-----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, L100tbsZOfNnIE4lGRkSgrQ9kn67kKNeWARKybqZJSHgnSjNsEOlU8v9Yv/qDUIa 8l7Rxt+fOsPKOZ3i4OMHOQ== 0000950123-98-002521.txt : 19980317 0000950123-98-002521.hdr.sgml : 19980317 ACCESSION NUMBER: 0000950123-98-002521 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 19980313 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: 3-D GEOPHYSICAL INC CENTRAL INDEX KEY: 0001003382 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 133841601 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: SEC FILE NUMBER: 005-47599 FILM NUMBER: 98565057 BUSINESS ADDRESS: STREET 1: 8226 PARK MEADOWS DRIVE STREET 2: BUILDING H CITY: LITTLETON STATE: CO ZIP: 80124 BUSINESS PHONE: 3038580500 MAIL ADDRESS: STREET 1: 8226 PARK MEADOWS DRIVE STREET 2: BUILDING H CITY: LITTLETON STATE: CO ZIP: 80124 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: 3-D GEOPHYSICAL INC CENTRAL INDEX KEY: 0001003382 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 133841601 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 8226 PARK MEADOWS DRIVE STREET 2: BUILDING H CITY: LITTLETON STATE: CO ZIP: 80124 BUSINESS PHONE: 3038580500 MAIL ADDRESS: STREET 1: 8226 PARK MEADOWS DRIVE STREET 2: BUILDING H CITY: LITTLETON STATE: CO ZIP: 80124 SC 14D9 1 3-D GEOPHYSICAL, INC. 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-9 ------------------------ SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 3-D GEOPHYSICAL, INC. (NAME OF SUBJECT COMPANY) 3-D GEOPHYSICAL, INC. (NAME OF PERSON(S) FILING STATEMENT) COMMON STOCK, PAR VALUE $.01 PER SHARE (TITLE OF CLASS OF SECURITIES) 88553V107 (CUSIP NUMBER OF CLASS OF SECURITIES) ------------------------ JOEL FRIEDMAN CHAIRMAN 3-D GEOPHYSICAL, INC. 599 LEXINGTON AVENUE NEW YORK, NEW YORK 10022 (212) 317-1234 WITH COPY TO: PETER S. KOLEVZON, ESQ. KRAMER, LEVIN, NAFTALIS & FRANKEL 919 THIRD AVENUE NEW YORK, NEW YORK 10022 (212) 715-9100 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT) ================================================================================ 2 ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the subject company is 3-D Geophysical, Inc., a Delaware corporation (the "Company"), and the address of the principal executive offices of the Company is 8226 Park Meadows Drive, Littleton, Colorado 80124. The title of the class of equity securities to which this Statement relates is the Common Stock, par value $.01 per share (the "Shares"), of the Company and the associated Preferred Share Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of July 17, 1997, between the Company and American Securities Transfer & Trust, Inc., as Rights Agent (as the same has heretofore and may hereafter be amended, the "Rights Agreement"). ITEM 2. TENDER OFFER OF THE BIDDER. This statement relates to a tender offer by WAI Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Western Atlas Inc., a Delaware corporation ("Western"), disclosed in a Tender Offer Statement on Schedule 14D-1, dated March 13, 1998, to purchase all outstanding Shares at a purchase price of $9.65 per share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in an Offer to Purchase dated March 13, 1998 (the "Offer") and pursuant to the Agreement and Plan of Merger dated as of March 8, 1998 (the "Merger Agreement"), among Western, Purchaser and the Company. The bidders in the Offer are Western and Purchaser (the "Bidders"). The principal executive offices of the Bidders are located at 10205 Westheimer Road, Houston, Texas 77042. ITEM 3. IDENTITY AND BACKGROUND. (a) The name and business address of the Company, which is the person filing this Statement, are set forth in Item 1 above. (b) (i) Certain contracts, agreements, arrangements or understandings between the Company or its affiliates and certain of its directors and executive officers are described in the sections entitled "Information Concerning Directors and Nominees -- Directors Compensation," "Executive Compensation -- Employment Agreements; Non-competition Agreements" and "Certain Relationships and Related Transactions" in the Company's Proxy Statement for its 1997 Annual Meeting of Stockholders held on May 16, 1997 (the "1997 Proxy Statement"). A copy of the relevant sections of the 1997 Proxy Statement has been filed with the Securities and Exchange Commission (the "SEC" or the "Commission") as Exhibit (c)(1) to this Statement and is incorporated herein by reference. In January 1998, the Company entered into amended and restated employment agreements with Messrs. Wayne P. Widynowski, Executive Vice President and a director of the Company, and Ronald L. Koons, Chief Financial Officer of the Company. These agreements are substantially the same as the prior agreements between the Company and Messrs. Widynowski and Koons except they extend the term of the agreements to December 31, 2000 and provide for severance equal to two years of salary (plus bonus) in the case of Mr. Widynowski and one year of salary (plus bonus) in the case of Mr. Koons if they are terminated without cause or they leave for "good reason" (as defined) following a change in control of the Company, are filed with the SEC as Exhibits (c)(2) and (c)(3) to this Statement, respectively, and are incorporated herein by reference. (ii) Except as indicated above, and except for the Merger Agreement, the Support Agreements and the Consulting and Noncompetition Agreements described below, which information to the extent it relates to this Item 3(b) is incorporated by reference, there are no material contracts, agreements, arrangements or understandings or actual or potential conflicts of interest between the Company or its affiliates and (i) its executive officers, directors or affiliates, or (ii) to the knowledge of the Company, the Bidders, their executive officers, directors or affiliates. MERGER AGREEMENT THE OFFER. The Merger Agreement provides that the Purchaser will commence the Offer and that, upon the terms and subject to prior satisfaction or waiver of the conditions of the Offer set forth in Annex I to the Merger Agreement (the "Tender Offer Conditions"), the Purchaser will purchase all Shares validly tendered 2 3 pursuant to the Offer. The Merger Agreement provides that, without the prior written consent of the Company, the Purchaser shall not (i) impose conditions to the Offer other than the Tender Offer Conditions, (ii) modify or amend the Tender Offer Conditions or any other term of the Offer in a manner adverse to the holders of Shares pursuant to the Offer, (iii) reduce the number of Shares subject to the Offer, (iv) reduce the amount offered per Share pursuant to the Offer, (v) except as provided in the following sentence, extend the Offer if all of the Tender Offer Conditions are satisfied or waived, or (vi) change the form of consideration payable in the Offer. Notwithstanding the foregoing, the Purchaser may, without the consent of the Company, extend the Offer at any time, and from time to time, (i) if at the then scheduled Expiration Date (as defined in the Merger Agreement) of the Offer any of the conditions to Purchaser's obligation to accept for payment and pay for all Shares shall not have been satisfied or waived; (ii) for any period required by any rule, regulation, interpretation or position of the SEC or its staff applicable to the Offer; or (iii) if all Tender Offer Conditions are satisfied or waived but the number of Shares tendered is at least equal to 70%, but less than 90%, of the then outstanding number of Shares, for an aggregate period of not more than 10 business days (for all such extensions) beyond the latest Expiration Date that would be permitted under clause (i) or (ii). The Offer is conditioned upon, among other things, at least a majority of the total number of outstanding Shares on a fully diluted basis being validly tendered prior to the Expiration Date and not properly withdrawn (the "Minimum Condition"). The Offer is also subject to certain other terms and conditions. The Offer will expire at 12:00 midnight, New York City time, on Thursday, April 9, 1998, unless extended. RECOMMENDATION. The Board of Directors of the Company (the "Company Board" or the "Board"), at a meeting duly called and held, (i) determined by unanimous vote of its directors that the Offer and the Merger are fair to and in the best interests of the Company and its stockholders, and (ii) recommended acceptance of the Offer and approval of the Merger Agreement by the Company's stockholders (if such approval is required by applicable law). The Merger Agreement provides that Western, upon the payment by Purchaser for Shares pursuant to the Offer, and from time to time thereafter, is entitled to designate such number of directors, rounded up to the next whole number, on the Company Board as is equal to the product of the total number of directors on the Company Board (determined after giving effect to the directors so elected pursuant to such provision) multiplied by the percentage that the aggregate number of Shares beneficially owned by Western or its affiliates bears to the total number of Shares then outstanding. The Company shall, upon request of Western, promptly take all actions necessary to cause Western's designees to be so elected, including, if necessary, seeking the resignations of one or more existing directors; provided, however, that prior to the time the Merger becomes effective (the "Effective Time"), the Company Board shall always have at least two members who are neither officers, directors, shareholders or designees of Purchaser or any of its affiliates ("Purchaser Insiders"). If the number of directors who are not Purchaser Insiders is reduced below two prior to the Effective Time, the remaining director who is not a Purchaser Insider will be entitled to designate a person to fill such vacancy who is not a Purchaser Insider and who will be a director not deemed to be a Purchaser Insider for all purposes of the Merger Agreement. Following the election or appointment of Western's designees and prior to the Effective Time, any amendment or termination of the Merger Agreement by the Company, any extension by the Company of the time for performance of any of the obligations or other acts of Western or the Purchaser or waiver of any of the Company's rights thereunder, will require the concurrence of a majority of the directors of the Company then in office who are not Purchaser Insiders (or in the case where there are two or fewer directors who are not Purchaser Insiders, the concurrence of one director who is not a Purchaser Insider) if such amendment, termination, extension or waiver would have an adverse effect on the minority stockholders of the Company. THE MERGER. The Merger Agreement provides that, at the Effective Time, Purchaser will be merged with and into the Company. Following the Merger, the separate corporate existence of the Purchaser will cease and the Company will continue as the Surviving Corporation. 3 4 The Company has agreed pursuant to the Merger Agreement that, if required by applicable law in order to consummate the Merger, it will (i) convene a special meeting of its stockholders as soon as practicable following the acceptance for payment of and payment for Shares by the Purchaser pursuant to the Offer for the purpose of considering and taking action upon the Merger Agreement; (ii) prepare and file with the Commission a preliminary proxy statement relating to the Merger Agreement, and use its reasonable best efforts (x) to obtain and furnish the information required to be included by the Commission in the Proxy Statement (as defined herein) and, after consultation with Western, to respond as soon as practicable to any comments made by the Commission with respect to the preliminary proxy statement and to cause a definitive proxy statement (the "Proxy Statement") to be mailed to its stockholders and (y) to obtain the necessary approvals of the Merger and adoption of the Merger Agreement by its stockholders; and (iii) include in the Proxy Statement the recommendation of the Company Board that stockholders of the Company vote in favor of the approval and adoption of the Merger and the Merger Agreement. Western has agreed in the Merger Agreement that it will vote, or cause to be voted, all of the Shares then owned by it, the Purchaser or any of its other subsidiaries in favor of the approval of the Merger and the Merger Agreement. The Merger Agreement further provides that, notwithstanding the foregoing, if the Purchaser acquires at least 90% of the outstanding Shares of the Company pursuant to the Offer, the parties to the Merger Agreement will take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the acceptance for payment of and payment for the Shares by the Purchaser pursuant to the Offer without a meeting of the stockholders of the Company, in accordance with Section 253 of the Delaware General Corporation law (the "GCL"). CHARTER, BYLAWS, DIRECTORS AND OFFICERS. The Certificate of Incorporation of Purchaser, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation, until thereafter amended in accordance with the provisions thereof and of the Merger Agreement and applicable law. The By-Laws of Purchaser in effect at the time of the Effective Time shall be the By-Laws of the Surviving Corporation until amended, subject to the provisions of the Merger Agreement which provide that all rights to indemnification now existing in favor of directors and officers of the Company and its subsidiaries as provided in their respective charters or by-laws shall survive the Merger and continue in effect for not less than six years thereafter. Subject to applicable law, the directors of Purchaser immediately prior to the Effective Time will be the initial directors, and the officers of Purchaser immediately prior to the Effective Time will be the initial officers, of the Surviving Corporation and will hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal. CONVERSION OF SECURITIES. By virtue of the Merger and without any action on the part of the holders thereof, at the Effective Time, each Share issued and outstanding immediately prior to the Effective Time (other than (i) any Shares held by Western, the Purchaser, any wholly-owned subsidiary of Western or the Purchaser, in the treasury of the Company or by any wholly-owned subsidiary of the Company, which Shares, by virtue of the Merger and without any action on the part of the holder thereof, will be canceled and retired and will cease to exist with no payment being made with respect thereto and (ii) Shares, if any, held by stockholders who perfect their appraisal rights under Delaware law ("Dissenting Shares")) will be canceled and retired and will be converted into the right to receive $9.65 net per Share in cash, payable to the holder thereof, without interest thereon (the "Merger Price"), upon surrender of the certificate formerly representing such Share. At the Effective Time, each share of common stock of Purchaser, par value $.01 per share, issued and outstanding immediately prior to the Effective Time will, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and become one validly issued, fully paid and non-assessable share of common stock, par value $.01 per share, of the Surviving Corporation. The Merger Agreement provides that, prior to the consummation of the Offer, the Company Board (or, if appropriate, any committee thereof) shall adopt appropriate resolutions and take all other actions necessary to provide for the cancellation, effective at the Effective Time, of all the outstanding stock options (the "Options") granted under any stock option or similar plan of the Company (the "Stock Plans") or under any agreement, without any payment therefor except as otherwise provided in the Merger Agreement. Immediately prior to the Effective Time, all Options (whether vested or unvested) will be canceled (and to the extent exercisable shall no longer be exercisable) and will entitle each holder thereof, in cancellation and settlement 4 5 therefor, to a payment, if any, in cash by the Company (less any applicable withholding taxes), as soon as practicable following the Effective Time, equal to the product of (i) the total number of Shares subject to such Option (whether vested or unvested) and (ii) the excess, if any, of the Merger Price over the exercise price per Common Share subject to such Option (the "Cash Payment"). REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the Company has made customary representations and warranties to Western and the Purchaser with respect to, among other matters, its organization and qualification, capitalization, authority, required filings, consents and approvals, financial statements, public filings, litigation, compliance with law, employee benefit plans, intellectual property, environmental matters, material contracts, opinion of financial advisor, information to be included in the Proxy Statement, tax status, condition of assets, relationships with customers and employees and the absence of any material adverse effects on the Company. Western and Purchaser have made customary representations and warranties to the Company with respect to, among other matters, its organization, qualifications, authority, required filings, consents and approvals and availability of funds. COVENANTS. The Merger Agreement obligates the Company and its subsidiaries, from the date of the Merger Agreement until the Effective Time, to conduct their operations only in the ordinary and usual course of business consistent with past practice and obligates the Company and its subsidiaries to use their reasonable best efforts to preserve intact their business organizations, to keep available the services of their present officers and key employees and to preserve the good will of those having business relationships with them. The Merger Agreement also contains specific restrictive covenants as to certain impermissible activities of the Company prior to the Effective Time, which provide that the Company will not (and will not permit any of its subsidiaries to) take certain actions without the prior written consent of Western including, among other things, amendments to its certificate of incorporation or by-laws, issuances or sales of its securities, changes in capital structure, dividends and other distributions, repurchases or redemptions of securities, material acquisitions or dispositions, increases in compensation or adoption of new benefit plans and certain other material events or transactions. ACCESS TO INFORMATION. The Merger Agreement provides that, until the Effective Time, the Company will give Western and the Purchaser and their representatives full access, upon reasonable notice and during normal business hours, to the offices and other facilities and to the books and records of the Company and its subsidiaries. EFFORTS. Subject to the terms and conditions provided in the Merger Agreement, each of the Company, Western and the Purchaser shall cooperate and use their respective reasonable commercial efforts to take or cause to be made all filings reasonably necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by the Merger Agreement. Each of the parties also has agreed to use its reasonable commercial efforts to obtain as promptly as practicable all Consents (as defined in the Merger Agreement) of any Governmental Entity (as defined in the Merger Agreement) or any other person required in connection with, and waivers of any Violations (as defined in the Merger Agreement) that may be caused by, the consummation of the transactions contemplated by the Offer and the Merger Agreement. PUBLIC ANNOUNCEMENTS. The Merger Agreement provides that the Company, on the one hand, and Western and the Purchaser, on the other hand, agree to consult promptly with each other prior to issuing any press release or otherwise making any public statement with respect to the Offer, the Merger and the other transactions contemplated by the Merger Agreement, agree to provide to the other party for review a copy of any such press release or statement, and shall not issue any such press release or make any such public statement prior to such consultation and review, unless required by applicable law or any listing agreement with a securities exchange. EMPLOYEE BENEFIT ARRANGEMENTS. With respect to employee benefit matters, the Merger Agreement provides that the Company will, and Western will cause the Company and, from and after the Effective Time, the Surviving Corporation to, honor all obligations under specified employment and severance agreements. Notwithstanding the foregoing, from and after the Effective Time, the Surviving Corporation will have the 5 6 right to amend, modify, alter or terminate any employee benefit plan, provided that any such action will not affect any rights for which the agreement of the other party or a beneficiary is required. The Merger Agreement also provides that employees of the Surviving Corporation immediately following the Effective Time who immediately prior to the Effective Time were employees of the Company or any Company subsidiary will be given credit for purposes of eligibility and vesting under each employee benefit plan, program, policy or arrangement of Western or the Surviving Corporation in which such employees participate subsequent to the Effective Time for all service with the Company and any Company subsidiary prior to the Effective Time (to the extent such credit was given by the Company or any Company subsidiary) for purposes of eligibility and vesting. The Company has agreed that it will not take any action which could prevent or impede the termination of the Company's 1995 Long-Term Incentive Compensation Plan, as amended and restated, or 1997 Long-Term Stock Incentive Plan, and all other Stock Plans (as defined in the Merger Agreement) and any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any subsidiary of the Company in each case effective prior to the Effective Time. The Company has agreed to take all necessary action so that none of Western, the Company or any of their respective subsidiaries is or will be bound by any Options (as defined in the Merger Agreement), other options, warrants, rights or agreements which would entitle any person, other than Western or its affiliates, to own any capital stock of the Surviving Corporation or any of its subsidiaries or to receive any payment in respect thereof as of the Effective Time and to obtain all necessary consents so that after the Effective Time, holders of Options will have no rights other than the rights of the holders of Options to receive the Cash Payment, if any, in cancellation and settlement thereof. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Pursuant to the Merger Agreement, Western has agreed that from and after the Effective Time all rights to indemnification existing at the date of the Merger Agreement in favor of directors or officers of the Company or any of its subsidiaries as set forth in the Certificate of Incorporation or By-Laws of the Company and its subsidiaries shall survive the Merger and shall continue in full force and effect for a period of six years following the Effective Time. The Merger Agreement further provides that Western shall cause the Company and, from and after the Effective Time, the Surviving Corporation to maintain in effect for not less than four years (except as provided below) from the Effective Time the current policies of the directors' and officers' liability insurance maintained by the Company; provided that the Surviving Corporation may substitute therefor other policies not less advantageous (other than to a de minimus extent) to the beneficiaries for the current policies and provided that such substitution shall not result in any gaps or lapses in coverage with respect to matters occurring prior to the Effective Time; and provided, further, that the Surviving Corporation shall not be required to pay an annual premium in excess of 175% of the last annual premium paid by the Company prior to the date hereof (which the Company represented to be $100,000 for the 12-month period ending December 31, 1998) and if the Surviving Corporation is unable to obtain such insurance it shall obtain as much comparable insurance as possible for an annual premium equal to such maximum amount. Notwithstanding the foregoing, at any time on or after the first anniversary of the Effective Time, Western may, at its election, provide funds to the Surviving Corporation to the extent necessary so that the Surviving Corporation may self-insure with respect to the level of insurance coverage required in lieu of causing to remain in effect any directors' and officers' liability insurance policy. Any indemnified party under the Merger Agreement (an "Indemnified Party") wishing to claim such indemnification, upon learning of any claim, action, suit, proceeding or investigation, must promptly notify Western thereof (but any such failure or delay will not relieve Western of liability except to the extent Western is actually prejudiced as a result of such failure or delay). In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) Western or the Surviving Corporation will have the right, from and after the purchase of Shares pursuant to the Offer, to assume the defense thereof and Western will not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, (ii) the Indemnified Parties will cooperate in the defense of any such matter and (iii) Western will not be liable for any settlement effected without its prior written consent, provided that Western shall not have any obligation hereunder to any indemnified party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final, that such person is not 6 7 entitled to indemnification under applicable law. The Merger Agreement provides that any Indemnified Party may retain its own separate counsel reasonably satisfactory to Western if there is a conflict of interest requiring separate representation under applicable principles of professional responsibility and may participate in (but not, except with respect to matters relating to such conflict, control) the defense of such claim, action, suit, proceeding or investigation and the Indemnifying Party will be responsible for any reasonable legal expenses or any other reasonable expenses subsequently incurred by such Indemnified Party in connection with such participation or defense to the extent such Indemnified Party is entitled to be indemnified therefrom. The Merger Agreement further provides that Western will not settle any claim, action, suit, proceeding or investigation unless the Indemnifying Party shall be fully released and discharged. NOTIFICATION OF CERTAIN MATTERS. Western and the Company have agreed to promptly notify each other of (i) the occurrence or non-occurrence of any fact or event which would be reasonably likely (A) to cause any representation or warranty contained in the Merger Agreement to be untrue or inaccurate in any material respect at any time prior to the Effective Time or (B) to cause any covenant, condition or agreement under the Merger Agreement not to be complied with or satisfied in any material respect and (ii) any failure of the Company or Western, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under the Merger Agreement in any material respect, provided that no such notification will affect the representations or warranties of any party or the conditions to the obligations of any party. Each of the Company, Western and Purchaser is also required to give prompt notice to the other parties of any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by the Merger Agreement. RIGHTS AGREEMENT. The Company covenants and agrees in the Merger Agreement that it will not (i) redeem the Rights, (ii) amend the Rights Agreement or (iii) take any action which would allow any Person (as defined in the Rights Agreement) other than Western or Purchaser to acquire beneficial ownership of 15% or more of the Shares without causing a Distribution Date or a Triggering Event (as such terms are defined in the Rights Agreement) to occur. STATE TAKEOVER LAWS. The Merger Agreement provides that the Company will, upon the request of the Purchaser, take all reasonable steps to assist in any challenge by the Purchaser to the validity or applicability to the transactions contemplated by the Merger Agreement, including the Offer and the Merger, of any state takeover law. NO SOLICITATION. The Merger Agreement requires the Company, its affiliates and their respective officers, directors, employees, representatives and agents to immediately cease any existing discussions or negotiations with any parties with respect to any acquisition or exchange of all or any material portion of the assets of, or any equity interest in, the Company or any of its subsidiaries or any business combination with the Company or any of its subsidiaries. The Merger Agreement further provides that, prior to the Effective Time, the Company will not authorize or permit any of its subsidiaries or any of its subsidiaries' directors, officers, employees, agents or representatives, directly or indirectly, to solicit, initiate, encourage or facilitate, or furnish or disclose non-public information in furtherance of, any inquiries or the making of any proposal with respect to any merger, liquidation, recapitalization, consolidation or other business combination involving the Company or its subsidiaries or acquisition of any capital stock or any material portion of the assets of the Company or of its subsidiaries, or any combination of the foregoing (an "Acquisition Transaction") or negotiate, explore or otherwise engage in discussions with any person (other than Purchaser, Western or their respective directors, officers, employees, agents and representatives) with respect to any Acquisition Transaction or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by the Merger Agreement, provided that the Company may furnish information to, and negotiate or otherwise engage in discussions with, any party who delivers a bona fide written proposal for an Acquisition Transaction if the Company Board determines in good faith and on a reasonable basis by a majority vote, after consultation with its outside legal counsel and its financial advisor, Salomon Smith Barney, that (i) such Acquisition Transaction is reasonably likely to be more favorable to the stockholders of the Company from a financial point of view than the transactions contemplated by the Merger Agreement and (ii) failing to take such action would thus constitute a breach of the fiduciary duties of the Company Board. The Merger Agreement further provides that, from and after the 7 8 execution of the Merger Agreement, the Company will, as soon as practicable, advise the Purchaser in writing of the receipt, directly or indirectly, of any discussions, negotiations, proposals or substantive inquiries relating to an Acquisition Transaction, identify the offeror and furnish to the Purchaser a copy of any such proposal or inquiry, if it is in writing, or a written summary of any oral proposal or inquiry relating to an Acquisition Transaction, and that the Company will promptly advise Western in writing of any substantive development relating to such proposal, including the results of any substantive discussions or negotiations with respect thereto. CONDITIONS TO CONSUMMATION OF THE MERGER. Pursuant to the Merger Agreement, the respective obligations of Western, the Purchaser and the Company to consummate the Merger are subject to the satisfaction, at or before the Effective Time, of each of the following conditions: (i) the stockholders of the Company shall have duly approved the transactions contemplated by the Merger Agreement, if required by applicable law; (ii) the Purchaser shall have accepted for payment and paid for Shares pursuant to the Offer in accordance with the terms of the Merger Agreement; (iii) the consummation of the Merger is not restrained, enjoined or prohibited by any order, judgment, decree, injunction or ruling of a court of competent jurisdiction or any Governmental Entity and there is not any statute, rule or regulation enacted, promulgated or deemed applicable to the Merger by any Governmental Entity which prevents the consummation of the Merger or has the effect of making the purchase of Shares illegal; and (iv) any waiting period (and any extension thereof) under the HSR Act (as defined) applicable to the Merger shall have expired or terminated. TERMINATION. The Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, notwithstanding approval thereof by the stockholders of the Company (with any termination by Western also being an effective termination by Purchaser): (a) by the mutual written consent of the Company, by action of its Board of Directors and Western; (b) by the Company if (i) Purchaser fails to commence the Offer by March 13, 1998, (ii) Purchaser has not accepted for payment and paid for the Shares pursuant to the Offer in accordance with the terms of the Offer on or before June 30, 1998, provided that if any applicable waiting period under the HSR Act shall not have expired or been terminated prior to June 30, 1998, then the Company may not terminate the Merger Agreement pursuant to this provision until August 31, 1998 or (iii) Purchaser fails to purchase validly tendered Shares in violation of the terms of the Merger Agreement; (c) by Western or the Company if the Offer is terminated or withdrawn pursuant to its terms without any Shares being purchased thereunder; provided, however, that neither Western nor the Company may terminate the Merger Agreement if such party shall have materially breached the Merger Agreement or, in the case of Western, if it or Purchaser is in material violation of the terms of the Offer; (d) by Western or the Company if any court or other Governmental Entity shall have issued an order, decree, judgment or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action shall have become final and nonappealable; (e) by the Company if, prior to the purchase of Shares pursuant to the Offer in accordance with the terms of the Merger Agreement, the Company Board approves an Acquisition Transaction, on terms which a majority of the members of the Company Board have determined in good faith and on a reasonable basis, after consultation with its outside counsel and Salomon Smith Barney, that (i) such Acquisition Transaction is more favorable to the Company and its stockholders from a financial point of view than the transactions contemplated by the Merger Agreement and (ii) failure to approve such proposal and terminate the Merger Agreement would thus constitute a breach of fiduciary duties of the Company Board under applicable law; provided that the termination described in this subparagraph (e) shall not be effective unless and until the Company shall have paid to Western the Termination Fee, as described below under "Fees and Expenses." (f) by Western if the Company breaches its covenant in Section 6.08 of the Merger Agreement (relating to the Rights Agreement); 8 9 (g) by Western prior to the purchase of the Shares pursuant to the Offer if the Company Board shall have withdrawn or modified (including by amendment of this Schedule 14D-9) in a manner adverse to the Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger, shall have approved or recommended another offer or transaction, or shall have resolved to effect any of the foregoing; (h) by Western if any Management Stockholder (as defined) who is a party to a Support Agreement shall have failed to perform or comply with any of his obligations, covenants or agreements in any material respect under a Support Agreement; (i) by Western prior to the purchase of the Shares pursuant to the Offer if the Minimum Condition shall not have been satisfied by the expiration date of the Offer and on or prior to such date (A) a third party shall have made a proposal or public announcement or communication to the Company with respect to (i) the acquisition of the Company by merger, tender offer or otherwise; (ii) the acquisition of 50% or more of the assets of the Company and its subsidiaries, taken as a whole; (iii) the acquisition of 15% or more of the outstanding Shares; (iv) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (v) the repurchase by the Company or any of its subsidiaries of 15% or more of the outstanding Shares at a price in excess of the Offer Price or (B) any person (including the Company or any of its affiliates or subsidiaries), other than Western or any of its affiliates, shall have become the beneficial owner of more than 15% of the Shares; or (j) by Western if Purchaser shall not have accepted for payment and paid for Shares pursuant to the Offer in accordance with the terms thereof on or before June 30, 1998. In the event of the termination of the Merger Agreement in accordance with its terms, the Merger Agreement will become void and have no effect, without any liability on the part of any party or its directors, officers, employees or stockholders, other than certain specified provisions, which shall survive any such termination, provided that no party shall be relieved from liability for any breach of the Merger Agreement. FEES AND EXPENSES. Except as provided below, whether or not the Merger is consummated, all costs and expenses incurred in connection with the Offer, the Merger Agreement and the transactions contemplated by the Merger Agreement will be paid by the party incurring such expenses. In the event that the Merger Agreement is terminated pursuant to subparagraphs (e), (f), (g) or (h) of "Termination" as described above (or is terminated pursuant to paragraph (c) as a result of the failure to satisfy the conditions set forth in paragraph (d) of Section 14 of the Offer) then the Company will within one business day after such termination (except for a termination under subparagraph (e) in which case payment is to be made upon or prior to such termination) pay Western a termination fee of $5,500,000 (the "Termination Fee") in immediately available funds by wire transfer to an account designated by Western. In the event that the Merger Agreement is terminated pursuant to subparagraph (i) of "Termination" and within six months of such termination the Company shall have entered into a definitive agreement or a written agreement in principle providing for an Acquisition Transaction, the Company shall pay Western the Termination Fee at or prior to execution of such agreement or agreement in principle in immediately available funds by wire transfer to an account designated by Western. In the event the Merger Agreement is terminated pursuant to subparagraph (c) of "Termination" as a result of the failure to satisfy the conditions set forth in subparagraph (f) or (g)(1) of Section 14 of the Offer, then the Company shall promptly (and in any event within one business day after such termination) reimburse Western for the fees and expenses of Western and the Purchaser (including reasonable printing fees, filing fees and reasonable fees and expenses of its legal and financial advisors) related to the Offer, the Merger Agreement, the transactions contemplated by the Merger Agreement and any related financing up to a maximum of $1,500,000 (collectively "Expenses") in immediately available funds by wire transfer to an account designated by Western. The prevailing party in any legal action undertaken to enforce the Merger Agreement or any provision thereof will be entitled to recover from the other party the costs and expenses (including attorneys and expert witness fees) incurred in connection with such action. AMENDMENT; EXTENSION; WAIVER. The Merger Agreement may be amended by the Company, Western and the Purchaser at any time before or after any approval of the Merger Agreement by the stockholders of the Company but, after any such approval, no amendment will be made which decreases the price to be paid 9 10 in the Merger, changes the consideration to be received or which otherwise adversely affects the rights of the Company's stockholders thereunder without the approval of such stockholders. At any time prior to the Effective Time, the parties to the Merger Agreement may (i) extend the time for the performance of any of the obligations or other acts of any other party thereto, (ii) waive any inaccuracies in the representations and warranties contained therein of any other party thereto or in any document, certificate or writing delivered pursuant to the Merger Agreement by any other party thereto or (iii) waive compliance with any of the agreements of any other party or with any conditions to its own obligations. The Merger Agreement provides that following the election or appointment of Western's designees to the Company Board and prior to the Effective Time, any amendment or termination of the Merger Agreement, or any extension by the Company of the time for the performance of any of the obligations or other acts of Western or the Purchaser or waiver of any of the Company's rights under the Merger Agreement, will require the concurrence of a majority of the directors of the Company then in office who are not Purchaser Insiders (or in the case where there are two or fewer directors who are not Purchaser Insiders, the concurrence of one director who is not a Purchaser Insider) if such extension or waiver would have an adverse effect on the minority stockholders of the Company. SUPPORT AGREEMENTS Concurrently with the execution of the Merger Agreement, Western entered into Support Agreements with each member of the Board of Directors of the Company and one executive officer who is not a director. In the aggregate, such stockholders owned 1,748,306 Shares (representing approximately 14.7% of the Shares outstanding) as of March 8, 1998. Pursuant to the Support Agreements the stockholder(s) have agreed to tender (except for one officer-director who owns 3,000 Shares) and not withdraw their Shares pursuant to the Offer. Each also agreed that, for so long as the Support Agreement was in effect, at any meeting of the stockholders of the Company, however called, he would vote his Shares in favor of the Merger, against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement, and against any action or agreement that would impede, interfere with, delay, postpone or attempt to discourage the Merger or the Offer. Each of these stockholders also granted representatives of Western an irrevocable proxy to vote his Shares in favor of the Merger and other transactions contemplated by the Merger Agreement, against any Acquisition Transaction and otherwise as contemplated by the preceding paragraph. In addition each of the stockholders who is a party to a Support Agreement agreed not to (i) transfer any or all of his Shares (except for one officer-director who owns 3,000 Shares and who may transfer his Shares to the Company), (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of his Shares (except for such officer-director who owns 3,000 Shares and who may enter into a contract with the Company with respect to such Shares), (iii) grant any proxy, power-of-attorney or other authorization in or with respect to his Shares, (iv) deposit his Shares into a voting trust or enter into a voting agreement or arrangement with respect to his Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of his obligations under the Support Agreements or by the Merger Agreement or which would make any representation or warranty of such stockholder under the Support Agreement untrue or incorrect. Each further agreed that he would not, and would not permit or authorize any of his affiliates, representatives or agents to, directly or indirectly, encourage, solicit, explore, participate in or initiate discussions or negotiations with, or provide or disclose any information to, any corporation, partnership, person or other entity or group (other than Western, Purchaser or any of their affiliates or representatives) concerning any Acquisition Transaction or enter into any agreement, arrangement or understanding requiring the Company to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by the Merger Agreement. Each such stockholder also agreed immediately to cease any existing activities, discussions or negotiations with any parties with respect to any Acquisition Transaction and to immediately 10 11 advise Western in writing of the receipt, directly or indirectly, of any inquiries, discussions, negotiations or proposals relating to an Acquisition Transaction, identify the offeror and furnish to Western a copy of any such proposal or inquiry, if it is in writing, or a written summary of any oral proposal or inquiry relating to an Acquisition Transaction and to promptly advise Western in writing of any development relating to such proposal, including the results of any discussions or negotiations with respect thereto. The Support Agreements provide, however, that any action taken by the Company or any member of the Board of Directors of the Company (including, if applicable, such stockholder acting in such capacity) in accordance with the proviso set forth in the second sentence of "No Solicitation" will be deemed not to violate the provisions described in this paragraph. The agreements and proxy contained in each Support Agreement will terminate on the earlier of payment for the Shares pursuant to the Offer and the termination of the Merger Agreement in accordance with its terms. CONSULTING AND NONCOMPETITION AGREEMENTS Joel Friedman, the Chairman of the Board and Chief Executive Officer of the Company, and Luis H. Ferran, the Executive Vice President for Latin American Operations and a director of the Company, have each entered into consulting and non-compete agreements with Western which will become effective upon consummation of the Merger. The agreements with Messrs. Friedman and Ferran provide for annual fees of $250,000 and $125,000, respectively, over a 4-year term. During their consultancy, and until the later of the end of the 4-year term or 12 months following the termination of their consultancy, each will be prohibited from engaging in the Company's primary businesses of seismic data acquisition and data processing and from soliciting employees and customers of Western and its affiliates (including the Company). ITEM 4. THE SOLICITATION OR RECOMMENDATION. (a) At a special meeting held on March 8, 1998, the Company Board unanimously determined that each of the Offer and the Merger is fair to, and in the best interests of, the Company's stockholders and approved the Merger Agreement and the transactions contemplated thereby. The Board hereby recommends that the Company's stockholders accept the Offer and tender all of their Shares pursuant to the Offer. Copies of a letter to stockholders is attached hereto as Exhibit (a)(1) and is incorporated herein by reference. (b) The reasons for the position stated in paragraph (a) of this Item 4 are presented in the information furnished below in this Item 4(b). BACKGROUND OF THE OFFER Initial contacts between the Company and Western began in early July 1997 when Richard C. White, President of The Western Geophysical division of Western Atlas International, Inc., a subsidiary of Western ("WAII"), telephoned Joel Friedman, Chairman of the Board of the Company, to discuss the possibility of meeting to explore a business combination. On July 15, 1997 Mr. Friedman met with Mr. White and Jesse Perez, Senior Vice President of Finance and Administration of WAII. Although specific terms were not discussed, the parties entered into a confidentiality agreement relating to the exchange of confidential information. After signing the confidentiality agreement, the Company provided Western with certain confidential information relating to the Company and its businesses. Following several general discussions concerning possible structures and potential valuations, both parties agreed that further discussions at such time would not be pursued. On July 30, 1997, Mr. Perez sent a letter to Mr. Friedman returning the confidential information which had previously been provided. During the fall of 1997, Mr. Friedman and other representatives of the Company had preliminary discussions with several other companies with respect to a possible business combination involving the Company. In connection with one such discussion, the Company and the other party exchanged confidential information, but determined not to proceed with a transaction. 11 12 In early November 1997, Mr. White contacted Mr. Friedman to reiterate Western's continued interest in a possible transaction, and later that month Salomon Smith Barney, which was acting as financial advisor to the Company with respect to a possible transaction, at the direction of the Company contacted and had further discussions with Mr. White. In early December 1997, Will Honeybourne, a Senior Vice President of WAII, met with Mr. Friedman and Mr. Ferran. The discussions at this meeting related primarily to the Company's and the industry's outlook and each party's potential interest in pursuing a business combination. On December 19, 1997 the Company and Western entered into a new confidentiality agreement. The Company then provided Western with additional financial and operational data and responded to Western's inquiries in connection with its preliminary financial review. On January 13, 1998, representatives of the Company and Western met to discuss a possible transaction. At this meeting, Western's representatives indicated that Western was willing to consider proposing an acquisition of the Company for cash but that Western would need to conduct a detailed due diligence investigation of the Company before it would be in a position to make or proceed with any such proposal. Western's representatives said that, for Western to continue with the necessary due diligence investigation, it would require the Company to enter into an agreement obligating it to negotiate exclusively with Western for a limited period of time during which Western would continue with its due diligence. Western's representatives stated that their initial financial analysis of the proposed transaction indicated a cash price of $10 per Share. As a result of these discussions, the Company and Western entered into an Exclusivity Agreement dated January 20, 1998 which initially provided that the Company would negotiate exclusively with Western until February 11, 1998 (the "Exclusivity Period"). Western continued its due diligence investigation through the remainder of January, and in February representatives of Western and the Company held numerous telephonic meetings to discuss the information learned through Western's due diligence investigation. During the course of these discussions, the Exclusivity Period was extended several times. On February 12, 1998, representatives of Western met with Messrs. Friedman and Ferran, other senior executives of the Company, three of its outside directors and a representative of Salomon Smith Barney to discuss the results of Western's due diligence investigation to such date. Following the meeting on February 12, representatives of the Company and Western held a number of telephonic meetings concerning the results of, and concerns raised by, Western's due diligence and the impact of such results on the price per Share Western would be willing to pay. As a result of these discussions and negotiations, each party's representatives expressed their willingness to recommend to their respective companies a compromise price of $9.65 per Share, subject to negotiation and execution of definitive documentation and board approval thereof. On February 25, 1998, Western furnished the Company with a draft Merger Agreement. Additional meetings and telephone discussions between Western, the Company and their respective advisors occurred between February 25 and March 8 during which the significant terms of the Merger Agreement, Support Agreements and consulting and non-compete agreements were negotiated and substantially revised. On March 4, 1998 a form of the Merger Agreement was presented to, and approved by, the Executive Committee of the Board of Directors of Western (acting with the authority of the full Board of Directors) and on March 8, 1998 the Merger Agreement was presented to and unanimously approved by the Board of Directors of the Company. Recommendation of the Board of Directors; Fairness of the Offer and the Merger In approving the Merger Agreement and recommending acceptance of the Offer and adoption of the Merger Agreement, the Board considered a number of factors, including, but not limited to, the following: (i) The Company's business, financial condition, results of operations, assets, liabilities, business strategy and prospects, as well as various uncertainties associated with those prospects. (ii) The Company's existing competition in the industry in which it operates and future competition, the relative size of other participants in the industry in which it operates and the available capital and other resources of such other participants as compared to the available capital and other resources of the Company. 12 13 (iii) A review of the possible alternatives to the Offer and the Merger, including the possibility of continuing to operate the Company as an independent entity and the timing and feasibility of those alternatives, and the possible values to the Company's stockholders of such alternatives; (iv) The historical and current market prices for the Shares. (v) The opinion of Salomon Smith Barney dated March 8, 1998 (the "Opinion") to the effect that, as of such date and based upon and subject to certain matters stated in the Opinion, the $9.65 per Share cash consideration to be received by holders of Shares (other than Western and its affiliates) in the Offer and the Merger was fair, from a financial point of view, to such holders. The full text of Salomon Smith Barney's Opinion, which sets forth the assumptions made, matters considered and limitations on the review undertaken by Salomon Smith Barney, is attached hereto as Exhibit (a)(4) and is incorporated herein by reference. The Opinion is directed only to the fairness, from a financial point of view, of the cash consideration to be received in the Offer and the Merger by holders of Shares (other than Western and its affiliates) and is not intended to constitute, and does not constitute, a recommendation as to whether any stockholder should tender Shares pursuant to the Offer. HOLDERS OF SHARES ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY. (vi) The fact that the Offer was not subject to a financing condition. (vii) The financial and other terms and conditions of the Offer, the Merger and the Merger Agreement, including, without limitation, the facts that the terms of the Merger Agreement will not prevent other third parties from making certain bona fide proposals subsequent to execution of the Merger Agreement, will not prevent the Company Board from determining, in the exercise of its fiduciary duties in accordance with the Merger Agreement, to provide information to and engage in negotiations with such third parties and will permit the Company, subject to the non-solicitation provisions and the payment of the termination fee discussed above, to enter into a transaction with a third party that would be more favorable to the Company's stockholders from a financial point of view than the Offer and the Merger. (viii) The structure of the transaction, which is designed, among other things, to result in receipt by the holders of Shares at the earliest practicable time of the consideration to be paid in the Offer and the fact that the consideration to be paid in the Offer and the Merger is the same. (ix) The likelihood that the Offer and the Merger would be consummated. The foregoing discussion of the information and factors considered and given weight by the Board is not intended to be exhaustive. In view of the wide variety of factors considered in connection with its evaluation of the Offer and the Merger, the Board found it impracticable to, and did not, quantify or otherwise attempt to assign relative weights to the specific factors considered in reaching its determination. The Board discussed in detail the matters referenced above; however, individual members of the Board may have given different weights to different factors. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The Company has retained Smith Barney Inc. and Salomon Brothers Inc, collectively doing business as Salomon Smith Barney, as its financial advisors in connection with the Offer and the Merger. Pursuant to the terms of Salomon Smith Barney's engagement, the Company has agreed to pay Salomon Smith Barney for its services an aggregate financial advisory fee of $900,000, of which $450,000 was paid in connection with the delivery of the Opinion and will be credited against the advisory fee which is payable upon consummation of the Offer. The Company also has agreed to reimburse Salomon Smith Barney for travel and other out-of-pocket expenses, including legal fees and expenses, and to indemnify Salomon Smith Barney and certain related parties against certain liabilities, including liabilities under the federal securities laws, arising out of Salomon Smith Barney's engagement. Salomon Smith Barney has in the past provided investment banking services to the Company unrelated to the Offer and the Merger, for which services Salomon Smith Barney has received compensation. In December 1996, Smith Barney Inc. acted as the lead managing underwriter for the Company's public offering of 3,500,000 Shares. In the ordinary course of business, Salomon Smith Barney and 13 14 its affiliates (including Travelers Group Inc. and its affiliates) may actively trade or hold the securities of the Company and Western for their own account or for the account of customers and, accordingly, may at any time hold a long or short position in such securities. Neither the Company nor any person acting on its behalf currently intends to employ, retain or compensate any person to make solicitations or recommendations to security holders on its behalf concerning the Offer or the Merger. ITEM 6. RECENT TRANSACTIONS AND INTEREST WITH RESPECT TO SECURITIES. (a) No transactions in Shares have been effected during the past 60 days by the Company or, to the best of the Company's knowledge, by any executive officer, director, subsidiary or affiliate of the Company. (b) To the best of the Company's knowledge, each executive officer, director and affiliate of the Company currently intends to tender to Purchaser all Shares over which such person has sole dispositive power as of the Expiration Date of the Offer, and each director and executive officer (except one officer-director who owns 3,000 Shares) has entered into Support Agreements pursuant to which they have agreed to do so. See Item 3 hereof. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a) Other than the Offer and the Merger, the Company is not engaged in any negotiation in response to the Offer which relates to or would result in (1) an extraordinary transaction, such as a merger or reorganization, involving the Company or any subsidiary of the Company; (2) a purchase, sale or transfer of a material amount of assets of the Company or any subsidiary of the Company; (3) a tender offer for or other acquisition of securities by or of the Company; or (4) any material change in the present capitalization or dividend policy of the Company. (b) Except as set forth or as incorporated by reference in this Item 7 or in Items 3 or 4 hereof, there are no transactions, Board resolutions, agreements in principle or signed contracts in response to the Offer which relate to or would result in one or more of the matters referred to in Item 7(a) hereof. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. (a) Section 203 of the Delaware General Corporation Law As a Delaware corporation, the Company is subject to Section 203 ("Section 203") of the Delaware General Corporation Law. Under Section 203, certain "business combinations" between a Delaware corporation whose stock is publicly traded or held on record by more than 2,000 stockholders and an "interested stockholder" are prohibited for a three-year period following the date that such a stockholder became an interested stockholder, unless (i) the corporation has elected in its original certificate of incorporation not to be governed by Section 203 (the Company did not make such an election), (ii) the transaction in which the stockholder became an interested stockholder or the business combination was approved by the board of directors of the corporation before the other party to the business combination became an interested stockholder, (iii) upon consummation of the transaction that made it an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the commencement of the transaction (excluding voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan) or (iv) the business combination was approved by the board of directors of the corporation and ratified by 66 2/3% of the voting stock which the interested stockholder did not own. The term "business combination" is defined generally to include mergers or consolidations between a Delaware corporation and an "interested stockholder," transactions with an "interested stockholder" involving the assets or stock of the corporation or its majority-owned subsidiaries and transactions which increase an "interested stockholder's" percentage ownership of stock. The term "interested stockholder" is defined generally as a stockholder who, together with affiliates and associates, owns (or, within three years prior, did own) 15% or more of a Delaware corporation's voting stock. 14 15 In accordance with the Merger Agreement and Section 203, the Company Board approved the Offer and the Merger and, therefore, the restrictions of Section 203 are inapplicable to the Offer and the Merger. (b) Amendment of the Rights Agreement The Company has represented to Western in the Merger Agreement that the Company Board, at a meeting duly called and held, has taken all necessary action to render the Rights inapplicable to the Offer, the Merger and the Support Agreements and to amend the Rights Agreement so that neither Bidder is an Acquiring Person as a result of entering into the Merger Agreement or the Support Agreements or making the Offer. At its meeting on March 8, 1998, the Company Board approved, and the Company entered into, the amendment to the Rights Agreement filed with the SEC as Exhibit (c)(10) to this Statement. (c) Litigation Relating to the Offer and Merger On or about March 9, 1998, a putative class action complaint, on behalf of the Company's stockholders, was filed in the Court of Chancery in the State of Delaware in and for New Castle County against the Company, the members of the Company Board, and Western (the "Chancery Court Action"). The complaint in the Chancery Court Action alleges that the directors of the Company breached their fiduciary duties by agreeing to the Merger contemplated by the Merger Agreement without making the requisite effort to obtain the best offer possible. The complaint seeks declaratory and injunctive relief, as well as unspecified damages and attorneys' fees. The Company believes that the Chancery Court Action is without merit and intends to defend such action vigorously. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO. DESCRIPTION - ----------- ----------- (a)(1) Letter to Stockholders of the Company dated March 13, 1998. (a)(2) Joint Press Release of the Company and Western dated March 9, 1998. (a)(3) Form of Summary Advertisement dated March 13, 1998. (a)(4) Opinion of Salomon Smith Barney dated March 8, 1998. (c)(1) Relevant Portions of 1997 Proxy Statement. (c)(2) Form of Amended and Restated Employment Agreement dated January 13, 1998 between the Company and Wayne P. Widynowski. (c)(3) Form of Amended and Restated Employment Agreement dated January 13, 1998 between the Company and Ronald L. Koons. (c)(4) Agreement and Plan of Merger dated as of March 8, 1998, among the Company, Purchaser and Western. (c)(5) Form of Support Agreement between Western and Robert P. Andrews, Ralph M. Bahna, Douglas W. Brandrup, Richard Davis, Arthur Emil, Luis H. Ferran, Joel Friedman, P. Dennis O'Brien and Emir L. Tavella. (c)(6) Form of Support Agreement between Western and Ronald L. Koons. (c)(7) Form of Support Agreement between Western and Wayne P. Widynowski. (c)(8) Consulting Agreement and Noncompetition Agreement, dated as of March 8, 1998 among Western, Friedman Enterprises Inc. and Joel Friedman. (c)(9) Consulting Agreement and Noncompetition Agreement, dated as of March 8, 1998 among Western, Luis H. Ferran Arroyo. (c)(10) Rights Agreement, dated as of July 17, 1997, between the Company and American Securities Transfer & Trust, Inc., as Rights Agent, as amended. (c)(11) Amended and Restated 1995 Long-Term Incentive Compensation Plan of the Company. (c)(12) 1997 Long-Term Stock Incentive Plan of the Company.
15 16 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. 3-D GEOPHYSICAL, INC. By: /s/ JOEL FRIEDMAN ------------------------------------ Name: Joel Friedman Title: Chairman Dated: March 13, 1998 16 17 Exhibit (a)(4) [SALOMON SMITH BARNEY LETTERHEAD] March 8, 1998 The Board of Directors 3-D Geophysical, Inc. 599 Lexington Avenue New York, New York 10022 Members of the Board: You have requested our opinion as to the fairness, from a financial point of view, to the holders of the common stock of 3-D Geophysical, Inc. ("3-D Geophysical") of the consideration to be received by such holders pursuant to the terms and subject to the conditions set forth in the Agreement and Plan of Merger, dated as of March 8, 1998 (the "Merger Agreement"), among Western Atlas Inc. ("Western Atlas"), WAI Acquisition Corporation, a subsidiary of Western Atlas ("Subsidiary"), and 3-D Geophysical. As more fully described in the Merger Agreement, (i) Subsidiary will commence a tender offer to purchase all outstanding shares of the common stock, par value $0.01 per share, of 3-D Geophysical (the "3-D Common Stock" and, such tender offer, the "Tender Offer") at a purchase price of $9.65 per share, net to the seller in cash (the "Cash Consideration") and (ii) subsequent to the Tender Offer, Subsidiary will be merged with and into 3-D Geophysical (the "Merger" and, together with the Tender Offer, the "Transaction") and each outstanding share of 3-D Common Stock not previously tendered will be converted into the right to receive the Cash Consideration. In arriving at our opinion, we reviewed the Merger Agreement and held discussions with certain senior officers, directors and other representatives and advisors of 3-D Geophysical and certain senior officers and other representatives of Western Atlas concerning the business, operations and prospects of 3-D Geophysical. We examined certain publicly available business and financial information relating to 3-D Geophysical as well as certain financial forecasts and other information and data for 3-D Geophysical which were provided to or otherwise discussed with us by the management of 3-D Geophysical. We reviewed the financial terms of the Merger as set forth in the Merger Agreement in relation to, among other things: current and historical market prices and trading volumes of 3-D Common Stock; the historical and projected earnings and other operating data of 3-D Geophysical; and the capitalization and financial condition of 3-D Geophysical. We considered, to the extent publicly available, the financial terms of certain other similar transactions recently effected which we considered relevant in evaluating the Merger and analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations we considered relevant in evaluating those of 3-D Geophysical. In addition to the foregoing, we conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as we deemed appropriate in arriving at our opinion. In rendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or furnished to or otherwise reviewed by or discussed with us. With respect to financial forecasts and other information and data provided to or otherwise reviewed by or discussed with us, we have been advised by the management of 3-D Geophysical that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of 3-D Geophysical as to the future financial performance of 3-D Geophysical. We have not made or been provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of 3-D Geophysical nor have we made any physical inspection of the properties or assets of 3-D Geophysical. In connection with our engagement, we were not requested to, and did not, solicit third party indications of interest in a possible acquisition of 3-D Geophysical, nor were we requested to consider, and our opinion does not address, the relative merits of the Transaction 18 The Board of Directors 3-D Geophysical, Inc. March 8, 1998 Page 2 as compared to any alternative business strategies that might exist for 3-D Geophysical or the effect of any other transaction in which 3-D Geophysical might engage. Our opinion is necessarily based upon information available to us, and financial, stock market and other conditions and circumstances existing and disclosed to us, as of the date hereof. Smith Barney Inc. and Salomon Brothers Inc (collectively doing business as Salomon Smith Barney) have acted as financial advisors to 3-D Geophysical in connection with the proposed Transaction and will receive a fee for such services, a significant portion of which is contingent upon the consummation of the Transaction. We also will receive a fee upon the delivery of this opinion. In the ordinary course of our business, we and our affiliates may actively trade or hold the securities of 3-D Geophysical and Western Atlas for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities. We have in the past provided investment banking services to 3-D Geophysical unrelated to the proposed Transaction, for which services we have received compensation. In addition, we and our affiliates (including Travelers Group Inc. and its affiliates) may maintain relationships with 3-D Geophysical, Western Atlas and their respective affiliates. Our advisory services and the opinion expressed herein are provided for the information of the Board of Directors of 3-D Geophysical in its evaluation of the proposed Transaction, and our opinion is not intended to be and does not constitute a recommendation to any stockholder as to whether or not such stockholder should tender shares of 3-D Common Stock in the Tender Offer or how such stockholder should vote on the proposed Merger. Our opinion may not be published or otherwise used or referred to, nor shall any public reference to Salomon Smith Barney be made, without our prior written consent; provided, that this opinion letter may be included in its entirety in the Solicitation/ Recommendation Statement of 3-D Geophysical relating to the proposed Transaction. Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the opinion that, as of the date hereof, the Cash Consideration to be received in the Transaction by the holders of 3-D Common Stock (other than Western Atlas and its affiliates) is fair, from a financial point of view, to such holders. Very truly yours, /s/ Salomon Smith Barney SALOMON SMITH BARNEY 19 ANNEX II 3-D GEOPHYSICAL, INC. 599 LEXINGTON AVENUE NEW YORK, NEW YORK 10022 INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER This Information Statement is being mailed on or about March 13, 1998, as part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") to holders of the Common Stock of 3-D Geophysical, Inc. (the "Company"). Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Schedule 14D-9. You are receiving this Information Statement in connection with the possible election of persons (the "Parent Designees") designated by Western Atlas Inc. (the "Parent") to a majority of the seats on the Board of Directors of the Company. Pursuant to the Merger Agreement, on March 13, 1998, Purchaser commenced the Offer. The Offer is scheduled to expire at 12:00 Midnight on April 9, 1998, unless otherwise extended. The information contained in this Information Statement (including information incorporated by reference) concerning Parent, Purchaser and the Parent Designees has been furnished to the Company by Parent and Purchaser, a wholly owned subsidiary of Parent, and the Company assumes no responsibility for the accuracy or completeness of such information. GENERAL INFORMATION REGARDING THE COMPANY GENERAL The common stock, par value $.01 per share ("Common Stock"), is the only class of voting securities of the Company outstanding. Each share of Common Stock has one vote. As of March 2, 1998, there were 11,916,666 shares of Common Stock outstanding. The Company does not have any treasury shares. The Board of Directors of the Company currently consists of ten members and there are currently no vacancies on the Board. The Board has three classes and each director serves a term of three years until his successor is duly elected and qualified or until his earlier death, resignation or removal. PARENT DESIGNEES The Merger Agreement provides that, subject to compliance with applicable law, promptly upon the payment by the Purchaser for Shares pursuant to the Offer, and from time to time thereafter, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company Board as is equal to the product of the total number of directors on the Company Board (determined after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by Parent or its affiliates bears to the total number of Shares then outstanding, and the Company shall, upon request of Parent, promptly take all actions necessary to cause Parent's designees to be so elected, including, if necessary, seeking the resignations of one or more existing directors, provided that prior to the Effective Time the Company Board shall always have at least two members who are neither officers, directors or designees of the Purchaser or any of its affiliates ("Purchaser Insiders"). If the number of directors who are not Purchaser Insiders is reduced below two prior to the Effective Time, the remaining director who is not a Purchaser Insider shall be entitled to designate a person to fill such vacancy who is not a Purchaser Insider and who shall be a director not deemed to be a Purchaser Insider for all purposes of the Merger Agreement. 1 20 DIRECTORS AND EXECUTIVE OFFICERS DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The table below provides information concerning the directors and executive officers of the Company, and sets forth their respective ages as of March 1, 1998 and the positions they hold with the Company.
