FIRST AMENDMENT TO CREDIT AGREEMENT
EXHIBIT
10.10
FIRST
AMENDMENT TO CREDIT AGREEMENT
THIS
FIRST AMENDMENT TO CREDIT AGREEMENT dated as of August 19, 2005, is between
Flotek Industries, Inc., a Delaware corporation (the
“Borrower”),
and
Xxxxx Fargo Bank, National Association, a national banking association (the
“Bank”).
RECITALS
A. Pursuant
to a Credit Agreement dated as of February 14, 2005 (the “Credit
Agreement”),
between the Borrower and the Bank, the Bank agreed to make revolving credit
and
term loans available to the Borrower.
B. The
Borrower has requested that the Credit Agreement be amended to increase the
amount available to be borrowed, as more fully set forth herein, and the Bank
is
willing to do so subject to the terms and conditions set forth herein and
provided that the Borrower and the Guarantors (as defined in the Credit
Agreement) ratify and confirm all of their respective obligations under the
Credit Agreement and the other Credit Documents.
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants set forth
in this amendment, the Borrower and the Bank agree as follows:
1. Defined
Terms.
Unless
otherwise defined herein, capitalized terms used herein have the meanings
assigned to them in the Credit Agreement.
2. Amendments
to Credit Agreement.
The
Credit Agreement is hereby amended as follows:
(a) The
following definitions are hereby added to Article I of the Credit Agreement
in
the appropriate alphabetical order:
“Acquisition
Commitment”
means
the Bank’s Commitment to make an Advance in the aggregate amount of $1,000,000
pursuant to Section
2.01(f).
“Acquisition
Loan”
has the
meaning specified in Section
2.01(f).
“Acquisition
Note”
means a
promissory note payable to the order of the Bank evidencing the Acquisition
Loan, together with all modifications, extensions, renewals and rearrangements
thereof.
“Additional
Equipment Commitment”
means
the Bank’s Commitment to make an Advance in the aggregate amount of
$1,320,000.02 pursuant to Section
2.01(d).
“Additional
Equipment Loan”
has the
meaning specified in Section
2.01(d).
“Additional
Equipment Note”
means a
promissory note payable to the order of the Bank evidencing the Additional
Equipment Loan, together with all modifications, extensions, renewals and
rearrangements thereof.
“Additional
Real Estate Commitment”
means
the Bank’s Commitment to make an Advance in the aggregate amount of $225,000
pursuant to Section
2.01(e).
“Additional
Real Estate Loan”
has the
meaning specified in Section
2.01(e).
“Additional
Real Estate Note”
means a
promissory note payable to the order of the Bank evidencing the Additional
Real
Estate Loan, together with all modifications, extensions, renewals and
rearrangements thereof.
“Additional
Real Property”
means
real property owned by Xxxxxx and its Subsidiaries.
“Amendment
Effective Date”
means
August 19, 2005.
“Equity
Interests”
means
(i) any capital stock, partnership, joint venture, member or limited liability
or unlimited liability interest, beneficial interest in a trust or similar
entity, or other equity interest in another Person of whatever nature, and
(ii)
any warrants, options or other rights to acquire such stock or
interests.
“Xxxxxx”
means
Xxxxxx’x Machine Works, Inc., a Texas corporation.
“Xxxxxx
Acquisition”
means
the purchase by Turbeco, Inc. of certain assets of Xxxxxx pursuant to the Asset
Purchase Agreement dated as of August 4, 2005, among Turbeco, Inc., Xxxxxx
and
Xxxxx Xxxxxx.
“Note”
and
“Notes”
means
the Equipment Note, the Additional Equipment Note, the Real Estate Note, the
Additional Real Estate Note, the Acquisition Note and the Working Capital Note,
individually or collectively, as appropriate.
“Original
Equipment Loan”
has the
meaning specified in Section 2.01(b).
“Original
Real Estate Loan”
has the
meaning specified in Section 2.01(c).
