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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D**
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
Flotek Industries Inc.
(Name of Issuer)
Common Stock, No Par Value Per Share
(Title of Class of Securities)
34339C 10 4
(Cusip Number)
Mr. Walter Roach
3900 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
(214) 922-0135
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 24, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box
[ ].
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
**The total number of shares of Stock reported herein is 19,850,000 shares,
which constitutes approximately 30.0% of the 65,180,795 shares deemed
outstanding pursuant to Rule 13d-3(d)(1)(i) under the Act. Except as otherwise
stated herein, all ownership percentages set forth herein assume that there are
45,680,795 shares of Stock outstanding.
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<TABLE>
<S> <C>
1. Name of Reporting Person:
TOSI, L.P.
2. Check the Appropriate Box if a Member of a Group:
(a) [ ]
(b) [X]
3. SEC Use Only
4. Source of Funds: OO - See Item 3.
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e):
[ ]
6. Citizenship or Place of Organization: Texas
7. Sole Voting Power: -0-
Number of
Shares
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: -0-
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
19,500,000 (1)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
[X]
13. Percent of Class Represented by Amount in Row (11): 29.9% (2)
14. Type of Reporting Person: PN
</TABLE>
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(1) Assumes exercise of all of the Warrants and conversion of all of the
original principal amount of the Loan into shares of the Stock. See
Item 6.
(2) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are
65,180,795 shares of the Stock outstanding.
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<TABLE>
<S> <C>
1. Name of Reporting Person:
Pitman Property Corp.
2. Check the Appropriate Box if a Member of a Group:
(a) [ ]
(b) [X]
3. SEC Use Only
4. Source of Funds: Not Applicable
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e):
[ ]
6. Citizenship or Place of Organization: Texas
7. Sole Voting Power: -0-
Number of
Shares
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: -0-
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
19,500,000 (1)(2)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
[X]
13. Percent of Class Represented by Amount in Row (11): 29.9% (3)
14. Type of Reporting Person: CO
</TABLE>
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(1) Solely in its capacity as the sole general partner of TOSI, L.P.
(2) Assumes exercise of all of the Warrants and conversion of all of the
original principal amount of the Loan into shares of the Stock. See
Item 6.
(3) Assumes, pursuant to Rule 13d-3(d)(1)(i) of the Act, that there are
65,180,795 shares of the Stock outstanding.
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<TABLE>
<S> <C>
1. Name of Reporting Person:
J. W. Beavers, Jr.
2. Check the Appropriate Box if a Member of a Group:
(a) [ ]
(b) [X]
3. SEC Use Only
4. Source of Funds: Not Applicable
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e):
[ ]
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: -0-
Number of
Shares
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: -0-
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
19,500,000 (1)(2)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
[X]
13. Percent of Class Represented by Amount in Row (11): 29.9% (3)
14. Type of Reporting Person: IN
</TABLE>
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(1) Solely in his capacity as the President of Pitman Property Corp., which
is the sole general partner of TOSI, L.P.
(2) Assumes exercise of all of the Warrants and conversion of all of the
original principal amount of the Loan into shares of the Stock. See
Item 6.
(3) Assumes, pursuant to Rule 13d-3(d)(1)(i) of the Act, that there are
65,180,795 shares of the Stock outstanding.
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<TABLE>
<S> <C>
1. Name of Reporting Person:
David S. Hunt
2. Check the Appropriate Box if a Member of a Group:
(a) [ ]
(b) [X]
3. SEC Use Only
4. Source of Funds: See Item 3.
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e):
[ ]
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: 350,000
Number of
Shares
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 350,000
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
350,000
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
[X]
13. Percent of Class Represented by Amount in Row (11): 0.8%
14. Type of Reporting Person: IN
</TABLE>
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Pursuant to Rule 13d-2(a) of Regulation 13D-G of the Rules and
Regulations under the Securities Exchange Act of 1934, as amended, the
undersigned hereby amend their Schedule 13D Statement dated November 10, 1997,
as amended by Amendment No. 1 thereto dated November 9, 1998, relating to the
common stock, no par value per share (the "Stock"), of Flotek Industries Inc.,
an Alberta corporation (the "Issuer").
Item 1. SECURITY AND ISSUER.
No material change.
Item 2. IDENTITY AND BACKGROUND.
No material change.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 hereby is amended in its entirety to read as follows:
Except where a reference to Canadian currency is indicated by the use
"CDN," all currency references in this Schedule 13D are to the lawful moneys of
the United States of America. All references in this Schedule 13D to Canadian
currency assume an exchange rate of CDN$1.40 per $1.00.
