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SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made as of the 16th day of
January, 1997, by MITCHAM INDUSTRIES, INC., a Texas corporation (hereinafter
called "Debtor"), in favor of BANK ONE, TEXAS, N.A. (hereinafter called
"Secured Party"). Debtor hereby agrees with Secured Party as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings indicated below:
(a) The term "Code" shall mean the Uniform Commercial
Code as in effect in the State of Texas on the date of this Agreement
or as it may hereafter be amended from time to time.
(b) The term "Collateral" shall mean all of the property
set forth below:
(i) All present and future accounts, chattel
paper, contract rights, documents, instruments, deposit
accounts and general intangibles (including any right to
payment for goods sold or leased or services rendered arising
out of the sale or delivery of personal property or work done
or labor performed by Debtor), now or hereafter owned, held,
or acquired by Debtor, together with any and all books of
account, customer lists and other records relating in any way
to the foregoing (including, without limitation, computer
software, whether on tape, disk, card, strip, cartridge or any
other form), and in any case where an account arises from the
sale or lease of goods or equipment, the interest of Debtor in
such goods or equipment.
(ii) All finished goods, equipment, fixtures
and machinery of whatsoever kind and character now or
hereafter possessed, held, acquired or owned by Debtor and
held for resale, lease or ordinary disposition in the course
of Debtor's business, together with all replacements,
accessories, additions, substitutions and accessions to all of
the foregoing, all records relating in any way to the
foregoing (including, without limitation, any computer
software, whether on tape, disk, card, strip, cartridge or any
other form).
(iii) All of Debtor's right, title and interest
in, to and under (a) present or future leases, rental
contracts and any other contracts for the use or operation of
any equipment owned by Debtor (each a "Lease" collectively,
"Leases") for and all rental payments and other monies from
time to time payable to or
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receivable by Debtor under the Leases, including all proceeds
thereof, and (b) all of Debtor's rights, powers and remedies
under the Leases.
The term Collateral, as used herein, shall also include all
PRODUCTS and PROCEEDS of all of the foregoing (including without
limitation, insurance payable by reason of loss or damage to the
foregoing property) and any property, securities, guaranties or monies
of Debtor which may at any time come into the possession of Secured
Party (as hereinafter defined). The designation of proceeds does not
authorize Debtor to sell, transfer or otherwise convey any of the
foregoing property except finished goods intended for sale in the
ordinary course of Debtor's business or as otherwise provided herein.
(c) The term "Indebtedness" shall mean:
(i) all indebtedness, obligations and
liabilities of Debtor to Secured Party of any kind or
character, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, and
regardless of whether such indebtedness, obligations and
liabilities may, prior to their acquisition by Secured Party,
be or have been payable to or in favor of a third party and
subsequently acquired by Secured Party (it being contemplated
that Secured Party may make such acquisitions from third
parties), including without limitation all indebtedness,
obligations and liabilities of Debtor to Secured Party now
existing or hereafter arising by note, draft, acceptance,
guaranty, endorsement, letter of credit, assignment, purchase,
overdraft, discount, indemnity agreement or otherwise, (ii)
all accrued but unpaid interest on any of the indebtedness
described in (i) above, (iii) all obligations of Debtor to
Secured Party under any documents evidencing, securing,
governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs
and expenses incurred by Secured Party in connection with the
collection and administration of all or any part of the
indebtedness and obligations described in (i), (ii) and (iii)
above or the protection or preservation of, or realization
upon, the collateral securing all or any part of such
indebtedness and obligations, including without limitation all
reasonable attorneys' fees, and (v) all renewals, extensions,
modifications and rearrangements of the indebtedness and
obligations described in (i), (ii), (iii) and (iv) above,
including, without limitation, the Notes of even date herewith
in the principal amounts of $4,000,000.00 (the "Revolving Line
of Credit") and
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$1,000,000.00 (the "Term Loan") (collectively, the "Notes"),
and all accrued but unpaid interest on the Notes.
(f) The term "Loan Documents" shall mean all instruments
and documents evidencing, securing, governing, guaranteeing and/or
pertaining to the Indebtedness.
(g) The term "Obligated Party" shall mean any party other
than Debtor who secures, guarantees and/or is otherwise obligated to
pay all or any portion of the Indebtedness.
(h) The term "Secured Party" shall mean Bank One, Texas,
N.A., and its successors and assigns, including without limitation,
any party to whom Secured Party, or its successors or assigns, may
assign its rights and interests under this Agreement.
All words and phrases used herein which are expressly defined in Section 1.201
or Chapter 9 of the Code shall have the meaning provided for therein. Other
words and phrases defined elsewhere in the Code shall have the meaning
specified therein except to the extent such meaning is inconsistent with a
definition in Section 1.201 or Chapter 9 of the Code.
2. SECURITY INTEREST. As security for the Indebtedness, Debtor,
for value received, hereby grants to Secured Party a continuing security
interest in the Collateral.
3. REPRESENTATIONS AND WARRANTIES. Debtor hereby represents and
warrants the following to Secured Party:
(a) Due Authorization. The execution, delivery and
performance of this Agreement and all of the other Loan Documents by
Debtor have been duly authorized by all necessary corporate action of
Debtor, to the extent Debtor is a corporation.
(b) Enforceability. This Agreement and the other Loan
Documents constitute legal, valid and binding obligations of Debtor,
enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or similar laws of general
application relating to the enforcement of creditors' rights and
except to the extent specific remedies may generally be limited by
equitable principles.
