Loan And Security Agreement

LOAN AND SECURITY AGREEMENT


DATED AS OF NOVEMBER 17, 1997


BETWEEN


SANWA BUSINESS CREDIT CORPORATION


AS LENDER


AND


NORTHERN GEOPHYSICAL OF AMERICA, INC.
AS BORROWER


TABLE OF CONTENTS
PAGE 1. DEFINITIONS AND ACCOUNTING TERMS.........................................................1


1.1 ................................................................"Account Debtor"1


1.2 ......................................................................"Accounts"1


1.3 ....................................................................."Affiliate"1


1.4 .........................................................."Ancillary Agreements"1


1.5 ...................................................."Average Daily Availability"2


1.6 ....................................................................."Borrowing"2


1.7 .................................................................."Business Day"2


1.8 ...................................................................."Capex Loan"2


1.9 ...................................................................."Capex Note"2


1.10 .........................................................."Capital Expenditures"2


1.11 ......................................................"Cash Flow Coverage Ratio"2


1.12 ................................................................."Change of Law"2


1.13 ......................................................................."Charges"2


1.14 .................................................................."Closing Date"2


1.15 ...................................................................."Collateral"2


1.16 ......................................................."Collateral Availability"2


1.17 ....................................................................."Companies"3


1.18 ....................................................................."Computers"3


1.19 ................................................................"Current Assets"3


1.20 ..........................................................."Current Liabilities"3


1.21 ......................................................."Daily Collateral Report"3


1.22 ......................................................................."Default"3


1.23 .................................................................."Default Rate"3


1.24 ......................................................................."Dollars"3


1.25 ..............................................................."Depository Bank"3


1.26 ................................................................"Direct Charges"3


1.27 ........................................................................"EBITDA"3


1.28 ............................................................."Eligible Accounts"3


TABLE OF CONTENTS
(CONTINUED)
PAGE


1.29 ................................................................"Environmental Laws"4


1.30 ........................................................................."Equipment"4


1.31 ............................................................................."ERISA"4


1.32 .................................................................."Event of Default"4


1.33 ........................................................................"Financials"4


1.34 .............................................................................."GAAP"4


1.35 ..............................................................."General Intangibles"4


1.36 ................................................................."Governmental Rule"4


1.37 ........................................................................."Guarantor"4


1.38 ..............................................................."Hazardous Materials"4


1.39 ......................................................................"Indebtedness"4


1.40 ......................................................................"Initial Term"5


1.41 ......................................................."Interest Determination Date"5


1.42 ..................................................................."Interest Period"5


1.43 ........................................................................."Inventory"5


1.44 ......................................................................."Liabilities"5


1.45 ............................................................................."LIBOR"5


1.46 ........................................................................"LIBOR Loan"6


1.47 ....................................................................."LIBOR Portion"6


1.48 .............................................................................."Lien"6


1.49 ..................................................................."Loan" or "Loans"6


1.50 ......................................................................"Loan Account"6


1.51 ............................................................"Net Profit After Taxes"6


1.52 ............................................................................."Notes"6


1.53 ...................................................."Notice of Borrowing/Conversion"6


1.54 ......................................................................."Overadvance"6


1.55 ......................................................................."Participant"6


1.56 ..................................................................."Permitted Liens"6


1.57 ............................................................................"Person"7


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TABLE OF CONTENTS
(CONTINUED)
PAGE


1.58 ............................................................................."Portion"7


1.59 ......................................................................"Prepayment Fee"7


1.60 .........................................................................."Prime Rate"7


1.61 ....................................................................."Prime Rate Loan"7


1.62 ........................................................................"Renewal Term"7


1.63 ...................................................................."Reportable Event"7


1.64 ......................................................................"Revolving Loan"7


1.65 ............................................................"Revolving Loan Borrowing"7


1.66 .................................................................."Security Documents"7


1.67 .................................................................."Special Collateral"7


1.68 ..............................................................................."Stock"7


1.69 ..........................................................................."Subsidiary"8


1.70 ..................................................................."Tangible Net Worth"8


1.71 ............................................................................"Term Loan"8


1.72 ............................................................................"Term Note"8


