Document:

Exhibit 10.1

 

 

EMPLOYMENT AGREEMENT

BETWEEN GEOKINETICS INC. AND DAVID CROWLEY

 

This Employment Agreement dated as of May 2, 2012 (the “Effective Date”), and Exhibit A attached hereto and incorporated by reference (collectively referred to as the “Agreement”), sets forth the principal terms of the employment relationship between David Crowley (the “Executive”) and Geokinetics Inc. and/or its subsidiaries (the “Company”).  This Agreement shall supersede any and all previous offers, agreements or understandings between Executive and the Company.  The Company and the Executive agree as follows:

 

Section 1: Employment, Compensation, and Benefits

 

1.1          Employment. The Company agrees to employ Executive, and Executive agrees to be employed by the Company, in the Position identified in Exhibit A.  Executive shall be based in Houston, Texas, U.S.A. or in such other location as may be designated by the Company and mutually acceptable to Executive. Executive further agrees that the Board of Directors of the Company (“Board”) may assign Executive any job functions that are consistent with Executive’s Position identified in Exhibit A and that Executive can reasonably be expected to perform.  Executive will devote substantially all of his time and attention during working hours and best efforts to the affairs of the Company.  Executive also agrees to fully perform his duties and responsibilities to the Company.

 

1.2          Compensation. The Executive shall be compensated as set forth in Exhibit A.  Executive’s monthly base salary shall be paid in accordance with the Company’s standard payroll practices, and (as with all other compensation paid to Executive by the Company) is subject to withholding of all federal, state, city, or other taxes as may be required by applicable law.  Compensation may, but will not necessarily, include base salary, annual bonus opportunity and periodic equity-based awards as determined appropriate by the Compensation Committee of the Board (“Compensation Committee”) or the Board.

 

1.3          Benefits. Executive shall be eligible to participate in all general employee benefit plans and programs that the Company has made available to the Company’s employees in the United States. Executive will be eligible for annual vacation in the amount specified in Exhibit A, pursuant to the Company’s policies and procedures.  Except as expressly provided in Exhibit A, nothing in this Agreement is to be construed to provide greater rights, participation, coverage or benefits than provided to similarly-situated employees under the terms of the benefit plans and programs.  The Company is not obligated to institute, maintain or refrain from changing, amending or discontinuing any benefit program or plan, as long as such actions are similarly applicable to covered employees generally.

 

Section 2: Termination of Employment

 

2.1          Employment Status. Executive and Company acknowledge and agree that the Executive’s employment is on an “at-will” basis, meaning that both the Executive and the Company are free to terminate the employment relationship at any time, for any reasons, with or without notice, and with or without Cause.  Subject to Section 2.3, Executive further

 

Crowley Employment Agreement Execution Copy

 

 

acknowledges and agrees that Company is not obligated to maintain Executive’s employment for any specific period of time and there is no definite term for this Agreement.

 

2.2          Delivery of Notice.   Executive and Company acknowledge and agree that any and all notices required to be delivered under the terms of this Agreement shall be forwarded by personal delivery or registered mail.  Notices shall be deemed to be communicated and effective on the date they are personally delivered or three (3) days after the date such notices are deposited (postage prepaid) in registered mail. Such notices shall be addressed as follows:

 

	
If   to Company:
    	
Richard   F. Miles
    
	
 
    	
Geokinetics   Inc.
    
	
 
    	
1500   City West, Suite 800
    
	
 
    	
Houston,   Texas 77042
    
	
 
    	
 
    
	
If   to the Executive:
    	
David   Crowley
    
	
 
    	
4107   Camden Bend Court
    
	
 
    	
Katy,   Texas 77450
    

 

2.3          Severance. Pursuant to the terms of this Agreement, Company will pay Executive Severance in the amount and at the time or times stated in Exhibit A as the “Severance Pay” if the Company terminates the Executive’s employment without Cause or if Executive resigns with Good Reason.  Except as otherwise specifically provided in this Agreement and the related Exhibit A, Executive is not entitled to Severance Pay for a termination based on Death/Disability, resignation without Good Reason, or termination for Cause.  Executive acknowledges and agrees that, regardless of the reason for termination, Executive’s continued eligibility for Severance Pay, if applicable, is contingent upon Executive’s compliance with Section 3.3 of this Agreement and that Executive shall not be entitled to any Severance Pay, and Company can discontinue the payment of any Severance Pay, if Executive violates the provisions of Sections 3.3 of this Agreement.  Discontinuance of such payments, however, will not prevent the Company from otherwise enforcing Section 3.3 of this Agreement.

 

To the extent Executive is eligible for Severance Pay under this Agreement, such Severance Pay is contingent upon Executive’s execution of a reasonable Release of All Claims in such form of Release as presented by the Company to Executive (“Release”) within a time period to be determined by the Company, such period not to exceed fifty (50) days.  In the event Executive refuses to sign and/or revokes any such reasonable Release, Executive acknowledges and agrees that Executive shall not be entitled to any Severance Pay so that the Company shall have no further obligation to compensate Executive under this Agreement for termination of employment other than paying earned but unpaid salary and accrued vacation.

 

To the extent Executive is eligible for Severance Pay under this Agreement, the Company shall pay such Severance Pay as specified in Exhibit A following Executive’s termination of employment, which will mean a “separation from service” (as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code) and Treasury Regulations and other guidance promulgated or issued thereunder (collectively referred to as “Section 409A”)), to the extent required under Section 409A; and provided further, that, if the Severance Pay is considered nonqualified deferred compensation subject to Section 409A and the period during which Executive has discretion to execute or revoke the Release straddles two taxable years of Executive, then the Company will commence the Severance Pay payment in the second of such taxable years.  Notwithstanding the foregoing, subject to the Release

 

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requirement, the Severance Pay will in all events be paid no later than 60 days following Executive’s termination of employment, regardless of which taxable year Executive actually delivers the executed Release to the Company.  Executive may not, directly or indirectly, designate the calendar year of the Severance Payment.  To the extent Executive is eligible for Severance Pay under this Agreement, the Company will also pay Executive a lump sum cash amount, to be paid at the same time as the Severance Pay, equal to the cost at the termination of employment date of the group health plan continuation coverage premium rate for Executive and his dependants under the Company’s group health plan for purposes of the continuation coverage provided under Code Section 4980B pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), for a period of 18 months.

 

This Agreement is intended to comply with Section 409A to the extent applicable, and any ambiguous provision will be construed in a manner that is compliant with or exempt from the application of Section 409A.  If any provision of this Agreement (or of any compensation or benefits hereunder) would cause Executive to incur any additional tax or interest under Section 409A, the Company shall, after consulting with Executive, reform such provision to comply with Section 409A, to the extent permitted under Section 409A; provided, however, that the Company agrees to maintain, to the maximum extent deemed practicable, the original intent and economic benefit to Executive of the applicable provision without violating or causing taxation under Section 409A.

 

For purposes of this Agreement, “Cause” shall mean: (a) the Executive’s conviction by a court of competent jurisdiction of a felony or crime involving moral turpitude, or entering a guilty plea, the plea of nolo contendere, or similar plea to such crime by the Executive regardless of whether such crime is subject to deferred adjudication; (b) the Executive’s commission of a material act of fraud; (c) the Executive’s material violation of the Company’s policies and procedures and/or Code of Conduct applicable to employees generally, which, if capable of cure, is not cured within 60 days of Executive being formally notified in writing of such material violation, which notice specifically identifies the violation as determined in good faith by the Company; (d) the Executive’s material misappropriation of funds or property of the Company; (e) the Executive’s knowing engagement, without prior written approval of the Company, in any material activity which directly competes with the business of the Company, its affiliates, or which could directly result in a material injury to the business or reputation of the Company or any affiliate; and (f) Executive’s material failure to perform his/her duties and responsibilities under this Agreement if not cured within 60 days of Executive being formally notified in writing of material failure, which notice shall specifically identify the performance failure as determined in good faith by the Company.

 

For purposes of this Agreement, resigning with “Good Reason” shall be defined to include any of the following events that arise without Executive’s prior written consent: (a) a relocation of Executive to an office or location more than fifty (50) miles from his/her office or location as of the Effective Date; (b) a material diminution in Executive’s title, duties, reporting level, responsibilities or authority; (c) a material diminution in Executive’s base salary or target bonus; provided, however, that prior to a Change of Control such diminution will not constitute Good Reason unless it is by more than ten percent (10%), except in connection with an executive-wide reduction for cost purposes; or (d) any other action or inaction that constitutes a material breach by the Company of this Agreement. Notwithstanding anything to the contrary contained herein, a termination by the Executive for “Good Reason” shall occur only if (i) the Executive provides written notice to the Company of the occurrence of the event that constitutes “Good Reason” within sixty (60) days of the event’s initial existence, and (ii) the Company fails

 

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to remedy the event within thirty (30) days of its receipt of such notice, and (iii) the Executive terminates his services no later than thirty (30) days following the end of such cure period.

 

For purposes of this Agreement, “Death/Disability” shall mean Executive’s: (a) death; (b) becoming incapacitated or disabled so as to entitle Executive to benefits under the Company’s long-term disability plan; or (c) becoming permanently and totally unable to perform Executive’s duties for the Company as a result of any physical or mental impairment supported by a written opinion by a physician selected by the Company.

 

2.4          Change of Control.  In the event the Company terminates the Executive’s employment without Cause or if Executive resigns with Good Reason within one year after a Change of Control, the Executive shall receive the Severance Pay set forth in Exhibit A. To the extent Executive is eligible to receive such compensation pursuant to a Change of Control; such compensation is contingent upon Executive’s execution of a reasonable Release presented by the Company as provided in Section 2.3.  In the event Executive refuses to sign and/or revokes any such reasonable Release, Executive acknowledges and agrees that Executive shall not be entitled to any compensation as a result of a Change of Control.

