Document:

Exhibit 4.2

 

FLORIDA
GAMING CORPORATION

 

AMENDED CERTIFICATE OF DESIGNATION

 

Florida Gaming Corporation, a Delaware
corporation (the “Corporation”), certifies that:

 

Pursuant to the provisions of the Restated
Certificate of Incorporation and Section 151(g) of the General Corporation Law
of Delaware, the following resolutions were duly adopted by the Board of
Directors of the Corporation at a meeting held on January 10, 2001:

 

WHEREAS, by resolutions duly adopted by the Board
of Directors of the Corporation and duly filed with the Delaware Secretary of
State on March 31, 1997, the Board of Directors established a series of
Preferred Stock designated as Series E Convertible Preferred Stock consisting
of 2,000 shares (the “Series E Preferred Stock”); and

 

WHEREAS, the Certificate of Designation for the
Series E Preferred Stock provides that if any shares of Series E Preferred
Stock are redeemed or converted or otherwise reacquired, the shares so
redeemed, converted or reacquired shall resume the status of authorized but
unissued shares of preferred stock and shall no longer be designated as Series
E Preferred Stock;

 

WHEREAS, the Corporation issued and subsequently
reacquired 1,950 shares of Series E Preferred Stock, leaving 50 shares of
preferred stock designated as Series E Preferred Stock, none of which have ever
been issued or outstanding; and

 

WHEREAS, the Board of Directors desires to amend
the Certificate of Designation to delete the provision in the Cerificate of
Designation requiring the automatic conversion of the shares of Series E
Preferred Stock into shares of common stock and to increase the number of
shares of preferred stock designated as Series E Preferred Stock to 300 shares.

 

NOW, THEREFORE, be it

 

RESOLVED, that the 1,950 shares of preferred stock
previously designated as Series E Preferred Stock are returned to the status of
authorized and unissued Preferred Stock, without designation; and, be it
further

 

RESOLVED, that Paragraph 4(b) of the Certificate
of Designation is deleted in its entirety; and, be it further

 

RESOLVED, that the number of shares of preferred
stock designated as Series E Preferred Stock are increased from 50 shares to
300 shares.

 

 

IN WITNESS WHEREOF, said Florida Gaming
Corporation has caused this Certificate to be duly executed by its Chairman and
Chief Executive Officer this 11th day of January, 2001.

 

	
   

  	
   

  	
  FLORIDA
  GAMING CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  W. Bennett Collett

  
	
   

  	
   

  	
   

  	
  W.
  Bennett Collett, 

  President and Chief Executive Officer

  

 

2Exhibit 10.4

 

 

LEASE AGREEMENT

 

dated
as of October 1, 1999,

as Amended and Restated as of April 30, 2003

 

Among

 

GEOLEASE
PARTNERS, L.P.

as Lessor,

 

GEOKINETICS
INC.

as Lessee

 

and

 

THE
GUARANTORS PARTY HERETO

as Guarantors

 

 

TABLE OF
CONTENTS

 

	
  SECTION 1.

  	
  Definitions.

  
	
   

  	
   

  	
   

  
	
  SECTION
  2.

  	
  Lease.

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  Certain Costs.

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  Conditions to Effectiveness.

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  Representations, Warranties and Covenants.

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 5.1.

  	
  Representations and Warranties

  
	
   

  	
  Section 5.2.

  	
  Covenants.

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  Term and Rent; Restructured Obligations.

  
	
   

  	
  Section 6.1.

  	
  Lease Term

  
	
   

  	
  Section 6.2.

  	
  Basic Rent

  
	
   

  	
  Section 6.3.

  	
  Supplemental Rent

  
	
   

  	
  Section 6.4.

  	
  Manner of Payments

  
	
   

  	
  Section 6.5.

  	
  Sales Tax

  
	
   

  	
  Section 6.6.

  	
  Restructuring of Old Equipment Lease

  
	
   

  	
  Section 6.7.

  	
  Amendment Fee

  
	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
  Ownership and Marking of Equipment;
  Personal Property.

  
	
   

  	
  Section 7.1.

  	
  Retention of Title

  
	
   

  	
  Section 7.2.

  	
  Insignia

  
	
   

  	
  Section 7.3.

  	
  Personal Property

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  Disclaimer of Warranties.

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  Return of Equipment.

  
	
   

  	
  Section 9.1.

  	
  Return of Equipment

  
	
   

  	
  Section 9.2.

  	
  Condition of Units

  
	
   

  	
   

  	
   

  
	
  SECTION
  10.

  	
  Security
  Interest; Guarantees.

  
	
   

  	
  Section 10.1.

  	
  Grant of Security Interests

  
	
   

  	
  Section 10.2.

  	
  Pledge

  
	
   

  	
  Section 10.3.

  	
  Uncertificated Securities

  
	
   

  	
  Section 10.4.

  	
  The Guaranty

  
	
   

  	
   

  	
   

  
	
  SECTION
  11.

  	
  Maintenance
  and Operation; Compliance with Laws; Subleases.

  
	
   

  	
  Section 11.1.

  	
  Maintenance and Operation

  
	
   

  	
  Section 11.2.

  	
  Compliance with Laws, etc

  
	
   

  	
  Section 11.3.

  	
  Sublease

  
	
   

  	
   

  	
   

  
	
  SECTION
  12.

  	
  Modifications
  and Replacements.

  

 

i

 

	
   

  	
  Section 12.1.

  	
  Required Modifications

  
	
   

  	
  Section 12.2.

  	
  Optional Modifications

  
	
   

  	
  Section 12.3.

  	
  Removal of Property; Replacements

  
	
   

  	
   

  	
   

  
	
  SECTION
  13.

  	
  Loss,
  Destruction or Requisition.

  
	
   

  	
  Section 13.1.

  	
  Event of Loss

  
	
   

  	
  Section 13.2.

  	
  Replacement upon Event of Loss

  
	
   

  	
  Section 13.3.

  	
  Replacement of Unit

  
	
   

  	
  Section 13.4.

  	
  Eminent Domain

  
	
   

  	
   

  	
   

  
	
  SECTION
  14.

  	
  Insurance.

  
	
   

  	
  Section 14.1.

  	
  Insurance Coverage

  
	
   

  	
  Section 14.2.

  	
  Certificates and Policies.

  
	
   

  	
  Section 14.3.

  	
  Additional Insurance

  
	
   

  	
   

  	
   

  
	
  SECTION
  15.

  	
  Inspection.

  
	
   

  	
   

  	
   

  
	
  SECTION
  16.

  	
  Lease
  Events of Default.

  
	
   

  	
   

  	
   

  
	
  SECTION
  17.

  	
  Remedies
  and Certain Covenants.

  
	
   

  	
  Section 17.1.

  	
  Remedies

  
	
   

  	
  Section 17.2.

  	
  Cumulative Remedies

  
	
   

  	
  Section 17.3.

  	
  No Waiver

  
	
   

  	
  Section 17.4.

  	
  Notice of Lease Default

  
	
   

  	
  Section 17.5.

  	
  Lessee’s Duty to Return Equipment upon
  Default

  
	
   

  	
  Section 17.6.

  	
  Specific Performance; Lessor Appointed
  Lessee’s Agent

  
	
   

  	
   

  	
   

  
	
  SECTION
  18.

  	
  Lessee’s
  Indemnities.

  
	
   

  	
  Section 18.1.

  	
  Taxes.

  
	
   

  	
  Section 18.2.

  	
  General Indemnification and Waiver of
  Certain Claims.

  
	
   

  	
   

  	
   

  
	
  SECTION
  19.

  	
  Further
  Assurances.

  
	
   

  	
   

  	
   

  
	
  SECTION
  20.

  	
  Lessor’s
  Right to Perform.

  
	
   

  	
   

  	
   

  
	
  SECTION
  21.

  	
  Assignment.

  
	
   

  	
  Section 21.1.

  	
  Assignment by Lessor

  
	
   

  	
  Section 21.2.

  	
  Assignment by Lessee

  
	
   

  	
  Section 21.3.

  	
  Sublessee’s Performance and Rights

  
	
   

  	
   

  	
   

  
	
  SECTION
  22.

  	
  Net
  Lease, Etc.

  
	
   

  	
   

  	
   

  
	
  SECTION
  23.

  	
  Notices.

  
	
   

  	
   

  	
   

  
	
  SECTION
  24.

  	
  Purchase
  Options.

  
	
   

  	
  Section 24.1.

  	
  Election to Retain or Return Equipment at
  End of Basic Term

  
	
   

  	
  Section 24.2.

  	
  Purchase Option

  

 

ii

 

	
  SECTION
  25.

  	
  Miscellaneous.

  
	
   

  	
  Section 25.1.

  	
  Merger Covenant

  
	
   

  	
  Section 25.2.

  	
  No Impairment of Warranties

  
	
   

  	
  Section 25.3.

  	
  Governing Law; Severability

  
	
   

  	
  Section 25.4.

  	
  Execution in Counterparts

  
	
   

  	
  Section 25.5.

  	
  Headings and Table of Contents; Section References

  
	
   

  	
  Section 25.6.

  	
  Successors and Assigns

  
	
   

  	
  Section 25.7.

  	
  True Lease

  
	
   

  	
  Section 25.8.

  	
  Amendments and Waivers

  
	
   

  	
  Section 25.9.

  	
  Survival

  
	
   

  	
  Section 25.10.

  	
  Business Days

  
	
   

  	
  Section 25.11.

  	
  UCC Original

  
	
   

  	
  Section 25.12.

  	
  Waiver of Trial by Jury

  
	
   

  	
  Section 25.13.

  	
  Waivers

  
	
   

  	
  Section 25.14.

  	
  Release of Liens and Guarantees

  

 

Attachments to
Lease Agreement

 

	
  Appendix
  A

  	
   

  	
  -

  	
   

  	
  Definitions

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Appendix
  

  	
   

  	
  -

  	
   

  	
  Advances

  
	
  A-1

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedules:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
    2.1

  	
   

  	
  -

  	
   

  	
  Equipment

  
	
    5.2

  	
   

  	
  -

  	
   

  	
  Current Indebtedness

  
	
  10.1

  	
   

  	
  -

  	
   

  	
  Other
  Liens

  
	
  14.1

  	
   

  	
  -

  	
   

  	
  Insurance

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibits:

  	
   

  	
   

  	
   

  	
   

  
	
  A

  	
   

  	
  -

  	
   

  	
  Certificate of Acceptance

  
	
  B

  	
   

  	
  -

  	
   

  	
  Acknowledgment Agreement

  
	
  C

  	
   

  	
  -

  	
   

  	
  Form of Joinder Agreement

  
	
  D

  	
   

  	
  -

  	
   

  	
  Form of Opinion

  
	
  E

  	
   

  	
  -

  	
   

  	
  Form of Perfection Certificate

  
	
  F

  	
   

  	
  -

  	
   

  	
  Form of Landlord Lien Waiver

  
	
  G

  	
   

  	
  -

  	
   

  	
  Form of Control Agreement

  

 

iii

 

LEASE AGREEMENT

 

THIS LEASE AGREEMENT
(the “Lease”)
is hereby amended and restated as of April 30, 2003 (the “Effective Date”),
among GEOLEASE
PARTNERS, L.P., a Delaware limited partnership (“Lessor”),
GEOKINETICS
INC., a Delaware corporation (“Lessee”), and the Subsidiary guarantors
listed on the signature pages hereto (the “Guarantors” and together with Lessee, the
“Obligors”).  This Lease is entered into with reference to
that certain Lease Agreement, dated as of October 1, 1999, initially
between Lessee and Input/Output, Inc., a Delaware corporation, as the same was
amended pursuant to that certain Amendment No. 1, dated as of
April 9, 2001, that certain Amendment No. 2, dated as of
September 30, 2002, that certain Amendment No. 3, dated as of
January 1, 2003, and that certain Amendment No. 4, dated as of
January 24, 2003, between Lessor and Lessee (collectively, the “Old
Equipment Lease”).

 

RECITALS

 

A.            The execution of this Lease is a
part of contemporaneous debt restructuring, recapitalization, and private
placement transactions (the “Restructuring”) among Lessor, Lessee, the
holders of Lessee’s 13.5% Senior Secured Notes due 2003, the holders of
Lessee’s 13.5% Senior Secured Notes due 2005, and certain existing and new
investors, pursuant to the terms of that certain Securities Purchase and
Exchange Agreement of even date herewith (the “Restructuring  Agreement”).

 

B.            As part of the Restructuring, Lessor
and Lessee are amending and restating this Lease to restructure Lessee’s
obligations under the Old Equipment Lease.

 

NOW,
THEREFORE, in consideration of their respective promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the parties, Lessor and Lessee hereby agree as follows:

 

AGREEMENTS

 

SECTION 1.                Definitions.

 

Unless the
context otherwise requires, all capitalized terms used herein without definition
shall have the respective meanings set forth in Appendix A hereto
for all purposes of this Lease.  All
references in this Lease to Sections, Exhibits and Schedules shall refer to
Sections of or Exhibits or Schedules attached to this Lease (as applicable)
unless the context expressly provides otherwise.

 

SECTION 2.                Lease.

 

This Lease
shall be effective from and after the Effective Date.  Subject to the terms and conditions set forth below, Lessor
agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the Units of
Lease Equipment listed in Schedule 2.1.

 

 

SECTION 3.                Certain
Costs.

 

Lessee agrees
to pay when due the reasonable expenses (including reasonable legal fees and
expenses) of Lessor incurred subsequent to the Original Effective Date in
connection with any supplements, amendments, modifications, alterations,
waivers or consents, lien searches and UCC and/or Landlord Lien Waiver filing
fees of or with respect to this Lease that are requested by, or necessitated by
action or inaction on the part of, Lessee or by any applicable law or
regulation (other than laws or regulations solely relating to the business of
Lessor) or entered into in connection with, or as a result of, a Lease Default
or Lease Event of Default.

 

SECTION 4.                Conditions
to Effectiveness.

 

The
effectiveness of this amendment to and restatement of the Old Equipment Lease
shall be subject to the satisfaction or waiver (in accordance with Section
25.8) of the following conditions prior to the Effective Date:

 

(a)           Lessor
shall have received a favorable opinion from Chamberlain, Hrdlicka, White,
Williams and Martin substantially in the form of Exhibit D and such
opinions of local counsel to the Obligors as Lessor may reasonably request,
each addressed to Lessor and dated as of the Effective Date;

 

(b)           Lessor
shall have received such documents and certificates as Lessor or its counsel
may reasonably request relating to the organization, existence and good
standing of each Obligor, the authorization of the Restructuring (including
this amendment and transactions related hereto) and any other legal matters
relating to the Obligors or the Restructuring, all in form and substance
reasonably satisfactory to Lessor and its counsel;

 

(c)           Lessor
shall have received certificates, dated the Effective Date and signed by the
President, a Vice President or a financial officer of Lessee, confirming
compliance with the conditions set forth in this Section 4;

 

(d)           Lessor
shall have received the Back Rent, all fees and other amounts due and payable
on or prior to the Effective Date, including, without limitation, the Amendment
Fee and, to the extent invoiced, reimbursement or payment of all out-of-pocket
expenses (including fees, charges and disbursements of counsel) required to be
reimbursed or paid by Lessee hereunder or under any other document;

 

(e)           The
Collateral and Guarantee Requirement shall have been satisfied and Lessor shall
have received a completed Perfection Certificate dated the Effective Date and
signed by an executive officer or financial officer of Lessee, together with
all attachments contemplated thereby, including the results of a search of the
UCC (or equivalent) filings made with respect to Obligors in the jurisdictions
contemplated by the Perfection Certificate and copies of the financing
statements (or similar documents) disclosed by such search and evidence
reasonably satisfactory to Lessor that the Liens indicated by such financing
statements (or similar documents) are permitted by Section 5.02(f) or have been
released or will be released pursuant to UCC-3 financing statements 

 

2

 

or other release
documentation.  The Other Collateral
Agreements reasonably requested by Lessor shall also have been executed;

 

(f)            UCC
financing statements naming Lessee as debtor and Lessor as secured party shall
have been filed in all jurisdictions where it is necessary and desirable in the
reasonable opinion of Lessor to so file so as to perfect and protect Lessor’s
interest in the Lease Equipment;

 

(g)           Each
condition precedent in favor of investors in the Restructuring Agreement shall
have been met, the Restructuring Agreement shall have been validly executed and
delivered, and the Restructuring shall have been, or substantially simultaneously
with the Effective Date shall be, consummated in accordance with the
Restructuring Agreement and applicable law;

 

(h)           The
representations and warranties of Obligors set forth in the Lease shall be true
and correct on and as of the Effective Date or the date of any amendment,
renewal or extension of same, as applicable.

 

(i)            Prior
to the Effective Date, the Old Equipment Lease shall remain in full force and
effect.

 

SECTION 5.                Representations, Warranties and
Covenants.

 

Section 5.1            Representations
and Warranties.  Each of the
Obligors represents and warrants to Lessor that:

 

(a)           It
is a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation, is duly licensed or qualified and
in good standing in each jurisdiction in which the failure to so qualify would
have a material adverse effect on its ability to carry on its business as now
conducted or to enter into and perform its obligations under this Lease, has
the corporate power and authority to carry on its business as then conducted
and has the requisite power and authority to execute, deliver and perform its obligations
under this Lease.

 

(b)           This
Lease has been duly authorized by all necessary corporate action of the
Obligor, and has been duly executed and delivered by the Obligor and, assuming
the due authorization, execution and delivery by the other parties thereto,
constitute the legal, valid and binding obligations of the Obligor, enforceable
against the Obligor in accordance with their respective terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the rights of creditors generally and by general
principles of equity.