The source and amount of the funds used by the Reporting Persons to
purchase shares of Stock are as follows:
REPORTING PERSON SOURCE OF FUNDS AMOUNT OF FUNDS
TOSI Contributions from $1,170,000 (1)
Partners
Pitman Not Applicable Not Applicable
JWB Not Applicable Not Applicable
DSH (2) $ 37,500 (2)
(1) Of this amount, (i) $750,000 represents the funds used to acquire
the convertible promissory note evidencing the Loan (as defined in Item 6), the
original principal amount of which is convertible into 12,500,000 shares of the
Stock at the rate of $0.06 per share of Stock and assumes conversion of the
entire original principal amount of the Loan into shares of the Stock and (ii)
$420,000 represents the funds to be used to acquire 7,000,000 shares of the
Stock pursuant to exercise of the Warrants (as defined in Item 6) at an exercise
price of $0.06 per share of Stock and assumes exercise of all of the Warrants.
See Item 6.
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(2) In connection with the transactions described in Item 6, the Issuer
paid DSH a finder's fee of $37,500 in the form of 350,000 shares of the Stock at
a deemed price of CDN$0.15 (approximately $0.107) per share of Stock.
Item 4. PURPOSE OF TRANSACTION.
No material change.
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5(a) hereby is amended in its entirety to read as follows:
(a)
TOSI
The aggregate number of shares of the Stock that TOSI owns beneficially,
pursuant to Rule 13d-3 of the Act, is 19,500,000, which constitute approximately
29.9% of the 65,180,795 shares of the Stock deemed outstanding pursuant to Rule
13d-3(d)(1)(i) of the Act.
Pitman
Because of its position as the sole general partner of TOSI, Pitman may,
pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of an
aggregate of 19,500,000 shares of the Stock, which constitute approximately
29.9% of the 65,180,795 shares of the Stock deemed outstanding pursuant to Rule
13d-3(d)(1)(i) of the Act.
JWB
Because of his position as President and controlling person of the sole
general partner of TOSI, JWB may, pursuant to Rule 13d-3 of the Act, be deemed
to be the beneficial owner of an aggregate of 19,500,000 shares of the Stock,
which constitute approximately 29.9% of the 65,180,795 shares of the Stock
deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Act.
DSH
Pursuant to Rule 13d-3 of the Act, DSH beneficially owns 350,000 shares of
the Stock, which constitutes approximately 0.8% of the outstanding shares of the
Stock.
To the best of the knowledge of each of the Reporting Persons, other than
as set forth above, none of the persons named in Item 2 herein is the beneficial
owner of any shares of the Stock.
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(b) - (e)
No material change.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
Item 6 hereby partially is amended by adding at the end thereof the
following:
On February 24, 1999, to be effective as of January 14, 1999, the
Issuer, the Subsidiaries and TOSI entered into an Agreement for Second Extension
and Amendment of Loan Documents, which is filed herewith as Exhibit 10.6 (the
"Second Extension Agreement"). In connection with a financing transaction (the
"Chisholm Financing") closed on February 24, 1999 between the Issuer and
Chisholm Energy Partners, L.L.C. ("Chisholm"), TOSI and Chisholm entered into an
Intercreditor Agreement, which is filed herewith as Exhibit 10.7 (the
"Intercreditor Agreement"). The descriptions that follow of the Second Extension
Agreement and the Intercreditor Agreement are not, and do not purport to be,
complete, and are qualified in their entirety by reference to such Exhibits 10.6
and 10.7, respectively.
Pursuant to the Second Extension Agreement and subject to the terms and
conditions set forth therein, (a) the maturity date of the Note has been
extended to August 24, 1999 (provided, however, that TOSI may extend the
maturity date of the Note for an additional sixty days), (b) the Issuer no
longer has the right to prepay the Note without TOSI's consent, (c) the
expiration date of the Warrants has been extended until February 1, 2009, (d)
the Issuer and the Subsidiaries have released TOSI from any and all claims
relating to the Loan Agreement, the Note, the Security Instruments (as defined
in the Loan Agreement) and the Guaranties (as defined in the Loan Agreement) and
(e) each of the following shall constitute an "Event of Default" under Section
6.01(c) of the Loan Agreement: (i) the failure by the Issuer or any Subsidiary
timely to comply with each of its covenants set forth in the Second Extension
Agreement and (ii) the breach by the Issuer or by any Subsidiary of any of its
representations or warranties set forth in the Second Extension Agreement. The
Issuer has agreed to pay on demand all of TOSI's out-of-pocket expenses in
connection with the Second Extension Agreement and the transactions contemplated
thereby, including attorneys' fees and costs and expenses relating to the
preparation and filing of this Amendment No. 2 to Schedule 13D Statement, and
that such amounts shall constitute "Indebtedness" within the meaning of the Loan
Agreement, the Security Instruments and the Guaranties. The Second Extension
Agreement deletes in its entirety Section 10 of the first Extension Agreement,
which made the Warrant Amendment and the Loan Conversion Extension contingent
upon approval of the Vancouver Stock Exchange.
