SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 31, 1996
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3-D GEOPHYSICAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 33-99240 13-3841601
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
7076 South Alton Way, Building H, Englewood, Colorado 80112
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 741-3700
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(Former name or former address, if changed since last report.)
The Exhibit Index appears on Page 5
Page 1 of pages.
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ITEM 5. OTHER EVENTS.
On May 31, 1996, the Registrant acquired from the manufacturer
thereof, Input/Output, Inc. (Input/Output"), seismic data acquisition equipment
(the "Equipment") for an aggregate of approximately $8,500,000 in cash and
refinanced certain conditional sales agreements with Input/Output for an
additional $4,500,000 of equipment. The Equipment will be used in the ordinary
course of the Registrant's business.
A portion of the purchase price for the Equipment and the
funds for the refinancing were paid from the proceeds of a $15 million term loan
(the "Term Loan") from First Interstate Bank of Texas, N.A. (the "Bank")
pursuant to a Loan Agreement between the Registrant and the Bank, dated as of
May 29, 1996 (the "Loan Agreement"). The Registrant plans to utilize the
remaining $3 million under the Term Loan to fund future capital expenditures.
The Term Loan is payable, with certain limited exceptions, in equal monthly
installments through July 31, 1999. The Term Loan bears interest at an annual
rate equal to the prime rate plus 1% and is secured by a lien on the
Registrant's accounts, accounts receivable, equipment, machinery, fixtures,
inventory, goods, chattel paper, documents, instruments, investment property,
general intangibles, and other personal property, whether then owned or
thereafter acquired, and all products and proceeds thereof, and by guarantees by
each of the Registrant's subsidiaries. The Loan Agreement also provides for a $3
million revolving credit loan (the "Revolving Credit Loan") which may be drawn
down from time to time through May 29, 1997 in an amount of up to 70% of the
Registrant's "Eligible Accounts" (as defined in the Loan Agreement). The rate of
interest and the security for the Revolving Credit Loan are the same as those
described above for the Term Loan. In addition to certain customary affirmative
covenants, the Loan Agreement contains restrictions on the Registrant with
respect to (i) incurring Debt (as defined), incurring or permitting to exist
Liens (as defined) on its property assets or revenues, (iii) declaring or paying
any dividends or other distributions on its capital stock (or acquiring any of
its capital stock), (iv) issuing capital stock, (v) entering into transactions
with affiliates, (vi) disposing of assets, and (vii) with respect to certain
other matters, and contains certain financial covenants. The foregoing summary
of the Loan Agreement is qualified in its entirety by reference to the Loan
Agreement and other agreements relating thereto, copies of which are attached as
exhibits to this Current Report on Form 8-K.
Page 2 of pages.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
10.1 Loan Agreement between 3-D Geophysical, Inc. and
First Interstate Bank of Texas, N.A., dated as of May
29, 1996.
10.2 Security Agreement between 3-D Geophysical, Inc.
and First Interstate Bank of Texas, N.A., dated as of
May 29, 1996.
10.3 Security Agreement between Northern Geophysical of
America, Inc. and First Interstate Bank of Texas,
N.A., dated as of May 29, 1996.
10.4 Security Agreement between Paragon Geophysical, Inc.
and First Interstate Bank of Texas, N.A., dated as of
May 29, 1996.
10.5 Security Agreement between Geoevaluaciones S.A. de
C.V. and First Interstate Bank of Texas, N.A., dated
as of May 29, 1996.
10.6 Guaranty Agreement by Northern Geophysical of
America, Inc. in favor of First Interstate Bank of
Texas, N.A., dated as of May 29, 1996.
10.7 Guaranty Agreement by Paragon Geophysical ,Inc. in
favor of First Interstate Bank of Texas, N.A., dated
as of May 29, 1996.
10.8 Guaranty Agreement by Geoevaluaciones S.A. de C.V. in
favor of First Interstate Bank of Texas, N.A., dated
as of May 29, 1996.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
3-D GEOPHYSICAL, INC.
BY:/S/ JOHN D. WHITE, JR.
Name: John D. White, Jr.
Title: Executive Vice President
Date: June ___, 1996
Page 4 of pages.
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EXHIBIT INDEX
Exhibit Page
10.1 Loan Agreement between 3-D Geophysical, Inc. and
First Interstate Bank of Texas, N.A., dated as of
May 29, 1996.
10.2 Security Agreement between 3-D Geophysical, Inc.
and First Interstate Bank of Texas, N.A., dated as
of May 29, 1996.
10.3 Security Agreement between Northern Geophysical of
America, Inc. and First Interstate Bank of Texas,
N.A., dated as of May 29, 1996.
10.4 Security Agreement between Paragon Geophysical,
Inc. and First Interstate Bank of Texas, N.A.,
dated as of May 29, 1996.
10.5 Security Agreement between Geoevaluaciones S.A. de
C.V. and First Interstate Bank of Texas, N.A.,
dated as of May 29, 1996.
10.6 Guaranty Agreement by Northern Geophysical of
America,Inc. in favor of First Interstate Bank of
Texas, N.A., dated as of May 29, 1996.
10.7 Guaranty Agreement by Paragon Geophysical ,Inc. in
favor of First Interstate Bank of Texas, N.A.,
dated as of May 29, 1996.
10.8 Guaranty Agreement by Geoevaluaciones S.A. de C.V.
in favor of First Interstate Bank of Texas, N.A.,
dated as of May 29, 1996.
Page 5 of pages.
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LOAN AGREEMENT
between
3-D GEOPHYSICAL, INC.
and
FIRST INTERSTATE BANK OF TEXAS, N.A.
Dated as of May 29, 1996
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of May 29, 1996, is between 3-D
GEOPHYSICAL, INC., a Delaware corporation (together with its successors and
permitted assigns, the "Borrower"), and FIRST INTERSTATE BANK OF TEXAS, N.A., a
national banking association (together with its successors and permitted
assigns, the "Lender").
R E C I T A L S:
A. The Borrower has requested the Lender to extend credit to the
Borrower in the form of (i) a revolving credit facility not to exceed $3,000,000
(the "Revolving Credit Loan") outstanding at any time and (ii) a term loan in
the principal amount of $15,000,000 (the "Term Loan").
B. The proceeds of the Revolving Credit Loan will be utilized to
finance Borrower's working capital. The proceeds of the Term Loan will be
utilized to (i) finance a portion of the cost of purchasing Equipment consisting
of a new seismic data acquisition system, (ii) refinance certain of Borrower's
existing debt and (iii) finance up to 85% of the purchase price of additional
purchases of new Equipment.
C. The Lender is willing to make such extensions of credit to the
Borrower upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. All capitalized terms used in this Agreement
shall have the meanings set forth on Appendix A attached hereto and incorporated
herein for all purposes.
Section 1.2 Other Definitional Provisions. All definitions contained in
Appendix A are equally applicable to the singular and plural forms of the terms
defined. The words "hereof', "herein", and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Unless otherwise specified, all
Article and Section references pertain to this Agreement. All accounting terms
not specifically defined herein shall be construed in accordance with GAAP.
Terms used herein that are defined in the UCC, unless otherwise defined herein,
shall have the meanings specified in the UCC
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ARTICLE II
Revolving Credit Loan
Section 2.1 Revolving Credit Commitment. Subject to the terms and
conditions of this Agreement, the Lender agrees to make one or more Revolving
Credit Advances to the Borrower from time to time from the date hereof to and
including the Revolving Credit Termination Date, provided that the aggregate
amount of all Revolving Credit Advances at any time outstanding shall not exceed
the lesser of (a) the Borrowing Base or (b) the amount of the Revolving Credit
Commitment. Subject to the foregoing limitations, and the other terms and
provisions of this Agreement, the Borrower may borrow, repay, and reborrow
hereunder.
Section 2.2 Revolving Credit Note. The obligation of the Borrower to
repay Revolving Credit Advances shall be evidenced by the Revolving Credit Note
executed by the Borrower, payable to the order of the Lender, in the principal
amount of the Commitment as originally in effect, and dated the date hereof.
Section 2.3 Repayment of Revolving Credit Loan. The Borrower shall
repay the outstanding principal amount of the Revolving Credit Commitment (i.e.,
all Revolving Credit Advances) on the Revolving Credit Termination Date.
Section 2.4 Interest. Revolving Credit Advances shall bear interest
prior to maturity at a varying rate per annum equal from day to day to the
lesser of (a) the Maximum Rate, or (b) the sum of the Applicable Rate in effect
from day to day. If at any time the rate of interest specified in clause (b)
above shall exceed the Maximum Rate, thereby causing the interest accruing on
Revolving Credit Advances to be limited to the Maximum Rate, then any subsequent
reduction in the Base Rate shall not reduce the rate of interest on Revolving
Credit Advances below the Maximum Rate until the aggregate amount of interest
accrued on Revolving Credit Advances equals the aggregate amount of ' interest
which would have accrued on the Revolving Credit Loan if the interest rate
specified in clause (b) above had at all times been in effect, Accrued and
unpaid interest on the Revolving Credit Loan shall be due and payable on each
Monthly Payment Date and on the Revolving Credit Termination Date.
Section 2.5 Borrowing Procedure. The Borrower shall give the Lender at
least three Business Days prior notice of each Revolving Credit Advance under
the Revolving Credit Loan by means of a Revolving Credit Advance Request Form
containing the information required therein. The Lender at its option may from
time to time accept telephonic requests for Revolving Credit Advances, provided
that such acceptance shall not constitute a waiver of the Lender's right to
require delivery of a Revolving Credit Advance Request Form in connection with
subsequent Advances. Any telephonic request for a Revolving Credit Advance shall
be promptly confirmed by submission of a properly completed Revolving Credit
Advance Request Form to the Lender. Subject to the terms and conditions of this
Agreement, each Revolving Credit Advance under the Revolving Credit Loan shall
be made available to the Borrower by
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depositing the same, in immediately available funds, in an account of the
Borrower maintained with the Lender at the Principal Office designated by the
Borrower.
Section 2.6 Use of Proceeds. The proceeds of the Revolving Credit
Advances shall be used by the Borrower for working capital in the ordinary
course of business.
Section 2.7 Borrowing Base; Mandatory Prepayments. If at any time the
outstanding principal amount of the Revolving Credit Loan exceeds the Borrowing
Base, the Borrower shall promptly, and in any event, within five days of
learning of the same, prepay the Revolving Credit Loan by an amount equal to
such excess plus accrued and unpaid interest on the amount so prepaid.
Section 2.8 Revolving Credit Commitment Fee. (a) The Borrower agrees to
pay to the Lender a commitment fee on the date of the first Advance under this
Agreement in the amount of $15,000. (b) In addition, the Borrower agrees to pay
to the Lender, from time to time, a commitment fee on the daily average unused
amount of the Revolving Credit Commitment for the period from and including the
date the requirement set forth in Section 6.2(a) of this Agreement is satisfied
to and including the Revolving Credit Termination Date, at the rate of 0.50% per
annum based on a 365 day year and the actual number of days elapsed. Accrued
commitment fee shall be payable in arrears on each Quarterly Payment Date and on
the Revolving Credit Termination Date.
Section 2.9 Reduction or Termination of Revolving Credit Commitment.
The Borrower shall have the right to terminate in whole or reduce in part the
unused portion of the Revolving Credit Commitment upon at least three Business
Days' prior notice (which notice shall be irrevocable) to the Lender specifying
the effective date thereof, whether a termination or reduction is being made,
and the amount of any partial reduction, provided that each partial reduction
shall be in the amount of $100,000 or an integral multiple thereof and the
Borrower shall simultaneously prepay the amount by which the unpaid principal
amount of the Revolving Credit Advances exceeds the Revolving Credit Commitment
(after giving effect to such notice) plus accrued and unpaid interest on the
principal amount so prepaid. The Revolving Credit Commitment may not be
reinstated after it has been terminated or reduced.
ARTICLE III
Term Loan
Section 3.1 Term Loan Commitment. Subject to the terms and conditions
of this Agreement, the Lender agrees to make the Term Loan to the Borrower in a
principal amount up to but not exceeding the amount of the Term Loan Commitment
in (i) an initial Term Loan Advance in the amount of at least $12,051,311.20 and
(ii) an additional Term Loan Advance in an amount not to exceed the then
remaining undrawn Term Loan Commitment on or before the Tenn Loan Termination
Date.
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Section 3.2 The Term Note. The obligation of the Borrower to repay the
Term Loan and accrued interest thereon shall be evidenced by the Term Note
executed by the Borrower, payable to the order of the Lender, in the principal
amount of the Term Loan Commitment, and dated the date hereof.
Section 3.3 Repayment of Term Loan. The Borrower shall repay the unpaid
principal amount of, and all accrued but unpaid interest on, the Term Loan in
accordance with the Term Note.
Section 3.4 Interest. The unpaid principal amount of the Term Loan
shall bear interest prior to maturity or Default at a varying rate per annum
equal from day to day to the lesser of (a) the Maximum Rate, or (b) the
Applicable Rate in effect from day to day. If at any time the rate of interest
specified in clause (b) above shall exceed the Maximum Rate, thereby causing the
interest accruing on the Term Loan to be limited to the Maximum Rate, then any
subsequent reduction in the Applicable Rate shall not reduce the rate of
interest on the Term Loan below the Maximum Rate until the aggregate amount of
interest accrued on the Term Loan equals the aggregate amount of interest which
would have accrued on the Term Loan if the interest rate specified in clause (b)
above had at all times been in effect.
Section 3.5 Borrowing Procedure, Etc. The Borrower shall give the
Lender at least three Business Days prior notice of the Term Loan Advance under
the Term Loan by means of a Term Loan Advance Request Form containing the
information required therein. Subject to the terms and conditions of this
Agreement, each Term Loan Advance under the Term Loan shall be made available to
the Borrower by depositing the same, in immediately available funds, in an
account of the Borrower maintained with the Lender at the Principal Office
designated by the Borrower. The second Term Loan Advance shall not be in an
amount greater than 85% of the purchase price of Equipment being acquired with
the proceeds thereof.
Section 3.6 Facility Fee. In consideration for making the Term Loan
available to Borrower, Borrower shall pay to Lender as a facility fee $75,000
upon the execution of this Agreement.
Section 3.7 Use of Proceeds. The proceeds of the Term Loan shall be
used by the Borrower to (i) finance a portion of the cost of purchasing
Equipment consisting of a new seismic data acquisition system, (ii) refinance
certain of Borrower's existing debt identified to Lender, and (iii) finance up
to 85% of the purchase price of additional purchases of new Equipment.
Section 3.8 Mandatory Prepayment. On each Quarterly Payment Date
(beginning November 30, 1996), the Borrower shall prepay the Term Loan in an
amount equal to 50 percent of the Excess Cash Flow for the immediately preceding
calendar quarter: All mandatory prepayments shall be applied to the outstanding
principal of the Term Loan in inverse order of maturity.
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Section 3.9 Voluntary Prepayment and Repayment. The Borrower may, on at
least two Business Days prior notice to the Lender, prepay the Term Loan in
whole at any time or from time to time in part without premium or penalty but
with accrued interest to the date of prepayment on the amount so prepaid,
provided that each partial prepayment under the Term Note shall be in the
principal amount of at least $100,000. With respect to the Term Note, all
prepayments shall be applied to the outstanding principal of the Term Loan in
inverse order of maturity.
ARTICLE IV
Payments
Section 4.1 Method of Payment. All payments of principal, interest, and
other amounts to be made by the Borrower under this Agreement and the other Loan
Documents shall be made to the Lender at the Principal Office in Dollars and
immediately available funds, without setoff, deduction, or counterclaim, not
later than 11:00 A.M., Houston, Texas time on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). Subject to the
provisions of the Lockbox Agreement, the Borrower shall, at the time of making
each such payment, specify to the Lender the sums payable by the Borrower under
this Agreement and the other Loan Documents to which such payment is to be
applied (and in the event the Borrower fails to so specify, or if an Event of
Default has occurred and is continuing, but subject to the Lockbox Agreement,
the Lender may apply such payment to the Obligations in such order and manner as
it may elect in its sole discretion). Whenever any payment under this Agreement
or any other Loan Document shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
the payment of interest and commitment fee, as the case may be.
Section 4.2 Computation of Interest. Interest on all amounts payable by
the Borrower hereunder shall be computed on the basis of a year of 365 days and
the actual number of days elapsed (including the first day but excluding the
last day) unless such calculation would result in a usurious rate, in which case
interest shall be calculated on the basis of a year of 365 or 366 days, as the
case may be.
Section 4.3 Interest at Default Rate. Notwithstanding any provision
herein, Advances and (to the fullest extent permitted by law) any other amount
payable by the Borrower under this Agreement or any other Loan Document that are
not paid in full when due (whether at stated maturity, by acceleration, or
otherwise) shall bear interest at the Default Rate for the period from and
including the due date thereof to but excluding the date the same is paid in
full. Interest payable at the Default Rate shall be payable from time to time on
demand.
Section 4.4 Capital Adequacy. If after the date hereof, the Lender
shall have determined that the adoption or implementation of any applicable law,
rule, or regulation
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regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or compliance by the Lender (or its parent) with any guideline,
request, or directive regarding capital adequacy (whether or not having the
force of law) of any such central bank or other Governmental Authority
applicable generally to Banks of Lender's (or its parent's) size, has or would
have the effect of reducing the rate of return on the Lender's (or its parent's)
capital as a consequence of its obligations hereunder or the transactions
contemplated hereby to a level below that which the Lender (or its parent) could
have achieved but for such adoption, implementation, change, or compliance
(taking into consideration the Lender's policies with respect to capital
adequacy) by an amount deemed by the Lender to be material, then from time to
time, within 10 Business Days after demand by the Lender, the Borrower shall pay
to the Lender (or its parent) such additional amount or amounts as will
compensate the Lender for such reduction. A certificate of the Lender claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive, provided that the
determination thereof is made on a reasonable basis. In determining such amount
or amounts, the Lender may use any reasonable averaging and attribution methods.
Section 4.5 Annual Agent Fee. Beginning on May 31, 1997, the Borrower
shall pay to the Lender on May 31 of each year during the term of this Agreement
an annual agent's fee of $15,000 to compensate the Lender for its efforts in
managing participations in Loans, disseminating information, and providing other
services related thereto.
ARTICLE V
Security
Section 5.1 Collateral. To secure full and complete payment and
performance of the Obligations, the Borrower shall execute and deliver, and
shall cause each Subsidiary to execute and deliver, a Security Agreement and
other documents described below covering the property and collateral described
in this Section (which, together with any other property and collateral which
may now or hereafter secure the Obligations or any part thereof, is sometimes
herein called the "Collateral"):
All of its accounts, accounts receivable, equipment,
machinery, fixtures, inventory, goods, chattel paper, documents,
instruments, investment property, general intangibles, and other
personal property, whether now owned or hereafter acquired, and all
products and proceeds thereof.
The Borrower shall execute and cause to be executed such further documents and
instruments, including, without limitation, Uniform Commercial Code financing
statements, as the Lender, in its sole discretion, deems necessary or desirable
to create, evidence, preserve, and perfect its liens and security interests in
the Collateral.
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Section 5.2 Guaranties. Each Guarantor shall guarantee Obligations
pursuant to a Guaranty.
Section 5.3 Additional Support. Manufacturer shall provide the
Remarketing and Support Agreement.
Section 5.4 Setoff. If an Event of Default shall have occurred and be
continuing, the Lender shall have the right to set off and apply against the
Obligations in such manner as the Lender may determine, at any time and without
notice to the Borrower or any Subsidiary, any and all deposits (general or
special, time or demand, provisional or final) or other sums at any time
credited by or owing from the Lender to the Borrower or any Subsidiary whether
or not the Obligations are then due. As further security for the Obligations,
the Borrower hereby grants to the Lender a security interest in all money,
instruments, and other property of the Borrower now or hereafter held by the
Lender, including, without limitation, property held in safekeeping. In addition
to the Lender's right of setoff and as further security for the Obligations, the
Borrower hereby grants to the Lender a security interest in all deposits
(general or special, time or demand, provisional or final) and other accounts of
the Borrower now or hereafter on deposit with or held by the Lender and all
other sums at any time credited by or owing from the Lender to the Borrower. The
rights and remedies of the Lender hereunder are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which the
Lender may have.
ARTICLE VI
Conditions Precedent
Section 6.1 Initial Term Loan Advance. The obligation of the Lender to
make an initial Term Loan Advance is subject to the condition precedent that the
Lender shall have received on or before the day of such Advance all of the
following, each dated (unless otherwise indicated) the date hereof, in form and
substance satisfactory to the Lender:
(a) Resolutions. Resolutions of the Board of Directors of each
of the Borrower, the Manufacturer, and the Guarantors certified by its
Secretary or an Assistant Secretary which authorize the execution,
delivery, and performance of the Loan Documents to which it is or is to
be a party (each of Manufacturer's and each Guarantor's certificate to
be dated the date of the initial Advance) or equivalent documents under
the laws of the Republic of Mexico);
(b) Incumbency Certificate. A certificate of incumbency of
each of the Borrower, the Manufacturer, and the Guarantors certified by
the Secretary or an Assistant Secretary of such Person certifying the
names of the officers of such Person authorized to sign each of the
Loan Documents to which it is or is to be a party (including the
certificates contemplated herein) together with specimen signatures of
such officers (each of Manufacturer's and each Guarantor's
certification to be dated the date
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of the initial Advance) or equivalent documents under the laws of the
Republic of Mexico);
(c) Articles of Incorporation. The articles of incorporation
of each of the Borrower, Manufacturer, and each Guarantor certified by
the appropriate public official of the jurisdiction of incorporation of
such Person and dated within 10 days prior to the date of the initial
Advance or equivalent documents under the laws of the Republic of
Mexico;
(d) Bylaws. The bylaws of each of the Borrower, Manufacturer,
and each Guarantor certified by the Secretary or an Assistant Secretary
of such Person (each of Manufacturer's and each Guarantor's
certification to be dated the date of the initial Advance or equivalent
documents under the laws of the Republic of Mexico);
(e) Governmental Certificates. Certificates of the appropriate
government officials of each of the Borrower's, Manufacturer's, and
each Guarantor's jurisdiction of incorporation as to the existence and
good standing of such Person, each dated within 10 days prior to the
date of the initial Advance or equivalent documents under the laws of
the Republic of Mexico;
(f) Term Note. The Term Note executed by the Borrower;
(g) Security Agreements. A Security Agreement executed by the
Borrower and each Guarantor;
(h) Financing Statements; Etc. Uniform Commercial Code
financing statements and all other appropriate documents necessary or
advisable (including, as applicable, equivalent documents under the
laws of the Republic of Mexico) to perfect the Lender's Lien on the
Collateral executed by the Borrower and each Guarantor and covering
such Collateral as the Lender may request;
(i) Guaranty. A Guaranty executed by each of the Guarantors;
(j) Remarketing and Support Agreement. Manufacturer's
Remarketing and Support Agreement executed by the Manufacturer;
(k) Representations and Warranties Certificate. The
Representations and Warranties Certificates each executed by an
authorized officer of the Borrower, the Manufacturer, and each
Guarantor and the other Persons party thereto;
(l) Lockbox Agreement. The Lockbox Agreement executed by the
Borrower, the Manufacturer and the Guarantors;
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(m) Insurance Policies. Binders of all insurance policies
required by Section 7.5, naming Lender as loss payee with respect to
all insurance policies covering Collateral and providing such insurance
will not be cancelled without 30 days' prior written notice to Lender,
and as soon as available, copies of such policies, together with loss
payable endorsements in favor of the Lender with respect to insurance
covering Collateral and naming Lender as an additional insured with
respect to comprehensive general liability insurance, and endorsements
providing for no cancellation without 30 days' prior written notice to
Lender;
(n) UCC Search, Etc. The results of a Uniform Commercial Code
search and other appropriate searches showing all financing statements
and other documents or instruments on file against the Borrower and its
Subsidiaries in the offices of the Secretary of State of Texas, the
Secretary of State of Colorado and other jurisdictions in which any of
them do business, such searches to be as of a date no more than 10 days
prior to the date of the initial Advance;
(o) Opinion of Counsel. Favorable opinion of Rothgerber,
Appel, Powers & Johnson LLP and Webb & Lautherbach, P.C., legal counsel
to the Borrower and its Subsidiaries, as to such matters as the Lender
or its counsel may reasonably request;
(p) Opinion of Counsel of Manufacturer. A favorable opinion of
Haynes & Boone, L.L.P., legal counsel to the Manufacturer, as to such
matters as the Lender may reasonably request;
(q) Facility Fee. Evidence that the Borrower has paid the
facility fee payable to Lender under Section 3.5;
(r) Accounts. Evidence that the Lockbox Account and related
reserve accounts have been established;
(s) Participants. Receipt of participation agreements from
financial institutions acceptable to the Lender in respect of 27.78% of
the Revolving Credit Commitment and the 27.78% Term Loan Commitment;
(t) Review of Certain Contracts. Review and approval by the
Lender of the Borrower's or a Guarantor's contract with British
Petroleum relating to seismic surveys to be performed on the North
Slope of Alaska;
(u) Attorneys' Fees and Expenses. Evidence that the costs and
expenses (including reasonable attorneys' fees) referred to in Section
11.1, to the extent incurred, shall have been paid in full;
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(v) Vessel Charters and Leases. As soon as available, a copy
of each charter relating to a Vessel on which all or any part of the
Collateral is or will be located and each lease of real Property where
Collateral is stored;
(w) Waivers. Receipt of landlord's, charterer's and other
similar waivers of any Lien on the Collateral, the form and substance
to be satisfactory to the Lender.
(x) All Advances. The obligation of the Lender to make any
Advance (including the initial Advance) is subject to the following
additional conditions precedent:
(y) Advance Request Form. The Lender shall have received, in
accordance with Section 3.6, an Advance Request Form, dated the date of
such Advance, executed by an authorized officer of the Borrower;
(z) No Default. No Default shall have occurred and be
continuing, or would exist after giving effect to such Advance;
(aa) Additional Documentation. Such additional approvals,
opinions, or documents as the Lender or its legal counsel, Winstead
Sechrest & Minick P.C., may reasonably request.
Section 6.2 Initial Revolving Credit Advance. The obligation of the
Lender to make an initial Revolving Credit Advance is subject to the condition
precedent that the Lender shall have received on or before the day of such
Advance all of the following, each dated (unless otherwise indicated) the date
hereof, in form and substance satisfactory to the Lender:
(a) Revolving Credit Note. The Revolving Credit Note executed
by the Borrower;
(b) Collateral Audit. Evidence satisfactory to the Lender that
its commercial finance department has completed a Collateral audit and
issued a satisfactory rating;
(c) Other Requirements. All of the requirements for an Initial
Term Loan Advance have been satisfied (including any not satisfied on
the date of the Initial Term Advance);
(d) Commitment Fee. Evidence that the Borrower has paid the
initial commitment fee payable to Lender under Section 2.8(b);
(e) Advance Request Form. The Lender shall have received, in
accordance with Section 2.5, an Advance Request Form, dated the date of
such Advance, executed by an authorized officer of the Borrower;
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(f) No Default. No Default shall have occurred and be
continuing, or would exist after giving effect to such Advance.
(g) Representations and Warranties. All of the representations
and warranties contained in the Representation and Warranties
Certificate and the other Loan Documents shall be true and correct on
and as of the date of such Advance with the same force and effect as if
such representations and warranties had been made on and as of such
date.
(h) Additional Documentation. The Borrower shall have provided
such additional approvals, opinions, or documents as the Lender or its
legal counsel, Winstead Sechrest & Minick, P.C., may reasonably
request.
Section 6.3 Conditions to All Advances. The obligation of the Lender to
make each Advance hereunder is subject to the additional condition precedent
that:
(a) No Default. No Default shall have occurred and be
continuing, or would exist after giving effect to such Advance.
(b) Advance Request Form. The Lender shall have received, in
accordance with Section 2.5 or 3.6, as the case may be, an Advance
Request Form, dated the date of such Advance, executed by an authorized
officer of the Borrower;
(c) Representations and Warranties. All of the representations
and warranties contained in the Representation and Warranties
Certificate and the other Loan Documents shall be true and correct on
and as of the date of such Advance with the same force and effect as if
such representations and warranties had been made on and as of such
date.
(d) Additional Documentation. The Borrower shall have provided
such additional approvals, opinions, or documents as the Lender or its
legal counsel, Winstead Sechrest & Minick P.C., may reasonably request.
ARTICLE VII
Positive Covenants
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or the Lender has any Commitment hereunder, the
Borrower will perform and observe the following positive covenants, unless the
Lender shall otherwise consent in writing:
Section 7.1 Reporting Requirements. The Borrower will furnish to the
Lender and to the Manufacturer:
(a) Annual Financial Statements. As soon as available, and in
any event within 120 days after the end of each fiscal year of the
Borrower, beginning with the
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fiscal year ending December 31, 1996, (i) a copy of the annual audit
report of the Borrower and the Subsidiaries for such fiscal year
containing, on a consolidated and consolidating basis, balance sheets
and statements of income, retained earnings, and cash flow as at the
end of such fiscal year and for the 12-month period then ended, in each
case setting forth in comparative form the figures for the preceding
fiscal year, all in reasonable detail and audited and certified by
independent certified public accountants of recognized standing
acceptable to the Lender, to the effect that such report has been
prepared in accordance with GAAP; and (ii) a certificate of such
independent certified public accountants to Lender (A) stating that to
their knowledge no Default has occurred and is continuing, or if in
their opinion a Default has occurred and is continuing, a statement as
to the nature thereof, and (B) confirming the calculations set forth in
the officer's certificate delivered simultaneously therewith;
(b) Annual Report on Form 10-K. As soon as available, and in
any event within 120 days after filing deadline therefor, a copy of the
annual report of the Borrower on Form 10-K filed with the Securities
and Exchange Commission or any successor agency, certified by the chief
financial officer of Borrower to be a true and correct copy thereof;
(c) Monthly Financial Statements. As soon as available, and in
any event within 45 days after the end of each calendar month of each
fiscal year of the Borrower, a copy of an unaudited financial report of
the Borrower as of the end of such month and for the portion of the
fiscal year then ended, containing, on a consolidated and consolidating
basis, balance sheets and statements of income, retained earnings, and
cash flow, in each case after March 31, 1997 setting forth in
comparative form the figures for the corresponding period of the
preceding fiscal year, all in reasonable detail certified by the chief
financial officer of the Borrower to have been prepared in accordance
with GAAP and to fairly and accurately present (subject to year-end
audit adjustments) the financial condition and results of operations of
the Borrower, on a consolidated and consolidating basis, at the date
and for the periods indicated therein; provided, however, that until
the Borrower is required to provide monthly in comparative form the
figures set forth above, the Borrower shall provide the same on a
quarterly basis (due 45 days after the end of each such quarter);
(d) Accounts Receivable and Accounts Payable Aging Reports.
Concurrently with the delivery of the financial statements referred to
in subsection 7.1(c), an accounts receivable and accounts payable aging
report and a backlog listing;
(e) Certificate of No Default. Concurrently with the delivery
of each of the financial statements referred to in subsections 7.1(a)
and 7.1(c), a certificate of the chief executive or other responsible
officer of the Borrower (i) stating that to the best of such officer's
knowledge, no Default has occurred and is continuing, or if a Default
has occurred and is continuing, a statement as to the nature thereof
and the action which is
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proposed to be taken with respect thereto, and (ii) showing in
reasonable detail the calculations demonstrating compliance with
Article IX;
(f) Annual Collateral Listing. Concurrently with the delivery
of the financial statements referred to in subsection 7.1(a), a listing
of all of the Borrower's inventory and equipment Collateral and its
location;
(g) Management Letters. Promptly upon receipt thereof, a copy
of any management letter or written report submitted to the Borrower or
any Subsidiary by independent certified public accountants with respect
to the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower or any Subsidiary;
(h) Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits, and proceedings before any
Governmental Authority or arbitrator affecting the Borrower or any
Subsidiary which, if determined adversely to the Borrower or such
Subsidiary, could have a Material Adverse Effect;
(i) Notice of Default. As soon as possible and in any event
within five days after the occurrence of each Default, a written notice
setting forth the details of such Default and the action that the
Borrower has taken and proposes to take with respect thereto;
(j) ERISA Reports. Promptly after the filing or receipt
thereof, copies of all reports, including annual reports, and notices
which the Borrower or any Subsidiary files with or receives from the
PBGC or the U.S. Department of Labor under ERISA; and as soon as
possible and in any event within five days after the Borrower or any
Subsidiary knows or has reason to know that any Reportable Event or
Prohibited Transaction has occurred with respect to any Plan or that
the PBGC or the Borrower or any Subsidiary has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, a
certificate of the chief financial officer of the Borrower setting
forth the details as to such Reportable Event or Prohibited Transaction
or Plan termination and the action that the Borrower proposes to take
with respect thereto;
(k) Notice of Material Adverse Change. As soon as possible and
in any event within ten days after the occurrence thereof, written
notice of any matter that could reasonably cause a Material Adverse
Effect on the Borrower or any Subsidiary;
(l) Borrowing Base. As soon as available, and in any event
within 15 days after the end of each calendar month, a Borrowing Base
Report, certified by the chief financial officer of the Borrower;
(m) Proxy Statements, Etc. As soon as available, one copy of
each financial statement, report notice or proxy statement sent by the
Borrower or any Subsidiary to its stockholders generally and one copy
of each regular, periodic or special report,
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registration statement, or prospectus filed by the Borrower or any
Subsidiary with any securities exchange or the Securities and Exchange
Commission or any successor agency; and
(n) General Information. Promptly, such other information
concerning the Borrower or any Subsidiary as the Lender may from time
to time reasonably request.