 

For purposes of this Agreement, a “Change of Control” means the occurrence of any of the following events: (i) the Company shall not be surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of an entity other than a previously wholly-owned subsidiary of the Company); (ii) the Company or any subsidiary of the Company is merged with or into or consolidated with another corporation and, immediately after giving effect to the merger or consolidation, less than 50% of the outstanding voting securities of the Company entitled to vote generally in the election of directors or persons who serve similar functions of the surviving or resulting entity are then beneficially owned (within the meaning of Rule 13d-3 of the Exchange Act) in the aggregate by (x) the stockholders of the Company immediately prior to such merger or consolidation, or (y) if a record date has been set to determine the stockholders of the Company entitled to vote on such merger or consolidation, the stockholders of the Company as of such a record date; (iii) the Company sells, leases or exchanges all or substantially all of its assets to any other person or entity (other than a wholly-owned subsidiary of the Company); (iv) the Company is to be dissolved and liquidated; (v) any person or entity, including a “group” as contemplated by Section 13(d)(3) of the 1934 Act, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the outstanding shares of the Company’s voting stock (based upon voting power); or (vi) as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board.  Notwithstanding the foregoing, a “Change of Control” shall not include any transaction or series of related transactions in which a stockholder or any “group” (as contemplated by Section 13(d)(3) of the 1934 Act) of which such stockholder is a member that, as of the date of approval of the Geokinetics 2010 Stock Awards Plan by the Board (March 23, 2010), owns more than 25% of the outstanding shares of the Company’s voting stock (based upon the voting power of all shares of the Company’s capital stock, the holders of which are entitled to vote for the election of members of the Board) acquires, directly or indirectly, more than 50% of the outstanding shares of the Company’s voting stock, but less than 75% of the outstanding shares of the Company’s voting stock (based, in either such case, upon the voting power of all shares of the Company’s capital stock, the holders of which are entitled to vote for the election of members of the Board).

 

2.5          Return of Company Property.  Upon termination or resignation of employment, Executive shall immediately return all documents, data, equipment and all other objects that constitute

 

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Company property to Executive’s manager or human resources representative including, but not limited to, Executive’s company issued laptop or computer, cell phone, credit cards, any leased or rented objects, security or identification cards, thumb drives, external hard drives and all keys to Company vehicles in Executive’s possession, custody or control.

 

Section 3: Inventions, Trade Secrets, and Non-Compete Obligations

 

3.1          Confidentiality. The Company shall provide Executive with valuable proprietary and confidential information during employment for the purpose of assisting in the performance of Executive’s job requirements and responsibilities.  Executive acknowledges that such proprietary and confidential information will be provided throughout his/her employment on a continuing basis because of the Executive’s position with the Company.  At all times during employment with the Company and after the termination or expiration of employment, whether voluntary or involuntary, Executive agrees to keep in confidence and trust all proprietary and confidential information that has been provided to Executive by the Company, and agrees not to use or disclose such proprietary and confidential information without the written consent of the Company, except as may be necessary to perform Executive’s duties to the Company. Executive also agrees to return all proprietary and confidential information to the Company upon request and/or prior to leaving employment with Company.

 

Proprietary and Confidential Information includes, by way of example and without limitation, the following:  (i) the Company or its affiliates’ development, patent and copyright development and licensing thereof, trade secrets, inventions, formulas, designs, drawings, specifications and engineering, laboratory analysis, production processes, or equipment; (ii) the Company or its affiliates’ marketing techniques, price lists, pricing policies, sales, service, costs, and business methods, formulas, product specifications, and planning efforts; (iii) the names of the Company or its affiliates’ customers and their representatives, customer services, or the type, quantity and specifications of products purchased by or from customers; (iv) information about the Company or its affiliates’ employees and the terms and conditions of their employment; (v) the Company or its affiliates’ computer techniques, programs and software, or (vi) any other confidential or proprietary information of the Company or the Company or its affiliates’ customers, suppliers, vendors, investors, partners, or other third parties that cannot be obtained readily by the public.  Executive acknowledges that this Confidential Information constitutes a valuable, special, and unique asset used by the Company or its affiliates in their business to obtain a competitive advantage over their competitors.  Executive further acknowledges that protection of such Confidential Information against unauthorized disclosure and use is of critical importance to the Company or its affiliates in maintaining their competitive position.

 

3.2          Inventions.  Executive agrees that all confidential information including copyrightable works, trademarks, and inventions (patentable or not), discovered, created, developed, or invented by Executive as a result of work that Executive performs in connection with this Agreement (whether during business hours and whether on Company premises or otherwise), and all applications for patents and resulting patents, shall belong to and be the property of the Company.  All proprietary and confidential information including, but not limited to, copyrightable works, trademarks, and inventions (patentable or not), discovered, created, developed, or invented by Executive as a result of work that Executive performs in connection with this Agreement (whether during business hours and whether on Company premises or otherwise), and all applications for patents and resulting patents, shall belong to and be the property of the Company.

 

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Executive agrees promptly to disclose to the Company all such intellectual property; cooperate fully with and assist the Company in the preparation and prosecution of all applications for patents, trademark registrations, and copyright registrations covering any such property; execute all necessary documents related to such property; provide necessary assistance associated with any other protection procedures for such property; assign to the Company all patents, trademark registrations, and copyright registrations issuing on such applications; and aid the Company in the enforcement of its proprietary rights.  The Company shall pay Executive reasonable compensation for and reimburse Executive for reasonable expenses associated with time spent in assisting, preparing, and prosecuting applications, executing necessary documents, engaging in other protection proceedings, and aiding the Company in enforcing its proprietary rights in connection with matters arising under this paragraph after the termination of Executive employment.

 

This Company Property and Inventions section shall not apply to any inventions that Executive developed or conceived prior to employment with the Company.  Similarly and regardless of any inventions described by Executive in the forgoing sentence, this Section shall not apply to any inventions that meet all of the following requirements:  (i) the invention is developed entirely by Executive on Executive’s own time without using the Company’s equipment, supplies, facilities or proprietary and confidential information; (ii) the invention does not relate to the Company’s business or the actual or demonstrably anticipated research or development of the Company; and (iii) the invention does not result from any work performed by Executive for the Company.

 

3.3          Non-compete Obligations.  The Company agrees to provide Executive with access to proprietary and confidential information upon signing of this Agreement.  In consideration for the Company’s agreement to disclose proprietary and confidential information to Executive and to protect the proprietary and confidential information described above, Executive agrees not to compete with the Company and its affiliates in the seismic service industry during employment with the Company.  In addition, following termination of employment by the Company, Executive agrees that he will not compete in the seismic service industry as more specifically set forth below and in Exhibit A.  During the Non-Competition Period stated on Exhibit A, Executive will not, directly or indirectly, for Executive or for others, in the Geographic Region defined in Exhibit A:

 

a.             engage in the seismic service industry to provide seismic data acquisition and seismic data processing and integrated reservoir geosciences services business such as providing advanced software and related services to the oil and natural gas exploration and production industry including, but not limited to, analysis, visualization, and modeling of the Earth’s subsurface, seismic data processing and imaging, prospect interpretation and modeling, reservoir characterization, time/depth conversions, or any other advanced software application or related service that was considered, developed, or offered by the Company within the twelve months preceding the termination of Executive’s employment with the Company (the “Restricted Business”);

 

b.             call on, service, or solicit Restricted Business from customers or potential customers of the Company or its affiliates with whom Executive, or any member of Executive management, within the previous twenty-four months, had or made contact.  These restrictions are limited by geography to the specific places, addresses, or locations where a customer is present and available for calling on, soliciting or servicing customers; or

 

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c.             render advice or services to, serve as a member of a Board of Directors, or otherwise assist, any other person, association or entity engaged in the Restricted Business activities referenced in “a” or “b” above.

 

Executive understands that the foregoing restrictions may limit Executive’s ability to engage in certain activities in the Geographic Region and during the Non-Competition Period, but acknowledges that these restrictions are necessary to protect the Confidential Information the Company or its affiliates has provided to Executive and the value of compensation available to Executive and others.  Executive agrees that the restrictions set forth in this paragraph and Exhibit A are intended to protect the legitimate business interests of the Company and its proprietary and confidential information that will be provided to Executive during employment.  Executive agrees that the time, geographic and scope of activity limitations set forth in Exhibit A are reasonable and necessary to protect the Company’s legitimate business interests.  Executive further acknowledges that in the event of Executive’s termination, Executive’s knowledge, experience and capabilities are such that Executive can obtain employment in business activities which are of a different and non-competing nature than those performed in the course of Executive’s employment with the Company.

 

3.4          Non-solicitation.  During Executive’s employment, and for the longer of twelve months or the Severance Pay Period, if applicable, following the termination of employment for any reason, Executive will not, either directly or indirectly, call on, solicit, encourage, or induce any other employee or officer of the Company or its affiliates with whom Executive had contact with, knowledge of, or association with in the course of employment with the Company, to terminate the individual’s employment or affiliation with the Company, and will not assist any other person or entity in such a solicitation.

 

Section 4: Other Provisions

 

4.1          Waiver of Right to Jury Trial.

 

THE COMPANY AND EXECUTIVE HEREBY VOLUNTARILY, KNOWINGLY AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY TO ALL CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT, AS WELL AS TO ALL CLAIMS ARISING OUT OF EXECUTIVE’S EMPLOYMENT WITH THE COMPANY OR TERMINATION THEREFROM INCLUDING, BUT NOT LIMITED TO:

 

a.             Any and all claims and causes of action arising under contract, tort or other common law including, without limitation, breach of contract, fraud, estoppel, misrepresentation, express or implied duties of good faith and fair dealing, wrongful discharge, discrimination, retaliation, harassment, negligence, gross negligence, false imprisonment, assault and battery, conspiracy, intentional or negligent infliction of emotional distress, slander, libel, defamation and invasion of privacy.

 

b.             Any and all claims and causes of action arising under any federal, state or local law, regulation or ordinance, including, without limitation, claims arising under Title VII of the Civil Rights Act of 1964, the Pregnancy Discrimination Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act and all corresponding state laws.

 

c.             Any and all claims and causes of action for wages, employee benefits, vacation pay, severance pay, pension or profit sharing benefits, health or welfare benefits, bonus

 

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compensation, commissions, deferred compensation or other remuneration, employment benefits or compensation, past or future loss of pay or benefits or expenses.

 

4.2          Choice of Law/Exclusive Jurisdiction and Venue.  The Company and Executive acknowledge and agree that this Agreement shall be interpreted, governed by and construed in accordance with the laws of the State of Texas, without regard to the conflict of laws principles or rules thereof.

 

The Company and Executive irrevocably and unconditionally agree that any legal suit, action or proceeding arising out of or relating to this Agreement, as well as to all claims arising out of Executive’s employment with Employer or termination therefrom, shall be brought in either the Federal District Court for the Southern District of Texas—Houston Division or in a judicial district court of Harris County, Texas (hereinafter referred to as the “Texas Courts”).  In that regard, the Company and Executive waive, to the fullest extent allowed, any objection which the Company or Executive may have to the venue of any such proceeding being brought in the Texas Courts, and any claim that any such action or proceeding brought in the Texas Courts has been brought in an inconvenient forum. In addition, the Company and Executive irrevocably and unconditionally submit to the exclusive jurisdiction of the Texas Courts in any such suit, action or proceeding.  The Company and Executive acknowledge and agree that a judgment in any suit, action or proceeding brought in the Texas Courts shall be conclusive and binding on each and may be enforced in any other courts to whose jurisdiction the Company or Executive is or may be subject to, by suit upon such judgment.

