UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 27, 2004
NATURAL GAS SERVICES GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Colorado 1-31398 75-2811855
(State or other jurisdiction (Commission File (IRS Employer
of Incorporation or organization) Number) Identification No.)
2911 South County Road 1260 Midland, Texas 79706
(Address of Principal Executive Offices) (Zip Code)
432-563-3974
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[_] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement.
On December 27, 2004, Natural Gas Services Group, Inc., as borrower,
and Western National Bank, as lender, entered into (a) a First Modification to
Second Amended and Restated Loan Agreement, dated effective December 15, 2004
(the "Loan Modification Agreement"), and (b) a Modification Agreement, dated
effective December 15, 2004 (the "Note Modification Agreement"). Natural Gas
entered into the Loan Modification Agreement for the primary purpose of
modifying its Second Amended and Restated Loan Agreement, dated November 3, 2003
(the "Loan Agreement"), between Natural Gas and Western National Bank, to allow
for an increased borrowing base and extended advance period under the Advancing
Line of Credit Promissory Note, dated November 3, 2003 (the "Advance Note"),
payable to the order of Western National Bank in the original principal amount
$7,000,000.00. In particular, under the Loan Modification Agreement, the parties
increased the borrowing base under the Advance Note from $7,000,000.00 to
$10,000,000.00, and extended the ending date for the period during which Natural
Gas can request an advance under the Advance Note from November 3, 2004, to
December 14, 2005.
Under the Note Modification Agreement, the interest rate floor of the
Advance Note was increased from five and one-quarter percent (5.25%) to six
percent (6.00%), and specific amortization provisions were added which relate to
advances made under the Advance Note during the period beginning on December 15,
2004, and ending December 14, 2005. The Note Modification Agreement provides
that advances under the Advance Note made prior to December 15, 2004, will be
amortized as originally provided for in the Advance Note, and subsequent
advances made after this date through December 14, 2005, will be amortized under
a separate amortization schedule provided for in the Note Modification
Agreement. This separate schedule provides that the sum of all advances made by
Western National Bank during the period beginning on December 15, 2004, and
ending December 14, 2005, will be amortized separately on a 60-month
amortization schedule with the outstanding principal balance attributable to
such advances to be recalculated by Western on a quarterly basis beginning March
31, 2005. Separate payments of principal are required to be made by Natural Gas
with respect to the portion of the outstanding principal balance of the Advance
Note attributable to advances made after December 15, 2004. These separate
payments are in addition to those payments of principal originally required
under the Advance Note and are due and payable on the 15th day of each month
through October 15, 2009. One final installment of all outstanding principal and
accrued, unpaid interest on the Advance Note is due and payable on November 15,
2009.
The remaining terms and provisions of the Loan Agreement and the
Advance Note remain in full force and effect.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
----------- -----------
10.1 First Modification to Second Amended and Restated
Loan Agreement, dated December 27, 2004, effective
December 15, 2004, by and among Natural Gas Services
Group, Inc. and Western National Bank.
10.2 Modification Agreement, dated December 27, 2004,
effective December 15, 2004, by and among Natural Gas
Services Group, Inc. and Western National Bank.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NATURAL GAS SERVICES GROUP, INC.
By: /s/ Wallace C. Sparkman
------------------------------
Wallace C. Sparkman, President
Dated: December 27, 2004
Exhibit 10.1
FIRST MODIFICATION TO
SECOND AMENDED AND RESTATED
LOAN AGREEMENT
This First Modification to Second Amended and Restated Loan Agreement
(the "First Modification") is made and entered into effective December 15, 2004,
by and among Natural Gas Services Group, Inc. ("Borrower") and Western National
Bank ("Lender").
