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) November 17, 1997
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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.)
8226 Park Meadows Drive, Littleton, Colorado 80124
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 858-0500
7076 South Alton Way, Building H, Englewood, Colorado 80112
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(Former name or former address, if changed since last report.)
The Exhibit Index appears on Page 6
Page 1 of pages.
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Item 5. Other Events.
On November 17, 1997 (the "Closing Date"), 3-D Geophysical, Inc.
(together with its wholly-owned subsidiary, Northern Geophysical of America,
Inc., the "Registrant") entered into a $30 million credit facility (the "Credit
Facility") with Sanwa Business Credit Corporation ("Sanwa"). Funding of the
Credit Facility occurred on November 18, 1997 with $10.1 million used to repay
the Registrant's outstanding debt to Wells Fargo Bank, N.A. under its existing
credit facility, which is being terminated. The Credit Facility will be also be
used to finance the continued growth of the Registrant's business, particularly
in Canada, Alaska and Latin America. The Registrant also repaid loans in the
aggregate of $850,000 plus interest to five persons: Joel Friedman, Chairman of
the Board ($125,000); Wayne P. Widynowski, Executive Vice President and a
director ($100,000); Ronald L. Koons, Vice President and Chief Financial Officer
($250,000); Ralph M. Bahna, a director ($125,000); and Lewis Brazelton
($250,000).
Under the Loan and Security Agreement, dated November 17, 1997, (the
"Loan Agreement") Sanwa has provided the Registrant with a $10 million five-year
term loan (the "Term Loan"), a $10 million credit line to be used to finance
capital expenditures (the "Capex Loan") and a $10 million revolving credit line
(the "Revolving Credit Loan") for five years. The Term Loan is payable in equal
monthly installments through and including November 1, 2002. The Term Loan bears
interest at an annual rate equal to the prime rate plus 1% or LIBOR plus 3.5%,
whichever the Registrant prefers. Draws on the Capex Loan during each 12- month
period following the Closing Date will be combined into a single promissory note
at the end of each such period, repayable based upon a 60-month amortization,
payable in full at the end of five years from the Closing Date. The rate of
interest for the Capex Loan is the same as those described above for the Term
Loan. The Revolving Credit Loan may be drawn down from time to time in an amount
not to exceed the lesser of (i) Ten Million Dollars ($10,000,000) and (ii) 80%
of the Registrant's "Eligible Accounts" (as defined in the Loan Agreement). The
Revolving Credit Loan bears an interest at an annual rate equal to the prime
rate plus 0.5% or LIBOR plus 2.75%, whichever the Registrant prefers. In
addition to certain customary affirmative covenants, the Loan Agreement contains
restrictions on the Registrant with respect to (i) declaring or paying any
dividends or other distributions on its capital stock (or acquiring any of its
capital stock), (ii) incurring Debt (as defined), (iii) issuing capital stock,
(iv) entering into transactions with affiliates, and (v) disposing of assets.
The foregoing summary of the Loan Agreement is qualified in its entirety by
reference to the Loan and Security 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 and Security Agreement between 3-D
Geophysical, Inc. and Sanwa Business Credit
Corporation, dated as of November 17, 1997.
10.2 Term Note between Northern Geophysical of
America, Inc. and Sanwa Business Credit
Corporation, dated as of November 17, 1997.
10.3 Security Agreement of 3-D Geophysical, Inc.
between 3-D Geophysical, Inc. and Sanwa
Business Credit Corporation, dated as of
November 17, 1997.
10.4 Security Agreement between J.R.S. Exploration Company
Limited and Sanwa Business Credit Corporation, dated
as of November 7, 1997.
10.5 Trademark Security Agreement between 3-D
Geophysical, Inc. and Sanwa Business Credit
Corporation, dated as of November 17, 1997.
10.6 Pledge Agreement between 3-D Geophysical, Inc.
and Sanwa Business Credit Corporation (with respect
to the capital stock of Northern Geophysical of
America, Inc.) dated as of November 17, 1997.
10.7 Pledge Agreement between 3-D Geophysical, Inc.
and Sanwa Business Credit Corporation (with respect
to the capital stock of 3-D Geophysical of Canada,
Inc.) dated as of November 17, 1997.
10.8 Pledge Agreement between 3-D Geophysical, Inc.
and Sanwa Business Credit Corporation (with respect
to the capital stock of 3-D Geophysical of Latin
America, Inc.) dated as of November 17, 1997.
10.9 Pledge Agreement between 3-D Geophysical, Inc.
and Sanwa Business Credit Corporation (with respect
to the capital stock of Geoevaluaciones, S.A. de C.V.
and Procesos Interactivos Avanzados, S.A. de C.V.)
dated as of November 17, 1997.
Page 3 of pages.
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10.10 Security Agreement (Securities) between W.G. Mueller
Consulting Services Ltd. and Sanwa Business Credit
Corporation (with respect to the capital stock of
J.R.S. Exploration Company Limited) dated as of
November 17, 1997.
10.11 Security Agreement (Securities) between Jan Vo
Equities Ltd. and Sanwa Business Credit
Corporation (with respect to the capital stock
of J.R.S. Exploration Company Limited) dated as
of November 17, 1997.
Page 4 of pages.
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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/Ronald L. Koons
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Name: Ronald L. Koons
Title: Vice President
Date: December 23, 1997
Page 5 of pages.
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EXHIBIT INDEX
Exhibit Page
10.1 Loan and Security Agreement between 3-D Geophysical, Inc. and
Sanwa Business Credit Corporation, dated as of November 17,
1997.
10.2 Term Note between Northern Geophysical of America, Inc. and
Sanwa Business Credit Corporation, dated as of November 17,
1997.
10.3 Security Agreement of 3-D Geophysical, Inc. between 3-D
Geophysical, Inc. and Sanwa Business Credit Corporation,
dated as of November 17, 1997.
10.4 Security Agreement between J.R.S. Exploration Company Limited
and Sanwa Business Credit Corporation, dated as of November
7, 1997.
10.5 Trademark Security Agreement between 3-D Geophysical, Inc.
and Sanwa Business Credit Corporation, dated as of November
17, 1997.
10.6 Pledge Agreement between 3-D Geophysical, Inc. and Sanwa
Business Credit Corporation (with respect to the capital
stock of Northern Geophysical of America, Inc.) dated as of
November 17, 1997.
10.7 Pledge Agreement between 3-D Geophysical, Inc. and Sanwa
Business Credit Corporation (with respect to the capital
stock of 3-D Geophysical of Canada, Inc.) dated as of
November 17, 1997.
10.8 Pledge Agreement between 3-D Geophysical, Inc. and Sanwa
Business Credit Corporation (with respect to the capital
stock of 3-D Geophysical of Latin America, Inc.) dated as of
November 17, 1997.
10.9 Pledge Agreement between 3-D Geophysical, Inc. and Sanwa
Business Credit Corporation (with respect to the capital
stock of Geoevaluaciones, S.A. de C.V. and Procesos
Interactivos Avanzados, S.A. de C.V.) dated as of November
17, 1997.
10.10 Security Agreement (Securities) between W.G. Mueller
Consulting Services Ltd. and Sanwa Business Credit
Corporation (with respect to the capital stock of J.R.S.
Exploration Company Limited) dated as of November 17, 1997.
10.11 Security Agreement (Securities) between Jan Vo Equities Ltd.
and Sanwa Business Credit Corporation (with respect to the
capital stock of J.R.S. Exploration Company Limited) dated as
of November 17, 1997.
Page 6 of pages.
LOAN AND SECURITY AGREEMENT
DATED AS OF NOVEMBER 17, 1997
BETWEEN
SANWA BUSINESS CREDIT CORPORATION
AS LENDER
AND
NORTHERN GEOPHYSICAL OF AMERICA, INC.
AS BORROWER
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TABLE OF CONTENTS
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PAGE
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1. DEFINITIONS AND ACCOUNTING TERMS.........................................................1
1.1 ................................................................"Account Debtor"1
1.2 ......................................................................"Accounts"1
1.3 ....................................................................."Affiliate"1
1.4 .........................................................."Ancillary Agreements"1
1.5 ...................................................."Average Daily Availability"2
1.6 ....................................................................."Borrowing"2
1.7 .................................................................."Business Day"2
1.8 ...................................................................."Capex Loan"2
1.9 ...................................................................."Capex Note"2
1.10 .........................................................."Capital Expenditures"2
1.11 ......................................................"Cash Flow Coverage Ratio"2
1.12 ................................................................."Change of Law"2
1.13 ......................................................................."Charges"2
1.14 .................................................................."Closing Date"2
1.15 ...................................................................."Collateral"2
1.16 ......................................................."Collateral Availability"2
1.17 ....................................................................."Companies"3
1.18 ....................................................................."Computers"3
1.19 ................................................................"Current Assets"3
1.20 ..........................................................."Current Liabilities"3
1.21 ......................................................."Daily Collateral Report"3
1.22 ......................................................................."Default"3
1.23 .................................................................."Default Rate"3
1.24 ......................................................................."Dollars"3
1.25 ..............................................................."Depository Bank"3
1.26 ................................................................"Direct Charges"3
1.27 ........................................................................"EBITDA"3
1.28 ............................................................."Eligible Accounts"3
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TABLE OF CONTENTS
(CONTINUED)
PAGE
1.29 ................................................................"Environmental Laws"4
1.30 ........................................................................."Equipment"4
1.31 ............................................................................."ERISA"4
1.32 .................................................................."Event of Default"4
1.33 ........................................................................"Financials"4
1.34 .............................................................................."GAAP"4
1.35 ..............................................................."General Intangibles"4
1.36 ................................................................."Governmental Rule"4
1.37 ........................................................................."Guarantor"4
1.38 ..............................................................."Hazardous Materials"4
1.39 ......................................................................"Indebtedness"4
1.40 ......................................................................"Initial Term"5
1.41 ......................................................."Interest Determination Date"5
1.42 ..................................................................."Interest Period"5
1.43 ........................................................................."Inventory"5
1.44 ......................................................................."Liabilities"5
1.45 ............................................................................."LIBOR"5
1.46 ........................................................................"LIBOR Loan"6
1.47 ....................................................................."LIBOR Portion"6
1.48 .............................................................................."Lien"6
1.49 ..................................................................."Loan" or "Loans"6
1.50 ......................................................................"Loan Account"6
1.51 ............................................................"Net Profit After Taxes"6
1.52 ............................................................................."Notes"6
1.53 ...................................................."Notice of Borrowing/Conversion"6
1.54 ......................................................................."Overadvance"6
1.55 ......................................................................."Participant"6
1.56 ..................................................................."Permitted Liens"6
1.57 ............................................................................"Person"7
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TABLE OF CONTENTS
(CONTINUED)
PAGE
1.58 ............................................................................."Portion"7
1.59 ......................................................................"Prepayment Fee"7
1.60 .........................................................................."Prime Rate"7
1.61 ....................................................................."Prime Rate Loan"7
1.62 ........................................................................"Renewal Term"7
1.63 ...................................................................."Reportable Event"7
1.64 ......................................................................"Revolving Loan"7
1.65 ............................................................"Revolving Loan Borrowing"7
1.66 .................................................................."Security Documents"7
1.67 .................................................................."Special Collateral"7
1.68 ..............................................................................."Stock"7
1.69 ..........................................................................."Subsidiary"8
1.70 ..................................................................."Tangible Net Worth"8
1.71 ............................................................................"Term Loan"8
1.72 ............................................................................"Term Note"8
1.73 .................................................................................."3-D"8
1.74 ......................................................................."Total Facility"8
1.75 ................................................................................."Type"8
2. LOANS: GENERAL TERMS............................................................................8
2.1 ........................................................................Total Facility.8
2.2 ........................................Advances to Constitute One Loan; Loan Purpose.11
2.3 ........................................................................Interest Rate.12
2.4 ..............................................................Change of Circumstances.12
2.5 .........................................................Funding Loss Indemnification.13
2.6 ..........................................................................Prepayments.14
2.7 ....................................Term of Agreement; Prepayment; Liquidated Damages.14
2.8 ............................................................................Audit Fee.15
2.9 ..........................................................................Closing Fee.15
2.10 .....................................................................Unused Line Fee.15
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TABLE OF CONTENTS
(CONTINUED)
PAGE
3. ELIGIBLE ACCOUNTS; ELIGIBLE INVENTORY.........................................................16
3.1 ...................................................................Eligible Accounts.16
4. PAYMENTS......................................................................................17
4.1 .............................................Loan Account; Method of Making Payments.17
4.2 .......................................................................Payment Terms.17
4.3 .................................................Collection of Accounts and Payments.18
4.4 .............................................Application of Payments and Collections.18
4.5 ..........................................................................Statements.19
5. COLLATERAL: GENERAL TERMS.....................................................................19
5.1 ...................................................................Security Interest.19
5.2 .....................................................Disclosure of Security Interest.19
5.3 ..................................................................Special Collateral.19
5.4 ..................................................................Further Assurances.19
5.5 ..........................................................................Inspection.20
5.6 .....................................Perfection and Priority; Location of Collateral.20
5.7 ..............................Lender's Payment of Claims Asserted Against Collateral.20
6. COLLATERAL: ACCOUNTS..........................................................................21
6.1 ............................................................Verification of Accounts.21
6.2 ....................................Assignments, Records and Daily Collateral Report.21
6.3 ..................................................Notice Regarding Disputed Accounts.21
6.4 .....................................................Sale or Encumbrance of Accounts.21
7. COLLATERAL: INVENTORY........................................................................21
8. COLLATERAL: EQUIPMENT.........................................................................21
8.1 ........................................................Maintenance of the Equipment.21
8.2 ..................................................Evidence of Ownership of Equipment.21
8.3 ...........................................................Proceeds of the Equipment.21
8.4 ...............................................................Location of Equipment.22
9. WARRANTIES AND REPRESENTATIONS................................................................22
9.1 ..............................................General Warranties and Representations.22
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TABLE OF CONTENTS
(CONTINUED)
PAGE
9.2 ..............................................Account Warranties and Representations.25
9.3 ............................................Inventory Warranties and Representations.26
9.4 ..........................Automatic Warranty and Representation and Reaffirmation of
Warranties and Representations.......................................................26
9.5 ..........................................Survival of Warranties and Representations.26
10. COVENANTS AND CONTINUING AGREEMENTS...........................................................27
10.1 ...............................................................Affirmative Covenants.27
10.2 ..................................................................Negative Covenants.29
10.3 ..................................................................Contesting Charges.31
10.4 ..................................................................Payment of Charges.31
10.5 ......................................................Insurance; Payment of Premiums.31
10.6 ...............................Survival of Obligations Upon Termination of Agreement.32
10.7 .............................................................Environmental Indemnity.32
10.8 ...................................................................Change of Control.32
10.9 ................................................................Revisions or Updates.32
11. CONDITIONS PRECEDENT TO CLOSING...............................................................33
12. DEFAULT; RIGHTS AND REMEDIES ON DEFAULT.......................................................35
12.1 .............................................................................Default.35
12.2 .....................................................Acceleration of the Liabilities.37
12.3 .........................................................Advances During Cure Period.37
12.4 ........................................................................Default Rate.37
12.5 ............................................................................Remedies.37
12.6 ..............................................................................Notice.38
13. MISCELLANEOUS.................................................................................38
13.1 .........................Appointment of Lender as Borrower's Lawful Attorney-In-Fact.38
13.2 ...........................Modification of Agreement; Assignment or Sale of Interest.39
13.3 .......................Attorneys' Fees and Expenses; Lender's Out-of-Pocket Expenses.39
13.4 ....................................................................Waiver by Lender.40
13.5 ........................................................................Severability.40
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13.6 ...........................................................Parties; Entire Agreement.40
13.7 ...................................................................Conflict of Terms.41
13.8 ..................................................................Waiver by Borrower.41
13.9 ................................................................Governing Law, Venue.41
13.10 ..............................................................................Notice.42
13.11 .................................................................Section Titles, Etc.42
13.12 ...................................................................Course of Dealing.42
13.13 ..............................................................................Setoff.43
13.14 ..............................................................Nonliability of Lender.43
13.15 .................................................................Time of the Essence.43
13.16 .....................................................................Indemnification.43
13.17 ....................................................Waiver of Right to Trial by Jury.44
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LIST OF EXHIBITS
Exhibit A Financials
Exhibit B Form of Notice of Borrowing/Conversion
Exhibit C Locations
Exhibit D Tradenames
Exhibit E Litigation
Exhibit F Title to Assets, Liens
Exhibit G Affiliates and Subsidiaries
Exhibit H Covenant Compliance Certificate
Exhibit I Form of Daily Collateral Report
Exhibit J Existing Indebtedness for Borrowed Money
Schedule 1.29 Equipment
Schedule 10.1(a) Financial Covenants
Schedule 10.2 Deposit Accounts
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of
the 17th day of November, 1997, by and between Sanwa Business Credit
Corporation, a Delaware corporation ("Lender"), and Northern Geophysical of
America, Inc., a Delaware corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower desires to borrow funds and obtain other
financial accommodations from Lender, and Lender is willing to make certain
loans and provide other financial accommodations to Borrower upon the terms and
subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the terms and conditions
contained herein, and of any loans or other financial accommodations heretofore,
now or hereafter made to, or for the benefit of, Borrower by Lender, the parties
hereto agree as follows:
1. DEFINITIONS AND ACCOUNTING TERMS
A. Specific Defined Terms. When used herein, the following terms shall
have the following respective meanings:
1.1 "ACCOUNT DEBTOR" shall mean any Person who is or who may become
obligated to Borrower under, with respect to, or on account of an Account.
1.2 "ACCOUNTS" shall mean and include all of Borrower's presently
existing and hereafter arising or acquired accounts, receivables and rights of
Borrower to payment for goods sold or leased or for services rendered,
including, without limitation, those which are not evidenced by instruments or
chattel paper, and whether or not they have been earned by performance; proceeds
of any letters of credit on which Borrower is named as beneficiary; contract
rights; chattel paper; instruments; documents; insurance proceeds; and all such
obligations whatsoever owing to Borrower, together with all instruments and all
documents of title representing any of the foregoing, all rights in any
merchandise or goods which any of the same may represent, and all right, title,
security and guaranties with respect to each of the foregoing, including,
without limitation, any right of stoppage in transit.
1.3 "AFFILIATE" shall mean any and all Subsidiaries and any and all
Persons which, in the reasonable judgment of Lender, directly or indirectly, own
or control, are controlled by or are under common control with Borrower, and any
and all Persons from whom, in the reasonable judgment of Lender, Borrower has
not or is not likely to exhibit independence of decision or action. For the
purpose of this definition, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
1.4 "ANCILLARY AGREEMENTS" shall mean all Security Documents and all
agreements, instruments and documents, including without limitation, notes,
guaranties,
1
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mortgages, deeds of trust, chattel mortgages, pledges, negative pledges, powers
of attorney, consents, assignments, contracts, notices, security agreements,
intellectual property security agreements, leases, financing statements,
subordination agreements, trust account agreements and all other written matter
whether heretofore, now, or hereafter executed by or on behalf of Borrower or
any other Person or delivered to Lender or any Participant with respect to this
Agreement.
1.5 "AVERAGE DAILY AVAILABILITY" shall mean for any period the sum of
Collateral Availability for each Business Day during such period divided by the
number of Business Days in such period.
1.6 "BORROWING" shall mean a borrowing by Borrower consisting of a Loan
made by Lender on the same date and of the same Type pursuant to a single Notice
of Borrowing/Conversion.
1.7 "BUSINESS DAY" shall mean (a) any day on which commercial banks are
not authorized to close or not required to close in Los Angeles, California and
(b) if such Business Day is related to a Loan which bears or is to bear interest
based on LIBOR, any day in which dealings in Dollar deposits may be carried out
in the London interbank market.
1.8 "CAPEX LOAN" shall have the meaning given to that term in Section
2.1(c).
1.9 "CAPEX NOTE" shall have the meaning given to that term in Section
2.1(c).
1.10 "CAPITAL EXPENDITURES" shall mean all expenditures made and
liabilities incurred for the acquisition of any fixed asset or improvement,
replacement, substitution or addition thereto, which has a useful life of more
than one year and including, without limitation, those arising in connection
with capital leases.
1.11 "CASH FLOW COVERAGE RATIO" shall mean for any period, the quotient
of (x) EBITDA minus the sum of (A) all taxes paid during such period, (B) all
Capital Expenditures permitted hereunder and actually made, except any portion
thereof financed through Indebtedness permitted hereunder, and (C) all dividends
actually paid during such period, divided by (y) the sum of (A) all principal,
interest and other payments made or required to be made by the Companies on
Indebtedness during such period, including any fees and charges owed by the
Companies in connection with any such Indebtedness and (B) all capitalized lease
payments made or required to be made by the Companies during such period.
1.12 "CHANGE OF LAW" shall have the meaning specified in Section
2.4(b).
1.13 "CHARGES" shall mean all national, federal, state, county, city,
municipal, or other governmental taxes, levies, assessments, charges, liens,
claims or encumbrances (including, without limitation, those of the Pension
Benefit Guaranty Corporation) upon or relating to (i) the Collateral, (ii) the
Liabilities, (iii) Borrower's employees, payroll, income or gross receipts, (iv)
Borrower's ownership or use of any of its assets, or (v) any other aspect of
Borrower's business.
1.14 "CLOSING DATE" shall mean the date on which each of the conditions
precedent in Section 11 are satisfied and the initial Loans are made.
1.15 "COLLATERAL" shall mean all of the property and interests in
property described in Section 5.1 and all other property and interests in
property which shall, from time to time, secure all or any part of the
Liabilities.
1.16 "COLLATERAL AVAILABILITY" shall have the meaning ascribed to it in
Section 2.1(a).
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1.17 "COMPANIES" shall mean, collectively, Borrower; 3-D; 3-D
Geophysical of Latin America, Inc., a Cayman Island company; J.R.S. Exploration
Company, Ltd., a Canada corporation; Geoevaluaciones, S.A. de C.V., a Mexico
company; and Procesos Interactivos Avanzados, S.A. de C.V., a Mexico company.
1.18 "COMPUTERS" shall mean all of Borrower's right, title and
interest, now owned and hereafter acquired, in computer equipment and hardware,
including, without limitation, all central processing units, terminals, disk
drives, tape drives, electronic memory units, printers, keyboards, screens,
peripherals (and other input/output devices), modems and other communication
controllers, and any and all accessions, parts and appurtenances thereto,
substitutions therefore and replacements thereof, all intellectual property used
by Borrower, at any time, in the operation of such computer equipment hardware,
including, without limitation, all software, all of Borrower's rights under any
licenses related to Borrower's software or hardware, and all leases pursuant to
which Borrower leases any computer equipment, hardware or software.
1.19 "CURRENT ASSETS" shall mean the aggregate net book value of the
current assets of Borrower as determined in accordance with GAAP, excluding any
Accounts owing to Borrower from any Affiliate.
1.20 "CURRENT LIABILITIES" shall mean the aggregate amount of all
liabilities of Borrower which would be classified as current liabilities under
GAAP.
1.21 "DAILY COLLATERAL REPORT" shall mean a borrowing base report in
the form of Exhibit I hereto delivered to Lender by Borrower, as required by
Section 6.2, consisting of sales, collections and an aged trial balance of all
of the Accounts existing as of the date of such Daily Collateral Report,
specifying for each Account Debtor obligated on the Accounts, such Account
Debtor's name, address and outstanding balance and the aging of such outstanding
balance; inventory valuations as set forth in the most recent Inventory Report,
and such other information as may, from time to time, be required by Lender.
1.22 "DEFAULT" shall mean the occurrence or existence of any one or
more of the events described in Section 12.1.
1.23 "DEFAULT RATE" shall have the meaning ascribed to it in Section
12.4.
1.24 "DOLLARS" shall mean U.S. dollars.
1.25 "DEPOSITORY BANK" shall mean the banking institution which is
referred to in Section 4.3.
1.26 "DIRECT CHARGES" shall mean accounts arising from work performed
by subcontractors or other third parties and billed by Borrower.
1.27 "EBITDA" shall mean, for any period, the net income for such
period of 3-D determined on a consolidated basis in accordance with GAAP
(excluding any extraordinary income items, including, without limitation, gain
on sale of assets, income relating to foreign exchange, swap or other derivative
transactions and changes in GAAP), plus the following items, to the extent
deducted from the revenues of 3-D in the calculation of net income or loss: (i)
depreciation, (ii) amortization of intangibles and any other non-cash items,
(iii) cash interest expense (excluding any interest paid-in-kind) and (iv) tax
expense.
1.28 "ELIGIBLE ACCOUNTS" shall mean those Accounts (including Accounts
of J.R.S. Exploration Company, Ltd., Geoevaluaciones, S.A. de C.V., and Procesos
Interactivos, S.A. de C.V., to the extent provided in Section 3.1 hereof)
included in a Daily Collateral Report which, as of the date of such Daily
Collateral Report and at all times thereafter, (i) satisfy the requirements for
eligibility as described in Section 3.1, (ii) do not violate the covenants,
representations and warranties and other provisions of this Agreement and (iii)
Lender, in its reasonable credit judgment, deems to be Eligible Accounts.
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1.29 "ENVIRONMENTAL LAWS" shall mean the Resource Conservation and
Recovery Act of 1987, the Comprehensive Environmental Response, Compensation and
Liability Act, any so-called "Superfund" or "Superlien" law, the Toxic
Substances Control Act, or any other federal state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, toxic or
dangerous waste, substance or material, as now or at any time hereafter in
effect.
1.30 "EQUIPMENT" shall mean all of Borrower's now owned and hereafter
acquired equipment and fixtures, including without limitation, furniture,
machinery, tools, vehicles and trade fixtures, together with any and all
accessories, parts and appurtenances thereto, substitutions therefor and
replacements thereof, including without limitation the Equipment listed in
Schedule 1.30 hereto.
1.31 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.32 "EVENT OF DEFAULT" shall mean any event or condition which, with
the passage of time or the giving of notice or both, would constitute a Default.
1.33 "FINANCIALS" shall mean those consolidated and consolidating
financial statements of 3-D attached hereto as Exhibit "A" or delivered to
Lender pursuant to Section 10.1(e).
1.34 "GAAP" shall mean generally accepted accounting principles,
consistently applied.
1.35 "GENERAL INTANGIBLES" shall mean all choses in action, general
intangibles, causes of action and all other intangible personal property of
Borrower of every kind and nature (other than Accounts) now owned or hereafter
acquired by Borrower. Without in any way limiting the generality of the
foregoing, General Intangibles specifically include, without limitation, all
corporate or other business records, security deposits, prepaid deposits and
expenses, inventions, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, tax refunds and tax refund claims, all
rights and claims against carriers and shippers, all rights to indemnification,
and all letters of credit, guarantee claims, security interests or other
security held by or granted to Borrower to secure payment by an Account Debtor
of any Accounts.
1.36 "GOVERNMENTAL RULE" shall mean any applicable law or governmental
rule, regulation or order (or any interpretation thereof, and including the
introduction of any new law or governmental rule, regulation or order).
1.37 "GUARANTOR" shall mean the Persons described in Section 10.1(k)
and any other Person who after the date hereof guaranties all or any part of the
Liabilities.
1.38 "HAZARDOUS MATERIALS" shall mean any hazardous substance or
pollutant or contaminant defined as such in (or for the purposes of) any
Environmental Law and shall include, but not be limited to, petroleum, any
radioactive material, and asbestos in any form or condition.
1.39 "INDEBTEDNESS" shall mean all of Borrower's liabilities,
obligations and indebtedness to any Person of any and every kind and nature,
whether primary, secondary, direct, indirect, absolute, contingent, fixed, or
otherwise, heretofore, now or hereafter owing, due or payable, however
evidenced, created, incurred, acquired or owing and however arising, whether
under written or oral agreement, by operation of law, or otherwise. Without in
any way limiting the generality of the foregoing, Indebtedness specifically
includes (i) the Liabilities, (ii) all obligations or liabilities of any Person
that are secured by
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any lien, claim, encumbrance or security interest upon property owned by
Borrower, even though Borrower has not assumed or become liable for the payment
thereof, (iii) all obligations or liabilities created or arising under any lease
of real or personal property, or conditional sale or other title retention
agreement with respect to property used or acquired by Borrower, even though the
rights and remedies of the lessor, seller or lender thereunder are limited to
repossession of such property, (iv) all unfunded pension fund obligations and
liabilities and (v) deferred taxes.
1.40 "INITIAL TERM" shall have the meaning ascribed to it in Section
2.7.
1.41 "INTEREST DETERMINATION DATE" shall have the meaning ascribed to
it in Section 1.45.
1.42 "INTEREST PERIOD" shall mean with respect to any LIBOR Loan or
LIBOR Portion, the time period selected by Borrower pursuant to Section 2.1(i)
which, in each case, commences on the first day of such Loan or Portion or the
effective date of any conversion and ends on the last day of such time period,
and thereafter, each subsequent time period selected by Borrower pursuant to
Section 2.1(i) which commences on the last day of the immediately preceding time
period and ends on the last day of that time period.
1.43 "INVENTORY" shall mean all goods, inventory, merchandise and other
personal property, including, without limitation, goods in transit, wherever
located and whether now owned or hereafter acquired by Borrower which is or may
at any time be held for sale or lease, furnished under any contract of service
or held as raw materials, work in process, supplies or materials used or
consumed in Borrower's business or are or might be used in connection with the
manufacturing, shipping, advertising or selling or finishing of such goods,
merchandise and other personal property and all documents of title or documents
representing the same, and all such property the sale or other disposition of
which has given rise to Accounts and which has been returned to or repossessed
or stopped in transit by Borrower.
1.44 "LIABILITIES" shall mean all of Borrower's liabilities,
obligations and indebtedness to Lender of any and every kind and nature, whether
primary, secondary, direct, absolute, contingent, fixed, or otherwise
(including, without limitation, the Revolving Loan, the Term Loan, any Capex
Loans or other accommodations, interest, charges, expenses, attorneys' fees and
other sums chargeable to Borrower by Lender, future advances made to or for the
benefit of Borrower and obligations of performance), whether arising under this
Agreement, under any other Ancillary Agreement or acquired by Lender from any
other source, whether heretofore, now or hereafter owing, arising, due, or
payable from Borrower to Lender, however evidenced, created, incurred, acquired
or owing and however arising, whether under written or oral agreement, operation
of law, or otherwise.
1.45 "LIBOR" shall mean the London Interbank Offered Rate. The LIBOR
Rate shall be determined as of each Interest Determination Date, which shall be
that date which corresponds to the initial transaction effective date and to
each subsequent interest reset for the Interest Period. LIBOR, with respect to
any Interest Determination Date, shall be determined as follows:
(i) As of the initial transaction effective date, the
offered rate for deposits in Dollars for the Interest Period which
appears on Telerate Page 3750 at approximately 11:00 A.M., London time,
on such Interest Determination Date. "Telerate Page 3750" shall mean
the display designated as Page 3750 on the Telerate Systems
Incorporated financial information reporting service (or such other
page as may replace page 3750 on the service for the purpose of
displaying London interbank offered rates as published by the British
Bankers' Association).
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(ii) If no offered rate appears on the Telerate Page
3750, the principal London offices of each of four major banks in the
London interbank market will be selected by Lender to provide Lender
with its offered quotations for deposits in Dollars for the Interest
Period to prime banks in the London interbank market at approximately
11:00 A.M. London time on such Interest Determination Date and in a
principal amount equal to an amount of not less than $1 million that is
representative of a single transaction in such market at such time. If
at least two such quotations are provided, LIBOR will be the arithmetic
mean of such quotations. If fewer than two quotations are provided,
LIBOR in respect of such Interest Determination Date will be the
arithmetic mean of the offered rates quoted by three major money center
banks in the City of New York selected by Lender at approximately 11:00
A.M., New York City time, on such Interest Determination Date for loans
in Dollars to leading European banks, for such Interest Period and in a
principal amount of not less than $1 million that is representative of
a single transaction in such market at such time; provided, however,
that if fewer than three banks selected as aforesaid by Lender are
quoting rates as set forth above, LIBOR for such Interest Period will
be the same as LIBOR for the immediately preceding Interest Period (or,
if there was no such Interest Period, the rate of interest payable on
the LIBOR Loans for which LIBOR is being determined shall be the
initial interest rate). 1.46 "LIBOR LOAN" shall mean any Loan or
Portion which bears interest at a rate
per annum based upon LIBOR.
1.47 "LIBOR PORTION" shall mean (i) with respect to the Revolving
Loans, the Portion of the Revolving Loans which bears interest at a rate
determined by reference to LIBOR as provided in Section 2.1(e)(ii), (ii) with
respect to the Term Loan, the Portion of the Term Loan which bears interest at a
rate determined by reference to LIBOR as provided in Section 2.1(f)(ii), and
(iii) with respect to the Capex Loan, the Portion of the Capex Loan which bears
interest at a rate determined by reference to LIBOR as provided in Section
2.1(g)(ii).
1.48 "LIEN" means any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, lien or charge, whether arising by operation of
law or otherwise.
1.49 "LOAN" OR "LOANS" shall mean any or all of the advances to be made
by Lender pursuant to this Agreement.
1.50 "LOAN ACCOUNT" shall have the meaning ascribed to it in Section
4.1.
1.51 "NET PROFIT AFTER TAXES" shall mean net income for such period of
Borrower determined in accordance with generally accepted accounting principles
("GAAP"), consistently applied (excluding any extraordinary items, including
without limitation income or expenses related to foreign exchange, swaps or
other derivative transactions and changes in GAAP).
1.52 "NOTES" shall mean, collectively, the Term Note and the Capex
Notes.
1.53 "NOTICE OF BORROWING/CONVERSION" shall have the meaning given to
that term in Section 2.1(d).
1.54 "OVERADVANCE" shall have the meaning given to that term in Section
2.6(b).
1.55 "PARTICIPANT" shall mean any Person, now or at any time or times
hereafter, participating with Lender in the Loans or other financial
accommodations made by Lender to Borrower pursuant to this Agreement and the
Ancillary Agreements.
1.56 "PERMITTED LIENS" shall mean the following:
(i) Any Liens existing on the Closing Date and
disclosed in Exhibit "F" or arising under this Agreement or the other
Ancillary Documents;
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(ii) Liens for taxes, fees, assessments or other
governmental charges or levies on real property, either not delinquent
or being contested in good faith by appropriate proceedings and for
which adequate reserves have been established;
(iii) Liens upon or in any Equipment acquired or held
by Borrower to secure the purchase price of such Equipment or
indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment in the original principal amount not to
exceed One Million Five Hundred Thousand Dollars ($1,500,000) per
fiscal year of Borrower.
1.57 "PERSON" shall mean any individual, sole proprietorship,
partnership, limited liability partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
entity, party, or government (whether national, federal, state, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
1.58 "PORTION" shall mean an amount of any Revolving Loan, Term Loan or
Capex Loan which is less than the entire outstanding principal balance of such
Revolving Loan, Term Loan or Capex Loan.
1.59 "PREPAYMENT FEE" shall have the meaning ascribed to it in Section
2.7.
1.60 "PRIME RATE" shall mean the highest prime rate of interest quoted,
from time to time, by The Wall Street Journal as the "base rate on corporate
loans at large U.S. money center commercial banks"; provided, however, that if
The Wall Street Journal ceases quoting a prime rate of the type described, Prime
Rate shall mean the highest per annum rate of interest quoted as the "Bank Prime
Loan" rate for "This Week" in Statistical Release H.15 (519) published from time
to time by the Board of Governors of the Federal Reserve System; provided,
further, that in the event that both of the aforesaid indices cease to be
published or to quote rates of the aforesaid types, the "Prime Rate" shall be
determined from a comparable index chosen by Lender in good faith. The Prime
Rate shall change effective on the date of the publication of any change in the
applicable index by which such "Prime Rate" is determined.
1.61 "PRIME RATE LOAN" shall mean any Loan or any Portion of any Loan
which bears interest at a rate per annum based upon the Prime Rate.
1.62 "RENEWAL TERM" shall have the meaning ascribed to it in Section
2.7.
1.63 "REPORTABLE EVENT" shall have the meaning ascribed to it in
Section 9.1(n).
1.64 "REVOLVING LOAN" shall have the meaning ascribed to it in Section
2.1(a).
1.65 "REVOLVING LOAN BORROWING" shall mean a borrowing by Borrower
consisting of a Revolving Loan made by Lender on the same date and of the same
Type pursuant to a single Notice of Revolving Loan Borrowing. 1.66 "SECURITY
DOCUMENTS" shall mean this Agreement and all other agreements, security
agreements, instruments, documents, financing statements, warehouse receipts,
bills of lading, notices of assignment, schedules, assignments, deeds of trust,
Ancillary Agreements, mortgages and other written matter necessary or requested
by Lender to create, perfect and maintain perfected, Lender's security interest
in the Collateral. 1.67 "SPECIAL COLLATERAL" shall have the meaning ascribed to
it in Section 5.3. 1.68 "STOCK" shall mean all shares, options, interests,
membership interests, participations or other equivalents (however designated)
of or in a corporation or limited liability company, whether voting or
non-voting, including, without limitation, common stock, warrants, membership
interests, preferred stock, convertible debentures and all agreements,
instruments and documents convertible, in whole or in part, into any one or more
or all of the foregoing.
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1.69 "SUBSIDIARY" shall mean, with respect to Borrower, each of the
Persons identified as a "Subsidiary" on Exhibit "G" hereto, and any Person of
which Borrower acquires, after the date hereof, 50% or more of the issued and
outstanding voting stock.
1.70 "TANGIBLE NET WORTH" shall mean, as of any particular date, the
difference between (a) 3-D's consolidated total assets as they would normally be
shown on the balance sheet of 3-D, but excluding therefrom the aggregate amount
of all 3-D's intangible assets, including but not limited to all values
attributable to goodwill, patents, copyrights, trademarks, licenses, prepaid
deposits and expenses, leasehold improvements net of depreciation, other General
Intangibles and Accounts due from Affiliates and other intangibles reasonably
determined by Lender and (b) 3-D's consolidated total liabilities and deferred
charges as they would usually be shown on such balance sheet, including as
liabilities (without duplication) all guarantees of the indebtedness of
Affiliates or any other Person.
1.71 "TERM LOAN" shall have the meaning ascribed to it in Section
2.1(b).
1.72 "TERM NOTE" shall have the meaning ascribed to it in Section
2.1(b).
1.73 "3-D" means 3-D Geophysical, Inc., a Delaware corporation.
1.74 "TOTAL FACILITY" shall have the meaning ascribed to it in Section
2.1.
1.75 "TYPE" shall mean, with respect to any Loan, Borrowing or Portion
at any time, the classification of such Loan, Borrowing or Portion by the type
of interest rate it then bears, whether an interest rate based on the Prime Rate
or LIBOR.
B. Accounting Terms. Any accounting terms used in this Agreement which
are not specifically defined shall have the meanings customarily given them in
accordance with GAAP.
C. Other Terms. All other terms contained in this Agreement which are
not otherwise defined in this Agreement shall, unless the context indicates
otherwise, have the meanings provided for by the Uniform Commercial Code of the
State of California to the extent the same are used or defined therein.
2. LOANS: GENERAL TERMS
2.1 TOTAL FACILITY. Lender agrees to make available for Borrower's use
from time to time during the term of this Agreement, upon Borrower's request
therefor, certain Loans and other financial accommodations in an aggregate
principal amount outstanding not to exceed Thirty Million Dollars ($30,000,000)
(the "Total Facility"). The Total Facility shall be subject to all of the terms
and conditions of this Agreement and shall consist of:
(A) Revolving Loan. A revolving line of credit consisting of
advances against Eligible Accounts (the "Revolving Loan") in an
aggregate principal amount not to exceed, at any time outstanding, the
lesser of (i) Ten Million Dollars ($10,000,000) and (ii) the
outstanding amount of Collateral Availability. As used in this
Agreement, "Collateral Availability" shall mean and, at any particular
time and from time to time, be equal to, up to eighty percent (80%) of
the net amount (after deduction of such reserves as Lender in its
reasonable credit judgment deems proper and necessary) of Eligible
Accounts. The Revolving Loan shall be repayable as provided in Section
4.2.
Lender shall have the right to establish reserves from time to
time against borrowing availability under the Revolving Loan in such
amounts, and with respect to such matters, as Lender shall deem
reasonably necessary or appropriate, including, without limitation, a
$2,000,000 reserve (which amount may be increased in Lender's
reasonable business judgment) with respect to the lawsuit described in
Section 11(y) below. Lender may, in the exercise of its reasonable
discretion, at any time and from
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time to time, increase or decrease the advance percentage contained in
this Section to be applied to Eligible Accounts. In the event such
percentage is decreased, such decrease shall become effective upon not
less than ten (10) Business Days notice to Borrower, unless an Event of
Default has occurred and is continuing or a material, negative audit
finding has been made, in which case such decrease shall be effective
immediately, for the purpose of calculating the amount which Lender may
be willing to advance, or allow to remain outstanding, against Eligible
Accounts.
(B) Term Loan. A term loan in the aggregate principal amount
of Ten Million Dollars ($10,000,000) (the "Term Loan"), evidenced by a
term loan promissory note (the "Term Note"), and repayable as provided
therein. The Term Note shall be in a form and contain such terms as may
be acceptable to Lender. The Term Loan shall be repayable in fifty-nine
(59) equal consecutive monthly installments of principal plus accrued
interest commencing on the first (1st) Business Day of the month
following the Closing Date, based on an eighty-four (84) month
amortization, with all remaining principal and all accrued but unpaid
interest thereon payable at the end of the Initial Term; provided,
however, that if the Revolving Loan is terminated by Lender or Borrower
for any reason the Term Loan shall be immediately due and payable in
full.
(C) Capex Loan. A Capital Expenditure line of credit ("Capex
Loan") in an aggregate principal amount not to exceed the lesser of (i)
$10,000,000 and (ii) 85% of the purchase price for new equipment and/or
85% of the orderly liquidation value (as determined by Lender) of used
equipment, in each case exclusive of taxes, licenses, delivery and
installation expenses. Draws under the Capex Loan, once repaid, may not
be reborrowed. Advances under the Capex Loan will be made upon
Borrower's request for funds to finance the acquisition of new or used
equipment, on the terms and subject to the conditions contained in this
Agreement. Draws on the Capex Loan during each 12-month period
following the Closing Date shall be combined into a single promissory
note (each, a "Capex Note") at the end of such period, repayable based
upon a 60-month amortization, and payable in full at the end of the
Initial Term. Until so evidenced by a Capex Note, Capex Loans shall be
payable interest-only. If the Revolving Loan is terminated by Lender or
Borrower for any reason, the Capex Loan shall be immediately due and
payable in full.
(D) Notice of Borrowing. Borrower shall request each Loan by
delivering to Lender an irrevocable written notice in the form of
Exhibit "B", appropriately completed (a "Notice of
Borrowing/Conversion"), which specifies, among other things:
i Whether the loan is to be a Revolving Credit
Loan, a Term Loan or a Capex Loan (in each case accompanied by such
supporting documentation as may be required hereunder);
(ii) The principal amount of the requested Borrowing;
(iii) Whether the requested Loan will be a Prime Rate
Loan or a
LIBOR Loan (each LIBOR Borrowing shall be in a minimum amount of
$1,000,000 or an integral multiple of $1,000,000 in excess thereof);
(iv) If the requested Loan is to be a LIBOR Loan, the
Interest Period selected by Borrower for such Loan in accordance with
Section 2.1(i); and
(v) The date of the requested Loan, which shall be a
Business Day. Borrower shall give each Notice of Borrowing/Conversion
to Lender at least two (2) Business Days before the date of the
requested Loan in the case of a Loan which will be a
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LIBOR Loan and before 10:00 a.m. Pacific time on the date of the requested Loan
in the case of a Loan which will be a Prime Rate Loan. Each Notice of
Borrowing/Conversion shall be delivered to Lender at the office or telecopy
number specified in Section 13.10; provided, however, that Borrower shall
promptly deliver to Lender the original of any Notice of Borrowing/Conversion
initially delivered by telecopy. Notwithstanding the above, no LIBOR Loans may
be requested at any time after the occurrence and during the continuance of a
Default.
(E) Revolving Loan Interest Rates. Borrower shall pay interest
on the outstanding principal balance of each Revolving Loan for so long
as such Revolving Loan is outstanding, at one of the following rates,
based on a year of 360 days and actual days elapsed:
(i) During such periods as any Portion of such
Revolving Loan is a Prime Rate Loan, at a rate per annum equal to the
Prime Rate plus one-half of one percent (0.5%), such rate to change
from time to time as the Prime Rate shall change; and
(ii) During such periods as any Portion of such
Revolving Loan is a LIBOR Loan, at a rate per annum equal at all times
during each Interest Period for such LIBOR Portion to LIBOR for such
Interest Period plus two and three-quarter percent (2.75%).
(F) Term Loan Interest Rates. Borrower shall pay interest on
the first day of each month on the unpaid principal amount of the Term
Loan from the date the Term Loan is made until paid in full at one of
the following rates, based on a year of 360 days and actual days
elapsed:
i During such period as any Portion of the Term
Loan is a Prime Rate Loan, at a rate per annum on such Portion equal to
the Prime Rate plus one percent (1.0%), such rate to change from time
to time as the Prime Rate shall change; and
(ii) During such period as any Portion of the Term
Loan is a LIBOR Loan, at a rate per annum equal at all times during
each Interest Period for such Portion to LIBOR for such Interest Period
plus three and one-half percent (3.5%).
(G) Capex Loan Interest Rates. Borrower shall pay interest on
the first day of each month on the aggregate unpaid principal amount of
the Capex Loan from the date the first Capex Loan is made until paid in
full at one of the following rates, based on a year of 360 days and
actual days elapsed:
i During such period as any Portion of the Capex
Loan is a Prime Rate Loan, at a rate per annum on such Portion equal to
the Prime Rate plus one percent (1.0%), such rate to change from time
to time as the Prime Rate shall change; and
(ii) During such period as any Portion of the Capex
Loan is a LIBOR Loan, at a rate per annum equal at all times during
each Interest Period for such LIBOR Portion to LIBOR for such Interest
Period plus three and one-half percent (3.5%). All Capex Loans
evidenced by Capex Notes shall bear interest and be payable in
accordance with the terms of such Capex Notes.
(H) Conversion of Interest Rate on Loans. So long as no
Default has occurred and is continuing, Borrower may convert
outstanding Prime Rate Loans into LIBOR Loans and outstanding LIBOR
Loans into Prime Rate Loans; provided,
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however, that any conversion of LIBOR Loans into a Prime Rate Loan
shall be made on, and only on, the last day of an Interest Period for
such LIBOR Loans. At Lender's option in its sole discretion, upon the
occurrence and at any time during the continuation of a Default, all
LIBOR Loans shall be converted to Prime Rate Loans, and Borrower shall
be liable for all costs and fees associated with such conversion as
provided in this Agreement. Borrower shall request such a conversion by
delivering to Lender an appropriately completed Notice of
Borrowing/Conversion, which specifies, among other things:
(i) The Prime Rate Portion or the LIBOR Portion which
is to be converted, specifying the amount thereof and whether such
Portion is a Revolving Loan Portion, a Term Loan Portion, or a Capex
Loan Portion;
(ii) The Type of Loans into which such Loans or
Portion are to be converted;
(iii) If Prime Rate Loans are to be converted into
LIBOR Loans, the Interest Period selected by Borrower for such Loans in
accordance with Section 2.1(i); and
(iv) The date of the requested conversion, which
shall be a Business Day.
Borrower shall give each Notice of Borrowing/Conversion to Lender at least two
(2) Business Days before the date of the requested conversion in the case of a
conversion into LIBOR Loans, and at least one (1) Business Day before the date
of the requested conversion in the case of a conversion into Prime Rate Loans.
Each Request for Borrowing/Conversion shall be delivered to Lender at the office
or to the telecopy number specified in Section 13.10; provided, however, that
Borrower shall promptly deliver to Lender the original of any Notice of
Borrowing/Conversion initially delivered by telecopy.
(i)LIBOR Interest Periods. The initial and each subsequent
Interest Period selected by Borrower for a LIBOR Loan shall be thirty
(30), sixty (60) or ninety (90) days; provided, however, that (A) any
Interest Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day,
unless such next Business Day falls in another calendar month, in which
case such Interest Period shall end on the immediately preceding
Business Day; (B) any interest Period for a LIBOR Loan which begins on
the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of a calendar
month; (C) no such Interest Period shall end after the Initial Term or
any Renewal Term or after any scheduled principal payment date on any
Loan, if any LIBOR Portion would have to be broken in order for
Borrower to timely make such principal payment; and (D) no more than
six (6) Portions (Revolving Loan Portions, Term Loan Portions or Capex
Loan Portions in the aggregate) bearing interest based on LIBOR may be
outstanding at any time. If Borrower fails to notify Lender of the next
Interest Period for any LIBOR Portion in accordance with this Section
2.1(i), such Portion shall automatically convert to a Prime Rate
Portion on the last day of the current Interest Period therefor. 2.2
ADVANCES TO CONSTITUTE ONE LOAN; LOAN PURPOSE. All Loans and advances
by Lender to Borrower under this Agreement and the Ancillary Agreements shall
constitute one loan and all Liabilities of Borrower to Lender under this
Agreement and the Ancillary Agreements shall constitute one general obligation
secured by the Collateral. The proceeds of the initial Loans or financial
accommodations made by Lender shall be used to repay 3-
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D's existing obligations to Wells Fargo Bank and certain other creditors, and
the proceeds of all Loans or financial accommodations made by Lender shall be
used to finance Borrower's and certain of its Affiliates' working capital
requirements, all on the terms and subject to the conditions set forth in this
Agreement and in accordance with applicable law.