Section 7.2 Maintenance of Existence; Conduct of Business. The Borrower
will preserve and maintain, and will cause each Subsidiary to preserve and
maintain, its corporate existence; in addition, the Borrower will preserve and
maintain, and will cause each Subsidiary to preserve and maintain, all its
leases, privileges, licenses, permits, franchises, qualifications, and rights
that are necessary in the ordinary conduct of its business. The Borrower will
conduct, and will cause each Subsidiary to conduct, its business in an orderly
and efficient manner in accordance with good business practices.
Section 7.3 Maintenance of Properties. The Borrower will maintain,
keep, and preserve, and cause each Subsidiary to maintain, keep, and preserve,
all of its properties (tangible and intangible) necessary or useful in the
proper conduct of its business in good working order and condition.
Section 7.4 Taxes and Claims. The Borrower will pay or discharge, and
will cause each Subsidiary to pay or discharge, at or before maturity or before
becoming delinquent: (a) all taxes, levies, assessments, and governmental
charges imposed on it or its income or profits or any of its property, and (b)
all lawful claims for labor, material, and supplies, which, if unpaid, might
become a Lien upon any of its property.
Section 7.5 Insurance. The Borrower will maintain, and will cause each
of the Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies in such amounts and covering such risks as is usually
carried by corporations engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower and the Subsidiaries
operate, provided that in any event the Borrower will maintain, and cause each
Subsidiary to maintain, workmen's compensation insurance, property insurance,
comprehensive general liability insurance (with Lender named as additional
insured), reasonably satisfactory to the Lender and naming the Lender as an
additional assured. Each insurance policy covering Collateral shall name the
Lender as additional assured and loss payee and shall provide that such policy
will not be cancelled or reduced without 30 days' prior written notice to the
Lender.
Section 7.6 Inspection Rights. At any reasonable time and from time to
time, the Borrower will permit, and will cause each Subsidiary to permit,
representatives of the Lender to examine, copy, and make extracts from its books
and records, to visit and inspect its properties, and to discuss its business,
operations, and financial condition with its officers, employees, and
independent certified public accountants. The Borrower shall cooperate and cause
each of its Subsidiaries to cooperate, with Lender's Commercial Finance
Department,
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which shall perform an semi-annual asset audits, and the Borrower shall bear the
cost and expense of such audits.
Section 7.7 Keeping Books and Records. The Borrower will maintain, and
will cause each Subsidiary to maintain, proper books of record and account in
which full, true, and correct entries in conformity with GAAP in all material
respects shall be made of all dealings and transactions in relation to its
business and activities.
Section 7.8 Compliance with Laws. The Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, rules, regulations, orders, and decrees of any Governmental Authority or
arbitrator.
Section 7.9 Compliance with Agreements. The Borrower will, and will
cause each Subsidiary to, comply in all material respects with all agreements,
contracts, and instruments binding on it or affecting its properties or
business.
Section 7.10 Comply with Vessel Charters and Leases. The Borrower will,
and will cause each Subsidiary to, pay all amounts owing under charters or
leases of Vessels and leases of real Property where Collateral is stored and
shall comply in all material respects with all of the terms and provisions
thereof.
Section 7.11 Vendors, Suppliers, Etc. The Borrower will, and will cause
each Subsidiary to, pay all of its vendors, suppliers and other Persons that may
assert a Lien on a Vessel or any Property of the Borrower and its Subsidiaries.
Section 7.12 Further Assurances. The Borrower will, and cause each
Subsidiary to, execute and deliver such further agreements and instruments and
take such further action as may be reasonably requested by the Lender to carry
out the provisions and purposes of this Agreement and the other Loan Documents
and to create, preserve, and perfect the Liens of the Lender in the Collateral.
Section 7.13 ERISA. The Borrower will comply, and cause each Subsidiary
to comply, with all minimum funding requirements, and all other material
requirements, of ERISA, if applicable, so as not to give any liability
thereunder.
Section 7.14 Annual Collateral and Systems Review. At any reasonable
time and from time to time, but not more than once during each six month period
unless a Default then exists, in which case such reviews shall not be limited),
the Borrower will permit, the Lender and its representatives, at the sole cost
and expense of the Borrower, to conduct audits of the Borrower's and each
Guarantor's accounts receivable and reviews of the Borrower's and each
Guarantor's accounts receivable control systems, and in connection therewith,
examine, copy, and make extracts from the Borrower's and each Guarantor's books
and records, to visit and inspect their properties and facilities.
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Section 7.15 Lockbox. The Borrower will direct its, and will cause the
Guarantors to direct their account debtors to send all payments on certain
agreed accounts to the Lockbox, or if payment is to be made by wire transfer to
such Person, then directed to the Lockbox Account. Borrower will deliver, and
cause each of the Guarantors to deliver, to the Lender, at the Lender's request,
copies of all letters and/or sales invoices from such Person to its account
debtors directing that accounts be paid into such Lockbox and/or Lockbox
Account.
ARTICLE VIII
Negative Covenants
The Borrower covenants and agrees that, as long the Obligations or any
part thereof are outstanding or the Lender has any Commitment hereunder, the
Borrower will perform and observe the following negative covenants, unless the
Lender shall otherwise consent in writing:
Section 8.1 Debt. The Borrower will not incur, create, assume, or
permit to exist, and will not permit any Subsidiary to incur, create, assume, or
permit to exist, any Debt (other than the Debt to the Lender), Guarantees or
other liabilities or obligations without Lender's prior written approval, except
(1) open account trade debt incurred in the ordinary course of its business, (2)
Debt, not to exceed $1,200,000 for purchase of a new computer and accounting
system and to increase the Borrower's existing fleet of vibraseis energy
sources, as currently contemplated on the date of this Agreement and disclosed
to the Lender in writing prior to the date hereof, (3) other Debt that shall not
exceed $750,000 in the aggregate and (4) the existing Debt described on Schedule
8.1 hereof.
Section 8.2 Limitation on Liens. The Borrower will not incur, create,
assume, or permit to exist, and will not permit any Subsidiary to incur, create,
assume, or permit to exist, any Lien upon any of its property, assets, or
revenues, whether now owned or hereafter acquired, except the following
(collectively referred to as the "Permitted Liens"):
(a) Liens disclosed on Schedule 8.2 hereto;
(b) Liens in favor of the Lender;
(c) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of real property that do
not (individually or in the aggregate) materially affect the value of
the assets encumbered thereby or materially impair the ability of the
Borrower to use such assets in their respective businesses, and none of
which is violated in any material respect by existing or proposed
structures or land use;
(d) Liens for taxes, assessments, or other governmental
charges which are not delinquent or which are being contested in good
faith and for which adequate reserves have been established;
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(e) Liens of mechanics, materialmen, warehousemen, carriers,
or other similar statutory Liens securing obligations that are not yet
due and are incurred in the ordinary course of business
(f) Liens resulting from good faith deposits to secure
payments of workmen's compensation or other social security programs or
to secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, or contracts (other than for payment of Debt), or
leases made in the ordinary course of business; and
(g) Liens securing on the purchase price of, or Capital Lease
Obligations in respect of, equipment (other than Equipment), provided
that (i) such Lien does not cover any other Property of the Borrower or
any Subsidiary and (ii) the Debt secured by Lien is permitted under
Section 8.1 of the Agreement.
Section 8.3 Mergers, Etc. Without Lender's written consent, the
Borrower will not, and will not permit any Subsidiary to, become a party to a
merger or consolidation, or purchase or otherwise acquire all or any part of the
assets of any Person or any shares or other evidence of beneficial ownership of
any Person, other than in respect to the transaction described on Schedule 8.3
hereof, or wind-up, dissolve, or liquidate.
Section 8.4 Restricted Payments. Except as provided in Schedule 8.4,
the Borrower will not declare or pay any dividends or make any other payment or
distribution (in cash, property, or obligations) on account of its capital
stock, or redeem, purchase, retire, or otherwise acquire any of its capital
stock, or permit any of their respective Subsidiaries to purchase or otherwise
acquire any capital stock of the Borrower or another Subsidiary, or set apart
any money for a sinking or other analogous fund for any dividend or other
distribution on its capital stock or for any redemption, purchase, retirement,
or other acquisition of any of its capital stock.
Section 8.5 Loans and Investments. Without Lender's written consent,
which consent will not be unreasonably withheld, the Borrower will not make, and
will not permit any Subsidiary to make, any advance, loan, extension of credit,
or capital contribution to or investment in, or purchase, or permit any
Subsidiary to purchase, any stock, bonds, notes, debentures, or other securities
of any Person, except:
(a) readily marketable direct obligations of the United States
of America or any agency thereof with maturities of one year or less
from the date of acquisition;
(b) fully insured certificates of deposit with maturities of
one year or less from the date of acquisition of any commercial bank
operating in the United States having capital and surplus in excess of
$50,000,000;
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(c) commercial paper of a domestic issuer if at the time of
purchase such paper is rated in one of the two highest rating
categories of Standard and Poor's Corporation or Moody's Investors
Service, Inc.; and
(d) in the case of Geo, short-term investments of its revenues
and funds in Mexican pesos in responsible Mexican institutions.
Section 8.6 Limitation on Issuance of Capital Stock. Except for the
matters referred to on Schedule 8.6 hereof, the Borrower will not, and will not
permit any of its Subsidiaries to, at any time issue, sell, assign, or otherwise
dispose of (a) any of its capital stock, (b) any securities exchangeable for or
convertible into or carrying any rights to acquire any of its capital stock, or
(c) any option, warrant, or other right to acquire any of its capital stock.
Section 8.7 Transactions With Affiliates. The Borrower will not enter
into, and will not permit any Subsidiaries to enter into, any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate of the Borrower or such
Subsidiary, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than would
be obtained in a comparable arm's-length transaction with a Person not an
Affiliate of the Borrower or such Subsidiary.
Section 8.8 Disposition of Assets. The Borrower will not sell, lease,
assign, transfer, or otherwise dispose of any of its assets, or permit any
Subsidiary to do so with any of its assets, except (i) dispositions of inventory
in the ordinary course of business and (ii) dispositions of obsolete equipment,
not to exceed $300,000 in value in any year during the term hereof, provided,
however, in no event shall Borrower sell, lease, assign, transfer, or dispose of
(i) any of its assets for less than fair value, or (ii) any Property purchased
from the Manufacturer.
Section 8.9 Sale and Leaseback. The Borrower will not enter into, and
will not permit any Subsidiary to enter into, any arrangement with any Person
pursuant to which it leases from such Person real or personal property that has
been or is to be sold or transferred, directly or indirectly, by it to such
Person.
Section 8.10 Prepayment of Debt. The Borrower will not prepay, and will
not permit any Subsidiary to prepay, any Debt from and after the date hereof,
except the Obligations.
Section 8.11 Nature of Business. The Borrower will not, and will not
permit any Subsidiary to, engage in any business other than, or unrelated to,
the businesses in which it is engaged as of the date hereof.
Section 8.12 Environmental Protection. The Borrower will not, and will
not permit any of its Subsidiaries to, (a) use (or permit any tenant to use) any
of its properties or assets for the handling, processing, storage,
transportation, or disposal of any Hazardous Material, (b) generate any
Hazardous Material, (c) conduct any activity that is likely to cause a Release
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or threatened Release of any Hazardous Material, or (d) otherwise conduct any
activity or use any of their respective properties or assets in any manner that
is likely to violate any Environmental Law or result in any Environmental
Liabilities for which the Borrower or any of its Subsidiaries would be
responsible and which would have a material adverse effect on the Borrower or
any of its Subsidiaries or would result in civil or criminal liability to
Lender.
Section 8.13 Accounting. The Borrower will not, and will not permit any
of its Subsidiaries to, change its fiscal year or make any change (a) in
accounting treatment or reporting practices, except as required by GAAP and
disclosed to the Lender, or (b) in tax reporting treatment, except as required
by law and disclosed to the Lender.
ARTICLE IX
Financial Covenants
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or the Lender has any Commitment hereunder, the
Borrower will observe and perform the following financial covenants, unless the
Lender shall otherwise consent in writing:
Section 9.1 EBITDA Coverage Ratio. The Borrower will at all times
maintain an EBITDA Coverage Ratio of at least 1.3 to 1.0. (Beginning April 1,
1997, the covenant shall be calculated on a rolling 12 month basis; the first
test of this covenant shall be for the period ending September 30, 1996; and the
September 30, 1996 test shall be calculated on an annualized basis using
preceding six month EBITDA (with subsequent periods until April 1, 1997 being on
an annualized based with each month after September 1996 included).
Section 9.2 Consolidated Tangible Net Worth. The Borrower will at all
times maintain Consolidated Tangible Net Worth in an amount at least $20,000,000
plus, on a cumulative basis beginning June 30, 1996, 50% of positive
consolidated Net Income and 90% of the net proceeds of each equity offering.
Section 9.3 Leverage Ratio. The Borrower will at all times maintain a
Leverage Ratio of not greater than 1.3 to 1.0.
ARTICLE X
Default
Section 10.1 Events of Default. Each of the following shall be deemed
an "Event of Default":
(a) The Borrower shall fail to pay when due the Obligations or
any part thereof.
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(b) Any representation or warranty made by the Borrower or any
Obligated Party (or any of their respective officers) in any Loan
Document or in any certificate, report, notice, or financial statement
furnished at any time in connection with this Agreement shall be false,
misleading, or erroneous in any material respect when made or deemed to
have been made.
(c) The Borrower, any Subsidiary, or any Obligated Party shall
fail to perform, observe, or comply with any covenant, agreement, or
term contained in this Agreement or any of the other Loan Documents.
(d) The Borrower, any Subsidiary, or any Obligated Party shall
commence a voluntary proceeding seeking liquidation, reorganization, or
other relief with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian, or other
similar official of it or a substantial part of its property or shall
consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it or shall make a general assignment for
the benefit of creditors or shall generally fail to pay its debts as
they become due or shall take any corporate action to authorize any of
the foregoing.
(e) An involuntary proceeding shall be commenced against the
Borrower, any Subsidiary, or any Obligated Party seeking liquidation,
reorganization, or other relief with respect to it or its debts under
any bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian, or other similar official for it or a substantial part of
its property, and such involuntary proceeding shall remain undismissed
and unstayed for a period of 60 days.
(f) The Borrower, any Subsidiary, or any Obligated Party shall
fail to discharge within a period of 30 days after the commencement
thereof any attachment, sequestration, or similar proceeding or
proceedings involving an aggregate amount in excess of $50,000 against
any of its assets or properties.
(g) A final judgment or judgments for the payment of money in
excess of $50,000 in the aggregate shall be rendered by a court or
courts against the Borrower, any Subsidiary, or any Obligated Party and
the same shall not be discharged (or provision shall not be made for
such discharge), or a stay of execution thereof shall not be procured,
within 30 days from the date of entry thereof and the Borrower or the
relevant Subsidiary or Obligated Party shall not, within said period of
30 days, or such longer period during which execution of the same shall
have been stayed, appeal therefrom and cause the execution thereof to
be stayed during such appeal.
(h) The Borrower, any Subsidiary or any Obligated Party shall
fail to pay when due any principal of or interest on any Debt (other
than the Obligations), or the maturity of any Debt shall have been
accelerated or required to be prepaid prior to the
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stated maturity thereof, or any event shall have occurred that permits
(or, with the giving of notice or lapse of time or both, would permit)
any holder or holders of such Debt or any Person acting on behalf of
such holder or holders to accelerate the maturity thereof or require
any such prepayment.
(i) This Agreement or any other Loan Document shall cease to
be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by
the Borrower, any Subsidiary, any Obligated Party or any of their
respective shareholders, or the Borrower or any Obligated Party shall
deny that it has any further liability or obligation under any of the
Loan Documents, or any lien or security interest created by the Loan
Documents shall for any reason cease to be a valid, first priority
perfected security interest in and lien upon any of the Collateral
purported to be covered thereby (except for Permitted Liens on the
Collateral).
(j) Any of the following events shall occur or exist with
respect to the Borrower or any ERISA Affiliate: (i) any Prohibited
Transaction involving any Plan; (ii) any Reportable Event with respect
to any Plan; (iii) the filing under Section 4041 of ERISA of a notice
of intent to terminate any Plan or the termination of any Plan; (iv)
any event or circumstance that might constitute grounds entitling the
PBGC to institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer, any
Plan, or the institution by the PBGC of any such proceedings; or (v)
complete or partial withdrawal under Section 4201 or 4204 of ERISA from
a Multiemployer Plan or the reorganization, insolvency, or termination
of any Multiemployer Plan; and in each case above, such event or
condition, together with all other events or conditions, if any, have
subjected or could in the reasonable opinion of the Lender subject the
Borrower to any tax, penalty, or other liability to a Plan, a
Multiemployer Plan, the PBGC, or otherwise (or any combination thereof)
which in the aggregate exceed or could reasonably be expected to exceed
$25,000.
(k) The Borrower shall fail to have at least $1 of net
operating income during any two consecutive quarters.
(l) The Borrower or any Obligated Party, or any of their
properties, revenues, or assets, shall become subject to an order of
forfeiture, seizure, or divestiture (whether under RICO or otherwise)
and the same shall not have been discharged within 30 days from the
date of entry thereof.
Section 10.2 Remedies Upon Default. If any Event of Default shall occur
and be continuing, the Lender may without notice except as expressly provided
herein declare the Obligations or any part thereof to be immediately due and
payable, and the same shall thereupon become immediately due and payable,
without further notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that upon the occurrence of an Event
of Default under Section
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10.1(d) or Section 10.1(e), and the Obligations shall become immediately due and
payable without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by the Borrower. If any Event of Default shall occur and be continuing,
the Lender may exercise all rights and remedies available to it in law or in
equity, under the Loan Documents, or otherwise. Notwithstanding the provisions
set forth above, if the Manufacturer is the sole cause of an Event of Default,
the Borrower shall have 30 days after notice from the Lender in which to satisfy
Lender by providing additional security or guaranties (satisfactory to Lender in
its sole discretion) before the Lender exercises its remedies as a result of an
Event of Default resulting from Default by the Manufacturer.
Section 10.3 Performance by the Lender. If the Borrower shall fail to
perform any covenant or agreement contained in any of the Loan Documents, the
Lender may perform or attempt to perform such covenant or agreement on behalf of
the Borrower. In such event, the Borrower shall, at the request of the Lender,
promptly pay any amount expended by the Lender in connection with such
performance or attempted performance to the Lender, together with interest
thereon at the Default Rate from and including the date of such expenditure to
but excluding the date such expenditure is paid in full. Notwithstanding the
foregoing, it is expressly agreed that the Lender shall not have any liability
or responsibility for the performance of any obligation of the Borrower under
this Agreement or any other Loan Document.
ARTICLE XI
Miscellaneous
Section 11.1 Expenses. The Borrower hereby agrees to pay on demand: (a)
all costs and expenses of the Lender in connection with the preparation,
negotiation, execution, and delivery of this Agreement and the other Loan
Documents and any and all amendments, modifications, renewals, extensions, and
supplements thereof and thereto, including, without limitation, the fees and
expenses of legal counsel for the Lender, (b) all costs and expenses of the
Lender in connection with any Default and the enforcement of this Agreement or
any other Loan Document, including, without limitation, the fees and expenses of
legal counsel for the Lender, (c) all transfer, stamp, documentary, or other
similar taxes, assessments, or charges levied by any Governmental Authority in
respect of this Agreement or any of the other Loan Documents, (d) all costs,
expenses, assessments, and other charges incurred in connection with any filing,
registration, recording, or perfection of any security interest or Lien
contemplated by this Agreement or any other Loan Document, and (e) all other
costs and expenses incurred by the Lender in connection with this Agreement or
any other Loan Document, including, without limitation, all costs, expenses, and
other charges incurred in connection with obtaining any mortgagee title
insurance policy, survey, audit, or appraisal in respect of the Collateral.
SECTION 11.2 INDEMNIFICATION. THE BORROWER SHALL INDEMNIFY THE LENDER
AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS FROM, AND
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HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS,
DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING
ATTORNEYS' FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR
INDIRECTLY ARISE FROM OR RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY,
PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B)
ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY
THE BORROWER OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT
CONTAINED IN ANY OF THE LOAN DOCUMENTS BY ANY PERSON OTHER THAN THE LENDER, (D)
THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY
HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES
OR ASSETS OF THE BORROWER OR ANY SUBSIDIARY, OR (E) ANY INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED
INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, RELATING TO ANY OF THE
FOREGOING. WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR OF ANY OTHER LOAN
DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO
BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD HARMLESS
AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON, BUT NOT IN
RESPECT OF LENDER'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
SECTION 11.3 LIMITATION OF LIABILITY. NEITHER THE LENDER NOR ANY
AFFILIATE, OFFICER, DIRECTOR, EMPLOYEE, ATTORNEY, OR AGENT OF THE LENDER SHALL
HAVE ANY LIABILITY WITH RESPECT TO, AND THE BORROWER HEREBY WAIVES, RELEASES,
AND AGREES NOT TO SUE ANY OF THEM UPON, ANY CLAIM FOR ANY SPECIAL, INDIRECT,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES SUFFERED OR INCURRED BY THE BORROWER IN
CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. THE BORROWER HEREBY WAIVES,
RELEASES, AND AGREES NOT TO SUE THE LENDER OR ANY OF THE LENDER'S AFFILIATES,
OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, OR AGENTS FOR PUNITIVE DAMAGES IN
RESPECT OF ANY CLAIM IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED
TO, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
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SECTION 11.4 LENDER NOT MANUFACTURER; DISCLAIMER. BORROWER UNDERSTANDS
AND AGREES THAT THE LENDER IS NOT THE MANUFACTURER OF THE EQUIPMENT BEING
PURCHASED BY BORROWER IN THE ACQUISITION. LENDER MAKES NO WARRANTIES OR
REPRESENTATIONS TO BORROWER, EITHER EXPRESS OR IMPLIED, AS TO:
(A) THE CONDITION, DESIGN, OPERATION, FITNESS FOR USE OR
MERCHANTABILITY OF THE EQUIPMENT;
(B) THE FITNESS OF THE EQUIPMENT FOR ANY PARTICULAR PURPOSE OF
BORROWER;
(C) THE VALUE OR WORTHINESS OF THE EQUIPMENT; OR
(D) ANY OTHER MATTER WHATSOEVER, IT BEING EXPRESSLY AGREED BY THE
PARTIES THAT ALL RISKS. RELATING TO OR ARISING FROM BORROWER'S
USE AND OPERATION OF THE EQUIPMENT SHALL BE BORNE AND ASSUMED
SOLELY BY BORROWER.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, LENDER SHALL NOT BE LIABLE FOR
ANY DEFECTS, EITHER LATENT OR PATENT, IN THE EQUIPMENT NOR FOR ANY GENERAL,
CONSEQUENTIAL OR INCIDENTAL DAMAGES, INCLUDING, WITHOUT LIMITATION, ANY DAMAGES
FOR DIMINUTION OF MARKET VALUE, LOSS OF USE OF THE EQUIPMENT, LOSS OF PROFITS OR
FOR ANY INTERRUPTION IN BORROWER'S BUSINESS OCCASIONED BY ITS INABILITY TO USE
THE EQUIPMENT FOR ANY REASON WHATSOEVER. LENDER SHALL NOT BE LIABLE FOR ANY
DAMAGES CLAIMED BY BORROWER OR ANY OTHER PERSON OR ENTITY UPON THE THEORIES OF
NEGLIGENCE OR STRICT LIABILITY IN TORT. IN NO EVENT SHALL ANY DEFECT IN, OR
UNFITNESS OF, THE
EQUIPMENT RELIEVE BORROWER OF ITS OBLIGATION TO MAKE PAYMENTS REQUIRED UNDER THE
NOTE, NOR RELIEVE BORROWER OF ANY OTHER OBLIGATION HEREUNDER.
Section 11.5 No Defenses. The Borrower will not assert any defense,
claim, counterclaim or charge against the Lender with respect to payment or
performance of the Obligations because of a breach of warranty or representation
of the Manufacturer, as the seller and the manufacturer of the equipment, the
purchase of which is being financed by this Term Loan.
Section 11.6 No Duty. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by the Lender shall have the right
to act exclusively in the interest of the Lender and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to the Borrower or any of the Borrower's shareholders
or any other Person.
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Section 11.7 Lender Not Fiduciary. The relationship between the
Borrower and the Lender is solely that of debtor and creditor, and the Lender
has no fiduciary or other special relationship with the Borrower, and no term or
condition of any of the Loan Documents shall be construed so as to deem the
relationship between the Borrower and the Lender to be other than that of debtor
and creditor.
Section 11.8 No Waiver; Cumulative Remedies. No failure on the part of
the Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power,
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. The rights and remedies
provided for in this Agreement and the other Loan Documents are cumulative and
not exclusive of any rights and remedies provided by law
Section 11.9 Successors and Assigns. This Agreement is binding upon and
shall inure to the benefit of the Lender and the Borrower and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Lender.
Section 11.10 Survival. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by the Lender or any closing shall affect the representations and
warranties or the right of the Lender to rely upon them. Without prejudice to
the survival of any other obligation of the Borrower hereunder, the obligations
of the Borrower under Sections 11.1 and 11.2 shall survive repayment of the
Notes.
Section 11.11 ENTIRE AGREEMENT; AMENDMENT. THIS AGREEMENT, THE NOTES,
AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
The provisions of this Agreement and the other Loan Documents to which the
Borrower is a party may be amended or waived only by an instrument in writing
signed by the parties hereto.
Section 11.12 Maximum Interest Rate. No provision of this Agreement or
any other Loan Document shall require the payment or the collection of interest
in excess of the maximum amount permitted by applicable law. If any excess of
interest in such respect is hereby provided for, or shall be adjudicated to be
so provided, in any Loan Document or otherwise in connection with this loan
transaction, the provisions of this Section shall govern and prevail and neither
the
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Borrower nor the sureties, guarantors, successors, or assigns of the Borrower
shall be obligated to pay the excess amount of such interest or any other excess
sum paid for the use, forbearance, or detention of sums loaned pursuant hereto.
In the event the Lender ever receives, collects, or applies as interest any such
sum, such amount which would be in excess of the maximum amount permitted by
applicable law shall be applied as a payment and reduction of the principal of
the indebtedness evidenced by the Notes; and, if the principal of the Notes has
been paid in full, any remaining excess shall forthwith be paid to the Borrower.
In determining whether or not the interest paid or payable exceeds the Maximum
Rate, the Borrower and the Lender shall, to the extent permitted by applicable
law, (a) characterize any non-principal payment as an expense, fee, or premium
rather than as interest, (b) exclude voluntary prepayments and the effects
thereof, and (c) amortize, promote, allocate, and spread in equal or unequal
parts the total amount of interest throughout the entire contemplated term of
the indebtedness evidenced by the Notes so that interest for the entire term
does not exceed the Maximum Rate.
Section 11.13 Notices. All notices and other communications provided
for in this Agreement and the other Loan Documents to which the Borrower is a
party shall be given or made by telecopy or in writing and telecopied, mailed by
certified mail return receipt requested, or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof; or, as to any party at such other address as shall be designated by such
party in a notice to the other party given in accordance with this Section.
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopy, subject to
telephone confirmation of receipt, or when personally delivered or, in the case
of a mailed notice, when duly deposited in the mails, in each case given or
addressed as aforesaid; provided, however, notices to the Lender pursuant to
Article II or III shall not be effective until received by the Lender.
SECTION 11.14 GOVERNING LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AGREEMENT
HAS BEEN ENTERED INTO IN HARRIS COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR
ALL PURPOSES IN HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING AGAINST THE
BORROWER UNDER OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT IN HARRIS COUNTY, TEXAS. THE BORROWER HEREBY
IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B)
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. THE BORROWER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS
SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11.11.
NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF
THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE
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RIGHT OF THE LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR
WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS. ANY ACTION
OR PROCEEDING BY THE BORROWER AGAINST THE LENDER SHALL BE BROUGHT ONLY IN A
COURT LOCATED IN HARRIS COUNTY, TEXAS.
Section 11.15 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.16 Severability. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 11.17 Headings. The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 11.18 Non-Application of Chapter 15 of Texas Credit Code. The
provisions of Chapter 15 of the Texas Credit Code (Vemon's Texas Civil Statutes,
Article 5069-15) are specifically declared by the parties hereto not to be
applicable to this Agreement or any of the other Loan Documents or to the
transactions contemplated hereby.
Section 11.19 Participations. The Lender shall have the right at any
time and from time to time to grant participations in the Revolving Credit Note,
the Term Note and any other Loan Documents. Each actual or proposed participant
shall be entitled to receive all information received by the Lender regarding
the Borrower, including, without limitation, information required to be
disclosed to a participant pursuant to Banking Circular 181 (Rev., August 2,
1984), issued by the Comptroller of the Currency (whether the actual or proposed
participant is subject to the circular or not).
Section 11.20 Construction. The Borrower and the Lender acknowledge
that each of them has had the benefit of legal counsel of its own choice and has
been afforded an opportunity to review this Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by the Borrower and the
Lender.
Section 11.21 Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default if such action is taken or such condition
exists.
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SECTION 11.22 DTPA WAIVER, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
APPLICABLE LAW FROM TIME TO TIME IN EFFECT, THE BORROWER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY (AND AFTER THE BORROWER HAS CONSULTED WITH ITS
OWN ATTORNEY) IRREVOCABLY AND UNCONDITIONALLY WAIVES THE PROVISIONS OF THE TEXAS
DECEPTIVE TRADE PRACTICES -- CONSUMER PROTECTION ACT (TX.
BUS. & COMM. CODE, CH. 17, SS. 17.41-17.63).
Section 11.23 Arbitration Program. The parties agree to be bound by the
terms and conditions of the current Arbitration Program of First Interstate Bank
of Texas, N.A., which is incorporated herein by reference herein and
acknowledged as received by the parties, pursuant to which any and all disputes
shall be resolved by mandatory binding arbitration upon the request of any
party.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWER:
3-D GEOPHYSICAL, INC.
By:____________________________________
J.D. White, Secretary
Address for Notices:
7076 S. Alton Way
Building H
Englewood, Colorado 80112
Fax No.: (303) 290-0447
Telephone No.: (303) 741-3700
Attention: President
LENDER:
FIRST INTERSTATE BANK OF TEXAS, N.A.
By:____________________________________
Randy Wade, Banking Officer
Address for Notices:
1000 Louisiana
Houston, Texas 77002
Fax No.: (713) 250-7031
Telephone No.: (713) 250-4833
Attention: Marc A. Dunmire
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APPENDIX A
Definitions
"Advance" means, as applicable, any of a Revolving Credit Advance or a
Term Loan Advance.
"Advance Request Form" means, as applicable, a Term Loan Advance
Request Form and a Revolving Credit Advance Request Form.
"Affiliate" means, as to any Person, any other Person (a) that directly
or indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds five percent or more of any class of voting stock of
such Person; or (c) five percent or more of the voting stock of which is
directly or indirectly beneficially owned or held by the Person in question. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise; provided,
however, in no event shall the Lender be deemed an Affiliate of the Borrower.
"Applicable Rate" means the Prime Rate, as it varies, plus one percent.
"Borrowing Base" means, at any time, an amount equal to 70% of Eligible
Accounts (the value of any Eligible Accounts denominated in Pesos shall be the
Lender's quoted exchange rate on the last day of the applicable month).
"Borrowing Base Report" means a monthly report of the Borrowing Base in
substantially the form of Exhibit "C" hereto.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Houston, Texas.
"Capital Lease Obligations" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP. For purposes of this Agreement, the amount of
such Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Collateral" has the meaning specified in Section 5.1.
<PAGE>
"Debt" means as to any Person at any time (without duplication): (a)
all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, notes, debentures, or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable of such Person arising in the ordinary
course of business which are not past due by more than 120 days or which all
being contested in good faith in an appropriate manner and by appropriate
proceedings and against which such Person has provided adequate reserves and
which do not result in a lien against Property of such Person, (d) all Capital
Lease Obligations of such Person, (e) all Debt or other obligations Guaranteed
by such Person, (f) all obligations secured by a Lien existing on property owned
by such Person, whether or not the obligations secured thereby have been assumed
by such Person or are non-recourse to the credit of such Person, (g) all
reimbursement obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptances, surety or other bonds and
similar instruments, and (h) all liabilities of such Person in respect of
unfunded vested benefits under any Plan.
"Debt Service" means, with respect to any period, the sum of all
scheduled principal payments of long-term Debt of the Borrower (including,
without limitation, the Term Loan) for such period plus all interest expense for
such period.
"Default" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event of
Default.
"Default Rate" means the lesser of (i) Maximum Rate or, (ii) the sum of
the Prime Rate in effect from day to day plus five percent.
"Dollars" and "$" mean lawful money of the United States of America.
"EBITDA" means as to any Person, for any period, the sum of the Net
Income for such period plus (a) interest expense plus (b) cash taxes paid plus
(c) amortization, depreciation and other non-cash charges to the extent deducted
from Net Income in such period.
