Loan Agreement

LOAN AGREEMENT


between


3-D GEOPHYSICAL, INC.


and


FIRST INTERSTATE BANK OF TEXAS, N.A.


Dated as of May 29, 1996


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LOAN AGREEMENT


THIS LOAN AGREEMENT, dated as of May 29, 1996, is between 3-D GEOPHYSICAL, INC., a Delaware corporation (together with its successors and permitted assigns, the "Borrower"), and FIRST INTERSTATE BANK OF TEXAS, N.A., a national banking association (together with its successors and permitted assigns, the "Lender").


R E C I T A L S:


A. The Borrower has requested the Lender to extend credit to the Borrower in the form of (i) a revolving credit facility not to exceed $3,000,000 (the "Revolving Credit Loan") outstanding at any time and (ii) a term loan in the principal amount of $15,000,000 (the "Term Loan").


B. The proceeds of the Revolving Credit Loan will be utilized to finance Borrower's working capital. The proceeds of the Term Loan will be utilized to (i) finance a portion of the cost of purchasing Equipment consisting of a new seismic data acquisition system, (ii) refinance certain of Borrower's existing debt and (iii) finance up to 85% of the purchase price of additional purchases of new Equipment.


C. The Lender is willing to make such extensions of credit to the Borrower upon the terms and conditions hereinafter set forth.


NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:


ARTICLE I


Definitions


Section 1.1 Definitions. All capitalized terms used in this Agreement shall have the meanings set forth on Appendix A attached hereto and incorporated herein for all purposes.


Section 1.2 Other Definitional Provisions. All definitions contained in Appendix A are equally applicable to the singular and plural forms of the terms defined. The words "hereof', "herein", and "hereunder" and words of similar import referring to this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all Article and Section references pertain to this Agreement. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. Terms used herein that are defined in the UCC, unless otherwise defined herein, shall have the meanings specified in the UCC


ARTICLE II


Revolving Credit Loan


Section 2.1 Revolving Credit Commitment. Subject to the terms and conditions of this Agreement, the Lender agrees to make one or more Revolving Credit Advances to the Borrower from time to time from the date hereof to and including the Revolving Credit Termination Date, provided that the aggregate amount of all Revolving Credit Advances at any time outstanding shall not exceed the lesser of (a) the Borrowing Base or (b) the amount of the Revolving Credit Commitment. Subject to the foregoing limitations, and the other terms and provisions of this Agreement, the Borrower may borrow, repay, and reborrow hereunder.


Section 2.2 Revolving Credit Note. The obligation of the Borrower to repay Revolving Credit Advances shall be evidenced by the Revolving Credit Note executed by the Borrower, payable to the order of the Lender, in the principal amount of the Commitment as originally in effect, and dated the date hereof.


Section 2.3 Repayment of Revolving Credit Loan. The Borrower shall repay the outstanding principal amount of the Revolving Credit Commitment (i.e., all Revolving Credit Advances) on the Revolving Credit Termination Date.


Section 2.4 Interest. Revolving Credit Advances shall bear interest prior to maturity at a varying rate per annum equal from day to day to the lesser of (a) the Maximum Rate, or (b) the sum of the Applicable Rate in effect from day to day. If at any time the rate of interest specified in clause (b) above shall exceed the Maximum Rate, thereby causing the interest accruing on Revolving Credit Advances to be limited to the Maximum Rate, then any subsequent reduction in the Base Rate shall not reduce the rate of interest on Revolving Credit Advances below the Maximum Rate until the aggregate amount of interest accrued on Revolving Credit Advances equals the aggregate amount of ' interest which would have accrued on the Revolving Credit Loan if the interest rate specified in clause (b) above had at all times been in effect, Accrued and unpaid interest on the Revolving Credit Loan shall be due and payable on each Monthly Payment Date and on the Revolving Credit Termination Date.