In addition, the Second Extension Agreement provides that, in the event
that the application of any provision of a Chisholm Financing document would
result in a right or benefit to Chisholm greater than, or in addition to, the
right or benefit that would result to TOSI from application of the analogous
provision (if applicable) in an analogous document under the Loan, then, without
any further action, the TOSI document shall be deemed amended to provide TOSI
with the same right or benefit that would be available to Chisholm from
application of such provision of such
11
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Chisholm Financing document. The effect of this provision includes, without
limitation, a change in the Warrant exercise price and in the Convertible Loan
Agreement conversion price from CDN$0.15 to US$0.06 per share of Stock and,
accordingly, an increase in the number of shares of Stock issuable upon
conversion of the original principal amount of the Loan from 7,000,000 to
12,500,000.
The Intercreditor Agreement provides that TOSI and Chisholm shall be
pari passu as to all collateral pledged by the Issuer and the Subsidiaries in
which either TOSI or Chisholm has a security interest. TOSI and Chisholm have
agreed, upon the request of either of them, to establish written procedures with
respect to the protection, collection and enforcement of the collateral and not
to take any action with respect to the collateral except in accordance with such
procedures. The Intercreditor Agreement provides that no increase in the
principal amount, change in the interest rate, or change in the term of payment
of principal or interest of the Notes (as defined therein), and no material
modification, amendment or supplement to a Loan Agreement (as defined therein)
or a Security Instrument (as defined therein) shall be made, and that no event
of default shall be waived, without the written consent of both TOSI and
Chisholm. Pursuant to the Intercreditor Agreement, Chisholm generally has
released TOSI from liability in connection with TOSI's physical possession of
collateral that requires such physical possession to perfect a security interest
therein.
The Intercreditor Agreement has no effect on TOSI's right to exercise
the Warrants and/or to convert the original principal amount of the Loan into
Shares.
Except as set forth herein or in the Exhibits filed or to be filed
herewith, there are no other contracts, arrangements, understandings or
relationships with respect to the Stock owned by the Reporting Persons.
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 hereby partially is amended by adding to the end thereof the
following:
Exhibit 10.6 -- Agreement for Second Extension and Amendment of Loan
Documents dated February 24, 1999, to be effective as of
January 14, 1999, by and among Flotek Industries, Inc.,
Petrovalve International, Inc., Petrovalve, Inc., Turbeco,
Inc., USA Petrovalve, Inc. and TOSI, L.P.
Exhibit 10.7 -- Intercreditor Agreement dated as of February 24, 1999, by
and between Chisholm Energy Partners, L.L.C. and TOSI, L.P.
Exhibit 99.1 -- Agreement pursuant to Rule 13d-1(f)(1)(iii)
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After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 2, 1999
/s/ David S. Hunt
David S. Hunt, individually and as
attorney-in-fact for:
TOSI, L.P. (1)
PITMAN PROPERTY CORP. (2)
J. W. BEAVERS, JR. (3)
(1) A power of attorney authorizing David S. Hunt to act on behalf of TOSI,
L.P. previously has been filed with the Commission.
(2) A power of attorney authorizing David S. Hunt to act on behalf of
Pitman Property Corp. previously has been filed with the Commission.
(3) A power of attorney authorizing David S. Hunt to act on behalf of J. W.
Beavers, Jr. previously has been filed with the Commission.
13
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
10.1 Convertible Loan Agreement, previously filed as Exhibit 99.2
with the Schedule 13D Statement dated November 10, 1997.
10.2 Registration Rights Agreement, previously filed as Exhibit
99.3 with the Schedule 13D Statement dated November 10, 1997.
10.3 Lock-Up Agreement, previously filed as Exhibit 99.4 with the
Schedule 13D Statement dated November 10, 1997.
10.4 Warrants, previously filed as Exhibit 99.5 with the Schedule
13D Statement dated November 10, 1997.
10.5 Agreement for Extension and Amendment of Loan Agreement,
Promissory Note and Warrant dated November 2, 1998, to be
effective as of October 16, 1998, by and among Flotek
Industries, Inc., Petrovalve International, Inc., Petrovalve,
Inc., Turbeco, Inc., USA Petrovalve, Inc. and TOSI, L.P.,
previously filed with Amendment No. 1 to the Schedule 13D
Statement dated November 9, 1998.
