SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
for the Quarterly Period Ended June 30, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 001-13601
OYO GEOSPACE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 76-0447780
(State or Other (I.R.S.
Jurisdiction of Employer
Incorporation or Identification
Organization) No.)
12750 SOUTH KIRKWOOD, SUITE 200
STAFFORD, TEXAS 77477
(Address of Principal Executive Offices)
(281) 494-8282
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [x] No [ ]
There were 5,310,990 shares of the Registrant's Common Stock outstanding as of
the close of business on August 6, 1998.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
NUMBER
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 14
Item 6. Exhibits and Reports on Form 8-K 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
OYO Geospace Corporation and Subsidiaries
We have reviewed the accompanying consolidated balance sheet of OYO
Geospace Corporation and Subsidiaries as of June 30, 1998, the related
consolidated statements of operations for the three months and nine months ended
June 30, 1998 and 1997, and the consolidated statement of cash flows for the
nine months ended June 30, 1998 and 1997. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express an opinion or any form of assurance on
such financial statements.
Based on our review, we are not aware of any material modifications that
should be made to the aforementioned financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of September 30, 1997, and the
related consolidated statements of operations, changes in shareholder's equity,
and cash flows for the year then ended (not presented herein) and, in our report
dated November 3, 1997, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of September 30, 1997, is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
July 27, 1998
3
<PAGE>
OYO GEOSPACE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
JUNE 30, SEPTEMBER 30,
ASSETS 1998 1997
-------- --------
(unaudited)
Current assets:
Cash and cash equivalents ......................... $ 2,936 $ 2,488
Trade accounts and notes receivable, net .......... 15,468 6,494
Inventories ....................................... 18,732 15,035
Deferred income tax ............................... 2,111 1,115
Prepaid expenses and other ........................ 630 132
-------- --------
Total current assets ........................... 39,877 25,264
Rental equipment, net ................................ 2,672 2,394
Property, plant and equipment, net ................... 14,944 6,108
Goodwill and other intangible assets, net ............ 4,575 1,006
Other assets ......................................... 279 306
-------- --------
Total assets ................................... $ 62,347 $ 35,078
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and notes payable $ 37 $ 1,500
Accounts payable .................................. 6,636 3,048
Accrued expenses and other ........................ 4,420 3,716
Income tax payable ................................ 822 860
-------- --------
Total current liabilities ...................... 11,915 9,124
Long-term debt ....................................... 963 --
Deferred income tax .................................. 1,416 854
-------- --------
Total liabilities .............................. 14,294 9,978
-------- --------
Commitments and contingencies ........................ -- --
Stockholders' equity:
Preferred stock ................................... -- --
Common stock ...................................... 54 40
Additional paid-in capital ........................ 29,130 9,785
Retained earnings ................................. 21,119 15,554
Cumulative foreign currency translation adjustments (563) (279)
Unearned compensation-restricted stock awards ..... (1,687) --
-------- --------
Total stockholders' equity ..................... 48,053 25,100
-------- --------
Total liabilities and stockholders' equity ..... $ 62,347 $ 35,078
======== ========
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE>
OYO GEOSPACE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ --------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales ....................................... $ 18,484 $ 12,452 $ 50,047 $ 30,454
Cost of sales ............................... 11,057 7,471 29,161 18,023
---------- ----------- ----------- -----------
Gross profit ................................ 7,427 4,981 20,886 12,431
Operating expenses:
Selling, general and administrative ...... 3,086 2,264 8,921 5,959
Research and development ................. 1,833 598 3,854 1,772
---------- ----------- ----------- -----------
Total operating expenses .............. 4,919 2,862 12,775 7,731
---------- ----------- ----------- -----------
Income from operations ...................... 2,508 2,119 8,111 4,700
Other income (expense):
Interest expense ......................... -- (222) (28) (441)
Interest income .......................... 86 25 300 69
Other, net ............................... 65 95 180 249
---------- ----------- ----------- -----------
Total other income (expense), net ..... 151 (102) 452 (123)
---------- ----------- ----------- -----------
Income before provision for income taxes .... 2,659 2,017 8,563 4,577
Provision for income taxes .................. 816 760 2,997 1,726
---------- ----------- ----------- -----------
Net income .................................. $ 1,843 $ 1,257 $ 5,566 $ 2,851
========== =========== =========== ===========
Basic earnings per share .................... $ 0.35 $ 0.31 $ 1.12 $ 0.71
========== =========== =========== ===========
Diluted earnings per share .................. $ 0.34 $ 0.31 $ 1.10 $ 0.71
========== =========== =========== ===========
Weighted average shares outstanding - Basic . 5,309,790 4,000,000 4,991,798 4,000,000
Weighted average shares outstanding - Diluted 5,438,377 4,000,000 5,082,983 4,000,000
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE>
OYO GEOSPACE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
-------- -------
<S> <C> <C>
Cash flows from operating expenses:
Net income ........................................... $ 5,566 $ 2,851
Adjustments to reconcile net income to
net cash provided by operating activities:
Deferred income tax ............................... (874) (109)
Depreciation and amortization ..................... 1,747 1,053
Amortization of restricted stock awards ........... 241 --
Bad debt expense .................................. 109 79
Effects of changes in operating assets
and liabilities:
Trade accounts and notes receivable ................ (8,100) (2,943)
Inventories ........................................ (2,575) (428)
Prepaid expenses and other assets .................. (503) (80)
Accounts payable ................................... 3,508 430
Accrued expenses and other ......................... 184 277
Income tax payable ................................. (156) 1,124
-------- -------
Net cash (used in) provided by
operating activities ............................ (853) 2,254
Cash flows from investing activities:
Capital expenditures ................................. (9,426) (2,572)
Investment in business acquisition, net
of cash acquired ................................... (2,688) --
Proceeds from sale of equipment ...................... 249 595
-------- -------
Net cash used in investing activities ............. (11,865) (1,977)
-------- -------
Cash flows from financing activities:
Net proceeds from initial public offering ............ 14,627 --
Increase in notes payable to banks ................... 1,000 --
Decrease in notes payable to banks ................... (2,407) (701)
Decrease in receivable from Parent ................... -- 1,487
-------- -------
Net cash provided by financing activities ......... 13,220 786
-------- -------
Effect of exchange rate on cash ......................... (54) 64
-------- -------
Increase in cash and cash equivalents ................... 448 1,127
Cash and cash equivalents, beginning of period .......... 2,488 780
-------- -------
Cash and cash equivalents, end of period ................ $ 2,936 $ 1,907
======== =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
6
<PAGE>
OYO GEOSPACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated balance sheet of OYO Geospace Corporation and its
subsidiaries (the "Company") at September 30, 1997 has been condensed from the
Company's audited consolidated financial statements at that date. The
consolidated balance sheet at June 30, 1998, the consolidated statements of
operations for the three months and nine months ended June 30, 1998 and 1997 and
the consolidated statements of cash flows for the nine months ended June 30,
1998 and 1997 have been prepared by the Company, without audit. In the opinion
of management, all adjustments, consisting of normal recurring adjustments,
necessary to present fairly the consolidated financial position, results of
operations and cash flows have been made. The results of operations for the
three months and nine months ended June 30, 1998 are not necessarily indicative
of the operating results for a full year or of future operations.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been omitted. The accompanying consolidated financial statements should be
read in conjunction with the financial statements and notes thereto contained in
the Company's Registration Statement on Form S-1 (Registration No. 333-36727) as
filed with the Securities and Exchange Commission on November 18, 1997.
2. INITIAL PUBLIC OFFERING
In November 1997, the Company completed an initial public offering (the
"Offering") of its common stock by selling 2,300,000 common shares, including
1,150,000 common shares owned by its parent, OYO Corporation U.S.A. ("OYO
U.S.A."). After deducting underwriting discounts and offering expenses, the net
proceeds from the Offering were $29.3 million, which were split equally between
the Company and OYO U.S.A. Immediately following the Offering, OYO U.S.A. held
approximately 55% of the outstanding stock of the Company.
3. EARNINGS PER COMMON SHARE
Effective October 1, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS
128 simplifies the computation of earnings per share by replacing the primary
and fully diluted presentations with the new basic and diluted presentations.
Basic earnings per common share is computed by dividing income available for
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per common share is computed by dividing income
available for common shareholders by the sum of the weighted average number of
common shares outstanding and the effect of all dilutive potential common shares
outstanding for the period All prior period earnings per share amounts have been
restated to conform with SFAS No.
128.
7
<PAGE>
The following table summarizes the calculation of net earnings and weighted
average common shares and common equivalent shares outstanding for purposes of
the computation of earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- ---------------------------------
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net earnings available to common
stockholders (in thousands) ............................. $ 1,843 $ 1,257 $ 5,566 $ 2,851
=============== =============== =============== ===============
Divided by weighted average common shares and common
share equivalents:
Weighted average common shares ......................... 5,309,790 4,000,000 4,991,798 4,000,000
Weighted average common share
equivalents .......................................... 128,587 -- 91,185 --
--------------- --------------- --------------- ---------------
Total weighted average common shares
and common share equivalents ............................ 5,438,377 4,000,000 5,082,983 4,000,000
=============== =============== =============== ===============
Basic earnings per common share ........................... $ 0.35 $ 0.31 $ 1.12 $ 0.71
=============== =============== =============== ===============
Diluted earnings per common share ......................... $ 0.34 $ 0.31 $ 1.10 $ 0.71
=============== =============== =============== ===============
</TABLE>
4. INVENTORIES
Inventories consisted of the following (in thousands):
JUNE 30, SEPTEMBER 30,
1998 1997
------- -------
(unaudited)
Finished goods ............................ $ 2,725 $ 3,385
Work in process ........................... 4,636 2,641
Raw materials and subcomponents ........... 11,371 9,009
------- -------
$18,732 $15,035
======= =======
5. LONG-TERM DEBT
In June 1998, the Company borrowed $1.0 million under the terms of a fifteen
year amortizing mortgage loan collateralized by the Company's corporate office
facility. The mortgage loan bears interest at a fixed rate of 7.55% per annum.
In June 1998, the Company obtained from Bank of America, N.A. (the "Bank") a
$10.0 million working capital line of credit (the "Credit Agreement") that
expires in June 2000. Borrowings under the Credit Agreement are subject to
borrowing base restrictions based on consolidated net income plus consolidated
interest expense, income taxes, depreciation and amortization. Borrowings under
the Credit Agreement are collateralized by the Company's accounts receivable and
inventory. At the Company's option, interest on borrowings is based on the
Bank's prime rate or offshore rate. The Credit Agreement prohibits the payment
of cash dividends on the Company's common stock, limits capital expenditures,
limits additional indebtedness to $7.5 million, requires the maintenance of
certain financial amounts and contains other covenants customary in transactions
of this type. As of June 30, 1998, there were no borrowings outstanding under
the Credit Agreement, and the borrowing base under the Credit Agreement was
$10.0 million.
8
<PAGE>
6. ACQUISITION
On February 3, 1998, the Company acquired 100% of the outstanding common
stock of JRC/Concord Technologies, Inc. ("Concord") as well as certain
intellectual property related to the business of Concord from Jimmy R. Cole, Jr.
for a purchase price of $6.4 million, consisting, after adjustments, of cash
payments totaling $3.6 million (including acquisition related costs of $0.1
million) and the issuance of 159,120 shares of the Company's common stock valued
at approximately $2.8 million. The purchase price was determined through
arm's-length negotiations with Mr. Cole, who had no prior relationship to the
Company or any of its affiliates or directors, officers or associates thereof.
The cash portion of the purchase price was funded with a portion of the net
proceeds of the Company's initial public offering. Concord, located in Houston,
Texas, designs and manufactures equipment used in connection with deepwater
marine seismic surveys. The Company will continue the business of Concord,
including the continued devotion of its plant and other assets to its business.
Mr. Cole continues to serve as the president of Concord.
The allocation of the total purchase price, including related expenses, for
Concord based on the estimated fair value of the net assets acquired, at the
date of acquisition, is as follows:
Net tangible assets..................... $ 2,734
Intangible assets....................... 3,658
--------
Total purchase price allocation...... $ 6,392
========
Intangible assets are being amortized using the straight-line method over
fifteen years.
7. SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES
During the nine months ended June 30, 1998, the Company increased its
additional paid-in capital by approximately $1.9 million and recorded a
corresponding increase in unearned compensation representing the issuance of
restrictive stock awards to employees, which awards vest ratably over four
years.
Components of cash used for the acquisition of Concord and intellectual
property related to the business of Concord, as reflected in the Consolidated
Statement of Cash Flows for the nine months ended June 30, 1998 are as follows
(in thousands):
Fair value of current assets, net of cash acquired.. $ 2,069
Fair value of noncurrent assets..................... 1,762
Fair value of intangible assets..................... 3,658
Liabilities assumed................................. (1,996)
Common stock issued at closing...................... (2,805)
--------
Cash paid, net of cash acquired..................... $ 2,688
========
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following analysis of the financial condition and results of operations
of the Company should be read in conjunction with the Consolidated Financial
Statements and Notes related thereto included elsewhere in this Form 10-Q.
OVERVIEW
OYO Geospace designs and manufactures instruments and equipment used in the
acquisition and processing of seismic data for the oil and gas industry and for
the commercial graphics industry worldwide.
Demand for the Company's products used in the acquisition and processing of
seismic data is dependent primarily upon the level of worldwide oil and gas
exploration activity. That activity, in turn, is dependent primarily upon
prevailing oil and gas prices. Historically, the markets for oil and gas have
been volatile, and such markets are likely to continue to be volatile. In recent
months, oil and gas prices have fallen sharply. This trend may indicate a
moderation of the Company's sales in fiscal periods following June 30, 1998.
However, as it is impossible to predict future oil and gas price movements with
certainty, no assurance can be given as to the level of future demand for the
Company's products.
RESULTS OF OPERATIONS
The following table sets forth for the three months and nine months ended
June 30, 1998 and 1997, the percentage of certain statement of operations items
to total sales:
THREE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- ---------------
1998 1997 1998 1997
----- ----- ----- -----
Sales .................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales ............................ 59.8 60.0 58.3 59.2
Gross profit ............................. 40.2 40.0 41.7 40.8
Selling, general and
administrative ........................... 16.7 18.2 17.8 19.6
Research and development ................. 9.9 4.8 7.7 5.8
Income from operations ................... 13.6 17.0 16.2 15.4
Other income (expense), net .............. 0.8 (0.8) 0.9 (0.4)
Income before provision for
income taxes ............................. 14.4 16.2 17.1 15.0
Provision for income taxes ............... 4.4 6.1 6.0 5.7
Net income ............................... 10.0 10.1 11.1 9.4
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997.
Sales for the three months and nine months ended June 30, 1998 increased $6.0
million, or 48.4%, and $19.6 million, or 64.3%, from the corresponding periods
of the prior year. The increase in sales was, in part, attributable to filling
orders from the strong demand of the previous quarter and sales generated by
Concord Technologies, Inc. ("Concord"), which the Company acquired on February
3, 1998. The Company expects that sales of its seismic products will return to
more moderate levels in the fourth quarter.
Cost of sales for the three months and nine months ended June 30, 1998
increased $3.6 million, or 48.0%, and $11.1 million, or 61.8%, from the
corresponding periods of the prior year. Cost of sales decreased as a percentage
of total sales to 59.8% and 58.3% in the three months and nine months ended June
30, 1998 from 60.0% and 59.2% in the corresponding periods of the prior year.
This percentage decrease was generally attributable to increased efficiencies as
a result of the higher sales volume during the three months and nine months
ended June 30, 1998. Should sales return to more moderate levels in future
quarters, the Company could experience lower gross profit margins.
10
<PAGE>
Selling, general and administrative expenses for the three months and nine
months ended June 30, 1998 increased $0.8 million, or 36.3%, and $3.0 million,
or 49.7%, from the corresponding period of the prior year, primarily
attributable to increased administrative expenses necessary to support higher
sales and the acquisition of Concord. Selling, general and administrative
expenses decreased as a percentage of total sales to 16.7% and 17.8% in the
three months and nine months ended June 30, 1998 from 18.2% and 19.6% in the
corresponding periods of the prior year, principally reflecting the impact of
higher sales volume and the leveraging of certain fixed expenses.
Research and development expenses for the three months and nine months ended
June 30, 1998 increased $1.2 million, or 206.5%, and $2.1, million or 117.5%,
from the corresponding periods of the prior year. Research and development
expenses increased as a percentage of total sales to 9.9% and 7.7% in the three
months and nine months ended June 30, 1998 from 4.8% and 5.8% in the
corresponding periods of the prior year, principally resulting from an increase
in expenditures targeted at new product development.
Other income (expense), net increased as a percentage of total sales to 0.8%
and 0.9% in the three months and nine months ended June 30, 1998 from (0.8)% and
(0.4)% in the corresponding periods of the prior year. This increase was
primarily attributable to a decrease in interest expense as a result of the
Company using a portion of the net proceeds of the Offering to repay outstanding
indebtedness and interest income earned on the temporary investment of the
remainder of such proceeds.
The Company's effective tax rate for the three months and nine months ended
June 30, 1998 was 30.7% and 35.0% compared to 37.7% in each of the corresponding
periods of the prior year. The decrease in the Company's effective tax rate is
principally the result of the implementation of certain tax strategies during
the three months ended June 30, 1998 designed to reduce the Company's domestic
and foreign income tax expense. The larger rate reduction for the three months
ended June 30, 1998 results from the cumulative adjustment required to reflect
the expected annualized tax rate.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had $2.9 million in cash and cash equivalents.
For the nine months ended June 30, 1998, cash used in operating activities was
$0.8 million principally resulting from increases in accounts receivable and
inventories offset by net income and an increase in accounts payable. The
increases in the Company's working capital accounts are a result of continued
growth in the demand for the Company's products.
For the nine months ended June 30, 1998, the Company used approximately $11.9
million in investing activities, consisting of capital expenditures of $9.4
million and a business acquisition of approximately $2.7 million, net of cash
acquired. The Company estimates that its capital expenditures in fiscal 1998
will be $12.0 million, including $4.0 million for the construction of an
additional manufacturing facility, $1.8 million for additional rental equipment,
and $1.5 million for the purchase of new office space.
Financing activities for the nine months ended June 30, 1998 generated $13.2
million of cash, principally resulting from the net proceeds from the Company's
initial public offering totaling $14.6 million. A portion of these proceeds were
used to repay outstanding bank borrowings of $2.4 million.
Prior to the Offering, the Company relied on various intercompany
arrangements with OYO U.S.A. for its financing requirements. Following the
Offering, OYO U.S.A. and its affiliates are no longer guaranteeing any
indebtedness for the Company's benefit. The Company obtained a working capital
line of credit in June 1998, under which the Company is able to borrow up to
$10.0 million. The Credit Agreement expires in June 2000 and is collateralized
by the Company's accounts receivable and inventory. The Credit Agreement
prohibits the payment of cash dividends on the Company's common stock, limits
capital expenditures, limits additional indebtedness to $7.5 million, requires
the maintenance of certain financial amounts and contains other covenants
customary in transactions of this type. There were no borrowings outstanding at
June 30, 1998 under the Credit Agreement, and the borrowing base under the
Credit Agreement was $10.0 million.
11
<PAGE>
The Company obtained a $1.0 million mortgage loan in June 1998 secured by the
Company's corporate office facility. The Company purchased this facility in
December 1997 for $1.5 million in cash including renovations. The Company is
considering the mortgage of additional facilities. However, there can be no
assurance that the Company will be successful in obtaining such loans or that
such loans will be available to the Company on terms the Company considers
reasonable
The Company believes that the combination of cash flow from operations,
borrowing availability under the Credit Agreement and the net proceeds from the
Offering should provide the Company with sufficient capital resources and
liquidity to fund its operations through fiscal 1999 and support its acquisition
and expansion program. However, there can be no assurance that such sources of
capital will be sufficient to support an acquisition and expansion program
through fiscal 1999 or in the long-term or otherwise support the Company's
capital requirements, and the Company may be required to issue additional debt
or equity securities in the future to meet its capital requirements.
Inflation has not had a significant impact on the Company's operations to
date.
ACQUISITION
On February 3, 1998, the Company acquired 100% of the outstanding common
stock of Concord as well as certain intellectual property related to the
business of Concord, for a purchase price of $6.4 million, consisting of cash
payments totaling $3.6 million (including acquisition related costs of $0.1
million) and the issuance of 159,120 shares of the Company's common stock valued
at approximately $2.8 million. The purchase price was determined through
arm's-length negotiations with Mr. Cole, who had no prior relationship to the
Company or any of its affiliates or directors, officers or associates thereof.
Concord, located in Houston, Texas, designs and manufactures equipment used in
connection with deepwater marine seismic surveys. The Company is continuing the
business of Concord, including the continued devotion of its plant and other
assets to its business.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes
standards for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. It requires (a) classification of the components of other
comprehensive income by their nature in a financial statement and (b) the
display of the accumulated balance of the other comprehensive income separate
from retained earnings and additional paid-in capital in the equity section of a
statement of financial position. SFAS 130 is effective for years beginning after
December 15, 1997 and is not expected to have a material impact on the Company's
financial statements.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 131 establishes standards for reporting information about operating
segments in annual financial statements and requires selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS 131 is effective for financial
statements for periods beginning after December 15, 1997 and is not expected to
have a material impact on the Company's financial statements.
In February 1998, the FASB issued Statement of Financial Accounting Standards
No. 132, "Employers' Disclosure about Pensions and Other Postretirement
Benefits" ("SFAS 132). SFAS 132 standardizes the disclosure requirements for
pensions and other postretirement benefits to the extent practicable. It also
requires additional information on changes in the benefit obligations and fair
values of plan assets. SFAS 132 is effective for years beginning after December
15, 1997 and is not expected to have a material impact on the Company's
financial statements.
12
<PAGE>
YEAR 2000 ISSUES
The "Year 2000 problem" is the result of computer programs being written
using two digits rather than four to define the applicable year. Any programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a major system failure or
miscalculations in affected computer and operational systems.
The Company has initiated a program of upgrading its internal accounting and
manufacturing software to make that software more efficient and compatible
Company-wide (the "Upgrade"). In connection with the Upgrade, all of the
Company's internal accounting and manufacturing software will become Year 2000
compliant. The Company expects that the Upgrade will be complete by the end of
fiscal 1998. The Company has been informed by the suppliers of substantially all
of the Company's software that all of those suppliers' software that will be
used by the Company following the Upgrade is Year 2000 compliant. The software
from these suppliers is used for financial and manufacturing purposes. However,
there can be no assurances that Year 2000 problems will not occur with respect
to the Company's computer systems. Further, the Company is in the process of
reviewing the operational computers built into its manufacturing equipment to
determine whether or not that equipment may be effected by the Year 2000
problem. The Company does not expect that it will incur material expenditures in
discovering and addressing any Year 2000 problems it may have. However, the Year
2000 problem may impact customers, suppliers, shippers and other entities with
which the Company transacts business, and the Company cannot predict the effect
of the Year 2000 problem on those entities or how those entities' Year 2000
problems may indirectly effect the Company.
FORWARD LOOKING STATEMENTS
This Form 10-Q includes "forward-looking" statements which are subject to the
"Safe Harbor" provisions of Section 27A of the Securities Exchange Act of 1933
and Section 21E of the Securities Exchange Act of 1934. All statements other
than statements of historical fact included herein, including statements about
potential future products and markets, the Company's future financial position,
business strategy and other plans and objectives for future operations, are
forward-looking statements. Although the Company believes the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct, and actual
results may differ materially from such forward-looking statements. Additional
important factors that could cause actual results to differ materially from the
Company's expectations are disclosed in the Company's Registration Statement on
Form S-1 (Reg. No. 333-36727), filed with the Securities and Exchange
Commission, under the heading "Risk Factors" and elsewhere. Further, all written
and verbal forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by such factors.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(d) The Company completed an initial public offering (the "Offering") of its
common stock, par value $.01 per share ("Common Stock") pursuant to a
Registration Statement on Form S-1 (Registration No. 333-36727) (the
"Registration Statement"), which was declared effective by the Securities and
Exchange Commission at 11:00 a.m. Eastern Standard Time on November 20, 1997.
The net proceeds of the Offering to the Company were approximately $14.6
million. From the effective date of the Registration Statement through June 30,
1998, the Company used a portion of the net proceeds of the Offering to repay
$4.9 million of outstanding indebtedness, including $1.5 million of which was
outstanding as of September 30, 1997. The Company incurred additional
indebtedness of $2.5 million from October 1, 1997 to November 26, 1997, which
resulted from the Company's growing working capital needs, primarily to fund
increases in accounts receivable and inventories resulting from increases in
sales, as well as to pay fiscal 1997 accrued bonuses. The remaining indebtedness
of $0.9 million was incurred by Concord prior to the acquisition. The Company
used $3.6 million of the net proceeds of the Offering in connection with the
acquisition of Concord. See "Acquisition" above. The remaining net proceeds of
the Offering have been invested in working capital.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed with this Quarterly Report.
10.1 Promissory Note, dated as of June 23, 1998, made by and between the Company
and Ameritas Life Insurance Corp.
10.2 Business Loan Agreement, dated as of June 26, 1998, made by and between the
Company and Bank of America.
10.3 Security Agreements, dated as of June 26, 1998, made by OYO Geospace
Corporation and its Subsidiaries in favor of Bank of America.
10.4 Business Loan Continuing Guaranty Agreements, dated as of June 26, 1998,
made by OYO Geospace Corporation and its Subsidiaries in favor of Bank of
America.
15.1 Awareness Letter of Independent Accountants
27.1 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the quarter for
which this report is filed.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
OYO GEOSPACE CORPORATION
Date: August 3, 1998
By: /s/ Gary D. Owens
Gary D. Owens, Chairman of the Board
President and Chief Executive Officer
(duly authorized officer)
Date: August 3, 1998
By: /s/ Thomas T. McEntire
Thomas T. McEntire
Chief Financial Officer
(principal financial officer)
15
PROMISSORY NOTE
$1,000,000.00 June 23, 1998
FOR VALUE RECEIVED, the undersigned (whether one or more referred to
herein as "Maker") promises to pay to the order of Ameritas Life Insurance
Corp., a Nebraska corporation ("Holder"), its successors or assigns, at 5900 "O"
Street, Lincoln, Nebraska 68510-2252, or such other place as the Holder may from
time to time designate in writing, the principal sum of one million and no/100
Dollars ($1,000,000.00), together with interest on the outstanding unpaid
principal balance from the date hereof until July 1, 2013, at the rate of seven
and fifty-five hundredths percent (7.55%) per annum (the "Stated Rate"). After
July 1, 2013, the interest rate shall be the lesser of eighteen percent (18%) or
the maximum rate allowed pursuant to the laws of the State of Texas (the
"Default Rate"). Interest shall be calculated on the basis of a 360 day year
consisting of twelve 30 day months, however, partial period interest shall be
calculated on the basis of actual days using a 365/366 day year. All amounts are
payable in lawful money of the United States.
