LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of February 16, 2001 (this "Agreement"), is
between CONCORD TECHNOLOGIES, LP, a Texas limited partnership ("Concord"),
GEOSPACE ENGINEERING RESOURCES INTERNATIONAL, LP, a Texas limited partnership
("Engineering"), GEO SPACE, LP, a Texas limited partnership ("Geo Space"), OYO
INSTRUMENTS, LP, a Texas limited partnership ("Instruments"), and OYOG
OPERATIONS, LP, a Texas limited partnership ("Operations", and together with
Concord, Engineering, Geo Space and Instruments, the "Borrowers"), jointly and
severally, and SOUTHWEST BANK OF TEXAS, N.A., a national banking association
("Lender").
R E C I T A L S :
Borrowers have requested that Lender extend credit to Borrowers in the form
of a revolving line of credit in the amount of $10,000,000.00 under which
Borrowers may request (a) advances and (b) letters of credit (subject to a
$5,000,000.00 sublimit). Lender is willing to make such extensions of credit to
Borrowers upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I.
Definitions
Section I.1. Definitions. As used in this Agreement, the following terms
have the following meanings:
"Advance" means an advance of funds by Lender to Borrowers pursuant to
Article II.
"Advance Request Form" means a certificate, in substantially the form
of Exhibit "K" hereto, properly completed and signed by an Authorized
Representative requesting an Advance.
"Affiliate" means, with respect to any Person, any other Person which,
directly or indirectly, controls or is controlled by or is under common
control with such Person, including, (a) any Person which
beneficially owns or holds ten percent (10%) or more of any class of voting
stock of such Person or ten percent (10%) or more of the equity interest in
such Person, (b) any Person of which such Person beneficially owns or holds
ten percent (10%) or more of any class of voting shares or in which such
Person beneficially owns or holds ten percent (10%) or more of the equity
interests in such Person, and (c) any officer or director of such Person.
"Annualized" means with respect to the calculation of EBITDA and, in
the calculation of the Ratio of EBITDA to Interest Expense, Interest
Expense (such amounts are referred to as the "Tested Amount" in this
definition), (a) for the fiscal quarter ended December 31, 2000, the Tested
Amount times four (4), (b) for the fiscal quarter ending March 31, 2001,
(i) the sum of the Tested Amount for the fiscal quarter ending March 31,
2001 plus the Tested Amount for the fiscal quarter ending December 31, 2000
(ii) multiplied by two (2), and (c) for the fiscal quarter ending June 30,
2001, (i) the sum of the Tested Amount for the fiscal quarter ending June
30, 2001, plus the Tested Amount for the fiscal quarter ending March 30,
2001, plus the Tested Amount for the fiscal quarter ended December 31,
2000, (ii) multiplied by four thirds (4/3).
"Arbitration Agreement" means the Arbitration Agreement executed by
Borrowers and Guarantors in substantially the form of Exhibit "S" hereto,
as the same may be amended, supplemented, or modified.
"Authorized Representative" means any officer or employee of Borrowers
who has been designated in writing by Borrowers to Lender to be an
Authorized Representative.
"Autopay Agreement" means that certain Southwest Autopay Agreement
between Operations and Lender, and all modifications, amendments and
supplements thereto and all restatements and replacements thereof.
"Borrowing Base" means, at any particular time, an amount equal to the
sum of (a) eighty percent (80%) of Eligible Accounts plus (b) the lesser of
(i) fifteen percent (15%) of Eligible Inventory and (ii) $2,000,000.00 plus
(c) eighty percent (80%) of Eligible Notes.
"Borrowing Base Certificate" means a certificate in the form of
Exhibit "L" hereto, fully completed and executed by Borrowers.
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"Business Day" means any day on which commercial banks are not
authorized or required to close in Houston, Texas.
"Capital Expenditures" means, for any Person, all expenditures for
assets which, in accordance with GAAP, are required to be capitalized and
so shown on the balance sheet of such Person.
"Capital Lease Obligations" means, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) real and/or personal property, which
obligations are required to be classified and accounted for as a capital
lease on a balance sheet of such Person under GAAP.
"Closing Date" means the date on which this Agreement has been
executed and delivered by the parties hereto and the conditions set forth
in Section 5.1 have been satisfied.
"Collateral" has the meaning specified in Section 4.1.
"Commitment" means the obligation of Lender to make Advances and issue
Letters of Credit hereunder in an aggregate principal amount at any time
outstanding up to but not exceeding $10,000,000.00.
"Concord" has the meaning given to such term in the first paragraph of
this Agreement.
"Contribution Agreement" means the Contribution Agreement executed by
Guarantors in substantially the form of Exhibit "I" hereto, as the same may
be amended, supplemented, or modified.
"Debt" means for any Person, without duplication, (a) all
indebtedness, whether or not represented by bonds, debentures, notes,
securities, or other evidences of indebtedness, for the repayment of money
borrowed, (b) all indebtedness representing deferred payment of the
purchase price of property or assets (other than trade payables), (c) all
Capital Lease Obligations, (d) all indebtedness under guaranties,
endorsements, assumptions, or other contingent obligations, in respect of,
or to purchase or otherwise acquire, indebtedness of others, (e) all
indebtedness secured by a Lien existing on property owned, subject to such
Lien, whether or not the indebtedness secured thereby shall have been
assumed by the owner thereof, and (f) any obligation to redeem or
repurchase any of such Person's capital stock, warrants, or stock
equivalents.
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"Default Rate" means the lesser of (a) the sum of the Prime Rate in
effect from day to day plus two percent (2.0%) or (b) the Maximum Rate.
"Domestic Receivables" means accounts receivable of any Borrower which
are owed by a Person that is a citizen of or organized under the laws of
the United States of America or any State thereof and are not owed by a
Foreign Person.
"EBITDA" means for Parent and its Subsidiaries, on a consolidated
basis, for any period, the sum of (a) Net Income for such period, plus (b)
depreciation, amortization and other non cash charges for such period, plus
(c) Interest Expense for such period, plus (d) income tax expense for such
period.
"Eligible Accounts" means the aggregate of all accounts receivable of
Borrowers that satisfy the following conditions: (a) are due and payable
within sixty (60) days; (b) have been outstanding less than ninety (90)
days past the original date of invoice; (c) have arisen in the ordinary
course of business from services performed by any Borrower to or for the
account debtor or from the sale by any Borrower of goods in which one or
more Borrowers had sole ownership where such goods have been shipped or
delivered to the account debtor; (d) represent complete bona fide
transactions which require no further act under any circumstances on the
part of any Borrower to make such accounts receivable payable by the
account debtor; (e) the goods the sale of which gave rise to such accounts
receivable were shipped or delivered to the account debtor on an absolute
sale basis and not on consignment, a sale or return basis, a guaranteed
sale basis, a xxxx and hold basis, or on the basis of any similar
understanding; (f) the goods the sale of which gave rise to such accounts
receivable were not, at the time of sale thereof, subject to any Lien,
except the security interest in favor of Lender created by the Loan
Documents; (g) are not subject to any provisions prohibiting assignment or
requiring notice of or consent to such assignment; (h) are subject to a
perfected, first priority security interest in favor of Lender and are not
subject to any other Lien; (i) are not subject to setoff, counterclaim,
defense, allowance, dispute, or adjustment other than normal discounts for
prompt payment, and the goods of sale which gave rise to such accounts
receivable have not been returned, rejected, repossessed, lost, or damaged;
(j) the account debtor is not insolvent or the subject of any bankruptcy or
insolvency proceeding and has not made an assignment for the benefit of
creditors, suspended
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normal business operations, dissolved, liquidated, terminated its
existence, ceased to pay its debts as they become due, or suffered a
receiver or trustee to be appointed for any of its assets or affairs; (k)
except for Eligible Notes, are not evidenced by chattel paper or any
instrument of any kind; (l) are Domestic Receivables; (m) are Foreign
Receivables and Lender has not delivered to any Borrower notice that either
(i) such Foreign Receivables do not constitute Eligible Accounts or (ii)
the accounts receivable of the Foreign Person who is the account debtor
with respect to such Foreign Receivables do not constitute Eligible
Accounts; (n) if any accounts receivable are owed by the United States of
America or any department, agency, or instrumentality thereof, the Federal
Assignment of Claims Act shall have been complied with; and (o) are not
owed by an Affiliate of any Borrower other than OYO Japan. No account
receivable owed by an account debtor to any Borrower shall be included as
an Eligible Account if more than twenty percent (20%) of the balances then
outstanding on accounts receivable owed by such account debtor and its
affiliates to Borrowers have remained unpaid for more than eighty-nine (89)
days from the dates of their original invoices. The amount of any Eligible
Accounts owed by an account debtor to Borrowers shall be reduced by the
amount of all "contra accounts" and other obligations owed by any Borrower
to such account debtor. In the event that at any time the accounts
receivable from any account debtor and its affiliates to Borrowers exceed
twenty percent (20%) the accounts receivable of Borrowers, the accounts
receivable from such account debtor and its affiliates shall not constitute
Eligible Accounts to the extent to which such accounts receivable exceed
twenty percent (20%) of the accounts receivable of Borrowers; provided,
however, that with respect to Persons which have been specifically approved
by Lender, the twenty percent (20%) limitation contained in this sentence
shall be a fifty percent (50%) limitation.
"Eligible Inventory" means, at any time, all inventory of raw
materials, work-in-process and finished goods then owned by (and in the
possession or under the control of) any Borrower, located in the State of
Texas, and held for sale or disposition in the ordinary course of any
Borrower's business, in which Lender has a perfected, first priority
security interest, valued at the lower of actual cost or fair market value.
Eligible Inventory shall not include (a) inventory that has been shipped or
delivered to a customer on consignment, a sale or return basis, or on the
basis of any similar understanding (b) inventory with respect to which a
claim exists disputing any Borrower's title to or right to possession of
such inventory, (c) inventory that is not in good condition or does not
comply with any applicable laws, rules, or regulations or the standards
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imposed by any governmental authority with respect to its manufacture, use,
or sale, and (d) inventory that Lender, in its reasonable sole discretion,
has determined to be unmarketable.
"Eligible Notes" means promissory notes executed by any Person to
evidence such Person's obligation to pay Borrower for the sale of goods or
the provision of services by Borrower to such Person, which have been
specifically approved by Lender to be Eligible Notes and which have been
endorsed to Lender (in a manner satisfactory to Lender) and delivered to
Lender.
"Engineering" has the meaning given to such term in the first
paragraph of this Agreement.
"Environmental Laws" means any and all federal, state and local laws,
regulations, and judicially enforceable requirements pertaining to
occupational health and safety, or the environment, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. (S) 9601 et seq., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. (S) 6901 et seq., the
Occupational Safety and Health Act, 29 U.S.C. (S) 651 et seq., the Clean
Water Act, 33 U.S.C. (S) 1251 et seq., the Toxic Substances Control Act, 15
U.S.C. (S) 2601 et seq., and all similar laws, regulations, and judicially
enforceable requirements of any governmental authority or agency having
jurisdiction over any Borrower, any Guarantor or any Subsidiary or any of
their respective properties or assets, as such laws, regulations, and
judicially enforceable requirements may be amended or supplemented.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published
interpretations thereunder.