Section 2.5 Borrowing Procedure. The Borrower shall give the Lender at least three Business Days prior notice of each Revolving Credit Advance under the Revolving Credit Loan by means of a Revolving Credit Advance Request Form containing the information required therein. The Lender at its option may from time to time accept telephonic requests for Revolving Credit Advances, provided that such acceptance shall not constitute a waiver of the Lender's right to require delivery of a Revolving Credit Advance Request Form in connection with subsequent Advances. Any telephonic request for a Revolving Credit Advance shall be promptly confirmed by submission of a properly completed Revolving Credit Advance Request Form to the Lender. Subject to the terms and conditions of this Agreement, each Revolving Credit Advance under the Revolving Credit Loan shall be made available to the Borrower by


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depositing the same, in immediately available funds, in an account of the Borrower maintained with the Lender at the Principal Office designated by the Borrower.


Section 2.6 Use of Proceeds. The proceeds of the Revolving Credit Advances shall be used by the Borrower for working capital in the ordinary course of business.


Section 2.7 Borrowing Base; Mandatory Prepayments. If at any time the outstanding principal amount of the Revolving Credit Loan exceeds the Borrowing Base, the Borrower shall promptly, and in any event, within five days of learning of the same, prepay the Revolving Credit Loan by an amount equal to such excess plus accrued and unpaid interest on the amount so prepaid.


Section 2.8 Revolving Credit Commitment Fee. (a) The Borrower agrees to pay to the Lender a commitment fee on the date of the first Advance under this Agreement in the amount of $15,000. (b) In addition, the Borrower agrees to pay to the Lender, from time to time, a commitment fee on the daily average unused amount of the Revolving Credit Commitment for the period from and including the date the requirement set forth in Section 6.2(a) of this Agreement is satisfied to and including the Revolving Credit Termination Date, at the rate of 0.50% per annum based on a 365 day year and the actual number of days elapsed. Accrued commitment fee shall be payable in arrears on each Quarterly Payment Date and on the Revolving Credit Termination Date.


Section 2.9 Reduction or Termination of Revolving Credit Commitment. The Borrower shall have the right to terminate in whole or reduce in part the unused portion of the Revolving Credit Commitment upon at least three Business Days' prior notice (which notice shall be irrevocable) to the Lender specifying the effective date thereof, whether a termination or reduction is being made, and the amount of any partial reduction, provided that each partial reduction shall be in the amount of $100,000 or an integral multiple thereof and the Borrower shall simultaneously prepay the amount by which the unpaid principal amount of the Revolving Credit Advances exceeds the Revolving Credit Commitment (after giving effect to such notice) plus accrued and unpaid interest on the principal amount so prepaid. The Revolving Credit Commitment may not be reinstated after it has been terminated or reduced.


ARTICLE III


Term Loan


Section 3.1 Term Loan Commitment. Subject to the terms and conditions of this Agreement, the Lender agrees to make the Term Loan to the Borrower in a principal amount up to but not exceeding the amount of the Term Loan Commitment in (i) an initial Term Loan Advance in the amount of at least $12,051,311.20 and (ii) an additional Term Loan Advance in an amount not to exceed the then remaining undrawn Term Loan Commitment on or before the Tenn Loan Termination Date.


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Section 3.2 The Term Note. The obligation of the Borrower to repay the Term Loan and accrued interest thereon shall be evidenced by the Term Note executed by the Borrower, payable to the order of the Lender, in the principal amount of the Term Loan Commitment, and dated the date hereof.


Section 3.3 Repayment of Term Loan. The Borrower shall repay the unpaid principal amount of, and all accrued but unpaid interest on, the Term Loan in accordance with the Term Note.


Section 3.4 Interest. The unpaid principal amount of the Term Loan shall bear interest prior to maturity or Default at a varying rate per annum equal from day to day to the lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to day. If at any time the rate of interest specified in clause (b) above shall exceed the Maximum Rate, thereby causing the interest accruing on the Term Loan to be limited to the Maximum Rate, then any subsequent reduction in the Applicable Rate shall not reduce the rate of interest on the Term Loan below the Maximum Rate until the aggregate amount of interest accrued on the Term Loan equals the aggregate amount of interest which would have accrued on the Term Loan if the interest rate specified in clause (b) above had at all times been in effect.