This Note shall be payable in one hundred eighty-one installments. The
first installment, consisting of interest only, shall be due and payable on the
first day of the month following the date hereof. Thereafter, the second through
the one hundred eightieth monthly installment shall be due and payable on the
first day of each and every month in the amount of nine thousand two hundred
ninety-nine and no/100 Dollars ($9,299.00); the final installment shall be in
the amount of all unpaid principal, accrued interest and other amounts payable
in connection with this Note and shall be due and payable on July 1, 2013 (the
"Maturity Date"). Each installment when paid shall be applied first to the
payment of amounts other than those described in this Note advanced in
accordance with the Security Documents (hereinafter defined), next to the
payment of late charges (hereinafter described), next to the payment of interest
and finally to the payment of principal.
IF ANY INSTALLMENT PAYABLE UNDER THIS NOTE IS NOT RECEIVED BY THE TENTH OF
THE MONTH, OR THE NEXT PRECEDING BUSINESS DAY IF THE TENTH IS ON A NON-BUSINESS
DAY AFTER THE DUE DATE THEREOF, THEN MAKER SHALL PAY TO HOLDER, IN ADDITION TO
ALL OTHER SUMS THEN DUE, A LATE CHARGE EQUAL TO FIVE PERCENT (5%) OF THE AMOUNT
PAST DUE, SAID LATE CHARGE BEING INTENDED AS LIQUIDATED DAMAGES IN LIEU OF
ACTUAL DAMAGES AND NOT AS A PENALTY.
/s/ TM
- --------
Initials
This Note is secured by a Deed of Trust, Security Agreement, Assignment of
Rents and Fixture Filing Statement of even date herewith (the "Deed of Trust")
for the benefit of Holder (containing due-on-sale, due-on-encumbrance and other
provisions), which is a lien on real property located in Ft. Bend County, Texas
(the "Property"). Such instruments and documents together with any other
instruments and documents evidencing or securing the indebtedness evidenced by
this Note are referred to herein as the "Security Document(s)." In the event of
any inconsistency between the terms of this Note and any of the Security
Documents, the terms of this Note shall control; however, this provision shall
not be deemed to limit, abrogate, restrict or impair any provision in any one or
more of the Security Documents which provides for more extensive or expansive
obligations, requirements or restrictions by or upon Maker or more extensive or
expansive rights or remedies of Holder, than are contained in this Note.
The occurrence of any one or more of the following events shall constitute
an "Event of Default" hereunder:
(a) Non-payment of principal or interest due under this Note or any other sum
due or otherwise advanced pursuant to any Security Document by the tenth
day of the month following the date said amount is due; or
<PAGE>
(b) Failure to perform or comply with any duty, covenant or obligation of
Maker under this Note or under any Security Document or any other
default by Maker thereunder (with the exception of a monetary default
provided for in SUBPARAGRAPH (a) above), including but not limited to,
breach of any due-on-sale, due-on-transfer or due-on-encumbrance
provisions contained in the Deed of Trust, provided that Holder shall
provide Maker with 30 days notice, as specifically described in the
Deed of Trust, to cure a non-monetary default; or
(c) The adjudication of Maker or any Guarantor as a bankrupt or insolvent;
the entry of any order appointing a receiver or trustee for Maker or
any Guarantor or for all or any part of their property; entry of an
order approving a petition seeking reorganization of Maker or any
Guarantor or other similar relief under the bankruptcy or other similar
laws of the United States of America or any other competent
jurisdiction; the filing by Maker or any Guarantor of a petition
seeking any of the foregoing or consenting to any of the foregoing; the
filing of a petition to take advantage of any debtor's act; the making
of a general assignment for the benefit of creditors; or the admission
in writing by Maker or any Guarantor of its inability to pay its debts
as they become due; or
(d) Should one or more of the representations of Maker made to induce the
making of the loan evidenced by this Note be false.
Upon the occurrence of an Event of Default: (i) the whole sum of
principal, accrued interest and all other amounts due under this Note or the
Security Documents may, at the option of Holder, be declared due and payable,
with interest thereon to accrue at the Default Rate from the date of the Event
of Default; or (ii) Holder may exercise any and all other rights and remedies
available under the Security Documents and available at law or equity.
The income to be derived from this Note is being used by Holder as the
basis for various financial representations made to its policyholders. Maker
understands that the indebtedness evidenced by this Note was approved by Holder
predicated on the understanding by the Maker that Holder is entitled to depend
on receiving the number and amount of payments agreed to or their cash
equivalent when and as due. Therefore, prepayment in full but not in part may be
made only on any payment due date and only so long as (a) Maker affords Holder
not less than fourteen (14) days advance written notice thereof, and (b) Maker
pays to Holder prior to or concurrently with such prepayment, as consideration
for the privilege of making such prepayment, the larger of a prepayment fee
equal to (1) the larger of (a) 101% of the unpaid Principal, or (b) the Net
Present Value of the payments then still owing under this Note, and (2) all
other sums payable to Lender, including, but not limited to, interest to the
date of prepayment. If all or any portion of the principal balance hereof is
prepaid prior to the stated Maturity Date for any reason whether by Maker or by
anyone on behalf of Maker, or otherwise, including without limitation, a tender
arising from a refinancing, acceleration as a result of a default by Maker, a
trustee's or sheriff's sale, redemption deed in lieu of foreclosure, or
otherwise, such prepayment will be deemed to be a voluntary prepayment hereof,
and such payment must, therefore, include the applicable prepayment fee or
prepayment premium.
The Net Present Value shall be calculated by discounting the remaining
cash flows required under this Note using a discount rate (the "Discount Rate")
determined by the following method: (1) secure an issue of THE WALL STREET
JOURNAL dated five (5) working days prior to the prepayment date and locate the
listing of Treasury Bonds, Notes and Bills therein (representative mid-afternoon
over-the-counter quotations supplied by the Federal Reserve Bank of New York,
based on transactions of $1 million or more); (2) select the five (5) issues
which mature closest to the maturity of this Note (in the event there are more
than five issues which mature closest to the maturity, Lender shall, in its sole
discretion, select which five (5) to use); and (3) discard the highest and
lowest yields-to-maturity and ascertain the average of the remaining three (3)
and add fifty (50) basis points to arrive at the Discount Rate. The formula for
this computation is as follows:
NPV = CF(M) + CF(M+1) + CF(M+2) + . . . + CF(M+N)
-------- --------------- ----------- -----
(1+/)(m) (1+/)((m+1) (1+/)(m+2) (1+/)(m+n)
-2-
<PAGE>
BY PLACING THEIR INITIALS IMMEDIATELY FOLLOWING THIS PARAGRAPH, MAKER
EXPRESSLY AGREES THAT IN THE EVENT OF AN ACCELERATION OF THE MATURITY OF THIS
NOTE AS A RESULT OF ANY EVENT OF DEFAULT, INCLUDING, WITHOUT LIMITATION, ANY
ACCELERATION UPON THE TRANSFER OF ANY INTEREST IN THE PROPERTY, A TENDER BY
MAKER OR BY ANYONE ON BEHALF OF MAKER OF PAYMENT OF THE AMOUNT NECESSARY TO
SATISFY THE INDEBTEDNESS EVIDENCED HEREBY MADE AT ANY TIME PRIOR TO, AT OR
FOLLOWING A FORECLOSURE SALE OR A SALE UNDER THE POWER OF SALE CONTAINED IN THE
DEED OF TRUST SHALL CONSTITUTE AN EVASION OF THE PREPAYMENT TERMS HEREUNDER.
THEREFORE, WITH ANY SUCH PAYMENT, MAKER SHALL PAY A PREPAYMENT PREMIUM IN AN
AMOUNT EQUAL TO THE AMOUNT WHICH WOULD BE DUE BY APPLYING THE FORMULA SET FORTH
IN THE PRECEDING PARAGRAPHS FOR VOLUNTARY PREPAYMENTS. MAKER EXPRESSLY WAIVES
THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW WHICH PROHIBITS OR MAY
PROHIBIT THE COLLECTION WITH ANY SUCH ACCELERATION. MAKER ACKNOWLEDGES AND
AGREES THAT THE FOREGOING WAIVER CONSTITUTES INDIVIDUAL CONSIDERATION TO
HOLDER'S AGREEMENT TO MAKE THE LOAN, AND THAT HOLDER WOULD NOT HAVE MADE THE
LOAN AND/OR WOULD HAVE CHARGED A HIGHER INTEREST RATE WITHOUT SUCH A WAIVER.
/s/ TM
- --------
Initials
Payment in full (whether prepayment or balloon at maturity) shall be wired
funds (Federal Wire) with interest paid to the date the funds are available to
Holder for reinvestment (not later than 12:00 noon, Central Standard Time).
Funds shall not be wired on Friday or any day preceding a legal holiday unless
interest is paid to the following Monday or working day following such holiday.
The rights and remedies of Holder as provided in this Note, in the Deed of
Trust, in any of the Security Documents or in any of the other instruments now
or hereafter securing this Note or as provided at law or in equity shall be
cumulative and concurrent and may be pursued singly, jointly or successively
against the Property, or any other funds, property or security held by Holder
for the payment hereof, or against Maker or otherwise, at the sole discretion of
Holder. The failure to exercise any such right or remedy shall in no event be
construed as a waiver or release of any rights or remedies or of the right to
exercise one or more of them at any later time.
Maker, Guarantors, if any, and all other persons now or hereafter liable,
whether primarily or secondarily, for the whole or any part of the indebtedness
evidenced by this Note, jointly and severally:
(a) Agree to remain and continue bound for the payment of the principal and
interest on this Note notwithstanding any extension or extensions of the
time for the payment of said principal or interest, or any change or
changes in the amount or amounts to be paid under and by virtue of the
obligation to pay provided for in this Note, or any change or changes by
way of release or surrender of any collateral, real or personal, held as
security for the payment of this Note, and waive all and every kind of
notice of such extension or extensions, change or changes, and agree that
same may be made without the joinder of any such persons;
(b) Except as otherwise provided herein, waive demand, presentment, notice of
dishonor, protest, notice of intent to accelerate the maturity of this
Note, notice of acceleration of maturity, notice of protest and diligence
in collection, and all homestead, other exemption and offset rights
against the indebtedness evidenced by this Note to which they or any of
them may now or hereafter be entitled under the laws of the State of Texas
or any other state;
(c) Agree Holder may release, modify or exchange any security, and release, in
whole or part, any Guarantor or other obligor of this Note;
(d) Agree to pay any collection expense, court costs and reasonable attorneys'
fees, (whether or not suit is commenced) which may be incurred in the
collection or enforcement of this Note or of any part hereof or any of the
Security Documents; and in the event suit is brought to enforce payment
-3-
<PAGE>
hereof, that such expenses, costs and fees be determined by a court
sitting without a jury. Attorneys' fees shall include any such fees
incurred in any bankruptcy, appellate or related ancillary or supplemental
proceedings, whether before or after final judgment related to the
enforcement or defense of this Note; and
(e) To the extent allowed by law, no single or partial exercise of any power
hereunder or under any Security Document securing this Note or any
guaranty shall preclude other or further exercise of such power or the
exercise of any other right, remedy or power. Holder shall at all times
have the right to proceed against any portion of the security held herefor
in such order and in such manner as Holder may elect, without waiving any
rights with respect to any other security. Neither (i) the acceptance by
Holder of any payment in an amount less than payment in full of the amount
due and payable at the time of such payment, nor (ii) any delay or
omission on the part of Holder in exercising any right, remedy or power
hereunder, shall operate as a waiver by Holder of the right to exercise
any right, remedy or power at the that time or at any subsequent time, or
nullify any prior exercise of a right, remedy or power.
All agreements and transactions between Maker and Holder, whether now
existing or hereafter arising, whether contained herein or in any other
instrument, and whether written or oral, are hereby expressly limited so that in
no contingency or event whatsoever, whether by reason of acceleration of the
maturity hereof, prepayment, demand for payment or otherwise, shall the amount
contracted for, charged or received by Holder from Maker for the use,
forbearance, or detention of the principal indebtedness or interest hereof,
which remains unpaid from time to time, exceed the maximum amount permissible
under Applicable Law, it particularly being the intention of the parties hereto
to conform strictly to the law of the State of Texas and of the United States of
America, whichever is applicable. Any interest payable hereunder or under any
other instrument relating to the loan evidenced hereby that is in excess of the
legal maximum under Applicable Law, shall, in the event of acceleration of
maturity, prepayment, demand for payment or otherwise, be automatically, as of
the date of such acceleration, prepayment, demand or otherwise, applied to a
reduction of the principal indebtedness hereof and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of such
principal, such excess shall be refunded to Maker. To the extent permitted by
Applicable Law, determination of the legal maximum amount of interest shall at
all times be made by amortizing, prorating, allocating and spreading in equal
parts during the period of the full stated term of the loan, all interest at any
time contracted for, charged or received from Maker in connection with the loan,
so that the actual rate of interest on account of such indebtedness is uniform
throughout the term thereof. The term "Applicable Law" as used herein means (1)
the law pertaining to maximum rates of interest that is now in effect and (2)
any law that comes into effect at any time in the future allowing a higher
maximum interest rate than the law now in effect.
The unenforceability or invalidity of any provision hereof shall not
render any other provision or provisions herein contained unenforceable or
invalid. Any provisions found unenforceable shall be severable from this Note.
Time is of the essence of this Note.
MAKER, BY EXECUTION OF THIS NOTE, AND HOLDER BY ACCEPTANCE OF THIS NOTE, EACH
HEREBY IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS NOTE, THE DEED OF TRUST AND
OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED THEREBY, ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION OF
ANY OF THE PARTIES. MAKER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT
TO HOLDER MAKING THE LOAN WHICH IS THE SUBJECT MATTER OF THIS TRANSACTION. MAKER
FURTHER ACKNOWLEDGES THAT THIS WAIVER HAS BEEN FREELY AND VOLUNTARILY MADE AFTER
FULL OPPORTUNITY TO DISCUSS SAME WITH COUNSEL OF MAKER'S CHOICE.
The individual signing this Note on behalf of Maker warrants that he/she
is duly authorized to execute and deliver this Note, the Security Documents and
all other documents and agreements evidencing or securing the indebtedness
evidenced by this Note on behalf of Maker.
MAKER ACKNOWLEDGES AND AGREES THAT SHOULD ANY MATTER HEREIN DEPEND OR BE
CONTINGENT UPON THE DISCRETION, JUDGMENT OR CONSENT OF THE HOLDER HEREOF, IT IS
TO BE PRESUMED THAT THE HOLDER WILL TAKE SUCH ACTIONS AND CONSIDER SUCH ELEMENTS
IN EXERCISING SAID DISCRETION, MAKING SUCH JUDGMENT, OR GRANTING OR DENYING SUCH
CONSENT AS REQUIRED, BASED ON HOLDER'S GOOD FAITH SUBJECTIVE JUDGMENT, TO
PROTECT THE SECURITY INTEREST OF HOLDER IN THE PROPERTY AND TO ENSURE REPAYMENT
OF THE LOAN EVIDENCED HEREBY.
-4-
<PAGE>
MAKER:
OYO Geospace Corporation,
a Delaware corporation
By: /s/ THOMAS McENTIRE
Its: Chief Financial Oficer
-5-
EXHIBIT 10.2
BANK OF AMERICA
BUSINESS LOAN AGREEMENT
This Agreement dated as of June 26, 1998 is between Bank of America Texas,
N.A. (the "Bank") and Oyo Geospace Corporation (the "Borrower").
1. LINE OF CREDIT AMOUNT AND TERMS
1.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank will provide a line
of credit to the Borrower. The amount of the line of credit (the "Commitment")
is Ten Million and No/100 Dollars ($10,000,000.00).
(b) This is a revolving line of credit with a within line facility for letters
of credit. During the availability period, the Borrower may repay principal
amounts and reborrow them.
(c) The Borrower agrees not to permit the outstanding principal balance of the
line of credit plus the outstanding amounts of any letters of credit, including
amounts drawn on letters of credit and not yet reimbursed, to exceed the
Commitment.
1.2 AVAILABILITY PERIOD. The line of credit is available between the date of
this Agreement and June 30, 2000 (the "Expiration Date") unless the Borrower is
in default.
1.3 INTEREST RATE.
(a) Unless the Borrower elects an Optional interest rate as described below, the
interest rate is the lesser of (a) the maximum lawful rate of interest permitted
under applicable usury laws, now or hereafter enacted (the "Maximum Rate"), or
(b) the rate (the "Basic Rate") that is equal to the Bank's Reference Rate.
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed
the Maximum Rate and thereafter the Basic Rate shall become less than the
Maximum Rate, the Rate of interest payable shall be the Maximum Rate until the
Bank shall have received the amount of interest it otherwise would have received
if the interest payable had not been limited by the Maximum Rate during the
period of time the Basic Rate exceeded the Maximum Rate.
(b) The Reference Rate is the rate of interest publicly announced from time to
time by the Bank in Dallas, Texas, as its Reference Rate. The Reference Rate is
set by the Bank based on various factors, including its costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans. The Bank may price loans to its
customers at, above, or below the Reference Rate. Any change in the Reference
Rate will take effect at the opening of business on the day specified in the
public announcement of a change in the Bank's Reference Rate.
1.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on June 30, 1998 and on the last day of each
quarter thereafter until payment in full of any principal outstanding under this
line of credit.
(b) The Borrower will repay in full all principal and any unpaid interest or
other charges outstanding under this line of credit no later than the Expiration
Date.
1.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's
Reference Rate, the Borrower may elect to have all or portions of the line of
credit (during the availability period) bear interest at the rate(s) described
below during an interest period selected by the Borrower; provided, however,
that the Borrower shall not have the option or right to elect to have all or any
portion of the line of credit bear interest at the rate(s) described below when
such rate(s) exceeds the Maximum Rate. Each interest rate is a rate per year.
Interest will be paid on June 30, 1998 and on the last day of each quarter
thereafter. At the end of any interest period, the interest rate will revert to
the rate based on the Reference Rate, unless the Borrower has designated another
optional interest rate for the portion.
1
<PAGE>
1.6 OFFSHORE RATE. The Borrower may elect to have all or portions of the
principal balance of the line of credit bear interest at the rate equal to the
lesser of (a) the IBOR Rate (as hereinafter defined) plus an amount equal to the
percentage amount (the "Offshore Rate") set forth in the table below opposite
the applicable ratio, at the time of Borrower's election, of (i) the
consolidated Funded Debt to (ii) the consolidated EBITDA (for definition and
calculation of the Funded Debt to EBITDA Ratio, refer to paragraph 7.5 of this
Agreement), or (b) the Maximum Rate. Borrower shall give Bank notice of its
election of an Offshore Rate by such time, and in such manner, as shall be
acceptable to Bank. Each such election shall be for an interest period of not
less than 30 days or more than 180 days. At the end of any interest period, the
interest rate will revert to the Basic Rate unless the Borrower has elected
another Offshore Rate interest period.
FUNDED DEBT TO EBITDA PERCENTAGE AMOUNT
Less than or equal to 1.00:1.00 0.90%
Greater than 1.00:1.00 1.25%
Designation of an Offshore Rate portion is subject to the following
requirements:
(a) The interest period during which the Offshore Rate will be in effect will
be no shorter than 30 days and no longer than 180 days. The last day of the
interest period will be determined by the Bank using the practices of the
offshore dollar inter-bank market.
(b) Each Offshore Rate portion will be for an
amount not less than Five Hundred Thousand Dollars ($500,000).
(c) The "Offshore Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All amounts in the
calculation will be determined by the Bank as of the first day of the interest
period.)
Offshore Rate = Grand Cayman Rate
(1.00 - Reserve Percentage)
Where,
(i) "Grand Cayman Rate" means the interest rate (rounded upward to the
nearest 1/16th of one percent) at which Bank of America National Trust and
Savings Association's Grand Cayman Branch, Grand Cayman, British West Indies,
would offer U.S. dollar deposits for the applicable interest period to other
major banks in the offshore dollar inter-bank markets.
(ii) "Reserve Percentages" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member banks of the
Federal Reserve System for Eurocurrency Liabilities, as defined in Federal
Reserve Board Regulation D, rounded upward to the nearest 1/100 of one percent.
The percentage will be expressed as a decimal, and will include, but not be
limited to, marginal, emergency, supplemental, special, and other reserve
percentages.
(d) The Borrower may not elect an Offshore Rate with respect to any portion of
the principal balance of the line of credit which is scheduled to be repaid
before the last day of the applicable interest period.
(e) Any portion of the principal balance of the line of credit already bearing
interest at the Offshore Rate will not be converted to a different rate during
its interest period.
2
<PAGE>
(f) Each prepayment of an Offshore Rate portion will be accompanied by the
amount of accrued interest on the amount prepaid; and a prepayment fee equal to
the amount (if any) by which:
(i) the additional interest which would have been payable on the amount
prepaid had it not been paid until the last day of the interest period, exceeds
(ii) the interest which would have been recoverable by the Bank by placing
the amount prepaid on deposit in the offshore dollar market for a period
starting on the date on which it was prepaid and ending on the last day of the
interest period for such portion.
(g) The Bank will have no obligation to accept an election for an Offshore Rate
portion if any of the following described events has occurred and is continuing:
(i) Dollar deposits in the principal amount, and for periods equal to the
interest period, of an Offshore Rate portion are not available in the offshore
Dollar inter-bank markets; or
(ii) the Offshore Rate does not accurately reflect the cost of an Offshore
Rate portion.
(h) If at any time during any applicable interest period the Offshore Rate shall
exceed the Maximum Rate and thereafter the Offshore Rate shall become less than
the Maximum Rate, the rate of interest payable shall be the Maximum Rate until
the Bank shall have received the amount of interest it otherwise would have
received if the interest payable had not been limited by the Maximum Rate during
the period of time the Offshore Rate exceeded the Maximum Rate.
1.7 LETTERS OF CREDIT. This line of credit may be used for financing:
(a) commercial letters of credit with a maximum maturity of 365 days but not to
extend more than 180 days beyond the Expiration Date. Each commercial letter of
credit will require drafts payable at sight.
(b) standby letters of credit to be issued by Bank of America NT&SA with a
maximum maturity not to extend more than 180 days beyond the Expiration Date.
(c) The amount of letters of credit outstanding at any one time (including
amounts drawn on letters of credit and not yet reimbursed) may not exceed Five
Million and No/100 Dollars ($5,000,000.00) for commercial letters of credit and
Five Million and No/100 Dollars ($5,000,000.00) for the standby letters of
credit.
The Borrower agrees:
(aa) any sum drawn under a letter of credit may, at the option of the Bank, be
added to the principal amount outstanding under this Agreement. The amount will
bear interest and be due as described elsewhere in this Agreement. (bb) if there
is a default under this Agreement, to immediately prepay and make the Bank whole
for any outstanding letters of credit. (cc) the issuance of any letter of credit
and any amendment to a letter of credit is subject to the Bank's written
approval and must be in form and content satisfactory to the Bank and in favor
of a beneficiary acceptable to the Bank. (dd) to sign the Bank's form
Application and Agreement for Commercial Letter of Credit or Application and
Agreement for Standby Letter of Credit. (ee) to pay any issuance and/or other
fees that the Bank notifies the Borrower will be charged for issuing and
processing letters of credit for the Borrower. (ff) to allow the Bank to
automatically charge its checking account for applicable fees, discounts, and
other charges.
2. FEES AND EXPENSES
2.1 FEES.
3
<PAGE>
(a) Unused Commitment Fee. Subject to the provisions of Section 2.3 hereof, the
Borrower agrees to pay a fee on any difference between the Commitment and the
amount of credit it actually uses, determined by the weighted average loan
balance maintained during the specified period. The fee will be calculated at
0.25% per year.
This fee is due on September 30, 1998 and on the last day of each
following quarter until the expiration of the availability period.
2.2 EXPENSES.
The Borrower agrees to reimburse the Bank for any reasonable expenses it
incurs in the preparation of this Agreement and any agreement or instrument
required by this Agreement. Expenses include, but are not limited to, reasonable
attorneys' fees.
2.3 NO EXCESS FEES. Notwithstanding anything to the contrary in this Section 2,
in no event shall any sum payable under this Section 2 (to the extent, if any,
constituting interest under any applicable laws), together with all amounts
constituting interest under applicable laws and payable in connection with the
credit evidenced hereby, exceed the Maximum Rate or the maximum amount of
interest permitted to be charged, taken, reserved, received or contracted for
under applicable usury laws.
3. COLLATERAL
3.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below. The collateral is further defined in security
agreement(s) executed by the Borrower.
(a) Inventory.
(b) Receivables.
3.2 PERSONAL PROPERTY SUPPORTING GUARANTY. The obligations of the guarantors
(OYO Instruments, Inc.; Concord Technologies, Inc.; 5404330 and More Royalties
Company; Geo Space Corporation; and Houston Geophysical Products, Inc.) to the
Bank will be secured by personal property the guarantors now own or will own in
the future as listed below. The collateral is further defined in security
agreement(s) executed by the guarantors.
(a) Inventory, and
(b) Receivables.
If Bank requires the execution of guaranties by other subsidiaries of Borrower
pursuant to paragraph 5.5 of this Agreement, each subsidiary executing a
guaranty also shall execute a security agreement on Bank's standard form
covering such subsidiary's inventory and receivables.
4. DISBURSEMENTS, PAYMENTS AND COSTS
4.1 REQUESTS FOR CREDIT. Each request for an extension of credit will be made in
writing in a manner acceptable to the Bank, or by another means acceptable to
the Bank.
4.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each payment
by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank from time
to time;
(b) made in immediately available funds, or such other type of funds
selected by the Bank;
(c) evidenced by records kept by the Bank. In addition,
the Bank may, at its discretion, require the Borrower to sign one or more
promissory notes.
4
<PAGE>
4.3 BANKING DAYS. Unless otherwise provided in this Agreement, a banking day is
a day other than a Saturday or a Sunday on which the Bank is open for business
in Texas. For amounts bearing interest at an offshore rate (if any), a banking
day is a day other than a Saturday or a Sunday on which the Bank is open for
business in Texas and California and dealing in offshore dollars. All payments
and disbursements which would be due on a day which is not a banking day will be
due on the next banking day. All payments received on a day which is not a
banking day will be applied to the credit on the next banking day.
4.4 ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for the Bank's
costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency which is applicable to all national banks or
a class of all national banks. The costs and losses will be allocated to the
loan in a manner determined by the Bank, using any reasonable method. The costs
include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments for
credit.
