<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
(MARK ONE)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended March 31, 1996
Commission file number
000-18816
GRANT GEOPHYSICAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-0766570
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16850 PARK ROW
HOUSTON, TEXAS 77084
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 398-9503
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
As of May 13, 1996, 12,689,740 shares of common stock, par value $.002
per share, were issued and outstanding.
1
<PAGE> 2
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31,
1996 (Unaudited) and December 31, 1995 . . . . . . . . . . . . . . . . . 3-4
Consolidated Statements of Operations for the
Three Months Ended March 31, 1996 (Unaudited)
and 1995 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1996 (Unaudited)
and 1995 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements (Unaudited) . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 15
PART III. SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
-------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 870 $ 1,047
Restricted cash. . . . . . . . . . . . . . . . . . . . . . . 10 100
Accounts receivable:
Trade (net of allowance for doubtful accounts
of $1,901 and $2,344 at March 31,
1996 and December 31, 1995, respectively) . . . . . . . . . 33,751 37,069
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,121 1,826
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 1,095 1,417
Prepaids . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,757 4,823
Mobilization costs . . . . . . . . . . . . . . . . . . . . . . 7,636 5,296
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . 50,240 51,578
--------- ---------
Property, plant and equipment, at cost . . . . . . . . . . . . 103,065 92,502
Less accumulated depreciation . . . . . . . . . . . . . . . . 65,146 61,565
--------- ---------
Net property, plant and equipment . . . . . . . . . . . . . 37,919 30,937
--------- ---------
Deferred costs . . . . . . . . . . . . . . . . . . . . . . . . 1,457 334
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . 313 315
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 3,594 3,768
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 93,523 $ 86,932
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 20,030 $ 19,241
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . 4,583 5,643
Foreign income taxes payable . . . . . . . . . . . . . . . . 529 231
Notes payable, current portion of long-term
debt and capital lease obligations . . . . . . . . . . . . 20,316 18,430
--------- ---------
Total current liabilities . . . . . . . . . . . . . . . 45,458 43,545
--------- ---------
Long-term debt and capital lease obligations,
excluding current portion . . . . . . . . . . . . . . . . . . 13,481 8,789
Other liabilities and deferred credits . . . . . . . . . . . . 3,510 4,883
Stockholders' equity:
$2.4375 Convertible exchangeable preferred stock, $.01 par
value. Authorized 2,300,000 shares; issued and outstanding
2,300,000 and 2,157,000 shares at March 31, 1996 and
December 31, 1995, respectively (liquidating preference
$25 per share, aggregating $53,925,000) . . . . . . . . . 23 22
Junior preferred stock, $100 par value. Authorized 15,000
shares; issued and outstanding 14,904 shares . . . . . . . 1,490 1,490
Serial preferred stock, $100 par value. Authorized 250,000
shares, none issued . . . . . . . . . . . . . . . . . . . . -- --
Common stock, $.002 par value. Authorized 40,000,000 shares;
issued and outstanding 12,572,396 and 12,234,151 shares
at March 31, 1996 and December 31, 1995, respectively . . . 24 24
Additional paid-in capital . . . . . . . . . . . . . . . . . 114,052 112,122
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . (84,515) (83,943)
-------- ---------
Total stockholders' equity . . . . . . . . . . . . . . . 31,074 29,715
Commitments and contingencies . . . . . . . . . . . . . . . .
--------- ---------
Total liabilities and stockholders' equity . . . . . . . $ 93,523 $ 86,932
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------------------
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,808 $ 18,406
Expenses:
Direct operating expense . . . . . . . . . . . . . . . . . 22,112 13,913
Other operating expenses . . . . . . . . . . . . . . . . . 2,266 1,809
Depreciation and amortization . . . . . . . . . . . . . . . 2,370 2,388
-------- --------
Total costs and expenses . . . . . . . . . . . . . . . . 26,748 18,110
-------- --------
Operating income . . . . . . . . . . . . . . . . . . . . 1,060 296
-------- --------
Other income (deductions):
Interest expense . . . . . . . . . . . . . . . . . . . . . (1,330) (725)
Interest income . . . . . . . . . . . . . . . . . . . . . 8 41
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 528
--------- --------
Total other deductions . . . . . . . . . . . . . . . . . (1,235) (156)
-------- --------
Income (loss) before income taxes . . . . . . . . . . . (175) 140
Income tax expense . . . . . . . . . . . . . . . . . . . . . . 397 100
--------- --------
Net income (loss) . . . . . . . . . . . . . . . . . . . (572) $ 40
--------- --------
Net loss applicable to common stock . . . . . . . . . . $ (3,106) $(1,275)
======== =======
LOSS PER COMMON SHARE -- ASSUMING NO AND FULL DILUTION:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.05) $ ---
Dividend requirement on $2.4375 preferred stock . . . . . . (0.20) (0.10)
--------- ---------
Net loss per common share . . . . . . . . . . . . . . . . . $ (0.25) $ (0.10)
-------- ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . 12,672,082 12,518,402
Fully Diluted . . . . . . . . . . . . . . . . . . . . . . . 12,672,082 12,518,402
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------------------
1996 1995
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) before dividend requirement . . . . . . . . $ (572) $ 40
Adjustments to reconcile net income/(loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization expense . . . . . . . . . . 2,370 2,388
Deferred costs amortization . . . . . . . . . . . . . . . 1,799 1,995
Gain on the sale of fixed assets . . . . . . . . . . . . (10) (152)
Exchange (gain) . . . . . . . . . . . . . . . . . . . . . (18) (284)
Other non-cash items . . . . . . . . . . . . . . . . . . -- 25
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable . . . . . . . . . . . . . . . . . . . 3,023 646
Inventories . . . . . . . . . . . . . . . . . . . . . . . 322 923
Prepaids . . . . . . . . . . . . . . . . . . . . . . . . 66 (1,357)
Deferred costs . . . . . . . . . . . . . . . . . . . . . (5,262) (3,676)
Other assets . . . . . . . . . . . . . . . . . . . . . . 174 654
Increase (decrease) in:
Accounts payable . . . . . . . . . . . . . . . . . . . . 789 783
Accrued expenses . . . . . . . . . . . . . . . . . . . . (1,060) (1,036)
Foreign income taxes payable . . . . . . . . . . . . . . 298 83
Other liabilities and deferred credits . . . . . . . . . (1,373) 426
-------- ----------
Net cash provided by operating activities . . . . . . . 546 1,458
-------- ----------
Cash flows from (used in) investing activities:
Capital expenditures, net . . . . . . . . . . . . . . . . . . (3,744) (3,145)
Proceeds from the sale of assets . . . . . . . . . . . . . . 10 152
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . 92 2,152
-------- ----------
Net cash flows used in investing activities . . . . . . (3,642) (841)
-------- ----------
Cash flows from (used in) financing activities:
Proceeds from exercise of stock options and warrants . . . . 205 11
Proceeds from issuance of $2.4375 Preferred Stock . . . . . . 1,573 --
Borrowings made during the period . . . . . . . . . . . . . . 29,667 22,477
Repayment on borrowings during the period . . . . . . . . . . (28,650) (23,639)
Other non-cash items . . . . . . . . . . . . . . . . . . . . 154 --
-------- ----------
Net cash from (used in) financing activities . . . . . 2,949 (1,151)
-------- ----------
Effect of exchange rate changes on cash . . . . . . . . . . . . (30) 176
Net decrease in cash and cash equivalents . . . . . . . (177) (358)
Cash and cash equivalents at beginning of period . . . . . . . 1,047 804
-------- ----------
Cash and cash equivalents at end of period . . . . . . . . . . $ 870 $ 446
======== ==========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES.
SEE NOTE 7.
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The balance sheet of Grant Geophysical, Inc. and subsidiaries
(the "Company") as of March 31, 1996, and the related statements of
operations and cash flows for the three months ended March 31, 1996 and
1995 are unaudited. The consolidated financial statements should be read
in conjunction with the audited financial statements and footnotes for the
year ended December 31, 1995, included in the Company's Form 10-K, as
filed with the Securities and Exchange Commission.
In the opinion of management, the unaudited consolidated
financial statements include normal recurring adjustments considered
necessary to present fairly the Company's consolidated financial position
and results of operations for the periods presented. The Company's
operating results for any particular interim period may not be indicative
of results for a full year.
Reclassifications
Certain amounts previously reported have been reclassified in
order to ensure comparability between the periods reported.
Use of Estimates
The preparation of financial statements in conformity with
Generally Accepted Accounting Principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Income (Loss) Per Common Share
Income (loss) per common share is computed based upon the
weighted average number of common shares outstanding during the period.
For purposes of this calculation, outstanding stock options and warrants
are considered common stock equivalents. Fully diluted income (loss) per
common share is determined based upon the weighted average number of
common shares, calculated using the ending market price of the common
shares for the period. The income/loss is decreased/increased by
undeclared, unpaid cumulative preferred stock dividends in calculating net
income/loss attributable to the common shareholder.
2. LIQUIDITY
The Company continues to experience constrained liquidity. The
factors driving these constraints are a result of the growth curve the
Company has undertaken which requires substantial immediate cash outflow
for startups, crew mobilizations and capital expenditures which are paid
in cash. Additional cash constraints are being experienced in the first
and second quarter of 1996 as North American crews have been hampered by
repetitive adverse weather conditions and permitting delays and some Latin
American crews have not been able to obtain in a timely manner additional
equipment in order to perform contracted work efficiently.
Management anticipates that the Company will be able to
generate sufficient cash flow from operations over the balance of 1996 to
fulfill most cash requirements; however, this cannot be completely
assured to occur on a timely basis. In case of a continued short fall in
cash, the Company may undertake additional funding from external sources.
The cost of these funds may be higher than typical lending rates due to the
Company's current outstanding debt structure. Issuance of additional
equity will be considered as well.
7
<PAGE> 8
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
________________________________________
3. SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
As of March 31, 1996, the Company had approximately $3,737,000
in net receivables from Nigerian customers. Historically, collection of
payments from Nigerian customers have exceeded the Company's average
collection period. Since mid-1993, the Company has encountered additional
delays in receiving cash remittances from its Nigerian customers due to
the political and social turmoil experienced in that country. The Company
has received several cash payments from its Nigerian customers during the
first quarter of 1996 and indications are that payments will continue;
however, Management cannot predict the exact timing and magnitude of such
payments.
4. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
A summary of notes payable, long-term debt, and capital lease
obligations of the Company at March 31, 1996 and December 31, 1995 follows
(dollars in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------- -------------
(UNAUDITED)
<S> <C> <C>
Revolving lines of credit:
15.0% due February 20, 1996 . . . . . . . . . . . . . . . . . $ -- $ 1,750
11.50% due February 17, 1997 . . . . . . . . . . . . . . . . . 3,800 8,045
Convertible Debentures -- 8%, due 1999 . . . . . . . . . . . . . 3,000 --
Equipment notes payable -- 7.35% - 12%, due 1996-2000 . . . . . . 9,680 5,178
Other notes payable -- 6.0% to 34.0%, due 1996-2005 . . . . . . . 10,173 6,579
Capital lease obligations -- 10.46% to 27.53%, due 1996-2000 . . 7,144 5,667
--------- ----------
33,797 27,219
Less current portion . . . . . . . . . . . . . . . . . . . . . . 20,316 18,430
-------- --------
Notes payable, long-term debt and capital lease obligations,
excluding current portion . . . . . . . . . . . . . . . $ 13,481 $ 8,789
======== ========
</TABLE>
On July 28, 1994, the Company entered into a $3,000,000 credit
facility with a holder of the Company's $2.4375 preferred stock. The
credit facility was secured by certain foreign receivables. On April 17,
1995, the credit facility was amended to provide the Company with a
$1,000,000 short-term credit facility for substantially the same terms
and conditions. In June 1995, the short-term credit facility was
increased by $750,000 and the expiration date was succeedingly extended
to February 20, 1996. The entire loan of $1,750,000 plus accrued
interest was repaid on the expiration date.
As of April 26, 1993, the Company entered into a $12,000,000
revolving credit facility (the "Credit Facility") with a credit
corporation. The Credit Facility is secured by domestic and certain
foreign U.S. dollar denominated accounts receivable, a first lien on
all unencumbered assets of the Company and a second lien on all other
assets as available. The terms of the Credit Facility permit the
Company to borrow up to the sum of (A) 80% of eligible domestic accounts
receivable; (B) 65% to 80% of eligible insured international accounts
receivable (not to exceed $8,000,000); (C) 45% of eligible uninsured
international accounts receivable; and (D) 10% of eligible other
accounts receivable. Nigerian U.S. dollar receivables are not eligible
under the terms of the Credit Facility. As of March 31, 1996,
approximately $3,800,000 had been borrowed and no letters of credit had
been issued under the Credit Facility. The term of the Credit Facility
is three years with an option to terminate at its annual anniversary
date with at least 90 days notice by either party. The Credit Facility
has been extended through February 17, 1997. The Credit Facility
contains a number of affirmative and negative covenants, the most
restrictive of which are financial covenants which require maintenance
of: (i) a minimum current ratio; (ii) a maximum ratio of debt to
tangible net worth; (iii) a minimum level of tangible net worth and (iv)
a minimum level of working
8
<PAGE> 9
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
________________________________________
capital. At March 31, 1996, the Company was in compliance with the
financial covenants contained in the Credit Facility.
On February 20, 1996, the Company entered into a two-year term
loan agreement with a subordinated lender for $3,843,750. The term loan
principal is payable beginning March 1, 1997 in eleven equal monthly
installments of $64,063 and a final installment of $3,139,063 due on
February 20, 1998. A mandatory prepayment provision requires the
Company to prepay the outstanding term loan balance with 50% of all U.S.
Dollar payments made on the Nigerian accounts receivable balance as of
February 20, 1996. The term loan bears interest at 14% per annum
payable monthly beginning on March 1, 1996. The Company paid a
non-refundable loan fee of $93,750 and is subject to a quarterly
administration fee of $75,000 commencing August 1996. The term loan
contains a number of affirmative and negative covenants, the most
restrictive of which are financial covenants which require maintenance
of: (i) a minimum current ratio; (ii) a maximum ratio of debt to
tangible net worth; (iii) a minimum level of tangible net worth and (iv)
a minimum level of working capital. At March 31, 1996, the Company was
in compliance with the financial covenants contained in the term loan.
On March 27, 1996, the Company issued $3,000,000 of its 8%
Convertible Debentures ("Debentures") due December 31, 1999. The
Debentures are convertible, at the option of the purchaser, into shares
of the Company's Common Stock at a conversion price of 80% of the five
day average low trading price prior to the conversion election of the
Common Stock, provided that such 80% figure is increased to 100% if the
Debentures are converted within 45 days of the Closing Date. Under
certain circumstances, the Company can redeem Debentures submitted for
conversion at 120% of the par value of the Debentures. Additionally, the
Company may redeem the Debentures on or after March 27, 1997 at a rate
of 120% of the par value of the Debenture, and on or after March 27,
1999, at a rate of 100% of the par value. Interest of 8% per annum is
payable quarterly.
At March 31, 1996, the Company was in default of certain
covenants related to delays in payment on its equipment notes payable.
Payment acceleration of these equipment notes was waived by the
Company's creditors.
5. PREFERRED STOCK ISSUANCE
On March 20, 1996, the Company issued 143,000 shares of the
Company's $2.4375 Convertible Exchangeable Preferred Stock (the "$2.4375
Preferred Stock"). The purchaser of the $2.4375 Preferred Stock is
entitled to all unpaid, undeclared dividends in arrears through March
31, 1996 totaling $1,220,000. The net proceeds from the issuance was
$1,573,000. The cumulative adjustment for these prior unpaid,
undeclared dividends is shown in the first quarter results.
6. DIVIDENDS IN ARREARS
The quarterly dividend payments for the first quarter 1996,
the four quarters of 1995, 1994 and 1993 and one quarterly dividend
payment for 1992 on the $2.4375 Preferred Stock were deferred by the
Company's Board of Directors. As of March 31, 1996, $2.4375 Preferred
Stock dividends in arrears amounted to approximately $19,622,000. This
amount relates to the total of 2,300,000 shares now outstanding.
9
<PAGE> 10
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
________________________________________
7. SUPPLEMENTAL CASH FLOW INFORMATION
(a) During the three months ended March 31, 1996, the Company
entered into new debt instruments for equipment totaling
approximately $7,027,000. Payments of approximately
$1,418,000 on equipment debt instruments have been included in
the statement of cash flows.
(b) Cash paid during the periods for income taxes, net of refunds
and interest is as follows (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
------------------------------
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
Cash paid during the period for income taxes,
net of refunds . . . . . . . . . . . . . . . . . . . . $ 700 $ 254
Cash paid during the period for interest . . . . . . . . $ 985 $ 861
===== ======
</TABLE>
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the historical financial condition and
results of operations of the Company should be read in conjunction with the
financial statements and notes thereto, included elsewhere in this Form 10-Q.
RESULTS OF OPERATIONS
The Company's operating profitability is dependent upon the mix of
contracts in effect during any given period.
Three months ended March 31, 1996 compared to three months ended March
31, 1995
The Company's consolidated revenues increased 51% ($9,402,000) to
$27,808,000. This increase is primarily due to increased crew capacity and crew
months in Latin America and the Far East, partially reduced by decreased
activity in Nigeria.
Revenues from the United States operations increased 14% ($1,557,000) to
$12,656,000. The United States operations, hampered somewhat by repetitive
adverse weather conditions in the first quarter and permitting delays, included
$1,200,000 of revenues resulting from a sale of the Company's interests under
two specific revenue sharing agreements. The impact of this transaction on
operating income was $1,098,359. Transactions of this nature may occur on a
periodic basis as the company continues to grow and is able to capitalize on
such opportunities. Crew capacity in the United States was increased to seven
crews from six crews in the prior year with the introduction of a Telseis
instrument shallow water transition zone crew. This crew had previously operated
in the Company's Middle East operations in 1993 and 1994. The crew resumed
contracted work in mid-March of 1996. Also, the United States operations added
an Input/Output System II in the second quarter of 1995 that replaced an older
technology system that was retired after the first quarter of 1995. Total crew
months for the United States in the 1996 period were sixteen as compared to
eighteen for the same period last year. The region has contracted work for most
of its crews through the third quarter of 1996 with some crews contracted for
the balance of the year.
Revenues from international operations increased 107% ($7,845,000) to
$15,152,000. This increase is largely due to both increased crew capacity and
active crew months in Latin America. The Nigerian operations experienced
reduced crew months and revenues compared to last year since the majority of the
region's contracted work was completed in early fourth quarter of 1995. The Far
East experienced increased crew months and revenues as two crews were active for
a portion of the first quarter. The Middle East region had no activity as
compared to last year when there were minimal revenues from equipment rentals
during the time the region was being demobilized.
