EXHIBIT 10.19
GUARANTY AGREEMENT
WHEREAS, the execution of this Guaranty Agreement is a condition to
COMPASS BANK, an Alabama state banking corporation ("Lender") making certain
loans to OYOG OPERATIONS, LP, a Texas limited partnership ("Borrower"), pursuant
to that certain Promissory Note in the principal amount of $3,040,000.00, dated
September 10, 2003, executed by Borrower and payable to the order of Lender
(such Promissory Note, as it may hereafter be renewed, extended or modified from
time to time, and all promissory notes executed in renewal, extension,
modification or substitution thereof, is hereinafter referred to as the "Note");
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the undersigned, OYO GEOSPACE CORPORATION, a
Delaware corporation (the "Guarantor"), hereby irrevocably and unconditionally
guarantees to Lender the full and prompt payment and performance of the
Guaranteed Indebtedness (hereinafter defined). This Guaranty Agreement shall be
upon the following terms:
I. The term "Guaranteed Indebtedness", as used herein means all of
the "Obligations" (as defined in the Note), and shall include, without
limitation, all principal of and interest on the Note and all renewals,
extensions, increases, decreases or other modifications of any of the foregoing
and all promissory notes given in renewal, extension, increase, decrease or
other modification thereof. The term "Guaranteed Indebtedness" shall include any
and all post-petition interest and expenses (including attorneys' fees) whether
or not allowed under any bankruptcy, insolvency, or other similar law.
II. This instrument shall be an absolute, continuing, irrevocable,
and unconditional guaranty of payment and performance, and not a guaranty of
collection, and Guarantor shall remain liable on its obligations hereunder until
the payment and performance in full of the Guaranteed Indebtedness. No set-off,
counterclaim, recoupment, reduction, or diminution of any obligation, or any
defense of any kind or nature which Borrower may have against Lender or any
other party, or which Guarantor may have against Borrower, Lender, or any other
party, shall be available to, or shall be asserted by, Guarantor against Lender
or any subsequent holder of the Guaranteed Indebtedness or any part thereof or
against payment of the Guaranteed Indebtedness or any part thereof.
III. If Guarantor becomes liable for any indebtedness owing by
Borrower to Lender by endorsement or otherwise, other than under this Guaranty
Agreement, such liability shall not be in any manner impaired or affected
hereby, and the rights of Lender hereunder shall be cumulative of any and all
other rights that Lender may ever have against Guarantor. The exercise by Lender
of any
right or remedy hereunder or under any other instrument, or at law or in equity,
shall not preclude the concurrent or subsequent exercise of any other right or
remedy.
IV. In the event of default by Borrower in payment or performance of
the Guaranteed Indebtedness, or any part thereof, when such Guaranteed
Indebtedness becomes due, whether by its terms, by acceleration, or otherwise,
Guarantor shall promptly pay the amount due thereon to Lender without notice or
demand in lawful currency of the United States of America and it shall not be
necessary for Lender, in order to enforce such payment by Guarantor, first to
institute suit or exhaust its remedies against Borrower or others liable on such
Guaranteed Indebtedness, or to enforce any rights against any collateral which
shall ever have been given to secure such Guaranteed Indebtedness. Until the
Guaranteed Indebtedness is paid in full and a period of ninety (90) days has
passed following such payment, Guarantor waives any and all rights it may now or
hereafter have under any agreement or at law or in equity (including, without
limitation, any law subrogating the Guarantor to the rights of Lender) to assert
any claim against or seek contribution, indemnification or any other form of
reimbursement from Borrower or any other party liable for payment of any or all
of the Guaranteed Indebtedness for any payment made by Guarantor under or in
connection with this Guaranty Agreement or otherwise.
V. If acceleration of the time for payment of any amount payable by
Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to
acceleration under the terms of the Guaranteed Indebtedness shall nonetheless be
payable by Guarantor hereunder forthwith on demand by Lender.
