**********************************************************************
LOAN AGREEMENT
between
3-D GEOPHYSICAL, INC.
and
FIRST INTERSTATE BANK OF TEXAS, N.A.
Dated as of May 29, 1996
*********************************************************************
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of May 29, 1996, is between 3-D
GEOPHYSICAL, INC., a Delaware corporation (together with its successors and
permitted assigns, the "Borrower"), and FIRST INTERSTATE BANK OF TEXAS, N.A., a
national banking association (together with its successors and permitted
assigns, the "Lender").
R E C I T A L S:
A. The Borrower has requested the Lender to extend credit to the
Borrower in the form of (i) a revolving credit facility not to exceed $3,000,000
(the "Revolving Credit Loan") outstanding at any time and (ii) a term loan in
the principal amount of $15,000,000 (the "Term Loan").
B. The proceeds of the Revolving Credit Loan will be utilized to
finance Borrower's working capital. The proceeds of the Term Loan will be
utilized to (i) finance a portion of the cost of purchasing Equipment consisting
of a new seismic data acquisition system, (ii) refinance certain of Borrower's
existing debt and (iii) finance up to 85% of the purchase price of additional
purchases of new Equipment.
C. The Lender is willing to make such extensions of credit to the
Borrower upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. All capitalized terms used in this Agreement
shall have the meanings set forth on Appendix A attached hereto and incorporated
herein for all purposes.
Section 1.2 Other Definitional Provisions. All definitions contained in
Appendix A are equally applicable to the singular and plural forms of the terms
defined. The words "hereof', "herein", and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Unless otherwise specified, all
Article and Section references pertain to this Agreement. All accounting terms
not specifically defined herein shall be construed in accordance with GAAP.
Terms used herein that are defined in the UCC, unless otherwise defined herein,
shall have the meanings specified in the UCC
ARTICLE II
Revolving Credit Loan
Section 2.1 Revolving Credit Commitment. Subject to the terms and
conditions of this Agreement, the Lender agrees to make one or more Revolving
Credit Advances to the Borrower from time to time from the date hereof to and
including the Revolving Credit Termination Date, provided that the aggregate
amount of all Revolving Credit Advances at any time outstanding shall not exceed
the lesser of (a) the Borrowing Base or (b) the amount of the Revolving Credit
Commitment. Subject to the foregoing limitations, and the other terms and
provisions of this Agreement, the Borrower may borrow, repay, and reborrow
hereunder.
Section 2.2 Revolving Credit Note. The obligation of the Borrower to
repay Revolving Credit Advances shall be evidenced by the Revolving Credit Note
executed by the Borrower, payable to the order of the Lender, in the principal
amount of the Commitment as originally in effect, and dated the date hereof.
Section 2.3 Repayment of Revolving Credit Loan. The Borrower shall
repay the outstanding principal amount of the Revolving Credit Commitment (i.e.,
all Revolving Credit Advances) on the Revolving Credit Termination Date.
Section 2.4 Interest. Revolving Credit Advances shall bear interest
prior to maturity at a varying rate per annum equal from day to day to the
lesser of (a) the Maximum Rate, or (b) the sum of the Applicable Rate in effect
from day to day. If at any time the rate of interest specified in clause (b)
above shall exceed the Maximum Rate, thereby causing the interest accruing on
Revolving Credit Advances to be limited to the Maximum Rate, then any subsequent
reduction in the Base Rate shall not reduce the rate of interest on Revolving
Credit Advances below the Maximum Rate until the aggregate amount of interest
accrued on Revolving Credit Advances equals the aggregate amount of ' interest
which would have accrued on the Revolving Credit Loan if the interest rate
specified in clause (b) above had at all times been in effect, Accrued and
unpaid interest on the Revolving Credit Loan shall be due and payable on each
Monthly Payment Date and on the Revolving Credit Termination Date.
Section 2.5 Borrowing Procedure. The Borrower shall give the Lender at
least three Business Days prior notice of each Revolving Credit Advance under
the Revolving Credit Loan by means of a Revolving Credit Advance Request Form
containing the information required therein. The Lender at its option may from
time to time accept telephonic requests for Revolving Credit Advances, provided
that such acceptance shall not constitute a waiver of the Lender's right to
require delivery of a Revolving Credit Advance Request Form in connection with
subsequent Advances. Any telephonic request for a Revolving Credit Advance shall
be promptly confirmed by submission of a properly completed Revolving Credit
Advance Request Form to the Lender. Subject to the terms and conditions of this
Agreement, each Revolving Credit Advance under the Revolving Credit Loan shall
be made available to the Borrower by
-3-
depositing the same, in immediately available funds, in an account of the
Borrower maintained with the Lender at the Principal Office designated by the
Borrower.
Section 2.6 Use of Proceeds. The proceeds of the Revolving Credit
Advances shall be used by the Borrower for working capital in the ordinary
course of business.
Section 2.7 Borrowing Base; Mandatory Prepayments. If at any time the
outstanding principal amount of the Revolving Credit Loan exceeds the Borrowing
Base, the Borrower shall promptly, and in any event, within five days of
learning of the same, prepay the Revolving Credit Loan by an amount equal to
such excess plus accrued and unpaid interest on the amount so prepaid.
Section 2.8 Revolving Credit Commitment Fee. (a) The Borrower agrees to
pay to the Lender a commitment fee on the date of the first Advance under this
Agreement in the amount of $15,000. (b) In addition, the Borrower agrees to pay
to the Lender, from time to time, a commitment fee on the daily average unused
amount of the Revolving Credit Commitment for the period from and including the
date the requirement set forth in Section 6.2(a) of this Agreement is satisfied
to and including the Revolving Credit Termination Date, at the rate of 0.50% per
annum based on a 365 day year and the actual number of days elapsed. Accrued
commitment fee shall be payable in arrears on each Quarterly Payment Date and on
the Revolving Credit Termination Date.
Section 2.9 Reduction or Termination of Revolving Credit Commitment.
The Borrower shall have the right to terminate in whole or reduce in part the
unused portion of the Revolving Credit Commitment upon at least three Business
Days' prior notice (which notice shall be irrevocable) to the Lender specifying
the effective date thereof, whether a termination or reduction is being made,
and the amount of any partial reduction, provided that each partial reduction
shall be in the amount of $100,000 or an integral multiple thereof and the
Borrower shall simultaneously prepay the amount by which the unpaid principal
amount of the Revolving Credit Advances exceeds the Revolving Credit Commitment
(after giving effect to such notice) plus accrued and unpaid interest on the
principal amount so prepaid. The Revolving Credit Commitment may not be
reinstated after it has been terminated or reduced.
ARTICLE III
Term Loan
Section 3.1 Term Loan Commitment. Subject to the terms and conditions
of this Agreement, the Lender agrees to make the Term Loan to the Borrower in a
principal amount up to but not exceeding the amount of the Term Loan Commitment
in (i) an initial Term Loan Advance in the amount of at least $12,051,311.20 and
(ii) an additional Term Loan Advance in an amount not to exceed the then
remaining undrawn Term Loan Commitment on or before the Tenn Loan Termination
Date.
-4-
Section 3.2 The Term Note. The obligation of the Borrower to repay the
Term Loan and accrued interest thereon shall be evidenced by the Term Note
executed by the Borrower, payable to the order of the Lender, in the principal
amount of the Term Loan Commitment, and dated the date hereof.
Section 3.3 Repayment of Term Loan. The Borrower shall repay the unpaid
principal amount of, and all accrued but unpaid interest on, the Term Loan in
accordance with the Term Note.
Section 3.4 Interest. The unpaid principal amount of the Term Loan
shall bear interest prior to maturity or Default at a varying rate per annum
equal from day to day to the lesser of (a) the Maximum Rate, or (b) the
Applicable Rate in effect from day to day. If at any time the rate of interest
specified in clause (b) above shall exceed the Maximum Rate, thereby causing the
interest accruing on the Term Loan to be limited to the Maximum Rate, then any
subsequent reduction in the Applicable Rate shall not reduce the rate of
interest on the Term Loan below the Maximum Rate until the aggregate amount of
interest accrued on the Term Loan equals the aggregate amount of interest which
would have accrued on the Term Loan if the interest rate specified in clause (b)
above had at all times been in effect.
Section 3.5 Borrowing Procedure, Etc. The Borrower shall give the
Lender at least three Business Days prior notice of the Term Loan Advance under
the Term Loan by means of a Term Loan Advance Request Form containing the
information required therein. Subject to the terms and conditions of this
Agreement, each Term Loan Advance under the Term Loan shall be made available to
the Borrower by depositing the same, in immediately available funds, in an
account of the Borrower maintained with the Lender at the Principal Office
designated by the Borrower. The second Term Loan Advance shall not be in an
amount greater than 85% of the purchase price of Equipment being acquired with
the proceeds thereof.
Section 3.6 Facility Fee. In consideration for making the Term Loan
available to Borrower, Borrower shall pay to Lender as a facility fee $75,000
upon the execution of this Agreement.
Section 3.7 Use of Proceeds. The proceeds of the Term Loan shall be
used by the Borrower to (i) finance a portion of the cost of purchasing
Equipment consisting of a new seismic data acquisition system, (ii) refinance
certain of Borrower's existing debt identified to Lender, and (iii) finance up
to 85% of the purchase price of additional purchases of new Equipment.
Section 3.8 Mandatory Prepayment. On each Quarterly Payment Date
(beginning November 30, 1996), the Borrower shall prepay the Term Loan in an
amount equal to 50 percent of the Excess Cash Flow for the immediately preceding
calendar quarter: All mandatory prepayments shall be applied to the outstanding
principal of the Term Loan in inverse order of maturity.
-5-
Section 3.9 Voluntary Prepayment and Repayment. The Borrower may, on at
least two Business Days prior notice to the Lender, prepay the Term Loan in
whole at any time or from time to time in part without premium or penalty but
with accrued interest to the date of prepayment on the amount so prepaid,
provided that each partial prepayment under the Term Note shall be in the
principal amount of at least $100,000. With respect to the Term Note, all
prepayments shall be applied to the outstanding principal of the Term Loan in
inverse order of maturity.
ARTICLE IV
Payments
Section 4.1 Method of Payment. All payments of principal, interest, and
other amounts to be made by the Borrower under this Agreement and the other Loan
Documents shall be made to the Lender at the Principal Office in Dollars and
immediately available funds, without setoff, deduction, or counterclaim, not
later than 11:00 A.M., Houston, Texas time on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). Subject to the
provisions of the Lockbox Agreement, the Borrower shall, at the time of making
each such payment, specify to the Lender the sums payable by the Borrower under
this Agreement and the other Loan Documents to which such payment is to be
applied (and in the event the Borrower fails to so specify, or if an Event of
Default has occurred and is continuing, but subject to the Lockbox Agreement,
the Lender may apply such payment to the Obligations in such order and manner as
it may elect in its sole discretion). Whenever any payment under this Agreement
or any other Loan Document shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
the payment of interest and commitment fee, as the case may be.
Section 4.2 Computation of Interest. Interest on all amounts payable by
the Borrower hereunder shall be computed on the basis of a year of 365 days and
the actual number of days elapsed (including the first day but excluding the
last day) unless such calculation would result in a usurious rate, in which case
interest shall be calculated on the basis of a year of 365 or 366 days, as the
case may be.
Section 4.3 Interest at Default Rate. Notwithstanding any provision
herein, Advances and (to the fullest extent permitted by law) any other amount
payable by the Borrower under this Agreement or any other Loan Document that are
not paid in full when due (whether at stated maturity, by acceleration, or
otherwise) shall bear interest at the Default Rate for the period from and
including the due date thereof to but excluding the date the same is paid in
full. Interest payable at the Default Rate shall be payable from time to time on
demand.
