 Qualification; Enforceability.............................. 8 2.4 Business and Property; Financial Statements................ 8 2.5 Compliance with Laws, Other Instruments; No Conflicts, etc.......................................... 8 2.6 Consents and Approvals..................................... 9 2.7 Litigation................................................. 9 2.8 Private Offering........................................... 10 2.9 No Defaults; Debt, etc; Liens.............................. 10 2.10 Full Disclosure............................................ 10 2.11 Environmental Matters...................................... 10 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 3.1 Investment Representation.................................. 12 3.2 Organization and Authority of Blackhawk; No Conflicts; Approvals; Enforceability.................... 14 ARTICLE IV COVENANTS 4.1 Financial Statements; Information.......................... 15 4.2 Corporate Existence........................................ 16 - ii - 4.3 Compliance with Laws; Government Filings................... 16 4.4 Environmental Matters...................................... 17 ARTICLE V CERTAIN OTHER COVENANTS 5.1 Approval and Filing of Charter Amendment................... 17 5.2 Repayment of Debt and Removal of Liens..................... 17 ARTICLE VI MISCELLANEOUS 6.1 Expenses................................................... 18 6.2 Reliance on and Survival of Representations................ 18 6.3 Amendment and Waiver....................................... 19 6.4 Shadow Warrant Register.................................... 19 6.5 Directly or Indirectly..................................... 19 6.6 Successors and Assigns..................................... 19 6.7 Notices.................................................... 20 6.8 LAW GOVERNING.............................................. 20 6.9 SUBMISSION TO JURISDICTION; Service of Process............. 20 6.10 Headings, etc.............................................. 21 6.11 Entire Agreement........................................... 21 6.12 WAIVER OF TRIAL BY JURY.................................... 21 6.13 Indemnification............................................ 22 6.14 Interpretive Provision..................................... 22 6.15 Severability............................................... 23 6.16 Counterparts............................................... 23 6.17 Finder's Fee............................................... 23 SCHEDULES: Schedule 1.1 Purchasers Schedule 1.5 Use of Proceeds Schedule 2.1(b) Capitalization of the Company Schedule 2.1(c) Capitalization of the Subsidiaries Schedule 2.2 Subsidiaries Schedule 2.5 Noncontravention Schedule 2.6 Consent and Approvals Schedule 2.7 Litigation Schedule 2.9 Debts; Liens - iii - EXHIBITS: Exhibit A Form of Certificate of Designation Exhibit B Form of Shadow Warrant Exhibit C-1 Form of Employment Agreement (Lynn Turner) Exhibit C-2 Form of Employment Agreement (Michael Dunn) Exhibit C-3 Form of Employment Agreement (Thomas Concannon) Exhibit D Form of Registration Rights Agreement Exhibit E Form of Monitoring Agreement Exhibit F Form of Opinion of Company Counsel - iv - SECURITIES PURCHASE AND EXCHANGE AGREEMENT THIS SECURITIES PURCHASE AND EXCHANGE AGREEMENT, dated as of July 18, 1997, among GEOKINETICS INC., a Delaware corporation (the "COMPANY"), BLACKHAWK INVESTORS, L.L.C., a Delaware limited liability company ("BLACKHAWK") and each of the undersigned HOLDERS OF THE SENIOR NOTES (individually, a "HOLDER" and collectively, the "HOLDERS"; Blackhawk and the Holders being sometimes hereinafter collectively referred to as the "PURCHASERS" and individually as a "PURCHASER"). WHEREAS, the capitalized terms used herein have the meaning given to such terms in APPENDIX I; and WHEREAS, the Company has authorized the issuance of an aggregate of 5,550,000 shares of Common Stock, 187,500 shares of Series A Preferred Stock and the Shadow Warrants and wishes to sell to Blackhawk an aggregate of 5,041,667 shares of Common Stock, 171,875 shares of Series A Preferred Stock and the Blackhawk Shadow Warrant, for the consideration provided herein, and wishes to issue to the Holders an aggregate of 458,333 shares of Common Stock, 15,625 shares of Series A Preferred Stock and the Holders' Shadow Warrants, in the individual amounts set forth opposite each Holder's name on SCHEDULE 1.1, in exchange for the surrender of the Senior Notes, in each case, subject to the terms and conditions of this Agreement; and WHEREAS, Blackhawk wishes to purchase 5,041,667 shares of Common Stock, 171,875 shares of Series A Preferred Stock and the Blackhawk Shadow Warrant, subject to the terms and conditions of this Agreement; and WHEREAS, the Holders wish to exchange the Senior Notes, in the aggregate principal amount of $500,000, for an aggregate of 458,333 shares of Common Stock, 15,625 shares of Series A Preferred Stock and the Holders' Shadow Warrants, in the individual amounts set forth opposite each Holder's name on SCHEDULE 1.1, subject to the terms and conditions of this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants and upon the terms and conditions hereinafter set forth, the Company and the Purchasers, intending to be mutually bound, agree as follows: ARTICLE I PURCHASE AND SALE OR EXCHANGE OF COMMON STOCK, SERIES A PREFERRED STOCK AND SHADOW WARRANTS 1.1 AUTHORIZATION AND DESCRIPTION OF COMMON STOCK, SERIES A PREFERRED STOCK AND SHADOW WARRANTS. The Company has authorized (i) the issuance and sale to Blackhawk at the Closing of (A) 5,041,667 shares of Common Stock, (B) 171,875 shares of Series A Preferred Stock and (C) a Shadow Warrant to purchase up to an aggregate of 6,512,095 shares of Common Stock, subject to adjustment (the "BLACKHAWK SHADOW WARRANT"), and (ii) the issuance to the Holders of an aggregate of (A) 458,333 shares of Common Stock, (B) 15,625 shares of Series A Preferred Stock and (C) Shadow Warrants to purchase up to an aggregate of 592,009 shares of Common Stock, subject to adjustment (the "HOLDERS' SHADOW WARRANTS"), in the individual amounts set forth opposite each Holder's name on SCHEDULE 1.1, in exchange for the surrender of the Senior Notes, in the aggregate principal amount of $500,000. The Series A Preferred Stock shall have the powers, rights and privileges and shall be subject to the terms and conditions set forth in the Certificate of Designation of Series A Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATION"), which shall be in the form of EXHIBIT "A" attached hereto. The Shadow Warrants shall be in the form of EXHIBIT "B" attached hereto. 1.2 SALE AND PURCHASE OF SECURITIES. The Company will sell to Blackhawk and Blackhawk will purchase from the Company, subject to the terms and conditions of this Agreement and in reliance on the representations, warranties and covenants of the Company contained herein and in the Exhibits hereto, (i) 5,041,667 shares of Common Stock, (ii) 171,875 shares of Series A Preferred Stock and (C) the Blackhawk Shadow Warrant, on the Closing Date, in each case, registered in the name of Blackhawk, in consideration of an aggregate purchase price of $5,500,000 (the "BLACKHAWK PURCHASE PRICE"), of which $3,781,250 will be paid in consideration of the Common Stock ($0.75 per share) and $1,718,750 will be paid in consideration of the Series A Preferred Stock ($10.00 per share). The Blackhawk Purchase Price shall be payable in cash by wire transfer of immediately available funds to the Company's bank account with Frost National Bank (the "CASH PAYMENT"), in accordance with wire transfer instructions delivered by the Company to Blackhawk at least one business day prior to the Closing. 1.3 EXCHANGE OF SENIOR NOTES FOR SECURITIES. The Company will sell to each of the Holders and each Holder severally will purchase from the Company, subject to the terms and conditions of this Agreement and in reliance on the representations, warranties and covenants of the Company contained herein and in the Exhibits hereto, an aggregate of (A) 458,333 shares of Common Stock, (B) 15,625 shares of Series A Preferred Stock and (C) the Holders' Shadow Warrants, on the Closing Date, registered in the names of the Holders in the individual amounts set forth opposite each Holder's name on SCHEDULE 1.1, in consideration of an aggregate purchase price of $500,000 (the "HOLDERS' - 2 - PURCHASE PRICE"), of which $343,750 will be paid in consideration of the Common Stock ($0.75 per share) and $156,250 will be paid in consideration of the Series A Preferred Stock ($10.00 per share). The Holders' Purchase Price shall be payable by the surrender and delivery by the Holders to the Company of the Senior Notes, in the aggregate principal amount of $500,000. 1.4 CLOSING. The sale and purchase or exchange (the "CLOSING") of the shares of Common Stock, shares of Series A Preferred Stock and the Shadow Warrants (collectively, the "SECURITIES") shall take place on the date hereof (the "CLOSING DATE") at the offices of Parson & Brown, 666 Third Avenue, 9th Floor, New York, New York 10017. At the Closing the Company will deliver to each Purchaser certificates for the shares of Common Stock and Series A Preferred Stock and the Shadow Warrants purchased hereunder, each dated the Closing Date, and registered in the names and amounts as set forth on SCHEDULE 1.1 hereto, against delivery by the Purchasers of the Purchase Price in the form of the Cash Payment and the surrender for cancellation of the Senior Notes. The failure of any Purchaser to deliver such Purchase Price shall not excuse any other Purchaser from delivery of his or its Purchase Price. 1.5 APPLICATION OF PROCEEDS. The Company shall apply the proceeds from the sale of the Securities as set forth in SCHEDULE 1.5 attached hereto. 1.6 PURCHASER'S CONDITIONS OF CLOSING. Each Purchaser's obligations to purchase and pay for the Securities to be purchased by him or it is subject to satisfaction, prior to or simultaneously with the closing, of the following conditions: (a) The Company shall have delivered a certificate of the President of the Company, dated the Closing Date, certifying that the representations and warranties of the Company contained in this Agreement and any Exhibit to which the Company is a party are true and correct in all material respects and that the Company has performed in all material respects all agreements and complied with all conditions contained in this Agreement and in any Exhibit to which it is a party that are required to be performed or complied with on or before the Closing Date. (b) The Company shall have delivered a certificate of the Secretary of the Company, dated the Closing Date, certifying as to (i) the certificate of incorporation of the Company and any amendments thereto, (ii) the by-laws of the Company, and (iii) resolutions of the Board of Directors of the Company authorizing the issuance of the shares of Common Stock and the shares of Series A Preferred Stock and the execution and delivery of the Shadow Warrants, this Agreement and all Exhibits to which the Company is a party and reserving for issuance (subject to the filing of the Charter Amendment with the Secretary of State of Delaware) such number of shares of Common Stock as is required to deliver shares of Common Stock upon exercise of rights therefor as provided in the Series A Preferred Stock and the Shadow Warrants. - 3 - (c) The Company shall have delivered a certificate of the President of the Company, dated the Closing Date, certifying that (i) the purchase and sale transaction contemplated by that certain Stock Purchase Agreement dated June 25, 1997 (the "SIGNATURE STOCK PURCHASE AGREEMENT"), among the Company, Gallant Energy, Inc. and Signature Geophysical Services, Inc. ("SIGNATURE") shall have been consummated substantially in accordance with its terms and (ii) the Master Seismic Agreement between Signature and Geco- Prakla is in full force and effect and the Supplemental Agreement referred to in the Geco-Prakla Letter has been entered into on substantially the terms stated therein (or if such Supplemental Agreement has not been executed as of the Closing Date, the Company has no knowledge, after due inquiry, of any change or proposed change with respect to the terms stated therein). (d) Messrs. Lynn Turner, Michael Dunn and Thomas J. Concannon shall have entered into Employment Agreements with the Company (collectively, the "EMPLOYMENT AGREEMENTS"), substantially in the forms of EXHIBITS "C-1", "C-2" and "C-3", respectively. (e) The Company shall have executed and delivered to the Purchasers the Registration Rights Agreement, substantially in the form of EXHIBIT "D" hereto. (f) The Company shall have executed and delivered to the Managing Member of Blackhawk the Monitoring Agreement, substantially in the form of EXHIBIT "E" hereto. (g) The Company shall have filed each of the Preferred Stock Charter Amendment and the Certificate of Designation with the Secretary of State of the State of Delaware. (h) Messrs. Steven A. Webster and William R. Ziegler shall have been duly elected to the Board of Directors of the Company and Messrs. Michael Hale, Herbert Hedick, and William Murphy shall have tendered their resignations from the Board of Directors of the Company, effective and conditioned upon the Closing. (i) The non-qualified stock options referred to in the Consulting and Engagement Agreement shall have been issued to William R. Ziegler in accordance with the terms thereof. (j) Each of the other Exhibits hereto shall have been executed and delivered to the Purchasers by the parties thereto. (k) No foreclosure action shall have been instituted by any of the Harbin/Murphy Entities or Input/Output, Inc. with respect to any default under either the Harbin/Murphy Notes or the I/O Note and the I/O Extension Agreement shall be in full force and effect with no breach by either party thereunder. (l) Chamberlain, Hrdlicka, White, Williams & Martin, counsel for the Company, shall have delivered to the Purchasers the Opinion of Company Counsel, substantially in the form of EXHIBIT "F" hereto. - 4 - (m) All proceedings taken in connection with the authorization, issuance and sale of the Securities and the consummation of the transactions contemplated hereby to occur on or prior to the Closing Date and all documents and papers relating thereto shall be satisfactory in form, scope and substance to the Purchasers and their counsel, and each Purchaser and their counsel shall have received copies (executed or certified as may be appropriate) of such documents and papers as each may reasonably request in connection therewith. (n) The Company shall have paid the reasonable legal fees and other expenses of the Purchasers' counsel and all other expenses for which the Company is obligated to pay pursuant to SECTION 6.1 and for which the Company shall have received invoices on or prior to the Closing. 1.7 COMPANY'S CONDITIONS OF CLOSING. The Company's obligations to issue and sell the Securities are subject to satisfaction, prior to or simultaneously with the closing, of the following conditions: (a) Blackhawk shall have delivered a certificate of a Partner of the Managing Member, dated the Closing Date, certifying that the representations and warranties of Blackhawk contained in this Agreement and any Exhibit to which Blackhawk is a party are true and correct in all material respects and that Blackhawk has performed in all material respects all agreements and complied with all conditions contained in this Agreement and in any Exhibit to which it is a party that are required to be performed or complied with on or before the Closing Date. (b) Each of the Holders shall have delivered a certificate, dated the Closing Date, certifying that the representations and warranties made by him as Purchaser in this Agreement and any Exhibit to which he is a party are true and correct in all material respects and that he has performed in all material respects all agreements and complied with all conditions contained in this Agreement and in any Exhibit to which he is a party that are required to be performed or complied with on or before the Closing Date. (c) The Holders shall have delivered to the Company the stock certificates representing the shares of capital stock of the Subsidiaries that were pledged in favor of the Holders pursuant to the Pledge Agreement, together with the stock powers executed and delivered pursuant thereto. (d) Each of the Holders shall have (i) surrendered to the Company for cancellation the Senior Note registered in his name and (ii) executed and delivered to the Company (A) such releases with respect to the Security Agreements and the Subordination Agreement as shall have been prepared by counsel for the Company and in form and substance reasonably satisfactory to such Holder and his counsel, (B) UCC-3 Termination Statements with respect to the UCC-1 Financing Statements filed pursuant to the Bridge Loan Securities Purchase Agreement and the Personal Property Security Agreement as shall have been prepared by counsel for the Company and in form and substance reasonably satisfactory to such Holder and his counsel and (C) any and all other documents, instruments and certificates reasonably requested by - 5 - the Company to evidence the release and termination of the Security Agreements executed and delivered pursuant to the Bridge Loan Securities Purchase Agreement, in each case, in form and substance reasonably satisfactory to such Holder and his counsel. (e) Each of the other Exhibits hereto shall have been executed and delivered to the Company by the parties thereto. (f) All proceedings taken in connection with the purchase by the Purchasers of the Securities and the consummation of the transactions contemplated hereby to occur on or prior to the Closing Date and all documents and papers relating thereto shall be satisfactory in form, scope and substance to the Company and its counsel, and the Company and its counsel shall have received copies (executed or certified as may be appropriate) of such documents and papers as each may reasonably request in connection therewith. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants as follows: 2.1 ORGANIZATION, AUTHORITY AND CAPITALIZATION OF THE COMPANY; STOCK OWNERSHIP. (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own or hold under lease the property it purports to own or hold under lease, to carry on its business as now conducted, to enter into this Agreement and the other Exhibits to which it is or is to be a party, to issue and sell the Securities (including the issuance of Common Stock upon the exercise or conversion, as the case may be, of the Series A Preferred Stock and the Shadow Warrants), to perform its obligations under this Agreement, the Securities (including the issuance of Common Stock upon the exercise or conversion, as the case may be, of the Series A Preferred Stock and the Shadow Warrants), and the other Exhibits to which it is or is to be a party and to consummate the transactions contemplated hereby and thereby. The Company has, by all necessary corporate action (no action of stockholders of the Company being required by law, by its charter or by-laws, or otherwise in connection therewith, other than with respect to the approval of the Charter Amendment), duly authorized the execution and delivery of this Agreement, the Securities (including the issuance of Common Stock upon the exercise or conversion, as the case may be, of the Series A Preferred Stock and the Shadow Warrants), and the other Exhibits to which it is or is to be a party, the performance of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby. (b) SCHEDULE 2.1(b) sets forth the authorized capital stock of the Company. All such authorized capital stock has been duly and validly authorized, and either are, or will be when issued, duly and validly issued and outstanding and are, or will be, fully paid and nonassessable. Such capital stock is not subject to any rights (either preemptive or otherwise) or warrants to subscribe for or to purchase, nor any options for the purchase of, nor any agreements - 6 - providing for the issue (contingent or otherwise) of, nor any calls, commitments or claims of any character relating thereto or any stock or securities convertible into or exchangeable for any capital stock, other than as set forth in SCHEDULE 2.1(b). All securities of the Company have been issued in compliance with the Securities Act and applicable state securities laws. Upon the issuance of the shares of Series A Preferred Stock by the Company against payment of the Purchase Price by the Purchasers in accordance with the provisions of this Agreement, the shares of Series A Preferred Stock will be duly authorized, validly issued and fully paid and nonassessable with no personal liability attaching to the ownership thereof. The shares of Common Stock that will be issuable upon the exercise or conversion, as the case may be, of the Series A Preferred Stock and the Shadow Warrants in the manner referred to in the Certificate of Designation and Shadow Warrants, respectively, have been duly authorized and reserved for issuance (subject to the filing of the Charter Amendment with the Secretary of State of Delaware), are not subject to any preemptive or similar rights on the part of the holders of any shares of capital stock or other securities of the Company, and when issued in the manner referred to in the Certificate of Designation and the Shadow Warrants will be validly issued, fully paid and nonassessable. (c) SCHEDULE 2.1(c) sets forth the authorized, issued and outstanding capital stock of each Subsidiary, including the record ownership thereof, and the ownership interests of the Company (direct and indirect), in any other Person. There are no liens on any capital stock of any Subsidiary or on the Company's ownership interests in any other Person, except as set forth in SCHEDULE 2.1(c). There are no outstanding rights, options, warrants, conversion rights or agreements for the purchase or acquisition from the Company or any Subsidiary of any shares of capital stock of any Subsidiary or any other securities convertible into or exchangeable for any shares of capital stock of any Subsidiary, except as set forth in SCHEDULE 2.1(c). 2.2 SUBSIDIARIES. (a) Schedule 2.2 sets forth the name and jurisdiction of incorporation or other organization of each Subsidiary. Except for the Subsidiaries, the Company does not directly or indirectly own any interest in any other Person. (b) Each of the Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, has all requisite corporate power and authority to own or hold under lease the property it purports to own or hold under lease, and to carry on its business as conducted by it. 2.3 QUALIFICATION; ENFORCEABILITY. (a) Each of the Company and each Subsidiary is duly qualified or licensed and in good standing as a foreign corporation duly authorized to do business in each jurisdiction in which the nature of the activities or the character of the properties owned or leased makes such qualification or licensing necessary, except for jurisdictions in which the failure to be so qualified would not have a Material Adverse Effect. - 7 - (b) This Agreement, the Shadow Warrants and the other Exhibits hereto to which the Company is a party have been (or at the Closing will be, as the case may be) duly executed and delivered by the Company and, assuming due execution and delivery by the Purchasers of this Agreement and the Exhibits that require execution by the Purchasers, constitute (or upon execution and delivery at the Closing, will constitute) the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect relating to or affecting the enforcement of creditors' rights generally or by the application of equitable principles (whether such application is considered in equity or in law). 2.4 BUSINESS AND PROPERTY; FINANCIAL STATEMENTS. The Company has furnished to each Purchaser a true and complete copy of the Offering Disclosure Documents (other than the PPM, which was prepared by the Purchasers, in large part, with information with respect to the Company, its industry, Signature and the Signature acquisition, provided by or on behalf of the Company). The Offering Disclosure Documents correctly describe in all material respects the business and material properties of the Company and its Subsidiaries and the nature of their operations as of the date thereof. The Financial Statements included in the Offering Disclosure Documents, were prepared in accordance with GAAP, applied on a consistent basis throughout the periods specified, and present fairly in all material respects the financial position of the Company and its Subsidiaries for the respective periods specified. Except as specifically described in the Financial Statements contained in the Offering Disclosure Documents, neither the Company nor any Subsidiary has as of the date thereof any material liabilities, contingent or otherwise, which under GAAP are required to be disclosed therein. There has been no material adverse change in the financial position or condition of the Company and its Subsidiaries since the date of such Financial Statements. 2.5 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS; NO CONFLICTS, ETC. (a) Except as set forth in SCHEDULE 2.5, neither the Company nor any Subsidiary is (i) in violation of any term or provision of its corporate charter or by-laws or (ii) in violation of or default under (A) any term or provision of any agreement, indenture, mortgage, instrument, permit or license to which it is a party or by which it or any of its properties may be bound or affected or (B) to the Company's knowledge, any existing statute, law, governmental rule, regulation or ordinance, or any order of any court, arbitrator or Governmental Body applicable to it or its properties (including, without limitation, any statute, law, rule, regulation, ordinance or order relating to occupational health and safety standards, or equal employment practice requirements), the consequences of which violation or default, either in any one case or taken together with all other such violations or defaults, (x) could have a Material Adverse Effect or (y) could materially and adversely affect the ability of the Company to perform its obligations under this Agreement, the Shadow Warrants or any other Exhibit to which it is a party. (b) Except as set forth in SCHEDULE 2.5, neither the execution, delivery or performance by the Company of this Agreement, the Shadow Warrants (including, without - 8 - limitation, the issuance of Common Stock upon any exercise or conversion, as the case may be, of the Series A Preferred Stock or the Shadow Warrants), or any other Exhibit to which it is a party, nor compliance by the Company with the respective terms hereof and thereof, as the case may be, will result in (i) any violation of or be in conflict with or constitute a default under (A) any term or provision of the corporate charter or by-laws of the Company or any Subsidiary, (B) any term or provision of any agreement, indenture, mortgage, instrument, permit or license to which it is a party or by which it or any of its properties may be bound or affected, or (C) to the Company's knowledge, any existing statute, law, governmental rule, regulation or ordinance, or any order of any court, arbitrator or Governmental Body applicable to it or its properties, or (ii) the creation of (or impose any obligation on the Company or any Subsidiary to create) any lien upon any of the properties or assets of the Company or any Subsidiary. 2.6 CONSENTS AND APPROVALS. Except as set forth on Sechedule 2.6, no consent, approval or authorization of, or filing or registration with, or the taking of any other action in respect of, any Governmental Body or any other Person (including any trustee or holder of any indebtedness, securities or other obligations of the Company or any Subsidiary) is required (i) for or in connection with the valid execution and delivery by the Company of, or the performance by the Company of any obligation under, this Agreement or any Exhibit to which it is a party or the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the offer, issue, sale and delivery of the Securities (including without limitation, the issuance of Common Stock upon any exercise or conversion, as the case may be, of the Series A Preferred Stock or the Shadow Warrants) or (ii) as a condition to the legality, validity or enforceability as against the Company of this Agreement or any Exhibit to which it is a party. 2.7 LITIGATION. Except as set forth on SCHEDULE 2.7, there are no actions, suits or proceedings pending (or, to the knowledge of the Company, threatened) against the Company or any Subsidiary or affecting any of their respective properties in any court or before any arbitrator of any kind or before or by any Governmental Body, which (i) question the validity or legality of this Agreement, the Shadow Warrants or any other Exhibit or any action taken or to be taken pursuant hereto or thereto or (ii) might result, either in any one case or in the aggregate, in (A) a material impairment of the ability of the Company to perform its obligations under this Agreement or any other Exhibit to which it is a party, or (B) a Material Adverse Effect. 2.8 PRIVATE OFFERING. Neither the Company, any Subsidiary, nor any other person acting on behalf of the Company or any Subsidiary has taken, or will take, any action which would subject the issuance or sale of the Securities (inclusive of the issuance of shares of Common Stock pursuant to any exercise or conversion, as the case may be, of the Series A Preferred Stock or the Shadow Warrants) to Section 5 of the Securities Act or to the registration or qualification requirements of any securities law of any state. - 9 - 2.9 NO DEFAULTS; DEBT, ETC; LIENS. (a) SCHEDULE 2.9 correctly lists (i) all secured and unsecured funded debt of the Company and any Subsidiary and (ii) any liens on any assets of the Company or any Subsidiary, in each case, as of the date hereof. Upon receipt of any Required Consent, no default or event of default, after giving effect to the issuance and sale of the Units and the consummation of the other transactions contemplated by this Agreement and the Exhibits, will exist (or, but for the waiver thereof, would exist) under any instrument or agreement evidencing, providing for the issuance or securing of, or otherwise relating to, any such debt or liens. (b) There is no pending foreclosure with respect to the Collateral or any other assets or properties of the Company or any Subsidiary, and as of the Closing there will not be any pending foreclosure with respect thereto, in each case, whether pursuant to the Harbin/Murphy Foreclosure Notices or otherwise. 2.10 FULL DISCLOSURE. None of this Agreement, any Exhibit, the Offering Disclosure Documents or any document, certificate or instrument delivered to the Purchasers by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by this Agreement as of their respective dates contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which the same were made, not misleading. 