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

  	
  Authorization, Etc.

  	
   

  
	
  Section 4.3

  	
  No Violation

  	
   

  
	
  Section 4.4

  	
  Consents

  	
   

  
	
  Section 4.5

  	
  Accounts Receivable

  	
   

  
	
  Section 4.6

  	
  Financial Statements

  	
   

  
	
  Section 4.7

  	
  Inventories

  	
   

  
	
  Section 4.8

  	
  Real Property

  	
   

  
	
  Section 4.9

  	
  Absence of Certain Changes

  	
   

  
	
  Section 4.10

  	
  No Material Change

  	
   

  
	
  Section 4.11

  	
  Litigation

  	
   

  
	
  Section 4.12

  	
  Intellectual Property

  	
   

  
	
  Section 4.13

  	
  Contracts

  	
   

  
	
  Section 4.14

  	
  Customers and Suppliers

  	
   

  
	
  Section 4.15

  	
  Employee Benefit Plans

  	
   

  
	
  Section 4.16

  	
  Compliance with Law

  	
   

  
	
  Section 4.17

  	
  Taxes

  	
   

  
	
  Section 4.18

  	
  Insurance

  	
   

  
	
  Section 4.19

  	
  Environmental Laws and
  Regulations

  	
   

  
	
  Section 4.20

  	
  Products and Services

  	
   

  
	
  Section 4.21

  	
  [Not used]

  	
   

  



 





















 


	
  Section 4.22

  	
  Capitalization

  	
   

  
	
  Section 4.23

  	
  Brokers and Finders

  	
   

  
	
  Section 4.24

  	
  [Not used]

  	
   

  
	
  Section 4.25

  	
  Books and Records

  	
   

  
	
  Section 4.26

  	
  Condition of Facilities

  	
   

  
	
  Section 4.27

  	
  No Undisclosed Financial
  Liabilities

  	
   

  
	
  Section 4.28

  	
  Employees

  	
   

  
	
  Section 4.29

  	
  Compliance with the Foreign
  Corrupt Practices Act and Export Control and Antiboycott Laws

  	
   

  
	
  Section 4.30

  	
  Relationships with Related
  Persons

  	
   

  
	
  Section 4.31

  	
  Title
  to Assets

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V.
  PRE-CLOSING COVENANTS

  	
   

  
	
  Section 5.1

  	
  General

  	
   

  
	
  Section 5.2

  	
  Notices
  and Consents

  	
   

  
	
  Section 5.3

  	
  Operation
  of Business

  	
   

  
	
  Section 5.4

  	
  Notice
  of Developments

  	
   

  
	
  Section 5.5

  	
  Exclusivity

  	
   

  
	
  Section 5.6

  	
  Access
  and Investigation

  	
   

  
	
  Section 5.7

  	
  Confidential Information of
  Corporations and Sellers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI.
  POST-CLOSING COVENANTS

  	
   

  
	
  Section 6.1

  	
  General

  	
   

  
	
  Section 6.2

  	
  Litigation
  Support

  	
   

  
	
  Section 6.3

  	
  Transition

  	
   

  
	
  Section 6.4

  	
  Confidentiality

  	
   

  
	
  Section 6.5

  	
  Restrictive
  Legend

  	
   

  
	
  Section 6.6

  	
  [Not
  used]

  	
   

  
	
  Section 6.7

  	
  Withholding
  Tax and Clearance Certificates

  	
   

  
	
  Section 6.8

  	
  Registration Rights

  	
   

  
	
  Section 6.9

  	
  Transferred
  Information

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII.
  CONDITIONS TO OBLIGATIONS TO CLOSE

  	
   

  
	
  Section 7.1

  	
  Conditions
  to Obligations of the Buyer

  	
   

  
	
  Section 7.2

  	
  Conditions
  to Obligation of the Sellers

  	
   

  
	