"EBITDA Coverage Ratio" means, for any period, the ratio of EBITDA for
such period minus cash taxes paid during such period to the sum of current
maturities of long term Debt and interest expense for such period plus
non-financed capital expenditures during such period.
"Eligible Accounts" means, at any time, all accounts receivable of the
Borrower or a Guarantor created in the ordinary course of business that are
acceptable to the Lender in its sole discretion and satisfy the following
conditions:
(a) The account complies with all applicable laws, rules, and
regulations, including, without limitation, usury laws, the Federal
Truth in Lending Act, and Regulation Z of the Board of Governors of the
Federal Reserve System;
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(b) The account has not been outstanding for more than 90 days
past the original date of invoice;
(c) The account was created in connection with (i) the sale of
goods by the Borrower or a Guarantor in the ordinary course of business
and such sale has been consummated and such goods have been shipped and
delivered and received by the account debtor, or (ii) the performance
of services by the Borrower or a Guarantor in the ordinary course of
business and such services have been completed and accepted by the
account debtor (and not the result of progress billing);
(d) The account arises from an enforceable contract, the
performance of which has been completed by the Borrower or a Guarantor;
(e) The account does not arise from the sale of any good that
is on a bill-andhold, guaranteed sale, sale-or-return, sale on
approval, consignment, or any other repurchase or return basis;
(f) The Borrower or a Guarantor has good and indefeasible
title to the account and the account is not subject to any Lien except
Liens in favor of the Lender;
(g) The account does not arise out of a contract with or order
from an account debtor that, by its terms, prohibits or makes void or
unenforceable the grant of a security interest by the Borrower or a
Guarantor to the Lender in and to such account;
(h) The account is not subject to any setoff, counterclaim,
defense, dispute, recoupment, or adjustment other than normal discounts
for prompt payment;
(i) The account debtor is not insolvent or the subject of any
bankruptcy or insolvency proceeding and has not made an assignment for
the benefit of creditors, suspended normal business operations,
dissolved, liquidated, terminated its existence, ceased to pay its
debts as they become due, or suffered a receiver or trustee to be
appointed for any of its assets or affairs;
(j) The account is not evidenced by chattel paper or an
instrument;
(k) No default exists under the account by any party thereto;
(1) The account debtor has not returned or refused to retain,
or otherwise notified the Borrower or a Guarantor of any dispute
concerning, or claimed nonconformity of, any of the goods from the sale
of which the account arose;
(m) The account is not owed by an Affiliate of the Borrower or
a Guarantor;
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(n) The account is payable in Dollars by the account debtor
(or in the case of Petroleos Mexicanos, Mexican pesos);
(o) The account shall be ineligible if the account debtor is
domiciled in any country other than the United States of America unless
the payment of such account is ensured by FCIA insurance;
(p) Any "pass through" payments to third Persons;
(q) The account shall be ineligible if more than 25 percent of
the aggregate balances then outstanding on accounts owed by such
account debtor and its Affiliates to the Borrower are more than 90 days
past due from the dates of their original invoices;
(r) The account shall be ineligible if more than 15% (25% in
the case of major energy companies approved by the Lender, in its sole
discretion, in writing) of the aggregate balance then outstanding for
all accounts is owed by the same account debtor or any Affiliate
thereof; and
(s) The account shall be ineligible if the account debtor is
the United States of America or any department, agency, or
instrumentality thereof, and the Federal Assignment of Claims Act of
1940, as amended, shall not have been complied with.
The amount of the Eligible Accounts owed by an account debtor to the
Borrower shall be reduced by the amount of all "contra accounts" and
other obligations owed by the Borrower to such account debtor.
"Environmental Laws" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. ss. 6901 et seq., the
Occupational Safety and Health Act, 29 U.S.C. ss. 651 et seq., the Clean Air
Act, 42 U.S.C. ss. 7401 et seq., the Clean Water Act, 33 U.S.C. ss. 1251 et
seq., and the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., as such
laws, regulations, and requirements may be amended or supplemented from time to
time.
"Environmental Liabilities" means, as to any Person, all liabilities,
obligations, responsibilities, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs, and expenses, (including,
without limitation, all reasonable fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigation and feasibility studies),
fines, penalties, sanctions, and interest incurred as a result of any claim or
demand, by any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including any
Environmental Law, permit, order or agreement with any Governmental Authority or
other Person, arising from environmental, health or safety
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conditions or the Release or threatened Release of a Hazardous Material into the
environment, resulting from the past, present, or future operations of such
Person or its Affiliates.
"Equipment" means the Property manufactured or distributed, or both, by
the Manufacturer, which Property includes seismic data acquisition systems,
recording boxes, central processing units, cables and geophones.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
"Event of Default" has the meaning specified in Section 10.1.
"Excess Cash Flow" means as to any Person, for any calendar quarter,
the net increase in cash reflected in the Borrower's Form 10-Q for such quarter
less (a) any increase attributable to Debt permitted under the Agreement, (b)
any increase resulting from Revolving Loan Advances, (c) 35% of any increase
resulting from Geo's operations or the international operations of other foreign
Subsidiaries, and (d) increases in cash that are Reserves (as such term is used
in the Lockbox Agreement).
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
applied in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Geo" means Geoevaluaciones S.A. de C.V.
"Governmental Authority" means any nation or government, any state or
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
liability or obligation of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or otherwise,
of such Person (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or
5
<PAGE>
services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (b) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment thereof or to
protect the obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Guarantors" means collectively Paragon Geophysical, Inc., Northern
Geophysical of America, Inc. and Geo.
"Guaranty" means collectively the guaranties of the Guarantors in favor
of the Lender, each in form and substance acceptable to the Lender, as the same
may be amended, supplemented, or modified from time to time.
"Hazardous Material" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law, including,
without limitation, asbestos, petroleum, and polychlorinated biphenyls.
"Leverage Ratio" means, for any period, the ratio of total liabilities
(determined according to GAAP) to Tangible Net Worth.
"Lien" means any lien, mortgage, security interest, tax lien, financing
statement, pledge, charge, hypothecation, assignment, preference, priority, or
other encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement), whether arising
by contract, operation of law, or otherwise.
"Loan Documents" means this Agreement, the Note, Security Agreements,
Guaranties, the Remarketing and Support Guaranty, Lockbox Agreements,
assignments, guaranties, and other instruments, documents, and agreements
executed and delivered pursuant to or in connection with this Agreement, as such
instruments, documents, and agreements may be amended, modified, renewed,
extended, or supplemented from time to time.
"Lockbox" means the post office box or boxes from time to time used by
the Lender or a third Person acting as Lender's agent as a lockbox and to which
the Borrower or one or more Guarantors, or both, shall direct all payments and
monies due from any source.
"Lockbox Account" means one or more segregated deposit accounts
established in the name of Lender, maintained with Lender or a third Person
acting as Lender's agent and into which certain of Borrower's and the
Guarantors' receivables will be deposited pursuant to the Lockbox Agreement.
6
<PAGE>
"Lockbox Agreement" means the lockbox agreements among Borrower, the
Guarantors, certain others and Lender or a third Person acting as Lender's
agent, in the form acceptable to all parties, as the same may be amended,
supplemented or be otherwise modified.
"Manufacturer" means Input/Output, Inc., a Delaware corporation.
"Material Adverse Effect" shall mean any material and adverse effect on
(i) the assets, liabilities, financial condition, business, operations, affairs,
or circumstances of a Person or one of its Subsidiaries individually or of such
Person and its Subsidiaries on a consolidated basis from those reflected in the
latest financial statements delivered to the Lender prior to the date hereof or
from the facts represented or warranted in this Agreement, or any of the other
Loan Documents or (ii) the ability of an Obligated Party or any of its
Subsidiaries individually or of such Person and its Subsidiaries on a
consolidated basis to carry out its business as of the date of this Agreement or
as proposed at the date of this Agreement to be conducted or meet its
obligations under the Notes, this Agreement, or any of the other Loan Documents
on a timely basis.
"Maximum Rate" means, at any time, the maximum rate of interest under
applicable law that the Lender may charge the Borrower. The Maximum Rate shall
be calculated in a manner that takes into account any and all fees, payments,
and other charges in respect of the Loan Documents that constitute interest
under applicable law. Each change in any interest rate provided for herein based
upon the Maximum Rate resulting from a change in the Maximum Rate shall take
effect without notice to the Borrower at the time of such change in the Maximum
Rate. For purposes of determining the Maximum Rate under Texas law, the
applicable rate ceiling shall be the indicated rate ceiling described in, and
computed in accordance with, Article 5069-1.04, Vernon's Texas Civil Statutes.
"Monthly Payment Date" means the last day of each calendar month of
each year, the first of which shall be June 30, 1996.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Borrower or
any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Income" means, for any period, a Person's consolidated net income
(or loss) after income and franchise taxes determined in conformity with GAAP,
but excluding: (a) the income of any other Person (other than the Subsidiaries)
in which such Person or any of its Subsidiaries has an ownership interest,
unless and except to the extent received by such Person or its Subsidiaries in a
cash distribution; and (b) to the extent not included in clause (a) above, any
after tax extraordinary noncash gains or extraordinary noncash losses.
"Notes" means the Revolving Credit Note and the Term Note and all
extensions, renewals and modifications thereof.
7
<PAGE>
"Obligated Party" means each Guarantor and any other Person who is or
becomes party to any agreement that guarantees or secures payment and
performance of Obligations or any part thereof and, in the case of clauses (b),
(c), (d) and (e) of Section 10.1 of the Agreement.
"Obligations" means all obligations, indebtedness, and liabilities of
the Borrower to the Lender, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, including, without limitation, the
obligations, indebtedness, and liabilities of the Borrower or the Guarantors, or
both, under this Agreement and the other Loan Documents, and all interest
accruing thereon and all attorneys' fees and other expenses incurred in the
enforcement or collection thereof.
"Operating Lease" means any lease (other than a lease constituting a
Capital Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Permitted Lien" has the meaning specified in Section 8.2 hereof.
"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, Governmental Authority, or
other entity.
"Plan" means any employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and which is covered by Title
IV of ERISA.
"Prime Rate" means, at any time, the rate of interest per annum then
most recently established by the Lender as its prime rate, which rate may not be
the lowest rate of interest charged by the Lender to its borrowers. Each change
in any interest rate provided for herein based upon the Prime Rate resulting
from a change in the Prime Rate shall take effect without notice to the Borrower
at the time of such change in the Prime Rate.
"Principal Office" means the principal office of the Lender, presently
located at 1000 Louisiana, Houston, Texas.
"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.
"Quarterly Payment Date" means the last day of each May, August,
November and February of each year, the first of which shall be November 30,
1996.
"Release" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, disbursement, leaching, or
migration of Hazardous Materials into the indoor or outdoor environment or into
or out of property owned by such Person, including,
8
<PAGE>
without limitation, the movement of Hazardous Materials through or in the air,
soil, surface water, ground water, or property.
"Remarketing and Support Agreement" means an agreement from the
Manufacturer of a portion of the Term Note, in form and substance acceptable to
the Lender, as the same may be amended, modified or supplemented from time to
time.
"Remedial Action" means all actions required to (a) clean up, remove,
treat, or otherwise address Hazardous Materials in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Hazardous Materials so that they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment, or (c) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Representations and Warranties Certificate" shall mean a certificate
in form and substance satisfactory to the Lender.
"Revolving Credit Advance" means an advance of funds by the Lender to
the Borrower pursuant to Article II; "Revolving Credit Advances" means all
advances of funds by the Lender to the Borrower pursuant to Article II.
"Revolving Credit Advance Request Form" means a certificate, in the
form satisfactory to the Lender in its sole discretion, properly completed and
signed by the Borrower requesting a Revolving Credit Advance.
"Revolving Credit Commitment" means the obligation of Lender to make
the Revolving Credit Loan to Borrower in multiple advances in the aggregate
principal amount of $3,000,000.
"Revolving Credit Loan" the revolving credit loan described in the
Recitals hereto and made or to be made to Borrower pursuant to Article II.
"Revolving Credit Note" means the promissory note of Borrower payable
to the order of Lender in substantially the form of Exhibit "A" attached hereto,
and all extensions, renewals and modifications thereof.
"Revolving Credit Loan Termination Date" means 11:00 a.m., Houston,
Texas time on May 29, 1997, or such earlier date on which the Term Loan
Commitment terminates as provided in this Agreement.
"RICO" means the Racketeer Influenced and Corrupt Organization Act of
1970, as amended from time to time.
9
<PAGE>
"Security Agreement" means a security agreement or other Lien agreement
(including in the case of Geo, appropriate documentation under the laws of the
Republic of Mexico) in favor of the Lender in form and substance satisfactory to
Lender, as the same may be amended, supplemented, or modified.
"Subordinated Debt" means indebtedness of a Person that by the express
terms of the instrument creating the same, or by the terms of a separate
subordination agreement, is validly and effectively made subordinate and subject
in right of payment, to whatever extent Lender may require, to payment of the
Obligations, the form and substance of such instrument or agreement, as the case
may be, to be satisfactory to Lender.
"Subsidiary" means any corporation of which at least a majority of the
outstanding shares of stock having by the terms thereof ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
Borrower or one or more of the Subsidiaries or by Borrower and one or more of
the Subsidiaries.
"Tangible Net Worth" means, at any particular time, all amounts which,
in conformity with GAAP, would be included as stockholders' equity on a
consolidated balance sheet of the Borrower; provided, there shall be included
therein Subordinated Debt of the Borrower, and provided further, there shall be
excluded therefrom: (a) any amount at which shares of capital stock of the
Borrower appear as an asset on the Borrower's balance sheet, (b) goodwill,
including any amounts, however designated, that represent the excess of the
purchase price paid for assets or stock over the value assigned thereto, (c)
patents, trademarks, trade names, and copyrights, (d) deferred expenses, (e)
loans and advances to any stockholder, director, officer, or employee of the
Borrower or any Affiliate of the Borrower, and (f) all other assets which are
properly classified as intangible assets with the exception of capitalized
non-exclusive seismic data costs, and (g) cumulative foreign currency
transaction adjustment (plus or minus) resulting from the operations of Geo.
"Term Loan" means the term loan described in the Recitals hereto and
made or to be made to Borrower pursuant to Article III.
"Term Loan Advance" means an advance of funds by the Lender to the
Borrower pursuant to Article III; "Term Loan Advances" means all advances of
funds by the Lender to the Borrower pursuant to Article III.
"Term Loan Commitment" means the obligation of Lender to make the Loan
to Borrower in multiple advances in the aggregate principal amount of
$15,000,000.
"Term Loan Advance Request Form" means a certificate, in the form
satisfactory to the Agent in its sole discretion, properly completed and signed
by the Borrowers requesting a Term Loan Advance.
10
<PAGE>
"Term Note" means the promissory note of Borrower payable to the order
of Lender in substantially the form of Exhibit "B" attached hereto, and all
extensions, renewals and modifications thereof.
"Term Loan Maturity Date" means 11:00 a.m., Houston, Texas time on the
date that is three years after the earlier of (a) last Term Loan Advance or (b)
the Term Loan Termination Date, or such earlier date and time on which the Term
Note matures as provided in this Agreement.
"Term Loan Termination Date" means 11:00 a.m., Houston, Texas time on
March 31, 1997 or such earlier date on which the Term Loan Commitment terminates
as provided in this Agreement.
"Total Liabilities" means total liabilities (as such term is used under
GAAP) of a Person less Subordinated Debt.
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas.
"Vessel" has the meaning assigned to it in the Security Agreements.
11
<PAGE>
Schedules 8.1 and 8.2 (also called Schedule 1)
12
<PAGE>
Schedule 8.3
The Borrower is currently reviewing a potential acquisition of another
seismic contractor. As consideration for this acquisition, the Borrower intends
to issue up to 600,000 shares of common stock, or its equivalents, and assume up
to $2.0 million in debt.
13
<PAGE>
Schedule 8.4
Restricted Agreements
A. The Borrower has $1.0 million debt plus 8% interest payable to the
former owners of its Mexican subsidiary. Payments are due on
semi-annually for the next two years. See "Certain Transactions"
section of Borrower's Prospectus dated February 6, 1996.
B. The Borrower has $1.0 million of restricted cash on its balance sheet
statement, which is offset by a long-term liability of $1.0 million.
This $1.0 million is payable to the former shareholders of the
Borrower's Mexican subsidiary after two years and will be offset by any
undisclosed liabilities including payments related to a disagreement
with Capilano International, Inc. See "Certain Transactions" and
"Business-Legal Proceedings" sections of Borrower's Prospectus dated
February 6, 1996.
14
<PAGE>
Schedule 8.6
Permitted Issuances of Capital Stock
3-D Geophysical, Inc. Stock Option Summary
Qualified Non-Qualified
Options Authorized 725,000 N/A
Options Issued at May 1, 1995 639,502 225,000
Options Pending Issuance 12,000 -0-
------- -------
Options Remaining Available for Distribution 73,498 N/A
Note: The company is currently contemplating a transaction that may involve
the issuance of up to 600,000 shares of stock.
15
<PAGE>
EXHIBIT "A"
REVOLVING CREDIT NOTE
---------------------
$3,000,000.00 Houston, Texas May 29, 1996
FOR VALUE RECEIVED, the undersigned, 3-D GEOPHYSICAL, INC., a Delaware
corporation ("Maker"), hereby promises to pay to the order of FIRST INTERSTATE
BANK OF TEXAS, N.A., a national banking association ("Payee"), at its offices at
1000 Louisiana, Houston, Harris County, Texas, in lawful money of the United
States of America, the principal sum of THREE MILLION AND NO/100 DOLLARS
($3,000,000.00), or so much thereof as may be advanced and outstanding
hereunder, together with interest on the outstanding principal balance from day
to day remaining. This Note shall be due and payable as follows:
(a) Accrued and unpaid interest on this Note shall be
payable on each Monthly Payment Date and on the
Revolving Credit Termination Date; and
(b) A final installment in the amount of the entire unpaid
principal balance hereof, plus all accrued and unpaid
interest hereon, shall be due and payable on the
Revolving Credit Termination Date.
This Revolving Credit Note provided for in that certain Loan Agreement of
even date herewith between Maker and Payee (such Loan Agreement as the same may
be amended, supplemented or otherwise modified from time to time is hereinafter
referred to as the "Agreement"). Capitalized terms not otherwise defined herein
shall have the same meanings except forth in the Agreement. Reference is hereby
made to the Agreement for provisions affecting this Revolving Credit Note,
including, without limitation, provisions regarding the limitation of interest
charged hereunder, the Collateral securing this Revolving Credit Note, optional
and mandatory prepayments, Defaults and Payee's rights arising as a result of
the occurrence thereof.
Subject to the terms of the Agreement, the outstanding principal balance
hereof shall bear interest prior to maturity at a varying rate (which shall from
day to day be equal to the lesser of (a) the Maximum Rate, or (b) the Applicable
Rate, each such change in the rate of interest charged hereunder to become
effective without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the rate of interest specified in clause (b) preceding shall exceed
the Maximum Rate thereby causing the interest rate hereon to be limited to the
Maximum Rate, than any subsequent reduction in the Applicable Rate will not
reduce the rate of interest hereon below the Maximum Rate until the total amount
of interest accrued hereon equals the amount of interest which would have
accrued hereon if the rate specified in clause (b) preceding had at all times
been in effect. Past due principal and interest shall bear interest at the
Default Rate.
A-1
<PAGE>
Interest on the indebtedness evidenced by this Note shall be computed
on the basis of a year of 365 days and the actual number of days elapsed
(including the first day but excluding the last day) unless such calculation
would result in a usurious rate, in which case interest shall be calculated on
the basis of a year of 365 or 366 days, as the case may be.
If the holder hereof expends any effort in any attempt to enforce
payment of all or any part or installment of any sum due the holder hereunder,
or if this Note is placed in the hands of an attorney for collection, or if it
is collected through any legal proceedings, Maker agrees to pay all costs,
expenses, and fees incurred by the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the
laws of the State of Texas and the applicable laws of the United States of
America. This Note is performable in Harris County, Texas.
Maker and each surety, guarantor, endorser, and other party ever liable
for payment of any sums of money payable on this Note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
3-D GEOPHYSICAL, INC.
By:___________________________________
J.D. White, Secretary
A-2
<PAGE>
EXHIBIT "B"
TERM NOTE
$15,000,000.00 Houston, Texas May 29, 1996
FOR VALUE RECEIVED, the undersigned, 3-D GEOPHYSICAL, INC., a Delaware
corporation ("Maker"), hereby promises to pay to the order of FIRST INTERSTATE
BANK OF TEXAS, N.A., a national banking association ("Payee"), at its offices at
1000 Louisiana, Houston, Harris County, Texas, in lawful money of the United
States of America, the principal sum of FIFTEEN MILLION AND NO/100 DOLLARS
($15,000,000.00), or so much thereof as may be advanced and outstanding
hereunder, together with interest on the outstanding principal balance from day
to day remaining as herein specified. This Note shall be due and payable as
follows:
(a) On even date herewith, $12,051,311.20 is being advanced by
the Payee to the Maker (the "Initial Advance"). Principal and interest
on the Initial Advance will be repaid as follows:
(i) Interest only will be paid on the Initial Advance
on June 30, 1996 and on July 31, 1996.
(ii) Thereafter, principal and interest on the
Initial Advance is due and payable in 36 installments, the
first 35 of which being in the principal amount of $334,758.64
(or such lesser amount as may then be outstanding) plus
accrued interest each, and the final installment being in the
amount of the balance of principal and interest then due
thereon. The first such installment of principal and interest
is due and payable on August 31, 1996, and the remaining
installments are due and payable in consecutive order on the
last day of each and every succeeding calendar month
thereafter until all sums called for hereunder applicable to
the Initial Advance have been paid in full, with maturity of
the final installment of the Initial Advance being July 31,
1999.
(b) All or part of the remaining principal to be advanced
hereunder shall be advanced only in accordance with the terms and
provisions of the Agreement (as hereinafter defined), all of which must
be done in a single advance prior to March 31, 1997 (the "Second
Advance"). The Second Advance shall be repayable in 36 substantially
equal monthly installments of principal, plus accrued interest each,
commencing after the Second Advance on the same day of the calendar
month that the next installment of the Initial Advance is due (and if
Initial Advance has been paid in full, then on the last day of the
month in which the Second Advance is made), and the remaining
installments are due and payable in consecutive order on the same day
of each and every calendar month thereafter unless there is no
numerically corresponding day of
B-1
<PAGE>
the month (in which case payment shall be made on the last day of the
month), with the first 35 installments being in the amount of the
Second Advance divided by 36, plus accrued interest each, with the
final installment in the amount of the unpaid principal balance then
owing hereunder applicable to the Second Advance being payable on or
before the same day of the month, 35 months subsequent to the date on
which the first installment payment is due for the Second Advance.
(c) In addition to the aforesaid installments, Maker shall
make Excess Cash Flow payments toward payment of this Note as required
by the Agreement, which payments shall be applied to the payment of
installments of principal in the inverse order of maturity.
This is the Term Note provided for in that certain Loan Agreement dated of
even date herewith between Maker and Payee (such Loan Agreement as the same may
be amended, supplemented or otherwise modified from time to time is hereinafter
referred to as the "Agreement"). Capitalized terms not otherwise defined herein
shall have the same meanings as set forth in the Agreement. Reference is hereby
made to the Agreement for provisions affecting this Note, including, without
limitation, provisions regarding the limitation of interest charged hereunder,
the Collateral securing this Term Note, optional and mandatory prepayments,
Defaults and Payee's rights arising as a result of the occurrence thereof.
Subject to the terms of the Agreement, the outstanding principal balance
hereof shall bear interest prior to maturity at a varying rate per annum which
shall from day to day be equal to the lesser of (a) the Maximum Rate, or (b) the
Prime Rate of Payee in effect from day to day plus one percent, each such change
in the rate of interest charged hereunder to become effective, without notice to
Maker, on the effective date of each change in the Prime Rate or the Maximum
Rate, as the case may be; provided, however, if at any time the rate of interest
specified in clause (b) preceding shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Prime Rate will not reduce the rate of interest hereon below
the Maximum Rate until the total amount of interest accrued hereon equals the
amount of interest which would have accrued hereon if the rate specified in
clause (b) preceding had at all times been in effect. All past due principal and
interest shall bear interest at the Default Rate.
Interest on the indebtedness evidenced by this Note shall be computed on
the basis of a year of 365 days and the actual number of days elapsed (including
the first day but excluding the last day) unless such calculation would result
in a usurious rate, in which case interest shall be calculated on the basis of a
year of 365 or 366 days, as the case may be.
If the holder hereof expends any effort in any attempt to enforce
payment of all or any part or installment of any sum due the holder hereunder,
or if this Note is placed in the hands of an attorney for collection, or if it
is collected through any legal proceedings, Maker agrees to pay all collection
costs and fees incurred by the holder, including reasonable attorneys' fees.
B-2
<PAGE>
This Note shall be governed by and construed in accordance with the laws of
the State of Texas and the applicable laws of the United States of America. This
Note is performable in Harris County, Texas.
Maker and each surety, guarantor, endorser, and other party ever liable
for payment of any sums of money payable on this Note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
3-D GEOPHYSICAL, INC.
By:___________________________________
J.D. White, Secretary
B-3
<PAGE>
EXHIBIT "C"
BORROWING BASE REPORT
TO: FIRST INTERSTATE BANK OF TEXAS, N.A.
1000 Louisiana
Houston, Texas 77002
Attention: Randy Wade
Gentlemen:
This Borrowing Base Report for the month ending ____________, 19__, is
executed and delivered by 3-D INTERNATIONAL (the "Borrower") to FIRST INTERSTATE
BANK OF TEXAS, N.A. ("Lender") under that certain Loan Agreement (the "Loan
Agreement") dated May 29, 1996, between the Borrower and the Lender. All terms
used herein shall have the meanings assigned to them in the Loan Agreement.
The Borrower represents and warrants to the Lender that all information
contained herein is true, correct, and complete, and that the total Eligible
Accounts referred to below represent the Eligible Accounts that qualify for
purposes of determining the Borrowing Base under the Loan Agreement. The
Borrower further represents and warrants to the Lender that attached hereto as
Schedule 1 is a list of the Eligible Accounts for the month ending ____________,
19__, showing all Eligible Accounts aged in 30-day intervals.
================================================================================
ACCOUNTS RECEIVABLE OF THE BORROWER AND GUARANTORS:
- --------------------------------------------------------------------------------
a. Gross Accounts Receivable -- ending balance for $
period ended _________________, 19_____
- --------------------------------------------------------------------------------
b. Less: Ineligible Accounts (determined pursuant to $
the definition of Eligible Accounts in the Loan
Agreement, without duplication)
- --------------------------------------------------------------------------------
Accounts not complying with applicable law $
- --------------------------------------------------------------------------------
Accounts outstanding for more than 90 days $
past the original due date
- --------------------------------------------------------------------------------
More than 25% of the balance of such portion $
of the account has been outstanding for more
than 90 days past the original date of invoice
- --------------------------------------------------------------------------------
Accounts created outside of the ordinary
course of business $
- --------------------------------------------------------------------------------
Accounts from unenforceable contracts or $
contracts not fully completed by the
Borrowers or the Guarantors
C-1
<PAGE>
- --------------------------------------------------------------------------------
Accounts from sales on bill-and-hold, $
guaranteed sale, sale-and-return, or
similar basis
- --------------------------------------------------------------------------------
Accounts subject to a Lien other than Liens $
held by the Lender
- --------------------------------------------------------------------------------
Accounts as to which a Borrower or the $
Guarantors does not have good and
indefeasible title
- --------------------------------------------------------------------------------
Accounts in which the Lender does not have a $
perfected first priority Lien
- --------------------------------------------------------------------------------
Accounts subject to anti-assignment provisions $
- --------------------------------------------------------------------------------
Accounts subject to set-off, dispute, etc. $
- --------------------------------------------------------------------------------
Accounts owed by account debtors subject to $
bankruptcy, insolvency, receivership, or
liquidation proceedings
- --------------------------------------------------------------------------------
Accounts evidenced by chattel paper or $
instruments
- --------------------------------------------------------------------------------
Accounts subject to a default by any party $
thereto
- --------------------------------------------------------------------------------
Accounts owed by Affiliates of the Borrower or $
a Guarantor
- --------------------------------------------------------------------------------
Accounts not payable in Dollars (excluding $
Petroleos Mexicanos accounts insured by FCIA)
- --------------------------------------------------------------------------------
Accounts owed by foreign account debtors - not $
insured by FCIA
- --------------------------------------------------------------------------------
Such portion of accounts representing more $
than 10 percent of the aggregate amount of all
accounts receivable
- --------------------------------------------------------------------------------
Accounts owed by the United States of America $
or any agency thereof for which the Federal
Assignment of Claims Act of 1940, as amended,
has not been complied with
- --------------------------------------------------------------------------------
Contra accounts owed to the account debtor $
- --------------------------------------------------------------------------------
c. Total Ineligible Accounts $
- --------------------------------------------------------------------------------
d. Total Eligible Accounts $
- --------------------------------------------------------------------------------
BORROWING BASE:
- --------------------------------------------------------------------------------
e. 70% of line d ("Borrowing Base") $
- --------------------------------------------------------------------------------
f. Outstanding Principal Amount of Advances under $
Revolving $ Credit Commitment
C-2
<PAGE>
- --------------------------------------------------------------------------------
g. Available Credit Amount [(the lesser of the amount $
of the $ Revolving Credit Commitment or line d)
minus line f]
================================================================================
The Borrower further represents and warrants to the Lender that the
representations and warranties contained in the Agreement are true and correct
on and as of the date of this Borrowing Base Report as if made on and as of the
date hereof, and that no Default has occurred and is continuing.
Date: ______________________, 19__
BORROWER:
3-D INTERNATIONAL, INC.
By:_________________________________
Authorized Officer
C-3
<PAGE>
TABLE OF CONTENTS
PAGE
R E C I T A L S............................................................. 1
ARTICLE I Definitions............................................... 1
Section 1.1 Definitions...................................... 1
Section 1.2 Other Definitional Provisions.................... 1
ARTICLE II Revolving Credit Loan..................................... 2
Section 2.1 Revolving Credit Commitment...................... 2
Section 2.2 Revolving Credit Note............................ 2
Section 2.3 Repayment of Revolving Credit Loan............... 2
Section 2.4 Interest......................................... 2
Section 2.5 Borrowing Procedure.............................. 2
Section 2.6 Use of Proceeds.................................. 3
Section 2.7 Borrowing Base; Mandatory Prepayments............ 3
Section 2.8 Revolving Credit Commitment Fee.................. 3
Section 2.9 Reduction or Termination of Revolving
Credit Commitment................................ 3
ARTICLE III Term Loan................................................. 3
Section 3.1 Term Loan Commitment............................. 3
Section 3.2 The Term Note.................................... 4
Section 3.3 Repayment of Term Loan........................... 4
Section 3.4 Interest......................................... 4
Section 3.5 Borrowing Procedure, Etc......................... 4
Section 3.6 Facility Fee..................................... 4
Section 3.7 Use of Proceeds.................................. 4
Section 3.8 Mandatory Prepayment............................. 4
Section 3.9 Voluntary Prepayment and Repayment............... 5
ARTICLE IV Payments...................................................... 5
Section 4.1 Method of Payment................................ 5
Section 4.2 Computation of Interest.......................... 5
Section 4.3 Interest at Default Rate......................... 5
Section 4.4 Capital Adequacy................................. 5
Section 4.5 Annual Agent Fee................................. 6
ARTICLE V Security.................................................. 6
Section 5.1 Collateral....................................... 6
Section 5.2 Guaranties....................................... 7
Section 5.3 Additional Support............................... 7
Section 5.4 Setoff........................................... 7
i
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE VI Conditions Precedent.......................................... 7
Section 6.1 Initial Term Loan Advance........................ 7
Section 6.2 Initial Revolving Credit Advance................. 10
Section 6.3 Conditions to All Advances....................... 11
ARTICLE VII Positive Covenants........................................... 11
Section 7.1 Reporting Requirements........................... 11
Section 7.2 Maintenance of Existence; Conduct of Business.... 14
Section 7.3 Maintenance of Properties........................ 14
Section 7.4 Taxes and Claims................................. 14
Section 7.5 Insurance........................................ 14
Section 7.6 Inspection Rights................................ 14
Section 7.7 Keeping Books and Records........................ 15
Section 7.8 Compliance with Laws............................. 15
Section 7.9 Compliance with Agreements....................... 15
Section 7.10 Comply with Vessel Charters and Leases........... 15
Section 7.11 Vendors, Suppliers, Etc.......................... 15
Section 7.12 Further Assurances............................... 15
Section 7.13 ERISA............................................ 15
Section 7.14 Annual Collateral and Systems Review............. 15
Section 7.15 Lockbox.......................................... 16
ARTICLE VIII Negative Covenants.......................................... 16
Section 8.1 Debt............................................. 16
Section 8.2 Limitation on Liens.............................. 16
Section 8.3 Mergers, Etc..................................... 17
Section 8.4 Restricted Payments.............................. 17
Section 8.5 Loans and Investments............................ 17
Section 8.6 Limitation on Issuance of Capital Stock.......... 18
Section 8.7 Transactions With Affiliates..................... 18
Section 8.8 Disposition of Assets............................ 18
Section 8.9 Sale and Leaseback............................... 18
Section 8.10 Prepayment of Debt............................... 18
Section 8.11 Nature of Business............................... 18
Section 8.12 Environmental Protection......................... 18
Section 8.13 Accounting....................................... 19
ii
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE IX Financial Covenants.......................................... 19
Section 9.1 EBITDA Coverage Ratio............................ 19
Section 9.2 Consolidated Tangible Net Worth.................. 19
Section 9.3 Leverage Ratio................................... 19
ARTICLE X Default................................................... 19
Section 10.1 Events of Default................................ 19
Section 10.2 Remedies Upon Default............................ 21
Section 10.3 Performance by the Lender........................ 22
ARTICLE XI Miscellaneous.................................................. 22
Section 11.1 Expenses............................................. 22
Section 11.2 Indemnification...................................... 22
Section 11.3 Limitation of Liability.............................. 23
Section 11.4 Lender Not Manufacturer; Disclaimer.................. 24
Section 11.5 No Defenses.......................................... 24
Section 11.6 No Duty.............................................. 24
Section 11.7 Lender Not Fiduciary................................. 25
Section 11.8 No Waiver; Cumulative Remedies....................... 25
Section 11.9 Successors and Assigns............................... 25
Section 11.10 Survival............................................ 25
Section 11.11 Entire Agreement; Amendment......................... 25
Section 11.12 Maximum Interest Rate............................... 25
Section 11.13 Notices............................................. 26
Section 11.14 Governing Law; Venue; Service of Process............ 26
Section 11.15 Counterparts........................................ 27
Section 11.16 Severability........................................ 27
Section 11.17 Headings............................................ 27
Section 11.18 Non-Application of Chapter 15 of Texas
Credit Code......................................... 27
Section 11.19 Participations...................................... 27
Section 11.20 Construction........................................ 27
Section 11.21 Independence of Covenants........................... 27
Section 11.22 DTPA Waiver......................................... 28
Section 11.23 Arbitration Program................................. 28
iii
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of May 29, 1996, is by and between 3-D
GEOPHYSICAL, INC., a Delaware corporation (the "Debtor") whose address is 7076
S. Alton Way, Englewood, Colorado 80112, and FIRST INTERSTATE BANK OF TEXAS,
N.A., a national banking association ("Secured Party") whose address is 1000
Louisiana, Houston, Texas.