"Event of Default" has the meaning specified in Section 10.1.
"Field Audits" means audits, verifications and inspections of the
accounts receivable and inventory of Borrowers conducted by an independent
third Person selected by Lender.
"Foreign Person" any Person organized under the laws of a jurisdiction
located outside of the United States of America.
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"Foreign Receivables" means accounts receivable of any Borrower which
are owed by a Foreign Person.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants or in
statements of the Financial Accounting Standards Board or their respective
successors and which are applicable in the circumstances as of the date in
question. Accounting principles are applied on a "consistent basis" when
the accounting principles observed in a current period are comparable in
all material respects to those accounting principles applied in a preceding
period.
"Geo Space" has the meaning given to such term in the first paragraph
of this Agreement.
"General Partner" means OYOG, LLC, a Delaware limited liability
company, and its successors and assigns.
"Guarantors" means General Partner, Limited Partner and Parent.
"Guaranty-General Partner" means the Guaranty Agreement executed by
General Partner in favor of Lender in substantially the form of Exhibit "F"
hereto, as the same may be amended, supplemented or modified.
"Guaranty-Limited Partner" means the Guaranty Agreement executed by
Limited Partner in favor of Lender in substantially the form of Exhibit "G"
hereto, as the same may be amended, supplemented or modified.
"Guaranty-Parent" means the Guaranty Agreement executed by Parent in
favor of Lender in substantially the form of Exhibit "H" hereto, as the
same may be amended, supplemented or modified.
"Guaranty Agreements" means the Guaranty-General Partner, the
Guaranty-Limited Partner and the Guaranty-Parent.
"Hazardous Substance" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed or regulated as a hazardous or toxic material under any
Environmental Law, including, without limitation, asbestos, petroleum, and
polychlorinated biphenyls.
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"Instruments" has the meaning given to such term in the first
paragraph of this Agreement.
"Interest Expense" means for any Person for any period, the sum of all
cash interest expense paid or accrued, or required to be accrued in
accordance with GAAP consistently applied.
"Letter of Credit" means any letter of credit issued by Lender for the
account of Borrowers pursuant to Article II.
"Letter of Credit Liabilities" means, at any time, the aggregate face
amounts of all outstanding Letters of Credit.
"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment, preference,
priority, or other encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or title retention agreement),
whether arising by contract, operation of law, or otherwise.
"Limited Partner" means OYOG Limited Partner, LLC, a Nevada limited
liability company, and its successors and assigns.
"Loan Documents" means this Agreement and all promissory notes,
security agreements, deeds of trust, assignments, letters of credit,
guaranties, and other instruments, documents, and agreements executed and
delivered pursuant to or in connection with this Agreement, as such
instruments, documents, and agreements may be amended, modified, renewed,
extended, or supplemented.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of any
Borrower and its Subsidiaries, taken as a whole, or any Guarantor and its
Subsidiaries, taken as a whole, (b) the ability of Borrowers to pay the
Obligations or the ability of any Borrower or any Guarantor to perform its
respective obligations under this Agreement or any of the other Loan
Documents, or (c) the validity or enforceability of this Agreement or any
of the other Loan Documents, or the rights or remedies of Lender hereunder
or thereunder.
"Maximum Rate" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including Chapter 303 of the
Texas Finance Code (the "Code") (and as the same may be incorporated
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by reference in other Texas statutes). To the extent that Chapter 303 of
the Code is relevant to Lender for the purposes of determining the Maximum
Rate, Lender elects to determine such applicable legal rate pursuant to the
"weekly ceiling," from time to time in effect, as referred to and defined
in Chapter 303 of the Code; subject, however, to the limitations on such
applicable ceiling referred to and defined in the Code, and further subject
to any right Lender may have subsequently, under applicable law, to change
the method of determining the Maximum Rate.
"Net Income" means, for any Person for any period, the consolidated
net income (or loss) of such Person for such period, calculated in
accordance with GAAP applied consistently.
"No Default Certificate" means a certificate in the form of Exhibit
"M" hereto, fully completed and executed by Borrowers and Parent.
"Note" means the promissory note executed by Borrowers payable to the
order of Lender, in substantially the form of Exhibit "A" hereto, as the
same may be renewed, extended or modified and all promissory notes executed
in renewal, extension, modifications or substitution thereof.
"Obligations" means all obligations, indebtedness, and liabilities of
Borrowers to Lender now existing or hereafter arising under this Agreement
and the other Loan Documents (including, without limitation, all of
Borrowers' contingent reimbursement obligations in respect of Letters of
Credit), and all interest accruing thereon and all attorneys' fees and
other expenses incurred in the enforcement or collection thereof.
"Operations" has the meaning given to such term in the first paragraph
of this Agreement.
"Organizational Documents" means, for any Person, (a) the articles of
incorporation and bylaws of such Person if such Person is a corporation,
(b) the articles of organization and regulations of such Person if such
Person is a limited liability company, (c) the limited partnership
agreement of such Person if such Person is a limited partnership, or (d)
the documents under which such Person was created and is governed if such
person is not a corporation, limited liability company or limited
partnership.
"Parent" means OYO Geospace Corporation, a Delaware corporation, and
its successors and assigns.
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"Partners" means General Partner and Limited Partner.
"Person" means any individual, corporation, limited liability company,
business trust, association, company, partnership, joint venture,
governmental authority, or other entity.
"Prime Rate" means that variable rate of interest per annum
established by Lender from time to time as its prime rate which shall vary
from time to time. Such rate is set by Lender as a general reference rate
of interest, taking into account such factors as Lender may deem
appropriate, it being understood that many of Lender's commercial or other
loans are priced in relation to such rate, that it is not necessarily the
lowest or best rate charged to any customer and that Lender may make
various commercial or other loans at rates of interest having no
relationship to such rate.
"Ratio of EBITDA to Interest Expense" means for Parent and its
Subsidiaries, on a consolidated basis, for any period, (a) EBITDA for such
period, divided by (b) Interest Expense for such period.
"Ratio of Senior Debt to EBITDA" means for Parent and its
Subsidiaries, on a consolidated basis, for any period (a) Senior Debt as of
the last day of such period, divided by (b) EBITDA for such period.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented.
"Regulatory Change" means, with respect to Lender, any change after
the date of this Agreement in United States federal or state laws or
regulations (including Regulation D or the adoption or making after such
date any interpretations, directives, or requests applying to a class of
banks including Lender) of or under any United States federal or state laws
or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Security Agreement-Concord" means the Security Agreement executed by
Concord in favor of Lender in substantially the form of Exhibit "B" hereto,
as the same may be amended, supplemented or modified.
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"Security Agreement-Engineering" means the Security Agreement executed
by Engineering in favor of Lender in substantially the form of Exhibit "C"
hereto, as the same may be amended, supplemented or modified.
"Security Agreement-Geo Space" means the Security Agreement executed
by Geo Space in favor of Lender in substantially the form of Exhibit "D"
hereto, as the same may be amended, supplemented or modified.
"Security Agreement-Instruments" means the Security Agreement executed
by Instruments in favor of Lender in substantially the form of Exhibit "E"
hereto, as the same may be amended, supplemented or modified.
"Security Agreement-Operations" means the Security Agreement executed
by Operations in favor of Lender in substantially the form of Exhibit "N"
hereto, as the same may be amended, supplemented or modified.
"Security Agreements" means the Security Agreement-Concord, the
Security Agreement-Engineering, the Security Agreement-Geo Space, the
Security Agreement-Instruments and the Security Agreement-Operations.
"Senior Debt" means, at any time, for Parent and its Subsidiaries, on
a consolidated basis, (a) all indebtedness for borrowed money, other than
Subordinated Debt, whether or not evidenced by bonds, debentures, notes or
similar instruments, including the Note, (b) all obligations to pay the
deferred purchase price of property or services (but excluding trade
accounts payable or trade notes in the ordinary course of business that are
not past due by more than 90 days), (c) all Capital Lease Obligations, and
(d) all indebtedness secured by a Lien (other than landlord's Liens) on the
property of Parent or its Subsidiaries.
"Subordinated Debt" means Debt of Parent or any of its Subsidiaries to
any Person, the payment of which has been subordinated to the payment of
the Senior Debt in a manner satisfactory to Lender and by a document
satisfactory to Lender.
"Subsidiary" means any Person of which or in which Parent and its
other Subsidiaries own or control, directly or indirectly, fifty percent
(50%) or more of (a) the combined voting power of all classes having
general voting power under ordinary circumstances to elect a majority of
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the directors or equivalent body of such Person, if it is a corporation,
(b) the capital interest or profits interest of such Person, if it is a
partnership, limited liability company, joint venture or similar entity, or
(c) the beneficial interest of such Person, if it is a trust, association
or other unincorporated association or organization.
"Tangible Net Worth" means, at any particular time, all amounts which,
in conformity with GAAP, would be included as stockholders' equity on a
consolidated balance sheet of Parent and its Subsidiaries; provided,
however, there shall be excluded therefrom (a) any amount at which shares
of capital stock of Parent appear as an asset on Parent's or any
Subsidiary's balance sheet, (b) goodwill, including any amounts, however
designated, that represent the excess of the purchase price paid for assets
or stock over the value assigned thereto, (c) patents, trademarks, trade
names, and copyrights, (d) deferred expenses, (e) loans and advances to any
stockholder, director, officer, or employee of Parent or any Subsidiary or
any Affiliate, and (f) all other assets which are properly classified as
intangible assets.
"Termination Date" means 11:00 a.m., Houston, Texas time on February
15, 2002, or such earlier date on which the Commitment terminates as
provided in this Agreement.
"Unmatured Event of Default" means the occurrence of an event or the
existence of a condition which, with the giving of notice or the passage of
time would constitute an Event of Default.
Section I.2. Other Definitional Provisions. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
specified, all Article and Section references pertain to this Agreement. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP. Terms used herein that are defined in the Uniform
Commercial Code as adopted by the State of Texas, unless otherwise defined
herein, shall have the meanings specified in the Uniform Commercial Code as
adopted by the State of Texas.
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ARTICLE II.
Advances and Letters of Credit
Section II.1. Advances. Subject to the terms and conditions of this
Agreement, Lender agrees to make one or more Advances to Borrowers from time to
time from the date hereof to and including the Termination Date in an aggregate
principal amount at any time outstanding up to but not exceeding the Commitment;
provided that the aggregate amount of all Advances at any time outstanding shall
not exceed the lesser of (a) the Commitment minus the outstanding Letter of
Credit Liabilities or (b) the Borrowing Base minus the outstanding Letter of
Credit Liabilities. Lender shall have no obligation to make any Advance if an
Event of Default or an Unmatured Event of Default has occurred and is
continuing. Subject to the foregoing limitations, and the other terms and
provisions of this Agreement, Borrowers may borrow, repay, and reborrow
hereunder.
