Exhibit 10.1

 

RESTRUCTURING SUPPORT AGREEMENT

 

This RESTRUCTURING SUPPORT AGREEMENT is made and entered into as of January 15,
2013 (the “Agreement”) by and among (i) Geokinetics Inc. on behalf of itself and
each of its direct and indirect domestic subsidiaries and affiliates
(collectively, the “Company”), which include: (a) Geokinetics Holdings
USA, Inc., (b) Geokinetics Services Corp., (c) Geokinetics Processing, Inc.,
(d) Geokinetics Acquisition Company, (e) Geokinetics USA, Inc., (f) Geokinetics
International Holdings, Inc., (g) Geokinetics Management, Inc.,  (h) Geokinetics
International, Inc., and (i) Advanced Seismic Technology, Inc.; (ii) American
Securities Opportunities Advisors, LLC (“American Securities”), Gates Capital
Management, Inc. (“Gates”) and the other undersigned holders (the
“Noteholders”), each as the beneficial owners (or advisor, nominee or investment
manager for beneficial owner(s)) of the 9.75% Senior Secured Notes due 2014
issued by Geokinetics Holdings USA, Inc. (the “Notes”) and, if and as
applicable, as lenders under that certain Amended and Restated Credit Agreement
dated as of August 12, 2011 (the “Revolving Credit Facility”); and (iii) Avista
Capital Partners, L.P. and Avista Capital Partners (Offshore), L.P. (the
“Preferred Equity Holders” and, together with the Company and the Noteholders,
each referred to as a “Party” and collectively referred to as the “Parties”),
each as the beneficial owners (or advisor, nominee or investment manager for
beneficial owner(s)) of preferred equity interests in Geokinetics Inc. comprised
of Series B-1 Senior Convertible Preferred Stock and Series C-1 Senior Preferred
Stock (collectively, the “Preferred Equity”) as well as junior preferred equity
interests in Geokinetics Inc. comprised of Series D Junior Preferred Stock (the
“Series D Preferred Stock”).

 

WITNESSETH:

 

WHEREAS, representatives of the Company, Noteholders, and Preferred Equity
Holders have agreed to the terms of a financial restructuring of the Company’s
indebtedness and other obligations (the “Restructuring”), the principal terms of
which are set forth in this Agreement and the accompanying term sheet, including
exhibits, attached hereto as Exhibit A (the “Restructuring Term Sheet”);

 

WHEREAS, the Company intends to (i) commence voluntary cases (collectively, the
“Chapter 11 Case”) under chapter 11 of title 11 of the United States Code (the
“Bankruptcy Code”) in the United States Bankruptcy Court for the District of
Delaware (the “Bankruptcy Court”), (ii) file and use its reasonable best efforts
to obtain confirmation by the Bankruptcy Court of a chapter 11 plan of
reorganization in the Chapter 11 Case that is consistent with the Restructuring
Term Sheet and implements the terms of the Restructuring (such plan of
reorganization, the “Chapter 11 Plan”), and (iii) file and use its reasonable
best efforts to obtain approval by the Bankruptcy Court of a disclosure
statement and related materials for the Chapter 11 Plan that are consistent with
the Restructuring Term Sheet (the “Disclosure Statement”);

 

WHEREAS, this Agreement and the Restructuring Term Sheet, which is incorporated
herein by reference and is made part of this Agreement, set forth the agreement
among the Parties concerning their commitment, subject to the terms and
conditions hereof and thereof, to implement the Restructuring.  In the event the
terms and conditions as set forth in the Restructuring Term Sheet and this
Agreement are inconsistent, the terms and conditions contained in the
Restructuring Term Sheet shall govern.

 

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NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto
hereby agree as follows:

 

Section 1.                                           General. Each of the
Parties agrees and covenants that, on the terms and subject to the conditions
set forth on the Restructuring Term Sheet:

 

(a)                                 it will negotiate in good faith (i) the
documentation regarding the Restructuring or otherwise contemplated by the
Restructuring Term Sheet, (ii) the Chapter 11 Plan, and (iii) the other
documents contemplated hereby and thereby, and will use its reasonable best
efforts to proceed expeditiously to complete such documents to the extent
possible prior to the Chapter 11 Commencement Date (as defined below);

 

(b)                                 it will not (i) object to, delay, impede,
commence any proceeding, or take any other action to interfere, directly or
indirectly, in any material respect with the acceptance or implementation of the
Chapter 11 Plan, (ii) vote for, consent to, support, encourage, induce or
participate in any way in the formulation of any other plan of reorganization or
liquidation to be proposed, proposed or filed in any chapter 11 or chapter 7
case or under the insolvency laws of any foreign jurisdiction commenced in
respect of the Company, (iii) directly or indirectly, in whatever jurisdiction,
seek, solicit, support, induce, facilitate, encourage or engage in discussions
with any person or entity concerning any other plan, sale, proposal, or offer of
dissolution, winding up, liquidation, administration, reorganization,
composition, arrangement, merger, consolidation or restructuring of the Company
that could reasonably be expected to prevent, delay or impede the success of the
Restructuring contemplated by the Chapter 11 Plan or the Restructuring Term
Sheet, (iv) participate itself, or in conjunction with others in the
commencement of any involuntary bankruptcy proceedings against the Company,
(vi) seek the appointment of a trustee or examiner under section 1104 of the
Bankruptcy Code or the conversion or dismissal of the Chapter 11 Case under
section 1112 of the Bankruptcy Code, or (vii) take any other action, in the
Chapter 11 Case or otherwise and in whatever jurisdiction, that is inconsistent
with, or is intended or is reasonably likely to interfere with or impede or
delay, confirmation of the Chapter 11 Plan and consummation of the
Restructuring;

 

(c)                                  it will take or cause to be taken all
reasonable actions necessary to confirm and consummate the Chapter 11 Plan on
the terms and subject to the conditions set forth in this Agreement and on the
Restructuring Term Sheet.

 

Section 2.                                           Support for the Chapter 11
Plan.

 

(a)                                 Except as otherwise provided in this
Agreement, the Company agrees and covenants that (i) it shall perform its
commitments and other obligations under the Restructuring Term Sheet and (ii) in
connection with the commencement of the Chapter 11 Case, it shall use its
reasonable best efforts to (A) launch the solicitation of votes to accept or
reject the Chapter 11 Plan required for confirmation of the Chapter 11 Plan (the
“Solicitation”) prior to the date of the filing of the Company’s chapter 11
petitions (the “Chapter 11 Commencement Date”); provided, however, that if the
Majority Noteholders (as defined below) determine that the Company should pursue
a pre-negotiated Chapter 11 Plan rather than a prepackaged Chapter 11 Plan, such
Solicitation shall be performed by the Company during the Chapter 11 Case after
approval of the Disclosure Statement by the Bankruptcy Court, (B) file the
Chapter 11 Plan on the Chapter 11

 

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Commencement Date, (C) seek approval of the Disclosure Statement and
confirmation of the Chapter 11 Plan by the Bankruptcy Court as expeditiously as
possible, (D) obtain any and all required regulatory and/or third-party
approvals for the Restructuring, (E) not take any actions inconsistent with this
Agreement, the Restructuring Term Sheet or the Chapter 11 Plan, and (F) take all
other necessary actions to support the Chapter 11 Plan provided that nothing
herein shall require the Company or its officers or directors to breach its, his
or her fiduciary duties.

 

(b)                                 Except as otherwise provided in the
Agreement, each of the Preferred Equity Holders agrees and covenants that it
shall (i) perform its commitments and other obligations under this Agreement and
the Restructuring Term Sheet, (ii) not object to any motions to be filed by the
Company in connection with the Chapter 11 Case, so long as such motions are not
inconsistent with the treatment of the Preferred Equity Holders as set forth in
the Restructuring Term Sheet, (iii) not object to the Disclosure Statement, the
solicitation of votes to accept the Chapter 11 Plan or confirmation of the
Chapter 11 Plan, so long as the Disclosure Statement and Plan are not
inconsistent with the treatment of the Preferred Equity Holders as set forth in
the Restructuring Term Sheet, (iv) take or cause to be taken all reasonable
actions necessary to ensure that the Company performs its commitments and other
obligations under this Agreement and the Restructuring Term Sheet; (v) at every
meeting of Preferred Equity Holders called, and at every adjournment or
postponement thereof, and on every action or approval by written consent of the
Preferred Equity Holders, if applicable, attend such meeting in person or by
proxy and/or to vote in  favor of, or consent to, the approval of the
Restructuring, (vi) following receipt of the solicitation materials (the
“Solicitation Materials”), promptly and timely exercise all votes to which it is
entitled with respect to Preferred Equity to accept the Chapter 11 Plan in
accordance with the applicable procedures set forth in the Solicitation
Materials (and will not withdraw or change such votes) and, to the extent such
election is available, shall not elect on its ballot to preserve any claims (in
respect of the claims that each Preferred Equity Holder may own) that may be
affected by any releases provided for under the Chapter 11 Plan, and (vii) take
or cause to be taken all reasonable actions necessary to fully cooperate with
the Company and the Noteholders in implementing the terms of the Restructuring,
including, without limitation, obtaining approval of the Chapter 11 Plan as
expeditiously as possible.

 

(c)                                  Except as otherwise provided in the
Agreement, so long as the Chapter 11 Plan is consistent with the Restructuring
Term Sheet, including, without limitation, the terms of treatment of the
Noteholders and other classes of creditors, each of the Noteholders agrees and
covenants that it shall (i) perform its commitments and other obligations under
the Restructuring Term Sheet, (ii) not object to any motions to be filed by the
Company in connection with the Chapter 11 Case, so long as such motions are in
form and substance substantially the same as the form approved by the
Noteholders holding more than 50% of the aggregate principal amount of all Notes
(the “Majority Noteholders”), (iii) not object to the Disclosure Statement, the
solicitation of votes to accept the Chapter 11 Plan or confirmation of the
Chapter 11 Plan, so long as the Disclosure Statement and the Chapter 11 Plan are
in form and substance substantially the same as the form approved by the
Majority Noteholders, (iv) following receipt of Solicitation Materials, promptly
and timely exercise all votes to which it is entitled to accept the Chapter 11
Plan in accordance with the applicable procedures set forth in the Solicitation
Materials (and will not withdraw or change such votes) and, to the extent such
election is available, shall not elect on its ballot to preserve any claims (in
respect of the claims that each Noteholder may own) that may be affected by any
releases provided for under the Chapter 11 Plan, and (v) take or cause to

 

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be taken all reasonable actions necessary to fully cooperate with the Company
and the Preferred Equity Holders in implementing the terms of the Restructuring,
including, without limitation, obtaining approval of the Chapter 11 Plan as
expeditiously as possible.

 

(d)                                 Notwithstanding the foregoing, nothing in
this Agreement shall be construed to prohibit any Party from appearing as a
party-in-interest in any matter to be adjudicated in the Chapter 11 Cases so
long as such appearance and the positions advocated in connection therewith are
consistent with this Agreement and the Restructuring Term Sheet and are not for
the purpose of, and could not reasonably be expected to have the effect of,
hindering, delaying or preventing the consummation of the Restructuring as set
forth in the Restructuring Term Sheet.

