Long-term Debt



Obligations (in thousands)	March 31, 2014			December 31, 2013
Senior secured second-priority notes	$	175,000		$	175,000
Revolving line of credit	50,000			35,000
Equipment capital leases	9,091			8,651
Brazil bank debt	5,649			—
Facility lease obligation	1,273			1,501
Total	241,013			220,152
Current portion of long-term debt and lease obligations	(60,551		)	(5,906		)
Non-current portion of long-term debt and lease obligations	$	180,462		$	214,246

Senior Secured Second-Priority Notes

On May 13, 2013, the Company sold $175.0 million aggregate principal amount of 8.125% Senior Secured Second-Priority Notes due 2018 (“Notes”) in a private offering pursuant to an Indenture dated as of May 13, 2013. The Notes are senior secured second-priority obligations of the Company, are guaranteed by certain of the Company’s U.S. subsidiaries, and mature on May 15, 2018. Interest on the Notes accrues at the rate of 8.125% per annum and will be payable semiannually in arrears on May 15 and November 15 of each year during their term. On April 10, 2014, the Company commenced a registered exchange offer pursuant to which holders of the privately placed Notes that have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), may exchange their Notes for a like principal amount of Notes that have been registered under the Securities Act. Unless extended, the exchange offer will expire at 5:00 p.m., New York City time, on May 9, 2014.

On or after May 15, 2015, the Company may on one or more occasions redeem all or a part of the Notes at the redemption prices set forth below, plus accrued and unpaid interest and special interest, if any, on the Notes redeemed during the 12-month period beginning on May 15th of the years indicated below:



Date		Percentage
2015		104.063%
2016		102.031%
2017 and thereafter		100.000%

The Notes are initially jointly and severally guaranteed on a senior secured basis by each of the Company’s current material U.S. subsidiaries: GX Technology Corporation, ION Exploration Production (U.S.A.), Inc. and I/O Marine Systems, Inc. (the “Notes Guarantors”). The Notes and the guarantees are secured, subject to certain exceptions and permitted liens, by second-priority liens on substantially all of the assets that secure the indebtedness under the Company’s senior first-priority secured credit facility with China Merchants Bank Co., Ltd., New York Branch (“CMB”) as administrative agent and lender under the facility (see “— Revolving Line of Credit” below). The indebtedness under the Notes is effectively junior to the Company’s obligations under the senior secured credit facility to the extent of the value of the collateral securing the facility, and to any other indebtedness secured on a first-priority basis to the extent of the value of the Company’s assets subject to those first-priority security interests.

The Notes contain certain covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries. These and other restrictive covenants contained in the Indenture are subject to important exceptions and qualifications. All of the Company’s subsidiaries are currently restricted subsidiaries. As of March 31, 2014, the Company was in compliance with these covenants.

In connection with the offering of the Notes, the Company entered into a consent agreement with CMB, as administrative agent and lender under the Company’s senior secured credit facility. See “— Revolving Line of Credit” below.

In connection with the issuance of the Notes, the Company and the Notes Guarantors entered into a second lien intercreditor agreement dated as of May 13, 2013 (the “Intercreditor Agreement”) with, among others, CMB, as administrative agent, first lien representative for the first lien secured parties and collateral agent for the first lien secured parties, the trustee under the Indenture and the collateral agent for the second lien secured parties. The Intercreditor Agreement provides, among other things, that the liens on the collateral securing the Notes and related obligations will be junior and subordinate in all respects to the liens on the collateral securing the Company’s senior secured credit facility and related obligations.

Revolving Line of Credit

On May 29, 2012, the Company amended the terms of its senior secured credit facility (the “Credit Facility”) with CMB, as administrative agent and lender. The First Amendment to the Credit Agreement and Loan Documents (the “First Amendment”) modified certain provisions of the Company’s senior credit agreement with CMB that it had entered into on March 25, 2010. The maturity date of any outstanding debt under the Credit Facility is March 24, 2015; therefore the outstanding balance of $50.0 million as of March 31, 2014 has been classified as a current obligation.

As amended by the First Amendment, the Credit Facility provides that the Company may make revolving credit borrowings in U.S. Dollars, Euros, British Pounds Sterling or Canadian Dollars up to an amount not to exceed the U.S. Dollar equivalent of $175.0 million. The Company also agreed that no additional borrowings may be made at any time at which the outstanding indebtedness under the revolving line of credit (principal, accrued interest and fees) exceeds the U.S. Dollar equivalent of $175.0 million. The First Amendment eliminated sub-facility limits under the Credit Facility.

The Company’s obligations under the Credit Facility continue to be guaranteed by certain of its material U.S. subsidiaries that remain as parties to the Credit Facility. In addition, INOVA Geophysical continues to provide a bank stand-by letter of credit as credit support for the Company’s obligations under the Credit Facility. The Company also entered into a credit support agreement with INOVA Geophysical whereby the Company has agreed to indemnify INOVA Geophysical for any and all losses sustained by INOVA Geophysical that arise out of INOVA Geophysical’s guarantee.

As amended by the First Amendment, the interest rates per annum on borrowings under the Credit Facility are, at the Company’s option:


•	an alternate base rate equal to the sum of (i) the greatest of (a) the prime rate of CMB, (b) a federal funds effective rate plus 0.50%, or (c) an adjusted LIBOR-based rate plus 1.0%, and (ii) an applicable interest margin of 1.4% (reduced from 2.5%); or


•	for eurodollar borrowings and borrowings in Euros, Pounds Sterling or Canadian Dollars, the sum of (i) an adjusted LIBOR-based rate, and (ii) an applicable interest margin of 2.4% (reduced from 3.5%).

As of March 31, 2014, the $50.0 million in outstanding revolving loan indebtedness under the Credit Facility accrued interest at a rate of 2.56% per annum.

The Credit Facility requires compliance with certain financial covenants, including the following:


•	maintain a minimum fixed charge coverage ratio, as defined, in an amount equal to at least 1.125 to 1;


•	not exceed a maximum leverage ratio, as defined, of 3.25 to 1; and


•	maintain a minimum tangible net worth of at least 60% of the Company’s tangible net worth as of March 31, 2010, as defined.

As of March 31, 2014, the Company was in compliance with these financial covenants.

Brazil Bank Debt

In connection with the Company’s acquisition of a controlling interest in OceanGeo, OceanGeo’s existing debt was consolidated into the Company’s accounts. As of March 31, 2014, the outstanding amount, denominated in Brazilian Reais, of this debt was $5.6 million, with various maturity dates in 2014 and 2015; the latest being November 3, 2015. Interest on this debt accrues at an average rate of 15.68%.