WESTERN NATIONAL BANK
508 WEST WALL STREET, SUITE 1100
MIDLAND, TEXAS
79701
Dawson
Geophysical Company
508 West Wall Street, Suite 800
Midland, Texas 79701
|
|
|
|
|
RE: Revolving Line of Credit Loan in the
amount of $20,000,000.00 from Western National Bank to Dawson
Geophysical Company
|
Pursuant to the
terms of a letter loan agreement, dated as of June 2, 2008
(the “ Existing Loan Agreement ”), Western
National Bank, a national banking association (alternatively,
“ Western ” or the “ Bank ”),
has previously committed to provide to Dawson Geophysical Company,
a Texas corporation (alternatively, “ Dawson
Geophysical ” or the “ Borrower ”), a
revolving line of credit loan in the original principal amount of
Forty Million and No/Dollars ($40,000,000.00) (the Existing
Loan ”). The Existing Loan is evidenced by a Revolving
Line of Credit Note, also dated as of June 2, 2008, executed
by the Borrower on behalf of Western, in the original principal
amount of Forty Million and No/100 Dollars ($40,000,000.00) (the
“ Existing Note ”). The Existing Note is secured
by that certain Security Agreement, also dated as of June 2,
2008, covering those accounts receivable described therein (the
“ Existing Security Agreement ”). From time to
time, the Existing Security Agreement, and any financing statements
filed to perfect the security interest created thereunder, may be
collectively referred to herein as the “ Existing Security
Instruments ”.
Borrower has
now requested that Western renew and extend the Existing Loan into
a new revolving line of credit loan in the original principal
amount of Twenty Million and No/100 Dollars ($20,000,000.00) (the
“ Loan ”). The Loan will be evidenced by a
Revolving Line of Credit Note, of even date herewith, executed by
the Borrower in favor of Western, in the original principal amount
of Twenty Million and No/100 Dollars ($20,000,000.00), which as
stated, will renew and extend the Existing Note (the “
Note ”). The Borrower’s performance under the
Note will be secured by its execution of a new Security Agreement,
of even date herewith, the security interest of which will be
perfected by the filing of amendments to the existing financing
statement, covering all accounts receivable and equipment described
therein (collectively, the “ Security Instruments
”). This Agreement, as defined below, the Note, the Security
Instruments, and any
1
other documents
executed simultaneously herewith are collectively referred to as
the “ Loan Documents ”.
Western has
agreed to renew the Existing Loan into the Loan. In consideration
of Western’s agreement to renew the Existing Loan into the
Loan, Borrower has agreed to execute this Loan Agreement, the Note,
and the Security Instruments required by the Bank, subject to the
fulfillment of the following terms and conditions of this letter
loan agreement (the “ Agreement ”):
This Agreement,
dated as of June 2, 2009 , and any extensions,
renewals, or modifications hereof.
Dawson
Geophysical Company
The lesser of
the following amounts: (a) the face amount of the Note; or
(b) the Borrowing Base then in effect.
From
June 1, 2009 through June 30, 2009, interest under the
Note shall accrue at an annual rate equal to the Prime Rate, minus
three-quarters of one percent (.75%) (the “ Prime Rate
Index ”). Beginning as of July 1, 2009, interest
under the Note shall accrue at an annual rate equal to either:
(a) the 30-day London Interbank Offered Rate (“
LIBOR ”), plus two and one-quarter percent (2.25%), or
(b) the Prime Rate Index, as the Borrower shall choose monthly
by notifying the Bank in writing, via facsimile or e-mail, by the
last day of each month, with each change to be effective as of the
first day of the following month, provided that such interest rate
shall not exceed the Highest Lawful Rate, as defined in the Note,
or be less than four percent (4.0%). Should Borrower fail to notify
Bank of its election of interest rate for any given month, the
interest rate shall remain at the interest rate index chosen by
Borrower for the immediately preceding month.