2.3 INTEREST RATE. All computations of interest and fees under this
Agreement shall be based on a year of 360 days and actual days elapsed. In no
contingency or event whatsoever shall the rate or amount of interest paid by
Borrower under this Agreement or any of the Ancillary Agreements exceed the
maximum rate or amount permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such a court determines that Lender has received interest hereunder
or under any Ancillary Agreement in excess of the maximum amount permitted by
such law, (i) Lender shall apply such excess to any unpaid principal owed by
Borrower to Lender on the Revolving Loan first, and then to the Capex Loan and
Term Loan or, if the amount of such excess exceeds the unpaid balance of such
principal, Lender shall promptly refund such excess interest to Borrower and
(ii) the provisions hereof shall be deemed amended to provide for such
permissible rate. All sums paid, or agreed to be paid, by Borrower which are, or
hereafter may be construed to be, compensation for the use, forbearance or
detention of money shall, to the extent permitted by applicable law, be
amortized, prorated, spread and allocated throughout the full term of all such
indebtedness until the indebtedness is paid in full.
2.4 CHANGE OF CIRCUMSTANCES.
(A) Inability to Determine Rates. If, on or before the first
day of any Interest Period of any Loan or Portion, (i) LIBOR for such
Interest Period cannot be adequately and reasonably determined due to
the unavailability of funds in, or other circumstances affecting, the
London interbank market or (ii) the LIBOR rates of interest for such
Loans or Portions do not adequately and fairly reflect the cost to
Lender of making or maintaining such Loans or Portions, Lender shall
promptly give notice of such condition to Borrower. After the giving of
any such notice and until Lender shall otherwise notify Borrower that
the circumstances giving rise to such condition no longer exist,
Borrower's right to request the making of or conversion to, and
Lender's obligation to make or convert to LIBOR Loans or LIBOR Portions
of the Type affected by such condition shall be suspended. Any LIBOR
Loans or LIBOR Portions of the Type affected by such condition
outstanding at the commencement of any such suspension shall be
converted at the end of the then-current Interest Period for such Loans
or Portions into another Type of Loan or Portion not affected by such
suspension unless such suspension has then ended.
(B) Illegality. If, after the date of this Agreement, (i) the
adoption of any Governmental Rule, (ii) any change in any Governmental
Rule or the application of requirements thereof (whether such change
occurs in accordance with the terms of such Governmental Rule as
enacted, as a result of amendment or otherwise), (iii) any change in
the interpretation or administration of any Governmental Rule by any
Governmental Authority, or (iv) compliance by Lender with any request
or directive (whether or not having the force of law) of any
Governmental Authority (each such occurrence, a "Change of Law") shall
make it unlawful or impossible for Lender to make or maintain any LIBOR
Loan or LIBOR Portion, Lender shall immediately notify Borrower of such
Change of Law. Upon receipt of such notice, (i) Borrower's right to
request the making of or conversion to, and Lender's obligation to make
or convert to, any Loans or Portions of the Type affected by such
Change of Law shall
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be terminated, and (ii) Borrower shall, at the request of Lender,
either (A) pursuant to Section 2.1(h), convert any such then
outstanding Loans or Portions into another Type of Loans or Portions
not affected by such Change of Law at the end of the current Interest
Period for such Loans or Portions, or (B) immediately repay or convert
any such Loans or Portions if Lender shall notify Borrower that Lender
may not lawfully continue to fund and maintain such Loans or Portions.
Any conversion or prepayment of Loans or Portions made pursuant to the
preceding sentence prior to the last day of an Interest Period for such
Loans or Portions shall be deemed a prepayment thereof for purposes of
this Agreement.
(C) Increased Costs. If any Change of Law announced after the
date of this Agreement:
(i)Shall subject Lender to any tax, duty or other
charge with respect to any LIBOR Loan or LIBOR Portion, or shall change
the basis of taxation of payments by Borrower to Lender on such a Loan
or Portion or in respect to such a Loan or Portion under this Agreement
(except for changes in the rate of taxation on the overall net income
of Lender); or
(ii) Shall impose, modify or hold applicable any
reserve, special deposit or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances or
loans by, or any other acquisition of funds by Lender for any LIBOR
Loan or LIBOR Portion; or
(iii) Shall impose on Lender any other condition
related to any LIBOR Loan or LIBOR Portion;
and the effect of any of the foregoing is to increase the direct cost to Lender
of making, renewing, or maintaining any such LIBOR Loan or LIBOR Portion or to
reduce any amount receivable by Lender hereunder; then Borrower shall from time
to time, upon demand by Lender, pay to Lender additional amounts sufficient to
reimburse Lender for such increased direct costs or to compensate Lender for
such reduced amounts showing the calculation thereof in reasonable detail. A
certificate as to the amount of such increased costs or reduced amounts,
submitted by Lender to Borrower shall, in the absence of manifest error, be
conclusive and binding on Borrower for all purposes; provided, however, that the
increased costs or reduced amounts shall not relate to any period more than 180
days prior to the date of such certificate.
(D) Capital Requirements. If, after the date of this
Agreement, Lender determines that (i) any Change of Law announced after
the date of this Agreement affects the amount of capital required or
expected to be maintained by Lender or any Person controlling Lender (a
"Capital Adequacy Requirement") and (ii) the amount of capital
maintained by Lender or such Person which is attributable to or based
upon the Loans or this Agreement must be increased as a result of such
Capital Adequacy Requirement (taking into account Lender's or such
Person's policies with respect to capital adequacy), Borrower shall pay
to Lender or such Person, upon demand, such amounts as Lender or such
Person shall determine are necessary to compensate Lender or such
Person for the increased costs to Lender or such Person of such
increased capital. A certificate of Lender setting forth in reasonable
detail the computation of any such increased costs, delivered by Lender
to Borrower shall, in the absence of manifest error, be conclusive and
binding on Borrower for all purposes; provided, however, that the
increased costs or reduced amounts shall not relate to any period more
than 180 days prior to the date of such certificate. 2.5 FUNDING LOSS
INDEMNIFICATION. If Borrower shall (a) repay or prepay any
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LIBOR Loan or LIBOR Portion on any day other than the last day of an Interest
Period therefor (whether an optional prepayment, a mandatory prepayment, a
payment upon acceleration or otherwise) or (b) fail to borrow (including any
conversion to) any LIBOR Loan or LIBOR Portion for which a Notice of
Borrowing/Conversion has been delivered to Lender (whether as a result of the
failure to satisfy any applicable conditions or otherwise) Borrower shall, upon
demand by Lender, reimburse Lender and hold Lender harmless for all costs and
losses incurred by Lender as a result of such repayment, prepayment or failure.
Borrower understands that such costs and losses may include, without limitation,
losses incurred by Lender as a result of funding and other contracts entered
into by Lender to fund a LIBOR Loan or LIBOR Portion. If Lender shall demand
payment under this Section 2.5, Lender shall deliver to Borrower a certificate
setting forth the amount of costs and losses for which demand is made, showing
the calculation thereof in reasonable detail. Such a certificate so delivered to
Borrower shall, in the absence of manifest error, be conclusive and binding on
Borrower as to the amount of such loss for all purposes.
2.6 PREPAYMENTS.
(A) Voluntary Prepayments. Subject to Section 2.7 below and
except for the paydown of the Revolving Loans from the collection of
the Accounts, Borrower may prepay the Loans in whole or in part only if
(i) Borrower gives Lender written notice (which shall be given by
first-class mail or telecopy to the office or the telecopy number
specified in Section 13.10) of Borrower's intention to make such
prepayments, at least one (1) Business Day prior to tendering the
prepayments, (ii) the total amount of the prepayments is a whole
multiple of $1,000,000 (or the entire remaining balance of the Term
Loan or the Capex Loan), and (iii) Borrower pays any accrued interest
on the amount prepaid at the time of such prepayment. Each such
prepayment will be applied by Lender to reduce the applicable Loan and,
in the case of the Term Loan and the Capex Notes, to reduce the
repayment installments in the inverse order of maturity of payments.
(B) Mandatory Prepayments When Overadvances Exist. If at any
time the outstanding amount of the Revolving Loan exceeds Collateral
Availability or the aggregate outstanding Revolving Loan exceeds Ten
Million Dollars ($10,000,000) (an "Overadvance"), whether as a result
of advances by Lender, a decline in the value of Eligible Accounts, or
otherwise, Borrower shall on demand by Lender make a prepayment in the
amount of the Overadvance.
2.7 TERM OF AGREEMENT; PREPAYMENT; LIQUIDATED DAMAGES. This Agreement
shall be in effect until five (5) years from the date hereof (the "Initial
Term") and shall be automatically renewed thereafter for successive periods of
one year (each a "Renewal Term") unless terminated as provided below. Borrower
and Lender shall have the right to terminate this Agreement at the end of the
Initial Term or at the end of any Renewal Term by giving the other party at
least sixty (60) days' prior written notice of such termination. In the event
Borrower gives notice of termination and the Total Facility is not paid in full
at the end of the Initial Term or Renewal Term, as applicable, upon the request
of Borrower, but in Lender's sole discretion, Lender may continue to make
advances under the Revolving Loan and renew this Agreement for an additional
year, upon such terms and conditions as Lender may require. In the event Lender
does not agree to continue to make advances and renew the term for an additional
year, all Liabilities shall be immediately due and payable. This Agreement may
also be terminated by Lender upon the occurrence of a Default. Upon the
effective date of any termination, all of the Liabilities (including the Notes)
shall become immediately due and payable without presentment, notice or demand.
Notwithstanding any
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termination, until all of the Liabilities shall have been fully and finally paid
and satisfied, Lender shall be entitled to retain its security interest in the
Collateral, Borrower shall continue to remit collections of Accounts and
proceeds of Collateral as provided in this Agreement, and Lender shall retain
all of its rights and remedies under this Agreement. During the Initial Term or
any Renewal Term, Borrower may, at its option, upon not less than ninety (90)
days' prior written notice to Lender specifying the date of prepayment,
terminate this Agreement and prepay all of the Liabilities hereunder. In such
event, Borrower shall pay to Lender for loss of the bargain and not as a
penalty, as liquidated damages and as compensation for the costs of Lender's
being prepared to make funds available to Borrower under this Agreement, an
amount (the "Prepayment Fee") equal to the following percentages of the maximum
Total Facility during the given year: 3.0% in the first year following the
Closing Date, 2.0% in the second year following the Closing Date, and 1.0%
during any year thereafter. In addition, Borrower shall pay to Lender, upon any
prepayment in whole or in part of the Term Loan and/or the Capex Loan, a fee
equal to the foregoing percentages of the principal amount so prepaid; provided
that, if such prepayment is made with the proceeds of equity or subordinated
debt issued by Borrower or 3-D and permitted pursuant to the terms of this
Agreement, Borrower shall pay a fee equal to 1.0% of the principal amount so
prepaid (the "Reduced Prepayment Amount"), regardless of the date of prepayment.
If, however, this Agreement is terminated prior to the end of the Initial Term,
Borrower shall be required at the time of termination to pay (in addition to the
Prepayment Fee described above) the difference between the Reduced Prepayment
Amount and the fee which would otherwise have been applicable to such prepaid
amount (had proceeds of equity or subordinated debt not been used for such
prepayment). Borrower shall also be responsible to pay, in every event, LIBOR
breakage penalties pursuant to Section 2.5, and if any fixed rate Loans are
outstanding Borrower agrees to pay an additional prepayment charge equal to the
actual loss, if any, that may be sustained by Lender through redeployment of the
funds loaned to Borrower at the then prevailing interest rates.
2.8 AUDIT FEE. Borrower shall pay to Lender its reasonable costs and
expenses incurred during the course of periodic field examinations and audits,
including a per diem charge for examiners in the field and office at Lender's
then prevailing rate (currently $500 per person per day).
2.9 CLOSING FEE. Borrower shall pay to Lender, in cash, upon the
execution of this Agreement, a Closing Fee in the amount of Three Hundred
Thousand Dollars ($300,000).
2.10 UNUSED LINE FEE. Borrower shall pay to Lender, each month, an
unused line fee equal to one-half of one percent (0.50%) per annum of the
difference between the maximum commitment for the Revolving Loan ($10,000,000 as
of the Closing Date) and the daily average outstanding borrowings under the
Revolving Loan for the prior month. The unused line fee shall be in addition to
any other fees or charges owing with respect to the Revolving Loan.
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3. ELIGIBLE ACCOUNTS
3.1 ELIGIBLE ACCOUNTS. Upon Borrower's delivery to Lender of a Daily
Collateral Report, Lender shall determine which individual Accounts listed
thereon are Eligible Accounts. Unless otherwise agreed to by Lender in writing
and except as specifically set forth in the proviso at the end of this Section
3.1, Eligible Accounts shall be (i) Accounts of Borrower, (ii) to the extent
Lender has a first priority perfected security interest therein, Accounts of
J.R.S. Exploration Company, Ltd., and (iii) to the extent owing by PEMEX,
Accounts of Geoevaluaciones, S.A. de C.V., and Procesos Interactivos, S.A. de
C.V., and shall in each case and at all times be subject to the following
requirements for eligibility:
(A) If the Account arises from the sale of goods, such goods
shall have been shipped or delivered on open account and on an absolute
sale basis and not on consignment, on approval or on a sale-or-return
basis and shall not be subject to any other repurchase or return
agreement and no material part of such goods shall have been returned,
repossessed, rejected, lost or damaged;
(B) Except as specifically set forth in the proviso at the end
of this Section 3.1, if the Account arises from the performance of
services, such services shall have been performed in full;
(C) The Account shall not be evidenced by chattel paper or an
instrument of any kind;
(D) The Account Debtor obligated on such Account shall not be
suspended from doing business, insolvent or the subject of any
bankruptcy or insolvency proceeding of any kind, or the subject of an
assignment for the benefit of creditors, or have had a receiver or
trustee appointed for a significant portion of its assets, and Lender
shall be satisfied with the creditworthiness of such Account Debtor;
(E) The Account Debtor obligated on such Account shall not be
a supplier to or creditor of Borrower, except to the extent that the
aggregate of such Account Debtor's Accounts exceeds Borrower's
liabilities (including contingent liabilities) to such Account Debtor;
(F) Except as specifically set forth in the proviso at the end
of this Section 3.1, if the Account is owing from an Account Debtor
located outside the United States or Canada (unless the Account Debtor
is PEMEX), such Account Debtor shall have furnished Borrower with an
irrevocable letter of credit issued or confirmed by a financial
institution acceptable to Lender, which letter of credit shall be in
form and substance acceptable to Lender, pledged to Lender, and be
payable in Dollars in an amount not less than the face value of the
Account;
(G) The Account shall be a valid, legally enforceable
obligation of the Account Debtor, reduced by the amount of any offset,
counterclaim or defense denying liability thereunder asserted in
writing by such Account Debtor;
(H) The Account shall be subject to and covered by Lender's
perfected security interest and shall not be subject to any other lien,
claim, encumbrance or security interest;
(i)The Account shall be evidenced by an invoice or other
documentation in form acceptable to Lender;
(J) The Account shall not have remained unpaid for a period
exceeding ninety (90) days after the original invoice date of the
related invoice and not more than fifty percent (50%) of the balance of
all Accounts owing from the Account Debtor obligated under such Account
shall have remained unpaid for more than ninety (90) days after the
invoice date of the related invoices or otherwise be deemed
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ineligible;
(K) If the Account Debtor is located in the State of New
Jersey or the State of Minnesota, Borrower shall have filed a Notice of
Business Activities Report with the appropriate agency in New Jersey or
Minnesota, as applicable, for the then current year;
(L) The Account shall not be owing from an employee, officer,
agent, director or stockholder of Borrower or any Affiliate or from the
United States of America or any department, agency or instrumentality
thereof;
(M) The aggregate amount of Accounts from an Account Debtor
owing to any of the Companies shall not, at any time, exceed fifteen
percent (15%) (twenty-five percent (25%) in the case of Occidental
Petroleum and other major energy companies approved by Lender from time
to time in its discretion, reasonably exercised, and thirty percent
(30%) in the case of PEMEX and British Petroleum) of the aggregate
amount of existing Eligible Accounts;
(N) The Account shall be one against which Lender is legally
permitted to make loans and advances;
(O) Each of the warranties and representations set forth in
Section 9.2 shall be reaffirmed with respect to such Account at the
time that the most recent Daily Collateral Report was delivered to
Lender;
(P) The Account shall not consist of unapplied cash, deferred
revenue, deposits from customers, Direct Charges or credits in excess
of ninety (90) days; and
(Q) The Account shall otherwise be acceptable to Lender in its
discretion, reasonably exercised;
provided, however, that Lender shall deem the following Accounts to be Eligible
Accounts, subject to the terms specified herein: (i) British Petroleum extended
terms balance owing to Borrower, eligible only through January 31, 1998, subject
to a limit of $1,200,000 on advances against such Accounts (ii) Accounts of
PEMEX owing to Geoevaluaciones, S.A. de C.V., subject to a limit of $3,000,000
on advances against such Accounts (provided that the aggregate of advances
against the British Petroleum balance described in clause (i) and the amount of
advances against PEMEX Eligible Accounts may not exceed $3,000,000 at any time),
and (iii) progress billings, subject to a limit of $1,000,000 on advances
against such Accounts. 4. PAYMENTS
4.1 LOAN ACCOUNT; METHOD OF MAKING PAYMENTS. Lender shall maintain a
loan account (the "Loan Account") on its books in which shall be recorded (i)
all loans and advances made by Lender to Borrower pursuant to this Agreement,
(ii) all payments made by Borrower on all such loans and advances and (iii) all
other appropriate debits and credits as provided in this Agreement, including,
without limitation, all fees, charges, expenses and interest. All entries in the
Loan Account shall be made in accordance with Lender's customary accounting
practices as in effect from time to time. Unless otherwise agreed to in writing,
all payments which Borrower is required to make to Lender under this Agreement
or under any of the Ancillary Agreements shall be made by appropriate debits to
the Loan Account. Lender may, in its discretion, elect to bill Borrower for the
amount of any such payment in which case such amount shall be immediately due
and payable with interest thereon at the rate then applicable to Prime Rate
Revolving Loan Portions.
4.2 PAYMENT TERMS. Unless otherwise expressly provided in writing, the
Liabilities will be repayable as follows: (i) interest shall be payable on the
first day of each month (for the immediately preceding month) out of the first
collections received with respect
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to any proceeds of Collateral, (ii) fees, costs, expenses and similar charges
shall be payable as and when provided for in this Agreement or the Ancillary
Agreements, and (iii) the principal balance of the Liabilities shall be payable
from collections received with respect to any proceeds of Collateral as such
proceeds are received; provided, however, that if at any time the outstanding
principal balance of the Revolving Loan exceeds the Collateral Availability or
the outstanding principal balance of all of the Liabilities exceeds the Total
Facility, Borrower shall immediately pay to Lender such amount as is necessary
to eliminate such excess. Subject to the foregoing and to the provisions of
Section 2.7, the Term Loan will be payable as provided in the Term Note. All of
the Liabilities shall be payable at the address of Lender set forth in Section
13.10. Nothing contained in this Section shall authorize Borrower to sell, lease
or otherwise dispose of any Collateral other than as expressly set forth in
Sections 6.4 and 8.3.
4.3 COLLECTION OF ACCOUNTS AND PAYMENTS. Lender has established one or
more special accounts in Lender's name with Wells Fargo Bank located at 1000
Louisiana, 3rd Floor, Houston, Texas 77002 (Attention: Alan Alexander, Energy
Department) and Bank One, Colorado, N.A., located at 1125 17th Street, Denver,
Colorado 80202-2088 (Attention: Ann Lyons) (collectively "Depository Bank") to
which Borrower will immediately deposit all remittances and proceeds of the
Collateral in the identical form in which such payment was made, whether by cash
or check. Borrower hereby agrees that all payments made to such special account
or otherwise received by Lender, whether on the Accounts or as proceeds of other
Collateral or otherwise, will be the sole and exclusive property of Lender and
will be applied on account of the Liabilities. After allowing one (1) calendar
day for collection after such funds are received by Lender, Lender will credit
(conditional upon final collection) all payments received through the special
account to the Loan Account. Borrower and any Affiliates, shareholders,
directors, officers, employees, agents of Borrower and all Persons acting for or
in concert with Borrower who receive any monies, checks, notes, drafts or any
other payments relating to or proceeds of Accounts or other Collateral which
come into their possession or under their control shall, acting as trustee for
Lender, hold such property as the sole and exclusive property of Lender and
immediately upon receipt thereof, shall remit the same or cause the same to be
remitted, in kind, to Lender. Borrower agrees to pay to Lender any and all fees,
costs and expenses (if any) which Lender incurs in connection with opening and
maintaining the special account and depositing for collection by Lender any
check or item of payment received or delivered to Depository Bank in connection
with the special account or any returned or collected checks received by
Depository Bank for deposit in the special account.
4.4 APPLICATION OF PAYMENTS AND COLLECTIONS. Borrower irrevocably
waives the right to direct the application of payments and collections received
by Lender from or on behalf of Borrower, and Borrower agrees that Lender shall
have the continuing exclusive right to apply and reapply any and all such
payments and collections against the Liabilities in such manner as Lender may
deem appropriate, notwithstanding any entry by Lender upon any of its books and
records. To the extent that Borrower makes a payment or payments to Lender or
Lender receives any payment or proceeds of the Collateral for Borrower's
benefit, which payment(s) or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy act,
state or federal law, common law or equitable cause, then, to the extent such
payment or proceeds received are so set aside, invalidated, required to be
repaid or the like, the Liabilities or part thereof intended to be satisfied
shall be revived and shall continue in full force and effect, as if such
payments or proceeds had not been
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received by Lender.
4.5 STATEMENTS. All advances and other financial accommodations
hereunder to Borrower, and all other debits and credits provided for in this
Agreement, shall be evidenced by entries made by Lender in its internal data
control systems showing the date, amount and reason for each such debit or
credit. Until such time as Lender shall have rendered to Borrower written
statements of account as provided herein, the balance in the Loan Account, as
set forth on Lender's most recent statement, shall be presumptive evidence of
the amounts due and owing to Lender by Borrower. Not more than ten (10) days
after the final day of each calendar month, Lender shall render to Borrower a
statement setting forth the balance of the Loan Account, including principal,
interest, expenses and fees. Each such statement shall be subject to subsequent
adjustment by Lender and Lender's right to reapply payments in accordance with
Section 4.4, but shall, absent manifest errors or omissions, be presumed correct
and binding upon Borrower and shall constitute an account stated unless, within
thirty (30) days after receipt of any statement from Lender, Borrower shall
deliver to Lender written objection thereto specifying the error or errors, if
any, contained in such statement.
5. COLLATERAL: GENERAL TERMS
5.1 SECURITY INTEREST. To secure the prompt payment to Lender of the
Liabilities, Borrower hereby grants to Lender a continuing security interest in
and to all of Borrower's now owned or existing and hereafter acquired or arising
tangible and intangible assets, including without limitation the following
property and interest in property of Borrower whether now owned or existing or
hereafter acquired or arising and wherever located: (i) all Accounts, Inventory,
Equipment, contract rights (including, without limitation, the right to receive
monies due under all contracts which may otherwise prohibit such assignment),
General Intangibles, tax refunds, chattel paper, instruments, letters of credit,
investment property, documents and documents of title; (ii) all of the
Borrower's deposit accounts (general or special) including those maintained with
Depository Bank or any other financial institution (iii) all monies, and any and
all other property of Borrower now or hereafter coming into the actual
possession, custody or control of Lender, or any Affiliate of Lender in any way
or for any purpose (whether for safekeeping, deposit, custody, pledge,
transmission, collection or otherwise); (iv) all of Borrower's Computers, books
and records; and (v) all insurance and other proceeds of or relating to any of
the foregoing; and (vi) all accessions and additions to, substitutions for, and
replacements, products and proceeds of any of the foregoing.
5.2 DISCLOSURE OF SECURITY INTEREST. Borrower shall make appropriate
entries upon its financial statements and books and records disclosing Lender's
security interest in the Collateral.
5.3 SPECIAL COLLATERAL. Immediately upon Borrower's receipt of any
Collateral which is evidenced or secured by an agreement, chattel paper, letter
of credit, instrument or document, including, without limitation, promissory
notes, documents of title and warehouse receipts (the "Special Collateral"),
Borrower shall deliver the original thereof to Lender or to such agent of Lender
as Lender shall designate, together with appropriate endorsements, the documents
required to draw thereunder (as may be relevant to letters of credit) or other
specific evidence (in form and substance acceptable to Lender) of assignment
thereof to Lender and shall take such actions as Lender may require to perfect
Lender's security interest in such Special Collateral and any collateral
securing such Special Collateral.
5.4 FURTHER ASSURANCES. At Lender's request, Borrower shall, from time
to time, (i) execute and deliver to Lender all Security Documents that Lender
may reasonably request, in form and substance acceptable to Lender, and pay the
costs of any recording or filing of
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the same and (ii) take such other actions as Lender may request in order to
fully effect the purposes of this Agreement and to protect Lender's interest in
the Collateral. Upon the occurrence of any uncured Default, Borrower hereby
irrevocably makes, constitutes and appoints Lender (and all Persons designated
by Lender for that purpose) as Borrower's true and lawful attorney and
agent-in-fact to sign the name of Borrower on any of the Security Documents and
to deliver any of the Security Documents to such Persons as Lender, in its sole
discretion, may elect. This power of attorney is coupled with an interest.
Borrower agrees that a photocopy or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. Upon Borrower's cure
of any Default, Lender shall have the right to complete any action commenced by
it as attorney or agent-in-fact while such Default was continuing.
5.5 INSPECTION. Lender (by any of its officers, employees or agents)
shall have the right, at any time or times without prior notice, to inspect the
Collateral, all records related thereto (and to make extracts from such records)
and the premises upon which any of the Collateral is located, to discuss
Borrower's affairs and finances with any Person and to verify the amount,
quality, value and condition of, or any other matter relating to, the
Collateral; provided that for so long as no Default is continuing, such
inspections shall occur only during Borrower's normal business hours. Borrower
shall pay all costs and expenses incurred by Lender in the course of periodic
audits and examinations of the Collateral (and any collateral for any Guaranty)
and Borrower's (and any of the Companies') operations plus a per diem charge at
Lender's then prevailing rate (currently $500 per person per day) for its
auditors and examiners in the field and office.
5.6 PERFECTION AND PRIORITY; LOCATION OF COLLATERAL. Borrower's chief
executive office, principal place of business and all other offices and
locations of the Collateral and books and records related thereto (including,
without limitation, the Computers, computer programs, printouts and other
computer materials and records concerning the Collateral but excluding temporary
field locations established by Borrower in the ordinary course of its business)
are set forth on Exhibit "C" attached hereto. Borrower shall not remove its
books and records or the Collateral from any such locations (except for
movements of Equipment in the ordinary course of Borrower's business within the
states listed on Exhibit "C" and in accordance with the terms of this Agreement)
and shall not open any new offices or relocate any of its books and records or
the Collateral except within the continental United States of America and with
at least thirty (30) days' prior written notice thereof to Lender.
5.7 LENDER'S PAYMENT OF CLAIMS ASSERTED AGAINST COLLATERAL. Lender may,
but shall not be obligated to, at any time or times hereafter, in its sole
discretion, and without waiving any Default or waiving or releasing any
obligation, liability or duty of Borrower under this Agreement or the Ancillary
Agreements, pay, acquire or accept an assignment of any security interest, lien,
claim or other encumbrance asserted by any Person against the Collateral, unless
Borrower is then contesting the related charge, lien, claim, security interest
or encumbrance as permitted by Section 10.3. All sums paid by Lender under this
Section, including all costs, fees (including reasonable attorneys' fees),
expenses and other charges relating thereto, shall be payable by Borrower to
Lender on demand and shall be additional Liabilities secured by the Collateral.
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6. COLLATERAL: ACCOUNTS
6.1 VERIFICATION OF ACCOUNTS. Any of Lender's officers, employees or
agents shall have the right, at any time or times hereafter, in Borrower's or
Lender's name or tradestyle or in the name of a firm of independent certified
public accountants acceptable to Lender, to verify the validity, amount or any
other matters relating to any Accounts by mail, telephone, telegraph or
otherwise.
6.2 ASSIGNMENTS, RECORDS AND DAILY COLLATERAL REPORT. Borrower shall
keep accurate and complete records of its Accounts and, as frequently as Lender
shall require, but not less frequently than twice weekly, Borrower shall deliver
to Lender a Daily Collateral Report and formal written assignments of all
Accounts, together with (upon Lender's request) copies of the invoices related
thereto. Borrower shall also deliver to Lender, upon demand, copies (or, after
an uncured Default, originals if requested by Lender) of all documents,
including, without limitation, repayment histories, present status reports and
shipment reports, relating to the Accounts included in any Daily Collateral
Report and such other matters and information relating to the status of then
existing Accounts as Lender shall reasonably request.
6.3 NOTICE REGARDING DISPUTED ACCOUNTS. Borrower shall give Lender
prompt notice of any Accounts which, for an Account Debtor, aggregate in excess
of One Hundred Thousand Dollars ($100,000) in dispute between such Account
Debtor and Borrower. In addition, each Daily Collateral Report shall identify
all disputed Accounts and disclose, in reasonable detail, the reason for the
dispute, all claims related thereto and the amount in controversy.
6.4 SALE OR ENCUMBRANCE OF ACCOUNTS. Borrower shall not, without the
prior written consent of Lender, sell, transfer, grant a security interest in or
otherwise dispose of or encumber any of its Accounts to any Person other than
Lender.
7. COLLATERAL: INVENTORY
Borrower shall keep such records with respect to its Inventory, if any,
as Lender shall reasonably request and shall provide copies of the same to
Lender promptly upon request.
8. COLLATERAL: EQUIPMENT
8.1 MAINTENANCE OF THE EQUIPMENT. Borrower shall keep and maintain the
Equipment in good operating condition and repair and shall make all necessary
replacements thereof so that the value, utility and operating efficiency thereof
shall at all times be maintained and preserved and shall promptly inform Lender
of any material additions to or deletions from the Equipment. Borrower shall not
permit any such Equipment to become affixed to real estate in such manner that
such Equipment will become a fixture or an accession to other personal property.
8.2 EVIDENCE OF OWNERSHIP OF EQUIPMENT. Borrower shall, upon Lender's
request, deliver to Lender all evidence of ownership of the Equipment
(including, without limitation, bills of sale, certificates of title and
applications for title).
8.3 PROCEEDS OF THE EQUIPMENT. Borrower shall not sell, transfer,
lease, grant a security interest in or otherwise dispose of or encumber the
Equipment or any part thereof to any Person other than Lender; provided,
however, that (i) Borrower may complete the sale of up to $400,000 worth of real
estate and related assets in Ohio, currently in progress; and (ii) in any fiscal
year of Borrower, Borrower may sell or otherwise dispose of Equipment with an
aggregate net book value not to exceed Two Hundred Fifty Thousand Dollars
($250,000). In the event any Equipment or real estate is sold, transferred or
otherwise disposed of as permitted in this Section, Borrower shall promptly
notify Lender of such fact and deliver all of the cash proceeds of such sale,
transfer or disposition to Lender, which
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proceeds shall be applied to the repayment of the Liabilities; provided,
however, that with Lender's prior consent, in its discretion reasonably
exercised, Borrower may use the proceeds of such sale, transfer or disposition
of Equipment to finance the purchase of replacement Equipment in which Lender
has a first priority, perfected security interest documented to the satisfaction
of Lender. Borrower shall deliver to Lender written evidence of the use of the
proceeds for such purchase. All replacement Equipment purchased by Borrower
shall be free and clear of all liens, claims, security interests and other
encumbrances, except for the security interest granted to Lender and Permitted
Liens.
8.4 LOCATION OF EQUIPMENT. Borrower and the other Companies shall at
all times maintain in the United States, in jurisdictions in which Lender has
perfected its security interest in Borrower's and the Companies' assets,
Equipment with an orderly liquidation value (determined to Lender's
satisfaction) of not less than $20,000,000. Borrower shall deliver a certificate
to Lender monthly confirming and detailing Borrower's compliance with such
covenant. 9. WARRANTIES AND REPRESENTATIONS
9.1 GENERAL WARRANTIES AND REPRESENTATIONS. Borrower warrants and
represents that:
(A) Existence and Qualification. Borrower is a corporation
duly organized and validly existing and in good standing under the laws
of the state of its incorporation and is qualified or licensed as a
foreign corporation to do business in all other countries, states and
provinces in which the laws thereof require Borrower to be so qualified
or licensed;
(B) Other Names. Borrower has not used, during the five (5)
year period preceding the date of this Agreement, and does not intend
to use, any other corporate or fictitious name, except as disclosed in
Exhibit "D" attached hereto;
(C) Authority and Power. Borrower has the right and power and
is duly authorized and empowered to enter into, execute, deliver and
perform this Agreement and the Ancillary Agreements to which it is a
party;
(D) Compliance with Law and Other Agreements. The execution,
delivery and performance by Borrower of this Agreement and the
Ancillary Agreements shall not, by their execution or performance, the
lapse of time, the giving of notice or otherwise, constitute a
violation of any applicable and material law, rule, regulation,
judgment, order or decree or a breach of any provision contained in
Borrower's charter documents or by-laws or contained in any agreement,
instrument, indenture or other document to which Borrower is now a
party or by which it is bound;
(E) Use of Proceeds. Borrower's use of the proceeds of any
advances made by Lender is and will continue to be a legal and proper
corporate use (duly authorized by its board of directors, in accordance
with applicable and material law, rule or regulation) and such use is
and will continue to be consistent with all applicable laws, rules and
regulations;
(F) Governmental Approvals. Borrower has, and is current and
in good standing with respect to, all governmental approvals, permits,
certificates, inspections, consents and franchises necessary to conduct
and to continue to conduct its present and intended business as
heretofore conducted by it and to own or lease and operate its
properties as now owned or leased and operated by it; and to the best
knowledge of Borrower, none of said governmental approvals, permits,
certificates, consents or franchises contains any term, provision,
condition or limitation more burdensome than such as are generally
applicable to Persons engaged in the same or similar business as
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Borrower;
(G) Solvency. Borrower now has capital sufficient to carry on
its business and transactions and all businesses and transactions in
which it is about to engage and is now solvent and able to pay its
debts as they mature and Borrower now owns property the fair salable
value of which is greater than the amount required to pay Borrower's
debts;
(H) No Litigation, Indebtedness or Guaranties. Except as
disclosed on Exhibit "E" attached hereto, Borrower has no litigation
pending, or to the best of its knowledge, threatened, and no
Indebtedness (except for trade payables arising in the ordinary course
of its business since the dates reflected in the Financials) and has
not guaranteed the obligations of any other Person;
(i)No Other Adverse Agreements or Arrangements. Borrower is
not a party to any contract or agreement or subject to any charge,
restriction, judgment, decree or order materially and adversely
affecting its business, property, assets, operations or condition,
financial or otherwise, and is not a party to any labor dispute,
lockout, strike or walkout relating to any labor contracts and no such
contract is scheduled to expire during the Initial Term;
(J) Good Title. Borrower has good, indefeasible and
merchantable title to, and ownership of, the Collateral, free and clear
of all liens, claims, security interests and other encumbrances, except
those of Lender and those described on Exhibit "F" attached hereto;
(K) No Violation of Laws. To the best knowledge of Borrower,
Borrower is not in violation of any applicable statute, rule,
regulation or ordinance of any governmental entity, including, without
limitation, the United States of America, any state, city, town,
municipality, county or any other jurisdiction, or of any agency
thereof, in any respect materially and adversely affecting the
Collateral or Borrower's business, property, assets, operations or
condition, financial or otherwise;
(L) No Lien or Borrowing Defaults. Borrower is not in default
under any indenture, loan agreement, mortgage, lease, deed of trust or
other similar agreement relating to the borrowing of monies or
encumbering of assets to which it is a party or by which it is bound;
(M) Financials. The Financials fairly present the assets,
liabilities and financial condition and results of operations of 3-D
and such other Persons described therein as of the dates thereof; there
are no omissions or other facts or circumstances which are or may be
material and there has been no material and adverse change in the
assets, liabilities or financial or other condition of 3-D or any of
such other Persons since the date of the Financials; there exist no
equity or long term investments in or outstanding advances to any
Person not reflected in the Financials; there are no actions or
proceedings which are pending or, to the best of Borrower's knowledge,
threatened, against Borrower or any other Person which might result in
any material adverse change in Borrower's financial condition or
materially and adversely affect Borrower's operations, its assets or
the Collateral;
(N) ERISA. Borrower has received no notice to the effect that
it is not in full compliance with any of the requirements of ERISA, and
the regulations promulgated thereunder and, to the best of its
knowledge, there exists no event described in Section 4043 of ERISA,
excluding subsections 4043(b)(2) and 4043 (b)(3) thereof ("Reportable
Event"), with respect to Borrower, and neither Borrower nor any Person
who is a member of Borrower's controlled group for Federal income
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tax purposes has directly or indirectly, caused or permitted any of the
following to occur: (i) restated or amended any pension,
profit-sharing, savings, stock bonus, or other deferred compensation
plans established and maintained by it which are subject to ERISA since
ERISA became effective with respect to such plans in a manner designed
to or which would disqualify those plans and their related trusts under
the applicable requirements of the Internal Revenue Code of 1986, as
amended (the "IRC"); (ii) permitted any of its officers to materially
and adversely affect the qualified tax-exempt status of any of its
pension, profit-sharing, savings, stock bonus or other deferred
compensation plans and trusts under the IRC; (iii) engaged in or
permitted any officer to engage in any "prohibited transaction" as
defined in Section 406 of ERISA or Section 4975 of the IRC; (iv)
incurred any "accumulated funding deficiency" as defined in Section 302
of ERISA or Section 412(a) of the IRC, whether or not waived in
connection with any pension, profit-sharing, savings, stock bonus or
other deferred compensation plans; (v) taken or failed to take any
action which caused or may cause a termination of any pension plan in a
manner which could result in the imposition of a lien on any Borrower's
property pursuant to Section 4068 of ERISA; (vi) failed to notify
Lender that notice has been received of a "termination" (as defined in
ERISA) of any "multi-employer plan" (as defined in ERISA) to which
Borrower has an obligation to contribute; (vii) incurred a "complete
withdrawal" (as defined in ERISA) from any "multi-employer plan" to
which Borrower has an obligation to contribute; (viii) incurred a
"partial withdrawal" (as defined in ERISA) from any "multi-employer
plan" to which Borrower has an obligation to contribute; or (ix) failed
to notify Lender that notice has been received from the Administrator
of any "multi-employer plan" to which Borrower has an obligation to
contribute that any such plan will be placed in "reorganization" as
defined in ERISA;
(O) Taxes. Borrower has filed all federal, state and local tax
returns and other reports, or has been included in consolidated returns
or reports filed by an Affiliate, which Borrower is required by law,
rule or regulation to file and all Charges that are due and payable
have been paid;
(P) No Securities. Borrower's execution and delivery of this
Agreement or any of the Ancillary Agreements does not directly or, to
the best knowledge of Borrower, indirectly violate or result in a
violation of any applicable laws, rules or regulations, including
without limitation, the Securities Exchange Act of 1934, as amended,
and Regulations U, G, T and X of the Board of Governors of the Federal
Reserve System (12 CFR 221, 207, 220 and 224, respectively), and
Borrower does not own or intend to purchase or carry any "margin
security," as defined in such Regulations.
(Q) Affiliates. All Persons who are Borrower's Affiliates at
this time are identified as such on Exhibit "G" hereto;
(R) Subsidiaries. Exhibit "G" correctly sets forth the names,
forms of legal entity and jurisdictions of formation of all
Subsidiaries of Borrower and all Subsidiaries of such Subsidiaries.
Except as described in Exhibit "G", Borrower does not own any capital
stock, partnership interest, joint venture interest or other equity
interest in any Person. Unless otherwise indicated in Exhibit "G", all
of the outstanding shares of capital stock or partnership or joint
venture interests of each Subsidiary of Borrower are owned of record
and beneficially by Borrower, and all securities and interests so owned
are duly authorized, validly issued, fully paid, non-
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assessable and issued in compliance with all applicable state and
federal securities and other laws, and are free and clear of all liens.
Each Subsidiary of Borrower is a legal entity duly formed, validly
existing and in good standing under the laws of its jurisdiction of
formation, is duly qualified or registered to transact business and is
in good standing in each jurisdiction in which the conduct of its
business or the ownership or leasing of its properties makes such
qualification or registration necessary and has all requisite legal
power and authority to conduct its business and to own and lease its
properties. Each Subsidiary of Borrower is in compliance with all laws
and other legal requirements applicable to its business, has obtained
all authorizations, consents, approvals, orders, licenses and permits
from, and has accomplished all filings, registrations and
qualifications with, or obtained exemptions from any of the foregoing
from, any governmental agency that are necessary for the transaction of
its business.
(S) Environmental Matters. (i) The operations of Borrower, any
other obligor and each of Borrower's Subsidiaries comply in all
material respects with all applicable Environmental Laws; (ii) none of
the operations of Borrower, any other obligor or any Subsidiary of
Borrower are subject to any judicial or administrative proceeding
alleging the violation of any Environmental Laws; (iii) none of the
operations of Borrower, any other obligor or any Subsidiary of Borrower
is the subject of any federal or state investigation evaluating whether
any remedial action is needed to respond to a release of any Hazardous
Material into the environment; (iv) none of Borrower, any other obligor
or any Subsidiary of Borrower has filed any notice under any federal or
state law indicating past or present treatment, storage or disposal of
a Hazardous Material or reporting a spill or release of a Hazardous
Material into the environment; and (v) none of Borrower, any other
obligor or any Subsidiary of Borrower has any known material contingent
liability in connection with any release of any Hazardous Material into
the environment. The materiality standard used in this Section shall be
exceeded if the facts giving rise to a breach or breaches of the
representations or warranties contained herein might result in
liability in excess of Two Hundred Fifty Thousand Dollars ($250,000) in
the aggregate.
(T) No Broker's Fee. No brokerage, finder's or similar fee or
commission is due to any party by reason of Borrower's entering into
this Agreement or by reason of any of the transactions contemplated
hereby, and Borrower shall indemnify and hold Lender harmless from any
such fees and commissions. 9.2 ACCOUNT WARRANTIES AND REPRESENTATIONS.
Borrower warrants and represents
that Lender may rely, in determining which Accounts listed on any Daily
Collateral Report are Eligible Accounts, without independent investigation, on
all statements, warranties and representations made by Borrower on or with
respect to any such Daily Collateral Report and, unless otherwise indicated in
writing by Borrower, that
(A) Such Accounts are genuine, are in all respects what they
purport to be, are not reduced to a judgment and, if evidenced by any
instrument, item of chattel paper, agreement, contract or document, are
evidenced by only one executed original instrument, item of chattel
paper, agreement, contract, or document, which original has been
endorsed and delivered to Lender;
(B) Such Accounts represent undisputed, bona fide transactions
completed in accordance with the terms and provisions contained in any
documents related thereto;
(C) The amounts shown on the Daily Collateral Report, and all
invoices
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and statements delivered to Lender with respect to any Account, are
actually and absolutely owing to Borrower and are not contingent for
any reason;
(D) Except as may be disclosed on such Daily Collateral
Report, there are no setoffs, counterclaims or disputes existing or
asserted with respect to any Accounts included on an Daily Collateral
Report, and Borrower has not made any agreement with any Account Debtor
for any deduction from such Account, except for discounts or allowances
allowed by Borrower in the ordinary course of its business for prompt
payment, which discounts and allowances have been disclosed to Lender
and are reflected in the calculation of the invoice related to such
Account;
(E) There are no facts, events or occurrences which in any way
impair the validity or enforcement of any of the Accounts or tend to
reduce the amount payable thereunder from the amount of the invoice
shown on any Daily Collateral Report and on all contracts, invoices and
statements delivered to Lender with respect thereto;
(F) To the best of Borrower's knowledge, all Account Debtors
are solvent and had the capacity to contract at the time any contract
or other document giving rise to or evidencing the Accounts was
executed;
(G) The goods (if any), the sale of which gave rise to the
Accounts, (i) were produced in full compliance with the Fair Labor
Standards Act, 29 U.S.C. ss.ss. 207 et seq., as amended from time to
time, and (ii) are not subject to any lien, claim, security interest or
other encumbrance, except those of Lender, and those removed or
terminated prior to the date hereof;
(H) Borrower has no knowledge of any fact or circumstance
which would impair the validity or collectability of any of the
Accounts;
(i) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any
Account Debtor which might result in any material adverse change in
such Account Debtor's financial condition or business; and
(J) The Accounts have not been pledged or sold to any other
Person or otherwise encumbered and Borrower is the owner of the
Accounts free of all claims, liens and encumbrances except those of
Lender.
9.3 INVENTORY WARRANTIES AND REPRESENTATIONS. Borrower warrants and
represents that it does not produce, purchase or sell a material amount of
Inventory in the ordinary course of its business.
9.4 AUTOMATIC WARRANTY AND REPRESENTATION AND REAFFIRMATION OF
WARRANTIES AND REPRESENTATIONS. Each request for an advance made by Borrower
pursuant to this Agreement or the Ancillary Agreements shall constitute (i) an
automatic warranty and representation by Borrower to Lender that there does not
then exist a Default or an Event of Default and (ii) a reaffirmation as of the
date of said request of all of the warranties and representations of Borrower
contained in this Agreement and in the Ancillary Agreements.
9.5 SURVIVAL OF WARRANTIES AND REPRESENTATIONS. Borrower covenants,
warrants and represents to Lender that all representations and warranties of
Borrower contained in this Agreement and the Ancillary Agreements shall be true
at the time of Borrower's execution of this Agreement and the Ancillary
Agreements, and shall survive the execution, delivery and acceptance hereof and
thereof by the parties thereto and the closing of the transactions described
herein and therein or related hereto or thereto.
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10. COVENANTS AND CONTINUING AGREEMENTS
10.1 AFFIRMATIVE COVENANTS. Borrower covenants that it shall:
(A) Financial Tests. Comply as of the end of each of
Borrower's fiscal quarters with each of the financial covenants set
forth on Schedule 10.1(a) hereto.
(B) Bank Fees. Pay to Lender, on demand, any and all fees,
costs or expenses which Lender or any Participant pays to a bank or
other similar institution arising out of or in connection with (i) the
forwarding to Borrower or any other Person on behalf of Borrower, by
Lender or any Participant, of proceeds of loans or other credit
accommodations made by such party to Borrower pursuant to this
Agreement and (ii) the depositing for collection, by Lender or any
Participant, of any check or item of payment received or delivered to
such party on account of the Liabilities;
(C) Notice of Loss of Collateral. Notify Lender promptly of
any event or occurrence causing a material loss or decline in value of
the Collateral and the estimated (or actual, if available) amount of
such loss or decline;
(D) Notice Re Account Debtors. Promptly upon Borrower's
learning thereof, notify Lender of (i) any material delay in Borrower's
performance of any of its obligations to any Account Debtor and of any
assertion of any claims, offsets, defenses or counterclaims by any
Account Debtor and of any allowances or credits granted (including all
credits issued for returned or repossessed Inventory) or other monies
advanced by Borrower to any Account Debtor and (ii) all material
adverse information relating to the financial or other condition of any
Account Debtor;
(E) Financials. Keep books of account and prepare consolidated
and consolidating financial statements, including in such financial
statements all foreign Companies ("Financials"), and furnish to Lender
the following (all to be kept and prepared in accordance with GAAP,
unless Borrower's independent certified public accountants concur in
any changes therein and such changes are disclosed in writing to Lender
and are consistent with then generally accepted accounting principles):
(i)as soon as available, but not later than ninety
(90) days after the close of each fiscal year of 3-D, consolidated and
consolidating Financials of 3-D, including in such financial statements
all foreign Companies (including a balance sheet, a profit and loss
statement and a statement of cash flows, each with supporting
footnotes) as at the end of such fiscal year and for the fiscal year
then ended all in reasonable detail as requested by Lender and audited
by a firm of independent certified public accountants of recognized
national standing selected by Borrower and containing the unqualified
opinion of such independent certified public accountants with respect
to the Financials;
(ii) as soon as available, but not later than thirty
(30) days after the end of each month and each fiscal quarter of 3-D,
unaudited consolidated and consolidating Financials of 3-D, including
in such financial statements all foreign Companies (including for each
month a statement of profit and loss for the month then ended and a
balance sheet as at the end of such month and, for each fiscal
quarter-end, a statement of profit and loss and of surplus for the
fiscal quarter then ended, a statement of cash flow, a balance sheet as
at the end of such quarter, and a covenant compliance certificate in
the form of Exhibit "H" hereto) as at the end of the portion of 3-D's
fiscal year then elapsed, all in reasonable detail as requested by
Lender and certified by 3-D's principal financial officer as prepared
in accordance with generally accepted accounting principles and fairly
presenting the financial
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position and results of operations of 3-D and its consolidated
Subsidiaries for such period;
(iii) for Borrower, J.R.S. Exploration Company, Ltd.,
Geoevaluaciones, S.A. de C.V., and Procesos Interactivos Avanzados,
S.A. de C.V., individually and in the aggregate, (A) as soon as
possible, but not later than fifteen (15) days after the end of each
month, an Accounts aging, and (B) as soon as possible, but not later
than thirty (30) days after the end of each month, an aging of all
accounts payable, all in reasonable detail as requested by Lender and
certified by Borrower's principal financial officer as accurate and
complete and prepared in accordance with generally accepted accounting
principles;
(iv) daily, a Daily Collateral Report;
(v) as soon as available, but not later than sixty
(60) days before the beginning of each fiscal year of 3-D, a
consolidated and consolidating income statement, balance sheet and cash
flow projection for 3-D for such fiscal year, including in such
documentation all foreign Companies, detailed by quarter, together with
appropriate supporting documents reasonably acceptable to Lender;
(vi) promptly after the sending or filing thereof, as
the case may be, copies of any proxy statements, financial statements
or reports which 3-D has made available to its shareholders and copies
of any regular, periodic and special reports or registration statements
which 3-D files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any
national securities exchange;
(Vii) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request,
bearing upon or related to the Collateral, Borrower's financial
condition or results of its operations, or the financial condition of
any Person who is a Guarantor;
(F) Notice Re Ineligibility of Accounts. Notify Lender
promptly, but in no event later than two (2) days after Borrower's
learning thereof, that any Eligible Account has ceased to be an
Eligible Account and the reason(s) for such ineligibility;
(G) Notice Re Litigation. Notify Lender, promptly upon
Borrower's learning of (i) any litigation affecting Borrower if the
claim is in excess of $250,000, whether or not the claim is considered
by Borrower to be covered by insurance; and (ii) the institution of any
suit or administrative proceeding which may materially and adversely
affect the operations, financial condition or business of Borrower or
which may affect Lender's security interest in the Collateral;
(H) Copies of Agreements. Provide Lender with copies of all
leases with a duration in excess of six months or similar agreements
between Borrower and any Person, whether Borrower is lessor or lessee
thereunder, and, upon request provide Lender with copies of any other
leases, licenses, permits or similar agreement relative to Borrower's
business;
(i)Notice of Default. Notify Lender, promptly upon learning
thereof, of any Default or Event of Default;
(J) Environmental Matters. Give written notice to Lender
immediately upon receipt of any notice that (i) the operations of
Borrower, any other obligor or any Subsidiary of Borrower are not in
full compliance with requirements of applicable Environmental Laws;
(ii) Borrower, any other obligor or any Subsidiary of Borrower is
subject to any federal or state investigation evaluating whether any
remedial action is needed to respond to the release of any Hazardous
Material into the environment;
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or (iii) any properties or assets of Borrower, any other obligor or any
Subsidiary of Borrower are subject to an Environmental Lien. As used
herein, "Environmental Lien" means a lien in favor of any governmental
entity for (A) any liability under any Environmental Laws, or (B)
damages arising from or costs incurred by such governmental entity in
response to a release of a Hazardous Material into the environment.