(b) The
definition of “Equipment Loan” is hereby amended to read as
follows:
“Equipment
Loan”
means
the Original Equipment Loan and the Additional Equipment Loan.
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(c) The
definition of “Real Estate Loan” is hereby amended to read as
follows:
“Real
Estate Loan”
means
the Original Real Estate Loan and the Additional Real Estate Loan.
(d) The
definition of “Working Capital Commitment” is hereby amended to read as
follows:
“Working
Capital Commitment”
means the Bank’s Commitment to make Advances in the aggregate amount of
$6,000,000 pursuant to Section
2.01(a)
as
reduced from time to time pursuant to Section
2.03.
(e) Section
2.01 of the Credit Agreement is hereby amended to read as follows:
SECTION
2.01 The
Advances.
(a) Subject
to the terms and conditions of this Agreement, including those in Article V,
the
Bank shall make Advances (the “Working
Capital Loan”)
to the
Borrower from time to time on any Business Day during the period from the date
hereof until the Working Capital Loan Maturity Date in an aggregate amount
not
to exceed at any time outstanding the Working Capital Commitment. Within the
limits of the Working Capital Commitment, the Borrower may borrow, prepay and
reborrow pursuant to the terms hereof; provided, however, that the Working
Capital Exposure shall at no time exceed the lesser of (y) the Working Capital
Commitment or (z) the Working Capital Loan Borrowing Base.
(b) The
Bank
has previously made an Advance (the “Original
Equipment Loan”)
to the
Borrower on February 14, 2005, having an original principal amount of
$7,000,000. The Original Equipment Loan has a current outstanding principal
balance of $6,299,998.98. The Borrower may not reborrow amounts repaid with
respect to the Original Equipment Loan.
(c) The
Bank
has previously made an Advance (the “Original
Real Estate Loan”)
to the
Borrower on February 14, 2005, having an original principal amount of $885,437.
The Original Real Estate Loan has a current outstanding principal balance of
$826,922.12. The Borrower may not reborrow amounts repaid with respect to the
Real Estate Loan.
(d) Subject
to the terms and conditions of this Agreement, including those in Article V,
the
Bank shall make an Advance (the “Additional
Equipment Loan”)
to the
Borrower on the Amendment Effective Date in an aggregate amount not to exceed
the Additional Equipment Commitment. The Borrower may not reborrow amounts
repaid with respect to the Additional Equipment Loan. The Additional Equipment
Commitment shall terminate at the close of business on the Amendment Effective
Date.
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(e) Subject
to the terms and conditions of this Agreement, including those in Article V,
the
Bank shall make an Advance (the “Additional
Real Estate Loan”)
to the
Borrower on the Amendment Effective Date in an aggregate amount not to exceed
the lesser of (i) the Additional Real Estate Commitment and (ii) 75% of the
appraised value of the Additional Real Property. The Borrower may not reborrow
amounts repaid with respect to the Additional Real Estate Loan. The Additional
Real Estate Commitment shall terminate at the close of business on the Amendment
Effective Date.
(f) Subject
to the terms and conditions of this Agreement, including those in Article V,
the
Bank shall make an Advance (the “Acquisition
Loan”)
to the
Borrower on the Amendment Effective Date in an aggregate amount not to exceed
the Acquisition Commitment. The Borrower may not reborrow amounts repaid with
respect to the Acquisition Loan. The Acquisition Commitment shall terminate
at
the close of business on the Amendment Effective Date.
(f) Section
3.01(a) of the Credit Agreement is hereby amended to read as
follows:
(a) The
aggregate amount of all Advances made by the Bank under the Working Capital
Loan
shall be evidenced by the Working Capital Note. The aggregate amount of all
Advances made by the Bank under the Original Equipment Loan shall be evidenced
by the Original Equipment Note. The aggregate amount of all Advances made by
the
Bank under the Original Real Estate Loan shall be evidenced by the Original
Real
Estate Note. The aggregate amount of all Advances made by the Bank under the
Additional Equipment Loan shall be evidenced by the Additional Equipment Note.