RECITALS
--------
WHEREAS, Borrower, the guarantor parties thereto, and Lender entered
into that certain Second Amended and Restated Loan Agreement dated November 3,
2003 (the "Loan Agreement"); and
WHEREAS, pursuant to the Loan Agreement, Borrower executed and
delivered to Lender that certain Advancing Line of Credit Promissory Note dated
November 3, 2003, in the original principal amount of $10,000,000.00 (the
"Note"), with an initial borrowing base of $7,000,000.00, and other terms and
conditions as set out in the Loan Agreement; and
WHEREAS, the guarantor parties to the Loan Agreement, Rotary Gas
Systems, Inc., NGE Leasing, Inc., and Great Lakes Compression, Inc., which were
Subsidiaries of Borrower, have now merged into Borrower; and
WHEREAS, Borrower and Lender now desire to modify the Loan Agreement
(a) to increase in the borrowing base of the Note, (b) to extend the period for
Borrower to request advances under the Note, and to modify certain other related
provisions of the Loan Agreement.
NOW THEREFORE, in view of the foregoing and in consideration of the
mutual covenants and agreements hereinafter contained, Borrower and Lender
hereby agree as follows:
ARTICLE 1
Modification of Loan Agreement
------------------------------
The Loan Agreement is hereby amended on the effective date of this
amendment in the following respects:
1. Paragraph 1.1 Defined Terms is amended in the following respects:
"Advance Note" means the Advancing Line of Credit Promissory Note
described in Section 2.1(b) hereof, as modified on even date herewith,
and as the same may be further renewed, extended, increased or
otherwise modified from time to time.
2. Paragraph 2.1(b) Advance Type Term Loans is amended in the following
respects:
"(b) Advance Type Term Loans. Contemporaneously with the execution and
delivery hereof, the Borrower shall execute and deliver to the Lender
the Modification Agreement in the form of Exhibit B hereto. Subject to
and upon the terms and conditions of this Agreement and the Advance
Note, the Borrower may, at any time and from time to time during the
period commencing on the date of the Advance Note and ending at the
close of business on December 14, 2005, request one or more Advances
and borrow (without the ability to reborrow amounts paid under the
Advance Note) under the Advance Note; provided, however, and
notwithstanding the face amount of the Advance Note, without the prior
written consent of Lender in its sole discretion the cumulative
aggregate principal amount of all Advances under the Advance Note shall
never exceed the lesser of (i) $10,000,000.00 or (ii) the amount
available for Advance under the Advance Note and Revolving Line of
Credit Promissory Note as determined in accordance with and set forth
in line O in the Borrowing Base Report. The Advance Note shall mature
as provided therein and shall bear interest on the unpaid principal
amount thereof from time to time outstanding at the applicable interest
rate per annum as provided in the Advance Note. Principal and interest
on the Advance Note shall be payable in the manner and on the dates
specified therein. The Advance Note, including the loans evidenced
thereby, is a multiple advance term loan facility and shall not be
construed as a revolving line of credit as reborrowings are not
permitted."
3. Paragraph 3.2 Conditions to Subsequent Advances, subparagraphs (d) and
(e) are amended in the following respects:
"(d) After giving effect to the Advances under the Advance Note
requested by Borrower to be made on any date, the cumulative aggregate
principal amount of all Advances under the Advance Note shall not
exceed $10,000,000.00.
"(e) Each request for an Advance under the Advance Note shall have been
received by Lender prior to December 14, 2005."
4. Exhibit D Borrowing Base Report, Line P, is amended to delete
$7,000,000.00 and substitute therefor $10,000,000.00.
ARTICLE 2
Miscellaneous
-------------
1. The provisions of this First Modification to Second Amended and Restated Loan
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and are incorporated by reference into the Loan Agreement as if set out
verbatim therein.
2
2. The Loan Agreement, as amended herein, is hereby ratified, adopted and
confirmed by Borrower. Each agreement, representation, warranty and covenant
made by Borrower in the Loan Agreement is hereby ratified, adopted, and
confirmed by Borrower on the date of execution hereof.
3. The effective date of this First Modification to Second Amended and Restated
Loan Agreement shall be December 15, 2004, at which time the provisions of this
First Modification to Second Amended and Restated Loan Agreement shall become
operative and are incorporated into the Loan Agreement.
