SEITEL, INC. NOTE PURCHASE AGREEMENT

Exhibit 4.21

 

            SEITEL, INC.

 

 

            NOTE PURCHASE AGREEMENT

 

 

            Dated as of February 12, 1999

 

 

            $20,000,000 7.03% Series D Senior Notes due February 15, 2004

            $75,000,000 7.28% Series E Senior Notes due February 15, 2009

            $43,000,000 7.43% Series F Senior Notes due February 15, 2009

             

             

             

            TABLE OF CONTENTS

           

Section			Page
1.	AUTHORIZATION OF NOTES		1
2.	SALE AND PURCHASE OF NOTES		2
3.	CLOSING.		2
	3.1	The Closing	2
	3.2	Failure of the Company to Deliver	3
	3.3	Failure by You to Deliver	3
4.	YOUR CONDITIONS TO CLOSINGS		3
	4.1	Representations and Warranties	3
	4.2	Performance; No Default	3
	4.3	Compliance Certificates	3
	4.4	Opinions of Counsel	4
	4.5	Purchases Permitted By Applicable Law, etc	4
	4.6	Sale of Other Notes	4
	4.7	Payment of Special Counsel Fees	5
	4.8	Private Placement Numbers	5
	4.9	Changes in Corporate Structure	5
	4.10	Subsidiary Guaranty	5
	4.11	Proceedings and Documents	5
4.A.	COMPANY'S CLOSING CONDITIONS		5
	4A.1	Representations and Warranties	5
	4A.2	Sales Permitted by Applicable Law, etc.	6
5.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY.		6
	5.1	Organization; Power and Authority	6
	5.2	Authorization, etc	7
	5.3	Disclosure	7
	5.4	Organization and Ownership of Shares of Subsidiaries; Affiliates	8
	5.5	Financial Statements	8
	5.6	Compliance with Laws, Other Instruments, etc	9
	5.7	Governmental Authorizations, etc	9
	5.8	Litigation; Observance of Agreements, Statutes and Orders	9
	5.9	Taxes	9
	5.10	Title to Property; Leases	10
	5.11	Licenses, Permits, etc	10
	5.12	Compliance with ERISA	10
	5.13	Private Offering by the Company	12
	5.14	Use of Proceeds; Margin Regulations	12
	5.15	Existing Debt; Future Liens	12
	5.16	Foreign Assets Control Regulations, etc	13
	5.17	Status under Certain Statutes	13
	5.18	Environmental Matters	13
	5.19	Year 2000 Problem	13
6.	REPRESENTATIONS OF THE PURCHASER		14
	6.1	Purchase for Investment	14
	6.2	Legend	14
	6.3	ERISA	15
	6.4	Organization; Power and Authority; Compliance with Laws	16
	6.5	Authorization, etc	16
7.	INFORMATION AS TO COMPANY.		16
	7.1	Financial and Business Information	16
	7.2	Officer's Certificate	21
	7.3	Inspection	21
8.	PREPAYMENT OF THE NOTES		22
	8.1	Required Prepayments	22
	8.2	Optional Prepayments with Make-Whole Amount; Rescission	22
	8.3	Allocation of Partial Prepayments	23
	8.4	Maturity; Surrender, etc	24
	8.5	Purchase of Notes	24
	8.6	Make-Whole Amount	24
9.	AFFIRMATIVE COVENANTS.		26
	9.1	Compliance with Law	26
	9.2	Insurance	26
	9.3	Maintenance of Properties	27
	9.4	Payment of Taxes and Claims	27
	9.5	Corporate Existence, etc	27
	9.6	Pari Passu	27
	9.7	Subsidiary Guaranty	28
10.	NEGATIVE COVENANTS		28
	10.1	Net Worth	28
	10.2	Interest Coverage	28
	10.3	Debt Incurrence	28
	10.4	Liens	29
	10.5	Mergers and Consolidations	31
	10.6	Sale of Assets	32
	10.7	Restricted Payments and Restricted Investments	35
	10.8	Limitations on Certain Restricted Subsidiary Actions	36
	10.9.	Affiliate Transactions	37
	10.10	Line of Business	37
11.	EVENTS OF DEFAULT		37
12.	REMEDIES ON DEFAULT, ETC.		39
	12.1	Acceleration	39
	12.2	Other Remedies	40
	12.3	Rescission	40
	12.4	No Waivers or Election of Remedies, Expenses, etc	40
13.	REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.		40
	13.1	Registration of Notes	40
	13.2	Transfer and Exchange of Notes	41
	13.3	Replacement of Notes	41
14.	PAYMENTS ON NOTES		42
	14.1	Place of Payment	42
	14.2	Home Office Payment	42
15.	EXPENSES, ETC.		42
	15.1	Transaction Expenses	42
	15.2	Survival	43
16.	SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT		43
17.	AMENDMENT AND WAIVER		43
	17.1	Requirements	43
	17.2	Solicitation of Holders	44
	17.3	Binding Effect, etc	44
	17.4	Notes held by Company, etc	44
18.	NOTICES.		45
19.	REPRODUCTION OF DOCUMENTS		45
20.	CONFIDENTIAL INFORMATION		45
21.	SUBSTITUTION OF PURCHASER.		47
22.	MISCELLANEOUS.		47
	22.1	Successors and Assigns	47
	22.2	Payments Due on Non-Business Days	47
	22.3	Severability	47
	22.4	Construction	48
	22.5	Counterparts	48
	22.6	Governing Law	48
	22.7	Consent to Jurisdiction; Appointment of Agent	48
	22.8	Defeasance	49
	22.9	GAAP	52
	22.10	Usury	52

 

SCHEDULE A	--	INFORMATION RELATING TO PURCHASERS
SCHEDULE B	--	DEFINED TERMS
SCHEDULE 4.9	--	Changes in Corporate Structure
SCHEDULE 5.3	--	Disclosure Materials
SCHEDULE 5.4	--	Subsidiaries of the Company and Ownership of Subsidiary Stock
SCHEDULE 5.5	--	Financial Statements
SCHEDULE 5.8	--	Certain Litigation
SCHEDULE 5.11	--	Patents, etc.
SCHEDULE 5.12	--	ERISA
SCHEDULE 5.15	--	Existing Debt
SCHEDULE 10.8	--	Certain Agreements by Restricted Subsidiaries
EXHIBIT 1D	--	Form of 7.03% Series D Senior Note due February 15, 2004
EXHIBIT 1E	--	Form of 7.28% Series E Senior Note due February 15, 2009
EXHIBIT 1F	--	Form of 7.43% Series F Senior Note due February 15, 2009
EXHIBIT 4.4(a)	--	Form of Opinion of Special Counsel for the Company
EXHIBIT 4.4(b)	--	Form of Opinion of Special Counsel for the Purchasers
EXHIBIT 4.10	--	Form of Subsidiary Guaranty

             

            SEITEL, INC.

West Building, 7th Floor

50 Briar Hollow Lane

Houston, Texas 77027

 

            $20,000,000 7.03% Series D Senior Notes Due February 15, 2004

$75,000,000 7.28% Series E Senior Notes Due February 15, 2009

$43,000,000 7.43 % Series F Senior Notes Due February 15, 2009

            As of February 12, 1999

 

Separately Addressed to each of the

      Purchasers Listed on Schedule A hereto:

Ladies and Gentlemen:

SEITEL, INC., a Delaware corporation (together with any Person who succeeds to all, or substantially all, of the assets and business of Seitel, Inc., the "Company" ), agrees with you as follows:

AUTHORIZATION OF NOTES.