Latin America revenues increased 286% ($9,859,000) to $13,306,000. The
number of active crews increased to seven in 1996 as compared to four in the
prior year, and active crew months increased to fifteen from seven,
respectively. During this period, the Company operated one crew in Bolivia, two
crews in Colombia, three crews in Peru, and began the start-up and mobilization
of a new Input/Output System II 3D crew in Brazil where the Company had
previously operated a smaller 2D crew under contract for three years. In the
prior year's period the Company operated one crew in Brazil, two crews in
Colombia, and one crew in Peru with a second crew being mobilized late in the
quarter. The region generally has contracted backlog extending into the latter
part of the year with some backlog in Brazil extending into early 1998.
Nigerian revenues decreased 72% ($2,357,000) to $938,000. The number of
active crews has decreased to one in 1996 from three in 1995 and the number of
active crew months decreased from seven to three, respectively. This decrease is
due to the completion during the fourth quarter of 1995 of contracted work for
two crews. The third crew has now completed its contracted work in March of
1996. The region currently has no contracted work in backlog, but the Company
has several bids currently outstanding, and current expectations are that the
Company will be awarded at least one of these contracts. The Company is
currently preparing for this anticipated work and is actively marketing its
services in the region; however, there is no assurance that the Company will be
awarded any of such work.
11
<PAGE> 12
Revenues in the Far East increased 179% ($582,000) to $908,000 with
active crew months increasing to three from one in this period as compared to
last year. The crew in Bangladesh, which was temporarily suspended due to
political unrest in the region, has now resumed operations and the contracted
work as been expanded. The second crew operated in Indonesia in January and is
currently not in operation.
Direct operating expenses as a percentage of revenue increased to 80%
from 76%. The increase is a result of higher operating costs in the United
States from adverse weather conditions and permitting delays and equipment
delays to Latin America which did not allow some crews to operate efficiently.
The overall dollar increase is primarily due to increased seismic activity in
Latin America and the United States with a partial reduction resulting from
decreased activity in Nigeria.
Other operating expenses, which consist of general and administrative
expenses at corporate headquarters and in foreign locations, decreased slightly
as a percentage of revenues to 8% from 10%. The percentage decrease was due to
the Company's ability to generate 51% more revenues, primarily in Latin America,
while incurring approximately the same amount of other operating expenses. The
overall increase in the amount of other operating expenses can be attributed
primarily to the higher level of seismic crew activity in Latin America and the
United States.
Depreciation and amortization expense decreased only slightly to
$2,370,000 from the prior year as the majority of newly acquired assets during
1995 have begun to be depreciated. As the Company continues to purchase and
utilize new seismic acquisition systems, the depreciation and amortization
expense should increase.
Interest expense increased from prior year by 83% to $1,330,000 as the
Company experienced higher levels of financing at higher interest rates,
particularly in the foreign areas of operation.
Other income (deduction) decreased approximately $441,000 from the first
quarter 1995. Foreign currency translation gains of approximately $284,000
resulting from the fluctuation in the Nigerian Naira and a $152,000 gain from
the sale of idle equipment recorded during the first quarter of 1995 were not
duplicated in 1996.
The income tax provision in both periods consisted of taxes owed to
foreign countries based on local tax laws. The level of foreign taxes has
increased from the prior period due to the increased activity of international
operations. No provision for U.S. Federal income taxes was made in either
period as the Company currently has net operating losses available for
carryforward.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company's short-term and long-term liquidity position
remains restricted. As of May 10, 1996, the Company's level of available cash
was approximately $1,304,000 as compared to the December 31, 1995 balance of
approximately $1,047,000. Net cash provided by operating activities during the
first quarter 1996 was approximately $546,000 compared to approximately
$1,458,000 for the same period in 1995. The primary factors influencing this
liquidity issue are the (i) increases in cash outflows for startups and crew
mobilizations; (ii) increases in the level of capital expenditures which are not
financed that are required to keep pace with the growth in the United States and
Latin American markets; (iii) the level at investment required for the
Company's proprietary seismic data acquisition system; and (iv) the continued
delays in receiving cash remittances from Nigeria and a certain domestic
customer. Additional cash constraints were experienced in the first and second
quarter of 1996 as North American crews have been hampered by repetitive adverse
weather conditions and permitting delays and some Latin American crews were not
able to obtain additional equipment timely in order to perform contracted work
efficiently.
Since mid-1993, the Company has encountered additional delays in
receiving cash remittances from its Nigerian customers due to the political and
social turmoil experienced in that country. During the first quarter of 1995,
these delays increased. These delays caused the Company to intensify its
collection efforts. The net receivable balance from Nigerian customers has
decreased from $7,896,000 at December 31, 1994 to $2,970,000 at April 30, 1996
due primarily to increased collection efforts and reduced crew operations.
There have been cash payments received during the first quarter of 1996, and
indications are that payments will continue; however, management cannot predict
the exact timing and magnitude of such payments. Also, during the second
quarter of 1995, the Company was
12
<PAGE> 13
notified by one of its domestic customers that payment on services performed
primarily during the first quarter of 1995 would be delayed. Payments totaling
approximately $588,000 have been received through May 10, 1996. The Company
believes the receivable balance at May 10, 1996 of $1,723,000 should be
collectible.
The Company has a revolving credit facility with its principal lender, a
credit corporation, for $12,000,000, secured by domestic and certain foreign
U.S. dollar denominated accounts receivable other than those originating from
Nigerian customers, a first lien on all unencumbered assets of the Company and a
second lien on all other assets as available. The Company entered into this
credit facility on February 17, 1993 for the portion secured by the domestic
receivables and on April 26, 1993 for the portion secured by the foreign U.S.
dollar denominated receivables. The credit facility has been extended through
February 17, 1997. As of March 31, 1996 approximately $3,800,000 had been
borrowed and no letters of credit had been issued under the credit facility. The
terms of the agreement permit the Company to borrow up to the sum of (A) 80% of
its eligible United States accounts receivable; (B) 65% to 80% of the eligible
insured international accounts receivable (not to exceed $8,000,000); (C) 45% of
the eligible uninsured international accounts receivable; and (D) 10% of
eligible other accounts receivable. The credit facility contains a number of
affirmative and negative covenants, the most restrictive of which are financial
covenants which require maintenance of: (i) a minimum current ratio; (ii) a
maximum ratio of debt to tangible net worth; (iii) a minimum level of tangible
net worth and (iv) a minimum level of working capital. Subsequent to December
31, 1994, an amendment to the Credit Facility was executed, which principally
provided additional flexibility with respect to certain covenants. At March 31,
1996, the Company was in compliance with the covenants. At May 10, 1996,
approximately $6,457,000 had been borrowed under this credit facility. All of
the Company's eligible accounts receivable are currently pledged to secure this
line of credit and the Company's current level of cash represents amounts
borrowed under the credit facility.
On March 1, 1995, the Company entered into a long-term financing
agreement with a credit company for $5,000,000. The facility contains a bargain
purchase option at the end of the lease term and is secured by the leased
equipment. At May 10, 1996, the Company had borrowed approximately $4,352,000
under the facility for equipment purchases. At March 31, 1996, the Company was
in default of certain covenants for this and other financing agreements related
to delays in payment on its equipment notes payable. Payment acceleration of
these equipment notes was waived by the Company's creditors.
On February 20, 1996, the Company entered into a two-year term loan
agreement with a subordinated lender for $3,843,750. The term loan principal is
payable beginning March 1, 1997 in eleven equal monthly installments of $64,063
and a final installment of $3,139,063 due on February 20, 1998. A mandatory
prepayment provision requires the Company to prepay the outstanding term loan
balance with 50% of all U.S. Dollar payments made on the Nigerian accounts
receivable balance as of February 20, 1996. The term loan bears interest at 14%
per annum payable monthly beginning on March 1, 1996. The Company paid a
non-refundable loan fee of $93,750 and is subject to a quarterly administration
fee of $75,000 commencing August 1996. The term loan contains a number of
affirmative and negative covenants, the most restrictive of which are financial
covenants which require maintenance of: (i) a minimum current ratio; (ii) a
maximum ratio of debt to tangible net worth; (iii) a minimum level of tangible
net worth and (iv) a minimum level of working capital. At March 31, 1996, the
Company was in compliance with the covenants.
On March 20, 1996, the Company issued 143,000 shares of the Company's
$2.4375 Convertible Exchangeable Preferred Stock. The purchaser of the
Preferred Stock is entitled to all undeclared, unpaid dividends in arrears
through March 20, 1996. The net proceeds from the issuance was $1,573,000.
Additionally on March 27, 1996, the Company issued $3,000,000 of its 8%
Convertible Debentures ("Debentures") due December 31, 1999. The Debentures
are convertible, at the option of the purchaser, into shares of the Company's
Common Stock at a conversion price of 80% of the five day average low trading
price prior to the conversion election of the Common Stock, provided that such
80% figure is increased to 100% if the Debentures are converted within 45 days
of the Closing Date. Under certain circumstances, the Company can redeem
Debentures submitted for conversion at 120% of the par value of the Debentures.
Additionally, the Company may redeem the Debentures on or after March 27, 1997
at a rate of 120% of the par value of the Debentures, and on or after March 27,
1999, at a rate of 100% of the par value. Interest of 8% per annum is payable
quarterly.
While the financing transactions entered into in the first quarter of
1996 provided funding for certain obligations, the Company continues to
experience constrained liquidity. The Company will continue to consider
additional sources of working capital to help improve its liquidity position.
Management anticipates that the Company will be able to generate sufficient cash
flow from operations over the balance of 1996 to fulfill most of
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<PAGE> 14
its cash requirements; however, this cannot be completely assured to occur on a
timely basis. In case of a continued short fall in cash, the Company may
undertake additional funding from external sources. The cost of these funds may
be higher than typical lending rates due to the Company's current outstanding
debt structure. Issuance of additional equity will be considered as well.
As a result of the continued short-term liquidity situation, the Company
has elected to defer the fourteenth quarterly dividend payment for March 31,
1996 on the $2.4375 preferred stock. See Note 6 of Notes to Consolidated
Financial Statements.
Capital Expenditures. Capital expenditures were approximately
$9,365,000 and $3,484,000 for the quarters ended March 31, 1996 and 1995,
respectively. The expenditures in the first quarter of 1996 were for the
purchase of one complete seismic acquisition recording system and additional
equipment necessitated by the Company's increased seismic operations in Latin
America and the United States and other equipment necessary for the completion
of the Company's new seismic data acquisition system. The majority of these
purchases are being financed utilizing leases and long-term notes payable from a
credit corporation and equipment manufacturers.
The Company is currently assembling a new proprietary seismic data
acquisition system. This system is a radio frequency telemetry system
specifically designed to be used on large 3D surveys where cables are
undesirable. The Company plans to complete the deployment phase of the first
system during the second quarter of 1996. Currently, there are no plans to
market or sell this technology to any third parties.
The Company's capital expenditures for the remainder of 1996, which are
estimated at amounts similar to the prior year, are contingent on the Company's
ability to obtain short- and long-term financing and on the generation of
sufficient cash flows from operations.
Long-Term Obligations. The long-term obligations of the Company as of
March 31, 1996 consisted primarily of the 8% Convertible Debentures, notes
payable and capital lease obligations related to the acquisition of geophysical
equipment and the Corporate headquarters and notes payable to the former Tensor
shareholders related to the Settlement and Release Agreement effective January
1, 1994.
OTHER
Foreign Exchange Gains and Losses. In order to mitigate foreign
exchange rate fluctuations, the Company attempts to structure the majority of
its international contracts to be billed and paid at a certain U.S. Dollar rate.
Additionally, the Company enters into same currency debt of a foreign subsidiary
to pay expenses incurred locally. Foreign currency transaction/translation
gains and losses resulting from these arrangements are included in Other income.
Presently, the Company does not use derivatives or forward foreign exchange
hedging contracts.
14
<PAGE> 15
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits
Exhibit No.
-----------
10.01 - Loan and Security Agreement dated February 20,
1996, by and between the Company and its
subordinated lender.
11.01 - Computation of Income (Loss) Per Common and
Common Equivalent Share for the Three Months
Ended March 31, 1996 and 1995.
27 - Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
1996.
15
<PAGE> 16
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.
GRANT GEOPHYSICAL, INC.
(REGISTRANT)
Date May 15, 1996 By George W. Tilley
_________________________
George W. Tilley
Chief Executive Officer,
President and Director
(Principal Executive Officer)
Date May 15, 1996 By William B. Cleveland
__________________________
William B. Cleveland
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
16
<PAGE> 17
EXHIBIT INDEX
Exhibit No.
-----------
10.01 - Loan and Security Agreement dated February 20,
1996, by and between the Company and its
subordinated lender.
11.01 - Computation of Income (Loss) Per Common and
Common Equivalent Share for the Three Months
Ended March 31, 1996 and 1995.
27 - Financial Data Schedule.
<PAGE> 1
TERM LOAN AGREEMENT
Dated as of February 20, 1996
among
GRANT GEOPHYSICAL, INC., as Borrower,
UNITED GEOPHYSICAL (NIGERIA) LTD., as Guarantor
and
MADELINE L.L.C., as Lender
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS; CERTAIN TERMS
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting and Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II
AMOUNT AND TERMS OF THE LOAN
SECTION 2.01. Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.02. Making the Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.03. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Default Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Interest Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Maximum Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.04. Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.05. Termination or Reduction of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.06. Optional Prepayment of the Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.07. Mandatory Prepayment of the Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
FEES, PAYMENTS AND OTHER COMPENSATION
SECTION 3.01. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) Loan Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Administration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.02. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.03. Maintenance of Loan Account; Periodic Statements . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
CONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 4.01. Conditions Precedent to Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Payment of Fees, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Representations and Warranties; No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Legality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(d) Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(e) Proceedings; Receipt of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(f) Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(g) Existing Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<TABLE>
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Borrower and UGNL . . . . . . . . . . . . . . . . . . . . 17
(a) Organization, Good Standing, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) Enforceability of Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(e) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(f) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(g) Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(h) Compliance with Law, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(i) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(j) Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(k) Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(l) Adverse Agreements, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(m) Holding Company and Investment Company Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(n) Permits, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(o) Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(p) Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(q) Operating Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(r) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(s) Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(u) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(v) Nigerian Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI
COVENANTS OF THE BORROWER AND EACH GUARANTOR
SECTION 6.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) Guaranties, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(c) Compliance with Laws, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Preservation of Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(e) Keeping of Records and Books of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(f) Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(g) Maintenance of Properties, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(h) Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(i) Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(j) Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(k) Lock-Box Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(l) Assignment of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(m) Notification of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(n) UGNL Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(o) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Liens, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(c) Guaranties, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(d) Merger, Consolidation, Sale of Assets, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(e) Change in Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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(f) Investments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(g) Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(h) Dividends, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(i) Sale of Notes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(j) Compromise of Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(k) Federal Reserve Regulations31
(l) Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(m) Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(n) Fiscal Year, Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(o) Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(p) Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(q) Factoring of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(r) Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII
MANAGEMENT, COLLECTION AND STATUS OF ACCOUNTS RECEIVABLE AND OTHER COLLATERAL
SECTION 7.01. Collection of Receivables; Management of Collateral . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 7.02. Accounts Receivable Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7.03. Status of Accounts Receivable and Other Collateral . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.04. Collateral Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 9.02. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9.03. No Waiver; Remedies, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9.04. Fees, Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9.05. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.06. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.07. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.08. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.09. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.11. Waiver of Jury Trial, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.12. Waiver of Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.13. Reinstatement; Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.14. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE X
GUARANTY
SECTION 10.01. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 10.02. Obligations Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 10.03. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 10.04. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 10.05. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 10.06. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 10.07. Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 10.08. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 10.09. Stay of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SCHEDULE I Subsidiaries
SCHEDULE II Indebtedness
SCHEDULE III Environmental
SCHEDULE IV Liens
SCHEDULE V Investments
SCHEDULE VI Litigation
SCHEDULE VII Operating Lease Obligations
SCHEDULE VIII Monthly and Weekly Reporting Requirements
SCHEDULE IX Names
SCHEDULE X Guaranties
EXHIBIT A Form of Note
EXHIBIT B Form of Guaranty
EXHIBIT C Form of Security Agreement
EXHIBIT D Form of Intercreditor Agreement
EXHIBIT E Form of Opinion
EXHIBIT F Form of Borrowing Base Certificate
EXHIBIT G Form of Notice of Borrowing
EXHIBIT H Form of Assignment of Nigerian Accounts Receivable
EXHIBIT I Form of Guarantor Security Agreement
</TABLE>
<PAGE> 6
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT, dated as of February 20, 1996, among
GRANT GEOPHYSICAL, INC., a Delaware corporation (the "Borrower"), UNITED
GEOPHYSICAL (NIGERIA) LTD., a corporation organized under the laws of Nigeria
("UGNL"), and MADELINE L.L.C., a New York limited liability company (the
"Lender").
RECITALS
The Borrower and UGNL have requested the Lender to extend
credit to the Borrower from the date hereof through the Maturity Date (as
hereinafter defined) in the form of a single two (2) year term loan in the
principal amount of $3,843,750. The proceeds of the term loan shall be used by
the Borrower to repay existing indebtedness of the Borrower and for the
Borrower's general working capital purposes. Accordingly, the Lender, the
Borrower and UGNL hereby agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
SECTION 1.01. Definitions. As used in this Agreement, the
following terms shall have the respective meanings indicated below, such
meanings to be applicable equally to both the singular and plural forms of such
terms:
"Account Debtor" means each debtor, customer or obligor in any
way obligated on or in connection with any Accounts Receivable.
"Accounts Receivable" means any and all rights of the Borrower
to payment for goods sold or leased or for services rendered by Borrower, or
arising out of goods sold or leased or services rendered by a Person other than
Borrower and acquired by Borrower from such Person by assignment or purchase,
including rights to payments with respect to accounts of the direct or indirect
Designated Subsidiaries that are sold or assigned to Borrower, including
accounts, contract rights, general intangibles and any such right evidenced by
chattel paper, instruments or documents, whether due or to become due and
whether or not it has been earned by performance, and whether now or hereafter
acquired or arising in the future and any proceeds arising therefrom or
relating thereto.
<PAGE> 7
"Affiliate" means, as to any Person, (i) any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person, or (ii) any trade
or business (whether or not incorporated) which is a member of a group of which
such Person is a member and which is under common control within the meaning of
Section 414 of the Internal Revenue Code and the rules and regulations
promulgated thereunder from time to time.
"Assignment of Nigerian Accounts Receivable" means the
Assignment of Nigerian Accounts Receivable, dated as of the date hereof between
Borrower and Lender, which agreement shall be substantially in the form of
Exhibit H attached hereto.
"Borrower" has the meaning specified therefor in the preamble
hereto.
"Borrowing Base" means, as of any date, the difference between
(i) (x) for the period from the Effective Date until May 20, 1996, 90% of the
aggregate amount of Eligible Accounts Receivable of the Borrower and (y) for
the period from May 21, 1996 until the Maturity Date, 85% of the aggregate
amount of Eligible Accounts Receivable of the Borrower and (ii) a reserve in
the amount of $500,000, or such other amount as the Lender, in its sole
discretion, may designate from time to time.
