5. DEBT

Credit Agreement

The Company’s existing amended and restated credit agreement (the “Credit Agreement”) with Veritex Community Bank, a Texas state bank (“Veritex Bank”), includes term loan and revolving loan features, and also allows for the issuance of letters of credit and other promissory notes. The Company can borrow up to a maximum of $20.0 million pursuant to the Credit Agreement, subject to the terms and limitations discussed below.

The Credit Agreement provides for a revolving loan feature (the “Line of Credit”) that permits the Company to borrow, repay and re-borrow, from time to time until June 30, 2019, up to the lesser of (i) $20.0 million or (ii) a sum equal to (a) 80% of the Company’s eligible accounts receivable (less the outstanding principal balance of term loans and letters of credit under the Credit Agreement) and (b) the lesser of (i) 50% of the value of certain of the Company’s core equipment or (ii) $12,500,000. The Company has not utilized the Line of Credit since its inception. Because the Company’s ability to borrow funds under the Line of Credit is tied to the amount of the Company’s eligible accounts receivable and value of certain of its core equipment, if the Company’s accounts receivable decrease materially for any reason, including delays, reductions or cancellations by clients, or decreased demand for the Company’s services, or the value of the Company’s pledged core equipment decreases materially, the Company’s borrowing ability to fund operations or other obligations may be reduced.

The Credit Agreement also provides for a term loan feature. Any notes outstanding under this feature would count toward the maximum amounts the Company may borrow under the Credit Agreement.

The Company does not currently have any notes payable under the term loan feature of the Credit Agreement.

The Company has one outstanding note payable under the Credit Agreement that is not under the term loan feature (and therefore does not count towards the maximum amounts that the Company may borrow) which was incurred on September 13, 2018 to purchase (and is secured by) equipment and has a remaining aggregate principal amount of $5,432,000 as of March 31, 2019. The note payable will mature upon the earlier of (i) the acceleration of the indebtedness pursuant to the terms of the Company’s existing credit facility with Veritex Bank or (ii) September 13, 2021.

The Company’s obligations under the Line of Credit are secured by a security interest in the Company’s accounts receivable and certain of the Company’s core equipment, and the term loans are also secured by certain of the Company’s core equipment. Interest on amounts outstanding under the Credit Agreement accrues at the lesser of 4.5% or the prime rate (as quoted in the Wall Street Journal), subject to an interest rate floor of 2.5%. The Credit Agreement contains customary covenants for credit facilities of this type, including limitations on disposition of assets, mergers and other fundamental changes. The Company is also obligated to meet certain financial covenants, including (i) a ratio of (x) total liabilities minus subordinated debt to (y) tangible net worth plus subordinated debt not to exceed 1.00:1.00, (ii) a ratio of current assets to current liabilities of at least 1.50:1.00 and (iii) required tangible net worth of not less than $100,000,000. The Company was in compliance with all covenants under the Credit Agreement, including specified ratios, as of March 31, 2019.

Veritex Bank has also issued two letters of credit as of March 31, 2019. The first letter of credit is in the amount of $1,767,000 to support payment of certain insurance obligations of the Company. The principal amount of this letter of credit is collateralized by certain of the Company’s core equipment. The second letter of credit is in the amount of $583,000 to support the Company’s workers compensation insurance and is secured by a certificate of deposit. Neither of the letters of credit counts as funds borrowed under the Company’s Line of Credit.

Other Indebtedness

As of March 31, 2019, the Company has two notes payable to a finance company for various insurance premiums totaling $1,413,000.

In addition, the Company leases certain seismic recording equipment and vehicles under leases classified as finance leases. The Company’s Condensed Consolidated Balance Sheets as of March 31, 2019 include finance leases of $4,475,000.

Maturities and Interest Rates of Debt

The following table sets forth the aggregate principal amount (in thousands) under the Company’s outstanding notes payable and the interest rates as of March 31, 2019 and December 31, 2018.



	March 31, 2019		December 31, 2018
Notes payable to commercial banks
Aggregate principal amount outstanding	$	5,432	$	5,975
Interest rate		5.00%		5.00%



	March 31, 2019		December 31, 2018
Notes payable to finance company for insurance
Aggregate principal amount outstanding	$	1,413	$	1,680
Interest rate		3.80% - 4.99%		3.80%

The aggregate maturities of notes payable at March 31, 2019 are as follows (in thousands):


April 2019 - March 2020	$	3,586
April 2020 - March 2021		2,173
April 2021 - March 2022		1,086
Total notes payable	$	6,845

The aggregate maturities of finance leases at March 31, 2019 are as follows (in thousands):


April 2019 - March 2020	$	2,873
April 2020 - March 2021		1,564
April 2021 - March 2022		24
April 2022 - March 2023		14
Obligations under finance leases	$	4,475

Interest rates on these leases range from 4.65% to 5.37%.