2.11 ENVIRONMENTAL MATTERS. (a) To the Company's knowledge, the Company and the Subsidiaries hold all Environmental Permits required under all Environmental Laws except to the extent failure to have any such Environmental Permit has not had and will not have a Material Adverse Effect. (b) To the Company's knowledge, the Company and the Subsidiaries currently are, and at all times heretofore have been, in compliance with all terms and conditions of all such Environmental Permits and all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in all applicable Environmental Laws except to the extent failure to comply therewith, in any one case or in the aggregate, has not had and will not have a Material Adverse Effect. (c) Neither any of the Company nor any Subsidiary has ever received, and, to the Company's knowledge, no predecessor in interest of any the Company and the Subsidiaries has ever received in respect of any of the Company Premises, from any Governmental Body or other Person any written notice of, and the Company has no knowledge of, any past, present or future events, conditions, circumstances, activities, practices, incidents, actions or plans that could reasonably be expected to interfere with or prevent compliance or continued compliance in all material respects with the Environmental Permits referred to in SECTION 2.11(a) or any scheduled renewals thereof or any Environmental Laws, or that could reasonably be expected to give rise to any liability on the part of any the Company and the Subsidiaries or otherwise form the basis of - 10 - any claim, action, demand, request, notice, suit, proceeding, hearing, study or investigation (collectively, "ENVIRONMENTAL CLAIMS") involving any of the Company and the Subsidiaries based on or related to (i) a violation of any Environmental Law or (ii) the manufacture, refining, generation, processing, distribution, use, sale, treatment, receipt, storage, disposal, transport, arranging for transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Substance, other than liabilities or Environmental Claims referred to in this SECTION 2.11(c) that have not had and will not have, either in any one case or in the aggregate, a Material Adverse Effect. (d) To the Company's knowledge, there has not been any civil, criminal or administrative action, suit, demand, summons, citation, claim, hearing, notice or demand letter, information request, notice of violation, judgment, order, lien, investigation, study or proceeding pending or threatened against any of the Company or the Subsidiaries, or against any predecessor in interest thereof, in its capacity as such, relating to any such Environmental Permits or any scheduled renewals thereof or any Environmental Laws that has had or will have, either in any one case or in the aggregate, a Material Adverse Effect. (e) To the Company's knowledge, (i) no part of the Company Premises or, so far as is known to the Company, the area surrounding the Company Premises is being used, or has been used at any time in the past, to manufacture, generate, refine, process, distribute, use, sell, treat, receive, store, dispose of, transport, arrange for transport of, handle, or conduct any other activity involving any Hazardous Substance except in a manner that has been in compliance in all material respects with all applicable Environmental Laws and Environmental Permits and to an extent that has not had and will not have a Material Adverse Effect; and (ii) neither the Company nor any Subsidiary is conducting or has ever conducted any such activities anywhere else except in a manner that has been in compliance in all material respects with all applicable Environmental Laws and Environmental Permits and to an extent that has not had and will not have a Material Adverse Effect. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS Each Purchaser, severally as to himself, represents and warrants as follows: 3.1 INVESTMENT REPRESENTATION. (a) The Purchaser of the Securities hereby acknowledges that the Securities (inclusive of any shares of Common Stock issued upon any exercise or conversion of the Series A Preferred Stock or the Shadow warrants, as the case may be) are not being registered (i) under the Securities Act or (ii) under any applicable state securities law; and that the Company's reliance on the Section 4(2) exemption of the Act and under applicable state securities laws is predicated in part on the representations hereby made to the Company in the Agreement. (b) The Purchaser of the Securities will not sell or transfer all or any part of the Securities unless and until he shall first have given notice to the Company describing such sale or - 11 - transfer and, if requested by the Company, furnished to the Company either (a) an opinion, reasonably satisfactory to counsel for the Company, of counsel skilled in securities matters (selected by the Purchaser and reasonably satisfactory to the Company) to the effect that the proposed sale or transfer may be made without registration under the Act and without registration or qualification under applicable state law, or (b) an interpretive letter from the Commission to the effect that no enforcement action will be recommended if the proposed sale or transfer is made without registration under the Act. The Purchaser acknowledges that the certificates representing the Common Stock and Series A Preferred Stock and the Shadow Warrants (and upon any exercise or conversion of the Series A Preferred Stock or the Shadow Warrants, as the case may be, the certificates representing the Common Stock) subscribed for hereby will bear a legend restricting transfer thereof as follows: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS BASED, IN PART, ON AN INVESTMENT REPRESENTATION OF THE PART OF THE PURCHASER THEREOF. THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM." (c) The Company may refuse to recognize a transfer of the Securities on its books should a Purchaser attempt to transfer the Securities otherwise than in compliance with this SECTION 3.1. (d) The Purchaser has adequate means of providing for his or its current needs and possible personal contingencies, he or it anticipates no need now or in the foreseeable future to sell the Securities (or upon any exercise or conversion of the Series A Preferred Stock or the Shadow Warrants, as the case may be, the Common Stock) which he or it is purchasing and he or it can afford the loss of his or its entire investment in the Company. (e) If an individual, the Purchaser either (i) has a net worth or joint net worth with spouse which exceeds $1,000,000; or (ii) has had an individual income in excess of $200,000 in each of 1995 and 1996 or joint income with spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in 1997. - 12 - (f) The Purchaser has such knowledge and experience in financial and business matters that he or it is capable of evaluating the merits and risks of investment in the Company and of making an informed investment decision. (g) The Purchaser has received and read and is familiar with the Offering Disclosure Documents and confirms that all documents, records and books pertaining to his or its proposed investment in the Company have been made available to him or it. The Purchaser is aware that no federal or state agency has passed upon the Securities or made any finding or determination concerning the fairness of the investment represented thereby. (h) The Purchaser had an opportunity to ask questions of and receive answers from representatives of the Company concerning the terms and conditions of this investment, and all such questions have been answered to the full satisfaction of the Purchaser. The Purchaser understands that no person other than the Company has been authorized to make any representation or warranty other than as contained herein (inclusive of the Exhibits hereto) or in the Offering Disclosure Documents and, if made, such representation may not be relied on unless it is made in writing and signed by the Company. The Company has not rendered any investment or tax advice to the Purchaser with respect to the suitability of an investment in the Securities or the tax consequences thereof. The Company has urged each Purchaser to consult his or its own tax adviser concerning any tax matters relating to this investment. (i) The Securities (inclusive of any shares of Common Stock issued upon any exercise or conversion of the Series A Preferred Stock or the Shadow Warrants) which Purchaser is acquiring will be acquired for his or its own account for investment. The Purchaser intends to hold the Securities (inclusive of any shares of Common Stock issued upon any exercise or conversion of the Series A Preferred Stock or the Shadow Warrants) indefinitely and he or it is not purchasing such securities with a view toward distribution in a manner which would require registration under the Securities Act, and he or it does not presently have any reasons to anticipate any change in his or its circumstances or other particular occasion or event which would cause him or it to sell, the Securities (inclusive of any shares of Common Stock issued upon any exercise or conversion of the Series A Preferred Stock or the Shadow Warrants) which he or it is purchasing hereunder, subject, nevertheless, to any requirement of law that the disposition of his or its property shall at all times be within his or its control. (j) The Purchaser acknowledges that it has been called to his or its attention both in the Offering Disclosure Documents and by those individuals with whom he has dealt in connection with his investment in the Company that his or its investment in the Company involves a high degree of risk. (k) The Purchaser has received no representations or warranties from the Company other than those contained herein (inclusive of the Exhibits hereto) or in the Offering Disclosure Documents or otherwise furnished in writing and signed by the Company. 3.2 ORGANIZATION AND AUTHORITY OF BLACKHAWK; NO CONFLICTS; APPROVALS; ENFORCEABILITY. (a) Blackhawk is a limited liability company organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority - 13 - to enter into this Agreement, to perform its obligations under this Agreement and the other Exhibits to which it is or is to be a party and to consummate the transactions contemplated hereby and thereby. Blackhawk has by all requisite limited liability company action as required by law and its governing instruments duly authorized the execution and delivery of this Agreement and the other Exhibits to which it is or is to be a party, the performance of its obligations hereunder or thereunder and the consummation of the transactions contemplated hereby and thereby. (b) Blackhawk is not in violation of or in default with respect to any term or provision of its organizational documents or any terms or provision of any agreement, indenture, mortgage, instrument, permit or license to which it is a party or by which it or any of its properties may be bound or affected or any existing statute, law, governmental rule, regulation or ordinance, or any order of any court the consequences of such violation or default would conflict with this Agreement or any Exhibit to which Blackhawk is or is to be a party or adversely affect the ability of Blackhawk to perform its obligations hereunder or thereunder. (c) No approval by, from or with, and not other action, in respect of, any Governmental Body or any other Person is required in connection with the execution and delivery of this Agreement or any Exhibit to which Blackhawk is or will be a party and the consummation of the transactions contemplated hereby and thereby. (d) This Agreement has been duly executed and delivered by Blackhawk and is a legal, valid and binding obligation of Blackhawk, enforceable against Blackhawk in accordance with its terms and conditions, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally and by general equity principles (regardless of whether such enforceability is considered in a proceeding a law or in equity). ARTICLE IV COVENANTS The Company, so long as at least 10% of either the Series A Preferred Stock or the Common Stock is owned by the Purchasers, agrees to perform and comply with each of the following covenants. 4.1 FINANCIAL STATEMENTS; INFORMATION. The Company shall furnish to each Purchaser the following: (a) FINANCIAL INFORMATION. The Company shall send, or cause to be sent, to each Purchaser (i) its consolidated audited annual financial statements, fairly and accurately presenting in all material respects the financial condition and the results of operations and cash flows of the Company and its Subsidiaries, prepared in accordance with GAAP, as soon as is practicable after the same have been issued but in any case within ninety days of the end of its fiscal year, together with the report thereon by independent public auditors as may be acceptable to the Majority-in-Interest, (ii) its unaudited quarterly consolidated financial statements, of each of - 14 - the first three fiscal quarters of its fiscal year, fairly and accurately presenting in all material respects the financial condition and the results of operations and cash flows of the Company and its Subsidiaries, prepared in accordance with GAAP, as soon as is practicable after the end of each fiscal quarter but in any case within forty-five days of the end of its fiscal quarters, certified by its duly authorized chief financial officer, (iii) a copy of any monthly financial report or statement of the Company and/or any of its Subsidiaries as may be prepared by or for the directors of such company or for any other Person, as soon as same is available, and (iv) such financial or other information relating to the Company and its Subsidiaries or any of the transactions contemplated by this Agreement or any Exhibit to which the Company is a party, as may be reasonably requested by a Majority-in-Interest of the Purchasers. (b) INFORMATION DELIVERED TO CREDITORS. Concurrently with the furnishing thereof, copies of any statements, reports or documents relating to the business or condition generally of the Company or any Subsidiary which are furnished by the Company or any Subsidiary to any other holder of funded debt of the Company or Subsidiary, or any notices which are so furnished, in each case pursuant to the terms of any indenture, loan, credit or similar agreement and not otherwise required to be furnished pursuant to any other clause of this SECTION 4.1 (c) COMMISSION AND OTHER REPORTS. Promptly upon their becoming available (and in any event within five Business Days thereafter), copies of (i) all financial statements, reports, notices, proxy statements and other information sent or made available generally by the Company to any class of its security holders (in their capacity as such) or by any Subsidiary to any class of its security holders other than the Company or another Subsidiary, (ii) all regular and periodic reports and all registration statements, forms and prospectuses filed by the Company or any of its Subsidiaries with any securities exchange or with the Commission, and (iii) all press releases and other statements made available generally by the Company or any of its Subsidiaries to the public concerning material developments in the business of the Company or any of its Subsidiaries. (d) DEFAULTS, ETC. Promptly upon and in any event within five Business Days after any officer of the Company obtaining knowledge of any condition or event which constitutes a default or an event of default under any agreement with respect to any debt for borrowed money in excess of $100,000 of the Company or any Subsidiary or becoming aware that any person has given any notice to the Company or any of its Subsidiaries or taken any other action with respect to a claimed default under or in respect of any debt for borrowed money in excess of $100,000 or with respect to the occurrence or existence of any event or condition of such type, written notice in reasonable detail specifying the facts and circumstances of such condition, event or action. (e) LITIGATION, ETC. Promptly and in any event within five Business Days after any officer of the Company obtains knowledge of any litigation, administrative proceeding or judgment (i) affecting the Company or any of its Subsidiaries which involves claims against the Company or its Subsidiaries aggregating, when taken together with all other such litigation, proceedings and judgments, $100,000 which are not considered by the Company, in its reasonable judgment, to be covered by insurance, or (ii) relating in any material way to this Agreement, the Shadow Warrants or any other Exhibit to which the Company is a party, notice thereof specifying - 15 - in each case in reasonable detail the facts and circumstances surrounding such litigation, proceeding or judgment. 4.2 CORPORATE EXISTENCE. The Company will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. 4.3 COMPLIANCE WITH LAWS; GOVERNMENT FILINGS. The Company shall, and shall cause each of its Subsidiaries to, comply in all material respects with all laws, statutes, rules, regulations and ordinances and all orders of, and restrictions imposed by, any court, arbitrator or Governmental Body in respect of the conduct of the business of the Company or Subsidiary and the ownership of the properties of the Company or Subsidiary (including, without limitation, applicable laws, statutes, rules, regulations, ordinances and orders relating to occupational health and safety standards, consumer protection and equal employment opportunities), except to the extent that the applicability or validity of any such law, statute, rule, regulation, ordinance or order is being contested in good faith by appropriate and timely actions or proceedings diligently pursued, and for which such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made. 4.4 ENVIRONMENTAL MATTERS. (a) The Company shall, and shall cause each of its Subsidiaries to, (i) obtain and maintain in full force and affect all Environmental Permits that may be required from time to time in order for the Company and such Subsidiary to comply in all material respects with all Environmental Laws applicable to the Company or such Subsidiaries and (ii) be and remain in compliance in all material respects with all terms and conditions of all such Environmental Permits and with all other limitations, restrictions, conditions, standards, prohibitions, require ments, obligations, schedules and timetables contained in all applicable Environmental Laws. (b) The Company shall not, and shall not permit any of its Subsidiaries to, (i) cause or allow (A) any Hazardous Substance to be present at any time on, in, under or above the Company Premises or any part thereof or (B) the Company Premises or any part thereof to be used at any time to manufacture, generate, refine, process, distribute, use, sell, treat, receive, store, dispose of, transport, arrange for transport of, handle, or be involved in any other activity involving, any Hazardous Substance, or (ii) conduct any such activities described in the foregoing clause (i) on the Company Premises or anywhere else, except, in each case referred to in the foregoing clauses (i) and (ii), in a manner that is in compliance in all material respects with all applicable Environmental Laws and Environmental Permits or to an extent that will not have a Material Adverse Effect. - 16 - ARTICLE V CERTAIN OTHER COVENANTS 5.1 APPROVAL AND FILING OF CHARTER AMENDMENT. In accordance with a covenant contained in the Certificate of Designation, the Company shall use its best efforts to cause an amendment to its certificate of incorporation to increase the number of authorized shares of its Common Stock from 15,000,000 shares to 100,000,000 shares (the "Charter Amendment") to be approved by its stockholders as soon as possible following the Closing and to file such Charter Amendment with the Secretary of State of Delaware promptly following the receipt of such stockholder approval. 5.2 REPAYMENT OF DEBT AND REMOVAL OF LIENS. The Company covenants and agrees to use the proceeds of the sale of the Securities as provided in SCHEDULE 1.5, including without limitation, the repayment in full of the Harbin/Murphy Notes and the I/O Note as promptly as practicable following the Closing hereof. In connection therewith, the Company shall condition the repayment of such notes upon the execution and delivery to the Company by the holders thereof of such documents, instruments and certificates as shall be required to evidence the release and termination of all liens and security interests granted by the Company and its Subsidiaries in favor of the holders thereof or their agents, which documents, instruments and certificates shall be in form and substance (including recordable form, with respect to liens of record) sufficient to evidence the release and termination of such security interests, and the Company shall file or record any such documents, instruments or certificates as promptly as possible following the Closing. ARTICLE VI MISCELLANEOUS 6.1 EXPENSES. Whether or not the transactions contemplated by Article I hereof are consummated, the Company shall: (a) directly pay the reasonable fees and expenses of special counsel to the Purchasers rendered in connection with such transactions or in connection with any actual or proposed amendment, waiver or consent pursuant to the provisions hereof, and all other expenses in connection with the foregoing (including, without limitation, document production and reproduction expenses); (b) reimburse each Purchaser for his reasonable out-of-pocket expenses in connection with each such actual or proposed amendment, waiver or consent pursuant to the provisions of this Agreement, and any items of the character referred to in clause (a) which shall have been paid by any Purchaser; (c) pay, and save each Purchaser of any Securities harmless from and against, any and all liability and loss with respect to or resulting from the nonpayment or delayed payment of any and all placement fees and other liability to pay any agent or finder in connection with the sale of the Securities to each Purchaser; (d) pay all fees and other charges payable in connection with the filings, recordings and registrations contemplated by this Agreement or any other Exhibit; and (e) pay all documentary, stamp or similar taxes - 17 - (including interest and penalties) which may be payable in respect of the execution and delivery or issuance (but not the transfer) of any of the Securities or of any amendment of, or waiver or consent under or with respect to, this Agreement, any of the Securities or any other Exhibit and save each Purchaser of the Securities harmless against each Purchaser any loss or liability resulting from nonpayment or delay in payment of any such tax. 6.2 RELIANCE ON AND SURVIVAL OF REPRESENTATIONS. All agreements, covenants, representations and warranties of the Company herein or of (or on behalf of) the Company in any Exhibit or in any certificate or other instrument delivered pursuant hereto or thereto shall: (a) be deemed to be material and to have been relied upon by each Purchaser, notwithstanding any investigation heretofore or hereafter made by each Purchaser or on his or its behalf, and (b) survive the execution and delivery of this Agreement and the execution and delivery of the Securities to each Purchaser and any investigation made at any time by him or it or on his or its behalf or any disposition of any of the Securities, until the expiration of any applicable statute of limitations. 6.3 AMENDMENT AND WAIVER. (a) Any term, provision, covenant, agreement or condition of this Agreement, the Shadow Warrants or any other Exhibit hereto may, with the written consent of the Company, be amended or modified, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by one or more substantially concurrent written instruments signed by the Purchasers. 6.4 SHADOW WARRANT REGISTER. (a) The Shadow Warrants shall be issued in registered form only. The Company shall keep a register (the "SHADOW WARRANT REGISTER") in which provision shall be made for the registration of the Shadow Warrants and the registration of transfers of the Shadow Warrants. Such Register shall be kept at the principal office of the Company and the Company is hereby appointed "SHADOW WARRANT REGISTRAR" for the purpose of registering the Shadow Warrants and transfers of the Shadow Warrants. Subject to compliance with the provisions of SECTION 3.1 hereof by a transferee, upon surrender for registration of transfer of any Shadow Warrant at the principal office of the Company and compliance with the provisions of SECTION 3.1, if applicable, the Company shall execute and deliver, in the name of the designated transferee, a new Shadow Warrant of a like amount and kind. The Company shall treat the individual or entity in whose name each Shadow Warrant is registered on the Shadow Warrant Register as the sole and absolute owner thereof, notwithstanding any contrary notice. (b) Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Shadow Warrant and of a letter of indemnity reasonably satisfactory to the Company, and upon reimbursement to the Company of all reasonable expenses incident thereto, and upon surrender or cancellation of a Shadow Warrant, if mutilated, the Company will make and deliver a new Shadow Warrant of like tenor in lieu of such lost, stolen, destroyed or mutilated Shadow Warrant. - 18 - 6.5 DIRECTLY OR INDIRECTLY. Where any provision of this Agreement refers to actions to be taken by any person, or which such person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such person. 6.6 SUCCESSORS AND ASSIGNS. All covenants and agreements in this Agreement by or on behalf of the respective parties hereto shall bind and inure to the benefit of their respective successors and, in the case of any Holder of a Shadow Warrant, registered assigns. The provisions of this Agreement are intended to be for the benefit of all Holders from time to time of the Series A Preferred Stock, and shall be enforceable by any such Holder, whether or not an express assignment to such Holder of rights under this Agreement has been made by the Purchaser or his successors or assigns. 6.7 NOTICES. Unless otherwise expressly provided in this Agreement, all notices, opinions and other communications provided for in this Agreement shall be in writing and delivered by hand or mailed, first class postage prepaid, return receipt requested or sent by overnight courier, or by confirmed telefax transmission (confirmed by hand-delivered, mailed or overnight courier copy) addressed (a) if to the Company, to the Company at Marathon Oil Tower, 5555 San Felipe, Suite 780, Houston, Texas 77056 (with a copy sent by telefax transmission to it at (713) 850-7330), marked to the attention of the President, with a copy to Chamberlain, Hrdlicka, White, Williams & Martin, 1400 Two Allen Center, 1200 Smith Street, Houston, Texas 77002-4310, telecopy number (713) 658-2553, to the attention of James J. Spring, III, Esq., or at such other address as the Company may hereafter designate by notice to each Purchaser of Securities or each Holder of Series A Preferred Stock or Shadow Warrants at the time outstanding, or (b) if to the Purchasers, at the address of each Purchaser as set forth in SCHEDULE 1.1 or at such other address as such Purchaser may hereafter designate by notice to the Company, or (c) if to any other Holder of any Series A Preferred Stock or Shadow Warrant, at the address of such Holder as it appears on the Series A Preferred Stock Register or the Shadow Warrant Register, as the case may be. 6.8 LAW GOVERNING. THIS AGREEMENT AND THE SHADOW WARRANTS AND ALL AMENDMENTS, SUPPLEMENTS, MODIFICATIONS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK. - 19 - 6.9 SUBMISSION TO JURISDICTION; SERVICE OF PROCESS . (a) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT, THE SHADOW WARRANTS OR ANY OTHER EXHIBIT MAY BE LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT. (b) In relation to any dispute arising out of or in connection with this Agreement or any Exhibit, and for the exclusive benefit of the Purchasers and any Holders, the Company irrevocably and unconditionally submits to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York, and to the non-exclusive jurisdiction of any court of the State of New York located in the City and County of New York, for the purposes of any suit, action or other proceeding arising out of, or relating to, this Agreement or any Exhibit or any of the transactions contemplated hereby or thereby, and hereby waives, and agrees not to assert, by way of motion, as a defense, or otherwise, that it is not personally subject to the jurisdiction of the above named courts for any reason whatsoever, that such suit, action or proceeding is brought in an inconvenient forum, or that the venue of such suit, action or proceeding is improper, or that this Agreement or any Exhibit or the subject matter hereof may not be enforced in or by such courts. The Company hereby agrees that process against it may be served by mail or delivery of service of process in any of the aforementioned action, suits or proceedings to CT Corporation System, 1633 Broadway, New York, New York 10019 (such agent being hereinafter called the "Process Agent"), which the Company hereby irrevocably designates and appoints as its attorney-in-fact to receive service of process in any action, suit or proceeding with respect to any matter as to which it submits to jurisdiction as set forth above, it being agreed that service to such office or upon such agent shall constitute valid service upon the Company. The Company hereby directs the Process Agent to receive and accept all process on its behalf. The Company shall promptly notify the Purchasers of any change in the address of the Process Agent and may, with prior notice given to Holders, appoint a successor Process Agent; PROVIDED, HOWEVER, that if the Process Agent shall at any time cease to exist or its agency shall for any reason cease, the Company shall designate forthwith a successor Process Agent in the County and State of New York and shall give prompt notice of such designation to the Holders, together with evidence of the acceptance of any such appointment. The Company agrees irrevocably to the service of process of any of the aforementioned courts in any suit, action or proceeding described above by mailing of copies of such process to the Company at its address specified in SECTION 6.7 hereof. Nothing herein shall preclude service of process in any other manner permitted by applicable law or prohibit any Holder from commencing legal proceedings against the Company or any of its properties in any other jurisdiction. 