Exhibit 10.1

 

LOGO [g604676g13o07.jpg]

LOAN AGREEMENT

 

Borrower:   Geospace Technologies Corporation   Lender:    Frost Bank

Address:

 

7007 Pinemont Drive

Houston, Texas 77040

 

Address:

  

P.O. Box 1600

San Antonio, Texas 78296

This LOAN AGREEMENT (this “Loan Agreement”), dated September 27, 2013, is
entered into by and among Borrower, Guarantor (as defined below) and Lender.

ARTICLE I

DEFINITIONS AND USE OF TERMS

Section 1.01. Certain Definitions. As used herein, the following terms have the
meanings indicated, unless the context otherwise requires:

“Accounts” means any right of Borrower or a Guarantor, as the case may be, to
payment for goods sold or leased or for services rendered, but shall not include
interest or service charges.

“Account Debtor” means a Person who is obligated on or under an Account.

“Advance” means a disbursement by Lender of any of the proceeds of a Loan.

“Advance Request Form” means a certificate substantially in the form of
Exhibit A hereto or other form mutually acceptable to Borrower and Lender.

“Affiliate” means any individual or entity directly or indirectly controlling,
controlled by, or under common control with, another individual or entity. As
used herein, the term “control” means possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise.

“Applicable Bankruptcy Law” means the United States Bankruptcy Code or any other
present or future insolvency, bankruptcy, liquidation, conservatorship,
reorganization or moratorium Governmental Requirement or other similar
Governmental Requirements.

“Business Day” means a day other than a Saturday, Sunday or a day on which
commercial banks in the State of Texas are authorized to be closed, or are in
fact closed.

“Capital Lease Obligation” means, as to any Person, the obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP, other than an Operating Lease.

“Closing Date” means the date of this Loan Agreement.

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“Code” means the Internal Revenue Code of 1986, as amended, and the regulations
promulgated and rulings issued thereunder.

“Collateral” means any and all Property and rights and interests in or to
Property of Borrower and each of the Guarantors, whether tangible or intangible,
in each case, in which a Lien is granted pursuant to the Security Agreement or
any other Loan Document; provided, however, that the term “Collateral” shall not
include any equity interests in any Foreign Subsidiary.

“Default” means any event or circumstance that constitutes an Event of Default
or, that with, the lapse of time, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.

“Distributions” means all dividends and other distributions made by a Person to
its equity holders.

“Domestic Subsidiary” means any Subsidiary that is incorporated, formed or
otherwise organized under the laws of the United States of America, any State
thereof or the District of Columbia.

“EBITDA” means, with respect to Borrower and its Subsidiaries on a consolidated
basis, for any period of determination, the sum of (a) Net Income for such
period, and (b) without duplication and to the extent deducted in determining
such Net Income (i) depreciation and amortization for such period, plus
(ii) Interest Expense for such period, plus (iii) Income Tax Expense for such
period, plus (iv) non-cash charges for such period.

“Environmental Laws” means any and all Federal, state, local, and foreign
Governmental Requirements, judgments, permits, concessions, grants, franchises,
licenses, agreements or governmental restrictions relating to pollution and the
protection of human health and the environment or the release of any Hazardous
Materials into the environment, including those related to hazardous substances
or wastes, air emissions and discharges to waste or public systems.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with Borrower within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by Borrower or any ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a Plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan
or notification that a Multiemployer Plan is in

 

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reorganization; (d) the filing of a notice of intent to terminate, the treatment
of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or
the commencement of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan; (e) an event or condition which constitutes grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any
liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate.

“Event of Default” has the meaning set forth in Article IX.

“Excluded Swap Obligation” means, with respect to any Guarantor, any obligation
to pay or perform under any agreement, contract or transaction that constitutes
a “swap” within the meaning of the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended from time to time, and any successor statute, and any
regulations promulgated thereunder.

“Existing Credit Agreement” means that certain Loan Agreement dated March 2,
2011, by and between Borrower, formerly known as OYO Geospace Corporation, and
Lender, formerly known as The Frost National Bank, as the same has been amended,
restated or modified from time to time and in effect on the date hereof.

“Existing Letters of Credit “ means each letter of credit issued and outstanding
under the Existing Credit Agreement as of the Closing Date.

“Financial Statements” means the financial information of Borrower and its
Subsidiaries on a consolidated basis, as required and set forth in Section 6.01
as, at the time in question, have been most recently furnished to Lender.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“Funded Debt” means, with respect to Borrower and its Subsidiaries on a
consolidated basis, on any date of determination and without duplication, the
outstanding principal amount of all liabilities for borrowed money and other
interest-bearing liabilities thereof to the extent such liabilities would be
considered indebtedness for borrowed money in accordance with GAAP (which, in
the case of the Loans and Letters of Credit, shall be deemed to equal the
average daily amount of the Loans or Letters of Credit, as the case may be,
outstanding for the fiscal quarter ending on the date of determination),
including current and long term debt, less the non-current portion of
Subordinated Liabilities, but excluding any contingent liability in respect of
the foregoing (including undrawn amounts under outstanding Letters of Credit and
guarantees) and any intercompany liabilities between Borrower and any of its
Subsidiaries or between a Subsidiary and any other Subsidiary).

“GAAP” means generally accepted accounting principles in the United States of
America set forth in the statements and pronouncements of the Financial
Accounting Standards Board or such other principles as may be in general use by
a significant segment of the accounting profession in the United States of
America, that are applicable to the circumstances as of the date of
determination, consistently applied to at least two successive accounting
periods.

 

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“Governmental Authority” means the government of the United States of America,
the state, the county, the city or any other political subdivision thereof in
which the Property is located, and any court or political subdivision, agency,
or instrumentality thereof, domestic or foreign, exercising executive,
legislative, judicial, taxing, regulatory, or administrative powers or functions
of or pertaining to government.

“Governmental Requirements” means all constitutions, statutes, laws, ordinances,
rules, regulations, orders, writs, injunctions or decrees of any Governmental
Authority.

“Guarantee” means, as to any Person (the “guarantor”), (a) any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation payable or
performable by another Person (the “primary obligor”) in any manner, whether
directly or indirectly, and including any obligation of the guarantor, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation, (ii) to purchase or lease
Property, securities or services for the purpose of assuring the obligee in
respect of such Indebtedness or other obligation of the payment or performance
of such Indebtedness or other obligation, (iii) to maintain working capital,
equity capital or any other financial statement condition or liquidity or level
of income or cash flow of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation, or (iv) entered into for
the purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of the guarantor securing any Indebtedness or other
obligation of the primary obligor, whether or not such Indebtedness or other
obligation is assumed by the guarantor; provided that “Guarantee” shall exclude
endorsement of instruments for collection or deposit in the ordinary course of
business. The amount of any Guarantee will be deemed to be an amount equal to
the stated or determinable amount of the related primary obligation, or portion
thereof, in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof.
The term “Guarantee” as a verb has a corresponding meaning.

“Guarantor” means any Person signing this Loan Agreement in the capacity of
Guarantor and any other Person who subsequently executes a Guaranty or a
supplement thereto in favor of Lender. For the avoidance of doubt, a “Guarantor”
shall never include a Foreign Subsidiary of Borrower.

“Guaranty” means the Guaranty Agreement executed by Guarantors in favor of
Lender, substantially in the form of Exhibit B hereto, as the same may be
amended, modified, restated, ratified, supplemented, or replaced from time to
time.

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

 

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“Income Tax Expense” means, with respect to Borrower and its Subsidiaries on a
consolidated basis, for any period of determination, all income taxes for such
period as determined in accordance with GAAP.

“Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP: (a) all obligations of such Person for
borrowed money and all obligations of such Person evidenced by bonds,
debentures, notes, loan agreements or other similar instruments (other than
those evidencing trade accounts payable in the ordinary course of business);
(b) all direct or contingent obligations of such Person arising under letters of
credit (including standby and commercial), bankers’ acceptances, bank
guaranties, surety bonds and similar instruments issued for the account of such
Person; (c) net obligations of such Person under any Swap Agreement; (d) all
obligations of such Person to pay the deferred purchase price of Property or
services (other than trade accounts payable in the ordinary course of business
that are not more than 180 days past due); (e) indebtedness (excluding prepaid
interest thereon) of others secured by a Lien on Property owned or being
purchased by such Person (including indebtedness arising under conditional sales
or other title retention agreements), whether or not such indebtedness will have
been assumed by such Person or is limited in recourse; (f) Capital Lease
Obligations and Synthetic Lease Obligations; and (g) all Guarantees of such
Person in respect of any of the obligations of another Person described in the
preceding clauses (a) through (f). For all purposes hereof, (i) the Indebtedness
of any Person will include the Indebtedness of any partnership or joint venture
(other than a joint venture that is itself a corporation or limited liability
company) in which such Person is a general partner or a joint venture to the
extent such Person is liable therefor as a result of such Person’s ownership
interest in such entity, unless such Indebtedness is expressly made non-recourse
to such Person, (ii) the amount of any net obligation under any Swap Agreement
on any date shall be deemed to be the Swap Termination Value thereof as of such
date and (iii) solely with respect to any Guarantor, Excluded Swap Obligations
of such Guarantor shall in any event be excluded from “Indebtedness” owing by
such Guarantor.

“Indemnitee” is defined in Section 10.14.

“Interest Expense” means, with respect to Borrower and its Subsidiaries on a
consolidated basis, for any period of determination, the sum of all interest
expense paid or required by its terms to be paid during such period, as
determined in accordance with GAAP.

“Investment” is defined in Section 7.06.

“IRS” means the United States Internal Revenue Service.

“Letter of Credit” means any letter of credit issued by Lender or any of its
Affiliates for the account of Borrower pursuant to Article III and shall include
the Existing Letters of Credit.

“Letter of Credit Agreement” means an Application and Agreement for Standby
Letter of Credit, or an Amendment Request Form in each case properly completed
and signed by Borrower requesting issuance, amendment, renewal or extension of a
Letter of Credit, and any other document related to a Letter of Credit, all in
form and substance reasonably satisfactory to Lender.

 

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“Letter of Credit Liabilities” means, at any time, the aggregate amount
available to be drawn under all outstanding Letters of Credit, plus the
aggregate amount of all disbursements made by Lender under the outstanding
Letters of Credit that have not yet been reimbursed by or on behalf of Borrower
at such time.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, and any financing lease having substantially the same economic effect
as any of the foregoing).

“Loans” is defined in Section 2.01, each individually a “Loan”.

“Loan Documents” means this Loan Agreement, the Revolving Credit Note, all
Guaranties, the Security Agreement, all Letters of Credit, all Letter of Credit
Agreements, and such other documents, instruments and agreements, evidencing,
securing or pertaining to the Obligations as will from time to time be executed
and delivered to Lender by Borrower, any Guarantor, or any other party pursuant
to this Loan Agreement, and any future amendments, restatements, modifications,
ratifications, confirmations, extensions or supplements hereto or thereto.

“Managerial Official” means, with respect to any Person, an officer or a
governing Person of such Person.

“Margin Stock” has the meaning given thereto in Section 221.2 of Regulation U,
promulgated by the Board of Governors of the Federal Reserve System,
F.R.S. Reg. U, 12 C.F.R. part 221 (April 1, 1998 revision), as amended from time
to time.

“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, assets, liabilities
(actual or contingent), or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole; or (b) a material adverse effect upon the
legality, validity, binding effect or enforceability against Borrower and the
Guarantors considered as a whole of any material Loan Document to which they are
a party or the rights of Lender under any such Loan Document.

“Maximum Rate” is defined in Section 10.05.

“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which Borrower, any Subsidiary, or any ERISA
Affiliate makes or is obligated to make contributions, or during the preceding
five plan years, has made or been obligated to make contributions.

“Net Income” means, with respect to Borrower and its Subsidiaries on a
consolidated basis, for any period of determination, the aggregate of all
amounts that would be included as net income on the consolidated financial
statements of Borrower for such period calculated in accordance with GAAP.

 

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“Net Tangible Assets” means, as of the date of determination, the total assets
of Borrower and its Subsidiaries on a consolidated basis, as determined at the
end of the specified fiscal period in accordance with GAAP, but excluding the
book value of all intangible assets of Borrower and its Subsidiaries.

“Obligations” means the unpaid principal of and accrued interest on all present
and future Indebtedness, obligations and liabilities of Borrower to Lender, in
each case, arising pursuant to the Loans, this Loan Agreement or any of the
other Loan Documents, or any Swap Agreement, and any renewals, extensions,
increases, or amendments thereof, or any part thereof, regardless of whether
such Indebtedness, obligations and liabilities are direct, indirect, fixed,
contingent, liquidated, unliquidated, joint, several or joint and several and
including accrued and unpaid interest and fees that accrue after the
commencement by or against Borrower of any proceeding under any Applicable
Bankruptcy Law naming Borrower as the debtor in such proceeding, regardless of
whether such interest and fees are allowed claims in such proceeding.

“Operating Lease” means (a) an operating lease under GAAP and (b) any lease that
would have been considered an operating lease under the provisions of GAAP as in
effect as of the date hereof.

“Patriot Act” is defined in Section 5.16.

“Patriot Rules” are referenced in Section 5.16.

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Pension Plan” means any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by Borrower, any
Subsidiary, or any ERISA Affiliate or to which Borrower, any Subsidiary, or any
ERISA Affiliate contributes or has an obligation to contribute, or in the case
of a multiple employer or other plan described in Section 4064(a) of ERISA, has
made contributions at any time during the immediately preceding five plan years.

“Permitted Investments” means:

(a) Money Market Mutual Funds. Money market mutual funds which are registered
with the Securities and Exchange Commission under the Securities Act of 1933 and
the Investment Company Act of 1940 and that are listed on the New York Stock
Exchange, the American Stock Exchange, or authorized for quotations display on
the National Association of Securities Dealers Automated Quotations System or
any successor national exchanges, and that have underlying investments
consisting predominantly of securities permitted in clauses (b) through
(g) below. For purposes hereof the term “predominantly” means ninety percent or
greater.

 

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(b) U.S. Government Securities. Direct United States Treasury obligations, the
principal and interest of which are fully guaranteed by the government of the
United States of America.

(c) Securities Issued or Guaranteed by U.S. Federal Government Agencies. Bonds,
debentures, notes, or other evidence of indebtedness, any of which are issued or
guaranteed by federal agencies and backed by the full faith and credit of the
United States of America.

(d) Securities Issued By Government-Sponsored Enterprises (GSEs). Bonds,
debentures, notes, or other evidence of indebtedness, any of which are issued or
guaranteed by a United States government-sponsored entity.

(e) Repurchase Agreements. Direct security repurchase agreements of any federal
book-entry only securities enumerated in the clauses (b), (c) and (d) above.
“Direct security repurchase agreement” means an agreement under which Borrower
or one of its Subsidiaries buys, holds for a specified time, and then sells back
those securities and obligations enumerated in clauses (b), (c) and (d) above.

(f) Municipal Securities. Bonds, debentures, notes, or other evidence of
indebtedness, any of which are issued by states, counties, cities and political
subdivisions, and are rated investment grade as reflected by a rating by
Moody’s, Inc., Fitch or Standard & Poor’s Corporation of A or better.

(g) Corporate Debt Securities. Bonds, debentures, notes, or other evidence of
indebtedness any of which are issued by corporations of the United States which
are rated investment grade as reflected by a rating by Moody’s, Inc. of A or its
equivalent or better or a rating by Fitch or Standard & Poor’s Corporation of A
or its equivalent or better.

(h) payroll advances and employee, officer, and director loans in an aggregate
amount up to $150,000 at any one time outstanding.

(i) Investments made through Lender or its Affiliates.

“Person” means any individual, firm, company, corporation, limited liability
company, joint stock company, association, partnership, joint venture, bank,
trust, unincorporated organization, Governmental Authority or other entity.

“Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by Borrower, any Subsidiary, or, with respect
to any such plan that is subject to Section 412 of the Code or Title IV of
ERISA, any ERISA Affiliate.

“Property” means any interest in property, whether real or personal or mixed,
tangible or intangible.

“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30-day notice period has been waived.

 

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“Revolving Credit Commitment” is defined in Section 2.01.

“Revolving Credit Loans” is defined in Section 2.01.

“Revolving Credit Note” means a promissory note executed by Borrower and payable
to the order of Lender, substantially in the form of Exhibit C hereto,
evidencing the Revolving Credit Loans made by Lender to Borrower hereunder, as
the same may be amended, restated, supplemented, modified, extended or increased
from time to time.

“Security Agreement” means the Pledge and Security Agreement executed by
Borrower and Guarantors, substantially in the form of Exhibit D hereto, as may
be amended, modified, ratified, supplemented, restated or replaced from time to
time.

“Standard Permitted Lien” means any of the following: (i) Liens for taxes,
unpaid utilities, assessments or governmental charges not yet delinquent or that
remain payable without penalty or Liens for taxes, unpaid utilities, assessments
or governmental charges being contested in good faith and by appropriate
proceedings for which adequate reserves in accordance with GAAP have been
established; (ii) Liens in respect of Property or assets imposed by law that
were incurred in the ordinary course of business, such as carriers’, suppliers’,
warehousemen’s, materialmen’s and mechanics’ Liens and other similar Liens
arising in the ordinary course of business, that do not in the aggregate
materially detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of Borrower or its
Subsidiaries taken as a whole and do not secure any Indebtedness; (iii) Liens
created by this Loan Agreement or the other Loan Documents; (iv) Liens arising
from judgments, decrees or attachments in circumstances not constituting an
Event of Default or securing appeal or other surety bonds related thereto;
(v) Liens (other than any Lien imposed by ERISA) incurred or deposits made in
the ordinary course of business in connection with workers’ compensation,
unemployment insurance and other types of social security; and mechanic’s Liens,
carrier’s Liens, and other Liens to secure the performance of tenders, statutory
obligations, contract bids, government contracts, surety, appeal, customs,
performance and return-of-money bonds and other similar obligations, incurred in
the ordinary course of business (exclusive of obligations in respect of the
payment for borrowed money), whether pursuant to statutory requirements, common
law or consensual arrangements; (vi) leases or subleases granted in the ordinary
course of business to others not interfering in any material respect with the
business of Borrower or its Subsidiaries taken as a whole and any interest or
title of a lessor, sublessor, licensor or sublicensor under any lease or license
not in violation of this Loan Agreement; (vii) easements, rights-of-way, zoning
or other restrictions, charges, encumbrances, defects in title, prior rights of
other persons, and obligations contained in similar instruments, in each case
that do not secure Indebtedness and do not involve, and are not likely to
involve at any future time, either individually or in the aggregate, a
substantial and prolonged interruption or disruption of the business activities
of Borrower and its Subsidiaries considered as an entirety; (viii) Liens arising
from the rights of lessors under leases (including financing statements
regarding the equipment or other Property subject to lease) not in violation of
the requirements of this Loan Agreement, provided that such Liens are only in
respect of the Property subject to, and secure only, the respective lease (and
any other lease with the same or an affiliated lessor) and any extensions or
renewals thereof; (ix) rights of consignors of goods or bailors of equipment,
whether or not perfected by the filing of a financing statement under the UCC;
(x) statutory rights of setoff in

 

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favor of depository institutions in funds of Borrower and its Subsidiaries held
in operating accounts at such institutions, together with Liens that are
contractual rights of setoff in such funds relating to the establishment of
depository relations with banks, and not given in connection with the issuance
of Indebtedness; (xi) customary setoff rights and related settlement procedures
under any Swap Agreement; (xii) Liens relating to pooled deposit or sweep
accounts of Borrower or any Subsidiary to permit satisfaction of overdraft or
similar obligations incurred in the ordinary course of business; (xiii) Liens
relating to purchase orders and other agreements entered into with customers of
Borrower or any Subsidiary in the ordinary course of business, (xiv) Liens
relating to bank services in the ordinary course of business, including credit
cards, stored value cards, treasury management services (including controlled
disbursement, automated clearinghouse transactions, return items, overdrafts and
interstate depository network services); and (xv) any license or sublicense of
any intellectual property and related rights granted in the ordinary course of
business.

“Subordinated Debt” means Indebtedness of Borrower or any of its Subsidiaries to
any Person the payment of which has been subordinated to the payment of the
Obligations in a manner satisfactory to Lender and by a document or documents
satisfactory to Lender.

“Subordinated Liabilities” means liabilities subordinated to Borrower’s
obligations to Lender in a manner acceptable to Lender in its sole discretion.

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a
“Subsidiary” or to “Subsidiaries” will refer to a Subsidiary or Subsidiaries of
Borrower.

“Swap Agreement” means (a) any interest rate swap agreement, interest rate
exchange agreement, currency exchange agreement, foreign exchange agreement,
interest rate and currency exchange agreement, forward rate agreement, rate
floor agreement, interest rate protection agreement, interest rate cap
agreement, rate collar agreement, or any other similar transactions or any
combination of the foregoing any option agreement respecting the foregoing,
whether or not any such transaction is governed by or subject to any master
agreement and (b) any and all transactions of any kind, and the related
confirmations, which are subject to the terms and conditions of, or governed by,
any form of master agreement published by the International Swaps and
Derivatives Association, Inc., any International Foreign Exchange Master
Agreement or any similar agreement or arrangement, and any schedule,
confirmation, exhibit, annex, document or instrument evidencing any interest
therein covered by any such agreement now existing or hereafter entered into by
a Person, as the same may be modified, supplemented, amended or revised and in
effect from time to time.

“Swap Termination Value” means in respect of any one or more Swap Agreements,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Agreements, (a) for any date on or after the
date such Swap Agreements

 

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have been closed out and termination value(s) determined in accordance
therewith, such termination value(s), and (b) for any date prior to the date
referenced in clause (a), the amount(s) determined as the mark-to-market
value(s) for such Swap Agreements, as determined based upon one or more
mid-market or other readily available quotations provided by any recognized
dealer in such Swap Agreements (which may include the Lender or any Affiliate of
the Lender).

“Synthetic Lease Obligation” means the monetary obligation of a Person under
(a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of Property creating obligations that do not
appear on the balance sheet of such Person but which, upon the insolvency or
bankruptcy of such Person, would be characterized as the Indebtedness of such
Person (without regard to accounting treatment).

“Termination Date” means the maturity date stated in the Revolving Credit Note.

“UCC” means the Uniform Commercial Code of the State of Texas or of any other
state having jurisdiction with respect to any of the rights and remedies of
Lender under the Loan Documents, as amended.

“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan’s assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.

Section 1.02. Headings. The headings, captions, and arrangements used herein or
in any of the Loan Documents are, unless specified otherwise, for convenience
only and will not be deemed to limit, amplify, or modify the terms hereof or of
the other Loan Documents nor to affect the meaning hereof or thereof.

Section 1.03. Number and Gender of Words. Whenever herein the singular number is
used, the same will include the plural where appropriate, and words of any
gender will include each other gender where appropriate.

Section 1.04. Money. Unless stipulated otherwise, all references herein or in
any of the Loan Documents to “Dollars,” “money,” “payments,” or other similar
financial or monetary terms are references to currency of the United States of
America.

Section 1.05. Articles, Sections and Exhibits. All references herein to Articles
and Sections are, unless specified otherwise, references to articles and
sections of this Loan Agreement. All references herein to an “Exhibit,” “Annex”
or “Schedule” are references to exhibits, annexes or schedules attached hereto,
all of which are made a part hereof for all purposes, the same as if set forth
herein verbatim, it being understood that if any exhibit, annex or schedule
attached hereto, which is to be executed and delivered, contains blanks, the
same will be completed correctly and in accordance with the terms and provisions
contained herein and as contemplated herein prior to or at the time of the
execution and delivery thereof. The words “herein,” “hereof,” “hereunder” and
other similar compounds of the word “here” when used in this Loan Agreement will
refer to the entire Loan Agreement and not to any particular provision or
section.

 

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Section 1.06. Accounting Terms. Unless otherwise specified, all accounting and
financial terms used and not otherwise defined herein and the compliance with
each of the covenants set forth herein are to be determined according to GAAP,
as in effect from time to time. If at any time any change in GAAP from that in
effect on the Closing Date would affect the computation of any financial ratio
or requirement set forth in any Loan Document or would render the same not
meaningful criteria for evaluating the matters contemplated to be evidenced by
such definitions or covenants, and either Borrower or Lender will so request,
Lender and Borrower will negotiate in good faith to amend such definition and
ratio or other covenant requirement, or both, to preserve the original intent
thereof in light of such change in GAAP (subject to the approval of Lender to
such amendment and such amendment being reasonably acceptable to Borrower),
provided that, until so amended, (a) such ratio or other covenant requirement
will continue to be computed in accordance with GAAP prior to such change
therein and Borrower shall be deemed to be in compliance with any such covenant
until the date of execution of such amendment, if and to the extent that
Borrower would have been in compliance therewith under GAAP as in effect
immediately prior to such change, and (b) Borrower will provide to Lender
financial statements and other documents required under this Loan Agreement or
as reasonably requested hereunder setting forth a reconciliation between
calculations of such ratio or requirement made before and after giving effect to
such change in GAAP.