VI. Guarantor hereby agrees that its obligations under this Guaranty
Agreement shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of Guarantor: (a) the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the release,
surrender, exchange, or subordination of any collateral now or hereafter
securing any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of Guarantor hereunder, or the full or partial release of any
other guarantor from liability for any or all of the Guaranteed Indebtedness;
(c) any disability of Borrower, or the dissolution, insolvency, or bankruptcy of
Borrower, Guarantor, or any other party at any time liable for the payment of
any or all of the Guaranteed Indebtedness; (d) any renewal, extension,
modification, waiver, amendment, or rearrangement of any or all of the
Guaranteed Indebtedness or any instrument,
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document, or agreement evidencing, securing, or otherwise relating to any or all
of the Guaranteed Indebtedness; (e) any adjustment, indulgence, forbearance,
waiver, or compromise that may be granted or given by Lender to Borrower,
Guarantor, or any other party ever liable for any or all of the Guaranteed
Indebtedness; (f) any neglect, delay, omission, failure, or refusal of Lender to
take or prosecute any action for the collection of any of the Guaranteed
Indebtedness or to foreclose or take or prosecute any action in connection with
any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Guaranteed Indebtedness; (g) the unenforceability
or invalidity of any or all of the Guaranteed Indebtedness or of any instrument,
document, or agreement evidencing, securing, or otherwise relating to any or all
of the Guaranteed Indebtedness; (h) any payment by Borrower or any other party
to Lender is held to constitute a preference under applicable bankruptcy or
insolvency law or if for any other reason Lender is required to refund any
payment or pay the amount thereof to someone else (i) the settlement or
compromise of any of the Guaranteed Indebtedness; (j) the non-perfection of any
security interest or lien securing any or all of the Guaranteed Indebtedness;
(k) any impairment of any collateral securing any or all of the Guaranteed
Indebtedness; (l) the failure of Lender to sell any collateral securing any or
all of the Guaranteed Indebtedness in a commercially reasonable manner or as
otherwise required by law; (m) any change in the corporate existence, structure,
or ownership of Borrower; or (n) any other circumstance which might otherwise
constitute a defense available to, or discharge of, Borrower or Guarantor.
VII. Guarantor represents and warrants to Lender as follows:
(1) Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, is qualified
to do business in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure to so
qualify would have a material adverse effect on its business, financial
condition, or operations.
(2) Guarantor has the corporate power, authority and legal right to
execute, deliver, and perform its obligations under this Guaranty Agreement and
this Guaranty Agreement constitutes the legal, valid, and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its respective
terms, except as limited by bankruptcy, insolvency, or other laws of general
application relating to the enforcement of creditor's rights.
(3) The execution, delivery, and performance by Guarantor of this
Guaranty Agreement have been duly authorized by all requisite action on the part
of Guarantor and do not and will not violate or conflict with the articles of
incorporation or bylaws of Guarantor or any law, rule, or regulation or any
order, writ, injunction or decree of any court, governmental authority or
agency, or arbitrator and do not and will not conflict with, result in a breach
of, or constitute a default under, or result in the imposition of any lien upon
any assets of Guarantor pursuant to the provisions of any indenture, mortgage,
deed of trust, security agreement, franchise, permit, license, or other
instrument or agreement to which Guarantor or its properties is bound.
(4) No authorization, approval, or consent of, and no filing or
registration with, any court, governmental authority, or third party, except
which has already been obtained by Guarantor, is necessary for the execution,
delivery or performance by Guarantor of this Guaranty Agreement or the validity
or enforceability thereof.
(5) The value of the consideration received and to be received by
Guarantor as a result of Lender making the loan to Borrower evidenced by the
Note and Guarantor executing and delivering this Guaranty Agreement is
reasonably worth at least as much as the liability and obligation of
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Guarantor hereunder, and such liability and obligation and the Note have
benefitted and may reasonably be expected to benefit Guarantor directly or
indirectly.
(6) Guarantor represents and warrants to Lender that Guarantor is
not insolvent, Guarantor's liabilities do not exceed its assets, and Guarantor
will not be rendered insolvent by the execution and performance of this Guaranty
Agreement and the Loan Documents.
VIII. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or Lender has any commitment
under the Note:
(1) Guarantor will deliver to Lender the financial statements of
Guarantor described in the Note at the times required by the Note.