Section 4.4 Capital Adequacy. If after the date hereof, the Lender
shall have determined that the adoption or implementation of any applicable law,
rule, or regulation
-6-
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or compliance by the Lender (or its parent) with any guideline,
request, or directive regarding capital adequacy (whether or not having the
force of law) of any such central bank or other Governmental Authority
applicable generally to Banks of Lender's (or its parent's) size, has or would
have the effect of reducing the rate of return on the Lender's (or its parent's)
capital as a consequence of its obligations hereunder or the transactions
contemplated hereby to a level below that which the Lender (or its parent) could
have achieved but for such adoption, implementation, change, or compliance
(taking into consideration the Lender's policies with respect to capital
adequacy) by an amount deemed by the Lender to be material, then from time to
time, within 10 Business Days after demand by the Lender, the Borrower shall pay
to the Lender (or its parent) such additional amount or amounts as will
compensate the Lender for such reduction. A certificate of the Lender claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive, provided that the
determination thereof is made on a reasonable basis. In determining such amount
or amounts, the Lender may use any reasonable averaging and attribution methods.
Section 4.5 Annual Agent Fee. Beginning on May 31, 1997, the Borrower
shall pay to the Lender on May 31 of each year during the term of this Agreement
an annual agent's fee of $15,000 to compensate the Lender for its efforts in
managing participations in Loans, disseminating information, and providing other
services related thereto.
ARTICLE V
Security
Section 5.1 Collateral. To secure full and complete payment and
performance of the Obligations, the Borrower shall execute and deliver, and
shall cause each Subsidiary to execute and deliver, a Security Agreement and
other documents described below covering the property and collateral described
in this Section (which, together with any other property and collateral which
may now or hereafter secure the Obligations or any part thereof, is sometimes
herein called the "Collateral"):
All of its accounts, accounts receivable, equipment,
machinery, fixtures, inventory, goods, chattel paper, documents,
instruments, investment property, general intangibles, and other
personal property, whether now owned or hereafter acquired, and all
products and proceeds thereof.
The Borrower shall execute and cause to be executed such further documents and
instruments, including, without limitation, Uniform Commercial Code financing
statements, as the Lender, in its sole discretion, deems necessary or desirable
to create, evidence, preserve, and perfect its liens and security interests in
the Collateral.
-7-
Section 5.2 Guaranties. Each Guarantor shall guarantee Obligations
pursuant to a Guaranty.
Section 5.3 Additional Support. Manufacturer shall provide the
Remarketing and Support Agreement.
Section 5.4 Setoff. If an Event of Default shall have occurred and be
continuing, the Lender shall have the right to set off and apply against the
Obligations in such manner as the Lender may determine, at any time and without
notice to the Borrower or any Subsidiary, any and all deposits (general or
special, time or demand, provisional or final) or other sums at any time
credited by or owing from the Lender to the Borrower or any Subsidiary whether
or not the Obligations are then due. As further security for the Obligations,
the Borrower hereby grants to the Lender a security interest in all money,
instruments, and other property of the Borrower now or hereafter held by the
Lender, including, without limitation, property held in safekeeping. In addition
to the Lender's right of setoff and as further security for the Obligations, the
Borrower hereby grants to the Lender a security interest in all deposits
(general or special, time or demand, provisional or final) and other accounts of
the Borrower now or hereafter on deposit with or held by the Lender and all
other sums at any time credited by or owing from the Lender to the Borrower. The
rights and remedies of the Lender hereunder are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which the
Lender may have.
ARTICLE VI
Conditions Precedent
Section 6.1 Initial Term Loan Advance. The obligation of the Lender to
make an initial Term Loan Advance is subject to the condition precedent that the
Lender shall have received on or before the day of such Advance all of the
following, each dated (unless otherwise indicated) the date hereof, in form and
substance satisfactory to the Lender:
(a) Resolutions. Resolutions of the Board of Directors of each
of the Borrower, the Manufacturer, and the Guarantors certified by its
Secretary or an Assistant Secretary which authorize the execution,
delivery, and performance of the Loan Documents to which it is or is to
be a party (each of Manufacturer's and each Guarantor's certificate to
be dated the date of the initial Advance) or equivalent documents under
the laws of the Republic of Mexico);
(b) Incumbency Certificate. A certificate of incumbency of
each of the Borrower, the Manufacturer, and the Guarantors certified by
the Secretary or an Assistant Secretary of such Person certifying the
names of the officers of such Person authorized to sign each of the
Loan Documents to which it is or is to be a party (including the
certificates contemplated herein) together with specimen signatures of
such officers (each of Manufacturer's and each Guarantor's
certification to be dated the date
-8-
of the initial Advance) or equivalent documents under the laws of the
Republic of Mexico);
(c) Articles of Incorporation. The articles of incorporation
of each of the Borrower, Manufacturer, and each Guarantor certified by
the appropriate public official of the jurisdiction of incorporation of
such Person and dated within 10 days prior to the date of the initial
Advance or equivalent documents under the laws of the Republic of
Mexico;
(d) Bylaws. The bylaws of each of the Borrower, Manufacturer,
and each Guarantor certified by the Secretary or an Assistant Secretary
of such Person (each of Manufacturer's and each Guarantor's
certification to be dated the date of the initial Advance or equivalent
documents under the laws of the Republic of Mexico);
(e) Governmental Certificates. Certificates of the appropriate
government officials of each of the Borrower's, Manufacturer's, and
each Guarantor's jurisdiction of incorporation as to the existence and
good standing of such Person, each dated within 10 days prior to the
date of the initial Advance or equivalent documents under the laws of
the Republic of Mexico;
(f) Term Note. The Term Note executed by the Borrower;
(g) Security Agreements. A Security Agreement executed by the
Borrower and each Guarantor;
(h) Financing Statements; Etc. Uniform Commercial Code
financing statements and all other appropriate documents necessary or
advisable (including, as applicable, equivalent documents under the
laws of the Republic of Mexico) to perfect the Lender's Lien on the
Collateral executed by the Borrower and each Guarantor and covering
such Collateral as the Lender may request;
(i) Guaranty. A Guaranty executed by each of the Guarantors;
(j) Remarketing and Support Agreement. Manufacturer's
Remarketing and Support Agreement executed by the Manufacturer;
(k) Representations and Warranties Certificate. The
Representations and Warranties Certificates each executed by an
authorized officer of the Borrower, the Manufacturer, and each
Guarantor and the other Persons party thereto;
(l) Lockbox Agreement. The Lockbox Agreement executed by the
Borrower, the Manufacturer and the Guarantors;
-9-
(m) Insurance Policies. Binders of all insurance policies
required by Section 7.5, naming Lender as loss payee with respect to
all insurance policies covering Collateral and providing such insurance
will not be cancelled without 30 days' prior written notice to Lender,
and as soon as available, copies of such policies, together with loss
payable endorsements in favor of the Lender with respect to insurance
covering Collateral and naming Lender as an additional insured with
respect to comprehensive general liability insurance, and endorsements
providing for no cancellation without 30 days' prior written notice to
Lender;
(n) UCC Search, Etc. The results of a Uniform Commercial Code
search and other appropriate searches showing all financing statements
and other documents or instruments on file against the Borrower and its
Subsidiaries in the offices of the Secretary of State of Texas, the
Secretary of State of Colorado and other jurisdictions in which any of
them do business, such searches to be as of a date no more than 10 days
prior to the date of the initial Advance;
(o) Opinion of Counsel. Favorable opinion of Rothgerber,
Appel, Powers & Johnson LLP and Webb & Lautherbach, P.C., legal counsel
to the Borrower and its Subsidiaries, as to such matters as the Lender
or its counsel may reasonably request;
(p) Opinion of Counsel of Manufacturer. A favorable opinion of
Haynes & Boone, L.L.P., legal counsel to the Manufacturer, as to such
matters as the Lender may reasonably request;
(q) Facility Fee. Evidence that the Borrower has paid the
facility fee payable to Lender under Section 3.5;
(r) Accounts. Evidence that the Lockbox Account and related
reserve accounts have been established;
(s) Participants. Receipt of participation agreements from
financial institutions acceptable to the Lender in respect of 27.78% of
the Revolving Credit Commitment and the 27.78% Term Loan Commitment;
(t) Review of Certain Contracts. Review and approval by the
Lender of the Borrower's or a Guarantor's contract with British
Petroleum relating to seismic surveys to be performed on the North
Slope of Alaska;
(u) Attorneys' Fees and Expenses. Evidence that the costs and
expenses (including reasonable attorneys' fees) referred to in Section
11.1, to the extent incurred, shall have been paid in full;
-10-
(v) Vessel Charters and Leases. As soon as available, a copy
of each charter relating to a Vessel on which all or any part of the
Collateral is or will be located and each lease of real Property where
Collateral is stored;
(w) Waivers. Receipt of landlord's, charterer's and other
similar waivers of any Lien on the Collateral, the form and substance
to be satisfactory to the Lender.
(x) All Advances. The obligation of the Lender to make any
Advance (including the initial Advance) is subject to the following
additional conditions precedent:
(y) Advance Request Form. The Lender shall have received, in
accordance with Section 3.6, an Advance Request Form, dated the date of
such Advance, executed by an authorized officer of the Borrower;
(z) No Default. No Default shall have occurred and be
continuing, or would exist after giving effect to such Advance;
(aa) Additional Documentation. Such additional approvals,
opinions, or documents as the Lender or its legal counsel, Winstead
Sechrest & Minick P.C., may reasonably request.
Section 6.2 Initial Revolving Credit Advance. The obligation of the
Lender to make an initial Revolving Credit Advance is subject to the condition
precedent that the Lender shall have received on or before the day of such
Advance all of the following, each dated (unless otherwise indicated) the date
hereof, in form and substance satisfactory to the Lender:
(a) Revolving Credit Note. The Revolving Credit Note executed
by the Borrower;
(b) Collateral Audit. Evidence satisfactory to the Lender that
its commercial finance department has completed a Collateral audit and
issued a satisfactory rating;
(c) Other Requirements. All of the requirements for an Initial
Term Loan Advance have been satisfied (including any not satisfied on
the date of the Initial Term Advance);
(d) Commitment Fee. Evidence that the Borrower has paid the
initial commitment fee payable to Lender under Section 2.8(b);
(e) Advance Request Form. The Lender shall have received, in
accordance with Section 2.5, an Advance Request Form, dated the date of
such Advance, executed by an authorized officer of the Borrower;
-11-
(f) No Default. No Default shall have occurred and be
continuing, or would exist after giving effect to such Advance.
(g) Representations and Warranties. All of the representations
and warranties contained in the Representation and Warranties
Certificate and the other Loan Documents shall be true and correct on
and as of the date of such Advance with the same force and effect as if
such representations and warranties had been made on and as of such
date.
(h) Additional Documentation. The Borrower shall have provided
such additional approvals, opinions, or documents as the Lender or its
legal counsel, Winstead Sechrest & Minick, P.C., may reasonably
request.
Section 6.3 Conditions to All Advances. The obligation of the Lender to
make each Advance hereunder is subject to the additional condition precedent
that:
(a) No Default. No Default shall have occurred and be
continuing, or would exist after giving effect to such Advance.
(b) Advance Request Form. The Lender shall have received, in
accordance with Section 2.5 or 3.6, as the case may be, an Advance
Request Form, dated the date of such Advance, executed by an authorized
officer of the Borrower;
(c) Representations and Warranties. All of the representations
and warranties contained in the Representation and Warranties
Certificate and the other Loan Documents shall be true and correct on
and as of the date of such Advance with the same force and effect as if
such representations and warranties had been made on and as of such
date.
(d) Additional Documentation. The Borrower shall have provided
such additional approvals, opinions, or documents as the Lender or its
legal counsel, Winstead Sechrest & Minick P.C., may reasonably request.
