Exhibit 10.1

 

 

STOCK PURCHASE AGREEMENT

 

By and Among

 

GEOKINETICS INC.

a Delaware corporation,

 

SCF-III, L.P.

a Delaware limited partnership,

 

AND

 

JAMES WHITE

an individual resident of Houston, Texas

 

 

Dated as of July 29, 2005

 

 

 

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

 

TABLE OF CONTENTS

 

ARTICLE I. DEFINITIONS

 

Section 1.1

Definitions

 

Section 1.2

Definitions Appearing Elsewhere in this Agreement

 

Section 1.3

Accounting Principles and Terms

 

Section 1.4

Determination of Current Assets and Liabilities

 

 

 

 

ARTICLE II. PURCHASE AND SALE OF COMPANY SHARES

 

Section 2.1

Purchase and Sale

 

Section 2.2

Payment of the Purchase Price

 

Section 2.3

Adjusted Purchase Price

 

Section 2.4

Post Closing Adjustment

 

Section 2.5

Treatment of the Trace Options

 

Section 2.6

Closing

 

Section 2.7

Deliveries at the Closing

 

 

 

 

ARTICLE III. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION

 

Section 3.1

Representations and Warranties of the Sellers

 

Section 3.2

Representations and Warranties of the Buyer

 

 

 

 

ARTICLE IV. REPRESENTATIONS AND WARRANTIES CONCERNING THE CORPORATIONS

 

Section 4.1

Corporate Organization; Etc.

 

Section 4.2 [a05-14299_1ex10d1.htm#Section4_2_223352]

Authorization, Etc. [a05-14299_1ex10d1.htm#Section4_2_223352]

 

Section 4.3 [a05-14299_1ex10d1.htm#Section4_3_223355]

No Violation [a05-14299_1ex10d1.htm#Section4_3_223355]

 

Section 4.4 [a05-14299_1ex10d1.htm#Section4_4_223358]

Consents [a05-14299_1ex10d1.htm#Section4_4_223358]

 

Section 4.5 [a05-14299_1ex10d1.htm#Section4_5_223400]

Accounts Receivable [a05-14299_1ex10d1.htm#Section4_5_223400]

 

Section 4.6 [a05-14299_1ex10d1.htm#Section4_6_223404]

Financial Statements [a05-14299_1ex10d1.htm#Section4_6_223404]

 

Section 4.7 [a05-14299_1ex10d1.htm#Section4_7_224713]

Inventories [a05-14299_1ex10d1.htm#Section4_7_224713]

 

Section 4.8 [a05-14299_1ex10d1.htm#Section4_8_224715]

Real Property [a05-14299_1ex10d1.htm#Section4_8_224715]

 

Section 4.9 [a05-14299_1ex10d1.htm#Section4_9_224910]

Absence of Certain Changes [a05-14299_1ex10d1.htm#Section4_9_224910]

 

Section 4.10 [a05-14299_1ex10d1.htm#Section4_10_224916]

No Material Change [a05-14299_1ex10d1.htm#Section4_10_224916]

 

Section 4.11 [a05-14299_1ex10d1.htm#Section4_11_224918]

Litigation [a05-14299_1ex10d1.htm#Section4_11_224918]

 

Section 4.12 [a05-14299_1ex10d1.htm#Section4_12_224923]

Intellectual Property [a05-14299_1ex10d1.htm#Section4_12_224923]

 

Section 4.13 [a05-14299_1ex10d1.htm#Section4_13_224929]

Contracts [a05-14299_1ex10d1.htm#Section4_13_224929]

 

Section 4.14 [a05-14299_1ex10d1.htm#Section4_14_224939]

Customers and Suppliers [a05-14299_1ex10d1.htm#Section4_14_224939]

 

Section 4.15 [a05-14299_1ex10d1.htm#Section4_15_224943]

Employee Benefit Plans [a05-14299_1ex10d1.htm#Section4_15_224943]

 

Section 4.16 [a05-14299_1ex10d1.htm#Section4_16_224949]

Compliance with Law [a05-14299_1ex10d1.htm#Section4_16_224949]

 

Section 4.17 [a05-14299_1ex10d1.htm#Section4_17_224956]

Taxes [a05-14299_1ex10d1.htm#Section4_17_224956]

 

Section 4.18 [a05-14299_1ex10d1.htm#Section4_18_225001]

Insurance [a05-14299_1ex10d1.htm#Section4_18_225001]

 

Section 4.19 [a05-14299_1ex10d1.htm#Section4_19_225005]

Environmental Laws and Regulations [a05-14299_1ex10d1.htm#Section4_19_225005]

 

Section 4.20 [a05-14299_1ex10d1.htm#Section4_20_225009]

Products and Services [a05-14299_1ex10d1.htm#Section4_20_225009]

 

Section 4.21 [a05-14299_1ex10d1.htm#Section4_21_225011]

[Not used] [a05-14299_1ex10d1.htm#Section4_21_225011]

 

 

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

 

Section 4.22 [a05-14299_1ex10d1.htm#Section4_22_225013]

Capitalization [a05-14299_1ex10d1.htm#Section4_22_225013]

 

Section 4.23 [a05-14299_1ex10d1.htm#Section4_23_225017]

Brokers and Finders [a05-14299_1ex10d1.htm#Section4_23_225017]

 

Section 4.24 [a05-14299_1ex10d1.htm#Section4_24_225019]

[Not used] [a05-14299_1ex10d1.htm#Section4_24_225019]

 

Section 4.25 [a05-14299_1ex10d1.htm#Section4_25_225021]

Books and Records [a05-14299_1ex10d1.htm#Section4_25_225021]

 

Section 4.26 [a05-14299_1ex10d1.htm#Section4_26_225024]

Condition of Facilities [a05-14299_1ex10d1.htm#Section4_26_225024]

 

Section 4.27 [a05-14299_1ex10d1.htm#Section4_27_225029]

No Undisclosed Financial Liabilities [a05-14299_1ex10d1.htm#Section4_27_225029]

 

Section 4.28 [a05-14299_1ex10d1.htm#Section4_28_225032]

Employees [a05-14299_1ex10d1.htm#Section4_28_225032]

 

Section 4.29 [a05-14299_1ex10d1.htm#Section4_29_225041]

Compliance with the Foreign Corrupt Practices Act and Export Control and
Antiboycott Laws [a05-14299_1ex10d1.htm#Section4_29_225041]

 

Section 4.30 [a05-14299_1ex10d1.htm#Section4_30_225047]

Relationships with Related Persons [a05-14299_1ex10d1.htm#Section4_30_225047]

 

Section 4.31 [a05-14299_1ex10d1.htm#Section4_31_225051]

Title to Assets [a05-14299_1ex10d1.htm#Section4_31_225051]

 

 

 

 

ARTICLE V. PRE-CLOSING COVENANTS
[a05-14299_1ex10d1.htm#Articlev_PreclosingCovenants_225057]

 

Section 5.1 [a05-14299_1ex10d1.htm#Section5_1_225059]

General [a05-14299_1ex10d1.htm#Section5_1_225059]

 

Section 5.2 [a05-14299_1ex10d1.htm#Section5_2_222721]

Notices and Consents [a05-14299_1ex10d1.htm#Section5_2_222721]

 

Section 5.3 [a05-14299_1ex10d1.htm#Section5_3_222724]

Operation of Business [a05-14299_1ex10d1.htm#Section5_3_222724]

 

Section 5.4 [a05-14299_1ex10d1.htm#Section5_4_222729]

Notice of Developments [a05-14299_1ex10d1.htm#Section5_4_222729]

 

Section 5.5 [a05-14299_1ex10d1.htm#Section5_5_222733]

Exclusivity [a05-14299_1ex10d1.htm#Section5_5_222733]

 

Section 5.6 [a05-14299_1ex10d1.htm#Section5_6_222737]

Access and Investigation [a05-14299_1ex10d1.htm#Section5_6_222737]

 

Section 5.7 [a05-14299_1ex10d1.htm#Section5_7_222740]

Confidential Information of Corporations and Sellers
[a05-14299_1ex10d1.htm#Section5_7_222740]

 

 

 

 

ARTICLE VI. POST-CLOSING COVENANTS
[a05-14299_1ex10d1.htm#Articlevi_PostclosingCovenants_222744]

 

Section 6.1 [a05-14299_1ex10d1.htm#Section6_1_222747]

General [a05-14299_1ex10d1.htm#Section6_1_222747]

 

Section 6.2 [a05-14299_1ex10d1.htm#Section6_2_222750]

Litigation Support [a05-14299_1ex10d1.htm#Section6_2_222750]

 

Section 6.3 [a05-14299_1ex10d1.htm#Section6_3_222753]

Transition [a05-14299_1ex10d1.htm#Section6_3_222753]

 

Section 6.4 [a05-14299_1ex10d1.htm#Section6_4_222757]

Confidentiality [a05-14299_1ex10d1.htm#Section6_4_222757]

 

Section 6.5 [a05-14299_1ex10d1.htm#Section6_5_222803]

Restrictive Legend [a05-14299_1ex10d1.htm#Section6_5_222803]

 

Section 6.6 [a05-14299_1ex10d1.htm#Section6_6_222809]

[Not used] [a05-14299_1ex10d1.htm#Section6_6_222809]

 

Section 6.7 [a05-14299_1ex10d1.htm#Section6_7_222810]

Withholding Tax and Clearance Certificates
[a05-14299_1ex10d1.htm#Section6_7_222810]

 

Section 6.8 [a05-14299_1ex10d1.htm#Section6_8_222817]

Registration Rights [a05-14299_1ex10d1.htm#Section6_8_222817]

 

Section 6.9 [a05-14299_1ex10d1.htm#Section6_9_222821]

Transferred Information [a05-14299_1ex10d1.htm#Section6_9_222821]

 

 

 

 

ARTICLE VII. CONDITIONS TO OBLIGATIONS TO CLOSE
[a05-14299_1ex10d1.htm#Articlevii_ConditionsToObligation_222824]

 

Section 7.1 [a05-14299_1ex10d1.htm#Section7_1_222827]

Conditions to Obligations of the Buyer [a05-14299_1ex10d1.htm#Section7_1_222827]

 

Section 7.2 [a05-14299_1ex10d1.htm#Section7_2_222839]

Conditions to Obligation of the Sellers
[a05-14299_1ex10d1.htm#Section7_2_222839]

 

Section 7.3 [a05-14299_1ex10d1.htm#Section7_3_222849]

Information Regarding the Satisfaction of Conditions
[a05-14299_1ex10d1.htm#Section7_3_222849]

 

 

 

 

ARTICLE VIII. REMEDIES FOR BREACHES OF THIS AGREEMENT
[a05-14299_1ex10d1.htm#Articleviii_RemediesForBreachesOf_222851]

 

Section 8.1 [a05-14299_1ex10d1.htm#Section8_1_222854]

Survival of Representations and Warranties
[a05-14299_1ex10d1.htm#Section8_1_222854]

 

Section 8.2 [a05-14299_1ex10d1.htm#Section8_2_222858]

Indemnification Provisions for Benefit of the Buyer
[a05-14299_1ex10d1.htm#Section8_2_222858]

 

Section 8.3 [a05-14299_1ex10d1.htm#Section8_3_222901]

Indemnification Provisions for Benefit of the Sellers
[a05-14299_1ex10d1.htm#Section8_3_222901]

 

Section 8.4 [a05-14299_1ex10d1.htm#Section8_4_222905]

Limitation of Indemnities [a05-14299_1ex10d1.htm#Section8_4_222905]

 

Section 8.5 [a05-14299_1ex10d1.htm#Section8_5_222918]

Indemnification Procedure [a05-14299_1ex10d1.htm#Section8_5_222918]

 

Section 8.6 [a05-14299_1ex10d1.htm#Section8_6_222926]

Determination of Adverse Consequences [a05-14299_1ex10d1.htm#Section8_6_222926]

 

Section 8.7 [a05-14299_1ex10d1.htm#Section8_7_222929]

Excluded Damages [a05-14299_1ex10d1.htm#Section8_7_222929]

 

Section 8.8 [a05-14299_1ex10d1.htm#Section8_8_222933]

Scope of the Representations and Warranties of Sellers
[a05-14299_1ex10d1.htm#Section8_8_222933]

 

 

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

 

Section 8.9 [a05-14299_1ex10d1.htm#Section8_9_222937]

Exclusive Remedy [a05-14299_1ex10d1.htm#Section8_9_222937]

 

Section 8.10 [a05-14299_1ex10d1.htm#Section8_10_222941]

Mitigation of Damages and Minimization of Claims
[a05-14299_1ex10d1.htm#Section8_10_222941]

 

 

 

 

ARTICLE IX. TERMINATION [a05-14299_1ex10d1.htm#Articleix_Termination_222943]

 

Section 9.1 [a05-14299_1ex10d1.htm#Section9_1_223011]

Termination of Agreement [a05-14299_1ex10d1.htm#Section9_1_223011]

 

Section 9.2 [a05-14299_1ex10d1.htm#Section9_2_223019]

Effect of Termination [a05-14299_1ex10d1.htm#Section9_2_223019]

 

 

 

 

ARTICLE X. MISCELLANEOUS [a05-14299_1ex10d1.htm#Articlex_Miscellaneous_223022]

 

Section 10.1 [a05-14299_1ex10d1.htm#Section10_1_223025]

Press Releases and Public Announcements
[a05-14299_1ex10d1.htm#Section10_1_223025]

 

Section 10.2 [a05-14299_1ex10d1.htm#Section10_2_223028]

No Third-Party Beneficiaries [a05-14299_1ex10d1.htm#Section10_2_223028]

 

Section 10.3 [a05-14299_1ex10d1.htm#Section10_3_223112]

Entire Agreement [a05-14299_1ex10d1.htm#Section10_3_223112]

 

Section 10.4 [a05-14299_1ex10d1.htm#Section10_4_223115]

Succession and Assignment [a05-14299_1ex10d1.htm#Section10_4_223115]

 

Section 10.5 [a05-14299_1ex10d1.htm#Section10_5_223120]

Counterparts [a05-14299_1ex10d1.htm#Section10_5_223120]

 

Section 10.6 [a05-14299_1ex10d1.htm#Section10_6_223211]

Headings [a05-14299_1ex10d1.htm#Section10_6_223211]

 

Section 10.7 [a05-14299_1ex10d1.htm#Section10_7_223215]

Notices [a05-14299_1ex10d1.htm#Section10_7_223215]

 

Section 10.8 [a05-14299_1ex10d1.htm#Section10_8_223246]

Governing Law [a05-14299_1ex10d1.htm#Section10_8_223246]

 

Section 10.9 [a05-14299_1ex10d1.htm#Section10_9_223249]

Amendments and Waivers [a05-14299_1ex10d1.htm#Section10_9_223249]

 

Section 10.10 [a05-14299_1ex10d1.htm#Section10_10_223252]

Severability [a05-14299_1ex10d1.htm#Section10_10_223252]

 

Section 10.11 [a05-14299_1ex10d1.htm#Section10_11_223256]

Expenses [a05-14299_1ex10d1.htm#Section10_11_223256]

 

Section 10.12 [a05-14299_1ex10d1.htm#Section10_12_223317]

Construction [a05-14299_1ex10d1.htm#Section10_12_223317]

 

Section 10.13 [a05-14299_1ex10d1.htm#Section10_13_223331]

Incorporation of Exhibits and Schedules
[a05-14299_1ex10d1.htm#Section10_13_223331]

 

Section 10.14 [a05-14299_1ex10d1.htm#Section10_14_223334]

Submission to Jurisdiction [a05-14299_1ex10d1.htm#Section10_14_223334]

 

 

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

 

EXHIBITS

 

Exhibit

 

Title

 

Section
Reference

 

 

 

 

 

A

 

Escrow Agreement

 

1.1

 

 

 

 

 

B

 

Registration Rights Agreement

 

6.10

 

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

 

SCHEDULES

 

Schedule

 

Title

 

Section
References

2.3

 

Sample Calculation of the Adjusted Purchase Price

 

2.3

3.1

 

Representations and Warranties of Sellers

 

3.1

3.2

 

Representations and Warranties of Buyer

 

3.2

4.1

 

Corporation Organization

 

4.1

4.3

 

No Violation

 

4.3

4.4

 

Consents

 

4.4

4.5

 

Accounts Receivable

 

4.5

4.6

 

Financial Statements

 

4.6

4.8

 

Real Property

 

4.8

4.9

 

Absence of Certain Changes

 

4.9

4.10

 

Material Changes

 

4.10

4.11

 

Litigation

 

4.11, 4.20

4.12(a)

 

Intellectual Property

 

4.12(a)

4.12(b)

 

Intellectual Property Licenses Granted

 

4.12(b)

4.12(c)

 

Intellectual Property Licenses Required

 

4.12(c)

4.12(e)

 

Intellectual Property Infringement

 

4.12(e)

4.13(a)

 

Corporation Contracts

 

4.13(a), 4.13(c)

4.13(b)

 

Sellers’ Rights under Corporation Contracts

 

4.13(b)

4.13(c)

 

Corporation Contracts Enforceability and Termination

 

4.13(c)

4.13(d)

 

Corporation Contracts Compliance

 

4.13(d)

4.14

 

Customers and Suppliers

 

4.14

4.15(a)

 

Employee Benefit Plans

 

4.15(a)

4.15(c)

 

Payment under Employee Plans

 

4.15(c)

4.15(i)

 

Worker’s Compensation Coverage

 

4.15(i)

4.15(j)

 

Acceleration or Vesting of Employee Compensation

 

4.15(j)

4.16(a)

 

Compliance with Law

 

4.16(a)

4.16(b)

 

Governmental Authorization

 

4.16(b), 4.16(c)

4.17

 

Taxes

 

4.17

4.18(a)

 

Insurance

 

4.18(a)

4.18(b)

 

Insurance Arrangements

 

4.18(b)

4.18(c)

 

Insurance Claims

 

4.18(c)

4.19

 

Environmental Laws and Regulations

 

4.19

4.21

 

Governmental Authorities

 

4.21

4.22(a)

 

Trace Capitalization

 

3.1(e), 4.22(a)

4.22(b)

 

Trace Texas Capitalization

 

4.22(b)

4.26

 

Condition of Facilities

 

4.26

4.28(a)

 

Employee List

 

4.28(a)

4.28(b)

 

Retired Employees

 

4.28(b)

4.28(c)

 

Terminated Employees

 

4.28(c)

4.28(f)

 

Increase in Compensation or Benefits

 

4.28(f)

 

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

 

4.28(g)

 

Collective Employee Contracts

 

4.28(g)

4.28(j)

 

Employees on Leave

 

4.28(j)

4.28(k)

 

Obligations to Former Employees

 

4.28(k)

4.28(l)

 

Independent Contractors

 

4.28(l)

4.29(a)

 

Payments to Political Parties

 

4.29(a)

4.29(b)

 

Payments to Third Parties

 

4.29(b)

4.29(d)

 

Antiboycott Prohibitions

 

4.29(d)

4.30

 

Relationships with Related Persons

 

4.30

4.31

 

Title to Assets

 

4.31

 

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

 

STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (“Agreement”) is entered into on July 29, 2005, by
and among Geokinetics Inc., a Delaware corporation (“Buyer”), SCF-III, L.P., a
Delaware limited partnership (“SCF”), and James White, an individual resident of
Houston, Texas (“White”).  SCF and White are each individually a “Seller,” and
collectively the “Sellers.”  The Buyer and the Sellers are referred to
collectively herein as the “Parties.”

 

Background

 

The Sellers in the aggregate own all of the outstanding common shares of Trace
Energy Services Ltd., a corporation organized under the laws of Alberta
(“Trace”).

 

This Agreement contemplates a transaction in which the Buyer will purchase from
the Sellers, and the Sellers will sell to the Buyer, all outstanding shares of
Trace Common Stock in return for cash and shares of the Common Stock, $.01 par
value per share, of Buyer (the “Geokinetics Shares”).

 

Trace is the sole shareholder of Trace Energy Services, Inc., a Texas
corporation (“Trace Texas”), and a minority shareholder of Trace Energy Services
(Sahtu) Ltd., a corporation organized under the laws of the Northwest
Territories (“Trace Sahtu”), and Delta Trace Ltd., a corporation organized under
the laws of the Northwest Territories (“Delta”) and Trace Energy Services
(Inuvialuit) Ltd., a corporation organized under the laws of the Northwest
Territories (“Trace Inuvialuit”). Trace and Trace Texas are each individually a
“Corporation,” and collectively the “Corporations.”

 

Now, therefore, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained, the Parties agree as follows.

 

ARTICLE I.
DEFINITIONS

 

SECTION 1.1                                   DEFINITIONS.

 

Where used in this Agreement, the following words and terms shall have the
respective definitions (and such definitions shall be equally applicable to the
singular and plural forms, and all grammatical variations, of such terms):

 

“Accounts Receivable” shall have the meaning given to it by Canadian GAAP.

 

“Acquiror” has the meaning set forth in Section 8.2 below.

 

“Acquiror Parties” has the meaning set forth in Section 8.2 below.

 

“Additional Seismic Equipment” means 3,500 channels of I/O Analog System 4.

 

1

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

 

“Adjusted Purchase Price” has the meaning set forth in Section 2.3 below.

 

“Adjusted Purchase Price Notice” has the meaning set forth in Section 2.3 below
and as it may be modified pursuant to the procedure specified in Section 2.4.

 

“Adverse Consequences” means all actions, suits, proceedings, claims,
injunctions, judgments, Orders, court ordered damages, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, obligations, Taxes, liens,
losses, expenses, and reasonable fees, including court costs and attorneys’ fees
and expenses, expressly excluding Excluded Damages or any claim for loss of
profit or economic loss.

 

“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.

 

“Affiliated Group” means any affiliated group within the meaning of Code § 1504
or any similar group defined under a similar provision of state, local or
foreign law.

 

“Agreement” has the meaning set forth in the preface above.

 

“Breach” means any breach of any representation or warranty or any breach of any
covenant or obligation, in or of this Agreement, or any event which with the
passing of time or the giving of notice, or both, would constitute such a
breach.

 

“Buyer” has the meaning set forth in the preface above.

 

“Buyer Consents and Approvals” means all of the consents and approvals required
to be obtained by the Buyer in connection with the execution and delivery of
this Agreement and the completion of the transactions contemplated hereby.

 

“Buyer Group” has the meaning set forth in Section 5.6 below.

 

“Canadian GAAP” has the meaning set forth in Section 1.3 below.

 

“Cash” means cash and cash equivalents (including marketable securities and
short term investments) calculated in accordance with Canadian GAAP, applied on
a basis consistent with the preparation of the Financial Statements.

 

“Closing” has the meaning set forth in Section 2.6 below.

 

“Closing Date” has the meaning set forth in Section 2.6 below.

 

“Closing Time” means the time of Closing.

 

“COBRA” has the meaning set forth in Section 4.15(e) below.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Competing Business” has the meaning set forth in Section 4.30 below.

 

2

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

 

“Contract” means any non-terminated or non-expired legally binding agreement,
contract, lease or consensual obligation (made in writing).

 

“Corporation” and “Corporations” have the respective meanings set forth in the
preface above.

 

“Current Assets” shall have the meaning given to it by Canadian GAAP.

 

“Current Liabilities”shall have the meaning given to it by Canadian GAAP.

 

“Debt” means, as to any Person, at a particular time, all items that, in
accordance with Canadian GAAP, would be classified as liabilities on a balance
sheet of such Person as at such time and that constitute, without duplication,
(a) indebtedness for borrowed money or the deferred purchase price of Property
(other than credit extended to such Person for the purchase of goods in the
Ordinary Course of Business to the extent the same would not otherwise
constitute indebtedness), (b) indebtedness evidenced by notes, bonds,
debentures, or similar instruments, (c) obligations under leases that, in
accordance with Canadian GAAP, are required to be capitalized on a balance
sheet, (d) obligations under conditional sales or other title retention
agreements, (e) indebtedness arising under letter of credit (both documentary
and standby) and acceptance facilities and the face amount of all letters of
credit issued for the account of such Person (but exclusive of the letters of
credit described on Schedule 4.13(xiv) hereto or the issuance of which are
approved in writing, by Buyer after the date of this Agreement) and, without
duplication, all drafts drawn thereunder to the extent such Person shall not
have reimbursed the issuer in respect of the issuer’s payment of such drafts,
(f) all liabilities of the types described in (a)-(d) above secured by any lien
on any property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof, (g) any repurchase obligation
or liability of such Person or any of its subsidiaries with respect to accounts
or notes receivable sold by such Person or any of its subsidiaries, (h) any sale
or leaseback transaction that does not create a liability on the consolidated
balance sheet of such Person or its subsidiaries and (i) any obligation to a
third party (which third-party obligation is not otherwise included within the
definition of Debt) to guarantee the obligations of another Person of the types
described in (a)-(d) above, to contribute to the payment of such obligations, to
provide funds, either by contribution or by purchase of property or services, to
enable such other Person to pay such obligations, or to hold harmless the
beneficiary of such obligation of another Person against loss.  For purposes
hereof, Debt shall not include (a) trade accounts payable to third parties for
the purchase of goods or services, which are incurred in the Ordinary Course of
Business and are by their terms, payable within 60 days, (b) accrued liabilities
and (c) income taxes payable.

 

“Delta” has the meaning set forth in the preface above.

 

“Employee Pension Benefit Plan” has the meaning set forth in ERISA § 3(2).

 

“Employee Plans” has the meaning set forth in Section 4.15(a).

 

“Employee Welfare Benefit Plan” has the meaning set forth in ERISA § 3(1).

 

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“Encumbrance” means any charge, claim, condition, equitable interest, lien,
option, Security Interest, pledge, mortgage, right of way, easement,
encroachment, servitude, right of first option, right of first refusal or
similar restriction, including any restriction on use, voting (in the case of
any security or equity interest), transfer, receipt of income or exercise of any
other attribute of ownership, but excluding (a) mechanic’s, materialmen’s, and
similar liens, (b) liens or assessments for Taxes not yet due and payable or for
Taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business.

 

“Engagement Letter” means that certain letter agreement between Trace and
Goldsmith, Agio, Helms & Lynner, LLC dated October 27, 2004, as amended March 8,
2005.

 

“Environment” means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.

 

“Environmental, Health and Safety Liabilities” means any cost, damages, expense,
liability, obligation or other responsibility arising from or under any
Environmental Law or occupational safety and health law, including those
consisting of or relating to:

 

(A)                                  ANY ENVIRONMENTAL, HEALTH OR SAFETY MATTER
OR CONDITION (INCLUDING ON-SITE OR OFF-SITE CONTAMINATION, OCCUPATIONAL SAFETY
AND HEALTH AND REGULATION OF ANY CHEMICAL SUBSTANCE OR PRODUCT);

 

(B)                                 ANY FINE, PENALTY, JUDGMENT, AWARD,
SETTLEMENT, LEGAL OR ADMINISTRATIVE PROCEEDING, DAMAGES, LOSS, CLAIM, DEMAND OR
RESPONSE, REMEDIAL OR INSPECTION COST OR EXPENSE ARISING UNDER ANY ENVIRONMENTAL
LAW OR OCCUPATIONAL SAFETY AND HEALTH LAW;

 

(C)                                  A LIABILITY ARISING UNDER ANY ENVIRONMENTAL
LAW OR OCCUPATIONAL SAFETY AND HEALTH LAW FOR CLEANUP COSTS OR CORRECTIVE
ACTION, INCLUDING ANY CLEANUP, REMOVAL, CONTAINMENT OR OTHER REMEDIATION OR
RESPONSE ACTIONS (“CLEANUP”) REQUIRED BY ANY ENVIRONMENTAL LAW OR OCCUPATIONAL
SAFETY AND HEALTH LAW (WHETHER OR NOT SUCH CLEANUP HAS BEEN REQUIRED OR
REQUESTED BY ANY GOVERNMENTAL BODY OR ANY OTHER PERSON) AND FOR ANY NATURAL
RESOURCE DAMAGES; OR

 

(D)                                 ANY OTHER COMPLIANCE, CORRECTIVE OR REMEDIAL
MEASURE REQUIRED UNDER ANY ENVIRONMENTAL LAW OR OCCUPATIONAL SAFETY AND HEALTH
LAW.

 

The terms “removal,” “remedial” and “response action” include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (“CERCLA”) and Canadian environmental
laws, regulations, rules, codes or policies.

 

“Environmental Law” means any Legal Requirement that requires or relates to:

 

4

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(A)                                  ADVISING APPROPRIATE AUTHORITIES, EMPLOYEES
OR THE PUBLIC OF INTENDED OR ACTUAL RELEASES OF POLLUTANTS OR HAZARDOUS
SUBSTANCES OR MATERIALS, VIOLATIONS OF DISCHARGE LIMITS OR OTHER PROHIBITIONS
AND THE COMMENCEMENT OF ACTIVITIES, SUCH AS RESOURCE EXTRACTION OR CONSTRUCTION,
THAT COULD HAVE SIGNIFICANT IMPACT ON THE ENVIRONMENT;

 

(B)                                 PREVENTING OR REDUCING TO ACCEPTABLE LEVELS
THE RELEASE OF POLLUTANTS OR HAZARDOUS SUBSTANCES OR MATERIALS INTO THE
ENVIRONMENT;

 

(C)                                  REDUCING THE QUANTITIES, PREVENTING THE
RELEASE OR MINIMIZING THE HAZARDOUS CHARACTERISTICS OF WASTES THAT ARE
GENERATED;

 

(D)                                 ASSURING THAT PRODUCTS ARE DESIGNED,
FORMULATED, PACKAGED AND USED SO THAT THEY DO NOT PRESENT UNREASONABLE RISKS TO
HUMAN HEALTH OR THE ENVIRONMENT WHEN USED OR DISPOSED OF;

 

(E)                                  PROTECTING RESOURCES, SPECIES OR ECOLOGICAL
AMENITIES;

 

(F)                                    REDUCING TO ACCEPTABLE LEVELS THE RISKS
INHERENT IN THE TRANSPORTATION OF HAZARDOUS SUBSTANCES, POLLUTANTS, OIL OR OTHER
POTENTIALLY HARMFUL SUBSTANCES;

 

(G)                                 CLEANING UP POLLUTANTS THAT HAVE BEEN
RELEASED, PREVENTING THE THREAT OF RELEASE OR PAYING THE COSTS OF SUCH CLEAN UP
OR PREVENTION; OR

 

(H)                                 MAKING RESPONSIBLE PARTIES PAY PRIVATE
PARTIES, OR GROUPS OF THEM, FOR DAMAGES DONE TO THEIR HEALTH OR THE ENVIRONMENT
OR PERMITTING SELF-APPOINTED REPRESENTATIVES OF THE PUBLIC INTEREST TO RECOVER
FOR INJURIES DONE TO PUBLIC ASSETS.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” has the meaning set forth in Section 4.15(d) below.

 

“Escrow Agent” means Amegy Bank National Association of Houston, Texas.

 

“Escrow Agreement” means a document in the form of Exhibit A.

 

“Escrow Amount” has the meaning set forth in Section 2.2(c).

 

“Escrowed Assets” has the meaning set forth in Section 8.4(i).

 

“Exchange Act” means the Securities Act of 1934, as amended.

 

“Exchange Rate” means for a particular day, the average Bank of Canada Noon Day
Rate, expressed in CDN$/US$ or US$/CDN$, as the case may be, for the previous
ten days, as set out on the Bank of Canada’s website.

 

“Excluded Damages” has the meaning set forth in Section 8.7 below.

 

“Facility” means any real property, leasehold or other interest in real property
currently owned or leased by the Corporations, including the Tangible Personal
Property used or operated

 

5

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by the Corporations at the respective locations of the real property specified
in Schedule 4.8. Notwithstanding the foregoing, for purposes of the definitions
of “Hazardous Activity” and “Remedial Action” and Section 4.19, “Facilities”
shall mean any real property, leasehold or other interest in real property
currently or formerly owned, leased or operated by the Corporations, including
the Tangible Personal Property used or operated by the Corporations at the
respective locations of the Real Property specified in Schedule 4.8.

 

“Fiduciary” has the meaning set forth in ERISA § 3(21).

 

“Financial Statement” has the meaning set forth in Section 4.6 below.

 

“Geokinetics Shares” has the meaning set forth in the preface above.

 

“Governing Documents” means with respect to any particular entity, (a) if a
corporation, the articles or certificate of incorporation and the bylaws; (b) if
a general partnership, the partnership agreement and any statement of
partnership; (c) if a limited partnership, the limited partnership agreement and
the certificate of limited partnership; (d) if a limited liability company, the
articles of organization and operating agreement; (e) if another type of Person,
any other charter or similar document adopted or filed in connection with the
creation, formation or organization of the Person; (f) all equity holders’
agreements, voting agreements, voting trust agreements, joint venture
agreements, registration rights agreements or other agreements or documents
relating to the organization, management or operation of any Person or relating
to the rights, duties and obligations of the equity holders of any Person; and
(g) any amendment or supplement to any of the foregoing.

 

“Governmental Authorization” means any consent, license, registration or permit
issued, granted, given or otherwise made available by or under the authority of
any Governmental Body or pursuant to any Legal Requirement.

 

“Governmental Body” means any:

 

(I)                                     NATION, STATE, COUNTY, CITY, TOWN,
BOROUGH, VILLAGE, DISTRICT OR OTHER JURISDICTION;

 

(II)                                  FEDERAL, STATE, PROVINCIAL, TERRITORIAL,
LOCAL, MUNICIPAL, FOREIGN OR OTHER GOVERNMENT;

 

(III)                               GOVERNMENTAL AUTHORITY OF ANY NATURE
(INCLUDING ANY AGENCY, BRANCH, DEPARTMENT, BOARD, COMMISSION, COURT, TRIBUNAL OR
OTHER ENTITY EXERCISING GOVERNMENTAL POWERS); OR

 

(IV)                              BODY EXERCISING, OR ENTITLED TO EXERCISE, ANY
ADMINISTRATIVE, EXECUTIVE, JUDICIAL, LEGISLATIVE, POLICE, REGULATORY OR TAXING
AUTHORITY OR POWER.