  Section 7.3

  	
  Information
  Regarding the Satisfaction of Conditions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII.
  REMEDIES FOR BREACHES OF THIS AGREEMENT

  	
   

  
	
  Section 8.1

  	
  Survival
  of Representations and Warranties

  	
   

  
	
  Section 8.2

  	
  Indemnification
  Provisions for Benefit of the Buyer

  	
   

  
	
  Section 8.3

  	
  Indemnification
  Provisions for Benefit of the Sellers

  	
   

  
	
  Section 8.4

  	
  Limitation
  of Indemnities

  	
   

  
	
  Section 8.5

  	
  Indemnification
  Procedure

  	
   

  
	
  Section 8.6

  	
  Determination
  of Adverse Consequences

  	
   

  
	
  Section 8.7

  	
  Excluded
  Damages

  	
   

  
	
  Section 8.8

  	
  Scope
  of the Representations and Warranties of Sellers

  	
   

  



 





















 


	
  Section 8.9

  	
  Exclusive
  Remedy

  	
   

  
	
  Section 8.10

  	
  Mitigation
  of Damages and Minimization of Claims

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX.
  TERMINATION

  	
   

  
	
  Section 9.1

  	
  Termination
  of Agreement

  	
   

  
	
  Section 9.2

  	
  Effect
  of Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X.
  MISCELLANEOUS

  	
   

  
	
  Section 10.1

  	
  Press
  Releases and Public Announcements

  	
   

  
	
  Section 10.2

  	
  No
  Third-Party Beneficiaries

  	
   

  
	
  Section 10.3

  	
  Entire
  Agreement

  	
   

  
	
  Section 10.4

  	
  Succession
  and Assignment

  	
   

  
	
  Section 10.5

  	
  Counterparts

  	
   

  
	
  Section 10.6

  	
  Headings

  	
   

  
	
  Section 10.7

  	
  Notices

  	
   

  
	
  Section 10.8

  	
  Governing
  Law

  	
   

  
	
  Section 10.9

  	
  Amendments
  and Waivers

  	
   

  
	
  Section 10.10

  	
  Severability

  	
   

  
	
  Section 10.11

  	
  Expenses

  	
   

  
	
  Section 10.12

  	
  Construction

  	
   

  
	
  Section 10.13

  	
  Incorporation
  of Exhibits and Schedules

  	
   

  
	
  Section 10.14

  	
  Submission
  to Jurisdiction

  	
   

  



 





















 


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).


 


3





















 


“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





















 


(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





















 


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


 


6





















 


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


 


7





















 


(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





















 


“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;


 


9





















 


(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


 


10





















 


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).


 


11





















 


“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.


 


12





















 


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.


 


13





















 


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


 


14





















 


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.


 


15





















 


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”).


 


16





















 


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


 


17





















 


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.


 


18





















 


(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.


 


19





















 


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


 


20





















 


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;


 


21





















 


(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;


 


22





















 


(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


 


23





















 


(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


 


24





















 


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;


 


25





















 


(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


 


26





















 


(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,


 


27





















 


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.


 


28





















 


(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


 


29





















 


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


 


30





















 


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)


 


31





















 


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


 


32





















 


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.


 


33





















 


(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:


 


34





















 


(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


 


35





















 


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


 


36





















 


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


 


37





















 


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,


 


38





















 


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.


 


39





















 


(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.


 


40





















 


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


 


41





















 


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


 


43





















 


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


 


44





















 


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


 


45





















 


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


 


46





















 


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


 


48





















 


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


 


49





















 


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.


 


50





















 


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;


 


51





















 


(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;


 


52





















 


(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;


 


53





















 


(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,


 


54





















 


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;


 


55





















 


(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


 


56





















 


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.


 


57





















 


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


 


58





















 


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.


 


59





















 


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).


 


62





















 


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.


 


65





















 


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.


 


*****


 


66





















 


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

  	
   

  
										



 


67