Section II.2. The Note. The obligation of Borrowers to repay the Advances
shall be evidenced by the Note executed by Borrowers, payable to the order of
Lender, in the principal amount of the Commitment.
Section II.3. Repayment of Advances; Extensions. Borrowers shall repay
the unpaid principal amount of all Advances on the earlier of (a) the
Termination Date or (b) such other dates on which the Advances are or may be
required to be paid pursuant to this Agreement. Prior to the Termination Date,
Lender will review such matters as it may deem appropriate in its sole
discretion and may, in its sole and absolute discretion, determine whether to
extend the Termination Date.
Section II.4. Interest. The unpaid principal amount of the Advances shall
bear interest prior to maturity at a varying rate per annum equal from day to
day to the lesser of (a) the Maximum Rate or (b) the Prime Rate in effect from
day to day, and each change in the rate of interest charged on the Advances
shall become effective, without notice to any Borrower, on the effective date of
each change in the Prime Rate or the Maximum Rate, as the case may be; provided,
however, if at any time the rate of interest specified in clause (b) preceding
shall exceed the Maximum Rate, thereby causing the interest on the Advances to
be limited to the Maximum Rate, then any subsequent reduction in the Prime Rate
shall not reduce the rate of interest on the Advances below the Maximum Rate
until the aggregate amount of interest actually accrued on the Advances equals
the amount of interest which would have accrued on the Advances if the interest
rate specified in clause (b) preceding had at all times been in effect. Accrued
and unpaid interest on the Advances shall be payable on the first day of each
month commencing on April 1, 2001, and on the earlier of the Termination Date or
any other date on which the principal amount of the Advances is paid (whether as
a result of optional or mandatory prepayment or acceleration). If an Event of
Default has occurred
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and is continuing, all principal of the Advances and all past due interest
thereon shall bear interest at the Default Rate.
Section II.5. Requests for Advances. (a) As long as the Autopay
Agreement is in effect, Advances may be made as provided in the Autopay
Agreement, and Borrowers shall not be required to request an Advance directly
from Lender by means of an Advance Request Form.
(b) If Borrowers so choose, or if the Autopay Agreement is not in effect,
or if the Available Amount (as defined in the Autopay Agreement) is, or has been
declared to be, equal to zero, the procedures set forth in this paragraph (b)
shall apply. Borrowers shall give Lender notice of each requested Advance by
delivery to Lender of an Advance Request Form executed by an Authorized
Representative, properly completed and containing the information required
therein. Prior to making any Advance, Lender may require that Borrowers deliver
a Borrowing Base Certificate dated a recent date acceptable to Lender evidencing
that the amount of the outstanding Advances plus the requested Advance plus the
Letter of Credit Liabilities is less than the lesser of (a) the Commitment or
(b) the Borrowing Base. Assuming that each Advance Request Form or request for
Advance is in proper form, if Lender receives an Advance Request Form or request
for Advance prior to 1:00 p.m. on any Business Day, Lender will make the
requested Advance on the same Business Day, and if Lender receives an Advance
Request Form or request for Advance after 1:00 p.m., Lender will make the
requested Advance on the next Business Day.
Section II.6. Use of Proceeds. The proceeds of Advances shall be used to
refinance existing indebtedness and for working capital purposes.
Section II.7. Mandatory Prepayment. If at any time the outstanding
principal amount of the Advances plus the Letter of Credit Liabilities exceeds
the Borrowing Base, Borrowers shall immediately prepay the outstanding Advances
by the amount of the excess plus accrued and unpaid interest on the amount so
prepaid or, if no (or insufficient) Advances are outstanding, Borrowers shall
immediately pledge to Lender cash or cash equivalent investments in an amount
equal to the excess as security for the Letter of Credit Liabilities.
Section II.8. Letters of Credit. Subject to the terms and conditions of
this Agreement, Lender agrees to issue one or more Letters of Credit for the
account of Borrowers from time to time from the date hereof to and including the
Termination Date; provided, however, that the outstanding Letter of Credit
Liabilities shall not at any time exceed the least of (a) $5,000,000.00, (b) the
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Commitment minus the outstanding Advances, or (c) the Borrowing Base minus the
outstanding Advances. Each Letter of Credit shall have an expiration date which
shall not be more than one year after the Termination Date. Each Letter of
Credit shall be payable in United States dollars, shall support a transaction
that is entered into in the ordinary course of any Borrower's business, and
shall otherwise be satisfactory in form and substance to Lender. No Letter of
Credit shall require any payment by Lender to the beneficiary thereunder
pursuant to a drawing prior to the end of the Business Day next following
presentment of a draft and any related documents to Lender. Notwithstanding any
provision of this Agreement to the contrary, in the event that any Borrower
should request that Lender issue, and Lender should issue, a letter of credit,
the face amount of which is fully secured by cash or cash equivalent securities
acceptable to Lender, such letter of credit shall not constitute a Letter of
Credit under this Agreement.
Section II.9. Procedure for Issuing Letters of Credit; Fully Cash Secured
Letters of Credit. Each Letter of Credit shall be issued upon receipt by Lender
of written notice from an Authorized Representative requesting the issuance of
such Letter of Credit, which notice shall be received by Lender at least three
(3) Business Days prior to the requested date of issuance of such Letter of
Credit. Such notice shall be accompanied by Lender's standard application for
issuance of Letters of Credit (commercial or standby) as then in effect and such
other documents and instruments as Lender may require. Such notice and
application (both front and back sides) may be sent by fax, provided that
Borrowers hold Lender harmless with respect to actions taken by Lender based
upon notices and applications sent by fax. Each request for a Letter of Credit
shall constitute a representation by Borrowers to Lender as to each of the
matters set forth in the Borrowing Base Certificate, including representations
that (a) the sum of (i) the outstanding Advances plus (ii) the Letter of Credit
Liabilities plus (iii) the face amount of the requested Letter of Credit does
not exceed the lesser of the Borrowing Base or the Commitment, and (b) no Event
of Default exists. Prior to Issuing any Letter of Credit, Lender may request a
Borrowing Base Certificate from Borrowers dated of a recent date acceptable to
Lender evidencing that the statements contained in the preceding sentence are
correct.
Section II.10. Payments Constitute Advances. Each payment by Lender
pursuant to a drawing under a Letter of Credit shall constitute and be deemed an
Advance by Lender to Borrowers under the Note and this Agreement as of the day
and time such payment is made by Lender and in the amount of such payment.
15
Section II.11. Letter of Credit Fees. Borrowers shall pay to Lender a
letter of credit fee payable on the date each Letter of Credit is issued in an
amount equal to the greater of (a) one percent (1.0%) per annum of the stated
amount of such Letter of Credit for the period during which such Letter of
Credit will remain outstanding, based on a 360 day year and the actual number of
days to elapse, and (b) $300.00. In addition, Borrowers shall pay to Lender (a)
at the time of issuance of any Letter of Credit, all out-of-pocket costs
incurred by Lender in connection with the issuance of such Letter of Credit (b)
upon the payment of any Letter of Credit, all applicable payment fees, and (c)
upon the amendment (including the extension) of any Letter of Credit, all
applicable amendment fees.
Section II.12. Obligations Absolute. The obligations of Borrowers under
this Agreement and the other Loan Documents, including without limitation the
obligation of Borrowers to reimburse Lender for payment of drawings under any
Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement and the other
Loan Documents under all circumstances, including (a) any lack of validity or
enforceability of any Letter of Credit or any other Loan Document, (b) the
existence of any claim, set-off, counterclaim, defense or other rights which any
Borrower, any Obligated Party or any other Person may have at any time against
any beneficiary of any Letter of Credit, Lender, or any other Person, whether in
connection with this Agreement or any other Loan Document or any unrelated
transaction, (c) if any statement, draft or other document presented under any
Letter of Credit proves to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein is untrue or inaccurate in any respect
whatsoever, (d) payment by Lender under any Letter of Credit against
presentation of a draft or other document which does not comply with the terms
of such Letter of Credit in a manner which is not material (but which in any
event complies with the requirements of Section 5.108(a) of the Texas Uniform
Commercial Code), (e) any amendment or waiver of, or any consent to departure
from, any Loan Document or (f) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
Section II.13. Limitation of Liability. Borrowers assume all risks of the
acts or omissions of any beneficiary of any Letter of Credit with respect to its
use of such Letter of Credit. Neither Lender or any of its officers, employees
or directors shall have any responsibility or liability to any Borrower or any
other Person for (a) the failure of any draft to bear any reference or adequate
reference to any Letter of Credit, or the failure of any documents to accompany
any draft at negotiation (provided such documents are otherwise timely
presented), or the failure of any Person to surrender or to take up any Letter
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of Credit or to send documents apart from drafts as required by the terms of any
Letter of Credit (provided such documents are otherwise timely presented), or
the failure of any Person to note the amount of any instrument on any Letter of
Credit, each of which requirements, if contained in any Letter of Credit itself,
it is agreed may be waived by Lender, (b) errors, omissions, interruptions or
delays in transmission or delivery of any messages, (c) the validity,
sufficiency or genuineness of any draft or other document, or any endorsement
thereon, even if any such draft, document or endorsement should in fact prove to
be in any and all respects invalid, insufficient, fraudulent or forged or any
statement therein is untrue or inaccurate in any respect or (d) payment by
Lender to the beneficiary of any Letter of Credit against presentation of any
draft or other document that does not comply with the terms of the Letter of
Credit in a respect which is not material (but which in any event complies with
the requirement of Section 5.108(a) of the Texas Uniform Commercial Code).
Lender may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary. Notwithstanding the foregoing, Lender shall be
liable to Borrowers to the extent of any direct, but not consequential, damages
suffered by Borrowers which Borrowers prove in a final nonappealable judgment
were caused by (i) Lender's willful misconduct or negligence in determining
whether documents presented under any Letter of Credit complied with the terms
thereof or (ii) Lender's willful failure to pay under any Letter of Credit after
presentation to it of documents strictly complying with the terms and conditions
of such Letter of Credit.
Section II.14. Cash Deposit Prior to Termination Date. If Letters of
Credit are to be outstanding after the Termination Date, not later than five (5)
Business Days prior to the Termination Date, Borrowers will deposit with Lender
cash, or pledge to Lender (in an manner satisfactory to Lender) cash equivalent
investments or other collateral acceptable to Lender, or a combination thereof,
in an amount equal to the sum of the face amounts of the Letters of Credit which
will remain outstanding after the Termination Date.
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ARTICLE III.