Section 3.5 Borrowing Procedure, Etc. The Borrower shall give the Lender at least three Business Days prior notice of the Term Loan Advance under the Term Loan by means of a Term Loan Advance Request Form containing the information required therein. Subject to the terms and conditions of this Agreement, each Term Loan Advance under the Term Loan shall be made available to the Borrower by depositing the same, in immediately available funds, in an account of the Borrower maintained with the Lender at the Principal Office designated by the Borrower. The second Term Loan Advance shall not be in an amount greater than 85% of the purchase price of Equipment being acquired with the proceeds thereof.


Section 3.6 Facility Fee. In consideration for making the Term Loan available to Borrower, Borrower shall pay to Lender as a facility fee $75,000 upon the execution of this Agreement.


Section 3.7 Use of Proceeds. The proceeds of the Term Loan shall be used by the Borrower to (i) finance a portion of the cost of purchasing Equipment consisting of a new seismic data acquisition system, (ii) refinance certain of Borrower's existing debt identified to Lender, and (iii) finance up to 85% of the purchase price of additional purchases of new Equipment.


Section 3.8 Mandatory Prepayment. On each Quarterly Payment Date (beginning November 30, 1996), the Borrower shall prepay the Term Loan in an amount equal to 50 percent of the Excess Cash Flow for the immediately preceding calendar quarter: All mandatory prepayments shall be applied to the outstanding principal of the Term Loan in inverse order of maturity.


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Section 3.9 Voluntary Prepayment and Repayment. The Borrower may, on at least two Business Days prior notice to the Lender, prepay the Term Loan in whole at any time or from time to time in part without premium or penalty but with accrued interest to the date of prepayment on the amount so prepaid, provided that each partial prepayment under the Term Note shall be in the principal amount of at least $100,000. With respect to the Term Note, all prepayments shall be applied to the outstanding principal of the Term Loan in inverse order of maturity.


ARTICLE IV


Payments


Section 4.1 Method of Payment. All payments of principal, interest, and other amounts to be made by the Borrower under this Agreement and the other Loan Documents shall be made to the Lender at the Principal Office in Dollars and immediately available funds, without setoff, deduction, or counterclaim, not later than 11:00 A.M., Houston, Texas time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). Subject to the provisions of the Lockbox Agreement, the Borrower shall, at the time of making each such payment, specify to the Lender the sums payable by the Borrower under this Agreement and the other Loan Documents to which such payment is to be applied (and in the event the Borrower fails to so specify, or if an Event of Default has occurred and is continuing, but subject to the Lockbox Agreement, the Lender may apply such payment to the Obligations in such order and manner as it may elect in its sole discretion). Whenever any payment under this Agreement or any other Loan Document shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of the payment of interest and commitment fee, as the case may be.


Section 4.2 Computation of Interest. Interest on all amounts payable by the Borrower hereunder shall be computed on the basis of a year of 365 days and the actual number of days elapsed (including the first day but excluding the last day) unless such calculation would result in a usurious rate, in which case interest shall be calculated on the basis of a year of 365 or 366 days, as the case may be.


Section 4.3 Interest at Default Rate. Notwithstanding any provision herein, Advances and (to the fullest extent permitted by law) any other amount payable by the Borrower under this Agreement or any other Loan Document that are not paid in full when due (whether at stated maturity, by acceleration, or otherwise) shall bear interest at the Default Rate for the period from and including the due date thereof to but excluding the date the same is paid in full. Interest payable at the Default Rate shall be payable from time to time on demand.


Section 4.4 Capital Adequacy. If after the date hereof, the Lender shall have determined that the adoption or implementation of any applicable law, rule, or regulation


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regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or compliance by the Lender (or its parent) with any guideline, request, or directive regarding capital adequacy (whether or not having the force of law) of any such central bank or other Governmental Authority applicable generally to Banks of Lender's (or its parent's) size, has or would have the effect of reducing the rate of return on the Lender's (or its parent's) capital as a consequence of its obligations hereunder or the transactions contemplated hereby to a level below that which the Lender (or its parent) could have achieved but for such adoption, implementation, change, or compliance (taking into consideration the Lender's policies with respect to capital adequacy) by an amount deemed by the Lender to be material, then from time to time, within 10 Business Days after demand by the Lender, the Borrower shall pay to the Lender (or its parent) such additional amount or amounts as will compensate the Lender for such reduction. A certificate of the Lender claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive, provided that the determination thereof is made on a reasonable basis. In determining such amount or amounts, the Lender may use any reasonable averaging and attribution methods.


