EXHIBIT 10.16
**LOAN AGREEMENT**
     THIS AGREEMENT made and entered into on this 30 day of March, 2004, by andbetween MITCHAM INDUSTRIES, INC. a Texas corporation, with principal offices atHuntsville, in Walker County, Texas (herein referred to as “Borrower”), andFirst Victoria National Bank, a national banking corporation, with its officesand domicile in Victoria, Victoria County, Texas, (herein referred to as“Lender”) to induce Lender to extend credit to Borrower in the amountsevidenced by the promissory notes described in Paragraphs II of this agreement(herein referred to as the “Loan”) and evidencing the line of credit describedherein.
     In consideration of their mutual warranties, covenants and agreementscontained herein and Lender’s extension of credit to Borrower in the amountaforesaid, Borrower and Lender hereby warrant, covenant and agree as follows:
**I. WARRANTIES OF BORROWER**
     A. That Borrower is a Texas corporation currently authorized to dobusiness in the State of Texas, and that all franchise taxes, employment taxes,withholding taxes, income taxes, sales taxes, use taxes and all other taxeshave been paid current to the date of this agreement.
     B. That the execution by Borrower of this agreement and the otherdocuments described herein has been duly authorized by its corporate board andthat all of the agreements, indentures, or conveyances described herein to bemade or undertaken by Borrower are within its corporate powers and notprohibited by law or its governing documents.
     C. That this Loan Agreement and all promissory notes and securitydocuments referenced herein are legal, valid and binding obligations ofBorrower which are enforceable against Borrower in accordance with therespective terms thereof.
     D. That all audits and financial information submitted to Lender may berelied upon by Lender as fairly representing the financial condition of thecompanies or individuals to which the same relate, and that there has been noadverse change in the financial condition of Borrower subsequent to thepresentment of the financial information now held by Lender.
     E. That there is no litigation, arbitration or governmental or regulatoryproceedings pending or threatened against Borrower which, if adverselydetermined, could have a material adverse effect on Borrower’s financialcondition or affect the legality, validity or enforceability of this LoanAgreement or any promissory notes or security documents referenced herein andthat Borrower has no material contingent liabilities or material forwardcommitments which are not disclosed in the financial information now held byLender.
     F. That there are no other liens or encumbrances against the propertygiven as security for the payment of the hereinafter described loan, except asstated herein.
**II. INDEBTEDNESS**
     A. Lender shall advance to Borrower, according to the terms thereof andsubject to the limitations expressed therein and in this agreement, theprincipal sums of such promissory notes as are executed by Borrower anddelivered to Lender from time to time to evidence advances to Borrower for thepurposes and on the terms and subject to the limitations set forth in ParagraphV.A.2 of this Agreement, pursuant to a line of credit established therein forthe purchase of seismic survey equipment for the purposes of sale to others.Each such promissory note shall bear interest at the prime rate published inthe Wall Street Journal (Southwest Edition) as the base rate on corporate loansestablished by a selected number of the largest banks in the United States,plus one-half of one percent (0.50%) per annum, as such rate is determineddaily by Lender on the outstanding principal balance of such note, and shallprovide for monthly installments of interest, as it accrues, and for paymentsof principal as follows:
 

 

1. Two equal principal payments in the amount of twenty-fivepercent (25.00%) of the entire principal balance of the note on thedate of the first of such principal payments. The first of suchpayments shall be due on the date six months after the date of thenote and the second of such payments shall be due on the date ninemonths after the date of the note. 2. One final principal payment in the amount of the entireremaining principal balance of the note (together with any accruedand unpaid interest). The final principal payment shall be due,together with any unpaid interest, on the date one year after thedate of the note.
     B. Borrower agrees to execute and deliver to Lender such promissory notesin the form prescribed by Lender and on terms described herein, evidencing theindebtedness created by such advances.
