Item 1.01 Entry into a Material Definitive Agreement.
On March 29, 2023, but effective March 31, 2023, Superior Drilling Products,
Inc. (the "Company") entered into the Fourth Amended and Restated Loan Agreement
(the "Loan Agreement") and the Fourth Amended and Restated Promissory Note (the
"Note") with Tronco Energy Corporation ("Tronco"). The obligations of Tronco are
guaranteed by G. Troy Meier, Chief Executive Officer of the Company, and Annette
Meier, Chief Operating Officer and President of the Company. Pursuant to the
Note, Tronco will make payments to the Company of $750,000 annually commencing
on March 31, 2024 through March 31, 2033, provided that the final payment shall
include all remaining outstanding principal and interest. Interest will continue
to accrue on the Note at 2.8% per annum. The security for the obligations under
the Loan Agreement and the Note remains the same.
In the event the average closing price for the Company's common stock for 10
consecutive trading days is equal to or greater than $3.00 per share, Tronco
shall pay fifty percent of the then outstanding principal balance together with
all accrued, unpaid interest within ten days of the date on which the 10 day
trading average first equals or exceeds $3.00. In the event the average closing
price for 10 consecutive trading days is $4.00 per share or greater, Tronco
shall pay the entire outstanding principal balance together with all accrued,
unpaid interest within ten (10) days of the date on which the 10 day average
first equals or exceeds $4.00.
In addition, in the event of a sale of all or substantially all of the assets or
a controlling equity interest in the Company, Tronco and the Meiers must utilize
the proceeds received from such sale to pay the entire outstanding principal
balance on the Note together with all accrued, unpaid interest.
Item 1.02 Termination of a Material Definitive Agreement.
On March 30, 2023, the Company and its subsidiary Hard Rock Solutions, LLC
("Hard Rock") sent notice to Bin Zayed Petroleum for Investment Ltd. ("BZP") of
the termination of the Exclusive Channel Partner and Distribution Agreement
dated effective June 26, 2022. Hard Rock sent a letter to BZP on February 3,
2023 citing eight breaches by BZP of the agreement which had different grace
periods for cure, and giving BZP the opportunity to cure such violations. All
the grace periods for curing the defaults passed with no response from BZP.
Under the agreement, BZP was engaged as the exclusive distributor of the
Company's Drill N Ream tool within a territory including the Middle East and
North Africa. BZP had the exclusive right to distribute and market, for lease or
rental, and to provide limited servicing, of the Drill N Ream tool within such
territory on pricing and other terms specified in the agreement. The agreement
had an initial term of three years with renewal provisions at the option of the
parties, and was subject to the achievement of certain ongoing performance and
revenue targets.
Item 9.01 Financial Statements and Exhibits.
Exhibit Description
Number
10.1 Fourth Amended and Restated Promissory Note between Superior
Drilling Products, Inc. and Tronco Energy Corporation dated March 31,
2023.
10.2 Fourth Amended and Restated Loan Agreement between Superior Drilling
Products, Inc. and Tronco Energy Corporation dated March 31, 2023.
10.3 Exclusive Channel Partner and Distribution Agreement dated effective
June 26, 2022 among Bin Zayed Petroleum for Investment Ltd., Hard Rock
Solutions, LLC and Superior Drilling Products, Inc. (incorporated by
reference from Exhibit 10.2 to the Company's Current Report on Form
8-K filed on June 29, 2022).
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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