10.6 Agreement for Second Extension and Amendment of Loan Documents
dated February 24, 1999, to be effective as of January 14,
1999, by and among Flotek Industries, Inc., Petrovalve
International, Inc., Petrovalve, Inc., Turbeco, Inc., USA
Petrovalve, Inc. and TOSI, L.P., filed herewith.
10.7 Intercreditor Agreement dated as of February 24, 1999, by and
between Chisholm Energy Partners, L.L.C. and TOSI, L.P., filed
herewith.
24.1 Power of Attorney of TOSI, L.P., previously filed with the
Schedule 13D Statement dated November 10, 1997.
24.2 Power of Attorney of Pitman Property Corp., previously filed
with the Schedule 13D Statement dated November 10, 1997.
24.3 Power of Attorney of J. W. Beavers, Jr., previously filed with
the Schedule 13D Statement dated November 10, 1997.
99.1 Agreement pursuant to Rule 13d-1(f)(1)(iii), filed herewith.
</TABLE>
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EXHIBIT 10.6
AGREEMENT FOR SECOND EXTENSION AND AMENDMENT OF
LOAN DOCUMENTS
This Agreement for Second Extension and Amendment of Loan Documents is
made on February 24, 1999, to be effective as of January 14, 1999, by and among
Flotek Industries, Inc., an Alberta corporation ("Borrower"), Petrovalve
International, Inc., an Alberta corporation, Petrovalve, Inc., a Delaware
corporation, Turbeco, Inc., a Texas corporation, and USA Petrovalve, Inc., a
Texas corporation (each a "Guarantor"), and TOSI, L. P., a Texas limited
partnership ("Lender").
WHEREAS, under and by virtue of that certain Promissory Note dated
October 16, 1997, in the principal amount of SEVEN HUNDRED FIFTY THOUSAND AND
NO/100 UNITED STATES DOLLARS (US$750,000.00), as extended and amended pursuant
to that certain Agreement for Extension and Amendment of Loan Agreement,
Promissory Note and Warrant among Borrower, Guarantors and Lender dated as of
October 16, 1998 (the "First Amendment") (the "Note"), and that certain
Convertible Loan Agreement dated as of October 16, 1997 between Borrower and
Lender, as extended and amended pursuant to the First Amendment (the "Loan
Agreement"), Borrower is indebted to Lender in the principal amount of the Note
and accrued but unpaid interest thereon, as well as for certain other amounts as
specified in the Loan Agreement, including without limitation the amounts
specified in Section 4.05 thereof;
WHEREAS, the Note matured on January 14, 1999 but to date remains
unpaid;
WHEREAS, contemporaneously herewith Borrower is borrowing $150,000 from
Chisholm Energy Partners, L.L.C., a Texas limited liability company ("Chisholm
Energy"), as evidenced by that certain Promissory Note made by Borrower in favor
of Chisholm of even date herewith (as the same may be amended, modified,
renewed, extended or rearranged, the "Chisholm Note") and, in connection
therewith, is entering into various agreements with Chisholm Energy, including
without limitation that certain Loan Agreement of even date herewith (as the
same may, from time to time, be amended or supplemented, the "Chisholm Loan
Agreement"), and is granting to Chisholm Energy options and warrants to purchase
shares of Borrower's common stock; and
WHEREAS, Borrower has requested that Lender extend the maturity date of
the Note and Lender is willing to do so on the terms and conditions set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which the parties hereby acknowledge, the parties hereby agree as
follows:
Agreement for Second Extension and Amendment of Loan Documents
As of January 14, 1999 - Page 1 of 10
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SECTION 1. NOTE.
(a) The maturity date of the Note hereby is extended to the date that
is one-hundred eighty (180) days from the date hereof, on which date the Note
shall be due and payable in full; provided, however, that Lender may, in its
sole discretion, extend the maturity date of the Note for an additional sixty
(60) days.
(b) The Note hereby is amended by deleting the following sentence:
"Borrower may at any time pay the full amount of this Note
without the payment of any premium, penalty or fee."
and replacing it with the following sentence:
"Borrower may not prepay this Note in whole or in part without
in each instance Lender's specific prior written consent."
SECTION 2. LOAN AGREEMENT.
(a) Each of the following shall constitute an Event of Default under
Section 6.01(c) of the Loan Agreement:
(i) The failure by Borrower or by any Guarantor timely to comply with
each of its covenants set forth in this Agreement; and
(ii) The breach by Borrower or by any Guarantor of any of its
representations or warranties set forth in this Agreement.