     C. Borrower hereby acknowledges and agrees that Lender has and shall havethe right, at any time, without the consent of or notice to Borrower, to grantparticipations in all or part of the obligations of Borrower evidenced by thisnote, together with any liens or collateral securing the payment hereof. Inthe event Lender elects to participate any Overline Portion (as hereinafterdefined) of the obligations evidenced by this note and if Lender is unable toprocure a participant or a participant fails or refuses to advance to Borrowerany Overline Portion through no fault of Lender, it is agreed that Lender shallhave no liability to Borrower to fund such Overline Portion, nor shall Lenderhave any obligation to procure funds from other sources or fund any amountsthat would cause Lender to be in violation of any state or federal law withrespect to Borrower being liable to Lender in an amount in excess of thatpermitted by such applicable law. The term “Overline Portion” shall mean theamount of loan proceeds in excess of the amount that Lender is permitted byapplicable law or Lender’s loan policy limitations to loan to Borrower.
     D. Notwithstanding any other provision in this agreement or the provisionsof any promissory note or other loan document to the contrary, Lender shall notcharge or collect and Lender does not intend to contract for interest in excessof that permitted by law for loans of this kind and to prevent such occurrence,Lender will, at maturity, or an earlier final payment of any promissory notedescribed above, determine the total amount of interest that can be lawfullycharged or collected by applying the highest lawful rate of interest to thefull periodic balances of principal for the period each is outstanding andunpaid and compare such amount with the total interest that has accrued underthe terms of such note, and, if necessary to prevent usury, reduce the totalamount of interest payable by Borrower to the lesser amount. If the amount ofinterest that has been collected exceeds the lawful amount, Lender shall eithermake direct refund of such excess to Borrower or credit it against other sumsowed by Borrower to Lender, whichever Lender deems appropriate. If at any timethe rate of interest provided for in any note shall exceed the highest lawfulrate, the annual rate which interest shall accrue on such note shall be limitedto such highest lawful rate. The highest lawful rate shall thereafter be therate at which interest is accrued on such note until the total amount ofinterest accrued equals the amount of interest that would have accrued if theinterest rate provided in such note had at all times been in effect, afterwhich the interest rate provided in such note, if it does not exceed thehighest lawful rate, shall apply. As used herein, the term “highest lawfulrate” means the highest rate of interest permitted to be charged or collectedunder the applicable state or federal law for this type of loan applied to thefull periodic balances of principal advances for the period each is outstandingand unpaid.
**III. SECURITY**
     A. As security for the loan, Borrower shall execute and deliver to,procure for, deposit with, and pay to Lender the following:
1. Security agreements, financing statements, and titledocuments in form and content acceptable to Lender, executed byBorrower and covering all equipment purchased by Borrower with theproceeds of each promissory note delivered by Borrower from time totime pursuant to Paragraph II.A hereof, together with allaccessions, repairs, replacements and substitutions thereto andtherefor and all instruments, chattel paper, general intangibles,proceeds and cash proceeds arising therefrom, securing payment ofthe note and all other and future indebtedness of Borrower to Lenderand evidencing a first lien and prior security interest in suchcollateral, whether now owned or hereinafter acquired by Borrower.
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2. Collateral Assignment to Lender, in form and contentacceptable to Lender, of Borrower’s rights under any leases ofequipment purchased with proceeds of any note delivered by Borrowerhereunder which has not been paid in full. 3. Such other documents and instruments as Lender may requirefor the perfection of liens and their registration under the laws ofthe State of Texas or of the United States. 4. Hazard insurance policy or policies in form and content andissued by a company or companies with loss payable endorsementsacceptable to Lender, insuring all collateral given as securityagainst loss or damage and against vandalism and malicious mischiefand insuring said collateral against the usual and customary risksand hazards as Lender may request, all of such policy or policies tobe for a total amount acceptable to Lender. 5. Such security agreements and pledges as are required byLender to provide that all collateral for Borrower’s other andfuture indebtedness to Lender secures the indebtedness of Borrowerarising from the Loan governed by this Agreement.
     B. Borrower shall execute and deliver to Lender such other documents andinstruments as Lender may require to evidence the status or authority ofBorrower and to evidence, govern or secure the payment of the Loan or anyportion thereof.