 

“Hazardous Activity” means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment or use (including any withdrawal or other
use of groundwater) of

 

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Hazardous Material in, on, under, about or from any of the Facilities or any
part thereof into the Environment and any other act, business, operation or
thing that increases the danger, or risk of danger, or poses an unreasonable
risk of harm, to persons or property on or off the Facilities.

 

“Hazardous Materials” means any substance, material or waste which is defined as
a “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely
hazardous waste,” “restricted hazardous waste,” “contaminant,” “toxic waste” or
“toxic substance” under any provision of Environmental Law, which includes
petroleum, petroleum products, asbestos, presumed asbestos-containing material
or asbestos-containing material, urea formaldehyde and polychlorinated
biphenyls.

 

“I/O Option Cost” means the remaining amount to be paid (net of rental credits)
to Input/Output Inc. to acquire the Additional Seismic Equipment, at the Closing
Time, if any.

 

“Indemnified Party” has the meaning set forth in Section 8.5(a) below.

 

“Indemnifying Party” has the meaning set forth in Section 8.5(a) below.

 

“Intellectual Property” means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).

 

“Interim Consolidated Balance Sheet” has the meaning set forth in
Section 4.6(a) below.

 

“Inventory” means all inventories of the Corporations, wherever located,
including all finished goods, work in process, raw materials, spare parts and
all other materials and supplies to be used or consumed by the Corporations in
the production of finished goods or provision of services.

 

“IRS” means the United States Internal Revenue Service.

 

“Knowledge” means:

 

(1)                                  WHAT AN INDIVIDUAL IS ACTUALLY AWARE OF; OR

 

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(2)                                  WHAT A PRUDENT INDIVIDUAL, BY REASON OF HIS
OR HER OCCUPYING THE SAME POSITION IN AN ENTITY OF SIMILAR SIZE OPERATING IN THE
OILFIELD SERVICES INDUSTRY IN CANADA OR THE UNITED STATES, COULD BE EXPECTED TO
DISCOVER OR OTHERWISE BECOME AWARE OF IN THE COURSE OF DISCHARGING HIS OR HER
DUTIES IN A PRUDENT MANNER,

 

EXCEPT THAT IN THE CASE OF:

 

(A)                                  SCF, THE KNOWLEDGE OF SCF MEANS WHAT JOHN
GEDDES IS ACTUALLY AWARE OF OR WHAT A PRUDENT INDIVIDUAL IN THE POSITION OF
CHAIR OF THE BOARD OF DIRECTORS OF AN ENTITY OF SIMILAR SIZE OPERATING IN THE
OILFIELD SERVICES INDUSTRY IN CANADA OR THE UNITED STATES COULD BE EXPECTED TO
DISCOVER OR OTHERWISE BECOME AWARE OF IN THE COURSE OF DISCHARGING HIS OR HER
DUTIES IN A PRUDENT MANNER; AND

 

(B)                                 THE CORPORATIONS, THE KNOWLEDGE OF THE
CORPORATIONS MEANS WHAT DAVID SMIDDY, JOHN VANCE AND EFTY USWAK ARE ACTUALLY
AWARE OF OR WHAT A PRUDENT INDIVIDUAL IN THE POSITION OF THE CHIEF FINANCIAL
OFFICER, CHIEF ACCOUNTING OFFICER OR GENERAL MANAGER OF AN ENTITY OF SIMILAR
SIZE OPERATING IN THE OILFIELD SERVICES INDUSTRY IN CANADA OR THE UNITED STATES
COULD BE EXPECTED TO DISCOVER OR OTHERWISE BECOME AWARE OF IN THE COURSE OF
DISCHARGING HIS OR HER DUTIES IN A PRUDENT MANNER.

 

“Legal Requirement” means any federal, state, provincial, territorial, local,
municipal, foreign, international, multinational or other constitution, law,
ordinance, code, regulation, statute or treaty.

 

“Liability” means any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.

 

“Minority Subsidiaries” means Trace Sahtu, Delta and Trace Inuvialuit.

 

“Multiemployer Plan” has the meaning set forth in ERISA § 3(37).

 

“Non-Resident Seller” has the meaning set forth in Section 6.7(a) below.

 

“NRV Purchase Price” has the meaning set forth in Section 6.7(b) below.

 

“Option Agreements” has the meaning set forth in Section 2.5(a).

 

“Option Costs” shall have the meaning given to it in Section 2.5(a) below.

 

“Optionholders” means the individuals who have entered into Option Agreements
with Trace, as identified in Section 2.5(c).

 

“Order” means any order, injunction, judgment, decree, ruling, assessment or
arbitration award of any Governmental Body or arbitrator.

 

8

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“Ordinary Course of Business” means the ordinary course of business consistent
with past custom and practice (including with respect to quantity and frequency)
of the entity in question.

 

“Original Value” has the meaning set forth in Section 2.4(b) below.

 

“Party” has the meaning set forth in the preface above.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Permitted Encumbrance” has the meaning set forth in Section 4.31 below.

 

“Person” means an individual, a partnership, a corporation, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).

 

“Pre-Closing Tax Period” has the meaning set forth in Section 6.6(a) below.

 

“Proceeding” means any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, judicial or
investigative, whether formal or informal, whether public or private) commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.

 

“Purchase Price” has the meaning set forth in Section 2.1 below.

 

“Recalculated Value” has the meaning set forth in Section 2.4(b) below.

 

“Related Person” means:

 

With respect to a particular individual:

 

(V)                                 EACH OTHER MEMBER OF SUCH INDIVIDUAL’S
FAMILY;

 

(VI)                              ANY BUSINESS ENTITY THAT IS DIRECTLY OR
INDIRECTLY CONTROLLED BY ANY ONE OR MORE MEMBERS OF SUCH INDIVIDUAL’S FAMILY;

 

(VII)                           ANY BUSINESS ENTITY IN WHICH MEMBERS OF SUCH
INDIVIDUAL’S FAMILY HOLD (INDIVIDUALLY OR IN THE AGGREGATE) A MATERIAL INTEREST;
AND

 

(VIII)                        ANY BUSINESS ENTITY WITH RESPECT TO WHICH ONE OR
MORE MEMBERS OF SUCH INDIVIDUAL’S FAMILY SERVES AS A DIRECTOR, OFFICER, PARTNER,
EXECUTOR OR TRUSTEE (OR IN A SIMILAR CAPACITY).

 

With respect to a specified Person other than an individual:

 

(IX)                                ANY PERSON THAT DIRECTLY OR INDIRECTLY
CONTROLS, IS DIRECTLY OR INDIRECTLY CONTROLLED BY OR IS DIRECTLY OR INDIRECTLY
UNDER COMMON CONTROL WITH SUCH SPECIFIED PERSON;

 

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(X)                                   ANY PERSON THAT HOLDS A MATERIAL INTEREST
IN SUCH SPECIFIED PERSON;

 

(XI)                                EACH PERSON THAT SERVES AS A DIRECTOR,
OFFICER, PARTNER, EXECUTOR OR TRUSTEE OF SUCH SPECIFIED PERSON (OR IN A SIMILAR
CAPACITY);

 

(XII)                             ANY PERSON IN WHICH SUCH SPECIFIED PERSON
HOLDS A MATERIAL INTEREST; AND

 

(XIII)                          ANY PERSON WITH RESPECT TO WHICH SUCH SPECIFIED
PERSON SERVES AS A GENERAL PARTNER OR A TRUSTEE (OR IN A SIMILAR CAPACITY).

 

For purposes of this definition, (a) ”control” (including “controlling,”
“controlled by,” and “under common control with”) means the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, and shall be construed as such term is used in the
rules promulgated under the Securities Act; (b) the “Family” of an individual
includes (i) the individual, (ii) the individual’s spouse, (iii) any other
natural person who is related to the individual or the individual’s spouse
within the second degree and (iv) any other natural person who resides with such
individual; and (c) ”Material Interest” means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities
or other voting interests representing at least ten percent (10%) of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least ten percent (10%) of the outstanding equity
securities or equity interests in a Person.

 

“Release” means any release, spill, emission, leaking, pumping, pouring,
dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching
or migration on or into the Environment or into or out of any property.

 

“Representative” means, with respect to a particular Person, any director,
officer, manager, employee, agent, accountant, financial advisor or legal
counsel.

 

“Retained Employees” means James White, David Smiddy, Efty Uswak, John Vance,
Tim Carry, Harold Cuddie, Greg Dearsley, Eddie Gonzales, Michael Lee, Jason
Nelson, and Paul Noseworthy.

 

“SCF” has the meaning set forth in the preface above.

 

“SCF Proportion” means 262,614 divided by 268,539.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“SEC Reports” has the meaning set forth in Section 3.2(f) below.

 

“Section 116 Certificate” has the meaning set forth in Section 6.7(a) below.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Security Interest” means any mortgage, pledge, lien, encumbrance, charge, or
other security interest, other than (a) mechanic’s, materialmen’s, and similar
liens, (b) liens or

 

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assessments for Taxes not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business.

 

“Seller” and “Sellers” have the meanings set forth in the preface above.

 

“Seller Consents and Approvals” means all consents and approvals required to be
obtained by each of the Sellers in connection with the execution and delivery of
this Agreement and the completion of the transactions contemplated hereby.

 

“Sellers’ Solicitors” means Bennett Jones LLP and Vinson & Elkins LLP.

 

“Tangible Personal Property” means all machinery, equipment, tools, furniture,
office equipment, computer hardware, supplies, materials, vehicles and other
items of tangible personal property of every kind owned or leased by the
Corporations (wherever located).

 

“Tax” means any federal, state, provincial, territorial, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
§ 59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, goods and services use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto that arises under
applicable Legal Requirements.

 

“Tax Act” has the meaning set forth in Section 6.7(a) below.

 

“Tax Liability Escrow” has the meaning set forth in Section 8.4(i) below.

 

“Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

 

“Texas Common Stock” has the meaning set forth in Section 4.22(b) below.

 

“Third Party Claim” has the meaning set forth in Section 8.5(b) below.

 

“Trace” has the meaning set forth in the preface above.

 

“Trace Common Stock” means the common shares of Trace.

 

“Trace Inuvialuit” has the meaning set forth in the preface above.

 

“Trace Options” means, collective, the options to acquire an aggregate 10,925
shares of Trace Common Stock pursuant to the Option Agreements.

 

“Trace Share Purchase Price” has the meaning set forth in Section 2.5(b).

 

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“Trace Texas” has the meaning set forth in the preface above.

 

“Trace Sahtu” has the meaning set forth in the preface above.

 

“Transaction Costs” means (a) all amounts payable to Trace’s financial advisor
pursuant to the Engagement Letter between Trace and Goldsmith, Agio, Helms &
Lynner, LLC, (b) the outstanding accounts of its legal counsel and any other
advisors for services rendered in connection with the transaction described in
this Agreement and (c) all amounts payable to Trace’s independent auditors after
the date of this Agreement to satisfy the condition set forth in
Section 7.1(o)(i) below.

 

“Transferred Information” means the personal information (namely, information
about an identifiable individual other than their business contact information
when used or disclosed for business communications) to be disclosed or conveyed
to the Buyer or any of its representatives or agents by or on behalf of the
Sellers as a result of or in conjunction with the transactions contemplated
herein, and includes all such personal information disclosed to the Buyer prior
to the execution of this Agreement.

 

“US GAAP” has the meaning set forth in Section 1.3 below.

 

“US Plans” has the meaning set forth in Section 4.15(o) below.

 

“WARN Act” has the meaning set forth in Section 4.28(d) below.

 

“White” has the meaning set forth in the preface above.

 

“White Proportion” means 5,925 divided by 268,539.

 

“Withheld Amount” has the meaning set forth in Section 6.7(c) below.

 

SECTION 1.2                                   DEFINITIONS APPEARING ELSEWHERE IN
THIS AGREEMENT.

 

The terms used in this Agreement which are defined in (a) the preface of this
Agreement, (b) the recitals of this Agreement and (c) the further Sections of
this Agreement shall have the respective definitions therein ascribed to them.

 

SECTION 1.3                                   ACCOUNTING PRINCIPLES AND TERMS.

 

(A)                                  THE REFERENCE TO “US GAAP” OR UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THIS AGREEMENT SHALL, TO THE EXTENT
NOT INCONSISTENT WITH SPECIFIC DEFINITIONS HEREIN, BE CONSTRUED IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES, CONSISTENTLY
APPLIED, AS SUCH PRINCIPLES ARE IN EFFECT AS OF THE DATE OF THIS AGREEMENT.

 

(B)                                 THE REFERENCE TO “CANADIAN GAAP” OR CANADIAN
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THIS AGREEMENT, AND ANY OTHER
ACCOUNTING TERMS NOT SPECIFICALLY DEFINED HEREIN, SHALL, TO THE EXTENT NOT
INCONSISTENT WITH SPECIFIC DEFINITIONS HEREIN, BE CONSTRUED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE CANADA, CONSISTENTLY APPLIED, AS
SUCH PRINCIPLES ARE IN EFFECT AS OF THE DATE OF THIS AGREEMENT OR, IF
APPLICABLE, THE CLOSING TIME.

 

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SECTION 1.4                                   DETERMINATION OF CURRENT ASSETS
AND LIABILITIES.

 

For the purposes of the definition of Current Assets and Current Liabilities,
all such amounts included in the definition shall be calculated as of the
Closing and in accordance with Canadian GAAP (except as specifically otherwise
provided in this Agreement). Any amounts included in Current Assets or Current
Liabilities that are denominated in US dollars will be converted to Canadian
Dollars as of the close of business on the business day immediately preceding
the Closing Date in accordance with Canadian GAAP.

 

ARTICLE II.
PURCHASE AND SALE OF COMPANY SHARES

 

SECTION 2.1                                   PURCHASE AND SALE.

 

Subject to the terms and conditions hereof, at Closing the Sellers covenant and
agree to sell, assign and transfer to the Buyer and the Buyer covenants and
agrees to purchase from the Sellers all outstanding shares of Trace Common Stock
for the Adjusted Purchase Price, the Escrow Amount and 1,000,000 Geokinetics
Shares (the “Purchase Price”).  At the Closing, SCF and Trace shall agree to
terminate all of the outstanding warrants of Trace.

 

SECTION 2.2                                   PAYMENT OF THE PURCHASE PRICE.

 

The Purchase Price is to be paid by the Buyer at Closing by:

 

(A)                                  THE DELIVERY AT CLOSING TO THE ESCROW AGENT
(TO BE HELD IN ESCROW IN ACCORDANCE WITH THE TERMS OF SECTION 8.4(I) BELOW AND
THE ESCROW AGREEMENT) OF VALIDLY ISSUED SHARE CERTIFICATES REPRESENTING AN
AGGREGATE ONE MILLION (1,000,000) SHARES OF COMMON STOCK, $.01 PAR VALUE PER
SHARE, OF THE BUYER (THE “GEOKINETICS SHARES”) WHICH SHALL BE REGISTERED IN SUCH
NAMES AND AMOUNTS: (I) AS DIRECTED BY SCF IN RESPECT OF THE NUMBER OF
GEOKINETICS SHARES EQUAL TO THE SCF PROPORTION MULTIPLIED BY 1,000,000; AND
(II) AS DIRECTED BY WHITE IN RESPECT OF THE NUMBER OF GEOKINETICS SHARES EQUAL
TO THE WHITE PROPORTION MULTIPLIED BY 1,000,000, IN EACH CASE ROUNDED DOWN TO
THE NEAREST SHARE;

 

(B)                                 THE DELIVERY AT CLOSING, BY WIRE TRANSFERS
OF IMMEDIATELY AVAILABLE FUNDS TO THE SELLERS, OF THE ADJUSTED PURCHASE PRICE
(CONVERTED INTO US$ AT THE EXCHANGE RATE) WHICH SHALL BE PAID: (I) AS DIRECTED
BY SCF IN AN AMOUNT EQUAL TO THE  SCF PROPORTION MULTIPLIED BY THE ADJUSTED
PURCHASE PRICE; AND (II) AS DIRECTED BY WHITE IN AN AMOUNT EQUAL TO THE WHITE
PROPORTION MULTIPLIED BY THE ADJUSTED PURCHASE PRICE, IN EACH CASE ROUNDED DOWN
TO THE NEAREST CENT;

 

(C)                                  THE DELIVERY AT CLOSING, BY WIRE TRANSFER
TO THE ESCROW AGENT, OF THE AMOUNT OF CDN$2,000,000 (THE “ESCROW AMOUNT”), SUCH
AMOUNT (CONVERTED INTO US$ AT THE EXCHANGE RATE) TO BE HELD IN ESCROW IN
ACCORDANCE WITH THE TERMS OF THE ESCROW AGREEMENT.

 

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SECTION 2.3                                   ADJUSTED PURCHASE PRICE.

 

The Adjusted Purchase Price shall be equal to (all amounts determined as at the
Closing Time):

 

(A)                                  CDN$33,000,000;

 

plus

 

(B)                                 THE CORPORATIONS’ CASH;

 

less

 

(C)                                  THE SUM OF THE FOLLOWING AMOUNTS:

 

(I)                                     THE AMOUNT BY WHICH THE CORPORATIONS’
CURRENT LIABILITIES (EXCLUDING ANY PORTION OF DEBT, I/O OPTION COST, TRANSACTION
COSTS AND OPTION COSTS) EXCEEDS THE CORPORATIONS’ CURRENT ASSETS (EXCLUDING
CASH);

 

(II)                                  THE AMOUNT OF THE I/O OPTION COST;

 

(III)                               THE AMOUNT OF THE CORPORATION’S DEBT;

 

(IV)                              THE AMOUNT OF THE TRANSACTION COSTS; AND

 

(V)                                 THE AMOUNT OF THE OPTION COSTS.

 

No earlier than five business days and no later than two business days prior to
the Closing Date, the Sellers shall provide to the Buyer a statement setting out
a good faith estimate of this calculation (the “Adjusted Purchase Price Notice”)
which shall specify the Adjusted Purchase Price payable at Closing, subject to
adjustment on the basis described in Section 2.4 below.  Attached to this
Agreement is Schedule 2.3 which illustrates the calculation of the Adjusted
Purchase Price based on Cash, Current Assets, Current Liabilities, Debt as shown
in Trace’s consolidated balance sheet at June 30, 2005 and other estimated
amounts.  Schedule 2.3 is included to assist the Sellers in preparing the
Adjusted Purchase Price Notice and the parties in completing any adjustments
pursuant to Section 2.4.

 

The difference between CDN$33,000,000 and the Adjusted Purchase Price shall be
applied at the Closing Time by the Buyer (or by Trace, upon payment of the
required funds to Trace by the Buyer), in the following order of priority, to
pay the full amount of the Transaction Costs, the Option Costs, the I/O Option
Cost, and to reduce the Debt (in the case of the Debt, to the extent any such
funds remain).

 

SECTION 2.4                                   POST CLOSING ADJUSTMENT.

 

(A)                                  WITHIN 45 DAYS OF THE CLOSING DATE, THE
BUYER AND EACH OF THE SELLERS SHALL HAVE THE RIGHT TO REVIEW THE BOOKS AND
RECORDS OF THE CORPORATIONS AND ANY OTHER RELEVANT BOOKS AND RECORDS MAINTAINED
BY THE CORPORATIONS AND DETERMINE WHETHER THE ADJUSTED PURCHASE PRICE

 

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NOTICE IS ACCURATE AND WHETHER THE ADJUSTED PURCHASE PRICE SHOULD BE ALTERED,
BASED ON THE BUYER’S OR THE SELLERS’ DETERMINATION, PER GOOD FAITH CALCULATIONS,
THAT THE VALUE OF SUCH ITEMS IS NOT ACCURATELY REPRESENTED IN THE ADJUSTED
PURCHASE PRICE NOTICE.  IN THE EVENT ANY OF THE PARTIES MAKES SUCH
DETERMINATION, IT SHALL PREPARE AND DELIVER TO THE OTHER PARTIES A STATEMENT
SETTING FORTH IN REASONABLE DETAIL, SUCH CALCULATION OF THE AMOUNT FOR WHICH
ADJUSTMENT IS PROVIDED HEREIN AND SHALL ASSIST THE OTHER PARTIES IN VERIFYING
THE AMOUNTS SET FORTH IN SUCH STATEMENTS.

 

(B)                                 BUYER OR EITHER OF THE SELLERS MAY DISPUTE
ALL OR ANY PORTION OF THE CALCULATION OF THE ADJUSTED PURCHASE PRICE NOTICE AND
THE PROPOSED REVISED ADJUSTED PURCHASE PRICE BY WRITTEN NOTICE TO THE OTHER
PARTY WITHIN 30 DAYS OF THE DATE OF RECEIPT OF THE STATEMENT REFERRED TO IN
SECTION 2.4(A) SETTING FORTH, IN REASONABLE DETAIL, THE BASIS FOR THE DISPUTE. 
IF THE PARTIES DO NOT AGREE ON THE CALCULATION OF THE ADJUSTMENT AMOUNTS WITHIN
15 DAYS OF ANY NOTICE OF DISPUTE, THE BUYER AND THE SELLERS WILL SELECT (WITHIN
10 DAYS OF THE EXPIRATION OF THAT 15 DAY PERIOD) AN ACCOUNTING FIRM MUTUALLY
ACCEPTABLE TO THEM TO RESOLVE ANY REMAINING OBJECTIONS.  IF THE BUYER AND THE
SELLERS ARE UNABLE TO AGREE ON THE CHOICE OF AN ACCOUNTING FIRM WITHIN SUCH 10
DAY PERIOD, THEY WILL SELECT, WITHIN AN ADDITIONAL 10 DAY PERIOD, THE CALGARY
OFFICE OF A NATIONALLY-RECOGNIZED ACCOUNTING FIRM BY LOT (AFTER EXCLUDING THEIR
RESPECTIVE REGULAR OUTSIDE ACCOUNTING FIRMS) THAT IS QUALIFIED TO PROVIDE AN
AUDIT OPINION IN RESPECT OF THE FINANCIAL STATEMENTS OF A “REPORTING ISSUER”, AS
THAT TERM IS DEFINED IN CANADIAN SECURITIES LAW.  THE DETERMINATION OF ANY
ACCOUNTING FIRM SO SELECTED (AND THE DETERMINATION IT MAKES PURSUANT TO ITS
POWER TO RESOLVE ANY OBJECTIONS REGARDING THE ADJUSTED PURCHASE PRICE) WILL BE
SET FORTH IN WRITING AND WILL BE CONCLUSIVE AND BINDING UPON THE BUYER AND THE
SELLERS FOR PURPOSES OF DETERMINING ADJUSTMENTS TO THE PURCHASE PRICE PURSUANT
TO THIS SECTION 2.4.  THE COST AND EXPENSE OF SUCH ACCOUNTING FIRM SHALL BE
BORNE EQUALLY BY THE BUYER AND THE SELLERS.  SUCH ACCOUNTING FIRM SHALL BE
ENGAGED ON THE BASIS THAT IT WILL MAKE ITS DETERMINATION WITHIN 60 DAYS OF BEING
SELECTED.

 

(C)                                  IF ALL OF THE ADJUSTMENT AMOUNTS ARE AGREED
TO BY THE PARTIES OR DETERMINED BY AN APPOINTED ACCOUNTING FIRM IN ACCORDANCE
WITH THIS SECTION 2.4, AS THE CASE MAY BE, AND IF:

 

(I)                                     THE SUM OF SUCH ADJUSTMENTS WOULD RESULT
IN A REVISED ADJUSTED PURCHASE PRICE (THE “RECALCULATED VALUE”) WHICH IS LESS IN
VALUE THAN THE AMOUNT OF THE ADJUSTED PURCHASE PRICE SET FORTH IN THE ADJUSTED
PURCHASE PRICE NOTICE DELIVERED PURSUANT TO SECTION 2.3 (THE “ORIGINAL VALUE”),
THEN THE SELLERS SHALL PAY TO THE BUYER THE AMOUNT OF THE ORIGINAL VALUE LESS
THE RECALCULATED VALUE WITHIN TWO (2) BUSINESS DAYS BY WIRE TRANSFER; OR

 

(II)                                  IF THE RECALCULATED VALUE IS GREATER THAN
THE ORIGINAL VALUE, THEN THE BUYER SHALL PAY TO THE SELLERS THE AMOUNT, IF ANY,
BY WHICH THE RECALCULATED VALUE IS GREATER THAN THE ORIGINAL VALUE WITHIN TWO
(2) BUSINESS DAYS BY WIRE TRANSFER.

 

(D)                                 ANY ADJUSTMENTS DETERMINED IN ACCORDANCE
WITH THIS SECTION 2.4 SHALL BE MADE IN ACCORDANCE WITH CANADIAN GAAP AND NO
ADJUSTMENT SHALL BE MADE FOR CHANGES IN THE EXCHANGE RATE FOR THE CANADIAN
DOLLAR IN EFFECT AFTER THE CLOSING DATE.

 

(E)                                  THE BUYER AND THE SELLERS SHALL HAVE NO
REMEDY WHATSOEVER IN RESPECT OF ANY DETERMINATION OF A RECALCULATED VALUE,
EXCEPT PURSUANT TO THIS SECTION 2.4.

 

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SECTION 2.5                                   TREATMENT OF THE TRACE OPTIONS

 

(A)                                  PURSUANT TO THOSE CERTAIN AGREEMENTS BY
WHICH TRACE AWARDED STOCK OPTIONS TO THE PERSONS LISTED IN THE TABLE UNDER
SECTION 2.5(C) (THE “OPTION AGREEMENTS”), AT THE CLOSING TIME TRACE, UPON
RECEIPT OF AN EXECUTED OPTION TERMINATION AGREEMENT WHICH TERMINATES ALL
OBLIGATIONS OF TRACE RELATING TO THE OPTION AGREEMENTS IN EXCHANGE FOR THE
PAYMENT DESCRIBED HEREIN IN A FORM ACCEPTABLE TO THE BUYER ACTING REASONABLY,
WILL PAY TO THE OPTIONHOLDERS AN AMOUNT FOR EACH OPTION EQUAL TO THE TRACE SHARE
PURCHASE PRICE (AS DETERMINED BELOW) LESS CDN$50 (AND TRACE SHALL BE ENTITLED TO
MAKE ANY WITHHOLDINGS REQUIRED BY APPLICABLE LAW).  THE TOTAL OF THESE PAYMENTS
SHALL BE THE “OPTION COSTS”.  AS A RESULT OF THESE PAYMENTS, ALL OF THE OPTION
AGREEMENTS WILL BE TERMINATED.  FOR CLARITY, THE OPTION COSTS SHALL NOT BE
ADJUSTED AFTER CLOSING, INCLUDING AS A CONSEQUENCE OF ANY POST CLOSING
ADJUSTMENT TO THE ADJUSTED PURCHASE PRICE.

 

(B)                                 THE “TRACE SHARE PURCHASE PRICE” SHALL BE A
DOLLAR AMOUNT EQUAL TO:

 

(I)                                     THE SUM OF:  (I) ADJUSTED PURCHASE PRICE
(CALCULATED WITHOUT ADJUSTMENT FOR THE OPTION COSTS), (II) THE ESCROW AMOUNT,
(III) THE PRODUCT OF 1,000,000 MULTIPLIED BY THE 10 DAY WEIGHTED AVERAGE TRADING
PRICE OF THE SHARES OF THE COMMON STOCK OF THE BUYER BEFORE THE CLOSING DATE
(AND CONVERTED TO CANADIAN DOLLARS USING THE EXCHANGE RATE); AND
(IV) CDN$546,250;

 

divided by

 

(II)                                  279,464.

 

(C)                                  THE TRACE OPTIONS HAVE BEEN ISSUED AS
FOLLOWS:

 

Option Holder

 

Number of Options

 

Tim Carry

 

700

 

 

Harold Cuddie

 

200

 

 

Greg Dearsley

 

250

 

 

Mike Lee

 

250

 

 

Paul Noseworthy

 

700

 

 

Dave Smiddy

 

1,600

 

 

Efty Uswak

 

450

 

 

John Vance

 

850

 

 

James White

 

5,925

 

 

 

SECTION 2.6                                   CLOSING.

 

The closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Chamberlain Hrdlicka White Williams & Martin,
1200 Smith Street, Suite 1400, Houston, Texas 77002 commencing at 9:00 a.m.
Houston, Texas time on the second business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date as
the Parties may mutually determine (the “Closing Date”).

 

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SECTION 2.7                                   DELIVERIES AT THE CLOSING.

 

At the Closing, (i) the Sellers will deliver to Buyer the various certificates,
instruments, and documents referred to in Section 7.1 below, (ii) Buyer will
deliver to the Sellers the various certificates, instruments, and documents
referred to in Section 7.2 below, (iii) each of the Sellers will deliver to
Buyer share certificates representing all of his or its Trace Common Stock,
endorsed in blank or accompanied by duly executed assignment documents, which
shall effect the transfer and assignment of such Trace Common Stock to the Buyer
as of the Closing Date, and (iv) the Buyer will deliver to each of the Sellers
the consideration specified in Section 2.2 above.

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION

 

SECTION 3.1                                   REPRESENTATIONS AND WARRANTIES OF
THE SELLERS.

 

Each of the Sellers severally and not jointly represents and warrants to the
Buyer with respect to himself or itself the following, except as set forth in
Schedule 3.1:

 

(A)                                  POWER AND AUTHORITY.  THE SELLER HAS THE
CAPACITY AND FULL POWER AND AUTHORITY (INCLUDING FULL PARTNERSHIP POWER AND
AUTHORITY, AS APPLICABLE) TO EXECUTE AND DELIVER THIS AGREEMENT AND TO
CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY.  THIS AGREEMENT CONSTITUTES THE
VALID AND LEGALLY BINDING OBLIGATION OF THE SELLER.  THE SELLER IS NOT REQUIRED
TO GIVE ANY NOTICE TO, MAKE ANY FILING WITH, OR OBTAIN ANY AUTHORIZATION,
CONSENT, OR APPROVAL OF ANY GOVERNMENT OR GOVERNMENTAL AGENCY IN ORDER TO
CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

(B)                                 NONCONTRAVENTION.   NEITHER THE EXECUTION
AND THE DELIVERY OF THIS AGREEMENT, NOR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY, WILL (I) VIOLATE ANY CONSTITUTION, STATUTE, REGULATION,
RULE, INJUNCTION, JUDGMENT, ORDER, DECREE, RULING, CHARGE, OR OTHER RESTRICTION
OF ANY GOVERNMENT, GOVERNMENTAL AGENCY, OR COURT TO WHICH THE SELLER IS SUBJECT
OR (II) CONFLICT WITH, RESULT IN A BREACH OF, CONSTITUTE A DEFAULT UNDER, RESULT
IN THE ACCELERATION OF, CREATE IN ANY PARTY THE RIGHT TO ACCELERATE, TERMINATE,
MODIFY, OR CANCEL, OR REQUIRE ANY NOTICE UNDER ANY AGREEMENT, CONTRACT, LEASE,
LICENSE, INSTRUMENT, OR OTHER ARRANGEMENT TO WHICH THE SELLER IS A PARTY OR BY
WHICH HE OR IT IS BOUND OR TO WHICH ANY, OF HIS OR ITS ASSETS IS SUBJECT.

 

(C)                                  BROKERS’ FEES.  EXCEPT FOR
GOLDSMITH-AGIO-HELMS, WHOSE FEES AND EXPENSES SHALL BE PAID BY TRACE AT CLOSING,
THE SELLERS HAVE NO LIABILITY OR OBLIGATION TO PAY ANY FEES OR COMMISSIONS TO
ANY BROKER, FINDER, OR AGENT WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT FOR WHICH THE BUYER COULD BECOME LIABLE OR OBLIGATED.

 

(D)                                 INVESTMENT.  THE SELLER (I) UNDERSTANDS THAT
THE GEOKINETICS SHARES HAVE NOT BEEN, AND, EXCEPT AS PROVIDED IN THE
REGISTRATION RIGHTS AGREEMENT, WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT,
OR UNDER ANY STATE SECURITIES LAWS, AND ARE BEING OFFERED AND SOLD IN RELIANCE
UPON FEDERAL AND STATE EXEMPTIONS FOR TRANSACTIONS NOT INVOLVING ANY PUBLIC
OFFERING, (II) IS ACQUIRING THE GEOKINETICS SHARES SOLELY FOR HIS OR ITS OWN
ACCOUNT FOR INVESTMENT PURPOSES, AND NOT WITH A VIEW TO THE DISTRIBUTION
THEREOF, (III) HAS KNOWLEDGE AND EXPERIENCE IN BUSINESS AND FINANCIAL

 

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MATTERS, (IV) HAS RECEIVED CERTAIN INFORMATION CONCERNING THE BUYER AND HAS HAD
THE OPPORTUNITY TO OBTAIN ADDITIONAL INFORMATION AS DESIRED IN ORDER TO EVALUATE
THE MERITS AND THE RISKS INHERENT IN HOLDING THE GEOKINETICS SHARES AND (V) IS
ABLE TO BEAR THE ECONOMIC RISK AND LACK OF LIQUIDITY INHERENT IN HOLDING THE
GEOKINETICS SHARES.