 

4.3          Code Section 409A and Other Tax Considerations.

 

a.             Deferred Compensation Exceptions.  Payments under this Agreement will be administered and interpreted to maximize the short-term deferral exception to and the involuntary separation pay exception under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder (collectively “Section 409A”).  The portion of any payment under this Agreement that is paid within the short-term deferral period (within the meaning of Code Section 409A and Treas. Regs. §1.409A-1(b)(4)) or that is paid within the involuntary separation pay safe harbor (as described in Code Section 409A and Treas. Regs. §1.409A-1(b)(9)(iii)) will not be treated as nonqualified deferred compensation and will not be aggregated with other nonqualified deferred compensation plans or payments.

 

b.             Separate Payments and Payment Timing.  Any payment or installment made under this Agreement, any amount that is paid as a short-term deferral, within the meaning of Treas. Regs. §1.409A-1(b)(4), and any payment within the involuntary separation pay safe harbor exception in Treas. Regs. §1.409A-1(b)(9)(iii) will be treated as separate payments.  Executive will not, directly or indirectly, designate the taxable year of a payment made under this Agreement.  Payment dates provided for in this Agreement will be deemed to incorporate grace periods that are treated as made upon a designated payment date within the meaning of Code Section 409A and Treas. Regs. §1.409A-3(d).  The Company does not guaranty or warrant the tax consequences of this Agreement and, except as specifically provided to the contrary in this Agreement, Executive, in all cases, will be liable for any taxes due as a result of this Agreement.  Neither the Company nor any of its affiliates shall have any obligation to indemnify or otherwise hold you harmless from any or all such taxes, interest or penalties, or liability for any damages related thereto.  Executive acknowledges that he has been advised to obtain independent legal, tax or other counsel in connection with Section 409A.

 

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c.             General Section 409A Provisions.  If for any reason, the short-term deferral or involuntary separation pay plan exception is inapplicable, payments and benefits payable to Executive under this Agreement are intended to comply with the requirements of Section 409A.  To the extent the payments and benefits under this Agreement are subject to Section 409A, this Agreement will be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations thereunder (and any applicable transition relief under Section 409A of the Code).

 

(i)            If Executive or the Company determines that any payments or benefits payable under this Agreement intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A of the Code, Executive and the Company agree to amend this Agreement, or take such other actions as Executive and the Company deem reasonably necessary or appropriate, to comply with the requirements of Section 409A of the Code, the Treasury Regulations thereunder (and any applicable relief provisions) while preserving the economic agreement of the parties.  If any provision of the Agreement would cause such payments or benefits to fail to so comply, such provision will not be effective and will be null and void with respect to such payments or benefits, and such provision will otherwise remain in full force and effect.

 

(ii)           All payments considered nonqualified deferred compensation under Section 409A and the regulations thereunder will be made on the date(s) provided herein and no request to accelerate or defer any payment under this Section will be considered or approved for any reason whatsoever, except as permitted under Section 409A.  Notwithstanding the foregoing, amounts payable hereunder which are not nonqualified deferred compensation, or which may be accelerated pursuant to Section 409A, such as distributions for applicable tax payments, may be accelerated, but not deferred, at the sole discretion of Company.

 

(iii)          To the extent required to comply with Section 409A, all references in this Agreement to termination of employment or termination mean Executive’s “separation from service” as that term is defined in Section 1.409A-1(h) of the Treasury Regulations.

 

d.             Reimbursements and In-Kind Benefits.  If any benefits coverage (whether provided to you before or after your termination of employment) under a medical, dental and/or life insurance plan, or the provision of any other benefit or perquisite, results in in-kind benefits or reimbursements to you that are (x) taxable for federal income tax purposes and (y) subject to Section 409A, then such in-kind benefits or reimbursements shall be subject to the following rules:

 

(i)            The in-kind benefits to be provided, or the amounts to be reimbursed, shall be determined pursuant to the terms of the applicable benefit plan, and shall be limited, in addition to any other applicable limitations, to your lifetime and the lifetime of your eligible dependents.

 

(ii)           The amounts eligible for reimbursement, or the in-kind benefits provided, during any calendar year may not affect the expenses eligible for reimbursement, or the in-kind benefits provided, in any other calendar year.

 

(iii)          Any reimbursement of an eligible expense shall be made on or before the last day of the calendar year following the calendar year in which the expense was incurred.

 

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(iv)          Your right to an in-kind benefit or reimbursement is not subject to liquidation or exchange for cash or another benefit.

 

e.             Specified Employee Status.

 

(i)            If Executive is a specified employee (within the meaning of Code Section 409A) on the date of his separation from service, any payments made with respect to such separation from service under this Agreement, and other payments or benefits under this Agreement that are subject to Section 409A of the Code, will be delayed in order to comply with Section 409A(a)(2)(B)(i) of the Code, and such payments or benefits will be paid or distributed to you during the five-day period commencing on the earlier of:  (i) the expiration of the six-month period measured from the date of Executive’s separation from service, or (ii) the date of Executive’s death.  Upon the expiration of the applicable six-month period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this Section (e) will be paid to Executive (or Executive’s estate, in the event of Executive’s death) in a lump sum payment.  Any remaining payments and benefits due under the Agreement will be paid as otherwise provided in the Agreement.

 

(ii)           To minimize the risk that the six-month delay pursuant to the preceding paragraph will disrupt coverage under any employee benefit plan in which Executive is entitled to participate following the termination of employment, payments that are not considered deferred compensation because they are paid as a short-term deferral or are within the involuntary separation pay safe harbor exception that are made during the six months following the termination of your employment shall first be applied to cover any costs relating to such continued employee benefits plan coverage, but only to the extent that such coverage would constitute deferred compensation for purposes of Section 409A, and thereafter shall be made in respect of other amounts or benefits owed to you.

 

f.             Withholding Taxes.  To the extent any payments under this Agreement are wages subject to income and employment tax withholding, the Company has the right to withhold or otherwise require Executive to pay to the Company the amount of any taxes that the Company may be required to withhold before delivery of such payment to Executive.

 

4.4          Entire Agreement.  This Agreement constitutes the entire Agreement between the parties.  None of the provisions of this Agreement may be waived, changed or altered except by an instrument in writing signed by both parties. The waiver by either party of a breach or violation of any provision of this Agreement shall not operate as, or be construed to be, a waiver of any subsequent breach or violation.  Headings used throughout this Agreement are for administrative convenience only and shall be disregarded for the purpose of construing and enforcing this Agreement.

 

4.5          Assignment.  This Agreement shall be binding and inure to the benefit of the Company and any other person, association, or entity that may acquire or succeed to all or substantially all of the business assets of the Company.  Executive’s rights and obligations under this Agreement are personal, and they shall not be assigned or transferred without the Company’s prior written consent.

 

4.6          Severability.  If any provision of this Agreement is declared or determined by any court of competent jurisdiction to be illegal, invalid, or unenforceable and cannot be modified to be

 

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enforceable, then the illegal, invalid or unenforceable provision shall be excluded from this Agreement, leaving the remaining provisions in full force and effect.

 

4.7          Executive Representations.  Executive represents and certifies that he/she: (1) has carefully read all of this Agreement; (2) has been given a fair opportunity to ask any questions necessary to understand the terms, consequences and binding effect of this Agreement; (3) understands its provisions and corresponding obligations; (4) has been given an adequate opportunity to consult with an attorney regarding this Agreement; (5) has determined that it is in his/her best interests to enter into this Agreement; (6) has not been influenced to sign this Agreement by any statement or representation by Company not contained in this Agreement; (7) expressly intends for this Agreement to supersede any terms of employment Executive might otherwise be eligible for in his/her Country of Operations or Country of Origin; and (8) enters into this Agreement knowingly and voluntarily.

 

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the Effective Date first written above.

 

 

	
GEOKINETICS   INC.
    	
 
    	
EXECUTIVE
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
/s/ William Ziegler
    	
 
    	
/s/ David Crowley
    
	
 
    	
William   Ziegler
    	
 
    	
David   Crowley
    
	
 
    	
Chairman   of the Board of Directors
    	
 
    	
 
    
	
 
    	
Geokinetics   Inc.
    	
 
    	
 
    

 

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EXHIBIT A

 

To the Employment Agreement Between Geokinetics Inc. (“Company”) and David Crowley (“Executive”)

 

The Company and the Executive agree that this Exhibit A is incorporated by reference into and is intended to be a material part of the Employment Agreement dated as of May 2, 2012 between the Company and the Executive (collectively the “Agreement”).

 

	
Name
    	
 
    	
David   Crowley
    
	
 
    	
 
    	
 
    
	
Position
    	
 
    	
President   and Chief Operating Officer
    
	
 
    	
 
    	
 
    
	
Country   of Operation
    	
 
    	
United   States
    
	
 
    	
 
    	
 
    
	
Reporting   To
    	
 
    	
Board   of Directors
    
	
 
    	
 
    	
 
    
	
Monthly   Salary
    	
 
    	
Executive’s   salary shall be a base salary of $16,666.67 USD paid semi-monthly (24 pay   cycles), which amounts to $400,000.00 USD on an annual basis. The Company is   or may be required to withhold from such gross amount deductions for federal,   state or local taxes, F.I.C.A. and such other taxes required by appropriate   governmental agencies. The amount paid to Executive shall be net of such   amounts. Executive’s salary will be reviewed and may be adjusted in   accordance with the Company’s normal performance review practices.
    
	
 
    	
 
    	
 
    
	
Incentive   Compensation Plan
    	
 
    	
Executive   will be eligible to participate in the Company’s Incentive Compensation Plan   based on an annual target of 67% of   Executive’s annual base salary, with a maximum award of 100% of annual base   salary.  Any bonus will be determined under the terms of the Company’s   Incentive Compensation Plan determined based upon the Company’s achievement   of financial targets and other objectives established by the Compensation   Committee of the Board of Directors of Geokinetics (the “Compensation   Committee”). Executive must be employed by the Company at the time of payment   in order to be eligible for and receive the annual bonus. For 2012, Executive   will be eligible to receive a pro-rated share of the bonus based solely on   achievement of specifically indentified financial targets and other objective   goals determined by the Compensation Committee.
    