ARTICLE II

LOANS

Section 2.01. Loans. Lender agrees to lend to Borrower, on a revolving basis
from time to time during the period commencing on the Closing Date and
continuing through the Termination Date, such amounts as Borrower may request
hereunder (the “Revolving Credit Loans”); provided, however, the total principal
amount outstanding at any time will not exceed FIFTY MILLION AND NO/100 DOLLARS
($50,000,000.00) (the “Revolving Credit Commitment”) minus the Letter of Credit
Liabilities. If at any time the outstanding Revolving Credit Loans exceed an
amount equal to the Revolving Credit Commitment, minus the Letter of Credit
Liabilities, Borrower shall immediately repay the Loans to Lender equal to such
excess amount, plus all accrued but unpaid interest thereon. Subject to the
terms and conditions hereof, Borrower may borrow, repay and reborrow hereunder.
All Revolving Credit Loans will be collectively called the “Loans”.

Section 2.02. Promissory Note. The Loans will be evidenced by the Revolving
Credit Note. Interest on the Revolving Credit Note will accrue at the rate set
forth therein. The principal of and interest on the Revolving Credit Note will
be due and payable in accordance with the terms and conditions set forth in the
Revolving Credit Note and in this Loan Agreement.

Section 2.03. Advances. For each requested Advance under the Revolving Credit
Commitment, Borrower shall give Lender notice of any borrowing hereunder by
telephone (and confirmed immediately in writing), facsimile or e-mail (confirmed
immediately by telephone) in substantially the form of an Advance Request Form
delivered to Lender on or before 12:00 noon (San Antonio, Texas time) on the
date of any requested Advance; provided, Borrower shall not be obligated to
provide Lender notice of any Advances made by Lender to Borrower pursuant to
Borrower’s Treasury Management Agreement with Lender.

 

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Section 2.04. Commitment Fee. Borrower shall pay Lender a commitment fee on the
daily average unused amount of the Revolving Credit Commitment for the period
from and including the Closing Date until the earlier of the date of termination
of the Revolving Credit Commitment and the Termination Date, at the rate of
twenty one-hundredths percent (0.20%) per annum based on a 360-day year and the
actual number of days elapsed (including the first date but excluding the last).
For the purpose of calculating the commitment fee hereunder, the Revolving
Credit Commitment will be deemed utilized by the amount of all outstanding
Revolving Credit Loans and outstanding Letter of Credit Liabilities. Accrued
commitment fee will be payable in arrears on the last day of each fiscal quarter
commencing with the first such date to occur after the Closing Date and on the
earlier of the date of termination of the Revolving Credit Commitment and the
Termination Date.

Section 2.05. Capital Adequacy. If after the Closing Date, Lender will have
determined that the adoption or implementation of any applicable Governmental
Requirement 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 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, has or would have the
effect of reducing the rate of return on 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 Lender (or its parent) could have achieved but for
such adoption, implementation, change, or compliance (taking into consideration
Lender’s policies with respect to capital adequacy) by an amount deemed by
Lender to be material, then from time to time, within ten (10) Business Days
after receipt of written demand by Lender, Borrower will pay to Lender (or its
parent, as the case may be) such additional amount or amounts as will compensate
Lender for such reduction. A certificate of Lender delivered to Borrower
claiming compensation under this Section and setting forth in reasonable detail
the additional amount or amounts to be paid to it hereunder will be conclusive,
provided that the determination thereof is made on a reasonable good faith basis
and absent manifest error. In determining such amount or amounts, Lender may use
any commercially reasonable averaging and attribution methods.

Section 2.06. Obligations Absolute. The obligations of Borrower under this Loan
Agreement and the other Loan Documents (including without limitation the
obligation of Borrower to reimburse Lender for draws under any Letter of Credit)
will be absolute, unconditional, and irrevocable, and will be performed strictly
in accordance with the terms of this Loan Agreement and the other Loan Documents
under all circumstances whatsoever, including without limitation the following
circumstances:

(a) Any lack of validity or enforceability of any Letter of Credit or any other
Loan Document;

(b) Any amendment or waiver of or any consent to departure from any Loan
Document;

(c) The existence of any claim, set-off, counterclaim, defense or other rights
which Borrower, its Subsidiaries, or any other Person may have at any time
against any beneficiary of any Letter of Credit, Lender, or any other Person,
whether in connection with this Loan Agreement or any other Loan Document or any
unrelated transaction;

 

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(d) Any statement, draft, or other document presented under any Letter of Credit
proving to be forged, fraudulent, invalid, or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect whatsoever;

(e) Payment by Lender under any Letter of Credit against presentation of a draft
or other document which does not comply with the terms of such Letter of Credit;
or

(f) Any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, that might otherwise constitute a defense available to, or
discharge of, Borrower.

Section 2.07. Optional Termination of Revolving Credit Commitments. During the
term of this Loan Agreement, Borrower may, upon ten (10) business days’ prior
written notice to Lender, terminate the Revolving Credit Commitments; provided,
that Borrower shall not terminate the Revolving Credit Commitments if there then
exists (a) any Default, or (b) any Letter of Credit Liabilities (other than in
respect of any Letter of Credit that has been cash collateralized in accordance
with Section 3.07). Upon termination of the Revolving Credit Commitments by
Borrower in accordance with this Section 2.07, Borrower shall immediately repay
to Lender all outstanding Obligations.

ARTICLE III

LETTERS OF CREDIT

Section 3.01. Letters of Credit. Subject to the terms and conditions of this
Loan Agreement and the applicable Letter of Credit Agreement, Lender agrees to
issue, amend, renew or extend one or more Letters of Credit for the account of
Borrower or any Subsidiary, and to honor compliant drawings under such Letters
of Credit, from time to time from the Closing Date to and including the later of
the Termination Date or the Expiration Date; provided, however, that the Letter
of Credit Liabilities will not at any time exceed the lesser of
(a) $50,000,000.00, and (b) an amount equal to the amount of the Revolving
Credit Commitment, minus the outstanding Revolving Credit Loans. Each Letter of
Credit (i) will expire at or prior to the close of business on the Expiration
Date (as hereinafter defined), (ii) will be payable in Dollars, (iii) must
support a transaction that is entered into in the ordinary course of Borrower’s
business, (iv) must be satisfactory in form and substance to Lender, and
(v) will be issued pursuant to such documents and instruments (including,
without limitation, the Letter of Credit Agreement) as Lender may require. The
“Expiration Date” shall mean the date that is one year or two years (depending
on the agreed term thereof set forth in the Letter of Credit Agreement) after
the date of the issuance of the Letter of Credit (or, in the case of any renewal
or extension thereof, one year or two years after such renewal or extension). In
the event the Expiration Date is after the Termination Date, all terms and
conditions of this Loan Agreement and the other Loan Documents, including all
security for such Obligations, shall remain in full force and effect until such
Expiration Date (except to the extent any outstanding Letter of Credit has been
cash collateralized in accordance with Section 3.07). All Existing Letters of
Credit shall be deemed to have been issued pursuant hereto, and from and after
the Closing Date shall be subject to and governed by the terms and conditions
hereof.

 

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Section 3.02. Procedure for Issuing, Amending, Renewing and Extending Letters of
Credit. Each request for issuance of a Letter of Credit will be made on at least
five (5) Business Days’ (or such later date as Lender and Borrower may agree in
a particular instance in their sole discretion) prior notice from Borrower to
Lender by means of a written Letter of Credit request describing the transaction
proposed to be supported thereby and specifying (A) in the case of the initial
issuance of a Letter of Credit, (i) the requested date of issuance of the Letter
of Credit (which will be a Business Day), (ii) the face amount of the Letter of
Credit, (iii) the Expiration Date of the Letter of Credit, (iv) the name and
address of the beneficiary, and (v) the tenor of the draft and any other
documents required to be presented by such beneficiary at the time of any
drawing (such notice to set forth the exact wording of such documents or to
attach copies thereof), and (B) in the case of an amendment, renewal or
extension of a Letter of Credit, (i) the Letter of Credit to be amended, renewed
or extended; and (ii) the date of amendment, renewal or extension thereof (which
will be a Business Day) (such notice to set forth the exact wording of such
documents or to attach copies thereof). Borrower shall also submit and execute a
Letter of Credit Agreement in connection with any request for issuance of a
Letter of Credit. Each request for amendment, renewal or extension of an
existing Letter of Credit shall be in writing, identifying the applicable Letter
of Credit by Letter of Credit number and specifying the date of amendment,
renewal or extension (which shall be a Business Day) and such other information
as shall be necessary to amend, renew or extend such Letter of Credit. Borrower
shall also submit and execute a Letter of Credit Agreement in connection with
any request to amend, renew or extend an existing Letter of Credit. Lender is
not obligated to amend, renew or extend any Letter of Credit except in strict
accordance with the requirements of this Article III. Lender may refuse to
issue, amend, extend or renew a Letter of Credit in the event Lender would be
prohibited from doing so under any applicable Governmental Requirement.

Section 3.03. Payments Constitute Advances. Each payment by Lender pursuant to a
drawing under a Letter of Credit will constitute and be deemed a Revolving
Credit Loan by Lender to Borrower under this Loan Agreement as of the day and
time such payment is made by Lender and in the amount of such payment.

Section 3.04. Letter of Credit Fee. Borrower will pay to Lender (a) a letter of
credit commission payable on the date each Letter of Credit is issued an amount
equal to two percent (2.0%) per annum of the face amount of such Letter of
Credit and (b) such other customary and standard fees, commissions, and costs
charged or incurred by Lender with respect to issuance, amendment, renewal or
extension of any Letter of Credit and determined in accordance with Lender’s
written fee policy as from time to time in effect.

Section 3.05. Limitation of Liability. Borrower assumes all risks of the acts or
omissions of any beneficiary of any Letter of Credit with respect to its use of
such Letter of Credit; provided, that this assumption is not intended to, and
shall not, preclude Borrower’s pursuing such rights and remedies as it may have
against the beneficiary or any transferee at law or otherwise. Neither Lender
nor any of its officers or directors will have any responsibility or liability
to Borrower or any other Person for: (a) the failure of any draft to bear any
reference or

 

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adequate reference to any Letter of Credit, or the failure of any documents to
accompany any draft at negotiation, or the failure of any Person to surrender or
to take up any Letter of Credit or to send documents apart from drafts as
required by the terms of any Letter of Credit, or the failure of any Person to
note the amount of any instrument on any Letter of Credit, each of which
requirements, if contained in any Letter of Credit itself, it is agreed may be
waived by Lender, (b) errors, omissions, interruptions, or delays in
transmission or delivery of any messages, (c) the validity, sufficiency, or
genuineness of any draft or other document, or any endorsement(s) thereon, even
if any such draft, document or endorsement should in fact prove to be in any and
all respects invalid, insufficient, fraudulent, or forged or any statement
therein is untrue or inaccurate in any respect, (d) the payment by Lender to the
beneficiary of any Letter of Credit against presentation of any draft or other
document that does not comply with the terms of the Letter of Credit, or (e) any
other circumstance whatsoever in making or failing to make any payment under a
Letter of Credit; provided, that notwithstanding anything herein to the
contrary, Borrower will have a claim against Lender, and Lender will be liable
to Borrower, to the extent of any direct, but not consequential, damages
suffered by Borrower which Borrower proves in a final non-appealable judgment
were caused by (i) Lender’s willful misconduct or gross negligence in
determining whether documents presented under any Letter of Credit complied with
the terms thereof or failure to comply with the standard of practice set forth
in Section 5.108(e) of the UCC, or (ii) Lender’s willful failure to pay under
any Letter of Credit after presentation to it of a demand strictly complying
with the terms and conditions of such Letter of Credit. Lender may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.

Section 3.06. Additional Costs in Respect of Letters of Credit. If as a result
of any regulatory change in Governmental Requirements there will be imposed,
modified, or deemed applicable any withholdings tax, reserve, special deposit,
or similar requirement against or with respect to or measured by reference to
Letters of Credit issued or to be issued hereunder or Lender’s commitment to
issue Letters of Credit hereunder, and the result will be to increase the cost
to Lender of issuing or maintaining any Letter of Credit or its commitment to
issue Letters of Credit hereunder or reduce any amount receivable by Lender
hereunder in respect of any Letter of Credit (which increase in cost, or
reduction in amount receivable, will be the result of Lender’s reasonable
allocation of the aggregate of such increases or reductions resulting from such
event), then, upon demand by Lender, Borrower agrees to pay Lender, from time to
time as specified by Lender, such additional amounts as will be sufficient to
compensate Lender for such increased costs or reductions in amount. A
certificate setting forth in reasonable detail such increased costs or
reductions in amount incurred by Lender, submitted by Lender to Borrower, will
be conclusive as to the amount thereof, provided that the determination thereof
is made on a reasonable good faith basis and absent manifest error.

Section 3.07. Cash Collateral Pledge. Upon request of Lender, if as of the
Expiration Date any Letters of Credit may remain outstanding and partially or
wholly drawn, (c) with respect to Letters of Credit with an expiry date after
the Expiration Date, fifteen (15) Business Days prior to the Expiration Date, or
(d) upon the occurrence of an Event of Default (and automatically without any
requirement for notice or request), Borrower shall immediately cash
collateralize the Letters of Credit in an amount equal to one hundred five
percent (105%) of the amounts available to be drawn under the Letters of Credit
according to the records of the Lender.

 

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Such cash collateral shall be pledged to Lender as a first and prior perfected
security interest in favor of Lender and Borrower shall execute such further
documents as reasonably required by Lender to perfect its lien on the cash
collateral. Lender shall promptly return all cash collateral to Borrower
following the Expiration Date.

ARTICLE IV

CONDITIONS PRECEDENT

Section 4.01. Initial Extension of Credit. The obligation of Lender to make the
initial Advance or issue the initial Letter of Credit is subject to the
condition precedent that Lender will have received on or before the day of such
Advance or issuance of such Letter of Credit all of the following, each dated
(unless otherwise indicated) the Closing Date, in form and substance
satisfactory to Lender:

(a) Resolutions. Resolutions of the board of directors, members, partners or
other appropriate governing body of Borrower and each Guarantor certified by a
Managerial Official of such Person, which resolutions authorize the execution,
delivery, and performance by such Person of this Loan Agreement and the other
Loan Documents to which it is a party;

(b) Certificates of Borrower and Guarantors. Certificates of Borrower and each
Guarantor executed by a Managerial Official of such Person certifying as to
(i) the names of the officers of such Person authorized to sign this Loan
Agreement and each of the other Loan Documents to which it is a party (including
the certificates contemplated herein) together with specimen signatures of such
officers; (ii) original certified or file–stamped copies of the certificate or
articles of incorporation, articles of organization, certificate of limited
partnership, trust agreement or other similar organizational document of such
Person, certified as true, correct and complete by the appropriate authority in
their respective jurisdictions of organization as of a date within thirty
(30) days prior to the Closing Date; (iii) bylaws, limited partnership
agreement, trust agreement, operating agreement or other similar organizational
document of such Person certified as true, correct, and complete by such
Managerial Official;

(c) Certificates of Governmental Officials. Certificates of the appropriate
government officials as to the existence and good standing (if applicable) of
such Person in their respective jurisdictions of organization, incorporation, or
formation, each dated within thirty (30) days prior to the Closing Date;

(d) Note. The Revolving Credit Note executed by Borrower;

(e) Security Agreement. The Pledge and Security Agreement executed by Borrower
and each Guarantor;

(f) Guaranty. The Guaranty executed by the Guarantors;

 

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(g) Insurance Policies. Copies of all insurance policies required by
Section 6.06, together with mortgagee and additional insured endorsements, as
applicable in favor of Lender with respect to all insurance policies covering
Collateral and Borrower;

(h) UCC, Lien Search, etc. The results of a Uniform Commercial Code, tax Lien,
bankruptcy and judgment searches showing all financing statements and other
documents or instruments on file against Borrower and each Guarantor with the
applicable authority in the jurisdiction of such Person’s organization,
incorporation or formation and such other jurisdictions requested by Lender,
such search to be as of a date no more than 10 days prior to the Closing Date;

(i) Termination of Existing Indebtedness. Evidence that (i) all existing
Indebtedness not otherwise permitted by Section 7.05 have been or concurrently
with the Closing Date are being terminated, and all outstanding amounts
thereunder have been paid in full and (ii) all Liens securing such Indebtedness
have been or concurrently with the Closing Date are being released; and

(j) Additional Documentation. Lender will have received such additional
approvals, opinions, instruments or documents as Lender or its legal counsel may
reasonably request.

Section 4.02. Conditions to all Advances. The obligation of Lender to make any
Advance or issue any Letter of Credit is subject to the following conditions
precedent:

(a) The representations and warranties of Borrower contained in Article V or any
other Loan Document, or which are contained in any document furnished at any
time under or in connection herewith or therewith, will be true and correct on
and as of the date of such Advance or issuance of such Letter of Credit, except
to the extent that such representations and warranties specifically refer to an
earlier date, in which case they will be true and correct as of such earlier
date, and except that for purposes of this Section 4.02, the representations and
warranties contained in Section 5.06 will be deemed to refer to the most recent
information and statements furnished pursuant to Section 6.01.

(b) No Default will exist, or would result from such proposed Advance or
issuance of Letter of Credit.

(c) Lender will have received a request for such Advance or issuance of Letter
of Credit in accordance with the requirements hereof.

Each request for Advance or issuance of Letter of Credit hereunder submitted by
Borrower will be deemed to be a representation and warranty that the conditions
specified in Sections 4.02(a) and (b) have been satisfied on and as of the date
of the applicable Advance or Letter of Credit.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES

Borrower hereby represents and warrants, and in accordance with Section 4.02 on
the date of each Advance or Letter of Credit further represents and warrants, to
Lender as follows:

Section 5.01. Existence, Power, Compliance with Governmental Requirements.
Borrower and each Guarantor (a) is a corporation, limited liability company or
limited partnership duly organized, validly existing and in good standing, if
applicable, under the Governmental Requirements of the jurisdiction of its
organization and all other states where the conduct of its business requires
such qualification, (b) has all requisite corporate, limited liability company,
or limited partnership power and authority to execute, deliver and perform the
Loan Documents to which it is a party, to own its Property and to conduct its
business and (c) is in compliance with all Governmental Requirements applicable
thereto; except in each case to the extent that failure to do so would not
reasonably be expected to result in a Material Adverse Effect.

Section 5.02. Binding Obligations. The execution, delivery, and performance by
Borrower and each Guarantor of this Loan Agreement and all of the other Loan
Documents to which it is a party have been duly authorized by all necessary
corporate, limited liability company, or limited partnership action by Borrower
and each such Guarantor, and this Loan Agreement constitutes, and each other
Loan Document when delivered will constitute, a legal, valid and binding
obligation of Borrower and each Guarantor, enforceable against such Person in
accordance with its respective terms, except as enforcement of remedies may be
limited by Applicable Bankruptcy Law and general principles of equity.

Section 5.03. No Consent. The execution, delivery and performance of this Loan
Agreement and the other Loan Documents, and the consummation of the transactions
contemplated hereby and thereby, by Borrower and each Guarantor do not
(a) result in a violation of or constitute a default under (i) any provision of
its charter or organizational documents, or other instrument binding upon
Borrower or any such Guarantor, (ii) any Governmental Requirements applicable
thereto or (iii) any material contract, agreement, document or instrument to
which Borrower or any such Guarantor is a party or affecting such Person or the
Property of such Person, (b) require the consent, approval or authorization of
or notice to or filing with any third party by Borrower or any such Guarantor,
not otherwise obtained and delivered to Lender or (c) result in creation or
perfection of a Lien pursuant to the express provisions of any material
agreement to which Borrower or any such Guarantor is a party; except in each
case to the extent that failure to do so would not reasonably be expected to
result in a Material Adverse Effect.

Section 5.04. Taxes; Governmental Charges. Borrower and each Subsidiary have
timely filed all federal, state and local material tax reports and returns
required by any Governmental Requirement to be filed, including, without
limitation, all material income, franchise, employment, property and sales tax
returns, and have duly paid all their respective material liabilities for taxes,
assessments, governmental charges and levies that are due and payable, except
for such taxes and assessments (i) that are not yet delinquent, or (ii) that are
being

 

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contested in good faith and for which adequate reserves have been established in
accordance with GAAP, or (iii) where failure to do so has not and could not
reasonably be expected to result in a Material Adverse Effect. The reserves for
taxes reflected on the consolidated balance sheet of Borrower are adequate in
amount for Borrower and each Subsidiary, as applicable. Neither Borrower or any
Subsidiary nor any Guarantor has received any written notice from a tax
authority proposing a tax assessment against Borrower, any Subsidiary or any
Guarantor that could result in a Material Adverse Effect, and there are no
unresolved claims that have been made by a tax authority in writing concerning
any tax liability of Borrower or any Subsidiary that could result in a Material
Adverse Effect.

Section 5.05. No Default. Neither Borrower nor any Subsidiary is in default
under or with respect to any contractual obligation that could, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. No Default has occurred and is continuing or would result from
the consummation of the transactions contemplated by this Loan Agreement or any
other Loan Document.

Section 5.06. Financial Statements. The Financial Statements fairly present the
financial condition and results of operations as of the dates specified and for
the period covered thereby of Borrower and its consolidated Subsidiaries, and
have been prepared in accordance with GAAP, except as expressly noted therein
and, in the case of unaudited financial statements, subject to year-end
adjustments and the absence of footnotes. Since the date of the audited
Financial Statements, no Material Adverse Effect has occurred, except as
heretofore disclosed in writing to Lender, nor has Borrower or any Subsidiary
incurred any material liability, direct or indirect, fixed or contingent that is
not disclosed in such audited financial statements. Each of Borrower and the
Guarantors is solvent.

Section 5.07. Suits, Actions, Etc. There are no investigations, actions, suits
or proceedings pending or to the knowledge of Borrower threatened in writing
before or by any Governmental Authority or arbitration authority against or
directly affecting Borrower, any Guarantor or the Collateral, or involving the
validity, enforceability or priority of any of the Loan Documents.

Section 5.08. Insurance. Borrower and its Subsidiaries and the Properties of
Borrower and its Subsidiaries are insured with financially sound and reputable
insurance companies not Affiliates of Borrower or any Subsidiary, in such
amounts, with such deductibles and covering such risks required by Lender and in
the absence of such requirements, as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where
Borrower or the applicable Subsidiary operates.

Section 5.09. Subsidiaries. As of the Closing Date, Borrower (a) has no
Subsidiaries other than those specifically disclosed on Schedule 5.09(a),
(b) has no equity investments or other interests convertible into equity in any
other corporation or entity other than those specifically disclosed in
Schedule 5.09(b) and (c) has no, and does not transact business under any,
assumed names or trade names other than those specifically disclosed in
Schedule 5.09(c).

 

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Section 5.10. Ownership of Property; Liens. Borrower and each Subsidiary have
good record and marketable title in fee simple to, or valid leasehold interests
in, all personal and real Property, including the Collateral, necessary or used
in the ordinary conduct of its business, except as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. The
Collateral is not subject to any Lien other than Liens in favor of Lender and
Liens permitted by Section 7.04. All Property of Borrower is titled in
Borrower’s legal name, and Borrower has not used any other name during the last
five years other than the assumed names or trade names listed on
Schedule 5.09(c).

Section 5.11. Environmental Compliance. Except as set forth on Schedule 5.11,
Borrower and its Subsidiaries are in compliance with all applicable
Environmental Laws and neither Borrower nor any Subsidiary is subject to any
liability or obligation for remedial action thereunder; there is no pending or,
to the knowledge of Borrower, written threatened, investigation or inquiry by
any governmental authority of Borrower or any Subsidiary, or any of their
respective properties pertaining to any Hazardous Material. Except in the
ordinary course of business and in material compliance with all Environmental
Laws, there are no Hazardous Materials located on or under any of the properties
of Borrower or its Subsidiaries. Except in the ordinary course of business and
in material compliance with all Environmental Laws, neither Borrower nor any
Subsidiary has caused to permitted any Hazardous Material to be disposed of on
or under or released from any of its properties. Borrower and each Subsidiary
have obtained all material permits, licenses, and authorizations which are
required under and by all Environmental Laws.

Section 5.12. ERISA Compliance.

(a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other Governmental Requirements, except to the
extent that failure to comply with such applicable provisions could not
reasonably be expected to have a Material Adverse Effect. Each Plan that is
intended to qualify under Section 401(a) of the Code has received a favorable
opinion or determination letter from the IRS or an application for such a letter
is currently being processed by the IRS with respect thereto and, to the best
knowledge of Borrower, nothing has occurred which would prevent, or cause the
loss of, such qualification. Borrower and each ERISA Affiliate have made all
required contributions to each Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.

(b) There are no pending or, to the best knowledge of Borrower, written
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan that could be reasonably be expected to have a Material
Adverse Effect. There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan that has resulted or
could reasonably be expected to result in a Material Adverse Effect.

(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no
Pension Plan has any Unfunded Pension Liability; (iii) neither Borrower nor any
ERISA Affiliate has incurred, or reasonably expects to incur, any liability
under Title IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (iv) neither Borrower nor
any ERISA Affiliate has

 

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incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Sections 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (v) neither Borrower nor any ERISA Affiliate has engaged
in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

Section 5.13. Margin Regulations; Investment Company Act.