 

Section 3.                                           Representations and
Warranties.

 

(a)                                 Each of the Parties severally, and not
jointly, represents and warrants to each of the other Parties that the following
statements are true and correct as of the date hereof:

 

(1)                                 Power and Authority. It has all requisite
power and authority to enter into this Agreement and to carry out the
transactions contemplated by, and perform its respective obligations under, this
Agreement.

 

(2)                                 Authorization. The execution and delivery of
this Agreement and the performance of its obligations hereunder have been duly
authorized by all necessary action on its part.

 

(3)                                 No Conflicts. The execution and delivery by
it, and performance by it of the transactions contemplated by this Agreement, do
not and shall not (i) violate any provision of law, rule, or regulation
applicable to it or its certificate of incorporation or bylaws (or other
organizational documents) or (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
material contractual obligation to which it is a party.

 

(4)                                 Governmental Consents. Except as
contemplated by this Agreement and the Restructuring Term Sheet, the execution
and delivery by it, and performance by it of the transactions contemplated by
this Agreement, do not and shall not require any registration or filing with,
consent or approval of, or notice to, or other action to, with, or by, any
Federal, state, or other governmental authority or regulatory body.

 

(5)                                 Binding Obligation. This Agreement is the
legally valid, and binding obligation of it, enforceable against it in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to or
limiting creditors’ rights generally or by equitable principles relating to
enforceability.

 

(6)                                 Proceedings. No litigation or proceeding
before any court, arbitrator, or administrative or governmental body is pending
or threatened against it that would adversely affect its ability to enter into
this Agreement or perform its obligations hereunder.

 

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(b)                                 Each of the Preferred Equity Holders
represents and warrants, severally and not jointly, to each of the other Parties
that the following statements are true, correct, and complete as of the date
hereof:

 

(1)                                 Ownership. It is (i) the sole beneficial
owner of the aggregate principal amount of the Preferred Equity set forth on the
signature page hereto and/or the investment advisor or manager for the
beneficial owners of such Preferred Equity, having the power to vote and dispose
of such Preferred Equity on behalf of such beneficial owners, and (ii) entitled
(for its own account or for the account of other persons claiming through it) to
all of the rights and economic benefits of such Preferred Equity.

 

(2)                                 Transfers. It has made no prior assignment,
sale, participation, grant, conveyance, or other transfer of, and has not
entered into any other agreement or otherwise agreed to assign, sell,
participate, grant, or otherwise transfer, in whole or in part, any portion of
its right, title, or interests in the Preferred Equity represented as owned or
controlled by it on the signature pages hereto.

 

(c)                                  Each of the Noteholders represents and
warrants, severally and not jointly, to each of the other Parties that the
following statements are true, correct, and complete as of the date hereof:

 

(1)                                 Ownership. It is (i) the sole beneficial
owner of (a) the aggregate principal amount of the Notes and (b) as applicable,
the aggregate principal amount owing under the Revolving Credit Facility (the
“Revolving Lender Claims”) set forth on the signature page hereto and/or the
investment advisor or manager for the beneficial owners of such Notes and, as
applicable, Revolving Lender Claims, having the power to vote and dispose of
such Notes and, as applicable, Revolving Lender Claims on behalf of such
beneficial owners, and (ii) entitled (for its own account or for the account of
other persons claiming through it) to all of the rights and economic benefits of
such Notes and, as applicable, Revolving Lender Claims.

 

(2)                                 Transfers. It has made no prior assignment,
sale, participation, grant, conveyance, or other transfer of, and has not
entered into any other agreement or otherwise agreed to assign, sell,
participate, grant, or otherwise transfer, in whole or in part, any portion of
its right, title, or interests in the Notes or, as applicable, the Revolving
Lender Claims represented as owned or controlled by it on the signature
pages hereto.

 

Section 4.                                           Covenants.

 

(a)                                 Each Preferred Equity Holder individually
covenants that such Party shall not, directly or indirectly, (i) sell, pledge,
hypothecate, or otherwise transfer any shares of (A) Preferred Equity or
(B) shares of Series D Preferred Stock except to a purchaser or other entity who
executes and delivers to the Company prior to the time of settlement of such
transfer an agreement in writing to be bound by all the terms of this Agreement
(which agreement shall include the applicable representations and warranties set
forth in Section 3 hereof), or (ii) grant any proxies, deposit any of its
Preferred Equity in a voting trust or enter into a voting or trading agreement
with respect to the Preferred Equity.  Any transfer of any shares of Preferred
Equity by a Preferred Equity Holder that does not comply with the procedure set
forth in the foregoing sentence shall be deemed void ab initio.

 

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(b)                                 Each Noteholder individually covenants that
such Party shall not, directly or indirectly, sell, pledge, hypothecate, or
otherwise transfer any Notes or, as applicable, Revolving Lender Claims, except
to a purchaser or other entity who executes and delivers to the Company prior to
the time of settlement of such transfer an agreement in writing to be bound by
all the terms of this Agreement (which agreement shall include the applicable
representations and warranties set forth in Section 3 hereof).  Any transfer of
any Notes or Revolving Lender Claims by a Noteholder that does not comply with
the procedure set forth in the foregoing sentence shall be deemed void ab
initio.

 

(c)                                  This Agreement shall in no way be construed
to preclude the Preferred Equity Holders or Noteholders from acquiring Notes or
additional Notes, provided that the Parties hereto shall be given written notice
by such transferee of such acquisition and any such Notes shall automatically be
deemed to be subject to the terms of this Agreement.

 

(d)                                 Each Noteholder individually covenants that
such Party: (i) will not exercise any rights under that certain Indenture dated
as of December 23, 2009 (as amended, modified or supplemented from time to time,
the “Indenture”) or, to the extent applicable, under the Revolving Credit
Facility, or instruct U.S. Bank National Association, as the trustee under the
Indenture (including any successors, assigns or agents, the “Trustee”) or, to
the extent applicable, Whitebox Advisors LLC, as the Administrative Agent and
Collateral Agent under the Revolving Credit Facility (including any successors,
assigns or agents, the “Revolving Credit Agent”) to exercise any such rights
except as consistent with this Agreement and the Restructuring Term Sheet,
(ii) in the event of any action by the Trustee to enforce rights and remedies
triggered by a Default or an Event of Default under (and as defined in) the
Indenture, will direct the Trustee to forbear from exercising such rights and
remedies, and (iii) to the extent applicable, in the event of any action by the
Revolving Credit Agent to enforce rights and remedies triggered by a Default or
an Event of Default under (and as defined in) the Revolving Credit Facility,
will direct the Revolving Credit Agent to forbear from exercising such rights
and remedies.

 

Section 5.                                           Termination by the
Noteholders. This Agreement may be terminated by any Noteholder, or group of
Noteholders, that beneficially owns or acts as the investment advisor or manager
with respect to at least a majority of the aggregate principal face amount of
the Notes that are subject to the terms of this Agreement on the occurrence of
any of the following events, by delivering written notice of the occurrence of
such event in accordance with Section 14 below to the other Parties:

 

(a)                                 the Company fails to meet any of the
milestones set forth below:(1)

 

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(1)  If the Majority Noteholders determine that the Company should pursue a
pre-negotiated Chapter 11 Plan rather than a prepackaged Chapter 11 Plan, the
milestones in this Section 5(a) shall be adjusted as follows:

 

(1)                                 the Company has not filed petitions
commencing the Chapter 11 Case by January 31, 2013;

 

(2)                                 the Company has not filed the Chapter 11
Plan and the Disclosure Statement on the Chapter 11 Commencement Date;

 

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(1)                                 the Company has not used its reasonable best
efforts to commence the Solicitation on or before January 22, 2013, and in any
event, the Solicitation is not commenced by January 31, 2013 (the “Solicitation
Date”);

 

(2)                                 the Company has not filed petitions
commencing the Chapter 11 Case by the date that is 14 days from the Solicitation
Date;

 

(3)                                 the Company has not filed the Chapter 11
Plan and the Disclosure Statement on the Chapter 11 Commencement Date;

 

(4)                                 the entry of an order (the “Interim DIP
Order”) approving debtor in possession financing pursuant to the terms set forth
in the Restructuring Term Sheet (the “DIP Facility”) on an interim basis in form
and substance acceptable to the Backstop DIP Lenders (as defined in the
Restructuring Term Sheet) has not occurred by the date that is 10 days after the
Chapter 11 Commencement Date;

 

(5)                                 the entry of a final order approving the DIP
Facility in form and substance acceptable to the Backstop DIP Lenders has not
occurred by the date that is 20 days after the entry of the Interim DIP Order;

 

(6)                                 the entry of an order or orders in form and
substance acceptable to the Majority Noteholders by the Bankruptcy Court
confirming the Chapter 11 Plan pursuant to section 1129 of the Bankruptcy Code
has not occurred by the date that is 35 days after the Chapter 11 Commencement
Date;

 

(7)                                 the effective date of the Chapter 11 Plan
has not occurred by the date that is 50 days after the Chapter 11 Commencement
Date.

 

(b)                                 the Company files a chapter 11 plan or any
exhibits, amendments, modifications or supplements thereto that are not in form
or substance acceptable to the Majority Noteholders;

 

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(3)                                 the entry of the Interim DIP Order (as
defined below) has not occurred by the date that is 10 days after the Chapter 11
Commencement Date;

 

(4)                                 the entry of a final order approving the DIP
Facility (as defined below) in form and substance acceptable to the Backstop DIP
Lenders has not occurred by the date that is 20 days after the entry of the
Interim DIP Order;

 

(5)                                 the entry of an order by the Bankruptcy
Court approving the Disclosure Statement in form and substance acceptable to the
Majority Noteholders has not occurred by the date that is 40 days after the
Chapter 11 Commencement Date;

 

(6)                                 the entry of an order or orders in form and
substance acceptable to the Majority Noteholders by the Bankruptcy Court
confirming the Chapter 11 Plan pursuant to section 1129 of the Bankruptcy Code
has not occurred by the date that is 75 days after the Chapter 11 Commencement
Date;

 

(7)                                 the effective date of the Chapter 11 Plan
has not occurred by the date that is 90 days after the Chapter 11 Commencement
Date.