NAME AGE POSITION(S) ---- --- ----------- Mr. Joel Friedman (a)(b).................. 58 Chairman of the Board of Directors and acting Chief Executive Officer Mr. Wayne P. Widynowski (b)............... 52 Executive Vice President and Chief Operating Officer and Director; President of Northern Geophysical, Inc., a wholly owned subsidiary of the Company ("Northern") Mr. Luis H. Ferran (b).................... 49 Executive Vice President -- Latin American Operations and Director; President of Geoevaluaciones, S.A. de C.V. ("Geo"), Procesos Interactivos Avanzados, S.A. de C.V. ("PIASA") and 3-D Geophysical of Latin America, Inc. ("3-D Latin America"), wholly owned subsidiaries of the Company. Mr. Ronald L. Koons....................... 50 Vice President, Chief Financial Officer, Secretary and Treasurer Mr. Robert P. Andrews (c)................. 42 Director Mr. Ralph M. Bahna (c).................... 55 Director Mr. Douglas W. Brandrup (a)(d)............ 57 Director Mr. Richard D. Davis...................... 63 Director Mr. Arthur D. Emil (c).................... 73 Director Mr. P. Dennis O'Brien (a)(c)(d)........... 56 Director Mr. Emir L. Tavella....................... 68 Director
- --------------- (a) Member of the Audit Committee (b) Member of the Executive Committee (c) Member of the Compensation Committee (d) Member of the Stock Option Committee Mr. Joel Friedman has served as Chairman of the Board of the Company since February 1996 and as the acting Chief Executive Officer of the Company since July 1997. He was President and Chief Executive Officer of the Company from March 1995 until February 1996. From August 1994 to September 1997 Mr. Friedman was a director of and from August 1994 to October 1996 he was the Chairman of Consolidated Health Care Associates, Inc., and was the Chief Executive Officer of that company from August 1994 until March 1996. Since 1969, he has been an officer, director and shareholder of Founders Property Corporation and its affiliated companies ("Founders"), a private real estate concern. From 1975 to 1986, Mr. Friedman was President and a director of Kenai Corporation, a publicly-held company engaged in contract drilling for oil and natural gas, wellhead equipment manufacturing and remanufacturing and oil and gas exploration and production. Mr. Wayne P. Widynowski has served as the Executive Vice President and Chief Operating Officer of the Company and as President of Northern since February 1996. From 1981 to February 1996, Mr. Widynowski was employed by Northern's predecessors, most recently as Executive Vice President. Prior to 1981, Mr. Widynowski was employed as an operations manager by United Geophysical, Inc., a subsidiary of the Bendix Corporation. Mr. Luis H. Ferran has served as Executive Vice President -- Latin American Operations of the Company and as President of Geo and PIASA since February 1996 and as President of 3-D Latin America since its formation by the Company in May 1996. Mr. Ferran was one of the founding shareholders of Geo in 1977 and has been General Manager of Geo since 1982. Prior to forming Geo, Mr. Ferran was a supervisor 2 21 with Compania Mexicana de Exploraciones, S.A. de C.V., a Mexican company associated with PEMEX, Mexico's national oil company. Mr. Ronald L. Koons has served as Vice President, Chief Financial Officer, Secretary and Treasurer of the Company since September 30, 1996. Mr. Koons was the Executive Vice President, Chief Financial Officer and Treasurer of Tuboscope Vetco International Corp. ("Tuboscope"), an oilfield service company, from October 1993 to April 1996 and Senior Vice President, Chief Financial Officer and Treasurer of Tuboscope from November 1991 to October 1993. From August 1988 to November 1991, Mr. Koons was the Vice President, Chief Financial Officer and Treasurer of Eastman Christensen Company ("Eastman"), an oilfield service company. He served as Controller of Eastman from June 1987 to August 1988 and Treasurer of Eastman from September 1986 to June 1987. Mr. Robert P. Andrews has served as the President of The Andrews Group International Inc., a Texas corporation which supplies goods and services to the oil and gas industry in Central and South America, in particular Mexico, since 1987 and as the President of A.G.I. Mexicana, S.A. de C.V., a Mexican company that sells goods and services relating to computer hardware and software for use in the oil and gas industry in Mexico, since 1991. Until February 1996, Mr. Andrews was also the President and Chairman of the Board of PIASA. A.G.I. Mexicana conducts the business of The Andrews Group International, Inc. in Mexico and acts as the exclusive representative for several companies in Mexico. A.G.I. Mexicana also acts as a non-exclusive distributor for various corporations in Mexico. Mr. Ralph M. Bahna serves as President of Masterworks Development Corporation ("Masterworks"), a company that he founded in 1990 to develop a series of hotels called Club Quarters. Between 1981 and 1988, Mr. Bahna was chief executive officer of Cunard Line Limited, which owns, among other cruise liners and hotels, the Queen Elizabeth 2, and was also a divisional managing director of Trafalgar House PLC, the parent company of Cunard Line Limited. From 1988 until he became President of Masterworks in 1990, he pursued investment and non-profit endeavors. Mr. Douglas W. Brandrup is a practicing attorney and senior partner at the law firm of Griggs, Baldwin & Baldwin in New York City, where he has practiced since 1974. Mr. Brandrup is Chairman of Equity Oil Company, a publicly-held oil and gas production and exploration company, and has been a director of that company since 1975. Mr. Richard D. Davis served as President and Chief Executive Officer of the Company from February 1996 until July 1997. From March 1994 to June 1996, Mr. Davis was Vice President of Operations of Kemp Geophysical Inc., a wholly owned subsidiary of the Company that was merged with Northern. From 1988 to March 1994, as President and sole owner of D-Cube International Inc., he was an independent consultant to several major oil companies in the area of seismic acquisition services. From 1983 to 1988, Mr. Davis was a director of Seismic Enterprises, Inc. (now Seitel, Inc.) and President and Chief Operating Officer of Triangle Geophysical Co. From 1979 to 1983, he was Executive Vice President of Geo Seismic Services, Inc., which at one time operated 38 seismic data acquisition crews. Mr. Arthur D. Emil is a practicing attorney and currently of counsel to the law firm of Kramer, Levin, Naftalis & Frankel in New York City. Between 1986 and 1993, he was a senior partner of and, upon retirement, of counsel to the law firm of Jones, Day, Reavis & Pogue. He served as an executive officer, director and chairman of the executive committee of North European Oil Company from 1955 to 1979. In addition, he served as general counsel for various companies, including the New England Patriots and Bartell Media Corp., a communications company. He is a trustee of various philanthropic institutions. Kramer, Levin, Naftalis & Frankel provides legal services to the Company and received fees of approximately $210,000 for such services in 1997. Mr. Emil was a general partner of South Norwalk Redevelopment Limited Partnership ("SNRLP"), a Connecticut limited partnership formed in 1981 to rehabilitate a portion of Norwalk, Connecticut. On July 25, 1994, a creditor of SNRLP, Scirocco Partners ("SP"), sought to foreclose on a SNRLP mortgage it held and SNRLP, seeking to avoid the foreclosure, filed a voluntary petition for reorganization on August 15, 1994 in the United States Bankruptcy Court, District of Connecticut (Case No. 94-51676). In a related case, SP has sued Mr. Emil in connection with a personal guarantee limited to interest and certain expenses he gave in connection with the mortgage. The bankrutcy has been terminated 3 22 and Mr. Emil has received a general release. In February 1998 Prudential Associates, a limited partnership, of which Mr. Emil is one of three general partners, owning a building in Buffalo, New York, filed a voluntary Chapter XI petition in the Western District of New York to avoid a foreclosure. In a related case, one of the mortgages sued the three general partners on a guaranty. These cases are pending. Mr. P. Dennis O'Brien served as the President and Chief Operating Officer of Advance Geophysical Corp. ("Advance"), a company that develops software for the geophysical industry, from 1988 to 1994. In March 1994, Advance merged with a subsidiary of Landmark Graphics Corporation, a major software developer in the geophysical industry. From April 1994 to June 1995, Mr. O'Brien served as the Chief Operating Officer of Advance. Since July 1995, Mr. O'Brien has provided consulting services to software development companies serving the petroleum industry. Mr. Emir L. Tavella is founder, and since May 1995 a partner and director, of Sagoil S.A., an Argentinian petroleum supply company associated with Sagoil Inc., a Canadian company. From February 1987 to April 1995, Mr. Tavella was the general manager for exploration activities for PLUSPetrol S.A., an Argentinian petroleum exploration and production company. ------------------------ Mr. Friedman has served as a Director of the Company since its inception; Messrs. Bahna, Brandrup, Davis, Emil and Ferran have served as Directors since October 1995; Messrs. Andrews and O'Brien have served as Directors since January 1996; and Mr. Tavella has served as a Director since April 1996. There are no family relationships among any of the directors or executive officers of the Company. There has been no change in control of the Company since January 1, 1997. The Offer will result in a change in control of the Company upon its consummation (see Item 2 of the Schedule 14D-9). COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS The Board has established an Executive Committee consisting of Messrs. Ferran, Friedman and Widynowski. The Executive Committee has the authority to exercise all the powers of the Board in the management of the business and affairs of the Company, subject to certain limitations under the General Corporation Law of the State of Delaware. The Executive Committee held six meetings and acted by unanimous written consent in lieu of a meeting three times in 1997. The Board has established an Audit Committee consisting of Messrs. Brandrup, Friedman and O'Brien. The Audit Committee annually recommends to the Board the appointment of the independent public accountants to serve as auditors for the Company. In addition, the Audit Committee discusses and reviews the scope and fees of the annual audit and reviews the results with the auditors, reviews compliance with existing major accounting and financial policies of the Company, reviews the adequacy of the financial organization of the Company and considers comments by the auditors regarding controls and accounting procedures and management's response to those comments. The Audit Committee held one meeting in 1997. The Board has established a Compensation Committee consisting of Messrs. Andrews, Bahna, Emil and O'Brien. The Compensation committee meets periodically to determine the compensation of certain of the Company's executive officers and other significant employees and the Company's personnel policies. The Compensation Committee held three meetings in 1997. The Board has established a Stock Option Committee consisting of Messrs. Brandrup and O'Brien to administer the Company's Stock Option Plan and other option plans approved by the Board of Directors and to grant options thereunder. The Stock Option Committee acted by unanimous written consent in lieu of a meeting five times in 1997. The Company does not have a nominating committee. The functions customarily performed by a nominating committee are performed by the Board of Directors as a whole. The Company's Board of Directors held three meetings and acted by unanimous written consent in lieu of a meeting four times in 1997. During 1997, no director or committee member attended fewer than 75% of the 4 23 meetings of the Board or the respective committees on which he served during the periods of his service as a director or committee member. DIRECTOR COMPENSATION Each member of the Board who is not an employee of the Company receives: (i) an annual retainer of $10,000; (ii) $750 per meeting of the Board of Directors or any committee thereof at which such director is present in person; and (iii) reimbursement of all ordinary and necessary expenses incurred in attending a meeting of the Board of Directors or committee thereof. Directors who are full-time employees of the Company do not receive any compensation for serving as directors. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company's Compensation Committee consists of Messrs. Andrews, Bahna, Emil and O'Brien, who are each independent directors of the Company. None of these individuals had any "interlock" relationship to report during 1997. COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section 16(a)"), requires the Company's directors and executive officers and persons who beneficially own more than ten percent of the Company's Common Stock to report their ownership of and transactions in the Company's Common Stock to the Securities and Exchange Commission and The Nasdaq National Stock Market. Copies of these reports are also required to be supplied to the Company. The Company believes, based solely on a review of the copies of such reports received by the Company, that during 1997 all applicable Section 16(a) reporting requirements were complied with, except that Messrs. Bahna, Ferran, Friedman, Koons and Widynowski inadvertently did not report the grant of options in November 1997, and Mr. Widynowski inadvertently did not report the purchase of 3,000 shares of Common Stock in December 1997, on a timely basis. EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION No salaries were paid during 1995 by the Company. Compensation paid to the Company's chief executive officer and the other most highly compensated executive officers who made more than $100,000 during the fiscal year ended December 31, 1997 (hereinafter, "1997") is disclosed below. 5 24 Summary Compensation Table. The following table sets forth compensation earned, whether paid or deferred, by the Company's Chief Executive Officer and its other most highly compensated executive officers who made more than $100,000 (collectively, the "Named Executive Officers") for services rendered in all capacities to the Company during 1997.
LONG-TERM COMPENSATION ------------ ANNUAL COMPENSATION AWARDS ---------------------------------------- ------------ ALL OTHER SECURITIES ANNUAL UNDERLYING ALL OTHER SALARY BONUSES COMPENSATION OPTIONS/SARS COMPENSATION YEAR ($) ($) ($) (#) ($) ---- ------- ------- ------------ ------------ ------------ Joel Friedman................... 1997 125,000 0 82,800(1) 50,000 0 Chairman of the Board 1996 125,000 0 82,800(1) 75,000 0 Luis Ferran..................... 1997 140,000(2) 0 0 0 0 Executive Vice President 1996 140,000(2) 0 0 250,000(3) 0 Wayne P. Widynowski............. 1997 140,000 0 6,900 20,000 0 Executive Vice President 1996 140,000 0 0 120,000 0 Ronald L. Koons(4).............. 1997 125,000 0 7,800 20,000 0 Vice President and Chief 1996 31,250 0 1,950 30,000 0 Financial Officer
- --------------- (1) Consists of an annual office allowance of $75,000 and a monthly automobile allowance totalling $7800. (2) Includes $77,161 and $89,910 paid to Comercializadora y Arrendadora, a consulting company owned by Mr. Ferran, in 1996 and 1997, respectively. (3) Consists of stock options which were granted in January 1996 immediately prior to the Company's initial public offering at an exercise price of $7.50 per share, equal to the price per share to the public in the initial public offering. (4) Mr. Koons commenced his employment with the Company on September 30, 1996. EMPLOYMENT AGREEMENTS; NON-COMPETITION AGREEMENTS Each of Messrs. Friedman, Ferran, Widynowski and Koons has entered into an employment agreement with the Company; the agreement with Mr. Friedman expires on December 31, 1998, and the agreements with Messrs. Ferran, Widynowski and Koons, expire on December 31, 2000. The employment agreements provide for base annual salaries as follows: Mr. Friedman: $125,000 plus an annual office allowance of $75,000, a portion of which is being applied to payments under the Company's New York City lease: Mr. Ferran: $140,000; Mr. Widynowski: $140,000; Mr. Koons: $125,000. Certain of the Company's executive officers are entitled to an automobile allowance, and, in addition, each executive officer is eligible pursuant to his employment agreement for a bonus to be determined in the discretion of the Board of Directors or a committee thereof. No bonuses were paid in 1996 or 1997. Each of the employment agreements with Messrs. Friedman, Ferran and Koons contains a covenant not to compete during the employee's employment with the Company or its subsidiaries and for one year thereafter unless the Company terminates the employee's employment without cause. The agreement with Mr. Widynowski contains a similar covenant not to complete but provides that upon termination of the agreement, other than by the Company for cause (as defined in the agreement) or by the employee without good reason (as defined in the agreement), the employee's covenant not to compete will lapse unless the Company pays the employee 80% of the employee's base salary in the year following such termination. In connection with the acquisition by the Company of Geo, Mr. Ferran and the other former stockholders of Geo entered into non-competition agreements under which Mr. Ferran and such former stockholders were entitled to certain additional consideration. In January 1998, the employment agreements of Messrs. Widynowski and Koons were amended and restated as described in Item 3(b) of the Schedule 14D-9. 6 25 OPTION GRANTS Shown below is information regarding grants of stock options during 1997 to the Company's executive officers, including the Named Executive Officers. The following table also shows the hypothetical value of the options granted at the end of the option terms (ten years) if the price of the Company Common Stock were to appreciate annually by 5% and 10%, respectively. These assumed rates of growth are required by the Securities and Exchange Commission for illustrative purposes only and are not intended to forecast possible future stock prices.
INDIVIDUAL GRANTS ---------------------------------------------------------- MARKET POTENTIAL REALIZABLE PRICE OF VALUE OF ASSUMED % OF TOTAL UNDERLYING ANNUAL RATES OPTIONS SECURITIES OF STOCK PRICES GRANTED ON THE DATE APPRECIATION FOR NUMBER TO OF GRANT IF OPTION TERM(2) OF EMPLOYEES EXERCISE HIGHER THAN ---------------------- OPTIONS IN FISCAL PRICE EXERCISE EXPIRATION 5% 10% NAME GRANTED YEAR(1) ($) PRICE DATE ($) ($) - ---- ------- ---------- -------- ----------- ---------- ---------- ---------- Joel Friedman................. 50,000(3) 14.8% 7.25 -- 11/10/2007 590,474.30 940,231.64 Wayne P. Widynowski(4)........ 20,000(3) 5.9% 7.25 -- 11/10/2007 236,189.72 376,092.66 Ronald L. Koons............... 20,000(3) 5.9% 7.25 -- 11/10/2007 236,189.72 376,092.66
- --------------- (1) The Company granted options to purchase an aggregate of 337,800 shares of Common Stock to its employees in 1997, of which 287,800 were granted under the 1997 Plan and 50,000 options were granted under the 1995 Plan. (2) Represents the product of (i) the difference between (A) the per-share fair market price at the time of the grant compounded annually at the assumed rate of appreciation over the term of the option, and (B) the per-share exercise price of the option, and (ii) the number of shares underlying the grant at March 8, 1998. (3) The option will become exercisable in four equal cumulative annual installments commencing on November 10, 1998. (4) On March 17, 1997 the Stock Option Committee amended the stock option to purchase 75,000 shares of Common Stock at a purchase price of $12.3125 per share granted to Mr. Widynowski on April 26, 1996 by changing the purchase price thereof to $6.25 per share. Such option was "repriced" in order to provide Mr. Widynowski with a significant additional incentive to further align his interests with all of the Company's stockholders. No option held by any other executive officer of the Company has ever been "repriced." Aggregate Option Exercises and Year-End Option Values. Shown below is information relating to the exercise of stock options during 1997 for the Company's executive officers, including the Named Executive Officers, and the value of unexercised options at March 8, 1998, assuming consummation of the Merger.
SHARES ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED ON UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS NAME EXERCISE VALUE REALIZED OPTIONS AT MARCH 8, 1997 AT MARCH 8, 1998(1) ---- ----------- -------------- ------------------------ -------------------- Joel Friedman................... 0 0 125,000 $120,000 Luis H. Ferran.................. 0 0 250,000 $537,500 Wayne P. Widynowski............. 0 0 140,000 $471,750 Ronald L. Koons................. 0 0 50,000 $ 90,000
- --------------- (1) Market value of underlying securities of $9.65 per share based on the price payable in the Offer. 7 26 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information with respect to beneficial ownership of Common Stock as of March 1, 1998, by: (i) all persons known to the Company to be the beneficial owner of 5% or more of the outstanding Common Stock, (ii) each director, (iii) each executive officer of the Company, and (iv) all executive officers and directors of the Company as a group:
COMMON STOCK BENEFICIALLY OWNED -------------------- NUMBER OF SHARES PERCENT --------- ------- Joel Friedman(1)............................................ 569,409 4.7% 599 Lexington Avenue New York, New York 10022 Richard D. Davis(2)......................................... 138,588 1.2 Luis H. Ferran(3)........................................... 1,433,651 11.8 Ninos Heroes, No. 51 Col. Tepepan Mexico, D.F. Wayne P. Widynowski(4)...................................... 148,000 1.2 Ronald L. Koons(5).......................................... 62,500 * Robert P. Andrews(6)........................................ 130,526 1.1 Ralph M. Bahna(6)(7)........................................ 28,719 * Douglas W. Brandrup(6)...................................... 26,667 * Arthur D. Emil(6)........................................... 24,456 * Dennis O'Brien(6)........................................... 21,667 * Emir L. Tavella(6).......................................... 16,667 * All officers and directors as a group (11 persons)(1)(2)(3)(4)(5)(6)(7)............................. 2,600,850 20.4 Wellington Management(8).................................... 891,000 7.0 Company, LLP 75 State Street Boston, Mass 02109 Heartland Advisor, Inc.(9).................................. 1,183,000 9.3 790 North Milwaukee Street Milwaukee, WI 53202
- --------------- * Less than 1% (1) Includes an aggregate of 109,540 shares of Common Stock, of which (a) 21,908 shares are owned by Friedman Enterprises, Inc., (b) 43,816 shares are owned by Mr. Friedman's wife, in which shares Mr. Friedman disclaims any beneficial ownership, and (c) 21,908 shares are owned by each of Mr. Friedman's two adult children, in which shares Mr. Friedman disclaims any beneficial ownership. Also includes 131,250 shares of Common Stock issuable upon the exercise of stock options. (2) Includes 125,000 shares of Common Stock issuable upon the exercise of stock options. (3) Includes 267,500 shares of Common Stock issuable upon the exercise of stock options. Excludes 15,235 shares of Common Stock owned by Mr. Ferran's wife, all of which shares are held in trust by a Mexican bank for her benefit, and in which shares Mr. Ferran disclaims any beneficial ownership. (4) Includes 145,000 shares of Common Stock issuable upon the exercise of stock options. (5) Includes 62,500 shares of Common Stock issuable upon the exercise of stock options. (6) Includes 16,667 shares of Common Stock issuable upon the exercise of stock options. (7) Includes 6,250 shares of Common Stock issuable upon the exercise of stock options granted in connection with a loan transaction (see "Certain Relationships and Related Transactions"). (8) Based on Schedule 13G dated January 17, 1998. (9) Based on Schedule 13G dated February 2, 1998. 8 27 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Mr. Andrews is the sole stockholder of The Andrews Group International, Inc. ("Andrews Group") which, through its Mexican affiliate, A.G.I. Mexicana, S.A. de C.V. ("A.G.I. Mexicana"), acts as the exclusive representative for several companies in Mexico. Geo purchased goods and services from A.G.I. Mexicana during 1997. Such purchases totalled approximately $619,000. In October 1997, Messrs. Bahna, Friedman, Koons and Widynowski loaned an aggregate of $600,000 to the Company at an annual interest rate of 12%. At the same time, Mr. Ferran guaranteed borrowings by Geo in the principal amount of $350,000. In connection with these loan transactions, the Company issued five-year options to purchase an aggregate of 47,500 shares of Common Stock at $6.50 per share. All of such loans were repaid in December 1997 in connection with the refinancing of the Company's line of credit with a commercial bank. In July 1997, the Company and Mr. Richard D. Davis entered into an agreement to terminate Mr. Davis' employment agreement with the Company. In connection with such termination, the Company paid Mr. Davis $80,000 plus accrued vacation pay of $8,950 in a lump sum and agreed to pay Mr. Davis a consulting fee of $155,000 for consulting services to be provided to the Company for the 12 months ending June 30, 1998. In addition, the Company agreed to pay Mr. Davis' moving expenses of $15,000, certain other relocation expenses and to continue certain insurance benefits for Mr. Davis and his family through December 31, 1998. The Company leases space in New York City at an annual base rental of $165,000. Mr. Friedman utilizes a portion of said space as his office and the balance of the space is utilized by sub-tenants. Mr. Friedman has agreed to reimburse the Company for any amounts under the lease that are payable with respect to space that is not utilized by the Company and which have not been paid by sub-tenants. In connection with the recent award of a contract to the Company, the Company has agreed to purchase certain seismic data owned by a company in which Mr. Widynowski is an officer and has an equity interest of less than ten percent. The purchase price for the data will be determined on the basis of an appraisal, but could approximate $500,000. For information concerning legal fees paid to Kramer, Levin, Naftalis & Frankel, to which firm Mr. Emil is of counsel, see "Directors and Executive Officers -- Directors and Executive Officers of the Company." CERTAIN LITIGATION For a description of certain litigation pending in connection with the Offer and the Merger Agreement see Item 8(c) of the Schedule 14D-9. 9 28 STOCK PERFORMANCE GRAPH The following table depicts the cumulative total return on the Company's Common Stock compared to the cumulative total return for the S&P 500 Index and the Geophysical Index, which was selected by the Company on an industry and line-of-business basis. The table assumes an investment of $100 on February 6, 1996, when the Company's stock was first traded in a public market. Reinvestment of dividends is assumed in all cases. 10 29 PARENT DESIGNEES The table below provides information concerning the Parent Designees furnished to the Company by Parent and Purchaser:
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AGE 5-YEAR EMPLOYMENT HISTORY ---- --- ----------------------------------- James E. Brasher....... 49 Senior Vice President and General Counsel of Parent since October 1997. Prior thereto, Vice President of Parent from 1996 to 1997 and Vice President and Group Counsel of Western Atlas International, Inc., ("WAII") from 1994 to 1997. Secretary and General Counsel of WAII from 1987 to 1994. William H. Flores...... 44 Senior Vice President and Chief Financial Officer of Parent since October 1997. Chief Financial Officer for WAII since August 1997. Prior thereto, served as an officer of Marine Drilling Companies, Inc. or its predecessors since 1980, most recently as Executive Vice President and Chief Financial Officer. Lourdes T. Hernandez... 42 Director since 1998. Corporate Secretary of Parent since September 1997. For more than five years prior thereto, assistant general counsel of NL Industries, Inc., a publicly traded international producer of titanium dioxide pigments. Will Honeybourne....... 46 Senior Vice President Marketing & Business Development of WAII and Vice President of Parent since September 1996. Prior thereto, President and Chief Executive Officer of Computalog Ltd., Calgary from September 1993 through November 1995, Vice President and General Manager of Baker Hughes INTEQ from March 1993 through August 1993 and President of EXLOG INC., a division of Baker Hughes Inc., from March 1984 through March 1993. Mr. Honeybourne is a citizen of the United Kingdom and a permanent resident of the United States. Richard C. White....... 42 Senior Vice President of Parent since May 7, 1996 and President of Western Geophysical division of WAII since 1995. Prior thereto, Vice President of Parent from 1995 to 1996. Senior Vice President of WAII since 1995. Chief Operating Officer from 1994 to 1995 and Senior Vice President of Western Geophysical since 1993.
11 30 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- (a)(1) Letter to Stockholders of the Company dated March 13, 1998. (a)(2) Joint Press Release of the Company and Western dated March 9, 1998. (a)(3) Form of Summary Advertisement dated March 13, 1998 (a)(4) Opinion of Salomon Smith Barney dated March 8, 1998. (c)(1) Relevant Portions of 1997 Proxy Statement. (c)(2) Form of Amended and Restated Employment Agreement dated January 13, 1998 between the Company and Wayne P. Widynowski. (c)(3) Form of Amended and Restated Employment Agreement dated January 13, 1998 between the Company and Ronald L. Koons. (c)(4) Agreement and Plan of Merger dated as of March 8, 1998, among the Company, Purchaser and Western. (c)(5) Form of Support Agreement between Western and Robert P. Andrews, Ralph M. Bahna, Douglas W. Brandrup, Richard Davis, Arthur Emil, Joel Friedman, Luis H. Ferran, P. Dennis O'Brien and Emir L. Tavella. (c)(6) Form of Support Agreement between Western and Ronald L. Koons. (c)(7) Form of Support Agreement between Western and Wayne P. Widynowski. (c)(8) Consulting Agreement and Noncompetition Agreement, dated as of March 8, 1998 among Western, Friedman Enterprises Inc. and Joel Friedman. (c)(9) Consulting Agreement and Noncompetition Agreement, dated as of March 8, 1998 between Western and Luis H. Ferran Arroyo. (c)(10) Rights Agreement, dated as of July 17, 1997, between the Company and American Securities Transfer & Trust, Inc., as Rights Agent, as amended. (c)(11) Amended and Restated 1995 Long-Term Incentive Compensation Plan of the Company. (c)(12) 1997 Long-Term Stock Incentive Plan of the Company.
EX-99.A1 2 LETTER TO STOCKHOLDERS 1 EXHIBIT (A)(1) [LETTERHEAD OF 3-D GEOPHYSICAL, INC.] March 13, 1998 To Our Stockholders: We are pleased to inform you that on March 8, 1998, 3-D Geophysical, Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Western Atlas Inc. ("Western") and WAI Acquisition Corp. ("Purchaser"), an indirect, wholly-owned subsidiary of Western, pursuant to which Purchaser has commenced a tender offer (the "Offer") to purchase all of the outstanding shares of the Company's common stock, par value $0.01 per share ("Common Stock"), for a cash price of $9.65 per share. The Offer is conditioned upon, among other things, the tender of at least a majority of the Common Stock outstanding on a fully diluted basis. The Merger Agreement provides that following consummation of the Offer, Purchaser will be merged (the "Merger") with and into the Company, and those shares of Common Stock that are not acquired in the Offer will be converted into the right to receive $9.65 per share of Common Stock in cash. The Company's Board of Directors (the "Board of Directors") has unanimously approved the Merger Agreement, the Offer and the Merger and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the Company and its stockholders and unanimously recommends that the Company's stockholders accept the Offer and tender their shares pursuant to the Offer. In arriving at its recommendation, the Board of Directors considered the factors described in the accompanying Schedule 14D-9, including the opinion of the Company's financial advisor, Salomon Smith Barney, to the effect that, as of March 8, 1998 and based upon and subject to certain matters stated in such opinion, the cash consideration of $9.65 per share of Common Stock to be received by the holders of Common Stock in the Offer and the Merger was fair, from a financial point of view, to such holders of Common Stock. A copy of Salomon Smith Barney's written opinion, which sets forth the assumptions made, matters considered and the limitations on the review undertaken by Salomon Smith Barney, is attached to the Schedule 14D-9 as Exhibit (a)(4) and should be read carefully in its entirety. The accompanying Offer to Purchase sets forth all of the terms of the Offer. Additionally, the enclosed Schedule 14D-9 sets forth additional information regarding the Offer and the Merger relevant to making an informed decision. We urge you to read these materials carefully and in their entirety. Very truly yours, Joel Friedman Chairman and Chief Executive Officer EX-99.A2 3 JOINT PRESS RELEASE 1 Exhibit (a)(2) WESTERN ATLAS SIGNS MERGER AGREEMENT WITH 3-D GEOPHYSICAL HOUSTON and LITTLETON, Colo., March 9 /PRNewswire/ -- Western Atlas Inc. (NYSE: WAI-news) and 3-D Geophysical, Inc. (Nasdaq: TDGO - news) announced today that they have signed a definitive merger agreement providing for Western Atlas to acquire 3-D Geophysical, a Colorado-based supplier of seismic data acquisition services. Western Atlas will offer 3-D Geophysical shareholders $9.65 per common share in an all-cash tender offer that will commence within the next five business days. Following consummation of the tender offer, 3-D Geophysical shares not purchased in the tender offer will be acquired for $9.65 per share in cash in a subsequent merger. 3-D Geophysical has approximately 11.9 million outstanding shares. The offer will be subject to the tender of a majority of 3-D Geophysical's outstanding shares, expiration of the Hart-Scott-Rodino Act waiting period, and other customary conditions. The tender offer and the merger have been unanimously approved by 3-D Geophysical's Board of Directors, which has received a fairness opinion from its financial advisor, Salomon Smith Barney. Revenues of 3-D Geophysical are expected to exceed $100 million for 1997. The company will become part of the Western Geophysical division of Western Atlas Inc. "The acquisition of 3-D Geophysical will accelerate the growth of Western Atlas as a leading supplier of seismic services," said Western Atlas President and CEO John Russell. "It will not impact Western Atlas' 1998 earnings, but will be accretive for 1999 onward." "3-D Geophysical has a strong presence in North America," said Richard White, president of Western Geophysical. "The employees of 3-D Geophysical are highly skilled and experienced, and we're pleased to be including them in Western Geophysical. They will be a valued addition to our team. Bringing these two organizations together increases our seismic data acquisition capabilities in the U.S., strengthens our business in Alaska and certain areas in Latin America, and expands our presence in Canada." "We at 3-D Geophysical look forward to joining the Western team," said Joel Friedman, chairman and CEO of 3-D Geophysical, Inc. "This combination with Western satisfies our three primary goals: enhancing shareholder value, providing the best service to our clients, and offering the most opportunity for personal growth to our employees." 3-D Geophysical has 11 crews operating land-based and shallow-water seismic data acquisition systems utilizing state-of-the-art recording equipment with approximately 26,000 channels. The company also offers data processing services in Mexico. Following its initial public offering in February 1996, the company acquired several established seismic data acquisition businesses: Northern Geophysical of America Inc., Geoevaluaciones, S.A. de C.V., Kemp Geophysical Corporation, Paragon Geophysical, PIASA (a Mexican seismic data processing company), and Calgary-based J.R.S. Exploration Co. Ltd., which extended the company's services into Canada. 2 Western Atlas Inc., based in Houston, Texas is one of the world's leading oilfield services companies, providing seismic, well-logging, and reservoir information services to the energy industry. The statements in this release relating to matters that are not historical facts, including, without limitations, statements regarding the demand for the Company's services, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve and are dependent upon certain risks and uncertainties, including, but not limited to, the following which are beyond the Company's control: dependence on energy industry spending; worldwide prices and demand for oil and gas; the presence of competitors with greater financial and other resources; technological changes and developments; operating risks inherent in the oilfield services industry; regulatory uncertainties; worldwide political stability and economic conditions; operating risks associated with international activities; and other risks and uncertainties described more fully in the Company's filings with the Securities and Exchange Commission. -2- EX-99.A3 4 FORM OF SUMMARY ADVERTISEMENT 1 EXHIBIT (a)(3) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase, dated March 13, 1998, and the related Letter of Transmittal, and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of WAI Acquisition Corp. by one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF 3-D GEOPHYSICAL, INC. BY WAI ACQUISITION CORP. A WHOLLY-OWNED SUBSIDIARY OF WESTERN ATLAS INC. AT $9.65 NET PER SHARE WAI Acquisition Corp. (the "Purchaser"), a Delaware corporation and a wholly-owned subsidiary of Western Atlas Inc., a Delaware corporation ("Parent"), is offering to purchase all outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of 3-D Geophysical, Inc., a Delaware corporation (the "Company"), and the associated preferred share purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of July 17, 1997, between the Company and American Securities Transfer & Trust, Inc., as Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase price of $9.65 per Share (and 2 associated Right), net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated March 13, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"). Unless the context otherwise requires, all references to Shares herein and in the Offer to Purchase shall include the associated Rights. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY TIME, ON THURSDAY, APRIL 9, 1998, UNLESS THE OFFER IS EXTENDED. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of March 8, 1998 (the "Merger Agreement"), by and among the Company, the Purchaser and Parent pursuant to which, following the consummation of the Offer and the satisfaction of certain conditions, the Purchaser will be merged with and into the Company (the "Merger"), with the Company continuing as the surviving corporation. On the effective date of the Merger, each outstanding Share (other than any Shares held by Parent, the Purchaser, any wholly-owned subsidiary of Parent or the Purchaser, in the treasury of the Company or by any wholly-owned subsidiary of the Company, and other than Shares, if any, held by stockholders who perfect their appraisal rights under Delaware law) will be converted into the right to receive an amount equal to $9.65 in cash (without interest). THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND ADOPTED THE MERGER AGREEMENT AND RECOMMENDS ACCEPTANCE OF THE OFFER BY THE COMPANY'S STOCKHOLDERS. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, AT LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE THE INTRODUCTION AND SECTIONS 1, 14 AND 15 OF THE OFFER TO PURCHASE. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance of such Shares for payment pursuant to the Offer. In all cases, upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to validly tendering stockholders. Under no circumstances will interest on the purchase price for Shares be paid by the Purchaser. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates representing Shares (the "Share Certificates") for such Shares or timely confirmation of the book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities") pursuant to the -2- 3 procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal delivered with the Offer to Purchase (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry transfer of Shares and (iii) any other documents required by the Letter of Transmittal. The Purchaser expressly reserves the right, in its sole discretion (subject to the terms and conditions of the Merger Agreement), at any time and from time to time, to extend the period during which the Offer is open for any reason, including the existence of any of the conditions specified in Section 14 of the Offer to Purchase, by giving oral or written notice of such extension to the Depositary. Any such extension will be followed as promptly as practicable by public announcement thereof, and such announcement will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date (as defined below). Tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment as provided in the Offer to Purchase, may also be withdrawn at any time after May 11, 1998. The term "Expiration Date" means 12:00 midnight, New York City time, on Thursday, April 9, 1998, unless and until the Purchaser, subject to the terms of the Merger Agreement, shall have further extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the time and date at which the Offer, as so extended by the Purchaser, shall expire. In order for a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn, and (if Share Certificates have been tendered) the name of the registered holder of the Shares as set forth in the Share Certificate, if different from that of the person who tendered such Shares. If Share Certificates have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the tendering stockholder must submit the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn and the signature on the notice of withdrawal must be guaranteed by a firm that is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program (an "Eligible Institution"), except in the case of Shares tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 3 of the Offer to Purchase, the notice of withdrawal must specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in this paragraph. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination shall be final and binding. Any Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be tendered at any subsequent time prior to the Expiration Date by following any of the procedures described in Section 3 of the Offer to Purchase. -3- 4 The information required to be disclosed pursuant to Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase, and is incorporated herein by reference. The Company is providing the Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the related Letter of Transmittal and, if required, other relevant materials will be mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance may be directed to the Information Agent at the address and telephone number listed below. Additional copies of the Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be obtained at the Purchaser's expense from the Information Agent or from brokers, dealers, commercial banks and trust companies. Neither Parent nor the Purchaser will pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: GEORGESON & COMPANY INC. Wall Street Plaza New York, New York 10005 Banks and Brokers Call Collect: (212) 440-9800 ALL OTHERS CALL TOLL FREE (800) 223-2064 March 13, 1998 -4- EX-99.A4 5 OPINION OF SALOMON SMITH BARNEY 1 Exhibit (a)(4) [SALOMON SMITH BARNEY LETTERHEAD] March 8, 1998 The Board of Directors 3-D Geophysical, Inc. 599 Lexington Avenue New York, New York 10022 Members of the Board: You have requested our opinion as to the fairness, from a financial point of view, to the holders of the common stock of 3-D Geophysical, Inc. ("3-D Geophysical") of the consideration to be received by such holders pursuant to the terms and subject to the conditions set forth in the Agreement and Plan of Merger, dated as of March 8, 1998 (the "Merger Agreement"), among Western Atlas Inc. ("Western Atlas"), WAI Acquisition Corporation, a subsidiary of Western Atlas ("Subsidiary"), and 3-D Geophysical. As more fully described in the Merger Agreement, (i) Subsidiary will commence a tender offer to purchase all outstanding shares of the common stock, par value $0.01 per share, of 3-D Geophysical (the "3-D Common Stock" and, such tender offer, the "Tender Offer") at a purchase price of $9.65 per share, net to the seller in cash (the "Cash Consideration") and (ii) subsequent to the Tender Offer, Subsidiary will be merged with and into 3-D Geophysical (the "Merger" and, together with the Tender Offer, the "Transaction") and each outstanding share of 3-D Common Stock not previously tendered will be converted into the right to receive the Cash Consideration. In arriving at our opinion, we reviewed the Merger Agreement and held discussions with certain senior officers, directors and other representatives and advisors of 3-D Geophysical and certain senior officers and other representatives of Western Atlas concerning the business, operations and prospects of 3-D Geophysical. We examined certain publicly available business and financial information relating to 3-D Geophysical as well as certain financial forecasts and other information and data for 3-D Geophysical which were provided to or otherwise discussed with us by the management of 3-D Geophysical. We reviewed the financial terms of the Merger as set forth in the Merger Agreement in relation to, among other things: current and historical market prices and trading volumes of 3-D Common Stock; the historical and projected earnings and other operating data of 3-D Geophysical; and the capitalization and financial condition of 3-D Geophysical. We considered, to the extent publicly available, the financial terms of certain other similar transactions recently effected which we considered relevant in evaluating the Merger and analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations we considered relevant in evaluating those of 3-D Geophysical. In addition to the foregoing, we conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as we deemed appropriate in arriving at our opinion. In rendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or furnished to or otherwise reviewed by or discussed with us. With respect to financial forecasts and other information and data provided to or otherwise reviewed by or discussed with us, we have been advised by the management of 3-D Geophysical that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of 3-D Geophysical as to the future financial performance of 3-D Geophysical. We have not made or been provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of 3-D Geophysical nor have we made any physical inspection of the properties or assets of 3-D Geophysical. In connection with our engagement, we were not requested to, and did not, solicit third party indications of interest in a possible acquisition of 3-D Geophysical, nor were we requested to consider, and our opinion does not address, the relative merits of the Transaction 2 The Board of Directors 3-D Geophysical, Inc. March 8, 1998 Page 2 as compared to any alternative business strategies that might exist for 3-D Geophysical or the effect of any other transaction in which 3-D Geophysical might engage. Our opinion is necessarily based upon information available to us, and financial, stock market and other conditions and circumstances existing and disclosed to us, as of the date hereof. Smith Barney Inc. and Salomon Brothers Inc (collectively doing business as Salomon Smith Barney) have acted as financial advisors to 3-D Geophysical in connection with the proposed Transaction and will receive a fee for such services, a significant portion of which is contingent upon the consummation of the Transaction. We also will receive a fee upon the delivery of this opinion. In the ordinary course of our business, we and our affiliates may actively trade or hold the securities of 3-D Geophysical and Western Atlas for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities. We have in the past provided investment banking services to 3-D Geophysical unrelated to the proposed Transaction, for which services we have received compensation. In addition, we and our affiliates (including Travelers Group Inc. and its affiliates) may maintain relationships with 3-D Geophysical, Western Atlas and their respective affiliates. Our advisory services and the opinion expressed herein are provided for the information of the Board of Directors of 3-D Geophysical in its evaluation of the proposed Transaction, and our opinion is not intended to be and does not constitute a recommendation to any stockholder as to whether or not such stockholder should tender shares of 3-D Common Stock in the Tender Offer or how such stockholder should vote on the proposed Merger. Our opinion may not be published or otherwise used or referred to, nor shall any public reference to Salomon Smith Barney be made, without our prior written consent; provided, that this opinion letter may be included in its entirety in the Solicitation/ Recommendation Statement of 3-D Geophysical relating to the proposed Transaction. Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the opinion that, as of the date hereof, the Cash Consideration to be received in the Transaction by the holders of 3-D Common Stock (other than Western Atlas and its affiliates) is fair, from a financial point of view, to such holders. Very truly yours, /s/ Salomon Smith Barney SALOMON SMITH BARNEY EX-99.C1 6 RELEVANT PORTIONS OF 1997 PROXY STATEMENT 1 EXHIBIT (C)(1) [. . . ] DIRECTOR COMPENSATION Each member of the Board who is not an employee of the Company receives: (i) an annual retainer of $10,000; (ii) $750 per meeting of the Board of Directors or any committee thereof at which such director is present in person; and (iii) reimbursement of all ordinary and necessary expenses incurred in attending a meeting of the Board of Directors or committee thereof. Directors who are full-time employees of the Company do not receive any compensation for serving as directors. Any newly elected or appointed non-employee director automatically received a nonqualified option under the 1995 Plan to purchase 10,000 shares of Common Stock at an exercise price equal to the fair market value of the Common Stock on the date of grant. Such option vests in cumulative installments of one-third on each of the first, second and third anniversaries of the date of grant and expires on the tenth anniversary of the date of such grant. On February 9, 1996, non-employee directors (Messrs. Andrews, Bahna, Brandrup, Emil and O'Brien) were awarded nonqualified stock options to purchase 10,000 shares of Common Stock pursuant to the 1995 Plan. The exercise price of these options was equal to the price to the public in the Company's initial public offering of $7.50 per share. Upon joining the Board in April 1996, Mr. Tavella was granted an option under the 1995 Plan to purchase 10,000 shares of Common Stock at an exercise price of $12.3125 per share. On September 30, 1996, each of such non-employee directors was granted an additional option to purchase 6,667 shares of Common Stock at $8.50 per share, the closing price of the Common Stock on the date of grant. Such options vested in full on February 6, 1997 and expire in September 2006. See Proposal 2. [. . . ] EMPLOYMENT AGREEMENTS; NON-COMPETITION AGREEMENTS Each of Messrs. Friedman, Davis, Ferran, Widynowski, Koons and Kemp has entered into an employment agreement with the Company that expires on December 31, 1998, except for the agreement with Mr. Koons, which expires on September 30, 1999, and for the agreement with Mr. Ferran, which expires on December 31, 2000. The employment agreements provide for base annual salaries as follows: Mr. Friedman: $125,000 plus an annual office allowance of $75,000, a portion of which is being applied to payments under the Company's New York City lease; Mr. Davis: $155,000; Mr. Ferran: $140,000; Mr. Widynowski: $140,000; Mr. Koons: $125,000; Mr. Kemp: $75,000. Certain of the Company's executive officers are entitled to an automobile allowance, and, in addition, each executive officer is eligible pursuant to his employment agreement for a bonus to be determined in the discretion of the Board of Directors or a committee thereof. No bonuses were paid in respect of 1996. Each of the employment agreements with Messrs. Friedman, Ferran and Koons contains a covenant not to compete during the employee's employment with the Company or its subsidiaries and for one year thereafter unless the Company terminates the employee's 2 employment without cause. Each of the agreements with Messrs. Davis and Widynowski contains a similar covenant not to compete but provides that upon termination of the agreement, other than by the Company for cause (as defined in the agreement) or by the employee without good reason (as defined in the agreement), the employee's covenant not to compete will lapse unless the Company pays the employee 80% of the employee's base salary in the year following such termination. Mr. Davis' agreement also provides that upon termination under certain circumstances he will receive a payment for certain relocation expenses and the continuation of certain benefits for a one-year period. Mr. Kemp receives a monthly payment of $4,167 for 36 months, ending in January 1999, in consideration of the covenant not to compete contained in his employment agreement. In connection with the acquisition by the Company of Geoevaluaciones, Mr. Ferran and the other former stockholders of Geoevaluaciones entered into non-competition agreements under which Mr. Ferran and such former stockholders were entitled to certain additional consideration (see "Certain Relationships and Related Transactions"). Until September 30, 1996, Mr. John D. White, Jr. served as the Company's Executive Vice President and Chief Financial Officer under an employment agreement that was to expire on December 31, 1998 and provided for a base salary of $150,000. Upon his resignation as an officer of the Company, Mr. White and the Company entered into an agreement terminating this employment agreement (see "Certain Relationships and Related Transactions"). Option Grants Shown below is information regarding grants of stock options Plan during 1996 to the Company's executive officers, including the Named Executive Officers. The following table also shows the hypothetical value of the options granted at the end of the option terms (ten years) if the price of the Company Common Stock were to appreciate annually by 5% and 10%, respectively. These assumed rates of growth are required by the Securities and Exchange Commission for illustrative purposes only and are not intended to forecast possible future stock prices. 3
Individual Grants ----------------------------------------------------------------------- Market Price % of Total of Underlying Number of Options Securities on Securities Granted to the Date of Potential Realizable Value of Underlying Employees Exercise Grant if Assumed Annual Rates of Stock Options in Fiscal Price higher than Expiration Price Appreciation for Option Name Granted Year (1) ($/Sh) Exercise Price Date Term (2) - ---- ------- -------- ------ -------------- ---- -------- 5% 10% -- --- Luis H. Ferran......... 250,000 28.0% $7.50 - 2/9/06 $3,054,375.00 $4,863,750.00 Richard D. Davis....... 50,000(3) 5.6 7.50 - 2/9/06 610,875.00 972,750.00 75,000(4) 8.4 12.3125 4/26/06 1,504,279.69 2,395,396.88 Joel Friedman.......... 75,000(4) 8.4 12.3125 - 4/26/06 1,504,279.69 2,395,396.88 Wayne P. Widynowski.... 45,000(3) 5.0 7.50 - 2/9/06 549,787.50 875,475.00 75,000(4) 8.4 12.3125 4/26/06 1,504,279.69 2,395,396.88 Ronald L. Koons........ 30,000(5) 3.4 8.25 - 9/30/06 403,177.50 642,015.00
- ------------- (1) The Company granted options to purchase an aggregate of 893,352 shares of Common Stock to its employees in 1996, of which options to purchase an aggregate of 628,350 shares of Common Stock were granted under the 1995 Plan. (2) Represents the product of (i) the difference between (A) the per-share fair market price at the time of the grant compounded annually at the assumed rate of appreciation over the term of the option, and (B) the per-share exercise price of the option, and (ii) the number of shares underlying the grant at the fiscal year-end. (3) The option became exercisable in three equal cumulative annual installments commencing on February 9, 1997. (4) On April 26, 1996 the Compensation Committee granted nonqualified options to each of Messrs. Friedman, Davis and Widynowski to purchase 75,000 shares of Common Stock. These options, which were not granted under the 1995 Plan, have an exercise price of $12.3125 per share, were granted on the same terms and conditions as are provided for in the 1995 Plan, vest in cumulative installments of 18,750 shares on each of the first four anniversaries of the date of grant and expire ten years after the date of grant. (5) The option becomes exercisable in three equal cumulative annual installments commencing on September 30, 1997. Aggregate Option Exercises and Year-End Option Values. Shown below is information relating to the exercise of stock options during 1996 for the Company's executive officers, including the Named Executive Officers, and the year-end value of unexercised options.