ARTICLE VII
Positive Covenants
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or the Lender has any Commitment hereunder, the
Borrower will perform and observe the following positive covenants, unless the
Lender shall otherwise consent in writing:
Section 7.1 Reporting Requirements. The Borrower will furnish to the
Lender and to the Manufacturer:
(a) Annual Financial Statements. As soon as available, and in
any event within 120 days after the end of each fiscal year of the
Borrower, beginning with the
-12-
fiscal year ending December 31, 1996, (i) a copy of the annual audit
report of the Borrower and the Subsidiaries for such fiscal year
containing, on a consolidated and consolidating basis, balance sheets
and statements of income, retained earnings, and cash flow as at the
end of such fiscal year and for the 12-month period then ended, in each
case setting forth in comparative form the figures for the preceding
fiscal year, all in reasonable detail and audited and certified by
independent certified public accountants of recognized standing
acceptable to the Lender, to the effect that such report has been
prepared in accordance with GAAP; and (ii) a certificate of such
independent certified public accountants to Lender (A) stating that to
their knowledge no Default has occurred and is continuing, or if in
their opinion a Default has occurred and is continuing, a statement as
to the nature thereof, and (B) confirming the calculations set forth in
the officer's certificate delivered simultaneously therewith;
(b) Annual Report on Form 10-K. As soon as available, and in
any event within 120 days after filing deadline therefor, a copy of the
annual report of the Borrower on Form 10-K filed with the Securities
and Exchange Commission or any successor agency, certified by the chief
financial officer of Borrower to be a true and correct copy thereof;
(c) Monthly Financial Statements. As soon as available, and in
any event within 45 days after the end of each calendar month of each
fiscal year of the Borrower, a copy of an unaudited financial report of
the Borrower as of the end of such month and for the portion of the
fiscal year then ended, containing, on a consolidated and consolidating
basis, balance sheets and statements of income, retained earnings, and
cash flow, in each case after March 31, 1997 setting forth in
comparative form the figures for the corresponding period of the
preceding fiscal year, all in reasonable detail certified by the chief
financial officer of the Borrower to have been prepared in accordance
with GAAP and to fairly and accurately present (subject to year-end
audit adjustments) the financial condition and results of operations of
the Borrower, on a consolidated and consolidating basis, at the date
and for the periods indicated therein; provided, however, that until
the Borrower is required to provide monthly in comparative form the
figures set forth above, the Borrower shall provide the same on a
quarterly basis (due 45 days after the end of each such quarter);
(d) Accounts Receivable and Accounts Payable Aging Reports.
Concurrently with the delivery of the financial statements referred to
in subsection 7.1(c), an accounts receivable and accounts payable aging
report and a backlog listing;
(e) Certificate of No Default. Concurrently with the delivery
of each of the financial statements referred to in subsections 7.1(a)
and 7.1(c), a certificate of the chief executive or other responsible
officer of the Borrower (i) stating that to the best of such officer's
knowledge, no Default has occurred and is continuing, or if a Default
has occurred and is continuing, a statement as to the nature thereof
and the action which is
-13-
proposed to be taken with respect thereto, and (ii) showing in
reasonable detail the calculations demonstrating compliance with
Article IX;
(f) Annual Collateral Listing. Concurrently with the delivery
of the financial statements referred to in subsection 7.1(a), a listing
of all of the Borrower's inventory and equipment Collateral and its
location;
(g) Management Letters. Promptly upon receipt thereof, a copy
of any management letter or written report submitted to the Borrower or
any Subsidiary by independent certified public accountants with respect
to the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower or any Subsidiary;
(h) Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits, and proceedings before any
Governmental Authority or arbitrator affecting the Borrower or any
Subsidiary which, if determined adversely to the Borrower or such
Subsidiary, could have a Material Adverse Effect;
(i) Notice of Default. As soon as possible and in any event
within five days after the occurrence of each Default, a written notice
setting forth the details of such Default and the action that the
Borrower has taken and proposes to take with respect thereto;
(j) ERISA Reports. Promptly after the filing or receipt
thereof, copies of all reports, including annual reports, and notices
which the Borrower or any Subsidiary files with or receives from the
PBGC or the U.S. Department of Labor under ERISA; and as soon as
possible and in any event within five days after the Borrower or any
Subsidiary knows or has reason to know that any Reportable Event or
Prohibited Transaction has occurred with respect to any Plan or that
the PBGC or the Borrower or any Subsidiary has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, a
certificate of the chief financial officer of the Borrower setting
forth the details as to such Reportable Event or Prohibited Transaction
or Plan termination and the action that the Borrower proposes to take
with respect thereto;
(k) Notice of Material Adverse Change. As soon as possible and
in any event within ten days after the occurrence thereof, written
notice of any matter that could reasonably cause a Material Adverse
Effect on the Borrower or any Subsidiary;
(l) Borrowing Base. As soon as available, and in any event
within 15 days after the end of each calendar month, a Borrowing Base
Report, certified by the chief financial officer of the Borrower;
(m) Proxy Statements, Etc. As soon as available, one copy of
each financial statement, report notice or proxy statement sent by the
Borrower or any Subsidiary to its stockholders generally and one copy
of each regular, periodic or special report,
-14-
registration statement, or prospectus filed by the Borrower or any
Subsidiary with any securities exchange or the Securities and Exchange
Commission or any successor agency; and
(n) General Information. Promptly, such other information
concerning the Borrower or any Subsidiary as the Lender may from time
to time reasonably request.
Section 7.2 Maintenance of Existence; Conduct of Business. The Borrower
will preserve and maintain, and will cause each Subsidiary to preserve and
maintain, its corporate existence; in addition, the Borrower will preserve and
maintain, and will cause each Subsidiary to preserve and maintain, all its
leases, privileges, licenses, permits, franchises, qualifications, and rights
that are necessary in the ordinary conduct of its business. The Borrower will
conduct, and will cause each Subsidiary to conduct, its business in an orderly
and efficient manner in accordance with good business practices.
Section 7.3 Maintenance of Properties. The Borrower will maintain,
keep, and preserve, and cause each Subsidiary to maintain, keep, and preserve,
all of its properties (tangible and intangible) necessary or useful in the
proper conduct of its business in good working order and condition.
Section 7.4 Taxes and Claims. The Borrower will pay or discharge, and
will cause each Subsidiary to pay or discharge, at or before maturity or before
becoming delinquent: (a) all taxes, levies, assessments, and governmental
charges imposed on it or its income or profits or any of its property, and (b)
all lawful claims for labor, material, and supplies, which, if unpaid, might
become a Lien upon any of its property.
Section 7.5 Insurance. The Borrower will maintain, and will cause each
of the Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies in such amounts and covering such risks as is usually
carried by corporations engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower and the Subsidiaries
operate, provided that in any event the Borrower will maintain, and cause each
Subsidiary to maintain, workmen's compensation insurance, property insurance,
comprehensive general liability insurance (with Lender named as additional
insured), reasonably satisfactory to the Lender and naming the Lender as an
additional assured. Each insurance policy covering Collateral shall name the
Lender as additional assured and loss payee and shall provide that such policy
will not be cancelled or reduced without 30 days' prior written notice to the
Lender.
Section 7.6 Inspection Rights. At any reasonable time and from time to
time, the Borrower will permit, and will cause each Subsidiary to permit,
representatives of the Lender to examine, copy, and make extracts from its books
and records, to visit and inspect its properties, and to discuss its business,
operations, and financial condition with its officers, employees, and
independent certified public accountants. The Borrower shall cooperate and cause
each of its Subsidiaries to cooperate, with Lender's Commercial Finance
Department,
-15-
which shall perform an semi-annual asset audits, and the Borrower shall bear the
cost and expense of such audits.
Section 7.7 Keeping Books and Records. The Borrower will maintain, and
will cause each Subsidiary to maintain, proper books of record and account in
which full, true, and correct entries in conformity with GAAP in all material
respects shall be made of all dealings and transactions in relation to its
business and activities.
Section 7.8 Compliance with Laws. The Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, rules, regulations, orders, and decrees of any Governmental Authority or
arbitrator.
Section 7.9 Compliance with Agreements. The Borrower will, and will
cause each Subsidiary to, comply in all material respects with all agreements,
contracts, and instruments binding on it or affecting its properties or
business.
Section 7.10 Comply with Vessel Charters and Leases. The Borrower will,
and will cause each Subsidiary to, pay all amounts owing under charters or
leases of Vessels and leases of real Property where Collateral is stored and
shall comply in all material respects with all of the terms and provisions
thereof.
Section 7.11 Vendors, Suppliers, Etc. The Borrower will, and will cause
each Subsidiary to, pay all of its vendors, suppliers and other Persons that may
assert a Lien on a Vessel or any Property of the Borrower and its Subsidiaries.
Section 7.12 Further Assurances. The Borrower will, and cause each
Subsidiary to, execute and deliver such further agreements and instruments and
take such further action as may be reasonably requested by the Lender to carry
out the provisions and purposes of this Agreement and the other Loan Documents
and to create, preserve, and perfect the Liens of the Lender in the Collateral.
Section 7.13 ERISA. The Borrower will comply, and cause each Subsidiary
to comply, with all minimum funding requirements, and all other material
requirements, of ERISA, if applicable, so as not to give any liability
thereunder.
Section 7.14 Annual Collateral and Systems Review. At any reasonable
time and from time to time, but not more than once during each six month period
unless a Default then exists, in which case such reviews shall not be limited),
the Borrower will permit, the Lender and its representatives, at the sole cost
and expense of the Borrower, to conduct audits of the Borrower's and each
Guarantor's accounts receivable and reviews of the Borrower's and each
Guarantor's accounts receivable control systems, and in connection therewith,
examine, copy, and make extracts from the Borrower's and each Guarantor's books
and records, to visit and inspect their properties and facilities.
-16-
Section 7.15 Lockbox. The Borrower will direct its, and will cause the
Guarantors to direct their account debtors to send all payments on certain
agreed accounts to the Lockbox, or if payment is to be made by wire transfer to
such Person, then directed to the Lockbox Account. Borrower will deliver, and
cause each of the Guarantors to deliver, to the Lender, at the Lender's request,
copies of all letters and/or sales invoices from such Person to its account
debtors directing that accounts be paid into such Lockbox and/or Lockbox
Account.
ARTICLE VIII
Negative Covenants
The Borrower covenants and agrees that, as long the Obligations or any
part thereof are outstanding or the Lender has any Commitment hereunder, the
Borrower will perform and observe the following negative covenants, unless the
Lender shall otherwise consent in writing:
Section 8.1 Debt. The Borrower will not incur, create, assume, or
permit to exist, and will not permit any Subsidiary to incur, create, assume, or
permit to exist, any Debt (other than the Debt to the Lender), Guarantees or
other liabilities or obligations without Lender's prior written approval, except
(1) open account trade debt incurred in the ordinary course of its business, (2)
Debt, not to exceed $1,200,000 for purchase of a new computer and accounting
system and to increase the Borrower's existing fleet of vibraseis energy
sources, as currently contemplated on the date of this Agreement and disclosed
to the Lender in writing prior to the date hereof, (3) other Debt that shall not
exceed $750,000 in the aggregate and (4) the existing Debt described on Schedule
8.1 hereof.
Section 8.2 Limitation on Liens. The Borrower will not incur, create,
assume, or permit to exist, and will not permit any Subsidiary to incur, create,
assume, or permit to exist, any Lien upon any of its property, assets, or
revenues, whether now owned or hereafter acquired, except the following
(collectively referred to as the "Permitted Liens"):
(a) Liens disclosed on Schedule 8.2 hereto;
(b) Liens in favor of the Lender;
(c) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of real property that do
not (individually or in the aggregate) materially affect the value of
the assets encumbered thereby or materially impair the ability of the
Borrower to use such assets in their respective businesses, and none of
which is violated in any material respect by existing or proposed
structures or land use;
(d) Liens for taxes, assessments, or other governmental
charges which are not delinquent or which are being contested in good
faith and for which adequate reserves have been established;
-17-
(e) Liens of mechanics, materialmen, warehousemen, carriers,
or other similar statutory Liens securing obligations that are not yet
due and are incurred in the ordinary course of business
(f) Liens resulting from good faith deposits to secure
payments of workmen's compensation or other social security programs or
to secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, or contracts (other than for payment of Debt), or
leases made in the ordinary course of business; and
(g) Liens securing on the purchase price of, or Capital Lease
Obligations in respect of, equipment (other than Equipment), provided
that (i) such Lien does not cover any other Property of the Borrower or
any Subsidiary and (ii) the Debt secured by Lien is permitted under
Section 8.1 of the Agreement.
Section 8.3 Mergers, Etc. Without Lender's written consent, the
Borrower will not, and will not permit any Subsidiary to, become a party to a
merger or consolidation, or purchase or otherwise acquire all or any part of the
assets of any Person or any shares or other evidence of beneficial ownership of
any Person, other than in respect to the transaction described on Schedule 8.3
hereof, or wind-up, dissolve, or liquidate.