 

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(c)                                  an order converting the Chapter 11 Case to
a case under chapter 7 of the Bankruptcy Code is entered by the Bankruptcy Court
and such order is not stayed, vacated, or reversed within thirty (30) days;

 

(d)                                 the Company’s exclusive right to file a
chapter 11 plan pursuant to section 1121 of the Bankruptcy Code shall have
terminated;

 

(e)                                  entry of an order dismissing the Chapter 11
Case;

 

(f)                                   a change in the operations of the Company
occurs that would have, or would reasonably be expected to have, a material
adverse effect on the ability of the Company to perform its obligations under
this Agreement and effect the Restructuring (a “Material Adverse Change”);
provided however, that the filing of the Chapter 11 Case and the other
transactions contemplated by the Restructuring Term Sheet shall not in and of
itself constitute a Material Adverse Change;

 

(g)                                  any court of competent jurisdiction or
other competent governmental or regulatory authority shall have issued an order
making illegal or otherwise restricting, preventing, or prohibiting the
Restructuring on the terms set forth in the Restructuring Term Sheet in a manner
that cannot be reasonably remedied in a timely manner by the Company or the
Noteholders or Preferred Equity Holders, as applicable;

 

(h)                                 the Company files or publicly announces its
intention to file a chapter 11 plan or any exhibit, amendment, modification or
supplement to the chapter 11 plan that contains terms or conditions that are not
consistent with the Restructuring or the Restructuring Term Sheet;

 

(i)                                     the Company shall have breached its
obligations under this Agreement in any material respect;

 

(j)                                    the entry of an order by the Bankruptcy
Court appointing an examiner with enlarged powers relating to the operation of
the material part of the business of the Company, taken as a whole (powers
beyond those set forth in section 1106(a)(3) and (4) of the Bankruptcy Code)
under section 1106(b) of the Bankruptcy Code, or the entry of an order by the
Bankruptcy Court appointing a trustee under section 1104 of the Bankruptcy Code
and, in either case, such order has not been stayed, reversed, or vacated within
thirty (30) days after the entry of such order;

 

(k)                                 the entry of an order by the Bankruptcy
Court denying confirmation of the Chapter 11 Plan or the Chapter 11 Plan is
withdrawn by the Company;

 

(l)                                     any of the Preferred Equity Holders has
breached its obligations under this Agreement in any material respect;

 

(m)                             termination of this Agreement by the Preferred
Equity Holders in accordance with Section 6 hereof;

 

(n)                                 the aggregate amount of all projected claims
against the Company in the Chapter 11 Case, other than claims with respect to
amounts owed under the Revolving Credit

 

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Facility and the Notes, and other than claims for amounts typically accounted
for as deferred revenue on the Company’s balance sheet, reasonably determined by
the Majority Noteholders to be allowed claims exceeds $85.7 million; or

 

(o)                                 the conditions set forth in the
Restructuring Term Sheet as the “Certain Closing and Other Conditions to the
Restructuring” have not occurred and/or have not been waived by the Majority
Noteholders.

 

Section 6.                                           Termination by the
Preferred Equity Holders.  This Agreement may be terminated by any Preferred
Equity Holder or group of Preferred Equity Holders that beneficially owns at
least a majority of the shares of the Preferred Equity, solely with respect to
such Preferred Equity Holder or group of Preferred Equity Holders, on the
occurrence of any of the following events, by delivering written notice of the
occurrence of such event in accordance with Section 14 below to the other
Parties; provided, however that any termination by a Preferred Equity Holder or
group of Preferred Equity Holders pursuant to this section shall not terminate
this Agreement or affect the obligations of the other Parties under this
Agreement:

 

(a)                                 in the event that the Chapter 11 Plan,
without the consent of the Preferred Equity Holders, provides for a treatment of
the Preferred Equity Holders that is different than the Restructuring Term Sheet
and such difference adversely affects in any material respect the treatment or
value of the consideration provided to the Preferred Equity Holders;

 

(b)                                 Noteholders holding in excess of one third
of the aggregate outstanding face amount of the Notes breach their obligations
under this Agreement in any material respect;

 

(c)                                  an order converting the Chapter 11 Case to
a case under chapter 7 of the Bankruptcy Code is entered by the Bankruptcy Court
and such order is not stayed, vacated, or reversed within thirty (30) days;

 

(d)                                 the Company’s exclusive right to file a
chapter 11 plan pursuant to section 1121 of the Bankruptcy Code shall have
terminated;

 

(e)                                  the entry of an order by the Bankruptcy
Court appointing an examiner with enlarged powers relating to the operation of
the material part of the business of the Company, taken as a whole (powers
beyond those set forth in section 1106(a)(3) and (4) of the Bankruptcy Code)
under section 1106(b) of the Bankruptcy Code, or the entry of an order by the
Bankruptcy Court appointing a trustee under section 1104 of the Bankruptcy Code
and, in either case, such order has not been stayed, reversed, or vacated within
sixty (30) days after the entry of such order;

 

(f)                                   the entry of an order by the Bankruptcy
Court denying confirmation of the Chapter 11 Plan or the Chapter 11 Plan is
withdrawn by the Company; or

 

(g)                                  in the event that prior to February 15,
2013, American Securities and Gates have not executed an agreement authorizing
and approving the form of a shareholders’ agreement governing the rights of
holders of New Common Stock (as defined in the Restructuring Term Sheet);
provided, however, that the Preferred Equity Holders, American Securities and
Gates may extend such deadline by unanimous agreement; and provided further

 

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that unless so extended or unless notice of termination shall have been given by
the Preferred Equity Holder as provided herein on or prior to February 15, 2013,
this right to terminate shall be null and void and of no further force and
effect.

 

Section 7.                                           Termination by the
Company.  In the event that (a) the Noteholders holding in excess of one third
of the aggregate outstanding face amount of the Notes breach their obligations
under this Agreement in any material respect, or (b) any court of competent
jurisdiction or other competent governmental or regulatory authority shall have
issued an order making illegal or otherwise restricting, preventing, or
prohibiting the Restructuring on the terms set forth in the Restructuring Term
Sheet in a manner that cannot be reasonably remedied in a timely manner by the
Company or the Noteholders or Preferred Equity Holders, as applicable, then the
Company shall have the right to terminate this Agreement by delivering written
notice of the occurrence of such event in accordance with Section 14 below to
the other Parties.

 

Section 8.                                           Termination by American
Securities and/or Gates.  In the event that American Securities and Gates have
not jointly executed an agreement authorizing and approving the form of a
shareholders’ agreement governing the rights of holders of New Common Stock (as
defined in the Restructuring Term Sheet) immediately prior to the earlier of
(a) the launch of the Solicitation and (b) the commencement of the Chapter 11
Cases, then this Agreement may be terminated by either American Securities or
Gates, in the discretion of each resepctively, by delivering written notice of
the occurrence of such event in accordance with Section 14 below to the Parties.

 

Section 9.                                           Effect of Termination.

 

(a)                                 On the delivery of the written notice
referred to in Sections 5, 7 or 8 in connection with the valid termination of
this Agreement, the obligations of each of the Parties hereunder shall thereupon
terminate and be of no further force and effect. Upon termination of this
Agreement, no Party (or any other party) shall have any continuing liability or
obligation to the other Parties hereunder; provided, however, that no such
termination shall relieve any party from liability for its breach or
non-performance of its obligations hereunder prior to such termination.

 

(b)                                 On the delivery of the written notice
referred to in Section 6 in connection with the valid termination of this
Agreement, the obligations hereunder of the Party that has delivered notice
pursuant to Section 6 (the “Terminating Party”) shall thereupon terminate and be
of no further force and effect solely with respect to such Terminating Party.
Upon termination of this Agreement pursuant to Section 6, no such Terminating
Party shall have any continuing liability or obligation to the other Parties
hereunder; provided, however, that no such termination shall relieve any party
from liability for its breach or non-performance of its obligations hereunder
prior to such termination.

 

Section 10.                                    Preparation of Restructuring
Documents.  The Company shall instruct its counsel promptly to deliver to
counsel to the each of the Noteholders and the Preferred Equity Holders for
their review and comment prior to the earlier of their filing or mailing (w) the
Chapter 11 Plan and Disclosure Statement, (x) the Bankruptcy Court orders to be
prepared in connection therewith, (y) the Solicitation Materials, and (z) all
other documents or agreements to be executed or implemented in connection
therewith (collectively the, “Restructuring

 

10

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Documents”), each of which Restructuring Documents shall be consistent in all
material respects with this Agreement and the Restructuring Term Sheet and
acceptable (i) to the Majority Noteholders in all respects, and (ii) to the
Preferred Equity Holders in respect that the treatment of their holdings of the
Preferred Equity is consistent with the Restructuring Term Sheet.  The Parties
further agree that this Agreement is not a financial accommodation contract that
would be unenforceable under section 365(c)(2) or the Bankruptcy Code, and each
agrees not to take any contrary position in the Chapter 11 Case.

 

Section 11.                                    Good Faith Negotiation of
Documents.  Each Party hereby further covenants and agrees to negotiate the
Restructuring Documents in good faith and, in any event, in all respects
consistent with the Restructuring Term Sheet.

 

Section 12.                                    Amendments. This Agreement may
not be modified, amended, or supplemented except in writing signed by the
Parties.

 

Section 13.                                    Governing Law; Jurisdiction. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York, regardless of the laws that might otherwise govern under
applicable principles of conflict of laws of the State of New York. By its
execution and delivery of this Agreement, each of the Parties hereto hereby
irrevocably and unconditionally agrees for itself that any legal action, suit,
or proceeding against it with respect to any matter under or arising out of or
in connection with this Agreement or for recognition or enforcement of any
judgment rendered in any such action, suit, or proceeding, shall be brought in
federal court in the Southern District of New York. By execution and delivery of
this Agreement, each of the Parties hereto hereby irrevocably accepts and
submits to the exclusive jurisdiction of such court, generally and
unconditionally, with respect to any such action, suit, or proceeding.
Notwithstanding the foregoing consent to jurisdiction, upon the commencement of
the Chapter 11 Case, each of the Parties hereto hereby agrees that the
Bankruptcy Court shall have exclusive jurisdiction over all matters arising out
of or in connection with this Agreement.

 

Section 14.                                    Notices. All demands, notices,
requests, consents, and communications hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or by courier service,
or messenger, or by facsimile or telecopy, and shall be deemed to have been duly
given or made (i) upon delivery, if delivered personally or by courier service,
or messenger, in each case with record of receipt, or (ii) upon transmission
with confirmed delivery, if sent by facsimile or telecopy, to the following
addresses, or such other addresses as may be furnished hereafter by notice in
writing, to the following Parties:

 

11

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If to the Company:

 

Gary L. Pittman

Geokinetics Inc.

1500 City West Blvd., Suite 800

Houston, Texas 77042

Telephone: (281) 848-6823

Facsimile: (713) 850-7330

 

with a copy to (which shall not constitute notice):

 

William (Bill) L. Moll, Jr.

Geokinetics Inc.

1500 City West Blvd., Suite 800

Houston, Texas 77042

Telephone: (281) 848-6820

Facsimile: (713) 850-7330

 

Akin Gump Strauss Hauer & Feld LLP

1700 Pacific Avenue, Suite 4100

Dallas, Texas 75201

Attn: Sarah Link Schultz, Esq.

Telephone: (214) 969-2800

Facsimile: (214) 969-4343

Akin Gump Strauss Hauer & Feld LLP

1111 Louisiana Street, 44th Floor

Houston, Texas 77002

Attn: David P. Elder, Esq.

