Exhibit 10.1

WESTERN NATIONAL BANK

508 WEST WALL STREET, SUITE 1100

MIDLAND, TEXAS

79701

December 2, 2013

Dawson Geophysical Company

508 West Wall Street, Suite 800

Midland, Texas 79701

Attention:    Stephen C. Jumper, President

 

RE: Extension of a new Multiple Advance Term Loan and Confirmation of Existing
Multiple Advance Term Loan, Existing Term Loan, and Existing Revolver Loan.

Gentlemen:

Pursuant to the terms of prior loan agreements, the most recent of which is
dated as of June 2, 2013, but effective as of June 1, 2013 (the “Existing Loan
Agreement”), WESTERN NATIONAL BANK, a national banking association
(alternatively, “Western”, the “Bank”, or the “Lender”) has previously agreed to
advance to DAWSON GEOPHYSICAL COMPANY, a Texas corporation (alternatively,
“Dawson Geophysical” or the “Borrower”), the following loans: (a) a revolving
line of credit loan in the original principal amount of Twenty Million and
No/Dollars ($20,000,000.00) (the “Revolver Loan”); (b) a term loan in the
original principal amount of Sixteen Million Four Hundred Twenty-Six Thousand
Six Hundred Eighty and Six/100 Dollars ($16,426,680.06) (the “First Term Loan”);
and (c) a multiple advance term loan in the original principal amount of Fifteen
Million and No/100 Dollars ($15,000,000.00) (the “Existing Second Term Loan”).

The Revolver Loan is evidenced by that certain Revolving Line of Credit Note,
also dated as of June 2, 2013, but effective as of June 1, 2013, in the original
principal amount of Twenty Million and No/100 Dollars ($20,000,000.00), executed
by the Borrower, as Maker, in favor of the Bank, as Payee (the “Revolver Note”).
The First Term Loan is evidenced by that certain Term Note, dated as of June 30,
2011, in the original principal amount of Sixteen Million Four Hundred
Twenty-Six Thousand Six Hundred Eighty and Six/100 Dollars ($16,426,680.06),
executed by the Borrower, as Maker, in favor of Western, as Payee (the “First
Term Note”). The Second Term Loan is evidenced by that certain Multiple Advance
Term Note, dated as of May 11, 2012, in the original principal amount of Fifteen
Million and No/100 Dollars ($15,000,000.00), executed by the Borrower, as Maker,
in favor of Western, as Payee (the “Existing Second Term Note”).

 

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The Borrower secured its performance under the Existing Loan Agreement, the
Existing Loans, and the Existing Notes by executing that certain Security
Agreement, also dated as of June 2, 2013, but effective as of June 1, 2013,
under which it granted to the Bank a security interest in all of its Accounts,
Equipment, and other items of collateral defined and described therein (the
“Existing Security Agreement”). The Borrower authorized the Bank to perfect the
security interest created under the Existing Security Agreement by filing a
financing statement (the “Existing Financing Statement”). The Existing Financing
Statement, the Existing Security Agreement, and any other instruments executed
or filed to secure collateral in support of Borrower’s performance are
collectively referred to as the “Existing Security Instruments.”

The Borrower and the Bank have now agreed to cap the principal balance available
under the Existing Second Term Loan in the amount of Four Million Seven Hundred
Ninety-Five Thousand Seven Hundred Two and Nineteen/Dollars ($4,795,702.19),
which is the currently outstanding principal balance previously advanced by the
Bank to the Borrower in connection with that Loan. As modified by the terms of
this letter loan agreement (the “Agreement”), the Existing Second Term Loan will
now be referred to as the “Second Term Loan”. The Revolver Loan, the First Term
Loan, and the Second Term Loan are collectively referred to herein as the
“Existing Loans”.

In order to reflect the capped principal balance outstanding under the Second
Term Loan, the Borrower and the Bank will execute a First Modification and
Amendment to Multiple Advance Term Note, of even date with this Agreement (the
“Modification”). As amended by the Modification, the Existing Second Term Note
will now be referred to as the “Second Term Note”. The Revolver Note, the First
Term Note, and the Existing Second Term Note are collectively referred to herein
as the “Existing Notes”.

In addition to its continuing obligations under the Existing Loans, which
Borrower acknowledges continue to be outstanding and owing to the Bank, the
Borrower has now requested that the Bank advance a new Multiple Advance Term
Loan in the original principal amount of Ten Million and No/100 Dollars
($10,000,000.00) (the “Third Term Loan”). The Revolver Loan, First Term Loan,
the Second Term Loan, and the Third Term Loan are collectively referred to
herein as the “Loans”.

The Third Term Loan will be evidenced by a Multiple Advance Term Note, dated of
even date herewith, in the original principal amount of Ten Million and No/100
Dollars ($10,000,000.00), to be executed by the Borrower, as Maker, in favor of
the Bank, as Payee (the “Third Term Note”). The Revolver Note, First Term Note,
the Second Term Note, and the Third Term Note are collectively referred to
herein as the “Notes”.

The Borrower will collateralize its performance under the Notes by executing a
Security Agreement, of even date herewith, covering all of its Accounts,
Equipment, and other items of collateral described therein (the “Security
Agreement”). The Borrower specifically authorizes the Bank to perfect the
security interest granted under the Security Agreement by filing one or

 

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more financing statements, or one or more amendments to the Existing Financing
Statement (in either case, collectively, the “Financing Statement”). The
Security Agreement and the Financing Statement are collectively referred to
herein as the “Security Instruments.” This letter loan agreement (the
“Agreement”), the Notes, the Security Instruments, and any other documents
executed simultaneously herewith are collectively referred to as the “Loan
Documents”.