	
 
    	
 
    	
 
    
	
Equity   Plan Participation/ Long-Term Incentive Awards
    	
 
    	
Executive   shall be eligible to participate in the Company’s long-term incentive   plan(s) in place at the time of the Employment Agreement (currently the   Geokinetics 2010 Stock Awards Plan) or any similar plan or plans thereafter.   The value of Executive’s periodic long-term incentive award will target approximately   33% of the then-current base salary for purposes of any recommendations to   the Compensation Committee. However, the specific amount of any awards will   be subject to the sole discretion of the Compensation Committee pursuant to   the provisions of the Geokinetics 2010 Stock Awards Plan. Actual payments or   settlement of the awards will be based upon performance results and may   consist of restricted shares, options or other units. All participation shall   be in accordance with the terms and provisions of the Plan(s).
    
	
 
    	
 
    	
 
    
	
Inducement   Sign-on Awards
    	
 
    	
The   Compensation Committee has approved the grant to Executive of the following   equity awards as an inducement to accept employment:

 

a.   A grant as of the close of   business on the last trading day immediately preceding the employment   commencement date of 350,000 restricted common shares (the “Restricted Stock   Inducement Award”) that will vest in three equal annual installments   beginning on May 15, 2013 and the next two anniversaries thereof (33.3%   Year 1, 33.3% Year 2 and 33.3% Year 3); and 

 

b.   A grant as of the close of   business on the last trading day immediately preceding the employment   commencement date of non-qualified stock options to purchase 200,000 shares   of common stock (the “Option Inducement Award”) with a fair market value   exercise price equal to the mean (average) of the high and low sales prices   for a share of common stock as quoted on the NYSEAMEX on the date of grant.   The Option Inducement Award will vest and become exercisable in four equal annual   
    

 

 

	
 
    	
 
    	
installments   beginning on May 15, 2014 and the next three anniversaries thereof (0%   Year 1, 25% Year 2, 25% Year 3, 25% Year 4 and 25% Year 5). The term of the   Option Inducement Award will be ten years from the grant date. Except as   provided in the Death/Disability Benefits provisions in this Exhibit A   (in the event Executive dies or becomes disabled (within the meaning of   clause (b) or (c) of the definition of Death/Disability in   Section 2.3 of the Agreement, “Disabled” or “Disability”) during   employment with the Company while performing or traveling on Company   business), the term of the Option Inducement Award will expire and no longer   be exercisable on the earlier of 90 days after termination of employment or   the maximum term stated in the option agreement. 

 

Notwithstanding   the foregoing, in the event Executive fails to give the Company at least five   days advance written notice of his employment commencement date, the date of   grant of the Restricted Stock Inducement Award and the Option Inducement   Award will be the employment commencement date. The Restricted Stock   Inducement Award and the Option Inducement Award will be subject to all the   provisions of the Geokinetics 2010 Stock Awards Plan. The Option Inducement   Award is intended to be issued and maintained in such manner to be exempt   from Code Section 409A. In the event of a material restructuring of the   Company’s capital structure on or before December 31, 2013, the Board of   Directors will recommend that the Compensation Committee make such additional   grants that may be required to preserve Executives then existing ownership   percentage represented by the Restricted Stock Inducement Award and the   Option Inducement Award determined on a fully diluted basis as of the day   immediately prior to the date of any such restructuring. Any additional   anti-dilution awards will be made in the same ratio as the original   inducement awards (63.6% restricted stock and 36.4% stock options) and any   option awards will be granted with a fair market value exercise price on the   date of grant.
    
	
 
    	
 
    	
 
    
	
Vacation
    	
 
    	
Executive   will be entitled to five weeks of paid vacation per annum in accordance with   the Company’s policies.
    
	
 
    	
 
    	
 
    
	
Severance   Pay Period and Severance Pay
    	
 
    	
Except   as provided below under the Change of Control Severance Pay Period, the   Severance Pay Period for purposes of Section 3.4 of the Agreement will   be 12 months. If Executive is terminated without Cause or resigns for Good   Reason during the first two (2) years of employment, Executive will   receive a lump-sum severance payment equal to the sum of one year of the then   current annual base salary and one year’s target bonus to be paid in cash on   the eighth day following receipt by the Company of Executive’s executed   Release; provided, however, if the Severance Pay is deferred compensation   subject to Code Section 409A and if the period during which Executive   has discretion to execute or revoke the Release straddles two taxable years   of Executive, then the Company will commence the Severance Pay payment in the   second of such taxable years. Notwithstanding the foregoing, subject to the   Release requirement, the Severance Pay will in all events be paid no later   than 60 days following Executive’s termination of employment, regardless of   which taxable year Executive actually delivers the executed Release to the   Company. Executive may not, directly or indirectly, designate the calendar   year of the Severance Payment. In addition, the Restricted Stock Inducement   Award will become fully vested. Executive will also be entitled to any equity   awards that were fully vested as of the date of termination in accordance   with the terms of such awards, but all other unvested equity awards will be   forfeited. However, the portion of any Option Inducement Award that is   scheduled to vest (assuming Executive’s employment continued) within 90 days   after the date of termination will become fully vested as of the date of   termination and the term of any vested Option Inducement Award will not   expire and continue to be exercisable until 90 days after the date of   termination of Executive’s employment. After the first two (2) years of   employment, if Executive is terminated without Cause or resigns for Good   Reason, Executive will receive, subject to execution of an appropriate   release, a lump-sum severance payment equal to the sum of one year’s base   salary and one year’s target bonus, plus any equity awards that were fully   vested as of the date of termination. All unvested equity awards will be   forfeited. However, the portion of any equity award that is scheduled to vest   (assuming Executive’s employment continued) within 90 days after the date of   termination will become fully vested as of the date of termination. The   amount of any lump-sum Severance Payment will be paid on the eighth day   following receipt by the Company of Executive’s executed Release; provided,   however that if the Severance Pay is 
    

 

 

	
 
    	
 
    	
deferred   compensation subject to Code Section 409A and if the period during which   Executive has discretion to execute or revoke the Release straddles two   taxable years of Executive, then the Company will commence the Severance Pay   payment in the second of such taxable years. Notwithstanding the foregoing,   subject to the Release requirement, the Severance Pay will in all events be   paid no later than 60 days following Executive’s termination of employment,   regardless of which taxable year Executive actually delivers the executed   Release to the Company. Executive may not, directly or indirectly, designate   the calendar year of the Severance Payment.
    
	
 
    	
 
    	
 
    
	
Change   of Control Severance Pay Period and Severance Pay
    	
 
    	
The   Severance Pay Period for purposes of Section 3.4 of the Agreement will   be 24 months if Executive is terminated without Cause or resigns for Good   Reason, each within one (1) year immediately following a Change of   Control, and Executive will be entitled to receive, subject to execution and   return of an irrevocable Release in a form satisfactory to the Company: 

 

a.   A lump-sum Severance   Payment equal to two (2) times Executive’s then-current annual base salary   and target bonus to be paid in cash on the eighth day following receipt by   the Company of Executive’s executed Release; provided, however, if the   Severance Pay is deferred compensation subject to Code Section 409A and   if the period during which Executive has discretion to execute or revoke the   Release straddles two taxable years of Executive, then the Company will   commence the Severance Pay payment in the second of such taxable years.   Notwithstanding the foregoing, subject to the Release requirement, the   Severance Pay will in all events be paid no later than 60 days following   Executive’s termination of employment, regardless of which taxable year   Executive actually delivers the executed Release to the Company. Executive   may not, directly or indirectly, designate the calendar year of the Severance   Payment; and 

 

b.   Immediate vesting of all   then-outstanding equity-based awards with any options continuing to be   exercisable during the remainder of the stated term (determined without   regard to any employment termination) subject to the terms of the option   agreement. 

 

Notwithstanding   the preceding, if a Change of Control occurs where: (i) the Company is   not the surviving entity in any merger, consolidation or other reorganization   (or survives only as a subsidiary of an entity other than a previously   wholly-owned subsidiary of the Company) and, immediately after giving effect   to such merger, consolidation or reorganization, the surviving entity is a   publicly traded entity (or a direct or indirect controlled subsidiary of a   publicly traded entity), or (ii) the Company is acquired by another   entity whose securities (or the securities of a direct or indirect   controlling parent of such entity) are publicly traded, then whether or not   Executive’s employment is terminated, all then-outstanding equity-based   awards held by Executive will become immediately vested as of the date of the   Change of Control and the term of any outstanding options will continue to be   exercisable during the remainder of the stated term (determined without   regard to any employment termination) subject to the terms of the option   agreement and the applicable Change of Control transaction terms.
    
	
 
    	
 
    	
 
    
	
Death/Disability   Benefits
    	
 
    	
In   the event of Executive’s Death/Disability while performing or traveling on   Company business during employment with the Company, Executive will not be   entitled to any severance or compensation, other than base salary through the   date of termination and reimbursement of proper business expenses incurred   through the date of termination, subject to the Company’s standard policies.   The terms of any stock options or restricted stock awarded to Executive will   provide that in the event of Executive’s Death/Disability while performing or   traveling on Company business during employment with the Company, the vesting   of such awards will become fully vested and the option term specified in any   outstanding option awards will not terminate prior to the maximum term   specified in the option agreement.
    

 

 

	
Non-Competition   Period
    	
 
    	
The   employment term, plus 12 months from last day of employment with the Company.
    
	
 
    	
 
    	
 
    
	
Geographic   Region of Non-Competition Obligations
    	
 
    	
During   the Non-Competition Period, Executive shall be subject to the Restricted   Business covenants in the Agreement. Due to the Executive’s responsibilities   and contact with confidential affairs of the Company, including business   matters, costs, profits, markets, sales, trade secrets, ideas,   customers, etc., this provision is in effect globally.
    

 

IN WITNESS WHEREOF, the parties hereto have executed this Exhibit A To the Employment Agreement Between Geokinetics Inc. and David Crowley as of the Effective Date first written above.

 

	
GEOKINETICS   INC.
    	
 
    	
EXECUTIVE
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
/s/ William Ziegler
    	
 
    	
/s/ David Crowley
    
	
 
    	
William   Ziegler
    	
 
    	
David   Crowley
    
	
 
    	
Chairman   of the Board of Directors
    	
 
    	
 
    
	
 
    	
Geokinetics   Inc.Exhibit 10.2

 

SERIES B PREFERRED STOCK SUBSCRIPTION AND EXCHANGE AGREEMENT

 

This Subscription and Exchange Agreement (this “Agreement”), dated as of May 9, 2012 (the “Effective Date”), is entered into by and among Geokinetics Inc., a Delaware corporation (the “Company”), and each of the other persons who are signatories to this Agreement and who are listed on Schedule A attached hereto (each of them is referred to as a “Stockholder” and together they are referred to as “Stockholders”).