Telephone: (713) 220-5800

Facsimile: (713) 236-0822

 

If to the Noteholders:

 

Larry First
American Securities Opportunities Advisors, LLC
299 Park Avenue
34th Floor
New York, NY 10171

 

Jeffrey Gates

Gates Capital Management, Inc.
1177 Avenue of the Americas
32nd Floor
New York, NY 10036

 

with a copy to (which shall not constitute notice):

 

Brad Eric Scheler, Esq.

Jennifer Rodburg, Esq.

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, NY 10004-1980

Telephone: (212) 859-8520

Facsimile: (212) 859-4000

 

If to the Preferred Equity Holders:

 

12

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Avista Capital Holdings, L.P.

65 East 55th Street, 18th Floor

New York, N.Y.

Attn:  General Counsel

Telephone: (212) 593-6900

Facsimile: (212) 593-6901

 

and

 

Avista Capital Holdings, L.P.

1000 Louisiana

Houston, TX 77002

Attn:  Jeff Gunst

Telephone: (212) 328-1099

Facsimile: (212) 328-1097

 

with a copy to (which shall not constitute notice):

 

Steven D. Rubin, Esq.
Gardere Wynne Sewell LLP
Wells Fargo Plaza, Suite 3400
1000 Louisiana
Houston, TX 77002
Telephone: 713-276-5202
Facsimile: 713-276-6202

 

Section 15.            Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement among the Parties with regard to the subject
matter hereof, and supersedes all prior negotiations and agreements with respect
to the subject matter hereof.

 

Section 16.            Headings. The headings of the paragraphs and
subparagraphs of this Agreement are inserted for convenience only and shall not
affect the interpretation hereof.

 

Section 17.            Successors and Assigns. This Agreement is intended to
bind and inure to the benefit of the Parties and their respective successors and
permitted assigns; provided, however, that nothing contained in this paragraph
shall be deemed to permit sales, assignments, or transfers other than in
accordance with Section 4.

 

Section 18.            Specific Performance. Each Party hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement may cause other parties to sustain damages for which such parties
would not have an adequate remedy at law for money damages, and therefore each
Party hereto agrees that in the event of any such breach, such other parties
shall be entitled to seek the remedy of specific performance of such covenants
and agreements and injunctive and other equitable relief in addition to any
other remedy to which such parties may be entitled, at law or in equity.

 

13

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Section 19.            Several Not Joint Obligations. The agreements,
representations, and obligations of the Parties under this Agreement are, in all
respects, several and not joint.

 

Section 20.            Remedies Cumulative. All rights, powers, and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
right, power, or remedy thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power, or remedy by such party.

 

Section 21.            No Waiver. The failure of any Party hereto to exercise
any right, power, or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any other
Party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
Party of its right to exercise any such or other right, power, or remedy or to
demand such compliance.  Moreover, each of the Parties expressly acknowledges
and agrees that, except as expressly provided in this Agreement, nothing in this
Agreement is intended to, or does, in any manner waive, limit, impair or
restrict the ability of any party to this Agreement to protect and preserve all
of its rights, remedies and interests, including, without limitation, with
respect to its claims against and interests in the Company.

 

Section 22.            Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same Agreement. Delivery of an executed signature
page of this Agreement by telecopier or email shall be as effective as delivery
of a manually executed signature page of this Agreement.

 

Section 23.            Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

Section 24.            Effectiveness of this Agreement.  The effectiveness of
this Agreement, and the respective obligations of the Parties under this
Agreement, are conditioned upon the receipt of the consent and signature hereto
of each of the Parties.

 

Section 25.            No Third-Party Beneficiaries. Unless expressly stated
herein, this Agreement shall be solely for the benefit of the Parties, and no
other person or entity shall be a third party beneficiary hereof.

 

Section 26.            Additional Parties. Without in any way limiting the
provisions hereof, additional holders of Notes may elect to become Parties by
executing and delivering to the Company a counterpart hereof. Such additional
holder shall become a Party to this Agreement as a Noteholder in accordance with
the terms of this Agreement as if such additional holder were an original named
party hereto.

 

Section 27.            No Solicitation. This Agreement is not intended to be,
and each signatory to this Agreement acknowledges that this Agreement is not, a
solicitation to the acceptance or rejection of a plan of reorganization for the
Company. Acceptance of the Restructuring will not

 

14

--------------------------------------------------------------------------------

 

be solicited from any holder of Notes until it has received the disclosures
required under or otherwise in compliance with applicable law.

 

Section 28.            Settlement Discussions. This Agreement and the
Restructuring are part of a proposed settlement of a dispute among the Parties.
Nothing herein shall be deemed an admission of any kind. Pursuant to Federal
Rule of Evidence 408 and any applicable state rules of evidence, this Agreement
and all negotiations relating thereto shall not be admissible into evidence in
any proceeding other than a proceeding to enforce the terms of this Agreement.

 

Section 29.            Consideration. It is hereby acknowledged by the Parties
hereto that, other than the agreements, covenants, representations, and
warranties set forth herein and in the Restructuring Term Sheet and the
Indenture, no consideration shall be due or paid to the Parties for their
agreement to support and vote to accept the Chapter 11 Plan in accordance with
the terms and conditions of this Agreement.

 

Section 30.            Receipt of Adequate Information; Representation by
Counsel. Each Party acknowledges that it has received adequate information to
enter into this Agreement and that it has been represented by counsel in
connection with this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of law or any legal decision that would provide
any party with a defense to the enforcement of the terms of this Agreement
against such party shall have no application and is expressly waived.  The
provisions of the Agreement shall be interpreted in a reasonable manner to
effect the intent of the Parties.

 

Section 31.            Mutual Assurances.  Each Party hereby covenants to the
other Parties to use its reasonable best efforts, as expeditiously as possible,
to perform its respective obligations under this Agreement and take such actions
as may be reasonably necessary under this Agreement to consummate the
Restructuring.  The Parties further agree to take such other actions as are
reasonably necessary and appropriate to carry out the foregoing and to
effectuate the Restructuring and evidence the Parties’ support of the Chapter 11
Plan and commitment to vote in favor of the Chapter 11 Plan including, without
limitation, the execution and delivery of any transmittal letters, written
consents, or other similar documents  containing customary terms and provisions,
for distribution to the holders of any impaired claims against or interests in
the Company.

 

Signature Pages Follow

 

15

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered this
Agreement as of the date first above written.

 

Dated:  January     , 2013

 

Geokinetics Inc.

 

Geokinetics USA, Inc.

 

 

 

 

 

By:

 

 

By:

 

Name:

 

 

Name:

 

Its:

 

 

Its:

 

 

 

 

 

 

Geokinetics Holdings USA, Inc.

 

Geokinetics International Holdings, Inc.

 

 

 

 

 

By:

 

 

By:

 

Name:

 

 

Name:

 

Its:

 

 

Its:

 

 

 

 

 

 

Geokinetics Services Corp.

 

Geokinetics Management, Inc.

 

 

 

 

 

By:

 

 

By:

 

Name:

 

 

Name:

 

Its:

 

 

Its:

 

 

 

 

 

 

Geokinetics Processing, Inc.

 

Geokinetics International, Inc.

 

 

 

 

 

By:

 

 

By:

 

Name:

 

 

Name:

 

Its:

 

 

Its:

 

 

 

 

 

 

Geokinetics Acquisition Company

 

Advanced Seismic Technology, Inc.

 

 

 

 

 

By:

 

 

By:

 

Name:

 

 

Name:

 

Its:

 

 

Its:

 

 

16

--------------------------------------------------------------------------------

 

Dated:  January       , 2013

[Party]

 

 

 

 

 

 

 

Name:

 

 

Title:

 

 

 

 

Telephone:

 

Facsimile:

 

 

 

Aggregate principal amount of Revolving Lender Claims:

 

 

 

 

 

$

 

 

 

Aggregate principal amount of Noteholder Claims:

 

 

 

 

 

$

 

 

 

Aggregate number of Preferred Equity Interests:

 

 

 

 

 

$

 

 

 

Any other claims or interests against the Company:

 

 

 

 

 

 

 

17

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EXHIBIT A

 

RESTRUCTURING TERM SHEET

 

18

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GEOKINETICS INC.

SUMMARY OF PRINCIPAL TERMS AND CONDITIONS OF RESTRUCTURING

 

This term sheet (the “Restructuring Term Sheet”) outlines certain of the
principal economic terms of a proposed restructuring (the “Restructuring
Transaction”) of the outstanding indebtedness of, and equity interests in,
Geokinetics, Inc. and its direct and indirect domestic affiliates and
subsidiaries (collectively, the “Company”).  The proposed terms and conditions
set forth in this Restructuring Term Sheet are intended as an outline of certain
material terms of the Restructuring Transaction.  This Restructuring Term Sheet
does not include descriptions of all terms, conditions and other provisions that
would be contained in definitive documentation related to a financial
restructuring and is not intended to limit the scope of discussion or
negotiation of any matters not inconsistent with the specific matters set forth
herein.  The transactions contemplated by this Restructuring Term Sheet will be
subject to the terms and conditions to be set forth in definitive documents at a
later date.

 

This Restructuring Term Sheet does not constitute an offer of securities or a
solicitation of the acceptance or rejection of any restructuring or similar
plan.

 

The Restructuring Transaction is intended to be effectuated through either a
pre-packaged or pre-negotiated in-court restructuring and chapter 11 plan of
reorganization described below.

 

This Restructuring Term Sheet is strictly confidential and may not be shared
with any person.

 

I.                                        GENERAL

 

Company

 

Geokinetics Inc.; Geokinetics Holdings USA, Inc.; Geokinetics Services Corp.;
Geokinetics Processing, Inc.; Geokinetics Acquisition Company; Geokinetics
USA, Inc.; Geokinetics International Holdings, Inc.; Geokinetics
Management, Inc.;  Geokinetics International, Inc.; and Advanced Seismic
Technology, Inc.  The entities listed herein as the “Company” are based on the
understanding that they include Geokinetics, Inc. and all of its direct and
indirect domestic affiliates and subsidiaries.

 

 

 

Revolving Lenders

 

Lenders (collectively, “Revolving Lenders”) under the $50 million revolving
credit facility (the “Revolving Credit Facility”) pursuant to that certain
Amended and Restated Credit Agreement, dated as of August 12, 2011, and as
amended from time to time, among the Company and the various financial entities
signatory thereto.

 

 

 

Noteholders

 

Holders (collectively, “Noteholders”) of $300 million in principal amount of
9.75% senior secured notes (the “Senior Secured Notes”) due December 2014.  The
holders of 50.1% or more in aggregate principal amount of the Senior Secured
Notes shall be referred to herein as the “Majority Noteholders”.

 

 

 

Preferred Equity Holders

 

Holders (collectively, “Preferred Equity Holders”) of approximately $144 million
in preferred equity interests in Geokinetics Inc. comprised of Series B-1 Senior
Convertible Preferred Stock and Series C-1 Senior Preferred Stock (collectively,
the “Preferred Equity Interests”).