In addition to the Existing Loans, which the Bank and the Borrower acknowledge
continue to be valid and subsisting, and for which the Borrower expressly
acknowledges that it will continue to be obligated, Western hereby agrees to
advance the Third Term Loan to the Borrower. In consideration of the Bank’s
agreement to advance the Third Term Loan, and to maintain in place the Existing
Loans, Borrower has agreed to execute this Loan Agreement, the Third Term Note,
the Security Agreement, and any other documents, as applicable and required by
the Bank. In addition to Borrower’s execution of the Loan Documents, the Bank’s
obligation to advance the Third Term Loan to the Borrower shall be further
subject to the fulfillment of the following terms and conditions of this letter
loan agreement (the “Agreement”):

 

I. TERMS

Agreement

This Agreement, dated as of December 2, 2013, and any extensions, renewals, or
modifications hereof.

Borrower

Dawson Geophysical Company

Bank

Western National Bank

Commitment

The lesser of the following amounts: (a) the combined face amounts of the Notes;
or (b) the sum of the outstanding principal balance due at any time under the
First Term Loan, the Second Term Loan, and the Third Term Loan, and the
“Borrowing Base” (as that term is defined below) then in effect for the Revolver
Loan.

Rate

Interest under the Third Term Note shall accrue at an annual rate equal to
3.16%. Beginning as of December 1, 2013, interest under the Existing Notes shall
accrue at an annual rate equal to either: (a) the 30-day London Interbank
Offered Rate (“LIBOR”), plus two and one-quarter percentage points (2.25%), or
(b) at an annual rate equal to the “Prime Rate”, as defined below, less
three-quarters of one percent (.75%) (the “Prime

 

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Rate Index”), as the Borrower shall choose monthly by notifying the Bank in
writing, via facsimile or e-mail, by the last day of each month, with each
change to be effective as of the first day of the following month; provided that
such interest rate shall not exceed the “Highest Lawful Rate”, as defined in the
Existing Notes, or be less than four percent (4.0%), as to the Existing Revolver
Note and the First Term Note, or be less than three and three-quarters of one
percent (3.75%), as to the Second Term Note. Should Borrower fail to notify Bank
of its election of interest rate for any given month, the interest rate shall
remain at the interest rate index chosen by Borrower for the immediately
preceding month.

For purposes of this Agreement, the “Prime Rate” shall be defined as that rate
established as the prime rate in the money rate table of The Wall Street
Journal, a Dow Jones publication, as of each “Business Day”, as defined below
(and for holidays or weekends, the Prime Rate shall be the prime rate published
in that money rate table of The Wall Street Journal, as of the close of business
on the most recent Business Day immediately preceding such weekend or holiday).
Without notice to the Borrower or any other person, the Prime Rate may change
from time to time pursuant to the preceding sentence, with the effective date of
each change to be the effective date reflected in the money rate table of The
Wall Street Journal. The Prime Rate is a reference rate only and does not
necessarily represent the lowest or best rate actually charged to any customer.
The Bank may make commercial loans or other loans at rates of interest at,
above, or below the Prime Rate.

In addition to the definition of “Prime Rate”, as defined above, the term
“LIBOR” shall mean, with respect to each Interest Period, as defined below, the
rate established as the 30-day LIBOR in the money rate table of The Wall Street
Journal, a Dow Jones publication, as of each Business Day, as defined below (and
for holidays or weekends, LIBOR shall be the 30-day LIBOR published in that
money rate table of The Wall Street Journal, as of the close of business on the
most recent Business Day immediately preceding such weekend or holiday). Without
notice to the Borrower or any other person, LIBOR may change from time to time
pursuant to the preceding sentence, with the effective date of each change to be
the effective date reflected in the money rate table of The Wall Street Journal.
Each change in LIBOR to be charged on the Notes will become effective without
notice on the commencement of each Interest Period based upon the Index then in
effect. “Interest Period” means each consecutive one month period (the next of
which shall commence on December 1, 2013), effective as of the first day of each
Interest Period and ending on the last day of each Interest Period; provided
that if any Interest Period is scheduled to end on a date for which there is no
numerical equivalent to the date on which the Interest Period commenced, then it
shall end instead on the last day of such calendar month.

The term “Business Day” shall mean any day other than a Saturday, Sunday or
legal holiday for commercial banks under the laws of the State of Texas.

 

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Security

The Loans shall be secured by the Security Instruments, under which the Borrower
grants against its Accounts and Equipment, as those terms are defined under the
Uniform Commercial Code of the State of Texas.

Structure

Under the First Term Note, funds will be available until June 30, 2014, the
maturity date of the First Term Loan. Borrower acknowledges that the Bank has
previously advanced to the Borrower all funds available under the First Term
Loan.

Under the Second Term Note, funds will be available until May 2, 2015, the
maturity date of the Second Term Loan. As reflected by the Modification, the
Borrower and the Bank have now agreed that the principal balance available under
the Second Term Loan will be capped at Five Million Three Hundred Forty-Three
Thousand Four Hundred Forty-Eight and Eighty-Five/100 Dollars ($5,343,448.85).
To the extent that the Bank has not previously advanced all of the principal
balance originally available under the Existing Second Term Loan, the Bank will
not advance the remaining principal available thereunder.