1.73 .................................................................................."3-D"8


1.74 ......................................................................."Total Facility"8


1.75 ................................................................................."Type"8


2. LOANS: GENERAL TERMS............................................................................8


2.1 ........................................................................Total Facility.8


2.2 ........................................Advances to Constitute One Loan; Loan Purpose.11


2.3 ........................................................................Interest Rate.12


2.4 ..............................................................Change of Circumstances.12


2.5 .........................................................Funding Loss Indemnification.13


2.6 ..........................................................................Prepayments.14


2.7 ....................................Term of Agreement; Prepayment; Liquidated Damages.14


2.8 ............................................................................Audit Fee.15


2.9 ..........................................................................Closing Fee.15


2.10 .....................................................................Unused Line Fee.15


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TABLE OF CONTENTS
(CONTINUED)
PAGE


3. ELIGIBLE ACCOUNTS; ELIGIBLE INVENTORY.........................................................16


3.1 ...................................................................Eligible Accounts.16


4. PAYMENTS......................................................................................17


4.1 .............................................Loan Account; Method of Making Payments.17


4.2 .......................................................................Payment Terms.17


4.3 .................................................Collection of Accounts and Payments.18


4.4 .............................................Application of Payments and Collections.18


4.5 ..........................................................................Statements.19


5. COLLATERAL: GENERAL TERMS.....................................................................19


5.1 ...................................................................Security Interest.19


5.2 .....................................................Disclosure of Security Interest.19


5.3 ..................................................................Special Collateral.19


5.4 ..................................................................Further Assurances.19


5.5 ..........................................................................Inspection.20


5.6 .....................................Perfection and Priority; Location of Collateral.20


5.7 ..............................Lender's Payment of Claims Asserted Against Collateral.20


6. COLLATERAL: ACCOUNTS..........................................................................21


6.1 ............................................................Verification of Accounts.21


6.2 ....................................Assignments, Records and Daily Collateral Report.21


6.3 ..................................................Notice Regarding Disputed Accounts.21


6.4 .....................................................Sale or Encumbrance of Accounts.21


7. COLLATERAL: INVENTORY........................................................................21


8. COLLATERAL: EQUIPMENT.........................................................................21


8.1 ........................................................Maintenance of the Equipment.21


8.2 ..................................................Evidence of Ownership of Equipment.21


8.3 ...........................................................Proceeds of the Equipment.21


8.4 ...............................................................Location of Equipment.22


9. WARRANTIES AND REPRESENTATIONS................................................................22


9.1 ..............................................General Warranties and Representations.22


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TABLE OF CONTENTS
(CONTINUED)
PAGE


9.2 ..............................................Account Warranties and Representations.25


9.3 ............................................Inventory Warranties and Representations.26


9.4 ..........................Automatic Warranty and Representation and Reaffirmation of


Warranties and Representations.......................................................26


9.5 ..........................................Survival of Warranties and Representations.26


10. COVENANTS AND CONTINUING AGREEMENTS...........................................................27


10.1 ...............................................................Affirmative Covenants.27


10.2 ..................................................................Negative Covenants.29


10.3 ..................................................................Contesting Charges.31


10.4 ..................................................................Payment of Charges.31


10.5 ......................................................Insurance; Payment of Premiums.31


10.6 ...............................Survival of Obligations Upon Termination of Agreement.32


10.7 .............................................................Environmental Indemnity.32


10.8 ...................................................................Change of Control.32


10.9 ................................................................Revisions or Updates.32


11. CONDITIONS PRECEDENT TO CLOSING...............................................................33


12. DEFAULT; RIGHTS AND REMEDIES ON DEFAULT.......................................................35


12.1 .............................................................................Default.35


12.2 .....................................................Acceleration of the Liabilities.37


12.3 .........................................................Advances During Cure Period.37


12.4 ........................................................................Default Rate.37


12.5 ............................................................................Remedies.37


12.6 ..............................................................................Notice.38


13. MISCELLANEOUS.................................................................................38


13.1 .........................Appointment of Lender as Borrower's Lawful Attorney-In-Fact.38


13.2 ...........................Modification of Agreement; Assignment or Sale of Interest.39