Section 8.4 Restricted Payments. Except as provided in Schedule 8.4,
the Borrower will not declare or pay any dividends or make any other payment or
distribution (in cash, property, or obligations) on account of its capital
stock, or redeem, purchase, retire, or otherwise acquire any of its capital
stock, or permit any of their respective Subsidiaries to purchase or otherwise
acquire any capital stock of the Borrower or another Subsidiary, or set apart
any money for a sinking or other analogous fund for any dividend or other
distribution on its capital stock or for any redemption, purchase, retirement,
or other acquisition of any of its capital stock.
Section 8.5 Loans and Investments. Without Lender's written consent,
which consent will not be unreasonably withheld, the Borrower will not make, and
will not permit any Subsidiary to make, any advance, loan, extension of credit,
or capital contribution to or investment in, or purchase, or permit any
Subsidiary to purchase, any stock, bonds, notes, debentures, or other securities
of any Person, except:
(a) readily marketable direct obligations of the United States
of America or any agency thereof with maturities of one year or less
from the date of acquisition;
(b) fully insured certificates of deposit with maturities of
one year or less from the date of acquisition of any commercial bank
operating in the United States having capital and surplus in excess of
$50,000,000;
-18-
(c) commercial paper of a domestic issuer if at the time of
purchase such paper is rated in one of the two highest rating
categories of Standard and Poor's Corporation or Moody's Investors
Service, Inc.; and
(d) in the case of Geo, short-term investments of its revenues
and funds in Mexican pesos in responsible Mexican institutions.
Section 8.6 Limitation on Issuance of Capital Stock. Except for the
matters referred to on Schedule 8.6 hereof, the Borrower will not, and will not
permit any of its Subsidiaries to, at any time issue, sell, assign, or otherwise
dispose of (a) any of its capital stock, (b) any securities exchangeable for or
convertible into or carrying any rights to acquire any of its capital stock, or
(c) any option, warrant, or other right to acquire any of its capital stock.
Section 8.7 Transactions With Affiliates. The Borrower will not enter
into, and will not permit any Subsidiaries to enter into, any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate of the Borrower or such
Subsidiary, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than would
be obtained in a comparable arm's-length transaction with a Person not an
Affiliate of the Borrower or such Subsidiary.
Section 8.8 Disposition of Assets. The Borrower will not sell, lease,
assign, transfer, or otherwise dispose of any of its assets, or permit any
Subsidiary to do so with any of its assets, except (i) dispositions of inventory
in the ordinary course of business and (ii) dispositions of obsolete equipment,
not to exceed $300,000 in value in any year during the term hereof, provided,
however, in no event shall Borrower sell, lease, assign, transfer, or dispose of
(i) any of its assets for less than fair value, or (ii) any Property purchased
from the Manufacturer.
Section 8.9 Sale and Leaseback. The Borrower will not enter into, and
will not permit any Subsidiary to enter into, any arrangement with any Person
pursuant to which it leases from such Person real or personal property that has
been or is to be sold or transferred, directly or indirectly, by it to such
Person.
Section 8.10 Prepayment of Debt. The Borrower will not prepay, and will
not permit any Subsidiary to prepay, any Debt from and after the date hereof,
except the Obligations.
Section 8.11 Nature of Business. The Borrower will not, and will not
permit any Subsidiary to, engage in any business other than, or unrelated to,
the businesses in which it is engaged as of the date hereof.
Section 8.12 Environmental Protection. The Borrower will not, and will
not permit any of its Subsidiaries to, (a) use (or permit any tenant to use) any
of its properties or assets for the handling, processing, storage,
transportation, or disposal of any Hazardous Material, (b) generate any
Hazardous Material, (c) conduct any activity that is likely to cause a Release
-19-
or threatened Release of any Hazardous Material, or (d) otherwise conduct any
activity or use any of their respective properties or assets in any manner that
is likely to violate any Environmental Law or result in any Environmental
Liabilities for which the Borrower or any of its Subsidiaries would be
responsible and which would have a material adverse effect on the Borrower or
any of its Subsidiaries or would result in civil or criminal liability to
Lender.
Section 8.13 Accounting. The Borrower will not, and will not permit any
of its Subsidiaries to, change its fiscal year or make any change (a) in
accounting treatment or reporting practices, except as required by GAAP and
disclosed to the Lender, or (b) in tax reporting treatment, except as required
by law and disclosed to the Lender.
ARTICLE IX
Financial Covenants
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or the Lender has any Commitment hereunder, the
Borrower will observe and perform the following financial covenants, unless the
Lender shall otherwise consent in writing:
Section 9.1 EBITDA Coverage Ratio. The Borrower will at all times
maintain an EBITDA Coverage Ratio of at least 1.3 to 1.0. (Beginning April 1,
1997, the covenant shall be calculated on a rolling 12 month basis; the first
test of this covenant shall be for the period ending September 30, 1996; and the
September 30, 1996 test shall be calculated on an annualized basis using
preceding six month EBITDA (with subsequent periods until April 1, 1997 being on
an annualized based with each month after September 1996 included).
Section 9.2 Consolidated Tangible Net Worth. The Borrower will at all
times maintain Consolidated Tangible Net Worth in an amount at least $20,000,000
plus, on a cumulative basis beginning June 30, 1996, 50% of positive
consolidated Net Income and 90% of the net proceeds of each equity offering.
Section 9.3 Leverage Ratio. The Borrower will at all times maintain a
Leverage Ratio of not greater than 1.3 to 1.0.
ARTICLE X
Default
Section 10.1 Events of Default. Each of the following shall be deemed
an "Event of Default":
(a) The Borrower shall fail to pay when due the Obligations or
any part thereof.
-20-
(b) Any representation or warranty made by the Borrower or any
Obligated Party (or any of their respective officers) in any Loan
Document or in any certificate, report, notice, or financial statement
furnished at any time in connection with this Agreement shall be false,
misleading, or erroneous in any material respect when made or deemed to
have been made.
(c) The Borrower, any Subsidiary, or any Obligated Party shall
fail to perform, observe, or comply with any covenant, agreement, or
term contained in this Agreement or any of the other Loan Documents.
(d) The Borrower, any Subsidiary, or any Obligated Party shall
commence a voluntary proceeding seeking liquidation, reorganization, or
other relief with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian, or other
similar official of it or a substantial part of its property or shall
consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it or shall make a general assignment for
the benefit of creditors or shall generally fail to pay its debts as
they become due or shall take any corporate action to authorize any of
the foregoing.
(e) An involuntary proceeding shall be commenced against the
Borrower, any Subsidiary, or any Obligated Party seeking liquidation,
reorganization, or other relief with respect to it or its debts under
any bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian, or other similar official for it or a substantial part of
its property, and such involuntary proceeding shall remain undismissed
and unstayed for a period of 60 days.
(f) The Borrower, any Subsidiary, or any Obligated Party shall
fail to discharge within a period of 30 days after the commencement
thereof any attachment, sequestration, or similar proceeding or
proceedings involving an aggregate amount in excess of $50,000 against
any of its assets or properties.
(g) A final judgment or judgments for the payment of money in
excess of $50,000 in the aggregate shall be rendered by a court or
courts against the Borrower, any Subsidiary, or any Obligated Party and
the same shall not be discharged (or provision shall not be made for
such discharge), or a stay of execution thereof shall not be procured,
within 30 days from the date of entry thereof and the Borrower or the
relevant Subsidiary or Obligated Party shall not, within said period of
30 days, or such longer period during which execution of the same shall
have been stayed, appeal therefrom and cause the execution thereof to
be stayed during such appeal.
(h) The Borrower, any Subsidiary or any Obligated Party shall
fail to pay when due any principal of or interest on any Debt (other
than the Obligations), or the maturity of any Debt shall have been
accelerated or required to be prepaid prior to the
-21-
stated maturity thereof, or any event shall have occurred that permits
(or, with the giving of notice or lapse of time or both, would permit)
any holder or holders of such Debt or any Person acting on behalf of
such holder or holders to accelerate the maturity thereof or require
any such prepayment.
(i) This Agreement or any other Loan Document shall cease to
be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by
the Borrower, any Subsidiary, any Obligated Party or any of their
respective shareholders, or the Borrower or any Obligated Party shall
deny that it has any further liability or obligation under any of the
Loan Documents, or any lien or security interest created by the Loan
Documents shall for any reason cease to be a valid, first priority
perfected security interest in and lien upon any of the Collateral
purported to be covered thereby (except for Permitted Liens on the
Collateral).
(j) Any of the following events shall occur or exist with
respect to the Borrower or any ERISA Affiliate: (i) any Prohibited
Transaction involving any Plan; (ii) any Reportable Event with respect
to any Plan; (iii) the filing under Section 4041 of ERISA of a notice
of intent to terminate any Plan or the termination of any Plan; (iv)
any event or circumstance that might constitute grounds entitling the
PBGC to institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer, any
Plan, or the institution by the PBGC of any such proceedings; or (v)
complete or partial withdrawal under Section 4201 or 4204 of ERISA from
a Multiemployer Plan or the reorganization, insolvency, or termination
of any Multiemployer Plan; and in each case above, such event or
condition, together with all other events or conditions, if any, have
subjected or could in the reasonable opinion of the Lender subject the
Borrower to any tax, penalty, or other liability to a Plan, a
Multiemployer Plan, the PBGC, or otherwise (or any combination thereof)
which in the aggregate exceed or could reasonably be expected to exceed
$25,000.
(k) The Borrower shall fail to have at least $1 of net
operating income during any two consecutive quarters.
(l) The Borrower or any Obligated Party, or any of their
properties, revenues, or assets, shall become subject to an order of
forfeiture, seizure, or divestiture (whether under RICO or otherwise)
and the same shall not have been discharged within 30 days from the
date of entry thereof.
Section 10.2 Remedies Upon Default. If any Event of Default shall occur
and be continuing, the Lender may without notice except as expressly provided
herein declare the Obligations or any part thereof to be immediately due and
payable, and the same shall thereupon become immediately due and payable,
without further notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that upon the occurrence of an Event
of Default under Section
-22-
10.1(d) or Section 10.1(e), and the Obligations shall become immediately due and
payable without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by the Borrower. If any Event of Default shall occur and be continuing,
the Lender may exercise all rights and remedies available to it in law or in
equity, under the Loan Documents, or otherwise. Notwithstanding the provisions
set forth above, if the Manufacturer is the sole cause of an Event of Default,
the Borrower shall have 30 days after notice from the Lender in which to satisfy
Lender by providing additional security or guaranties (satisfactory to Lender in
its sole discretion) before the Lender exercises its remedies as a result of an
Event of Default resulting from Default by the Manufacturer.
Section 10.3 Performance by the Lender. If the Borrower shall fail to
perform any covenant or agreement contained in any of the Loan Documents, the
Lender may perform or attempt to perform such covenant or agreement on behalf of
the Borrower. In such event, the Borrower shall, at the request of the Lender,
promptly pay any amount expended by the Lender in connection with such
performance or attempted performance to the Lender, together with interest
thereon at the Default Rate from and including the date of such expenditure to
but excluding the date such expenditure is paid in full. Notwithstanding the
foregoing, it is expressly agreed that the Lender shall not have any liability
or responsibility for the performance of any obligation of the Borrower under
this Agreement or any other Loan Document.
ARTICLE XI
Miscellaneous
Section 11.1 Expenses. The Borrower hereby agrees to pay on demand: (a)
all costs and expenses of the Lender in connection with the preparation,
negotiation, execution, and delivery of this Agreement and the other Loan
Documents and any and all amendments, modifications, renewals, extensions, and
supplements thereof and thereto, including, without limitation, the fees and
expenses of legal counsel for the Lender, (b) all costs and expenses of the
Lender in connection with any Default and the enforcement of this Agreement or
any other Loan Document, including, without limitation, the fees and expenses of
legal counsel for the Lender, (c) all transfer, stamp, documentary, or other
similar taxes, assessments, or charges levied by any Governmental Authority in
respect of this Agreement or any of the other Loan Documents, (d) all costs,
expenses, assessments, and other charges incurred in connection with any filing,
registration, recording, or perfection of any security interest or Lien
contemplated by this Agreement or any other Loan Document, and (e) all other
costs and expenses incurred by the Lender in connection with this Agreement or
any other Loan Document, including, without limitation, all costs, expenses, and
other charges incurred in connection with obtaining any mortgagee title
insurance policy, survey, audit, or appraisal in respect of the Collateral.