The aggregate amount of all Advances made by the Bank under the Additional
Real
Estate Loan shall be evidenced by the Additional Real Estate Note. The aggregate
amount of all Advances made by the Bank under the Acquisition Loan shall be
evidenced by the Acquisition Note.
(g) Section
3.02 of the Credit Agreement is hereby amended to read as follows:
SECTION
3.02
(a) The
Original Real Estate Loan, the Additional Real Estate Loan and each Working
Capital Advance shall bear interest on the unpaid principal amount thereof
at a
rate per annum equal to the lesser of (i) the Prime Rate in effect from time
to
time and (ii) the Highest Lawful Rate.
(b) The
Original Equipment Loan and the Additional Equipment Loan shall bear interest
on
the unpaid principal amount thereof at a rate per annum equal to the lesser
of
(i) the Prime Rate in effect from time to time plus 0.50% and (ii) the Highest
Lawful Rate.
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(c) The
Acquisition Loan shall bear interest on the unpaid principal amount thereof
at a
rate per annum equal to the lesser of (i) the Prime Rate in effect from time
to
time plus 1.0% and (ii) the Highest Lawful Rate.
(d) Interest
on each Advance shall be payable on each Interest Payment Date and on any other
date on which any payment of principal of such Advance is made.
(e) If
the
Borrower shall default in the payment of the principal of or interest on any
Advance, or any amount becoming due hereunder or under any Loan Document, the
Borrower shall on demand pay interest, to the extent permitted by applicable
law, on such defaulted amount at a rate per annum equal to the lesser of (i)
the
rate otherwise applicable to such Advance plus 4% and (ii) the Highest Lawful
Rate.
(h) Section
3.04 of the Credit Agreement is hereby amended to read as follows:
SECTION
3.04 Principal
Payments.
(a) Subject
to the mandatory prepayment and acceleration provisions of this Agreement,
the
Borrower hereby promises to pay the unpaid principal balance of the Working
Capital Note on the Working Capital Loan Maturity Date.
(b) The
Borrower hereby promises to pay the principal balance of the Equipment Loan
outstanding on the Amendment Effective Date in 54 principal installments of
$127,000.00 payable on each Interest Payment Date and a final installment of
$889,000.00 payable on the Termination Date.
(c) The
Borrower hereby promises to pay the principal balance of the Real Estate Loan
outstanding on the Amendment Effective Date in 54 principal installments of
$5,844.01 payable on each Interest Payment Date and a final installment of
$736,345.63 payable on the Termination Date.
(d) The
Borrower hereby promises to pay the Acquisition Loan in 17 monthly principal
installments of $55,555.55 payable on each Interest Payment Date and a final
installment of $55,555.65 payable on January 31, 2007.
(i) Section
3.05 of the Credit Agreement is hereby amended to read as follows:
SECTION
3.05 Voluntary
Prepayments.
The
Borrower may prepay the outstanding principal amount of any Advance in whole
or
in part, together with accrued unpaid interest to the date of such prepayment
on
the principal amount prepaid by giving the Bank at least one Business Day’s
prior notice. All such prepayments shall be applied first to accrued, but
unpaid, interest on such Advance, then to the principal amount of such Advance.
Payments of principal on the Equipment Loan, the Real Estate Loan and the
Acquisition Loan shall be applied to the remaining installments thereof in
inverse order of maturity. If the Borrower prepays all or part of the Equipment
Loan or the Real Estate Loan prior to the third anniversary of the Effective
Date, the Borrower shall pay the Bank a prepayment fee equal to 1% of the
Commitment amount as of the Effective Date.
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(j) Section
3.06 of the Credit Agreement is hereby amended to read as follows:
SECTION
3.06 Mandatory
Prepayments.
(a) In
the
event any Working Capital Loan Borrowing Base Certificate submitted pursuant
to
Section 7.02 reflects that the Working Capital Exposure exceeds the Working
Capital Loan Borrowing Base, the Borrower shall promptly make a prepayment
in an
aggregate principal amount equal to such excess.