13.3 .......................Attorneys' Fees and Expenses; Lender's Out-of-Pocket Expenses.39


13.4 ....................................................................Waiver by Lender.40


13.5 ........................................................................Severability.40


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13.6 ...........................................................Parties; Entire Agreement.40


13.7 ...................................................................Conflict of Terms.41


13.8 ..................................................................Waiver by Borrower.41


13.9 ................................................................Governing Law, Venue.41


13.10 ..............................................................................Notice.42


13.11 .................................................................Section Titles, Etc.42


13.12 ...................................................................Course of Dealing.42


13.13 ..............................................................................Setoff.43


13.14 ..............................................................Nonliability of Lender.43


13.15 .................................................................Time of the Essence.43


13.16 .....................................................................Indemnification.43


13.17 ....................................................Waiver of Right to Trial by Jury.44


LIST OF EXHIBITS


Exhibit A Financials Exhibit B Form of Notice of Borrowing/Conversion Exhibit C Locations Exhibit D Tradenames Exhibit E Litigation Exhibit F Title to Assets, Liens Exhibit G Affiliates and Subsidiaries Exhibit H Covenant Compliance Certificate Exhibit I Form of Daily Collateral Report Exhibit J Existing Indebtedness for Borrowed Money


Schedule 1.29 Equipment Schedule 10.1(a) Financial Covenants Schedule 10.2 Deposit Accounts


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LOAN AND SECURITY AGREEMENT


THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of the 17th day of November, 1997, by and between Sanwa Business Credit Corporation, a Delaware corporation ("Lender"), and Northern Geophysical of America, Inc., a Delaware corporation ("Borrower").


W I T N E S S E T H:


WHEREAS, Borrower desires to borrow funds and obtain other financial accommodations from Lender, and Lender is willing to make certain loans and provide other financial accommodations to Borrower upon the terms and subject to the conditions set forth herein;


NOW THEREFORE, in consideration of the terms and conditions contained herein, and of any loans or other financial accommodations heretofore, now or hereafter made to, or for the benefit of, Borrower by Lender, the parties hereto agree as follows:


1. DEFINITIONS AND ACCOUNTING TERMS


A. Specific Defined Terms. When used herein, the following terms shall have the following respective meanings:


1.1 "ACCOUNT DEBTOR" shall mean any Person who is or who may become obligated to Borrower under, with respect to, or on account of an Account.


1.2 "ACCOUNTS" shall mean and include all of Borrower's presently existing and hereafter arising or acquired accounts, receivables and rights of Borrower to payment for goods sold or leased or for services rendered, including, without limitation, those which are not evidenced by instruments or chattel paper, and whether or not they have been earned by performance; proceeds of any letters of credit on which Borrower is named as beneficiary; contract rights; chattel paper; instruments; documents; insurance proceeds; and all such obligations whatsoever owing to Borrower, together with all instruments and all documents of title representing any of the foregoing, all rights in any merchandise or goods which any of the same may represent, and all right, title, security and guaranties with respect to each of the foregoing, including, without limitation, any right of stoppage in transit.


1.3 "AFFILIATE" shall mean any and all Subsidiaries and any and all Persons which, in the reasonable judgment of Lender, directly or indirectly, own or control, are controlled by or are under common control with Borrower, and any and all Persons from whom, in the reasonable judgment of Lender, Borrower has not or is not likely to exhibit independence of decision or action. For the purpose of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.


1.4 "ANCILLARY AGREEMENTS" shall mean all Security Documents and all agreements, instruments and documents, including without limitation, notes, guaranties,


1


mortgages, deeds of trust, chattel mortgages, pledges, negative pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, intellectual property security agreements, leases, financing statements, subordination agreements, trust account agreements and all other written matter whether heretofore, now, or hereafter executed by or on behalf of Borrower or any other Person or delivered to Lender or any Participant with respect to this Agreement.


1.5 "AVERAGE DAILY AVAILABILITY" shall mean for any period the sum of Collateral Availability for each Business Day during such period divided by the number of Business Days in such period.