 

RECITALS

 

A.            Certain technical legal questions have arisen relating to the prior issuance and/or amendment of certain shares of the Series B Senior Convertible Preferred Stock, par value $10.00 per share, of the Company (which shares were subsequently renamed as Series B-1 Senior Convertible Preferred Stock by an Amended Certificate of Designation filed with the Secretary of State of the State of Delaware on July 28, 2008 and subsequently renamed as Series B Preferred Stock by a Third Amended Certificate of Designation filed with the Secretary of State of the State of Delaware on December 18, 2009)(the “Old Shares”); and

 

B.            In order to resolve any such questions, and to ensure that full legal effect is given to prior agreements between the Company and the Stockholders, the Company and the Stockholders desire (i) to cause the Company to issue to each Stockholder the number of shares of Series B-1 Senior Convertible Preferred Stock, par value $10.00 per share, of the Company set forth next to such Stockholder’s name on Schedule A (the “New Shares”) in exchange for the number of Old Shares held (or purported to be held) by each such Stockholder and (ii) that all references to the Old Shares in any other agreements, documents, instruments or certificates (including any warrant certificates)(the “Related Agreements”) shall mean and be a reference to the New Shares issued to the Stockholders pursuant to this Agreement as if such New Shares were issued on the same date as the Old Shares such that the rights and obligations pursuant to the Related Agreements would have the same economic effect as they would have had, save and except for the amendments referred to in Section 1 below (the “Related Agreement Amendments”) with respect to the warrants issued on July 28, 2008 and December 14, 2010 and the changes to modify the anti-dilution provisions reflected in the New Shares to be different from the Old Shares with respect to the warrants to be issued in connection with the Commitment Letter between the Company and Avista Capital Partners, L.P. and Avista Capital Partners (Offshore), L.P. dated March 16, 2012, as amended, if there were no such questions relating to the issuance of and/or amendment to the Old Shares, in each case upon the terms and conditions set forth herein.

 

AGREEMENT

 

NOW THEREFORE, in order to implement the foregoing and in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Company and each of the Stockholders agree as follows:

 

Section 1.              Exchange of Shares.  The Company (x) shall issue to each Stockholder, and each such Stockholder shall receive and accept from the Company, the number of New 

 

 

Shares set forth next to such Stockholder’s name on Schedule A and (y) agrees that all references to the Old Shares in the Related Agreements shall mean and be a reference to the New Shares issued to the Stockholders pursuant to this Agreement as if such New Shares were issued on the same date as the Old Shares such that the rights and obligations pursuant to any such Related Agreements would have the same economic effect as they would have had, save and except for the Related Agreement Amendments, if there were no questions as to the issuance of and/or amendment to the Old Shares, in exchange (the “Exchange”) for:

 

(a)           all of such Stockholder’s rights, interests and claims with respect to the Old Shares (and any right, warrant, option or other security or instrument evidencing, or convertible into or exchangeable or otherwise exercisable for any Old Shares) to the extent such rights, interests and claims are held by such Stockholder;

 

(b)           the agreement of each of the Stockholders that (x) all references to the Old Shares in any of the Related Agreements shall mean and be a reference to the New Shares issued to the Stockholders pursuant to this Agreement as if such New Shares were issued on the same date as the Old Shares such that the rights and obligations pursuant to the Related Agreements would have the same economic effect as they would have had, save and except for the Related Agreement Amendments, if there were no questions as to the issuance of and/or amendment to the Old Shares, and (y) such Stockholders will facilitate (including the return of any of the certificates representing the Old Shares to the Company for replacement thereof), at the Company’s sole timing and discretion, the amendment, restatement or replacement of any of the Related Agreements with new agreements, documents, instruments or certificates to further effectuate the agreement set forth in this Section 1(b); and

 

(c)           the release by such Stockholder as set forth in Section 2;

 

provided, that the Exchange shall be contingent upon (i) the approval of the Exchange (including, but not limited to, the creation of the New Shares and the issuance of the New Shares to the Stockholders) by the requisite percentage of holders of the outstanding Series D Junior Preferred Stock of the Company in accordance with Section 1(d) of the Certificate of Designation of Series D Junior Preferred Stock, (ii) the approval of the Exchange (including, but not limited to, the creation of the New Shares and the issuance of the New Shares to the Stockholders) by the requisite percentage of the holders of the outstanding Series C Senior Preferred Stock of the Company in accordance with Section 1(d) of the Certificate of Designation of Series C Senior Preferred Stock, (iii) the amendment of the outstanding warrants to purchase common stock of the Company issued on July 28, 2008 to modify the price adjustment provision of such warrants, (iv) the amendment of the outstanding warrants to purchase common stock of the Company issued on December 14, 2010 to modify the definition of “Additional Stock,” and (v) the filing of a Certificate of Designation of the New Shares in the form attached as Annex A with the Secretary of State of the State of Delaware.  Following the Exchange, the Company shall promptly issue to each Stockholder a stock certificate evidencing the New Shares set forth next to such Stockholder’s name on Schedule A upon the execution and delivery by such Stockholder of this Agreement and the surrender by such Stockholder of each stock certificate or certificates, if any, representing the Old Shares.

 

 

Section 2.              Release of Claims.  In consideration for the New Shares to be issued in exchange for the Old Shares and the modification of the Related Agreements, the Company and each Stockholder, their respective successors and assigns, and all persons or entities acting by, through, under or in concert with the Company and each such Stockholder, do hereby release and forever discharge (a) the Stockholders, in the case of the Company, and the Company, in the case of the Stockholders, (b) all past and present officers, directors, employees, counsel, agents, representatives and controlling persons, if any, of the Stockholders, in the case of the Company, and the Company, in the case of the Stockholders (c) all past and present affiliates and subsidiaries of the Stockholders, in the case of Company, and the Company, in the case of the Stockholders and (d) all of the past or present subsidiaries’ and affiliates’ officers, directors, employees, counsel, agents, representatives, controlling persons of the Stockholders, in the case of the Company, and the Company, in the case of the Stockholders, if any, from any and all manner of (and hereby waive any) claims, actions or proceedings of any nature which have been, could have been, or could be brought in any local, state or federal court, administrative agency or other tribunal, including, but not limited to, those arising under common law, federal law, or state statutory law, in law or in equity, suits, debts, liens, contracts, agreements, including, but not limited to, any escrow agreement, investors’ agreement, stock option agreement, or subscription or stock purchase agreement, promises, liabilities, claims, demands, damages, losses, costs or expenses, of any nature whatsoever, known or unknown, fixed or contingent, including all claims for incidental, consequential, punitive or exemplary damages or equitable relief arising out of any of the foregoing, which the Company or such Stockholder, as applicable, now has or may hereafter have against any of the foregoing respective released parties, arising out of or related to the issuances (or purported issuance) of the Old Shares (or any right, warrant, option or other security or instrument evidencing, or convertible into or exchangeable or otherwise exercisable for, any capital stock of the Company), and ratification of all actions taken by the Stockholders, in the case of the Company, or Board of Directors of the Company, in the case of the Stockholders, to approve the foregoing.

 

Section 3.              Representations and Warranties.

 

(a)           Each of the Stockholders hereby represents, warrants and covenants to the Company as of the Effective Date as follows:

 

(i)            that each such Stockholder is, or but for the questions relating to the Company’s issuance or amendment of the Old Shares would be, the record and beneficial owner of the number of issued and outstanding Old Shares set forth next to such Stockholder’s name on the signature page hereto;

 

(ii)           that the Old Shares set forth on the signature page constitute all of the issued and outstanding Old Shares owned, or arguably owned, of record or beneficially owned by such Stockholder, and the Stockholder does not own (or have any claim to own) beneficially or of record, any other Old Shares (or any right, warrant, option or other security or instrument evidencing, or convertible into or exchangeable or otherwise exercisable for, any Old Shares);

 

(iii)          that each such Stockholder has the legal capacity, power and authority to enter into and perform all of such Stockholder’s obligations under this Agreement;

 

 

(iv)          that this Agreement has been duly and validly executed and delivered by the Stockholder and constitutes a valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms;

 

(v)           that each such Stockholder is an “accredited investor” (as such term is used in Rule 501 under the Securities Act of 1993, as amended); and

 

(vi)          that from time to time, at the request of the Company and without further consideration, the Stockholder shall execute and deliver such additional documents as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement.

 

(b)           The Company hereby represents, warrants and covenants to the Stockholders as of the Effective Date as follows:

 

(i)            that it is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware;

 

(ii)           that it has the corporate power and authority to enter into and perform all of its obligations under this Agreement and to consummate the transactions contemplated hereby;

 

(iii)          that the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Company;

 

(iv)          that it has taken all other actions required by applicable law, its certificate of incorporation and its bylaws to consummate the transactions contemplated by this Agreement;

 

(v)           that this Agreement constitutes the valid and binding obligation of the Company and is enforceable in accordance with its terms, except as enforceability may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally; and

 

(vi)          that from time to time, at the request of the applicable Stockholder and without further consideration, the Company shall execute and deliver such additional documents as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement.

 

Section 4.              Intent of the Parties.  Each party acknowledges and agrees that it is the intent of the parties that the rights, interests and obligations of the parties with respect to the New Shares and the Related Agreements (after the substitution of the references to the Old Shares with references to the New Shares) shall be the same as the rights, interests and obligations of the parties with respect to the Old Shares (assuming the valid issuance of and/or amendment to the Old Shares) and the Related Agreements such that the New Shares and the Related Agreements (after the substitution of the references to the Old Shares with references to the New Shares) would have the same economic effect as the Old Shares and the Related Agreements would have 

 

 

had, save and except for the Related Agreement Amendments, if there were no questions as to the issuance of and/or amendment to the Old Shares.  Each party agrees that when construing the provisions of this Agreement and the Related Agreements that such intent will be taken into account and agrees to take such further actions as necessary to implement such intent.

 

Section 5.              Consent to Certain Actions.  Each of the Stockholders, by execution of this Agreement, does hereby, (a) consent to the creation of the New Shares and the issuance of the New Shares in exchange for the Old Shares, (b) consent to the creation of the Series C-1 Senior Preferred Stock of the Company and the issuance of the Series C-1 Senior Preferred Stock of the Company in exchange (the “Series C Preferred Stock Exchange”) for the Series C Senior Preferred Stock of the Company pursuant to the Series C Preferred Stock Subscription and Exchange Agreement, dated as of May 9, 2012, by and among the Company and Avista Capital Partners, L.P. and Avista Capital Partners (Offshore), L.P., and (c) waive such Stockholder’s rights, if any, to acquire capital stock of the Company in connection with the Series C Preferred Stock Exchange pursuant to Section 1(h) of the Fourth Amended Certificate of Designation of Series B Senior Convertible Preferred Stock of the Company.  Each Stockholder acknowledges and agrees that this Agreement constitutes such Stockholder’s written consent to the foregoing pursuant to Section 228 of the General Corporation Law of the State of Delaware.  Promptly following the execution of this Agreement, each Stockholder shall deliver a signed and dated copy of this Agreement to the Secretary of the Company and hereby directs the Secretary of the Company to file the fully executed copy of this Agreement with the books and records of the Company in accordance with Section 228 of the General Corporation Law of the State of Delaware.