"Borrowing Base Certificate" means the certification provided
by the chief financial officer of the Borrower in compliance with Section
6.01(a)(v) hereof, substantially in the form of Exhibit F hereto.
"Business Day" means any day not a Saturday, Sunday or legal
holiday on which the Lender is open for business in New York City.
"Capital Expenditures" means any expenditure (including
deposits) of the Borrower for assets, other than assets which are financed
subject to a purchase money security interest granted to a party other than an
Affiliate of the Borrower, which it is contemplated will be used or usable in
fiscal years of the Borrower subsequent to the year of acquisition and which
are properly classifiable as fixed assets the cost of which may not be deducted
from income in the year of acquisition, all computed in accordance with GAAP.
"Capital Leases" means leases or agreements to lease that, in
accordance with GAAP, have been or should be capitalized on the books of the
Borrower.
"Capitalized Lease Obligations" means any obligation of the
Borrower for the payment of rent for any real or personal property under
Capital Leases and, for purposes hereof, the amount of any such obligation
shall be the capitalized amount thereof, all computed and consolidated in
accordance with GAAP.
"Collateral" means all of the property (tangible and
intangible) of the Borrower purported to be subject to the lien or security
interest purported to be created by any mortgage,
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<PAGE> 8
deed of trust, security agreement, pledge agreement, assignment or other
security document heretofore or hereafter executed by the Borrower in favor of
the Lender as security for all or any part of the Obligations.
"Commitment" means the commitment of the Lender to make a Loan
to the Borrower pursuant to Section 2.01(a) hereof in the principal amount not
to exceed $3,843,750.
"Current Assets" means, as of any date of determination, the
aggregate amount of all current assets of the Borrower calculated on a
consolidated basis, that would, in accordance with GAAP, be classified on a
balance sheet as current assets.
"Current Liabilities" means, as of any date of determination,
the aggregate amount of all current liabilities of the Borrower (including the
Obligations), calculated on a consolidated basis, that would, in accordance
with GAAP, be classified on a balance sheet as current liabilities.
"Designated Subsidiaries" means Grant Geophysical, Inc., U.K.,
a Texas corporation, Grant Geophysical (Int'l), Inc., a California corporation,
Seiscom Delta Unida S.A., a corporation organized under the laws of Costa Rica,
and UGNL.
"EALP" means Elliott & Associates, L.P., a Delaware limited
partnership.
"Effective Date" has the meaning specified therefor in Article
IV hereof.
"Eligible Accounts Receivable" means such Nigerian Accounts
Receivable of the Borrower, which are and at all times shall continue to be,
acceptable to the Lender in all respects as determined in its sole discretion.
"Employee Plan" means an employee benefit plan (other than a
Multiemployer Plan) covered by Title IV of ERISA and maintained for employees
of the Borrower or any of its Affiliates.
"Environmental Action" shall mean any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation,
proceeding, judgment, letter or other communication to Borrower from any
Governmental Authority or any third party involving a Release of Hazardous
Materials or violations of Environmental Laws.
"Environmental Law" means the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9601, et seq.),
the Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.),
the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the
Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control
Act (15 U.S.C. Section 2601 et seq.), and the Occupational Safety and Health
Act (29 U.S.C. Section 6451 et seq.), as such laws have been amended or
supplemented from time to time, and any similar present or future Federal,
state or local statute, ordinance, rule or regulation.
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<PAGE> 9
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and, unless the context otherwise requires,
the rules and regulations promulgated thereunder from time to time.
"Event of Default" means any of the events set forth in
Section 8.01 hereof.
"Financial Statements" means the audited financial statements
of the Borrower and its Designated Subsidiaries for the fiscal year ended
December 31, 1994, the unaudited financial statements for the fiscal year ended
December 31, 1995 and the unaudited financial statement for the month of
January, 1996.
"FIT" means First Interstate Bank of Texas, N.A.
"FIT Lock-Box Account" means the lock-box account number
0407594688 maintained at FIT established pursuant to a Remittance Banking
Agreement dated as of April 13, 1993 by and among Borrower, FIT and the Senior
Secured Creditor.
"GAAP" means generally accepted accounting principles as in
effect from time-to-time in the United States, consistently applied.
"Governmental Authority" means any nation or government, any
federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Guaranties" or "Guaranty" means a Guaranty made by UGNL in
favor of the Lender pursuant to Article X hereof, guaranteeing the Obligations
and any other guaranty delivered to the Lender pursuant to Section 6.01(b)
hereof and substantially in the form of Exhibit B hereto.
"Guarantor" or "Guarantors" means UGNL and all Persons which
hereafter guarantee, pursuant to Section 6.01(b) hereof or otherwise, all or
any part of the Obligations.
"Guarantor Security Agreement" means a security agreement made
by a Guarantor in favor of the Lender, substantially in the form of Exhibit I
hereto, as the same may be amended or modified from time to time, securing the
Obligations and any other obligations of such Guarantor to the Lender hereunder
or under any other Loan Document, as the same may be amended or modified from
time to time.
"Hazardous Materials" means, without limit, any pollutant,
contaminant, solid waste, flammable explosives, radioactive materials,
hazardous materials, hazardous wastes, special waste, hazardous or toxic
substances, petroleum and its refined fractions, polychlorinated biphenyls,
asbestos-containing materials or other materials defined in or regulated under
any Environmental Law.
-4-
<PAGE> 10
"Indebtedness" means (i) all indebtedness or other obligations
of the Borrower for borrowed money or for the deferred purchase price of
property or services, (ii) Capitalized Lease Obligations of the Borrower, (iii)
all obligations of the Borrower under direct or indirect guaranties, contingent
or other obligations of the Borrower to purchase or otherwise acquire or assure
a creditor against loss in respect thereof, indebtedness or other obligations
of any other Person for borrowed money or for the deferred purchase price of
property or services or Capitalized Lease Obligations of any other Person, (iv)
all indebtedness or other obligations of the Borrower for borrowed money or for
the deferred purchase price of property or services secured by (or for which
the holder of such indebtedness has an existing right, contingent or otherwise,
to be secured by) any lien, security interest or other charge or encumbrance
upon or in property owned by the Borrower, (v) all obligations of the Borrower
in respect of letters of credit and bankers' acceptances, (vi) liabilities
incurred under Title IV of ERISA with respect to any plan (other than a
Multiemployer Plan) covered by Title IV of ERISA and maintained for employees
of the Borrower or any of its Affiliates, and (vii) withdrawal liability
incurred under ERISA by the Borrower or any of its Affiliates to any
Multiemployer Plan.
"Intercreditor Agreement" means, the intercreditor agreement
between the Lender and the Senior Secured Creditor in the form annexed hereto
as Exhibit D, dated as of the date hereof, containing provisions regarding,
without limitation, the sharing of any Collateral, application of payments,
declaration of an event of default, releases, notices, consents and amendments
under this Agreement and the other Loan Documents.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time.
"Inventory" means all goods and merchandise of the Borrower
including, but not limited to, all raw materials, work in process, finished
goods, materials and supplies of every nature used or usable in connection with
the shipping, storing, advertising or sale of such goods and merchandise,
whether now owned or hereafter acquired and all such property, the sale or
disposition of which would give rise to Accounts Receivable or cash.
"Lender" has the meaning specified therefor in the preamble
hereto.
"Loan" means the term loan made by the Lender to the Borrower
pursuant to Article II of this Agreement.
"Loan Account" shall have the meaning ascribed to it in
Section 3.03 of this Agreement.
"Loan Documents" means this Agreement, the Note, the Security
Agreement, the Guaranties, the Guarantor Security Agreement, and all other
instruments, documents and agreements executed and delivered pursuant hereto.
-5-
<PAGE> 11
"Loan Fee" shall have the meaning ascribed to it in Section
3.01(a) of this Agreement.
"Loan Parties" means the Borrower and each of the Guarantors.
"Lock-Box Accounts" means the TCB Lock-Box Account and the FIT
Lock-Box Account.
"Maturity Date" means February 20, 1998, or such earlier date
on which the Loan shall become due and payable, in whole or in part, in
accordance with the terms of this Agreement, whether by acceleration or
otherwise.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA.
"Net Proceeds" means (a) with respect to the sale or other
disposition of any asset by the Borrower, the excess, if any, of (i) the
aggregate amount received in cash (including any cash received by way of
deferred payment pursuant to a note receivable, other non-cash consideration or
otherwise, but only as and when such cash is so received) in connection with
such sale or other disposition, over (ii) the sum of (A) the principal amount
of any Indebtedness owed to the Lender or which is secured by any such asset
(other than Indebtedness owed to the Lender or Indebtedness assumed by the
purchaser of such asset) or which is required to be, and is, repaid in
connection with the sale or other disposition thereof (other than Indebtedness
hereunder) and (B) the reasonable out-of-pocket expenses and fees incurred by
the Borrower in connection with such sale or other disposition (but only to the
extent that such out-of-pocket expenses and fees, if paid to an Affiliate of
the Borrower, are approved by the Lender), and provided that all such expenses
and fees are set forth on a certificate provided to the Lender; and
(b) with respect to the sale or other disposition of any
capital stock or debt security by the Borrower, the excess of (i) the aggregate
amount received in cash (including any cash received by way of deferred payment
pursuant to a note receivable, other non-cash consideration or otherwise, but
only as and when such cash is so received) in connection with such sale or
other disposition, over (ii) the reasonable and customary fees, commissions and
other out-of-pocket expenses incurred by the Borrower actually paid in
connection with such sale or other disposition (but only to the extent such
fees, commissions and expenses, if paid to an Affiliate of the Borrower, are
approved by the Lender and provided that all such fees, commissions and
expenses are set forth on a certificate provided to the Lender.
"Nigerian Accounts Receivable" means the portion of Accounts
Receivable emanating from Nigeria payable or paid in U.S. Dollars, whether such
payments are payable to the Borrower or a Designated Subsidiary, including, but
not limited to, Accounts Receivable owed by The Shell Petroleum Development
Company of Nigeria Ltd., Nigerian AGIP Oil Company Limited, Nigerian National
Petroleum Corporation and National Petroleum Development Company Limited.
-6-
<PAGE> 12
"Note" means a promissory note of the Borrower, substantially
in the form of Exhibit A hereto, evidencing the Indebtedness resulting from the
making of the Loan and delivered to the Lender pursuant to Article IV hereof,
as such promissory note may be modified or extended from time to time, and any
promissory note or notes issued in exchange or replacement therefor.
"Notice of Borrowing" has the meaning specified in Section
2.02 hereof.
"Obligations" means (i) the obligation of any Loan Party to
pay, as and when due and payable (by scheduled maturity or otherwise), all
amounts from time to time owing by it in respect of any Loan Document, whether
for principal, interest, (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Borrower
whether or not a claim for post-filing interest is allowed in such
proceedings), fees or otherwise and (ii) the obligation of any Loan Party to
perform or observe all of its other obligations from time to time existing
under any Loan Document.
"Operating Leases" means leases or agreements to lease of the
Borrower, other than Capital Leases.
"Operating Lease Obligations" means all obligations of the
Borrower for the payment of rent for any real or personal property under leases
or agreements to lease, other than Capitalized Lease Obligations, all computed
in accordance with GAAP.
"Payment Office" means Madeline L.L.C., 950 Third Avenue, New
York, New York 10022, Attn: Mr. Kevin Genda.
"Permitted Investments" means (i) marketable direct
obligations issued or unconditionally guaranteed by the United States
Government, or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one year from the
date of acquisition thereof, (ii) commercial paper, maturing not more than 270
days after the date of issue, issued by a corporation rated P-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poor's Corporation or issued by
the Lender or its Affiliates, (iii) time certificates of deposit, issued by
commercial banking institutions, each of which is a member of the Federal
Reserve System and has a combined capital and surplus of not less than
$100,000,000, (iv) money market accounts maintained with mutual funds having
assets in excess of $2,500,000,000, and (v) tax exempt securities rated A or
better by Moody's Investors Service, Inc. or A+ or better by Standard & Poor's
Corporation.
"Person" means an individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture or governmental authority.
"Post-Default Rate" means a rate per annum equal to the lesser
of (i) 20% and (ii) the maximum rate permitted by applicable law.
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<PAGE> 13
"Potential Default" means an event which, with the giving of
notice or the passage of time, or both, would become an Event of Default.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing (including the abandonment or discarding of barrels, containers or
other closed receptacles containing any Hazardous Materials) of a Hazardous
Material into the environment.
"Remedial Action" shall mean all actions taken to (i) monitor,
assess, evaluate, investigate, clean up, remove, remediate, treat, contain or
in any way address Releases of Hazardous Materials in the environment, (ii)
prevent or mitigate a Release or threatened Release of Hazardous Materials so
that the Release or threatened Release does not migrate or endanger human
health or the environment, or (iii) perform pre-remedial studies and
investigations and post-remedial operation and maintenance activities, or any
actions authorized by 42 U.S.C. 9601.
"Security Agreement" means the Security Agreement made by the
Borrower in favor of the Lender, substantially in the form of Exhibit C hereto,
securing the Obligations as the same may be amended or otherwise modified from
time to time.
"Senior Debt" means the Indebtedness owing by the Borrower to
the Senior Secured Creditor pursuant to the Senior Loan Agreement and the Loan
Documents (as defined in the Senior Loan Agreement) and any refinancing thereof
permitted by Section 6.02(b)(ix) hereof.
"Senior Loan Agreement" means the Loan and Security Agreement
by and between Borrower, formerly known as Grant Tensor Geophysical Corp., and
the Senior Secured Creditor dated as of April 26, 1993, as subsequently
modified or amended.
"Senior Secured Creditor" means Foothill Capital Corporation,
a California corporation, its successors and assigns under the Senior Loan
Agreement.
"Subsidiary" means any corporation of which more than 50% of
the outstanding capital stock having (in the absence of contingencies) ordinary
voting power to elect directors (or Persons performing similar functions) of
such corporation is, at the time of determination, owned directly, or
indirectly through one or more intermediaries, by any Person.
"Tangible Net Worth" means, as of the date determination
thereof is to be made, Borrower's total stockholder's equity, minus the
Borrower's intangible assets, calculated on a consolidated basis in accordance
with GAAP.
"TCB" means Texas Commerce Bank, N.A.
"TCB Lock-Box Account" means the lock-box account number
301-01099663 maintained at TCB established pursuant to a Tri-Party Depository
Agreement dated February, 1994 by and among Borrower, TCB and the Senior
Secured Creditor.
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<PAGE> 14
"Termination Event" means (i) a reportable event described in
Section 4043 of ERISA (other than a reportable event not subject to the
provision for 30-day notice to the Pension Benefit Guaranty Corporation under
the regulations promulgated under such Section) with respect to any Employee
Plan, (ii) any event that causes the Borrower or any of its Affiliates to incur
liability under Sections 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA,
(iii) the filing of a notice of intent to terminate an Employee Plan or the
treatment of an Employee Plan amendment as a termination under Section 4041 of
ERISA, (iv) the institution of proceedings by the Pension Benefit Guaranty
Corporation to terminate an Employee Plan, and (v) any other event or condition
which might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Employee Plan.
"Unfunded Liabilities" means, at any time, (i) in the case of
an Employee Plan, the amount, if any, by which the present value of all vested,
nonforfeitable benefits under such Employee Plan exceeds the fair market value
of the assets of such Employee Plan allocable to such benefits, all determined
as of the then most recent valuation date for such Employee Plan, and (ii) in
the case of a Multiemployer Plan, the withdrawal liability of the Borrower and
its Affiliates.
"Working Capital" means Current Assets minus Current
Liabilities.
SECTION 1.02. Accounting and Other Terms. Unless otherwise
expressly stated herein, all accounting determinations hereunder and all
computations utilized by the Borrower in complying with the covenants contained
herein shall be made, all accounting terms used herein shall be interpreted,
and all financial statements required to be delivered hereunder shall be
prepared in accordance with GAAP. All terms used in this Agreement which are
defined in Article 9 of the Uniform Commercial Code in effect in the State of
New York on the date hereof and which are not otherwise defined herein shall
have the same meanings herein as set forth therein.
ARTICLE II
AMOUNT AND TERMS OF THE LOAN
SECTION 2.01. Commitment. (a) The Lender agrees, on the
terms and conditions hereinafter set forth, to make a term loan to the Borrower
on the Effective Date in a principal amount not to exceed the Commitment.
(b) Any principal amount of the Loan which is
repaid or prepaid by the Borrower may not be reborrowed.
SECTION 2.02. Making the Loan. The Borrower shall give the
Lender prior written notice in substantially the form of Exhibit G hereto (a
"Notice of Borrowing") no later than 11:00 A.M. (New York City time) on the day
of the proposed borrowing. Such Notice of Borrowing shall be irrevocable and
shall specify the principal amount of the proposed borrowing
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and the proposed borrowing date, which shall be the Effective Date, and the
Borrower shall be bound to make a borrowing in accordance therewith. The
Lender may act without liability upon the basis of written notice believed by
the Lender in good faith to be from the Borrower (or from any officer thereof
designated in writing to the Lender) and the Borrower hereby waives the right
to dispute the Lender's record of the terms of any such Notice of Borrowing.
On the Effective Date and upon fulfillment of the applicable conditions set
forth in Article IV hereof, the Lender will make available the requested Loan
to the Borrower in an amount not to exceed the Borrowing Base, by crediting the
proceeds thereof, less the Loan Fee, into an account of the Borrower set forth
in the Notice of Borrowing, on the date and in the amount set forth in the
Notice of Borrowing. The Borrower shall execute and deliver to the Lender, on
the Effective Date, the Note payable to the order of the Lender to evidence the
Loan in the principal amount of the Commitment. The Loan amount shall be
increased to provide for the funding and payment of the Lender's fees and costs
incurred in connection herewith, together with interest, which are unpaid as of
the Maturity Date. The Note and the books and records of the Lender shall be
presumptive evidence of the Loan.
SECTION 2.03. Interest.
(a) Loan. The Loan shall bear interest on the
principal amount thereof from time to time outstanding from the Effective Date
until such principal amount becomes due at an interest rate per annum of
fourteen (14%) percent.
(b) Default Interest. Any amount of principal of
the Loan, fees and (to the extent permitted by law) interest which is not paid
when due, whether upon demand, by acceleration or otherwise, and all amounts
payable after the occurrence and during the continuance of an Event of Default,
shall bear interest from the day when due until such amount is paid in full at
a rate per annum equal to the Post-Default Rate.
(c) Interest Payment. Interest on the Loan shall
be payable monthly, in arrears, on the first day of each month for the
immediately preceding month, commencing March 1, 1996, and at maturity (whether
by demand, acceleration or otherwise). Interest at the Post-Default Rate shall
be payable on demand.
(d) Maximum Interest. Notwithstanding anything
to the contrary contained in this Agreement or the Note, interest paid or
becoming due hereunder or under the Note, or any document or instrument
executed in connection herewith or therewith shall in no event exceed the
maximum rate permitted by applicable law.
