Exhibit 10.2
COMMERCIAL SECURITY
AGREEMENT
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Principal
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Loan Date
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Maturity
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Loan No
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Call /
Coll
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Account
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Officer
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Initials
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$
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5,000,000.00
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09-16-2008
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09-16-2009
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17003864
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4A / 466
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SBV
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References in the boxes above are for
Lender’s use only and do not limit the applicability of this
document to any particular loan or item. Any item above
containing “***” has been omitted due to text length
limitations.
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Grantor:
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TGC Industries, Inc.
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Lender:
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Sovereign Bank
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101 E. Park Blvd. Ste955
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Preston Center
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Plano, TX 75074
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6060 Sherry Lane
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Dallas, TX 75225
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THIS COMMERCIAL SECURITY AGREEMENT dated
September 16, 2008, is made and executed between TGC
industries, Inc. (“Grantor”) and Sovereign Bank
(“Lender”).
GRANT OF SECURITY INTEREST. For valuable
consideration, Grantor grants to Lender a security interest in the
Collateral to secure the Indebtedness and agrees that Lender shall
have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have
by law.
COLLATERAL DESCRIPTION. The word “Collateral” as used in
this Agreement means the following described property, whether now
owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located, in which Grantor is giving to Lender
a security interest for the payment of the Indebtedness and
performance of all other obligations under the Note and this
Agreement:
All Accounts and General
Intangibles
In addition, the word “Collateral”
also includes all the following, whether now owned or hereafter
acquired, whether now existing or hereafter arising, and wherever
located:
(A) All accessions,
attachments, accessories, replacements of and additions to any of
the collateral described herein, whether added now or
later.
(B) All products and produce of
any of the property described in this Collateral
section.
(C) All accounts, general
intangibles, instruments, rents, monies, payments, and all other
rights, arising out of a sale, lease, consignment or other
disposition of any of the property described in this Collateral
section.
(D) All proceeds (including
insurance proceeds) from the sale, destruction, loss, or other
disposition of any of the property described in this Collateral
section, and sums due from a third party who has damaged or
destroyed the Collateral or from that party’s insurer,
whether due to judgment, settlement or other process.
(E) All records and data
relating to any of the property described in this Collateral
section, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of
Grantor’s right, title, and interest in and to all computer
software required to utilize, create, maintain, and process any
such records or data on electronic media.
RIGHT OF SETOFF. To the extent permitted by applicable law,
Lender reserves a right of setoff in all Grantor’s accounts
with Lender (whether checking, savings, or some other account).
This includes all accounts Grantor holds jointly with someone else
and all accounts Grantor may open in the future. However, this does
not include any IRA or Keogh accounts, or any trust accounts for
which setoff would be prohibited by law. Grantor authorizes Lender,
to the extent permitted by applicable law, to charge or setoff all
sums owing on the Indebtedness against any and all such
accounts.
GRANTOR’S REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO THE COLLATERAL. With respect to the Collateral, Grantor
represents and promises to Lender that:
Perfection of Security
Interest. Grantor agrees
to take whatever actions are requested by Lender to perfect and
continue Lender’s security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of
the documents evidencing or constituting the Collateral, and
Grantor will note Lender’s interest upon any and all chattel
paper
and instruments if not delivered to
Lender for possession by Lender. This is a continuing Security
Agreement and will continue in effect even though all or any part
of the Indebtedness is paid in full and even though for a period of
time Grantor may not be indebted to Lender.
Notices to Lender.
Grantor will promptly notify Lender
in writing at Lender’s address shown above (or such other
addresses as Lender may designate from time to time) prior to any
(1) change in Grantor’s name; (2) change in
Grantor’s assumed business name(s); (3) change in the
management of the Corporation Grantor; (4) change in the
authorized signer(s); (5) change in Grantor’s principal
office address; (6) change in Grantor’s state of
organization; (7) conversion of Grantor to a new or different
type of business entity; or (8) change in any other aspect of
Grantor that directly or indirectly relates to any agreements
between Grantor and Lender. No change in Grantor’s name
or state of organization will take effect until after Lender has
received notice.
No Violation.
The execution and delivery of this
Agreement will not violate any law or agreement governing Grantor
or to which Grantor is a party, and its certificate or articles of
incorporation and bylaws do not prohibit any term or condition of
this Agreement.