The Company will authorize the issue and sale of

Twenty Million Dollars ($20,000,000) aggregate principal amount of its seven and three hundredths percent (7.03%) Series D Senior Notes due February 15, 2004 (the "Series D Notes," such term to include any such notes issued in substitution therefor pursuant to § 13 of this Agreement or the Other Agreements (as hereinafter defined)),

Seventy-Five Million Dollars ($75,000,000) aggregate principal amount of its seven and twenty-eight hundredths percent (7.28%) Series E Senior Notes due February 15, 2009 (the "Series E Notes," such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreements), and

Forty-Three Million Dollars ($43,000,000) aggregate principal amount of its seven and forty-three hundredths percent (7.43%) Series F Senior Notes due February 15, 2009 (the "Series F Notes," such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreements).

The Series D Notes shall be substantially in the form set out in Exhibit 1D, the Series E Notes shall be substantially in the form set out in Exhibit 1E, and the Series F Notes shall be substantially in the form set out in Exhibit 1F, in each case, with such changes therefrom, if any, as may be approved by you and the Company (the Series D Notes, the Series E Notes and the Series F Notes are herein referred to collectively as the "Notes," and each individually as a "Note" ). Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.

SALE AND PURCHASE OF NOTES.

Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, in accordance with the provisions hereof, at the Closing provided for in Section 3, Notes of the Series and in the principal amounts specified opposite your name in Schedule A at the purchase price of one hundred percent (100%) of the principal amount thereof; provided, however, that you may change such information on Schedule A (other than the aggregate principal amount of your commitment) by written notice delivered to the Company prior to the Closing (except that one or more (but not more than three) of your Affiliates shall be the purchaser or purchasers of the principal amount of the Notes specified opposite your name on Schedule A). Contemporaneously with entering into this Agreement, the Company is entering into separate Note Purchase Agreements (the "Other Agreements" ) identical with this Agreement with each of the other purchasers named in Schedule A (the " Other Purchasers "), providing for the sale at the Closing to each of the Other Purchasers of Notes of the Series and in the principal amounts specified opposite its name in Schedule A. Your obligation hereunder and the obligations of the Other Purchasers under the Other Agreements are several and not joint obligations and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or non-performance by any Other Purchaser thereunder.

CLOSING.

0.1        The Closing.

The sale and purchase of the Notes to be purchased by the purchasers listed on Schedule A hereto (the "Purchasers" ) shall occur at the offices of Hebb & Gitlin, One State Street, Hartford, Connecticut 06103, at 10:00 a.m., eastern standard time, at a closing (the "Closing" ) on February 12, 1999 (the "Closing Date" ). At the Closing the Company will deliver to each Purchaser the Notes to be purchased by it in the form of, respectively, a single Series D Note, Series E Note, or Series F Note, as the case may be (or such greater number of Series D Notes, Series E Notes, or Series F Notes, in denominations of at least One Hundred Thousand Dollars ($100,000) as such Purchaser may request), dated the Closing Date and registered in its name (or in the name of its nominee), against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 1820760377 at Bank One-Houston, 910 Travis, Houston, Texas 77002, ABA # 111000614.

Failure of the Company to Deliver.

If on the Closing Date the Company fails to tender to you the Notes to be acquired by you on such date or if the conditions specified in Section 4 have not been fulfilled to your satisfaction on the Closing Date, you may thereupon elect to be relieved of all further obligations under this Agreement with respect to the Notes to be purchased by you on such date. Nothing in this Section shall operate to relieve the Company from any of its obligations under this Agreement or to waive any of your rights against the Company.

Failure by You to Deliver.

If on the Closing Date you fail to deliver the full amount of funds to be delivered by you on such date or if the conditions specified in Section 4A have not been fulfilled on such date, the Company may thereupon elect to return immediately any funds delivered by you on such date and to be relieved of all further obligations under this Agreement with respect to the Notes to be purchased by you on such date. Except as described herein and in accordance with applicable law, nothing in this Section shall operate to relieve you from any of your obligations to the Company under this Agreement or to waive any of the Company's rights against you.

YOUR CONDITIONS TO CLOSINGS.

Your obligation to purchase and pay for the Notes to be sold to you on the Closing Date is subject to the fulfillment to your satisfaction, prior to or on the Closing Date (except as otherwise specified), of the following conditions:

Representations and Warranties.

The representations and warranties of the Company in this Agreement shall be true and correct when made and on the Closing Date.

Performance; No Default.

The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or on the Closing Date and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14), no Default or Event of Default shall have occurred and be continuing.

Compliance Certificates.

Officer's Certificate. The Company shall have delivered to you an Officer's Certificate, dated the Closing Date, certifying that the conditions specified in Sections 4.1 and 4.2 have been fulfilled.

Company Secretary's Certificate. The Company shall have delivered to you a certificate, dated the Closing Date, signed by the Secretary or an Assistant Secretary of the Company, and certifying as to the resolutions, the bylaws and the certificate of incorporation attached thereto and as to other corporate proceedings relating to the authorization, execution and delivery of the Notes, this Agreement and any other agreement or instrument related thereto.

Secretary's Certificates of Restricted Subsidiaries. Each Restricted Subsidiary shall have delivered to you a certificate dated the Closing Date (separately executed or executed jointly by one or more Restricted Subsidiaries), signed by the Secretary or an Assistant Secretary of such Restricted Subsidiary, and certifying as to the resolutions, the bylaws and the certificate or articles of incorporation of such Restricted Subsidiary attached thereto and as to other corporate proceedings relating to the authorization, execution and delivery by such Restricted Subsidiary of the Subsidiary Guaranty.

Opinions of Counsel.

You shall have received from

Gardere Wynne Sewell & Riggs, L.L.P., counsel for the Company and the Restricted Subsidiaries, and

Hebb & Gitlin, your special counsel,

closing opinions satisfactory to you in form, scope and substance, each dated as of the Closing Date, substantially in the respective forms set forth in Exhibits 4.4(a) and 4.4(b), and opining as to such other matters as you may reasonably request. This Section 4.4 shall constitute direction by the Company to such counsel named in the immediately preceding subsection (a) to deliver such closing opinion to you.

Purchases Permitted By Applicable Law, etc.

On the Closing Date your purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted.

Sale of Other Notes.

Contemporaneously with the Closing, the Company shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A.

Payment of Special Counsel Fees.

Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the fees, charges and disbursements of your special counsel referred to in Section 4.4(b) to the extent reflected in a statement of such counsel rendered to the Company at least one (1) Business Day prior to the Closing.

Private Placement Numbers.

Private Placement numbers issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each Series.

Changes in Corporate Structure.

Except as specified in Schedule 4.9, the Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5.

Subsidiary Guaranty.

You shall have received the Guaranty, duly executed and delivered by each Restricted Subsidiary, substantially in the form of Exhibit 4.10 (the " Subsidiary Guaranty " ), satisfactory to you in form and substance, which Guaranty shall be in full force and effect .

Proceedings and Documents.

All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be reasonably satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request.

4A.       COMPANY'S CLOSING CONDITIONS.