 

(E)                                  TRACE COMMON STOCK.  THE SELLER HOLDS OF
RECORD AND OWNS BENEFICIALLY THE NUMBER OF TRACE COMMON STOCK SET FORTH NEXT TO
HIS OR ITS NAME IN SCHEDULE 4.22(A), FREE AND CLEAR OF ANY RESTRICTIONS ON
TRANSFER (OTHER THAN ANY RESTRICTIONS UNDER THE SECURITIES ACT AND STATE
SECURITIES LAWS), TAXES, ENCUMBRANCES, OPTIONS, WARRANTS, PURCHASE RIGHTS,
CONTRACTS, COMMITMENTS, EQUITIES AND DEMANDS.  THE SELLER IS NOT A PARTY TO ANY
OPTION, WARRANT, PURCHASE RIGHT, OR OTHER CONTRACT OR COMMITMENT THAT COULD
REQUIRE THE SELLER TO SELL, TRANSFER, OR OTHERWISE DISPOSE OF ANY CAPITAL STOCK
OF TRACE (OTHER THAN THIS AGREEMENT).  THE SELLER IS NOT A PARTY TO ANY VOTING
TRUST, PROXY, OR OTHER AGREEMENT OR UNDERSTANDING WITH RESPECT TO THE VOTING OF
ANY CAPITAL STOCK OF TRACE.

 

SECTION 3.2                                   REPRESENTATIONS AND WARRANTIES OF
THE BUYER.

 

The Buyer represents and warrants to the Sellers the following, except as set
forth on Schedule 3.2:

 

(A)                                  ORGANIZATION.  THE BUYER IS A CORPORATION
DULY ORGANIZED, VALIDLY EXISTING, AND IN GOOD STANDING UNDER THE LAWS OF THE
JURISDICTION OF ITS INCORPORATION.

 

(B)                                 AUTHORIZATION OF TRANSACTION.  THE BUYER HAS
FULL POWER AND AUTHORITY (INCLUDING FULL CORPORATE POWER AND AUTHORITY) TO
EXECUTE AND DELIVER THIS AGREEMENT AND TO PERFORM ITS OBLIGATIONS HEREUNDER AND
THE BOARD OF DIRECTORS OF BUYER HAS APPROVED THIS AGREEMENT AND TRANSACTIONS
CONTEMPLATED HEREIN.  THIS AGREEMENT CONSTITUTES THE VALID AND LEGALLY BINDING
OBLIGATION OF THE BUYER, ENFORCEABLE IN ACCORDANCE WITH ITS TERMS AND
CONDITIONS.  THE BUYER IS NOT REQUIRED TO GIVE ANY NOTICE TO, MAKE ANY FILING
WITH, OR OBTAIN ANY AUTHORIZATION, CONSENT, OR APPROVAL OF ANY GOVERNMENT OR
GOVERNMENTAL AGENCY IN ORDER TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.

 

(C)                                  NONCONTRAVENTION.  NEITHER THE EXECUTION
AND THE DELIVERY OF THIS AGREEMENT, NOR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY, WILL (I) VIOLATE ANY CONSTITUTION, STATUTE, REGULATION,
RULE, INJUNCTION, JUDGMENT, ORDER, DECREE, RULING, CHARGE, OR OTHER RESTRICTION
OF ANY GOVERNMENT, GOVERNMENTAL AGENCY, OR COURT TO WHICH THE BUYER IS SUBJECT
OR ANY PROVISION OF ITS CHARTER OR BYLAWS OR (II) CONFLICT WITH, RESULT IN A
BREACH OF, CONSTITUTE A DEFAULT UNDER, RESULT IN THE ACCELERATION OF, CREATE IN
ANY PARTY THE RIGHT TO ACCELERATE, TERMINATE, MODIFY, OR CANCEL, OR REQUIRE ANY
NOTICE UNDER ANY AGREEMENT, CONTRACT, LEASE, LICENSE, INSTRUMENT, OR OTHER
ARRANGEMENT TO WHICH THE BUYER IS A PARTY OR BY WHICH IT IS BOUND OR TO WHICH
ANY OF ITS ASSETS IS SUBJECT.

 

(D)                                 BROKERS’ FEES.  THE BUYER DOES NOT HAVE ANY
LIABILITY OR OBLIGATION TO PAY ANY FEES OR COMMISSIONS TO ANY BROKER, FINDER, OR
AGENT WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT FOR WHICH
ANY SELLER COULD BECOME LIABLE OR OBLIGATED.

 

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(E)                                  INVESTMENT.  THE BUYER IS NOT ACQUIRING
TRACE COMMON STOCK WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT.

 

(F)                                    COMPANY SHARES AND SEC REPORTS.  BUYER
HAS FILED ALL REPORTS REQUIRED TO BE FILED BY IT UNDER THE SECURITIES ACT AND
THE EXCHANGE ACT, INCLUDING PURSUANT TO SECTION 13(A) OR 15(D) THEREOF, FOR THE
TWELVE (12) MONTHS PRECEDING THE DATE HEREOF (OR SUCH SHORTER PERIOD AS THE
COMPANY WAS REQUIRED BY LAW TO FILE SUCH MATERIAL) (THE FOREGOING MATERIALS,
INCLUDING THE EXHIBITS THERETO, BEING COLLECTIVELY REFERRED TO HEREIN AS THE
“SEC REPORTS”) ON A TIMELY BASIS OR HAS RECEIVED A VALID EXTENSION OF SUCH TIME
OF FILING AND HAS FILED ANY SUCH SEC REPORTS PRIOR TO THE EXPIRATION OF ANY SUCH
EXTENSION.  AS OF THEIR RESPECTIVE DATES, THE SEC REPORTS COMPLIED IN ALL
MATERIAL RESPECTS WITH THE REQUIREMENTS OF THE SECURITIES ACT AND THE EXCHANGE
ACT AND THE RULES AND REGULATIONS OF THE SEC PROMULGATED THEREUNDER, AND NONE OF
THE SEC REPORTS, WHEN FILED, CONTAINED ANY UNTRUE STATEMENT OF A MATERIAL FACT
OR OMITTED TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY
IN ORDER TO MAKE THE STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER
WHICH THEY WERE MADE, NOT MISLEADING.

 

ARTICLE IV.
REPRESENTATIONS AND WARRANTIES CONCERNING THE CORPORATIONS

 

Each of the Sellers represents and warrants to Buyer, jointly and not severally,
as set forth below.  Each representation and warranty of the Sellers in this
Article IV shall be deemed true and correct except to the extent that any Breach
of such representations and warranties would result in a material adverse effect
on the business, results of operations or financial position of the
Corporations.  The representations and warranties set forth in Article IV are
generally subject to the exceptions set forth in Schedules 4.1 to 4.31 (it is
acknowledged and agreed that it is unnecessary for a disclosure made in one such
Schedule to expressly qualify a particular representation made in Article IV),
as specifically identified in Schedules 4.1 to 4.31 and as may be modified
pursuant to disclosures made pursuant to Section 5.4.

 

SECTION 4.1                                   CORPORATE ORGANIZATION; ETC.

 

Each of the Corporations is a corporation duly organized, validly existing and
in good standing under its jurisdiction of incorporation. The Corporations have
full corporate power and authority to carry on their business as they are now
being conducted and to own the properties and assets they now own.  The
Corporations are duly qualified or licensed to do business and is in good
standing in each jurisdiction listed on Schedule 4.1.  Except as set forth on
Schedule 4.1, there is no other jurisdiction in which the character or location
of the properties owned or leased by the Corporations or the nature of the
business conducted by the Corporations makes such qualification or licensing
necessary.  Schedule 4.1 sets forth the capitalization of each of the Minority
Subsidiaries and the equity ownership of each such Minority Subsidiary by the
Corporations.  Trace Explorations Ltd. (Sucrsal Argentine) is an unincorporated
branch of Trace doing business in Argentina.

 

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SECTION 4.2                                   AUTHORIZATION, ETC.

 

The Corporations have taken all action required by applicable Legal
Requirements, the Corporations’ Governing Documents or otherwise to authorize
the transactions contemplated in this Agreement.

 

SECTION 4.3                                   NO VIOLATION.

 

The Corporations are not subject to, nor a party to, any contract, instrument or
other commitment that would prevent the consummation of the transactions
contemplated in this Agreement.  Except as set forth in Schedule 4.3, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will, directly or indirectly (with or without
notice or lapse of time), (a) Breach (i) any provision of any of the Governing
Documents of the Corporations or (ii) any resolution adopted by the board of
directors or the shareholders of the Corporations; (b) Breach or give any
Governmental Body or other Person the right to challenge any of the transactions
contemplated hereby or to exercise any remedy or obtain any relief under any
Legal Requirement or any Order to which any Corporation or any of its assets,
may be subject; (c) contravene, conflict with or result in a violation or Breach
of any of the terms or requirements of, or give any Governmental Body the right
to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by the Corporations or that otherwise relates to the
Corporations’ assets or to the business of the Corporations; (d) cause the Buyer
to become subject to, or to become liable for the payment of, any Tax payable by
the Corporations not accrued for or reflected in the Financial Statements;
(e) Breach any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or payment under, or to cancel, terminate or modify, any contract to which the
either Corporation is a party; or (f) result in the imposition or creation of
any Encumbrance, other than a Permitted Encumbrance, upon or with respect to any
of the Corporations’ assets.

 

SECTION 4.4                                   CONSENTS.

 

Except as set forth in Schedule 4.4, neither Corporation is required to give any
notice to or obtain any consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
transactions contemplated hereby.

 

SECTION 4.5                                   ACCOUNTS RECEIVABLE.

 

All Accounts Receivable that are reflected on the Interim Consolidated Balance
Sheet or on the accounting records of the Corporations as of the Closing Date
represent or will represent valid obligations arising from sales actually made
or services actually performed by the Corporations and the Minority Subsidiaries
in the Ordinary Course of Business.  Except to the extent paid prior to the
Closing Date, such Accounts Receivable are or will be as of the Closing Date
collectible net of the respective reserves shown on the Interim Consolidated
Balance Sheet or Adjusted Purchase Price Notice (as it may be re-calculated
pursuant to Section 2.4) (which reserves are adequate and calculated consistent
with past practice).  There is no contest, claim, defense or right of setoff,
other than returns in the Ordinary Course of Business of the Corporations, under
any Contract with any account debtor of an Account Receivable relating to

 

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the amount or validity of such Account Receivable.  Schedule 4.5 contains a
complete and accurate list of all Accounts Receivable of the Corporations as of
the date of the Interim Consolidated Balance Sheet, which list sets forth the
aging of each such Account Receivable.

 

SECTION 4.6                                   FINANCIAL STATEMENTS.

 

(A)                                 SCHEDULE 4.6 CONTAINS A TRUE AND CORRECT
COPY OF (I) AN UNAUDITED CONSOLIDATED BALANCE SHEET OF TRACE AT MAY 31, 2005,
AND THE RELATED STATEMENTS OF INCOME, SHAREHOLDERS’ EQUITY AND CASH FLOWS FOR
THE PERIOD THEN ENDED (“INTERIM CONSOLIDATED BALANCE SHEET”), AND (II) AUDITED
FINANCIAL STATEMENTS OF TRACE AS OF DECEMBER 31 OF EACH OF 2002, 2003 AND 2004,
AND SCHEDULE 4.6 WILL CONTAIN, WITHIN 20 DAYS AFTER THE DATE OF THIS AGREEMENT,
A TRUE AND CORRECT COPY OF AN UNAUDITED CONSOLIDATED BALANCE SHEET OF TRACE AT
JUNE 30, 2005, AND THE RELATED STATEMENTS OF INCOME, SHAREHOLDERS’ EQUITY AND
CASH FLOWS FOR THE PERIOD THEN ENDED (THE FINANCIAL STATEMENTS DESCRIBED IN
CLAUSES (I), (II) AND (III) ABOVE ARE COLLECTIVELY REFERRED TO AS THE “FINANCIAL
STATEMENTS”).  EXCEPT AS NOTED ON SCHEDULE 4.6 OR IN THE FINANCIAL STATEMENTS
AND EXCEPT FOR NORMAL YEAR-END ADJUSTMENTS, THE FINANCIAL STATEMENTS WERE
PREPARED IN ACCORDANCE WITH CANADIAN GAAP AND PRESENT FAIRLY, IN ALL MATERIAL
RESPECTS, THE FINANCIAL POSITION OF THE CORPORATIONS AT THE RESPECTIVE DATES
THEREOF AND THE OPERATING INCOME OF THE CORPORATIONS FOR THE RESPECTIVE PERIODS
THEN ENDED.

 

(B)                                 TRACE HAS NO DEBT EXCEPT AS SET FORTH IN THE
INTERIM CONSOLIDATED BALANCE SHEET OR THE ADJUSTED PURCHASE PRICE NOTICE (AS IT
MAY BE RE-CALCULATED PURSUANT TO SECTION 2.4).

 

SECTION 4.7                                   INVENTORIES.

 

The Corporations have no Inventories.

 

SECTION 4.8                                   REAL PROPERTY.

 

The Corporations do not own any fee simple interest in real property. 
Schedule 4.8 lists and describes briefly all real property leased or subleased
to the Corporations.   The Corporations have made available to the Buyer correct
and complete copies of the leases and subleases listed in Schedule 4.8, each as
amended to date.  With respect to each lease and sublease listed in
Schedule 4.8, and any amendment thereto:

 

(A)                                 THE LEASE OR SUBLEASE, AND ANY AMENDMENT
THERETO, IS LEGAL, VALID, BINDING, ENFORCEABLE, AND IN FULL FORCE AND EFFECT;

 

(B)                                 THE LEASE OR SUBLEASE WILL (SUBJECT TO
LANDLORD APPROVAL, AS SET FORTH ON SCHEDULE 4.4 OR 4.8) CONTINUE TO BE LEGAL,
VALID, BINDING, ENFORCEABLE, AND IN FULL FORCE AND EFFECT ON THE SAME TERMS
FOLLOWING THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY;

 

(C)                                  THE CORPORATIONS ARE NOT AND TO THE
KNOWLEDGE OF THE SELLERS, NO OTHER PARTY TO THE LEASE OR SUBLEASE IS, IN BREACH
OR DEFAULT, AND NO EVENT HAS OCCURRED WHICH, WITH NOTICE OR LAPSE OF TIME, WOULD
CONSTITUTE A BREACH OR DEFAULT OR PERMIT TERMINATION, MODIFICATION, OR
ACCELERATION THEREUNDER;

 

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(D)                                 THE CORPORATIONS HAVE NOT AND, TO THE
KNOWLEDGE OF THE SELLERS, NO OTHER PARTY TO THE LEASE OR SUBLEASE HAS,
REPUDIATED ANY PROVISION THEREOF;

 

(E)                                  THERE ARE NO DISPUTES, ORAL AGREEMENTS, OR
FORBEARANCE PROGRAMS IN EFFECT AS TO THE LEASE OR SUBLEASE;

 

(F)                                   WITH RESPECT TO EACH SUBLEASE, NEITHER THE
CORPORATIONS NOR ANY SELLER HAS TAKEN ANY ACTION THAT WOULD CAUSE THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTIONS 4.8(A) THROUGH 4.8(E) ABOVE
TO BE UNTRUE OR INCORRECT WITH RESPECT TO THE UNDERLYING LEASE;

 

(G)                                  THE CORPORATIONS HAVE NOT ASSIGNED,
TRANSFERRED, CONVEYED, MORTGAGED, DEEDED IN TRUST, OR ENCUMBERED ANY INTEREST IN
THE LEASEHOLD OR SUBLEASEHOLD; AND

 

(H)                                 ALL FACILITIES LEASED OR SUBLEASED
THEREUNDER ARE SUPPLIED WITH UTILITIES AND OTHER SERVICES NECESSARY FOR THE
OPERATION OF SAID FACILITIES AS CURRENTLY OPERATED BY THE CORPORATIONS.

 

SECTION 4.9                                   ABSENCE OF CERTAIN CHANGES.

 

Except as and to the extent set forth in Schedule 4.9, or as permitted by the
Agreement or consented to by the Buyer, since December 31, 2004, the
Corporations have conducted their business only in the Ordinary Course of
Business and there has not been any:

 

(A)                                 CHANGE IN THE CORPORATIONS’ AUTHORIZED OR
ISSUED CAPITAL STOCK, GRANT OF ANY STOCK OPTION OR RIGHT TO PURCHASE SHARES OF
CAPITAL STOCK OF THE CORPORATIONS OR ISSUANCE OF ANY SECURITY CONVERTIBLE INTO
SUCH CAPITAL STOCK;

 

(B)                                 AMENDMENT TO THE GOVERNING DOCUMENTS OF THE
CORPORATIONS;

 

(C)                                  PAYMENT (EXCEPT IN THE ORDINARY COURSE OF
BUSINESS) OR INCREASE BY THE CORPORATIONS OF ANY BONUSES, SALARIES OR OTHER
COMPENSATION TO ANY SHAREHOLDER, DIRECTOR OR OFFICER OR ENTRY INTO ANY
EMPLOYMENT, SEVERANCE OR SIMILAR CONTRACT WITH ANY DIRECTOR OR OFFICER PROVIDING
FOR AN ANNUAL RATE OF COMPENSATION EXCEEDING CDN$50,000.00 AND THAT IS NOT
CANCELABLE WITH NO MORE THAN 90 DAYS NOTICE;

 

(D)                                 ADOPTION OF, AMENDMENT TO OR INCREASE IN THE
PAYMENTS TO OR BENEFITS UNDER, ANY EMPLOYEE PLAN;

 

(E)                                  DAMAGE TO OR DESTRUCTION OR LOSS IN EXCESS
OF CDN$25,000.00 TO ANY ASSET OF THE CORPORATIONS, WHETHER OR NOT COVERED BY
INSURANCE;

 

(F)                                   EXCEPT AS IS DESCRIBED IN
SCHEDULE 4.13(A), (B), (C), OR (D) ENTRY INTO, TERMINATION OF OR RECEIPT OF
NOTICE OF TERMINATION OF (I) ANY LICENSE, DISTRIBUTORSHIP, DEALER, SALES
REPRESENTATIVE, JOINT VENTURE CONTRACT TO WHICH THE EITHER CORPORATION IS A
PARTY, OR (II) ANY CONTRACT OR TRANSACTION (OTHER THAN ANY CONTRACT OR
TRANSACTION INVOLVING THE PERFORMANCE OF SERVICES OR DELIVERY OF GOODS OR
MATERIALS BY ANY CORPORATION OR TO ANY CORPORATION IN THE ORDINARY COURSE OF
BUSINESS) INVOLVING A TOTAL REMAINING COMMITMENT BY EITHER CORPORATION OF AT
LEAST CDN$25,000.00;

 

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(G)                                  SALE (OTHER THAN SALES OF INVENTORIES OR
SERVICES IN THE ORDINARY COURSE OF BUSINESS OF THE CORPORATIONS), LEASE OR OTHER
DISPOSITION OF ANY ASSET OR PROPERTY OF EITHER CORPORATION (INCLUDING THE
INTELLECTUAL PROPERTY ASSETS) WHERE THE PROCEEDS FROM SUCH DISPOSITION EXCEEDED
CDN$25,000.00 OR THE CREATION OF ANY ENCUMBRANCE ON ANY ASSET WITH A BOOK VALUE
GREATER THAN CDN$25,000.00;

 

(H)                                 CANCELLATION OR WAIVER OF ANY CLAIMS OR
RIGHTS WITH A VALUE TO ANY CORPORATION IN EXCESS OF CDN$25,000.00;

 

(I)                                     NOTIFICATION BY ANY CUSTOMER OR SUPPLIER
OF DISCONTINUANCE OF OR CHANGES TO THE TERMS OF ITS RELATIONSHIP WITH EITHER
CORPORATION;

 

(J)                                    MATERIAL CHANGE IN THE ACCOUNTING METHODS
USED BY THE CORPORATIONS; OR

 

(K)                                 CONTRACT BY THE CORPORATIONS  TO DO ANY OF
THE FOREGOING.

 

SECTION 4.10                            NO MATERIAL CHANGE.

 

Except as set forth in Schedule 4.10, or, as may be shown in the Adjusted
Purchase Price Notice (as it may be re-calculated pursuant to Section 2.4) since
the date of the Interim Consolidated Balance Sheet, there has not been any
material adverse change in the business, assets, liabilities (contingent or
otherwise), results of operations or financial position, of the Corporations.

 

SECTION 4.11                            LITIGATION.

 

(a)                                 Except as set forth in Schedule 4.11, there
is no pending (which, for the purpose of this Agreement, shall mean a Proceeding
notice of which has been received by either of the Corporations) or, to the
Sellers’ Knowledge, threatened Proceeding:

 

(I)                                     BY OR AGAINST EITHER CORPORATION, OR
THAT OTHERWISE RELATES TO OR MAY MATERIALLY ADVERSELY AFFECT THE BUSINESS OF, OR
ANY OF THE ASSETS OWNED OR USED BY, EITHER CORPORATION; OR

 

(II)                                  THAT CHALLENGES, OR THAT MAY HAVE THE
EFFECT OF PREVENTING, DELAYING, MAKING ILLEGAL OR OTHERWISE INTERFERING WITH,
ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.

 

To the Knowledge of the Sellers or the Corporations, no event has occurred or
circumstance exists that is reasonably likely to give rise to or serve as a
basis for the commencement of any such Proceeding.  The Corporations have made
available to the Buyer copies of all pleadings, correspondence and other
documents relating to each Proceeding listed in Schedule 4.11.

 

(B)                                 EXCEPT AS SET FORTH IN SCHEDULE 4.11:

 

(I)                                     THERE IS NO ORDER TO WHICH THE
CORPORATIONS, THEIR BUSINESS OR ANY OF THE CORPORATIONS ‘ ASSETS IS SUBJECT; AND

 

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(II)                                  NO OFFICER, DIRECTOR, AGENT OR EMPLOYEE OF
THE CORPORATIONS IS SUBJECT TO ANY ORDER THAT PROHIBITS SUCH OFFICER, DIRECTOR,
AGENT OR EMPLOYEE FROM ENGAGING IN OR CONTINUING ANY CONDUCT, ACTIVITY OR
PRACTICE RELATING TO THE BUSINESS OF THE CORPORATIONS.

 

(C)                                  EXCEPT AS SET FORTH IN SCHEDULE 4.11:

 

(I)                                     THE CORPORATIONS ARE, AND, AT ALL TIMES
SINCE DECEMBER 31, 2002, HAVE BEEN IN COMPLIANCE WITH ALL OF THE TERMS AND
REQUIREMENTS OF EACH ORDER TO WHICH IT OR ANY OF THE CORPORATIONS’ ASSETS IS OR
HAS BEEN SUBJECT;

 

(II)                                  TO SELLERS’ KNOWLEDGE, NO EVENT HAS
OCCURRED OR CIRCUMSTANCE EXISTS THAT IS REASONABLY LIKELY TO CONSTITUTE OR
RESULT IN (WITH OR WITHOUT NOTICE OR LAPSE OF TIME) A VIOLATION OF OR FAILURE TO
COMPLY WITH ANY TERM OR REQUIREMENT OF ANY ORDER TO WHICH THE CORPORATIONS OR
ANY OF THE CORPORATIONS ASSETS ARE SUBJECT; AND

 

(III)                               THE CORPORATIONS HAVE NOT RECEIVED, AT ANY
TIME SINCE DECEMBER 31, 2002, ANY NOTICE OR OTHER COMMUNICATION (WHETHER ORAL OR
WRITTEN) FROM ANY GOVERNMENTAL BODY OR ANY OTHER PERSON REGARDING ANY ACTUAL OR
ALLEGED VIOLATION OF, OR FAILURE TO COMPLY WITH, ANY ORDER TO WHICH THE
CORPORATIONS OR ANY OF THE CORPORATIONS’ ASSETS IS OR HAS BEEN SUBJECT.

 

SECTION 4.12                            INTELLECTUAL PROPERTY.

 

(A)                                 EXCEPT AS SET FORTH IN SCHEDULE 4.12(A), ALL
OF THE CORPORATIONS’ INTELLECTUAL PROPERTY IS VESTED IN AND BENEFICIALLY OWNED
BY THE CORPORATIONS FREE AND CLEAR OF ANY ENCUMBRANCES.  EXCEPT AS DISCLOSED IN
SCHEDULE 4.12(A), THE CORPORATIONS HAVE NO INTELLECTUAL PROPERTY REGISTERED WITH
ANY GOVERNMENTAL BODY.

 

(B)                                 EXCEPT AS SET FORTH IN SCHEDULE 4.12(B), THE
CORPORATIONS HAVE NOT GRANTED ANY LICENSE UNDER ANY OF THE INTELLECTUAL PROPERTY
TO ANY OTHER PERSON.

 

(C)                                  EXCEPT AS SET FORTH IN SCHEDULE 4.12(C),
THE CORPORATIONS DO NOT REQUIRE A LICENSE OR RIGHT UNDER OR IN RESPECT OF ANY
INTELLECTUAL PROPERTY OF ANY OTHER PERSON TO CONDUCT THEIR BUSINESS AS IT IS
CONDUCTED AS OF THE DATE OF THIS AGREEMENT AND NO SUBSTANTIAL PART OF THE
BUSINESS IS CARRIED ON UNDER THE AGREEMENT OR CONSENT OF ANY OTHER PERSON NOR IS
THERE ANY AGREEMENT WITH ANY OTHER PERSON WHICH SIGNIFICANTLY RESTRICTS THE
FIELDS IN WHICH THE CORPORATIONS’ BUSINESS MAY BE CARRIED ON.

 

(D)                                 NO DISCLOSURE HAS BEEN MADE TO ANY PERSON OF
THE KNOW-HOW OR FINANCIAL OR TRADE SECRETS OF THE CORPORATIONS, EXCEPT IN THE
ORDINARY COURSE OF BUSINESS AND ON THE EXPECTATION THAT SUCH DISCLOSURE IS TO BE
TREATED AS BEING OF A CONFIDENTIAL NATURE.

 

(E)                                  EXCEPT AS SET FORTH ON SCHEDULE 4.12(E):
(I) NONE OF THE PROCESSES CURRENTLY USED BY THE CORPORATIONS OR ANY OF THE
PROPERTIES, PRODUCTS OR SERVICES CURRENTLY SOLD BY THE CORPORATIONS OR ANY
INTELLECTUAL PROPERTY INFRINGES THE INTELLECTUAL PROPERTY RIGHTS OF ANY OTHER
PERSON; AND (II) NEITHER THE CORPORATIONS NOR ANY SELLER HAS RECEIVED ANY NOTICE
OF ADVERSE CLAIM

 

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OR THREAT OF ADVERSE CLAIM BY ANY PERSON WITH RESPECT THERETO, AND, TO THE
KNOWLEDGE OF SELLERS OR THE CORPORATIONS, NO BASIS EXISTS FOR ANY SUCH CLAIM.

 

SECTION 4.13                            CONTRACTS.

 

(A)                                 SCHEDULE 4.13(A) CONTAINS AN ACCURATE AND
COMPLETE LIST, AND THE CORPORATIONS HAVE MADE AVAILABLE TO BUYER ACCURATE AND
COMPLETE SUMMARIES OR COPIES, OF:

 

(I)                                     EACH CONTRACT BETWEEN EITHER CORPORATION
AND A RELATED PARTY;

 

(II)                                  EACH CONTRACT THAT INVOLVES PERFORMANCE OF
SERVICES OR DELIVERY OF GOODS OR MATERIALS BY EITHER CORPORATION OR TO EITHER
CORPORATION, AS THE CASE MAY BE, (A) OF AN AMOUNT OR VALUE IN EXCESS OF
CDN$100,000.00 AND (B) THAT IS NOT CANCELABLE WITH NO MORE THAN 90 DAYS NOTICE;

 

(III)                               EACH CONTRACT OF EITHER CORPORATION THAT WAS
NOT ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS AND THAT INVOLVES
EXPENDITURES OR RECEIPTS OF SUCH CORPORATION IN EXCESS OF CDN$25,000.00;

 

(IV)                              EACH CONTRACT OF EITHER CORPORATION AFFECTING
THE OWNERSHIP OF, LEASING OF, TITLE TO, USE OF  OR ANY LEASEHOLD OR OTHER
INTEREST IN ANY REAL OR PERSONAL PROPERTY (EXCEPT PERSONAL PROPERTY LEASES AND
INSTALLMENT AND CONDITIONAL SALES AGREEMENTS HAVING A VALUE PER ITEM OR
AGGREGATE PAYMENTS OF LESS THAN CDN$25,000.00 AND WITH A TERM OF LESS THAN ONE
YEAR);

 

(V)                                 EACH CONTRACT OF EITHER CORPORATION WITH ANY
LABOR UNION OR OTHER EMPLOYEE REPRESENTATIVE OF A GROUP OF EMPLOYEES RELATING TO
WAGES, HOURS AND OTHER CONDITIONS OF EMPLOYMENT;

 

(VI)                              EACH CONTRACT (HOWEVER NAMED) INVOLVING AN
EXPRESS PROVISION FOR THE SHARING OF PROFITS, LOSSES, COSTS OR LIABILITIES BY
EITHER CORPORATION WITH ANY OTHER PERSON RATHER THAN DIRECT PAYMENTS FOR GOODS
OR SERVICES;

 

(VII)                           EACH CONTRACT CONTAINING EXPRESS COVENANTS THAT
RESTRICT EITHER CORPORATION’S BUSINESS ACTIVITIES OR THE ABILITY COMPETE WITH
ANY PERSON;

 

(VIII)                        EACH CONTRACT PROVIDING FOR PAYMENTS TO OR BY
EITHER CORPORATION BASED ON SALES, PURCHASES OR PROFITS, OTHER THAN DIRECT
PAYMENTS FOR GOODS OR SERVICES;

 

(IX)                              EACH POWER OF ATTORNEY OF EITHER CORPORATION
THAT IS CURRENTLY EFFECTIVE AND OUTSTANDING;

 

(X)                                 EACH CONTRACT ENTERED INTO OTHER THAN IN THE
ORDINARY COURSE OF BUSINESS THAT CONTAINS OR PROVIDES FOR AN EXPRESS UNDERTAKING
BY EITHER CORPORATION TO BE RESPONSIBLE FOR CONSEQUENTIAL DAMAGES;

 

(XI)                              EACH CONTRACT FOR CAPITAL EXPENDITURES BY
EITHER CORPORATION IN EXCESS OF $25,000.00;

 

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(XII)                           EACH NON-TERMINATED OR NON-EXPIRED LEGALLY
BINDING AGREEMENT OR CONTRACT OF EITHER CORPORATION MADE ORALLY BY EITHER
CORPORATION;

 

(XIII)                        EACH GUARANTEE BY EITHER CORPORATION OF THE
OBLIGATIONS OF ANY PERSON OR ENTITY (OTHER THAN ONE OF THE CORPORATIONS);

 

(XIV)                       ANY LETTERS OF CREDIT ISSUED ON BEHALF OF EITHER
CORPORATION TO OR FOR THE BENEFIT OF ANY CREDITOR OR OTHER THIRD PERSON OR
ENTITY; AND

 

(XV)                          EACH EFFECTIVE AMENDMENT, SUPPLEMENT AND
MODIFICATION (MADE IN WRITING) IN RESPECT OF ANY OF THE FOREGOING.

 

(B)                                 EXCEPT AS SET FORTH IN SCHEDULE 4.13(B), NO
SELLER HAS (OR HAS A RIGHT TO ACQUIRE) ANY RIGHTS OF ANY CORPORATION OR ANY OF
THE CORPORATIONS’ ASSETS.

 

(C)                                  EXCEPT AS SET FORTH IN SCHEDULE 4.13(C):

 

(I)                                     UNLESS COMPLETED IN THE ORDINARY COURSE
OF BUSINESS OR DISCHARGED DUE TO THE BANKRUPTCY OF A PARTY THERETO, EACH
CONTRACT IDENTIFIED OR REQUIRED TO BE IDENTIFIED IN SCHEDULE 4.13(A) IS IN FULL
FORCE AND EFFECT AND IS VALID AND ENFORCEABLE IN ACCORDANCE WITH ITS TERMS; AND

 

(II)                                  NO CONTRACT IDENTIFIED OR REQUIRED TO BE
IDENTIFIED IN SCHEDULE 4.13(A) IS SUBJECT TO CANCELLATION OR TERMINATION AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED HEREIN.

 

(D)                                 EXCEPT AS SET FORTH IN SCHEDULE 4.13(D):

 

(I)                                     THE CORPORATIONS HAVE, AND AT ALL TIMES
SINCE DECEMBER 31, 2004, HAVE BEEN, IN COMPLIANCE WITH ALL APPLICABLE TERMS AND
REQUIREMENTS OF EACH CONTRACT TO WHICH EITHER CORPORATION IS A PARTY;

 

(II)                                  TO THE SELLERS’ KNOWLEDGE, EACH OTHER
PERSON THAT HAS OR HAD ANY OBLIGATION OR LIABILITY UNDER ANY CONTRACT TO WHICH
ANY CORPORATION IS A PARTY IS, AND AT ALL TIMES SINCE DECEMBER 31, 2004, HAS
BEEN, IN FULL COMPLIANCE WITH ALL APPLICABLE TERMS AND REQUIREMENTS OF SUCH
CONTRACT;

 

(III)                               TO THE SELLERS’ KNOWLEDGE, NO EVENT HAS
OCCURRED OR CIRCUMSTANCE EXISTS THAT (WITH OR WITHOUT NOTICE OR LAPSE OF TIME)
MAY CONTRAVENE, CONFLICT WITH OR RESULT IN A BREACH OF, OR GIVE THE CORPORATIONS
OR OTHER PERSON THE RIGHT TO DECLARE A DEFAULT OR EXERCISE ANY REMEDY UNDER, OR
TO ACCELERATE THE MATURITY OR PERFORMANCE OF, OR PAYMENT UNDER, OR TO CANCEL,
TERMINATE OR MODIFY, ANY CONTRACT TO WHICH EITHER CORPORATION IS A PARTY;

 

(IV)                              TO THE SELLERS’ KNOWLEDGE, NO EVENT HAS
OCCURRED OR CIRCUMSTANCE EXISTS UNDER OR BY VIRTUE OF ANY CONTRACT THAT (WITH OR
WITHOUT NOTICE OR LAPSE OF TIME) WOULD CAUSE THE CREATION OF ANY ENCUMBRANCE
AFFECTING ANY OF THE CORPORATIONS’ ASSETS; AND

 

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(V)                                 THE CORPORATIONS HAVE NOT GIVEN TO OR
RECEIVED FROM ANY OTHER PERSON, AT ANY TIME SINCE DECEMBER 31, 2004, ANY WRITTEN
NOTICE OR OTHER COMMUNICATION (WHETHER ORAL OR WRITTEN) REGARDING ANY ACTUAL OR
ALLEGED VIOLATION OR BREACH OF, OR DEFAULT UNDER, ANY CONTRACT TO WHICH EITHER
CORPORATION IS A PARTY.