(a) Borrower is not engaged and will not engage, principally or as one of its
important activities, in the business of purchasing or carrying Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.

(b) None of Borrower, any Person controlling Borrower, or any Subsidiary is or
is required to be registered as an “investment company” under the Investment
Company Act of 1940.

Section 5.14. Disclosure. Borrower has disclosed to Lender, or has stated in
filings with the Securities and Exchange Commission, all agreements, documents,
instruments and organizational documents or other restrictions in effect on the
date hereof to which it, or any of its Subsidiaries, is subject, and all other
matters known to it, that, in each case, the violation of which, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect. No report, financial statement, certificate or other information
furnished (whether in writing or orally) by or on behalf of Borrower or any
Subsidiary to Lender in connection with the transactions contemplated hereby and
the negotiation of this Loan Agreement or delivered hereunder (as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or, when read together with filings with the Securities and
Exchange Commission, omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading in any material respect; provided that, with respect to
projected financial information, Borrower represents only that such information
was prepared in good faith based upon assumptions believed by it to be
reasonable at the time.

Section 5.15. Intellectual Property. Borrower and its Subsidiaries own, or
possess the right to use, all of the trademarks, service marks, trade names,
copyrights, patents, patent rights, franchises, licenses, slogans, other
advertising products and processes, and other intellectual property rights that
are reasonably necessary for the operation of their respective businesses,
without conflict with the rights of any other Person, except where failure to do
so has not and could not reasonably be expected to result in a Material Adverse
Effect. To the best knowledge of Borrower, no slogan or other advertising
product, process or other material now used by Borrower or any Subsidiary
infringes upon any rights held by any other Person and which infringement could
reasonably be expected to have a Material Adverse Effect.

Section 5.16. Patriot Act. All capitalized words and phrases and all defined
terms used in the USA Patriot Act of 2001, 107 Public Law 56 (October 26, 2001)
(the “Patriot Act”) and in other statutes and all orders, rules and regulations
of the United States government and its various executive departments, agencies
and offices related to the subject matter of the Patriot Act, including, but not
limited to, Executive Order 13224 effective September 24, 2001, are

 

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hereinafter collectively referred to as the “Patriot Rules” and are incorporated
into this section of the Loan Agreement. Borrower represents and warrants to
Lender that neither it nor any of its principals, shareholders, members,
partners, or Affiliates, as applicable, is a Person named as a Specially
Designated National and Blocked Person (as defined in Presidential Executive
Order 13224) and that it is not acting, directly or indirectly, for or on behalf
of any such Person. Borrower further represents and warrants to Lender that
Borrower and its principals, shareholders, members, partners, or Affiliates, as
applicable, are not, directly or indirectly, engaged in, nor facilitating, the
transactions contemplated by this Loan Agreement on behalf of any Person named
as a Specially Designated National and Blocked Person. Borrower hereby agrees to
defend, indemnify and hold harmless Lender from and against any and all claims,
damages, losses, risks, liabilities, and expenses (including reasonable
attorneys’ fees and costs) arising from or related to any breach of the
foregoing representations and warranties in this Section 5.16.

ARTICLE VI

AFFIRMATIVE COVENANTS

Until (i) all Obligations (other than contingent indemnification obligations and
Obligations in respect of any Letter of Credit that has been cash collateralized
in accordance with Section 3.07) are fully paid and satisfied, (ii) the
Revolving Credit Commitment and the commitment to issue Letters of Credit have
been terminated, and (iii) the termination or expiration of all Letters of
Credit (other than in respect of any Letter of Credit that has been cash
collateralized in accordance with Section 3.07), Borrower agrees and covenants
that it will, and will cause each Subsidiary (as applicable) to:

Section 6.01. Financial Statements. Furnish to Lender the following financial
information and statements, and such additional information as requested by
Lender from time to time:

(a) Annual Financial Statements. As soon as available, and in any event within
120 days after the end of each fiscal year of Borrower, a copy of its Annual
Report on Form 10-K, or equivalent, of Borrower for such fiscal year that
includes a consolidated balance sheet and related statements of income or
operations, shareholders’ equity and cash flows of Borrower and its consolidated
Subsidiaries as of the end of such fiscal year and for the twelve-month period
then ended, in each case audited by independent public accountants of recognized
standing reasonably satisfactory to Lender, accompanied by a report and opinion
of such accountants, which report and opinion shall be prepared in accordance
with GAAP and shall not be subject to any “going concern,” “emphasis on going
concern,” or like qualification or exception, or any qualification or exception
as to the scope of such audit. Borrower grants Lender permission to discuss with
such independent public accountants the results of any audit, the field work
undertaken, the Loans and any other matters related to Borrower and any
Subsidiary.

 

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(b) Interim Financial Statements. As soon as available, and in any event within
60 days after the end of each of the first three fiscal quarters of each fiscal
year of Borrower, a copy of its Quarterly Report on Form 10-Q, or equivalent, of
Borrower for such fiscal quarter that includes a consolidated balance sheet and
income statement of Borrower and its consolidated Subsidiaries as of the end of
such fiscal quarter, all in form and substance and in reasonable detail
reasonably satisfactory to Lender and duly certified (subject to year-end review
adjustments) by a Managerial Official of Borrower as fairly presenting in all
material aspects to the best of his or her knowledge the financial condition of
Borrower and its Consolidated Subsidiaries in accordance with GAAP, subject to
normal year-end adjustments and the absence of footnotes (provided that the
requirement for such certification contained in this paragraph (b) shall be
deemed satisfied by a certification of a Managerial Official made in conjunction
with a Form 10-Q as required by the Sarbanes-Oxley Act of 2002 as in effect on
the Closing Date).

(c) Compliance Certificate. Concurrently with or promptly following the delivery
of the financial statements referred to in Section 6.01(a) and Section 6.01(b),
a certificate substantially in the form of Exhibit E hereto signed by a
Managerial Official of Borrower stating that Borrower is not in Default of any
term or provisions hereof or thereof, and demonstrating compliance with the
covenants set forth in Article VIII.

(d) Accounts Aging. Concurrently with or promptly following the delivery of the
financial statements referred to in Section 6.01(a) and Section 6.01(b), an
Accounts aging report signed by a Managerial Official of Borrower in form and
detail reasonably satisfactory to Lender.

Borrower shall be deemed to have satisfied the requirement to deliver documents
pursuant to Section 6.01(a), Section 6.01(b) and Section 6.12 if such documents
shall have been timely made available on “EDGAR”, the Securities and Exchange
Commission’s website (as of the date of this Loan Agreement located at
www.sec.gov) or on Borrower’s website (as of the date of this Loan Agreement
located at www.geospace.com) and a confirmatory notice of such availability
shall have been delivered to Lender; provided that such notice may be included
in a certificate delivered pursuant to Section 6.01(c). Information required to
be delivered pursuant to Section 6.01(a), Section 6.01(b), Section 6.01(d), and
Section 6.12 may also be delivered by electronic communications pursuant to
procedures approved by Lender.

Section 6.02. Notices. Promptly notify Lender:

(a) of the occurrence of any Default;

(b) of any matter, including (i) a breach or non-performance of, or any default
under, a contractual obligation of Borrower or any Subsidiary; (ii) any dispute,
litigation, investigation, proceeding or suspension between Borrower or any
Subsidiary, on the one hand, and any Governmental Authority, on the other hand;
or (iii) the commencement of, or any material development in, any litigation or
proceeding against Borrower or any Subsidiary (to the extent such notice does
not require a waiver of the attorney-client privilege in respect thereof), that,
in each case, has resulted or could reasonably be expected to result in a
Material Adverse Effect;

(c) of the occurrence of any ERISA Event but only after Borrower or any ERISA
Affiliate knows or has reason to know about such ERISA event;

 

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(d) of a change in name of Borrower or any Guarantor or a change in the location
of Borrower, any Guarantor, or any Collateral, in each case to the extent
reasonably practicable, within 30 days prior to such change;

(e) of any material change in accounting policies or financial reporting
practices by Borrower or any Subsidiary; and

(f) of any judgment against Borrower, any Subsidiary or any Obligated Party in
an amount which is more than $250,000.00, to the extent not covered by
independent third-party insurance as to which such insurer has not disputed
coverage.

Each notice pursuant to this Section 6.02 will be accompanied by a statement of
a Managerial Official of Borrower setting forth details of the occurrence
referred to therein and stating what action Borrower has taken and proposes to
take with respect thereto. Each notice pursuant to this Section 6.02 will
describe with particularity any and all provisions of this Loan Agreement and
any other Loan Document that have been breached or affected thereby.

Section 6.03. Accounts and Records. With respect to Borrower and its Domestic
Subsidiaries, maintain its books and records in accordance with GAAP.

Section 6.04. Preservation of Existence, Etc. Except as otherwise permitted by
Section 7.02, (a) preserve, renew and maintain in full force and effect its
legal existence and good standing under the Governmental Requirements of the
jurisdiction of its organization and each state in which it is qualified to do
business, unless Borrower (i) determines in good faith that the failure to so
preserve its existence or good standing is not materially disadvantageous to the
Lender and (ii) provides Lender notice of any such determination no less than 15
days prior to action taken to terminate the existence or good standing of any
such entity; and (b) take all commercially reasonable action to maintain all
rights, privileges, permits, licenses and franchises necessary or desirable in
the ordinary conduct of the business of Borrower and its Subsidiaries taken as a
whole, except to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect.

Section 6.05. Maintenance of Properties. (a) Maintain, preserve and protect all
of its material properties and equipment necessary in the operation of its
business in good working order and condition in accordance with industry
practice, ordinary wear and tear excepted; (b) make all necessary repairs
thereto and renewals and replacements thereof except where the failure to do so
could not reasonably be expected to have a Material Adverse Effect; (c) use the
standard of care customary in the industry in the operation and maintenance of
its facilities; and (d) preserve or renew all of its material registered
patents, trademarks, trade names and service marks (including licenses thereof),
in each case except to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect.

Section 6.06. Maintenance of Insurance. Maintain with financially sound and
reputable insurance companies not Affiliates of Borrower, insurance with respect
to its properties and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar business, including
but not limited to, commercial property insurance, all risks property damage,
commercial general liability, worker’s compensation, business

 

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interruption and other insurance, of such types and in such amounts as are
customarily carried under similar circumstances by such other similarly situated
Persons in the industry and providing for not less than 30 days’ prior notice to
Lender of termination, lapse or cancellation of such insurance. Each insurance
policy will name Lender as “additional insured” and “mortgagee”, as applicable.
Borrower will, and will cause each Subsidiary to, deliver to Lender upon
Lender’s request, originals or certified copies of insurance policies or
certificates of insurance, each in form and substance reasonably satisfactory to
Lender.

Section 6.07. Right of Inspection. Permit Lender to (a) visit its properties and
installations, (b) examine, audit and make and take away copies or reproductions
of its books and records, and (c) discuss with its respective directors,
partners, principal officers and independent auditors its respective businesses,
assets, liabilities, financial positions, results of operations, and business
prospects, at all reasonable times during normal business hours and upon
reasonable advance notice to Borrower. Borrower shall be responsible for the
reasonable and documented out-of-pocket costs and expenses of Lender associated
with any such inspection; provided that unless an Event of Default shall have
occurred and be continuing, Borrower shall not be responsible for the costs and
expenses associated with more than one inspection per calendar year. To the
extent Borrower maintains any records, including computer generated records and
software programs for the generation of such records in the possession of a
third party, Borrower will, to the extent such records constitute Collateral,
(i) notify such third party of Lender’s Lien in such records, (ii) cause such
party to grant reasonable access to Lender to such records and (iii) provide
Lender with copies of any records Lender may request, all at Borrower’s sole
cost and expense.

Section 6.08. Right to Additional Information. Furnish Lender with such
additional information and statements, lists of assets and liabilities,
statements of contingent liabilities, tax returns, and other reports and
certificates with respect to Borrower’s or any Subsidiary’s financial condition,
business operations and compliance with the terms of the Loan Documents as
Lender may reasonably request from time to time.

Section 6.09. Compliance with Governmental Requirements. Conduct its business in
an orderly and efficient manner consistent with good business practices, and
perform and comply in all material respects with all Governmental Requirements
applicable to Borrower, its Subsidiaries, and their businesses, operations and
Property (including without limitation, all applicable Environmental Laws)
except in such instances in which (a) such Governmental Requirement is being
contested in good faith, or (b) the failure to comply therewith could not
reasonably be expected to have a Material Adverse Effect.

Section 6.10. Taxes. Timely pay and discharge when due all of its Indebtedness
and obligations, including without limitation, all assessments, taxes,
governmental charges, levies, Liens and claims, of every kind and nature,
imposed upon Borrower, its Subsidiaries or any of their properties, income, or
profits, prior to the earlier of the date on which such obligation would become
delinquent or the date penalties would attach, and all lawful claims that, if
unpaid, might become a Lien or charge upon any of Borrower’s or its Subsidiary’s
properties, income, or profits; provided, however, Borrower and its Subsidiaries
will not be required to pay and discharge any such assessment, tax, government
charge, levy, Lien or claim so long as (i) such assessment, tax government
charge, levy, Lien or claim is not yet delinquent, (ii) (a) the legality

 

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of the same will be contested in good faith by appropriate judicial,
administrative or other legal proceedings instituted with reasonable promptness
and diligently conducted, and (b) Borrower and its Subsidiaries will have
established on their books adequate reserves with respect to such contested
assessment, tax, government charge, levy, Lien or claim in accordance with GAAP,
or (iii) where failure to do so could not reasonably be expected to result in a
Material Adverse Effect.

Section 6.11. Notice of Indebtedness. Promptly inform Lender of the creation,
incurrence or assumption by Borrower or any Subsidiary of any actual or
contingent liabilities not permitted under this Loan Agreement or any other Loan
Document.

Section 6.12. Proxy Statements, Etc. Promptly after the same are available,
furnish to Lender one copy of each financial statement, report, notice or proxy
statement sent by Borrower or any Subsidiary to its stockholders generally and
one copy of each regular, periodic or special report, registration statement, or
prospectus filed by Borrower or any Subsidiary within any securities exchange or
the Securities and Exchange Commission or any successor agency in each case to
the extent that such items are not otherwise required to be delivered to Lender
hereunder.

Section 6.13. Additional Documents. Execute and deliver, or cause to be executed
and delivered, to Lender, from time to time as reasonably required by Lender,
any and all other agreements, instruments and documents in order to provide the
rights and remedies to Lender granted or provided for by the Loan Documents or
give effect to the transactions contemplated under this Loan Agreement and the
other Loan Documents.

Section 6.14. Lender as Principal Depository. To maintain with Lender the
primary operating account of Borrower and its Domestic Subsidiaries, including
maintaining with Lender all business, cash management, operating and
administrative deposit accounts, subject to compliance with Borrower’s
investment policy as in effect from time to time.

ARTICLE VII

NEGATIVE COVENANTS

Until (i) all Obligations (other than contingent indemnification obligations and
Obligations in respect of any Letter of Credit that has been cash collateralized
in accordance with Section 3.07) are fully paid and satisfied, (ii) the
Revolving Credit Commitment and the commitment to issue Letters of Credit have
been terminated, and (iii) the termination or expiration of all Letters of
Credit (other than in respect of any Letter of Credit that has been cash
collateralized in accordance with Section 3.07), Borrower will not, nor will it
permit any Subsidiary to, directly or indirectly:

Section 7.01. Nature of Business. Make any material change in the nature of the
business of Borrower and its Subsidiaries, taken as a whole, as carried on as of
the Closing Date (provided that entering into lines of business substantially
related or incidental to those lines of business conducted as of the Closing
Date shall not constitute a material change for purposes of this Section 7.01).

 

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Section 7.02. Mergers, Consolidations. Become a party to a merger or
consolidation, or purchase or otherwise acquire all or a substantial part of the
assets of any Person or any shares or other evidence of beneficial ownership of
any Person, except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred, (i) Borrower may merge into or
consolidate with any Person in a transaction in which Borrower is the surviving
entity, (ii) any Subsidiary may merge into or consolidate with Borrower in a
transaction in which Borrower is the surviving entity, (iii) any Subsidiary may
merge into or consolidate with any Guarantor (or Person that concurrently
therewith becomes a Guarantor) in a transaction in which the surviving entity is
or concurrently becomes a Guarantor (and notwithstanding anything to the
contrary herein, upon compliance with the foregoing the non-surviving Person may
be dissolved or liquidated).

Section 7.03. Sale of Assets. Sell, lease, assign, transfer or otherwise dispose
of any of its assets or Properties, other than in the ordinary course of
business; provided that any Subsidiary may sell, transfer, lease or otherwise
dispose of its assets to Borrower or to a Guarantor (or a Person that
concurrently therewith becomes a Guarantor). Notwithstanding anything to the
contrary in this Loan Agreement (including Section 7.02 and this Section 7.03),
Borrower and its Subsidiaries may acquire or purchase a business or assets
involving cash or equity consideration (or a combination thereof) of up to $20.0
million in the aggregate in any period of twelve consecutive months provided
that, at the time of and immediately after giving effect to such acquisition or
purchase, Borrower is in compliance with the requirements set forth in Article
VIII following the consummation of any such transaction.

Section 7.04. Liens. Create, incur or permit to exist any Lien on any of its
assets, other than:

(a) Liens securing Indebtedness owing to Lender;

(b) Standard Permitted Liens;

(c) Liens in favor of Borrower or any Guarantor;

(d) Liens in existence on the Closing Date that are listed in Schedule 7.04(d),
and any continuations thereof;

(e) Any Lien existing on any asset or property prior to the acquisition thereof
by Borrower or any Subsidiary or existing on any asset or property of any Person
that becomes a Subsidiary after the date hereof prior to the time such Person
becomes a Subsidiary, provided that such Liens shall only secure such
obligations that they secure on the date of such acquisition or the date such
Person becomes a Subsidiary and extensions, renewals and refinancings of such
obligations permitted by Section 7.05;

(f) Liens consisting of conditional sale, title retention or similar
arrangements for the sale of goods Borrower or any Subsidiary entered into in
the ordinary course of business;

 

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(g) Liens arising from UCC financing statement filings regarding leases Borrower
or any Subsidiary entered into in the ordinary course of business;

(h) Liens pursuant to any order of attachment, execution, enforcement, or
similar legal process arising in connection with court proceedings, provided
that such process is effectively stayed, discharged, or otherwise set aside
within 30 days; and

(i) Liens to secure Indebtedness permitted under Section 7.05(f),
Section 7.05(g) and Section 7.05(n).

Section 7.05. Indebtedness. Create, incur, or assume any Indebtedness, other
than:

(a) Indebtedness owing to Lender;

(b) Indebtedness outstanding on the Closing Date and listed in Schedule 7.05(b);

(c) Indebtedness owing by (i) Borrower to any Subsidiary, or (ii) any Subsidiary
to Borrower or to any other Subsidiary;

(d) Indebtedness in respect of current accounts payable and accrued expenses
incurred in the ordinary course of business;

(e) Indebtedness arising from the endorsement of instruments for collection or
deposit in the ordinary course of business;

(f) Capital Lease Obligations, purchase money Indebtedness to finance the
acquisition, construction, development, or improvement of fixed or capital
assets or property, and other Indebtedness, in an aggregate principal amount not
to exceed $10.0 million in the aggregate at any one time outstanding;

(g) Indebtedness incurred or assumed (including by operation of law) in
connection with transactions contemplated in Sections 7.02, 7.03 and 7.04(e),
provided, that such Indebtedness existed prior to such transaction and was not
created in anticipation thereof;

(h) Indebtedness as an account party in respect of letters of credit issued in
the ordinary course of business;

(i) Indebtedness under performance guaranties, performance bonds, letters of
credit and similar instruments issued in the ordinary course of business and
serving as a performance guaranty;

(j) Indebtedness incurred in the ordinary course of business and constituting
reimbursement obligations with respect to letters of credit in respect of
workers’ compensation claims or self-insurance obligations;

(k) Guarantees in respect of Indebtedness otherwise permitted hereunder;

 

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(l) Subordinated Debt;

(m) Indebtedness to local Russian banks (consisting of overdraft lines of
credit) in an aggregate principal amount that does not exceed $500,000 at any
one time outstanding and which is in addition to Indebtedness otherwise
permitted hereunder;

(n) extensions, refinancing, renewals, or replacements (or successive
extensions, refinancing, renewals, or replacements), in whole or in part, of the
Indebtedness permitted above which, in the case of any such extension,
refinancing, renewal, or replacement, does not increase the amount of the
Indebtedness being extended, refinanced, renewed, or replaced, other than
amounts incurred to pay accrued interest thereon and the fees, costs, and
expenses of and relating to any such extension, refinancing, renewal, or
replacement.

Section 7.06. Loans and Investments. Make any advance, loan, extension of
credit, or capital contribution to or investment in, or purchase any stock,
bonds, notes, debentures, or other securities of, any Person (each an
“Investment”), other than in the ordinary course of business and:

(a) Permitted Investments;

(b) Investments made by Borrower to or in its Subsidiaries and made by any
Subsidiary to or in Borrower or any other Subsidiary;

(c) Investments permitted under Section 7.02;

(d) Guarantees constituting Indebtedness permitted by Section 7.05;

(e) Investments existing on the Closing Date or made pursuant to binding
commitments in effect on the Closing Date and, in each case, set forth on
Schedule 7.06(e);

(f) Investments in the ordinary course consisting of endorsements for collection
or deposit;

(g) Investments of any Person existing at the time such Person becomes a
Subsidiary or enters into a transaction with Borrower or any Subsidiary with
respect to a consolidation or merger (including in connection with acquisitions
permitted hereunder) so long as such Investments were not made in contemplation
of such Person becoming a Subsidiary or of such consolidation or merger;

(h) extensions of trade credit in the ordinary course of business;

(i) advances to customers or suppliers in the ordinary course of business that
are in conformity with GAAP, recorded as accounts receivable, prepaid expenses
or deposits on the balance sheet of Borrower or any of its Subsidiaries;

 

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(j) Investments (including debt obligations and equity interests) acquired
(i) in connection with the bankruptcy or reorganization of, or settlement of
delinquent accounts and disputes with, customers and suppliers, in each case in
the ordinary course of business, or (ii) as a result of a foreclosure by
Borrower or any Subsidiary with respect to any secured Investment or other
transfer of title with respect to any secured Investment in default;

(k) Investments consisting of purchases and acquisitions of inventory, supplies,
materials and equipment or purchases of contract rights, licenses or leases of
intellectual property, in each case in the ordinary course of business;

(l) Investments arising from any transaction permitted by Section 7.07;

(m) Investments consisting of Swap Agreements; and

(n) other Investments not otherwise permitted hereunder in an aggregate amount
of up to $2,000,000 at any one time outstanding.

Section 7.07. Transactions with Affiliates. Enter into any material transaction,
including, without limitation, the purchase, sale or exchange of Property or the
rendering of any service, with any Affiliate of Borrower or any Subsidiary,
except in the ordinary course of business and pursuant to the reasonable
requirements of Borrower’s and its Subsidiaries’ business and upon fair and
reasonable terms substantially as favorable to Borrower or any Subsidiary as
those that might be obtained at the time in a comparable arm’s-length
transaction with a Person not an Affiliate of Borrower or any Subsidiary,
provided, that the foregoing shall not apply to transactions among Borrower and
one or more of its Subsidiaries or between or among the Subsidiaries and
transactions otherwise permitted herein.

Section 7.08. Dividends. Declare or pay any dividends or Distributions
(excluding distributions solely of capital stock or partnership interests) or
make any other payment (in cash, property, or obligations) on account of its
capital stock or partnership interests, as applicable, or redeem, purchase,
retire, or otherwise acquire any of its capital stock, or set apart any money
for a sinking or other analogous fund for any dividend or other distribution on
its capital stock or for any redemption, purchase, retirement, or other
acquisition of any of its capital stock (excluding any net or cashless exercise
of stock options); provided, that Borrower and its Subsidiaries may make
Distributions if immediately after giving effect to such Distribution the
covenants contained in Article VIII are satisfied. Borrower will not permit any
Guarantor to grant or issue any capital stock or any warrant, right or option
pertaining to its capital stock, or issue any security convertible into capital
stock.

Section 7.09. Use of Proceeds. Use the proceeds of the Loans for any purpose
other than to finance general corporate needs including accounts receivable and
inventory, equipment purchases and acquisition needs, not in contravention of
any Governmental Requirement or of any Loan Document.

 

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Section 7.10. Additional Subsidiaries. Except as contemplated in Section 7.02,
form or acquire any Domestic Subsidiary unless Borrower shall have notified
Lender at the time that any Person becomes a Domestic Subsidiary, and promptly
thereafter (and in any event within 30 days thereafter), cause each such Person
that is organized under the laws of any State of the United States of America to
(a) become a Guarantor by executing and delivering to Lender a counterpart of
the Guaranty or such other document as Lender will deem appropriate for such
purpose, (b) deliver to Lender an executed counterpart of the Security Agreement
or such other document as Lender will deem appropriate, (c) favorable opinions
of counsel to such Person (which will cover, among other things, the legality,
validity, binding effect and enforceability of the documentation referred to
herein), and (d) such other documents, instruments and agreements Lender will
reasonably request.