 

1

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Restructuring Transaction

 

Subject to the terms hereof, the Company shall file for chapter 11 relief in the
District of Delaware (the “Bankruptcy Court”) and restructure its capital
structure (the “Restructuring”) through a pre-packaged or pre-negotiated
restructuring plan (the “Plan”) as determined by the Majority Noteholders.  The
Plan shall be consistent with the terms of this Restructuring Term Sheet and
satisfactory in form and substance to the Majority Noteholders.  The Majority
Noteholders shall determine whether the Plan will be implemented through a
pre-packaged chapter 11 case or a pre-negotiated chapter 11 case provided that
regardless of such determination, the Company shall file the Plan and related
disclosure statement and a bar date motion with the Bankruptcy Court on the same
day the Company files its bankruptcy petitions (the “Petition Date”).  In light
of the treatment of unsecured creditors provided herein and the execution of the
Restructuring Support Agreement, the Company shall request that an official
committee of unsecured creditors not be appointed in Company’s chapter 11 case. 

 

 

 

Plan Support

 

The Majority Noteholders, and Avista Capital Partners, L.P. and Avista Capital
Partners (Offshore), L.P., holders of over two thirds of the Preferred Equity
Interests, will enter into a plan support agreement (the “PSA”) with the Company
wherein they will commit to support the Restructuring and the Plan.  This
Restructuring Term Sheet will be an exhibit to the PSA and will be incorporated
into the PSA in all respects.

 

II.                                   FINANCING

 

Debtor In Possession Financing

 

Up to $25 million of debtor in possession financing (“DIP Facility”), subject to
a budget approved by the Backstop DIP Lenders (as defined and provided in
Exhibit 1), shall be provided by Noteholders.  The opportunity to participate in
the DIP Facility will be given to all Noteholders on a pro rata basis based on
their holdings of the Senior Secured Notes.  American Securities Opportunities
Advisors, LLC and Gates Capital Management, Inc. will backstop the entire amount
of the DIP Facility based on their pro rata holdings of the Senior Secured Notes
vis-à-vis each other.

 

The DIP Facility will be secured by liens junior to the Revolving Credit
Facility and senior to all other liens, including, without limitation, the liens
securing the Senior Secured Notes.

 

Pursuant to the Plan, on the effective date of the Plan (the “Effective Date”),
all outstanding amounts under the DIP Facility shall be converted into newly
issued shares of common stock of reorganized Geokinetics Inc. (the “New Common
Stock”) at a 20% discount to Plan value (the “DIP Equity Distribution”) with
such Plan value as agreed to by the Majority Noteholders and the Company.

 

A summary of the principal terms and conditions of the DIP Facility is set forth
in the debtor in possession financing term sheet (the “DIP Term Sheet”) attached
hereto as Exhibit 1.

 

2

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Exit Facility

 

The reorganized Company will obtain exit financing (the “Exit Facility”) in an
amount and on terms to be determined by the Majority Noteholders, to fund the
cash requirements of the Plan, including without limitation, repayment of the
$50 million outstanding under the Revolving Credit Facility plus accrued
interest, and the post-confirmation operations of the Company’s business.

 

III.                              TREATMENT OF CLAIMS AND INTERESTS UNDER THE
PLAN

 

Administrative Expense Claims

 

All administrative expense claims will be paid in full, in cash, on the
Effective Date; provided that, (i) administrative expense claims incurred in the
ordinary course will be paid in accordance with their terms and (ii) fees and
expenses of professionals retained under section 327 or 1103 of the Bankruptcy
Code will be paid in accordance with the procedures established by the
Bankruptcy Court.

 

 

 

Priority Tax Claims

 

All priority tax claims will be paid in full, in cash, on the Effective Date or
treated in an alternative manner consistent with the Bankruptcy Code and
determined by the Majority Noteholders.

 

 

 

Unsecured Priority Claims

 

All unsecured priority claims will be paid in full, in cash, on the Effective
Date or treated in an alternative manner consistent with the Bankruptcy Code and
determined by the Majority Noteholders. 

 

 

 

DIP Facility

 

On the Effective Date, all outstanding amounts under the DIP Facility shall be
converted into New Common Stock at a 20% discount to Plan value with such Plan
value determined as set forth above.

 

 

 

Revolving Credit Facility

 

On the Effective Date, the $50 million in outstanding revolving loans plus any
accrued interest(1) shall be satisfied in full with proceeds of the Exit
Facility, or will be afforded such other treatment as agreed by the Revolving
Lenders and the Majority Noteholders.

 

 

 

Senior Secured Notes

 

On the Effective Date, in exchange for their Senior Secured Notes, Noteholders
shall receive their pro rata share of 100% of the New Common Stock (subject to
dilution from the Management Incentive Plan (as detailed below) and the DIP
Equity Distribution).

 

 

 

Preferred Equity Interests

 

On the Effective Date, in exchange for their Preferred Equity Interests,
Preferred Equity Holders shall receive their pro rata share of a $6 million cash
distribution.

 

 

 

Series D Preferred Stock

 

Holders of Series D Preferred Stock shall receive no distribution and their
Series D Preferred Stock shall be canceled under the Plan.

 

 

 

Common Equity Interests

 

Holders of common stock shall receive no distribution and their equity interests
shall be canceled under the Plan.

 

--------------------------------------------------------------------------------

(1)  Interest shall accrue at the non-default contract rate.

 

3

--------------------------------------------------------------------------------

 

Trade Claims and Other Unsecured Claims

 

The Company represents that trade and other unsecured claims scheduled by the
Company in its bankruptcy schedules will not exceed $46 million in the aggregate
and that claims of governmental units will not exceed $40 million in the
aggregate.  Based on these representations, unless otherwise determined by the
Majority Noteholders, all trade claims and other unsecured debt shall be paid in
the ordinary course of business.

 

 

 

Releases and Exculpation

 

Management, the Board of Directors, the Revolving Lenders (and Agents under the
Revolving Credit Facility), the Noteholders and the Preferred Equity Holders
will receive mutual releases and exculpation (from each other and from the
Company) on customary terms.  D&O coverage will continue without any lapses for
new, continuing and departing directors and officers.

 

IV.                               CORPORATE GOVERNANCE AND MANAGEMENT

 

Board of Directors

 

Board of Directors (the “New Board”) to be determined by the Majority
Noteholders.  The identities and affiliations of the members of the New Board
will be disclosed to the Bankruptcy Court as required by the Bankruptcy Code.

 

 

 

Management

 

The senior management team of the reorganized Company will enter into new
employment agreements that shall be satisfactory to the Majority Noteholders. 

 

 

 

Management Incentive Plan

 

On or as soon as reasonably practicable after the Effective Date, a management
incentive program (the “Management Incentive Program”) shall be adopted by the
New Board to provide designated members of senior management of the Company with
shares of, units representing shares of or the value of a share of, and/or
options to purchase shares of, up to 10% of the New Common Stock.  The
Management Incentive Program shall contain performance based and/or time-vesting
grants and the specific identities of recipients, amounts and timing of grants
and other terms and conditions will be determined by the New Board. 

 

 

 

Shareholders Agreement

 

It shall be a condition to the Restructuring and the Majority Noteholders’
support of the Restructuring that prior to the earlier of the solicitation of
votes to accept or reject the Plan or the commencement of the chapter 11 cases,
American Securities Opportunities Advisors, LLC and Gates Capital
Management, Inc. shall have reached mutual agreement as to the terms of a
shareholders’ agreement for holders of New Common Stock.

 

4

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Terms for Reorganized Company and New Common Stock

 

The New Common Stock will be issued pursuant to one or more exemptions from
registration under federal and state securities laws and will: (i) not be
registered and (ii) be transferable by the recipients thereof only under an
effective registration statement or pursuant to an exemption from registration,
including, without limitation, section 1145 of the Bankruptcy Code.  The Plan
shall provide that the New Common Stock is being issued pursuant to section 1145
of the Bankruptcy Code.  The reorganized Company will initially be a private
company.

 

The organizational structure of the reorganized Company shall be structured in
the most tax efficient manner as determined by the Majority Noteholders (and the
terms of the Plan shall be revised to the extent necessary to be consistent with
any such structure).

 

 

 

Professional Fees and Expenses

 

All of the Majority Noteholders’ professional fees and out-of-pocket expenses
incurred in connection with the Restructuring or any other matter in connection
thereto, including, without limitation, those fees and expenses incurred during
the Company’s chapter 11 cases, shall be paid by the Company on a current basis
and prior to and as a condition to the Effective Date without need for a fee
application or court approval.

 

Up to $75,000 in the aggregate of Avista Capital Partners, L.P. and Avista
Capital Partners (Offshore), L.P.’s professional fees and out-of-pocket expenses
incurred in connection with the Restructuring or any other matter in connection
thereto, including without limitation, those fees and expenses incurred during
the Company’s chapter 11 cases, shall be paid by the Company on a current basis
and prior to and as a condition to the Effective Date without need for a fee
application or court approval.

 

 

 

Corporate Governance Documents

 

Corporate governance terms to be determined by the Majority Noteholders in
consultation with the Company.

 

V.                                    OTHER TERMS

 

Governing Law

 

New York

 

5

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Certain Closing and Other Conditions to the Restructuring

 

The Restructuring shall be subject to usual and customary and necessary
conditions for a transaction of this type, as well as other conditions
satisfactory to the Majority Noteholders, including, without limitation:

 

·                  The terms, conditions and circumstances of any and all
documents relating to the Restructuring and the Company shall be acceptable to
the Majority Noteholders in all respects and will have been reviewed and
expressly approved by the Majority Noteholders.

 

·                  All of the Majority Noteholders’ professional fees and
out-of-pocket expenses incurred in connection with the Restructuring or any
other matter in connection thereto, including, without limitation, those fees
and expenses incurred during the Company’s chapter 11 cases, shall have been
paid by the Company as a condition to the Effective Date.

 

·                  The Company shall have provided the Majority Noteholders with
full and complete access to the Company and its management.

 

·                  The Restructuring transactions shall be structured in the
most tax efficient manner as determined by the Majority Noteholders, and all
accounting treatment and other tax matters shall be resolved to the satisfaction
of the Majority Noteholders.

 

·                  All requisite governmental or regulatory approvals for the
Restructuring shall have been obtained and no governmental or regulatory
authority shall have taken any action that could reasonably be expected to have
a material adverse effect on the consummation (including, without limitation,
timing) of the Restructuring.

 

·                  There is no material adverse change to the assets,
liabilities, businesses or prospects of the Company which occurs or is
discovered after the date of execution of the PSA.

 

·                  The amount of all projected claims against the Company,
including, without limitation, all trade and other unsecured claims, but
excluding claims for amounts owed under the Revolving Credit Facility and the
Notes, and excluding claims for amounts typically accounted for as deferred
revenue on the Company’s balance sheet, reasonably determined by the Majority
Noteholders to be allowed claims shall not exceed $85.7 million in the
aggregate.