 

(c)           The
execution, delivery and performance by the Obligor of this Lease and Schedule
2.1, and compliance by the Obligor with all of the provisions thereof, do not
contravene any law or regulation, or any order of any court or Governmental
Authority applicable to or binding on the Obligor or any of its properties, or
contravene the provisions of, or constitute a default by the Obligor under, or
result in the creation of any 

 

3

 

Lien upon the property of the
Obligor under its certificate of incorporation, by-laws or other organizational
documents or any indenture, mortgage, contract or other agreement or instrument
to which the Obligor is a party or by which the Obligor or any of its property
is bound or affected.

 

(d)           There
are no proceedings pending or, to the knowledge of the Obligor, threatened
against the Obligor in any court or before any Governmental Authority or
arbitration board or tribunal that individually or in the aggregate could reasonably
be expected to materially and adversely affect the financial condition or
business of Lessee and its Subsidiaries, taken as a whole, or impair the
ability of Lessee to perform its obligations under this Lease or any Schedule,
or that question the validity of this Lease or any Schedule or any action taken
or to be taken pursuant thereto.  No
Obligor is in default with respect to any order of any court or Governmental
Authority or arbitration board or tribunal, the default under which would
affect adversely the ability of Lessee to perform its obligations under this
Lease and each Schedule.

 

(e)           Other
than those received in connection with the Restructuring, no consent, approval
or authorization of, or filing, registration or qualification with, or the
giving of notice to, any trustee or any holder of indebtedness of any Obligor
or any Governmental Authority is required in connection with the execution and
delivery by Lessee of this Lease and each Schedule.

 

(f)            It
has good title to, or valid leasehold interests in, all its real and personal
property material to its business (including any mortgaged properties), except
for minor defects in title that do not interfere with its ability to conduct
its business as currently conducted or to utilize such properties for their
intended purposes.

 

(g)           It
owns, or is licensed to use, all trademarks, trade names, copyrights, patents
and other intellectual property material to its business, and to Lessee’s
knowledge the use thereof by any Obligor does not infringe upon the rights of
any other Person, except for any such infringements that, individually or in
the aggregate, could not reasonably be expected to result in a material adverse
effect.

 

(h)           (i)  This Lease is effective to create in favor
of Lessor, a legal, valid and enforceable security interest in the
Collateral.  When financing statements
in appropriate form are filed in the offices specified on Schedule 7 to
the Perfection Certificate, the security interest created by Section 10 of this
Lease shall constitute a perfected security interest in all right, title and
interest of the grantors thereunder in such Collateral (other than the
Securities), in each case prior and superior in right to any other Person,
other than with respect to Liens permitted by Section 5.02(f).  Additionally, this Lease is effective to
create in favor of Lessor a legal, valid and enforceable security interest in
the Securities.  When such Securities
are delivered to Lessor and for so long as Lessor remains in possession of such
Securities, the security interest created by this Lease shall constitute a perfected
first priority security interest in all right, title and interest of Lessee
thereunder in such Securities, in each case prior and superior in right to any
other Person.

 

4

 

(ii) When the Lease (or a summary thereof) is filed in the United
States Patent and Trademark Office and the United States Copyright Office and
the financing statements referred to in clause (i) above are appropriately
filed, the security interest created by the Lease shall constitute a perfected
security interest in all right, title and interest of the grantors thereunder
in the Intellectual Property in which a security interest may be perfected by
filing, recording or registering a security agreement, financing statement or
analogous document in the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, in each case prior and superior
in right to any other Person (it being understood that subsequent recordings in
the United States Patent and Trademark Office and the United States Copyright
Office and subsequent UCC filings may be necessary to perfect a Lien on
registered trademarks, trademark applications and copyrights acquired by the
Obligor after the Effective Date), other than with respect to Liens permitted
by Section 5.02(f).

 

(i)            Each
Lease Equipment location identified on Schedule 2 to the Perfection Certificate
is owned or leased by the entity identified thereon free and clear of any Liens
for Indebtedness or leases subject to the Liens of the mortgagees and interest
of the landlords identified on Schedule 2 to the Perfection Certificate.

 

(j)            No
Tax Liens have been filed and no claims are being asserted with respect to any
material Taxes, fees or other charges that could reasonably be expected to have
a materially adverse effect on its ability to perform its obligations under
this Lease or any Schedule.

 

(k)           No
Lease Default or Lease Event of Default has occurred and is continuing and to
the knowledge of Lessee, no Event of Loss, or event with which the giving of notice
and/or the passage of time would constitute an Event of Loss, has occurred.

 

(l)            Lessee
is not an “investment company” or an “affiliated person” of an “investment
company” within the meaning of the Investment Company Act of 1940.

 

(m)          None
of the transactions contemplated by this Lease will result in a violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or any
regulations issued pursuant thereto, including, without limitation, Regulations
G, T, U and X of the Board of Governors of the Federal Reserve System, 12
C.F.R., Chapter 11.

 

(n)           Lessee
is not in violation of any term of any charter instrument, by-law or in any
material respect of any other material agreement or instrument to which it is a
party or by which it may be bound. 
Lessee is in compliance with all laws, ordinances, governmental rules
and regulations to which it is subject, the failure to comply with which would
have a material and adverse effect on its operations or condition, financial or
otherwise, or would impair its ability to perform its obligations under this
Lease or any Schedule, and has obtained all licenses, permits, franchises and
other governmental authorizations material to the conduct of its business.

 

5

 

(o)           Lessee
does not have any Subsidiaries other than those listed in the Perfection
Certificate.

 

(p)           No
broker’s or finder’s or placement fee or commission will be payable with respect
to the transactions contemplated by this Lease or any Lease Schedule as a
result of any action by Lessee, and Lessee agrees that it will hold Lessor
harmless from any claim, demand or liability for any other broker’s or finder’s
or placement fees or commission alleged to have been incurred as a result of
any action by Lessee in connection with such transactions.

 

(q)           All
representations and warranties of Lessee made in the Restructuring Agreements
shall be true and correct.

 

(r)            Lessee
is not subject to regulation as a “Holding Company,” an “Affiliate” of a
“Holding Company,” or a “Subsidiary Company” of a “Holding Company,” within the
meaning of the Public Utility Holding Company Act of 1935, as amended.

 

Section 5.2.             Covenants.

 

(a)           Information.  Lessee covenants and agrees with Lessor that
it will furnish or cause to be furnished directly to Lessor each of the
following:

 

(i)      Unless included in a Form 10-QSB delivered
pursuant to Section 5(a)(iii) within the 45-day period specified in this clause
(i) (or any extended period under Rule 12b-25 under the Securities Exchange Act
of 1934), as soon as available and in any event within 45 days after the end of
each quarterly period, except the last, of each fiscal year, the consolidated
balance sheet of Lessee and its consolidated Subsidiaries as at the end of such
period, together with the related consolidated statements of income and cash
flows of Lessee and its consolidated Subsidiaries for the period beginning on
the first day of such fiscal year and ending on the last day of such quarterly
period, setting forth in each case (except for the consolidated balance sheet)
in comparative form the figures for the corresponding periods of the previous
fiscal year, all in reasonable detail and prepared in accordance with generally
accepted accounting principles, except that such statements may be without
footnotes and subject to year end revision.

 

(ii)     Unless included in a Form 10-KSB delivered
under Section 5(a)(iii) within the 90-day period specified in this clause (ii)
(or any extended period under Rule 12b-25 under the Securities Exchange Act of
1934), as soon as available and in any event within 90 days after the last day
of each fiscal year, a copy of Lessee’s audited financial statements covering
the operations of Lessee and its consolidated Subsidiaries, including a
consolidated balance sheet, and related consolidated statements of income and
cash flows of Lessee and its consolidated Subsidiaries for such fiscal year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and prepared in accordance with generally
accepted accounting principles applied on a consistent basis, which statements
will have been certified by a firm of independent certified public accountants
selected by Lessee.

 

6

 

(iii)    As soon as available, one copy of each
Annual Report on Form 10-KSB (or any successor form) and Quarterly Report on
Form 10-QSB (or any successor form) filed by Lessee with the Securities and
Exchange Commission or any successor agency.

 

(iv)    Within the time period prescribed in
Sections 5(a)(i) and (ii), a certificate, signed by the treasurer or principal
financial officer of Lessee, (w) stating that the signer has reviewed the
activities of Lessee during the immediately preceding fiscal quarter and/or
year (as applicable) and that the signer is not aware of any Lease Default or
Event of Loss in compliance by Lessee with any of the covenants, terms and
provisions of this Lease (except as specified), and if a default shall exist,
specifying such default and the nature and status thereof, (x) identifying
any parcels of real property or improvements thereto with a value exceeding
$350,000 that have been acquired by Lessee since the end of the previous fiscal
year, (y) identifying any changes of the type described in Section 5(c)
that have not been previously reported by Lessee and (z) identifying any
Intellectual Property with respect to which a notice is required to be
delivered and has not been previously delivered.

 

(v)     Promptly, all material reports or
statements that Lessee may make to, or file with, the Securities and Exchange
Commission or any successor thereto (excluding such reports or statements that
are treated as confidential and not available to the public, in accordance with
applicable law, by the Securities and Exchange Commission, for so long as such
confidentiality shall be maintained).

 

(vi)    Within 30 days after the end of each
calendar month the consolidated balance sheet of Lessee and its consolidated
Subsidiaries as of the end of such month and the related consolidated statements
of operations and retained earnings/stockholders deficiency and statement of
cash flows for such month and for the elapsed portion of the fiscal year ended
with the last day of such month, in form and substance reasonably satisfactory
to Lessor.

 

(vii)   Promptly after the receipt thereof by Lessee
or any of its Subsidiaries, a copy of any final “management letter” received by
any of them from its certified public accountants and the management’s
responses thereto.

 

(viii)  No later than 45 days following the
commencement of the first day of each fiscal year of Lessee, a budget in form
consistent with past practices and reasonably satisfactory to Lessor, prepared
by Lessee for each of the twelve months of such fiscal year prepared in detail.

 

(b)     Lessee will furnish to
Lessor prompt written notice of the following:

 

(i)      the occurrence of any Lease Default or
Event of Loss;

 

(ii)     the filing or commencement of any action,
suit or proceeding by or before any arbitrator or Governmental Authority
against or affecting Lessee and the Guarantors that, if adversely determined,
could reasonably be expected to result in a material adverse effect; and

 

7

 

(iii)    any other development that results in, or
could reasonably be expected to result in, a material adverse effect.

 

Each notice
delivered under this Section 5(b) shall be accompanied by a statement of a
financial officer or other executive officer of Lessee setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto and the location of the Lease
Equipment as of such date.

 

(c)     Lessee will furnish to
Lessor prompt written notice of any change:

 

(i)      in any Obligor’s legal name or in any
trade name used to identify it in the conduct of its business or in the
ownership of its properties;

 

(ii)     in the location of any Obligor’s chief
executive office, its principal place of business, any office in which it
maintains books or records relating to Collateral owned by it or any office or
facility at which Collateral owned by it is located (including the
establishment of any such new office or facility),

 

(iii)    in any Obligor’s identity or structure; or

 

(iv)    in any Obligor’s Federal Taxpayer
Identification Number.  Lessee agrees
not to effect or permit any change referred to in the preceding sentence unless
written notice has been delivered to Lessor, together with all applicable
information to enable Lessor to make all filings under the UCC or otherwise
that are required in order for Lessor to continue at all times following such
change to have a valid, legal and perfected security interest in all the
Collateral.

 

(d)     If any additional
Subsidiary of Lessee is formed or acquired after the Effective Date, Lessee
will, within five Business Days after such Subsidiary is formed or acquired,
notify Lessor and, within five Business Days after such Subsidiary is formed or
acquired, cause the Collateral and Guarantee Requirement to be satisfied with
respect to any Equity Interest in or Securities of such Subsidiary owned by or
on behalf of any Obligor.

 

(e)     (i)  Each of the
Obligors will, and will cause each new Subsidiary to, execute any and all
further documents, financing statements, agreements and instruments, and take
all such further actions (including the filing and recording of financing
statements, fixture filings, mortgages, deeds of trust, landlord waivers and
other documents), which may be required under any applicable law, or which
Lessor may reasonably request, to cause the Collateral and Guarantee
Requirement to be and remain satisfied, all at the expense of Lessee.  Lessee also agrees to provide to Lessor,
from time to time upon request, evidence reasonably satisfactory to Lessor as
to the perfection and priority of the Liens created or intended to be created
by this Lease.

 

(ii)     If any assets (including any real property
or improvements thereto or any interest therein) having a book value or fair
market value of $350,000 or more in the aggregate are acquired by Lessee or any
Obligor after the Effective Date or through the acquisition of a Subsidiary,
Lessee will notify Lessor thereof and, if reasonably requested by Lessor,
Lessee will 

 

8

 

cause such assets to be subjected to a Lien securing the Obligations
and will take, and cause the Subsidiary to take, such actions as shall be
necessary or reasonably requested by Lessor to grant and perfect such Liens,
including actions described in paragraph (e)(i) of this Section, all at the
expense of Lessee.

 

(f)      Lessee will not, and will
not cause or permit any of the Guarantors to, directly or indirectly, create,
incur, assume or permit or suffer to exist any Liens of any kind against or
upon any property or assets of Lessee or any of the Guarantors, whether owned
on the Effective Date or acquired after the Effective Date, or any proceeds
therefrom, or assign or otherwise convey any right to receive income or profits
therefrom, in each case other than Permitted Liens, except that Lessee and the
Guarantors may incur Liens on property or assets that are not Collateral (other
than the Lease Equipment) if (i) in the case of any such Liens securing
Indebtedness that is expressly subordinate or junior in right of payment to the
Lease, the Lease is secured by a Lien on such property or assets that is senior
in priority to such Liens and (ii) in the case of all other such Liens, the
Lease is equally and ratably secured. 
In the event that the Lien the existence of which gives rise to a Lien
securing the Lease pursuant to the foregoing exception ceases to exist, the
Lien securing the Lease required by the foregoing exception shall automatically
be released and Lessor shall execute appropriate documentation as requested by
Lessee.

 

(g)     Until satisfaction of
Lessee’s Obligations under this Lease, Lessee shall not create, incur or assume
any Indebtedness, other than the following (such items collectively being the “Permitted
Indebtedness”): 
(i) Lessee’s Obligations under this Lease, (ii) Lessee’s
aggregate borrowings outstanding on the date hereof and disclosed to Lessor on Schedule
5.2 attached hereto, (iii) additional borrowings under a bank line of
credit (or similar facility) in a commitment amount not to exceed $2,000,000
and secured by the assets of Lessee and/or its Subsidiaries, and
(iv) additional purchase money Indebtedness or capital lease obligations
(whether or not secured) in an amount outstanding at any one time not to exceed
$500,000 in the aggregate (the “Permitted Additional Obligations”).  Lessor hereby consents to Lessee incurring
the Permitted Indebtedness, and will provide notices, certifications and
additional agreements, undertakings or other assurances, and take such action,
as Lessee reasonably requests to confirm Lessor’s consent to the Permitted
Indebtedness and to facilitate Lessee’s granting any security for the Permitted
Indebtedness in favor of third parties, including subordination of Lessor’s
Liens granted hereunder and termination of any deposit account control
agreements in respect of the Collateral in order to facilitate the incurring of
the Permitted Indebtedness by Lessee.

 

SECTION 6.                Term
and Rent; Restructured Obligations.

 

Section 6.1            Lease
Term.  The Basic Term of the
Lease and the Units covered thereby (the “Basic Term”) shall commence as of the
Basic Term Commencement Date and, subject to earlier termination pursuant to
other provisions of this Lease, shall expire at 11:59 P.M. (Texas time) on the
Basic Term Expiration Date.

 

Section 6.2            Basic
Rent.  Pursuant to the terms
of the Restructuring, Lessee hereby agrees to pay Lessor $62,400 per month as
basic rent (the “Basic Rent”) for the period beginning April 1, 2002
until the later of the Basic Term Expiration Date or return of all of the Lease
Equipment to Lessor pursuant to Section 9. 
Each monthly payment is due on the first day of 

 

9

 

each calendar month.  In
addition to, and by no way in limitation of, any other Liens granted to Lessor,
Lessee hereby grants Lessor a security interest in any advanced payments of
rent to secure any and all obligations due hereunder, including but not limited
to, any sums owed to Lessor resulting from any breach of Lessee’s obligations
hereunder.  Notwithstanding the
foregoing, in the event that Lessee fails to make timely payment of Basic Rent,
such amounts shall become Supplemental Rent as provided in Section 6.2 and all
such accrued and unpaid Rent shall become due and payable no later than the
Basic Term Expiration Date.

 

Section 6.3            Supplemental
Rent.  Lessee also agrees to
pay to Lessor, or to whosoever shall be entitled thereto, any and all Supplemental
Rent, promptly as the same shall become due and owing, or where no due date is
specified, promptly after demand by the Person entitled thereto.  Lessee will also pay, as Supplemental Rent,
but without duplication, to the extent permitted by applicable law, a late fee
calculated at the Late Rate on (x) any part of any installment of Basic
Rent not paid when initially due for any period for which the same shall be
overdue on the earlier of the Basic Term Expiration Date or upon the occurrence
of a Lease Event of Default which shall not have been cured or waived,
(y) the Prior Accrued Balance if not paid on the earlier of the Basic Term
Expiration Date or upon the occurrence of a Lease Event of Default which shall
not have been cured or waived, and (z) any other payment of Supplemental
Rent not paid when due or ten days after demanded, as the case may be, for the
period from such date or ten days after demanded, as the case may be, until the
same shall be paid, on demand.