The Third Term Note is structured on the basis of multiple advances. To the
extent that the Bank has not previously advanced all of the principal balance
available under the Third Term Loan, the Bank may advance the remaining
principal available thereunder, according to the terms of the Third Term Note.
Final maturity under the Third Term Note shall occur on December 2, 2016. Unlike
the principal available under the Revolver Loan, principal repaid by the
Borrower under either the Second Term Loan and the Third Term Loan shall not be
subject to further advance by the Bank.

Under the Revolver Note, funds will be available on a revolving basis through
June 2, 2015, the maturity date of the Revolver Loan (the “Revolving Period”).
During the Revolving Period, the Borrower may borrow, repay, and re-borrow funds
as long as the aggregate amount (including outstanding letters of credit) does
not exceed the Commitment.

Borrowing Base

At any time, and from time to time, the amounts outstanding under the Revolver
Note shall not exceed the lesser of: (a) the face amount of the Revolver Note;
or (b) the Borrowing Base, as determined from time to time by the Bank, acting
in its sole and unlimited discretion. As used in this Agreement, the term
“Borrowing Base” shall mean an amount equal to eighty percent (80%) of
Borrower’s Eligible Accounts.

For the purposes of this Agreement, the term “Eligible Account” shall mean an
account receivable of the Borrower (net of any credit balance, trade discount,
or unbilled amount or retention) that is contractually due, for which each of
the following statements is

 

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accurate and complete (and the Borrower, by including such Account in any
computation of the Borrowing Base, shall be deemed to represent and warrant to
the Bank the accuracy and completeness of such statements):

 

  a. Said Account is a binding and valid obligation of the obligor thereon, in
full force and effect, and enforceable in accordance with its terms;

 

  b. Said Account is genuine, in all respects, as appearing on its face as
represented in the books and records of Borrower, and all information set forth
therein is true and correct;

 

  c. Said Account is free of all default of any party thereto, counterclaims,
offsets, and defenses, and from any rescission, cancellation, or avoidance, and
all right thereof, whether by operation of law or otherwise;

 

  d. The payment of said Account is not more than ninety (90) days past due the
invoice date thereof;

 

  e. Said Account is free of concessions or understandings with the obligor
thereon of any kind not disclosed to and approved by the Bank in writing;

 

  f. Said Account is, and at all times will be, free and clear of all liens
except those in favor of the Bank;

 

  g. Said Account is not a receivable arising from intercompany indebtedness
existing between or among the Borrower and any of its affiliated entities;

 

  h. Said Account is derived from sales made or services rendered to the obligor
in the ordinary course of the business of the Borrower;

 

  i. The obligor on said Account (i) is located within the United States;
(ii) is not the subject of any bankruptcy or insolvency proceeding, any other
proceeding in which a trustee or receiver been appointed for all or a
substantial part of its property, or any proceeding or transaction in which the
obligor has made an assignment for the benefit of creditors, or admitted its
inability to pay its debts as they mature or suspended its business, (iii) is
not owed by any entity affiliated, directly or indirectly, with Borrower, as a
subsidiary or affiliate, employee or otherwise; and (iv) is not owed by a state
or federal government department, commission, board, bureau, or agency;

 

  j. Said Account is not owed by a customer whose principal place of business is
located in a foreign country; and

 

  k. Said Account did not arise from sales to an obligor as to whom fifteen
percent (15%) or more of the total Accounts owing by such obligor to the
Borrower are delinquent Accounts receivable (that is, an Account for which
payment has not been tendered within ninety (90) days of the date when the date
of the original invoice transmitted by the Borrower).

 

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In addition to the criteria stated above for determining whether an account
receivable is an “Eligible Account”, the Bank and the Borrower agree that no
such Account shall constitute an Eligible Account if that Account arises from
any single customer, other than Chesapeake Exploration Limited Partnership and
its affiliates and subsidiaries (collectively, “Chesapeake”) or Devon Energy
Group and its affiliates and subsidiaries (collectively, “Devon”), whose
Accounts constitute more than twenty-five percent (25%) of Borrower’s total
Accounts. The Bank agrees that an Account owed by Chesapeake to the Borrower
(collectively, the “Chesapeake Accounts”) and, likewise, an Account owed by
Devon to the Borrower (collectively, the “Devon Accounts”) may still qualify as
an Eligible Account even if the either set of such Eligible Accounts constitutes
more than twenty-five percent (25%) of Borrower’s total Accounts.

Based upon the terms of this Agreement, and the information provided and the
representations made by the Borrower to the Bank, the Bank hereby redetermines
the Borrowing Base, and establishes it in the amount of Twenty Million and
No/100 Dollars ($20,000,000.00). Because the redetermined Borrowing Base is
equivalent to the principal amount available under the Revolver Loan, the Bank
will only be able to increase the Borrowing Base if the Borrower agrees to
pledge additional Collateral, or other circumstances exist that would justify
such an increase.