Without limiting the generality of any of Borrower's other covenants
and agreements, the operations of Borrower, any other obligor and each
of Borrower's Subsidiaries shall at all times comply in all material
respects with all applicable Environmental Laws and post-testing
procedures and requirements. The materiality standard used in this
Section shall be exceeded if the facts giving rise to a breach or
breaches of the covenant contained herein might result in liability in
excess of Two Hundred Fifty Thousand Dollars ($250,000) the aggregate;
and
(K) Guaranty. Provide Lender with and maintain in effect
continuing guaranties in form and substance satisfactory to Lender
("Guaranties") and executed by each of the following Affiliates of
Borrower: 3-D; 3-D Geophysical of Latin America, Inc., a Cayman Island
company; J.R.S. Exploration Company, Ltd., a Canada corporation;
Geoevaluaciones, S.A. de C.V., a Mexico company; and Procesos
Interactivos Avanzados, S.A. de C.V., a Mexico company. The Guaranty of
3-D shall be secured by a perfected first priority security interest in
the stock of certain of the Companies and the Guaranty of J.R.S.
Exploration Company, Ltd. shall be secured by a perfected first
priority security interest in all of the assets of such Guarantor in
each case pursuant to security agreements, pledge agreements and such
other documentation as Lender shall require, all in form and substance
satisfactory to Lender in its sole discretion. Each such Guarantor
shall make representations and warranties similar to those of Borrower
in this Agreement, and shall agree to be bound by covenants and
agreements similar to those applicable to Borrower in this Agreement.
10.2 NEGATIVE COVENANTS. Borrower covenants that it shall not, without
the prior
written consent of Lender, which consent shall be in the discretion of Lender,
reasonably exercised:
(A) Merger. Merge or consolidate with or acquire any Person;
(B) Investments. Other than in the ordinary course of its
business, make any investment in the securities of any Person;
(C) Dividends. Declare or pay dividends upon any of Borrower's
Stock or make any distribution of Borrower's property or assets or make
any loans, advances or extensions of credit to any Person, including,
without limitation, any Affiliate, officer or employee of Borrower;
provided that Borrower may issue stock dividends upon its Stock so long
as the same is in accordance with all applicable laws and provided no
Default has occurred;
(D) Loans and Advances. Make any loans or other advances of
money (other than salary) to officers, directors or stockholders of any
of the Companies, or permit the annual salary and all other direct and
indirect remuneration (excluding stock options) to their officers to
exceed Seven Hundred Thousand Dollars ($700,000) individually or Three
Million Five Hundred Thousand Dollars ($3,500,000) in the aggregate; or
make loans or other advances of money to Affiliates, except for (i)
transfers to J.R.S. Exploration Company, Ltd., Geoevaluaciones, S.A. de
C.V., 3- D Geophysical of Latin America, Inc., and Procesos
Interactivos, S.A. de C.V., not to exceed at any time for any such
Company the outstanding amount of advances
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made by Lender to Borrower based on the Eligible Accounts of such
Company, (ii) loans by Borrower to the Companies described in clause
(i) hereof in excess of the amounts permitted under clause (i),
provided that no Default or Event of Default then exists or would
result from the making of such loan, and (iii) in addition to the
foregoing entities described in clause (i), advances to other
Affiliates, in an amount for each such Affiliate not to exceed $25,000
at any time outstanding or $50,000 in the aggregate at any time
outstanding for all such Affiliates;
(E) Redemptions. Redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of Borrower's Stock;
(F) Change in Business. Make any material change in Borrower's
capital structure or in any of its business objectives, purposes and
operations which might in any way adversely affect the repayment of the
Liabilities;
(G) Affiliate Transactions. Except as provided in Section
10.2(d), above, enter into, or be a party to, any transaction with any
Affiliate, director, officer or stockholder of Borrower, except in the
ordinary course of and pursuant to the reasonable requirements of
Borrower's business and upon fair and reasonable terms which are fully
disclosed to Lender and are no less favorable to Borrower than would
obtain in a comparable arm's length transaction with a Person not an
Affiliate, director, officer or stockholder of Borrower;
(H) Agreements Re Collateral. Enter into any transaction which
materially and adversely affects the Collateral or Borrower's ability
to repay the Liabilities or permit or agree to any extension,
compromise or settlement or make any change or modification of any kind
or nature with respect to any Account, including any of the terms
relating thereto;
(i) Guaranty. Guarantee or otherwise, in any way, become
liable with respect to the obligations or liabilities of any Person,
except (i) its Affiliates' obligations to Lender and (ii) by
endorsement of instruments or items of payment for deposit to the
general account of Borrower or for delivery to Lender on account of the
Liabilities;
(J) Deposits to Affiliates. Except as provided in Section
10.2(d), above, make deposits to or withdrawals from any of its deposit
accounts for the benefit of any Affiliate;
(K) Encumbrances. Except as otherwise expressly permitted
herein or in the Ancillary Agreements, encumber, pledge, mortgage,
grant a security interest in, assign, sell, lease or otherwise dispose
of or transfer, whether by sale, merger, consolidation, liquidation,
dissolution, or otherwise, any of Borrower's assets;
(L) Indebtedness for Borrowed Money. Incur any Indebtedness
for borrowed money in excess of One Million Five Hundred Thousand
Dollars ($1,500,000) during any fiscal year of Borrower, other than the
Liabilities, except for Indebtedness disclosed on Exhibit "J" hereto
and except for Indebtedness which is unsecured and is with Persons who
execute and deliver to Lender (in form and substance acceptable to
Lender) subordination agreements subordinating their claims against
Borrower to the payment of the Liabilities;
(M) Capital Expenditures. Make Capital Expenditures, in any
fiscal year which, in the aggregate, exceed the greater of (i) Sixteen
Million Dollars ($16,000,000) or (ii) an amount equal to 12% of
Borrower's gross revenues, not to exceed Twenty Five Million Dollars
($25,000,000), or;
(N) Affiliate Accounts. Except as provided in Section
10.2(d)(i), permit
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any Accounts owing to Borrower from any Affiliate to be payable on
terms which would not allow Borrower to demand payment upon the
occurrence of a default;
(O) Deposit Accounts. Open, transfer, close or change any of
Borrower's deposit accounts. A description of all Borrower's deposit
accounts is provided in Schedule 10.2 hereto; or
(P) 3-D Stock. Nothing herein shall be deemed to prohibit or
otherwise affect or require consent by Lender to any issuance by 3-D of
any stock of 3-D or options with respect thereto for any purpose
whatsoever, except to consummate a merger or acquisition. 10.3
CONTESTING CHARGES. Notwithstanding anything to the contrary herein,
Borrower may dispute any Charges without prior payment thereof, even if such
non-payment may cause a lien to attach to Borrower's assets, provided that
Borrower shall give Lender prompt notice of such dispute and shall be diligently
contesting the same in good faith and by an appropriate proceeding and there is
no danger of a loss or forfeiture of any of the Collateral or of Lender's
priority position with respect to such Collateral and provided further that, if
the same are potentially or actually in excess of Two Hundred Fifty Thousand
Dollars ($250,000) in the aggregate at any time hereafter, Borrower shall give
Lender such additional collateral and assurances as Lender, in its sole
discretion, deems necessary under the circumstances, immediately upon demand by
Lender.
10.4 PAYMENT OF CHARGES. Subject to the provisions of Section 10.3,
Borrower shall pay promptly when due all of the Charges. In the event Borrower,
at any time or times hereafter, shall fail to pay the Charges or to promptly
obtain the satisfaction of such Charges, Borrower shall promptly so notify
Lender thereof and Lender may, without waiving or releasing any obligation or
liability of Borrower hereunder or any Default, in its discretion reasonably
exercised, at any time or times thereafter, make such payment or any part
thereof, (but shall not be obligated so to do) or obtain such satisfaction and
take any other action with respect thereto which Lender deems advisable. All
sums so paid by Lender and any expenses, including reasonable attorneys' fees,
court costs, expenses and other charges relating thereto, shall be payable by
Borrower to Lender upon demand and shall be additional Liabilities.
10.5 INSURANCE; PAYMENT OF PREMIUMS. At its sole cost and expense,
Borrower shall (i) keep and maintain the Collateral insured for the greater of
original cost or replacement value of the Collateral against loss or damage by
fire, theft, explosion, sprinklers and all other hazards and risks in amounts
customary for companies of similar size engaged in the same or similar
businesses; (ii) if applicable, maintain product liability insurance in an
amount customary for the business conducted by Borrower and acceptable to
Lender; and (iii) general public liability insurance in an amount satisfactory
to Lender but in no event less than Ten Million Dollars ($10,000,000) per
occurrence, for bodily injury and property damage. All policies of insurance on
the Collateral or otherwise required hereunder shall be in form and amount
satisfactory to Lender and with insurers reasonably recognized as adequate by
Lender. Borrower shall deliver to Lender a copy of each policy of insurance and,
if requested, evidence of payment of all premiums therefor and shall deliver
renewals of all such policies to Lender at least thirty (30) days prior to their
expiration dates. Such policies of insurance shall contain an endorsement, in
form and substance acceptable to Lender, showing all losses payable to Lender.
Such endorsement shall provide that the insurance companies will give Lender at
least thirty (30) days' prior notice before any such policy shall be altered or
canceled and that no act or default of Borrower or any other person shall affect
the right of Lender to recover under such policy in case of loss or damage.
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Borrower hereby directs all insurers under such policies to pay all proceeds
payable thereunder directly to Lender. After the occurrence and during the
continuance of a Default, Borrower irrevocably makes, constitutes and appoints
Lender (and all officers, employees or agents designated by Lender) as
Borrower's true and lawful attorney and agent-in-fact for the purpose of making,
settling and adjusting claims under such policies (provided that Lender shall
consult with Borrower prior to finally making, settling or adjusting claims
under such policies), endorsing the name of Borrower in writing or by stamp on
any check, draft, instrument or other item of payment for the proceeds of such
policies and for making all determinations and decisions with respect to such
policies. If Borrower shall fail to obtain or maintain any of the policies
required by this Section 10.5 or to pay any premium relating thereto, then
Lender, without waiving or releasing any obligation or default by Borrower
hereunder, may (but shall be under no obligation to do so) obtain and maintain
such policies of insurance and pay such premiums and take any other action with
respect thereto which Lender deems advisable. All sums so disbursed by Lender,
including reasonable attorneys' fees, court costs, expenses and other charges
relating thereto, shall be payable by Borrower to Lender upon demand and shall
be additional Liabilities.
10.6 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF AGREEMENT. Except as
otherwise expressly provided for in this Agreement and in the Ancillary
Agreements, no termination or cancellation (regardless of cause or procedure) of
this Agreement or the Ancillary Agreements shall in any way affect or impair the
powers, obligations, duties, rights, and liabilities of Borrower or Lender in
any way or respect relating to any transaction or event occurring prior to such
termination or cancellation, the Collateral, or any of the undertakings,
agreements, covenants, warranties and representations of Borrower or Lender
contained in this Agreement or the Ancillary Agreements. All such undertakings,
agreements, covenants, warranties and representations shall survive such
termination or cancellation.
10.7 ENVIRONMENTAL INDEMNITY. Borrower hereby indemnifies Lender, its
successors and assignees, and agrees to hold Lender harmless from and against
any and all losses, liabilities, damages, injuries, costs, expenses and claims
of any and every kind whatsoever (including, without limitation, court costs and
attorneys' fees) which at any time or from time to time may be paid, incurred or
suffered by, or asserted against, Lender for, with respect to, or as a direct or
indirect result of the violation by Borrower, any other obligor or any of
Borrower's Affiliates, of any laws, including but not limited to, the
Environmental Laws or any laws or regulations relating to Hazardous Materials,
treatment, storage, disposal, generation and transportation, air, water and
noise pollution, soil or ground or water contamination, the handling, storage or
release into the environment of Hazardous Materials; or with respect to, or as a
direct or indirect result of the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission or release from, properties utilized by
Borrower, any other obligor or any of Borrower's Subsidiaries in the conduct of
their respective business into or upon any land, the atmosphere, or any
watercourse, body of water or wetland, of any Hazardous Materials (including,
without limitation, any losses, liabilities, damages, injuries, costs, expenses
or claims asserted or arising under the Environmental Laws); and the provisions
of and undertakings and indemnification set out in this Section shall survive
the satisfaction and payment of the Liabilities and the termination of this
Agreement.
10.8 CHANGE OF CONTROL. It is covenanted and agreed by Borrower that
3-D shall at all times own 100% of the shares of Borrower's capital stock.
10.9 REVISIONS OR UPDATES. Should any of the information or disclosures
provided
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on any of the Schedules or Exhibits originally attached hereto become outdated
or incorrect in any material respect, Borrower promptly shall provide to Lender
such revisions or updates as may be necessary or appropriate to update or
correct such Schedule(s) or Exhibit(s); provided that no such revisions or
updates shall be deemed to have amended, modified or superseded such Schedule or
Exhibit as originally attached hereto, or to have cured any breach of warranty
or representation resulting from the inaccuracy or incompleteness of any such
Schedule or Exhibit unless and until Lender, in its sole and absolute
discretion, shall have accepted in writing such revisions or updates.
11. CONDITIONS PRECEDENT TO CLOSING
Lender will not be obligated to make any advances hereunder
unless the following conditions precedent have been satisfied as determined by
Lender:
(A) Lender shall have received landlord waivers, mortgagee
waivers and warehouse agreements acceptable to Lender in its sole
discretion from the owners of such owned and leased locations of
Borrower with a duration in excess of six months as Lender shall
determine. The landlord waivers shall include, without limitation, a
right of Lender to remain on the premises for up to three months;
(B) Borrower's representations and warranties contained in
this Agreement and the Ancillary Agreements shall be correct and
complete; Borrower shall have performed and complied with all
covenants, agreements, and conditions contained herein and in the
Ancillary Agreements which are required to have been performed or
complied with; and there shall exist no Default or Event of Default;
(C) No material adverse change in the condition, operations or
prospects, financial or otherwise, of any of the Companies shall have
occurred during the period commencing with June 30, 1997 and ending on
the Closing Date ("Interim Period");
(D) This Agreement, the Guaranties, all security documents
relating to the foregoing Guaranties, all other collateral documents
and agreements, promissory notes and other documents, instruments and
agreements required by Lender shall be executed by the parties thereto
and delivered to Lender in form and substance acceptable to Lender and
its counsel;
(E) Borrower shall have entered into one or more dominion
account agreements with Lender and the financial institutions
maintaining such accounts, all in form and substance acceptable to
Lender;
(F) Lender shall have received such opinions of counsel for
the Companies as Lender may require;
(G) Lender shall have received such opinions, if any, as it
may require from counsel in Canada and Mexico opining as to the
perfection of Lender's liens and security interests in the assets of
the Companies located in such jurisdictions;
(H) Lender shall have received one or more pledges of all
stock of the Companies (other than the stock of 3-D), and shall have
received the original stock certificates of such Companies with duly
executed assignments in blank;
(i) Lender shall have received insurance certificates,
lender's loss payable endorsements and copies of all insurance policies
confirming insurance by the Companies in amounts, coverage, form and by
insurers satisfactory to Lender in its discretion;
(J) Lender shall have received confirmation that it has a
first priority perfected security interest in the Collateral (and all
collateral pledged as security for any Guaranty), subject only to such
liens and encumbrances, if any, as Lender shall have approved in its
discretion in writing. Such confirmation shall include, without
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limitation, (i) written confirmation from all relevant jurisdictions of
the filing and priority of financing statements (or similar foreign
filings) covering the Collateral, and (ii) written confirmation from
the United States Patent and Trademark Office and any other applicable
federal, state and international offices of the registration and
priority of Lender's lien on all of Borrower's intellectual property
assets;
(K) Lender shall have received a certificate of corporate
status with respect to each Company, dated within 21 calendar days
prior to the Closing Date, from the Secretary of State (or similar
foreign office, as applicable) of such Company's jurisdiction of
incorporation, which indicates that such Company is in good standing in
such jurisdiction;
(L) Lender shall have received certificates of corporate
status indicating that each Company is in good standing as a foreign
corporation, dated within 21 calendar days prior to the Closing Date,
from the Secretary of State (or similar foreign office, as applicable)
of each jurisdiction in which the character of such Company's assets or
the nature of its activities makes such qualification necessary;
(M) None of the Companies shall have entered into any material
commitment or material transaction during the Interim Period,
including, without limitation, transactions for borrowings and capital
expenditures, which are not in the ordinary course of such Company's
business;
(N) None of the Companies shall have made any material change
in its accounting methods or principles during the Interim Period;
(O) No materially advantageous agreement previously in effect
between any Company and any other Person shall have been terminated,
modified or declared to be in default during the Interim Period;
(P) All consents necessary to permit the secured financing
transaction contemplated by this Agreement and the Ancillary Agreements
to be consummated pursuant to the terms and conditions hereof and
thereof shall have been obtained;
(Q) Lender shall have received a description of all employee
pension benefit plans (if any) of the Companies, and shall have
confirmed that such plans are funded at a level satisfactory to Lender;
(R) During the Interim Period, there shall not have been
instituted or threatened in any court or administrative forum, any
material litigation or proceeding to which any of the Companies is a
party;
(S) Lender shall have received evidence satisfactory to it
that no broker's fee, finder's fee or similar fee shall be payable by
any of the Companies or by any other Person in connection with this
Agreement;
(T) Lender shall have received copies of all labor contracts
(if any) to which any of the Companies is a party, and all labor
contracts (if any) necessary to the continuation of the business
operations of the Companies shall be in effect on the Closing Date;
(U) On the Closing Date, the present fair salable value of the
assets of Borrower shall be greater than the total liabilities of
Borrower, including, without limitation, contingent liabilities, and
Lender shall be satisfied that the present fair salable value of the
assets of Borrower will continue thereafter to be greater than the
total liabilities of Borrower, including, without limitation,
contingent liabilities;
(v) On the Closing Date and after giving effect to the
financial accommodations contemplated hereunder, all of the assets
supporting the Liabilities shall be sufficient in value, as determined
by Lender, to provide Borrower with
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(a) minimum excess borrowing availability under the Revolving Loan of
$3,000,000, and (b) adequate working capital to enable Borrower to
profitably operate its business;
(W) Subordination agreements, no-offset agreements and
intercreditor agreements in form and substance satisfactory to Lender,
shall have been executed and delivered by the Companies and such other
parties as Lender deems necessary;
(X) During the Interim Period, Lender or its representatives
shall have been given access at all reasonable times to inspect and
evaluate the Collateral (and any collateral pledged by any Guarantor)
and the Companies' books and records; and the Companies shall have
provided Lender with all financial and other information which Lender
may have reasonably requested;
(Y) Lender shall have received satisfactory information
regarding the lawsuit by Capilano International Inc. against
Geoevaluaciones, S.A. de C.V. ("Geo-Mexico"), and Lender shall be
satisfied in its sole discretion (i) with the likely outcome to such
lawsuit, (ii) that an adverse outcome with respect thereto will not
have a material adverse affect on 3-D or Geo-Mexico, and (iii) that 3-D
and Geo-Mexico have adequate cash reserves and contingency plans in the
event of an adverse outcome to such lawsuit;
(Z) Lender shall have received (i) the consolidated and
consolidating third fiscal quarter financial statements of 3-D, and
(ii) the most recently prepared projections of the Companies, all of
which must be acceptable to Lender in its discretion reasonably
exercised;
(AA) Lender shall be satisfied with the Companies' procedures
for verifying job completion;
(BB) Lender shall have received a certificate from the
secretary or assistant secretary of each Company certifying (i) the
adoption of resolutions by the board of directors of such Company
authorizing the transactions contemplated hereby, (ii) the articles or
certificate of incorporation of such Company, and (iii) the by-laws of
such Company; and
(CC) Lender shall have received the Closing Fee and all other
fees and expenses payable on or prior to the Closing Date.
12. DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
12.1 DEFAULT. The occurrence of any one or more of the following events
shall constitute a Default:
(A) Borrower fails to pay any part of the Liabilities when due
or declared due or is in default, beyond any applicable grace period,
in the payment of any other Indebtedness in excess of $125,000 in the
aggregate;
(B) Borrower or any Guarantor fails or neglects to perform,
keep or observe any other term, provision, condition or covenant
contained in this Agreement or in the Ancillary Agreements, which is
required to be performed, kept or observed by Borrower or any Guarantor
and any such failure or neglect shall continue for more than five (5)
days from the date of such failure or neglect, provided that the
foregoing cure period shall not apply to a default with respect to
Section 10.2 hereof;
(C) A default shall occur and continue beyond any applicable
grace period under any agreement, document or instrument, other than
this Agreement or any of the Ancillary Agreements, now or hereafter
existing, to which Borrower is a party if as a result thereof Borrower
is in default of obligations in excess of $125,000 in the aggregate;
(D) Any statement, warranty, representation, report, financial
statement, or
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certificate made or delivered by Borrower or by any Guarantor, or any
of their officers, employees or agents, to Lender is not true and
correct in any material respect;
(E) There shall occur any material uninsured damage to or
loss, theft, or destruction of any of the Collateral;
(F) Collateral or any of Borrower's or any Guarantor's other
assets with an aggregate value in excess of $125,000 are attached,
seized, levied upon or subjected to a writ or distress warrant, or come
within the possession of any receiver, trustee, custodian or assignee
for the benefit of creditors and the same is not dismissed or otherwise
avoided within thirty (30) days thereafter; or application is made by
any Person other than Borrower or any Guarantor for the appointment of
a receiver, trustee, or custodian for any of the Collateral or any of
Borrower's or any Guarantor's other assets and the same is not
dismissed within thirty (30) days after the application therefor;
(G) An application is made by Borrower or any Guarantor for
the appointment of a receiver, trustee or custodian for any of the
Collateral or any of Borrower's or any Guarantor's other assets; a
petition under any section or chapter of the Bankruptcy Code or similar
law or regulation is filed by Borrower or any Guarantor; a petition
under any section or chapter of the Bankruptcy Code or similar law or
regulation is filed against Borrower or any Guarantor and is not
dismissed within thirty (30) days after filing; Borrower or any
Guarantor makes an assignment for the benefit of its creditors or any
case or proceeding is filed by or against Borrower or any Guarantor for
its dissolution, liquidation, or termination; Borrower or any Guarantor
ceases to conduct its business as now conducted or is enjoined,
restrained or in any way prevented by court order from conducting all
or any material part of its business affairs;
(H) Except as permitted in Section 10.3, a notice of lien,
levy or assessment is filed of record with respect to all or any
substantial portion of Borrower's or any Guarantor's assets by the
United States, or any department, agency or instrumentality thereof, or
by any state, county, municipal or other governmental agency including,
without limitation, the Pension Benefit Guaranty Corporation, or any
taxes or debts owing to any of the foregoing becomes a lien or
encumbrance upon the Collateral or any of Borrower's or any Guarantor's
other assets and such lien or encumbrance is not released within thirty
(30) days after its creation;
(i)One or more judgments is rendered against Borrower or any
Guarantor in an aggregate amount in excess of Two Hundred Fifty
Thousand Dollars ($250,000) or, in the lawsuit described in Section
11(y), in excess of Two Million Dollars ($2,000,000), and Borrower or
any Guarantor, as applicable, fails to immediately satisfy such
judgment or fails to bond and stay enforcement of such judgment and
commence appropriate proceedings to appeal such judgment within the
applicable appeal period or, after such appeal is filed, Borrower or
any Guarantor, as applicable, fails to diligently prosecute such appeal
or such appeal is denied;
(J) Borrower or any Guarantor becomes insolvent or fails
generally to pay its debts as they become due;
(K) Borrower fails within fifteen (15) days after the
occurrence of any of the following events, to furnish Lender with
appropriate notice thereof: (i) the happening of a Reportable Event
with respect to any profit sharing or pension plan governed by ERISA
(such notice shall contain the statement of the chief financial
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officer of Borrower setting forth details as to such Reportable Event
and the action which Borrower proposes to take with respect thereto and
a copy of the notice of such Reportable Event to the Pension Benefit
Guaranty Corporation), (ii) the termination of any such plan, (iii) the
appointment of a trustee by an appropriate United States District Court
to administer any such plan, or (iv) the institution of any proceedings
by the Pension Benefit Guaranty Corporation to terminate any such plan
or to appoint a trustee to administer any such plan;
(L) Borrower fails to: (i) furnish to Lender a copy of each
report which is filed by Borrower with respect to any profit sharing or
pension plan governed by ERISA promptly after the filing thereof with
the Secretary of Labor or the Pension Benefit Guaranty Corporation or
(ii) notify Lender promptly upon receipt by Borrower of any notice of
the institution of any proceeding or other actions which may result in
the termination of any such plans;
(M) Any Guarantor revokes or terminates any Guaranty relating
to any of the Liabilities or any document or agreement securing the
same, or defaults under the terms of any such Guaranty or other
agreement beyond any applicable grace period;
(N) Any party (other than Lender) to an intercreditor and/or
subordination agreement executed in connection herewith shall be in
default thereunder;
(O) A default occurs under any agreement, instrument or
document relating to any of the Liabilities heretofore, now or at any
time or times hereafter executed by, or delivered to Lender by Borrower
or by any Guarantor. 12.2 ACCELERATION OF THE LIABILITIES. Upon and
after the occurrence of a Default,
all of the Liabilities may, at the option of Lender and without demand, notice,
or legal process of any kind, be declared, and immediately shall become, due and
payable.
12.3 ADVANCES DURING CURE PERIOD. Upon the occurrence of a Default
which is subject to any cure period, Lender may, in its sole discretion, cease
making further advances during the time such Default remains uncured.
12.4 DEFAULT RATE. Upon the occurrence of a Default, the Loans shall
bear interest at a Default Rate equal at all times to three percent (3%) above
the Prime Rate-based interest rates provided for such Loans, such Default rate
to begin upon the occurrence of the Default and to be adjusted upon any change
in the Prime Rate as provided herein.
12.5 REMEDIES. Upon and after the occurrence of a Default, Lender shall
have all of the following rights and remedies:
(a) All of the default rights and remedies of a secured party
under the California Commercial Code or any other applicable law, all
of which rights and remedies shall be cumulative, and not exclusive, to
the extent permitted by law and in addition to any other rights and
remedies contained in this Agreement and in any of the Ancillary
Agreements;
(b) The right to (i) peacefully enter upon the premises of
Borrower or any other place or places where the Collateral is located,
without any obligation to pay rent to Borrower or any other Person,
through self-help and without judicial process or first obtaining a
final judgment or giving Borrower notice and opportunity for a hearing
on the validity of Lender's claim, and remove the Collateral from such
premises and places to the premises of Lender or any agent of Lender,
for such time as Lender may require to collect or liquidate the
Collateral, and/or (ii) require Borrower to assemble and deliver the
Collateral to Lender at a place to be designated by Lender;
(c) The right to (i) open Borrower's mail and collect any and
all amounts
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due from Account Debtors or direct that Borrower's mail be diverted to
a post office box or other location as determined by Lender, (ii)
notify Account Debtors that the Accounts have been assigned to Lender
and that Lender has a security interest therein and (iii) direct such
Account Debtors to make all payments due from them upon the Accounts,
including the Special Collateral, directly to Lender or to a lock box
designated by Lender. Lender shall promptly furnish Borrower with a
copy of any such notice sent and Borrower hereby agrees that any such
notice, in Lender's sole discretion, may be sent on Lender's
stationery, in which event, Borrower shall, upon demand, co-sign such
notice with Lender;
(d) The right to sell, lease or to otherwise dispose of all or
any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale or
sales, in lots or in bulk, for cash or on credit, all as Lender, in its
sole discretion, may deem advisable. At any such sale or sales of the
Collateral, the Collateral need not be in view of those present and
attending the sale, nor at the same location at which the sale is being
conducted. Lender shall have the right to conduct such sales on
Borrower's premises or elsewhere and shall have the right to use
Borrower's premises without charge for such sales for such time or
times as Lender may see fit. Lender is hereby granted a license or
other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names,
trademarks and advertising matter, or any property of a similar nature,
as it pertains to the Collateral, in advertising for sale and selling
any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Lender's benefit but Lender shall
have no obligations thereunder. Lender may purchase all or any part of
the Collateral at public or, if permitted by law, private sale and, in
lieu of actual payment of such purchase price, may setoff the amount of
such price against the Liabilities. The proceeds realized from the sale
of any Collateral shall be applied first to the costs, expenses and
attorneys' fees and expenses incurred by Lender for collection and for
acquisition, completion, protection, removal, storage, sale and
delivery of the Collateral; second to interest due upon any of the
Liabilities; and third to the principal of the Liabilities. Lender
shall account to Borrower for any surplus. If any deficiency shall
arise, Borrower shall remain liable to Lender therefor. 12.6 NOTICE.
Borrower agrees that any notice required to be given by Lender of a
sale, lease, or other disposition of any of the Collateral or any other intended
action by Lender, which is personally delivered to Borrower or which is
deposited in the United States mail, postage prepaid and duly addressed to
Borrower at the address set forth in Section 13.10, at least five (5) days prior
to any such public sale, lease or other disposition or other action being taken,
or the time after which any private sale of the Collateral is to be held, shall
constitute commercially reasonable and fair notice thereof to Borrower.
13.0 MISCELLANEOUS
13.1 APPOINTMENT OF LENDER AS BORROWER'S LAWFUL ATTORNEY-IN-FACT.
Borrower, irrevocably designates, makes, constitutes and appoints Lender (and
all persons designated by Lender) as Borrower's true and lawful attorney and
agent-in-fact (this power of attorney is coupled with an interest) and Lender,
or Lender's agent, may, without notice to Borrower:
(a) At any time hereafter, for the purpose of protecting,
preserving or collecting the Collateral, endorse by writing or stamp
Borrower's name on any checks, notes, drafts or any other payment
relating to the Collateral which comes into
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<PAGE>
the possession of Lender or under Lender's control and deposit the same
to the account of Lender for application to the Liabilities;
(b) At any time after the occurrence of an uncured Event of
Default, in Borrower's or Lender's name: (i) demand payment of the
Collateral; (ii) enforce payment of the Collateral, by legal
proceedings or otherwise; (iii) exercise all of Borrower's rights and
remedies with respect to the collection of the Collateral; (iv) settle,
adjust, compromise, extend or renew the Accounts and the Special
Collateral; (v) settle, adjust or compromise any legal proceedings
brought to collect the Collateral; (vi) if permitted by applicable law,
sell or assign the Collateral upon such terms, for such amounts and at
such time or times as Lender deems advisable; (vii) satisfy and release
the Accounts and Special Collateral; (viii) take control, in any
manner, of any item of payment or proceeds referred to in Section 4.3;
(ix) prepare, file and sign Borrower's name on any proof of claim in
Bankruptcy or similar document against any Account Debtor; (x) prepare,
file and sign Borrower's name on any notice of lien, assignment or
satisfaction of lien or similar document in connection with the
Collateral; (xi) do all acts and things necessary, in Lender's sole
discretion, to fulfill Borrower's obligations under this Agreement;
(xii) endorse by writing or stamp the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or
similar document or agreement relating to the Collateral; and (xiii)
use the information recorded on or contained in any data processing
equipment and computer hardware and software relating to the Collateral
to which Borrower has access; provided that, upon Borrower's cure of
any Default or Event of Default, Lender shall have the right to
complete any action commenced by it as attorney or agent-in-fact while
such Default or Event of Default was continuing; and
(c) At any time after the occurrence of an Event of Default
notify the post office authorities to change the address for delivery
of Borrower's mail to an address designated by Lender and receive, open
and dispose of all mail addressed to Borrower.
13.2 MODIFICATION OF AGREEMENT; ASSIGNMENT OR SALE OF INTEREST. This
Agreement and the Ancillary Agreements may not be modified, altered or amended,
except by an agreement in writing signed by Borrower and Lender. Borrower may
not sell, assign or transfer this Agreement or the Ancillary Agreements or any
portion hereof or thereof, including, without limitation, Borrower's right,
title, interest, remedies, powers, or duties hereunder or thereunder. Borrower
hereby consents to Lender's participation, sale, assignment, transfer or other
disposition, at any time or times hereafter, of this Agreement or the Ancillary
Agreements or of any portion hereof or thereof, including, without limitation,
Lender's right, title, interest, remedies, powers, or duties hereunder or
thereunder.
13.3 ATTORNEYS' FEES AND EXPENSES; LENDER'S OUT-OF-POCKET EXPENSES. If,
at any time or times, whether prior or subsequent to the date hereof and
regardless of the existence of a Default or an Event of Default, Lender incurs
legal or other costs and expenses or employs counsel, accountants, advisors,
consultants and/or other professionals for advice or other representation or
services in connection with:
(a) The preparation, negotiation, execution and administration
of this Agreement, all Ancillary Agreements, any amendment of or
modification of this Agreement or the Ancillary Agreements or any sale
or attempted sale of any interest herein to a co-lender or a
Participant; or consultation with counsel in connection with any of the
foregoing or any of the items listed in clauses (b) through (e) of this
39
<PAGE>
Section 13.3;
(b) Any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Lender, Borrower or any other Person) in
any way relating to the Collateral, this Agreement, the Ancillary
Agreements or Borrower's affairs;
(c) Any attempt to enforce any rights of Lender or any
Participant against Borrower or any other Person which may be obligated
to Lender or such Participant by virtue of this Agreement or the
Ancillary Agreements, including, without limitation, the Account
Debtors;
(d) Any attempt to inspect, verify, protect, collect, sell,
liquidate or otherwise dispose of any of the Collateral; or
(e) Any inspection, verification, protection, collection,
sale, liquidation or other disposition of any of the Collateral,
including without limitation, Lender's periodic or special audits of
Borrower's books and records;
then, in any such event, the reasonable attorneys' and paralegals' fees and
expenses arising from such services and all reasonably incurred expenses, costs,
charges and other fees of or paid by Lender in any way or respect arising in
connection with or relating to any of the events or actions described in this
Section shall be payable by Borrower to Lender upon demand and shall be
additional Liabilities. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include bank charges and fees,
accountants' fees, costs and expenses, court costs, fees and expenses,
photocopying and duplicating expenses, court reporter fees, costs and expenses,
long distance telephone charges, air express charges, telegram charges,
secretarial over-time charges, and expenses for travel, lodging and food paid or
incurred in connection with the performance of all such services.
13.4 WAIVER BY LENDER. Lender's failure, at any time or times
hereafter, to require strict performance by Borrower of any provision of this
Agreement or the Ancillary Agreements shall not constitute a waiver, or affect
or diminish any right of Lender thereafter to demand strict compliance and
performance herewith or therewith. Any suspension or waiver by Lender of a
Default under this Agreement or the Ancillary Agreements shall not suspend,
waive or affect any other Default under this Agreement or the Ancillary
Agreements, whether the same is prior or subsequent thereto and whether of the
same or of a different type. None of the undertakings, agreements, warranties,
covenants and representations of Borrower contained in this Agreement or the
Ancillary Agreements and no Default under this Agreement or the Ancillary
Agreements shall be deemed to have been suspended or waived by Lender, unless
such suspension or waiver is by an instrument in writing signed by an officer of
Lender and directed to Borrower specifying such suspension or waiver.
13.5 SEVERABILITY. Wherever possible, each provision of this Agreement
and the Ancillary Agreements shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
or the Ancillary Agreements shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement or the Ancillary Agreements.
13.6 PARTIES; ENTIRE AGREEMENT. This Agreement and the Ancillary
Agreements shall be binding upon and inure to the benefit of the respective
successors and assigns of Borrower and Lender. Borrower's successors and assigns
shall include, without limitation, a trustee, receiver or debtor-in-possession
of or for Borrower. Nothing contained in this Section shall be deemed to modify
Section 13.2. This Agreement is the complete statement of the agreement by and
between Borrower and Lender and supersedes all prior negotiations,
40
<PAGE>
understandings and representations between them with respect to the subject
matter of this Agreement.
13.7 CONFLICT OF TERMS. The provisions of the Ancillary Agreements are
incorporated in this Agreement by this reference. Except as otherwise provided
in this Agreement and except as otherwise provided in the Ancillary Agreements
by specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in conflict with, or inconsistent with,
any provision in any Ancillary Agreement, the provision contained in this
Agreement shall govern and control.
13.8 WAIVER BY BORROWER. Except as otherwise provided for in this
Agreement, Borrower waives (a) presentment, demand and protest, notice of
protest, notice of presentment, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Lender on which Borrower may in any way be liable and hereby
ratifies and confirms whatever Lender may do in this regard; (b) except as
otherwise provided by applicable law, all rights to notice and a hearing prior
to Lender's taking possession or control of, or to Lender's replevy, attachment
or levy upon, the Collateral or any bond or security which might be required by
any court prior to allowing Lender to exercise any of Lender's remedies; and (c)
except as otherwise provided by applicable law, the benefit of all valuation,
appraisement, extension and exemption laws. Borrower acknowledges that it has
been advised by its own counsel with respect to this Agreement and the
transactions evidenced by this Agreement. Borrower further agrees that (y)
Lender shall have no obligation to take, and Borrower shall have the sole
responsibility for taking, any and all steps to preserve rights against any and
all Account Debtors and against any and all prior parties to any note, chattel
paper, draft, trade acceptance, or other instrument for the payment of money
covered by the security interest whether or not in Lender's possession and (z)
Lender shall not be responsible to Borrower for loss or damage resulting from
Lender's failure to enforce any Accounts or to collect any moneys due or to
become due thereunder or other proceeds constituting Collateral hereunder unless
such loss or damage results from Lender's gross negligence or willful
misconduct.
13.9 GOVERNING LAW, VENUE. This Agreement has been delivered for
acceptance by Lender in Los Angeles County, California and shall be governed by
and construed in accordance with the internal laws (as opposed to the conflicts
of law provisions) of the State of California as the same may from time to time
be in effect, including without limitation the Uniform Commercial Code as
adopted in California. Borrower hereby (a) irrevocably submits to the
jurisdiction of any state or federal court located in Los Angeles County,
California over any action or proceeding to enforce or defend any matter arising
from or related to this Agreement; (b) waives personal service of any and all
process upon Borrower, and consents that all such service of process be made by
messenger, certified mail or registered mail directed to Borrower at the address
set forth in Section 13.10 and service so made shall be deemed to be completed
upon the earlier of actual receipt or three (3) days after the same shall have
been posted to Borrower's address; (c) irrevocably waives, to the fullest extent
Borrower may effectively do so, the defense of an inconvenient forum to the
maintenance of any such action or proceeding; (d) agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in any
other jurisdictions by suit on the judgment or in any other manner provided by
law; and (e) agrees not to institute any legal action or proceeding against
Lender or any of Lender's directors, officers, employees, agents or property,
concerning any matter arising out of or relating to this Agreement in any court
other than one located in Los Angeles County, California. Nothing
41
<PAGE>
in this Section shall affect or impair Lender's right to serve legal process in
any manner permitted by law or Lender's right to bring any action or proceeding
against Borrower or Borrower's property in the courts of any other jurisdiction.
13.10 NOTICE. Except as otherwise provided herein or in the Ancillary
Agreements:
(a) All notices, requests, demands, directions and other
communications provided for hereunder or under any other Ancillary
Agreement must be in writing and must be mailed, telecopied or
delivered to the appropriate party at the address set forth below or,
as to any party hereto or to any Ancillary Agreement, at any other
address as may be designated by it in a written notice sent to all
other parties in accordance with this Section; and
(b) Any notice, request, demand, direction or other
communication given by telecopier will be confirmed within 48 hours by
letter mailed or delivered to the appropriate party at its respective
address. Except as otherwise expressly provided herein or in any
Ancillary Agreement, if any notice, request, demand, direction or other
communication required or permitted by any Loan Document is given by
mail it will be effective on the earlier of receipt or the third
calendar day after deposit in the United States mail with first class
or airmail postage prepaid; if given by telecopier, when sent; or if
given by personal delivery, when delivered.
If to Lender, at:
Sanwa Business Credit Corporation
550 North Brand Boulevard, Suite 950
Glendale, California 91203
Attn: Region Manager
Telephone: (818) 545-0090
Telecopier: (818) 545-0095
If to Borrower, at:
Northern Geophysical of America, Inc.
8226 Park Meadows Drive
Littleton, Colorado 80124
Attn: Ronald L. Koons, Vice President & C.F.O.
Telephone: (303) 858-0500
Telecopier: (303) 708-8941
Tax Identification Number: 133869239
13.11 SECTION TITLES, ETC.. The Section titles and table of contents,
if any, contained in this Agreement are and shall be without substantive meaning
or content of any kind whatsoever and are not a part of the agreement between
the parties hereto. All references herein to Sections, paragraphs, clauses and
other subdivisions refer to the corresponding Sections, paragraphs, clauses and
other subdivisions of this Agreement; and the words "herein", "hereof",
"hereby", "hereto", "hereunder", and words of similar import refer to this
Agreement as a whole and not to any particular Section, paragraph, clause or
subdivision hereof. All Exhibits which are referred to herein or attached hereto
are hereby incorporated by reference.
13.12 COURSE OF DEALING. No course of dealing between Lender and
Borrower or
42
<PAGE>
any third party and no delay or omission by Lender in exercising any right or
remedy hereunder or under any Ancillary Agreement or with respect to any
Liabilities shall operate as a waiver thereof or of any other right or remedy,
and no single or partial exercise thereof shall preclude any other or further
exercise thereof or the exercise of any other right or remedy. All rights and
remedies of Lender are cumulative.
13.13 SETOFF. Without limiting any other right of Lender, whenever
Lender has the right to declare any Liabilities to be immediately due and
payable (whether or not it has so declared), Lender at its sole election may
setoff against the Liabilities any and all monies then or thereafter owed to
Borrower by Lender in any capacity, whether or not the Liabilities or the
obligation to pay such monies owed by Lender is then due, and Lender shall be
deemed to have exercised such right of setoff immediately at the time of such
election even though any charge therefor is made or entered on Lender's records
subsequent thereto.
13.14 NONLIABILITY OF LENDER. Borrower acknowledges and agrees that:
(a) Any inspections of any Collateral made by or through
Lender are for purposes of administration of advances made hereunder
only and Borrower is not entitled to rely upon the same;
(b) By accepting or approving anything required to be
observed, performed, fulfilled or given to Lender pursuant to this
Agreement or the Ancillary Agreements, Lender shall not be deemed to
have warranted or represented the sufficiency, legality, effectiveness
or legal effect of the same, or of any term, provision or condition
thereof, and such acceptance or approval thereof shall not constitute a
warranty or representation to anyone with respect thereto by Lender;
(c) The relationship between Borrower and Lender is, and shall
at all times remain, solely that of a borrower and lender; Lender shall
not under any circumstance be construed to be a partner or joint
venturer of Borrower; Lender shall not under any circumstance be deemed
to be in a fiduciary relationship with Borrower; Lender does not
undertake or assume any responsibility or duty to Borrower to select,
review, inspect, supervise, pass judgment upon or inform Borrower of
any matter in connection with its property or the operations of
Borrower; Borrower shall rely entirely upon its own judgment with
respect to such matters; and any review, inspection, supervision,
exercise of judgment or supply of information undertaken or assumed by
Lender in connection with such matters is solely for the protection of
Lender and neither Borrower nor any other Person is entitled to rely
thereon; and
(d) Lender shall not be responsible or liable to any Person
for any loss, damage, liability or claim of any kind relating to injury
or death to such Persons or damage to property not caused by Lender and
caused by the actions, inaction or negligence of Borrower and Borrower
hereby indemnifies and holds Lender harmless from any such loss,
damage, liability or claim.
13.15 TIME OF THE ESSENCE. Time is of the essence hereunder and under
the Ancillary Agreements.
13.16 INDEMNIFICATION.
43
<PAGE>
If after receipt of any payment of all or any part of the Indebtedness,
Lender is for any reason compelled to surrender such payment to any Person,
because such payment is determined to be void or voidable as a preference,
impermissible setoff, or a diversion of trust funds, or for any other reason,
this Agreement shall continue in full force and Borrower shall be liable to, and
shall indemnify and hold Lender harmless for, the amount of such payment
surrendered. The provisions of this Section shall be and remain effective
notwithstanding any contrary action which may have been taken by Lender in
reasonable reliance upon such payment, and any such contrary action so taken
shall be without prejudice to Lender's rights under this Agreement and shall be
deemed to have been conditioned upon such payment having become final and
irrevocable. The provisions of this Section shall survive the termination of
this Agreement.
Borrower agrees to indemnify, save and hold harmless Lender and its
directors, officers, agents, attorneys and employees (collectively the
"Indemnitees") from and against: (i) Any and all claims, demands, actions or
causes of action that are asserted against any Indemnitee by any Person if the
claim, demand, action or cause of action directly or indirectly relates to a
claim, demand, action or cause of action that such Person asserts or may assert
against Borrower, or any Affiliate or any officer, director or shareholder of
Borrower and such claim, demand, action or cause of action arises out of or
relates to this Agreement or the Ancillary Agreements, the use of proceeds of
any advance, or the relationship of Borrower and Lender under this Agreement;
(ii) Any and all claims, demands, actions or causes of action if the claim,
demand, action or cause of action arises out of or relates to Borrower's
compliance or noncompliance with the requirements of any environmental law;
(iii) Any administrative or investigative proceeding by any governmental agency
arising out of or related to a claim, demand, action or cause of action
described in clauses (i) or (ii) above; and (iv) Any and all liabilities,
losses, costs or expenses (including reasonable attorneys' fees and
disbursements and other professional services) that any Indemnitee suffers or
incurs as a result of the assertion of any foregoing claim, demand, action or
cause of action; provided that no Indemnitee shall be entitled to
indemnification for any loss caused by its own gross negligence or willful
misconduct. Each Indemnitee is authorized to employ counsel of its own choosing
in enforcing its rights hereunder and in defending against any claim, demand,
action or cause of action covered by this Section; provided that each Indemnitee
shall endeavor, in connection with any matter covered by this Section which also
involves other Indemnitees, to use reasonable efforts to avoid unnecessary
duplication of effort by counsel for all Indemnitees. Whenever practicable, upon
obtaining actual knowledge of any event that would entitle Lender to be
indemnified under this Section, Lender shall endeavor to provide notice to
Borrower of such fact and Lender shall cooperate with Borrower to endeavor to
minimize the liabilities for which Lender is entitled to be indemnified. Any
obligation or liability of Borrower to any Indemnitee under this Section shall
survive the expiration or termination of this Agreement and the repayment of all
Liabilities and the payment and performance of all other obligations under this
Agreement owed to Lender.
13.17 WAIVER OF RIGHT TO TRIAL BY JURY. THE PARTIES TO THIS AGREEMENT
ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL EXPENSES AND DELAYS NOT
OCCASIONED BY NONJURY TRIALS. THE PARTIES TO THIS AGREEMENT AGREE AND STIPULATE
THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL JUDGE IN A COURT BY MEANS
OF A BENCH
44
<PAGE>
TRIAL WITHOUT A JURY. IN VIEW OF THE FOREGOING, AND AS A SPECIFICALLY NEGOTIATED
PROVISION OF THIS AGREEMENT, EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO,
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the day and year specified at the beginning hereof.
BORROWER:
---------
NORTHERN GEOPHYSICAL OF
AMERICA,
INC.
By /s/ Ronald L. Koons
---------------------------------
Title Vice President
LENDER:
SANWA BUSINESS CREDIT
CORPORATION
By /s/ Timothy K. Turner
---------------------------------
Title First Vice President
45
<PAGE>
EXHIBIT A
FINANCIALS
(SEE ATTACHED)
A-1
<PAGE>
EXHIBIT B
FORM OF NOTICE OF BORROWING/CONVERSION
(SEE ATTACHED)
B-1
<PAGE>
EXHIBIT C
LOCATIONS
8226 Park Meadows Drive
Littleton, CO 80124
1) 2361 Cinnabar Loop
Anchorage, AK 99507
2) 11177 Katy Freeway
Houston, Texas 77079
3) 2495 W. Mesa Court
Grand Junction, CO 81505
4) 5723 Roberts Street
Katy, Texas 77450
5) 5707 State Route 61, Box 32
Mt. Gilead, OH 43338
6) 599 Lexington Avenue
Suite 4102
New York, NY 10022
7) Ninos Heros No. 51
Esquina Guadalupel Ramirez
Col. Tepenan, Del. Xochimilco
Mexico, D.F. 16020
8) 4750 30th Street SE
Calgary, Alberta, Canada T2B 2Z1
The states in which Borrower usually works include:
1) California
2) Nevada
3) Utah
4) Colorado
5) Wyoming
6) Montana
7) North Dakota
C-1
<PAGE>
8) Kansas
9) Oklahoma
10) Texas
11) Mississippi
12) Alaska
The states in which Borrower has worked sporadically in the past and potentially
in the future include:
1) Oregon
2) Illinois
3) Louisiana
4) New Mexico
C-2
<PAGE>
EXHIBIT D
TRADENAMES
1) 3-D Geophysical, Inc.