R E C I T A L S:
A. Debtor and Secured Party have entered into that certain Loan
Agreement dated of even date herewith (such Loan Agreement, as the same may be
amended or modified from time to time, being hereinafter referred to as the
"Loan Agreement") pursuant to which Secured Party has agreed to make a revolving
credit loan to Borrower in the aggregate principal amount not to exceed
$3,000,000.00 and a term loan to Borrower in the aggregate principal amount not
to exceed $15,000,000.00, subject to the terms and conditions of the Loan
Agreement.
B. Secured Party has conditioned its obligations under the Loan
Agreement upon the execution and delivery of this Agreement by Debtor.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. All terms used herein which are defined in the
Uniform Commercial Code as adopted and in effect from time to time in the State
of Texas ("UCC") shall have the same meanings herein as in the UCC unless the
context in which such terms are used herein indicates otherwise. All capitalized
terms used but not otherwise defined herein or which are defined in the UCC that
are defined in the Loan Agreement shall have the meanings ascribed to such terms
in the Loan Agreement, the applicable provisions of which Loan Agreement are
incorporated herein.
ARTICLE II
Security Interest
Section 2.1 Security Interest. To secure the prompt payment and
performance in full of the Obligations, Debtor hereby grants to Secured Party a
security interest in, and assigns and pledges, the following property, whether
now owned or existing or hereafter arising or acquired
<PAGE>
and wherever arising or located (such property being hereinafter sometimes
called the "Collateral"):
(a) all accounts, accounts receivable, documents, instruments,
chattel paper, general intangibles of Debtor, including, without
limitation, all income tax returns, copyrights, patents, patent rights,
trademarks, tradenames, tradestyles, goodwill, going concern value,
franchise and distributorship agreements, whether now owned or
hereafter acquired, and all products and proceeds thereof;
(b) all equipment, inventory, machinery, and fixtures of Debtor,
whether now owned or hereafter acquired, and all accessions thereto and
all products and proceeds thereof;
(c) all investment property of Debtor, whether now owned or
hereafter acquired, and all accessions thereto and all products and
proceeds thereof;
(d) the Lockbox Account, any other deposit accounts now or
hereafter maintained by Debtor at or with Secured Party and all cash,
checks, instruments, securities, funds and monies now or hereafter
deposited in the foregoing; and
(e) all books and records (including computer software, diskettes,
information stored in computers and the like) pertaining to the
property described in clauses (a) and (d) above.
Section 2.1 Debtor Remains Liable. Notwithstanding anything to the
contrary contained herein, (a) the Debtor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Secured Party of any of its rights hereunder shall not release the Debtor from
any of its duties or obligations under the contracts and agreements included in
the Collateral, and (c) the Secured Party shall not have any obligation or
liability under any of the contracts and agreements included in the Collateral
by reason of this Agreement, nor shall the Secured Party be obligated to perform
any of the obligations or duties of the Debtor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
ARTICLE III
Representations and Warranties; Etc.
To induce Secured Party to enter into this Agreement and the Loan
Agreement, represents and warrants to, and covenants and agrees with, Secured
Party that:
-2-
<PAGE>
Section 3.1 Title. Except for the security interest granted herein,
Debtor owns, and with respect to Collateral acquired after the date hereof
Debtor will own, the Collateral free and clear of any Lien, other than Permitted
Liens.
Section 3.2 Accounts. Unless Debtor has given Secured Party written
notice to the contrary, whenever the security interest granted hereunder
attaches to an account, Debtor shall be deemed to have represented and wan-anted
to Secured Party as to each and all of its accounts that (i) each account is
genuine and in all respects what it purports to be, (ii) each account represents
the legal, valid, and binding obligation of the account debtor evidencing
indebtedness unpaid and owed by such account debtor arising out of the
performance of labor or services by Debtor or the sale or lease of goods by
Debtor, (iii) the amount of each account represented as owing is the correct
amount actually and unconditionally owing except for normal trade discounts
granted in the ordinary course of business, and (iv) no account is subject to
any offset counterclaim, or other defense.
Section 3.3 Financing Statements. No financing statement, security
agreement, or other lien instrument covering all or any part of the Collateral
is on file in any public office, except as may have been filed in favor of
Secured Party pursuant to this Agreement.
Section 3.4 Organization and Authority. Debtor is a corporation duly
organized, validly existing, and in good standing under the laws of its state of
incorporation. Debtor has the partnership power and authority to execute,
deliver, and perform this Agreement, and the execution, delivery, and
performance of this Agreement by Debtor have been authorized by all necessary
corporate action on the part of Debtor and do not and will not violate any law,
rules or regulation or partnership agreement of Debtor and do not and will not
conflict with, result in a breach of, or constitute a default under the
provisions of any indenture, mortgage, deed of trust, security agreement, or
other instrument or agreement pursuant to which Debtor or any of its property is
bound.
Section 3.5 Principal Place of Business. The principal place of
business and chief executive office of Debtor, and the office where Debtor keeps
its books and records, is located at the address of Debtor shown at the
beginning of this Agreement.
Section 3.6 Location of Collateral; Markings. Debtor intends to place
all or part of the Collateral on certain vessels (collectively, "Vessel").
Debtor shall advise and notify Secured Party in writing from time to time, and
at any time upon Secured Party's request, the name, flag and name of owner of
the Vessels on which the Collateral is located; or, if not on a Vessel, the
other location of such Collateral. Debtor agrees to mark all equipment and
inventory Co now or hereafter located on a Vessel with a prominent nameplate
indicating that the Debtor owns such Collateral and Secured Party has a Lien
thereon.
-3-
<PAGE>
Section 3.7 Intellectual Property. No patents, trademarks, copyrights,
rights of use or other intellectual property are necessary, advisable or useful
for the conduct of Debtor's business and Debtor has none of the same.
Section 3.8 Perfection. Upon the filing of Uniform Commercial Code
financing statements in the jurisdictions listed on Schedule 2 attached hereto,
and upon the Secured Party's obtaining possession of all documents, instruments,
and chattel paper of the Debtor, the security interest in favor of the Secured
Party created herein will constitute a valid and perfected Lien upon and
security interest in the Collateral, subject to no equal or prior Lien.
Section 3.9 Inventory. All inventory has been produced in compliance
with all requirements of the Fair Labor Standards Act.
Section 3.10 Intellectual Property. No patents, trademarks, copyrights,
rights of use or other intellectual property are necessary, advisable or useful
for the conduct of Debtor's business and Debtor has none of the same.
ARTICLE IV
Covenants
Debtor covenants and agrees with Secured Party that until the
Obligations are paid and performed in full:
Section 4.1 Maintenance. Debtor shall maintain the Collateral in good
operating condition and repair and shall not permit any waste or destruction of
the Collateral or any part thereof. Debtor shall not use or permit the
Collateral to be used in violation of any law or inconsistently with the terms
of any policy of insurance. Debtor shall not use or permit the Collateral to be
used in any manner or for any purpose that would impair the value of the
Collateral or expose the Collateral to unusual risk.
Section 4.2 Liens and Encumbrances. (a) Neither Debtor, owner,
charterer, agent, master, nor any member of the crew of any Vessel has, nor
shall have, any right, power or authority to create, incur or permit to be
placed or imposed on any Collateral, or any part thereof, any lien whatsoever
other than to Secured Party. Debtor shall defend the Collateral against, any
lien, security interest, or other encumbrance on the Collateral except the
security interest of Secured Party hereunder, and shall defend Debtor's rights
in the Collateral and Secured Party's security interest in the Collateral
against the claims of all persons and entities. Debtor shall further obtain
consent from the owner of each of the Vessel, each mortgagee of real property
owned by Debtor, and each landlord of real property leased by Debtor upon which
any Collateral is located not to create, permit, or suffer to exist any lien,
security interest, or other encumbrances on the Collateral.
-4-
<PAGE>
(b) Debtor shall promptly pay and discharge, or caused to be paid,
discharged and released, any and all taxes, assessments, governmental charges,
fines, penalties, or Liens that may attach to or be imposed upon the Collateral
by virtue that the Collateral is located on the Vessel. If any Vessel shall be
detained, seized, levied upon or taken into custody under process or under color
of any authority, Debtor shall promptly notify Secured Party in writing and
shall promptly cause the Vessel to be discharged or released therefrom.
Section 4.3 Modification of Accounts. Debtor shall do nothing to impair
the rights of Secured Party in the Collateral. The Debtor shall, in accordance
with prudent business practices, endeavor to collect or cause to be collected
from each account debtor under its accounts, as and when due, any and all
amounts owing under such accounts. Without the prior written consent of Secured
Party, Debtor shall not (a) grant any extension of time for any payment with
respect to the Accounts, (b) compromise, compound, or settle any of the
Accounts, (c) release in whole or in part any person or entity liable for
payment with respect to the Accounts, (d) allow any credit or discount for
payment with respect to the Accounts other than (i) normal trade discounts
granted in the ordinary course of business or (ii) discounts not to exceed
(without Secured Party's consent) $150,000 individually or $400,000 in the
aggregate that are given to avoid a greater loss or maximize recovery of monies
due to Debtor, or (e) release any lien, security interest, or assignment
securing the Accounts, or otherwise amend or modify any of the Accounts.
Section 4.4 Disposition of Collateral. Debtor shall not sell, lease, or
otherwise dispose of the Collateral or any part thereof without the prior
written consent of Secured Party, except Debtor may sell inventory in the
ordinary course of business.
Section 4.5 Further Assurances. At any time and from time to time, upon
the request of Secured Party, and at the sole expense of Debtor, Debtor shall
promptly execute and deliver all such further instruments and documents and take
such further action as Secured Party may deem necessary or desirable to preserve
and perfect its security interest in the Collateral and carry out the provisions
and purposes of this Agreement, including, without limitation, the execution and
filing of such financing statements as Secured Party may require. A carbon,
photographic, or other reproduction of this Agreement or of any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement and may be filed as a financing statement. Debtor shall
promptly endorse and deliver to Secured Party all documents, instruments, and
chattel paper that it now owns or may hereafter acquire.
Section 4.6 Risk of Loss; Insurance. Debtor shall be responsible for
any loss of or damage to the Collateral. Debtor shall maintain, with financially
sound and reputable companies, insurance policies (i) insuring the Collateral
against all marine risks, loss by fire, explosion, theft, and such other risks
and casualties as are customarily insured against by companies engaged in the
same or a similar business, and (ii) insuring Debtor and Secured Party against
liability for personal injury and property damage relating to the Collateral,
such policies to be in such amounts and covering such risks as are customarily
insured against by companies engaged in the same or a similar business, with
losses payable to Debtor and Secured Party as their respective interests
-5-
<PAGE>
may appear and with the Secured Party being named as an additional assured
thereunder. All insurance with respect to the Collateral shall provide that no
cancellation, reduction in amount, or change in coverage thereof shall be
effective unless Secured Party has received 30 days prior written notice
thereof. Debtor shall deliver to Secured Party copies of all insurance policies
covering the Collateral or any part thereof.
Section 4.7 Warehouse Receipts Non-Negotiable. Debtor agrees that if
any warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its inventory, such warehouse receipt or receipt in the
nature thereof shall not be "negotiable" (as such term is used in Section 7-104
of the Uniform Commercial Code as adopted by the State of Texas).
Section 4.8 Inspection Rights. Debtor shall permit and obtain consent
from the Vessel Owner to permit Secured Party and its representatives to examine
or inspect the Collateral wherever located and to examine, inspect, and copy
Debtor's books and records at any reasonable time and as often as Secured Party
may desire.
Section 4.9 Vessel Owner, Mortgagee and Landlord Waivers, Etc. Debtor
shall cause each owner of a Vessel on, which the Collateral is located to
execute and deliver instruments satisfactory in form and substance to Secured
Party pursuant to which such Vessel owner (i) waives its rights, if any, in the
Collateral, (ii) confirms that it will not create, incur or place upon any
Collateral located on its Vessel any Lien, security interest, or other
encumbrance, (iii) covenants not to remove the Vessel from the territorial
waters of the United States, Canada or Mexico in the Gulf of Mexico without
prior written notification to Secured Party, (iv) confirms that there is no Lien
upon the Vessel or that it has notified the holder of the Lien that the Debtor's
Property located thereon is not the owner's nor the Vessel's, and (v) covenants
not to abandon a Vessel in any port. Debtor shall cause each mortgagee of real
property owned by Debtor and each landlord of real property leased by the Debtor
upon which any of the Collateral is located to execute and deliver instruments
satisfactory in form and substance to Secured Party pursuant to which such
mortgagee or landlord (i) waives its rights, if any, in the Collateral, and (ii)
confirms that it will not create, incur or place upon any Collateral located on
its property any Lien, security interest, or other encumbrance.
Section 4.10 Taxes. Debtor agrees to pay or discharge prior to
delinquency all taxes, assessments, levies, and other governmental charges
imposed on it or its property, except Debtor shall not be required to pay or
discharge any tax, assessment, levy, or other governmental charge if (i) the
amount or validity thereof is being contested by Debtor in good faith by
appropriate proceedings diligently pursued, (ii) such proceedings do not involve
any risk of sale, forfeiture, or loss of the Collateral or any interest therein,
and (iii) adequate reserves therefor have been established in conformity with
GAAP.
Section 4.11 Obligations. Debtor shall duly and punctually pay and
perform the Obligations.
-6-
<PAGE>
Section 4.12 Notification. Debtor shall promptly notify Secured Party
of (i) any Lien made or threatened against the Collateral, (ii) any material
change in the Collateral, including, without limitation, any material damage to
or loss of the Collateral, and (iii) the occurrence or existence of any Event of
Default or the occurrence or existence of any condition or event that, with the
giving of notice or lapse of time or both, would be an Event of Default.
Section 4.13 Corporate Changes. Debtor shall not change its name,
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading unless
Debtor shall have given Secured Party 30 days prior written notice thereof and
shall have taken all action deemed necessary by Secured Party to make each
financing statement not seriously misleading. Debtor shall not change its
principal place of business, chief executive office, or the place where it keeps
its books and records unless it shall have given Secured Party 30 days prior
written notice thereof and shall have taken all action deemed necessary by
Secured Party to cause its security interest in the Collateral to be perfected
with the priority required by this Agreement.
Section 4.14 Books and Records; Information. Debtor shall keep accurate
and complete books and records of the Collateral and Debtor's business and
financial condition in accordance with generally accepted accounting principles
consistently applied. Debtor shall from time to time at the request of Secured
Party deliver to Secured Party such information regarding the Collateral and
Debtor as Secured Party may request, including, without limitation, lists and
descriptions of the Collateral and evidence of the identity and existence of the
Collateral. Debtor shall mark its books and records to reflect the security
interest of Secured Party under this Agreement.
Section 4.15 Compliance with Agreements. Debtor shall comply in all
material respects with all mortgages, deeds of trust, instruments, and other
agreements binding on it or affecting its properties or business.
Section 4.16 Compliance with Laws. Debtor shall comply with all
applicable laws, rules, regulations, and orders of any court or governmental
authority.
Section 4.17 Equipment and Inventory. The Debtor shall keep the
equipment and inventory at the locations specified on Schedule 1 hereto or, upon
30 days prior written notice to the Secured Party, at such other places within
the United States of America where all action required to perfect the Secured
Party's security interest in the equipment and inventory with the priority
required by this Agreement shall have been taken.
Section 4.18 Collection of Accounts. Accounts shall be collected
through the Lockbox (Secured Party, recognizing that some Accounts arising in
the first several months of this Agreement cannot effectively be directed to the
Lockbox). In connection with such collections, the Debtor may take (and, at the
Secured Party's direction, shall take) such actions as the Debtor or the Secured
Party may deem necessary or advisable to enforce collection of the accounts. In
addition to the foregoing, the Debtor agrees that if any Proceeds of any
Collateral (including
-7-
<PAGE>
payments made in respect of accounts) shall be received by the Debtor rather
than through the Lockbox, the Debtor shall promptly deliver such Proceeds to the
Secured Party with any necessary endorsements. Until such Proceeds are delivered
to the Secured Party, such Proceeds shall be held in trust by the Debtor for the
benefit of the Secured Party and shall not be commingled with any other funds or
property of the Debtor. All Proceeds of Collateral received by the Secured Party
pursuant to this Section may be applied by the Secured Party to the Obligations
in such order and manner as. the Secured Party may elect in its sole discretion.
Section 4.19 Location of Collateral. Debtor shall not move any of the
Collateral from the Vessel or Vessels identified hereunder without the prior
written consent of Secured Party.
Section 4.20 Lockbox Account. The Debtor agrees to notify each account
debtor and other obligors to deliver all payments and amounts owed to the Debtor
directly to the Lockbox and to renotify, from time to time and in any event
promptly upon request of the Secured Party, those account debtors and obligors
who do not deliver all payments due to the Debtor directly to the Lockbox that
the same must be delivered to the Lockbox (the Secured Party being granted such
renotification right if the Debtor fails or refuses so to do). The Lockbox shall
be under the sole control of the Secured Party. The Debtor shall have no right
to effect withdrawals from the Lockbox Account and the Lockbox Account shall be
maintained in the name and under the domain and control of the Secured Party.
After Default and upon instructions from I/O, funds to be disbursed to the
Borrower may be restricted or applied to the Obligations, or both.
ARTICLE V
Rights of Secured Party
Section 5.1 Power of Attorney. Debtor hereby irrevocably constitutes
and appoints Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the name of Debtor or in its own name, to take any and
all action and to execute any and all documents and instruments which Secured
Party at any time and from time to time deems necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, Debtor hereby gives Secured Party the power and right on
behalf of Debtor and in its own name to do any of the following, without notice
to or the consent of Debtor:
(i) to demand, sue for, collect, or receive in the name of Debtor
or in its own name, any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral and,
in connection therewith, endorse checks, notes, drafts, acceptances,
money orders, documents of title, or any other instruments for the
payment of money under the Collateral or any policy of insurance;
(ii) to pay or discharge taxes, liens, security interests, or
other encumbrances levied or placed on or threatened against the
Collateral;
-8-
<PAGE>
(iii) to send requests for verification to account debtors and
other obligors;
(iv) to notify post office authorities to change the address for
delivery of mail of Debtor to an address designated by Secured Party
and to receive, open, and dispose of mail addressed to Debtor;
(v) (A) to direct account debtors and any other parties liable for
any payment under any of the Collateral to make payment of any and all
monies due and to become due thereunder directly to Secured Party or as
Secured Party shall direct; (B) to receive payment of and receipt for
any and all monies, claims, and other amounts due and to become due at
any time in respect of or arising out of any Collateral; (C) to sign
and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
proxies, stock powers, verifications, and notices in connection with
accounts and other documents relating to the Collateral; (D) to
commence and prosecute any suit, action, or proceeding at law or in
equity in any court of competent jurisdiction to collect the Collateral
or any part thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action, or proceeding brought
against Debtor with respect to any Collateral; (F) to settle,
compromise, or adjust any suit, action, or proceeding described above
and, in connection therewith, to give such discharges or releases as
Secured Party may deem appropriate; (G) to exchange any of the
Collateral for other property upon any merger, consolidation,
reorganization, recapitalization, or other readjustment of the issuer
thereof and, in connection therewith, deposit any of the Collateral
with any committee, depositary, transfer agent, registrar, or other
designated agency upon such terms as Secured Party may determine; (H)
to add or release any guarantor, endorser, surety, or other party to
any of the Collateral or the Obligations; (I) to renew, extend, or
otherwise change the terms and conditions of any of the Collateral or
Obligations; (J) to insure, and to make, settle, compromise, or adjust
claims under any insurance policy covering, any of the Collateral; and
(K) to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as
though Secured Party were the absolute owner thereof for all purposes,
and to do, at Secured Party's option and Debtors expense, at any time,
or from time to time, all acts and things which Secured Party deems
necessary to protect, preserve, or realize upon the Collateral and
Secured Party's security interest therein.
This power of attorney is a power coupled with an interest and shall be
irrevocable. Secured Party shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Secured Party in this Agreement, and shall not be liable
for any failure to do so or any delay in doing so. SECURED PARTY SHALL NOT BE
LIABLE FOR ANY ACT OR OMISSION OR FOR ANY ERROR OF JUDGMENT OR ANY MISTAKE OF
FACT OR LAW IN ITS INDIVIDUAL CAPACITY OR IN ITS CAPACITY AS ATTORNEY-IN-FACT
EXCEPT ACTS OR OMISSIONS RESULTING FROM ITS GROSS NEGLIGENCE MISCONDUCT. This
power
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of attorney is conferred on Secured Party solely to protect, preserve, and
realize upon its security interest in the Collateral. Secured Party shall not be
responsible for any decline in the value of the Collateral and shall not be
required to take any steps to preserve rights against prior parties or to
protect, preserve, or maintain any security interest or lien given to secure the
Collateral.
Section 5.2 Performance by Secured Party. If Debtor fails to perform or
comply with any of its agreements contained herein, Secured Party itself may, at
its sole discretion, cause or attempt to cause performance or compliance with
such agreement and the expenses of Secured Party, together with interest thereon
at the maximum nonusurious per annum rate permitted by applicable law, shall be
payable by Debtor to Secured Party on demand and shall constitute Obligations
secured by this Agreement. Notwithstanding the foregoing, it is expressly agreed
that Secured Party shall not have any liability or responsibility for the
performance of any obligation of Debtor under this Agreement.
Section 5.3 Setoff; Property Held by Secured Party. Secured Party shall
have the right to set off and apply against the Obligations, at any time and
without notice to Debtor, and is hereby granted a contractual Lien and right to
setoff, any and all deposits (general or special, time or demand, provisional or
final) or other sums at any time credited by or owing from Secured Party to
Debtor whether or not the Obligations are then due. As additional security for
the Obligations, Debtor hereby grants Secured Party a security interest in all
money, instruments, and other property of Debtor now or hereafter held by
Secured Party, including, without limitation, property held in safekeeping. In
addition to Secured Party's right of setoff and as further security for the
Obligations, Debtor hereby grants Secured Party a security interest in all
deposits (general or special, time or demand, provisional or final) and other
accounts of Debtor now or hereafter deposited with or held by Secured Party and
all other sums at any time credited by or owing from Secured Party to Debtor.
The rights and remedies of Secured Party hereunder are in addition to other
rights and remedies (including, without limitation, other rights of setoff)
which Secured Party may have.
Section 5.4 Assignment by Secured Party. Secured Party may from time to
time assign the Obligations and any portion thereof and/or the Collateral and
any portion thereof, and the assignee shall be entitled to all of the rights and
remedies of Secured Party under this Agreement in relation thereto.
ARTICLE VI
Default
Section 6.1 Upon the occurrence of an Event of Default, Secured Party
shall have the following rights and remedies and may do any one or more of the
following:
(i) Secured Party may declare the Obligations or any part thereof
immediately due and payable, without notice, demand, presentment,
notice of dishonor, notice of
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acceleration, notice of intent to accelerate, notice of intent to
demand, protest, or other formalities of any kind, all of which are
hereby expressly waived by Debtor; provided, however, that upon the
occurrence of an Event of Default under Section 9.1(d) or Section
9.1(e) of the Loan Agreement, the Obligations shall become immediately
due and payable without notice, demand, presentment, notice of
dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, protest, or other formalities of any kind,
all of which are hereby expressly waived by Debtor.
(ii) In addition to all other rights and remedies granted to
Secured Party in this Agreement and in any other instrument or
agreement securing, evidencing, or relating to the Obligations or any
part thereof, Secured Party shall have all of the rights and remedies
of a secured party under the UCC as adopted by the State of Texas.
Without limiting the generality of the foregoing, Secured Party may (A)
without demand or notice to Debtor, collect, receive, or take
possession of the Collateral or any part thereof and for that purpose
Secured Party may enter upon any premises on which the Collateral is
located and remove the Collateral therefrom or render it inoperable,
and/or (B) sell, lease, or otherwise dispose of the Collateral, or any
part thereof, in one or more parcels at public or private sale or
sales, at Secured Party's offices or elsewhere, for cash, on credit, or
for future delivery. Upon the request of Secured Party, Debtor shall
assemble the Collateral and make it available to Secured Party at any
place designated by Secured Party that is reasonably convenient to
Debtor and Secured Party. Debtor agrees that Secured Party shall not be
obligated to give more than five days written notice of the time and
place of any public sale or of the time after which any private sale
may take place and that such notice shall constitute reasonable notice
of such matters. Debtor shall be liable for all expenses of retaking,
holding, preparing for sale, or the like, and all attorneys' fees,
legal expenses, and all other costs and expenses incurred by Secured
Party in connection with the collection of the Obligations and the
enforcement of Secured Party's rights under this Agreement. Secured
Party may apply the Collateral against the Obligations in such order
and manner as Secured Party may elect in its sole discretion. Debtor
shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay the Obligations
in full. Debtor waives all rights of marshalling in respect of the
Collateral.
(iii) Secured Party may cause any or all of the Collateral held by
it to be transferred into the name of Secured Party or the name or
names of Secured Party's nominee or nominees.
(iv) Secured Party may exercise or cause to be exercised all
voting rights and corporate powers in respect of the Collateral.
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ARTICLE VII
Miscellaneous
Section 7.1 Expenses; Indemnification. Debtor agrees to pay on demand
all costs and expenses incurred by Secured Party in connection with the
preparation, negotiation, and execution of the Agreement and any and all
amendments, modifications, and supplements hereto. Debtor agrees to pay and to
hold Secured Party harmless from and against all fees and all excise, sales,
stamp, and other taxes payable in connection with this Agreement or the
transactions contemplated hereby. Debtor hereby indemnifies Secured Party and
each affiliate thereof and their respective officers, directors, employees,
attorneys, and agents from, and holds each of them harmless against, any and all
losses, liabilities, claims, damages, penalties, judgments, costs, and expenses
(including attorneys' fees) to which any of them may become subject which
directly or indirectly arise from or relate to (i) the negotiation, execution,
delivery, performance, administration, or enforcement of this Agreement or any
other instrument or agreement securing, evidencing, or relating to the
Obligations or any part thereof, (ii) any of the transactions contemplated by
this Agreement or any other instrument or agreement securing, evidencing, or
relating to the Obligations or any part thereof, (iii) any breach by Debtor of
any representation, warranty, covenant, or other agreement contained in this
Agreement or any other instrument or agreement securing, evidencing, or relating
to the Obligations or any part thereof, or (iv) any investigation, litigation,
or other proceeding, including, without limitation, any threatened
investigation, litigation, or other proceeding relating to any of the foregoing.
WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR ANY OTHER INSTRUMENT, OR
AGREEMENT SECURING, EVIDENCING, OR RELATING TO THE OBLIGATIONS OR ANY PART
THEREOF, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON OR
ENTITY TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD
HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES,
JUDGMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE PERSON OR ENTITY TO BE
INDEMNIFIED, but no indemnitee shall be indemnified for their own gross
negligence or willful misconduct.
Section 7.2 No Waiver; Cumulative Remedies. No failure on the part of
Secured Party to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in this Agreement are cumulative and not
exclusive of any rights and remedies provided by law.
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<PAGE>
Section 7.3 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Debtor and Secured Party and their respective
heirs, successors, and assigns, except that Debtor may not assign any of its
rights or obligations under this Agreement without the prior written consent of
Secured Party.
Section 7.4 AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTERHEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the parties hereto.
Section 7.5 Notices. All notices and other communications provided for
in this Agreement shall be given or made in accordance with the terms of the
Loan Agreement.
Section 7.6 APPLICABLE LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AGREEMENT
HAS BEEN ENTERED INTO IN HARRIS COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR
ALL PURPOSES IN HARRIS COUNTY, TEXAS.
Section 7.7 Headings. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 7.8 Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by Secured Party shall affect the
representations and warranties or the right of Secured Party to rely upon them.
Section 7.9 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.10 Waiver of Bond. In the event Secured Party seeks to take
possession of any or all of the Collateral by judicial process, Debtor hereby
irrevocably waives any bonds and any surety or security relating thereto that
may be required by applicable law as an incident to such possession, and waives
any demand for possession prior to the commencement of any such suit or action.
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Section 7.11 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 7.12 Construction. Debtor and Secured Party acknowledge that
each of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by Debtor and Secured
Party.
Section 7.13 Obligations Absolute. The obligations of Debtor under this
Agreement shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including, without limitation, any amendment, modification, extension, or
renewal of this Agreement, the Obligations, or any document or instrument
evidencing, securing, or otherwise relating to the Obligations, or any release
or subordination of collateral, or any waiver, consent, extension, indulgence,
compromise, settlement, or other action or inaction in respect of this
Agreement, the Obligations, or any document or instrument evidencing, securing,
or otherwise relating to the Obligations, or any exercise or failure to exercise
any right, remedy, power, or privilege in respect of the Obligations.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
DEBTOR: SECURED PARTY:
3-D GEOPHYSICAL, INC. FIRST INTERSTATE BANK OF TEXAS, N.A.
By: ________________________ By: ________________________________
J.D. White, Secretary Randy Wick
Banking Officer
Address for Notices: Address for Notices:
7076 S. Alton Way 1000 Louisiana
Englewood, Colorado 80112 Houston, Texas 77002
Fax No.: (303) 290-0447 Fax No.: (713) 250-7031
Telephone No.: (303) 741-3700 Telephone No.: (713) 250-7240
Attention: President Attention: Mr. Marc A. Dunmire
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of May 29, 1996, is by and between
NORTHERN GEOPHYSICAL OF AMERICA, INC., a Delaware corporation, whose address is
set forth on its signature page hereto, and FIRST INTERSTATE BANK OF TEXAS,
N.A., a national banking association (the "Secured Party"), whose address is
1000 Louisiana, Houston, Texas 77002.
R E C I T A L S:
A. 3-D Geophysical, Inc., a Delaware corporation (the "Borrower"), and
the Secured Party have entered into that certain Loan Agreement of even date
herewith (such Loan Agreement, as the same may be amended or modified from time
to time, being hereinafter referred to as the "Loan Agreement") pursuant to
which Secured Party has agreed to make to Borrower (i) a revolving credit loan
in the aggregate principal amount not to exceed $3,000,000.00 and (ii) a term
loan in the aggregate principal amount not to exceed $15,000,000.00, subject to
the terms and conditions of the Loan Agreement. Terms defined in the Loan
Agreement and not otherwise defined herein being used as defined therein).
B. The Secured Party has conditioned its obligations under the Loan
Agreement upon the execution and delivery of this Agreement by the Debtor.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1. Definitions. All terms used herein which are defined in
the Uniform Commercial Code as adopted and in effect from time to time in the
State of Texas ("UCC") shall have the same meanings herein as in the UCC unless
the context in which such terms are used herein indicates otherwise. All
capitalized terms used but not otherwise defined herein or which are defined in
the UCC that are defined in the Loan Agreement shall have the meanings ascribed
to such terms in the Loan Agreement, the applicable provisions of which Loan
Agreement are incorporated herein.