(c) Ownership and Liens. Debtor has good and marketable
title to the Collateral free and clear of all liens, security
interests, encumbrances or adverse claims, except for the security
interest created by this Agreement. No dispute, right of setoff,
counterclaim or defense exists with respect to all or any part of the
Collateral. Debtor has not executed
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any other security agreement currently affecting the Collateral and no
effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording
office except as may have been executed or filed in favor of Secured
Party.
(d) No Conflicts or Consents. Neither the ownership, the
intended use of the Collateral by Debtor, the grant of the security
interest by Debtor to Secured Party herein nor the exercise by Secured
Party of its rights or remedies hereunder, will (i) conflict with any
provision of (A) any domestic or foreign law, statute, rule or
regulation, (B) the articles or certificate of incorporation, charter,
bylaws or partnership agreement, as the case may be, of Debtor, or (C)
any agreement, judgment, license, order or permit applicable to or
binding upon Debtor, or (ii) result in or require the creation of any
lien, charge or encumbrance upon any assets or properties of Debtor or
of any person except as may be expressly contemplated in the Loan
Documents. Except as expressly contemplated in the Loan Documents, no
consent, approval, authorization or order of, and no notice to or
filing with, any court, governmental authority or third party is
required in connection with the grant by Debtor of the security
interest herein or the exercise by Secured Party of its rights and
remedies hereunder.
(e) Security Interest. Debtor has and will have at all
times full right, power and authority to grant a security interest in
the Collateral to Secured Party in the manner provided herein, free
and clear of any lien (other than liens held by Secured Party),
security interest or other charge or encumbrance. This Agreement
creates a legal, valid and binding security interest in favor of
Secured Party in the Collateral securing the Indebtedness. Possession
by Secured Party of all certificates, instruments and cash
constituting Collateral from time to time and/or the filing of the
financing statements delivered prior hereto and/or concurrently
herewith by Debtor to Secured Party will perfect and establish the
first priority of Secured Party's security interest hereunder in the
Collateral.
(f) Location. Debtor's residence or chief executive
office, as the case may be, and the office where the records
concerning the Collateral are kept is located at its address set forth
on the signature page hereof.
(g) Solvency of Debtor. As of the date hereof, and after
giving effect to this Agreement and the completion of all other
transactions contemplated by Debtor at the time of the execution of
this Agreement, (i) Debtor is and will be solvent, (ii) the fair
saleable value of Debtor's assets exceeds and will continue to exceed
Debtor's liabilities (both
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fixed and contingent), (iii) Debtor is paying and will continue to be
able to pay its debts as they mature, and (iv) if Debtor is not an
individual, Debtor has and will have sufficient capital to carry on
Debtor's businesses and all businesses in which Debtor is about to
engage.
(h) Compliance with Environmental Laws. Except as
disclosed in writing to Secured Party: (i) Debtor is conducting
Debtor's businesses in material compliance with all applicable
federal, state and local laws, statutes, ordinances, rules,
regulations, orders, determinations and court decisions, including
without limitation, those pertaining to health or environmental
matters such as the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 (collectively, together
with any subsequent amendments, hereinafter called "CERCLA"), the
Resource Conservation and Recovery Act of 1976, as amended by the Used
Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of
1980, and the Hazardous Substance Waste Amendments of 1984
(collectively, together with any subsequent amendments, hereinafter
called "RCRA"), the Texas Water Code and the Texas Solid Waste
Disposal Act; (ii) none of the operations of Debtor is the subject of
a federal, state or local investigation evaluating whether any
material remedial action is needed to respond to a release or disposal
of any toxic or hazardous substance or solid waste into the
environment; (iii) Debtor has not filed any notice under any federal,
state or local law indicating that Debtor is responsible for the
release into the environment, the disposal on any premises in which
Debtor is conducting its businesses or the improper storage, of any
material amount of any toxic or hazardous substance or solid waste or
that any such toxic or hazardous substance or solid waste has been
released, disposed of or is improperly stored, upon any premise on
which Debtor is conducting its businesses; and (iv) Debtor otherwise
does not have any known material contingent liability in connection
with the release into the environment, disposal or the improper
storage, of any such toxic or hazardous substance or solid waste. The
terms "hazardous substance" and "release", as used herein, shall have
the meanings specified in CERCLA, and the terms "solid waste" and
"disposal", as used herein, shall have the meanings specified in RCRA;
provided, however, that to the extent that the laws of the State of
Texas establish meanings for such terms which are broader than that
specified in either CERCLA or RCRA, such broader meanings shall apply.
(i) Accounts. Each account represents the valid and
legally binding indebtedness of a bona fide account debtor arising
from the sale or lease by Debtor of goods or the rendition by Debtor
of services and is not subject to contra
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accounts, setoffs, defenses or counterclaims by or available to
account debtors obligated on the accounts except as disclosed by
Debtor to Secured Party from time to time in writing. The amount
shown as to each account on Debtor's books is the true and undisputed
amount owing and unpaid thereon, subject only to discounts,
allowances, rebates, credits and adjustments to which the account
debtor has a right and which have been disclosed to Secured Party in
writing.
(j) Chattel Paper, Documents and Instruments. The
chattel paper, documents and instruments of Debtor pledged hereunder
have only one original counterpart and no party other than Debtor or
Secured Party is in actual or constructive possession of any such
chattel paper, documents or instruments.