 

Section 6.              Acknowledgment.  The Stockholders and the Company acknowledge and agree that (a) neither the issuance of New Shares in connection with the Exchange nor the issuance of shares of the Company’s Series C-1 Senior Preferred Stock in exchange for shares of the Company’s Series C Senior Preferred Stock shall constitute an issuance or deemed issuance of “Additional Stock” and shall not otherwise result in a conversion price adjustment pursuant to either the Certificate of Designation of the Old Shares or the Certificate of Designation of the New Shares and (b) the number of Old Shares exchanged for New Shares pursuant to this Agreement includes all dividends paid in additional Old Shares in lieu of cash for all quarters ending on or prior to March 31, 2012.

 

Section 7.              Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of laws principles thereof.

 

Section 8.              Assignment; Binding Effect; Benefits.  This Agreement is not assignable without the written consent of each of the other parties hereto.  Subject to the foregoing, the provisions of this Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors and permitted assigns.  Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties or their respective successors or assigns (and other than the persons released in Section 2 hereof) any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

 

 

Section 9.              Amendment.  This Agreement may be amended only by a written instrument signed by each of the parties which specifically states that it is amending this Agreement.

 

Section 10.            Counterparts.  This Agreement may be executed in counterparts or in facsimiles, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.  Notwithstanding anything in this Agreement to the contrary, the failure of one or more Stockholders (for whom this Agreement sets forth a signature line) to execute or otherwise to become bound by this Agreement shall not affect the enforceability of this Agreement against, or otherwise impact the validity of this Agreement with respect to, the persons who execute and deliver this Agreement.

 

Section 11.            Notice.  All notices and other communications made under this Agreement shall be in writing and shall be mailed by registered or certified U.S. mail or a nationally reputable overnight carrier, postage prepaid, sent by facsimile or otherwise delivered by hand or courier addressed to each party’s address or facsimile number set forth on the signature page.

 

[signature pages follow]

 

 

IN WITNESS WHEREOF, each of the parties has executed this Agreement on the date set forth below such party’s name.

 

	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
Geokinetics   Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Richard F. Miles
    
	
 
    	
 
    	
Richard   F. Miles
    
	
 
    	
 
    	
President   and Chief Executive Officer 
    
	
 
    	
 
    	
Date:   May 9, 2012
    

 

[Series B Preferred Stock Exchange Agreement]

 

 

	
 
    	
STOCKHOLDERS:
    
	
 
    	
 
    
	
 
    	
Avista   Capital Partners, L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Avista   Capital Partners GP, LLC
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Ben Silbert
    
	
 
    	
 
    	
Name:   Ben Silbert
    
	
 
    	
 
    	
Title:   General Counsel 
    
	
 
    	
 
    	
Date:   5/9/12
    
	
 
    	
 
    
	
 
    	
Address:
    	
65   E. 55th Street
    
	
 
    	
 
    	
18   Floor
    
	
 
    	
 
    	
NY   NY 10022
    
	
 
    	
 
    
	
 
    	
Number   of Shares Held:
    	
258,998
    
					

 

[Series B Preferred Stock Exchange Agreement]

 

 

	
 
    	
Avista   Capital Partners (Offshore), L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Avista   Capital Partners GP, LLC
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Ben Silbert
    
	
 
    	
 
    	
Name:   Ben Silbert
    
	
 
    	
 
    	
Title:   General Counsel
    
	
 
    	
 
    	
Date:   5/9/12
    
	
 
    	
 
    
	
 
    	
Address:
    	
65   E. 55th Street
    
	
 
    	
 
    	
18   Floor
    
	
 
    	
 
    	
NY   NY 10022
    
	
 
    	
 
    
	
 
    	
Number   of Shares Held:
    	
68,290
    
					

 

[Series B Preferred Stock Exchange Agreement]

 

 

	
 
    	
Levant   America S.A.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Kenneth H. Hannan, Jr.
    
	
 
    	
 
    	
Name:   Kenneth H. Hannan, Jr.
    
	
 
    	
 
    	
Title:   Attorney-in-fact
    
	
 
    	
 
    	
Date:   May 8, 2012
    
	
 
    	
 
    
	
 
    	
Address:
    	
c/o   Colonial Navigation Co. Inc.
    
	
 
    	
 
    	
750   Lexington Ave
    
	
 
    	
 
    	
NY   NY 10022
    
	
 
    	
 
    
	
 
    	
Number   of Shares Held:
    	
32,720
    
					

 

[Series B Preferred Stock Exchange Agreement]

 

 

SCHEDULE A

 

	
Name of Stockholder
    	
 
    	
Number of Old
   Shares
    	
 
    	
Number of New
   Shares to be Issued
   in Exchange for the
   Old Shares
    	
 
    
	
Avista   Capital Partners, L.P.
    	
 
    	
258,998
    	
 
    	
258,998
    	
 
    
	
Avista   Capital Partners (Offshore), L.P.
    	
 
    	
68,290
    	
 
    	
68,290
    	
 
    
	
Levant   America S.A.
    	
 
    	
32,720
    	
 
    	
32,720
    	
 
    

 

 

ANNEX A

 

See attached.

 

 

CERTIFICATE OF DESIGNATION OF

 

SERIES B-1 SENIOR CONVERTIBLE PREFERRED STOCK

 

OF

 

GEOKINETICS INC.

 

PURSUANT TO SECTION 151(g) OF THE

 

GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

 

Geokinetics Inc. (the “Corporation”), a corporation organized and existing under the laws of the State of Delaware, hereby certifies that the Board of Directors of the Corporation, on May 9, 2012, duly adopted the following resolution providing for the issuance of a series of the Corporation’s Preferred Stock, par value $10.00 per share (the “Preferred Stock”), and further providing for the designation, powers, preferences and relative, participating, optional and other rights, and the qualifications, limitations and restrictions thereof, all in accordance with Section 151(g) of the General Corporation Law of the State of Delaware:

 

RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation by Article Fourth of the Corporation’s Certificate of Incorporation (as amended, the “Certificate of Incorporation”), a series of Preferred Stock of the Corporation be, and hereby is, created out of the authorized but unissued shares of capital stock of the Corporation and authorized to be issued, such series to be designated Series B-1 Senior Convertible Preferred Stock, to consist of 550,000 shares, par value $10.00 per share, of which the powers, preferences and relative, participating, optional and other rights, and the qualifications, limitations and restrictions thereof, shall be, in addition to those set forth in the Certificate of Incorporation, as follows:

 

(1)           General.

 

(a)           The shares of such series shall be designated as the Series B-1 Senior Convertible Preferred Stock (the “Series B-1 Preferred Stock”).

 

(b)           The number of authorized shares of Series B-1 Preferred Stock shall be 550,000.

 

(c)           No fractional shares of Series B-1 Preferred Stock shall be issued.

 

(2)           Dividends.

 

(a)           The holders of Series B-1 Preferred Stock, prior and in preference to any declaration or payment of any dividend on any class or series of capital stock of this Corporation, shall be entitled to receive cumulative dividends at the applicable Dividend Rate.  “Dividend Rate” shall mean 9.75% per annum, compounded quarterly commencing on April 1, 2012, of the Original Issue Price (as defined in Section 3(a)) for each share of Series B-1 Preferred Stock.  At the option of the Corporation, all or any portion of dividends payable on shares of Series B-1

 

 

Preferred Stock on any quarterly dividend payment date through and including December 16, 2015 may be paid in additional shares of Series B-1 Preferred Stock, instead of cash with such number of additional shares of Series B-1 Preferred Stock to be rounded down to the nearest whole share and any amount so rounded down and not paid in cash being taken into account in the calculation of the dividend payment on the next quarterly dividend payment date.  The value of each share of Series B-1 Preferred Stock paid in lieu of cash shall be equal to the Original Issue Price.  After December 16, 2015, all dividends shall be paid in cash when, and if, declared.  All unpaid dividends on Series B-1 Preferred Stock shall be cumulative and shall accrue, compounding quarterly, regardless of whether or not the Corporation shall have funds legally available for the payment of such dividends.

 

(b)           After payment of the dividends provided for in Section 2(a), any additional dividends or distributions shall be distributed among all holders of the Common Stock, par value $.01 per share, of the Corporation (the “Common Stock”), Series B-1 Preferred Stock, and other preferred securities which are convertible into shares of Common Stock, in proportion to the number of shares of Common Stock that would be held by each such holder if all shares of Series B-1 Preferred Stock and other preferred securities were converted to Common Stock at the then-effective conversion rate.

 

(3)           Liquidation Preference.

 

(a)           The holders of Series B-1 Preferred Stock, in the event of any Liquidation Event (as defined in Section 3(c)), either voluntary or involuntary, shall be entitled to receive, prior and in preference to the distribution of any proceeds of such Liquidation Event (the “Proceeds”) to the holders of Common Stock and other preferred securities (but pari passu to any holder of the Series C-1 Senior Preferred Stock of the Corporation (the “Series C-1 Preferred Stock”), an amount per share (the “Liquidation Preference Amount”) equal to (i) the sum of the Original Issue Price for the Series B-1 Preferred Stock, plus (ii) any accrued but unpaid dividends, which have been accrued to the date of payment. In case the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding shares of Series B-1 Preferred Stock of the full preferential amount to which the holders of such shares are entitled, then such net assets shall be distributed ratably upon outstanding shares of Series B-1 Preferred Stock in proportion to the full preferential amount to which each such share is entitled.  “Original Issue Price” shall mean $250.00 per share for each share of Series B-1 Preferred Stock (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like with respect to the Series B-1 Preferred Stock).

 

(b)           After the payment of the Liquidation Preference Amount with respect to each share of Series B-1 Preferred Stock, the holders of Series B-1 Preferred Stock will have the right following a Liquidation Event to receive an additional distribution for each share of Series B-1 Preferred Stock equal to the excess, if any, of (i) the aggregate amount distributable with respect to each share of Common Stock following the Liquidation Event multiplied by the number of shares of Common Stock into which each share of Series B-1 Preferred Stock is convertible at the Conversion Rate (as defined in Section 5(a)) effective at the time of the Liquidation Event over (ii) the Liquidation Preference Amount.  As a result, the total amount distributed with respect to each share of Series B-1 Preferred Stock following a Liquidation Event will be not less than the amount determined as if all shares of Series B-1 Preferred Stock

 

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had been converted to Common Stock at the Conversion Rate effective at the time of the Liquidation Event.  In view of this additional distribution right, the Corporation and the holders of the Series B-1 Preferred Stock expect that the Series B-1 Preferred Stock will not be treated as “preferred stock” for federal income tax purposes under Treasury Regulation § 1.305-5(a).