**IV. COVENANTS OF BORROWER**
     A. For so long any portion of the Loan remains unpaid, Borrower covenantsand agrees as follows:
**POSITIVE COVENANTS**
1. That Borrower agrees to pay Lender, upon demand, all expensesof every nature incurred by Lender in connection with theconsummation of the transaction contemplated by this agreement, orthe enforcement or preservation of Lender’s rights hereunder,including attorney’s fees and expenses of Lender’s counsel, hazardinsurance premiums, filing and recording fees, court costs, andother fees and reasonable expenses incurred by Lender. 2. That Borrower shall furnish or cause to be furnished at itsexpense to Lender statements or reports in form and contentacceptable to Lender on the forty-fifth (45th) day after the end ofeach quarter of Borrower’s fiscal year which shall set forth anoperating statement and balance sheet for Borrower herein named asBorrower an ageing of notes, contract rights, accounts receivableand accounts payable of Borrower for the preceding calendar quarter.Lender shall be allowed to make reasonable inspections of allassets securing said loan and shall further have the right toinspect the books of Borrower or other records relating to theaffairs of Borrower. The reasonable costs of any such inspectionare to be borne by Borrower. 3. That Borrower shall furnish at its expense to Lenderannually, within ninety (90) days after the end of Borrower’s incometax reporting year, a report prepared and audited by a CertifiedPublic Accountant for Borrower, including a balance sheet, incomestatement, sources and uses of funds statement, and a reconciliationof net worth. 4. That while Borrower is indebted to Lender hereunder Borrowerwill:
a. Perform all of its obligations to appropriateregulatory agencies; b. Punctually pay all indebtedness from time to timeowing hereunder when due; c. Perform all of its obligations under the SecurityInstruments described herein;
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d. Promptly pay and discharge any and allindebtedness or obligations when due and owing, including alltaxes of every kind and character, all assessments, and otherclaims which might give rise to a lien on the property givenas security for this loan or impair Borrower’s obligation toconduct its business, except as it may in good faith contestor as to which a bona fide dispute may arise, providedprovision is made to the satisfaction of Lender for eventualpayment thereof in the event that it is found that suchindebtedness or obligation or tax or claim is an obligation ofBorrower, and when such dispute or contest is settled ordetermined, it will promptly pay the amount then due. e. Maintain and keep in force insurance of the typesand in the amounts customarily carried by companies in similarlines of business, including adequate amounts of fire,windstorm, explosion, public liability, property damage, andworkman’s compensation insurance; all insurance is to becarried in company or companies satisfactory to Lender, andBorrower will deliver to Lender from time to time, at therequest of Lender, a schedule setting forth all insurance ineffect; f. Maintain a standard and modern accounting systemin accordance with generally accepted principles of accountingpermit Lender to inspect its books of account and records atall reasonable times, furnish to Lender such informationrespecting the business affairs and financial condition ofBorrower as Lender may reasonably request. g. Preserve all rights, privileges, franchises,licenses, and permits connected with its business and to theextent of its ability will conduct its business in an orderly,efficient manner without voluntary interruptions, and complywith all applicable laws and regulations of governmentagencies; h. Maintain preserve and keep all properties andequipment in good repair, working order and condition, andfrom time to time make all necessary and proper repairs,renewals, replacements, and improvements thereto so that atall times the efficiency and value thereof shall be fullypreserved and maintained, and maintain leases, licenses andpermits, but nothing herein contained shall prevent Borrowerfrom in good faith contesting or seeking legal construction ofany dispute, terms or conditions of a contract, lease or otherobligation, Lender may, at reasonable times, visit and inspectany of the properties of Borrower; i. Maintain Borrower’s financial condition incompliance with the following ratio, as determined by Lenderbased on generally accepted accounting principals andcomputation methods adopted by Lender in Lender’s sole andexclusive discretion:
a. A ratio of total debt to shareholders’ equity of not morethan 0.6:1.0.
j. To give notice in writing to Lender within 30days of any proceedings by any public or private body, agency,or authority, pending or threatened, which may have asubstantial adverse effect on Borrower, and of any litigationinvolving the possibility of judgments or liabilities inexcess of an aggregate of $1,000,000.00 not covered byinsurance.
5. That Borrower will pay to Lender, at the time of each advanceby Lender of the amount of one of the promissory notes described inParagraph II.A hereof, a fee in the amount of one-quarter of onepercent (0.25%) of the amount of such advance, such fee being inaddition to all other charges and interest due to Lender under theterms of this Agreement and such note.