 

Section 6.4            Manner
of Payments.  All Rent (other
than Supplemental Rent payable to Persons other than Lessor, which shall be
payable to such other Persons in accordance with written instructions furnished
to Lessee by such Persons) and the Prior Accrued Balance and interest thereon
shall be paid by Lessee to Lessor at such address or account in the United
States as may be designated in writing by Lessor to Lessee from time to
time.  All Rent shall be paid by Lessee
in funds consisting of lawful currency of the United States of America, which
shall be immediately available to the recipient not later than 12:00 noon
(Houston, Texas time) on the date of such payment.

 

Section 6.5            Sales
Tax.  Whether or not Lessee
pays Basic Rent in cash, Lessee shall remit to Lessor, in the manner set forth
in Section 6.4 above, in the lawful currency of the United States of America,
all sales and other similar taxes applicable to any Rent payments hereunder
pursuant to Texas Tax Code Section 151.051 and Section 151.052.

 

Section 6.6            Restructuring
of Old Equipment Lease.  As
of the Effective Date, all Rent previously accrued or deferred pursuant to the
Old Equipment Lease shall be adjusted and payable as follows:

 

(a)           the
accrued lease balance owed by Lessee under the Old Equipment Lease as of
April 30, 2002 is hereby reduced from $6,672,530 to (i) a principal
amount of $3,700,000 (the “Prior Accrued Balance”), plus
(ii) simple interest at 6% per annum accruing on the Prior Accrued Balance
beginning on  April 30, 2002, plus
(iii) 5,317,803, representing 28% of shares of Common Stock, plus
(iv) the Residual Amount, plus (v) an amount in cash equal to $62,400
(inclusive of any applicable taxes) for each calendar month (or portion
thereof) from April 1, 2002 through the Effective Date;

 

10

 

(b)           the
$1,900,000 Deferred Rent obligation (as defined and provided in the Old
Equipment Lease) owed under the Old Equipment Lease is hereby terminated in all
respects; and

 

(c)           (i)
on the Basic Term Expiration Date, Lessee shall pay Lessor the Prior Accrued
Balance, plus accrued but unpaid simple interest of 6% per annum from the April
30, 2002, and (ii) on or prior to the Effective Date Lessee shall issue or
otherwise pay to Lessor (x) 5,317,803, representing 28% of shares of
Common Stock, (y) the Residual Amount and (z) an amount equal to
$62,400 (inclusive of any applicable taxes) for each calendar month (or portion
thereof) from April 1, 2002 through the Effective Date in satisfaction of
the Basic Rent accrued under the Old Equipment Lease and owed by Lessee through
the Effective Date (the Common Stock and cash referred to in clause (ii) in
this subsection (c), the “Back Rent”).

 

Section 6.7            Amendment
Fee.  On or prior to the
Effective Date, Lessee shall pay Lessor, the Amendment Fee in a manner consistent
with Section 6.4.

 

SECTION 7.                Ownership
and Marking of Equipment; Personal Property.

 

Section 7.1            Retention
of Title.  Lessor shall and
hereby does retain full legal title to and beneficial ownership of the Units
notwithstanding the delivery to and possession and use of the Units by Lessee
hereunder or any sublessee under any sublease permitted hereby.

 

Section 7.2            Insignia.  At Lessor’s request, Lessee shall cause labels,
plates or similar items to be attached to the Units reflecting Lessor as the owner
of the Units.  Lessee may cause the
Units to be lettered with the names or initials or other insignia customarily
used by Lessee or any permitted sublessees or any of their respective
Affiliates for convenience of identification of the right of Lessee to use the
Units hereunder or any permitted sublessee to use the Units pursuant to a
sublease permitted hereby; provided such lettering shall in no manner
conflict with the labeling performed pursuant to the preceding sentence.

 

Section 7.3            Personal
Property.  Lessee covenants
that each Unit shall remain personal property regardless or whether it becomes
affixed or attached to or incorporated into real property or any improvement
thereof.  Lessee shall not permit any
Unit to become so related to any particular real estate or improvement or to be
installed in or affixed to other goods so as to become part of such real
property or improvement or (unless such goods are also Units covered by the
same Lease) an accession to such other goods. 
Lessee agrees to execute all such agreements and other documents and to
obtain the execution thereof by such other persons as Lessor may request, in
recordable form, by all parties having an interest in any real property to
which any Unit is related, with respect to the identity of such Unit as
personal property, and the disclaimer of any interest in such Unit by such
other persons.  Lessee consents to the
recordation of all such agreements and documents.

 

SECTION 8.                Disclaimer
of Warranties.

 

Without
waiving any claim Lessee may have against any seller, supplier, manufacturer or
any other Person other than Lessor or its Affiliates, LESSEE ACKNOWLEDGES AND 

 

11

 

AGREES THAT (i) EACH UNIT IS OF A SIZE, DESIGN, CAPACITY AND
MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (ii) LESSEE IS SATISFIED
THAT EACH UNIT IS SUITABLE FOR ITS PURPOSES AND LESSEE HAS ACCEPTED EACH UNIT,
(iii) LESSEE HAS INSPECTED THE UNITS PRIOR TO DELIVERY TO AND ACCEPTANCE
BY LESSEE, (iv) EACH UNIT IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE
LAWS AND GOVERNMENTAL REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED, AND
(v) LESSOR LEASES AND LESSEE TAKES EACH UNIT “AS-IS”, “WHERE-IS” AND “WITH
ALL FAULTS”, IN WHATEVER CONDITION IT MAY BE, AND LESSEE ACKNOWLEDGES THAT
LESSOR DOES NOT MAKE NOR SHALL BE DEEMED TO HAVE MADE, AND LESSOR EXPRESSLY
DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER
EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR
PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO THE TITLE, OF THE
UNITS, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF
TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT,
THE ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS
TO THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY
OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT
THERETO AND LESSOR EXPRESSLY DISCLAIMS SELECTION OF THE UNITS; except that
Lessor represents and warrants that Lessor shall have received whatever title
to the Units as was conveyed to Lessor. 
Lessor hereby appoints and constitutes Lessee its agent and
attorney-in-fact during the Basic Term to assert and enforce, from time to
time, in the name and for the account of Lessor and Lessee, as their interests
may appear, but in all cases at the sole cost and expense of Lessee, whatever
claims and rights Lessor may have as owner of the Units against the
manufacturers or any prior owner thereof; provided, if at any time a Lease Event of
Default shall have occurred and be continuing, at Lessor’s option, such power
of attorney shall terminate, and Lessor may assert and enforce, at Lessee’s
sole cost and expense, such claims and rights.  Lessor shall have no responsibility or liability to Lessee or any
other Person with respect to any of the following:  (i) any liability, loss or damage caused or alleged to be
caused directly or indirectly by any Unit, or by any operation thereof, whether
or not permitted by the terms hereof, or by any inadequacy thereof or
deficiency or defect therein or by any other circumstances in connection
therewith including but not limited to alleged defects in the design or
construction of any Unit; (ii) the use, operation or performance of any
Unit or any risks relating thereto; (iii) any interruption of service,
loss of business or anticipated profits or consequential damages; or
(iv) the delivery, operation, servicing, maintenance, repair, improvement
or replacement of any Unit.  Lessee’s
delivery of a Schedule hereto shall be conclusive evidence as between Lessee
and Lessor that all Units described therein are in all the foregoing respects
satisfactory to Lessee.

 

SECTION 9.                Return
of Equipment.

 

Section 9.1            Return
of Equipment.  (a)  If Lessee elects not to deliver the notice
contemplated by Section 24.1 of its irrevocable election of the purchase option
in Section 24.2, Lessee shall deliver to Lessor a notice of its intention to
return the Units upon the Basic Term Expiration Date, such notice to be
furnished not less than 90 days prior to the Basic Term 

 

12

 

Expiration Date.  Upon the
expiration of the lease created by the applicable Lease Schedule or earlier termination
of such lease (other than when such Unit is being replaced or sold pursuant to
the terms hereof) with respect to a Unit, Lessee, at its own risk and expense,
will comply with the dismantling, storage, return, transport and other
obligations set forth in this Section 9.1. 
Concurrently with each delivery of a Unit to Lessor hereunder, upon
request of Lessor, Lessee will deliver to Lessor all records, if any, in its
possession relating to the repair and maintenance history of such Unit,
including, without limitation, all logs, schedules and computer data relating
to such history of the type maintained in the ordinary course of business of
Lessee with respect to Units owned or leased by Lessee.

 

(b)           Upon the Basic Term
Expiration Date with respect to such Unit and compliance with the terms hereof
(including Section 9.2), the obligation to pay Basic Rent and all other Rent
for such Unit (except for any Rent obligations which have otherwise accrued but
not been paid as of the date of the expiration of the Basic Term) shall
terminate and any accrued and unpaid Obligations shall become immediately due
and payable.

 

(c)           Upon the return of
any Unit, Lessee shall, at its own cost and expense, have taken all necessary
action to assure that such Unit shall be in the condition required by this
Section 9.1 and Section 9.2.  If Lessor
or its agent shall inspect any Unit pursuant to this Section and shall
reasonably determine that such Unit is not in the condition required by this
Section 9.1 or Section 9.2, Lessee, at no cost to Lessor, shall within 90 days
thereafter make such repairs and perform such work as shall be necessary to
place such Units in the condition required by this Section 9.1 and Section 9.2
to Lessor’s reasonable satisfaction, failing which Lessor may make such repairs
and perform such work at Lessee’s expense.

 

(d)           As to each Unit to
be returned by Lessee hereunder, at Lessor’s request Lessee shall:  (i) detach such Unit from a facility or
improvements (if any) to which such Unit may be attached, (ii) disassemble
such Unit to the extent necessary to transport the Unit via truck or another
mode of transportation selected by Lessor, (iii) repair any damage to the
Unit occurring during such detachment or disassembly activities per
subparagraph (c) above, and (iv) cause the Unit to be shipped to a
facility located at Eleven Madison Avenue, New York, New York 10010, and to be
insured for no less than its full replacement value during such transport (with
Lessor to be the named insured under such insurance).

 

(e)           The obligations of
Lessee pursuant to Section 9.1 and Section 9.2 shall be at the expense and risk
of Lessee.

 

Section 9.2            Condition
of Units.  Each Unit when
returned to Lessor shall be (except for additions, modifications and improvements
which Lessee is entitled or required to make in accordance with the terms of
this Lease) in the condition in which such Unit is required to be maintained
pursuant to Section 11.1; provided, each Unit when returned to
Lessor pursuant to Section 9.1 shall in all events:

 

(i)                                     have attached or
affixed thereto all parts to which Lessor has title hereunder; provided,
as to any such parts that are required to be removed during the removal of such
Unit, such parts may not be reattached but shall be required to be boxed or
crated and kept with such Unit;

 

13

 

(ii)                                  be free and clear of
all Liens except the Liens created by this Lease and Lessor Liens; and

 

(iii)                               be free of any marks or
insignia which infringe the proprietary rights of third parties.

 

SECTION 10.             Security Interest; Guarantees.

 

Section 10.1         Grant
of Security Interests. 
(a)  As security for the prompt
and complete payment and performance when due of all of the Obligations,
Obligor does hereby collaterally assign and transfer unto Lessor, a continuing
security interest of first priority (subject to Permitted Liens) in, all of the
right, title and interest of such Obligor in, to and under all of the
following, whether now existing or hereafter from time to time acquired
(collectively, the “Collateral”):

 

(i)                      all Equipment (other than
the Lease Equipment);

 

(ii)                     all Inventory;

 

(iii)                    all Contracts, together with
all Contract Rights thereunder;

 

(iv)                    all Instruments;

 

(v)                     all General Intangibles;

 

(vi)                    all Accounts;

 

(vii)                   all Insurance Policies;

 

(viii)                  all Intellectual Property;

 

(ix)                     all Chattel Paper;

 

(x)                      all Investment Property
and Financial Assets;

 

(xi)                     all Deposit Accounts;

 

(xii)                    all Letter-of-Credit Rights;

 

(xiii)                   all Goods;

 

(xiv)                  all Commercial Tort Claims,
including, without limitation, each Specified Commercial Tort Claim;

 

(xv)                   all Documents;

 

(xvi)                  all Fixtures;

 

(xvii)                 all Supporting Obligations
relating to any and all of the foregoing;

 

14

 

(xviii)                all books, records, ledgers,
printouts, computer recording media, data files, tapes, file materials and
other papers containing information relating to any and all items of Collateral;
and

 

(xix)                   to the extent not covered by
clauses (i) through (xviii) of this sentence, all other personal property
whether tangible or intangible wherever located; and

 

(xx)                    all Proceeds of any and all
of the foregoing.

 

(b)           The security
interests of Lessor under this Agreement extends to all Collateral of the kind
which is the subject of this Lease which Lessee may acquire at any time during
the continuation of this Lease.

 

(c)           The capitalized
terms used in this Section 10.1 shall have the meanings given to them in the
UCC.

 

Section 10.2         Pledge.  To secure the payment and performance when
due of all of the Obligations, each Obligor (i) hereby grants to Lessor a
continuing first priority security interest in and to all of the right, title
and interest of such Obligor in, to and under the Collateral, (ii) hereby
pledges and deposits with Lessor the Securities owned by such Obligor on the
date hereof, and delivers to Lessor certificates therefor, duly endorsed in
blank in the case of promissory notes and accompanied by undated stock powers
duly executed in blank by such Obligor (and accompanied by any transfer tax
stamps required in connection with the pledge of such Securities) in the case
of capital stock, or such other instruments of transfer as are reasonably
acceptable to Lessor, (iii) hereby collaterally assigns, transfers, hypothecates
and sets over to Lessor all of such Obligor’s right, title and interest in and
to such Securities (and in and to the certificates or instruments evidencing
such Securities and the other Collateral), to be held by Lessor as collateral
security for the Obligations, upon the terms and conditions set forth in this
Lease and (iv) covenants not to issue any new Equity Interests to anyone other
than another Obligor.

 

Section 10.3         Uncertificated
Securities.  Notwithstanding
anything to the contrary, if any Securities (whether now owned or hereafter acquired)
are uncertificated securities, each Obligor shall promptly (and in any event
within ten Business Days) notify Lessor thereof, and shall promptly (and in any
event within ten Business Days) take all actions reasonably required to perfect
the security interest of Lessor under Applicable Law.  Each Obligor further agrees to take such actions as Lessor deems
reasonably necessary or desirable to effect the foregoing (including, without
limitation, causing the issuer of such uncertificated Securities to execute and
deliver to Lessor an acknowledgment of the pledge of such Securities hereunder)
and to permit Lessor to exercise any of its rights and remedies hereunder, and
agrees to provide an opinion of counsel reasonably satisfactory to Lessor with
respect to any such pledge of uncertificated Securities promptly upon the reasonable
request of Lessor.

 

Section 10.4         The
Guaranty.  (a)  The Guarantors hereby jointly and severally
guarantee each as a primary obligor and not as a surety to Lessor and its
successors and assigns the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the principal of and interest
(including any interest, fees, costs or charges that would accrue 

 

15

 

but for the provisions of the bankruptcy code after any bankruptcy or insolvency
petition under the bankruptcy code) on the Obligations, and all owing to Lessor
by Lessee, under this Lease and by any of the Other Collateral Documents, and
all Obligations of Lessee to Lessor, in each case strictly in accordance with
the terms thereof.  The Guarantors
hereby jointly and severally agree that if Lessee shall fail to pay in full
when due (whether at stated maturity, by acceleration or otherwise) or
otherwise perform any of the Obligations, the Guarantors will promptly pay the
same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Obligations, the same
will be promptly paid in full when due (whether at extended maturity, by
acceleration or otherwise) in accordance with the terms of such extension or
renewal.

 

(b)           Obligations Unconditional.  The obligations of the Guarantors under this
Section 10.4 are absolute, irrevocable and unconditional, joint and
several, irrespective of the value, genuineness, validity, regularity or
enforceability of the obligations of Lessee under this Lease or any other
agreement or instrument referred to herein or therein, or any substitution,
release or exchange of any other guarantee of or security for any of the Obligations,
and, to the fullest extent permitted by applicable law, irrespective of any
other circumstance whatsoever that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor (except for payment in
full).  Without limiting the generality
of the foregoing, it is agreed that the occurrence of any one or more of the
following shall not alter or impair the liability of the Guarantors hereunder
which shall remain absolute, irrevocable and unconditional under any and all
circumstances as described above:

 

(i)      at any time or from time to time, without
notice to the Guarantors, the time for any performance of or compliance with
any of the Obligations shall be extended, or such performance or compliance
shall be waived;

 

(ii)     any of the acts mentioned in any of the
provisions of this Lease or any other agreement or instrument referred to
herein or therein shall be done or omitted;

 

(iii)    the maturity of any of the Obligations shall
be accelerated, or any of the Obligations shall be amended in any respect, or
any right under this Lease or any Other Collateral Document or any other
agreement or instrument referred to herein or therein shall be amended or
waived in any respect or any other guarantee of any of the Obligations or any
security therefor shall be released or exchanged in whole or in part or
otherwise dealt with;

 

(iv)    any Lien granted to, or in favor of, Lessor
as security for any of the Obligations shall fail to be perfected or shall fail
to have the priority contemplated by the Lease and the Other Collateral
Documents; or

 

(v)     the release of any other Guarantor.