Value of Unexercised Number of Securities in-the-Money Options Underlying Unexercised at Fiscal Year-End (1) Shares Acquired Value Realized Options at Fiscal Year-End (Exercisable/ Name on Exercise (1) (Exercisable/Unexercisable) Unexercisable) - ---- ----------- --- --------------------------- ------------- Joel Friedman.................. 0 0 0/75,000 $0/0 Richard D. Davis............... 0 0 0/125,000 0/75,000 Luis H. Ferran................. 0 0 0/250,000 0/375,000 Wayne P. Widynowski............ 0 0 0/120,000 0/67,500 Ronald L. Koons................ 0 0 0/30,000 0/22,500 G.C.L. Kemp.................... 0 0 0/0 0/0
----------------- 4 (1) Market value of underlying securities of $9.00 per share based on the average of the high and low trading price of the Company's Common Stock on December 31, 1996, minus the aggregate exercise price. In addition, during 1996 the Compensation Committee and, after September 1996 the Stock Option Committee, granted pursuant to the 1995 Plan options to purchase an aggregate of 179,350 shares of Common Stock to other key employees of the Company at prices ranging from $7.375 to $12.3125 per share. Each of these options vests in cumulative installments of one-fourth of the number of shares subject thereto on each of the first four anniversaries of the grant date and expires in 2006. The Compensation Committee of the Board of Directors made no determination with respect to the 1996 cash compensation of any of the Company's executive officers, all of whose cash compensation was paid pursuant to employment agreements approved by the entire Board of Directors. Options granted to executive officers prior to the Company's initial public offering were granted by the entire Board of Directors pursuant to the 1995 Plan. Options granted to executive officers after the Company's initial public offering were granted by the Compensation Committee of the Board of Directors under the 1995 Plan or pursuant to authority granted to the Committee by the entire Board of Directors. [. . . ] CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company was incorporated in March 1995 and conducted no operations until February 1996, when it consummated its initial public offering (the "Initial Public Offering") and acquired Northern, Geoevaluaciones, Kemp, Paragon (the "Operating Subsidiaries") and PIASA. Simultaneously with the consummation of the Initial Public Offering, the Company acquired in separate transactions, in exchange for cash, notes and shares of Common Stock, the Operating Subsidiaries and PIASA, as described below. Of the approximately $28.7 million of net proceeds to the Company from the Initial Public Offering, (i) approximately $13.8 million was used to pay the cash portion of the purchase price to certain former stockholders of the Operating Subsidiaries and PIASA; and (ii) approximately $5.9 million was used to repay indebtedness of the Operating Subsidiaries, including approximately $1.9 million of indebtedness that was guaranteed by or was owed to certain former stockholders of the Operating Subsidiaries. In addition, the former stockholders of the Operating Subsidiaries and PIASA received an aggregate of 1,599,319 shares of Common Stock having a market value, based on the price to the public in the Initial Public Offering of $7.50 per share, of approximately $12.0 million in the aggregate. Under a stock purchase agreement (the "Geoevaluaciones Stock Purchase Agreement"), the Company purchased from Mr. Ferran, his wife, his father-in-law and his mother-in-law (collectively, the "Former Geoevaluaciones Stockholders") all of the issued and outstanding shares of capital stock of Geoevaluaciones. In connection with this acquisition, the Company entered into a separate non-competition agreement with each of the Former Geoevaluaciones Stockholders (collectively, the "Geoevaluaciones Non-Competition Agreement"). The Geoevaluaciones Stock Purchase Agreement and the Geoevaluaciones Non-Competition Agreement were entered into on the basis of arm's-length negotiations among the Former Geoevaluaciones Stockholders and, on behalf of the Company, Messrs. Friedman and White. Neither the Company nor the Former Geoevaluaciones Stockholders obtained an appraisal of Geoevaluaciones or such non-competition covenants in connection with this transaction; at September 30, 1995, the net book value of Geoevaluaciones was approximately $2.1 million. Pursuant to the Geoevaluaciones Stock Purchase Agreement, the Company paid to the Former 5 Geoevaluaciones Stockholders: (i) $2.45 million in cash at closing; and (ii) $1.0 million by delivery at closing of four promissory notes, payable in installments at six, 12, 18 and 24 months after the closing in the following aggregate amounts (which amounts include interest at 8% per annum): $290,000, $280,000, $270,000 and $260,000, respectively. Pursuant to the Geoevaluaciones Non-Competition Agreement, the Company paid to the Former Geoevaluaciones Stockholders: (i) 100,000 shares of Common Stock that was issued at closing to trusts with Mexican banks for the benefit of the Former Geoevaluaciones Stockholders, and is to be released February 9, 1998; and (ii) $1.9 million, reduced by the amount of any liabilities Geoevaluaciones had not disclosed to the Company and by any amount paid by Geoevaluaciones to settle or otherwise in connection with Geoevaluaciones' dispute with a supplier, such portion of the consideration consisting of (a) $1.0 million in cash that was deposited at the closing in a bank account, and which, subject to any such reduction, may be disbursed only upon the approval of (1) either Mr. Ferran or another Former Geoevaluaciones Stockholder, and (2) either Mr. Friedman or Mr. White; and (b) 117,647 shares of Common Stock that were delivered at closing to trusts with Mexican banks for the benefit of the Former Geoevaluaciones Stockholders, and which may not be released until June 30, 1997 and then only upon the approval of a designated representative of the Former Geoevaluaciones Stockholders and Mr. Friedman. Mr. Ferran entered into an employment agreement with the Company and serves as Executive Vice President -- Latin American Operations, President of Geoevaluaciones and a director of the Company. In addition, Mr. Ferran may receive, pursuant to the Geoevaluaciones Non-Competition Agreement, as described above, up to a maximum of 57,394 of the shares of Common Stock payable to the Former Geoevaluaciones Stockholders. Of the amounts paid by the Company to the Former Geoevaluaciones Stockholders, Mr. Ferran received, as described above, $645,167 in cash, a note in the principal amount of $263,333, with interest of 8% per annum thereon payable over two years, and will receive up to $263,334 in cash that may not be released until June 30, 1997 (see "-- Employment Agreements; Non-Competition Agreements" and "Security Ownership of Certain Beneficial Owners and Management"). Under a stock purchase agreement, the Company purchased from Messrs. Andrews, Ferran and five other stockholders of PIASA all of the issued and outstanding shares of capital stock of PIASA for approximately $300,000, consisting of $60,000 in cash and approximately 28,235 shares of Common Stock. The stock purchase agreement with the former stockholders of PIASA was entered into on the basis of arm's-length negotiations among Mr. Andrews, the President and Chairman of the Board of PIASA, and Mr. Ferran, a director and Secretary of PIASA, on behalf of the former stockholders of PIASA, and Messrs. Friedman and White, on behalf of the Company. Neither the Company nor PIASA obtained an appraisal of PIASA in connection with this transaction; at September 30, 1995, the net book value of PIASA was approximately $288,000. Mr. Ferran received 9,176 shares of Common Stock and $19,500 in connection with the sale of PIASA, and Mr. Andrews received 10,588 shares of Common Stock and $22,500 in connection with the sale of PIASA. Under an asset purchase agreement between Northern's predecessor ("Old Northern") and the Company, the Company purchased substantially all of Old Northern's assets related to its land-based seismic data acquisition business. Neither the Company nor Old Northern obtained an appraisal of the assets of Old Northern to be acquired by the Company in connection with this transaction; at September 30, 1995, the net book value of such assets was approximately $2.0 million. Such asset purchase agreement was the result of arm's-length negotiations among representatives of the Company and representatives of Old Northern. The 6 aggregate consideration paid by the Company was $10.9 million in cash. Wayne P. Widynowski, the Vice President of Marketing of Old Northern, entered into an employment agreement with the Company and serves as Executive Vice President and Chief Operating Officer of the Company and as President of Northern (see "-- Employment Agreements; Non-Competition Agreements," and "Security Ownership of Certain Beneficial Owners and Management"). Under a merger agreement among Paragon, the Company and a subsidiary of the Company, Paragon merged with the subsidiary with Paragon being the surviving entity (the "Paragon Merger"). Mr. Friedman, two other individuals and members of their respective immediate families (the "Former Paragon Stockholders" ) each owned one-third of the issued and outstanding capital stock of Paragon. In August 1994, Paragon purchased all of the net assets of Paragon Geophysical, Inc., an Ohio corporation, for $1.1 million in cash and, in addition, assumed long-term liabilities of $1.9 million. To finance the purchase, Paragon borrowed $1.1 million from a commercial bank that was guaranteed by the Former Paragon Stockholders and the Former Paragon Stockholders contributed approximately $150,000 in cash. The Former Paragon Stockholders received approximately 1,314,261 shares of Common Stock in connection with the Paragon Merger. In addition, the Company assumed an aggregate of $4.8 million of Paragon's debt, of which $1.7 million had been personally guaranteed by Mr. Friedman and certain other Former Paragon Stockholders. All of this debt was repaid upon consummation of the Initial Public Offering with a portion of the net proceeds therefrom. The terms of the Paragon Merger were not determined through arm's-length negotiations and may have been significantly greater than would have resulted from arm's-length negotiations. The Company did not obtain an appraisal of Paragon in connection with the Paragon Merger; at September 30, 1995, the net book value of Paragon was negative by approximately $496,000. Mr. Friedman, who, prior to the Paragon Merger, was the President and Chief Executive Officer of the Company and Chairman of the Board and Chief Executive Officer of Paragon, together with members of his family, owns a total of 438,159 shares of Common Stock as a result of the Paragon Merger. Mr. White, who, prior to the Paragon Merger, was acting Chief Financial Officer of Paragon, served as Executive Vice President, Chief Financial Officer, Secretary, Treasurer and a director of the Company until September 30, 1996. In connection with the Paragon Merger, Messrs. Friedman and White entered into employment agreements. Mr. White entered into a termination agreement with the Company following his resignation in September 1996, as described below. Under a stock purchase agreement among G.C.L. Kemp and his wife (the "Former Kemp Stockholders") and the Company (the "Kemp Stock Purchase Agreement"), the Company purchased all of the issued and outstanding shares of capital stock of Kemp. The Kemp Stock Purchase Agreement was entered into on the basis of arm's-length negotiations among G.C.L. Kemp, on behalf of the Former Kemp Stockholders, and Messrs. Friedman and White, on behalf of the Company, and the consideration payable to the Former Kemp Stockholders thereunder represents the value the Former Kemp Stockholders deemed appropriate for their business. Neither the Company nor the Former Kemp Stockholders obtained an appraisal of Kemp in connection with this transaction; at September 30, 1995 the net book value of Kemp was $422,000. The aggregate consideration paid by the Company to the Former Kemp Stockholders, as modified by amendments in June 1996, was approximately $919,000, consisting of $625,000 in cash and $294,000 paid by delivery of 39,176 shares of Common Stock. In addition, the Company assumed and repaid approximately $152,000 in debt owed by Kemp, of which $135,000 was guaranteed by Mr. Kemp. In addition, the Company assumed $50,000 of debt 7 owed by Kemp to Mr. Kemp, of which $25,000 was forgiven by Mr. Kemp in June 1996. Mr. Kemp entered into an employment agreement pursuant to which he serves as a Vice President of the Company. Mr. Andrews is the sole stockholder of The Andrews Group International, Inc. ("Andrews Group") which, through its Mexican affiliate, A.G.I. Mexicana, S.A. de C.V. ("A.G.I. Mexicana") (collectively, the "Andrews Companies"), acts as the exclusive representative for several companies in Mexico, including Input/Output, Inc. and Landmark Graphics Corporation. Geoevaluaciones and PIASA purchase goods and services from A.G.I. Mexicana and during 1996 such purchases totalled approximately $635,000. In addition, as of December 31, 1996 PIASA owed A.G.I. Mexicana $65,000 for goods and services purchased prior to the Initial Public Offering. The Company also leased approximately 1,000 channels of 3-D seismic data acquisition equipment and geophones from Andrews Group under two separate six-month lease agreements with automatic monthly renewals that provided for deposits of approximately $293,000 and $77,000, respectively, and for monthly payments of approximately $110,000 and $29,000, respectively. The leases provided the Company with options to purchase the equipment for approximately $2,445,000 and $642,000, respectively, subject to offsets of 80% of the rental payments during the six months ended March 1, 1997 and a 10% discount if the options were exercised during such period. The Company used a portion of the proceeds of its December 1996 public offering to exercise such options and purchase the equipment for $2,942,000. The Company anticipates that it will continue to purchase goods and services from the Andrews Companies. The Company believes that the past transactions with the Andrews Companies have been, and that any future transactions with the Andrews Companies will be, on terms no less favorable to the Company than could be obtained from an unaffiliated third party. The Company agreed to pay to a consulting company owned by Mr. White $250,000 for financial advisory and other consulting services in connection with the structuring, negotiation and consummation of the acquisitions of the Operating Subsidiaries and PIASA, of which $125,000 was paid upon the consummation the Initial Public Offering and $125,000 was paid on January 3, 1997. In connection with Mr. White's resignation as an executive officer of the Company and the termination of his employment agreement on October 1, 1996, the Company agreed to pay Mr. White $200,000 in January 1997 plus $5,000 per month through December 31, 1998, the expiration date of the employment agreement, to provide him with office space in the Company's New York City facility through December 31, 1997, provided he does not serve as an officer of a competitor of the Company during that period, and to provide him with certain insurance benefits through December 31, 1998. In exchange therefor, Mr. White rendered financial and advisory services to the Company in connection with its December 1996 public offering and the acquisition of J.R.S. Exploration Company, Limited. The Company leases space in New York City at an annual base rental of $165,000 to provide offices for Messrs. Friedman and White. Mr. Friedman has agreed to reimburse the Company for any amounts under the lease that are payable with respect to space that is not utilized by him and Mr. White and which have not been paid by sub-lessees. For information concerning legal fees paid to Kramer Levin, to which firm Mr. Emil is of counsel, see "Information Concerning Directors and Nominees". EX-99.C2 7 FORM OF AMENDED AND RESTATED EMPLOYMENT AGREEMENT 1 EXHIBIT (C)(2) AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") dated January 13, 1998 between 3-D Geophysical, Inc. (the "Company"), a Delaware corporation, and Wayne P. Widynowski (the "Employee"). WHEREAS, the Employee is employed by the Company in a key managerial capacity and the Employee's services are valuable to the conduct of the business of the Company; WHEREAS, the Company recognizes that circumstances may arise in which a change in control of the Company occurs, through acquisition or otherwise, thereby causing uncertainty about the Employee's future employment with the Company without regard to the Employee's competence or past contributions, which uncertainty may result in the loss of valuable services of the Employee to the detriment of the Company and its stockholders, and the Company and the Employee wish to provide reasonable security to the Employee as an incentive for the continuation by Employee of his current relationship with the Company; WHEREAS, the Employee and the Company are parties to an Employment Agreement dated January 31, 1996 (the "Prior Agreement") and wish to amend and restate the terms and conditions of the Prior Agreement in their entirety with the terms and conditions of this Agreement; WHEREAS, the Company desires to continue to employ the Employee on the terms 2 and conditions provided in this Agreement; and WHEREAS, the Employee desires to continue such employment and to render services to the Company on the terms and conditions provided in this Agreement. NOW, THEREFORE, in consideration of the mutual agreements herein contained, the Company and the Employee hereby agree as follows: Section 1. Engagement. The Company hereby employs the Employee as Executive Vice President and Chief Operating Officer of the Company, and the Employee hereby accepts such employment, upon and subject to the terms and conditions hereinafter set forth. Section 2. Term. Unless sooner terminated as provided in this Agreement, the term of the Employee's employment under this Agreement shall commence on the date hereof (the "Effective Date") and shall end on December 31, 2000 (the "Term"). Section 3. Duties and Services. 3.1 The Employee shall render services to the Company as the Executive Vice President and Chief Operating Officer of the Company, shall perform such other duties and responsibilities (including, without limitation, service otherwise consistent with the Employee's duties hereunder as an officer, director or equivalent position of any subsidiary, affiliated company or venture of the Company, without additional compensation) as may be assigned to the Employee from time to time - 2 - 3 by the Board of Directors (the "Directors") or the Chief Executive Officer of the -3- 4 Company and shall abide by the practices and policies of the Company governing the conduct of employees. The Company and all such subsidiaries, affiliated companies and ventures are herein collectively referred to as the "3-D Companies". 3.2 During the Term, the Employee shall devote his full energy and time (exclusive of normal holidays and vacation periods and periods of sickness and disability) to the performance of the Employee's duties as defined herein and shall promptly and faithfully perform all the duties which pertain to the Employee's employment. The previous sentence shall not prohibit the Employee from activities permitted pursuant to clause (iii) of Section 9.1 or from activities in connection with ownership of an interest in the real property owned by CBNC, Inc. ("Northern") in Grand Junction, Colorado, provided that such activities do not interfere with the performance of Employee's duties hereunder. Section 4. Compensation. 4.1 Annual Compensation. In consideration of all of the services to be rendered by the Employee hereunder and the covenants of Employee herein, the Company agrees to pay to the Employee, and the Employee agrees to accept, a salary at the annual rate of $140,000, payable in accordance with the Company's normal payroll practices. 4.2 Bonus Pool. The Company intends to create a bonus plan based upon the earnings of the Company to provide incentives for certain employees of the Company and its subsidiaries. The Employee shall be entitled to participate in such plan on such terms as may be determined by the Board of Directors of the Company or a duly constituted committee thereof, in its discretion. -4- 5 Nothing in this Agreement shall require the Company to pay any such bonus. Section 5. Change in Control. 5.1 Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) Change of Control. The term "Change of Control" means an event which shall be deemed to have occurred if: (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Directors, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (iii) or (iv) of this Section 5.1(a)) whose election by the Board of Directors of -5- 6 the Company or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board of Directors of the Company; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 25% of the combined voting power of the Company's then outstanding securities shall not constitute a Change of Control; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of, or the Company sells or disposes of, all or substantially all of the Company's assets, or any such sale or disposition is effected through condemnation proceedings. The Company's outside legal counsel shall notify the parties to this Agreement whether and when a Change of Control has occurred. However, the preceding sentence shall not -6- 7 preclude any party to this Agreement from giving such notice. (b) Code. The term "Code" means the Internal Revenue Code of 1986, including any amendments thereto or successor tax codes thereof. References to any section of the Code shall include any amended or successor section of comparable import. (c) Covered Termination. The term "Covered Termination" means any termination of the Employee's employment for "Good Reason" after a Change of Control of the Company which occurs prior to the end of the Term. (d) Good Reason. The Employee shall have a "Good Reason" for termination of employment after a Change of Control of the Company in the event of: (i) a termination of the Employee's employment by the Company for any reason other than Cause (as defined in Section 8(c) hereof); or (ii) a good faith determination by the Employee that there has been a significant adverse change, without the Employee's express prior written consent, in the Employee's working conditions or status with the Company from such working conditions or status in effect immediately prior to the Change of Control of the Company, including but not limited to (A) a significant change in the nature or scope of the Employee's authority, powers, functions, duties or responsibilities or reporting responsibilities, or (B) a significant reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements (regardless of -7- 8 whether such reduction is part of a general reduction applicable to all senior executive employees of the Company), or (C) a reduction in the salary or benefits to which the Employee is entitled under this Agreement, or (D) a relocation of the Employee's principal place of business to a location which is more than 50 miles from its current location as of the Effective Date. 5.2 Benefits. If there is a Covered Termination, the Employee shall be entitled to the following benefits: (a) Accrued Benefits. The Employee shall be paid the amount of the Employee's Accrued Benefits. For purposes of this Agreement, the Employee's "Accrued Benefits" shall consist of the aggregate of the following amounts, payable as described herein: (i) all base salary, and accrued vacation pay, for the time period ending with the date of termination; (ii) reimbursement for any and all monies or other reimbursable costs advanced in connection with the Employee's employment for reasonable and necessary expenses incurred by the Employee on behalf of the Company for the time period ending with the date of termination; (iii) any and all other cash earned through the date of termination and deferred at the election of the Employee or pursuant to any deferred compensation plan then in effect, and any increments thereon as determined under such plan; and (iv) a lump sum payment of the bonus or incentive compensation otherwise payable to the Employee with respect to the year in which termination occurs, or for the prior year, under all bonus or incentive compensation plans in which the Employee is a participant. Payment of Accrued Benefits shall be made promptly in accordance with the Company's prevailing practice. -8- 9 (b) Severance Payment. The Employee will be entitled to cash compensation, calculated as described below, payable in one lump sum within fifteen (15) days of the Company's receipt of notice of the Covered Termination. The aggregate cash compensation will be calculated as two times the Employee's annual rate of salary as provided for in Section 4.1 and bonus. Cash compensation paid pursuant to this provision shall be subject to appropriate payroll deductions. (c) Payment Adjustment. (i) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a "Payment") would be nondeductible by the Company for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of amounts payable or distributable as severance benefits hereunder shall be reduced to the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of such severance benefits without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. Anything in this Agreement to the contrary notwithstanding, if the Reduced Amount is zero and it is determined further that any Payment which is not part of the severance benefits payable hereunder would nevertheless be nondeductible by the Company for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of Payments which are not severance benefits under this Agreement shall also be reduced (but not below zero) to an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to -9- 10 be nondeductible by the Company because of Section 280G of the Code. For purposes of this Section 5.2(c), present value shall be determined in accordance with Section 280G(d)(4) of the Code. (ii) All determinations required to be made under this Section 5.2(c) shall be made by the Company's independent auditors which shall provide detailed supporting calculations both to the Company and the Employee within 15 business days of the date of termination or such earlier time as is requested by the Company and, to the extent appropriate under the circumstances, an opinion to the Employee that he has substantial authority not to report any excise tax on his Federal income tax return with respect to any Payments. Any such determination by the Company's independent auditors shall be binding upon the Company and the Employee. The Employee shall determine which and how much of the Payments shall be eliminated or reduced consistent with the requirements of this Section 5.2(c), provided that, if the Employee does not make such determination within ten business days of the receipt of the calculations made by the Company's independent auditors, the Company shall elect which and how much of the Payments shall be eliminated or reduced consistent with the requirements of this Section 5.2(c) and shall notify the Employee promptly of such election; and provided further that any Payments which do not constitute gross income to the Employee shall not be reduced or eliminated unless all other Payments have first been eliminated. Within five business days thereafter, the Company shall pay to or distribute to or for the benefit of the Employee such amounts as are then due to the Employee under this Agreement. (iii) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Company's independent auditors -10- 11 hereunder, it is possible that Payments will have been made by the Company which should not have been made ("Overpayment") or that Payments will not have been made by the Company which could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. In the event that the Company's independent auditors, based upon the assertion of a deficiency by the Internal Revenue Service against Employee or the Company which the Company's independent auditors believe has a high probability of success, determine that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Employee shall be treated for all purposes as a loan ab initio to the Employee which the Employee shall repay to the Company together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code, compounded semiannually; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which the Employee is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Company's independent auditors, based upon controlling precedent or other substantial authority, determine that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee together with interest at 120% of the applicable Federal rate provided for in Section 7872(f)(2) of the Code, compounded semiannually. Section 6. Expenses and Reimbursement. The Employee shall be reimbursed by the Company for reasonable and necessary out-of-pocket expenses incurred by the Employee in performing his duties hereunder, provided such expenses are approved in accordance with the procedures of the Company then in effect and are presented for reimbursement in accordance with the Company's policies and practices then in effect. -11- 12 Section 7. Benefits. During the Term, the Company agrees to provide the Employee, in addition to and not in limitation of the compensation set forth in Section 4, the following benefits, which shall be determined in the sole discretion of the Directors (or a duly constituted committee thereof): (a) The Employee shall be entitled, subject to general qualification requirements, to participate in any and all group insurance plans, group health or medical insurance plans, group accidental and disability insurance plans made generally available to the senior executive employees of the Company, provided that in the event that this Agreement is terminated pursuant to Section 8(b), the Company shall pay to the Employee during the lesser of (A) six months following such termination and (B) the remainder of the Term an amount equal to the Employee's salary pursuant to Section 4.1 less any payments to Employee pursuant to any plan of disability insurance based on the Employee's disability, if applicable. Except to the extent set forth in the prior sentence, any payment owed by the Company pursuant to such sentence is in addition to and not in lieu of any policy of disability insurance, and payments owed by the Company pursuant to such sentence shall not be deemed co-insurance but additional salary. (b) The Employee shall be entitled to participate in the Company's pension, profit-sharing, stock option, stock purchase and other employee benefit programs made generally available to the senior executive employees of the Company. (c) The Employee shall be entitled to vacation, sick leave and holidays in accordance with the Company's policies for senior executive employees generally but in no case less than four weeks paid vacation per annum. -12- 13 (d) During the term of employment under this Agreement, the Company shall pay the Employee $575 per month as a non-accountable allowance for lease payments, insurance and other expenses of an automobile leased by the Employee. The Company shall provide all insurance for such vehicles required by law or applicable lease terms. Section 8. Termination. Subject to the provisions of Sections 5 and 9, which shall survive the termination of this Agreement, this Agreement shall terminate upon: (a) The death of the Employee; (b) Illness, disability or incapacity that prevents the Employee from performing his duties hereunder for sixty (60) consecutive days, or for any sixty (60) days within any one hundred and eighty (180) day period, and the provision of written notice of such termination to the Employee by the Company; (c) Upon written notice by the Company for "Cause", which shall include: (i) the failure of the Employee to observe or perform any material term of this Agreement for twenty (20) days after written notice thereof specifying such failure; (ii) any act of illegality, dishonesty, moral turpitude or fraud in connection with the Employee's employment; (iii) any course of action which is materially detrimental to the business of the Company (other than good faith actions of the Employee to fulfill his duties hereunder in the exercise of his business judgment and not inconsistent with the direction of the Chief Executive Officer or Directors of the Company); or (iv) the commission by the Employee of any felony; or -13- 14 (d) Upon written notice by the Employee to the Company for Good Reason. Section 9. Restrictive Covenants. In consideration of the undertakings of the Company set forth herein, the Employee agrees as follows: 9.1 Covenant Not to Compete. The Employee will not in any way, directly or indirectly, as an agent, employee, officer, director, stockholder, partner or otherwise of any corporation, partnership or other venture or enterprise, compete with the 3-D Companies in the provision of seismic data acquisition or analysis services or any services related thereto (a "Competing Business") while Employee is employed under this Agreement, and, unless this Agreement is terminated by the Company without Cause or by the Employee for Good Reason, for a period of one (1) year after the termination of this Agreement for any reason whatsoever other than (i) due to the Employee's performance of his duties hereunder during the Term; (ii) by ownership for investment purposes of no more than 1% of the stock of a company which is traded on a national securities exchange or interdealer quotation system; or (iii) the sale, use and licensing by the Employee, directly or indirectly, in a manner which does not interfere with the performance of Employee's duties hereunder, of seismic data retained by Northern pursuant to the Asset Purchase Agreement dated as of November 8, 1995 by and between the Company and Northern and transferred to the Employee or an entity in which the Employee has an interest (the "Seismic Data Library"). 9.2 Non-Solicitation Covenant. During the Term and for a period of one (1) year after the termination of this Agreement for any reason whatsoever, unless this Agreement is terminated by -14- 15 the Company without Cause or by the Employee for Good Reason, the Employee shall not solicit, sell to or contract with, on behalf of the Employee or on behalf of any Competing Business, any person or entity to which the 3-D Companies shall have provided seismic data acquisition or analysis services at any time during the Term. This Section 9.2 shall not prohibit the sale, use and licensing by the Employee, directly or indirectly, in a manner which does not interfere with the performance of Employee's duties hereunder, of the Seismic Data Library. 9.3 Covenant Not to Solicit Employees of the Company. During the Term and for a period of one (1) year after the termination of this Agreement for any reason whatsoever, the Employee shall not solicit for employment any sales, engineering or other technical or management employee who was employed by the 3-D Companies during the six months prior to the conclusion of the Term. 9.4 Certain Payments. Upon the termination of this Agreement other than by the Company for Cause or by the Employee without Good Reason, the provisions of Sections 9.1, 9.2 and 9.3 shall lapse unless, during the year following such termination, the Company pays to the Employee an amount equal to 80% of the Employee's salary pursuant to Section 4.1 in equal monthly installments commencing on the first day of the month following such termination. Such lapse shall occur if the Company (i) fails to pay the first such installment within 20 days of notice from the Employee citing this Section or (ii) fails to make any subsequent payment within seven days of notice from the Employee citing this Section. In the event the Company makes the payment described in clause (i) of the preceding sentence and the circumstances described in clause (ii) occur, the remaining payments described in the preceding sentence shall become immediately -15- 16 due and payable. The amounts owed pursuant to this Section 9.5 shall be reduced (or if already paid shall be repaid by the Employee) to the extent that such amounts plus any amounts earned by the Employee as an employee or independent contractor during such year exceed 120% of the Employee's annual salary pursuant to Section 4.1. 9.5 Non-Disclosure Covenant. The Employee recognizes and acknowledges that, prior to and in the course of his employment, the Employee may have had and shall have access to trade secrets and other confidential or proprietary information of the 3-D Companies, including, but not limited to, information acquired or developed by the 3-D Companies and Northern concerning seismic data, marketing strategy, technology, techniques and know-how, customer specifications and customer lists, cost figures, budgets, sales forecasts and business plans (other than the Seismic Data Library). The Employee agrees that the disclosure of any such trade secrets or information could be harmful to the interests of the 3-D Companies and that, during the Employee's employment by the Company, the Employee will take appropriate caution to safeguard such trade secrets and information, and will not during the Term or thereafter use, disclose, divulge or publish any such trade secrets or information except as required by law or as the Employee's duties during the Employee's employment by the Company may require or as the Company may in writing specifically consent. -16- 17 9.6 Proprietary Information. The Employee recognizes and acknowledges that all documents, manuals, letters, notebooks, reports, records, computer programs or data banks and other evidences of trade secrets and other confidential or proprietary information of the 3-D Companies, including copies thereof, whether prepared by the Employee or others, are the sole property of and belong exclusively to the 3-D Companies, and agrees that, during the Employee's employment by the Company, the Employee will under no circumstances remove any such material for use outside of his offices except in connection with the business of the 3-D Companies during the course of the Employee's employment. In the event of the termination of this Agreement for any reason whatsoever, the Employee shall immediately return to the Company any and all documents, manuals, letters, notebooks, reports, records, computer programs or data banks or other evidence of trade secrets and other confidential or proprietary information of the 3-D Companies (and all copies thereof) which are the property of the 3-D Companies. 9.7 Remedies. The Employee further agrees that in the event of a breach or threatened breach of any of the covenants contained in this Section 9, the Company's remedy at law is likely to be inadequate and that accordingly the Company will be entitled to obtain an injunction or other equitable relief with regard thereto without proving damages or that damages would not constitute an adequate remedy. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 9 is invalid or unenforceable, the parties hereto agree that the court making the determination of invalidity or unenforceability shall have the power to, and is hereby directed to, reduce the scope, duration or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid and unenforceable term or provision, and this Agreement shall be enforceable as so modified after the -17- 18 expiration of the time within which the judgment may be appealed. Section 10. Miscellaneous Provisions. 10.1 Notices. All notices and demands of any kind which any party hereto may be required or desire to serve upon another party under the terms of this Agreement shall be in writing and shall be served upon such other party: (a) by personal service upon such other party at such other party's address set forth below in this Section 10.1; (b) by mailing a copy thereof by certified or registered mail, postage prepaid, with return receipt requested, addressed to such other party at the address of such other party set forth below in this Section 10.1; or (c) by sending a copy thereof by Federal Express or equivalent courier service, addressed to such other party at the address of such other party set forth below in this Section 10.1. In case of service by Federal Express or equivalent courier service or by personal service, such service shall be deemed complete upon receipt. In the case of service by mail, such service shall be deemed complete upon reasonable proof of receipt. The address to which, and person to whose attention, notices and demands shall be delivered or sent may be changed from time to time by notice served, as hereinabove provided, by any party upon the other party. The current addresses of the parties are: If, to Employee: Wayne P. Widynowski 7763 South Elm Court Littleton, Colorado 80122 copy to: Paul F. Lewis, Esq. Moye, Giles, O'Keefe, Vermeire & Gorrell 1225 Seventeenth Street -18- 19 29th Floor Denver, Colorado 80202 If, to the Company: 3-D Geophysical, Inc. 599 Lexington Avenue New York, New York 10022 Attention: Joel Friedman, Chairman copy to: Peter S. Kolevzon, Esq. 919 Third Avenue New York, New York 10022 10.2 Entire Agreement; Amendment. This Agreement contains the entire agreement between the parties, expressly supersedes the Prior Agreement in its entirety, which the parties hereto agree shall be of no further force and effect, merges all prior negotiations, agreements and understandings, if any, and states in full all representations, warranties and agreements which have induced this Agreement. Each party agrees that in dealing with third parties no contrary representations will be made. This Agreement may not be amended, modified or otherwise changed orally but only by an agreement in writing signed by the party against whom enforcement of any amendment, modification or change is sought. 10.3 Assignment; Binding Nature; No Beneficiaries. This Agreement may not be assigned by any party hereto without the written consent of the other party. This Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, personal representatives, legatees, successors and permitted assigns. This Agreement shall not confer any rights or remedies upon any person other than the parties hereto and their respective heirs, personal representatives, legatees, successors, and permitted assigns. 10.4 Nonwaiver. No waiver by any party of any term, provision or covenant contained in -19- 20 this Agreement (or any breach thereof) shall be effective unless it is in writing executed by the party against which such waiver is to be enforced; no waiver shall be deemed or construed as a further or continuing waiver of any such term, provision or covenant (or breach) on any other occasion or as a waiver of any other term, provision or covenant (or of the breach of any other term, provision or covenant) contained in this Agreement on the same or any other occasion. 10.5 Remedies. The remedies provided for or permitted by this Agreement shall be cumulative and the exercise by any party of any remedy provided for herein or otherwise available shall not preclude the assertion or exercise by such party of any other right or remedy provided for herein or otherwise available. 10.6 Headings. The headings in this Agreement are inserted for convenience only and shall not constitute a part hereof. 10.7 Construction. In this Agreement (i) words denoting the singular include the plural and vice versa, (ii) "it" or "its" or words denoting any gender include all genders, (iii) any reference herein to a Section refers to a Section of this Agreement, unless otherwise stated, (iv) when calculating the period of time within or following which any act is to be done or steps taken, the date which is the reference day in calculating such period shall be excluded and if the last day of such period is not a business day, then the period shall end on the next day which is a business day, and (v) all dollar amounts are expressed in United States funds. 10.8 Governing Law; Arbitration. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware applicable to contracts made -20- 21 and to be entirely performed therein. Any controversy arising out of or relating to this Agreement or the breach hereof shall be settled by arbitration in Denver, Colorado before a single, neutral arbitrator who shall be a former state or federal judge in accordance with the Commercial Arbitration rules of the American Arbitration Association then existing and judgment upon the award rendered may be entered in any court having jurisdiction thereof, except that in the event of any controversy relating to any violation or alleged violation of any provision of Section 9 hereof, the Company in its sole discretion shall be entitled to seek injunctive relief from a court of competent jurisdiction without any requirement to seek arbitration. The party (or aligned parties) substantially prevailing in such arbitration or judicial proceeding shall receive in addition to other relief afforded by the arbitrator or judge an award of costs, expert witness fees and reasonable attorneys' fees. 10.9 Counterparts. For the convenience of the parties, any number of counterparts hereof may be executed, each such executed counterpart shall be deemed an original and all such counterparts together shall constitute one and the same instrument. -21- 22 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date and year first written above. 3-D GEOPHYSICAL, INC. Attest: By______________________________ Name: Title: _____________________________ Name: Title: EMPLOYEE: ______________________________ Wayne P. Widynowski -22- EX-99.C3 8 FORM OF AMENDED AND RESTATED EMPLOYMENT AGREEMENT 1 Exhibit (c)(3) AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") dated January 13, 1998 between 3-D Geophysical, Inc., a Delaware corporation (the "Company"), and Ronald L. Koons (the "Employee"). WHEREAS, the Employee is employed by the Company in a key managerial capacity and the Employee's services are valuable to the conduct of the business of the Company; WHEREAS, the Company recognizes that circumstances may arise in which a change in control of the Company occurs, through acquisition or otherwise, thereby causing uncertainty about the Employee's future employment with the Company without regard to the Employee's competence or past contributions, which uncertainty may result in the loss of valuable services of the Employee to the detriment of the Company and its stockholders, and the Company and the Employee wish to provide reasonable security to the Employee as an incentive for the continuation by Employee of his current relationship with the Company; WHEREAS, the Employee and the Company are parties to an Employment Agreement dated September 30, 1996 (the "Prior Agreement") and wish to amend and restate the terms and conditions of the Prior Agreement in their entirety with the terms 2 and conditions of this Agreement; WHEREAS, the Company desires to continue to employ the Employee on the terms and conditions provided in this Agreement; and WHEREAS, the Employee desires to continue such employment and to render services to the Company on the terms and conditions provided in this Agreement. NOW, THEREFORE, in consideration of the mutual agreements herein contained, the Company and the Employee hereby agree as follows: Section 1. Engagement. The Company hereby employs the Employee as Vice President, Chief Financial Officer, Secretary and Treasurer of the Company, and the Employee hereby accepts such employment, upon and subject to the terms and conditions hereinafter set forth. Section 2. Term. Unless sooner terminated as provided in this Agreement, the term of the Employee's employment under this Agreement shall commence on the date hereof (the "Effective Date") and shall end on December 31, 2000 (the "Term"). -2- 3 Section 3. Duties and Services. 3.1 The Employee shall render services to the Company as Vice President, Chief Financial Officer, Secretary and Treasurer of the Company, shall perform such other duties and responsibilities as may be assigned to the Employee from time to time by the Board of Directors (the "Directors") or the Chief Executive Officer of the Company and shall abide by the practices and policies of the Company governing the conduct of employees. 3.2 During the Term, the Employee shall devote such energy and time (exclusive of normal holidays and vacation periods and periods of sickness and disability) as is reasonably necessary to perform the Employee's duties as defined herein and shall promptly and faithfully perform all the duties which pertain to the Employee's employment. Section 4. Compensation. 4.1 Annual Compensation. In consideration of all of the services to be rendered by the Employee hereunder and the covenants of Employee herein, the Company agrees to pay to the Employee, and the Employee agrees to accept, a salary at the annual rate of $125,000.00, payable in accordance with the Company's normal payroll practices. 4.2 Bonus Pool. The Company intends to create a bonus plan based upon the -3- 4 earnings of the Company to provide incentives for certain employees of the Company and its subsidiaries. The Employee shall be entitled to participate in such plan on such terms as may be determined by the Board of Directors of the Company or a duly constituted committee thereof, in its discretion. Nothing in this Agreement shall require the Company to pay any such bonus. Section 5. Change in Control. 5.1 Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) Change of Control. The term "Change of Control" means an event which shall be deemed to have occurred if: (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or -4- 5 (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Directors, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (iii) or (iv) of this Section 5.1(a)) whose election by the Board of Directors of the Company or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board of Directors of the Company; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 25% of the combined voting power of the Company's then outstanding securities shall not constitute a Change of Control; or -5- 6 (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of, or the Company sells or disposes of, all or substantially all of the Company's assets, or any such sale or disposition is effected through condemnation proceedings. The Company's outside legal counsel shall notify the parties to this Agreement whether and when a Change of Control has occurred. However, the preceding sentence shall not preclude any party to this Agreement from giving such notice. (b) Code. The term "Code" means the Internal Revenue Code of 1986, including any amendments thereto or successor tax codes thereof. References to any section of the Code shall include any amended or successor section of comparable import. (c) Covered Termination. The term "Covered Termination" means any termination of the Employee's employment for "Good Reason" after a Change of Control of the Company which occurs prior to the end of the Term. (d) Good Reason. The Employee shall have a "Good Reason" for termination of employment after a Change of Control of the Company in the event of: -6- 7 (i) a termination of the Employee's employment by the Company for any reason other than Cause (as defined in Section 8(c) hereof); or (ii) a good faith determination by the Employee that there has been a significant adverse change, without the Employee's express prior written consent, in the Employee's working conditions or status with the Company from such working conditions or status in effect immediately prior to the Change of Control of the Company, including but not limited to (A) a significant change in the nature or scope of the Employee's authority, powers, functions, duties or responsibilities or reporting responsibilities, or (B) a significant reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements (regardless of whether such reduction is part of a general reduction applicable to all senior executive employees of the Company), or (C) a reduction in the salary or benefits to which the Employee is entitled under this Agreement, or (D) a relocation of the Employee's principal place of business to a location which is more than 50 miles from its current location as of the Effective Date. 5.2 Benefits. If there is a Covered Termination, the Employee shall be entitled to the following benefits: (a) Accrued Benefits. The Employee shall be paid the amount of the Employee's Accrued Benefits. For purposes of this Agreement, the Employee's "Accrued Benefits" shall consist of the aggregate of the following amounts, payable as -7- 8 described herein: (i) all base salary, and accrued vacation pay, for the time period ending with the date of termination; (ii) reimbursement for any and all monies or other reimbursable costs advanced in connection with the Employee's employment for reasonable and necessary expenses incurred by the Employee on behalf of the Company for the time period ending with the date of termination; (iii) any and all other cash earned through the date of termination and deferred at the election of the Employee or pursuant to any deferred compensation plan then in effect, and any increments thereon as determined under such plan; and (iv) a lump sum payment of the bonus or incentive compensation otherwise payable to the Employee with respect to the year in which termination occurs, or for the prior year, under all bonus or incentive compensation plans in which the Employee is a participant. Payment of Accrued Benefits shall be made promptly in accordance with the Company's prevailing practice. (b) Severance Payment. The Employee will be entitled to cash compensation, calculated as described below, payable in one lump sum within fifteen (15) days of the Company's receipt of notice of the Covered Termination. The aggregate cash compensation will be calculated as one times the Employee's annual rate of salary as provided for in Section 4.1 and bonus. Cash compensation paid pursuant to this provision shall be subject to appropriate payroll deductions. (c) Payment Adjustment. (i) Anything in this Agreement to the contrary -8- 9 notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a "Payment") would be nondeductible by the Company for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of amounts payable or distributable as severance benefits hereunder shall be reduced to the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of such severance benefits without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. Anything in this Agreement to the contrary notwithstanding, if the Reduced Amount is zero and it is determined further that any Payment which is not part of the severance benefits payable hereunder would nevertheless be nondeductible by the Company for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of Payments which are not severance benefits under this Agreement shall also be reduced (but not below zero) to an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. For purposes of this Section 5.2(c), present value shall be determined in accordance with Section 280G(d)(4) of the Code. (ii) All determinations required to be made under this Section 5.2(c) shall be made by the Company's independent auditors which shall provide detailed supporting calculations both to the Company and the Employee within 15 business days of the date of termination or such earlier time as is requested by the Company and, to the -9- 10 extent appropriate under the circumstances, an opinion to the Employee that he has substantial authority not to report any excise tax on his Federal income tax return with respect to any Payments. Any such determination by the Company's independent auditors shall be binding upon the Company and the Employee. The Employee shall determine which and how much of the Payments shall be eliminated or reduced consistent with the requirements of this Section 5.2(c), provided that, if the Employee does not make such determination within ten business days of the receipt of the calculations made by the Company's independent auditors, the Company shall elect which and how much of the Payments shall be eliminated or reduced consistent with the requirements of this Section 5.2(c) and shall notify the Employee promptly of such election; and provided further that any Payments which do not constitute gross income to the Employee shall not be reduced or eliminated unless all other Payments have first been eliminated. Within five business days thereafter, the Company shall pay to or distribute to or for the benefit of the Employee such amounts as are then due to the Employee under this Agreement. (iii) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Company's independent auditors hereunder, it is possible that Payments will have been made by the Company which should not have been made ("Overpayment") or that Payments will not have been made by the Company which could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. In the event that the Company's independent auditors, based upon the assertion of a deficiency by the Internal Revenue Service against Employee or the Company which the Company's independent -10- 11 auditors believe has a high probability of success, determine that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Employee shall be treated for all purposes as a loan ab initio to the Employee which the Employee shall repay to the Company together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code, compounded semiannually; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which the Employee is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Company's independent auditors, based upon controlling precedent or other substantial authority, determine that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee together with interest at 120% of the applicable Federal rate provided for in Section 7872(f)(2) of the Code, compounded semiannually. Section 6. Expenses and Reimbursement. The Employee shall be reimbursed by the Company for reasonable and necessary out-of-pocket expenses incurred by the Employee in performing his duties hereunder, provided such expenses are approved in accordance with the procedures of the Company then in effect and are presented for reimbursement in accordance with the Company's policies and practices then in effect. Section 7. Benefits. During the Term, the Company agrees to provide the Employee, in addition to and not in limitation of the compensation set forth in Section 4, -11- 12 the following benefits, which shall be determined in the sole discretion of the Directors (or a duly constituted committee thereof): (a) The Employee shall be entitled, subject to qualification requirements, to participate in any and all group insurance plans, group health or medical insurance plans, group accidental and disability insurance plans made generally available to the senior executive employees of the Company. (b) The Employee shall be entitled to participate in the Company's pension, profit-sharing, stock option, stock purchase and other employee benefit programs made generally available to the senior executive employees of the Company. (c) The Employee shall be entitled to three weeks annual paid vacation, as well as sick leave and holidays in accordance with the Company's policies for senior executive employees generally. (d) During the term of employment under this Agreement, the Company shall pay the Employee, on a monthly basis, an amount equal to $650 per month as a non-accountable allowance for lease payments, insurance and other expenses of an automobile leased by the Employee. Section 8. Termination. Subject to the provisions of Sections 5 and 9, which shall survive the termination of this Agreement, this Agreement shall terminate upon: -12- 13 (a) The death of the Employee; (b) Illness, disability or incapacity that prevents the Employee from performing his duties hereunder for sixty (60) consecutive days, or for any sixty (60) days within any one hundred and eighty (180) day period, and the provision of written notice of such termination to the Employee by the Company; (c) Upon written notice by the Company for "Cause", which shall include, without limitation, (i) the failure of the Employee to observe or perform any material term of this Agreement for twenty (20) days after written notice thereof specifying such failure; (ii) any act of illegality, dishonesty, moral turpitude, or fraud in connection with the Employee's employment; or (iii) the commission by the Employee of any felony; or (d) Upon written notice by the Employee to the Company for Good Reason. Section 9. Restrictive Covenants. In consideration of the undertakings of the Company set forth herein, the Employee agrees as follows: 9.1 Covenant Not to Compete. The Employee will not in any way, directly or indirectly, as an agent, employee, officer, director, stockholder, partner or otherwise of any corporation, partnership or other venture or enterprise compete with the Company or any of its subsidiaries in the provision of seismic data acquisition or analysis services or -13- 14 any services related thereto (a "Competing Business") during the Term, other than due to the Employee's performance of his duties hereunder, and for a period of one (1) year after the termination of this Agreement for any reason whatsoever, unless this Agreement is terminated by the Company without Cause. 9.2 Non-Solicitation Covenant. During the Term and for a period of one (1) year after the termination of this Agreement for any reason whatsoever, the Employee shall not solicit, sell to or contract with, on behalf of the Employee or on behalf of any Competing Business, any person or entity to which the Company or any subsidiary of the Company shall have provided seismic data acquisition or analysis services at any time during the Term. 9.3 Covenant Not to Solicit Employees of the Company. During the Term and for a period of one (1) year after the termination of this Agreement for any reason whatsoever, the Employee shall not solicit for employment any sales, engineering or other technical or management employee who was employed by the Company or any of its subsidiaries during the Term. 9.4 Non-Disclosure Covenant. The Employee recognizes and acknowledges that, prior to and in the course of his employment, the Employee may have had and shall have access to trade secrets and other confidential or proprietary information of the Company and its subsidiaries, including, but not limited to, information acquired or developed by the Company and its subsidiaries concerning seismic data, marketing strategy, -14- 15 technology, techniques and know-how, customer specifications and customer lists, cost figures, budgets, sales forecasts and business plans. The Employee agrees that the disclosure of any such trade secrets or information could be harmful to the interests of the Company or its subsidiaries and that, during the Employee's employment by the Company or its subsidiaries, the Employee will take appropriate caution to safeguard such trade secrets and information, and will not during the Term or thereafter use, disclose, divulge or publish any such trade secrets or information except as required by law or as the Employee's duties during the Employee's employment by the Company or its subsidiaries may require or as the Company may in writing specifically consent. -15- 16 9.5 Proprietary Information. The Employee recognizes and acknowledges that all documents, manuals, letters, notebooks, reports, records, computer programs or data banks and other evidences of trade secrets and other confidential or proprietary information of the Company and its subsidiaries, including copies thereof, whether prepared by the Employee or others, are the sole property of and belong exclusively to the Company and its subsidiaries, and agrees that, during the Employee's employment by the Company or its subsidiaries, the Employee will under no circumstances remove any such material for use outside of his offices except in connection with the business of the Company during the course of the Employee's employment. In the event of the termination of this Agreement for any reason whatsoever, the Employee shall immediately return to the Company any and all documents, manuals, letters, notebooks, reports, records, computer programs or data banks or other evidence of trade secrets and other confidential or proprietary information of the Company and its subsidiaries (and all copies thereof) which are the property of the Company or any of its subsidiaries. 9.6 Remedies. The Employee further agrees that in the event of a breach or threatened breach of any of the covenants contained in this Section 9, the Company's remedy at law is likely to be inadequate and that accordingly the Company will be entitled to obtain an injunction or other equitable relief with regard thereto without proving damages or that damages would not constitute an adequate remedy. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 9 is invalid or unenforceable, the parties hereto agree that the court making the determination of invalidity or unenforceability shall have the power to, and is hereby -16- 17 directed to, reduce the scope, duration or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid and unenforceable term or provision, and this Agreement shall be enforceable as so modified. Section 10. Miscellaneous Provisions. 10.1 Notices. All notices and demands of any kind which any party hereto may be required or desire to serve upon another party under the terms of this Agreement shall be in writing and shall be served upon such other party: (a) by personal service upon such other party at such other party's address set forth below in this Section 10.1; or (b) by mailing a copy thereof by certified or registered mail, postage prepaid, with return receipt requested, addressed to such other party at the address of such other party set forth below in this Section 10.1; or (c) by sending a copy thereof by Federal Express or equivalent courier service, addressed to such other party at the address of such other party set forth below in this Section 10.1; or (d) by sending a copy thereof by facsimile to such other party at the facsimile number, if any, of such other party set forth below in this Section 10.1. In case of service by Federal Express or equivalent courier service or by facsimile or by personal service, such service shall be deemed complete upon receipt. In the case of service by mail, such service shall be deemed complete upon reasonable proof -17- 18 of receipt. The address and facsimile number to which, and person to whose attention, notices and demands shall be delivered or sent may be changed from time to time by notice served, as hereinabove provided, by any party upon the other party. The current addresses and facsimile numbers of the parties are: If to the Employee: Ronald Koons c/o 3-D Geophysical, Inc. 8226 Park Meadows Drive Littleton, Colorado 80124 Telecopier No.: (303) 708-8941 If to the Company: 3-D Geophysical, Inc. 599 Lexington Avenue Suite 4102 New York, New York 10022 Telecopier No.: (212) 317-9230 Attention: Joel Friedman, Chairman with a copy to: Kramer, Levin, Naftalis & Frankel 919 Third Avenue New York, New York 10022 Telecopier No.: (212) 715-8000 Attention: Peter S. Kolevzon, Esq. 10.2 Entire Agreement; Amendment. This Agreement contains the entire agreement between the parties, expressly supersedes the Prior Agreement in its entirety, which the parties hereto agree shall be of no further force and effect, merges all prior negotiations, agreements and understandings, if any, and states in full all representations, -18- 19 warranties and agreements which have induced this Agreement. Each party agrees that in dealing with third parties no contrary representations will be made. This Agreement may not be amended, modified or otherwise changed orally but only by an agreement in writing signed by the party against whom enforcement of any amendment, modification or change is sought. 10.3 Assignment; Binding Nature; Assumption; No Beneficiaries. This Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, personal representatives, legatees, successors and permitted assigns. This Agreement shall not confer any rights or remedies upon any person other than the parties hereto and their respective heirs, personal representatives, legatees, successors and permitted assigns. This Agreement may be assigned by the Company to any purchaser of all or substantially all of the Company's business or assets, any successor to the Company or any assignee thereof (whether direct or indirect, by purchase, merger, consolidation or otherwise). The Company will require any such purchaser, successor or assignee to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such purchase, succession or assignment had taken place. This Agreement may not be assigned by the Employee without the prior written consent of the Company. 10.4 Nonwaiver. No waiver by any party of any term, provision or covenant contained in this Agreement (or any breach thereof) shall be effective unless it is in -19- 20 writing executed by the party against which such waiver is to be enforced; no waiver shall be deemed or construed as a further or continuing waiver of any such term, provision or covenant (or breach) on any other occasion or as a waiver of any other term, provision or covenant (or of the breach of any other term, provision or covenant) contained in this Agreement on the same or any other occasion. 10.5 Remedies. The remedies provided for or permitted by this Agreement shall be cumulative and the exercise by any party of any remedy provided for herein or otherwise available shall not preclude the assertion or exercise by such party of any other right or remedy provided for herein or otherwise available. 10.6 Headings. The headings in this Agreement are inserted for convenience only and shall not constitute a part hereof. 10.7 Construction. In this Agreement (i) words denoting the singular include the plural and vice versa, (ii) "it" or "its" or words denoting any gender include all genders, (iii) any reference herein to a Section refers to a Section of this Agreement, unless otherwise stated, (iv) when calculating the period of time within or following which any act is to be done or steps taken, the date which is the reference day in calculating such period shall be excluded and if the last day of such period is not a business day, then the period shall end on the next day which is a business day, and (v) all dollar amounts are expressed in United States funds. -20- 21 10.8 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware applicable to contracts made and to be entirely performed therein. 10.9 Counterparts. For the convenience of the parties, any number of counterparts hereof may be executed, each such executed counterpart shall be deemed an original and all such counterparts together shall constitute one and the same instrument. -21- 22 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date and year first written above. 3-D GEOPHYSICAL, INC. By ------------------------------ Attest: Name: --------------------------------- Title: Name: Title: EMPLOYEE: ------------------------------ Ronald L. Koons -22- EX-99.C4 9 AGREEMENT AND PLAN OF MERGER 1 Exhibit (c)(4) AGREEMENT AND PLAN OF MERGER by and among WESTERN ATLAS INC., WAI ACQUISITION CORP. and 3-D GEOPHYSICAL, INC. dated as of March 8, 1998 2 TABLE OF CONTENTS Page ARTICLE I THE OFFER SECTION 1.1. The Offer............................................ 2 SECTION 1.2. Company Actions...................................... 3 SECTION 1.3. Directors............................................ 4 ARTICLE II THE MERGER SECTION 2.1. The Merger........................................... 5 SECTION 2.2. Effective Time....................................... 5 SECTION 2.3. Effects of the Merger................................ 6 SECTION 2.4. Certificate of Incorporation and By-Laws of the Surviving Corporation....................... 6 SECTION 2.5. Directors............................................ 6 SECTION 2.6. Officers............................................. 6 SECTION 2.7. Conversion of Common Shares.......................... 6 SECTION 2.8. Conversion of Purchaser Common Stock................. 6 SECTION 2.9. Options; Stock Plans................................. 7 SECTION 2.10. Stockholders' Meeting................................ 7 SECTION 2.11. Merger Without Meeting of Stockholders............... 8 ARTICLE III DISSENTING SHARES; PAYMENT FOR SHARES SECTION 3.1. Dissenting Shares.................................... 8 SECTION 3.2. Payment for Common Shares............................ 8 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 4.1. Organization and Qualification; Subsidiaries......... 10 SECTION 4.2. Charter; By-Laws and Rights Agreement................ 10 SECTION 4.3. Capitalization; Subsidiaries......................... 11 SECTION 4.4. Authority............................................ 12 SECTION 4.5. No Conflict; Required Filings and Consents........... 12 SECTION 4.6. SEC Reports and Financial Statements................. 13 SECTION 4.7. Environmental Matters................................ 14 SECTION 4.8. Compliance with Applicable Laws...................... 16 SECTION 4.9. Change of Control.................................... 16 3 Page SECTION 4.10. Litigation........................................... 17 SECTION 4.11. Information.......................................... 17 SECTION 4.12. Certain Approvals.................................... 17 SECTION 4.13. Employee Benefit Plans............................... 18 SECTION 4.14. Intellectual Property................................ 20 SECTION 4.15. Taxes................................................ 21 SECTION 4.16. Absence of Certain Changes........................... 22 SECTION 4.17. Labor Matters........................................ 22 SECTION 4.18. Rights Agreement..................................... 23 SECTION 4.19. Condition of Assets.................................. 23 SECTION 4.20. Brokers.............................................. 23 SECTION 4.21. Opinion of Financial Advisor......................... 23 SECTION 4.22. Employees............................................ 24 SECTION 4.23. Customers............................................ 24 SECTION 4.24. Material Contracts................................... 24 SECTION 4.25. Affiliated Transactions.............................. 25 SECTION 4.26. Omission of Material Facts........................... 25 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER SECTION 5.1. Organization and Qualification....................... 25 SECTION 5.2. Authority............................................ 26 SECTION 5.3. No Conflict; Required Filings and Consents........... 26 SECTION 5.4. Information.......................................... 27 SECTION 5.5. Financing............................................ 27 ARTICLE VI COVENANTS SECTION 6.1. Conduct of Business of the Company................... 27 SECTION 6.2. Access to Information................................ 30 SECTION 6.3. Efforts.............................................. 30 SECTION 6.4. Public Announcements................................. 31 SECTION 6.5. Employee Benefit Arrangements........................ 31 SECTION 6.6. Indemnification...................................... 32 SECTION 6.7. Notification of Certain Matters...................... 33 SECTION 6.8. Rights Agreement..................................... 33 SECTION 6.9. State Takeover Laws.................................. 33 SECTION 6.10. No Solicitation...................................... 34 -ii- 4 Page ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER SECTION 7.1. Conditions........................................... 35 ARTICLE VIII TERMINATION; AMENDMENTS; WAIVER SECTION 8.1. Termination.......................................... 35 SECTION 8.2. Effect of Termination................................ 