<PAGE>
ARTICLE II
Security Interest
Section 2.1. Security Interest. To secure the prompt payment and
performance in full of the Obligations, Debtor hereby grants to Secured Party a
security interest in, and assigns and pledges, the following property, whether
now owned or existing or hereafter arising or acquired and wherever arising or
located (such property being hereinafter sometimes called the "Collateral"):
(a) all accounts, accounts receivable, documents, instruments,
chattel paper, general intangibles of Debtor, including, without
limitation, all income tax returns, copyrights, patents, patent rights,
trademarks, tradenames, tradestyles, goodwill, going concern value,
franchise and distributorship agreements, whether now owned or
hereafter acquired, and all products and proceeds thereof;
(b) all equipment, inventory, machinery, and fixtures of Debtor,
whether now owned or hereafter acquired, and all accessions thereto and
all products and proceeds thereof;
(c) all investment property of Debtor, whether now owned or
hereafter acquired, and all accessions thereto and all products and
proceeds thereof;
(d) the Lockbox Account, any other deposit accounts now or
hereafter maintained by Debtor at or with Secured Party and all cash,
checks, instruments, securities, funds and monies now or hereafter
deposited in the foregoing; and
(e) all books and records (including computer software, diskettes,
information stored in computers and the like) pertaining to the
property described in clauses (a) and (d) above.
Section 2.2. Debtor Remains Liable. Notwithstanding anything to the
contrary contained herein, (a) the Debtor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Secured Party of any of its rights hereunder shall not release the Debtor from
any of its duties or obligations under the contracts and agreements included in
the Collateral, and (c) the Secured Party shall not have any obligation or
liability under any of the contracts and agreements included in the Collateral
by reason of this Agreement, nor shall the Secured Party be obligated to perform
any of the obligations or duties of the Debtor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
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ARTICLE III
Representations and Warranties
To induce the Secured Party to enter into this Agreement and the Loan
Agreement, the Debtor represents and warrants to the Secured Party that:
Section 3.1. Title. The Debtor is, and with respect to Collateral
acquired after the date hereof the Debtor will be, the legal and beneficial
owner of the Collateral free and clear of any Lien, security interest, or other
encumbrance.
Section 3.2. Accounts. Unless the Debtor has given the Secured Party
written notice to the contrary, whenever the security interest granted hereunder
attaches to an account, the Debtor shall be deemed to have represented and
warranted to the Secured Party as to each and all of its accounts that (a) each
account is genuine and in all respects what it purports to be, (b) each account
represents the legal, valid, and binding obligation of the account debtor
evidencing indebtedness unpaid and owed by such account debtor arising out of
the performance of labor or services by the Debtor or the sale or lease of goods
by the Debtor, (c) the amount of each account represented as owing is the
correct amount actually and unconditionally owing except for normal trade
discounts granted in the ordinary course of business, and (d) no account is
subject to any offset, counterclaim, or other defense.
Section 3.3. Financing Statements. No financing statement, security
agreement, or other Lien instrument covering all or any part of the Collateral
is on file in any public office, except as may have been filed in favor of the
Secured Party pursuant to this Agreement.
Section 3.4. Principal Place of Business. The principal place of
business and chief executive office of the Debtor, and the office where the
Debtor keeps its books and records, is located at the address of the Debtor
shown at the beginning of this Agreement.
Section 3.5. Location of Collateral; Marking. Debtor intends to place
all or part of the Collateral on certain vessels (collectively, "Vessel").
Debtor shall advise and notify Secured Party in writing from time to time, and
at any time upon Secured Party's request, the name, flag and name of owner of
the Vessels on which the Collateral is located; or, if not on a Vessel, the
other location of such Collateral. Debtor agrees to mark all equipment and
inventory Collateral now or hereafter located on a Vessel with a prominent
nameplate indicating that the Debtor owns such Collateral and Secured Party has
a Lien thereon.
Section 3.6. Perfection. Upon the filing of Uniform Commercial Code
financing statements in the jurisdictions listed on Schedule 2 attached hereto,
and upon the Secured Party's obtaining possession of all documents, instruments,
and chattel paper of the Debtor, the security interest in favor of the Secured
Party created herein will constitute a valid and perfected Lien upon and
security interest in the Collateral, subject to no equal or prior Lien.
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<PAGE>
Section 3.7. Inventory. All inventory has been produced in compliance
with all requirements of the Fair Labor Standards Act.
Section 3.8. Independent Investigation. The Debtor has, independently
and without reliance upon the Secured Party and based upon such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. There are no conditions precedent to the
full effectiveness of this Agreement that have not been fully and permanently
satisfied.
Section 3.9. Intellectual Property. No patents, trademarks, copyrights,
rights of use or other intellectual property are necessary, advisable or useful
for the conduct of Debtor's business and Debtor has none of the same.
Section 3.10. Benefit to Debtor. The value of the consideration
received and to be received by the Debtor as a result of the Borrower and the
Secured Party entering into the Loan Agreement and the Debtor executing and
delivering this Agreement is reasonably worth at least as much as the liability
and obligation of the Debtor hereunder, and such liability and obligation and
the Borrower's entering into the Loan Agreement have benefited and may
reasonably be expected to benefit the Debtor directly and indirectly.
ARTICLE IV
Covenants
The Debtor covenants and agrees with the Secured Party that until the
Obligations are paid and performed in full and all commitments of the Secured
Party to the Borrower and the Debtor have terminated:
Section 4.1. Maintenance. Debtor shall maintain the Collateral in good
operating condition and repair and shall not permit any waste or destruction of
the Collateral or any part thereof. Debtor shall not use or permit the
Collateral to be used in violation of any law or inconsistently with the terms
of any policy of insurance. Debtor shall not use or permit the Collateral to be
used in any manner or for any purpose that would impair the value of the
Collateral or expose the Collateral to unusual risk.
Section 4.2. Liens and Encumbrances. (a) Neither Debtor, owner,
charterer, agent, master, nor any member of the crew of any Vessel has, nor
shall have, any right, power or authority to create, incur or permit to be
placed or imposed on any Collateral, or any part thereof, any lien whatsoever
other than to Secured Party. Debtor shall defend the Collateral against, any
lien, security interest, or other encumbrance on the Collateral except the
security interest of Secured Party hereunder, and shall defend Debtor's rights
in the Collateral and Secured Party's security interest in the Collateral
against the claims of all persons and entities. Debtor shall further obtain
consent from the owner of each of the Vessel, each mortgagee of real
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property owned by Debtor, and each landlord of real property leased by Debtor
upon which any Collateral is located not to create, permit, or suffer to exist
any lien, security interest, or other encumbrances on the Collateral.
(b) Debtor shall promptly pay and discharge, or caused to be paid,
discharged and released, any and all taxes, assessments, governmental charges,
fines, penalties, or Liens that may attach to or be imposed upon the Collateral
by virtue that the Collateral is located on the Vessel. If any Vessel shall be
detained, seized, levied upon or taken into custody under process or under color
of any authority, Debtor shall promptly notify Secured Party in writing and
shall promptly cause the Vessel to be discharged or released therefrom.
Section 4.3. Modification of Accounts. Debtor shall do nothing to
impair the rights of Secured Party in the Collateral. The Debtor shall, in
accordance with prudent business practices, endeavor to collect or cause to be
collected from each account debtor under its accounts, as and when due, any and
all amounts owing under such accounts. Without the prior written consent of the
Secured Party, the Debtor shall not (a) grant any extension of time for any
payment with respect to any of the accounts, (b) compromise, compound, or settle
any of the accounts for less than the full amount thereof, (c) release, in whole
or in part, any Person liable for payment thereof, (d) allow any credit or
discount for payment with respect to any account other than (i) normal trade
discounts granted in the ordinary course of business or (ii) discounts not to
exceed (without Secured Party's consent) $_______ individually or $______ in the
aggregate that are given to avoid a greater loss or maximize recovery of monies
due to Debtor, or (e) release any Lien, security interest, or guaranty securing
any account.
Section 4.4. Disposition of Collateral. The Debtor shall not sell,
lease, assign (by operation of law or otherwise), or otherwise dispose of, or
grant any option with respect to, the Collateral or any part thereof without the
prior written consent of the Secured Party, except the Debtor may sell Inventory
in the ordinary course of business.
Section 4.5. Further Assurances. At any time and from time to time,
upon the request of the Secured Party, and at the sole expense of the Debtor,
the Debtor shall promptly execute and deliver all such further instruments,
agreements, and documents and take such further action as the Secured Party may
deem necessary or desirable to preserve and perfect its security interest in the
Collateral and carry out the provisions and purposes of this Agreement,
including, without limitation, the execution and filing of such financing
statements as the Secured Party may require. A carbon, photographic, or other
reproduction of this Agreement or of any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement and
may be filed as a financing statement.
Section 4.6. Risk of Loss; Insurance. Debtor shall be responsible for
any loss of or damage to the Collateral. Debtor shall maintain, with financially
sound and reputable companies, insurance policies (i) insuring the Collateral
against all marine risks, loss by fire, explosion, theft, and such other risks
and casualties as are customarily insured against by
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<PAGE>
companies engaged in the same or a similar business, and (ii) insuring Debtor
and Secured Party against liability for personal injury and property damage
relating to the Collateral, such policies to be in such amounts and covering
such risks as are customarily insured against by companies engaged in the same
or a similar business, with losses payable to Debtor and Secured Party as their
respective interests may appear and with the Secured Party being named as an
additional assured thereunder. All insurance with respect to the Collateral
shall provide that no cancellation, reduction in amount, or change in coverage
thereof shall be effective unless Secured Party has received 30 days prior
written notice thereof. Debtor shall deliver to Secured Party copies of all
insurance policies covering the Collateral or any part thereof.
Section 4.7. Inspection Rights. Debtor shall permit and obtain consent
from the Vessel Owner to permit Secured Party and its representatives to examine
or inspect the Collateral wherever located and to examine, inspect, and copy
Debtor's books and records at any reasonable time and as often as Secured Party
may desire.
Section 4.8. Vessel Owner, Mortgagee and Landlord Waivers, Etc. Debtor
shall cause each owner of a Vessel on which the Collateral is located to execute
and deliver instruments satisfactory in form and substance to Secured Party
pursuant to which such Vessel owner (i) waives its rights, if any, in the
Collateral, (ii) confirms that it will not create, incur or place upon any
Collateral located on its Vessel any Lien, security interest, or other
encumbrance, (iii) covenants not to remove the Vessel from the territorial
waters of the United States, Canada or Mexico in the Gulf of Mexico without
prior written notification to Secured Party, (iv) confirms that there is no Lien
upon the Vessel or that it has notified the holder of the Lien that the Debtor's
Property located thereon is not the owner's nor the Vessel's, and (v) covenants
not to abandon a Vessel in any port. Debtor shall cause each mortgagee of real
property owned by Debtor and each landlord of real property leased by the Debtor
upon which any of the Collateral is located to execute and deliver instruments
satisfactory in form and substance to Secured Party pursuant to which such
mortgagee or landlord (i) waives its rights, if any, in the Collateral, and (ii)
confirms that it will not create, incur or place upon any Collateral located on
its property any Lien, security interest, or other encumbrance.
Section 4.9. Corporate Changes. The Debtor shall not change its name,
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading unless
the Debtor shall have given the Secured Party 30 days prior written notice
thereof and shall have taken all action deemed necessary or desirable by the
Secured Party to make each financing statement not seriously misleading. The
Debtor shall not change its principal place of business, chief executive office,
or the place where it keeps its books and records unless it shall have given the
Secured Party 30 days prior written notice thereof and shall have taken all
action deemed necessary or desirable by the Secured Party to cause its security
interest in the Collateral to be perfected with the priority required by this
Agreement.
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<PAGE>
Section 4.10. Books and Records; Information. The Debtor shall keep
accurate and complete books and records of the Collateral and the Debtor's
business and financial condition in accordance with GAAP. The Debtor shall from
time to time at the request of the Secured Party deliver to the Secured Party
such information regarding the Collateral and the Debtor as the Secured Party
may request, including, without limitation, lists and descriptions of the
Collateral and evidence of the identity and existence of the Collateral. The
Debtor shall mark its books and records to reflect the security interest of the
Secured Party under this Agreement.
Section 4.11. Equipment and Inventory. The Debtor shall keep the
equipment and inventory at the locations specified on Schedule 1 hereto or, upon
30 days prior written notice to the Secured Party, at such other places within
the United States of America where all action required to perfect the Secured
Party's security interest in the equipment and inventory with the priority
required by this Agreement shall have been taken.
Section 4.12. Warehouse Receipts Non-Negotiable. The Debtor agrees that
if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued in respect of any of the Collateral, such warehouse receipt or receipt in
the nature thereof shall not be "negotiable" (as such term is used in Section
7.104 of the Uniform Commercial Code as in effect in any relevant jurisdiction
or under relevant law).
Section 4.13. Taxes. The Debtor shall pay and discharge, before the
same become delinquent, all taxes, assessments, and governmental charges imposed
upon it or upon any of its property, except Debtor shall not be required to pay
or discharge any such tax, assessment, or governmental charge if (i) the amount
or validity thereof is being contested in good faith by proper proceedings being
diligently pursued, (ii) such proceedings do not involve any risk of sale,
forfeiture, or loss of the Collateral or any interest therein; or (iii) adequate
reserves therefor have been established in accordance with GAAP.
Section 4.14. Compliance with Laws. The Debtor shall comply in all
material respects with all applicable laws, rules, regulations, orders, and
decrees of any Governmental Authority or arbitrator.
Section 4.15. Compliance with Agreements. The Debtor shall comply in
all material respects with all agreements, contracts, and instruments binding on
it or affecting its properties or businesses.
Section 4.16. Notification. The Debtor shall promptly notify the
Secured Party of (a) any Lien made or asserted against any of the Collateral,
(b) any material change in any of the Collateral, including, without limitation,
any material damage to or loss of any of the Collateral, (c) the occurrence of
any other event that, with the giving of notice or lapse of time or both, would
be an Event of Default.
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<PAGE>
Section 4.17. Collection of Accounts. Accounts shall be collected
through the Lockbox (Secured Party, recognizing that some Accounts arising in
the first several months of this Agreement cannot effectively be directed to the
Lockbox). In connection with such collections, the Debtor may take (and, at the
Secured Party's direction, shall take) such actions as the Debtor or the Secured
Party may deem necessary or advisable to enforce collection of the accounts. In
addition to the foregoing, the Debtor agrees that if any Proceeds of any
Collateral (including payments made in respect of accounts) shall be received by
the Debtor rather than through the Lockbox, the Debtor shall promptly deliver
such Proceeds to the Secured Party with any necessary endorsements. Until such
Proceeds are delivered to the Secured Party, such Proceeds shall be held in
trust by the Debtor for the benefit of the Secured Party and shall not be
commingled with any other funds or property of the Debtor. All Proceeds of
Collateral received by the Secured Party pursuant to this Section may be applied
by the Secured Party to the Obligations in such order and manner as the Secured
Party may elect in its sole discretion.
Section 4.18. Location of Collateral. Debtor shall not move any of the
Collateral from the Vessel or Vessels identified hereunder without the prior
written consent of Secured Party.
Section 4.19. Lockbox Account. The Debtor agrees to notify each account
debtor and other obligor to deliver all payments and amounts owed to the Debtor
directly to the Lockbox and to renotify, from time to time and in any event
promptly upon request of the Secured Party, those account debtors and obligor
who do not deliver all payments due to the Debtor directly to the Lockbox that
the same must be delivered to the Lockbox (the Secured Party being granted such
renotification right if the Debtor fails or refuses so to do). The Lockbox shall
be under the sole control of the Secured Party. The Debtor shall have no right
to effect withdrawals from the Lockbox Account and the Lockbox Account shall be
maintained in the name and under the domain and control of the Secured Party.
After Default and upon instructions from I/O, funds to be disbursed to the
Borrower may be restricted or applied to the Obligations, or both.
ARTICLE V
Rights of Secured Party
Section 5.1. Power of Attorney. Debtor hereby irrevocably constitutes
and appoints Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attomey-in-fact with full irrevocable power
and authority in the name of Debtor or in its own name, to take any and all
action and to execute any and all documents and instruments which Secured Party
at any time and from time to time deems necessary or desirable to accomplish the
purposes of this Agreement and, without limiting the generality of the
foregoing, Debtor hereby gives Secured Party the power and right on behalf of
Debtor and in its own name to do any of the following, without notice to or the
consent of Debtor:
(i) to demand, sue for, collect, or receive in the name of Debtor
or in its own name, any money or property at any time payable or
receivable on account of or in
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<PAGE>
exchange for any of the Collateral and, in connection therewith,
endorse checks, notes, drafts, acceptances, money orders, documents of
title, or any other instruments for the payment -of money under the
Collateral or any policy of insurance;
(ii) to pay or discharge taxes, liens, security interests, or
other encumbrances levied or placed on or threatened against the
Collateral;
(iii) to send requests for verification to account debtors and
other obligors;
(iv) to notify post office authorities to change the address for
delivery of mail of Debtor to an address designated by Secured Party
and to receive, open, and dispose of mail addressed to Debtor;
(v) (A) to direct account debtors and any other parties liable for
any payment under any of the Collateral to make payment of any and all
monies due and to become due thereunder directly to Secured Party or as
Secured Party shall direct; (B) to receive payment of and receipt for
any and all monies, claims, and other amounts due and to become due at
any time in respect of or arising out of any Collateral; (C) to sign
and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
proxies, stock powers, verifications, and notices in connection with
accounts and other documents relating to the Collateral; (D) to
commence and prosecute any suit, action, or proceeding at law or in
equity in any court of competent jurisdiction to collect the Collateral
or any part thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action, or proceeding brought
against Debtor with respect to any Collateral; (F) to settle,
compromise, or adjust any suit, action, or proceeding described above
and, in connection therewith, to give such discharges or releases as
Secured Party may deem appropriate; (G) to exchange any of the
Collateral for other property upon any merger, consolidation,
reorganization, recapitalization, or other readjustment of the issuer
thereof and, in connection therewith, deposit any of the Collateral
with any committee, depositary, transfer agent, registrar, or other
designated agency upon such terms as Secured Party may determine; (H)
to add or release any guarantor, endorser, surety, or other party to
any of the Collateral or the Obligations; (I) to renew, extend, or
otherwise change the terms and conditions of any of the Collateral or
Obligations; (J) to insure, and to make, settle, compromise, or adjust
claims under any insurance policy covering, any of the Collateral; and
(K) to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as
though Secured Party were the absolute owner thereof for all purposes,
and to do, at Secured Party's option and Debtor's expense, at any time,
or from time to time, all acts and things which Secured Party deems
necessary to protect, preserve, or realize upon the Collateral and
Secured Party's security interest therein.
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<PAGE>
This power of attorney is a power coupled with an interest and shall be
irrevocable. Secured Party shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Secured Party in this Agreement, and shall not be liable
for any failure to do so or any delay in doing so. SECURED PARTY SHALL NOT BE
LIABLE FOR ANY ACT OR OMISSION OR FOR ANY ERROR OF JUDGMENT OR ANY MISTAKE OF
FACT OR LAW IN ITS INDIVIDUAL CAPACITY OR IN ITS CAPACITY AS ATTORNEY-IN-FACT
EXCEPT ACTS OR OMISSIONS RESULTING FROM ITS GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. This power of attorney is conferred on Secured Party solely to
protect, preserve, and realize upon its security interest in the Collateral.
Secured Party shall not be responsible for any decline in the value of the
Collateral and shall not be required to take any steps to preserve rights
against prior parties or to protect, preserve, or maintain any security interest
or lien given to secure the Collateral.
Section 5.2. Performance by Secured Party. If Debtor fails to perform
or comply with any of its agreements contained herein, Secured Party itself may,
at its sole discretion, cause or attempt to cause performance or compliance with
such agreement and the expenses of Secured Party, together with interest thereon
at the maximum nonusurious per annum rate permitted by applicable law, shall be
payable by Debtor to Secured Party on demand and shall constitute Obligations
secured by this Agreement. Notwithstanding the foregoing, it is expressly agreed
that Secured Party shall not have any liability or responsibility for the
performance of any obligation of Debtor under this Agreement.
Section 5.3. Setoff; Property Held by Secured Party. Secured Party
shall have the right to set off and apply against the Obligations, at any time
and without notice to Debtor, and is hereby granted a contractual Lien and right
to setoff, any and all deposits (general or special, time or demand, provisional
or final) or other sums at any time credited by or owing from Secured Party to
Debtor whether or not the Obligations are then due. As additional security for
the Obligations, Debtor hereby grants Secured Party a security interest in all
money, instruments, and other property of Debtor now or hereafter held by
Secured Party, including, without limitation, property held in safekeeping. In
addition to Secured Party's right of setoff and as further security for the
Obligations, Debtor hereby grants Secured Party a security interest in all
deposits (general or special, time or demand, provisional or final) and other
accounts of Debtor now or hereafter deposited with or held by Secured Party and
all other sums at any time credited by or owing from Secured Party to Debtor.
The rights and remedies of Secured Party hereunder are in addition to other
rights and remedies (including, without limitation, other rights of setoff)
which Secured Party may have.
Section 5.4. Assignment by Secured Party. Secured Party may from time
to time assign the Obligations and any portion thereof and/or the Collateral and
any portion thereof, and the assignee shall be entitled to all of the rights and
remedies of Secured Party under this Agreement in relation thereto.
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<PAGE>
ARTICLE VI
Default
Section 6.1. Upon the occurrence of an Event of Default, Secured Party
shall have the following rights and remedies and may do any one or more of the
following:
(i) Secured Party may declare the Obligations or any part thereof
immediately due and payable, without notice, demand, presentment,
notice of dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, protest, or other formalities
of any kind, all of which are hereby expressly waived by Debtor;
provided, however, that upon the occurrence of an Event of Default
under Section 9.1(d) or Section 9.1(e) of the Loan Agreement, the
Obligations shall become immediately due and payable without notice,
demand, presentment, notice of dishonor, notice of acceleration, notice
of intent to accelerate, notice of intent to demand, protest, or other
formalities of any kind, all of which are hereby expressly waived by
Debtor.
(ii) In addition to all other rights and remedies granted to
Secured Party in this Agreement and in any other instrument or
agreement securing, evidencing, or relating to the Obligations or any
part thereof, Secured Party shall have all of the rights and remedies
of a secured party under the UCC as adopted by the State of Texas.
Without limiting the generality of the foregoing, Secured Party may (A)
without demand or notice to Debtor, collect, receive, or take
possession of the Collateral or any part thereof and for that purpose
Secured Party may enter upon any premises on which the Collateral is
located and remove the Collateral therefrom or render it inoperable,
and/or (B) sell, lease, or otherwise dispose of the Collateral, or any
part thereof, in one or more parcels at public or private sale or
sales, at Secured Party's offices or elsewhere, for cash, on credit, or
for future delivery. Upon the request of Secured Party, Debtor shall
assemble the Collateral and make it available to Secured Party at any
place designated by Secured Party that is reasonably convenient to
Debtor and Secured Party. Debtor agrees that Secured Party shall not be
obligated to give more than five days written notice of the time and
place of any public sale or of the time after which any private sale
may take place and that such notice shall constitute reasonable notice
of such matters. Debtor shall be liable for all expenses of retaking,
holding, preparing for sale, or the like, and all attorneys' fees,
legal expenses, and all other costs and expenses incurred by Secured
Party in connection with the collection of the Obligations and the
enforcement of Secured Party's rights under this Agreement. Secured
Party may apply the Collateral against the Obligations in such order
and manner as Secured Party may elect in its sole discretion. Debtor
shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay the Obligations
in full. Debtor waives all rights of marshalling in respect of the
Collateral.
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<PAGE>
(iii) Secured Party may cause any or all of the Collateral held by
it to be transferred into the name of Secured Party or the name or
names of Secured Party's nomine or nominees.
(iv) Secured Party may exercise or cause to be exercised all
voting rights and corporate powers in respect of the Collateral.
ARTICLE VII
Miscellaneous
Section 7.1. Expenses; Indemnification. Debtor agrees to pay on demand
all costs and expenses incurred by Secured Party in connection with the
preparation, negotiation, and execution of the Agreement and any and all
amendments, modifications, and supplements hereto. Debtor agrees to pay and to
hold Secured Party harmless from and against all fees and all excise, sales,
stamp, and other taxes payable in connection with this Agreement or the
transactions contemplated hereby. Debtor hereby indemnifies Secured Party and
each affiliate thereof and their respective officers, directors, employees,
attorneys, and agents from, and holds each of them harmless against, any and all
losses, liabilities, claims, damages, penalties, judgments, costs, and expenses
(including attorneys' fees) to which any of them may become subject which
directly or indirectly arise from or relate to (i) the negotiation, execution,
delivery, performance, administration, or enforcement of this Agreement or any
other instrument or agreement securing, evidencing, or relating to the
Obligations or any part thereof, (ii) any of the transactions contemplated by
this Agreement or any other instrument or agreement securing, evidencing, or
relating to the Obligations or any part thereof, (iii) any breach by Debtor of
any representation, warranty, covenant, or other agreement contained in this
Agreement or any other instrument or agreement securing, evidencing, or relating
to the Obligations or any part thereof, or (iv) any investigation, litigation,
or other proceeding, including, without limitation, any threatened
investigation, litigation, or other proceeding relating to any of the foregoing.
WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR ANY OTHER INSTRUMENT, OR
AGREEMENT SECURING, EVIDENCING, OR RELATING TO THE OBLIGATIONS OR ANY PART
THEREOF, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON OR
ENTITY TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD
HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES,
JUDGMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE PERSON OR ENTITY TO BE
INDEMNIFIED, but no such indemnitee shall be indemnified for its own gross
negligence or willful misconduct.
Section 7.2. No Waiver; Cumulative Remedies. No failure on the part of
Secured Party to exercise and no delay in exercising, and no course of dealing
with respect to, any right,
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<PAGE>
power, or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power, or privilege under
this Agreement preclude any other or further exercise thereof or the exercise of
any other right, power, or privilege. The rights and remedies provided for in
this Agreement are cumulative and not exclusive of any rights and remedies
provided by law.
Section 7.3. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Debtor and Secured Party and their respective
heirs, successors, and assigns, except that Debtor may not assign any of its
rights or obligations under this Agreement without the prior written consent of
Secured Party.
Section 7.4. AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the parties hereto.
Section 7.5. Notices. All notices and other communications provided for
in this Agreement shall be given or made in accordance with the terms of the
Loan Agreement.
Section 7.6. APPLICABLE LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AGREEMENT
HAS BEEN ENTERED INTO IN HARRIS COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR
ALL PURPOSES IN HARRIS COUNTY, TEXAS.
Section 7.7. Headings. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 7.8. Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by Secured Party shall affect the
representations and warranties or the right of Secured Party to rely upon them.
Section 7.9. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
Section 7.10. Waiver of Bond. In the event Secured Party seeks to take
possession of any or all of the Collateral by judicial process, Debtor hereby
irrevocably waives any bonds and any surety or security relating thereto that
may be required by applicable law as an incident to such possession, and waives
any demand for possession prior to the commencement of any such suit or action.
Section 7.11. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 7.12. Construction. Debtor and Secured Party acknowledge that
each of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by Debtor and Secured
Party.
Section 7.13. Obligations Absolute. The obligations of Debtor under
this Agreement shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including, without limitation, any amendment, modification, extension, or
renewal of this Agreement, the Obligations, or any document or instrument
evidencing, securing, or otherwise relating to the Obligations, or any release
or subordination of collateral, or any waiver, consent, extension, indulgence,
compromise, settlement, or other action or inaction in respect of this
Agreement, the Obligations, or any document or instrument evidencing, securing,
or otherwise relating to the Obligations, or any exercise or failure to exercise
any right, remedy, power, or privilege in respect of the Obligations.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
DEBTOR: SECURED PARTY:
- ------- --------------
NORTHERN GEOPHYSICAL FIRST INTERSTATE BANK OF TEXAS,
OF AMERICA, INC. N.A.
By:___________________________ By:________________________
J.D. White, Treasurer Randy Wade, Banking Officer
Address for Notices: Address of Notices:
7076 S. Alton Way 1000 Louisiana
Englewood, Colorado 80112 Houston, Texas 77002
Fax No.: (303) 290-0447 Fax No.: (713) 250-7031
Telephone No.: (303) 741-3700 Telephone No.: (713) 250-7240
Attention: President Attention: Mr. Marc A. Dunmire
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of May 29, 1996, is by and between
PARAGON GEOPHYSICAL, INC., a Delaware corporation (the "Debtor"), whose address
is set forth on its signature page hereto, and FIRST INTERSTATE BANK OF TEXAS,
N.A., a national banking association (the "Secured Party"), whose address is
1000 Louisiana, Houston, Texas 77002.
R E C I T A L S:
A. 3-D Geophysical, Inc., a Delaware corporation (the "Borrower"), and
the Secured Party have entered into that certain Loan Agreement of even date
herewith (such Loan Agreement, as the same may be amended or modified from time
to time, being hereinafter referred to as the "Loan Agreement") pursuant to
which Secured Party has agreed to make to Borrower (i) a revolving credit loan
in the aggregate principal amount not to exceed $3,000,000.00 and (ii) a term
loan in the aggregate principal amount not to exceed $15,000,000.00, subject to
the terms and conditions of the Loan Agreement. Terms defined in the Loan
Agreement and not otherwise defined herein being used as defined therein).
B. The Secured Party has conditioned its obligations under the Loan
Agreement upon the execution and delivery of this Agreement by the Debtor.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1. Definitions. All terms used herein which are defined in
the Uniform Commercial Code as adopted and in effect from time to time in the
State of Texas ("UCC") shall have the same meanings herein as in the UCC unless
the context in which such terms are used herein indicates otherwise. All
capitalized terms used but not otherwise defined herein or which are defined in
the UCC that are defined in the Loan Agreement shall have the meanings ascribed
to such terms in the Loan Agreement, the applicable provisions of which Loan
Agreement are incorporated herein.
<PAGE>
ARTICLE II
Security Interest
Section 2.1. Security Interest. To secure the prompt payment and
performance in full of the Obligations, Debtor hereby grants to Secured Party a
security interest in, and assigns and pledges, the following property, whether
now owned or existing or hereafter arising or acquired and wherever arising or
located (such property being hereinafter sometimes called the "Collateral"):
(a) all accounts, accounts receivable, documents, instruments,
chattel paper, general intangibles of Debtor, including, without
limitation, all income tax returns, copyrights, patents, patent rights,
trademarks, tradenames, tradestyles, goodwill, going concern value,
franchise and distributorship agreements, whether now owned or
hereafter acquired, and all products and proceeds thereof;
(b) all equipment, inventory, machinery, and fixtures of Debtor,
whether now owned or hereafter acquired, and all accessions thereto and
all products and proceeds thereof,
(c) all investment property of Debtor, whether now owned or
hereafter acquired, and all accessions thereto and all products and
proceeds thereof;
(d) the Lockbox Account, any other deposit accounts now or
hereafter maintained by Debtor at or with Secured Party and all cash,
checks, instruments, securities, funds and monies now or hereafter
deposited in the foregoing; and
(e) all books and records (including computer software, diskettes,
information stored in computers and the like) pertaining to the
property described in clauses (a) and (d) above.
Section 2.2. Debtor Remains Liable. Notwithstanding anything to the
contrary contained herein, (a) the Debtor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Secured Party of any of its rights hereunder shall not release the Debtor from
any of its duties or obligations under the contracts and agreements included in
the Collateral, and (c) the Secured Party shall not have any obligation or
liability under any of the contracts and agreements included in the Collateral
by reason of this Agreement, nor shall the Secured Party be obligated to perform
any of the obligations or duties of the Debtor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
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<PAGE>
ARTICLE III
Representations and Warranties
To induce the Secured Party to enter into this Agreement and the Loan
Agreement, the Debtor represents and warrants to the Secured Party that:
Section 3.1. Title. The Debtor is, and with respect to Collateral
acquired after the date hereof the Debtor will be, the legal and beneficial
owner of the Collateral free and clear of any Lien, security interest, or other
encumbrance.
Section 3.2. Accounts. Unless the Debtor has given the Secured Party
written notice to the contrary, whenever the security interest granted hereunder
attaches to an account, the Debtor shall be deemed to have represented and
warranted to the Secured Party as to each and all of its accounts that (a) each
account is genuine and in all respects what it purports to be, (b) each account
represents the legal, valid, and binding obligation of the account debtor
evidencing indebtedness unpaid and owed by such account debtor arising out of
the performance of labor or services by the Debtor or the sale or lease of goods
by the Debtor, (c) the amount of each account represented as owing is the
correct amount actually and unconditionally owing except for normal trade
discounts granted in the ordinary course of business, and (d) no account is
subject to any offset, counterclaim, or other defense.
Section 3.3. Financing Statements. No financing statement, security
agreement, or other Lien instrument covering all or any part of the Collateral
is on file in any public office, except as may have been filed in favor of the
Secured Party pursuant to this Agreement.
Section 3.4. Principal Place of Business. The principal place of
business and chief executive office of the Debtor, and the office where the
Debtor keeps its books and records, is located at the address of the Debtor
shown at the beginning of this Agreement.
Section 3.5. Location of Collateral; Markings. Debtor intends to place
all or part of the Collateral on certain vessels (collectively, "Vessel").