Payments
Section III.1. Method of Payment. All payments of principal, interest,
and other amounts to be made by Borrowers under this Agreement, the Note or any
other Loan Documents shall be made to Lender at its designated office, without
setoff, deduction, or counterclaim in immediately available funds. Whenever any
payment under this Agreement, the Note or any other Loan Document shall be
stated to be due on a day that is not a Business Day, such payment may be made
on the next Business Day, and interest shall continue to accrue during such
extension.
Section III.2. Voluntary Prepayment. Borrowers may prepay the Note in
whole at any time or from time to time in part without premium or penalty but
with accrued interest to the date of prepayment on the amount so prepaid.
Section III.3. Computation of Interest. Interest on the indebtedness
evidenced by the Note shall be computed on the basis of a year of 365 days and
the actual number of days elapsed (including the first day but excluding the
last day) unless such calculation would result in a usurious rate, in which case
interest shall be calculated on the basis of a year of 365 or 366 days, as the
case may be.
Section III.4. Additional Costs in Respect of Letters of Credit. If as a
result of any Regulatory Change there shall be imposed, modified, or deemed
applicable any tax, reserve, special deposit, or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder or Lender's commitment to issue Letters of Credit hereunder,
and the result shall be to increase the cost to Lender of issuing or maintaining
any Letter of Credit or its commitment to issue Letters of Credit hereunder or
reduce any amount receivable by Lender hereunder in respect of any Letter of
Credit (which increase in cost, or reduction in amount receivable, shall be the
result of Lender's reasonable allocation of the aggregate of such increases or
reductions resulting from such event), then, upon demand by Lender, Borrowers
agree to pay to Lender from time to time as specified by Lender, such additional
amounts as shall be sufficient to compensate Lender for such increased costs or
reductions in amount. A statement in reasonable detail as to such increased
costs or reductions in amount incurred by Lender, submitted by Lender to
Borrowers, shall be conclusive as to the amount thereof, provided that the
determination thereof is made on a reasonable basis.
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Section III.5. Joint and Several Obligations. The obligations of
Borrowers under this Agreement shall be joint and several in all respects.
Section III.6. Subrogation and Contribution. (a) If any Borrower makes a
payment in respect of the Obligations, it shall be subrogated to the rights of
Lender (or any other payee) against the other Borrowers, as appropriate, with
respect to such payment and shall have the rights of contribution set forth
below against the other Borrowers; provided that such Borrower shall not enforce
its rights to any payment by way of subrogation or by exercising its rights of
contribution until all the Obligations shall have been paid in full and Lender
has no Commitment to make Advances or issue Letters of Credit hereunder. If any
Borrower makes a payment in respect of the Obligations so that the amount of its
then current Net Payments is less than the amount of its then current
Contribution Obligation, any Borrower making such proportionately smaller
payment shall, when permitted by the preceding sentence, pay to the other
Borrowers an amount such that the Net Payments made by the Borrowers in respect
of the Obligations shall be shared among the Borrowers pro rata in proportion to
their respective Contribution Percentage. If any Borrower receives any payment
by way of subrogation or contribution so that the amount of its then current Net
Payments is greater than the amount of its then current Contribution Obligation,
the Borrower receiving such proportionately greater payment shall, when
permitted by the second preceding sentence, pay to the other Borrowers an amount
such that the Net Payments received by the Borrowers shall be shared among the
Borrowers pro rata in proportion to their respective Contribution Percentage.
If any Borrower makes a payment in respect of the Obligations so that the amount
of its then current Net Payments is greater than the amount of its then current
Contribution Obligation, any Borrower making such proportionately larger payment
shall, when permitted by the third preceding sentence, receive from the other
Borrowers an amount such that the Net Payments made by the Borrowers in respect
of the Obligations shall be shared amount the Borrowers pro rata in proportion
to their respective Contribution Percentage, unless otherwise agreed to by the
Borrowers.
(b As used in this Section 3.7, the term "Contribution Obligation" shall
mean an amount equal, at any time and from time to time and for each respective
Borrower, to the product of (i) such Borrower's Contribution Percentage, times
(ii) the sum of all payments made previous to or at the time of calculation by
all Borrowers in respect of the Obligations (less the amount of any such
payments previously returned to any Borrower by operation of law or otherwise,
but not including payments received by any Borrower by way of its rights of
subrogation and contribution hereunder). Notwithstanding anything to the
contrary contained in this Section or in this Agreement, no liability or
obligation of any Borrower that shall accrue pursuant to this Agreement shall be
paid nor shall it be deemed owed
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pursuant to this Agreement until all of the Obligations shall be paid in full
and Lender shall have no Commitment to make Advances or issue Letter of Credit
hereunder.
(c As used in this Section 3.7, the term "Net Payments" shall mean an
amount equal, at any time and from time to time and for each respective
Borrower, to the difference of (i) the sum of all payments made previous to or
at the time of calculation by such Borrower in respect of the Obligations and in
respect of its obligations contained in this Agreement, less (ii) the sum of all
such payments previously returned to such Borrower by operation of law or
otherwise and including payments received by such Borrower by way of its rights
of subrogation and contribution hereunder.
(d As used in this Section 3.7, the term "Contribution Percentage" shall
mean, for any applicable date as of which such percentage is being determined an
amount equal to the quotient of (i) the Net Worth of such Borrower as of such
date, divided by (ii) the sum of the Net Worth of all the Borrowers as of such
date.
(e As used herein, the term "Net Worth" shall mean for any Borrower,
calculated on and as of any applicable date on which such amount is being
determined, the difference between (i) the sum of all such Borrower's property
(other than its equity interest in another Borrower, at a fair valuation as of
such date, minus (ii) the sum of all such Borrower's debts, at a fair valuation
as of such date excluding the Obligations.
ARTICLE IV.
Collateral
Section IV.1. Collateral. To secure full and complete payment and
performance of the Obligations, Borrowers shall execute and deliver or cause to
be executed and delivered the documents described below covering the property
and collateral described therein and in this Section 4.1 (which, together with
any other property and collateral which may now or hereafter secure the
Obligations or any part thereof, is sometimes herein called the "Collateral"):
(a Each Borrower shall grant to Lender a first priority security
interest in all of its accounts, accounts receivable, general intangibles
(but excluding patents, trademarks, trade names and other intellectual
property), inventory, chattel paper, documents, instruments and all
investment securities, cash and financial assets arising therefrom,
20
whether now owned or hereafter acquired, and all products and proceeds
thereof, pursuant to the Security Agreement executed by such Borrower.
(b Borrowers shall execute and cause to be executed such further
documents and instruments, including without limitation, Uniform Commercial
Code financing statements, as Lender, in its sole discretion, deems
necessary or desirable to evidence and perfect its liens and security
interests in the Collateral.
Section IV.2. Setoff. Upon the occurrence of an Event of Default, Lender
shall have the right to set off and apply against the Obligations in such a
manner as Lender may determine, at any time and without notice to any Borrower,
any and all deposits (general, time or demand, provisional or final) or other
sums at any time credited by or owing from Lender to any Borrower whether or not
the Obligations are then due. The rights and remedies of Lender hereunder are
in addition to other rights and remedies (including, without limitation, to the
rights of setoff) which Lender may have.
Section IV.3. Guaranty Agreements. Guarantors shall unconditionally and
irrevocably guarantee payment and performance of the Obligations by execution
and delivery of the Guaranty Agreements, respectively.
ARTICLE V.
Conditions Precedent
Section V.1. Initial Extension of Credit. The obligation of Lender to
make the initial Advance or issue the initial Letter of Credit is subject to the
condition precedent that prior thereto Lender shall have received all of the
documents set forth below in form and substance satisfactory to Lender.
(a Certificate - Each Borrower. For each Borrower, a certificate of
an officer of such Borrower acceptable to Lender certifying (i) resolutions
of the General Partner which authorize the execution, delivery and
performance by such Borrower of this Agreement and the other Loan Documents
to which such Borrower is or is to be a party, and (ii) the names of the
officers of such Borrower authorized to sign this Agreement and each of the
other Loan Documents to which such Borrower is or is to be a party together
with specimen signatures of such Persons.
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(b Organizational Documents - Each Borrower. The Limited
Partnership Agreement of each Borrower and the Certificate of Limited
Partnership of each Borrower certified by an officer of such Borrower
acceptable to Lender.
(c Governmental Certificates - Each Borrower. A certificate issued
by the appropriate government official of the state of organization of each
Borrower as to the existence of such Borrower.
(d Certificate - Parent. A certificate of the Secretary or another
officer of Parent acceptable to Lender certifying (i) resolutions of the
board of directors of Parent which authorize the execution, delivery and
performance by Parent of the Guaranty-Parent and the other Loan Documents
to which Parent is or is to be a party, and (ii) the names of the officers
of Parent authorized to sign the Guaranty-Parent and each of the other Loan
Documents to which Parent is or is to be a party together with specimen
signatures of such officers.
(e Organizational Documents - Parent. The articles of incorporation
and the bylaws of Parent certified by the Secretary or another officer of
Parent acceptable to Lender.
(f Governmental Certificates - Parent. Certificates issued by the
appropriate government officials of (i) the state of incorporation of
Parent as to the existence and good standing of Parent and (ii) the state
of Texas as to the existence and good standing of Parent as a foreign
corporation in such states.
(g Certificate - Each Partner. A certificate of a Manager or
another officer of each Partner acceptable to Lender certifying (i)
resolutions of the Members of such Partner which authorize the execution,
delivery and performance by such Partner of the Guaranty Agreement to which
such Partner is a party and the other Loan Documents to which such Partner
is or is to be a party, and (ii) the names of the Managers or other
officers of such Partner authorized to sign the Guaranty Agreement to which
such Partner is a party and the other Loan Documents to which such Partner
is or is to be a party together with specimen signatures of such Persons.
(h Organizational Documents - Each Partner. The articles of
organization and the regulations of each Partner certified by a Manager or
another officer of such Partner acceptable to Lender.
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(i Governmental Certificates - Each Partner. Certificates issued by
the appropriate government officials of (i) the state of Delaware as to the
existence and good standing of General Partner and (ii) the state of Nevada
as to the existence and good standing of Limited Partner.
(j Note. The Note executed by Borrowers.
(k Security Agreements. The Security Agreements executed by
Borrowers, respectively.
(l Financing Statements. Uniform Commercial Code financing
statements executed by Borrowers, respectively.
(m Guaranty Agreements. The Guaranty Agreements executed by
Guarantors, respectively.
(n Contribution Agreement. The Contribution Agreement executed by
Borrowers and Guarantors.
(o Autopay Agreement. The Autopay Agreement executed by Operations.
(p Insurance Policies. Copies of all insurance policies or
certificates therefor required by Section 7.5, together with loss payable
endorsements in favor of Lender with respect to all insurance policies
covering Collateral.
(q UCC Search. A Uniform Commercial Code search showing all
financing statements and other documents or instruments on file against (i)
Borrowers and Guarantors in the office of the Secretary of State of Texas,
(ii) Parent and General Partner in the office of the Secretary of State of
Delaware, and (iii) Limited Partner in the office of the Secretary of
State of Nevada.