(2) Guarantor will furnish promptly to Lender written notice of the
occurrence of any default under this Guaranty Agreement or an Event of Default
as defined in the Note of which Guarantor has knowledge.
(3) Guarantor will furnish promptly to Lender such additional
information concerning Guarantor as Lender may reasonably request.
(4) Guarantor will not (a) become a party to a merger, consolidation
or other business combination or acquire all or a substantial part of the assets
of any Person (as defined in the Note) or any shares or other evidence of
beneficial ownership of any Person unless guarantor is the surviving Person to
such transaction, (b) dissolve or liquidate, or (iii) sell, lease, assign,
transfer or otherwise dispose of substantially all of its assets, except
dispositions of inventory in the ordinary course of business.
(5) Guarantor will comply with all of the covenants contained in the
Note with which Borrower agrees to in the Note to cause Guarantor to comply.
(6) Guarantor will comply with the financial covenants contained on
Exhibit "A" attached hereto.
IX. Upon the occurrence of an Event of Default (as defined in the
Note) Lender shall have the right to set off and apply against this Guaranty
Agreement or the Guaranteed Indebtedness or both, at any time and without notice
to Guarantor, any and all deposits (general or special, time or demand,
provisional or final) or other sums at any time credited by or owing from Lender
to Guarantor whether or not the Guaranteed Indebtedness is then due and
irrespective of whether or not Lender shall have made any demand under this
Guaranty Agreement. In addition to Lender's right of setoff and as further
security for this Guaranty Agreement and the Guaranteed Indebtedness, Guarantor
hereby grants Lender a security interest in all deposits (general or special,
time or demand, provisional or final) and all other accounts of Guarantor now or
hereafter on deposit with or held by
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Lender and all other sums at any time credited by or owing from Lender to
Guarantor. The rights and remedies of Lender hereunder are in addition to other
rights and remedies (including, without limitation, other rights of setoff)
which Lender may have.
X. Guarantor hereby agrees that the Subordinated Indebtedness shall
be subordinate and junior in right of payment to the prior payment in full of
all Guaranteed Indebtedness, and Guarantor hereby assigns the Subordinated
Indebtedness to Lender as security for the Guaranteed Indebtedness. If any sums
shall be paid to Guarantor by Borrower or any other person or entity on account
of the Subordinated Indebtedness, such sums shall be held in trust by Guarantor
for the benefit of Lender and shall forthwith be paid to Lender without
affecting the liability of Guarantor under this Guaranty Agreement. For purposes
of this Guaranty Agreement, the term "Subordinated Indebtedness" means all
indebtedness, liabilities, and obligations of Borrower to Guarantor, whether
such indebtedness, liabilities, and obligations now exist or are hereafter
incurred or arise, or whether the obligations of Borrower thereon are direct,
indirect, contingent, primary, secondary, several, joint and several, or
otherwise, and irrespective of the person or persons in whose favor such
indebtedness, obligations, or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by Guarantor.
XI. No amendment or waiver of any provision of this Guaranty
Agreement or consent to any departure by the Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed by Lender. No
failure on the part of Lender to exercise, and no delay in exercising, any
right, power, or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
XII. This Guaranty Agreement is for the benefit of Lender and its
successors and assigns, and in the event of an assignment of the Guaranteed
Indebtedness, or any part thereof, the rights and benefits hereunder, to the
extent applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty Agreement is binding not only on Guarantor, but on
Guarantor's successors and assigns.
XIII. Guarantor recognizes that Lender is relying upon this Guaranty
Agreement and the undertakings of Guarantor hereunder in making extensions of
credit to Borrower under the Note and further recognizes that the execution and
delivery of this Guaranty Agreement is a material inducement to Lender in
entering into the Note. Guarantor hereby acknowledges that there are no
conditions to the full effectiveness of this Guaranty Agreement.