Enforceability of
Collateral. To the extent
the Collateral consists of accounts, chattel paper, or general
intangibles, as defined by the Uniform Commercial Code, the
Collateral is enforceable in accordance with its terms, is genuine,
and fully complies with all applicable laws and regulations
concerning form, content and manner of preparation and execution,
and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as
they appear to be on the Collateral. At the time any account
becomes subject to a security interest in favor of Lender, the
account shall be a good and valid account representing an
undisputed, bonafide indebtedness incurred by the account debtor,
for merchandise held subject to delivery instructions or previously
shipped or delivered pursuant to a contract of sale, or for
services previously performed by Grantor with or for the account
debtor. So long as this Agreement remains in effect, Grantor shall
not, without Lender’s prior written consent, compromise,
settle, adjust, or extend payment under or with regard to any such
Accounts. There shall be no setoffs or counterclaims against any of
the Collateral, and no agreement shall have been made under which
any deductions or discounts may be claimed concerning the
Collateral except those disclosed to Lender in writing.
Location of the
Collateral. Except in the
ordinary course of Grantor’s business, Grantor agrees to keep
the Collateral (or to the extent the Collateral consists of
intangible property such as accounts or general intangibles, the
records concerning the Collateral) at Grantor’s address shown
above or at such other locations as are acceptable to Lender. Upon
Lender’s request, Grantor will deliver to Lender in form
satisfactory to Lender a schedule of real properties and Collateral
locations relating to Grantor’s operations, including without
limitation the following: (1) all real property Grantor owns
or is purchasing; (2) all real property Grantor is renting or
leasing; (3) all storage facilities
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Grantor owns, rents, leases, or
uses; and (4) all other properties where Collateral is or may
be located.
Removal of the
Collateral. Except in the
ordinary course of Grantor’s business, Grantor shall not
remove the Collateral from its existing location without
Lender’s prior written consent. Grantor shall, whenever
requested, advise Lender of the exact location of the
Collateral.
Transactions Involving
Collateral. Except for
inventory sold or accounts collected in the ordinary course of
Grantor’s business, or as otherwise provided for in this
Agreement, Grantor shall not sell, offer to sell, or otherwise
transfer or dispose of the Collateral. Grantor shall not pledge,
mortgage, encumber or otherwise permit the Collateral to be subject
to any lien, security interest, encumbrance, or charge, other than
the security interest provided for in this Agreement, without the
prior written consent of Lender. This includes security interests
even if junior in right to the security interests granted under
this Agreement. Unless waived by Lender, all proceeds from any
disposition of the Collateral (for whatever reason) shall be held
in trust for Lender and shall not be commingled with any other
funds; provided however, this requirement shall not constitute
consent by Lender to any sale or other disposition. Upon receipt,
Grantor shall immediately deliver any such proceeds to
Lender.
Title. Grantor represents and warrants to Lender that
Grantor holds good and marketable title to the Collateral, free and
clear of all liens and encumbrances except for the lien of this
Agreement. No financing statement covering any of the Collateral is
on file in any public office other than those which reflect the
security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender’s rights
in the Collateral against the claims and demands of all other
persons.
Repairs and
Maintenance. Grantor
agrees to keep and maintain, and to cause others to keep and
maintain, the Collateral in good order, repair and condition at all
times while this Agreement remains in effect. Grantor further
agrees to pay when due all claims for work done on, or services
rendered or material furnished in connection with the Collateral so
that no lien or encumbrance may ever attach to or be filed against
the Collateral.
Inspection of
Collateral. Lender and
Lender’s designated representatives and agents shall have the
right at all reasonable times to examine and inspect the Collateral
wherever located.
Taxes, Assessments and
Liens. Grantor will pay
when due all taxes, assessments and liens upon the Collateral, its
use or operation, upon this Agreement, upon any promissory note or
notes evidencing the Indebtedness, or upon any of the other Related
Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an
appropriate proceeding to contest the obligation to pay and so long
as Lender’s interest in the Collateral is not jeopardized in
Lender’s sole opinion. In any contest Grantor shall defend
itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in
the contest proceedings. Grantor further agrees to furnish Lender
with evidence that such taxes, assessments, and governmental and
other charges have been paid in full and in a timely manner.