 

(E)                                  THERE ARE NO RENEGOTIATIONS OF, ATTEMPTS TO
RENEGOTIATE OR OUTSTANDING RIGHTS TO RENEGOTIATE ANY AMOUNTS PAID OR PAYABLE TO
THE EITHER CORPORATION UNDER CURRENT OR COMPLETED CONTRACTS WITH ANY PERSON
HAVING THE CONTRACTUAL OR STATUTORY RIGHT TO DEMAND OR REQUIRE SUCH
RENEGOTIATION AND NO SUCH PERSON HAS MADE WRITTEN DEMAND FOR SUCH RENEGOTIATION.

 

SECTION 4.14                            CUSTOMERS AND SUPPLIERS.

 

Except as set forth in Schedule 4.14, since December 31, 2004, no supplier,
customer, distributor or third party sales representative has canceled or
otherwise terminated, or given notice of intent to cancel or otherwise
terminate, for any reason, its relationship with either Corporation.

 

SECTION 4.15                            EMPLOYEE BENEFIT PLANS.

 

(A)                                 SET FORTH IN SCHEDULE 4.15(A) IS A COMPLETE
AND CORRECT LIST OF ALL “EMPLOYEE BENEFIT PLANS” AS DEFINED BY SECTION 3(3) OF
ERISA, ALL SPECIFIED FRINGE BENEFIT PLANS AS DEFINED IN SECTION 6039D OF THE
CODE, AND ALL OTHER BONUS, INCENTIVE-COMPENSATION, DEFERRED-COMPENSATION,
PROFIT-SHARING, STOCK-OPTION, STOCK-APPRECIATION-RIGHT, STOCK-BONUS,
STOCK-PURCHASE, EMPLOYEE-STOCK-OWNERSHIP, SAVINGS, SAVINGS PLANS (REGISTERED OR
NON-REGISTERED) SEVERANCE, CHANGE-IN-CONTROL, SUPPLEMENTAL-UNEMPLOYMENT, LAYOFF,
SALARY-CONTINUATION, RETIREMENT, PENSION, HEALTH, LIFE-INSURANCE, DISABILITY,
ACCIDENT, GROUP-INSURANCE, VACATION, HOLIDAY, SICK-LEAVE, FRINGE-BENEFIT OR
WELFARE PLAN, AND ANY OTHER EMPLOYEE COMPENSATION OR BENEFIT PLAN, AGREEMENT,
POLICY, PRACTICE, COMMITMENT, CONTRACT OR UNDERSTANDING (WHETHER QUALIFIED OR
NONQUALIFIED, CURRENTLY EFFECTIVE OR TERMINATED, WRITTEN OR UNWRITTEN) AND ANY
TRUST, ESCROW OR OTHER AGREEMENT RELATED THERETO THAT (I) IS SPONSORED,
MAINTAINED OR CONTRIBUTED TO BY THE CORPORATIONS OR REQUIRED TO BE SPONSORED,
MAINTAINED OR CONTRIBUTED TO BY THE CORPORATIONS WITHIN THE SIX YEARS PRIOR TO
THE CLOSING DATE; AND (II) PROVIDES BENEFITS, OR DESCRIBES POLICIES OR
PROCEDURES APPLICABLE TO ANY CURRENT OR FORMER DIRECTOR, OFFICER, EMPLOYEE OR
SERVICE PROVIDER OF THE CORPORATIONS, OR THE DEPENDENTS OF ANY THEREOF,
REGARDLESS OF HOW (OR WHETHER) LIABILITIES FOR THE PROVISION OF BENEFITS ARE
ACCRUED OR ASSETS ARE ACQUIRED OR DEDICATED WITH RESPECT TO THE FUNDING THEREOF
(COLLECTIVELY THE “EMPLOYEE PLANS”).  THE CORPORATIONS DO NOT SPONSOR, MAINTAIN
OR CONTRIBUTE TO ANY EMPLOYEE PLAN THAT IS A “DEFINED BENEFIT PLAN” (AS DEFINED
IN SECTION 414(J) OF THE CODE), A PLAN INTENDED TO MEET THE REQUIREMENTS OF
SECTION 401(A) OF THE CODE, OR A “MULTIEMPLOYER PLAN” (AS DEFINED IN
SECTION 3(37) OF ERISA) (A “MULTIEMPLOYER PLAN”), AND HAVE NOT SPONSORED,
MAINTAINED OR CONTRIBUTED TO, OR HAD ANY OBLIGATION TO CONTRIBUTE TO, ANY SUCH
EMPLOYEE PLAN WITHIN THE SIX YEARS PRECEDING THE CLOSING DATE.  THE ONLY
EMPLOYEE WELFARE BENEFIT PLAN SPONSORED, MAINTAINED OR CONTRIBUTED TO BY THE
CORPORATIONS WITHIN THE SIX YEARS PRECEDING THE DATE OF THIS AGREEMENT IS A
FULLY INSURED GROUP HEALTH PLAN.

 

(B)                                 EACH OF THE CORPORATIONS HAVE MADE AVAILABLE
TO THE BUYER TRUE, ACCURATE AND COMPLETE COPIES OF (I) THE DOCUMENTS COMPRISING
EACH EMPLOYEE PLAN (OR, WITH RESPECT TO ANY EMPLOYEE PLAN WHICH IS UNWRITTEN, A
DETAILED WRITTEN DESCRIPTION OF ELIGIBILITY, PARTICIPATION,

 

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BENEFITS, FUNDING ARRANGEMENTS, ASSETS AND ANY OTHER MATTERS WHICH RELATE TO THE
OBLIGATIONS OF EACH OF THE CORPORATIONS); (II) ALL TRUST AGREEMENTS, INSURANCE
CONTRACTS OR ANY OTHER FUNDING INSTRUMENTS RELATED TO THE EMPLOYEE PLANS;
(III) ALL RULINGS, DETERMINATION LETTERS, NO-ACTION LETTERS OR ADVISORY OPINIONS
FROM THE IRS, THE U.S. DEPARTMENT OF LABOR, THE PBGC OR ANY OTHER GOVERNMENTAL
BODY THAT PERTAIN TO EACH EMPLOYEE PLAN AND ANY OPEN REQUESTS THEREFOR; (IV) THE
MOST RECENT ACTUARIAL (IF APPLICABLE) AND FINANCIAL REPORTS (AUDITED AND/OR
UNAUDITED) AND THE ANNUAL REPORTS FILED WITH ANY GOVERNMENT BODY WITH RESPECT TO
THE EMPLOYEE PLANS DURING THE CURRENT YEAR; (V) ALL SECURITIES REGISTRATION
STATEMENTS FILED WITH RESPECT TO ANY EMPLOYEE PLAN; (VI) ALL CONTRACTS WITH
THIRD-PARTY ADMINISTRATORS, ACTUARIES, INVESTMENT MANAGERS, CONSULTANTS AND
OTHER INDEPENDENT CONTRACTORS THAT RELATE TO ANY EMPLOYEE PLAN, AND (VII) WITH
RESPECT TO ANY EMPLOYEE PLANS THAT ARE SUBJECT TO TITLE IV OF ERISA, THE MOST
RECENT FORM PBGC-1 FILED FOR SUCH PLAN.

 

(C)                                  EXCEPT AS DISCLOSED IN SCHEDULE 4.15(C),
FULL PAYMENT HAS BEEN MADE OF ALL AMOUNTS THAT ARE REQUIRED UNDER THE TERMS OF
EACH EMPLOYEE PLAN AND APPLICABLE LEGAL REQUIREMENTS TO BE PAID BY THE
CORPORATIONS AS CONTRIBUTIONS WITH RESPECT TO ALL PERIODS PRIOR TO AND INCLUDING
THE LAST DAY OF THE MOST RECENT FISCAL YEAR OF SUCH EMPLOYEE PLAN ENDED ON OR
BEFORE THE DATE OF THIS AGREEMENT AND ALL PERIODS THEREAFTER PRIOR TO THE
CLOSING DATE.  TRACE TEXAS HAS PAID IN FULL ALL REQUIRED INSURANCE PREMIUMS,
SUBJECT ONLY TO NORMAL RETROSPECTIVE ADJUSTMENTS IN THE ORDINARY COURSE, WITH
REGARD TO THE EMPLOYEE PLANS FOR ALL POLICY YEARS OR OTHER APPLICABLE POLICY
PERIODS ENDING ON OR BEFORE THE CLOSING DATE.

 

(D)                                 WITH RESPECT TO ANY EMPLOYEE PENSION BENEFIT
PLAN AND ANY EMPLOYEE WELFARE BENEFIT PLAN WHICH IS SPONSORED, MAINTAINED, OR
CONTRIBUTED TO, OR HAS BEEN SPONSORED, MAINTAINED OR CONTRIBUTED TO WITHIN SIX
YEARS PRIOR TO THE CLOSING DATE, BY THE CORPORATIONS OR ANY OTHER CORPORATION OR
TRADE OR BUSINESS CONTROLLED BY, CONTROLLING OR UNDER COMMON CONTROL WITH THE
CORPORATIONS (WITHIN THE MEANING OF SECTION 414 OF THE CODE OR
SECTION 4001(A)(14) OR 4001(B) OF ERISA) (“ERISA AFFILIATE”), NEITHER TRACE
TEXAS NOR ANY ERISA AFFILIATE HAS ANY LIABILITY OR HAS KNOWLEDGE OF ANY FACTS OR
CIRCUMSTANCES THAT MIGHT GIVE RISE TO ANY LIABILITY OF THE CORPORATIONS FOR, OR
THE IMPOSITION OF A LIEN ON ANY OF THEIR ASSETS OR WITH RESPECT TO ANY OF THEIR
ASSETS, AND THE TRANSACTIONS CONTEMPLATED HEREBY WILL NOT RESULT IN ANY
LIABILITY FOR (I) THE TERMINATION OF OR WITHDRAWAL FROM ANY EMPLOYEE PENSION
BENEFIT PLAN UNDER SECTIONS 4062, 4063 OR 4064 OF ERISA; (II) ANY LIEN IMPOSED
UNDER SECTION 302(F) OF ERISA OR SECTION 412(N) OF THE CODE; (III) ANY INTEREST
PAYMENTS REQUIRED UNDER SECTION 302(E) OF ERISA OR SECTION 412(M) OF THE CODE;
(IV) ANY EXCISE TAX IMPOSED BY SECTION 4971 OF THE CODE; (V) ANY MINIMUM FUNDING
CONTRIBUTIONS UNDER SECTION 302(C)(11) OF ERISA OR SECTION 412(C)(11) OF THE
CODE; OR (VI) WITHDRAWAL FROM ANY MULTIEMPLOYER PLAN UNDER SECTION 4201 OF
ERISA.

 

(E)                                  TRACE TEXAS HAS, AT ALL TIMES, COMPLIED,
AND CURRENTLY COMPLIES, IN ALL MATERIAL RESPECTS WITH THE APPLICABLE
CONTINUATION REQUIREMENTS FOR ITS WELFARE BENEFIT PLANS THAT ARE “GROUP HEALTH
PLANS” WITHIN THE MEANING OF SECTION 5000(B)(I) OF THE CODE, INCLUDING
(1) SECTION 4980B OF THE CODE (AS WELL AS ITS PREDECESSOR PROVISION,
SECTION 162(K) OF THE CODE) AND SECTIONS 601 THROUGH 608, INCLUSIVE, OF ERISA,
WHICH PROVISIONS ARE HEREINAFTER REFERRED TO COLLECTIVELY AS “COBRA” AND (2) ANY
APPLICABLE STATE STATUTES MANDATING HEALTH INSURANCE CONTINUATION COVERAGE FOR
EMPLOYEES.

 

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(F)                                   THE FORM OF ALL EMPLOYEE PLANS IS IN
COMPLIANCE WITH THE APPLICABLE TERMS OF ERISA, THE CODE, AND ANY OTHER
APPLICABLE LEGAL REQUIREMENTS, AND SUCH PLANS HAVE BEEN OPERATED IN COMPLIANCE
WITH SUCH LAWS AND THE WRITTEN EMPLOYEE PLAN DOCUMENTS.  ALL REQUIRED REPORTS
AND DESCRIPTIONS OF THE EMPLOYEE PLANS (INCLUDING INTERNAL REVENUE SERVICE
FORM 5500 ANNUAL REPORTS, SUMMARY ANNUAL REPORTS AND SUMMARY PLAN DESCRIPTIONS
AND SUMMARIES OF MATERIAL MODIFICATIONS) HAVE BEEN (WHEN REQUIRED) TIMELY FILED
WITH THE IRS, THE U.S. DEPARTMENT OF LABOR OR OTHER GOVERNMENTAL BODY AND
DISTRIBUTED AS REQUIRED, AND ALL NOTICES REQUIRED BY ERISA OR THE CODE OR ANY
OTHER LEGAL REQUIREMENT WITH RESPECT TO THE EMPLOYEE PLANS HAVE BEEN
APPROPRIATELY GIVEN.

 

(G)                                  THERE IS NO MATERIAL PENDING OR THREATENED
PROCEEDING RELATING TO ANY EMPLOYEE PLAN, NOR IS THERE ANY BASIS FOR ANY SUCH
PROCEEDING OTHER THAN ANY PENDING ROUTINE DETERMINATION FILINGS, IF ANY. 
NEITHER TRACE TEXAS NOR ANY FIDUCIARY OF AN EMPLOYEE PLAN HAS ENGAGED IN A
TRANSACTION WITH RESPECT TO ANY EMPLOYEE PLAN THAT, ASSUMING THE TAXABLE PERIOD
OF SUCH TRANSACTION EXPIRED AS OF THE DATE HEREOF, COULD SUBJECT TRACE TEXAS OR
BUYER TO A TAX OR PENALTY IMPOSED BY EITHER SECTION 4975 OF THE CODE OR
SECTION 502(L) OF ERISA OR A VIOLATION OF SECTION 406 OF ERISA.  THE
TRANSACTIONS CONTEMPLATED HEREBY WILL NOT RESULT IN THE POTENTIAL ASSESSMENT OF
A TAX OR PENALTY UNDER SECTION 4975 OF THE CODE OR SECTION 502(L) OF ERISA NOR
RESULT IN A VIOLATION OF SECTION 406 OF ERISA.

 

(H)                                 TRACE TEXAS HAS MAINTAINED WORKERS’
COMPENSATION COVERAGE AS REQUIRED BY APPLICABLE STATE, PROVINCIAL, OR
TERRITORIAL LAW THROUGH PURCHASE OF INSURANCE AND NOT BY SELF-INSURANCE OR
OTHERWISE EXCEPT AS DISCLOSED TO BUYER ON SCHEDULE 4.15(I).

 

(I)                                     EXCEPT AS REQUIRED BY LEGAL REQUIREMENTS
OR AS SET OUT IN SCHEDULE 4.15(J), THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY WILL NOT ACCELERATE THE TIME OF VESTING OR THE TIME OF
PAYMENT, OR INCREASE THE AMOUNT, OF COMPENSATION DUE TO ANY DIRECTOR, EMPLOYEE,
OFFICER, FORMER EMPLOYEE OR FORMER OFFICER OF THE CORPORATIONS.

 

(J)                                    EXCEPT FOR THE CONTINUATION COVERAGE
REQUIREMENTS OF COBRA, THE CORPORATIONS HAVE NO OBLIGATIONS OR POTENTIAL
LIABILITY FOR BENEFITS TO EMPLOYEES, FORMER EMPLOYEES OR THEIR RESPECTIVE
DEPENDENTS FOLLOWING TERMINATION OF EMPLOYMENT OR RETIREMENT UNDER ANY OF THE
EMPLOYEE PLANS THAT ARE EMPLOYEE WELFARE BENEFIT PLANS.

 

(K)                                 NONE OF THE TRANSACTIONS CONTEMPLATED HEREBY
WILL RESULT IN AN AMENDMENT, MODIFICATION OR TERMINATION OF ANY OF THE EMPLOYEE
PLANS. NO WRITTEN OR ORAL REPRESENTATIONS HAVE BEEN MADE TO ANY EMPLOYEE OR
FORMER EMPLOYEE OF THE CORPORATIONS PROMISING OR GUARANTEEING ANY EMPLOYER
PAYMENT OR FUNDING FOR THE CONTINUATION OF MEDICAL, DENTAL, LIFE OR DISABILITY
COVERAGE FOR ANY PERIOD OF TIME BEYOND THE END OF THE CURRENT PLAN YEAR (EXCEPT
TO THE EXTENT OF COVERAGE REQUIRED UNDER COBRA). NO WRITTEN OR ORAL
REPRESENTATIONS HAVE BEEN MADE BY THE CORPORATIONS TO ANY EMPLOYEE OR FORMER
EMPLOYEE OF THE CORPORATIONS CONCERNING THE EMPLOYEE BENEFITS OF THE BUYER.

 

(L)                                     ALL EMPLOYEE PLANS OF THE CORPORATIONS
OTHER THAN THE US PLANS (AS DEFINED IN PARAGRAPH (O) BELOW) HAVE BEEN DULY
REGISTERED, WHERE REQUIRED, AND ARE IN GOOD STANDING UNDER ALL APPLICABLE
LEGISLATION (FOREIGN OR DOMESTIC), INCLUDING, WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, THE TAX ACT, THE EMPLOYMENT PENSION PLANS ACT (ALBERTA), OR
SIMILAR LEGISLATION IN

 

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ANY OTHER JURISDICTION AND ALL REQUIRED EMPLOYER CONTRIBUTIONS UNDER ANY SUCH
PLAN(S) OR POLICIES HAVE BEEN MADE AND NO PAST SERVICE FUNDING LIABILITIES EXIST
THEREUNDER.

 

(M)                             NOTWITHSTANDING ANY PROVISION TO THE CONTRARY
ABOVE, ANY REPRESENTATION THAT IS MADE CONCERNING AN EMPLOYEE PLAN AND ITS
COMPLIANCE WITH ERISA, THE CODE OR ANY APPLICABLE LEGAL REQUIREMENTS UNDER U.S.
LAW, OR WHERE THE IRS, PBGC, ERISA, THE CODE OR ANY APPLICABLE LEGAL REQUIREMENT
UNDER U.S. LAW IS REFERRED TO IN THE CONTEXT OF SUCH EMPLOYEE PLAN, SUCH
REPRESENTATION IS HEREBY LIMITED TO EMPLOYEE PLANS THAT ARE SPONSORED,
CONTRIBUTED TO OR MAINTAINED BY THE CORPORATIONS OR ANY OF THEIR SUBSIDIARIES IN
THE UNITED STATES ON BEHALF OF EMPLOYEES EMPLOYED BY SUCH ENTITIES IN THE UNITED
STATES (“US PLANS”) AND NO REPRESENTATION IS MADE IN SUCH REGARD CONCERNING ANY
EMPLOYEE PLANS THAT ARE NOT US PLANS.

 

SECTION 4.16                            COMPLIANCE WITH LAW.

 

(A)                                 EXCEPT AS SET FORTH IN SCHEDULE 4.16(A),

 

(I)                                     THE CORPORATIONS ARE, AND AT ALL TIMES
SINCE DECEMBER 31, 2002, HAVE BEEN, IN FULL COMPLIANCE WITH EACH LEGAL
REQUIREMENT THAT IS OR WAS APPLICABLE TO THEM OR TO THE CONDUCT OR OPERATION OF
ITS BUSINESS OR THE OWNERSHIP OR USE OF ANY OF ITS ASSETS IN ALL MATERIAL
RESPECTS;

 

(II)                                  NO EVENT HAS OCCURRED SINCE DECEMBER 31,
2002 OR CIRCUMSTANCE EXISTS SINCE DECEMBER 31, 2002 THAT (WITH OR WITHOUT NOTICE
OR LAPSE OF TIME) (A) IS LIKELY TO CONSTITUTE OR RESULT IN A VIOLATION BY EITHER
CORPORATION OF, OR A FAILURE ON THE PART OF EITHER CORPORATION TO COMPLY WITH,
ANY LEGAL REQUIREMENT OR (B) IS LIKELY TO GIVE RISE TO ANY OBLIGATION ON THE
PART OF EITHER CORPORATION TO UNDERTAKE, OR TO BEAR ALL OR ANY PORTION OF THE
COST OF, ANY REMEDIAL ACTION OF ANY NATURE; AND

 

(III)                               NEITHER CORPORATION HAS RECEIVED, AT ANY
TIME SINCE DECEMBER 31, 2002, ANY NOTICE OR OTHER COMMUNICATION (WHETHER ORAL OR
WRITTEN) FROM ANY GOVERNMENTAL BODY OR ANY OTHER PERSON REGARDING (A) ANY ACTUAL
OR ALLEGED VIOLATION OF, OR FAILURE TO COMPLY WITH, ANY LEGAL REQUIREMENT OR
(B) ANY ACTUAL OR ALLEGED OBLIGATION ON THE PART OF THE CORPORATIONS TO
UNDERTAKE, OR TO BEAR ALL OR ANY PORTION OF THE COST OF, ANY REMEDIAL ACTION OF
ANY NATURE.

 

(B)                                 SCHEDULE 4.16(B) CONTAINS A COMPLETE AND
ACCURATE LIST OF EACH GOVERNMENTAL AUTHORIZATION THAT IS HELD BY THE
CORPORATIONS OR THAT OTHERWISE RELATES TO THE CORPORATIONS’ BUSINESS OR ITS
ASSETS.  EACH GOVERNMENTAL AUTHORIZATION NEEDED BY THE CORPORATIONS FOR THE
CONDUCT OF ITS BUSINESS IS VALID AND IN FULL FORCE AND EFFECT.  EXCEPT AS SET
FORTH IN SCHEDULE 4.16(B):

 

(I)                                     THE CORPORATIONS ARE, AND AT ALL TIMES
SINCE DECEMBER 31, 2002, HAVE BEEN, IN FULL COMPLIANCE WITH ALL OF THE TERMS AND
REQUIREMENTS OF EACH GOVERNMENTAL AUTHORIZATION IDENTIFIED OR REQUIRED TO BE
IDENTIFIED IN SCHEDULE 4.16(B);

 

(II)                                  NO EVENT HAS OCCURRED SINCE DECEMBER 31,
2002 OR CIRCUMSTANCE EXISTS SINCE DECEMBER 31, 2002 THAT IS LIKELY TO
(A) CONSTITUTE OR RESULT DIRECTLY OR INDIRECTLY IN A

 

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VIOLATION OF OR A FAILURE TO COMPLY WITH ANY TERM OR REQUIREMENT OF ANY
GOVERNMENTAL AUTHORIZATION OR (B) RESULT DIRECTLY OR INDIRECTLY IN THE
REVOCATION, WITHDRAWAL, SUSPENSION, CANCELLATION OR TERMINATION OF, OR ANY
MODIFICATION TO, ANY GOVERNMENTAL AUTHORIZATION NEEDED BY EITHER CORPORATION FOR
THE CONDUCT OF ITS BUSINESS AS PRESENTLY CONDUCTED;

 

(III)                               NEITHER CORPORATION HAS RECEIVED, AT ANY
TIME SINCE DECEMBER 31, 2002, ANY NOTICE OR OTHER COMMUNICATION (WHETHER ORAL OR
WRITTEN) FROM ANY GOVERNMENTAL BODY OR ANY OTHER PERSON REGARDING (A) ANY ACTUAL
OR ALLEGED VIOLATION OF OR FAILURE TO COMPLY WITH ANY TERM OR REQUIREMENT OF ANY
GOVERNMENTAL AUTHORIZATION OR (B) ANY ACTUAL OR PROPOSED REVOCATION, WITHDRAWAL,
SUSPENSION, CANCELLATION, TERMINATION OF OR MODIFICATION TO ANY GOVERNMENTAL
AUTHORIZATION; AND

 

(IV)                              SINCE DECEMBER 31, 2002 ALL APPLICATIONS
REQUIRED TO HAVE BEEN FILED FOR THE RENEWAL OF THE GOVERNMENTAL AUTHORIZATIONS
NECESSARY OF THE CONDUCT OF THE CORPORATIONS’ BUSINESS HAVE BEEN DULY FILED ON A
TIMELY BASIS WITH THE APPROPRIATE GOVERNMENTAL BODIES, AND ALL OTHER FILINGS
REQUIRED TO HAVE BEEN MADE WITH RESPECT TO SUCH GOVERNMENTAL AUTHORIZATIONS HAVE
BEEN DULY MADE ON A TIMELY BASIS WITH THE APPROPRIATE GOVERNMENTAL BODIES.

 

(C)                                  THE GOVERNMENTAL AUTHORIZATIONS LISTED IN
SCHEDULE 4.16(B) COLLECTIVELY CONSTITUTE ALL OF THE GOVERNMENTAL AUTHORIZATIONS
NECESSARY TO PERMIT THE CORPORATIONS TO LAWFULLY CONDUCT AND OPERATE THEIR
BUSINESS IN THE MANNER IN WHICH IT CURRENTLY CONDUCTS AND OPERATES SUCH BUSINESS
AND TO PERMIT THE CORPORATIONS TO OWN AND USE THEIR ASSETS IN THE MANNER IN
WHICH THEY CURRENTLY OWN AND USE SUCH ASSETS.

 

(D)                                 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS SECTION 4.16, THE PROVISIONS OF THIS SECTION 4.16 SHALL NOT RELATE TO OR
COVER COMPLIANCE WITH LEGAL REQUIREMENTS RELATED TO: (I) EMPLOYEE PLANS OF THE
CORPORATION OR ANY OF THEIR ERISA AFFILIATES, WHICH ARE COVERED EXCLUSIVELY BY
SECTION 4.15; OR (II) ENVIRONMENTAL LAW, WHICH IS COVERED EXCLUSIVELY BY
SECTION 4.19.

 

SECTION 4.17                            TAXES.

 

(A)                                 TAX RETURNS FILED AND TAXES PAID.  THE
CORPORATIONS HAVE FILED OR CAUSED TO BE FILED ON A TIMELY BASIS ALL TAX RETURNS
AND ALL REPORTS WITH RESPECT TO TAXES THAT ARE OR WERE REQUIRED TO BE FILED
PURSUANT TO APPLICABLE LEGAL REQUIREMENTS.  TRACE TEXAS WILL FILE ALL TAX
RETURNS AND REPORTS REQUIRED TO BE FILED IN RESPECT OF ITS FISCAL YEAR ENDED
DECEMBER 31, 2004, ON OR BEFORE SEPTEMBER 15, 2005.  ALL TAX RETURNS AND REPORTS
FILED BY THE CORPORATIONS ARE TRUE, CORRECT AND COMPLETE (PROVIDED THAT THIS
REPRESENTATION SHALL NOT BE CONSTRUED AS A REPRESENTATION AS TO THE EXISTENCE,
AVAILABILITY OR VALUE TO THE BUYER OF ANY NET OPERATING LOSS, FOREIGN TAX CREDIT
OR OTHER TAX ATTRIBUTES OF THE CORPORATIONS AS OF THE CLOSING TIME).  EACH OF
THE SELLERS AND THE CORPORATIONS, AS THE CASE MAY BE, HAS PAID, OR MADE
PROVISION FOR THE PAYMENT OF, ALL TAXES FOR WHICH THEY ARE RESPONSIBLE THAT HAVE
OR MAY HAVE BECOME DUE FOR ALL PERIODS COVERED BY THE TAX RETURNS OR OTHERWISE,
OR PURSUANT TO ANY ASSESSMENT RECEIVED BY THE CORPORATIONS, EXCEPT SUCH TAXES,
IF ANY, AS ARE LISTED IN SCHEDULE 4.17 AND ARE BEING CONTESTED IN GOOD FAITH AND
AS TO WHICH ADEQUATE RESERVES (DETERMINED IN ACCORDANCE WITH US GAAP OR CANADIAN
GAAP, AS APPLICABLE)

 

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HAVE BEEN PROVIDED IN THE INTERIM CONSOLIDATED BALANCE SHEET AND THE FINANCIAL
STATEMENTS.  EXCEPT AS PROVIDED IN SCHEDULE 4.17, NONE OF THE CORPORATIONS ARE
CURRENTLY THE BENEFICIARY OF ANY EXTENSION OF TIME WITHIN WHICH TO FILE ANY TAX
RETURN.  NO CLAIM HAS EVER BEEN MADE OR IS EXPECTED TO BE MADE BY ANY
GOVERNMENTAL BODY IN A JURISDICTION WHERE EITHER CORPORATION DOES NOT FILE TAX
RETURNS THAT IT IS OR MAY BE SUBJECT TO TAXATION BY THAT JURISDICTION.  THERE
ARE NO ENCUMBRANCES ON ANY OF THE ASSETS OF THE CORPORATIONS THAT AROSE IN
CONNECTION WITH ANY FAILURE TO PAY ANY TAX (OTHER THAN TAXES NOT YET DUE AND
PAYABLE), AND THE SELLERS HAVE NO KNOWLEDGE OF ANY CLAIMS ATTRIBUTABLE TO TAXES
WHICH, IF ADVERSELY DETERMINED, WOULD RESULT IN ANY SUCH ENCUMBRANCE.

 

(B)                                 DELIVERY OF TAX RETURNS AND INFORMATION
REGARDING AUDITS AND POTENTIAL AUDITS.  THE SELLERS HAVE MADE AVAILABLE TO BUYER
COPIES OF, AND SCHEDULE 4.17 CONTAINS A COMPLETE AND ACCURATE COPY OF, ALL
FEDERAL, STATE, PROVINCIAL, TERRITORIAL, LOCAL, AND FOREIGN INCOME TAX RETURNS
OF THE CORPORATIONS (OTHER THAN TAX RETURNS FOR SALES AND USE TAXES) FILED SINCE
DECEMBER 31, 2000.  SCHEDULE 4.17 CONTAINS A COMPLETE AND ACCURATE LIST OF ALL
PENDING AUDITS AND TAX DISPUTES.  NEITHER THE CORPORATIONS NOR ANY SELLER
EXPECTS ANY UNDISCLOSED DEFICIENCIES IN PAYMENT OF TAX TO BE ASSERTED WITH
RESPECT TO ANY SUCH AUDIT.  ANY SUCH DEFICIENCIES PROPOSED AS A RESULT OF SUCH
AUDITS HAVE BEEN PAID, RESERVED AGAINST, SETTLED OR ARE BEING CONTESTED IN GOOD
FAITH.  THE SELLERS HAVE MADE AVAILABLE TO BUYER, COPIES OF ANY EXAMINATION
REPORTS, STATEMENTS OR DEFICIENCIES OR SIMILAR ITEMS WITH RESPECT TO SUCH AUDITS
IN EITHER CORPORATION’S POSSESSION.  EXCEPT AS PROVIDED IN SCHEDULE 4.17, THE
SELLERS HAVE NO KNOWLEDGE THAT ANY GOVERNMENTAL BODY IS LIKELY TO ASSESS ANY
ADDITIONAL TAXES FOR ANY PERIOD FOR WHICH TAX RETURNS HAVE BEEN FILED.  EXCEPT
AS PROVIDED IN SCHEDULE 4.17, THERE IS NO DISPUTE OR CLAIM CONCERNING ANY TAXES
OF THE CORPORATIONS EITHER (I) CLAIMED OR RAISED BY ANY GOVERNMENTAL BODY IN
WRITING OR (II) AS TO WHICH THE SELLERS HAVE KNOWLEDGE.  EXCEPT AS DESCRIBED IN
SCHEDULE 4.17, NEITHER CORPORATION HAS BEEN GIVEN OR BEEN REQUESTED TO GIVE
WAIVERS OR EXTENSIONS (OR IS OR WOULD BE SUBJECT TO A WAIVER OR EXTENSION GIVEN
BY ANY OTHER PERSON) OF ANY STATUTE OF LIMITATIONS RELATING TO THE PAYMENT OF
TAXES OF EITHER CORPORATION OR FOR WHICH EITHER CORPORATION MAY BE LIABLE.

 

(C)                                  POST-CLOSING TAX LIABILITIES.  THE UNPAID
TAXES OF THE CORPORATIONS DO NOT, AS OF THE CLOSING DATE, EXCEED THE RESERVE FOR
TAX LIABILITY (RATHER THAN ANY RESERVE FOR DEFERRED TAXES ESTABLISHED TO REFLECT
TIMING DIFFERENCES BETWEEN BOOK AND TAX INCOME) SET FORTH ON THE FACE OF THE
INTERIM CONSOLIDATED BALANCE SHEET.  EXCEPT AS DISCLOSED IN SCHEDULE 4.17, SINCE
DECEMBER 31, 2004, NEITHER CORPORATION HAS RECEIVED NOTICE OF ANY PROPOSED TAX
ASSESSMENT OR DEFICIENCY AGAINST EITHER CORPORATION.  SINCE THE DATE OF THE
INTERIM CONSOLIDATED BALANCE SHEET, THE CORPORATIONS HAVE NOT INCURRED ANY
LIABILITY FOR TAXES ARISING FROM EXTRAORDINARY GAINS OR LOSSES, AS THAT TERM IS
USED IN CANADIAN GAAP.