If the aggregate amounts outstanding under the Revolver Note exceed the
Borrowing Base at any time, the Bank will provide written notice of that event
to Borrower. On or before the tenth (10th) day following Borrower’s receipt of
such notification, Borrower will either, at the direction of the Bank, acting in
its sole and absolute discretion: (a) make a mandatory payment to the Bank of
the principal of the Revolver Note in an amount at least equal to the amount
necessary to cause the outstanding principal balance of the Revolver Note to be
less than or equal to the Borrowing Base; or (b) create liens on other assets of
Borrower, satisfactory in nature, quantity, and value to the Bank, acting in its
sole discretion, said assets to have a fair market value sufficient to at least
equal to the amount necessary to cause the outstanding principal balance of the
Revolver Note to be less than or equal to the Borrowing Base.

Non-Recourse

Although the Borrower is responsible on a corporate basis for the full repayment
of principal and interest due on the Obligations and for any other Event of
Default for which the Borrower is responsible, the Bank specifically
acknowledges and agrees that neither any of the directors, officers, or
employees of the Borrower nor any of the Borrower’s shareholders shall have any
personal liability whatsoever for the repayment of the Loans. The sole party
responsible for repayment of the Loans shall be the Borrower, and the sole
security for the Loans shall be the Collateral covered by the Security
Instruments.

 

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Cross-Collateralization

Notwithstanding any of the provisions contained herein or in any of the other
Loan Documents to the contrary, all of the Collateral to be pledged pursuant to
the terms of this Agreement will be deemed to cross-collateralize the
performance of the Borrower under any and all loans now or hereafter advanced
directly by the Bank to the Borrower.

Purpose

Funds from the Revolver Loan have been used to renew and extend the indebtedness
owed to the Bank by the Borrower and to provide additional funds for working
capital. Funds from the First Term Loan and the Second Term Loan were used to
purchase equipment. Funds from the Third Term Loan will be used to purchase
additional seismic equipment. No proceeds from the Loans shall be used for the
purpose of purchasing or carrying margin stock in violation of Regulations G, U,
or X of the Board of Governors of the Federal Reserve System.

Maturity Dates

As stated, the maturity date of the Revolver Note is June 2, 2015, the maturity
date of the First Term Note is June 30, 2014, the maturity date of the Second
Term Note is May 2, 2015, and the maturity date of the Third Term Note is
December 2, 2016.

Environmental Laws

The term “Environmental Laws” shall mean all applicable local, state, and
federal laws, including common law, that relate to: (a) the prevention,
abatement, or elimination of pollution, or the protection of the environment or
natural resources; (b) the generation, handling, treatment, storage, disposal,
release, or transportation of “Hazardous Materials” (as defined below), waste
materials or hazardous or toxic substances; or (c) the regulation of, or
exposure to, hazardous, toxic, or other substances alleged to be harmful,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U. S. C. § 9601, et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. §6901, et seq.; the Federal Water
Pollution Control Act (Clean Water Act), 33 U.S.C. § 1251, et seq.; the Clean
Air Act, 42 U.S.C. § 7401, et seq.; the Hazardous Materials Transportation Act,
49 U.S.C. § 1501, et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601,
et seq.; the Oil Pollution Act, 33 U.S.C. § 2701, et seq.; the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. §11001, et seq.; the Safe
Drinking Water Act, 42 U.S.C. §§ 300f through 300j; the Endangered Species Act,
16 U.S.C. §1531, et seq.; and all similar laws of any Governmental Authority
having jurisdiction over the property in question. This term expressly includes
the regulations of the Texas Railroad Commission relating to plugging and
abandonment, equipment purging and removal, and bonding requirements respecting
inactive wells, 16. T.A.C. § 3.15, as well as regulations and interpretations of
the U.S. Environmental Protection Agency and the Texas Commission on
Environmental Quality relating to air emissions, pollution control, and
permitting that have been, or may be, adopted.

 

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Hazardous Materials

The term “Hazardous Materials” shall mean, without limitation, those substances
or materials defined as “hazardous substances”, “hazardous waste”, “toxic
substances”, or “pollutant or contaminant” in any of the Environmental Laws, as
well as such other substances as are subsequently determined legislatively,
judicially, or administratively, to be harmful or deleterious to the physical
environment or the public health.

 

II. REPRESENTATIONS AND WARRANTIES

 

  A. Good Standing and Identity. The Borrower is a corporation, duly organized
under the State of Texas, and whose legal name is that reflected in the address
of this Agreement. The Borrower has the power and authority to own its property
and to carry on its business in each jurisdiction in which it operates.

 

  B. Authority and Compliance. The Borrower has full power and authority to
enter into this Agreement, to borrow the funds evidenced by the Notes, to
execute and deliver the Third Term Note, and to incur the obligations provided
for herein. No consent or approval of any public authority is required as a
condition to the validity of this Agreement, the Notes, and the Security
Instruments, and Borrower is in compliance with all laws and regulatory
requirements to which he is subject.

 

  C. Litigation. There are no proceedings pending or, to the knowledge of
Borrower, threatened before any court or administrative agency that will or may
have a material adverse effect on the financial condition or operations of
Borrower, except as disclosed to the Bank in writing prior to the date of this
Agreement.

 

  D. Ownership of Assets. As of the date of this Agreement, Borrower has good
title to those interests covered by the Security Instruments and any other
collateral pledged and the other collateral is owned free and clear of liens.
Borrower will at all times maintain its tangible property, real and personal, in
good order and repair, taking into consideration reasonable wear and tear.

 

  E. Taxes. Borrower has paid all income taxes and other taxes due and payable
prior to them becoming delinquent.

 

  F. Financial Statements. The books and records of the Borrower properly
reflect the financial condition of the Borrower in all material respects, and
there has been no material change in Borrower’s financial condition as
represented in its most recent financial statements.