(b) Within
15
days after the delivery of annual financial statements of the Borrower and
its
Subsidiaries for the fiscal year ending December 31, 2005, and each fiscal
year
thereafter, as contemplated by Section 7.02(a), the Borrower shall repay the
Acquisition Loan and the Equipment Loan, without premium or penalty, in an
amount equal to 50% of Excess Cash Flow for such fiscal year. Such payments
shall be applied to the Acquisition Loan prior to any application to the
Equipment Loan.
(c) Within
five days after the receipt of Net Proceeds from the issuance of any Equity
Interests of the Borrower or any Subsidiary, the Borrower shall repay the
Acquisition Loan in an amount equal to such Net Proceeds.
(d) Within
90
days after the last day of each fiscal quarter, the Borrower shall prepay the
Equipment Loan from the net proceeds of any Equipment sold during such quarter
that have not been reinvested in similar equipment and like or greater value
prior to such 90th day.
(e) Any
prepayment of the Acquisition Loan or the Equipment Loan shall be applied to
the
remaining installments of the Acquisition Loan or the Equipment Loan, as the
case may be, in inverse order of maturity.
(k) Section
7.13 of the Credit Agreement is hereby amended to read as follows:
SECTION
7.13 Use
of
Proceeds.
The
Borrower shall use the proceeds of the Additional Equipment Loan, the Additional
Real Estate Loan and the Acquisition Loan to make the Xxxxxx Acquisition and
to
repay indebtedness of Xxxxxx and shall use the proceeds of other Advances to
finance the working capital requirements of the Borrower and its
Subsidiaries.
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3. Conditions
to Effectiveness.
This
amendment shall become effective on the date on which the following conditions
have been satisfied or waived:
(a) The
Bank
shall have received this amendment, executed and delivered by the
Borrower;
(b) Each
Guarantor shall have executed and delivered an acknowledgment and consent to
this amendment substantially in the form of Exhibit A hereto;
(c) The
Borrower shall have executed and delivered to the Bank an Acquisition Note,
an
Additional Real Estate Note, an Additional Equipment Note and a replacement
Working Capital Note in form and substance satisfactory to the Bank;
(d) The
Bank
shall have received evidence in form and substance satisfactory to it to the
effect that (i) the total financing requirements for the Xxxxxx Acquisition
shall not exceed the sum of $[4,005,000.00] plus the principal of and accrued
interest on of the debt and related fees owed by Xxxxxx to [Southwest Bank],
(ii) the Xxxxxx Acquisition shall be consummated on the Amendment Effective
Date
in all material respects in accordance with the terms hereof and the terms
of
the Asset Purchase Agreement previously delivered to the Bank (and without
the
waiver or amendment of any substantive terms thereof not approved by the Bank)
and (iii) upon the consummation of the Xxxxxx Acquisition, the Bank shall have
a
perfected first priority mortgage, security interest or other lien in all of
the
properties and assets acquired by Turbeco, Inc. from Xxxxxx;
(e) The
Bank
shall have received evidence satisfactory to it that (i) the indebtedness owed
by Xxxxxx to [Southwest Bank] (the “Existing
Bank Debt”)
will
be repaid in full on the Amendment Effective Date with proceeds of the Loans
to
be made on such date and (ii) all Liens securing the Existing Bank Debt will
be
released and extinguished on such date, and the Bank shall have received an
acknowledgment of the repayment of the Existing Bank Debt and the termination
of
such Liens in form and substance acceptable to it;
(f) The
Bank
shall have received a Deed of Trust executed and delivered by Turbeco, Inc.