 

(D)                                 TRANSACTIONS AFFECTING POST-CLOSING TAX
YEARS.  THE CORPORATIONS WILL NOT BE REQUIRED TO INCLUDE ANY ITEM OF INCOME IN,
OR EXCLUDE ANY ITEM OF DEDUCTION FROM, TAXABLE INCOME FOR ANY TAXABLE PERIOD (OR
PORTION THEREOF) ENDING AFTER THE CLOSING DATE AS A RESULT OF ANY (I) CHANGE IN
METHOD OF ACCOUNTING FOR A TAXABLE PERIOD ENDING ON OR PRIOR TO THE CLOSING
DATE, (II) ”CLOSING AGREEMENT” AS DESCRIBED IN CODE SECTION 7121 (OR ANY
CORRESPONDING PROVISION OR SIMILAR PROVISION OF FEDERAL, STATE, PROVINCIAL,
TERRITORIAL, LOCAL OR FOREIGN INCOME TAX LAW) EXECUTED ON OR PRIOR TO THE
CLOSING DATE, (III) INSTALLMENT SALE OR OPEN TRANSACTION

 

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DISPOSITION MADE ON OR PRIOR TO THE CLOSING DATE, OR (IV) PREPAID AMOUNT
RECEIVED ON OR PRIOR TO THE CLOSING DATE.

 

(E)                                  SPECIFIC POTENTIAL TAX LIABILITIES AND TAX
SITUATIONS.  EXCEPT AS PROVIDED IN SCHEDULE 4.17:

 

(I)                                     WITHHOLDING.  ALL TAXES THAT THE
CORPORATIONS ARE OR WERE REQUIRED BY LEGAL REQUIREMENTS TO WITHHOLD, DEDUCT OR
COLLECT PRIOR TO THE CLOSING DATE HAVE BEEN OR WILL BE DULY WITHHELD, DEDUCTED
AND COLLECTED AND, TO THE EXTENT REQUIRED, WILL BE PAID TO THE PROPER
GOVERNMENTAL BODY OR OTHER PERSON.

 

(II)                                  TAX SHARING OR SIMILAR AGREEMENTS.  THERE
IS NO TAX SHARING AGREEMENT, TAX ALLOCATION AGREEMENT, TAX INDEMNITY OBLIGATION
OR SIMILAR WRITTEN OR UNWRITTEN AGREEMENT OR PRACTICE WITH RESPECT TO TAXES
(INCLUDING ANY ADVANCE PRICING AGREEMENT, CLOSING AGREEMENT OR OTHER ARRANGEMENT
RELATING TO TAXES) THAT WILL REQUIRE ANY PAYMENT BY EITHER CORPORATION AFTER THE
CLOSING.

 

(III)                               CONSOLIDATED GROUP.  NEITHER CORPORATION
(I) HAS BEEN A MEMBER OF AN AFFILIATED GROUP (OR ANY SIMILAR GROUP DEFINED UNDER
A SIMILAR PROVISION OF FEDERAL, STATE, PROVINCIAL, TERRITORIAL, LOCAL OR FOREIGN
LAW) AND (II) HAS NO LIABILITY FOR TAXES OF ANY PERSON (OTHER THAN THE
CORPORATIONS) UNDER §1.1502-6 OF THE TREASURY REGULATIONS (OR ANY SIMILAR
PROVISION OF STATE, LOCAL OR FOREIGN LAW), AS A TRANSFEREE OR SUCCESSOR BY
CONTRACT OR OTHERWISE.

 

(IV)                              LISTED TRANSACTIONS.  IN THE PAST SIX YEARS,
NEITHER CORPORATION HAS EVER PARTICIPATED IN A TRANSACTION THAT HAS BEEN
SPECIFICALLY IDENTIFIED BY THE IRS AS A “LISTED” TRANSACTION FOR PURPOSES OF
§1.6011-4(B) OF THE TREASURY REGULATIONS AND HAS NOT DISCLOSED ANY TRANSACTIONS
TO THE IRS UNDER ANY PENALTY AMNESTY PROGRAM.

 

(V)                                 GOLDEN PARACHUTE AGREEMENTS.  NEITHER
CORPORATION IS A PARTY TO ANY AGREEMENT, CONTRACT OR PLAN THAT AS A RESULT OF
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY COULD RESULT,
SEPARATELY OR IN THE AGGREGATE, IN THE PAYMENT OF (I) ANY “EXCESS PARACHUTE
PAYMENT” WITHIN THE MEANING OF CODE SECTION 280G (OR ANY CORRESPONDING PROVISION
OF FEDERAL, STATE, PROVINCIAL, TERRITORIAL, LOCAL OR FOREIGN TAX LAW) AND
(II) ANY AMOUNT THAT WILL NOT BE FULLY DEDUCTIBLE AS A RESULT OF CODE
SECTION 162(M) (OR ANY CORRESPONDING PROVISION OF STATE, LOCAL OR FOREIGN TAX
LAW).

 

(VI)                              ARRANGEMENT CONSTITUTING A PARTNERSHIP. 
NEITHER CORPORATION IS SUBJECT TO ANY JOINT VENTURE, PARTNERSHIP OR OTHER
ARRANGEMENT OR CONTRACT THAT IS TREATED AS A PARTNERSHIP FOR FEDERAL OR
APPLICABLE STATE INCOME TAX PURPOSES OR FOR ANY OTHER TAX PURPOSES.

 

(VII)                           TAX ATTRIBUTES.  SUBJECT TO THE GENERAL
QUALIFICATION MADE IN SECTION 4.17(A) THAT NO REPRESENTATION WILL BE MADE AS THE
ACTUAL VALUE OF SUCH AMOUNTS, SCHEDULE 4.17(F)(VII) SETS FORTH THE ESTIMATED
AMOUNT OF ANY NET OPERATING LOSS, NET CAPITAL LOSS, UNUSED INVESTMENT, FOREIGN
TAX OR OTHER CREDIT, OR EXCESS CHARITABLE CONTRIBUTION ALLOCABLE TO EITHER
CORPORATION AS OF DECEMBER 31, 2004.

 

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(F)                                   SINCE DECEMBER 31, 2004, THE CORPORATIONS
HAVE NOT:

 

(I)                                     MADE ANY ELECTION UNDER SECTION 85 OF
THE TAX ACT WITH RESPECT TO THE ACQUISITION OR DISPOSITION OF ANY PROPERTY;

 

(II)                                  MADE ANY ELECTION UNDER SECTION 83 OR 196
OF THE TAX ACT; OR

 

(III)                               DISCONTINUED CARRYING ON ANY BUSINESS IN
RESPECT OF WHICH ANY UNUTILIZED NON-CAPITAL LOSSES WERE INCURRED.

 

(G)                                  THE CORPORATIONS HAVE MADE ALL ELECTIONS
REQUIRED TO BE MADE UNDER THE TAX ACT IN CONNECTION WITH ANY DISTRIBUTIONS BY IT
AND ALL SUCH ELECTIONS WERE TRUE AND CORRECT AND IN THE PRESCRIBED FORM AND WERE
MADE WITHIN THE PRESCRIBED TIME PERIODS;

 

(H)                                 THE YEAR END OF THE CORPORATIONS FOR INCOME
TAX PURPOSES IS DECEMBER 31;

 

(I)                                     THE SELLERS ARE EACH A NON-RESIDENT
PERSON WITHIN THE MEANING OF THE TAX ACT;

 

(J)                                    TRACE IS A TAXABLE CANADIAN CORPORATION
WITHIN THE MEANING OF THE TAX ACT.

 

SECTION 4.18                            INSURANCE.

 

(A)                                 EXCEPT AS SET FORTH IN SCHEDULE 4.18(A), THE
CORPORATIONS HAVE MADE AVAILABLE TO BUYER ACCURATE AND COMPLETE COPIES OF:

 

(I)                                     ALL POLICIES OF INSURANCE (AND
CORRESPONDENCE RELATING TO COVERAGE THEREUNDER) TO WHICH ANY CORPORATION IS A
PARTY OR UNDER WHICH ANY CORPORATION IS OR HAS BEEN COVERED AT ANY TIME SINCE
DECEMBER 31, 2004;

 

(II)                                  ALL PENDING APPLICATIONS BY THE
CORPORATIONS FOR POLICIES OF INSURANCE; AND

 

(III)                               ANY WRITTEN STATEMENT BY THE AUDITOR OF
TRACE’S FINANCIAL STATEMENTS OR ANY CONSULTANT OR RISK MANAGEMENT ADVISOR WITH
REGARD TO THE INADEQUACY OF THE CORPORATIONS’ COVERAGE OR OF THE RESERVES FOR
CLAIMS RECEIVED BY THE CORPORATIONS SINCE JUNE 30, 2004.

 

(B)                                 EXCEPT AS SET FORTH IN SCHEDULE 4.18(B), THE
CORPORATIONS:

 

(I)                                     DO NOT HAVE ANY WRITTEN SELF-INSURANCE
ARRANGEMENT BY (OR THAT EXPRESSLY INVOLVES) THE CORPORATIONS, INCLUDING ANY
RESERVES ESTABLISHED THEREUNDER; AND

 

(II)                                  HAVE COMPLIED WITH ALL OBLIGATIONS OF THE
CORPORATIONS TO PROVIDE INSURANCE COVERAGE TO THIRD PARTIES (FOR EXAMPLE, UNDER
LEASES OR SERVICE AGREEMENTS).

 

(C)                                  EXCEPT AS SET FORTH IN SCHEDULE 4.18(C):

 

(I)                                     ALL POLICIES OF INSURANCE THAT PROVIDE
COVERAGE TO EITHER CORPORATION AND WHICH HAVE BEEN ESTABLISHED BY THE
CORPORATIONS:

 

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(A)                               ARE VALID, OUTSTANDING AND ENFORCEABLE,
SUBJECT TO LIMITATIONS ON ENFORCEABILITY AS ARE APPLICABLE UNDER APPLICABLE
LEGAL REQUIREMENTS; AND

 

(B)                               ARE ISSUED BY AN INSURER THAT IS REPUTABLE;

 

(II)                                  WITH RESPECT TO ANY POLICY OF INSURANCE
DESCRIBED IN SECTION 4.18(C)(I), NEITHER CORPORATION HAS RECEIVED (A) ANY
REFUSAL OF COVERAGE OR ANY NOTICE THAT A DEFENSE WILL BE AFFORDED WITH
RESERVATION OF RIGHTS OR (B) ANY NOTICE OF CANCELLATION OR ANY OTHER INDICATION
THAT ANY POLICY OF INSURANCE IS NO LONGER IN FULL FORCE OR EFFECT OR THAT THE
ISSUER OF ANY POLICY OF INSURANCE IS NOT WILLING OR ABLE TO PERFORM ITS
OBLIGATIONS THEREUNDER;

 

(III)                               WITH RESPECT TO ANY POLICY OF INSURANCE
DESCRIBED IN SECTION 4.18(C)(I) THAT INVOLVES EITHER CORPORATION, SUCH
CORPORATION HAS PAID OR CAUSED TO BE PAID, ALL PREMIUMS DUE, AND HAS OTHERWISE
PERFORMED ALL OF ITS OBLIGATIONS,; AND

 

(IV)                              WITH RESPECT TO ANY POLICY OF INSURANCE
DESCRIBED IN SECTION 4.18(C)(I), THE CORPORATIONS HAVE GIVEN NOTICE TO THE
INSURER OF ALL KNOWN CLAIMS THAT MAY BE INSURED THEREBY.

 

SECTION 4.19                            ENVIRONMENTAL LAWS AND REGULATIONS.

 

Except as set forth in Schedule 4.19:

 

(A)                                 THE CORPORATIONS, SINCE DECEMBER 31, 2002,
HAVE BEEN IN COMPLIANCE WITH, AND ARE NOT IN VIOLATION OF OR LIABLE UNDER, ANY
ENVIRONMENTAL LAW.  SINCE DECEMBER 31, 2002, NEITHER CORPORATION HAS RECEIVED,
NOR, TO THE KNOWLEDGE OF THE CORPORATIONS OR THE SELLERS, HAS ANY OTHER PERSON
FOR WHOSE CONDUCT EITHER CORPORATION IS OR MAY BE HELD TO BE RESPONSIBLE
RECEIVED, ANY WRITTEN ORDER, NOTICE OR OTHER COMMUNICATION FROM (I) ANY
GOVERNMENTAL BODY OR (II) THE CURRENT OR PRIOR OWNER OR OPERATOR OF ANY
FACILITIES, OF ANY ACTUAL OR ALLEGED VIOLATION OR FAILURE TO COMPLY WITH ANY
ENVIRONMENTAL LAW, OR OF ANY ACTUAL OR THREATENED OBLIGATION TO UNDERTAKE OR
BEAR THE COST OF ANY ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES WITH RESPECT
TO ANY FACILITY OR OTHER PROPERTY OR ASSET (WHETHER REAL, PERSONAL OR MIXED) IN
WHICH THE CORPORATIONS HAVE OR HAD AN INTEREST.

 

(B)                                 THERE ARE NO PENDING OR, TO THE KNOWLEDGE OF
THE CORPORATIONS OR THE SELLERS, THREATENED CLAIMS, ENCUMBRANCES, OR OTHER
RESTRICTIONS OF ANY NATURE SEEKING TO ASSERT OR THREATENING TO CREATE ANY
ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES AND THERE ARE NO CLAIMS ARISING
UNDER OR PURSUANT TO ANY ALLEGED VIOLATIONS OF ENVIRONMENTAL LAW WITH RESPECT TO
OR AFFECTING ANY FACILITY OR ANY OTHER PROPERTY OR ASSET (WHETHER REAL, PERSONAL
OR MIXED) IN WHICH EITHER CORPORATION HAS OR HAD AN INTEREST.

 

(C)                                  NEITHER CORPORATION EXPECTS, NOR, TO THE
SELLERS’ KNOWLEDGE, HAS ANY OTHER PERSON FOR WHOSE CONDUCT EITHER CORPORATION IS
OR MAY BE HELD RESPONSIBLE, RECEIVED, ANY WRITTEN CITATION, DIRECTIVE, INQUIRY,
NOTICE, ORDER, SUMMONS, WARNING OR OTHER COMMUNICATION THAT RELATES TO HAZARDOUS
ACTIVITY, HAZARDOUS MATERIALS, OR ANY ALLEGED OR ACTUAL VIOLATION OR FAILURE TO
COMPLY WITH ANY ENVIRONMENTAL LAW, OR OF ANY ALLEGED OR ACTUAL OBLIGATION TO
UNDERTAKE OR BEAR THE COST OF ANY ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES
WITH RESPECT TO ANY FACILITY OR

 

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PROPERTY OR ASSET (WHETHER REAL, PERSONAL OR MIXED) IN WHICH EITHER CORPORATION
HAS OR HAD AN INTEREST, IN ALL CASES IN RESPECT OF CONDUCT SINCE DECEMBER 31,
2002.

 

(D)                                 THE CORPORATIONS HAVE MADE AVAILABLE TO
BUYER TRUE AND COMPLETE COPIES AND RESULTS OF ANY REPORTS, STUDIES, ANALYSES,
TESTS, OR MONITORING POSSESSED OR INITIATED BY EITHER CORPORATION THAT ARE IN
POSSESSION OF THE CORPORATION PERTAINING TO HAZARDOUS MATERIALS OR HAZARDOUS
ACTIVITIES IN, ON, OR UNDER THE FACILITIES, OR CONCERNING COMPLIANCE, BY EITHER
CORPORATION OR ANY OTHER PERSON FOR WHOSE CONDUCT THEY ARE OR MAY BE HELD
RESPONSIBLE, WITH ENVIRONMENTAL LAWS.

 

(E)                                  THERE ARE NO HAZARDOUS MATERIALS PRESENT AT
ANY FACILITY, OR INCORPORATED INTO ANY STRUCTURE THEREON.

 

SECTION 4.20                            PRODUCTS AND SERVICES.

 

Schedule 4.11 sets forth all claims asserted or, to the Knowledge of the
Corporations or the Sellers, threatened at any time since June 30, 2003 against
either Corporation in respect of personal injury, wrongful death or property
damage alleged to have resulted from products or services provided by either
Corporation, and all warranty claims with respect to any single product with a
value, individually or in the aggregate, in excess of CDN$10,000.

 

SECTION 4.21                            [NOT USED].

 

SECTION 4.22                            CAPITALIZATION.

 

(A)                                 THE AUTHORIZED CAPITAL STOCK OF TRACE
CONSISTS OF AN UNLIMITED NUMBER OF COMMON SHARES (THE “TRACE COMMON STOCK”), OF
WHICH 268,539 SHARES ARE ISSUED AND OUTSTANDING, AND, EXCEPT AS SET FORTH ON
SCHEDULE 4.22(A), NO SHARES ARE RESERVED FOR ISSUANCE PURSUANT TO TRACE’S STOCK
OPTION AND PURCHASE PLANS AND NO SHARES ARE RESERVED FOR ISSUANCE PURSUANT TO
SECURITIES EXERCISABLE OR EXCHANGEABLE FOR, OR CONVERTIBLE INTO, SHARES OF TRACE
COMMON STOCK.  EXCEPT AS SET FORTH IN SCHEDULE 4.22(A), THE OUTSTANDING SHARES
OF TRACE COMMON STOCK HAVE BEEN DULY AUTHORIZED AND VALIDLY ISSUED AND ARE FULLY
PAID AND NONASSESSABLE, ARE OWNED BENEFICIALLY AND OF RECORD BY THE SHAREHOLDERS
SET FORTH ON SCHEDULE 4.22(A) AND IN SUCH AMOUNTS AS SET FORTH ON
SCHEDULE 4.22(A).  THE OUTSTANDING SHARES OF TRACE COMMON STOCK HAVE BEEN
OFFERED, ISSUED, SOLD AND DELIVERED BY TRACE IN COMPLIANCE WITH ALL APPLICABLE
SECURITIES LAWS INCLUDING, BUT NOT LIMITED TO, THE SECURITIES ACT (ALBERTA). 
EXCEPT PURSUANT TO THE OPTION AGREEMENTS AND AS SET FORTH ON SCHEDULE 4.22(A),
THERE ARE NO OUTSTANDING RIGHTS, OPTIONS, WARRANTS, CONVERSION RIGHTS,
PREEMPTIVE RIGHTS OR OTHER RIGHTS TO ACQUIRE SECURITIES OF TRACE.  THERE ARE NO
OUTSTANDING OBLIGATIONS OF TRACE TO REPURCHASE, REDEEM OR OTHERWISE ACQUIRE ANY
CAPITAL STOCK OF TRACE.  EXCEPT AS SET FORTH ON SCHEDULE 4.22(A), THERE ARE NO
AGREEMENTS OR RESTRICTIONS (SUCH AS A RIGHT OF FIRST REFUSAL, CO-SALE, RIGHT OF
FIRST OFFER, PROXY, VOTING TRUST OR VOTING AGREEMENTS) WITH RESPECT TO THE SALE
OR VOTING OF ANY SHARES OF THE CAPITAL STOCK OF TRACE.  TRACE DOES NOT OWN OR
CONTROL, DIRECTLY OR INDIRECTLY, ANY INTEREST OR INVESTMENT IN ANY CORPORATION,
PARTNERSHIP, ASSOCIATION OR OTHER FORM OF BUSINESS ENTITY EXCEPT TRACE TEXAS,
TRACE EXPLORATIONS LTD. (SUCRAL ARGENTINA) AND THE MINORITY SUBSIDIARIES.  TRACE
HOLDS OF RECORD AND BENEFICIALLY OWNS LESS THAN A MAJORITY OF THE COMMON STOCK
OF THE MINORITY SUBSIDIARIES.  NEITHER CORPORATION IS LIABLE FOR ANY CURRENT OR

 

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FUTURE OBLIGATIONS OR LIABILITIES OF THE MINORITY SUBSIDIARIES, EXCEPT PURSUANT
TO APPLICABLE LEGAL REQUIREMENTS.

 

(B)                                 THE AUTHORIZED CAPITAL STOCK OF TRACE TEXAS
CONSISTS OF 100,000 SHARES OF COMMON STOCK, $1.00 PAR VALUE PER SHARE (THE
“TEXAS COMMON STOCK”), OF WHICH 1,000 SHARES ARE ISSUED AND OUTSTANDING, AND,
EXCEPT AS SET FORTH ON SCHEDULE 4.22(B), NO SHARES ARE RESERVED FOR ISSUANCE
PURSUANT TO TRACE TEXAS’ STOCK OPTION AND PURCHASE PLANS AND NO SHARES ARE
RESERVED FOR ISSUANCE PURSUANT TO SECURITIES EXERCISABLE OR EXCHANGEABLE FOR, OR
CONVERTIBLE INTO, SHARES OF TEXAS COMMON STOCK.  THE OUTSTANDING SHARES OF TEXAS
COMMON STOCK HAVE BEEN DULY AUTHORIZED AND VALIDLY ISSUED AND ARE FULLY PAID AND
NONASSESSABLE, ARE OWNED BENEFICIALLY AND OF RECORD BY THE SHAREHOLDERS SET
FORTH ON SCHEDULE 4.22(B) AND IN SUCH AMOUNTS AS SET FORTH ON SCHEDULE 4.22(B). 
THE OUTSTANDING SECURITIES OF TRACE TEXAS HAVE BEEN OFFERED, ISSUED, SOLD AND
DELIVERED BY TRACE TEXAS IN TRANSACTIONS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES OR “BLUE
SKY” LAWS.  EXCEPT AS SET FORTH ON SCHEDULE 4.22(B), THERE ARE NO OUTSTANDING
RIGHTS, OPTIONS, WARRANTS, CONVERSION RIGHTS, PREEMPTIVE RIGHTS OR OTHER RIGHTS
TO ACQUIRE SECURITIES OF TRACE TEXAS.  THERE ARE NO OUTSTANDING OBLIGATIONS OF
TRACE TEXAS TO REPURCHASE, REDEEM OR OTHERWISE ACQUIRE ANY CAPITAL STOCK OF
TRACE TEXAS.  EXCEPT AS SET FORTH ON SCHEDULE 4.22(B), THERE ARE NO AGREEMENTS
OR RESTRICTIONS (SUCH AS A RIGHT OF FIRST REFUSAL, CO-SALE, RIGHT OF FIRST
OFFER, PROXY, VOTING TRUST OR VOTING AGREEMENTS) WITH RESPECT TO THE SALE OR
VOTING OF ANY SHARES OF THE CAPITAL STOCK OF TRACE TEXAS.  TRACE TEXAS DOES NOT
OWN OR CONTROL, DIRECTLY OR INDIRECTLY, ANY INTEREST OR INVESTMENT IN ANY
CORPORATION, PARTNERSHIP, ASSOCIATION OR OTHER FORM OF BUSINESS ENTITY.

 

SECTION 4.23                            BROKERS AND FINDERS.

 

Except for Goldsmith-Agio-Helms, whose fees and expenses shall be paid by Trace
at Closing, neither the Corporations nor any of the Corporations’ officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders fees in connection with
the Transactions contemplated by this Agreement, and the Buyer shall not have
any liability for any such fees or commissions.

 

SECTION 4.24                            [NOT USED].

 

SECTION 4.25                            BOOKS AND RECORDS.

 

The books of account and other financial records of the Corporations in the
possession of the Corporations, all of which have been made available to the
Buyer, are complete and correct in all material respects in respect of the
matters described therein, to the Sellers’ Knowledge, represent actual, bona
fide transactions and have been maintained in accordance with applicable Legal
Requirements, including, since December 31, 2002, the maintenance of an adequate
system of internal controls.

 

SECTION 4.26                            CONDITION OF FACILITIES.

 

(A)                                 USE OF THE REAL PROPERTY FOR THE VARIOUS
PURPOSES FOR WHICH IT IS PRESENTLY BEING USED IS PERMITTED AS OF RIGHT UNDER ALL
APPLICABLE ZONING LEGAL REQUIREMENTS AND IS NOT SUBJECT TO “PERMITTED
NONCONFORMING” USE OR STRUCTURE CLASSIFICATIONS.  ALL IMPROVEMENTS TO REAL
PROPERTY

 

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LEASED BY THE CORPORATIONS OR OTHERWISE USED IN THE ORDINARY COURSE OF BUSINESS
BY THE CORPORATIONS ARE IN COMPLIANCE WITH ALL APPLICABLE LEGAL REQUIREMENTS,
INCLUDING THOSE PERTAINING TO ZONING AND BUILDING, AND ARE ACCEPTED AS IS.  TO
THE SELLERS’ KNOWLEDGE, NO PART OF ANY IMPROVEMENT ENCROACHES ON ANY REAL
PROPERTY NOT LEASED BY THE CORPORATIONS.  TO THE SELLERS’ KNOWLEDGE, THERE IS NO
EXISTING OR PROPOSED PLAN TO MODIFY OR REALIGN ANY STREET OR HIGHWAY OR ANY
EXISTING OR PROPOSED EMINENT DOMAIN PROCEEDING THAT WOULD RESULT IN THE TAKING
OF ALL OR ANY PART OF ANY FACILITY OR THAT WOULD PREVENT OR HINDER THE CONTINUED
USE OF ANY FACILITY AS HERETOFORE USED IN THE CONDUCT OF THE BUSINESS OF THE
CORPORATIONS.

 

(B)                                 EACH ITEM OF TANGIBLE PERSONAL PROPERTY IS
ACCEPTED AS IS.  ALL TANGIBLE PERSONAL PROPERTY USED IN THE CORPORATIONS’
BUSINESS IS IN THE POSSESSION OF THE CORPORATIONS, EXCEPT: (I) AS MAY NOT BE IN
THEIR POSSESSION AS A RESULT OF ACTIONS TAKEN IN THE ORDINARY COURSE OF BUSINESS
OR (II) AS SET FORTH ON SCHEDULE 4.26.

 

SECTION 4.27                            NO UNDISCLOSED FINANCIAL LIABILITIES.

 

Except as set forth in Schedule 4.27, all of the Liabilities which, in
accordance with Canadian GAAP are of a nature as are required to be described in
the Interim Consolidated Balance Sheet are so described in such balance sheet
and there are no additional Liabilities which, in accordance with Canadian GAAP,
are of a nature which are required to be disclosed except as are incurred in the
Ordinary Course of Business of the Corporations since the date of the Interim
Consolidated Balance Sheet or as are otherwise accounted for in the Adjusted
Purchase Price, including as it may be recalculated pursuant to Section 2.4.

 

SECTION 4.28                            EMPLOYEES.

 

(A)                                 SCHEDULE 4.28(A) CONTAINS A COMPLETE AND
ACCURATE LIST OF THE FOLLOWING INFORMATION FOR EACH CURRENT EXECUTIVE,
ADMINISTRATION, OFFICE OR OPERATIONAL MANAGEMENT EMPLOYEE OF THE CORPORATIONS,
INCLUDING EACH EMPLOYEE ON LEAVE OF ABSENCE OR LAYOFF STATUS: NAME; JOB TITLE;
DATE OF HIRE; AND CURRENT COMPENSATION PAID OR PAYABLE AND ANY CHANGE IN
COMPENSATION SINCE DECEMBER 31, 2004.

 

(B)                                 THE CORPORATIONS HAVE NO RETIRED EMPLOYEES
EXCEPT AS SET FORTH ON SCHEDULE 4.28(B).

 

(C)                                  SCHEDULE 4.28(C) CONTAINS A COMPLETE AND
ACCURATE LIST OF THE FOLLOWING INFORMATION FOR EACH SUCH EMPLOYEE OF EITHER
CORPORATION WHO HAS BEEN TERMINATED OR LAID OFF, OR WHOSE HOURS OF WORK HAVE
BEEN REDUCED BY MORE THAN FIFTY PERCENT (50%) BY EITHER CORPORATION, IN THE
THREE MONTHS PRIOR TO THE DATE OF THIS AGREEMENT: (I) THE DATE OF SUCH
TERMINATION, LAYOFF OR REDUCTION IN HOURS; (II) A STATEMENT OF WHETHER IT WAS A
TERMINATION FOR CAUSE, LAYOFF OR REDUCTION IN HOURS; AND (III) THE LOCATION TO
WHICH THE EMPLOYEE WAS ASSIGNED.

 

(D)                                 THE CORPORATIONS HAVE NOT VIOLATED THE
WORKER ADJUSTMENT AND RETRAINING NOTIFICATION ACT (THE “WARN ACT”) OR ANY
SIMILAR STATE OR LOCAL LEGAL REQUIREMENT.

 

(E)                                  TO THE KNOWLEDGE OF THE SELLERS, NO
OFFICER, DIRECTOR, EMPLOYEE OR CONTRACTOR OF THE CORPORATIONS IS BOUND BY ANY
CONTRACT THAT PURPORTS TO LIMIT THE ABILITY OF SUCH OFFICER,

 

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DIRECTOR, EMPLOYEE, OR CONTRACTOR TO ENGAGE IN OR CONTINUE OR PERFORM ANY
CONDUCT, ACTIVITY, DUTIES OR PRACTICE.  TO THE SELLERS’ KNOWLEDGE, NO EXECUTIVE
OR MANAGERIAL EMPLOYEE OF THE CORPORATIONS IS A PARTY TO, OR IS OTHERWISE BOUND
BY, ANY CONTRACT THAT IN ANY WAY ADVERSELY AFFECTED, AFFECTS, OR WILL AFFECT THE
ABILITY OF THE CORPORATIONS OR THE BUYER TO CONDUCT THE BUSINESS AS HERETOFORE
CARRIED ON BY THE CORPORATIONS.

 

(F)                                   EXCEPT AS DISCLOSED IN SCHEDULE 4.28(F),
THE CORPORATIONS HAVE NOT, SINCE DECEMBER 31, 2004, DIRECTLY OR INDIRECTLY, MADE
ANY INCREASE IN THE COMPENSATION OR OTHER BENEFITS PAYABLE OR TO BECOME PAYABLE
TO THEIR EMPLOYEES OR ANY OF THEM, OTHER THAN GENERAL SALARY INCREASES IN THE
ORDINARY COURSE OF BUSINESS, CONSISTENT WITH PAST PRACTICE, OR ANY INCREASE IN
THE COMPENSATION OR OTHER BENEFITS PAYABLE OR TO BECOME PAYABLE TO ANY OFFICER
OR DIRECTOR OR ANY INCREASE IN THE BENEFITS PROVIDED UNDER ANY OF ITS PENSION
PLANS OR OTHER EMPLOYEE BENEFIT PLANS.

 

(G)                                  EXCEPT AS SET OUT IN SCHEDULE 4.28(G) OR AS
OTHERWISE DESCRIBED IN ANY MANNER IN SECTION 4.15, THE CORPORATIONS ARE NOT A
PARTY TO AND ARE NOT BOUND BY ANY:

 

(I)                                     CONTRACT OR COLLECTIVE AGREEMENT WITH OR
COMMITMENT TO ANY LABOUR UNION OR EMPLOYEE ASSOCIATION AND THE CORPORATIONS HAVE
NOT CONDUCTED NEGOTIATIONS WITH RESPECT TO ANY FUTURE SUCH CONTRACTS OR
COMMITMENTS AND THERE ARE NO CURRENT OR THREATENED ATTEMPTS TO ORGANIZE OR
ESTABLISH ANY LABOUR UNION OR EMPLOYEE ASSOCIATION WITH RESPECT TO THE
CORPORATIONS, AND NO TRADE UNION, COUNCIL OF TRADE UNIONS, EMPLOYEE BARGAINING
AGENCY OR AFFILIATED BARGAINING AGENT:

 

(A)                               HOLDS BARGAINING RIGHTS WITH RESPECT TO ANY OF
THE EMPLOYEES OF THE CORPORATIONS BY WAY OF CERTIFICATION, INTERIM
CERTIFICATION, VOLUNTARY RECOGNITION, DESIGNATION OR SUCCESSOR RIGHTS;

 

(B)                               HAS APPLIED TO BE CERTIFIED AS THE BARGAINING
AGENT OF ANY OF THE EMPLOYEES OF THE CORPORATIONS; OR

 

(C)                               HAS APPLIED TO HAVE EITHER CORPORATION
DECLARED A RELATED EMPLOYER PURSUANT TO THE LABOUR RELATIONS CODE (ALBERTA);

 

(II)                                  BONUS, PENSION, PROFIT SHARING, DEFERRED
COMPENSATION, RETIREMENT, HOSPITALIZATION, DISABILITY, INSURANCE OR SIMILAR PLAN
OR PRACTICE, FORMAL OR INFORMAL, OR POLICY WITH RESPECT TO ANY OF THEIR
EMPLOYEES OR OTHERS, OTHER THAN THE CANADA PENSION PLAN, THE ALBERTA HEALTH CARE
INSURANCE PLAN AND OTHER SIMILAR HEALTH PLANS ESTABLISHED AND ADMINISTERED BY
ANY OTHER JURISDICTION (FOREIGN OR DOMESTIC) AND WORKERS’ COMPENSATION INSURANCE
PROVIDED PURSUANT TO STATUTE.

 

(H)                                 THERE ARE NO PROCEEDINGS WITH RESPECT TO
EITHER CORPORATION UNDER THE LABOUR RELATIONS CODE (ALBERTA) OR ANY OTHER
SIMILAR LEGISLATION IN OTHER JURISDICTION (FOREIGN OR DOMESTIC), NOR ARE THERE
ANY LABOUR DISPUTES, GRIEVANCES, STRIKES OR LOCKOUTS, CURRENT, PENDING OR, TO
THE KNOWLEDGE OF THE CORPORATIONS OR THE SELLERS, THREATENED.

 

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(I)                                     TO THE KNOWLEDGE OF THE CORPORATIONS OR
THE SELLERS, THERE ARE NO ALLEGATIONS WITH RESPECT TO EITHER CORPORATION OF
UNFAIR LABOUR PRACTICES OR COMPLAINTS UNDER THE EMPLOYMENT STANDARDS CODE, THE
HUMAN RIGHTS, CITIZENSHIP AND MULTICULTURALISM ACT, (ALBERTA) THE WORKERS’
COMPENSATION ACT (ALBERTA) OR THE LABOUR RELATIONS CODE (ALBERTA) OR ANY OTHER
SIMILAR LEGISLATION IN ANY OTHER JURISDICTION (FOREIGN OR DOMESTIC).