4. AFFIRMATIVE COVENANTS. Debtor will comply with the covenants
contained in this Section 4 at all times during the period of time this
Agreement is effective unless Secured Party shall otherwise consent in writing.
(a) Ownership and Liens. Debtor will maintain good and
marketable title to all Collateral free and clear of all liens,
security interests, encumbrances or adverse claims, except for the
security interest created by this Agreement and the security interests
and other encumbrances expressly permitted by the other Loan
Documents. Debtor will not permit any dispute, right of setoff,
counterclaim or defense to exist with respect to all or any part of
the Collateral. Debtor will cause any financing statement or other
security instrument with respect to the Collateral to be terminated,
except as may exist or as may have been filed in favor of Secured
Party. Debtor will defend at its expense Secured Party's right, title
and security interest in and to the Collateral against the claims of
any third party.
(b) Further Assurances. Debtor will from time to time at
its expense promptly execute and deliver all further instruments and
documents and take all further action necessary or appropriate or that
Secured Party may request in order (i) to perfect and protect the
security interest created or purported to be created hereby and the
first priority of such security interest, (ii) to enable Secured Party
to exercise and enforce its rights and remedies hereunder in respect
of the Collateral, and (iii) to otherwise effect the purposes of this
Agreement, including without limitation: (A) executing and filing
such financing or continuation statements, or amendments thereto; and
(B) furnishing to Secured Party from time to time statements and
schedules further identifying and describing the Collateral and such
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other reports in connection with the Collateral, all in reasonable
detail satisfactory to Secured Party.
(c) Inspection of Collateral. Debtor will keep adequate
records concerning the Collateral and will permit Secured Party and
all representatives and agents appointed by Secured Party to inspect
any of the Collateral and the books and records of or relating to the
Collateral at any time during normal business hours, to make and take
away photocopies, photographs and printouts thereof and to write down
and record any such information.
(d) Payment of Taxes. Debtor (i) will timely pay all
property and other taxes, assessments and governmental charges or
levies imposed upon the Collateral or any part thereof, (ii) will
timely pay all lawful claims which, if unpaid, might become a lien or
charge upon the Collateral or any part thereof, and (iii) will
maintain appropriate accruals and reserves for all such liabilities in
a timely fashion in accordance with generally accepted accounting
principles. Debtor may, however, delay paying or discharging any such
taxes, assessments, charges, claims or liabilities so long as the
validity thereof is contested in good faith by proper proceedings and
provided Debtor has set aside on Debtor's books adequate reserves
therefor; provided, however, Debtor understands and agrees that in the
event of any such delay in payment or discharge and upon Secured
Party's written request, Debtor will establish with Secured Party an
escrow acceptable to Secured Party adequate to cover the payment of
such taxes, assessments and governmental charges with interest, costs
and penalties and a reasonable additional sum to cover possible costs,
interest and penalties (which escrow shall be returned to Debtor upon
payment of such taxes, assessments, governmental charges, interests,
costs and penalties or disbursed in accordance with the resolution of
the contest to the claimant) or furnish Secured Party with an
indemnity bond secured by a deposit in cash or other security
acceptable to Secured Party. Notwithstanding any other provision
contained in this Subsection, Secured Party may at its discretion
exercise its rights under Subsection 6(c) at any time to pay such
taxes, assessments, governmental charges, interest, costs and
penalties.
(e) Mortgagee's and Landlord's Waivers. Debtor shall
cause each mortgagee of real property owned by Debtor and each
landlord of real property leased by Debtor to execute and deliver
agreements satisfactory in form and substance to Secured Party by
which such mortgagee or landlord waives or subordinates any rights it
may have in the Collateral.
(f) Condition of Goods. Debtor will maintain, preserve,
protect and keep all Collateral which constitutes goods or
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Equipment in good condition, repair and working order and will cause
such Collateral to be used and operated in good and workmanlike
manner, in accordance with applicable laws and in a manner which will
not make void or cancelable any insurance with respect to such
Collateral. Debtor will promptly make or cause to be made all
repairs, replacements and other improvements to or in connection with
the Collateral which Secured Party may request from time to time.
(g) Insurance. Debtor will, at its own expense, maintain
insurance with respect to all Collateral which constitutes goods or
Equipment in such amounts, against such risks, in such form and with
such insurers, as shall be satisfactory to Secured Party from time to
time. If requested by Secured Party, each policy for property damage
insurance shall provide for all losses to be paid directly to Secured
Party. If requested by Secured Party, each policy of insurance
maintained by Debtor shall (i) name Debtor and Secured Party as
insured parties thereunder (without any representation or warranty by
or obligation upon Secured Party) as their interests may appear, (ii)
contain the agreement by the insurer that any loss thereunder shall be
payable to Secured Party notwithstanding any action, inaction or
breach of representation or warranty by Debtor, (iii) provide that
there shall be no recourse against Secured Party for payment of
premiums or other amounts with respect thereto, and (iv) provide that
at least thirty (30) days prior written notice of cancellation or of
lapse shall be given to Secured Party by the insurer. Debtor will, if
requested by Secured Party, deliver to Secured Party original or
duplicate policies of such insurance and, as often as Secured Party
may reasonably request, a report of a reputable insurance broker with
respect to such insurance. Debtor will also, at the request of
Secured Party, duly execute and deliver instruments of assignment of
such insurance policies and cause the respective insurers to
acknowledge notice of such assignment. All insurance payments in
respect of loss of or damage to any Collateral shall be paid to
Secured Party and applied as Secured Party in its sole discretion
deems appropriate.