 

The Guarantors
hereby expressly waive diligence, presentment, demand of payment, protest and
all notices whatsoever, and any requirement that Lessor or Affiliate thereof
exhaust any right, power or remedy or proceed against Lessee under this Lease
or any other agreement or instrument referred to herein or therein, or against
any other Person under any other guarantee of, 

 

16

 

or security for, any of the Obligations.  The Guarantors waive any and all notice of the creation, renewal,
extension, waiver, termination or accrual of any of the Obligations and notice
of or proof of reliance by any Lessor or Affiliate thereof upon this guarantee
or acceptance of this guarantee, and the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this guarantee, and all dealings between Lessee and Lessor or Affiliate
thereof shall likewise be conclusively presumed to have been had or consummated
in reliance upon this guarantee.  This
guarantee shall be construed as a continuing, absolute, irrevocable and
unconditional guarantee of payment without regard to any right of offset with
respect to the Obligations at any time or from time to time held by Lessor or
Affiliate thereof, and the obligations and liabilities of the Guarantors
hereunder shall not be conditioned or contingent upon the pursuit by Lessor or
Affiliate thereof or any other Person at any time of any right or remedy
against Lessee or against any other Person which may be or become liable in
respect of all or any part of the Obligations or against any collateral security
or guarantee therefor or right of offset with respect thereto.  This guarantee shall remain in full force
and effect and be binding in accordance with and to the extent of its terms
upon the Guarantors and the successors and assigns thereof, and shall inure to
the benefit of Lessor, and its successors and assigns, notwithstanding that
from time to time during the term of this Agreement there may be no Obligations
outstanding.

 

(c)           Reinstatement.  The obligations of the Guarantors under this
Section 10.4 shall be automatically reinstated if and to the extent that
for any reason any payment by or on behalf of Lessor in respect of the
Obligations is rescinded or must be otherwise restored by any holder of any of
the Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise.  The
Guarantors jointly and severally agree that they will indemnify Lessor or
Affiliate thereof on demand for all reasonable costs and expenses (including
reasonable fees of counsel) incurred by Lessor or Affiliate thereof in
connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment constituted
a preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law, other than any costs or expenses resulting from the
gross negligence or bad faith of such Person.

 

(d)           Subrogation; Subordination.  Each Guarantor hereby agrees that until the
indefeasible payment and satisfaction in full in cash of all Obligations it
shall not exercise any right or remedy arising by reason of any performance by
it of its guarantee in Section 10.4, whether by subrogation or otherwise,
against Lessee or any other Guarantor of any of the Obligations or any security
for any of the Obligations.  The payment
of any amounts due with respect to any Indebtedness of Lessee or any other
Guarantor now or hereafter owing to any Guarantor by reason of any payment by
such Guarantor under the Guarantee in this Section 10.4 is hereby
subordinated to the prior indefeasible payment in full in cash of the
Obligations.  Each Guarantor agrees that
it will not demand, sue for or otherwise attempt to collect any such
Indebtedness of Lessee to such Guarantor until the Obligations shall have been
indefeasibly paid in full in cash. If, notwithstanding the foregoing sentence,
any Guarantor shall prior to the indefeasible payment in full in cash of the
Obligations collect, enforce or receive any amounts in respect of such
Indebtedness, such amounts shall be collected, enforced and received by such
Guarantor as trustee for Lessor and Affiliates thereof and be paid over to
Lessor on account of 

 

17

 

the
Obligations without affecting in any manner the liability of such Guarantor
under the other provisions of the guarantee contained herein.

 

(e)           Remedies.  The Guarantors jointly and severally agree
that, as between the Guarantors and Lessor, the obligations of Lessee under
this Lease and the Other Collateral Documents may be declared to be forthwith
due and payable as provided in Section 17.1 for purposes of
Section 17.1, notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically
due and payable) as against Lessee and that, in the event of such declaration
(or such obligations being deemed to have become automatically due and
payable), such obligations (whether or not due and payable by Lessee) shall
forthwith become due and payable by the Guarantors for purposes of Section 17.1.

 

(f)            Instrument
for the Payment of Money. 
Each Guarantor hereby acknowledges that the guarantee in this
Section 10.4 constitutes an instrument for the payment of money, and
consents and agrees that Lessor, at its sole option, in the event of a dispute
by such Guarantor in the payment of any moneys due hereunder, shall have the
right to bring a motion-action under New York CPLR Section 3213.

 

(g)           Continuing Guarantee.  The guarantee in this Section 10.4 is a
continuing guarantee, and shall apply to all Obligations whenever arising.

 

(h)           General Limitation on Obligations.  In any action or proceeding involving any
state corporate law, or any state, Federal or foreign bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the
obligations of any Guarantor under Section 10.4 would otherwise be held or
determined to be void, voidable, invalid or unenforceable, or subordinated to
the claims of any other creditors, on account of the amount of its liability
under Section 10.4, then, notwithstanding any other provision to the
contrary, the amount of such liability shall, without any further action by
such Guarantor, Lessor or any other Person, be automatically limited and
reduced to the highest amount that is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding.

 

SECTION 11.             Maintenance and Operation; Compliance with Laws;
Subleases.

 

Section 11.1         Maintenance
and Operation.  Lessee shall
pay or cause its permitted sublessees to pay all costs, expenses, fees and
charges incurred in connection with the use and operation of each Unit.  Lessee shall at all times, at its or its
sublessee’s own expense, maintain or cause to be maintained the Units or cause
the Units to be maintained (i) in good operating and physical condition,
ordinary wear and tear excepted, and (ii) as shall be necessary to maintain
each Unit in compliance with Applicable Law. 
The foregoing undertaking to maintain the Units shall apply regardless
of the cause necessitating repair (whether foreseen or unforeseen) and regardless
of whether Lessee has possession of the Units, and as between Lessor, on the
one hand, and Lessee, on the other hand, all risk of damage to the Units is assumed
by Lessee.  Lessee will acquire and
maintain or cause to be maintained all permits, records, logs and other
materials required by any Governmental Authority having jurisdiction over the
Units required to be maintained in respect of any Unit, all as if Lessee were
the owner of such Units, including without limitation all permits, records,
logs and other materials necessary to authorize construction, operation, repair
and modification of the Units.  Lessor
shall have no responsibility 

 

18

 

for the maintenance and operation of the Units, and shall likewise have
no responsibility to obtain permits or to maintain records required by any
Governmental Authority for the acquisition, construction, operation, repair or
modification of any Unit.

 

Section 11.2         Compliance
with Laws, etc.  (a)  So long as no Lease Event of Default shall
have occurred and be continuing, Lessee may use the Units in the regular course
of its business in any manner which is in compliance with Applicable Law and is
consistent with the purpose for which it was designed.  Lessee will not do or permit any act or
thing which is contrary in any material respect to any Applicable Law.  Lessee shall cause to be obtained and
maintained all permits of, and filings and registrations with, any Governmental
Authority or other Person necessary for the performance by Lessee of its
obligations hereunder or the acquisition, construction, modification, repair,
use or operation of the Units.  Lessee
shall also be responsible at its sole expense to purchase or obtain any
emission reduction credits, emission allowances or offsets required under
environmental law for the acquisition, construction, modification, repair, use
or operation of the Units.

 

(b)           Lessee shall, at its
own sole cost and expense, promptly and duly execute, deliver, file and record
all such documents, statements, filings and registrations, and take such
further actions as Lessor shall from time to time reasonably request in a
manner consistent with commercial practices at the time in order to preserve
and maintain Lessor’s title to and interest in the Units in any applicable
jurisdiction.

 

(c)           Lessee shall use
reasonable precautions to prevent loss or damage to the Units and to prevent
injury to third persons, in a manner consistent with Lessee’s customary
practices with respect to its own property similar to the Units.  Lessee shall cooperate fully with the
reasonable requests of Lessor in the investigation and defense of any claims or
suits arising from the operation of the Units; provided nothing contained
in this paragraph (c) shall be construed as imposing on Lessor any duty to
investigate or defend any such claims or suits or as a waiver of any of Lessee’s
rights and obligations with respect thereto.

 

(d)           Lessee shall keep
according to its customary practice accurate and current records with respect
to the Units.  To the extent Lessee now
or hereafter maintains records with respect to state of repair with respect to
any class of equipment or property included within the Units, Lessee shall also
do so with respect to the Units.

 

(e)           Lessee shall not
suffer to exist any judgment, decree or order of any court or other
Governmental Authority (i) which has or is reasonably likely to have an adverse
effect on any Unit or (ii) which is reasonably likely to interfere with the due
and timely payment by Lessee of any sum payable or the exercise of any of its
rights or the performance of any of its duties or responsibilities (including
without limitation under this Section) under this Lease unless such judgment,
decree or order is the subject of a Permitted Contest.  Lessee shall, on receipt of notice from
Lessor to the effect that any such judgment, decree or order exists, promptly
take such action as may be reasonably necessary to prevent or terminate such
judgment, decree or order.

 

Section 11.3         Sublease.  (a) 
Lessee shall not sublease the Units without the prior written consent of
Lessor, which consent Lessor may grant or withhold in its discretion; provided

 

19

 

no consent of Lessor shall be required with respect to a sublease to an
Affiliate of Lessee.  No sublease shall
relieve Lessee from any of its obligations hereunder.

 

(b)           So long as no Lease
Event of Default has occurred and is continuing, Lessor will not take or
authorize others to take any action contrary to the terms of any permitted sublease
to deprive the sublessee thereunder of the right to peaceful, quiet and
uninterrupted use and enjoyment of the Units so subleased without any
interference, hindrance, ejection or molestation by or from Lessor.

 

SECTION 12.             Modifications and Replacements.

 

Section 12.1         Required
Modifications.  If any
Applicable Law requires that any Unit be altered or modified (a “Required Modification”),
Lessee agrees that it shall, at no cost to Lessor, cause such Required Modification
to be made unless such requirement is then the subject of a Permitted Contest
by Lessee.  Title to any Required
Modification shall immediately vest in Lessor.

 

Section 12.2         Optional
Modifications.  Lessee at
anytime may in its discretion and at its own cost and expense modify, alter or
improve any Unit in a manner which is not required by Section 12.1 (a “Modification”);
provided
no Modification shall diminish the current value and estimated residual value,
utility or remaining useful life of such Unit below the current value and estimated
residual value, utility or remaining useful life thereof immediately prior to
such Modification, other than in a de minimis manner, assuming such Unit was
then in the condition required to be maintained by the terms of this
Lease.  Title to any Non-Severable
Modification shall be immediately vested in Lessor.  Title to any Severable Modification shall remain with Lessee
unless it is a Required Modification, in which case title shall vest in Lessor
pursuant to Section 12.1.  Title to any
Severable Modification on any Unit not removed by Lessee shall pass to Lessor
upon return of such Unit to Lessor.

 

Section 12.3         Removal
of Property; Replacements. 
Lessee may, in the ordinary course of maintenance or repair of any Unit,
remove any item of property constituting a part of such Unit, and, unless the
removal of such item is required by Section 12.1, Lessee shall replace such
item as promptly as practicable with an item of property that is free and clear
of all Liens (and Lessor Liens) and in as good operating condition as, and with
a current value and estimated residual value, utility and useful life at least
equal to, the current value, estimated residual value, utility and useful life
as the item of property being replaced, assuming that such replaced item was in
the condition required to be maintained by the terms of this Lease.  Any item of property removed from such Unit
as provided in the preceding sentence shall remain the property of Lessor free
and clear of all rights of Lessee until replaced in accordance with the terms
of such sentence, but shall then, without further act, become the property of
Lessee.  Any such replacement property
shall, without further act, become the property of Lessor and be deemed part of
such Unit for all purposes.

 

SECTION 13.             Loss, Destruction or Requisition.

 

Section 13.1         Event
of Loss.  If any Units
comprising a material portion of the Lease Equipment shall (a) suffer damage or
contamination which, in Lessee’s reasonable judgment, 

 

20

 

makes repair or modification uneconomic for commercial use,
(b) suffer destruction, or shall suffer theft or, for a period exceeding
three months, or if earlier, the expiration of the Lease, disappearance,
(c) have title thereto taken or appropriated by any Governmental Authority
under the power of eminent domain or otherwise, (d) suffer an actual or
constructive total loss, (e) in the normal course of commerce, have been
prohibited from being used for a continuous period in excess of three months or
if earlier, the expiration of this Lease as a result of any rule, regulation,
order promulgated, or any other action taken, by any United States Governmental
Authority, or (f) be taken or requisitioned for use by any United States
Governmental Authority under the power of eminent domain or otherwise, and such
taking or requisition is for a period that exceeds 12 months or if earlier, the
Basic Term Expiration Date (any such occurrence being hereinafter called an “Event of
Loss”), Lessee, in accordance with the terms of Section 13.2, shall
fully inform Lessor of such Event of Loss.

 

Section 13.2         Replacement
upon Event of Loss.  On the
Rent Payment Date immediately following the occurrence of an Event of Loss,
Lessee shall convey or cause to be conveyed to Lessor a Replacement Unit to be
leased to Lessee hereunder in place of the Unit, such Replacement Unit to be an
identical Unit and free and clear of all Liens (other than Lessor Liens), and
all terms of this Lease will apply to the Replacement Unit as would apply to
the Unit had it not been replaced.

 

Section 13.3         Replacement
of Unit.  For all purposes
hereof, upon passage of title thereto to Lessor, each Replacement Unit shall be
deemed part of the property pursuant to this Lease, and such Replacement Unit
shall be deemed a “Unit” of Equipment as defined herein.  Upon such passage of title, Lessee will
transfer to Lessor, without recourse or warranty (except as to Lessor Liens),
all of Lessee’s right, title and interest in and to the replaced Unit (and shall
execute and deliver to Lessor or its designee such bills of sale and other
documents and instruments as Lessor may reasonably request to evidence such
conveyance).  Lessor shall pay or cause
to be paid all reasonable out-of-pocket costs and expenses (including
reasonable legal fees and expenses) incurred by Lessee in connection with any
replacement pursuant to this Section 13.3.

 

Section 13.4         Eminent
Domain.  If during the Basic
Term the use of any Unit is requisitioned or taken by any Governmental Authority
under the power of eminent domain or otherwise for a period which does not
constitute an Event of Loss, all of Lessee’s obligations under this Lease, including,
without limitation, Lessee’s obligation to pay all installments of Basic Rent,
shall continue for the duration of such requisitioning or taking.  Lessee shall be entitled to receive and
retain for its own account all sums payable for any such period by such
Governmental Authority as compensation for the requisitioning or taking of
possession.

 

SECTION 14.             Insurance.

 

Section 14.1         Insurance
Coverage.  At all times until
the Units are returned to Lessor in accordance with the terms of this Lease,
Lessee shall maintain, at no cost to Lessor, the insurance described on Schedule
14.1.

 

21

 

Section 14.2.           Certificates and Policies.

 

(a)           Certificate of Insurance.  Lessee shall, prior to the Original
Effective Date, furnish Lessor with a certificate signed by the insurer or an
independent insurance broker showing the insurance then maintained by Lessee
pursuant to Section 14.1 and that all premiums thereon have been timely paid
and any financing thereof is current, or other evidence of maintenance of the
insurance required hereunder satisfactory to Lessor and, with respect to any
renewal policy or policies, shall furnish certificates or binders evidencing
such renewal as soon as practicable (and in any event no later than ten days
prior to the stated expiration date of the policies then in effect).  Such certificate shall designate Lessee as
the insured entity and Lessor as an additional insured entity and as a payee
for any insurable loss.

 

(b)           Policy Provisions.  All insurance policies required to be
maintained pursuant to Section 14.1 shall (and Lessee shall so request of each
insurer) (i) provide that the interests of Lessor shall not be invalidated
by any action or inaction by Lessee or any other Person (other than Lessor),
(ii) insure Lessor regardless of any breach or violation by Lessee or any
other Person (other than Lessor) of any warranties, declarations or conditions
in such polices, (iii) provide that Lessor will be furnished with at least
30 days prior written notice of any cancellation prior to expiration of
coverage, (iv) provide that such insurance is primary without any right of
contribution form any other insurance carried by Lessor or any of its
Affiliates and shall expressly provide that all provisions, except the limits
of liability, shall operate in the same manner as if there were a separate
policy covering each such additional insured, (v) provide that the
insurers waive any rights of setoff, recoupment, counterclaim, deduction, or
subrogation against Lessor, and (vi) acknowledge that any obligation
imposed on Lessee (including, without limitation, the liability to pay
premiums, calls, commissions or assessments) shall be the sole obligation of
Lessee and not the obligation of Lessor.

 

Section 14.3         Additional
Insurance.  If Lessee shall
fail to cause to be maintained the insurance as provided in Section 14.1,
Lessor may at its option, upon ten days’ prior written notice to Lessee,
acquire such insurance and, in such event, Lessee shall, upon demand from time
to time, reimburse Lessor for the cost thereof together with interest from the
date of payment thereof, on the amount of the cost to Lessor of such insurance
which Lessee shall have failed to maintain, at the applicable Late Rate.  In addition, at any time Lessor may at its
own expense carry insurance with respect to its interest in the Units.  Any insurance payments received from
policies maintained by Lessor pursuant to the preceding sentence shall be
retained by Lessor without reducing or otherwise affecting Lessee’s obligations
hereunder.

 

SECTION 15.             Inspection.

 

Lessor shall
have the right, but not the obligation, at its sole cost and expense, by its authorized
representatives, to inspect any Units and Lessee’s maintenance records with respect
to the Units.  No inspection pursuant to
this Section 15 shall interfere with the use, operation or maintenance of the
Units or the normal conduct of Lessee’s business.

 

22

 

SECTION 16.             Lease Events of Default.