 

(J)                                    EXCEPT AS DISCLOSED IN SCHEDULE 4.28(J),
NO EMPLOYEE OF EITHER CORPORATION IS ON LAY OFF, LEAVE OF ABSENCE, MATERNITY OR
DISABILITY LEAVE.  SCHEDULE 4.28(J) SETS FORTH THE TERMS OF SUCH LAY OFF, LEAVE
OF ABSENCE, MATERNITY OR DISABILITY LEAVE.

 

(K)                                 EXCEPT AS DISCLOSED IN SCHEDULE 4.28(K), THE
CORPORATIONS DO NOT OWE ANY OBLIGATIONS TO FORMER DIRECTORS, OFFICERS OR
EMPLOYEES.

 

(L)                                     EXCEPT AS DISCLOSED IN SCHEDULE 4.28(L),
THERE ARE NO INDEPENDENT CONTRACTORS ENGAGED BY EITHER CORPORATION.

 

(M)                             ALL PLANS AND POLICIES LISTED IN
SCHEDULE 4.28(G) HAVE BEEN DULY REGISTERED WHERE REQUIRED BY, AND ARE IN GOOD
STANDING UNDER, ALL APPLICABLE LEGISLATION (FOREIGN OR DOMESTIC), INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE TAX ACT AND THE EMPLOYMENT
PENSION PLANS ACT (ALBERTA) OR ANY OTHER SIMILAR LEGISLATION IN ANY OTHER
JURISDICTION AND ALL REQUIRED EMPLOYER CONTRIBUTIONS UNDER ANY SUCH PLANS OR
POLICIES HAVE BEEN MADE AND NO PAST SERVICE FUNDING LIABILITIES EXIST
THEREUNDER.

 

(N)                                 EXCEPT AS OTHERWISE DESCRIBED IN
SECTION 4.15, THE AMOUNT OF SALARIES, PENSIONS, BONUSES, AND OTHER REMUNERATION
AND FRINGE BENEFITS OF ANY NATURE, INCLUDING VACATION PAY, SEVERANCE PAY AND
UNPAID EARNED WAGES OF THE DIRECTORS, OFFICERS AND EMPLOYEES OF THE CORPORATIONS
AS OF THE CLOSING DATE HAVE BEEN PAID IN FULL OR ACCRUED AND THERE IS NO
OUTSTANDING OVERDUE ASSESSMENT, ORDER, CERTIFICATE, LIEN OR JUDGMENT UNDER THE
EMPLOYMENT STANDARDS CODE (ALBERTA), HUMAN RIGHTS, CITIZENSHIP AND
MULTICULTURALISM ACT, (ALBERTA), LABOUR RELATIONS CODE (ALBERTA), WORKERS’
COMPENSATION ACT (ALBERTA) AND ANY OTHER STATUTE REGARDING EMPLOYMENT OF ANY
JURISDICTION (FOREIGN OR DOMESTIC) IN WHICH EITHER CORPORATION CARRIES ON
BUSINESS OR HAVE EMPLOYEES.

 

(O)                                 ALL EMPLOYER OBLIGATIONS OF THE CORPORATIONS
WITH RESPECT TO THE DIRECTORS, OFFICERS AND EMPLOYEES OF EITHER CORPORATION FOR
WITHHOLDING TAX, AND FOR CANADA PENSION PLAN, EMPLOYMENT INSURANCE, WORKERS’
COMPENSATION BOARD PREMIUMS, CONTRIBUTIONS OR REMITTANCES OF ANY KIND IN ALL
MATERIAL RESPECTS WHICH ARE THEN DUE, HAVE BEEN PAID IN FULL OR ACCRUED AS OF
THE CLOSING DATE.

 

(P)                                 THERE ARE NO WRITTEN WARNINGS OR
DISCIPLINARY ACTION CURRENTLY OUTSTANDING AGAINST ANY EMPLOYEE OF THE
CORPORATIONS.

 

(Q)                                 EXCEPT FOR REMUNERATION PAID TO EMPLOYEES IN
ORDINARY COURSE OF BUSINESS AND MADE AT CURRENT RATES OF REMUNERATION NO
PAYMENTS HAVE BEEN MADE OR AUTHORIZED SINCE THE DATE OF THE INTERIM CONSOLIDATED
BALANCE SHEET BY THE CORPORATION OR TO OFFICERS, DIRECTORS OR EMPLOYEES OF THE
CORPORATION.

 

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SECTION 4.29                            COMPLIANCE WITH THE FOREIGN CORRUPT
PRACTICES ACT AND EXPORT CONTROL AND ANTIBOYCOTT LAWS.

 

(A)                                 EXCEPT AS SET FORTH IN SCHEDULE 4.29(A), THE
CORPORATIONS HAVE NOT, AND THE CORPORATIONS’ EMPLOYEES, AGENTS AND
REPRESENTATIVES HAVE NOT, USED ANY FUNDS OF THE CORPORATIONS FOR ANY UNLAWFUL
CONTRIBUTION, GIFT, ENTERTAINMENT OR OTHER UNLAWFUL EXPENSE RELATING TO
POLITICAL ACTIVITY, MADE ANY DIRECT OR INDIRECT UNLAWFUL PAYMENT TO ANY FOREIGN
OR DOMESTIC GOVERNMENTAL OFFICIAL OR EMPLOYEE, VIOLATED OR IS IN VIOLATION OF
ANY PROVISION OF THE FOREIGN CORRUPT PRACTICES ACT OF 1977 OR MADE ANY ILLEGAL
BRIBE, REBATE, PAYOFF, INFLUENCE PAYMENT, KICKBACK OR OTHER UNLAWFUL PAYMENT.

 

(B)                                 EXCEPT AS SET FORTH IN SCHEDULE 4.29(B), THE
CORPORATIONS HAVE MADE ALL PAYMENTS TO THIRD PARTIES BY CHECK, BY CREDIT CARD OR
BY WIRE TRANSFER TO SUCH THIRD PARTY IN THE COUNTRY IN WHICH THE WORK WAS
PERFORMED.

 

(C)                                  THE CORPORATIONS HAVE AT ALL TIMES BEEN IN
COMPLIANCE WITH ALL LEGAL REQUIREMENTS RELATING TO EXPORT CONTROL AND TRADE
EMBARGOES.  NO PRODUCT SOLD OR SERVICE PROVIDED BY TRACE (TEXAS) DURING THE LAST
FIVE (5) YEARS HAS BEEN DIRECTLY SOLD TO OR PERFORMED IN OR ON BEHALF OF CUBA,
IRAQ, IRAN, LIBYA OR NORTH KOREA.

 

(D)                                 EXCEPT AS SET FORTH IN SCHEDULE 4.29(D),
TRACE TEXAS HAS NOT VIOLATED THE ANTIBOYCOTT PROHIBITIONS CONTAINED IN 50 U.S.C.
§ 2401 ET SEQ. OR TAKEN ANY ACTION THAT CAN BE PENALIZED UNDER SECTION 999 OF
THE CODE.  EXCEPT AS SET FORTH IN SCHEDULE 4.29(D), DURING THE LAST FIVE
(5) YEARS, TRACE TEXAS HAS NOT BEEN A PARTY TO, IS NOT A BENEFICIARY UNDER AND
HAS NOT PERFORMED ANY SERVICE OR SOLD ANY PRODUCT UNDER ANY CONTRACT UNDER WHICH
A PRODUCT HAS BEEN SOLD DIRECTLY TO CUSTOMERS IN BAHRAIN, IRAQ, JORDAN, KUWAIT,
LEBANON, LIBYA, OMAN, QATAR, SAUDI ARABIA, SUDAN, SYRIA, UNITED ARAB EMIRATES OR
THE REPUBLIC OF YEMEN.

 

SECTION 4.30                            RELATIONSHIPS WITH RELATED PERSONS.

 

To the Knowledge of the Sellers or the Corporations, no Related Person of the
Corporations has, or since December 31, 2004, has had, any interest in any
property used by the Corporations in the Corporations’ business.  To the
Knowledge of the Sellers or the Corporations, no Related Person of the
Corporations owns, or since December 31, 2004, has owned, of record or as a
beneficial owner, an equity interest or any other financial or profit interest
in any Person (other than the Corporations themselves or the Minority
Corporations) that has (a) had significant business dealings or a significant
financial interest in any transaction with either Corporation other than
business dealings or transactions disclosed in Schedule 4.30, each of which has
been conducted in the Ordinary Course of Business with such Corporation at
substantially prevailing market prices and on substantially prevailing market
terms or (b) engaged in competition with such Corporation with respect to any
line of the products or services of such Corporation (a “Competing Business”) in
any market presently served by such Corporation, except for any of the Related
Parties of SCF or ownership of less than five percent (5%) of the outstanding
capital stock of any Competing Business that is publicly traded on any
recognized exchange or in the over-the-counter market.  To the Knowledge of the
Corporations or the Sellers, no Related Person of either Corporation (other than
one of the Corporations) is a

 

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party to any Contract with, or has any claim or right against, such Corporation
except as set forth in Schedule 4.30.

 

SECTION 4.31                            TITLE TO ASSETS.

 

The Corporations have good and marketable title to, or a valid leasehold or
other interest in, the properties and assets used by them, located on their
premises, or shown on the Interim Consolidated Balance Sheet or acquired after
the date thereof, free and clear of all Encumbrances, except for Permitted
Encumbrances or properties, assets or interests disposed of in the Ordinary
Course of Business since the date of the Interim Consolidated Balance Sheet or
as otherwise permitted by this Agreement.

 

As used herein, the term “Permitted Encumbrances” shall include the following:

 

(I)                                     LIENS FOR TAXES, ASSESSMENTS OR
GOVERNMENTAL OR QUASI-GOVERNMENTAL CHARGES THAT ARE NOT YET DELINQUENT;

 

(II)                                  ENCUMBRANCES REFLECTED IN THE FINANCIAL
STATEMENTS OR CREATED IN THE ORDINARY COURSE OF BUSINESS SUBSEQUENT TO THE DATE
OF THE FINANCIAL STATEMENTS;

 

(III)                               ENCUMBRANCES DISCLOSED IN SCHEDULE 4.31;

 

(IV)                              ZONING ORDINANCES, CONSERVATION RESTRICTIONS,
BUILDING CODES AND ALL OTHER STATUTES, REGULATIONS AND ADMINISTRATIVE ENACTMENTS
OF ANY FEDERAL, STATE OR GOVERNMENTAL OR PUBLIC AUTHORITY HAVING JURISDICTION
OVER THE PROPERTY AFFECTED THEREBY;

 

(V)                                 ANY MATTERS TO WHICH A REAL PROPERTY LEASE
IS SUBJECT OR SUBORDINATE;

 

(VI)                              ENCUMBRANCES THAT WILL BE RELEASED OR
SATISFIED AT CLOSING, PURSUANT TO THE TERMS OF THIS AGREEMENT; AND

 

(VII)                           ENCUMBRANCES THAT DO NOT, INDIVIDUALLY OR IN THE
AGGREGATE, SIGNIFICANTLY INTERFERE WITH THE PRESENT USE BY THE COMPANIES OF THE
REAL PROPERTY SUBJECT THERETO OR AFFECTED THEREBY.

 

ARTICLE V.
PRE-CLOSING COVENANTS

 

The Parties agree as follows with respect to the period between the execution of
this Agreement and the Closing, except as provided in Section 5.7.

 

SECTION 5.1                                   GENERAL.

 

Each of the Parties will use his or its commercially reasonable efforts to take
all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Article VII below).

 

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SECTION 5.2                                   NOTICES AND CONSENTS.

 

The Sellers will cause the Corporations to give any notices to third parties,
and will cause the Corporations to use their commercially reasonable efforts to
obtain any third-party consents, that the Buyer reasonably may request in
connection with the matters referred to in Section 4.4 above.  Each of the
Parties will (and the Sellers will cause the Corporations to) give any notices
to, make any filings with, and use its commercially reasonable efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section 4.4 above.

 

SECTION 5.3                                   OPERATION OF BUSINESS.

 

(A)                                 SELLERS WILL NOT CAUSE OR PERMIT THE
CORPORATIONS TO ENGAGE IN ANY PRACTICE, TAKE ANY ACTION, OR ENTER INTO ANY
TRANSACTION OUTSIDE THE ORDINARY COURSE OF BUSINESS EXCEPT:

 

(I)                                     TO THE EXTENT PERMITTED OR REQUIRED BY
THIS AGREEMENT;

 

(II)                                  AS REQUIRED TO ACQUIRE THE ADDITIONAL
SEISMIC EQUIPMENT;

 

(III)                               AS REQUIRED TO COMPLETE JOINT VENTURE
ARRANGEMENTS OF TRACE RELATING TO CONDUCTING OR CREATING BUSINESS IN THE
NORTHWEST, YUKON OR NUNAVUT TERRITORIES, PROVIDED THAT THE COMPLETION OF SUCH
JOINT VENTURE ARRANGEMENTS SHALL BE SUBJECT TO THE CONSENT OF THE BUYER, SUCH
CONSENT NOT TO BE UNREASONABLY WITHHELD; OR

 

(IV)                              AS CONSENTED TO BY THE BUYER.

 

(B)                                 WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, THE SELLERS SHALL USE THEIR COMMERCIALLY REASONABLE EFFORTS TO
PRESERVE THE GOODWILL OF THE CORPORATIONS’ CUSTOMERS, EMPLOYEES, SUPPLIERS AND
OTHER WITH WHOM THE CORPORATIONS HAVE BUSINESS RELATIONS.  SELLERS WILL NOT
CAUSE OR PERMIT EITHER CORPORATION TO (I) DECLARE, SET ASIDE, OR PAY ANY
DIVIDEND OR MAKE ANY DISTRIBUTION WITH RESPECT TO ITS CAPITAL STOCK OR REDEEM,
PURCHASE, OR OTHERWISE ACQUIRE ANY OF ITS CAPITAL STOCK; (II) ENTER INTO
EMPLOYMENT AGREEMENTS, MODIFYING EXISTING EMPLOYMENT AGREEMENTS OR GRANT ANY
COMPENSATION INCREASES OR OTHER ADDITIONAL COMPENSATION TO EMPLOYEES (OTHER THAN
SEASONAL EMPLOYEES); OR (III) OTHERWISE ENGAGE IN ANY PRACTICE, TAKE ANY ACTION,
OR ENTER INTO ANY TRANSACTION OF THE SORT DESCRIBED IN SECTION 4.9 ABOVE.

 

SECTION 5.4                                   NOTICE OF DEVELOPMENTS.

 

Each Party will give written notice within three days to the other Parties of
any development causing a Breach of any of the representations and warranties in
Article III or Article IV above either in respect of representations made as of
the date of this Agreement or in respect of a Breach of a representation or
warranty which would cause a Party to be unable to satisfy the conditions set
forth in Section 7.1 or Section 7.2.   The Parties shall be entitled to make
such determination in their discretion, acting reasonably, as to whether an
event of circumstance constitutes a Breach.  Such notices may take the form of
an amendment or supplement of any of the representations or Schedules to this
Agreement or the creation of a new Schedule to this Agreement or any other form
as may be applicable.  A written notice given

 

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pursuant to this Section 5.4 shall become an exhibit to this Agreement and shall
be incorporated herein if such notice is delivered prior to the Closing.  If the
Party to whom the notice is addressed receives such notice prior to Closing and
thereafter participates in the Closing, such Party will be deemed to have waived
any claims relating to the matters specified in such notice; however, no waiver
shall be deemed to have been made with respect to any claims that arise from or
are the subject of matters that are not specifically stated in such notice. 
Such notices must be delivered on or before 72 hours before the Closing Time. 
If any such notice is delivered after such period, the Closing Time shall be
delayed to a time that is 72 hours (or the same hour on the next business day if
such time falls on a day that is not a business day in Houston Texas) after the
delivery of such notice, except as otherwise may be agreed by the Buyer and the
Sellers.

 

SECTION 5.5                                   EXCLUSIVITY.

 

(A)                                 SUBJECT TO SECTION 5.5(B), THE SELLERS WILL
NOT (AND WILL CAUSE THE CORPORATIONS TO NOT) SOLICIT, DIRECTLY OR THROUGH ANY
INTERMEDIARY, OFFERS FOR THE TRACE COMMON STOCK AND ALL OR SUBSTANTIALLY ALL OF
THE ASSETS OF THE CORPORATIONS, FROM ANY PERSON OTHER THAN THE BUYER AND ITS
AFFILIATES.  IF THE SELLERS, THE CORPORATIONS OR THEIR RESPECTIVE
REPRESENTATIVES RECEIVE AN UNSOLICITED BONA FIDE THIRD-PARTY OFFER TO SELL OR
OTHERWISE ACQUIRE THE TRACE COMMON STOCK OR ALL OR SUBSTANTIALLY ALL OF TRACE’S
ASSETS, THE BUYER SHALL BE GIVEN PROMPT NOTICE OF SUCH OFFER AND THE SELLERS
SHALL NOTIFY THE PERSON MAKING SUCH OFFER OF THE PROVISIONS OF THIS SECTION 5.5.

 

(B)                                 THE OBLIGATION UNDER THIS SECTION 5.5 WILL
TERMINATE, AND THE SELLERS, THE CORPORATIONS AND THEIR REPRESENTATIVES WILL BE
ABLE TO SOLICIT ANY OFFER OF ANY KIND FOR SOME OR ALL OF THE TRACE COMMON STOCK
OR SOME OR ALL OF THE ASSETS OF THE CORPORATIONS WITHOUT ANY RESTRICTION
WHATSOEVER, UPON THE EARLIER OF:

 

(I)                                     RECEIPT BY THE SELLERS OF A PROPOSAL BY
THE BUYER TO REDUCE THE AMOUNT OF THE PURCHASE PRICE OR OTHERWISE ALTER THE
CONSIDERATION THAT COMPRISES THE PURCHASE PRICE;

 

(II)                                  THE BUYER’S FAILURE TO DELIVER TO THE
SELLERS, ON OR PRIOR TO THE DATE THAT IS 30 DAYS FROM THE DATE OF THE AGREEMENT,
WRITTEN NOTIFICATION THAT BUYER’S DUE DILIGENCE IS COMPLETED; OR

 

(III)                               THE BUYER’S FAILURE TO DELIVER TO THE
SELLERS, ON OR PRIOR TO THE DATE THAT IS 60 DAYS FROM THE DATE OF THE AGREEMENT,
WRITTEN EVIDENCE THAT THE BUYER HAS OBTAINED FINANCING COMMITMENTS THAT WILL
ALLOW IT TO PAY THE PURCHASE PRICE WHICH COMMITMENTS ARE NOT SUBJECT TO
CONDITIONS OTHER THAN THOSE SET FORTH IN SECTION 7.1.

 

SECTION 5.6                                   ACCESS AND INVESTIGATION.

 

(A)                                 BETWEEN THE DATE OF THIS AGREEMENT AND THE
CLOSING DATE, AND UPON REASONABLE ADVANCE NOTICE RECEIVED FROM THE BUYER, THE
CORPORATIONS SHALL (AND SELLERS SHALL CAUSE THE CORPORATIONS TO) (A) AFFORD THE
BUYER AND ITS REPRESENTATIVES AND PROSPECTIVE LENDERS AND THEIR REPRESENTATIVES
(COLLECTIVELY, “BUYER GROUP”) FULL AND FREE ACCESS, DURING REGULAR BUSINESS
HOURS, TO THE CORPORATIONS’ PERSONNEL, PROPERTIES (INCLUDING NON-DESTRUCTIVE
SUBSURFACE TESTING), CONTRACTS, GOVERNMENTAL AUTHORIZATIONS, BOOKS AND RECORDS
AND OTHER DOCUMENTS AND DATA, SUCH RIGHTS OF ACCESS TO BE EXERCISED IN A MANNER
THAT DOES NOT UNREASONABLY INTERFERE WITH THE

 

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OPERATIONS OF THE CORPORATIONS; THE PERFORMANCE OF THE CORPORATIONS’ OR THE
SELLERS’ DUTIES UNDER THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
(B) FURNISH BUYER GROUP WITH COPIES OF ALL SUCH CONTRACTS, GOVERNMENTAL
AUTHORIZATIONS, BOOKS AND RECORDS AND OTHER EXISTING DOCUMENTS AND DATA AS BUYER
GROUP MAY REASONABLY REQUEST; (C) FURNISH BUYER GROUP WITH SUCH ADDITIONAL
FINANCIAL, OPERATING AND OTHER RELEVANT DATA AND INFORMATION REGARDING THE
CORPORATIONS AS BUYER MAY REASONABLY REQUEST; AND (D) OTHERWISE COOPERATE AND
ASSIST, TO THE EXTENT REASONABLY REQUESTED BY BUYER, WITH BUYER’S INVESTIGATION
OF THE PROPERTIES, ASSETS AND FINANCIAL POSITION RELATED TO THE CORPORATIONS,
EXCEPT WHERE THE SELLERS OR THE CORPORATIONS ARE CONTRACTUALLY PRECLUDED BY AN
AGREEMENT PRE-EXISTING THE DATE OF THIS AGREEMENT (OR ARE OTHERWISE PRECLUDED BY
APPLICABLE LEGAL REQUIREMENT)  FROM MAKING SUCH MATERIAL AVAILABLE OR TAKING ANY
SUCH ACTION.  NOTWITHSTANDING THESE REQUIREMENTS, THE CORPORATIONS (AND THE
SELLERS) SHALL HAVE NO OBLIGATION TO CREATE ANY NEW INFORMATION FOR THE BUYER;

 

(B)                                 BUYER ACKNOWLEDGES AND AGREES THAT ALL SUCH
MATERIAL AND INFORMATION PROVIDED TO BUYER GROUP SHALL CONSTITUTE CONFIDENTIAL
INFORMATION (UNLESS SUCH INFORMATION IS EXCLUDED BY THE TERMS OF THE DEFINITION
OF CONFIDENTIAL INFORMATION);

 

(C)                                  IN ADDITION, BUYER UPON REASONABLE ADVANCE
NOTICE RECEIVED FROM THE BUYER SHALL HAVE THE RIGHT TO HAVE THE REAL PROPERTY
AND TANGIBLE PERSONAL PROPERTY INSPECTED BY BUYER GROUP, AT BUYER’S SOLE COST
AND EXPENSE, DURING REGULAR BUSINESS HOURS, FOR PURPOSES OF DETERMINING THE
PHYSICAL CONDITION AND LEGAL CHARACTERISTICS OF THE REAL PROPERTY AND TANGIBLE
PERSONAL PROPERTY AND SUCH RIGHTS OF ACCESS SHALL BE EXERCISED IN A MANNER THAT
DOES NOT UNREASONABLY INTERFERE WITH THE OPERATIONS OF THE CORPORATIONS, THE
PERFORMANCE OF THE CORPORATIONS’ OR THE SELLERS’ DUTIES UNDER THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY, EXCEPT THAT WHERE THE SELLERS OR THE
CORPORATIONS ARE CONTRACTUALLY PRECLUDED BY AN AGREEMENT PRE-EXISTING THE DATE
OF THIS AGREEMENT (OR ARE OTHERWISE PRECLUDED BY LAW) FROM TAKING ANY SUCH
ACTION THEY SHALL NOT BE OBLIGATED TO PROVIDE SUCH ACCESS; AND

 

(D)                                 IN THE EVENT SUBSURFACE TESTING IS
RECOMMENDED BY ANY OF BUYER GROUP, BUYER SHALL BE PERMITTED TO HAVE THE SAME
PERFORMED, AT ITS OWN COST ONLY AFTER AGREEING TO INDEMNIFY THE CORPORATIONS
FROM ALL ADVERSE CONSEQUENCES ARISING FROM SUCH TESTING, OBTAINING ADEQUATE
INSURANCE, NECESSARY PERMITS AND AFTER RECEIVING CONSENT FROM THE CORPORATIONS,
WHICH SHALL NOT BE UNREASONABLY WITHHELD, AND THE LAND OWNER.  BEFORE CONDUCTING
SUCH ACTIVITIES, BUYER SHALL ENTER INTO A SITE ACCESS AGREEMENT WITH THE OWNER
OF THE REAL PROPERTY WITH RESPECT TO SUCH TESTING.

 

SECTION 5.7                                   CONFIDENTIAL INFORMATION OF
CORPORATIONS AND SELLERS.

 

(A)                                 UNTIL THE CLOSING (EXCEPT IN RESPECT OF
CONFIDENTIAL INFORMATION REGARDING THE SELLERS, IN WHICH CASE SUCH OBLIGATION
SHALL NOT TERMINATE), ALL CONFIDENTIAL INFORMATION, AS HEREINAFTER DEFINED,
ACQUIRED BY BUYER GROUP WITH RESPECT TO THE CORPORATIONS OR THE SELLERS SHALL
BE: (A) MAINTAINED IN STRICT CONFIDENCE; (B) USED ONLY FOR THE PURPOSE OF AND IN
CONNECTION WITH EVALUATING THE TRANSACTION CONTEMPLATED HEREIN; AND
(C) DISCLOSED ONLY TO EMPLOYEES AND DULY AUTHORIZED AGENTS AND REPRESENTATIVES
OF BUYER GROUP WHO HAVE BEEN INFORMED OF THE OBLIGATIONS OF THE BUYER UNDER THIS
SECTION 5.7, HAVE A NEED TO KNOW THE INFORMATION IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AGREE TO KEEP SUCH INFORMATION
CONFIDENTIAL, AND AGREE TO BE BOUND BY THE TERMS OF THIS PROVISION TO THE SAME
EXTENT

 

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AS IF THEY WERE PARTIES HERETO.  THE BUYER SHALL KEEP A RECORD OF SUCH
INDIVIDUALS AND SHALL CONFIRM THEIR COMPLIANCE WITH THE PROVISIONS OF THIS
OBLIGATION.

 

(B)                                 IN THE EVENT THAT ANY OF BUYER GROUP IS
REQUESTED OR REQUIRED (BY ORAL QUESTION OR REQUEST FOR INFORMATION OR DOCUMENTS
IN ANY LEGAL PROCEEDING, INTERROGATORY, SUBPOENA, CIVIL INVESTIGATIVE DEMAND, OR
SIMILAR PROCESS) TO DISCLOSE ANY CONFIDENTIAL INFORMATION, THEN THE BUYER WILL
NOTIFY THE SELLERS PROMPTLY OF THE REQUEST OR REQUIREMENT SO THAT THE SELLERS
MAY SEEK AN APPROPRIATE PROTECTIVE ORDER OR WAIVE COMPLIANCE WITH THE PROVISIONS
OF THIS SECTION 5.7.  IF, IN THE ABSENCE OF A PROTECTIVE ORDER OR THE RECEIPT OF
A WAIVER HEREUNDER, ANY OF BUYER GROUP IS, ON THE ADVICE OF COUNSEL, COMPELLED
TO DISCLOSE ANY CONFIDENTIAL INFORMATION TO ANY TRIBUNAL, BUYER GROUP MAY
DISCLOSE THE CONFIDENTIAL INFORMATION TO THE TRIBUNAL; PROVIDED, HOWEVER, THAT
THE DISCLOSING MEMBER OF BUYER GROUP SHALL USE HIS OR ITS COMMERCIALLY
REASONABLE EFFORTS TO OBTAIN, AT THE REASONABLE REQUEST OF THE SELLERS, AN ORDER
OR OTHER ASSURANCE THAT CONFIDENTIAL TREATMENT WILL BE ACCORDED TO SUCH PORTION
OF THE CONFIDENTIAL INFORMATION REQUIRED TO BE DISCLOSED AS THE SELLERS SHALL
DESIGNATE.

 

(C)                                  FOR THE PURPOSES OF THIS SECTION 5.7, THE
TERM “CONFIDENTIAL INFORMATION” SHALL MEAN ALL INFORMATION ACQUIRED BY BUYER
GROUP FROM THE SELLERS, THE CORPORATIONS OR THEIR REPRESENTATIVES WITH RESPECT
TO THE BUSINESS OF THE CORPORATIONS OTHER THAN INFORMATION GENERALLY AVAILABLE
TO THE PUBLIC (OTHER THAN AS A RESULT OF DISCLOSURE BY BUYER GROUP OR ITS
REPRESENTATIVES IN VIOLATION OF THIS SECTION 5.7) AND INFORMATION WHICH BECOMES
AVAILABLE TO BUYER GROUP ON A NON-CONFIDENTIAL BASIS FROM A SOURCE OTHER THAN
THE SELLERS OR THE CORPORATIONS OR THEIR REPRESENTATIVES (PROVIDED THAT SUCH
SOURCE IS NOT KNOWN BY BUYER GROUP TO BE BOUND BY A CONFIDENTIALITY AGREEMENT
WITH, OR OTHER OBLIGATION OF SECRECY TO THE SELLERS, THE CORPORATIONS OR ANOTHER
PARTY).  IF THE CLOSING DOES NOT OCCUR, ALL CONFIDENTIAL INFORMATION IN WRITTEN
OR PRINTED OR OTHER TANGIBLE FORM (WHETHER COPIES OR ORIGINALS) HELD BY BUYER
GROUP SHALL BE RETURNED TO TRACE AND ALL DOCUMENTS, MEMORANDA, NOTES AND OTHER
WRITINGS WHATSOEVER PREPARED BY BUYER GROUP BASED ON THE CONFIDENTIAL
INFORMATION SHALL BE DESTROYED AND, UPON WRITTEN REQUEST OF TRACE, THE BUYER
SHALL PROVIDE CONFIRMATION FROM ITSELF AND EACH ENTITY WHICH COMPRISES BUYER
GROUP OF COMPLIANCE WITH THIS PROVISION.

 

ARTICLE VI.
POST-CLOSING COVENANTS

 

The Parties agree as follows with respect to the period following the Closing.

 

SECTION 6.1                                   GENERAL.

 

In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Article VIII below).  The Sellers
acknowledge and agree that from and after the Closing the Buyer will be entitled
to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Corporations.  After
Closing, the Sellers shall have access to all documents, books, records
(including Tax records), agreements, and financial data of any sort relating to
the

 

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Corporations at their sole cost and expense, and such records shall not be
destroyed prior to the expiration of five years following the Closing Date,
unless otherwise agreed to by the Parties.

 

SECTION 6.2                                   LITIGATION SUPPORT.

 

In the event and for so long as any Party actively is contesting or defending
against any action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving the Corporations, each
of the other Parties will cooperate with him or it and his or its counsel in the
contest or defense, make available their personnel upon reasonable notice, and
provide such testimony and access to their books and records upon reasonable
notice as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party which shall be
paid within 30 days of an invoice being rendered) (unless the contesting or
defending Party is entitled to indemnification therefor under Article VIII below
or such disclosure is prohibited by applicable Legal Requirements or by a
pre-existing duty or covenant of confidentiality).

 

SECTION 6.3                                   TRANSITION.

 

For a period of two years after the Closing Date, SCF will not take any action
that is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Corporations
from maintaining the same business relationships with the Corporations after the
Closing as it maintained with the Corporations prior to the Closing except to
the extent that such action: (a) is taken by SCF in the course of exercising any
of its rights pursuant to this Agreement or defending any claim made against SCF
pursuant to this Agreement; (b) involves the direct or indirect sale or
disposition of any of the Geokinetics Shares; or (c) results from any activity
undertaken after the Closing Date, of SCF or any entity in which it has an
investment, its limited partners, its general partner or any of their Related
Persons or their Representatives or Representatives of their Related Persons,
including any business activities that compete directly with the businesses of
the Corporations as constituted on the Closing Date or anytime thereafter.  SCF
will refer all customer inquiries relating to the business of the Corporations
to the Buyer after the Closing.

 

SECTION 6.4                                   CONFIDENTIALITY.

 

(A)                                 SCF WILL TREAT AND HOLD AS SUCH ALL OF THE
CONFIDENTIAL INFORMATION, AND REFRAIN FROM USING ANY OF THE CONFIDENTIAL
INFORMATION EXCEPT IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE IN CONNECTION
WITH IT HAVING BEEN A SHAREHOLDER OF TRACE, AND AFTER THE CLOSING DATE DESTROY,
AT THE REQUEST AND OPTION OF BUYER, ALL TANGIBLE EMBODIMENTS (AND ALL COPIES) OF
THE CONFIDENTIAL INFORMATION WHICH ARE IN ITS POSSESSION EXCEPT TO THE EXTENT
THAT SUCH CONFIDENTIAL INFORMATION IS CONTAINED WITHIN OTHER DOCUMENTS WHICH DO
NOT OTHERWISE CONSTITUTE CONFIDENTIAL INFORMATION OR IS OTHERWISE REQUIRED TO
PERMIT SCF TO MAINTAIN ITS OWN RECORDS, AS IT DETERMINES IN ITS DISCRETION, IN
ORDER TO ASSERT ITS RIGHTS PURSUANT TO THIS AGREEMENT OR DEFEND AGAINST ANY
CLAIM MADE BY THE BUYER PURSUANT TO THIS AGREEMENT.