(h) Accounts and General Intangibles. Debtor will,
except as otherwise provided in Subsection 6(e), collect, at Debtor's
own expense, all amounts due or to become due under each of the
accounts and general intangibles. In connection with such
collections, Debtor may and, at Secured Party's direction, will take
such action not otherwise forbidden by Subsection 5(e) as Debtor or
Secured Party may deem necessary or advisable to enforce collection or
performance of each of the accounts and general intangibles. Debtor
will also duly perform and cause to be performed all of its
obligations with respect to the goods or services, the sale or lease
or rendition of which gave rise or will give rise to each account
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and all of its obligations to be performed under or with respect to
the general intangibles. Debtor also covenants and agrees to take any
action and/or execute any documents that Secured Party may request in
order to comply with the Federal Assignment of Claims Act, as amended.
(i) Chattel Paper, Documents and Instruments. Debtor
will take such action as may be requested by Secured Party in order to
cause any chattel paper, documents or instruments to be valid and
enforceable and will cause all chattel paper to have only one original
counterpart. Upon request by Secured Party, Debtor will deliver to
Secured Party all originals of chattel paper, documents or instruments
and will mark all chattel paper with a legend indicating that such
chattel paper is subject to the security interest granted hereunder.
(j) Equipment. Debtor will furnish Secured Party with
written notice within two (2) business days of Debtor's knowledge, or
reasonable belief, of the occurrence from time to time of any change
in the location of any part of the Collateral that is not within the
United States of America and Canada.
5. NEGATIVE COVENANTS. Debtor will comply with the covenants
contained in this Section 5 at all times during the period of time this
Agreement is effective, unless Secured Party shall otherwise consent in
writing.
(a) Transfer or Encumbrance. Debtor will not (i) sell,
assign (by operation of law or otherwise), transfer, exchange, lease
or otherwise dispose of any of the Collateral, (ii) grant a lien or
security interest in or execute, file or record any financing
statement or other security instrument with respect to the Collateral
to any party other than Secured Party, or (iii) deliver actual or
constructive possession of any of the Collateral to any party other
than Secured Party, except for (A) sales and leases of leased
equipment and the sale of inventory in the ordinary course of
business, and (B) the sale or other disposal of any item of equipment
which is worn out or obsolete and which has been replaced by an item
of equal suitability and value, owned by Debtor and made subject to
the security interest under this Agreement, but which is otherwise
free and clear of any lien, security interest, encumbrance or adverse
claim; provided, however, the exceptions permitted in clauses (A) and
(B) above shall automatically terminate upon the occurrence of an
Event of Default.
(b) Impairment of Security Interest. Debtor will not
take or fail to take any action which would in any manner impair the
value or enforceability of Secured Party's security interest in any
Collateral.
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(c) Possession of Collateral. Debtor will not cause or
permit the removal of any Collateral from its possession, control and
risk of loss other than (i) as permitted by Subsection 4(j) and/or
5(a), or (ii) in connection with the possession of any Collateral by
Secured Party or by its bailee. Notwithstanding the foregoing, Debtor
will not cause or permit the removal of 50% of the Collateral from the
United States of America and Canada.
(d) Goods. Debtor will not permit any Collateral which
constitutes goods to at any time (i) be covered by any document except
documents in the possession of the Secured Party, (ii) become so
related to, attached to or used in connection with any particular real
property so as to become a fixture upon such real property, or (iii)
be installed in or affixed to other goods so as to become an accession
to such other goods unless such other goods are subject to a perfected
first priority security interest under this Agreement.
(e) Compromise of Collateral. Debtor will not adjust,
settle, compromise, amend or modify any Collateral, except an
adjustment, settlement, compromise, amendment or modification in good
faith and in the ordinary course of business; provided, however, this
exception shall automatically terminate upon the occurrence of an
Event of Default or upon Secured Party's written request. Debtor
shall provide to Secured Party such information concerning (i) any
adjustment, settlement, compromise, amendment or modification of any
Collateral, and (ii) any claim asserted by any account debtor for
credit, allowance, adjustment, dispute, setoff or counterclaim, as
Secured Party may request from time to time.
(f) Financing Statement Filings. Debtor recognizes that
financing statements pertaining to the Collateral have been or may be
filed where Debtor maintains any Collateral, has its records
concerning any Collateral or has its residence or chief executive
office, as the case may be. Without limitation of any other covenant
herein, Debtor will not cause or permit any change in the location of
(i) any Collateral (except as permitted in that certain Letter Loan
Agreement, of even date herewith, entered into by and between Debtor
and Secured Party), (ii) any records concerning any Collateral, or
(iii) Debtor's residence or chief executive office, as the case may
be, to a jurisdiction other than as represented in Subsection 3(f)
unless Debtor shall have notified Secured Party in writing of such
change at least thirty (30) days prior to the effective date of such
change, and shall have first taken all action required by Secured
Party for the purpose of further perfecting or protecting the security
interest in favor of Secured Party in the Collateral or unless
otherwise permitted by Section 4.(j) hereof. In any written notice
furnished pursuant to this Subsection, Debtor will
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expressly state that the notice is required by this Agreement and
contains facts that may require additional filings of financing
statements or other notices for the purpose of continuing perfection
of Secured Party's security interest in the Collateral.
