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Notes Payable

6 Months Ended

Jun. 30, 2012

6.	Notes Payable

Revolving Credit Agreement

The Company entered into a credit agreement with JP Morgan Chase Bank, N.A. (“Chase”) in October 2007. At June 30, 2012 there was $2.0 million and at December 31, 2011 there was $5.0 million of borrowings outstanding. There were additional borrowing capacity of $5.1 million and $3.7 million at June 30, 2012 and December 31, 2011, respectively.

On August 10 the $10.0 million credit agreement was amended which extended the maturity date to July 1, 2014, modified the financial covenants to a net profitability test of $1 on a trailing six month basis, a 1.0 to 1.0 leverage test of total liabilities to total net worth and eliminated the $6.0 million limit on borrowings if the “adjusted net income” became less than $1.00 for any quarter. The current ratio test remained unchanged. The agreement is collateralized by the Company’s real estate in Houston and Beaumont, Texas, trade accounts receivable, equipment, inventories, and work-in-process, and the Company’s U.S. subsidiaries are guarantors of the borrowings.

Under the agreement, the credit facility’s interest rate is LIBOR plus 3.25% per annum and a commitment fee of 0.3% per annum of the unused portion of the credit limit each quarter. Additionally, the terms of the agreement contain covenants which provide for customary restrictions and limitations and restriction from paying dividends without prior written consent of the bank. On June 30, 2012 the interest rate was 3.48%.

On May1, 2012 the Company and Chase executed a consent and amendment to the credit agreement to allow for the $5M convertible preferred stock transaction as discussed in Note 11. Mandatorily Redeemable Convertible Preferred Stock.