37 SECTION 8.3. Fees and Expenses.................................... 37 SECTION 8.4. Amendment............................................ 38 SECTION 8.5. Extension; Waiver.................................... 38 ARTICLE IX MISCELLANEOUS SECTION 9.1. Non-Survival of Representations and Warranties....... 38 SECTION 9.2. Entire Agreement; Assignment......................... 39 SECTION 9.3. Validity............................................. 39 SECTION 9.4. Notices.............................................. 39 SECTION 9.5. Governing Law........................................ 40 SECTION 9.6. Descriptive Headings................................. 40 SECTION 9.7. Counterparts......................................... 40 SECTION 9.8. Parties in Interest.................................. 40 SECTION 9.9. Certain Definitions.................................. 40 SECTION 9.10. Specific Performance................................. 41 Signatures ..................................................... 40 ANNEX I Conditions to the Offer ANNEX II Form of Support Agreement ANNEX III Form of Consulting and Noncompete Agreement with Joel Friedman ANNEX IV Form of Consulting and Noncompete Agreement with Luis H. Ferran Arroyo -iii- 5 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of March 8, 1998, by and among Western Atlas Inc., a Delaware corporation ("Parent"), WAI Acquisition Corp., a Delaware corporation and a subsidiary of Parent (the "Purchaser"), and 3-D Geophysical, Inc., a Delaware corporation (the "Company"). WHEREAS, the respective Boards of Directors of Parent, the Purchaser and the Company have approved the acquisition of the Company on the terms and subject to the conditions set forth in this Agreement; WHEREAS, pursuant to this Agreement the Purchaser has agreed to commence a tender offer (the "Offer") to purchase all of the outstanding shares of the Company's common stock, par value $.01 per share (the "Common Shares") (including the associated preferred share purchase rights (the "Rights") issued pursuant to the Share Purchase Rights Agreement, dated as of July 17, 1997, between the Company and American Securities Transfer & Trust, Inc., as Rights Agent (the "Rights Agreement"), which Rights together with the Common Shares are hereinafter referred to as the "Shares"), at a price per Share of $9.65 net to the seller in cash (the "Offer Price"); WHEREAS, the Board of Directors of the Company (the "Company Board") has (i) approved the Offer and (ii) adopted and approved this Agreement and is recommending that the Company's stockholders accept the Offer, tender their Shares to the Purchaser and approve this Agreement; WHEREAS, the respective Boards of Directors of the Purchaser and the Company have approved the merger of the Purchaser with and into the Company, as set forth below (the "Merger"), in accordance with the General Corporation Law of Delaware (the "GCL") and upon the terms and subject to the conditions set forth in this Agreement, whereby each of the issued and outstanding Common Shares not owned directly or indirectly by Parent, the Purchaser or the Company will be converted into the right to receive $9.65 in cash; WHEREAS, as a condition and inducement to Parent's and the Purchaser's willingness to enter into this Agreement, upon the execution and delivery of this Agreement, Robert P. Andrews, Ralph M. Bahna, Douglas W. Brandrup, Richard D. Davis, Arthur D. Emil, P. Dennis O'Brien and Emir L. Tavella (the "Director Stockholders") and Luis H. Ferran Arroyo, Joel Friedman, Ronald L. Koons and Wayne P. Widynowski (the "Management Stockholders") are simultaneously entering into and delivering support agreements (the "Support Agreements") in the form attached hereto as Annex II; WHEREAS, as a condition and inducement to Parent's and the Purchaser's willingness to enter into this Agreement, Joel Friedman and Luis H. Ferran Arroyo are simultaneously entering into and delivering Consulting and Noncompete Agreements in the forms of Annex III and IV attached hereto; 6 WHEREAS, Parent, the Purchaser and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, Parent, the Purchaser and the Company agree as follows: ARTICLE I THE OFFER SECTION 1.1. The Offer. (a) Provided that this Agreement shall not have been terminated in accordance with Article VIII hereof and none of the events set forth in Annex I hereto (the "Tender Offer Conditions") shall have occurred, as promptly as practicable but in no event later than the fifth business day from the date of this Agreement, the Purchaser shall, and Parent shall cause Purchaser to, commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (including the rules and regulations promulgated thereunder, the "Exchange Act")) an offer to purchase all outstanding Shares at the Offer Price and shall file all necessary documents with the Securities and Exchange Commission (the "SEC") in connection with the Offer (the "Offer Documents"). The obligation of the Purchaser to accept for payment or pay for any Shares tendered pursuant thereto will be subject only to the satisfaction of the conditions set forth in Annex I hereto. (b) Without the prior written consent of the Company, Purchaser shall not (i) impose conditions to the Offer in addition to the Tender Offer Conditions, (ii) modify or amend the Tender Offer Conditions or any other term of the Offer in a manner adverse to the holders of Common Shares, (iii) reduce the number of Shares subject to the Offer, (iv) reduce the Offer Price, (v) except as provided in the following sentence, extend the Offer, if all of the Tender Offer Conditions are satisfied or waived, or (vi) change the form of consideration payable in the Offer. Notwithstanding the foregoing, Purchaser may, without the consent of the Company, extend the Offer at any time, and from time to time, (i) if at the then scheduled expiration date of the Offer any of the conditions to Purchaser's obligation to accept for payment and pay for all Shares shall not have been satisfied or waived; (ii) for any period required by any rule, regulation, interpretation or position of the SEC or its staff applicable to the Offer; or (iii) if all Tender Offer Conditions are satisfied or waived but the number of Common Shares tendered is at least equal to 70%, but less than 90%, of the then outstanding number of Common Shares, for an aggregate period of not more than 10 business days (for all such extensions) beyond the latest expiration date that would be permitted under clause (i) or (ii) of this sentence. So long as this Agreement is in effect, the Offer has been commenced and the Tender Offer Conditions have not been satisfied or waived, Purchaser shall, and Parent shall cause Purchaser to, cause the Offer not to expire, subject however to Purchaser's and Parent's rights of termination under this Agreement. -2- 7 Parent and Purchaser shall comply with the obligations respecting prompt payment pursuant to Rule 14e-1(c) under the Exchange Act. (c) Parent and Purchaser represent that the Offer Documents will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Parent or the Purchaser with respect to information supplied by the Company in writing for inclusion in the Offer Documents. Each of Parent and the Purchaser, on the one hand, and the Company, on the other hand, agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect and the Purchaser further agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to stockholders of the Company, in each case, as and to the extent required by applicable federal securities laws. SECTION 1.2. Company Actions. (a) The Company shall file with the SEC and mail to the holders of Common Shares, as promptly as practicable on the date of the filing by Parent and the Purchaser of the Offer Documents, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the "Schedule 14D-9") reflecting the recommendation of the Company Board that holders of Shares tender their Shares pursuant to the Offer and shall disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the Exchange Act. The Schedule 14D-9 will set forth, and the Company hereby represents, that the Company Board, at a meeting duly called and held, has (i) determined by unanimous vote of its directors that the Offer and the Merger, is fair to and in the best interests of the Company and its stockholders, (ii) approved the Offer and adopted this Agreement in accordance with the GCL, (iii) recommended acceptance of the Offer and approval of this Agreement by the Company's stockholders (if such approval is required by applicable law), and (iv) taken all other action necessary to render Section 203 of the GCL and the Rights inapplicable to the Offer, the Merger and the Support Agreements; provided, however, that such recommendation and approval may be withdrawn, modified or amended to the extent that the Company Board determines in good faith and on a reasonable basis, after consultation with its outside counsel, that failure to take such action would be a breach of the Company Board's fiduciary obligations under applicable law. The Company further represents that, prior to the execution hereof, Salomon Smith Barney ("SSB"), the Company's financial advisor, has delivered to the Company Board its opinion, and as of the date hereof will deliver its written opinion, to the effect that, as of the date of this Agreement, the cash consideration to be received by the holders of Common Shares (other than Common Shares held by Parent or any of its affiliates, in the treasury of the Company or by any wholly-owned subsidiary of the Company) pursuant to the Offer and the Merger is fair to such holders from a financial point of view. The Company further represents and warrants that it has been authorized by SSB to permit, subject to prior review and consent by SSB (such consent not to be unreasonably withheld), the inclusion of such opinion (or a reference thereto) in the Offer Documents and -3- 8 in the Schedule 14D-9. The Company hereby consents to the inclusion in the Offer Documents of the recommendations of the Company Board described in this Section 1.2(a). (b) The Company represents that the Schedule 14D-9 will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information supplied by Parent or the Purchaser in writing for inclusion in the Schedule 14D-9. Each of the Company, on the one hand, and Parent and the Purchaser, on the other hand, agree promptly to correct any information provided by either of them for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to the holders of Shares, in each case, as and to the extent required by applicable federal securities law. (c) In connection with the Offer, the Company will promptly furnish the Purchaser with mailing labels, security position listings, any non-objecting beneficial owner lists and any available listing or computer list containing the names and addresses of the record holders of the Common Shares as of the most recent practicable date and shall furnish the Purchaser with such additional information (including, but not limited to, updated lists of holders of Common Shares and their addresses, mailing labels and lists of security positions and non-objecting beneficial owner lists) and such other assistance as the Purchaser or its agents may reasonably request in communicating the Offer to the Company's record and beneficial stockholders. SECTION 1.3. Directors. (a) Subject to compliance with applicable law, promptly upon the payment by the Purchaser for the Common Shares pursuant to the Offer, and from time to time thereafter, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company Board as is equal to the product of the total number of directors on the Company Board (determined after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Common Shares beneficially owned by Parent or its affiliates bears to the total number of Common Shares then outstanding, and the Company shall, upon request of Parent, promptly take all actions necessary to cause Parent's designees to be so elected, including, if necessary, seeking the resignations of one or more existing directors; provided, however, that prior to the Effective Time (as defined herein), the Company Board shall always have at least two members who are neither officers, directors or designees of the Purchaser or any of its affiliates ("Purchaser Insiders"). If the number of directors who are not Purchaser Insiders is reduced below two prior to the Effective Time, the remaining director who is not a Purchaser Insider shall be entitled to designate a person to fill such vacancy who is not a Purchaser Insider and who shall be a director not deemed to be a Purchaser Insider for all purposes of this Agreement. -4- 9 (b) The Company's obligations to appoint Parent's designees to the Company Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. The Company shall promptly take all actions required pursuant to such Section and Rule in order to fulfill its obligations under this Section 1.3 and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors as is required under such Section and Rule in order to fulfill its obligations under this Section 1.3. Parent will supply any information with respect to itself, and its officers, directors and affiliates required by such Section and Rule to the Company. (c) Following the election or appointment of Parent's designees pursuant to this Section 1.3 and prior to the Effective Time (as defined herein), any amendment or termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or the Purchaser or waiver of any of the Company's rights hereunder, will require the concurrence of a majority of the directors of the Company then in office who are not Purchaser Insiders (or in the case where there are two or fewer directors who are not Purchaser Insiders, the concurrence of one director who is not a Purchaser Insider) if such amendment, termination, extension or waiver would have an adverse effect on the minority stockholders of the Company. ARTICLE II THE MERGER SECTION 2.1. The Merger. Upon the terms and subject to the satisfaction or waiver of the conditions hereof, and in accordance with the applicable provisions of this Agreement and the GCL, at the Effective Time the Purchaser shall be merged with and into the Company. Following the Merger, the separate corporate existence of the Purchaser shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation"). SECTION 2.2. Effective Time. As soon as practicable after the satisfaction of the conditions set forth in Sections 7.1(a) and 7.1(b), but subject to Sections 7.1(c) and 7.1(d), the Company shall execute, in the manner required by the GCL, and deliver to the Secretary of State of the State of Delaware a duly executed and verified certificate of merger, and the parties shall take such other and further actions as may be required by law to make the Merger effective. The time the Merger becomes effective in accordance with applicable law is referred to as the "Effective Time." SECTION 2.3. Effects of the Merger. The Merger shall have the effects set forth in the GCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and the Purchaser shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and the Purchaser shall become the debts, liabilities and duties of the Surviving Corporation. -5- 10 SECTION 2.4. Certificate of Incorporation and By-Laws of the Surviving Corporation. (a) The Certificate of Incorporation of the Purchaser, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended in accordance with the provisions thereof and hereof and applicable law. (b) Subject to the provisions of Section 6.6 of this Agreement, the By-Laws of the Purchaser in effect at the Effective Time shall be the By-Laws of the Surviving Corporation until amended in accordance with the provisions thereof and applicable law. SECTION 2.5. Directors. Subject to applicable law, the directors of the Purchaser immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal. SECTION 2.6. Officers. The officers of the Purchaser immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal. SECTION 2.7. Conversion of Common Shares. At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each Common Share issued and outstanding immediately prior to the Effective Time (other than (i) any Common Shares held by Parent, the Purchaser, any wholly owned subsidiary of Parent or the Purchaser, in the treasury of the Company or by any wholly owned subsidiary of the Company, which Common Shares, by virtue of the Merger and without any action on the part of the holder thereof, shall be cancelled and retired and shall cease to exist with no payment being made with respect thereto and (ii) Dissenting Shares (as defined herein)), shall be cancelled and retired and shall be converted into the right to receive $9.65 in cash (the "Merger Price"), payable to the holder thereof, without interest thereon, upon surrender of the certificate formerly representing such Common Share. SECTION 2.8. Conversion of Purchaser Common Stock. The Purchaser has outstanding 1,000 shares of common stock, par value $.01 per share, all of which are entitled to vote with respect to approval and adoption of this Agreement. At the Effective Time, each share of common stock, par value $.01 per share, of the Purchaser issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and become one validly issued, fully paid and non-assessable share of common stock, par value $.01 per share, of the Surviving Corporation. SECTION 2.9. Options; Stock Plans. Prior to the consummation of the Offer, the Company Board (or, if appropriate, any committee thereof) shall adopt appropriate resolutions and take all other actions necessary to provide for the cancellation, effective at the Effective Time, of all the outstanding stock options (the "Options") heretofore granted under any stock option or similar plan of the Company (the "Stock Plans") or under any agreement, without any -6- 11 payment therefor except as otherwise provided in this Section 2.9. Immediately prior to the Effective Time, all Options (whether vested or unvested) which are listed in Section 4.3 of the disclosure schedule delivered to Parent by the Company prior to the date hereof (the "Company Disclosure Schedule") (or were inadvertently omitted from such schedule and for which the related Cash Payments are de minimus in the aggregate) shall be cancelled (and to the extent formerly so exercisable shall no longer be exercisable) and shall entitle each holder thereof, in cancellation and settlement therefor, to a payment, if any, in cash by the Company (less any applicable withholding taxes), at the Effective Time, equal to the product of (i) the total number of Common Shares subject to such Option (whether vested or unvested) and (ii) the excess, if any, of the Merger Price over the exercise price per Common Share subject to such Option (the "Cash Payments"). The Company represents and warrants that the Company Board has taken all necessary action to terminate the Company's 1995 Long-Term Incentive Compensation Plan, as amended, the Company's 1997 Long-Term Stock Incentive Plan and all other Stock Plans and any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any subsidiary in each case effective prior to the Effective Time. SECTION 2.10. Stockholders' Meeting. (a) If required by applicable law in order to consummate the Merger, the Company, acting through the Company Board, shall, in accordance with applicable law: (i) duly call, give notice of, convene and hold a special meeting of its stockholders (the "Special Meeting") as soon as practicable following the acceptance for payment of and payment for Common Shares by the Purchaser pursuant to the Offer for the purpose of considering and taking action upon this Agreement; (ii) prepare and file with the SEC a preliminary proxy statement relating to this Agreement, and use reasonable best efforts (A) to obtain and furnish the information required to be included by the SEC in the Proxy Statement (as hereinafter defined) and, after consultation with Parent, to respond as soon as practicable to any comments made by the SEC with respect to the preliminary proxy statement and cause a definitive proxy statement (the "Proxy Statement") to be mailed to its stockholders and (B) to obtain the necessary approvals of the Merger and adoption of this Agreement by its stockholders; and (iii) include in the Proxy Statement the recommendation of the Company Board that stockholders of the Company vote in favor of the approval and adoption of the Merger and of this Agreement. (b) Parent agrees that it will vote, or cause to be voted, all of the Common Shares then owned by it, the Purchaser or any of its other subsidiaries in favor of the approval of the Merger and of this Agreement. SECTION 2.11. Merger Without Meeting of Stockholders. Notwithstanding Section 2.10, in the event that the Purchaser shall acquire at least 90% of the outstanding Com- -7- 12 mon Shares pursuant to the Offer, the parties hereto agree to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the acceptance for payment of and payment for Common Shares by the Purchaser pursuant to the Offer without a meeting of stockholders of the Company, in accordance with Section 253 of the GCL. ARTICLE III DISSENTING SHARES; PAYMENT FOR SHARES SECTION 3.1. Dissenting Shares. Notwithstanding Section 2.7, Common Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Common Shares in accordance with the GCL ("Dissenting Shares") shall not be converted into a right to receive the Merger Price, unless such holder fails to perfect or withdraws or otherwise loses such holder's right to appraisal. If after the Effective Time such holder fails to perfect or withdraws or loses such holder's right to appraisal, such Common Shares shall be treated as if they had been converted as of the Effective Time into a right to receive the Merger Price. The Company shall give Parent prompt notice of any demands received by the Company for appraisal of Common Shares, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, or otherwise negotiate, any such demands. SECTION 3.2. Payment for Common Shares. (a) From and after the Effective Time, The Bank of New York or such other bank or trust company as shall be mutually acceptable to Parent and the Company shall act as paying agent (the "Paying Agent") in effecting the payment of the Merger Price in respect of certificates (the "Certificates") that, prior to the Effective Time, represented Common Shares entitled to payment of the Merger Price pursuant to Section 2.7. At the Effective Time, Parent or the Purchaser shall deposit, or cause to be deposited, in trust with the Paying Agent the aggregate Merger Price to which holders of Common Shares shall be entitled at the Effective Time pursuant to Section 2.7. (b) Promptly after the Effective Time, the Paying Agent shall mail to each record holder of Certificates a form of letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent and instructions for use in surrendering such Certificates and receiving the Merger Price in respect thereof. Upon the surrender of each such Certificate, the Paying Agent shall pay the holder of such Certificate the Merger Price multiplied by the number of Common Shares formerly represented by such Certificate, in consideration therefor, and such Certificate shall forthwith be cancelled. Until so surrendered, each such Certificate (other than Certificates representing Common Shares held by Parent or the Purchaser, any wholly owned subsidiary of Parent or the Purchaser, in the treasury of the Company or by any wholly owned subsidiary of the Company or Dissenting Shares) shall represent solely the right to receive the -8- 13 aggregate Merger Price relating thereto. No interest or dividends shall be paid or accrued on the Merger Price. If the Merger Price (or any portion thereof) is to be delivered to any person other than the person in whose name the Certificate surrendered is registered, it shall be a condition to such right to receive such Merger Price that the Certificate so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the person surrendering such Common Shares shall pay to the Paying Agent any transfer or other taxes required by reason of the payment of the Merger Price to a person other than the registered holder of the Certificate surrendered, or shall establish to the satisfaction of the Paying Agent that such taxes have been paid or are not applicable. In the event any Certificate shall have been lost, stolen or destroyed, the Paying Agent shall be required to pay the full Merger Price in respect of any Common Shares represented by such Certificate; however, Parent may require the owner of such lost, stolen or destroyed Certificate to execute and deliver to the Paying Agent a form of affidavit claiming such Certificate to be lost, stolen or destroyed in form and substance reasonably satisfactory to Parent and the posting by such owner of a bond in such amount as Parent may determine is reasonably necessary as indemnity against any claim that may be made against Parent or the Paying Agent. (c) Promptly following the date which is 180 days after the Effective Time, the Paying Agent shall deliver to the Surviving Corporation all cash, Certificates and other documents in its possession relating to the transactions described in this Agreement, and the Paying Agent's duties shall terminate. Thereafter, each holder of a Certificate may surrender such Certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in consideration therefor the aggregate Merger Price relating thereto, without any interest or dividends thereon. Notwithstanding the foregoing, none of Parent, the Purchaser, the Company or the Paying Agent shall be liable to any person in respect of any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificates shall not have been surrendered immediately prior to such date on which any payment pursuant to this Article III would otherwise escheat to or become the property of any Governmental Entity, the cash payment in respect of such Certificate shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interests of any person previously entitled thereto. (d) After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of any Common Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent, they shall be surrendered and cancelled in return for the payment of the aggregate Merger Price relating thereto, as provided in this Article III. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and the Purchaser that except as set forth in the Company Disclosure Schedule: -9- 14 SECTION 4.1. Organization and Qualification; Subsidiaries. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of the Company's subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Company and each of its subsidiaries has the requisite corporate power and authority to own, operate or lease its properties and to carry on its business as it is now being conducted, and is duly qualified or licensed to do business, and is in good standing, in each jurisdiction in which the nature of its business or the properties owned, operated or leased by it makes such qualification, licensing or good standing necessary, except where the failure to have such power or authority, or the failure to be so qualified, licensed or in good standing, would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. The term "Material Adverse Effect," as used in this Agreement, means any change in or effect on the business, assets, liabilities, financial condition, results of operations or prospects of the Company or any of its subsidiaries that would reasonably be expected to be materially adverse to the Company and its subsidiaries taken as a whole (except for changes or effects that (i) affect the seismic exploration or oilfield service industries as a whole or (ii) result from performance by the Company or any of its subsidiaries pursuant to and in compliance with the terms of the agreement between the Company and Maxus Bolivia as set forth in the accepted proposal dated December 18, 1997 (other than losses or liabilities resulting from any breach of contract, negligence or violation of law in connection with performance of such contract). SECTION 4.2. Charter; By-Laws and Rights Agreement. The Company has heretofore made available to Parent and the Purchaser a complete and correct copy of the certificate of incorporation and the by-laws or comparable organizational documents, each as amended to the date hereof, of the Company and each of its subsidiaries and a complete and correct copy of the Rights Agreement as amended to the date hereof. SECTION 4.3. Capitalization; Subsidiaries. The authorized capital stock of the Company consists of 25,000,000 Common Shares and 1,000,000 shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of which 100,000 shares are designated Series A Junior Participating Preferred Stock, par value $.01 per share (the "Junior Preferred Stock"). As of the close of business on March 2, 1998, 11,916,666 Common Shares were issued and outstanding, all of which are entitled to vote on this Agreement, and no Common Shares were held in treasury. As of the close of business on March 2, 1998 there were no shares of Preferred Stock issued and outstanding. The Company has no shares reserved for issuance, except that, as of March 2, 1998, there were 790,002 Common Shares reserved for issuance pursuant to outstanding Options and rights granted under the Stock Plans or agreements providing for the grant of Options and 100,000 shares of Junior Preferred Stock reserved for issuance upon exercise of the Rights. Section 4.3 of the Company Disclosure Schedule sets forth the holders of all outstanding Options and the number, exercise prices and expiration dates of each grant to such holders. Since September 30, 1997, the Company has not issued any shares of capital stock except pursuant to the exercise of Options outstanding as of such date and except pursuant to the exchange of exchangeable non-voting shares (the "Exchangeable Shares") of 3-D Geophysical Canada, Inc. ("3-D Canada") outstanding as of such date for Common Shares. All the outstanding Common Shares are, and all the Common Shares which may be issued pursuant to the exercise of out- -10- 15 standing Options will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and nonassessable and are not subject to, nor were they issued in violation of, any preemptive rights. There are no bonds, debentures, notes or other indebtedness having general voting rights (or convertible into securities having such rights) ("Voting Debt") of the Company or any of its subsidiaries issued and outstanding. Except as set forth above or in Section 4.3 of the Company Disclosure Schedule or for the Rights and except for the transactions contemplated by this Agreement, there are no existing options, warrants, calls, subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the issued or unissued capital stock of the Company or any of its subsidiaries, obligating the Company or any of its subsidiaries to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or Voting Debt of, or other equity interest in, the Company or any of its subsidiaries or securities convertible into or exchangeable for such shares or equity interests and neither the Company nor any of its subsidiaries is obligated to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment. Except as contemplated by this Agreement or the Rights Agreement, there are no outstanding contractual obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any Common Shares or the capital stock of the Company or any of its subsidiaries. Each of the outstanding shares of capital stock of each of the Company's subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and such shares of the Company's subsidiaries are owned by the Company or by a subsidiary of the Company in each case free and clear of any lien, claim, option, charge, security interest, limitation, encumbrance and restriction of any kind (any of the foregoing being a "Lien") except as set forth in Section 4.3 of the Company Disclosure Schedule. Set forth in Section 4.3 of the Company Disclosure Schedule is a complete and correct list of each subsidiary (direct or indirect) of the Company and any joint ventures, partnerships or similar arrangements in which the Company or any of its subsidiaries has an interest (and the amount and percentage of any such interest). No entity in which the Company or any of its subsidiaries owns, directly or indirectly, less than a 50% equity interest is, individually or when taken together with all such other entities, material to the business of the Company and its subsidiaries taken as a whole. SECTION 4.4. Authority. The Company has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized and approved by the Company Board and no other corporate proceedings on the part of the Company are necessary to authorize or approve this Agreement or to consummate the transactions contemplated hereby (other than, with respect to the Merger, the approval and adoption of this Agreement by the affirmative vote of the holders of a majority of the then outstanding Common Shares entitled to vote thereon, to the extent required by applicable law). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due and valid authorization, execution and delivery of this Agreement by Parent and the Purchaser, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms. -11- 16 SECTION 4.5. No Conflict; Required Filings and Consents. (a) Assuming (i) the filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), are made and the waiting periods thereunder have been terminated or have expired, (ii) the requirements of the Exchange Act and any applicable state securities, "blue sky" or takeover law are met, (iii) the filing of the certificate of merger and other appropriate merger documents, if any, as required by the GCL, is made and (iv) approval of this agreement by the holders of a majority of the Common Shares, if required by the GCL, is received, none of the execution and delivery of this Agreement by the Company, the consummation by the Company of the transactions contemplated hereby or compliance by the Company with any of the provisions hereof will (i) conflict with or violate the Certificate of Incorporation or By-Laws of the Company or the comparable organizational documents of any of its subsidiaries, (ii) except as disclosed in the SEC Reports (as hereinafter defined) or specifically disclosed in Section 4.5(a) of the Company Disclosure Schedule, result in a breach or violation of, a default under or the triggering of any payment or the increase in any other obligations pursuant to, any of the Company's existing Employee Benefit Arrangements (as hereinafter defined) or any grant or award made under any of the foregoing, (iii) conflict with or violate any statute, ordinance, rule, regulation, order, judgment, decree, permit or license applicable to the Company or any of its subsidiaries, or by which any of them or any of their respective properties or assets may be bound or affected, or (iv) except as disclosed in Section 4.5(a) of the Company Disclosure Schedule, result in a violation or breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in any loss of any benefit, the triggering of any payment by, or the increase in any other obligation of, the Company or any of its subsidiaries or the creation of any material Lien on any of the property or assets of the Company or any of its subsidiaries (any of the foregoing referred to in clause (ii), (iii) or this clause (iv) being a "Violation") pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their respective properties may be bound or affected, except in the case of clauses (ii), (iii) and (iv) where such Violations would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (b) None of the execution and delivery of this Agreement by the Company, the consummation by the Company and its subsidiaries of the transactions contemplated hereby or compliance by the Company and it subsidiaries with any of the provisions hereof will require any consent, waiver, approval, authorization or permit of, or registration or filing with or notification to (any of the foregoing being a "Consent"), any government or subdivision thereof, domestic, foreign or supranational or any administrative, governmental or regulatory authority, agency, commission, tribunal or body, domestic, foreign or supranational (a "Governmental Entity"), except for (i) compliance with any applicable requirements of the Exchange Act, (ii) the filing of a certificate of merger pursuant to the GCL, (iii) compliance with the HSR Act, and (iv) such filings, authorizations, orders and approvals, if any, as set forth in Section 4.5(b) of the Company Disclosure Schedule, as are required under foreign laws except in the case of clause (iv) for fil- -12- 17 ings, authorizations, orders and approvals the failure of which to make or obtain would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. SECTION 4.6. SEC Reports and Financial Statements. (a) The Company and its subsidiaries have filed with the SEC all forms, reports, schedules, registration statements and definitive proxy statements required to be filed by them with the SEC since February 9, 1996 (as amended since the time of their filing, collectively, the "SEC Reports") and has heretofore made available to Parent complete and correct copies of all such forms, reports, schedules, registration statements, and proxy statements. As of their respective dates, the SEC Reports (including, but not limited to, any financial statements or schedules included or incorporated by reference therein) complied in all material respects with the requirements of the Exchange Act or the Securities Act of 1933, as amended, including the rules and regulations of the SEC promulgated thereunder (the "Securities Act") applicable, as the case may be, to such SEC Reports, and none of the SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. (b) The (i) consolidated balance sheets as of December 31, 1996 (the "12/31/96 Balance Sheet") and December 31, 1995 and the consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996 (including the related notes and schedules thereto) of the Company (or its predecessors) contained in the Company's Form 10-K for the fiscal year ended December 31, 1996 and (ii) the unaudited consolidated balance sheet as of September 30, 1997 (the "9/30/97 Balance Sheet") and the unaudited consolidated statements of operations, stockholders' equity and cash flows for the three- and nine-month periods ended September 30, 1997 of the Company contained in the Company's Form 10-Q for the three-month period ended September 30, 1997 present fairly the consolidated financial position and the consolidated results of operations and cash flows of the Company and its subsidiaries as of the dates or for the periods presented therein and were prepared in accordance with United States generally accepted accounting principles ("GAAP") consistently applied during the periods involved except as otherwise disclosed therein (subject, in the case of unaudited statements, to recurring audit adjustments normal in nature and amount). (c) Except as reflected or reserved against in the 9/30/97 Balance Sheet or as disclosed in the notes thereto or as set forth in Section 4.6(c) of the Company Disclosure Schedule, as of the date hereof, neither the Company nor any of its subsidiaries have any liabilities or obligations (absolute, accrued, fixed, contingent or otherwise) that are material to the Company and its subsidiaries taken as a whole, other than liabilities incurred in the ordinary course of business consistent with past practice since September 30, 1997. (d) The Company has heretofore furnished to Parent a complete and correct copy of any amendments or modifications which have not yet been filed with the SEC to agreements, documents or other instruments which previously had been filed by the Company with the SEC pursuant to the Securities Act or the Exchange Act. -13- 18 SECTION 4.7. Environmental Matters. (a) Except as set forth in Section 4.7 of the Company Disclosure Schedule, the operations of the Company and its subsidiaries comply with all applicable material Environmental Laws, except for such failures to comply which would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. The Company and its subsidiaries have obtained all Environmental Permits necessary for the operation of the business, and all such Environmental Permits are in good standing and the Company and its subsidiaries are in compliance with all material terms and conditions of such Environmental Permits, except for such failures to obtain or comply which would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. Neither the Company nor any of its subsidiaries is subject to any ongoing investigation by, order from or written claim by any Person (including without limitation any current or prior owner or operator of any of the Company Property) respecting (i) any Environmental Law, (ii) any Remedial Action or (iii) any claim, demand, complaint or other action arising from the Release or threatened Release of a Hazardous Material into the environment which individually or in the aggregate would reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any of its subsidiaries is subject to any judicial or administrative proceeding, or outstanding order, judgment, decree or settlement alleging or addressing a violation of or liability under any Environmental Law, which upon resolution would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (b) There have been no Releases by the Company or any of its subsidiaries of any Hazardous Materials (i) into, on or under any Company Property, or (ii) into, on or under any other properties, including landfills in which Hazardous Materials have been Released or properties on or under which the Company or any of its subsidiaries has performed services, in any case in such a way as to create any material unpaid liability (including the costs of required remediation) under any applicable Environmental Law. As used in this Agreement, the term "Knowledge" means the actual Knowledge of the officers and directors of the Company. Except as set forth in Section 4.7(b) of the Company Disclosure Schedule, no Company Property has been used at any time as a landfill or as a treatment, storage or disposal facility for any Hazardous Material. To the Knowledge of the Company there is no, and there has not been, any underground storage tank, surface impoundment, landfill, waste pile or leachfield on or in any Company Property. (c) Any asbestos-containing material which is on or part of any Company Property does not create any unpaid material liability (including the costs of required remediation) under any applicable Environmental Law. No claims have been made, and no suits or proceedings are pending or, to the Knowledge of the Company, threatened by any employee against the Company or any of its subsidiaries that are premised on exposure to asbestos or asbestos-containing material, which would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. -14- 19 (d) For purposes of this Section: (i) "Company Property" means any real or personal property, plant, building, facility, structure, underground storage tank, equipment, fixture or unit, or other asset owned, leased or operated by the Company or any of its subsidiaries. (ii) "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and any rules and regulations promulgated thereunder. (iii) "Environmental Law" means all applicable United States federal, state and local laws or regulations and all foreign laws or regulations governing the protection of the environment, and employee health or safety, including but not limited to CERCLA, OSHA and RCRA and any state or foreign equivalent thereof. (iv) "Hazardous Materials" means, collectively, (a) any petroleum or petroleum products, flammable explosives, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (b) any chemicals, materials, substances or wastes which are defined as or included in the definition of "hazardous materials," "hazardous wastes" or "toxic substances" under applicable Environmental Law. (v) "Environmental Permits" means all approvals, authorizations, consents, permits, licenses, registrations and certificates required by any applicable Environmental Law. (vi) "OSHA" means the Occupational Safety and Health Act, as amended, and any rules and regulations promulgated thereunder. (vii) "RCRA" means the Resource Conservation and Recovery Act, as amended, and any rules and regulations promulgated thereunder. (viii) "Release" means release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of Hazardous Materials into the environment or into or out of any Company Property, including the movement of Hazardous Materials through or in the air, soil, surface water, groundwater or Company Property. (ix) "Remedial Action" means all actions required to (a) clean up, remove, treat or in any other way remediate any Hazardous Material; (b) prevent the release of Hazardous Materials so that they do not migrate or endanger or threaten to endanger public health or welfare or the environment; or (c) perform studies, investigations and care related to any such Hazardous Material. -15- 20 SECTION 4.8. Compliance with Applicable Laws. Except with respect to Environmental Laws which are covered in Section 4.7, the Company and its subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities (the "Permits") except for such Permits as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. The Company and its subsidiaries are in compliance with the terms of the Permits which it holds except for such Permits as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. Except with respect to Environmental Laws which are covered in Section 4.7, the operations of the Company and its subsidiaries have been conducted in compliance with all laws, ordinances and regulations of any Governmental Entity (except where lack of compliance would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect). SECTION 4.9. Change of Control. Except as set forth in Section 4.09 of the Company Disclosure Schedule, the transactions contemplated by this Agreement will not constitute a "change of control" under, require the consent from or the giving of notice to a third party pursuant to, cause termination pursuant to the terms thereof or permit a third party to terminate or accelerate vesting or repurchase rights under the terms, conditions or provisions of any (i) note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which any of them or any of their properties or assets may be bound, (ii) Permit, except for such Permits as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, or (iii) employment, compensation, termination or severance agreement, instrument, obligation or other Plan (as defined in Section 4.13(a)) of the Company or any of its subsidiaries. The total amounts payable to the executives identified in Section 4.9 of the Company Disclosure Schedule, as a result of the transactions contemplated by this Agreement and/or any subsequent employment termination (including any cash-out or acceleration of options and restricted stock and any other payments with respect thereto or in connection therewith), based on compensation data applicable as of the date hereof, calculated assuming effective tax rates of 39.6%, will not exceed the amount set forth on such schedule. SECTION 4.10. Litigation. Except as set forth in Section 4.10 of the Company Disclosure Schedule or Section 4.7, there is no suit, claim, action, proceeding or investigation pending or, to the Knowledge of the Company, threatened, against the Company or any of its subsidiaries, which, if adversely determined, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or could prevent or materially delay the consummation of the transactions contemplated by this Agreement. Except as set forth in Section 4.10 of the Company Disclosure Schedule neither the Company nor any of its subsidiaries is subject to any outstanding order, writ, injunction or decree which, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect or could prevent or materially delay the consummation of the transactions contemplated hereby. SECTION 4.11. Information. None of the information supplied by the Company for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the Proxy Statement or (iii) any other document to be filed with the SEC or any other Governmental Entity in connection with the transactions contemplated by this Agreement (the "Other Filings") will, at -16- 21 the respective times filed with the SEC or other Governmental Entity and, in addition, in the case of the Proxy Statement, at the date it or any amendment or supplement is mailed to stockholders, at the time of the Special Meeting and at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act, except that no representation is made by the Company with respect to statements made therein based on information supplied by Parent or the Purchaser in writing specifically for inclusion in the Proxy Statement. SECTION 4.12. Certain Approvals. The Company Board has taken any and all necessary and appropriate action to render inapplicable to the Offer, the Merger and the transactions contemplated by this Agreement and the Support Agreements the provisions of Section 203 of the GCL. No other state takeover statute or similar domestic or foreign statute or regulation applies or purports to apply to the Offer, the Merger or the transactions contemplated by this Agreement or the Support Agreements. SECTION 4.13. Employee Benefit Plans. (a) Section 4.13(a) of the Company Disclosure Schedule includes a complete list of all employee benefit plans, programs, agreements and other arrangements providing benefits to any former or current employee, officer or director of the Company or any of its subsidiaries or any beneficiary or dependent thereof, whether or not written, and whether covering one person or more than one person, sponsored or maintained by the Company or any of its subsidiaries or to which the Company or any of its subsidiaries contributes or is obligated to contribute ("Plans"). Without limiting the generality of the foregoing, the term "Plans" includes all employee welfare benefit plans within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder ("ERISA") and all employee pension benefit plans within the meaning of Section 3(2) of ERISA and all other employee benefit, employment, bonus, incentive, profit sharing, thrift, compensation, restricted stock, retirement, savings, deferred compensation, stock purchase, stock option, termination, severance, change in control, fringe benefit and other similar plans, programs, agreements or arrangements. (b) With respect to each Plan, the Company has made available to Parent a true, correct and complete copy of: (i) each writing constituting a part of such Plan, including, without limitation, all plan documents, benefit schedules, trust agreements, and insurance contracts and other funding vehicles; (ii) the most recent Annual Report (Form 5500 Series) and accompanying schedule, if any; (iii) the current summary plan description (and any material modification to such description), if any; (iv) the most recent annual financial report, if any; (v) the most recent actuarial report, if any; and (vi) the most recent determination letter from the Internal Revenue Service (the "IRS"), if any. Except as specifically provided in the foregoing documents made available to Parent, there are no material amendments to any Plan (or the establishment of any new Plan), other than those required by law, that have been adopted or approved nor has the Company or any of its subsidiaries undertaken or committed to make any such material amend- -17- 22 ments or to adopt or approve any new Plans, except any such amendment to a Plan or establishment of a new Plan, which would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (c) Section 4.13(c) of the Company Disclosure Schedule identifies each Plan that is intended to be a "qualified plan" within the meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder (the "Code") ("Qualified Plans"). Except as provided in Section 4.13(c) of the Company Disclosure Schedule, the IRS has issued a favorable determination letter with respect to each Qualified Plan that has not been revoked, and there are no existing circumstances nor any events that have occurred that could adversely affect the qualified status of any Qualified Plan or the related trust. No Plan is intended to meet the requirements of Section 501(c)(9) of the Code. (d) Except as provided in Section 4.13(d) of the Company Disclosure Schedule, all contributions required to be made to any Plan by applicable law or regulation or by any plan document or other contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Plan have been timely made or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been fully reflected in the financial statements of the Company included in the SEC Reports to the extent required under GAAP. (e) Except as provided in Section 4.13(e) of the Company Disclosure Schedule, (i) the Company and each of its subsidiaries have complied, and are now in compliance, in all material respects, with all provisions of ERISA, the Code and all laws and regulations applicable to the Plans; (ii) there is not now, nor do any circumstances exist that could give rise to, any requirement for the posting of security with respect to a Plan or the imposition of any Lien on the assets of the Company or any of its subsidiaries under ERISA or the Code; and (iii) no prohibited transaction has occurred with respect to any Plan, except for such noncompliance, requirements for the posting of security, liens or prohibited transactions which would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (f) (i) No Plan is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code; and (ii) without limiting the generality of the foregoing, no Plan is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or more contributing sponsors at least two of whom are not under common control, within the meaning of Section 4063 of ERISA and which is subject to Title IV of ERISA (a "Multiple Employer Plan"), nor has the Company or any of its subsidiaries, or any of their respective ERISA Affiliates (as defined herein), in the preceding five years contributed to or been obligated to contribute to any Multiemployer Plan or Multiple Employer Plan. An "ERISA Affiliate" means any entity, trade or business that is a member of a group described in Section 414(b), (c) or (m) of the Code or Section 4001(b)(1) of ERISA that includes the Company or any of its subsidiaries, or that is a member of the same "controlled group" as the Company or any of its subsidiaries, pursuant to Section 4001(a)(14) of ERISA. (g) Except as provided in Section 4.13(g) of the Company Disclosure Schedule, there does not now exist, nor do any circumstances exist, that could result in, any liability under -18- 23 (i) Title IV of ERISA (other than ordinary course premium payments, if any, to the Pension Benefit Guaranty Corporation which have been or will be made on a timely basis, if applicable), (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code, or (iv) the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code that would be a liability of the Company or any of its subsidiaries following the Effective Time which would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. Without limiting the generality of the foregoing, none of the Company, its subsidiaries nor any ERISA Affiliate of the Company or any of its subsidiaries has engaged in any transaction described in Section 4069, 4204 or 4212(c) of ERISA. (h) Except as provided in Section 4.13(h) of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries has any liability for life, health, medical or other welfare benefits to former employees or beneficiaries or dependents thereof, except for health continuation coverage as required by Section 4980B of the Code or Part 6 of Title I of ERISA which would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (i) Except as provided in Section 4.13(i) of the Company Disclosure Schedule, there are no pending or, to the Knowledge of the Company, threatened claims (other than claims for benefits in the ordinary course), lawsuits, arbitrations or other alternate dispute resolution proceedings which have been asserted or instituted against the Plans, any fiduciaries thereof with respect to their duties to the Plans or the assets of any of the trusts under any of the Plans which would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (j) Except as provided in Section 4.13(j) of the Company Disclosure Schedule, all Plans covering foreign employees of the Company or any of its subsidiaries comply in all material respects with applicable local law (including any qualification or registration requirements) and, to the extent applicable, the fair market value of the assets and/or the book reserve established for each such Plan that is a funded or book reserved Plan is sufficient to provide for the liability for accrued benefits under such Plans (based upon reasonable actuarial assumptions) except where any failure to maintain sufficient assets or liabilities would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. SECTION 4.14. Intellectual Property. (a) Set forth in Section 4.14(a) of the Company Disclosure Schedule is a list and description of all material patents, patent applications, patent disclosures, assumed names, trade names, trademarks, trademark registrations and trademark applications, service marks, service mark registrations and service mark applications, certification marks, certification mark registrations and certification mark applications, copyrights, copyright registrations and copyright registration applications, chip registrations and chip registration applications, both domestic and foreign, which are owned by the Company or any of its subsidiaries. The assets described in Section 4.14(a) of the Company Disclosure Schedule and all computer software (and related documentation) ("Software"), trade secrets, know-how, industrial property, technology or other -19- 24 proprietary rights which are owned or used by the Company or any of its subsidiaries are referred to as the "Intellectual Property." Except as otherwise indicated in Section 4.14(a) of the Company Disclosure Schedule, the Company and its subsidiaries own all right, title and interest in and to the Intellectual Property free and clear of all Liens, with the sole and exclusive right to use the same, subject to those licenses listed on Section 4.14(b) of the Company Disclosure Schedule except for such liens as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (b) Set forth in Section 4.14(b) of the Company Disclosure Schedule is a list and description of (i) all material licenses, assignments and other transfers of Intellectual Property granted to others by the Company or any of its subsidiaries, and (ii) all material licenses, assignments and other transfers of patents, trade names, trademarks, service marks, copyrights, chip registrations, Software, trade secrets, know-how, technology or other proprietary rights granted to the Company or any of its subsidiaries by others. Except as set forth in Section 4.14(b) of the Company Disclosure Schedule, none of the licenses described above is subject to termination or cancellation or change in its terms or provisions as a result of this Agreement or the transactions provided for in this Agreement except where such termination, cancellation or change in terms would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (c) To the Knowledge of the Company, no Person or entity is infringing, or has misappropriated, any material Intellectual Property. (d) Except as disclosed in Section 4.14(d) of the Company Disclosure Schedule, no material claims with respect to the Intellectual Property or with respect to the manufacture, sale or use of any product or process or the furnishing of any services, have been asserted or, to the Knowledge of the Company, are threatened by any Person (i) to the effect that the manufacture, sale or use of any product or process or the furnishing of any service as previously used, now used or offered or proposed for use or sale by the Company infringes on any copyright, trade secret, patent, tradename or other intellectual property right of any Person, (ii) against the use by the Company or any of its subsidiaries of any Intellectual Property, or (iii) challenging the ownership, validity or effectiveness of any Intellectual Property. To the Company's Knowledge, all granted and issued patents and all registered trademarks and service marks listed in Section 4.14(a) of the Company Disclosure Schedule and all copyrights held by the Company or any of its subsidiaries are valid, enforceable and subsisting. (e) No Intellectual Property is subject to any outstanding order, judgment, decree, stipulation or agreement restricting in any manner the licensing thereof by the Company or any of its subsidiaries. Neither the Company nor any of its subsidiaries has entered into any agreement to indemnify any other person against any charge of infringement of any Intellectual Property, except standard infringement indemnities agreed to in the ordinary course of business included as part of the Company's license or source agreements. Neither the Company nor any of its subsidiaries has entered into any agreement granting any third party the right to bring infringement actions with respect to, or otherwise to enforce rights with respect to, any Intellectual -20- 25 Property. The Company and its subsidiaries have the exclusive right to file, prosecute and maintain all applications and registrations with respect to Intellectual Property. SECTION 4.15. Taxes. (a) Except as set forth in Section 4.15 of the Company Disclosure Schedule, the Company and each of its subsidiaries has duly filed all federal, state, local and foreign income and other Tax Returns (as hereinafter defined) required to be filed by it, and has duly paid or caused to be paid all Taxes (as hereinafter defined) shown to be due on such Tax Returns in respect of the periods covered by such returns and has made adequate provision in the Company's financial statements for payment of all Taxes anticipated to be payable in respect of all taxable periods or portions thereof ending on or before the date hereof, except for such as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. Section 4.15 of the Company Disclosure Schedule lists the periods through which the Tax Returns required to be filed by the Company or its subsidiaries have been examined by the IRS or other appropriate taxing authority, or the period during which any assessments may be made by the IRS or other appropriate taxing authority has expired. All deficiencies and assessments asserted as a result of such examinations or other audits by federal, state, local or foreign taxing authorities have been paid, fully settled or adequately provided for in the Company's financial statements, and no material issue or claim has been asserted in writing for Taxes by any taxing authority for any prior period, except for such as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, other than those heretofore paid or adequately provided for in the Company's financial statements. There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any Tax Return of the Company or any of its subsidiaries. Neither the Company nor any of its subsidiaries has filed a consent pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as such term is defined in Section 341(f)(2) of the Code) owned by the Company or any of its subsidiaries. Neither the Company nor any of its subsidiaries is a party to any agreement, contract or arrangement that could result, separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code or that would not be deductible pursuant to the terms of Section 162(a)(l), 162(m) or 162(n) of the Code. Neither the Company nor any of its subsidiaries (i) has been a member of a group filing consolidated returns for federal income tax purposes, or (ii) is a party to a tax sharing or tax indemnity agreement or any other agreement of a similar nature that remains in effect, except that the Company and its subsidiaries organized under the laws of the United States or any state file as consolidated entities. (b) For purposes of this Agreement, the term "Taxes" means all taxes, charges, fees, levies or other assessments, including, without limitation, income, gross receipts, excise, property, sales, use, transfer, license, payroll, withholding, export, import, and customs duties, capital stock and franchise taxes, imposed by the United States or any state, local or foreign government or subdivision or agency thereof, including any interest, penalties or additions thereto. For purposes of this Agreement, the term "Tax Return" means any report, return or other information or document required to be supplied to a taxing authority in connection with Taxes. -21- 26 SECTION 4.16. Absence of Certain Changes. Except as disclosed in Section 4.16 of the Company Disclosure Schedule, since September 30, 1997 (i) there has not been any Material Adverse Effect; (ii) the businesses of the Company and each of its subsidiaries have been conducted only in the ordinary course and in a manner consistent with past practice; (iii) neither the Company nor any of its subsidiaries has engaged in any material transaction or entered into any material agreement or commitments outside the ordinary course of business; (iv) neither the Company nor any of its subsidiaries has taken any action referred to in Section 6.1 hereof except as permitted thereby; and (v) there has not been any revaluation by the Company or any of its subsidiaries of any of its material assets, including but not limited to writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business. SECTION 4.17. Labor Matters. No work stoppage involving the Company or any of its subsidiaries is pending or threatened and neither the Company nor any of its subsidiaries is involved in, or to the Company's Knowledge, threatened with or affected by any material labor dispute, arbitration, lawsuit or administrative proceeding. None of the employees of the Company or of any of its subsidiaries are represented by any labor union or any collective bargaining organization and, to the Knowledge of the Company, no labor union is attempting to organize employees of the Company or any of its subsidiaries. SECTION 4.18. Rights Agreement. The Company and the Company Board have taken all necessary action to amend the Rights Agreement (without redeeming the Rights) so that none of the execution or delivery of this Agreement and the Support Agreements, the making of the Offer, the acquisition of Common Shares pursuant to the Offer or the consummation of the Merger will (i) cause any Rights issued pursuant to the Rights Agreement to become exercisable or to separate from the stock certificates to which they are attached, (ii) cause Parent, the Purchaser or any of their Affiliates or Associates to be an Acquiring Person (as each such term is defined in the Rights Agreement) or (iii) trigger other provisions of the Rights Agreement, including giving rise to a Distribution Date or a Triggering Event (as each such term is defined in the Rights Agreement). SECTION 4.19. Condition of Assets. The properties and assets, including the equipment, supplies and other consumables, owned, leased or used by the Company and its subsidiaries in the operation of their respective business are in good operating condition and repair, ordinary wear and tear excepted, are reasonably suitable for the purposes for which they are used, are reasonably adequate and sufficient for the Company's and its subsidiaries' current operations and are directly related to the business of the Company and its subsidiaries. SECTION 4.20. Brokers. Except for the engagement of SSB, none of the Company, any of its subsidiaries, or any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finder's fees in connection with the transactions contemplated by this Agreement. The Company has previously delivered to Parent a copy of the Company's engagement letter with SSB. The aggregate fees and expenses payable to the Company's legal and financial advisors in connection -22- 27 with the Offer, the Merger and the transactions contemplated by this Agreement will not exceed the amount set forth in Section 4.20 of the Company Disclosure Schedule. SECTION 4.21. Opinion of Financial Advisor. The Company Board has received the opinion, and as of the date hereof will receive the written opinion, of SSB, the Company's financial advisor, to the effect that, as of the date of this Agreement, the cash consideration to be received in the Offer and the Merger by the holders of Common Shares (other than Parent and its affiliates) is fair to such holders from a financial point of view. The Company will deliver to Parent a copy of SSB's written opinion promptly upon receipt thereof. SECTION 4.22. Employees. As of the date hereof, to the Company's Knowledge, its relationship with its employees is satisfactory. SECTION 4.23. Customers. Section 4.23(a) of the Company Disclosure Schedule sets forth (a) the names of all customers of Company that accounted for more than 5% of the Company's consolidated revenues during the twelve-month period ended December 31, 1997 and (b) the amount for which each such customer was invoiced during such period. The Company has not received any notice that any such customer of the Company (i) has ceased, or will cease, to use the products, goods or services of the Company and its subsidiaries, (ii) has substantially reduced or will substantially reduce, the use of products, goods or services of the Company and its subsidiaries or (iii) has sought, or is seeking, to substantially reduce the price it will pay for products, goods or services of the Company and its subsidiaries, including in each case after the consummation of the transactions contemplated hereby. Section 4.23(b) of the Company Disclosure Schedule sets forth the term, price, any "change in control" provisions and geographic dimensions of any currently outstanding bids or proposals of the Company in excess of $1,000,000. SECTION 4.24. Material Contracts. Except as set forth in Section 4.24 of the Company Disclosure Schedule, or filed as exhibits to the SEC Reports, neither the Company nor any of its subsidiaries is a party to or bound by (i) any "material contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC); (ii) any non-competition agreement or any other agreement or obligation which purports to limit in any respect the manner in which, or the localities in which, the business of the Company and its subsidiaries (including, for purposes of this Section 4.24 Parent and its subsidiaries, assuming the Merger has taken place), is or would be conducted; (iii) any employment or consulting agreement requiring payments in the aggregate in excess of $100,000; (iv) any joint venture, partnership or other similar agreement; (v) any agreement that grants a right of first refusal with respect to any asset or property of the Company or any of its subsidiaries; (vi) any agreement, entered into other than in the ordinary course, for the purchase or sale of goods, supplies, equipment, services or other assets that provides for payments by or to the Company or any of its subsidiaries in the aggregate in excess of $200,000 or, with respect to contracts for the sale of goods, supplies, equipment, other assets or services, if entered into in the ordinary course, in excess of $1,000,000; (vii) any agreement relating to indebtedness for borrowed money or deferred purchase price of property in excess of $200,000 (in either case, whether incurred, assumed, guaranteed or secured); (viii) any other contract, agreement or arrangement, entered into other than in the ordinary course of business, -23- 28 requiring future payments in the aggregate in excess of $100,000; or (ix) any contract or other agreement which would prohibit or materially delay the consummation of the transactions contemplated by this Agreement (all contracts of the type described in clauses (i) through (ix) being referred to herein as "Company Material Contracts"). Each Company Material Contract is valid and binding on the Company (or, to the extent a subsidiary of the Company is a party, such subsidiary) and is in full force and effect, and the Company and each subsidiary of the Company have in all material respects performed all obligations required to be performed by them to date under each Company Material Contract, except for such instances which would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. The Company does not have Knowledge, nor has it or any of its subsidiaries received written notice of, any violation or default under nor, to the Knowledge of the Company, does there exist any condition which with the passage of time or the giving of notice or both would result in such violation or default under any Company Material Contract, except in such instances which would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. SECTION 4.25. Affiliated Transactions. Except as set forth in Section 4.25 of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries nor any of their respective officers, directors, employees or affiliates (nor any individual related by blood, marriage or adoption to any such individual), is a party to any agreement, contract, commitment, transaction or understanding with or binding upon the Company or any of its subsidiaries or any of their respective assets or has engaged in any transaction with any of the foregoing within the last twelve months except for customary payments to employees, officers or directors in the ordinary course of business consistent with past practice for services rendered in their capacity as employees, officers or directors. SECTION 4.26. Omission of Material Facts. No statements of the Company contained in this Agreement or in the Company Disclosure Schedule or any certificate or opinion delivered or to be delivered pursuant hereto omits or will omit to state a material fact necessary in order to make any such statement, in light of the circumstances under which it was made, not misleading. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER Parent and the Purchaser represent and warrant to the Company as follows: SECTION 5.1. Organization and Qualification. Each of Parent and the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. Each of Parent and the Purchaser has the requisite corporate power and authority to own, operate or lease its properties and to carry on its business as it is now being conducted, and is duly qualified or licensed to do business, and is in good standing, in each jurisdiction in which the nature of its business or the properties owned, operated or leased by it makes such qualification, licensing or good standing necessary, except where the failure to have such -24- 29 power or authority, or the failure to be so qualified, licensed or in good standing, would not have a Material Adverse Effect on Parent. The term "Material Adverse Effect on Parent," as used in this Agreement, means any change in or effect on the business, assets, liabilities, financial condition, results of operation or prospects of Parent or any of its subsidiaries that would be materially adverse to Parent and its subsidiaries taken as a whole. SECTION 5.2. Authority. Each of Parent and the Purchaser has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and the Purchaser and the consummation by Parent and the Purchaser of the transactions contemplated hereby have been duly and validly authorized and approved by the respective Boards of Directors of Parent and the Purchaser and by Parent as sole stockholder of the Purchaser and no other corporate proceedings on the part of Parent or the Purchaser are necessary to authorize or approve this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of Parent and the Purchaser and, assuming the due and valid authorization, execution and delivery by the Company, constitutes a valid and binding obligation of each of Parent and the Purchaser enforceable against each of them in accordance with its terms. SECTION 5.3. No Conflict; Required Filings and Consents (a) Assuming (i) the filings required under the HSR Act are made and the waiting periods thereunder have terminated or have expired, (ii) the requirements of the Exchange Act and any applicable state securities, "blue sky" or takeover law are met and (iii) the filing of the certificate of merger and other appropriate merger documents, if any, as required by the GCL, is made, none of the execution and delivery of this Agreement by Parent or the Purchaser, the consummation by Parent or the Purchaser of the transactions contemplated hereby or compliance by Parent or the Purchaser with any of the provisions hereof will (i) conflict with or violate the organizational documents of Parent or the Purchaser, (ii) conflict with or violate any statute, ordinance, rule, regulation, order, judgment, decree, permit or license applicable to Parent or the Purchaser or any of their subsidiaries, or by which any of them or any of their respective properties or assets may be bound or affected, or (iii) result in a violation pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or the Purchaser or any of their subsidiaries is a party or by which Parent or the Purchaser or any of their subsidiaries or any of their respective properties or assets may be bound or affected. (b) None of the execution and delivery of this Agreement by Parent and the Purchaser, the consummation by Parent and the Purchaser of the transactions contemplated hereby or compliance by Parent and the Purchaser with any of the provisions hereof will require any Consent of any Governmental Entity, except for (i) compliance with any applicable requirements of the Exchange Act and any state securities, "blue sky" or takeover law, (ii) the filing of a certificate of merger pursuant to the GCL, (iii) compliance with the HSR Act and (iv) such Consents that become applicable solely as a result of the business, operations or regulatory status of the Company or any of its subsidiaries. -25- 30 SECTION 5.4. Information. None of the information supplied or to be supplied by Parent and the Purchaser for inclusion in (i) the Schedule 14D-9, (ii) the Proxy Statement or (iii) the Other Filings will, at the respective times filed with the SEC or such other Governmental Entity and, in addition, in the case of the Proxy Statement, at the date it or any amendment or supplement is mailed to stockholders, at the time of the Special Meeting and at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. SECTION 5.5. Financing. Parent and Purchaser collectively have and will have at the closing of the Offer and the Effective Time and Parent will make available to Purchaser sufficient funds available to enable Purchaser to purchase all Common Shares, on a fully diluted basis, and to pay all fees and expenses related to the transactions contemplated by this Agreement payable by them. ARTICLE VI COVENANTS SECTION 6.1. Conduct of Business of the Company. Except as contemplated by this Agreement or otherwise with the prior written consent of Parent, during the period from the date of this Agreement to the Effective Time, the Company will, and will cause each of its subsidiaries to, conduct its operations only in the ordinary and usual course of business consistent with past practice and will use its reasonable best efforts, and will cause each of its subsidiaries to use its reasonable best efforts, to preserve intact the business organization of the Company and each of its subsidiaries, to keep available the services of its and their present officers and employees, and to preserve the good will of those having business relationships with it, including, without limitation, maintaining satisfactory relationships with licensors, suppliers, customers and others having business relationships with the Company and its subsidiaries. Without limiting the generality of the foregoing, and except as otherwise contemplated by this Agreement, the Company will not, and will not permit any of its subsidiaries to, prior to the Effective Time, without the prior written consent of Parent: (a) adopt any amendment to its certificate of incorporation or by-laws or comparable organizational documents or the Rights Agreement or adopt a plan of merger, consolidation, reorganization, dissolution or liquidation; (b) sell, pledge or encumber any stock owned by it in any of its subsidiaries; (c) (i) issue, reissue or sell, or authorize the issuance, reissuance or sale of (A) additional shares of capital stock of any class, or securities convertible into capital stock of any class, or any rights, warrants or options to acquire any convertible securities or capital stock, other than the issuance of Common Shares (and the related Rights), in accordance with the terms of the instruments governing such issuance on the date hereof, pursuant to the exercise or conversion of Options and any Exchangeable Shares outstanding on the date hereof, or (B) any other -26- 31 securities in respect of, in lieu of, or in substitution for, Common Shares or any other capital stock of any class outstanding on the date hereof or (ii) make any other changes in its capital structure; (d) declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) in respect of any class or series of its capital stock other than between any of the Company and any of its wholly owned subsidiaries; (e) split, combine, subdivide, reclassify or redeem, purchase or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any shares of its capital stock, or any of its other securities (except as disclosed in Section 6.1(e) of the Company Disclosure Schedule); (f) increase the compensation or fringe benefits payable or to become payable to its directors, officers or, except in the ordinary course of business consistent with past practice, employees (whether from the Company or any of its subsidiaries), or pay or award any benefit not required by any existing plan or arrangement to any officer, director or employee (including, without limitation, the granting of stock options, stock appreciation rights, shares of restricted stock or performance units pursuant to the Stock Plans or otherwise), or grant any severance or termination pay to any officer, director or other employee of the Company or any of its subsidiaries (other than as required by existing agreements or policies described in Section 6.01 of the Company Disclosure Schedule), or enter into any employment or severance agreement with, any director, officer or other employee of the Company or any of its subsidiaries or establish, adopt, enter into, amend, or waive any performance or vesting criteria under any Plan for the benefit or welfare of any current or former directors, officers or employees of the Company or its subsidiaries or their beneficiaries or dependents (any of the foregoing being an "Employee Benefit Arrangement"), except, in each case, to the extent required by applicable law or regulation; (g) acquire, mortgage, encumber, sell, pledge, lease, license or dispose of any assets (including Intellectual Property) or securities, except pursuant to existing contracts or commitments entered into in the ordinary course of business consistent with past practice, or enter into any contract, arrangement, commitment or transaction outside the ordinary course of business consistent with past practice other than transactions between a wholly owned subsidiary of the Company and the Company or another wholly owned subsidiary of the Company; (h) (i) incur, assume or prepay any long-term debt or incur or assume any short-term debt, except that the Company and its subsidiaries may incur or prepay debt in the ordinary course of business in amounts and for purposes consistent with past practice under existing lines of credit, (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person except in the ordinary course of business consistent with past practice, (iii) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, contingent or otherwise), except in the ordinary course of business consistent with past practice, (iv) make any loans, advances or capital contributions to, or investments in, any other person or entity, except for loans, advances, capital contributions or investments between any wholly owned subsidiary of the Company and the -27- 32 Company or another wholly owned subsidiary of the Company, (v) authorize or make capital expenditures in excess of $50,000, (vi) materially accelerate or delay collection of notes or accounts receivable in advance of or beyond their regular due dates or the dates when the same would have been collected in the ordinary course of business consistent with past practice, (vii) materially delay or accelerate payment of accounts payable beyond or in advance of its due date or the date such liability would have been paid in the ordinary course of business consistent with past practice, or (viii) vary the Company's inventory practices in any material respect from the Company's past practices; (i) settle or compromise any suit or claim or threatened suit or claim where the amount involved is greater than $50,000; (j) other than in the ordinary course of business consistent with past practice, (i) modify, amend or terminate any material contract, (ii) waive, release, relinquish or assign any contract (or any of the rights of the Company or any of its subsidiaries thereunder), right or claim, or (iii) cancel or forgive any indebtedness (other than with respect to indebtedness which is de minimus in the aggregate) owed to the Company or any of its subsidiaries; provided, however, that neither the Company nor any of its subsidiaries may under any circumstance waive or release any of its rights under any confidentiality agreement to which it is a party; (k) make any tax election not required by law or settle or compromise any tax liability; (l) cancel or terminate any insurance policy naming it as a beneficiary or a loss payable payee, except in the ordinary course of business consistent with past practice; (m) acquire (by merger, consolidation, acquisition of stock or assets, combination or other similar transaction) any material corporation, partnership or other business organization or division or assets thereof; (n) except as may be required as a result of a change in law or in GAAP or the rules of the SEC, make any change in its methods of accounting, including tax accounting policies and procedures; (o) enter into any agreement of a nature that would be required to be filed as an exhibit to Form 10-K under the Exchange Act or make or submit any bids or proposals in excess of $1,000,000 with respect to any services proposed to be rendered in any location in Latin America, or in excess of $3,000,000 with respect to any services proposed to be rendered in any location outside of Latin America, provided that Parent agrees not to unreasonably withhold or delay its consent with respect to such bids or proposals and provided further that Parent agrees that any information provided by the Company relating to such bids or proposals shall (i) be treated confidentially, (ii) shall not be disclosed to any employees of Parent or its subsidiaries who are involved in preparing or substantively analyzing a bid or proposal on behalf of Parent or any of its subsidiaries relating to such services at the applicable location and (iii) shall not be used to the detriment of the Company in connection with such bid or proposal; -28- 33 (p) take, or agree to commit to take, any action that would or is reasonably likely to result in any of the conditions to the Offer set forth in Annex I or any of the conditions to the Merger set forth in Article VII not being satisfied, or would make any representation or warranty of the Company contained herein, when read without any exception or qualification as to materiality or Material Adverse Effect, inaccurate in any respect at, or as of any time prior to, the Effective Time except for such inaccuracies which would not be reasonably expected to, individually or in the aggregate, result in a Material Adverse Effect, or that would impair the ability of the Company to consummate the Merger in accordance with the terms hereof or delay such consummation; or (q) agree in writing or otherwise to take any of the foregoing actions prohibited under this Section 6.1. SECTION 6.2. Access to Information. From the date of this Agreement until the Effective Time, the Company will, and will cause its subsidiaries, and each of their respective officers, directors, employees, counsel, advisors and representatives (collectively, the "Company Representatives") to, give Parent and the Purchaser and their respective officers, employees, counsel, advisors and representatives (collectively, the "Parent Representatives") full access, upon reasonable notice and during normal business hours, to the offices and other facilities and to the books and records of the Company and its subsidiaries and will cause the Company Representatives and the Company's subsidiaries to furnish Parent, the Purchaser and the Parent Representatives to the extent available with such financial and operating data and such other information with respect to the business and operations of the Company and its subsidiaries as Parent and the Purchaser may from time to time request subject, in each case, to the continuing obligations of the parties under the Confidentiality Agreement between Parent and the Company dated December 19, 1997, which agreement shall survive until termination pursuant to the terms thereof. The Company shall furnish promptly to Parent and the Purchaser a copy of each report, schedule, registration statement and other document filed by it or its subsidiaries during such period pursuant to the requirements of federal or state or foreign securities laws. SECTION 6.3. Efforts. (a) Subject to the terms and conditions provided herein, each of the Company, Parent and the Purchaser shall, and the Company shall cause each of its subsidiaries to, cooperate and use their respective reasonable commercial efforts to take, or cause to be made, all filings reasonably necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including but not limited to cooperation in the preparation and filing of the Offer Documents, the Schedule 14D-9, the Proxy Statement, any required filings under the HSR Act, or other foreign filings and any amendments to any thereof. In addition, if at any time prior to the Effective Time any event or circumstance relating to either the Company or Parent or the Purchaser or any of their respective subsidiaries should be discovered by the Company or Parent, as the case may be, which should be set forth in -29- 34 an amendment to the Offer Documents or Schedule 14D-9, the discovering party will promptly inform the other party of such event or circumstance. (b) Each of the parties will use its reasonable commercial efforts to obtain as promptly as practicable all Consents of any Governmental Entity or any other person required in connection with, and waivers of any Violations that may be caused by, the consummation of the transactions contemplated by the Offer and this Agreement. SECTION 6.4. Public Announcements. The Company, on the one hand, and Parent and the Purchaser, on the other hand, agree to consult promptly with each other prior to issuing any press release or otherwise making any public statement with respect to the Offer, the Merger and the other transactions contemplated hereby, agree to provide to the other party for review a copy of any such press release or statement, and shall not issue any such press release or make any such public statement prior to such consultation and review, unless required by applicable law or any listing agreement with a securities exchange. SECTION 6.5. Employee Benefit Arrangements. (a) The Company shall, and Parent agrees to cause the Company to, honor and, from and after the Effective Time, the Surviving Corporation to honor, all obligations under the employment and severance agreements to which the Company or any of its subsidiaries is presently a party which are listed in Section 6.05 of the Company Disclosure Schedule. Notwithstanding the foregoing, from and after the Effective Time, the Surviving Corporation shall have the right to amend, modify, alter or terminate any Plan, provided that any such action shall not affect any rights for which the agreement or consent of the other party or a beneficiary is required. Employees of the Surviving Corporation immediately following the Effective Time who immediately prior to the Effective Time were employees of the Company or any Company subsidiary shall be given credit for purposes of eligibility and vesting under each employee benefit plan, program, policy or arrangement of the Parent or the Surviving Corporation in which such employees participate subsequent to the Effective Time for all service with the Company and any Company subsidiary prior to the Effective Time (to the extent such credit was given by the Company or any Company subsidiary) for purposes of eligibility and vesting. (b) The Company will not take any action which could prevent or impede the termination of the 1995 Long-Term Incentive Compensation Plan, as amended, the 1997 Long-Term Incentive Compensation Plan Stock Incentive Plan and all other Stock Plans and any other plans, programs or arrangements providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any subsidiary of the Company in each case effective prior to the Effective Time. The Company will take all necessary action to (i) ensure that none of Parent, the Company or any of their respective subsidiaries is or will be bound by any Options, other options, warrants, rights or agreements which would entitle any Person, other than Parent or its affiliates, to own any capital stock of the Surviving Corporation or any of its subsidiaries or to receive any payment in respect thereof as of the Effective Time and (ii) obtain all necessary consents so that after the Effective Time, holders of Options will have no rights other -30- 35 than the rights of the holders of Options to receive the Cash Payment, if any, in cancellation and settlement thereof. SECTION 6.6. Indemnification. (a) Parent agrees that all rights to indemnification now existing in favor of any director or officer of the Company and its subsidiaries (the "Indemnified Parties") as provided in their respective charters or by-laws shall survive the Merger and shall continue in full force and effect for a period of not less than six years from the Effective Time. After the Effective Time, Parent agrees to cause the Surviving Corporation to honor all rights to indemnification referred to in the preceding sentence. (b) Parent agrees to cause the Company, and from and after the Effective Time, the Surviving Corporation to maintain in effect for not less than four years (except as provided in the last sentence of this Section 6.6(b)) from the Effective Time the current policies of the directors' and officers' liability insurance maintained by the Company; provided that the Surviving Corporation may substitute therefor other policies not less advantageous (other than to a de minimus extent) to the beneficiaries of the current policies and provided that such substitution shall not result in any gaps or lapses in coverage with respect to matters occurring prior to the Effective Time; and provided, further, that the Surviving Corporation shall not be required to pay an annual premium in excess of 175% of the last annual premium paid by the Company prior to the date hereof (which the Company represents to be $100,000 for the 12-month period ending December 31, 1998) and if the Surviving Corporation is unable to obtain the insurance required by this Section 6.6(b) it shall obtain as much comparable insurance as possible for an annual premium equal to such maximum amount. Notwithstanding the foregoing, at any time on or after the first anniversary of the Effective Time, Parent may, at its election, provide funds to the Surviving Corporation to the extent necessary so that the Surviving Corporation may self-insure with respect to the level of insurance coverage required under this Section 6.6(b) in lieu of causing to remain in effect any directors' and officers' liability insurance policy. (c) Any Indemnified Party wishing to claim indemnification under paragraph (a) of this Section 6.6, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify Parent thereof (but any such failure or delay shall not relieve Parent of liability except to the extent Parent is actually prejudiced as a result of such failure or delay). In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) Parent or the Surviving Corporation shall have the right, from and after the purchase of Common Shares pursuant to the Offer, to assume the defense thereof and Parent shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, (ii) the Indemnified Parties will cooperate in the defense of any such matter and (iii) Parent shall not be liable for any settlement effected without its prior written consent, provided that Parent shall not have any obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final, that such person is not entitled to indemnification under applicable law. Any Indemnified Party may retain its own separate counsel reasonably satisfactory to Parent if there is a -31- 36 conflict of interest requiring separate representation under applicable principles of professional responsibility and may participate in (but not, except with respect to matters relating to such conflict, control) the defense of such claim, action, suit, proceeding or investigation and the Indemnifying Party shall be responsible for any reasonable legal expenses or any other reasonable expenses subsequently incurred by such Indemnified Party in connection with such participation or defense to the extent such Indemnified Party is entitled to be indemnified therefrom pursuant to this Section 6.6. Parent shall not settle any claim, action, suit, proceeding or investigation unless the Indemnified Party shall be fully released and discharged. SECTION 6.7. Notification of Certain Matters. Parent and the Company shall promptly notify each other of (i) the occurrence or non-occurrence of any fact or event which would be reasonably likely (A) to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the Effective Time or (B) to cause any covenant, condition or agreement under this Agreement not to be complied with or satisfied in any material respect and (ii) any failure of the Company or Parent, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder in any material respect; provided, however, that no such notification shall affect the representations or warranties of any party or the conditions to the obligations of any party hereunder. Each of the Company, Parent and the Purchaser shall give prompt notice to the other parties hereof of any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement. SECTION 6.8. Rights Agreement. The Company covenants and agrees that it will not (i) redeem the Rights, (ii) amend the Rights Agreement or (iii) take any action which would allow any Person (as defined in the Rights Agreement) other than Parent or the Purchaser to acquire beneficial ownership of 15% or more of the Common Shares without causing a Distribution Date or a Triggering Event to occur. SECTION 6.9. State Takeover Laws. The Company shall, upon the request of the Purchaser, take all reasonable steps to assist in any challenge by the Purchaser to the validity or applicability to the transactions contemplated by this Agreement, including the Offer and the Merger, of any state takeover law. SECTION 6.10. No Solicitation. (a) The Company, its affiliates and their respective officers, directors, employees, representatives and agents shall immediately cease any existing discussions or negotiations, if any, with any parties conducted heretofore with respect to any acquisition or exchange of all or any material portion of the assets of, or any equity interest in, the Company or any of its subsidiaries or any business combination with the Company or any of its subsidiaries. The Company agrees that, prior to the Effective Time, it shall not, and shall not authorize or permit any of its subsidiaries or any of its or its subsidiaries' directors, officers, employees, agents or representatives, directly or indirectly, to solicit, initiate, encourage or facilitate, or furnish or disclose non-public information in furtherance of, any inquiries or the making of any proposal with respect to -32- 37 any merger, liquidation, recapitalization, consolidation or other business combination involving the Company or its subsidiaries or acquisition of any capital stock or any material portion of the assets of the Company or its subsidiaries, or any combination of the foregoing (an "Acquisition Transaction"), or negotiate, explore or otherwise engage in discussions with any person (other than the Purchaser, Parent or their respective directors, officers, employees, agents and representatives) with respect to any Acquisition Transaction or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by this Agreement; provided that the Company may furnish information to, and negotiate or otherwise engage in discussions with, any party who delivers a bona fide written proposal for an Acquisition Transaction if the Company Board determines in good faith and on a reasonable basis by a majority vote, after consultation with its outside legal counsel and SSB, that (i) such Acquisition Transaction is reasonably likely to be more favorable to the stockholders of the Company from a financial point of view than the transactions contemplated by this Agreement and (ii) that failing to take such action would thus constitute a breach of the fiduciary duties of the Company Board. (b) From and after the execution of this Agreement, the Company shall, as soon as practicable, advise the Purchaser in writing of the receipt, directly or indirectly, of any discussions, negotiations, proposals or substantive inquiries relating to an Acquisition Transaction, identify the offeror and furnish to the Purchaser a copy of any such proposal or substantive inquiry, if it is in writing, or a written summary of any oral proposal or substantive inquiry relating to an Acquisition Transaction. The Company shall as soon as practicable advise Parent in writing of any substantive development relating to such proposal, including the results of any substantive discussions or negotiations with respect thereto. ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER SECTION 7.1. Conditions. The respective obligations of Parent, the Purchaser and the Company to consummate the Merger are subject to the satisfaction, at or before the Effective Time, of each of the following conditions: (a) Stockholder Approval. The stockholders of the Company shall have duly approved the transactions contemplated by this Agreement, if required by applicable law. (b) Purchase of Common Shares. The Purchaser shall have accepted for payment and paid for Common Shares pursuant to the Offer in accordance with the terms hereof. (c) Injunctions; Illegality. The consummation of the Merger shall not be restrained, enjoined or prohibited by any order, judgment, decree, injunction or ruling of a court of competent jurisdiction or any Governmental Entity and there shall not have been any statute, rule or regulation enacted, promulgated or deemed applicable to the Merger by any Governmental Entity which prevents the consummation of the Merger or has the effect of making the purchase of Common Shares illegal. -33- 38 (d) HSR Act. Any waiting period (and any extension thereof) under the HSR Act applicable to the Merger shall have expired or terminated. ARTICLE VIII TERMINATION; AMENDMENTS; WAIVER SECTION 8.1. Termination. This Agreement may be terminated and the Merger contemplated hereby may be abandoned at any time prior to the Effective Time, notwithstanding approval thereof by the stockholders of the Company (with any termination by Parent also being an effective termination by the Purchaser): (a) by the mutual written consent of the Company, by action of its Board of Directors and Parent; (b) by the Company if (i) the Purchaser fails to commence the Offer as provided in Section 1.1 hereof, (ii) the Purchaser shall not have accepted for payment and paid for Common Shares pursuant to the Offer in accordance with the terms thereof on or before June 30, 1998, provided that if any applicable waiting period under the HSR Act shall not have expired or been terminated prior to June 30, 1998, then the Company may not terminate this Agreement pursuant to this Section 8.1(c)(ii) until August 31, 1998 or (iii) the Purchaser fails to purchase validly tendered Common Shares in violation of the terms of this Agreement; (c) by Parent or the Company if the Offer is terminated or withdrawn pursuant to its terms without any Common Shares being purchased thereunder; provided, however, that neither Parent nor the Company may terminate this Agreement pursuant to this Section 8.1(c) if such party shall have materially breached this Agreement or, in the case of Parent, if it or the Purchaser is in material violation of the terms of the Offer; (d) by Parent or the Company if any court or other Governmental Entity shall have issued an order, decree, judgment or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, Common Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action shall have become final and nonappealable; (e) by the Company if, prior to the purchase of Common Shares pursuant to the Offer in accordance with the terms of this Agreement, the Company Board approves an Acquisition Transaction, on terms which a majority of the members of the Company Board have determined in good faith and on a reasonable basis, after consultation with its outside counsel and SSB, that (i) such Acquisition Transaction is more favorable to the Company and its stockholders from a financial point of view than the transactions contemplated by this Agreement and (ii) failure to approve such proposal and terminate this Agreement would thus constitute a breach of fiduciary duties of the Company Board under applicable law; provided that the termination described in this Section 8.1(e) shall not be effective unless and until the Company shall have paid to Parent the Termination Fee (as defined in Section 8.3(b)); -34- 39 (f) by Parent if the Company breaches its covenant in Section 6.8; (g) by Parent prior to the purchase of Common Shares pursuant to the Offer, if the Company Board shall have withdrawn or modified (including by amendment of the Schedule 14D-9) in a manner adverse to the Purchaser its approval or recommendation of the Offer, this Agreement or the Merger, shall have approved or recommended another offer or transaction, or shall have resolved to effect any of the foregoing; (h) by Parent if any Management Stockholder shall have failed to perform or to comply with any of his obligations, covenants or agreements in any material respect under a Support Agreement; (i) by Parent prior to the purchase of Common Shares pursuant to the Offer if the Minimum Condition (as defined in Annex I) shall not have been satisfied by the expiration date of the Offer and on or prior to such date (A) a third party shall have made a proposal or public announcement or communication to the Company with respect to (i) the acquisition of the Company by merger, tender offer or otherwise; (ii) the acquisition of 50% or more of the assets of the Company and its subsidiaries, taken as a whole; (iii) the acquisition of 15% or more of the outstanding Common Shares; (iv) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (v) the repurchase by the Company or any of its subsidiaries of 15% or more of the outstanding Common Shares at a price in excess of the Offer Price or (B) any person (including the Company or any of its affiliates or subsidiaries), other than Parent or any of its affiliates, shall have become the beneficial owner of more than 15% of the Common Shares; or (j) by Parent if Purchaser shall not have accepted for payment and paid for Common Shares pursuant to the Offer in accordance with the terms thereof on or before June 30, 1998. SECTION 8.2. Effect of Termination. In the event of the termination of this Agreement pursuant to Section 8.1, this Agreement shall forthwith become void and have no effect, without any liability on the part of any party or its directors, officers, employees or stockholders, other than the provisions of this Section 8.2 and Section 8.3, which shall survive any such termination. Nothing contained in this Section 8.2 or elsewhere in this Agreement shall relieve any party from liability for any breach of this Agreement. SECTION 8.3. Fees and Expenses. (a) Whether or not the Merger is consummated, except as otherwise specifically provided herein, all costs and expenses incurred in connection with the Offer, this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses. (b) In the event that this Agreement is terminated pursuant to Section 8.1(e), (f), (g), or (h) or pursuant to Section 8.1(c) as a result of the failure to satisfy any of the conditions set forth in paragraph (d) of Annex I, then the Company shall within one business day after such -35- 40 termination pay Parent (except in the case of termination pursuant to Section 8.1(e) in which case payment shall be made upon or prior to such termination) a termination fee of $5,500,000 (the "Termination Fee") in immediately available funds by wire transfer to an account designated by Parent. In the event that this Agreement is terminated pursuant to Section 8.1(i) and within six months of such termination the Company shall have entered into a definitive agreement or a written agreement in principle providing for an Acquisition Transaction, the Company shall pay Parent the Termination Fee at or prior to execution of such agreement or agreement in principle in immediately available funds by wire transfer to an account designated by Parent. In the event this Agreement is terminated pursuant to Section 8.1(c) as a result of the failure to satisfy the conditions set forth in paragraphs (f) or (g)(1) of Annex I, then the Company shall promptly (and in any event within one business day after such termination and receipt of notice by Parent specifying, in reasonable detail, such fees and expenses) reimburse Parent for the fees and expenses of Parent and the Purchaser (including reasonable printing fees, filing fees and reasonable fees and expenses of its legal and financial advisors) related to the Offer, this Agreement, the transactions contemplated hereby and any related financing up to a maximum of $1,500,000 (collectively "Expenses") in immediately available funds by wire transfer to an account designated by Parent. (c) The prevailing party in any legal action undertaken to enforce this Agreement or any provision hereof shall be entitled to recover from the other party the costs and expenses (including attorneys' and expert witness fees) incurred in connection with such action. SECTION 8.4. Amendment. This Agreement may be amended by the Company, Parent and the Purchaser at any time before or after any approval of this Agreement by the stockholders of the Company but, after any such approval, no amendment shall be made which decreases the Merger Price, changes the consideration to be received or which otherwise adversely affects the rights of the Company's stockholders hereunder without the approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of all the parties. Any amendment to this Agreement following the election or appointment of Parent's designees pursuant to Section 1.3 shall be made only in accordance with Section 1.3(c). SECTION 8.5. Extension; Waiver. Subject to Section 1.3(c), at any time prior to the Effective Time, the parties hereto may (i) extend the time for the performance of any of the obligations or other acts of any other party hereto, (ii) waive any inaccuracies in the representations and warranties contained herein by any other party or in any document, certificate or writing delivered pursuant hereto by any other party or (iii) waive compliance with any of the agreements of any other party or with any conditions to its own obligations. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. -36- 41 ARTICLE IX MISCELLANEOUS SECTION 9.1. Non-Survival of Representations and Warranties. The representations and warranties made in this Agreement shall not survive beyond the Effective Time. Notwithstanding the foregoing, the agreements set forth in Article III and Sections 6.5(a) and 6.6 shall survive the Effective Time indefinitely (except to the extent a shorter period of time is explicitly specified therein). SECTION 9.2. Entire Agreement; Assignment. (a) This Agreement (including the documents and the instruments referred to herein) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof. (b) Neither this Agreement nor any of the rights, interests or obligations hereunder will be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of each other party (except that Parent may assign its rights and the Purchaser may assign its rights, interest and obligations to any affiliate or direct or indirect subsidiary of Parent without the consent of the Company provided that no such assignment shall relieve Parent of any liability for any breach by such assignee). Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. SECTION 9.3. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, each of which shall remain in full force and effect. SECTION 9.4. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by overnight courier or facsimile to the respective parties as follows: If to Parent or the Purchaser: Western Atlas Inc. 10205 Westheimer Road Houston, Texas 77042-3115 Attention: James E. Brasher, Esq. Fax: (713) 266-1717 -37- 42 with a copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attention: Daniel A. Neff, Esq. Fax: (212) 403-2000 If to the Company: 3-D Geophysical, Inc. 599 Lexington Avenue Suite 4102 New York, New York 10022 Attention: Joel Friedman Fax: (212) 317-9230 with a copy to: Kramer, Levin, Naftalis & Frankel 919 Third Avenue New York, New York 10022 Attention: Peter S. Kolevzon, Esq. Fax: (212) 715-8000 or to such other address as the person to whom notice is given may have previously furnished to the other in writing in the manner set forth above; provided that notice of any change of address shall be effective only upon receipt thereof. SECTION 9.5. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. SECTION 9.6. Descriptive Headings. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. SECTION 9.7. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. SECTION 9.8. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and, except with respect to Sections 6.5(a) and 6.6, nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. -38- 43 SECTION 9.9. Certain Definitions. As used in this Agreement: (a) the term "affiliate", as applied to any Person, shall mean any other person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise; (b) the term "Person" or "person" shall include individuals, corporations, partnerships, trusts, other entities and groups (which term shall include a "group" as such term is defined in Section 13(d)(3) of the Exchange Act); and (c) the term "subsidiary" or "subsidiaries" means, with respect to Parent, the Company or any other person, any corporation, partnership, joint venture or other legal entity of which Parent, the Company or such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, stock or other equity interests the holders of which are generally entitled to 50% or more of the vote for the election of the board of directors or other governing body of such corporation or other legal entity. SECTION 9.10. Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity, without posting any bond or proving that damages would be inadequate. -39- 44 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its respective officer thereunto duly authorized, all as of the day and year first above written. WESTERN ATLAS INC. By: /s/ Richard White --------------------------------- Name: Richard White Title: WAI ACQUISITION CORP. By: /s/ Richard White --------------------------------- Name: Richard White Title: 3-D GEOPHYSICAL, INC. By: /s/ Joel Friedman --------------------------------- Name: Joel Friedman Title: -40- 45 Annex I The capitalized terms used in this Annex I shall have the meanings set forth in the Agreement and Plan of Merger to which this Annex is attached, except that the term "Merger Agreement" shall be deemed to refer to such Agreement and Plan of Merger. Conditions to the Offer. Notwithstanding any other provisions of the Offer, the Purchaser shall not be required to accept for payment or pay for any tendered Common Shares and may terminate or, subject to the terms of the Merger Agreement, amend the Offer, if (i) there shall not be validly tendered and not properly withdrawn prior to the expiration date for the Offer (the "Expiration Date") that number of Common Shares which represents at least a majority of the total number of outstanding Common Shares on a fully diluted basis on the date of purchase (not taking into account the Rights) (the "Minimum Condition"), (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated, or (iii) at any time on or after March 8, 1998 and prior to the time of payment for any Common Shares, any of the following exist: (a) there shall be any action taken, or any statute, rule, regulation, legislation, interpretation, ruling, judgment, order or injunction enacted, enforced, promulgated, amended, issued or deemed applicable to the Offer, by any legislative body, court, government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would reasonably be expected to, directly or indirectly: (1) make illegal or otherwise prohibit or materially delay consummation of the Offer or the Merger or seek to obtain material damages or make materially more costly the making of the Offer, (2) prohibit or materially limit the ownership or operation by Parent or the Purchaser of all or any portion of the business or assets of the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or compel Parent or the Purchaser to dispose of or hold separately all or any portion of the business or assets of Parent or the Purchaser or the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or impose any material limitation on the ability of Parent or the Purchaser to conduct its business or own such assets, (3) impose material limitations on the ability of Parent or the Purchaser effectively to acquire, hold or exercise full rights of ownership of the Common Shares, including, without limitation, the right to vote any Common Shares acquired or owned by the Purchaser or Parent on all matters properly presented to the Company's stockholders, (4) require divestiture by Parent or the Purchaser of any Common Shares, or (5) result in a Material Adverse Effect; or (b) there shall be instituted or pending any action or proceeding by any Governmental Entity seeking, or by any third party that would reasonably be expected to result in, any of the consequences referred to in clauses (1) through (5) of paragraph (a) above; or (c) any change shall have occurred or been threatened (or any development shall have occurred or been threatened involving prospective change) in the business, assets, liabilities, financial condition, results of operations or prospects of the Company or any of its subsidiaries that has, or would reasonably be expected to have, a Material Adverse Effect; or 46 (d) (1) it shall have been publicly disclosed or the Purchaser shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph (d) as set forth in Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the outstanding Common Shares has been acquired by any person (including the Company or any of its subsidiaries or affiliates) or group (as defined in Section 13(d)(3) under the Exchange Act), (2) the Company Board or any committee thereof shall have withdrawn, or shall have modified or amended in a manner adverse to Parent or the Purchaser, the approval, adoption or recommendation, as the case may be, of the Offer or the Merger Agreement, or approved or recommended any other takeover proposal or other acquisition of Common Shares other than the Offer and the Merger, (3) a third party shall have entered into a definitive agreement or a written agreement in principle with the Company with respect to the acquisition of a majority of the Company's assets, a tender offer or exchange offer to be made to holders of Common Shares or a merger, consolidation or other business combination with or involving the Company or any of its subsidiaries, or (4) the Company Board or any committee thereof shall have resolved to do any of the foregoing; or (e) the Company and the Purchaser and Parent shall have reached an agreement that the Offer or the Merger Agreement be terminated, or the Merger Agreement shall have been terminated in accordance with its terms; or (f) any of the representations and warranties of the Company set forth in the Merger Agreement, when read without any exception or qualification as to materiality or Material Adverse Effect, shall not be true and correct, as if such representations and warranties were made at the time of such determination (except as to any such representation or warranty which speaks as of a specific date, which must be untrue or incorrect as of such specific date), except where the failure or failures to be so true and correct would not, individually or in the aggregate, reasonably be expected to (i) have a Material Adverse Effect, (ii) prevent or materially delay the consummation of the Offer, or (iii) materially increase the cost of the Offer to the Purchaser; or (g) (1) the Company shall have failed to perform or to comply with any of its obligations, covenants or agreements under the Merger Agreement in any material respect or (2) any Management Stockholder shall have failed to perform or to comply in any material respect with any of his obligations, covenants or agreements under a Support Agreement; or (h) any Consent set forth in Section 4.05 of the Company Disclosure and identified thereon as a "required Consent" shall not have been filed or obtained or shall not have occurred, as the case may be; or (i) there shall have occurred, and continued to exist, (1) any general suspension of, or limitation on prices for, trading in securities on the New York Stock Exchange or in the NASDAQ National Market System, (2) any decline of at least 25% in either the Dow Jones Average of Industrial Stocks or the Standard & Poor's 500 Index from the -2- 47 close of business on the last trading day immediately preceding the date of the Merger Agreement, (3) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (4) a commencement of a war, armed hostilities or other national or international crisis directly or indirectly involving the United States, with the exception of any military action directed against the nation of Iraq, or a material limitation (whether or not mandatory) by any Governmental Entity on the extension of credit by banks or other lending institutions, or (5) in the case of any of the foregoing clauses (1) through (4) existing at the time of the commencement of the Offer, a material acceleration or worsening thereof. The foregoing conditions (including those set forth in clauses (i) and (ii) of the initial paragraph) are for the benefit of Parent and the Purchaser and may be asserted by Parent or the Purchaser regardless of the circumstances giving rise to any such conditions and may be waived by Parent or the Purchaser, in whole or in part, at any time and from time to time in their reasonable discretion, in each case, subject to the terms of the Merger Agreement. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. -3- EX-99.C5 10 FORM OF SUPPORT AGREEMENT 1 Exhibit (c)(5) SUPPORT AGREEMENT (this "Agreement"), dated as of March 8, 1998, by and between Western Atlas Inc., a Delaware corporation ("Parent"), and ________________________ ("Seller"). WHEREAS, concurrently herewith, Parent, WAI Acquisition Corp. (the "Purchaser"), a Delaware corporation and a subsidiary of Parent, and 3-D Geophysical, Inc. (the "Company"), a Delaware corporation, are entering into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement", which term shall not include any amendment to such Agreement which decreases the Offer Price or changes the form of consideration payable in the Offer, unless Seller consents to the inclusion of such amendment in such term). Capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement, pursuant to which the Purchaser agrees to make a tender offer (the "Offer") for all outstanding shares of common stock, par value $.01 per share (the "Shares"), of the Company, at $9.65 per share (the "Offer Price") net to the seller in cash, to be followed by a merger (the "Merger") of the Purchaser with and into the Company; WHEREAS, as of the date hereof, Seller beneficially owns directly ______________ Shares (the "Owned Shares"); WHEREAS, as a condition to their willingness to enter into the Merger Agreement and make the Offer, Parent and the Purchaser have required that Seller agree, and Seller hereby agrees, (i) to tender pursuant to the Offer the Owned Shares, together with any Shares acquired after the date hereof and prior to the termination of the Offer, whether upon the exercise of options, conversion of convertible securities or otherwise (collectively, the "Tender Shares") on the terms and subject to the conditions provided for in this Agreement and (ii) to enter into the other agreements set forth herein; and NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration given to each party hereto, the receipt of which is hereby acknowledged, the parties agree as follows: 1. Agreement to Tender and Vote. 1.1 Tender. Seller hereby agrees to validly tender (or cause the record owner of such shares to validly tender), pursuant to and in accordance with the terms of the Offer, as soon as practicable after commencement of the Offer but in no event later than five business days after the date of commencement of the Offer, the Tender Shares by physical delivery of the certificates therefor and to not withdraw such Tender Shares, except following termination of this Agreement pursuant to Section 2 hereof. Seller hereby acknowledges and agrees that Parent's and the Purchaser's obligation to accept for payment and pay for the Tender Shares is subject to the terms and conditions of the Offer. Seller hereby permits Parent and the Purchaser to publish and disclose in the Offer Documents and, if approval of the Company's stockholders is required under applicable law, the Proxy Statement (including all documents and schedules filed with the Securities and Exchange Commission) his identity and ownership of the Tender Shares and the nature of his commitments, arrangements and understandings under this Agreement. 2 1.2 Voting. Seller hereby agrees that, during the time this Agreement is in effect, at any meeting of the shareholders of the Company, however called, Seller shall (a) vote the Tender Shares in favor of the Merger; (b) vote the Tender Shares against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement; and (c) vote the Tender Shares against any action or agreement (other than the Merger Agreement or the transactions contemplated thereby) that would impede, interfere with, delay, postpone or attempt to discourage the Merger or the Offer, including, but not limited to: (i) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or any of its subsidiaries; (ii) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries or a reorganization, recapitalization or liquidation of the Company and its subsidiaries; (iii) any change in the management or board of directors of the Company, except as otherwise agreed to in writing by the Purchaser; (iv) any material change in the present capitalization or dividend policy of the Company; or (v) any other material change in the Company's corporate structure or business. Seller hereby revokes any proxy previously granted by him with respect to the Tender Shares. 1.3 Grant of Irrevocable Proxy; Appointment of Proxy. (i) Seller hereby irrevocably grants to, and appoints, William H. Flores and James E. Brasher, or either of them, in their respective capacities as officers or directors of Parent, and any individual who shall hereafter succeed to any such office or directorship of Parent, and each of them individually, Seller's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of Seller, to vote the Tender Shares in favor of the Merger and other transactions contemplated by the Merger Agreement, against any Acquisition Transaction and otherwise as contemplated by Section 1.2. (ii) Seller represents that any proxies heretofore given in respect of the Tender Shares are not irrevocable, and that any such proxies are hereby revoked. (iii) Seller understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon Seller's execution and delivery of this Agreement. Seller hereby affirms that the irrevocable proxy set forth in this Section 1.3 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of Seller under this Agreement. Seller hereby further affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked. Seller hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 212(e) of the Delaware General Corporation Law. 1.4 No Inconsistent Arrangements. Seller hereby covenants and agrees that, except as contemplated by this Agreement and the Merger Agreement, it shall not (i) transfer (which term shall include, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Tender Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all -2- 3 of the Tender Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization in or with respect to the Tender Shares, (iv) deposit the Tender Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Tender Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of his obligations hereunder or the transactions contemplated hereby or by the Merger Agreement or which would make any representation or warranty of Seller hereunder untrue or incorrect. 1.5 No Solicitation. Seller hereby agrees that Seller shall not, and shall not permit or authorize any of his affiliates, representatives or agents to, directly or indirectly, encourage, solicit, explore, participate in or initiate discussions or negotiations with, or provide or disclose any information to, any corporation, partnership, person or other entity or group (other than Parent, the Purchaser or any of their affiliates or representatives) concerning any Acquisition Transaction or enter into any agreement, arrangement or understanding requiring the Company to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by the Merger Agreement. Seller will immediately cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Transaction. From and after the execution of this Agreement, Seller shall immediately advise Parent in writing of the receipt, directly or indirectly, of any inquiries, discussions, negotiations or proposals relating to an Acquisition Transaction, identify the offeror and furnish to Parent a copy of any such proposal or inquiry, if it is in writing, or a written summary of any oral proposal or inquiry relating to an Acquisition Transaction. Seller shall promptly advise Parent in writing of any development relating to such proposal, including the results of any discussions or negotiations with respect thereto. Any action taken by the Company or any member of the Board of Directors of the Company including, if applicable, Seller acting in such capacity, in accordance with the proviso to the second sentence of Section 6.10(a) of the Merger Agreement shall be deemed not to violate this Section 1.5. 1.6 Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, Seller hereby agrees to use all reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement and the Merger Agreement. Seller shall promptly consult with Parent and provide any necessary information and material with respect to all filings made by Seller with any Governmental Entity in connection with this Agreement and the Merger Agreement and the transactions contemplated hereby and thereby. 1.7 Waiver of Appraisal Rights. Seller hereby waives any rights of appraisal or rights to dissent from the Merger that he may have. 2. Expiration. This Agreement and Seller's obligation to tender provided hereto shall terminate on the earlier of the payment for the Shares pursuant to the Offer and the termination of the Merger Agreement in accordance with its terms. -3- 4 3. Representation and Warranties. Seller hereby represents and warrants to Parent as follows: (a) Title. Seller has good and valid title to the Tender Shares, free and clear of any lien, pledge, charge, encumbrance or claim of whatever nature and, upon the purchase of the Tender Shares by the Purchaser, Seller will deliver good and valid title to the Tender Shares, free and clear of any lien, charge, encumbrance or claim of whatever nature. (b) Ownership of Shares. On the date hereof, the Owned Shares are owned of record or beneficially by Seller and, on the date hereof, the Owned Shares constitute all of the Shares owned of record or beneficially by Seller. Seller has sole voting power and sole power of disposition with respect to all of the Owned Shares, with no restrictions, subject to applicable federal securities laws, on Seller's rights of disposition pertaining thereto. (c) Power; Binding Agreement. Seller has the legal capacity, power and authority to enter into and perform all of his obligations under this Agreement. The execution, delivery and performance of this Agreement by Seller will not violate any other agreement to which Seller is a party including, without limitation, any voting agreement, stockholders agreement or voting trust. This Agreement has been duly and validly executed and delivered by Seller and constitutes a valid and binding agreement of Seller, enforceable against Seller in accordance with its terms. (d) No Conflicts. Other than in connection with or in compliance with the provisions of the Exchange Act and the HSR Act, no authorization, consent or approval of, or filing with, any court or any public body or authority is necessary for the consummation by Seller of the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not constitute a breach, violation or default (or any event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, encumbrance, pledge, charge or claim upon any of the properties or assets of Seller under, any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument to which Seller is a party or by which his properties or assets are bound. (e) No Finder's Fees. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Seller. -4- 5 4. Additional Shares. Seller hereby agrees, while this Agreement is in effect, to promptly notify Parent of the number of any new Shares acquired by Seller, if any, after the date hereof. 5. Further Assurances. From time to time, at the Parent's request and without further consideration, Seller shall execute and deliver such additional documents and take all such further action as may be reasonably necessary or desirable to consummate and make effective the transactions contemplated by Section 1 of this Agreement. 6. Miscellaneous. 6.1 Non-Survival. The representations and warranties made herein shall terminate upon Seller's sale of the Tender Shares to the Purchaser in the Offer, other than Seller's representation and warranty in Section 3.2(a), which shall survive the sale of the Tender Shares and the termination of this Agreement following such sale. 6.2 Entire Agreement; Assignment. This Agreement (i) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (ii) shall not be assigned by operation of law or otherwise, provided that Parent may assign its rights and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent, but no such assignment shall relieve Parent of its obligations hereunder if such assignee does not perform such obligations. 6.3 Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. 6.4 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given by hand delivery, telegram, telex or telecopy or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: If to Seller: copy to Seller's Counsel: -5- 6 If to Parent: Western Atlas Inc. 10205 Westheimer Road Houston, Texas 77042-3115 Attention: James E. Brasher, Esq. Fax: (713) 266-1717 copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attention: Daniel A. Neff, Esq. Fax: (212) 403-2000 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 6.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 6.6 Specific Performance. Seller recognizes and acknowledges that a breach by him of any covenants or agreements contained in this Agreement will cause Parent to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore Seller agrees that in the event of any such breach Parent shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 6.7 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original, but both of which shall constitute one and the same Agreement. 6.8 Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 6.9 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. -6- 7 IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to be duly executed as of the day and year first above written. WESTERN ATLAS INC. By: --------------------------------- Name: Title: SELLER ---------------------------- Name: -7- EX-99.C6 11 FORM OF SUPPORT AGREEMENT 1 Exhibit (c)(6) SUPPORT AGREEMENT (this "Agreement"), dated as of March 8, 1998, by and between Western Atlas Inc., a Delaware corporation ("Parent"), and Ronald L. Koons ("Seller"). WHEREAS, concurrently herewith, Parent, WAI Acquisition Corp. (the "Purchaser"), a Delaware corporation and a subsidiary of Parent, and 3-D Geophysical, Inc. (the "Company"), a Delaware corporation, are entering into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement", which term shall not include any amendment to such Agreement which decreases the Offer Price or changes the form of consideration payable in the Offer, unless Seller consents to the inclusion of such amendment in such term). Capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement, pursuant to which the Purchaser agrees to make a tender offer (the "Offer") for all outstanding shares of common stock, par value $.01 per share (the "Shares"), of the Company, at $9.65 per share (the "Offer Price") net to the seller in cash, to be followed by a merger (the "Merger") of the Purchaser with and into the Company; WHEREAS, as of the date hereof, Seller beneficially owns directly ______________ Shares (the "Owned Shares"); WHEREAS, as a condition to their willingness to enter into the Merger Agreement and make the Offer, Parent and the Purchaser have required that Seller agree, and Seller hereby agrees, (i) to tender pursuant to the Offer the Owned Shares, together with any Shares acquired after the date hereof and prior to the termination of the Offer, whether upon the exercise of options, conversion of convertible securities or otherwise (collectively, the "Tender Shares") on the terms and subject to the conditions provided for in this Agreement and (ii) to enter into the other agreements set forth herein; and NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration given to each party hereto, the receipt of which is hereby acknowledged, the parties agree as follows: 1. Agreement to Tender and Vote. 1.1 Tender. Seller hereby agrees to validly tender (or cause the record owner of such shares to validly tender), pursuant to and in accordance with the terms of the Offer, as soon as practicable after commencement of the Offer but in no event later than five business days after the date of commencement of the Offer, the Tender Shares by physical delivery of the certificates therefor and to not withdraw such Tender Shares, except following termination of this Agreement pursuant to Section 2 hereof. Seller hereby acknowledges and agrees that Parent's and the Purchaser's obligation to accept for payment and pay for the Tender Shares is subject to the terms and conditions of the Offer. Seller hereby permits Parent and the Purchaser to publish and disclose in the Offer Documents and, if approval of the Company's stockholders is required under applicable law, the Proxy Statement (including all documents and schedules filed with the Securities and Exchange Commission) his identity and ownership of the Tender Shares and the nature of his commitments, arrangements and understandings under this Agreement. 2 1.2 Voting. Seller hereby agrees that, during the time this Agreement is in effect, at any meeting of the shareholders of the Company, however called, Seller shall (a) vote the Tender Shares in favor of the Merger; (b) vote the Tender Shares against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement; and (c) vote the Tender Shares against any action or agreement (other than the Merger Agreement or the transactions contemplated thereby) that would impede, interfere with, delay, postpone or attempt to discourage the Merger or the Offer, including, but not limited to: (i) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or any of its subsidiaries; (ii) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries or a reorganization, recapitalization or liquidation of the Company and its subsidiaries; (iii) any change in the management or board of directors of the Company, except as otherwise agreed to in writing by the Purchaser; (iv) any material change in the present capitalization or dividend policy of the Company; or (v) any other material change in the Company's corporate structure or business. Seller hereby revokes any proxy previously granted by him with respect to the Tender Shares. 1.3 Grant of Irrevocable Proxy; Appointment of Proxy. (i) Seller hereby irrevocably grants to, and appoints, William H. Flores and James E. Brasher, or either of them, in their respective capacities as officers or directors of Parent, and any individual who shall hereafter succeed to any such office or directorship of Parent, and each of them individually, Seller's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of Seller, to vote the Tender Shares in favor of the Merger and other transactions contemplated by the Merger Agreement, against any Acquisition Transaction and otherwise as contemplated by Section 1.2. (ii) Seller represents that any proxies heretofore given in respect of the Tender Shares are not irrevocable, and that any such proxies are hereby revoked. (iii) Seller understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon Seller's execution and delivery of this Agreement. Seller hereby affirms that the irrevocable proxy set forth in this Section 1.3 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of Seller under this Agreement. Seller hereby further affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked. Seller hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 212(e) of the Delaware General Corporation Law. 1.4 No Inconsistent Arrangements. Seller hereby covenants and agrees that, except as contemplated by this Agreement and the Merger Agreement, it shall not (i) transfer (which term shall include, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Tender Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all -2- 3 of the Tender Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization in or with respect to the Tender Shares, (iv) deposit the Tender Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Tender Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of his obligations hereunder or the transactions contemplated hereby or by the Merger Agreement or which would make any representation or warranty of Seller hereunder untrue or incorrect. 1.5 No Solicitation. Seller hereby agrees that Seller shall not, and shall not permit or authorize any of his affiliates, representatives or agents to, directly or indirectly, encourage, solicit, explore, participate in or initiate discussions or negotiations with, or provide or disclose any information to, any corporation, partnership, person or other entity or group (other than Parent, the Purchaser or any of their affiliates or representatives) concerning any Acquisition Transaction or enter into any agreement, arrangement or understanding requiring the Company to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by the Merger Agreement. Seller will immediately cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Transaction. From and after the execution of this Agreement, Seller shall immediately advise Parent in writing of the receipt, directly or indirectly, of any inquiries, discussions, negotiations or proposals relating to an Acquisition Transaction, identify the offeror and furnish to Parent a copy of any such proposal or inquiry, if it is in writing, or a written summary of any oral proposal or inquiry relating to an Acquisition Transaction. Seller shall promptly advise Parent in writing of any development relating to such proposal, including the results of any discussions or negotiations with respect thereto. 1.6 Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, Seller hereby agrees to use all reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement and the Merger Agreement. Seller shall promptly consult with Parent and provide any necessary information and material with respect to all filings made by Seller with any Governmental Entity in connection with this Agreement and the Merger Agreement and the transactions contemplated hereby and thereby. 1.7 Waiver of Appraisal Rights. Seller hereby waives any rights of appraisal or rights to dissent from the Merger that he may have. 2. Expiration. This Agreement and Seller's obligation to tender provided hereto shall terminate on the earlier of the payment for the Shares pursuant to the Offer and the termination of the Merger Agreement in accordance with its terms. 3. Representation and Warranties. Seller hereby represents and warrants to Parent as follows: (a) Title. Seller has good and valid title to the Tender Shares, free and clear of any lien, pledge, charge, encumbrance or claim of whatever nature and, upon the purchase of the Tender Shares by the Purchaser, Seller will deliver -3- 4 good and valid title to the Tender Shares, free and clear of any lien, charge, encumbrance or claim of whatever nature. (b) Ownership of Shares. On the date hereof, the Owned Shares are owned of record or beneficially by Seller and, on the date hereof, the Owned Shares constitute all of the Shares owned of record or beneficially by Seller. Seller has sole voting power and sole power of disposition with respect to all of the Owned Shares, with no restrictions, subject to applicable federal securities laws, on Seller's rights of disposition pertaining thereto. (c) Power; Binding Agreement. Seller has the legal capacity, power and authority to enter into and perform all of his obligations under this Agreement. The execution, delivery and performance of this Agreement by Seller will not violate any other agreement to which Seller is a party including, without limitation, any voting agreement, stockholders agreement or voting trust. This Agreement has been duly and validly executed and delivered by Seller and constitutes a valid and binding agreement of Seller, enforceable against Seller in accordance with its terms. (d) No Conflicts. Other than in connection with or in compliance with the provisions of the Exchange Act and the HSR Act, no authorization, consent or approval of, or filing with, any court or any public body or authority is necessary for the consummation by Seller of the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not constitute a breach, violation or default (or any event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, encumbrance, pledge, charge or claim upon any of the properties or assets of Seller under, any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument to which Seller is a party or by which his properties or assets are bound. (e) No Finder's Fees. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Seller. 4. Additional Shares. Seller hereby agrees, while this Agreement is in effect, to promptly notify Parent of the number of any new Shares acquired by Seller, if any, after the date hereof. 5. Further Assurances. From time to time, at the Parent's request and without further consideration, Seller shall execute and deliver such additional documents and take all such further action as may be reasonably necessary or desirable to consummate and make effective the transactions contemplated by Section 1 of this Agreement. -4- 5 6. Miscellaneous. 6.1 Non-Survival. The representations and warranties made herein shall terminate upon Seller's sale of the Tender Shares to the Purchaser in the Offer, other than Seller's representation and warranty in Section 3.2(a), which shall survive the sale of the Tender Shares and the termination of this Agreement following such sale. 6.2 Entire Agreement; Assignment. This Agreement (i) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (ii) shall not be assigned by operation of law or otherwise, provided that Parent may assign its rights and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent, but no such assignment shall relieve Parent of its obligations hereunder if such assignee does not perform such obligations. 6.3 Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. 6.4 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given by hand delivery, telegram, telex or telecopy or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: If to Seller: copy to Seller's Counsel: If to Parent: Western Atlas Inc. 10205 Westheimer Road Houston, Texas 77042-3115 -5- 6 Attention: James E. Brasher, Esq. Fax: (713) 266-1717 copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attention: Daniel A. Neff, Esq. Fax: (212) 403-2000 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 6.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 6.6 Specific Performance. Seller recognizes and acknowledges that a breach by him of any covenants or agreements contained in this Agreement will cause Parent to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore Seller agrees that in the event of any such breach Parent shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 6.7 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original, but both of which shall constitute one and the same Agreement. 6.8 Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 6.9 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to be duly executed as of the day and year first above written. -6- 7 WESTERN ATLAS INC. By: ------------------------------------------ Name: Title: SELLER ------------------------------------------ Name: -7- EX-99.C7 12 FORM OF SUPPORT AGREEMENT 1 Exhibit (c)(7) SUPPORT AGREEMENT (this "Agreement"), dated as of March 8, 1998, by and between Western Atlas Inc., a Delaware corporation ("Parent"), and Wayne P. Widynowski ("Seller"). WHEREAS, concurrently herewith, Parent, WAI Acquisition Corp. (the "Purchaser"), a Delaware corporation and a subsidiary of Parent, and 3-D Geophysical, Inc. (the "Company"), a Delaware corporation, are entering into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement", which term shall not include any amendment to such Agreement which decreases the Offer Price or changes the form of consideration payable in the Offer, unless Seller consents to the inclusion of such amendment in such term). Capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement, pursuant to which the Purchaser agrees to make a tender offer (the "Offer") for all outstanding shares of common stock, par value $.01 per share (the "Shares"), of the Company, at $9.65 per share (the "Offer Price") net to the seller in cash, to be followed by a merger (the "Merger") of the Purchaser with and into the Company; WHEREAS, as of the date hereof, Seller beneficially owns directly ______________ Shares (the "Owned Shares", and together with any Shares acquired after the date hereof and prior to the termination of the Offer, whether upon the exercise of options, conversion of convertible securities or otherwise, the "Tender Shares"); WHEREAS, as a condition to their willingness to enter into the Merger Agreement and make the Offer, Parent and the Purchaser have required that Seller agree, and Seller hereby agrees, to enter into this Agreement; and NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration given to each party hereto, the receipt of which is hereby acknowledged, the parties agree as follows: 1. Agreement to Vote. 1.1 Voting. Seller hereby agrees that, during the time this Agreement is in effect, at any meeting of the shareholders of the Company, however called, Seller shall (a) vote the Tender Shares in favor of the Merger; (b) vote the Tender Shares against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement; and (c) vote the Tender Shares against any action or agreement (other than the Merger Agreement or the transactions contemplated thereby) that would impede, interfere with, delay, postpone or attempt to discourage the Merger or the Offer, including, but not limited to: (i) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or any of its subsidiaries; (ii) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries or a reorganization, recapitalization or liquidation of the Company and its subsidiaries; (iii) any change in the management or board of directors of the Company, except as otherwise agreed to in writing by the Purchaser; (iv) any material change in the present capitalization or dividend policy of the Company; or (v) any other material change in the Company's corporate structure or business. Seller hereby revokes any proxy previously granted 2 by him with respect to the Tender Shares. Seller hereby permits Parent and the Purchaser to publish and disclose in the Offer Documents and, if approval of the Company's stockholders is required under applicable law, the Proxy Statement (including all documents and schedules filed with the Securities and Exchange Commission) his identity and ownership of the Tender Shares and the nature of his commitments, arrangements and understandings under this Agreement. 