 

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  G. Hazardous Materials. To its best knowledge, the Borrower and the properties
that it owns or intends to acquire comply in all respects with all Environmental
Laws, and the Borrower is not aware of and has not received any notice of any
violation of any Environmental Laws. To the best knowledge of the Borrower, no
governmental or administrative agency or other third party has heretofore filed
any complaint, or commenced any administrative procedure, against it, or any of
its predecessors in title, alleging a violation of any Environmental Laws.
Currently and from time to time, the Borrower, in the course of its regular
business, may use or generate on a portion of its properties materials that may
be classified as Hazardous Materials. The Borrower has and will make a good
faith attempt to comply with all Environmental Laws. To the best of its
knowledge, the Borrower has not otherwise installed, used, generated, stored or
disposed of any Hazardous Materials on their properties. No underground storage
tanks or facilities have been installed upon any property owned by the Borrower,
and to the knowledge of the Borrower, none of such properties has ever been used
for the treatment, storage, recycling, or disposal of any Hazardous Materials.

 

III. CONDITIONS PRECEDENT

The provisions of this Agreement will serve as the terms of the relationship
among the Borrower and the Bank. Prior to any funds being made available,
Borrower will execute and deliver to the Bank, in form and substance
satisfactory to the Bank, this Agreement, the Third Term Note, and the Security
Instruments. In addition, the Borrower expressly authorizes the Bank to file the
Financing Statement in order to perfect the security interests granted under the
Security Agreement.

 

IV. COVENANTS

Unless the Bank shall otherwise consent in writing, and so long as any debt
remains outstanding or the commitment still available, the Borrower shall comply
with the following:

 

  A. Affirmative Covenants.

 

  1. As soon as available, but in any event not later than ninety (90) days
after the end of each fiscal year, with the next year to be measured ending as
of September 30, 2013, Borrower will provide financial statements, in form and
substance satisfactory to the Bank, reflecting Borrower’s financial performance
as of the end of such year and the related statements of income and changes in
cash flows for such year, such statements to be audited by an independent
certified accountant and to be prepared according to generally accepted
accounting principles, consistently applied (“GAAP”).

 

  2. Within ninety (90) days of the end of each fiscal quarter, with the next
fiscal quarter to be measured ending as of September 30, 2013, the Borrower will
submit to the Bank a financial statement reflecting Borrower’s financial
performance during the previous fiscal quarter, with such statements to be
company-prepared.

 

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  3. Within thirty (30) days of the end of each calendar month, with the next
month to be measured being the one ending on October 31, 2013, Borrower shall
provide monthly Accounts aging reports.

 

  4. Within thirty (30) days of transmitting any tax return to any governmental
authority, the Borrower will submit to the Bank a copy of that tax return.

 

  5. Within thirty (30) days following the end of each calendar month, with the
next calendar month to be measured being the one ending on October 31, 2013,
Borrower shall provide a monthly borrowing base report and compliance
certificate in the form attached hereto as Exhibit “A” and Exhibit “B”,
respectively.

 

  6. Borrower shall maintain an average “Debt Service Coverage Ratio” (as that
term is defined below) of not less than 1.50 to 1.0, calculated quarterly, with
the next quarter to be measured ending as of September 30, 2013, from the date
of the Loans to maturity. For purposes of this Agreement, the term “Debt Service
Coverage Ratio” means, with respect to any period of calculation thereof, the
ratio of the sum of “Cash Flow”, as that term is defined below, to all currently
due payments of principal and interest on any long-term “Debt”, as that term is
defined below. “Cash Flow” is defined as the sum of: (a) the net income (or
loss) from continuing operations of Borrower during such period calculated on an
after-taxes basis; plus (b) interest, depreciation, depletion, and amortization
expenses of Borrower during such period, less (c) gains from the sale of any
assets; plus (d) losses from the sale of any assets; less (e) extraordinary
adjustments to net income. “Debt” is defined as all scheduled capital lease
obligations and all principal and interest payments due for the period subject
to measurement, all determined in accordance with GAAP.

 

  7.

For any quarter subject to measurement hereunder, Borrower will maintain a “Debt
to Tangible Net Worth Ratio” of no greater than 1.50 to 1.00 to be measured
quarterly, with the next measurement to occur as of the end of the quarter
ending as of September 30, 2013. For purposes of this paragraph, “Debt” shall
mean, all liabilities, obligations, and indebtedness of the Borrower, of any
kind or nature, now or hereafter owing, arising, due or payable, howsoever
evidenced, created, incurred, acquired or owing, whether primary, secondary,
direct, contingent, fixed, or otherwise, and “Tangible Net Worth” means the
excess, if any, of the total assets of Borrower over all items of indebtedness,
obligations, or liability which would be classified as liabilities of Borrower,
for the time period to be measured, each to be determined in accordance with
GAAP; provided,

 

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  however, that for the purposes of any such computation of Tangible Net Worth,
“assets” will not include (a) goodwill (whether representing the excess of cost
over book value of assets acquired or otherwise), and (b) patents, trademarks,
trade names, copyrights, franchises, and deferred charges.