THIS WRITTEN AGREEMENT REPRESENTS 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 BETWEEN THE
PARTIES.
Executed on _____________, 2004, but effective as of December 15, 2004.
BORROWER:
Natural Gas Services Group, Inc.
By:_________________________________________
Wallace C. Sparkman, President
LENDER:
Western National Bank
By:_________________________________________
Scott A. Lovett, Executive Vice President
3
Exhibit 10.2
MODIFICATION AGREEMENT
----------------------
This Modification Agreement ("Modification Agreement") is effective as of
December 15, 2004. The parties to the Modification Agreement are Natural Gas
Services Group, Inc. ("Borrower") and Western National Bank ("Lender").
RECITALS
On November 3, 2003, Borrower executed and delivered to Lender that certain
Advancing Line of Credit Promissory Note in the original principal sum of
$10,000,000.00, bearing interest at the rate stated therein, with a stated final
maturity date of November 15, 2009 (the "Note"), pursuant to that certain Second
Amended and Restated Loan Agreement dated November 3, 2003 (the " Loan
Agreement"). All liens, security interests and assignments securing the Note are
collectively called the "Liens". Terms defined in the Note or the Loan Agreement
and not otherwise defined herein shall have the same meanings here as in those
documents.
Contemporaneously with the execution and delivery by Borrower to Lender of that
certain First Modification to Second Amended and Restated Loan Agreement of even
date herewith between Borrower and Lender, (the "First Modification"), Borrower
and Lender agreed (a) to increase the Borrowing Base of said Note from
$7,000,00.00 to $10,000,000.00, (b) extend the period for Borrower to request
advances under the Note from November 3, 2004, to December 14, 2005, (c) modify
the provisions relating to the amortization of advances between the date hereof
and an December 14, 2005, and (d) to make other related changes to the Loan
Agreement to incorporate such agreement and substitution.
Further, Borrower and Lender agreed to enter into this Modification Agreement to
modify the interest provisions of the Note to provide for an increase in the
interest floor from five and one-fourth percent (5.25%) to six percent (6%), and
to ratify the Liens.
AGREEMENT
1. Modification of Interest Provisions of the Note. In lieu of the following
provisions which were contained in the first paragraph of Note:
"...at a rate per annum which shall from day to day be equal
to the lesser of (a) a rate per annum (the "Established Rate") equal to
the greater of (i) one percent (1%) over the Prime Rate in effect from
day to day, or (ii) five and one-fourth percent (5.25%), or (b) the
Highest Lawful Rate, in each case calculated on the basis of actual
days elapsed, but computed as if each calendar year consisted of 360
days."
such provisions of the Note are changed to read in their entirety as follows:
"...at a rate per annum which shall from day to day be equal
to the lesser of (a) a rate per annum (the "Established Rate") equal to
the greater of (i) one percent (1%) over the Prime Rate in effect from
day to day, or (ii) six percent (6.0%), or (b) the Highest Lawful Rate,
in each case calculated on the basis of actual days elapsed, but
computed as if each calendar year consisted of 360 days."
2. Modification of Payment Provisions of the Note. In lieu of the following
provision which was contained in the fourth (4th) paragraph of the Note:
"The principal of this Note shall be due and payable in (a)
fifty-nine consecutive monthly installments which shall each be in an
amount equal to 1/60th of the outstanding principal balance of this
Note on December 15, 2004, with the first such installment being due
and payable on December 15, 2004, and a like installment being due and
payable on the fifteenth day of each succeeding month to and including
October 15, 2009; and (b) one final installment in an amount equal to
all remaining unpaid principal and accrued and unpaid interest on this
Note shall be due and payable on November 15, 2009. Interest, computed
on the unpaid balance of this Note, shall be due and payable monthly as
it accrues, on the same dates as, but in addition to each installment
of principal."