Debtor shall advise and notify Secured Party in writing from time to time, and
at any time upon Secured Party's request, the name, flag and name of owner of
the Vessels on which the Collateral is located; or, if not on a Vessel, the
other location of such Collateral. Debtor agrees to mark all equipment and
inventory Collateral now or hereafter located on a Vessel with a prominent
nameplate indicating that the Debtor owns such Collateral and Secured Party has
a Lien thereon.
Section 3.6. Perfection. Upon the filing of Uniform Commercial Code
financing statements in the jurisdictions listed on Schedule 2 attached hereto,
and upon the Secured Party's obtaining possession of all documents, instruments,
and chattel paper of the Debtor, the security interest in favor of the Secured
Party created herein will constitute a valid and perfected Lien upon and
security interest in the Collateral, subject to no equal or prior Lien.
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<PAGE>
Section 3.7. Inventory. All inventory has been produced in compliance
with all requirements of the Fair Labor Standards Act.
Section 3.8. Independent Investigation. The Debtor has, independently
and without reliance upon the Secured Party and based upon such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. There are no conditions precedent to the
full effectiveness of this Agreement that have not been fully and permanently
satisfied.
Section 3.9. Intellectual Property. No patents, trademarks, copyrights,
rights of use or other intellectual property are necessary, advisable or useful
for the conduct of Debtor's business and Debtor has none of the same.
Section 3.10. Benefit to Debtor. The value of the consideration
received and to be received by the Debtor as a result of the Borrower and the
Secured Party entering into the Loan Agreement and the Debtor executing and
delivering this Agreement is reasonably worth at least as much as the liability
and obligation of the Debtor hereunder, and such liability and obligation and
the Borrower's entering into the Loan Agreement have benefited and may
reasonably be expected to benefit the Debtor directly and indirectly.
ARTICLE IV
Covenants
The Debtor covenants and agrees with the Secured Party that until the
Obligations are paid and performed in full and all commitments of the Secured
Party to the Borrower and the Debtor have terminated:
Section 4.1. Maintenance. Debtor shall maintain the Collateral in good
operating condition and repair and shall not permit any waste or destruction of
the Collateral or any part thereof. Debtor shall not use or permit the
Collateral to be used in violation of any law or inconsistently with the terms
of any policy of insurance. Debtor shall not use or permit the Collateral to be
used in any manner or for any purpose that would impair the value of the
Collateral or expose the Collateral to unusual risk.
Section 4.2. Liens and Encumbrances. (a) Neither Debtor, owner,
charterer, agent, master, nor any member of the crew of any Vessel has, nor
shall have, any right, power or authority to create, incur or permit to be
placed or imposed on any Collateral, or any part thereof, any lien whatsoever
other than to Secured Party. Debtor shall defend the Collateral against, any
lien, security interest, or other encumbrance on the Collateral except the
security interest of Secured Party hereunder, and shall defend Debtor's rights
in the Collateral and Secured Party's security interest in the Collateral
against the claims of all persons and entities. Debtor shall further obtain
consent from the owner of each of the Vessel, each mortgagee of real property
owned by Debtor, and each landlord of real property leased by Debtor upon which
any
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Collateral is located not to create, permit, or suffer to exist any lien,
security interest, or other encumbrances on the Collateral.
(b) Debtor shall promptly pay and discharge, or caused to be paid,
discharged and released, any and all taxes, assessments, governmental charges,
fines, penalties, or Liens that may attach to or be imposed upon the Collateral
by virtue that the Collateral is located on the Vessel. If any Vessel shall be
detained seized, levied upon or taken into custody under process or under color
of any authority, Debtor shall promptly notify Secured Party in writing and
shall promptly cause the Vessel to be discharged or released therefrom.
Section 4.3. Modification of Accounts. Debtor shall do nothing to
impair the rights of Secured Party in the Collateral. The Debtor shall, in
accordance with prudent business practices, endeavor to collect or cause to be
collected from each account debtor under its accounts, as and when due, any and
all amounts owing under such accounts. Without the prior written consent of the
Secured Party, the Debtor shall not (a) grant any extension of time for any
payment with respect to any of the accounts, (b) compromise, compound, or settle
any of the accounts for less than the full amount thereof, (c) release, in whole
or in part, any Person liable for payment thereof, (d) allow any credit or
discount for payment with respect to any account other than (i) normal trade
discounts granted in the ordinary course of business or (ii) discounts not to
exceed (without Secured Party's consent) $_______ individually or $_______ in
the aggregate that are given to avoid a greater loss or maximize recovery of
monies due to Debtor, or (e) release any Lien, security interest, or guaranty
securing any account.
Section 4.4. Disposition of Collateral. The Debtor shall not sell,
lease, assign (by operation of law or otherwise), or otherwise dispose of, or
grant any option with respect to, the Collateral or any part thereof without the
prior written consent of the Secured Party, except the Debtor may sell Inventory
in the ordinary course of business.
Section 4.5. Further Assurances. At any time and from time to time,
upon the request of the Secured Party, and at the sole expense of the Debtor,
the Debtor shall promptly execute and deliver all such further instruments,
agreements, and documents and take such further action as the Secured Party may
deem necessary or desirable to preserve and perfect its security interest in the
Collateral and carry out the provisions and purposes of this Agreement,
including, without limitation, the execution and filing of such financing
statements as the Secured Party may require. A carbon, photographic, or other
reproduction of this Agreement or of any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement and
may be filed as a financing statement.
Section 4.6. Risk of Loss; Insurance. Debtor shall be responsible for
any loss of or damage to the Collateral. Debtor shall maintain, with financially
sound and reputable companies, insurance policies (i) insuring the Collateral
against all marine risks, loss by fire, explosion, theft, and such other risks
and casualties as are customarily insured against by companies engaged in the
same or a similar business, and (ii) insuring Debtor and Secured Party against
liability for personal injury and property damage relating to the Collateral,
such policies
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to be in such amounts and covering such risks as are customarily insured against
by companies engaged in the same or a similar business, with losses payable to
Debtor and Secured Party as their respective interests may appear and with the
Secured Party being named as an additional assured thereunder. All insurance
with respect to the Collateral shall provide that no cancellation, reduction in
amount, or change in coverage thereof shall be effective unless Secured Party
has received 30 days prior written notice thereof. Debtor shall deliver to
Secured Party copies of all insurance policies covering the Collateral or any
part thereof.
Section 4.7. Inspection Rights. Debtor shall permit and obtain consent
from the Vessel Owner to permit Secured Party and its representatives to examine
or inspect the Collateral wherever located and to examine, inspect, and copy
Debtor's books and records at any reasonable time and as often as Secured Party
may desire.
Section 4.8. Vessel Owner, Mortgagee and Landlord Waivers, Etc. Debtor
shall cause each owner of a Vessel on which the Collateral is located to execute
and deliver instruments satisfactory in form and substance to Secured Party
pursuant to which such Vessel owner (i) waives its rights, if any, in the
Collateral, (ii) confirms that it will not create, incur or place upon any
Collateral located on its Vessel any Lien, security interest, or other
encumbrance, (iii) covenants not to remove the Vessel from the territorial
waters of the United States, Canada or Mexico in the Gulf of Mexico without
prior written notification to Secured Party, (iv) confirms that there is no Lien
upon the Vessel or that it has notified the holder of the Lien that the Debtor's
Property located thereon is not the owner's nor the Vessel's, and (v) covenants
not to abandon a Vessel in any port. Debtor shall cause each mortgagee of real
property owned by Debtor and each landlord of real property leased by the Debtor
upon which any of the Collateral is located to execute and deliver instruments
satisfactory in form and substance to Secured Party pursuant to which such
mortgagee or landlord (i) waives its rights, if any, in the Collateral, and (ii)
confirms that it will not create, incur or place upon any Collateral located on
its property any Lien, security interest, or other encumbrance.
Section 4.9. Corporate Changes. The Debtor shall not change its name,
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading unless
the Debtor shall have given the Secured Party 30 days prior written notice
thereof and shall have taken all action deemed necessary or desirable by the
Secured Party to make each financing statement not seriously misleading. The
Debtor shall not change its principal place of business, chief executive office,
or the place where it keeps its books and records unless it shall have given the
Secured Party 30 days prior written notice thereof and shall have taken all
action deemed necessary or desirable by the Secured Party to cause its security
interest in the Collateral to be perfected with the priority required by this
Agreement.
Section 4.10. Books and Records; Information. The Debtor shall keep
accurate and complete books and records of the Collateral and the Debtor's
business and financial condition in accordance with GAAP. The Debtor shall from
time to time at the request of the Secured Party deliver to the Secured Party
such information regarding the Collateral and the Debtor as
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the Secured Party may request, including, without limitation, lists and
descriptions of the Collateral and evidence of the identity and existence of the
Collateral. The Debtor shall mark its books and records to reflect the security
interest of the Secured Party under this Agreement.
Section 4.11. Equipment and Inventory. The Debtor shall keep the
equipment and inventory at the locations specified on Schedule 1 hereto or, upon
30 days prior written notice to the Secured Party, at such other places within
the United States of America where all action required to perfect the Secured
Party's security interest in the equipment and inventory with the priority
required by this Agreement shall have been taken.
Section 4.12. Warehouse Receipts Non-Negotiable. The Debtor agrees that
if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued in respect of any of the Collateral, such warehouse receipt or receipt in
the nature thereof shall not be "negotiable" (as such term is used in Section
7.104 of the Uniform Commercial Code as in effect in any relevant jurisdiction
or under relevant law).
Section 4.13. Taxes. The Debtor shall pay and discharge, before the
same become delinquent, all taxes, assessments, and governmental charges imposed
upon it or upon any of its property, except Debtor shall not be required to pay
or discharge any such tax, assessment, or governmental charge if (i) the amount
or validity thereof is being contested in good faith by proper proceedings being
diligently pursued, (ii) such proceedings do not involve any risk of sale,
forfeiture, or loss of the Collateral or any interest therein; or (iii) adequate
reserves therefor have been established in accordance with GAAP.
Section 4.14. Compliance with Laws. The Debtor shall comply in all
material respects with all applicable laws, rules, regulations, orders, and
decrees of any Governmental Authority or arbitrator.
Section 4.15. Compliance with Agreements. The Debtor shall comply in
all material respects with all agreements, contracts, and instruments binding on
it or affecting its properties or businesses.
Section 4.16. Notification. The Debtor shall promptly notify the
Secured Party of (a) any Lien made or asserted against any of the Collateral,
(b) any material change in any of the Collateral, including, without limitation,
any material damage to or loss of any of the Collateral, (c) the occurrence of
any other event that, with the giving of notice or lapse of time or both, would
be an Event of Default.
Section 4.17. Collection of Accounts. Accounts shall be collected
through the Lockbox (Secured Party, recognizing that some Accounts arising in
the first several months of this Agreement cannot effectively be directed to the
Lockbox). In connection with such collections, the Debtor may take (and, at the
Secured Party's direction, shall take) such actions as the Debtor or the Secured
Party may deem necessary or advisable to enforce collection of the accounts. In
addition to the foregoing, the Debtor agrees that if any Proceeds of any
Collateral (including
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payments made in respect of accounts) shall be received by the Debtor rather
than through the Lockbox, the Debtor shall promptly deliver such Proceeds to the
Secured Party with any necessary endorsements. Until such Proceeds are delivered
to the Secured Party, such Proceeds shall be held in trust by the Debtor for the
benefit of the Secured Party and shall not be commingled with any other funds or
property of the Debtor. All Proceeds of Collateral received by the Secured Party
pursuant to this Section may be applied by the Secured Party to the Obligations
in such order and manner as the Secured Party may elect in its sole discretion.
Section 4.18. Location of Collateral. Debtor shall not move any of the
Collateral from the Vessel or Vessels identified hereunder without the prior
written consent of Secured Party.
Section 4.19. Lockbox Account. The Debtor agrees to notify each account
debtor and other obligers to deliver all payments and amounts owed to the Debtor
directly to the Lockbox and to renotify, from time to time and in any event
promptly upon request of the Secured Party, those account debtors and obligers
who do not deliver all payments due to the Debtor directly to the Lockbox that
the same must be delivered to the Lockbox (the Secured Party being granted such
renotification right if the Debtor fails or refuses so to do). The Lockbox shall
be under the sole control of the Secured Party. The Debtor shall have no right
to effect withdrawals from the Lockbox Account and the Lockbox Account shall be
maintained in the name and under the domain and control of the Secured Party.
After Default and upon instructions from 1/O, funds to be disbursed to the
Borrower may be restricted or applied to the Obligations, or both.
ARTICLE V
Rights of Secured Party
Section 5.1. Power of Attorney. Debtor hereby irrevocably constitutes
and appoints Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the name of Debtor or in its own name, to take any and
all action and to execute any and all documents and instruments which Secured
Party at any time and from time to time deems necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, Debtor hereby gives Secured Party the power and right on
behalf of Debtor and in its own name to do any of the following, without notice
to or the consent of Debtor:
(i) to demand, sue for, collect, or receive in the name of Debtor
or in its own name, any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral and,
in connection therewith, endorse checks, notes, drafts, acceptances,
money orders, documents of title, or any other instruments for the
payment of money under the Collateral or any policy of insurance;
(ii) to pay or discharge taxes, liens, security interests, or
other encumbrances levied or placed on or threatened against the
Collateral;
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(iii) to send requests for verification to account debtors and
other obligers;
(iv) to notify post office authorities to change the address for
delivery of mail of Debtor to an address designated by Secured Party
and to receive, open, and dispose of mail addressed to Debtor;
(v) (A) to direct account debtors and any other parties liable for
any payment under any of the Collateral to make payment of any and all
monies due and to become due thereunder directly to Secured Party or as
Secured Party shall direct; (B) to receive payment of and receipt for
any and all monies, claims, and other amounts due and to become due at
any time in respect of or arising out of any Collateral; (C) to sign
and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
proxies, stock powers, verifications, and notices in connection with
accounts and other documents relating to the Collateral; (D) to
commence and prosecute any suit, action, or proceeding at law or in
equity in any court of competent jurisdiction to collect the Collateral
or any part thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action, or proceeding brought
against Debtor with respect to any Collateral; (F) to settle,
compromise, or adjust any suit, action, or proceeding described above
and, in connection therewith, to give such discharges or releases as
Secured Party may deem appropriate; (G) to exchange any of the
Collateral for other property upon any merger, consolidation,
reorganization, recapitalization, or other readjustment of the issuer
thereof and, in connection therewith, deposit any of the Collateral
with any committee, depositary, transfer agent, registrar, or other
designated agency upon such terms as Secured Party may determine; (H)
to add or release any guarantor, endorser, surety, or other party to
any of the Collateral or the Obligations; (I) to renew, extend, or
otherwise change the terms and conditions of any of the Collateral or
Obligations; (J) to insure, and to make, settle, compromise, or adjust
claims under any insurance policy covering, any of the Collateral; and
(K) to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as
though Secured Party were the absolute owner thereof for all purposes,
and to do, at Secured Party's option and Debtor's expense, at any time,
or from time to time, all acts and things which Secured Party deems
necessary to protect, preserve, or realize upon the Collateral and
Secured Party's security interest therein.
This power of attorney is a power coupled with an interest and shall be
irrevocable. Secured Party shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Secured Party in this Agreement, and shall not be liable
for any failure to do so or any delay in doing so. SECURED PARTY SHALL NOT BE
LIABLE FOR ANY ACT OR OMISSION OR FOR ANY ERROR OF JUDGMENT OR ANY MISTAKE OF
FACT OR LAW IN ITS INDIVIDUAL CAPACITY OR IN ITS CAPACITY AS ATTORNEY-IN-FACT
EXCEPT ACTS OR OMISSIONS RESULTING FROM ITS GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. This power of attorney is conferred on Secured Party solely to
protect,
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preserve, and realize upon its security interest in the Collateral. Secured
Party shall not be responsible for any decline in the value of the Collateral
and shall not be required to take any steps to preserve rights against prior
parties or to protect, preserve, or maintain any security interest or lien given
to secure the Collateral.
Section 5.2. Performance by Secured Party. If Debtor fails to perform
or comply with any of its agreements contained herein, Secured Party itself may,
at its sole discretion, cause or attempt to cause performance or compliance with
such agreement and the expenses of Secured Party, together with interest thereon
at the maximum nonusurious per annum rate permitted by applicable law, shall be
payable by Debtor to Secured Party on demand and shall constitute Obligations
secured by this Agreement. Notwithstanding the foregoing, it is expressly agreed
that Secured Party shall not have any liability or responsibility for the
performance of any obligation of Debtor under this Agreement.
Section 5.3. Setoff; Property Held by Secured Party. Secured Party
shall have the right to set off and apply against the Obligations, at any time
and without notice to Debtor, and is hereby granted a contractual Lien and right
to setoff, any and all deposits (general or special, time or demand, provisional
or final) or other sums at any time credited by or owing from Secured Party to
Debtor whether or not the Obligations are then due. As additional security for
the Obligations, Debtor hereby grants Secured Party a security interest in all
money, instruments, and other property of Debtor now or hereafter held by
Secured Party, including, without limitation, property held in safekeeping. In
addition to Secured Party's right of setoff and as further security for the
Obligations, Debtor hereby grants Secured Party a security interest in all
deposits (general or special, time or demand, provisional or final) and other
accounts of Debtor now or hereafter deposited with or held by Secured Party and
all other sums at any time credited by or owing from Secured Party to Debtor.
The rights and remedies of Secured Party hereunder are in addition to other
rights and remedies (including, without limitation, other rights of setoff)
which Secured Party may have.
Section 5.4. Assignment by Secured Party. Secured Party may from time
to time assign the Obligations and any portion thereof and/or the Collateral and
any portion thereof, and the assignee shall be entitled to all of the rights and
remedies of Secured Party under this Agreement in relation thereto.
ARTICLE VI
Default
Section 6.1. Upon the occurrence of an Event of Default, Secured Party
shall have the following rights and remedies and may do any one or more of the
following:
(i) Secured Party may declare the Obligations or any part thereof
immediately due and payable, without notice, demand, presentment,
notice of dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, protest, or other
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formalities of any kind, all of which are hereby expressly waived by
Debtor; provided, however, that upon the occurrence of an Event of
Default under Section 9.1(d) or Section 9.1(e) of the Loan Agreement,
the Obligations shall become immediately due and payable without
notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to
demand, protest, or other formalities of any kind, all of which are
hereby expressly waived by Debtor.
(ii) In addition to all other rights and remedies granted to
Secured Party in this Agreement and in any other instrument or
agreement securing, evidencing, or relating to the Obligations or any
part thereof, Secured Party shall have all of the rights and remedies
of a secured party under the UCC as adopted by the State of Texas.
Without limiting the generality of the foregoing, Secured Party may (A)
without demand or notice to Debtor, collect, receive, or take
possession of the Collateral or any part thereof and for that purpose
Secured Party may enter upon any premises on which the Collateral is
located and remove the Collateral therefrom or render it inoperable,
and/or (B) sell, lease, or otherwise dispose of the Collateral, or any
part thereof, in one or more parcels at public or private sale or
sales, at Secured Party's offices or elsewhere, for cash, on credit, or
for future delivery. Upon the request of Secured Party, Debtor shall
assemble the Collateral and make it available to Secured Party at any
place designated by Secured Party that is reasonably convenient to
Debtor and Secured Party. Debtor agrees that Secured Party shall not be
obligated to give more than five days written notice of the time and
place of any public sale or of the time after which any private sale
may take place and that such notice shall constitute reasonable notice
of such matters. Debtor shall be liable for all expenses of retaking,
holding, preparing for sale, or the like, and all attorneys' fees,
legal expenses, and all other costs and expenses incurred by Secured
Party in connection with the collection of the Obligations and the
enforcement of Secured Party's rights under this Agreement. Secured
Party may apply the Collateral against the Obligations in such order
and manner as Secured Party may elect in its sole discretion. Debtor
shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay the Obligations
in full. Debtor waives all rights of marshalling in respect of the
Collateral.
(iii) Secured Party may cause any or all of the Collateral held by
it to be transferred into the name of Secured Party or the name or
names of Secured Party's nominee or nominees.
(iv) Secured Party may exercise or cause to be exercised all
voting rights and corporate powers in respect of the Collateral.
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ARTICLE VII
Miscellaneous
Section 7.1. Expenses; Indemnification. Debtor agrees to pay on demand
all costs and expenses incurred by Secured Party in connection with the
preparation, negotiation, and execution of the Agreement and any and all
amendments, modifications, and supplements hereto. Debtor agrees to pay and to
hold Secured Party harmless from and against all fees and all excise, sales,
stamp, and other taxes payable in connection with this Agreement or the
transactions contemplated hereby. Debtor hereby indemnifies Secured Party and
each affiliate thereof and their respective officers, directors, employees,
attorneys, and agents from, and holds each of them harmless against, any and all
losses, liabilities, claims, damages, penalties, judgments, costs, and expenses
(including attorneys' fees) to which any of them may become subject which
directly or indirectly arise from or relate to (i) the negotiation, execution,
delivery, performance, administration, or enforcement of this Agreement or any
other instrument or agreement securing, evidencing, or relating to the
Obligations or any part thereof, (ii) any of the transactions contemplated by
this Agreement or any other instrument or agreement securing, evidencing, or
relating to the Obligations or any part thereof, (iii) any breach by Debtor of
any representation, warranty, covenant, or other agreement contained in this
Agreement or any other instrument or agreement securing, evidencing, or relating
to the Obligations or any part thereof, or (iv) any investigation, litigation,
or other proceeding, including, without limitation, any threatened
investigation, litigation, or other proceeding relating to any of the foregoing.
WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR ANY OTHER INSTRUMENT, OR
AGREEMENT SECURING, EVIDENCING, OR RELATING TO THE OBLIGATIONS OR ANY PART
THEREOF, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON OR
ENTITY TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD
HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES,
JUDGMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE PERSON OR ENTITY TO BE
INDEMNIFIED, but no such indemnitee shall be indemnified for its own gross
negligence or willful misconduct.
Section 7.2. No Waiver; Cumulative Remedies. No failure on the part of
Secured Party to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in this Agreement are cumulative and not
exclusive of any rights and remedies provided by law.
Section 7.3. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Debtor and Secured Party and their respective
heirs, successors, and assigns,
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except that Debtor may not assign any of its rights or obligations under this
Agreement without the prior written consent of Secured Party.
Section 7.4. AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the parties hereto.
Section 7.5. Notices. All notices and other communications provided for
in this Agreement shall be given or made in accordance with the terms of the
Loan Agreement.
Section 7.6. APPLICABLE LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AGREEMENT
HAS BEEN ENTERED INTO IN HARRIS COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR
ALL PURPOSES IN HARRIS COUNTY, TEXAS.
Section 7.7. Headings. The headings, captions, and arrangements used in
this Agree- ment are for convenience only and shall not affect the
interpretation of this Agreement.
Section 7.8. Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by Secured Party shall affect the
representations and warranties or the right of Secured Party to rely upon them.
Section 7.9. Counterparts. This Agreement may be executed in any number
of counter- parts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.10. Waiver of Bond. In the event Secured Party seeks to take
possession of any or all of the Collateral by judicial process, Debtor hereby
irrevocably waives any bonds and any surety or security relating thereto that
may be required by applicable law as an incident to such possession, and waives
any demand for possession prior to the commencement of any such suit or action.
Section 7.11. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agree-
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ment, and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
Section 7.12. Construction. Debtor and Secured Party acknowledge that
each of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by Debtor and Secured
Party.
Section 7.13. Obligations Absolute. The obligations of Debtor under
this Agreement shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including, without limitation, any amendment, modification, extension, or
renewal of this Agreement, the Obligations, or any document or instrument
evidencing, securing, or otherwise relating to the Obligations, or any release
or subordination of collateral, or any waiver, consent, extension, indulgence,
compromise, settlement, or other action or inaction in respect of this
Agreement, the Obligations, or any document or instrument evidencing, securing,
or otherwise relating to the Obligations, or any exercise or failure to exercise
any right, remedy, power, or privilege in respect of the Obligations.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
DEBTOR SECURED PARTY:
PARAGON GEOPHYSICAL, INC. FIRST INTERSTATE BANK OF TEXAS, N.A.
By:______________________ By:_________________________________
J.D. White Randy Wade
Treasurer Banking Officer
Address for Notices: Address for Notices:
7076 S. Alton Way 1000 Louisiana
Englewood, Colorado 80112 Houston, Texas 77002
Fax No.: (303) 290-0447 Fax No.: (713) 250-7031
Telephone No.: (303) 744-3700 Telephone No.: (713) 250-7240
Attention: President Attention: Mr. Marc A. Dunmire
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SECURITY AGREEMENT EXECUTED BETWEEN THE GUARANTOR, GEOEVALUACIONES, S.A. DE C.V.
(THE "GUARANTOR") REPRESENTED BY MR. ___________ AND THE CREDITOR, FIRST
INTERSTATE BANK OF TEXAS, N.A. ("THE CREDITOR") REPRESENTED BY MR. _____________
IN ACCORDANCE WITH THE FOLLOWING DECLARATIONS AND CLAUSES:
DECLARATIONS
I. The GUARANTOR, a company duly incorporated in accordance with the laws of the
United Mexican States has guaranteed to the CREDITOR, a national banking
association organized under the laws of the United States of America, loans to
3-D Geophysical, Inc. (the "DEBTOR"), in the amount of US.$18,000,000.00
(Eighteen Million Dollars) plus interest which it is obligated to pay in
accordance with the terms of the Loan Agreement (the "Loan Agreement"), executed
as of May 29, 1996, attached hereto as Annex "A".
II. The GUARANTOR, having a legal interest in guaranteeing and paying the
DEBTOR's debts to the CREDITOR, and in order to secure the prompt payment and
performance in full of all of the DEBTOR's obligations to the CREDITOR,
GUARANTOR hereby grants to the CREDITOR a security interest in, and assigns and
pledges, the following property, whether now owned or existing or hereafter
arising or acquired and wherever arising or located:
(a) all accounts receivable, documents, instruments, chattel paper, general
intangibles of GUARANTOR, including, without limitation, all income tax returns,
copyrights, patents, patent rights, trademarks, tradenames, tradestyles,
goodwill, going concern value, franchise and distributorship agreements, whether
now owned or hereafter acquired, and all products and proceeds thereof;
(b) all equipment, inventory, machinery, and fixtures of GUARANTOR, whether now
owned or hereafter acquired, and all accessions thereto and all products and
proceeds thereof;
(c) all investment property of GUARANTOR, whether now owned or hereafter
acquired, and all accessions thereto and all products and proceeds thereof;
(d) the Lockbox Account (as defined in the Loan Agreement), any other deposit
accounts now or hereafter maintained by GUARANTOR at or with CREDITOR and all
cash, checks, instruments, securities, funds and monies now or hereafter
deposited in the foregoing; and
(e) all books and records (including computer software, diskettes, information
stored in computers and the like) pertaining to the property described in
clauses (a) and (d) above.
In accordance with the above, the parties hereby agree as follows:
<PAGE>
CLAUSES
FIRST. The GUARANTOR hereby grants a security interest in favor of the CREDITOR,
who accepts, all of the rights, proceeds and benefits derived from the equipment
and property set forth in detail in Annex "B".
SECOND. The Guarantor as the depository shall hold all equipment and machinery
detailed in Annex "B" of the Agreement.
THIRD. The GUARANTOR is authorized to use the equipment and tools without
causing major damage or loss. To that effect, it shall be maintained in good
condition, repaired and insured against any risk to which it might be exposed,
including, but not limited to, fire, flood, theft, and collision for the
CREDITOR, which shall receive payment for any loss, in such amounts as the
CREDITOR may require. The GUARANTOR guarantees that it shall maintain the
property of the equipment and tools, free of any liens, encumbrances or claims
(except for those granted herein and any others related hereto), agreeing to
preserve and defend the rights of the CREDITOR under the present Agreement for
the loss, damage or destruction of the equipment and/or tools for which the
GUARANTOR is exclusively responsible.
The GUARANTOR, shall prepare and send to the CREDITOR, financial statements or
other documents or instruments, or follow any other instruction considered
necessary by the CREDITOR which it may give from time to time in order to
perfect or continue this security interest. The GUARANTOR shall maintain its
principal domicile at Av. Rio Churubusco No. 522, Colonia El Retono, 09440,
Mexico, D.F., where it shall store the equipment and tools. The above-mentioned
domicile may be modified with the prior written authorization of the CREDITOR.
FOURTH. At any time, and from time to time, whether any of the secured debt be
due and totally or partially payable, the CREDITOR may in its discretion and at
the expense of the GUARANTOR: (i) judicially request the sale of the equipment
and/or tools, (ii) inspect the books and registers of the GUARANTOR and obtain
copies of the same, (iii) apply to the payment of any portion of the secured
debts, whether due or not, any amounts of monies, including dividends or income,
now or hereafter in the hands of the CREDITOR on deposit or otherwise, under the
terms to be decided by the CREDITOR.
FIFTH. In the event that the GUARANTOR does not comply with the obligations that
it contracted for in accordance with the terms of the Loan Agreement which is
attached hereto as Annex "A", the CREDITOR may request the judicial sale of the
secured goods. Notice shall be given to the GUARANTOR and it shall have a period
of three days to oppose the said sale by showing receipts of the payment of the
guaranteed debt; if the GUARANTOR does not oppose the sale, the judge shall
order that the sale shall be carried out at a price fixed by a public appraiser
("Corredor Publico") or by two commercial vendors with businesses located in the
domicile which are dedicated to the sale of similar products. The results of the
sales shall
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<PAGE>
immediately be delivered to the CREDITOR who shall apply them to the debt in
accordance with the terms of the Loan Agreement Annex "A".
SIXTH. This security interest shall continue all payments due to the CREDITOR by
the DEBTOR are paid or until the complete execution of the security interest in
accordance with the terms previously agreed upon herein.
SEVENTH. This contract shall be governed by and in the case of an omission,
supplemented by the applicable provisions of the General Law of Credit
Instruments and Operations and as well as by the Civil Code of the Federal
District.
EIGHT. The parties agree to submit the interpretation and performance of this
contract to the jurisdiction of the Courts of Mexico City, Federal District, and
hereby waive any other to which they may be entitled by reason of their present
or future domicile.
The parties hereby sign the present contract in triplicate.
THE GUARANTOR THE CREDITOR
Geoevaluaciones, S.A. de C.V. First Interstate Bank of Texas, N.A.
By:_________________________ By:_________________________________
Name:_______________________ Name:_______________________________
Title:______________________ Title:______________________________
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GUARANTY AGREEMENT
WHEREAS, the execution of this Guaranty Agreement is a condition to 3-D
GEOPHYSICAL, INC., a Delaware corporation ("Borrower"), borrowing money from
FIRST INTERSTATE BANK OF TEXAS, N.A., a national banking association ("Lender"),
pursuant to that certain Loan Agreement dated as of May 26, 1996, between
Borrower and Lender (such Loan Agreement, as the same may hereafter be amended
or modified from time to time, being hereinafter referred to as the "Loan
Agreement");
WHEREAS, as of the date hereof, the Guaranteed Indebtedness (defined
below) includes (i) a revolving credit loan in the amount of $3,000,000.00 and
(ii) a term loan in the original principal amount of $15,000,000.00;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the undersigned, Northern Geophysical of America,
Inc., a Delaware corporation (the "Guarantor"), hereby irrevocably and
unconditionally guarantees to Lender the full and prompt payment and performance
of the Guaranteed Indebtedness (hereinafter defined), this Guaranty Agreement
being upon the following terms:
1. The term "Guaranteed Indebtedness", as used herein, means all of the
"Obligations" (as defined in the Loan Agreement), including, without limitation,
(i) that certain promissory note in the original principal amount of $3,000,000
dated of even date herewith, (ii) that certain promissory note in the original
principal amount of $15,000,000.00 dated of even date herewith, each being
executed by Borrower and payable to the order of Lender and (iii) all renewals,
extensions and modifications thereof. The term "Guaranteed Indebtedness" shall
include future advances and any and all post-petition interest and expenses
(including attorneys' fees) whether or not allowed under any bankruptcy,
insolvency, or other similar law.
2. This instrument shall be an absolute, continuing, irrevocable, and
unconditional guaranty of payment and performance, and not a guaranty of
collection, and Guarantor shall remain liable on its obligations hereunder until
the payment and performance in full of the Guaranteed Indebtedness. No set-off,
counterclaim, recoupment, reduction, or diminution of any obligation, or any
defense of any kind or nature which Borrower may have against Lender or any
other party, or which Guarantor may have against Borrower, Lender, or any other
party, shall be available to, or shall be asserted by, Guarantor against Lender
or any subsequent holder of the Guaranteed Indebtedness or any part thereof or
against payment of the Guaranteed Indebtedness or any part thereof.
3. If Guarantor becomes liable for any indebtedness owing by Borrower
to Lender by endorsement or otherwise, other than under this Guaranty Agreement,
such liability shall not be in any manner impaired or affected hereby, and the
rights of Lender hereunder shall be cumulative of any and all other rights that
Lender may ever have against Guarantor. The exercise by Lender of any right or
remedy hereunder or under any other instrument, or at law
<PAGE>
or in equity, shall not preclude the concurrent or subsequent exercise of any
other right or remedy.