Notwithstanding the foregoing, in no event shall any sum payable under this
Section 4.4 (to the extent, if any, constituting interest under applicable
laws), together with all amounts constituting interest under applicable laws and
payable in connection with the credit evidenced hereby, exceed the Maximum Rate
or the maximum amount of interest permitted to be charged, taken, reserved,
received or contracted for under any applicable usury laws.
4.5 INTEREST CALCULATION. Except as otherwise expressly stated in this
Agreement, all interest (including but not limited to interest at the Offshore
Rate) and fees, if any, will be computed on the basis of a 360 day year and the
actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used. Interest at the Basic Rate and the Maximum Rate
will always be computed on the basis of a 365-day year and the actual number of
days elapsed.
4.6 INTEREST ON LATE PAYMENTS. At the Bank's sole option in each instance, any
amount not paid when due under this Agreement (including interest) shall bear
interest from the due date at the lesser of (a) the Maximum Rate or (b) the
Bank's Reference Rate.
The Maximum Rate is the maximum lawful rate of interest permitted under
applicable usury laws, now or hereafter enacted and the Reference Rate is the
rate of interest publicly announced from time to time by the Bank in Irving,
Texas, as its Reference Rate. The Reference Rate is set by the Bank based on
various factors, including its costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans. The Bank may price loans to its customers at, above, or below the
Reference Rate. Any change in the Reference Rate will take effect at the opening
of business on the day specified in the public announcement of a change in the
Bank's Reference Rate.
4.7 DEFAULT RATE. Upon the occurrence and during the continuation of any default
under this Agreement, advances under this Agreement will at the option of the
Bank bear interest at the lesser of (a) the Maximum Rate and (b) a rate per
annum which is 2.0 percentage point(s) higher than the rate of interest
otherwise provided under this Agreement. This will not constitute a waiver of
any default.
5. CONDITIONS. The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement:
5.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by the
Borrower and each guarantor of this Agreement and any instrument or agreement
required under this Agreement have been duly authorized.
5
<PAGE>
5.2 SECURITY AGREEMENTS. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessory security interest), which the Bank requires.
5.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens in favor of
the Bank are valid, enforceable, and prior to all others' rights and interests,
except those the Bank consents to in writing.
5.4 INSURANCE. Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement.
5.5 GUARANTIES. Guaranties signed by OYO Instruments, Inc., Concord
Technologies, Inc., 5404330 and More Royalties Company, Geo Space Corporation,
and Houston Geophysical Products, Inc., on the Bank's standard form in an amount
as may be acceptable, from time to time, to the Bank. Upon thirty (30) days
prior notice to Borrower, Bank may (1) require that any other subsidiaries of
the Borrower, whether now existing or formed or acquired by Borrower in the
future, execute a guaranty on the Bank's standard form in an amount as may be
acceptable, from time to time, to the Bank, or (2) if any such subsidiary is
formed or organized in a jurisdiction outside the United States of America,
require that Borrower execute a pledge agreement in favor of the Bank on the
Bank's standard form, or on such other form as Bank may reasonably require,
covering up to 65% of such subsidiary's capital stock or other ownership rights
held by Borrower, as additional collateral hereunder.
5.6 GOOD STANDING. Certificates of good standing for the Borrower and any
Guarantor from its state of incorporation and from any other state in which the
Borrower or any Guarantor, as the case may be, is required to qualify to conduct
its business.
5.7 OTHER ITEMS. Any other items that the Bank reasonably requires.
6. REPRESENTATIONS AND WARRANTIES. When the Borrower signs this Agreement, and
until the Bank is repaid in full, the Borrower makes the following
representations and warranties. Each request for an extension of credit
constitutes a renewed representation.
6.1 ORGANIZATION OF BORROWER. The Borrower and its subsidiaries are corporations
duly formed and existing under the laws of the states or other jurisdictions
where organized.
6.2 AUTHORIZATION. This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's or Guarantor's powers, have been duly
authorized, and do not conflict with any of its organizational papers.
6.3 ENFORCEABLE AGREEMENT. This Agreement constitutes the legal, valid and
binding agreement of the Borrower, enforceable against the Borrower in
accordance with its terms, and each other instrument or agreement required
hereunder, when executed and delivered, will be similarly legal, valid, binding
and enforceable. (except, in each case, as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting creditors' rights generally) and by general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law).
6.4 GOOD STANDING. In each state in which the Borrower or any Guarantor does
business, each is properly licensed, in good standing, and, where required, in
compliance with fictitious name statutes.
6.5 NO CONFLICTS. This Agreement does not conflict with any law, agreement, or
obligation by which the Borrower is bound.
6
<PAGE>
6.6 FINANCIAL INFORMATION. All financial and other information that has
been or will be supplied to the Bank is:
(a) sufficiently complete to give the Bank accurate knowledge of the Borrower's
and any subsidiary's financial condition.
(b) in form required by the Bank.
(c) in compliance with all government regulations that apply.
6.7 LAWSUITS. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower or any of its subsidaries, which, if lost, would
impair the Borrower's financial condition or ability to repay the loan, except
as have been disclosed in writing to the Bank.
6.8 COLLATERAL. All collateral required in this Agreement is owned by the
grantor of the security interest free of any title defects or any liens or
interests of others.
6.9 PERMITS, FRANCHISES. The Borrower and its subsidiaries possess all permits,
memberships, franchises, contracts and licenses required and all trademark
rights, trade name rights, patent rights and fictitious name rights necessary to
enable it to conduct the business in which it is now engaged.
6.10 OTHER OBLIGATIONS. The Borrower and any subsidiary is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
6.11 INCOME TAX RETURNS. The Borrower and its subsidiaries have no knowledge of
any pending assessments or adjustments of its income tax for any year.
6.12 NO EVENT OF DEFAULT. There is no event which is, or with notice or lapse of
time or both would be, a default under this Agreement.
6.13 ERISA PLANS.
(a) The Borrower and its subsidiaries have not incurred any funding deficiencies
under Section 302 of ERISA or Section 412 of the Code in excess of $200,000.00
with respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, and has not incurred any
liability to the PBGC (other than for the payment of premiums) with respect to
any Plan under Title IV of ERISA. (b) No reportable event which would have a
Material Adverse Effect (as defined in Section 9.3) has occurred under Section
4043(b) of ERISA for which the PBGC requires 30 day notice. (c) No action by the
Borrower or any subsidiary to terminate or withdraw from any Plan which would
have a Material Adverse Effect (as defined in Section 9.3) has been taken and no
notice of intent to terminate a Plan has been filed under Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to a Plan under Section 4042
of ERISA, and no event has occurred or condition exists which might constitute
grounds for the commencement of such a proceeding. (e) The following terms have
the meanings indicated for purposes of this Agreement:
(i) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(ii) "ERISA" means the Employee Retirement Income Act of 1974, as amended
from time to time.
(iii) "PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
(iv) "Plan" means any employee pension benefit plan maintained or
contributed to by the Borrower and insured by the Pension Benefit Guaranty
Corporation under Title IV of ERISA.
7
<PAGE>
6.14 LOCATION OF BORROWER. The Borrower's place of business (or, if the Borrower
has more than one place of business, its chief executive office) is located at
the address listed under the Borrower's signature on this Agreement, and all of
its inventory is located in that state.
6.15 REPRESENTATIONS CONCERNING THE YEAR 2000. The Borrower acknowledges that it
has received a copy of the brochure prepared by the Bank entitled "On Turning
00" and that it has reviewed this material and is aware of the possible impact
of the "Year 2000 problem" (that is, the inability of computers, as well as
embedded microchips in non-computing devices to properly perform date-sensitive
functions after December 31, 1999). Borrower has developed and budgeted for a
comprehensive program to address the Year 2000 problem and has implemented that
program substantially in accordance with its timetable and budget, and
reasonably anticipates that it will substantially avoid the Year 2000 problem as
to all computers, as well as embedded microchips in non-computing devices, that
are material to the business, properties or operations of Borrower and its
subsidiaries. Borrower has developed feasible contingency plans adequate to
ensure uninterrupted and unimpaired business operations in the event of failure
of its or any subsidiary's or a third party's systems or equipment due to the
Year 2000 problem, including those of vendors, customers and suppliers, as well
as a general failure of, or interruption in, its communications or delivery
infrastructure.
7. COVENANTS. The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
7.1 USE OF PROCEEDS. To use the proceeds of the credit only for working capital,
capital expenditures and, within appropriate limits, acquisitions.
7.2 FINANCIAL INFORMATION. To provide the following financial information and
statements and such additional information as requested by the Bank from time to
time:
(a) Within 100 days of the Borrower's fiscal year end, the Borrower's annual
financial statements and a compliance certificate. These financial statements
must be audited by a Certified Public Accountant ("CPA") acceptable to the Bank.
The statements shall be prepared on a consolidated and consolidating basis.
(b) Within 50 days of the period's end, the Borrower's quarterly financial
statements and a compliance certificate. These financial statements may be
Borrower prepared. The statements shall be prepared on a consolidated and
consolidating basis.
(c) Copies of the Borrower's Form l0-K Annual Report, Form l0-Q Quarterly Report
and Form 8-K Current Report within 10 days after the date of filing with the
Securities and Exchange Commission.
7.3 QUICK RATIO. To maintain on a consolidated basis a ratio of quick assets to
current liabilities (excluding the principal outstanding under the revolving
line of credit of this Agreement) of at least 1.0:1.0, measured quarterly.
"Quick assets" means cash, short-term cash investments, net trade receivables
and marketable securities not classified as long-term investments.
7.4 MINIMUM NET WORTH. To maintain on a consolidated basis net worth equal to
the sum of a) $36,500,000.00 plus b) 100% of Borrowers' proceeds from any equity
offering or equity issued plus c) beginning with the quarter ending 3/31/98, 80%
of quarterly Net Income (with no reduction for losses) thereafter, measured
quarterly.
"Net worth" means the gross book value of the Borrower's assets less total
liabilities, including but not limited to accrued and deferred income taxes, and
any reserves against assets.
7.5 FUNDED DEBT TO EBITDA RATIO. To maintain on a consolidated basis a ratio of
Funded Debt to EBITDA not to exceed 2.0:1.0. As of the last day of each fiscal
quarter, Borrower shall determine the ratio of the consolidated Funded Debt of
Borrower as of the end of the fiscal quarter then ended to (ii) the consolidated
EBITDA of Borrower for the preceding four fiscal quarters then ended ("Funded
Debt to EBITDA Ratio").
8
<PAGE>
"Funded Debt" means, with respect to Borrower as of any date of its
determination, without duplication (a) indebtedness for borrowed money, (b)
obligations evidenced by notes, bonds, debentures, or other similar instruments.
(c) obligations as lessee under capital leases, (d) obligations to pay the
deferred purchase price of property or services, other than debt in the form of
accounts payable to trade creditors and current operating liabilities incurred
in the ordinary course of business, and (e) obligations under guaranties,
commercial and standby letters of credit.
"EBITDA" means, with respect to Borrower for any period of its determination,
the consolidated net income for such period, plus the consolidated interest
expense, income taxes, depreciation and amortization for such period.
This Funded Debt to EBITDA Ratio will be calculated and reported in the
compliance certificate required to be furnished by Borrower pursuant to the
above paragraph 7.2 (b). After receipt of the compliance certificate, any change
in the Funded Debt to EBITDA Ratio shall be retroactive to the end of the
preceding fiscal quarter.
7.6 OTHER DEBTS. On a consolidated basis, not to have outstanding or incur any
direct or contingent debts or lease obligations (other than those to the Bank),
or become liable for the debts of others without the Bank's written consent.
This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit. (b)
Endorsing negotiable instruments received in the usual course of business. (c)
Obtaining surety bonds in the usual course of business. (d) Additional debts and
lease obligations for the acquisition of fixed or capital assets, to the extent
permitted elsewhere in this Agreement. (e) Additional debts and capital lease
obligations for business purposes which do not exceed a total principal amount
of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) outstanding at
any one time. (f) Additional long-term mortgage financing on real property which
does not exceed a total principal amount of Seven Million Five Hundred Thousand
and No/100 Dollars ($7,500,000.00) outstanding at any one time.
7.7 OTHER LIENS. On a consolidated basis, not to create, assume, or allow any
security interest or lien (including judicial liens) on property the Borrower
now or later owns, except:
(a) Deeds of trust and security agreements in favor of the Bank. (b) Liens for
taxes not yet due. (c) Liens outstanding on the date of this Agreement disclosed
in writing to the Bank. (d) Additional liens which secure obligations in a total
principal amount not exceeding Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00).
(e) Additional liens which, together with the liens permitted under
subparagraph(s) 7.6(f), above, secure obligations in a total principal amount
not exceeding Seven Million Five Hundred Thousand and No/100 Dollars
($7,500,000.00).
7.8 CAPITAL EXPENDITURES. On a consolidated basis, not to spend or incur
obligations for capital expenditures and rental equipment, including but not
limited to the total amount of capital leases, for more than Ten Million and
No/100 Dollars ($10,000,000.00) in the period of twelve (12) calendar months
next following the effective date of this Agreement, nor more than Seven Million
and No/100 Dollars ($7,000,000.00) in each succeeding period of twelve (12)
calendar months thereafter.
7.9 DIVIDENDS. Other than payments by and among itself and its subsidaries, not
to declare or pay any dividends on any of its shares except dividends payable in
capital stock of the Borrower, and not to purchase, redeem or otherwise acquire
for value any of its shares, or create any sinking fund in relation thereto.
9
<PAGE>
7.10 NOTICES TO BANK. To promptly notify the Bank in writing of:
(a) any lawsuit over One Million and No/100 Dollars ($1,000,000.00) against the
Borrower or any subsidiary. (b) any substantial dispute between the Borrower or
any subsidiary and any government authority. (c) any failure to comply with this
Agreement. (d) any material adverse change in the Borrower's or any subsidiary
's financial condition or operations. (e) any change in the Borrower's or any
subsidiary's name, legal structure, place of business, location of inventory or
chief executive office if the Borrower has more than one place of business.
7.11 BOOKS AND RECORDS. To maintain adequate books and records.
7.12 AUDITS. To allow the Bank and its agents to inspect the Borrower's and any
subsidiary's properties and examine, audit, and make copies of books and records
at any reasonable time. If any of the Borrower's or any subsidiary's properties,
books or records are in the possession of a third party, the Borrower authorizes
that third party to permit the Bank or its agents to have access to perform
inspections or audits and to respond to the Bank's requests for information
concerning such properties, books and records.
7.13 COMPLIANCE WITH LAWS. To comply with the laws, (including any fictitious
name statute), regulations, and orders of any government body with authority
over the Borrower's or its subsidiaries' business.
7.14 PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges,
and franchises the Borrower or any of its subsidiaries now has.
7.15 MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or replacements
to keep the Borrower's properties in good working condition.
7.16 PERFECTION OF LIENS. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.
7.17 COOPERATION. To take any action reasonably requested by the Bank to carry
out the intent of this Agreement.
7.18 INSURANCE.
(a) Insurance Covering Collateral. To maintain all risk property damage
insurance policies covering the tangible property comprising the collateral.
Each insurance policy must be in an amount acceptable to the Bank. The insurance
must be issued by an insurance company acceptable to the Bank and must include a
lender's loss payable endorsement in favor of the Bank in a form acceptable to
the Bank.
(b) General Business Insurance. To maintain insurance satisfactory to the Bank
as to amount, nature and carrier covering property damage (including loss of use
and occupancy) to any of the Borrower's and its subsidiaries' properties, public
liability insurance including coverage for contractual liability, product
liability and workers' compensation, and any other insurance which is usual for
the Borrower's and its subsidiaries' business.
(c) Evidence of Insurance. Upon the request of the Bank, to deliver to the Bank
a copy of each insurance policy or, if permitted by the Bank, a certificate of
insurance listing all insurance in force.
7.19 ADDITIONAL NEGATIVE COVENANTS. Not to, nor allow its subsidiaries to,
without the Bank's written consent:
(a) engage in any business activities
substantially different from the Borrower's present business.
(b) liquidate or
dissolve the Borrower's business.
(c) enter into any consolidation, merger,
pool, joint venture, syndicate, or other combination.
10
<PAGE>
(d) on a consolidated
basis, lease, or dispose of all or a substantial part of the Borrower's business
or the Borrower's assets in excess of Two Hundred Fifty Thousand and No/100
Dollars ($250,000.00).
(e) on a consolidated basis, acquire or purchase a
business or its assets involving cash consideration totaling more than Ten
Million and No/100 Dollars ($10,000,000.00) in any twelve month period or more
than Five Million ($5,000,000) for any single transaction.
(f) sell or otherwise
dispose of any assets for less than fair market value or enter into any sale and
leaseback agreement covering any of its fixed or capital assets.
(g) voluntarily
suspend its business.
7.20 ERISA PLANS. With respect to itself and any of its subsidiaries, to give
prompt written notice to the Bank of: (a) The occurrence of any reportable event
under Section 4043(b) of ERISA for which the PBGC requires 30 day notice. (b)
Any action to terminate or withdraw from a Plan or the filing of any notice of
intent to terminate under Section 4041 of ERISA. (c) Any notice of noncompliance
made with respect to a Plan under Section 4041(b) of ERISA. (d) The commencement
of any proceeding with respect to a Plan under Section 4042 of ERISA.
8. HAZARDOUS WASTE. The Borrower and its subsidiaries will indemnify and hold
harmless the Bank from any loss or liability directly or indirectly arising out
of the use, generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a hazardous substance. This
indemnity will apply whether the hazardous substance is on, under or about the
Borrower's property or operations or property leased to the Borrower. The
indemnity includes but is not limited to reasonable attorneys' fees (including
the reasonable estimate of the allocated cost of in-house counsel and staff).
The indemnity extends to the Bank, its parent, subsidiaries and all of their
directors, officers, employees, agents, successors, attorneys and assigns. For
these purposes, the term "hazardous substances" means any substance which is or
becomes designated as "hazardous" or "toxic" under any federal, state or local
law. This indemnity will survive repayment of the Borrower's obligations to the
Bank.
9. DEFAULT. If any of the following events occur, the Bank may do one or more of
the following: (i) declare the Borrower in default, (ii) stop making any
additional credit available to the Borrower, (iii) exercise any and all rights
and remedies as may be available to the Bank under the terms of any collateral
documents, security instruments, debt instruments or any other document or
instrument executed in connection herewith or in any way related hereto, (iv)
exercise any and all rights and remedies as may be available to the Bank at law
or in equity, and (v) declare the entire debt created and evidenced hereby to be
immediately due and payable in full, whereupon the entire unpaid principal
indebtedness evidenced hereby, and all accrued unpaid interest thereon, shall at
once mature and become due and payable without presentment, demand, protest,
grace or notice of any kind (including, without limitation, notice of intent to
accelerate, notice of acceleration or notice of protest), all of which are
hereby severally waived by the Borrower. If a bankruptcy petition is filed by
the Borrower, the entire debt outstanding under this Agreement will
automatically become due immediately.
9.1 FAILURE TO PAY. The Borrower fails to make a payment under this Agreement
within five (5) days after the date when due.
9.2 LIEN PRIORITY. The Bank fails to have an enforceable first lien (except for
any prior liens to which the Bank has consented in writing) on or security
interest in any property given as security for the extensions of credit under
this Agreement.
9.3 FALSE INFORMATION. The Borrower has given the Bank materially false or
misleading information or representations. With respect to Section 6.4 of this
Agreement, Borrower will be deemed to have given the Bank a materially false or
misleading representation only if the false or misleading representation has a
Material Adverse Effect. In this Agreement, "Material Adverse Effect" means a
material adverse effect on (I) the financial condition, operations, business,
assets or property of the Borrower and its subsidiaries taken as a whole, or
(ii) the ability of the Borrower or any of its subsidiaries to perform any of
its payment obligations or other material obligations under this Agreement or
any other instrument or agreement required hereunder to which it is a party.
11
<PAGE>
9.4 BANKRUPTCY. The Borrower or any guarantor files a bankruptcy petition, or a
bankruptcy petition is filed against the Borrower or any guarantor and the same
shall not have been dismissed within 60 days after the filing thereof, or the
Borrower or any guarantor makes a general assignment for the benefit of
creditors.
9.5 RECEIVERS. A receiver or similar official is appointed for the Borrower's or
any guarantor's business, or the business is terminated.
9.6 JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower or any of its subsidiaries, or the Borrower or any subsidiary enters
into any settlement agreements with respect to any litigation or arbitration, in
an aggregate amount of One Million and No/100 Dollars ($1,000,000.00) or more in
excess of any insurance coverage that remains unpaid for 30 days.
9.7 GOVERNMENT ACTION. Any government authority takes action that the Bank
reasonably and in good faith believes materially adversely affects the
Borrower's or any Guarantor's financial condition or ability to repay.
9.8 NON-COMPLIANCE. The Borrower or any subsidiary fails to meet the conditions
of, or fails to perform any obligation under any other agreement the Borrower or
any subsidiary has with the Bank or any affiliate of the Bank.
9.9 CROSS-DEFAULT. Any default occurs under any agreement in connection with any
credit the Borrower or any guarantor has obtained from anyone else or which the
Borrower or any subsidiary has guaranteed.
9.10 DEFAULT UNDER RELATED DOCUMENTS. Any guaranty, subordination agreement,
security agreement, deed of trust, or other document required by this Agreement
is revoked in whole or in part, violated or no longer in effect.
9.11 ERISA PLANS. The occurrence of any one or more of the following events with
respect to a Plan, provided such event or events could reasonably be expected,
to subject the Borrower to any tax, penalty or liability (or any combination of
the foregoing) which, in the aggregate, could have a Material Adverse Effect (as
defined in Section 9.3):
(a) A reportable event shall occur with respect to a Plan which is, in the
reasonable judgment of the Bank, likely to result in the termination of such
Plan for purposes of Title IV of ERISA. (b) Any Plan termination (or
commencement of proceedings to terminate a Plan) or the Borrower's full or
partial withdrawal from a Plan.
9.12 OTHER BREACH UNDER AGREEMENT. The Borrower or any of its subsidiaries, on a
consolidated basis, fails to meet the conditions of, or fails to perform any
obligation under, any term of this Agreement not specifically referred to in
this Article; provided that (a) except with respect to Sections 7.3 - 7.9 and
7.19 of this Agreement, such failure shall not be an event of default hereunder
unless such failure continues for 30 days, and (b) with respect to Sections
7.13-7.15 of this Agreement, Borrower will be deemed to have failed to meet the
conditions of this Agreement only if the Borrower's failure to satisfy the
requirements of Sections 7.13, 7.14 or 7.15 has a Material Adverse Effect, as
defined in Section 9.3 hereof.
12
<PAGE>
10. ENFORCING THIS AGREEMENT; MISCELLANEOUS
10.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
10.2 GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY TEXAS LAW.
10.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and the
Bank's successors and assignees. The Borrower agrees that it may not assign this
Agreement without the Bank's prior consent. The Bank may sell participations in
or assign this loan, and may exchange financial information about the Borrower
with actual or potential participants or assignees. If a participation is sold
or the loan is assigned, the purchaser will have the right of set-off against
the Borrower.
10.4 ARBITRATION.
(a) This paragraph concerns the resolution of any controversies or claims
between the Borrower, its subsidiaries and the Bank, including but not limited
to those that arise from:
(i) This Agreement (including any renewals, extensions or
modifications of this Agreement);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business conducted between
the Borrower and the Bank, including claims for injury to persons, property or
business interests (torts).
(b) At the request of the Borrower or the Bank, any such controversies or claims
will be settled by arbitration in accordance with the United States Arbitration
Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS AGREEMENT
PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitations, the filing of
an arbitration pursuant to this paragraph is the equivalent of the filing of a
lawsuit, and any claim or controversy which may be arbitrated under this
paragraph is subject to any applicable statutes of limitations. The arbitrators
will have the authority to decide whether any such claim or controversy is
barred by the statute of limitations and, if so, to dismiss the arbitration on
that basis.
(e) If there is a dispute as to whether an issue is arbitratable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted to
an authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of the Borrower or the Bank to:
(i) exercise self-help remedies such as setoff; (ii) foreclose against or
sell any real or personal property
collateral; or
(iii) act in a court of law before, during or after the arbitration
proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
13
<PAGE>
(h) The pursuit of a successful action for interim, additional or supplementary
remedies, or the filing of a court action, does not constitute a waiver of the
right of the Borrower or the Bank, including the suing party, to submit the
controversy or claim to arbitration if the other party contests the lawsuit.
10.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even if
it makes a loan after default. If the Bank waives a default, it may enforce a
later default. Any consent or waiver under this Agreement must be in writing.
10.6 COSTS. If the Bank incurs any expenses in connection with preparing or
enforcing this Agreement, or if the Bank takes collection action under this
Agreement, it is entitled to costs and reasonable attorneys' fees, including any
allocated costs of in-house counsel.
10.7 ATTORNEYS' FEES. In the event of a lawsuit or arbitration proceeding, the
prevailing party is entitled to recover costs and reasonable attorneys' fees
(including any allocated costs of in-house counsel) incurred in connection with
the lawsuit or arbitration proceeding, as determined by the court or arbitrator.
10.8 NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses on the
signature page of this Agreement, or to such other addresses as the Bank and the
Borrower may specify from time to time in writing.
10.9 HEADINGS. Article and paragraph headings are for reference only and shall
not affect the interpretation or meaning of any provisions of this Agreement.
10.10 COUNTERPARTS. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counterparts
each of which, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same agreement.
10.11 USURY LAWS. It is the intention of the parties to comply with applicable
usury laws; accordingly, it is agreed that notwithstanding any provisions to the
contrary in this Agreement or in any of the documents evidencing or securing
payment hereof or otherwise relating hereto, in no event shall this Agreement or
such instruments or documents require or permit the payment, contracting for,
charging, taking, reserving or receiving any sums constituting interest, as
defined under applicable usury laws, in excess of the maximum amount permitted
by such laws. If any such excess of interest is contracted for, paid, charged,
taken, reserved or received under this Agreement or under any of the documents
evidencing or securing payment hereof or otherwise relating hereto, on the
amount of principal actually outstanding from time to time shall exceed the
maximum amount of interest permitted by applicable usury laws, then in any such
event,
(i) the provisions of this Section shall govern and control; (ii) any such
excess shall be canceled automatically to the extent of
such excess, and shall not be collected or collectible;
(iii) any such excess which is or has been received shall be credited
against the unpaid principal balance hereof or refunded to the Borrower, at
the Bank's option; and
(iv) the effective rate of interest shall be automatically reduced to the
maximum lawful rate allowed under applicable laws as construed by courts having
jurisdiction hereof or thereof.