such provision of the Note is changed to read as follows:
"The principal of this Note shall be due and payable as
follows:
(a) with respect to the principal balance outstanding under this
Note on December 15, 2004, in fifty-nine (59) consecutive
monthly installments of $116,666.67, with the first (1st) such
installment being due and payable on December 5, 2004 and a
like installment being due and payable on the 15th day of each
succeeding month to and including October 15, 2009; plus
(b) 1/60th of the sum of all advances made by Lender under this
note after December 15, 2004 and prior to March 31, 2005 and a
like installment being due and payable on the 15th day of each
succeeding month to and including October 15, 2009; plus
(c) 1/60th of the sum of all advances made by Lender under this
note after April 1, 2005 and prior to June 30, 2005, and a
like installment being due and payable on the 15th day of each
succeeding month to and including October 15, 2009; plus
(d) 1/60th of the sum of all advances made by Lender under this
note after July 1, 2005 and prior to September 30, 2005 and a
like installment being due and payable on the 15th day of each
succeeding month to and including October 15, 2009; plus
(e) 1/60th of the sum of all advances made by Lender under this
note after October 1, 2005 and prior to December 15, 2005 and
a like installment being due and payable on the 15th day of
each succeeding month to and including October 15, 2009; plus
(f) one final installment in an amount equal to all remaining
unpaid principal and accrued and unpaid interest on the Note
shall be due and payable on November 15, 2009.
Interest, computed on the unpaid balance of the Note, shall be due and payable
monthly as it accrues, on the same dates as, but in addition to each installment
of principal."
3. Ratification of Liens. Borrower and Lender further agree that all Liens
securing the Note shall continue and carry forward until the Note and all
indebtedness evidenced thereby is paid in full. Borrower further agrees that
such liens are hereby ratified and affirmed as valid and subsisting against the
collateral described therein, and that this Modification Agreement shall in no
manner vitiate, affect or impair the Note or the Liens (except as expressly
modified in this Modification Agreement) and that such Liens shall not in any
manner be waived, released, altered or modified.
4. Miscellaneous.
(a) As modified hereby, the provisions of the Note and the Liens
shall continue in full force and effect, and Borrower
acknowledges and affirms its liability to Lender thereunder.
In the event of an inconsistency between this Modification
Agreement and the terms of the Note or of the Liens, this
Modification Agreement shall govern.
(b) Borrower hereby agrees to pay all costs and expenses incurred
by Lender in connection with the execution and administration
of this Modification Agreement.
(c) Any default by Borrower in the performance of his obligations
herein contained shall constitute a default under the Note and
the Liens and shall allow Lender to exercise any or all of its
remedies set forth in such Note and Liens or at law or in
equity.
(d) Lender does not, by its execution of this Modification
Agreement, waive any rights it may have against any person not
a party hereto.
(e) All terms, provisions, covenants, agreements, and conditions
of the Note and the Liens are unchanged, except as provided
herein. Borrower agrees that this Modification Agreement and
all of the covenants and agreements contained herein shall be
binding upon Borrower and shall inure to the benefit of Lender
and each of their respective heirs, executors, legal
representatives, successors, and permitted assigns.
THIS MODIFICATION AGREEMENT REPRESENTS 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 BETWEEN THE
PARTIES.
Borrower:
---------
Natural Gas Services Group, Inc.
By:_________________________________________
Wallace C. Sparkman, President
Lender:
-------
Western National Bank
By:_________________________________________
Scott A. Lovett, Executive Vice President
STATE OF TEXAS ss.
ss.
COUNTY OF MIDLAND ss.
This instrument was acknowledged before me on December _____, 2004, by
Wallace C. Sparkman, President of Natural Gas Services Group, Inc., a Colorado
corporation, on behalf of said corporation.
_____________________________
Notary Public, State of Texas
STATE OF TEXAS ss.
ss.
COUNTY OF MIDLAND ss.
This instrument was acknowledged before me on December _____, 2004, by
Scott A. Lovett, Executive Vice President of Western National Bank, a national
banking association, on behalf of said association.
_____________________________
Notary Public, State of Texas