2) 3-D Geophysical of Latin America, Inc.
3) 3-D Geophysical of Canada, Inc.
4) Geo Acquisition Sub, Inc.
5) Geoevaluaciones, S.A. de C.V.
6) Procesos Interactivos Avanzados, S.A. de C.V.
7) International Production Services, Inc.
8) JanVo Equities, Ltd.
9) Cal-Core Properties, Ltd.
10) Mueller Consulting Service, Ltd.
11) Siegfried & Siegfried, Ltd.
12) JRS Exploration Company, Ltd.
13) Paragon Geophysical, Inc.
14) Kemp Geophysical Corporation
15) Northern Geophysical of America, A Joint Venture
16) Northern Geophysical of America (Alaska), Inc.
D-1
<PAGE>
EXHIBIT E
LITIGATION
1. Leo Popp and Zbranek Brothers v. Victor Jerome Sodia and Kemp
Geophysical Corporation, filed in the 23rd Judicial District Court of
Wharton County, Texas
2. Kelman Technologies, Inc. (formerly Capilano International, Inc.) v.
Geoevaluaciones, S.A. de C.V., filed in Federal District Court in
Mexico
3. Karen L. Rudolph v. Northern Geophysical of America, Inc., filed in
United States District Court, Southwestern Division, North Dakota
4. Crystal Calkins, f/n/a Crystal Hutzenbiler v. Northern Geophysical of
America, Inc., filed in United States District Court, Southwestern
Division, North Dakota
5. Domingo Martinez Uscanga v. Geoevaluaciones, S.A. de C.V., filed in
Junta Federal 38 de Conciliacion y Arbitraje de Coatzacoalcos, Veracruz
6. Naftali Mendez Gomez v. PEMEX, Perforadata and Geoevaluaciones, S.A. de
C.V., filed in Junta Especial 7-Bis de la Federal de Concilacion y
Arbitraje (Labor Federal Court 7-Bis)
7. Geoevaluaciones, S.A. de C.V. v. S.H.C.P. (Mexican Tax Authority),
filed in Income Tax Office in Nuevo Laredo, Tamaulipas, Mexico, Docket
No. 738/97
8. Geoevaluaciones, S.A. de C.V. v. S.H.C.P. (Mexican Tax Authority),
filed in Income Tax Office in Nuevo Laredo, Tamaulipas, Mexico, Docket
No. 739/97
9. Geoevaluaciones, S.A. de C.V. v. S.H.C.P. (Mexican Tax Authority),
filed in Income Tax Office in Nuevo Laredo, Tamaulipas, Mexico, Docket
No. 32420
10. Elsie Zahn and Edwin & Lillian Eggemeyer v. Kemp Geophysical, a
threatened action in Texas resulting from an alleged trespass in
January, 1996
11. Coby Shorter, Jr. v. Kemp Geophysical, a threatened action in Texas
resulting from an alleged trespass in January, 1996
E-1
<PAGE>
EXHIBIT F
TITLE TO ASSETS, LIENS
F-1
<PAGE>
EXHIBIT G
AFFILIATES AND SUBSIDIARIES
AFFILIATES
1) 3-D Geophysical, Inc., a Delaware corporation
2) 3-D Geophysical of Latin America, Inc., a Cayman Islands company
3) 3-D Geophysical of Canada, Inc., an Alberta Canada company
4) Geo Acquisition Sub, Inc., a Delaware corporation
5) Geoevaluaciones, S.A. de C.V., a Mexican company
6) Procesos Interactivos Avanzados, S.A. de C.V., a Mexican company
7) International Production Services, Inc., a Texas company
8) JanVo Equities, Ltd., an Alberta, Canada company
9) Cal-Core Properties, Ltd., an Alberta, Canada company
10) Mueller Consulting Service, Ltd., an Alberta, Canada company
11) Siegfried & Siegfried, Ltd., an Alberta, Canada company
12) JRS Exploration Company, Ltd., an Alberta, Canada company
13) Paragon Geophysical, Inc., an Ohio company
14) Kemp Geophysical Corporation, a Texas company
15) Northern Geophysical of America, A Joint Venture, a Colorado partnership
16) Northern Geophysical of America (Alaska), Inc., an Alaska corporation
SUBSIDIARIES
None
G-1
<PAGE>
EXHIBIT H
FORM OF COVENANT COMPLIANCE CERTIFICATE
(SEE ATTACHED)
H-1
<PAGE>
EXHIBIT I
FORM OF DAILY COLLATERAL REPORT
(SEE ATTACHED)
I-1
<PAGE>
EXHIBIT J
EXISTING INDEBTEDNESS FOR BORROWED MONEY
J-1
<PAGE>
SCHEDULE 1.30
EQUIPMENT
68
<PAGE>
SCHEDULE 10.1(A)
FINANCIAL COVENANTS
NOTE: All of the following covenants and definitions are on a
consolidated basis for 3-D Geophysical, Inc. and its consolidated subsidiaries
<TABLE>
<CAPTION>
=============================================================================================================================
COVENANT REQUIRED COMMENTS
=============================================================================================================================
<S> <C> <C> <C>
Indebtedness to Tangible Net 1997 - 1.3 Tested quarterly.
Worth Ratio 1998 - 1.3 For purposes of this
1999 - 1.3 covenant,
2000 - 1.3 "Indebtedness" shall
2001 - 1.3 be exclusive of
2002 - 1.3 operating leases,
contingent
liabilities
arising
out
of
lawsuits
not
yet
ripened
into
judgments,
performance
and
importation
bonds
and
deferred
taxes.
- -----------------------------------------------------------------------------------------------------------------------------
Tangible Net Worth Closing Date $38,000,000 Tested quarterly
("TNW")
At 12/31/97 $38,000,000
Thereafter Previous year-end TNW plus the following amount
1998
1st quarter $450,000
2nd quarter $450,000
3rd quarter $750,000
4th quarter $950,000
1999
1st quarter $300,000
2nd quarter $300,000
3rd quarter $700,000
4th quarter $800,000
=============================================================================================================================
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================================
<S> <C> <C> <C>
2000
1st quarter $450,000
2nd quarter $450,000
3rd quarter $750,000
4th quarter $950,000
2001
1st quarter $500,000
2nd quarter $500,000
3rd quarter $1,000,000
4th quarter $1,200,000
2002
1st quarter $650,000
2nd quarter $650,000
3rd quarter $1,200,000
4th quarter $1,450,000
- -----------------------------------------------------------------------------------------------------------------------------
Cash Flow Coverage Ratio 1997 - 1.05 1997 will be a 4th
1998 - 1.05 quarter test only.
1999 - 1.05
2000 - 1.10 1998 will be tested
2001 - 1.15 each quarter based
2002 - 1.20 on the following
trailing levels:
1st quarter - trailing
6 months
2nd quarter - trailing
9 months
3rd quarter - trailing
12 months
4th quarter - trailing
12 months
1999 and thereafter
will be tested each
quarter on a trailing
12 month basis
</TABLE>
68
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income (determined in 1997 1997 will be a 4th
accordance with generally 4th quarter $200,000 for the quarter test only.
accepted accounting quarter
principles, consistently 1998 will be tested
applied) 1998 each quarter based
----
1st quarter $ 900,000 on the following
2nd quarter $ 900,000 trailing levels:
3rd quarter $1,500,000
4th quarter $1,900,000 1st quarter - trailing
6 months
1999
1st quarter $1,900,000 2nd quarter - trailing
2nd quarter $1,800,000 9 months
3rd quarter $1,700,000
4th quarter $1,600,000 3rd quarter - trailing
12 months
2000
1st quarter $1,700,000 4th quarter - trailing
2nd quarter $1,700,000 12 months
3rd quarter $1,800,000
4th quarter $1,900,000 1999 and thereafter
will be tested each
2001 quarter on a trailing
1st quarter $2,000,000 12 month basis
2nd quarter $2,100,000
3rd quarter $2,300,000
4th quarter $2,400,000
2002
1st quarter $2,500,000
2nd quarter $2,600,000
3rd quarter $2,800,000
4th quarter $2,900,000
=============================================================================================================================
</TABLE>
68
<PAGE>
SCHEDULE 10.2
DEPOSIT ACCOUNTS
<TABLE>
<CAPTION>
Bank or Institution Acct. Account No. Address
Name
<S> <C> <C> <C>
1) Wells Fargo Bank 3-D 4159499706 Energy Department
3-D 4159677962 1000 Louisiana
NGA 4159677921 3rd Floor
NGA 4159677939 Houston, Texas 77002
NGA 4159677913
3-D 4159677947
1) Bank One, Colorado, N.A. NGA 1283238127 P.O. Box 5586
NGA 1283236881 Denver, CO 80217-5586
3-D 1283238135 1125 17th Street
3-D 616285722 Denver, CO 80202-2088
NGA 616285714 Attention: Ann Lyons
3-D 616285730
1) Bank One, N.A. Paragon 789068228 Department 1045
Paragon 789065628 Columbus, OH 43271-1045
Paragon 789068201
1) Norwest Bank 3-D 2693022920 2350 East Arapahoe Road
3-D 2698019346 Littleton, CO 80122
1) Chase Manhattan Bank 3-D 031173041 1211 Avenue of the Americas
36th Floor
New York, NY 10036
1) Laredo National Bank GEO 80106218 Houston, Texas
1) Barclays Bank PLC 2774282 P.O. Box 68
Georgetown, Grand Cayman,
BWI
1) Banco Wiese 1484280 051 Camino Real
3475131 Lima, Peru
1) Banco Santa Cruz de la Sierra 1000104200302241 Santa Cruz, Bolivia
1) Royal Bank of Canada 1080018 Calgary, Alberta, Canada
</TABLE>
68
<PAGE>
<TABLE>
<S> <C> <C>
1) Alberta Treasury Branches 730000005124 Calgary, Alberta, Canada
730000005170
730000005102
730000007824
730000008624
730000009424
730000010824
730000011624
730000012424
730000013224
730000016724
730000163324
730000164124
730000018324
730000019124
730000020524
1) Banca Serfin, S.A. 40003113425 Renosa, Tamualipas, Mexico
1) Banca Serfin, S.A. 0530120808781 Posa Rica, Veracruz, Mexico
1) Banca Serfin, S.A. 10604018686 Soledad de Doblado,
Veracruz, Mexico
1) Banca Serfin, S.A. 03707382927 General Bravo, N.L., Mexico
1) Banca Serfin, S.A. 09006053748 Mexico City, Mexico
09009412285
1) Banco Inverlar, S.A. 9275185 Mexico City, Mexico
1) Banamex, S.A. 3630757 Mexico City, Mexico
9275185
1) Banamex, S.A. 2036102 Posa Rica, Veracruz, Mexico
1) Banamex, S.A. 3020414 Reynosa, Tamulipas, Mexico
1) Bancomer, S.A. 181788 Laredo, Tamulipas, Mexico
1) Inversiones Serfin 09009412285 Mexico City, Mexico
1) Inversiones Banamex 71676560 Mexico City, Mexico
1) Banco Continental/Tarapoto 00110310080100014926 Tarapota, Peru
Abbreviations Summary:
"3-D" = 3-D Geophysical, Inc.
"NGA" = Northern Geophysical of America, Inc.
"Paragon" = Paragon Geophysical, Inc.
"GEO" = Geoevaluaciones, S.A. de C.V.
</TABLE>
68
TERM NOTE
$10,000,000 Los Angeles, California
As of November 17, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
SANWA BUSINESS CREDIT CORPORATION, a Delaware corporation (hereinafter "Lender")
at its offices located at 550 North Brand Boulevard, Suite 950, Glendale,
California 91203, or such other place as Lender may from time to time designate
in writing, in lawful money of the United States of America, the principal sum
of Ten Million Dollars ($10,000,000), plus interest from the date hereof on the
unpaid principal balance, as set forth herein.
PRINCIPAL. The principal sum hereof shall be payable as follows:
A. Fifty-nine (59) monthly installments of $119,048 each, commencing on
December 1, 1997 and continuing on the first day of each consecutive month
thereafter through and including November 1, 2002; and
B. The entire unpaid principal balance, together with all accrued and
unpaid interest thereon and any other amounts due hereunder, shall be due and
payable on November 16, 2002.
INTEREST. Interest shall be computed at the rates and in the manner
provided in the Agreement (as defined below) and shall be payable on the first
day of each and every month (commencing December 1, 1997).
ADDITIONAL PROVISIONS. At the option of Lender, either unpaid principal
or interest or both may be charged to the undersigned's loan account with
Lender.
The makers, endorsers and guarantors of this Term Note hereby waive
presentment for payment, demand, notice of non-payment and dishonor, protest and
notice of protest; WAIVE TRIAL BY JURY in any action and/or proceeding arising
on, out of or under or by reason of this Term Note; consent to any renewals,
extensions and partial payments of this Term Note or any indebtedness for which
it is given, and consent that no such renewals extensions or partial payments
shall discharge any party hereto from liability hereon in whole or in part. If a
petition under any provision of the U.S. Bankruptcy Code or any other insolvency
statute for any relief thereunder shall be filed after the date hereof by or
against any maker, endorser or guarantor hereof, then this Term Note and all
other existing obligations of every kind of each maker, endorser or guarantor
hereof to the holder hereof shall become immediately due and payable.
It is expressly agreed that if default be made in payment of any
principal or
<PAGE>
interest installment, as above provided, or in the payment of any other
indebtedness owing to the holder of this Term Note, the then unpaid principal
balance due and owing on this Term Note, together with interest accrued thereon,
shall forthwith become due and payable at the option of the holder hereof,
without presentment, demand, protest or notice of protest of any kind, all of
which are hereby expressly waived.
This Term Note is secured by (a) the Collateral pledged by the
undersigned pursuant to that certain Loan and Security Agreement dated as of the
date hereof (the "Agreement") between the undersigned and Lender, (b) the
collateral pledged by the undersigned pursuant to that certain Security
Agreement (Intellectual Property) dated as of the date hereof between the
undersigned and Lender, and (c) any other collateral heretofore or at any time
hereafter pledged by the undersigned to Lender. The Agreement and the Security
Agreement (Intellectual Property) are hereby incorporated herein in full by this
reference. Capitalized terms used but not defined herein shall have the meanings
given them in the Agreement. Any Default under and as defined in the Agreement
shall constitute a default hereunder. If it shall become necessary to employ
counsel to collect this obligation, or to protect or foreclose the security
therefor, the undersigned also agrees to pay reasonable attorneys' fees and
costs for the services of such counsel, whether or not suit is brought. This
Term Note may be prepaid subject to the terms and conditions of the Agreement.
Lender shall not be deemed to have waived any of its rights hereunder
or under any other agreement, instrument or paper signed by the maker unless
such waiver is in writing and signed by Lender. No delay or omission on the part
of Lender in exercising any right shall operate as a waiver thereof or of any
other right. A waiver upon any one occasion shall not be construed as a bar or a
waiver of any right or remedy as to any future occasion nor shall it establish a
custom or course of dealing.
This Term Note may not be changed, modified, amended or terminated
orally. The validity of this Term Note, its construction, interpretation and
enforcement, and the rights of the parties hereunder shall be determined under
the laws of the State of California.
[THIS SPACE INTENTIONALLY LEFT BLANK]
- 2 -
<PAGE>
Notwithstanding anything herein to the contrary, in the event that the
Agreement is terminated by the undersigned or by Lender, then the entire unpaid
principal balance of this Term Note, together with all accrued and unpaid
interest, shall become immediately due and payable in full without presentment,
notice or demand of any kind.
NORTHERN GEOPHYSICAL OF AMERICA,
INC.
By: /s/ Ronald L. Koons
-------------------
Name: Ronald L. Koons
Title: Vice President
- 3 -
SECURITY AGREEMENT OF 3-D GEOPHYSICAL, INC.
This Security Agreement is entered into as November 17, 1997 by and
between 3-D Geophysical, Inc., a Delaware corporation ("Debtor"), located at
8226 Park Meadows Drive, Littleton, Colorado 80124, and SANWA BUSINESS CREDIT
CORPORATION, a corporation ("Secured Party"), located at 550 N. Brand Boulevard,
Suite 950, Glendale, California 91203.
1. Grant of Security Interest. Debtor hereby grants to Secured Party a
continuing lien on and security interest in the property described or referred
to in Paragraph 2 below (collectively, the "Collateral") to secure prompt
payment and full performance of the liabilities described in Paragraph 3 below
(collectively, the "Liabilities").
2. Collateral. The Collateral consists of all of Debtor's now owned and
hereafter acquired accounts, inventory, equipment, fixtures, contract rights,
general intangibles, chattel paper, instruments, investment property, documents,
and other property; including without limitation, the property described below
and the proceeds and products thereof:
(a) all goods of Debtor, including without limitation, machinery,
equipment, furniture, furnishings, fixtures, tools, parts, supplies and motor
vehicles of every kind and description and all improvements thereto which the
Debtor now owns or in which Debtor may have or may hereafter acquire any
interest, together with all customer lists and records of Debtor's business;
(b) all inventory of Debtor, including, but not limited to, all
merchandise, raw materials, parts, supplies, work in process, and finished
products intended for sale, of every kind and description now or at any time
hereafter owned by and in the custody or possession actual or constructive, of
Debtor, including such inventory as is temporarily out of Debtor's custody or
possession and including insurance proceeds, resulting from the sale and
disposition of any of the foregoing, including, among other things, but not
limited to, raw materials and merchandise, materials, parts, supplies, work in
process, inventories and finished products intended for sale by Debtor including
inventory temporarily removed from said premises and items in transit;
(c) all contract rights and general intangibles of Debtor,
including without limitation, goodwill, trademarks, trade styles, trade names,
patents, patent applications, copyrights, bank deposits, deposit accounts,
income tax refunds and property in the possession, deposited with or under the
control of Secured Party or any of its affiliates;
(d) all present and future accounts, accounts receivable and other
receivables and all books and records relating thereto;
(e) all documents, instruments, investment property, pledged
assets
<PAGE>
and chattel paper; and
(f) all the products and proceeds of the foregoing, and any
replacements, additions, accessions, or substitutions thereof, all after
acquired property, all accounts or proceeds arising from the sale or disposition
of any inventory of Debtor including any returns thereof and including, where
applicable, the proceeds of insurance covering said Collateral or tort claims in
connection with the Collateral;
whether such Collateral shall be presently in existence or whether it shall be
acquired or created by Debtor at any time hereafter, wherever located, to remain
in force so long as Debtor is, in any manner, obligated to Secured Party.
3. Liabilities. The liabilities ("Liabilities") secured under this
Security Agreement are all liabilities of Debtor to Secured Party from time to
time, including, without limitation, the "Liabilities" under and as defined in
that certain Secured Continuing Corporate Guaranty dated the date hereof
("Guaranty") made by Debtor in favor of Secured Party with respect to the
obligations of Northern Geophysical of America, Inc., a Delaware corporation
("Borrower"), Debtor's affiliate, to Secured Party, arising under or related to
that certain Loan and Security Agreement dated the date hereof between Borrower
and Secured Party ("Loan Agreement").
4. Covenants of Debtor. Until the Liabilities are paid in full, Debtor
agrees that it shall, except to the extent otherwise specifically provided to
the contrary in the Loan Agreement:
(a) not sell or otherwise dispose of the Collateral except for the
sale of inventory in the ordinary course of business;
(b) not create, incur, assume or permit to exist any liens,
encumbrances, security interests, levies, assessments or charges on or in any of
the Collateral, without Secured Party's consent;
(c) appear in and defend, at Debtor's own expense, any action or
proceeding which may affect Debtor's title to or Secured Party's interest in the
Collateral;
(d) procure or execute and deliver, from time to time, in form and
substance satisfactory to Secured Party, any endorsements, assignments,
financing statements or other writings deemed necessary or appropriate by
Secured Party to perfect, maintain or protect Secured Party's security interest
in the Collateral and the priority thereof, and take such other action and
deliver such other documents, instruments and agreements pertaining to the
Collateral as Secured Party may request to effectuate the intent of this
Security Agreement;
(e) notify Secured Party in writing at least thirty (30) days
prior to
- 2 -
<PAGE>
any change in Debtor's name, identity or corporate structure, or any addition or
change to the address of Debtor specified in the introductory paragraph hereof;
(f) keep separate, accurate and complete records of the Collateral
and provide Secured Party during normal business hours with access thereto and
to Debtor's financial records, in each case with the right to make extracts
therefrom;
(g) provide Secured Party during normal business hours with access
to the Collateral, and with such other information as Secured Party may
reasonably request from time to time;
(h) maintain and preserve its corporate existence, and all rights,
privileges, franchises and other authority necessary for the conduct of its
business;
(i) continue operations in the same form and structure of business
as currently conducted, and not merge or consolidate with or acquire or be
acquired by any other corporation, partnership, entity or person, without
Secured Party's prior written consent; and
(j) comply with each of the covenants and agreements set forth in
Sections 5, 6, 7, 8 and 10 of the Loan Agreement as if such covenants were
applicable to Debtor and fully set forth herein.
5. Authorized Action By Secured Party. (a) After the occurrence of any
"Event of Default" (as defined below) and while it is continuing, Debtor hereby
irrevocably appoints Secured Party as its attorney-in-fact to do (but Secured
Party shall not be obligated to and shall not incur any liability to Debtor or
any third party for failure so to do) any act which Debtor is obligated by this
Security Agreement to do, and to exercise such rights and powers as Debtor might
exercise with respect to the Collateral, including, without limitation, the
right to:
(i) collect by legal proceedings or otherwise and endorse,
receive and receipt for all payments, proceeds and other sums and
property now or hereafter payable on or on account of the Collateral;
(ii) enter into any extension, deposit or other agreement
pertaining to, or deposit, surrender, accept, hold or apply other
property in exchange for, the Collateral;
(iii) process and preserve the Collateral; and
(iv) make any compromise, settlement or adjustment, and take
any action it deems advisable, with respect to the Collateral.
(b) Debtor agrees to reimburse Secured Party upon demand for any
- 3 -
<PAGE>
costs and expenses, including attorneys' fees, Secured Party may incur while
acting as Debtor's attorney-in-fact hereunder, all of which costs and expenses
are included in the Liabilities secured hereby and are payable upon demand, with
interest thereon at the interest rate then applicable to revolving loans under
the Loan Agreement.
(c) It is further agreed and understood between the parties hereto
that such care as Secured Party gives to the safekeeping of its own property of
like kind shall constitute reasonable care of the Collateral when in Secured
Party's possession; provided, however, that Secured Party shall not be required
to make any presentment, demand or protest, or give any notice and need not take
any action to preserve any rights against any prior party or any other person in
connection with the Liabilities or with respect to the Collateral.
(d) Whether or not Debtor is in default, Debtor agrees that
Secured Party may at any time send verification requests, and so long as an
Event of Default has not occurred, such requests will not identify Secured Party
to any account debtor on any Collateral.
(e) If Debtor's records are prepared or retained by a computer
service company or any accountant or accounting service, so long as any
Liabilities are outstanding, Debtor grants Secured Party the absolute and
irrevocable right, with reasonable notice to Debtor, to inspect such records
(including Debtor's internal work papers), receive duplicate copies of all
information furnished to Debtor and prepared by such company, accountant or
accounting service, and agrees to furnish such consents as may be necessary to
effectuate the same. Debtor further agrees to promptly notify Secured Party of
the name and address of such company, accountant or accounting service and of
any change in respect thereof.
(f) All the foregoing powers authorized herein, being coupled with
an interest, are irrevocable so long as any Liabilities are outstanding.
6. Default. The occurrence of any of the following events or conditions
(herein "Events of Default") shall constitute an Event of Default hereunder:
(a) breach, violation or nonperformance of any covenant on
Debtor's part hereunder or under the Guaranty;
(b) non-payment of any of the Liabilities as and when due and
payable to Secured Party; or
(c) any Event of Default under and as defined in the Loan
Agreement.
7. Remedies. Upon the occurrence and during the continuation of any
- 4 -
<PAGE>
Event of Default, Secured Party may, at its option, without notice to or demand
on Debtor, declare all Liabilities immediately due and payable, and Secured
Party shall have all the default rights and remedies of a secured party under
the Uniform Commercial Code as in effect in the State of California and other
applicable law as well as the following rights and remedies, all of which may be
exercised with or without further notice to Debtor:
(a) to the extent permitted by law, to notify any and all obligors
and account debtors on the Collateral that the same has been assigned to Secured
Party and that all payments thereon are to be made directly to Secured Party;
(b) to settle, compromise or release, on terms acceptable to
Secured Party, in whole or in part, any amounts owing on the Collateral, and to
extend the time of payment, make allowances and adjustments and to issue credits
in Secured Party's name or in the name of Debtor in respect thereof;
(c) to enter any premises where any Collateral may be located and
to take possession of and remove the Collateral, with or without judicial
process;
(d) to sell or otherwise dispose of the Collateral or any part
thereof, for cash, on credit or otherwise, with or without representations or
warranties, and upon such terms as shall be acceptable to Secured Party;
(e) to remove from any premises where the same may be located, any
and all documents, instruments, files and records relating to the collateral,
and Secured Party may, at Debtor's expense, use the supplies and space of Debtor
at its places of business as may be necessary to properly administer and control
the Collateral or the handling of collections and realizations thereon;
(f) receive, open and dispose of all mail addressed to Debtor and
notify postal authorities to change the address for delivery thereof to such
address as Secured Party may designate; and
(g) take or bring, in Secured Party's name or in the name of
Debtor, all steps, actions, suits or proceedings deemed by Secured Party
necessary or desirable to effect collection of or to realize upon the
Collateral,
all at Secured Party's sole option and as Secured Party in its sole discretion
may deem advisable.
8. Application of Proceeds of Collateral. The net cash proceeds
resulting from the collection, liquidation, sale or other disposition of the
Collateral shall be applied first to the expenses (including all attorneys'
fees) of retaking, holding, processing and preparing for sale, selling,
collecting, liquidating and the like, and then to the satisfaction of all
Liabilities secured hereby, application as to any particular obligation or
indebtedness or
- 5 -
<PAGE>
against principal or interest to be in Secured Party's discretion. Debtor shall
be liable to Secured Party and shall pay to Secured Party on demand any
deficiency which may remain after such sale, disposition, collection or
liquidation of Collateral.
9. Cumulative Rights. The rights, powers and remedies of Secured Party
under this Security Agreement shall be in addition to all rights, powers and
remedies given to Secured Party under any statute or rule of law or any other
document, instrument or agreement, all of which rights, powers and remedies
shall be cumulative and may be exercised successively or concurrently.
10. Waiver. Any forbearance, failure or delay by Secured Party in
exercising any right, power or remedy shall not preclude the further exercise
thereof, and every right, power or remedy of Secured Party shall continue in
full force and effect until such right, power or remedy is specifically waived
in a writing executed by Secured Party. Debtor waives any right to require
Secured Party to proceed against any person or to exhaust any Collateral or to
pursue any remedy in Secured Party's power prior to pursuing Debtor in respect
of the Liabilities.
11. Setoff. Debtor agrees that Secured Party may exercise its rights of
setoff with respect to the Liabilities in the same manner as if the Liabilities
were unsecured.
12. Binding Upon Successors. All rights of Secured Party under this
Security Agreement shall inure to the benefit of its successors and assigns, and
all obligations of Debtor shall bind the representatives, executors,
administrators, heirs, successors and assigns of the Debtor.
13. Entire Agreement; Severability. This Security Agreement contains
the entire security agreement between Secured Party and Debtor with respect to
the Collateral. If any of the provisions of this Security Agreement shall be
held invalid or unenforceable, this Security Agreement shall be construed as if
not containing those provisions and the rights and obligations of the parties
hereto shall be construed and enforced accordingly.
14. References. The captions or titles of the paragraphs of this
Security Agreement are for convenience of reference only and shall not define or
limit the provisions hereof.
15. Governing Law; Waivers. This Agreement shall be interpreted in
accordance with the internal laws (and not the conflict of laws rules) of the
State of California governing contracts to be performed entirely within such
state. Debtor hereby consents to the exclusive jurisdiction of any state or
federal court located within the County of Los Angeles in the State of
California or, at the sole option of Secured Party, in any other court in which
Secured Party shall initiate legal or equitable proceedings and which has
subject matter jurisdiction over the matter in controversy. Debtor waives any
objection of forum non conveniens and venue. Debtor further waives personal
service of any and all
- 6 -
<PAGE>
process upon it, and consents that all such service of process be made in the
manner set forth in Section 17 hereof for the giving of notice. BOTH DEBTOR AND
SECURED PARTY WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW.
16. Attorneys' Fees. If any legal action or proceeding shall be
commenced at any time by any party to this Agreement in connection with the
interpretation of this Agreement or the enforcement of any rights or remedies
hereunder, the prevailing party or parties in such action or proceeding shall be
entitled to reimbursement of its reasonable attorneys' fees and costs in
connection therewith, in addition to all other relief to which the prevailing
party or parties may be entitled.
17. Notice. Any written notice, consent or other communication provided
for in this Security Agreement shall be delivered personally (effective upon
delivery), via overnight courier (effective the next day after dispatch) or via
U.S. Mail (effective 3 days after mailing, postage prepaid, first class) to each
party at its address set forth above, or to such other address as either party
shall specify to the other; provided, that all notices to Secured Party shall be
copied to any assignee of Secured Party's rights hereunder.
18. Counterparts. This Security Agreement may be executed in any number
of counterparts, and by the parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
SECURED PARTY: DEBTOR:
SANWA BUSINESS CREDIT 3-D GEOPHYSICAL, INC.
CORPORATION
By: /s/ Timothy K. Turner By: /s/ Ronald L. Koons
--------------------- -------------------
Its: First Vice President Its: Vice President
- 7 -
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated for reference November 7,1997.
SECTION 1
SECURITY INTEREST
1.1 Creation of Security Interest.
J.R.S. EXPLORATION COMPANY LIMITED (the "DEBTOR"), having its chief
executive office at 4750 30 Street, S.E., Calgary, Alberta, T2B 2Z1 as
continuing security for the repayment and the performance of the Obligations (as
defined herein) of the Debtor to SANWA BUSINESS CREDIT CORPORATION (the "SECURED
PARTY") having an office at Suite 950, 550 North Brand Boulevard, Glendale,
California, U.S.A. 91203, grants to the Secured Party a continuing, specific and
fixed assignment, transfer, mortgage, charge and security interest in all of the
Debtor's property, assets, rights and undertaking of every nature, item and
kind, now or at any time and from time to time, wherever situate, including
those described in this clause 1.1, namely:
i) ACCESSIONS. All increases, additions, accretions and accessions to, and
all extensions, reversions, renewals, continuations or replacement of
any of the Collateral (as defined in Section 2. 1) (collectively the
"ACCESSIONS");
ii) ACCOUNTS. All debts, accounts, claims and monies which now are, or
which may at any time hereafter be, due or owing to or owned by the
Debtor OR in which the Debtor now or hereafter has any other interest,
and also all securities, bills, notes and other documents now held or
owned or which may be hereafter taken, held or owned by the Debtor or
anyone on behalf of the Debtor in respect of the said debts, accounts,
claims and monies, and any part thereof (collectively, the "ACCOUNTS");
iii) Chattel Paper. All chattel paper in which the Debtor now or hereafter
has an interest, and any part thereof (the "CHATTEL PAPER");
iv) DOCUMENTS OF TITLE. All documents of title, whether negotiable or
nonnegotiable, including, without limitation, all warehouse receipts
and bills of lading, in which the Debtor now or hereafter has an
interest, and any part thereof (collectively, the "DOCUMENTS OF
TITLE");
v) EQUIPMENT. All goods in which the Debtor now or hereafter has an
interest other than Inventory or consumer goods and any part thereof,
including, without limitation, all tools, apparatus, fixtures, plant,
machinery, furniture, chattels, vehicles, vessels, air
<PAGE>
conditioning, heating, ventilating, electrical, mechanical, plumbing,
communications and data systems, elevators, escalators and other
conveyancing devices, boilers, furnaces, carpets, blinds, window
coverings, curtains, awnings, lighting fixtures, doors, windows,
demising walls and partitions, wiring, pipes, conduits, seasonal
decorations, and the equipment described in the Schedule hereto or any
schedule hereafter annexed hereto (collectively, the "EQUIPMENT');
vi) INSTRUMENTS. All letters of credit, advices of credit and all other
instruments in which the Debtor now or hereafter has an interest, and
any part thereof (collectively, the "INSTRUMENTS");
vii) INTANGIBLES. All intangible property of whatever kind in which the
Debtor now or hereafter has an interest, including, without limitation,
all of the Debtor's choses in action, contractual rights, agreements,
leases of personal property, license rights, licenses, permits,
goodwill, patents, trade marks, trade names, quotas, industrial
designs, copyrights and other industrial or intellectual property
(collectively, the "INTANGIBLES");
viii) INVENTORY. All personal property of whatever kind and wherever
situated, which now or hereafter forms part of the inventory of the
Debtor, in which the Debtor now or hereafter has an interest, including
without limitation, all goods, merchandise, raw materials, goods in
process, work in progress, finished goods and other tangible personal
property now or hereafter held for sale, lease, resale or exchange or
furnished or to be furnished under contracts for service or that are
used or consumed in the business of the Debtor, and any part thereof
(collectively, the "INVENTORY");
ix) MONEY. All money in which the Debtor now or hereafter has an interest,
and any part thereof (the "Money");
x) PROCEEDS. All proceeds and personal property in any form derived
directly or indirectly from any dealing with the Collateral or any part
thereof and all proceeds of proceeds and any part thereof
(collectively, the "PROCEEDS");
xi) RECORDS. All books, papers, documents, writings, tapes, magnetic or
other machine readable data and records, and all other information,
however stored, recording or relating to any of the Collateral
(collectively, the "RECORDS"); and
xii) SECURITIES. All shares, stock, warrants, bonds, debentures, debenture
stock, mortgages and other
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securities in which the Debtor now or hereafter has an interest, and
any part thereof (collectively, the "SECURITIES').
1.2 Floating Charge.
As security for the repayment and the performance of each of the
Obligations (as defined herein), the Debtor grants a floating charge to the
Secured Party on all the Debtor's interest in real property, including without
limitation, all fixtures, crops and improvements, both present and future, other
than such as are validly and effectively, charged under Section 1.1 or
1.3 Nature of Security Interests.
Notwithstanding the Debtor's right to deal with the Inventory in the
ordinary course of business as provided herein, the security interest created
hereby shall operate as fixed and specific mortgages and charges of all of the
Collateral presently existing, and with respect to all future Collateral, shall
operate as fixed and specific mortgages and charges of such future Collateral
which shall attach at the moment the Debtor acquires any right or interest
therein. The security interest created by Section 1.2 is intended as a floating
charge which shall attach at the time provided in Section 1.4.
1.4 Attachment.
The Debtor acknowledges that value has been given. The security
interests created hereby are intended to attach, as to all of the Collateral in
which the Debtor has an interest, forthwith when the Debtor executes this
Security Agreement, and, as to all Collateral in which the Debtor acquires any
right or interest after the execution of this Security Agreement, when the
Debtor acquires such right or interest.
1.5 Exceptions.
Leases - The last day of any term reserved by any lease, verbal or
written, or any agreement therefor, now held or hereafter acquired by the Debtor
is hereby excepted out of the security interests created hereby. The Debtor
shall assign and dispose of such last day of any term reserved by any such lease
in such manner as the Secured Party may from time to time direct in writing.
Upon any sale, assignment sublease or other disposition of such lease or
agreement to lease, the Secured Party shall, for the purpose of vesting the
aforesaid residue of any such term in any purchaser, assignee, sublessee or such
other acquire of the lease, agreement to lease or any interest therein, be
entitled by deed or other written instrument to assign to such other person, the
aforesaid residue of any such other in lease of the Debtor and to vest the same
freed and discharged from any obligation whatsoever respecting the same.
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1.6 Statement.
The Debtor acknowledges that a security interest is taken in all of the
Debtor's present and after acquired property.
1.7 Where Consent Required.
Nothing herein shall constitute an assignment or attempted assignment
of any right, privilege, benefit contact permit, policy or other document or
instrument which by the provisions thereof or by law is not assignable or which
requires the consent of any third party to its assignment unless such is
obtained or is waived by the third party. In each such case the Debtor shall,
unless the Secured Party otherwise agrees in writing, forthwith obtain the
consent of any necessary third party to its assignment hereby and for its
further assignment by the Secured party to any third party who may acquire same
as a result of the Secured party's exercise or remedies after an Event of
Default. Upon such consents being obtained or waived, this Security Agreement
shall apply thereto without regard to this Section 1.7 and without the necessity
of any further assurance to effect the assignment thereof
1.8 Pending Consent.
In any case to which Section 1.7 applies, unless and until consent to
assignment is obtained as therein provided, the Debtor shall, to the extent it
may do so by law or pursuant to the provisions of the document or interest
therein referred to, hold all benefit to be derived therefrom in trust for the
Secured Party as additional security for performance of the Obligations and
shall deliver up all such benefit to the Secured Party forthwith upon demand by
the Secured Party.
SECTION 2
DEFINITIONS
2.1 Collateral.
The property, assets, rights and undertaking charged hereunder,
including all of such Accessions, Accounts, Chattel Paper, Documents of Title,
Equipment, Instruments, Intangibles, Inventory, Money, Proceeds, Records and
Securities together with all increases, additions, improvements and accessions
thereto, and all substitutions or any replacements thereof are, unless otherwise
specified, herein referred to as the "COLLATERAL".
2.2 Defined Terms.
Unless the context otherwise requires or unless otherwise specified,
all the terms used herein without initial capitals which are defined in the
Personal Property Security Act (Alberta) or the regulations thereunder, as they
may be amended, restated or replaced by successor legislation of comparable
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effect (collectively, the "PISA), have the same meaning herein as in the PISA.
2.3 General Terms.
i) "AGREEMENT" means any contract, instrument, permit, policy or other
document forming part of the Collateral, or creating or evidencing any
right, privilege or benefit forming part of the Collateral;
ii) "BUSINESS PREMISES" means real property which the Debtor uses in its
business, if any;
iii) "ENVIRONMENTAL LAWS" means any laws, regulations, orders, by-laws,
permits or lawful requirements of any governmental authority with
respect to environmental protection or regulating hazardous materials;
and
iv) "HAZARDOUS MATERIALS" means any asbestos material, urea formaldehyde,
explosives, radioactive materials, pollutants, contaminants, hazardous
substances, corrosive substances, toxic substances, special waste or
waste of any kind including, without limitation, compounds known as
chlorobiphenyls and any substance the storage, manufacture, disposal,
treatment, generation, use, transport, remediation or release of which
into the environment is prohibited, controlled or licensed under
Environmental Laws.
SECTION 3
OBLIGATIONS SECURED
3.1 Obligations Secured.
The Collateral constitutes and will constitute continuing security for
the following obligations (collectively, the "OBLIGATIONS') of the Debtor to the
Secured Party:
i) INDEBTEDNESS. The prompt payment, as and when due and payable, of all
amounts now or hereafter owing by the Debtor to the Secured Party,
including by way of guarantee or indemnity, whether now existing or
hereafter incurred, matured or unmatured, direct, indirect, joint or
several, or contingent including any extensions and renewals thereof,
and all future advances and re-advances; and
ii) PERFORMANCE OF AGREEMENTS. The strict performance and observance by the
Debtor of all agreements, warranties, representations, covenants and
conditions of the Debtor made pursuant to this Security Agreement or
any other agreement between the Debtor and the Secured Party all as now
in effect or as hereafter entered into or amended.
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3.2 Reduction of Obligations.
The Obligations may be reduced to zero from time to time without
affecting the validity, perfection or enforceability of this Security Agreement
or the security interests created hereby until this Security Agreement is
discharged in accordance with Section 9. 1 0.
SECTION 4
DEBTOR'S REPRESENTATIONS AND WARRANTIES
4.1 General
The Debtor represents and warrants to and for the benefit of the
Secured Party and so long as this Security Agreement in effect shall be deemed
to continuously represent and warrant as set out in this Section 4.
4.2 Incorporation, Licenses and Qualifications.
The Debtor is a body corporate, duly incorporated, properly organized
and validly existing under the laws of Alberta and is duly recognized and
qualified to do business under the laws of each other jurisdiction in which the
character of the properties owned by it or the nature of the activities
conducted b it make such registration or qualification advisable or necessary.
4.3 Corporate Power.
The Debtor has full power and lawful authority to enter this Security
Agreement and to grant the security interests hereby created.
4.4 Enforceability.
This Security Agreement constitutes a valid and legally binding
obligation of the Debtor enforceable against the Debtor in accordance with its
terms, subject only to bankruptcy, insolvency or other statutes or judicial
decisions affecting the enforcement of creditors' rights generally and to
general principles of equity.
4.5 No Actions or Material Adverse Changes.
There is no action or proceeding pending or to the knowledge of the
Debtor threatened against the Debtor before any court, administrative agency,
tribunal, arbitrator, government or governmental agency or any fact known to the
Debtor and not disclosed to the Secured Party which might involve any material
adverse change in the properties, business, prospects or condition of the
Debtor, or which question the validity of this Security Agreement or any other
material agreement to which the Debtor is a party (or the Debtor's ability to
perform its
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obligations under this Security Agreement) and there are no outstanding
judgments, writs of execution, work orders, injunctions, directives against the
Debtor or its properties.
4.6 Non-Conflict.
Neither the execution nor the performance of this Security Agreement
requires the approval of any regulatory agency having jurisdiction over the
Debtor nor is this Security Agreement in contravention of or in conflict with
the articles, by-laws or resolutions of the directors or shareholders of the
Debtor or of the provisions of any agreement to which the Debtor is a party or
by which any of its property may be bound or of any statute, regulation, by-law,
ordinance or other law, or of any judgment, decree, award, ruling or order to
which the Debtor or any of its property may be subject.
4.7 No Default.
The Debtor is not in breach of any agreement to which it is a party.
4.8 Ownership and Collateral Free of Encumbrances.
The Debtor is the owner of or has rights in the Collateral free and
clear of all other security interests, mortgages, hypothecs, pledges, liens,
claims, charges, whether fixed or floating, or other encumbrances whatsoever
(collectively the "ENCUMBRANCES").
4.9 No Other Corporate Names or Styles.
The Debtor does not now carry on business under or use any name or
style other than the name(s) specified in this Security Agreement.
4.10 Places of Business of the Debtor.
The place of business of the Debtor or the chief place of business if
there are more than one places of business is at 4750 30 Street, S.E., Calgary,
Alberta, T2B 2Z1 (the "PLACE OF BUSINESS") where the Debtor conducts its
business operations or keeps or stores the Collateral and records in respect
thereof and of the Debtor's business.
4.11 Serial Numbered Goods.
The complete, accurate and appropriate serial number (as specified in
the regulations under the PPSA) for each item of Equipment that is serial
numbered goods in which the Debtor now has any interest, is set out in the
Schedule hereto.
4.12 Insurance.
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The Collateral is insured in accordance with the terms hereof.
4.13 Account Debtor.
Each Account, Chattel Paper, Security and Instrument constituting
Collateral is genuine and enforceable in accordance with its terms against the
party obligated to pay thereunder (the "Account Debtor").
4.14 Amounts Due From Account Debtor.
The amount represented by the Debtor to the Secured Party from time to
time as owing by each Account Debtor or by all Account Debtors shall, to the
best of the Debtor's knowledge be the correct amount actually and
unconditionally owing by such Account Debtor or Account Debtors, save and except
for normal cash discounts where applicable.
4.15 Financial Information.
In all information and financial statements supplied for the benefit of
the Secured Party, the Debtor has made no untrue statement of any material fact,
and has revealed all material facts the omission of which would make such
information and statements misleading. The Debtor has disclosed all facts which
materially adversely affect or, so far as the Debtor can reasonably foresee,
will materially adversely affect the business, properties, prospects or
financial condition of the Debtor or the ability of the Debtor to perform its
obligations hereunder. All accounting information and financial statements
supplied for the benefit of the Secured Party have been prepared in accordance
with generally accepted accounting principles.
4.16 Survival and Reliance.
All representations and warranties of the Debtor made herein or in any
certificate or other document delivered by or on behalf of the Debtor for the
benefit of the Secured party are material, shall survive the execution and
delivery of this Security Agreement and shall continue in full force and effect
without time limit. The Secured Party is deemed to have relied upon each such
representation and warranty notwithstanding any investigation made by or on
behalf of the Secured Party at any time.
SECTION 5
DEBTOR'S COVENANTS
5.1 General.
Unless compliance with the following covenants is waived by the Secured
Party in writing or unless non-compliance with any such covenants is otherwise
consented to by the Secured
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Party by written agreement with the Debtor, the Debtor covenants and agrees with
the Secured Party to observe and perform each of the covenants set out in this
Section 5.
5.2 Keep Collateral in Good Repair.
The Debtor will keep the Collateral in good order, condition and
repair.
5.3 Conduct of Business.
The Debtor will carry on and conduct its business in a proper
and efficient manner so as to protect and preserve the Collateral.
5.4 Servicing of Payables.
The Debtor will pay when due all amounts are payable by it howsoever
arising, including without limiting the generality of.the foregoing, all rents,
charges, taxes, rates, levies, assessments, fees and duties of every nature
which may be levied, assessed or imposed against or in respect of the Collateral
or Debtor and will provide the Secured Party with evidence of such payment upon
request.
5.5 Compliance with Agreements and Laws.
The Debtor will not use the Collateral in violation of this Security
Agreement or any other agreement relating to the Collateral or any policy
insuring the Collateral or any applicable statute, law, by-law, rule,
regulation, court order or ordinance.
5.6 Notice of Encumbrances and Proceedings.
The Debtor will promptly notify the Secured Party of any Encumbrance
made or asserted against any of the Collateral, and of any suit, action or
proceeding affecting any of the Collateral or which could affect the Debtor. The
Debtor will, at its own expense, defend the Collateral against any and all such
Encumbrances and aging any and all such suits, actions or proceedings.
5.7 No Accessions or Fixtures.
The Debtor will prevent the Collateral from becoming an accession to
any property other than the Collateral or from becoming a fixture unless the
security interests hereby created rank prior to the interests of all other
persons in the realty.
5.8 Marking the Collateral.
The Debtor will, at the request of the Secured Party, mark, or
otherwise take appropriate steps to identify, the
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Collateral to indicate clearly that it is subject to the security interests
hereby created.
5.9 Disposition of Collateral.
The Debtor will not assign, transfer, sell, lease, exchange, or
otherwise dispose of the Collateral or any interest therein except for:
i) Inventory in the ordinary course of business on customary trade terms;
and
ii) Equipment which has become worn out, damaged or otherwise unsuitable
for its purpose, on condition that the Debtor substitute for such
Equipment property of equal value free from all Encumbrances, except in
favour of the Secured Party. Such substituted property shall become
part of the Collateral as soon as the Debtor acquires any interest in
it.
5.10 Encumbrances.
Except for the Permitted Encumbrances, the Debtor will not create,
assume or suffer to exist any Encumbrance in, of or on any of the Collateral.
5.11 Change of Place of Business, Collateral and Names.
The Debtor will not change its Place of Business, chief executive
office, the location of any of the Collateral, or the records in respect thereof
or change its name or any name or style under which it carries on business
without giving to the Secured Party 20 day's prior written notice of me change
or of the new name or style, as applicable.
5.12 Serial Numbered Goods.
The Debtor will, at or before the time that it acquires any interest in
any item of Equipment that is serial numbered goods, give the Secured Party a
written notice setting out the complete, accurate and appropriate serial number
(as specified in the regulations under the PPSA) of such item of Equipment.
5.13 Notice of Loss of Collateral.
i) all loss or damage to or loss or possession of the Collateral otherwise
than by disposition in accordance with the terms hereof; and
ii) any failure of any Account Debtor in payment or performance of
obligations due to the Debtor which may affect the Collateral.
5.14 Inspection of Records and Collateral.
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The Debtor will at all times keep accurate and complete records of the
Collateral as well as proper books of account for its business all in accordance
with generally accepted accounting principles, consistently applied. The Debtor
will permit the Secured Party or its authorized agents to have access to all
premises occupied by the Debtor or any place where the Collateral may be found
to inspect the Collateral and to examine the books of accounts, financial
records and reports of the Debtor and to have temporary custody of, make copies
of and take extracts from such books, records and reports.
5.15 Access to Computer Information.
In the event that the use of a computer system is required to access
any information and data which the Secured Party is entitled to access and
examine hereunder, the Debtor will allow the Secured Party the use of its
computer system for such purpose and will provide assistance in that regard. If
for any reason such information and data cannot be accessed and retrieved
Debtor's premises the Secured Party may remove the medium in which such
information or data is stored from the Debtor's premises to any other place
which has a computer system that will give the Secured Party the opportunity to
retrieve, record or copy such information and data. The Secured Party is hereby
authorized to reproduce and retain a copy of any such information and data in
any format whatsoever.
5.16 Delivery of Documents.
The Debtor will promptly deliver to the Secured Party upon request:
i) DOCUMENTS OF TITLE. Any Chattel Paper, Instruments, Securities, and
Documents of Title, and upon such delivery, where applicable, duly
endorse the same for transfer in blank or as the Secured Party may
direct;
ii) BOOKS OF ACCOUNT. All computer software, tapes, discs, drums and cards,
all books of account and all records, ledgers, reports, correspondence,
schedules, documents, statements, lists and other writings relating to
the Collateral or the Debtor's business for the purpose of inspecting,
auditing or copying the same;
iii) FINANCIAL STATEMENTS. All financial statements prepared by or for the
Debtor regarding the Debtor's business;
iv) POLICIES OF INSURANCE. All policies and certificates of insurance
relating to the Collateral;
v) AGREEMENTS. All agreements, licenses, and consents relating to the
Collateral and the Debtor's business; and
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vi) OTHER INFORMATION. Such information concerning the Collateral, the
Debtor and the Debtor's business and affairs as the Secured Party may
request.