6.10 HEADINGS, ETC. - 20 - The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning or construction of any of the terms hereof. Unless otherwise specified, any reference in this Agreement to a particular section, clause or other subdivision, or a particular schedule or exhibit, shall be considered a reference to that section, clause or other subdivision of, or to that schedule or exhibit to, this Agreement. 6.11 ENTIRE AGREEMENT. This Agreement (inclusive of the Exhibits hereto) embodies the entire agreement and understanding among the Company and the Purchasers and supersedes all prior agreements and understandings among such parties relating to the subject matter hereof. 6.12 WAIVER OF TRIAL BY JURY. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY EXHIBIT HERETO OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF THE PURCHASERS IN THE NEGOTIATION OR ENFORCEMENT HEREOF OR THEREOF. 6.13 INDEMNIFICATION. In consideration of the execution and delivery of this Agreement by each Purchaser, the Company hereby agrees to indemnify, defend and hold each Purchaser and the Managing Member and each partner of the Managing Member and the employees and agents thereof, and each Holder from time to time of any Series A Preferred Stock or Shadow Warrant (herein called the "INDEMNITEES"), free and harmless from and against any and all claims, actions, causes of action, suits or other proceedings (whether or not any such Indemnitee is a party thereto), losses, liabilities and damages, and expenses in connection therewith, including, without limitation, fees and disbursements of counsel, consultants and experts and claims relating to personal injury or property damage (herein called the "INDEMNIFIED LIABILITIES", which term shall not include, however, in respect of any particular Indemnitee, liabilities incurred by reason of the gross negligence or willful misconduct of such Indemnitee) incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part directly or indirectly with proceeds from the sale of any Securities, or (b) the execution, delivery, performance or enforcement of this Agreement, the Shadow Warrants or any other Exhibit, or the consummation of any of the transactions contemplated hereby or thereby or (c) any failure of any representation or warranty set forth in SECTION 2.11 to be true and correct when made or any failure by the Company to comply with any of its covenants or agreements set forth in SECTION 4.4 or any liability of the Company arising pursuant to Environmental Laws. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment of each of the Indemnified Liabilities which is permissible under applicable law. The provisions of, and obligations of the Company under, this SECTION 6.13 shall survive the execution and delivery of - 21 - this Agreement, the enforcement of any provision hereof, the consummation of the transactions to occur on the Closing Date, and any amendments or waivers, and shall be enforceable by each Indemnitee separately or together; and any such Indemnitee seeking to enforce the indemnification provided for hereunder may initially proceed directly against the Company without first resorting to any other rights of indemnification or otherwise that it may have. 6.14 INTERPRETIVE PROVISION. Wherever any representation, warranty or other statement made by the Company in this Agreement is limited to the Company's knowledge, such limitation shall mean the actual knowledge or awareness of any person who, on the date hereof, is an executive officer or director of the Company after due inquiry of the circumstances thereof. 6.15 SEVERABILITY. Any provision of this Agreement which shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or enforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 6.16 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. 6.17 FINDER'S FEE. (a) The Company represents and warrants that it has not incurred any obligation or liability to any broker or finder for any fee or payment with respect to the offering or sale of the Securities and agrees to indemnify and hold the Purchasers harmless against any claims or liabilities asserted against them by any person acting or claiming to act as a broker or finder on behalf of the Company or any Subsidiary. (b) Each Purchaser represents and warrants that it has not incurred any obligation or liability to any broker or finder for any fee or payment with respect to the offering or sale of the Securities and agrees to indemnify and hold the Company harmless against any claims or liabilities asserted against them by any person acting or claiming to act as a broker or finder on behalf of such Purchaser. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first before written. COMPANY: GEOKINETICS INC. - 22 - By: /s/ JAY D. HABER Name: Jay D. Haber Title: President PURCHASERS: BLACKHAWK INVESTORS, L.L.C. By: Blackhawk Capital Partners, Managing Member By: /s/ WILLIAM R. ZIEGLER Name: William R. Ziegler Title: Partner /s/ STEVEN A. WEBSTER Steven A. Webster, Individually /s/ WILLIAM R. ZIEGLER William R. Ziegler, Individually - 23 - APPENDIX I DEFINITIONS As used in this Agreement the following terms shall have the meanings ascribed thereto: "AGREEMENT" means this agreement, as it may be amended from time to time, including all schedules and exhibits thereto. "BLACKHAWK PURCHASE PRICE" has the meaning set forth in SECTION 1.2. "BLACKHAWK SHADOW WARRANT" has the meaning set forth in SECTION 1.1. "BRIDGE LOAN SECURITIES PURCHASE AGREEMENT" means that certain Securities Purchase Agreement dated as of April 25, 1997 between the Company and the Holders. "BUSINESS DAY" means any day other than a Saturday, Sunday or any other day on which commercial banks are required or authorized by law or regulation to be closed in New York, New York. "CASH PAYMENT" has the meaning set forth in SECTION 1.2. "CERTIFICATE OF DESIGNATION" has the meaning set forth in SECTION 1.1. "CHARTER AMENDMENT" has the meaning set forth in SECTION 5.1. "CLOSING" has the meaning set forth in SECTION 1.4. "COLLATERAL" means the rights and interests of the Company and Subsidiary Obligors in to the property and assets of the Company and the Subsidiary Obligors described and as set forth in Schedule 2.8 to the Bridge Loan Securities Purchase Agreement. "COMMISSION" means the Securities and Exchange Commission or any other United States agency at the time administering the Securities Act. "COMMON STOCK" means common stock of the Company having a par value of $.20 per share. "COMPANY" means Geokinetics Inc., a Delaware corporation. "COMPANY PREMISES" means real property in which (a) the Company, (b) any Subsidiary of any person referred to in clause (a) of this definition or (c) any person which has at any time been a Subsidiary of any person referred to in clause (a) of this definition at any time has or ever had any direct or indirect interest, including, without limitation, ownership thereof, or any - 24 - arrangement for the lease, rental or other use thereof, or the retention or claim of any mortgage or security interest therein or thereon. "CONSULTING AND ENGAGEMENT AGREEMENT" means that certain consulting and engagement agreement dated as of April 25, 1997 between the Company and one of the Holders. "DEEDS OF TRUST" means those certain deeds of trust of GPC and HOC in favor of the Holders, each dated as of April 25, 1997, each executed, delivered and recorded in accordance with the terms of the Bridge Loan Securities Purchase Agreement. "ENVIRONMENTAL CLAIMS" has the meaning set forth in SECTION 2.12(c). "ENVIRONMENTAL LAW" any past, present or future Federal, state, local or foreign statutory or common law, or any regulation, ordinance, code, plan, Order, permit, grant, franchise, concession, restriction or agreement issued, entered, promulgated or approved thereunder, relating to (a) the environment, human health or safety, including, without limitation, emissions, discharges, releases or threatened releases of Hazardous Substances into the environment (including, without limitation, air, surface water, groundwater or land), or (b) the manufacture, generation, refining, processing, distribution, use, sale, treatment, receipt, storage, disposal, transport, arranging for transport, or handling of Hazardous Substances, "ENVIRONMENTAL PERMIT" means any and all permits, consents, licenses, approvals and registrations of any nature at any time required pursuant to or in order to comply with any Environmental Law. "EXHIBIT" means any of the exhibits to this Agreement, including such exhibits as executed and delivered pursuant to the terms of this Agreement. "FINANCIAL STATEMENTS" means (i) the (A) condensed statements of financial position of the Company and the Subsidiaries as of March 31, 1997 and December 31, 1996, and (B) the condensed statements of operations of the Company and the Subsidiaries for the three months ended March 31, 1997 and 1996 and (C) condensed statement of cash flow of the Company and the Subsidiaries for the three months ended March 31, 1997 and 1996, in each case, together with the notes thereto, and as set forth in the Form 10-QSB of the Company for the Quarter Ended March 31, 1997, and (ii) the unaudited consolidated balance sheet of the Company and the Subsidiaries as of May 31, 1997, and the unaudited consolidated statement of operations of the Company and the Subsidiaries for the five month period ended May 31, 1997, in each case, together with the notes thereto. "GAAP" means generally accepted accounting principles as from time to time set forth in the opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and in statements by the Financial Accounting Standards Board or in such opinions and statements of such other entities as shall be approved by a significant segment of the accounting profession in the United States of America. - 25 - "GECO-PRAKLA LETTER" means that certain letter dated June 25, 1997 from Jeffrey W. Imber, Project Manager TZ-NEPS Department, Geco-Prakla, addressed To Whom It May Concern with respect to the terms of Weeks project job awarded by Geco-Prakla to Signature. "GOVERNMENTAL BODY" means any Federal, state, municipal, local or other governmental department, commission, board, bureau, agency, instrumentality, political subdivision or taxing authority of any country. "GPC" means Geokinetics Production Co., Inc., a Texas corporation that is a Subsidiary Obligor. "HARBIN/MURPHY ENTITIES" means Elinor T. Harbin, Elinor T. Harbin Trust, Richard W. Harbin, William H. Murphy and Michael A. Kimmel. "HARBIN/MURPHY NOTES" means those certain promissory notes of the Company, in the aggregate principal amount of $701,001.85, payable to the Harbin/Murphy Entities. "HAZARDOUS SUBSTANCES" collectively, contaminants; pollutants; toxic or hazardous chemicals, substances, materials, wastes and constituents; petroleum products; polychlorinated biphenyls; medical wastes; infectious wastes; asbestos; paint containing lead; and urea formaldehyde. "HOC" means HOC Operating Co., Inc., a Texas corporation that is a Subsidiary Obligor. "HOLDER" means initially a Purchaser and thereafter such person who from time to time is the registered Holder of any shares of Series A Preferred Stock or any Shadow Warrant, as the case may be, or a Holder of either. "HOLDERS' PURCHASE PRICE" has the meaning set forth in SECTION 1.3. "HOLDERS' SHADOW WARRANTS" has the meaning set forth in SECTION 1.1. "INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION 6.13. "INDEMNITEES" has the meaning set forth in SECTION 6.13. "I/O EXTENSION AGREEMENT" means that certain agreement dated April 9, 1997 between Input/Output, Inc. and the Company, providing for an extension of the maturity or other due date of the current outstanding principal amount of the I/O Note issued by the Company in favor of Input/Output, Inc. until the earlier of October 1, 1997 or the closing date of any financing of the Company (excluding the Senior Note financing) or change in control of the Company, provided that the Company make six monthly payments totaling $14,722.18 representing repayment of interest owing on the I/O Note, commencing on the execution date of an amended note. "I/O NOTE" means that certain promissory note of the Company payable to Input/Output, Inc. in the original principal amount of $300,000, as amended. - 26 - "MAJORITY-IN-INTEREST" means the Holders of at least 50.1% of the Common Stock (assuming the conversion of the Series A Preferred Stock into shares of Common Stock) purchased hereunder. "MANAGING MEMBER" means Blackhawk Capital Partners, a Texas general partnership and the managing member of Blackhawk. "MATERIAL ADVERSE EFFECT" means any circumstance or event which is material and adverse to the financial condition or business operations or prospects of the Company and its Subsidiaries, taken as a whole. "MATERIAL CONTRACT" means any contract of the Company or any Subsidiary with any Person that is presently in effect and (i) that either (A) accounted for 10 percent or more of the annual revenues of the Company or any Subsidiary during any of the past three fiscal years or (B) is expected to account for 10 percent or more of the annual revenues of the Company or any Subsidiary during the present fiscal year or (ii) the expiration or termination of which would have a Material Adverse Effect. "MONITORING AGREEMENT" means that certain Monitoring Agreement to be entered into between the Company and the Managing Member, in the form of EXHIBIT "E" attached hereto. "OFFERING DISCLOSURE DOCUMENTS" means (i) the Annual Report on Form 10-KSB of the Company for the year ended December 31, 1996, and the Form 10-QSB of the Company for the Quarter Ended March 31, 1997, in each case, as filed with the Commission, (ii) the Financial Statements and (iii) that certain Confidential Private Placement Memorandum of Blackhawk dated June 25, 1997, but only to the extent of the information provided or supplied to Blackhawk or its counsel by or on behalf of the Company. "OPINION OF COMPANY COUNSEL" means the legal opinion of Chamberlain, Hrdlicka, White, Williams & Martin, counsel for the Company, in favor of the Purchasers, in the form of EXHIBIT "F" hereto "PERSON" means a corporation, a partnership, an organization or business, an individual, a government or political subdivision thereof or governmental agency. "PERSONAL PROPERTY SECURITY AGREEMENT" means that certain security agreement dated as of April 25, 1997 of the Company and the Subsidiary Obligors in favor of the Holders, executed and delivered pursuant to the Bridge Loan Securities Purchase Agreement. "PLEDGE AGREEMENT" means that certain pledge agreement of the Company in favor of the Holders dated as of April 25, 1997 with respect to all of the capital stock of the Subsidiaries owned by the Company, , executed and delivered pursuant to the Bridge Loan Securities Purchase Agreement. "PREFERRED STOCK CHARTER AMENDMENT" means that certain charter amendment that was approved by the stockholders of the Company at its last annual meeting of stockholders - 27 - providing for the increase in the authorized capital stock of the Company to consist of (A) 15,000,000 shares of Common Stock and (B) 2,500,000 shares of series preferred stock, par value $10 per share (the "Preferred Stock"). "PURCHASER" means a person set forth on SCHEDULE 1.1 with respect to that number of Securities set forth opposite his or its name and a person who executes and delivers a counterpart signature page to this Agreement, and Purchasers means two or more Purchasers. "REGISTRATION RIGHTS AGREEMENT" means that certain registration rights agreement to be entered into between the Company and the Purchasers in the form of EXHIBIT "D" hereto. "SECURITIES" has the meaning set forth in SECTION 1.4. "SECURITIES ACT" means the Securities Act of 1933, or any similar United States statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "SECURITY AGREEMENTS" means (i) the Pledge Agreement, (ii) the Deeds of Trust and (iii) the Personal Property Security Agreement. "SENIOR NOTES" means those certain 12% Senior Secured Promissory Notes of the Company and the Subsidiary Obligors, in the aggregate principal amount of $500,000, executed and delivered pursuant to the Bridge Loan Securities Purchase Agreement. "SERIES A PREFERRED STOCK" means that series of Preferred Stock of the Company created and designated pursuant to the Certificate of Designation of Series A Convertible Preferred Stock of the Company, in the form of EXHIBIT "A" attached hereto. "SHADOW WARRANTS" collectively means the Blackhawk Shadow Warrant and the Holders' Shadow Warrants, and individually means any of such Shadow Warrants, in each case, issued by the Company pursuant to the terms hereof in the form of EXHIBIT "B" attached hereto. "SHADOW WARRANT REGISTER" has the meaning set forth in SECTION 6.4. "SUBORDINATION AGREEMENT" means that certain subordination agreement dated as of April 25, 1997 executed and delivered pursuant to the terms of the Bridge Loan Securities Purchase Agreement. "SUBSIDIARY" means any corporation or other legal entity 50% or more of the voting stock of which is owned by the Company or another Subsidiary of the Company. For these purposes voting stock means the capital stock or other form of ownership which ordinarily, in the absence of contingencies, entitles the holder to elect corporate directors or persons performing similar functions. For purposes of the covenants contained in Article IV hereof, Subsidiary generally includes any corporation or other legal entity in which the Company or any other Subsidiary of the Company hereafter acquires 50% or more of the voting stock, and specifically includes Signature. - 28 - "SUBSIDIARY OBLIGOR" means: (i) each of the existing Subsidiaries of the Company other than Quantum Geophysical, Inc.; and (ii) any Subsidiary hereafter formed or acquired by the Company, either directly or through one or more other Subsidiaries. - 28 - SCHEDULE 1.1 PURCHASERS Name, Address, Telefax No. No. Shares No. Shares No. Shadow and Tax Identification No. Common Preferred Warrant of Purchaser Stock Stock Shares - -------------------------------------- ----------- ----------- ----------- Blackhawk Investors, L.L.C ........... 5,041,667 171,875 6,512,095 1013 Centre Road Wilmington, Delaware 19805-1297 Steven A. Webster .................... 229,166 7,812 296,005 c/o Falcon Drilling Company, Inc. 1900 West Loop South, Suite 1800 Houston, Texas 77027 Telefax No.: (713) 623-8103 William R. Ziegler ................... 229,167 7,813 296,004 c/o Parson & Brown 666 Third Avenue, 9th Floor New York, New York 10017 Telefax No.: (212) 682-9112 SCHEDULE 1.5 USE OF PROCEEDS See Attached. SCHEDULE 2.2 SUBSIDIARIES See Attached. SCHEDULE 2.5 NONCONTRAVENTION See Attached. SCHEDULE 2.7 LITIGATION See Attached. SCHEDULE 2.9 DEBTS; LIENS See Attached. SCHEDULES Schedule 1.1 Purchasers Schedule 1.5 Use of Proceeds Schedule 2.1(b) Capitalization of the Company Schedule 2.1(c) Capitalization of the Subsidiaries Schedule 2.2 Subsidiaries Schedule 2.4 Change in Financial Condition Schedule 2.5 Compliance with Laws, Other Instruments; No Conflicts, etc Schedule 2.6 Consents and Approvals Schedule 2.7 Litigation Schedule 2.9 Debts; Liens EX-2.2 3 EXHIBIT 2.2 STOCK PURCHASE AGREEMENT AMONG GEOKINETICS INC. AND GALLANT ENERGY, INC. AND SIGNATURE GEOPHYSICAL SERVICES, INC. JUNE ___, 1997 TABLE OF CONTENTS Page ---- ARTICLE I. GENERAL................................................................1 1.1 DEFINITIONS......................................................1 1.2 AGREEMENT TO PURCHASE AND SELL ACQUIRED SHARES...................5 1.3 PURCHASE PRICE...................................................5 1.4 EMPLOYMENT AGREEMENT.............................................5 1.5 THE CLOSING......................................................5 1.6 ADDITIONAL EQUITY FINANCING......................................6 1.7 EMPLOYEES........................................................6 1.8 DELIVERIES AT THE CLOSING........................................6 ARTICLE II. REPRESENTATIONS AND WARRANTIES.........................................6 2.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER.....................6 (a) AUTHORIZATION OF TRANSACTION...............................7 (b) NONCONTRAVENTION...........................................7 (c) BROKERS' FEES..............................................7 (d) INVESTMENT.................................................7 (e) ACQUIRED SHARES............................................7 2.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER......................8 (a) ORGANIZATION OF THE BUYER..................................8 (b) AUTHORIZATION OF TRANSACTION...............................8 (c) NONCONTRAVENTION...........................................8 (d) BROKERS' FEES..............................................8 (e) INVESTMENT.................................................8 2.3 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY...........10 (a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER..........10 (b) AUTHORIZATION OF TRANSACTION..............................11 (c) CAPITALIZATION............................................11 (d) NONCONTRAVENTION..........................................11 (e) BROKERS' FEES.............................................11 (f) TITLE TO ASSETS...........................................11 (g) SUBSIDIARIES, ETC.........................................12 (h) FINANCIAL STATEMENTS......................................12 (i) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END..........12 (j) UNDISCLOSED LIABILITIES...................................14 (k) LEGAL COMPLIANCE..........................................14 (l) TAX MATTERS...............................................14 i TABLE OF CONTENTS (Cont'd.) (m) REAL PROPERTY.............................................15 (n) OWNED INTELLECTUAL PROPERTY...............................16 (o) USED INTELLECTUAL PROPERTY................................17 (p) BUSINESS ACTIVITY.........................................17 (q) TANGIBLE ASSETS...........................................18 (r) CONTRACTS.................................................18 (s) NOTES AND ACCOUNTS RECEIVABLE.............................19 (t) POWERS OF ATTORNEY........................................19 (u) INSURANCE.................................................19 (v) LITIGATION................................................20 (w) WARRANTY..................................................20 (x) EMPLOYEES.................................................21 (y) EMPLOYEE BENEFITS.........................................21 (z) GUARANTIES................................................21 (aa) ENVIRONMENT, HEALTH, AND SAFETY...........................21 (bb) CERTAIN BUSINESS RELATIONSHIPS............................21 (cc) DISCLOSURE................................................21 ARTICLE III. CONDUCT AND TRANSACTIONS PRIOR TO CLOSING.............................21 3.1 GENERAL.........................................................21 3.2 NOTICES AND CONSENTS............................................22 3.3 OPERATION OF BUSINESS...........................................22 3.4 PRESERVATION OF BUSINESS........................................22 3.5 FULL ACCESS.....................................................22 3.6 NOTICE OF DEVELOPMENTS..........................................22 3.7 EXCLUSIVITY.....................................................23 3.8 CONFIDENTIALITY.................................................23 ARTICLE IV. POST-CLOSING COVENANTS................................................24 4.1 GENERAL.........................................................24 4.2 LITIGATION SUPPORT..............................................24 4.3 TRANSITION......................................................24 4.4 CONFIDENTIALITY.................................................24 ARTICLE V. CONDITIONS OF CLOSING.................................................25 5.1 CONDITIONS OF OBLIGATIONS OF THE BUYER..........................25 ii TABLE OF CONTENTS (Cont'd.) 5.2 CONDITIONS OF OBLIGATIONS OF THE SELLER.........................26 ARTICLE VI. REMEDIES FOR BREACHES OF AGREEMENT....................................27 6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................27 6.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.............27 6.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER............28 6.4 MATTERS INVOLVING THIRD PARTIES.................................28 6.5 OTHER INDEMNIFICATION PROVISIONS................................29 ARTICLE VII. MISCELLANEOUS.........................................................30 7.1 TERMINATION OF AGREEMENT........................................30 7.2 EFFECT OF TERMINATION...........................................30 7.3 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.........................30 7.4 NO THIRD-PARTY BENEFICIARIES....................................30 7.5 ENTIRE AGREEMENT................................................30 7.6 SUCCESSION AND ASSIGNMENT.......................................31 7.7 COUNTERPARTS....................................................31 7.8 HEADINGS........................................................31 7.9 NOTICES.........................................................31 7.10 GOVERNING LAW...................................................32 7.11 AMENDMENTS AND WAIVERS..........................................32 7.12 SEVERABILITY....................................................32 7.13 EXPENSES........................................................32 7.14 CONSTRUCTION....................................................32 7.15 INCORPORATION OF EXHIBITS AND SCHEDULES.........................33 7.16 SPECIFIC PERFORMANCE............................................33 7.17 SUBMISSION TO JURISDICTION......................................33 iii STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "AGREEMENT") is made and entered into as of June ___, 1997, by and among Geokinetics Inc., a Delaware corporation (the "BUYER"), Gallant Energy, Inc., a Texas corporation (the "SELLER"), and Signature Geophysical Services, Inc., a Michigan corporation (the "COMPANY"). The Buyer, the Seller and the Company are sometimes referred to collectively herein as the "PARTIES." The Company is engaged in the business of conducting 2-D and 3-D seismic surveys of oil and gas prospects, focusing on the Permian Basin and the Gulf Coast with a special emphasis on swamp work (the "BUSINESS"). The Seller owns 500 shares of the issued and outstanding capital stock of the Company, no par value (the "COMMON STOCK"), representing all of the issued and outstanding capital stock of the Company. This Agreement contemplates a transaction in which the Buyer will purchase from the Seller, and the Seller will sell to the Buyer all of the shares of the Common Stock owned by Seller in return for shares of Buyer's common stock, $.20 par value ("Buyer Common Stock"). NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. ARTICLE I. GENERAL 1.1 DEFINITIONS. Unless otherwise stated in this Agreement, capitalized terms shall have the following meanings: "ACQUIRED SHARES" means 500 shares of Common Stock of the Company owned by the Seller, representing one hundred percent (100%) of the total issued and outstanding shares of the capital stock of the Company. "ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including court costs and attorneys' fees and expenses. "AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act. 1 "AFFILIATED GROUP" means any affiliated group within the meaning of Section 1504 of the Code or any similar group defined under a similar provision of state, local or foreign law. "AGREEMENT" has the meaning set forth in the first paragraph above. "BASIS" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or could form the basis for any specified consequence. "BUSINESS" has the meaning set forth in the second paragraph above. "BUYER" has the meaning set forth in the first paragraph above. "BUYER COMMON STOCK" has the meaning set forth in the fourth paragraph above. "CLOSING" has the meaning set forth in Section 1.5 below. "CLOSING DATE" has the meaning set forth in Section 1.5 below. "CODE" means the Internal Revenue Code of 1986, as amended. "COMMON STOCK" means any share of the common stock, no par value, of the Company. "COMPANY" has the meaning set forth in the first paragraph above. "CONFIDENTIAL INFORMATION" has the meaning set forth in Section 3.8 below. "DISCLOSURE SCHEDULE" has the meaning set forth in Section 2.3 below. "EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe benefit plan or program. "EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in Section 3(2) of ERISA. "EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in Section 3(1) of ERISA. "ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and the Occupational Safety and Health Act of 1970, each as amended, together with all other laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof) 2 concerning pollution or protection of the environment, public health and safety, or employee health and safety, including laws relating to emissions, discharges, releases, or threatened releases of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes into ambient air, surface water, ground water, or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "FIDUCIARY" has the meaning set forth in Section 3(21) of ERISA. "FINANCIAL STATEMENTS" has the meaning set forth in Section 2.3(h) below. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "INDEMNIFIED PARTY" has the meaning set forth in Section 6.4 below. "INDEMNIFYING PARTY" has the meaning set forth in Section 6.4 below. "INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, seismic data bases, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (f) all computer software (including data and related documentation), (g) all other proprietary rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium). "KNOWN" OR "KNOWLEDGE" means that whenever a statement regarding the existence or absence of facts in this Agreement is qualified by a phrase such as "to such Person's knowledge" or "known by such Person," the Parties intend that the information to be attributed to such Person is information that is actually or constructively known to (a) the Person in the case of an individual, or (b) in the case of a corporation or other entity, an officer or an employee who devoted substantive attention to matters of such nature during the ordinary course of his employment. A Person has "constructive knowledge" of those matters which the individual involved could reasonably be expected to have as a result of undertaking an investigation of such a scope and extent as a reasonably prudent man would undertake concerning the particular subject matter. 3 "LETTER OF INTENT" means that certain Letter of Intent between James V. Gallant, the Company and Buyer, dated March 5, 1997. "LIABILITY" means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes. "MOST RECENT BALANCE SHEET" means the balance sheet contained within the Most Recent Financial Statements. "MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section 2.3(h) below. "MOST RECENT FISCAL MONTH END" has the meaning set forth in Section 2.3(h) below. "MOST RECENT FISCAL YEAR END" has the meaning set forth in Section 2.3(h) below. "MULTIEMPLOYER PLAN" has the meaning set forth in Section 3(37) of ERISA. "ORDINARY COURSE OF BUSINESS" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). "PARTY" has the meaning set forth in the preface above. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "PRIVATE PLACEMENT" has the meaning set forth in Section 1.6 below. "PROCESS AGENT" has the meaning set forth in Section 7.17 below. "PURCHASE PRICE" has the meaning set forth in Section 1.3 below. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "SECURITY INTEREST" means any mortgage, deed of trust, pledge, lien, encumbrance, charge, or other security interest, other than (a) mechanic's, materialmen's, and similar liens, (b) liens for Taxes not yet due and payable, (c) purchase money liens and liens securing rental payments under capital lease arrangements, and (d) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money. "SELLER" has the meaning set forth in the first paragraph above. 4 "SUBSIDIARY" means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors. "TAX" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Sec. 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "TAX RETURN" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "THIRD PARTY CLAIM" has the meaning set forth in Section 6.4 below. 1.2 AGREEMENT TO PURCHASE AND SELL ACQUIRED SHARES. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, all of the Acquired Shares for the consideration specified below in Section 1.3. 1.3 PURCHASE PRICE. The purchase price for the Acquired Shares shall be for the aggregate consideration (the "Purchase Price") consisting of 400,000 shares of the Buyer's Common Stock. At the Closing the Buyer and the Seller shall enter into a registration rights agreement (the "Registration Rights Agreement"), on mutually acceptable terms, which will entitle Seller to receive "piggyback" registration rights to participate as a selling shareholder in up to two public offerings of Common Stock by Buyer, if any, occurring more than six months after the date hereof and not later than four years after the date hereof, subject to reasonable and customary terms and conditions, including the right of the managing underwriter to cut back the number of shares to be sold by any selling shareholder as a result of market conditions. In addition, the Registration Rights Agreement shall provide that, beginning one year after the date hereof, the Seller shall receive a one-time right to require registration of not less than 50% of all of the Common Stock received by Seller pursuant hereto, subject to reasonable and customary terms and conditions. 1.4 EMPLOYMENT AGREEMENT. At the Closing, immediately following Buyer's acquisition of the Acquired Shares, the Company and James V. Gallant shall execute and deliver an Executive Employment Agreement in the form attached as Exhibit A (the "Executive Employment Agreement"), providing for the employment of Mr. Gallant as President of the Company for an initial term of three years. Any shares of Buyer's Common Stock acquired by Mr. Gallant upon the exercise of stock options granted pursuant to the terms of the Executive Employment Agreement shall also be entitled to the benefits of the Registration Rights Agreement. 1.5 THE CLOSING. The closing of the transactions contemplated by this Agreement (the "CLOSING") shall take place at the offices of Chamberlain, Hrdlicka, White, Williams & Martin in Houston, Texas, commencing at 9:00 a.m. local time on the second business day following the 5 satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other date as the Buyer and the Seller may mutually determine (the "CLOSING DATE"); provided, however, that the Closing Date shall be no later than July 15, 1997. 1.6 ADDITIONAL EQUITY FINANCING. It is contemplated that, in order to obtain the equity capital necessary for the consummation of the transactions contemplated by this Agreement, Buyer will conduct a private offering of not less than $6,000,000 of Buyer's equity securities (the "PRIVATE PLACEMENT"), pursuant to an exemption from registration under the Securities Act. The Buyer intends to apply the proceeds of the Private Placement approximately as follows: (i) $500,000 to conversion of certain outstanding bridge financing to (ii)$2,000,000 pursuant to the provisions of Section 5.2(e) hereof, (iii)$1,000,000 to the working capital requirements of Quantum Geophysical, Inc., a wholly-owned subsidiary of the Buyer after the Closing, (iv)$2,150,000 for the repayment of certain indebtedness of the Buyer, and (v)$350,000 to the Buyer's working capital requirements of the Buyer after the Closing. 1.7 EMPLOYEES. Prior to or at the Closing, Seller will permit or cause the Company to permit Buyer to offer continued employment to some or all of the individuals that are employees of the Company immediately prior to Closing. The Buyer shall have full and absolute discretion in determining the terms, conditions and benefits relating to such employment. Nothing contained in this Agreement shall obligate the Buyer to continue the employment of any employee (other than Mr. Gallant, who will be employed after the Closing pursuant to the terms of the Executive Employment Agreement), nor is this Section 1.8 intended to create any claim or right on the part of the employee of the Company and no such employee shall be entitled to assert any such claim. 1.8 DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will deliver to the Buyer the various certificates, instruments, and documents referred to in Section 5.1 below, (ii) the Buyer will deliver to the Seller the various certificates, instruments, and documents referred to in Section 5.2 below, (iii) the Seller will deliver to the Buyer a stock certificate representing all of the Acquired Shares, endorsed in blank or accompanied by a duly executed assignment document, (iv) the Buyer will deliver to the Seller the consideration specified in Section 1.3 above , (v) the Buyer and the Seller shall have executed the Registration Rights Agreement specified in Section 1.3 above, and (vi) the Company and Mr. Gallant shall execute and deliver the Executive Employment Agreement. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents and warrants to the Buyer that the statements contained in this Section 2.1 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 2.1 with respect to Seller). 6 (a) AUTHORIZATION OF TRANSACTION. The Seller has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms and conditions. The Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. (b) NONCONTRAVENTION. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Seller is subject or, or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Seller is a party or by which it is bound or to which any of Seller's assets is subject. (c) BROKERS' FEES. The Seller has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. (d) INVESTMENT. The Seller (A) understands that the Buyer Common Stock has not been, and, except as contemplated by the Registration Rights Agreement, will not be, registered under the Securities Act, or under any state securities laws, and is being offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering, (B) is acquiring the Buyer Common Stock for its own account for investment purposes, and not with a view to the distribution thereof, (C) is a sophisticated investor with knowledge and experience in business and financial matters, (D) has received certain information concerning the Buyer, and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Buyer Common Stock, and (E) is able to bear the economic risk and lack of liquidity inherent in holding the Buyer Common Stock, and (F) the certificate evidencing the shares of Buyer Common Stock will contain legends restricting the transfer thereof. (e) ACQUIRED SHARES. The Seller holds of record and owns beneficially the Acquired Shares, free and clear of any restrictions on transfer (other than any restrictions under the Securities Act and state securities laws), Taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. The Acquired Shares constitute all of the issued and outstanding capital stock of the Company. The Seller is not a party to any option, warrant, purchase right, or other contract or commitment that could require the Seller to sell, transfer, or otherwise dispose of any capital stock of the Company (other than as contemplated in this Agreement). The Seller is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any capital stock of the Company. 7 2.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Seller that the statements contained in this Section 2.2 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 2.2). (a) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Buyer is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required. The Buyer has full corporate power and authority and all licenses, permits, and authorizations necessary to carry on the business in which it is engaged and to own and use the properties owned and used by it. The Buyer is not in default or in violation of any provision of its charter or bylaws. (b) AUTHORIZATION OF TRANSACTION. Buyer has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions. Assuming the truth and accuracy of the Seller's representation and warranty in Section 2.1(d) above, the Buyer does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. (c) NONCONTRAVENTION. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of its charter or bylaws or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Buyer is a party or by which any of Buyer's assets is subject (or result in the imposition of any Security Interest upon any of its assets). (d) BROKERS' FEES. The Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Seller could become liable or obligated. (e) INVESTMENT. The Buyer is not acquiring the Acquired Shares with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act. (f) BUYER'S COMMON STOCK. The shares of Buyer Common Stock to be issued to Seller pursuant to Section 1.3 above and to Mr. Gallant pursuant to the Executive Employment Agreement will be validly issued, fully paid and non-assessable. 8 (g) FINANCIAL STATEMENTS. The Buyer has delivered to the Seller the following financial Statements: (i) The unaudited balance sheet and statement of income, changes in stockholders' equity, and cash flows as of and for the fiscal year ended December 31, 1996 for the Buyer and its subsidiaries; and (ii) Buyer's Quarterly Report on Form 10-QSB for the three months ended March 31, 1997. Such financial statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, present fairly the financial condition of the Buyer as of such dates and the results of operations of the Buyer for such periods, are correct and complete, and are consistent with the books and records of the Buyer (which books and records are correct and complete). Since March 31, 1997, there has not been any material adverse change in the business, financial condition, operations, results of operations, or future prospects of the Buyer. (h) LEGAL COMPLIANCE. The Buyer and its subsidiaries and their respective predecessors have complied in all material respects with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof), and no actions, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply. (i) TAX MATTERS. The Buyer has filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material respects. All Taxes owed by the Buyer (whether or not shown on any Tax Return) have been paid. The Buyer currently is not the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where the Buyer does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Security Interests on any assets of the Buyer or any of its subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax. (j) BUSINESS ACTIVITY. The Buyer has not infringed, misappropriated or otherwise violated any intellectual property rights of third parties, nor does the Buyer have any knowledge of any infringement, misappropriation or violation which will occur as a result of the continued operation of the Buyer's business as now conducted or as presently proposed to be conducted. (k) TANGIBLE ASSETS. The Buyer and its subsidiaries own or lease all buildings, machinery, equipment and other tangible assets necessary for the conduct of their businesses as presently conducted and as presently proposed to be conducted. Each such tangible asset is free from defects (patent and latent), has been maintained in accordance with normal industry practice, is in good operation condition and repair (subject to normal wear and tear), and is suitable for the purposes for which it presently is used and presently is proposed to be used. (l) LITIGATION. Neither the Buyer nor any of its subsidiaries (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a party or is 9 threatened to be made a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator. The Buyer does not have any reason to believe that any such action, suit, proceeding, hearing, or investigation may be brought or threatened against the Company or any of its subsidiaries. (m) PUBLIC FILINGS. Each of Buyer's public filings under the Securities Exchange Act contains the information required therein and is complete and correct in all materials respects (except that Buyer's Form 10-QSB for the year ended December 31, 1996, will be required to be supplemented with appropriate financial statements promptly after the completion of the Private Placement). The capitalization of Buyer is as set forth in such filings. (n) DISCLOSURE. The representations and warranties contained in this Section 2.2 do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 2.2 not misleading. 2.3 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. The Seller and the Company, jointly and severally, represent and warrant to the Buyer that the statements contained in this Section 2.3 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were sub stituted for the date of this Agreement throughout this Section 2.3), except as set forth in the disclosure schedule to be delivered by the Seller to the Buyer on the Closing Date hereof and initialed by the Parties (the "DISCLOSURE SCHEDULE"). Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Disclosure Schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other item itself). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 2.3. (a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Michigan. The Company is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required. The Company has full corporate power and authority and all licenses, permits, and authorizations necessary to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. Section 2.3(a) of the Disclosure Schedule lists the directors and officers of the Company. The Seller has delivered to the Buyer correct and complete copies of the charter and bylaws of the Company, as amended to date. The minute book (containing the records of meetings of the shareholders, the board of directors, and any committees of the board of directors), the stock certificate books, and the stock record books of the Company are correct 10 and complete. The Company is not in default under or in violation of any provision of its charter or bylaws. (b) AUTHORIZATION OF TRANSACTION. The Company has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Company, enforceable in accordance with its terms and conditions. (c) CAPITALIZATION. Section 2.3(c) of the Disclosure Schedule sets forth a true and accurate schedule stating (i) the number of shares of authorized capital stock of each class of the Company's stock, (ii) the number of issued and outstanding shares of each class of its capital stock, the names of the holders thereof, and the number of shares held by each such holder, and (iii) the number of shares of its capital stock held in treasury. All of the issued and outstanding shares of the Company's capital stock, including the Acquired Shares, have been duly authorized, are validly issued, fully paid, and nonassessable, and are held of record by the respective Persons set forth in Section 2.3(c) of the Disclosure Schedule. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require the Company to issue, sell, or otherwise cause to become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Company. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the capital stock of the Company. (d) NONCONTRAVENTION. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Company is subject or any provision of the charter or bylaws of the Company or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Company is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Security Interest upon any of its assets). The Company does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement. (e) BROKERS' FEES. The Company has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement. (f) TITLE TO ASSETS. The Company has good and marketable title to, or a valid leasehold interest in, the properties and assets used by them, located on their premises, or shown on the unaudited balance sheet as of March 31, 1997 or acquired after the date thereof, 11 free and clear of all Security Interests, except as set forth in Section 2.3(f) of the Disclosure Schedule. (g) SUBSIDIARIES, ETC. The Company does not own of record or beneficially, directly or indirectly, (i) any shares of outstanding capital stock or securities convertible into capital stock of any other corporation or (ii) any participating interest in any partnership, joint venture, limited liability company, or other non-corporate business enterprise, except as listed in Section 2.3(g) of the Disclosure Schedule. (h) FINANCIAL STATEMENTS. Attached hereto as Exhibit 2.3(h) are the following financial statements (collectively the "FINANCIAL STATEMENTS"): (i) the reviewed balance sheet and statements of income, changes in stockholders' equity, and cash flows as of and for the fiscal year ended August 31, 1996 (the "MOST RECENT FISCAL YEAR END") for the Company; and (ii) unaudited balance sheet and statements of income (the "MOST RECENT FINANCIAL STATEMENTS") as of and for the seven months ended March 31, 1997 (the "MOST RECENT FISCAL MONTH END") for the Company. The Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, present fairly the financial condition of the Company as of such dates and the results of operations of the Company for such periods, are correct and complete, and are consistent with the books and records of the Company (which books and records are correct and complete). (i) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most Recent Fiscal Year End, there has not been any material adverse change in the Business, financial condition, operations, results of operations, or future prospects of the Company. Without limiting the generality of the foregoing, since that date, except as set forth in Section 2.3(i) of the Disclosure Schedule, the Company has not: (i) sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than for a fair consideration in the Ordinary Course of Business; (ii) entered into any agreement, contract, lease or license (or series of related agreements, contracts, leases, and licenses) involving more than $10,000; (iii) accelerated, terminated, modified, or canceled any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) involving more than $10,000 to which the Company is a party or by which the Company is bound, nor has any other Person accelerated, terminated, modified, or canceled any of the foregoing; (iv) imposed any Security Interests upon any of its assets, tangible or intangible; (v) made any capital expenditure (or series of related capital expenditures) involving more than $10,000; 12 (vi) made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions); (vii) issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease obligation either involving more than $10,000 singly or $50,000 in the aggregate; (viii) delayed or postponed the payment of accounts payable and other Liabilities outside the Ordinary Course of Business; (ix) canceled, compromised, waived, or released any right or claim (or series of related rights and claims) involving more than $1,000; (x) granted any license or sublicense of any rights under or with respect to any Intellectual Property; (xi) made or authorized any change in the charter or bylaws of the Company; (xii) issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock; (xiii) declared, set aside, or paid any dividend or made any distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock; (xiv) experienced or suffered any damage, destruction, or loss (whether or not covered by insurance) to its property; (xv) made any loan to, or entered into any other transaction with, any of its directors, officers, and employees; (xvi) entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement; (xvii) granted any increase in the base compensation of any of its directors, officers, and employees outside the Ordinary Course of Business; (xviii) adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Employee Benefit Plan); 13 (xix) made any other change in employment terms for any of its directors, officers, and employees outside the Ordinary Course of Business; (xx) made or pledged to make any charitable or other capital contribution; or (xxi) become aware of any other material occurrence, event, incident, action, failure to act, or transaction involving the Company. (j) UNDISCLOSED LIABILITIES. Except as described in Section 2.3(j) of the Disclosure Schedule, the Company has no Liability (and there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any of them giving rise to any Liability), except for (i) Liabilities set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) and (ii) Liabilities which have arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of law). (k) LEGAL COMPLIANCE. The Company is in compliance in all material respects with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply. (l) TAX MATTERS. (i) The Company has filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material respects. All Taxes owed by the Company (whether or not shown on any Tax Return) have been paid. The Company currently is not the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Security Interests on any of the assets of the Company that arose in connection with any failure (or alleged failure) to pay any Tax. (ii) The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. (iii) No Seller or director or officer (or employee responsible for Tax matters) of the Company expects any authority to assess any additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax Liability of the Company either (A) claimed or raised by any authority in writing or (B) as to which any of the Seller and the directors and officers (and employees 14 responsible for Tax matters) of the Company has knowledge, based upon personal contact with any agent of such authority. Section 2.3(l) of the Disclosure Schedule lists all federal, state, local, and foreign income Tax Returns filed with respect to the Company for taxable periods ended on or after August 31, 1994, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Seller has delivered to the Buyer correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by the Company since August 31, 1994. (iv) The Company has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. (v) The Company is not a party to any Tax allocation or sharing agreement. The Company (A) has not been a member of an Affiliated Group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) or (B) has no Liability for the Taxes of any Person (other than the Company) under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. (vi) Section 2.3(l) of the Disclosure Schedule sets forth the following information with respect to the Company as of the most recent practicable date: (A) the basis of the Company in its assets and (B) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign tax, or excess charitable contribution allocable to the Company. (vii) The unpaid Taxes of the Company (A) did not, as of the Most Recent Fiscal Month End, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) and (B) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company in filing its Tax Returns. (m) REAL PROPERTY. (i) The Company does not own real property. (ii) Section 2.3(m)(ii) of the Disclosure Schedule lists and describes briefly all real property leased or subleased to the Company. Section 2.3(m)(ii) of the Disclosure Schedule also identifies the leased or subleased properties. The Seller has delivered to the Buyer correct and complete copies of the leases and subleases listed in Section 2.3(m)(ii) of the Disclosure Schedule (as amended to date). With respect to each lease and sublease listed in Section 2.3(m)(ii) of the Disclosure Schedule, to the knowledge of Seller: 15 (A) the lease or sublease is legal, valid, binding, enforceable, and in full force and effect; (B) the lease or sublease will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (C) no party to the lease or sublease is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification, or acceleration thereunder; (D) no party to the lease or sublease has repudiated any provision thereof; (E) there are no disputes, oral agreements, or forbearance programs in effect as to the lease or sublease; (F) with respect to each sublease, the representations and warranties set forth in subsections (A) through (E) above are true and correct with respect to the underlying lease; and (G) the Company has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold or subleasehold. (n) OWNED INTELLECTUAL PROPERTY. Section 2.3(n) of the Disclosure Schedule sets forth a list of Intellectual Property owned by the Company. With respect to each of such item of Intellectual Property, to the knowledge of Seller: (i) the Company is the sole and exclusive owner and has the sole and exclusive right to use the item in the conduct of the Business; (ii) no proceedings have been instituted, are pending or are threatened which challenge the validity, enforceability, use or ownership thereof; (iii) the item (A) does not infringe upon or otherwise violate the rights of others, (B) is not being infringed upon by others, (C) is not subject to any outstanding order, decree, judgment, stipulation or charge; (iv) no license, sublicense or agreement pertaining to the item has been granted by the Company; (v) the Company has not received any charge of interference or infringement with respect to the item; 16 (vi) the Company has not agreed to indemnify any Person for or against any infringement with respect to the item; (vii) there is no invention or application therefor or similar property which infringes upon the item; (viii) the transactions contemplated by this Agreement will have no adverse effect on the Company's right, title and interest in the item; (ix) the Company has taken all steps necessary to protect the rights set forth in Section 2.3(n) of the Disclosure Schedule and will continue to maintain those rights prior to the Closing so as not to adversely affect the validity or enforcement of such rights; and (x) the Company has supplied Buyer with true and complete copies of all written documentation evidencing its ownership of the item and of all licenses and other contracts related thereto. To the best Knowledge of the Company and the Seller, there are no inventions, new products or methods of manufacturing or processing developed by any competitors or others which are expected by the Company or the Seller to supersede or make obsolete the products or processes of the Company within 18 months of the date hereof. (o) USED INTELLECTUAL PROPERTY. Section 2.3(o) of the Disclosure Schedule sets forth a list describing all of the Intellectual Property of others which the Company practices or uses that is material to the Company's Business. With respect to each of such item of Intellectual Property to the knowledge of Seller: (i) a license agreement covering the item has been validly executed and delivered by the Company and by the other parties thereto and is in full force and effect; (ii) no event has occurred which constitutes a breach of such license agreement, the Company has not repudiated and no other party thereto has repudiated any provisions thereof and there are no disputes, oral arrangements or delayed payments programs in effect as to any such license agreement; (iii) the Company has supplied Buyer with a true and correct copy of the license agreement; and (iv) the transaction contemplated by this Agreement will have no adverse effect on the Company's ability to continue using or practicing each such item. (p) BUSINESS ACTIVITY. The Company has not infringed, misappropriated or otherwise violated any intellectual property rights of third parties, nor does the Company have 17 any Knowledge of any infringement, misappropriation or violation which will occur as a result of the continued operation of the Company's business as now conducted or as presently proposed to be conducted. (q) TANGIBLE ASSETS. The Company owns or leases all buildings, machinery, equipment, and other tangible assets necessary for the conduct of its business as presently conducted. Each such tangible asset has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear), and is suitable for the purposes for which it presently is used and presently is proposed to be used. (r) CONTRACTS. Section 2.3(r) of the Disclosure Schedule lists the following contracts and other agreements to which the Company is a party: (i) any agreement (or group of related agreements) for the lease of personal property to or from any Person providing for lease payments in excess of $1,000 per annum; (ii) any agreement (or group of related agreements) for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than one year, result in a material loss to the Company, or involve consideration in excess of $1,000. (iii) any agreement concerning a partnership or joint venture; (iv) any agreement (or group of related agreements) under which it has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, in excess of $1,000 or under which it has imposed a Security Interest on any of its assets, tangible or intangible; (v) any agreement concerning confidentiality or noncompetition; (vi) any agreement with any of the Seller or its Affiliates (other than the Company); (vii) any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other plan or arrangement for the benefit of its current or former directors, officers, and employees; (viii) any collective bargaining agreement; (ix) any agreement for the employment of any individual on a full-time, part-time, consulting, or other basis providing annual compensation in excess of $20,000 or providing severance benefits; 18 (x) any agreement under which it has advanced or loaned any amount to any of its directors, officers, and employees; (xi) any agreement under which the consequences of a default or