(r Attorneys' Fees and Expenses. Evidence that the costs and
expenses (including reasonable attorneys' fees) referred to in Section
11.1, to the extent incurred, have been paid in full by Borrowers.
(s Additional Documentation. Such additional approvals, opinions or
documents as Lender may reasonably request.
Section V.2. All Extensions of Credit. The obligation of Lender to make
any Advance or issue any Letter of Credit (including the initial Advance
23
and the initial Letter of Credit) is subject to receipt by Lender of the items
required by Section 2.5(b), if applicable, and 2.9, and such additional
documents as Lender may reasonably request.
ARTICLE VI.
Representations and Warranties
To induce Lender to enter into this Agreement, each Borrower represents and
warrants to Lender that:
Section VI.1. Existence. (a) Each Borrower (i) is duly formed and
validly existing under the laws of the State of Texas, (ii) has all requisite
power and authority to own its assets and carry on its business as now being or
as proposed to be conducted and (iii) is qualified to do business in all
jurisdictions where such qualification is required by law and where failure to
so qualify might reasonably be expected to have a Material Adverse Effect.
(b) Each Subsidiary (i) is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, (ii) has all
requisite power and authority to own its assets and carry on its business as now
being or as proposed to be conducted and (iii) is qualified to do business in
all jurisdictions where such qualification is required by law and where failure
to so qualify might reasonably be expected to have a Material Adverse Effect.
Each Borrower has the power and authority to execute, deliver and perform its
obligations under this Agreement and the other Loan Documents to which it is or
may become a party.
Section VI.2. Financial Statements. Borrowers have delivered to Lender
audited consolidated financial statements of Parent and its Subsidiaries as at
and for the fiscal year ended September 30, 2000. Such financial statements are
true and correct, have been prepared in accordance with GAAP, and fairly and
accurately present, on a consolidated basis, the consolidated financial
condition of Parent and its Subsidiaries as of the respective dates indicated
therein and the consolidated results of operations for the respective periods
indicated therein. Neither Parent nor any of its Subsidiaries has any material
contingent liabilities, liabilities for taxes, material forward or long-term
commitments, or unrealized or anticipated losses from any unfavorable
commitments not reflected in such financial statements. There has been no
Material Adverse Effect since the effective date of the most recent financial
statements referred to in this Section.
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Section VI.3. Requisite Action; No Breach. The execution, delivery, and
performance by each Borrower of this Agreement and the other Loan Documents to
which such Borrower is or may become a party have been duly authorized by all
requisite action on the part of such Borrower and General Partner and do not and
will not violate or conflict with the Organizational Documents of such Borrower
or General Partner or any law, rule or regulation or any order, writ,
injunction, or decree of any court, governmental authority, or arbitrator, and
do not and will not conflict with, result in a breach of, or constitute a
default under, or result in the imposition of any Lien (except as provided in
this Agreement) upon any of the revenues or assets of such Borrower or any
Subsidiary pursuant to the provisions of any indenture, mortgage, deed of trust,
security agreement, franchise, permit, license, or other instrument or agreement
by which such Borrower or any Subsidiary or any of their respective properties
is bound.
Section VI.4. Operation of Business. Each Borrower, each Guarantor and
each Subsidiary possess all licenses, permits, franchises, patents, copyrights,
trademarks, and tradenames, or rights thereto, to conduct their respective
businesses substantially as now conducted and as presently proposed to be
conducted.
Section VI.5. Litigation and Judgments. There is no action, suit,
investigation, or proceeding before or by any court, governmental authority, or
arbitrator pending, or to the knowledge of any Borrower, threatened against or
affecting any Borrower, any Guarantor or any Subsidiary, that would, if
adversely determined, have a Material Adverse Effect. There are no outstanding
judgments against any Borrower, any Guarantor or any Subsidiary.
Section VI.6. Rights in Properties; Liens. Each Borrower, each Guarantor
and each Subsidiary have good and indefeasible title to or valid leasehold
interests in their respective properties and assets, real and personal,
including the properties, assets and leasehold interests reflected in the
financial statements described in Section 6.2, and none of the properties,
assets or leasehold interests of any Borrower, any Guarantor or any Subsidiary
is subject to any Lien, except as permitted by this Agreement.
Section VI.7. Enforceability. This Agreement constitutes, and the other
Loan Documents to which each Borrower is party, when delivered, shall constitute
the legal, valid, and binding obligations of such Borrower, enforceable against
such Borrower in accordance with their respective terms, except as
enforceability thereof may be limited by (i) bankruptcy, insolvency, or other
laws of general application relating to the enforcement of creditor's rights and
(ii) by general principles of equity.
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Section VI.8. Approvals. No authorization, approval, or consent of, and
no filing or registration with, any court, governmental authority, or third
party is or will be necessary for the execution, delivery, or performance by any
Borrower of this Agreement and the other Loan Documents to which any Borrower is
or may become a party or the validity or enforceability thereof.
Section VI.9. Debt. Neither any Borrower, any Guarantor nor any
Subsidiary has any Debt except Debt to Lender and other Debt permitted pursuant
to Section 8.1.
Section VI.10. Use of Proceeds; Margin Securities. Neither any Borrower,
any Guarantor nor any Subsidiary is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations T, U, or
X of the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any extension of credit under this Agreement will be used to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying margin stock.
Section VI.11. ERISA. Each Borrower, each Guarantor and each Subsidiary
have complied with all applicable minimum funding requirements and all other
applicable and material requirements of ERISA, and there are no existing
conditions that would give rise to liability thereunder. No Reportable Event
(as defined in Section 4043 of ERISA) has occurred in connection with any
employee benefit plan that might constitute grounds for the termination thereof
by the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to administer such plan.
Section VI.12. Taxes. Each Borrower, each Guarantor and each Subsidiary
have filed all tax returns (federal, state, and local) required to be filed,
including all income, franchise, employment, property, and sales taxes, and have
paid all of their liabilities for taxes, assessments, governmental charges, and
other levies that are due and payable, and no Borrower knows of any pending
investigation of any Borrower, any Guarantor or any Subsidiary by any taxing
authority or of any pending but unassessed tax liability of any Borrower, any
Guarantor or any Subsidiary.
Section VI.13. Disclosure. There is no fact known to any Borrower which
has a Material Adverse Effect, or which might in the future have a Material
Adverse Effect that has not been disclosed in writing to Lender.
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Section VI.14. Subsidiaries. Neither any Borrower nor any Guarantor has
any Subsidiaries except as shown on the OYO Geospace Corporation Entity
Structure Effective October 1, 2000 (Revised 1/8/2001) (the "Corporate Chart")
delivered by Borrowers to Lender. Each Borrower and each Guarantor owns the
percentage of ownership interests in its Subsidiaries shown on the Corporate
Chart.
Section VI.15. Compliance with Laws. Neither any Borrower, any Guarantor
nor any Subsidiary is in violation in any material respect of any law, rule,
regulation, order, or decree of any court, governmental authority, or
arbitrator. All inventory of Borrowers has been and will hereafter be produced
in compliance with all applicable laws, rules, regulations, and governmental
standards, including, without limitation, the minimum wage and overtime
provisions of the Fair Labor Standards Act, as amended (29 U.S.C. (S)(S) 201-
219), and the regulations promulgated thereunder.
Section VI.16. Compliance with Agreements. Neither any Borrower, any
Guarantor nor any Subsidiary is in violation in any material respect of any
material document, agreement, contract or instrument to which it is a party or
by which it or its properties are bound.
Section VI.17. Environmental Matters. Each Borrower, each Guarantor and
each Subsidiary, and their respective properties are in compliance with all
applicable Environmental Laws and neither any Borrower, any Guarantor nor any
Subsidiary is subject to any liability or obligation for remedial action
thereunder. There is no pending or, to the knowledge of Borrowers, threatened
investigation or inquiry by any governmental authority of any Borrower, any
Guarantor or any Subsidiary, or any of their respective properties pertaining to
any Hazardous Substance. Except in the ordinary course of business and in
material compliance with all Environmental Laws, there are no Hazardous
Substances located on or under any of the properties of any Borrower, any
Guarantor or any Subsidiary. Except in the ordinary course of business and in
material compliance with all Environmental Laws, neither any Borrower, any
Guarantor nor any Subsidiary has caused or permitted any Hazardous Substance to
be disposed of on or under or released from any of its properties. Each
Borrower, each Guarantor and each Subsidiary have obtained all material permits,
licenses, and authorizations which are required under and by all Environmental
Laws.
Section VI.18. Solvency. Each Borrower and its Subsidiaries, on an
individual and a consolidated basis, is not insolvent, each Borrower's and its
Subsidiaries' assets, on an individual and a consolidated basis, exceed its
liabilities, and no Borrower will be rendered insolvent by the execution and
27
performance of this Agreement and the Loan Documents. Each Guarantor and its
Subsidiaries, on an individual and a consolidated basis, is not insolvent, each
Guarantor's and its Subsidiaries' assets, on an individual and a consolidated
basis, exceed its liabilities, and no Guarantor will be rendered insolvent by
the execution and performance of this Agreement and the Loan Documents.
Section VI.19. Investment Company Act. Neither any Borrower, any
Guarantor nor any Subsidiary is an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
Section VI.20. Partners. General Partner owns one percent (1%) of each
Borrower and Limited Partner owns ninety-nine percent (99%) of each Borrower.
ARTICLE VII.
Affirmative Covenants
Borrowers covenant and agree that, as long as the Obligations or any part
thereof are outstanding or Lender has any Commitment hereunder, Borrowers will
perform and observe the covenants set forth below, unless Lender shall otherwise
consent in writing.
Section VII.1. Reporting Requirements. Borrowers will deliver to Lender:
(a Annual Financial Statements - Parent. As soon as available, and
in any event within one hundred twenty (120) days after the end of each
fiscal year of Parent, beginning with the fiscal year ending September 30,
2001, a copy of the annual audited consolidated financial statements of
Parent and its Subsidiaries for such fiscal year on SEC Form 10-K
containing, on a consolidated basis, balance sheets, statements of income,
statements of stockholders' equity and statements of cash flows as at the
end of such fiscal year and for the 12-month period then ended, in each
case setting forth in comparative form the figures for the preceding fiscal
year, all in reasonable detail, prepared in accordance with GAAP, and
audited and certified without qualification by independent certified public
accountants of recognized standing acceptable to Lender.
(b Quarterly Financial Statements - Parent. As soon as available,
and in any event within sixty (60) days after the end of each quarter of
each fiscal year of Parent, a copy of the consolidated financial
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statements of Parent and its Subsidiaries as of the end of such fiscal
quarter and for the portion of the fiscal year then ended, on SEC Form 10-
Q, containing, on a consolidated basis, balance sheets, statements of
income and cash flows in each case setting forth in comparative form the
figures for the corresponding period of the preceding fiscal year, all in
reasonable detail, prepared in accordance with GAAP and reviewed by
independent certified public accountants acceptable to Lender.