5.17 Risk and Insurance.
The Debtor will bear the sole risk of any loss, damage, destruction or
confiscation of or to the Collateral during the Debtor's possession thereof or
otherwise. The Debtor will insure the Collateral with insurers acceptable to the
Secured Party against loss or damage by fire, theft or other insurable perils
customarily insured against by persons having an interest in such Collateral for
the full insurable value thereof with the Secured Party as a named insured and
with loss payable to the Secured Party as its interest may appear. All such
policies of insurance shall provide that the insurance coverage provided
thereunder shall not be changed or cancelled except on 30 days' prior written
notice to the Secured Party. If the Debtor shall fail to so insure, the Secured
Party may, but shall not be required to, insure the Collateral and the premiums
for such insurance shall be added to the Obligations and be secured hereby.
5.18 Proceeds In Trust.
The Debtor will and shall be deemed to hold all Proceeds in trust,
separate and apart from other Money, Instruments or property, for the benefit of
the Secured Party until all amounts owing by the Debtor to the Secured Party
have been paid in full.
5.19 No Amalgamation.
The Debtor will not change the nature of its business or amalgamate or
otherwise merge with any person or permit all of or a substantial portion of its
property to become the property of any other person, whether in one or a series
of transactions, and the Debtor shall not do any act or thing that would
materially adversely affect its business, property, prospects or financial
condition.
5.20 Dividends.
The Debtor will not pay any dividends to the shareholders of any of the
classes of shares in die capital of the Debtor, and the Debtor shall not
purchase or redeem any of the shares in the capital of the Debtor without the
prior written approval of the Secured Party, which approval will not be
unreasonably withheld.
5.21 Performance and Default by Debtor.
The Debtor will observe and perform all the obligations imposed on the
Debtor by or in respect of the Collateral, maintain the Collateral in good
standing and not do or permit to
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be done anything to impair, and not omit to do anything that would prevent the
impairment of, the security interests hereby created. The Debtor will give to
the Secured Party prompt notice of any default by the Debtor in the performance
of its covenants to the Secured Party under this Security Agreement.
5.22 Default under Agreements.
The Debtor will not default under any provision of any Agreement or any
other agreement which creates a security interest in or otherwise affects the
Collateral or, without the prior written consent of the Secured Party, amend any
Agreement or give any consent, concession or waiver of the terms of, or exercise
any option of the Debtor permitted under such terms, or cancel or terminate any
Agreement or accept the surrender thereof The Debtor will give to the Secured
Party notice of any default by the Debtor under any Agreement or any other
agreement which creates a security interest in or otherwise affects the
Collateral, promptly upon becoming aware of the occurrence of such default, but
in all events, if the Debtor is aware of the default, in sufficient time to
afford the Secured Party an opportunity to cure any such default prior to any
other party to any Agreement or any such other agreement terminating or
otherwise enforcing its rights and remedies under the Agreement or such other
agreement.
5.23 Environmental Law.
The Debtor covenants and agrees with the Secured Party to:
i) develop and use the Business Premises only in compliance with all
Environmental Laws;
ii) permit the Secured Party to investigate the Business Premises, any
goods on the Business Premises and the Debtor's records at any time and
from time to time to verify such compliance with Environmental Laws and
this Security Agreement;
iii) upon the request of the Secured Party, obtain from time to time at the
Debtor's cost a report from an independent consultant designated or
approved by the Secured Party verifying compliance with Environmental
Laws and this Security Agreement or the extent of any non-compliance
therewith;
iv) not store, manufacture, dispose, treat, generate, use, transport,
remediate or release Hazardous Materials on or from the Business
Premises without notifying the Secured Party in writing;
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v) promptly remove any Hazardous Materials from the Business Premises in a
manner which conforms to Environmental Laws governing their removal;
and,
vi) notify the Secured Party in writing of:
a) any enforcement, clean-up, removal, litigation or other
governmental, regulatory, judicial or administrative action
instituted, contemplated or threatened against the Debtor or
the Business Premises pursuant to any Environmental Laws;
b) all claims, actions, orders or investigations, made or
threatened by any third party against the Debtor or the
Business Premises relating to damage, contribution, cost
recovery, compensation, loss or injuries resulting from any
Hazardous Materials or any breach of the Environmental Laws;
and
c) the discovery of any Hazardous Materials or any occurrence or
condition on the Business Premises or any real property
adjoining or in the vicinity of the Business Premises which
could subject the Debtor or the Business Premises to any
fines, penalties, orders or proceedings under any
Environmental Laws.
SECTION 6
COLLECTION OF ACCOUNTS
6.1 Collection of Accounts.
The Secured Party may, whether before or after default under this
Security Agreement, notify and direct any Account Debtor to make all payments
whatever to the Secured Party. The Secured Party may hold all amounts acquired
from any Account Debtor and any Proceeds as part of the Collateral.
6.2 Trust Provision.
Any payments received by the Debtor whether before or after
notification to Account Debtors, shall be held by the Debtor in trust for the
Secured Party in the same medium in which received, shall not be commingled with
any assets of the Debtor and shall, at the request of the Secured Party, be
turned over to the Secured Party not later than the next business day following
the day of their receipt.
SECTION 7
DEFAULT
7.1 Default.
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The Debtor shall be in default under this Security Agreement upon the
occurrence of any of the following events ("EVENTS OF DEFAULT"):
i) PERFORMANCE OF OBLIGATIONS. The Debtor defaults in the payment or
performance of any of the Obligations;
ii) BREACH OF AGREEMENT. The Debtor breaches any term, provision, warranty,
representation or covenant under this Security Agreement or any other
agreement between the Debtor and the Secured Party, all as in effect or
as hereafter entered into or amended;
iii) GUARANTOR OR INDEMNITOR DEFAULT. Any person who from time to time
guarantees, assumes or otherwise becomes liable for the Obligations or
who covenants and agrees to indemnify the Secured Party for any loss,
costs or damages as a result of the Debtor's failure to perform the
Obligations (the "GUARANTOR/INDEMNITOR"), commits a breach of, or fails
to observe or perform, any covenant, representation or warranty in
favour of the Secured Party;
iv) CEASE TO CARRY ON BUSINESS. The Debtor or Guarantor/Indemnitor ceases
or threatens to cease to carry on business;
v) BANKRUPTCY, INSOLVENCY. The dissolution, termination of existence,
insolvency, bankruptcy or business failure of the Debtor or
Guarantor/Indemnitor, or upon the appointment of a receiver,
receiver-manager or receiver and manager of any part of the property of
the Debtor or Guarantor/Indemnitor, or the commencement by or against
the Debtor or Guarantor/Indemnitor of any proceeding under any
bankruptcy, arrangement, reorganization, dissolution, liquidation,
insolvency or similar law for the relief of or otherwise affecting
creditors of the Debtor or Guarantor/Indemnitor, or by or against any
guarantor or surety for the Debtor or Guarantor/Indemnitor, or upon the
issue of any writ of execution, warrant, attachment, sequestration,
levy, third party demand, notice of intention to enforce security or
garnishment or similar process against the Debtor, Guarantor/Indemnitor
or any part of the Collateral;
vi) COMMIT ACT OF BANKRUPTCY. The Debtor or Guarantor/Indemnitor commits or
threatens to commit an act of bankruptcy;
vii) DISSOLUTION, WINDING UP. The institution by or against the Debtor or
Guarantor/Indemnitor of any formal or informal proceeding for the
dissolution or liquidation
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of, settlement of claims against or winding up of affairs of the Debtor
or Guarantor/Indemnitor;
viii) SALE IN BULK. The Debtor or Guarantor/Indemnitor makes or proposes to
make any sale of its assets in bulk;
ix) CHARGE AGAINST COLLATERAL. If any right of distress is levied or is
threatened to be levied against the Collateral or if any Encumbrance
affecting the Collateral becomes enforceable against the Collateral or
any part thereof;
x) DESTRUCTION OF COLLATERAL. Any material portion of the Collateral is
damaged or destroyed;
xi) OTHER DEFAULT. The Debtor or any Guarantor/Indemnitor defaults under
any agreement with respect to any indebtedness or other obligation to
any person other than the Secured Party, if such default has resulted
in, or may result, with notice or lapse of time or both, in, the
acceleration of any such indebtedness or obligation or the right of
such person to realize upon any Collateral; and
xii) PERFORMANCE IMPAIRED. The Secured Party in good faith believes the
prospect of payment or performance of the Obligations hereunder is or
is about to be impaired or that any Collateral is or is about to be
placed in jeopardy.
7.2 Crystallization.
The floating charge created by Section 1.2 shall become a fixed charge
as soon as:
i) the Secured Party gives notice to that effect to the Debtor;
ii) the Secured Party takes any step to accelerate or demand payment of the
Obligations, or gives notice of its intention or takes any steps to
enforce its security; or
iii) an Event of Default described in Subsection 7.1(e) or (g) occurs in
respect of the Debtor.
7.3 Demand Obligations.
The fact that this Security Agreement provides for Events of Default
and rights of acceleration shall not derogate from the demand nature of any
Obligation payable on demand.
7.4 Waiver not to Affect Subsequent Breach.
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The Secured Party may waive default or any breach by the Debtor of any
of the provisions contained in this Security Agreement. No waiver shall extend
to a subsequent breach or default, whether or not the same as or similar to the
breach or default waived. No act or omission of the Secured Party shall extend
to or be taken in any manner whatsoever to affect any subsequent breach or
default of the Debtor or the rights of the Secured Party resulting therefrom.
Any such waiver must to be in writing and signed by the Secured Party to be
effective.
SECTION 8
SECURED PARTY'S REMEDIES ON DEFAULT
8.1 Indebtedness Due and Rights and Remedies.
Upon the occurrence of an Event of Default all of the Obligations shall
become immediately due and payable without notice to the Debtor, and the Secured
Party may, at its option, proceed to enforce payment of same and to exercise any
or all of the rights and remedies contained herein, including, without
limitation, the signification and collection of the Debtor's Accounts, or
otherwise afforded by law, in equity or otherwise. The Secured Party shall have
the right to enforce one or more remedies successively or concurrently in
accordance with applicable law and the Secured Party expressly retains all
rights and remedies not inconsistent with the provisions herein including all
the rights it may have under the PPSA, and, without restricting the generality
of the foregoing, the Secured Party may upon such Event of Default:
i) APPOINTMENT OF RECEIVER. Appoint by instrument in writing a receiver,
receiver manager or receiver and manager (herein a "RECEIVER") of the
Debtor and of all or any part of the Collateral and remove or replace
such Receiver from time to time or may institute proceedings in any
court of competent jurisdiction for the appointment of a Receiver. Any
Receiver appointed by the Secured Party so far as concerns
responsibility for its acts shall be deemed the agent of the Debtor and
not of the Secured Party. Where the Secured Party is referred to in
this Section the reference includes, where the context permits, any
Receiver so appointed and the officers, employees, servants or agents
of such Receiver;
ii) ENTER AND REPOSSESS. Immediately and without notice enter the Debtor's
premises and repossess, disable or remove the Collateral and the Debtor
hereby grants to the Secured Party a license to occupy any premises of
the Debtor for the purpose of storage of the Collateral;
iii) RETAIN THE COLLATERAL. Retain and administer the Collateral in the
Secured Party's sole and unfettered
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<PAGE>
discretion, which the Debtor hereby acknowledges is commercially
reasonable;
iv) DISPOSE OF THE COLLATERAL. Dispose of any Collateral by public auction,
private tender or private contract with or without notice, advertising
or any other formality, all of which are hereby waived by the Debtor.
The Secured Party may, at its discretion establish the terms of such
disposition, including, without limitation, terms and conditions as to
credit, upset, reserve bid or price. The Secured Party may also lease
the Collateral on such terms as it deems appropriate. The payments for
Collateral, whether on a disposition or lease, may be deferred. All
payments made pursuant to such dispositions shall be credited against
the Obligations only as they are actually received. The Secured Party
may buy in, rescind or vary any contract for the disposition of any
Collateral and may dispose of any Collateral again without being
answerable for any loss occasioned thereby. Any such disposition may
take place whether or not the Secured Party has taken possession of the
Collateral;
v) FORECLOSE. Foreclose upon the Collateral in satisfaction of the
Obligations. The Secured Party may designate any part of the
Obligations to be satisfied by the foreclosure of particular Collateral
which the Secured Party considers to have a net realizable value
approximating the amount of the designated part of the Obligations, in
which case only the designated part of the Obligations shall be deemed
to be satisfied by the foreclosure of the particular Collateral;
vi) CARRY ON BUSINESS. Carry on or concur in the carrying on of all or any
part of the business of the Debtor and may, m any event, to the
exclusion of all others, including the Debtor, enter upon, occupy and
use all premises of or occupied or used by the Debtor and use any of
the personal property (which shall include fixtures) of the Debtor for
such time and such purposes as the Secured Party sees fit. The Secured
Party shall not be liable to the Debtor for any neglect in so doing or
in respect of any rent, cost, charges, depreciation or damages in
connection therewith;
vii) PAYMENT OF ENCUMBRANCES. Pay any Encumbrance that may exist or be
threatened against the Collateral. In any such case the amounts so paid
together with costs, charges and expenses incurred in connection
therewith shall be added to the Obligations secured by this Security
Agreement;
viii) PAYMENT OF DEFICIENCY. If the proceeds of realization are sufficient to
pay all monetary Obligations, the
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<PAGE>
Debtor shall forthwith pay or cause to be paid to the Secured Party any
deficiency and the Secured Party may sue the Debtor to collect the
amount of such deficiency; and
ix) DEALING WITH COLLATERAL. Subject to applicable law seize, collect,
realize, borrow money on the security of, release to third parties,
sell (by way of public or private sale), lease or otherwise deal with
the Collateral in such manner, upon such terms and conditions, at such
time or times and place or places and for such consideration as may
seem to the Secured Party advisable and without notice to the Debtor.
The Secured Party may charge on its own behalf and pay to others sums
for expenses incurred and for services rendered (expressly including
legal services, consulting, receivers and accounting fees) in or in
connection with seizing, collecting, realizing, borrowing on the
security of, selling or obtaining payment of the Collateral and may add
such sums to the Obligations secured by the Security Agreement.
8.2 Assemble the Collateral.
To assist the Secured Party in the implementation of such rights and
remedies the Debtor will, at its own risk and expense and at the Secured Party's
request, assemble and prepare for removal such items of the Collateral as are
selected for the Secured Party as shall, in the Secured Party's sole judgment,
have a value sufficient to cover all the Obligations.
8.3 Secured Party Not Liable for Failure to Exercise Remedies.
The Secured Party shall not be liable or accountable for any delay or
failure to exercise its remedies, take possession of, seize, collect, realize,
sell, lease or otherwise dispose of or obtain payment for the Collateral. The
Secured Party shall not be bound to institute proceedings for such purposes or
for the purpose of preserving any rights, remedies or powers of the Secured
Party, the Debtor or any other person in respect of the Collateral or against
any Account Debtor.
8.4 Allocation of Proceeds.
All monies collected or received by the Secured Party in respect of the
Collateral may be held by the Secured Party and may be applied on account of
such parts of the Obligations at the sole discretion of the Secured Party.
8.5 Extension of Time.
The Secured Party may grant extensions of time and other indulgences,
take and give up securities, accept
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<PAGE>
compositions, grant releases and discharges, release the Collateral to third
parties and otherwise deal with the Debtor's guarantors or sureties and others
and with the Collateral and other securities as the Secured Party may see fit
without prejudice to the liability of the Debtor to the Secured Party, or the
Secured Party's rights, remedies and powers under this Security Agreement.
8.6 Forbearance is not Waiver.
No extension of time, forbearance, indulgence or other accommodation
now, heretofore or hereafter given by the Secured Party to the Debtor shall
operate as a waiver, alteration or amendment of the right of the Secured Party
or otherwise preclude the Secured Party from enforcing such rights.
8.7 Effect of Appointment of Receiver.
As soon as the Secured Party takes possession of any Collateral or
appoints a Receiver, all powers, functions,m rights and privileges of the
directors and officers of the Debtor with respect to that Collateral shall
cease, unless specifically continued by the written consent of the Secured Party
or the Receiver.
8.8 Limitation of Liability.
The Secured Party shall not be liable by reason of any entry into or
taking possession of any of the Collateral hereby charged or intended so to be
or any part thereof, to account as mortgagee in possession or for anything
except actual receipts or be liable for any loss on realization or any act or
omission for which a secured party in possession might be liable. The Debtor
acknowledges and agrees that any and all payments, responsibilities, obligations
and liabilities in respect of the Collateral shall remain those of the Debtor
and no such payments, responsibilities obligations or liabilities are assigned
hereby nor are assumed or incurred by the Secured Party hereunder.
8.9 Release by Debtor.
The Debtor hereby releases and discharges the Secured Party and the
Receiver from every claim of every nature, whether in sounding in damages or
not, which may arise or be caused to the Debtor or any person claiming through
or under the Debtor by reason or as a result of any act or omission of the
Secured Party or any successor or assign claiming through or under the Secured
Party or the Receiver under the provisions of this Security Agreement unless
such claim is the result of dishonesty or gross neglect.
8.10 Performance by Secured Party.
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<PAGE>
Nothing herein shall obligate the Secured Party to assume or perform
any obligation of the Debtor to any third party in respect or arising out of the
Collateral. The Debtor agrees to indemnify and save harmless the Secured Party
from any and all claims of such third parties. The Secured Party may however at
its option assume or perform any such obligations which the Secured Party
considers necessary or desirable to obtain the benefit of the Collateral, or any
part thereof, free of any set off, deduction or abatement and any money so
expended by the Secured Party shall form part of the Obligations and shall bear
interest at the highest rate per annum from time to time charged by the Secured
party on any of the other Obligations.
SECTION 9
MISCELLANEOUS
9.1 Costs.
The Debtor will indemnify and reimburse the Secured Party on demand for
all interest, commissions, costs of realization and other costs and expenses
(including the full amount of all legal fees and expenses paid by the Secured
Party) incurred by the Secured Party or any Receiver in connection with:
i) the perpetual registration of any financing statement registered in
connection with the security interests hereby created;
ii) the preparation, execution, perfection, protection, enforcement of and
advice with respect to this Security Agreement;
iii) the realization, disposition of, retention, protection, insuring or
collection of any Collateral;
iv) the protection or enforcement of the rights, remedies and powers of the
Secured Party or any Receiver, including, without limitation,
participation, preparation and advice with respect to any actions or
proceedings commenced or threatened by or against the Debtor or any
Guarantor/Indemnitor;
v) the inspection of the Collateral;
vi) investigating title to the Collateral;
vii) the compliance by the Secured Party with all demands made upon the
Secured Party to amend, extend, cancel or discharge any registrations
and filings related hereto; and
viii) any other cost related hereto.
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<PAGE>
All amounts for which the Debtor is required hereunder to reimburse the Secured
Party or any Receiver shall, from the date of disbursement until the date the
Secured Party, or the Receiver receives reimbursement, be deemed advanced to the
Debtor by the Secured Party, shall be deemed to be Obligations and shall bear
interest at the highest rate per annum from time to time charged by the Secured
Party on any of the other Obligations.
9.2 Appointment of Attorney.
The Debtor constitutes and appoints the Secured Party, or any Receiver,
the true and lawful attorney of the Debtor irrevocably with full power of
substitution to do, make and execute all such assignments, documents, acts,
matters or things with the right to use the name of the Debtor whenever and
wherever it may be deemed necessary or expedient. The Debtor hereby declares
that the irrevocable power of attorney granted hereby, being coupled with an
interest, is given for valuable consideration.
9.3 No Obligation to Make Advances.
Nothing herein shall obligate the Secured Party to make any advance or
loan or further advance or extend credit to the Debtor and, in particular,
nothing herein shall obligate the Secured Party to advance any unadvanced
portion of any loan or credit to the Debtor after the occurrence of an Event of
Default. Except to the extent that the Secured Party:
i) by accepting bills of exchange drawn on it by the Debtor; or
ii) by issuing letters of credit or letters of guarantee on the application
of the Debtor,
is required to advance monies on the maturity of those bills or pursuant to
those letters of credit or letters of guarantee, as the case may be, none of the
preparation, execution, perfection or registration of this Security Agreement or
the advance of any monies by the Secured Party shall bind the Secured party to
make any further advance.
9.4 Security Interests Effective Immediately.
Neither the execution of nor any filing with respect to, this Security
Agreement shall bind the Secured Party to grant any credit to the Debtor, but
the security interests hereby created shall take effect forthwith upon the
execution of this Security Agreement by the Debtor.
9.5 Security in Addition and not in Substitution, Remedies Cumulative.
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<PAGE>
The rights, remedies and powers conferred by this Security
Agreement are in addition to, and not in substitution for, any other rights,
remedies or powers the Secured Party may have under this Security Agreement, at
law, in equity or by or under the PPSA or any other statute. The Secured Party
may proceed by way of any action, suit or other proceeding at law or in equity
and no right, remedy or power of the Secured Party shall be exclusive of or
dependent on any other. The Secured Party may exercise any of its rights,
remedies or powers separately or in combination and at any time.
9.6 Statutory Waivers.
To the fullest extent permitted by law, the Debtor waives all of the
rights, benefits and protection given by the provisions of any existing or
future statute which imposes limitations upon the rights, remedies or powers of
a Secured Party or upon the methods of realization of security, including any
seize or sue or anti-deficiency statute or any similar provisions of any other
statute. In particular, the Debtor waives all rights, benefits and protection
given by the Civil Enforcement Act and sections 47 to 50 of the Law of Property
Act of the Province of Alberta insofar as they extend to or relate to any of the
Collateral. The Limitation of Civil Rights Act of the Province of Saskatchewan
shall not apply to the security interests hereby created or any of the rights,
remedies powers of the Secured Party or any Receiver.
9.7 Provisions Reasonable.
The Debtor acknowledges that the provisions of this Security Agreement
and, in particular, those respecting rights, remedies and powers of the Secured
Party and any Receiver against the Debtor, its business and any Collateral upon
an Event of Default, are commercially reasonable and not manifestly
unreasonable.
9.8 Further Assurances.
The Debtor shall at all times, do, execute, acknowledge and deliver or
cause to be done, executed, acknowledged or delivered all such further acts,
deeds, transfers, assignments, security agreements and assurances as the Secured
Party may reasonably require in order to give effect to the provisions hereof
and for the better granting, transferring, assigning, charging, setting over,
assuring, confirming or perfecting the security interests hereby created and the
priority accorded to them by law or under this Security Agreement.
9.9 Notices.
i) Every notice, demand and other communication in connection with this
Security Agreement (including, without limitation, notices required or
permitted
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<PAGE>
under the Bankruptcy and Insolvency Act) and all legal process in
regard hereto shall be validly given, made or served if in writing and
delivered to, or mailed, postage prepaid, or telecopied or telexed or
sent by other similar form of communication (collectively "ELECTRONIC
COMMUNICATION") to the intended recipient at its address first written
above and if to the Debtor to the attention of President and if to the
Secured Party to the attention of Manager or to such other address or
person as the other may from time to time designate by notice.
ii) Any notice, requisition, demand or other instrument, (including,
without limitation, notices required or permitted under the Bankruptcy
and Insolvency Act) if delivered, shall be deemed to have been given or
made on the day on which it was delivered and if sent by Electronic
Communication shall be deemed to have been given or made on the
business day next following the day on which it was so sent, and if
mailed shall be deemed to have been given or made on the third business
day following the day on which it was so mailed. Any party hereto may
give written notice of a change of address in the same manner, in which
event any notice shall thereafter be given to it as above provided at
such changed address.
9.10 Discharge.
Upon payment and performance by the Debtor of the Obligations secured
hereby the Secured Party shall upon request in writing by the Debtor deliver up
this Security Agreement to the Debtor and shall at the expense of the Debtor
cancel and discharge the security interests hereby created and execute and
deliver to the Debtor such documents as shall be requisite to discharge the
security interests hereby created.
9.11 Delivery of Copy/Waiver.
The Debtor hereby acknowledges receiving a copy of this Security Agreement.
The Debtor waives all rights to receive from the Secured Party a copy
of any financing statement or financing change statement registered or
verification statement issued at any time in respect of this Security
Agreement.
9.12 Release of Information.
The Debtor hereby authorizes the Secured Party to provide a copy of this
Security Agreement and such other information (including full details
of the Obligations) as may be requested of me Secured Party by persons
entitled thereto under the PPSA.
9.13 Inspection, Management and Repairs.
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<PAGE>
The Debtor covenants and agrees that the Secured Party may,
but shall be under no obligation to, at such time or times as the Secured Party
deems necessary and without the concurrence of the Debtor or any other person
make such arrangements for the repairing, finishing and putting in order of the
Business Premises, including, without limitation, such repairs, replacements and
improvements as are necessary so that the Debtor and the Business Premises
comply with Environmental Laws, and all reasonable costs, charges and expenses
including, an allowance for the time and services of the Secured Party, the
Secured Party's servants or agents or any other person or persons appointed for
the above purposes including, without limitation, the full amount of all legal
fees, disbursements, costs, charges and expenses incurred by the Secured Party
and any amount due hereunder shall be payable forthwith to the Secured Party,
shall be deemed an advance to the Debtor by the Secured Party, shall be deemed
to be Obligations, and shall bear interest at the highest rate per annum from
time to time charged by the Secured Party on any of the other Obligations until
paid.
9.14 Hazardous Materials and Environmental Laws.
The Debtor represents and warrants to the Secured Party that:
i) the Business Premises are not insulated with urea formaldehyde and do
not contain any asbestos material or underground tanks;
ii) the Business Premises are free of any Hazardous Materials;
iii) the Business Premises are not currently used in a manner, and, to the
Debtor's knowledge, after having made due inquiry, no prior use has
occurred, which is contrary to any laws, regulations, orders, bylaws,
permits or lawful requirements of any Environmental Laws; and
iv) there are no existing or threatened claims, actions, orders or
investigations under any Environmental Laws against the Debtor or
against the Business Premises.
9.15 Authorization of Inquiries.
The Debtor hereby authorizes the Secured party to make inquiries from
time to time of any governmental authority with respect tot he Debtor's
compliance with Environmental Laws and the Debtor agrees that the Debtor will
from time to time provide to the Secured Party with such written authorization
as the Secured Party may reasonably require in order to facilitate the obtaining
of such information.
9.16 Indemnification.
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<PAGE>
i) The Debtor shall indemnify, reimburse and save harmless the Secured
Party, any receiver, its directors officers, employees, agents, and
successors and assigns, from any and all liabilities, actions, damages,
claims, losses, costs and expenses whatsoever (including without
limitation, the full amount of all legal fees, costs, charges and
expenses and the cost of removal, treatment, storage and disposal of
any Hazardous Materials and remediation of the Business Premises) which
may be paid, incurred or asserted against the Secured Party for, with
respect to or as a direct or indirect result of the presence on or
under, or the escape, seepage, leakage, spillage, discharge, emission
or release from, the Business Premises or into or upon any other land,
the atmosphere or any watercourse, body of water or wetland of any
Hazardous Materials.
ii) Any amount owing by the Debtor hereunder shall, from the date of
disbursement until the date the recipient receives reimbursement, be
deemed advanced to the Debtor by the Secured party, shall be deemed to
be obligations and shall bear interest at the highest rate per annum
from time to time charged by the Secured party on any of the other
Obligations until paid.
iii) The Debtor agrees that the indemnity obligations hereunder shall
survive the release of the security of this Security Agreement and the
payment and satisfaction of the indebtedness and liabilities hereby
secured, but only insofar as such indemnity obligations relate to
liabilities, actions, damages, claims, losses, costs and expenses
arising in connection with Hazardous Material that were on the Business
Premises prior to such release, payment and satisfaction.
SECTION 10
INTERPRETATION
10.1 Entire Agreement/Amendment.
This Security Agreement contains the entire agreement between the
parties relating to the security interests hereby created. Any amendment of this
Security Agreement shall not be binding unless in writing and signed by the
Secured Party and the Debtor. The Debtor confirms that there are no
representations, warranties, covenants or acknowledgements affecting, or relied
upon in entering this Security Agreement.
10.2 Severability.
Any provision of this Security Agreement prohibited by law or otherwise
ineffective shall be effective only to the extent of such prohibition or
ineffectiveness and shall be
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severable without invalidating or otherwise affecting the
remaining provisions hereof.
10.3 Joint and Several Liability.
If more than one person executes this Security Agreement as Debtor,
their Obligations hereunder and the liability resulting therefrom shall be joint
and several.
10.4 Headings.
All headings and titles in this Security Agreement are for reference
only and are not to be used in the interpretation of the terms hereof.
10.5 Included Words.
Wherever the singular or the masculine are used herein, the same shall
be deemed to include the plural or the feminine or the body politic or corporate
where the context or the parties so require.
10.6 Applicable Law.
This Security Agreement shall be construed and enforceable trader and
in accordance with the laws of Alberta.
10.7 Binding Effect.
This Security Agreement shall be binding on the Debtor and its
successors, heirs, administrators and executors and shall enure to the benefit
of the Secured Party and its successors and assigns.
Execution
Date
Officer Y M D Transferor(s) Signature(s)
Signature(s) J.R.S. EXPLORATION
COMPANY LIMITED
by its authorized signatory
/s/ Donald E. Janveau
- ---------------------
/s/ Garnet W. Mueller
- ---------------------
/s/ Donald E. Janveau
---------------------------
DONALD E. JANVEAU
President
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TRADEMARK SECURITY AGREEMENT
THIS TRADEMARK SECURITY AGREEMENT ("Security Agreement"), dated as of
November 17, 1997, is executed by and between 3-D GEOPHYSICAL, INC., a Delaware
corporation ("Grantor"), and Sanwa Business Credit Corporation, a Delaware
corporation ("Lender").
RECITALS
A. Grantor has executed in favor of Lender a guaranty and certain
related documents dated as of November 17, 1997 (collectively, the "Guaranty")
in connection with loans made by Lender to Northern Geophysical of America, Inc.
B. To secure Grantor's obligations under the Guaranty, Grantor has
agreed to deliver this duly executed Security Agreement to Lender.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Grantor hereby agrees with Lender as follows:
1. Definitions and Interpretation. When used in this Security
Agreement, the following terms shall have the following respective meanings:
"Affiliate" shall mean any person or entity controlling,
controlled by or under common control with another person or entity.
"Collateral" shall have the meaning given to that term in
Paragraph 2 hereof.
"Obligations" shall mean and include all loans, advances,
debts, liabilities and obligations, howsoever arising, owed by Grantor
to Lender of every kind and description (whether or not evidenced by
any note or instrument and whether or not for the payment of money),
direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising pursuant to the terms of the Guaranty,
including without limitation all interest, fees, charges, expenses,
attorneys' fees and accountants' fees chargeable to and payable by
Grantor hereunder and thereunder.
"Patent and Trademark Office" shall mean the United States
Patent and Trademark Office or any successor office or agency thereto.
"Trademarks" shall have the meaning given to that term in
<PAGE>
Attachment I hereto.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of California from time to time.
Unless otherwise defined herein, all other capitalized terms
used herein and defined in the Guaranty shall have the respective meanings given
to those terms in the Guaranty, and all terms defined in the UCC shall have the
respective meanings given to those terms in the UCC.
2. Grant of Security Interest. As security for the
Obligations, Grantor hereby pledges, mortgages and grants to Lender a security
interest in the property described in Attachment I annexed hereto (collectively
and severally, the "Collateral"), which Attachment I is incorporated herein by
this reference.
3. Representations and Warranties. Grantor represents and
warrants to Lender that:
(a) Grantor is the owner of the Collateral (or, in the case of
after-acquired Collateral, at the time Grantor acquires rights in the
Collateral, will be the owner thereof) and that no other Person has
(or, in the case of after-acquired Collateral, at the time Grantor
acquires rights therein, will have) any right, title, claim or interest
(by way of Lien or otherwise) in, against or to the Collateral;
(b) Lender has (or in the case of after-acquired Collateral,
at the time Grantor acquires rights therein, will have) a first
priority perfected security interest in the Collateral;
(c) Grantor has full corporate power and authority to grant
the security interest herein granted, and the execution and delivery of
this Security Agreement by Grantor and the performance of its
obligations hereunder, have been duly authorized by all necessary
corporate action on the part of Grantor;
(d) Grantor does not own any Trademarks registered in, or the
subject of pending applications in, the Patent and Trademark Office or
any similar offices or agencies in any other country or any political
subdivision thereof, other than those described in Schedule A or
Schedule B to Attachment I hereto;
(e) Grantor has the sole and full right, title and interest in
and to each of the Trademarks shown on Schedule A to Attachment I
hereto for the goods and services covered by the registrations thereof,
unencumbered except as set forth in Schedule C to Attachment I hereto,
and such registrations are valid and enforceable and in full force and
effect;
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<PAGE>
(f) There is no claim by any third party that any Trademarks
are invalid or unenforceable or do or may violate the rights of any
Person;
(g) All licenses of Trademarks which Grantor has granted to
any Person are set forth in Schedule C to Attachment I hereto; and
(h) All licenses of Trademarks which any Person has granted to
Grantor are set forth in Schedule D to Attachment I hereto.
4. Covenants of Grantor. Grantor hereby agrees:
(a) Grantor shall perform all acts and execute all documents,
including, without limitation, Grants of Security Interest
substantially in the form of Attachment II annexed hereto, that may be
necessary or desirable to record, maintain, preserve, protect and
perfect Lender's interest in the Collateral, the Lien granted to Lender
in the Collateral and the first priority of such Lien;
(b) Except to the extent that Lender shall give its prior
written consent,
(i) Grantor shall continue to use the Trademarks in
connection with each and every trademarked class of goods or
services applicable to its current line as reflected in its
current catalogs, brochures, price lists or similar materials
in order to maintain the Trademarks in full force and effect
free from any claim of abandonment for nonuse, and Grantor
shall not (and will not permit any licensee thereof to) do any
act or omit to do any act whereby any Trademark may become
invalidated and shall notify Lender immediately if Grantor
knows of any reason or has reason to know that any application
or registration may become invalidated; and
(ii) Grantor shall not assign, sell, mortgage, lease,
transfer, pledge, hypothecate, grant a security interest in or
Lien upon, encumber, grant an exclusive or non-exclusive
license, or otherwise dispose of any of the Collateral, and
nothing in this Security Agreement shall be deemed a consent
by Lender to any such action except as expressly permitted
herein;
(c) Grantor shall promptly pay Lender for any and all sums,
costs, and expenses which Lender may pay or incur pursuant to the
provisions of this Security Agreement or in enforcing the Obligations,
the Collateral or the security interest granted hereunder, including,
without limitation, all filing or recording fees, court costs,
collection charges, travel, and reasonable attorneys' fees and
expenses, all of which together with interest at the highest rate then
payable on the Obligations
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<PAGE>
shall be part of the Obligations and be payable on demand;
(d) Grantor shall promptly notify Lender upon the filing with
the Patent and Trademark Office or any similar office or agency in any
other country or any political subdivision thereof, either by Grantor
or by any agent, employee, licensee or designee of Grantor, of (i) an
application for the registration of any Trademark with the Patent and
Trademark Office or any similar office or agency in any other country
or any political subdivision thereof or (ii) any assignment of any
Trademark which Grantor may acquire from a third party. Upon the
request of Lender, Grantor shall execute and deliver any and all
documents, instruments, and agreements as Lender may request to
evidence Lender's security interest in such Trademark (and the goodwill
and general intangibles of Grantor relating thereto or represented
thereby), and Grantor authorizes Lender to amend an original
counterpart of the applicable Grant of Security Interest executed
pursuant to Subparagraph 4(a) of this Security Agreement without first
obtaining Grantor's approval of or signature to such amendment, and to
record such security interest with the Patent and Trademark Office;
(e) Grantor shall keep the Collateral free of all Liens,
except in favor of Lender;
(f) Grantor shall take all necessary steps in any proceeding
before the Patent and Trademark Office or any similar office or agency
in any other country or any political subdivision thereof, to
diligently prosecute or maintain, as applicable, each application and
registration of the Trademarks;
(g) So long as any of the Obligations are outstanding, Grantor
shall make application to the Patent and Trademark Office (and assign
any such application to Lender as security) to register any
registerable but unregistered material Trademarks used by Grantor in
connection with its products or services, unless Grantor, in the
exercise of its prudent business judgment, deems any such Trademark not
to have any significant commercial value or determines that its rights
thereunder are better preserved as a trade secret;
(h) Grantor shall (i) use proper statutory notice in
connection with any use of the Trademarks, and (ii) maintain consistent
standards of quality in its manufacture of products sold under the
Trademarks or provision of services in connection with the Trademarks;
(i) Grantor agrees that if it or any Affiliate learns of any
use by any Person of any term or design likely to cause confusion with
any Trademark, Grantor shall promptly notify Lender of such use and of
all steps taken and to be taken to remedy any infringement of any
Trademark; and
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<PAGE>
(j) Grantor shall at all times keep at least one complete set
of its records concerning the Collateral at its chief executive office
and shall make such records available for inspection by Lender at such
times as Lender may reasonably request.
5. Authorized Action by Lender.
(a) Lender may, in its sole discretion, pay any amount or do
any act required of Grantor hereunder or requested by Lender to
preserve, defend, protect, maintain, record or enforce Grantor's
obligations contained herein, the Obligations, the Collateral, or the
right, title and interest granted Lender by this Security Agreement,
and which Grantor fails to do or pay, and any such payment shall be
deemed an advance by Lender to Grantor and shall be payable on demand
together with interest at the highest rate then payable on the
Obligations.
(b) Grantor agrees to execute and deliver to Lender three
originals of a Special Power of Attorney in substantially the form of
Attachment III to this Agreement for the implementation of the
recording, giving of notice, preservation, assignment, sale or other
disposal of the Collateral pursuant to Paragraph 2 and Subparagraphs
5(a) and 7(a).
(c) Grantor hereby grants to Lender and its employees and
agents the right to visit Grantor's business facilities at which
Grantor manufactures products or provides services, which products or
services are sold under or provided in connection with any of the
Trademarks, and to inspect such products and the quality control
records relating thereto or observe the provision of such services.
6. Litigation and Other Proceedings.
(a) Unless Grantor determines in the exercise of its
reasonable business judgment that (i) the Trademark at issue is of
immaterial value and (ii) loss of the exclusive use of such Trademark
would not have a material adverse effect on Grantor's condition
(financial or otherwise) or on the collateral, Grantor shall have the
obligation to commence and diligently prosecute such suits, proceedings
or other actions for infringement or other damage, or reexamination or
reissue proceedings, or opposition or cancellation proceedings as are
reasonable to protect any of the Trademarks. No such suit, proceeding
or other actions shall be settled or voluntarily dismissed, nor shall
any party be released or excused of any claims of or liability for
infringement, without the prior written consent of Lender, which
consent shall not be
- 5 -
<PAGE>
unreasonably withheld.
(b) Upon the occurrence and during the continuation of an
Event of Default, Lender shall have the right but not the obligation to
bring suit or institute proceedings in the name of Grantor or Lender to
enforce any rights in the Collateral, including any license thereunder,
in which event Grantor shall at the request of Lender do any and all
lawful acts and execute any and all documents required by Lender in aid
of such enforcement. If Lender elects not to bring suit to enforce any
right under the Collateral, including any license thereunder, Grantor
agrees to use all reasonable measures, whether by suit, proceeding or
other action, to prevent the infringement of any right under the
Collateral by any Person and for that purpose agrees to diligently
maintain any action, suit or proceeding against any Person so
infringing necessary to prevent such infringement.
7. Default and Remedies.
(a) Grantor shall be deemed in default under this Security
Agreement upon the occurrence of an Event of Default. Upon the
occurrence and during the continuation of any such Event of Default,
Lender may, at its option, and (except if otherwise specified below)
without notice to or demand on Grantor, and in addition to all rights
and remedies available to Lender under the Guaranty or the other loan
documents, do any one or more of the following:
(i) upon ten (10) days' prior notice to Grantor,
direct Grantor not to make any further use of the Trademarks
(or any mark similar thereto) for any purpose;
(ii) at any time and from time to time, upon ten (10)
days' prior notice to Grantor, license, whether general,
special or otherwise, and whether on an exclusive or
nonexclusive basis, any of the Trademarks throughout the world
for such term or terms, on such conditions, and in such
manner, as Lender shall in its sole discretion determine;
(iii) at any time and from time to time, enforce (and
upon notice to Grantor have the exclusive right to enforce)
against any licensee or sublicensee all rights and remedies of
Grantor in, to and under any one or more license agreements
with respect to the Collateral (without assuming any
obligations or liability thereunder), and take or refrain from
taking any action under any thereof;
(iv) at any time and from time to time, upon ten (10)
days' prior
- 6 -
<PAGE>
notice to Grantor, assign, sell, or otherwise dispose of, the
Collateral or any of it, either with or without special or
other conditions or stipulations, with power to buy the
Collateral or any part of it, and with power also to execute
assurances, and do all other acts and things for completing
the assignment, sale or disposition which Lender shall, in its
sole discretion, deem appropriate or proper; and
(v) in addition to the foregoing, in order to
implement the assignment, sale or other disposal of any of the
Collateral pursuant to clause (a)(iv) hereof, Lender may, at
any time, pursuant to the authority granted in the Power of
Attorney executed pursuant to Subparagraph 5(b) hereof,
execute and deliver on behalf of Grantor, one or more
instruments of assignment of the Trademarks (or any
application for registration thereof), in form suitable for
filing, recording or registration in any country.
(b) Grantor agrees to pay when due all reasonable costs
incurred in any such transfer of the Trademarks, including, without
limitation, any taxes, fees and reasonable attorneys' fees and
expenses, and all such costs shall be added to the Obligations. Lender
may apply the proceeds actually received from any such license,
assignment, sale or other disposition to the reasonable costs and
expenses thereof, including, without limitation, reasonable attorneys'
fees and all legal, travel and other expenses which may be incurred by
Lender, and then to the Obligations, in such order as to principal or
interest as Lender may desire; and Grantor shall remain liable and will
pay Lender on demand any deficiency remaining, together with interest
thereon at a rate equal to the highest rate then payable on the
Obligations and the balance of any expenses unpaid. Nothing herein
contained shall be construed as requiring Lender to take any such
action at any time. In the event of any such license, assignment, sale
or other disposition of the Collateral, or any of it, after the
occurrence or continuation as hereinabove provided of an Event of
Default, Grantor shall supply its know-how and expertise relating to
the manufacture and sale of the products bearing the Trademarks or in
connection with which the Trademarks are used, and its consumer or
customer lists and other records relating to the Trademarks and to the
distribution of products or the provisions of services, to Lender or
its designee.
- 7 -
<PAGE>
(c) In furtherance of Lender's rights hereunder, Grantor
hereby grants to Lender an irrevocable, non-exclusive license
(exercisable without royalty or other payment by Lender) to use,
license or sublicense any Trademark in which Grantor now or hereafter
has any right, title or interest together with the right of access to
all media in which any Trademark may be recorded or stored. Such
license shall be exercisable only upon the occurrence and during the
continuation of an Event of Default (after any applicable cure periods
have expired).
8. Reassignment. Upon the payment in full of the Obligations and the
termination of the Guaranty and Lender's obligation to provide advances
thereunder, Lender shall execute and deliver to Grantor (at no expense to
Lender) all assignments and other instruments as may be necessary to vest in
Grantor full right, title and interest in and to the Collateral, subject to any
disposition thereof which may have been made by Lender pursuant to the
provisions of this Security Agreement.
9. Indemnification and Release.
(a) Grantor assumes all responsibility and liability arising
from the use of the Trademarks, and Grantor shall indemnify and hold
Lender and its directors, officers, employees, agents and any of their
respective Affiliates ("Indemnitees") harmless from and against any
claim, suit, loss, damage or expense (including, without limitation,
reasonable attorneys' fees and expenses) arising out of or in
connection with any alleged infringement of any trademark or alleged
defect in any product manufactured, promoted or sold by Grantor (or any
Affiliate of Grantor) in connection with any Trademark, or out of the
manufacture, promotion, labeling, sale or advertisement of any product
or service by Grantor (or any Affiliate of Grantor). Grantor agrees
that Lender does not assume, and shall have no responsibility for, the
payment of any sums due or to become due under any agreement or
contract included in the Collateral or the performance of any
obligations to be performed under or with respect to any such agreement
or contract by Grantor, and Grantor hereby agrees to indemnify and hold
each Indemnitee harmless with respect to any and all claims by any
Person relating thereto.
(b) Grantor agrees to indemnify and hold each Indemnitee
harmless from and against any claim, suit, loss, damage or expense
(including, without limitation, reasonable attorneys' fees and
expenses) arising out of or in connection with any action taken or
omitted to be taken by Lender pursuant to clause 7(a)(iii) hereof with
respect to any license agreement of Grantor.
(c) Grantor agrees to indemnify and hold each Indemnitee
harmless
- 8 -
<PAGE>
from and against any claim, suit, loss, damage or expense (including,
without limitation, reasonable attorneys' fees and expenses) arising
out of or in connection with (i) any claim, suit or proceeding
instituted by Grantor or (ii) any action taken or omitted to be taken
by Lender pursuant to Subparagraph 6(b).
(d) Grantor hereby releases the Indemnitees from any claims,
causes of action and demands at any time arising out of or with respect
to any actions taken or omitted to be taken by the Indemnitees under
the powers of attorney granted under the Special Power of Attorney
executed pursuant to Subparagraph 5(b) herein, other than actions taken
or omitted to be taken through the gross negligence or willful
misconduct of such Indemnitees.
(e) Grantor agrees to cause Lender to be named as an
additional insured with respect to any policy of insurance held by
Grantor from time to time covering product liability or intellectual
property infringement risk.
10. Miscellaneous.
(a) Notices. Except as otherwise provided herein, all notices,
requests, demands or other communications to or upon Lender or Grantor
hereunder shall be addressed to Lender or Grantor at the respective
addresses indicated below or at such other address as Lender or Grantor
may designate by written notice to the other party, and shall be deemed
to have been given (i) in the case of notice by letter, three (3) days
after deposited in the mails registered and return receipt requested,
or (ii) in the case of notice given by telecommunication, when sent
with appropriate confirmation received:
Lender: Sanwa Business Credit Corporation
550 N. Brand Boulevard
Suite 950
Glendale, California 91203
Attention: Regional Manager
Telephone: (818) 545-0090
Telecopy: (818) 545-0095
- 9 -
<PAGE>
Grantor: 3-D Geophysical, Inc.
8226 Park Meadows Drive
Littleton, Colorado 80124
Attention: Ronald L. Koons
Telephone:
Telecopy:
with a copy to: Rothgerber, Appel, Powers & Johnson, LLP
Norwest Bank Tower
90 S. Cascade Ave., Suite 1100
Colorado Springs, CO 80903
Attention: Bruce Warren, Esq.
Telephone:
Telecopy:
(b) Nonwaiver. No failure or delay on Lender's part in
exercising any right hereunder shall operate as a waiver thereof or of
any other right nor shall any single or partial exercise of any such
right preclude any other further exercise thereof or of any other
right.
(c) Amendments and Waivers. Except with respect to action by
Lender pursuant to Subparagraph 4(d), this Security Agreement may not
be amended or modified, nor may any of its terms be waived, except by
written instruments signed by Grantor and Lender as required by the
Guaranty. Each waiver or consent under any provision hereof shall be
effective only in the specific instances and for the purpose for which
given.
(d) Assignments. This Security Agreement shall be binding upon
and inure to the benefit of Lender and Grantor and their respective
successors and assigns; provided, however, that Grantor and Lender may
sell, assign and delegate their respective rights and obligations
hereunder only as permitted by the Guaranty.
(e) Cumulative Rights, etc. The rights, powers and remedies of
Lender under this Security Agreement shall be in addition to all
rights, powers and remedies given to Lender by virtue of any applicable
law, rule or regulation of any governmental authority, the Guaranty or
any other agreement, all of which rights, powers, and remedies shall be
cumulative and may be exercised successively or concurrently without
impairing Lender's rights hereunder. Grantor waives any right to
require Lender to proceed against any Person or to exhaust any
Collateral or to pursue any remedy in Lender's power.
- 10 -
<PAGE>
(f) Payments Free of Taxes, Etc. All payments made by Grantor
under this Security Agreement shall be made by Grantor free and clear
of and without deduction for any and all present and future taxes,
levies, charges, deductions and withholdings. In addition, Grantor
shall pay upon demand any stamp or other taxes, levies or charges of
any jurisdiction with respect to the execution, delivery, registration,
performance and enforcement of this Security Agreement. Upon request by
Lender, Grantor shall furnish evidence satisfactory to Lender that all
requisite authorizations and approvals by, and notices to and filings
with, governmental authorities and regulatory bodies have been obtained
and made and that all requisite taxes, levies and charges have been
paid.
(g) Partial Invalidity. If at any time any provision of this
Security Agreement is or becomes illegal, invalid or unenforceable in
any respect under the law of any jurisdiction, neither the legality,
validity or enforceability of the remaining provisions of this Security
Agreement nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction shall in any way be
affected or impaired thereby.
(h) Governing Law. This Security Agreement shall be governed
by and construed in accordance with the laws of the State of California
without reference to conflicts of law rules.
(i) Submission to Jurisdiction. Grantor hereby irrevocably and
unconditionally:
(i) Submits for itself and its property in any legal
action or proceeding relating to this Security Agreement, or
for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive jurisdiction of the courts
located in Los Angeles, and consents and agrees to suit being
brought in such courts as Lender may elect;
(ii) 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 proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) Agrees as an alternate means of service of
process in any such legal action or proceeding to service by
mailing of copies thereof (by registered or certified mail, if
practicable) postage prepaid, or by telecopy, to the then
active agent or to Grantor at its address set forth in
Subparagraph 10(a) hereof or at such other address of which
Lender shall have
- 11 -
<PAGE>
been notified pursuant thereto, and agrees that failure to
receive such copy or notice shall not affect or impair the
validity of such service or of any judgment rendered in any
action or proceeding based thereon; and
(iv) Agrees that nothing herein shall affect Lender's
right to effect service of process in any other manner
permitted by law, and that Lender shall have the right to
bring any legal proceedings (including a proceeding for
enforcement of a judgment entered by any of the aforementioned
courts) against Guarantor in such courts or in any other court
or jurisdiction in accordance with applicable law.