termination could have an adverse effect on the business, financial condition, operations, results of operations, or future prospects of the Company; or (xii) any other agreement (or group of related agreements) the performance of which involves consideration in excess of $5,000. The Seller has delivered to the Buyer a correct and complete copy of each written agreement listed in Section 2.3(r) of the Disclosure Schedule (as amended to date) and a written summary setting forth the terms and conditions of each oral agreement referred to in Section 2.3(r) of the Disclosure Schedule. With respect to each such agreement: (A) the agreement is legal, valid, binding, enforceable, and in full force and effect; (B) the agreement will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (C) no party is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration, under the agreement; and (D) no party has repudiated any provision of the agreement. (s) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable of the Company are reflected properly on their books and records, are valid receivables subject to no setoffs or counterclaims, are current and collectible, subject to the reserve for bad debts set forth on the Company's balance sheet for the Most Recent Fiscal Month End, and are expected to be collected in accordance with their terms at their recorded amounts. (t) POWERS OF ATTORNEY. There are no outstanding powers of attorney executed on behalf of the Company. (u) INSURANCE. Section 2.3(u) of the Disclosure Schedule sets forth the following information with respect to each insurance policy (including policies providing property, casualty, liability, and workers' compensation coverage and bond and surety arrangements) to which the Company has been a party, a named insured, or otherwise the beneficiary of coverage at any time within the past three years: (i) the name, address, and telephone number of the agent; (ii) the name of the insurer, the name of the policyholder, and the name of each covered insured; (iii) the policy number and the period of coverage; 19 (iv) the scope (including an indication of whether the coverage was on a claims made, occurrence, or other basis) and amount (including a description of how deductibles and ceilings are calculated and operate) of coverage; and (v) a description of any retroactive premium adjustments or other loss-sharing arrangements. With respect to each such insurance policy, to the knowledge of Seller: (A) the policy is legal, valid, binding, enforceable, and in full force and effect; (B) the policy will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (C) neither any of the Company nor any other party to the policy is in breach or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit termination, modification, or acceleration, under the policy; and (D) no party to the policy has repudiated any provision thereof. The Company has been covered during the past three years by insurance in scope and amount customary and reasonable for the businesses in which it has engaged during the aforementioned period. Section 2.3(u) of the Disclosure Schedule describes any self-insurance arrangements affecting the Company. (v) LITIGATION. Section 2.3(v) of the Disclosure Schedule sets forth each instance in which the Company (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a party or is threatened to be made a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or adminis trative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator. Unless specifically noted in Section 2.3(v) of the Disclosure Schedule, none of the actions, suits, proceedings, hearings, and investigations set forth in Section 2.3(v) of the Disclosure Schedule could reasonably be expected to result in any adverse change in the business, financial condition, operations, results of operations, or future prospects of the Company. None of the Seller and the directors and officers (and employees with responsibility for litigation matters) of the Company has any reason to believe that any such action, suit, pro ceeding, hearing, or investigation may be brought or threatened against the Company. (w) WARRANTY. Each product and service sold or delivered by the Company has been in material conformity with all applicable contractual commitments and all express and implied warranties, and the Company has no material Liability (and there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against the Company giving rise to any material Liability) for replacement or correction thereof or other damages in connection therewith. No product or service sold or delivered by the Company is subject to any guaranty, warranty, or other indemnity beyond the applicable standard terms and conditions of sale or lease. Section 2.3(w) of the Disclosure Schedule includes copies of the standard terms and conditions of sale for the Company (containing applicable guaranty, warranty, and indemnity provisions). 20 (x) EMPLOYEES. To the Knowledge of the Seller and the directors and officers of the Company, no executive, key employee, or group of employees has any plans to terminate employment with the Company. The Company is not a party to or bound by any collective bargaining agreement, nor has it experienced any strikes, grievances, claims of unfair labor practices, or other collective bargaining disputes. The Company has not committed any unfair labor practice. None of the Seller and the directors and officers (and employees with responsibility for employment matters) of the Company has any Knowledge of any organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of the Company. (y) EMPLOYEE BENEFITS. The Company does not maintain nor ever has maintained or contributes, ever has contributed, or ever has been required to contribute to any Employee Benefit Plan. The Company has no Liability for any contribution to any Employee Benefit Plan. (z) GUARANTIES. The Company is not a guarantor or otherwise is liable for any Liability or obligation (including indebtedness) of any other Person. (aa) ENVIRONMENT, HEALTH, AND SAFETY. The Company has complied in all material respects with all Environmental, Health, and Safety Laws, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against the Company alleging any failure so to comply. Without limiting the generality of the preceding sentence, the Company has obtained and has been in compliance with all of the terms and conditions of all permits, licenses, and other authorizations which are required under, and has complied in all material respects with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules, and timetables which are contained in, all Environmental, Health, and Safety Laws. (bb) CERTAIN BUSINESS RELATIONSHIPS. None of the Seller and its Affiliates has been involved in any business arrangement or relationship with the Company within the past 12 months, and none of the Seller or its Affiliates either owns any asset, tangible or intangible, which is used in the Business of the Company or is owed any amount by the Company or owes any amount to the Company. (cc) DISCLOSURE. The representations and warranties contained in this Section 2.3 do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 2.3 not misleading. ARTICLE III. CONDUCT AND TRANSACTIONS PRIOR TO CLOSING 3.1 GENERAL. The Parties agree that with respect to the period between the execution of this Agreement and the Closing, each of the Parties will use his or its best efforts to take all action 21 and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Article V below). 3.2 NOTICES AND CONSENTS. The Seller will cause the Company to give any notices to third parties, and will cause the Company to obtain any third-party consents in connection with the matters referred to in Sections 2.3(c) and 2.3(d) above. Each of the Parties will (and the Seller will cause the Company to) give any notices to, make any filings with, and use its best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies in connection with the matters referred to in Sections 2.1(a), 2.1(b), 2.3(c) and 2.3(d) above. 3.3 OPERATION OF BUSINESS. Seller covenants and agrees that, prior to the Closing, unless Buyer shall otherwise agree and except as otherwise expressly contemplated or permitted by this Agreement, the Seller will not cause or permit the Company to engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business. Without limiting the generality of the foregoing, the Seller will not cause or permit the Company to (i) declare, set aside, or pay any dividend or make any distribution with respect to its capital stock or redeem, purchase, or otherwise acquire any of its capital stock, (ii) create any Subsidiaries, or (iii) otherwise engage in any practice, take any action, or enter into any transaction of the sort described in Section 2.3(i) above. 3.4 PRESERVATION OF BUSINESS. The Seller will use all reasonable efforts to: (i) cause the Company to keep its Business and properties substantially intact, keep in full force and effect all rights, licenses, permits and franchises relating to its Business or properties, keep available the services of its officers and employees as a group and maintain satisfactory relationships with suppliers, distributors, customers and others having business relationships with the Company; (ii) report on a regular basis to representatives of Buyer regarding operational matters and the general status of ongoing operations; (iii) not to take any action which would render any representation or warranty made by the Company in this Agreement untrue at any time prior to the Closing if then made; and (iv) notify Buyer of any emergency or other change in the normal course of its Business or in the operation of its properties and of any tax audits, tax claims, governmental or third party complaints, investigation or hearings (or communications indicating that the same may be contemplated) if such emergency, change, audit, claim, complaint, investigation or hearing would reasonably be material, individually or in the aggregate, to the financial condition, results of operations or Business of the Company, or to the Seller's, Company's and Buyer's ability to consummate the transactions contemplated by this Agreement. 3.5 FULL ACCESS. The Seller will permit, and the Seller will cause the Company to permit, representatives of the Buyer to have full access, at all reasonable times, to all premises, properties, personnel, books, records (including Tax records), contracts, and documents of or pertaining to the Company. 3.6 NOTICE OF DEVELOPMENTS. The Seller will give prompt written notice to the Buyer of any material adverse development causing a breach of any of the representations and warranties in Section 2.1 or 2.3 above. Each Party will give prompt written notice to the others of any material 22 adverse development causing a breach of any of his or its own representations and warranties contained in Article II above. No disclosure by any Party pursuant to this Section 3.6, however, shall be deemed to amend or supplement the Disclosure Schedule or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant. 3.7 EXCLUSIVITY. The Seller will not (and the Seller will not cause or permit the Company to) (i) solicit, initiate, or encourage the submission of any proposal or offer from any Person relating to the acquisition of any capital stock or other voting securities, or any substantial portion of the assets of, the Company (including any acquisition structured as a merger, consolidation, or share exchange) or (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing. The Seller will notify the Buyer immediately if any Person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing. 3.8 CONFIDENTIALITY. (a) All Confidential Information (as hereafter defined), acquired by the Buyer with respect to the Company shall be (i) maintained in strict confidence, (ii) used only for the purpose of and in connection with evaluating the transactions contemplated by this Agreement, and (iii) disclosed only to employees and duly authorized agents and representatives of the Buyer who have been informed of the obligations of the Buyer under this Section 3.8. The Buyer will take all reasonable measures to restrain its representatives and agents from prohibited or unauthorized disclosure of Confidential Information. For purposes of this Agreement, "Confidential Information" shall mean all information acquired by the Buyer from the Company or the Seller with respect to the Business, other than information generally available to the public, other than as a result of disclosure by the Buyer in violation of this Section 3.8 and information which is rightfully disclosed to the Buyer on a nonconfidential basis from a source other than the Company or its representatives, provided such source is not known by the Buyer to be bound by a confidentiality agreement with, or other obligation of secrecy to, the Company or another party. If the transactions contemplated by this Agreement are not consummated, all Confidential Information in written or printed or other tangible form (either copies or originals) shall be returned to the Company. (b) In the event that the Buyer is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, the Buyer will notify the Seller promptly of the request or requirement so that the Seller may seek an appropriate protective order or waive compliance with the provisions of this Section 3.8. If, in the absence of a protective order or the receipt of a waiver hereunder, the Buyer is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, the Buyer may disclose the Confidential Information to the tribunal; provided, however, that the disclosing Person shall use his reasonable best efforts to obtain, at the request of the Seller, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as the Seller shall designate. 23 ARTICLE IV. POST-CLOSING COVENANTS 4.1 GENERAL. If at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under Article VI below). The Seller acknowledges and agrees that from and after the Closing, the Buyer will be entitled to possession of all documents, books, records (including Tax records), agreements, and financial data of any sort relating to the Company. 4.2 LITIGATION SUPPORT. In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Company, each of the other Parties will cooperate with him or it and his or its counsel in the contest or defense, make available their personnel, and provide such testimony and access to their books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under Article VI below). 4.3 TRANSITION. The Seller will take no action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier, or other business associate of the Company from maintaining the same business relationships with the Company and after the Closing as it maintained with the Company prior to the Closing. The Seller will refer all customer inquiries relating to the Business of the Company to the Buyer from and after the Closing. 4.4 CONFIDENTIALITY. The Seller will treat and hold as such all of the Confidential Information and refrain from using any of the Confidential Information except in connection with this Agreement. In the event that the Seller is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, the Seller will notify the Buyer promptly of the request or requirement so that the Buyer may seek an appropriate protective order or waive compliance with the provisions of this Section 4.4. If, in the absence of a protective order or the receipt of a waiver hereunder, the Seller is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, the Seller may disclose the Confidential Information to the tribunal; provided, however, that the disclosing Seller shall use his reasonable best efforts to obtain, at the request of the Buyer, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as the Buyer shall designate. 24 4.5 RULE 144. The Buyer will use all reasonable efforts to comply with the requirements of the Securities Act and the Securities Exchange Act after the Closing in order to make the benefits of Rule 144 of the Securities and Exchange Commission under the Securities Act available to Seller and Mr. Gallant. ARTICLE V. CONDITIONS OF CLOSING 5.1 CONDITIONS OF OBLIGATIONS OF THE BUYER. The obligations of the Buyer to consummate the transactions to be performed by it in connection with the Closing are subject to satisfaction of the following conditions: (a) the representations and warranties set forth in Section 2.1 and Section 2.3 above shall be true and correct in all material respects at and as of the Closing Date; (b) the Seller and the Company shall have performed all obligations and agreements and complied with all of their covenants in this Agreement in all material respects at or before the Closing; (c) the Company and/or Seller shall provide evidence, in form and substance satisfactory to Buyer, that there have been obtained all consents, approval and authorizations required for the consummation of the transactions contemplated by this Agreement; (d) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (C) affect adversely the right of the Buyer to own the Acquired Shares and to control the Company, or (D) affect adversely the right of the Company to own its assets and to operate the Business (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (e) the Seller shall have delivered to the Buyer a certificate dated as of the Closing Date and executed by both the Seller and the President of the Company to the effect that each of the conditions specified above in Sections 5.1(a) to 5.1(d) is satisfied in all respects; (f) the Buyer shall have received from counsel to the Seller, acceptable to Buyer, an opinion in form and substance acceptable to the Buyer, addressed to the Buyer, dated as of the Closing Date and addressing the matters referred to in Sections 2.1(a), (b) and (e) and 2.3(a)-(d) above; (g) Buyer shall have completed the Private Placement and all transactions related thereto; 25 (h) The investigation by Buyer and its representatives in connection with the transactions contemplated by this Agreement shall not have caused the Buyer or its representatives to become aware of any facts or circumstances relating to the Business, operations, assets, properties, liabilities, financial condition, results of operation or affairs of the Company that, in the sole judgment of the Buyer, make its inadvisable for the Buyer to proceed with the purchase of the Acquired Shares; (i) Buyer shall have received releases, in form satisfactory to the Buyer, of any and all claims and liabilities of Seller, Signature Geophysical Services Incorporated and Kahuna Energy, Inc. against the Company; (j) Seller shall have delivered to the Buyer executed contracts for the performance of geophysical services for GEKO/Prakla's Weeks Island project (providing for a contract price of $37,500 per square mile and additional payments to Input/Output, Inc. of $1,400,000) and SMK Energy Corporation's Interdomal project; (k) Seller shall have delivered to the Buyer the Disclosure Schedule, in form and substance satisfactory to Buyer, in its sole discretion; (l) Buyer's board of directors shall have approved and authorized this Agreement and the transactions contemplated by this Agreement; and (m) all actions to be taken by the Seller in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be satisfactory in form and substance to the Buyer. The Buyer may waive any condition specified in this Section 5.1 if it executes a writing so stating at or prior to the Closing. 5.2 CONDITIONS OF OBLIGATIONS OF THE SELLER. The obligations of the Seller to consummate the transactions to be performed by Seller in connection with the Closing are subject to satisfaction of the following conditions: (a) the representations and warranties set forth in Section 2.2 above shall be true and correct in all material respects at and as of the Closing Date; (b) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (c) no action, suit, or proceeding shall be pending before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following 26 consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (d) the Buyer shall have delivered to the Seller a certificate to the effect that each of the conditions specified above in Sections 5.2(a) to 5.2(c) is satisfied in all respects; (e) the Buyer shall have delivered to the Seller evidence, satisfactory to the Seller, that the Private Placement and all transactions related thereto shall have been completed and that the Buyer will make available to the Company immediately after Closing (i) up to $1,000,000 for the payment of the Company's liabilities and (ii) an additional $1,000,000 for satisfaction of the Company's working capital requirements after the Closing; (f) the Seller shall have received from Chamberlain, Hrdlicka, White, Williams & Martin, counsel to the Buyer, an opinion acceptable to the Seller, addressed to the Seller, dated as of the Closing Date and addressing the matters referred to in Sections 2.2(a)-(c) and (f) above; (g) the Seller or Mr. Gallant shall have received from the Buyer funds sufficient to pay the Company's indebtedness to Seller, Signature Geophysical Services, Incorporated and Kahuna Energy, Inc.; and (h) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be satisfactory in form and substance to the Seller. The Seller may waive any condition specified in this Section 5.2 if they execute a writing so stating at or prior to the Closing. ARTICLE VI. REMEDIES FOR BREACHES OF AGREEMENT 6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the representations and warranties of the Parties contained in this Agreement shall survive the Closing hereunder and continue in full force and effect for a period of three (3) years thereafter, except for representations regarding Company's Tax Liabilities, which representations will expire and be terminated on the date of expiration of the statute of limitations for collection of such Tax Liability in question. 6.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER. (a) In the event the Seller or the Company breaches (or in the event any third party alleges facts that, if true, would mean the Seller has breached) any of their representations, warranties, and covenants contained herein and, provided that the Buyer makes a written claim for indemnification against the Seller pursuant to Section 7.9 below within the survival 27 period specified in Section 6.1 hereof, then the Seller agrees to indemnify each of the Buyer from and against the entirety of any Adverse Consequences the Buyer may suffer through and after the date of the claim for indemnification (including any Adverse Consequences the Buyer may suffer after the end of the survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach (or the alleged breach). Notwithstanding the foregoing to the contrary, Seller shall not be required to indemnify the Buyer from any Adverse Consequences pursuant to this Section 6.2(a) until the aggregate amount of such Adverse Consequences exceeds $10,000. (b) The Seller agrees to indemnify the Buyer from and against the entirety of any Adverse Consequences the Buyer may suffer resulting from, arising out of, relating to, in the nature of, or caused by any Liability of the Company for the unpaid Taxes of any Person (other than the Company) under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. (c) The Seller agrees to indemnify the Buyer from and against one-half of the first $500,000 of any Adverse Consequences (including the Company's attorneys' fees) the Buyer may suffer resulting from, arising out of , relating to, in the nature of, or caused by any litigation among the Company, Sonat Exploration Company ("Sonat") and Vanguard Geophysical Services, Inc. In the event the Company recovers any amount of damages from Sonat as a result of any such litigation, (i) Seller shall be entitled to be reimbursed for any amounts paid by Seller pursuant hereto out of a percentage of any such recovery equal to the amounts paid by Seller pursuant hereto divided by the aggregate amount of all Adverse Consequences suffered by Buyer under this Section 6.2(c), and (ii) any additional amount shall be applied first to reimburse the Company for any expenses incurred as a result of such litigation and the balance shall be treated as additional revenue of the Company. 6.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER. In the event the Buyer breaches (or in the event any third party alleges facts that, if true, would mean the Buyer has breached) any of its representations, warranties, and covenants contained herein, provided that the Seller makes a written claim for indemnification against the Buyer pursuant to Section 7.9 below within the survival period specified in Section 6.1 hereof, then the Buyer, as applicable, agree to indemnify the Seller from and against the entirety of any Adverse Consequences the Seller may suffer through and after the date of the claim for indemnification (including any Adverse Consequences the Seller may suffer after the end of the survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach (or the alleged breach). 6.4 MATTERS INVOLVING THIRD PARTIES. (a) If any third party shall notify any Party (the "INDEMNIFIED PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which may give rise to a claim for indemnification against any other Party (the "INDEMNIFYING PARTY") under this Article VI, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the 28 Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced. (b) Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified Party in writing within fifteen (15) days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against the entirety of any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim, (B) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder, (C) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice materially adverse to the continuing business interests of the Indemnified Party, and (E) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. (c) So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 6.4(b) above, (A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably). (d) In the event any of the conditions in Section 6.4(b) above is or becomes unsatisfied, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith), (B) the Indemnifying Parties will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys' fees and expenses), and (C) the Indemnifying Parties will remain responsible for any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Article VI. 6.5 OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory, equitable, or common law remedy any Party may have for breach of representation, warranty, or covenant. 29 ARTICLE VII. MISCELLANEOUS 7.1 TERMINATION OF AGREEMENT. Certain of the Parties may terminate this Agreement as provided below: (a) the Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; (b) the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing (A) in the event the Seller or the Company has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Seller of the breach, and the breach has continued without cure for a period of ten (10) days after the notice of breach or (B) if the Closing shall not have occurred on or before July 15, 1997, by reason of the failure of any condition precedent under Section 5.1 above (unless the failure results primarily from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); and (c) the Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (A) in the event the Buyer has breached any material represen tation, warranty, or covenant contained in this Agreement in any material respect, the Seller has notified the Buyer of the breach, and the breach has continued without cure for a period of ten (10) days after the notice of breach or (B) if the Closing shall not have occurred on or before July 15, 1997 (unless the failure to close results primarily from the Seller or the Company itself breaching any representation, warranty, or covenant contained in this Agreement). 7.2 EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant to Section 7.1 above, all rights and obligations of the Parties hereunder shall terminate without any Liability of any Party to any other Party (except for any Liability of any Party then in breach). 7.3 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of the Buyer and the Seller; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use its reasonable best efforts to advise the other Parties prior to making the disclosure). 7.4 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and to James V. Gallant and their respective successors and permitted assigns. 7.5 ENTIRE AGREEMENT. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, 30 agreements, or representations by or among the Parties, written or oral, to the extent they related in any way to the subject matter hereof including, without limitation, the Letter of Intent. 7.6 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the Buyer and the Seller; provided, however, that the Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates and (ii) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). 7.7 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. 7.8 HEADINGS. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 7.9 NOTICES. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: IF TO THE SELLER OR THE COMPANY: SIGNATURE GEOPHYSICAL SERVICES, INC. 19407 PARK ROW, SUITE 195 HOUSTON, TEXAS 77084 ATTENTION: JAMES V. GALLANT COPY TO: BRACEWELL & PATTERSON, L.L.P. 711 LOUISIANA STREET, SUITE 2900 HOUSTON, TEXAS 77002 ATTENTION: THOMAS W. ADKINS IF TO BUYER: GEOKINETICS INC. 5555 SAN FELIPE, SUITE 780 HOUSTON, TEXAS 77056 ATTENTION: JAY D. HABER COPY TO: CHAMBERLAIN, HRDLICKA, WHITE, WILLIAMS & MARTIN 1200 SMITH STREET, SUITE 1400 HOUSTON, TEXAS 77002 ATTENTION: JAMES J. SPRING, III 31 Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. 7.10 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. 7.11 AMENDMENTS AND WAIVERS. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and the Seller. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. 7.12 SEVERABILITY. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. 7.13 EXPENSES. Each of the Parties will bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. The Seller agrees that the Seller will bear the Seller's costs and expenses (including Seller's legal fees and expenses) in connection with this Agreement or any of the transactions contemplated hereby. Notwithstanding the foregoing to the contrary, the Parties acknowledge that the Company shall pay up to $7,500.00 of legal expenses incurred in connection with the transactions contemplated by this Agreement. 7.14 CONSTRUCTION. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not 32 detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. 7.15 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. 7.16 SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter (subject to the provisions set forth in Section 7.17 below), in addition to any other remedy to which they may be entitled, at law or in equity. 