It is further agreed that without limitation of the foregoing, all calculations
of the rate of interest calculated for, paid, charged, taken, reserved or
received under this Agreement or under such other documents or instruments that
are made for the purpose of determining whether such rate exceeds the maximum
lawful rate of interest, shall be made, to the extent permitted by applicable
usury laws, by amortizing, prorating, allocating and spreading in equal parts
during the period of the full stated term of the indebtedness, all interest at
any time contracted for, paid, charged, taken, reserved or received from the
Borrower or otherwise by the holder or holders thereof. The terms of this
section shall be deemed to be incorporated in every loan document, security
instrument, debt instrument, and communication relating to this Agreement and
the law evidenced hereby. The term "applicable usury laws" shall mean such law
of the State of Texas or the laws of the United States;
14
<PAGE>
whichever laws allow the higher rate of interest, as such laws now exist;
provided, however, that if such laws shall hereafter allow higher rates of
interest. then the applicable usury laws shall be the laws allowing the higher
rate to be effective as of the effective date of such laws. To the extent that
TEX. REV. STAT. ANN. art 5069-1D.001-1D.016 (TEX. FINANCE CODE ss.ss. 303.001 -
303.308), as amended (the "Act"), is relevant to the Bank for the purposes of
determining the Maximum Rate, the parties elect to determine the Maximum Rate
under the Act pursuant to the "weekly ceiling" from time to time in effect, as
referred to and defined in article 5069-1D.003 (TEX. FINANCE CODE ss. 303.201)
of the Act; subject, however, to any right the Bank may have subsequently under
applicable law, to change the method of determining the Maximum Rate.
10.12 NO ORAL AGREEMENTS. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the Bank and
the Borrower concerning this credit;
(b) replace any prior oral or written
agreements between the Bank and the Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
THIS WRITTEN AGREEMENT AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN CONNECTION
HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Agreement is executed as of the date stated at the top of the first page.
15
<PAGE>
Bank of America Texas, N.A.
/s/ GEORGE M SMITH
By: George M. Smith
Title: Vice President
Address where notices to the Bank
are to be sent:
Bank of America Texas, N.A.
Houston Commercial Lending #2552
333 Clay Street, Ste. 3600
Houston, Texas 77002
16
<PAGE>
Oyo Geospace Corporation
/s/ THOMAS T. MCENTIRE
By: Thomas T. McEntire
Title: Chief Financial Officer
Address where notices to the Borrower
are to be sent:
12750 S. Kirkwood, Suite 200
Stafford, Texas 77477
17
EXHIBIT 10.3
BANK OF AMERICA
SECURITY AGREEMENT
(RECEIVABLES AND INVENTORY)
1. THE SECURITY. The undersigned OYO Instruments, Inc. ("Guarantor") hereby
assigns and grants to Bank of America Texas, N.A. ("Bank") a security interest
in the following described property ("Collateral"):
A. All of the following, whether now owned or hereafter acquired by
Guarantor: accounts, contract rights, chattel paper, instruments,
deposit accounts and general intangibles.
B. All inventory now owned or hereafter acquired by Guarantor. C. All
negotiable and nonnegotiable documents of title now owned or hereafter
acquired by Guarantor covering any of the above-described property.
D. All rights under contracts of insurance now owned or hereafter acquired
by Guarantor covering any of the above-described property.
E. All proceeds now owned or hereafter acquired by Guarantor of any
of the above-described property.
F. All books and records now owned or hereafter acquired by Guarantor
pertaining to any of the above-described property, including but not
limited to any computer-readable memory and any computer hardware or
software necessary to process such memory ("Books and Records").
2. THE INDEBTEDNESS. The Collateral secures and will secure all Indebtedness of
Oyo Geospace Corporation ("Borrower") to Bank. For the purposes of this
Agreement, "Indebtedness" means all loans and advances made by Bank to Borrower
and all other obligations and liabilities of Borrower to Bank, whether now
existing or hereafter incurred or created, whether voluntary or involuntary,
whether due or not due, whether absolute or contingent, with respect to that
certain Business Loan Agreement between Borrower and Bank and dated of even date
herewith (the "Loan Agreement"). Unless Guarantor shall have otherwise agreed in
writing, Indebtedness, for the purposes of this Agreement, shall not include
"consumer credit" subject to the disclosure requirements of the Federal Truth in
Lending Act or any regulations promulgated thereunder.
3. GUARANTOR'S REPRESENTATIONS, WARRANTIES, AND COVENANTS. Guarantor covenants
and warrants that unless compliance is waived by Bank in writing:
A. Guarantor is the owner of the Collateral and has good right, title and
authority to pledge, sell, transfer and assign the Collateral.
B. There is no financing statement or other document creating or
evidencing a lien now on file in any public office covering any of the
Collateral, nor is there any lien or encumbrance on any of the
Collateral.
C. Guarantor shall execute and deliver such financing statements, and do
such other things, as Bank may from time to time require in order to
perfect and preserve the security interest hereby granted and the
priority of such security interest.
D. If any amount payable under or in connection with any of the Collateral
shall become evidenced by any promissory note or other instrument, such
instrument shall be immediately pledged to Bank hereunder and Guarantor
shall deliver to Bank such instrument, duly endorsed in a manner
satisfactory to Bank.
E. Guarantor will properly preserve the Collateral; defend the Collateral
against any adverse claims and demands; and keep accurate Books and
Records.
F. Guarantor has notified Bank in writing of, and will notify Bank in
writing prior to any change in, the locations of (i) Guarantor's place
of business or Guarantor's chief executive office if Guarantor has more
than one place of business, and (ii) any Collateral, including the
Books and Records.
G. Guarantor will notify Bank in writing prior to any change in
Guarantor's name, identity or business structure.
H. Guarantor will maintain and keep in force insurance covering the
Collateral as required by the Loan Agreement. INSURANCE IS REQUIRED IN
CONNECTION WITH THE INDEBTEDNESS SECURED BY THIS SECURITY AGREEMENT.
THE GUARANTOR SHALL HAVE THE OPTION OF FURNISHING THE REQUIRED
INSURANCE EITHER THROUGH EXISTING POLICIES OF INSURANCE OWNED OR
CONTROLLED BY THE GUARANTOR OR OF PROCURING AND FURNISHING EQUIVALENT
INSURANCE COVERAGES THROUGH ANY INSURANCE COMPANY AUTHORIZED TO
TRANSACT BUSINESS IN TEXAS.
1
<PAGE>
I. Guarantor has not granted and will not grant any security interest in
any of the Collateral except to Bank, and will keep the Collateral free
of all liens, claims, security interests and encumbrances of any kind
or nature except the security interest of Bank.
J. Guarantor will not sell, lease, agree to sell or lease, or otherwise
dispose of, or remove from Guarantor's place of business (i) any
inventory except in the ordinary course of business as heretofore
conducted by Guarantor, or (ii) any other Collateral except with the
prior written consent of Bank.
K. Guarantor will promptly notify Bank in writing of any event which
affects the value of the Collateral, the ability of Guarantor or Bank
to dispose of the Collateral, or the rights and remedies of Bank in
relation thereto, including, but not limited to, the levy of any legal
process against any Collateral and the adoption of any marketing order,
arrangement or procedure affecting the Collateral, whether governmental
or otherwise.
L. If any Collateral is or becomes the subject of any registration
certificate or negotiable document of title, including any warehouse
receipt or bill of lading, Guarantor shall immediately deliver such
document to Bank.
M. Until Bank exercises its rights to make collection, Guarantor will
diligently collect all Collateral.
4. ADDITIONAL OPTIONAL REQUIREMENTS. Guarantor agrees that Bank may at its
option at any time, whether or not Borrower is in default:
A. Require Guarantor to deliver to Bank (i) copies of or extracts from the
Books and Records, and (ii) information on any contracts or other
matters affecting the Collateral.
B. Examine the Collateral, including the Books and Records, and make
copies of or extracts from the Books and Records, and for such purposes
enter at any reasonable time upon the property where any Collateral or
any Books and Records are located.
C. Require Guarantor to obtain Bank's prior written consent to any sale,
lease, agreement to sell or lease, or other disposition of any
inventory other than in the ordinary course of business.
Guarantor further agrees that if Borrower is in default, Bank may:
AA.Require Guarantor to segregate all collections and proceeds of the
Collateral so that they are capable of identification and deliver daily
such collections and proceeds to Bank in kind.
BB.Require Guarantor to deliver to Bank any instruments or chattel paper
constituting Collateral or proceeds of Collateral.
CC.Notify any account debtors, any buyers of the Collateral, or any other
persons of Bank's interest in the Collateral.
DD.Require Guarantor to direct all account debtors to forward all payments
and proceeds of the Collateral to a post office box under Bank's
exclusive control.
EE.Demand and collect any payments and proceeds of the Collateral. In
connection therewith Guarantor irrevocably authorizes Bank to endorse
or sign Guarantor's name on all checks, drafts, collections, receipts
and other documents, and to take possession of and open the mail
addressed to Guarantor and remove therefrom any payments and proceeds
of the Collateral.
5. DEFAULTS. The occurrence of any event described in Section 9 of the Loan
Agreement shall constitute a default hereunder.
6. BANK'S REMEDIES AFTER DEFAULT. In the event of any default Bank may do any
one or more of the following, all without demand, presentment, protest, notice
of protest, notice of intention to accelerate, notice of acceleration, or other
notice of any kind, all of which are hereby waived by Guarantor to the extent
permitted by applicable law:
A. Declare any Indebtedness immediately due and payable.
B. Enforce the security interest given hereunder pursuant to the Uniform
Commercial Code and any other applicable law.
C. Exercise a right of setoff against any deposit account of Guarantor
maintained with Bank by applying such account to the Indebtedness.
2
<PAGE>
D. Require Guarantor to assemble the Collateral, including the Books and
Records, and make them available to Bank at a place designated by Bank.
E. Enter upon the property where any Collateral, including any Books and
Records, are located and take possession of such Collateral and such
Books and Records, and use such property (including any buildings and
facilities) and any of Guarantor's equipment, if Bank deems such use
necessary or advisable in order to take possession of, hold, preserve,
process, assemble, prepare for sale or lease, market for sale or lease,
sell or lease, or otherwise dispose of, any Collateral.
F. Grant extensions and compromise or settle claims with respect to the
Collateral for less than face value, all without prior notice to
Guarantor.
G. Have a receiver appointed by any court of competent jurisdiction to
take possession of the Collateral.
H. Take such measures as Bank may deem necessary or advisable to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and Guarantor hereby irrevocably
constitutes and appoints Bank as Guarantor's attorney-in-fact to
perform all acts and execute all documents in connection therewith.
7. MISCELLANEOUS.
A. Any waiver, express or implied, of any provision hereunder and any
delay or failure by Bank to enforce any provision shall not preclude
Bank from enforcing any such provision thereafter.
B. Guarantor shall, at the request of Bank, execute such other agreements,
documents, instruments, or financing statements in connection with this
Agreement as Bank may reasonably deem necessary to perfect and preserve
the security interests created by this Security Agreement.
C. All notes, security agreements, subordination agreements and other
documents executed by Guarantor or furnished to Bank in connection with
this Agreement must be in form and substance satisfactory to Bank.
D. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS
OF THE STATE OF TEXAS, TO THE JURISDICTION OF WHICH THE PARTIES HERETO
SUBMIT.
E. All rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies otherwise provided by law. Any
single or partial exercise of any right or remedy shall not preclude
the further exercise thereof or the exercise of any other right or
remedy.
F. All terms not defined herein are used as set forth in the Uniform
Commercial Code.
G. In the event of any action by Bank to enforce this Agreement or to
protect the security interest of Bank in the Collateral, or to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, Guarantor agrees to pay immediately the
costs and expenses thereof, together with reasonable attorney's fees
and allocated costs for in-house legal services. Notwithstanding the
foregoing, if the Indebtedness was extended primarily for the purchase
of one or more motor vehicles (other than a heavy commercial vehicle),
the expense for which the Guarantor shall be liable pursuant to this
section 7 (g) shall not exceed the following: all amounts actually
incurred by the Bank as court costs; attorneys' fees assessed by a
court; and the reasonable cost actually expended for repossessing,
storing, preparing for sale, or selling any Collateral.
8. NO ORAL AGREEMENTS. THIS WRITTEN SECURITY AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[The remainder of this page is intentionally left blank.]
3
<PAGE>
9. SIGNATURES
This document is executed by Guarantor as of June 26, 1998.
LENDER: GUARANTOR:
BANK OF AMERICA TEXAS, N.A. OYO INSTRUMENTS, INC.
By: /s/ GEORGE M. SMITH By: /s/ THOMAS T. MCENTIRE
George M. Smith, Vice President Thomas T. McEntire, CFO
ADDRESS WHERE NOTICES TO THE BANK ADDRES WHERE NOTICES TO THE
ARE TO BE SENT: GUARANTOR ARE TO BE SENT:
Bank of America Texas, N.A. 9777 West Gulf Bank, Suite 10
Houston Commercial Lending, #2552 Houston, Texas 77040
333 Clay Street, Ste. 3600
Houston, Texas 77002
4
<PAGE>
BANK OF AMERICA
SECURITY AGREEMENT
(RECEIVABLES AND INVENTORY)
1. THE SECURITY. The undersigned Concord Technologies, Inc. ("Guarantor") hereby
assigns and grants to Bank of America Texas, N.A. ("Bank") a security interest
in the following described property ("Collateral"):
A. All of the following, whether now owned or hereafter acquired by
Guarantor: accounts, contract rights, chattel paper, instruments,
deposit accounts and general intangibles.
B. All inventory now owned or hereafter acquired by Guarantor. C. All
negotiable and nonnegotiable documents of title now owned or hereafter
acquired by Guarantor covering any of the above-described property.
D. All rights under contracts of insurance now owned or hereafter acquired
by Guarantor covering any of the above-described property.
E. All proceeds now owned or hereafter acquired by Guarantor of any of
the above-described property.
F. All books and records now owned or hereafter acquired by Guarantor
pertaining to any of the above-described property, including but not
limited to any computer-readable memory and any computer hardware or
software necessary to process such memory ("Books and Records").
2. THE INDEBTEDNESS. The Collateral secures and will secure all Indebtedness of
Oyo Geospace Corporation ("Borrower") to Bank. For the purposes of this
Agreement, "Indebtedness" means all loans and advances made by Bank to Borrower
and all other obligations and liabilities of Borrower to Bank, whether now
existing or hereafter incurred or created, whether voluntary or involuntary,
whether due or not due, whether absolute or contingent, with respect to that
certain Business Loan Agreement between Borrower and Bank and dated of even date
herewith (the "Loan Agreement"). Unless Guarantor shall have otherwise agreed in
writing, Indebtedness, for the purposes of this Agreement, shall not include
"consumer credit" subject to the disclosure requirements of the Federal Truth in
Lending Act or any regulations promulgated thereunder.
3. GUARANTOR'S REPRESENTATIONS, WARRANTIES, AND COVENANTS. Guarantor covenants
and warrants that unless compliance is waived by Bank in writing:
A. Guarantor is the owner of the Collateral and has good right, title and
authority to pledge, sell, transfer and assign the Collateral.
B. There is no financing statement or other document creating or
evidencing a lien now on file in any public office covering any of the
Collateral, nor is there any lien or encumbrance on any of the
Collateral.
C. Guarantor shall execute and deliver such financing statements, and do
such other things, as Bank may from time to time require in order to
perfect and preserve the security interest hereby granted and the
priority of such security interest.
D. If any amount payable under or in connection with any of the Collateral
shall become evidenced by any promissory note or other instrument, such
instrument shall be immediately pledged to Bank hereunder and Guarantor
shall deliver to Bank such instrument, duly endorsed in a manner
satisfactory to Bank.
E. Guarantor will properly preserve the Collateral; defend the Collateral
against any adverse claims and demands; and keep accurate Books and
Records.
F. Guarantor has notified Bank in writing of, and will notify Bank in
writing prior to any change in, the locations of (i) Guarantor's place
of business or Guarantor's chief executive office if Guarantor has more
than one place of business, and (ii) any Collateral, including the
Books and Records.
G. Guarantor will notify Bank in writing prior to any change in
Guarantor's name, identity or business structure.
H. Guarantor will maintain and keep in force insurance covering the
Collateral as required by the Loan Agreement. INSURANCE IS REQUIRED IN
CONNECTION WITH THE INDEBTEDNESS SECURED BY THIS SECURITY AGREEMENT.
THE GUARANTOR SHALL HAVE THE OPTION OF FURNISHING THE REQUIRED
INSURANCE EITHER THROUGH EXISTING POLICIES OF INSURANCE OWNED OR
CONTROLLED BY THE GUARANTOR OR OF PROCURING AND FURNISHING EQUIVALENT
INSURANCE COVERAGES THROUGH ANY INSURANCE COMPANY AUTHORIZED TO
TRANSACT BUSINESS IN TEXAS.
1
<PAGE>
I. Guarantor has not granted and will not grant any security interest in
any of the Collateral except to Bank, and will keep the Collateral free
of all liens, claims, security interests and encumbrances of any kind
or nature except the security interest of Bank.
J. Guarantor will not sell, lease, agree to sell or lease, or otherwise
dispose of, or remove from Guarantor's place of business (i) any
inventory except in the ordinary course of business as heretofore
conducted by Guarantor, or (ii) any other Collateral except with the
prior written consent of Bank.
K. Guarantor will promptly notify Bank in writing of any event which
affects the value of the Collateral, the ability of Guarantor or Bank
to dispose of the Collateral, or the rights and remedies of Bank in
relation thereto, including, but not limited to, the levy of any legal
process against any Collateral and the adoption of any marketing order,
arrangement or procedure affecting the Collateral, whether governmental
or otherwise.
L. If any Collateral is or becomes the subject of any registration
certificate or negotiable document of title, including any warehouse
receipt or bill of lading, Guarantor shall immediately deliver such
document to Bank.
M. Until Bank exercises its rights to make collection, Guarantor will
diligently collect all Collateral.
4. ADDITIONAL OPTIONAL REQUIREMENTS. Guarantor agrees that Bank may at its
option at any time, whether or not Borrower is in default:
A. Require Guarantor to deliver to Bank (i) copies of or extracts from the
Books and Records, and (ii) information on any contracts or other
matters affecting the Collateral.
B. Examine the Collateral, including the Books and Records, and make
copies of or extracts from the Books and Records, and for such purposes
enter at any reasonable time upon the property where any Collateral or
any Books and Records are located.
C. Require Guarantor to obtain Bank's prior written consent to any sale,
lease, agreement to sell or lease, or other disposition of any
inventory other than in the ordinary course of business.
Guarantor further agrees that if Borrower is in default, Bank may:
AA.Require Guarantor to segregate all collections and proceeds of the
Collateral so that they are capable of identification and deliver daily
such collections and proceeds to Bank in kind.
BB.Require Guarantor to deliver to Bank any instruments or chattel paper
constituting Collateral or proceeds of Collateral.
CC.Notify any account debtors, any buyers of the Collateral, or any other
persons of Bank's interest in the Collateral.
DD.Require Guarantor to direct all account debtors to forward all payments
and proceeds of the Collateral to a post office box under Bank's
exclusive control.
EE.Demand and collect any payments and proceeds of the Collateral. In
connection therewith Guarantor irrevocably authorizes Bank to endorse
or sign Guarantor's name on all checks, drafts, collections, receipts
and other documents, and to take possession of and open the mail
addressed to Guarantor and remove therefrom any payments and proceeds
of the Collateral.
5. DEFAULTS. The occurrence of any event described in Section 9 of the Loan
Agreement shall constitute a default hereunder.
6. BANK'S REMEDIES AFTER DEFAULT. In the event of any default Bank may do any
one or more of the following, all without demand, presentment, protest, notice
of protest, notice of intention to accelerate, notice of acceleration, or other
notice of any kind, all of which are hereby waived by Guarantor to the extent
permitted by applicable law:
A. Declare any Indebtedness immediately due and payable.
B. Enforce the security interest given hereunder pursuant to the Uniform
Commercial Code and any other applicable law.
C. Exercise a right of setoff against any deposit account of Guarantor
maintained with Bank by applying such account to the Indebtedness.
2
<PAGE>
D. Require Guarantor to assemble the Collateral, including the Books and
Records, and make them available to Bank at a place designated by Bank.
E. Enter upon the property where any Collateral, including any Books and
Records, are located and take possession of such Collateral and such
Books and Records, and use such property (including any buildings and
facilities) and any of Guarantor's equipment, if Bank deems such use
necessary or advisable in order to take possession of, hold, preserve,
process, assemble, prepare for sale or lease, market for sale or lease,
sell or lease, or otherwise dispose of, any Collateral.
F. Grant extensions and compromise or settle claims with respect to the
Collateral for less than face value, all without prior notice to
Guarantor.
G. Have a receiver appointed by any court of competent jurisdiction to
take possession of the Collateral.
H. Take such measures as Bank may deem necessary or advisable to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and Guarantor hereby irrevocably
constitutes and appoints Bank as Guarantor's attorney-in-fact to
perform all acts and execute all documents in connection therewith.
7. MISCELLANEOUS.
A. Any waiver, express or implied, of any provision hereunder and any
delay or failure by Bank to enforce any provision shall not preclude
Bank from enforcing any such provision thereafter.
B. Guarantor shall, at the request of Bank, execute such other agreements,
documents, instruments, or financing statements in connection with this
Agreement as Bank may reasonably deem necessary to perfect and preserve
the security interests created by this Security Agreement.
C. All notes, security agreements, subordination agreements and other
documents executed by Guarantor or furnished to Bank in connection with
this Agreement must be in form and substance satisfactory to Bank.
D. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS
OF THE STATE OF TEXAS, TO THE JURISDICTION OF WHICH THE PARTIES HERETO
SUBMIT.
E. All rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies otherwise provided by law. Any
single or partial exercise of any right or remedy shall not preclude
the further exercise thereof or the exercise of any other right or
remedy.
F. All terms not defined herein are used as set forth in the Uniform
Commercial Code.
G. In the event of any action by Bank to enforce this Agreement or to
protect the security interest of Bank in the Collateral, or to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, Guarantor agrees to pay immediately the
costs and expenses thereof, together with reasonable attorney's fees
and allocated costs for in-house legal services. Notwithstanding the
foregoing, if the Indebtedness was extended primarily for the purchase
of one or more motor vehicles (other than a heavy commercial vehicle),
the expense for which the Guarantor shall be liable pursuant to this
section 7 (g) shall not exceed the following: all amounts actually
incurred by the Bank as court costs; attorneys' fees assessed by a
court; and the reasonable cost actually expended for repossessing,
storing, preparing for sale, or selling any Collateral.
8. NO ORAL AGREEMENTS. THIS WRITTEN SECURITY AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[The remainder of this page is intentionally left blank.]
3
<PAGE>
9. SIGNATURES
This document is executed by Guarantor as of June 26, 1998.
LENDER: GUARANTOR:
BANK OF AMERICA TEXAS, N.A. CONCORD TECHNOLOGIES, INC.
By: /s/ GEORGE M. SMITH By: /s/ THOMAS T. MCENTIRE
George M. Smith, Vice President Thomas T. McEntire, CFO
ADDRESS WHERE NOTICES TO THE BANK ADDRESS WHERE NOTICES TO THE
ARE TO BE SENT: GUARANTOR ARE TO BE SENT:
Bank of America Texas, N.A. 1830 Kersten
Houston Commercial Lending, #2552 Houston, Texas 77043-3118
333 Clay Street, Ste. 3600
Houston, Texas 77002
4
<PAGE>
BANK OF AMERICA
SECURITY AGREEMENT
(RECEIVABLES AND INVENTORY)
1. THE SECURITY. The undersigned 5404330 and More Royalties Company
("Guarantor") hereby assigns and grants to Bank of America Texas, N.A. ("Bank")
a security interest in the following described property ("Collateral"):
A. All of the following, whether now owned or hereafter acquired by
Guarantor: accounts, contract rights, chattel paper, instruments,
deposit accounts and general intangibles.
B. All inventory now owned or hereafter acquired by Guarantor. C. All
negotiable and nonnegotiable documents of title now owned or hereafter
acquired by Guarantor covering any of the above-described property.
D. All rights under contracts of insurance now owned or hereafter acquired
by Guarantor covering any of the above-described property.
E. All proceeds now owned or hereafter acquired by Guarantor of any of
the above-described property.
F. All books and records now owned or hereafter acquired by Guarantor
pertaining to any of the above-described property, including but not
limited to any computer-readable memory and any computer hardware or
software necessary to process such memory ("Books and Records").
2. THE INDEBTEDNESS. The Collateral secures and will secure all Indebtedness of
Oyo Geospace Corporation ("Borrower") to Bank. For the purposes of this
Agreement, "Indebtedness" means all loans and advances made by Bank to Borrower
and all other obligations and liabilities of Borrower to Bank, whether now
existing or hereafter incurred or created, whether voluntary or involuntary,
whether due or not due, whether absolute or contingent, with respect to that
certain Business Loan Agreement between Borrower and Bank and dated of even date
herewith (the "Loan Agreement"). Unless Guarantor shall have otherwise agreed in
writing, Indebtedness, for the purposes of this Agreement, shall not include
"consumer credit" subject to the disclosure requirements of the Federal Truth in
Lending Act or any regulations promulgated thereunder.
3. GUARANTOR'S REPRESENTATIONS, WARRANTIES, AND COVENANTS. Guarantor covenants
and warrants that unless compliance is waived by Bank in writing:
A. Guarantor is the owner of the Collateral and has good right, title and
authority to pledge, sell, transfer and assign the Collateral.
B. There is no financing statement or other document creating or
evidencing a lien now on file in any public office covering any of the
Collateral, nor is there any lien or encumbrance on any of the
Collateral.
C. Guarantor shall execute and deliver such financing statements, and do
such other things, as Bank may from time to time require in order to
perfect and preserve the security interest hereby granted and the
priority of such security interest.
D. If any amount payable under or in connection with any of the Collateral
shall become evidenced by any promissory note or other instrument, such
instrument shall be immediately pledged to Bank hereunder and Guarantor
shall deliver to Bank such instrument, duly endorsed in a manner
satisfactory to Bank.
E. Guarantor will properly preserve the Collateral; defend the Collateral
against any adverse claims and demands; and keep accurate Books and
Records.
F. Guarantor has notified Bank in writing of, and will notify Bank in
writing prior to any change in, the locations of (i) Guarantor's place
of business or Guarantor's chief executive office if Guarantor has more
than one place of business, and (ii) any Collateral, including the
Books and Records.
G. Guarantor will notify Bank in writing prior to any change in
Guarantor's name, identity or business structure.
H. Guarantor will maintain and keep in force insurance covering the
Collateral as required by the Loan Agreement. INSURANCE IS REQUIRED IN
CONNECTION WITH THE INDEBTEDNESS SECURED BY THIS SECURITY AGREEMENT.