ARTICLE VIII

FINANCIAL COVENANTS

Until (i) all Obligations (other than contingent indemnification obligations and
Obligations in respect of any Letter of Credit that has been cash collateralized
in accordance with Section 3.07) are fully paid and satisfied, (ii) the
Revolving Credit Commitment and the commitment to issue Letters of Credit have
been terminated, and (iii) the termination or expiration of all Letters of
Credit (other than in respect of any Letter of Credit that has been cash
collateralized in accordance with Section 3.07), Borrower will:

Section 8.01. Cash Flow Coverage Ratio. Maintain, for the twelve-month period
ending on the last day of each fiscal quarter of Borrower commencing on
December 31, 2013, a ratio of (a) Net Income, plus depreciation and amortization
expense, plus Interest Expense, less capital expenditures (excluding
“Investments in rental equipment” as reflected on the Consolidated Statement of
Cash Flows of Borrower) and less any Distributions, to (b) current principal
payments of long-term debt (including the outstanding balance of the Loan) plus
Interest Expense, of Borrower and its Subsidiaries on a consolidated basis of
not less than 1.5 to 1.0.

Section 8.02. Funded Debt to EBITDA Ratio. Maintain, for the twelve-month period
ending on the last day of each fiscal quarter of Borrower commencing on
December 31, 2013, a ratio of Funded Debt to EBITDA of Borrower and its
Subsidiaries on a consolidated basis not exceeding 2.0 to 1.0.

Section 8.03. Current Ratio. Maintain, for the twelve-month period ending on the
last day of each fiscal quarter of Borrower commencing on December 31, 2013, a
ratio of current assets to current liabilities (including the outstanding
balance of the Loan) of Borrower and its Subsidiaries on a consolidated basis of
not less than 1.50 to 1.0.

ARTICLE IX

EVENTS OF DEFAULT

Section 9.01. Events of Default. Each of the following will constitute an “Event
of Default” under this Loan Agreement:

 

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(a) The failure of Borrower to pay when due any part of the principal of the
Loans, any interest on the Loans, or any fees or other Obligations owing thereby
hereunder or under any other Loan Document and such failure remains unremedied
for five (5) days after the date due (unless such failure results from the
Lender’s or its affiliates’ or subsidiaries’ action or inaction in connection
with the auto debiting of such payments).

(b) The failure of Borrower or any Guarantor to timely and properly observe,
keep or perform any covenant, agreement or condition required in
Sections 6.02(a) and 6.02(b) and Article VII and Article VIII.

(c) The failure of Borrower or any Guarantor to timely and properly observe,
keep or perform any covenant, agreement or condition required herein (other than
as specified in clauses (a) and (b) above) or in any of the other Loan Documents
and such failure remains unremedied for fifteen (15) days after the date notice
thereof is given by Lender to Borrower.

(d) Any representation or warranty contained herein, in any of the other Loan
Documents or in any other document ever delivered or furnished by Borrower or
any Guarantor to Lender in connection with the Obligations is or proves to have
been false, misleading, erroneous or breached in any material respect on the
date it was made or deemed to have been made.

(e) If Borrower or any Guarantor: (i) becomes insolvent, or makes a transfer in
fraud of creditors, or makes an assignment for the benefit of creditors, or
admits in writing its inability to or is unable to pay its debts as they become
due; (ii) generally is not paying its debts as such debts become due; (iii) has
a receiver, trustee or custodian appointed for, or take possession of, all or
substantially all of the assets of such party, either in a proceeding brought by
such party or in a proceeding brought against such party and such appointment is
not discharged or such possession is not terminated within 60 days after the
effective date thereof or such party consents to or acquiesces in such
appointment or possession; (iv) files a petition for relief under the Applicable
Bankruptcy Laws or an involuntary petition for relief is filed against such
party under any Applicable Bankruptcy Law, or an order for relief naming such
party is entered under any Applicable Bankruptcy Law, or any composition,
rearrangement, extension, reorganization or other relief of debtors now or
hereafter existing is requested or consented to by such party; or (v) fails to
pay within 30 days of the date due any final money judgment (to the extent not
covered by independent third-party insurance as to which such insurer has not
disputed coverage) in an amount exceeding $1.0 million against such party

(f) A levy, or any execution, garnishment, attachment, sequestration or other
writ or similar proceeding in an aggregate amount exceeding $1.0 million against
the Property of Borrower or any Guarantor or any part thereof (to the extent not
covered by independent third-party insurance as to which such insurer has not
disputed coverage) which is not permanently dismissed or discharged within 30
days after the commencement of such levy or other proceeding.

 

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(g) Abandonment of any portion of the Property of Borrower or any Guarantor in
an aggregate amount exceeding $1.0 million.

(h) The occurrence of any event or condition which results in, or with notice or
lapse of time or both could result in, a default in the payment of any
Indebtedness or performance of any obligation of Borrower or any Guarantor to
any Person other than Lender, excluding any Indebtedness or obligation not
exceeding, individually or in the aggregate, $1.0 million.

(i) The occurrence of an ERISA Event that results in a liability of Borrower or
an ERISA Affiliate of an aggregate amount exceeding $1.0 million.

(j) Any Loan Document or any provision thereof ceases to be in full force and
effect; or Borrower or any Guarantor contests the validity or enforceability of
any Loan Document or any provision thereof; or Borrower or any Guarantor denies
that it has any or further liability or obligation under any Loan Document, or
purports to revoke, terminate or rescind any Loan Document or any provision
thereof.

(k) Any default occurs under any Swap Agreement in which Lender is the
counterparty.

Nothing contained in this Loan Agreement will be construed to limit the events
of default enumerated in any of the other Loan Documents and all such events of
default will be cumulative.

Section 9.02. Remedies. Upon the occurrence and during the continuance of any
Event of Default, (a) the entire unpaid balance of principal of the Revolving
Credit Note, together with all accrued but unpaid interest thereon, and all
other Indebtedness owing to Lender by Borrower at such time will, at the option
of Lender, become immediately due and payable without further notice, demand,
presentation, notice of dishonor, notice of intent to accelerate, notice of
acceleration, protest or notice of protest of any kind, all of which are
expressly waived by Borrower, (b) Lender may, at its option, cease further
Advances under the Revolving Credit Note, (c) reduce any claim to judgment, and
(d) exercise any and all rights and remedies afforded by any of the Loan
Documents, or by law or equity or otherwise, as Lender will deem appropriate.
All rights and remedies of Lender set forth in this Loan Agreement and in any of
the other Loan Documents may be exercised by Lender at its option and in its
sole discretion, upon the occurrence and during the continuance of an Event of
Default.

Section 9.03. Right of Setoff. If an Event of Default shall have occurred and be
continuing, Lender and its Affiliates are hereby authorized at any time and from
time to time, to the fullest extent not prohibited by applicable Governmental
Requirements, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency) at any time held and
other obligations (in whatever currency) at any time owing by Lender or any such
Affiliate to or for the credit or the account of Borrower or any Guarantor
against any and all of the Obligations or the obligations of any Guarantor now
or hereafter existing under this Loan Agreement or any other Loan Document,
irrespective of whether or not Lender shall have made any demand under this Loan
Agreement or any other Loan Document

 

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and although the Obligations or such obligations of such Guarantor may be
contingent or unmatured or are owed to a branch or office of Lender different
from the branch or office holding such deposit or obligated on such
Indebtedness. The rights of Lender and its Affiliates under this Section are in
addition to other rights and remedies (including other rights of setoff) that
Lender or its Affiliates may have. Lender agrees to notify Borrower promptly
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application.

Section 9.04. Performance by Lender. Should any covenant, duty, or agreement of
any Guarantor fail to be performed in accordance with the terms of the Loan
Documents, Lender may, after providing ten days’ prior written notice to
Borrower, at its option, perform, or attempt to perform, such covenant, duty or
agreement on behalf of any Guarantor. In such event, Borrower will pay to Lender
on demand any amount expended by Lender in such performance or attempted
performance, together with interest thereon at the rate provided in the
Revolving Credit Note for past-due payments from the date of such expenditure by
Lender until paid. Notwithstanding the foregoing, it is expressly understood
that Lender does not assume and will never have any liability or responsibility
for the performance of any duties of Borrower hereunder. Without limiting the
generality of the foregoing, upon the occurrence and during the continuance of
an Event of Default, Lender will have the right, in addition to any other right
of Lender, but not the obligation, in its own name or in the name of Borrower,
to enter into possession of the Property, as and to the extent permitted by
applicable law.

Section 9.05. Rights Cumulative; Election of Remedies. All rights and remedies
of Lender under the terms of this Loan Agreement will be cumulative of, and in
addition to, the rights and remedies of Lender under any and all other
agreements between Borrower and Lender (including, but not limited to, the other
Loan Documents), and not in substitution or diminution of any rights and
remedies now or hereafter held by Lender under the terms of any other agreement.
Such rights and remedies may be pursued separately, successively or concurrently
against Borrower, or any Guarantor or any Property covered under the Loan
Documents at the sole discretion of Lender. The exercise or failure to exercise
any of the same will not constitute a waiver or release thereof or of any other
right, and the same will be nonexclusive.

ARTICLE X

MISCELLANEOUS

Section 10.01. Waiver and Amendment. Neither the failure nor any delay on the
part of Lender to exercise any right, remedy, power or privilege herein or under
any of the other Loan Documents will operate as a waiver thereof, nor will any
single or partial exercise of such right, remedy, power or privilege preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. No waiver of any provision in this Loan Agreement or
in any of the other Loan Documents and no departure by Borrower or any Guarantor
therefrom will be effective unless the same will be in writing and signed by
Lender and such Borrower or Guarantor and then will be effective only in the
specific instance and for the purpose for which given and to the extent
specified in such writing. No modification or amendment to this Loan Agreement
or to any of the other Loan Documents will be valid or effective unless the same
is signed by the party against whom it is sought to be enforced.

 

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Section 10.02. Benefits; Assignment. This Loan Agreement will be binding upon
and inure to the benefit of Lender and Borrower, and their respective successors
and permitted assigns, provided, however, that Borrower may not, without the
prior written consent of Lender, assign or encumber any interests, rights,
remedies, powers, duties or obligations under this Loan Agreement or any of the
other Loan Documents, and Lender may not assign or otherwise transfer any of its
rights or obligations hereunder except (i) by way of participation in accordance
with and subject to the provisions of Section 10.15, (ii) by way of pledge or
assignment of a security interest to secure obligations to a Federal Reserve
Bank (provided that any such pledge shall not release Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for Lender as a
party hereto), or (iii) following the occurrence and during the continuance of
an Event of Default, and in each case any other attempted assignment or transfer
by any party shall be null and void.

Section 10.03. Notices.

(a) All notices, requests, demands or other communications required or permitted
to be given pursuant to this Loan Agreement shall be in writing and given by
(i) personal delivery, (ii) expedited delivery service with proof of delivery,
(iii) United States mail, postage prepaid, registered or certified mail, return
receipt requested, or (iv) where expressly permitted, electronic delivery, sent
to the intended addressee at the physical address set forth on the first page
hereof and will be deemed to have been received either, in the case of personal
delivery, as of the time of personal delivery, in the case of expedited delivery
service, as of the date of first attempted delivery at the address and in the
manner provided herein, or in the case of mail, upon deposit in a depository
receptacle under the care and custody of the United States Postal Service, and
in the case of permitted electronic communications, delivery shall be in
accordance with the procedures agreed by the parties. Either party will have the
right to change its address for notice hereunder to any other location within
the continental United States by notice to the other party of such new address
at least five (5) days prior to the effective date of such new address.

(b) Borrower and Lender agree that no notices or other communications by
electronic means between such parties or their representatives in connection
with this Loan Agreement or any instrument executed in connection herewith shall
constitute a transaction, agreement, contract or electronic signature under the
Electronic Signatures in Global and National Commerce Act, any version of the
Uniform Electronic Transactions Act or any other statute governing electronic
transactions, unless otherwise specifically agreed to in writing.

Section 10.04. Continuation and Survival. All covenants, agreements,
representations and warranties made in or pursuant to this Loan Agreement and
the other Loan Documents will be deemed continuing and made at and as of the
date of this Loan Agreement and as set forth in Section 4.02(a). All covenants,
agreements, representations and warranties made in or pursuant to this Loan
Agreement and the other Loan Documents will survive until payment in full of all
sums owing and performance of all other obligations hereunder by Borrower to
Lender and will not be waived by the execution and delivery of this Loan
Agreement, any Advance or issuance of any Letter of Credit hereunder, any
investigation by Lender or any other event except a specific written waiver by
Lender.

 

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Section 10.05. Controlling Agreement. Notwithstanding anything to the contrary
in any Loan Document, and subject to Section 10.08, the parties hereto intend to
conform strictly to the applicable usury Governmental Requirements. In no event,
whether by reason of demand for payment or acceleration of the maturity of the
Obligations or otherwise, will the interest contracted for, charged or received
by Lender hereunder, or under any other Loan Documents, or otherwise exceed the
maximum rate of non-usurious interest permissible under applicable Governmental
Requirements (the “Maximum Rate”). If, from any circumstance whatsoever,
interest would otherwise be payable to Lender in excess of the Maximum Rate, the
interest payable to Lender will be reduced automatically to the Maximum Rate. If
Lender will ever receive interest, or anything of value deemed interest under
applicable Governmental Requirements, which would apart from this provision be
in excess of the Maximum Rate, an amount equal to any amount which would have
been excessive interest will be applied to the reduction of the principal amount
owing on the Obligations in the inverse order of its maturity and not to the
payment of interest, or if such amount which would have been excessive interest
exceeds the unpaid principal balance of the Obligations, such excess will be
refunded to Borrower. The interest and any other amounts that would have been
payable in respect of any portion of the Obligations or during any period but
were not payable as a result of the operation of this Section shall be cumulated
and the interest and other amounts on any other portion of the Obligations or
periods shall be increased (but not above the maximum amount permitted under
applicable Governmental Requirement) until such cumulated amount shall have been
received by Lender. All interest paid or agreed to be paid to Lender will, to
the extent permitted by applicable Governmental Requirements, be amortized,
prorated, allocated and spread throughout the full stated term (including any
renewal or extension) of such Indebtedness so that the amount of interest on
account of such Indebtedness does not exceed the Maximum Rate.

Section 10.06. No Third Party Beneficiary. This Loan Agreement is for the sole
benefit of Lender and Borrower and is not for the benefit of any third party.

Section 10.07. Lender’s Consent or Approval. Except where otherwise expressly
provided in the Loan Documents, in any instance where the approval, consent or
the exercise of judgment of Lender is required, the granting or denial of such
approval or consent and the exercise of such judgment will be (a) within the
sole discretion of Lender; and (b) deemed to have been given only by a specific
writing intended for the purpose and executed by Lender. Each provision for
consent, approval, inspection, review, or verification by Lender is for Lender’s
own purposes and benefit only.

Section 10.08. Applicable Governmental Requirements. This Loan Agreement and the
other Loan Documents have been executed and delivered in the State of Texas, are
performable in Bexar County, Texas, and will be governed by and construed in
accordance with the Governmental Requirements of the State of Texas and the
Governmental Requirements of the United States of America applicable to
transactions within the State of Texas. Except to the extent that the
Governmental Requirements of the United States may apply to the terms hereof,
the substantive Governmental Requirements of the State of Texas shall govern the
validity, construction, enforcement and interpretation of this Loan Agreement
and the other Loan

 

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Documents. In the event of a dispute involving this Loan Agreement, any other
Loan Document or any other instrument executed in connection herewith, Borrower
irrevocably agrees that venue for such dispute shall lie in any court of
competent jurisdiction in Bexar County, Texas. To the extent that Chapter 303 of
the Texas Finance Code is applicable to any Loan, any Advance or any Loan
Document, the “WEEKLY CEILING” specified in such chapter is the applicable
ceiling; provided that, if any applicable Governmental Requirement permits
greater interest, the Governmental Requirement permitting the greatest interest
will apply.

Section 10.09. Loan Agreement Governs. This Loan Agreement, together with the
other Loan Documents, comprise the complete and integrated agreement of the
parties on the subject matter hereof and thereof and supersedes all prior
agreements, written or oral, on such subject matter. In the event of any
conflict between the terms of this Loan Agreement and any terms of any other
Loan Document (including, without limitation, any Letter of Credit Agreement),
the terms of this Loan Agreement will govern; provided, that the inclusion of
supplemental rights or remedies in favor of Lender in any other Loan Document
will not be deemed a conflict with this Loan Agreement. Each Loan Document was
drafted with the joint participation of the respective parties thereto and will
be construed neither against nor in favor of any party, but rather in accordance
with the fair meaning thereof.

Section 10.10. Time of Essence. Time will be of the essence in this Loan
Agreement.

Section 10.11. Patriot Act Notice. Lender hereby notifies Borrower that pursuant
to the requirements of the Patriot Act, it is required to obtain, verify and
record information that identifies Borrower, which information includes the name
and address of Borrower and other information that will allow Lender to identify
Borrower in accordance with the Act.

Section 10.12. Invalid Provisions. If any provision of this Loan Agreement or
any of the other Loan Documents is held to be illegal, invalid or unenforceable
under present or future Governmental Requirements, such provision will be fully
severable and the remaining provisions of this Loan Agreement or any of the
other Loan Documents will remain in full force and effect and will not be
affected by the illegal, invalid or unenforceable provision or by its severance.
The invalidity of a provision in a particular jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.

Section 10.13. Expenses of Lender. Borrower shall pay to Lender on demand:
(a) all reasonable out-of-pocket costs and expenses incurred by Lender in
connection with the preparation, negotiation, execution and administration of
this Loan Agreement and the other Loan Documents and any and all amendments,
modifications, renewals, extensions, increases, and supplements thereof and
thereto, including, without limitation, the reasonable fees and expenses of
Lender’s legal counsel and professionals, (b) all out-of-pocket costs and
expenses incurred by Lender in connection with the enforcement, workout or
restructure of this Loan Agreement or any other Loan Document, including,
without limitation, the reasonable fees and expenses of Lender’s legal counsel
and professionals, and (c) all other reasonable out-of-pocket costs and expenses
incurred by Lender in connection with this Loan Agreement or any other Loan
Document, including, without limitation, all costs, expenses, taxes,
assessments, filing fees, and other charges levied by a Governmental Authority
or otherwise payable in respect of this Loan Agreement or any other Loan
Document.

 

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Section 10.14. INDEMNIFICATION OF LENDER. BORROWER SHALL INDEMNIFY AND HOLD
LENDER, ITS AFFILIATES AND LENDER’S SUCCESSORS AND PERMITTED ASSIGNS (EACH SUCH
PERSON HEREIN REFERRED TO AS AN “INDEMNITEE”) ABSOLUTELY HARMLESS FROM AND
AGAINST ALL CLAIMS, LIABILITIES, LOSSES, DAMAGES, OBLIGATIONS OR RELATED
EXPENSES INCURRED BY OR IMPOSED UPON OR ALLEGED TO BE DUE OF INDEMNITEE IN
CONNECTION WITH (A) THE EXECUTION OR DELIVERY OF THIS LOAN AGREEMENT, ANY OTHER
LOAN DOCUMENT OR ANY OTHER AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR
THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OF THEIR RESPECTIVE OBLIGATIONS
HEREUNDER OR THEREUNDER, THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, OR, IN THE CASE OF LENDER, THE ADMINISTRATION OF THIS LOAN
AGREEMENT AND THE OTHER LOAN DOCUMENTS, (B) ANY LOAN OR LETTER OF CREDIT OR THE
USE OR PROPOSED USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL BY LENDER
TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS
PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS
OF SUCH LETTER OF CREDIT), (C) ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF
HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY BORROWER OR ANY
SUBSIDIARY, OR ANY ENVIRONMENTAL LIABILITY RELATED TO BORROWER OR ANY
SUBSIDIARY, OR (D) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR
PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY, WHETHER BROUGHT BY A THIRD PARTY OR BY BORROWER OR ANY
SUBSIDIARY, AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, IN ALL
CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE
COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE INDEMNITEE; PROVIDED THAT
SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT
SUCH CLAIMS, LIABILITIES, LOSSES, DAMAGES, OBLIGATIONS OR RELATED EXPENSES
(I) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND
NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNITEE OR (II) RESULT FROM A CLAIM BROUGHT BY BORROWER OR
ANY GUARANTOR AGAINST AN INDEMNITEE FOR BREACH IN BAD FAITH OF SUCH INDEMNITEE’S
OBLIGATIONS HEREUNDER OR ANY OTHER LOAN DOCUMENT, IF BORROWER OR SUCH GUARANTOR
HAS OBTAINED A FINAL AND NONAPPEALABLE JUDGMENT IN ITS FAVOR ON SUCH CLAIM AS
DETERMINED BY A COURT OF COMPETENT JURISDICTION. IN THE EVENT OF COURT ACTION IN
CONNECTION WITH ANY SUCH CLAIM OR DEMAND, BORROWER WILL ASSUME, TO THE EXTENT
REQUESTED BY LENDER, THE RESPONSIBILITY FOR THE DEFENSE OF ANY SUCH ACTION AND
WILL IMMEDIATELY SATISFY AND DISCHARGE ANY FINAL DECREE OR JUDGMENT RENDERED
THEREIN. LENDER MAY, IN ITS SOLE DISCRETION, MAKE ANY

 

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PAYMENTS SUSTAINED OR INCURRED BY REASON OF ANY OF THE FOREGOING, AND BORROWER
WILL IMMEDIATELY REPAY TO LENDER IN CASH THE AMOUNT OF SUCH PAYMENT, WITH
INTEREST THEREON AT THE RATE SPECIFIED IN THE REVOLVING CREDIT NOTE TO BE
APPLICABLE TO PAST-DUE PRINCIPAL FROM THE DATE THAT IS TEN (10) DAYS AFTER
DEMAND THEREFOR UNTIL PAID.

Section 10.15. Participation of the Loans. Borrower agrees that Lender may, at
its option, sell interests in the Loans and its rights and remedies under this
Loan Agreement to one or more financial institutions or other Person (other than
a natural person) acceptable to Lender and, in connection with each such sale,
Lender may disclose any financial and other information available to Lender
concerning Borrower or any Guarantor to each prospective purchaser; provided,
that (a) Lender’s and Borrower’s obligations under this Loan Agreement shall
remain unchanged, (b) Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, and (c) Borrower shall
continue to deal solely and directly with Lender in connection with Lender’s
rights and obligations under this Loan Agreement, unless applicable Governmental
Requirements provide otherwise.

Any agreement or instrument pursuant to which Lender sells such a participation
shall provide that Lender shall retain the sole right to enforce this Loan
Agreement and the other Loan Documents; a participant shall not be entitled to
receive any greater payment under Section 2.04 or Section 3.06 than Lender would
have been entitled to receive with respect to the participation sold to such
participant, unless the sale of the participation to such participant is made
with Borrower’s prior written consent.

Section 10.16. Counterparts; Facsimile Documents and Signatures. This Loan
Agreement may be separately executed in any number of counterparts, each of
which will be an original, but all of which, taken together, will be deemed to
constitute one and the same instrument. For purposes of negotiating and
finalizing this Loan Agreement, if this document or any document executed in
connection with it is transmitted by facsimile machine, electronic mail or other
electronic transmission, it will be treated for all purposes as an original
document. Additionally, the signature of any party on this document transmitted
by way of a facsimile machine or electronic mail will be considered for all
purposes as an original signature. Any such transmitted document will be
considered to have the same binding legal effect as an original document. At the
request of any party, any faxed or electronically transmitted document will be
re-executed by each signatory party in an original form.

Section 10.17. Imaging of Documents. Borrower understands and agrees that
(a) Lender’s document retention policy may involve the electronic imaging of
executed Loan Documents and the destruction of the paper originals, and
(b) Borrower waives any right that it may have to claim that the imaged copies
of the Loan Documents are not originals.

Section 10.18. No Oral Agreements. The term “WRITTEN AGREEMENT” will include
this Loan Agreement, together with each and every other document relating to
and/or securing the Obligations, regardless of the date of execution. THIS
WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

 

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Section 10.19. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE
GOVERNMENTAL REQUIREMENT, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS LOAN
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS LOAN
AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 10.20. Amendment and Restatement. This Loan Agreement is given in
amendment and restatement, and not in extinguishment or novation, of the
obligations of Borrower under the Existing Credit Agreement.

Section 10.21. Treatment of Certain Information; Confidentiality. Lender agrees
to maintain the confidentiality of the Information (as defined below), except
that Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents,
trustees, advisors and representatives (it being understood that the Persons to
whom such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential and will
maintain such confidences), (b) to the extent requested or required by
applicable laws or regulations or by any subpoena or similar legal process,
(c) subject to this Section 10.21, to any other party hereto, (d) in connection
with the exercise of any remedies hereunder or under any other Loan Document or
any action or proceeding relating to this Loan Agreement or any other Loan
Document, (e) subject to an agreement containing provisions substantially the
same as those of this Section, to any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or obligations
under this Loan Agreement, (f) with the consent of Borrower or (g) to the extent
such Information (x) becomes publicly available other than as a result of a
breach of this Section or (y) becomes available to Lender on a non-confidential
basis from a source other than Borrower.