XIV. This Guaranty Agreement is executed and delivered as an incident
to a lending transaction negotiated, consummated, and performable in Harris
County, Texas, and shall be governed by and construed in accordance with the
laws of the State of Texas. Any action or proceeding against Guarantor under or
in connection with this Guaranty Agreement may be brought
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in any state or federal court in Harris County, Texas, and Guarantor hereby
irrevocably submits to the nonexclusive jurisdiction of such courts, and waives
any objection it may now or hereafter have as to the venue of any such action or
proceeding brought in such court. Guarantor agrees that service of process upon
it may be made by certified or registered mail, return receipt requested, at its
address specified in the Note. Nothing herein shall affect the right of Lender
to serve process in any other matter permitted by law or shall limit the right
of Lender to bring any action or proceeding against Guarantor or with respect to
any of Guarantor's property in courts in other jurisdictions. Any action or
proceeding by Guarantor against Lender shall be brought only in a court located
in Harris County, Texas.
XV. Guarantor shall pay on demand all reasonable attorneys' fees and
all other reasonable costs and expenses incurred by Lender in connection with
the preparation, administration, enforcement, or collection of this Guaranty
Agreement.
XVI. Guarantor hereby waives promptness, diligence, notice of any
default under the Guaranteed Indebtedness, demand of payment, notice of
acceptance of this Guaranty Agreement, presentment, notice of protest, notice of
dishonor, notice of the incurring by Borrower of additional indebtedness, and
all other notices and demands with respect to the Guaranteed Indebtedness and
this Guaranty Agreement.
XVII. The Note, and all of the terms thereof, are incorporated herein
by reference, the same as if stated verbatim herein, and Guarantor agrees that
Lender may exercise any and all rights granted to it under the Note and the
other Loan Documents (as defined in the Note) without affecting the validity or
enforceability of this Guaranty Agreement. Any notices given hereunder shall be
given in the manner provided by and to the addresses set forth in the Note.
XVIII. Guarantor hereby represents and warrants to Lender that
Guarantor has adequate means to obtain from Borrower on a continuing basis
information concerning the financial condition and assets of Borrower and that
Guarantor is not relying upon Lender to provide (and Lender shall have no duty
to provide) any such information to Guarantor either now or in the future.
XIX. This notice is being supplied in compliance with 12 C.F.R. 227,
Regulation AA, promulgated by the Federal Reserve Board and applies to any
Guaranteed Indebtedness which may be a consumer credit obligation as defined in
such Regulation AA. You are being asked to guarantee the debt of Borrower now
existing or hereafter arising. There is no limit as to the amount unless this
Guaranty expressly provides for such limitation. Think carefully before you
guarantee the existing and future debts of Borrower. If Borrower doesn't pay any
of such debts, you will have to. Be sure that you can afford to pay all such
debts if you have to and that you want to accept this responsibility. You may
have to pay up to the full amount of all Borrower's debts if Borrower does not
pay. You may also have to pay late fees or collection costs, which increase this
amount. Lender can collect such debts from you without first trying to collect
from Borrower. Lender can use the same collection methods against you that can
be used against Borrower, such as suing you, etc. If any such
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debts is ever in default, that fact may become part of your credit record. This
notice is not the contract that makes you liable for Borrower's debts. The
Guaranty that is set forth in this instrument is however, a contract that makes
you liable for Borrower's debts.
XX. THIS GUARANTY AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT OF
GUARANTOR AND LENDER WITH RESPECT TO GUARANTOR'S GUARANTY OF THE GUARANTEED
INDEBTEDNESS AND SUPERSEDES 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 OR OTHER
EXTRINSIC EVIDENCE OF ANY NATURE. THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR
AND LENDER. THIS GUARANTY AGREEMENT MAY NOT BE AMENDED EXCEPT IN WRITING BY
GUARANTOR AND LENDER.
DATED AND EXECUTED as of September 10, 2003.
GUARANTOR:
OYO GEOSPACE CORPORATION
By: /s/ Gary D. Owens
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Name: Gary D. Owens
Title: President
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EXHIBIT "A"
Financial Covenants
OYO Geospace Corporation, a Delaware corporation ("Guarantor") covenants
and agrees that, as long as the Guaranteed Indebtedness (as defined in the
foregoing Guaranty Agreement) or any part thereof is outstanding, Guarantor will
observe and perform the following financial covenants set forth below, unless
Lender (as defined in the foregoing Guaranty Agreement) shall otherwise consent
in writing.