 

  8. Borrow shall maintain a “Current Ratio”, as defined below, of not less than
1.50 to 1.0, measured quarterly, with the next measurement to occur as of the
quarter ending on September 30, 2013 from the date of the Loans to maturity. For
purposes of this Agreement, “Current Ratio” means, with respect to any period of
calculation thereof, the ratio of “Current Assets” to “Current Liabilities”, as
those terms are defined below. “Current Assets” means the sum of: (a) current
assets, as defined under GAAP, to include, specifically, a minimum of Three
Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00) in cash and
readily marketable securities. “Current Liabilities” shall have the same meaning
as the definition found for that term under GAAP. The requirement that Current
Assets include cash and readily marketable securities of a value of Three
Million Five Hundred Thousand and No/100 Dollars shall apply only if any Loan
currently carries an outstanding principal balance.

 

  9. Within ten (10) days of their publication, Borrower shall provide Bank with
copies of: (a) all financial statements, reports, notices, and proxy statements
sent or made available generally by the Borrower to its shareholders; (b) all
regular and periodic reports and all private placement memorandums; (c) all
registration statements and prospectuses, if any, filed by the Borrower with any
securities exchange or with the Security Exchange Commission; and (d) all press
releases and other statements made available generally by the Borrower to the
public concerning material changes in the business of the Borrower.

 

  10. Borrower shall maintain all primary operating accounts with the Bank.

 

  11. Borrower shall maintain its existence in good standing and comply with all
laws, regulations and governmental requirements applicable to it or to any of
its property, business operations and transactions.

 

  12. Borrower shall promptly pay any reasonable costs incurred by the Bank in
connection with the preparation or enforcement of this Agreement, the Notes, the
Security Instruments, and any other documentation executed concurrently
herewith.

 

  13.

Borrower shall remain in substantial compliance with all Environmental Laws and
will not place or permit to be placed any Hazardous Materials on any of its
properties in violation of any such Environmental Laws. In

 

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  the event that the Borrower should discover any Hazardous Materials on any of
its properties that could result in a breach of the foregoing covenant, the
Borrower shall notify the Bank within three (3) days after such discovery. The
Borrower shall dispose of all material amounts of Hazardous Materials that it
generates only at facilities or with carriers that maintain valid governmental
permits under the Resource Conservation and Recovery Act, 42 U.S.C. §6901. In
the event of any notice or filing of any procedure against the Borrower alleging
a violation of any Environmental Law, the Borrower shall give notice to the Bank
within five (5) days after receiving notice of such notice or filing.

 

  14. The Borrower shall provide such other information as the Bank may
reasonably request from time to time in its sole discretion.

 

  B. Negative Covenants.

 

  1. Borrower shall not make any change in its present accounting method or
change his present fiscal year.

 

  2. Borrower shall not make any substantial change in the nature of its
business as now conducted.

 

  3. Borrower shall not reorganize or merge with any other entity, without the
prior written consent of the Bank.

 

  4. Borrower shall not sell, contract to sell, convey, assign, transfer,
mortgage, pledge, hypothecate, encumber, or in any way alienate its interest in
any of the collateral covered by the Security Instruments, without the consent
of the Bank.

 

V. EVENTS OF DEFAULT

The occurrence and continuing existence of any one of the following shall
constitute an Event of Default under this Agreement and the Notes:

 

  A. Borrower fails to pay when due any principal, interest, or other amount
payable under this Agreement, or any promissory notes executed or guaranteed by
the Borrower in favor of the Bank;

 

  B. Any representation or warranty made by the Borrower hereunder or in any
related collateral security or other documents entered into with the Bank proves
to be at any time false or incorrect in any significant respect;

 

  C. The Borrower fails to observe or perform any covenant, obligation,
agreement, or other provision contained herein or in any other contract or
instrument executed in connection herewith;

 

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  D. Any default or defined Event of Default shall occur under any security
agreement, deed of trust, promissory note, loan agreement or other contract or
instrument executed by the Borrower pursuant to, or as required by, this
Agreement;

 

  E. Any court of competent jurisdiction enters or renders judgment or judgments
against Borrower for the payment of money, which Borrower fails to satisfy,
discharge, or stay no less than thirty (30) days prior to the date on which any
of its assets could be lawfully sold to satisfy such judgment or judgments; or

 

  F. Borrower: (i) becomes insolvent, or suffers or consents to, or applies for
the appointment of a receiver, trustee, custodian or liquidator for itself or
any of its property, or generally fails to pay its debts as they become due, or
makes a general assignment for the benefit of creditors; or (ii) files a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as recodified from
time to time (“Bankruptcy Code”), or as now or hereafter in effect, or any
involuntary petition or proceeding pursuant to said Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy or reorganization or
other relief for debtors is filed or commenced against Borrower; or (iii) files
any answer admitting the jurisdiction of the court and the material allegations
of any such involuntary petition; or (iv) is adjudicated as bankrupt, under said
Bankruptcy Code or any other state or federal law relating to bankruptcy,
reorganization, or other relief for debtors.

 

VI. REMEDIES

If any Event of Default shall occur, any term hereof or of the Notes to the
contrary notwithstanding, the entire outstanding principal balance then due
under the Notes, shall at the Bank’s option become immediately due and payable.
In addition, the obligation, if any, of the Bank to permit further borrowings
hereunder shall immediately cease and terminate and the Bank shall have all
rights, powers, and remedies available under this Agreement, the Notes, or other
contracts or instruments executed in connection herewith, or accorded by law,
including without limitation the right to resort to any or all of the collateral
and to exercise any or all of its rights, powers, or remedies at any time and
from time to time after the occurrence of an Event of Default.