with
respect to the real property acquired by it pursuant to the Xxxxxx Acquisition;
(g) The
Bank
shall have received payment of all other amounts due and payable under the
Credit Agreement on or prior to the Amendment Effective Date, including, to
the
extent invoiced, reimbursement of all expenses required to be reimbursed or
paid
by the Borrower;
(h) The
Bank
shall have received the results of a recent lien search in each of the
jurisdictions in which UCC financing statements or other filings or recordations
should be made to evidence or perfect security interests in all assets of the
Xxxxxx, and such search shall reveal no Liens on any of the assets of Xxxxxx,
except for Permitted Liens and Liens to be released pursuant to Section 3(e);
and
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(i) Each
document (including any UCC financing statement) required by the Security
Documents or under law or reasonably requested by the Bank to be filed,
registered or recorded in order to create in favor of the Bank a perfected
Lien
on the Collateral described therein, prior and superior in right to any other
Person (other than with respect to Permitted Liens), shall have been filed,
registered or recorded or shall have been delivered to the Bank in proper form
for filing, registration or recordation.
4. Representations
and Warranties.
The
Borrower hereby represents and warrants to the Bank as follows:
(a) This
amendment has been duly authorized by all necessary corporate action and
constitutes the binding obligation of the Borrower.
(b) Each
of
the representations and warranties made by the Borrower or its Subsidiaries
in
or pursuant to the Credit Agreement and the other Credit Documents is true
and
correct in all material respects as of the date hereof, as if made (after giving
effect to this amendment) on and as of such date, except for any representations
and warranties made as of a specified date, which are true and correct in all
material respects as of such specified date.
(c) After
giving effect to this amendment, no Default or Event of Default has occurred
and
is continuing as of the date hereof.
5. Continuing
Effect of the Credit Agreement.
This
amendment shall not constitute a waiver of any provision of the Credit Agreement
and shall not be construed as a consent to any action on the part of the
Borrower that would require a waiver or consent of the Lenders or an amendment
or modification to any term of the Credit Documents except as expressly stated
herein. The Borrower hereby confirms and ratifies the Credit Agreement and
each
of the other Credit Documents as amended hereby and acknowledges and agrees
that
the same shall continue in full force and effect as amended hereby.
6. Reference
to the Credit Agreement.
Upon
the effectiveness of this amendment, each reference in the Credit Agreement
to
“this Credit Agreement,”“hereunder,”“herein” or words of like import shall mean
and be a reference to the Credit Agreement, as amended and affected
hereby.
7. Counterparts.
This
amendment may be executed by all parties hereto in any number of separate
counterparts each of which may be delivered in original or facsimile form and
all of such counterparts taken together shall be deemed to constitute one and
the same instrument.
8. References.
The
words “hereby,” “herein,” “hereinabove,” “hereinafter,”
“hereinbelow,” “hereof,” “hereunder” and words of similar import
when used in this amendment shall refer to this amendment as a whole and not
to
any particular article, section or provision of this amendment. References
in
this amendment to a section number are to such sections of the Credit Agreement
unless otherwise specified.
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9. Headings
Descriptive.
The
headings of the several sections of this amendment are inserted for convenience
only and shall not in any way affect the meaning or construction of any
provision of this amendment.
10. Governing
Law.
This
amendment shall be governed by and construed in accordance with the law of
the
State of Texas, without regard to such state’s conflict of laws
rules.
11. Payment
of Expenses.
The
Borrower shall pay or reimburse the Administrative Agent for all of its
out-of-pocket costs and reasonable expenses incurred in connection with this
amendment, any other documents prepared in connection herewith and the
transactions contemplated hereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Administrative Agent.
12. Final
Agreement of the Parties.
THIS
AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS REPRESENT 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 AMONG THE PARTIES.
[Signature
Pages Follow]
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IN
WITNESS WHEREOF, the parties are signing this amendment as of the date first
above written.
FLOTEK
INDUSTRIES, INC.
By:
/s/
Xxxxx. X. Xxxxx
Name: Xxxxx
X.
Xxxxx, Xx.
Title: Chairman
and Chief Executive Officer
[Signature
Page to First Amendment to Credit Agreement]
XXXXX
FARGO BANK
By:
/s/
Xxxx Xxxxxxx
Name:
Xxxx Xxxxxxx
Title:
Assistant Vice President
[Signature
Page to First Amendment to Credit Agreement]
Exhibit
A