 

The following
events shall constitute Lease Events of Default hereunder (whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority) and each such Lease Event of Default shall be deemed to exist and
continue so long as, but only as long as, it shall not have been remedied:

 

(a)           Subject
to Section 6.2, Lessee shall fail to make any payment of Basic Rent to be paid
by Lessee for any Units pursuant to this Lease within five days after the same
shall have become due; or

 

(b)           Lessee
shall fail to (i) make any payment of any Supplemental Rent (excluding
Supplemental Rent covered by clause (a) preceding) to be paid by Lessee pursuant
to this Lease after the same shall have become due and such failure shall continue
unremedied for ten days after receipt by Lessee of the original demand therefor
from Lessor, or (ii) pay the Prior Accrued Balance along with any accrued and
unpaid interest thereon upon the Basic Term Expiration Date; or

 

(c)           any
representation or warranty made by Lessee in this Lease is untrue or incorrect
in any material respect as of the date of making thereof and such untruth or incorrectness
shall be material and unremedied for a period of 30 days after receipt by Lessee
of written notice thereof from Lessor; or

 

(d)           Lessee
shall (i) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect, or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or (ii) consent to any such relief or to the appointment of or
taking possession by any such official in any voluntary case or other
proceeding commenced against it, or (iii) admit in writing its inability
to pay its debts generally as they come due, or (iv) make a general
assignment for the benefit of creditors; or

 

(e)           an
involuntary case or other proceeding shall be commenced against Lessee seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect, or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its property,
and such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or

 

(f)            Lessee
shall fail to observe or perform in any material respect any other covenants or
agreements to be observed or performed by Lessee under this Lease and such
failure shall continue unremedied for 30 days after notice from Lessor to
Lessee, specifying the failure and demanding the same to be remedied; or

 

(g)           Lessee
has failed, after the expiration of any applicable notice or cure period or
both, to make one or more payments due or has otherwise defaulted on any 

 

23

 

indebtedness for borrowed
money, which failure or default relates to Indebtedness in aggregate principal
amount (or a sum of payments) in excess of $500,000; or

 

(h)           a
Change of Control of Lessee occurs; or

 

(i)            Lessee
sells or disposes of all, or substantially all, of its assets; or

 

(j)            Lessee
allows any Liens (other than Permitted Liens); or

 

(k)           except
in connection with the Restructuring, Lessee makes any dividend payment to any
common stockholder or repurchases or redeems any of its outstanding equity; or

 

(l)            any
provision of Section 10 or the Collateral and Guarantee Requirement shall cease
to be in full force and effect or any Guarantor shall disaffirm its obligation
hereunder.

 

SECTION 17.             Remedies and Certain Covenants.

 

Section 17.1         Remedies.  Upon the occurrence of any Lease Event of Default
and at any time thereafter so long as the same shall be continuing, Lessor may,
at its option, declare this Lease and each other Lease entered into pursuant to
this Lease to be in default by a written notice to Lessee (except that this
Lease and such other Leases shall, without any action on the part of Lessor, be
automatically deemed to have been declared in default upon the occurrence of a
Lease Event of Default described in Section 16(d) or (e)); and at any time
thereafter, unless Lessee shall have remedied all outstanding Lease Events of
Default prior to the commencement of the exercise by Lessor of any of its
remedies hereunder, Lessor may do one or more of the following as Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to compliance
with any mandatory requirements of, Applicable Law then in effect:

 

(a)           proceed
by appropriate court action or actions, either at law or in equity, to enforce
performance by Lessee of the applicable covenants of this Lease or to recover
damages for the breach thereof;

 

(b)           by
notice in writing to Lessee, cancel this Lease, whereupon all rights of Lessee
and any sublessee to the possession and use of the Units shall absolutely cease
and terminate as though this Lease and such sublease had never been made, but
Lessee shall remain liable as hereinafter provided; and thereupon, Lessor may
demand that Lessee, and Lessee shall, upon written demand of Lessor and at no
cost to Lessor, forthwith return physical possession of and/or all of Lessee’s
rights to control all or any part of the Units in the manner and condition
required by, and otherwise in accordance with all of the provisions in Section
9; or Lessor with or without notice or judicial process may by its agents enter
upon the premises where any of the Units at the time may be located and take
possession of and remove all or any of the Units, and Lessor may use and employ
in connection with such removal any services, aids, equipment, trackage and
other facilities as is reasonably required to remove such Units and thenceforth
hold, 

 

24

 

possess and enjoy the same free
from any right of Lessee to use such Units for any purpose whatever;

 

(c)           sell
any Unit at public or private sale by such advertisement or publication, if
any, as Lessor may determine, free and clear of any rights of Lessee and
without any duty to account to Lessee with respect to such sale or for the
proceeds thereof;

 

(d)           hold,
keep idle or lease to others any Unit as Lessor in its sole discretion may determine,
free and clear of any rights of Lessee;

 

(e)           whether
or not Lessor shall have exercised, or shall thereafter at any time exercise,
any of its rights under clause (a), (b), (c) or (d) above with respect to any
Unit, Lessor, by written notice to Lessee specifying a payment date, which
shall be not earlier than ten days after the date of such notice, may declare
the Basic Term Expiration Date to have occurred and demand that Lessee pay to
Lessor, and Lessee shall pay or cause to be paid to Lessor, on the payment date
specified in such notice, as liquidated damages for loss of a bargain and not
as a penalty (in lieu of the Basic Rent for such Unit attributable to the
period after the payment date specified in such notice), all accrued and unpaid
Obligations, including, without limitation, the Prior Accrued Balance, plus
whichever of the following amounts Lessor, in its sole discretion, shall
specify in such notice:  (i) an amount
with respect to each such Unit which represents the excess of the present
value, at the time of such payment date, of all rentals for such Unit which
would otherwise have accrued hereunder from such payment date for the remainder
of the Basic Term over the then present value of the then Fair Market Rental
Value of such Unit (taking into account its actual condition) for such period,
such present value to be computed in each case on a basis of a per annum
discount at 12%, compounded on the same periodic basis that Basic Rent is due
under this Lease from the respective dates upon which rentals would have been
payable hereunder had this Lease not been terminated; or (ii) if Lessor
shall not have sold such Unit pursuant to the exercise of its rights under clause
(c) above with respect to such Unit, an amount equal to the present value, at
the time of such payment date, of all rentals for such Unit which would
otherwise have accrued hereunder from such payment date for the remainder of
the Basic Term, such present value to be computed on a basis of a per annum
discount at 12%, compounded on the same periodic basis that Basic Rent is due
under this Lease from the respective dates upon which rentals would have been
payable hereunder had this Lease not been terminated, plus the Fair Market
Sales Value of such Unit (assuming it is in the condition required by this
Lease) as of the payment date specified in such notice, and upon payment by
Lessee pursuant to this clause (ii) and of all other amounts payable by Lessee
under this Lease and under this Lease in respect of such Unit, Lessor shall
transfer “as-is,” “where-is,” “with all faults,” without recourse or warranty except
as to the absence of any Lessor Lien, all right, title and interest of Lessor
in and to such Unit to Lessee or its designee, and Lessor shall execute and
deliver such instruments or documents evidencing such transfer, including a
bill of sale, as Lessee shall reasonably request, and the obligation of Lessee
to pay Basic Rent for such Unit under the Lease shall cease and the Basic Term
for such Unit shall end;

 

25

 

(f)            if
Lessor shall have sold any Unit pursuant to paragraph (c) above, Lessor, in
lieu of exercising its rights under paragraph (e) above with respect to such
Unit, may, if it shall so elect, demand that Lessee pay to Lessor, and Lessee
shall pay to Lessor, as liquidated damages for loss of a bargain and not as a
penalty, any accrued and unpaid Obligations for such Unit as of the date of such
sale and, if that date is a Rent Payment Date, the Basic Rent due on that date,
plus, the amount, if any, by which the sum of (i) all rentals for such Unit
which would otherwise have accrued hereunder, and (ii) the Fair Market Sales
Value of such Unit (assuming it is in the condition required by this Lease),
both computed as of the Rent Payment Date next preceding the date of such sale
or, if such sale occurs on a Rent Payment Date, then computed as of such Rent
Payment Date, exceeds the net proceeds of such sale; and

 

(g)           Lessor
may terminate the leasing of any or all Units under this Lease and/or declare
the Basic Term Expiration Date to have occurred, or may exercise any other
right or remedy that may be available to it under applicable law.

 

In addition,
Lessee shall be liable, except as otherwise provided above, for any and all
unpaid Obligations attributable to the period before the exercise of any of the
foregoing remedies and for legal fees and other costs and expenses incurred by
reason of the occurrence of any Lease Event of Default or the exercise of
Lessor’s remedies with respect thereto, including without limitation the
repayment in full of any costs and expenses necessary to be expended in
repairing any Unit in order to cause it to be in compliance with all
maintenance and regulatory standards imposed by this Lease.

 

Section 17.2         Cumulative
Remedies.  The remedies
expressly set forth in this Lease in favor of Lessor shall not be deemed
exclusive, but shall be cumulative and shall be in addition to all other
remedies in its favor existing at law or in equity.  Lessee hereby waives any mandatory requirements of law, now or
hereafter in effect, which might limit or modify any of the remedies herein
provided, to the extent that such waiver is permitted by law.  Lessee hereby waives any and all existing or
future claims of any right to assert any offset or counterclaim against the
Obligations due hereunder, and agrees to make the Obligations payments regardless
of any offset or counterclaim or claim which may be asserted by Lessee on its
behalf in connection with the lease of the Units.  To the extent permitted by applicable law, Lessee hereby waives
any rights now or hereafter conferred by statute or otherwise that may require
Lessor to sell, lease or otherwise use the Units in mitigation of Lessor’s damages
as set forth in Section 17.1 or that may otherwise limit or modify any of
Lessor’s rights and remedies provided in this Section 17.2.

 

Section 17.3         No
Waiver.  No delay or omission
to exercise any right, power or remedy accruing to Lessor upon any breach or
default occurring under this Lease shall impair any such right, power or remedy
of Lessor, nor shall any such delay or omission be construed as a waiver of any
breach or default, or of any similar breach or default hereafter occurring; nor
shall any waiver of a single breach or default be deemed a waiver of any
subsequent breach or default.

 

Section 17.4         Notice
of Lease Default.  Lessee
agrees to furnish to Lessor, promptly upon any executive officer of Lessee
acquiring actual knowledge thereof, written notice of any condition which
constituted or constitutes a Lease Default under this Lease, describing such condition
and the nature and status thereof.

 

26

 

Section 17.5         Lessee’s
Duty to Return Equipment upon Default.  If Lessor shall terminate the leasing of any or all Units
pursuant to this Section 17 and shall have provided to Lessee the written
demand specified in Section 17.1(b) with respect to such Units, Lessee shall
forthwith deliver possession of and return such Units to Lessor in accordance
with Section 9.1 (except where Lessor has received all amounts payable by
Lessee pursuant to any notice provided by Lessor under Section
17.1(e)(ii)).  All Units returned shall
be in the condition required by Sections 9.1 and 9.2.

 

Section 17.6         Specific
Performance; Lessor Appointed Lessee’s Agent.  The obligations of Lessee pursuant to Section
17.5 to comply with the requirements of Sections 9.1 and 9.2 are of the essence
of this Lease and, upon application to any court of equity having jurisdiction
in the premises, Lessor shall be entitled to a decree against Lessee requiring
specific performance of such obligations. 
Without in any way limiting the obligation of Lessee under the
provisions of Section 17.5, Lessee hereby irrevocably appoints Lessor as the
agent and attorney of Lessee, with full power and authority, at any time while
Lessee is obligated to deliver possession of any Units to Lessor pursuant to
this Section 17.6, to demand and take possession of such Unit in the name and
on behalf of Lessee from whosoever shall be at the time in possession of such
Unit.

 

SECTION 18.             Lessee’s Indemnities.

 

Section 18.1.           Taxes.

 

(a)           Payment of Taxes:  Lessee covenants and agrees to pay to the
appropriate taxing authority other than as provided in Section 6.5, and
discharge before the same become delinquent, all taxes, fees, or other charges
of any nature whatsoever, without pro-ration, together with any related interest
or penalties (“Impositions”) now or hereafter imposed, assessed or payable
during the term of the Lease including any extension thereof (including any
holdover) (or an Imposition relating to a record date or status date that fell
within the term of the Lease including any extension thereof or is otherwise
associated with Lessee’s leasing, possession or use of the Lease Equipment)
against Lessor, Lessee or the Lease Equipment by any Federal, state, county or
local government or taxing authority upon or with respect to (i) the Lease
Equipment or any Unit, (ii) upon the leasing, ordering, purchase, sale,
ownership, use, operation, return or other disposition thereof, (iii) the
Obligations, or (iv) the leasing of the Lease Equipment, excepting only
federal, state and local taxes measured by the Net Income of Lessor or any franchise
tax upon Lessor measured by Lessor’s capital, capital stock or net worth.  Because the payment due date or
reimbursement date for an Imposition may occur after the expiration or termination
of the term of this Lease, it is understood and agreed that Lessee’s liability
for such Impositions shall survive the expiration or termination of the term of
this Lease.

 

(b)           Billing. 
Lessee shall, to the extent permitted by law, cause all Impositions
to be billed to Lessee.  Lessee shall,
at its expense, timely file all forms and returns and timely do all things
required to be done in connection with the levy, assessment and payment of any
impositions, and Lessor hereby appoints Lessee as Lessor’s attorney-in-fact
where necessary for such purposes. 
Lessee shall submit written evidence to Lessor of the payment of all
Impositions required to be paid by Lessee hereunder promptly after such
payment.  Notwithstanding the foregoing,
Lessor in its sole discretion, may pay any Imposition itself or file any forms
or returns 

 

27

 

with respect
thereto.  If Lessor pays any Imposition,
Lessee shall, when billed, reimburse Lessor for such payment.

 

(c)           Contest.  Lessee may contest any Imposition by appropriate
legal proceedings; provided the nonpayment of such Imposition
thereof, or such proceedings, will not, in the opinion of counsel for Lessor,
adversely affect the title, property interest or rights of Lessor in the Lease
Equipment; and provided  further that, if requested by Lessor,
Lessee has given to Lessor security, sufficient in form and amount in Lessor’s
reasonable judgment, to fully satisfy the amount of the contested Imposition.

 

Section 18.2.           General Indemnification and Waiver of
Certain Claims.

 

(a)           Claims Defined.  For the purposes of this Section 18.2, the
term “Claims”
shall mean any and all costs, expense, liabilities, obligations, losses,
damages, penalties, actions or suits or claims of whatsoever kind or nature
(whether or not on the basis of negligence, strict or absolute liability or
liability in tort) which may be imposed on, incurred by, suffered by, or asserted
against an Indemnified Person, as defined herein, or any Unit and, except as
otherwise expressly provided in this Section 18.2, shall include, but not be
limited to, all reasonable out-of-pocket costs, disbursements and expenses
(including legal fees and expenses) paid or incurred by an Indemnified Person
in connection therewith or related thereto. 
“Claims” shall include all Claims brought by or on behalf of any Person,
including but not limited to officers, employees, agents, independent
contractors, employees of independent contractors, parents, subsidiaries and
affiliates of Lessee.

 

(b)           Indemnified Person Defined.  For the purposes of this Section 18.2, “Indemnified
Person” means Lessor and its partners, officers, employees,
successors and permitted assigns, agents and servants.

 

(c)           Claims Indemnified.  Lessee agrees to indemnify, protect, defend
and hold harmless each Indemnified Person on an After-Tax Basis against Claims
directly or indirectly resulting from or arising out of or alleged to result
from or arise out of (whether or not such Indemnified Person shall be indemnified
as to such Claim by any other Person):

 

(i)                                     this Lease or any
of the transactions contemplated hereby or any Unit or the ownership, lease,
operation, possession, modification, improvement, abandonment, use, non-use,
maintenance, sublease, substitution, control, repair, rebuild, refurbishment,
storage, alteration, transfer or other application or disposition, return,
overhaul, testing, servicing, replacement, permitting or registration or any
other authorization by a Governmental Authority of any Unit (including, without
limitation, injury, death or property damage of passengers, shippers or others,
and environmental control, noise and pollution regulations, or the discharge,
spillage, release or escape of Hazardous Substances or damage to the environment
(including, without limitation, clean-up costs, response costs, costs of
corrective actions and natural resource damages) whether assessed by any Governmental
Authority or any other Person) whether or not in compliance with the terms of
this Lease, or by any of the commodities, items or materials from time to time
utilized in or processed though any Unit, whether or not in 

 

28

 

compliance with the terms of this Lease, or
by the inadequacy of any Unit or deficiency or defect in any Unit or by any
other circumstances in connection with any Unit, or by the performance of any
Unit or any risks relating thereto, or by any interruption of service, loss of
business or anticipated profits or consequential damages;

 

(ii)                                  the acquisition,
construction, manufacture, financing, refinancing, design, purchase,
acceptance, rejection, delivery, non-delivery or condition of any Unit (including,
without limitation, latent and other defects, whether or not discoverable, and
any claim for patent, trademark or copyright infringement);

 

(iii)                               any act or omission
(whether negligent or otherwise) or any breach of or failure to perform or
observe, or any other non-compliance with, any covenant, condition or agreement
to be performed by, or other obligation of, Lessee under this Lease, or the
falsity of any representation or warranty of Lessee in this Lease or in any
document or certificate delivered in connection therewith; or

 

(iv)                              any violation of law,
rule, regulation or order by Lessee or any sublessee or their respective
directors, officers, employees, agents or servants.

 

(d)           Insured Claims.  In the case of any Claim indemnified by
Lessee hereunder which is covered by a policy of insurance maintained by Lessee
pursuant to this Lease or otherwise, each Indemnified Person agrees to provide
reasonable cooperation to the insurers in the exercise of their rights to
investigate, defend or compromise such Claim as may be required to retain the
benefits of such insurance with respect to such Claim.