Grantor may withhold any such payment or may elect to contest any
lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as
Lender’s interest in the Collateral is not
jeopardized.
Compliance with Governmental
Requirements. Grantor
shall comply promptly with all laws, ordinances, rules and
regulations of all governmental authorities, now or hereafter in
effect, applicable to the ownership, production, disposition, or
use of the Collateral, including all laws or regulations relating
to the undue erosion of highly-erodible land or relating to the
conversion of wetlands for the production of an agricultural
product or commodity. Grantor may contest in good faith any such
law, ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as
Lender’s interest in the Collateral, in Lender’s
opinion, is not jeopardized.
Hazardous Substances.
Grantor represents and warrants that
the Collateral never has been, and never will be so long as this
Agreement remains a lien on the Collateral, used in violation of
any Environmental Laws or for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release
of any Hazardous Substance. The representations and warranties
contained herein are based on Grantor’s due diligence in
investigating the Collateral for Hazardous Substances. Grantor
hereby (1) releases and waives any future claims against
Lender for indemnity or contribution in the event Grantor becomes
liable for cleanup or other costs under any Environmental Laws, and
(2) agrees to indemnify, defend, and hold harmless Lender
against any and all claims and losses resulting from a breach of
this provision of this Agreement. This obligation to indemnify and
defend shall survive the payment of the indebtedness and the
satisfaction of this Agreement.
Maintenance of Casualty
Insurance. Grantor shall
procure and maintain all risks insurance, including without
limitation fire, theft and liability coverage together with such
other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender. Grantor, upon request of Lender, will deliver
to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations
that coverages
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will not be cancelled or diminished
without at least thirty (30) days’ prior written notice to
Lender and not including any disclaimer of the insurer’s
liability for failure to give such a notice. Each insurance policy
also shall include an endorsement providing that coverage in favor
of Lender will not be impaired in any way by any act, omission or
default of Grantor or any other person. In connection with all
policies covering assets in which Lender holds or is offered a
security interest, Grantor will provide Lender with such loss
payable or other endorsements as Lender may require. If Grantor at
any time fails to obtain or maintain any insurance as required
under this Agreement, Lender may (but shall not be obligated to)
obtain such insurance as Lender deems appropriate, including if
Lender so chooses “single interest insurance,” which
will cover only Lender’s interest in the
Collateral.
Application of Insurance
Proceeds. Grantor shall
promptly notify Lender of any loss or damage to the Collateral if
the estimated cost of repair or replacement exceeds 5,000.00,
whether or not such casualty or loss is covered by insurance.
Lender may make proof of loss if Grantor fails to do so within
fifteen (15) days of the casualty. All proceeds of any insurance on
the Collateral, including accrued proceeds thereon, shall be held
by Lender as part of the Collateral. If Lender consents to repair
or replacement of the damaged or destroyed Collateral, Lender
shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the
proceeds to pay all of the Indebtedness, and shall pay the balance
to Grantor. Any proceeds which have not been disbursed within six
(6) months after their receipt and which Grantor has not
committed to the repair or restoration of the Collateral shall be
used to prepay the Indebtedness.
Insurance Reserves.
Lender may require Grantor to
maintain with Lender reserves for payment of insurance premiums,
which reserves shall be created by monthly payments from Grantor of
a sum estimated by Lender to be sufficient to produce, at least
fifteen (15) days before the premium due date, amounts at least
equal to the insurance premiums to be paid. If fifteen (15) days
before payment is due, the reserve funds are insufficient, Grantor
shall upon demand pay any deficiency to Lender. The reserve funds
shall be held by Lender as a general deposit and shall constitute a
non-interest-bearing account which Lender may satisfy by payment of
the insurance premiums required to be paid by Grantor as they
become due. Lender does not hold the reserve funds in trust for
Grantor, and Lender is not the agent of Grantor for payment of the
insurance premiums required to be paid by Grantor. The
responsibility for the payment of premiums shall remain
Grantor’s sole responsibility.
Insurance Reports.
Grantor, upon request of Lender,
shall furnish to Lender reports on each existing policy of
insurance showing such
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information as Lender may reasonably
request including the following: (1) the name of
the