For purposes of this Section, “Information” means all information received from
Borrower or any of its Subsidiaries relating to Borrower or any of its
Subsidiaries or any Affiliate of any of them, or any of their respective
businesses, other than any such information that is available to Lender on a
non-confidential basis prior to disclosure by Borrower or any of its
Subsidiaries, provided that, in the case of information received from Borrower
or any of its Subsidiaries after the date hereof, such information is clearly
identified at the time of delivery as confidential. Any Person required to
maintain the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

 

41

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Lender acknowledges that (a) the Information may include material non-public
information concerning Borrower and its Subsidiaries, as the case may be and
(b) it will use commercially reasonable efforts to handle such material
non-public information in accordance with applicable law, including United
States Federal and state securities Laws.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURES ON THE FOLLOWING PAGE(S)]

 

42

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Executed as of the date first written above.

 

BORROWER: GEOSPACE TECHNOLOGIES CORPORATION, a Delaware corporation

By:

  /s/ Thomas T. McEntire  

Thomas T. McEntire, Vice President,

Chief Financial Officer and Secretary

GUARANTORS:

GTC, INC.

EXILE TECHNOLOGIES CORPORATION GEOSPACE ENGINEERING RESOURCES     INTERNATIONAL,
INC.

GEOSPACE FINANCE CORP.

GEOSPACE J.V., INC.

GEOSPACE TECHNOLOGIES, SUCURSAL     SUDAMERICANA LLC

By:

  /s/ Thomas T. McEntire  

Thomas T. McEntire, Vice President,

Chief Financial Officer and Secretary of each of the Guarantors named above

LENDER:

FROST BANK, a Texas state bank

By:

  /s/ Larry Hammonds

Name:

  Larry Hammonds

Title:

  Market President

Signature Page

to Loan Agreement

--------------------------------------------------------------------------------

EXHIBITS AND SCHEDULES

Exhibits:

Exhibit A – Form of Advance Request Form

Exhibit B – Form of Guaranty

Exhibit C – Form of Revolving Credit Note

Exhibit D – Form of Security Agreement

Exhibit E – Form of Compliance Certificate

Schedules:

Schedule 5.09(a) – Subsidiaries

Schedule 5.09(b) – Equity Investments

Schedule 5.09(c) – Assumed Names or Trade Names

Schedule 5.11 – Environmental Compliance

Schedule 7.04(d) – Liens

Schedule 7.05(b) – Indebtedness

Schedule 7.06(e) – Investments

Exhibits and Schedules

--------------------------------------------------------------------------------

EXHIBIT A

Form of Advance Request Form

ADVANCE REQUEST FORM

 

TO: Frost Bank

   DATE:                         TIME:                     

FAX #: (210) 220-                       

     

ATTN.:                                          

     

 

FROM:   

GEOSPACE

TECHNOLOGIES CORPORATION

      TELEPHONE REQUEST (For Bank Use Only):    Borrower’s Name               
The following person is authorized to request
the loan payment transfer/loan advance on the
designated account and is known to me.

FROM:

                Authorized Signature (Borrower)      
Authorized Requester & Phone #

PHONE #:

                      Received by (Bank) & Phone #                      
Authorized Signature (Bank)

 

REQUESTED TRANSACTION

TYPE

  

REQUESTED DOLLAR

AMOUNT

   For Bank Use Only PRINCIPAL INCREASE* (ADVANCE)   
$                                                         Date Recd: PRINCIPAL
PAYMENT (ONLY)    $                                                        
Time:       Comp. Status:        ¨  YES    ¨  NO OTHER INSTRUCTIONS:      
Status Date:       Time:      Approval:               

All representations and warranties of Borrower stated in the Loan Agreement are
true, correct and complete in all material respects as of the date of the
telephone request for and advance confirmed by this Advance Request Form,
including without limitation the representation that Borrower has paid for and
owns the equipment financed by Lender; provided, however, that those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of such date; provided,
that the representations and warranties in Section 5.06 of the Loan Agreement
will be deemed to refer to the most recent information and statements furnished
pursuant to Section 6.01 of the Loan Agreement.

 

A-1

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* IS THERE A WIRE REQUEST TIED TO THIS LOAN ADVANCE? (PLEASE CIRCLE ONE):

¨  YES    ¨  NO

If YES, the Outgoing Wire Transfer Instructions must be completed below.

OUTGOING WIRE TRANSFER INSTRUCTIONS             Fed Reference Number Bank
Transfer Number

The items marked with an asterisk (*) are required to be completed.

 

*Beneficiary Name

  

 

*Beneficiary Account Number

  

 

*Beneficiary Address

  

 

    Currency Type

  

US DOLLARS ONLY

*ABA Routing Number (9 Digits)

  

 

*Receiving Institution Name

  

 

*Receiving Institution Address

  

 

*Wire Account

  

$

 

A-2

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EXHIBIT B

Form of Guaranty

[Attached]

 

B-1

--------------------------------------------------------------------------------

 

LOGO [g604676g13o07.jpg]

GUARANTY AGREEMENT

This GUARANTY AGREEMENT (this “Guaranty”) is made as of September 27, 2013, by
and among EACH OF THE PERSONS IDENTIFIED ON SCHEDULE 1 HERETO (each such Person,
together with any other Person that becomes a party to this Guaranty as a
guarantor hereunder in accordance with Section 23 hereof, a “Guarantor” and,
collectively, the “Guarantors”) for the benefit of FROST BANK, a Texas state
bank (“Lender”).

RECITALS:

A. GEOSPACE TECHNOLOGIES CORPORATION, a Delaware corporation (“Borrower”), and
Guarantors entered into a Loan Agreement of even date herewith with Lender (the
“Loan Agreement”).

B. Pursuant to the Loan Agreement, Lender has agreed to extend credit to
Borrower.

C. In order to induce the Lender to extend such credit and to issue letters of
credit, each Guarantor has agreed to enter into this Guaranty.

D. Lender has conditioned its obligations under the Loan Agreement upon the
execution and delivery by the Guarantors of this Guaranty.

E. Except as otherwise defined herein, capitalized terms used herein and defined
in the Loan Agreement shall be used herein as therein defined. Certain terms
used herein are defined in Section 1 hereof.

AGREEMENTS:

NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which
are hereby acknowledged, each Guarantor hereby irrevocably and unconditionally
guarantees to Lender, the full and prompt payment and performance of the
Guaranteed Indebtedness (hereinafter defined), this Guaranty being upon the
following terms:

1. Definition – Guaranteed Indebtedness. As used in this Guaranty, the term
“Guaranteed Indebtedness” shall mean (a) the principal of all indebtedness,
obligations and liabilities of Borrower to Lender of any kind or character, now
existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, in each case, under the Loan
Agreement and any other Loan Document including, without limitation, all
Obligations of Borrower, and all indebtedness, obligations and liabilities of
Borrower to Lender now existing or hereafter arising by note, draft, acceptance,
guaranty, endorsement, letter of credit, assignment, purchase, overdraft,
discount, indemnity agreement, or otherwise, in each case, in connection
therewith, (b) all accrued but unpaid interest on any of the indebtedness
described in (a) above, (c) all reasonable and documented out-of-pocket costs
and expenses incurred by Lender in connection with the collection of all or any
part of the indebtedness and enforcement of the obligations described in (a) or
(b) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all reasonable attorneys’ fees, and (d) all
renewals, extensions, modifications, restructurings and rearrangements of the
indebtedness and obligations described in (a), (b), and (c) above.
Notwithstanding any language to the contrary in this Guaranty, the term
“Guaranteed Indebtedness” does not include any Excluded Swap Obligation.

--------------------------------------------------------------------------------

2. Obligations. As an inducement to Lender to extend or continue to extend
credit and other financial accommodations to Borrower, each Guarantor, for value
received, does hereby unconditionally and absolutely guarantee the prompt and
full payment and performance of the Guaranteed Indebtedness when due or declared
to be due and at all times thereafter.

3. Character of Obligations.

(a) This is an absolute, continuing and unconditional guaranty of payment and
not of collection. This Guaranty and the Guarantors’ obligations hereunder are
irrevocable. All of the Guaranteed Indebtedness shall be conclusively presumed
to have been made in acceptance hereof. Each Guarantor shall be liable, jointly
and severally, with Borrower and any other guarantor of all or any part of the
Guaranteed Indebtedness.

(b) Each Guarantor agrees that its obligations hereunder shall not be released,
diminished, impaired, reduced or affected by the existence of any other guaranty
or the payment by any other guarantor of any part of the Guaranteed Indebtedness
(other than payment in full thereof) and, each Guarantor’s obligations hereunder
shall continue until Lender has received payment in full of the Guaranteed
Indebtedness.

(c) Each Guarantor’s obligations hereunder shall not be released, diminished,
impaired, reduced or affected by, nor shall any provision contained herein be
deemed to be a limitation upon, the amount of credit which Lender may extend to
Borrower, the number of transactions between Lender and Borrower, payments by
Borrower to Lender or Lender’s allocation of payments by Borrower.

4. Representations and Warranties. Each Guarantor hereby represents and warrants
the following to Lender:

(a) This Guaranty may reasonably be expected to benefit, directly or indirectly,
such Guarantor, and (i) if such Guarantor is a corporation, the Board of
Directors of Guarantor has determined that this Guaranty may reasonably be
expected to benefit, directly or indirectly, such Guarantor, or (ii) if
Guarantor is a partnership, the requisite number of its partners have determined
that this Guaranty may reasonably be expected to benefit, directly or
indirectly, such Guarantor; or (iii) if Guarantor is a limited liability
company, the requisite number of its members/managers have determined that this
Guaranty may reasonably be expected to benefit, directly or indirectly,
Guarantor; or (iv) if Guarantor is a trust, the requisite number of its trustees
have determined that this Guaranty may reasonably be expected to benefit,
directly or indirectly, such Guarantor; and

(b) Guarantor is familiar with, and has independently reviewed the books and
records regarding, the financial condition of Borrower and is familiar with the
value of any and all collateral intended to be pledged as security for the
payment of all or any part of the Guaranteed Indebtedness; provided, however,
such Guarantor is not relying on such financial condition or collateral as an
inducement to enter into this Guaranty; and

 

2

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(c) Guarantor has adequate means to obtain from Borrower on a continuing basis
information concerning the financial condition of Borrower and such Guarantor is
not relying on Lender to provide such information to such Guarantor either now
or in the future; and

(d) Neither Lender nor any other party has made any representation, warranty or
statement to Guarantor in order to induce such Guarantor to execute this
Guaranty.

5. Covenants. Until (i) all Obligations (other than contingent indemnification
obligations and Obligations in respect of any Letter of Credit that has been
cash collateralized in accordance with Section 3.07 of the Loan Agreement) are
fully paid and satisfied, (ii) the Revolving Credit Commitment and the
commitment to issue Letters of Credit have been terminated, and (iii) the
termination or expiration of all Letters of Credit (other than in respect of any
Letter of Credit that has been cash collateralized in accordance with
Section 3.07 of the Loan Agreement), each Guarantor hereby covenants and agrees
with Lender that Guarantor shall comply with all terms and provisions of the
Loan Documents that apply to such Guarantor or that Borrower has agreed to cause
to be performed by such Guarantor.

6. Consent and Waiver.

(a) Each Guarantor waives (i) promptness, diligence and notice of acceptance of
this Guaranty and notice of the incurring of any obligation, indebtedness or
liability to which this Guaranty applies or may apply and waives presentment for
payment, notice of nonpayment, protest, demand, notice of protest, notice of
intent to accelerate, notice of acceleration, notice of dishonor, diligence in
enforcement and indulgences of every kind, and (ii) the taking of any other
action by Lender, including without limitation giving any notice of default or
any other notice to, or making any demand on, Borrower, any other guarantor of
all or any part of the Guaranteed Indebtedness or any other party.

(b) Each Guarantor waives any rights Guarantor has under, or any requirements
imposed by, Chapter 43 of the Texas Civil Practice and Remedies Code, as in
effect on the date of this Guaranty or as it may be amended from time to time.

(c) Lender may agree with Borrower at any time, without the consent of or notice
to any Guarantor, without incurring responsibility to such Guarantor and without
impairing, releasing, reducing or affecting the obligations of such Guarantor
hereunder: (i) change the manner, place or terms of payment of all or any part
of the Guaranteed Indebtedness, or renew, extend, modify, rearrange or alter all
or any part of the Guaranteed Indebtedness; (ii) change the interest rate
accruing on any of the Guaranteed Indebtedness (including, without limitation,
any periodic change in such interest rate that occurs because such Guaranteed
Indebtedness accrues interest at a variable rate which may fluctuate from time
to time); (iii) sell, exchange, release, surrender, subordinate, realize upon or
otherwise deal with in any manner and in any order any collateral for all or any
part of the Guaranteed Indebtedness or this Guaranty or setoff against all or
any

 

3

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part of the Guaranteed Indebtedness; (iv) neglect, delay, omit, fail or refuse
to take or prosecute any action for the collection of all or any part of the
Guaranteed Indebtedness or this Guaranty or to take or prosecute any action in
connection with any of the Loan Documents; (v) exercise or refrain from
exercising any rights against Borrower or others, or otherwise act or refrain
from acting; (vi) settle or compromise all or any part of the Guaranteed
Indebtedness and subordinate the payment of all or any part of the Guaranteed
Indebtedness to the payment of any obligations, indebtedness or liabilities
which may be due or become due to Lender or others; (vii) apply any deposit
balance, fund, payment, collections through process of law or otherwise or other
collateral of Borrower to the satisfaction and liquidation of the indebtedness
or obligations of Borrower to Lender not guaranteed under this Guaranty; and
(viii) apply any sums paid to Lender by such Guarantor, Borrower or others to
the Guaranteed Indebtedness in such order and manner as Lender, in its sole
discretion, may determine not inconsistent with the Loan Documents.

(d) Should Lender seek to enforce the obligations of any Guarantor hereunder by
action in any court or otherwise, such Guarantor waives any requirement,
substantive or procedural, that (i) Lender first enforce any rights or remedies
against Borrower or any other person or entity liable to Lender for all or any
part of the Guaranteed Indebtedness, including without limitation that a
judgment first be rendered against Borrower or any other person or entity, or
that Borrower or any other person or entity should be joined in such cause, or
(ii) Lender first enforce rights against any collateral which shall ever have
been given to secure all or any part of the Guaranteed Indebtedness or this
Guaranty. Such waiver shall be without prejudice to Lender’s right, at its
option, to proceed against Borrower or any other person or entity, whether by
separate action or by joinder.

(e) In addition to any other waivers, agreements and covenants of a Guarantor
set forth herein, each Guarantor hereby further waives and releases all claims,
causes of action, defenses and offsets for any act or omission of Lender, its
directors, officers, employees, representatives or agents in connection with
Lender’s administration of the Guaranteed Indebtedness, except for Lender’s
fraud, willful misconduct and gross negligence.

(f) Each Guarantor grants to Lender a collateral security interest in, and
hereby collaterally assigns, conveys, delivers, pledges and transfers to Lender
all of such Guarantor’s right, title and interest in and to such Guarantor’s
deposit accounts with Lender, excluding however all IRA and Keogh accounts, and
all trust accounts for which the grant of a security interest would be
prohibited by law. If an Event of Default shall have occurred and be continuing,
Guarantor authorizes Lender, to the extent permitted by applicable law, to
charge or setoff all sums owing by such Guarantor under this Guaranty or any
other Loan Document to Lender against any and all such deposit accounts.

 

4

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(g) To the extent not prohibited by applicable law, each Guarantor waives
(i) each of such Guarantor’s rights or defenses arising under (A) Rule 31 of the
Texas Rules of Civil Procedure, (B) Section 17.001 of the Texas Civil Practice
and Remedies Code, or (C) any other statute or law, common law, in equity, under
contract or otherwise, or under any amendments, recodifications, supplements, or
any successor statute or law of or to any such statute or law, and (ii) any and
all rights under Sections 51.003, 51.004 and 51.005 of the Texas Property Code,
and under any amendments, recodifications, supplements or any successor statute
or law of or to any such statute or law. The parties intend that Guarantor shall
not be considered a “debtor” as defined in Section 9.102 of the Texas Business
and Commerce Code (and any successor statute thereto), as amended.

7. Obligations Not Impaired.

(a) Guarantor agrees that its obligations hereunder shall not be released,
diminished, impaired, reduced or affected by the occurrence of any one or more
of the following events: (i) the lack of corporate power of Borrower, Guarantor
or any other guarantor of all or any part of the Guaranteed Indebtedness,
(ii) any receivership, insolvency, bankruptcy or other proceedings affecting
Borrower, Guarantor or any other guarantor of all or any part of the Guaranteed
Indebtedness, or any of their respective property; (iii) the partial or total
release or discharge of Borrower or any other guarantor of all or any part of
the Guaranteed Indebtedness, or any other person or entity from the performance
of any obligation contained in any instrument or agreement evidencing, governing
or securing all or any part of the Guaranteed Indebtedness, whether occurring by
reason of law or otherwise; (iv) the taking or accepting of any collateral as
security for all or any part of the Guaranteed Indebtedness or this Guaranty;
(v) the taking or accepting of any other guaranty as security for all or any
part of the Guaranteed Indebtedness; (vi) any failure by Lender to acquire,
perfect or continue any lien or security interest on collateral securing all or
any part of the Guaranteed Indebtedness or this Guaranty; (vii) the impairment
of any collateral securing all or any part of the Guaranteed Indebtedness or
this Guaranty; (viii) any failure by Lender to sell any collateral securing all
or any part of the Guaranteed Indebtedness or this Guaranty in a commercially
reasonable manner or as otherwise required by law; (ix) any invalidity or
unenforceability of or defect or deficiency in any of the Loan Documents;
(x) any other circumstance which might otherwise constitute a defense available
to, or discharge of, Borrower or any other guarantor of all or any part of the
Guaranteed Indebtedness; or (xi) the application by Lender of the proceeds from
the sale, foreclosure or other realization of or on any collateral for the
Guaranteed Indebtedness to any other indebtedness or obligations secured by such
collateral.

(b) This Guaranty shall continue to be effective or be reinstated, as the case
may be, to the extent of any payment of all or any part of the Guaranteed
Indebtedness that is rescinded or must otherwise be returned by Lender upon the
insolvency, bankruptcy or reorganization of Borrower, Guarantor, any other
guarantor of all or any part of the Guaranteed Indebtedness, or otherwise, all
as though such payment had not been made.

 

5

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(c) None of the following shall affect Guarantor’s liability hereunder: (i) the
unenforceability of all or any part of the Guaranteed Indebtedness against
Borrower by reason of the fact that the Guaranteed Indebtedness exceeds the
amount permitted by law; (ii) the act of creating all or any part of the
Guaranteed Indebtedness is ultra vires; or (iii)the officers creating all or any
part of the Guaranteed Indebtedness acted in excess of their authority.

8. Actions Against Guarantor. In the event of a default in the payment of all or
any part of the Guaranteed Indebtedness when such Guaranteed Indebtedness
becomes due, whether by its terms, by acceleration or otherwise, Guarantor
shall, without notice or demand, promptly pay the amount of such unpaid
Guaranteed Indebtedness to Lender, in lawful money of the United States of
America, at the address specified for it, in the Loan Agreement. The exercise by
Lender of any right or remedy under this Guaranty or under any other agreement
or instrument, at law, in equity or otherwise, shall not preclude concurrent or
subsequent exercise of any other right or remedy. The books and records of
Lender shall be admissible as evidence in any action or proceeding involving
this Guaranty and shall be prima facie evidence (absent fraud or manifest error)
of the payments made on, and the outstanding balance of, the Guaranteed
Indebtedness.

9. Payment by Guarantor. Whenever Guarantor makes any payment to Lender which is
or may become due under this Guaranty, written notice must be delivered to
Lender contemporaneously with such payment. In the absence of such notice to
Lender by Guarantor in compliance with the provisions hereof, any sum received
by Lender on account of the Guaranteed Indebtedness shall be conclusively deemed
paid by Borrower.

10. Notice of Sale. In the event that Guarantor is entitled to receive any
notice under the Uniform Commercial Code, as it exists in the state governing
any such notice, of the sale or other disposition of any collateral securing all
or any part of the Guaranteed Indebtedness or this Guaranty, reasonable notice
shall be deemed given when such notice is deposited in the United States mail,
postage prepaid, at the address for Guarantor set forth in the Loan Agreement
ten (10) days prior to the date any public sale, or after which any private
sale, of any such collateral is to be held; provided, however, that notice given
in any other reasonable manner or at any other reasonable time shall be
sufficient.

11. Waiver by Lender. No delay on the part of Lender in exercising any right
hereunder or failure to exercise the same shall operate as a waiver of such
right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by an officer of Lender, and
then only in the specific instance and for the purpose given.

12. Successors and Assigns. This Guaranty is for the benefit of Lender, its
successors and permitted assigns. This Guaranty is binding upon Guarantor and
Guarantor’s successors, including without limitation any person or entity
obligated by operation of law upon the reorganization, merger, consolidation or
other change in the organizational structure of Guarantor.

 

6

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13. Costs and Expenses. Guarantor shall pay on demand by Lender all reasonable
and documented out-of-pocket costs and expenses, including without limitation
all reasonable attorneys’ fees, incurred by Lender in connection with the
preparation, administration, enforcement and/or collection of this Guaranty.
This covenant shall survive the payment of the Guaranteed Indebtedness.

14. Severability. If any provision of this Guaranty is held by a court of
competent jurisdiction to be illegal, invalid or unenforceable under present or
future laws, such provision shall be fully severable, shall not impair or
invalidate the remainder of this Guaranty and the effect thereof shall be
confined to the provision held to be illegal, invalid or unenforceable.

15. No Obligation. Nothing contained herein shall be construed as an obligation
on the part of Lender to extend or continue to extend credit to Borrower.

16. Amendment. No modification or amendment of any provision of this Guaranty,
nor consent to any departure by Guarantor therefrom, shall be effective unless
the same shall be in writing and signed by an officer of Lender, and then shall
be effective only in the specific instance and for the purpose for which given.

17. Cumulative Rights. All rights and remedies of Lender hereunder are
cumulative of each other and of every other right or remedy which Lender may
otherwise have at law or in equity or under any instrument or agreement, and the
exercise of one or more of such rights or remedies shall not prejudice or impair
the concurrent or subsequent exercise of any other rights or remedies.

18. Governing Law, Venue. This Guaranty is intended to be performed in the State
of Texas. Except to the extent that the laws of the United States of America may
apply to the terms hereof, the substantive laws of the State of Texas shall
govern the validity, construction, enforcement and interpretation of this
Guaranty. In the event of a dispute involving this Guaranty or any other
instruments executed in connection herewith, the undersigned irrevocably agrees
that venue for such dispute shall lie in any court of competent jurisdiction in
Bexar County, Texas.

19. Compliance with Applicable Usury Laws. Notwithstanding any other provision
of this Guaranty or of any instrument or agreement evidencing, governing or
securing all or any part of the Guaranteed Indebtedness, Guarantor and Lender by
its acceptance hereof agree that Guarantor shall never be required or obligated
to pay interest in excess of the maximum non-usurious interest rate as may be
authorized by applicable law for the written contracts which constitute the
Guaranteed Indebtedness. It is the intention of Guarantor and Lender to conform
strictly to the applicable laws which limit interest rates, and any of the
aforesaid contracts for interest, if and to the extent payable by Guarantor,
shall be held to be subject to reduction to the maximum non-usurious interest
rate allowed under said law.

20. Gender. Within this Guaranty, words of any gender shall be held and
construed to include the other gender.

21. Captions. The headings in this Guaranty are for convenience only and shall
not define or limit the provisions hereof.

 

7

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22. Notices. Except as otherwise expressly provided herein, all notices and
other communications provided for hereunder shall be in writing and delivered in
accordance with Section 10.03 of the Loan Agreement.

23. ADDITIONAL GUARANTORS. IN ACCORDANCE WITH THE TERMS OF THE LOAN AGREEMENT,
ADDITIONAL DOMESTIC SUBSIDIARIES MAY BECOME A PARTY TO THIS GUARANTY AS A
GUARANTOR HEREUNDER BY EXECUTION OF A GUARANTY JOINDER SUPPLEMENT SUBSTANTIALLY
IN THE FORM OF EXHIBIT A HERETO.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURES ON THE FOLLOWING PAGE(S)]

 

8

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EXECUTED AND DELIVERED as of the date first above written by each of the
undersigned as of the date first above written.

 

GUARANTORS:

GTC, INC.

EXILE TECHNOLOGIES CORPORATION GEOSPACE ENGINEERING RESOURCES     INTERNATIONAL,
INC.

GEOSPACE FINANCE CORP.

GEOSPACE J.V., INC.