 

6

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EXHIBIT 1

 

DEBTOR-IN-POSSESSION FACILITY

 

Summary of Principal Terms and Conditions

 

--------------------------------------------------------------------------------

 

This Summary of Principal Terms and Conditions outlines certain key terms of a
proposed Debtor-in-Possession Facility by and among the Loan Parties, the DIP
Agent and the DIP Lenders, each as described below (the “DIP Facility”). This
term sheet (the “DIP Term Sheet”) is not binding on any party and does not
contain all of the terms, conditions and other provisions of the transactions
contemplated hereby.  As such, the terms and conditions set forth in this DIP
Term Sheet are to be used solely as a basis for continued discussions and do not
constitute a commitment to provide a financing commitment of any sort or to
prepare, negotiate, execute or deliver such a commitment.  The DIP Term Sheet is
in the nature of a settlement proposal in furtherance of settlement discussions
and is entitled to protection from any use or disclosure to any party or person
pursuant to Federal Rule of Evidence 408 and any other rule of similar import. 
All figures, terms, and conditions are subject to change or withdrawal at any
time.  This DIP Term Sheet is confidential and is subject to the execution of
definitive documents acceptable to the parties in their sole discretion.

 

I.                PARTIES

 

Debtor/Loan Parties:

 

Geokinetics Holdings USA, Inc. and its domestic direct and indirect
subsidiaries, as debtors and debtors-in-possession in a case under chapter 11 of
the United States Bankruptcy Code, 11 U.S.C. §§ 101, et seq. commenced in the
District of Delaware (such case, the “Case”).  Geokinetics Holdings USA, Inc.
shall be the “Borrower” and Geokinetics Inc. (the “Parent”) and each of its
direct and indirect domestic subsidiaries (other than the Borrower) shall be
“Guarantors” of the DIP Obligations (the Borrower and Guarantors, collectively,
the “Loan Parties”).

 

 

 

DIP Agent:

 

[              ](2)

 

 

 

DIP Lenders:

 

The Backstop DIP Lenders (as defined below) to provide (i) during the Interim
Period (as defined below), the Interim Availability (as defined below) of Term
Loans subject to the Approved Budget (as defined below) and (ii) upon entry of
the Final DIP Order (as defined below), the Final Availability (as defined
below) of the Term Loans subject to the Approved Budget; provided that each
beneficial holder of the 9.75% Senior Secured Notes Due 2014 (the “Senior
Notes”) [that is an accredited investor] will have an opportunity prior to entry
of the Final DIP Order to elect to be a lender under the DIP Facility and to
fund a portion of the aggregate Term Loans under the DIP Facility based on such
holder’s pro rata share of the principal amount of the Senior Notes held by such
holder (such electing holders, together with the Backstop DIP Lenders, the “DIP
Lenders”).

 

 

 

 

Backstop DIP Lenders:

 

American Securities Opportunities Advisors, LLC (“Am Sec”) and Gates Capital
Management, Inc. (“GCM” and together with Am Sec, the “Backstop DIP Lenders”)
shall backstop the entire DIP Facility (including (i) as to elections of other
DIP Lenders to become DIP Lenders and (ii) as to any defaulting DIP Lender that
fails to fund its portion of the DIP Facility) based on their pro rata holding
of Senior

 

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(2)  DIP Agent to be determined by the Majority Noteholders.

 

1

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Notes vis-a-vis each other.

 

II.           DIP FACILITY(3)

 

Type and Amount:

 

A superpriority debtor-in-possession term loan facility in an aggregate
principal amount of up to $25,000,000 (the “Term Loan” and together with all
other obligations under the DIP Facility, the “DIP Obligations”), subject to the
Approved Budget (as defined below) and other limitations set forth below,
secured by liens junior to the Revolving Credit Facility (as defined below) and
senior to all other liens, including, without limitation, the liens securing the
Senior Notes (as defined below). 

 

 

 

DIP Closing Date:

 

Closing to occur upon satisfaction (or waiver by the Backstop DIP Lenders in
their sole discretion) of the conditions under “Closing Conditions” below.

 

 

 

DIP Maturity Date:

 

The date that is the earlier to occur of: (a) four (4) months after the DIP
Closing Date; (b) the date the DIP Obligations are accelerated pursuant to the
terms of the DIP Documentation (defined below), whether at stated maturity, upon
an Event of Default or otherwise; and (c) the effective date of the Loan
Parties’ confirmed chapter 11 plan.

 

 

 

Availability:

 

Up to $25,000,000 of the Term Loan shall be available to the Borrower during the
term of the DIP Facility subject to terms and conditions set forth in the DIP
Documentation and the Approved Budget (as defined below); provided that:
(a) after entry of the Interim Order, in form and substance satisfactory to the
Backstop DIP Lenders, but prior to the entry of the Final DIP Order, the
Borrower shall only be permitted to request and receive an amount not to exceed,
as of any date of determination, the lesser of (i) $15,000,000 and (ii) the
amount authorized by the Bankruptcy Court pursuant to the Interim DIP Order
(“Interim Availability”) to be funded by the Backstop DIP Lenders);(4) (b) upon
entry of the Final DIP Order approving the Adequate Protection (as defined
below) and otherwise in form and substance satisfactory to the Backstop DIP
Lenders, subject to the terms and conditions of the DIP Documentation, the
Borrower shall only be permitted to request and receive an amount not to exceed,
as of any date of determination, $25,000,000 minus the aggregate amount borrowed
during the Interim Period (“Final Availability”)(5) to be funded by the Backstop
DIP Lenders (or, to the extent funded pursuant to the election of other Senior
Noteholders, the other DIP Lenders); and (c) each borrowing shall be requested
and made in accordance with the Approved Budget (as defined below) and subject
to the satisfaction of the conditions precedent in the DIP Documentation.   For
the avoidance of doubt, (x) if the Final DIP Order does not approve the Adequate
Protection or the Final DIP Order is not otherwise in form and

 

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(3)  In the event the Majority Noteholders determine to proceed with a
pre-packaged chapter 11 filing, the type and amount, maturity date and
availability, as well as other applicable terms will be modified to address the
shorter duration of the Case.

 

(4)  The “Interim DIP Order” means any order entered by the Bankruptcy Court in
the Case approving the DIP Facility on an interim basis.

 

(5)  The “Interim Period” means the period from the DIP Closing Date through
entry of the order by the Bankruptcy Court in the Case approving the DIP
Facility on a final non-appealable basis (the “Final DIP Order”).

 

2

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substance satisfactory to the Backstop DIP Lenders, the DIP Lenders shall have
no commitment to make any additional loans and all availability under the DIP
Facility shall be eliminated and (y) the Backstop DIP Lenders shall not be
required to make any Loans in excess of the Interim Availability (during the
Interim Period) or the Final Availability (after the Interim Period) for any
reason, including, without limitation, to pay the fees and expenses of
estate-retained professionals.

 

 

 

Purpose:

 

Upon entry of the Interim DIP Order, the proceeds of the Term Loan shall be used
to fund the working capital needs and general corporate purposes of the Borrower
(including, without limitation, costs related to the Case) and for such other
purposes as agreed by the Borrower and Backstop DIP Lenders.  Use of the
proceeds of the Term Loan pursuant to this paragraph each shall be subject to
availability pursuant to the preceding section entitled “Availability”.  None of
the proceeds may be used to challenge, as opposed to investigate, the validity,
perfection, priority, extent or enforceability of the Senior Notes, or the liens
or security interests securing the obligations under the Senior Notes or to
pursue any causes of action of any kind against the Collateral Trustee and/or
the Indenture Trustee for the Senior Notes, or the holders of the Senior Notes
(the “Senior Noteholders”).  To the extent an official committee of unsecured
creditors is appointed in the Case, no more than $25,000 of any proceeds or cash
collateral shall be used by counsel to the official committee, if any, to
investigate, but not prosecute, the validity, perfection, priority, extent or
enforceability of the Senior Notes or the liens or security interests securing
the obligations under the Senior Notes.  The Loan Parties shall waive the right
to investigate and challenge the validity, perfection, priority, extent or
enforceability of the Senior Notes (and the liens and claims granted thereunder)
and shall waive any and all claims of any kind against the Collateral Trustee,
the Indenture Trustee and Senior Noteholders (subject to the rights of the
official committee, if any, to commence any action against the Collateral
Trustee, the Indenture Trustee and/or the Senior Noteholders within 15 days of
the committee’s appointment).  Notwithstanding anything herein, the Loan Parties
shall not be entitled to use the proceeds of the Term Loan in any way or for any
purpose other than as explicitly set forth in the Approved Budget and the DIP
Documentation.

 

III.      CERTAIN ECONOMIC TERMS

 

Interest Rate:

 

The outstanding DIP Obligations shall bear interest at a rate equal to 9.25% per
annum and shall be paid in cash on the last business day of each month. 

 

 

 

DIP Agent Fees:

 

$[      ].(6)

 

 

 

Transaction Fees:

 

None.

 

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(6)  Fees of DIP Agent will depend on the DIP Agent selected by the Backstop DIP
Lenders.

 

3

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IV.       COLLATERAL

 

Collateral:

 

The DIP Lenders shall be granted pursuant to sections 361, 362, 364(c)(2),
364(c)(3), and 364(d) of the Bankruptcy Code, continuing, valid, binding,
enforceable, non-avoidable, and automatically perfected post-petition security
interests (the “DIP Liens”), which are junior to the security interests securing
the revolving loans pursuant to the Amended and Restated Credit Agreement dated
as of August 12, 2011 by and among the Borrower, Parent, Administrative Agent
and Collateral Agent and the lenders party thereto from time to time
(collectively, the “Revolving Lenders”) (the “Revolving Credit Facility”), and
senior and superior in priority to all other secured and unsecured creditors of
the Loan Parties’ estate, upon and to be upon all real and personal
property(7) of the Loan Parties now owned or hereafter acquired and all other
property of whatever kind and nature (whether pre or post petition), in each
case, that is pledged as collateral or is otherwise subject to a lien or
security interest under any security document constituting part of the DIP
Documentation (as defined below) or any order of the Bankruptcy Court in the
Case relating to working capital needs and general corporate purposes of the
Borrower (including, without limitation, costs related to the Case)
(collectively, the “Collateral”), including, without limitation, the Interim DIP
Order and/or Final DIP Order (each such financing order is individually and
collectively, a “DIP Order”); provided, however, all liens and security
interests securing the DIP Obligations shall be subject to: (a) so long as no
Event of Default has occurred, allowed professional fees and expenses in the
Case incurred prior to the occurrence of an Event of Default, subject to entry
of a customary order of the Bankruptcy Court;(8) (b) following an Event of
Default, allowed professional fees and expenses in the Case, which expenses and
fees were incurred solely following such Event of Default, in an aggregate
amount not to exceed $2,500,000; and (c) United States Trustee’s fees pursuant
to 28 U.S.C. 1930(a)(6) and 31 U.S.C. 3717 (the fees and expenses described in
this paragraph, collectively, the “Carve-Out”); and provided, further, however,
any liens and security interests in Avoidance Actions shall be granted only
pursuant to the Final DIP Order and shall not be granted pursuant to any Interim
DIP Order.   As used herein, the term “Avoidance Actions” means any and all
claims or causes of action arising under Chapter 5 (other than Section 506(c) or
Section 724(a)) of the Bankruptcy Code to avoid transfers, preserve or transfer
liens or otherwise recover property of the estate and the proceeds thereof and
property received thereby whether by judgment, settlement or otherwise. 
“Avoidance Actions” do not include claims or causes of action pursuant to
Section 549 of the Bankruptcy Code and the proceeds thereof, to the extent the
transfer avoided was of an asset otherwise constituting Collateral securing the
Senior Notes on the Petition Date.