1.6 "BORROWING" shall mean a borrowing by Borrower consisting of a Loan made by Lender on the same date and of the same Type pursuant to a single Notice of Borrowing/Conversion.
1.7 "BUSINESS DAY" shall mean (a) any day on which commercial banks are not authorized to close or not required to close in Los Angeles, California and (b) if such Business Day is related to a Loan which bears or is to bear interest based on LIBOR, any day in which dealings in Dollar deposits may be carried out in the London interbank market.
1.8 "CAPEX LOAN" shall have the meaning given to that term in Section 2.1(c).
1.9 "CAPEX NOTE" shall have the meaning given to that term in Section 2.1(c).
1.10 "CAPITAL EXPENDITURES" shall mean all expenditures made and liabilities incurred for the acquisition of any fixed asset or improvement, replacement, substitution or addition thereto, which has a useful life of more than one year and including, without limitation, those arising in connection with capital leases.
1.11 "CASH FLOW COVERAGE RATIO" shall mean for any period, the quotient of (x) EBITDA minus the sum of (A) all taxes paid during such period, (B) all Capital Expenditures permitted hereunder and actually made, except any portion thereof financed through Indebtedness permitted hereunder, and (C) all dividends actually paid during such period, divided by (y) the sum of (A) all principal, interest and other payments made or required to be made by the Companies on Indebtedness during such period, including any fees and charges owed by the Companies in connection with any such Indebtedness and (B) all capitalized lease payments made or required to be made by the Companies during such period.
1.12 "CHANGE OF LAW" shall have the meaning specified in Section 2.4(b).
1.13 "CHARGES" shall mean all national, federal, state, county, city, municipal, or other governmental taxes, levies, assessments, charges, liens, claims or encumbrances (including, without limitation, those of the Pension Benefit Guaranty Corporation) upon or relating to (i) the Collateral, (ii) the Liabilities, (iii) Borrower's employees, payroll, income or gross receipts, (iv) Borrower's ownership or use of any of its assets, or (v) any other aspect of Borrower's business.
1.14 "CLOSING DATE" shall mean the date on which each of the conditions precedent in Section 11 are satisfied and the initial Loans are made.
1.15 "COLLATERAL" shall mean all of the property and interests in property described in Section 5.1 and all other property and interests in property which shall, from time to time, secure all or any part of the Liabilities.
1.16 "COLLATERAL AVAILABILITY" shall have the meaning ascribed to it in Section 2.1(a).


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1.17 "COMPANIES" shall mean, collectively, Borrower; 3-D; 3-D Geophysical of Latin America, Inc., a Cayman Island company; J.R.S. Exploration Company, Ltd., a Canada corporation; Geoevaluaciones, S.A. de C.V., a Mexico company; and Procesos Interactivos Avanzados, S.A. de C.V., a Mexico company.
1.18 "COMPUTERS" shall mean all of Borrower's right, title and interest, now owned and hereafter acquired, in computer equipment and hardware, including, without limitation, all central processing units, terminals, disk drives, tape drives, electronic memory units, printers, keyboards, screens, peripherals (and other input/output devices), modems and other communication controllers, and any and all accessions, parts and appurtenances thereto, substitutions therefore and replacements thereof, all intellectual property used by Borrower, at any time, in the operation of such computer equipment hardware, including, without limitation, all software, all of Borrower's rights under any licenses related to Borrower's software or hardware, and all leases pursuant to which Borrower leases any computer equipment, hardware or software.
1.19 "CURRENT ASSETS" shall mean the aggregate net book value of the current assets of Borrower as determined in accordance with GAAP, excluding any Accounts owing to Borrower from any Affiliate.
1.20 "CURRENT LIABILITIES" shall mean the aggregate amount of all liabilities of Borrower which would be classified as current liabilities under GAAP.
1.21 "DAILY COLLATERAL REPORT" shall mean a borrowing base report in the form of Exhibit I hereto delivered to Lender by Borrower, as required by Section 6.2, consisting of sales, collections and an aged trial balance of all of the Accounts existing as of the date of such Daily Collateral Report, specifying for each Account Debtor obligated on the Accounts, such Account Debtor's name, address and outstanding balance and the aging of such outstanding balance; inventory valuations as set forth in the most recent Inventory Report, and such other information as may, from time to time, be required by Lender.
1.22 "DE ...