Form Of Employee Benefits Allocation Agreement

EMPLOYEE BENEFITS ALLOCATION AGREEMENT


This EMPLOYEE BENEFITS ALLOCATION AGREEMENT, dated _______________, 1997, is between Seitel Inc. ("Seitel"), a Delaware corporation, and Eagle Geophysical, Inc. ("Eagle"), a Delaware corporation.


WHEREAS, Seitel, a public company whose common shares are traded on the New York Stock Exchange, owns indirectly 100% of the common stock of Eagle.


WHEREAS, the Board of Directors of Seitel has determined, subject to its further consideration and the satisfaction of certain conditions, to separate the ownership of a majority of its equity ownership of Eagle and its subsidiaries from Seitel by means of an initial public offering by Eagle and Seitel of 5,880,000 shares of Eagle common stock (the "IPO") pursuant to a Registration Statement filed by Eagle with the SEC on June 2, 1997, as amended.


WHEREAS, the parties hereto have determined that it is necessary and desirable to make certain agreements regarding employee benefit plans and related matters in connection with the IPO.


NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows:


ARTICLE I
DEFINITIONS; HEADINGS


SECTION 1 - DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings, unless a different meaning clearly is required by the context:


(a) Administrative Services Agreement. The transition management Administrative Services Agreement, dated _____ _________, 1997, between Seitel and Eagle entered into pursuant to the terms of the Master Separation Agreement.


(b) Action or Claim. Any "Third-party Claim" as defined in the Master Separation Agreement, together with any assessment of, or claim for, taxes or a statutory penalty. For purposes hereof, the term "Action" or "Claim" always is deemed to include, but is not limited to, a Qualification or ERISA Claim.


(c) Closing Date. The Closing Date as defined in the Master Separation Agreement.


(d) COBRA. Continuation health coverage maintained under Section 4980B of the Code and Sections 601 to 607 of ERISA, and any successor provisions thereto.


(e) Code. The Internal Revenue Code of 1986, as amended, and any predecessor or successor thereto.


(f) Employee or Active Employee. An individual maintained on an entity's payroll system (including, but not limited to, an individual on approved leave of absence and an individual in receipt of or entitled to worker's compensation or employer-provided long term


2 disability benefits) and, to the extent required by the context, such an individual's dependents and beneficiaries.


(g) ERISA. The Employee Retirement Income Security Act of 1974, as amended from time to time.


(h) Filing. The requirement to timely file a form related to an employee benefit plan, including but not limited to Internal Revenue Service ("IRS") Form 5500; to timely distribute a notice related to an employee benefit plan, including, but not limited to, a COBRA notice or a summary plan description; and to timely pay a fee or premium.


(i) IPO. The initial public offering described in the recitals to this Agreement.


(j) Master Separation Agreement. The Master Separation Agreement of even date herewith between Seitel and Eagle.


(k) Policy Claim. A routine claim for benefits under a medical, dental, disability or group life insurance program.


(l) Qualification or ERISA Claim. Any Action or Claim arising from, or related to, the failure of a benefit plan that is intended to be tax-qualified under the provisions of Section 401(a), et seq., of the Code to satisfy the requirements for qualification, in form or in operation; any Action or Claim arising from, or related to, the failure of an employee benefit plan to comply with applicable requirements of ERISA (including, for this purpose, Section 4975 of the Code); and any Action or Claim arising from, or related to, the failure to make a Filing.


SECTION 2 - HEADINGS. The headings in this Agreement are for convenience of reference only and are not to be construed as a part of the Agreement.


ARTICLE II
DEFINED CONTRIBUTION 401(K) PLAN


SECTION 1 - IDENTIFICATION OF EXISTING PLAN. The Seitel, Inc. 401(k) Plan is maintained in the United States for employees and former employees of Seitel and its related participating employers.


SECTION 2 - VESTING; FUNDING. Effective as of the close of business on the Closing Date, each individual who is an active employee of Eagle and who is a participant in the Seitel, Inc. 401(k) Plan shall be vested in the benefit accrued by him as of the Closing Date to the maximum extent allowed for based on his compensation and service through such date. On such date as determined by Seitel, but prior to the asset transfer described in Section 3 of this Article II, Seitel shall contribute, or cause to be contributed, to the Seitel, Inc. 401(k) Plan any contributions required to be made under such plan on behalf of participants who are employees of Eagle.


SECTION 3 - ESTABLISHMENT OF NEW 401(K) PLAN AND ASSET TRANSFER. On or before July 1, 1997, Eagle shall adopt a defined contribution plan. Such plan (the "Eagle Geophysical, Inc. 401(k) Plan") shall be effective as of July 1, 1997. At such administratively feasible date


2 3 following the Closing Date as is determined by Seitel, there shall be a transfer from the Seitel, Inc. 401(k) Plan to the Eagle Geophysical, Inc. 401(k) Plan of the account balances of individuals who were participants in the Seitel, Inc. 401(k) Plan and who are eligible to become participants in the Eagle Geophysical, Inc. 401(k) Plan. Such transfers may be made in cash or in kind or in a combination of both, in Seitel's sole discretion. Prior to such transfer, Seitel shall continue to administer the Seitel, Inc. 401(k) Plan in the interests of such participants as well as all other participants in the Seitel, Inc. 401(k) Plan. It shall be provided that no further 401(k) employee and matching contributions shall be made after the final _______________, 1997 payroll deposit is made by or on behalf of a participant who is or is scheduled to become an active employee of Eagle as of the close of business on the Closing Date and provided, further, that no loans may be obtained on or after _______________, 1997 from the 401(k) Plan by such participants.


SECTION 4 - ALLOCATION OF RESPONSIBILITIES. Eagle shall be solely responsible for all Filings for, and the defense of any Claim with respect to, the plan adopted by it pursuant to Article II and Seitel shall be solely responsible for all Filings for, and the defense of any Qualification or ERISA Claim with respect to, the Seitel, Inc. 401(k) Plan.


ARTICLE III
MEDICAL, DENTAL, DISABILITY AND GROUP LIFE INSURANCE BENEFITS


Eagle shall establish as soon as administratively feasible after the Closing Date, and in any event on or before ___________, 1997, medical, dental, disability and group life insurance (which includes life and accidental death and dismemberment benefits) programs for the benefit of Eagle's active employees that provide coverage to such employees that is substantially similar to the coverage provided for such active employees immediately prior thereto, including coverage without any pre-existing condition limitation for individuals currently insured under Seitel's insurance and annual out-of-pocket expenses that had been satisfied or paid by such employees under similar programs maintained by Seitel prior to the Closing Date. Eagle shall be solely responsible for all Filings and Policy Claims for the programs established by it pursuant to this Article III, and Seitel shall be solely responsible for all Filings and, to the extent consistent with the terms of the programs sponsored by Seitel, Policy Claims and the defense (including the settlement or payment) of all medical, dental, disability and group life insurance Claims made by a covered participant or his or her beneficiary relating to events that occurred prior to the close of business on the Closing Date under an insurance program sponsored by Seitel. Eagle shall be solely responsible for all Filings and Policy Claims made by a covered participant who is an Eagle employee or his or her beneficiary relating to events that occur after the close of business on the Closing Date under an insurance program sponsored by Seitel but prior to the establishment of Eagle's programs pursuant to this Article III (provided, however, that Seitel shall use its reasonable efforts to administer such Claims), and Eagle shall pay to Seitel the proportionate share of premiums under such programs relating to periods after the Closing Date and prior to the establishment of Eagle's programs for such Eagle employees and related beneficiaries. Eagle shall cooperate with Seitel in any manner reas ...