4. In the event of default by Borrower in payment or performance of the
Guaranteed Indebtedness, or any part thereof, when such Guaranteed Indebtedness
becomes due, whether by its terms, by acceleration, or otherwise, Guarantor
shall promptly pay the amount due thereon to Lender without notice or demand,
except as expressly provided for herein, in lawful currency of the United States
of America and it shall not be necessary for Lender, in order to enforce such
payment by Guarantor, first to institute suit or exhaust its remedies against
Borrower or others liable on such Guaranteed Indebtedness, or to enforce any
rights against any collateral which shall ever have been given to secure such
Guaranteed Indebtedness. Notwithstanding anything to the contrary contained in
this Guaranty Agreement, Guarantor hereby irrevocably waives any and all rights
it may now or hereafter have under any agreement or at law or in equity
(including, without limitation, any law subrogating the Guarantor to the rights
of Lender) to assert any claim against or seek contribution, indemnification or
any other form of reimbursement from Borrower or any other party liable for
payment of any or all of the Guaranteed Indebtedness for any payment made by
Guarantor under or in connection with this Guaranty Agreement or otherwise.
5. If acceleration of the time for payment of any amount payable by
Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to
acceleration under the terms of the Guaranteed Indebtedness shall nonetheless be
payable by Guarantor hereunder forthwith on demand by Lender.
6. Guarantor hereby agrees that its obligations under this Guaranty
Agreement shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of Guarantor: (a) the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the release,
surrender, exchange,. or subordination of any collateral now or hereafter
securing any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of Guarantor hereunder, or the full or partial release of any
other guarantor from liability for any or all of the Guaranteed Indebtedness;
(c) any disability of Borrower, or the dissolution, insolvency, or bankruptcy of
Borrower, Guarantor, or any other party at any time liable for the payment of
any or all of the Guaranteed Indebtedness; (d) any renewal, extension,
modification, waiver, amendment, or rearrangement of any or all of the
Guaranteed Indebtedness or any instrument, document, or agreement evidencing,
securing, or otherwise relating to any or all of the Indebtedness; (e) any
adjustment, indulgence, forbearance, waiver, or compromise that may be granted
or given by Lender to Borrower, Guarantor, or any other party ever liable for
any or all of the Guaranteed Indebtedness; (f) any neglect, delay, omission,
failure, or refusal of Lender to take or prosecute any action for the collection
of any of the Guaranteed Indebtedness or to foreclose or take or prosecute any
action in connection with any instrument, document, or agreement evidencing,
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<PAGE>
securing, or otherwise relating to any or all of the Indebtedness; (g) the
unenforceability or invalidity of any or all of the Guaranteed Indebtedness or
of any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Guaranteed Indebtedness; (h) any payment by
Borrower or any other party to Lender is held to constitute a preference under
applicable bankruptcy or insolvency law or if for any other reason Lender is
required to refund any payment or pay the amount thereof to someone else; (i)
the settlement or compromise of any of the Guaranteed Indebtedness; (j) the
non-perfection of any security interest or lien securing any or all of the
Guaranteed Indebtedness; (k) any impairment of any collateral securing any or
all of the Guaranteed Indebtedness; (l) the failure of Lender to sell any
collateral securing any or all of the Guaranteed Indebtedness in a commercially
reasonable manner or as otherwise required by law; (m) any change in the
corporate existence, structure, or ownership of Borrower; or (n) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower or Guarantor.
7. Guarantor represents and wan-ants to Lender as follows:
(a) Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, is qualified to do business in all jurisdictions in
which the nature of the business conducted by it makes such
qualification necessary and where failure to so qualify would have a
material adverse effect on its business, financial condition, or
operations.
(b) Guarantor has the corporate power and authority and legal
right to execute, deliver, and perform its obligations under this
Guaranty Agreement and this Guaranty Agreement constitutes the legal,
valid, and binding obligation of Guarantor, enforceable against
Guarantor in accordance with its respective terms, except as limited by
bankruptcy, insolvency, or other laws of general application relating
to the enforcement of creditor's rights.
(c) The execution, delivery, and performance by Guarantor of this
Guaranty Agreement have been duly authorized by all requisite action on
the part of Guarantor and do not and will not violate or conflict with
the articles of incorporation or bylaws of Guarantor or any law, rule,
or regulation or any order, writ, injunction or decree of any court,
governmental authority or agency, or arbitrator and do not and will not
conflict with, result in a breach of, or constitute a default under, or
result in the imposition of any lien upon any assets of Guarantor
pursuant to the provisions of any indenture, mortgage, deed of trust,
security agreement, franchise, permit, license, or other instrument or
agreement to which Guarantor or its properties is bound.
(d) No authorization, approval, or consent of, and no filing or
registration on with, any court, governmental authority, or third party
is necessary for the execution, delivery or performance by Guarantor of
this Guaranty Agreement or the validity or enforceability thereof.
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<PAGE>
(e) The value of the consideration received and to be received by
as a result of Borrower and Lender entering into the Loan Agreement and
executing and delivering this Guaranty Agreement is reasonably worth at
least as much as the liability and obligation of Guarantor hereunder,
and such liability and obligation and the Loan Agreement have benefited
and may reasonably be expected to benefit Guarantor directly or
indirectly.
(f) Guarantor has, independently and without reliance upon Lender
and based upon such documents and information as Guarantor has deemed
appropriate, made its own analysis and decision to enter into this
Guaranty Agreement.
(g) Guarantor hereby represents that (i) it is not insolvent as of
the date hereof and will not be rendered insolvent as a result of this
Guaranty Agreement, (ii) it is not engaged in business or a
transaction, or about to engage in a business or a transaction, for
which any property or assets remaining with such Guarantor is
unreasonably small capital, and (iii) it does not intend to incur, or
believe it will incur, debts that will be beyond its ability to pay as
such debts mature.
8. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or Lender has any commitment
under the Loan Agreement:
(a) Guarantor will furnish promptly to Lender written notice of
the occurrence of any default under this Guaranty Agreement or a
Default under the Loan Agreement of which Guarantor his knowledge.
(b) Guarantor will furnish promptly to Lender such additional
information concerning Guarantor as Lender may request.
(c) Guarantor will obtain at any time and from time to time all
authorizations, licenses, consents or approvals as shall now or
hereafter be necessary or desirable under all applicable laws or
regulations or otherwise in connection with the execution, delivery and
performance of this Guaranty Agreement and will promptly furnish copies
thereof to Lender.
9. (a) Guarantor hereby agrees that the Subordinated Indebtedness (as
hereinafter defined) shall be subordinate and junior in right of payment to the
prior payment in full of all Guaranteed Indebtedness, and Guarantor hereby
assigns the Subordinated Indebtedness to Lender as security for the Guaranteed
Indebtedness. If any sums shall be paid to Guarantor by Borrower or any other
person or entity on account of the Subordinated Indebtedness, such sums shall be
held in trust by Guarantor for the benefit of Lender and shall forthwith be paid
to Lender without affecting the liability of Guarantor under this Guaranty
Agreement and may be applied by Lender against the Guaranteed Indebtedness in
such order and manner as Lender may determine in its sole
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<PAGE>
discretion. Upon the request of Lender, Guarantor shall execute, deliver, and
endorse to Lender such documents and instruments as Lender may request to
perfect, preserve, and enforce its rights hereunder. For purposes of this
Guaranty Agreement, the term "Subordinated Indebtedness" means all indebtedness,
liabilities, and obligations of Borrower to Guarantor, whether such
indebtedness, liabilities, and obligations now exist or are hereafter incurred
or arise, or whether the obligations of Borrower thereon are direct, indirect,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such indebtedness, liabilities, or obligations are
evidenced by a note, contract, open account, or otherwise, and irrespective of
the person or persons in whose favor such indebtedness, obligations, or
liabilities may, at their inception, have been, or may hereafter be created, or
the manner in which they have been or may hereafter be acquired by Guarantor.
(b) Guarantor agrees that any and all liens, security interests,
judgment liens, charges, or other encumbrances upon Borrower's assets securing
payment of any Subordinated Indebtedness shall be and remain inferior and
subordinate to any and all liens, security interests, judgment liens, charges,
or other encumbrances upon Borrower's assets securing payment of the Guaranteed
Indebtedness or any part thereof, regardless of whether such encumbrances in
favor of Guarantor or Lender presently exist or are hereafter created or
attached. Without the prior written consent of Lender, Guarantor shall not (i)
file suit against Borrower or exercise or enforce any other creditor's right it
may have against Borrower, or (ii) foreclose, repossess, sequester, or otherwise
take steps or institute any action or proceedings (j)udicial or otherwise,
including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding) to enforce any liens, security interests, collateral rights,
judgments or other encumbrances held by Guarantor on assets of Borrower.
(c) In the event of any receivership, bankruptcy, reorganization,
rearrangement, debtor's relief, or other insolvency proceeding involving
Borrower as debtor, Lender shall have the right to prove and vote any claim
under the Subordinated Indebtedness and to receive directly from the receiver,
trustee or other court custodian all dividends, distributions, and payments made
in respect of the Subordinated Indebtedness. Lender may apply any such
dividends, distributions, and payments against the Guaranteed Indebtedness in
such order and manner as Lender may determine in its sole discretion.
(d) Guarantor agrees that all promissory notes, accounts receivable,
ledgers, records, or any other evidence of Subordinated Indebtedness shall
contain a specific written notice thereon that the indebtedness evidenced
thereby is subordinated under the terms of this Guaranty Agreement.
10. No amendment or waiver of any provision of this Guaranty Agreement
or consent to any departure by the Guarantor therefrom shall in any event be
effective unless the same shall be in writing and signed by Lender. No failure
on the part of Lender to exercise, and no delay in exercising, any right, power,
or privilege hereunder shall operate as a waiver thereof; nor
- 5 -
<PAGE>
shall any single or partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
11. Any acknowledgment or new promise, whether by payment of principal
or interest or otherwise and whether by Borrower or others (including
Guarantor), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of Guarantor against Lender shall have commenced
to run, toll the running of such statute of limitations and, if the period of
such statute of limitations shall have expired, prevent the operation of such
statute of limitations.
12. This Guaranty Agreement is for the benefit of Lender and its
successors and assigns, and in the event of an assignment of the Guaranteed
Indebtedness, or any part thereof, the rights and benefits hereunder, to the
extent applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty Agreement is binding not only on Guarantor, but on
Guarantor's successors and assigns.
13. Guarantor recognizes that Lender is relying upon this Guaranty
Agreement and the undertakings of Guarantor hereunder in making extensions of
credit to Borrower under the Loan Agreement and further recognizes that the
execution and delivery of this Guaranty Agreement is a material inducement to
Lender in entering into the Loan Agreement. Guarantor hereby acknowledges that
there are no conditions to the full effectiveness of this Guaranty Agreement.
14. This Guaranty Agreement is executed and delivered as an incident to
a lending transaction negotiated, consummated, and performable in Harris County,
Texas, and shall be governed by and construed in accordance with the laws of the
State of Texas. Any action or proceeding against Guarantor under or in
connection with this Guaranty Agreement may be brought in any state or federal
court in Harris County, Texas. Guarantor hereby irrevocably (i) submits to the
nonexclusive jurisdiction of such courts, and (ii) waives any objection it may
now or hereafter have as to the venue of any such action or proceeding brought
in such court or that such court is an inconvenient forum. Guarantor agrees that
service of process upon it may be made by certified or registered mail, return
receipt requested, at its address specified below. Nothing herein shall affect
the right of Lender to serve process in any other matter permitted by law or
shall limit the right of Lender to bring any action or proceeding against
Guarantor or with respect to any of Guarantor's property in courts in other
jurisdictions. Any action or proceeding by Guarantor against Lender shall be
brought only in a court located in Harris County, Texas.
15. Guarantor shall pay on demand all attorneys' fees and all other
costs and expenses incurred by Lender in connection with the preparation,
administration, enforcement, or collection of this Guaranty Agreement.
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<PAGE>
16. Except as expressly provided for herein, Guarantor hereby waives
promptness, diligence, notice of any default under the Guaranteed Indebtedness,
demand of payment, notice of acceptance of this Guaranty Agreement, presentment,
notice of protest, notice of dishonor, notice of intent to accelerate, notice of
acceleration, notice of the incurring by Borrower of additional indebtedness,
and all other notices and demands with respect to the Guaranteed Indebtedness
and this Guaranty Agreement. Without limiting the generality of the foregoing,
Guarantor unconditionally waives, to the extent permitted by law, (a) notice of
any of the matters referred to in Section 6 above, (b) all notices which may be
required by statute, rule of law or otherwise, now or hereafter in effect, to
preserve intact any rights against Guarantor, including, without limitation, any
demand, presentment and protest, proof of notice of non-payment under any of the
Loan Documents and notice of any Event of Default or any failure on the part of
Borrower, Guarantor or any other guarantor of the Obligations to perform or
comply with any covenant, agreement, term or condition of any of the Loan
Documents, (b) any right to the enforcement, assertion or exercise against
Borrower, Guarantor or any other guarantor of the Obligations and the Guaranteed
Indebtedness, as applicable, of any right or remedy conferred under any of the
Loan Documents, (d) any requirement of diligence on the part of any Person, (e)
any requirement to exhaust any remedies or to mitigate the damages resulting
from any default under any of the Loan Documents, (f) any notice of any sale,
transfer or other disposition of any right, tide or interest of Lender under any
of the Loan Documents and (g) any rights of Guarantor pursuant to Chapter 34 of
the Texas Business and Commerce Code, as amended.
17. The Loan Agreement, and all of the terms thereof, are incorporated
herein by reference, the same as if stated verbatim herein, and Guarantor agrees
that Lender may exercise any and all rights granted to it under the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement)
without affecting the validity or enforceability of this Guaranty Agreement.
18. Guarantor hereby represents and wan-ants to Lender that Guarantor
has adequate means to obtain from Borrower on a continuing basis information
concerning the financial condition and assets of Borrower and that Guarantor is
not relying upon Lender to provide (and Lender shall have no duty to provide)
any such information to Guarantor either now or in the future.
19. THIS GUARANTY AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT OF
GUARANTOR AND LENDER WITH RESPECT TO GUARANTOR'S GUARANTY OF THE GUARANTEED
INDEBTEDNESS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL RELATING TO THE
SUBJECT MATTER HEREOF. THIS GUARANTY AGREEMENT IS INTENDED BY GUARANTOR AND
LENDER AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY
AGREEMENT, AND NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER, NO COURSE OF
PERFORMANCE, NO
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<PAGE>
TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE
USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY
AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.
20. THE PARTIES AGREE TO BE BOUND BY THE TERMS AND CONDITIONS OF THE
CURRENT ARBITRATION PROGRAM OF LENDER, WHICH IS INCORPORATED HEREIN BY REFERENCE
AND ACKNOWLEDGED AS RECEIVED BY THE PARTIES PURSUANT TO WHICH ANY AND ALL
DISPUTES SHALL BE RESOLVED BY MANDATORY BINDING ARBITRATION UPON THE REQUEST OF
ANY PARTY.
21. (a) All payments payable hereunder in respect of the Guaranteed
Obligations shall be payable by Guarantor to Beneficiary in the currency in
which the Guaranteed Obligations are expressed (herein called the "Required
Currency"). The obligation of Guarantor to make payment in the Required Currency
shall not be discharged or satisfied by any payment or tender, or any recovery
pursuant to any judgment or order, which is or is expressed in or converted into
any currency other than the Required Currency, except to the extent such
payment, tender or recovery shall result in the actual receipt by Beneficiary of
the full amount of the Required Currency expressed to be payable hereunder.
Without limiting the generality of the foregoing, Guarantor authorizes
Beneficiary, on any payment, tender or recovery in a currency other than the
Required Currency, to purchase in accordance with its normal procedures,
Required Currency with the amount of such other currency so tendered or
recovered. The obligation of Guarantor to make payments in the Required Currency
shall be enforceable as an alternative or additional cause of action for the
purpose of recovery in the Required Currency of the amount (if any) by which
such actual receipt shall fall short of the full amount due hereunder and shall
not be affected by judgment being obtained for any other sums due under this
Guaranty.
(b) All payments made to Beneficiary hereunder shall be made in the
Required Currency for value on the day on which payment is due, without any
setoff or counterclaim, free and clear of and without deduction or withholding
for or on account of, any present or future taxes now or hereafter imposed by
any governmental or other authority. As used herein, the term "Taxes" shall
include all withholding, income, gains, excise, stamp and other taxes of
whatever nature as well as all withholding, levies, imports, duties, charges or
fees of whatever nature. If Guarantor is compelled by law to make any such
deductions or withholdings, it will pay such additional amounts as may be
necessary in order that the net amount received and retained by Beneficiary
after such deduction or withholdings (including any required deduction or
withholding on such additional amounts) shall equal the amount it would have
received and retained had no such deductions or withholdings been required to be
made, and it will provide Beneficiary with evidence satisfactory to Beneficiary
that it has paid such deduction or
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<PAGE>
withholdings. Guarantor hereby agrees to indemnify Beneficiary and hold it
harmless against all losses, costs, expenses or other amounts incurred or
suffered by Beneficiary by reason of the failure of Guarantor to perform its
obligations under this clause (b).
22. WITH RESPECT TO ANY AND ALL DISPUTES ARISING HEREUNDER, UNDER THE
NOTES, UNDER THE OTHER GUARANTEED OBLIGATIONS, OR UNDER ANY OF THE OTHER
INSTRUMENTS AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR THEREWITH NOT
SETTLED OR SUBJECT TO ARBITRATION, PURSUANT TO ANY ARBITRATION PROGRAM
REFERENCED TO HEREIN, GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTY AND ANY OTHER DOCUMENT TO WHICH IT IS A
PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT OF ANY
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
TEXAS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
TEXAS, AND APPELLATE COURTS FROM ANY THEREOF;
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN IMPROPER VENUE OR AN INCONVENIENT COURT AND AGREES
NOT TO PLEAD OR CLAIM THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY
BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS
SPECIFIED ON THE SIGNATURE PAGE HEREOF;
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE
IN ANY OTHER JURISDICTION;
(e) DESIGNATES AND APPOINTS MIKE WEBB, WHOSE ADDRESS ON THE DATE HEREOF
IS 1990 POST OAK BLVD., SUITE 1670, HOUSTON, TEXAS 77056 (HEREINAFTER CALLED THE
"PROCESS AGENT"), AS ITS ATTORNEY-IN-FACT IN THE UNITED STATES OF AMERICA, TO
RECEIVE SERVICE OF PROCESS IN ANY ACTION, SUIT OR PROCEEDING, IT BEING AGREED
THAT SERVICE UPON SUCH ATTORNEY-IN-FACT SHALL CONSTITUTE VALID SERVICE UPON IT
OR ITS SUCCESSORS AND ASSIGNS;
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<PAGE>
(f) AGREES THAT ITS SUBMISSION TO JURISDICTION AND ITS DESIGNATION OF
THE PROCESS AGENT SET FORTH ABOVE IS MADE FOR THE EXPRESS BENEFIT OF PAYEE;
(g) AGREES THAT A FINAL JUDGMENT AGAINST IT IN ANY ACTION, SUIT OR
PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED, IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW, A CERTIFIED OR TRUE
COPY OF WHICH FINAL JUDGMENT BEING CONCLUSIVE EVIDENCE OF THE FACT AND AMOUNT OF
ANY OF ITS LIABILITY THEREIN DESCRIBED; AND
(h) COVENANTS AND AGREES THAT SO LONG AS THIS NOTES SHALL BE UNPAID, IT
SHALL MAINTAIN A DULY APPOINTED AGENT FOR THE SERVICE OF SUMMONS AND OTHER LEGAL
PROCESS IN HOUSTON, TEXAS, U.S.A.
23. THIS GUARANTY AND THE OTHER LOAN DOCUMENTS, AND THE INSTRUMENTS AND
DOCUMENTS EXECUTED IN CONNECTION HEREWITH, 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.
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<PAGE>
24. Language. All notices, communications, evidences, reports,
opinions, financial statements and other documents given under this Guaranty,
unless submitted in the English language shall be accompanied by one certified
copy of an English translation thereof for each copy of the foregoing so
submitted and the English version shall govern in the event of any conflict with
the non-English version thereof.
EXECUTED as of the 29th day of May, 1996.
GUARANTOR:
NORTHERN GEOPHYSICAL
OF AMERICA, INC.,
a Delaware corporation
By:_________________________________
J.D. White, Treasurer
Address: 76 S. Alton Way.
Englewood, Colorado 80112
Fax No.: (303) 290-0447
Telephone No.: (303) 741-3700
Attention: President
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GUARANTY AGREEMENT
WHEREAS, the execution of this Guaranty Agreement is a condition to 3-D
GEOPHYSICAL, INC., a Delaware corporation ("Borrower"), borrowing money from
FIRST INTERSTATE BANK OF TEXAS, N.A., a national banking association ("Lender"),
pursuant to that certain Loan Agreement dated as of May 26, 1996, between
Borrower and Lender (such Loan Agreement, as the same may hereafter be amended
or modified from time to time, being hereinafter referred to as the "Loan
Agreement");
WHEREAS, as of the date hereof, the Guaranteed Indebtedness (defined
below) includes (i) a revolving credit loan in the amount of $3,000,000.00 and
(ii) a term loan in the original principal amount of $15,000,000.00;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the undersigned, Paragon Geophysical, Inc., a
Delaware corporation (the "Guarantor"), hereby irrevocably and unconditionally
guarantees to Lender the full and prompt payment and performance of the
Guaranteed Indebtedness (hereinafter defined), this Guaranty Agreement being
upon the following terms:
1. The term "Guaranteed Indebtedness", as used herein, means all of the
"Obligations" (as defined in the Loan Agreement), including, without limitation,
(i) that certain promissory note in the original principal amount of $3,000,000
dated of even date herewith, (ii) that certain promissory note in the original
principal amount of $15,000,000.00 dated of even date herewith, each being
executed by Borrower and payable to the order of Lender and (iii) all renewals,
extensions and modifications thereof. The term "Guaranteed Indebtedness" shall
include future advances and any and all post-petition interest and expenses
(including attorneys' fees) whether or not allowed under any bankruptcy,
insolvency, or other similar law.
2. This instrument shall be an absolute, continuing, irrevocable, and
unconditional guaranty of payment and performance, and not a guaranty of
collection, and Guarantor shall remain liable on its obligations hereunder until
the payment and performance in full of the Guaranteed Indebtedness. No set-off,
counterclaim, recoupment, reduction, or diminution of any obligation, or any
defense of any kind or nature which Borrower may have against Lender or any
other party, or which Guarantor may have against Borrower, Lender, or any other
party, shall be available to, or shall be asserted by, Guarantor against Lender
or any subsequent holder of the Guaranteed Indebtedness or any part thereof or
against payment of the Guaranteed Indebtedness or any part thereof.
3. If Guarantor becomes liable for any indebtedness owing by Borrower
to Lender by endorsement or otherwise, other than under this Guaranty Agreement,
such liability shall not be in any manner impaired or affected hereby, and the
rights of Lender hereunder shall be cumulative of any and all other rights that
Lender may ever have against Guarantor. The
<PAGE>
exercise by Lender of any right or remedy hereunder or under any other
instrument, or at law or in equity, shall not preclude the concurrent or
subsequent exercise of any other right or remedy.
4. In the event of default by Borrower in payment or performance of the
Guaranteed Indebtedness, or any part thereof, when such Guaranteed Indebtedness
becomes due, whether by its terms, by acceleration, or otherwise, Guarantor
shall promptly pay the amount due thereon to Lender without notice or demand,
except as expressly provided for herein, in lawful currency of the United States
of America and it shall not be necessary for Lender, in order to enforce such
payment by Guarantor, first to institute suit or exhaust its remedies against
Borrower or others liable on such Guaranteed Indebtedness, or to enforce any
rights against any collateral which shall ever have been given to secure such
Guaranteed Indebtedness. Notwithstanding anything to the contrary contained in
this Guaranty Agreement, Guarantor hereby irrevocably waives any and all rights
it may now or hereafter have under any agreement or at law or in equity
(including, without limitation, any law subrogating the Guarantor to the rights
of Lender) to assert any claim against or seek contribution, indemnification or
any other form of reimbursement from Borrower or any other party liable for
payment of any or all of the Guaranteed Indebtedness for any payment made by
Guarantor under or in connection with this Guaranty Agreement or otherwise.
5. If acceleration of the time for payment of any amount payable by
Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to
acceleration under the terms of the Guaranteed Indebtedness shall nonetheless be
payable by Guarantor hereunder forthwith on demand by Lender.
6. Guarantor hereby agrees that its obligations under this Guaranty
Agreement shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of Guarantor: (a) the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the release,
surrender, exchange, or subordination of any collateral now or hereafter
securing any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of Guarantor hereunder, or the full or partial release of any
other guarantor from liability for any or all of the Guaranteed Indebtedness;
(c) any disability of Borrower, or the dissolution, insolvency, or bankruptcy of
Borrower, Guarantor, or any other party at any time liable for the payment of
any or all of the Guaranteed Indebtedness; (d) any renewal, extension,
modification, waiver, amendment, or rearrangement of any or all of the
Guaranteed Indebtedness or any instrument, document, or agreement evidencing,
securing, or otherwise relating to any or all of the Guaranteed Indebtedness;
(e) any adjustment, indulgence, forbearance, waiver, or compromise that may be
granted or given by Lender to Borrower, Guarantor, or any other party ever
liable for any or all of the Guaranteed Indebtedness; (f) any neglect, delay,
omission, failure, or refusal of Lender to take or prosecute any action for the
collection of any of the Guaranteed Indebtedness or to
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<PAGE>
foreclose or take or prosecute any action in connection with any instrument,
document, or agreement evidencing, securing, or otherwise relating to any or all
of the Guaranteed Indebtedness; (g) the unenforceability or invalidity of any or
all of the Guaranteed Indebtedness or of any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (h) any payment by Borrower or any other party to Lender is held
to constitute a preference under applicable bankruptcy or insolvency law or if
for any other reason Lender is required to refund any payment or pay the amount
thereof to someone else; (i) the settlement or compromise of any of the
Guaranteed Indebtedness; (j) the non-perfection of any security interest or lien
securing any or all of the Guaranteed Indebtedness; (k) any impairment of any
collateral securing any or all of the Guaranteed Indebtedness; (1) the failure
of Lender to sell any collateral securing any or all of the Guaranteed
Indebtedness in a commercially reasonable manner or as otherwise required by
law; (m) any change in the corporate existence, structure, or ownership of
Borrower; or (n) any other circumstance which might otherwise constitute a
defense available to, or discharge of, Borrower or Guarantor.
7. Guarantor represents and warrants to Lender as follows:
(a) Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, is qualified to do business in all jurisdictions in
which the nature of the business conducted by it makes such
qualification necessary and where failure to so qualify would have a
material adverse effect on its business, financial condition, or
operations.
(b) Guarantor has the corporate power and authority and legal
right to execute, deliver, and perform its obligations under this
Guaranty Agreement and this Guaranty Agreement constitutes the legal,
valid, and binding obligation of Guarantor, enforceable against
Guarantor in accordance with its respective terms, except as limited by
bankruptcy, insolvency, or other laws of general application relating
to the enforcement of creditor's rights.
(c) The execution, delivery, and performance by Guarantor of this
Guaranty Agreement have been duly authorized by all requisite action on
the part of Guarantor and do not and will not violate or conflict with
the articles of incorporation or bylaws of Guarantor or any law, rule,
or regulation or any order, writ, injunction or decree of any court,
governmental authority or agency, or arbitrator and do not and will not
conflict with, result in a breach of, or constitute a default under, or
result in the imposition of any lien upon any assets of Guarantor
pursuant to the provisions of any indenture, mortgage, deed of trust,
security agreement, franchise, permit, license, or other instrument or
agreement to which Guarantor or its properties is bound.
(d) No authorization, approval, or consent of, and no filing or
registration with, any court, governmental authority, or third party is
necessary for the execution,
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<PAGE>
delivery or performance by Guarantor of this Guaranty Agreement or the
validity or enforceability thereof.
(e) The value of the consideration received and to be received by
Guarantor as a result of Borrower and Lender entering into the Loan
Agreement and Guarantor executing and delivering this Guaranty
Agreement is reasonably worth at least as much as the liability and
obligation of Guarantor hereunder, and such liability and obligation
and the Loan Agreement have benefited and may reasonably be expected to
benefit Guarantor directly or indirectly.
(f) Guarantor has, independently and without reliance upon Lender
and based upon such documents and information as Guarantor has deemed
appropriate, made its own analysis and decision to enter into this
Guaranty Agreement.
(g) Guarantor hereby represents that (i) it is not insolvent as of
the date hereof and will not be rendered insolvent as a result of this
Guaranty Agreement, (ii) it is not engaged in business or a
transaction, or about to engage in a business or a transaction, for
which any property or assets remaining with such Guarantor is
unreasonably small capital, and (iii) it does not intend to incur, or
believe it will incur, debts that will be beyond its ability to pay as
such debts mature.
8. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or Lender has any commitment
under the Loan Agreement:
(a) Guarantor will furnish promptly to Lender written notice of
the occurrence of any default under this Guaranty Agreement or a
Default under the Loan Agreement of which Guarantor has knowledge.
(b) Guarantor will furnish promptly to Lender such additional
information concerning Guarantor as Lender may request.
(c) Guarantor will obtain at any time and from time to time all
authorization, licenses, consents or approvals as shall now or
hereafter be necessary or desirable under all applicable laws or
regulations or otherwise in connection with the execution, delivery and
performance of this Guaranty Agreement and will promptly furnish copies
thereof to Lender.
9. (a) Guarantor hereby agrees that the Subordinated Indebtedness (as
hereinafter defined) shall be subordinate and junior in right of payment to the
prior payment in full of all Guaranteed Indebtedness, and Guarantor hereby
assigns the Subordinated Indebtedness to Lender as security for the Guaranteed
Indebtedness. If any sums shall be paid to Guarantor by Borrower or any other
person or entity on account of the Subordinated Indebtedness, such sums shall be
held in trust by Guarantor for the
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<PAGE>
benefit of Lender and shall forthwith be paid to Lender without affecting the
liability of Guarantor under this Guaranty Agreement and may be applied by
Lender against the Guaranteed Indebtedness in such order and manner as Lender
may determine in its sole discretion. Upon the request of Lender, Guarantor
shall execute, deliver, and endorse to Lender such documents and instruments as
Lender may request to perfect, preserve, and enforce its rights hereunder. For
purposes of this Guaranty Agreement, the term "Subordinated Indebtedness" means
all indebtedness, liabilities, and obligations of Borrower to Guarantor, whether
such indebtedness, liabilities, and obligations now exist or are hereafter
incurred or arise, or whether the obligations of Borrower thereon are direct,
indirect, contingent, primary, secondary, several, joint and several, or
otherwise, and irrespective of whether such indebtedness, liabilities, or
obligations are evidenced by a note, contract, open account, or otherwise, and
irrespective of the person or persons in whose favor such indebtedness,
obligations, or liabilities may, at their inception, have been, or may hereafter
be created, or the manner in which they have been or may hereafter be acquired
by Guarantor.
(b) Guarantor agrees that any and all liens, security interests,
judgment liens, charges, or other encumbrances upon Borrower's assets securing
payment of any Subordinated Indebtedness shall be and remain inferior and
subordinate to any and all liens, security interests, judgment liens, charges,
or other encumbrances upon Borrower's assets securing payment of the Guaranteed
Indebtedness or any part thereof, regardless of whether such encumbrances in
favor of Guarantor or Lender presently exist or are hereafter created or
attached. Without the prior written consent of Lender, Guarantor shall not (i)
file suit against Borrower or exercise or enforce any other creditor's right it
may have against Borrower, or (ii) foreclose, repossess, sequester, or otherwise
take steps or institute any action or proceedings (judicial or otherwise,
including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding) to enforce any liens, security interests, collateral rights,
judgments or other encumbrances held by Guarantor on assets of Borrower.
(c) In the event of any receivership, bankruptcy, reorganization,
rearrangement, debtor's relief, or other insolvency proceeding involving
Borrower as debtor, Lender shall have the right to prove and vote any claim
under the Subordinated Indebtedness and to receive directly from the receiver,
trustee or other court custodian all dividends, distributions, and payments made
in respect of the Subordinated Indebtedness. Lender may apply any such
dividends, distributions, and payments against the Guaranteed Indebtedness in
such order and manner as Lender may determine in its sole discretion.
(d) Guarantor agrees that all promissory notes, accounts receivable,
ledgers, records, or any other evidence of Subordinated Indebtedness shall
contain a specific
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<PAGE>
written notice thereon that the indebtedness evidenced thereby is subordinated
under the terms of this Guaranty Agreement.
10. No amendment or waiver of any provision of this Guaranty Agreement
or consent to any departure by the Guarantor therefrom shall in any event be
effective unless the same shall be in writing and signed by Lender. No failure
on the part of Lender to exercise, and no delay in exercising, any right, power,
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, power, or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power, or
privilege. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
11. Any acknowledgment or new promise, whether by payment of principal
or interest or otherwise and whether by Borrower or others (including
Guarantor), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of Guarantor against Lender shall have commenced
to run, toll the running of such statute of limitations and, if the period of
such statute of limitations shall have expired, prevent the operation of such
statute of limitations.
12. This Guaranty Agreement is for the benefit of Lender and its
successors and assigns, and in the event of an assignment of the Guaranteed
Indebtedness, or any part thereof, the rights and benefits hereunder, to the
extent applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty Agreement is binding not only on Guarantor, but on
Guarantor's successors and assigns.