THE GUARANTOR SHALL HAVE THE OPTION OF FURNISHING THE REQUIRED
INSURANCE EITHER THROUGH EXISTING POLICIES OF INSURANCE OWNED OR
CONTROLLED BY THE GUARANTOR OR OF PROCURING AND FURNISHING EQUIVALENT
INSURANCE COVERAGES THROUGH ANY INSURANCE COMPANY AUTHORIZED TO
TRANSACT BUSINESS IN TEXAS.
1
<PAGE>
I. Guarantor has not granted and will not grant any security interest in
any of the Collateral except to Bank, and will keep the Collateral free
of all liens, claims, security interests and encumbrances of any kind
or nature except the security interest of Bank.
J. Guarantor will not sell, lease, agree to sell or lease, or otherwise
dispose of, or remove from Guarantor's place of business (i) any
inventory except in the ordinary course of business as heretofore
conducted by Guarantor, or (ii) any other Collateral except with the
prior written consent of Bank.
K. Guarantor will promptly notify Bank in writing of any event which
affects the value of the Collateral, the ability of Guarantor or Bank
to dispose of the Collateral, or the rights and remedies of Bank in
relation thereto, including, but not limited to, the levy of any legal
process against any Collateral and the adoption of any marketing order,
arrangement or procedure affecting the Collateral, whether governmental
or otherwise.
L. If any Collateral is or becomes the subject of any registration
certificate or negotiable document of title, including any warehouse
receipt or bill of lading, Guarantor shall immediately deliver such
document to Bank.
M. Until Bank exercises its rights to make collection, Guarantor will
diligently collect all Collateral.
4. ADDITIONAL OPTIONAL REQUIREMENTS. Guarantor agrees that Bank may at its
option at any time, whether or not Borrower is in default:
A. Require Guarantor to deliver to Bank (i) copies of or extracts from the
Books and Records, and (ii) information on any contracts or other
matters affecting the Collateral.
B. Examine the Collateral, including the Books and Records, and make
copies of or extracts from the Books and Records, and for such purposes
enter at any reasonable time upon the property where any Collateral or
any Books and Records are located.
C. Require Guarantor to obtain Bank's prior written consent to any sale,
lease, agreement to sell or lease, or other disposition of any
inventory other than in the ordinary course of business.
Guarantor further agrees that if Borrower is in default, Bank may:
AA.Require Guarantor to segregate all collections and proceeds of the
Collateral so that they are capable of identification and deliver daily
such collections and proceeds to Bank in kind.
BB.Require Guarantor to deliver to Bank any instruments or chattel paper
constituting Collateral or proceeds of Collateral.
CC.Notify any account debtors, any buyers of the Collateral, or any other
persons of Bank's interest in the Collateral.
DD.Require Guarantor to direct all account debtors to forward all payments
and proceeds of the Collateral to a post office box under Bank's
exclusive control.
EE.Demand and collect any payments and proceeds of the Collateral. In
connection therewith Guarantor irrevocably authorizes Bank to endorse
or sign Guarantor's name on all checks, drafts, collections, receipts
and other documents, and to take possession of and open the mail
addressed to Guarantor and remove therefrom any payments and proceeds
of the Collateral.
5. DEFAULTS. The occurrence of any event described in Section 9 of the Loan
Agreement shall constitute a default hereunder.
6. BANK'S REMEDIES AFTER DEFAULT. In the event of any default Bank may do any
one or more of the following, all without demand, presentment, protest, notice
of protest, notice of intention to accelerate, notice of acceleration, or other
notice of any kind, all of which are hereby waived by Guarantor to the extent
permitted by applicable law:
A. Declare any Indebtedness immediately due and payable.
B. Enforce the security interest given hereunder pursuant to the Uniform
Commercial Code and any other applicable law.
2
<PAGE>
C. Exercise a right of setoff against any deposit account of Guarantor
maintained with Bank by applying such account to the Indebtedness.
D. Require Guarantor to assemble the Collateral, including the Books and
Records, and make them available to Bank at a place designated by Bank.
E. Enter upon the property where any Collateral, including any Books and
Records, are located and take possession of such Collateral and such
Books and Records, and use such property (including any buildings and
facilities) and any of Guarantor's equipment, if Bank deems such use
necessary or advisable in order to take possession of, hold, preserve,
process, assemble, prepare for sale or lease, market for sale or lease,
sell or lease, or otherwise dispose of, any Collateral.
F. Grant extensions and compromise or settle claims with respect to the
Collateral for less than face value, all without prior notice to
Guarantor.
G. Have a receiver appointed by any court of competent jurisdiction to
take possession of the Collateral.
H. Take such measures as Bank may deem necessary or advisable to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and Guarantor hereby irrevocably
constitutes and appoints Bank as Guarantor's attorney-in-fact to
perform all acts and execute all documents in connection therewith.
7. MISCELLANEOUS.
A. Any waiver, express or implied, of any provision hereunder and any
delay or failure by Bank to enforce any provision shall not preclude
Bank from enforcing any such provision thereafter.
B. Guarantor shall, at the request of Bank, execute such other agreements,
documents, instruments, or financing statements in connection with this
Agreement as Bank may reasonably deem necessary to perfect and preserve
the security interests created by this Security Agreement.
C. All notes, security agreements, subordination agreements and other
documents executed by Guarantor or furnished to Bank in connection with
this Agreement must be in form and substance satisfactory to Bank.
D. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS
OF THE STATE OF TEXAS, TO THE JURISDICTION OF WHICH THE PARTIES HERETO
SUBMIT.
E. All rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies otherwise provided by law. Any
single or partial exercise of any right or remedy shall not preclude
the further exercise thereof or the exercise of any other right or
remedy.
F. All terms not defined herein are used as set forth in the Uniform
Commercial Code.
G. In the event of any action by Bank to enforce this Agreement or to
protect the security interest of Bank in the Collateral, or to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, Guarantor agrees to pay immediately the
costs and expenses thereof, together with reasonable attorney's fees
and allocated costs for in-house legal services. Notwithstanding the
foregoing, if the Indebtedness was extended primarily for the purchase
of one or more motor vehicles (other than a heavy commercial vehicle),
the expense for which the Guarantor shall be liable pursuant to this
section 7 (g) shall not exceed the following: all amounts actually
incurred by the Bank as court costs; attorneys' fees assessed by a
court; and the reasonable cost actually expended for repossessing,
storing, preparing for sale, or selling any Collateral.
8. NO ORAL AGREEMENTS. THIS WRITTEN SECURITY AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[The remainder of this page is intentionally left blank.]
3
<PAGE>
9. SIGNATURES
This document is executed by Guarantor as of June 26, 1998.
LENDER: GUARANTOR:
BANK OF AMERICA TEXAS, N.A. 5404330 AND MORE ROYALTIES COMPANY
By: /s/ GEORGE M. SMITH By: /s/ GARY D. OWENS
George M. Smith, Vice President Gary D. Owens, President
ADDRESS WHERE NOTICES TO THE BANK ADDRESS WHERE NOTICES TO THE
ARE TO BE SENT: GUARANTOR ARE TO BE SENT:
Bank of America Texas, N.A. 101 Convention Center Drive, Suite 850
Houston Commercial Lending, #2552 Las Vegas, Nevada 89109
333 Clay Street, Ste. 3600
Houston, Texas 77002
4
<PAGE>
BANK OF AMERICA
SECURITY AGREEMENT
(RECEIVABLES AND INVENTORY)
1. THE SECURITY. The undersigned Geo Space Corporation ("Guarantor") hereby
assigns and grants to Bank of America Texas, N.A. ("Bank") a security interest
in the following described property ("Collateral"):
A. All of the following, whether now owned or hereafter acquired by
Guarantor: accounts, contract rights, chattel paper, instruments,
deposit accounts and general intangibles.
B. All inventory now owned or hereafter acquired by Guarantor. C. All
negotiable and nonnegotiable documents of title now owned or hereafter
acquired by Guarantor covering any of the above-described property.
D. All rights under contracts of insurance now owned or hereafter acquired
by Guarantor covering any of the above-described property.
E. All proceeds now owned or hereafter acquired by Guarantor of any of the
above-described property.
F. All books and records now owned or hereafter acquired by Guarantor
pertaining to any of the above-described property, including but not
limited to any computer-readable memory and any computer hardware or
software necessary to process such memory ("Books and Records").
2. THE INDEBTEDNESS. The Collateral secures and will secure all Indebtedness of
Oyo Geospace Corporation ("Borrower") to Bank. For the purposes of this
Agreement, "Indebtedness" means all loans and advances made by Bank to Borrower
and all other obligations and liabilities of Borrower to Bank, whether now
existing or hereafter incurred or created, whether voluntary or involuntary,
whether due or not due, whether absolute or contingent, with respect to that
certain Business Loan Agreement between Borrower and Bank and dated of even date
herewith (the "Loan Agreement"). Unless Guarantor shall have otherwise agreed in
writing, Indebtedness, for the purposes of this Agreement, shall not include
"consumer credit" subject to the disclosure requirements of the Federal Truth in
Lending Act or any regulations promulgated thereunder.
3. GUARANTOR'S REPRESENTATIONS, WARRANTIES, AND COVENANTS. Guarantor covenants
and warrants that unless compliance is waived by Bank in writing:
A. Guarantor is the owner of the Collateral and has good right, title and
authority to pledge, sell, transfer and assign the Collateral.
B. There is no financing statement or other document creating or
evidencing a lien now on file in any public office covering any of the
Collateral, nor is there any lien or encumbrance on any of the
Collateral.
C. Guarantor shall execute and deliver such financing statements, and do
such other things, as Bank may from time to time require in order to
perfect and preserve the security interest hereby granted and the
priority of such security interest.
D. If any amount payable under or in connection with any of the Collateral
shall become evidenced by any promissory note or other instrument, such
instrument shall be immediately pledged to Bank hereunder and Guarantor
shall deliver to Bank such instrument, duly endorsed in a manner
satisfactory to Bank.
E. Guarantor will properly preserve the Collateral; defend the Collateral
against any adverse claims and demands; and keep accurate Books and
Records.
F. Guarantor has notified Bank in writing of, and will notify Bank in
writing prior to any change in, the locations of (i) Guarantor's place
of business or Guarantor's chief executive office if Guarantor has more
than one place of business, and (ii) any Collateral, including the
Books and Records.
G. Guarantor will notify Bank in writing prior to any change in
Guarantor's name, identity or business structure.
H. Guarantor will maintain and keep in force insurance covering the
Collateral as required by the Loan Agreement. INSURANCE IS REQUIRED IN
CONNECTION WITH THE INDEBTEDNESS SECURED BY THIS SECURITY AGREEMENT.
THE GUARANTOR SHALL HAVE THE OPTION OF FURNISHING THE REQUIRED
INSURANCE EITHER THROUGH EXISTING POLICIES OF INSURANCE OWNED OR
CONTROLLED BY THE GUARANTOR OR OF PROCURING AND FURNISHING EQUIVALENT
INSURANCE COVERAGES THROUGH ANY INSURANCE COMPANY AUTHORIZED TO
TRANSACT BUSINESS IN TEXAS.
1
<PAGE>
I. Guarantor has not granted and will not grant any security interest in
any of the Collateral except to Bank, and will keep the Collateral free
of all liens, claims, security interests and encumbrances of any kind
or nature except the security interest of Bank.
J. Guarantor will not sell, lease, agree to sell or lease, or otherwise
dispose of, or remove from Guarantor's place of business (i) any
inventory except in the ordinary course of business as heretofore
conducted by Guarantor, or (ii) any other Collateral except with the
prior written consent of Bank.
K. Guarantor will promptly notify Bank in writing of any event which
affects the value of the Collateral, the ability of Guarantor or Bank
to dispose of the Collateral, or the rights and remedies of Bank in
relation thereto, including, but not limited to, the levy of any legal
process against any Collateral and the adoption of any marketing order,
arrangement or procedure affecting the Collateral, whether governmental
or otherwise.
L. If any Collateral is or becomes the subject of any registration
certificate or negotiable document of title, including any warehouse
receipt or bill of lading, Guarantor shall immediately deliver such
document to Bank.
M. Until Bank exercises its rights to make collection, Guarantor will
diligently collect all Collateral.
4. ADDITIONAL OPTIONAL REQUIREMENTS. Guarantor agrees that Bank may at its
option at any time, whether or not Borrower is in default:
A. Require Guarantor to deliver to Bank (i) copies of or extracts from the
Books and Records, and (ii) information on any contracts or other
matters affecting the Collateral.
B. Examine the Collateral, including the Books and Records, and make
copies of or extracts from the Books and Records, and for such purposes
enter at any reasonable time upon the property where any Collateral or
any Books and Records are located.
C. Require Guarantor to obtain Bank's prior written consent to any sale,
lease, agreement to sell or lease, or other disposition of any
inventory other than in the ordinary course of business.
Guarantor further agrees that if Borrower is in default, Bank may:
AA.Require Guarantor to segregate all collections and proceeds of the
Collateral so that they are capable of identification and deliver daily
such collections and proceeds to Bank in kind.
BB.Require Guarantor to deliver to Bank any instruments or chattel paper
constituting Collateral or proceeds of Collateral.
CC.Notify any account debtors, any buyers of the Collateral, or any other
persons of Bank's interest in the Collateral.
DD.Require Guarantor to direct all account debtors to forward all payments
and proceeds of the Collateral to a post office box under Bank's
exclusive control.
EE.Demand and collect any payments and proceeds of the Collateral. In
connection therewith Guarantor irrevocably authorizes Bank to endorse
or sign Guarantor's name on all checks, drafts, collections, receipts
and other documents, and to take possession of and open the mail
addressed to Guarantor and remove therefrom any payments and proceeds
of the Collateral.
5. DEFAULTS. The occurrence of any event described in Section 9 of the Loan
Agreement shall constitute a default hereunder.
6. BANK'S REMEDIES AFTER DEFAULT. In the event of any default Bank may do any
one or more of the following, all without demand, presentment, protest, notice
of protest, notice of intention to accelerate, notice of acceleration, or other
notice of any kind, all of which are hereby waived by Guarantor to the extent
permitted by applicable law:
A. Declare any Indebtedness immediately due and payable.
B. Enforce the security interest given hereunder pursuant to the Uniform
Commercial Code and any other applicable law.
2
<PAGE>
C. Exercise a right of setoff against any deposit account of Guarantor
maintained with Bank by applying such account to the Indebtedness.
D. Require Guarantor to assemble the Collateral, including the Books and
Records, and make them available to Bank at a place designated by Bank.
E. Enter upon the property where any Collateral, including any Books and
Records, are located and take possession of such Collateral and such
Books and Records, and use such property (including any buildings and
facilities) and any of Guarantor's equipment, if Bank deems such use
necessary or advisable in order to take possession of, hold, preserve,
process, assemble, prepare for sale or lease, market for sale or lease,
sell or lease, or otherwise dispose of, any Collateral.
F. Grant extensions and compromise or settle claims with respect to the
Collateral for less than face value, all without prior notice to
Guarantor.
G. Have a receiver appointed by any court of competent jurisdiction to
take possession of the Collateral.
H. Take such measures as Bank may deem necessary or advisable to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and Guarantor hereby irrevocably
constitutes and appoints Bank as Guarantor's attorney-in-fact to
perform all acts and execute all documents in connection therewith.
7. MISCELLANEOUS.
A. Any waiver, express or implied, of any provision hereunder and any
delay or failure by Bank to enforce any provision shall not preclude
Bank from enforcing any such provision thereafter.
B. Guarantor shall, at the request of Bank, execute such other agreements,
documents, instruments, or financing statements in connection with this
Agreement as Bank may reasonably deem necessary to perfect and preserve
the security interests created by this Security Agreement.
C. All notes, security agreements, subordination agreements and other
documents executed by Guarantor or furnished to Bank in connection with
this Agreement must be in form and substance satisfactory to Bank.
D. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS
OF THE STATE OF TEXAS, TO THE JURISDICTION OF WHICH THE PARTIES HERETO
SUBMIT.
E. All rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies otherwise provided by law. Any
single or partial exercise of any right or remedy shall not preclude
the further exercise thereof or the exercise of any other right or
remedy.
F. All terms not defined herein are used as set forth in the Uniform
Commercial Code.
G. In the event of any action by Bank to enforce this Agreement or to
protect the security interest of Bank in the Collateral, or to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, Guarantor agrees to pay immediately the
costs and expenses thereof, together with reasonable attorney's fees
and allocated costs for in-house legal services. Notwithstanding the
foregoing, if the Indebtedness was extended primarily for the purchase
of one or more motor vehicles (other than a heavy commercial vehicle),
the expense for which the Guarantor shall be liable pursuant to this
section 7 (g) shall not exceed the following: all amounts actually
incurred by the Bank as court costs; attorneys' fees assessed by a
court; and the reasonable cost actually expended for repossessing,
storing, preparing for sale, or selling any Collateral.
8. NO ORAL AGREEMENTS. THIS WRITTEN SECURITY AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[The remainder of this page is intentionally left blank.]
3
<PAGE>
9. SIGNATURES
This document is executed by Guarantor as of June 26, 1998.
LENDER: GUARANTOR:
BANK OF AMERICA TEXAS, N.A. GEO SPACE CORPORATION
By:/s/ GEORGE M. SMITH By: /s/ THOMAS T. MCENTIRE
George M. Smith, Vice President Thomas T. McEntire, CFO
ADDRESS WHERE NOTICES TO THE BANK ADDRESS WHERE NOTICES TO THE
ARE TO BE SENT: GUARANTOR ARE TO BE SENT:
Bank of America Texas, N.A. 7334 North Gessner Road
Houston Commercial Lending, #2552 Houston, Texas 77040
333 Clay Street, Ste. 3600
Houston, Texas 77002
4
<PAGE>
BANK OF AMERICA
SECURITY AGREEMENT
(RECEIVABLES AND INVENTORY)
1. THE SECURITY. The undersigned Houston Geophysical Products, Inc.
("Guarantor") hereby assigns and grants to Bank of America Texas, N.A. ("Bank")
a security interest in the following described property ("Collateral"):
A. All of the following, whether now owned or hereafter acquired by
Guarantor: accounts, contract rights, chattel paper, instruments,
deposit accounts and general intangibles.
B. All inventory now owned or hereafter acquired by Guarantor. C. All
negotiable and nonnegotiable documents of title now owned or hereafter
acquired by Guarantor covering any of the above-described property.
D. All rights under contracts of insurance now owned or hereafter acquired
by Guarantor covering any of the above-described property.
E. All proceeds now owned or hereafter acquired by Guarantor of any of the
above-described property.
F. All books and records now owned or hereafter acquired by Guarantor
pertaining to any of the above-described property, including but not
limited to any computer-readable memory and any computer hardware or
software necessary to process such memory ("Books and Records").
2. THE INDEBTEDNESS. The Collateral secures and will secure all Indebtedness of
Oyo Geospace Corporation ("Borrower") to Bank. For the purposes of this
Agreement, "Indebtedness" means all loans and advances made by Bank to Borrower
and all other obligations and liabilities of Borrower to Bank, whether now
existing or hereafter incurred or created, whether voluntary or involuntary,
whether due or not due, whether absolute or contingent, with respect to that
certain Business Loan Agreement between Borrower and Bank and dated of even date
herewith (the "Loan Agreement"). Unless Guarantor shall have otherwise agreed in
writing, Indebtedness, for the purposes of this Agreement, shall not include
"consumer credit" subject to the disclosure requirements of the Federal Truth in
Lending Act or any regulations promulgated thereunder.
3. GUARANTOR'S REPRESENTATIONS, WARRANTIES, AND COVENANTS. Guarantor covenants
and warrants that unless compliance is waived by Bank in writing:
A. Guarantor is the owner of the Collateral and has good right, title and
authority to pledge, sell, transfer and assign the Collateral.
B. There is no financing statement or other document creating or
evidencing a lien now on file in any public office covering any of the
Collateral, nor is there any lien or encumbrance on any of the
Collateral.
C. Guarantor shall execute and deliver such financing statements, and do
such other things, as Bank may from time to time require in order to
perfect and preserve the security interest hereby granted and the
priority of such security interest.
D. If any amount payable under or in connection with any of the Collateral
shall become evidenced by any promissory note or other instrument, such
instrument shall be immediately pledged to Bank hereunder and Guarantor
shall deliver to Bank such instrument, duly endorsed in a manner
satisfactory to Bank.
E. Guarantor will properly preserve the Collateral; defend the Collateral
against any adverse claims and demands; and keep accurate Books and
Records.
F. Guarantor has notified Bank in writing of, and will notify Bank in
writing prior to any change in, the locations of (i) Guarantor's place
of business or Guarantor's chief executive office if Guarantor has more
than one place of business, and (ii) any Collateral, including the
Books and Records.
G. Guarantor will notify Bank in writing prior to any change in
Guarantor's name, identity or business structure.
H. Guarantor will maintain and keep in force insurance covering the
Collateral as required by the Loan Agreement. INSURANCE IS REQUIRED IN
CONNECTION WITH THE INDEBTEDNESS SECURED BY THIS SECURITY AGREEMENT.
THE GUARANTOR SHALL HAVE THE OPTION OF FURNISHING THE REQUIRED
INSURANCE EITHER THROUGH EXISTING POLICIES OF INSURANCE OWNED OR
CONTROLLED BY THE GUARANTOR OR OF PROCURING AND FURNISHING EQUIVALENT
INSURANCE COVERAGES THROUGH ANY INSURANCE COMPANY AUTHORIZED TO
TRANSACT BUSINESS IN TEXAS.
1
<PAGE>
I. Guarantor has not granted and will not grant any security interest in
any of the Collateral except to Bank, and will keep the Collateral free
of all liens, claims, security interests and encumbrances of any kind
or nature except the security interest of Bank.
J. Guarantor will not sell, lease, agree to sell or lease, or otherwise
dispose of, or remove from Guarantor's place of business (i) any
inventory except in the ordinary course of business as heretofore
conducted by Guarantor, or (ii) any other Collateral except with the
prior written consent of Bank.
K. Guarantor will promptly notify Bank in writing of any event which
affects the value of the Collateral, the ability of Guarantor or Bank
to dispose of the Collateral, or the rights and remedies of Bank in
relation thereto, including, but not limited to, the levy of any legal
process against any Collateral and the adoption of any marketing order,
arrangement or procedure affecting the Collateral, whether governmental
or otherwise.
L. If any Collateral is or becomes the subject of any registration
certificate or negotiable document of title, including any warehouse
receipt or bill of lading, Guarantor shall immediately deliver such
document to Bank.
M. Until Bank exercises its rights to make collection, Guarantor will
diligently collect all Collateral.
4. ADDITIONAL OPTIONAL REQUIREMENTS. Guarantor agrees that Bank may at its
option at any time, whether or not Borrower is in default:
A. Require Guarantor to deliver to Bank (i) copies of or extracts from the
Books and Records, and (ii) information on any contracts or other
matters affecting the Collateral.
B. Examine the Collateral, including the Books and Records, and make
copies of or extracts from the Books and Records, and for such purposes
enter at any reasonable time upon the property where any Collateral or
any Books and Records are located.
C. Require Guarantor to obtain Bank's prior written consent to any sale,
lease, agreement to sell or lease, or other disposition of any
inventory other than in the ordinary course of business.
Guarantor further agrees that if Borrower is in default, Bank may:
AA.Require Guarantor to segregate all collections and proceeds of the
Collateral so that they are capable of identification and deliver daily
such collections and proceeds to Bank in kind.
BB.Require Guarantor to deliver to Bank any instruments or chattel paper
constituting Collateral or proceeds of Collateral.
CC.Notify any account debtors, any buyers of the Collateral, or any other
persons of Bank's interest in the Collateral.
DD.Require Guarantor to direct all account debtors to forward all payments
and proceeds of the Collateral to a post office box under Bank's
exclusive control.
EE.Demand and collect any payments and proceeds of the Collateral. In
connection therewith Guarantor irrevocably authorizes Bank to endorse
or sign Guarantor's name on all checks, drafts, collections, receipts
and other documents, and to take possession of and open the mail
addressed to Guarantor and remove therefrom any payments and proceeds
of the Collateral.
5. DEFAULTS. The occurrence of any event described in Section 9 of the Loan
Agreement shall constitute a default hereunder.
6. BANK'S REMEDIES AFTER DEFAULT. In the event of any default Bank may do any
one or more of the following, all without demand, presentment, protest, notice
of protest, notice of intention to accelerate, notice of acceleration, or other
notice of any kind, all of which are hereby waived by Guarantor to the extent
permitted by applicable law:
A. Declare any Indebtedness immediately due and payable.
B. Enforce the security interest given hereunder pursuant to the Uniform
Commercial Code and any other applicable law.
2
<PAGE>
C. Exercise a right of setoff against any deposit account of Guarantor
maintained with Bank by applying such account to the Indebtedness.
D. Require Guarantor to assemble the Collateral, including the Books and
Records, and make them available to Bank at a place designated by Bank.
E. Enter upon the property where any Collateral, including any Books and
Records, are located and take possession of such Collateral and such
Books and Records, and use such property (including any buildings and
facilities) and any of Guarantor's equipment, if Bank deems such use
necessary or advisable in order to take possession of, hold, preserve,
process, assemble, prepare for sale or lease, market for sale or lease,
sell or lease, or otherwise dispose of, any Collateral.
F. Grant extensions and compromise or settle claims with respect to the
Collateral for less than face value, all without prior notice to
Guarantor.
G. Have a receiver appointed by any court of competent jurisdiction to
take possession of the Collateral.
H. Take such measures as Bank may deem necessary or advisable to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and Guarantor hereby irrevocably
constitutes and appoints Bank as Guarantor's attorney-in-fact to
perform all acts and execute all documents in connection therewith.
7. MISCELLANEOUS.
A. Any waiver, express or implied, of any provision hereunder and any
delay or failure by Bank to enforce any provision shall not preclude
Bank from enforcing any such provision thereafter.
B. Guarantor shall, at the request of Bank, execute such other agreements,
documents, instruments, or financing statements in connection with this
Agreement as Bank may reasonably deem necessary to perfect and preserve
the security interests created by this Security Agreement.
C. All notes, security agreements, subordination agreements and other
documents executed by Guarantor or furnished to Bank in connection with
this Agreement must be in form and substance satisfactory to Bank.
D. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS
OF THE STATE OF TEXAS, TO THE JURISDICTION OF WHICH THE PARTIES HERETO
SUBMIT.
E. All rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies otherwise provided by law. Any
single or partial exercise of any right or remedy shall not preclude
the further exercise thereof or the exercise of any other right or
remedy.
F. All terms not defined herein are used as set forth in the Uniform
Commercial Code.