 

For the avoidance of doubt, liens and security interests granted pursuant to
Bankruptcy Code section 364(d) shall mean any liens or security

 

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(7)  Personal property includes cash, deposit accounts, negotiable instruments
and other cash equivalents.  Personal property also includes Avoidance Actions
(as defined below).

 

(8)  For the avoidance of doubt, fees and expenses incurred prior to an Event of
Default by a court-approved professional, regardless of whether an order has
been entered approving such fees and expenses shall be included in this section
“ (a) ”, but no fees or expenses shall be paid unless and until such time as an
order is entered approving such fees and expenses.

 

4

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interests subordinate and junior to the liens and security interests securing
the loans and other obligations under the Revolving Credit Facility in existence
and equal or senior in priority to valid and enforceable liens and security
interests in existence on Petition Date in the Collateral that are perfected and
unavoidable on the Petition Date (or perfected after the Petition Date pursuant
to Bankruptcy Code section 546(b)).

 

For the avoidance of doubt, subject to (a) the Carve-Out, and (b) as to the
Avoidance Actions, upon entry of the Final DIP Order, the Collateral includes
all of the assets of the Loan Parties existing on the date of the filing by Loan
Parties of the petition(s) with respect to the Case (the “Petition Date”) and
all of the assets of Loan Parties arising or acquired after the Petition Date,
including, without limitation, Avoidance Actions.

 

Subject to the Carve-Out, all DIP Obligations will constitute allowed
super-priority administrative expense claims in the Case having priority over
all other administrative expenses of the kind specified in sections 503(b) and
507(b) of the Bankruptcy Code (other than any administrative expenses claims of
the kind specified in sections 503(b) and 507(b) of the Bankruptcy Code to
extent provided to Revolving Lenders and Agents  under the Revolving Credit
Facility, in which case, such claims of the Revolving Lenders and Agents shall
have priority over all of such claims owned by the DIP Agent and DIP Lenders).

 

 

 

 

 

Except for the DIP Orders, no filing with any governmental authority, delivery
of possessory collateral, establishment of “control” or other action shall be
required with respect to perfection of the DIP Liens; and no endorsement of any
insurance policies to include a lender’s loss payable clause, or to name the DIP
Agent as additional insured, shall be required in respect of the DIP Facility;
provided that Company shall make such filings and take such other actions as the
Backstop DIP Lenders may reasonably request, subject to the cooperation of the
Collateral Trustee, if required.

 

V.            ADEQUATE PROTECTION

 

Adequate Protection (Senior Notes):

 

Pursuant to sections 361, 363(e) and 364(d)(1) of the Bankruptcy Code, the
Collateral Trustee (insofar as acting on behalf of the Indenture Trustee and the
Senior Noteholders), the Indenture Trustee for the Senior Notes, and the Senior
Noteholders shall be granted the following as adequate protection (collectively,
the “Adequate Protection”) of their respective prepetition security interests
and in connection with the use of cash collateral, the consensual priming
specified herein and any diminution in the value of collateral securing the
Senior Notes and the pre-petition security interests of the Collateral Trustee
(insofar as acting on behalf of the Indenture Trustee and the Senior
Noteholders), Indenture Trustee and Senior Noteholders, whether or not such
diminution in value results from the sale, lease or use by the Loan Parties of
the collateral securing the Senior Notes, including, without limitation, cash
collateral or the stay of enforcement of any pre-petition security interest
arising from section 362 of the Bankruptcy Code, or otherwise:

 

5

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(a) Note Adequate Protection Lien. Without the necessity of the execution of
mortgages, security agreements, pledge agreements, financing statements or other
agreements, a security interest in and lien on the Collateral (the “Note
Adequate Protection Liens”), subject and subordinate only to (x) the liens
securing the Revolving Credit Facility, (y) the Carve-Out and (z) the liens
securing the DIP Facility.

 

(b) Super-Priority Claim. Subject to the payment of the Carve-Out, a
superpriority administrative expense claim as provided for in section 507(b) of
the Bankruptcy Code, immediately junior to the claims under section 364(c)(1) of
the Bankruptcy Code held by the DIP Agent and the DIP Lenders under the DIP
Facility, provided that the Indenture Trustee and the Senior Noteholders shall
not receive or retain any payments, property or other amounts in respect of the
superpriority claims under section 507(b) of the Bankruptcy Code granted
hereunder unless and until the obligations under the DIP Facility and Revolving
Credit Facility have indefeasibly been paid in cash in full.

 

(c) Professional Fees and Expenses.  Payment of the costs and expenses of the
Indenture Trustee for the Senior Notes, and the Backstop DIP Lenders, including,
without limitation, the professional fees and expenses of Fried, Frank, Harris,
Shriver and Jacobson LLP.  No fee application or court approval shall be
required and payment upon delivery of an invoice shall be sufficient.  These
fees and expenses shall be paid on a current basis during the Case and, to the
extent not so paid, shall be a condition to the effective date of any chapter 11
plan.

 

(d) Waiver of Claims.  The Loan Parties shall acknowledge the Borrower’s
indebtedness under the Senior Notes and shall waive all claims it may have
against the Indenture Trustee and Senior Noteholders under the Senior Notes.

 

 

 

Adequate Protection (Revolving Credit Facility):

 

Pursuant to sections 361 and 363(e) of the Bankruptcy Code, the Agents and
Revolving Lenders under the Revolving Credit Facility shall be granted the
following as adequate protection (collectively, the “Revolver Adequate
Protection”; together with Note Adequate Protection, the “Adequate Protection”)
of their respective prepetition security interests and in connection with the
use of cash collateral, and any diminution in the value of collateral securing
the Revolving Credit Facility and the pre-petition security interests of the
Agents and the Revolving Lenders under the Revolving Credit Facility, whether or
not such diminution in value results from the sale, lease or use by the Loan
Parties of the collateral securing the Revolving Credit Facility, including,
without limitation, cash collateral or the stay of enforcement of any
pre-petition security interest arising from section 362 of the Bankruptcy Code,
or otherwise:

 

(a) Adequate Protection Lien. Without the necessity of the execution of
mortgages, security agreements, pledge agreements, financing statements or other
agreements, a security interest in and lien on the Collateral (the “Revolver
Adequate Protection Liens”), subject and subordinate only to the Carve-Out.

 

(b) Super-Priority Claim. Subject to the payment of the Carve-Out, a
superpriority administrative expense claim as provided for in section

 

6

--------------------------------------------------------------------------------

 

 

 

507(b) of the Bankruptcy Code, senior to the claims under section 364(c)(1) of
the Bankruptcy Code held by the DIP Agent and the DIP Lenders under the DIP
Facility and held by the Indenture Trustee and Noteholders and senior to the
superpriority administrative expense claims under section 507(b) of the
Bankruptcy Code provided to Indenture Trustee and Noteholders.

 

(c) Professional Fees and Expenses.  Payment of the reasonable fees and expenses
of the attorneys for the Agents and Revolving Lenders under the Credit
Facility.  No fee application or court approval shall be required and payment
upon delivery of an invoice shall be sufficient.

 

VI.       CERTAIN CONDITIONS

 

Closing Conditions:

 

The DIP Facility shall be conditioned upon the satisfaction of conditions
precedent usual and customary for facilities and transactions of this type as
agreed to by the Loan Parties and the Backstop DIP Lenders.  In addition, the
following conditions shall also be satisfied as a condition to the effectiveness
of the DIP Facility and the DIP Lenders’ commitment to make DIP Loans during the
Interim Period:

 

 

 

 

 

Each Loan Party shall have executed and delivered satisfactory to the Backstop
DIP Lenders definitive financing documentation for the DIP Facility (the “DIP
Documentation”).  Also, such DIP Documentation shall confirm that all
representations and warranties in the DIP Documentation are accurate in all
material respects.

 

 

 

 

 

The DIP Agent and the Backstop DIP Lenders shall have received (i) a detailed
2013 budget with back-up and schedules and (ii) an initial thirteen-week cash
flow forecast for the period beginning with the week which includes the Petition
Date through the thirteenth week thereafter, in each case in form and substance
satisfactory to the Backstop DIP Lenders (the “Initial Approved Budget”).(9) 
The Borrower shall not pay current interest on the Revolving Credit Facility or
the Senior Notes during the Case and the Approved Budget shall so reflect this. 
All interest earned under the Revolving Credit Facility and the Senior Notes
shall accrue during the Case and shall be added to the pre-petition claim amount
of the holders thereof to be satisfied in accordance with the Plan (as defined
below).

 

 

 

 

 

The Interim DIP Order shall have authorized (i) the Borrower to pay to the
Backstop DIP Lenders (as applicable) from proceeds of the DIP Facility or from
other funds at closing all actual expenses required to be paid for which
invoices have been presented on or before the DIP Closing Date including,
without limitation, the fees and expenses of Fried, Frank, Harris, Shriver &
Jacobson LLP and (ii) the DIP Loans to be made during the Interim Period
consistent with the provisions hereof. 

 

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(9)  For the avoidance of doubt, estate-retained professionals will estimate
their anticipated fees and expenses to be included within the Initial Approved
Budget; however, the fees and expenses of estate-retained professionals, and the
incurrence of Term Loans for the payment thereof, shall not be subject to the
Initial Approved Budget or any other Approved Budget (as defined below).

 

7

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All approvals necessary in connection with the financing contemplated hereby and
the continuing operations of the Loan Parties shall have been obtained on terms
satisfactory to the Backstop DIP Lenders and shall be in full force and effect,
and all applicable waiting periods shall have expired without any action being
taken or threatened by any competent authority that would restrain, prevent or
otherwise impose adverse conditions on the DIP Facility or the transactions
contemplated hereby.

 

 

 

 

 

The Backstop DIP Lenders shall have received title reports and UCC lien and
intellectual property related search results with respect to the Collateral
indicating no material liens other than the Priority Liens subject to the
Collateral Trust and Intercreditor Agreement, dated as of December 23, 2009 (the
“Collateral Trust and Intercreditor Agreement”), among Borrower, the guarantors
from time to time party thereto, the Priority Debt Representatives (as defined
therein) and U.S. Bank National Association, as collateral trustee.