Section A. Tangible Net Worth. Guarantor will at all times maintain
Tangible Net Worth in an amount not less than $43,000,000.00 from and after
December 31, 2003.
Section B. Ratio of Total Liabilities to Tangible Net Worth.
Guarantor will at all times maintain a Ratio of Total Liabilities to Tangible
Net Worth of not greater than 1.00 to 1.00 from and after December 31, 2003.
Section C. Fixed Charge Coverage Ratio. Guarantor will at all times
maintain a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00. The Fixed
Charge Coverage Ratio shall be calculated and tested quarterly as of the last
day of each fiscal quarter of Guarantor, commencing on December 31, 2003, on a
cumulative basis for the four quarters ended as of such date.
As used in this Exhibit "A", the following terms are defined as follows:
"Current Maturities of Long Term Debt" means for Guarantor and
its Subsidiaries on a consolidated basis, the required principal
payments and mandatory prepayments for the next succeeding twelve month
period on Debt of Guarantor and its Subsidiaries for borrowed money
which has a final maturity more than twelve months from the date of
payment.
"Debt" means for any Person (a) all indebtedness, whether or not
represented by bonds, debentures, notes, securities, or other evidences
of indebtedness, for the repayment of money borrowed, (b) all
indebtedness representing deferred payment of the purchase price of
property or assets, (c) all indebtedness under any lease which, in
conformity with GAAP, is required to be capitalized for balance sheet
purposes, (d) all indebtedness under guaranties, endorsements,
assumptions, or other contingent obligations, in respect of, or to
purchase or otherwise acquire, indebtedness of others, (e) all
indebtedness secured by a lien existing on property owned, subject to
such lien, whether or not the indebtedness secured thereby shall have
been assumed by the owner thereof, and (f) any obligation to redeem or
repurchase any of such Person's capital stock, partnership or membership
interests or other ownership interests as applicable.
"EBITDA" means for Guarantor and its Subsidiaries, on a
consolidated basis, the sum of (a) Net Income, plus (b) depreciation,
amortization and other non cash charges, plus (c) Interest Expense, plus
(d) extraordinary losses, minus (e) extraordinary gains.
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Fixed Charge Coverage Ratio" means for Guarantor and its
Subsidiaries, on a consolidated basis, as of any date (a) EBITDA for the
period ended on such date, minus non-financed capital expenditures,
minus distributions, divided by (b) the sum of (i) Current Maturities of
Long Term Debt for the period ended on such date, plus (ii) Interest
Expense for the period ended on such date.
"GAAP" means generally accepted accounting principles in the
United States of America consistently applied.
"Net Income" means, for Guarantor and its Subsidiaries for any
period, the consolidated net income (or loss) of Guarantor and its
Subsidiaries for such period, calculated in accordance with GAAP.
"Person" means any individual, corporation, limited liability
company, business trust, association, company, partnership, joint
venture, governmental authority, or other entity.
"Ratio of Total Liabilities to Tangible Net Worth" means, as of
any date, (a) (i) Total Liabilities minus (ii) Subordinated Debt divided
by (b) Tangible Net Worth.
"Subordinated Debt" collectively means Debt of Guarantor the
payment of which is subordinated to the payment of the Guaranteed
Indebtedness in a manner acceptable to Lender.
"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 Guarantor and its
Subsidiaries, plus Subordinated Debt; provided, however, there shall be
excluded therefrom (a) goodwill, including any amounts, however
designated, that represent the excess of the purchase price paid for
assets or stock over the value assigned thereto, (b) patents,
trademarks, trade names, and copyrights, (c) deferred expenses, (d)
loans and advances to any stockholder, director, officer, or employee of
Guarantor or any Subsidiary or any affiliate of Guarantor, and (e) all
other assets which are properly classified as intangible assets.
"Total Liabilities" means, as of any date, all amounts which, in
accordance with GAAP, would be classified as liabilities on a
consolidated balance sheet of Guarantor and its Subsidiaries.
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