 

(e)           Claims Procedure.  An Indemnified Person shall, after obtaining
knowledge thereof, promptly notify Lessee of any Claim as to which
indemnification is sought; provided the failure to give such notice
shall not release Lessee from any of its obligations under this Section 18.2,
except to the extent that failure to give notice of any action, suit or
proceeding against such Indemnified Person shall have a material adverse affect
on Lessee’s ability to defend such Claim or recover proceeds under any
insurance policies maintained by Lessee hereunder.  Lessee shall, after obtaining knowledge thereof, promptly notify
each Indemnified Person of any indemnified Claim affecting such person.  Subject to the provisions of the following
paragraph, Lessee shall at its sole cost and expense be entitled to control,
and shall assume full responsibility for, the defense of such claim or
liability; provided
Lessee shall keep the Indemnified Person which is the subject of such
proceeding fully apprised of the status of such proceeding and shall provide
such Indemnified Person with all information with respect to such proceeding as
such indemnified Person shall reasonably request.  Upon the request of Lessee, the Indemnified Person which is the
subject of any Claim will cooperate in all reasonable respects, at no expense
to such Indemnified Person, in the defense thereof.

 

Notwithstanding
any of the foregoing to the contrary, Lessee shall not be entitled to control
and assume responsibility for the defense of such claim or liability if (i) a
Lease Event of Default shall have occurred and be continuing, (ii) such
proceeding will involve any material danger of the sale, forfeiture or loss of,
or the creation of any Lien (other than any Lien which is adequately bonded to
the satisfaction of such Indemnified Person) on any Unit, (iii) the amounts 

 

29

 

involved, in the good faith opinion of such Indemnified Person, are
likely to have a materially adverse effect on the business of such Indemnified
Person other than the ownership, leasing and financing of the Units, (iv) in
the good faith opinion of such Indemnified Person, there exists an actual or
potential conflict of interest such that it is advisable for such Indemnified Person
to retain control of such proceeding or (v) such claim or liability involves
the possibility of criminal sanctions or liability to such Indemnified
Person.  In the circumstances described
in clauses (i) - (v) above, the Indemnified Person shall be entitled to control
and assume responsibility for the defense of such claim or liability at the
expense of Lessee.  In addition, any
Indemnified Person may participate in any proceeding controlled by Lessee
pursuant to this Section 18.2, at its own expense, in respect of any such
proceeding as to which Lessee shall have acknowledged in writing its obligation
to indemnify the Indemnified Person pursuant to this Section 18.2, and at the
expense of Lessee in respect of any such proceeding as to which Lessee shall not
have so acknowledged its obligation to the Indemnified Person pursuant to this
Section 18.2.  Lessee may in any event
participate in all such proceedings at its own cost.  Nothing contained in this Section 18.2 shall be deemed to require
an Indemnified Person to contest any Claim or to assume responsibility for or
control of any judicial proceeding with respect thereto.

 

(f)            Subrogation.  If a Claim indemnified by Lessee under this
Section 18.2 is paid in full by Lessee and/or an insurer under a policy of
insurance maintained by Lessee, Lessee and/or such insurer, as the case may be,
shall be subrogated to the extent of such payment to the rights and remedies of
the Indemnified Person (other than under insurance policies maintained by such
Indemnified Person) on whose behalf such Claim was paid with respect to the
transaction or event giving rise to such Claim.  So long as no Lease Event of Default shall have occurred and be
continuing, should an Indemnified Person receive any refund, in whole or in
part, with respect to any Claim paid by Lessee hereunder, it shall promptly pay
over the amount reflected (but not in excess of the amount Lessee or any of its
insurers has paid) to Lessee.

 

(g)           Waiver of Stay, Extension or Usury
Laws.  Lessee covenants (to
the extent that it may lawfully do so) that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law that would prohibit
or forgive it from performing its obligations as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Lease so long as the Late Rate remains 18%
or such lesser amount equal to the maximum amount allowable by Applicable Law;
but will suffer and permit the execution of every such power as though no such
law had been enacted.

 

(h)           EXPRESS NEGLIGENCE.  THE INDEMNIFICATION OBLIGATIONS UNDER AND
THE PROVISIONS OF THIS SECTION 18.2 SHALL APPLY NOTWITHSTANDING THE SOLE, JOINT
OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANY INDEMNIFIED
PERSON.

 

SECTION 19.             Further Assurances.

 

Lessee will
duly execute and deliver to Lessor such further documents and assurances and
take such further action as Lessor may from time to time reasonably request or
as may be required by applicable law or regulation in order to effectively
carry out the intent and purpose of this Lease and to preserve and maintain the
rights and remedies created or intended to be created 

 

30

 

in favor of Lessor hereunder, including, without limitation, the
execution and delivery of supplements or amendments hereto, subjecting to this
Lease any Replacement Unit and, if required to maintain title to the Units in
Lessor, the recording or filing of counterparts hereof or thereof in accordance
with the laws of any jurisdiction as Lessor may from time to time deem
advisable, in each case the cost thereof to be borne and paid by Lessee.

 

SECTION 20.             Lessor’s Right to Perform.

 

If a Lease
Default or Lease Event of Default shall have occurred and be continuing and
Lessee fails to make any payment required to be made by it hereunder or fails
to perform or comply with any of its other agreements contained herein, Lessor
may itself make such payment or perform or comply with such agreement, after
giving not less than five days’ prior notice thereof to Lessee, but shall not
be obligated hereunder to do so, and the amount of such payment and of the reasonable
expenses of Lessor incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with a fee
thereon at the Late Rate from such date of payment, to the extent permitted by
applicable law, shall be deemed to be Supplemental Rent, payable by Lessee to
Lessor on demand.

 

SECTION 21.             Assignment.

 

Section 21.1         Assignment
by Lessor.  This Lease and/or
the Obligations due to Lessor thereunder may be assigned by such Lessor and, if
so assigned, the assignee shall have and be entitled to exercise specifically
assigned rights and specifically assigned powers of Lessor hereunder, but the
assignee shall not be chargeable with any obligations or liabilities of Lessor
hereunder or in respect hereof.  Lessee
will make all claims concerning the Units to the manufacturer or supplier of
such Units and not with or against Lessor’s assignee hereunder, and Lessor’s
assignee shall have no liability or obligation arising out of any such claim
and Lessee covenants that it will not assert against any assignee of Lessor any
defense, counterclaim or offset on account of breach of warranty or otherwise
including in any action for payment of Rent or other amounts due hereunder or
for possession of the Units brought by any assignee of Lessor.  Any payment of Rent or other payment by
Lessee to such assignee shall be in full satisfaction of Lessee’s obligation to
make such payment under this Lease, but Lessee shall be under no obligation to
make any payment to any such assignee until Lessor shall give Lessee written
notice to make such payment to such assignee. 
In the event of any assignment or grant of a Lien by Lessor, promptly
following request Lessee shall execute and deliver to Lessor an Acknowledgment
Agreement substantially in the form of Exhibit B.

 

Section 21.2         Assignment
by Lessee.  LESSEE WILL NOT,
WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR (WHICH CONSENT MAY BE WITHHELD BY
LESSOR IN ITS SOLE DISCRETION), ASSIGN ANY OF ITS RIGHTS OR OBLIGATIONS
HEREUNDER.  UNLESS EXPRESSLY AGREED IN
WRITING BY LESSOR, NO SUCH ASSIGNMENT CONSENTED TO BY LESSEE SHALL RELIEVE
LESSEE OF ITS OBLIGATIONS HEREUNDER; RATHER, LESSEE SHALL BE JOINTLY AND
SEVERALLY LIABLE WITH SUCH ASSIGNEE FOR THE OBLIGATIONS OF THE “LESSEE” UNDER
THIS LEASE.

 

31

 

Section 21.3         Sublessee’s
Performance and Rights.  Any
obligation imposed on Lessee in this Lease shall require only that Lessee
perform or cause to be performed such obligation, even if stated herein as a
direct obligation, and the performance of any such obligation by any permitted
assignee or sublessee under an assignment or sublease then in effect and permitted
by the terms of this Lease shall constitute performance by Lessee and discharge
of such obligation by Lessee.

 

SECTION 22.             Net Lease, Etc.

 

This Lease is
a net lease and Lessee’s obligation to pay all Obligations and other amounts
payable pursuant to the terms and provisions hereof shall be absolute,
unconditional and irrevocable and shall not be affected by any circumstance of
any character including, without limitation, (a) any set-off, abatement,
counterclaim, suspension, recoupment, reduction, rescission, defense or other
right that Lessee may have against Lessor, any Affiliate of Lessor, any vendor
or manufacturer of any Unit, or any other Person for any reason whatsoever,
(b) any defect in or failure of title, merchantability, condition, design,
compliance with specifications, operation or fitness for use of all or any part
of any Unit, (c) any damage to, or removal, abandonment, requisition, taking,
condemnation, loss, theft or destruction of all or any part of any Unit or any
interference, interruption, restriction, curtailment or cessation in the use or
possession of any Unit by Lessee or any other Person for any reason whatsoever
or of whatever duration, (d) any insolvency, bankruptcy, reorganization or
similar proceeding by or against Lessee, Lessor or any other Person,
(e) the invalidity, illegality or unenforceability of this Lease or any
other instrument referred to herein or therein or any other infirmity herein or
therein or any lack of right, power or authority of Lessee or Lessor, or any
other Person to enter into this Lease or to perform the obligations hereunder
or thereunder or consummate the transactions contemplated hereby or thereby or
any doctrine of force majeure, impossibility, frustration or failure of
consideration, (f) the breach or failure of any warranty or representation
made in this Lease by Lessee or Lessor or any other Person, (g) the
requisitioning, seizure or other taking of title to or use of such Unit by any
government or Governmental Authority or otherwise, whether or not by reason of
any act or omission of Lessor or Lessee, or any other deprivation or limitation
of use of such Unit in any respect or for any length of time, whether or not
resulting from accident and whether or not without fault on the part of Lessee,
(h) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing, any present or future law to the contrary
notwithstanding to the extent permitted by Applicable Law; provided nothing contained
in this Section 22 shall prevent Lessee from bringing an action for damages
suffered by Lessee as a result of the breach by any Person of any obligation
owed by it to Lessee or for equitable relief to obtain compliance with such obligation.  To the extent permitted by Applicable Law,
Lessee hereby waives any and all rights which it may now have or which at any
time hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease with respect to any Unit, except in
accordance with the express terms hereof. 
Each payment of Rent and any other amounts made by Lessee hereunder shall
be final and Lessee shall not seek or have any right to recover all or any part
of such payment from Lessor or any Person for any reason whatsoever except as expressly
provided herein.  Nothing contained
herein shall be construed to alter Lessee’s obligations (and the limitations
thereon) with respect to Taxes, indemnification for which is provided in
Section 18 or to waive any claim which Lessee might have under this Lease or
otherwise or to limit the right of Lessee to make 

 

32

 

any claim it might have against Lessor or any other Person or to pursue
such claim in such manner as Lessee shall deem appropriate, except in the
manners precluded by this Section 22.

 

SECTION 23.             Notices.

 

Unless
otherwise expressly specified or permitted by the terms hereof, all communications
and notices provided for herein shall be in writing or by facsimile capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, without limitation, by overnight mail or
courier service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof or
(c) in the case of notice by such facsimile, upon confirmation of receipt
thereof, provided
such transmission is promptly further confirmed in writing by either of the
methods set forth in clause (a) or (b), in each case addressed to Lessor or
Lessee (as applicable) at its respective address set forth below or such other
address as such Person may from time to time designate by written notice to the
other Person;

 

If to Lessor:

 

GeoLease
Partners, L.P.

c/o CSFB Private Equity, Inc

Eleven Madison Avenue

New York, New York  10010

Attention:  General Counsel

Telecopy:  (212) 892-7551

 

with a copy to:

 

Cahill Gordon
& Reindel

80 Pine Street

New York, New York  10005

Attention:  John Schuster, Esq.

Telecopy:  (212) 269-5420

 

If to Lessee:

 

Geokinetics
Inc.

One Riverway, Suite 2100

Houston, Texas  77056

Attention:  Chief Financial Officer

Telecopy:  (713) 850-7330

 

33

 

with a copy to:

 

Chamberlain,
Hrdlicka, White, Williams & Martin

1200 Smith Street, Suite 1400

Houston, Texas  77002-4310

Attention:  James J. Spring, III, Esq.

Telecopy:  (713) 658-2553

 

SECTION 24.             Purchase Options.

 

Section 24.1         Election
to Retain or Return Equipment at End of Basic Term.  Not less than 90 days prior to the end of
the Basic Term, Lessee shall give Lessor irrevocable written notice of its
decision to return or retain all of the Units at the end of the Basic
Term.  If Lessee fails to timely give
the notice required by this Section 24.1, Lessee shall be deemed to have
irrevocably elected to return all of the Units at the end of the Basic
Term.  Any notice given by Lessee
pursuant to this Section 24.1 shall be irrevocable.

 

Section 24.2         Purchase
Option.  Provided that no
Lease Default or Lease Event of Default shall have occurred and be continuing
either at the time of notice pursuant to Section 24.1 or the expiration of the
Basic Term (unless Lessor shall have waived such Lease Event of Default or
Lease Default solely for the purpose of this Section 24.2) and Lessee shall
have duly given the notice required by Section 24.1, Lessee shall have the
right and, upon the timely giving of such notice or the failure to timely give
such notice under Section 24.1, the obligation to purchase all of the Units at
the expiration of the Basic Term at a price equal to the Fair Market Sales
Value of the Units as of the Basic Term Expiration Date.  Payment of the purchase price, together with
all other amounts due and owing by Lessee under this Lease, shall be made at
the place of payment specified in Section 6.4 in immediately available funds
against delivery of a bill of sale transferring and assigning to Lessee all
right, title and interest of Lessor in and to such Units on an “as-is,
where-is, with all faults” basis and without recourse or warranty except
against Lessor Liens.  Lessor shall
deliver such other documents or releases as Lessee reasonably requests.  Lessor shall not be required to make any
other representation or warranty as to the condition of such Units or any other
matters, and may specifically disclaim any such representations or warranties.

 

SECTION 25.             Miscellaneous.

 

Section 25.1         Merger
Covenant.  Lessee shall not
consolidate with or merge into any other Person, or permit any other Person to
merge into it, or convey, transfer or lease substantially all of its assets as
an entirety to any Person unless (i) the Person formed by such consolidation
or surviving such merger (if other than Lessee) or the Person that acquires by
conveyance, transfer or lease substantially all of the assets of Lessee, as an
entirety (the “Successor Entity”), shall execute and deliver to Lessor an
agreement containing the assumption by such Successor Entity of the due and
punctual performance and observance of each covenant and condition of this
Lease to be performed or observed by Lessee, (ii) immediately prior to and
immediately after giving effect to such transaction, no Lease Default or Lease
Event of Default shall have occurred, whether as a result of such consolidation
or merger or such conveyance, transfer or lease or otherwise, (iii) Lessee
shall have made all filings necessary or appropriate in 

 

34

 

the reasonable opinion of Lessor in order to preserve and protect the
rights of Lessor under this Lease, (iv) the financial condition of the
Successor Entity immediately after the consummation of such consolidation,
merger or other transaction is equal to or greater than the financial condition
of Lessee immediately prior thereto, and (v) there shall have been
delivered to Lessor an officer’s certificate of the Successor Entity, and an
opinion of counsel (which may be such Persons’ in-house counsel) in form and
substance reasonably satisfactory to Lessor, each stating that such
consolidation, merger or other transaction mentioned in clause (i) above comply
with this Section 25.1 (except that such opinion of counsel shall not be
required to address clause (iv) above). 
Upon consummation of such consolidation, merger or other transaction,
the Successor Entity shall succeed to, and be substituted for, and may exercise
every right and power of, Lessee under this Lease with the same effect as if
such Successor Entity had been named as Lessee herein.

 

Section 25.2         No
Impairment of Warranties. 
From and after the Original Effective Date and throughout the Basic
Term, Lessee shall not take any action (or fail to take any action) if the result
of such action (or failure to act) would abrogate or invalidate or otherwise
materially adversely affect the validity of any warranties applicable to the
Units that would otherwise be available with respect to the Units.

 

Section 25.3         Governing
Law; Severability.  This
Lease and any extensions, amendments, modifications, renewals or supplements
hereto shall be governed by and construed in accordance with the internal laws
and decisions of the State of Texas. 
Whenever possible, each provision of the Lease shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of any such lease shall be prohibited by or invalid under the laws of
any jurisdiction, such provision, as to such jurisdiction, shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of such lease in any
other jurisdiction.

 

Section 25.4         Execution
in Counterparts.  This Lease
may be executed in any number of counterparts, each executed counterpart
constituting an original, and in each case such counterparts shall constitute
but one and the same instrument; provided no security interest in this
Lease may be created through the transfer or possession of any counterpart
thereof other than the manually executed counterpart marked “Counterpart No. 1
of          ” on the signature
page thereof, which counterpart shall constitute the only “original” hereof for
purposes of the UCC.

 

Section 25.5         Headings
and Table of Contents; Section References.  The headings of the sections of this Lease and the Table of
Contents are inserted for purposes of convenience only and shall not be construed
to affect the meaning or construction of any of the provisions hereof.

 

Section 25.6         Successors
and Assigns.  This Lease
shall be binding upon and shall inure to the benefit of, and shall be
enforceable by, the parties hereto and their respective permitted successors and
assigns.

