Form Of Tax Indemnity Agreement

TAX INDEMNIFICATION AGREEMENT


BETWEEN


SEITEL, INC.


AND


EAGLE GEOPHYSICAL, INC.


DATED: _______________, 1997 2
EXHIBIT 10.24


TAX INDEMNIFICATION AGREEMENT


This Tax Indemnification Agreement (the "Agreement"), dated as of this ___ day of _________________, 1997, by and between Seitel, Inc. ("Seitel"), a Delaware corporation, and Eagle Geophysical, Inc. ("Eagle"), a Delaware corporation, is entered into in connection with a Master Separation Agreement (the "Separation Agreement") dated as of the ______ day of ____________, 1997, by and between Seitel and Eagle.


WHEREAS, Seitel and Eagle have entered into the Separation Agreement pursuant to which the ownership of Eagle and the Eagle Businesses will be separated from Seitel and the Seitel Businesses by means of an initial public offering by Eagle of its common stock (the "IPO") pursuant to a Registration Statement (the "IPO Registration Statement") filed by Eagle with the SEC;


WHEREAS, after the Effective Date it is anticipated that the Seitel Group will own less than 20% Post-Closing of the issued and outstanding shares of Eagle and thereafter neither Eagle nor any of the Eagle Post-Closing Affiliates will file Tax Returns as a member of the Seitel Group; and


WHEREAS, Seitel and Eagle desire to set forth their agreement on the proper allocation among Seitel and Eagle and their subsidiaries of their respective liabilities for Taxes.


NOW, THEREFORE, in consideration of their mutual promises, Seitel and Eagle agree as follows:


ARTICLE I


DEFINITIONS


As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and the plural forms of the terms defined):


"Code" means the Internal Revenue Code of 1986, as amended, or any successor thereto, as in effect for the taxable period in question.


"Consolidated Group" means the group of corporations that immediately prior to the Effective Date are members of the affiliated group of corporations (within the meaning of Section 1504 of the Code) of which Seitel is the common parent.


"Eagle Pre-Closing Affiliate" means any corporation, partnership or other entity directly or indirectly controlled by Eagle on or before the Effective Date.


"Eagle Post-Closing Affiliate" means any corporation, partnership or other entity directly or indirectly controlled by Eagle after the Effective Date. 3
"Eagle Businesses" means the present and future subsidiaries, divisions and business of any member of Eagle and the Eagle Post-Closing Affiliates.


"Effective Date" means the date upon which the IPO Registration Statement is declared effective.


"Final Determination" shall mean the final resolution of liability for any Tax for a taxable period, including any related interest or penalties, (i) by Internal Revenue Service Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the Internal Revenue Service ("IRS"), or by a comparable form under the laws of other jurisdictions; except that a Form 870 or 870-AD or comparable form that reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund and/or the right of the Taxing Authority to assert a further deficiency shall not constitute a Final Determination; (ii) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (iii) by a closing agreement or accepted offer in compromise under Section 7121 or 7122 of the Code, or comparable agreements under the laws of other jurisdictions; (iv) by any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the Tax imposing jurisdiction; or (v) by any other final disposition, including by reason of the expiration of the applicable statute of limitations.


"Pre-Closing Straddle Period" is defined in Section 2.04.


"Representative" means with respect to any person or entity, any of such person's or entity's directors, officers, employees, agents, consultants, advisors, accountants, attorneys, and representatives.


"Seitel Affiliate" means any corporation, partnership or other entity directly or indirectly controlled by Seitel, other than Eagle or any Eagle Affiliate.


"Seitel Businesses" means the present and future subsidiaries, divisions and business of any member of the Seitel Group, other than the present and future subsidiaries, divisions and business of Eagle or any Eagle Post-Closing Affiliates. Seitel Businesses shall include all former subsidiaries, divisions and businesses, other than the Eagle Businesses.


"Seitel Group" means the group of corporations that immediately after the Effective Date are members of the affiliated group of corporations of which Seitel is the common parent (within the meaning of section 1504 of the Code).


"Straddle Period" is defined in Section 2.04.


"Tax" or "Taxes" means (A) all forms of taxation, whenever created or imposed, and whenever imposed by a national, municipal, governmental, state, federal or other body, whether domestic or foreign (a "Taxing Authority"), and without limiting the generality of the foregoing, shall include net income, alternative or add-on minimum tax, gross income, sales, use, ad valorem, gross receipts, value added, franchise, profits, license, transfer, recording, withholding,


2 4 payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profit, custom duty, or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any related interest, penalties, or other additions to tax, or additional amounts imposed by any such Taxing Authority, (B) liability for the payment of any amounts of the type described in (A) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period, including any liability arising pursuant to Treas. Reg. Section 1.1502-6, or as a result of being a party to any agreement or arrangement whereby liability for payment of such amounts was determined or taken into account with reference to the liability of another party, and (C) liability for the payment of any amounts of the type described in (A) as a result of any express or implied obligation to indemnify any other person.


"Taxing Authority" is defined under the term "Taxes".


"Tax Return" means any return, filing, questionnaire or other document required to be filed, including requests for extensions of time, filings made with estimated Tax payments, claims for refund and amended returns that may be filed, for any taxable period with any Taxing Authority in connection with any Tax (whether or not a payment is required to be made with respect to such filing).


"Tax Schedule" is defined in Section 2.04.


ARTICLE II


PREPARATION AND FILING OF TAX RETURNS


Section 2.01. Income Included. All Tax Returns required to be filed by or on behalf of any member of the Consolidated Group relating to taxable periods ending before or including the Effective Date and filed after the date of this Agreement shall include the income attributable to such taxable periods (including, for Federal income Tax purposes, any deferred income triggered into income by Treas. Reg. Section 1.1502.13 and Treas. Reg. Section 1.1502-14 and any excess loss accounts taken into income under Treas. Reg. Section 1.1502.19) of Eagle and the Eagle Pre-Closing Affiliates in the Consolidated Group's consolidated Federal income Tax Returns (or under any similar rules applicable to any state, local or other Tax Returns filed on a consolidated basis) for all periods through the Effective Date. The income of Eagle and such Eagle Pre-Closing Affiliates will be apportioned to the period up to and including the Effective date and the period after the Effective Date by closing the books of Eagle and such Eagle Pre-Closing Affiliates as of the end of the Effective Date.


Section 2.02. Pre-Effective Date Tax Returns. Except as otherwise provided in Section 2.04, Seitel shall timely prepare and file, or cause to be timely prepared and filed, all Tax Returns required to be filed by or on behalf of any member of the Consolidated Group relating to taxable periods ending before or including the Effective Date. Eagle shall provide Seitel any Tax-related information reasonably requested by Seitel relating to any taxable periods ending on or before the Effective Date.


Section 2.03. Post-Effective Date Tax Returns. Eagle shall prepare and file, or cause to be prepared and filed, all Tax Returns for Eagle and any Eagle Post-Closing Affiliate for taxable


3 5 periods beginning after the Effective Date. Seitel shall prepare and file, or cause to be prepared and filed, all Tax Returns for the Seitel Group for taxable periods beginning after the Effective Date.


Section 2.04. Straddle Period Returns.


(a) Eagle shall prepare and file on a timely basis any Tax Returns (but not including any Federal income Tax Return) of Eagle and any Eagle Pre-Closing Affi ...