SECTION 2.04. Repayment. The Loan shall be payable as to
principal in twelve (12) installments as follows: (a) eleven consecutive equal
monthly installments of $64,062.50 on the first Business Day of each month,
commencing on March 1, 1997 and (b) a final installment of $3,139,062.50 on the
Maturity Date, together with all such other amounts as may be necessary to
repay in full and in cash all unpaid Obligations to the Lender.
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SECTION 2.05. Termination or Reduction of Commitment. The
Commitment shall terminate in full at 5:00 P.M. (New York City time) on the
Effective Date.
SECTION 2.06. Optional Prepayment of the Loan. The
Borrower may, on the same Business Day's telephone notice no later than 11:00
A.M. (New York City time) (promptly confirmed in writing) prepay without cost
or penalty, the outstanding amount of the Loan in whole or in part with accrued
interest to the date of such prepayment on the amount prepaid; provided,
however, that such prepayment shall be in a minimum amount of $250,000. Each
prepayment of the Loan shall be applied to the installments thereof in the
inverse order of maturity and accompanied by accrued interest on the amount of
such prepayment to the date thereof.
SECTION 2.07. Mandatory Prepayment of the Loan.
(a) At any time that the then existing Borrowing
Base is less than the principal amount of the Loan outstanding, the Borrower
will (i) upon becoming aware of the existence of the differential, or (ii) upon
demand by the Lender, immediately prepay the Loan in an amount which will
reduce the principal amount of the Loan outstanding to an amount less than or
equal to the then existing Borrowing Base.
(b) The Borrower shall prepay the Loan with 50%
of all payments received in U.S. Dollars with respect to Nigerian Accounts
Receivable, whether such payments are payable to Borrower or UGNL or any other
Subsidiary of Borrower (including, without limitation, Nigerian Accounts
Receivable owed by the Shell Petroleum Development Company of Nigeria Ltd.,
Nigerian AGIP Oil Company Limited, Nigerian National Petroleum Corporation and
National Petroleum Development Company Limited). Borrower shall cause all such
amounts owing by such Account Debtors to be paid to the TCB Lock-Box Account.
(c) The Borrower shall, subject to the
Intercreditor Agreement, prepay the Loan in the amount of and on the date of
each receipt by the Borrower of Net Proceeds from the sale, lease, assignment
or other disposition, other than in the ordinary course of business, of any
Nigerian Assets (as defined in the Intercreditor Agreement).
(d) Any prepayment of the Loan made pursuant to
this Section 2.07 shall be applied to the installments thereof in the inverse
order of maturity and accompanied by accrued interest on the principal amount
being prepaid to the date of prepayment.
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ARTICLE III
FEES, PAYMENTS AND OTHER COMPENSATION
SECTION 3.01. Fees.
(a) Loan Fee. The Borrower shall pay to the
Lender a non-refundable loan fee (the "Loan Fee") in an amount equal to
$93,750. The Loan Fee shall be withheld from the disbursement of the Loan on
the Effective Date and is included in the initial principal amount of the Loan.
(b) Administration Fee. The Borrower shall pay
to the Lender a non-refundable administration fee equal to $75,000 per ninety
(90) day period, payable in arrears on each of August 18, 1996, November 16,
1996, February 4, 1997, May 5, 1997, August 3, 1997, November 1, 1997 and
January 30, 1998; provided, that if the Borrower prepays the Loan in full prior
to August 18, 1996, no such fee shall be due or payable; and provided further
that if the Borrower prepays the Loan in full on or after August 18, 1996 and
prior to the Maturity Date, pursuant to Section 2.06 or 2.07 hereof, the
pro-rata portion of such fee accruing as of the date of such prepayment shall
be due and payable on such date.
SECTION 3.02. Payments and Computations. (i) The Borrower
will make each payment under the Loan Documents to which it is a party not
later than 11:00 A.M. (New York City time) on the day when due, in lawful money
of the United States of America and in immediately available funds, to the Loan
Account. All payments shall be made by the Borrower without defense, set-off
or counterclaim to the Lender. Whenever any payment to be made under any such
Loan Document shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be. All computations of interest under this Agreement
and any other Loan Document and all fees shall be made by the Lender on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
is payable.
(ii) Subject to the Intercreditor
Agreement, all payments received by the Lender on account of Accounts
Receivable or as proceeds of other Collateral will be the sole property of the
Lender and will be deemed received as follows: (A) all cash payments received
by the Lender including, without limitation, payments made by wire transfer of
immediately available funds received by the Lender prior to the 12:00 p.m. (New
York City time) on any Business Day will be deemed received as of the same
Business Day and all such amounts received by the Lender after 12:00 p.m. (New
York City time) on any Business Day will be deemed received on the next
succeeding Business Day; and (B) all payments in the form of checks and other
instruments received by the Lender at the Payment Office will be deemed
received one Business Day after the date of final collection.
SECTION 3.03. Maintenance of Loan Account; Periodic
Statements. The Lender shall maintain an account at a bank in the Lender's
name into which the Borrower will
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deposit amounts owing to the Lender (the "Loan Account"). The Borrower will be
credited with all amounts received by the Lender from the Borrower or from
others for the Borrower's account, including, as above set forth, all amounts
received by the Lender in payment of Accounts Receivable and other Collateral.
In no event shall prior recourse to any Collateral be a prerequisite to the
Lender's right to demand payment of any Obligation.
ARTICLE IV
CONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 4.01. Conditions Precedent to Effectiveness. This
Agreement shall become effective as of the Business Day when each of the
following conditions precedent shall have been satisfied (the "Effective
Date"):
(a) Payment of Fees, Etc. The Borrower shall
have paid on or before the Effective Date all fees, costs, expenses and taxes
then payable by the Borrower pursuant to Sections 3.01 and 9.04 hereof.
(b) Representations and Warranties; No Event of
Default. The representations and warranties contained in Section 5.01 of this
Agreement and in each other Loan Document and certificate or other writing
delivered to the Lender pursuant hereto on or prior to the Effective Date shall
be correct on and as of the Effective Date as though made on and as of such
date; and no Event of Default, or event which with the giving of notice or the
lapse of time or both would constitute an Event of Default, shall have occurred
and be continuing on the Effective Date or would result from this Agreement
becoming effective in accordance with its terms.
(c) Legality. The making of the Loan shall not
contravene any law, rule or regulation applicable to the Lender, the Borrower
or the Guarantors.
(d) Delivery of Documents. The Lender shall have
received on or before the Effective Date the following, each in form and
substance satisfactory to the Lender and, unless indicated otherwise, dated the
Effective Date:
(i) the Note, duly executed by the
Borrower;
(ii) a Guaranty, duly executed by each of
the Guarantors;
(iii) a Security Agreement, duly executed
by the Borrower and a Guarantor Security Agreement duly executed by
UGNL;
(iv) the Intercreditor Agreement, duly
executed by the Senior Secured Creditor;
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<PAGE> 19
(v) appropriate financing statements on
Form UCC-1, duly executed by the Borrower to be filed in such office
or offices as may be necessary or, in the opinion of the Lender,
desirable to perfect the security interests purported to be created by
the Security Agreement;
(vi) certified copies of requests for
copies of information on Form UCC-11, listing all effective financing
statements which name as debtor the Borrower and which are filed in
the offices referred to in clause (v) above, together with copies of
such financing statements, none of which, except as otherwise agreed
to in writing by the Lender, shall cover any of the Collateral;
(vii) a copy of the resolutions adopted by
the Board of Directors of each Loan Party, certified as of the
Effective Date by an authorized officer thereof, authorizing (A) the
borrowings hereunder and the transactions contemplated by the Loan
Documents to which such entity is or will be a party, and (B) the
execution, delivery and performance by each Loan Party of each Loan
Document to which it is or will be a party and the execution and
delivery of the other documents to be delivered by the Loan Parties in
connection herewith;
(viii) a certificate of an authorized
officer of each Loan Party certifying the names and true signatures of
the officers of such Loan Party authorized to sign each Loan Document
to which such entity is or will be a party and the other documents to
be executed and delivered by the Loan Parties in connection herewith,
together with evidence of the incumbency of such authorized officers;
(ix) a certificate, dated as of a date
not more than ten (10) Business Days' prior to the Effective Date, of
the appropriate official of the jurisdiction of incorporation and each
jurisdiction of foreign qualification, both inside and outside the
United States, of the Borrower, certifying as to the subsistence in
good standing of, and the payment of taxes by, the Borrower in such
jurisdictions and listing all charter documents of the Borrower on
file with such official(s), together with confirmation by telephone or
telegram (where available) on the Effective Date from such official(s)
as to such matters;
(x) a copy of the charter of the
Borrower, certified as of a date not more than 30 days prior to the
Effective Date by the appropriate official of the jurisdiction of
incorporation of the Borrower and as of the Effective Date by an
authorized officer of the Borrower;
(xi) a copy of the by-laws of the
Borrower, certified as of the Effective Date by an authorized officer
of the Borrower;
(xii) an opinion of Hutcheson & Grundy,
counsel to the Borrower and each of the Guarantors, substantially in
the form of Exhibit E hereto and as to such other matters as the
Lender may reasonably request;
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<PAGE> 20
(xiii) a certificate of the chief executive
officer or the chief financial officer of the Borrower, certifying as
to the matters set forth in subsection (b) of this Section 4.01;
(xiv) a copy of the Financial Statements
of the Borrower, together with a certificate of the chief executive
officer or chief financial officer of the Borrower, setting forth all
existing guarantees and other contingent liabilities of the Borrower;
(xv) a certificate of insurance
evidencing insurance on all property of the Borrower as is required by
Section 6.01(h) hereof, naming the Lender as additional insured and
sole loss payee, if the Senior Debt is not outstanding, using a long
form loss payee endorsement, or additional insured as its interests
may appear, if the Senior Debt is outstanding, for all insurance
maintained by the Borrower;
(xvi) a direction letter to TCB, in form
and substance satisfactory to the Lender, directing TCB to remit (a)
in the absence of an Event of Default, 50% of all proceeds of the TCB
Lock-Box Account and (b) during the continuance of any Event of
Default, 100% of all proceeds of the TCB Lock-Box Account, to the
Lender, together with all necessary consents to such direction letter
by the Senior Secured Creditor and all other necessary parties;
(xvii) not later than 3 days prior to the
Effective Date, the most recent weekly and monthly schedules described
in Section 6.01(a)(v) and (vi) certified by the chief financial
officer of the Borrower;
(xviii) a schedule of all existing leases
under which the Borrower is a lessee for the use of real property,
certified by the chief financial officer of the Borrower;
(xix) a Borrowing Base Certificate from
the chief financial officer of the Borrower in compliance with Section
6.01(a)(v) hereof, substantially in the form of Exhibit F hereto;
(xx) a certificate of the chief executive
officer or chief financial officer of the Borrower setting forth in
reasonable detail the calculations required to establish whether the
Borrower is in compliance with the requirements of each of the
financial covenants of Section 6.02(l) hereof;
(xxi) a copy of each license agreement of
the Borrower, certified as true and correct by the chief executive
officer or chief financial officer of the Borrower, and the licensor
under each such license agreement shall have consented to an
assignment of the Borrower's rights under each such license agreement
to the Lender;
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<PAGE> 21
(xxii) the Lender shall have received
satisfactory evidence that, on the Effective Date, the aggregate sum
of Borrower's unrestricted cash, cash equivalents, and credit
availability under the Senior Loan Agreement is equal to or greater
than Two and One-Half Million Dollars ($2,500,000), after deduction of
expenses owing to the Lender hereunder and Foothill Expenses (as
defined in the Foothill Loan Agreement) incurred in connection with
the closing of the transaction contemplated hereunder and after the
repayment in full of all of the obligations of Borrower owing to EALP;
(xxiii) UCC termination statements by EALP
and other documentation evidencing the termination of EALP's liens and
security interests in and to the properties and assets of Borrower,
including a termination of the Assignment of Nigerian Accounts
Receivable among, inter alia, EALP and the Borrower;
(xxiv) the Assignment of Nigerian Accounts
Receivable, duly executed by the Borrower;
(xxv) the Assignment for Security
(Trademarks), in the form attached to the Security Agreement as
Exhibit A thereto, duly executed by the Borrower;
(xxvi) the Assignment for Security
(Patents), in the form attached to the Security Agreement as Exhibit B
thereto, duly executed by the Borrower;
(xxvii) a written consent by the Senior
Secured Creditor to this Agreement and the transactions contemplated
hereby, in form and substance satisfactory to the Lender; and
(xxviii) such other agreements, instruments,
approvals, opinions and other documents as the Lender may reasonably
request.
(e) Proceedings; Receipt of Documents. All
documents executed in connection with the transactions contemplated by this
Agreement, shall be satisfactory to the Lender and its counsel, and the Lender
and such counsel shall have received all such information and such counterpart
originals or certified or other copies of such documents as the Lender or such
counsel may reasonably request.
(f) Material Adverse Change. The Lender shall
have determined, in its sole judgment, that no material adverse change shall
have occurred in the business, operations, financial condition or prospects of
the Borrower after January 30, 1996.
(g) Existing Loans. All indebtedness owing to
EALP by the Borrower outstanding immediately prior to the Effective Date shall
be repaid in full (which may be with the proceeds of the Loan).
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the
Borrower and UGNL. The Borrower and UGNL, as appropriate, represent and
warrant as follows:
(a) Organization, Good Standing, Etc. Each Loan
Party (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) has all
requisite power and authority to conduct its business as now conducted and as
presently contemplated to make the borrowings hereunder and to consummate the
transactions contemplated hereby and by each of the Loan Documents to which it
is a party, and (iii) is duly qualified to do business and is in good standing
in each jurisdiction and territory, inside and outside of the United States, in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary. UGNL is a
wholly-owned subsidiary of Seiscom Delta Unida, S.A., a corporation organized
under the laws of Costa Rica, which is a wholly-owned subsidiary of Grant
Geophysical (Int'l), Inc., a California corporation, which is wholly-owned by
the Borrower.
(b) Authorization, Etc. The execution, delivery
and performance by each Loan Party of each Loan Document to which it is a party
(i) have been duly authorized by all necessary corporate action, (ii) do not
and will not contravene the charter or by-laws, any law or any contractual
restriction binding on or otherwise affecting it or any of its properties,
(iii) do not and will not result in or require the creation of any lien,
security interest or other charge or encumbrance (other than pursuant to any
such Loan Document) upon or with respect to any of its properties, and (iv) do
not and will not result in any suspension, revocation, impairment, forfeiture
or nonrenewal of any permit, license, authorization or approval applicable to
its operations or any of its properties.
(c) Governmental Approvals. No authorization or
approval or other action by, and no notice to or filing with, any Governmental
Authority or other regulatory body is required in connection with (i) the due
execution, delivery and performance by the Borrower or the Guarantors of any
Loan Document to which such Persons are or will be parties or (ii) the exercise
by the Lender of any of its rights and remedies hereunder.
(d) Enforceability of Loan Documents. This
Agreement is, and each other Loan Document to which the Borrower or the
Guarantors is or will be a party, when delivered hereunder, will be a legal,
valid and binding obligation of such Person, enforceable against such Person in
accordance with its terms.
(e) Subsidiaries. Except as set forth in
Schedule I hereto, there are no Subsidiaries of the Borrower.
(f) Litigation. Except as set forth on Schedule
VI hereto, there is no pending or, to the Borrower's best knowledge, threatened
action, suit or proceeding affecting the
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Borrower or any of the Guarantors which could individually or in the aggregate
have a material adverse effect on the operations or conditions, financial or
otherwise, of the Borrower or any Guarantor or the ability of such Loan Party
to perform its obligations under any Loan Document to which it is or will be a
party before any court or other Governmental Authority or any arbitrator.
There is no pending or, to the Borrower's best knowledge, threatened action,
suit or proceeding affecting the Borrower or any of the Guarantors before any
court or other Governmental Authority or any arbitrator which may materially
adversely affect the operations or condition, financial or otherwise, of such
Person or the ability of such Person to perform its obligations under any Loan
Document to which such Person is or will be a party.
(g) Financial Condition. The Financial
Statements, copies of which have been delivered to the Lender, fairly present
the financial condition of the Borrower as at the respective dates thereof and
the results of operations of the Borrower for the fiscal periods ended on such
respective dates, all in accordance with GAAP. Since December 31, 1994 there
has been no material adverse change in such condition or operations.
(h) Compliance with Law, Etc. Neither the
Borrower nor any Guarantor is in violation of its charter or by-laws, any law
or any material term of any agreement or instrument binding on or otherwise
affecting it or any of its properties.
(i) ERISA. (i) Each Employee Plan is in
substantial compliance with ERISA and the Internal Revenue Code, (ii) no
Termination Event has occurred nor is reasonably expected to occur with respect
to any Employee Plan, (iii) the most recent annual report (Form 5500 Series)
with respect to each Employee Plan, including Schedule B (Actuarial
Information) thereto, copies of which have been filed with the Internal Revenue
Service and delivered to the Lender, is complete and correct and fairly
presents the funding status of such Employee Plan, and since the date of such
report there has been no material adverse change in such funding status, (iv)
no Employee Plan had an accumulated or waived funding deficiency or permitted
decreases which would create a deficiency in its funding standard account
within the meaning of Section 412 of the Internal Revenue Code at any time
during the previous 60 months, (v) no lien, security interest or other charge
or encumbrance imposed under the Internal Revenue Code or ERISA exists or is
likely to arise on account of any Employee Plan within the meaning of Section
412(a) of the Internal Revenue Code at any time during the previous 60 months,
(vi) the aggregate Unfunded Liabilities of all Employee Plans and Multiemployer
Plans in respect of which the Borrower or any of its Affiliates may have any
liability do not exceed $100,000, and (vii) in the event of a withdrawal from
each Multiemployer Plan, the aggregate withdrawal liability would not
reasonably be expected to exceed $100,000. Neither the Borrower nor any of its
Affiliates has incurred any withdrawal liability under ERISA with respect to
any Multiemployer Plan, and the Borrower is not aware of any fact indicating
that the Borrower or any of its Affiliates may in the future incur any such
withdrawal liability. Except as required by Section 4980B of the Internal
Revenue Code, neither the Borrower nor any of its Affiliates maintains a
welfare plan (as defined in ERISA) which provides benefits or coverage after a
participant's termination of employment. No prohibited transaction as defined
in Section 406 of ERISA has occurred with respect to any employee benefit plan
(within the meaning of Section 3(3) of ERISA) maintained by the Borrower
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or any of its Affiliates. Neither the Borrower nor any of its Affiliates has
incurred a mass layoff or plant closing within the meaning of the Worker
Adjustment and Retraining Notification Act.