7.17 SUBMISSION TO JURISDICTION. Each of the Parties submits to the jurisdiction of any federal court sitting in Houston, Texas, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each of the Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto. Each Party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at equity. 33 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as of the date first above written. BUYER: GEOKINETICS INC. /s/ JAY D. HABER Jay D. Haber, President SELLER: GALLANT ENERGY, INC. /s/ JAMES V. GALLANT James V. Gallant, President COMPANY: SIGNATURE GEOPHYSICAL SERVICES, INC. /s/ JAMES V. GALLANT James V. Gallant, President James V. Gallant, a Texas resident, hereby fully and unconditionally guarantees the performance by the Seller of all obligations, covenants and agreements of Seller and the Company under the terms of the Agreement (including, but not limited to, the agreements set forth in Sections 2.2, 2.3, 3.1 and 6.2 thereof). /s/ JAMES V. GALLANT JAMES V. GALLANT 34 EX-2.3 4 EXHIBIT 2.3 LETTER AGREEMENT RE ADDITIONAL INVESTMENT LETTER AGREEMENT (hereinafter referred to as this "Agreement"), dated as of July 24, 1997, by and between GEOKINETICS INC., a Delaware corporation (the "Company"), and BLACKHAWK INVESTORS, L.L.C., a Delaware limited liability company ("Blackhawk"). W I T N E S S E T H: WHEREAS, pursuant to a Securities Purchase and Exchange Agreement dated July 18, 1997 (the "Purchase Agreement") among the Company, Blackhawk and certain Holders (as defined therein), (i) Blackhawk purchased (A) 5,041,667 shares of Common Stock of the Company, (B) 171,875 shares of Series A Preferred Stock of the Company and (C) a Shadow Warrant to purchase up to an aggregate of 6,512,095 shares of Common Stock, subject to adjustment, for an aggregate purchase price of $5,500,000, and (ii) the Holders exchanged certain 12% Senior Secured Promissory Notes of the Company and certain of its subsidiaries, in the aggregate principal amount of $500,000, for an aggregate of (A) 458,333 shares of Common Stock, (B) 15,625 shares of Series A Preferred Stock and (C) Shadow Warrants to purchase up to an aggregate of 592,009 shares of Common Stock, subject to adjustment; WHEREAS, Blackhawk desires to make an additional $1,000,000 investment in the Company, on the same terms as its initial investment, except as otherwise provided herein, and the Company desires to accept such investment on such terms and to issue and sell additional securities to Blackhawk as herein provided. NOW, THEREFORE, in consideration of the conditions and mutual agreements hereinafter set forth, the parties hereto agree as follows: 1. The Company will issue and sell to Blackhawk (i) 100,000 shares of a new series of its authorized Series Preferred Stock, par value $10.00 per share, which Preferred Stock shall be designated as Series B Convertible Preferred Stock (the "Series B Convertible Preferred Stock") and (ii) shadow warrants on the same terms as the Blackhawk Shadow Warrants issued on July 18, 1997, except that the maximum aggregate number of shares of Common Stock issuable thereunder shall be re-calculated to take into account any increase in the number of shares of Common Stock issuable under the Subject Warrants (as defined in the Blackhawk Shadow Warrant) that may result from the issuance of the Series B Convertible Preferred Stock or any conversion thereof into shares of Common Stock (the "New Blackhawk Shadow Warrant"), for an aggregate purchase price (the "Purchase Price") of $1,000,000 (or $10.00 per share of Series B Convertible Preferred Stock). The Series B Convertible Preferred Stock shall have identical terms to the Series A Convertible Preferred Stock, except that the automatic conversion date shall be January 1, 1998 instead of the date of the filing of the Charter Amendment, and the shares of Common Stock issuable upon the date of the filing of the Charter Amendment, and the shares of Common Stock issuable upon the conversion thereof, as well as the shares of Common Stock issuable upon any exercise of the New Blackhawk Shadow Warrant, shall be subject to the terms of the Registration Rights Agreement. 2. Blackhawk shall pay the Purchase Price by wire transfer to the Company's account with Frost National Bank contemporaneously with the execution and delivery of this Letter Agreement and, in consideration thereof, (i) the Company agrees to enter into a new securities purchase agreement and related documentation with Blackhawk as soon as practicable, on substantially the terms and conditions of the Purchase Agreement and other related closing documentation (including, without limitation, certified Board resolutions and opinion of counsel with respect to the authorization and issuance of the securities) MUTATIS MUTANDIS, provided that Series B Convertible Preferred Stock will be issued as provided above in lieu of a combination of Common Stock and Series A Convertible Preferred Stock; and provided further, that at the option of Blackhawk, such closing documentation may take the form of one or more amendments to the Purchase Agreement and related closing documentation in lieu of new agreements; and (ii) the Company agrees to amend the terms of the Holders' Shadow Warrants to increase the aggregate maximum amount of shares of Common Stock issuable thereunder to increase the aggregate maximum amount of shares of Common Stock issuable thereunder to reflect any increase in the number of shares of Common Stock issuable under the Subject Warrants (as defined therein) that may result from the issuance of the Series B Convertible Preferred Stock or any conversion thereof into shares of Common Stock. 3. Capitalized terms used herein without definition shall have the respective meanings ascribed to them in the Purchase Agreement. 4. No modification of this Agreement, or any part hereof, shall be valid or effective unless in writing and signed by the party or parties sought to be charged therewith. 5. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to choice of law or conflicts of law principles. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. GEOKINETICS, INC. By: /s/ JAY D. HABER Name: Jay D. Haber Title: President BLACKHAWK INVESTORS, L.L.C. By: Blackhawk Capital Partners, its Managing Member By: /s/ WILLIAM R. ZIEGLER William R. Ziegler, Partner EX-4 5 EXHIBIT 4 CERTIFICATE OF DESIGNATION OF SERIES A CONVERTIBLE PREFERRED STOCK OF GEOKINETICS INC. Pursuant to Section 151(g) of the General Corporation Law of the State of Delaware The undersigned, Jay D. Haber, President of Geokinetics Inc., a Delaware corporation (the "Corporation"), does hereby state and certify that the Board of Directors of the Corporation, by unanimous written consent dated as of July 10, 1997, duly adopted the following resolution providing for the issuance of a series of its Preferred Stock, par value $10.00 per share(the "Preferred Stock"), and further providing for the designation, powers, preferences, and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof, all in accordance with the provisions of Section 151(g) of the General Corporation Law of the State of Delaware: RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation by Article FOURTH of the Corporation's Certificate of Incorporation (the "Certificate of Incorporation"), a series of Preferred Stock of the Corporation be, and hereby is, created out of the authorized but unissued shares of capital stock of the Corporation and authorized to be issued, such series to be designated Series A Convertible Preferred Stock (the "Series A Convertible Preferred Stock"), to consist of 187,500 shares, par value $10.00 per share, of which the powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof, shall be, in addition to those set forth in the Corporation's Certificate of Incorporation, as follows: 1. DIVIDENDS. Holders of shares of Series A Convertible Preferred Stock will be entitled to receive, when and as declared by the Board of Directors of the Corporation (the "Board") out of assets of the Corporation legally available for payment, dividends payable in cash, evidences of indebtedness, assets or property other than cash, or securities of the Corporation, at the same rate as such dividends are declared with respect to shares of Common Stock (as defined in paragraph 3(a) below). In connection therewith, the shares of Series A Convertible Preferred Stock held by each holder shall be deemed to represent that number of shares of Common Stock into which they are then convertible, rounded to the nearest 1/100th of a share. Dividends will be payable to holders of record of the Series A Convertible Preferred Stock as they appear on the stock books of the Corporation on such record dates, not more than 60 days nor less than 10 days preceding the payment dates thereof, as shall be fixed by the Board. No dividends may be paid upon or declared or set apart for the Series A Convertible Preferred Stock for any dividend period unless: (a) as to each series of Preferred Stock entitled to cumulative dividends, dividends for all past dividend periods shall have been paid or shall have been declared and a sum sufficient for the payment thereof set apart; and (b) as to all series of Preferred Stock (including the Series A Convertible Preferred Stock), dividends for the current dividend period shall have been paid or be or have been declared and a sum sufficient for the payment thereof set apart ratably in accordance with the amounts which would be payable as dividends on the shares of the respective series for the current dividend period if all dividends for the current dividend period were declared and paid in full. No dividend in respect of past dividend periods shall be paid upon or declared and set apart for payment on any of the Preferred Stock entitled to cumulative dividends unless there shall be or have been declared and set apart for payment on all outstanding shares of Preferred Stock entitled to cumulative dividends, dividends for past dividend periods ratably in accordance with the amounts which would be payable on the shares of the series entitled to cumulative dividends if all dividends due for all past dividend periods were declared and paid in full. So long as any shares of the Series A Convertible Preferred Stock are outstanding, the Corporation shall not pay or declare any dividend payable in cash, evidences of indebtedness, assets or property other than cash, or stock of the Corporation ranking equally with or senior to the Series A Convertible Preferred Stock in respect of dividends, or make any other distribution on the Common Stock or any other class or series of stock ranking equally with or junior to the Series A Convertible Preferred Stock in respect of dividends, unless the Corporation has paid, or at the same time pays or provides for the payment of, all accrued and unpaid dividends on the Series A Convertible Preferred Stock; provided, however, that the Corporation may pay less than the amount of all accrued and unpaid dividends on any class or series of stock ranking equally with the Series A Convertible Preferred Stock in respect of dividends if such payment is made ratably in accordance with the respective accrued and unpaid dividends on the Series A Convertible Preferred Stock and such class or series of stock ranking equally with the Series A Convertible Preferred Stock in respect of dividends. The Series A Convertible Preferred Stock shall rank junior as to dividends to any class or series of stock of the Corporation which is by its terms made senior as to dividends to the Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock shall rank equally as to dividends with the Corporation's Common Stock and with all shares of the Corporation's Preferred Stock and any other class or series of stock of the Corporation which is expressly stated to rank on a parity as to dividends with the Series A Convertible Preferred Stock. For purposes of the Series A Convertible Preferred Stock, the amount of -2- dividends "accrued" on any share of Series A Convertible Preferred Stock at any date shall be deemed to be the amount of any declared but unpaid dividends thereon. 2. LIQUIDATION PREFERENCE. The shares of Series A Convertible Preferred Stock shall rank prior to the shares of Common Stock and of any other class of stock of the Corporation ranking junior to the Series A Convertible Preferred Stock upon liquidation, so that in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series A Convertible Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to its stockholders, whether from capital, surplus or earnings, before any distribution is made to holders of shares of Common Stock or any other such junior stock, an amount equal to $10.00 per share (the "Liquidation Preference" of a share of Series A Convertible Preferred Stock) plus an amount equal to all cash dividends accrued and unpaid on the shares of Series A Convertible Preferred Stock to the date of final distribution. (For purposes hereof, the Common Stock shall rank on liquidation junior to the Series A Convertible Preferred Stock.) If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of shares of the Series A Convertible Preferred Stock and any other preferred stock ranking on a parity as to liquidation preference with the Series A Convertible Preferred Stock (such other preferred stock and the Series A Convertible Preferred Stock hereinafter being collectively referred to in this paragraph 2 as the "Parity Preferred Stock") shall be insufficient to pay in full the preferential amount aforesaid, then such assets, or the proceeds thereof, shall be distributable among such holders ratably in accordance with the respective amounts which would be payable on such shares if all amounts thereon were payable in full. In liquidation, the Series A Convertible Preferred Stock shall be senior to the Corporation's Common Stock and senior to or PARI PASSU with any other series of convertible Preferred Stock hereinafter authorized and issued by the Corporation, but junior to any series of Preferred Stock which does not have any conversion feature and which is hereinafter authorized and issued by the Corporation. After payment to holders of the Series A Convertible Preferred Stock of the full preferential amounts as aforesaid, holders of the Series A Convertible Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation. The merger or consolidation of the Corporation into or with any other corporation, or the merger of any other corporation into the Corporation, or the sale, lease or conveyance of all or substantially all of the property or business as of the Corporation shall not be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this paragraph 2. 3. CONVERSION. The holders of the Series A Convertible Preferred Stock shall have the following conversion rights: -3- (a) AUTOMATIC CONVERSION. Shares of Series A Convertible Preferred Stock automatically shall be converted into fully paid and non-assessable shares of Common Stock, at the conversion ratio (the "Conversion Ratio") of 13-1/3 shares of Common Stock for each share of Series A Preferred Stock (13-1/3:1), upon the filing by the Corporation of the Charter Amendment (as defined in subparagraph (e) below of this paragraph 3) with the Secretary of State of the State of Delaware. Upon the occurrence of any automatic conversion of the Series A Convertible Preferred Stock, the holders thereof shall be entitled to the payment of all accrued and unpaid cash dividends through the date of such conversion. Upon the occurrence of such automatic conversion of the Series A Convertible Preferred Stock, (i) the Corporation shall cause to be filed with the conversion agent and shall cause to be mailed to the holders of the Series A Convertible Preferred Stock, in accordance with the notice provisions of subparagraph (d) of this paragraph 3, a notice of automatic conversion (a "Notice of Automatic Conversion") which sets forth the instructions for the surrender of all certificates representing shares of Series A Convertible Preferred Stock and (ii) as promptly as possible thereafter, the holders of such Series A Convertible Preferred Stock shall surrender for cancellation the certificates representing such shares at the office of the Corporation or of any conversion agent designated by the Corporation or the transfer agent for the Common Stock, all in accordance with the instructions contained in the Notice of Automatic Conversion. Thereupon, there shall be issued and delivered to each such holder a certificate or certificates for the number of shares of Common Stock into which the shares of the Series A Convertible Preferred Stock surrendered were convertible on the date on which such automatic conversion occurred, together with a check in the amount of all accrued but unpaid cash dividends on the Series A Convertible Preferred Stock through the date of such automatic conversion, and any fractional interest in respect of a share of Common Stock arising from such conversion shall be settled as provided in subparagraph (b) of this paragraph 3. Upon such automatic conversion date, the holders of shares of Series A Convertible Preferred Stock shall cease to be holders of Series A Convertible Preferred Stock and shall automatically become holders of shares of Common Stock, irrespective of whether or not the certificates for shares of Series A Convertible Preferred Stock shall have been properly surrendered for cancellation in accordance with the Notice of Automatic Conversion, and thereafter such shares of Series A Convertible Preferred Stock shall no longer be transferrable upon the books of the Corporation and such holders of shares of Series A Convertible Preferred Stock shall have no interest or claim against the Corporation with respect to such shares except the right to receive a certificate representing the shares of Common Stock into which such shares were converted, together with a check in the amount of all accrued but unpaid cash dividends on the Series A Convertible Preferred Stock through the date of conversion and payment of any cash in lieu of fractional interests as provided in subparagraph (b) of this paragraph 3. The term "Common Stock" shall mean the Common Stock, par value $0.20 per share, of the Corporation as the same exists at the date of this Certificate or as such stock -4- may be constituted from time to time, except that for the purposes of subparagraph (c) of this paragraph 3 the term "Common Stock" shall also mean and include stock of the Corporation of any class (other than Series A Convertible Preferred Stock), whether now or hereafter authorized, which shall have the right to participate in the distribution of either earnings or assets of the Corporation without limit as to amount or percentage. (b) CASH PAYMENT FOR FRACTIONAL SHARES. No fractional shares or script representing fractions of shares of Common Stock shall be issued upon conversion of the Series A Convertible Preferred Stock. Instead of any fractional interest in a share of Common Stock which would otherwise be deliverable upon the conversion of a share of Series A Convertible Preferred Stock, the Corporation shall pay to the holder of such share an amount in cash (computed to the nearest cent) equal to the current market price (as determined in a reasonable manner prescribed by the Board in its sole discretion) thereof at the close of business on the business day next preceding the day of conversion. If more than one share shall be surrendered for conversion at one time by the same holder, the number of shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate Liquidation Preference of the shares of Series A Convertible Preferred Stock so surrendered. (c) ADJUSTMENTS TO CONVERSION RATIO. The Conversion Ratio shall be adjusted from time to time as follows: (i) In case the Corporation shall hereafter (A) pay a dividend or make a distribution on the Common Stock in shares of Common Stock, (B) subdivide its outstanding shares of Common Stock into a greater number of shares, (C) combine its outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of the Common Stock any shares of capital stock of the Corporation, the Conversion Ratio in effect immediately prior to such action shall be adjusted so that the holder of any share of Series A Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other capital stock of the Corporation which he would have owned or been entitled to receive immediately following such action had such share been converted immediately prior thereto. An adjustment made pursuant to this subdivision (i) shall become effective immediately after the record date, in the case of a dividend or distribution, or immediately after the effective date, in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this subdivision (i), the holder of any share of Series A Convertible Preferred Stock thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Corporation, the Board (whose determination shall be conclusive and shall be described in a statement filed with the conversion agent by the Corporation as soon as practicable) shall determine the allocation of the adjusted Conversion -5- Ratio between or among shares of such classes of capital stock or shares of Common Stock and other capital stock. (ii) If at any time after the date of issuance of the shares of Series A Convertible Preferred Stock, the Corporation shall issue to all holders of its Common Stock or sell or fix a record date for the issuance to all holders of its Common Stock of (A) Common Stock or (B) rights, options or warrants entitling the holders thereof to subscribe for or purchase Common Stock (or securities convertible or exchangeable into or exercisable for Common Stock), in any such case, at a price per share (or having a conversion, exchange or exercise price per share) that is less than $0.75 (the "Placement Price") then, immediately after the date of such issuance or sale or on such record date, the number of shares of Common Stock to be delivered upon the conversion of the Series A Convertible Preferred Stock shall be increased so that the holders of the Series A Convertible Preferred Stock thereafter will be entitled to receive the number of shares of Common Stock determined by multiplying the number of shares of Common Stock such holder would have been entitled to receive immediately before the date of such issuance or sale on such record date by a fraction, the denominator of which will be the number of shares of Common Stock outstanding on such date plus the number of shares of Common Stock that the aggregate offering price of the total number of shares so offered for subscription or purchase (or the aggregate initial conversion price, exchange price or exercise price of the convertible securities or exchangeable securities or rights, options or warrants, as the case may be, so offered) would purchase at such Placement Price, and the numerator of which will be the number of shares of Common Stock outstanding on such date plus the number of additional shares of Common Stock offered for subscription or purchase (or into which the convertible or exchangeable securities or rights, options or warrants so offered are initially convertible or exchangeable or exercisable, as the case may be). Notwithstanding anything contained herein to the contrary, the provisions of this paragraph 3(c)(ii) shall not apply to any issuance of shares of Common Stock to employees, officers or directors of the Corporation pursuant to the exercise of options or pursuant to a stock option plan or other arrangements approved by the Board of Directors of the Corporation. (iii) In case the Corporation shall distribute pro rata to holders of shares of its Common Stock evidences of its indebtedness or assets (excluding any cash dividends payable in Common Stock or equity securities of the Corporation) or rights or warrants to subscribe for securities of the Corporation or any of its subsidiaries (other than shares of Common Stock referred to in subdivision (ii) above), then in each case the number of shares of Common Stock into which each share of the Series A Convertible Preferred Stock shall be convertible thereafter shall be determined by multiplying the number of shares of Common Stock into which each such share was convertible theretofore by a fraction, of which the numerator shall be the Average Market Price (as defined below) for a share of -6- Common Stock on the record date mentioned below, and of which the denominator shall be such Average Market Price, less the fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) as of such record date of the portion of such evidences of indebtedness or assets or rights or warrants to subscribe which are applicable to one of the outstanding shares of Common Stock. Such adjustment shall be made whenever such a distribution is made and shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such distribution. (iv) In any case in which this paragraph 3 shall require that an adjustment be made immediately following a record date or an effective date, the Corporation may elect to defer (but only until five business days following the filing by the Corporation with the conversion agent of the certificate of the chief financial officer of the Corporation required by subdivision (vi) of this subparagraph (c)) issuing to the holder of any share of Series A Convertible Preferred Stock converted after such record date or effective date the additional shares of Common Stock or other capital stock issuable upon such conversion over and above the shares of Common Stock or other capital stock issuable upon such conversion on the basis of the Conversion Ratio prior to adjustment, and paying to such holder any amount of cash in lieu of a fractional share. (v) No adjustment in the Conversion Ratio shall be required to be made unless such adjustment would require an increase or decrease of at least 1% of such Conversion Ratio; PROVIDED, HOWEVER, that any adjustments which by reason of this subdivision (v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this paragraph 3 shall be to the nearest 1/100th of a share. Anything in this paragraph 3 to the contrary notwithstanding, the Corporation shall be entitled to make such adjustment in the Conversion Ratio, in addition to those required by this paragraph 3, as it in its discretion shall determine to be advisable in order that any stock dividend, subdivision of shares, distribution of rights to purchase stock or securities, or distribution of securities convertible into or exchangeable for stock hereafter made by the Corporation to its stockholders shall not be taxable to the recipients. (vi) Whenever the Conversion Ratio is adjusted as herein provided, (A) the Corporation shall promptly file with the conversion agent a certificate of the chief financial officer of the Corporation setting forth the Conversion Ratio after such adjustment and setting forth a brief statement of the facts requiring such adjustment and the manner of computing the same, which certificate shall be conclusive evidence of the correctness of such adjustment, and (B) a notice stating that the Conversion Ratio has been adjusted and setting forth the adjusted Conversion Ratio shall forthwith be mailed by the Corporation to the holders of -7- the Series A Convertible Preferred Stock at their addresses as shown on the stock books of the Corporation. (vii) In the event that at any time as a result of an adjustment made pursuant to subdivision (i) of this subparagraph (c), the holder of any share of Series A Convertible Preferred Stock thereafter surrendered for conversion shall become entitled to receive any shares of the Corporation other than shares of Common Stock, thereafter the Conversion Ratio of such other shares so receivable upon conversion of any share shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in this paragraph 3. (viii) The Average Market Price of Common Stock at any date shall be deemed to be the average of the Current Market Prices (as defined below) for the 30 consecutive business days commencing 45 business days before the date in question. The "Current Market Price" on any given day shall mean the closing price per share of the Corporation's Common Stock on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or traded on any such exchange, on the National Market System (the "National Market System") of the National Association of Securities Dealers Automated Quotations System ("NASDAQ"), or if not listed or traded on any such exchange or system, on the Nasdaq Bulletin Board, or if not listed or traded on any such exchange, system or board, the average of the bid and asked price per share on NASDAQ or, if such quotations are not available, the fair market value per share of the Corporation's Common Stock as reasonably determined by the Board of Directors of the Company. (d) NOTICES OF RECORD DATE. In case: (i) there shall be any capital stock reorganization or reclassification of the Common Stock (other than a subdivision or combination of the outstanding Common Stock and other than a change in the par value of the Common Stock), or any consolidation or merger to which the Corporation is a party or any statutory exchange of securities with another corporation and for which approval of any stockholders of the Corporation is required, or any sale or transfer of all or substantially all the assets of the Corporation; or (ii) there shall be a voluntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed with the conversion agent, and shall cause to be mailed to the holders of shares of the Series A Convertible Preferred Stock at their addresses as shown on the stock books of the Corporation, at least 10 days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to -8- be taken for the purpose of such distribution or rights, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such distribution or rights are to be determined, or (B) the date on which such reorganization, reclassification, consolidation, merger, statutory exchange, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, statutory exchange, sale, transfer, dissolution, liquidation or winding up. Failure to give such notice or any defect therein shall not affect the legality or validity of the proceedings described in subdivision (i) or (ii) of this subparagraph (d). (e) RESERVATION OF COMMON STOCK FOR CONVERSION. The Corporation covenants that it will (i) use its best efforts to cause an amendment to its Certificate of Incorporation to increase the aggregate number of shares of authorized Common Stock from 15,000,000 shares to 100,000,000 shares (the "Charter Amendment") to be approved and adopted by its stockholders as soon as possible after the date hereof and thereafter promptly to file the Charter Amendment with the Secretary of State of the State of Delaware and (ii) thereafter, at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of Common Stock or shares of Common Stock held in its treasury, or both, for the purpose of effecting conversions of the Series A Convertible Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of Series A Convertible Preferred Stock not theretofore converted. For purposes of this subparagraph (e), the number of shares of Common Stock which shall be deliverable upon the conversion of all outstanding shares of Series A Convertible Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single holder. (f) TAXES UPON CONVERSION. The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on conversions of the Series A Convertible Preferred Stock pursuant hereto; PROVIDED, HOWEVER, that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the holder of the Series A Convertible Preferred Stock to be converted and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (g) MODIFICATION OF COMMON STOCK. Notwithstanding any provision herein to the contrary, in case of any consolidation or merger to which the Corporation is a party (other than a merger or consolidation in which the Corporation is the continuing corporation), or in case of any sale or conveyance to another corporation of the property -9- of the Corporation as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Corporation), the holder of each share of Series A Convertible Preferred Stock then outstanding shall have the right thereafter to convert such share into the kind and amount of securities, cash or other property receivable upon such consolidation, merger, statutory exchange, sale or conveyance by a holder of the number of shares of Common Stock into which such share of Series A Convertible Preferred Stock might have been converted immediately prior to such consolidation, merger, statutory exchange, sale or conveyance, assuming such holder of Common Stock failed to exercise his rights of election, if any, as to the kind of amount of securities, cash or other property receivable upon such consolidation, merger, statutory exchange, sale or conveyance (provided that if the kind or amount of securities, cash or other property receivable upon such consolidation, merger, statutory exchange, sale or conveyance is not the same for each share of Common Stock in respect of which such rights of election shall not have been exercised (each, a "non-electing share"), then for the purpose of this subparagraph (g) the kind and amount of securities, cash or other property receivable upon such consolidation, merger, statutory exchange, sale or conveyance for each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). Thereafter, the holders of the Series A Convertible Preferred Stock shall be entitled to appropriate adjustments with respect to their conversion rights to the end that the provisions set forth in this paragraph 3 shall correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the conversion of the Series A Convertible Preferred Stock. Any such adjustment shall be approved by the Board of Directors of the Corporation, evidenced by a certificate of the chief financial officer of the Corporation to that effect delivered to the conversion agent; and any adjustment so approved shall for all purposes hereof conclusively be deemed to be an appropriate adjustment. The above provisions of this subparagraph (g) shall similarly apply to successive consolidations, mergers, statutory exchanges, sales or conveyances. 