G. In the event of any action by Bank to enforce this Agreement or to
protect the security interest of Bank in the Collateral, or to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, Guarantor agrees to pay immediately the
costs and expenses thereof, together with reasonable attorney's fees
and allocated costs for in-house legal services. Notwithstanding the
foregoing, if the Indebtedness was extended primarily for the purchase
of one or more motor vehicles (other than a heavy commercial vehicle),
the expense for which the Guarantor shall be liable pursuant to this
section 7 (g) shall not exceed the following: all amounts actually
incurred by the Bank as court costs; attorneys' fees assessed by a
court; and the reasonable cost actually expended for repossessing,
storing, preparing for sale, or selling any Collateral.
8. NO ORAL AGREEMENTS. THIS WRITTEN SECURITY AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[The remainder of this page is intentionally left blank.]
3
<PAGE>
9. SIGNATURES
This document is executed by Guarantor as of June 26, 1998.
LENDER: GUARANTOR:
BANK OF AMERICA TEXAS, N.A. HOUSTON GEOPHYSICAL PRODUCTS, INC.
By: /s/ GEORGE M. SMITH By: /s/ THOMAS T. MCENTIRE
George M. Smith, Vice President Thomas T. McEntire, CFO
ADDRESS WHERE NOTICES TO THE BANK ADDRESS WHERE NOTICES TO THE
ARE TO BE SENT: GUARANTOR ARE TO BE SENT:
Bank of America Texas, N.A. 507 Allen Genoa Road
Houston Commercial Lending, #2552 Houston, Texas 77017
333 Clay Street, Ste. 3600
Houston, Texas 77002
4
BANK OF AMERICA
BUSINESS LOAN
CONTINUING GUARANTY
In this guaranty (the "Guaranty"), "Guarantor", refers to each business
organization or person who signs below. "Bank" refers to Bank of America Texas,
N.A.
1. GUARANTY In consideration of the financial arrangements between Bank and the
Borrowers listed below (each a "Borrower" and collectively, the "Borrowers"),
Guarantor guarantees payment of, and agrees to pay to the order of Bank on
demand, the debts (herein so called) to the Bank of the following Borrower(s):
1. Oyo Geospace Corporation, Borrower
2.
3.
4.
If two or more Borrowers are named above, the Guarantor guarantees payment of
any Debt they incur together as well as any Debt each one incurs alone. The Debt
includes all loans and advances made by Bank to Borrower and all other
obligations and liabilities of Borrower to Bank, whether now existing or
hereafter incurred or created, whether voluntary or involuntary, whether
individually or with others, whether due or not due, whether absolute or
contingent, whether liquidated or unliquidated or for a determined or
undetermined amount with respect to that certain Business Loan Agreement between
Borrower and Bank dated of even date herewith.
The Debt also includes any and all renewals, extensions, modifications and
increases of each Borrower's obligations to Bank.
Guarantor irrevocably and unconditionally covenants and agrees that it is liable
for the Debt as primary obligor.
Guarantor represents and warrants that it has received or will receive direct or
indirect benefit from the making of this Guaranty and the loans made by Bank to
Borrower, that Guarantor is familiar with the financial condition of Borrower
and the value of any collateral security for the Debt, and that Bank has made no
representations to Guarantor to induce Guarantor to execute this Guaranty.
This Guaranty is continuous. Until revoked, it covers Debts Borrower incurs even
after fully repaying any previous Debts. Each guarantor's obligations remain and
will not be affected in the event of revocation by any other guarantor.
This Guaranty is unconditional. Bank may require Guarantor to pay, and Guarantor
shall not be released or discharged, even if Bank does not:
o proceed against any borrower, guarantor, or other party;
o perfect any security interest;
o proceed against any security; or
o pursue any other remedy.
Bank may do any of the following without release or discharging Guarantor;
o release, in full or in part, Borrower, other guarantors, or any other
obligors from liability with respect to the Debt;
o grant any forbearance or compromise to Borrower;
o release, subordinate its interest in, surrender, or otherwise impair the
value of, its interest in any collateral securing the Debt; or
o fail to exercise diligence, commercial reasonableness, or reasonable care
in the preservation, enforcement or sale of any collateral securing the
Debt.
1
<PAGE>
Bank may require Guarantor to pay even if a statute of limitations or disability
bars recovery from Borrower, or the Debt is or becomes otherwise unenforceable.
Guarantor waives the benefit of any statute of limitations that would apply to
this Guaranty.
Guarantor hereby waives all notices, including, without limitation, notice of
(a) acceptance of this Guaranty,
(b) the extension of credit by Bank to Borrower,
(c) the occurrence of any breach or default by Borrower in respect of the Debt,
(d) the sale or foreclosure of any collateral for the Debt,
(e) the transfer of the Debt to any third party,
(f) intent to accelerate, and
(g) acceleration.
Guarantor's obligations are independent of Borrower's obligations, and Bank may
sue Guarantor without suing Borrower.
2. LIMITS OF THE GUARANTY Guarantor shall not be liable for any amount over the
following limit, although Bank may allow the Debt to go above it:
the principal amount of $10,000,000.00; plus
any interest, fees, and other expenses arising out of, or constituting
part of, the Debt.
This Guaranty is in addition to any other guaranty given by Guarantor.
3. RIGHTS OF THE BANK Bank may from time to time, without notice to or demand
on Guarantor:
o change the interest rate on or renew the Debt;
o accelerate, extend, compromise, or otherwise change the repayment period
of the Debt;
o receive, substitute, or release collateral for the Debt;
o sell, otherwise dispose of, or apply collateral in any order;
o apply amounts received from anyone other than Guarantor to any
unguaranteed part of the Debt;
o assign or sell the whole or a portion of the Debt and this Guaranty; or
o foreclose any deed of trust securing the Debt, either by judicial
foreclosure or power of sale. Even if the foreclosure destroys or
lessens Guarantor's rights against Borrower, the Guarantor will be liable
to Bank for any part of the Debt remaining unpaid after foreclosure.
Bank may, at its option, request periodic financial statements from Guarantor.
Guarantor agrees to supply these statements promptly whenever they are
requested.
Bank may exercise these rights either before or after Guarantor revokes this
Guaranty, and without affecting any obligation under this Guaranty.
Bank may assign this Guaranty, in whole or part, without notice, and Bank and
any assignee or purchaser, or any prospective assignee or purchaser of the Debt,
may exchange financial information about Guarantor with each other in connection
with any assignment or purchase transaction.
If a Borrower is a corporation or partnership, Bank is not required to
investigate the powers of anyone acting on Borrower's behalf.
2
<PAGE>
4. PROTECTING THE BANK'S INTEREST Guarantor agrees that any amounts Borrower
owes Guarantor now or in the future are subordinated to Borrower's debt to Bank.
If Bank requires, Guarantor, as a trustee for the Bank, shall collect amounts
Borrower owes Guarantor and pay them to Bank in reduction of the Debt without
affecting or reducing any obligations under this Guaranty.
Guarantor agrees that Guarantor does not have, and hereby waives, any:
o right of subrogation, reimbursement, indemnification or contribution
arising from the existence or performance of this Guaranty. This includes
any such rights arising from contract, statutory law or otherwise, and
includes any claim of subrogation under the Bankruptcy Code (Title 11 of
the U.S. Code) or any successor statute;
o right to enforce a remedy which Bank now has or may later have against
Borrower;
o right to participate in security now or later held by Bank; or
o right to any defense based on a claim that the obligations under this
Guaranty are more burdensome or are in excess of Borrower's debt to Bank
Guarantor is solely responsible for obtaining any financial information from
Borrower that guarantor may require. Bank is not required to give Guarantor any
information about Borrower's business operations or financial condition, or any
other notices or demands of any kind, including notices of new debts that may be
incurred by Borrower, notices of default or notice of acceptance of this
Guaranty.
5. SECURITY AND RIGHT OF SETOFF To secure all the Debts covered by this
Guaranty, Guarantor assigns and grants to Bank a security interest in all of
Guarantor's:
o money;
o securities;
o deposit accounts and their proceeds; and
o any other property maintained in the possession of Bank.
If Borrower defaults, or if any of Guarantor's obligations to Bank are not
fulfilled, Bank may immediately set off any money or proceeds of Guarantor's
deposit accounts, securities, or other property in Bank's possession against the
outstanding Debt.
Bank may also foreclose on any other collateral as provided in the Texas Uniform
Commercial Code and in any security agreements between Bank and Guarantor.
If this Guaranty is secured by real property, Guarantor agrees that any
transfer, assignment, sale or conveyance of such property shall constitute a
default under this Guaranty.
6. ARBITRATION
(a) This paragraph concerns the resolution of any controversies or claims
between Borrower and Bank, including but not limited to those that rise
from:
(i) This Guaranty (including any renewals, extensions or modifications
of this Guaranty);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Guaranty;
(iii) Any violation of this Guaranty; or
(iv) Any claims for damages resulting from any business conducted between
Guarantor and Bank, including claims for injury to persons, property
or business interests (torts).
(b) At the request of Guarantor or Bank, any such controversies or claims will
be settled by arbitration in accordance with the United States Arbitration
Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS
AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitation, the filing
of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statute of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss
the arbitration on that basis.
3
<PAGE>
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of Guarantor or Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral;
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) a provisional or interim remedy; and/or
(B) additional or supplementary remedies
(h) The pursuit of a successful action for provisional, interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of Guarantor or Bank, including the suing
party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
7. EXPENSES Guarantor agrees to pay all reasonable attorneys' fees, including
allocated costs of the Bank's in-house counsel, court costs and all other
expenses Bank incurs in enforcing this Guaranty.
8. REVOKING THE GUARANTY Guarantor may revoke this Guaranty as to future
transactions at any time, provided that Guarantor renounces any consideration
given in return for the guaranty of such transactions. Guarantor is obligated on
all credit extended by Bank to Borrower until Bank receives a written notice at
the address shown below revoking this Guaranty.
Any revocation will not affect the Guarantor's obligation for any transactions
that preceded receipt of the written notice, and the Guarantor shall remain
obligated on all debts related to such transactions, even if such debts, before
or after the revocation, have been renewed or modified or any of their terms
shall have been changed in any way.
If this Guaranty is revoked, cancelled or returned, and Bank later must refund
or rescind a payment, or transfer an interest in property back to Borrower, this
Guaranty shall be reinstated as to such payment or interest.
9. ENFORCING THIS GUARANTY THIS GUARANTY IS GOVERNED BY TEXAS LAW, AND BANK MAY
SUE GUARANTOR IN COURTS IN DALLAS COUNTY, TEXAS.
Bank may delay or waive exercising or enforcing any of its rights, including,
without limitation, its rights to setoff and lien, without losing them. Such
rights continue until Bank waives them in writing.
4
<PAGE>
10. SIGNATURES/DATE All guarantors who sign are jointly and severally liable for
all obligations under this Guaranty.
This Guaranty is executed as of June ______________________, 1998.
5
GEO SPACE CORPORATION, GUARANTOR
Dated: ___________________
X________________________________
Thomas T. McEntire, Chief Financial Officer
7334 North Gessner Road
Houston, Texas 77040
Tax I.D. No.: 76-0394288
Address for notices to the Bank:
BANK OF AMERICA TEXAS, N.A.
Houston Commercial Lending, #2552
333 Clay Street, Ste. 3600
Houston, Texas 77002
<PAGE>
BANK OF AMERICA
BUSINESS LOAN
CONTINUING GUARANTY
In this guaranty (the "Guaranty"), "Guarantor", refers to each business
organization or person who signs below. "Bank" refers to Bank of America Texas,
N.A.
1. GUARANTY In consideration of the financial arrangements between Bank and the
Borrowers listed below (each a "Borrower" and collectively, the "Borrowers"),
Guarantor guarantees payment of, and agrees to pay to the order of Bank on
demand, the debts (herein so called) to the Bank of the following Borrower(s):
1. Oyo Geospace Corporation, Borrower
2.
3.
4.
If two or more Borrowers are named above, the Guarantor guarantees payment of
any Debt they incur together as well as any Debt each one incurs alone. The Debt
includes all loans and advances made by Bank to Borrower and all other
obligations and liabilities of Borrower to Bank, whether now existing or
hereafter incurred or created, whether voluntary or involuntary, whether
individually or with others, whether due or not due, whether absolute or
contingent, whether liquidated or unliquidated or for a determined or
undetermined amount with respect to that certain Business Loan Agreement between
Borrower and Bank dated of even date herewith.
The Debt also includes any and all renewals, extensions, modifications and
increases of each Borrower's obligations to Bank.
Guarantor irrevocably and unconditionally covenants and agrees that it is liable
for the Debt as primary obligor.
Guarantor represents and warrants that it has received or will receive direct or
indirect benefit from the making of this Guaranty and the loans made by Bank to
Borrower, that Guarantor is familiar with the financial condition of Borrower
and the value of any collateral security for the Debt, and that Bank has made no
representations to Guarantor to induce Guarantor to execute this Guaranty.
This Guaranty is continuous. Until revoked, it covers Debts Borrower incurs even
after fully repaying any previous Debts. Each guarantor's obligations remain and
will not be affected in the event of revocation by any other guarantor.
This Guaranty is unconditional. Bank may require Guarantor to pay, and Guarantor
shall not be released or discharged, even if Bank does not:
o proceed against any borrower, guarantor, or other party;
o perfect any security interest;
proceed against any security; or
o pursue any other remedy.
Bank may do any of the following without release or discharging Guarantor;
o release, in full or in part, Borrower, other guarantors, or any other
obligors from liability with respect to the Debt;
o grant any forbearance or compromise to Borrower;
o release, subordinate its interest in, surrender, or otherwise impair the
value of, its interest in any collateral securing the Debt; or
o fail to exercise diligence, commercial reasonableness, or reasonable care
in the preservation, enforcement or sale of any collateral securing the
Debt.
1
<PAGE>
Bank may require Guarantor to pay even if a statute of limitations or disability
bars recovery from Borrower, or the Debt is or becomes otherwise unenforceable.
Guarantor waives the benefit of any statute of limitations that would apply to
this Guaranty.
Guarantor hereby waives all notices, including, without limitation, notice of
(a) acceptance of this Guaranty,
(b) the extension of credit by Bank to Borrower,
(c) the occurrence of any breach or default by Borrower in respect of the Debt,
(d) the sale or foreclosure of any collateral for the Debt,
(e) the transfer of the Debt to any third party,
(f) intent to accelerate, and
(g) acceleration.
Guarantor's obligations are independent of Borrower's obligations, and Bank may
sue Guarantor without suing Borrower.
2. LIMITS OF THE GUARANTY Guarantor shall not be liable for any amount over the
following limit, although Bank may allow the Debt to go above it:
o the principal amount of $10,000,000.00; plus
o any interest, fees, and other expenses arising out of, or constituting
part of, the Debt.
This Guaranty is in addition to any other guaranty given by Guarantor.
3. RIGHTS OF THE BANK Bank may from time to time, without notice to or demand
on Guarantor:
o change the interest rate on or renew the Debt;
o accelerate, extend, compromise, or otherwise change the repayment period
of the Debt;
o receive, substitute, or release collateral for the Debt;
o sell, otherwise dispose of, or apply collateral in any order;
o apply amounts received from anyone other than Guarantor to any
unguaranteed part of the Debt;
o assign or sell the whole or a portion of the Debt and this Guaranty; or
o foreclose any deed of trust securing the Debt, either by judicial
foreclosure or power of sale. Even if the foreclosure destroys or lessens
Guarantor's rights against Borrower, the Guarantor will be liable to Bank
for any part of the Debt remaining unpaid after foreclosure.
Bank may, at its option, request periodic financial statements from Guarantor.
Guarantor agrees to supply these statements promptly whenever they are
requested.
Bank may exercise these rights either before or after Guarantor revokes this
Guaranty, and without affecting any obligation under this Guaranty.
Bank may assign this Guaranty, in whole or part, without notice, and Bank and
any assignee or purchaser, or any prospective assignee or purchaser of the Debt,
may exchange financial information about Guarantor with each other in connection
with any assignment or purchase transaction.
If a Borrower is a corporation or partnership, Bank is not required to
investigate the powers of anyone acting on Borrower's behalf.
2
<PAGE>
4. PROTECTING THE BANK'S INTEREST Guarantor agrees that any amounts Borrower
owes Guarantor now or in the future are subordinated to Borrower's debt to Bank.
If Bank requires, Guarantor, as a trustee for the Bank, shall collect amounts
Borrower owes Guarantor and pay them to Bank in reduction of the Debt without
affecting or reducing any obligations under this Guaranty.
Guarantor agrees that Guarantor does not have, and hereby waives, any:
o right of subrogation, reimbursement, indemnification or contribution
arising from the existence or performance of this Guaranty. This includes
any such rights arising from contract, statutory law or otherwise, and
includes any claim of subrogation under the Bankruptcy Code (Title 11 of
the U.S. Code) or any successor statute;
o right to enforce a remedy which Bank now has or may later have against
Borrower;
o right to participate in security now or later held by Bank; or
o right to any defense based on a claim that the obligations under this
Guaranty are more burdensome or are in excess of Borrower's debt to Bank
Guarantor is solely responsible for obtaining any financial information from
Borrower that guarantor may require. Bank is not required to give Guarantor any
information about Borrower's business operations or financial condition, or any
other notices or demands of any kind, including notices of new debts that may be
incurred by Borrower, notices of default or notice of acceptance of this
Guaranty.
5. SECURITY AND RIGHT OF SETOFF To secure all the Debts covered by this
Guaranty, Guarantor assigns and grants to Bank a security interest in all of
Guarantor's:
o money;
o securities;
o deposit accounts and their proceeds; and
o any other property maintained in the possession of Bank.
If Borrower defaults, or if any of Guarantor's obligations to Bank are not
fulfilled, Bank may immediately set off any money or proceeds of Guarantor's
deposit accounts, securities, or other property in Bank's possession against the
outstanding Debt.
Bank may also foreclose on any other collateral as provided in the Texas Uniform
Commercial Code and in any security agreements between Bank and Guarantor.
If this Guaranty is secured by real property, Guarantor agrees that any
transfer, assignment, sale or conveyance of such property shall constitute a
default under this Guaranty.
6. ARBITRATION
(a) This paragraph concerns the resolution of any controversies or claims
between Borrower and Bank, including but not limited to those that rise
from:
(i) This Guaranty (including any renewals, extensions or modifications
of this Guaranty);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Guaranty;
(iii) Any violation of this Guaranty; or
(iv) Any claims for damages resulting from any business conducted between
Guarantor and Bank, including claims for injury to persons, property
or business interests (torts).
(b) At the request of Guarantor or Bank, any such controversies or claims will
be settled by arbitration in accordance with the United States Arbitration
Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS
AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitation, the filing
of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statute of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss
the arbitration on that basis.
3
<PAGE>
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of Guarantor or Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral;
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) a provisional or interim remedy; and/or (B) additional or
supplementary remedies
(h) The pursuit of a successful action for provisional, interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of Guarantor or Bank, including the suing
party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
7. EXPENSES Guarantor agrees to pay all reasonable attorneys' fees, including
allocated costs of the Bank's in-house counsel, court costs and all other
expenses Bank incurs in enforcing this Guaranty.
8. REVOKING THE GUARANTY Guarantor may revoke this Guaranty as to future
transactions at any time, provided that Guarantor renounces any consideration
given in return for the guaranty of such transactions. Guarantor is obligated on
all credit extended by Bank to Borrower until Bank receives a written notice at
the address shown below revoking this Guaranty.
Any revocation will not affect the Guarantor's obligation for any transactions
that preceded receipt of the written notice, and the Guarantor shall remain
obligated on all debts related to such transactions, even if such debts, before
or after the revocation, have been renewed or modified or any of their terms
shall have been changed in any way.
If this Guaranty is revoked, cancelled or returned, and Bank later must refund
or rescind a payment, or transfer an interest in property back to Borrower, this
Guaranty shall be reinstated as to such payment or interest.
9. ENFORCING THIS GUARANTY THIS GUARANTY IS GOVERNED BY TEXAS LAW, AND BANK MAY
SUE GUARANTOR IN COURTS IN DALLAS COUNTY, TEXAS.
Bank may delay or waive exercising or enforcing any of its rights, including,
without limitation, its rights to setoff and lien, without losing them. Such
rights continue until Bank waives them in writing.
4
<PAGE>
10. SIGNATURES/DATE All guarantors who sign are jointly and severally liable for
all obligations under this Guaranty.
This Guaranty is executed as of ____________________, 1998.
GEO SPACE CANADA, INC., GUARANTOR
Dated: ___________________
X________________________________
Thomas T. McEntire, Chief Financial Officer
2735 - 37th Avenue, N.E.
Calgary, Alberta
Canada T1Y5R8
Tax I.D. No.: not applicable for Canadian entity
Address for notices to the Bank:
BANK OF AMERICA TEXAS, N.A.
Houston Commercial Lending, #2552
333 Clay Street, Ste. 3600
Houston, Texas 77002
<PAGE>
BANK OF AMERICA
BUSINESS LOAN
CONTINUING GUARANTY
In this guaranty (the "Guaranty"), "Guarantor", refers to each business
organization or person who signs below. "Bank" refers to Bank of America Texas,
N.A.
1. GUARANTY In consideration of the financial arrangements between Bank and the
Borrowers listed below (each a "Borrower" and collectively, the "Borrowers"),
Guarantor guarantees payment of, and agrees to pay to the order of Bank on
demand, the debts (herein so called) to the Bank of the following Borrower(s):
1. Oyo Geospace Corporation, Borrower
2.
3.
4.
If two or more Borrowers are named above, the Guarantor guarantees payment of
any Debt they incur together as well as any Debt each one incurs alone. The Debt
includes all loans and advances made by Bank to Borrower and all other
obligations and liabilities of Borrower to Bank, whether now existing or
hereafter incurred or created, whether voluntary or involuntary, whether
individually or with others, whether due or not due, whether absolute or
contingent, whether liquidated or unliquidated or for a determined or
undetermined amount with respect to that certain Business Loan Agreement between
Borrower and Bank dated of even date herewith.
The Debt also includes any and all renewals, extensions, modifications and
increases of each Borrower's obligations to Bank.
Guarantor irrevocably and unconditionally covenants and agrees that it is liable
for the Debt as primary obligor.
Guarantor represents and warrants that it has received or will receive direct or
indirect benefit from the making of this Guaranty and the loans made by Bank to
Borrower, that Guarantor is familiar with the financial condition of Borrower
and the value of any collateral security for the Debt, and that Bank has made no
representations to Guarantor to induce Guarantor to execute this Guaranty.
This Guaranty is continuous. Until revoked, it covers Debts Borrower incurs even
after fully repaying any previous Debts. Each guarantor's obligations remain and
will not be affected in the event of revocation by any other guarantor.
This Guaranty is unconditional. Bank may require Guarantor to pay, and Guarantor
shall not be released or discharged, even if Bank does not:
o proceed against any borrower, guarantor, or other party;
o perfect any security interest;
o proceed against any security; or
o pursue any other remedy.
Bank may do any of the following without release or discharging Guarantor;
o release, in full or in part, Borrower, other guarantors, or any other
obligors from liability with respect to the Debt;
o grant any forbearance or compromise to Borrower;
o release, subordinate its interest in, surrender, or otherwise impair
the value of, its interest in any collateral securing the Debt; or
o fail to exercise diligence, commercial reasonableness, or reasonable care
in the preservation, enforcement or sale of any collateral securing the
Debt.
Bank may require Guarantor to pay even if a statute of limitations or disability
bars recovery from Borrower, or the Debt is or becomes otherwise unenforceable.
1
<PAGE>
Guarantor waives the benefit of any statute of limitations that would apply to
this Guaranty.
Guarantor hereby waives all notices, including, without limitation, notice of
(a) acceptance of this Guaranty,
(b) the extension of credit by Bank to Borrower,
(c) the occurrence of any breach or default by Borrower in respect of the Debt,
(d) the sale or foreclosure of any collateral for the Debt,
(e) the transfer of the Debt to any third party,
(f) intent to accelerate, and
(g) acceleration.
Guarantor's obligations are independent of Borrower's obligations, and Bank may
sue Guarantor without suing Borrower.
2. LIMITS OF THE GUARANTY Guarantor shall not be liable for any amount over the
following limit, although Bank may allow the Debt to go above it:
o the principal amount of $10,000,000.00; plus
o any interest, fees, and other expenses arising out of, or constituting
part of, the Debt.
This Guaranty is in addition to any other guaranty given by Guarantor.
3. RIGHTS OF THE BANK Bank may from time to time, without notice to or demand
on Guarantor:
o change the interest rate on or renew the Debt;
o accelerate, extend, compromise, or otherwise change the repayment period
of the Debt;
o receive, substitute, or release collateral for the Debt;
o sell, otherwise dispose of, or apply collateral in any order;
o apply amounts received from anyone other than Guarantor to any
unguaranteed part of the Debt;
o assign or sell the whole or a portion of the Debt and this Guaranty; or
o foreclose any deed of trust securing the Debt, either by judicial
foreclosure or power of sale. Even if the foreclosure destroys or lessens
Guarantor's rights against Borrower, the Guarantor will be liable to Bank
for any part of the Debt remaining unpaid after foreclosure.
Bank may, at its option, request periodic financial statements from Guarantor.
Guarantor agrees to supply these statements promptly whenever they are
requested.
Bank may exercise these rights either before or after Guarantor revokes this
Guaranty, and without affecting any obligation under this Guaranty.
Bank may assign this Guaranty, in whole or part, without notice, and Bank and
any assignee or purchaser, or any prospective assignee or purchaser of the Debt,
may exchange financial information about Guarantor with each other in connection
with any assignment or purchase transaction.
If a Borrower is a corporation or partnership, Bank is not required to
investigate the powers of anyone acting on Borrower's behalf.
4. PROTECTING THE BANK'S INTEREST Guarantor agrees that any amounts Borrower
owes Guarantor now or in the future are subordinated to Borrower's debt to Bank.
If Bank requires, Guarantor, as a trustee for the Bank, shall collect amounts
Borrower owes Guarantor and pay them to Bank in reduction of the Debt without
affecting or reducing any obligations under this Guaranty.
Guarantor agrees that Guarantor does not have, and hereby waives, any:
2
<PAGE>
o right of subrogation, reimbursement, indemnification or contribution
arising from the existence or performance of this Guaranty. This includes
any such rights arising from contract, statutory law or otherwise, and
includes any claim of subrogation under the Bankruptcy Code (Title 11 of
the U.S. Code) or any successor statute;
o right to enforce a remedy which Bank now has or may later have against
Borrower;
o right to participate in security now or later held by Bank; or
o right to any defense based on a claim that the obligations under this
Guaranty are more burdensome or are in excess of Borrower's debt to Bank
Guarantor is solely responsible for obtaining any financial information from
Borrower that guarantor may require. Bank is not required to give Guarantor any
information about Borrower's business operations or financial condition, or any
other notices or demands of any kind, including notices of new debts that may be
incurred by Borrower, notices of default or notice of acceptance of this
Guaranty.