6. RIGHTS OF SECURED PARTY. Secured Party shall have the rights
contained in this Section 6 at all times during the period of time this
Agreement is effective.
(a) Additional Financing Statements Filings. Debtor
hereby authorizes Secured Party to file, without the signature of
Debtor, one or more financing or continuation statements, and
amendments thereto, relating to the Collateral. Debtor further agrees
that a carbon, photographic or other reproduction of this Security
Agreement or any financing statement describing any Collateral is
sufficient as a financing statement and may be filed in any
jurisdiction Secured Party may deem appropriate.
(b) Power of Attorney. Debtor hereby irrevocably
appoints Secured Party as Debtor's attorney-in-fact, such power of
attorney being coupled with an interest, with full authority in the
place and stead of Debtor and in the name of Debtor or otherwise, from
time to time in Secured Party's discretion, to take any action and to
execute any instrument which Secured Party may deem necessary or
appropriate to accomplish the purposes of this Agreement, including
without limitation: (i) to obtain and adjust insurance required by
Secured Party hereunder; (ii) to demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of the Collateral; (iii) to receive,
endorse and collect any drafts or other instruments, documents and
chattel paper in connection with clause (i) or (ii) above; and (iv) to
file any claims or take any action or institute any proceedings which
Secured Party may deem necessary or appropriate for the collection
and/or preservation of the Collateral or otherwise to enforce the
rights of Secured Party with respect to the Collateral.
(c) Performance by Secured Party. If Debtor fails to
perform any agreement or obligation provided herein, Secured Party may
itself perform, or cause performance of, such agreement or obligation,
and the expenses of Secured Party incurred in connection therewith
shall be a part of the Indebtedness, secured by the Collateral and
payable by Debtor on demand.
(d) Debtor's Receipt of Proceeds. All amounts and
proceeds (including instruments and writings) received by Debtor in
respect of such accounts or general intangibles
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shall be received in trust for the benefit of Secured Party hereunder
and, upon request of Secured Party, shall be segregated from other
property of Debtor and shall be forthwith delivered to Secured Party
in the same form as so received (with any necessary endorsement) and
applied to the Indebtedness in such manner as Secured Party deems
appropriate in its sole discretion.
(e) Notification of Account Debtors. If Secured Party
has a reasonable basis to believe an Event of Default has occurred, or
with the passage of time, could occur, Secured Party may at its
discretion notify any or all obligors under any accounts or general
intangibles (i) of Secured Party's security interest in such accounts
or general intangibles and direct such obligors to make payment of all
amounts due or to become due to Debtor thereunder directly to Secured
Party, and (ii) to verify the accounts or general intangibles with
such obligors. Secured Party shall have the right, at the expense of
Debtor, to enforce collection of any such accounts or general
intangibles and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Debtor.
7. EVENTS OF DEFAULT. Each of the following constitutes an
"Event of Default" under this Agreement:
(a) Failure to Pay Indebtedness. The failure, refusal or
neglect of Debtor to make any payment of principal or interest on the
Indebtedness or any other amounts owing by Debtor to Secured Party, or
any portion thereof, as the same shall become due and payable; or
(b) Non-Performance of Covenants. The failure of Debtor
or any Obligated Party to timely and properly observe, keep or perform
any covenant, agreement, warranty or condition required herein or in
any of the other Loan Documents; or
(c) Default Under other Loan Documents. The occurrence
of an event of default under any of the other Loan Documents or any
other agreement between Debtor and Secured Party; or
(d) False Representation. Any representation contained
herein or in any of the other Loan Documents made by Debtor or any
Obligated Party is false or misleading in any material respect; or
(e) Default to Third Party. The occurrence of any event
which permits the acceleration of the maturity of any indebtedness
owing by Debtor or any Obligated Party to any third party under any
agreement or undertaking; or
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(f) Bankruptcy or Insolvency. If Debtor or any Obligated
Party:
(i) becomes insolvent, or makes a transfer
in fraud of creditors, or makes an assignment for the benefit
of creditors, or admits in writing its inability to pay its
debts as they become due; or
(ii) generally is not paying its debts as
such debts become due; or
(iii) has a receiver or custodian appointed
for, or take possession of, all or substantially all of the
assets of such party or any of the Collateral, either in a
proceeding brought by such party or in a proceeding brought
against such party and such appointment is not discharged or
such possession is not terminated within thirty (30) days
after the effective date thereof or such party consents to or
acquiesces in such appointment or possession; or
(iv) files a petition for relief under the
United States Bankruptcy Code or any other present or future
federal or state insolvency, bankruptcy or similar laws (all
of the foregoing hereinafter collectively called "Applicable
Bankruptcy Law") or an involuntary petition for relief is
filed against such party under any Applicable Bankruptcy Law
and such involuntary petition is not dismissed within thirty
(30) days after the filing thereof, or an order for relief
naming such party is entered under any Applicable Bankruptcy
Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter
existing is requested or consented to by such party; or
(v) fails to have discharged within a period
of thirty (30) days any attachment, sequestration or similar
writ levied upon any property of such party; or
(vi) fails to pay within thirty (30) days any
final money judgment against such party; or
(g) Execution on Collateral. The Collateral or any
portion thereof is taken on execution or other process of law in any
action against Debtor; or
(h) Abandonment. Debtor abandons the Collateral or any
portion thereof; or
(i) Action by Other Lienholder. The holder of any lien
or security interest on any of the assets of Debtor, including
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without limitation, the Collateral (without hereby implying the
consent of Secured Party to the existence or creation of any such lien
or security interest on the Collateral), declares a default thereunder
or institutes foreclosure or other proceedings for the enforcement of
its remedies thereunder; or
(j) Liquidation, Death and Related Events. If Debtor or
any Obligated Party is an entity, the liquidation, dissolution, merger
or consolidation of any such entity or, if Debtor or any Obligated
Party is an individual, the death or legal incapacity of any such
individual.