The Company's obligation to sell the Notes to be purchased by you on the Closing Date is subject to the fulfillment to the Company's satisfaction, prior to or on the Closing Date (except as otherwise specified), of the following conditions:

4A.1     Representations and Warranties.

The representations and warranties made by you in Section 6 shall be correct when made and on the Closing Date.

4A.2     Sales Permitted by Applicable Law, etc.

On the Closing Date the Company's sale of the Notes and the granting of the Subsidiary Guaranty by the Restricted Subsidiaries shall (a) be permitted by the laws and regulations of each jurisdiction to which the Company and the Restricted Subsidiaries are subject, and (b) not violate any applicable law or regulation.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to you that:

Organization; Power and Authority.

The Company

is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware;

is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and

has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Other Agreements and the Notes and to perform the provisions hereof and thereof.

Each Subsidiary

is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation;

is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and

has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, and, in the case of the Restricted Subsidiaries, to execute and deliver the Subsidiary Guaranty and to perform the provisions hereof and thereof.

Authorization, etc.

This Agreement and the Other Agreements and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors'rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

The Subsidiary Guaranty has been duly authorized by all necessary corporate action on the part of each Restricted Subsidiary and constitutes a legal, valid and binding obligation of each Restricted Subsidiary enforceable against such Restricted Subsidiary in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors'rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

Disclosure.

The Company, through its agent, Prudential Securities Incorporated, has delivered to you and each Other Purchaser a copy of a Confidential Private Placement Memorandum, dated January 1999 (the " Memorandum "), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and the Subsidiaries. This Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. All projections and forward-looking statements contained in the Memorandum are based upon assumptions that the Company believes to be reasonable and were made in good faith, although no assurances can be given that the results set forth in such projections or forward-looking statements will be achieved. Except as disclosed in the Memorandum or in the financial statements listed in Schedule 5.5, since December 31, 1997, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby.

Organization and Ownership of Shares of Subsidiaries; Affiliates.

Schedule 5.4 contains (except as noted therein) complete and correct lists of (i) the Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization and the percentage of shares of each class of its outstanding capital stock or similar equity interests owned by the Company and each other Subsidiary, and whether such Subsidiary is a Restricted Subsidiary, and (ii) the Company's Affiliates (other than Subsidiaries).

All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4).

Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.

No Restricted Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Restricted Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of the Restricted Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Restricted Subsidiary.

Financial Statements.

The Company has delivered to each Purchaser copies of the financial statements of the Company and the Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) present fairly, in all material respects, the consolidated financial position of the Company and the Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments).

Compliance with Laws, Other Instruments, etc.

Neither the execution, delivery and performance by the Company of this Agreement and the Notes, nor the execution, delivery and performance by any Restricted Subsidiary of the Subsidiary Guaranty, will (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Restricted Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Restricted Subsidiary is bound or by which the Company or any Restricted Subsidiary or any of their respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Restricted Subsidiary or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Restricted Subsidiary.

Governmental Authorizations, etc.

No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance (a) by the Company of this Agreement or the Notes or (b) by any Restricted Subsidiary of the Subsidiary Guaranty.

Litigation; Observance of Agreements, Statutes and Orders.

Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

Taxes.

The Company and the Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not individually or in the aggregate Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and the Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and the Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended December 31, 1996.

Title to Property; Leases.

The Company and the Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects.

Licenses, Permits, etc.

Except as disclosed in Schedule 5.11,

the Company and the Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, with respect to the business of the Company and/or any Subsidiary as currently conducted, that individually or in the aggregate are Material, without known conflict with the rights of others;

to the best knowledge of the Company, no product of the Company or any Subsidiary infringes in any material respect upon any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and

to the best knowledge of the Company, there is no violation by any Person of any right of the Company or any Subsidiary with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any Subsidiary which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

Compliance with ERISA.

The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material.

The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The term " benefit liabilities " has the meaning specified in section 4001 of ERISA and the terms " current value " and " present value " have the meaning specified in section 3 of ERISA.

The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material.

The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and the Restricted Subsidiaries is not Material.

The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.3 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you.

Schedule 5.12 lists all ERISA Affiliates that are Subsidiaries and that maintain one or more Plans and any employee organizations in respect of any Multiemployer Plan or Plan. Schedule 5.12 sets forth all ERISA Affiliates and all "employee benefit plans" with respect to which the Company or any "affiliate" of the Company is a "party-in-interest" or in respect of which the Notes could constitute an "employer security" ("employee benefit plan," "party-in-interest" and "employee organization" have the meanings specified in section 3 of ERISA, "affiliate" has the meaning specified in section 407(d) of ERISA and Section V of the Department of Labor Prohibited Transaction Exemption 95-60 (60 FR 35925, July 12, 1995) and "employer security" has the meaning specified in section 407(d) of ERISA).

Private Offering by the Company.

Neither the Company nor anyone acting on its behalf has offered the Notes or any similar Securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than you, the Other Purchasers and not more than seventy-two (72) other Institutional Investors, each of which has been offered the Notes at a private sale for investment pursuant to a valid exemption from the registration requirements of Section 5 of the Securities Act. In reliance upon the accuracy of your representations and warranties and the representations and warranties of the Other Purchasers, neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act.

Use of Proceeds; Margin Regulations.

The Company will apply the proceeds of the sale of the Notes to refinance existing Debt and to fund capital expenditures primarily associated with the acquisition of seismic data and investment in working interests of exploration and production projects. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any Securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than one percent (1%) of the value of the consolidated assets of the Company and the Subsidiaries and the Company does not have any present intention that margin stock will constitute more than five percent (5%) of the value of such assets. As used in this Section, the terms " margin stock " and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation U.

Existing Debt; Future Liens.

Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Debt (in excess of $100,000 outstanding) of the Company and the Subsidiaries as of February 10, 1999, since which date there has been no material change in the amounts, interest rates, sinking funds, instalment payments or maturities of the Debt of the Company or the Subsidiaries. Neither the Company nor Subsidiary is in default, and no waiver of default is currently in effect, in the payment of any principal of or interest on any Debt of the Company or such Subsidiary and no event or condition exists with respect to any Debt of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment.

Except as disclosed in Schedule 5.15, neither the Company nor any Restricted Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.4.

Foreign Assets Control Regulations, etc.

Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto.

Status under Certain Statutes.

Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Transportation Acts (49 U.S.C.), as amended, or the Federal Power Act, as amended.

Environmental Matters.

Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no action or proceeding of any kind has been instituted raising any claim against the Company or any of the Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing,

neither the Company nor any of the Subsidiaries has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect;

neither the Company nor any of the Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them or has disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and

all buildings on all real properties now owned, leased or operated by the Company or any of the Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect.

Year 2000 Problem.                 

The Company and the Subsidiaries are implementing measures to have all critical business and computer systems Year 2000 Compliant and Ready in a timely manner and the advent of the year 2000 and its impact on said critical business and computer systems are not reasonably expected to have a Material Adverse Effect.

REPRESENTATIONS OF THE PURCHASER.