**NEGATIVE COVENANTS**
6. Borrower will not, except with the prior written consent ofLender:
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a. Permit any lien (other than for taxes notdelinquent and for taxes and other items being contested ingood faith) to exist on property given as security for thisloan or on the income or profits thereof, excepting liensexisting as of the date hereof and as otherwise providedherein. b. Assign any leases or the proceeds thereof toanyone except Lender;
7. Borrower will take no action which would result in any changein the form of the corporate entity of Borrower or result in anyreorganization, merger or consolidation of Borrower with any otherentity during the term of this agreement without prior writtenconsent of Lender. 8. That Borrower may not assign or otherwise transfer thisAgreement or any rights hereunder, and that this Agreement shall bebinding upon Borrower an the representatives, heirs, executors,legal representatives and successors of Borrower. 9. That Borrower shall not (i) borrow from any source in anyamount; (ii) incur any obligations other than in the usual andnormal course of Borrower’s operation; or (iii) guarantee the debtor obligation of others without the prior written approval ofLender. 10. That, except after written notice to Beneficiary and wheresuch use and the activities relating thereto are in strictcompliance with all applicable laws and regulations, Borrower shallnot hereafter permit any property which is (a) given as security forthis Loan, (b) used by Borrower for any business or other activitiesfinanced by Lender, or (c) the source of repayment of this Loan, tobe used in any way for the generation, transportation, treatment,disbursal, storage, discharge or disposal of any pollutants,hazardous or toxic substances, or hazardous wastes as defined orregulated by any of the following federal statutes: (a) TheComprehensive Environmental Response, Compensation and Liability Act(“CERCLA”), as amended by the Superfund Amendments andRe-Authorization Act of 1986 (“SARA”), (b) the Resource Conservationand Recovery Act (“RCRA”), (c) the Toxic Substance Control Act(“TSCA”), (d) any amendments to or regulations promulgated by anyagency under any of the above statutes, and (e) any other state orfederal statute or regulation for the control of hazardous or toxicsubstances.
**V. COVENANTS OF LENDER**
     A. Subject to the terms of this agreement and of the notes and securityinstruments described herein, Lender covenants and agrees as follows:
1. Lender shall, from time to time, advance to Borrower sumsrequested by Borrower for the purchase of seismic survey equipmentby Borrower, with such advances to be evidenced by Borrower’spromissory notes executed pursuant to Paragraph II.A. of thisAgreement. Each such advance shall be evidenced by a separate notein the form prescribed by Lender and payable to the order of theBorrower in the amount of such advance, as provided in ParagraphII.A. Such sums shall not in any case exceed eighty percent(80.00%) of the actual net cost to Borrower of the purchasedequipment. In no event shall the total unpaid principal balance ofall advances to Borrower under this Paragraph V.A.2 and ParagraphII.A.2 at any one time exceed Four Million Dollars ($4,000,000.00)in the aggregate and Lender shall have no obligation to Advance anysums in any amount which would cause the total of such advances inthe aggregate to exceed such sum. Borrower’s right to request andLender’s obligation to make the advances provided in this paragraphshall expire on the 30 day of June, 2005. 2. Lender’s obligation to make any of the advances described inthis Agreement will be subject to performance and fulfillment of thefollowing conditions as well as those of the Security agreementsdescribed in Paragraph II.A.
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a. Presentation by Borrower of a request for advancein the amount of eighty-percent (80%) of the net cost toBorrower of the equipment to be purchased, together with anexecuted contract for the sale of the same equipment byBorrower to a bona fide third party. b. Compliance by Borrower with all terms andconditions of this Loan Agreement, with respect to said Loanand the absence of any default by Borrower hereunder. c. Payment of all fees and expenses contemplated bythis Agreement. d. Execution of all notes, security agreements andother documents required by Lender. e. Furnishing of financial statements evidencingsound and satisfactory financial condition of each Borrower.