 

Section 25.7         True
Lease.  It is the intent of
the parties to this Lease that it will be a true lease and not a “conditional
sale,” and that Lessor shall at all times be considered to be 

 

35

 

Lessor or owner (as applicable) of each Unit
which is the subject of such lease for all purposes, and that such lease
conveys to Lessee no right, title or interest in any Unit except as
lessee.  Both parties agree that for all
purposes, including financial and tax purposes, this Lease will be reported and
treated as an operating lease and not a financing lease.  To protect Lessor and its successors and
assigns in the event any court or other third party determines that this Lease
is a financing arrangement, Lessee has granted to Lessor, pursuant to this
Lease, a security interest in and lien upon all of the Units covered by such
lease and all replacements and substitutions therefor (including, without
limitation, Replacement Units), accessories, attachments, modifications and
accessions that are now hereafter affixed thereto or incorporated therein and
proceeds (cash and non-cash), insurance proceeds and any all chattel paper,
accounts, contract rights and general intangibles arising from the sale, lease
or other disposition of such Units.  
Lessee shall execute such financing statements and fixture filings as
are necessary to perfect the aforesaid security interest in each relevant
jurisdiction, in each case at Lessee’s cost.

 

Section 25.8         Amendments
and Waivers.  No term,
covenant, agreement or condition of this Lease may be terminated, amended or
compliance therewith waived (either generally or in a particular instance,
retroactively or prospectively) except by an instrument or instruments in
writing executed by each party hereto.

 

Section 25.9         Survival.  All warranties, representations, indemnities
and covenants made by either party hereto, herein or in any certificate or
other instrument delivered by such party or on the behalf of any such party under
this Lease, shall be considered to have been relied upon by the other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Original Effective Date and the amendment and restatement hereof
as of the Effective Date regardless of any investigation made by either such
party or on behalf of either such party, and obligation to make payment on the
Obligations, to the extent having accrued and not been paid, or relating to or
otherwise arising in connection with the transactions contemplated by this
Lease, shall survive the expiration or other termination of this Lease.

 

Section 25.10       Business
Days.  If any payment is to
be made hereunder or any action is to be taken hereunder on any date that is
not a Business Day, such payment or action otherwise required to be made or
taken on such date shall be made or taken on the immediately succeeding
Business Day with the same force and effect as if made or taken on such
scheduled date and as to any payment (provided any such payment is made on such
succeeding Business Day) no interest shall accrue on the amount of such payment
from and after such scheduled date to the time of such payment on such next
succeeding Business Day.

 

Section 25.11       UCC
Original.  To the extent that
this Lease constitutes chattel paper (as such term is defined in the Uniform
Commercial Code), no security interest in this Lease may be created through the
transfer or possession of any counterpart hereof, other than the manually executed
counterpart hereof marked “Counterpart No. 1 of 2,” which counterpart shall
constitute the only “original” hereof for purposes of the Uniform Commercial
Code.

 

Section 25.12       Waiver
of Trial by Jury.  EACH PARTY
TO THIS LEASE WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS LEASE.  THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY EACH PARTY AND 

 

36

 

EACH PARTY ACKNOWLEDGES THAT NEITHER THE
OTHER PARTY NOR ANY PERSON ACTING ON BEHALF OF THE OTHER PARTY HAS MADE ANY
REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRAIL BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT.  EACH
PARTY FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS LEASE AND IN THE MAKING
OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND
THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.  EACH PARTY FURTHER ACKNOWLEDGES THAT IT HAS
READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION.

 

Section 25.13       Waivers.  NO WAIVER OF ANY PROVISION OF THIS LEASE SHALL DE
DEEMED TO BE A CONTINUING WAIVER OF SUCH PROVISION IN THE EVENT THE SAME OR
SIMILAR CONDITIONS GIVING RISE TO SUCH WAIVER THEREAFTER OCCUR.

 

Section 25.14       Release
of Liens and Guarantees.  (a)  After the Basic Term Expiration Date and the
payment in full of all Obligations, this Lease, along with the guarantees and
Liens (both as to Collateral and Lease Equipment) granted hereby, shall
terminate.  Lessor shall, at the request
and expense of the Obligors, promptly execute and deliver to the applicable
Obligor a proper instrument or instruments (including UCC termination
statements on Form UCC-3) acknowledging the satisfaction and termination of
this Lease, and will duly assign, transfer and deliver to the applicable
Obligor (without recourse and without any representation or warranty) such
Collateral of such Obligor as may be in the possession of Lessor.

 

(b)           To the extent that
any part of the Collateral is sold by the Obligors in the ordinary course of
its business, such Collateral will be sold free and clear of the Liens created
by this Lease and Lessor, at the request and expense of the Obligors, will duly
assign, transfer and deliver to such Obligor (without recourse and without any
representation or warranty) such Collateral of such Obligor so sold or released
as may be in the possession of Lessor and has not theretofore been released
pursuant to this Lease.

 

(c)           At any time that any
Obligor desires that Lessor take any action to acknowledge or give effect to
any release of Collateral pursuant to this Section 25.14, it shall deliver to
Lessor a certificate signed by an officer of such Obligor that the release of
the respective Collateral is permitted pursuant to this Section 25.14

 

(d)           Solely to the extent
the capital stock of a Guarantor is released from the Lien granted hereby,
pursuant to this Section 25.14 and such Guarantor ceases to be a Subsidiary of
Lessee, such Guarantor’s guarantee shall be automatically released and all of
its obligations under this Lease will be terminated without any further action
on the part of the parties hereto.

 

Section 25.15       Prepayment.  Lessee may prepay, in whole or in part, the Prior
Accrued Balance along with any accrued and unpaid interest thereon, without any
penalty or premium.  Lessee shall
provide reasonable advanced notice to Lessor of any such prepayment.  

 

37

 

[signatures on the following page]

 

38

 

IN WITNESS
WHEREOF, Lessor and Lessee have caused this Lease to be duly executed and
delivered on the day and year first above written.

 

	
   

  	
  LESSOR:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GEOLEASE PARTNERS, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: Geolease GP, Inc.

  
	
   

  	
  its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LESSEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GEOKINETICS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GEOKINETICS PRODUCTION CO., INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GEOPHYSICAL DEVELOPMENT

  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

39

 

	
   

  	
  QUANTUM GEOPHYSICAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SIGNATURE GEOPHYSICAL SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

40

 

Appendix A

Lease Agreement

 

DEFINITIONS

 

General Provisions

 

The following
terms shall have the following meanings for all purposes of the Lease to which
this Appendix A is attached, unless the context thereof shall otherwise
require, and such meanings shall be equally applicable to both the singular and
the plural forms of the terms herein defined. 
In the case of any conflict between the provisions of this Appendix A
and the provisions of the main body of the Lease, the provisions of the main
body of the Lease shall control the construction of such Lease.

 

Unless the
context otherwise requires, (i) references to agreements shall be deemed to
mean and include such agreements as the same may be amended, supplemented and
otherwise modified from time to time, and (ii) references to parties to
agreements shall be deemed to include the permitted successors and assigns of
such parties.

 

Defined Terms

 

“2003
Noteholder” means a holder of Lessee’s 131⁄2% senior secured notes due
2003.

 

“Affiliate”
of any Person shall mean any other Person which directly or indirectly
controls, or is controlled by, or is under a common control with, such
Person.  The term “control” means the
possession, directly or indirectly, 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 the term “controlling”
and “controlled”
shall have meanings correlative to the foregoing.

 

“After-Tax
Basis” shall mean, with respect to any payment received or accrued
by any Person, that the amount of such payment is supplemented by a further
payment or payments so that the sum of all such payments, after reduction for
all Taxes payable by such Person imposed by any taxing authority (taking into
account any reduction in available net operating loss), shall be equal to the
payment due to such Person.

 

“Amendment
Fee” means $1,000,000 payable to Lessor as described in Section 6.7
in connection with the amendment and restatement of the Old Equipment Lease.

 

“Applicable
Law” means (i) when used other than with respect to a Unit or Units,
all then existing applicable laws, rules, regulations (including Environmental
Laws), statutes, treaties, codes, ordinances, permits, certificates, orders and
licenses of and interpretations by any Governmental Authority and all then
existing applicable judgments, decrees, injunctions, writs, orders or like
action of any court, arbitrator or other administrative, judicial or
quasi-judicial tribunal or agency of competent jurisdiction (including those
pertaining to health, safety or the 

 

 

environment and those pertaining to the use of the Units) and
(ii) when used with respect to a Unit or Units, all then existing laws,
rules, regulations (including Environmental Laws), statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and interpretations
by any Governmental Authority applicable to such Unit or Units in the applicable
jurisdiction and all then existing judgments, decrees, injunctions, writs,
orders or like action of any court, arbitrator or other administrative,
judicial or quasi-judicial tribunal or agency of competent jurisdiction (including
those pertaining to health, safety or the environment and those pertaining to
the use of such Unit or Units) applicable to such Unit or Units in the
applicable jurisdiction.

 

“Back Rent”
has the meaning provided in Section 6.6(c).

 

“Basic Rent”
shall have the meaning specified in Section 6.2 of this Lease.

 

“Basic Term”
shall have the meaning specified in Section 6.1 of this Lease.

 

“Basic Term
Commencement Date” shall mean the Original Effective Date.

 

“Basic Term
Expiration Date” shall mean the earliest of (i) April 1,
2004, (ii) a Subsidiary Sale by Lessee or (iii) the declaration of
such pursuant to Section 17.

 

“Business Day”
shall mean any day other than a Saturday, Sunday or a day on which commercial
banking institutions are authorized or required by law, regulation or executive
order to be closed in Texas.

 

“Change of
Control” shall mean when any Person or two or more Persons, acting
in concert, acquires beneficial ownership (within the meaning of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended), directly or indirectly, of
securities of Lessee (or other securities convertible into such securities)
representing forty percent (40%) or more of the combined voting power of all
outstanding securities of Lessee entitled to vote in the election of directors;
provided,
however,
that a “Change of Control” shall not exist or arise as a result of the
undertaking and/or completion of the Restructuring.

 

“Claims”
shall have the meaning specified in Section 18.2(a) of this Lease.

 

“Collateral”
has the meaning provided in Section 10.1.

 

“Collateral
and Guarantee Requirement” means the requirement that:

 

(a)           in the case of any
person that becomes a Guarantor subsequent to the Effective Date, a Joinder
Agreement substantially in the form of Exhibit C, duly executed and delivered
on behalf of such Guarantor;

 

(b)           all outstanding
Equity Interests of the Guarantors owned by or on behalf of any Obligor shall
have been pledged pursuant to Section 10.2 (except that the Obligors shall not
be required to pledge more than 65% of the outstanding voting Equity Interest
of any non-U.S. domiciled Subsidiary) and Lessor shall have received
certificates or 

 

2

 

other
instruments representing all such Equity Interests, together with stock powers
or other instruments of transfer with respect thereto endorsed in blank;

 

(c)           in the event that
that there is any departure from the procedures detailed on Appendix A-1, all
Indebtedness of any Obligor in an aggregate principal amount that exceeds $100,000
that is owing to any other Obligor shall be evidenced by a promissory note and
shall have been pledged pursuant to Section 10.2 and Lessor shall have received
all such promissory notes, together with instruments of transfer with respect
thereto endorsed in blank;

 

(d)           all documents and
instruments, including UCC financing statements, required by law or reasonably
requested by Lessor to be filed, registered or recorded to create the Liens in
the Collateral intended to be created by the Lease and perfect such Liens to
the extent required by, and with the priority required by the Lease, shall have
been filed, registered or recorded or delivered to Lessor for filing,
registration or recording; and

 

(e)           Each Obligor shall
have obtained all consents and approvals required to be obtained by it in
connection with the granting by it of the Liens hereunder.

 

 “Common Stock” means the common stock,
$0.001 par value per share, of Lessee (following and giving effect to the
reverse stock split occurring immediately prior to the Restructuring).

 

“Control
Agreement” shall mean any and all agreements executed in
substantially the same form as Exhibit G.

 

 “Effective Date” shall have the meaning set
forth in the preamble of this Lease.

 

“Environmental
Law” means any and all federal, state, local and foreign laws,
statutes, ordinances, orders, codes, rules, regulations, policies, guidance
documents, judgments, decrees, injunctions or agreements with any Governmental
Authority, relating to the protection of health or the air, surface water,
groundwater, land (including land surface or subsurface), fish, wildlife, biota
and any other natural resources and/or governing the handling, use, generation,
treatment, storage, transportation, disposal, manufacture, distribution, formulation,
packaging, labeling or Release of Hazardous Substances, whether now existing or
subsequently amended or enacted, and any common law doctrine, including but not
limited to, negligence, nuisance, trespass, personal injury or property damage
related to or arising out of the presence, Release or exposure to a Hazardous
Substance.

 

“Equity
Interest” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person or warrants, options or
other rights to acquire such interests.

 

“Event of
Loss” shall have the meaning specified in Section 13.1 of this
Lease.

 

3

 

“Fair Market
Rental Value”  or “Fair Market Sales Value” with respect to
any Unit of Lease Equipment shall mean the cash rent or cash price,
respectively, obtainable for such Unit in an arm’s length lease or sale,
respectively, between an informed and willing lessee or purchaser, respectively,
under no compulsion to lease or purchase, as the case may be, and an informed
and willing lessor or seller, under no compulsion to lease or sell, as the case
may be, as the same shall be determined by a nationally or industry-wide (with
respect to the oil and gas exploration industry) recognized independent
appraisal firm in the practice of regularly appraising equipment similar to the
Lease Equipment selected by Lessor and reasonably acceptable to Lessor and
Lessee.

 

“Governmental
Authority” shall mean any federal, state, county, municipal, foreign
or other governmental or regulatory authority, agency, board, body, commission,
instrumentality, court or quasi-Governmental Authority.

 

“Guarantor”
means each of the Lessee’s Subsidiaries on the Effective Date and/or future
Subsidiaries of Lessee that in the future execute a Joinder Agreement to this
Lease substantially in the form of Exhibit C in which such Subsidiary
agrees to be bound by the terms of this Lease as a Guarantor; provided
that any Person constituting a Guarantor as described above shall cease to
constitute a Guarantor pursuant to Section 25.14.

 

“Hazardous
Substances” shall mean any hazardous or toxic substances, materials
or wastes, including, but not limited to, those substances, materials, and
wastes listed in the United States Department of Transportation Hazardous
Materials Table (49 CFR 172.101) or by the Environmental Protection Agency as
hazardous substances (40 CFR part 302) and amendments thereto, or such
substances, materials and wastes which are or become regulated under any
applicable local, state or federal law or the equivalent under applicable
foreign laws including, without limitation, any materials, waste or substance
which is (a) petroleum, (b) asbestos, (c) polychlorinated
biphenyls, (d) defined as a “hazardous material,” “hazardous substance” or
“hazardous waste” under applicable local, state or federal law or the
equivalent under applicable foreign laws, (e) designated as a “hazardous
substance” pursuant to Section 311 of the Clean Water Act, (f) defined as
“hazardous waste” pursuant to Section 1004 of the Resource Conservation and
Recovery Act, or (g) defined as “hazardous substances” pursuant to Section
101 of the Comprehensive Environmental Response, Compensation, and Liability
Act.

 

“Impositions”
shall have the meaning specified in Section 18.1 of this Lease.

 

“Indebtedness”
means with respect to any Person, without duplication:

 

(1)           all obligations of
such Person for borrowed money;

 

(2)           all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments;

 

(3)           all obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding any such obligations that constitute trade accounts

 

4

 

 payable and other accrued liabilities arising
in the ordinary course of business that are not overdue by 90 days or more or
are being contested in good faith);

 

(4)           all obligations for
the reimbursement of any obligor on any letter of credit, banker’s acceptance
or similar credit transaction;

 

(5)           guarantees and other
contingent obligations in respect of Indebtedness of other Persons of the type
referred to in clauses (1) through (4) above and clause (7) below but, in the
case of a guarantee, only to the extent so guaranteed;

 

(6)           all obligations of
any other Person of the type referred to in clauses (1) through (5) which are
secured by any lien on any property or asset of such Person, the amount of such
obligation being deemed to be the lesser of the fair market value of such
property or asset and the amount of the obligation so secured; and

 

(7)           all obligations
under commodity agreements and interest swap agreements of such Person.

 

The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation; provided that the amount outstanding at
any time of any Indebtedness issued with original issue discount is the
original issue price of such Indebtedness.

 

“Indemnified
Person” shall have the meaning specified in Section 18.2(b) of this
Lease.

 

“Intellectual
Property” means, collectively, patents, trademarks, copyrights,
licenses and any goodwill related thereto.

 

“Intercompany
Promissory Notes” means all promissory notes, certificated in
accordance with the Collateral and Guarantee Requirement, where the maker is an
Obligor and the payee is another Obligor.

 

“Landlord
Lien Waiver” shall mean any and all agreements executed in
substantially the same form as Exhibit F.

 

“Late Rate”
shall mean, with respect to any Rent or other payment not paid on the date when
due, the lesser of (x) 18% per annum and (y) the maximum interest rate from
time to time permitted by law.

 

“Lease”
shall mean this Lease Agreement, as amended and restated as of April 30,
2003, as such may be further amended and supplemented from time to time.

 

“Lease
Default” shall mean an event or occurrence that upon the giving of
notice or lapse of time or both would constitute a Lease Event of Default.

 

“Lease
Equipment” shall mean the equipment and other properties described
in this Lease, together with any and all accessions, additions, improvements
and replacements from 

 

5

 

time to time incorporated or installed in any item thereof which are
the property of Lessor pursuant to the terms of this Lease.

 

“Lease Event
of Default” shall have the meaning assigned to such term in Section
16 of this Lease.

 

“Lessee”
means Geokinetics Inc., a Delaware corporation.

 

“Lessor”
means Geolease Partners, L.P., a Delaware limited partnership.