For purposes of
this Agreement, LIBOR shall mean, with respect to each Interest
Period, as defined below, the rate as established as the 30-day
LIBOR in the money rate table of The Wall Street Journal, a
Dow Jones publication, as of each Business Day, as defined below
(and for holidays or weekends, LIBOR shall be the 30-day LIBOR
published in that money rate table of
2
The Wall
Street Journal, as of the
close of business on the most recent Business Day immediately
preceding such weekend or holiday). Without notice to the Borrowers
or any other person, LIBOR may change from time to time pursuant to
the preceding sentence, with the effective date of each change to
be the effective date reflected in the money rate table of The
Wall Street Journal. Without notice to the Borrowers or any
other person, LIBOR may change from time to time pursuant to the
preceding sentence, with the effective date of each change to be
the effective date reflected in the money rate table of The Wall
Street Journal. Each change in LIBOR to be charged on the
Revolver Note will become effective without notice on the
commencement of each Interest Period based upon the Index then in
effect. “ Interest Period ” means each
consecutive one month period (the first of which shall commence on
June 1, 2009), effective as of the first day of each Interest
Period and ending on the last day of each Interest Period, provided
that if any Interest Period is scheduled to end on a date for which
there is no numerical equivalent to the date on which the Interest
Period commenced, then it shall end instead on the last day of such
calender month. For purposes of this Agreement, the “
Prime Rate ” shall be defined as that rate established
as the prime rate in the money rate table of The Wall Street
Journal, a Dow Jones publication, as of each Business Day, as
hereinafter defined, (and for holidays or weekends, the Prime Rate
shall be the prime rate published in that money rate table of
The Wall Street Journal, as of the close of business on the
most recent Business Day immediately preceding such weekend or
holiday). Without notice to the Borrower or any other person, the
Prime Rate may change from time to time pursuant to the preceding
sentence, with the effective date of each change to be the
effective date reflected in the money rate table of The Wall
Street Journal. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to
any customer. The Bank may make commercial loans or other loans at
rates of interest at, above, or below the Prime Rate. “
Business Day ” shall mean any day other than a
Saturday, Sunday or legal holiday for commercial banks under the
laws of the State of Texas.
The Loan shall
be secured by the Security Instruments.
Under the Note,
funds will be available on a revolving basis through
June 2, 2011 , the maturity date of the Loan (the
“ Revolving Period ”). During the Revolving
Period, the Borrower may borrow, repay, and re-borrow funds as long
as the aggregate amount (including outstanding letters of credit)
does not exceed the Commitment.
At any time,
and from time to time, the amounts outstanding under the Revolver
Note shall not exceed the lesser of: (a) the face amount of
the Revolver Note; or (b) the Borrowing Base, as determined
from time to time by the Bank, acting in its sole and unlimited
discretion (said lesser amount being referred to herein as the
“ Revolver Commitment ”). As used in this
Agreement, the term “ Borrowing Base ” shall
mean an amount equal to eighty percent (80%) of Borrower’s
Eligible Accounts.
3
For the
purposes of this Agreement, the term “ Eligible
Account ” shall mean an account receivable of the
Borrower (net of any credit balance, trade discount, or unbilled
amount or retention) that is contractually due, for which each of
the following statements is accurate and complete (and the
Borrower, by including such account receivable in any computation
of the Borrowing Base, shall be deemed to represent and warrant to
the Bank the accuracy and completeness of such
statements):
|
|
a.
|
|
Said account receivable is a binding
and valid obligation of the obligor thereon, in full force and
effect, and enforceable in accordance with its terms;
|
|
|
|
|
|
|
|
b.
|
|
Said account receivable is genuine,
in all respects, as appearing on its face as represented in the
books and records of Borrower, and all information set forth
therein is true and correct;
|
|
|
|
|
|
|
|
c.
|
|
Said account receivable is free of
all default of any party thereto, counterclaims, offsets, and
defenses, and from any rescission, cancellation, or avoidance, and
all right thereof, whether by operation of law or
otherwise;
|
|
|
|
|
|
|
|
d.