0.2        Purchase for Investment.

You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof or with any present intention of offering or selling any of the Notes in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction, provided that the disposition of your or their property shall at all times be within your or their control. You represent and warrant that you and any Person for whose account you are purchasing the Notes are either a Qualified Institutional Buyer or an Accredited Institution, in either case with such knowledge and experience in financial and business matters as are necessary in order to evaluate the merits and risks of an investment in the Notes. You also understand that the Company and, for purposes of the opinions to be delivered to you pursuant to Section 4.4, counsel to the Company and your special counsel, will rely upon the accuracy and truth of the foregoing representations and you hereby consent to such reliance. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes.

Legend.

You agree that the Notes shall contain the following legend:

" THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY ONLY BE REOFFERED AND SOLD IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN EXEMPTION THEREFROM. "

The legend requirements imposed by this Section 6.2 shall cease and terminate as to any particular Note if the Notes represented thereby have been:

effectively registered under the Securities Act (the Company having no obligation to effect the registration of such Notes) and disposed of in accordance with the registration statement covering such Notes,

distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, or

otherwise transferred in accordance herewith and the subsequent disposition of such Notes shall not require the registration or qualification of such Notes under the Securities Act or any similar state law then in force.

Whenever such restrictions shall terminate as to any Notes, the holder thereof shall be entitled to receive from the Company, without expense to such holder (except for stamp taxes or governmental charges, if any, payable in connection with a transfer of such Notes, as required by Section 13.2), a new Note of like tenor not bearing the legend set forth in this Section 6.2.

ERISA.

You represent:

if you are acquiring the Notes for your own account with funds from or attributable to your general account, and in reliance upon the Company's representations set forth in Section 5.12 and the related disclosures set forth in Schedule 5.12, that the amount of the reserves and liabilities for the general account contracts (as defined by the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the "NAIC Annual Statement" )) held by or on behalf of any Plan together with the amount of the reserves and liabilities for the general account contracts held by or on behalf of any other Plans maintained by the same employer (or affiliate thereof, as such term is defined in section V of DOL Prohibited Transaction Exemption 95-60 (60 FR 35925, July 12, 1995)) or by the same employee organization (as defined in ERISA) in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with the state of domicile of the insurance company; for purposes of the percentage limitation in this clause (a), the amount of reserves and liabilities for the general account contracts held by or on behalf of a Plan shall be determined before reduction for credits on account of any reinsurance ceded on a coinsurance basis; or

if any part of the funds being used by you to purchase the Notes shall come from assets of an employee benefit plan (as defined in section 3 of ERISA) or a plan (as defined in section 4975(e)(1) of the Code), that:

if such funds are attributable to a "separate account" (as defined in section 3 of ERISA), then

all requirements for an exemption under DOL Prohibited Transaction Exemption 90-1 (issued January 29, 1990) are met with respect to the use of such funds to purchase the Notes, or

the employee benefit plans with an interest in such separate account have been identified in a writing delivered by you to the Company;

if such funds are attributable to a "separate account" (as defined in section 3 of ERISA) that is maintained solely in connection with fixed contracted obligations of an insurance company, any amounts payable, or credited, to any employee benefit plan having an interest in such account and to any participant or beneficiary of such plan (including an annuitant) are not affected in any manner by the investment performance of the separate account;

if such funds are attributable to an "investment fund" managed by a "qualified plan asset manager" (as such terms are defined in Part V of DOL Prohibited Transaction Exemption 84-14, issued March 13, 1984), all requirements for an exemption under such Exemption are met with respect to the use of such funds to purchase the Notes; or

such employee benefit plan is excluded from the provisions of section 406 of ERISA by virtue of section 4(b) of ERISA.

Organization; Power and Authority; Compliance with Laws.

You represent and warrant that:

you are a corporation duly organized, validly existing, and in good standing under the laws of the state of your incorporation,

you have the corporate power and authority to execute and deliver this Agreement and to perform the provisions hereof, and

the execution, delivery and performance of this Agreement by you will not violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to you.

Authorization, etc.

You represent and warrant that this Agreement has been duly authorized by all necessary corporate action on your part, and this Agreement constitutes your legal, valid and binding obligation enforceable against you in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors'rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

INFORMATION AS TO COMPANY.

0.3        Financial and Business Information.

The Company shall deliver to each holder that is an Institutional Investor:

Quarterly Statements -- within forty-five (45) days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of,

consolidated balance sheets of the Company and its consolidated Subsidiaries, and of the Company and its Restricted Subsidiaries, as at the end of such quarter, and

consolidated statements of operations, stockholders'equity and cash flows of the Company and its consolidated Subsidiaries, and of the Company and its Restricted Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter,

setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that, so long as the Company shall not have any Unrestricted Subsidiaries, delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a);

Annual Statements -- within ninety (90) days after the end of each fiscal year of the Company, duplicate copies of,

a consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such year,

consolidated statements of operations, stockholders'equity and cash flows of the Company and its consolidated Subsidiaries for such year, and

a condensed consolidating balance sheet, and condensed consolidating statements of operations and cash flows of the Company and its Subsidiaries setting forth, in each case, consolidating information sufficient to show the financial position and results of operations and cash flows of the Company and the Restricted Subsidiaries,

setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by

in the case of the financial statements identified in the foregoing clauses (i) and (ii), an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and

a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit),

provided that, so long as the Company shall not have any Unrestricted Subsidiaries, the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission, together with the accountants'certificates described in clauses (A) and (B) above, shall be deemed to satisfy the requirements of this Section 7.1(b);

SEC and Other Reports -- promptly upon their becoming available, one copy of

each financial statement, report, notice or proxy statement sent by the Company or any Restricted Subsidiary to public securities holders generally, and

(A)        each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Restricted Subsidiary with the Securities and Exchange Commission; and

(B)        by facsimile only, all press releases and other statements made available generally by the Company or any Restricted Subsidiary to the public concerning developments that are Material;

Audit Reports - as soon as practicable after receipt thereof by the Company or any Subsidiary, a copy of each other report submitted to the Company or any Subsidiary by its independent accountants in connection with any interim or special audit made by them of the books of the Company or any Subsidiary;

Litigation -- within five (5) days after the Company obtains knowledge thereof, written notice of any pending or threatened (in writing) (i) litigation not fully covered by insurance or as to which an insurance company has not accepted liability or (ii) governmental proceeding, in each case against the Company or any Restricted Subsidiary, in which the damages sought exceed One Million Dollars ($1,000,000), individually or in the aggregate, or which otherwise could reasonably be expected to have a Material Adverse Effect;

Notice of Default or Event of Default -- promptly, and in any event within five (5) days after a Responsible Officer shall become aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto;

Oil and Gas Reserve Reports -- promptly, and in any event no later than April 1 in each year, engineering reports in form and substance reasonably satisfactory to the Required Holders, certified by Forrest A. Garb & Associates, Inc. (or any other nationally or regionally recognized independent consulting petroleum engineers) as fairly and accurately setting forth

the proven and producing, shut-in, behind-pipe, and undeveloped oil and gas reserves (separately classified as such) of the Company and its Restricted Subsidiaries as of January 1 of the year for which such reserve reports are furnished,

the aggregate present value of the future net income with respect to such reserves discounted at a stated per annum annual discount rate,

projections of the annual rate of production, gross income, and net income with respect to such proven and producing reserves, and

information with respect to the "take-or-pay," "prepayment," and gas-balancing liabilities of the Company and its Restricted Subsidiaries;

ERISA Matters -- promptly, and in any event within five (5) days after a Responsible Officer shall become aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto:

with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or

the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or

any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect;

Notices from Governmental Authority -- promptly, and in any event within thirty (30) days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and

Audited Financial Statements for Restricted Group -- with respect to any fiscal year of the Company as to which both of the following conditions would be satisfied:

(i)          the assets of all Unrestricted Subsidiaries, determined on a combined basis as of the last day of such year, exceed 20% of the consolidated total assets of the Company and its consolidated Subsidiaries, and

(ii)         the revenues of all Unrestricted Subsidiaries, determined on a combined basis for such fiscal year, exceed 20% of the consolidated revenues of the Company and its consolidated Subsidiaries,

upon the written request of the Required Holders, the Company will deliver to each holder that is an Institutional Investor the same financial statements and opinion with respect to the Company and its Restricted Subsidiaries as is provided pursuant to clauses (i) and (ii) of Section 7.1(b) with respect to the Company and its consolidated Subsidiaries (such delivery to be made no later than the later of (x) the time delivery is made of the financial statements referred to in such clauses, if such request is made at least 60 days before such time, or (y) 60 days after such request is made).

Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of the Restricted Subsidiaries (including, without limitation, information regarding the impact of the occurrence of the year 2000 on the Company and the Restricted Subsidiaries and plans of the Company to address any such impact) or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder including, without limitation, information required by 17 C.F.R. Section 230.144A, as amended from time to time.

Officer's Certificate.

Each set of financial statements delivered to a holder pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth:

Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Sections 10.1 through 10.7, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and

Event of Default -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and the Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto.

Inspection.

The Company shall permit the representatives of each holder that is an Institutional Investor:

No Default -- if no Default or Event of Default then exists, at the expense of such holder (with respect to its travel and other out-of-pocket costs and compensation expenses of its representatives) upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and the Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants and its independent petroleum engineers, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times as may be reasonably requested in writing, provided that you shall be permitted to make only two inspections per calendar year pursuant to the provisions of this subsection (a) (without limitation of the inspection rights of any Other Purchaser); and

Default -- if a Default or an Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers, independent public accountants and independent petroleum engineers (and by this provision the Company authorizes said accountants and engineers to discuss the affairs, finances and accounts of the Company and the Subsidiaries), all at such times and as often as may be requested.

PREPAYMENT OF THE NOTES

0.4        Required Prepayments.

Regardless of the amount of the Notes which may be outstanding from time to time, the Company shall prepay or, in the case of principal amounts due at the maturity of any Note, pay, and there shall become due and payable on the respective dates specified below, the respective aggregate principal amounts of each Series of Notes hereinafter set forth opposite such dates (or such lesser amount as would constitute payment in full of the Notes of such Series):

The principal amount of any Note remaining outstanding at the maturity thereof shall be paid at such maturity. Each such prepayment or payment shall be at a price of 100% of the principal amount prepaid or paid, together with interest accrued thereon to (but not including) the date of prepayment or payment. No Make-Whole Amount shall be payable in connection with any mandatory prepayment or payment made pursuant to this Section 8.1.

Optional Prepayments with Make-Whole Amount; Rescission.

Optional Prepayments with Make-Whole Amount. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in a principal amount of not less than (i) in the case of a partial prepayment other than a Contingent Optional Prepayment, Five Million Dollars ($5,000,000), or (ii) in the case of a partial prepayment which is a Contingent Optional Prepayment, Two Million Dollars ($2,000,000), or, in either case, such lesser amount as shall then be outstanding, at one hundred percent (100%) of the principal amount so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder written notice (an "Optional Prepayment Notice" ) of each optional prepayment under this Section 8.2 not less than thirty (30) days and not more than sixty (60) days prior to the date fixed for such prepayment (the "Optional Prepayment Date" ). Each such Optional Prepayment Notice shall

specify the Optional Prepayment Date,

state whether such prepayment is contingent upon the completion of an asset disposition by the Company or a Restricted Subsidiary or the consummation of a new credit facility with another creditor or group of creditors (a "Contingent Optional Prepayment" ) and describe in reasonable detail the terms thereof,

specify the aggregate principal amount of each Series to be prepaid on such date,

specify the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3),

specify the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and

be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation.

Two (2) Business Days prior to such prepayment, the Company shall deliver to each holder a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date.

Rescission. In the event that the Company shall give an Optional Prepayment Notice of any Contingent Optional Prepayment pursuant to Section 8.2(a), the Company thereafter shall have the right to rescind such Optional Prepayment Notice by giving each holder written notice of such rescission (a "Rescission Notice" ) not less than ten (10) Business Days prior to the Optional Prepayment Date specified in such Optional Prepayment Notice. Upon delivery of such Rescission Notice in accordance with this Section 8.2(b), the Company shall be relieved of any obligation to make the Contingent Optional Prepayment on the Optional Prepayment Date in respect of which such Rescission Notice was delivered.

Allocation of Partial Prepayments.

All partial prepayments of the Series D Notes, the Series E Notes and the Series F Notes pursuant to Section 8.1 shall be allocated to all outstanding Notes of the relevant Series ratably in accordance with the unpaid principal amounts thereof. All partial prepayments of the Notes pursuant to Section 8.2 shall be allocated to all outstanding Notes (without distinguishing among the different Series) ratably in accordance with the unpaid principal amounts thereof. Any partial prepayment of the Series D Notes, the Series E Notes and the Series F Notes pursuant to Section 8.2 shall reduce the principal amount of each required prepayment of such Series becoming due under Section 8.1 on and after the date of such prepayment in the inverse order of the maturity thereof.

Maturity; Surrender, etc.

In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.

Purchase of Notes.

The Company will not and will not permit any Restricted Subsidiary or Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Restricted Subsidiary or Affiliate pursuant to any payment or prepayment of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes.

Make-Whole Amount.

The term "Make-Whole Amount" means, with respect to any Series D Note, Series E Note or Series F Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings:

"Called Principal" means, with respect to any Series D Note, Series E Note, or Series F Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

"Discounted Value" means, with respect to the Called Principal of any Series D Note, Series E Note, or Series F Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.

"Reinvestment Yield" means, with respect to the Called Principal of any Series D Note, Series E Note, or Series F Note, the sum of one half percent (.5%) per annum plus the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second (2nd) Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on the Dow Jones Market Service (or such other display as may replace Page 678 on the Dow Jones Market Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second (2nd) Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the constant maturity closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the constant maturity closest to and less than the Remaining Average Life.

"Remaining Average Life" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

"Remaining Scheduled Payments" means, with respect to the Called Principal of any Series D Note, Series E Note, or Series F Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes of such Series, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1.

"Settlement Date" means, with respect to the Called Principal of any Series D Note, Series E Note, or Series F Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

AFFIRMATIVE COVENANTS.

The Company covenants that so long as any of the Notes are outstanding:

Compliance with Law.

The Company will and will cause each of the Subsidiaries to comply with all laws, ordinances, rules or regulations of Governmental Authorities to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other authorizations of Governmental Authorities necessary to the ownership and operation of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other authorizations of Governmental Authorities could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Insurance.

The Company will and will cause each of the Subsidiaries to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated, except to the extent that the failure to maintain such insurance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Maintenance of Properties.