GEOSPACE TECHNOLOGIES, SUCURSAL     SUDAMERICANA LLC

By:

      Thomas T. McEntire, Vice President, Chief Financial Officer and Secretary
of each of the Guarantors named above

Signature Page

to Guaranty Agreement

--------------------------------------------------------------------------------

SCHEDULE 1

TO

GUARANTY AGREEMENT

Guarantors

 

(1) GTC, Inc., a Texas corporation

 

(2) Exile Technologies Corporation, a Texas corporation

 

(3) Geospace Engineering Resources International, Inc., a Texas corporation

 

(4) Geospace Finance Corp., a Texas corporation

 

(5) Geospace J.V., Inc., a Texas corporation

 

(6) Geospace Technologies, Sucursal Sudamericana LLC, a Texas limited liability
company

Schedule 1

to Guaranty Agreement

--------------------------------------------------------------------------------

EXHIBIT A

TO

GUARANTY AGREEMENT

Form of Guarantor Joinder Agreement

GUARANTOR JOINDER AGREEMENT

This GUARANTOR JOINDER AGREEMENT dated as of                 , 20        , is by
and among                     , a                 (“New Guarantor”), GEOSPACE
TECHNOLOGIES CORPORATION, a Delaware corporation (“Borrower”), EACH OF THE
PERSONS IDENTIFIED ON SCHEDULE 1 HERETO (“Guarantors”) and FROST BANK, a Texas
state bank (“Lender”).

A. Guarantors executed a Guaranty Agreement, dated as of September 27, 2013 (as
amended, modified or supplemented, the “Guaranty”).

B. The parties hereto desire to join New Guarantor as a Guarantor (as such term
is defined in the Guaranty) under the Guaranty.

NOW THEREFORE, the parties hereto hereby agree as follows:

1. Definitions. Capitalized terms used in this Guarantor Joinder Agreement,
unless otherwise defined herein, shall have the meaning ascribed to such terms
in that certain Loan Agreement, dated as of September 27, 2013, among Borrower,
Guarantors and Lender (as amended, modified or supplemented, the “Loan
Agreement”).

2. Joinder. Subject to the terms and conditions of this Guarantor Joinder
Agreement, New Guarantor is hereby joined in the Guaranty as a Guarantor, and
New Guarantor hereby agrees to be bound by the terms and conditions (including
without limitation all of the representations and warranties and covenants) of
each Loan Document to which a Guarantor is a party, including without limitation
the Guaranty, as Guarantor, in each case as if New Guarantor were a direct
signatory thereto.

3. Effectiveness. This Guarantor Joinder Agreement shall be effective upon the
execution and delivery hereof by the parties hereto.

4. Representations and Warranties. New Guarantor represents and warrants to
Lender that both immediately before and immediately after giving effect to the
consummation of this Guarantor Joinder Agreement each of the representations and
warranties set forth in the Loan Agreement to the extent applicable to such New
Guarantor mutatis mutandis are true, correct and complete in all material
respects (except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof).

 

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5. Scope. Except as expressly modified by this Guarantor Joinder Agreement, the
Loan Agreement and all of the other Loan Documents shall remain in full force
and effect as executed.

6. Governing Law. This Guarantor Joinder Agreement shall be construed in
accordance with and governed by the laws of the State of Texas, without regard
to the conflict of laws principles thereof

IN WITNESS WHEREOF, this Guarantor Joinder Agreement has been duly executed as
of the date first above written.

 

NEW GUARANTOR:  

By: 

   

Name: 

   

Title: 

   

 

A-2

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SCHEDULE 1

TO

GUARANTOR JOINDER AGREEMENT

Guarantors

 

(1) GTC, Inc., a Texas corporation

 

(2) Exile Technologies Corporation, a Texas corporation

 

(3) Geospace Engineering Resources International, Inc., a Texas corporation

 

(4) Geospace Finance Corp., a Texas corporation

 

(5) Geospace J.V., Inc., a Texas corporation

 

(6) Geospace Technologies, Sucursal Sudamericana LLC, a Texas limited liability
company

Schedule 1

to Guaranty Agreement

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EXHIBIT C

Form of Revolving Credit Note

[Attached]

 

C-1

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LOGO [g604676g13o07.jpg]

REVOLVING PROMISSORY NOTE

 

$50,000,000.00    September 27, 2013

For value received, GEOSPACE TECHNOLOGIES CORPORATION, a Delaware corporation
(“Borrower”), does hereby promise to pay to the order of FROST BANK, a Texas
state bank (“Lender”), at P.O. Box 34746, San Antonio, Texas 78265, or at such
other address as Lender shall from time to time specify in writing, in lawful
money of the United States of America, the sum of FIFTY MILLION AND NO/100
DOLLARS ($50,000,000.00), or so much thereof as from time to time may be
disbursed by Lender to Borrower under the terms of that certain Loan Agreement
dated of even date herewith between Borrower, Guarantor (as defined therein) and
Lender (the “Loan Agreement”), and be outstanding, together with interest from
the date hereof on the principal balance outstanding from time to time as
hereinafter provided. Interest shall be computed on a per annum basis of a year
of 360 days and for the actual number of days elapsed, unless such calculation
would result in a rate greater than the highest rate permitted by applicable
law, in which case interest shall be computed on a per annum basis of a year of
365 days or 366 days in a leap year, as the case may be. Any capitalized terms
used in this Note and not otherwise defined herein shall have the meaning
ascribed to them in the Loan Agreement.

1. Payment Terms. Interest only on amounts outstanding hereunder shall be due
and payable monthly as it accrues, on the 1st day of each and every calendar
month, beginning November 1, 2013, and continuing regularly and monthly
thereafter until April 27, 2016, when the entire amount hereof, principal and
accrued interest then remaining unpaid, shall be then due and payable; interest
being calculated on the unpaid principal each day principal is outstanding and
all payments made credited to any collection costs and late charges, to the
discharge of the interest accrued and to the reduction of the principal, in such
order as Lender shall determine.

2. Interest Rate.

(a) The interest rate is a rate per year equal to the lesser of (i) the Wall
Street Journal LIBOR Rate (as defined in clause (c) below) plus the Applicable
Margin (as defined in clause (d) below), or (ii) the Maximum Rate.

(b) The interest rate will be adjusted on the first (1st) day of each quarter
(the “Adjustment Date”) and remain fixed until the next successive Adjustment
Date. If the Adjustment Date in any particular quarter would otherwise fall on a
day that is not a Business Day then, at Lender’s option, the Adjustment Date for
that particular month will be the first Business Day immediately following
thereafter.

(c) The Wall Street Journal LIBOR Rate is a rate of interest equal to the one
month London interbank offered rate as published in the “Money Rates” section of
The Wall Street Journal (or, if such source is not available, such alternate
source as determined by Lender reasonably and in good faith) on the banking day
immediately preceding the Adjustment Date, as adjusted from time to time in
Lender’s sole discretion for reserve requirements, deposit insurance assessment
rates and other regulatory costs.

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(d) The Applicable Margin shall be the following amounts per annum, based upon
the ratio of Funded Debt to EBITDA, as set forth in the most recent compliance
certificate (or, if no compliance certificate is required, the Borrower’s most
recent financial statements) received by Lender as required in the Loan
Agreement; provided, however, that, until Lender receives the first compliance
certificate or financial statement, such amounts shall be those indicated for
pricing level 4 set forth below:

 

Pricing

Level

   Funded Debt to EBITDA    Wall Street Journal
LIBOR Rate +  

1

   > 1.50      3.25 % 

2

   1.50 >, but > 1.25      3.00 % 

3

   1.25>, but > 1.00      2.75 % 

4

   <1.00      2.50 % 

The ratio of Funded Debt to EBITDA will be calculated at the end of each
reporting period for which Lender requires financial statements, using the
results of the twelve-month period ending with that reporting period. The
Applicable Margin shall be in effect from the date the most recent compliance
certificate or financial statement is received by Lender until the date the next
compliance certificate or financial statement is received; provided, however,
that if Borrower fails to timely deliver the next compliance certificate or
financial statement, the Applicable Margin from the date such compliance
certificate or financial statement was due until the date such compliance
certificate or financial statement is received by Lender shall be the highest
pricing level set forth above.

3. Late Charge. If a payment is made more than 10 days after it is due, Borrower
will be charged, in addition to interest, a delinquency charge of (a) 5% of the
unpaid portion of the regularly scheduled payment, or (b) $250.00, whichever is
less. Additionally, upon maturity of this Note, if the outstanding principal
balance (plus all accrued but unpaid interest) is not paid within 10 days of the
maturity date, Borrower will be charged a delinquency charge of (i) 5% of the
sum of the outstanding principal balance (plus all accrued but unpaid interest),
or (ii) $250.00, whichever is less. Borrower agrees with Lender that the charges
set forth herein are reasonable compensation to Lender for the handling of such
late payments.

4. Default Rate. For so long as any Event of Default exists, regardless of
whether or not there has been an acceleration of the indebtedness evidenced by
this Note, and at all times after the maturity of the indebtedness evidenced by
this Note (whether by acceleration or otherwise), and in addition to all other
rights and remedies of Lender hereunder, interest shall accrue at the applicable
rate stated in Section 2 above plus two percent (2%) per annum, but in no event
in excess of the Maximum Rate, and such accrued interest shall be immediately
due and payable. Borrower acknowledges that it would be extremely difficult or
impracticable to determine Lender’s actual damages resulting from any Event of
Default, and such accrued interest is a reasonable estimate of those damages and
does not constitute a penalty.

5. Revolving Line of Credit. Under the Loan Agreement, Borrower may request
advances and make payments hereunder from time to time, provided that it is
understood and agreed that the aggregate principal amount outstanding from time
to time hereunder shall not at any time exceed the Revolving Credit Commitment
minus the Letter of Credit Liabilities. The

 

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unpaid balance of this Note shall increase and decrease with each new advance or
payment hereunder, as the case may be. This Note shall not be deemed terminated
or canceled prior to the date of its maturity other than in accordance with the
terms of the Loan Agreement, although the entire principal balance hereof may
from time to time be paid in full. Borrower may borrow, repay and re-borrow
hereunder. All payments and prepayments of principal or interest on this Note
shall be made in lawful money of the United States of America in immediately
available funds, at the address of Lender indicated above, or such other place
as the holder of this Note shall designate in writing to Borrower. If any
payment of principal or interest on this Note shall become due on a day which is
not a Business Day, such payment shall be made on the next succeeding Business
Day and any such extension of time shall be included in computing interest in
connection with such payment. The books and records of Lender shall be prima
facie evidence of all outstanding principal of and accrued and unpaid interest
on this Note.

6. Prepayment. Borrower reserves the right from time to time to prepay, prior to
maturity, all or any part of the principal of this Note without premium or
penalty. Any prepayments shall be applied first to accrued interest and then to
principal. Borrower will provide written notice to the holder of this Note of
any such prepayment of all or any part of the principal at the time thereof. All
payments and prepayments of principal or interest on this Note shall be made in
lawful money of the United States of America in immediately available funds, at
the address of Lender indicated above, or such other place as the holder of this
Note shall designate in writing to Borrower.

7. Default. It is expressly provided that upon the occurrence and during the
continuance of an Event of Default the holder of this Note may, at its option,
exercise the remedies of Lender provided in Section 9.02 of the Loan Agreement;
and in the event default is made in the prompt payment of this Note when due or
declared due, and the same is placed in the hands of an attorney for collection,
or suit is brought on same, or the same is collected through probate, bankruptcy
or other judicial proceedings, then the Borrower agrees and promises to pay all
out-of-pocket costs of collection, including reasonable attorney’s fees.

8. No Usury Intended; Usury Savings Clause. In no event shall interest
contracted for, charged or received hereunder, plus any other charges in
connection herewith which constitute interest, exceed the Maximum Rate. The
amounts of such interest or other charges previously paid to the holder of the
Note in excess of the amounts permitted by applicable law shall be applied by
the holder of the Note to reduce the principal of the indebtedness evidenced by
the Note, or, at the option of the holder of the Note, be refunded. To the
extent permitted by applicable law, determination of the Maximum Rate shall at
all times be made by amortizing, prorating, allocating and spreading in equal
parts during the period of the full stated term of the loan and indebtedness,
all interest at any time contracted for, charged or received from the Borrower
hereof in connection with the loan and indebtedness evidenced hereby, so that
the actual rate of interest on account of such indebtedness is uniform
throughout the term hereof.

9. Security. This Note has been executed and delivered pursuant to the Loan
Agreement and is secured by a Security Agreement of even date herewith, by and
among Borrower, each of the domestic subsidiaries of Borrower identified on
Schedule 1 hereto and Lender, covering certain collateral as more particularly
described therein. The holder of this Note is entitled to the benefits and
security provided in the Loan Documents.

 

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10. Joint and Several Liability; Waiver. Each maker, signer, surety and endorser
hereof, as well as all successors and assigns of said parties, shall be directly
and primarily, jointly and severally, liable for the payment of all indebtedness
hereunder. Lender may release or modify the obligations of any of the foregoing
persons or entities, or guarantors hereof, in connection with this Note without
affecting the obligations of the others. All such persons or entities expressly
waive presentment and demand for payment, notice of default, notice of intent to
accelerate maturity, notice of acceleration of maturity, protest, notice of
protest, notice of dishonor, and all other notices and demands for which waiver
is not prohibited by law, and diligence in the collection hereof; and agree to
all renewals, extensions, indulgences, partial payments, releases or exchanges
of collateral, or taking of additional collateral, with or without notice,
before or after maturity. No delay or omission of Lender in exercising any right
hereunder shall be a waiver of such right or any other right under this Note.

11. Texas Finance Code. In no event shall Chapter 346 of the Texas Finance Code
(which regulates certain revolving loan accounts and revolving tri-party
accounts) apply to this Note. To the extent that Chapter 303 of the Texas
Finance Code is applicable to this Note, the “weekly ceiling” specified in such
article is the applicable ceiling; provided that, if any applicable law permits
greater interest, the law permitting the greatest interest shall apply.

12. Governing Law, Venue. This Note is being executed and delivered, and is
intended to be performed in the State of Texas. Except to the extent that the
laws of the United States of America may apply to the terms hereof, the
substantive laws of the State of Texas shall govern the validity, construction,
enforcement and interpretation of this Note. In the event of a dispute involving
this Note or any other instruments executed in connection herewith, the
undersigned irrevocably agrees that venue for such dispute shall lie in any
court of competent jurisdiction in Bexar County, Texas.

13. Purpose of Loan. Borrower agrees that no advances under this Note shall be
used for personal, family or household purposes, and that all advances hereunder
shall be used solely for business, commercial, investment, or other similar
purposes.

14. Captions. The captions in this Note are inserted for convenience only and
are not to be used to limit the terms herein.

15. Renewal. This Note is given in renewal, extension and increase, but not
extinguishment, of all amounts left owing and unpaid on that certain Revolving
Promissory Note dated March 2, 2011, executed and delivered by Borrower,
formerly known as OYO Geospace Corporation, and payable to the order of Lender,
formerly known as The Frost National Bank, in the original face amount of
$25,000,000.00.

 

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BORROWER:

 

GEOSPACE TECHNOLOGIES

CORPORATION, a Delaware corporation

By:

      Thomas T. McEntire, Vice President,   Chief Financial Officer and
Secretary

Signature Page

to Revolving Promissory Note

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SCHEDULE 1

TO

REVOLVING PROMISSORY NOTE

 

(1) GTC, Inc., a Texas corporation

 

(2) Exile Technologies Corporation, a Texas corporation

 

(3) Geospace Engineering Resources International, Inc., a Texas corporation

 

(4) Geospace Finance Corp., a Texas corporation

 

(5) Geospace J.V., Inc., a Texas corporation

 

(6) Geospace Technologies, Sucursal Sudamericana LLC, a Texas limited liability
company

Schedule 1

to Revolving Promissory Note

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EXHIBIT D

Form of Security Agreement

[Attached]

 

D-1

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PLEDGE AND SECURITY AGREEMENT

This PLEDGE AND SECURITY AGREEMENT, dated as of September 27, 2013 (as the same
may from time to time be further amended, restated, supplemented or otherwise
modified, this “Agreement”), is entered into by and among GEOSPACE TECHNOLOGIES
CORPORATION, a Delaware corporation (herein, together with its successors and
assigns, the “Borrower”), EACH OF THE DOMESTIC SUBSIDIARIES OF THE BORROWER
identified on Schedule 1 hereto (each such Domestic Subsidiary, together with
the Borrower and any other Person that becomes a party hereto as a Grantor
hereunder pursuant to Section 7.13, and each of their respective successors and
assigns, collectively, the “Grantors” and, individually, “Grantor”), and FROST
BANK, a Texas state bank (the “Lender”).

RECITALS:

A. The parties entered into a Loan Agreement (as the same may from time to time
be further amended, restated, supplemented or otherwise modified, the “Loan
Agreement”), dated as of even date herewith, among the Borrower, Grantors, and
Lender.

B. The obligation of Lender to make loans and provide other financial
accommodations under the Loan Agreement is subject to the condition, among
others, that the Grantors secure the obligations of the Borrower to the Lender
under the Loan Agreement, the other Loan Documents (as defined in the Loan
Agreement) and otherwise as more fully described herein in the manner set forth
herein.

C. Each Grantor will obtain benefits from the Loan Agreement and, accordingly,
desires to execute this Agreement to satisfy the conditions described in the
preceding paragraph and to induce the Lender to extend credit pursuant to the
Loan Agreement and the other Loan Documents.

AGREEMENTS:

NOW, THEREFORE, in consideration of the foregoing and the other benefits
accruing to each Grantor, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND TERMS

1.1 Defined Terms. Capitalized terms used in this Agreement and not otherwise
defined in Section 1.2 shall have the meanings given to such terms in the Loan
Agreement. Unless otherwise defined herein, all terms used herein and defined in
the UCC shall have the same definitions herein as specified therein; provided,
however, that if a term is defined in Article 9 of the UCC differently than in
another Article of the UCC, the term shall have the meaning specified in
Article 9 of the UCC.

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1.2 Additional Defined Terms. The following terms shall have the meanings
specified herein unless the context otherwise requires:

“Account” means any “account,” as such term is now or hereafter defined in the
UCC.

“Account Debtor” means any “account debtor,” as such term is now or hereafter
defined in the UCC.

“Accounts Receivable” means (a) all Accounts, now existing or hereafter arising;
and (b) without limitation of the foregoing, in any event includes, without
limitation, (i) all right to a payment for Goods or other property (other than
Money) that has been or is to be sold, consigned, leased, licensed, assigned or
otherwise disposed of, for services rendered or to be rendered, whether or not
it has been earned by performance, and whether now existing or hereafter
acquired or arising in the future, including Accounts Receivable from employees
and Affiliates of any Grantor, and including all such rights to payment
evidenced by an Account, invoice, purchase order, requisition, bill of exchange,
note, contract, security agreement, lease, chattel paper, or any evidence of
indebtedness or security related to the foregoing, and (ii) all powers of
attorney for the execution of any evidence of indebtedness, guaranty, letter of
credit or security or other writing in connection therewith.

“Administrative Expenses” means, collectively, (a) any and all reasonable costs,
liabilities and expenses (including, without limitation, losses, damages,
penalties, claims, actions, reasonable attorneys’ fees, legal expenses,
judgments, suits and disbursements) incurred by, imposed upon, or asserted
against, Lender in the performance of its duties under or otherwise in
connection with this Agreement or the other Loan Documents, or in any attempt by
Lender to (i) obtain, preserve, perfect or enforce any security interest
evidenced by this Agreement, any other Security Agreement or any other Loan
Document; (ii) obtain payment, performance or observance of any and all of the
Obligations; or (iii) maintain, insure, audit, collect, preserve, repossess or
dispose of any of the Collateral or any other collateral securing the
Obligations, including, without limitation, costs and expenses for appraisals,
assessments, and audits of any Grantor, or any such Collateral; and (b) all
costs, liabilities and expenses incidental or related to (a) above, in each
case, to the extent required to be paid pursuant to Sections 10.13 and 10.14 of
the Loan Agreement; provided that if any such costs, liabilities or expenses
shall not be paid within five Business Days after Lender requests payment
therefor in writing, such costs, liabilities and expenses shall accrue interest
at the Default Rate from the date of such written request until paid.

“Administrative Obligations” means, collectively, all Administrative Expenses
and all other Indebtedness or other obligations now owing or hereafter incurred
by the Borrower or any other Grantor to Lender pursuant to this Agreement or any
other Loan Document.

“Agreement” has the meaning provided in the first paragraph of this Agreement.

 

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“Borrower” has the meaning provided in the first paragraph of this Agreement.

“Chattel Paper” means any “chattel paper,” as such term is now or hereafter
defined in the UCC.

“Collateral” has the meaning provided in Section 2.1.

“Collateral Documents” shall mean this Agreement, together with all other
documents, instruments or agreements executed in connection with this Agreement,
or in connection with any security interest or Lien granted, or otherwise
obtained, on or in connection with the Creditor Collateral, or any part thereof.

“Copyrights” means any copyright rights to which a Grantor now or hereafter has
title, as well as any application for a copyright hereafter made by such
Grantor.

“Creditor Collateral” shall mean, collectively, (a) all of the Collateral, as
defined in each of the respective Security Agreements executed by any Grantor,
and (b) any other property, whether tangible or intangible, at any time securing
the Obligations, or any part thereof, whether such Lien securing any of the
Obligations shall have been granted to, or otherwise obtained by, Lender.

“Default Rate” means, for any day, a rate per annum equal to the highest default
rate set forth in Section 4 of the Note.

“Domestic Subsidiary” means any Subsidiary organized under the Governmental
Requirements of the United States of America, any state thereof, the District of
Columbia, or any United States possession.

“Equipment” means any “equipment,” as such term is now or hereafter defined in
the UCC.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“General Intangibles” means any “general intangibles,” as such term is now or
hereafter defined in the UCC.

“Goods” means any “goods,” as such term is now or hereafter defined in the UCC.

“Grantor” or “Grantors” has the meaning provided in the first paragraph of this
Agreement.

“Grantor Joinder Agreement” means a joinder agreement substantially in the form
of Exhibit A hereto.

 

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“Intellectual Property” means (a) all Trademarks; (b) all Patents; (c) all
Copyrights; and (d) all computer programs and software applications and source
code of such Grantor and all intellectual property rights therein and all other
Proprietary Information of such Grantor, including, but not limited to, Trade
Secrets.

“Intercompany and Third Party Notes” means all Promissory Notes, Instruments,
debentures, bonds, evidences of indebtedness and similar securities from time to
time issued to, or held by, any Grantor.

“Inventory” means any “inventory,” as such term is now or hereafter defined in
the UCC.

“Lender” has the meaning provided in the first paragraph of this Agreement.

“Loan Agreement” has the meaning provided in the Recitals of this Agreement.

“Money” means any “money,” as such term is now or hereafter defined in the UCC.

“Patents” means any patent to which a Grantor now or hereafter has title, as
well as any application, registrations and recordings for a patent now or
hereafter made by a Grantor.

“Payment Intangible” means any “payment intangible,” as such term is now or
hereafter defined in the UCC.

“Proceeds” means any “proceeds” as such term is now or hereafter defined in the
UCC.

“Products” means any “products” as such term is now or hereafter defined in the
UCC.

“Promissory Notes” means any “promissory note,” as such term is now or hereafter
defined in the UCC.

“Proprietary Information” means all information and know-how worldwide,
including, without limitation, technical data; manufacturing data; research and
development data; data relating to compositions, processes and formulations,
manufacturing and production know-how and experience; management know-how;
training programs; manufacturing, engineering and other drawings;
specifications; performance criteria; operating instructions; maintenance
manuals; technology; technical information; software; computer programs;
engineering and computer data and databases; design and engineering
specifications; catalogs; promotional literature; financial, business and
marketing plans; and inventions and invention disclosures.

“Reporting Date” has the meaning provided in Section 4.8(a).

“Secured Obligations” means the Obligations and the Administrative Obligations.

 

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“Security Interest” means the security interest granted by a Grantor and/or by
all Grantors, as applicable, pursuant to Section 2.1.

“Supporting Obligations” means any “supporting obligation,” as such term is now
or hereafter defined in the UCC.

“Trademarks” means any trademarks and service marks now held or hereafter
acquired by a Grantor to which a Grantor has title, as well as any unregistered
marks used by a Grantor, including logos and/or designs that are incorporated as
part of any of these registered or unregistered marks, and with the
applications, registrations and recordings, together with the goodwill of the
business of any Grantor connected with or symbolized by any of the foregoing.

“Trade Secrets” means any secretly held existing engineering and other data,
information, production procedures, techniques, and other know-how or other
general intangibles of like nature relating to the design, manufacture,
assembly, installation, use, operation, marketing, sale and servicing of any
products or business of a Grantor worldwide whether written or not written.

“UCC” means, unless the context indicates otherwise, the Uniform Commercial
Code, as at any time adopted and in effect in the State of Texas, specifically
including and taking into account all amendments, supplements, revisions and
other modifications thereto.