SECTION 11.2 INDEMNIFICATION. THE BORROWER SHALL INDEMNIFY THE LENDER
AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS FROM, AND
-23-
HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS,
DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING
ATTORNEYS' FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR
INDIRECTLY ARISE FROM OR RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY,
PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B)
ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY
THE BORROWER OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT
CONTAINED IN ANY OF THE LOAN DOCUMENTS BY ANY PERSON OTHER THAN THE LENDER, (D)
THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY
HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES
OR ASSETS OF THE BORROWER OR ANY SUBSIDIARY, OR (E) ANY INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED
INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, RELATING TO ANY OF THE
FOREGOING. WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR OF ANY OTHER LOAN
DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO
BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD HARMLESS
AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON, BUT NOT IN
RESPECT OF LENDER'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
SECTION 11.3 LIMITATION OF LIABILITY. NEITHER THE LENDER NOR ANY
AFFILIATE, OFFICER, DIRECTOR, EMPLOYEE, ATTORNEY, OR AGENT OF THE LENDER SHALL
HAVE ANY LIABILITY WITH RESPECT TO, AND THE BORROWER HEREBY WAIVES, RELEASES,
AND AGREES NOT TO SUE ANY OF THEM UPON, ANY CLAIM FOR ANY SPECIAL, INDIRECT,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES SUFFERED OR INCURRED BY THE BORROWER IN
CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. THE BORROWER HEREBY WAIVES,
RELEASES, AND AGREES NOT TO SUE THE LENDER OR ANY OF THE LENDER'S AFFILIATES,
OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, OR AGENTS FOR PUNITIVE DAMAGES IN
RESPECT OF ANY CLAIM IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED
TO, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
-24-
SECTION 11.4 LENDER NOT MANUFACTURER; DISCLAIMER. BORROWER UNDERSTANDS
AND AGREES THAT THE LENDER IS NOT THE MANUFACTURER OF THE EQUIPMENT BEING
PURCHASED BY BORROWER IN THE ACQUISITION. LENDER MAKES NO WARRANTIES OR
REPRESENTATIONS TO BORROWER, EITHER EXPRESS OR IMPLIED, AS TO:
(A) THE CONDITION, DESIGN, OPERATION, FITNESS FOR USE OR
MERCHANTABILITY OF THE EQUIPMENT;
(B) THE FITNESS OF THE EQUIPMENT FOR ANY PARTICULAR PURPOSE OF
BORROWER;
(C) THE VALUE OR WORTHINESS OF THE EQUIPMENT; OR
(D) ANY OTHER MATTER WHATSOEVER, IT BEING EXPRESSLY AGREED BY THE
PARTIES THAT ALL RISKS. RELATING TO OR ARISING FROM BORROWER'S
USE AND OPERATION OF THE EQUIPMENT SHALL BE BORNE AND ASSUMED
SOLELY BY BORROWER.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, LENDER SHALL NOT BE LIABLE FOR
ANY DEFECTS, EITHER LATENT OR PATENT, IN THE EQUIPMENT NOR FOR ANY GENERAL,
CONSEQUENTIAL OR INCIDENTAL DAMAGES, INCLUDING, WITHOUT LIMITATION, ANY DAMAGES
FOR DIMINUTION OF MARKET VALUE, LOSS OF USE OF THE EQUIPMENT, LOSS OF PROFITS OR
FOR ANY INTERRUPTION IN BORROWER'S BUSINESS OCCASIONED BY ITS INABILITY TO USE
THE EQUIPMENT FOR ANY REASON WHATSOEVER. LENDER SHALL NOT BE LIABLE FOR ANY
DAMAGES CLAIMED BY BORROWER OR ANY OTHER PERSON OR ENTITY UPON THE THEORIES OF
NEGLIGENCE OR STRICT LIABILITY IN TORT. IN NO EVENT SHALL ANY DEFECT IN, OR
UNFITNESS OF, THE
EQUIPMENT RELIEVE BORROWER OF ITS OBLIGATION TO MAKE PAYMENTS REQUIRED UNDER THE
NOTE, NOR RELIEVE BORROWER OF ANY OTHER OBLIGATION HEREUNDER.
Section 11.5 No Defenses. The Borrower will not assert any defense,
claim, counterclaim or charge against the Lender with respect to payment or
performance of the Obligations because of a breach of warranty or representation
of the Manufacturer, as the seller and the manufacturer of the equipment, the
purchase of which is being financed by this Term Loan.
Section 11.6 No Duty. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by the Lender shall have the right
to act exclusively in the interest of the Lender and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to the Borrower or any of the Borrower's shareholders
or any other Person.
-25-
Section 11.7 Lender Not Fiduciary. The relationship between the
Borrower and the Lender is solely that of debtor and creditor, and the Lender
has no fiduciary or other special relationship with the Borrower, and no term or
condition of any of the Loan Documents shall be construed so as to deem the
relationship between the Borrower and the Lender to be other than that of debtor
and creditor.
Section 11.8 No Waiver; Cumulative Remedies. No failure on the part of
the Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power,
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. The rights and remedies
provided for in this Agreement and the other Loan Documents are cumulative and
not exclusive of any rights and remedies provided by law
Section 11.9 Successors and Assigns. This Agreement is binding upon and
shall inure to the benefit of the Lender and the Borrower and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Lender.
Section 11.10 Survival. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by the Lender or any closing shall affect the representations and
warranties or the right of the Lender to rely upon them. Without prejudice to
the survival of any other obligation of the Borrower hereunder, the obligations
of the Borrower under Sections 11.1 and 11.2 shall survive repayment of the
Notes.
Section 11.11 ENTIRE AGREEMENT; AMENDMENT. THIS AGREEMENT, THE NOTES,
AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
The provisions of this Agreement and the other Loan Documents to which the
Borrower is a party may be amended or waived only by an instrument in writing
signed by the parties hereto.
Section 11.12 Maximum Interest Rate. No provision of this Agreement or
any other Loan Document shall require the payment or the collection of interest
in excess of the maximum amount permitted by applicable law. If any excess of
interest in such respect is hereby provided for, or shall be adjudicated to be
so provided, in any Loan Document or otherwise in connection with this loan
transaction, the provisions of this Section shall govern and prevail and neither
the
-26-
Borrower nor the sureties, guarantors, successors, or assigns of the Borrower
shall be obligated to pay the excess amount of such interest or any other excess
sum paid for the use, forbearance, or detention of sums loaned pursuant hereto.
In the event the Lender ever receives, collects, or applies as interest any such
sum, such amount which would be in excess of the maximum amount permitted by
applicable law shall be applied as a payment and reduction of the principal of
the indebtedness evidenced by the Notes; and, if the principal of the Notes has
been paid in full, any remaining excess shall forthwith be paid to the Borrower.
In determining whether or not the interest paid or payable exceeds the Maximum
Rate, the Borrower and the Lender shall, to the extent permitted by applicable
law, (a) characterize any non-principal payment as an expense, fee, or premium
rather than as interest, (b) exclude voluntary prepayments and the effects
thereof, and (c) amortize, promote, allocate, and spread in equal or unequal
parts the total amount of interest throughout the entire contemplated term of
the indebtedness evidenced by the Notes so that interest for the entire term
does not exceed the Maximum Rate.
Section 11.13 Notices. All notices and other communications provided
for in this Agreement and the other Loan Documents to which the Borrower is a
party shall be given or made by telecopy or in writing and telecopied, mailed by
certified mail return receipt requested, or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof; or, as to any party at such other address as shall be designated by such
party in a notice to the other party given in accordance with this Section.
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopy, subject to
telephone confirmation of receipt, or when personally delivered or, in the case
of a mailed notice, when duly deposited in the mails, in each case given or
addressed as aforesaid; provided, however, notices to the Lender pursuant to
Article II or III shall not be effective until received by the Lender.
SECTION 11.14 GOVERNING LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AGREEMENT
HAS BEEN ENTERED INTO IN HARRIS COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR
ALL PURPOSES IN HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING AGAINST THE
BORROWER UNDER OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT IN HARRIS COUNTY, TEXAS. THE BORROWER HEREBY
IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B)
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. THE BORROWER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS
SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11.11.
NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF
THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE
-27-
RIGHT OF THE LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR
WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS. ANY ACTION
OR PROCEEDING BY THE BORROWER AGAINST THE LENDER SHALL BE BROUGHT ONLY IN A
COURT LOCATED IN HARRIS COUNTY, TEXAS.
Section 11.15 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.16 Severability. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 11.17 Headings. The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 11.18 Non-Application of Chapter 15 of Texas Credit Code. The
provisions of Chapter 15 of the Texas Credit Code (Vemon's Texas Civil Statutes,
Article 5069-15) are specifically declared by the parties hereto not to be
applicable to this Agreement or any of the other Loan Documents or to the
transactions contemplated hereby.
Section 11.19 Participations. The Lender shall have the right at any
time and from time to time to grant participations in the Revolving Credit Note,
the Term Note and any other Loan Documents. Each actual or proposed participant
shall be entitled to receive all information received by the Lender regarding
the Borrower, including, without limitation, information required to be
disclosed to a participant pursuant to Banking Circular 181 (Rev., August 2,
1984), issued by the Comptroller of the Currency (whether the actual or proposed
participant is subject to the circular or not).
Section 11.20 Construction. The Borrower and the Lender acknowledge
that each of them has had the benefit of legal counsel of its own choice and has
been afforded an opportunity to review this Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by the Borrower and the
Lender.
Section 11.21 Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default if such action is taken or such condition
exists.
-28-
SECTION 11.22 DTPA WAIVER, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
APPLICABLE LAW FROM TIME TO TIME IN EFFECT, THE BORROWER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY (AND AFTER THE BORROWER HAS CONSULTED WITH ITS
OWN ATTORNEY) IRREVOCABLY AND UNCONDITIONALLY WAIVES THE PROVISIONS OF THE TEXAS
DECEPTIVE TRADE PRACTICES -- CONSUMER PROTECTION ACT (TX.
BUS. & COMM. CODE, CH. 17, SS. 17.41-17.63).
Section 11.23 Arbitration Program. The parties agree to be bound by the
terms and conditions of the current Arbitration Program of First Interstate Bank
of Texas, N.A., which is incorporated herein by reference herein and
acknowledged as received by the parties, pursuant to which any and all disputes
shall be resolved by mandatory binding arbitration upon the request of any
party.
-29-
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWER:
3-D GEOPHYSICAL, INC.
By:____________________________________
J.D. White, Secretary
Address for Notices:
7076 S. Alton Way
Building H
Englewood, Colorado 80112
Fax No.: (303) 290-0447
Telephone No.: (303) 741-3700
Attention: President
LENDER:
FIRST INTERSTATE BANK OF TEXAS, N.A.
By:____________________________________
Randy Wade, Banking Officer
Address for Notices:
1000 Louisiana
Houston, Texas 77002
Fax No.: (713) 250-7031
Telephone No.: (713) 250-4833
Attention: Marc A. Dunmire
-30-
APPENDIX A
Definitions
"Advance" means, as applicable, any of a Revolving Credit Advance or a
Term Loan Advance.
"Advance Request Form" means, as applicable, a Term Loan Advance
Request Form and a Revolving Credit Advance Request Form.
"Affiliate" means, as to any Person, any other Person (a) that directly
or indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds five percent or more of any class of voting stock of
such Person; or (c) five percent or more of the voting stock of which is
directly or indirectly beneficially owned or held by the Person in question. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise; provided,
however, in no event shall the Lender be deemed an Affiliate of the Borrower.
"Applicable Rate" means the Prime Rate, as it varies, plus one percent.
"Borrowing Base" means, at any time, an amount equal to 70% of Eligible
Accounts (the value of any Eligible Accounts denominated in Pesos shall be the
Lender's quoted exchange rate on the last day of the applicable month).
"Borrowing Base Report" means a monthly report of the Borrowing Base in
substantially the form of Exhibit "C" hereto.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Houston, Texas.
"Capital Lease Obligations" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP. For purposes of this Agreement, the amount of
such Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Collateral" has the meaning specified in Section 5.1.