The Company will and will cause each of the Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that

no violation of this Section 9.3 shall be deemed to have occurred with respect to any property of the Company or any Subsidiary damaged or destroyed by a casualty occurrence, so long as the Company or such Restricted Subsidiary is proceeding diligently to repair or replace such property, and      

this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (which term shall not, for the purpose of this clause (b) only, include the discontinuance of the operation and maintenance of a Restricted Subsidiary's properties that would render such Restricted Subsidiary unable to perform its obligations under the Subsidiary Guaranty, and therefore result in a Material Adverse Effect only under clause (c) of the definition of such term).

Payment of Taxes and Claims.

The Company will and will cause each of the Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (a) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or such Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (b) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect.

Corporate Existence, etc.

Subject to Section 10.5, the Company will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 10.5 and 10.6, the Company will at all times preserve and keep in full force and effect the corporate existence of each of the Subsidiaries (unless merged into the Company or a Subsidiary) and all rights, franchises, licenses and permits of the Company and the Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right, franchise, license or permit could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (which term shall not (for the purpose of this Section 9.5 only) include, with respect to any Restricted Subsidiary, the termination of or failure to preserve and keep in full force and effect such corporate existence, right, franchise, license or permit that would render such Restricted Subsidiary unable to perform its obligations under the Subsidiary Guaranty, and therefore result in a Material Adverse Effect only under clause (c) of the definition of such term).

Pari Passu.

The Company covenants that its obligations under the Notes and under this Agreement and the Other Agreements do and will rank at least pari passu with all its other present and future unsecured Senior Debt.

Subsidiary Guaranty.

The Company will cause each Subsidiary which becomes a Restricted Subsidiary after the Closing Date to execute and deliver to the holders a copy of the Joinder Agreement in the form attached to the Subsidiary Guaranty as Annex 2, duly executed by such Subsidiary, together with an opinion of counsel satisfactory to the Required Holders addressing with respect to such Subsidiary the issues relating to Subsidiaries and the Subsidiary Guaranty in the form of opinion attached hereto as Exhibit 4.4(a).

NEGATIVE COVENANTS.

The Company covenants that so long as any of the Notes are outstanding:

Net Worth.

The Company will not, at any time, permit Consolidated Net Worth to be less than the sum of (a) One Hundred Eighty Million Dollars ($180,000,000), plus (b) an aggregate amount equal to fifty percent (50%) of Consolidated Net Income (but, in each case, only if a positive number) for each completed fiscal year of the Company beginning with the fiscal year ending December 31, 1999.

Interest Coverage.

The Company will not, at any time, permit (a) EBITDA for the period of four consecutive fiscal quarters of the Company then most recently ended to be less than (b) five hundred percent (500%) of Consolidated Interest Expense for such period.

Debt Incurrence.

Company Debt. The Company will not, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Debt (including, without limitation, any extension, renewal or refunding of Debt), unless on the date the Company becomes liable with respect to any such Debt and immediately after giving effect thereto and the concurrent retirement of any other Debt,

no Default or Event of Default exists, and

Consolidated Debt does not exceed fifty percent (50%) of Total Capitalization.

Restricted Subsidiary Debt. The Company will not permit any of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Debt (including, without limitation, any extension, renewal or refunding of Debt), unless on the date such Restricted Subsidiary becomes liable with respect to any such Debt and immediately after giving effect thereto and the concurrent retirement of any Debt,

no Default or Event of Default exists,

the aggregate amount of Priority Debt does not exceed ten percent (10%) of Consolidated Tangible Assets, and

Consolidated Debt does not exceed fifty percent (50%) of Total Capitalization.

Time of Incurrence of Debt. For the purposes of this Section 10.3, any Person becoming a Restricted Subsidiary after the date hereof shall be deemed, at the time it becomes a Restricted Subsidiary, to have incurred all of its then outstanding Debt, and any Person extending, renewing or refunding any Debt shall be deemed to have incurred such Debt at the time of such extension, renewal or refunding.

Liens.

The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property (including, without limitation, any document or instrument in respect of goods or accounts receivable) of the Company or any Restricted Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom (whether or not provision is made for the equal and ratable securing of the Notes in accordance with the last paragraph of this Section 10.4), or assign or otherwise convey any right to receive income or profits, except:

Liens for taxes, assessments or other governmental charges the payment of which is not at the time required by Section 9.4;

statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens, in each case, incurred in the ordinary course of business for sums not yet due or the payment of which is being contested in accordance with the general procedures described in Section 9.4 relating to tax matters;

Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business (i) in connection with workers'compensation, unemployment insurance and other types of social security or retirement benefits, or (ii) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal and supersedeas bonds (not in excess of Five Million Dollars ($5,000,000)), bids, leases (other than Capital Leases), performance bonds, purchase, construction or sales contracts and other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property;

leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case incidental to, and not interfering with, the ordinary conduct of the business of the Company or any of the Restricted Subsidiaries, provided that such Liens do not, in the aggregate, materially detract from the value of such property with respect to its then current use;

Liens on property of the Company or any of the Restricted Subsidiaries securing Debt owing to the Company or to a Wholly-Owned Restricted Subsidiary;

Liens existing on the date of this Agreement and securing the Debt of the Company and the Restricted Subsidiaries identified as secured Debt in Schedule 5.15, but not any refinancing of such Debt;

Liens on property acquired or constructed by the Company or any Restricted Subsidiary after the date of this Agreement to secure Debt of the Company or such Restricted Subsidiary incurred in connection with or related to such acquisition or construction, and Liens existing on such property at the time of acquisition thereof, provided that

no such Lien shall extend to or cover any property other than the property being acquired or constructed (including contractual and other rights related thereto and proceeds thereof),

the amount of Debt secured by any such Lien shall not exceed an amount equal to the lesser of the total purchase or construction price or Fair Market Value (as determined in good faith by the Board of Directors or the board of directors of such Restricted Subsidiary) of the property being acquired or constructed, determined at the time of such acquisition or at the time of substantial completion of such construction,

such Lien shall be created concurrently with or within twelve months after such acquisition or substantial completion of such construction, and

no Default or Event of Default shall exist at the time of creation, incurrence or assumption of such Lien;

Liens existing on property of a corporation at the time it becomes a Restricted Subsidiary or is merged or consolidated with the Company or a Restricted Subsidiary, provided that

no such Lien shall extend to or cover any property other than the property subject to such Lien at the time of any such transaction,

the amount of Debt secured by any such Lien shall not exceed the Fair Market Value (as determined in good faith by the Board of Directors or the board of directors of such Restricted Subsidiary) of the property subject thereto, determined at the time of such transaction,

such Lien was not created in contemplation of any such transaction, and

no Default or Event of Default shall exist at the time of any such transaction;

Liens incidental to the conduct of the business referred to in Section 10.10 (including, without limitation, licenses, participation rights, rebate or revenue sharing obligations, or similar encumbrances), provided that such Liens have not arisen in connection with the incurrence of Debt; and

Liens, not otherwise permitted by the provisions of this Section 10.4, on property of the Company or any Restricted Subsidiary, provided that on the date the Company or such Restricted Subsidiary becomes liable with respect to the Debt secured by such Liens, and immediately after giving effect thereto and the concurrent retirement of any other Debt constituting Priority Debt,

no Default or Event of Default exists, and

the aggregate amount of Priority Debt does not exceed ten percent (10%) of Consolidated Tangible Assets.