(c No Default Certificate. Together with the financial statements
delivered pursuant to Section 7.1(a) and (b), a No Default Certificate as
of the last day of the fiscal quarter or year covered by such financial
statements, in each case executed by an officer of Parent acceptable to
Lender and containing detailed calculations of the covenants contained in
Article IX.
(d Borrowing Base Certificate. As soon as available, and in any
event within thirty (30) days after the end of each month of each fiscal
year of Borrowers, a Borrowing Base Certificate as of the last day of such
month certified by an officer of each Borrower acceptable to Lender.
(e Monthly Accounts Receivable Reports. As soon as available, and
in any event within thirty (30) days after the end of each month of each
fiscal year of Borrowers, aged accounts receivable reports for Borrowers as
of the last day of such month certified by an officer of each Borrower
acceptable to Lender.
(f Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits and proceedings before any court or
governmental department, commission, board, agency or instrumentality,
domestic or foreign, affecting any Borrower, any Guarantor or any
Subsidiary which if concluded adversely to such Person might reasonably be
expected to have a Material Adverse Effect.
(g Judgments. Within five (5) days of the rendering thereof, notice
of any judgment against any Borrower, any Guarantor or any Subsidiary in an
amount which is more than $25,000.00.
(h Notice of Default. As soon as possible and in any event within
five (5) days after the occurrence of each Event of Default and Unmatured
Event of Default, a written notice setting forth the details of such Event
of Default or Unmatured Event of Default and the action which Borrowers
have taken and propose to take with respect thereto.
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(i Notice of Material Adverse Effect. As soon as possible, an in
any event within five (5) days after any Borrower becomes aware thereof,
notice of the occurrence of any event or the existence of any condition
which might reasonably be expected to have a Material Adverse Effect.
(j Proxy Statements, Etc. As soon as available, one copy of each
financial statement, report, notice or proxy statement sent by Parent or
any Subsidiary to its stockholders generally and one copy of each regular,
periodic or special report, registration statement, or prospectus filed by
Parent or any Subsidiary within any securities exchange or the Securities
and Exchange Commission or any successor agency.
(k General Information. Promptly, such other information concerning
any Borrower, any Guarantor or any Subsidiary as Lender may from time to
time reasonably request.
Section VII.2. Maintenance of Existence; Conduct of Business. Each
Borrower will preserve and maintain, and will cause each Guarantor and each
Subsidiary to preserve and maintain, its corporate existence and all of its
leases, privileges, licenses, permits, franchises, qualifications and rights
that are necessary or desirable in the ordinary conduct of its business.
Section VII.3. Maintenance of Properties. Each Borrower will maintain,
and will cause each Guarantor and each Subsidiary to maintain, its assets and
properties in good condition and repair, normal wear and tear excepted.
Section VII.4. Taxes and Claims. Each Borrower will pay or discharge, and
will cause each Guarantor and each Subsidiary to pay or discharge, at or before
maturity or before becoming delinquent (a) all taxes, levies, assessments, and
governmental charges imposed on it or its income or profits or any of its
property, and (b) all lawful claims for labor, material, and supplies, which, if
unpaid, might become a Lien upon any of its property; provided, however, that
neither any Borrower, any Guarantor or any Subsidiary shall be required to pay
or discharge any tax, levy, assessment, or governmental charge, which is being
contested in good faith by appropriate proceedings diligently pursued, and for
which adequate reserves have been established to the extent required by GAAP.
Section VII.5. Insurance. Each Borrower will maintain, and will cause
each Guarantor and each Subsidiary to maintain, with financially sound
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and reputable insurance companies workmen's compensation insurance, liability
insurance, and insurance on its property, assets and business, all at least in
such amounts and against such risks as are usually insured against by Persons
engaged in similar businesses. Each insurance policy covering Collateral shall
name Lender as lender loss payee and provide that such policy will not be
cancelled without thirty (30) days prior written notice to Lender.
Section VII.6. Inspection; Field Audits. (a) At any reasonable time and
from time to time and upon reasonable prior notice from Lender, each Borrower
will permit, and will cause each Guarantor and each Subsidiary to permit,
representatives of Lender:
(a) to examine and make copies of the books and records of, and visit
and inspect the properties or assets of Borrowers, Guarantors and any
Subsidiary and to discuss the business, operations, and financial condition
of any such Persons with their respective officers and employees and with
their independent certified public accountants, and
(b) to conduct Field Audits; provided that (i) Lender intends to
conduct the first such Field Audit within ninety (90) days of the Closing
Date (the "Post Closing field audit"), (ii) Borrowers shall pay up to
$3,000.00 of the cost of the Post Closing Field Audit, and (iii) Borrower
shall pay the cost of all additional Field Audits, but not more than
$3,000.00 during any fiscal year of Borrowers.
Section VII.7. Keeping Books and Records. Each Borrower will maintain,
and will cause each Guarantor and each Subsidiary to maintain, proper books of
record and account in which full, true, and correct entries in conformity with
GAAP shall be made of all dealings and transactions in relation to its business
and activities.
Section VII.8. Compliance with Laws. Each Borrower will comply, and will
cause each Guarantor and each Subsidiary to comply, in all material respects
with all applicable laws, rules, regulations, and orders of any court,
governmental authority, or arbitrator.
Section VII.9. Compliance with Agreements. Each Borrower will comply, and
will cause each Guarantor and each Subsidiary to comply, in all material
respects with all material agreements, contracts, and instruments binding on it
or affecting its properties or business.
Section VII.10. Further Assurances. Each Borrower will execute and
deliver, and will cause each Guarantor and each Subsidiary to execute and
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deliver, such further instruments as may be reasonably requested by Lender to
carry out the provisions and purposes of this Agreement and the other Loan
Documents and to preserve and perfect the Liens of Lender in the Collateral.
Section VII.11. ERISA. Each Borrower will comply, and will cause each
Guarantor and each Subsidiary to comply, with all minimum funding requirements,
and all other material requirements, of ERISA, if applicable, so as not to give
rise to any liability thereunder.
Section VII.12. Continuity of Operations. Each Borrower will continue to
conduct, and will cause each Guarantor to continue to conduct, its primary
businesses as substantially conducted as of the Closing Date and to continue its
operations in such businesses.
ARTICLE VIII.
Negative Covenants
Borrowers covenant and agree that, as long as the Obligations or any part
thereof are outstanding or Lender has any Commitment hereunder, Borrowers will
perform and observe the covenants set forth below, unless Lender shall otherwise
consent in writing.
Section VIII.1. Debt. No Borrower will incur, create, assume or permit to
exist, nor will it permit any Guarantor or any Subsidiary to incur, create,
assume, or permit to exist, any Debt, except (a) Debt to Lender, (b) Debt of
Borrowers, Guarantors and their Subsidiaries in an aggregate principal amount
which does not exceed $2,000,000.00 outstanding at any time, (c Debt described
in Schedule 8.1(c), (d) Subordinated Debt, (e) accounts payable in the ordinary
course of business, and (f) Debt arising from the endorsement of instruments for
collection in the ordinary course of business.
Section VIII.2. Limitation on Liens. No Borrower will incur, create,
assume or permit to exist, nor will it permit any Guarantor or any Subsidiary to
incur, create, assume or permit to exist, any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired, except (a) Liens in
favor of Lender, (b) purchase money Liens securing Debt permitted by Section
8.1(b), which Liens cover only the assets financed with the Debt permitted by
Section 8.1(b), but not the Collateral or the machinery, equipment, furniture or
fixtures of Borrower, any Guarantor or any Subsidiary, (c) Liens on real
property securing Debt permitted by Section 8.1(c), which Liens cover only the
real property financed with the Debt permitted by Section 8.1(c), (d)
encumbrances consisting of minor easements, zoning restrictions,
32
or other restrictions on the use of real property that do not (individually or
in the aggregate) materially affect the value of the assets encumbered thereby
or materially impair the ability of any Borrower, any Guarantor or any
Subsidiary to use such assets in its business, and none of which is violated in
any material aspect by existing or proposed structures or land use, (e) Liens
for taxes, assessments, or other governmental charges which are not delinquent
or which are being contested in good faith, and for which adequate reserves have
been established, and (f) Liens of mechanics, materialmen, warehousemen,
carriers or other similar statutory Liens securing obligations that are not yet
due and are incurred in the ordinary course of business.
Section VIII.3. Negative Pledge on Equipment. No Borrower will incur,
create, assume or permit to exist, nor will it permit any Guarantor or any
Subsidiary to, incur, create, assume or permit to exist, any Lien upon any of
the machinery and equipment of any Borrower, any Guarantor or any Subsidiary, or
any portion thereof, whether now owned or hereafter acquired.
Section VIII.4. Mergers, Acquisitions, Dissolutions and Disposition of
Assets. No Borrower will, nor will it permit any Guarantor or any Subsidiary
to, (a) become a party to a merger, consolidation, joint venture or other
business combination ("Merger") or purchase or otherwise acquire all or a
substantial part of the assets of any Person (other than a Borrower or a
Guarantor) or any shares or other evidence of beneficial ownership of any Person
(other than a Borrower or a Guarantor) ("Acquisition"), unless (i) such
Borrower, such Guarantor or such Subsidiary is the surviving Person to such
Merger or Acquisition, (ii) no Event of Default or Unmatured Event of Default
exists immediately prior to such Merger or Acquisition, and (iii) no Event of
Default or Unmatured Event of Default would arise as a result of such Merger or
Acquisition, (b) dissolve or liquidate, (c) sell, lease, assign, transfer or
otherwise dispose of substantially all of its assets, except dispositions of
inventory in the ordinary course of business, (d) amend its Organizational
Documents, (e) create any new Subsidiary, or (f) enter into any agreement to do
any of the foregoing; provided, however, notwithstanding the foregoing
provisions of this Section 8.4 or any other provision of any Loan Document,
Parent and its Subsidiaries may, on a consolidated basis, acquire or purchase a
business or its assets involving cash consideration totaling not more than
$10,000,000.00 in any period of twelve (12) consecutive months and not more than
$5,000,000.00 for any single transaction.
Section VIII.5. Restricted Payments. No Borrower will, nor will it permit
Parent or any other Guarantor to, declare or pay any dividends or distributions
(excluding distributions solely of capital stock or partnership interests) or
make any other payment (in cash, property, or obligations) on
33
account of its capital stock or partnership interests, as applicable, or redeem,
purchase, retire, or otherwise acquire any of its capital stock, or set apart
any money for a sinking or other analogous fund for any dividend or other
distribution on its capital stock or for any redemption, purchase, retirement,
or other acquisition of any of its capital stock (excluding any net or cashless
exercise of stock opinions). No Borrower will, nor will it permit any Guarantor
other than Parent to, grant or issue any capital stock or any warrant, right, or
option pertaining to its capital stock, or issue any security convertible into
capital stock.