1.3. Terms Generally. The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words “include,” “includes” and “including” shall be deemed to
be followed by the phrase “without limitation.” The word “will” shall be
construed to have the same meaning and effect as the word “shall.” Unless the
context requires otherwise, (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time may be amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, and (d) unless otherwise specified, all
references herein to Sections, Schedules and Exhibits shall be construed to
refer to Sections of, and Schedules and Exhibits to, this Agreement.

ARTICLE II

SECURITY INTERESTS

2.1 Grant of Security Interests. As security for the prompt and complete payment
when due of the Obligations, each Grantor does hereby pledge, collaterally
assign and transfer unto Lender, and does hereby grant to Lender a continuing
security interest in, all of the right, title and interest of such Grantor in,
to and under all of the following of such Grantor, whether now existing or
hereafter from time to time arising or acquired and wherever located
(collectively, the “Collateral”):

 

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  (a) all Accounts, including, without limitation, each and every Account
Receivable;

 

  (b) all Inventory;

 

  (c) all Equipment;

 

  (d) all Chattel Paper;

 

  (e) all General Intangibles, excluding any and all Intellectual Property;

 

  (f) all Payment Intangibles;

 

  (g) all Promissory Notes;

 

  (h) all Supporting Obligations;

 

  (i) all additions, modifications, alterations, improvements, upgrades,
accessions, components, parts, appurtenances, substitutions and/or replacements
of, to or for any of the foregoing; and

 

  (j) Proceeds and Products of any and all of the foregoing.

2.2 No Assumption of Liability. The Security Interest of any Grantor is granted
as security only and shall not subject Lender to, or in any way alter or modify,
any obligation or liability of such Grantor with respect to or arising out of
any of the Collateral.

2.3 Power of Attorney. Each Grantor hereby irrevocably (for the term of this
Agreement) constitutes and appoints Lender its true and lawful agent and
attorney-in-fact, and in such capacity Lender shall have, without any further
action required by or on behalf of any Grantor, the right, with full power of
substitution, in the name of such Grantor or otherwise, for the use and benefit
of Lender after the occurrence of and during the continuance of an Event of
Default: (a) to receive, endorse, present, assign, deliver and/or otherwise deal
with any and all notes, acceptances, letters of credit, checks, drafts, money
orders, or other evidences of payment relating to the Collateral of such Grantor
or any part thereof; (b) to demand, collect, receive payment of, and give
receipt for and give credits, allowances, discounts, discharges, releases and
acquittances of and for any or all of the Collateral of such Grantor; (c) to
sign the name of such Grantor on any invoice or bill of lading relating to any
of the Collateral of such Grantor; (d) to send verifications of any or all of
the Accounts Receivable of such Grantor to its Account Debtors; (e) to commence
and prosecute any and all suits, actions or proceedings at law or in equity in
or before any court or other tribunal (including any arbitration proceedings) to
collect or otherwise realize on all or any of the Collateral of such Grantor, or
to enforce any rights of such Grantor in respect of any of its Collateral;
(f) to settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to any or all of the Collateral of such Grantor; (g) to
notify, or require such Grantor to notify or cause to be notified, its Account
Debtors to make payment directly to Lender; or (h) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with any
or all of the Collateral of such Grantor, and to do all other acts and things
necessary or appropriate to carry out the intent and purposes of this Agreement,
as fully and completely as though Lender were the absolute owner of the
Collateral of such Grantor for all purposes; provided, however, that any such
action shall be consistent with the term of this Agreement and the other Loan
Documents, provided, further, that nothing herein contained shall be construed
as requiring or obligating Lender to make any commitment or to

 

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make any inquiry as to the nature or sufficiency of any payment received by
Lender, or to present or file any claim or notice, or to take any action with
respect to the Collateral or any part thereof or the moneys due or to become due
in respect thereof or any property covered thereby, and no action taken or
omitted to be taken by Lender with respect to the Collateral or any part thereof
shall give rise to any defense, counterclaim or offset in favor of any Grantor
or to any claim or action against Lender (other than for fraud, gross
negligence, or willful misconduct). It is understood and agreed that the
appointment of Lender as the agent and attorney-in-fact of each of the Grantors
for the purposes set forth above is a presently effective appointment, is
coupled with an interest sufficient at law and is irrevocable for the term
hereof. The provisions of this Section shall in no event relieve any Grantor of
any of its obligations under this Agreement or any of the other Loan Documents
with respect to the Collateral or any part thereof or impose any obligation on
Lender to proceed in any particular manner with respect to the Collateral or any
part thereof, or in any way limit the exercise by Lender of any other or further
right it may have on the date of this Agreement or hereafter, whether hereunder,
under any other Loan Document, by law or otherwise.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Each Grantor represents and warrants to Lender, which representations and
warranties shall survive the execution and delivery of this Agreement until the
termination of this Agreement in accordance with Section 7.9, below, as follows:

3.1 Validity of Security Interest. When the financing statements in appropriate
form are filed in the office of the Secretary of the State of incorporation or
formation, as the case may be, of each Grantor, the Security Interest in the
interest of each such Grantor in all of the Collateral of such Grantor
constitutes a legal, valid and enforceable (with respect to any licenses where a
Grantor is the licensee, only as against such Grantor) first priority security
interest therein in favor of Lender securing the payment of the Obligations in
accordance with the terms of the Loan Agreement, subject only to the Standard
Permitted Liens and other Liens permitted under Section 7.04 of the Loan
Agreement.

3.2 Perfection of Security Interest under UCC. All financing statement filings
which are required by the terms of this Agreement to have been done and
accomplished by such Grantor in respect of its portion of the Collateral have
been done and accomplished.

3.3 Places of Business, Jurisdiction Where Organized, Locations of Collateral,
etc. Each Grantor represents and warrants that on the Closing Date: (a) the
principal place of business of such Grantor, or its chief executive office, if
it has more than one place of business, is located at the address indicated on
Schedule 3.3; (b) the jurisdiction of formation or organization of such Grantor
is set forth on Schedule 3.3; (c) the U.S. Federal Tax identification number
and, if applicable, the organizational identification number of such Grantor is
set forth on Schedule 3.3; (d) all Inventory and Equipment of such Grantor with
an aggregate value in

 

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excess of $4,000,000 is located at one of the locations set forth on
Schedule 3.3, other than temporary relocation of Inventory and Equipment with
third parties in the ordinary course of business; and (f) the exact legal name
of such Grantor, and each legal name that such Grantor has had in the five years
preceding the Closing Date (including, without limitation, any predecessor
entities), are set forth on Schedule 3.3. Such Grantor does not, at and as of
the date hereof, conduct business in any jurisdiction, and except as set forth
on Schedule 3.3, in the five years immediately preceding, such Grantor and any
predecessors in interest have not conducted business in any such jurisdiction,
except under the current legal name of such Grantor and such other names as are
listed on Schedule 3.3.

ARTICLE IV

GENERAL COVENANTS

4.1 Defense of Title, etc. Each Grantor, at its sole cost and expense, will take
any and all actions reasonably necessary and appropriate to defend title to its
Collateral against any and all Persons and to defend the validity,
enforceability, perfection, effectiveness and priority of the Security Interest
of Lender therein against any Lien other than Standard Permitted Liens and Liens
permitted under Section 7.04 of the Loan Agreement.

4.2 Further Assurances; Filings and Recordings, etc.

(a) Each Grantor, at its sole cost and expense, will duly execute, acknowledge
and deliver all such agreements, instruments and other documents and take all
such actions reasonably requested by Lender and not inconsistent with this
Agreement or the Loan Agreement, including, without limitation, subject to
Section 4.4 below, making financing statement filings, recordings and
registrations, as Lender may from time to time reasonably instruct to better
assure, preserve, protect and perfect the Security Interest of Lender in the
Collateral of such Grantor, and the rights and remedies of Lender hereunder, or
otherwise to further effectuate the intent and purposes of this Agreement and to
carry out the terms hereof.

(b) Each Grantor, at its sole cost and expense, will (i) take such actions as
Lender reasonably requests to at all times cause this Agreement (and/or proper
notices, financing statements or other registrations or filings in respect
hereof, and supplemental collateral assignments or collateral security
agreements in respect of any portion of the Collateral) to be duly filed,
recorded, registered and published, and re-filed, re-recorded, re-registered and
re-published in such manner and in such places as may be required under the UCC
or other applicable Governmental Requirement to establish, perfect, preserve and
protect the rights, remedies and Security Interest of Lender in or with respect
to the Collateral of such Grantor, and (ii) pay all taxes, fees and charges and
comply with all statutes and regulations, applicable to such filing, recording,
registration and publishing and such re-filing, re-recording, re-registration
and re-publishing.

 

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4.3 Use and Disposition of the Collateral.

(a) Unless and until an Event of Default shall have occurred and be continuing
and Lender shall have notified the Grantors thereof in writing that the rights
of any or all of the Grantors under this Section 4.3(a) are suspended during the
continuance of such Event of Default, each Grantor may use and dispose of its
Collateral in any lawful manner not inconsistent with the provisions of this
Agreement, the Loan Agreement or any other Loan Document.

(b) No Grantor will consign any of its Inventory that has a cost or market value
(whichever is higher) at the time of consignment, individually, or in the
aggregate for all such consigned Inventory, that exceeds $500,000, to any Person
unless all filings of financing statements under the UCC and other actions and
filings, registrations and recordings required under other applicable
Governmental Requirements have been made to perfect the rights and interests of
such Grantor in the consigned Inventory against creditors of and purchasers from
the consignee.

(c) No Grantor will permit any of its Inventory or Equipment having a cost or
market value (whichever is higher), individually, or in the aggregate for all
such Inventory and Equipment, in excess of $4,000,000 (or such larger amount as
shall be acceptable to Lender, in its discretion) to be in the possession or
control of any single warehouseman, bailee, processor, supplier or agent at any
time, unless such warehouseman, bailee, processor, supplier or agent shall have
been notified of the Security Interest and shall have agreed in writing to hold
such Collateral subject to the Security Interest and the instructions of Lender
and to waive and release any Lien held by it with respect to such Collateral,
whether arising by operation of law or otherwise.

4.4 Delivery or Marking of Chattel Paper; Assignment of Security From Account
Debtors and Consignments; etc. Without limitation of any of the provisions of
Section 4.2(a):

(a) If any amount payable to a Grantor under or in connection with any of the
Collateral shall be or become evidenced by any Promissory Note or Chattel Paper
if in excess of $1,000,000 individually or in the aggregate, upon the occurrence
of during the continuance of Event of Default and at such time upon written
request by Lender, such Grantor will cause such Promissory Note or such Chattel
Paper to be delivered to Lender and pledged as part of the Collateral hereunder,
accompanied by any appropriate instruments or endorsements of transfer. In the
case of any Chattel Paper, Lender may require, in lieu of the delivery thereof
to Lender, that the writings evidencing the Chattel Paper be legended to reflect
the Security Interest of Lender therein, all in a manner acceptable to Lender.

(b) If at any time any Grantor shall take and perfect a security interest in any
property of any Account Debtor, as security for the Accounts owed by such
Account Debtor and/or any of its Affiliates, or take and perfect a security
interest arising out of the consignment to any Person of any Inventory or other
Collateral, such Grantor shall, if

 

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requested by Lender, promptly execute and deliver to Lender a separate
assignment of all financing statements and other filings made to perfect the
same. Such separate assignment need not be filed of public record unless
necessary to continue the perfected status of the security interest of such
Grantor against creditors of any transferees from the Account Debtor or
consignee.

4.5 Authorization to File Financing Statements. Each Grantor irrevocably
authorizes Lender at any time and from time to time to file in any jurisdiction
any initial financing statements and all amendments thereto and continuations
thereof that (a) indicate the Collateral (i) as “all assets” or “all personal
property” of such Grantor or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of the UCC,
or (ii) as being of an equal or lesser scope or with greater detail, and
(b) contain any other information required pursuant to the UCC for the
sufficiency or filing office acceptance of any financing statement, amendment or
continuation, including, but not limited to, (i) whether such Grantor is an
organization, the type of organization and any organization identification
number, and (ii) in the case of a financing statement that is filed as a fixture
filing, a sufficient description of the real property to which the Collateral
relates.

4.6 Modification of Terms of Accounts. No Grantor will enter into any material
modification of the terms or provisions of any of its Accounts Receivable, or
grant any extension of time for the payment of any of its Accounts Receivable,
or compromise or settle the same for less than the full amount thereof, or
release, wholly or partially, any person liable for the payment thereof or any
guaranty, letter of credit, collateral or other obligation supporting or
securing the payment thereof, or allow any material credit or discount
whatsoever thereon, other than modifications, extensions, compromises,
settlements, credits and discounts granted or made (i) in the ordinary course of
business or (ii) not otherwise prohibited by the terms of the Loan Agreement or
any other Loan Document.

4.7 Maintenance of Records, etc. Each Grantor will keep and maintain at its own
cost and expense satisfactory and complete records of its Accounts Receivable
and other Collateral in accordance with its customary practices, including, but
not limited to, the originals of all documentation with respect thereto, records
of all payments received, all credits granted thereon, all merchandise returned
and all other dealings therewith. All billings and invoices issued by a Grantor
with respect to its Accounts Receivable will be in compliance, in all material
respects, with, and conform to, the requirements of all applicable federal,
state and local Governmental Requirements and any applicable Governmental
Requirements of any relevant foreign jurisdiction. If an Event of Default shall
have occurred and be continuing and Lender so directs, each Grantor shall
legend, in form and manner satisfactory to Lender, its Accounts Receivable as
well as books, records and documents of such Grantor evidencing or pertaining
thereto with an appropriate reference to the fact that such Accounts Receivable
have been assigned to Lender and that Lender has a security interest therein.

 

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4.8 Schedules; Collateral Reports.

(a) Schedules. If any information contained in any Schedule to this Agreement
shall become untrue or incorrect in any material respect (other than as to any
of the matters set forth in Section 4.9 which shall be subject to the terms
thereof), or if any Grantor acquires or disposes of any of the Collateral such
that any Schedule to this Agreement is no longer accurate or complete in any
material respect (other than as to any of the matters set forth in Section 4.2
which shall be subject to the terms thereof and the Grantor Joinder Agreement
pursuant to Section 7.13), then on the date on which the Borrower is required to
deliver to Lender a Compliance Certificate under the Loan Agreement (each a
“Reporting Date”) immediately following the date on which such information
becomes so untrue or incorrect or after such acquisition or disposition occurs,
such Grantor shall deliver to Lender a new Schedule or Schedules to this
Agreement without the need for any amendment to this Agreement pursuant to
Section 7.15, provided that the delivery of such new Schedule or Schedules to
this Agreement after any applicable Reporting Date shall not serve to cure, or
constitute a waiver of, any Event of Default that may have occurred as a result
of such information becoming untrue, incorrect, inaccurate or incomplete in any
material respect.

(b) Collateral Reports. Whenever requested to do so by Lender and not
inconsistent with the Loan Agreement, each Grantor will promptly, at its own
sole cost and expense, deliver to Lender, in written hard copy form or, if
available, on magnetic tape or other computer or machine readable form, as
specified by Lender, such listings, agings, descriptions, schedules and other
reports with respect to its Accounts Receivable, Inventory, Equipment and other
Collateral as Lender may reasonably instruct, all of the same to be in such
scope, categories and detail as Lender may have reasonably instructed and to be
accompanied by copies of invoices and other documentation as and to the extent
reasonably instructed by Lender and in each case not inconsistent with the Loan
Agreement.

4.9 Legal Status; Location of Inventory and Equipment. Each Grantor agrees that
(a) it will not change its name, place of business, type of organization,
jurisdiction of organization or other legal structure, or, if more than one,
chief executive office, or its mailing address or organizational identification
number, if it has one, in each case without providing Lender at least 30 days’
prior written notice thereof and, if and as required by the Loan Agreement, the
consent of Lender, (b) if such Grantor does not have an organizational
identification number and later obtains one, it will promptly notify Lender of
such organizational identification number, and (c) it will not maintain any of
its Inventory or Equipment with an aggregate value in excess of $2,000,000 at a
location other than a location set forth on Schedule 3.3 (other than temporary
relocation of Inventory and Equipment with third parties in the ordinary course
of business), unless it shall have provided Lender prompt written notice
thereof, in each case, except as otherwise permitted under the Loan Agreement.

4.10 Insurance. Each Grantor will at all times keep its business and its
Collateral insured in accordance with Section 6.06 of the Loan Agreement.

 

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4.11 Proceeds of Casualty Insurance, Condemnation or Taking.

(a) All amounts recoverable with respect to the Collateral under any policy of
casualty insurance or any award for the condemnation or taking by any
governmental authority of any portion of the Collateral are hereby assigned to
Lender.

(b) In the event any portion of the Collateral suffers a casualty loss or is
involved in any proceeding for condemnation or taking by any governmental
authority, then, if an Event of Default has occurred and is continuing, Lender
is authorized and empowered, to the fullest extent permitted by law, at its
option, to participate in, control, direct, adjust, settle and/or compromise any
such loss or proceeding, to collect and receive the proceeds therefrom and,
after deducting from such proceeds any out-of pocket expenses incurred by it in
connection with the collection or handling thereof, to apply the net proceeds
thereof to the Obligations in accordance with Section 6.4.

(c) If any proceeds are received by Lender as a result of a casualty,
condemnation or taking involving the Collateral and no Event of Default has
occurred and is continuing, then Lender will promptly release such proceeds to
the applicable Grantor, unless the Loan Agreement provides otherwise.

4.14 Protective Advances by Lender. At its option, but without being obligated
to do so, Lender may, upon prior notice to any applicable Grantor, after the
occurrence and during the continuance of an Event of Default, (a) pay and
discharge past due taxes, assessments and governmental charges, at any time
levied on or with respect to any of the Collateral of such Grantor which such
Grantor has failed to pay and discharge in accordance with the requirements of
this Agreement or any of the other Loan Documents, (b) pay and discharge any
claims of other creditors of such Grantor which are secured by any Lien on any
Collateral, other than a Standard Permitted Lien or Lien permitted by
Section 7.04 of the Loan Agreement, (c) pay for the maintenance, repair,
restoration and preservation of the Collateral to the extent such Grantor fails
to comply with its obligations in regard thereto under this Agreement and the
other Loan Documents or Lender reasonably believes payment of the same is
necessary or appropriate to avoid a material loss or material diminution in
value of the Collateral, and/or (d) obtain and pay the premiums on insurance for
the Collateral which such Grantor fails to maintain in accordance with the
requirements of this Agreement and the other Loan Documents, and each Grantor
agrees to reimburse Lender on demand for all payments and out-of-pocket expenses
incurred by Lender with respect to such Grantor or any of its Collateral
pursuant to the foregoing authorization, provided, however, that nothing in this
Section shall be construed as excusing any Grantor from the performance of, or
imposing any obligation on Lender to cure or perform, any covenants or other
agreements of any Grantor with respect to any of the foregoing matters as set
forth herein or in any of the other Loan Documents.

 

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ARTICLE V

SPECIAL PROVISIONS CONCERNING

ACCOUNTS AND COLLECTION OF ACCOUNTS, ETC.

5.1 Collection of Accounts.

(a) Each Grantor shall, in a manner consistent with the provisions of this
Section 5.1 and the past practices of such Grantor, endeavor to cause to be
collected from the Account Debtor named in each of its Accounts, as and when due
(including, without limitation, amounts which are delinquent, such amounts to be
collected in accordance with generally accepted lawful collection procedures),
any and all amounts owing under or on account of such Accounts and shall cause
such collections to deposited.

(b) Each Grantor shall, and Lender hereby authorizes each Grantor to, enforce
and collect all amounts owing to it on its Inventory and Accounts, for the
benefit and on behalf of Lender; provided, however, that such privilege may at
the sole option of Lender, by notice to the Borrower (on behalf of all
Grantors), be terminated upon the occurrence and during the continuance of any
Event of Default.

ARTICLE VI

REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT

6.1 Remedies Generally; Obtaining of the Collateral. Each Grantor agrees that,
if an Event of Default shall have occurred and be continuing, then and in every
such case, subject to applicable Governmental Requirement then in effect,
Lender, in addition to any rights now or hereafter existing under applicable
Governmental Requirement, shall have all rights as a secured creditor under the
UCC in all relevant jurisdictions and may exercise any or all of the following
rights (all of which each Grantor hereby agrees is commercially reasonable to
the fullest extent permitted under applicable Governmental Requirement now or
hereafter in effect):

(a) personally, or by agents’ attorneys or other authorized representatives,
immediately take possession of the Collateral or any part thereof, from such
Grantor or any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon such
Grantor’s or such other Person’s premises where any of the Collateral is located
and remove the same and use in connection with such removal any and all
services, supplies, aids and other facilities of such Grantor;

(b) instruct the obligor or obligors on any Account, agreement, instrument or
other obligation (including, without limitation, Account Debtors) constituting
the Collateral to make any payment required by the terms of such Account,
agreement, instrument or other obligation directly to Lender and/or directly to
a lockbox under the sole dominion and control of Lender;

 

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(c) sell, assign or otherwise liquidate, or direct such Grantor to sell, assign
or otherwise liquidate, any or all of the Collateral or any part thereof of such
Grantor, and take possession of the proceeds of any such sale or liquidation;

(d) pay and discharge taxes, Liens or claims on or against any of the
Collateral;

(e) pay, perform or satisfy, or cause to be paid, performed or satisfied, for
the benefit of any Grantor, any of the obligations, terms, covenants, provisions
or conditions to be paid, observed, performed or satisfied by such Grantor under
any contract, agreement or instrument relating to its Collateral, all in
accordance with the terms, covenants, provisions and conditions thereof, as and
to the extent that such Grantor fails or refuses to perform or satisfy the same;

(f) enter into any extension of, or any other agreement in any way relating to,
any of the Collateral;

(g) make any compromise or settlement Lender deems desirable or necessary with
respect to any of the Collateral; and/or

(h) take possession of the Collateral or any part thereof, by directing such
Grantor or any other Person in possession thereof in writing to deliver the same
to Lender at any place or places reasonably designated by Lender, in which event
such Grantor shall at its own expense:

(i) forthwith cause the same to be moved to the place or places so designated by
Lender and there delivered to Lender,

(ii) store and keep any Collateral so delivered to Lender at such place or
places pending further action by Lender as provided in Section 6.2, and

(iii) while the Collateral shall be so stored and kept, provide such guards and
maintenance services as shall be necessary to protect the same and to preserve
and maintain them in substantially the same condition prior to such action; it
being understood that such Grantor’s obligation so to deliver the Collateral is
of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, Lender shall be entitled to a decree
requiring specific performance by such Grantor of said obligation.

6.2 Disposition of the Collateral. Upon the occurrence and continuance of an
Event of Default, any Collateral repossessed by Lender under or pursuant to
Section 6.1 and any other Collateral whether or not so repossessed by Lender,
may be sold, assigned, leased or otherwise disposed of under one or more
contracts or as an entirety, and without the necessity of gathering

 

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at the place of sale of the property to be sold, and in general in such manner,
at such time or times, at such place or places and on such terms as Lender may,
in compliance with any mandatory requirements of applicable Governmental
Requirement, determine to be commercially reasonable. Any of the Collateral may
be sold, leased or otherwise disposed of, in the condition in which the same
existed when taken by Lender or after any overhaul or repair which Lender shall
determine to be commercially reasonable. Except in the case of any Collateral
that is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, (a) in the case of any such disposition
which shall be a private sale or other private proceedings permitted by such
requirements, such sale shall be made upon not less than 10 days’ prior written
notice to such Grantor specifying the time at which such disposition is to be
made and the intended sale price or other consideration therefor, and shall be
subject, for the 10 days after the giving of such notice, to the right of the
relevant Grantor or any nominee of the relevant Grantor to acquire the
Collateral involved at a price or for such other consideration at least equal to
the intended sale price or other consideration so specified, and (b) in the case
of any such disposition which shall be a public sale permitted by such
requirements, such sale shall be made upon not less than 10 days’ prior written
notice to the relevant Grantor specifying the time and place of such sale and,
in the absence of applicable Governmental Requirements, shall be by public
auction (which may, at Lender’s sole option, be subject to reserve), after
publication of notice of such auction not less than 10 days prior thereto in two
newspapers in general circulation in the city where such Collateral is located.
To the extent permitted by any Governmental Requirement, Lender may bid for and
become the purchaser (by bidding in Secured Obligations or otherwise) of the
Collateral or any item thereof, offered for sale in accordance with this Section
without accountability to the relevant Grantor (except to the extent of surplus
money received as provided in Section 6.4). Unless so obligated under mandatory
requirements of applicable Governmental Requirements, Lender shall not be
required to make disposition of the Collateral within a period of time which
does not permit the giving of notice to the relevant Grantor as hereinabove
specified. Lender need give the relevant Grantor only such notice of disposition
as Lender shall deem to be reasonably practicable in view of such mandatory
requirements of applicable Governmental Requirements.