In case any property shall be subjected to a Lien in violation of this Section 10.4, the Company will forthwith make or cause to be made, to the fullest extent permitted by applicable law, provision whereby the Notes will be secured equally and ratably as to such property with all other obligations secured thereby pursuant to such agreements and instruments as shall be approved by the Required Holders, and the Company will promptly cause to be delivered to each holder of a Note an opinion, reasonably satisfactory to the Required Holders, of Gardere Wynne Sewell & Riggs, L.L.P. or other independent counsel satisfactory to the Required Holders to the effect that such agreements and instruments are enforceable in accordance with their terms, and in any event the Notes shall have the benefit, to the full extent that, and with such priority as, the holders of Notes may be entitled under applicable law, of an equitable Lien on such property (and any proceeds thereof) securing the Notes. Such violation of this Section 10.4 will constitute an Event of Default hereunder, whether or not any such provision is made or any equitable Lien is created pursuant to this Section 10.4.

Mergers and Consolidations.

The Company will not, and will not permit any of the Restricted Subsidiaries to, consolidate with or merge with any other corporation or convey, transfer, spin-off or lease substantially all of its assets in a single transaction or series of transactions to any Person (except that a Restricted Subsidiary may (x) consolidate with or merge with, or convey, transfer, spin-off or lease substantially all of its assets in a single transaction or series of transactions to, another Restricted Subsidiary or the Company and (y) convey, transfer, spin-off or lease all of its assets in compliance with the provisions of Section 10.6), provided that the foregoing restriction does not apply to the consolidation or merger of the Company with, or the conveyance, transfer, spin-off or lease of substantially all of the assets of the Company in a single transaction or series of transactions to, any Person so long as:

the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer, spin-off or lease substantially all of the assets of the Company as an entirety, as the case may be (the "Successor Corporation" ), shall be a solvent corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and shall conduct substantially all of its business in one or more of such jurisdictions;

if the Company is not the Successor Corporation, such corporation shall have executed and delivered to each holder its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes (pursuant to such agreements and instruments as shall be reasonably satisfactory to the Required Holders), and the Company shall have caused to be delivered to each holder an opinion, reasonably satisfactory to the Required Holders, of Gardere Wynne Sewell & Riggs, L.L.P. or other nationally recognized independent counsel satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof;

immediately prior to, and immediately after giving effect to, such transaction, no Default or Event of Default would exist; and

immediately after giving effect to such transaction, the Successor Corporation would be permitted, pursuant to the provisions of Section 10.3, to incur at least One Dollar ($1) of additional Debt owing to a Person other than a Restricted Subsidiary of the Successor Corporation.

No such conveyance, transfer, spin-off or lease of substantially all of the assets of the Company shall have the effect of releasing the Company or any Successor Corporation from its liability under this Agreement or the Notes.

Sale of Assets.

Sale of Assets. The Company will not, and will not permit any of the Restricted Subsidiaries to, make any Transfer, provided that the foregoing restriction does not apply to a Transfer if:

the property that is the subject of such Transfer constitutes either (A) inventory held for sale, or (B) equipment, fixtures, supplies or materials no longer required in the operation of the business of the Company or such Restricted Subsidiary or that is obsolete, and, in the case of any Transfer described in clause (A) or clause (B), such Transfer is in the ordinary course of business (an "Ordinary Course Transfer" );

either

such Transfer is from a Restricted Subsidiary to the Company or a Wholly-Owned Restricted Subsidiary, or

such Transfer is from the Company to a Wholly-Owned Restricted Subsidiary,

so long as immediately before and immediately after the consummation of such transaction, and after giving effect thereto, no Default or Event of Default exists or would exist (collectively with any Ordinary Course Transfers, "Excluded Transfers" ); or

such Transfer is not an Excluded Transfer and all of the following conditions shall have been satisfied with respect thereto:

such Transfer does not involve a Substantial Portion of the property of the Company and the Restricted Subsidiaries,

in the good faith opinion of the Company, the Transfer is in exchange for consideration with a Fair Market Value at least equal to that of the property exchanged, and is in the best interests of the Company, and

immediately after giving effect to such transaction no Default or Event of Default would exist.

Debt Prepayment Transfers and Reinvested Transfers.

Notwithstanding the provisions of Section 10.6(a), the determination of whether a Transfer involves a Substantial Portion of the property of the Company and the Restricted Subsidiaries, as provided in Section 10.6(a)(iii)(A), shall be made without taking into account the same proportion of the book value attributable to the property subject to such Transfer as shall be equal to the proportion of the Net Asset Sale Proceeds Amount (the "Designated Portion" ) to be applied to either a prepayment of the Notes pursuant to Section 8.2 (a "Prepayment Transfer" ) or the acquisition of assets similar to the assets which were the subject of such Transfer (a "Reinvested Transfer" ) within one hundred eighty (180) days of the consummation of such Transfer, as specified in an Officer's Certificate delivered to each holder prior to, or contemporaneously with, the consummation of such Transfer.

If, notwithstanding the certificate referred to in the foregoing clause (i), the Company shall fail to apply the entire amount of the Designated Portion as specified in such certificate within the period stated in Section 10.6(b)(i), the computation of whether such Transfer involved a Substantial Portion of the property of the Company and the Restricted Subsidiaries shall be recomputed, as of the date of such Transfer, by taking into account the same proportion of the book value attributable to the property subject to such Transfer as shall be equal to the proportion of the Net Asset Sale Proceeds Amount actually applied to either a Prepayment Transfer or a Reinvested Transfer within such period. If, upon the recomputation provided for in the preceding sentence, such Transfer involved a Substantial Portion of the property of the Company and the Restricted Subsidiaries, an Event of Default shall be deemed to have existed as of the expiration of such period.

Certain Definitions. The following terms have the following meanings:

Disposition Value -- means, at any time, with respect to any Transfer of property,

in the case of property that does not constitute capital stock of a Restricted Subsidiary, the book value thereof, valued at the amount taken into account (or which would be taken into account) in the consolidated balance sheet of the Company then most recently required to have been delivered to the holders pursuant to Section 7.1, and

in the case of property that constitutes capital stock of a Restricted Subsidiary, an amount equal to that percentage of the book value of the assets of the Restricted Subsidiary that issued such capital stock as is equal to the percentage that the book value of such capital stock represents of the book value of all of the outstanding capital stock of such Restricted Subsidiary (assuming, in making such calculations, that all Securities convertible into such capital stock are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion), determined as of the date of the balance sheet referred to in the foregoing clause (A).

Substantial Portion -- means, at any time, any property subject to a Transfer if

the Disposition Value of such property, when added to the Disposition Value of all other property of the Company and the Restricted Subsidiaries that has been the subject of a Transfer (other than an Excluded Transfer and subject, with respect to both such property and all such other property, to the provisions of Section 10.6(b)) during the then current fiscal year of the Company, exceeds an amount equal to ten percent (10%) of Consolidated Total Assets as reflected (or as would be reflected) in the consolidated balance sheet of the Company then most recently required to have been delivered to the holders pursuant to Section 7.1, or

the Disposition Value of such property, when added to the Disposition Value of all other property of the Company and the Restricted Subsidiaries that has been the subject of a Transfer (other than an Excluded Transfer and subject, with respect to both such property and all such other property, to the provisions of Section 10.6(b)) during the period beginning on the Closing Date and ending on and including the date of the consummation of such Transfer, exceeds an amount equal to twenty percent (20%) of Consolidated Total Assets as reflected (or as would be reflected) in the consolidated balance sheet of the Company then most recently required to have been delivered to the holders pursuant to Section 7.1 hereof.

