Item 1.01
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Entry into a Material Definitive Agreement
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Series A Preferred Unit Purchase Agreement
On May 29, 2018 (the Closing Date), Cypress Energy Partners, L.P. (the Partnership, us or we)
entered into a Series A Preferred Unit Purchase Agreement (the Preferred Purchase Agreement) with Stephenson Equity, Co. No. 3 (the Purchaser), an affiliate of Cypress Energy Partners GP, LLC, the General Partner of the
Partnership (the General Partner). Pursuant to the Preferred Purchase Agreement, on the Closing Date, we issued and sold in a private placement (the Private Placement) 5,769,231 Series A Preferred Units representing limited
partner interests in the Partnership (the Preferred Units) to the Purchaser for a cash purchase price of $7.54 per Preferred Unit (the Issue Price), resulting in proceeds to the Partnership of $43.5 million. The proceeds
of the Private Placement were used to reduce outstanding borrowings on our revolving credit facility. Concurrently with the closing of the Private Placement (the Closing) we entered into an Amended and Restated Credit Agreement, dated as
of May 29, 2018 (the Credit Agreement), to amend and restate the terms of our credit facility, as described below in this Item 1.01.
The
Preferred Purchase Agreement also provides the Partnership with the right to exercise an option, at any time during the six months following the Closing, to issue and sell to the Purchaser up to $6.5 million of additional Preferred Units. The
Purchase Agreement sets forth the method of determining the purchase price of these additional units, which price will in turn determine the number of units to be issued and sold.
The Preferred Purchase Agreement contains customary representations, warranties, and covenants of the Partnership and the Purchaser. The Partnership, on the
one hand, and the Purchaser, on the other hand, agreed to indemnify each other and their respective officers, directors, managers, employees, agents, counsel, accountants, investment bankers, and other representatives against certain losses
resulting from breaches of their respective representations, warranties, and covenants, subject to certain negotiated limitations and survival periods set forth in the Preferred Purchase Agreement.
Pursuant to the Preferred Purchase Agreement, in connection with the Closing, the General Partner executed the First Amendment to First Amended and Restated
Agreement of Limited Partnership of the Partnership (the Amendment), which authorizes and establishes the rights and preferences of the Preferred Units. The Amendment is described in more detail under Item 5.03 of this Current Report on
Form
8-K.
The foregoing description of the Preferred Purchase Agreement does not purport to be complete and is
qualified in its entirety by reference to the text of the Preferred Purchase Agreement, which is filed as Exhibit 10.1 to this Current Report on Form
8-K
and is incorporated herein by reference.
Amended and Restated Credit Agreement
The Credit Agreement provides up to $90.0 million of borrowing capacity, subject to certain limitations, and contains an accordion feature that allows us
to increase the borrowing capacity to $110.0 million if lenders agree to increase their commitments in the future, or other lenders join the facility. The Credit Agreement matures on May 29, 2021. The obligations under the Credit Agreement
are secured by a first priority lien on substantially all of our assets.
All borrowings under the Credit Agreement bear interest, at our option, on a
leverage-based grid pricing at (i) a base rate plus a margin of 1.5% to 3.0% per annum or (ii) an adjusted LIBOR rate plus a margin of 2.5% to 4.0% per annum. Commitment fees are charged at a rate of 0.5% on any unused credit.
The Credit Agreement contains various customary covenants and restrictive provisions. The Credit Agreement also requires the maintenance of certain financial
covenants, including a leverage ratio (as defined in the Credit Agreement) of not more than 4.0 to 1.0 and an interest coverage ratio (as defined in the Credit Agreement) of not less than 3.0 to 1.0. Upon the occurrence and during the continuation
of an event of default, subject to the terms and conditions of the Credit Agreement, the lenders may declare any outstanding principal, together with any accrued and unpaid interest, to be immediately due and payable any may exercise other remedies
as set forth or referred to in the Credit Agreement.
In addition, the Credit Agreement restricts our ability to make distributions on, or redeem or
repurchase, our equity interests, with certain exceptions detailed in the Credit Agreement. However, we may make distributions of available cash so long as, both at the time of the distribution and after giving effect to the distribution, no default
exists under the Credit Agreement and we are in compliance with the financial covenants in the Credit Agreement.
The foregoing description of the Credit
Agreement does not purport to be complete and is qualified in its entirety by reference to the text of the Credit Agreement, which is filed as Exhibit 10.2 to this Current Report on Form
8-K
and is
incorporated herein by reference.