ONCE AN EVENT OF DEFAULT HAS OCCURRED, WESTERN MAY PURSUE THE REMEDIES PROVIDED
FOR IN THIS AGREEMENT, THE NOTES, AND THE SECURITY INSTRUMENTS WITHOUT
PRESENTMENT, DEMAND, PROTEST, NOTICE OF ACCELERATION, NOTICE OF INTENT TO
ACCELERATE, NOTICE OF PROTEST OR NOTICE OF DISHONOR, OR ANY OTHER NOTICE OF ANY
KIND, ALL OF WHICH ARE EXPRESSLY WAIVED BY BORROWER.

All rights, powers, and remedies of the Bank in connection with this Agreement,
the Notes or any other contract or instrument on which the Borrower may at any
time be

 

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obligated to the Bank (or any holder thereof) are cumulative and not exclusive
and will be in addition to any other rights, powers, or remedies provided by law
or equity, including without limitation the right to set off any liability owing
by the Bank to the Borrower (including sums deposited in any deposit account of
Borrower with the Bank, excluding those deposit accounts held by Borrower as
agent for any third party) against any liability of the Borrower to the Bank.

 

VII. WAIVER

No delay, failure, or discontinuation by the Bank, or any holder of the Notes,
in exercising any right, power, or remedy under this Agreement, the Notes, or
any other contract or instrument on which the Borrower may at any time be
obligated to the Bank (or any holder thereof) shall affect or operate as waiver
of such right, power or remedy. Any waiver, permit, consent, or approval of any
kind by the Bank (or any holder of the Notes), or of any provisions or
conditions of, or any breach or default under this Agreement, the Note, or any
other contract or instrument on which the Borrower may at any time be obligated,
must be in writing and shall be effective only to the extent set forth in such
writing.

 

VIII. NOTICES

All notices, requests, and demands given to or made upon the respective parties
must be in writing and shall be deemed to have been given or made: (1) at the
time of personal delivery thereof, (2) or two days after any of the same are
deposited in the U.S. Mail, first class and postage prepaid, addressed as
follows:

 

Borrower:    Dawson Geophysical Company    508 West Wall Street, Suite 800   
Midland, Texas 79701 Western:    Western National Bank    Attention: Mr. Wesley
D. Bownds    508 West Wall Street, Suite 1100    Midland, Texas 79701

Any party to this Agreement may change its address by providing written notice
to the other parties. Such a change of address shall be effective as of the date
that each party receives it.

 

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IX. SUCCESSORS AND ASSIGNS

This Agreement shall be binding on and inure to the benefit of the heirs,
executors, administrators, legal representatives, successors, and assigns of the
parties; provided, however, that this Agreement may not be assigned by the
Borrower without the prior written consent of the Bank. The Bank reserves the
right to sell, assign, transfer, negotiate, or grant participation in all or any
part of, or any interest in, the Bank’s rights and benefits under this
Agreement, the Note or any contracts or instruments relating thereto. In
connection therewith, the Bank may disclose all documents and information which
the Bank now has or may hereafter acquire relating to the loan or the promissory
notes, the Borrower, his business, or any collateral required hereunder.

 

X. SEVERABILITY OF PROVISIONS

If any of the provisions of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or any remaining provisions of this Agreement.

 

XI. VENUE AND JURISDICTION

Any suit, action or proceeding against the Borrower arising out of or relating
to this Agreement or any judgment entered by any court in respect thereof, must
be brought or enforced in the courts of the State of Texas, County of Midland,
or in the United States District Court for the Western District of Texas, as
Western in its sole discretion may elect, and Borrower hereby submit to the
exclusive jurisdiction of such courts for the purpose of any such suit, action
or proceeding. The Borrower hereby irrevocably consent to service of process in
any suit, action or proceeding in any of said courts by the mailing thereof by
the Bank by registered or certified mail, postage prepaid, to the Borrower, at
the addresses set forth herein.

THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS THAT THEY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT BROUGHT IN ANY OF SAID COURTS AND HEREBY
FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

FURTHER, THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT GRANTED BY STATUTE,
RULE OR COURT OR OTHERWISE TO HAVE SUCH SUIT, ACTION, PROCEEDING, OR ISSUE TRIED
BY A JURY. THE BORROWER HAS WAIVED THE RIGHT TO TRIAL BY JURY KNOWINGLY AND
VOLUNTARILY, AND SUCH WAIVER SHALL BE INTERPRETED TO ENCOMPASS INDIVIDUALLY AND
COLLECTIVELY EACH INSTANCE AND EACH INSTANCE AS TO WHICH THE RIGHT TO

 

16

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TRIAL BY JURY MIGHT OTHERWISE ACCRUE. THE BORROWER HEREBY AGREES THAT THE BANK
MAY INCLUDE A COPY OF THIS PARAGRAPH IN ANY PLEADING OR OTHER DOCUMENTATION IN
ORDER TO EVIDENCE THE WAIVER PROVIDED HEREUNDER.

 

XII. MISCELLANEOUS

 

  A. Texas Law Applicable. This Agreement, the Notes, the Security Instruments,
and any contracts or instruments relating thereto, shall be governed by and
construed in accordance with the laws of the State of Texas, except to the
extent that the Bank has greater rights or remedies under federal law or the law
of any jurisdiction in which the collateral properties are located, in which
case such choice of Texas law shall not be deemed to deprive the Bank of such
rights and remedies under federal law or the law of any jurisdiction in which
the collateral properties are located, in which case such choice of Texas law
shall not be deemed to deprive the Bank of such rights and remedies as may be
available under such law.