4. NO REISSUANCE OF SERIES A CONVERTIBLE PREFERRED STOCK. No share or shares of Series A Convertible Preferred Stock acquired by the Corporation by reason of purchase, conversion or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Corporation shall be authorized to issue. The Corporation may from time to time take such appropriate corporate action as may be necessary to reduce accordingly the authorized number of shares of the Series A Convertible Preferred Stock. 5. VOTING RIGHTS. Except as otherwise expressly provided herein or as required by law, the holders of the Series A Convertible Preferred Stock shall be entitled to vote on all matters upon which holders of Common Stock have the right to vote and, with respect to such right to vote, shall be entitled to notice of any stockholders' meeting -10- in accordance with the Corporation's Bylaws, and shall be entitled to a number of votes equal to the number of shares of Common Stock into which such shares of Series A Convertible Preferred Stock could then be converted, at the record date for the determination of stockholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited. Except as otherwise expressly provided herein, or to the extent class or series voting is otherwise required by law or agreement, the holders of the Series A Convertible Preferred Stock and the holders of the Common Stock shall vote together as a single class and not as separate classes. 6. NO CONSENT REQUIRED. No consent of the holders of the Series A Convertible Preferred Stock shall be required for (a) the creation of any indebtedness of any kind of the Corporation, (b) the creation of any class of stock of the Corporation ranking senior (provided such class of stock is not convertible into Common Stock or any equity security convertible into or exchangeable for Common Stock), junior or PARI PASSU as to dividends or upon liquidation to the Series A Convertible Preferred Stock or (c) any increase of decrease in the amount of authorized Common Stock or any increase, decrease or change in the par value thereof or in any other terms thereof. 7. RESERVATION OF RIGHTS. The Board reserves the right by subsequent amendment of this resolution from time to time to increase or decrease the number of shares which constitute the Series A Convertible Preferred Stock (but not below the number of shares thereof then outstanding) and in other respects to amend this resolution within the limitations provided by law, this resolution and the Certificate of Incorporation. IN WITNESS WHEREOF, Geokinetics Inc. has caused this Certificate of Designation of Series A Convertible Preferred Stock to be made under the seal of the Corporation and signed by Jay D. Haber, its President, and attested by Michael Hale, its Secretary, as of this 11 day of July, 1997. GEOKINETICS INC. By: /s/ JAY D. HABER Name: Jay D. Haber Title: President [SEAL] Attest: /s/ MICHAEL HALE Name: Michael Hale Title: Secretary STATE OF TEXAS ) ) ss.: COUNTY OF HARRIS ) On the 11 day of July, 1997 before me, the undersigned Notary Public, personally came Jay D. Haber, to me known, who by me duly sworn, did depose and say that deponent is the President of GEOKINETICS INC., the corporation described in, and which executed the foregoing instrument, that the facts stated therein are true, that deponent knows the seal of the Corporation, that the seal affixed to the instrument is the corporate seal, that it was affixed by order of the board of directors of the Corporation, and that deponent signed deponent's name to the foregoing instrument by order of the board of directors of the Corporation being authorized so to do on its behalf. IN WITNESS WHEREOF, I hereunto set my hand and official seal. -11- /s/ SUSAN POE Notary Public STATE OF TEXAS ) ) ss.: COUNTY OF HARRIS ) On the 11 day of July, 1997 before me, the undersigned Notary Public, personally came Michael Hale, to me known, who by me duly sworn, did depose and say that deponent is the Secretary of GEOKINETICS INC., the corporation described in, and which executed the foregoing instrument, that the facts stated therein are true, that deponent knows the seal of the Corporation, that the seal affixed to the instrument is the corporate seal, that it was affixed by order of the board of directors of the Corporation, and that deponent signed deponent's name to the foregoing instrument by order of the board of directors of the Corporation being authorized so to do on its behalf. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ SUSAN POE Notary Public -12- EX-10.1 6 EXHIBIT 10.1 EMPLOYMENT AGREEMENT This Employment Agreement (this "AGREEMENT") is made as of July __, 1997 by SIGNATURE GEOPHYSICAL SERVICES, INC, a Michigan corporation (the "EMPLOYER"), and JAMES V. GALLANT, an individual resident of the State of Texas (the "EXECUTIVE"). INTRODUCTION Employer is engaged in the business of conducting 2-D and 3-D seismic surveys of oil and gas prospects, focusing on the Permian Basin and the Gulf Coast with a special emphasis on swamp work. This Agreement shall be effective on the date (the "EFFECTIVE DATE") that one hundred percent (100%) of the issued and outstanding stock of Employer has been acquired by Geokinetics Inc., a Delaware corporation ("GEOKINETICS"), pursuant to that certain Stock Purchase Agreement, by and among Geokinetics, the Employer and Gallant Energy, Inc. dated as of June 25, 1997 (the "Stock Purchase Agreement"). The Executive has been the President of the Employer since July, 1996. The Employer desires the Executive's continued employment with the Employer, and the Executive wishes to accept such continued employment, upon the terms and conditions set forth in this Agreement. The parties, intending to be legally bound, agree as follows: Section 1. DEFINITIONS. For the purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1. 1.1 "AFFILIATE" or "AFFILIATES" -- any Person that, directly or indirectly, controls, or is controlled by or under common control with, the Employer or Geokinetics, including the Employer and Geokinetics. For the purposes of this definition, "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the power to direct or cause the direction of the management and policies of any Person, directly or indirectly, through ownership of voting securities, by contract, or otherwise. 1.2 "AGREEMENT" -- this Employment Agreement, including all Exhibits attached hereto, as amended from time to time. 1.3 "BASIC COMPENSATION" -- Salary and Benefits. 1.4 "BENEFITS" -- as defined in Section 3.1(d). 1.5 "BOARD OF DIRECTORS" -- the board of directors of the Employer. 1.6 "CONFIDENTIAL INFORMATION" -- any and all: (a) trade secrets concerning the business and affairs of any Affiliate, product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current, and planned research and development, current and planned 1 manufacturing or distribution methods and processes, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, seismic data bases, computer software and programs (including object code and source code), computer software and database technologies, systems, structures, and architectures (and related formulae, compositions, processes, improvements, devices, know-how, inventions, discoveries, concepts, ideas, designs, methods and information), and any other information, however documented, that is a trade secret within the meaning of the common law of the State of Texas; and (b) information concerning the business and affairs of any Affiliate (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, personnel training and techniques and materials), however documented; and (c) notes, analysis, compilations, studies, summaries, and other material prepared by or for any Affiliate containing or based, in whole or in part, on any information included in the foregoing. 1.7 "DISABILITY" -- as defined in Section 5.2. 1.8 "EFFECTIVE DATE" -- the date stated in the first paragraph of the Agreement. 1.9 "EMPLOYEE INVENTION" -- any idea, invention, technique, modification, process, or improvement (whether patentable or not), any industrial design (whether registerable or not), any mask work, however fixed or encoded, that is suitable to be fixed, embedded or programmed in a semiconductor product (whether recordable or not), and any work of authorship (whether or not copyright protection may be obtained for it) created, conceived, or developed by the Executive, either solely or in conjunction with others, during the Employment Period, or a period that includes a portion of the Employment Period, that relates in any way to, or is useful in any manner in, the business then being conducted or proposed to be conducted by the Employer or the Affiliates, and any such item created by the Executive, either solely or in conjunction with others, following termination of the Executive's employment with the Employer, that is based upon or uses Confidential Information. 1.10 "EMPLOYMENT PERIOD" -- the term of the Executive's employment under this Agreement. 1.11 "FISCAL YEAR" -- the Employer's fiscal year, as it exists on the Effective Date or as changed from time to time. 1.12 "FOR CAUSE" -- as defined in Section 5.3. 1.13 "FORCE MAJEURE" -- as defined in Section 3.2(b). 2 1.14 "INCENTIVE COMPENSATION" -- as defined in Section 3.2. 1.15 "OPTION PLAN" -- the Geokinetics Inc. 1995 Employee Stock Option Plan. 1.16 "NONINCENTIVE COMPENSATION" -- as defined in Section 3.3. 1.17 "PERSON" -- any individual, general or limited partnership, joint venture, corporation (including any non-profit corporation), limited liability company, bank, estate, trust, association, entity, unincorporated organization, or government body. 1.18 "POST-EMPLOYMENT PERIOD" -- as defined in Section 7.2. 1.19 "PROPRIETARY ITEMS" -- as defined in Section 6.2(a)(iv). 1.20 "SALARY" -- as defined in Section 3.1(a). 1.21 "SIGNING BONUS" -- as defined in Section 3.1(b). Section 2. EMPLOYMENT TERMS AND DUTIES. 2.1 EMPLOYMENT. The Employer hereby employs the Executive, and the Executive hereby accepts employment by the Employer, upon the terms and conditions set forth in this Agreement. 2.2 TERM. Subject to the provisions of Section 5, the term of the Executive's employment under this Agreement will be three years, beginning on the Effective Date and ending on the third anniversary of the Effective Date. Thereafter, the term may continue for additional one (1) year periods upon the mutual written agreement of the Executive and the Employer. 2.3 DUTIES. The Executive will have such duties as are assigned or delegated to the Executive by the Board of Directors (which duties shall be of a management or executive level) and will initially serve as President of the Employer and a member of its Board of Directors. The Executive will devote substantially all of his entire business time, attention, skill, and energy exclusively to the business of the Employer, will use his best efforts to promote the success of the Employer's business, and will cooperate fully with the Board of Directors in the advancement of the best interests of the Employer. For the Executive's service as a director of the Employer or as a director or officer of any of its affiliates, the Executive will fulfill his duties as such director or officer without additional compensation. Section 3. COMPENSATION. 3.1 BASIC COMPENSATION. (a) SALARY. The Executive will be paid an annual salary of $120,000.00, subject to adjustment as provided below (the "SALARY"), which will be payable in equal periodic installments according to the Employer's customary payroll practices, 3 but no less frequently than monthly. The Salary will be reviewed by the Board of Directors not less frequently than annually, and may be adjusted upward or downward in the sole discretion of the Board of Directors, but in no event will the Salary be less than $120,000.00 per year. (b) SIGNING BONUS. In order to induce the Executive to continue his employment with the Employer, the Employer agrees to pay the Executive a bonus ("SIGNING BONUS"). Subject to the Executive's employment by the Employer, such bonus shall be paid to the Executive, in installments, as follows: $50,000.00 upon execution of this Agreement, and $12,500.00 on each of October 1, 1998, January 1, April 1, July 1 and October 1, 1999, and January 1, April 1, and July 1, 2000. (c) CONTINUITY OF SERVICE PAYMENT. Upon Executive's completion of each three months of employment hereunder, Employer shall pay to the Executive an additional $7,500.00 bonus for continuity of service. Subject to Executive's employment hereunder, Employer shall pay the Executive $7,500.00 on each of October 1, 1997, January 1, April 1, July 1 and October 1, 1998, January 1, April 1, July 1 and October 1, 1999, and January 1, April 1 and July 1 2000. (d) BENEFITS. The Executive will, during the Employment Period, be permitted to participate in such pension, profit sharing, bonus, life insurance, hospitalization, major medical, and other employee benefit plans of the Employer that may be in effect from time to time, to the extent the Executive is eligible under the terms of those plans (collectively, the "BENEFITS"). 3.2 INCENTIVE COMPENSATION. As additional compensation (the "INCENTIVE COMPENSATION") for the services to be rendered by the Executive pursuant to this Agreement, the Executive will be entitled to participate in the following plans, in the manner described below: (a) The Executive shall be entitled to receive an annual bonus ("BONUS") based upon the amount of the Employer's earnings before taxes in accordance with the terms of the Bonus Plan attached hereto as Exhibit "A". The Employer's earnings before taxes shall be computed by Geokinetics, for purposes of calculation of the Bonus, for each twelve-month period beginning on July 1 and ending on June 30 during the term hereof, and shall be determined in accordance with generally accepted accounting principles, consistently applied. (b) Upon the commencement of Executive's employment hereunder, Executive shall be granted an option to purchase up to an aggregate of 400,000 shares of Geokinetics' Common Stock, $.20 par value ("COMMON STOCK"), at a price per share of $.75 (equal to the closing bid price for the Common Stock on the day before the execution date of the Stock Purchase Agreement), exercisable in accordance with the following terms and conditions. On or before each of 4 March 31 and September 30, 1998 and March 31 and September 30, 1999, Geokinetics shall cause to be prepared and delivered to the Executive a statement (each a "STATEMENT") based on the financial statements of the Employer for each six-month period ending on December 31, 1997, June 30 and December 31, 1998 and June 30, 1999, respectively, prepared in accordance with generally accepted accounting principles, and showing the calculation of the amount of the Employer's earnings before taxes, but after interest, depreciation and amortization ("EBIT"), for such period (the "EARN- OUT"). For purposes of calculating the Earn-Out, the Employer shall not be charged more than an average of $15,000 per month (or an aggregate of $90,000 during each six-month period) for any services rendered to or on behalf of the Employer by Geokinetics or any Affiliate of Geokinetics. Any interest charges which may be accrued by Geokinetics in respect of the $2,000,000 which will be advanced by Geokinetics to the Employer after the Effective Date shall not be considered in the calculation of the Earn-Out. The number of shares of Common Stock as to which the Executive shall be vested and entitled to exercise the option granted herein shall be equal to the amount of the Earn-Out as set forth in each Statement divided by five (5), up to a maximum of 400,000 shares in the aggregate. The amount of any negative EBIT shown on any Statement shall be cumulated and offset against any positive EBIT shown on any succeeding Statement(s). The option granted herein shall be exercisable at any time during the thirty-six month period beginning on the date of delivery of each Statement with respect to the number of shares specified in each Statement up to an aggregate of 400,000 shares. The maximum cumulative Earn-Out that shall be considered hereunder is $2,000,000. The period for determination of the Earn-Out shall be extended by the period of any event of force majeure and the amount of EBIT calculable hereunder shall not include any such period of time. The term "force majeure" shall mean any acts of God, strikes, lockouts, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, storms, floods, arrests, civil disturbances, explosions, the binding order of any court or governmental authority which has been resisted in good faith by all reasonable legal means, and any other cause not within the control of the Executive and which, by the exercise of due diligence, the Executive was unable to prevent or overcome. The Executive (A) understands that the shares of Common Stock to be received by the Executive hereunder will not be registered (except as contemplated by the Registration Rights Agreement) under the Securities Act of 1933, as amended, or under any state securities laws, and are being offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering, (B) is acquiring the Common Stock for his own account for investment purposes, and not with a view to the distribution thereof, (C) is a sophisticated investor with knowledge and experience in business and financial matters, (D) has received, and will continue to receive, information concerning Geokinetics, and has had the opportunity to obtain additional 5 information as desired in order to evaluate the merits and the risks inherent in acquiring the Common Stock, and (E) is able to bear the economic risk and lack of liquidity inherent in holding the Common Stock. The Executive understands that the certificates evidencing the shares of Common Stock to be issued hereunder will contain a legend restricting transfers thereof. 3.3 NONINCENTIVE COMPENSATION. As additional compensation (the "NONINCENTIVE COMPENSATION") for the services to be rendered by the Executive pursuant to this Agreement, the Executive shall be permitted to participate in the Option Plan. Upon the commencement of Executive's employment hereunder, the Executive shall be granted one, five-year option to purchase an aggregate of 225,000 shares of Common Stock on the terms and conditions set forth below: (a) The Executive will have one option (the "Option") to purchase 225,000 shares of Common Stock and will become eligible to exercise 75,000 shares of the Option on and after each of July 15, 1998, 1999 and 2000 provided the Executive continues to be employed by the Employer hereunder on such dates, and the Executive exercises such Option prior to or on July 15, 2002; and (b) The Option shall be exercisable at a price per share of Common Stock of $.75 (equal to the closing bid price for the Common Stock on the day before the execution date of the Stock Purchase Agreement). 3.4 VACATIONS AND HOLIDAYS. The Executive will be entitled to four weeks' paid vacation each Fiscal Year in accordance with the vacation policies of the Employer in effect for its executive officers from time to time. Vacation must be taken by the Executive at such time or times as approved by the Chairman of the Board of Directors. The Executive will also be entitled to the paid holidays and other paid leave set forth in the Employer's policies. Vacation days and holidays during any Fiscal Year that are not used by the Executive during such Fiscal Year may not be used in any subsequent Fiscal Year, but Executive shall be paid at the end of each Fiscal Year for any vacation days which Executive was unable to use as a result of a request for approval of a vacation having been denied by the Chairman of the Board of Directors. 3.5 AUTOMOBILE. During the Employment Period, the Executive shall be entitled to the use of an automobile owned by the Employer, comparable to the type of automobile presently being provided to the Executive for his use. The Employer will pay on behalf of the Executive (or reimburse the Executive for) reasonable expenses incurred by the Executive for the repair and maintenance of such automobile in the performance of the Executive's duties pursuant to this Agreement, and in accordance with the Employer's employment policies. The Executive shall file expense reports with respect to such expenses in accordance with the Employer's policies. Section 4. FACILITIES AND EXPENSES. The Employer will furnish the Executive office space, equipment, supplies, and such other facilities and personnel as the Employer deems necessary or appropriate for the performance of the Executive's duties under this Agreement and as are 6 commensurate with Executive's duties under Section 2.3. The Employer will pay the Executive's dues in such professional societies and organizations as the Chairman of the Board of Directors of the Employer deems appropriate, and will pay on behalf of the Executive (or reimburse the Executive for) reasonable expenses incurred by the Executive at the request of, or on behalf of, the Employer in the performance of the Executive's duties pursuant to this Agreement, and in accordance with the Employer's employment policies, including reasonable expenses incurred by the Executive in attending conventions, seminars, and other business meetings, in appropriate business entertainment activities, and for promotional expenses. The Executive must file expense reports with respect to such expenses in accordance with the Employer's policies. Section 5. TERMINATION. 5.1 EVENTS OF TERMINATION. The Employment Period, the Executive's Basic Compensation, Incentive Compensation, Nonincentive Compensation, and any and all other rights of the Executive under this Agreement or otherwise as an employee of the Employer will terminate (except as otherwise provided in this Section 5): (a) upon the death of the Executive; (b) upon the Disability of the Executive (as defined in Section 5.2) immediately upon notice from either party to the other; (c) For Cause (as defined in Section 5.3), immediately upon notice from the Employer to the Executive, or at such later time as such notice may specify; or (d) upon Executive's voluntary termination of employment, which termination shall be effective thirty (30) days after Employer's receipt of Executive's written resignation. 5.2 DISABILITY. For purposes of this Section 5, the Executive will be deemed to have a "DISABILITY" if, for physical or mental reasons, the Executive is unable to perform the Executive's duties under this Agreement for 120 consecutive days, or 180 days during any twelve month period, as determined in accordance with this Section 5.2. The Disability of the Executive will be determined by a medical doctor selected by written agreement of the Employer and the Executive upon the request of either party by notice to the other. If the Employer and the Executive cannot agree on the selection of a medical doctor, each of them will select a medical doctor and the two medical doctors will select a third medical doctor who will determine whether the Executive has a Disability. The determination of the medical doctor selected under this Section 5.2 will be binding on both parties. The Executive must submit to a reasonable number of examinations by the medical doctor making the determination of Disability under this Section 5.2, and the Executive hereby authorizes the disclosure and release to the Employer of such determination and all supporting medical records. If the Executive is not legally competent, the Executive's legal guardian or duly authorized attorney-in-fact will act on behalf of the Executive, under this Section 5.2, for the purposes of submitting the 7 Executive to the examinations, and providing the authorization of disclosure, required under this Section 5.2. 5.3 FOR CAUSE. For purposes of Section 5.1, the phrase "FOR CAUSE" means any conduct or behavior by the Executive that, in the good faith judgment of the Employer's Board of Directors, is materially detrimental to or materially harmful to the business or reputation of the Employer including, without limitation: (a) the Executive's breach of this Agreement, which breach is not substantially cured within ten (10) days after Executive's receipt of written notice thereof from Employer; (b) the Executive's failure to adhere to any written Employer policy and Executive's failure to cure such noncompliance within ten (10) days after receipt of written notice thereof from Employer; (c) the appropriation (or attempted appropriation) of a material business opportunity of the Employer, including attempting to secure or securing any personal profit in connection with any transaction entered into on behalf of the Employer; (d) the misappropriation (or attempted misappropriation) of any of the Employer's funds or property; or (e) the conviction of, the indictment for (or its procedural equivalent), or the entering of a guilty plea or plea of no contest with respect to, a felony (other than involving the misuse of alcohol), the equivalent thereof, or any other crime with respect to which imprisonment is a possible punishment. 5.4 TERMINATION PAY. Effective upon the termination of this Agreement, the Employer will be obligated to pay the Executive (or, in the event of his death, his designated beneficiary as defined below) only such compensation as is provided in this Section 5.4, and in lieu of all other amounts and in settlement and complete release of all claims the Executive may have against the Employer under this Agreement. For purposes of this Section 5.4, the Executive's designated beneficiary will be such individual beneficiary or trust, located at such address, as the Executive may designate by notice to the Employer from time to time or, if the Executive fails to give notice to the Employer of such a beneficiary, the Executive's estate. Notwithstanding the preceding sentence, the Employer will have no duty, in any circumstances, to attempt to open an estate on behalf of the Executive, to determine whether any beneficiary designated by the Executive is alive or to ascertain the address of any such beneficiary, to determine the existence of any trust, to determine whether any person or entity purporting to act as the Executive's personal representative (or the trustee of a trust established by the Executive) is duly authorized to act in that capacity, or to locate or attempt to locate any beneficiary, personal representative, or trustee. (a) TERMINATION BY THE EMPLOYER FOR CAUSE. If the Employer terminates this Agreement For Cause, the Executive will be entitled to receive his Salary, Signing Bonus and Benefits through the date such termination is effective and the vested portion of any Incentive Compensation and any Nonincentive Compensation. (b) TERMINATION UPON DISABILITY. If this Agreement is terminated by either party as a result of the Executive's Disability, as determined under Section 5.2, the Employer will pay the Executive his Salary, Signing Bonus and Benefits through the remainder of the calendar month during which such termination is effective and for the lesser of (i) six consecutive months thereafter, or (ii) the period until Disability insurance benefits commence under the 8 Disability insurance coverage, if any, furnished by the Employer to the Executive. The Executive shall be entitled to the vested portions of his Incentive Compensation and Nonincentive Compensation and to a pro rata portion of his Incentive Compensation and Nonincentive Compensation for the year during which such Disability occurs, but shall not be entitled to any other Incentive Compensation or Nonincentive Compensation. (c) TERMINATION UPON DEATH. If this Agreement is terminated because of the Executive's death, the Executive will be entitled to receive his Salary, Signing Bonus and Benefits through the end of the calendar month in which his death occurs. The Executive shall be entitled to receive the vested portions of his Incentive Compensation and Nonincentive Compensation and to a pro rata portion of his Incentive Compensation and Nonincentive Compensation for the year during which the Executive's death occurs, but shall not be entitled to any other Incentive Compensation or Nonincentive Compensation for or any subsequent year. (d) TERMINATION UPON RESIGNATION. If this Agreement is terminated because of the voluntary resignation of the Executive hereunder, the Executive shall be entitled to receive his Salary, Signing Bonus and Benefits through the effective date of his termination and any vested portions of his Incentive Compensation or Nonincentive Compensation. The Executive shall not be entitled to any other Incentive Compensation or to any other Nonincentive Compensation. (e) TERMINATION BY THE EMPLOYER NOT FOR CAUSE. If the Employer terminates this Agreement not For Cause, the Executive will be entitled to either: (i) receive all of the compensation and Benefits provided by Section 3.1, the Incentive Compensation provided by Section 3.2, and the Nonincentive Compensation provided by Section 3.3 for the remainder of the Employment Term, and the Executive shall be subject to the provisions of Section 7.2 hereof; or (ii) the Executive shall be entitled to receive all of the compensation and Benefits provided by Section 3.1 and the vested portions of any Incentive Compensation provided by Section 3.2 and Nonincentive Compensation provided by Section 3.3 through the end of the calendar month in which such termination occurs, and the Executive shall not be subject to the provisions of Section 7.2. (f) BENEFITS. The Executive's accrual of, or participation in plans providing for, the Benefits will cease at the effective date of the termination of this Agreement, and the Executive will be entitled to accrued Benefits pursuant to such plans only as provided in such plans. The Executive will not receive, as part of his termination pay pursuant to this Section 5, any payment or other compensation for any vacation, holiday, sick leave, or other leave unused on the date the notice of termination is given under this Agreement. 