Section VIII.6. Loans and Advances. No Borrower will make, nor will it
permit any Guarantor or any Subsidiary to make, any advance, loan or extension
of credit to any Person, including any other Borrower, Guarantor or Subsidiary
or any employee, officer or director of any Borrower, any Guarantors or any
Subsidiary; provided, however, that any Borrower may make loans and advances to
any other Borrower or Guarantor.
Section VIII.7. Investments. No Borrower will make, nor will it permit
any Guarantor or any Subsidiary to make, any capital contribution to or
investment in any Person. No Borrower will purchase, or permit any Guarantor or
any Subsidiary to purchase, any stock, bonds, notes, debentures, or other
securities of any Person, except (a) readily marketable direct obligations of
the United States of America, (b) fully insured certificates of deposit with
maturities of one year or less from the date of acquisition of Lender or any
commercial bank operating in the United States having capital and surplus in
excess of $100,000,000.00, (c) commercial paper of a domestic issuer if at the
time of purchase such paper is rated in one of the two highest rating categories
of Standard and Poor's Corporation ("S&P") or Xxxxx Investors Service ("Xxxxx"),
(d) investments in securities with maturity of one (1) year or less from the
date of acquisition issued or fully guaranteed by the United States or any
state, commonwealth or territory of the United States, or any political
subdivision thereof, and rated at least "A" by S&P or Xxxxx, (e) any money
market or similar fund investing solely in the foregoing investments, and (f)
investments made through Lender or its affiliates and approved by Lender.
Section VIII.8. Compliance with Environmental Laws. No Borrower will, nor
will it permit any Guarantor or any Subsidiary to, (a) use (or permit any tenant
to use) any of their respective properties or assets for the handling,
processing, storage, transportation, or disposal of any Hazardous Substance,
except in the ordinary course of business and in compliance with all
Environmental Laws, (b) generate any Hazardous Substance, (c) conduct any
activity which is likely to cause a release or threatened release of any
Hazardous Substance, or (d) otherwise conduct any activity or use any of their
34
respective properties or assets in any manner that is likely to violate any
Environmental Law.
Section VIII.9. Accounting. No Borrower will make, nor will it permit any
Guarantor or any Subsidiary to make, any change in accounting treatment or
reporting practices, except as required by GAAP.
Section VIII.10. Subordinated Debt. No Borrower will pay, nor will it
permit any Guarantor or any Subsidiary to pay, any Subordinated Debt except
pursuant to the agreement pursuant to which the payment of such Subordinated
Debt is subordinated to the payment of the Obligations.
Section VIII.11. Change of Business. No Borrower will enter into, no will
it permit any Guarantor or any Subsidiary to enter into, any type of business
which is materially different from the business in which such Borrower, such
Guarantor or such Subsidiary is presently engaged.
ARTICLE IX.
Financial Covenants
Borrowers covenant and agree that, as long as the Obligations or any part
thereof are outstanding or Lender has any Commitment hereunder, Borrowers will
observe and perform, and will cause Parent and its Subsidiaries to observe and
perform, the financial covenants set forth below, unless Lender shall otherwise
consent in writing.
Section IX.1. Tangible Net Worth. Parent will at all times maintain
Tangible Net Worth in an amount not less than $43,000,000.00. Tangible Net
Worth shall be calculated and tested quarterly as of the last day of each fiscal
quarter of Parent.
Section IX.2. Ratio of EBITDA to Interest Expense. Parent will at all
times maintain a Ratio of EBITDA to Interest Expense of not less than 4.00 to
1.00. The Ratio of EBITDA to Interest Expense shall be calculated and tested
quarterly as of the last day of each fiscal quarter of Parent on a cumulative
basis (rolling four quarter basis) for the four fiscal quarters ended as of the
date of calculation; provided, however, that for the fiscal quarters ended
December 31, 2000, March 31, 2001 and June 30, 2001, EBITDA and Interest Expense
shall be calculated on an Annualized basis.
35
Section IX.3. Ratio of Senior Debt to EBITDA. Parent will at all times
maintain a Ratio of Senior Debt to EBITDA of not greater than 2.50 to 1.00. The
Ratio of Senior Debt to EBITDA shall be calculated and tested quarterly as of
the last day of each fiscal quarter of Parent on a cumulative basis (rolling
four quarter basis) for the four fiscal quarters ended as of the date of
calculation; provided, however, that for the fiscal quarters ended December 31,
2000, March 31, 2001 and June 30, 2001, EBITDA shall be calculated on an
Annualized basis.
Section IX.4. Capital Expenditures. Borrowers will not permit the
aggregate capital expenditures of Borrowers and their Subsidiaries to exceed
$8,000,000.00 during any fiscal year.
ARTICLE X.
Default
Section X.1. Events of Default. Each of the following shall be deemed an
"Event of Default":
(a Any Borrower shall fail to pay the Obligations or any part
thereof when due and such failure shall continue for a period of five (5)
days.
(b Any representation or warranty made or deemed made by any
Borrower or any Guarantor (or any of their respective officers) in any Loan
Document or in any certificate, report, notice, or financial statement
furnished at any time in connection with this Agreement shall be false,
misleading, or erroneous in any material respect when made or deemed to
have been made.
(c Any Borrower or any Guarantor shall fail to perform, observe, or
comply with any covenant, agreement, or term contained in this Agreement or
any other Loan Document and such failure shall continue for a period of
twenty (20) days.
(d Any Borrower, any Guarantor or any Subsidiary shall commence a
voluntary proceeding seeking liquidation, reorganization, or other relief
with respect to itself or its debts under any bankruptcy, insolvency, or
other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian, or other similar official of it
or a substantial part of its property or shall consent to any
36
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it or
shall make a general assignment for the benefit of creditors or shall
generally fail to pay its debts as they become due or shall take any
corporate action to authorize any of the foregoing.
(e An involuntary proceeding shall be commenced against any
Borrower, any Guarantor or any Subsidiary seeking liquidation,
reorganization, or other relief with respect to it or its debts under any
bankruptcy, insolvency, or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official for it or a substantial part of its property, and
such involuntary proceeding shall remain undismissed and unstayed for a
period of sixty (60) days.
(f Any Borrower, any Guarantor or any Subsidiary shall fail to
discharge within a period of thirty (30) days after the commencement
thereof any attachment, sequestration, or similar proceeding or proceedings
involving an aggregate amount in excess of $25,000.00 against any of its
assets or properties.
(g Any Borrower, any Guarantor or any Subsidiary shall fail to
satisfy and discharge promptly any final judgement or judgements against it
for the payment of money in an aggregate amount in excess of $25,000.00.
(h Any Borrower, any Guarantor or any Subsidiary shall fail to pay
when due any principal of or interest on any Debt (other than the
Obligations), or the maturity of any such Debt shall have been accelerated,
or any such Debt shall have been required to be prepaid prior to the stated
maturity thereof, or any event shall have occurred that permits (or, with
the giving of notice or lapse of time or both, would permit) any holder or
holders of such Debt or any Person acting on behalf of such holder or
holders to accelerate the maturity thereof or require any such prepayment.
(i This Agreement or any other Loan Document shall cease to be in
full force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by any Borrower,
any Guarantor, any Subsidiary, or any Borrower or any Guarantor shall deny
that it has any further liability or obligation under any of the Loan
Documents, or any Lien or security interest created by the Loan Documents
shall for any reason cease to be a valid, first priority
37
perfected security interest in and Lien upon any of the Collateral
purported to be covered thereby.
Section X.2. Remedies Upon Default. If any Event of Default shall occur,
Lender may do any one or more of the following: (a) declare the outstanding
principal of and accrued and unpaid interest on the Notes and the Obligations or
any part thereof to be immediately due and payable, and the same shall thereupon
become immediately due and payable, without notice, demand, presentment, notice
of dishonor, notice of acceleration, notice of intent to accelerate, notice of
intent to demand, protest, or other formalities of any kind, all of which are
hereby expressly waived by Borrowers, (b) terminate the Commitment without
notice to any Borrower, (c) foreclose or otherwise enforce any Lien granted to
Lender to secure payment and performance of the Obligations, and (d) exercise
any and all rights and remedies afforded by the laws of the State of Texas or
any other jurisdiction by any of the Loan Documents, by equity or otherwise;
provided, however, that upon the occurrence of an Event of Default under Section
10.1(d) or Section 10.1(e), the Commitment shall automatically terminate, and
the outstanding principal of and accrued and unpaid interest on the Notes and
the other Obligations shall become immediately due and payable without notice,
demand, presentment, notice of dishonor, notice of acceleration, notice of
intent to accelerate, notice of intent to demand, protest, or other formalities
of any kind, all of which are hereby expressly waived by Borrowers.
Section X.3. Cash Collateral. If any Event of Default shall occur,
Borrowers shall, if requested by Lender, immediately deposit with and pledge to
Lender, cash or cash equivalent investments in an amount equal to the
outstanding Letter of Credit Liabilities as security for the Obligations. Such
cash or cash equivalent investment shall bear interest while held by Lender and
shall be released on the date on which (a) all Letters of Credit which were
outstanding at the time of such Event of Default have expired by their own terms
(and have not been extended by Lender) without being drawn, and (b) all the
Advances representing drawings on Letters of Credit which were outstanding at
the time of such Event of Default have been paid in full.
Section X.4. Performance by Lender. If Borrowers shall fail to perform
any covenant, duty, or agreement contained in any of the Loan Documents, Lender
may perform or attempt to perform such covenant, duty, or agreement on behalf of
Borrowers. In such event, Borrowers shall, at the request of Lender, promptly
pay any amount expended by Lender in such performance or attempted performance
to Lender, together with interest thereon at the Default Rate from the date of
such expenditure until paid. Notwithstanding the foregoing, it is expressly
agreed that Lender shall not have
38
any liability or responsibility for the performance of any obligation of
Borrowers under this Agreement or any other Loan Document.
ARTICLE XI.
Miscellaneous
Section XI.1. Expenses of Lender. Borrowers hereby agree to pay Lender on
demand (a) all reasonable costs and expenses incurred by Lender in connection
with the preparation, negotiation, and execution of this Agreement and the other
Loan Documents and any and all amendments, modifications, renewals, extensions,
and supplements thereof and thereto, including, without limitation, the fees and
expenses of Lender's legal counsel, (b) all reasonable costs and expenses
incurred by Lender in connection with the enforcement of this Agreement or any
other Loan Document, including, without limitation, the fees and expenses of
Lender's legal counsel, and (c) all other reasonable costs and expenses incurred
by Lender in connection with this Agreement or any other Loan Document,
including, without limitation, all costs, expenses, taxes (other than income
taxes and franchise taxes), assessments, filing fees, and other charges levied
by any governmental authority or otherwise payable in respect of this Agreement
or any other Loan Document or in obtaining any insurance policy, audit or
appraisal in respect of the Collateral.