(j) Taxes, Etc. After giving effect to any
lawful extension, all Federal, state and local tax returns and other reports
required by applicable law to be filed by the Borrower or the Guarantors have
been filed, and all taxes, assessments and other governmental charges imposed
upon the Borrower or the Guarantors or any property of the Borrower or the
Guarantors which have become due and payable on or prior to the date hereof
have been paid, except to the extent contested in good faith by proper
proceedings which stay the imposition of any penalty, fine or lien resulting
from the non-payment thereof and with respect to which adequate reserves have
been set aside for the payment thereof.
(k) Regulation U. The Borrower is not and will
not be engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U issued
by the Board of Governors of the Federal Reserve System), and no proceeds of
the Loan will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock.
(l) Adverse Agreements, Etc. The Borrower is not
a party to any agreement or instrument, or subject to any charter or other
corporate restriction or any judgment, order, regulation, ruling or other
requirement of a court or other Governmental Authority or regulatory body,
which materially adversely affects, or, to the best knowledge of the Borrower,
in the future is reasonably likely to materially adversely affect, the
condition or operations, financial or otherwise, of the Borrower or the ability
of the Borrower to perform its obligations under any Loan Document to which the
Borrower is or will be a party.
(m) Holding Company and Investment Company Acts.
The Borrower is not (i) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended, or (ii)
an "investment company" or an "affiliated person" or "promoter" of, or
"principal underwriter" of or for, an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended.
(n) Permits, Etc. The Borrower, and each
Guarantor, has all permits, licenses, authorizations and approvals required for
it to own and operate its business lawfully.
(o) Title to Properties. The Borrower has good
and marketable title to all of its properties and assets, free and clear of all
liens, security interests and other charges and encumbrances and other types of
preferential arrangements, except (i) Liens in favor of the Senior Secured
Creditor pursuant to the Senior Loan Agreement and the Loan Documents (as
defined in the Senior Loan Agreement), and (ii) such as are permitted by
Section 6.02(a) hereof. All of Borrower's properties are titled in Borrower's
legal name, in its prior legal name which was Grant Tensor Geophysical Corp. or
in the name of Borrower's predecessor, Grant Norpac, Inc., all of the assets of
which were acquired by Borrower. Borrower has not used, or filed a financing
statement (or other evidence of a lien, charge or security interest) under, any
other name in any
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<PAGE> 25
United States jurisdiction or territory outside the United States for at least
the last five (5) years, except as set forth on the attached Schedule IX.
(p) Full Disclosure. No Loan Document or
schedule or exhibit thereto and no certificate, report, statement or other
document or information furnished by the Borrower to the Lender in connection
herewith or with the consummation of the transactions contemplated hereby,
contains any misstatement of material fact or omits to state a material fact or
any fact necessary to make the statements contained herein or therein not
misleading. There is no contingent liability or other material fact that may
adversely affect the condition or operations, financial or otherwise, or the
business or prospects of the Borrower or any Guarantor which has not been set
forth in a footnote included in the Financial Statements or a schedule hereto
or thereto.
(q) Operating Lease Obligations. The Borrower
does not have any obligation as lessee for the payment of rent in excess of
$100,000 per annum for any real or personal property other than as set forth in
Schedule VII hereto.
(r) Environmental Matters. The Borrower is in
compliance with all applicable Environmental Laws. Except as disclosed in
Schedule III hereto, (i) none of the operations of the Borrower is the subject
of any Federal, state or local investigation to determine whether any remedial
action is needed to address the presence, disposal, release or threatened
release of any Hazardous Material into the environment which may have a
material adverse effect on the business, operations, property, assets or
financial or other condition of the Borrower, (ii) there has been no Release of
any Hazardous Material into the environment at any property owned or operated
by the Borrower which may have a material adverse effect on its business,
operations, property, assets or financial or other condition, (iii) the
Borrower has not caused a Release or threatened Release at any site where it
has conducted operations that may have a material adverse effect on its
business, operations, property, assets or financial or other conditions, and
(iv) no Environmental Actions have been filed or threatened to be asserted
against the Borrower or to the Borrower's knowledge at any disposal or
treatment facility that received Hazardous Materials generated by the Borrower.
(s) Schedules. All of the information which is
required to be scheduled to this Agreement is correct and accurate in all
material respects.
(t) Insurance. The Borrower, and each Guarantor,
keeps its insurable properties adequately insured and maintains (i) insurance
to such extent and against such risks, including fire, as is customary with
companies in the same or similar businesses, (ii) workmen's compensation
insurance in the amount required by applicable law, (iii) personal liability
insurance and public liability insurance, which shall include product liability
insurance, in the amount customary with companies in the same or similar
business against claims for personal injury or death or properties owned,
occupied or controlled by it, and (iv) such other insurance as may be required
by law or as may be reasonably required in writing by the Lender.
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(u) Use of Proceeds. The proceeds of the Loan
shall be used to repay existing indebtedness owing to EALP and for general
working capital.
(v) Nigerian Accounts Receivable. All Nigerian
Accounts Receivable generated by UGNL, or any other Subsidiary of the Borrower
have been duly assigned to the Borrower pursuant to the Master Agreement (as
defined in the Senior Loan Agreement). No amendment, modification, or
supplement has been made to the Master Agreement and no waiver has been granted
with respect thereto.
ARTICLE VI
COVENANTS OF THE BORROWER AND EACH GUARANTOR
SECTION 6.01. Affirmative Covenants. So long as any
principal of or interest on the Loan shall remain unpaid or the Lender shall
have any commitment to make the Loan hereunder, the Borrower and, where
appropriate, each Guarantor will, unless the Lender shall otherwise consent in
writing:
(a) Reporting Requirements. Furnish to the
Lender:
(i) as soon as available and in any
event within 30 days after the end of each month, an interim (A)
consolidated and consolidating balance sheets of the Borrower as at
the end of such month and for the period commencing at the end of the
immediately preceding fiscal year and ending with the end of such
month, (B) consolidated and consolidating statement of income of the
Borrower as at the end of such month and for the period commencing at
the end of the immediately preceding fiscal year and ending with the
end of such month, and (C) consolidated and consolidating statement of
cash flow of the Borrower for such month and for the period commencing
at the end of the immediately preceding fiscal year and ending with
the end of such month, setting forth in comparative form the
corresponding figures for the corresponding date or period of the
immediately preceding fiscal year, all in reasonable detail and
prepared in accordance with GAAP, each duly certified by the chief
financial officer of the Borrower as (1) fairly presenting the
financial condition of the Borrower at the end of such month, and the
results of the operations of the Borrower for such month (subject to
normal year-end audit adjustments), and (2) having been prepared in
accordance with GAAP;
(ii) as soon as available and in any
event within 45 days after the end of each fiscal quarter of the
Borrower, an interim (A) consolidated and consolidating balance sheet
of the Borrower as at the end of such quarter and for the period
commencing at the end of the immediately preceding fiscal year and
ending with the end of such quarter, (B) consolidated and
consolidating statement of income of the Borrower as at the end of
such quarter and for the period commencing at the end of the
immediately preceding fiscal year and ending with the end of such
quarter, and (C) consolidated and consolidating statement of cash flow
of the Borrower for such quarter
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and for the period commencing at the end of the immediately preceding
fiscal year and ending with the end of such quarter setting forth in
comparative form the corresponding figures for the corresponding date
or period of the immediately preceding fiscal year, all in reasonable
detail and prepared in accordance with GAAP, each duly certified by
the chief financial officer of the Borrower as (1) fairly presenting
the financial condition of the Borrower at the end of such quarter,
and the results of the operations of the Borrower for such quarter
(subject to normal year-end audit adjustments), and (2) having been
prepared in accordance with GAAP;
(iii) as soon as available and in any
event within 90 days after the end of each fiscal year of the
Borrower, a (A) consolidated and consolidating balance sheet of the
Borrower as at the end of such fiscal year, (B) consolidated and
consolidating statement of income of the Borrower as at the end of
such fiscal year, and (C) consolidated and consolidating statement of
cash flow of the Borrower for such fiscal year setting forth in
comparative form the corresponding figures for the immediately
preceding fiscal year and setting forth the budget for such fiscal
year, all in reasonable detail and prepared in accordance with GAAP
and, in the case of balance sheets and statement of income,
accompanied by a report and an unqualified opinion, prepared in
accordance with generally accepted auditing standards, of an
independent certified public accountant of recognized standing
selected by the Borrower and satisfactory to the Lender, together with
any management letter prepared by such accountant and a written
statement of such accountant (1) to the effect that in making the
examination necessary for its certification of such financial
statements, it has not obtained any knowledge of the existence of an
Event of Default, or an event which, with the giving of notice or the
lapse of time or both, would constitute an Event of Default, or (2) if
such accountant shall have obtained any knowledge of the existence of
an Event of Default, or an event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default,
describing the nature thereof;
(iv) simultaneously with the delivery of
the financial statements required by clauses (i), (ii) and (iii) of
this Section 6.01(a), (A) a certificate of the chief financial officer
of the Borrower, stating that such officer has reviewed the provisions
of this Agreement and the other Loan Documents to which the Borrower
is a party and has made or caused to be made under his supervision a
review of the condition and operations of the Borrower during the
period covered by such financial statements with a view to determining
whether the Borrower was in compliance with all of the provisions of
such Loan Documents, and that such review has not disclosed, and such
officer has no knowledge of, the existence during such period of an
Event of Default, or an event which, with the giving of notice or the
lapse of time or both, would constitute an Event of Default, and (B) a
schedule showing the calculations specified in subsections (g) and (l)
of Section 6.02 of this Agreement, certified by the chief financial
officer of the Borrower;
(v) on each Monday for the week ended
Friday of the preceding week, (i) a Borrowing Base Certificate, (ii) a
report, in form and substance satisfactory to the Lender, regarding
the TCB Lock-Box Account, (iii) a certificate setting forth the
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principal amount of indebtedness owing by the Borrower to the Senior
Secured Creditor, and (iv) each of the reports and other financial
information described in Schedule VIII hereto under the heading
"Weekly", in form and substance reasonably satisfactory to the Lender
and certified by the chief financial officer of the Borrower;
(vi) within 30 days after the end of each
month, the reports and other financial information described in
Schedule VIII hereto under the heading "Monthly", in form and
substance reasonably satisfactory to the Lender and certified by the
chief financial officer of the Borrower;
(vii) as soon as available, and in any
event no later than (i) 15 days prior to the end of each fiscal year,
draft annual financial projections (including forecasted income
statements, cash flow statements, balance sheets, schedules of cash
receipts and disbursements and borrowings hereunder) of the Borrower
prepared on a monthly basis for the next succeeding three-year period,
all in reasonable detail and prepared in accordance with GAAP,
together with all such supporting information as the Lender shall
reasonably request; and (ii) 45 days after the end of each fiscal
year, final annual financial projections (including forecasted income
statements, cash flow statements, balance sheets, schedules of cash
receipts and disbursements and borrowings hereunder) of the Borrower
prepared on a monthly basis for the next succeeding three-year period,
all in reasonable detail and prepared in accordance with GAAP,
together with all such supporting information as the Lender shall
reasonably request;
(viii) with respect to each Guarantor, as
soon as available and in any event within 90 days after the end of
each fiscal year of such Guarantor, a (A) balance sheet of the
Guarantor as at the end of such fiscal year, (B) statement of income
of the Guarantor as at the end of such fiscal year, and (C) statement
of cash flow of the Guarantor for such fiscal year setting forth in
comparative form the corresponding figures for the immediately
preceding fiscal year, all in reasonable detail and prepared in
accordance with GAAP and, in the case of balance sheets and statement
of income, together with a certificate of the chief financial officer
of the Guarantor, stating that such officer has reviewed the
provisions of this Agreement and the other Loan Documents to which the
Guarantor is a party and has made or caused to be made under his
supervision a review of the condition and operations of the Guarantor
during the period covered by such financial statements with a view to
determining whether the Guarantor was in compliance with all of the
provisions of such Loan Documents, and that such review has not
disclosed, and such officer has no knowledge of, the existence during
such period of an Event of Default, or an event which, with the giving
of notice or the lapse of time or both, would constitute an Event of
Default;
(ix) promptly after submission to any
Governmental Authority, all documents and information furnished to
such Governmental Authority, unless such documents and information are
furnished in the ordinary course of business and will not result in
any adverse action to be taken by such Governmental Authority;
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(x) promptly after obtaining knowledge
thereof but in any event not later than five (5) Business days after
the occurrence of an Event of Default, or an event which, with the
giving of notice or the lapse of time or both, would constitute an
Event of Default, or a material adverse change in the condition or
operations, financial or otherwise, of the Borrower, the written
statement of the chief executive officer or the chief financial
officer of the Borrower, setting forth the details of such Event of
Default, event or material adverse change and the action which the
Borrower proposes to take with respect thereto;
(xi) (A) as soon as possible and in any
event (1) within thirty (30) days after the Borrower or any of its
Affiliates knows or has reason to know that any Termination Event
described in clause (i) of the definition of Termination Event with
respect to any Employee Plan has occurred, and (2) within ten (10)
days after the Borrower or any of its Affiliates knows or has reason
to know that any other Termination Event with respect to any Employee
Plan has occurred, a statement of the chief financial officer of the
Borrower describing such Termination Event and the action, if any,
which the Borrower or such Affiliate proposes to take with respect
thereto, (B) promptly and in any event within two (2) Business Days
after receipt thereof by the Borrower or any of its Affiliates from
the Pension Benefit Guaranty Corporation, copies of each notice
received by the Borrower or any of its Affiliates of the Pension
Benefit Guaranty Corporation's intention to terminate any Plan or to
have a trustee appointed to administer any Plan, (C) promptly and in
any event within 30 days after the filing thereof with the Internal
Revenue Service, copies of each Schedule B (Actuarial Information) to
the annual report (Form 5500 Series) with respect to each Employee
Plan, (D) promptly and in any event within five (5) Business Days
after receipt thereof by the Borrower or any of its Affiliates from a
sponsor of a Multiemployer Plan or from the Pension Benefit Guaranty
Corporation, a copy of each notice received by the Borrower or any of
its Affiliates concerning the imposition or amount of withdrawal
liability under Section 4202 of ERISA or indicating that such
Multiemployer Plan may enter reorganization status under Section 4241
of ERISA, and (E) promptly and in any event within three (3) Business
Days after the filing thereof a copy of each notice required to be
given by the Borrower or any of its Affiliates under the Worker
Adjustment and Retraining Notification Act;
(xii) promptly after the commencement
thereof but in any event not later than five (5) Business Days after
service of process with respect thereto on, or the obtaining of
knowledge thereof by, the Borrower, notice of each action, suit or
proceeding before any court or other Governmental Authority or other
regulatory body or any arbitrator which may materially adversely
affect the condition or operations, financial or otherwise, of the
Borrower; and
(xiii) promptly upon request, such other
information concerning the condition or operations, financial or
otherwise, of the Borrower as the Lender from time to time may
reasonably request.
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(b) Guaranties, Etc. Give the Lender prompt
written notice of the creation or establishment of any Subsidiary which
generates any Nigerian Accounts Receivable or has any other assets located in
Nigeria. Cause each such Subsidiary to execute and deliver to the Lender, or
cause to be executed and delivered to the Lender, promptly upon the formation
or acquisition thereof (i) a guaranty, substantially in the form of Exhibit B
hereto, guaranteeing the Obligations, (ii) evidence, satisfactory to the Lender
that the Nigerian Accounts Receivable of such Subsidiary have been assigned to
Borrower and (iii) a Guarantor Security Agreement, and, in connection with such
delivery, cause to be delivered to the Lender, in form and substance
satisfactory to the Lender, a favorable written opinion of counsel,
substantially in the form of Exhibit E hereto, as to such matters relating
thereto as the Lender may reasonably request, together with such other
agreements, instruments, approvals or other documents as the Lender may
reasonably request.
(c) Compliance with Laws, Etc. Comply in all
material respects with all applicable laws, rules, regulations and orders, such
compliance to include, without limitation, (i) paying before the same become
delinquent all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits or upon any of their properties, and (ii)
paying all lawful claims which if unpaid might become a lien or charge upon any
of their properties, except to the extent contested in good faith by proper
proceedings which stay the imposition of any penalty, fine or lien resulting
from the non-payment thereof and with respect to which adequate reserves have
been set aside for the payment thereof.
(d) Preservation of Existence, Etc. Maintain and
preserve its existence, rights and privileges, and become or remain duly
qualified and in good standing in each jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary. Maintain all licenses and
accreditations necessary to conduct the business of the Borrower.
(e) Keeping of Records and Books of Account.
Keep adequate records and books of account, with complete entries made in
accordance with GAAP.
(f) Inspection Rights. Permit the Lender or any
agent or representative thereof at any time and from time to time to examine
and make copies of and abstracts from its records and books of account, to
visit and inspect its properties, to conduct audits or examinations, and to
discuss its affairs, finances and accounts with any of the directors, officers,
employees, independent accountants or other representatives thereof. The
Borrower agrees to pay the cost of each such audit or examination, which such
audits and examinations, in the absence of an Event of Default, will be
performed no more frequently than four (4) times a year.
(g) Maintenance of Properties, Etc. Maintain and
preserve all of its properties which are necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear and
tear excepted, and comply at all times with the provisions of all leases to
which the Borrower is a party as lessee or under which the Borrower occupies
property, so as to prevent any loss or forfeiture thereof or thereunder.
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(h) Maintenance of Insurance. Maintain insurance
with responsible and reputable insurance companies or associations (including,
without limitation, comprehensive general liability, personal liability and
hazard insurance) with respect to its properties and business, in such amounts
and covering such risks, as is required by any Governmental Authority or other
regulatory body having jurisdiction with respect thereto or as is carried
generally in accordance with sound business practice by companies in similar
businesses similarly situated.
(i) Environmental Indemnity. Comply with the
requirements of all applicable Environmental Laws, provide to the Lender all
documentation in connection with such compliance that the Lender may reasonably
request, and defend, indemnify, and hold harmless the Lender, its employees,
agents, officers, and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs, or expenses
(including, without limitation, attorney and consultant fees, investigation and
laboratory fees, court costs, and litigation expenses) arising out of (i) the
Release, or threatened Release of any Hazardous Materials on any property
currently or formerly owned or occupied by the Borrower (or its predecessors in
interest or title) or at any site where the Borrower has conducted operations;
(ii) any personal injury (including wrongful death) or property damage (real or
personal) arising out of or related to such Hazardous Materials; (iii) any
Environmental Action; (iv) any violation of any Environmental Law; or (v) any
breach of any representation or warranty made by the Borrower in Section
5.01(r) or any breach of any covenant made by the Borrower in Section 6.01(i)
or 6.02(r). This environmental indemnity shall survive the repayment of the
Obligations and discharge or release of any security interest granted pursuant
to the Loan Documents.
(j) Borrowing Base. Maintain the Loan in
compliance with the then current Borrowing Base.
(k) Lock-Box Accounts. In the case of the
Borrower, maintain the Lock-Box Accounts.