**VI. DEFAULT AND REMEDIES**
     A. The occurrence of any one of the following events of default shall, atthe option of Lender and without notice or demand, except as describedhereunder, make all or such parts of the sums owing from Borrower to Lenderhereunder, as Lender in its discretion shall determine, immediately due andpayable:
1. Failure of Borrower to pay within 10 days after demand anysum past due hereunder; 2. Failure of Borrower to pay upon demand any debt hereunder,the maturity of which has been accelerated; 3. The breach of any warranties of Borrower herein contained inany material respect; 4. Insolvency; 5. The making by Borrower of an assignment for the benefit ofcreditors; 6. The levy of any attachment, execution, or other like processagainst any of Borrower’s property; 7. The voluntary suspension of business by Borrower; 8. The entry of any decree or order of a court havingjurisdiction in the premises appointing a receiver of all or anysubstantial part of Borrower’s property; 9. The breach by Borrower of any of the provisions of thisAgreement, or of any of the promissory notes or security instrumentsdescribed herein, if the same is not remedied within 10 days afterwritten notice from Lender. 10. Any default by Borrower in the payment or performance of anyother obligation of Borrower to Lender, including but not limited toany event of default under any other loan agreement between Borrowerand Lender or any failure of Borrower to timely pay any sum when dueon any indebtedness owing by Borrower to Lender, regardless of howarising, or any breach by Borrower of any covenant in any securityagreement relating to any indebtedness of Borrower to Lender.
     B. That no waiver of any default on the part of Borrower shall beconsidered waiver of any other or subsequent default and no forbearance, delay,or omission in exercising or enforcing the rights and powers of Lender shall beconstrued as a waiver of such rights and powers, and likewise no exercise orpartial exercise of any rights or powers hereunder by Lender shall be held topreclude further exercise of such rights and powers, and every such right andpower may be exercised from time to time.
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     C. The rights, powers and remedies given to Lender hereunder shall be inaddition to all rights, powers and remedies given to Lender by law againstBorrower and any other person.
     D. No action shall be commenced by Borrower for any claim against Lenderunder the terms of this Loan Agreement or arising from the subject loanrelationship unless a notice in writing specifically setting forth the claim ofBorrower shall have been given to Lender within six (6) months after theoccurrence of the event which Borrower alleges gave rise to such claim.Failure to give such notice shall constitute a waiver of any such claim.
**VII. GENERAL PROVISIONS**
     A. Any notice or demand required or permitted to be given hereunder byLender may be given in writing by depositing such notice in the United StatesMail, postage prepaid, addressed to Borrower at P. O. Box 1175, Huntsville,Texas 77342-1175, Attn: Blake Dupuis, or such other place as Borrower shallhave designated in writing. Notice shall be deemed to have been given 48 hoursafter being so deposited in the United States Mail.
     B. This agreement shall be construed under and in accordance with the lawsof the State of Texas, and all obligations of the parties created hereunder areperformable in Victoria County, Texas. Notwithstanding the provisions of thisparagraph, Chapter 346 of the Texas Finance Code shall not apply to the loangoverned by this agreement or any part thereof
     C. In any case, if any one or more of the provisions contained in thisAgreement shall for any reason be held to be invalid, illegal, or unenforceablein any respect, such invalidity, illegality, or unenforceability shall notaffect any other provision hereof and this Agreement shall be construed as ifsuch invalid, illegal, or unenforceable provision had never been containedherein.
     D. This Agreement constitutes the sole and only agreement of the partieshereto and supersedes any prior understandings or written or oral agreementsbetween the parties respecting the within subject matter.
     E. This agreement shall apply to and govern the herein describedextensions of credit and all renewals, extensions and rearrangements of suchindebtedness of Borrower to Lender.
     EXECUTED on the date first hereinabove mentioned in Victoria, VictoriaCounty, Texas.       MITCHAM INDUSTRIES, INC.      By: /s/ P. Blake Dupuis      P. Blake Dupuis   Its Vice President                                      BORROWER       FIRST VICTORIA NATIONAL BANK      By: /s/ John Howard      John Howard   Its Senior Vice President                                      LENDER   THE STATE OF TEXAS § §COUNTY OF WALKER §
     This instrument was acknowledged before me on March 20, 2004, by P. BlakeDupuis, as Vice President of MITCHAM INDUSTRIES, INC., on behalf of saidcorporation.
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    /s/ Susan Annette Lester   Notary Public, State of Texas    [SEAL AFFIXED]   THE STATE OF TEXAS § §COUNTY OF VICTORIA §
     This instrument was acknowledged before me on March 17, 2004, by JohnHoward, as Senior Vice President, as of FIRST VICTORIA NATIONAL BANK, on behalfof said corporation.    /s/ Christine M. Diaz   Notary Public, State of Texas    [SEAL AFFIXED]
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