Employment Agreement Dated February 6, 1995

EMPLOYMENT AGREEMENT (this "Agreement") dated February 6, 1996 between 3-D Geophysical, Inc. (the "Company"), a Delaware corporation, and Charles O. Merchant (the "Employee").


WHEREAS, the Employee has been an executive officer of Paragon Geophysical, Inc., a Delaware corporation ("Paragon"), for a number of years;


WHEREAS, the Company has acquired, by merger, all of the outstanding capital stock of Paragon pursuant to that certain Agreement and Plan of Merger dated November __, 1995 by and among the Company, 3-D Paragon Acquisition Sub, Inc., a wholly-owned subsidiary of the Company, and Paragon (the "Merger Agreement");


WHEREAS, it is a condition to the closing of the transactions contemplated under the Merger Agreement that the parties hereto enter into this Agreement;


WHEREAS, the Company desires to employ the Employee on the terms and conditions provided in this Agreement;


WHEREAS, the Employee desires to accept such employment and to render services to the Company and Paragon on the terms and conditions provided in this Agreement;


NOW, THEREFORE, in consideration of the mutual agreements herein contained, the Company and the Employee hereby agree as follows: 2
Section 1. Engagement. The Company hereby employs the Employee as Vice President of the Company and as President of Paragon, and the Employee hereby accepts such employment, upon and subject to the terms and conditions hereinafter set forth.


Section 2. Term. Unless sooner terminated as provided in this Agreement, the term of the Employee's employment under this Agreement shall commence on the date of the closing under the Merger Agreement and shall end on December 31, 1998 (the "Term").


Section 3. Duties and Services.


3.1 The Employee shall render services to the Company as a Vice President and as President of Paragon, and shall perform such other duties and responsibilities as may be assigned to the Employee from time to time by the Board of Directors (the "Directors") or Chief Executive Officer of the Company and shall abide by the practices and policies of the Company and Paragon governing the conduct of employees.


3.2 During the Term, the Employee shall devote his full energy and time (exclusive of normal holidays and vacation periods and periods of sickness and disability) to the performance of the Employee's duties as defined herein and shall promptly and faithfully perform all the duties which pertain to the Employee's employment.


Section 4. Compensation.


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4.1 Annual Compensation. In consideration of all of the services to be rendered by the Employee hereunder and the covenants of Employee herein, the Company agrees to pay to the Employee, and the Employee agrees to accept, a salary at the annual rate of $82,500.


4.2 Bonus Pool. The Company intends to create a bonus plan based upon the earnings of the Company to provide incentives for certain employees of the Company and its subsidiaries. The Employee shall be entitled to participate in such plan on such terms as may be determined by the Chief Executive Officer and the Directors, in their discretion. Nothing in this Agreement shall require the Company to pay any such bonus.


4.3 Stock Options. The Company has established a 1995 Long-Term Incentive Compensation Plan pursuant to which the Company has granted to the Employee options to purchase 10,000 shares of Common Stock of the Company as and to the extent set forth in the Option Agreement governing such grant and subject to the terms and conditions of such plan.


Section 5. Expenses and Reimbursement. The Employee shall be reimbursed by the Company for reasonable and necessary out-of-pocket expenses incurred by the Employee in performing his duties hereunder, provided such expenses are approved in accordance with the procedures of the Company then in effect and are presented for reimbursement in accordance with the Company's policies and practices then in effect.


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Section 6. Benefits. During the Term, the Company agrees to provide the Employee, in addition to and not in limitation of the compensation set forth in Section 4, the following benefits, which shall be determined in the sole discretion of the Directors (or a duly constituted committee thereof):


(a) The Employee shall be entitled, subject to qualification requirements, to participate in any and all group insurance plans, group health or medical insurance plans, group accidental and disability insurance plans made generally available to the senior executive employees of the Company.


(b) The Employee shall be entitled to participate in the Company's pension, profit-sharing, stock option, stock purchase and other employee benefit programs made generally available to the senior executive employees of the Company.


(c) The Employee shall be entitled to vacation, sick leave and holidays in accordance with the Company's policies for senior executive employees generally.


(d) During the term of employment under this Agreement, the Company shall provide the Employee with a Company vehicle.


Section 7. Termination. Subject to the provisions of Section 8, which shall survive the termination of this Agreement, this Agreement shall terminate upon:


(a) The death of the Employee;


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(b) Illness, disability or incapacity that prevents the Employee from performing his duties hereunder for sixty (60) consecutive days, or for any sixty (60) days within any one hundred and eighty (180) day period, and the provision of written notice of such termination to the Employee by the Company;


(c) Upon written notice by the Company for Cause, which shall include: (i) the failure of the Employee to observe or perform any material term of this Agreement for twenty (20) days after written notice thereof specifying such failure; (ii) any act of illegality, dishonesty, moral turpitude or fraud in connection with the Employee's employment; (iii) any course of action which is materially detrimental to the business of the Company (other than good faith actions of the employee to fulfill his duties hereunder in the exercise of his business judgment and in accordance with the direction of the Chief Executive Officer or Directors of the Company); or (iv) the commission by the Employee of any felony; or


(d) Upon written notice by the employee for Good Reason. As used herein, "G ...