6.3 Waiver of Claims. Except as otherwise provided in this Agreement, EACH
GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE GOVERNMENTAL
REQUIREMENTS, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH LENDER’S TAKING
POSSESSION OR LENDER’S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT
LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR
REMEDIES AND ANY SUCH RIGHT WHICH THE GRANTOR WOULD OTHERWISE HAVE UNDER THE
CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and each
Grantor hereby further waives, to the extent permitted by Governmental
Requirement: (i) all damages occasioned by such taking of possession except any
damages which are the direct result of Lender’s gross negligence or willful
misconduct, as determined by a final non-appealable judgment of a court of
competent jurisdiction; (ii) all other requirements as to the time, place and
terms of sale or other requirements with respect to the enforcement of Lender’s
rights hereunder; and (iii) all rights of redemption, appraisement, valuation,
stay, extension or moratorium now or hereafter in force under any applicable
Governmental

 

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Requirement in order to prevent or delay the enforcement of this Agreement or
the absolute sale of the Collateral or any portion thereof, and each Grantor,
for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such Governmental
Requirements to the fullest extent permitted by applicable Governmental
Requirement now or hereafter in effect. Any sale of, or the grant of options to
purchase, or any other realization upon, any Collateral shall operate to divest
all right, title, interest, claim and demand, either at law or in equity, of the
relevant Grantor therein and thereto, and shall be a perpetual bar both at law
and in equity against the relevant Grantor and against any and all Persons
claiming or attempting to claim the Collateral so sold, optioned or realized
upon, or any part thereof, from, through and under the relevant Grantor.

6.4 Application of Proceeds. All Collateral and proceeds of Collateral obtained
and realized by Lender in connection with the enforcement of this Agreement
pursuant to this Article VI shall be applied as set forth in the Loan Agreement.

6.5 Remedies Cumulative, etc. Each and every right, power and remedy hereby
specifically given to Lender shall be in addition to every other right, power
and remedy specifically given under this Agreement or the other Loan Documents
or now or hereafter existing at law or in equity, or by statute and each and
every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by Lender. All such rights, powers and
remedies shall be cumulative and the exercise or the beginning of exercise of
one shall not be deemed a waiver of the right to exercise of any other or
others. No delay or omission of Lender in the exercise of any such right, power
or remedy, or partial or single exercise thereof, and no renewal or extension of
any of the Obligations, shall impair or constitute a waiver of any such right,
power or remedy or shall be construed to be a waiver of any Default or Event of
Default or an acquiescence therein. No notice to or demand on any Grantor in any
case shall entitle it to any other or further notice or demand in similar or
other circumstances or constitute a waiver of any of the rights of Lender to any
other or further action in any circumstances without notice or demand. In the
event that Lender shall bring any suit to enforce any of its rights hereunder
and shall be entitled to judgment, then in such suit Lender may recover
reasonable expenses, including attorneys’ fees, and the amounts thereof shall be
included in such judgment.

6.6 Discontinuance of Proceedings. In case Lender shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to Lender, then and in every such case the relevant Grantor, Lender and each
holder of any of the Obligations shall be restored to their former positions and
rights hereunder with respect to the Collateral subject to the Security Interest
created under this Agreement, and all rights, remedies and powers of Lender
shall continue as if no such proceeding had been instituted.

 

16

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6.7 Purchasers of Collateral. Upon any sale of any of the Collateral by Lender
hereunder (whether by virtue of the power of sale herein granted, pursuant to
judicial process or otherwise), the receipt of Lender or the officer making the
sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold, and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to Lender or
such officer or be answerable in any way for the misapplication or
nonapplication thereof.

ARTICLE VII

MISCELLANEOUS

7.1 Notices. Except as otherwise expressly provided herein, all notices and
other communications provided for hereunder shall be in writing and delivered in
accordance with the terms of the Loan Agreement.

7.2 Entire Agreement. This Agreement and the other Loan Documents represent the
final agreement among the parties with respect to the subject matter hereof and
thereof, supersede any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof and thereof, and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral agreements
among the parties. There are no unwritten oral agreements among the parties.

7.3 Obligations Absolute. The obligations of each Grantor under this Agreement
shall be absolute and unconditional and shall remain in full force and effect
without regard to, and shall not be released, suspended, discharged, terminated
or otherwise affected by, any circumstance or occurrence whatsoever, other than
indefeasible payment in full of, and complete performance of, all of the
Obligations, including, without limitation:

(a) any renewal, extension, amendment or modification of, or addition or
supplement to or deletion from other Loan Documents, or any other instrument or
agreement referred to therein, or any assignment or transfer of any thereof;

(b) any waiver, consent, extension, indulgence or other action or inaction under
or in respect of any such agreement or instrument or this Agreement except as
expressly provided in such renewal, extension, amendment, modification,
addition, supplement, assignment or transfer;

(c) any furnishing of any additional security to Lender or its assignee or any
acceptance thereof or any release of any security by Lender or its assignee;

(d) any limitation on any other Person’s liability or obligations under any such
instrument or agreement or any invalidity or unenforceability, in whole or in
part, of any such instrument or agreement or any term thereof;

 

17

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(e) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to any other Grantor
or any Subsidiary of a Grantor, or any action taken with respect to this
Agreement by any trustee or receiver, or by any court, in any such proceeding,
whether or not a Grantor shall have notice or knowledge of any of the foregoing;
or

(f) to the fullest extent permitted by applicable Governmental Requirement now
or hereafter in effect, any other event or circumstance which, but for this
provision, might release or discharge a guarantor or other surety from its
obligations as such.

7.4 Successors and Assigns. This Agreement shall be binding upon each Grantor
and its successors and assigns and shall inure to the benefit of Lender and its
successors and permitted assigns, provided that no Grantor may transfer or
assign any or all of its rights or obligations hereunder without the written
consent of Lender. All agreements, statements, representations and warranties
made by each Grantor herein or in any certificate or other instrument delivered
by such Grantor or on its behalf under this Agreement shall be considered to
have been relied upon by Lender and shall survive the execution and delivery of
this Agreement and the other Loan Documents regardless of any investigation made
by the Lender on its behalf.

7.5 Headings Descriptive. The headings of the several Sections of this Agreement
are inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.

7.6 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

7.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE GOVERNMENTAL REQUIREMENT OF THE STATE OF TEXAS WITHOUT
REGARD TO ITS CONFLICT OF LAWS PRINCIPLES.

7.8 Enforcement Expenses, etc. The Grantors hereby jointly and severally agree
to pay, to the extent required by, but not paid pursuant to, Section 10.13 of
the Loan Agreement, all out-of-pocket costs and expenses of Lender in connection
with the enforcement of this Agreement, the preservation of the Collateral, the
perfection of the Security Interest, and any amendment, waiver or consent
relating hereto (including, without limitation, the reasonable fees and
disbursements of counsel employed by Lender) .

7.9 Releases of Collateral. If any Collateral shall be sold, transferred or
otherwise disposed of by any Grantor in a transaction not prohibited by this
Agreement or the Loan Agreement, then Lender, at the request and expense of the
requesting Grantor, will execute and deliver to the relevant Grantor a proper
instrument or instruments acknowledging the full and final release of the Liens
created hereby or by any other Collateral Document on such Collateral, and will
duly assign, transfer and deliver to the relevant Grantor (without recourse and
without any representation or warranty) such of the applicable Collateral as was
delivered to Lender and as has not theretofore been sold or otherwise applied or
released pursuant to this Agreement.

 

18

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7.10 Termination. This Agreement shall terminate upon the date upon which
(a) the Revolving Credit Commitment, the Loan Agreement and all other Loan
Documents have been terminated, (b) no Note or Letter of Credit (other than any
Letter of Credit that has been cash collateralized in accordance with
Section 3.07 of the Loan Agreement) is outstanding, and (c) all Loans and other
Obligations (other than contingent indemnification obligations and Obligations
in respect of any Letter of Credit that has been cash collateralized in
accordance with Section 3.07 of the Loan Agreement), owing to the Lender have
been indefeasibly paid or satisfied in full. Upon such termination, Lender, at
the request and expense of the requesting Grantor, will execute and deliver to
the relevant Grantor a proper instrument or instruments (including UCC
termination statements on form UCC-3) acknowledging the satisfaction and
termination of this Agreement and the full and final release of the Liens
created hereby or by any other Collateral Document on any and all Collateral,
and will duly assign, transfer and deliver to the relevant Grantor (without
recourse and without any representation or warranty) such of the Collateral as
was delivered to Lender and as has not theretofore been sold or otherwise
applied or released pursuant to this Agreement.

7.11 Other Creditors, etc. Not Third Party Beneficiaries. No creditor of any
Grantor or any of its Affiliates, or other Person claiming by, through or under
any Grantor or any of its Affiliates, other than Lender, and its successors and
assigns, shall be a beneficiary or third party beneficiary of this Agreement or
otherwise shall derive any right or benefit here from.

7.12 Counterparts. This Agreement may be executed in any number of counterparts
and by different parties hereto on separate counterparts, including via
facsimile transmission or other electronic transmission capable of
authentication, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same agreement.
A set of counterparts executed by all the parties hereto shall be lodged with
the Borrower and Lender.

7.13 Additional Grantors. Additional Grantors may become a party to this
Agreement by execution of a Grantor Joinder Agreement.

7.14 Effectiveness. This Agreement shall be effective as to any Grantor upon its
execution and delivery to Lender of a counterpart of this Agreement manually
executed on behalf of such Grantor, regardless of the date of this Agreement or
the date this Agreement is executed and delivered by any other party hereto.

7.15 Amendments and Waivers. Neither this Agreement nor any provision hereof may
be changed, waived, modified or varied in any manner whatsoever unless in
writing duly signed by (a) Lender and (b) the Grantor or Grantors with respect
to which such change, waiver, modification or variance is to apply, subject to
any consent required in accordance with Section 10.01 of the Loan Agreement.

 

19

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7.16 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS
AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, OR THE
TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH GRANTOR
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 7.16
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURES ON THE FOLLOWING PAGE(S)]

 

20

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.

 

BORROWER: GEOSPACE TECHNOLOGIES CORPORATION, a Delaware corporation By:      
Thomas T. McEntire, Vice President, Chief Financial Officer and Secretary
GRANTORS: GTC, INC. EXILE TECHNOLOGIES CORPORATION

GEOSPACE ENGINEERING RESOURCES INTERNATIONAL, INC.

GEOSPACE FINANCE CORP. GEOSPACE J.V., INC.

GEOSPACE TECHNOLOGIES, SUCURSAL SUDAMERICANA LLC

By:       Thomas T. McEntire, Vice President, Chief Financial Officer and
Secretary of each of the Grantors named above

LENDER:

FROST BANK, a Texas state bank

By:

   

Name:

   

Title:

   

Signature Page

to Pledge and Security Agreement

--------------------------------------------------------------------------------

EXHIBITS AND SCHEDULES

Exhibits

Exhibit A – Grantor Joinder Agreement

Schedules

Schedule 1 – Subsidiaries

Schedule 3.3 – Places of Business, Jurisdiction Where Organized, Locations of
Collateral, etc.

Exhibits and Schedules

--------------------------------------------------------------------------------

EXHIBIT A

TO

PLEDGE AND SECURITY AGREEMENT

Form of Grantor Joinder Agreement

GRANTOR JOINDER AGREEMENT

THIS GRANTOR JOINDER AGREEMENT dated as of                     , 20    , is by
and among                                         , a
                                         (“New Guarantor”), GEOSPACE
TECHNOLOGIES CORPORATION, a Delaware corporation (“Borrower”), EACH OF THE
PERSONS IDENTIFIED ON SCHEDULE 1 HERETO (collectively, “Grantors”) and FROST
BANK, a Texas state bank (“Lender”).

A. Grantors executed a Pledge and Security Agreement, dated as of
                     (as amended, modified or supplemented, the “Security
Agreement”).

B. The parties hereto desire to join New Grantor as a Grantor (as such term is
defined in the Security Agreement) under the Security Agreement.

NOW THEREFORE, the parties hereto hereby agree as follows:

1. Definitions. Capitalized terms used in this Grantor Joinder Agreement, unless
otherwise defined herein, shall have the meaning ascribed to such terms in that
certain Loan Agreement, dated as of                     , among Borrower,
Guarantors (as defined therein) and Lender (as amended, modified or
supplemented, the “Loan Agreement”).

2. Joinder. Subject to the terms and conditions of this Grantor Joinder
Agreement, New Grantor is hereby joined in the Security Agreement as a Grantor,
and New Grantor hereby agrees to be bound by the terms and conditions (including
without limitation all of the representations and warranties and covenants) of
each Loan Document to which a Grantor is a party, including without limitation
the Security Agreement, as Grantor, in each case as if New Grantor were a direct
signatory thereto.

3. Effectiveness. This Grantor Joinder Agreement shall be effective upon the
execution and delivery hereof by the parties hereto.

4. Representations and Warranties. New Grantor represents and warrants to Lender
that both immediately before and immediately after giving effect to the
consummation of this Grantor Joinder Agreement each of the representations and
warranties set forth in the Loan Agreement to the extent applicable to New
Grantor mutatis mutandis are true, correct and complete in all material respects
(except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof).

 

A-1

--------------------------------------------------------------------------------

5. Scope. Except as expressly modified by this Grantor Joinder Agreement, the
Loan Agreement and all of the other Loan Documents shall remain in full force
and effect as executed.

6. Governing Law. This Grantor Joinder Agreement shall be construed in
accordance with and governed by the Governmental Requirements of the State of
Texas, without regard to the conflict of laws principles thereof

IN WITNESS WHEREOF, this Grantor Joinder Agreement has been duly executed as of
the date first above written.

 

NEW GRANTOR:

 

By:

   

Name:

   

Title:

   

 

A-2

--------------------------------------------------------------------------------

SCHEDULE 1

TO

GRANTOR JOINDER AGREEMENT

Grantors

 

(1) GTC, Inc., a Texas corporation

 

(2) Exile Technologies Corporation, a Texas corporation

 

(3) Geospace Engineering Resources International, Inc., a Texas corporation

 

(4) Geospace Finance Corp., a Texas corporation

 

(5) Geospace J.V., Inc., a Texas corporation

 

(6) Geospace Technologies, Sucursal Sudamericana LLC, a Texas limited liability
company

 

A-3

--------------------------------------------------------------------------------

SCHEDULE 1

TO

PLEDGE AND SECURITY AGREEMENT

Domestic Subsidiary Grantors

 

(1) GTC, Inc., a Texas corporation

 

(2) Exile Technologies Corporation, a Texas corporation

 

(3) Geospace Engineering Resources International, Inc., a Texas corporation

 

(4) Geospace Finance Corp., a Texas corporation

 

(5) Geospace J.V., Inc., a Texas corporation

 

(6) Geospace Technologies, Sucursal Sudamericana LLC, a Texas limited liability
company

Schedule 1

to Pledge and Security Agreement

--------------------------------------------------------------------------------

SCHEDULE 3.3

TO

PLEDGE AND SECURITY AGREEMENT

Places of Business, Jurisdiction Where Organized, Locations of Collateral, etc.

 

Legal Name

  

Assumed Names /
Trade Names

   U.S. Federal Tax
ID No.    Organizational
No.
(if applicable)   

Jurisdiction of
Organization or
Formation

  

Principal Place of
Business / Chief
Executive Office

Geospace Technologies
Corporation   

Geospace

Technologies

Geospace

Geospace Offshore

   76-0447780    2438514    Delaware   

7007 Pinemont Drive

Houston, TX 77040

GTC, Inc.   

Geospace Offshore

Geospace Technologies

Geospace

Geo Space

Concord Technologies

   80-0815190    801594451    Texas   

7007 Pinemont Drive

Houston, TX 77040

Exile Technologies Corporation    None    46-1085397    801653427    Texas   

7007 Pinemont Drive

Houston, TX 77040

Geospace Engineering Resources International, Inc.    None    36-4733046   
801594426    Texas   

7007 Pinemont Drive

Houston, TX 77040

Geospace Finance Corp.    None    76-0447780    800893193    Texas   

7007 Pinemont Drive

Houston, TX 77040

Geospace J.V., Inc.    None    80-0815247    801594441    Texas   

7007 Pinemont Drive

Houston, TX 77040

Geospace Technologies, Sucursal Sudamericana LLC    None    36-4741167   
801645736    Texas   

7007 Pinemont Drive

Houston, TX 77040

Prior legal names (in last 5 years)

Geospace Technologies Corporation: OYO Geospace Corporation, a Delaware
corporation

GTC, Inc.: Geospace Technologies, LP, a Texas limited partnership; Geospace
Technologies Corporation, a Delaware corporation

Exile Technologies Corporation: OYO Instruments, LP, a Texas limited partnership

Geospace Engineering Resources International, Inc.: Geospace Engineering
Resources International, LP, a Texas limited partnership

Geospace Finance Corp.: None

Geospace J.V., Inc.: OYO Geospace J.V., LP

Geospace Technologies, Sucursal Sudamericana LLC: Geospace Technologies,
Sucursal Sur America LLC

Location of Inventory or Equipment (with an aggregate value in excess of
$4,000,000)

7007 Pinemont Drive, Houston, TX 77040

6410 Langfield Rd., Bldg. E, Houston, TX 77092

6855 Wynwood, Houston, TX 77008

Schedule 3.3

to Pledge and Security Agreement

--------------------------------------------------------------------------------

In addition, the Company routinely sends inventory for testing or assembly on a
short-term basis to the following locations:

Suntronic Inc., 10501 Kipp Way Drive, Suite 350, Houston, Texas 77099

Southwest Research Institute, 6220 Culebra Road, P.O. Drawer 28510, San Antonio,
Texas 8228-0510

Schedule 3.3

to Pledge and Security Agreement

--------------------------------------------------------------------------------

EXHIBIT E

Form of Compliance Certificate

COMPLIANCE CERTIFICATE

This COMPLIANCE CERTIFICATE (this “Certificate”) is delivered pursuant to the
Loan Agreement dated as of September 27, 2013 (together with all amendments and
modifications, if any, from time to time made thereto, the “Loan Agreement”),
among Geospace Technologies Corporation, a Delaware corporation (“Borrower”),
certain Guarantors named therein, and Frost Bank, a Texas state bank. Unless
otherwise defined, terms used herein (including the exhibits hereto) have the
meanings provided in the Loan Agreement.

The undersigned, being the duly elected, qualified and acting
                     of Borrower, on behalf of Borrower and solely in his or her
capacity as an officer of Borrower, hereby certifies and warrants that:

As of                     , 20        :

 

  (1) No Default. No Default or Event of Default exists under the Loan Agreement
or any other Loan Document as of the date hereof.

 

  (2) Cash Flow Coverage Ratio. The Cash Flow Coverage Ratio of Borrower and its
Subsidiaries on a consolidated basis was                      to 1.00 as
computed in accordance with Section 8.01 of the Loan Agreement as further
detailed on the Cash Flow Coverage Ratio Exhibit attached hereto.

 

  (3) Funded Debt to EBITDA Ratio. The Funded Debt to EBITDA Ratio of Borrower
and its Subsidiaries on a consolidated basis was                      to 1.00 as
computed in accordance with Section 8.02 of the Loan Agreement as further
detailed on the Funded Debt to EBITDA Ratio Exhibit attached hereto.

 

  (4) Current Ratio. The Current Ratio of Borrower and its Subsidiaries on a
consolidated basis was                      to 1.00 as computed in accordance
with Section 8.03 of the Loan Agreement as further detailed on the Current Ratio
Exhibit attached hereto.

[Balance of Page Intentionally Left Blank]

[Signature(s) on Following Page(s)]

 

E-1

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate,
this                      day of                     , 20        .

 

By:

   

Title:

   

On behalf of Geospace Technologies Corporation

 

E-2

--------------------------------------------------------------------------------

CASH FLOW COVERAGE RATIO EXHIBIT

Period ending                     , 20        

Consolidated Cash Flow Coverage Ratio

 

1.      Cash Flow:

  

 Net Income

       $                      

+       depreciation

       $                      

+       amortization

       $                      

+       Interest Expense

       $                      

-        capital expenditures

       ($                     ) 

-        Distributions

       ($                     ) 

(A) = Total Cash Flow

       $                      

2.      Current principal payments of long-term debt (including the outstanding
balance of the Loan) + Interest Expense

       $                      

(A) = Total Debt Service

       $                      

Cash Flow Coverage Ratio = 1(A) ÷ 2(A)

                            to 1.00 

Required Cash Flow Coverage Ratio is:

                     1.50 to 1.00 

--------------------------------------------------------------------------------

FUNDED DEBT TO EBITDA RATIO EXHIBIT

Period ending                     , 20    

Consolidated Funded Debt to EBITDA Ratio

 

1.      Funded Debt:

  

(A) = Funded Debt

     $                        

2.      EBITDA:

  

 Net Income

     $                        

+       depreciation

     $                        

+       amortization

     $                        

+       Interest Expense

     $                        

+       Income Tax Expense

     $                        

+       non-cash charges for such period

     $                        

(A) = EBITDA

     $                         Funded Debt to EBITDA Ratio = [1(A) ÷ 2(A)] to
1.00                           to 1.00   

Required Funded Debt to EBITDA Ratio is:

     2.00 to 1.00   

--------------------------------------------------------------------------------

CURRENT RATIO EXHIBIT

Period ending             , 20    

Current Ratio

 

1.      Current Assets:

  

(A)   Current assets:

     $                        

2.      Current Liabilities:

  

(A)   Current liabilities (including the outstanding balance of the Loan):

     $                        

Current Ratio = [1(A) ÷ 2(A)] to 1.00

                          to 1.00    Required Current Ratio is:      1.50 to
1.00   

--------------------------------------------------------------------------------

SCHEDULE 5.09(a)

Subsidiaries

 

(1) GTC, Inc., a Texas corporation

 

(2) Exile Technologies Corporation, a Texas corporation

 

(3) Geospace Engineering Resources International, Inc., a Texas corporation

 

(4) Geospace Finance Corp., a Texas corporation

 

(5) Geospace J.V., Inc., a Texas corporation

 

(6) Geospace Technologies, Sucursal Sudamericana LLC, a Texas limited liability
company

 

(7) Geospace Technologies Canada, Inc., a corporation organized under the laws
of Canada

 

(8) Exile Technologies Limited, a company organized under the laws of the United
Kingdom

 

(9) Geospace Technologies Eurasia LLC, a limited liability company organized
under the laws of Russia

 

(10) GTC, Inc. Beijing, a representative office of GTC, Inc.

 

(11) Geospace Technologies Corporation Azerbaijan Branch, a corporation
organized under the laws of Azerbaijan

 

(12) Geospace Technologies, Sucursal Sudamericana, a branch office of Geospace
Technologies, Sucursal Sudamericana LLC, a Texas limited liability company,
organized under the laws of Colombia

Schedule 5.09(a)

to Loan Agreement

--------------------------------------------------------------------------------

SCHEDULE 5.09(b)

Equity Investments

 

(1) Money Market Account with Compass Bank

 

(2) Money Market Account with Bank of America

 

(3) Money Market Account with Frost Bank

 

(4) Money Market Account with Regions Bank, N.A.

 

(5) Money Market Account with Trustmark National Bank

 

(6) Money Market Account with Amegy Bank

 

(7) Money Market Account with Bank of Texas, N.A.

 

(8) Money Market Account with Patriot Bank

 

(9) Account with Charles Schwab & Co., advised through Reliant Investment
Management, LLC

Schedule 5.09(b)

to Loan Agreement

--------------------------------------------------------------------------------

SCHEDULE 5.09(c)

Assumed Names or Trade Names

 

(1) Geospace Technologies

 

(2) Geospace

 

(3) Geospace Offshore

Schedule 5.09(c)

to Loan Agreement

--------------------------------------------------------------------------------

SCHEDULE 5.11

Environmental Compliance

 

1. In 2003, Borrower purchased the real property at 7007 Pinemont Drive, Houston
Texas 77040 (the “Property”) from Cooper Power Tools, Inc. (“Cooper”) at which
time the property did have Hazardous Materials and historical contamination and
other environmental issues. Cooper Industries, Inc., an affiliate of Cooper, has
agreed to indemnify Borrower for claims relating to such environmental matters
at the Property and has undertaken remedial actions with respect thereto.
Currently Cooper is petitioning the State of Texas to have a “no further action
letter” issued with respect to the Property, which would be evidence that the
Property has been remediated to the satisfaction of the State of Texas.

 

2. Cooper Industries, Inc. has notified Borrower that Hazardous Materials from
an adjoining property to the south of the Property are leaching onto the
Property. It is Borrower’s understanding that the Texas Commission on
Environmental Quality is aware of such Hazardous Materials and historical
contamination and other environmental issues on such adjoining property.

Schedule 5.11

to Loan Agreement

--------------------------------------------------------------------------------

SCHEDULE 7.04(d)

Liens

 

Debtor

   Jurisdiction      Financing Statement and Lien Data  

None

     N/A         N/A   

Schedule 7.04(d)

to Loan Agreement

--------------------------------------------------------------------------------

SCHEDULE 7.05(b)

Indebtedness

None

Schedule 7.05(b)

to Loan Agreement

--------------------------------------------------------------------------------

SCHEDULE 7.06(e)

Investments

Schedule 5.09(b) is hereby incorporated by reference in this schedule.

Schedule 7.06(e)

to Loan Agreement