 

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(B)                                 IN THE EVENT THAT SCF IS REQUESTED OR
REQUIRED (BY ORAL QUESTION OR REQUEST FOR INFORMATION OR DOCUMENTS IN ANY LEGAL
PROCEEDING, INTERROGATORY, SUBPOENA, CIVIL INVESTIGATIVE DEMAND, OR SIMILAR
PROCESS) TO DISCLOSE ANY CONFIDENTIAL INFORMATION, THEN SCF WILL NOTIFY THE
BUYER PROMPTLY OF THE REQUEST OR REQUIREMENT SO THAT THE BUYER MAY SEEK AN
APPROPRIATE PROTECTIVE ORDER OR WAIVE COMPLIANCE WITH THE PROVISIONS OF THIS
SECTION 6.4.  IF, IN THE ABSENCE OF A PROTECTIVE ORDER OR THE RECEIPT OF A
WAIVER HEREUNDER, SCF IS, ON THE ADVICE OF COUNSEL, COMPELLED TO DISCLOSE ANY
CONFIDENTIAL INFORMATION TO ANY TRIBUNAL OR ELSE STAND LIABLE FOR CONTEMPT, SCF
MAY DISCLOSE THE CONFIDENTIAL INFORMATION TO THE TRIBUNAL; PROVIDED, HOWEVER,
THAT SCF SHALL USE ITS COMMERCIALLY REASONABLE EFFORTS TO OBTAIN, AT THE
REASONABLE REQUEST OF BUYER, AN ORDER OR OTHER ASSURANCE THAT CONFIDENTIAL
TREATMENT WILL BE ACCORDED TO SUCH PORTION OF THE CONFIDENTIAL INFORMATION
REQUIRED TO BE DISCLOSED AS THE BUYER SHALL DESIGNATE.  THE FOREGOING PROVISIONS
SHALL NOT APPLY TO ANY CONFIDENTIAL INFORMATION WHICH IS GENERALLY AVAILABLE TO
THE PUBLIC IMMEDIATELY PRIOR TO THE TIME OF DISCLOSURE.

 

(C)                                  FOR THE PURPOSES OF THIS SECTION 6.4, THE
TERM “CONFIDENTIAL INFORMATION” SHALL MEAN ALL INFORMATION ACQUIRED BY SCF FROM
THE CORPORATIONS OR THEIR REPRESENTATIVES WITH RESPECT TO THE BUSINESS OF THE
CORPORATIONS OTHER THAN INFORMATION GENERALLY AVAILABLE TO THE PUBLIC (OTHER
THAN AS A RESULT OF DISCLOSURE BY SCF OR ITS REPRESENTATIVES IN VIOLATION OF
THIS PARAGRAPH) AND INFORMATION WHICH BECOMES AVAILABLE TO SCF ON A
NON-CONFIDENTIAL BASIS FROM A SOURCE OTHER THAN THE CORPORATIONS OR THEIR
REPRESENTATIVES (PROVIDED THAT SUCH SOURCE IS NOT KNOWN BY SCF TO BE BOUND BY A
CONFIDENTIALITY AGREEMENT WITH, OR OTHER OBLIGATION OF SECRECY TO THE
CORPORATIONS).

 

SECTION 6.5                                   RESTRICTIVE LEGEND.

 

Each certificate representing Geokinetics Shares will be imprinted with a legend
substantially in the following form:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL
BE VALID OR EFFECTIVE UNLESS SUCH TRANSFER IS MADE (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS, OR (B) PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE OR
LOCAL SECURITIES LAW (INCLUDING WITHOUT LIMITATION THE DELIVERY OF A LEGAL
OPINION FROM COUNSEL TO THE TRANSFEROR, REASONABLY SATISFACTORY, IF REQUESTED BY
THE COMPANY).

 

Each holder desiring to transfer a Geokinetics Share first must furnish the
Buyer with (i) a written opinion reasonably satisfactory to Buyer in form and
substance from counsel reasonably satisfactory to Buyer by reason of experience
to the effect that the holder may transfer the Geokinetics Shares as desired
without registration under the Securities Act and (ii) a

 

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written undertaking executed by the desired transferee reasonably satisfactory
to Buyer in form and substance agreeing to be bound by the restrictions on
transfer contained herein.

 

SECTION 6.6                                   [NOT USED]

 

SECTION 6.7                                   WITHHOLDING TAX AND CLEARANCE
CERTIFICATES.

 

(A)                                 EACH OF THE SELLERS WHO IS NOT A RESIDENT OF
CANADA FOR THE PURPOSES OF THE INCOME TAX ACT (CANADA) (THE “TAX ACT”) (EACH
SUCH PERSON REFERRED TO HEREIN AS A “NON-RESIDENT SELLER”) SHALL ATTEMPT TO
DELIVER OR CAUSE TO BE DELIVERED TO THE BUYER AT OR PRIOR TO THE CLOSING DATE A
CLEARANCE CERTIFICATE (A “SECTION 116 CERTIFICATE”) ISSUED BY THE CANADA REVENUE
AGENCY PURSUANT TO SECTION 116 OF THE TAX ACT IN RESPECT OF THE DISPOSITION OF
THE NON-RESIDENT SELLER’S TRACE COMMON STOCK.

 

(B)                                 EACH SUCH SECTION 116 CERTIFICATE SHALL FIX
(OR OTHERWISE BE BASED ON AN AMOUNT EQUAL TO) A CERTIFICATE LIMIT THAT IS NOT
LESS THAN THE PRICE PAYABLE TO THE APPLICABLE NON-RESIDENT SELLER FOR THE
NON-RESIDENT SELLER’S TRACE COMMON STOCK (SUCH PRICE FOR THE NON-RESIDENT
SELLER’S TRACE COMMON STOCK BEING REFERRED TO HEREIN AS THE “NRV PURCHASE PRICE”
AND, IN THE CASE OF THE PARTIAL PAYMENT WITH GEOKINETICS SHARES AS REFERRED TO
IN SECTION 2.2(A), SHALL HAVE AN AMOUNT ADDED TO THE CASH PORTION OF THE
PURCHASE PRICE PAYABLE TO THEM EQUAL TO THE NUMBER OF GEOKINETICS SHARES
MULTIPLIED BY THE 10 DAY WEIGHTED AVERAGE TRADING PRICE OF THE SHARES OF THE
COMMON STOCK OF THE BUYER BEFORE THE CLOSING DATE (CONVERTED TO CANADIAN DOLLARS
USING THE EXCHANGE RATE).

 

(C)                                  IF A NON-RESIDENT SELLER DOES NOT DELIVER
OR CAUSE TO BE DELIVERED A SECTION 116 CERTIFICATE CONTAINING A CERTIFICATE
LIMIT AS REQUIRED BY SECTION 6.7(B) TO THE BUYER AT OR PRIOR TO THE CLOSING
DATE, THE NON-RESIDENT SELLER ACKNOWLEDGES THAT THE BUYER SHALL BE ENTITLED TO
DEDUCT AN AMOUNT FROM THE NRV PURCHASE PRICE PAYABLE BY THE BUYER TO THE
NON-RESIDENT SELLER ON THE CLOSING DATE EQUAL TO 25% OF SUCH NRV PURCHASE PRICE,
PROVIDED THAT A CORRESPONDING AMOUNT OF ANY SUCH DEDUCTION (THE “WITHHELD
AMOUNT”) SHALL BE PAID IN CASH AND DEPOSITED BY THE BUYER TO THE SELLERS’
SOLICITORS ON THE CLOSING DATE, ON THE CONDITION THAT SUCH AMOUNT SHALL BE HELD
BY THE SELLERS’ SOLICITORS IN TRUST PENDING THE DELIVERY TO THE BUYER OF A
SECTION 116 CERTIFICATE WITH A CERTIFICATE LIMIT THAT IS NOT LESS THE FULL
AMOUNT OF THE NRV PURCHASE PRICE PAYABLE TO THE NON-RESIDENT SELLER, ALL IN
ACCORDANCE WITH THE FOLLOWING TERMS AND CONDITIONS:

 

(I)                                     THE DEPOSIT OF THE WITHHELD AMOUNT WITH
THE SELLERS’ SOLICITORS BY THE BUYER ON THE CLOSING DATE SHALL SATISFY THE
BUYER’S PAYMENT OBLIGATION IN RESPECT OF THE CORRESPONDING PORTION OF THE NRV
PURCHASE PRICE PAYABLE TO THE NON-RESIDENT SELLER;

 

(II)                                  THE AMOUNT DEPOSITED WITH THE SELLERS’
SOLICITORS SHALL BE HELD IN TRUST BY THE SELLERS’ SOLICITORS FOR THE BENEFIT OF
THE NON-RESIDENT SELLER AND THE BUYER FOR PAYMENT TO THE NON-RESIDENT SELLER AND
THE RECEIVER GENERAL FOR CANADA, AS DESCRIBED BELOW;

 

(III)                               PROMPTLY UPON THE NON-RESIDENT SELLER’S
PROVIDING A SECTION 116 CERTIFICATE TO THE BUYER WITH A CERTIFICATE LIMIT THAT
IS NOT LESS THE NRV PURCHASE PRICE PAYABLE TO THE NON-RESIDENT SELLER, THE FULL
AMOUNT OF THE FUNDS HELD IN TRUST BY THE

 

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SELLERS’ SOLICITORS FOR THE NON-RESIDENT SELLER (INCLUDING ANY INTEREST EARNED
ON THE FUNDS HELD IN TRUST LESS ANY CANADIAN WITHHOLDING TAX ON SUCH INTEREST)
SHALL BE PAID TO THE NON-RESIDENT SELLER;

 

(IV)                              IF A SECTION 116 CERTIFICATE HAS NOT BEEN
PROVIDED TO THE BUYER AS SET OUT ABOVE ON OR BEFORE THE 30TH DAY AFTER THE END
OF THE MONTH IN WHICH THE CLOSING DATE OCCURS, THE SELLERS’ SOLICITORS SHALL
REMIT THE FULL AMOUNT IT CONTINUES TO HOLD IN TRUST FOR THE APPLICABLE
NON-RESIDENT SELLER AT THAT DATE (LESS ANY INTEREST EARNED IN RESPECT OF SUCH
FUNDS) TO THE RECEIVER GENERAL FOR CANADA IN SATISFACTION OF THE BUYER’S
WITHHOLDING TAX LIABILITY IN RESPECT OF THE PURCHASE OF THE NON-RESIDENT
SELLER’S TRACE COMMON STOCK PURSUANT TO SUBSECTION 116(5) OF THE TAX ACT, UNLESS
THE NON-RESIDENT SELLER PROVIDES EVIDENCE SATISFACTORY TO THE BUYER (ACTING
REASONABLY) THAT THE CANADA REVENUE AGENCY HAS INSTRUCTED THAT THE FUNDS NOT BE
REMITTED AT SUCH TIME, IN WHICH CASE THE FUNDS HELD BY THE ESCROW AGENT SHALL
CONTINUE TO BE HELD IN TRUST;

 

(V)                                 IN THE EVENT THAT SUBPARAGRAPH (IV) APPLIES
TO DEFER THE TIME AT WHICH AMOUNTS WOULD OTHERWISE BE REQUIRED TO BE REMITTED TO
THE RECEIVER GENERAL FOR CANADA UNDER THAT PARAGRAPH, THE PROVISIONS OF THIS
PARAGRAPH (C) SHALL CONTINUE TO APPLY TO ANY SUCH WITHHELD FUNDS AS IF THE
REFERENCE TO THE DATE THAT SUCH AMOUNTS ARE REQUIRED TO BE REMITTED TO THE
RECEIVER GENERAL FOR CANADA WERE INSTEAD A REFERENCE TO THE NEW DATE SET BY THE
CANADA REVENUE AGENCY AS THE DATE FOR THE REMITTANCE OR THE DATE REMITTANCE IS
OTHERWISE REQUIRED BY LAW;

 

(VI)                              IF THE AGGREGATE CERTIFICATE LIMIT IN THE
SECTION 116 CERTIFICATE PROVIDED TO THE BUYER BY THE NON-RESIDENT SELLER IS LESS
THAN THE NRV PURCHASE PRICE PAYABLE TO THE NON-RESIDENT SELLER, THE SELLERS’
SOLICITORS SHALL REMIT 25% OF THE DIFFERENCE BETWEEN SUCH EXCESS NRV PURCHASE
PRICE AMOUNT AND THE CERTIFICATE LIMIT SHOWN IN THE SECTION 116 CERTIFICATE TO
THE RECEIVER GENERAL FOR CANADA IN SATISFACTION OF THE BUYER’S WITHHOLDING TAX
LIABILITY IN RESPECT OF THE PURCHASE OF THE NON-RESIDENT SELLER’S TRACE COMMON
STOCK PURSUANT TO SUBSECTION 116(5) OF THE TAX ACT, AND ANY EXCESS FUNDS HELD BY
THE SELLERS’ SOLICITORS FOLLOWING SUCH REMITTANCE (INCLUDING ANY INTEREST EARNED
ON THE FUNDS HELD IN TRUST LESS ANY CANADIAN WITHHOLDING TAX ON SUCH INTEREST)
SHALL BE PAID TO THE NON-RESIDENT SELLER;

 

(VII)                           THE FUNDS HELD BY THE SELLERS’ SOLICITORS FOR
THE NON-RESIDENT SELLER SHALL BE INVESTED IN AN INTEREST BEARING ACCOUNT, WITH
ANY SUCH INTEREST (LESS ANY APPLICABLE CANADIAN WITHHOLDING TAX) TO ACCRUE FOR
THE BENEFIT OF THE NON-RESIDENT SELLER; AND

 

(VIII)                        IF REQUESTED BY THE NON-RESIDENT SELLER, THE
SELLERS’ SOLICITORS WILL BE ENTITLED TO PAY ALL OR ANY PORTION OF THE FUNDS THAT
IT HOLDS IN TRUST FOR THE NON-RESIDENT SELLER DIRECTLY TO THE RECEIVER GENERAL
FOR CANADA AGAINST DELIVERY BY THE CANADA REVENUE AGENCY OF A SECTION 116
CERTIFICATE.

 

SECTION 6.8                                   REGISTRATION RIGHTS.

 

On the Closing Date, the Buyer and the Sellers shall enter into the Registration
Rights Agreement in substantially the form attached hereto as Exhibit B.

 

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SECTION 6.9                                   TRANSFERRED INFORMATION.

 

The Buyer covenants and agrees to:

 

(A)                                 PRIOR TO THE COMPLETION OF THE TRANSACTIONS
CONTEMPLATED HEREIN, COLLECT, USE AND DISCLOSE THE TRANSFERRED INFORMATION
SOLELY FOR THE PURPOSE OF REVIEWING AND COMPLETING THE TRANSACTIONS CONTEMPLATED
HEREIN, INCLUDING THE DETERMINATION TO COMPLETE SUCH TRANSACTIONS, AND ONLY
COLLECT, USE AND DISCLOSE SUCH INFORMATION TO THE EXTENT NECESSARY TO MEET SUCH
PURPOSE AND AS AUTHORIZED OR PERMITTED BY LAW;

 

(B)                                 AFTER THE COMPLETION OF THE TRANSACTIONS
CONTEMPLATED HEREIN: (I) COLLECT, USE AND DISCLOSE THE TRANSFERRED INFORMATION
ONLY FOR THOSE PURPOSES FOR WHICH THE TRANSFERRED INFORMATION WAS INITIALLY
COLLECTED FROM OR IN RESPECT OF THE INDIVIDUAL TO WHICH SUCH TRANSFERRED
INFORMATION RELATES, UNLESS: (A) THE BUYER HAS FIRST NOTIFIED SUCH INDIVIDUAL OF
SUCH ADDITIONAL PURPOSE, AND WHERE REQUIRED BY LAW, OBTAINED THE CONSENT OF SUCH
INDIVIDUAL TO SUCH ADDITIONAL PURPOSE, OR (B) SUCH USE OR DISCLOSURE IS
PERMITTED OR AUTHORIZED BY LAW, WITHOUT NOTICE TO, OR CONSENT FROM, SUCH
INDIVIDUAL; AND (II) WHERE REQUIRED BY APPLICABLE LEGAL REQUIREMENT, PROMPTLY
NOTIFY THE INDIVIDUALS TO WHOM THE TRANSFERRED INFORMATION RELATES THAT THE
TRANSACTIONS CONTEMPLATED HEREIN HAVE TAKEN PLACE AND THAT THE TRANSFERRED
INFORMATION HAS BEEN DISCLOSED TO THE BUYER;

 

(C)                                  RETURN OR DESTROY THE TRANSFERRED
INFORMATION, AT THE OPTION OF THE SELLERS, SHOULD THE TRANSACTIONS CONTEMPLATED
HEREIN NOT BE COMPLETED; AND

 

(D)                                 WHERE THE DISCLOSURE OR TRANSFER OF
TRANSFERRED INFORMATION TO THE BUYER REQUIRES THE CONSENT OF, OR THE PROVISION
OF NOTICE TO, THE INDIVIDUAL TO WHICH SUCH TRANSFERRED INFORMATION RELATES, TO
NOT REQUIRE OR ACCEPT THE DISCLOSURE OR TRANSFER OF SUCH TRANSFERRED INFORMATION
UNTIL THE SELLERS HAVE FIRST NOTIFIED SUCH INDIVIDUAL OF SUCH DISCLOSURE OR
TRANSFER AND THE PURPOSE FOR SAME, AND WHERE REQUIRED BY LAW, OBTAINED THE
INDIVIDUAL’S CONSENT TO SAME.

 

ARTICLE VII.
CONDITIONS TO OBLIGATIONS TO CLOSE

 

SECTION 7.1                                   CONDITIONS TO OBLIGATIONS OF THE
BUYER.

 

The obligation of the Buyer to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:

 

(A)                                 ALL OF THE REPRESENTATIONS AND WARRANTIES OF
THE SELLERS MADE IN THIS AGREEMENT (AND AS MODIFIED PURSUANT TO SECTION 5.4)
SHALL BE TRUE AND CORRECT IN ALL RESPECTS AS OF THE CLOSING DATE (UNLESS THEY
EXPRESSLY REFER TO AN EARLIER DATE) WITH THE SAME EFFECT AS IF MADE AT AND AS OF
THE CLOSING TIME (AND FOR THE PURPOSE OF THIS CONDITION, THE REPRESENTATIONS AND
WARRANTIES OF THE SELLERS MADE IN THIS AGREEMENT SHALL BE READ AS THOUGH NONE OF
THEM CONTAINED ANY “MATERIAL ADVERSE EFFECT” OR OTHER MATERIALITY
QUALIFICATION), EXCEPT TO THE EXTENT THAT ANY BREACH OF SUCH REPRESENTATIONS AND
WARRANTIES ARISES FROM THE ACTIONS OF THE SELLERS OR THE CORPORATIONS WHICH ARE
REQUIRED BY THIS AGREEMENT OR ARE CONSENTED TO BY THE BUYER;

 

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(B)                                 THE SELLERS SHALL HAVE COMPLIED WITH AND
PERFORMED ALL OF THEIR OBLIGATIONS IN THIS AGREEMENT TO BE PERFORMED OR COMPLIED
WITH AT OR BEFORE CLOSING, EXCEPT TO THE EXTENT THAT ANY BREACH OF SUCH
OBLIGATIONS IS CONSENTED TO BY THE BUYER;

 

(C)                                  SINCE THE DATE OF THE AGREEMENT, THE
BUSINESS OF TRACE HAS BEEN CONDUCTED IN THE ORDINARY COURSE OF BUSINESS (EXCEPT
AS OTHERWISE PERMITTED BY THIS AGREEMENT) AND IN THE ABSENCE OF ANY MATERIAL
CASUALTY OR MATERIAL ADVERSE CHANGE IN THE CONDUCT OF SUCH BUSINESS;

 

(D)                                 THE BUYER SHALL HAVE FINALIZED FINANCING
ARRANGEMENTS, SATISFACTORY TO THE BUYER, WITH BLACKHAWK CAPITAL PARTNERS OR
ANOTHER PERSON, IN THE BUYER’S SOLE DISCRETION, TO PAY THE PURCHASE PRICE AS
SPECIFIED IN THIS AGREEMENT;

 

(E)                                  THE BUYER SHALL HAVE AGREED TO EMPLOYMENT
TERMS WITH THE RETAINED EMPLOYEES, SUCH TERMS TO BE SUBJECT TO THE COMPLETION OF
CLOSING AND TO INCLUDE COMPENSATION, DESCRIPTION OF DUTIES, NON-COMPETITION AND
NON-SOLICITATION COVENANTS, AND INCENTIVE COMPENSATION PROVISIONS (INCLUDING,
WHERE APPLICABLE, PARTICIPATION IN THE BUYER’S 401K TO THE EXTENT SUCH EMPLOYEES
ARE ELIGIBLE FOR PARTICIPATION);

 

(F)                                   AS OF THE CLOSING DATE, TRACE SHALL HAVE
CONTRACTS WHICH ALLOW FOR A BACKLOG OF AT LEAST CDN$19,000,000, WHICH CONTRACTS
SHALL REFLECT PROFIT MARGINS CONSISTENT WITH TRACE’S PRIOR BIDDING PRACTICES;

 

(G)                                  THE BUYER SHALL HAVE COMPLETED ITS DUE
DILIGENCE REVIEW OF TRACE TO ITS SATISFACTION IN ITS ABSOLUTE AND SOLE
DISCRETION;

 

(H)                                 THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT WILL NOT RESULT IN THE ACCELERATION OF A
TERMINATION RIGHT (OR THE CREATION OF A TERMINATION RIGHT) OR THE ACTUAL
TERMINATION OF, ANY MATERIAL CONTRACT;

 

(I)                                     TRACE SHALL HAVE EXERCISED ITS OPTION TO
PURCHASE THE ADDITIONAL SEISMIC EQUIPMENT PURSUANT TO THE TERMS OF THE OPTION
AGREEMENT BETWEEN TRACE AND INPUT-OUTPUT INC. AND THE I/O OPTION PRICE SHALL
HAVE BEEN PAID BY TRACE IN CASH OR DEBT (WHICH DEBT SHALL BE INCURRED ON TERMS
AND CONDITIONS SATISFACTORY TO THE BUYER), OR HAS BEEN EXERCISED ON THE BASIS
THAT THE I/O OPTION COST WILL BE PAID BY TRACE (OR THE BUYER) AT THE CLOSING
TIME OR THEREAFTER;

 

(J)                                    THE SELLERS SHALL HAVE ENTERED INTO THE
ESCROW AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT;

 

(K)                                 THE SELLER CONSENTS AND APPROVALS AND THE
BUYER CONSENTS AND APPROVALS SHALL HAVE BEEN OBTAINED WITH NO CONDITIONS OTHER
THAN THOSE AGREED TO IN WRITING BY THE BUYER, ACTING REASONABLY, OR COMPLIED
WITH ON OR BEFORE THE CLOSING AND THE SELLER CONSENTS AND APPROVALS SHALL BE IN
FORM AND HAVE TERMS SATISFACTORY TO THE BUYER, ACTING REASONABLY;

 

(L)                                     THE SELLERS SHALL HAVE DELIVERED TO THE
BUYER A CERTIFICATE TO THE EFFECT THAT EACH OF THE CONDITIONS SPECIFIED ABOVE IN
SECTION 7.1(A), (B), (C), (F), (H) AND (I) IS SATISFIED IN ALL RESPECTS;

 

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(M)                             THE FINAL SCHEDULES TO SECTION 3.1 AND
ARTICLE IV OF THIS AGREEMENT SHALL HAVE BEEN DELIVERED TO THE BUYER BY THE
SELLERS NOT LESS THAN THREE BUSINESS DAYS PRIOR TO THE CLOSING, AND SUCH
SCHEDULES SHALL BE SATISFACTORY TO THE BUYER IN ITS SOLE DISCRETION;

 

(N)                                 THE BUYER SHALL HAVE RECEIVED THE
RESIGNATIONS, EFFECTIVE AS OF THE CLOSING, OF EACH DIRECTOR AND OFFICER OF THE
CORPORATIONS RESIGNING THEIR POSITIONS AS AN OFFICER OR DIRECTOR, AS THE CASE
MAY BE, OTHER THAN THOSE WHOM THE BUYER SHALL HAVE SPECIFIED IN WRITING AT LEAST
THREE BUSINESS DAYS PRIOR TO THE CLOSING; AND

 

(O)                                 TRACE SHALL HAVE DELIVERED TO BUYER
CONSOLIDATED FINANCIAL STATEMENTS OF THE CORPORATIONS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2002, 2003, AND 2004, TOGETHER WITH THE CONSENT (WHICH CONSENT
SHALL BE IN FORM ACCEPTABLE TO BUYER, ACTING REASONABLY) OF THE CORPORATIONS’
INDEPENDENT AUDITORS TO THE INCLUSION OF SUCH FINANCIAL STATEMENTS AND THE
RELATED REPORTS THEREON (I) IN THE BUYER’S REQUIRED FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AFTER THE CLOSING DATE OR (II) IN ANY REGISTRATION STATEMENT OR OTHER OFFERING
DOCUMENT REQUIRED TO BE PREPARED BY THE BUYER IN ORDER TO REGISTER ITS
SECURITIES, OR PERFECT AN EXEMPTION FROM APPLICABLE REGISTRATION REQUIREMENTS,
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.

 

The Buyer may waive any condition specified in this Section 7.1 if it executes a
notice in writing so stating at or prior to the Closing.  If any of the
conditions specified in this Section 7.1 are not complied with (provided such
non-compliance did not arise from the acts or omissions of the Buyer) or waived
by the Buyer on or before the Closing Date (other than Section 7.1(g), for which
the Buyer must provide the Sellers with notice of non-satisfaction on or before
the date that is 30 days from the date of this Agreement and if no such notice
is received by such date it shall be deemed to have been satisfied) the Buyer
may terminate this Agreement by written notice to the Sellers.

 

SECTION 7.2                                   CONDITIONS TO OBLIGATION OF THE
SELLERS.

 

The obligation of the Sellers to consummate the transactions to be performed by
them in connection with the Closing is subject to satisfaction of the following
conditions:

 

(A)                                 ALL OF THE REPRESENTATIONS AND WARRANTIES OF
THE BUYER MADE IN THIS AGREEMENT (AND AS MODIFIED PURSUANT TO SECTION 5.4) SHALL
BE TRUE AND CORRECT IN ALL RESPECTS AS OF THE CLOSING AND WITH THE SAME EFFECT
AS IF MADE AT AND AS OF THE CLOSING DATE, EXCEPT TO THE EXTENT THAT ANY BREACH
OF SUCH REPRESENTATIONS AND WARRANTIES ARISES FROM THE ACTIONS OF THE BUYER
WHICH ARE REQUIRED BY THIS AGREEMENT OR ARE CONSENTED TO BY SCF;

 

(B)                                 THE BUYER SHALL HAVE COMPLIED WITH AND
PERFORMED ALL OF THE TERMS AND CONDITIONS IN THIS AGREEMENT ON ITS PART TO BE
PERFORMED OR COMPLIED WITH AT OR BEFORE CLOSING, EXCEPT TO THE EXTENT THAT ANY
BREACH OF SUCH OBLIGATIONS IS CONSENTED TO BY SCF;

 

(C)                                  SINCE THE DATE OF THIS AGREEMENT, THE
BUYER’S BUSINESS HAS BEEN CONDUCTED IN THE ORDINARY COURSE OF BUSINESS AND IN
THE ABSENCE OF ANY MATERIAL CASUALTY OF MATERIAL ADVERSE CHANGE IN THE CONDUCT
OF SUCH BUSINESS;

 

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(D)                                 THE BUYER SHALL HAVE ENTERED INTO THE ESCROW
AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT;

 

(E)                                  THE SELLER CONSENTS AND APPROVALS AND THE
BUYER CONSENTS AND APPROVALS SHALL HAVE BEEN OBTAINED WITH NO CONDITIONS OTHER
THAN THOSE AGREED TO IN WRITING BY THE SELLERS, ACTING REASONABLY, OR COMPLIED
WITH ON OR BEFORE THE CLOSING AND THE BUYER CONSENTS AND APPROVALS SHALL BE IN
FORM AND HAVE TERMS SATISFACTORY TO THE SELLERS, ACTING REASONABLY;

 

(F)                                   THE BUYER SHALL HAVE DELIVERED TO THE
SELLERS A CERTIFICATE TO THE EFFECT THAT EACH OF THE CONDITIONS SPECIFIED ABOVE
IN SECTION 7.2(A), (B), (C) AND (D) IS SATISFIED IN ALL RESPECTS;

 

(G)                                  THE FINAL SCHEDULES TO SECTION 3.2 OF THIS
AGREEMENT SHALL HAVE BEEN DELIVERED TO THE SELLERS BY THE BUYER NOT LESS THAN
THREE BUSINESS DAYS PRIOR TO THE CLOSING, AND SUCH SCHEDULES SHALL BE
SATISFACTORY TO THE SELLERS IN THEIR SOLE DISCRETION.  THE BUYER MAY AMEND THE
SCHEDULES TO SECTION 3.2 UP TO THE DAY THAT IS THREE BUSINESS DAYS PRIOR TO THE
CLOSING; AND

 

(H)                                 THE DIRECTORS OF THE CORPORATIONS AND THE
MINORITY CORPORATIONS AND SCF SHALL HAVE RECEIVED RELEASES FROM THE CORPORATIONS
AND THE MINORITY CORPORATIONS THAT ARE SATISFACTORY TO THEM, AND THE BUYER, IN
EACH CASE ACTING REASONABLY.

 

SCF, on behalf of the Sellers, may waive any condition specified in this
Section 7.2 if it executes a notice in writing so stating at or prior to the
Closing.  If any of the conditions specified in this Section 7.2 are not
complied with or waived by SCF on or before the Closing Date (provided such
non-compliance did not arise from the acts or omissions of the Sellers), SCF, on
behalf of the Sellers, may terminate this Agreement by written notice to the
Buyer.

 

SECTION 7.3                                   INFORMATION REGARDING THE
SATISFACTION OF CONDITIONS

 

At the request of the Sellers, the Buyer shall provide information to the
Sellers regarding progress that is made in satisfaction in the conditions set
forth in Section 7.1.  At the request of the Buyer, the Sellers shall provide
information to the Buyer regarding progress that is being made in the
satisfaction of the conditions set forth in Section 7.2.  Such information shall
be delivered to the requesting Party in such reasonable detail as will permit
such Party to assess progress that has been made by the other Party (or Parties)
in the satisfaction of the conditions and such information shall be provided
promptly after such request.

 

ARTICLE VIII.
REMEDIES FOR BREACHES OF THIS AGREEMENT

 

SECTION 8.1                                   SURVIVAL OF REPRESENTATIONS AND
WARRANTIES.

 

All of the representations, warranties and covenants of the Parties contained in
this Agreement and any certificates delivered at Closing shall survive the
Closing hereunder (but not if notice of a Breach is provided pursuant to
Section 5.4) and continue in full force and effect for a period of twelve months
following the Closing Date (or lesser period specified by any applicable
statutes of limitations).  The twelve month period set forth in this Section 8.1
shall not apply with respect to the inaccuracy or breach of the representations
set forth in (a) Section 4.17,

 

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which representations shall survive the Closing and continue in full force and
effect until the earlier of:  (i) 36 months following the Closing Date; and
(ii) the occurrence of an event described in Section 8.4(i)(v), so long as such
event occurs after the first anniversary of the Closing Date; and
(b) Section 3.1(e), which shall survive the Closing and continue in full force
and effect (subject to the applicable statute of limitations).

 

SECTION 8.2                                   INDEMNIFICATION PROVISIONS FOR
BENEFIT OF THE BUYER

 

If the Closing Time occurs, in the event any Seller Breaches any of the
representations, warranties, covenants or agreements contained in this Agreement
or in any certificate delivered by the Sellers with respect hereto in connection
with the Closing, provided that an Acquiror Party provides a Claim Notice to the
Sellers pursuant to Section 8.5 below within the survival period specified in
Section 8.1, then each of the Sellers shall indemnify (individually as to a
Seller’s Breach of any of the representations set forth in Section 3.1 above,
but severally in the case of a Breach of any other representations, warranties,
covenants or agreements made by the Sellers in this Agreement) from the Escrow
Fund the Buyer and the Corporations (each, an “Acquiror”) and each of Acquiror’s
respective officers, directors, employees, agents, Representatives, Affiliates,
successors and permitted assigns (collectively, “Acquiror Parties”) and hold
each of them harmless from and against and pay on behalf of or reimburse such
Acquiror Parties in respect of the entirety of any Adverse Consequences such
Acquiror Parties may suffer through and after the date of the claim for
indemnification resulting from, arising out of, relating to, in the nature of,
or caused by the Breach.  For the purpose of this Article VIII, the
representations and warranties of the Sellers made in this Agreement shall be
read as though none of them contained any “material adverse effect” or other
materiality qualification (which, for greater certainty, does not apply to any
knowledge qualification or a qualification as to significance).

 

SECTION 8.3                                   INDEMNIFICATION PROVISIONS FOR
BENEFIT OF THE SELLERS.

 

In the event the Buyer Breaches any of its representations, warranties, and
covenants contained herein, provided that the Sellers provide a Claim Notice to
the Buyer pursuant to Section 8.5 below within the survival period specified in
Section 8.1, the Buyer shall indemnify each of the Sellers from and against the
entirety of any Adverse Consequences the Seller may suffer through and after the
date of the claim for indemnification resulting from, arising out of, relating
to, in the nature of, or caused by the Breach.  For the purpose of this
Article VIII, the representations and warranties of the Buyer made by in this
Agreement shall be read as though none of them contained any “material adverse
effect” or other materiality qualification.

 

SECTION 8.4                                   LIMITATION OF INDEMNITIES.