1.2 Grant of Irrevocable Proxy; Appointment of Proxy. (i) Seller hereby irrevocably grants to, and appoints, William H. Flores and James E. Brasher, or either of them, in their respective capacities as officers or directors of Parent, and any individual who shall hereafter succeed to any such office or directorship of Parent, and each of them individually, Seller's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of Seller, to vote the Tender Shares in favor of the Merger and other transactions contemplated by the Merger Agreement, against any Acquisition Transaction and otherwise as contemplated by Section 1.2. (ii) Seller represents that any proxies heretofore given in respect of the Tender Shares are not irrevocable, and that any such proxies are hereby revoked. (iii) Seller understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon Seller's execution and delivery of this Agreement. Seller hereby affirms that the irrevocable proxy set forth in this Section 1.2 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of Seller under this Agreement. Seller hereby further affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked. Seller hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 212(e) of the Delaware General Corporation Law. 1.3 No Inconsistent Arrangements. Seller hereby covenants and agrees that, except as contemplated by this Agreement and the Merger Agreement, it shall not (i) except to the Company, transfer (which term shall include, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Tender Shares or any interest therein, (ii) except with the Company, enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Tender Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization in or with respect to the Tender Shares, (iv) deposit the Tender Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Tender Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of his obligations hereunder or the transactions contemplated hereby or by the Merger Agreement or which would make any representation or warranty of Seller hereunder untrue or incorrect. 1.4 No Solicitation. Seller hereby agrees that Seller shall not, and shall not permit or authorize any of his affiliates, representatives or agents to, directly or indirectly, encourage, solicit, explore, participate in or initiate discussions or negotiations with, or provide or disclose any information to, any corporation, partnership, person or other entity or group -2- 3 (other than Parent, the Purchaser or any of their affiliates or representatives) concerning any Acquisition Transaction or enter into any agreement, arrangement or understanding requiring the Company to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by the Merger Agreement. Seller will immediately cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Transaction. From and after the execution of this Agreement, Seller shall immediately advise Parent in writing of the receipt, directly or indirectly, of any inquiries, discussions, negotiations or proposals relating to an Acquisition Transaction, identify the offeror and furnish to Parent a copy of any such proposal or inquiry, if it is in writing, or a written summary of any oral proposal or inquiry relating to an Acquisition Transaction. Seller shall promptly advise Parent in writing of any development relating to such proposal, including the results of any discussions or negotiations with respect thereto. Any action taken by the Company or any member of the Board of Directors of the Company including, if applicable, Seller acting in such capacity, in accordance with the proviso to the second sentence of Section 6.10(a) of the Merger Agreement shall be deemed not to violate this Section 1.5. 1.5 Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, Seller hereby agrees to use all reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement and the Merger Agreement. Seller shall promptly consult with Parent and provide any necessary information and material with respect to all filings made by Seller with any Governmental Entity in connection with this Agreement and the Merger Agreement and the transactions contemplated hereby and thereby. 1.6 Waiver of Appraisal Rights. Seller hereby waives any rights of appraisal or rights to dissent from the Merger that he may have. 2. Expiration. This Agreement and Seller's obligation to tender provided hereto shall terminate on the earlier of the payment for the Shares pursuant to the Offer and the termination of the Merger Agreement in accordance with its terms. 3. Representation and Warranties. Seller hereby represents and warrants to Parent as follows: (a) Title. Seller has good and valid title to the Tender Shares, free and clear of any lien, pledge, charge, encumbrance or claim of whatever nature and, upon the purchase of the Tender Shares by the Purchaser, Seller will deliver good and valid title to the Tender Shares, free and clear of any lien, charge, encumbrance or claim of whatever nature. (b) Ownership of Shares. On the date hereof, the Owned Shares are owned of record or beneficially by Seller and, on the date hereof, the Owned Shares constitute all of the Shares owned of record or beneficially by Seller. Seller has sole voting power and sole power of disposition with respect to all of -3- 4 the Owned Shares, with no restrictions, subject to applicable federal securities laws, on Seller's rights of disposition pertaining thereto. (c) Power; Binding Agreement. Seller has the legal capacity, power and authority to enter into and perform all of his obligations under this Agreement. The execution, delivery and performance of this Agreement by Seller will not violate any other agreement to which Seller is a party including, without limitation, any voting agreement, stockholders agreement or voting trust. This Agreement has been duly and validly executed and delivered by Seller and constitutes a valid and binding agreement of Seller, enforceable against Seller in accordance with its terms. (d) No Conflicts. Other than in connection with or in compliance with the provisions of the Exchange Act and the HSR Act, no authorization, consent or approval of, or filing with, any court or any public body or authority is necessary for the consummation by Seller of the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not constitute a breach, violation or default (or any event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, encumbrance, pledge, charge or claim upon any of the properties or assets of Seller under, any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument to which Seller is a party or by which his properties or assets are bound. (e) No Finder's Fees. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Seller. 4. Additional Shares. Seller hereby agrees, while this Agreement is in effect, to promptly notify Parent of the number of any new Shares acquired by Seller, if any, after the date hereof. 5. Further Assurances. From time to time, at the Parent's request and without further consideration, Seller shall execute and deliver such additional documents and take all such further action as may be reasonably necessary or desirable to consummate and make effective the transactions contemplated by Section 1 of this Agreement. 6. Miscellaneous. 6.1 Non-Survival. The representations and warranties made herein shall terminate upon Seller's sale of the Tender Shares to the Purchaser in the Offer, other than Seller's representation and warranty in Section 3.2(a), which shall survive the sale of the Tender Shares and the termination of this Agreement following such sale. -4- 5 6.2 Entire Agreement; Assignment. This Agreement (i) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (ii) shall not be assigned by operation of law or otherwise, provided that Parent may assign its rights and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent, but no such assignment shall relieve Parent of its obligations hereunder if such assignee does not perform such obligations. 6.3 Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. 6.4 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given by hand delivery, telegram, telex or telecopy or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: If to Seller: copy to Seller's Counsel: If to Parent: Western Atlas Inc. 10205 Westheimer Road Houston, Texas 77042-3115 Attention: James E. Brasher, Esq. Fax: (713) 266-1717 copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attention: Daniel A. Neff, Esq. Fax: (212) 403-2000 -5- 6 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 6.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 6.6 Specific Performance. Seller recognizes and acknowledges that a breach by him of any covenants or agreements contained in this Agreement will cause Parent to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore Seller agrees that in the event of any such breach Parent shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 6.7 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original, but both of which shall constitute one and the same Agreement. 6.8 Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 6.9 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. -6- 7 IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to be duly executed as of the day and year first above written. WESTERN ATLAS INC. By: ----------------------------------- Name: Title: SELLER ----------------------------------- Name: -7- EX-99.C8 13 CONSULTING AGREEMENT & NONCOMPETITION AGREEMENT 1 Exhibit (c)(8) CONSULTING AND NON-COMPETE AGREEMENT AGREEMENT, dated as of March 8, 1998, by and between Western Atlas Inc., a Delaware corporation (the "Parent"), Friedman Enterprises Inc., a New York corporation ("FEI") and Joel Friedman (the "Consultant"). WHEREAS, the Consultant is the Chairman of the Board of Directors of 3-D Geophysical, Inc., a Delaware corporation, (collectively with its subsidiaries, the "Company"); WHEREAS, the Parent has entered into an Agreement and Plan of Merger with the Company and WAI Acquisition Corp., dated as of March 8, 1998 (the "Merger Agreement"); WHEREAS, the Consultant will terminate employment with the Company effective as of the "Effective Time" (as defined in the Merger Agreement) of the merger contemplated by the Merger Agreement (the "Merger"); and WHEREAS, the Consultant is the President and sole shareholder of FEI; and WHEREAS, the Parent desires to provide for the Consultant to perform services for the Parent and the Company following the Merger and FEI desires to make Consultant available to perform such services. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the Parent and the Consultant hereby agree as follows: 1. Consulting Services. Subject to the effectiveness of the Merger, the Consultant hereby agrees to provide such consulting services to the Parent and to the Company as the President of the Western Geophysical Division of Western Atlas International, Inc. or his designee shall reasonably request for not more than 20 hours per month. Such consulting services may be rendered in New York, New York, or at any other mutually agreeable place. FEI hereby agrees to make Consultant available to provide such service. 2. Term. The period of consultancy under this Agreement shall be for a period commencing on the Effective Time and ending on the fourth anniversary of the Effective Time (the "Term"). 3. Consulting Fee. The Parent shall pay to FEI, in consideration of the consulting services, a consulting fee (the "Consulting Fee") at an annual rate of $250,000 payable in substantially equal monthly installments during the Term. 4. Expenses. The Parent will reimburse FEI for all authorized reasonable and necessary out-of-pocket expenses incurred by the Consultant in the performance of his duties hereunder upon the presentation of appropriate documentation. Such expenses shall be submitted to Parent, at P.O. Box 1407, Houston, TX 77251-1407, Attn.: J. Perez, on Parent's standard 2 expense report forms in accordance with Parent's expense reimbursement policy in effect from time to time during the Term. 5. Termination of Consultancy. The Consultant's consultancy hereunder shall terminate prior to the scheduled end of the Term upon the first to occur of: (a) the death of the Consultant; or (b) the Consultant's illness, disability or incapacity ("Disability") that prevents the Consultant from performing his duties hereunder for sixty (60) consecutive days, or for any sixty (60) days within any one hundred and eighty (180) day period, and the provision of written notice of such termination to the Consultant; or (c) written notice by the Parent to the Consultant of termination of the Consultant's consultancy by the Parent for "Cause," which shall include, without limitation, (i) the failure of the Consultant to perform his duties hereunder after at least 30 days' written notice thereof specifying such failure and the Consultant's failure to remedy same within such 30-day period; (ii) any act of illegality, dishonesty, moral turpitude, or fraud in connection with the Consultant's consultancy; (iii) any course of action by the Consultant which is materially detrimental to the business of the Parent or any of its affiliates (including without limitation any violation of Sections 7, 8 or 9 of this Agreement); or (iv) the commission by the Consultant of any felony; or (d) written notice by the Parent to the Consultant of termination of the Consultant's consultancy without Cause; or (e) written notice by the Consultant to the Parent of termination of his consultancy. The date of termination of the Consultant's consultancy shall be the date written notice is given or such later date (within thirty (30) days following such notice) specified in the written notice. 6. Termination Payments. In the event of the termination of the Consultant's consultancy pursuant to Section 5, the Parent shall make the payments to FEI set forth below and have no further obligation to the Consultant or FEI hereunder. (a) In the event of the termination of the Consultant's consultancy by the Parent for Cause pursuant to Section 5(c) of this Agreement or the termination of the Consultant's consultancy by the Consultant pursuant to Section 5(e) of this Agreement, the Parent shall pay to FEI the Consulting Fee previously earned but not paid as of the date of termination. (b) In the event of the termination of the Consultant's consultancy by the Parent without Cause (and not for death or Disability) pursuant to Section 5(d) of this Agreement, the Parent shall continue to pay FEI the full Consulting Fee contemplated by Section 3 of this Agreement in monthly installments through the scheduled end of the Term, subject to the Consultant's and FEI's compliance with Sections 7, 8 and 9 of this Agreement. -2- 3 (c) In the event of the Consultant's death or termination for Disability pursuant to Section 5(b) of this Agreement during the Term, the Parent shall continue to pay to FEI the Consulting Fee contemplated by Section 3 in monthly installments for the lesser of (i) six months following such date of termination or (ii) the number of months remaining in the Term, subject to the Consultant's and FEI's compliance with Section 7, 8 and 9 of this Agreement. 7. Covenant Not to Compete. During the Term and until the later of (a) 12 months after the Consultant's termination of consultancy with the Parent for any reason or (b) the end of the scheduled Term (the "Noncompetition Period"), the Consultant will not, directly or indirectly (whether as sole proprietor, partner or venturer, stockholder, director, officer, employee or consultant or in any other capacity as principal or agent or through any person, subsidiary or employee acting as nominee or agent): (a) Conduct or engage in or have an interest in or be associated with any person, firm, association, partnership, corporation or other entity which conducts or engages in the business of seismic data acquisition or data processing (the "Business"), which are the primary businesses of the Company; (b) Take any action, directly or indirectly, to finance, guarantee or provide any other material assistance to any person, firm, association, partnership, corporation or other entity which conducts or engages in the Business; (c) Influence or attempt to influence any person, firm, association, partnership, corporation or other entity which is a contracting party with the Parent at any time during the Noncompetition Period to terminate any agreement with the Parent except to the extent the Consultant is acting on behalf, and at the direction, of the Parent in good faith; (d) Hire or attempt to hire for employment any person who is employed by the Parent or attempt to influence any such person to terminate employment with the Parent, except to the extent the Consultant is acting on behalf, and at the direction, of the Parent in good faith; or (e) Call on, solicit or take away as a client or customer or attempt to call on, solicit or take away as a client or customer any person, firm, association, partnership, corporation or other entity that is or was a client or customer of the Parent, including actively sought prospective customers, during the Term or the Consultant's prior employment with the Company. The restrictive provisions of this Agreement shall not prohibit the Consultant from having an equity interest in the securities of any corporation engaged in the Business, which securities are listed on a recognized securities exchange or traded in the over-the-counter market to the extent that such interest does not exceed 3% of the value or voting power of such corporation and does not constitute control of such corporation. For purposes of this Section 7 and Sections 8 and 9 of this Agreement, the term "Parent" shall include the Parent and the Company, and each of their affiliates, and the term "Consultant" shall include the Consultant and FEI. -3- 4 8. Confidential Information; Ownership Rights. (a) The Consultant acknowledges and agrees that all nonpublic information concerning the Parent's business including, without limitation, information relating to its products, customer lists, pricing, trade secrets, patents, business methods, financial and cost data, business plans and strategies (collectively, the "Confidential Information") is and shall remain the property of the Parent. The Consultant recognizes and agrees that all of the Confidential Information, whether developed by the Consultant or made available to the Consultant, other than information that is generally known to the public, is a unique asset of the business of the Parent, the disclosure of which would be damaging to the Parent. Accordingly, the Consultant agrees to hold such Confidential Information in a fiduciary capacity for the benefit of the Parent. The Consultant agrees that he will not at any time during or after the Consultant's consultancy with the Parent for any reason, directly or indirectly, disclose to any person any Confidential Information of the Parent, other than information that is already known to the public, except as may be required in the ordinary course of business of the Parent or as may be required by law. Promptly upon the termination of this Agreement for any reason, the Consultant agrees to return to the Parent any and all documents, memoranda, drawings, notes and other papers and items (including all copies thereof, whether electronic or otherwise) embodying any Confidential Information of the Parent which are in the possession or control of the Consultant. Information concerning the Parent's business that becomes public as a result of the Consultant's breach of this Section 8 shall be treated as Confidential Information under this Section 8. (b) The Consultant hereby assigns to the Parent all right, title and interest in and to any ideas, inventions, original works or authorship, developments, improvements or trade secrets with respect to the Business which the Consultant solely or jointly has conceived or reduced to practice, or will conceive or reduce to practice, or cause to be conceived or reduced to practice, during the Term or his prior employment with the Company. All original works or authorship which are made by Consultant (solely or jointly with others) within the scope of Consultant's services hereunder or for the Company and which are protectable by copyright are "works made for hire," as that term is defined in the United States Copyright Act. 9. Disparagement. During the Term and thereafter, the Consultant agrees not to (a) criticize, denigrate or speak adversely of, or (b) disclose negative information about, the operations, management or performance of the Parent or about any director, officer, employee or agent of the Parent, except as may be required by law. 10. Breach of Certain Provisions. The Consultant acknowledges that a violation on the Consultant's part of any of the covenants contained in Sections 7, 8 or 9 of this Agreement would cause immeasurable and irreparable damage to the Parent and the Company. Accordingly, the Consultant agrees that the Parent shall be entitled to injunctive relief in any court of competent jurisdiction for any actual or threatened violation of any such covenant in addition to any other remedies it may have. The Consultant agrees that in the event that any court of competent jurisdiction shall finally hold that any provision of Section 7, 8 or 9 hereof is void or constitutes an unreasonable restriction against the Consultant, the provisions of such Section shall not be rendered void but shall apply to such extent as such court may determine -4- 5 constitutes a reasonable restriction under the circumstances. Sections 7, 8 and 9 shall survive the termination of this Agreement. 11. Independent Contractor. Nothing herein shall be construed to create an employer-employee, agency, master and servant or joint venture relationship or other association between the Parent or the Company and FEI or the Consultant, and the Consultant shall not be deemed to be an employee of the Parent or the Company for any purpose, including without limitation for the purpose of participating in any employee benefit plan of the Parent or the Company. The Consultant agrees that he is an independent contractor and will not hold himself out to be an employee of the Parent or the Company. FEI and the Consultant shall perform all services under this Agreement as, and shall remain, independent contractors. All persons performing or assisting FEI or the Consultant with any part of the services under this Agreement for the Company or the Parent shall be employees or agents of FEI. FEI's employees and personnel are not employees, agents or representatives of the Company or the Parent, or their shareholders, affiliates or co-venturers, notwithstanding that any such employees or personnel may be construed to be borrowed servants of the Company or the Parent at any time or from time to time. FEI shall not hold its employees or personnel out as employees, representatives or agents of the Company or the Parent or make any representations to create such impression. The Consultant, FEI, and its employees and personnel shall have no authority, express or implied, to make any contract or agreement for, or on behalf of, or otherwise commit the Company or the Parent, or their shareholders, affiliates or coventurers to any contract, commitment, obligation, or liability binding on the Company or the Parent, and the Parent and the Company do not assume any responsibility for proposals, guarantees, or contracts entered into by FEI or the Consultant with others. 12. Risk of Loss. The Consultant assumes all risk of personal injury or death to himself and all risk of damage to or loss of personal property furnished by the Consultant in connection with the services to be performed by the Consultant under this Agreement. The Consultant will abide by the safety and security regulations of the Parent and the Company while on the respective properties of the Parent and the Company. 13. Warranty. The Consultant and FEI warrant that entering into this Agreement and performance of services hereunder will not conflict with any obligation of the Consultant arising under any other contract or by operation of law. The Consultant warrants that he has the right to disclose all information transmitted to the Parent or the Company pursuant to this Agreement, and that the services to be performed by the Consultant under this Agreement do not violate or in any way infringe upon the rights of third parties, including property, contractual, employment, trade secrets, proprietary information, and nondisclosure rights, or any trademark, copyright or patent rights, and that Consultant will not enter into any agreements or arrangements with third persons that would result in the performance of such services violating or infringing the rights of such persons. 14. Assignment. This agreement is a contract for the personal services of the Consultant, and neither FEI nor the Consultant may assign this Agreement or subcontract any services without first obtaining the written consent of the Parent. The Parent may assign this -5- 6 Agreement to any subsidiary or affiliated company or to any third party together with the business to which it pertains. 15. Governing Law. This Agreement is governed by, and is to be construed and enforced in accordance with, the laws of the State of Delaware. If, under such law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation or ordinance, such portion shall be deemed to be modified or altered to conform thereto or, if that is not possible, to be omitted from this Agreement; and the invalidity of any such portion shall not affect the force, effect and validity of the remaining portion hereof. The parties agree that all actions or proceedings initiated by any party hereto and arising directly or indirectly out of this Agreement which are brought pursuant to judicial proceedings shall be litigated in the State courts of Delaware. 16. Notices. All notices hereunder shall be in writing and shall be given (and shall be deemed to have been duly received if so given) by hand delivery, telegram, telex or telecopy, or by mail (registered or certified mail, postage prepaid, return receipt requested) or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: If to the Parent, to: Western Atlas Inc. 10205 Westheimer Road Houston, Texas 77042-3115 Attention: General Counsel Fax: 713-266-1717 If to the Consultant, to: Joel Friedman 11 Reimer Road Scarsdale, NY 10583 If to FEI, to: 11 Reimer Road Scarsdale, NY 10583 Attention: Joel Friedman or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 17. Miscellaneous. The Consultant shall terminate from employment with the Company as of the Effective Time. This Agreement constitutes the entire understanding between the Parent and the Consultant and FEI relating to the consulting services to be rendered by the Consultant to the Parent and the Company and cancels all prior written and oral agreements and -6- 7 understandings with respect to the subject matter of this Agreement between the Company and the Consultant, and the Consultant hereby waives any further payments, under the Employment Agreement, dated February 1, 1996, between the Company and the Consultant, and any severance payments under any plan or agreement. This Agreement may be amended only by a subsequent written agreement of the parties hereto. This Agreement shall be binding upon and shall inure to the benefit of FEI, its successors and permitted assigns, and the Consultant, his heirs, executors, administrators, beneficiaries and permitted assigns and shall be binding upon and shall inure to the benefit of the Parent and its successors and permitted assigns. -7- 8 IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the year and day first above written. WESTERN ATLAS INC. By: /s/ Richard White --------------------------------------- Richard White /s/ Joel Friedman --------------------------------------- Joel Friedman FRIEDMAN ENTERPRISES INC. By: /s/ Joel Friedman --------------------------------------- Joel Friedman, President -8- EX-99.C9 14 CONSULTING AGREEMENT & NONCOMPETITION AGREEMENT 1 Exhibit (c)(9) CONSULTING AND NON-COMPETE AGREEMENT AGREEMENT, dated as of March 8, 1998, by and between Western Atlas Inc., a Delaware corporation (the "Parent"), and Luis H. Ferran Arroyo (the "Consultant"). WHEREAS, the Consultant is the Executive Vice President for Latin American Operations of 3-D Geophysical, Inc., a Delaware corporation, (collectively with its subsidiaries, the "Company"); WHEREAS, the Parent has entered into an Agreement and Plan of Merger with the Company and WAI Acquisition Corp., dated as of March 8, 1998 (the "Merger Agreement"); WHEREAS, the Consultant will terminate employment with the Company effective as of the "Effective Time" (as defined in the Merger Agreement) of the merger contemplated by the Merger Agreement (the "Merger"); and WHEREAS, the Parent desires to provide for the Consultant to perform services for the Parent and the Company following the Merger. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the Parent and the Consultant hereby agree as follows: 1. Consulting Services. Subject to the effectiveness of the Merger, the Consultant hereby agrees to provide such consulting services to the Parent and to the Company as the President of the Western Geophysical Division of Western Atlas International, Inc. or his designee shall reasonably request, including without limitation consulting services with respect to Petroleos Mexicanos, for not more than 32 hours per month. Such consulting services may be rendered in person at the corporate offices of the Parent or the Company or one of their affiliates, or at any other mutually agreeable place. 2. Term. The period of consultancy under this Agreement shall be for a period commencing on the Effective Time and ending on the fourth anniversary of the Effective Time (the "Term"). 3. Consulting Fee. The Parent shall pay to the Consultant, in consideration of his consulting services, a consulting fee (the "Consulting Fee") at an annual rate of $125,000 payable in substantially equal monthly installments during the Term. 4. Expenses. The Parent will reimburse the Consultant for all authorized reasonable and necessary out-of-pocket expenses incurred by him in the performance of his duties hereunder upon the presentation of appropriate documentation. Such expenses shall be submitted to Parent, at P.O. Box 1407, Houston, TX 77251-1407, Att: J. Perez, on Parent's standard expense report forms in accordance with Parent's expense reimbursement policy in effect from time to time during the Term. 2 5. Termination of Consultancy. The Consultant's consultancy hereunder shall terminate prior to the scheduled end of the Term upon the first to occur of: (a) the death of the Consultant; or (b) the Consultant's illness, disability or incapacity ("Disability") that prevents the Consultant from performing his duties hereunder for sixty (60) consecutive days, or for any sixty (60) days within any one hundred and eighty (180) day period, and the provision of written notice of such termination to the Consultant; or (c) written notice by the Parent to the Consultant of termination of the Consultant's consultancy by the Parent for "Cause," which shall include, without limitation, (i) the failure of the Consultant to perform his duties hereunder after at least 30 days' written notice thereof specifying such failure and the Consultant's failure to remedy same within such 30-day period; (ii) any act of illegality, dishonesty, moral turpitude, or fraud in connection with the Consultant's consultancy; (iii) any course of action by the Consultant which is materially detrimental to the business of the Parent or any of its affiliates (including without limitation any violation of Sections 7, 8 or 9 of this Agreement); or (iv) the commission by the Consultant of any felony; or (d) written notice by the Parent to the Consultant of termination of the Consultant's consultancy without Cause; or (e) written notice by the Consultant to the Parent of termination of his consultancy. The date of termination of the Consultant's consultancy shall be the date written notice is given or such later date (within thirty (30) days following such notice) specified in the written notice. 6. Termination Payments. In the event of the termination of the Consultant's consultancy pursuant to Section 5, the Parent shall make the payments to the Consultant set forth below and have no further obligation to the Consultant hereunder. (a) In the event of the termination of the Consultant's consultancy by the Parent for Cause pursuant to Section 5(c) of this Agreement or the termination of the Consultant's consultancy by the Consultant pursuant to Section 5(e) of this Agreement, the Parent shall pay the Consultant the Consulting Fee previously earned but not paid as of the date of termination. (b) In the event of the termination of the Consultant's consultancy by the Parent without Cause (and not for Disability) pursuant to Section 5(d) of this Agreement, the Parent shall continue to pay the Consultant the full Consulting Fee contemplated by Section 3 of this Agreement in monthly installments through the scheduled end of the Term, subject to the Consultant's compliance with Sections 7, 8 and 9 of this Agreement. (c) In the event of the Consultant's death or termination for Disability pursuant to Section 5(b) of this Agreement during the Term, the Parent shall continue to pay to Consultant (or to his estate or beneficiary in the event of his death) the Consulting Fee contemplated by -2- 3 Section 3 in monthly installments for the lesser of (i) six months following such date of termination or (ii) the number of months remaining in the Term, subject to, in the event of termination for Disability, the Consultant's compliance with Sections 7, 8 and 9 of this Agreement. 7. Covenant Not to Compete. During the Term and until the later of (a) 12 months after the Consultant's termination of consultancy with the Parent for any reason or (b) the end of the scheduled Term (the "Noncompetition Period"), the Consultant will not, directly or indirectly (whether as sole proprietor, partner or venturer, stockholder, director, officer, employee or consultant or in any other capacity as principal or agent or through any person, subsidiary or employee acting as nominee or agent): (a) Conduct or engage in or have an interest in or be associated with any person, firm, association, partnership, corporation or other entity which conducts or engages in the business of seismic data acquisition or data processing (the "Business"), which are the primary businesses of the Company; (b) Take any action, directly or indirectly, to finance, guarantee or provide any other material assistance to any person, firm, association, partnership, corporation or other entity which conducts or engages in the Business; (c) Influence or attempt to influence any person, firm, association, partnership, corporation or other entity which is a contracting party with the Parent at any time during the Noncompetition Period to terminate any agreement with the Parent except to the extent the Consultant is acting on behalf, and at the direction, of the Parent in good faith; (d) Hire or attempt to hire for employment any person who is employed by the Parent or attempt to influence any such person to terminate employment with the Parent, except to the extent the Consultant is acting on behalf, and at the direction, of the Parent in good faith; or (e) Call on, solicit or take away as a client or customer or attempt to call on, solicit or take away as a client or customer any person, firm, association, partnership, corporation or other entity that is or was a client or customer of the Parent, including actively sought prospective customers, during the Term or the Consultant's prior employment with the Company. The restrictive provisions of this Agreement shall not prohibit the Consultant from having an equity interest in the securities of any corporation engaged in the Business, which securities are listed on a recognized securities exchange or traded in the over-the-counter market to the extent that such interest does not exceed 1% of the value or voting power of such corporation and does not constitute control of such corporation. For purposes of this Section 7 and Sections 8 and 9 of this Agreement, the term "Parent" shall include the Parent and the Company, and each of their affiliates. 8. Confidential Information; Ownership Rights. (a) The Consultant acknowledges and agrees that all nonpublic information concerning the Parent's business including, -3- 4 without limitation, information relating to its products, customer lists, pricing, trade secrets, patents, business methods, financial and cost data, business plans and strategies (collectively, the "Confidential Information") is and shall remain the property of the Parent. The Consultant recognizes and agrees that all of the Confidential Information, whether developed by the Consultant or made available to the Consultant, other than information that is generally known to the public, is a unique asset of the business of the Parent, the disclosure of which would be damaging to the Parent. Accordingly, the Consultant agrees to hold such Confidential Information in a fiduciary capacity for the benefit of the Parent. The Consultant agrees that he will not at any time during or after the Consultant's consultancy with the Parent for any reason, directly or indirectly, disclose to any person any Confidential Information of the Parent, other than information that is already known to the public, except as may be required in the ordinary course of business of the Parent or as may be required by law. Promptly upon the termination of this Agreement for any reason, the Consultant agrees to return to the Parent any and all documents, memoranda, drawings, notes and other papers and items (including all copies thereof, whether electronic or otherwise) embodying any Confidential Information of the Parent which are in the possession or control of the Consultant. Information concerning the Parent's business that becomes public as a result of the Consultant's breach of this Section 8 shall be treated as Confidential Information under this Section 8. (b) The Consultant hereby assigns to the Parent all right, title and interest in and to any ideas, inventions, original works or authorship, developments, improvements or trade secrets with respect to the Business which the Consultant solely or jointly has conceived or reduced to practice, or will conceive or reduce to practice, or cause to be conceived or reduced to practice, during the Term or his prior employment with the Company. All original works or authorship which are made by Consultant (solely or jointly with others) within the scope of Consultant's services hereunder or for the Company and which are protectable by copyright are "works made for hire," as that term is defined in the United States Copyright Act. 9. Disparagement. During the Term and thereafter, the Consultant agrees not to (a) criticize, denigrate or speak adversely of, or (b) disclose negative information about, the operations, management or performance of the Parent or about any director, officer, employee or agent of the Parent, except as may be required by law. 10. Breach of Certain Provisions. The Consultant acknowledges that a violation on the Consultant's part of any of the covenants contained in Sections 7, 8 or 9 of this Agreement would cause immeasurable and irreparable damage to the Parent and the Company. Accordingly, the Consultant agrees that the Parent shall be entitled to injunctive relief in any court of competent jurisdiction for any actual or threatened violation of any such covenant in addition to any other remedies it may have. The Consultant agrees that in the event that any court of competent jurisdiction shall finally hold that any provision of Section 7, 8 or 9 hereof is void or constitutes an unreasonable restriction against the Consultant, the provisions of such Section shall not be rendered void but shall apply to such extent as such court may determine constitutes a reasonable restriction under the circumstances. Sections 7, 8 and 9 shall survive the termination of this Agreement. -4- 5 11. Independent Contractor. Nothing herein shall be construed to create an employer-employee, agency, master and servant or joint venture relationship or other association between the Parent or the Company and the Consultant, and the Consultant shall not be deemed to be an employee of the Parent or the Company for any purpose, including without limitation for the purpose of participating in any employee benefit plan of the Parent or the Company. The Consultant agrees that he will not hold himself out to be an employee of the Parent or the Company. The Consultant shall perform all services under this Agreement as, and shall remain, an independent contractor. The Consultant shall have no authority, express or implied, to make any contract or agreement for, or on behalf of, or otherwise commit the Company or the Parent, or their shareholders, affiliates or coventurers to any contract, commitment, obligation, or liability binding on the Company or the Parent, and the Parent and the Company do not assume any responsibility for proposals, guarantees, or contracts entered into by the Consultant with others. 12. Risk of Loss. The Consultant assumes all risk of personal injury or death to himself and all risk of damage to or loss of personal property furnished by the Consultant in connection with the services to be performed by the Consultant under this Agreement. The Consultant will abide by the safety and security regulations of the Parent and the Company while on the respective properties of the Parent and the Company. 13. Warranty. The Consultant warrants that entering into this Agreement and performance of service hereunder will not conflict with any obligation of the Consultant arising under any other contract or by operation of law. The Consultant warrants that he has the right to disclose all information transmitted to the Parent or the Company under this Agreement, and that the services to be performed by the Consultant under this Agreement do not violate or in any way infringe upon the rights of third parties, including property, contractual, employment, trade secrets, proprietary information, and nondisclosure rights, or any trademark, copyright or patent rights, and that Consultant will not enter into any agreements or arrangements with third persons that would result in the performance of such services violating or infringing the rights of such persons. 14. Assignment. This agreement is a contract for the personal services of the Consultant, and the Consultant may not assign this Agreement or subcontract any services without first obtaining the written consent of the Parent. The Parent may assign this Agreement to any subsidiary or affiliated company or to any third party together with the business to which it pertains. 15. Governing Law. This Agreement is governed by, and is to be construed and enforced in accordance with, the laws of the State of Delaware. If, under such law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation or ordinance, such portion shall be deemed to be modified or altered to conform thereto or, if that is not possible, to be omitted from this Agreement; and the invalidity of any such portion shall not affect the force, effect and validity of the remaining portion hereof. The parties agree that all actions or proceedings initiated by any party hereto and arising directly or indirectly out of this Agreement which are brought pursuant to judicial proceedings shall be litigated in the State courts of Delaware. -5- 6 16. Notices. All notices hereunder shall be in writing and shall be given (and shall be deemed to have been duly received if so given) by hand delivery, telegram, telex or telecopy, or by mail (registered or certified mail, postage prepaid, return receipt requested) or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: If to the Parent, to: Western Atlas Inc. 10205 Westheimer Road P.O. Box 1407 Houston, Texas 77251 Attention: General Counsel Houston, Texas 77042-3115 Attention: General Counsel Fax: 713-266-1717 If to the Consultant, to: Luis H. Ferran Arroyo Avenida La Malinche No. 320 Colonia Colinas del Basques Deleg, Tialplan, Mexico, D.F Fax: (525) 532-5700 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 17. Miscellaneous. The Consultant shall terminate from employment with the Company as of the Effective Time. This Agreement constitutes the entire understanding between the Parent and the Consultant relating to the consulting services to be rendered by the Consultant to the Parent and the Company and cancels all prior written and oral agreements and understandings with respect to the subject matter of this Agreement between the Company and the Consultant, and the Consultant hereby waives any further payments under the Employment Agreement, dated February 1, 1996, between the Company and the Consultant, and any severance payments under any plan or agreement. This Agreement may be amended only by a subsequent written agreement of the Consultant and the Parent. This Agreement shall be binding upon and shall inure to the benefit of the Consultant, his heirs, executors, administrators, beneficiaries and permitted assigns and shall be binding upon and shall inure to the benefit of the Parent and its successors and permitted assigns. -6- 7 IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the year and day first above written. WESTERN ATLAS INC. By: /s/ Richard White ---------------------------------------- Richard White /s/ Luis H. Ferran Arroyo ---------------------------------------- Luis H. Ferran Arroyo -7- EX-99.C10 15 RIGHTS AGREEMENT 1 Exhibit (c)(10) RIGHTS AGREEMENT Rights Agreement (this "Agreement") dated as of July 17, 1997, between 3-D Geophysical, Inc., a Delaware corporation (the "Company"), and American Securities Transfer & Trust, Inc. (the "Rights Agent"). R E C I T A L S The Board of Directors of the Company has authorized and declared the payment of a dividend of one preferred share purchase right (the "Right") for each share of Common Stock (as defined in Section 1) outstanding on the Record Date (as defined in Section 1) and has authorized the issuance of one Right for each share of Common Stock issued between the Record Date and the Distribution Date (as defined in Section 1), and, in certain cases following the Distribution Date. Each Right represents, as of the Record Date, the right to purchase one one-thousandth of a share of Preferred Stock (as defined in Section 1) upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth in this Agreement, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) (i) "Acquiring Person" means any Person who or which, together with all Affiliates and Associates of such Person, is (or has previously been, at any time after the date of this Agreement, whether or not such Person(s) continues to be) the Beneficial Owner of 15% or more of the Common Stock then outstanding (determined without taking into account any securities exercisable or exchangeable for, or convertible into, Common Stock, other than any such securities beneficially owned by the Acquiring Person and Affiliates and Associates of such Person). However, "Acquiring Person" shall not include any Exempt Person. (ii) A Person does not become an "Acquiring Person" solely as the result of (A) an acquisition of Common Stock by the Company or any of its Subsidiaries which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more of the Common Stock then outstanding as determined pursuant to Section 1(a)(i), or (B) such Person becoming the Beneficial Owner of 15% or more of the Common Stock then outstanding as determined pursuant to Section 1(a)(i) solely as a result of an Exempt Event; provided, however, that if a Person becomes the Beneficial Owner of 15% or more of the Common Stock then outstanding as determined pursuant to Section 1(a)(i) solely by reason of such a share acquisition by the Company or the occurrence of such an Exempt Event and such Person shall, after becoming the Beneficial Owner of such Common Stock, become the Beneficial Owner of additional shares of Common Stock constituting 1% or more of the then outstanding shares of Common Stock by any means whatsoever (other than as a result of the subsequent occurrence of an Exempt Event, a stock dividend or a subdivision of the Common Stock into a larger number of shares or a similar transaction), then such Person shall be deemed to be an "Acquiring Person; or (C) the inadvertent acquisition of beneficial ownership of 15% or more of the 2 Common Stock of the Company if the Board of Directors determines in good faith that such acquisition was inadvertent and such Person immediately divests itself of a sufficient number of shares of Common Stock so that such Person could no longer be an "Acquiring Person"; or (D), if such Person is an Institutional Investor, such Institutional Investor becoming the Beneficial Owner of 15% or more of the Common Stock then outstanding as determined pursuant to Section 1(a)(i) solely by reason of such Institutional Investor's Regular Trading Activities; provided, however, that if an Institutional Investor becomes the Beneficial Owner of 20% or more of the Common Stock other than solely as the result of the events described in clause (B) or (C) of this Section 1(a)(ii) (and in the case of clause (C), such Institutional Investor immediately divests itself of a sufficient number of shares of Common Stock as that it is no longer the Beneficial Owner of 20% or more of the Common Stock), then such Institutional Investor shall be deemed an "Acquiring Person." (b) "Affiliate" of a Person has the meaning given to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement. (c) "Associate" of a Person has the meaning given to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement. (d) Except as provided below, a Person is the "Beneficial Owner" of, and "beneficially owns," any securities: (i) which such Person or any Affiliate or Associate of such Person beneficially owns, directly or indirectly; (ii) which such Person or any Affiliate or Associate of such Person has, directly or indirectly, the right or obligation (whether or not then exercisable or effective) to acquire pursuant to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; provided, however, that a Person will not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any Affiliate or Associate of such Person until such tendered securities are accepted for purchase or exchange; and provided further, that prior to the occurrence of a Triggering Event, a Person will not be deemed the Beneficial Owner of, or to beneficially own, securities obtainable upon exercise of the Rights; (iii) which such Person or any Affiliate or Associate of such Person has, directly or indirectly, the right (whether or not then exercisable or effective) to vote, or to direct the voting of, pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security pursuant to this clause (iii) if the agreement, arrangement or understanding to vote, or to direct the voting of, such security (A) arises solely from a revocable proxy or consent given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the Exchange Act and applicable rules and regulations thereunder and (B) is not also then 3 reportable on Schedule 13D under the Exchange Act (or any comparable or successor schedule or report); (iv) which such Person or any Affiliate or Associate of such Person has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act or any successor provision); or (v) which are beneficially owned, directly or indirectly, by any other Person or any Affiliate or Associate of such other Person with whom such Person or any Affiliate or Associate of such Person has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in subparagraph (iii) of this Section 1(d)) or disposing of any securities of the Company. Nothing in this Section 1(d) causes a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own," any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition. Notwithstanding anything in this Agreement to the contrary, for purposes of this Agreement, no Person is to be treated as the "Beneficial Owner" of, or to "beneficially own," any securities owned by any other Person that is an Exempt Person. (e) "Board of Directors" means the Board of Directors of the Company, as the same is constituted from time to time, or if the Company ceases to exist as a result of a Business Combination or otherwise, the board of directors of the Company's successor, if any. (f) "Business Combination" has the meaning set forth in Section 13(a). (g) "Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions in the States of New York or Colorado are authorized or obligated by law or executive order to close. (h) "Close of Business" on any given date means 5:00 p.m., Denver, Colorado time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 p.m., Denver, Colorado time, on the next succeeding Business Day. (i) "Common Stock" when used in any context applicable prior to a Business Combination means the Common Stock, par value $.01 per share, of the Company (as the same may be changed by reason of any combination, subdivision or reclassification of the Common Stock). "Common Stock" when used with reference to any Person (other than the Company prior to a Business Combination) means shares of capital stock of such Person (if such Person is a corporation) of any class or series, or units of equity interests in such Person (if such Person is not a corporation) of any class or series, the terms of which shares or units do not limit (as a fixed amount and not merely in proportional terms) the amount of dividends or income payable or distributable on such shares or units or the amount of assets distributable on such 4 shares or units upon any voluntary or involuntary liquidation, dissolution or winding up of such Person and do not provide that such shares or units are subject to redemption at the option of such Person, or any shares of capital stock or units of equity interests into which the foregoing shall be reclassified or changed; provided, however, that if at any time there are more than one such class or series of capital stock of or equity interests in such Person, "Common Stock" of such Person will include all such classes and series substantially in the proportion of the total number of shares or other units of each such class or series outstanding at such time. (j) "Current Market Price" per share of Common Stock, Preferred Stock or Equivalent Shares on any date is the average of the daily closing prices per share of such Common Stock, Preferred Stock or Equivalent Shares for the 30 consecutive Trading Days (as such term is hereinafter defined) ending on the last Trading Day immediately prior to such date for the purpose of any computation under this Agreement except computations made pursuant to Section 11(a)(iv), and for the last Trading Day immediately prior to such date for the purpose of any computation under Section 11(a)(iv); provided, however, that in the event that the Current Market Price per share of Common Stock, Preferred Stock or Equivalent Shares is determined during a period following the announcement by the issuer of such Common Stock, Preferred Stock or Equivalent Shares of (i) a dividend or distribution on such Common Stock, Preferred Stock or Equivalent Shares other than a regular quarterly cash dividend, or (ii) any subdivision, combination or reclassification of such Common Stock, Preferred Stock or Equivalent Shares, and prior to the expiration of 30 Trading Days after the "ex-dividend" date for such dividend or distribution or the record date for such subdivision, combination or reclassification, then, and in each such case, the "Current Market Price" must be appropriately adjusted to take into account such dividend, distribution, subdivision, combination or reclassification. The closing price for each Trading Day shall be the last sale price, regular way, on such day, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, on such day, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the National Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") National Market or, if the Common Stock, Preferred Stock or Equivalent Shares are not listed or admitted to trading on the Nasdaq National Market, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal United States national securities exchange on which the Common Stock, Preferred Stock or Equivalent Shares are listed or admitted to trading or, if the Common Stock, Preferred Stock or Equivalent Shares are not listed or admitted to trading on any United States national securities exchange, the last quoted sale price on such day or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market on such day, as reported by Nasdaq or such other system then in use. If on any such day the Common Stock, Preferred Stock or Equivalent Shares are not quoted by any such organization, the average of the closing bid and asked prices on such day as furnished by a professional market maker making a market in the Common Stock, Preferred Stock or Equivalent Shares selected by a majority of the Board of Directors shall be used. If no such market maker is making a market, the fair market value of such shares on such day as determined in good faith by a majority of the Board of Directors or the Board of Directors of the issuer of such Common Stock, Preferred Stock or Equivalent Shares must be used, which determination must be described in a 5 statement filed with the Rights Agent and shall be final, binding and conclusive for all purposes. The term "Trading Day" means a day on which the principal United States national securities exchange on which the Common Stock, Preferred Stock or Equivalent Shares are listed or admitted to trading is open for the transaction of business or, if the Common Stock, Preferred Stock of Equivalent Shares are not listed or admitted to trading on any United States national securities exchange, but are traded in the over-the-counter market and reported by Nasdaq, then any day for which Nasdaq reports the high bid and low asked prices in the over-the-counter market, or if the Common Stock, Preferred Stock or Equivalent Shares are not traded in the over-the-counter market and reported by Nasdaq, then a Business Day. If the Common Stock, Preferred Stock or Equivalent Shares have not been so listed or admitted to trading for 30 or more Trading Days or traded in the over-the-counter market and reported by Nasdaq for 30 or more Trading Days, "Current Market Price" per share means the fair market value per share as determined in good faith by a majority of the Board of Directors, whose determination must be described in a statement filed with the Rights Agent and shall be final, binding and conclusive for all purposes. (k) "Distribution Date" means the earlier of (i) the day after the Company's right to redeem the Rights pursuant to Section 23(a)(i) expires, and (ii) the tenth Business Day after the Tender Offer Date. The Board of Directors may, at its election, defer the date set forth in clause (ii) of the preceding sentence to a specified later date or to an unspecified later date to be determined by a subsequent action or event. (l) "Equivalent Shares" means any class or series of capital stock of the Company, other than the Preferred Stock, which is entitled to participate on a proportional basis with the Preferred Stock in dividends and other distributions, including distributions upon the liquidation, dissolution or winding up of the Company. In calculating the number of any class or series of Equivalent Shares for purposes of Section 11, the number of shares, or fractions of a share, of such class or series of capital stock that is entitled to the same dividend or distribution as a whole share of Preferred Stock shall be deemed to be one share. (m) "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any successor statute. (n) "Exchange Date" means the time at which the Rights are exchanged pursuant to Section 11(a)(iv). (o) "Exempt Event" means with respect to any Person, the acquisition by such Person of Beneficial Ownership of Common Stock of the Company solely as a result of the occurrence of a Triggering Event and the effect of such Triggering Event on the last proviso of clause (ii) of the definition of Beneficial Owner, other than a Triggering Event in which such Person becomes an Acquiring Person. (p) "Exempt Person" means (i) the Company, (ii) any Subsidiary of the Company, (ii) any employee benefit plan of the Company or of any Subsidiary of the Company, and (iv) any Person holding Common Stock for any such employee benefit plan or for employees of the Company or of any Subsidiary of the Company pursuant 6 to the terms of any such employee benefit plan. (q) "Expiration Date" means the Close of Business on July 17, 2007. (r) "Institutional Investor" shall mean a Person who is principally engaged in the business of managing investment funds for unaffiliated securities investors and, as part of such Person's duties as agent for fully managed accounts, holds or exercises voting or dispositive power over shares of Common Stock. (s) "Person" means any individual, firm, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization or other entity, and shall include any "group" as that term is used in Rule 13d-5(b) under the Exchange Act (or any successor provision). (t) "Preferred Stock" means the Company's Junior Participating Preferred Stock, par value $.01 per share, having the rights and preferences set forth in the Certificate of Designation, Preferences and Rights of Junior Participating Preferred Stock attached hereto as Exhibit A. (u) "Principal Party" means (i) in the case of any Business Combination described in clause (i), (ii) or (iii) of the first sentence of Section 13(a), (A) the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted or for which they are exchanged in such Business Combination or, if there is more than one such issuer, the issuer of the Common Stock which has the greatest aggregate market value or (B) if no securities are so issued, the Person that survives or results from such Business Combination or, if there is more than one such Person, the Person the Common Stock of which has the greatest aggregate market value; and (ii) in the case of any Business Combination described in clause (iv) of the first sentence in Section 13(a), the Person that receives the greatest portion of the assets or earning power transferred pursuant to such Business Combination or, if each Person that is a party to such Business Combination receives the same portion of the assets or earning power so transferred or if the Person receiving the greatest portion of the assets or earning power cannot reasonably be determined, whichever of such Persons is the issuer of the Common Stock which has the greatest aggregate market value; provided, however, that in any such case, if the Common Stock of such Person is not at such time and has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act and such Person is a direct or indirect Subsidiary of one or more other Persons, then (x) "Principal Party" refers to whichever of such other Persons has Common Stock that is and has been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act; (y) if the Common Stocks of two or more of such other Persons are and have been so registered, "Principal Party" refers to whichever of such other Persons is the issuer of the Common Stock which has the greatest aggregate market value; or (z) if the Common Stock of none of such other Persons has been so registered, "Principal Party" refers to whichever of such other Persons (other than an individual) is the Person which has the equity securities with the greatest aggregate market value. In case such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth above apply to each of the chains of ownership having an interest in such joint venture as if such Person were a 7 Subsidiary of both or all of such joint venturers and the Principal Parties in each such chain shall bear the obligations set forth in Section 13 in the same ratio as their direct or indirect interests in such Person bear to the total of such interests. (v) "Purchase Price" with respect to each Right is initially $50.00 per one one-thousandth of a share of Preferred Stock, shall be subject to adjustment from time to time as provided in Sections 11 and 13, and shall be payable in lawful money of the United States of America in cash or by certified check or bank draft payable to the order of the Company. (w) "Record Date" means the Close of Business on July 18, 1997. (x) "Redemption Date" means the time at which the Rights are scheduled to be redeemed as provided in Section 23. (y) "Redemption Price" has the meaning given to such term in Section 23. (z) "Regular Trading Activities" means trading activities undertaken in the Institutional Investor's normal course of business and not for the purpose of exercising, either alone or in concert with any other Person, power to direct or cause the direction of the management and policies of the Company. (aa) "Rights Agent" means American Securities Transfer & Trust, Inc. or any Co-Rights Agent or Successor Rights Agent appointed by the Company pursuant to Section 2. (bb) "Securities Act" means the Securities Act of 1933, as amended, and any successor statute. (cc) "Stock Acquisition Date" means the first date (including, without limitation, any such date which is on or after the date of this Agreement and prior to the issuance of the Rights) of public disclosure by the Company, an Acquiring Person or otherwise that a Person has become an Acquiring Person. (dd) "Subsidiary" has the meaning given to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement. (ee) "Tender Offer Date" means the date of commencement or public disclosure of an intention to commence (including any such commencement or public disclosure which occurs on or after the date of this Agreement and prior to the issuance of the Rights) a tender offer or exchange offer by a Person if, after acquiring the maximum number of securities sought pursuant to such offer, such Person, or any Affiliate or Associate of such Person, would be an Acquiring Person. (ff) "Triggering Event" occurs when a Person becomes an Acquiring Person. 8 Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable. Section 3. Issuance of Rights Certificates. (a) Until the Distribution Date: (i) the Rights shall be issued in respect of and shall be evidenced by the certificates representing the shares of Common Stock issued and outstanding on the Record Date and shares of Common Stock issued or which become outstanding after the Record Date and prior to the earliest of the Distribution Date, the Redemption Date, the Exchange Date and the Expiration Date (which certificates for Common Stock shall be deemed to also be certificates evidencing the Rights), and not by separate certificates; (ii) the registered holders of such shares of Common Stock shall also be the registered holders of the Rights associated with such shares; and (iii) the Rights shall be transferable only in connection with the transfer of shares of Common Stock and the surrender for transfer of any certificate for such shares of Common Stock shall also constitute the surrender for transfer of the Rights associated with the shares of Common Stock represented thereby. As soon as practicable after the Company has notified the Rights Agent of the occurrence of the Distribution Date, the Company will prepare and execute, and the Company will deliver to the Rights Agent to be countersigned, which the Rights Agent shall do, and the Rights Agent shall mail, by first-class, insured, postage prepaid mail, to each record holder of the Common Stock as of the Close of Business on the Distribution Date, as shown by the records of the Company, at the address of such holder shown on such records, one or more certificates evidencing the Rights ("Rights Certificates"), in substantially the form of Exhibit B hereto, evidencing one Right (as adjusted from time to time pursuant to this Agreement) for each share of Common Stock so held. From and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates. In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11(o), at the time of distribution of the Rights Certificates, the Company may make the necessary and appropriate adjustments (in accordance with Section 14(a)) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. (b) On the Record Date, or as soon as practicable thereafter, the Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in substantially the form of Exhibit C hereto (the "Summary of Rights"), by first-class, postage-prepaid mail, to each record holder of Common Stock as of the close of business on the Record Date (other than any Acquiring Person or any Associate or Affiliate of any Acquiring Person), at the address of such holder shown on the records of the Company. With respect to certificates for Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with the Summary of Rights. Until the Distribution Date (or the earlier of the Redemption Date and the Expiration Date), the surrender for transfer of any certificate for Common Stock outstanding on the Record Date, with or without a copy of the Summary of Rights, shall 9 also constitute the transfer of the Rights associated with the Common Stock represented thereby. (c) Rights shall be issued in respect of all shares of Common Stock which are issued or sold by the Company after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date, the Exchange Date or the Expiration Date. In addition, in connection with the issuance or sale of Common Stock by the Company following the Distribution Date and prior to the earliest of the Redemption Date, the Exchange Date or the Expiration Date, the Company shall, with respect to Common Stock so issued or sold pursuant to (i) the exercise of stock options issued prior to the Distribution Date or under any employee plan or arrangement created prior to the Distribution Date, or (ii) upon the exercise, conversion or exchange of securities issued by the Company prior to the Distribution Date, issue Rights and Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (x) no such Rights and Rights Certificates shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificates would be issued; and (y) no such Rights and Rights Certificates shall be issued, if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Certificates issued after the Record Date representing shares of Common Stock outstanding on the Record Date or shares of Common Stock issued after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date, the Exchange Date and the Expiration Date shall have impressed, printed, or written on, or otherwise affixed to them a legend substantially in the following form: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between 3-D Geophysical, Inc. and American Securities Transfer & Trust, Inc., as Rights Agent, dated as of July 17, 1997 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of 3-D Geophysical, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. 3-D Geophysical, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights that were, are or become beneficially owned by Acquiring Persons or their Associates or Affiliates (as such terms are defined in the Rights Agreement) may become null and void and the holder of any of such Rights (including any subsequent holder) shall not have any right to exercise such Rights. Section 4. Form of Rights Certificates. (a) The Rights Certificates (and the form of election to purchase shares and form of assignment to be printed on the reverse thereof) shall be in substantially the form of Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem 10 appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed or any securities association on whose interdealer quotation system the Rights may be from time to time authorized for quotation, or to conform to usage. Subject to the provisions of this Agreement, the Rights Certificates, whenever issued, shall be dated as of the Distribution Date, and on their face shall entitle the holders thereof to purchase such number of shares of Preferred Stock as shall be set forth therein at the Purchase Price set forth therein, but the number and kind of such securities and the Purchase Price shall be subject to adjustment as provided in this Agreement. (b) Notwithstanding any other provision of this Agreement, (i) any Rights Certificate issued pursuant to this Agreement that represents Rights beneficially owned or formerly beneficially owned, on or after the earlier of the Distribution Date and the Stock Acquisition Date, by a Person known by the Company to be: (A) an Acquiring Person or an Associate or Affiliate of an Acquiring Person; (B) a direct or indirect transferee of an Acquiring Person (or of an Associate or Affiliate of such Acquiring Person) who becomes or becomes entitled to be a transferee after the Acquiring Person becomes such; or (C) a direct or indirect transferee of an Acquiring Person (or of an Associate or Affiliate of such Acquiring Person) who becomes or becomes entitled to be a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (x) a direct or indirect transfer (whether or not for consideration) from the Acquiring Person (or from an Associate or Affiliate of such Acquiring Person) to holders of equity interests in such Acquiring Person (or to holders of equity interests in an Associate or Affiliate of such Acquiring Person) or to any Person with whom such Acquiring Person (or an Associate or Affiliate of such Acquiring Person) has any continuing agreement, arrangement or understanding regarding the transferred Rights, or (y) a direct or indirect transfer which a majority of the Board of Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of Section 7(e); or (ii) any Rights Certificate issued pursuant to this Agreement upon transfer, exchange, replacement or adjustment of any other Rights Certificate beneficially owned by a Person referred to in this Section 4(b), shall contain (to the extent feasible) the following legend: The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement. Section 5. Execution, Countersignature and Registration. (a) Each Rights Certificate shall be executed on behalf of the Company by the Company's Chairman, Chief Executive Officer, President or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Company's Secretary or an 11 Assistant Secretary, either manually or by facsimile signature. Each Rights Certificate shall be countersigned by the Rights Agent either manually or, if permitted by the Company, by facsimile signature and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed a Rights Certificate shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificate nevertheless may be countersigned by the Rights Agent and issued and delivered with the same force and effect as though the Person who signed such Rights Certificate had not ceased to be such officer of the Company; and any Rights Certificate may be signed on behalf of the Company by any Person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Agreement any such Person was not such an officer. (b) Following the Distribution Date, the Rights Agent shall keep or cause to be kept, at its principal corporate trust office, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced by each Rights Certificate, and the certificate number and the date of issuance of each Rights Certificate. Section 6. Transfer, Division, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a) Subject to the provisions of Section 14, at any time after the Close of Business on the Distribution Date and at or prior to the Close of Business on the earliest of the Redemption Date, the Exchange Date or the Expiration Date, any Rights Certificate or Rights Certificates may be transferred, divided, combined or exchanged for another Rights Certificate or Rights Certificates, entitling the registered holder to purchase a like number of shares of Preferred Stock (or, following a Triggering Event or a Business Combination, other securities, cash or other property, as the case may be) as the Rights Certificate or Rights Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, divide, combine or exchange any Rights Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Rights Certificates to be transferred, divided, combined or exchanged at the principal corporate office of the Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. As a condition to such transfer, division, combination or exchange, the Company may require payment by the surrendering holder of a sum sufficient to cover any tax or governmental charge that may be imposed in connection therewith. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have duly completed and executed the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or such former or proposed Beneficial Owner) thereof or such Beneficial Owner's Affiliates or Associates as the Company shall reasonably request. (b) Upon receipt by the Company and the Rights Agent of evidence 12 reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will make and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature by the Rights Agent and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) Each Right shall entitle (except as otherwise provided in this Agreement) the registered holder thereof, upon the exercise thereof as provided in this Agreement, to purchase, for the Purchase Price, at any time after the Distribution Date and prior to the earliest of the Expiration Date, the Exchange Date or the Redemption Date, one one-thousandth (1/1000) of a share of Preferred Stock (or, following a Triggering Event or a Business Combination, other securities, cash or other assets, as the case may be), subject to adjustment from time to time as provided in Sections 11 and 13. (b) The registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided in this Agreement) in whole or in part (except that no fraction of a Right may be exercised) at any time after the Distribution Date and prior to the earliest of the Expiration Date, the Exchange Date or the Redemption Date, by surrendering the Rights Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the principal corporate trust office of the Rights Agent, together with payment of the Purchase Price for each one one-thousandth of a share of Preferred Stock (or, following a Triggering Event or a Business Combination, other securities, cash or other assets, as the case may be) as to which the Rights are exercised. (c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for each one one-thousandth of a share of Preferred Stock (or, following a Triggering Event or a Business Combination, other securities, cash or other assets, as the case may be) to be purchased and an amount in cash, certified bank check or bank draft payable to the order of the Company equal to any applicable transfer tax required to be paid by the surrendering holder pursuant to Section 9(d), the Rights Agent shall, subject to the provisions of this Agreement, thereupon promptly (i)(A) requisition from any transfer agent for the Preferred Stock (or make available, if the Rights Agent is the transfer agent for the Preferred Stock) certificates for the total number of one one-thousandths of a share of Preferred Stock to be purchased (and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests), or (B) if the Company shall have elected to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-thousandths of a share of Preferred Stock as are to be purchased (in which case certificates for the Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company shall direct the depositary agent to 13 comply with such request; (ii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder; and (iii) if appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 and, promptly after receipt thereof, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate. In the event that the Company is obligated to issue other securities (including shares of Common Stock) of the Company, pay cash and/or distribute other property pursuant to this Agreement, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate. (d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate or to his duly authorized assigns, subject to the provisions of Section 6 and Section 14. (e) Notwithstanding anything in this Agreement to the contrary, any Rights that are or were formerly beneficially owned on or after the earlier of the Distribution Date and the Stock Acquisition Date by (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person; (ii) a direct or indirect transferee of an Acquiring Person (or of an Associate or Affiliate of such Acquiring Person) who becomes or becomes entitled to be a transferee after the Acquiring Person becomes such; or (iii) a direct or indirect transferee of an Acquiring Person (or of an Associate or Affiliate of such Acquiring Person) who becomes or becomes entitled to be a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a direct or indirect transfer (whether or not for consideration) from the Acquiring Person (or from an Associate or Affiliate of such Acquiring Person) to holders of equity interests in such Acquiring Person (or to holders of equity interests in any Associate or Affiliate of such Acquiring Person) or to any Person with whom the Acquiring Person (or an Associate or Affiliate of such Acquiring Person) has any continuing agreement, arrangement or understanding regarding the transferred Rights, or (B) a direct or indirect transfer which a majority of the Board of Directors determines is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall, immediately upon the occurrence of a Triggering Event and without any further action, be null and void and no holder of such Rights shall have any rights whatsoever with respect to such Rights whether under this Agreement or otherwise; provided, however, that, in the case of transferees described in clause (ii) or clause (iii) of this Section 7(e), any Rights beneficially owned by such transferee shall be null and void only if and to the extent such Rights were formerly beneficially owned by a Person who was, at the time such Person beneficially owned such Rights, or who later became, an Acquiring Person or an Affiliate or Associate of such Acquiring Person. The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) are complied with, but shall have no liability to any holder of a Rights Certificate or to any other Person as a result of the Company's failure to make, or any delay in making (including any such failure or delay by the Board of Directors), any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees under this Section 7(e) or 14 any other provision of this Agreement. (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to the registered holder of a Rights Certificate upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former or proposed Beneficial Owner) thereof or the Affiliates or Associates of such Beneficial Owner (or former or proposed Beneficial Owner) as the Company shall reasonably request. Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer, division, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu therefor except as expressly permitted by the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Preferred Stock. (a) The Company covenants and agrees that it will cause to be reserved and kept available at all times out of its authorized and unissued shares of Preferred Stock or its authorized and issued shares of Preferred Stock held in its treasury (and, following the occurrence of a Triggering Event or a Business Combination, out of its authorized and unissued shares of Common Stock and/or other securities or out of its authorized and issued shares of Common Stock and/or other securities held in its treasury) free from preemptive rights or any right of first refusal, a sufficient number of shares of Preferred Stock (and, following the occurrence of a Triggering Event or a Business Combination, shares of Common Stock and/or other securities) to permit the exercise in full of all Rights from time to time outstanding. (b) The Company further covenants and agrees, so long as the Preferred Stock (and, following the occurrence of a Triggering Event or a Business Combination, shares of Common Stock and/or other securities) issuable upon the exercise of Rights may be listed on any United States national securities exchange or quoted on any automated quotation system, to use its best efforts to cause, from and after the time that the Rights become exercisable, all such shares and/or other securities reserved for such issuance to be listed on such exchange or quoted on such automated quotation system upon official notice of issuance upon such exercise. (c) The Company further covenants and agrees that it will take all such 15 action as may be necessary to ensure that all shares of Preferred Stock (and, following the occurrence of a Triggering Event or a Business Combination, shares of Common Stock and/or other securities) delivered upon the exercise of Rights shall, at the time of delivery of the certificates for such shares and/or such other securities (subject to payment of the Purchase Price), be duly and validly authorized and issued, fully paid, nonassessable, freely tradeable, not subject to liens or encumbrances, and free of preemptive rights, rights of first refusal or any other restrictions or limitations on the transfer or ownership thereof, of any kind or nature whatsoever. (d) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the original issuance or delivery of the Rights Certificates or of any certificates for shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to (i) pay any transfer tax which may be payable in respect of any transfer involved in the issuance or delivery of any Rights Certificates or the issuance or delivery of any certificates for shares of Preferred Stock (or Common Stock and/or other securities as the case may be) to a Person other than, or in a name other than that of, the registered holder of the Rights Certificate evidencing Rights surrendered for exercise; or (ii) transfer or deliver any Rights Certificate or issue or deliver any certificates for shares of Preferred Stock (or Common Stock and/or other securities as the case may be) upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. (e) The Company shall use its best efforts (i) as soon as practicable following a Triggering Event (provided the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii)), or as soon as is required by law following the Distribution Date, as the case may be, to prepare and file a registration statement on an appropriate form under the Securities Act with respect to the securities purchasable upon exercise of the Rights; (ii) to cause such registration statement to become effective as soon as practicable after such filing; and (iii) to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of (A) the date as of which Rights are no longer exercisable for such securities or (B) the Expiration Date. The Company shall also use its best efforts to take such action as may be necessary or appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercise of the Rights. The Company may temporarily suspend, for a period of time not to exceed 90 days after the date of a Triggering Event, the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall make a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained and until a registration statement has been declared effective under the Securities Act. 16 Section 10. Preferred Stock Record Date. Each Person in whose name any certificate for shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (or Common Stock and/or such other securities, as the case may be) on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are open. Section 11. Adjustments to Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number and kind of securities, cash and other property obtainable upon exercise of each Right and the number of Rights outstanding shall be subject to adjustment from time to time as provided in this Section 11. (a) (i) In the event the Company shall at any time on or after the date of this Agreement (A) pay a dividend or make a distribution on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide (by a stock split or otherwise) the outstanding Preferred Stock into a larger number of shares, (C) combine (by a reverse stock split or otherwise) the outstanding Preferred Stock into a smaller number of shares, or (D) issue any securities in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the surviving corporation), then in each such event the Purchase Price and the Redemption Price set forth in Section 23, as each is in effect at the time of the record date for such dividend or distribution, or of the effective date of such subdivision, combination or reclassification, shall be proportionately adjusted by multiplying the Purchase Price and such Redemption Price by a fraction the numerator of which shall be the total number of shares of Preferred Stock outstanding immediately prior to the occurrence of such event and the denominator of which shall be the total number of shares of Preferred Stock outstanding immediately following the occurrence of such event. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii). (ii) Upon the first occurrence of a Triggering Event, proper provision shall be made so that each holder of a Right, except as otherwise provided in this Agreement, shall thereafter have the right to receive, and the Company shall issue, upon exercise thereof at the then-current Purchase Price required to be paid in order to exercise a Right in accordance with the terms of this Agreement, in lieu of the number of one one-thousandths of a share of Preferred Stock or other securities receivable upon exercise of a Right prior to the occurrence of the Triggering Event, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) 17 multiplying the then-current Purchase Price by the number of one-thousandths of a share of Preferred Stock or other securities for which a Right was then exercisable (without giving effect to such Triggering Event) and (y) dividing that product by 50% of the Current Market Price per share of Common Stock on the date of the occurrence of the Triggering Event (such number of shares being referred to as the "Adjustment Shares"); provided, however, that if the transaction or event that would otherwise give rise to the foregoing adjustment is also subject to the provisions of Section 13, then only the provisions of Section 13 shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii). Upon the occurrence of such Triggering Event, the Purchase Price required to be paid in order to exercise a Right shall be unchanged, and the Purchase Price shall be appropriately adjusted to reflect, and shall thereafter mean, the amount required to be paid per share of Common Stock upon exercise of a Right. (iii) In lieu of issuing shares of Common Stock in accordance with Section 11(a)(ii), the Company may, if a majority of the Board of Directors determines that such action is necessary or appropriate and not contrary to the interests of holders of Rights (and, in the event that the number of shares of Common Stock which are authorized by the Company's certificate of incorporation, but which are not outstanding or reserved for issuance for purposes other than upon exercise of the Rights, are not sufficient to permit the exercise in full of the Rights in accordance with Section 11(a)(ii), the Company shall) take one or more of the following actions: (A) reduce (but in no event less than the Current Market Price per share of Common Stock) the Purchase Price required to be paid in order to exercise a Right by any amount (the "Reduction Amount"), in which event the number of Adjustment Shares and/or the amount of any Substitute Consideration (as hereinafter defined) issuable in respect of each Right (the Adjustment Shares, if any, and the Substitute Consideration, if any, issuable in respect of a Right are herein collectively referred to as the "Total Consideration") shall be reduced so that the aggregate value of the Total Consideration issuable in respect of each Right is equal to the Current Value (as hereinafter defined) less the Reduction Amount (such difference, the "Adjusted Current Value"); and/or (B) make adequate provision with respect to each Right to substitute for all or part of the Adjustment Shares otherwise obtainable upon exercise of a Right: (1) cash, (2) other equity securities of the Company (including, without limitation, shares, or units of shares, of preferred stock which a majority of the Board of Directors have determined (which determination shall be final, binding and conclusive for all purposes) to have the same value as shares of Common Stock (such shares or units of preferred stock being referred to as "Common Stock Equivalents")), (3) debt securities of the Company, (4) other assets, or (5) any combination of the foregoing (collectively, "Substitute Consideration") having an aggregate value which, when added to the value of the Adjustment Shares (if any) in respect of which no substitution is being made, is equal to the Adjusted Current Value. If a majority of the Board of Directors determines to issue or deliver any equity securities (other than Common Stock or Common Stock Equivalents), debt securities and/or other assets pursuant to this Section 11(a)(iii), the value of such securities and/or assets shall be determined by a majority of the Board of Directors based upon the advice of a nationally recognized investment banking firm selected by a majority of the Board of Directors (which determination shall be final, binding and conclusive for all purposes). If the Company is required to make adequate provision to deliver value pursuant to the first sentence of this Section 11(a)(iii) and the Company shall not have made such adequate provision to deliver value within ninety (90) days following the 18 first occurrence of a Triggering Event (the "Substitution Period"), then notwithstanding any provision of Section 11(a)(ii) or this Section 11(a)(iii) to the contrary, the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the excess of the Current Value over the Purchase Price. If both Common Stock and cash are to be delivered pursuant to the preceding sentence, amounts of both Common Stock and cash shall be delivered upon surrender of each Right in a ratio of Common Stock to cash that bears the same ratio as the total value of all Common Stock to be delivered (as determined pursuant to this Section 11(a)(iii)) bears to the total value of all cash to be delivered; provided, however, that the Company may adjust such ratio to avoid issuing any fractional shares of Common Stock so long as the method of adjustment is applied consistently to each holder of Rights entitled to receive value thereon pursuant to this Section 11(a)(iii). To the extent that the Company determines that some action is to be taken pursuant to the first and/or third sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and (y) may suspend the exercisability of the Rights but in no event to a time later than the expiration of the Substitution Period. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Upon any change in the Adjustment Shares obtainable upon exercise of a Right pursuant to this Section 11(a)(iii), the Purchase Price shall thereafter mean the amount, if any, required to be paid upon exercise of a Right for the Adjustment Shares, if any, and the Substitute Consideration, if any, then issuable or deliverable upon exercise of a Right, and a majority of the Board of Directors shall make any necessary provisions to ensure that the provisions of Section 11(e) shall thereafter apply as appropriate to the Total Consideration. For purposes of this Section 11(a)(iii), (A) "Current Value" shall be the product derived by multiplying (x) the number of Adjustment Shares issuable in respect of each Right determined under Section 11(a)(ii), by (y) the Current Market Price per share of Common Stock on the date of the Triggering Event; and (B) the value of each share of Common Stock and each share or unit of any "Common Stock Equivalent" shall be deemed conclusively to be equal to the Current Market Price per share of the Common Stock on the date of the Triggering Event. (iv) A majority of the Board of Directors may, at its option, at any time and from time to time after the first occurrence of a Triggering Event, cause the Company to exchange, for all or part of the then-outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e)), shares of Common Stock or Common Stock Equivalents at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date of this Agreement (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Any partial exchange shall be effected on a pro rata basis based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e)) held by each holder of Rights. Immediately upon the action of a majority of the Board of Directors 19 ordering the exchange of any Rights pursuant to this Section 11(a)(iv) and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock and/or Common Stock Equivalents equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange and, in addition, the Company shall promptly mail a notice of any such exchange to all of the holders of such Rights in accordance with Section 25; provided, however, that the failure to give, any delay in giving or any defect in, such notice shall not affect the validity of such exchange. Each such notice of exchange will state the method by which the exchange of the Common Stock or Common Stock Equivalents for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. In the event that the number of shares of Common Stock which is authorized but not outstanding or reserved for issuance for a purpose other than exercise of the Rights is not sufficient to permit any exchange of Rights as contemplated in accordance with this Section 11(a)(iv), the Board of Directors shall take all such action within its power as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights. The Company shall not be required to issue fractions of shares of Common Stock or Common Stock Equivalents or to distribute certificates which evidence fractional shares of Common Stock or Common Stock Equivalents. In lieu of such fractional shares of Common Stock or Common Stock Equivalents, the Company shall pay to the registered holders of the Rights Certificates with regard to which such fractional shares of Common Stock or Common Stock Equivalents would otherwise be issuable an amount in cash equal to the product derived by multiplying (x) the subject fraction, by (y) the last sale price of the Common Stock on the fifth Trading Day following the public announcement of the exchange by the Company, or, in case no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case on a when issued basis (taking into account the exchange), as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Nasdaq National Market (or, if the Company's Common Stock is not so listed or traded, then as determined in the manner provided under the definition of "Current Market Price," adjusted to take into account the exchange). For the purposes of this Section 11(a)(iv), the value of any Common Stock Equivalent on any date shall be the same as the value of the Common Stock, as determined pursuant to the previous sentence, on such date. (b) If the Company shall at any time on or after the date of this Agreement fix a record date for the issuance of rights, options or warrants to holders of Preferred Stock entitling them to subscribe for or purchase Preferred Stock or Equivalent Shares (or securities convertible into or exchangeable for Preferred Stock or Equivalent Shares) at a price per share of Preferred Stock or Equivalent Shares (or, in the case of a convertible or exchangeable security, having a conversion or exchange price per share of Preferred Stock or Equivalent Shares) less than the Current Market Price per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock and Equivalent Shares (if any) outstanding on such record date, plus the number of shares of Preferred Stock or Equivalent Shares, as the case may be, which the aggregate exercise, conversion and/or exchange price for the 20 total number of shares of Preferred Stock or Equivalent Shares, as the case may be, which are obtainable upon exercise, conversion and/or exchange of such rights, options, warrants or convertible or exchangeable securities would purchase at such Current Market Price, and the denominator of which shall be the number of shares of Preferred Stock and Equivalent Shares (if any) outstanding on such record date, plus the number of additional shares of Preferred Stock or Equivalent Shares, as the case may be, which may be obtained upon exercise, conversion and/or exchange of such rights, options, warrants or convertible or exchangeable securities. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by a majority of the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be final, binding and conclusive for all purposes. Preferred Stock and Equivalent Shares owned by or held for the account of the Company or any Subsidiary shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not issued following such adjustment, the Purchase Price shall be readjusted to be the Purchase Price that would have been in effect if such record date had not been fixed. (c) In case the Company shall at any time after the date of this Agreement fix a record date for the making of a distribution to holders of Preferred Stock (including any such distribution made in connection with a reclassification of the Preferred Stock or a consolidation or merger in which the Company is the surviving corporation) of securities (other than Preferred Stock and rights, options, warrants or convertible or exchangeable securities referred to in Section 11(b)), cash (other than a regular periodic cash dividend at an annual rate not in excess of: (x) 125% of the annual rate of the regular cash dividend paid on the Preferred Stock during the immediately preceding fiscal year (or, if the Preferred Stock was not outstanding during such preceding fiscal year, then 125% of the annual rate of the regular cash dividend paid on the Common Stock during such year), or (y) in the event that a regular cash dividend was not paid on the Preferred Stock (or Common Stock) during such preceding fiscal year, 5% of the Current Market Value of the Preferred Stock on the date such regular cash dividend was first declared), property, evidences of indebtedness, or assets, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Market Price per share of Preferred Stock on such record date, less the fair market value (as determined in good faith by a majority of the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be final, binding and conclusive for all purposes) of the portion of such securities, cash, property, evidences of indebtedness or assets to be so distributed in respect of one share of Preferred Stock, and the denominator of which shall be such Current Market Price per share of Preferred Stock on such record date. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not made following such adjustment, the Purchase Price shall be readjusted to be the Purchase Price that would have been in effect if such record date had not been fixed. (d) Except as provided below, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at 21 least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent, to the nearest one hundred-thousandth of a share of Common Stock, or to the nearest one hundred-thousandths of a share of Preferred Stock. Notwithstanding the first sentence of this Section 11(d), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment and (ii) the Expiration Date. (e) If, as a result of an adjustment made pursuant to Section 11(a) or Section 13(a), the holder of any Right thereafter exercised shall become entitled to receive any securities of the Company other than shares of Preferred Stock, thereafter the Purchase Price and the number of such other securities so receivable upon exercise of any Right 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 the shares of Preferred Stock contained in this Section 11 and the provisions of Sections 7, 9, 10, 12, 13, 14 and 24 with respect to the shares of Preferred Stock shall apply on like terms to any such other securities. (f) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of shares of Preferred Stock or other securities, cash or other property purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided in this Agreement. (g) Unless the Company shall have exercised its election as provided in Section 11(h), upon each adjustment of the Purchase Price as a result of any calculation made pursuant to Sections 11(a)(i), 11(b) and 11(c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a share of Preferred Stock (calculated to the nearest one hundred-thousandths of a share of Preferred Stock) obtained by (i) multiplying the number of one one-thousandths of a share of Preferred Stock covered by a Right immediately prior to adjustment pursuant to this Section 11(g) by the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (h) The Company may elect, on or after the date of any adjustment of the Purchase Price or any adjustment to the number of shares of Preferred Stock for which a Right may be exercised, to adjust the number of Rights, in lieu of an adjustment in the number of one one-thousandths of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right outstanding prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one hundred-thousandth) obtained by dividing the Purchase Price in effect immediately prior to such adjustment by the Purchase Price in effect immediately after such adjustment. The Company shall make a public announcement of its election to adjust the number of Rights, indicating 22 the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least 10 days after the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(h) the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date a new Rights Certificate evidencing, subject to Section 14, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record, in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment and upon surrender thereof (if required by the Company), new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates to be so distributed shall be issued, executed and countersigned in the manner provided for in this Agreement (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. (i) Irrespective of any adjustment or change in the Purchase Price or the number or kind of shares issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-thousandth of a share of Preferred Stock and the number of shares of Preferred Stock which were expressed in the initial Rights Certificates issued hereunder. (j) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of one one-thousandth of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable one one-thousandth shares of such Preferred Stock at such adjusted Purchase Price. (k) In any case in which this Section 11 shall require that an adjustment be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the shares of Preferred Stock and other securities, cash or property of the Company, if any, issuable upon such exercise over and above the shares of Preferred Stock and other securities, cash or property of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) or other securities, cash or property upon the occurrence of the event requiring such adjustment. (l) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that the Board of Directors in its sole discretion shall determine to be advisable in order that any combination or subdivision of the Preferred Stock, issuance wholly for cash of any 23 Preferred Stock at less than the Current Market Price per share of Preferred Stock, issuance wholly for cash of Preferred Stock or securities which by their terms are convertible into or exchangeable or exercisable for Preferred Stock, stock dividends or issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Stock, shall not be taxable to such stockholders. (m) The Company covenants and agrees that it shall not (i) consolidate with, (ii) merge with or into, or (iii) directly or indirectly sell, lease or otherwise transfer or dispose of (in one transaction or a series of related transactions) assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries taken as a whole, to any other Person if (A) at the time of or immediately after such consolidation, merger, sale, lease, transfer or disposition there are any rights, warrants, securities or other instruments outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights; (B) prior to, simultaneously with or immediately after such consolidation, merger, sale, lease, transfer or disposition the stockholders (or equity holders) of the Person who constitutes, or would constitute, the Principal Party in such transaction shall have received a distribution of Rights previously owned by such Person or any of its Affiliates or Associates; or (C) the form or nature of organization of the Principal Party would preclude or limit the exercisability of the Rights. The Company shall not consummate any such consolidation, merger, sale, lease, transfer or disposition unless prior thereto the Company and such other Person shall have executed and delivered to the Rights Agent a supplemental agreement evidencing compliance with this Section 11(m). (n) The Company covenants and agrees that, after the Stock Acquisition Date, it will not, except as permitted by Section 11(a)(iv), 26 or 29(b), take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will, directly or indirectly, diminish or otherwise eliminate the benefits intended to be afforded by the Rights. (o) Anything in this Agreement to the contrary notwithstanding, if the Company shall at any time prior to the Distribution Date (i) pay a dividend or distribution on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, and the Purchase Price under, and the number of one one-thousandths of a share of Preferred Stock issuable in respect of, the Rights, shall be proportionately adjusted, so that following such event one Right (with the Purchase Price and the number of one one-thousandths of a share of Preferred Stock proportionately adjusted thereunder) shall thereafter be associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date. For example, if the Company effects a two-for-one stock split at a time when each Right (if it becomes exercisable) would entitle the holder to purchase one one-thousandth of a share of Preferred Stock for a Purchase Price of $"Z", then following such stock split each previous Right would be split into two current Rights and thereafter each such current Right, upon becoming exercisable, would (subject to further adjustment) entitle the holder to purchase one one-thousandth of a share of 24 Preferred Stock at a Purchase Price of 1/2 x $"Z". Section 12. Certification of Adjustments. Whenever an adjustment is made as provided in Section 11 or 13, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Preferred Stock a copy of such certificate, and (c) mail or cause the Rights Agent to mail a brief summary thereof to each holder of a Rights Certificate (or, if no Rights Certificates have been issued, to each holder of a certificate representing shares of Common Stock) in accordance with Section 25. Notwithstanding the foregoing sentence, the failure of the Company to give such notice shall not affect the validity of or the force or effect of or the requirement for such adjustment. Any adjustment to be made pursuant to Section 11 or 13 shall be effective as of the date of the event giving rise to such adjustment. Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. (a) A "Business Combination" shall be deemed to occur in the event that, on or following a Triggering Event, (i) the Company shall, directly or indirectly, consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(m) and Section 11(n)) in a transaction in which the Company is not the continuing, resulting or surviving corporation of such merger or consolidation; (ii) any Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(m) and Section 11(n)) shall, directly or indirectly, consolidate with the Company, or shall merge with and into the Company, in a transaction in which the Company is the continuing, resulting or surviving corporation of such merger or consolidation and, in connection with such merger or consolidation, all or part of the Common Stock shall be changed (including, without limitation, any conversion into or exchange for securities of the Company or of any other Person, cash or any other property); (iii) the Company shall, directly or indirectly, effect a share exchange in which all or part of the Common Stock shall be changed (including, without limitation, any conversion into or exchange for securities of any other Person, cash or any other property); or (iv) the Company shall, directly or indirectly, sell, lease, exchange, mortgage, pledge (other than pledges in the ordinary course of the Company's financing activities) or otherwise transfer or dispose of (or one or more of its Subsidiaries shall directly or indirectly sell, lease, exchange, mortgage, pledge (other than pledges in the ordinary course of the Company's financing activities) or otherwise transfer or dispose of), in one transaction or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person (other than the Company or any of its Subsidiaries in one or more transactions each and all of which comply with Section 11(m) and Section 11(n)). In the event of a Business Combination, proper provision shall be made so that each holder of a Right (except as otherwise provided in this Agreement) shall thereafter have the right to receive, upon the exercise thereof at the Purchase Price immediately prior to the first occurrence of a Triggering Event multiplied by the number of one one-thousandths of a share of Preferred Stock for which a Right was 25 exercisable immediately prior to the first occurrence of a Triggering Event (without giving effect to the Triggering Event) in accordance with the terms of this Agreement, such number of shares of Common Stock of the Principal Party as shall be equal to the result obtained by (x) multiplying the Purchase Price immediately prior to the first occurrence of a Triggering Event by the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Triggering Event (without giving effect to the Triggering Event), and (y) dividing that product by 50% of the Current Market Price per share of the Common Stock of such Principal Party immediately prior to the consummation of such Business Combination. All shares of Common Stock of any Person for which any Right may be exercised after consummation of a Business Combination as provided in this Section 13(a) shall, when issued upon exercise thereof in accordance with this Agreement, be duly and validly authorized and issued, fully paid, nonassessable, freely tradeable, not subject to liens or encumbrances, and free of preemptive rights, rights of first refusal or any other restrictions or limitations on the transfer or ownership thereof of any kind or nature whatsoever. (b) After consummation of any Business Combination, (i) the Principal Party shall be liable for, and shall assume, by virtue of such Business Combination and without the necessity of any further act, all the obligations and duties of the Company pursuant to this Agreement, (ii) the term "Company" as used in this Agreement shall thereafter be deemed to refer to such Principal Party, and (iii) such Principal Party shall take all steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock in accordance with Section 9) in connection with such Business Combination as is necessary to ensure that the provisions of this Agreement shall thereafter be applicable, as nearly equivalent as practicable, in relation to the shares of its Common Stock thereafter deliverable upon the exercise of the Rights. (c) The Company shall not consummate any Business Combination unless prior thereto (i) the Principal Party shall have a sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance (other than shares reserved for issuance pursuant to this Agreement to the holders of Rights) to permit the exercise in full of the Rights in accordance with this Section 13; (ii) the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the fulfillment of the Principal Party's obligations and the terms as set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable on or after the date of such Business Combination, the Principal Party, at its own expense, shall (A) prepare and file, if necessary, a registration statement on an appropriate form under the Securities Act with respect to the Rights and the securities purchasable upon exercise of the Rights; (B) use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date; (C) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act; (D) use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the state securities or "blue sky" laws of such jurisdictions as may be necessary or appropriate; (E) use its best efforts to list the Rights and the securities purchasable upon 26 exercise of the Rights on a United States national securities exchange; and (F) obtain waivers of any rights of first refusal or preemptive rights in respect of the Common Stock of the Principal Party subject to purchase upon exercise of outstanding Rights; (iii) the Company and the Principal Party shall have furnished to the Rights Agent an opinion of independent counsel stating that such supplemental agreement is a legal, valid and binding agreement of the Principal Party enforceable against the Principal Party in accordance with its terms; and (iv) the Company and the Principal Party shall have filed with the Rights Agent a certificate of a nationally recognized firm of independent accountants setting forth the number of shares of Common Stock of such issuer which may be purchased upon the exercise of each Right after the consummation of such Business Combination. (d) The provisions of this Section 13 shall similarly apply to successive Business Combinations. In the event a Business Combination shall be consummated at any time after the occurrence of a Triggering Event, the Rights which have not theretofore been exercised shall thereafter be exercisable for the consideration and in the manner described in Section 13(a). Following a Business Combination, the provisions of Section 11(a)(ii) shall be of no effect. (e) Notwithstanding any other provision of this Agreement, no adjustment to the number of shares of Preferred Stock (or fractions of a share) or other securities, cash or other property for which a Right is exercisable or the number of Rights outstanding or associated with each share of Common Stock or any similar or other adjustment shall be made or be effective if such adjustment would have the effect of reducing or limiting the benefits the holders of the Rights would have had absent such adjustment, including, without limitation, the benefits under Sections 11 and 13, unless the terms of this Agreement are amended so as to preserve such benefits. (f) The Company covenants and agrees that it shall not effect any Business Combination if at the time of, or immediately after such Business Combination, there are any rights, options, warrants or other instruments outstanding which would diminish or otherwise eliminate the benefits intended to be afforded by the Rights. (g) Without limiting the generality of this Section 13, in the event the nature of the organization of any Principal Party shall preclude or limit the acquisition of Common Stock of such Principal Party upon exercise of the Rights as required by Section 13(a) as a result of a Business Combination, it shall be a condition to such Business Combination that such Principal Party shall take such steps (including, but not limited to, a reorganization) as may be necessary to ensure that the benefits intended to be derived under this Section 13 upon the exercise of the Rights are assured to the holders thereof. (h) In addition to, and without limiting, any other provision of this Section 13, in case the Principal Party which is to be a party to a transaction referred to in this Section 13 has provision in any of its authorized securities or in its certificate of incorporation or by-laws or other instrument governing its corporate affairs, which provision would have the effect of (i) causing such Principal Party to issue (other than to holders of Rights pursuant to this Section 13), in connection with, or as a consequence 27 of, the consummation of a transaction referred to in this Section 13, Common Stock of such Principal Party at less than the then Current Market Price per share or securities exercisable for, or convertible into, Common Stock of such Principal Party at less than such then Current Market Price, or (ii) providing for any special payment, tax or similar provisions in connection with the issuance of the Common Stock of such Principal Party pursuant to the provisions of this Section 13, then, in such event, the Company hereby agrees with each holder of Rights that it shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been cancelled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction. Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractional Rights or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, the Company may at its option pay to the registered holders of the Rights Certificates with respect to which such fractional Rights would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of a Right for the Trading Day immediately prior to the date on which such fractional Rights otherwise would have been issuable. The closing price for any Trading Day shall be the last sale price on such day, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, on such day, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Nasdaq National Market or, if the Rights are not listed or admitted to trading on the Nasdaq National Market, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal United States national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any United States national securities exchange, the last quoted sale price on such day or, if not so quoted, the average of the high bid and low asked prices on such day in the over-the-counter market, as reported by Nasdaq or such other system then in use or, if on such day the Rights are not quoted by any such system, the average of the closing bid and asked prices on such day as furnished by a professional market maker making a market in the Rights selected by a majority of the Board of Directors. If on such day no such market maker is making a market in the Rights, the current market value of the Rights on such day shall be determined in good faith by a majority of the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be final, binding and conclusive for all purposes. (b) The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred 28 Stock). Fractions of shares of Preferred Stock may, at the election of the Company, be evidenced by depositary receipts pursuant to an appropriate agreement between the Company and a depositary selected by it, provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Stock. In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-thousandth of a share of Preferred Stock, the Company may at its option (i) issue scrip or warrants in registered form (either represented by a certificate or uncertificated) or in bearer form (represented by a certificate) which shall entitle the holder to receive a full one one-thousandth of a share of Preferred Stock upon the surrender of such scrip or warrants aggregating a full one one-thousandth of a share of Preferred Stock, or (ii) pay to the registered holders of Rights Certificates at the time such Rights Certificates are exercised as provided in this Agreement an amount in cash equal to the same fraction of the current market value of a share of Preferred Stock. For purposes of this Section 14(b), the current market value of a share of Preferred Stock shall be the closing price of a share of Preferred Stock (as determined pursuant to the second sentence of the definition of "Current Market Price" in Section 1) for the Trading Day immediately prior to the date of such exercise. (c) The Company shall not be required to issue fractions of shares of Common Stock or Common Stock Equivalents or to distribute certificates which evidence fractional shares of Common Stock or Common Stock Equivalents. In lieu of such fractional shares of Common Stock or Common Stock Equivalents, the Company shall pay to the registered holders of the Rights Certificates with regard to which such fractional shares of Common Stock or Common Stock Equivalents would otherwise be issuable an amount in cash equal to the product derived by multiplying (x) the subject fraction, by (y) Current Market Price of the Company's Common Stock. (d) The holder of a Right by his acceptance thereof expressly waives any right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as otherwise provided in this Agreement). Section 15. Rights of Action. Except as otherwise provided, all rights of action in respect of this Agreement are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, any registered holders of associated Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, any share of associated Common Stock), without the consent of the Rights Agent or of the holder of any other Right, may, on his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company or any Principal Party to enforce, or otherwise act in respect of, his rights pursuant to this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against any actual or threatened violation of the obligations of any Person subject to, this Agreement. Section 16. Agreement of Rights Holders Concerning Transfer and Ownership of Rights. Every holder of a Right by accepting the same consents and 29 agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock; (b) after the Distribution Date, the Rights Certificates will be transferable on the registry books of the Rights Agent only if surrendered at the principal corporate trust office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer; (c) the Company and the Rights Agent may deem and treat the Person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificate or the associated Common Stock certificate made by anyone other than the Company, the transfer agent for the Common Stock or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary; and (d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. Section 17. Rights Holder Not Deemed a Stockholder. No holder, as such, of any Rights Certificate shall be entitled to vote or to receive dividends or distributions or shall be deemed for any purpose the holder of Preferred Stock or any other securities, cash or other property which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained in this Agreement or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company, including, without limitation, any right (i) to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, (ii) to give or withhold consent to any corporate action, (iii) to receive notice of meetings or other actions affecting stockholders (except as provided in Section 24), (iv) to receive dividends, distributions or subscription rights, (v) to institute, as a holder of Preferred Stock or other securities issuable on exercise of the Rights represented by any Rights Certificate, any derivative action on behalf of the Company, or otherwise, until and only to the extent that the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions of this Agreement. Section 18. Concerning the Rights Agent. The Company agrees to pay to 30 the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability or expense incurred without gross negligence, bad faith, willful misconduct or breach of this Agreement on the part of the Rights Agent for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. This indemnification shall survive the termination of this Agreement. The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or certificate for Preferred Stock or Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document reasonably believed by it to be genuine and to be signed, executed and, when necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section 20. Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any document or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under Section 21. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificate so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificate either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. 31 Section 20. Duties of Rights Agent. The Rights Agent undertakes and agrees to perform the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted to be taken by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person or any Affiliate or Associate of an Acquiring Person or the determination of Current Market Price) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be specifically prescribed in this Agreement) may be deemed to be conclusively proved and established by a certificate signed by the Chairman, the President, the Chief Executive Officer, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or omitted by it in good faith under this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder only for the gross negligence, bad faith, willful misconduct or breach of this Agreement by it or its attorneys or agents. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery of this Agreement (except the due execution and delivery of this Agreement by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in the transferability or exercisability of the Rights or any change or adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Section 3, 11, 13 or 23 or any other provision of this Agreement or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Preferred Stock, Common Stock or other securities to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Preferred Stock, Common Stock or other securities will, when 32 issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performance by the Rights Agent of its duties and obligations under this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman, the Chief Executive Officer, the President, any Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for such instructions. When applying to any such officer for instructions, the Rights Agent may set forth in writing (i) any proposed action or omission of the Rights Agent with respect to its duties or obligations under this Agreement and (ii) the date on or after which the Rights Agent proposes such action will be taken or omitted. Such date shall not be less than three Business Days after any such officer receives such application for instructions from the Rights Agent. Unless the Rights Agent has received written instructions from the Company (including any such officer) with respect to such proposed action or omission prior to such date (or, if longer, in the case of a proposed action to be taken, prior to the Rights Agent actually taking such action), the Rights Agent shall not be liable for the actions or omissions set forth in such application, provided that such action or omission does not violate any express provision of this Agreement. (h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though the Rights Agent were not serving as such under this Agreement. Nothing in this Agreement shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of such attorney or agent, provided that the Rights Agent exercised reasonable care in the selection and continued employment of such attorney or agent. (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights hereunder if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to the Rights Agent. 33 (k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Stock or Preferred Stock by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock or Preferred Stock by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. Notwithstanding any other provision of this Agreement, in no event shall the resignation or removal of a Rights Agent be effective until a successor Rights Agent shall have been appointed and have accepted such appointment. If the Company shall fail to make such appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by any holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then the incumbent Rights Agent or the registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or any state of the United States so long as such corporation is authorized to conduct a corporate trust or banking business under the laws of such state and is in good standing, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100,000,000. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for such purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock or Preferred Stock and mail a notice thereof in writing to the registered holders of the Rights Certificates. Neither the failure to give any notice provided for in this Section 21, however, nor any defect therein, shall affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights Certificates to the contrary, the Company may, at its option, issue new Rights Certificates evidencing new Rights in 34 such form as may be approved by a majority of the Board of Directors of the Company to reflect any adjustment or change in the Purchase Price per share and the number or kind or class of securities, cash or other property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of Common Stock following the Distribution Date and prior to the earlier of the Redemption Date and the Expiration Date, the Company may with respect to Common Stock so issued or sold pursuant to (i) the exercise of stock options, (ii) under any employee plan or arrangement, (iii) upon the exercise, conversion or exchange of securities notes or debentures issued by the Company or (iv) a contractual obligation of the Company, in each case existing prior to the Distribution Date, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale. Section 23. Redemption (a) The Board of Directors may, at its option, at any time prior to the earlier of (i) the Stock Acquisition Date and (ii) the Expiration Date, redeem all but not less than all of the then-outstanding Rights at a redemption price of $.01 per Right (the "Redemption Price") appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date of this Agreement. The Company may, at its option, pay the Redemption Price in cash, shares (including fractional shares) of Common Stock (based on the Current Market Price of the Common Stock at the time of redemption) or any other form of consideration deemed appropriate by the Board of Directors. 35 (b) At the time and date of effectiveness set forth in any resolution of the Board of Directors ordering the redemption of the Rights (the "Redemption Date"), without any further action and without any further notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price; provided, however, that such resolution of the Board of Directors may be revoked, rescinded or otherwise modified at any time prior to the time and date of effectiveness set forth in such resolution, in which event the right to exercise will not terminate at the time and date originally set for such termination by the Board of Directors. As soon as practicable after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and to the holders of the then-outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the issuance of Rights Certificates, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in the manner provided in this Agreement shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. In any case, failure to give such notice by mail, or any defect in the notice, to any particular holder of Rights shall not affect the sufficiency of the notice to other holders of Rights. In the case of a redemption permitted under this Section 23, the Company may, at its option, discharge all of its obligations with respect to the Rights by (i) issuing a press release announcing the manner of redemption of the Rights and (ii) mailing payment of the Redemption Price to the registered holders of the Rights at their last addresses as they appear on the registry books of the Rights Agent or, prior to the issuance of the Rights Certificates, on the registry books of the transfer agent for the Common Stock, and upon such action, all outstanding Rights Certificates shall be null and void without any further action by the Company. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than as specifically set forth in this Section 23, and other than in connection with the purchase of shares of Common Stock prior to the earlier of the Distribution Date and the Expiration Date. Section 24. Notice of Certain Events. In case the Company, on or after the Distribution Date, shall propose to (a) pay any dividend payable in stock of any class to the holders of its Preferred Stock or to make any other distribution to the holders of its Preferred Stock (other than a regular periodic cash dividend at an annual rate not in excess of 125% of the annual rate of the cash dividend paid on the Preferred Stock during the immediately preceding fiscal year, or if the Preferred Stock was not outstanding during such preceding fiscal year, then 125% of the annual rate of the cash dividend paid on the Common Stock during such year); or (b) offer to the holders of its Preferred Stock rights, options or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options; or (c) effect any reclassification of the Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock, a change in the par value of such Preferred Stock or a change from par value to no par value); or (d) directly or indirectly effect any consolidation or merger into or with, or effect any sale, lease, exchange or other transfer or disposition (or to permit one or more of its Subsidiaries to effect any sale, lease, exchange or other transfer or disposition), in one transaction or a series of related transactions, of more than 50% of 36 the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person; or (e) effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Right, in accordance with Section 25, a notice of such proposed action, which shall specify any record date for the purposes of such stock dividend, distribution or rights, or the date on which such reclassification, consolidation, merger, sale, lease, exchange, transfer, disposition, liquidation, dissolution, or winding up is to take place and if such holders will or may participate therein, the date of participation therein by the holders of Common Stock and/or Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (a) or (b) above at least 20 days prior to the record date for determining holders of the Preferred Stock for purposes of such action, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein, if any, by the holders of Preferred Stock, whichever shall be the earlier. In case any Triggering Event or Business Combination shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, in accordance with Section 25, notice of the occurrence of such Triggering Event or Business Combination, which shall specify the Triggering Event or Business Combination and include a description of the consequences of such event to holders of Rights under Section 11(a)(ii) or 13. The failure to give notice as required by this Section 24 or any defect therein shall not affect the legality or validity of the action taken by the Company or the vote upon any such action. Section 25. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address (or another person's attention) is filed in writing with the Rights Agent) as follows: 3-D Geophysical, Inc. 8226 Park Meadows Drive Littleton, CO 80124 Attention: Secretary Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address (or another person's attention) is filed in writing with the Company) as follows: American Securities Transfer & Trust, Inc. 1825 Lawrence Street, Suite 444 Denver, CO 80202 37 Attention: Kathy Heagerty Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company (or, if no Rights Certificates have been issued, if sent by first-class mail, postage prepaid, addressed to the holder of a certificate representing shares of Common Stock at the address of such holder as shown on the Company's Common Stock registry books). Section 26. Amendments and Supplements. This Agreement may not be amended or supplemented except as permitted in Section 26(a) or 26(b) or as contemplated by Section 11(a)(iii). (a) At any time prior to the Distribution Date, a majority of the Board of Directors may, and the Rights Agent shall, if so directed, amend or supplement any provision of this Agreement without the approval of any holders of Rights. (b) From and after the Distribution Date, a majority of the Board of Directors may, and the Rights Agent shall, if so directed, amend or supplement this Agreement without the approval of any holders of Rights Certificates (i) to cure any ambiguity, (ii) to correct or supplement any provision contained in this Agreement which may be defective or inconsistent with any other provision of this Agreement, or (iii) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). (c) Immediately upon the action of a majority of the Board of Directors providing for any amendment or supplement pursuant to this Section 26, and without any further action and without notice, such amendment or supplement shall be deemed effective. Promptly following the adoption of any amendment or supplement pursuant to this Section 26, the Company shall deliver to the Rights Agent a copy, certified by the Secretary or any Assistant Secretary of the Company, of resolutions of a majority of the Board of Directors adopting such amendment or supplement. Upon such delivery, the amendment or supplement shall be administered by the Rights Agent as part of this Agreement in accordance with the terms of this Agreement, as so amended or supplemented. Section 27. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 28. Benefits of this Agreement; Determinations and Actions by the Board of Directors. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of Rights any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the 38 registered holders of the Rights. For purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act (or any successor provision); provided, however, that any such calculation made for purposes of determining the particular percentage of outstanding shares of Common Stock of which any Person is the Beneficial Owner shall also include any such other securities not then actually issued and outstanding which such Person would be deemed to be the Beneficial Owner of, or to "beneficially own," pursuant to Section 1(d). The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board of Directors of the Company or the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights, to exchange or not exchange the Rights for Common Stock or other securities of the Company, or to amend or supplement this Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board of Directors in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other Persons, and (y) not subject the Board of Directors to any liability to the holders of the Rights. Section 29. Severability. (a) If any term, provision, covenant or restriction of this Agreement or the application thereof to any Person or to any circumstance is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (b) If legal counsel to the Company delivers to the Company a written opinion to the effect that, as a result of changes in federal law or Delaware law, any term, provision, covenant or restriction of this Agreement may be invalid, void or unenforceable, then, notwithstanding any other provision of this Agreement, the Company and the Rights Agent may amend this Agreement to modify, revise or delete such term, provision, covenant or restriction to the extent necessary to comply with such law as so changed. Section 30. Governing Law. This Agreement and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the internal laws of such state applicable to contracts to be made and performed entirely within such State. Section 31. Counterparts. This Agreement may be executed in counterparts and each of such counterparts shall for all purposes be deemed to be an 39 original, and both such counterparts shall together constitute but one and the same instrument. Section 32. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions of this Agreement. Section 33. Grammatical Construction. Throughout this Agreement, where such meanings would be appropriate, (a) any pronouns used herein shall include the corresponding masculine, feminine or neuter forms (e.g., references to "he" shall also include "she" and "it" and references to "who" and "whom" shall also include "which"), (b) the plural form of nouns and pronouns shall include the singular and vice-versa, (c) reference to a Section means a Section of this Agreement, and (d) the word "including" means "including, without limitation," whether expressly stated or not. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. 3-D GEOPHYSICAL, INC. Attest: /s/ John Wilkie By: /s/ Joel Friedman - ----------------------------- ----------------------------- Name: Joel Friedman Title: Chairman AMERICAN SECURITIES TRANSFER & TRUST, INC. Attest: /s/ K. Watson By: /s/ Kathy Heagerty - ----------------------------- ----------------------------- Name: Kathy Heagerty Title: Operations Officer 40 FIRST AMENDMENT TO RIGHTS AGREEMENT FIRST AMENDMENT dated as of March 6, 1998 ("this Amendment") between 3-D Geophysical, Inc., a Delaware corporation (the "Company"), and American Securities Transfer & Trust, Inc., as Rights Agent. WHEREAS, the above-mentioned parties have previously entered into that certain Rights Agreement dated as of July 17, 1997 (the "Rights Agreement") governing certain preferred stock purchase rights (the "Rights") of the Company's stockholders; WHEREAS, the Company proposes to enter into an Agreement and Plan of Merger (the "Merger Agreement"), dated as of March 8, 1998, by and among the Company, Western Atlas Inc., a Delaware corporation ("Parent"), and WAI Acquisition Corp., a Delaware corporation and a subsidiary of Parent ("WAI"), whereby WAI will make a tender offer (the "Tender Offer") to purchase all outstanding shares of Common Stock of the Company for cash and upon consummation of the Tender Offer WAI will merge with and into the Company (the "Merger") upon the terms and subject to the conditions set forth in the Merger Agreement; WHEREAS, upon the execution and delivery of the Merger Agreement, certain directors and officers of the Company will simultaneously enter into and deliver, support agreements (each a "Support Agreement") in substantially the form attached to the Merger Agreement as Annex II; WHEREAS, the Board of Directors deems it desirable and in the best interests of its stockholders that the transactions contemplated by the Merger Agreement be consummated; WHEREAS, Section 4.18 of the Merger Agreement provides that prior to the Effective Time (as defined in the Merger Agreement), the Company shall amend the Rights Agreement (without redeeming the Rights) so that none of the transaction contemplated by the Merger Agreement will (i) cause any Rights issued pursuant to the Rights Agreement to become exercisable or to separate from the stock certificates to which they are attached, (ii) cause Parent, WAI or any of their Affiliates or Associates to be an Acquiring Person (as each such term is defined in the Rights Agreement), or (iii) trigger other provisions of the Rights Agreement, including giving rise to a Distribution Date or a Triggering Event (as each such term is defined in the Rights Agreement). WHEREAS, such parties wish to amend the Rights Agreement in the manner set forth below. NOW, THEREFORE, the parties hereto agree as follows: 34. All capitalized terms used herein, unless otherwise defined herein, shall have the meanings given them in the Rights Agreement, and each reference in the Rights Agreement to 41 "this Agreement," "hereof," "herein," "hereunder" or "hereby" and each other similar reference shall be deemed to refer to the Rights Agreement as amended hereby. All references to the Rights Agreement in any other agreement between or among any of the parties hereto relating to the transactions contemplated by the Rights Agreement shall be deemed to refer to the Rights Agreement as amended hereby. 35. The definition of "Acquiring Person" in Section 1 is hereby amended by adding the following provision to the end of paragraph (a)(i) of such definition: "and neither Parent nor WAI shall become an Acquiring Person by reason or as a result of the execution or delivery of any Support Agreement or the Merger Agreement or the consummation of the Tender Offer or of the Merger or any other transaction contemplated by the Merger Agreement." 36. The definition of "Distribution Date" in Section 1 is hereby amended by adding the following provision to the end of such definition: "; provided that no Distribution Date shall occur by reason or as a result of the execution or delivery of any Support Agreement or the Merger Agreement or the consummation of the Tender Offer or Merger or any other transaction contemplated by the Merger Agreement." 37. The following definitions are hereby added to Section 1: ""Merger" means the merger of WAI with and into the Company upon the terms and conditions set forth in the Merger Agreement." ""Merger Agreement" means the Agreement and Plan of Merger, dated as of March 8, among the Company, WAI and Parent." ""Parent" means Western Atlas Inc., a Delaware corporation." ""Support Agreement" means the Support Agreement in the form of Annex II to the Merger Agreement, dated as of the date of the Merger Agreement and executed by certain directors and officers of the Company." ""Tender Offer" means the offer by WAI to purchase all of the outstanding shares of Common Stock (including the Right associated with each share of Common Stock) pursuant to Article I of the Merger Agreement. ""WAI" means WAI Acquisition Corp., a Delaware corporation and a direct, wholly owned subsidiary of Parent." 38. This Amendment shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed entirely in Delaware. 41 42 39. This Amendment may be signed in any number of counterparts, each of which shall be deemed an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 40. Except as expressly amended hereby, the Rights Agreement shall remain in full force and effect. 42 43 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. 3-D GEOPHYSICAL, INC. Attest: /s/ John M. Wilkie, Jr. By: /s/ Joel Friedman - ----------------------------- ----------------------------- Name: Joel Friedman Title: Chairman AMERICAN SECURITIES TRANSFER & TRUST, INC. Attest: /s/ Kimberly Hammond By: /s/ Kellie Gwinn - ----------------------------- ----------------------------- Name: Kellie Gwinn Title: Senior Vice President 43 EX-99.C11 16 AMENDED & RESTATED 1995 LONG-TERM INCENTIVE PLAN 1 EXHIBIT (C)(11) 3-D GEOPHYSICAL 1995 LONG-TERM INCENTIVE COMPENSATION PLAN Amended and Restated January 5, 1996 2 Table of Contents