|
|
The
payment of said account receivable is not more than ninety
(90) days past due the invoice date thereof;
|
|
|
|
|
|
|
|
e.
|
|
Said account receivable is free of
concessions or understandings with the obligor thereon of any kind
not disclosed to and approved by the Bank in writing;
|
|
|
|
|
|
|
|
f.
|
|
Said account receivable is, and at
all times will be, free and clear of all liens except those in
favor of the Bank;
|
|
|
|
|
|
|
|
g.
|
|
Said account receivable is not a
receivable arising from intercompany indebtedness existing between
or among any of the Borrower;
|
|
|
|
|
|
|
|
h.
|
|
Said account receivable is derived
from sales made or services rendered to the obligor in the ordinary
course of the business of the Borrower;
|
|
|
|
|
|
|
|
i.
|
|
The
obligor on said account receivable (i) is located within the
United States or the District of Columbia; (ii) is not the
subject of any bankruptcy or insolvency proceeding, nor has a
trustee or receiver been appointed for all or a substantial part of
its property, nor has said obligor made an assignment for the
benefit of creditors, admitted its inability to pay its debts as
they mature or suspended its business, (iii) is not
affiliated, directly or indirectly, with Borrower, as a subsidiary
or affiliate, employee or otherwise; and (iv) is not a state
or federal government department, commission, board, bureau, or
agency;
|
|
|
|
|
|
|
|
j.
|
|
Said account receivable is not owed
by a customer whose principal place of business is located in a
foreign country; and
|
4
|
|
k.
|
|
Said account receivable did not
arise from sales to an obligor as to whom fifteen percent (15%) or
more of the total accounts receivable owing by such obligor to the
Borrower are delinquent accounts receivable (that is, an account
that is more than ninety (90) days delinquent).
|
In addition to
the criteria stated above for determining whether an account
receivable is an “ Eligible Account ”, the Bank
and the Borrower agree that no such account receivable shall
constitute an Eligible Account if that account receivable arises
from any single customer, other than Client A and its affiliates
and subsidiaries (collectively, “ Client A ”),
whose accounts receivable constitute more than twenty-five percent
(25%) of Borrower’s total accounts receivable. The Bank
agrees that an account receivable owed by Client A to the Borrower
(collectively, the “ Client A Accounts ”) may
still qualify as an Eligible Account even if the Client A Accounts
constitute more than twenty-five percent (25%) of Borrower’s
total accounts receivable.
Based upon the
terms of this Agreement, and the information provided and the
representations made by the Borrower to the Bank, the Bank hereby
redetermines the Borrowing Base, and establishes it in the amount
of Twenty Million and No/100 Dollars ($20,000,000.00). The Borrower
may request in writing an additional increase in the Borrowing
Base, such request to be accompanied by a description and
evaluation of any additional collateral to be provided by the Bank.
The Bank may evaluate such for an increase in its sole and absolute
discretion, and in conjunction with such evaluation, may conduct a
full credit analysis of the Borrower and the existing or additional
collateral.
If the
aggregate amounts outstanding under the Note exceeds the Revolver
Commitment at any time, the Bank will provide written notice of
that event to Borrower. On or before the tenth (10
th ) day following receipt of such notification by
Borrower, Borrower will either, at the direction of the Bank,
acting in its sole and absolute discretion: (a) make a
mandatory payment to the Bank of the principal of the Note in an
amount at least equal to the amount necessary to cause the
outstanding principal balance of the Note to be less than or equal
to the Revolver Commitment; or (b) create liens on other
assets of Borrower, satisfactory in nature, quantity, and value to
the Bank, acting in its sole discretion, said assets to have a fair
market value sufficient to at least equal to the amount necessary
to cause the outstanding principal balance of the Note to be less
than or equal to the Revolver Commitment.
Although the
Borrower is responsible on a corporate basis for the full repayment
of principal and interest due on the Obligations and for any other
Event of Default for which the Borrower is responsible, the Bank
specifically acknowledges and agrees that neither any of the
directors, officers, or e
|