 

(c)           A “Liquidation Event” shall include (i) the sale, transfer or other disposition of all or substantially all of the Corporation’s assets, (ii) the merger or consolidation of the Corporation with or into another entity (except a merger or consolidation in which the holders of capital stock of the Corporation immediately prior to such merger or consolidation continue to hold at least 50% of the voting power of the capital stock of the Corporation or the surviving or acquiring entity following such merger or consolidation), (iii) the transfer (whether by merger, consolidation, exchange, reorganization or otherwise), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than Avista Capital Partners, L.P. and its affiliates), of the Corporation’s equity securities if, after such transfer, such person or group of affiliated persons would hold 50% or more of the outstanding voting stock of the Corporation (or the surviving or acquiring entity) or (iv) a liquidation, dissolution or winding up of the Corporation; provided, however, that a transaction shall not constitute a Liquidation Event if its sole purpose is to change the state of the Corporation’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Corporation’s securities immediately prior to such transaction.  The treatment of any particular transaction or series of related transactions as a Liquidation Event hereunder may be waived by the vote or written consent of the holders of a majority of the outstanding Series B-1 Preferred Stock (voting on an as-converted basis).

 

(d)           In any Liquidation Event, if Proceeds received by the Corporation or its stockholders are other than cash, their value will be deemed their fair market value.  The determination of such fair market value shall be made by the Board of Directors of the Corporation or as otherwise may be set forth in the definitive agreements governing such Liquidation Event.

 

(4)           Redemption Rights.

 

(a)           If, at any time after December 16, 2015, the holders of not less than a majority of the shares of Series B-1 Preferred Stock then outstanding deliver written notice to the Corporation of such holders’ desire to have the Series B-1 Preferred Stock redeemed, all outstanding shares of Series B-1 Preferred Stock, if not previously converted pursuant to Section 5, shall be redeemed by the Corporation on a date which is not more than 90 days after the date on which such written notice was given to the Corporation by the holders of the Series B-1 Preferred Stock. Each share of Series B-1 Preferred Stock to be redeemed hereunder shall be redeemed by payment by the Corporation in cash of the Redemption Price. “Redemption Price” shall mean, with respect to each share of Series B-1 Preferred Stock, an amount equal to the Liquidation Preference Amount.

 

(b)           Any redemption pursuant to Section 4(a) shall be preceded by written notice from the Corporation to each holder of Series B-1 Preferred Stock stating the date fixed for redemption, the Redemption Price and the place at which holders of Series B-1 Preferred

 

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Stock may obtain payment of the Redemption Price upon surrender of their respective stock certificates.

 

(c)           All shares of Series B-1 Preferred Stock redeemed, otherwise acquired or returned (as a result of conversion or otherwise) by the Corporation shall immediately be canceled and shall not be reissued.

 

(5)           Conversion.  The holders of the Series B-1 Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

(a)           Right to Convert.  Each share of Series B-1 Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Liquidation Preference Amount for the Series B-1 Preferred Stock by the applicable Conversion Price for the Series B-1 Preferred Stock (the conversion rate for Series B-1 Preferred Stock into Common Stock is referred to herein as the “Conversion Rate”), determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The “Conversion Price” per share for Series B-1 Preferred Stock shall be $15.95 (which amount, for the avoidance of doubt, takes into account all adjustments to the conversion price prior to the Filing Date (as defined in Section 5(d)(i)) of the Corporation’s Series B Senior Convertible Preferred Stock that is to be exchanged for the shares of Series B-1 Preferred Stock and then eliminated); provided, however, that the Conversion Price for the Series B-1 Preferred Stock shall be subject to adjustment as set forth in Section 5(d).

 

(b)           Corporation Conversion Election.  At the election of the Corporation, each share of Series B-1 Preferred Stock shall be converted into shares of Common Stock at the Conversion Rate at the time in effect for Series B-1 Preferred Stock immediately upon the Corporation’s sale of its Common Stock in an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), covering the offer and sale of Common Stock (i) at an offering price per share of not less than $35.00 (as adjusted for any stock splits, stock dividends, combinations, subdivisions or the like), (ii) which results in net proceeds to the Corporation and the selling stockholders, if any, of not less than $75,000,000, and (iii) after which the Common Stock is listed on the NYSE, AMEX or the NASDAQ National Market (a “Qualified Public Offering”).

 

(c)           Mechanics of Conversion.  Before any holder of Series B-1 Preferred Stock shall be entitled to voluntarily convert the same into shares of Common Stock, such holder shall surrender the certificate or certificates therefore, duly endorsed, at the office of the Corporation or of any transfer agent for the Series B-1 Preferred Stock, and shall give written notice to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued.  The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series B-1 Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid.  Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares

 

4

 

of Series B-1 Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.  If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act, the conversion may, at the option of any holder tendering Series B-1 Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the persons entitled to receive the Common Stock upon conversion of the Series B-1 Preferred Stock shall not be deemed to have converted such Series B-1 Preferred Stock until immediately prior to the closing of such sale of securities.  If the conversion is in connection with the automatic conversion provisions of Section 5(b), such conversion shall be deemed to have been made immediately prior to the closing of such Qualified Public Offering in which the Corporation has elected to cause such conversion, and the persons entitled to receive shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holders of such shares of Common Stock as of such date.

 

(d)           Conversion Price Adjustments of Series B-1 Preferred Stock for Certain Dilutive Issuances, Splits and Combinations.  The Conversion Price of the Series B-1 Preferred Stock shall be subject to adjustment from time to time as follows:

 

(i)            If the Corporation shall issue, on or after the date upon which this Certificate of Designation is accepted for filing by the Secretary of State of the State of Delaware (the “Filing Date”), any Additional Stock (as defined in Section 5(d)(viii)) for a consideration per share less than the Conversion Price applicable to the Series B-1 Preferred Stock in effect immediately prior to the issuance of such Additional Stock, and if the aggregate dollar amount of (x) all previous issuances of Additional Stock and (y) all previous issuances of the Corporation’s securities made after September 8, 2006 and prior to the Filing Date that would have been considered issuances of Additional Stock as defined in Section 5(d)(viii) had they been issued after the Filing Date, including, for the avoidance of doubt, any securities issued as consideration in the Acquisition or pursuant to the Public Offering, as such terms are defined in that certain Amendment and Exchange Agreement dated December 2, 2009, by and among the Corporation, Avista Capital Partners, L.P., Avista Capital Partners (Offshore), L.P. and Levant America S.A. (“Additional Stock Equivalents”), is less than $50,000,000 (determined by aggregating all previous issuances of Additional Stock and Additional Stock Equivalents), then the Conversion Price for the Series B-1 Preferred Stock in effect immediately prior to each such issuance shall forthwith be adjusted to a price equal to the per share consideration paid or given for such Additional Stock; provided, however, if the Corporation shall issue, on or after the Filing Date, any Additional Stock after the aggregate amount of previous issuances made after September 8, 2006 are in excess of $50,000,000 (determined by aggregating all previous issuances of Additional Stock and Additional Stock Equivalents) for a consideration per share less than the Conversion Price applicable to the Series B-1 Preferred Stock in effect immediately prior to the issuance of such Additional Stock, then the Conversion Price for the Series B-1 Preferred Stock in effect immediately prior to each such issuance shall forthwith be adjusted to a price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock Outstanding immediately prior to such issuance plus the number of shares of Common Stock that the aggregate consideration received by the Corporation for such issuance would purchase at such Conversion Price; and the denominator of which shall be the number of shares of Common Stock Outstanding immediately prior to such issuance plus

 

5

 

the number of shares of such Additional Stock.  “Common Stock Outstanding” shall mean and include the following; (A) outstanding Common Stock, (B) Common Stock issuable upon exercise of outstanding stock options, (C) Common Stock issuable upon exercise of outstanding warrants to purchase Common Stock, (D) Common Stock issuable upon conversion of the Series B-1 Preferred Stock, and (E) Common Stock issuable upon the conversion of any other series or class of equity securities issued after the date hereof which is convertible into shares of Common Stock.  Shares described in (A) through (C) above shall be included whether vested or unvested, whether contingent or non- contingent and whether exercisable or not yet exercisable.

 

(ii)           Notwithstanding anything to the contrary set forth in this Certificate of Designation, no adjustment of the Conversion Price for the Series B-1 Preferred Stock shall be made in respect of issuances of Additional Stock as consideration in the Acquisition.

 

(iii)          Notwithstanding anything to the contrary set forth in this Certificate of Designation, in the event of an adjustment to the Conversion Price as a result of the issuance (or deemed issuance) of any Additional Stock in connection with, relating to or arising from that certain Commitment Letter, dated March 16, 2012, among the Corporation, Avista Capital Partners L.P. and Avista Capital Partners (Offshore) L.P. (as amended on March 29, 2012, the “Avista Letter”), including without limitation pursuant to any definitive documents subsequently entered into with any of the parties to the Avista Letter (or with any of their affiliates or associated persons or entities) or with Whitebox Advisors, LLC or Gates Capital Management, Inc. (or any of their affiliates or associated persons or entities) as a result of the exercise of the Preference Right (as defined in the Avista Letter), to any of the aforementioned persons or entities (or other third parties), in no event shall the Conversion Price be adjusted, as a result of such issuance (or deemed issuance), to an amount lower than the price per share of the Common Stock in the last reported trade of the Common Stock on the NYSE Amex, or such other primary exchange on which the Common Stock is then listed or quoted, as quoted by Bloomberg, LP (or similar organization succeeding to its functions of reporting market prices), on the last trading day immediately preceding the date on which the Company is obligated to issue the securities exchangeable for such Additional Stock under the Avista Letter or otherwise.  In the event the Common Stock is no longer listed or quoted, then the price shall be determined in good faith by the Board of Directors of the Corporation.

 

(iv)          No adjustment of the Conversion Price for the Series B-1 Preferred Stock shall be made in an amount less than one cent per share, provided that any adjustments that are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to three (3) years from the date of the event giving rise to the adjustment being carried forward, or shall be made at the end of three (3) years from the date of the event giving rise to the adjustment being carried forward. Except to the limited extent provided for in Section 5(d)(vii)(C) and Section (5)(d)(vii)(D), no adjustment of such Conversion Price pursuant to this Section 5(d) shall have the effect of increasing the Conversion Price above the Conversion Price in effect immediately prior to such adjustment.