5. SECURITY AND RIGHT OF SETOFF To secure all the Debts covered by this
Guaranty, Guarantor assigns and grants to Bank a security interest in all of
Guarantor's:
o money;
o securities;
o deposit accounts and their proceeds; and
o any other property maintained in the possession of Bank.
If Borrower defaults, or if any of Guarantor's obligations to Bank are not
fulfilled, Bank may immediately set off any money or proceeds of Guarantor's
deposit accounts, securities, or other property in Bank's possession against the
outstanding Debt.
Bank may also foreclose on any other collateral as provided in the Texas Uniform
Commercial Code and in any security agreements between Bank and Guarantor.
If this Guaranty is secured by real property, Guarantor agrees that any
transfer, assignment, sale or conveyance of such property shall constitute a
default under this Guaranty.
6. ARBITRATION
(a) This paragraph concerns the resolution of any controversies or claims
between Borrower and Bank, including but not limited to those that rise
from:
(i) This Guaranty (including any renewals, extensions or modifications
of this Guaranty);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Guaranty;
(iii) Any violation of this Guaranty; or
(iv) Any claims for damages resulting from any business conducted between
Guarantor and Bank, including claims for injury to persons, property
or business interests (torts).
(b) At the request of Guarantor or Bank, any such controversies or claims will
be settled by arbitration in accordance with the United States Arbitration
Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS
AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitation, the filing
of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statute of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss
the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of Guarantor or Bank to:
4
<PAGE>
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral;
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) a provisional or interim remedy; and/or (B) additional or
supplementary remedies
(h) The pursuit of a successful action for provisional, interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of Guarantor or Bank, including the suing
party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
7. EXPENSES Guarantor agrees to pay all reasonable attorneys' fees, including
allocated costs of the Bank's in-house counsel, court costs and all other
expenses Bank incurs in enforcing this Guaranty.
8. REVOKING THE GUARANTY Guarantor may revoke this Guaranty as to future
transactions at any time, provided that Guarantor renounces any consideration
given in return for the guaranty of such transactions. Guarantor is obligated on
all credit extended by Bank to Borrower until Bank receives a written notice at
the address shown below revoking this Guaranty.
Any revocation will not affect the Guarantor's obligation for any transactions
that preceded receipt of the written notice, and the Guarantor shall remain
obligated on all debts related to such transactions, even if such debts, before
or after the revocation, have been renewed or modified or any of their terms
shall have been changed in any way.
If this Guaranty is revoked, cancelled or returned, and Bank later must refund
or rescind a payment, or transfer an interest in property back to Borrower, this
Guaranty shall be reinstated as to such payment or interest.
9. ENFORCING THIS GUARANTY THIS GUARANTY IS GOVERNED BY TEXAS LAW, AND BANK MAY
SUE GUARANTOR IN COURTS IN DALLAS COUNTY, TEXAS.
Bank may delay or waive exercising or enforcing any of its rights, including,
without limitation, its rights to setoff and lien, without losing them. Such
rights continue until Bank waives them in writing.
4
<PAGE>
10. SIGNATURES/DATE All guarantors who sign are jointly and severally liable for
all obligations under this Guaranty.
This Guaranty is executed as of June 26, 1998.
OYO INSTRUMENTS, INC., GUARANTOR
Dated: June 26, 1998
X /s/ THOMAS T. MCENTIRE
Thomas T. McEntire, Chief Financial Officer
9777 West Gulf Bank, Suite 10
Houston, Texas 77040
Tax I.D. No.:76-0394284
Address for notices to the Bank:
BANK OF AMERICA TEXAS, N.A.
Houston Commercial Lending, #2552
333 Clay Street, Ste. 3600
Houston, Texas 77002
<PAGE>
BANK OF AMERICA
BUSINESS LOAN
CONTINUING GUARANTY
In this guaranty (the "Guaranty"), "Guarantor", refers to each business
organization or person who signs below. "Bank" refers to Bank of America Texas,
N.A.
1. GUARANTY In consideration of the financial arrangements between Bank and the
Borrowers listed below (each a "Borrower" and collectively, the "Borrowers"),
Guarantor guarantees payment of, and agrees to pay to the order of Bank on
demand, the debts (herein so called) to the Bank of the following Borrower(s):
1. Oyo Geospace Corporation, Borrower
2.
3.
4.
If two or more Borrowers are named above, the Guarantor guarantees payment of
any Debt they incur together as well as any Debt each one incurs alone. The Debt
includes all loans and advances made by Bank to Borrower and all other
obligations and liabilities of Borrower to Bank, whether now existing or
hereafter incurred or created, whether voluntary or involuntary, whether
individually or with others, whether due or not due, whether absolute or
contingent, whether liquidated or unliquidated or for a determined or
undetermined amount with respect to that certain Business Loan Agreement between
Borrower and Bank dated of even date herewith.
The Debt also includes any and all renewals, extensions, modifications and
increases of each Borrower's obligations to Bank.
Guarantor irrevocably and unconditionally covenants and agrees that it is liable
for the Debt as primary obligor.
Guarantor represents and warrants that it has received or will receive direct or
indirect benefit from the making of this Guaranty and the loans made by Bank to
Borrower, that Guarantor is familiar with the financial condition of Borrower
and the value of any collateral security for the Debt, and that Bank has made no
representations to Guarantor to induce Guarantor to execute this Guaranty.
This Guaranty is continuous. Until revoked, it covers Debts Borrower incurs even
after fully repaying any previous Debts. Each guarantor's obligations remain and
will not be affected in the event of revocation by any other guarantor.
This Guaranty is unconditional. Bank may require Guarantor to pay, and Guarantor
shall not be released or discharged, even if Bank does not:
o proceed against any borrower, guarantor, or other party;
o perfect any security interest;
o proceed against any security; or
o pursue any other remedy.
Bank may do any of the following without release or discharging Guarantor;
o release, in full or in part, Borrower, other guarantors, or any other
obligors from liability with respect to the Debt;
o grant any forbearance or compromise to Borrower;
o release, subordinate its interest in, surrender, or otherwise impair
the value of, its interest in any collateral securing the Debt; or
o fail to exercise diligence, commercial reasonableness, or reasonable care
in the preservation, enforcement or sale of any collateral securing the
Debt.
1
<PAGE>
Bank may require Guarantor to pay even if a statute of limitations or disability
bars recovery from Borrower, or the Debt is or becomes otherwise unenforceable.
Guarantor waives the benefit of any statute of limitations that would apply to
this Guaranty.
Guarantor hereby waives all notices, including, without limitation, notice of
(a) acceptance of this Guaranty,
(b) the extension of credit by Bank to Borrower,
(c) the occurrence of any breach or default by Borrower in respect of the
Debt,
(d) the sale or foreclosure of any collateral for the Debt,
(e) the transfer of the Debt to any third party,
(f) intent to accelerate, and
(g) acceleration.
Guarantor's obligations are independent of Borrower's obligations, and Bank may
sue Guarantor without suing Borrower.
2. LIMITS OF THE GUARANTY Guarantor shall not be liable for any amount over the
following limit, although Bank may allow the Debt to go above it:
o the principal amount of $10,000,000.00; plus
o any interest, fees, and other expenses arising out of, or constituting
part of, the Debt.
This Guaranty is in addition to any other guaranty given by Guarantor.
3. RIGHTS OF THE BANK Bank may from time to time, without notice to or demand
on Guarantor:
o change the interest rate on or renew the Debt;
o accelerate, extend, compromise, or otherwise change the repayment period
of the Debt;
o receive, substitute, or release collateral for the Debt;
o sell, otherwise dispose of, or apply collateral in any order;
o apply amounts received from anyone other than Guarantor to any
unguaranteed part of the Debt;
o assign or sell the whole or a portion of the Debt and this Guaranty; or
o foreclose any deed of trust securing the Debt, either by judicial
foreclosure or power of sale. Even if the foreclosure destroys or lessens
Guarantor's rights against Borrower, the Guarantor will be liable to Bank
for any part of the Debt remaining unpaid after foreclosure.
Bank may, at its option, request periodic financial statements from Guarantor.
Guarantor agrees to supply these statements promptly whenever they are
requested.
Bank may exercise these rights either before or after Guarantor revokes this
Guaranty, and without affecting any obligation under this Guaranty.
Bank may assign this Guaranty, in whole or part, without notice, and Bank and
any assignee or purchaser, or any prospective assignee or purchaser of the Debt,
may exchange financial information about Guarantor with each other in connection
with any assignment or purchase transaction.
If a Borrower is a corporation or partnership, Bank is not required to
investigate the powers of anyone acting on Borrower's behalf.
2
<PAGE>
4. PROTECTING THE BANK'S INTEREST Guarantor agrees that any amounts Borrower
owes Guarantor now or in the future are subordinated to Borrower's debt to Bank.
If Bank requires, Guarantor, as a trustee for the Bank, shall collect amounts
Borrower owes Guarantor and pay them to Bank in reduction of the Debt without
affecting or reducing any obligations under this Guaranty.
Guarantor agrees that Guarantor does not have, and hereby waives, any:
o right of subrogation, reimbursement, indemnification or contribution
arising from the existence or performance of this Guaranty. This includes
any such rights arising from contract, statutory law or otherwise, and
includes any claim of subrogation under the Bankruptcy Code (Title 11 of
the U.S. Code) or any successor statute;
o right to enforce a remedy which Bank now has or may later have against
Borrower;
o right to participate in security now or later held by Bank; or
o right to any defense based on a claim that the obligations under this
Guaranty are more burdensome or are in excess of Borrower's debt to Bank
Guarantor is solely responsible for obtaining any financial information from
Borrower that guarantor may require. Bank is not required to give Guarantor any
information about Borrower's business operations or financial condition, or any
other notices or demands of any kind, including notices of new debts that may be
incurred by Borrower, notices of default or notice of acceptance of this
Guaranty.
5. SECURITY AND RIGHT OF SETOFF To secure all the Debts covered by this
Guaranty, Guarantor assigns and grants to Bank a security interest in all of
Guarantor's:
o money;
o securities;
o deposit accounts and their proceeds; and
o any other property maintained in the possession of Bank.
If Borrower defaults, or if any of Guarantor's obligations to Bank are not
fulfilled, Bank may immediately set off any money or proceeds of Guarantor's
deposit accounts, securities, or other property in Bank's possession against the
outstanding Debt.
Bank may also foreclose on any other collateral as provided in the Texas Uniform
Commercial Code and in any security agreements between Bank and Guarantor.
If this Guaranty is secured by real property, Guarantor agrees that any
transfer, assignment, sale or conveyance of such property shall constitute a
default under this Guaranty.
6. ARBITRATION
(a) This paragraph concerns the resolution of any controversies or claims
between Borrower and Bank, including but not limited to those that rise
from:
(i) This Guaranty (including any renewals, extensions or modifications
of this Guaranty);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Guaranty;
(iii) Any violation of this Guaranty; or
(iv) Any claims for damages resulting from any business conducted between
Guarantor and Bank, including claims for injury to persons, property
or business interests (torts).
(b) At the request of Guarantor or Bank, any such controversies or claims will
be settled by arbitration in accordance with the United States Arbitration
Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS
AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitation, the filing
of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statute of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss
the arbitration on that basis.
3
<PAGE>
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of Guarantor or Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral;
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) a provisional or interim remedy; and/or
(B) additional or supplementary remedies
(h) The pursuit of a successful action for provisional, interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of Guarantor or Bank, including the suing
party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
7. EXPENSES Guarantor agrees to pay all reasonable attorneys' fees, including
allocated costs of the Bank's in-house counsel, court costs and all other
expenses Bank incurs in enforcing this Guaranty.
8. REVOKING THE GUARANTY Guarantor may revoke this Guaranty as to future
transactions at any time, provided that Guarantor renounces any consideration
given in return for the guaranty of such transactions. Guarantor is obligated on
all credit extended by Bank to Borrower until Bank receives a written notice at
the address shown below revoking this Guaranty.
Any revocation will not affect the Guarantor's obligation for any transactions
that preceded receipt of the written notice, and the Guarantor shall remain
obligated on all debts related to such transactions, even if such debts, before
or after the revocation, have been renewed or modified or any of their terms
shall have been changed in any way.
If this Guaranty is revoked, cancelled or returned, and Bank later must refund
or rescind a payment, or transfer an interest in property back to Borrower, this
Guaranty shall be reinstated as to such payment or interest.
9. ENFORCING THIS GUARANTY THIS GUARANTY IS GOVERNED BY TEXAS LAW, AND BANK MAY
SUE GUARANTOR IN COURTS IN DALLAS COUNTY, TEXAS.
Bank may delay or waive exercising or enforcing any of its rights, including,
without limitation, its rights to setoff and lien, without losing them. Such
rights continue until Bank waives them in writing.
4
<PAGE>
10. SIGNATURES/DATE All guarantors who sign are jointly and severally liable for
all obligations under this Guaranty.
This Guaranty is executed as of ____________________, 1998.
OYO GEOSPACE INTERNATIONAL, INC., GUARANTOR
Dated: ___________________
X________________________________
Thomas T. McEntire, Chief Financial Officer
c/o Abacus Trust & Banking Services, Inc.
Bishops Court Hill
St. Carmichael
Barbados W.I.
Tax I.D. No.: 98-0181902
Address for notices to the Bank:
BANK OF AMERICA TEXAS, N.A.
Houston Commercial Lending, #2552
333 Clay Street, Ste. 3600
Houston, Texas 77002
<PAGE>
BANK OF AMERICA
BUSINESS LOAN
CONTINUING GUARANTY
In this guaranty (the "Guaranty"), "Guarantor", refers to each business
organization or person who signs below. "Bank" refers to Bank of America Texas,
N.A.
1. GUARANTY In consideration of the financial arrangements between Bank and the
Borrowers listed below (each a "Borrower" and collectively, the "Borrowers"),
Guarantor guarantees payment of, and agrees to pay to the order of Bank on
demand, the debts (herein so called) to the Bank of the following Borrower(s):
1. Oyo Geospace Corporation, Borrower
2.
3.
4.
If two or more Borrowers are named above, the Guarantor guarantees payment of
any Debt they incur together as well as any Debt each one incurs alone. The Debt
includes all loans and advances made by Bank to Borrower and all other
obligations and liabilities of Borrower to Bank, whether now existing or
hereafter incurred or created, whether voluntary or involuntary, whether
individually or with others, whether due or not due, whether absolute or
contingent, whether liquidated or unliquidated or for a determined or
undetermined amount with respect to that certain Business Loan Agreement between
Borrower and Bank dated of even date herewith.
The Debt also includes any and all renewals, extensions, modifications and
increases of each Borrower's obligations to Bank.
Guarantor irrevocably and unconditionally covenants and agrees that it is liable
for the Debt as primary obligor.
Guarantor represents and warrants that it has received or will receive direct or
indirect benefit from the making of this Guaranty and the loans made by Bank to
Borrower, that Guarantor is familiar with the financial condition of Borrower
and the value of any collateral security for the Debt, and that Bank has made no
representations to Guarantor to induce Guarantor to execute this Guaranty.
This Guaranty is continuous. Until revoked, it covers Debts Borrower incurs even
after fully repaying any previous Debts. Each guarantor's obligations remain and
will not be affected in the event of revocation by any other guarantor.
This Guaranty is unconditional. Bank may require Guarantor to pay, and Guarantor
shall not be released or discharged, even if Bank does not:
o proceed against any borrower, guarantor, or other party;
o perfect any security interest;
o proceed against any security; or
o pursue any other remedy.
Bank may do any of the following without release or discharging Guarantor;
o release, in full or in part, Borrower, other guarantors, or any other
obligors from liability with respect to the Debt;
o grant any forbearance or compromise to Borrower;
o release, subordinate its interest in, surrender, or otherwise impair the
value of, its interest in any collateral securing the Debt; or
o fail to exercise diligence, commercial reasonableness, or reasonable care
in the preservation, enforcement or sale of any collateral securing the
Debt.
Bank may require Guarantor to pay even if a statute of limitations or disability
bars recovery from Borrower, or the Debt is or becomes otherwise unenforceable.
1
<PAGE>
Guarantor waives the benefit of any statute of limitations that would apply to
this Guaranty.
Guarantor hereby waives all notices, including, without limitation, notice of
(a) acceptance of this Guaranty,
(b) the extension of credit by Bank to Borrower,
(c) the occurrence of any breach or default by Borrower in respect of the
Debt,
(d) the sale or foreclosure of any collateral for the Debt,
(e) the transfer of the Debt to any third party,
(f) intent to accelerate, and
(g) acceleration.
Guarantor's obligations are independent of Borrower's obligations, and Bank may
sue Guarantor without suing Borrower.
2. LIMITS OF THE GUARANTY Guarantor shall not be liable for any amount over the
following limit, although Bank may allow the Debt to go above it:
o the principal amount of $10,000,000.00; plus
o any interest, fees, and other expenses arising out of, or constituting
part of, the Debt.
This Guaranty is in addition to any other guaranty given by Guarantor.
3. RIGHTS OF THE BANK Bank may from time to time, without notice to or demand
on Guarantor:
o change the interest rate on or renew the Debt;
o accelerate, extend, compromise, or otherwise change the repayment period
of the Debt;
o receive, substitute, or release collateral for the Debt;
o sell, otherwise dispose of, or apply collateral in any order;
o apply amounts received from anyone other than Guarantor to any
unguaranteed part of the Debt;
o assign or sell the whole or a portion of the Debt and this Guaranty; or
o foreclose any deed of trust securing the Debt, either by judicial
foreclosure or power of sale. Even if the foreclosure destroys or lessens
Guarantor's rights against Borrower, the Guarantor will be liable to Bank
for any part of the Debt remaining unpaid after foreclosure.
Bank may, at its option, request periodic financial statements from Guarantor.
Guarantor agrees to supply these statements promptly whenever they are
requested.
Bank may exercise these rights either before or after Guarantor revokes this
Guaranty, and without affecting any obligation under this Guaranty.
Bank may assign this Guaranty, in whole or part, without notice, and Bank and
any assignee or purchaser, or any prospective assignee or purchaser of the Debt,
may exchange financial information about Guarantor with each other in connection
with any assignment or purchase transaction.
If a Borrower is a corporation or partnership, Bank is not required to
investigate the powers of anyone acting on Borrower's behalf.
4. PROTECTING THE BANK'S INTEREST Guarantor agrees that any amounts Borrower
owes Guarantor now or in the future are subordinated to Borrower's debt to Bank.
If Bank requires, Guarantor, as a trustee for the Bank, shall collect amounts
Borrower owes Guarantor and pay them to Bank in reduction of the Debt without
affecting or reducing any obligations under this Guaranty.
Guarantor agrees that Guarantor does not have, and hereby waives, any:
2
<PAGE>
o right of subrogation, reimbursement, indemnification or contribution
arising from the existence or performance of this Guaranty. This includes
any such rights arising from contract, statutory law or otherwise, and
includes any claim of subrogation under the Bankruptcy Code (Title 11 of
the U.S. Code) or any successor statute;
o right to enforce a remedy which Bank now has or may later have against
Borrower;
o right to participate in security now or later held by Bank; or
o right to any defense based on a claim that the obligations under this
Guaranty are more burdensome or are in excess of Borrower's debt to Bank
Guarantor is solely responsible for obtaining any financial information from
Borrower that guarantor may require. Bank is not required to give Guarantor any
information about Borrower's business operations or financial condition, or any
other notices or demands of any kind, including notices of new debts that may be
incurred by Borrower, notices of default or notice of acceptance of this
Guaranty.
5. SECURITY AND RIGHT OF SETOFF To secure all the Debts covered by this
Guaranty, Guarantor assigns and grants to Bank a security interest in all of
Guarantor's:
o money;
o securities;
o deposit accounts and their proceeds; and
o any other property maintained in the possession of Bank.
If Borrower defaults, or if any of Guarantor's obligations to Bank are not
fulfilled, Bank may immediately set off any money or proceeds of Guarantor's
deposit accounts, securities, or other property in Bank's possession against the
outstanding Debt.
Bank may also foreclose on any other collateral as provided in the Texas Uniform
Commercial Code and in any security agreements between Bank and Guarantor.
If this Guaranty is secured by real property, Guarantor agrees that any
transfer, assignment, sale or conveyance of such property shall constitute a
default under this Guaranty.
6. ARBITRATION
(a) This paragraph concerns the resolution of any controversies or claims
between Borrower and Bank, including but not limited to those that rise
from:
(i) This Guaranty (including any renewals, extensions or modifications
of this Guaranty);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Guaranty;
(iii) Any violation of this Guaranty; or
(iv) Any claims for damages resulting from any business conducted between
Guarantor and Bank, including claims for injury to persons, property
or business interests (torts).
(b) At the request of Guarantor or Bank, any such controversies or claims will
be settled by arbitration in accordance with the United States Arbitration
Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS
AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitation, the filing
of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statute of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss
the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of Guarantor or Bank to:
3
<PAGE>
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral;
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) a provisional or interim remedy; and/or
(B) additional or supplementary remedies
(h) The pursuit of a successful action for provisional, interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of Guarantor or Bank, including the suing
party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
7. EXPENSES Guarantor agrees to pay all reasonable attorneys' fees, including
allocated costs of the Bank's in-house counsel, court costs and all other
expenses Bank incurs in enforcing this Guaranty.
8. REVOKING THE GUARANTY Guarantor may revoke this Guaranty as to future
transactions at any time, provided that Guarantor renounces any consideration
given in return for the guaranty of such transactions. Guarantor is obligated on
all credit extended by Bank to Borrower until Bank receives a written notice at
the address shown below revoking this Guaranty.
Any revocation will not affect the Guarantor's obligation for any transactions
that preceded receipt of the written notice, and the Guarantor shall remain
obligated on all debts related to such transactions, even if such debts, before
or after the revocation, have been renewed or modified or any of their terms
shall have been changed in any way.
If this Guaranty is revoked, cancelled or returned, and Bank later must refund
or rescind a payment, or transfer an interest in property back to Borrower, this
Guaranty shall be reinstated as to such payment or interest.
9. ENFORCING THIS GUARANTY THIS GUARANTY IS GOVERNED BY TEXAS LAW, AND BANK MAY
SUE GUARANTOR IN COURTS IN DALLAS COUNTY, TEXAS.
Bank may delay or waive exercising or enforcing any of its rights, including,
without limitation, its rights to setoff and lien, without losing them. Such
rights continue until Bank waives them in writing.
4
<PAGE>
10. SIGNATURES/DATE All guarantors who sign are jointly and severally liable for
all obligations under this Guaranty.
This Guaranty is executed as of June 26, 1998.
5404339 AND MORE ROYALTIES COMPANY, GUARANTOR
Dated: June 26, 1998
X /s/ GARY D. OWENS
Gary D. Owens, President
101 Convention Center Drive, Suite 850
Las Vegas, Nevada 89109
Tax I.D. No.: 88-0384835
Address for notices to the Bank:
BANK OF AMERICA TEXAS, N.A.
Houston Commercial Lending, #2552
333 Clay Street, Ste. 3600
Houston, Texas 77002
<PAGE>
BANK OF AMERICA
BUSINESS LOAN
CONTINUING GUARANTY
In this guaranty (the "Guaranty"), "Guarantor", refers to each business
organization or person who signs below. "Bank" refers to Bank of America Texas,
N.A.
1. GUARANTY In consideration of the financial arrangements between Bank and the
Borrowers listed below (each a "Borrower" and collectively, the "Borrowers"),
Guarantor guarantees payment of, and agrees to pay to the order of Bank on
demand, the debts (herein so called) to the Bank of the following Borrower(s):
1. Oyo Geospace Corporation, Borrower
2.
3.
4.
If two or more Borrowers are named above, the Guarantor guarantees payment of
any Debt they incur together as well as any Debt each one incurs alone. The Debt
includes all loans and advances made by Bank to Borrower and all other
obligations and liabilities of Borrower to Bank, whether now existing or
hereafter incurred or created, whether voluntary or involuntary, whether
individually or with others, whether due or not due, whether absolute or
contingent, whether liquidated or unliquidated or for a determined or
undetermined amount with respect to that certain Business Loan Agreement between
Borrower and Bank dated of even date herewith.
The Debt also includes any and all renewals, extensions, modifications and
increases of each Borrower's obligations to Bank.
Guarantor irrevocably and unconditionally covenants and agrees that it is liable
for the Debt as primary obligor.
Guarantor represents and warrants that it has received or will receive direct or
indirect benefit from the making of this Guaranty and the loans made by Bank to
Borrower, that Guarantor is familiar with the financial condition of Borrower
and the value of any collateral security for the Debt, and that Bank has made no
representations to Guarantor to induce Guarantor to execute this Guaranty.
This Guaranty is continuous. Until revoked, it covers Debts Borrower incurs even
after fully repaying any previous Debts. Each guarantor's obligations remain and
will not be affected in the event of revocation by any other guarantor.
This Guaranty is unconditional. Bank may require Guarantor to pay, and Guarantor
shall not be released or discharged, even if Bank does not:
o proceed against any borrower, guarantor, or other party;
o perfect any security interest;
o proceed against any security; or
o pursue any other remedy.
Bank may do any of the following without release or discharging Guarantor;
o release, in full or in part, Borrower, other guarantors, or any other
obligors from liability with respect to the Debt;
o grant any forbearance or compromise to Borrower;
o release, subordinate its interest in, surrender, or otherwise impair the
value of, its interest in any collateral securing the Debt; or
o fail to exercise diligence, commercial reasonableness, or reasonable care
in the preservation, enforcement or sale of any collateral securing the
Debt.
Bank may require Guarantor to pay even if a statute of limitations or disability
bars recovery from Borrower, or the Debt is or becomes otherwise unenforceable.
1
<PAGE>
Guarantor waives the benefit of any statute of limitations that would apply to
this Guaranty.
Guarantor hereby waives all notices, including, without limitation, notice of
(a) acceptance of this Guaranty,
(b) the extension of credit by Bank to Borrower,
(c) the occurrence of any breach or default by Borrower in respect of the
Debt,
(d) the sale or foreclosure of any collateral for the Debt,
(e) the transfer of the Debt to any third party,
(f) intent to accelerate, and
(g) acceleration.
Guarantor's obligations are independent of Borrower's obligations, and Bank may
sue Guarantor without suing Borrower.
2. LIMITS OF THE GUARANTY Guarantor shall not be liable for any amount over the
following limit, although Bank may allow the Debt to go above it:
o the principal amount of $10,000,000.00; plus
o any interest, fees, and other expenses arising out of, or constituting
part of, the Debt.
This Guaranty is in addition to any other guaranty given by Guarantor.