(j) Jury Trial. EACH OF GRANTOR AND LENDER, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
- 12 -
<PAGE>
IN WITNESS WHEREOF, Grantor and Lender have caused this Security
Agreement to be executed as of the day and year first above written.
"GRANTOR"
3-D GEOPHYSICAL, INC.,
a Delaware corporation,
By: /s/ Ronald L. Koons
-------------------------------------
Name: Ronald L. Koons
Title: Vice President
"LENDER"
SANWA BUSINESS CREDIT CORPORATION,
a Delaware corporation
By: /s/ Timothy K. Turner
-------------------------------------
Name: Timothy K. Turner
Title: First Vice President
- 13 -
<PAGE>
ATTACHMENT I
TO TRADEMARK SECURITY AGREEMENT
(a) All trademarks, trade names, trade styles and service marks, and
all prints and labels on which said trademarks, trade names, trade styles and
service marks have appeared or appear, and all designs and general intangibles
of like nature, now existing or hereafter adopted or acquired, all right, title
and interest therein and thereto, all registrations and recordings thereof,
including without limitation, (i) all applications, registrations and recordings
in the Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof, or any foreign country or any political
subdivision thereof, all whether now owned or hereafter acquired by Grantor,
including, but not limited to, those described in Schedules A and B to this
Attachment I, which Schedules A and B are incorporated herein by this reference,
and (ii) all reissues, extensions or renewals thereof and all licenses thereof
(collectively, the "Trademarks");
(b) All goodwill of Grantor's business symbolized by the Trademarks and
all customer lists and other records of Grantor relating to the distribution of
products or provision of services bearing or covered by the Trademarks;
(c) All claims by Grantor against any Person for past, present or
future infringement of the Trademarks, including, without limitation, the right
to take any action to enforce such claims;
(d) All proceeds of the foregoing (including, without limitation,
whatever is receivable or received when Collateral or proceeds are sold,
collected, exchanged, licensed or otherwise disposed of, whether such
disposition is voluntary or involuntary, including, without limitation, rights
to payment and return premiums and insurance proceeds under insurance with
respect to any Collateral, and all rights to payment with respect to any cause
of action affecting or relating to the Collateral).
I-A
<PAGE>
SCHEDULE A TO ATTACHMENT I
TO TRADEMARK SECURITY AGREEMENT
TRADEMARKS
Trademark Jurisdiction Reg. Date Reg. No.
--------- ------------ --------- --------
None.
<PAGE>
SCHEDULE B TO ATTACHMENT I
TO TRADEMARK SECURITY AGREEMENT
APPLICATIONS FOR TRADEMARKS
Trademark Jurisdiction Date Filed Serial No.
--------- ------------ ---------- ----------
3-D Geophysical U.S. 10/8/96 75-179,174
<PAGE>
SCHEDULE C TO ATTACHMENT I
TO TRADEMARK SECURITY AGREEMENT
LICENSES GRANTED BY GRANTOR TO THIRD PARTIES
None
<PAGE>
SCHEDULE D TO ATTACHMENT I
TO TRADEMARK SECURITY AGREEMENT
LICENSES GRANTED BY THIRD PARTIES TO GRANTOR
None
<PAGE>
ATTACHMENT II TO TRADEMARK SECURITY AGREEMENT
GRANT OF SECURITY INTEREST
TRADEMARKS
THIS GRANT OF SECURITY INTEREST, dated as of November 17,
1997, is executed by 3-D Geophysical, Inc., a Delaware corporation ("Grantor"),
in favor of Sanwa Business Credit Corporation, a Delaware corporation
("Lender").
A. Grantor has executed in favor of Lender a guaranty and
certain related documents dated as of November 17, 1997 (collectively, the
"Guaranty") in connection with loans made by Lender to Northern Geophysical of
America, Inc.;
B. Grantor has adopted, used and is using certain trademarks,
more particularly described on Schedules 1-A and 1-B annexed hereto as part
hereof, which trademarks are registered or subject to an application for
registration in the United States Patent and Trademark Office (collectively, the
"Trademarks");
C. Grantor has entered into a Trademark Security Agreement
dated the date hereof (the "Security Agreement") in favor of Lender; and
D. Pursuant to the Security Agreement, Grantor has granted to
Lender a security interest in all right, title and interest of Grantor in and to
the Trademarks, together with the goodwill of the business symbolized by the
Trademarks and the customer lists and records related to the Trademarks and the
applications and registrations thereof, and all proceeds thereof, including,
without limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the prompt payment,
performance and observance of the Obligations, as defined in the Security
Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Grantor does hereby further grant to Lender a
security interest in the Collateral to secure the prompt payment, performance
and observance of the Obligations.
<PAGE>
Grantor does hereby further acknowledge and affirm that the
rights and remedies of Lender with respect to the security interest in the
Collateral granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which are hereby incorporated herein by reference as
if fully set forth herein.
Lender's address is: Sanwa Business Credit Corporation
550 N. Brand Boulevard
Suite 950
Glendale, California 91203
Attention: Regional Manager
Telephone: (818) 545-0090
Telecopy: (818) 545-0095
IN WITNESS WHEREOF, Grantor has caused this Grant of Security
Interest to be executed as of the day and year first above written.
"GRANTOR"
3-D GEOPHYSICAL, INC.,
a Delaware corporation,
By: /s/ Ronald L. Koons
----------------------
Name: Ronald L. Koons
Title: Vice President
II-2
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
- -------------------------------------------------------------------------------
STATE OF CALIFORNIA )
) ss.
)
On , before me, ,
(Name And Title Of Officer)
personally appeared
,
personally known to me
-OR-
proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed
the same in his/her/their authorized capacity(ies), and that
by his/her/their signature(s) on the instrument the person(s),
or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature Of Notary
- -------------------------------------------------------------------------------
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
Individual
Corporate Officer
Title(s) Title Or Type Of Document
Partner(s) Limited
General
Attorney-In-Fact
Trustee(s)
Guardian/Conservator Number Of Pages
Other:
Signer is representing:
Name Of Person(s) Or Entity(ies) Date Of Document
Signer(s) Other Than Named Above
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
TRADEMARKS
Mark Registration Date Registration No.
---- ----------------- ----------------
None.
<PAGE>
SCHEDULE 1-B TO GRANT OF SECURITY INTEREST
TRADEMARK APPLICATIONS
Mark Application Date Application No.
---- ---------------- ---------------
3-D Geophysical 10/8/96 75-179,174
<PAGE>
ATTACHMENT III TO TRADEMARK SECURITY AGREEMENT
SPECIAL POWER OF ATTORNEY
STATE OF CALIFORNIA )
) ss.:
COUNTY OF LOS ANGELES )
KNOW ALL PERSONS BY THESE PRESENTS, THAT 3-D Geophysical,
Inc., a Delaware corporation ("Grantor"), pursuant to a Trademark Security
Agreement, dated as of November 17, 1997 (the "Security Agreement"), by and
between Grantor and Sanwa Business Credit Corporation, a Delaware corporation
("Lender"), hereby appoints and constitutes Lender its true and lawful attorney,
with full power of substitution, and with full power and authority to perform
the following acts on behalf of Grantor:
1. For the purpose of assigning, selling, licensing or
otherwise disposing of all right, title and interest of Grantor in and to any
trademarks, trade names, trade styles and service marks, and all registrations,
recordings, reissues, extensions and renewals thereof, and all pending
applications therefor, and for the purpose of the recording, registering and
filing of, or accomplishing any other formality with respect to, the foregoing,
to execute and deliver any and all agreements, documents, instruments of
assignment or other papers necessary or advisable to effect such purpose.
2. For the purpose of evidencing and perfecting Lender's
interest in any trademark not previously assigned to Lender as security, or in
any trademark which Grantor may acquire from a third party, and for the purpose
of the recording, registering and filing of, or accomplishing any other
formality with respect to, the foregoing, to execute and deliver any and all
agreements, documents, instruments of assignment or other papers necessary or
advisable to effect such purpose.
3. To execute any and all documents, statements, certificates
or other papers necessary or advisable in order to obtain the purposes described
above as Lender may in its sole discretion determine.
<PAGE>
This power of attorney is made pursuant to the Security
Agreement and takes effect solely for the purposes of Paragraph 2 and
Subparagraphs 5(a) and 7(a) thereof and is subject to the conditions thereof and
may not be revoked until the payment in full of all "Obligations" as defined in
the Security Agreement.
Dated: November 17, 1997
"GRANTOR"
3-D GEOPHYSICAL, INC.,
a Delaware corporation,
By: /s/ Ronald L. Koons
----------------------
Name: Ronald L. Koons
Title: Vice President
III-2
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
- -------------------------------------------------------------------------------
STATE OF CALIFORNIA )
) ss.
)
On , before me, ,
(Name And Title Of Officer)
personally appeared
,
personally known to me
-OR-
proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed
the same in his/her/their authorized capacity(ies), and that
by his/her/their signature(s) on the instrument the person(s),
or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature Of Notary
- -------------------------------------------------------------------------------
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
Individual
Corporate Officer
Title(s) Title Or Type Of Document
Partner(s) Limited
General
Attorney-In-Fact
Trustee(s)
Guardian/Conservator Number Of Pages
Other:
Signer is representing:
Name Of Person(s) Or Entity(ies) Date Of Document
Signer(s) Other Than Named Above
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT
This Pledge Agreement is entered into as of November 17, 1997, by and
between:
PLEDGOR: 3-D GEOPHYSICAL, INC.
8226 Park Meadows Drive
Littleton, Colorado 80124
AND
PLEDGEE: SANWA BUSINESS CREDIT CORPORATION
550 North Brand Boulevard
Glendale, California 91203
WHEREAS, 3-D Geophysical, Inc., a Delaware corporation ("Pledgor") owns
one hundred percent (100%) of the issued and outstanding shares of capital stock
of Northern Geophysical of America, Inc., a Delaware corporation ("Borrower");
WHEREAS, Borrower has received or will receive loans and other
financial accommodations made by Sanwa Business Credit Corporation ("Pledgee")
pursuant to a Loan and Security Agreement dated as of the date hereof between
Borrower and Pledgee (the "Loan Agreement");
WHEREAS, in consideration for such financial accommodations, Pledgor
has guarantied the obligations of Borrower to Pledgee pursuant to a Secured
Continuing Corporate Guaranty dated as of the date hereof (the "Guaranty"),
which Guaranty is secured by, among other things, this Pledge Agreement.
NOW THEREFORE, for value received, and in consideration of the
foregoing recitals, Pledgor and Pledgee hereby agree as follows:
1. Pledge of Collateral and Delivery of Pledged Collateral.
1.1 Pledgor hereby pledges and assigns to Pledgee and grants to
Pledgee a security interest in all of the Collateral described in Section 2
below, whether now owned or hereafter acquired, now or at any time hereafter in
the possession, custody or control of Pledgee or its agents, whether held for
safekeeping, in a safe deposit box, or otherwise ("Collateral") to secure prompt
payment and full performance of the obligations described in Section 3 below
(collectively, "Obligations").
1.2 All certificates or instruments representing or evidencing the
Collateral shall be delivered to and held by or on behalf of Pledgee pursuant
hereto and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to Pledgee. Pledgee shall have the right, at
any time, after an Event of Default (as defined herein), in its reasonable
discretion and without notice to Pledgor, to transfer to or to register
<PAGE>
in the name of Pledgee or any of its nominees any or all of the Collateral. In
addition, Pledgee shall have the right at any time to exchange certificates or
instruments representing or evidencing Collateral for certificates or
instruments of smaller or larger denominations.
2. Collateral. The Collateral consists of the following:
2.1 All the shares of common stock of Borrower, owned beneficially
and of record by Pledgor and listed on Schedule I attached hereto and made a
part hereof, and all cash, dividends, other securities, instruments, rights and
other property at any time and from time to time received or receivable in
respect thereof or in exchange for all or any part thereof, including without
limitation, stock dividends, warrants, rights to subscribe, conversion rights,
liquidating dividends and other stock rights, and in the event Pledgor receives
any of the foregoing, Pledgor acknowledges that the same shall be received IN
TRUST for Pledgee and agrees immediately to deliver the same to Pledgee in
original form of receipt, together with any stock or bond powers, assignments,
endorsements or other documents or instruments as Pledgee may reasonably request
to establish, protect or perfect Pledgee's interest in respect of such
Collateral; and
2.2 Subject to the terms of Section 7.1.2 hereof, all other
property hereafter delivered to Pledgee (or any agent or bailee holding on
behalf of Pledgee) by Pledgor in substitution for or in addition to any of the
foregoing, all certificates and instruments representing or evidencing such
other property and all cash, dividends, other securities, instruments, rights
and other property at any time and from time to time received or receivable in
respect thereof or in exchange for all or any part thereof, including without
limitation, stock dividends, warrants, rights to subscribe, conversion rights,
liquidating dividends and other stock rights, and in the event Pledgor receives
any of the foregoing, Pledgor acknowledges that the same shall be received IN
TRUST for Pledgee and agrees immediately to deliver the same to Pledgee in
original form of receipt, together with any stock or bond powers, assignments,
endorsements or other documents or instruments as Pledgee may request to
establish, protect or perfect Pledgee's interest in respect of such Collateral;
and
2.3 All proceeds of all of the foregoing.
3. Obligations. The Obligations secured under this Pledge Agreement are
the obligations of Pledgor under the Guaranty and under this Pledge Agreement,
and all extensions, amendments, modifications and renewals of any of the
foregoing.
4. Representations and Warranties. Pledgor represents and warrants on
the date hereof, and shall be deemed to represent and warrant on the date of
each loan or advance made by Pledgee to Borrower, that:
4.1 Pledgor is the sole legal, beneficial and, if applicable,
record owner of the Collateral (or, in the case of after-acquired Collateral,
will be the sole such owner thereof), having good and marketable title thereto,
free of all liens, security interests, encumbrances or claims of any kind;
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4.2 All information heretofore, herein or hereafter given to
Pledgee by or on behalf of Pledgor is complete, true and correct.
4.3 All shares of stock constituting Collateral (a) have been duly
and validly issued in compliance with all applicable state and federal laws
(including, without limitation, the Securities Act of 1933, as amended (the
"Securities Act"), if applicable), (b) are fully paid, nonassessable and free of
preemptive rights, (c) are not subject to any restrictions upon the voting
rights or upon the transfer thereof other than as may appear on the face of the
certificates evidencing such Collateral, (d) constitute all securities of
Borrower owned beneficially and of record by Pledgor and (e) include 100% of the
issued and outstanding shares of each class of voting stock of Borrower;
4.4 Pledgor has the right and power and is duly authorized and
empowered to enter into, execute, deliver and perform this Pledge Agreement;
4.5 This Pledge Agreement has been duly executed and delivered by
Pledgor and constitutes a legal, valid and binding obligation of Pledgor,
enforceable against Pledgor in accordance with its terms;
4.6 The execution, delivery and performance of this Pledge
Agreement do not (i) violate any provisions of law or any order of any court or
other agency of government, or (ii) contravene any provision of any material
contract or agreement to which Pledgor is a party or by which Pledgor or
Pledgor's assets are bound; and
4.7 Each of the representations and warranties set forth in
Paragraph 16 of the Guaranty is accurate and complete as of the date hereof.
5. Covenants of Pledgor. Until the Obligations are paid in full,
Pledgor agrees to:
5.1 Preserve and protect the Collateral;
5.2 Not create, incur, assume or permit to exist any liens,
encumbrances, security interests, levies, assessments or charges on or in any of
the Collateral, except those approved in advance in writing by Pledgee;
5.3 Promptly pay and discharge before the same become delinquent
all taxes, assessments and governmental charges or levies imposed on Pledgor or
any of the Collateral;
5.4 Not sell, encumber, or otherwise dispose of or transfer any
Collateral, or any right or interest therein and agrees that it will (i) cause
Borrower not to issue any other voting stock in addition to or in substitution
for the Collateral, except to Pledgor, or in connection with outstanding stock
options or with the prior written consent of Pledgee and (ii) pledge hereunder,
immediately upon Pledgor's acquisition (directly or indirectly) thereof, any and
all additional shares of stock or other securities of Borrower;
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5.5 Appear in and defend, at Pledgor's own expense, any action or
proceeding which may affect Pledgor's title to or Pledgee's interest in the
Collateral;
5.6 Procure or execute and deliver, from time to time, in form and
substance satisfactory to Pledgee, any stock powers, bond powers, endorsements,
assignments, financing statements, estoppel certificates or other writings
deemed necessary or appropriate by Pledgee to perfect, maintain or protect
Pledgee's security interest in the Collateral and the priority thereof, and take
such other action and deliver such other documents, instruments and agreements
pertaining to the Collateral as Pledgee may request to effectuate the intent of
this Pledge Agreement;
5.7 If Pledgee gives value to enable Pledgor to acquire rights in
or use of any Collateral, use such value only for such purpose;
5.8 Keep separate, accurate and complete records of the Collateral
and provide Pledgee with access thereto and to Pledgor's financial records, in
each case with the right to make extracts therefrom;
5.9 Provide Pledgee with copies of all reports filed by Borrower
or Pledgor with the Securities and Exchange Commission within ten (10) business
days after the last date such report is required to be filed;
5.10 Provide Pledgee with such other information pertaining to the
Collateral as Pledgee may reasonably request from time to time;
5.11 Maintain and preserve its corporate or other legal existence
and that of its majority-owned subsidiaries, including, without limitation,
Borrower, and all rights, privileges, franchises and other authority necessary
for the conduct of their respective businesses; and
5.12 Continue its operations in the same form and structure of
business (i.e., corporate, partnership, individual) as currently conducted, and
not merge or consolidate with or acquire or be acquired by any other
corporation, partnership, entity or person, without Pledgee's prior written
consent; and
5.13 At all times comply with the covenants and agreements set
forth in the Guaranty.
6. Authorized Action by Pledgee.
6.1 Pledgor hereby irrevocably appoints Pledgee as its
attorney-in- fact to do (but Pledgee shall not be obligated to and shall not
incur any liability to Pledgor or any third party for failure so to do) any act
which Pledgor is obligated by this Pledge Agreement to do, and to exercise such
rights and powers as Pledgor might exercise with respect to the Collateral,
including, without limitation, the right to:
6.1.1 collect by legal proceedings or otherwise and endorse,
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receive and receipt for all payments, proceeds and other sums and property now
or hereafter payable on or in respect of proceeds and other sums and property
now or hereafter payable on or in respect of the Collateral, including dividends
and interest payments;
6.1.2 enter into any extension, reorganization, deposit,
merger or consolidation agreement or other agreement pertaining to the
Collateral, and in connection therewith may deposit or surrender control of the
Collateral thereunder, accept other property in exchange therefor, and do and
perform such acts and things as it may deem proper, and any money or property
secured in exchange therefor shall be applied to the Obligations or held by
Pledgee pursuant to the provisions of this Pledge Agreement;
6.1.3 protect and preserve the Collateral;
6.1.4 transfer the Collateral to its own or its nominee's
name; and
6.1.5 make any compromise, settlement or adjustment, and take
any action it deems advisable, with respect to the Collateral;
provided, however, that Pledgee shall only exercise such rights after the
occurrence and during the continuation of an Event of Default (as defined
herein), except that upon the cure of any Event of Default, Pledgee shall have
the right to complete any action commenced by it during such Event of Default.
6.2 Pledgor agrees to reimburse Pledgee upon demand for any costs
and expenses, including attorneys' fees, Pledgee may incur while acting as
Pledgor's attorney-in-fact hereunder, all of which costs and expenses are
included in the Obligations secured hereby and are payable upon demand. It is
further agreed and understood between the parties hereto that such care as
Pledgee gives to the safekeeping of its own property of like kind shall
constitute reasonable care of the Collateral when in Pledgee's possession;
provided, however, that Pledgee shall not be required to make any presentment,
demand or protest, or give any notice and need not take any action to preserve
any rights against any prior party or any other person in connection with the
Obligations or with respect to the Collateral.
6.3 If Pledgor's records are prepared or retained by a computer
service company or any accountant or accounting service, so long as any
Obligations are outstanding, Pledgor grants Pledgee the absolute and irrevocable
right to inspect such records, receive duplicate copies of all information
furnished to Pledgor and prepared by such company, accountant or accounting
service, and agrees to furnish such consents as may be necessary to effectuate
the same. Pledgor further agrees to promptly notify Pledgee of the name and
address of such company, accountant or accounting service and of any change in
respect thereof.
6.4 All the foregoing powers authorized herein, being coupled with
an interest, are irrevocable so long as any Obligations are outstanding.
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7. Transfer, Voting, Dividends, Etc.
7.1 Notwithstanding any other provision hereof, so long as no
Event of Default (as defined herein) shall have occurred and be continuing:
7.1.1 Pledgor shall be entitled to exercise all voting powers
pertaining to all shares of stock and other securities constituting Collateral
for all purposes not inconsistent with the terms of this Pledge Agreement;
7.1.2 To the extent permitted in the Loan Agreement, Pledgor
shall be entitled to receive and retain all dividends (other than stock or
liquidating dividends) and all interest payments payable in respect of the
Collateral; provided, however, that all stock or property representing stock or
liquidating dividends or a distribution or return of capital upon or in respect
of the shares of stock constituting Collateral or resulting from a split-up,
revision or reclassification of such Collateral or received in exchange
therefor, as a result of a merger, consolidation or otherwise, shall be paid or
transferred directly to Pledgee immediately upon receipt thereof by Pledgor, and
shall be retained by Pledgee as Collateral hereunder; and
7.1.3 in order to permit Pledgor to exercise such voting
powers and to receive such dividends Pledgee shall, if necessary, upon the
written request of the Pledgor, from time to time, execute and deliver to
Pledgor appropriate proxies.
7.2 If any Event of Default (as defined herein) shall have
occurred and while the same is continuing:
7.2.1 Pledgee, or its nominee or nominees, shall, at its
option (after notice to Pledgor of Pledgee's intent to exercise such rights),
have the sole and exclusive right to exercise all voting powers pertaining to
the shares of stock constituting Collateral, and shall exercise such powers in
such manner as Pledgee may elect, and Pledgor hereby grants Pledgee an
irrevocable proxy, coupled with an interest to vote such shares of stock;
provided, however, that such proxy shall terminate upon termination of Pledgee's
security interest therein; and
7.2.2 All dividends and other distributions made upon or in
respect of shares of stock constituting Collateral and all interest payments
shall be paid directly to and shall be retained by Pledgee as Collateral
hereunder.
8. Default and Remedies.
8.1 The occurrence of any of the following events or conditions
(herein "Events of Default") shall, at the option of Pledgee and without notice
to or demand on Pledgor, constitute an Event of Default hereunder:
8.1.1 any Default, under and as defined in the Loan Agreement,
shall have occurred and be continuing;
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8.1.2 breach, violation or non-performance of any warranty,
covenant or undertaking on Pledgor's part hereunder; or
8.1.3 breach, violation or non-performance of any warranty,
covenant or undertaking on Pledgor's part under any other agreement with Pledgee
(including, without limitation, the Guaranty).
8.2 Upon the occurrence of any Event of Default, Pledgee may, at
its option, without notice to or demand on Pledgor, declare all Obligations
immediately due and payable, and Pledgee shall have all the default rights and
remedies of a secured party under Chapter 5 of Division 9 of the California
Uniform Commercial Code and other applicable law as well as the following rights
and remedies, all of which may be exercised with or without further notice to
Pledgor, at Pledgee's sole option and as Pledgee in its sole discretion may deem
advisable:
8.2.1 to settle, compromise or release, on terms acceptable to
Pledgee, in whole or in part, any amounts owing on the Collateral, and to extend
the time of payment, in Pledgee's name or in the name of Pledgor, in respect
thereof;
8.2.2 to apply to the payment of the Obligations, or set-off
or collect the Collateral, notwithstanding any forfeiture of interest or loss of
other rights of Pledgor against any obligor on the Collateral resulting from
such action; and
8.2.3 to sell or otherwise dispose of the Collateral, or any
part thereof, either at public or private sale, on any broker's board or
securities exchange, in lots or in bulk, for cash, on credit or otherwise, with
or without representations or warranties, and upon such terms as shall be
acceptable to Pledgee.
8.3 The net cash proceeds resulting from the collection,
liquidation, sale, or other disposition of the Collateral shall be applied
first, to the expenses (including all attorneys' fees) of holding, storing,
preparing for sale, selling, collecting, liquidating and the like, including any
brokerage commissions and stamp or transfer taxes, and then to the satisfaction
of all Obligations secured hereby, application as to any particular obligation
or indebtedness or against principal or interest to be in Pledgee's absolute
discretion.
8.4 If by reason of any prohibition contained in the Securities
Act of 1933, as now or hereafter in effect, or in applicable California or other
state securities laws, as now or hereafter in effect, or in any rules or
regulations pertaining to any of the foregoing laws, Pledgee believes it is
compelled to resort to one or more private sales of shares of stock constituting
Collateral to a single purchaser or a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such securities for their own
account, for investment and not with a view to the distribution or resale
thereof, Pledgor acknowledges and agrees that private sales of such Collateral
may be held notwithstanding that such sales may be at prices and on other terms
less favorable to Pledgor than if such Collateral were sold at public sale.
Pledgor further agrees that Pledgee has no obligation to delay the sale of any
such Collateral for the period of time necessary to permit registration of
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the Collateral, even if the issuer thereof would, or should, agree to register
such Collateral for public sale under applicable securities laws. Pledgor
specifically agrees that private sales made under the foregoing circumstances
shall be deemed to have been made in a "commercially reasonable" manner.
8.5 Pledgor further acknowledges and recognizes that Pledgee may
be unable to effect a public sale of all or a part of the Collateral and may be
compelled to resort to one or more private sales of shares of stock constituting
Collateral to a single purchaser or a restricted group of purchasers who will be
obligated to agree, among other things, to acquire the Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. Pledgor acknowledges that any such private sales may be at prices and
on terms less favorable to Pledgee than those of public sales, and agrees that
such private sales shall be deemed to have been made in a commercially
reasonable manner and that Pledgee has no obligation to delay the sale of any
Collateral to permit the issuer thereof to register it for public sale under the
Securities Act.
9. Duty of Pledgee. Pledgee shall not be under any duty or obligation
whatsoever to collect any dividends, interest or other payments due or accruing
in respect of the Collateral or to take any action to preserve rights in
connection with any Collateral, including, without limitation, making or giving
any presentment, demands for performance, notices of non-performance, protests,
notices of protest or notices of dishonor in connection with any Collateral.
10. Cumulative Rights. The rights, powers and remedies of Pledgee under
this Pledge Agreement shall be in addition to all rights, powers and remedies
given to Pledgee under any statute or rule of law, this Pledge Agreement or any
other agreement, all of which rights, powers and remedies shall be cumulative
and may be exercised successively or concurrently.
11. Waiver. Any forbearance, failure or delay by Pledgee in exercising
any right, power or remedy shall not preclude the further exercise thereof, and
every right, power or remedy of Pledgee shall continue in full force and effect
until such right, power or remedy is specifically waived in a writing executed
by Pledgee. Pledgor waives any right to require Pledgee to proceed against any
person or to exhaust any Collateral or to pursue any remedy in Pledgee's power
prior to pursuing Pledgor in respect of the Obligations.
12. Setoff. Pledgor agrees that Pledgee may exercise its rights of
setoff with respect to the Obligations in the same manner as if the Obligations
were unsecured.
13. Binding Upon Successors. All rights of Pledgee under this Pledge
Agreement shall inure to the benefit of its successors and assigns, and all
obligations of Pledgor shall bind the representatives, and successors and
assigns of the Pledgor.
14. Waiver of Suretyship Defenses. Pledgor hereby reaffirms each of the
waivers given in the Guaranty as if each such waiver was fully set forth herein.
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15. Substituted Collateral; Additional Collateral. Pledgor may
substitute Collateral under this Pledge Agreement provided that any Collateral
proposed for substitution is satisfactory to Pledgee in Pledgee's sole
discretion. As of the date of delivery of any Collateral approved for
substitution by Pledgee pursuant to this Section 15 or otherwise approved as
additional security pursuant to this Pledge Agreement, Pledgor represents and
warrants to Pledgee that (1) Pledgor will own such shares, certificates and
instruments free and clear of any right of any other person or entity, and (2)
Pledgor will have good and marketable title to the shares, certificates and
instruments and have the right to pledge such shares, certificates or
instruments pursuant to this Pledge Agreement. By delivery of such substituted
or additional Collateral, Pledgor shall have represented and warranted that
Pledgee has a valid, perfected, first priority security interest in such shares,
certificates and instruments and the proceeds thereof free and clear of all
liens, claims and rights of third parties whatsoever. All documentary, stamp or
other taxes or fees owing in connection with the issuance, transfer and/or
pledge of the Collateral or any substituted or additional Collateral have been
paid and will hereafter be paid by Pledgor as such become due and payable.
16. Entire Agreement; Severability. This Pledge Agreement contains the
entire pledge agreement between Pledgee and Pledgor with respect to the
Collateral. If any of the provisions of this Pledge Agreement shall be held
invalid or unenforceable, this Pledge Agreement shall be construed as if not
containing those provisions and the rights and obligations of the parties hereto
shall be construed and enforced accordingly.
17. Return; Acquittance. Pledgee may at any time deliver any Collateral
to Pledgor and the receipt thereof by Pledgor shall be a complete and full
acquittance in respect of the Collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
18. References. As used herein, terms in the singular include the
plural. The captions or titles of the sections of this Pledge Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
19. Choice of Law. This Pledge Agreement shall be construed in
accordance with and governed by the laws of the State of California, and, where
applicable and except as otherwise defined herein, terms used herein shall have
the meanings given them in the California Uniform Commercial Code. Pledgor
irrevocably and unconditionally submits to the jurisdiction of the Superior
Court of the State of California for the County of Los Angeles or the United
States District Court of the Central District of California, as Pledgee may deem
appropriate, or if required, the Municipal Court of the State of California for
the County of Los Angeles, in connection with any legal action or proceeding
arising out of or relating to this Pledge Agreement, and Pledgor waives any
objection relating to the basis for personal or in rem jurisdiction or to venue
which it may now or hereafter have in any such suit, action or proceeding.
20. Jury Trial. PLEDGOR AND PLEDGEE WAIVE THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF
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ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE OBLIGATIONS
HEREIN.
21. Notice. Any written notice, consent or other communication provided
for in this Pledge Agreement shall be delivered or sent by first-class mail,
with postage prepaid, to the party to be notified, to the mailing address
specified in the introductory section hereof. Such addresses may be changed by
written notice as provided herein.
22. Expenses. Pledgor will reimburse Pledgee for all out-of-pocket
expenses incurred by Pledgee arising out of the enforcement of this Agreement,
including without limitation, attorneys' fees and costs whether or not suit is
filed.
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23. Indemnification. Pledgor agrees to pay, and on demand to indemnify
and hold harmless, Pledgee, its successors, assigns and agents, from and against
any and all claims, damages, losses, liabilities, demands, suits, judgments,
causes of action and all legal proceedings, whether civil or criminal,
penalties, fines and other sanctions, and any costs and expenses incurred in
connection therewith, including attorneys' fees, which may result from, relate
to or arise out of this Pledge Agreement or any Collateral, including the
ownership, purchase, delivery, acceptance or rejection, use, possession or
disposition of any item of Collateral, but not including any claims arising out
of the gross negligence or willful misconduct of Pledgee or its agents.
EXECUTED as of November 17, 1997.
PLEDGEE: PLEDGOR:
SANWA BUSINESS CREDIT 3-D GEOPHYSICAL, INC.
CORPORATION
By: /s/ Timothy K. Turner By: /s/ Ronald L. Koons
--------------------- --------------------
Its: First Vice President Its: Vice President
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SCHEDULE I
Class of Stock No. of Shares
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1. Common Stock of Northern Geophysical
of America, Inc. registered in the name of
3-D Geophysical, Inc.
PLEDGE AGREEMENT
This Pledge Agreement is entered into as of November 17, 1997, by and
between:
PLEDGOR: 3-D GEOPHYSICAL, INC.
8226 Park Meadows Drive
Littleton, Colorado 80124
AND
PLEDGEE: SANWA BUSINESS CREDIT CORPORATION
550 North Brand Boulevard
Glendale, California 91203
WHEREAS, 3-D Geophysical, Inc., a Delaware corporation ("Pledgor") owns
one hundred percent (100%) of the issued and outstanding shares of capital stock
of 3-D Geophysical of Canada, Inc., an Alberta, Canada company (the "Company");
WHEREAS, Northern Geophysical of America, Inc., a Delaware corporation
("Borrower"), has received or will receive loans and other financial
accommodations made by Sanwa Business Credit Corporation ("Pledgee") pursuant to
a Loan and Security Agreement dated as of the date hereof between Borrower and
Pledgee (the "Loan Agreement");
WHEREAS, in consideration for such financial accommodations, Pledgor
has guarantied the obligations of Borrower to Pledgee pursuant to a Secured
Continuing Corporate Guaranty dated as of the date hereof (the "Guaranty"),
which Guaranty is secured by, among other things, this Pledge Agreement.
NOW THEREFORE, for value received, and in consideration of the
foregoing recitals, Pledgor and Pledgee hereby agree as follows:
1. Pledge of Collateral and Delivery of Pledged Collateral.
1.1 Pledgor hereby pledges and assigns to Pledgee and grants to
Pledgee a security interest in all of the Collateral described in Section 2
below, whether now owned or hereafter acquired, now or at any time hereafter in
the possession, custody or control of Pledgee or its agents, whether held for
safekeeping, in a safe deposit box, or otherwise ("Collateral") to secure prompt
payment and full performance of the obligations described in Section 3 below
(collectively, "Obligations").
1.2 All certificates or instruments representing or evidencing the
Collateral shall be delivered to and held by or on behalf of Pledgee pursuant
hereto and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed
<PAGE>
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Pledgee. Pledgee shall have the right, at any time, after an
Event of Default (as defined herein), in its reasonable discretion and without
notice to Pledgor, to transfer to or to register in the name of Pledgee or any
of its nominees any or all of the Collateral. In addition, Pledgee shall have
the right at any time to exchange certificates or instruments representing or
evidencing Collateral for certificates or instruments of smaller or larger
denominations. Pledgee shall promptly take all steps necessary under the laws of
Canada to legally perfect the interest of Pledgee created hereby.
2. Collateral. The Collateral consists of the following:
2.1 Sixty-five percent (65%) in the aggregate of the shares of
common stock of the Company, all such stock owned beneficially and of record by
Pledgor and listed on Schedule I attached hereto and made a part hereof, and all
cash, dividends, other securities, instruments, rights and other property at any
time and from time to time received or receivable in respect thereof or in
exchange for all or any part thereof, including without limitation, stock
dividends, warrants, rights to subscribe, conversion rights, liquidating
dividends and other stock rights, and in the event Pledgor receives any of the
foregoing, Pledgor acknowledges that the same shall be received IN TRUST for
Pledgee and agrees immediately to deliver the same to Pledgee in original form
of receipt, together with any stock or bond powers, assignments, endorsements or
other documents or instruments as Pledgee may reasonably request to establish,
protect or perfect Pledgee's interest in respect of such Collateral; and
2.2 Subject to the terms of Section 7.1.2 hereof, all other
property hereafter delivered to Pledgee (or any agent or bailee holding on
behalf of Pledgee) by Pledgor in substitution for or in addition to any of the
foregoing, all certificates and instruments representing or evidencing such
other property and all cash, dividends, other securities, instruments, rights
and other property at any time and from time to time received or receivable in
respect thereof or in exchange for all or any part thereof, including without
limitation, stock dividends, warrants, rights to subscribe, conversion rights,
liquidating dividends and other stock rights, and in the event Pledgor receives
any of the foregoing, Pledgor acknowledges that the same shall be received IN
TRUST for Pledgee and agrees immediately to deliver the same to Pledgee in
original form of receipt, together with any stock or bond powers, assignments,
endorsements or other documents or instruments as Pledgee may request to
establish, protect or perfect Pledgee's interest in respect of such Collateral;
and
2.3 All proceeds of all of the foregoing.
3. Obligations. The Obligations secured under this Pledge Agreement are
the obligations of Pledgor under the Guaranty and under this Pledge Agreement,
and all extensions, amendments, modifications and renewals of any of the
foregoing.
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4. Representations and Warranties. Pledgor represents and warrants on
the date hereof, and shall be deemed to represent and warrant on the date of
each loan or advance made by Pledgee to Borrower, that:
4.1 Pledgor is the sole legal, beneficial and, if applicable,
record owner of the Collateral (or, in the case of after-acquired Collateral,
will be the sole such owner thereof), having good and marketable title thereto,
free of all liens, security interests, encumbrances or claims of any kind;
4.2 All information heretofore, herein or hereafter given to
Pledgee by or on behalf of Pledgor is complete, true and correct.
4.3 All shares of stock constituting Collateral (a) have been duly
and validly issued in compliance with all applicable laws, (b) are fully paid,
nonassessable and free of preemptive rights, (c) are not subject to any
restrictions upon the voting rights or upon the transfer thereof other than as
may appear on the face of the certificates evidencing such Collateral, and (d)
include not less than 65% of the issued and outstanding shares of each class of
voting stock of the Company;
4.4 Pledgor has the right and power and is duly authorized and
empowered to enter into, execute, deliver and perform this Pledge Agreement;
4.5 This Pledge Agreement has been duly executed and delivered by
Pledgor and constitutes a legal, valid and binding obligation of Pledgor,
enforceable against Pledgor in accordance with its terms;
4.6 The execution, delivery and performance of this Pledge
Agreement do not (i) violate any provisions of law or any order of any court or
other agency of government, or (ii) contravene any provision of any material
contract or agreement to which Pledgor is a party or by which Pledgor or
Pledgor's assets are bound; and
4.7 Each of the representations and warranties set forth in
Paragraph 16 of the Guaranty is accurate and complete as of the date hereof.
5. Covenants of Pledgor. Until the Obligations are paid in full,
Pledgor agrees to:
5.1 Preserve and protect the Collateral;
5.2 Not create, incur, assume or permit to exist any liens,
encumbrances, security interests, levies, assessments or charges on or in any of
the Collateral, except those approved in advance in writing by Pledgee;
5.3 Promptly pay and discharge before the same become delinquent
all taxes, assessments and governmental charges or levies imposed on Pledgor or
any of the
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Collateral;
5.4 Not sell, encumber, or otherwise dispose of or transfer any
Collateral, or any right or interest therein and agrees that it will (i) cause
the Company not to issue any other voting stock in addition to or in
substitution for the Collateral, except to Pledgor, or in connection with
outstanding stock options or with the prior written consent of Pledgee and (ii)
pledge hereunder, immediately upon Pledgor's acquisition (directly or
indirectly) thereof, any and all additional shares of stock or other securities
of the Company;
5.5 Appear in and defend, at Pledgor's own expense, any action or
proceeding which may affect Pledgor's title to or Pledgee's interest in the
Collateral;
5.6 Procure or execute and deliver, from time to time, in form and
substance satisfactory to Pledgee, any stock powers, bond powers, endorsements,
assignments, financing statements, estoppel certificates or other writings
deemed necessary or appropriate by Pledgee to perfect, maintain or protect
Pledgee's security interest in the Collateral and the priority thereof, and take
such other action and deliver such other documents, instruments and agreements
pertaining to the Collateral as Pledgee may request to effectuate the intent of
this Pledge Agreement;
5.7 If Pledgee gives value to enable Pledgor to acquire rights in
or use of any Collateral, use such value only for such purpose;
5.8 Keep separate, accurate and complete records of the Collateral
and provide Pledgee with access thereto and to Pledgor's financial records, in
each case with the right to make extracts therefrom;
5.9 Provide Pledgee with copies of all reports filed by the
Company or Pledgor with the Securities and Exchange Commission within ten (10)
business days after the last date such report is required to be filed;
5.10 Provide Pledgee with such other information pertaining to the
Collateral as Pledgee may reasonably request from time to time;
5.11 Maintain and preserve its corporate or other legal existence
and that of its majority-owned subsidiaries, including, without limitation, the
Company, and all rights, privileges, franchises and other authority necessary
for the conduct of their respective businesses; and
5.12 Continue its operations in the same form and structure of
business (i.e., corporate, partnership, individual) as currently conducted, and
not merge or consolidate with or acquire or be acquired by any other
corporation, partnership, entity or person, without Pledgee's prior written
consent; and
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5.13 At all times comply with the covenants and agreements set
forth in the Guaranty.
6. Authorized Action by Pledgee.
6.1 Pledgor hereby irrevocably appoints Pledgee as its
attorney-in- fact to do (but Pledgee shall not be obligated to and shall not
incur any liability to Pledgor or any third party for failure so to do) any act
which Pledgor is obligated by this Pledge Agreement to do, and to exercise such
rights and powers as Pledgor might exercise with respect to the Collateral,
including, without limitation, the right to:
6.1.1 collect by legal proceedings or otherwise and endorse,
receive and receipt for all payments, proceeds and other sums and property now
or hereafter payable on or in respect of proceeds and other sums and property
now or hereafter payable on or in respect of the Collateral, including dividends
and interest payments;
6.1.2 enter into any extension, reorganization, deposit,
merger or consolidation agreement or other agreement pertaining to the
Collateral, and in connection therewith may deposit or surrender control of the
Collateral thereunder, accept other property in exchange therefor, and do and
perform such acts and things as it may deem proper, and any money or property
secured in exchange therefor shall be applied to the Obligations or held by
Pledgee pursuant to the provisions of this Pledge Agreement;
6.1.3 protect and preserve the Collateral;
6.1.4 transfer the Collateral to its own or its nominee's
name; and
6.1.5 make any compromise, settlement or adjustment, and take
any action it deems advisable, with respect to the Collateral;
provided, however, that Pledgee shall only exercise such rights after the
occurrence and during the continuation of an Event of Default (as defined
herein), except that upon the cure of any Event of Default, Pledgee shall have
the right to complete any action commenced by it during such Event of Default.
6.2 Pledgor agrees to reimburse Pledgee upon demand for any costs
and expenses, including attorneys' fees, Pledgee may incur while acting as
Pledgor's attorney-in-fact hereunder, all of which costs and expenses are
included in the Obligations secured hereby and are payable upon demand. It is
further agreed and understood between the parties hereto that such care as
Pledgee gives to the safekeeping of its own property of like kind shall
constitute reasonable care of the Collateral when in Pledgee's possession;
provided, however, that Pledgee shall not be required to make any presentment,
demand or protest, or give any notice and need not take any action to preserve
any rights against any
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prior party or any other person in connection with the Obligations or with
respect to the Collateral.
6.3 If Pledgor's records are prepared or retained by a computer
service company or any accountant or accounting service, so long as any
Obligations are outstanding, Pledgor grants Pledgee the absolute and irrevocable
right to inspect such records, receive duplicate copies of all information
furnished to Pledgor and prepared by such company, accountant or accounting
service, and agrees to furnish such consents as may be necessary to effectuate
the same. Pledgor further agrees to promptly notify Pledgee of the name and
address of such company, accountant or accounting service and of any change in
respect thereof.
6.4 All the foregoing powers authorized herein, being coupled with
an interest, are irrevocable so long as any Obligations are outstanding.
7. Transfer, Voting, Dividends, Etc.
7.1 Notwithstanding any other provision hereof, so long as no
Event of Default (as defined herein) shall have occurred and be continuing:
7.1.1 Pledgor shall be entitled to exercise all voting powers
pertaining to all shares of stock and other securities constituting Collateral
for all purposes not inconsistent with the terms of the Loan Agreement and this
Pledge Agreement;
7.1.2 To the extent permitted in the Loan Agreement, Pledgor
shall be entitled to receive and retain all dividends (other than stock or
liquidating dividends) and all interest payments payable in respect of the
Collateral; provided, however, that all stock or property representing stock or
liquidating dividends or a distribution or return of capital upon or in respect
of the shares of stock constituting Collateral or resulting from a split-up,
revision or reclassification of such Collateral or received in exchange
therefor, as a result of a merger, consolidation or otherwise, shall be paid or
transferred directly to Pledgee immediately upon receipt thereof by Pledgor, and
shall be retained by Pledgee as Collateral hereunder; and
7.1.3 in order to permit Pledgor to exercise such voting
powers and to receive such dividends Pledgee shall, if necessary, upon the
written request of the Pledgor, from time to time, execute and deliver to
Pledgor appropriate proxies.
7.2 If any Event of Default (as defined herein) shall have
occurred and while the same is continuing:
7.2.1 Pledgee, or its nominee or nominees, shall, at its
option (after notice to Pledgor of Pledgee's intent to exercise such rights),
have the sole and exclusive right to exercise all voting powers pertaining to
the shares of stock constituting
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Collateral, and shall exercise such powers in such manner as Pledgee may elect,
and Pledgor hereby grants Pledgee an irrevocable proxy, coupled with an interest
to vote such shares of stock; provided, however, that such proxy shall terminate
upon termination of Pledgee's security interest therein; and
7.2.2 All dividends and other distributions made upon or in
respect of shares of stock constituting Collateral and all interest payments
shall be paid directly to and shall be retained by Pledgee as Collateral
hereunder.
8. Default and Remedies.
8.1 The occurrence of any of the following events or conditions
(herein "Events of Default") shall, at the option of Pledgee and without notice
to or demand on Pledgor, constitute an Event of Default hereunder:
8.1.1 any Default, under and as defined in the Loan Agreement,
shall have occurred and be continuing;
8.1.2 breach, violation or non-performance of any warranty,
covenant or undertaking on Pledgor's part hereunder; or
8.1.3 breach, violation or non-performance of any warranty,
covenant or undertaking on Pledgor's part under any other agreement with Pledgee
(including, without limitation, the Guaranty).
8.2 Upon the occurrence of any Event of Default, Pledgee may, at
its option, without notice to or demand on Pledgor, declare all Obligations
immediately due and payable, and Pledgee shall have all the default rights and
remedies of a secured party under Chapter 5 of Division 9 of the California
Uniform Commercial Code and other applicable law as well as the following rights
and remedies, all of which may be exercised with or without further notice to
Pledgor, at Pledgee's sole option and as Pledgee in its sole discretion may deem
advisable:
8.2.1 to settle, compromise or release, on terms acceptable to
Pledgee, in whole or in part, any amounts owing on the Collateral, and to extend
the time of payment, in Pledgee's name or in the name of Pledgor, in respect
thereof;
8.2.2 to apply to the payment of the Obligations, or set-off
or collect the Collateral, notwithstanding any forfeiture of interest or loss of
other rights of Pledgor against any obligor on the Collateral resulting from
such action; and
8.2.3 to sell or otherwise dispose of the Collateral, or any
part thereof, either at public or private sale, on any broker's board or
securities exchange, in lots or in bulk, for cash, on credit or otherwise, with
or without representations or warranties,
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and upon such terms as shall be acceptable to Pledgee.
8.3 The net cash proceeds resulting from the collection,
liquidation, sale, or other disposition of the Collateral shall be applied
first, to the expenses (including all attorneys' fees) of holding, storing,
preparing for sale, selling, collecting, liquidating and the like, including any
brokerage commissions and stamp or transfer taxes, and then to the satisfaction
of all Obligations secured hereby, application as to any particular obligation
or indebtedness or against principal or interest to be in Pledgee's absolute
discretion.
8.4 If by reason of any prohibition contained in the Securities
Act of 1933, as now or hereafter in effect, or in applicable California or other
state securities laws, as now or hereafter in effect, or in any rules or
regulations pertaining to any of the foregoing laws, Pledgee believes it is
compelled to resort to one or more private sales of shares of stock constituting
Collateral to a single purchaser or a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such securities for their own
account, for investment and not with a view to the distribution or resale
thereof, Pledgor acknowledges and agrees that private sales of such Collateral
may be held notwithstanding that such sales may be at prices and on other terms
less favorable to Pledgor than if such Collateral were sold at public sale.
Pledgor further agrees that Pledgee has no obligation to delay the sale of any
such Collateral for the period of time necessary to permit registration of the
Collateral, even if the issuer thereof would, or should, agree to register such
Collateral for public sale under applicable securities laws. Pledgor
specifically agrees that private sales made under the foregoing circumstances
shall be deemed to have been made in a "commercially reasonable" manner.
8.5 Pledgor further acknowledges and recognizes that Pledgee may
be unable to effect a public sale of all or a part of the Collateral and may be
compelled to resort to one or more private sales of shares of stock constituting
Collateral to a single purchaser or a restricted group of purchasers who will be
obligated to agree, among other things, to acquire the Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. Pledgor acknowledges that any such private sales may be at prices and
on terms less favorable to Pledgee than those of public sales, and agrees that
such private sales shall be deemed to have been made in a commercially
reasonable manner and that Pledgee has no obligation to delay the sale of any
Collateral to permit the issuer thereof to register it for public sale under the
Securities Act.
9. Duty of Pledgee. Pledgee shall not be under any duty or obligation
whatsoever to collect any dividends, interest or other payments due or accruing
in respect of the Collateral or to take any action to preserve rights in
connection with any Collateral, including, without limitation, making or giving
any presentment, demands for performance, notices of non-performance, protests,
notices of protest or notices of dishonor in connection with any Collateral.
10. Cumulative Rights. The rights, powers and remedies of Pledgee under
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this Pledge Agreement shall be in addition to all rights, powers and remedies
given to Pledgee under any statute or rule of law, this Pledge Agreement or any
other agreement, all of which rights, powers and remedies shall be cumulative
and may be exercised successively or concurrently.
11. Waiver. Any forbearance, failure or delay by Pledgee in exercising
any right, power or remedy shall not preclude the further exercise thereof, and
every right, power or remedy of Pledgee shall continue in full force and effect
until such right, power or remedy is specifically waived in a writing executed
by Pledgee. Pledgor waives any right to require Pledgee to proceed against any
person or to exhaust any Collateral or to pursue any remedy in Pledgee's power
prior to pursuing Pledgor in respect of the Obligations.
12. Setoff. Pledgor agrees that Pledgee may exercise its rights of
setoff with respect to the Obligations in the same manner as if the Obligations
were unsecured.
13. Binding Upon Successors. All rights of Pledgee under this Pledge
Agreement shall inure to the benefit of its successors and assigns, and all
obligations of Pledgor shall bind the representatives, and successors and
assigns of the Pledgor.