 

(A)                                 NO CLAIMS, DEMANDS, SUITS, ACTIONS,
PROCEEDINGS OR REMEDIES (“CLAIMS”) WITH RESPECT TO THE INDEMNITIES PROVIDED BY
THIS AGREEMENT SHALL BE MADE OR BE AVAILABLE UNLESS A CLAIM NOTICE (AS THAT TERM
IS DEFINED IN SECTION 8.5(B)) HAS BEEN GIVEN BY THE PARTY MAKING THE CLAIM TO
THE OTHER PARTIES HERETO WITHIN TWELVE MONTHS OF THE CLOSING DATE (OR LESSER
PERIOD SPECIFIED IN ANY APPLICABLE STATUTE OF LIMITATIONS), EXCEPT IN THE CASE
OF A CLAIM FOR A BREACH OF THE REPRESENTATIONS SET FORTH IN SECTION 3.1(E) WHICH
MAY BE MADE UP UNTIL THE APPLICABLE LIMITATION PERIOD EXPIRES;

 

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(B)                                 THE SELLERS’ LIABILITY PURSUANT TO THIS
ARTICLE VIII SHALL BE LIMITED TO THE ESCROW AMOUNT (INCLUDING ANY INTEREST
THEREON) AND THE ACQUIROR PARTY SHALL HAVE NO REMEDY WHATSOEVER AGAINST THE
SELLERS OR ANY OTHER ASSET OR INTEREST OF THEM IN RESPECT OF ANY SUCH CLAIM,
EVEN IN THE EVENT THAT THE ESCROW AMOUNT IS LOST OR IS NOT OTHERWISE AVAILABLE,
EXCEPT AS PROVIDED IN SECTIONS 8.4(I) AND 8.9;

 

(C)                                  THE SELLERS SHALL HAVE NO OBLIGATION TO
PROVIDE ANY INDEMNITY TO THE ACQUIROR PARTIES UNLESS AND UNTIL THE AGGREGATE OF
ALL ADVERSE CONSEQUENCES SUFFERED BY THE ACQUIROR PARTIES THEREUNDER EXCEED
CDN$150,000, WHICH AMOUNT SHALL BE TREATED AS A DEDUCTIBLE AND SUCH INITIAL
AMOUNT OF CDN$150,000 AMOUNT SHALL NOT BE INDEMNIFIABLE BY THE SELLERS PURSUANT
TO SECTION 8.2;

 

(D)                                 THE BUYER SHALL HAVE NO OBLIGATION TO
PROVIDE ANY INDEMNITY TO THE SELLERS UNLESS AND UNTIL THE AGGREGATE OF ALL
ADVERSE CONSEQUENCES SUFFERED BY THE SELLERS THEREUNDER EXCEEDS CDN$150,000,
WHICH AMOUNT SHALL BE TREATED AS A DEDUCTIBLE AND SUCH INITIAL AMOUNT OF
CDN$150,000 SHALL NOT BE INDEMNIFIABLE BY THE BUYER PURSUANT TO SECTION 8.3;

 

(E)                                  THE INDEMNIFICATION OBLIGATIONS OF THE
SELLERS AND THE BUYER HEREUNDER WITH RESPECT TO ANY ADVERSE CONSEQUENCES
SUFFERED BY AN INDEMNIFIED PARTY SHALL BE DEEMED REDUCED BY THE AMOUNT OF
(I) ANY INSURANCE PROCEEDS RECEIVED BY SUCH INDEMNIFIED PARTY WITH RESPECT TO
SUCH ADVERSE CONSEQUENCES AND (II) ANY PAYMENTS RECEIVED BY SUCH INDEMNIFIED
PARTY PURSUANT TO SECTION 2.4 WHICH WOULD OTHERWISE RESULT IN AN INDEMNIFICATION
OBLIGATION UNDER SECTION 8.2 OR 8.3, AS APPLICABLE;

 

(F)                                   NO ACQUIROR PARTY MAY MAKE A CLAIM
PURSUANT TO THIS ARTICLE VIII FOR ANY MATTER ARISING FROM ANY CIRCUMSTANCE,
MATTER OR THING ACTUALLY KNOWN BY THE BUYER OR ITS REPRESENTATIVES ON OR BEFORE
THE CLOSING TIME;

 

(G)                                  THE SELLERS MAY NOT MAKE A CLAIM PURSUANT
TO THIS ARTICLE VIII FOR ANY MATTER ARISING FROM ANY CIRCUMSTANCE, MATTER OR
THING ACTUALLY KNOWN BY THE SELLERS OR ITS REPRESENTATIVES ON OR BEFORE THE
CLOSING TIME;

 

(H)                                 THE ACQUIROR PARTIES AND THE SELLERS SHALL
NOT BE ENTITLED TO RELY ON THE PROVISIONS OF THIS ARTICLE VIII IN RESPECT OF ANY
CLAIM REGARDING THE OBLIGATIONS SET FORTH IN SECTION 2.4; AND

 

(I)

 

(I)                                     THE ESCROW AGENT SHALL HOLD THE
GEOKINETICS SHARES AND ANY PROCEEDS DERIVED THEREFROM (THE “ESCROWED ASSETS”) IN
ESCROW (THE “TAX LIABILITY ESCROW”) UNTIL THE SECOND ANNIVERSARY OF THE CLOSING
DATE, AT WHICH TIME SUCH PORTION OF THE ESCROWED ASSETS THAT REPRESENTS 80% OF
THE VALUE OF THE ESCROWED ASSETS AT THAT DATE THAT ARE IN EXCESS OF THE AMOUNT
OF ANY CLAIM OR CLAIMS FOR A TAX BREACH THAT ARE PENDING AT THAT DATE, AS
DETERMINED IN ACCORDANCE WITH THIS SECTION 8.4(I)(IV), SHALL BE RELEASED FROM
THE TAX

 

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LIABILITY ESCROW TO THE SELLERS AND SHALL NO LONGER FORM PART OF THE ESCROWED
ASSETS.  THE REMAINING ESCROWED ASSETS SHALL CONTINUE TO BE HELD IN THE TAX
LIABILITY ESCROW UNTIL THE THIRD ANNIVERSARY OF THE CLOSING DATE, AT WHICH TIME
SUCH REMAINING ESCROWED ASSETS, SUBJECT TO THE TERMS OF THE ESCROW AGREEMENT,
SHALL BE RELEASED FROM THE TAX LIABILITY ESCROW TO THE SELLERS AND SHALL NO
LONGER FORM PART OF THE ESCROWED ASSETS.  THE SELLERS SHALL BE PERMITTED AT ALL
TIMES TO DISPOSE OF THE GEOKINETICS SHARES OR ANY OTHER ESCROWED ASSETS  HELD IN
THE TAX LIABILITY ESCROW SO LONG AS THE ESCROW AGENT RETAINS ALL PROCEEDS FROM
ANY SUCH DISPOSITION IN THE TAX LIABILITY ESCROW;

 

(II)                                  IF AN ACQUIROR PARTY PROVIDES A CLAIM
NOTICE PURSUANT TO SECTION 8.5 (AFTER ALL OF THE ESCROW AMOUNT HAS BEEN RELEASED
PURSUANT TO THE ESCROW AGREEMENT) WITH RESPECT TO A CLAIM FOR A BREACH BY ANY OF
THE SELLERS OF ANY OF THE REPRESENTATIONS SET FORTH IN SECTION 4.17 (A “TAX
BREACH”), THE SELLERS’ LIABILITY PURSUANT TO THIS ARTICLE VIII IN RESPECT OF
SUCH TAX BREACH SHALL BE LIMITED TO AN AMOUNT EQUAL TO THE LESSER OF:

 

(A)                               THE VALUE OF THE ESCROWED ASSETS AS OF THE
DATE THE CLAIM IS SATISFIED; AND

 

(B)                               THE ESCROW AMOUNT LESS ALL PAYMENTS PREVIOUSLY
MADE TO ANY ACQUIROR PARTY THEREFROM OR FROM THE ESCROWED ASSETS.

 

There shall be no claim against all or any portion of the Escrowed Assets if at
the time the Claim Notice is received by the Sellers any portion of the Escrow
Amount remains in escrow under the Escrow Agreement.

 

(III)                               THE ACQUIROR PARTY SHALL HAVE NO REMEDY
WHATSOEVER AGAINST THE SELLERS OR ANY OTHER ASSET OR INTEREST OF THEM IN RESPECT
OF ANY SUCH CLAIM FOR A TAX BREACH SET FORTH IN A CLAIM NOTICE PROVIDED PURSUANT
TO SECTION 8.4(I)(II), EVEN IN THE EVENT THAT THE ESCROWED ASSETS ARE LOST OR
ARE NOT OTHERWISE AVAILABLE;

 

(IV)                              THE VALUE OF ANY GEOKINETICS SHARES THAT FORM
PART OF THE ESCROWED ASSETS AT ANY TIME AND FROM TIME TO TIME SHALL BE EQUAL TO
THE NUMBER OF SUCH GEOKINETICS SHARES MULTIPLIED BY THE 10 DAY WEIGHTED AVERAGE
TRADING PRICE OF THE SHARES OF THE COMMON STOCK OF THE BUYER BEFORE SUCH TIME
(CONVERTED TO CANADIAN DOLLARS USING THE EXCHANGE RATE).  THE VALUE OF ANY OTHER
ASSETS FORMING PART OF THE ESCROWED ASSETS SHALL BE DETERMINED BY THE SELLERS
ACTING REASONABLY;

 

(V)                                 THE PROVISIONS OF THIS SECTION 8.4(I) SHALL
TERMINATE AND BE OF NO FORCE AND EFFECT UPON THE BUYER UNDERGOING A MERGER (IN
WHICH THE BUYER IS NOT THE SURVIVING ENTITY), TENDER OFFER, REORGANIZATION, SALE
OF ALL OR SUBSTANTIALLY ALL OF ITS ASSETS, DISPOSITION (IN A SINGLE TRANSACTION
OR SERIES OF RELATED TRANSACTIONS) OF AT LEAST 50% OF ITS COMMON SHARES OR
SIMILAR TRANSACTION RESULTING IN A CHANGE IN CONTROL OF THE BUYER, IN WHICH CASE
THE TAX LIABILITY ESCROW SHALL TERMINATE AND ALL REMAINING ESCROWED ASSETS SHALL
BE RELEASED TO THE SELLERS; AND

 

(VI)                              IF, AT ANY TIME, THE ESCROWED ASSETS INCLUDE
CASH AT LEAST EQUAL TO THE AMOUNT OF THE ESCROW AMOUNT LESS ALL PREVIOUS
PAYMENTS MADE TO ANY ACQUIROR PARTY FROM EITHER THE ESCROW AMOUNT OR THE
ESCROWED  ASSETS, THE ESCROW AGENT SHALL, UPON WRITTEN REQUEST FROM THE SELLERS,
RELEASE TO THE SELLERS ALL ESCROWED ASSETS OTHER THAN AN AMOUNT OF CASH EQUAL TO
THE ESCROW AMOUNT LESS ALL PREVIOUS PAYMENTS TO MADE TO ANY ACQUIROR PARTY FROM
EITHER THE ESCROW AMOUNT OR THE ESCROWED ASSETS.

 

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SECTION 8.5                                   INDEMNIFICATION PROCEDURE.

 

The following procedure shall apply to a claim for indemnity described in this
Article VIII:

 

(A)                                 FOR PURPOSES OF THIS SECTION, THE TERM
“INDEMNIFYING PARTY” WHEN USED IN CONNECTION WITH A CLAIM SHALL MEAN THE PERSON
HAVING AN OBLIGATION TO INDEMNIFY ANOTHER PERSON WITH RESPECT TO SUCH CLAIM
PURSUANT TO THIS AGREEMENT AND THE TERM “INDEMNIFIED PARTY” WHEN USED IN
CONNECTION WITH A PARTICULAR CLAIM SHALL MEAN THE PERSON HAVING THE RIGHT TO BE
INDEMNIFIED WITH RESPECT TO SUCH CLAIM BY THE INDEMNIFYING PARTY PURSUANT TO
THIS AGREEMENT;

 

(B)                                 TO MAKE CLAIM FOR INDEMNIFICATION, AN
INDEMNIFIED PARTY SHALL NOTIFY THE INDEMNIFYING PARTY OF ITS CLAIM, INCLUDING
THE SPECIFIC DETAILS OF AND SPECIFIC BASIS UNDER THIS AGREEMENT FOR ITS CLAIM
(THE “CLAIM NOTICE”).  IN THE EVENT THAT THE CLAIM FOR INDEMNIFICATION IS BASED
UPON A CLAIM BY A THIRD PARTY AGAINST THE INDEMNIFIED PARTY (A “THIRD PARTY
CLAIM”), THE INDEMNIFIED PARTY SHALL PROVIDE ITS CLAIM NOTICE PROMPTLY AFTER THE
INDEMNIFIED PARTY HAS ACTUAL KNOWLEDGE OF THE THIRD PARTY CLAIM AND SHALL
ENCLOSE A COPY OF ALL PAPERS (IF ANY) SERVED WITH RESPECT TO THE THIRD PARTY
CLAIM; PROVIDED THAT THE FAILURE OF ANY INDEMNIFIED PARTY TO GIVE NOTICE OF A
THIRD PARTY CLAIM AS PROVIDED HEREIN SHALL NOT RELIEVE THE INDEMNIFYING PARTY OF
ITS OBLIGATIONS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT SUCH FAILURE RESULTS
IN INSUFFICIENT TIME BEING AVAILABLE TO PERMIT THE INDEMNIFYING PARTY TO
EFFECTIVELY DEFEND AGAINST THE THIRD PARTY CLAIM OR OTHERWISE MATERIALLY
PREJUDICES THE INDEMNIFYING PARTY’S ABILITY TO DEFEND AGAINST THE THIRD PARTY
CLAIM OR INCREASES THE AMOUNT OF LIABILITY OR COST OF DEFENSE.  IN THE EVENT
THAT THE CLAIM FOR INDEMNIFICATION IS BASED UPON AN INACCURACY OR BREACH OF A
REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT, THE CLAIM NOTICE SHALL SPECIFY
THE REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT WHICH WAS INACCURATE OR
BREACHED;

 

(C)                                  THE INDEMNIFYING PARTY SHALL HAVE THE
RIGHT, BY NOTICE TO THE INDEMNIFIED PARTY GIVEN NOT LATER THAN 60 DAYS AFTER
RECEIPT OF THE CLAIM NOTICE, TO ASSUME THE CONTROL OF THE COMPROMISE, SETTLEMENT
AND DEFENSE OF THE THIRD PARTY CLAIM, PROVIDED THAT SUCH ASSUMPTION SHALL, BY
ITS TERMS, BE WITHOUT COST TO THE INDEMNIFIED PARTY.  THE INDEMNIFIED PARTY IS
AUTHORIZED, PRIOR TO AND DURING SUCH 60-DAY PERIOD, TO FILE ANY MOTION, ANSWER
OR OTHER PLEADING THAT IT SHALL DEEM NECESSARY OR APPROPRIATE TO PROTECT ITS
INTERESTS OR THOSE OF THE INDEMNIFYING PARTY AND THAT IS NOT PREJUDICIAL TO THE
INDEMNIFYING PARTY;

 

(D)                                 UPON THE ASSUMPTION OF CONTROL OF ANY THIRD
PARTY CLAIM BY THE INDEMNIFYING PARTY ON THE BASIS PROVIDED HEREIN, THE
INDEMNIFYING PARTY SHALL DILIGENTLY PROCEED WITH THE DEFENSE, COMPROMISE OR
SETTLEMENT OF THE THIRD PARTY CLAIM, INCLUDING, THE EMPLOYMENT OF COUNSEL
SATISFACTORY TO THE INDEMNIFYING PARTY AND, IN CONNECTION THEREWITH, THE
INDEMNIFIED PARTY SHALL: (I) COOPERATE FULLY AND TO MAKE AVAILABLE TO THE
INDEMNIFYING PARTY ALL PERTINENT INFORMATION, DOCUMENTS AND WITNESSES UNDER THE
INDEMNIFIED PARTY’S CONTROL; AND (II) MAKE SUCH ASSIGNMENTS AND TAKE SUCH OTHER
STEPS AS ON THE ADVICE OF COUNSEL FOR THE INDEMNIFYING PARTY ARE REASONABLY
NECESSARY TO ENABLE THE INDEMNIFYING PARTY TO CONDUCT SUCH DEFENSE;

 

(E)                                  NOTWITHSTANDING ANY OTHER PROVISION
CONTAINED HEREIN, THE INDEMNIFIED PARTY, AT ITS SOLE EXPENSE, SHALL HAVE THE
RIGHT TO PARTICIPATE IN THE NEGOTIATION, SETTLEMENT AND DEFENSE OF ANY THIRD
PARTY CLAIM AND THE INDEMNIFYING PARTY SHALL NOT NEGOTIATE, SETTLE, COMPROMISE
OR PAY

 

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ANY THIRD PARTY CLAIM WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFIED
PARTY; SUCH CONSENT NOT TO BE UNREASONABLY WITHHELD OR DELAYED;

 

(F)                                   SHOULD THE INDEMNIFYING PARTY FAIL TO GIVE
NOTICE TO THE INDEMNIFIED PARTY IN ACCORDANCE WITH SUBSECTION (D) ABOVE, THE
INDEMNIFIED PARTY SHALL DILIGENTLY PROCEED WITH THE DEFENSE, COMPROMISE OR
SETTLEMENT OF THE THIRD PARTY CLAIM, AND, IN CONNECTION THEREWITH, THE
INDEMNIFYING PARTY SHALL, AT ITS SOLE EXPENSE, COOPERATE FULLY TO MAKE AVAILABLE
TO THE INDEMNIFIED PARTY ALL PERTINENT INFORMATION AND WITNESSES UNDER THE
INDEMNIFYING PARTY’S CONTROL AND (II) MAKE SUCH ASSIGNMENTS AND TAKE SUCH OTHER
STEPS AS ON THE ADVICE OF COUNSEL FOR THE INDEMNIFIED PARTY ARE REASONABLY
NECESSARY TO CONDUCT SUCH DEFENSE. NOTWITHSTANDING ANY OTHER PROVISION CONTAINED
HEREIN, THE INDEMNIFYING PARTY SHALL HAVE THE RIGHT TO PARTICIPATE IN THE
NEGOTIATION, SETTLEMENT AND DEFENSE OF ANY THIRD PARTY CLAIM, AT ITS SOLE
EXPENSE, AND UNDER NO CIRCUMSTANCE SHALL THE INDEMNIFIED PARTY NEGOTIATE,
SETTLE, COMPROMISE OR PAY (EXCEPT IN THE CASE OF PAYMENT OF A JUDGMENT) ANY
THIRD PARTY CLAIM WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFYING PARTY,
SUCH CONSENT NOT TO BE UNREASONABLY WITHHELD OR DELAYED; AND

 

(G)                                  IN THE CASE OF A CLAIM FOR INDEMNIFICATION
NOT BASED UPON A THIRD PARTY CLAIM (A “DIRECT CLAIM”), THE INDEMNIFYING PARTY
SHALL HAVE 60 DAYS FROM ITS RECEIPT OF THE CLAIM NOTICE TO (I) CURE THE ADVERSE
CONSEQUENCES THAT FORM THE SUBSTANCE OF THE CLAIM; (II) ADMIT ITS LIABILITY FOR
SUCH ADVERSE CONSEQUENCES OR (III) DISPUTE THE CLAIM FOR SUCH ADVERSE
CONSEQUENCES.  IF THE INDEMNIFYING PARTY DOES NOT NOTIFY THE INDEMNIFIED PARTY
WITHIN SUCH 60-DAY PERIOD THAT IT HAS CURED THE ADVERSE CONSEQUENCES OR THAT IT
DISPUTES THE CLAIM FOR SUCH ADVERSE CONSEQUENCES, THE AMOUNT OF SUCH ADVERSE
CONSEQUENCES SHALL CONCLUSIVELY BE DEEMED A LIABILITY OF THE INDEMNIFYING PARTY
HEREUNDER.  THE INDEMNIFIED PARTY SHALL COOPERATE FULLY TO MAKE AVAILABLE TO THE
INDEMNIFYING PARTY ALL PERTINENT INFORMATION, DOCUMENTS AND WITNESSES UNDER THE
INDEMNIFIED PARTY’S CONTROL.  THE INDEMNIFIED PARTY SHALL NOT BE ENTITLED TO THE
PAYMENT OF ANY OF ITS EXPENSES IN THIS REGARD FROM THE ESCROW AMOUNT UNTIL THE
OUTCOME OF SUCH PROCEEDINGS IS KNOWN AND THE OBLIGATION OF THE INDEMNIFYING
PARTY IS DETERMINED.

 

SECTION 8.6                                   DETERMINATION OF ADVERSE
CONSEQUENCES.

 

All indemnification payments under this Article VIII shall be deemed adjustments
to the Purchase Price except as required by applicable Legal Requirements.

 

SECTION 8.7                                   EXCLUDED DAMAGES

 

Notwithstanding any other provision of this Agreement, no Indemnified Party
shall be entitled to any consequential damages including exemplary, punitive,
incidental, indirect or special damages (collectively “Excluded Damages”)
suffered by an Indemnified Party except to the extent  such Excluded Damages
were incurred by a third party and are the subject of a Third-Party Claim
asserted by that third-party after the Closing Date, and Buyer hereby releases
Seller, and Seller hereby releases Buyer, in each case to the fullest extend
applicable law permits, from liabilities for all Excluded Damages.

 

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SECTION 8.8                                   SCOPE OF THE REPRESENTATIONS AND
WARRANTIES OF SELLERS.

 

THE BUYER ACKNOWLEDGES THAT EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT THE
SELLERS HAVE NOT MADE, AND THE SELLERS HEREBY EXPRESSLY DISCLAIM AND NEGATE, AND
BUYER HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED,
AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO, AND THE BUYER HEREBY
EXPRESSLY WAIVES AND RELINQUISHES ANY AND ALL RIGHTS, CLAIMS AND CAUSES OF
ACTION AGAINST THE SELLERS AND ITS REPRESENTATIVES IN CONNECTION WITH, THE
ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL), HERETOFORE FURNISHED TO THE BUYER AND ITS
REPRESENTATIVES BY OR ON BEHALF OF THE SELLERS.  EXCEPT AS EXPRESSLY PROVIDED IN
THIS AGREEMENT, THE SELLERS EXPRESSLY DISCLAIM AND NEGATE, AND THE BUYER HEREBY
WAIVES, AS TO PERSONAL PROPERTY, EQUIPMENT AND FIXTURES CONSTITUTING A PART OF
THE ASSETS OWNED OR OPERATED BY THE CORPORATIONS,

 

(A)                               ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY;

 

(B)                               ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR
A PARTICULAR PURPOSE;

 

(C)                               ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER
APPLICABLE LEGAL REQUIREMENTS.

 

THE SELLERS AND THE BUYER AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LEGAL
REQUIREMENTS TO BE EFFECTIVE, THE DISCLAIMERS OF THE WARRANTIES CONTAINED IN
THIS SECTION ARE CONSPICUOUS.

 

SECTION 8.9                                   EXCLUSIVE REMEDY.

 

Except in respect of (i) the right to injunctive relief under Section 10.4 below
or (ii) any claims based on fraud involving a knowing and intentional
misrepresentation of a material fact:  (a) the indemnities provided for in this
Article VIII shall be the sole and exclusive remedy of any person after the
Closing with respect to, matters arising out of, or resulting from this
Agreement (including for any inaccuracy of any representation or warranty or any
failure or breach of any covenant, obligation, condition or agreement contained
in this Agreement whether such action is brought in tort, contract or
otherwise); (b) Each Party covenants and agrees that following the Closing it
shall not seek or assert any other remedy hereunder; and (c) Each Party
specifically waives and releases the other Parties from any liability and any
rights it might otherwise have pursuant to law except as provided for in this
Article VIII.  Any claims by a Party for a Breach by another Party of such
second Party’s obligations under Section 2.4 above shall not be subject to the
limitations set forth in this Article VIII.

 

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SECTION 8.10                            MITIGATION OF DAMAGES AND MINIMIZATION
OF CLAIMS.

 

The Buyer and the Sellers agree to use all reasonable commercial efforts to: 
(a) resolve all Third Party Claims and Direct Claims for which indemnification
is sought under this Article VIII on the lowest cost basis that complies with
the requirements of Applicable Laws; and (b) mitigate the costs and expenses as
well as any Adverse Consequences arising out of any Third Party Claim or Direct
Claim.

 

ARTICLE IX.
TERMINATION

 

SECTION 9.1                                   TERMINATION OF AGREEMENT.

 

Certain of the Parties may terminate this Agreement as provided below:

 

(A)                                 THE BUYER AND SCF MAY TERMINATE THIS
AGREEMENT BY MUTUAL WRITTEN CONSENT AT ANY TIME PRIOR TO THE CLOSING;

 

(B)                                 THE BUYER TERMINATE THIS AGREEMENT BY GIVING
WRITTEN NOTICE TO THE SELLERS ON OR BEFORE THE 30TH DAY FOLLOWING THE DATE OF
THIS AGREEMENT IF THE BUYER IS NOT SATISFIED WITH THE RESULTS OF ITS CONTINUING
BUSINESS, LEGAL AND ACCOUNTING DUE DILIGENCE REGARDING THE CORPORATIONS;

 

(C)                                  THE BUYER MAY TERMINATE THIS AGREEMENT BY
GIVING WRITTEN NOTICE TO THE SELLERS AT ANY TIME PRIOR TO THE CLOSING (A) IN THE
EVENT ANY OF THE SELLERS HAS BREACHED ANY REPRESENTATION, WARRANTY OR COVENANT
CONTAINED IN THIS AGREEMENT IN ANY MATERIAL RESPECT, THE BUYER HAS NOTIFIED THE
SELLERS OF THE BREACH, AND THE BREACH HAS CONTINUED WITHOUT CURE FOR A PERIOD OF
15 DAYS AFTER THE NOTICE OF BREACH OR (B) IF THE CLOSING SHALL NOT HAVE OCCURRED
ON OR BEFORE THE DAY THAT IS 90 DAYS FOLLOWING THE DATE OF THIS AGREEMENT
(UNLESS THE FAILURE RESULTS PRIMARILY FROM THE BUYER ITSELF BREACHING ANY
COVENANT CONTAINED IN THIS AGREEMENT (EXCEPT A BREACH OF A COVENANT OF THE BUYER
WHICH ARISES FROM OR IN CONNECTION WITH A BREACH OF A REPRESENTATION OR WARRANTY
OF THE BUYER)), EXCEPT AS SUCH CLOSING MAY BE DELAYED PURSUANT TO SECTION 5.4
(FOR UP TO NINE DAYS); AND

 

(D)                                 SCF MAY TERMINATE THIS AGREEMENT BY GIVING
WRITTEN NOTICE TO THE BUYER ANY TIME PRIOR TO THE CLOSING (I) IN THE EVENT THE
BUYER HAS BREACHED ANY REPRESENTATION, WARRANTY, OR COVENANT CONTAINED IN THIS
AGREEMENT IN ANY MATERIAL RESPECT, SCF HAS NOTIFIED THE BUYER OF THE BREACH, AND
THE BREACH HAS CONTINUED WITHOUT CURE FOR A PERIOD OF 15 DAYS AFTER THE NOTICE
OF BREACH, OR (II) IF THE CLOSING SHALL NOT HAVE OCCURRED ON OR BEFORE DAY THAT
IS 90 DAYS FOLLOWING THE DATE OF THIS AGREEMENT (UNLESS THE FAILURE RESULTS
PRIMARILY FROM ANY OF THE SELLERS THEMSELVES BREACHING ANY COVENANT CONTAINED IN
THIS AGREEMENT (EXCEPT A BREACH OF A COVENANT OF ONE OR MORE OF THE SELLERS
WHICH ARISES FROM OR IN CONNECTION WITH A BREACH OF A REPRESENTATION OR WARRANTY
OR ON OR MORE OF THE SELLERS)), EXCEPT AS SUCH CLOSING MAY BE DELAYED PURSUANT
TO SECTION 5.4 (FOR UP TO NINE DAYS).

 

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SECTION 9.2                                   EFFECT OF TERMINATION.

 

If any Party terminates this Agreement pursuant to Section 9.1 above or any
other provision of this Agreement, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
except that the provisions of Section 5.7, Section 10.1, Section 10.2,
Section 10.8 and Section 10.14 shall survive termination of this Agreement.

 

ARTICLE X.
MISCELLANEOUS

 

SECTION 10.1                            PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.

 

No Party shall issue any press release or make any public announcement relating
to the subject matter of this Agreement  without the prior written approval of
the Buyer and SCF; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its commercially reasonable best efforts to
advise the other Parties prior to making the disclosure).  These obligations
shall not apply to: (a) SCF’s notification of its limited partners of the
completion of Closing in a fashion consistent with its past practice; and
(b) disclosure made in the marketing materials of the advisors of the Buyer and
the Sellers that discloses only the identity of Trace, the identity of the
Buyer, the date of the sale and the participation of the advisor in the
transaction.

 

SECTION 10.2                            NO THIRD-PARTY BENEFICIARIES.

 

This Agreement shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted assigns.

 

SECTION 10.3                            ENTIRE AGREEMENT.

 

This Agreement (including the documents referred to herein) constitutes the
entire agreement among the Parties and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or oral, to the
extent they related in any way to the subject matter hereof.

 

SECTION 10.4                            SUCCESSION AND ASSIGNMENT.

 

This Agreement shall be binding upon and inure to the benefit of the Parties
named herein and their respective successors and permitted assigns.  No Party
may assign either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of the other Parties;
provided, however, that the Buyer may (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or all of
which cases Buyer shall nonetheless remain responsible for the performance of
all of its obligations hereunder).

 

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SECTION 10.5                            COUNTERPARTS.

 

This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original but all of which together will constitute one and the same
instrument.

 

SECTION 10.6                            HEADINGS.

 

The section headings contained in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of this
Agreement.

 

SECTION 10.7                            NOTICES.

 

All notices, requests, demands, claims, and other communications hereunder will
be in writing.  Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given if (and then two business days after) it is
sent by, registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:

 

Notices to Buyer:

 

Geokinetics Inc.

One Riverway, Suite 2100

Houston, Texas 77056

Attention:                                David A. Johnson

Phone:                                                 (713) 782-1234

Facsimile:                                (713) 850-7330

 

with a copy to:

 

Chamberlain, Hrdlicka, White, Williams & Martin

1200 Smith Street

Suite 1400

Houston, Texas  77002

Attention: James J. Spring, III

Phone:                                                (713) 658-1818

Facsimile:                               (713) 658-2553

 

Notices to the SCF:

 

SCF –III, L.P.

600 Travis Street, Suite 6600

Houston, Texas  77002

Attention: Adam Zylman

Phone:                                                (713) 227-7888

Facsimile:                               (713) 227-7850

 

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with a copy to:

 

Bennett Jones LLP

4500, 855 2nd Street SW

Calgary, AB T2P 4K7

Attention: Chip Johnston

Phone:                                                (403) 298-3020

Facsimile:                               (403) 265-7219

 

And

 

Vinson & Elkins LLP

2300 First City Tower

1001 Fannin Street

Houston, TX 77002-6760

USA

Attention: Scott Wulfe

Phone:                                                (713) 758-2750

Facsimile:                               (713) 615-5637

 

Notices to James White:

 

James White

302 Cove Creek Lane

Houston, Texas  77002

Phone:                                                (713) 435-0800

Facsimile:                               (713) 435-0804

 

Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any,
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient.  Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.

 

SECTION 10.8                            GOVERNING LAW.

 

This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Texas without giving effect to any choice or
conflict of law provision or rule (whether of the State of Texas or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Texas.

 

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SECTION 10.9                            AMENDMENTS AND WAIVERS.

 

No amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by the Buyer and the Sellers.  No waiver by any
Party of any default, misrepresentation, or Breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any, prior
or subsequent default, misrepresentation, or Breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.

 

SECTION 10.10                     SEVERABILITY.

 

Any term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or enforceability, of
the offending term or provision in any other situation or in any other
jurisdiction.

 

SECTION 10.11                     EXPENSES.

 

Except as otherwise provided herein, each of the Parties will bear his or its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.  The
Parties acknowledge that Trace has borne all of the Seller’s costs and expenses
(including legal fees) in connection with this Agreement and any of the
transactions contemplated hereby and that Trace (and no other Party) shall pay
the Transaction Costs, Option Costs and I/O Option Costs (if any) at Closing.

 

SECTION 10.12                     CONSTRUCTION.

 

The Parties have participated jointly in the negotiation and drafting of this
Agreement.  In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement. 
Any reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.  The word “including” shall mean including
without limitation.  The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance.  If any Party has
Breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not Breached shall not detract from or
mitigate the fact that the Party is in Breach of the first representation,
warranty, or covenant.  Matters disclosed by the Sellers in any exhibit or
schedule to this Agreement shall be deemed disclosed as to all portions of this
Agreement and shall qualify all such portions of the Agreement, without being
restricted to the express provisions that they are identified as excepting.  Any
waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

 

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SECTION 10.13                     INCORPORATION OF EXHIBITS AND SCHEDULES.

 

The Exhibits and Schedules identified in this Agreement (including notices given
pursuant to Section 5.4) are incorporated herein by reference and made a part
hereof.

 

SECTION 10.14                     SUBMISSION TO JURISDICTION.

 

Each of the Parties submits to the jurisdiction of any state or federal court
sitting in Harris County, Texas, in any action or proceeding arising out of or
relating to this Agreement and agrees that all claims in respect of the action
or proceeding may be heard and determined in any such court.  Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto.  Any Party may
make service on any other Party by sending or delivering a copy of the process 
to the Party to be served at the address and in the manner provided for the
giving of notices in Section 10.7 above.  Nothing in this Section 10.14,
however, shall affect the right of any Party to bring any action or proceeding
arising out of or relating to this Agreement in any other court or to serve
legal process in any other manner permitted by law or at equity.  Each Party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.

 

*****

 

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

 

 

 

GEOKINETICS INC.

 

 

 

 

 

By:

/s/ David A. Johnson

 

 

Name:

David A. Johnson

 

 

Title:

President

 

 

 

 

 

 

SCF-III, L.P., by its general partner SCF-II, L.P., by its
general partner L.E. Simmons & Associates Incorporated,

 

 

 

 

 

By:

/s/ Adam Zylman

 

 

Name:

Adam Zylman

 

 

Title:

Vice President

 

 

 

 

 

 

JAMES WHITE

 

 

 

 

 

/s/ James White

 

 

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