8. REMEDIES AND RELATED RIGHTS. If an Event of Default shall
have occurred, and without limiting any other rights and remedies provided
herein, under any of the other Loan Documents or otherwise available to Secured
Party, Secured Party may exercise one or more of the rights and remedies
provided in this Section.
(a) Remedies. Secured Party may from time to time at its
discretion, without limitation and without notice except as expressly
provided in any of the Loan Documents:
(i) exercise in respect of the Collateral
all the rights and remedies of a secured party under the Code
(whether or not the Code applies to the affected Collateral);
(ii) require Debtor to, and Debtor hereby
agrees that it will at its expense and upon request of Secured
Party, assemble the Collateral as directed by Secured Party
and make it available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to
both parties;
(iii) reduce its claim to judgment or
foreclose or otherwise enforce, in whole or in part, the
security interest granted hereunder by any available judicial
procedure;
(iv) sell or otherwise dispose of, at its
office, on the premises of Debtor or elsewhere, the
Collateral, as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being
agreed that the sale or other disposition of any part of the
Collateral shall not exhaust Secured Party's power of sale,
but sales or other dispositions may be made from time to time
until all of the Collateral has been sold or disposed of or
until the Indebtedness has been paid and performed in full),
and at any such sale or other disposition it shall not be
necessary to exhibit any of the Collateral;
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(v) buy the Collateral, or any portion
thereof, at any public sale;
(vi) buy the Collateral, or any portion
thereof, at any private sale if the Collateral is of a type
customarily sold in a recognized market or is of a type which
is the subject of widely distributed standard price
quotations;
(vii) apply for the appointment of a receiver
for the Collateral, and Debtor hereby consents to any such
appointment; and
(viii) at its option, retain the Collateral in
satisfaction of the Indebtedness whenever the circumstances
are such that Secured Party is entitled to do so under the
Code or otherwise.
Debtor agrees that in the event Debtor is entitled to receive any
notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any
Collateral, reasonable notice shall be deemed given when such notice
is deposited in a depository receptacle under the care and custody of
the United States Postal Service, postage prepaid, at Debtor's address
set forth on the signature page hereof, five (5) days prior to the
date of any public sale, or after which a private sale, of any of such
Collateral is to be held. Secured Party shall not be obligated to
make any sale of Collateral regardless of notice of sale having been
given. Secured Party may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to
which it was so adjourned.
(b) Application of Proceeds. If any Event of Default shall have
occurred, Secured Party may at its discretion apply or use any cash held by
Secured Party as Collateral, and any cash proceeds received by Secured Party in
respect of any sale or other disposition of, collection from, or other
realization upon, all or any part of the Collateral as follows in such order
and manner as Secured Party may elect:
(i) to the repayment or reimbursement of the
reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred by Secured
Party in connection with (A) the administration of the Loan
Documents, (B) the custody, preservation, use or operation of,
or the sale of, collection from, or other realization upon,
the Collateral, and (C) the exercise or enforcement of any of
the rights and remedies of Secured Party hereunder;
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(ii) to the payment or other satisfaction of
any liens and other encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as
Collateral;
(v) to the payment of any other amounts
required by applicable law (including without limitation,
Section 9.504(a)(3) of the Code or any other applicable
statutory provision); and
(vi) by delivery to Debtor or any other party
lawfully entitled to receive such cash or proceeds whether by
direction of a court of competent jurisdiction or otherwise.
(c) Deficiency. In the event that the proceeds of any
sale of, collection from, or other realization upon, all or any part
of the Collateral by Secured Party are insufficient to pay all amounts
to which Secured Party is legally entitled, Debtor and any party who
guaranteed or is otherwise obligated to pay all or any portion of the
Indebtedness shall be liable for the deficiency, together with
interest thereon as provided in the Loan Documents.
(d) Non-Judicial Remedies. In granting to Secured Party
the power to enforce its rights hereunder without prior judicial
process or judicial hearing, Debtor expressly waives, renounces and
knowingly relinquishes any legal right which might otherwise require
Secured Party to enforce its rights by judicial process. Debtor
recognizes and concedes that non-judicial remedies are consistent with
the usage of trade, are responsive to commercial necessity and are the
result of a bargain at arm's length. Nothing herein is intended to
prevent Secured Party or Debtor from resorting to judicial process at
either party's option.