9 (g) EXPIRATION OF EMPLOYMENT. Employer agrees to notify the Executive not less than sixty (60) days prior to the expiration of the initial term of this Agreement or any subsequent continuation thereof as to whether Employer desires to extend the Employment Period of this Agreement. Section 6. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS. 6.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. The Executive acknowledges that during the Employment Period and as a part of his employment, the Executive will be afforded access to Confidential Information; public disclosure of such Confidential Information could have an adverse effect on the Employer and its business; because the Executive possesses substantial technical expertise and skill with respect to the Employer's business, the Employer desires to obtain exclusive ownership of each Employee Invention, and the Employer will be at a substantial competitive disadvantage if it fails to acquire exclusive ownership of each Employee Invention; Geokinetics has required that the Executive make the covenants in this Section 6 as a condition to its purchase of the Employer's stock; and the provisions of this Section 6 are reasonable and necessary to prevent the improper use or disclosure of Confidential Information and to provide the Employer with exclusive ownership of all Employee Inventions. 6.2 AGREEMENTS OF THE EXECUTIVE. In consideration of the compensation and benefits to be paid or provided to the Executive by the Employer under this Agreement, the Executive covenants as follows: (a) CONFIDENTIALITY. (i) During and for a period of three (3) years following the Employment Period, the Executive will hold in confidence the Confidential Information and will not disclose it to any person except with the specific prior written consent of the Employer or except as otherwise expressly permitted by the terms of this Agreement. (ii) Any trade secrets of any Affiliate will be entitled to all of the protections and benefits under the common law of the State of Texas and any other applicable law. If any information that the Employer deems to be a trade secret is found by a court of competent jurisdiction not to be a trade secret for purposes of this Agreement, such information will, nevertheless, be considered Confidential Information for purposes of this Agreement. The Executive hereby waives any requirement that the Employer submit proof of the economic value of any trade secret or post a bond or other security. (iii) None of the foregoing obligations and restrictions applies to any part of the Confidential Information that the Executive demonstrates either (x) was known by Executive prior to the date of his employment by the Employer, (y) was or became generally available to the public 10 other than as a result of a disclosure by the Executive, or (z) was made known to Executive on a nonconfidential basis from a source other than Employer or its representatives or agents, provided that such source is not bound by a confidentiality agreement with, or other obligation of secrecy to, Employer or another party. (iv) The Executive will not remove from the premises of the Employer or any Affiliate (except to the extent such removal is for purposes of the performance of the Executive's duties at home or while traveling, or except as otherwise specifically authorized by the Employer or such Affiliate) any document, record, notebook, plan, model, component, device, or computer software or code, whether embodied in a disk or in any other form (collectively, the "PROPRIETARY ITEMS"). The Executive recognizes that, as between the Employer or any Affiliate and the Executive, all of the Proprietary Items, whether or not developed by the Executive, are the exclusive property of the Employer or the Affiliates. Upon termination of this Agreement by either party, or upon the request of the Employer or any Affiliate during the Employment Period, the Executive will return to the Employer or the Affiliates all of the Proprietary Items in the Executive's possession or subject to the Executive's control, and the Executive shall not retain any copies, abstracts, sketches, or other physical embodiment of any of the Proprietary Items. (b) EMPLOYEE INVENTIONS. Each Employee Invention will belong exclusively to the Employer. The Executive acknowledges that all of the Executive's writing, works of authorship, specially commissioned works, and other Employee Inventions are works made for hire and the property of the Employer, including any copyrights, patents, or other intellectual property rights pertaining thereto. If it is determined that any such works are not works made for hire, the Executive hereby assigns to the Employer all of the Executive's right, title, and interest, including all rights of copyright, patent, and other intellectual property rights, to or in such Employee Inventions. The Executive covenants that he will promptly: (i) disclose to the Employer in writing any Employee Invention; (ii) assign to the Employer or to a party designated by the Employer, at the Employer's request and without additional compensation, all of the Executive's right to the Employee Invention for the United States and all foreign jurisdictions; (iii) execute and deliver to the Employer such applications, assignments, and other documents as the Employer may request in order to apply for and obtain patents or other 11 registrations with respect to any Employee Invention in the United States and any foreign jurisdictions; (iv) sign all other papers necessary to carry out the above obligations; and (v) give testimony and render any other assistance in support of the Employer's rights to any Employee Invention. 6.3 DISPUTES OR CONTROVERSIES. The Executive recognizes that should a dispute or controversy arising from or relating to this Agreement be submitted for adjudication to any court, arbitration panel, or other third party, the preservation of the secrecy of Confidential Information may be jeopardized. All pleadings, documents, testimony, and records relating to any such adjudication will be maintained in secrecy and will be available for inspection by the Employer, the Executive, and their respective attorneys and experts, who will agree, in advance and in writing, to receive and maintain all such information in secrecy, except as may be limited by them in writing. Section 7. NON-COMPETITION AND NON-INTERFERENCE. 7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. The Executive acknowledges and agrees that the limitations set forth in this Section 7 are a necessary part of and ancillary to the Executive's agreement not to disclose Confidential Information, reasonable and do not impose a greater restraint on the activities of the Executive than is necessary to protect the business interest of the Employer. In the event that any such territorial, scope, or time limitation are deemed to be unreasonable by a court of competent jurisdiction, the Executive agrees to the reduction of the territorial, scope or time limitation to the area, scope or time which such court shall have deemed reasonable. 7.2 COVENANTS OF THE EXECUTIVE. In consideration of the acknowledgments by the Executive, and in consideration of the compensation and benefits to be paid or provided to the Executive by the Employer in the event this Agreement is terminated pursuant to Section 5.4(a), 5.4(d) or 5.4(e)(i), the Executive covenants that he will not, directly or indirectly: (a) during the Employment Period, except in the course of his employment hereunder, and during the Post-Employment Period (as defined below), engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend the Executive's name or any similar name to, lend Executive's credit to or render services or advice to, any business whose products or activities compete in whole or in part with the products or activities of the Employer or any Affiliate of Employer anywhere within the geographic areas in which the Employer or any such Affiliate now or hereafter conducts its business; provided, however, that the Executive may purchase or otherwise acquire up to (but not more than) one percent of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on 12 any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934; (b) whether for the Executive's own account or for the account of any other person, at any time during the Employment Period and the Post-Employment Period, solicit business of the same or similar type being carried on by the Employer or any Affiliate of Employer, from any person known by the Executive to be a customer of the Employer or any such Affiliate, whether or not the Executive had personal contact with such person during and by reason of the Executive's employment with the Employer; (c) whether for the Executive's own account or the account of any other person at any time during the Employment Period and the Post-Employment Period, (i) solicit, employ, or otherwise engage as an employee, independent contractor, or otherwise, any person who is or was an employee of the Employer or any Affiliate of Employer at any time during the Employment Period or in any manner induce or attempt to induce any employee of the Employer and any such Affiliate to terminate his employment with the Employer; or (ii) interfere with the Employer's or any Affiliate's relationship with any person, including any person who at any time during the Employment Period was an employee, contractor, supplier, or customer of the Employer or any such Affiliate; or (d) at any time during or after the Employment Period, disparage the Employer or any of its shareholders, directors, officers, employees, or agents. For purposes of this Section 7.2, the term "POST-EMPLOYMENT PERIOD" means the two-year period beginning on the date of termination of the Executive's employment with the Employer. If any covenant in this Section 7.2 is held to be unreasonable, arbitrary, or against public policy, such covenant will be considered to be divisible with respect to scope, time, and geographic area, and such lesser scope, time, or geographic area, or all of them, as a court of competent jurisdiction may determine to be reasonable, not arbitrary, and not against public policy, will be effective, binding, and enforceable against the Executive. The period of time applicable to any covenant in this Section 7.2 will be extended by the duration of any violation by the Executive of such covenant, as determined by a court of competent jurisdiction. The Executive will, while the covenant under this Section 7.2 is in effect, give notice to the Employer, within ten days after accepting any other employment, of the identity of the Executive's new employer. Geokinetics or the Employer may notify such new employer that the Executive is bound by this Agreement and, at Geokinetics' or the Employer's election, furnish such new employer with a copy of this Agreement or relevant portions thereof. 13 Section 8. GENERAL PROVISIONS. 8.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. The Executive acknowledges that the injury that would be suffered by the Employer as a result of a breach of the provisions of this Agreement (including any provision of Sections 6 and 7) would be irreparable and that an award of monetary damages to the Employer for such a breach would be an inadequate remedy. Consequently, the Employer will have the right, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Agreement, and the Employer will not be obligated to post bond or other security in seeking such relief. Any such remedy shall be in addition to any damages which the Employer may be legally entitled to recover as a result of any breach by the Employee of any provision of this Agreement. The Employer may pursue any of the remedies described in this Section concurrently or consecutively and in any order as to such breach or violation, and the pursuit of any one of such remedies at any time will not be deemed an election of remedies or a waiver of the right to pursue any other available remedy. 8.2 ESSENTIAL AND INDEPENDENT COVENANTS. The covenants by the Executive in Sections 6 and 7 are essential elements of this Agreement supported by the payment of $10.00 and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Executive, and without the Executive's agreement to comply with such covenants, the Employer would not have entered into this Agreement or employed or continued the employment of the Executive. The Employer and the Executive have independently consulted their respective counsel and have been advised in all respects concerning the reasonableness and propriety of such covenants, with specific regard to the nature of the business conducted by the Employer. If the Executive's employment hereunder expires or is terminated, this Agreement will continue in full force and effect as is necessary or appropriate to enforce the covenants and agreements of the Executive in Sections 6 and 7. 8.3 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE. The Executive represents and warrants to the Employer that the execution and delivery by the Executive of this Agreement do not, and the performance by the Executive of the Executive's obligations hereunder will not, with or without the giving of notice or the passage of time, or both: violate any judgment, writ, injunction, or order of any court, arbitrator, or governmental agency applicable to the Executive; or conflict with, result in the breach of any provisions of or the termination of, or constitute a default under, any agreement to which the Executive is a party or by which the Executive is or may be bound. The Executive further represents and warrants to the Employer that no agreements or understandings, whether written or oral, are currently in force and effect between the Executive and the Employer, or any other Person concerning the subject matter of this Agreement. 14 8.4 OBLIGATIONS CONTINGENT ON PERFORMANCE. The obligations of the Employer hereunder, including its obligation to pay the compensation provided for herein, are contingent upon the Executive's performance of the Executive's obligations hereunder. 8.5 WAIVER. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by either party in exercising any right, power, or privilege under this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, no claim or right arising out of this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement. 8.6 NOTICES. All notices pertaining to this Agreement must be in writing, must be sent to the addressee at the address set forth in this Section, or at such other address as the addressee has designated by a notice given in the manner set forth in this Section, and must be sent by telegram, telex, facsimile, electronic mail, courier, or prepaid, certified U.S. Mail. Notices will be deemed given when received, if sent by telegram, telex, electronic mail or facsimile and if received between the hours of 8:00 a.m. and 5:00 p.m., local time of the destination address, on a business day (with confirmation of completed transmission sufficing as prima facie evidence of receipt of a notice sent by telex, telecopy, electronic mail, or facsimile), and when delivered and receipted for (or when attempted delivery is refused at the address where sent) if sent by courier or by certified U.S. Mail. Notices sent by telegram, telex, electronic mail, or facsimile and received between 12:01 a.m. and 7:59 a.m., local time of the destination address, on a business day will be deemed given at 8:00 a.m. on that same day. Notices sent by telegram, telex, electronic mail, or facsimile and received at a time other than between the hours of 12:01 a.m. and 5:00 p.m., local time of the destination address, on a business day will be deemed given at 8:00 a.m. on the next following business day after the day of receipt. The addresses for notice are as follows: If to Employer: Signature Geophysical Services, Inc. c/o Geokinetics Inc. 5555 San Felipe, Suite 780 Houston, Texas 77056 Attention: President Facsimile No.: (713) 850-7330 15 With copies to: Geokinetics Inc. 5555 San Felipe, Suite 780 Houston, Texas 77056 Attention: President Facsimile No.: (713) 850-7330 and If to the Executive: James V. Gallant 1319 W. Vistawood Houston, Texas 77077 With a copy to: Cohen & Small 2700 Post Oak Blvd., Suite 950 Houston, Texas 77056 Attention: William G. Small 8.7 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors, assigns, heirs, and legal representatives, including any entity with which the Employer may merge or consolidate or to which all or substantially all of its assets may be transferred. The duties and covenants of the Executive under this Agreement, being personal, may not be delegated. 8.8 INTERPRETATION. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. A determination that any provision of this Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other provision. 8.9 HEADINGS. The section headings appearing in this Agreement have been inserted for convenience only and shall be given no substantive meaning or significance whatever in construing the terms and provisions of this Agreement. 8.10 ENTIRE AGREEMENT. This Agreement constitutes the final and entire agreement and understanding between the parties to this Agreement concerning the subject matter of this Agreement, and this Agreement supersedes and replaces all prior agreements and understandings, whether written or oral, between such parties concerning the subject matter of this Agreement. No alleged representation, warranty, promise, inducement, or statement of intention not expressly set forth in this Agreement is binding on any party to this Agreement. 8.11 ACKNOWLEDGMENT AND RELEASE BY THE EXECUTIVE. By his execution of this Agreement, the Executive acknowledges that this Agreement supersedes and replaces all other agreements and understandings, whether written or oral, between the Executive and any other Person concerning the subject matter of this Agreement. In consideration for the rights and obligations arising under this Agreement, the Executive hereby voluntarily, knowingly, fully, finally, completely, and forever releases, relinquishes, and forever discharges the Employer and its Affiliates, their officers, directors, 16 employees, and agents, from any and all claims, actions, demands, and causes of action of whatever kind or character, whether known or unknown, joint or several, which the Executive might have or might claim to have against the Employer for any and all injuries, harm, damages, penalties, costs, losses, expenses, attorneys' fees, liabilities, or other detriments, if any, whatsoever and whenever incurred, suffered, or claimed by the Executive arising from any prior agreement or understanding, whether written or oral, between the Executive and the Employer, or any other Person concerning the subject matter of this Agreement. 8.12 GOVERNING LAW. This Agreement will be governed by the laws of the State of Texas without regard to conflicts of laws principles. 8.13 JURISDICTION. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against either of the parties in the courts of the State of Texas, County of Harris, or, if it has or can acquire jurisdiction, in the United States District Court for the District of Texas, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on either party anywhere in the world. 8.14 LIMITATION OF LIABILITY. The Executive acknowledges that he has personally guaranteed the obligations of Gallant Energy, Inc. and the Employer under the Stock Purchase Agreement. In consideration for the agreement of Geokinetics to limit the Executive's personal liability under such guarantee to the amount of the Earn-Out described in Section 3.2(b) above, the Executive hereby authorizes Geokinetics to offset any amounts that may be payable by the Executive pursuant to the terms of such guarantee against the amount of the Earn-Out. Geokinetics hereby agrees that, so long as Executive has not willfully concealed adverse information regarding the Employer from Geokinetics which would otherwise have been required to be disclosed pursuant to the terms of the Stock Purchase Agreement, Geokinetics' sole remedy against the Executive under his guarantee shall be to offset any liability incurred thereunder against the amount of the Earn-Out. 8.15 EXERCISE OF OPTIONS. The Executive shall be entitled to exercise the options granted pursuant to Section 3.2(b) and 3.3: (i) in cash or by certified or cashier's check payable to Geokinetics; or (ii) by delivery to Geokinetics of certificates representing the number of shares of Common Stock then owned by the Executive, the Designated Value of which equals the option price of the shares of Common Stock purchased pursuant to the option or options being exercised. (For purposes of this Agreement, the Designated Value of any shares of Common Stock delivered in payment of the option price payable upon exercise of any option granted hereunder shall be the Designated Value as of the exercise date, and the exercise date shall be the date of delivery of the certificates for the Common Stock used as payment of such option price. The "Designated Value" of the shares of Common Stock on a given date shall mean the average of the closing prices of the Common Stock on the principal market or registered exchange on which the Common Stock is traded (or the average of the closing bid and asked prices, if a single closing price is not reported for such market) on the ten (10) consecutive trading days preceding the date for the determination of such value, provided that the Common Stock is then traded on the over-the-counter market or on the NASDAQ National Market System or any registered securities exchange. 17 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. EMPLOYER: SIGNATURE GEOPHYSICAL SERVICES, INC. BY: /s/ MICHAEL HALE NAME: Michael Hale TITLE: Vice President EXECUTIVE: /s/ JAMES V. GALLANT JAMES V. GALLANT 19 EX-10.2 7 EXHIBIT 10.2 INVESTMENT MONITORING AGREEMENT INVESTMENT MONITORING AGREEMENT (hereinafter referred to as this "Agreement"), dated as of July 18, 1997, by and among GEOKINETICS INC., a Delaware corporation (the "Company"), BLACKHAWK CAPITAL PARTNERS, a Texas general partnership (the "Investment Monitor") and BLACKHAWK INVESTORS, L.L.C, a Delaware limited liability company ("Blackhawk"). W I T N E S S E T H: WHEREAS, pursuant to a Securities Purchase and Exchange Agreement of even date herewith (the "Purchase Agreement") among the Company, Blackhawk and certain Holders (as defined therein), Blackhawk will invest in the Company (the "Investment") by purchasing 5,041,667 shares of Common Stock of the Company, 171,875 shares of Series A Preferred Stock of the Company and a Shadow Warrant to purchase up to an aggregate of 6,512,095 shares of Common Stock, subject to adjustment; WHEREAS, the Investment Monitor is the managing member of Blackhawk; WHEREAS, as an inducement to the consummation of the transactions contemplated by the Purchase Agreement Merger and the making of the Investment, the parties have agreed that the Investment Monitor will oversee the Investment on behalf of Blackhawk, and the Investment Monitor is willing to undertake such responsibility on the terms and conditions set forth herein; and WHEREAS, capitalized terms used herein without definition shall have the respective meanings ascribed to the in the Purchase Agreement. NOW, THEREFORE, in consideration of the conditions and mutual agreements hereinafter set forth, the parties hereto agree as follows: 1. The parties agree that the Investment Monitor will monitor the Investment, on behalf of Blackhawk, during the term of this Agreement (the "Term"), which shall commence on the Closing Date of the transactions contemplated by the Purchase Agreement and terminate as provided in paragraph 6 below. 2. During the Term, the Company shall pay to the Investment Monitor an annual fee, in the amount of $25,000, in payment for its services to be rendered hereunder (the "Fee"), which Fee will be paid quarterly in arrears on the last business day of March, June, September and December of each year, commencing September 30, 1997. 3. Nothing herein shall require the Investment Monitor to devote full time to its duties hereunder, the Investment Monitor hereby agrees to devote such of its time and activity during normal business days and hours as it, in its sole discretion, shall deem necessary for the accomplishment of its duties hereunder. -1- 4. The Investment Monitor shall not be liable to Blackhawk or any of its members on account of any compensation received or action taken pursuant to this Agreement. 5. Blackhawk hereby agrees to hold the Investment Monitor harmless from and indemnify the Investment Monitor against all actions, proceedings, claims and demands (herein referred to as "Claims") which may be brought against, suffered or incurred by the Investment Monitor by reason of its performance or nonperformance of its duties under the terms of this Agreement (including all reasonable legal, professional and other expenses incurred), except any such Claim that arises from the willful misconduct, gross negligence or fraud of the Investment Monitor in the performance or nonperformance of its obligations or duties hereunder. 6. This Agreement shall terminate (except for the provisions of paragraph 5), upon the earlier to occur of (i) the date that on which Blackhawk and/or its affiliates ceases to own 10% of the equity securities of the Company or (ii) December 31, 2002, provided, that, if the event described in subparagraph (i) above shall not have occurred before December 31, 2002, this Agreement shall be automatically extended beyond December 31, 2002 for successive one year terms, unless either the Company or Blackhawk shall give written notice to the Investment Monitor at least 30 days before such expiration date or such extended expiration date or until the occurrence of the event described in subparagraph (i) above. 7. No modification of this Agreement, or any part hereof, shall be valid or effective unless in writing and signed by the party or parties sought to be charged therewith. 8. This Agreement contains the entire understanding of the parties and supersedes any prior agreements and understandings between the parties with respect to its subject matter. 9. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to choice of law or conflicts of law principles. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. GEOKINETICS INC. By:/s/ JAY D. HABER Name: Jay D. Haber Title: President BLACKHAWK CAPITAL PARTNERS By:/s/ WILLIAM R. ZIEGLER William R. Ziegler, Partner -2- BLACKHAWK INVESTORS, L.L.C. By: Blackhawk Capital Partners, its Managing Member By:/s/ WILLIAM R. ZIEGLER William R. Ziegler, Partner -3- EX-99 8 EXHIBIT 99 Geokinetics Closes Private Placement Equity Financing and Announces Acquisition Houston, July 18, 1997 - Geokinetics Inc., (NASDAQ: GEOK) announced today that it had funded a $6,000,000 equity financing obtained from private investment sources. The financing consisted of both common and preferred stock. Geokinetics issued 5,500,000 shares of common at $.75 cents per share and 187,500 shares of preferred priced at $10.00 per share. The preferred stock is convertible into common at $.75 cents per share. Upon conclusion of the transaction, Geokinetics has 13,353,288 shares of common stock outstanding, assuming conversion of the new preferred issue. In addition, the private investment sources received shadow warrants providing partial anti-dilution protection for the groups approximately 62% ownership interest in the company. Geokinetics also announced today that it has completed the acquisition of Signature Geophysical Services, Inc., a Houston based 3-D seismic acquisition contractor. Signature currently operates one 3400 channel I/O RSR System Two primarily in the Atchafalaya Basin of Louisiana. Geokinetics issued 400,000 shares of common stock and granted certain earn out provisions in exchange for all of the outstanding shares of Signature Geophysical. This acquisition is an important step in the company's strategic repositioning as a technologically focused provider of land-based 3-D seismic acquisition services to the oil and gas industry. In conjunction with the above transactions, Geokinetics also announced several changes in the composition of its Board of Directors. William R. Ziegler, a partner of the New York Law firm Parson & Brown, and Steven A. Webster, Chairman and CEO of Falcon Drilling Company, Inc., a NYSE company, have been elected to the Board of Directors effective July 18, 1997. Immediately following the election of Mr. Ziegler and Mr. Webster, it was announced that Michael D. Hale, (who will remain an officer of the company), Herbert H. Hedick and William H. Murphy were resigning their positions as Directors of the company. -----END PRIVACY-ENHANCED MESSAGE-----