 

 

 

 

 

The Borrower shall have provided the Backstop DIP Lenders a copy of all motions
to be filed on the Petition Date by the Borrower with the Bankruptcy Court as
soon as possible and in no event later than the DIP Closing Date.

 

The form and substance of any motion submitted to the Bankruptcy Court
requesting approval of the DIP Facility shall be satisfactory to the Backstop
DIP Lenders.

 

The Bankruptcy Court shall have entered the Interim DIP Order, in form and
substance satisfactory to the Backstop DIP Lenders, which shall not be subject
to any stay or injunction or otherwise be subject to reversal on appeal as to
any funded portion of the DIP Facility.

 

The Borrower shall have filed a chapter 11 plan and related disclosure statement
on the date of the filing of the Borrower’s chapter 11 petitions, which plan
shall be consistent with the Restructuring Term Sheet and Restructuring Support
Agreement in all respects (the “Plan”) and shall be, in form and substance,
satisfactory to the Backstop DIP Lenders.

 

For the sake of clarity, (a) no assignments to the DIP Agent or the DIP Lenders
of the Priority Liens, and no consent by existing holders of Priority Lien
Obligations (whether by Act of Instructing Debtholders (as defined in the
Collateral Trust and Intercreditor Agreement) or otherwise), will be required as
a condition to advances under the DIP Facility, and (b) the DIP Obligations will
not, and will not be required to, constitute Priority Lien Obligations under the
Collateral Trust and Intercreditor Agreement.

 

With respect to DIP Loans to be made during the Interim Period (in addition to
satisfaction of the above conditions):

 

All representations and warranties in the DIP Documentation are accurate in all
respects after giving effect to each advance (unless such representations and
warranties were made as of an earlier date in which case such representations
and warranties shall be accurate in all respects

 

8

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as of such earlier date) and no default or event of default is in existence at
the time of, or after giving effect to the making of, such advance.

 

The amount of any advance is consistent with the Approved Budget.(10)

 

 

 

Additional Advance Conditions After Interim Period

 

(a) The Closing Conditions have been satisfied.

 

(b) The Bankruptcy Court shall have entered the Final DIP Order, in form and
substance satisfactory to the Backstop DIP Lenders, which Final DIP Order shall
be in full force and effect and which shall not have been reversed, vacated, or
stayed and shall not have been amended, supplemented, or otherwise modified in a
manner adverse to the Backstop DIP Lenders without the prior written consent of
the Backstop DIP Lenders.

 

(c) All representations and warranties in the DIP Documentation are accurate in
all material respects after giving effect to each additional advance (unless
such representations and warranties were made as of an earlier date in which
case such representations and warranties shall be accurate in all respects as of
such earlier date) and no default or event of default is in existence at the
time of, or after giving effect to the making of, such additional advance.

 

(d) The amount of any advance is consistent with the applicable updated thirteen
week cash flow forecast and related supporting schedules that have been approved
by the Backstop DIP Lenders (collectively, the “Approved Budget”).(11)

 

VII.  CERTAIN DOCUMENTATION MATTERS

 

DIP Documentation:

 

All documents relating to the DIP Facility, including, without limitation, the
DIP Documentation and DIP Orders, shall be in form and substance satisfactory to
the Backstop DIP Lenders.

 

 

 

Funding Conditions, Representations, Warranties, Covenants, Prepayments:

 

DIP Documentation to contain conditions to funding, reporting requirements and
provision of financial statements, representations, warranties, covenants, and
prepayments customary for financings of this type and other terms as agreed to
by the Loan Parties and the Backstop DIP Lenders.

 

While the DIP Facility is outstanding, the Loan Parties shall submit (i) an
updated thirteen-week cash flow forecast on a weekly basis that is acceptable to
the Backstop DIP Lenders, and a comparison of actual performance to projections
for the prior week and the prior cumulative four-week period and an explanation
for any variance or other

 

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(10)  For the avoidance of doubt, estate-retained professionals will estimate
their anticipated fees and expenses to be included within the Approved Budget;
however, the fees and expenses of estate-retained professionals, or the
incurrence of Term Loans for the payment thereof, shall not be subject to the
Approved Budget or any variance testing thereunder.

 

(11)  For the avoidance of doubt, estate-retained professionals will estimate
their anticipated fees and expenses to be included within the Approved Budget;
however, the fees and expenses of estate-retained professionals, or the
incurrence of Term Loans for the payment thereof, shall not be subject to the
Approved Budget or any variance testing thereunder.

 

9

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information and (ii) any material changes to the 2013 budget or Approved Budget,
which must be acceptable to the Backstop DIP Lenders.

 

 

 

Events of Default

 

Usual events of default, including, but not limited to, payment, cross-default
to post-petition obligations, violation of covenants, breach of representations
or warranties, judgment, ERISA, environmental, change of control, loss of
material permits, licenses and regulatory approvals and other events of default
which are usual and customary in facilities of this nature, modified as
necessary to reflect the commencement of the Case.

 

In addition, an event of default shall occur if: (i) the Case shall be dismissed
or converted to a chapter 7 case; a chapter 11 trustee or an examiner with
enlarged powers shall be appointed; any other superpriority administrative
expense claim which is senior to or pari passu with the DIP Lenders’ claims
shall be granted (other than to Revolving Lenders and Agents under the Revolving
Credit Facility); the Interim DIP Order or the Final DIP Order, as the case may
be, shall be stayed, amended, modified, reversed or vacated; (ii) a plan shall
be confirmed in the Cases which is inconsistent with the Restructuring Term
Sheet or the Restructuring Support Agreement; or the Loan Parties shall take any
action, including, without limitation, the filing of an application, in support
of any plan that is inconsistent with the Restructuring Term Sheet or the
Restructuring Support Agreement, or any person other than the Loan Parties shall
do so and such application is not contested in good faith by the Loan Parties;
or (iii) an official committee, if any, or any other party seeks leave to file
an action challenging the validity, perfection, priority, extent or
enforceability of the DIP Documentation (and the liens and claims granted
thereunder).

 

 

 

Milestones

 

In addition, an event of default shall occur upon the failure to achieve any of
the following milestones in the pre-packaged Case:(12)

 

·      the Borrower shall have used its reasonable best efforts to send the
solicitation materials to all Senior Noteholders and all holders of the
Preferred Equity Interests on or before January 22, 2013, and in no event later
than January 31, 2013 (the “Solicitation Date”);

·      the Company shall have filed petitions commencing the Case by

 

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(12)  If the Majority Noteholders determine that the Company should pursue a
pre-negotiated Chapter 11 Plan rather than a prepackaged Chapter 11 Plan, the
milestones in this section shall be adjusted as follows:

 

·  the Borrower shall have filed petitions commencing the Case by January 31,
2013;

 

·  the Borrower shall have filed the Plan and related disclosure statement on
the Petition Date;

 

·  the Bankruptcy Court shall have entered the Interim DIP Order, which is in
form and substance satisfactory to the Backstop DIP Lenders, within 10 days
after the Petition Date;

 

·  within 20 days after the entry of the Interim DIP Order, the Bankruptcy Court
shall have entered the Final DIP Order, which is in form and substance
satisfactory to the Backstop DIP Lenders;

 

·  on or prior to 40 days following the Petition Date, the Loan Parties shall
have obtained an order of the Bankruptcy Court approving the disclosure
statement, which is in form and substance satisfactory to the Backstop DIP
Lenders;

 

·  on or prior to 75 days following the Petition Date, the Loan Parties shall
have obtained an order of the Bankruptcy Court confirming the Plan, which is in
form and substance satisfactory to the Backstop DIP Lenders;  and

 

·  on or prior to 90 days following the Petition Date, the effective date of the
Plan shall have occurred.

 

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the date that is 14 days from the Solicitation Date;

·                  the Borrower shall have filed the Plan and related disclosure
statement by the Petition Date;

·                  the Bankruptcy Court shall have entered the Interim DIP
Order, which is in form and substance satisfactory to the Backstop DIP Lenders,
within 10 days after the Petition Date;

·                  within 20 days after the entry of the Interim DIP Order, the
Bankruptcy Court shall have entered the Final DIP Order, which is in form and
substance satisfactory to the Backstop DIP Lenders;

·                  on or prior to 35 days following the Petition Date, the Loan
Parties shall have obtained an order or orders in form and substance acceptable
to the Backstop DIP Lenders by the Bankruptcy Court confirming the Plan; and

·                  on or prior to 50 days following the Petition Date, the
effective date of the Plan shall have occurred.

 

 

 

Remedies:

 

Upon occurrence and during the continuance of an Event of Default, the Backstop
DIP Lenders may suspend or terminate all commitments under the DIP Facility. 
Following 3 days notice of such Event of Default to the Borrower, the official
committee of unsecured creditors appointed in the Case, if any, and the U.S.
Trustee, unless such Event of Default is cured within such time or an order of
the Bankruptcy Court is entered to the contrary, the DIP Lenders shall be
relieved from the automatic stay (without the need for further court order) to
exercise remedies under the DIP Facility and the Borrower’s right to use cash
collateral shall thereupon terminate pending further order of the Bankruptcy
Court.

 

 

 

Voting:

 

Amendments, consents and waivers under the DIP Documentation will be subject to
the approval of the DIP Lenders holding at least 70.0% of the aggregate
principal amount of the outstanding Term Loans (other than with respect to
amendments to provisions that typically require consent of each affected DIP
Lender).

 

 

 

Expenses and Indemnification:

 

The Borrower shall pay: (a) all actual out-of-pocket expenses of the DIP Agent
and the Backstop DIP Lenders (i) associated with the preparation, negotiation,
execution and delivery of this term sheet and associated with the preparation,
negotiation, execution, delivery and administration of the DIP Documentation and
any amendment or waiver with respect thereto (including, without limitation, the
fees, disbursements and other charges of professionals and/or counsel), and
(ii) incurred by the DIP Agent and the Backstop DIP Lenders in connection with
the Case (including, without limitation, the fees, disbursements and other
charges of professionals and/or counsel); and (b) all actual out-of-pocket
expenses of the DIP Agent and the Backstop DIP Lenders (including, without
limitation, the fees, disbursements and other charges of professionals and/or
counsel) in connection with the enforcement of the DIP Documentation.

 

 

 

Assignments, Participations, Etc.:

 

The DIP Lenders shall be permitted to sell or assign their rights and
obligations under the DIP Documentation, or any part thereof, to any person or
entity without the consent of the Loan Parties; provided, however, that each of
the Backstop DIP Lenders agrees not to make any such sale or assignment if as a
result thereof the Backstop DIP Lenders or their affiliates would not hold a
majority of the Term Loans and

 

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commitments under the DIP Facility and in any event, may not assign their
“backstop” obligations described herein (except to their affiliates), including
in the section entitled “Backstop DIP Lenders” above.  The DIP Lenders shall be
permitted to grant participations in such rights and obligations, or any part
thereof, to any person or entity without consent of the Loan Parties.

 

 

 

Governing Law:

 

State of New York, except as governed by the Bankruptcy Code.

 

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