14. Waiver of Suretyship Defenses. Pledgor hereby reaffirms each of the
waivers given in the Guaranty as if each such waiver was fully set forth herein.
15. Substituted Collateral; Additional Collateral. Pledgor may
substitute Collateral under this Pledge Agreement provided that any Collateral
proposed for substitution is satisfactory to Pledgee in Pledgee's sole
discretion. As of the date of delivery of any Collateral approved for
substitution by Pledgee pursuant to this Section 15 or otherwise approved as
additional security pursuant to this Pledge Agreement, Pledgor represents and
warrants to Pledgee that (1) Pledgor will own such shares, certificates and
instruments free and clear of any right of any other person or entity, and (2)
Pledgor will have good and marketable title to the shares, certificates and
instruments and have the right to pledge such shares, certificates or
instruments pursuant to this Pledge Agreement. By delivery of such substituted
or additional Collateral, Pledgor shall have represented and warranted that
Pledgee has a valid, perfected, first priority security interest in such shares,
certificates and instruments and the proceeds thereof free and clear of all
liens, claims and rights of third parties whatsoever. All documentary, stamp or
other taxes or fees owing in connection with the issuance, transfer and/or
pledge of the Collateral or any substituted or additional Collateral have been
paid and will hereafter be paid by Pledgor as such become due and payable.
16. Entire Agreement; Severability. This Pledge Agreement contains the
entire pledge agreement between Pledgee and Pledgor with respect to the
Collateral. If any of the provisions of this Pledge Agreement shall be held
invalid or unenforceable, this Pledge Agreement shall be construed as if not
containing those provisions and the rights and obligations of the parties hereto
shall be construed and enforced accordingly.
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17. Return; Acquittance. Pledgee may at any time deliver any Collateral
to Pledgor and the receipt thereof by Pledgor shall be a complete and full
acquittance in respect of the Collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
18. References. As used herein, terms in the singular include the
plural. The captions or titles of the sections of this Pledge Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
19. Choice of Law. This Pledge Agreement shall be construed in
accordance with and governed by the laws of the State of California, and, where
applicable and except as otherwise defined herein, terms used herein shall have
the meanings given them in the California Uniform Commercial Code. Pledgor
irrevocably and unconditionally submits to the jurisdiction of the Superior
Court of the State of California for the County of Los Angeles or the United
States District Court of the Central District of California, as Pledgee may deem
appropriate, or if required, the Municipal Court of the State of California for
the County of Los Angeles, in connection with any legal action or proceeding
arising out of or relating to this Pledge Agreement, and Pledgor waives any
objection relating to the basis for personal or in rem jurisdiction or to venue
which it may now or hereafter have in any such suit, action or proceeding.
20. Jury Trial. PLEDGOR AND PLEDGEE WAIVE THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO ANY OF THE OBLIGATIONS HEREIN.
21. Notice. Any written notice, consent or other communication provided
for in this Pledge Agreement shall be delivered or sent by first-class mail,
with postage prepaid, to the party to be notified, to the mailing address
specified in the introductory section hereof. Such addresses may be changed by
written notice as provided herein.
22. Expenses. Pledgor will reimburse Pledgee for all out-of-pocket
expenses incurred by Pledgee arising out of the enforcement of this Agreement,
including without limitation, attorneys' fees and costs whether or not suit is
filed.
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23. Indemnification. Pledgor agrees to pay, and on demand to indemnify
and hold harmless, Pledgee, its successors, assigns and agents, from and against
any and all claims, damages, losses, liabilities, demands, suits, judgments,
causes of action and all legal proceedings, whether civil or criminal,
penalties, fines and other sanctions, and any costs and expenses incurred in
connection therewith, including attorneys' fees, which may result from, relate
to or arise out of this Pledge Agreement or any Collateral, including the
ownership, purchase, delivery, acceptance or rejection, use, possession or
disposition of any item of Collateral, but not including any claims arising out
of the gross negligence or willful misconduct of Pledgee or its agents.
EXECUTED as of November 17, 1997.
PLEDGEE: PLEDGOR:
SANWA BUSINESS CREDIT 3-D GEOPHYSICAL, INC.
CORPORATION
By: /s/ Timothy K. Turner By: /s/ Ronald L. Koons
--------------------- -------------------
Its: First Vice President Its: Vice President
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SCHEDULE I
Class of Stock No. of Shares
1. Common Stock of 3-D Geophysical of
Canada, Inc. registered in the name of
3-D Geophysical, Inc.
PLEDGE AGREEMENT
This Pledge Agreement is entered into as of November 17, 1997, by and
between:
PLEDGOR: 3-D GEOPHYSICAL, INC.
8226 Park Meadows Drive
Littleton, Colorado 80124
AND
PLEDGEE: SANWA BUSINESS CREDIT CORPORATION
550 North Brand Boulevard
Glendale, California 91203
WHEREAS, 3-D Geophysical, Inc., a Delaware corporation ("Pledgor") owns
one hundred percent (100%) of the issued and outstanding shares of capital stock
of 3-D Geophysical of Latin America, Inc., a Cayman Islands company (the
"Company");
WHEREAS, Northern Geophysical of America, Inc., a Delaware corporation
("Borrower"), has received or will receive loans and other financial
accommodations made by Sanwa Business Credit Corporation ("Pledgee") pursuant to
a Loan and Security Agreement dated as of the date hereof between Borrower and
Pledgee (the "Loan Agreement");
WHEREAS, in consideration for such financial accommodations, Pledgor
has guarantied the obligations of Borrower to Pledgee pursuant to a Secured
Continuing Corporate Guaranty dated as of the date hereof (the "Guaranty"),
which Guaranty is secured by, among other things, this Pledge Agreement.
NOW THEREFORE, for value received, and in consideration of the
foregoing recitals, Pledgor and Pledgee hereby agree as follows:
1. Pledge of Collateral and Delivery of Pledged Collateral.
1.1 Pledgor hereby pledges and assigns to Pledgee and grants to
Pledgee a security interest in all of the Collateral described in Section 2
below, whether now owned or hereafter acquired, now or at any time hereafter in
the possession, custody or control of Pledgee or its agents, whether held for
safekeeping, in a safe deposit box, or otherwise ("Collateral") to secure prompt
payment and full performance of the obligations described in Section 3 below
(collectively, "Obligations").
1.2 All certificates or instruments representing or evidencing the
Collateral shall be delivered to and held by or on behalf of Pledgee pursuant
hereto and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed
<PAGE>
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Pledgee. Pledgee shall have the right, at any time, after an
Event of Default (as defined herein), in its reasonable discretion and without
notice to Pledgor, to transfer to or to register in the name of Pledgee or any
of its nominees any or all of the Collateral. In addition, Pledgee shall have
the right at any time to exchange certificates or instruments representing or
evidencing Collateral for certificates or instruments of smaller or larger
denominations. Pledgee shall promptly take all steps necessary under the laws of
the Cayman Islands to legally perfect the interest of Pledgee created hereby,
including the registering of Pledgee as the holder of the Collateral in the
Register of Members of the Company.
2. Collateral. The Collateral consists of the following:
2.1 Sixty-five percent (65%) in the aggregate of the shares of
common stock of the Company, all such stock owned beneficially and of record by
Pledgor and listed on Schedule I attached hereto and made a part hereof, and all
cash, dividends, other securities, instruments, rights and other property at any
time and from time to time received or receivable in respect thereof or in
exchange for all or any part thereof, including without limitation, stock
dividends, warrants, rights to subscribe, conversion rights, liquidating
dividends and other stock rights, and in the event Pledgor receives any of the
foregoing, Pledgor acknowledges that the same shall be received IN TRUST for
Pledgee and agrees immediately to deliver the same to Pledgee in original form
of receipt, together with any stock or bond powers, assignments, endorsements or
other documents or instruments as Pledgee may reasonably request to establish,
protect or perfect Pledgee's interest in respect of such Collateral; and
2.2 Subject to the terms of Section 7.1.2 hereof, all other
property hereafter delivered to Pledgee (or any agent or bailee holding on
behalf of Pledgee) by Pledgor in substitution for or in addition to any of the
foregoing, all certificates and instruments representing or evidencing such
other property and all cash, dividends, other securities, instruments, rights
and other property at any time and from time to time received or receivable in
respect thereof or in exchange for all or any part thereof, including without
limitation, stock dividends, warrants, rights to subscribe, conversion rights,
liquidating dividends and other stock rights, and in the event Pledgor receives
any of the foregoing, Pledgor acknowledges that the same shall be received IN
TRUST for Pledgee and agrees immediately to deliver the same to Pledgee in
original form of receipt, together with any stock or bond powers, assignments,
endorsements or other documents or instruments as Pledgee may request to
establish, protect or perfect Pledgee's interest in respect of such Collateral;
and
2.3 All proceeds of all of the foregoing.
3. Obligations. The Obligations secured under this Pledge Agreement are
the obligations of Pledgor under the Guaranty and under this Pledge Agreement,
and all extensions, amendments, modifications and renewals of any of the
foregoing.
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4. Representations and Warranties. Pledgor represents and warrants on
the date hereof, and shall be deemed to represent and warrant on the date of
each loan or advance made by Pledgee to Borrower, that:
4.1 Pledgor is the sole legal, beneficial and, if applicable,
record owner of the Collateral (or, in the case of after-acquired Collateral,
will be the sole such owner thereof), having good and marketable title thereto,
free of all liens, security interests, encumbrances or claims of any kind;
4.2 All information heretofore, herein or hereafter given to
Pledgee by or on behalf of Pledgor is complete, true and correct.
4.3 All shares of stock constituting Collateral (a) have been duly
and validly issued in compliance with all applicable laws, (b) are fully paid,
nonassessable and free of preemptive rights, (c) are not subject to any
restrictions upon the voting rights or upon the transfer thereof other than as
may appear on the face of the certificates evidencing such Collateral, and (d)
include not less than 65% of the issued and outstanding shares of each class of
voting stock of the Company;
4.4 Pledgor has the right and power and is duly authorized and
empowered to enter into, execute, deliver and perform this Pledge Agreement;
4.5 This Pledge Agreement has been duly executed and delivered by
Pledgor and constitutes a legal, valid and binding obligation of Pledgor,
enforceable against Pledgor in accordance with its terms;
4.6 The execution, delivery and performance of this Pledge
Agreement do not (i) violate any provisions of law or any order of any court or
other agency of government, or (ii) contravene any provision of any material
contract or agreement to which Pledgor is a party or by which Pledgor or
Pledgor's assets are bound; and
4.7 Each of the representations and warranties set forth in
Paragraph 16 of the Guaranty is accurate and complete as of the date hereof.
5. Covenants of Pledgor. Until the Obligations are paid in full,
Pledgor agrees to:
5.1 Preserve and protect the Collateral;
5.2 Not create, incur, assume or permit to exist any liens,
encumbrances, security interests, levies, assessments or charges on or in any of
the Collateral, except those approved in advance in writing by Pledgee;
5.3 Promptly pay and discharge before the same become delinquent
all taxes, assessments and governmental charges or levies imposed on Pledgor or
any of the
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Collateral;
5.4 Not sell, encumber, or otherwise dispose of or transfer any
Collateral, or any right or interest therein and agrees that it will (i) cause
the Company not to issue any other voting stock in addition to or in
substitution for the Collateral, except to Pledgor, or in connection with
outstanding stock options or with the prior written consent of Pledgee and (ii)
pledge hereunder, immediately upon Pledgor's acquisition (directly or
indirectly) thereof, any and all additional shares of stock or other securities
of the Company;
5.5 Appear in and defend, at Pledgor's own expense, any action or
proceeding which may affect Pledgor's title to or Pledgee's interest in the
Collateral;
5.6 Procure or execute and deliver, from time to time, in form and
substance satisfactory to Pledgee, any stock powers, bond powers, endorsements,
assignments, financing statements, estoppel certificates or other writings
deemed necessary or appropriate by Pledgee to perfect, maintain or protect
Pledgee's security interest in the Collateral and the priority thereof, and take
such other action and deliver such other documents, instruments and agreements
pertaining to the Collateral as Pledgee may request to effectuate the intent of
this Pledge Agreement;
5.7 If Pledgee gives value to enable Pledgor to acquire rights in
or use of any Collateral, use such value only for such purpose;
5.8 Keep separate, accurate and complete records of the Collateral
and provide Pledgee with access thereto and to Pledgor's financial records, in
each case with the right to make extracts therefrom;
5.9 Provide Pledgee with copies of all reports filed by the
Company or Pledgor with the Securities and Exchange Commission within ten (10)
business days after the last date such report is required to be filed;
5.10 Provide Pledgee with such other information pertaining to the
Collateral as Pledgee may reasonably request from time to time;
5.11 Maintain and preserve its corporate or other legal existence
and that of its majority-owned subsidiaries, including, without limitation, the
Company, and all rights, privileges, franchises and other authority necessary
for the conduct of their respective businesses; and
5.12 Continue its operations in the same form and structure of
business (i.e., corporate, partnership, individual) as currently conducted, and
not merge or consolidate with or acquire or be acquired by any other
corporation, partnership, entity or person, without Pledgee's prior written
consent; and
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5.13 At all times comply with the covenants and agreements set
forth in the Guaranty.
6. Authorized Action by Pledgee.
6.1 Pledgor hereby irrevocably appoints Pledgee as its
attorney-in- fact to do (but Pledgee shall not be obligated to and shall not
incur any liability to Pledgor or any third party for failure so to do) any act
which Pledgor is obligated by this Pledge Agreement to do, and to exercise such
rights and powers as Pledgor might exercise with respect to the Collateral,
including, without limitation, the right to:
6.1.1 collect by legal proceedings or otherwise and endorse,
receive and receipt for all payments, proceeds and other sums and property now
or hereafter payable on or in respect of proceeds and other sums and property
now or hereafter payable on or in respect of the Collateral, including dividends
and interest payments;
6.1.2 enter into any extension, reorganization, deposit,
merger or consolidation agreement or other agreement pertaining to the
Collateral, and in connection therewith may deposit or surrender control of the
Collateral thereunder, accept other property in exchange therefor, and do and
perform such acts and things as it may deem proper, and any money or property
secured in exchange therefor shall be applied to the Obligations or held by
Pledgee pursuant to the provisions of this Pledge Agreement;
6.1.3 protect and preserve the Collateral;
6.1.4 transfer the Collateral to its own or its nominee's
name; and
6.1.5 make any compromise, settlement or adjustment, and take
any action it deems advisable, with respect to the Collateral;
provided, however, that Pledgee shall only exercise such rights after the
occurrence and during the continuation of an Event of Default (as defined
herein), except that upon the cure of any Event of Default, Pledgee shall have
the right to complete any action commenced by it during such Event of Default.
6.2 Pledgor agrees to reimburse Pledgee upon demand for any costs
and expenses, including attorneys' fees, Pledgee may incur while acting as
Pledgor's attorney-in-fact hereunder, all of which costs and expenses are
included in the Obligations secured hereby and are payable upon demand. It is
further agreed and understood between the parties hereto that such care as
Pledgee gives to the safekeeping of its own property of like kind shall
constitute reasonable care of the Collateral when in Pledgee's possession;
provided, however, that Pledgee shall not be required to make any presentment,
demand or protest, or give any notice and need not take any action to preserve
any rights against any
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prior party or any other person in connection with the Obligations or with
respect to the Collateral.
6.3 If Pledgor's records are prepared or retained by a computer
service company or any accountant or accounting service, so long as any
Obligations are outstanding, Pledgor grants Pledgee the absolute and irrevocable
right to inspect such records, receive duplicate copies of all information
furnished to Pledgor and prepared by such company, accountant or accounting
service, and agrees to furnish such consents as may be necessary to effectuate
the same. Pledgor further agrees to promptly notify Pledgee of the name and
address of such company, accountant or accounting service and of any change in
respect thereof.
6.4 All the foregoing powers authorized herein, being coupled with
an interest, are irrevocable so long as any Obligations are outstanding.
7. Transfer, Voting, Dividends, Etc.
7.1 Notwithstanding any other provision hereof, so long as no
Event of Default (as defined herein) shall have occurred and be continuing:
7.1.1 Pledgor shall be entitled to exercise all voting powers
pertaining to all shares of stock and other securities constituting Collateral
for all purposes not inconsistent with the terms of the Loan Agreement and this
Pledge Agreement;
7.1.2 To the extent permitted in the Loan Agreement, Pledgor
shall be entitled to receive and retain all dividends (other than stock or
liquidating dividends) and all interest payments payable in respect of the
Collateral; provided, however, that all stock or property representing stock or
liquidating dividends or a distribution or return of capital upon or in respect
of the shares of stock constituting Collateral or resulting from a split-up,
revision or reclassification of such Collateral or received in exchange
therefor, as a result of a merger, consolidation or otherwise, shall be paid or
transferred directly to Pledgee immediately upon receipt thereof by Pledgor, and
shall be retained by Pledgee as Collateral hereunder; and
7.1.3 in order to permit Pledgor to exercise such voting
powers and to receive such dividends Pledgee shall, if necessary, upon the
written request of the Pledgor, from time to time, execute and deliver to
Pledgor appropriate proxies.
7.2 If any Event of Default (as defined herein) shall have
occurred and while the same is continuing:
7.2.1 Pledgee, or its nominee or nominees, shall, at its
option (after notice to Pledgor of Pledgee's intent to exercise such rights),
have the sole and exclusive right to exercise all voting powers pertaining to
the shares of stock constituting
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Collateral, and shall exercise such powers in such manner as Pledgee may elect,
and Pledgor hereby grants Pledgee an irrevocable proxy, coupled with an interest
to vote such shares of stock; provided, however, that such proxy shall terminate
upon termination of Pledgee's security interest therein; and
7.2.2 All dividends and other distributions made upon or in
respect of shares of stock constituting Collateral and all interest payments
shall be paid directly to and shall be retained by Pledgee as Collateral
hereunder.
8. Default and Remedies.
8.1 The occurrence of any of the following events or conditions
(herein "Events of Default") shall, at the option of Pledgee and without notice
to or demand on Pledgor, constitute an Event of Default hereunder:
8.1.1 any Default, under and as defined in the Loan Agreement,
shall have occurred and be continuing;
8.1.2 breach, violation or non-performance of any warranty,
covenant or undertaking on Pledgor's part hereunder; or
8.1.3 breach, violation or non-performance of any warranty,
covenant or undertaking on Pledgor's part under any other agreement with Pledgee
(including, without limitation, the Guaranty).
8.2 Upon the occurrence of any Event of Default, Pledgee may, at
its option, without notice to or demand on Pledgor, declare all Obligations
immediately due and payable, and Pledgee shall have all the default rights and
remedies of a secured party under Chapter 5 of Division 9 of the California
Uniform Commercial Code and other applicable law as well as the following rights
and remedies, all of which may be exercised with or without further notice to
Pledgor, at Pledgee's sole option and as Pledgee in its sole discretion may deem
advisable:
8.2.1 to settle, compromise or release, on terms acceptable to
Pledgee, in whole or in part, any amounts owing on the Collateral, and to extend
the time of payment, in Pledgee's name or in the name of Pledgor, in respect
thereof;
8.2.2 to apply to the payment of the Obligations, or set-off
or collect the Collateral, notwithstanding any forfeiture of interest or loss of
other rights of Pledgor against any obligor on the Collateral resulting from
such action; and
8.2.3 to sell or otherwise dispose of the Collateral, or any
part thereof, either at public or private sale, on any broker's board or
securities exchange, in lots or in bulk, for cash, on credit or otherwise, with
or without representations or warranties,
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and upon such terms as shall be acceptable to Pledgee.
8.3 The net cash proceeds resulting from the collection,
liquidation, sale, or other disposition of the Collateral shall be applied
first, to the expenses (including all attorneys' fees) of holding, storing,
preparing for sale, selling, collecting, liquidating and the like, including any
brokerage commissions and stamp or transfer taxes, and then to the satisfaction
of all Obligations secured hereby, application as to any particular obligation
or indebtedness or against principal or interest to be in Pledgee's absolute
discretion.
8.4 If by reason of any prohibition contained in the Securities
Act of 1933, as now or hereafter in effect, or in applicable California or other
state securities laws, as now or hereafter in effect, or in any rules or
regulations pertaining to any of the foregoing laws, Pledgee believes it is
compelled to resort to one or more private sales of shares of stock constituting
Collateral to a single purchaser or a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such securities for their own
account, for investment and not with a view to the distribution or resale
thereof, Pledgor acknowledges and agrees that private sales of such Collateral
may be held notwithstanding that such sales may be at prices and on other terms
less favorable to Pledgor than if such Collateral were sold at public sale.
Pledgor further agrees that Pledgee has no obligation to delay the sale of any
such Collateral for the period of time necessary to permit registration of the
Collateral, even if the issuer thereof would, or should, agree to register such
Collateral for public sale under applicable securities laws. Pledgor
specifically agrees that private sales made under the foregoing circumstances
shall be deemed to have been made in a "commercially reasonable" manner.
8.5 Pledgor further acknowledges and recognizes that Pledgee may
be unable to effect a public sale of all or a part of the Collateral and may be
compelled to resort to one or more private sales of shares of stock constituting
Collateral to a single purchaser or a restricted group of purchasers who will be
obligated to agree, among other things, to acquire the Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. Pledgor acknowledges that any such private sales may be at prices and
on terms less favorable to Pledgee than those of public sales, and agrees that
such private sales shall be deemed to have been made in a commercially
reasonable manner and that Pledgee has no obligation to delay the sale of any
Collateral to permit the issuer thereof to register it for public sale under the
Securities Act.
9. Duty of Pledgee. Pledgee shall not be under any duty or obligation
whatsoever to collect any dividends, interest or other payments due or accruing
in respect of the Collateral or to take any action to preserve rights in
connection with any Collateral, including, without limitation, making or giving
any presentment, demands for performance, notices of non-performance, protests,
notices of protest or notices of dishonor in connection with any Collateral.
10. Cumulative Rights. The rights, powers and remedies of Pledgee under
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this Pledge Agreement shall be in addition to all rights, powers and remedies
given to Pledgee under any statute or rule of law, this Pledge Agreement or any
other agreement, all of which rights, powers and remedies shall be cumulative
and may be exercised successively or concurrently.
11. Waiver. Any forbearance, failure or delay by Pledgee in exercising
any right, power or remedy shall not preclude the further exercise thereof, and
every right, power or remedy of Pledgee shall continue in full force and effect
until such right, power or remedy is specifically waived in a writing executed
by Pledgee. Pledgor waives any right to require Pledgee to proceed against any
person or to exhaust any Collateral or to pursue any remedy in Pledgee's power
prior to pursuing Pledgor in respect of the Obligations.
12. Setoff. Pledgor agrees that Pledgee may exercise its rights of
setoff with respect to the Obligations in the same manner as if the Obligations
were unsecured.
13. Binding Upon Successors. All rights of Pledgee under this Pledge
Agreement shall inure to the benefit of its successors and assigns, and all
obligations of Pledgor shall bind the representatives, and successors and
assigns of the Pledgor.
14. Waiver of Suretyship Defenses. Pledgor hereby reaffirms each of the
waivers given in the Guaranty as if each such waiver was fully set forth herein.
15. Substituted Collateral; Additional Collateral. Pledgor may
substitute Collateral under this Pledge Agreement provided that any Collateral
proposed for substitution is satisfactory to Pledgee in Pledgee's sole
discretion. As of the date of delivery of any Collateral approved for
substitution by Pledgee pursuant to this Section 15 or otherwise approved as
additional security pursuant to this Pledge Agreement, Pledgor represents and
warrants to Pledgee that (1) Pledgor will own such shares, certificates and
instruments free and clear of any right of any other person or entity, and (2)
Pledgor will have good and marketable title to the shares, certificates and
instruments and have the right to pledge such shares, certificates or
instruments pursuant to this Pledge Agreement. By delivery of such substituted
or additional Collateral, Pledgor shall have represented and warranted that
Pledgee has a valid, perfected, first priority security interest in such shares,
certificates and instruments and the proceeds thereof free and clear of all
liens, claims and rights of third parties whatsoever. All documentary, stamp or
other taxes or fees owing in connection with the issuance, transfer and/or
pledge of the Collateral or any substituted or additional Collateral have been
paid and will hereafter be paid by Pledgor as such become due and payable.
16. Entire Agreement; Severability. This Pledge Agreement contains the
entire pledge agreement between Pledgee and Pledgor with respect to the
Collateral. If any of the provisions of this Pledge Agreement shall be held
invalid or unenforceable, this Pledge Agreement shall be construed as if not
containing those provisions and the rights and obligations of the parties hereto
shall be construed and enforced accordingly.
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<PAGE>
17. Return; Acquittance. Pledgee may at any time deliver any Collateral
to Pledgor and the receipt thereof by Pledgor shall be a complete and full
acquittance in respect of the Collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
18. References. As used herein, terms in the singular include the
plural. The captions or titles of the sections of this Pledge Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
19. Choice of Law. This Pledge Agreement shall be construed in
accordance with and governed by the laws of the State of California, and, where
applicable and except as otherwise defined herein, terms used herein shall have
the meanings given them in the California Uniform Commercial Code. Pledgor
irrevocably and unconditionally submits to the jurisdiction of the Superior
Court of the State of California for the County of Los Angeles or the United
States District Court of the Central District of California, as Pledgee may deem
appropriate, or if required, the Municipal Court of the State of California for
the County of Los Angeles, in connection with any legal action or proceeding
arising out of or relating to this Pledge Agreement, and Pledgor waives any
objection relating to the basis for personal or in rem jurisdiction or to venue
which it may now or hereafter have in any such suit, action or proceeding.
20. Jury Trial. PLEDGOR AND PLEDGEE WAIVE THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO ANY OF THE OBLIGATIONS HEREIN.
21. Notice. Any written notice, consent or other communication provided
for in this Pledge Agreement shall be delivered or sent by first-class mail,
with postage prepaid, to the party to be notified, to the mailing address
specified in the introductory section hereof. Such addresses may be changed by
written notice as provided herein.
22. Expenses. Pledgor will reimburse Pledgee for all out-of-pocket
expenses incurred by Pledgee arising out of the enforcement of this Agreement,
including without limitation, attorneys' fees and costs whether or not suit is
filed.
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23. Indemnification. Pledgor agrees to pay, and on demand to indemnify
and hold harmless, Pledgee, its successors, assigns and agents, from and against
any and all claims, damages, losses, liabilities, demands, suits, judgments,
causes of action and all legal proceedings, whether civil or criminal,
penalties, fines and other sanctions, and any costs and expenses incurred in
connection therewith, including attorneys' fees, which may result from, relate
to or arise out of this Pledge Agreement or any Collateral, including the
ownership, purchase, delivery, acceptance or rejection, use, possession or
disposition of any item of Collateral, but not including any claims arising out
of the gross negligence or willful misconduct of Pledgee or its agents.
EXECUTED as of November 17, 1997.
PLEDGEE: PLEDGOR:
SANWA BUSINESS CREDIT 3-D GEOPHYSICAL, INC.
CORPORATION
By: /s/ Timothy K. Turner By: /s/ Ronald L. Koons
--------------------- -------------------
Its: First Vice President Its: Vice President
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SCHEDULE I
Class of Stock No. of Shares
1. Common Stock of 3-D Geophysical of
Latin America, Inc. registered in the name
of
3-D Geophysical, Inc.
PLEDGE AGREEMENT
This Pledge Agreement is entered into as of November 17, 1997,
by and between:
PLEDGOR: 3-D GEOPHYSICAL, INC.
8226 Park Meadows Drive
Littleton, Colorado 80124
AND
PLEDGEE: SANWA BUSINESS CREDIT CORPORATION
550 North Brand Boulevard
Glendale, California 91203
WHEREAS, 3-D Geophysical, Inc., a Delaware corporation ("Pledgor") owns
ninety-nine percent (99%) of the issued and outstanding shares of capital stock
of (i) Geoevaluaciones, S.A. de C.V., and (ii) Procesos Interactivos Avanzados,
S.A. de C.V. (collectively, the "Companies");
WHEREAS, Northern Geophysical of America, Inc., a Delaware corporation
("Borrower") has received or will receive loans and other financial
accommodations made by Sanwa Business Credit Corporation ("Pledgee") pursuant to
a Loan and Security Agreement dated as of the date hereof between Borrower and
Pledgee (the "Loan Agreement");
WHEREAS, in consideration for such financial accommodations, Pledgor
has guarantied the obligations of Borrower to Pledgee pursuant to a Secured
Continuing Corporate Guaranty dated as of the date hereof (the "Guaranty"),
which Guaranty is secured by, among other things, this Pledge Agreement.
NOW THEREFORE, for value received, and in consideration of the
foregoing recitals, Pledgor and Pledgee hereby agree as follows:
1. Pledge of Collateral and Delivery of Pledged Collateral.
1.1 Pledgor hereby pledges and assigns to Pledgee and grants
to Pledgee a security interest in all of the Collateral described in Section 2
below, whether now owned or hereafter acquired, now or at any time hereafter in
the possession, custody or control of Pledgee or its agents, whether held for
safekeeping, in a safe deposit box, or otherwise ("Collateral") to secure prompt
payment and full performance of the obligations described in Section 3 below
(collectively, "Obligations").
1.2 Pledgor hereby delivers to Pledgee all certificates or
instruments representing or evidencing the Collateral duly endorsed "en
garantia," together with a certified copy of the stock registry book of each of
the Companies evidencing the registration of this pledge therein. Pledgee shall
have the right, at any time, after an Event of Default (as defined herein), in
its reasonable discretion and without notice to Pledgor, to transfer to or to
register in the name of Pledgee or any of its nominees any or all of the
Collateral. In
<PAGE>
addition, Pledgee shall have the right at any time to exchange certificates or
instruments representing or evidencing Collateral for certificates or
instruments of smaller or larger denominations.
2. Collateral. The Collateral consists of the following:
2.1 Sixty-five percent (65%) in the aggregate of the shares of
common stock of the Companies, all such stock owned beneficially and of record
by Pledgor and listed on Schedule I attached hereto and made a part hereof, and
all cash, dividends, other securities, instruments, rights and other property at
any time and from time to time received or receivable in respect thereof or in
exchange for all or any part thereof, including without limitation, stock
dividends, warrants, rights to subscribe, conversion rights, liquidating
dividends and other stock rights, and in the event Pledgor receives any of the
foregoing, Pledgor acknowledges that the same shall be received IN TRUST for
Pledgee and agrees immediately to deliver the same to Pledgee in original form
of receipt, together with any stock or bond powers, assignments, endorsements or
other documents or instruments as Pledgee may reasonably request to establish,
protect or perfect Pledgee's interest in respect of such Collateral; and
2.2 Subject to the terms of Section 7.1.2 hereof, all other
property hereafter delivered to Pledgee (or any agent or bailee holding on
behalf of Pledgee) by Pledgor in substitution for or in addition to any of the
foregoing, all certificates and instruments representing or evidencing such
other property and all cash, dividends, other securities, instruments, rights
and other property at any time and from time to time received or receivable in
respect thereof or in exchange for all or any part thereof, including without
limitation, stock dividends, warrants, rights to subscribe, conversion rights,
liquidating dividends and other stock rights, and in the event Pledgor receives
any of the foregoing, Pledgor acknowledges that the same shall be received IN
TRUST for Pledgee and agrees immediately to deliver the same to Pledgee in
original form of receipt, together with any stock or bond powers, assignments,
endorsements or other documents or instruments as Pledgee may request to
establish, protect or perfect Pledgee's interest in respect of such Collateral;
and
2.3 All proceeds of all of the foregoing.
3. Obligations. The Obligations secured under this Pledge Agreement are
the obligations of Pledgor under the Guaranty and under this Pledge Agreement,
and all extensions, amendments, modifications and renewals of any of the
foregoing.
4. Representations and Warranties. Pledgor represents and warrants on
the date hereof, and shall be deemed to represent and warrant on the date of
each loan or advance made by Pledgee to Borrower, that:
4.1 Pledgor is the sole legal, beneficial and, if applicable,
record owner of the Collateral (or, in the case of after-acquired Collateral,
will be the sole such owner thereof), having good and marketable title thereto,
free of all liens, security interests, encumbrances or claims of any kind;
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4.2 All information heretofore, herein or hereafter given to
Pledgee by or on behalf of Pledgor is complete, true and correct.
4.3 All shares of stock constituting Collateral (a) have been
duly and validly issued in compliance with all applicable laws, (b) are fully
paid, nonassessable (liberadas) and free of preemptive rights, (c) are not
subject to any restrictions upon the voting rights or upon the transfer thereof
other than as may appear on the face of the certificates evidencing such
Collateral, and (d) include not less than 65% of the issued and outstanding
shares of each class of voting stock of each of the Companies;
4.4 Pledgor has the right and power and is duly authorized and
empowered to enter into, execute, deliver and perform this Pledge Agreement;
4.5 This Pledge Agreement has been duly executed and delivered
by Pledgor and constitutes a legal, valid and binding obligation of Pledgor,
enforceable against Pledgor in accordance with its terms;
4.6 Upon delivery to Pledgee of the certificates evidencing
the Collateral, endorsed "en garantia" and the registration of this pledge in
the registry books of the Companies, the security interest created herein will
constitute a valid, perfected first priority security interest in the Collateral
enforceable in accordance with its terms against all creditors of Pledgor and
any person purporting to purchase any Collateral from Pledgor.
4.7 The execution, delivery and performance of this Pledge
Agreement do not (i) violate any provisions of law or any order of any court or
other agency of government, or (ii) contravene any provision of any material
contract or agreement to which Pledgor is a party or by which Pledgor or
Pledgor's assets are bound; and
4.8 Each of the representations and warranties set forth in
Paragraph 16 of the Guaranty is accurate and complete as of the date hereof.
5. Covenants of Pledgor. Until the Obligations are paid in full,
Pledgor agrees to:
5.1 Preserve and protect the Collateral as a first priority,
perfected security interest;
5.2 Not create, incur, assume or permit to exist any liens,
encumbrances, security interests, levies, assessments or charges on or in any of
the Collateral, except those approved in advance in writing by Pledgee;
5.3 Promptly pay and discharge before the same become
delinquent all taxes, assessments and governmental charges or levies imposed on
Pledgor or any of the Collateral;
5.4 Not sell, encumber, or otherwise dispose of or transfer
any Collateral, or any right or interest therein and agrees that it will (i)
cause the Companies not to issue any other voting stock in addition to or in
substitution for the Collateral, except to Pledgor, or in connection with
outstanding stock options or with the prior written consent of Pledgee and (ii)
pledge hereunder, immediately upon Pledgor's acquisition (directly or
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indirectly) thereof, any and all additional shares of stock or other securities
of the Companies;
5.5 Appear in and defend, at Pledgor's own expense, any action
or proceeding which may affect Pledgor's title to or Pledgee's interest in the
Collateral;
5.6 Procure or execute and deliver, from time to time, in form
and substance satisfactory to Pledgee, any stock powers, bond powers,
endorsements, assignments, financing statements, estoppel certificates or other
writings deemed necessary or appropriate by Pledgee to perfect, maintain or
protect Pledgee's security interest in the Collateral and the priority thereof,
and take such other action and deliver such other documents, instruments and
agreements pertaining to the Collateral as Pledgee may request to effectuate the
intent of this Pledge Agreement;
5.7 If Pledgee gives value to enable Pledgor to acquire rights
in or use of any Collateral, use such value only for such purpose;
5.8 Keep separate, accurate and complete records of the
Collateral and provide Pledgee with access thereto and to Pledgor's financial
records, in each case with the right to make extracts therefrom;
5.9 Provide Pledgee with copies of all reports filed by the
Companies or Pledgor with the Securities and Exchange Commission within ten (10)
business days after the last date such report is required to be filed;
5.10 Provide Pledgee with such other information pertaining to
the Collateral as Pledgee may reasonably request from time to time;
5.11 Maintain and preserve its corporate or other legal
existence and that of its majority-owned subsidiaries, including, without
limitation, the Companies, and all rights, privileges, franchises and other
authority necessary for the conduct of their respective businesses; and
5.12 Continue its operations in the same form and structure of
business (i.e., corporate, partnership, individual) as currently conducted, and
not merge or consolidate with or acquire or be acquired by any other
corporation, partnership, entity or person, without Pledgee's prior written
consent; and
5.13 At all times comply with the covenants and agreements set
forth in the Guaranty.
6. Authorized Action by Pledgee.
6.1 Pledgor hereby irrevocably appoints Pledgee as its
attorney-in- fact to do (but Pledgee shall not be obligated to and shall not
incur any liability to Pledgor or any third party for failure so to do) any act
which Pledgor is obligated by this Pledge Agreement to do, and to exercise such
rights and powers as Pledgor might exercise with respect to the Collateral,
including, without limitation, the right to:
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6.1.1 collect by legal proceedings or otherwise and
endorse, receive and receipt for all payments, proceeds and other sums and
property now or hereafter payable on or in respect of proceeds and other sums
and property now or hereafter payable on or in respect of the Collateral,
including dividends and interest payments;
6.1.2 enter into any extension, reorganization,
deposit, merger or consolidation agreement or other agreement pertaining to the
Collateral, and in connection therewith may deposit or surrender control of the
Collateral thereunder, accept other property in exchange therefor, and do and
perform such acts and things as it may deem proper, and any money or property
secured in exchange therefor shall be applied to the Obligations or held by
Pledgee pursuant to the provisions of this Pledge Agreement;
6.1.3 protect and preserve the Collateral;
6.1.4 transfer the Collateral to its own or its
nominee's name; and
6.1.5 make any compromise, settlement or adjustment,
and take any action it deems advisable, with respect to the Collateral;
provided, however, that Pledgee shall only exercise such rights after the
occurrence and during the continuation of an Event of Default (as defined
herein), except that upon the cure of any Event of Default, Pledgee shall have
the right to complete any action commenced by it during such Event of Default.
6.2 Pledgor agrees to reimburse Pledgee upon demand for any
costs and expenses, including attorneys' fees, Pledgee may incur while acting as
Pledgor's attorney-in-fact hereunder, all of which costs and expenses are
included in the Obligations secured hereby and are payable upon demand. It is
further agreed and understood between the parties hereto that such care as
Pledgee gives to the safekeeping of its own property of like kind shall
constitute reasonable care of the Collateral when in Pledgee's possession;
provided, however, that Pledgee shall not be required to make any presentment,
demand or protest, or give any notice and need not take any action to preserve
any rights against any prior party or any other person in connection with the
Obligations or with respect to the Collateral.
6.3 If Pledgor's records are prepared or retained by a
computer service company or any accountant or accounting service, so long as any
Obligations are outstanding, Pledgor grants Pledgee the absolute and irrevocable
right to inspect such records, receive duplicate copies of all information
furnished to Pledgor and prepared by such company, accountant or accounting
service, and agrees to furnish such consents as may be necessary to effectuate
the same. Pledgor further agrees to promptly notify Pledgee of the name and
address of such company, accountant or accounting service and of any change in
respect thereof.
6.4 All the foregoing powers authorized herein, being coupled
with an interest, are irrevocable so long as any Obligations are outstanding.
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<PAGE>
7. Transfer, Voting, Dividends, Etc.
7.1 Notwithstanding any other provision hereof, so long as no
Event of Default (as defined herein) shall have occurred and be continuing:
7.1.1 Pledgor shall be entitled to exercise all
voting powers pertaining to all shares of stock and other securities
constituting Collateral for all purposes not inconsistent with the terms of the
Loan Agreement and this Pledge Agreement;
7.1.2 To the extent permitted in the Loan Agreement,
Pledgor shall be entitled to receive and retain all dividends (other than stock
or liquidating dividends) and all interest payments payable in respect of the
Collateral; provided, however, that all stock or property representing stock or
liquidating dividends or a distribution or return of capital upon or in respect
of the shares of stock constituting Collateral or resulting from a split-up,
revision or reclassification of such Collateral or received in exchange
therefor, as a result of a merger, consolidation or otherwise, shall be paid or
transferred directly to Pledgee immediately upon receipt thereof by Pledgor, and
shall be retained by Pledgee as Collateral hereunder; and
7.1.3 in order to permit Pledgor to exercise such
voting powers and to receive such dividends Pledgee shall, if necessary, upon
the written request of the Pledgor, from time to time, execute and deliver to
Pledgor appropriate proxies.
7.2 If any Event of Default (as defined herein) shall have
occurred and while the same is continuing:
7.2.1 Pledgee, or its nominee or nominees, shall, at
its option (after notice to Pledgor of Pledgee's intent to exercise such
rights), have the sole and exclusive right to exercise all voting powers
pertaining to the shares of stock constituting Collateral, and shall exercise
such powers in such manner as Pledgee may elect, and Pledgor hereby grants
Pledgee an irrevocable proxy, coupled with an interest to vote such shares of
stock; provided, however, that such proxy shall terminate upon termination of
Pledgee's security interest therein; and
7.2.2 All dividends and other distributions made upon
or in respect of shares of stock constituting Collateral and all interest
payments shall be paid directly to and shall be retained by Pledgee as
Collateral hereunder.
8. Default and Remedies.
8.1 The occurrence of any of the following events or
conditions (herein "Events of Default") shall, at the option of Pledgee and
without notice to or demand on Pledgor, constitute an Event of Default
hereunder:
8.1.1 any Default, under and as defined in the Loan
Agreement, shall have occurred and be continuing;
8.1.2 breach, violation or non-performance of any
warranty, covenant or undertaking on Pledgor's part hereunder; or
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8.1.3 breach, violation or non-performance of any
warranty, covenant or undertaking on Pledgor's part under any other agreement
with Pledgee (including, without limitation, the Guaranty).
8.2 Upon the occurrence of any Event of Default, Pledgee may,
at its option, without notice to or demand on Pledgor, declare all Obligations
immediately due and payable, and Pledgee shall have all the default rights and
remedies of a secured party under Chapter 5 of Division 9 of the California
Uniform Commercial Code and other applicable law as well as the following rights
and remedies, all of which may be exercised with or without further notice to
Pledgor, at Pledgee's sole option and as Pledgee in its sole discretion may deem
advisable:
8.2.1 to settle, compromise or release, on terms
acceptable to Pledgee, in whole or in part, any amounts owing on the Collateral,
and to extend the time of payment, in Pledgee's name or in the name of Pledgor,
in respect thereof;
8.2.2 to apply to the payment of the Obligations, or
set-off or collect the Collateral, notwithstanding any forfeiture of interest or
loss of other rights of Pledgor against any obligor on the Collateral resulting
from such action; and
8.2.3 to sell or otherwise dispose of the Collateral,
or any part thereof, either at public or private sale, on any broker's board or
securities exchange, in lots or in bulk, for cash, on credit or otherwise, with
or without representations or warranties, and upon such terms as shall be
acceptable to Pledgee.
8.3 The net cash proceeds resulting from the collection,
liquidation, sale, or other disposition of the Collateral shall be applied
first, to the expenses (including all attorneys' fees) of holding, storing,
preparing for sale, selling, collecting, liquidating and the like, including any
brokerage commissions and stamp or transfer taxes, and then to the satisfaction
of all Obligations secured hereby, application as to any particular obligation
or indebtedness or against principal or interest to be in Pledgee's absolute
discretion.
8.4 If by reason of any prohibition contained in the
Securities Act of 1933, as now or hereafter in effect, or in applicable
California or other state securities laws, as now or hereafter in effect, or in
any rules or regulations pertaining to any of the foregoing laws, Pledgee
believes it is compelled to resort to one or more private sales of shares of
stock constituting Collateral to a single purchaser or a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to the
distribution or resale thereof, Pledgor acknowledges and agrees that private
sales of such Collateral may be held notwithstanding that such sales may be at
prices and on other terms less favorable to Pledgor than if such Collateral were
sold at public sale. Pledgor further agrees that Pledgee has no obligation to
delay the sale of any such Collateral for the period of time necessary to permit
registration of the Collateral, even if the issuer thereof would, or should,
agree to register such Collateral for public sale under applicable securities
laws. Pledgor specifically agrees that private sales made under the foregoing
circumstances shall be deemed to have been made in a "commercially reasonable"
manner.
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<PAGE>
8.5 Pledgor further acknowledges and recognizes that Pledgee
may be unable to effect a public sale of all or a part of the Collateral and may
be compelled to resort to one or more private sales of shares of stock
constituting Collateral to a single purchaser or a restricted group of
purchasers who will be obligated to agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges that any such private sales
may be at prices and on terms less favorable to Pledgee than those of public
sales, and agrees that such private sales shall be deemed to have been made in a
commercially reasonable manner and that Pledgee has no obligation to delay the
sale of any Collateral to permit the issuer thereof to register it for public
sale under the Securities Act.
9. Duty of Pledgee. Pledgee shall not be under any duty or obligation
whatsoever to collect any dividends, interest or other payments due or accruing
in respect of the Collateral or to take any action to preserve rights in
connection with any Collateral, including, without limitation, making or giving
any presentment, demands for performance, notices of non-performance, protests,
notices of protest or notices of dishonor in connection with any Collateral.
10. Cumulative Rights. The rights, powers and remedies of Pledgee under
this Pledge Agreement shall be in addition to all rights, powers and remedies
given to Pledgee under any statute or rule of law, this Pledge Agreement or any
other agreement, all of which rights, powers and remedies shall be cumulative
and may be exercised successively or concurrently.
11. Waiver. Any forbearance, failure or delay by Pledgee in exercising
any right, power or remedy shall not preclude the further exercise thereof, and
every right, power or remedy of Pledgee shall continue in full force and effect
until such right, power or remedy is specifically waived in a writing executed
by Pledgee. Pledgor waives any right to require Pledgee to proceed against any
person or to exhaust any Collateral or to pursue any remedy in Pledgee's power
prior to pursuing Pledgor in respect of the Obligations.
12. Setoff. Pledgor agrees that Pledgee may exercise its rights of
setoff with respect to the Obligations in the same manner as if the Obligations
were unsecured.
13. Binding Upon Successors. All rights of Pledgee under this Pledge
Agreement shall inure to the benefit of its successors and assigns, and all
obligations of Pledgor shall bind the representatives, and successors and
assigns of the Pledgor.
14. Waiver of Suretyship Defenses. Pledgor hereby reaffirms each of the
waivers given in the Guaranty as if each such waiver was fully set forth herein.
15. Substituted Collateral; Additional Collateral. Pledgor may
substitute Collateral under this Pledge Agreement provided that any Collateral
proposed for substitution is satisfactory to Pledgee in Pledgee's sole
discretion. As of the date of delivery of any Collateral approved for
substitution by Pledgee pursuant to this Section 15 or otherwise approved as
additional security pursuant to this Pledge Agreement, Pledgor represents and
warrants to Pledgee that (1) Pledgor will own such shares, certificates and
instruments free and clear of any right of any other person or entity, and (2)
Pledgor will have good and marketable title to the shares, certificates and
instruments and have the right to pledge such
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<PAGE>
shares, certificates or instruments pursuant to this Pledge Agreement. By
delivery of such substituted or additional Collateral, Pledgor shall have
represented and warranted that Pledgee has a valid, perfected, first priority
security interest in such shares, certificates and instruments and the proceeds
thereof free and clear of all liens, claims and rights of third parties
whatsoever. All documentary, stamp or other taxes or fees owing in connection
with the issuance, transfer and/or pledge of the Collateral or any substituted
or additional Collateral have been paid and will hereafter be paid by Pledgor as
such become due and payable.
16. Entire Agreement; Severability. This Pledge Agreement contains the
entire pledge agreement between Pledgee and Pledgor with respect to the
Collateral. If any of the provisions of this Pledge Agreement shall be held
invalid or unenforceable, this Pledge Agreement shall be construed as if not
containing those provisions and the rights and obligations of the parties hereto
shall be construed and enforced accordingly.
17. Return; Acquittance. Pledgee may at any time deliver any Collateral
to Pledgor and the receipt thereof by Pledgor shall be a complete and full
acquittance in respect of the Collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
18. References. As used herein, terms in the singular include the
plural. The captions or titles of the sections of this Pledge Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
19. Choice of Law. This Pledge Agreement shall be construed in
accordance with and governed by the laws of the State of California, and, where
applicable and except as otherwise defined herein, terms used herein shall have
the meanings given them in the California Uniform Commercial Code. Pledgor and
Pledgee each irrevocably and unconditionally submits to the jurisdiction of the
Superior Court of the State of California for the County of Los Angeles or the
United States District Court of the Central District of California, or if
required, the Municipal Court of the State of California for the County of Los
Angeles, in connection with any legal action or proceeding arising out of or
relating to this Pledge Agreement, and Pledgor waives any objection relating to
the basis for personal or in rem jurisdiction or to venue which it may now or
hereafter have in any such suit, action or proceeding.
20. Jury Trial. PLEDGOR AND PLEDGEE WAIVE THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO ANY OF THE OBLIGATIONS HEREIN.
21. Notice. Any written notice, consent or other communication provided
for in this Pledge Agreement shall be delivered or sent by first-class mail,
with postage prepaid, to the party to be notified, to the mailing address
specified in the introductory section hereof. Such addresses may be changed by
written notice as provided herein.
22. Expenses. Pledgor will reimburse Pledgee for all out-of-pocket
expenses incurred by Pledgee arising out of the enforcement of this Agreement,
including without limitation, attorneys' fees and costs whether or not suit is
filed.
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<PAGE>
23. Indemnification. Pledgor agrees to pay, and on demand to indemnify
and hold harmless, Pledgee, its successors, assigns and agents, from and against
any and all claims, damages, losses, liabilities, demands, suits, judgments,
causes of action and all legal proceedings, whether civil or criminal,
penalties, fines and other sanctions, and any costs and expenses incurred in
connection therewith, including attorneys' fees, which may result from, relate
to or arise out of this Pledge Agreement or any Collateral, including the
ownership, purchase, delivery, acceptance or rejection, use, possession or
disposition of any item of Collateral, but not including any claims arising out
of the gross negligence or willful misconduct of Pledgee or its agents.
EXECUTED as of November 17, 1997.
PLEDGEE: PLEDGOR:
SANWA BUSINESS CREDIT 3-D GEOPHYSICAL, INC.