 

“Lessor Liens”
means any Lien affecting, on or in respect of any Unit, arising as a result of
(i) claims against Lessor, not related to the transactions contemplated by
this Lease, or (ii) acts or omissions of Lessor not related to the
transactions contemplated by this Lease or in breach of any covenant or
agreement of Lessor set forth in this Lease, or (iii) taxes imposed
against Lessor or the Unit which are not indemnified against by Lessee pursuant
to this Lease.

 

“Lien”
shall mean any mortgage, pledge, hypothecation, assignment, attachments,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including without limitation any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing) including any agreement
to give any of the foregoing.

 

“Modification”
shall have the meaning set forth in Section 12.2 of this Lease.

 

“Net income”
shall have its commonly used meaning under U.S. Generally Accepted Accounting
Principles (“GAAP”).

 

“Non-Severable
Modification” shall mean any Modification that is not readily
removable without impairing the current and residual value, utility or
remaining useful life of the Unit immediately prior to removal of such
Modification, other than in a de minimis nature.

 

“Obligations”
means Lessee’s obligations to pay Basic Rent, the Prior Accrued Balance, plus
accrued and unpaid interest thereon and Supplemental Rent, if any.

 

“Obligor”
shall have the meaning ascribed to it in the preamble hereto.

 

“Old Equipment
Lease” shall have the meaning set forth in the preamble of this
Lease.

 

“Other
Collateral Agreements” shall mean any Control Agreements, Landlord
Lien Waivers and any additional documents Lessor deems reasonably necessary to
effectuate securing the Collateral.

 

“Original
Effective Date” means October 1, 1999.

 

“Perfection
Certificate”  means the
perfection certificate to be completed by the Obligors substantially in the
form of Exhibit E hereto.

 

6

 

“Permitted
Capital Lease Obligation” shall have the meaning ascribed to it in
Section 17.7.

 

“Permitted
Contest” means actions taken by a Person to contest in good faith
and by appropriate proceedings diligently conducted, the legality, validity or
applicability to any Unit of any Applicable Law; provided such contest could
not reasonably be expected to (i) interfere (other than in a de minimis
respect) with the use, possession, operation or return of any Unit or (ii)
create a material risk of sale, forfeiture, loss, or loss of or interference
with use or possession of any Unit or interference with the payment of Rent or
(iii) expose Lessor to criminal sanctions or (iv) relieve Lessee of the
obligation to return the Unit in compliance with the provisions of this Lease.

 

“Permitted
Indebtedness” shall have the meaning set forth in Section 5.2(g) of
this Lease.

 

“Permitted
Liens” means the following types of Liens:

 

(1)           inchoate
Liens for taxes, assessments or governmental charges or claims either (a) not
delinquent or (b) contested in good faith by appropriate proceedings and as to
which Lessee or any of its Subsidiaries shall have set aside on its books such
reserves as may be required pursuant to GAAP;

 

(2)           statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen and other Liens imposed by law incurred in the ordinary
course of business for sums not yet delinquent or being contested in good
faith, if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made in respect thereof;

 

(3)           Liens
incurred or deposits made in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other types of social
security, including any Lien securing letters of credit issued in the ordinary
course of business consistent with past practice in connection therewith, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the payment
of borrowed money);

 

(4)           judgment
Liens not giving rise to a Lease Event of Default so long as such Lien is
adequately bonded and any appropriate legal proceedings which may have been
duly initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceedings may be initiated shall
not have expired;

 

(5)           easements,
rights-of-way, zoning restrictions and other similar charges or encumbrances in
respect of real property not interfering in any material respect with the ordinary
conduct of the business of Lessee or any of its Subsidiaries;

 

(6)           any
interest or title of a lessor under any Permitted Additional Obligation or
operating lease; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Permitted Additional
Obligation or operating lease; 

 

7

 

provided, however, that (i) any such purchase
money Indebtedness shall not exceed the purchase price or other cost of or
investment in the property subject thereto and shall not be secured by any
property of the Obligor other than the property subject thereto and (ii) the
Lien securing any such purchase money Indebtedness shall be created prior to or
within 180 days after the later of the acquisition, completion of construction
or improvement or commencement of full operation of such property;

 

(7)           Liens
securing Permitted Indebtedness;

 

(8)           Liens
upon specific items of inventory or other goods and proceeds of any Person
securing such Person’s obligations in respect of bankers’ acceptances issued or
created for the account of such Person to facilitate the purchase, shipment or
storage of such inventory or other goods;

 

(9)           Liens
securing reimbursement obligations with respect to commercial letters of credit
which encumber documents and other property relating to such letters of credit
and products and proceeds thereof;

 

(10)         Liens
encumbering deposits made to secure obligations arising from statutory,
regulatory, contractual or warranty requirements of Lessee or any of its
Subsidiaries, including rights of offset and set-off;

 

(11)         leases,
subleases, licenses and sublicenses granted to others that do not materially
interfere with the ordinary course of business of the Obligors;

 

(12)         banker’s
Liens, rights of setoff and similar Liens with respect to cash and cash
equivalents on deposit in one or more bank accounts in the ordinary course of
business;

 

(13)         Liens
arising from filing UCC financing statements regarding operating leases not
related to this Lease;

 

(14)         Liens
in favor of customs and revenue authorities arising as a matter of law to
secure payments of customs duties in connection with the importation of goods;

 

(14)         Liens
existing on the Effective Date listed on Schedule 6 to the Perfection
Certificate;

 

(15)         Liens
securing obligations with respect to operating leases and guarantees thereof, provided
that such Liens do not extend to or cover any property of Lessee or any of its
Subsidiaries other than the property subject to such leases, any property or
rights (including rights under subleases) relating to such leased property and
the equity interests of the lessee in any such lease;

 

(16)         Liens
created under this Lease and Other Collateral Documents;

 

8

 

(17)         deposits
made in the ordinary course of business to secure liability to insurance carriers;

 

(18)         rights
of a licensor of intellectual property; and

 

(19)         Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by Lessee or any of its Subsidiaries
in the ordinary course of business.

 

Notwithstanding
the foregoing, with respect to Collateral, “Permitted Lien” shall not include
the Liens described in clauses (3), (9), (13) and (17) through (19).  With respect to Collateral, “Permitted Lien”
shall be subject to the provisions of Section 5(2)(1) hereof.

 

“Person”
shall mean an individual, partnership, corporation, trust, association or
unincorporated organization, and a government or agency or political
subdivision thereof.

 

“Prior
Accrued Balance” shall have the meaning set forth in Section 6.6(a) of
this Lease.

 

“Release”
means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, dumping or disposing of a Hazardous Material into the air,
surface water, groundwater, land (including land surface or subsurface), fish,
wildlife, biota or any other natural resources.

 

“Rent”
shall mean all Basic Rent and Supplemental Rent.

 

“Rent Payment
Date” or “Payment Date” shall mean each monthly
payment date of each year occurring during the Basic Term as specified in Section
6 of this Lease; provided, if any such date shall not be a Business Day, then
“Rent Payment Date” or “Payment Date” shall mean the next succeeding Business
Day.

 

“Replacement
Unit” shall mean any Unit which shall have been substituted for
another such Unit of the same type and leased under this Lease.

 

“Required
Modification” shall have the meaning set forth in Section 12.1 of
this Lease.

 

“Residual
Amount” means up to 2,848,823 shares of Common Stock not subscribed
for by Lessee’s 2003 Noteholders plus up to $135,000 in cash not distributed to
Lessee’s 2003 Noteholders in lieu of Common Stock, each as provided in the
Restructuring Agreement such that, assuming a per share price of $0.04739, the
aggregate value of all Common Stock and cash received as the Residual Amount
equals $135,000.

 

“Restructuring”
shall have the meaning set forth in the recitals to this Lease.

 

“Restructuring
Agreement” shall have the meaning set forth in the recitals of this
Lease.

 

“Securities”
shall mean the Equity Interests and any Intercompany Promissory Notes pledged
pursuant to the Lease.

 

9

 

“Severable
Modification” shall mean any Modification that is readily removable
without causing material damage to any Unit and without diminishing the current
or expected residual value, utility or useful life of such Unit below the
current and residual value, utility or useful life of such Unit immediately
prior to such Modification, assuming that such Unit was then in the condition
required to be maintained by the terms of this Lease, other than of a de minimis
nature.

 

“Subsidiary”
of any Person shall mean any corporation, association, or other business entity
of which more than 50% (by number of votes) of the voting stock at the time
outstanding shall at the time be owned, directly or indirectly, by such Person
or by any other corporation, association or trust which is itself a Subsidiary
within the meaning of this definition, or collectively by such Person and any
one or more such Subsidiaries.

 

“Subsidiary
Sale” shall mean the sale by Lessee of (i) substantially all of
the assets of or the amount of securities representing more than fifty percent
(50%) of the combined voting power of all outstanding securities of Quantum
Geophysical, Inc., a Texas corporation and a wholly owned Subsidiary of Lessee.

 

“Successor
Entity” shall have the meaning set forth in Section 25.1 of this
Lease.

 

“Supplemental
Rent” shall mean all amounts, liabilities and obligations (other
than Basic Rent and the Prior Accrued Balance and any interest thereon) which
Lessee assumes or agrees to pay under this Lease to or on behalf of any of the
other parties thereto.

 

“Taxes”
means any and all new or existing governmental or quasi-governmental taxes,
assessments, levies, assessments, imposts, duties, fees, charges and
withholdings of any kind or nature whatsoever and howsoever described,
including income, gross receipts, franchise, sales, use, property, excise,
profits, capital, Btu or energy, gathering, transport, pipeline, utility,
employment, stamp, transfer, interest equalization mortgage, intangible,
license, filing, recording and activity fees or charges together with any and
all penalties, fines, additions or interest thereon.

 

“UCC”
means the Uniform Commercial Code as in effect on the Effective Date in the
State of New York; provided, however, that if by reason
of mandatory provisions of law the perfection or the effect of perfection or
non-perfection of the security interest in any item or portion of the Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, “UCC” shall also mean the Uniform Commercial Code
as in effect in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or effect of perfection or non-perfection.

 

“Unit”
shall mean a unit or item of Lease Equipment.

 

10

 

Appendix A-1 to Lease
Agreement

 

Advances

 

Cash coming
into subsidiaries is swept daily into the Geokinetics Inc. account.  Funds are provided to subsidiaries on an
as-needed basis.  Intercompany debits or
credits are eliminated in consolidation on a monthly basis.

 

Schedule
2 to Lease Agreement

 

Equipment

 

 

Schedule 5.2 to Lease
Agreement

 

Current
Indebtedness

 

	
  Entity

  	
   

  	
  Principal

  Amount

  	
   

  	
  Date of

  Issuance

  	
   

  	
  Interest
  Rate

  	
   

  	
  Maturity

  Date

  	
   

  
	
  Note to Financial  Institution (Benefit Life)

  	
   

  	
  $

  	
  1,978,386

  	
   

  	
  Mach 1, 1996

  	
   

  	
  Prime + 1.5

  	
  %

  	
  March 1, 2006

  	
   

  
	
  Capital Lease with TerraByte Data Systems,
  Ltd.

  	
   

  	
  $

  	
  83,462

  	
   

  	
  August 7, 2001

  	
   

  	
  12

  	
  %

  	
  July 1, 2003

  	
   

  
	
  Capital Lease with TerraByte Data Systems,
  Ltd.

  	
   

  	
  $

  	
  120,301

  	
   

  	
  July 30, 2002

  	
   

  	
  12

  	
  %

  	
  May 15, 2004

  	
   

  
	
  Capital Lease with TerraByte Data Systems,
  Ltd.

  	
   

  	
  $

  	
  56,923

  	
   

  	
  Sept. 1, 2002

  	
   

  	
  12

  	
  %

  	
  Feb. 1, 2004

  	
   

  
	
  Capital Lease with TerraByte Data Systems,
  Ltd.

  	
   

  	
  $

  	
  42,008

  	
   

  	
  Sept. 1, 2002

  	
   

  	
  12

  	
  %

  	
  Aug. 1, 2004

  	
   

  
	
  Capital Lease with TerraByte Data Systems,
  Ltd.

  	
   

  	
  $

  	
  12,011

  	
   

  	
  Nov. 4, 2002

  	
   

  	
  12

  	
  %

  	
  Oct. 4, 2004

  	
   

  

 

 

Schedule
10 to Lease Agreement

 

Other Liens

 

 

Schedule 14.1 to Lease
Agreement

 

Insurance

 

At all times
during the term of the Lease and until the Units are returned to Lessor in
accordance with Section 9.1, Lessee shall at its costs and expense, maintain or
cause to be maintained valid and enforceable insurance of the following
character:

 

(i)                                     “all
risks” property insurance covering the Units and all replacements and additions
thereto, and all other property which constitute part of the Units in a manner
consistent with insurance maintained by prudent owners or operators of assets
similar to the Units and in any event in amounts not less than the greater of
(a) the actual replacement cost of the Units and (b) the [Retirement Amount]
applicable to the Units.

 

(ii)                                  public
liability insurance covering legal liability against claims for bodily injury,
death or property damage, occurring on, in or about the facilities at which the
Units are located and the adjoining land, streets, sidewalks or ways or
occurring as a result of construction and use and operation of such facilities
or as a result of materials manufactured, processed, constructed or sold, or services
rendered from such facilities or the Units in the minimum amount of $1,000,000
and with umbrella excess liability coverage in the amount of $5,000,000.  Coverage shall include “premises/operations”,
“independent contractors”, and “blanket contractual” liabilities.

 

(iii)                               insurance
during the course of any construction or repair or modification of any Units
against “all risks”, including collapse and transit coverage, covering the
total value of work performed and equipment, supplies and materials furnished,
in an amount equal to the greater of (a) the actual replacement cost of such
Units and (b) the [Retirement Amount] applicable to the
Units.

 

(iv)                              worker’s
compensation insurance (or other similar insurance or self-insurance program
permitted and in compliance with Applicable Laws) covering all Persons employed
in connection with any work done on or about or with the Units with respect to
which claims for death or bodily injury could be asserted against Lessor.

 

(v)                                 such
other insurance, in such amounts, against such risks, and with such other
provisions as is customarily and generally maintained by operators of similar
properties of a financial standing similar to Lessee, including war risk
insurance (at and during such times and at such locations as war risk insurance
is commonly obtained in the case of property similar to the Units), when and to
the extent obtainable.

 

Lessee may
self-insure up to the amount of $100,000 with respect to such risks described
in clauses (i), (ii) and (iii) above.

 

 

Such insurance
shall be written by reputable insurance companies of recognized financial
standing and which are legally qualified to issue such insurance and shall name
Lessee as insured and Lessor as additional insured with respect to insurance
described in clause (ii) and, to the extent applicable, clause (v) above, and
shall name Lessor as loss payee, for distribution to itself and Lessee, as
their interests may appear, with respect to insurance described in clauses (i),
(iii) and, to the extent applicable, clause (v) above.  Lessee shall obtain such insurance policies
from insurance companies with a General Policy Rating of A:X or better in
Best’s Key Rating Guide.  Such insurance
may be obtained by Lessee by endorsement on its blanket insurance policies,
provided that the Units shall be separately scheduled so that no loss at any
other property shall reduce the amount payable with respect to the Units.  All liability policies shall be provided on
an occurrence policy language form with no punitive damage exclusion and with
an unlimited claim discovery period. 
Each policy shall contain a waiver of subrogation against the Indemnified
Persons.  Lessee shall be responsible
for any obligation incurred as a result of any self-retention or deductible
application.

 

2

 

EXHIBIT A

 

Certificate of
Acceptance

 

Re:                               Lease Agreement dated
                              ,
2003, executed by GeoLease Partners, L.P. and Geokinetics Inc. (the “Lease”).

 

The
undersigned, an authorized officer of Geokinetics Inc., Lessee, certifies that
each Unit of Equipment described on Schedule 2 of the Lease has been accepted
by Geokinetics Inc. for all purposes.

 

Any
capitalized term used but not defined herein shall have the meaning ascribed to
such term in the above referenced Lease Agreement.

 

EXECUTED as of
                                                .

 

 

	
   

  	
  GEOKINETICS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

 

EXHIBIT B

 

Acknowledgment
Agreement

 

Re:                               Lease Agreement dated
                                  ,
2003 (the “Lease”)
between GeoLease Partners, L.P., as Lessor, and Geokinetics Inc., as Lessee.

 

Lessor hereby
gives notice to Lessee that the Lease will be assigned by Lessor to the party
identified below (the “Assignee”).  Until otherwise instructed in writing, Lessee is hereby
instructed to make all payments of Rent under the Lease to:

 

 

 

 

As a material
inducement to Assignee to consummate the assignment referenced above, Lessee
hereby acknowledges and agrees that:

 

(i)                                     the
Lease is in full force and effect and Lessee is not in default thereunder;

 

(ii)                                  Lessee’s
obligation to make all Rent Payments as set forth in the Lease is unconditional
and it will make all of said payments, without any right of setoff, defense or
counterclaims, as provided in Section 6 of the Lease;

 

(iii)                               Assignee
shall enjoy all of Lessor’s right and privileges under the Lease but shall not
be chargeable with any obligations or liabilities under the Lease except to the
extent expressly assumed in writing by Assignee; and

 

(iv)                              any
notice which Lessee is required to give Lessor under the Lease shall be sent to
Assignee.

 

This
Acknowledgment Agreement may be executed in counterparts.

 

The parties
have executed this Acknowledgment Agreement as of this
       day of
                  ,
           .

 

LESSEE:

 

	
  GEOKINETICS INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
					

 

 

	
  LESSOR:

  	
   

  
	
   

  	
   

  
	
  By:  GeoLease, GP, Inc.,

  	
   

  
	
  its General Partner

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
					

 

2

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