 

(v)           In the case of the issuance of Additional Stock for cash, the consideration shall be deemed to be the amount of cash paid therefore before deducting any

 

6

 

reasonable discounts, commission or other expenses allowed, paid or incurred by the Corporation for any underwriting or otherwise in connection with the issuance and sale thereof.

 

(vi)          In the case of the issuance of the Additional Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market thereof as determined by the Board of Directors irrespective of any accounting treatment.

 

(vii)         In the case of the issuance of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock or options to purchase or rights to subscribe for such convertible or exchangeable securities, the following provisions shall apply for purposes of determining the number of shares of Additional Stock issued and the consideration paid therefor:

 

(A)          The aggregate maximum number of shares of Common Stock deliverable upon exercise (assuming the satisfaction of any conditions to exercisability, including without limitation, the passage of time, but without taking into account potential antidilution adjustments) of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in Section 5(d)(v) and Section 5(d)(vi)), if any, received by the Corporation upon the issuance of such options or rights plus the minimum exercise price provided in such options or rights (without taking into account potential antidilution adjustments) for the Common Stock covered thereby.

 

(B)          The aggregate maximum number of shares of Common Stock deliverable upon conversion, or in exchange (assuming the satisfaction of any conditions to convertibility or exchangeability, including, without limitation, the passage of time, but without taking into account potential antidilution adjustments) for, any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by the Corporation for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by the Corporation (without taking into account potential antidilution adjustments) upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in Section 5(d)(v) and Section 5(d)(vi)).

 

(C)          In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to the Corporation upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable shares, the Conversion Price of the Series B-1 Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities.

 

7

 

(D)          The number of shares of Additional Stock deemed issued and the consideration deemed paid therefor pursuant to Section 5(d)(vii)(A) and Section 5(d)(vii)(B) shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either Section 5(d)(vii)(A) or Section 5(d)(vii)(B).

 

(viii)        “Additional Stock” shall mean any shares of Common Stock issued (or deemed to have been issued pursuant to Section 5(d)(vii)) by the Corporation) or after the Filing Date other than:

 

(A)          Shares of Common Stock issued to employees, directors, officers, consultants and other service providers for the primary purpose of soliciting or retaining their services pursuant to plans or agreements approved by the Corporation’s Board of Directors;

 

(B)          Common Stock issued pursuant to the conversion or exercise of convertible or exercisable securities outstanding on the Filing Date;

 

(C)          Common Stock or other securities convertible into shares of Common Stock that are issued with the approval of the holders of not less than a majority of the then-outstanding shares of Series B-1 Preferred Stock; and

 

(D)          Common Stock issued pursuant to the conversion of the Series B-1 Preferred Stock.

 

(e)           In the event the Corporation should at any time or from time to time after the Filing Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as “Common Stock Equivalents”) without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price of the Series B-1 Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents.

 

If the number of shares of Common Stock outstanding at any time after the Filing Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for the Series B-1 Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in outstanding shares.

 

(f)            Reservation of Common Stock.  The Corporation shall reserve and keep available out of its authorized but unissued Common Stock that number of shares of Common

 

8

 

Stock as shall from time to time be sufficient to effect the full conversion of all outstanding shares of Series B-1 Preferred Stock.

 

(6)           Election and Removal of Directors by Series B-1 Preferred Stock.  Subject to Section 7(b), the holders of record of the shares of Series B-1 Preferred Stock, exclusively, shall be entitled to nominate and elect one (1) director of the Corporation (the “Series B-1 Director”).  At each regularly scheduled meeting of the Corporation’s stockholders which is called for the purpose of electing members of the Board of Directors, the presence in person or by proxy of the holders of a majority of the shares of Series B-1 Preferred Stock then outstanding shall constitute a quorum of the Series B-1 Preferred Stock for the purpose of electing the director by holders of the Series B-1 Preferred Stock. A vacancy in said directorship filled by the holders of Series B-1 Preferred Stock shall be filled only by vote or written consent in lieu of a meeting of the holders of the Series B-1 Preferred Stock.  The Series B-1 Director may be removed, with our without cause, by the holders of Series B-1 Preferred Stock in the same manner as such director may be elected hereunder.

 

(7)           Voting Rights.

 

(a)           Except as otherwise expressly provided herein or as required by law, the holders of Series B-1 Preferred Stock shall be entitled to vote on all matters upon which holders of Common Stock have the right to vote and, with respect to such right to vote, shall be entitled to notice of any stockholders’ meeting in accordance with the Corporation’s Bylaws, and shall be entitled to a number of votes equal to the number of shares of Common Stock into which such shares of Series B-1 Preferred Stock could then be converted, at the record date for the determination of stockholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited. Except as otherwise expressly provided herein, or to the extent class or series voting is otherwise required by law or agreement, the holders of Series B-1 Preferred Stock or Common Stock shall vote together as a single class and not as separate classes.

 

(b)           So long as at least 125,000 shares of Series B-1 Preferred Stock remain outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent, as provided by law) of not less than a majority of the then-outstanding shares of the Series B-1 Preferred Stock, as determined on a fully diluted and as-converted basis:

 

(i)            Amend the Corporation’s Certificate of Incorporation or Bylaws in any material respect (other than an amendment to change the name of the Corporation);

 

(ii)           Declare or pay any dividend or other distribution upon the Corporation’s capital stock (except dividends payable solely in shares of Common Stock or Series B-1 Preferred Stock or the Series C-1 Preferred Stock in lieu of payment of cash dividends), or purchase, redeem, or otherwise acquire any shares of the Corporation’s capital stock, except for repurchases, at cost, of shares of the capital stock of the Corporation (pursuant to rights held by the Corporation as of the Filing Date) held by the Corporation’s consultants, directors, officers or employees;

 

9

 

(iii)          Sell, lease, assign, transfer or otherwise convey or otherwise dispose of all or substantially all of the assets of the Corporation or any of its subsidiaries, or effect any consolidation, merger or reorganization involving the Corporation or any of its subsidiaries, or effect any transaction or series of related transactions in which the Corporation’s stockholders immediately prior to such transaction or transactions own immediately after such transaction or transactions less than 50% of the voting securities of the surviving corporation or entity (or its parent);

 

(iv)          Reclassify, reorganize or recapitalize the Corporation’s outstanding capital stock;

 

(v)           Except for the creation and issuance of the Series C-1 Preferred Stock, create or issue any class or series of stock or other security of the Corporation on parity with or having preference over the Series B-1 Preferred Stock or increase the authorized number of shares of the Series B-1 Preferred Stock;

 

(vi)          Effect any transaction with the management, related parties or other affiliates of the Corporation, or extend or waive the terms of any such existing transactions, other than (A) issuances of options, warrants or Common Stock pursuant to an equity incentive plan or similar arrangement approved by the Board of Directors or (B) any other transaction with management, related parties or affiliates of the Corporation on terms approved by a majority of the members of the Board of Directors who are not, either directly or indirectly, a party to such transaction; and

 

(vii)         Increase or decrease the number of directors on the Board of Directors of the Corporation.

 

(8)           Financial Statements, Reports, etc.  The Corporation shall furnish to each holder of the Series B-1 Preferred Stock:

 

(a)           within 90 days after the end of each fiscal year, its consolidated balance sheet and related statements of income, stockholders’ equity and cash flows showing the financial condition of the Corporation and its consolidated subsidiaries as of the close of such fiscal year and the results of its operations and the operations of such subsidiaries during such year, together with comparative figures for the immediately preceding fiscal year, all in reasonable detail and prepared in accordance with United States generally accepted accounting principles (“GAAP”), all audited by UHY, LLP or other independent public accountants of recognized national standing and accompanied by an opinion of such accountants (which opinion shall be without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements fairly present the financial condition and results of operations of the Corporation and its consolidated subsidiaries on a consolidated basis in accordance with GAAP;

 

(b)           within 45 days after the end of each of the first three fiscal quarters of each fiscal year, its consolidated balance sheet and related statements of income, stockholders’ equity and cash flows showing the financial condition of the Corporation and its consolidated subsidiaries as of the close of such fiscal quarter and the results of its operations and the

 

10

 

operations of such subsidiaries during such fiscal quarter and the then-elapsed portion of the fiscal year, and comparative figures for the same periods in the immediately preceding fiscal year, all certified by one of the chief executive officer, chief financial officer, any vice president, principal accounting officer, treasurer, assistant treasurer or controller of the Corporation as fairly presenting in all material respects the financial condition and results of operations of the Corporation and its consolidated subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes.

 

(9)           Preemptive Rights.  If the Corporation authorizes the issuance and sale of Additional Stock (as defined in Section 5(d)(viii)) other than pursuant to an underwritten public offering registered under the Securities Act or for non-cash consideration pursuant to a merger or consolidation approved by the Board of Directors of the Corporation, the Corporation shall first offer in writing to sell to each holder of Series B-1 Preferred Stock a portion of the securities being issued equal to the quotient obtained by dividing (a) the aggregate number of shares of Series B-1 Preferred Stock then owned by such holder by (b) the aggregate number of shares of Series B-1 Preferred Stock then outstanding.  If all offered securities are not subscribed to by such holder of Series B-1 Preferred Stock in writing delivered to the Corporation within twenty days after the date of delivery of the Corporation’s original notice to such holder, then the Corporation shall offer all of such securities for sale to those other holders of Series B-1 Preferred Stock that did elect to subscribe for such securities.  If such offer is oversubscribed by such Series B-1 Preferred Stock holders then the Corporation shall offer such securities to such Series B-1 Preferred Stockholders pro rata on the basis of the number of securities previously subscribed to by such holders pursuant to the formula above.  If the holders of Series B-1 Preferred Stock do not elect to subscribe for all of such securities in writing delivered to the Corporation within twenty days after the date of delivery of the Corporation’s second notice then the Corporation shall be free to offer such securities to any other person or persons at a price and on terms determined by the Corporation, provided that such price and terms are no more favorable to such person or persons than the price and terms on which such securities were offered to the holders of Series B-1 Preferred Stock.  Any securities not sold by the Corporation within 90 days after the date of the Corporation’s initial notice to the holders of Series B-1 Preferred Stock hereunder shall then become subject again to the provisions of this Section 9.

 

[signature page follows]

 

11

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to its Certificate of Incorporation to be duly executed by its President and Chief Executive Officer this 9th day of May, 2012.

 

	
 
    	
GEOKINETICS INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Richard F. Miles
    
	
 
    	
 
    	
President and Chief Executive Officer
    

 

[Series B-1 Senior Convertible Preferred Stock Certificate of Designation]

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