(e) Other Recourse. Debtor waives any right to require
Secured Party to proceed against any third party, exhaust any
Collateral or other security for the Indebtedness, or to have any
third party joined with Debtor in any suit arising out of the
Indebtedness or any of the Loan Documents, or pursue any other remedy
available to Secured Party. Debtor further waives any and all notice
of acceptance of this Agreement and of the creation, modification,
rearrangement, renewal or extension of the Indebtedness. Debtor
further waives any defense arising by reason of any disability or
other defense of any third party or by reason of the cessation from
any cause whatsoever of the liability of any third party. Until all
of the Indebtedness shall have been paid in full, Debtor
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shall have no right of subrogation and Debtor waives the right to
enforce any remedy which Secured Party has or may hereafter have
against any third party, and waives any benefit of and any right to
participate in any other security whatsoever now or hereafter held by
Secured Party. Debtor authorizes Secured Party, and without notice or
demand and without any reservation of rights against Debtor and
without affecting Debtor's liability hereunder or on the Indebtedness
to (i) take or hold any other property of any type from any third
party as security for the Indebtedness, and exchange, enforce, waive
and release any or all of such other property, (ii) apply such other
property and direct the order or manner of sale thereof as Secured
Party may in its discretion determine, (iii) renew, extend,
accelerate, modify, compromise, settle or release any of the
Indebtedness or other security for the Indebtedness, (iv) waive,
enforce or modify any of the provisions of any of the Loan Documents
executed by any third party, and (v) release or substitute any third
party.
9. INDEMNITY. Debtor hereby indemnifies and agrees to hold
harmless Secured Party, and its officers, directors, employees, agents and
representatives (each an "Indemnified Person") from and against any and all
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature,
including, but not limited to attorney's fees and any settlement costs,
(collectively, the "Claims") which may be imposed on, incurred by, or asserted
against, any Indemnified Person (whether or not caused by any Indemnified
Person's sole, concurrent or contributory negligence) arising in connection
with the Loan Documents, the Indebtedness or the Collateral (including without
limitation, the enforcement of the Loan Documents and the defense of any
Indemnified Person's actions and/or inactions in connection with the Loan
Documents), except to the limited extent the Claims against an Indemnified
Person are proximately caused by such Indemnified Person's gross negligence or
willful misconduct. If Debtor or any third party ever alleges such gross
negligence or willful misconduct by any Indemnified Person, the indemnification
provided for in this Section shall nonetheless be paid upon demand, subject to
later adjustment or reimbursement, until such time as a court of competent
jurisdiction enters a final judgment as to the extent and effect of the alleged
gross negligence or willful misconduct. The indemnification provided for in
this Section shall survive the termination of this Agreement and shall extend
and continue to benefit each individual or entity who is or has at any time
been an Indemnified Person hereunder.
10. MISCELLANEOUS.
(a) Entire Agreement. This Agreement contains the entire
agreement of Secured Party and Debtor with respect to
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the Collateral. If the parties hereto are parties to any prior
agreement, either written or oral, relating to the Collateral, the
terms of this Agreement shall amend and supersede the terms of such
prior agreements as to transactions on or after the effective date of
this Agreement, but all security agreements, financing statements,
guaranties, other contracts and notices for the benefit of Secured
Party shall continue in full force and effect to secure the
Indebtedness unless Secured Party specifically releases its rights
thereunder by separate release.
(b) Amendment. No modification, consent or amendment of
any provision of this Agreement or any of the other Loan Documents
shall be valid or effective unless the same is in writing and signed
by the party against whom it is sought to be enforced.
(c) Actions by Secured Party. The lien, security
interest and other security rights of Secured Party hereunder shall
not be impaired by (i) any renewal, extension, increase or
modification with respect to the Indebtedness, (ii) any surrender,
compromise, release, renewal, extension, exchange or substitution
which Secured Party may grant with respect to the Collateral, or (iii)
any release or indulgence granted to any endorser, guarantor or surety
of the Indebtedness. The taking of additional security by Secured
Party shall not release or impair the lien, security interest or other
security rights of Secured Party hereunder or affect the obligations
of Debtor hereunder.
(d) Waiver by Secured Party. Secured Party may waive
any Event of Default without waiving any other prior or subsequent
Event of Default. Secured Party may remedy any default without
waiving the Event of Default remedied. Neither the failure by Secured
Party to exercise, nor the delay by Secured Party in exercising, any
right or remedy upon any Event of Default shall be construed as a
waiver of such Event of Default or as a waiver of the right to
exercise any such right or remedy at a later date. No single or
partial exercise by Secured Party of any right or remedy hereunder
shall exhaust the same or shall preclude any other or further exercise
thereof, and every such right or remedy hereunder may be exercised at
any time. No waiver of any provision hereof or consent to any
departure by Debtor therefrom shall be effective unless the same shall
be in writing and signed by Secured Party and then such waiver or
consent shall be effective only in the specific instances, for the
purpose for which given and to the extent therein specified. No
notice to or demand on Debtor in any case shall of itself entitle
Debtor to any other or further notice or demand in similar or other
circumstances.
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(e) Costs and Expenses. Debtor will upon demand pay to
Secured Party the amount of any and all costs and expenses (including
without limitation, reasonable attorneys' fees and expenses), which
Secured Party may incur in connection with (i) the transactions which
give rise to the Loan Documents, (ii) the preparation of this
Agreement and the perfection and preservation of the security
interests granted under the Loan Documents, (iii) the administration
of the Loan Documents, (iv) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization
upon, the Collateral, (v) the exercise or enforcement of any of the
rights of Secured Party under the Loan Documents, or (vi) the failure
by Debtor to perform or observe any of the provisions hereof.