13. Guarantor recognizes that Lender is relying upon this Guaranty
Agreement and the undertakings of Guarantor hereunder in making extensions of
credit to Borrower under the Loan Agreement and further recognizes that the
execution and delivery of this Guaranty Agreement is a material inducement to
Lender in entering into the Loan Agreement. Guarantor hereby acknowledges that
there are no conditions to the full effectiveness of this Guaranty Agreement.
14 This Guaranty Agreement is executed and delivered as an incident to
a lending transaction negotiated, consummated, and performable in Harris County,
Texas, and shall be governed by and construed in accordance with the laws of the
State of Texas. Any action or proceeding against Guarantor under or in
connection with this Guaranty Agreement may be brought in any state or federal
court in Harris County, Texas. Guarantor hereby irrevocably (i) submits to the
nonexclusive jurisdiction of such courts, and (ii) waives any objection it may
now or hereafter have as to the venue of any such action or proceeding brought
in such court or that such court is an inconvenient forum. Guarantor agrees that
service of process upon it may be made by certified or registered mail, return
receipt requested, at its address specified below. Nothing herein shall affect
the right of Lender to serve process in any other matter permitted by law or
shall limit the right of Lender to bring any action or proceeding against
Guarantor or with respect to any of Guarantor's property in courts in other
jurisdictions. Any
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<PAGE>
action or proceeding by Guarantor against Lender shall be brought only in a
court located in Harris County, Texas.
15. Guarantor shall pay on demand all attorneys' fees and all other
costs and expenses incurred by Lender in connection with the preparation,
administration, enforcement, or collection of this Guaranty Agreement.
16. Except as expressly provided for herein, Guarantor hereby waives
promptness, diligence, notice of any default under the Guaranteed Indebtedness,
demand of payment, notice of acceptance of this Guaranty Agreement, presentment,
notice of protest, notice of dishonor, notice of intent to accelerate, notice of
acceleration, notice of the incurring by Borrower of additional indebtedness,
and all other notices and demands with respect to the Guaranteed Indebtedness
and this Guaranty Agreement. Without limiting the generality of the foregoing,
Guarantor unconditionally waives, to the extent permitted by law, (a) notice of
any of the matters referred to in Section 6 above, (b) all notices which may be
required by statute, rule of law or otherwise, now or hereafter in effect, to
preserve intact any rights against Guarantor, including, without limitation, any
demand, presentment and protest, proof of notice of non-payment under any of the
Loan Documents and notice of any Event of Default or any failure on the part of
Borrower, Guarantor or any other guarantor of the Obligations to perform or
comply with any covenant, agreement, term or condition of any of the Loan
Documents, (b) any right to the enforcement, assertion or exercise against
Borrower, Guarantor or any other guarantor of the Obligations and the Guaranteed
Indebtedness, as applicable, of any right or remedy conferred under any of the
Loan Documents, (d) any requirement of diligence on the part of any Person, (e)
any requirement to exhaust any remedies or to mitigate the damages resulting
from any default under any of the Loan Documents, (f) any notice of any sale,
transfer or other disposition of any right, title or interest of Lender under
any of the Loan Documents and (g) any rights of Guarantor pursuant to Chapter 34
of the Texas Business and Commerce Code, as amended.
17. The Loan Agreement, and all of the terms thereof, are incorporated
herein by reference, the same as if stated verbatim herein, and Guarantor agrees
that Lender may exercise any and all rights granted to it under the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement)
without affecting the validity or enforceability of this Guaranty Agreement.
18. Guarantor hereby represents and warrants to Lender that Guarantor
has adequate means to obtain from Borrower on a continuing basis information
concerning the financial condition and assets of Borrower and that Guarantor is
not relying upon Lender to provide (and Lender shall have no duty to provide)
any such information to, Guarantor either now or in the future.
19. THIS GUARANTY AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT OF
GUARANTOR AND LENDER WITH RESPECT TO GUARANTOR'S
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GUARANTY OF THE GUARANTEED INDEBTEDNESS AND SUPERSEDES ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY AGREEMENT IS INTENDED
BY GUARANTOR AND LENDER AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE
GUARANTY AGREEMENT, AND NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER, NO
COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC
EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY
ANY TERM OF THIS GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN
GUARANTOR AND LENDER.
20. THE PARTIES AGREE TO BE BOUND BY THE TERMS AND CONDITIONS OF THE
CURRENT ARBITRATION PROGRAM OF LENDER, WHICH IS INCORPORATED HEREIN BY REFERENCE
AND ACKNOWLEDGED AS RECEIVED BY THE PARTIES PURSUANT TO WHICH ANY AND ALL
DISPUTES SHALL BE RESOLVED BY MANDATORY BINDING ARBITRATION UPON THE REQUEST OF
ANY PARTY.
21. (a) All payments payable hereunder in respect of the Guaranteed
Obligations shall be payable by Guarantor to Beneficiary in the currency in
which the Guaranteed Obligations are expressed (herein called the "Required
Currency"). The obligation of Guarantor to make payment in the Required Currency
shall not be discharged or satisfied by any payment or tender, or any recovery
pursuant to any judgment or order, which is or is expressed in or converted into
any currency other than the Required Currency, except to the extent such
payment, tender or recovery shall result in the actual receipt by Beneficiary of
the full amount of the Required Currency expressed to be payable hereunder.
Without limiting the generality of the foregoing, Guarantor authorizes
Beneficiary, on any payment, tender or recovery in a currency other than the
Required Currency, to purchase in accordance with its normal procedures,
Required Currency with the amount of such other currency so tendered or
recovered. The obligation of Guarantor to make payments in the Required Currency
shall be enforceable as an alternative or additional cause of action for the
purpose of recovery in the Required Currency of the amount (if any) by which
such actual receipt shall fall short of the full amount due hereunder and shall
not be affected by judgment being obtained for any other sums due under this
Guaranty.
(b) All payments made to Beneficiary hereunder shall be made in the
Required Currency for value on the day on which payment is due, without any
setoff or counterclaim, free and clear of and without deduction or withholding
for or on account of, any present or future Taxes now or hereafter imposed by
any governmental or other authority. As used herein, the term "Taxes" shall
include all withholding, income, gains, excise, stamp and other taxes of
whatever nature as well as all withholding, levies, imports, duties, charges or
fees of whatever
-8-
<PAGE>
nature. If Guarantor is compelled by law to make any such deductions or
withholdings, it will pay such additional amounts as may be necessary in order
that the net amount received and retained by Beneficiary after such deduction or
withholdings (including any required deduction or withholding on such additional
amounts) shall equal the amount it would have received and retained had no such
deductions or withholdings been required to be made, and it will provide
Beneficiary with evidence satisfactory to Beneficiary that it has paid such
deduction or withholdings. Guarantor hereby agrees to indemnify Beneficiary and
hold it harmless against all losses, costs, expenses or other amounts incurred
or suffered by Beneficiary by reason of the failure of Guarantor to perform its
obligations under this clause (b).
22. WITH RESPECT TO ANY AND ALL DISPUTES ARISING HEREUNDER, UNDER THE
NOTES, UNDER THE OTHER GUARANTEED OBLIGATIONS, OR UNDER ANY OF THE OTHER
INSTRUMENTS AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR THEREWITH NOT
SETTLED OR SUBJECT TO ARBITRATION, PURSUANT TO ANY ARBITRATION PROGRAM
REFERENCED TO HEREIN, GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTY AND ANY OTHER DOCUMENT TO WHICH IT IS A
PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT OF ANY
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
TEXAS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
TEXAS, AND APPELLATE COURTS FROM ANY THEREOF;
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN IMPROPER VENUE OR AN INCONVENIENT COURT AND AGREES
NOT TO PLEAD OR CLAIM THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY
BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS
SPECIFIED ON THE SIGNATURE PAGE HEREOF;
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE
IN ANY OTHER JURISDICTION;
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(e) DESIGNATES AND APPOINTS MIKE WEBB, WHOSE OFFICE ON THE DATE HEREOF
IS 1990 POST OAK BLVD., SUITE 1670, HOUSTON, TEXAS 77056 (HEREINAFTER CALLED THE
"PROCESS AGENT"), AS ITS ATTORNEY-IN-FACT IN THE UNITED STATES OF AMERICA, TO
RECEIVE SERVICE OF PROCESS IN ANY ACTION, SUIT OR PROCEEDING, IT BEING AGREED
THAT SERVICE UPON SUCH ATTORNEY-IN-FACT SHALL CONSTITUTE VALID SERVICE UPON IT
OR ITS SUCCESSORS AND ASSIGNS;
(f) AGREES THAT ITS SUBMISSION TO JURISDICTION AND ITS DESIGNATION OF
THE PROCESS AGENT SET FORTH ABOVE IS MADE FOR THE EXPRESS BENEFIT OF PAYEE;
(g) AGREES THAT A FINAL JUDGMENT AGAINST IT IN ANY ACTION, SUIT OR
PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED, IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW, A CERTIFIED OR TRUE
COPY OF WHICH FINAL JUDGMENT BEING CONCLUSIVE EVIDENCE OF THE FACT AND AMOUNT OF
ANY OF ITS LIABILITY THEREIN DESCRIBED; AND
(h) COVENANTS AND AGREES THAT SO LONG AS THIS NOTES SHALL BE UNPAID, IT
SHALL MAINTAIN A DULY APPOINTED AGENT FOR THE SERVICE OF SUMMONS AND OTHER LEGAL
PROCESS IN HOUSTON, TEXAS, U.SA.
23. THIS GUARANTY AND THE OTHER LOAN DOCUMENTS, AND THE INSTRUMENTS'
AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH, 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.
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24. Language. All notices, communications, evidences, reports,
opinions, financial statements and other documents given under this Guaranty,
unless submitted in the English language shall be accompanied by one certified
copy of an English translation thereof for each copy of the foregoing so
submitted and the English version shall govern in the event of any conflict with
the non-English version thereof.
EXECUTED as of the 29th day of May, 1996.
GUARANTOR:
PARAGON GEOPHYSICAL, INC., a
Delaware corporation
By: _______________________________
J.D. White, Treasurer
Address: 7076 S. Alton Way
Englewood, Colorado 80112
Fax No.: (303) 290-0447
Telephone No.: (303) 741-3700
Attention: President
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GUARANTY AGREEMENT
WHEREAS, the execution of this Guaranty Agreement is a condition to 3-D
GEOPHYSICAL, INC., a Delaware corporation ("Borrower"), borrowing money from
FIRST INTERSTATE BANK OR TEXAS, N. A., a national banking association
("Lender"), pursuant to that certain Loan Agreement dated as of May 29, 1996,
between Borrower and Lender (such Loan Agreement, as the same may hereafter be
amended or modified from time to time, being hereinafter referred to as the
"Loan Agreement");
WHEREAS, as of the date hereof, the Guaranteed Indebtedness (defined
below) includes (i) a revolving credit loan in the amount of $3,000,000.00 and
(ii) a term loan in the original principal amount of $15,000,000.00;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the undersigned, Geoevaluaciones, S. A. de C. V.
a Mexican corporation, the address of which is Ave. Rio Churubusco 522, Col. El
Retono, 09440 Mexico City (the "Guarantor"), hereby irrevocably and
unconditionally guarantees to Lender the full and prompt payment and performance
of the Guaranteed Indebtedness (hereinafter defined), this Guaranty Agreement
being upon the following terms:
1. The term "Guaranteed Indebtedness", as used herein, means all of the
"Obligations" (as defined in the Loan Agreement), including, without limitation,
(i) that certain promissory note in the original principal amount of $3,000,000
dated of even date herewith, (ii) that certain promissory note in the original
principal amount of $15,000,000.00 dated of even date herewith, each being
executed by Borrower and payable to the order of Lender and (iii) all renewals,
extensions and modifications thereof. The term "Guaranteed Indebtedness" shall
include future advances and any and all post-petition interest and expenses
(including attorneys' fees) whether or not allowed under any bankruptcy,
insolvency or other similar law.
2. This instrument shall be an absolute, continuing, irrevocable, and
unconditional guaranty of payment and performance, and not a guaranty of
collection, and Guarantor shall remain liable on its obligations herewith until
the payment and performance in full of the Guaranteed Indebtedness. No set-off,
counterclaim, recoupment, reduction, or diminution of any obligation, or any
defense of any kind or nature which Borrower may have against Lender or other
party, or which Guarantor may have against Borrower, Lender or any other party,
shall be available to, or shall be asserted by, Guarantor against Lender or any
subsequent holder of the Guaranteed Indebtedness or any part thereof or against
payment of the Guaranteed Indebtedness or any part thereof.
3. If Guarantor becomes liable for any indebtedness owing by Borrower
to Lender by endorsement or otherwise, other than under this Guaranty Agreement,
such liability shall not be in any manner impaired or affected hereby, and the
rights of Lender hereunder shall be
<PAGE>
cumulative of any and all other rights that Lender may ever have against
Guarantor. The exercise by Lender of any right or remedy hereunder or under any
other instrument, or at law or in equity, shall not preclude the concurrent or
subsequent exercise of any other right or remedy.
4. In the event of default by Borrower in payment of performance of the
Guaranteed Indebtedness, or any part thereof, when such Guaranteed Indebtedness
becomes due, whether by its terms, by acceleration, or otherwise, Guarantor
shall promptly pay the amount due, thereon to Lender without notice or demand,
except as expressly provided for herein, in lawful currency of the United States
of America and it shall not be necessary for Lender, in order to enforce such
payment by Guarantor, first to institute suit or exhaust its remedies against
Borrower or others liable on such Guaranteed Indebtedness, or to enforce any
rights against any collateral which liable on such Guaranteed Indebtedness, or
to enforce any rights against any collateral which shall ever have been given to
secure such Guaranteed Indebtedness. Notwithstanding anything to the contrary
contained in this Guaranty Agreement, Guarantor hereby irrevocably waives any
and all rights it may now or hereafter have under any agreement or at law or in
equity (including, without limitation, any law subrogating the Guarantor to the
rights of Lender) to assert any claim against or seek contribution,
indemnification or any other form of reimbursement from Borrower or any other
party liable for payment of any or all of the Guaranteed Indebtedness for any
payment made by Guarantor under or in connection with this Guaranty Agreement or
otherwise.
5. If acceleration of the time form payment of any amount payable by
Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to
acceleration under the terms of the Guaranteed Indebtedness shall nonetheless be
payable by Guarantor hereunder forthwith on demand by Lender.
6. Guarantor hereby agrees that its obligations under this Guaranty
Agreement shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of Guarantor: (a) the taking or accepting of collateral as
securing for any or all of the Guaranteed Indebtedness or the release,
surrender, exchange, or subordination of any collateral now or hereafter
succoring any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of Guarantor hereunder, or the full or partial release of any
other guarantor from liability for any or all of the Guaranteed Indebtedness;
(c) any disability of Borrower, or the dissolution, insolvency, or bankruptcy of
Borrower, Guarantor, or any other party at any time liable for the payment of
any or all of the Guaranteed Indebtedness; (d) any renewal, extension,
modification, waiver, amendment, or rearrangement of any or all of the
Guaranteed Indebtedness or any instrument, document, or agreement evidencing,
securing, or otherwise relating to any or all to the Guaranteed Indebtedness;
(e) any adjustment, indulgence, forbearance, waiver or compromise that may be
granted or given by Lender to Borrower, Guarantor, or any other party ever
liable for any or
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<PAGE>
all of the Guaranteed Indebtedness; (f) any neglect, delay, omission, failure,
or refusal of Lender to take or prosecute any action for the collection of any
of the Guaranteed Indebtedness or to foreclose or take or prosecute any action
in connection with any instrument, document, or agreement evidencing, securing,
or otherwise relating to any or all of the Guaranteed Indebtedness; (g) the
unenforceablity or invalidity of any or all of the Guaranteed Indebtedness; (h)
any payment by Borrower or any other party to Lender is held to constitute a
preference under applicable bankruptcy or insolvency law or if for any other
reason Lender is required to refund any payment or pay the amount thereof to
someone else; (i) the settlement or compromise of any of the Guaranteed
Indebtedness; (j) the non-perfection of any security interest or lien securing
any or all of the Guaranteed Indebtedness; (k) any impairment of any collateral
securing any or all of the Guaranteed Indebtedness; (l) the failure of Lender to
sell any collateral securing any or all of the Guaranteed Indebtedness in a
commercially reasonable manner or as otherwise required by law; (m) any change
in the corporate existence, structure, or ownership of Borrower or (n) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower or Guarantor.
7. Guarantor represents and warrants to Lender as follows:
(a) Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, is
qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where failure to
so qualify would have a material adverse effect on its business, financial
condition, or operations.
(b) Guarantor has the corporate power and authority and legal right
to execute, deliver, and perform its obligations under this Guaranty Agreement
and this Guaranty Agreement constitutes the legal, valid and binding obligation
of Guarantor, enforceable against Guarantor in accordance with its respective
terms, except as limited by bankruptcy, insolvency, or other laws of general
application relating to the enforcement or creditor's rights.
(c) The execution, delivery, and performance by Guarantor of this
Guaranty Agreement have been duly authorized by all requisite action on the part
of Guarantor and do not and will not violate or conflict with the articles of
incorporation or bylaws of Guarantor or any law, rule, or regulation or any
order, writ, induction or decree of any court, governmental authority or agency,
or arbitrator and do not and will not conflict with, result in breach of, or
constitute a default under, or result in the imposition or any lien upon any
assets of Guarantor pursuant to the provisions of any indenture, mortgage, deed
of trust, security agreement, franchise, permit, license, or other instrument or
agreement to which Guarantor or its properties is bound.
(d) No authorization, approval, or consent of, and no filing or
registration with, any court, governmental authority, or third party is
necessary for the execution, delivery or performance by Guarantor of this
Guaranty Agreement or the validity or enforceability thereof.
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<PAGE>
(e) The value of the consideration received and to be received by
Guarantor as a result of Borrower and Lender entering into the Loan Agreement
and Guarantor executing and delivering this Guaranty Agreement is reasonably
worth at least as much as the liability and obligation of Guarantor hereunder,
and such liability and obligation and the Loan Agreement have benefited and may
reasonably be expected to benefit Guarantor directly or indirectly.
(f) Guarantor has, independently and without reliance upon Lender
and based upon such documents and information as Guarantor has deemed
appropriate, made its own analysis and decision to enter into this Guaranty
Agreement.
(g) Guarantor hereby represents that (i) it is not insolvent as of
the date hereof and will not be rendered insolvent as a result of this Guaranty
Agreement, (ii) it is not engaged in business or a transaction, or about to
engage in business or a transaction, for which any property or assets remaining
with such Guarantor is unreasonably small capital, and (iii) it does not intend
to incur, or believe it will incur, debts that will be beyond its ability to pay
as such debts mature.
8. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or Lender has any commitment
under the Loan Agreement:
(a) Guarantor will furnish promptly to Lender written notice of the
occurrence of any default under this Guaranty Agreement or a Default under the
Loan Agreement of which Guarantor has knowledge.
(b) Guarantor will furnish promptly to Lender such additional
information concerning Guarantor as Lender may request.
(c) Guarantor will obtain at any time and from time to time all
authorizations, licenses, consents or approvals as shall now or hereafter be
necessary or desirable under all applicable laws or regulations or otherwise in
connection with the execution, delivery and performance of this Guaranty
Agreement and will promptly furnish copies thereof to Lender.
9. (a) Guarantor hereby agrees that the Subordinated Indebtedness (as
hereinafter defined) shall be subordinate and junior in right of payment to the
prior payment in full of all Guaranteed Indebtedness, and Guarantor hereby
assigns the Subordinated Indebtedness to Lender as security for the Guaranteed
Indebtedness. If any sums shall be paid to Guarantor by Borrower or any or any
other person or entity on account of the Subordinated Indebtedness, such sums
shall be held in trust by Guarantor for the benefit of Lender and shall
forthwith be paid to Lender without affecting the liability of Guarantor under
this Guaranty Agreement and may be applied by Lender against the Guaranteed
Indebtedness in such order and manner as Lender may determine in its sole
discretion. Upon the request of Lender Guarantor shall execute, deliver and
endorse to Lender such documents and instruments as Lender may request to
perfect,
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<PAGE>
preserve, and enforce its rights hereunder. For purposes of this Guaranty
Agreement, the term "Subordinated Indebtedness" means all indebtedness,
liabilities and obligations of Borrower to Guarantor whether such indebtedness,
liabilities and obligations now exist or are hereafter incurred or arise, or
whether the obligations of Borrower thereon are direct, indirect, contingent,
primary, secondary, several, joint and several, or otherwise, and irrespective
of whether such indebtedness, liabilities, or obligations are evidenced by a
note, contract, open account, or otherwise, and irrespective of the person or
persons in whose favor such indebtedness, obligations, or liabilities may, at
their inception, have been, or may hereafter be created, or the manner in which
they have been or may hereafter be acquired by Guarantor.
(b) Guarantor agrees that any and all liens, security interests,
judgment liens, charges, or other encumbrances upon Borrower's assets securing
payment of any Subordinated Indebtedness shall be and remain inferior and
subordinate to any and all liens, security interests, judgment liens, charges,
or other encumbrances upon Borrower's assets securing payment of the Guaranteed
Indebtedness or any part thereof, regardless of whether such encumbrances in
favor of Guarantor or Lender presently exist or are hereafter created or
attached. Without the prior written consent of Lender, Guarantor shall not (i)
file suit against Borrower or exercise or enforce any other creditor's right it
may have against Borrower, or (ii) foreclose, repossess, sequester, or otherwise
take steps or institute any action or proceedings (judicial or otherwise,
including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding) to enforce any liens, security interests, collateral rights,
judgments or other encumbrances held by Guarantor on assets of Borrower.
(c) In the event of any receivership, bankruptcy, reorganization,
rearrangement, debtor's relief, or other insolvency proceeding involving
Borrower as debtor, Lender shall have the right to prove and vote any claim
under the Subordinated Indebtedness and to receive directly from the receiver,
trustee or other court custodian all dividends, distributions, and payments made
in respect of the Subordinated Indebtedness. Lender may apply any such
dividends, distributions, and payments against the Guaranteed Indebtedness in
such order and manner as Lender may determine in its sole discretion.
(d) Guarantor agrees that all promissory notes, accounts receivable,
ledgers, records, or any other evidence of Subordinated Indebtedness shall
contain a specific written notice therein that the indebtedness evidenced
thereby is subordinated under the terms of this Guaranty Agreement.
10. No amendment or waiver of any provision of this Guaranty Agreement
or consent to any departure by the Guarantor therefrom shall in any event be
effective unless the same shall be in writing and signed by Lender. No failure
on the part of Lender to exercise, and no delay in exercising, any right, power,
or privilege thereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, power, or privilege hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power, or
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<PAGE>
privilege. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
11. Any acknowledgment or new promise, whether by payment of principal
or interest or otherwise and whether by Borrower or others ( including
Guarantor), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of Guarantor against Lender shall have commenced
to run, toll the running of such statute of limitations and, if the period of
such statute of limitations shall have expired, prevent the operation of such
statute of limitations.
12. This Guaranty Agreement is for the benefit of Lender and its
successors and assigns, and in the event of an assignment of the Guaranteed
Indebtedness, or any part thereof, the rights and benefits hereunder, to the
extent applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty Agreement is binding not only on Guarantor, but on
Guarantor's successors and assigns.
13. Guarantor recognizes that Lender is relying upon this Guaranty
Agreement and the undertakings of Guarantor hereunder in making extensions of
credit to Borrower under the Loan Agreement and further recognizes that the
execution and delivery of this Guaranty Agreement is a material inducement to
Lender in entering into the Loan Agreement. Guarantor hereby acknowledges that
there are no conditions to the full effectiveness of this Guaranty Agreement.
14. This Guaranty Agreement is executed and delivered as an incident to
a lending transaction negotiated, consummated, and performable in Harris County,
Texas, and shall be governed by and construed in accordance with the laws of the
State of Texas. Any action or proceeding against Guarantor under or in
connection with this Guaranty Agreement may be brought in any state or federal
court in Harris County, Texas. Guarantor hereby irrevocably (i) submits to the
nonexclusive jurisdiction of such courts, and (ii) waives any objection it may
now or hereafter have as to the venue of any such action or proceeding brought
in such court or that such court is an inconvenient forum. Guarantor agrees that
service of process upon it may be made by certified or registered mail, return
receipt requested, at its address specified below. Nothing herein shall affect
the right of Lender to serve process in any other matter permitted by law or
shall limit the right of Lender to bring any action or proceeding against
Guarantor or with respect to any of Guarantor's property in courts in other
jurisdictions. Any action or proceeding by Guarantor against Lender shall be
brought only in a court located in Harris County, Texas.
15. Guarantor shall pay on demand all attorneys' fees and all other
costs and expenses incurred by Lender in connection with the preparation,
administration, enforcement, or collection of this Guaranty Agreement.
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<PAGE>
16. Except as expressly provided for herein, Guarantor hereby waives
promptness, diligence, notice of any default under Guaranteed Indebtedness,
demand of payment, notice of acceptance of this Guaranty Agreement, presentment,
notice of protest, notice of dishonor, notice of intent to accelerate, notice of
acceleration, notice of the incurring by Borrower of additional indebtedness,
and all other notices and demands with respect to the Guaranteed Indebtedness
and this Guaranty Agreement. Without limiting the generality of the foregoing,
Guarantor unconditionally waives, to the extent permitted by law, (a) notice of
any of the matters referred to in Section 6 above, (b) all notices which may be
required by statute, rule of law or otherwise, now or hereafter in effect, to
preserve intact any rights against Guarantor, including, without limitation, any
demand, presentment and protest, proof of notice of non-payment under any of the
Loan Documents and notice of any Event of Default or any failure on the part of
Borrower, Guarantor or any other guarantor of the Obligations to perform or
comply with any covenant, agreement, term or condition of any of the Loan
Documents, (c) any right to enforcement, assertion or exercise against Borrower,
Guarantor or any other guarantor of the Obligations and the Guaranteed
Indebtedness, as applicable, of any right or remedy conferred under any of the
Loan Documents, (d) requirement of diligence on the part of any Person, (e) any
requirement to exhaust any remedies or to mitigate the damages resulting from
any default under any of the Loan Documents, (f) any notice of any sale,
transfer or other disposition of any right, title or interest of Lender under
any of the Loan Documents and (g) any rights of Guarantor pursuant to Chapter 34
of the Texas Business and Commerce Code, as amended.
17. The Loan Agreement, and all of the terms thereof, are incorporated
herein by reference, the same as if stated verbatim herein, and Guarantor agrees
that Lender may exercise any and all rights granted to it under the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement)
without affecting the validity or enforceability of this Guaranty Agreement.
18. Guarantor hereby represents and warrants to Lender that Guarantor
has adequate means to obtain from Borrower on a continuing basis information
concerning the financial condition and assets of Borrower and that Guarantor is
not relying upon Lender to provide (and Lender shall have no duty to provide)
any such information to Guarantor either now of in the future.
19. THIS GUARANTY AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT OF
GUARANTOR AND LENDER WITH RESPECT TO GUARANTOR'S GUARANTY OF THE GUARANTEED
INDEBTEDNESS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT GUARANTOR AND LENDER AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF
THE GUARANTY AGREEMENT, AND NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER,
NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR,
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<PAGE>
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSION OR OTHER EXTRINSIC
EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY
ANY TERM OF THIS GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN
GUARANTOR AND LENDER.
20. THE PARTIES AGREE TO BE BOUND BY THE TERMS AND CONDITIONS OF THE
CURRENT ARBITRATION PROGRAM OF LENDER, WHICH IS INCORPORATED HEREIN BY REFERENCE
AND ACKNOWLEDGED AS RECEIVED BY THE PARTIES PURSUANT TO WHICH ANY AND ALL
DISPUTES SHALL BE RESOLVED BY MANDATORY BINDING ARBITRATION UPON THE REQUEST OF
ANY PARTY.
21. (a) All payments payable hereunder in respect of the Guaranteed
Obligations shall be payable by Guarantor to Beneficiary in the currency in
which the Guaranteed Obligations are expressed (herein called the "Required
Currency"). The obligations of Guarantor to make payment in the Required
Currency shall not be discharged or satisfied by any payment or tender, or any
recovery pursuant to any judgment or order, which is or is expressed in or
converted into any currency other than the Required Currency, except to the
extent such payment, tender or recovery shall result in the actual receipt by
Beneficiary of the full amount of the foregoing, Guarantor authorizes
Beneficiary, on any payment, tender or recovery in a currency other than the
Required Currency, to purchase in accordance with its normal procedures,
Required Currency with the amount of such other currency so tendered or
recovered. The obligation of Guarantor to make payments in the Required Currency
shall be enforceable as an alternative or additional cause of action of the
purpose of recovery in the Required Currency of the amount (if any) by which
such actual receipt shall fall short of the full amount due hereunder and shall
not be affected by judgment being obtained for any other sums due under this
Guaranty.
(b) All payments made to Beneficiary hereunder shall be made in the
Required Currency for value on the day on which payment is due, without any
setoff or counterclaim, free and clear of and without deduction or withholding
for or on account of, any present of future Taxes now or hereafter imposed by
any governmental or other authority. As used herein, the term "Taxes" shall
include all withholding, income, gains, excise, stamp and other taxes of
whatever nature as well as all withholding, levies, imports, duties, charges or
fees of whatever nature. If Guarantor is compelled by law to make any such
deductions or withholdings, it will pay such additional amounts as may be
necessary in order that the net amount received and retained by Beneficiary
after such deduction or withholdings (including any required deduction or
withholding (including any required deduction or withholding on such additional
amounts) shall equal the amount it would have received and retained had no such
deduction or withholdings been required to be made, and it will provide
Beneficiary with evidence satisfactory to Beneficiary that it has paid such
deduction or withholdings. Guarantor hereby agrees to indemnify Beneficiary and
hold it harmless against all losses, costs, expenses or other amounts
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<PAGE>
incurred suffered by Beneficiary by reason of the failure of Guarantor to
perform its obligations under this clause (b)
22. WITH RESPECT TO ANY AND ALL DISPUTES ARISING HEREUNDER, UNDER THE
NOTES, UNDER THE GUARANTEED OBLIGATIONS, OR UNDER ANY OF THE OTHER DOCUMENTS
EXECUTED IN CONNECTION HEREWITH NOT SETTLED OR SUBJECT TO ARBITRATION, PURSUANT
TO ANY ARBITRATION PROGRAM REFERENCED TO HEREIN, GUARANTOR HEREBY IRREVOCABLY
AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATION TO THIS GUARANTY AND ANY OTHER DOCUMENT IN RESPECT OF ANY
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
TEXAS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
TEXAS, AND APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BY BROUGHT IN
SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR PROCEEDING IN ANY SUCH
COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN IMPROPER VENUE OR AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL ) OR
ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS
SPECIFIED ON THE SIGNATURE PAGE HEREOF;
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
TO SUE IN ANY OTHER JURISDICTION;
(E) DESIGNATES AND APPOINTS MIKE WEBB, WHOSE ADDRESS ON THE DATE
HEREOF IS 1990 POST OAK BLVD., SUITE 1670, HOUSTON, TEXAS 77056 (HEREINAFTER
CALLED THE "PROCESS AGENT"), AS ITS ATTORNEY-INFACT IN THE UNITED STATES OF
AMERICA, TO RECEIVE SERVICE OF PROCESS IN ANY ACTION, SUIT OR PROCEEDING, IT
BEING AGREED THAT SERVICE UPON SUCH ATTORNEY-IN-FACT SHALL CONSTITUTE VALID
SERVICE UPON IT OR ITS SUCCESSORS AND ASSIGNS;
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<PAGE>
(F) AGREES THAT ITS SUBMISSION TO JURISDICTION AND ITS DESIGNATION
OF THE PROCESS AGENT SET FORTH ABOVE IS MADE FOR THE EXPRESS BENEFIT OF PAYEE;
(G) AGREES THAT ITS SUBMISSION TO JURISDICTION BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER BEING CONCLUSIVE EVIDENCE OF THE FACT AND AMOUNT
OF ANY OF ITS LIABILITY THEREIN DESCRIBED; AND
(H) COVENANTS AND AGREES THAT SO LONG AS THIS NOTES SHALL BE UNPAID,
IT SHALL MAINTAIN A DULY APPOINTED AGENT FOR THE SERVICE OF SUMMONS AND OTHER
LEGAL PROCESS IN HOUSTON, TEXAS, U.S.A.
23. THIS GUARANTY AND THE OTHER LOAN DOCUMENTS, AND INSTRUMENTS AND
DOCUMENTS EXECUTED IN CONNECTION HEREWITH, 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.
24. Language. All notices, communications, evidences, reports,
opinions, financial statements and other documents given under this Guaranty
unless submitted in the English language shall be accompanied by one certified
copy of an English translation thereof for each copy of the foregoing so
submitted and the event of any conflict with the non-English version thereof.
EXECUTED as of the 29 day of May, 1996.
GUARANTOR:
GEOEVALUACIONES S.A. DE C. V.
By: _____________________________
Name: Luis H. Ferran Arroyo.
Title: President
Address: Ave Rio Churubusco 522 Col. El
Retono 09440 Mexico City
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