CORPORATION
By: /s/ Timothy K. Turner By: /s/ Ronald L. Koons
-------------------------- -----------------------
Its: First Vice President Its: Vice President
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SCHEDULE I
Class of Stock No. of Shares
- -------------- -------------
1. Common Stock of Geoevaluaciones, S.A. ________
de C.V. registered in the name of
3-D Geophysical, Inc.
2. Common Stock of Procesos Interactivos ________
Avanzados, S.A. de C.V.
SECURITY AGREEMENT (SECURITIES)
THIS SECURITY AGREEMENT (SECURITIES) is dated for reference
November 17, 1997,
MADE BY:
W.G. MUELLER CONSULTING SERVICES LTD., a body
corporate under the laws of Alberta, having its chief place of
business at 220 - 99 Avenue, S.E., Calgary, Alberta, T2J 0J1
(the "Pledgor")
IN FAVOUR OF:
SANWA BUSINESS CREDIT CORPORATION, of 550 North
Brand Boulevard, Glendale, California, 91203,
(the "Pledgee")
WHEREAS:
A. The Pledgor owns eighteen percent (18%) of the issued and outstanding voting
shares (the "Shares") of the capital stock of J.R.S. Exploration Company
Limited, an Alberta company ("JRS") represented by the share certificates listed
in the Schedule attached hereto;
B. The Pledgee has made available to Northern Geophysical of America, Inc., a
Delaware corporation (the "Borrower"), certain loans and other financial
accommodations pursuant to a Loan and Security Agreement dated as of the date
hereof between Borrower and Pledgee (the "Loan Agreement");
C. In consideration for such financial accommodations, the Borrower has given a
security interest in the shares of the shareholder of the Pledgor and has
requested the Pledgor execute, among other things, this Pledge Agreement.
NOW THEREFORE THIS SECURITY AGREEMENT (SECURITIES) WITNESSES
THAT in consideration of the premises and for other good and valuable
consideration (the receipt and sufficiency of which is hereby acknowledged by
the Pledgor, the Pledgor hereby agrees with the Pledgee as follows:
1. Collateral. The Pledgor grants to the Pledgee a continuing, specific and
fixed assignment, transfer, mortgage, charge and security interest in the
following (hereinafter collectively, the "Collateral"):
<PAGE>
(a) All of the Shares of common stock of JRS issued or registered
in the name of the Pledgor, owned beneficially and of record
by the Pledgor and made a part hereof, and all cash, bonds,
dividends, other securities, instruments, rights and other
property at any time and from time to time received or
receivable in respect thereof or in exchange for all or any
part thereof, including without limitation, dividends,
warrants, rights to subscribe, conversion rights, liquidating
dividends and other share rights, and in the event the Pledgor
receives any of the foregoing, the Pledgor acknowledges that
the same shall be received IN TRUST for the Pledgee and agrees
immediately to deliver the same to the Pledgee in original
form of receipt, together with any powers of attorney,
assignments, endorsements or other documents or instruments as
the Pledgee may reasonably request to establish, protect or
perfect the Pledgee's interest in respect of such Collateral;
and
(b) Subject to section 8.1(b), all other property hereafter
delivered to the Pledgee (or any agent or bailee holding on
behalf of the Pledgee) by the Pledgor in substitution for or
in addition to any of the foregoing, all certificates and
instruments representing or evidencing such other property and
all cash, dividends, other securities, instruments, rights and
other property at any time and from time to time received or
receivable in respect thereof or in exchange for all or any
part thereof, including without limitation, subject to section
8.1(b), dividends, warrants, rights to subscribe, conversion
rights, liquidating dividends and other share rights, and in
the event the Pledgor receives any of the foregoing, the
Pledgor acknowledges that the same shall be received IN TRUST
for the Pledgee and agrees immediately to deliver the same to
the Pledgee in original form of receipt, together with any
powers of attorney, assignments, endorsements or other
documents or instruments as the Pledgee may request to
establish, protect or perfect the Pledgee's interest in
respect of such Collateral; and
(c) All proceeds of all of the foregoing.
2. Registration of Securities. All certificates or instruments representing or
evidencing the Collateral shall be delivered to and held by or on behalf of the
Pledgee pursuant hereto and shall be duly endorsed in blank for transfer or
shall be transferred into the name of the Pledgee, if the Pledgee requests. The
Pledgee shall have the right, at any time, both before or after an Event of
Default (as defined herein), in its reasonable discretion and without notice to
the Pledgor, but shall be under no obligation to, to transfer to or to register
in the name of the Pledgee or any of its nominees any or all of the Collateral.
In addition, the Pledgee shall have the right at any time to exchange
certificates or instruments representing or evidencing Collateral for
certificates or instruments of small or larger denominations. The Pledgee shall
be under no obligation to accept any Collateral or to cause, or to permit, a
transfer thereof to be made into its name if, in the opinion of the Pledgor,
such acceptance or transfer might involve or render the Pledgor subject to any
liability or expense unless the Pledgor be indemnified to its satisfaction for
so doing.
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<PAGE>
3. Obligations. The Collateral shall be held by the Pledgee as continuing
security and shall secure the payment of:
(a) all and every indebtedness, present and future, direct and
indirect, absolute and contingent, of the Borrower to the
Pledgee (herein called the "Indebtedness"); and
(b) all and every liability, present and future, direct and
indirect, absolute and contingent, of each of JRS and the
Pledgor to the Pledgee (herein called the "Liability" and
collectively with the Indebtedness, the "Obligations").
4. Securities Additional Security. The Collateral are in addition to and not in
substitution for any other security or securities which the Pledgee now or from
time to time may hold or take from JRS or from any other person or persons
whomsoever.
5. Representations and Warranties. The Pledgor represents and warrants on the
date hereof, and shall be deemed to represent and warrant on the date of each
loan or advance made by the Pledgee to Borrower, that:
(a) the Pledgor is the sole legal, beneficial and, if applicable,
record owner of the Collateral (or, in the case of
after-acquired Collateral, will be the sole such owner
thereof), having good and marketable title hereto, free of all
liens, security interests, encumbrances or claims of any kind;
(b) all information heretofore, herein or hereafter given to
Pledgee by or on behalf of Pledgor is complete, true and
correct;
(c) all shares constituting the Collateral (a) have been duly and
validly issued in compliance with all the laws of Alberta and
laws of Canada Applicable to Alberta, (b) are fully paid,
nonassessable and free of preemptive rights, (c) are not
subject to any restrictions upon the voting rights or upon the
voting rights or upon the transfer thereof other than as may
appear on the face of the certificates evidencing such
Collateral, (d) constitute all securities of JRS owned
beneficially and of record by the Pledgor and (e) include 82%
of the issued and outstanding voting shares of JRS;
(d) the Pledgor has the right and power and is duly authorized and
empowered to enter into, execute, deliver and perform this
Pledge Agreement;
(e) this Pledge Agreement has been duly executed and delivered by
Pledgor and constitutes a legal, valid and binding obligation
of Pledgor, enforceable against Pledgor in accordance with its
terms; and
(f) the execution, delivery and performance of this Pledge
Agreement do not (i) violate any provisions of law or any
order of any court or other agency of government, or (ii)
contravene any provision of any material contract or
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<PAGE>
agreement to which the Pledgor is a party or by which the
Pledgor or the Pledgor's assets are bound.
6. Covenants of Pledgor. Until the Obligations are satisfied in full, the
Pledgor agrees to:
(a) preserve and protect the Collateral;
(b) not create, incur, assume or permit to exist any liens,
encumbrances, security interests, levies, assessments or
charges on or in any of the Collateral, except those approved
in advance in writing by the Pledgee;
(c) promptly pay and discharge before the same become delinquent
all taxes, assessments and governmental charges or levies
imposed on the Pledgor or any of the Collateral;
(d) not sell, encumber, or otherwise dispose of or transfer any
Collateral, or any right or interest therein and agrees that
it will (i) cause JRS not to issue any other voting stock in
addition to or in substitution for the Collateral, except to
the Pledgor or in connection with outstanding stock options or
with the prior written consent of the Pledgee and (ii) pledge
hereunder, immediately upon the Pledgor's acquisition
(directly or indirectly) thereof, any and all additional
shares of stock or other securities of JRS;
(e) appear in and defend, at the Pledgor's own expense, any action
or proceeding which may affect the Pledgor's title to or the
Pledgee's interest in the Collateral;
(f) procure or execute and deliver, from time to time, in form and
substance satisfactory to the Pledgee, any powers, powers of
attorney, endorsements, assignments, financing statements,
estoppel certificates or other writings deemed necessary or
appropriate by the Pledgee to perfect, maintain or protect the
Pledgee's security interest in the Collateral and the priority
thereof, and take such other action and deliver such other
documents, instruments and agreements pertaining to the
Collateral as the Pledgee may request to effectuate the intent
of this Pledge Agreement;
(g) if the Pledgee gives value to enable the Pledgor to acquire
rights in or use of any Collateral, use such value only for
such purpose;
(h) keep separate, accurate and complete records of the Collateral
and provide the Pledgee with access thereto and to the
Pledgor's financial records, in each case with the right to
make extracts therefrom;
(i) provide the Pledgee with such other information pertaining to
the Collateral as the Pledgee may reasonably request from time
to time;
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<PAGE>
(j) maintain and preserve its corporate or other legal existence
of, including without limitation, JRS, and all rights,
privileges, franchises and other authority necessary for the
conduct of their respective businesses; and
(k) Continue its operations in the same form and structure of
business (i.e., corporate, partnership, individual) as
currently conducted, and not merge or consolidate with or
acquire or be acquired by any other corporation, partnership,
entity or person, with the Pledgee's prior written consent.
7. Authorized Action by Pledged.
7.1 The Pledgor hereby irrevocably appoints the Pledgee as its lawful attorney
to do (but the Pledgee shall not be obligated to and shall not incur any
liability to the Pledgor or any third party for failure so to do) any act which
the Pledgor is obligated by this Pledge Agreement to do, and to exercise such
rights and powers as the Pledgor might exercise with respect to the Collateral,
including, without limitation, the right to:
(a) collect by legal proceedings or otherwise and endorse, receive
and receipt for all payments, proceeds and other sums and
property now or hereafter payable on or in respect of proceeds
and other sums and property now or hereafter payable on or in
respect of the Collateral, including dividends and interest
payments;
(b) enter into any extension, reorganization, deposit,
amalgamation or consolidation agreement or other agreement
pertaining to the Collateral, and in connection therewith may
deposit or surrender control of the Collateral thereunder,
accept other property in exchange therefor, and do and perform
such acts and things as it may deem proper, and any money or
property secured in exchange therefor shall be applied to the
Obligations or held by the Pledgee pursuant to the provisions
of this Pledge Agreement;
(c) protect and preserve the Collateral;
(d) transfer the Collateral to its own or its nominee's name; and
(e) make any compromise, settlement or adjustment, and take any
action it deems advisable, with respect to the Collateral;
provided, however, that Pledgee shall only exercise such rights after the
occurrence and during the continuation of an Event of Default (as defined
herein), except that upon the cure of any Event of Default, the Pledgee shall
have the right to complete any action commenced by it curing such Event of
Default.
7.2 The Pledgor agrees to reimburse the Pledgee upon demand for any costs and
expenses, including legal fees, the Pledgee may incur while acting as the
Pledgor's lawful attorney hereunder, all of which costs and expenses are
included in the Obligations secured hereby and are payable upon demand. It is
further agreed and understood between the parties
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<PAGE>
hereto that such care as the Pledgee gives to the safekeeping of its own
property of like kind shall constitute reasonable care of the Collateral when in
the Pledgee's possession; provided, however, that the Pledgee shall not be
required to make any presentment, demand or protest, or give any notice and need
not take any action to preserve any rights against any prior party or any other
person in connection with the Obligations or with respect to the Collateral.
7.3 If the Pledgor's records are prepared or retained by a computer service
company or any accountant or accounting service, so long as any Obligations are
outstanding, Pledgor grants Pledgee the absolute and irrevocable right to
inspect such records, receive duplicate copies of all information furnished to
Pledgor and prepared by such company, accountant or accounting service, and
agrees to furnish such consents as may be necessary to effectuate the same.
Pledgor further agrees to promptly notify Pledgee of the name and address of
such company, accountant or accounting service and of any change in respect
thereof.
7.4 All the foregoing powers authorized herein, being coupled with an interest
are irrevocable so long as any Obligations are outstanding.
8. Transfer, Voting, Dividends, Etc.
8.1 Notwithstanding any other provision hereof, so long as no Event of Default
(as defined herein) shall have occurred and be continuing:
(a) the Pledgor shall have the right, subject to the restrictions
hereinafter imposed, to vote all shares comprised in the
Collateral with the same force and effect as though they had
not been delivered to the Pledgee hereunder. If the Collateral
shall have been transferred into the name of the Pledgee or
its nominee or nominees, the Pledgee, on request of the
Pledgor shall execute and deliver or cause to be executed and
delivered to the Pledgor suitable proxies for voting powers in
favour of the nominee or nominees of the Pledgor for voting,
and otherwise facilitate the voting of any such Securities. On
the security hereby constituted becoming enforceable the
Pledgee may enforce the right to vote the shares comprised in
the Collateral in the same manner and to the same extent as if
it were the absolute owner thereof until the Pledgor shall
again be entitled under the provisions hereof to exercise the
right of voting in respect of the Collateral. The Pledgor
shall not use or vote or permit to be used or voted any of the
Collateral for any purpose contrary to the covenants of the
Pledgor herein contained or otherwise inconsistent with the
provisions or purposes hereof; and
(b) To the extent permitted in the Loan Agreement, the Pledgor
shall be entitled to receive and retain all dividends paid or
declared in respect of any Collateral (other than stock or
liquidating dividends) and all interest payments payable in
respect of the Collateral, and, from time to time, upon the
written request of the Pledgor, the Pledgee shall deliver to
the Pledgor suitable orders in favour of the Pledgor or its
nominee or nominees for the payment of such dividends, and the
Pledgee shall at once pay over to the Pledgor any such
dividends which may have been received by it; provided,
however, that all shares or property representing
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<PAGE>
the shares or liquidating dividends or a distribution or
return of capital upon or in respect of the shares of stock
constituting Collateral or resulting from a split-up, revision
or reclassification of such Collateral or received in exchange
therefor, as a result of a merger, consolidation or otherwise,
shall be paid or transferred directly to Pledgee immediately
upon receipt thereof by Pledgor, and shall be retained by the
Pledgee as Collateral hereunder.
8.2 If any Event of Default (as defined herein) shall have occurred and while
the same is continuing:
(a) the Pledgee, or its nominee or nominees, shall, at its option
(after notice to the Pledgor of the Pledgee's intent to
exercise such rights), have the sole and exclusive right to
exercise all voting powers pertaining to the shares
constituting Collateral, and shall exercise such powers in
such manner as Pledgee may elect, and Pledgor hereby grants
Pledgee an irrevocable proxy, coupled with an interest to vote
such shares of stock; provided, however, that such proxy shall
terminate upon termination of Pledgee's security interest
therein; and
(b) All dividends and other distributions made upon or in respect
of shares of stock constituting Collateral and all interest
payments shall be paid directly to and shall be retained by
the Pledgee as Collateral hereunder.
9. Default and Remedies.
9.1 The occurrence of any of the following events or conditions (herein "Events
of Default") shall, at the option of the Pledgee and without notice to or demand
on the Pledgor, constitute an Event of Default hereunder:
(a) any Default, under and as defined in the Loan Agreement, shall
have occurred and be continuing; or
(b) any breach, violation or non-performance or any warranty,
covenant or undertaking on the Pledgor's part hereunder; or
(c) any breach, violation or non-performance of any warranty,
covenant or undertaking on the part of JRS under any other
agreement with the Pledgee.
9.2 Upon the occurrence of any Event of Default, the Pledgee may, at its option,
without notice to or demand on the Pledgor, declare all Obligations immediately
due and payable, and the Pledgee shall have the following rights and remedies,
all of which may be exercised with or without further notice to the Pledgor, at
the Pledgee's sole option and as the Pledgee in its sole discretion may deem
advisable:
(a) the Pledgee may enforce any and all security which it may hold
including the Collateral and may deal with or realize upon
such of the Collateral as it may in its sole discretion deem
fit; provided however, that the Pledgee shall not be bound
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<PAGE>
to deal with the Collateral nor exercise any right or remedy
thereunder and shall not be liable for any loss which may be
occasioned by any failure to do so;
(b) to settle, compromise or release, on terms acceptable to the
Pledgee, in whole or in part, any amounts owing on the
Collateral, and to extend the time of payment, in the
Pledgee's name or in the name of Pledgor, in respect thereof;
(c) to apply to the satisfaction of all Obligations, or set-off or
collect the Collateral, notwithstanding any forfeiture of
interest or loss of other rights of Pledgor against any
obligor on the Collateral resulting from such action; and
(d) to sell or otherwise dispose of the Collateral, or any part
thereof, either at public or private sale, on any broker's
board or securities exchange, in lots or in bulk, for cash, on
credit or otherwise, with or without representations or
warranties, and upon such terms as shall be acceptable to the
Pledgee.
9.3 The net cash proceeds resulting from the collection, liquidation, sale, or
other disposition of the Collateral shall be applied first, to the expenses
(including all legal fees) of holding, storing, preparing for sale, selling
collecting, liquidating and the like, including any brokerage commissions and
transfer taxes, and then to the satisfaction of all Obligations secured hereby,
application as to any particular obligation or indebtedness or against principal
or interest to be in the Pledgee's absolute discretion.
10. Redemption and Stock Dividends. Unless the Pledgee consents in writing, the
Pledgor shall not be entitled to receive and the Pledgee shall not pay over to
the Pledgor the redemption price, exclusive of accrued dividends, of any
Collateral, nor any stock dividends on any Collateral nor such cash dividends on
any such Collateral as may become payable on or in the course of the
dissolution, liquidation or winding-up of any corporation and which shall be in
any way the proceeds of or chargeable to or payable out of capital. Any such
redemption price, stock dividends and cash dividends chargeable to or payable
out of capital received by the Pledgor shall forthwith be paid over or delivered
to the Pledgee without demand. If the Pledgee shall have permitted any such
Collateral to remain registered in the name of the Pledgor, the Pledgor
covenants to furnish to the Pledgee on demand suitable orders for the payment to
the Pledgee of any such redemption price or cash dividends which represent the
proceeds of or are chargeable to or payable out of capital or for the issue in
the name of the Pledgee or its nominee or nominees, and the delivery to the
Pledgee of any such stock dividends.
11. Protection of Securities. The Pledgee may, in its discretion, protect the
property which underlies or is charged or affected by any of the Collateral by
instituting or joining in judicial proceedings by the purchase at judicial sale
thereof, by joining in any reorganization of such property or of the corporation
owing the same, or in any other manner which the Pledgee may deem expedient.
12. Duty of Pledgee. The Pledgee shall not be under any duty or obligation
whatsoever to collect any dividends, interest or other payments due or accruing
in respect of the Collateral, or to take any action to preserve rights in
connection with any Collateral, including,
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without limitation, making or giving any presentment, demands for performance,
notices of non-performance, protests, notices of protest or notices of dishonor
in connection with any Collateral.
13. Cumulative Rights. The rights, powers and remedies of the Pledgee under this
Pledge Agreement shall be in addition to all rights, powers and remedies given
to the Pledgee under any statute or rule of law, this Pledge Agreement or any
other agreement, all of which rights, powers and remedies shall be cumulative
and may be exercised successively or concurrently.
14. Forbearance Not Waiver. Any forbearance, failure or delay by the Pledgee in
exercising any right, power or remedy shall not preclude the further exercise
thereof, and every right, power or remedy of the Pledgee shall continue in full
force and effect until such right, power or remedy is specifically waived in a
writing executed by the Pledgee. The Pledgor waives any right to require the
Pledgee to proceed against any person or to exhaust any Collateral or to pursue
any remedy in the Pledgee's power prior to pursuing the Pledgor in respect of
the Obligations.
15. Setoff. The Pledgor agrees that the Pledgee may exercise its rights of
setoff with respect to the Obligations in the same manner as if the Obligations
were unsecured.
16. Substituted Collateral; Additional Collateral. The Pledgor may substitute
Collateral under this Pledge Agreement provided that any Collateral proposed for
substitution is satisfactory to the Pledgee in the Pledgee's sole discretion. As
of the date of delivery of any Collateral approved for substitution by the
Pledgee pursuant to this Section 16 or otherwise approved as additional security
pursuant to this Pledge Agreement, the Pledgor represents and warrants to the
Pledgee that (1) the Pledgor will own such shares, certificates and instruments
free and clear of any right of any other person or entity, and (2) the Pledgor
will have good and marketable title to the shares, certificates and instruments
and have the right to pledge such shares, certificates or instruments pursuant
to this Pledge Agreement. By delivery of such substituted or additional
Collateral, the Pledgor shall have represented and warranted that the Pledgee
has a valid, perfected, first priority security interest in such shares,
certificates and instruments and the proceeds thereof free and clear of all
liens, claims and rights of third parties whatsoever. All documentary, stamp or
other taxes or fees owing in connection with the issuance, transfer and/or
pledge of the Collateral or any substituted or additional Collateral have been
paid and will hereafter be paid by the Pledgor as such become due and payable.
17. Records. The records of the Pledgee as to payment of the Indebtedness being
in default or of any demand for payment having been made shall be prima facie
evidence of such default or demand.
18. Application of Payments. Payments made in respect of the Indebtedness or the
Liability to the Pledgee from time to time and the moneys realized from any
securities held therefor (including moneys realized from the enforcement of any
of the Collateral) may be applied on such part or parts of the Indebtedness and
Liability or either of them as the Pledgee may see fit, and the Pledgee shall at
all times and from time to time have the right to change
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and appropriation of any moneys received by it and re-apply the same on any part
or parts of the Indebtedness and Liability or either of them as the Pledgee may
see fit, notwithstanding any previous application by whomsoever made, and the
Pledgee may grant extensions, take and give up securities, accept compositions,
grant releases and discharges and otherwise make arrangements and deal with the
Pledgor and with others as the Pledgee may see fit without prejudice to the
liability of the Pledgor to the Pledgee, the Pledgee's claim for any deficiency
or the Pledgee's right to hold, deal with and realize on the security of the
Collateral.
19. Return; Acquittance. The Pledgee may at any time deliver any Collateral to
the Pledgor and the receipt thereof by the Pledgor shall be a complete and full
acquittance in respect of the Collateral so delivered, and the Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
20. Delivery of Copy/Waiver. The Pledgor hereby acknowledges receiving a copy of
this Security Agreement (Securities). The Pledgor waives all rights to receive
from the Pledgee a copy of any financing statement or financing change statement
registered or verification statement issued at any time in respect of this
Security Agreement (Securities).
21. Indemnification. The Pledgor agrees to pay, and on demand to indemnify and
hold harmless, the Pledgee, its successors, assigns and agents, from and against
any and all claims, damages, losses, liabilities, demands, suits, judgments,
causes of action and all legal proceedings, whether civil or criminal,
penalties, fines and other sanctions, and any costs and expenses incurred in
connection therewith, including legal fees, which may result from, relate to or
arise out of this Pledge Agreement or any Collateral, including the ownership,
purchase, delivery, acceptance or rejection, use, possession or disposition of
any item of Collateral, but not including any claims arising out of the gross
negligence or willful misconduct of the Pledgee or its agents.
22. Expenses. The Pledgor will reimburse the Pledgee for all out-of-pocket
expenses incurred by the Pledgee arising out of the enforcement of this Pledge
Agreement, including without limitation, legal fees and costs whether or not
suit is filed.
23. Entire Agreement/Amendment. This Pledge Agreement contains the entire
agreement between the parties hereto with respect to the Collateral. Any
amendment of this Pledge Agreement shall not be binding unless in writing and
signed by the Pledgor and the Pledgee. The Pledgor confirms that there are no
representation, warranties, covenants or acknowledgements affecting, or relied
upon in entering this Pledge Agreement.
24. Notice. Any written notice, consent or other communication provided for in
this Pledge Agreement shall be delivered or sent by first-class mail, with
postage prepaid, to the party to be notified, to the mailing address specified
in the introductory section hereof. Such addresses may be changed by written
notice as provided herein.
25. Severability. Any provision of this Pledge Agreement prohibited by law or
otherwise ineffective shall be ineffective only to the extent of such
prohibition or ineffectiveness
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and shall be severable without invalidating or otherwise affecting the remaining
provisions hereof.
26. References. As used herein, terms in the singular include the plural. The
captions or titles of the sections of this Pledge Agreement are for convenience
of reference only and shall not define or limit the provisions hereof.
27. Applicable Law. This Pledge Agreement shall be construed and enforceable
under and in accordance with the laws of Alberta.
28. Binding Upon Successors. All rights of the Pledgee under this Pledge
Agreement shall inure to the benefit of its successors and assigns, and all
obligations of the Pledgor shall bind the representatives, and successors and
assigns of the Pledgor.
IN WITNESS WHEREOF W.G. MUELLER CONSULTING SERVICES LTD., has
executed this Security Agreement (Securities) by its duly authorized signatory
under its common seal on November 17, 1997.
W.G. MUELLER CONSULTING SERVICES LTD.
C/S
By: /s/ Donald E. Janveau
--------------------------
Name: Donald E. Janveau
Title: President
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<PAGE>
SCHEDULE
LIST OF SHARE CERTIFICATES
6 CLASS A SHARES OF JRS EXPLORATION COMPANY LIMITED
6 CLASS B SHARES OF JRS EXPLORATION COMPANY LIMITED
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SECURITY AGREEMENT (SECURITIES)
THIS SECURITY AGREEMENT (SECURITIES) is dated for
reference November 17, 1997,
MADE BY:
JAN VO EQUITIES LTD., a body corporate under the laws of
Alberta, having its chief place of business at 180 Rundlewood
CL, N.E., Calgary, Alberta, T1Y2P3,
(the "PLEDGOR")
IN FAVOUR OF:
SANWA BUSINESS CREDIT CORPORATION, of 550 North Brand
Boulevard, Glendale, California, 91203,
(the "PLEDGEE")
WHEREAS:
A. The Pledgor owns eighty-two percent (82%) of the issued and outstanding
voting shares (the "SHARES") of the capital stock of J.R.S. Exploration Company
Limited, an Alberta company ("JRS") represented by the share certificates listed
in the Schedule attached hereto;
B. The Pledgee has made available to Northern Geophysical of America, Inc., a
Delaware corporation (the "BORROWER"), certain loans and other financial
accommodations pursuant to a Loan and Security Agreement dated as of the date
hereof between Borrower and Pledgee (the "LOAN AGREEMENT");
C. In consideration for such financial accommodations, the Borrower has given a
security interest in the shares of the shareholder of the Pledgor and has
requested the Pledgor execute, among other things, this Pledge Agreement.
NOW, THEREFORE, THIS SECURITY AGREEMENT (SECURITIES) WITNESSES
THAT in consideration of the premises and for other good and valuable
consideration (the receipt and sufficiency of which is hereby acknowledged by
the Pledgor, the Pledgor hereby agrees with the Pledgee as follows:
1. Collateral. The Pledgor grants to the Pledgee a continuing, specific and
fixed assignment, transfer, mortgage, charge and security interest in the
following (hereinafter collectively, the "COLLATERAL"):
(a) All of the Shares of common stock of JRS issued or registered
in the name of the Pledgor, owned
<PAGE>
beneficially and of record by the Pledgor and made a part
hereof, and all cash, bonds, dividends, other securities,
instruments, rights and other property at any time and from
time to time received or receivable in respect thereof or in
exchange for all or any part thereof, including without
limitation, dividends, warrants, rights to subscribe,
conversion rights, liquidating dividends and other share
rights, and in the event the Pledgor receives any of the
foregoing, the Pledgor acknowledges that the same shall be
received IN TRUST for the Pledgee and agrees immediately to
deliver the same to the Pledgee in original form of receipt,
together with any powers of attorney, assignments,
endorsements or other documents or instruments as the Pledgee
may reasonably request to establish, protect or perfect the
Pledgee's interest in respect of such Collateral; and
(b) Subject to section 8.1(b), all other property hereafter
delivered to the Pledgee (or any agent or bailee holding on
behalf of the Pledgee) by the Pledgor in substitution for or
in addition to any of the foregoing, all certificates and
instruments representing or evidencing such other property and
all cash, dividends, other securities, instruments, rights and
other property at any time and from time to time received or
receivable in respect thereof or in exchange for all or any
part thereof, including without limitation, subject to section
8.1(b), dividends, warrants, rights to subscribe, conversion
rights, liquidating dividends and other share rights, and in
the event the Pledgor receives any of the foregoing, the
Pledgor acknowledges that the same shall be received IN TRUST
for the Pledgee and agrees immediately to deliver the same to
the Pledgee in original form of receipt, together with any
powers of attorney, assignments, endorsements or other
documents or instruments as the Pledgee may request to
establish, protect or perfect the Pledgee's interest in
respect of such Collateral; and
(c) All proceeds of all of the foregoing.
2. Registration of Securities. All certificates or instruments representing or
evidencing the Collateral shall be delivered to and held by or on behalf of the
Pledgee pursuant hereto and shall be duly endorsed in blank for transfer or
shall be transferred into the name of the Pledgee, if the Pledgee requests. The
Pledgee shall have the right, at any time, both before or after an Event of
Default (as defined herein), in its reasonable discretion and without notice to
the Pledgor, but shall be under no obligation to, transfer to or to register in
the name of the Pledgee or any of its nominees any or all of the Collateral. In
addition, the Pledgee shall have the right at any
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<PAGE>
time to exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger denominations.
The Pledgee shall be under no obligation to accept any Collateral or to cause,
or to permit, a transfer thereof to be made into its name if, in the opinion of
the Pledgor, such acceptance or transfer might involve or render the Pledgor
subject to any liability or expense unless the Pledgor be indemnified to its
satisfaction for so doing.
3. Obligations. The Collateral shall be held by the Pledgee as continuing
security and shall secure the payment of:
(a) all and every indebtedness, present and future, direct and
indirect, absolute and contingent, of the Borrower to the
Pledgee (herein called the "INDEBTEDNESS"); and
(b) all and every liability, present and future, direct and
indirect, absolute and contingent, of each of JRS and the
Pledgor to the Pledgee (herein called the "LIABILITY" and
collectively with the Indebtedness, the "OBLIGATIONS").
4. Securities Additional Security. The Collateral are in addition to and not in
substitution for any other security or securities which the Pledgee now or from
time to time may hold or take from JRS or from any other person or persons
whomsoever.
5. Representations and Warranties. The Pledgor represents and warrants on the
date hereof, and shall be deemed to represent and warrant on the date of each
loan or advance made by the Pledgee to Borrower, that:
(a) the Pledgor is the sole legal, beneficial and, if applicable,
record owner of the Collateral (or, in the case of
after-acquired Collateral, will be the sole such owner
thereof), having good and marketable title thereto, free of
all liens, security interests, encumbrances or claims of any
kind;
(b) all information heretofore, herein or hereafter given to
Pledgee by or on behalf of Pledgor is complete, true and
correct;
(c) all shares constituting the Collateral (a) have been duly and
validly issued in compliance with all the laws of Alberta and
laws of Canada applicable to Alberta, (b) are fully paid,
nonassessable and free of preemptive rights, (c) are not
subject to any restrictions upon the voting rights or upon the
transfer thereof other than as may appear on the face of the
certificates evidencing such Collateral, (d) constitute all
securities of JRS owned beneficially and of record by the
Pledgor and (e) include 82% of the issued and outstanding
voting shares of JRS;
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<PAGE>
(d) the Pledgor has the right and power and is duly authorized and
empowered to enter into, execute, deliver and perform this
Pledge Agreement;
(e) this Pledge Agreement has been duly executed and delivered by
Pledgor and constitutes a legal, valid and binding obligations
of Pledgor, enforceable against Pledgor in accordance with its
terms; and
(f) the execution, delivery and performance of this Pledge
Agreement do not (i) violate any provisions of law or any
order of any court or other agency of government, or (ii)
contravene any provision of any material contract or agreement
to which the Pledgor is a party or by which the Pledgor or the
Pledgor's assets are bound.
6. Covenants of Pledgor. Until the Obligations are satisfied in full, the
Pledgor agrees to:
(a) preserve and protect the Collateral;
(b) not create, incur, assume or permit to exist any liens,
encumbrances, security interests, levies, assessments or
charges on or in any of the Collateral, except those approved
in advance in writing by the Pledgee;
(c) promptly pay and discharge before the same become delinquent
all taxes, assessments and governmental charges or levies
imposed on the Pledgor or any of the Collateral;
(d) not sell, encumber, or otherwise dispose of or transfer any
Collateral, or any right or interest therein and agrees that
it will (i) cause JRS not to issue any other voting stock in
addition to or in substitution for the Collateral, except to
the Pledgor, or in connection with outstanding stock options
or with the prior written consent of the Pledgee and (ii)
pledge hereunder, immediately upon the Pledgor's acquisition
(directly or indirectly) thereof, any and all additional
shares of stock or other securities of JRS;
(e) appear in and defend, at the Pledgor's own expense, any action
or proceeding which may affect the Pledgor's title to or the
Pledgee's interest in the Collateral;
(f) procure or execute and deliver, from time to time, in form and
substance satisfactory to the Pledgee, any powers, powers of
attorney, endorsements, assignments, financing statements,
estoppel certificates or other writings deemed necessary or
appropriate by the Pledgee to perfect, maintain or protect the
Pledgee's security interest in the Collateral and the priority
thereof,
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<PAGE>
and take such other action and deliver such other documents,
instruments and agreements pertaining to the Collateral as the
Pledgee may request to effectuate the intent of this Pledge
Agreement;
(g) if the Pledgee gives value to enable the Pledgor to acquire
rights in or use of any Collateral, use such value only for
such purpose;
(h) keep separate, accurate and complete records of the Collateral
and provide the Pledgee with access thereto and to the
Pledgor's financial records, in each case with the right to
make extracts therefrom;
(i) provide the Pledgee with such other information pertaining to
the Collateral as the Pledgee may reasonably request from time
to time;
(j) maintain and preserve its corporate or other legal existence
of, including without limitation, JRS, and all rights,
privileges, franchises, and other authority necessary for the
conduct of their respective businesses; and
(k) Continue its operations in the same form and structure of
business (i.e., corporate, partnership, individual) as
currently conducted, and not merge or consolidate with or
acquire or be acquired by any other corporation, partnership,
entity or person, without the Pledgee's prior written consent.
7. Authorized Action by Pledgee.
7.1 The Pledgor hereby irrevocably appoints the Pledgee as its lawful attorney
to do (but the Pledgee shall not be obligated to and shall not incur any
liability to the Pledgor or any third party for failure so to do) any act which
the Pledgor is obligated by this Pledge Agreement to do, and to exercise such
rights and powers as the Pledgor might exercise with respect to the Collateral,
including, without limitation, the right to:
(a) collect by legal proceedings or otherwise and endorse, receive
and receipt for all payments, proceeds and other sums and
property now or hereafter payable on or in respect of proceeds
and other sums and property now or hereafter payable on or in
respect of the Collateral, including dividends and interest
payments;
(b) enter into any extension, reorganization, deposit,
amalgamation or consolidation agreement or other agreement
pertaining to the Collateral, and in connection therewith may
deposit or surrender control of the Collateral thereunder,
accept other property in exchange therefor, and do and perform
such acts and
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<PAGE>
things as it may deem proper, and any money or property
secured in exchange therefor shall be applied to the
Obligations or held by the Pledgee pursuant to the provisions
of this Pledge Agreement;
(c) protect and preserve the Collateral;
(d) transfer the Collateral to its own or its nominee's name; and
(e) make any compromise, settlement or adjustment, and take any
action it deems advisable, with respect to the Collateral;
provided, however, that Pledgee shall only exercise such rights after the
occurrence and during the continuation of an Event of Default (as defined
herein), except that upon the cure of any Event of Default, the Pledgee shall
have the right to complete any action commenced by it curing such Event of
Default.
7.2 The Pledgor agrees to reimburse the Pledgee upon demand for any costs and
expenses, including legal fees, the Pledgee may incur while acting as the
Pledgor's lawful attorney hereunder, all of which costs and expenses are
included in the Obligations secured hereby and are payable upon demand. It is
further agreed and understood between the parties hereto that such care as the
Pledgee gives to the safekeeping of its own property of like kind shall
constitute reasonable care of the Collateral when in the Pledgee's possession;
provided, however, that the Pledgee shall not be required to make any
presentment, demand or protest, or give any notice and need not take any action
to preserve any rights against any prior party or any other person in connection
with the Obligations or with respect to the Collateral.
7.3 If the Pledgor's records are prepared or retained by a computer service
company or any accountant or accounting service, so long as any Obligations are
outstanding, Pledgor grants Pledgee the absolute and irrevocable right to
inspect such records, receive duplicate copies of all information furnished to
Pledgor and prepared by such company, accountant or accounting service, and
agrees to furnish such consents as may be necessary to effectuate the same.
Pledgor further agrees to promptly notify Pledgee of the name and address of
such company, accountant or accounting service and of any change in respect
thereof.
7.4 All the foregoing powers authorized herein, being coupled with an interest,
are irrevocable so long as any Obligations are outstanding.
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8. Transfer, Voting, Dividends, Etc.
8.1 Notwithstanding any other provision hereof, so long as no Event of Default
(as defined herein) shall have occurred and be continuing:
(a) the Pledgor shall have the right, subject to the restrictions
hereinafter imposed, to vote all shares comprised in the
Collateral with the same force and effect as though they had
not been delivered to the Pledgee hereunder. If the Collateral
shall have been transferred into the name of the Pledgee or
its nominee or nominees, the Pledgee, on request of the
Pledgor shall execute and deliver or cause to be executed and
delivered to the Pledgor suitable proxies for voting powers in
favour of the nominee or nominees of the Pledgor for voting,
and otherwise facilitate the voting of any such Securities. On
the security hereby constituted becoming enforceable the
Pledgee may enforce the right to vote the shares comprised in
the Collateral in the same manner and to the same extent as if
it were the absolute owner thereof until the Pledgor shall
again be entitled under the provisions hereof to exercise the
right of voting in respect of the Collateral. The Pledgor
shall not use or vote or permit to be used or voted any of the
Collateral for any purpose contrary to the covenants of the
Pledgor herein contained or otherwise inconsistent with the
provisions or purposes hereof; and
(b) To the extent permitted in the Loan Agreement, the Pledgor
shall be entitled to receive and retain all dividends paid or
declared in respect of any Collateral (other than stock or
liquidating dividends) and all interest payments payable in
respect of the Collateral, and, from time to time, upon the
written request of the Pledgor, the Pledgee shall deliver to
the Pledgor suitable orders in favour of the Pledgor or its
nominee or nominees for the payment of such dividends, and the
Pledgee shall at once pay over to the pledgor any such
dividends which may have been received by it; provided,
however, that all shares or property representing the shares
or liquidating dividends or a distribution or return of
capital upon or in respect of the shares of stock constituting
Collateral or resulting from a split-up, revision or
reclassification of such Collateral or received in exchange
therefor, as a result of a merger, consolidation or otherwise,
shall be paid or transferred directly to Pledgee immediately
upon receipt thereof by Pledgor, and shall be retained by the
Pledgee as Collateral hereunder.
8.2 If any Event of Default (as defined herein) shall have occurred and while
the same is continuing:
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(a) the Pledgee, or its nominee or nominees, shall, at its option
(after notice to the Pledgor of the Pledgee's intent to
exercise such rights), have the sole and exclusive right to
exercise all voting powers pertaining to the shares
constituting Collateral, and shall exercise such powers in
such manner as Pledgee may elect, and Pledgor hereby grants
Pledgee an irrevocable proxy, coupled with an interest to vote
such shares of stock; provided, however, that such proxy shall
terminate upon termination of Pledgee's security interest
therein; and
(b) All dividends and other distribution made upon or in respect
of shares of stock constituting Collateral and all interest
payments shall be paid directly to and shall be retained by
the Pledgee as Collateral hereunder.
9. Defaults and Remedies.
9.1 The occurrence of any of the following events or conditions (herein "EVENTS
OF DEFAULT") shall, at the option of the Pledgee and without notice to or demand
on the Pledgor, constitute an Event of Default hereunder:
(a) any Default, under and as defined in the Loan Agreement, shall
have occurred and be continuing; or
(b) any breach, violation or non-performance of any warranty,
covenant or undertaking on the Pledgor's part hereunder; or
(c) any breach, violation or non-performance of any warranty,
covenant or undertaking on the part of JRS under any other
agreement with the Pledgee.
9.2 Upon the occurrence of any Event of Default, the Pledgee may, at its option,
without notice to or demand on the Pledgor, declare all Obligations immediately
due and payable, and the Pledgee shall have the following rights and remedies,
all of which may be exercised with or without further notice to the Pledgor, at
the Pledgee's sole option and as the Pledgee in its sole discretion may deem
advisable:
(a) the Pledgee may enforce any and all security which it may hold
including the Collateral as it may in its sole discretion deem
fit; provided, however, that the Pledgee shall not be bound to
deal with the Collateral nor exercise any right or remedy
thereunder and shall not be liable for any loss which may be
occasioned by any failure to do so;
(b) to settle, compromise or release, on terms acceptable to the
Pledgee, in whole or in part, any amounts owing
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<PAGE>
on the Collateral, and to extend the time of payment, in the
Pledgee's name or in the name of Pledgor, in respect thereof;
(c) to apply to the satisfaction of all Obligations, or set-off or
collect the Collateral, notwithstanding any forfeiture of
interest or loss of other rights of Pledgor against any
obligor on the Collateral resulting from such action; and
(d) to sell or otherwise dispose of the Collateral, or any part
thereof, either at public or private sale, on any broker's
board or securities exchange, in lots or in bulk, for cash, on
credit or otherwise, with or without representations or
warranties, and upon such terms as shall be acceptable to the
Pledgee.
9.3 The net cash proceeds resulting from the collection, liquidation, sale, or
other disposition of the Collateral shall be applied first, to the expenses
(including all legal fees) of holding, storing, preparing for sale,e selling,
collecting, liquidating and the like, including any brokerage commissions and
transfer taxes, and then to the satisfaction of all Obligations secured hereby,
application as to any particular obligation or indebtedness or against principal
or interest to be in the Pledgee's absolute discretion.
10. Redemption and Stock Dividends. Unless the Pledgee consents in writing, the
Pledgor shall not be entitled to receive and the Pledgee shall not pay over to
the Pledgor the redemption price, exclusive of accrued dividends, of any
Collateral, nor any stock dividends on any Collateral nor such cash dividends on
any such Collateral as may become payable on or in the course of the
dissolution, liquidation or winding-up of any corporation and which shall be in
any way the proceeds of or chargeable to or payable out of capital. Any such
redemption price, stock dividends and cash dividends chargeable to or payable
out of capital received by the Pledgor shall forthwith be paid over or delivered
to the Pledgee without demand. If the Pledgee shall have permitted any such
Collateral to remain registered in the name of the Pledgor, the Pledgor
covenants to furnish to the Pledgee on demand suitable orders for the payment to
the Pledgee of any such redemption price or cash dividends which represent the
proceeds of or are chargeable to or payable out of capital or for the issue in
the name of the Pledgee or its nominee or nominees, and the delivery to the
Pledgee of any such stock dividends.
11. Protection of Securities. The Pledgee may, in its discretion, protect the
property which underlies or is charged or affected by any of the Collateral by
instituting or joining in judicial proceedings by the purchase at judicial sale
thereof, by joining in any reorganization of such property or of the
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corporation owning the same, or in any other manner which the Pledgee may deem
expedient.
12. Duty of Pledgee. The Pledgee shall not be under any duty or obligation
whatsoever to collect any dividends, interest or other payments due or accruing
in respect of the Collateral or to take any action to preserve rights in
connection with any Collateral, including, without limitation, making or giving
any presentment, demands for performance, notices of non-performance, protests,
notices of protest or notices of dishonor in connection with any Collateral.
13. Cumulative Rights. The rights, powers and remedies of the Pledgee under this
Pledge Agreement shall be in addition to all rights, powers and remedies given
to the Pledgee under any statute or rule of law, this Pledge Agreement or any
other agreement, all of which rights, powers and remedies shall be cumulative
and may be exercised successively or concurrently.
14. Forbearance Not Waiver. Any forbearance, failure or delay by the Pledgee in
exercising any right, power or remedy shall not preclude the further exercise
thereof, and every right, power or remedy of the Pledgee shall continue in full
force and effect until such right, power or remedy is specifically waived in a
writing executed by the Pledgee. The Pledgor waives any right to require the
Pledgee to proceed against any person or to exhaust any Collateral or to pursue
any remedy in the Pledgee's power prior to pursuing the Pledgor in respect of
the Obligations.
15. Setoff. The Pledgor agrees that the Pledgee may exercise its rights of
setoff with respect to the Obligations in the same manner as if the Obligations
were unsecured.
16. Substituted Collateral; Additional Collateral. The Pledgor may substitute
Collateral under this Pledge Agreement provided that any Collateral proposed for
substitution is satisfactory to the Pledgee in the Pledgee's sole discretion. As
of the date of delivery of any Collateral approved for substitution by the
Pledgee pursuant to this Section 16 or otherwise approved as additional security
pursuant to this Pledge Agreement, the Pledgor represents and warrants to the
Pledgee that (1) the Pledgor will own such shares, certificates and instruments
free and clear of any right of any other person or entity, and (2) the Pledgor
will have good and marketable title to the shares, certificates and instruments
and have the right to pledge such shares, certificates or instruments pursuant
to this Pledge Agreement. By delivery of such substituted or additional
Collateral, the Pledgor shall have represented and warranted that the Pledgee
has a valid, perfected, first priority security interest in such shares,
certificates and instruments and the proceeds thereof free and clear of all
liens, claims and rights of third parties whatsoever. All documentary, stamp or
other taxes or fees owing in connection with the issuance, transfer
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and/or pledge of the Collateral or any substituted or additional Collateral have
been paid and will hereafter be paid by the Pledgor as such become due and
payable.
17. Records. The records of the Pledgee as to payment of the Indebtedness being
in default or of any demand for payment having been made shall be prima facie
evidence of such default or demand.
18. Application of Payments. Payments made in respect of the Indebtedness or the
Liability to the Pledgee from time to time and the moneys realized from any
securities held therefor (including moneys realized from the enforcement of any
of the Collateral) may be applied on such part or parts of the Indebtedness and
Liability or either of them as the Pledgee may see fit, and the Pledgee shall at
all times and from time to time have the right to change and appropriation of
any moneys received by it and re-apply the same on any part or parts of the
Indebtedness and Liability or either of them as the Pledgee may see fit,
notwithstanding any previous application by whomsoever made, and the Pledgee may
grant extensions, take and give up securities, accept compositions, grant
releases and discharges and otherwise make arrangements and deal with the
Pledgor and with others as the Pledgee may see fit without prejudice to the
liability of the Pledgor to the Pledgee, the Pledgee's claim for any deficiency
or the Pledgee's right to hold, deal with and realize on the security of the
Collateral.
19. Return; Acquittance. The Pledgee may at any time deliver any Collateral to
the Pledgor and the receipt thereof by the Pledgor shall be a complete and full
acquittance in respect of the Collateral so delivered, and the Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
20. Delivery of Copy/Waiver. The Pledgor hereby acknowledges receiving a copy of
this Security Agreement (Securities). The Pledgor waives all rights to receive
from the Pledgee a copy of any financing statement or financing change statement
registered or verification statement issued at any time in respect of this
Security Agreement (Securities).
21. Indemnification. The Pledgor agrees to pay, and on demand to indemnify and
hold harmless, the Pledgee, its successors, assigns and agents, from and against
any and all claims, damages, losses, liabilities, demands, suits, judgments,
causes of action and all legal proceedings, whether civil or criminal,
penalties, fines and other sanctions, and any costs and expenses incurred in
connection therewith, including legal fees, which may result from, relate to or
arise out of this Pledge Agreement or any Collateral, including the ownership,
purchase, delivery, acceptance or rejection, use, possession or disposition of
any item of Collateral, but not including any claims arising out of the gross
negligence or willful misconduct of the Pledgee or its agents.
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22. Expenses. The Pledgor will reimburse the Pledgee for all out-of-pocket
expenses incurred by the Pledgee arising out of the enforcement of this Pledge
Agreement, including without limitation, legal fees and costs whether or not
suit is filed.
23. Entire Agreement/Amendment. This Pledge Agreement contains the entire
agreement between the parties hereto with respect to the Collateral. Any
amendment of this Pledge Agreement shall not be binding unless in writing and
signed by the Pledgor and the Pledgee. The Pledgor confirms that there are no
representation, warranties, covenants or acknowledgments affecting, or relied
upon in entering this Pledge Agreement.
24. Notice. Any written notice, consent or other communication provided for in
this Pledge Agreement shall be delivered or sent by first-class mail, with
postage prepaid, to the party to be notified, to the mailing address specified
in the introductory section hereof. Such addresses may be changed by written
notice as provided herein.
25. Severability. Any provision of this Pledge Agreement prohibited by law or
otherwise ineffective shall be ineffective only to the extent of such
prohibition or ineffectiveness and shall be severable without invalidating or
otherwise affecting the remaining provisions hereof.
26. References. As used herein, terms in the singular include the plural. The
captions or titles of the sections of this Pledge Agreement are for convenience
of reference only and shall not define or limit the provisions hereof.
27. Applicable Law. This Pledge Agreement shall be construed and enforceable
under and in accordance with the laws of Alberta.
28. Binding Upon Successors. All rights of the Pledgee under this Pledge
Agreement shall inure to the benefit of its successors and assigns, and all
obligations of the Pledgor shall bind the representatives, and successors and
assigns of the Pledgor.
IN WITNESS WHEREOF, JAN VO EQUITIES LTD., has executed this
Security Agreement (Securities) by its duly authorized signatory under its
common seal on November 17, 1997.
JAN VO EQUITIES LTD.
C/S
By:/s/ Donald E. Janveau
---------------------
Name: Donald E. Janveau
Title: President
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SCHEDULE
LIST OF SHARE CERTIFICATES
27 CLASS A SHARES OF JRS EXPLORATION COMPANY LIMITED
27 CLASS B SHARES OF JRS EXPLORATION COMPANY LIMITED
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