(l) Assignment of Accounts. Cause any
Subsidiary, including without limitation UGNL, which owns, obtains or creates
any Nigerian Account Receivable to assign all of its rights, title and
interests in such Nigerian Account Receivable to Borrower on the date hereof or
immediately upon such Subsidiary obtaining or creating such Nigerian Account
Receivable.
(m) Notification of Event of Default.
Immediately notify Lender in writing of any default of nonpayment or any other
default or event of default or notice thereof under any of the Loan Documents
(as defined in the Senior Loan Agreement) or any other agreements or
instruments representing material indebtedness of Borrower or any security
interest therein.
(n) UGNL Documents. As soon as practicable, and
in any event within thirty (30) days after the Effective Date, the Borrower
shall cause to be delivered to the Lender, in form and substance satisfactory
to the Lender:
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(i) consents, in form and substance
satisfactory to the Lender, from each Account Debtor with respect to
Nigerian Accounts Receivable generated by UGNL or any other Subsidiary
of Borrower, consenting to the assignment by UGNL or such other
Subsidiary to Borrower of the right to receive payments with respect
to such Nigerian Account Receivable;
(ii) a certificate, dated as of a date
not more than ten (10) Business Days prior to the Effective Date, of
the appropriate official of the jurisdiction of incorporation and each
jurisdiction of foreign qualification, both inside and outside the
United States, of UGNL, certifying as to the subsistence in good
standing of, and the payment of taxes by, UGNL in such jurisdictions
and listing all charter documents of UGNL on file with such
official(s);
(iii) a copy of the charter of UGNL,
certified as of a date not more than, thirty (30) days prior to the
Effective Date by the appropriate official of the jurisdiction of
incorporation of UGNL and as of the Effective Date by an authorized
officer of UGNL; and
(iv) an opinion of Chief Rotimi Williams,
Nigerian counsel to UGNL, in form and substance satisfactory to the
Lender and as to such matters as the Lender may reasonably request.
(o) Further Assurances. The Borrower and each Guarantor
shall do, execute, acknowledge and deliver, at the sole cost and expense of the
Borrower, all such further acts, deeds, conveyances, mortgages, assignments,
estoppel certificates, financing statements, notices of assignment, transfers
and assurances as the Lender may reasonably require from time to time in order
to better assure, convey, grant, assign, transfer and confirm unto the Lender
the rights now or hereafter intended to be granted to the Lender under this
Agreement, any Loan Document or any other instrument under which the Borrower
may be or may hereafter become bound to convey, mortgage or assign to the
Lender to effect the intention or facilitate the performance of the terms of
this Agreement. If requested by the Lender, the Borrower will promptly, and in
any event within 30 days after such request, deliver to the Lender a landlord
waiver, in form and substance satisfactory to the Lender, executed by each of
the landlords of the Borrower designated by the Lender or evidence that the
Borrower is unable to obtain such waivers after using its best efforts to do
so.
SECTION 6.02. Negative Covenants. So long as any principal
of or interest on the Loan shall remain unpaid or the Lender shall have any
commitment to make the Loan, the Borrower will not, without the prior written
consent of the Lender:
(a) Liens, Etc. Create or suffer to exist any
mortgage, pledge, lien, security interest or other charge or encumbrance, or
any other type of preferential arrangement, upon or with respect to any of its
properties, rights or other assets, whether now owned or hereafter acquired, or
assign or otherwise transfer any right to receive income, other than:
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(i) liens or security interests created
pursuant to the Loan Documents;
(ii) liens existing on the date hereof,
as set forth in Schedule IV hereto, and the renewal and replacement of
such liens, provided that any such renewal or replacement lien shall
be limited to the property or assets covered by the lien renewed or
replaced and the indebtedness secured by any such renewal or
replacement lien shall be in an amount not greater than the amount of
indebtedness secured by the lien renewed or replaced;
(iii) liens for taxes, assessments or
governmental charges or levies to the extent that the payment thereof
shall not be required by Section 6.01(c)(i) hereof;
(iv) liens created by operation of law,
such as materialmen's liens, mechanics' liens and other similar liens,
arising in the ordinary course of business and securing claims the
payment of which shall not be required by Section 6.01(c)(ii) hereof;
(v) deposits, pledges or liens (other
than liens arising under ERISA) securing (A) obligations incurred in
respect of workers' compensation, unemployment insurance or other
forms of governmental insurance or benefits, (B) the performance of
bids, tenders, leases, contracts (other than for the payment of money)
and statutory obligations, or (C) obligations on surety or appeal
bonds, but only to the extent such deposits, pledges or liens are
incurred or otherwise arise in the ordinary course of business and
secure obligations which are not past due;
(vi) restrictions on the use of real
property and minor irregularities in the title thereto which do not
(A) secure obligations for the payment of money or (B) materially
impair the value of such property or its use by the Borrower in the
normal conduct of the Borrower's business;
(vii) (A) purchase money liens on or
purchase money security interests in equipment acquired or held by the
Borrower or its Subsidiaries in the ordinary course of their
businesses to secure the purchase price of such property or
Indebtedness incurred solely for the purpose of financing the
acquisition of such property, or (B) liens or security interests
existing on such property at the time of its acquisition, provided,
that (1) no such lien or security interest shall extend to cover any
other property of the Borrower or its Subsidiaries, and (2) the
principal amount of the Indebtedness secured by any such lien or
security interest shall not exceed 100% of the lesser of the fair
market value or the cost of the property so held or acquired;
(viii) liens in favor of the Senior Secured
Creditor pursuant to the Loan Documents (as defined in the Senior Loan
Agreement), or in favor of any lender that
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replaces the Senior Secured Creditor pursuant to a refinancing
permitted by Section 6.02(b)(ix) hereof; and
(ix) any other lien, mortgage or pledge
provided to the Lender.
(b) Indebtedness. Create, incur or suffer to
exist any Indebtedness, other than:
(i) Indebtedness to the Lender;
(ii) Indebtedness created hereunder or
under the Note;
(iii) Indebtedness existing on the date
hereof, as set forth in Schedule II hereto, and any extension of
maturity, refinancing or other modification of the terms thereof,
provided, however, that such extension, refinancing or modification
(A) is pursuant to terms that are not less favorable to the Borrower
than the terms of the Indebtedness being extended, refinanced or
modified, and (B) after giving effect to the extension, refinancing or
modification of such Indebtedness, the amount of such Indebtedness
outstanding is not greater than the amount of such Indebtedness
outstanding immediately prior to such extension, refinancing or
modification;
(iv) Indebtedness represented by accounts
payable incurred in the ordinary course of business;
(v) Indebtedness secured by liens or
security interests permitted by clause (iii) of subsection (a) of this
Section 6.02;
(vi) Indebtedness permitted by subsection
(c) of this Section 6.02;
(vii) Indebtedness secured by liens or
security interests permitted by clause (vii) of subsection (a) of this
Section 6.02;
(viii) Indebtedness under Operating Leases;
and
(ix) Indebtedness under the Senior Loan
Agreement and any extension of maturity, refinancing or other
modification of the terms thereof, provided, however, that such
extension, refinancing or modification (A) is pursuant to terms that,
as a whole, are not materally less favorable to the Borrower than the
terms of the Indebtedness being extended, refinanced or modified, and
(B) after giving effect to the extension, refinancing or modification
of such Indebtedness, the amount of such Indebtedness outstanding is
not greater than the Maximum Amount (as defined in the Senior Loan
Agreement).
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<PAGE> 35
(c) Guaranties, Etc. Assume, guarantee, indorse
or otherwise become directly or contingently liable (including, without
limitation, liable by way of agreement, contingent or otherwise, to purchase,
to provide funds for payment, to supply funds to or otherwise invest in the
debtor or otherwise to assure the creditor against loss), in connection with
any Indebtedness of any other Person, other than:
(i) guaranties created hereunder or
under any Loan Document;
(ii) guaranties by indorsement of
negotiable instruments for deposit or collection in the ordinary
course of business;
(iii) guaranties existing on the date
hereof, as set forth in Schedule X hereto, including any renewal or
other modification thereof, provided, however, that such renewal or
modification (A) is pursuant to terms that are not less favorable to
the Borrower than the terms of the guaranty being renewed or modified,
and (B) after giving effect to the renewal or modification of such
guaranty, the amount of the outstanding indebtedness guaranteed by
such guaranty is not greater than the amount of the outstanding
indebtedness guaranteed by such guaranty immediately prior to such
renewal or modification;
(iv) guaranties of any other Indebtedness
to the Lender or Indebtedness permitted by subsection (b) of this
Section 6.02; and
(v) a guaranty by UGNL in favor of the
Senior Secured Creditor granted pursuant to the Senior Loan Agreement,
or in favor of any lender that replaces the Senior Secured Creditor
pursuant to a refinancing permitted by Section 6.02(b)(ix) hereof.
(d) Merger, Consolidation, Sale of Assets, Etc.
(i) merge or consolidate with any
Person; or
(ii) sell, assign, lease, engage in sale
leaseback transactions or otherwise transfer or dispose of, whether in
one transaction or in a series of related transactions, any
substantial portion of its properties, rights or other assets (whether
now owned or hereafter acquired) to any Person.
(e) Change in Nature of Business. Make any
material change in the nature of its business as carried on at the date hereof.
(f) Investments, Etc. Make any loan or advance
to any Person or purchase or otherwise acquire any capital stock, properties,
assets or obligations of, or any interest in, any Person, other than (i)
Permitted Investments, and (ii) investments existing on the date hereof, as set
forth in Schedule V hereto.
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<PAGE> 36
(g) Capital Expenditures. Make or be committed
to make any Capital Expenditures (by purchase) which would cause the aggregate
amount of all such Capital Expenditures to exceed $7,500,000 in any fiscal year
of the Borrower.
(h) Dividends, Etc. Declare or pay any dividend,
purchase or otherwise acquire for value any of its capital stock now or
hereafter outstanding, return any capital to its stockholders as such, or make
any other payment or distribution of assets to its stockholders as such or to
purchase or otherwise acquire for value any stock of the Borrower.
(i) Sale of Notes, Etc. Sell, discount or
otherwise dispose of notes, Accounts Receivable or other obligations owing to
the Borrower, except for collection in the ordinary course of business.
(j) Compromise of Receivable. Compromise or
adjust any of the Accounts Receivable (or extend the time for payment thereof)
or grant any discounts, allowance or credits thereon, in each case other than
in the normal course of business.
(k) Federal Reserve Regulations. Permit the Loan
or any proceeds of the Loan under this Agreement to be used for the purpose
which violates or is inconsistent with the provisions of Regulations G, T, U or
X of the Board of Governors of the Federal Reserve System.
(l) Financial Covenants. Permit:
(i) Current Ratio. The ratio of
Current Assets divided by Current Liabilities to be less than one to
one (1.0:1.0) from the Effective Date through the Maturity Date,
measured on a fiscal quarter basis.
(ii) Debt to Worth Ratio. The ratio
of Borrower's total liabilities, calculated on a consolidated basis in
accordance with GAAP, divided by Tangible Net Worth to be more than
(A) two and twenty-five hundredths to one (2.25:1.0) from the
Effective Date through March 31, 1996; (B) two to one (2.0:1.0) from
April 1, 1996 through September 30, 1996; (C) one and seventy-five
hundredths to one (1.75:1.0) from October 1, 1996 through December 31,
1996; and (D) one and five tenths to one (1.50:1.0) from January 1,
1997 through the Maturity Date, measured on a fiscal quarter basis.
(iii) Tangible Net Worth. Tangible
Net Worth at any time to be less than Twenty Seven Million Dollars
($27,000,000).
(iv) Working Capital. Working
Capital at any time from the Effective Date through the Maturity Date
to be less than Two Million Five Hundred Thousand Dollars
($2,500,000).
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<PAGE> 37
(m) Transactions with Affiliates. The Borrower
shall not enter into or be a party to any transaction with any of its
Affiliates, except in the ordinary course of business for fair consideration
and on terms no less favorable to the Borrower as are available from
unaffiliated third parties.
(n) Fiscal Year, Accounting Policies. Permit any
material change in the fiscal year or accounting policies and procedure of the
Borrower without the prior written consent of the Lender.
(o) Accounts. Take any action or make any
statements which would in any way impede or delay the payment or collection of
Borrower's, UGNL's, or any other Subsidiary's Nigerian Accounts Receivable.
(p) Senior Debt. Permit aggregate outstanding
principal indebtedness to the Senior Secured Creditor to exceed $10,000,000 at
any time.
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(q) Factoring of Collateral. Further pledge or
grant any security interest in any of the Collateral, except for such security
interests granted or pledged (i) pursuant to the Senior Loan Agreement or (ii)
to a Replacement Lender (as defined in the Intercreditor Agreement) with
respect to Collateral as to which Lender's security interest therein would be
junior in priority pursuant to the terms of the Intercreditor Agreement.
(r) Environmental. Allow the use, handling,
generation, storage, treatment, or Release of Hazardous Materials at any
property owned or operated by the Borrower or at any site where the Borrower
conducts operations except in compliance with Environmental Laws.
ARTICLE VII
MANAGEMENT, COLLECTION AND STATUS OF
ACCOUNTS RECEIVABLE AND OTHER COLLATERAL
SECTION 7.01. Collection of Receivables; Management of
Collateral. (a) So long as any principal of or interest on the Loan shall
remain unpaid or the Lender shall have any Commitment hereunder, the Borrower
shall continue to maintain the Lock-Box Accounts. The Borrower hereby pledges,
assigns and grants to the Lender a continuing security interest in the Lock-Box
Accounts and all funds held in such accounts, all certificates and instruments,
if any, from time to time evidencing such accounts, all notes, checks and other
instruments from time to time deposited in such accounts, all interest, if any,
from time to time received in respect of such accounts and all other property
of the Borrower, from time to time in the possession of, under the control of,
or in transit to, the Senior Secured Creditor or the Lender. The Borrower
shall transfer to the Lender the exclusive dominion and control of the TCB
Lock-Box Account, and the Borrower shall transfer to the Lender, as soon as
the Senior Debt is no longer outstanding, the exclusive dominion and control of
the FIT Lock-Box Account and the Borrower shall have no right of withdrawal
from such accounts; provided, however that in the absence of an Event of
Default, the Lender will cause to be remitted fifty percent (50%) of the
proceeds of the TCB Lock-Box Account to the FIT Lock-Box Account and, while the
Lender has control of the FIT Lock-Box Account, the Lender will remit all of
the proceeds of the FIT Lock-Box Account to the Borrower for use in the
ordinary course of Borrower's business. Promptly after the Effective Date, and
from time to time thereafter as any additional Account Debtor shall have become
obligated to the Borrower with respect to Nigerian Accounts Receivable, the
Borrower, at its sole expense, shall send notice to each such Account Debtor
stating that all payments by such Account Debtor shall be made directly to the
Central Bank of Nigeria, with instructions for the Central Bank of Nigeria to
make all payments in U.S. Dollars directly to the TCB Lock-Box Account;
provided, that such notice may be included in an invoice sent by the Borrower
to such Account Debtor. The Borrower shall provide to the Lender a copy of
each such notice that is sent to any Account Debtor with respect to Nigerian
Accounts Receivable. Except as otherwise expressly provided to the contrary in
this Agreement and the Loan Documents, the Borrower shall take all such actions
as the Lender deems necessary or appropriate to ensure that at all times on and
after the Effective Date all proceeds of Nigerian Assets (as defined in the
Intercreditor Agreement) owned by the Borrower are deposited directly in the
TCB Lock-Box Account and all proceeds of Collateral, other than Nigerian Assets
(as defined in the Intercreditor
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Agreement) owned by the Borrower are deposited directly in the TCB Lock-Box
Account and all proceeds of Collateral, other than Nigerian Assets (as defined
in the Intercreditor Agreement), owned by the Borrower are deposited directly
in the FIT Lock-Box Account. If, notwithstanding the notices and actions
provided for in the preceding sentences of this Section 7.01(a), the Borrower
shall receive or any financial institution shall receive for the account of the
Borrower, any proceeds of Collateral, the Borrower shall, or shall cause such
financial institution to, transmit in the form received, before the close of
business on the next succeeding Business Day, all such proceeds (properly
endorsed, where required, so that all items delivered shall be collected by the
Lender) to the Lender for credit to the Loan Account, in accordance with this
Agreement, if such proceeds are proceeds of Nigerian Assets (as defined in the
Intercreditor Agreement) and, if such proceeds are proceeds of Collateral other
than Nigerian Assets (as defined in the Intercreditor Agreement), to the Senior
Secured Creditor if the Senior Debt is outstanding or, if the Senior Debt is not
outstanding, to the Lender. The Borrower shall not, and shall cause any such
financial institution not to, commingle any such proceeds so received with the
Borrower's other property, and shall hold separate and apart from all other
property, all such proceeds in an express trust for the benefit of the Senior
Secured Creditor and the Lender until delivery thereof is made to the Senior
Secured Creditor or the Lender. The Borrower hereby agrees not to deposit any
monies into the Lock-Box Accounts or to otherwise permit any moneys to be
deposited into such accounts or commingled with other funds in such accounts,
except proceeds of the Accounts Receivable and other Collateral owned by the
Borrower.
After an Event of Default, the Lender may, subject to the
provisions of the Intercreditor Agreement, send a notice of assignment and/or
notice of the Lender's security interest to any and all Account Debtors or any
third party holding or otherwise concerned with any of the Collateral, and
thereafter the Lender shall have the sole right, provided the Senior Debt is
not outstanding, or, if the Senior Debt is outstanding, subject to the
provisions of the Intercreditor Agreement, the Lender and the Senior Secured
Creditor shall both have the right to collect the Accounts Receivable, and/or
take possession of the Collateral and the books and records relating thereto.
The Borrower shall not without prior written consent of the Lender, grant any
extension of time of payment of any Account Receivable, compromise or settle
any Account Receivable for less than the full amount thereof, release, in whole
or in part, any Person or property liable for the payment thereof, or allow any
credit or discount whatsoever thereon, except, prior to the occurrence of an
Event of Default, as permitted by Section 6.02(j) hereof.
(b) (i) Subject to the provisions of the
Intercreditor Agreement, the Borrower hereby constitutes the Lender or its
designee on behalf of the Lender as such Borrower's attorney-in-fact with power
to endorse the Borrower's name upon any notes, acceptances, checks, drafts,
money orders or other evidences of payment or Collateral that may come into its
possession, to sign the Borrower's name on any invoice or bill of lading
relating to any of the Accounts Receivable, drafts against Account Debtors,
assignments and verifications of Accounts Receivable and notices to Account
Debtors, to send verification of Accounts Receivable, and upon the acceleration
of the Loan, and any other Obligations under the Loan Documents following an
Event of Default, to notify the Postal Service authorities to change the
address for delivery of mail addressed to such Borrower to such address as the
Lender may designate and to do all other acts and things necessary to carry out
this Agreement. All acts of
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said attorney or designee are hereby ratified and approved, and said attorney
or designate shall not be liable for any acts of omission or commission (other
than acts or omissions constituting gross negligence or willful misconduct),
nor for any error of judgment or mistake of fact or law; this power being
coupled with an interest is irrevocable until the Loan, and any other
Obligations under the Loan Documents are paid in full and all of the Loan
Documents are terminated.