 

  B. Discretionary Reviews. Western National Bank reserves the right to
periodically conduct a review of the Borrower’s ability to perform under the
terms of the Notes and to limit or restrict future advances under the Notes.

 

  C. Federal Small Business Certification. Borrower represents, warrants and
certifies, that none of the principals of Borrower or Borrower’s affiliates have
been convicted of, or pleaded nolo contender to, any offense covered by 42
U.S.C. Â§16911(7). For purposes of this subsection, the term principal means:
(a) with respect to a sole proprietorship, the proprietor; (b) with respect to a
partnership, each managing partner and each partner who is a natural Person, as
defined below, and holds a twenty percent (20.00%) or more ownership interest in
the partnership; and (c) with respect to a corporation, limited liability
company, association or development company, each director, each of the five
most highly compensated executives or officers of the entity, and each natural
Person, as defined below, who is a direct or indirect holder of twenty percent
(20.00%) or more of the ownership stock or stock equivalent of the entity. For
purposes of this Agreement, “Person” shall mean an individual, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental authority or
other entity of whatever nature.

 

  D.

Notice of Final Agreement. THIS AGREEMENT, THE NOTES, AND ANY CONTRACTS OR
INSTRUMENTS RELATING THERETO, REPRESENT THE ENTIRE AGREEMENT BETWEEN THE
PARTIES, AND IT IS EXPRESSLY UNDERSTOOD THAT ALL PRIOR CONVERSATIONS OR
MEMORANDA BETWEEN THE PARTIES REGARDING THE TERMS OF THIS AGREEMENT SHALL BE
SUPERSEDED BY THIS AGREEMENT. ANY AMENDMENT, APPROVAL, OR WAIVER BY

 

17

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  WESTERN OF THE TERMS OF THIS AGREEMENT, THE NOTES AND ANY CONTRACTS OR
INSTRUMENTS RELATING THERETO, MUST BE IN WRITING OR CONFIRMED WRITING, AND SHALL
BE EFFECTIVE ONLY TO THE EXTENT SPECIFICALLY SET FORTH IN SUCH WRITING. THIS
AGREEMENT, IN CONJUNCTION WITH THE NOTES AND ANY CONTRACTS OR INSTRUMENTS
RELATING THERETO, SHALL SERVE TO EVIDENCE THE TERMS OF THE ENTIRE AGREEMENT
BETWEEN THE PARTIES.

{The remainder of this page is intentionally left blank. Signature page
follows.}

 

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Please acknowledge your acceptance of and agreement to the terms of this
Agreement by dating and executing where indicated.

 

Very truly yours, WESTERN NATIONAL BANK By:  

/s/ Wesley D. Bownds

  Wesley D. Bownds   President

 

AGREED TO AND ACCEPTED AS OF THE

2nd DAY OF DECEMBER 2013.

BORROWER: DAWSON GEOPHYSICAL COMPANY By:  

/s/ Stephen C. Jumper

  Stephen C. Jumper   President By:  

/s/ Christina W. Hagan

  Christina W. Hagan   Secretary

 

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EXHIBIT “A”

Form of Borrowing Base Certificate

DAWSON GEOPHYSICAL COMPANY

BORROWING BASE REPORT

 

ACCOUNTS RECEIVABLES:

     

Eligible Accounts Receivables as of                                         

      $                      

 

 

 

Multiplier

        x 80 % 

Receivables Portion of Borrowing Base

      $                      

 

 

 

TOTAL BORROWING BASE

   $                      

 

 

    

 

Submitted By: Dawson Geophysical Company

 

 

Date

 

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EXHIBIT “B”

COMPLIANCE CERTIFICATE

Reference is made to that certain Loan Agreement dated as of December 2, 2013,
by and between DAWSON GEOPHYSICAL COMPANY (“Borrower”); and WESTERN NATIONAL
BANK (“Bank”) (the “Loan Agreement”).

1. Pursuant to the provisions of the Loan Agreement, the undersigned hereby
certifies, represents and warrants to Bank that, to the best of their knowledge,
except as set forth below, (i) during the period covered by this certificate, no
Event of Default has occurred; (ii) there exists no condition or event that,
with the giving of notice or lapse of time or both, would constitute an Event of
Default; and (iii) during the period covered by this certificate, Borrower has
observed, performed and complied in all material respects with all covenants,
agreements, duties and obligations contained in the Loan Documents.

Exceptions to the above certification: [State “none” or specify the nature and
period of existence thereof and the action that Borrower is taking or proposed
to take with respect thereto.]

2. Borrower’s Cash Flow Coverage Ratio is              to 1.0.

3. Borrower’s Current Ratio is              to 1.0.

4. Borrower’s Debt to Tangible Net Worth Ratio is              to 1.0.

5. To the best knowledge of the undersigned, the attached financial statements
are true and correct and correctly set forth the financial position and results
of operations at the date(s) and for the period(s) stated. The attached
financial statements include all contingent liabilities and cash flow
information of Borrower.

6. Period covered: [Year or Month] ended             , 20    .

7. Capitalized terms used but not defined herein shall have the respective
meanings ascribed thereto in the Loan Agreement.

Dated:             , 20    .

 

DAWSON GEOPHYSICAL COMPANY By:  

 

By:  

 

 

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