SECTION XI.2. INDEMNIFICATION. BORROWERS HEREBY INDEMNIFY LENDER AND EACH
AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS FROM, AND HOLDS EACH OF THEM HARMLESS AGAINST, ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS,
COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) (COLLECTIVELY, "CLAIMS") TO
WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR
RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION,
OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY ANY BORROWER OF ANY
REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE
LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL,
REMOVAL, OR CLEANUP OF ANY HAZARDOUS SUBSTANCE LOCATED ON, WITHIN, OR MIGRATING
FROM ANY OF THE PROPERTIES OR ASSETS OF ANY BORROWER OR ANY SUBSIDIARY, (E) ANY
ACT OR OMISSION OF LENDER BASED UPON ANY FAX OR ELECTRONIC TRANSMISSION, OR
39
(F) ANY MATTER RELATED TO ANY LETTER OF CREDIT, OTHER THAN A NON-CONFORMING
LETTER OF CREDIT DRAWING PAID AS A RESULT OF LENDER'S ORDINARY NEGLIGENCE,
INCLUDING, WITH RESPECT TO ALL OF THE ABOVE, ANY CLAIM WHICH ARISES AS A RESULT
OF THE NEGLIGENCE OF LENDER; PROVIDED, HOWEVER, THAT BORROWERS' INDEMNIFICATION
OBLIGATIONS UNDER THIS SECTION 11.2 SHALL NOT APPLY TO THE EXTENT THAT THE
CLAIMS ARISE AS A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
LENDER.
Section XI.3. Limitation of Liability. Neither Lender nor any affiliate,
officer, director, employee, attorney, or agent of Lender shall have any
liability with respect to, and each Borrower hereby waives, releases, and agrees
not to xxx any of them upon, any claim for any special, indirect, incidental, or
consequential damages suffered or incurred by any Borrower in connection with,
arising out of, or in any way related to, this Agreement or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents. Each Borrower hereby waives, releases, and agrees
not to xxx Lender or any of Lender's affiliates, officers, directors, employees,
attorneys, or agents for punitive damages in respect of any claim in connection
with, arising out of, or in any way related to, this Agreement or any of the
other Loan Documents, or any of the transactions contemplated by this Agreement
or any of the other Loan Documents.
Section XI.4. No Waiver; Cumulative Remedies. No failure on the part of
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power,
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. The rights and
remedies provided for in this Agreement and the other Loan Documents are
cumulative and not exclusive of any rights and remedies provided by law.
Section XI.5. Successors and Assigns. This Agreement is binding upon and
shall inure to the benefit of Lender and Borrowers and their respective
successors and assigns, except that no Borrower may assign or transfer any of
its rights or obligations under this Agreement without prior written consent of
Lender.
Section XI.6. Survival. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by Lender or any closing shall affect the representations and
warranties or the right of Lender to rely upon them. Without prejudice to the
40
survival of any other obligation of Borrowers hereunder, the obligations of
Borrowers under Sections 11.1 and 11.2 shall survive repayment of the Note and
termination of the Commitment and the Letters of Credit.
Section XI.7. Amendment. The provisions of this Agreement may be amended
or waived only by an instrument in writing signed by the parties hereto.
Section XI.8. Maximum Interest Rate. No provision of this Agreement or of
any other Loan Documents shall require the payment or the collection of interest
in excess of the maximum permitted by applicable law. If any excess of interest
in such respect is hereby provided for, or shall be adjudicated to be so
provided, in any Loan Documents or otherwise in connection with this loan
transaction, the provisions of this Section shall govern and prevail and neither
any Borrower nor the sureties, guarantors, successors, or assigns of any
Borrower shall be obligated to pay the excess amount of such interest or any
other excess sum paid for the use, forbearance, or detention of sums loaned
pursuant hereto. In the event Lender ever receives, collects, or applies as
interest any such sum, such amount which would be in excess of the maximum
amount permitted by applicable law shall be applied as a payment and reduction
of the principal of the indebtedness evidenced by the Notes; and, if the
principal of the Notes has been paid in full, any remaining excess shall
forthwith be paid to Borrowers. In determining whether or not the interest paid
or payable exceeds the Maximum Rate, Borrowers and Lender shall, to the extent
permitted by applicable law, (a) characterize any non-principal payment as an
expense, fee, or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the indebtedness evidenced by the Notes so that
interest for the entire term does not exceed the Maximum Rate.
Section XI.9. Notices. All notices and other communications provided for
in this Agreement and the other Loan Documents shall be in writing and may be
telecopied (faxed), mailed by certified mail return receipt requested, or
delivered to the intended recipient at the addresses specified below or at such
other address as shall be designated by any party listed below in a notice to
the other parties listed below given in accordance with this Section.
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If to any Borrower: 00000 Xxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxx 00000
Attention: Xxx XxXxxxxx
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
If to any Guarantor 00000 Xxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxx 00000
Attention: Xxx XxXxxxxx
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
If to Lender: Southwest Bank of Texas, N.A.
Five Post Oak Park
0000 Xxxx Xxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopy (fax), subject to confirmation of receipt, when personally delivered
or, in the case of a mailed notice, three (3) Business Days after being duly
deposited in the mail, in each case given or addressed as aforesaid; provided,
however, that notices to Lender pursuant to Article II shall not be effective
until received by Lender.
Section XI.10. Applicable Law; Venue; Service of Process. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas and the applicable laws of the United States of America. This Agreement
has been entered into in Xxxxxx County, Texas and it shall be performable for
all purposes in Xxxxxx County, Texas. Except as provided in the Arbitration
Agreement, any action or proceeding against any Borrower under or in connection
with any of the Loan Documents may be brought in any state or federal court in
Xxxxxx County, Texas, and each Borrower hereby irrevocably submits to the
nonexclusive jurisdiction of such courts and waives any objection it may now or
hereafter have as to the venue of any such action or proceeding brought in any
such court or that any such court is an inconvenient forum. Each Borrower
agrees that service of process upon it may be made by certified or registered
mail, return receipt requested, at its office specified in this Agreement.
Except as provided in the Arbitration Agreement, nothing herein or in any of the
other Loan Documents shall affect the right of Lender to serve
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process in any other manner permitted by law or shall limit the right of Lender
to bring any action or proceeding against any Borrower or with respect to any of
its property in courts in other jurisdictions. Except as provided in the
Arbitration Agreement, any action or proceeding by any Borrower against Lender
shall be brought only in a court located in Xxxxxx County, Texas.
Section XI.11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section XI.12. Severability. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section XI.13. Headings. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section XI.14. Non-Application of Chapter 346 of Texas Finance Code. The
provisions of Chapter 346 of the Texas Finance Code are specifically declared by
the parties hereto not to be applicable to this Agreement or any of the other
Loan Documents or to the transactions contemplated hereby.
Section XI.15. Consent to Participations. Lender shall have the right at
any time and from time to time to sell or transfer one or more participation
interests in the Notes and the indebtedness evidenced thereby to one or more
purchasers ("Purchasers"), whether related or unrelated to Lender. Subject in
all respects to the provisions of Section 11.18 of this Agreement, Lender may
provide to any one or more Purchasers or potential Purchasers any information,
financial statements, data or knowledge Lender may have about any Borrower or
about any other matter relating to the Obligations. Borrowers further waive any
and all notices of sale of participation interests and notices of repurchases of
participation interests. In the event of any such sale by Lender of
participation interests to a Purchaser, Lender's obligations under the Loan
Documents shall remain unchanged, Lender shall remain solely responsible to
Borrowers for the performance of such obligations, Lender shall remain the owner
and holder of the Note for all purposes under the Loan Documents, all amounts
payable by Borrowers and Guarantors under this Agreement shall be determined as
if Lender had not sold such participation interests, and Borrowers and
Guarantors shall continue to deal solely and directly with Lender in connection
with Lender's rights and obligations under the Loan Documents. Lender shall
retain the sole right to approve, without the consent of any
43
Purchaser, any amendment, modification or waiver of any provision of the Loan
Documents other than any amendment, modification or waiver with respect to any
credit extension or Commitment in which such Purchaser has an interest which (i)
forgives principal or interest, or reduces the interest rate or fees payable
with respect to any such credit extension, (ii) extends the Termination Date,
postpones any date fixed for any regularly-scheduled payment of principal or
interest on any credit extension or Commitment in which such Purchaser has an
interest, or of any regularly-scheduled payment of fees on any such credit
extension or Commitment, (iii) releases any Guarantor of any such credit
extension, or (iv) releases all or substantially all of the Collateral.
Borrowers agree that each Purchaser shall be deemed to have the right of setoff
in respect of its participation interests in amounts owing under the Loan
Documents to the same extent as if the amount of its participation interests
were owing directly to it as Lender under the Loan Documents. Borrowers further
agree that any Purchaser may enforce its interests irrespective of any claims or
defenses that any Borrower may have against Lender.
SECTION XI.16. ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES, AND THE OTHER
LOAN DOCUMENTS REFERRED TO HEREIN REPRESENT THE FINAL, ENTIRE AGREEMENT AMONG
THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
Section XI.17. Confidentiality. Lender agrees to hold any confidential
information which it may receive from any Borrower or any Guarantor pursuant to
any Loan Document in confidence, except for disclosure (i) to legal counsel,
accountants and other professional advisers to Lender, (ii) to regulatory
officials, (iii) to any Person as required by law, regulation or legal process,
(iv) to any Person in connection with any legal proceeding to which Lender is a
party, and (v) as permitted by Section 11.18.
Section XI.18. Dissemination of Information. Each Borrower and each
Guarantor authorizes Lender to disclose to any Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in Lender's
possession concerning the creditworthiness of Borrowers and
44
Guarantors; provided that each Transferee and prospective Transferee first
agrees in writing to be bound by Section 11.17 of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
BORROWERS:
CONCORD TECHNOLOGIES, LP
By: OYOG, LLC,
its general partner
By: /s/ Xxxxxx X. XxXxxxxx
----------------------
Xxxxxx X. XxXxxxxx
Chief Financial Officer
GEOSPACE ENGINEERING RESOURCES
INTERNATIONAL, LP
By: OYOG, LLC,
its general partner
By: /s/ Xxxxxx X. XxXxxxxx
----------------------
Xxxxxx X. XxXxxxxx
Chief Financial Officer
GEO SPACE, LP
By: OYOG, LLC,
its general partner
By: /s/ Xxxxxx X. XxXxxxxx
----------------------
Xxxxxx X. XxXxxxxx
Chief Financial Officer
45
OYO INSTRUMENTS, LP
By: OYOG, LLC,
its general partner
By: /s/ Xxxxxx X. XxXxxxxx
----------------------
Xxxxxx X. XxXxxxxx
Chief Financial Officer
OYOG OPERATIONS, LP
By: OYOG, LLC,
its general partner
By: /s/ Xxxxxx X. XxXxxxxx
----------------------
Xxxxxx X. XxXxxxxx
Chief Financial Officer
LENDER:
SOUTHWEST BANK OF TEXAS, N.A.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx
Vice President
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