"Debt" means as to any Person at any time (without duplication): (a)
all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, notes, debentures, or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable of such Person arising in the ordinary
course of business which are not past due by more than 120 days or which all
being contested in good faith in an appropriate manner and by appropriate
proceedings and against which such Person has provided adequate reserves and
which do not result in a lien against Property of such Person, (d) all Capital
Lease Obligations of such Person, (e) all Debt or other obligations Guaranteed
by such Person, (f) all obligations secured by a Lien existing on property owned
by such Person, whether or not the obligations secured thereby have been assumed
by such Person or are non-recourse to the credit of such Person, (g) all
reimbursement obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptances, surety or other bonds and
similar instruments, and (h) all liabilities of such Person in respect of
unfunded vested benefits under any Plan.
"Debt Service" means, with respect to any period, the sum of all
scheduled principal payments of long-term Debt of the Borrower (including,
without limitation, the Term Loan) for such period plus all interest expense for
such period.
"Default" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event of
Default.
"Default Rate" means the lesser of (i) Maximum Rate or, (ii) the sum of
the Prime Rate in effect from day to day plus five percent.
"Dollars" and "$" mean lawful money of the United States of America.
"EBITDA" means as to any Person, for any period, the sum of the Net
Income for such period plus (a) interest expense plus (b) cash taxes paid plus
(c) amortization, depreciation and other non-cash charges to the extent deducted
from Net Income in such period.
"EBITDA Coverage Ratio" means, for any period, the ratio of EBITDA for
such period minus cash taxes paid during such period to the sum of current
maturities of long term Debt and interest expense for such period plus
non-financed capital expenditures during such period.
"Eligible Accounts" means, at any time, all accounts receivable of the
Borrower or a Guarantor created in the ordinary course of business that are
acceptable to the Lender in its sole discretion and satisfy the following
conditions:
(a) The account complies with all applicable laws, rules, and
regulations, including, without limitation, usury laws, the Federal
Truth in Lending Act, and Regulation Z of the Board of Governors of the
Federal Reserve System;
2
(b) The account has not been outstanding for more than 90 days
past the original date of invoice;
(c) The account was created in connection with (i) the sale of
goods by the Borrower or a Guarantor in the ordinary course of business
and such sale has been consummated and such goods have been shipped and
delivered and received by the account debtor, or (ii) the performance
of services by the Borrower or a Guarantor in the ordinary course of
business and such services have been completed and accepted by the
account debtor (and not the result of progress billing);
(d) The account arises from an enforceable contract, the
performance of which has been completed by the Borrower or a Guarantor;
(e) The account does not arise from the sale of any good that
is on a bill-andhold, guaranteed sale, sale-or-return, sale on
approval, consignment, or any other repurchase or return basis;
(f) The Borrower or a Guarantor has good and indefeasible
title to the account and the account is not subject to any Lien except
Liens in favor of the Lender;
(g) The account does not arise out of a contract with or order
from an account debtor that, by its terms, prohibits or makes void or
unenforceable the grant of a security interest by the Borrower or a
Guarantor to the Lender in and to such account;
(h) The account is not subject to any setoff, counterclaim,
defense, dispute, recoupment, or adjustment other than normal discounts
for prompt payment;
(i) The account debtor is not insolvent or the subject of any
bankruptcy or insolvency proceeding and has not made an assignment for
the benefit of creditors, suspended normal business operations,
dissolved, liquidated, terminated its existence, ceased to pay its
debts as they become due, or suffered a receiver or trustee to be
appointed for any of its assets or affairs;
(j) The account is not evidenced by chattel paper or an
instrument;
(k) No default exists under the account by any party thereto;
(1) The account debtor has not returned or refused to retain,
or otherwise notified the Borrower or a Guarantor of any dispute
concerning, or claimed nonconformity of, any of the goods from the sale
of which the account arose;
(m) The account is not owed by an Affiliate of the Borrower or
a Guarantor;
3
(n) The account is payable in Dollars by the account debtor
(or in the case of Petroleos Mexicanos, Mexican pesos);
(o) The account shall be ineligible if the account debtor is
domiciled in any country other than the United States of America unless
the payment of such account is ensured by FCIA insurance;
(p) Any "pass through" payments to third Persons;
(q) The account shall be ineligible if more than 25 percent of
the aggregate balances then outstanding on accounts owed by such
account debtor and its Affiliates to the Borrower are more than 90 days
past due from the dates of their original invoices;
(r) The account shall be ineligible if more than 15% (25% in
the case of major energy companies approved by the Lender, in its sole
discretion, in writing) of the aggregate balance then outstanding for
all accounts is owed by the same account debtor or any Affiliate
thereof; and
(s) The account shall be ineligible if the account debtor is
the United States of America or any department, agency, or
instrumentality thereof, and the Federal Assignment of Claims Act of
1940, as amended, shall not have been complied with.
The amount of the Eligible Accounts owed by an account debtor to the
Borrower shall be reduced by the amount of all "contra accounts" and
other obligations owed by the Borrower to such account debtor.
"Environmental Laws" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. ss. 6901 et seq., the
Occupational Safety and Health Act, 29 U.S.C. ss. 651 et seq., the Clean Air
Act, 42 U.S.C. ss. 7401 et seq., the Clean Water Act, 33 U.S.C. ss. 1251 et
seq., and the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., as such
laws, regulations, and requirements may be amended or supplemented from time to
time.
"Environmental Liabilities" means, as to any Person, all liabilities,
obligations, responsibilities, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs, and expenses, (including,
without limitation, all reasonable fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigation and feasibility studies),
fines, penalties, sanctions, and interest incurred as a result of any claim or
demand, by any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including any
Environmental Law, permit, order or agreement with any Governmental Authority or
other Person, arising from environmental, health or safety
4
conditions or the Release or threatened Release of a Hazardous Material into the
environment, resulting from the past, present, or future operations of such
Person or its Affiliates.
"Equipment" means the Property manufactured or distributed, or both, by
the Manufacturer, which Property includes seismic data acquisition systems,
recording boxes, central processing units, cables and geophones.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
"Event of Default" has the meaning specified in Section 10.1.
"Excess Cash Flow" means as to any Person, for any calendar quarter,
the net increase in cash reflected in the Borrower's Form 10-Q for such quarter
less (a) any increase attributable to Debt permitted under the Agreement, (b)
any increase resulting from Revolving Loan Advances, (c) 35% of any increase
resulting from Geo's operations or the international operations of other foreign
Subsidiaries, and (d) increases in cash that are Reserves (as such term is used
in the Lockbox Agreement).
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
applied in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Geo" means Geoevaluaciones S.A. de C.V.
"Governmental Authority" means any nation or government, any state or
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
liability or obligation of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or otherwise,
of such Person (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or
5
services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (b) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment thereof or to
protect the obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Guarantors" means collectively Paragon Geophysical, Inc., Northern
Geophysical of America, Inc. and Geo.
"Guaranty" means collectively the guaranties of the Guarantors in favor
of the Lender, each in form and substance acceptable to the Lender, as the same
may be amended, supplemented, or modified from time to time.
"Hazardous Material" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law, including,
without limitation, asbestos, petroleum, and polychlorinated biphenyls.
"Leverage Ratio" means, for any period, the ratio of total liabilities
(determined according to GAAP) to Tangible Net Worth.
"Lien" means any lien, mortgage, security interest, tax lien, financing
statement, pledge, charge, hypothecation, assignment, preference, priority, or
other encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement), whether arising
by contract, operation of law, or otherwise.
"Loan Documents" means this Agreement, the Note, Security Agreements,
Guaranties, the Remarketing and Support Guaranty, Lockbox Agreements,
assignments, guaranties, and other instruments, documents, and agreements
executed and delivered pursuant to or in connection with this Agreement, as such
instruments, documents, and agreements may be amended, modified, renewed,
extended, or supplemented from time to time.
"Lockbox" means the post office box or boxes from time to time used by
the Lender or a third Person acting as Lender's agent as a lockbox and to which
the Borrower or one or more Guarantors, or both, shall direct all payments and
monies due from any source.
"Lockbox Account" means one or more segregated deposit accounts
established in the name of Lender, maintained with Lender or a third Person
acting as Lender's agent and into which certain of Borrower's and the
Guarantors' receivables will be deposited pursuant to the Lockbox Agreement.
6
"Lockbox Agreement" means the lockbox agreements among Borrower, the
Guarantors, certain others and Lender or a third Person acting as Lender's
agent, in the form acceptable to all parties, as the same may be amended,
supplemented or be otherwise modified.
"Manufacturer" means Input/Output, Inc., a Delaware corporation.
"Material Adverse Effect" shall mean any material and adverse effect on
(i) the assets, liabilities, financial condition, business, operations, affairs,
or circumstances of a Person or one of its Subsidiaries individually or of such
Person and its Subsidiaries on a consolidated basis from those reflected in the
latest financial statements delivered to the Lender prior to the date hereof or
from the facts represented or warranted in this Agreement, or any of the other
Loan Documents or (ii) the ability of an Obligated Party or any of its
Subsidiaries individually or of such Person and its Subsidiaries on a
consolidated basis to carry out its business as of the date of this Agreement or
as proposed at the date of this Agreement to be conducted or meet its
obligations under the Notes, this Agreement, or any of the other Loan Documents
on a timely basis.
"Maximum Rate" means, at any time, the maximum rate of interest under
applicable law that the Lender may charge the Borrower. The Maximum Rate shall
be calculated in a manner that takes into account any and all fees, payments,
and other charges in respect of the Loan Documents that constitute interest
under applicable law. Each change in any interest rate provided for herein based
upon the Maximum Rate resulting from a change in the Maximum Rate shall take
effect without notice to the Borrower at the time of such change in the Maximum
Rate. For purposes of determining the Maximum Rate under Texas law, the
applicable rate ceiling shall be the indicated rate ceiling described in, and
computed in accordance with, Article 5069-1.04, Vernon's Texas Civil Statutes.
"Monthly Payment Date" means the last day of each calendar month of
each year, the first of which shall be June 30, 1996.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Borrower or
any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Income" means, for any period, a Person's consolidated net income
(or loss) after income and franchise taxes determined in conformity with GAAP,
but excluding: (a) the income of any other Person (other than the Subsidiaries)
in which such Person or any of its Subsidiaries has an ownership interest,
unless and except to the extent received by such Person or its Subsidiaries in a
cash distribution; and (b) to the extent not included in clause (a) above, any
after tax extraordinary noncash gains or extraordinary noncash losses.
"Notes" means the Revolving Credit Note and the Term Note and all
extensions, renewals and modifications thereof.
7
"Obligated Party" means each Guarantor and any other Person who is or
becomes party to any agreement that guarantees or secures payment and
performance of Obligations or any part thereof and, in the case of clauses (b),
(c), (d) and (e) of Section 10.1 of the Agreement.
"Obligations" means all obligations, indebtedness, and liabilities of
the Borrower to the Lender, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, including, without limitation, the
obligations, indebtedness, and liabilities of the Borrower or the Guarantors, or
both, under this Agreement and the other Loan Documents, and all interest
accruing thereon and all attorneys' fees and other expenses incurred in the
enforcement or collection thereof.
"Operating Lease" means any lease (other than a lease constituting a
Capital Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Permitted Lien" has the meaning specified in Section 8.2 hereof.
"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, Governmental Authority, or
other entity.
"Plan" means any employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and which is covered by Title
IV of ERISA.
"Prime Rate" means, at any time, the rate of interest per annum then
most recently established by the Lender as its prime rate, which rate may not be
the lowest rate of interest charged by the Lender to its borrowers. Each change
in any interest rate provided for herein based upon the Prime Rate resulting
from a change in the Prime Rate shall take effect without notice to the Borrower
at the time of such change in the Prime Rate.
"Principal Office" means the principal office of the Lender, presently
located at 1000 Louisiana, Houston, Texas.
"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.
"Quarterly Payment Date" means the last day of each May, August,
November and February of each year, the first of which shall be November 30,
1996.
"Release" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, disbursement, leaching, or
migration of Hazardous Materials into the indoor or outdoor environment or into
or out of property owned by such Person, including,
8
without limitation, the movement of Hazardous Materials through or in the air,
soil, surface water, ground water, or property.
"Remarketing and Support Agreement" means an agreement from the
Manufacturer of a portion of the Term Note, in form and substance acceptable to
the Lender, as the same may be amended, modified or supplemented from time to
time.