(ii) Subject to the provisions of the
Intercreditor Agreement, the Lender, without notice to or consent of the
Borrower, upon the occurrence and during the continuance of an Event of Default
(A) may sue upon or otherwise collect, extend the time of payment of, or
compromise or settle for cash, credit or otherwise upon any terms, any of the
Accounts Receivable or any securities, instruments or insurance applicable
thereto and/or release the Account Debtor thereon; (B) is authorized and
empowered to accept the return of the goods represented by any of the Accounts
Receivable and (C) shall have the right to receive, endorse, assign and/or
deliver in its name or the name of the Borrower any and all checks, drafts, and
other instruments or the payment of money relating to the Accounts Receivable.
The Borrower hereby waives notice of presentment, protest and non-payment of
any instrument so endorsed, all in a commercially reasonable manner and without
discharging or in any way affecting liability hereunder.
(c) Nothing herein contained shall be construed
to constitute the Borrower as agent of the Lender for any purpose whatsoever,
and the Lender shall not be responsible or liable for any shortage,
discrepancy, damage, loss or destruction of any part of the Collateral wherever
the same may be located and regardless of the cause thereof (other than from
acts or omissions of the Lender constituting gross negligence or willful
misconduct). The Lender shall not, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of the Accounts
Receivable or any instrument received in payment thereof or for any damage
resulting therefrom (other than acts or omissions of the Lender constituting
gross negligence or willful misconduct). The Lender, by anything herein or in
any assignment or otherwise, does not assume any of the obligations of the
Borrower under any contract or agreement assigned to the Lender, and the Lender
shall not be responsible in any way for the performance by the Borrower of any
of the terms and conditions thereof.
(d) If any of the Accounts Receivable includes a
charge for any tax payable to any Governmental Authority, the Lender is hereby
authorized (but in no event obligated) in its discretion to pay the amount
thereof to the proper taxing authority for the account of the Borrower and to
add such amount to the Loan. The Borrower shall notify the Lender if any
Accounts Receivable include any taxes due to any such authority and, in the
absence of such notice, the Lender shall have the right to retain the full
proceeds of such Account Receivable and shall not be liable for any taxes that
may be due from the Borrower by reason of the sale and delivery creating such
Accounts Receivable.
SECTION 7.02. Accounts Receivable Documentation. The
Borrower will at such intervals as the Lender may require, execute and deliver
confirmatory written assignments of the Nigerian Accounts Receivable (and,
after the repayment in full of the Senior Debt, all
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Accounts Receivable) to the Lender and furnish such further schedules and/or
information as the Lender may require relating to the Nigerian Accounts
Receivable (and, after the repayment in full of the Senior Debt, all Accounts
Receivable), including, without limitation, sales invoices or the equivalent,
credit memos issued, remittance advices, reports and copies of deposit slips
and copies of original shipping or delivery receipts for all merchandise sold.
In addition, the Borrower shall notify the Lender of any non-compliance in
respect of the representations, warranties and covenants contained in Section
7.03 below. The items to be provided under this Section 7.02 are to be in form
satisfactory to the Lender and are to be executed and delivered to the Lender
from time to time solely for its convenience in maintaining records of the
Collateral. The failure by the Borrower to give any of such items to the
Lender shall not affect, terminate, modify or otherwise limit the Lender's lien
or security interest in the Collateral. The Borrower shall not re-date any
invoice or sale or make sales on extended dating beyond that customary in the
Borrower's industry, and shall not re-bill any Account Receivable without
promptly disclosing the same to the Lender and providing the Lender with a copy
of such re-billing, identifying the same as such. If the Borrower becomes
aware of anything materially detrimental to any of the Borrower's customers'
credit, the Borrower will promptly advise the Lender thereof.
SECTION 7.03. Status of Accounts Receivable and Other
Collateral. With respect to Collateral of the Borrower at the time the
Collateral becomes subject to the Lender's security interests, the Borrower,
covenants, represents and warrants: (a) the Borrower shall be the sole owner,
free and clear of all liens, mortgages, pledges or other encumbrances except in
the favor of the Lender or otherwise permitted hereunder, of and fully
authorized to sell, transfer, pledge and/or grant a security interest in each
and every item of said Collateral; (b) each Account Receivable shall be a good
and valid account representing an undisputed bona fide indebtedness incurred or
an amount indisputably owed by the Account Debtor therein named, for a fixed
sum as set forth in the invoice relating thereto with respect to any absolute
sale and delivery upon the specified terms of goods sold by the Borrower, or
work, labor and/or services theretofore rendered by the Borrower; (c) no
Account Receivable is or shall be subject to any defense, offset, counterclaim,
discount or allowance except as may be stated in the invoice relating thereto
or discounts and allowances as may be customary in the business of the
Borrower, and each of such Account Receivable will be paid when due; (d) none
of the transactions underlying or giving rise to any Account Receivable shall
violate any applicable state or federal laws or regulations, and all documents
relating to regulations and shall be legally sufficient under such laws or
regulations and shall be legally enforceable in accordance with their terms;
(e) each Account Debtor, guarantor or endorser is solvent and will continue to
be fully able to pay when due all Accounts Receivable on which it is obligated;
(f) no agreement under which any deduction or offset of any kind, other than
normal trade discounts, may be granted or shall have been made by the Borrower
at or before the time such Account Receivable is created; (g) all documents and
agreements relating to Accounts Receivable shall be true and correct and in all
respects what they purport to be; (h) all signatures and endorsements that
appear on all documents and agreements relating to Accounts Receivable shall be
genuine and all signatories and endorsers shall have full capacity to contract;
(i) the Borrower shall maintain books and records pertaining to said Collateral
in such detail, form and scope as the Lender shall require; (j) the Borrower
will immediately notify the Lender if any of its accounts arise out of
contracts with the United States or any department, agency, or instrumentality
thereof and will execute any instruments and take any steps required by the
Lender
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in order that all monies due or to become due under any such contract shall be
assigned to the Lender and notice thereof given to the United States Government
under the Federal Assignment of Claims Act; (k) the Borrower will, immediately
upon learning thereof, report to the Lender any material loss or destruction
of, or substantial damage to, any of the Collateral, and any other matters
affecting the value, enforceability or collectibility of any of the Collateral;
(1) if any amount payable under or in connection with any Account Receivable is
evidenced by a promissory note or other instrument, as such term is defined in
the Uniform Commercial Code, such promissory note or instrument shall be
immediately pledged, endorsed, assigned and delivered to the Senior Secured
Creditor, if the Senior Debt is outstanding, or, if the Senior Debt is not
outstanding, to the Lender as additional Collateral; (m) the Borrower shall not
re-date any invoice or sale or make sales on extended dating beyond that
customary in the industry; (n) the Borrower shall conduct a physical count of
its Inventory at such intervals as the Lender may request and the Borrower
shall promptly supply the Lender with a copy of such count accompanied by a
report of the value (based on the lower of cost (on a FIFO basis) or market
value) of such Inventory; and (o) the Borrower is not and shall not be entitled
to pledge the Lender's credit on any purchases for or any purpose whatsoever.
SECTION 7.04. Collateral Custodian. Upon the occurrence
and during the continuance of an Event of Default or an event which, with the
giving of notice or lapse of time or both, would constitute an Event of
Default, the Lender may at any time and from time to time employ and maintain
in the premises of the Borrower a custodian selected by the Lender who shall
have full authority to do all acts necessary to protect the Lender's interests.
The Borrower hereby agrees to cooperate with any such custodian and to do
whatever the Lender may reasonably request to preserve the Collateral. All
costs and expenses incurred by the Lender by reason of the employment of the
custodian shall be added to the Loan.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. If any of the following
Events of Default shall occur and be continuing:
(a) the Borrower shall fail to pay any principal
on the Loan when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise);
(b) the Borrower shall fail to pay any interest
on the Loan or any fee or other amount when due (whether by scheduled payment,
acceleration, demand or otherwise);
(c) any representation or warranty made by any
Loan Party or any officer of any Loan Party under or in connection with any
Loan Document shall have been incorrect in any material respect when made;
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(d) any Loan Party shall fail to perform or
observe any covenant contained in Sections 6.01 and Section 6.02 hereof and
Article VII hereof;
(e) any Loan Party shall fail to perform or
observe any other term, covenant or agreement contained in any Loan Document
and to be performed or observed by such Loan Party;
(f) any Loan Party shall fail to pay any of its
Indebtedness, or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Indebtedness, or any
other default under any agreement or instrument relating to any such
Indebtedness, or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness in
excess of such amount shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof;
(g) any Loan Party (i) shall institute any
proceeding or voluntary case seeking to adjudicate it a bankrupt or insolvent,
or seeking dissolution, liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for such Person or for any
substantial part of its property, (ii) shall be generally not paying its debts
as such debts become due, or shall admit in writing its inability to pay its
debts generally, (iii) shall make a general assignment for the benefit of
creditors, or (iv) shall take any action to authorize or effect any of the
actions set forth above in this subsection (g);
(h) any proceeding shall be instituted against
any Loan Party seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief of debtors, or seeking the entry of an order for relief or
the appointment of a receiver, trustee, custodian or other similar official for
such Person or for any substantial part of its property, and either such
proceeding shall remain undismissed or unstayed for a period of 60 days or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property) shall occur;
(i) any provision of any Loan Document which is
material to the interpretation of such Loan Document shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Loan Party, or a proceeding shall be
commenced by any Loan Party, or by any Governmental Authority or other
regulatory body having jurisdiction over any Loan Party, seeking to establish
the invalidity or unenforceability thereof, or any Loan Party shall deny that
such Loan Party has any liability or obligation purported to be created under
any Loan Document;
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(j) the Security Agreement or any other security
document, after delivery thereof pursuant hereto, shall for any reason fail or
cease to create a valid and perfected and, except to the extent permitted by
the terms hereof or thereof, first priority lien on or security interest in any
Collateral purported to be covered thereby;
(k) one or more judgments or orders (other than a
judgment or award described in subsections (g) and (h) of this Section 8.01)
for the payment of money exceeding any applicable insurance coverage by more
than $100,000 shall be rendered against any Loan Party, and either (i)
enforcement proceedings shall have been commenced by any creditor upon any such
judgment or order, or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of any such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect provided, however, that
the English Judicial Judgment dated December 8, 1995, with respect to the
matter of High Life Cruise S.A.E. versus the Borrower shall not be deemed to be
an Event of Default under this Section 8.01(k);
(l) the Borrower or any of its Affiliates shall
have made a complete or partial withdrawal from a Multiemployer Plan, and, as a
result of such complete or partial withdrawal, the Borrower or such Affiliate
incurs a withdrawal liability in an annual amount exceeding $100,000; or a
Multiemployer Plan enters reorganization status under Section 4241 of ERISA,
and, as a result thereof, the Borrower's or such Affiliate's annual
contribution requirement with respect to such Multiemployer Plan increases in
an annual amount exceeding $100,000.
(m) any Termination Event with respect to any
Employee Plan shall have occurred, and, 30 days after notice thereof shall have
been given to the Borrower by the Lender, (i) such Termination Event (if
correctable) shall not have been corrected, and (ii) the then current value of
such Employee Plan's vested benefits exceeds the then current value of assets
allocable to such benefits in such Employee Plan by more than $100,000 (or in
the case of a Termination Event involving liability under Sections 515, 4062,
4063, 4064, 4069, 4201 or 4204 of ERISA, the liability is in excess of such
amount);
(n) an Event of Default shall have occurred under
any of the Loan Documents (as defined in the Senior Loan Agreement); or
(o) the Master Agreement (as defined in the
Senior Loan Agreement) shall be amended, modified, supplemented or terminated
without the prior written consent of Lender;
then, and in any such event, the Lender may, by notice to the Borrower, (i)
declare its commitment to make the Loan hereunder to be terminated, whereupon
such commitment shall forthwith terminate, (ii) declare the Loan, all interest
thereon and all other amounts payable under this Agreement to be forthwith due
and payable, whereupon the Loan, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest
or further notice of any kind, all of which are hereby expressly waived by the
Borrower;
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provided, however, that upon the occurrence of an Event of Default described in
subsections (g) and (h) of this Section 8.01, its commitment to make the Loan
hereunder shall immediately terminate and the Loan, all such interest thereon
and all other amounts shall become payable and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are expressly waived by the Borrower, and (iii) exercise any and all of
its other rights under applicable law, hereunder and under the other Loan
Documents.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing and shall be mailed,
telecopied or delivered, if to the Borrower or any Guarantor, at the following
address:
Grant Geophysical, Inc.
16850 Park Row
Houston, Texas 77084
Attention: William B. Cleveland
Telephone No. (713) 647-5203
Telecopy No.: (713) 647-5286
with copies to:
Hutcheson & Grundy, LLP
1200 Smith Street
#3300
Houston, Texas 77007-4579
Attention: Jay E. Scott Lineberry
Telephone No.: (713) 951-2903
Telecopy No.: (713) 951-2925
and if to the Lender, to it at the following address:
Madeline L.L.C.
950 Third Avenue
New York, New York 10022
Attention: Mr. Kevin Genda
Telephone No.: (212) 758-5110
Telecopy No.: (212) 758-5305
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with copies to:
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Attention: Mark A. Neporent, Esq.
Telephone No.: (212) 756-2238
Telecopy No.: (212) 593-5955
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other party complying as to delivery with the
terms of this Section 9.01. All such notices and other communications shall be
effective (i) if mailed, when received or three days after mailing, whichever
first occurs, (ii) if telecopied, when transmitted, provided same is on a
Business Day and, if not, on the next Business Day, or (iii) if delivered, upon
delivery, provided same is on a Business Day and, if not, on the next Business
Day, except that notices to the Lender pursuant to Article II hereof shall not
be effective until received by the Lender.
SECTION 9.02. Amendments, Etc. No amendment of any
provision of this Agreement, the Note or any other Loan Document shall be
effective unless it is in writing and signed by the Borrower, each of the
Guarantors and the Lender, and no waiver of any provision of this Agreement,
the Note or any other Loan Document, nor consent to any departure by the
Borrower therefrom, shall be effective unless it is in writing and signed by
the Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 9.03. No Waiver; Remedies, Etc. No failure on the
part of the Lender to exercise, and no delay in exercising, any right hereunder
or under any other Loan Document shall operate as a waiver thereof; nor shall
any single or partial exercise of any right under any Loan Document preclude
any other or further exercise thereof or the exercise of any other right. The
rights and remedies of the Lender provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any
right or remedy provided by law. The rights of the Lender under any Loan
Document against any party thereto are not conditional or contingent on any
attempt by the Lender to exercise any of its rights under any other Loan
Document against such party or against any other Person.
SECTION 9.04. Fees, Costs, Expenses and Taxes. Whether or
not the Loan is made hereunder or the transactions contemplated hereby are
consummated, the Borrower will pay on demand (i) all fees, costs and expenses
in connection with the preparation, execution, delivery, filing, recording,
amendment, modification, waiver and administration of the Loan Documents and
the other documents to be delivered pursuant to the Loan Documents, including,
without limitation, the reasonable fees, out-of-pocket expenses and other
client charges of Schulte Roth & Zabel, counsel to the Lender, and with respect
to advising the Lender as to its rights and responsibilities under the Loan
Documents and the reasonable fees, out-of-pocket expenses and other client
charges of all accountants, auditors and consultants retained by the Lender in
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connection with the transactions contemplated by this Agreement, and (ii) all
costs and expenses, if any (including reasonable counsel fees, out-of-pocket
expenses and other client charges), in connection with the enforcement of the
Loan Documents and the other documents to be delivered pursuant to the Loan
Documents. In addition, the Borrower will pay any and all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of the Loan Documents and the other
documents to be delivered pursuant to the Loan Documents, and will save the
Lender harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
SECTION 9.05. Right of Set-off. Upon the occurrence and
during the continuance of any Event of Default, the Lender may, and is hereby
authorized to, at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower) and to the
fullest extent permitted by law, subject to the provisions of the Intercreditor
Agreement set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by the Lender to or for the credit or the account of the Borrower
against any and all Obligations now or hereafter existing, irrespective of
whether or not the Lender shall have made any demand hereunder or thereunder
and although such Obligations may be contingent or unmatured. The Lender
agrees to notify the Borrower promptly after any such set-off and application
made by the Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the Lender
under this Section 9.05 are in addition to the other rights and remedies
(including, without limitation, other rights of set-off) which the Lender may
have.
SECTION 9.06. Severability. Any provision of this
Agreement, or of any other Loan Document to which the Borrower or any of the
Guarantors is a party, which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 9.07. Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the Borrower, each Guarantor and
the Lender and their respective successors and assigns, except that neither the
Borrower nor any Guarantor may assign its rights hereunder or any interest
herein without the prior written consent of the Lender. The Lender may assign
to one or more banks or other entities all or any part of, or may grant
participations to one or more banks or other entities in or to all or any part
of the Commitment, the Loan, or the Note, and, to the extent of any such
assignment or participation (unless otherwise stated therein), the assignee of
such assignment shall have the same rights and benefits hereunder and under the
Note as it would have if it were the Lender hereunder. The Lender may, in
connection with any such assignment or participation or as may be required by
law or any Governmental Authority or other regulatory body, disclose any public
and non-public information relating to the Borrower and each of the Guarantors
furnished by or on behalf of the Borrower or any of the Guarantors or any of
their Affiliates to the Lender.
SECTION 9.08. Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which
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<PAGE> 48
shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
SECTION 9.09. Headings. Section headings herein are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
SECTION 9.10. Governing Law. This Agreement, the Note, and
the other Loan Documents shall be governed by, and construed in accordance
with, the law of the State of New York applicable to contracts made and to be
performed in the State of New York without regard to conflicts of law
principles. Any legal action or proceeding with respect to this Agreement or
any other Loan Document may be brought in the courts of the State of New York
or of the United States for the Southern District of New York, and, by
execution and delivery of this Agreement, the Borrower and each Guarantor
hereby irrevocably accept for themselves in respect of their property,
generally and unconditionally, the jurisdiction of the aforesaid courts. The
Borrower and each Guarantor further irrevocably consent to the service of
process out of any of the aforementioned courts and in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower at its address for notices contained in
Section 9.01, such service to become effective thirty (30) days after such
mailing. The Borrower and each Guarantor hereby irrevocably appoint the
Secretary of State of the State of New York, or such other Person as shall be
acceptable to the Lender, as their agent for service of process in respect of
any such action or proceeding. Nothing herein shall affect the right of the
Lender to service of process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Borrower and each
Guarantor in any other jurisdiction.