Transfer -- means, with respect to any Person, any transaction in which such Person sells, conveys, transfers or leases (as lessor) any of its property, including, without limitation, capital stock of any other Person.

Restricted Payments and Restricted Investments.

Limitation. The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, declare, make or incur any liability to make any Restricted Payment or make or authorize any Restricted Investment unless immediately after giving effect to such action:

the sum of (x) the aggregate amount of outstanding Restricted Investments (valued immediately after such action), plus (y) the aggregate amount of Restricted Payments of the Company and the Restricted Subsidiaries declared or made during the period commencing on the Closing Date, and ending on the date such Restricted Payment or Restricted Investment is declared or made, inclusive, would not exceed the sum of

Thirty-Five Million Dollars ($35,000,000), plus

fifty percent (50%) of Consolidated Net Income for the period commencing January 1, 1999 and ending on the date such Restricted Payment or such Restricted Investment is declared or made (or minus 100% of Consolidated Net Income for such period if Consolidated Net Income for such period is a loss), plus

the aggregate amount of Net Proceeds of Common Stock of the Company for such period; and

the Company could incur, pursuant to Section 10.3, at least One Dollar ($1) of additional Debt owing to a Person other than a Restricted Subsidiary; and

no Default or Event of Default would exist.

Time of Payment. The Company will not, nor will it permit any of the Restricted Subsidiaries to, authorize a Restricted Payment that is not payable within sixty (60) days of authorization.

Investments of Subsidiaries. Each Person which becomes a Restricted Subsidiary after the Closing Date will be deemed to have made, on the date such Person becomes a Restricted Subsidiary, all Restricted Investments of such Person in existence on such date. Investments in any Person that ceases to be a Restricted Subsidiary after the Closing Date (but in which the Company or another Restricted Subsidiary continues to maintain an Investment) will be deemed to have been made on the date on which such Person ceases to be a Restricted Subsidiary.

Limitations on Certain Restricted Subsidiary Actions.

The Company will not, and will not permit any of the Restricted Subsidiaries to, enter into any agreement which would restrict any Restricted Subsidiary's legal ability or right to:

pay dividends or make any other distributions on its common stock;

pay any Debt owing to the Company or another Restricted Subsidiary (other than waivers of subrogation);

make any Investment in the Company or another Restricted Subsidiary;

transfer its property to the Company or another Restricted Subsidiary (except that any such agreement may (i) prohibit the assignment of contractual rights, (ii) include grants of contractual rights of first refusal, and (iii) include similar contractual obligations not unusual in the course of such Restricted Subsidiary's business); or

Guaranty the Notes or any renewals or refinancings thereof;

provided , however, that

the restrictions of this Section 10.8 shall not apply to

any such agreement in existence on the Closing Date and set forth in Schedule 10.8,

this Agreement, or

other agreements relating to the creation of Senior Debt incurred in accordance with the terms of this Agreement, and

the restrictions of clause (d) of this Section 10.8 shall not apply to any agreement relating to the creation of Priority Debt or Debt of Restricted Subsidiaries secured by Liens permitted by Section 10.4(a) to Section 10.4(i), inclusive, to the extent that such restrictions limit the ability of any Restricted Subsidiary to transfer the Property that secures such Priority Debt or such other Debt;

provided further that, in the case of the foregoing clauses (i) and (ii), such agreement does not impose any limitations on any Restricted Subsidiary's ability to perform its obligations under the Subsidiary Guaranty.

Affiliate Transactions.

The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, enter into any transaction (other than transactions among the Company and its wholly-owned Unrestricted Subsidiaries that are not, individually or in the aggregate, Material), including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate of the Company or any of its Restricted Subsidiaries, except in the ordinary course of business of the Company or such Restricted Subsidiary and upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate.

Line of Business.

The Company will not, and will not permit any of the Subsidiaries to, engage in any business if, as a result, the Company and the Subsidiaries, taken as a whole, would not be engaged primarily in the provision of (a) seismic data services, (b) exploration for, and development and ownership of, gas and oil reserves, (c) gas marketing and (d) businesses related to the foregoing businesses.

EVENTS OF DEFAULT.

An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing:

the Company defaults in the payment of any principal of or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or

the Company defaults in the payment of any interest on any Note for more than five (5) Business Days after the same becomes due and payable; or

the Company defaults in the performance of or compliance with any term contained in Sections 10.1 through 10.9, inclusive, except as set forth in paragraph 11(d) below with respect to Section 10.4; or

the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) or incurs at any time Liens of the types described in paragraphs (a), (b) and (c) of Section 10.4 for obligations then due aggregating less than Five Million Dollars ($5,000,000), and such default is not remedied within thirty (30) days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder (any such written notice to be identified as a "notice of default" and to refer specifically to this Section 11(d)); or

any representation or warranty made in writing by or on behalf of the Company or any Restricted Subsidiary or by any officer of the Company or any Restricted Subsidiary in this Agreement or the Subsidiary Guaranty or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or

(i) the Company or any Restricted Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any one or more issues of outstanding Debt in an aggregate principal amount of at least Ten Million Dollars ($10,000,000) beyond any period of grace provided with respect thereto, or (ii) the Company or any Restricted Subsidiary is in default in the performance of or compliance with any term of any evidence of any one or more issues of Debt in an aggregate outstanding principal amount of at least Ten Million Dollars ($10,000,000) or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and the effect of such default or condition is to cause, or the holder or holders of such obligation (or a trustee on behalf of such holder or holders) as a result of such default or condition actually cause, such obligation to become due prior to any originally stated maturity, or to be repurchased by the Company or any Restricted Subsidiary prior to any originally scheduled maturity; or

the Company or any Restricted Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or

a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any of the Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of the Subsidiaries, or any such petition shall be filed against the Company or any of the Subsidiaries and such petition shall not be dismissed within sixty (60) days; or

a final judgment or judgments for the payment of money aggregating in excess of Five Million Dollars ($5,000,000) are rendered against one or more of the Company and the Subsidiaries and such judgments are not, within forty-five (45) days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within forty-five (45) days after the expiration of such stay; or

(i)          the Subsidiary Guaranty shall cease to be in full force and effect or shall be declared by a court or Governmental Authority of competent jurisdiction to be void, voidable or unenforceable against any Restricted Subsidiary,

(ii)         the validity or enforceability of the Subsidiary Guaranty against any Restricted Subsidiary shall be contested by such Restricted Subsidiary, the Company or any Affiliate, or

(iii)        any Restricted Subsidiary, the Company or any Affiliate shall deny that such Restricted Subsidiary has any further liability or obligation under the Subsidiary Guaranty.

REMEDIES ON DEFAULT, ETC.

0.5        Acceleration.

If an Event of Default with respect to the Company described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.

If any other Event of Default has occurred and is continuing, the Required Holders may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable.

If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable.

Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default is intended to provide compensation for the deprivation of such right under such circumstances.

Other Remedies.

If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.

Rescission.

At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the Required Holders, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.

No Waivers or Election of Remedies, Expenses, etc.

No course of dealing and no delay on the part of any holder in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Sectio