"Remedial Action" means all actions required to (a) clean up, remove,
treat, or otherwise address Hazardous Materials in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Hazardous Materials so that they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment, or (c) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Representations and Warranties Certificate" shall mean a certificate
in form and substance satisfactory to the Lender.
"Revolving Credit Advance" means an advance of funds by the Lender to
the Borrower pursuant to Article II; "Revolving Credit Advances" means all
advances of funds by the Lender to the Borrower pursuant to Article II.
"Revolving Credit Advance Request Form" means a certificate, in the
form satisfactory to the Lender in its sole discretion, properly completed and
signed by the Borrower requesting a Revolving Credit Advance.
"Revolving Credit Commitment" means the obligation of Lender to make
the Revolving Credit Loan to Borrower in multiple advances in the aggregate
principal amount of $3,000,000.
"Revolving Credit Loan" the revolving credit loan described in the
Recitals hereto and made or to be made to Borrower pursuant to Article II.
"Revolving Credit Note" means the promissory note of Borrower payable
to the order of Lender in substantially the form of Exhibit "A" attached hereto,
and all extensions, renewals and modifications thereof.
"Revolving Credit Loan Termination Date" means 11:00 a.m., Houston,
Texas time on May 29, 1997, or such earlier date on which the Term Loan
Commitment terminates as provided in this Agreement.
"RICO" means the Racketeer Influenced and Corrupt Organization Act of
1970, as amended from time to time.
9
"Security Agreement" means a security agreement or other Lien agreement
(including in the case of Geo, appropriate documentation under the laws of the
Republic of Mexico) in favor of the Lender in form and substance satisfactory to
Lender, as the same may be amended, supplemented, or modified.
"Subordinated Debt" means indebtedness of a Person that by the express
terms of the instrument creating the same, or by the terms of a separate
subordination agreement, is validly and effectively made subordinate and subject
in right of payment, to whatever extent Lender may require, to payment of the
Obligations, the form and substance of such instrument or agreement, as the case
may be, to be satisfactory to Lender.
"Subsidiary" means any corporation of which at least a majority of the
outstanding shares of stock having by the terms thereof ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
Borrower or one or more of the Subsidiaries or by Borrower and one or more of
the Subsidiaries.
"Tangible Net Worth" means, at any particular time, all amounts which,
in conformity with GAAP, would be included as stockholders' equity on a
consolidated balance sheet of the Borrower; provided, there shall be included
therein Subordinated Debt of the Borrower, and provided further, there shall be
excluded therefrom: (a) any amount at which shares of capital stock of the
Borrower appear as an asset on the Borrower's balance sheet, (b) goodwill,
including any amounts, however designated, that represent the excess of the
purchase price paid for assets or stock over the value assigned thereto, (c)
patents, trademarks, trade names, and copyrights, (d) deferred expenses, (e)
loans and advances to any stockholder, director, officer, or employee of the
Borrower or any Affiliate of the Borrower, and (f) all other assets which are
properly classified as intangible assets with the exception of capitalized
non-exclusive seismic data costs, and (g) cumulative foreign currency
transaction adjustment (plus or minus) resulting from the operations of Geo.
"Term Loan" means the term loan described in the Recitals hereto and
made or to be made to Borrower pursuant to Article III.
"Term Loan Advance" means an advance of funds by the Lender to the
Borrower pursuant to Article III; "Term Loan Advances" means all advances of
funds by the Lender to the Borrower pursuant to Article III.
"Term Loan Commitment" means the obligation of Lender to make the Loan
to Borrower in multiple advances in the aggregate principal amount of
$15,000,000.
"Term Loan Advance Request Form" means a certificate, in the form
satisfactory to the Agent in its sole discretion, properly completed and signed
by the Borrowers requesting a Term Loan Advance.
10
"Term Note" means the promissory note of Borrower payable to the order
of Lender in substantially the form of Exhibit "B" attached hereto, and all
extensions, renewals and modifications thereof.
"Term Loan Maturity Date" means 11:00 a.m., Houston, Texas time on the
date that is three years after the earlier of (a) last Term Loan Advance or (b)
the Term Loan Termination Date, or such earlier date and time on which the Term
Note matures as provided in this Agreement.
"Term Loan Termination Date" means 11:00 a.m., Houston, Texas time on
March 31, 1997 or such earlier date on which the Term Loan Commitment terminates
as provided in this Agreement.
"Total Liabilities" means total liabilities (as such term is used under
GAAP) of a Person less Subordinated Debt.
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas.
"Vessel" has the meaning assigned to it in the Security Agreements.
11
Schedules 8.1 and 8.2 (also called Schedule 1)
12
Schedule 8.3
The Borrower is currently reviewing a potential acquisition of another
seismic contractor. As consideration for this acquisition, the Borrower intends
to issue up to 600,000 shares of common stock, or its equivalents, and assume up
to $2.0 million in debt.
13
Schedule 8.4
Restricted Agreements
A. The Borrower has $1.0 million debt plus 8% interest payable to the
former owners of its Mexican subsidiary. Payments are due on
semi-annually for the next two years. See "Certain Transactions"
section of Borrower's Prospectus dated February 6, 1996.
B. The Borrower has $1.0 million of restricted cash on its balance sheet
statement, which is offset by a long-term liability of $1.0 million.
This $1.0 million is payable to the former shareholders of the
Borrower's Mexican subsidiary after two years and will be offset by any
undisclosed liabilities including payments related to a disagreement
with Capilano International, Inc. See "Certain Transactions" and
"Business-Legal Proceedings" sections of Borrower's Prospectus dated
February 6, 1996.
14
Schedule 8.6
Permitted Issuances of Capital Stock
3-D Geophysical, Inc. Stock Option Summary
Qualified Non-Qualified
Options Authorized 725,000 N/A
Options Issued at May 1, 1995 639,502 225,000
Options Pending Issuance 12,000 -0-
------- -------
Options Remaining Available for Distribution 73,498 N/A
Note: The company is currently contemplating a transaction that may involve
the issuance of up to 600,000 shares of stock.
15
EXHIBIT "A"
REVOLVING CREDIT NOTE
---------------------
$3,000,000.00 Houston, Texas May 29, 1996
FOR VALUE RECEIVED, the undersigned, 3-D GEOPHYSICAL, INC., a Delaware
corporation ("Maker"), hereby promises to pay to the order of FIRST INTERSTATE
BANK OF TEXAS, N.A., a national banking association ("Payee"), at its offices at
1000 Louisiana, Houston, Harris County, Texas, in lawful money of the United
States of America, the principal sum of THREE MILLION AND NO/100 DOLLARS
($3,000,000.00), or so much thereof as may be advanced and outstanding
hereunder, together with interest on the outstanding principal balance from day
to day remaining. This Note shall be due and payable as follows:
(a) Accrued and unpaid interest on this Note shall be
payable on each Monthly Payment Date and on the
Revolving Credit Termination Date; and
(b) A final installment in the amount of the entire unpaid
principal balance hereof, plus all accrued and unpaid
interest hereon, shall be due and payable on the
Revolving Credit Termination Date.
This Revolving Credit Note provided for in that certain Loan Agreement of
even date herewith between Maker and Payee (such Loan Agreement as the same may
be amended, supplemented or otherwise modified from time to time is hereinafter
referred to as the "Agreement"). Capitalized terms not otherwise defined herein
shall have the same meanings except forth in the Agreement. Reference is hereby
made to the Agreement for provisions affecting this Revolving Credit Note,
including, without limitation, provisions regarding the limitation of interest
charged hereunder, the Collateral securing this Revolving Credit Note, optional
and mandatory prepayments, Defaults and Payee's rights arising as a result of
the occurrence thereof.
Subject to the terms of the Agreement, the outstanding principal balance
hereof shall bear interest prior to maturity at a varying rate (which shall from
day to day be equal to the lesser of (a) the Maximum Rate, or (b) the Applicable
Rate, each such change in the rate of interest charged hereunder to become
effective without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the rate of interest specified in clause (b) preceding shall exceed
the Maximum Rate thereby causing the interest rate hereon to be limited to the
Maximum Rate, than any subsequent reduction in the Applicable Rate will not
reduce the rate of interest hereon below the Maximum Rate until the total amount
of interest accrued hereon equals the amount of interest which would have
accrued hereon if the rate specified in clause (b) preceding had at all times
been in effect. Past due principal and interest shall bear interest at the
Default Rate.
A-1
Interest on the indebtedness evidenced by this Note shall be computed
on the basis of a year of 365 days and the actual number of days elapsed
(including the first day but excluding the last day) unless such calculation
would result in a usurious rate, in which case interest shall be calculated on
the basis of a year of 365 or 366 days, as the case may be.
If the holder hereof expends any effort in any attempt to enforce
payment of all or any part or installment of any sum due the holder hereunder,
or if this Note is placed in the hands of an attorney for collection, or if it
is collected through any legal proceedings, Maker agrees to pay all costs,
expenses, and fees incurred by the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the
laws of the State of Texas and the applicable laws of the United States of
America. This Note is performable in Harris County, Texas.
Maker and each surety, guarantor, endorser, and other party ever liable
for payment of any sums of money payable on this Note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
3-D GEOPHYSICAL, INC.
By:___________________________________
J.D. White, Secretary
A-2
EXHIBIT "B"
TERM NOTE
$15,000,000.00 Houston, Texas May 29, 1996
FOR VALUE RECEIVED, the undersigned, 3-D GEOPHYSICAL, INC., a Delaware
corporation ("Maker"), hereby promises to pay to the order of FIRST INTERSTATE
BANK OF TEXAS, N.A., a national banking association ("Payee"), at its offices at
1000 Louisiana, Houston, Harris County, Texas, in lawful money of the United
States of America, the principal sum of FIFTEEN MILLION AND NO/100 DOLLARS
($15,000,000.00), or so much thereof as may be advanced and outstanding
hereunder, together with interest on the outstanding principal balance from day
to day remaining as herein specified. This Note shall be due and payable as
follows:
(a) On even date herewith, $12,051,311.20 is being advanced by
the Payee to the Maker (the "Initial Advance"). Principal and interest
on the Initial Advance will be repaid as follows:
(i) Interest only will be paid on the Initial Advance
on June 30, 1996 and on July 31, 1996.
(ii) Thereafter, principal and interest on the
Initial Advance is due and payable in 36 installments, the
first 35 of which being in the principal amount of $334,758.64
(or such lesser amount as may then be outstanding) plus
accrued interest each, and the final installment being in the
amount of the balance of principal and interest then due
thereon. The first such installment of principal and interest
is due and payable on August 31, 1996, and the remaining
installments are due and payable in consecutive order on the
last day of each and every succeeding calendar month
thereafter until all sums called for hereunder applicable to
the Initial Advance have been paid in full, with maturity of
the final installment of the Initial Advance being July 31,
1999.
(b) All or part of the remaining principal to be advanced
hereunder shall be advanced only in accordance with the terms and
provisions of the Agreement (as hereinafter defined), all of which must
be done in a single advance prior to March 31, 1997 (the "Second
Advance"). The Second Advance shall be repayable in 36 substantially
equal monthly installments of principal, plus accrued interest each,
commencing after the Second Advance on the same day of the calendar
month that the next installment of the Initial Advance is due (and if
Initial Advance has been paid in full, then on the last day of the
month in which the Second Advance is made), and the remaining
installments are due and payable in consecutive order on the same day
of each and every calendar month thereafter unless there is no
numerically corresponding day of
B-1
the month (in which case payment shall be made on the last day of the
month), with the first 35 installments being in the amount of the
Second Advance divided by 36, plus accrued interest each, with the
final installment in the amount of the unpaid principal balance then
owing hereunder applicable to the Second Advance being payable on or
before the same day of the month, 35 months subsequent to the date on
which the first installment payment is due for the Second Advance.
(c) In addition to the aforesaid installments, Maker shall
make Excess Cash Flow payments toward payment of this Note as required
by the Agreement, which payments shall be applied to the payment of
installments of principal in the inverse order of maturity.