SECTION 9.11. WAIVER OF JURY TRIAL, ETC. EACH OF THE
BORROWER, EACH GUARANTOR AND THE LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHT UNDER THIS
AGREEMENT, THE NOTE, OR OTHER LOAN DOCUMENT, OR UNDER ANY AMENDMENT, WAIVER,
CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE
FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY. EACH OF THE BORROWER AND UGNL HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. THE BORROWER AND UGNL CERTIFY THAT NO OFFICER,
REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDER HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR
COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. THE BORROWER AND UGNL
HEREBY
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<PAGE> 49
ACKNOWLEDGE THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER
ENTERING INTO THIS AGREEMENT.
SECTION 9.12. Waiver of Immunities. To the extent
that the Guarantor has or hereafter may acquire any immunity from jurisdiction
of any court or from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself or its property, the Guarantor hereby
irrevocably waives such immunity in respect of its obligations under this
Agreement and its Guaranty hereunder, the Guarantor Security Agreement, and any
other Loan Document to which it is a party.
SECTION 9.13. Reinstatement; Certain Payments. If a claim
is ever made upon the Lender for repayment or recovery of any amount or amounts
received by the Lender in payment or on account of any of the Obligations under
this Agreement, the Lender shall give prompt notice of such claim to the
Borrower, and if the Lender repays all or part of said amount by reason of (i)
any judgment, decree or order of any court or administrative body having
jurisdiction over the Lender or any of its property, or (ii) any settlement or
compromise of any such claim effected by the Lender with any such claimant,
then and in such event the Borrower and each Guarantor (A) agree that any such
judgment, decree, order, settlement or compromise shall be binding upon the
Borrower and each Guarantor notwithstanding the cancellation of the Note or
other instrument evidencing the Obligations under this Agreement or the other
Loan Documents or the termination of this Agreement or the other Loan
Documents, and (B) shall be and remain liable to the Lender hereunder for the
amount so repaid or recovered to the same extent as if such amount had never
originally been received by the Lender.
SECTION 9.14. Indemnification. In addition to all of their
other Obligations under this Agreement, the Borrower and each Guarantor agree
to defend, protect, indemnify and hold harmless the Lender, and all of the
respective officers, directors, employees, attorneys, consultants and agents
(including, without limitation, those retained in connection with the
satisfaction or attempted satisfaction of any of the conditions set forth in
this Agreement) of the Lender (collectively called the "Indemnitees") from and
against any and all losses, damages, liabilities, obligations, penalties, fees,
costs and expenses (including, without limitation, attorneys' fees, costs and
expenses) incurred by such Indemnitees, whether prior to or from and after the
Effective Date, whether direct, indirect or consequential, as a result of or
arising from or relating to any suit, investigation, action or proceeding by
any Person, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any Person under any statute or regulation, including,
without limitation, any Federal or state securities or labor laws, or under any
Federal, state or local environmental, health or safety laws, regulations or,
common law principles, arising from or in connection with the past, present or
future operations of the Borrower or its predecessors in interest, arising from
or in connection with any of the following: (i) the negotiation, preparation,
execution or performance of this Agreement or of any document executed in
connection with the transactions contemplated by this Agreement, (ii) the
Lender's furnishing of funds to the Borrower under this Agreement, including,
without limitation, the management of the Loan, or (iii) any matter relating to
the financing transactions contemplated by this Agreement or by any document
executed in connection with the transactions contemplated by
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<PAGE> 50
this Agreement (collectively, the "Indemnified Matters"); provided, however,
that the Borrower and each Guarantor shall have no obligation to any Indemnitee
hereunder for any Indemnified Matter caused by or resulting from the gross
negligence or willful misconduct of such Indemnitee, as determined by a final
judgment of a court of competent jurisdiction. Such indemnification for all of
the foregoing losses, damages, fees, costs and expenses of the Lender shall be
part of the Obligations, secured by the Collateral. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this Section 9.14
may be unenforceable because it is violative of any law or public policy, the
Borrower shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnitees. The provisions of this
Section 9.14 shall survive termination of this Agreement.
ARTICLE X
GUARANTY
SECTION 10.01. Guaranty. UGNL, and each other Guarantor
that may become party hereto, hereby (i) irrevocably, absolutely and
unconditionally guarantees the prompt payment, as and when due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), of (A) all the Obligations, including, without limitation, all
amounts now or hereafter owing in respect of the Loan Documents, whether for
principal, interest, fees, expenses or otherwise, and (B) all indebtedness,
obligations and other liabilities, direct or indirect, absolute or contingent,
now existing or hereafter arising of the Borrower to the Lender and (ii)
agrees, to pay any and all expenses (including reasonable counsel fees and
expenses) incurred by the Lender in enforcing its rights under this Article X.
SECTION 10.02. Obligations Unconditional.
(i) UGNL and each other Guarantor that
may become party hereto, hereby guarantees that the Obligations will be paid
strictly in accordance with the terms of the Loan Documents, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Lender with respect thereto.
UGNL and each other Guarantor agrees that its guarantee constitutes a guaranty
of payment when due and not of collection, and waives any right to require that
any resort be had by the Lender to any security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Lender in favor of the Borrower or for any other reason. The liability of
UGNL and each other Guarantor hereunder shall be absolute and unconditional
irrespective of: (i) any lack of validity or enforceability of any Loan
Document or any agreement or instrument relating thereto; (ii) any extension or
change in the time, manner or place of payment of, or in any other term in
respect of, all or any of the Obligations (including, without limitation, any
extension for longer than the original period), or any other amendment or
waiver of or consent to any departure from any provision of any Loan Document;
(iii) any exchange or release of, or non-perfection of any lien on or security
interest in, any Collateral, or any release or amendment or waiver of or
consent to any departure from any other guaranty, for all or any of the
Obligations; or (iv) any
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<PAGE> 51
other circumstance which might otherwise constitute a defense available to, or
a discharge of, the Borrower or any other guarantor in respect of the
Obligations or UGNL and each other Guarantor in respect hereof.
(ii) This Guaranty (i) is a continuing
guaranty and shall remain in full force and effect until such date on which all
of the Obligations and all other expenses to be paid by UGNL or any other
Guarantor pursuant hereto shall have been satisfied in full after the
Commitment shall have been terminated, (ii) shall continue to be effective or
shall be reinstated, as the case may be, if at any time any payment of any of
the Obligations is rescinded or must otherwise be returned by the Lender upon
the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all
as though such payment had not been made, and (iii) shall be binding upon UGNL,
any other Guarantor or their respective heirs, executors, successors and
assigns.
SECTION 10.03. Waivers. UGNL and each other Guarantor
hereby waives, to the extent permitted by applicable law, (i) promptness and
diligence, (ii) notice of acceptance and notice of the incurrence of any
Obligation, (iii) notice of any action taken by the Lender or the Borrower or
any other Loan Party under any Loan Document or any other agreement or
instrument relating thereto, (iv) all other notices, demands and protests, and
all other formalities of every kind in connection with the enforcement of the
Obligations or of the obligations of UGNL and each other Guarantor hereunder,
the omission of or delay in which, but for the provisions of this Section
10.03, might constitute grounds for relieving UGNL or any other Guarantor of
its obligations hereunder, and (v) any requirement that the Lender protect,
secure, perfect or insure any security interest or lien or any property subject
thereto or exhaust any right or take any action against any Person or any
Collateral. All such waivers by UGNL shall be effective only to the extent
permitted by applicable law.
SECTION 10.04. Subrogation. Neither UGNL nor any other
Guarantor will exercise any rights which it may acquire by way of subrogation
hereunder, by any payment made by it hereunder or otherwise, until such date on
which all of the Obligations and all other expenses to be paid by UGNL or such
other Guarantor pursuant hereto shall have been satisfied in full. If any
amount shall be paid to UGNL or such other Guarantor on account of such
subrogation rights at any time when all of the Obligations and all such other
expenses shall not have been paid in full, such amount shall be held in trust
for the benefit of the Lender, shall be segregated from the other funds of UGNL
or such other Guarantor and shall forthwith be paid over to the Lender to be
applied in whole or in part by the Lender against the Obligations, whether
matured or unmatured, and all such other expenses in accordance with the terms
of the Loan Agreement. If (i) UGNL or such other Guarantor shall make payment
to the Lender of all or any portion of the Obligations and (ii) all of the
Obligations and all such other expenses shall be paid in full, the Lender will,
at UGNL's or such other Guarantor's request, execute and deliver to UGNL or
such other Guarantor (without recourse, representation or warranty) appropriate
documents necessary to evidence the transfer by subrogation to UGNL or such
other Guarantor of an interest in the Obligations resulting from such payment
by UGNL or such other Guarantor, such subrogation to be fully subject and
subordinate, however, to the collection by the Lender of all other amounts due
to the Lender by the Borrower and each other Loan Party under the Loan
Agreement and the other Loan Documents
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<PAGE> 52
SECTION 10.05. No Waiver; Remedies. No failure on the part
of the Lender to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedy provided by law.
SECTION 10.06. Taxes .
(a) Each payment by UGNL or any other Guarantor under
this Loan Agreement shall be made without withholding for or on account of any
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding, in the case of the Lender,
taxes imposed on its income, and franchise taxes imposed on it by the
jurisdiction (or any political subdivision thereof) under the laws of which the
Lender is organized (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
"Taxes"); provided, however, that if such Taxes are required by law to be
withheld from any such payment, UGNL, or such other Guarantor, as applicable,
shall make such withholding for the account of the Lender, make timely payment
thereof to the appropriate governmental authority, and forthwith pay for the
account of the Lender such additional amount as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 10.06) the Lender receives an amount equal to
the sum it would have received had no such deductions been made. All such Taxes
shall be paid by UGNL, or such other Guarantor, as applicable, prior to the
date on which penalties attach thereto or interest accrues thereon; provided,
however, that, if any such penalties or interest become due, UGNL, or such
other Guarantor, as applicable, shall make prompt payment thereof to the
appropriate Governmental Authority.
(b) UGNL and each other Guarantor will indemnify the
Lender for the full amount of Taxes (including any Taxes on amounts payable
under this Section 10.06.) paid by the Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Lender makes
written demand therefor.
(c) Within 30 days after the date of any payment of
Taxes, UGNL or such other Guarantor, as applicable, will furnish to the Lender
the original or a certified copy of a receipt evidencing payment thereof. If no
Taxes are payable in respect of any payment hereunder or under the Note, UGNL
or such other Guarantor, as applicable, will furnish to the Lender a
certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to the Lender, in either case stating that such payment is exempt
from or not subject to Taxes.
(d) In addition, UGNL or such other Guarantor will pay
any stamp or other taxes of any jurisdiction with respect to the execution,
delivery, registration, performance and enforcement of this Guaranty, Taxes
specified in subsection (a) above and taxes of all jurisdictions with respect
to any amounts paid under this subsection (d). If any Taxes specified in
subsection (a) above or any taxes referred to in this subsection (d) are paid
by the Lender, UGNL or such
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<PAGE> 53
other Guarantor will, upon demand of the Lender, and whether or not such Taxes
or taxes shall be correctly or legally asserted, indemnify the Lender for such
payments, together with any interest, penalties and expenses in connection
therewith, plus interest thereon at the highest rate specified in the Note
(calculated as if such payments constituted overdue amounts of principal as of
the date of the making of such payments).
SECTION 10.07. Judgment. If, for the purposes of obtaining
judgment in any court, it is necessary to convert a sum due from the Guarantor
hereunder in United States Dollars into another currency (the "Other
Currency"), the rate of exchange used shall be that at which the Lender could,
in accordance with normal banking procedures, purchase United States Dollars
with the Other Currency on the Business Day preceding that on which final
judgment is given. The obligation of the Guarantor in respect of any such sum
due from it to the Lender hereunder shall, notwithstanding any judgment in such
Other Currency, be discharged only to the extent that, on the Business Day
immediately following the date on which the Lender receives any sum adjudged to
be so due in the Other Currency, the Lender may, in accordance with normal
banking procedures, purchase United States Dollars with the Other Currency. If
the United States Dollars so purchased are less than the sum originally due to
the Lender in United States Dollars, the Guarantor agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify the Lender
against such loss, and if the United States Dollars so purchased exceed the sum
originally due to the Lender in United States Dollars, the Lender agrees to
remit to the Guarantor such excess.
SECTION 10.08. Payment. The Guarantor will make each
payment hereunder in lawful money of the United States of America and in
immediately available funds to the Loan Account.
SECTION 10.09. Stay of Acceleration. If acceleration of the
time for payment of any amount payable by the Borrower in respect of the
Obligations is stayed upon the insolvency, bankruptcy or reorganization of the
Borrower, all such amounts otherwise subject to acceleration under the terms of
this Agreement shall nonetheless be payable by UGNL and any other Guarantor
hereunder forthwith on demand by the Lender.
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<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
GRANT GEOPHYSICAL, INC.
By:
-----------------------------
Name:
Title:
UNITED GEOPHYSICAL (NIGERIA) LTD.
By:
-----------------------------
Name:
Title:
MADELINE L.L.C.
By:
-----------------------------
Name:
Title:
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<PAGE> 55
Schedule I
Subsidiaries
<PAGE> 56
Schedule II
Indebtedness
<PAGE> 57
Schedule III
Environmental
<PAGE> 58
Schedule IV
Liens
<PAGE> 59
Schedule V
Investments
<PAGE> 60
Schedule VI
Litigation
<PAGE> 61
Schedule VII
Operating Lease Obligations
<PAGE> 62
Schedule VIII
Monthly and Weekly Reporting Requirements
<PAGE> 63
Schedule IX
Names
<PAGE> 64
Schedule X
Guaranties
<PAGE> 65
EXHIBIT A
FORM OF NOTE
$3,843,750.00 Dated: February 20, 1996
New York, New York
FOR VALUE RECEIVED, GRANT GEOPHYSICAL, INC., a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of MADELINE
L.L.C., a New York limited liability company (the "Lender") (i) the initial
principal amount of THREE MILLION EIGHT HUNDRED FORTY-THREE THOUSAND SEVEN
HUNDRED FIFTY AND 00/100 DOLLARS ($3,843,750), or, the aggregate unpaid
principal amount of the Loan (as defined in the Loan Agreement hereinafter
referred to) made by the Lender to the Borrower, payable in such installments
and at such times as are specified in the Loan Agreement, and (ii) interest on
the unpaid principal amount of the Obligations under the Loan Agreement from
the date such Loan is made until all such Obligations are paid in full, at such
interest rates, and payable at such times, as are specified in the Loan
Agreement.
Notwithstanding any other provision of the Note, interest paid or
becoming due hereunder or under the Loan Agreement, or any document or
instrument executed in connection herewith or therewith, shall in no event
exceed the maximum rate permitted by applicable law. Both principal and
interest are payable in lawful money of the United States of America in
immediately available funds to Madeline L.L.C. at 950 Third Avenue, New York,
New York 10022, Attention: Mr. Kevin Genda, or such other office as the Lender
may designate.
The Loan made by the Lender to the Borrower pursuant to the Loan
Agreement, and all payments made on account of principal hereof, shall be
recorded by the Lender and, prior to any transfer hereof, indorsed on the
schedule attached hereto which is a part of this Note.
This Note is the Note referred to in, and is entitled to the
benefits of, the Term Loan Agreement dated as of February 20, 1996 (as amended
or otherwise modified from time to time, the "Loan Agreement"), among the
Borrower, United Geophysical (Nigeria) Ltd. and the Lender. The Loan
Agreement, among other things, contains provisions for the acceleration of the
maturity of the unpaid principal amount of this Note upon the happening of
certain stated events of default and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
specified therein. The Borrower hereby waives presentment for payment, demand,
protest and notice of dishonor of this Note.
<PAGE> 66
This Note shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of New York applicable to
contracts made and to be performed therein without consideration as to choice
of law.
GRANT GEOPHYSICAL, INC.
By:
---------------------------
Name:
Title:
-2-
<PAGE> 67
LOAN AND REPAYMENT OF PRINCIPAL
<TABLE>
<CAPTION>
Amount Principal Principal Notation
of Loan Paid or Prepaid Balance Made By
- ------- --------------- --------- -------
<S> <C> <C> <C>
</TABLE>
<PAGE> 68
EXHIBIT B
Form of Guaranty
<PAGE> 69
EXHIBIT C
Form of Security Agreement
<PAGE> 70
EXHIBIT D
Form of Intercreditor Agreement
<PAGE> 71
EXHIBIT E
Form of Opinion
<PAGE> 72
EXHIBIT F
Form of Borrowing Base Certificate
<PAGE> 73
EXHIBIT G
Form of Notice of Borrowing
<PAGE> 74
EXHIBIT H
Form of Assignment of Nigerian Accounts Receivable
<PAGE> 75
EXHIBIT I
Form of Guarantor Security Agreement
<PAGE> 1
EXHIBIT 11.01
GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
COMPUTATION OF INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
(dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
--------------------------------
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE:
Net income (loss)................................................... $ (572) $ 40
Dividend requirement on $2.4375 preferred stock* ................... (2,534) (1,315)
----------- -----------
Net loss applicable to common stock,
net of preferred dividends* ...................................... $ (3,106) $ (1,275)
=========== ===========
LOSS PER COMMON SHARE-ASSUMING
NO AND FULL DILUTION:
Net income(loss) ................................................. $ (0.05) $ --
Dividend requirement on $2.4375 preferred stock*.................. (0.20) (0.10)
=========== ===========
Net loss per common share, net of preferred dividends* ........... $ (.25) $ (0.10)
=========== ===========
COMPUTATION OF WEIGHTED AVERAGE COMMON SHARES-
PRIMARY AND FULLY DILUTED:
Weighted average number of common shares outstanding.............. 12,306,490 12,173,886
Common shares issuable for warrants and under incentive
stock option plan................................................ 965,250 681,750
Less shares assumed repurchased with proceeds..................... (599,658) (337,234)
----------- -----------
12,672,082 12,518,402
=========== ===========
</TABLE>
* The income/loss is decreased/increased by the undeclared, unpaid cumulative
preferred stock dividends in calculating net income/loss attributable to the
common shareholders.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1996 (Unaudited) and the Consolidated
Statement of Operations for the Three Months Ended March 31, 1996 (Unaudited)
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 880
<SECURITIES> 0
<RECEIVABLES> 37,773
<ALLOWANCES> 1,901
<INVENTORY> 1,095
<CURRENT-ASSETS> 50,240
<PP&E> 103,065
<DEPRECIATION> 65,146
<TOTAL-ASSETS> 93,523
<CURRENT-LIABILITIES> 45,458
<BONDS> 0
<COMMON> 24
0
1,513
<OTHER-SE> 29,537
<TOTAL-LIABILITY-AND-EQUITY> 93,523
<SALES> 0
<TOTAL-REVENUES> 27,808
<CGS> 0
<TOTAL-COSTS> 26,748
<OTHER-EXPENSES> 87
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,322)
<INCOME-PRETAX> (175)
<INCOME-TAX> 397
<INCOME-CONTINUING> (572)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (572)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