Page ---- ARTICLE I GENERAL 1.1 Purpose................................................................................. 1 1.2 Administration.......................................................................... 1 1.3 Persons Eligible for Awards............................................................. 3 1.4 Types of Awards Under Plan.............................................................. 3 1.5 Shares Available for Awards............................................................. 4 1.6 Definitions of Certain Terms............................................................ 5 ARTICLE II AWARDS UNDER THE PLAN 2.1 Agreements Evidencing Awards............................................................ 8 2.2 Grant of Stock Options, Stock Appreciation Rights ............................................................................... 8 2.3 Grant of Stock Options to Non-Employee Directors ............................................................................ 11 2.4 Exercise of Options and Stock Appreciation Rights................................................................................ 12 2.5 Termination of Employment; Death........................................................ 15 2.6 Grant of Restricted Stock............................................................... 17 ARTICLE III MISCELLANEOUS 3.1 Amendment of the Plan; Modification of Awards............................................................................. 20 3.2 Restrictions............................................................................ 21 3.3 Nonassignability........................................................................ 22 3.4 Requirement of Notification of Election Under Section 83(b) of the Code....................................................... 22 3.5 Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code............................................................ 23 3.6 Right of Discharge Reserved............................................................. 23 3.7 Nature of Payments...................................................................... 23 3.8 Non-Uniform Determinations.............................................................. 24 3.9 Other Payments or Awards................................................................ 24 3.10 Section Headings........................................................................ 25 3.11 Effective Date and Term of Plan......................................................... 25 3.12 Governing Law........................................................................... 25
-i- 3 ARTICLE I GENERAL 1.1 Purpose The purpose of the 3-D Geophysical 1995 Long-Term Incentive Plan (the "Plan") is to provide for directors, officers and key employees of, and consultants to, 3-D Geophysical, Inc. (the "Company") and its subsidiaries an incentive (a) to enter into and remain in the service of the Company or its subsidiaries, (b) to enhance the long-term performance of the Company and its subsidiaries, and (c) to acquire a proprietary interest in the success of the Company and its subsidiaries. 1.2 Administration 1.2.1 Subject to Section 1.2.6, the Plan shall be administered by the Compensation Committee (the "Committee") of the board of directors of the Company (the "Board"), which shall consist of not less than two directors. The members of the Committee shall be appointed by, and serve at the pleasure of, the Board. To the extent required for transactions under the Plan to qualify for the exemptions available under Rule 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934 (the "1934 Act"), no person may serve on the Committee if, during the year preceding such service, he was granted or awarded equity securities of the Company (including options on such 4 securities) under the Plan or any other plan of the Company or any affiliate thereof (other than a grant pursuant to Section 2.3 hereof). 1.2.2 The Committee shall have the authority (a) to exercise all of the powers granted to it under the Plan, (b) to construe, interpret and implement the Plan and any Plan Agreements executed pursuant to Section 2.1, (c) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules governing its own operations, (d) to make all determinations necessary or advisable in administering the Plan, (e) to correct any defect, supply any omission and reconcile any inconsistency in the Plan, and (f) to amend the Plan to reflect changes in applicable law. 1.2.3 Actions of the Committee shall be taken by the vote of a majority of its members. Any action may be taken by a written instrument signed by a majority of the Committee members, and action so taken shall be fully as effective as if it had been taken by a vote at a meeting. 1.2.4 The determination of the Committee on all matters relating to the Plan or any Plan Agreement shall be final, binding and conclusive. 1.2.5 No member of the Committee shall be liable for -2- 5 any action or determination made in good faith with respect to the Plan or any award thereunder. 1.2.6 Notwithstanding anything to the contrary contained herein: (a) until the Board shall appoint the members of the Committee, the Plan shall be administered by the Board; and (b) the Board may, in its sole discretion, at any time and from time to time, resolve to administer the Plan. In either of the foregoing events, the term "Committee" as used herein shall be deemed to mean the Board. 1.3 Persons Eligible for Awards Awards under the Plan may be made to such officers, directors, and executive, administrative, technical or professional employees of, and consultants to, the Company and its subsidiaries (collectively, "key persons") as the Committee shall in its sole discretion select. Awards to directors who are not employees of the Company or a subsidiary shall be made only pursuant to Section 2.3. 1.4 Types of Awards Under Plan Awards may be made under the Plan in the form of (a) incentive stock options, (b) nonqualified stock options, (c) stock appreciation rights and (d) restricted stock, all as more fully set forth in Article II. The term "award" means any -3- 6 of the foregoing. No incentive stock option may be granted to a person who is not an employee of the Company on the date of grant. 1.5 Shares Available for Awards 1.5.1 The total number of shares of common stock of the Company, par value $0.01 per share ("Common Stock"), with respect to which awards may be granted pursuant to the Plan shall not exceed 720,000 shares. Such shares may be authorized but unissued Common Stock or authorized and issued Common Stock held in the Company's treasury or acquired by the Company for the purposes of the Plan. The Committee may direct that any stock certificate evidencing shares issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares pursuant to the Plan. 1.5.2 If there is any change in the outstanding shares of Common Stock by reason of a stock dividend or distribution, stock split-up, recapitalization, combination or exchange of shares, or by reason of any merger, consolidation, spinoff or other corporate reorganization in which the Company is the surviving corporation, the number of shares available for issuance both in the aggregate and with respect to each outstanding award, and the purchase price per share under outstanding awards, shall be equitably adjusted by the Committee, whose determination -4- 7 shall be final, binding and conclusive. After any adjustment made pursuant to this Section 1.5.2, the number of shares subject to each outstanding award shall be rounded to the nearest whole number. 1.5.3 The following shares of Common Stock shall become available for further awards under the Plan: any shares subject to an award under the Plan that remain unissued upon the cancellation or termination of such award for any reason whatsoever; any shares of restricted stock forfeited pursuant to Section 2.5.5; any shares in respect of which a stock appreciation right is settled for cash; and any shares tendered in payment upon the exercise of an option or stock appreciation right. Except as provided in Section 2.2.8, there shall be no limit on the number or the value of the shares of Common Stock that may be subject to awards to any individual under the Plan. 1.6 Definitions of Certain Terms 1.6.1 The "Fair Market Value" of a share of Common Stock on any day shall be determined as follows. (a) If the principal market for the Common Stock (the "Market") is a national securities exchange or the National Association of Securities Dealers Automated Quotation System ("NASDAQ") National Market, the last sale price or, if no report- -5- 8 ed sales take place on the applicable date, the average of the high bid and low asked price of Common Stock as reported for such Market on such date or, if no such quotation is made on such date, on the next preceding day on which there were quotations, provided that such quotations shall have been made within the ten (10) business days preceding the applicable date; (b) If the Market is the NASDAQ National List, the NASDAQ Supplemental List or another market, the average of the high bid and low asked price for Common Stock on the applicable date, or, if no such quotations shall have been made on such date, on the next preceding day on which there were quotations, provided that such quotations shall have been made within the ten (10) business days preceding the applicable date; or, (c) In the event that neither paragraph (a) nor (b) shall apply, the Fair Market Value of a share of Common Stock on any day shall be determined in good faith by the Committee. 1.6.2 The term "incentive stock option" means an option that is intended to qualify for special federal income tax treatment pursuant to sections 421 and 422 of the Internal Revenue Code of 1986 (the "Code"), as now constituted or subsequently amended, or pursuant to a successor provision of the Code, and which is so designated in the applicable Plan Agreement. Any option that is not specifically designated as an -6- 9 incentive stock option shall under no circumstances be considered an incentive stock option. Any option that is not an incentive stock option is referred to herein as a "nonqualified stock option." 1.6.3 The term "employment" means, in the case of a grantee of an award under the Plan who is not an employee of the Company or a subsidiary, the grantee's membership on the Board or status as a consultant to the Company or a subsidiary. 1.6.4 A grantee shall be deemed to have a "termination of employment" upon ceasing to be employed by the Company and all of its subsidiaries or by a corporation assuming awards in a transaction to which section 425(a) of the Code applies. The Committee may in its discretion determine whether any leave of absence constitutes a termination of employment for purposes of the Plan and the impact, if any, of any such leave of absence on awards theretofore made under the Plan. The Committee shall have the right to determine whether the termination of a grantee's employment is a dismissal for cause and the date of termination in such case, which date the Committee may retroactively deem to be the date of the action that is cause for dismissal. Such determinations of the Committee shall be final, binding and conclusive. -7- 10 1.6.5 The terms "parent corporation" and "subsidiary corporation" have the meanings given them in section 425(e) and (f) of the Code, respectively. -8- 11 ARTICLE II AWARDS UNDER THE PLAN 2.1 Agreements Evidencing Awards Each award granted under the Plan shall be evidenced by a written agreement ("Plan Agreement") which shall contain such provisions as the Committee may in its sole discretion deem necessary or desirable. By accepting an award pursuant to the Plan, a grantee thereby agrees that the award shall be subject to all of the terms and provisions of the Plan and the applicable Plan Agreement. 2.2 Grant of Stock Options and Stock Appreciation Rights 2.2.1 The Committee may grant incentive stock options and nonqualified stock options (collectively, "options") to purchase shares of Common Stock from the Company, to such key persons, and in such amounts and subject to such terms and conditions, as the Committee shall determine in its sole discretion, subject to the provisions of the Plan. 2.2.2 The Committee may grant stock appreciation rights to such key persons, and in such amounts and subject to such terms and conditions, as the Committee shall determine in its sole discretion, subject to the provisions of the Plan. Stock appreciation rights may be granted in connection with all -9- 12 or any part of, or independently of, any option granted under the Plan. A stock appreciation right granted in connection with a nonqualified stock option may be granted at or after the time of grant of such option. A stock appreciation right granted in connection with an incentive stock option may be granted only at the time of grant of such option. 2.2.3 The grantee of a stock appreciation right shall have the right, subject to the terms of the Plan and the applicable Plan Agreement, to receive from the Company an amount equal to (a) the excess of the Fair Market Value of a share of Common Stock on the date of exercise of the stock appreciation right over (b) the Fair Market Value of a share of Common Stock on the date of grant (or over the option exercise price if the stock appreciation right is granted in connection with an option), multiplied by (c) the number of shares with respect to which the stock appreciation right is exercised. Payment upon exercise of a stock appreciation right shall be in cash or in shares of Common Stock (valued at their Fair Market Value on the date of exercise of the stock appreciation right) or both, all as the Committee shall determine in its sole discretion. Upon the exercise of a stock appreciation right granted in connection with an option, the number of shares subject to the option shall be reduced by the number of shares with respect to which the stock appreciation right is exercised. Upon the exercise of an option -10- 13 in connection with which a stock appreciation right has been granted, the number of shares subject to the stock appreciation right shall be reduced by the number of shares with respect to which the option is exercised. 2.2.4 Each Plan Agreement with respect to an option shall set forth the amount (the "option exercise price") payable by the grantee to the Company upon exercise of the option evidenced thereby. The option exercise price per share shall be determined by the Committee in its sole discretion; provided, however, that the exercise price of an incentive stock option shall be at least 100% of the Fair Market Value of a share of Common Stock on the date the option is granted, and provided further that in no event shall the option exercise price be less than the par value of a share of Common Stock. 2.2.5 Each Plan Agreement with respect to an option or stock appreciation right shall set forth the periods during which the award evidenced thereby shall be exercisable, whether in whole or in part. Such periods shall be determined by the Committee in its sole discretion; provided, however, that no incentive stock option (or a stock appreciation right granted in connection with an incentive stock option) shall be exercisable more than 10 years after the date of grant. -11- 14 2.2.6 To the extent that the aggregate Fair Market Value (determined as of the time the option is granted) of the stock with respect to which incentive stock options are first exercisable by any employee during any calendar year shall exceed $100,000, or such higher amount as may be permitted from time to time under section 422 of the Code, such options shall be treated as nonqualified stock options. 2.2.7 Notwithstanding the provisions of Sections 2.2.4 and 2.2.5, an incentive stock option may not be granted under the Plan to an individual who, at the time the option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of his employer corporation or of its parent or subsidiary corporations (as such ownership may be determined for purposes of section 422(b)(6) of the Code) unless (a) at the time such incentive stock option is granted the option exercise price is at least 110% of the Fair Market Value of the shares subject thereto and (b) the incentive stock option by its terms is not exercisable after the expiration of 5 years from the date it is granted. 2.3 Grant of Stock Options to Non-Employee Directors. 2.3.1 This Section 2.3 sets forth the provisions pursuant to which nonqualified stock options shall be granted to those directors of the Company who are not employees of the Com- -12- 15 pany or a subsidiary. The terms of such options as set forth herein may not be varied other than by amendment of this Section 2.3 in accordance with Section 3.1. To the extent that any administrative action is required in connection with this Section 2.3, such action shall be taken by the Board, whose determination in such case shall be conclusive. 2.3.2 Nonqualified stock options shall be granted under this Section 2.3 only to persons who are members of the Board and are not employees of the Company or any subsidiary thereof ("Eligible Directors"). 2.3.3 On the effective date of the initial public offering of the Common Stock, each person who then satisfies the definition of Eligible Director shall be granted a nonqualified stock option for 10,000 shares of Common Stock at the price established for such public offering. Thereafter, upon the initial election to the Board of any other person who satisfies the definition of Eligible Director, such person shall be granted an option to purchase 10,000 shares of Common Stock at the Fair Market Value on the date of such person's election to the Board. 2.3.4 Each option granted under this Section 2.3 shall have a term of 10 years, and shall become exercisable as to one-third of the shares subject thereto on each of the first, second -13- 16 and third anniversaries of the date of grant. An option may be exercised from time to time for all or part of the shares as to which it is then exercisable. 2.4 Exercise of Options and Stock Appreciation Rights Subject to the provisions of this Article II, each option or stock appreciation right granted under the Plan shall be exercisable as follows: 2.4.1 Unless the applicable Plan Agreement otherwise provides, an option or stock appreciation right shall become exercisable in four substantially equal installments, the first of which shall become exercisable on the first anniversary of the date of grant and the remaining three of which shall become exercisable, respectively, on the second, third and fourth anniversaries of the date of grant. 2.4.2 Unless the applicable Plan Agreement otherwise provides, once an installment becomes exercisable, it shall remain exercisable until expiration, cancellation or termination of the award. 2.4.3 Unless the applicable Plan Agreement otherwise provides, an option or stock appreciation right may be exercised from time to time as to all or part of the shares as to which such award is then exercisable. A stock appreciation right -14- 17 granted in connection with an option may be exercised at any time when, and to the same extent that, the related option may be exercised. 2.4.4 An option or stock appreciation right shall be exercised by the filing of a written notice with the Company, on such form and in such manner as the Committee shall in its sole discretion prescribe. In the case of a grantee of a stock appreciation right whose transactions in Common Stock are subject to Section 16(b) of the 1934 Act, an election to exercise the stock appreciation right in whole or in part shall, to the extent required to conform to applicable interpretations of Rule 16b-3, be subject to the approval of the Committee in its sole discretion, occur no sooner than six months after the grant thereof, and be made irrevocably at least six months prior to such exercise unless both the election and the exercise are made in a single "window period" of 10 business days beginning on the third day following release of the Company's quarterly or annual summary statement of sales and earnings. 2.4.5 Any written notice of exercise of an option shall be accompanied by payment for the shares being purchased. Such payment shall be made: (a) by certified or official bank check (or the equivalent thereof acceptable to the Company) for the full option exercise price; or (b) with the consent of the Committee (except that such consent shall not be required in the -15- 18 case of an option granted pursuant to Section 2.3), by delivery of shares of Common Stock acquired at least six months prior to the option exercise date and having a Fair Market Value (determined as of the exercise date) equal to all or part of the option exercise price and a certified or official bank check (or the equivalent thereof acceptable to the Company) for any remaining portion of the full option exercise price; or (c) except in the case of an option granted pursuant to Section 2.3, at the discretion of the Committee and to the extent permitted by law, by such other provision as the Committee may from time to time prescribe. 2.4.6 Each Plan Agreement evidencing an option (other than an option granted pursuant to Section 2.3) shall provide that, upon the filing of the notice described in Section 2.4.4, the Committee may in its discretion determine that the Company shall make a payment to the grantee in lieu of exercise of the option, which payment shall be equal to (a) the excess of the Fair Market Value of a share of Common Stock on the date of such notice over (b) the option exercise price, multiplied by (c) the number of shares with respect to which the grantee proposes to exercise the option. Such payment shall be made to the grantee in cash or in shares of Common Stock (valued at their Fair Market Value on the notice date) or both, as the Committee shall determine in its sole discretion. -16- 19 2.4.7 Promptly after receiving payment of the full option exercise price, or after receiving notice of the exercise of a stock appreciation right for which payment will be made partly or entirely in shares, or after a determination by the Committee to make a payment in lieu of exercise partly or entirely in shares, the Company shall, subject to the provisions of Section 3.2, deliver to the grantee or to such other person as may then have the right to exercise the award, a certificate or certificates for the shares of Common Stock for which the award has been exercised. If the method of payment employed upon option exercise so requires, and if applicable law permits, an optionee may direct the Company to deliver the certificate(s) to the optionee's stockbroker. 2.4.8 No grantee of an option or stock appreciation right (or other person having the right to exercise such award) shall have any of the rights of a stockholder of the Company with respect to shares subject to such award until the issuance of a stock certificate to such person for such shares. Except as otherwise provided in Section 1.5.2, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such stock certificate is issued. 2.5 Termination of Employment; Death -17- 20 2.5.1 Except to the extent otherwise provided in Section 2.5.2 or 2.5.3 or in the applicable Plan Agreement, all options and stock appreciation rights not theretofore exercised shall terminate upon termination of the grantee's employment (which, in the case of an Eligible Director, shall mean his membership on the Board) for any reason (including death). 2.5.2 If a grantee's employment terminates for any reason other than death or dismissal for cause, the grantee may exercise any outstanding option or stock appreciation right on the following terms and conditions: (a) exercise may be made only to the extent that the grantee was entitled to exercise the award on the date of employment termination; and (b) exercise must occur within three months after employment terminates, except that the three-month period shall be increased to one year if termination is by reason of disability, but in no event after the expiration date of the award as set forth in the Plan Agreement. 2.5.3 If a grantee dies while employed by the Company or any subsidiary, or after employment termination but during the period in which the grantee's awards are exercisable pursuant to Section 2.5.2, any outstanding option or stock appreciation right shall be exercisable on the following terms and conditions: -18- 21 (a) exercise may be made only to the extent that the grantee was entitled to exercise the award on the date of death; and (b) exercise must occur by the earlier of the first anniversary of the grantee's death or the expiration date of the award. Any such exercise of an award following a grantee's death shall be made only by the grantee's executor or administrator, unless the grantee's will specifically disposes of such award, in which case such exercise shall be made only by the recipient of such specific disposition. If a grantee's personal representative or the recipient of a specific disposition under the grantee's will shall be entitled to exercise any award pursuant to the preceding sentence, such representative or recipient shall be bound by all the terms and conditions of the Plan and the applicable Plan Agreement which would have applied to the grantee. 2.6 Grant of Restricted Stock 2.6.1 The Committee may grant restricted shares of Common Stock to such key persons, in such amounts, and subject to such terms and conditions as the Committee shall determine in its sole discretion, subject to the provisions of the Plan. Restricted stock awards may be made independently of or in connection with any other award under the Plan. A grantee of a restricted stock award shall have no rights with respect to such award unless such grantee accepts the award within such period as the Committee shall specify by executing a Plan Agreement in such -19- 22 form as the Committee shall determine and, if the Committee shall so require, makes payment to the Company by certified or official bank check (or the equivalent thereof acceptable to the Company) in such amount as the Committee may determine. 2.6.2 Promptly after a grantee accepts a restricted stock award, the Company shall issue in the grantee's name a certificate or certificates for the shares of Common Stock covered by the award. Upon the issuance of such certificate(s), the grantee shall have the rights of a stockholder with respect to the restricted stock, subject to the nontransferability restrictions and Company repurchase rights described in Sections 2.6.4 and 2.6.5, subject also to such other restrictions and conditions as the Committee in its discretion may include in the applicable Plan Agreement. 2.6.3 Unless the Committee shall otherwise determine, any certificate issued evidencing shares of restricted stock shall remain in the possession of the Company until such shares are free of any restrictions specified in the applicable Plan Agreement. 2.6.4 Shares of restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided in this Plan or the applicable Plan Agreement. The Committee at the time of grant -20- 23 shall specify the date or dates (which may depend upon or be related to the attainment of performance goals and other conditions) on which the nontransferability of the restricted stock shall lapse. Unless the applicable Plan Agreement provides otherwise, additional shares of Common Stock or other property distributed to the grantee in respect of shares of restricted stock, as dividends or otherwise, shall be subject to the same restrictions applicable to such restricted stock. 2.6.5 During the 90 days following termination of the grantee's employment for any reason, the Company shall have the right to require the return of any shares to which restrictions on transferability apply, in exchange for which the Company shall repay to the grantee (or the grantee's estate) any amount paid by the grantee for such shares. -21- 24 ARTICLE III MISCELLANEOUS 3.1 Amendment of the Plan; Modification of Awards 3.1.1 The Board may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever, except that no such amendment shall materially impair any rights or materially increase any obligations under any award theretofore made under the Plan without the consent of the grantee (or, after the grantee's death, the person having the right to exercise the award). Notwithstanding the foregoing, Sections 2.3.2, 2.3.3 and 2.3.4 may not be amended more than once every six months except as may be necessary to comply with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the regulations thereunder. 3.1.2 Shareholder approval shall be required with respect to any amendment (a) which increases the aggregate number of shares which may be issued pursuant to incentive stock options or changes the class of employees eligible to receive such options or (b) for which approval is required for compliance with Rule 16b-3. 3.1.3 The Committee may amend any outstanding Plan Agreement other than one evidencing an award under Section 2.3, -22- 25 including, without limitation, by amendment which would (a) accelerate the time or times at which the award becomes unrestricted or may be exercised, or (b) waive or amend any goals, restrictions or conditions set forth in the Agreement, or (c) waive or amend the operation of Section 2.5 with respect to the termination of the award at termination of employment. However, any such or amendment that materially impairs the rights or materially increases the obligations of a grantee under an outstanding award shall be made only with the consent of the grantee (or, upon the grantee's death, the person having the right to exercise the award). 3.2 Restrictions 3.2.1 If the Committee shall at any time determine that any Consent (as hereinafter defined) is necessary or desirable as a condition of, or in connection with, the granting of any award under the Plan, the issuance or purchase of shares or other rights thereunder, or the taking of any other action thereunder (each such action being hereinafter referred to as a "Plan Action"), then such Plan Action shall not be taken, in whole or in part, unless and until such Consent shall have been effected or obtained to the full satisfaction of the Committee. 3.2.2 The term "Consent" as used herein with respect to any Plan Action means (a) any and all listings, registrations -23- 26 or qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation, (b) any and all written agreements and representations by the grantee with respect to the disposition of shares, or with respect to any other matter, which the Committee shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made and (c) any and all consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory bodies. 3.3 Nonassignability To the extent necessary to comply with section 422 of the Code and with applicable interpretations of Rule 16b-3, no award or right granted to any person under the Plan shall be assignable or transferable other than by will or by the laws of descent and distribution, and all such awards and rights shall be exercisable during the life of the grantee only by the grantee or the grantee's legal representative. No assignment or transfer shall be made without consent of the Committee. 3.4 Requirement of Notification of Election Under Section 83(b) of the Code If any grantee shall, in connection with the acquisi- -24- 27 tion of shares of Common Stock under the Plan, make the election permitted under section 83(b) of the Code (i.e., an election to include in gross income in the year of transfer the amounts specified in section 83(b)), such grantee shall notify the Company of such election within 10 days of filing notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under the authority of Code section 83(b). 3.5 Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code Each Plan Agreement with respect to an incentive stock option shall require the grantee to notify the Company of any disposition of shares of Common Stock issued pursuant to the exercise of such option under the circumstances described in section 421(b) of the Code (relating to certain disqualifying dispositions), within 10 days of such disposition. 3.6 Right of Discharge Reserved Nothing in the Plan or in any Plan Agreement shall confer upon any grantee the right to continue in the employ of the Company or any subsidiary thereof or affect any right which the Company may have to terminate such employment. -25- 28 3.7 Nature of Payments 3.7.1 Any and all grants of awards and issuances of shares of Common Stock under the Plan shall be in consideration of services performed for the Company or a subsidiary by the grantee. 3.7.2 All such grants and issuances shall constitute a special incentive payment to the grantee and shall not be taken into account in computing the amount of salary or compensation of the grantee for the purpose of determining any benefits under any pension, retirement, profit-sharing, bonus, life insurance or other benefit plan of the Company or a subsidiary or under any agreement between the Company or a subsidiary and the grantee, unless such plan or agreement specifically provides otherwise. 3.8 Non-Uniform Determinations The Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Plan agreements, as to (a) the persons to receive awards under the Plan, (b) the terms and provisions of awards under the Plan, and -26- 29 (c) the treatment of leaves of absence pursuant to Section 1.6.4. 3.9 Other Payments or Awards Nothing contained in the Plan shall be deemed in any way to limit or restrict the Company and its subsidiaries from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect. 3.10 Section Headings The section headings contained herein are for the purpose of convenience only and are not intended to define or limit the contents of the sections. 3.11 Effective Date and Term of Plan 3.11.1 The Plan was adopted by the Board on November 10, 1995, subject to approval by the Company's shareholders. All awards under the Plan prior to such shareholder approval are subject in their entirety to such approval. If such approval is not obtained prior to the first anniversary of the date of adoption of the Plan, the Plan and all awards thereunder shall terminate on that date. 3.11.2 Unless sooner terminated by the Board, the Plan shall terminate on the tenth anniversary of its adoption by the -27- 30 Board. All awards made under the Plan prior to its termination shall remain in effect until such awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable Plan Agreements. 3.12 Governing Law All rights and obligations under the Plan shall be construed and interpreted in accordance with the laws of the State of [New York], without giving effect to principles of conflict of laws. -28- EX-99.C12 17 1997 LONG-TERM STOCK INCENTIVE PLAN 1 Exhibit (C)(12) 3-D GEOPHYSICAL, INC. 1997 LONG-TERM STOCK INCENTIVE PLAN 2 Table of Contents
Page ARTICLE I GENERAL 1.1 Purpose................................................................................. 1 1.2 Administration.......................................................................... 1 1.3 Persons Eligible for Awards............................................................. 3 1.4 Types of Awards Under Plan.............................................................. 3 1.5 Shares Available for Awards............................................................. 4 1.6 Definitions of Certain Terms............................................................ 5 ARTICLE II AWARDS UNDER THE PLAN 2.1 Agreements Evidencing Awards............................................................ 9 2.2 No Rights as a Shareholder.............................................................. 9 2.3 Grant of Stock Options, Stock Appreciation Rights and Dividend Equivalent Rights................................................. 10 2.4 Exercise of Options and Stock Appreciation Rights................................................................................ 13 2.5 Termination of Employment; Death........................................................ 15 2.6 Grant of Restricted Stock............................................................... 16 2.7 Grant of Restricted Stock Units......................................................... 18 2.8 Other Stock-Based Awards................................................................ 19 2.9 Grant of Dividend Equivalent Rights..................................................... 20 2.10 Right of Recapture...................................................................... 20 ARTICLE III MISCELLANEOUS 3.1 Amendment of the Plan; Modification of Awards............................................................................. 22 3.2 Tax Withholding......................................................................... 23 3.3 Restrictions............................................................................ 24 3.4 Nonassignability........................................................................ 24 3.5 Requirement of Notification of Election Under Section 83(b) of the Code....................................................... 25 3.6 Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code............................................................ 25 3.7 Change in Control....................................................................... 25
-i- 3 3.8 Right of Discharge Reserved............................................................. 28 3.9 Nature of Payments...................................................................... 28 3.10 Non-Uniform Determinations.............................................................. 29 3.11 Other Payments or Awards................................................................ 29 3.12 Section Headings........................................................................ 29 3.13 Effective Date and Term of Plan......................................................... 29 3.14 Governing Law........................................................................... 30
-ii- 4 ARTICLE I GENERAL 1.1 Purpose The purpose of the 3-D Geophysical 1997 Long-Term Stock Incentive Plan (the "Plan") is to provide for officers, other employees and directors of, and consultants to, 3-D Geophysical, Inc.. (the "Company") and its subsidiaries an incentive (a) to enter into and remain in the service of the Company or its subsidiaries, (b) to enhance the long-term performance of the Company and its subsidiaries, and (c) to acquire a proprietary interest in the success of the Company and its subsidiaries. 1.2 Administration 1.2.1 Subject to Section 1.2.6, the Plan shall be administered by the Compensation Committee (the "Committee") of the board of directors of the Company (the "Board"), which shall consist of not less than two directors. The members of the Committee shall be appointed by, and serve at the pleasure of, the Board. To the extent required for transactions under the Plan to qualify for the exemptions available under Rule 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934 (the "1934 Act"), all actions relating to awards to persons subject to Section 16 of the 1934 Act shall be taken by the Board unless each person who serves on the Committee is a "non-employee director" within the meaning of Rule 16b-3 or such actions are taken by a sub-committee of the Committee (or the Board) comprised solely of "non-employee directors". To the extent required for compensation realized from awards under the Plan to be deductible by the Company pursuant to section 162(m) of the Internal Revenue Code -iii- 5 of 1986 (the "Code"), the members of the Committee shall be "outside directors" within the meaning of section 162(m). 1.2.2 The Committee shall have the authority (a) to exercise all of the powers granted to it under the Plan, (b) to construe, interpret and implement the Plan and any Plan Agreements executed pursuant to Section 2.1, (c) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules governing its own operations, (d) to make all determinations necessary or advisable in administering the Plan, (e) to correct any defect, supply any omission and reconcile any inconsistency in the Plan, and (f) to amend the Plan to reflect changes in applicable law. 1.2.3 Actions of the Committee shall be taken by the vote of a majority of its members. Any action may be taken by a written instrument signed by a majority of the Committee members, and action so taken shall be fully as effective as if it had been taken by a vote at a meeting. 1.2.4 The determination of the Committee on all matters relating to the Plan or any Plan Agreement shall be final, binding and conclusive. 1.2.5 No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any award thereunder. 1.2.6 Notwithstanding anything to the contrary contained herein: (a) until the Board shall appoint the members of the Committee, the Plan shall be administered by the Board; and (b) the Board may, in its sole discretion, at any time and from time to time, grant awards or resolve to administer the Plan. In either of the foregoing events, the Board shall have all of the -2- 6 authority and responsibility granted to the Committee herein. 1.3 Persons Eligible for Awards Awards under the Plan may be made to such directors, officers and other employees of the Company and its subsidiaries (including prospective employees conditioned on their becoming employees), and to such consultants to the Company and its subsidiaries (collectively, "key persons") as the Committee shall in its discretion select. 1.4 Types of Awards Under Plan Awards may be made under the Plan in the form of (a) incentive stock options (within the meaning of section 422 of the Code), (b) nonqualified stock options, (c) stock appreciation rights, (d) dividend equivalent rights, (e) restricted stock, (f) restricted stock units and (g) other stock-based awards, all as more fully set forth in Article II. The term "award" means any of the foregoing. No incentive stock option may be granted to a person who is not an employee of the Company on the date of grant. 1.5 Shares Available for Awards 1.5.1 The total number of shares of common stock of the Company, par value $0.01 per share ("Common Stock"), which may be transferred pursuant to awards granted under the Plan shall not exceed 750,000 shares. Such shares may be authorized but unissued Common Stock or authorized and issued Common Stock held in the Company's treasury or acquired by the Company for the purposes of the Plan. The Committee may direct that any stock certificate evidencing shares issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares pursuant to the Plan. -3- 7 1.5.2 Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding award, the number of shares available for awards, the number of shares that may be subject to awards to any one employee, and the price per share of Common Stock covered by each such outstanding award shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an award. After any adjustment made pursuant to this Section 1.5.2, the number of shares subject to each outstanding award shall be rounded to the nearest whole number. 1.5.3 Except as provided in this Section 1.5 and in Section 2.2.8, there shall be no limit on the number or the value of the shares of Common Stock that may be subject to awards to any individual under the Plan. 1.6 Definitions of Certain Terms -4- 8 1.6.1 The "Fair Market Value" of a share of Common Stock on any day shall be determined as follows. (a) If the principal market for the Common Stock (the "Market") is a national securities exchange or the National Association of Securities Dealers Automated Quotation System ("NASDAQ") National Market, the last sale price or, if no reported sales take place on the applicable date, the average of the high bid and low asked price of Common Stock as reported for such Market on such date or, if no such quotation is made on such date, on the next preceding day on which there were quotations, provided that such quotations shall have been made within the ten (10) business days preceding the applicable date; (b) If the Market is the NASDAQ National List, the NASDAQ Supplemental List or another market, the average of the high bid and low asked price for Common Stock on the applicable date, or, if no such quotations shall have been made on such date, on the next preceding day on which there were quotations, provided that such quotations shall have been made within the ten (10) business days preceding the applicable date; or, (c) In the event that neither paragraph (a) nor (b) shall apply, the Fair Market Value of a share of Common Stock on any day shall be determined in good faith by the Committee. 1.6.2 The term "incentive stock option" means an option that is intended to qualify for special federal income tax treatment pursuant to sections 421 and 422 of the Code, as now constituted or subsequently amended, or pursuant to a successor provision of the Code, and which is so designated in the applicable Plan Agreement. Any option that is not specifically -5- 9 designated as an incentive stock option shall under no circumstances be considered an incentive stock option. Any option that is not an incentive stock option is referred to herein as a "nonqualified stock option." 1.6.3 The term "employment" means, in the case of a grantee of an award under the Plan who is not an employee of the Company, the grantee's association with the Company or a subsidiary as a director, consultant or otherwise. 1.6.4 A grantee shall be deemed to have a "termination of employment" upon ceasing to be employed by the Company and all of its subsidiaries or by a corporation assuming awards in a transaction to which section 425(a) of the Code applies. The Committee may in its discretion determine (a) whether any leave of absence constitutes a termination of employment for purposes of the Plan, (b) the impact, if any, of any such leave of absence on awards theretofore made under the Plan, and (c) when a change in a non-employee's association with the Company constitutes a termination of employment for purposes of the Plan. The Committee shall have the right to determine whether the termination of a grantee's employment is a dismissal for cause and the date of termination in such case, which date the Committee may retroactively deem to be the date of the action that is cause for dismissal. Such determinations of the Committee shall be final, binding and conclusive. 1.6.5 The term "cause," when used in connection with termination of a grantee's employment, shall have the meaning set forth in any then-effective employment agreement between the grantee and the Company or a subsidiary thereof. In the absence of such an employment agreement, "cause" means: (a) conviction of any crime (whether or not involving -6- 10 the Company) constituting a felony in the jurisdiction involved; (b) engaging in any substantiated act involving moral turpitude; (c) engaging in any act which, in each case, subjects, or if generally known would subject, the Company to public ridicule or embarrassment; (d) material violation of the Company's policies, including, without limitation, those relating to sexual harassment or the disclosure or misuse of confidential information; (e) serious neglect or misconduct in the performance of the grantee's duties for the Company or a subsidiary or willful or repeated failure or refusal to perform such duties; in each case as determined by the Committee, which determination shall be final, binding and conclusive. -7- 11 ARTICLE II AWARDS UNDER THE PLAN 2.1 Agreements Evidencing Awards Each award granted under the Plan (except an award of unrestricted stock) shall be evidenced by a written agreement ("Plan Agreement") which shall contain such provisions as the Committee in its discretion deems necessary or desirable. By accepting an award pursuant to the Plan, a grantee thereby agrees that the award shall be subject to all of the terms and provisions of the Plan and the applicable Plan Agreement. 2.2 No Rights as a Shareholder No grantee of an option or stock appreciation right (or other person having the right to exercise such award) shall have any of the rights of a shareholder of the Company with respect to shares subject to such award until the issuance of a stock certificate to such person for such shares. Except as otherwise provided in Section 1.5.3, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such stock certificate is issued. -8- 12 2.3 Grant of Stock Options, Stock Appreciation Rights and Dividend Equivalent Rights 2.3.1 The Committee may grant incentive stock options and nonqualified stock options (collectively, "options") to purchase shares of Common Stock from the Company, to such key persons, in such amounts and subject to such terms and conditions, as the Committee shall determine in its discretion, subject to the provisions of the Plan. 2.3.2 The Committee may grant stock appreciation rights to such key persons, in such amounts and subject to such terms and conditions, as the Committee shall determine in its discretion, subject to the provisions of the Plan. Stock appreciation rights may be granted in connection with all or any part of, or independently of, any option granted under the Plan. A stock appreciation right granted in connection with a nonqualified stock option may be granted at or after the time of grant of such option. A stock appreciation right granted in connection with an incentive stock option may be granted only at the time of grant of such option. 2.3.3 The grantee of a stock appreciation right shall have the right, subject to the terms of the Plan and the applicable Plan Agreement, to receive from the Company an amount equal to (a) the excess of the Fair Market Value of a share of Common Stock on the date of exercise of the stock appreciation right over (b) the exercise price of such right as set forth in the Plan Agreement (or over the option exercise price if the stock appreciation right is granted in connection with an option), multiplied by (c) the number of shares with respect to which the stock appreciation right is exercised. Payment upon exercise of a stock appreciation right shall be in cash or in shares of Common Stock (valued at their Fair Market Value on the date of exercise of the stock appreciation right) or both, all as the Committee shall determine in its discretion. Upon the exercise of a stock appreciation right granted in connection with an -9- 13 option, the number of shares subject to the option shall be correspondingly reduced by the number of shares with respect to which the stock appreciation right is exercised. Upon the exercise of an option in connection with which a stock appreciation right has been granted, the number of shares subject to the stock appreciation right shall be correspondingly reduced by the number of shares with respect to which the option is exercised. 2.3.4 Each Plan Agreement with respect to an option shall set forth the amount (the "option exercise price") payable by the grantee to the Company upon exercise of the option evidenced thereby. The option exercise price per share shall be determined by the Committee in its discretion; provided, however, that the option exercise price of an incentive stock option shall be at least 100% of the Fair Market Value of a share of Common Stock on the date the option is granted, and provided further that in no event shall the option exercise price be less than the par value of a share of Common Stock. 2.3.5 Each Plan Agreement with respect to an option or stock appreciation right shall set forth the periods during which the award evidenced thereby shall be exercisable, whether in whole or in part. Such periods shall be determined by the Committee in its discretion; provided, however, that no incentive stock option (or a stock appreciation right granted in connection with an incentive stock option) shall be exercisable more than 10 years after the date of grant. 2.3.6 The Committee may in its discretion include in any Plan Agreement with respect to an option (the "original option") a provision that an additional option (the "additional option") shall be granted to any grantee who, pursuant to Section 2.4.3(b), delivers shares of Common Stock in partial or full payment of the exercise price of the original option. The -10- 14 additional option shall be for a number of shares of Common Stock equal to the number thus delivered, shall have an exercise price equal to the Fair Market Value of a share of Common Stock on the date of exercise of the original option, and shall have an expiration date no later than the expiration date of the original option. In the event that a Plan Agreement provides for the grant of an additional option, such Agreement shall also provide that the exercise price of the original option be no less than the Fair Market Value of a share of Common Stock on its date of grant, and that any shares that are delivered pursuant to Section 2.4.3(b) in payment of such exercise price shall have been held for at least six months. 2.3.7 To the extent that the aggregate Fair Market Value (determined as of the time the option is granted) of the stock with respect to which incentive stock options granted under this Plan and all other plans of the Company and any subsidiary are first exercisable by any employee during any calendar year shall exceed the maximum limit (currently, $100,000), if any, imposed from time to time under section 422 of the Code, such options shall be treated as nonqualified stock options. 2.3.8 Notwithstanding the provisions of Sections 2.3.4 and 2.3.5, to the extent required under section 422 of the Code, an incentive stock option may not be granted under the Plan to an individual who, at the time the option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of his employer corporation or of its parent or subsidiary corporations (as such ownership may be determined for purposes of section 422(b)(6) of the Code) unless (a) at the time such incentive stock option is granted the option exercise price is at least 110% of the Fair Market Value of the shares subject thereto and (b) the incentive stock option by its terms is not exercisable after the expiration of 5 years from -11- 15 the date it is granted. 2.4 Exercise of Options and Stock Appreciation Rights Subject to the provisions of this Article II, each option or stock appreciation right granted under the Plan shall be exercisable as follows: 2.4.1 Unless the applicable Plan Agreement otherwise provides, an option or stock appreciation right shall become exercisable in four substantially equal installments, on each of the first, second, third and fourth anniversaries of the date of grant, and each installment, once it becomes exercisable, shall remain exercisable until expiration, cancellation or termination of the award. 2.4.2 Unless the applicable Plan Agreement otherwise provides, an option or stock appreciation right may be exercised from time to time as to all or part of the shares as to which such award is then exercisable (but, in any event, only for whole shares). A stock appreciation right granted in connection with an option may be exercised at any time when, and to the same extent that, the related option may be exercised. An option or stock appreciation right shall be exercised by the filing of a written notice with the Company, on such form and in such manner as the Committee shall prescribe. 2.4.3 Any written notice of exercise of an option shall be accompanied by payment for the shares being purchased. Such payment shall be made: (a) by certified or official bank check (or the equivalent thereof acceptable to the Company) for the full option exercise price; or (b) unless the applicable Plan Agreement provides otherwise, by delivery of -12- 16 shares of Common Stock acquired at least six months prior to the option exercise date and having a Fair Market Value (determined as of the exercise date) equal to all or part of the option exercise price and a certified or official bank check (or the equivalent thereof acceptable to the Company) for any remaining portion of the full option exercise price; or (c) at the discretion of the Committee and to the extent permitted by law, by such other provision as the Committee may from time to time prescribe. 2.4.4 Promptly after receiving payment of the full option exercise price, or after receiving notice of the exercise of a stock appreciation right for which payment will be made partly or entirely in shares, the Company shall, subject to the provisions of Section 3.3 (relating to certain restrictions), deliver to the grantee or to such other person as may then have the right to exercise the award, a certificate or certificates for the shares of Common Stock for which the award has been exercised. If the method of payment employed upon option exercise so requires, and if applicable law permits, an optionee may direct the Company to deliver the certificate(s) to the optionee's stockbroker. 2.5 Termination of Employment; Death 2.5.1 Except to the extent otherwise provided in Section 2.5.2 or 2.5.3 or in the applicable Plan Agreement, all options and stock appreciation rights not theretofore exercised shall terminate upon termination of the grantee's employment for any reason (including death). 2.5.2 If a grantee's employment terminates for any reason other than death or dismissal for cause, the grantee may exercise any outstanding option or stock appreciation right on the following terms and conditions: (a) exercise may be made only to the extent that -13- 17 the grantee was entitled to exercise the award on the date of employment termination; and (b) exercise must occur within three months after employment terminates, except that the three-month period shall be increased to one year if the termination is by reason of disability, but in no event after the expiration date of the award as set forth in the Plan Agreement. In the case of an incentive stock option, the term "disability" for purposes of the preceding sentence shall have the meaning given to it by section 422(c)(7) of the Code. 2.5.3 If a grantee dies while employed by the Company or any subsidiary, or after employment termination but during the period in which the grantee's awards are exercisable pursuant to Section 2.5.2, any outstanding option or stock appreciation right shall be exercisable on the following terms and conditions: (a) exercise may be made only to the extent that the grantee was entitled to exercise the award on the date of death; and (b) exercise must occur by the earlier of the first anniversary of the grantee's death or the expiration date of the award. Any such exercise of an award following a grantee's death shall be made only by the grantee's executor or administrator, unless the grantee's will specifically disposes of such award, in which case such exercise shall be made only by the recipient of such specific disposition. If a grantee's personal representative or the recipient of a specific disposition under the grantee's will shall be entitled to exercise any award pursuant to the preceding sentence, such representative or recipient shall be bound by all the terms and conditions of the Plan and the applicable Plan Agreement which would have applied to the grantee including, without limitation, the provisions of Sections 3.3 and 3.7 hereof. 2.6 Grant of Restricted Stock 2.6.1 The Committee may grant restricted shares of Common Stock to such key -14- 18 persons, in such amounts, and subject to such terms and conditions as the Committee shall determine in its discretion, subject to the provisions of the Plan. Restricted stock awards may be made independently of or in connection with any other award under the Plan. A grantee of a restricted stock award shall have no rights with respect to such award unless such grantee accepts the award within such period as the Committee shall specify by executing a Plan Agreement in such form as the Committee shall determine and, if the Committee shall so require, makes payment to the Company by certified or official bank check (or the equivalent thereof acceptable to the Company) in such amount as the Committee may determine. 2.6.2 Promptly after a grantee accepts a restricted stock award, the Company shall issue in the grantee's name a certificate or certificates for the shares of Common Stock covered by the award. Upon the issuance of such certificate(s), the grantee shall have the rights of a shareholder with respect to the restricted stock, subject to the nontransferability restrictions and Company repurchase rights described in Sections 2.6.4 and 2.6.5 and to such other restrictions and conditions as the Committee in its discretion may include in the applicable Plan Agreement. 2.6.3 Unless the Committee shall otherwise determine, any certificate issued evidencing shares of restricted stock shall remain in the possession of the Company until such shares are free of any restrictions specified in the applicable Plan Agreement. 2.6.4 Shares of restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided in this Plan or the applicable Plan Agreement. The Committee at the time of grant shall specify the date or dates (which may depend upon or be related to the attainment of performance goals and other condi- -15- 19 tions) on which the nontransferability of the restricted stock shall lapse. Unless the applicable Plan Agreement provides otherwise, additional shares of Common Stock or other property distributed to the grantee in respect of shares of restricted stock, as dividends or otherwise, shall be subject to the same restrictions applicable to such restricted stock. 2.6.5 During the 120 days following termination of the grantee's employment for any reason, the Company shall have the right to require the return of any shares to which restrictions on transferability apply, in exchange for which the Company shall repay to the grantee (or the grantee's estate) any amount paid by the grantee for such shares. 2.7 Grant of Restricted Stock Units 2.7.1 The Committee may grant awards of restricted stock units to such key persons, in such amounts, and subject to such terms and conditions as the Committee shall determine in its discretion, subject to the provisions of the Plan. Restricted stock units may be awarded independently of or in connection with any other award under the Plan. 2.7.2 At the time of grant, the Committee shall specify the date or dates on which the restricted stock units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate. In the event of the termination of the grantee's employment by the Company and its subsidiaries for any reason, restricted stock units that have not become nonforfeitable shall be forfeited and cancelled. The Committee at any time may accelerate vesting dates and otherwise waive or amend any conditions of an award of restricted stock units. -16- 20 2.7.3 At the time of grant, the Committee shall specify the maturity date applicable to each grant of restricted stock units, which may be determined at the election of the grantee. Such date may be later than the vesting date or dates of the award. On the maturity date, the Company shall transfer to the grantee one unrestricted, fully transferable share of Common Stock for each restricted stock unit scheduled to be paid out on such date and not previously forfeited. The Committee shall specify the purchase price, if any, to be paid by the grantee to the Company for such shares of Common Stock. 2.8 Other Stock-Based Awards The Board may authorize other types of stock-based awards (including the grant of unrestricted shares), which the Committee may grant to such key persons, and in such amounts and subject to such terms and conditions, as the Committee shall in its discretion determine, subject to the provisions of the Plan. Such awards may entail the transfer of actual shares of Common Stock to Plan participants, or payment in cash or otherwise of amounts based on the value of shares of Common Stock. -17- 21 2.9 Grant of Dividend Equivalent Rights The Committee may in its discretion include in the Plan Agreement with respect to any award a dividend equivalent right entitling the grantee to receive amounts equal to the ordinary dividends that would be paid, during the time such award is outstanding and unexercised, on the shares of Common Stock covered by such award if such shares were then outstanding. In the event such a provision is included in a Plan Agreement, the Committee shall determine whether such payments shall be made in cash, in shares of Common Stock or in another form, whether they shall be conditioned upon the exercise of the award to which they relate, the time or times at which they shall be made, and such other terms and conditions as the Committee shall deem appropriate. 2.10 Right of Recapture If at any time within one year after the date on which a participant exercises an option or stock appreciation right, or on which restricted stock vests, or which is the maturity date of restricted stock units, or on which income is realized by a participant in connection with any other stock-based award (each of which events is a "Realization Event"), the participant (a) is terminated for cause or (b) engages in any activity determined in the discretion of the Committee to be in competition with any activity of the Company, or otherwise inimical, contrary or harmful to the interests of the Company (including, but not limited to, accepting employment with or serving as a consultant, adviser or in any other capacity to an entity that is in competition with or acting against the interests of the Company), then any gain ("Gain") realized by the participant from the Realization Event shall be paid by the participant to the Company upon notice from the Company. Such Gain shall be determined as of the date of the Realization -18- 22 Event, without regard to any subsequent change in the Fair Market Value of a share of Common Stock. The Company shall have the right to offset such Gain against any amounts otherwise owed to the participant by the Company (whether as wages, vacation pay, or pursuant to any benefit plan or other compensatory arrangement). -19- 23 ARTICLE III MISCELLANEOUS 3.1 Amendment of the Plan; Modification of Awards 3.1.1 The Board may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever, except that no such amendment shall materially impair any rights or materially increase any obligations under any award theretofore made under the Plan without the consent of the grantee (or, after the grantee's death, the person having the right to exercise the award). For purposes of this Section 3.1, any action of the Board or the Committee that alters or affects the tax treatment of any award shall not be considered to materially impair any rights of any grantee. 3.1.2 Shareholder approval of any amendment shall be obtained to the extent necessary to comply with section 422 of the Code (relating to incentive stock options) or other applicable law or regulation. 3.1.3 The Committee may amend any outstanding Plan Agreement, including, without limitation, by amendment which would accelerate the time or times at which the award becomes unrestricted or may be exercised, or waive or amend any goals, restrictions or conditions set forth in the Agreement. However, any such amendment (other than an amendment pursuant to Section 3.7.2, relating to change in control) that materially impairs the rights or materially increases the obligations of a grantee under an outstanding award shall be made only with the consent of the grantee (or, upon the grantee's death, the person having the right to exercise the award). -20- 24 3.2 Tax Withholding 3.2.1 As a condition to the receipt of any shares of Common Stock pursuant to any award or the lifting of restrictions on any award, or in connection with any other event that gives rise to a federal or other governmental tax withholding obligation on the part of the Company relating to an award (including, without limitation, FICA tax), the Company shall be entitled to require that the grantee remit to the Company an amount sufficient in the opinion of the Company to satisfy such withholding obligation. 3.2.2 If the event giving rise to the withholding obligation is a transfer of shares of Common Stock, then, unless otherwise specified in the applicable Plan Agreement, the grantee may satisfy the withholding obligation imposed under Section 3.2.1 by electing to have the Company withhold shares of Common Stock having a Fair Market Value equal to the amount of tax to be withheld. For this purpose, Fair Market Value shall be determined as of the date on which the amount of tax to be withheld is determined (and any fractional share amount shall be settled in cash). -21- 25 3.3 Restrictions 3.3.1 If the Committee shall at any time determine that any consent (as hereinafter defined) is necessary or desirable as a condition of, or in connection with, the granting of any award under the Plan, the issuance or purchase of shares or other rights thereunder, or the taking of any other action thereunder (each such action being hereinafter referred to as a "plan action"), then such plan action shall not be taken, in whole or in part, unless and until such consent shall have been effected or obtained to the full satisfaction of the Committee. 3.3.2 The term "consent" as used herein with respect to any plan action means (a) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation, (b) any and all written agreements and representations by the grantee with respect to the disposition of shares, or with respect to any other matter, which the Committee shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made and (c) any and all consents, clearances and approvals in respect of a plan action by any governmental or other regulatory bodies. 3.4 Nonassignability Except to the extent otherwise provided in the applicable Plan Agreement, no award or right granted to any person under the Plan shall be assignable or transferable other than by will or by the laws of descent and distribution, and all such awards and rights shall be -22- 26 exercisable during the life of the grantee only by the grantee or the grantee's legal representative. 3.5 Requirement of Notification of Election Under Section 83(b) of the Code If any grantee shall, in connection with the acquisition of shares of Common Stock under the Plan, make the election permitted under section 83(b) of the Code (that is, an election to include in gross income in the year of transfer the amounts specified in section 83(b)), such grantee shall notify the Company of such election within 10 days of filing notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under the authority of Code section 83(b). 3.6 Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code If any grantee shall make any disposition of shares of Common Stock issued pursuant to the exercise of an incentive stock option under the circumstances described in section 421(b) of the Code (relating to certain disqualifying dispositions), such grantee shall notify the Company of such disposition within 10 days thereof. 3.7 Change in Control 3.7.1 For purposes of this Section 3.7, a "change in control" shall have occurred if: (a) any "person", as such term is used in Sections 13(d) and 14(d) of the 1934 Act (other than (i) the Company or any 80% owned subsidiary of the Company, (ii) any -23- 27 trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; or (b) during any period of twenty-four (24) consecutive months, individuals who at the effective date of this Plan constitute the Board of Directors of the Company and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section 3.7.1) whose election by the Board of Directors or nomination for election by the Company shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the effective date of this Plan or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) the shareholders of the Company approve a merger or consolidation of the Company with any other company (other than a wholly-owned subsidiary of the Company), other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) 50% or more of the combined voting power of voting securities of the Company or such -24- 28 surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as defined in Section 3.7.1(a) above with the exceptions noted in section 3.7.1(a)) acquires 50% or more of the combined voting power of the Company's then outstanding securities); or (d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). 3.7.2 Upon the happening of a change in control: (a) notwithstanding any other provision of this Plan, any option or stock appreciation right then outstanding shall become fully vested and immediately exercisable upon the subsequent termination of employment of the grantee by the Company or it successors without cause unless the applicable Plan Agreement expressly provides otherwise; (b) to the fullest extent permitted by law, the Committee may, in its sole discretion, amend any Plan Agreement in such manner as it deems appropriate, including, without limitation, by amendments that advance the dates upon which any or all outstanding awards of any type shall terminate. 3.7.3 Whenever deemed appropriate by the Committee, any action referred to in Section 3.7.2(b) may be made conditional upon the consummation of the applicable Change in Control transaction. -25- 29 3.8 Right of Discharge Reserved Nothing in the Plan or in any Plan Agreement shall confer upon any grantee the right to continue in the employ of the Company or affect any right which the Company may have to terminate such employment. 3.9 Nature of Payments 3.9.1 Any and all grants of awards and issuances of shares of Common Stock under the Plan shall be in consideration of services performed for the Company by the grantee. 3.9.2 All such grants and issuances shall constitute a special incentive payment to the grantee and shall not be taken into account in computing the amount of salary or compensation of the grantee for the purpose of determining any benefits under any pension, retirement, profit-sharing, bonus, life insurance or other benefit plan of the Company or under any agreement between the Company and the grantee, unless such plan or agreement specifically provides otherwise. -26- 30 3.10 Non-Uniform Determinations The Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Plan agreements, as to (a) the persons to receive awards under the Plan, (b) the terms and provisions of awards under the Plan, and (c) the treatment of leaves of absence pursuant to Section 1.6.4. 3.11 Other Payments or Awards Nothing contained in the Plan shall be deemed in any way to limit or restrict the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect. 3.12 Section Headings The section headings contained herein are for the purpose of convenience only and are not intended to define or limit the contents of the sections. -27- 31 3.13 Effective Date and Term of Plan 3.13.1 The Plan was adopted by the Board on February 3, 1997. To the extent provided in the applicable Plan Agreement, an award may be subject to approval of the Plan by the Company's shareholders, in which case, if such approval is not obtained within one year of such date of adoption by the Board, the award shall terminate on that date. 3.13.2 Unless sooner terminated by the Board, the provisions of the Plan respecting the grant of incentive stock options shall terminate on the day before the tenth anniversary of the adoption of the Plan by the Board, and no incentive stock option awards shall thereafter be made under the Plan. All awards made under the Plan prior to its termination shall remain in effect until such awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable Plan Agreements. 3.14 Governing Law All rights and obligations under the Plan shall be construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflict of laws. -28- -----END PRIVACY-ENHANCED MESSAGE-----