This is the Term Note provided for in that certain Loan Agreement dated of
even date herewith between Maker and Payee (such Loan Agreement as the same may
be amended, supplemented or otherwise modified from time to time is hereinafter
referred to as the "Agreement"). Capitalized terms not otherwise defined herein
shall have the same meanings as set forth in the Agreement. Reference is hereby
made to the Agreement for provisions affecting this Note, including, without
limitation, provisions regarding the limitation of interest charged hereunder,
the Collateral securing this Term Note, optional and mandatory prepayments,
Defaults and Payee's rights arising as a result of the occurrence thereof.
Subject to the terms of the Agreement, the outstanding principal balance
hereof shall bear interest prior to maturity at a varying rate per annum which
shall from day to day be equal to the lesser of (a) the Maximum Rate, or (b) the
Prime Rate of Payee in effect from day to day plus one percent, each such change
in the rate of interest charged hereunder to become effective, without notice to
Maker, on the effective date of each change in the Prime Rate or the Maximum
Rate, as the case may be; provided, however, if at any time the rate of interest
specified in clause (b) preceding shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Prime Rate will not reduce the rate of interest hereon below
the Maximum Rate until the total amount of interest accrued hereon equals the
amount of interest which would have accrued hereon if the rate specified in
clause (b) preceding had at all times been in effect. All past due principal and
interest shall bear interest at the Default Rate.
Interest on the indebtedness evidenced by this Note shall be computed on
the basis of a year of 365 days and the actual number of days elapsed (including
the first day but excluding the last day) unless such calculation would result
in a usurious rate, in which case interest shall be calculated on the basis of a
year of 365 or 366 days, as the case may be.
If the holder hereof expends any effort in any attempt to enforce
payment of all or any part or installment of any sum due the holder hereunder,
or if this Note is placed in the hands of an attorney for collection, or if it
is collected through any legal proceedings, Maker agrees to pay all collection
costs and fees incurred by the holder, including reasonable attorneys' fees.
B-2
This Note shall be governed by and construed in accordance with the laws of
the State of Texas and the applicable laws of the United States of America. This
Note is performable in Harris County, Texas.
Maker and each surety, guarantor, endorser, and other party ever liable
for payment of any sums of money payable on this Note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
3-D GEOPHYSICAL, INC.
By:___________________________________
J.D. White, Secretary
B-3
EXHIBIT "C"
BORROWING BASE REPORT
TO: FIRST INTERSTATE BANK OF TEXAS, N.A.
1000 Louisiana
Houston, Texas 77002
Attention: Randy Wade
Gentlemen:
This Borrowing Base Report for the month ending ____________, 19__, is
executed and delivered by 3-D INTERNATIONAL (the "Borrower") to FIRST INTERSTATE
BANK OF TEXAS, N.A. ("Lender") under that certain Loan Agreement (the "Loan
Agreement") dated May 29, 1996, between the Borrower and the Lender. All terms
used herein shall have the meanings assigned to them in the Loan Agreement.
The Borrower represents and warrants to the Lender that all information
contained herein is true, correct, and complete, and that the total Eligible
Accounts referred to below represent the Eligible Accounts that qualify for
purposes of determining the Borrowing Base under the Loan Agreement. The
Borrower further represents and warrants to the Lender that attached hereto as
Schedule 1 is a list of the Eligible Accounts for the month ending ____________,
19__, showing all Eligible Accounts aged in 30-day intervals.
================================================================================
ACCOUNTS RECEIVABLE OF THE BORROWER AND GUARANTORS:
- --------------------------------------------------------------------------------
a. Gross Accounts Receivable -- ending balance for $
period ended _________________, 19_____
- --------------------------------------------------------------------------------
b. Less: Ineligible Accounts (determined pursuant to $
the definition of Eligible Accounts in the Loan
Agreement, without duplication)
- --------------------------------------------------------------------------------
Accounts not complying with applicable law $
- --------------------------------------------------------------------------------
Accounts outstanding for more than 90 days $
past the original due date
- --------------------------------------------------------------------------------
More than 25% of the balance of such portion $
of the account has been outstanding for more
than 90 days past the original date of invoice
- --------------------------------------------------------------------------------
Accounts created outside of the ordinary
course of business $
- --------------------------------------------------------------------------------
Accounts from unenforceable contracts or $
contracts not fully completed by the
Borrowers or the Guarantors
C-1
- --------------------------------------------------------------------------------
Accounts from sales on bill-and-hold, $
guaranteed sale, sale-and-return, or
similar basis
- --------------------------------------------------------------------------------
Accounts subject to a Lien other than Liens $
held by the Lender
- --------------------------------------------------------------------------------
Accounts as to which a Borrower or the $
Guarantors does not have good and
indefeasible title
- --------------------------------------------------------------------------------
Accounts in which the Lender does not have a $
perfected first priority Lien
- --------------------------------------------------------------------------------
Accounts subject to anti-assignment provisions $
- --------------------------------------------------------------------------------
Accounts subject to set-off, dispute, etc. $
- --------------------------------------------------------------------------------
Accounts owed by account debtors subject to $
bankruptcy, insolvency, receivership, or
liquidation proceedings
- --------------------------------------------------------------------------------
Accounts evidenced by chattel paper or $
instruments
- --------------------------------------------------------------------------------
Accounts subject to a default by any party $
thereto
- --------------------------------------------------------------------------------
Accounts owed by Affiliates of the Borrower or $
a Guarantor
- --------------------------------------------------------------------------------
Accounts not payable in Dollars (excluding $
Petroleos Mexicanos accounts insured by FCIA)
- --------------------------------------------------------------------------------
Accounts owed by foreign account debtors - not $
insured by FCIA
- --------------------------------------------------------------------------------
Such portion of accounts representing more $
than 10 percent of the aggregate amount of all
accounts receivable
- --------------------------------------------------------------------------------
Accounts owed by the United States of America $
or any agency thereof for which the Federal
Assignment of Claims Act of 1940, as amended,
has not been complied with
- --------------------------------------------------------------------------------
Contra accounts owed to the account debtor $
- --------------------------------------------------------------------------------
c. Total Ineligible Accounts $
- --------------------------------------------------------------------------------
d. Total Eligible Accounts $
- --------------------------------------------------------------------------------
BORROWING BASE:
- --------------------------------------------------------------------------------
e. 70% of line d ("Borrowing Base") $
- --------------------------------------------------------------------------------
f. Outstanding Principal Amount of Advances under $
Revolving $ Credit Commitment
C-2
- --------------------------------------------------------------------------------
g. Available Credit Amount [(the lesser of the amount $
of the $ Revolving Credit Commitment or line d)
minus line f]
================================================================================
The Borrower further represents and warrants to the Lender that the
representations and warranties contained in the Agreement are true and correct
on and as of the date of this Borrowing Base Report as if made on and as of the
date hereof, and that no Default has occurred and is continuing.
Date: ______________________, 19__
BORROWER:
3-D INTERNATIONAL, INC.
By:_________________________________
Authorized Officer
C-3
TABLE OF CONTENTS
PAGE
R E C I T A L S............................................................. 1
ARTICLE I Definitions............................................... 1
Section 1.1 Definitions...................................... 1
Section 1.2 Other Definitional Provisions.................... 1
ARTICLE II Revolving Credit Loan..................................... 2
Section 2.1 Revolving Credit Commitment...................... 2
Section 2.2 Revolving Credit Note............................ 2
Section 2.3 Repayment of Revolving Credit Loan............... 2
Section 2.4 Interest......................................... 2
Section 2.5 Borrowing Procedure.............................. 2
Section 2.6 Use of Proceeds.................................. 3
Section 2.7 Borrowing Base; Mandatory Prepayments............ 3
Section 2.8 Revolving Credit Commitment Fee.................. 3
Section 2.9 Reduction or Termination of Revolving
Credit Commitment................................ 3
ARTICLE III Term Loan................................................. 3
Section 3.1 Term Loan Commitment............................. 3
Section 3.2 The Term Note.................................... 4
Section 3.3 Repayment of Term Loan........................... 4
Section 3.4 Interest......................................... 4
Section 3.5 Borrowing Procedure, Etc......................... 4
Section 3.6 Facility Fee..................................... 4
Section 3.7 Use of Proceeds.................................. 4
Section 3.8 Mandatory Prepayment............................. 4
Section 3.9 Voluntary Prepayment and Repayment............... 5
ARTICLE IV Payments...................................................... 5
Section 4.1 Method of Payment................................ 5
Section 4.2 Computation of Interest.......................... 5
Section 4.3 Interest at Default Rate......................... 5
Section 4.4 Capital Adequacy................................. 5
Section 4.5 Annual Agent Fee................................. 6
ARTICLE V Security.................................................. 6
Section 5.1 Collateral....................................... 6
Section 5.2 Guaranties....................................... 7
Section 5.3 Additional Support............................... 7
Section 5.4 Setoff........................................... 7
i
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE VI Conditions Precedent.......................................... 7
Section 6.1 Initial Term Loan Advance........................ 7
Section 6.2 Initial Revolving Credit Advance................. 10
Section 6.3 Conditions to All Advances....................... 11
ARTICLE VII Positive Covenants........................................... 11
Section 7.1 Reporting Requirements........................... 11
Section 7.2 Maintenance of Existence; Conduct of Business.... 14
Section 7.3 Maintenance of Properties........................ 14
Section 7.4 Taxes and Claims................................. 14
Section 7.5 Insurance........................................ 14
Section 7.6 Inspection Rights................................ 14
Section 7.7 Keeping Books and Records........................ 15
Section 7.8 Compliance with Laws............................. 15
Section 7.9 Compliance with Agreements....................... 15
Section 7.10 Comply with Vessel Charters and Leases........... 15
Section 7.11 Vendors, Suppliers, Etc.......................... 15
Section 7.12 Further Assurances............................... 15
Section 7.13 ERISA............................................ 15
Section 7.14 Annual Collateral and Systems Review............. 15
Section 7.15 Lockbox.......................................... 16
ARTICLE VIII Negative Covenants.......................................... 16
Section 8.1 Debt............................................. 16
Section 8.2 Limitation on Liens.............................. 16
Section 8.3 Mergers, Etc..................................... 17
Section 8.4 Restricted Payments.............................. 17
Section 8.5 Loans and Investments............................ 17
Section 8.6 Limitation on Issuance of Capital Stock.......... 18
Section 8.7 Transactions With Affiliates..................... 18
Section 8.8 Disposition of Assets............................ 18
Section 8.9 Sale and Leaseback............................... 18
Section 8.10 Prepayment of Debt............................... 18
Section 8.11 Nature of Business............................... 18
Section 8.12 Environmental Protection......................... 18
Section 8.13 Accounting....................................... 19
ii
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE IX Financial Covenants.......................................... 19
Section 9.1 EBITDA Coverage Ratio............................ 19
Section 9.2 Consolidated Tangible Net Worth.................. 19
Section 9.3 Leverage Ratio................................... 19
ARTICLE X Default................................................... 19
Section 10.1 Events of Default................................ 19
Section 10.2 Remedies Upon Default............................ 21
Section 10.3 Performance by the Lender........................ 22
ARTICLE XI Miscellaneous.................................................. 22
Section 11.1 Expenses............................................. 22
Section 11.2 Indemnification...................................... 22
Section 11.3 Limitation of Liability.............................. 23
Section 11.4 Lender Not Manufacturer; Disclaimer.................. 24
Section 11.5 No Defenses.......................................... 24
Section 11.6 No Duty.............................................. 24
Section 11.7 Lender Not Fiduciary................................. 25
Section 11.8 No Waiver; Cumulative Remedies....................... 25
Section 11.9 Successors and Assigns............................... 25
Section 11.10 Survival............................................ 25
Section 11.11 Entire Agreement; Amendment......................... 25
Section 11.12 Maximum Interest Rate............................... 25
Section 11.13 Notices............................................. 26
Section 11.14 Governing Law; Venue; Service of Process............ 26
Section 11.15 Counterparts........................................ 27
Section 11.16 Severability........................................ 27
Section 11.17 Headings............................................ 27
Section 11.18 Non-Application of Chapter 15 of Texas
Credit Code......................................... 27
Section 11.19 Participations...................................... 27
Section 11.20 Construction........................................ 27
Section 11.21 Independence of Covenants........................... 27
Section 11.22 DTPA Waiver......................................... 28
Section 11.23 Arbitration Program................................. 28
iii