(F) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE
EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST
GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.
(g) Venue. This Agreement has been entered into in the
county in Texas where Secured Party's address for notice purposes is
located, and it shall be performable for all purposes in such county.
Courts within the State of Texas shall have jurisdiction over any and
all disputes arising under or pertaining to this Agreement and venue
for any such disputes shall be in the county or judicial district
where this Agreement has been executed and delivered.
(h) Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be illegal, invalid or
unenforceable under present or future laws, such provision shall be
fully severable, shall not impair or invalidate the remainder of this
Agreement and the effect thereof shall be confined to the provision
held to be illegal, invalid or unenforceable.
(i) No Obligation. Nothing contained herein shall be
construed as an obligation on the part of Secured Party to extend or
continue to extend credit to Debtor.
(j) Notices. All notices, requests, demands or other
communications required or permitted to be given pursuant to this
Agreement shall be in writing and given by (i) personal delivery, (ii)
expedited delivery service with proof of delivery, or (iii) United
States mail, postage prepaid, registered or certified mail, return
receipt requested, sent to the intended addressee at the address set
forth on the signature page hereof or to such different address as the
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addressee shall have designated by written notice sent pursuant to the
terms hereof and shall be deemed to have been received either, in the
case of personal delivery, at the time of personal delivery, in the
case of expedited delivery service, as of the date of first attempted
delivery at the address and in the manner provided herein, or in the
case of mail, upon deposit in a depository receptacle under the care
and custody of the United States Postal Service. Either party shall
have the right to change its address for notice hereunder to any other
location within the continental United States by notice to the other
party of such new address at least thirty (30) days prior to the
effective date of such new address.
(k) Binding Effect and Assignment. This Agreement (i)
creates a continuing security interest in the Collateral, (ii) shall
be binding on Debtor and the heirs, executors, administrators,
personal representatives, successors and assigns of Debtor, and (iii)
shall inure to the benefit of Secured Party and its successors and
assigns. Without limiting the generality of the foregoing, Secured
Party may pledge, assign or otherwise transfer the Indebtedness and
its rights under this Agreement and any of the other Loan Documents to
any other party. Debtor's rights and obligations hereunder may not be
assigned or otherwise transferred without the prior written consent of
Secured Party.
(l) Termination. It is contemplated by the parties
hereto that from time to time there may be no outstanding
Indebtedness, but notwithstanding such occurrences, this Agreement
shall remain valid and shall be in full force and effect as to
subsequent outstanding Indebtedness. Upon (i) the satisfaction in
full of the Indebtedness, (ii) the termination or expiration of any
commitment of Secured Party to extend credit to Debtor, (iii) written
request for the termination hereof delivered by Debtor to Secured
Party, and (iv) written release or termination delivered by Secured
Party to Debtor, this Agreement and the security interests created
hereby shall terminate. Upon termination of this Agreement and
Debtor's written request, Secured Party will, at Debtor's sole cost
and expense, return to Debtor such of the Collateral as shall not have
been sold or otherwise disposed of or applied pursuant to the terms
hereof and execute and deliver to Debtor such documents as Debtor
shall reasonably request to evidence such termination.
(m) Cumulative Rights. All rights and remedies of
Secured Party hereunder are cumulative of each other and of every
other right or remedy which Secured Party may otherwise have at law or
in equity or under any of the other Loan Documents, and the exercise
of one or more of such rights or
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remedies shall not prejudice or impair the concurrent or subsequent
exercise of any other rights or remedies.
(n) Gender and Number. Within this Agreement, words of
any gender shall be held and construed to include the other gender,
and words in the singular number shall be held and construed to
include the plural and words in the plural number shall be held and
construed to include the singular, unless in each instance the context
requires otherwise.
(o) Descriptive Headings. The headings in this Agreement
are for convenience only and shall in no way enlarge, limit or define
the scope or meaning of the various and several provisions hereof.
(p) First Lien; No Merger. Notwithstanding anything to
the contrary contained herein, the liens created by this Security
Agreement are junior, second and inferior to the liens against the
Collateral described in that certain Security Agreement from Debtor in
favor of Secured Party and Banc One Leasing Corporation (collectively,
the secured party thereunder), executed by Debtor as of January 31,
1996 (the "Bank One First Lien"). Neither Debtor nor Secured Party
intend that there be, and there shall not in any event be, a merger of
any of the liens created by this Agreement with the title, any other
lien or other interest of Secured Party in the Collateral by virtue of
the Bank One First Lien or any of the Loan Documents (as defined in
that certain Letter Loan Agreement dated as of January 31, 1996
entered into by and among Debtor, Secured Party, and Banc One Leasing
Corporation), and the parties hereto expressly provide that each such
interest in any lien created hereby on one hand and any other title,
lien or other interest on the other are and remain at all times
SEPARATE and DISTINCT.
EXECUTED as of the date first written above.
DEBTOR:
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Debtor's Address:
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MITCHAM INDUSTRIES, INC.,
a Texas corporation
P. O. Box 1175
Huntsville, Texas
77342-1175 By: /s/ BILLY F. MITCHAM, JR.
-------------------------------
Billy F. Mitcham, Jr., President
Secured Party's Address:
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Bank One, Texas, N.A.
910 Travis
Houston, Harris County, Texas 77002
Attn: Walter F. Rodee, III, Vice President
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