3. RIGHTS OF THE BANK Bank may from time to time, without notice to or demand
on Guarantor:
o change the interest rate on or renew the Debt;
o accelerate, extend, compromise, or otherwise change the repayment period
of the Debt;
o receive, substitute, or release collateral for the Debt;
o sell, otherwise dispose of, or apply collateral in any order;
o apply amounts received from anyone other than Guarantor to any
unguaranteed part of the Debt;
o assign or sell the whole or a portion of the Debt and this Guaranty; or
o foreclose any deed of trust securing the Debt, either by judicial
foreclosure or power of sale. Even if the foreclosure destroys or lessens
Guarantor's rights against Borrower, the Guarantor will be liable to Bank
for any part of the Debt remaining unpaid after foreclosure.
Bank may, at its option, request periodic financial statements from Guarantor.
Guarantor agrees to supply these statements promptly whenever they are
requested.
Bank may exercise these rights either before or after Guarantor revokes this
Guaranty, and without affecting any obligation under this Guaranty.
Bank may assign this Guaranty, in whole or part, without notice, and Bank and
any assignee or purchaser, or any prospective assignee or purchaser of the Debt,
may exchange financial information about Guarantor with each other in connection
with any assignment or purchase transaction.
If a Borrower is a corporation or partnership, Bank is not required to
investigate the powers of anyone acting on Borrower's behalf.
4. PROTECTING THE BANK'S INTEREST Guarantor agrees that any amounts Borrower
owes Guarantor now or in the future are subordinated to Borrower's debt to Bank.
If Bank requires, Guarantor, as a trustee for the Bank, shall collect amounts
Borrower owes Guarantor and pay them to Bank in reduction of the Debt without
affecting or reducing any obligations under this Guaranty.
Guarantor agrees that Guarantor does not have, and hereby waives, any:
2
<PAGE>
o right of subrogation, reimbursement, indemnification or contribution
arising from the existence or performance of this Guaranty. This includes
any such rights arising from contract, statutory law or otherwise, and
includes any claim of subrogation under the Bankruptcy Code (Title 11 of
the U.S. Code) or any successor statute;
o right to enforce a remedy which Bank now has or may later have against
Borrower;
o right to participate in security now or later held by Bank; or
o right to any defense based on a claim that the obligations under this
Guaranty are more burdensome or are in excess of Borrower's debt to Bank
Guarantor is solely responsible for obtaining any financial information from
Borrower that guarantor may require. Bank is not required to give Guarantor any
information about Borrower's business operations or financial condition, or any
other notices or demands of any kind, including notices of new debts that may be
incurred by Borrower, notices of default or notice of acceptance of this
Guaranty.
5. SECURITY AND RIGHT OF SETOFF To secure all the Debts covered by this
Guaranty, Guarantor assigns and grants to Bank a security interest in all of
Guarantor's:
o money;
o securities;
o deposit accounts and their proceeds; and
o any other property maintained in the possession of Bank.
If Borrower defaults, or if any of Guarantor's obligations to Bank are not
fulfilled, Bank may immediately set off any money or proceeds of Guarantor's
deposit accounts, securities, or other property in Bank's possession against the
outstanding Debt.
Bank may also foreclose on any other collateral as provided in the Texas Uniform
Commercial Code and in any security agreements between Bank and Guarantor.
If this Guaranty is secured by real property, Guarantor agrees that any
transfer, assignment, sale or conveyance of such property shall constitute a
default under this Guaranty.
6. ARBITRATION
(a) This paragraph concerns the resolution of any controversies or claims
between Borrower and Bank, including but not limited to those that rise
from:
(i) This Guaranty (including any renewals, extensions or modifications
of this Guaranty);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Guaranty;
(iii) Any violation of this Guaranty; or
(iv) Any claims for damages resulting from any business conducted between
Guarantor and Bank, including claims for injury to persons, property
or business interests (torts).
(b) At the request of Guarantor or Bank, any such controversies or claims will
be settled by arbitration in accordance with the United States Arbitration
Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS
AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitation, the filing
of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statute of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss
the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of Guarantor or Bank to:
3
<PAGE>
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral;
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) a provisional or interim remedy; and/or
(B) additional or supplementary remedies
(h) The pursuit of a successful action for provisional, interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of Guarantor or Bank, including the suing
party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
7. EXPENSES Guarantor agrees to pay all reasonable attorneys' fees, including
allocated costs of the Bank's in-house counsel, court costs and all other
expenses Bank incurs in enforcing this Guaranty.
8. REVOKING THE GUARANTY Guarantor may revoke this Guaranty as to future
transactions at any time, provided that Guarantor renounces any consideration
given in return for the guaranty of such transactions. Guarantor is obligated on
all credit extended by Bank to Borrower until Bank receives a written notice at
the address shown below revoking this Guaranty.
Any revocation will not affect the Guarantor's obligation for any transactions
that preceded receipt of the written notice, and the Guarantor shall remain
obligated on all debts related to such transactions, even if such debts, before
or after the revocation, have been renewed or modified or any of their terms
shall have been changed in any way.
If this Guaranty is revoked, cancelled or returned, and Bank later must refund
or rescind a payment, or transfer an interest in property back to Borrower, this
Guaranty shall be reinstated as to such payment or interest.
9. ENFORCING THIS GUARANTY THIS GUARANTY IS GOVERNED BY TEXAS LAW, AND BANK MAY
SUE GUARANTOR IN COURTS IN DALLAS COUNTY, TEXAS.
Bank may delay or waive exercising or enforcing any of its rights, including,
without limitation, its rights to setoff and lien, without losing them. Such
rights continue until Bank waives them in writing.
4
<PAGE>
10. SIGNATURES/DATE All guarantors who sign are jointly and severally liable for
all obligations under this Guaranty.
This Guaranty is executed as of June 26, 1998.
CONCORD TECHNOLOGIES, INC., GUARANTOR
Dated: June 26, 1998
X /s/ THOMAS T. MCENTIRE
Thomas T. McEntire, Chief Financial Officer
1830 Kersten
Houston, Texas 77043-3118
Tax I.D. No.: 76-0561467
Address for notices to the Bank:
BANK OF AMERICA TEXAS, N.A.
Houston Commercial Lending, #2552
333 Clay Street, Ste. 3600
Houston, Texas 77002
<PAGE>
BANK OF AMERICA
BUSINESS LOAN
CONTINUING GUARANTY
In this guaranty (the "Guaranty"), "Guarantor", refers to each business
organization or person who signs below. "Bank" refers to Bank of America Texas,
N.A.
1. GUARANTY In consideration of the financial arrangements between Bank and the
Borrowers listed below (each a "Borrower" and collectively, the "Borrowers"),
Guarantor guarantees payment of, and agrees to pay to the order of Bank on
demand, the debts (herein so called) to the Bank of the following Borrower(s):
1. Oyo Geospace Corporation, Borrower
2.
3.
4.
If two or more Borrowers are named above, the Guarantor guarantees payment of
any Debt they incur together as well as any Debt each one incurs alone. The Debt
includes all loans and advances made by Bank to Borrower and all other
obligations and liabilities of Borrower to Bank, whether now existing or
hereafter incurred or created, whether voluntary or involuntary, whether
individually or with others, whether due or not due, whether absolute or
contingent, whether liquidated or unliquidated or for a determined or
undetermined amount with respect to that certain Business Loan Agreement between
Borrower and Bank dated of even date herewith.
The Debt also includes any and all renewals, extensions, modifications and
increases of each Borrower's obligations to Bank.
Guarantor irrevocably and unconditionally covenants and agrees that it is liable
for the Debt as primary obligor.
Guarantor represents and warrants that it has received or will receive direct or
indirect benefit from the making of this Guaranty and the loans made by Bank to
Borrower, that Guarantor is familiar with the financial condition of Borrower
and the value of any collateral security for the Debt, and that Bank has made no
representations to Guarantor to induce Guarantor to execute this Guaranty.
This Guaranty is continuous. Until revoked, it covers Debts Borrower incurs even
after fully repaying any previous Debts. Each guarantor's obligations remain and
will not be affected in the event of revocation by any other guarantor.
This Guaranty is unconditional. Bank may require Guarantor to pay, and Guarantor
shall not be released or discharged, even if Bank does not:
o proceed against any borrower, guarantor, or other party;
o perfect any security interest;
o proceed against any security; or
o pursue any other remedy.
Bank may do any of the following without release or discharging Guarantor;
o release, in full or in part, Borrower, other guarantors, or any other
obligors from liability with respect to the Debt;
o grant any forbearance or compromise to Borrower;
o release, subordinate its interest in, surrender, or otherwise impair the
value of, its interest in any collateral securing the Debt; or
o fail to exercise diligence, commercial reasonableness, or reasonable care
in the preservation, enforcement or sale of any collateral securing the
Debt.
Bank may require Guarantor to pay even if a statute of limitations or disability
bars recovery from Borrower, or the Debt is or becomes otherwise unenforceable.
1
<PAGE>
Guarantor waives the benefit of any statute of limitations that would apply to
this Guaranty.
Guarantor hereby waives all notices, including, without limitation, notice of
(a) acceptance of this Guaranty,
(b) the extension of credit by Bank to Borrower,
(c) the occurrence of any breach or default by Borrower in respect of the
Debt,
(d) the sale or foreclosure of any collateral for the Debt,
(e) the transfer of the Debt to any third party,
(f) intent to accelerate, and
(g) acceleration.
Guarantor's obligations are independent of Borrower's obligations, and Bank may
sue Guarantor without suing Borrower.
2. LIMITS OF THE GUARANTY Guarantor shall not be liable for any amount over the
following limit, although Bank may allow the Debt to go above it:
o the principal amount of $10,000,000.00; plus
o any interest, fees, and other expenses arising out of, or constituting
part of, the Debt.
This Guaranty is in addition to any other guaranty given by Guarantor.
3. RIGHTS OF THE BANK Bank may from time to time, without notice to or demand
on Guarantor:
o change the interest rate on or renew the Debt;
o accelerate, extend, compromise, or otherwise change the repayment period
of the Debt;
o receive, substitute, or release collateral for the Debt;
o sell, otherwise dispose of, or apply collateral in any order;
o apply amounts received from anyone other than Guarantor to any
unguaranteed part of the Debt;
o assign or sell the whole or a portion of the Debt and this Guaranty; or
o foreclose any deed of trust securing the Debt, either by judicial
foreclosure or power of sale. Even if the foreclosure destroys or lessens
Guarantor's rights against Borrower, the Guarantor will be liable to Bank
for any part of the Debt remaining unpaid after foreclosure.
Bank may, at its option, request periodic financial statements from Guarantor.
Guarantor agrees to supply these statements promptly whenever they are
requested.
Bank may exercise these rights either before or after Guarantor revokes this
Guaranty, and without affecting any obligation under this Guaranty.
Bank may assign this Guaranty, in whole or part, without notice, and Bank and
any assignee or purchaser, or any prospective assignee or purchaser of the Debt,
may exchange financial information about Guarantor with each other in connection
with any assignment or purchase transaction.
If a Borrower is a corporation or partnership, Bank is not required to
investigate the powers of anyone acting on Borrower's behalf.
2
<PAGE>
4. PROTECTING THE BANK'S INTEREST Guarantor agrees that any amounts Borrower
owes Guarantor now or in the future are subordinated to Borrower's debt to Bank.
If Bank requires, Guarantor, as a trustee for the Bank, shall collect amounts
Borrower owes Guarantor and pay them to Bank in reduction of the Debt without
affecting or reducing any obligations under this Guaranty.
Guarantor agrees that Guarantor does not have, and hereby waives, any:
o right of subrogation, reimbursement, indemnification or contribution
arising from the existence or performance of this Guaranty. This includes
any such rights arising from contract, statutory law or otherwise, and
includes any claim of subrogation under the Bankruptcy Code (Title 11 of
the U.S. Code) or any successor statute;
o right to enforce a remedy which Bank now has or may later have against
Borrower;
o right to participate in security now or later held by Bank; or
o right to any defense based on a claim that the obligations under this
Guaranty are more burdensome or are in excess of Borrower's debt to Bank
Guarantor is solely responsible for obtaining any financial information from
Borrower that guarantor may require. Bank is not required to give Guarantor any
information about Borrower's business operations or financial condition, or any
other notices or demands of any kind, including notices of new debts that may be
incurred by Borrower, notices of default or notice of acceptance of this
Guaranty.
5. SECURITY AND RIGHT OF SETOFF To secure all the Debts covered by this
Guaranty, Guarantor assigns and grants to Bank a security interest in all of
Guarantor's:
o money;
o securities;
o deposit accounts and their proceeds; and
o any other property maintained in the possession of Bank.
If Borrower defaults, or if any of Guarantor's obligations to Bank are not
fulfilled, Bank may immediately set off any money or proceeds of Guarantor's
deposit accounts, securities, or other property in Bank's possession against the
outstanding Debt.
Bank may also foreclose on any other collateral as provided in the Texas Uniform
Commercial Code and in any security agreements between Bank and Guarantor.
If this Guaranty is secured by real property, Guarantor agrees that any
transfer, assignment, sale or conveyance of such property shall constitute a
default under this Guaranty.
6. ARBITRATION
(a) This paragraph concerns the resolution of any controversies or claims
between Borrower and Bank, including but not limited to those that rise
from:
(i) This Guaranty (including any renewals, extensions or modifications
of this Guaranty);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Guaranty;
(iii) Any violation of this Guaranty; or
(iv) Any claims for damages resulting from any business conducted between
Guarantor and Bank, including claims for injury to persons, property
or business interests (torts).
(b) At the request of Guarantor or Bank, any such controversies or claims will
be settled by arbitration in accordance with the United States Arbitration
Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS
AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitation, the filing
of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statute of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss
the arbitration on that basis.
3
<PAGE>
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of Guarantor or Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral;
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) a provisional or interim remedy; and/or
(B) additional or supplementary remedies
(h) The pursuit of a successful action for provisional, interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of Guarantor or Bank, including the suing
party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
7. EXPENSES Guarantor agrees to pay all reasonable attorneys' fees, including
allocated costs of the Bank's in-house counsel, court costs and all other
expenses Bank incurs in enforcing this Guaranty.
8. REVOKING THE GUARANTY Guarantor may revoke this Guaranty as to future
transactions at any time, provided that Guarantor renounces any consideration
given in return for the guaranty of such transactions. Guarantor is obligated on
all credit extended by Bank to Borrower until Bank receives a written notice at
the address shown below revoking this Guaranty.
Any revocation will not affect the Guarantor's obligation for any transactions
that preceded receipt of the written notice, and the Guarantor shall remain
obligated on all debts related to such transactions, even if such debts, before
or after the revocation, have been renewed or modified or any of their terms
shall have been changed in any way.
If this Guaranty is revoked, cancelled or returned, and Bank later must refund
or rescind a payment, or transfer an interest in property back to Borrower, this
Guaranty shall be reinstated as to such payment or interest.
9. ENFORCING THIS GUARANTY THIS GUARANTY IS GOVERNED BY TEXAS LAW, AND BANK MAY
SUE GUARANTOR IN COURTS IN DALLAS COUNTY, TEXAS.
Bank may delay or waive exercising or enforcing any of its rights, including,
without limitation, its rights to setoff and lien, without losing them. Such
rights continue until Bank waives them in writing.
4
<PAGE>
10. SIGNATURES/DATE All guarantors who sign are jointly and severally liable for
all obligations under this Guaranty.
This Guaranty is executed as of June 26, 1998.
HOUSTON GEOPHYSICAL PRODUCTS, INC., GUARANTOR
Dated: June 26, 1998
X /s/ THOMAS T. MCENTIRE
Thomas T. McEntire, Chief Financial Officer
507 Allen Genoa Road
Houston, Texas 77017
Tax I.D. No.: 74-2138710
Address for notices to the Bank:
BANK OF AMERICA TEXAS, N.A.
Houston Commercial Lending, #2552
333 Clay Street, Ste. 3600
Houston, Texas 77002
<PAGE>
BANK OF AMERICA
BUSINESS LOAN
CONTINUING GUARANTY
In this guaranty (the "Guaranty"), "Guarantor", refers to each business
organization or person who signs below. "Bank" refers to Bank of America Texas,
N.A.
1. GUARANTY In consideration of the financial arrangements between Bank and the
Borrowers listed below (each a "Borrower" and collectively, the "Borrowers"),
Guarantor guarantees payment of, and agrees to pay to the order of Bank on
demand, the debts (herein so called) to the Bank of the following Borrower(s):
1. Oyo Geospace Corporation, Borrower
2.
3.
4.
If two or more Borrowers are named above, the Guarantor guarantees payment of
any Debt they incur together as well as any Debt each one incurs alone. The Debt
includes all loans and advances made by Bank to Borrower and all other
obligations and liabilities of Borrower to Bank, whether now existing or
hereafter incurred or created, whether voluntary or involuntary, whether
individually or with others, whether due or not due, whether absolute or
contingent, whether liquidated or unliquidated or for a determined or
undetermined amount with respect to that certain Business Loan Agreement between
Borrower and Bank dated of even date herewith.
The Debt also includes any and all renewals, extensions, modifications and
increases of each Borrower's obligations to Bank.
Guarantor irrevocably and unconditionally covenants and agrees that it is liable
for the Debt as primary obligor.
Guarantor represents and warrants that it has received or will receive direct or
indirect benefit from the making of this Guaranty and the loans made by Bank to
Borrower, that Guarantor is familiar with the financial condition of Borrower
and the value of any collateral security for the Debt, and that Bank has made no
representations to Guarantor to induce Guarantor to execute this Guaranty.
This Guaranty is continuous. Until revoked, it covers Debts Borrower incurs even
after fully repaying any previous Debts. Each guarantor's obligations remain and
will not be affected in the event of revocation by any other guarantor.
This Guaranty is unconditional. Bank may require Guarantor to pay, and Guarantor
shall not be released or discharged, even if Bank does not:
o proceed against any borrower, guarantor, or other party;
o perfect any security interest;
o proceed against any security; or
o pursue any other remedy.
Bank may do any of the following without release or discharging Guarantor;
o release, in full or in part, Borrower, other guarantors, or any other
obligors from liability with respect to the Debt;
o grant any forbearance or compromise to Borrower;
o release, subordinate its interest in, surrender, or otherwise impair the
value of, its interest in any collateral securing the Debt; or
o fail to exercise diligence, commercial reasonableness, or reasonable care
in the preservation, enforcement or sale of any collateral securing the
Debt.
1
<PAGE>
Bank may require Guarantor to pay even if a statute of limitations or disability
bars recovery from Borrower, or the Debt is or becomes otherwise unenforceable.
Guarantor waives the benefit of any statute of limitations that would apply to
this Guaranty.
Guarantor hereby waives all notices, including, without limitation, notice of
(a) acceptance of this Guaranty,
(b) the extension of credit by Bank to Borrower,
(c) the occurrence of any breach or default by Borrower in respect of the
Debt,
(d) the sale or foreclosure of any collateral for the Debt,
(e) the transfer of the Debt to any third party,
(f) intent to accelerate, and
(g) acceleration.
Guarantor's obligations are independent of Borrower's obligations, and Bank may
sue Guarantor without suing Borrower.
2. LIMITS OF THE GUARANTY Guarantor shall not be liable for any amount over the
following limit, although Bank may allow the Debt to go above it:
o the principal amount of $10,000,000.00; plus
o any interest, fees, and other expenses arising out of, or constituting
part of, the Debt.
This Guaranty is in addition to any other guaranty given by Guarantor.
3. RIGHTS OF THE BANK Bank may from time to time, without notice to or demand
on Guarantor:
o change the interest rate on or renew the Debt;
o accelerate, extend, compromise, or otherwise change the repayment period
of the Debt;
o receive, substitute, or release collateral for the Debt;
o sell, otherwise dispose of, or apply collateral in any order;
o apply amounts received from anyone other than Guarantor to any
unguaranteed part of the Debt;
o assign or sell the whole or a portion of the Debt and this Guaranty; or
o foreclose any deed of trust securing the Debt, either by judicial
foreclosure or power of sale. Even if the foreclosure destroys or lessens
Guarantor's rights against Borrower, the Guarantor will be liable to Bank
for any part of the Debt remaining unpaid after foreclosure.
Bank may, at its option, request periodic financial statements from Guarantor.
Guarantor agrees to supply these statements promptly whenever they are
requested.
Bank may exercise these rights either before or after Guarantor revokes this
Guaranty, and without affecting any obligation under this Guaranty.
Bank may assign this Guaranty, in whole or part, without notice, and Bank and
any assignee or purchaser, or any prospective assignee or purchaser of the Debt,
may exchange financial information about Guarantor with each other in connection
with any assignment or purchase transaction.
If a Borrower is a corporation or partnership, Bank is not required to
investigate the powers of anyone acting on Borrower's behalf.
2
<PAGE>
4. PROTECTING THE BANK'S INTEREST Guarantor agrees that any amounts Borrower
owes Guarantor now or in the future are subordinated to Borrower's debt to Bank.
If Bank requires, Guarantor, as a trustee for the Bank, shall collect amounts
Borrower owes Guarantor and pay them to Bank in reduction of the Debt without
affecting or reducing any obligations under this Guaranty.
Guarantor agrees that Guarantor does not have, and hereby waives, any:
o right of subrogation, reimbursement, indemnification or contribution
arising from the existence or performance of this Guaranty. This includes
any such rights arising from contract, statutory law or otherwise, and
includes any claim of subrogation under the Bankruptcy Code (Title 11 of
the U.S. Code) or any successor statute;
o right to enforce a remedy which Bank now has or may later have against
Borrower;
o right to participate in security now or later held by Bank; or
o right to any defense based on a claim that the obligations under this
Guaranty are more burdensome or are in excess of Borrower's debt to Bank
Guarantor is solely responsible for obtaining any financial information from
Borrower that guarantor may require. Bank is not required to give Guarantor any
information about Borrower's business operations or financial condition, or any
other notices or demands of any kind, including notices of new debts that may be
incurred by Borrower, notices of default or notice of acceptance of this
Guaranty.
5. SECURITY AND RIGHT OF SETOFF To secure all the Debts covered by this
Guaranty, Guarantor assigns and grants to Bank a security interest in all of
Guarantor's:
o money;
o securities;
o deposit accounts and their proceeds; and
o any other property maintained in the possession of Bank.
If Borrower defaults, or if any of Guarantor's obligations to Bank are not
fulfilled, Bank may immediately set off any money or proceeds of Guarantor's
deposit accounts, securities, or other property in Bank's possession against the
outstanding Debt.
Bank may also foreclose on any other collateral as provided in the Texas Uniform
Commercial Code and in any security agreements between Bank and Guarantor.
If this Guaranty is secured by real property, Guarantor agrees that any
transfer, assignment, sale or conveyance of such property shall constitute a
default under this Guaranty.
6. ARBITRATION
(a) This paragraph concerns the resolution of any controversies or claims
between Borrower and Bank, including but not limited to those that rise
from:
(i) This Guaranty (including any renewals, extensions or modifications
of this Guaranty);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Guaranty;
(iii) Any violation of this Guaranty; or
(iv) Any claims for damages resulting from any business conducted between
Guarantor and Bank, including claims for injury to persons, property
or business interests (torts).
(b) At the request of Guarantor or Bank, any such controversies or claims will
be settled by arbitration in accordance with the United States Arbitration
Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS
AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitation, the filing
of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statute of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss
the arbitration on that basis.
3
<PAGE>
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of Guarantor or Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral;
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) a provisional or interim remedy; and/or
(B) additional or supplementary remedies
(h) The pursuit of a successful action for provisional, interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of Guarantor or Bank, including the suing
party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
7. EXPENSES Guarantor agrees to pay all reasonable attorneys' fees, including
allocated costs of the Bank's in-house counsel, court costs and all other
expenses Bank incurs in enforcing this Guaranty.
8. REVOKING THE GUARANTY Guarantor may revoke this Guaranty as to future
transactions at any time, provided that Guarantor renounces any consideration
given in return for the guaranty of such transactions. Guarantor is obligated on
all credit extended by Bank to Borrower until Bank receives a written notice at
the address shown below revoking this Guaranty.
Any revocation will not affect the Guarantor's obligation for any transactions
that preceded receipt of the written notice, and the Guarantor shall remain
obligated on all debts related to such transactions, even if such debts, before
or after the revocation, have been renewed or modified or any of their terms
shall have been changed in any way.
If this Guaranty is revoked, cancelled or returned, and Bank later must refund
or rescind a payment, or transfer an interest in property back to Borrower, this
Guaranty shall be reinstated as to such payment or interest.
9. ENFORCING THIS GUARANTY THIS GUARANTY IS GOVERNED BY TEXAS LAW, AND BANK MAY
SUE GUARANTOR IN COURTS IN DALLAS COUNTY, TEXAS.
Bank may delay or waive exercising or enforcing any of its rights, including,
without limitation, its rights to setoff and lien, without losing them. Such
rights continue until Bank waives them in writing.
4
<PAGE>
10. SIGNATURES/DATE All guarantors who sign are jointly and severally liable for
all obligations under this Guaranty.
This Guaranty is executed as of ____________________, 1998.
OYO INSTRUMENTS UK, LTD., GUARANTOR
Dated: ___________________
X________________________________
Roger Caldwell, Managing Director and Secretary
F3 Bramingham Business Park
Enterprise Way, Luton
Bedshire LU3 4BU
England
Tax I.D. No.:not applicable for UK entity
Address for notices to the Bank:
BANK OF AMERICA TEXAS, N.A.
Houston Commercial Lending, #2552
333 Clay Street, Ste. 3600
Houston, Texas 77002
EXHIBIT 15.1
AWARENESS LETTER OF INDEPENDENT ACCOUNTANTS
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: OYO Geospace Corporation
Registration on Form S-8
We are aware that our report dated July 27, 1998, on our review of interim
financial information of OYO Geospace Corporation as of and for the three months
and nine months ended June 30, 1998 and 1997, and included in the Company's
quarterly report on Form 10-Q for the quarter then ended is incorporated by
reference in the Company's registration statement on Form S-8 (333-40893).
Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not
be considered a part of the registration statement prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
July 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1998
<CASH> 2,936
<SECURITIES> 0
<RECEIVABLES> 16,125
<ALLOWANCES> 657
<INVENTORY> 18,732
<CURRENT-ASSETS> 39,877
<PP&E> 26,182
<DEPRECIATION> 8,566
<TOTAL-ASSETS> 62,347
<CURRENT-LIABILITIES> 11,915
<BONDS> 963
0
0
<COMMON> 54
<OTHER-SE> 47,999
<TOTAL-LIABILITY-AND-EQUITY> 62,347
<SALES> 50,047
<TOTAL-REVENUES> 50,047
<CGS> 29,161
<TOTAL-COSTS> 12,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 109
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> 8,563
<INCOME-TAX> 2,997
<INCOME-CONTINUING> 5,566
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,566
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.10
</TABLE>