Section 4.5 Annual Agent Fee. Beginning on May 31, 1997, the Borrower shall pay to the Lender on May 31 of each year during the term of this Agreement an annual agent's fee of $15,000 to compensate the Lender for its efforts in managing participations in Loans, disseminating information, and providing other services related thereto.


ARTICLE V


Security


Section 5.1 Collateral. To secure full and complete payment and performance of the Obligations, the Borrower shall execute and deliver, and shall cause each Subsidiary to execute and deliver, a Security Agreement and other documents described below covering the property and collateral described in this Section (which, together with any other property and collateral which may now or hereafter secure the Obligations or any part thereof, is sometimes herein called the "Collateral"):


All of its accounts, accounts receivable, equipment,
machinery, fixtures, inventory, goods, chattel paper, documents,
instruments, investment property, general intangibles, and other
personal property, whether now owned or hereafter acquired, and all
products and proceeds thereof.


The Borrower shall execute and cause to be executed such further documents and instruments, including, without limitation, Uniform Commercial Code financing statements, as the Lender, in its sole discretion, deems necessary or desirable to create, evidence, preserve, and perfect its liens and security interests in the Collateral.


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Section 5.2 Guaranties. Each Guarantor shall guarantee Obligations pursuant to a Guaranty.


Section 5.3 Additional Support. Manufacturer shall provide the Remarketing and Support Agreement.


Section 5.4 Setoff. If an Event of Default shall have occurred and be continuing, the Lender shall have the right to set off and apply against the Obligations in such manner as the Lender may determine, at any time and without notice to the Borrower or any Subsidiary, any and all deposits (general or special, time or demand, provisional or final) or other sums at any time credited by or owing from the Lender to the Borrower or any Subsidiary whether or not the Obligations are then due. As further security for the Obligations, the Borrower hereby grants to the Lender a security interest in all money, instruments, and other property of the Borrower now or hereafter held by the Lender, including, without limitation, property held in safekeeping. In addition to the Lender's right of setoff and as further security for the Obligations, the Borrower hereby grants to the Lender a security interest in all deposits (general or special, time or demand, provisional or final) and other accounts of the Borrower now or hereafter on deposit with or held by the Lender and all other sums at any time credited by or owing from the Lender to the Borrower. The rights and remedies of the Lender hereunder are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Lender may have.


ARTICLE VI


Conditions Precedent


Section 6.1 Initial Term Loan Advance. The obligation of the Lender to make an initial Term Loan Advance is subject to the condition precedent that the Lender shall have received on or before the day of such Advance all of the following, each dated (unless otherwise indicated) the date hereof, in form and substance satisfactory to the Lender:


(a) Resolutions. Resolutions of the Board of Directors of each
of the Borrower, the Manufacturer, and the Guarantors certified by its
Secretary or an Assistant Secretary which authorize the execution,
delivery, and performance of the Loan Documents to which it is or is to
be a party (each of Manufacturer's and each Guarantor's certificate to
be dated the date of the initial Advance) or equivalent documents under
the laws of the Republic of Mexico);


(b) Incumbency Certificate. A certificate of incumbency of
each of the Borrower, the Manufacturer, and the Guarantors certified by
the Secretary or an Assistant Secretary of such Person certifying the
names of the officers of such Person authorized to sign each of the
Loan Documents to which it is or is to be a party (including the
certificates contemplated herein) together with specimen signatures of
such officers (each of Manufacturer's and each Guarantor's
certification to be dated the date


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of the initial Advance) or equivalent documents under the laws of the
Republic of Mexico);


(c) Articles of Incorporation. The articles of incorporation
of each of the Borrower, Manufacturer, and each Guarantor certified by
the appropriate public official of the jurisdiction of incorporation of
such Person and dated within 10 days prior to the date of the initial
Advance or equivalent documents under the laws of the Republic of
Mexico;


(d) Bylaws. The bylaws of each of the Borrower, Manufacturer,
and each Guarantor certified by the Secretary or an Assistant Secretary
of such Person (each of Manufacturer's and each Guarantor's
certification to be dated the date of the initial Advance or equivalent
documents under the laws of the Republic of Mexico);


(e) Governmental Certificates. Certificates of the appropriate
government officials of each of the Borrower's, Manufacturer's, and
each Guarantor's jurisdiction of incorporation as to the existence and
good standing of such Person, each dated within 10 days prior to the
date of the initial Advance or equivalent documents under the laws of
the Republic of Mexico;


(f) Term Note. The Term Note executed by the Borrower;


(g) Security Agreements. A Security Agreement executed by the
Borrower and each Guarantor;


(h) Financing Statements; Etc. Uniform Commercial Code
financing statements and all other appropriate documents necessary or
advisable (including, as applicable, equivalent documents under the
laws of the Republic of Mexico) to perfect the Lender's Lien on the
Collateral executed by the Borrower and each Guarantor and covering
such Collateral as the Lender may request;


(i) Guaranty. A Guaranty executed by each of the Guarantors;


(j) Remarketing and Support Agreement. Manufacturer's
Remarketing and Support Agreement executed by the Manufacturer;


(k) Representations and Warranties Certificate. The
Representations and Warranties Certificates each executed by an
authorized officer of the Borrower, the Manufacturer, and each
Guarantor and the other Persons party thereto;


(l) Lockbox Agreement. The Lockbox Agreement executed by the
Borrower, the Manufacturer and the Guarantors;


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(m) Insurance Policies. Binders of all insurance policies
required by Section 7.5, naming Lender as loss payee with respect to
all insurance policies covering Collateral and providing such insurance
will not be cancelled without 30 days' prior written notice to Lender,
and as soon as available, copies of such policies, together with loss
payable endorsements in favor of the Lender with respect to insurance
covering Collateral and naming Lender as an additional insured with
respect to comprehensive general liability insurance, and endorsements
providing for no cancellation without 30 days' prior written notice to
Lender;


(n) UCC Search, Etc. The results of a Uniform Commercial Code
search and other appropriate searches showing all financing statements
and other documents or instruments on file against the Borrower and its
Subsidiaries in the offices of the Secretary of State of Texas, the
Secretary of State of Colorado and other jurisdictions in which any of
them do business, such searches to be as of a date no more than 10 days
prior to the date of the initial Advance;


(o) Opinion of Counsel. Favorable opinion of Rothgerber,
Appel, Powers & Johnson LLP and Webb & Lautherbach, P.C., legal counsel
to the Borrower and its Subsidiaries, as to such matters as the Lender
or its counsel may reasonably request;


(p) Opinion of Counsel of Manufacturer. A favorable opinion of
Haynes & Boone, L.L.P., legal counsel to the Manufacturer, as to such
matters as the Lender may reasonably request;


(q) Facility Fee. Evidence that the Borrower has paid the
facility fee payable to Lender under Section 3.5;


(r) Accounts. Evidence that the Lockbox Account and related
reserve accounts have been established;


(s) Participants. Receipt of participation agreements from
financial institutions acceptable to the Lender in respect of 27.78% of
the Revolving Credit Commitment and the 27.78% Term Loan Commitment;


(t) Review of Certain Contracts. Review and approval by the
Lender of the Borrower's or a Guarantor's contract with British
Petroleum relating to seismic surveys to be performed on the North
Slope of Alaska;


(u) Attorneys' Fees and Expenses. Evidence that the costs and
expenses (including reasonable attorneys' fees) referred to in Section
11.1, to the extent incurred, shall have been paid in full;


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(v) Vessel Charters and Leases. As soon as available, a copy
of each charter relating to a Vessel on which all or any part of the
Collateral is or will be located and each lease of real Property where
Collateral is stored;


(w) Waivers. Receipt of landlord ...