(b) The Loan Agreement hereby is amended by adding thereto a new
Section 5.11, as follows:
"Section 5.11. Harmonization with Chisholm Loan Agreement. The
Borrower and the Lender acknowledge that the Borrower and Chisholm
Energy Partners, L.L.C. have entered into a Loan Agreement dated as of
February 24, 1999 (the "Chisholm Loan Agreement"). Notwithstanding
anything in this Agreement or in the Chisholm Loan Agreement or in any
other document or instrument entered into in connection therewith to
the contrary, the Borrower and the Lender hereby agree as follows:
"(a) In the event that application of any provision of the
Chisholm Loan Agreement would result in a right or benefit to Chisholm
Energy (as defined therein) greater than the right or benefit that
would result to the Lender from application of an analogous provision
in this Agreement, then, without the necessity of any further action,
this Agreement shall be deemed amended to provide the
Agreement for Second Extension and Amendment of Loan Documents
As of January 14, 1999 - Page 2 of 10
<PAGE> 3
Lender with the same right or benefit that would be available to
Chisholm Energy from application of such provision of the Chisholm Loan
Agreement; and
"(b) In the event that application of any provision of the
Chisholm Loan Agreement would result in a right or benefit to Chisholm
Energy and this Loan Agreement does not contain an analogous provision,
then, without the necessity of any further action, this Loan Agreement
shall be deemed amended to provide the Lender with the same right or
benefit that would be available to Chisholm Energy from application of
such provision of the Chisholm Loan Agreement."
SECTION 3. WARRANT.
(a) Each and every reference in the Warrant to "October 16, 1999" is
hereby amended to read "February 1, 2009."
(b) The Warrant hereby is amended by adding thereto a new Section 1(e),
as follows:
"(e) In the event that, at the time of desired exercise,
applicable restrictions of the Vancouver Stock Exchange do not permit
the issuance of the Warrant Stock at the then-applicable Warrant Price,
then, notwithstanding anything in this Warrant to the contrary, the
Holder, at its election, may exercise this Warrant at the lowest
price-per-share that will be in conformity with such restrictions."
(c) The Warrant hereby is amended by adding thereto a new Section 12,
as follows:
"12. Harmonization with Chisholm Warrant.
"The Company and the Holder acknowledge that the Company has
issued a Warrant to Purchase Common Stock to Chisholm Energy Partners,
L.L.C. expiring on February 1, 2009 (the "Chisholm Warrant").
Notwithstanding anything in this Warrant or in the Chisholm Warrant or
in any other document or instrument entered into in connection
therewith to the contrary, the Company and the Holder hereby agree as
follows:
"(i) In the event that application of any provision
of the Chisholm Warrant (including without limitation the
warrant exercise price) would result in a right or benefit to
Chisholm Energy (as defined therein) greater than the right or
benefit that would result to the Holder from application of an
analogous provision in this Warrant, then, without the
necessity of any further action, this Warrant (including
without limitation the Warrant Price) shall be deemed amended
to provide the Holder with the same right or benefit that
would be available to Chisholm Energy from application of such
provision of the Chisholm Warrant; and
Agreement for Second Extension and Amendment of Loan Documents
As of January 14, 1999 - Page 3 of 10
<PAGE> 4
"(ii) In the event that application of any provision
of the Chisholm Warrant would result in a right or benefit to
Chisholm Energy and this Warrant does not contain an analogous
provision, then, without the necessity of any further action,
this Warrant shall be deemed amended to provide the Holder
with the same right or benefit that would be available to
Chisholm Energy from application of such provision of the
Chisholm Warrant."
SECTION 4. GUARANTIES.
(a) Each of the Guaranty Agreements respectively made by the Guarantors
in favor of Lender in connection with the transactions contemplated by the Loan
Agreement hereby is amended by adding thereto a new Section 11, as follows:
"11. Guarantor acknowledges that Guarantor has made a Guaranty
Agreement in favor of Chisholm Energy Partners, L.L.C., a Texas limited
liability company, as of February 24, 1999 (the "Chisholm Guaranty
Agreement"). Notwithstanding anything in this guaranty or in the
Chisholm Guaranty Agreement or in any other document or instrument
entered into in connection therewith to the contrary, Guarantor hereby
covenants and agrees as follows:
"(a) In the event that application of any provision
of the Chisholm Guaranty Agreement would result in a right or
benefit to Chisholm (as defined therein) greater than the
right or benefit that would result to Lender from application
of an analogous provision in this guaranty, then, without the
necessity of any further action, this guaranty shall be deemed
amended to provide Lender with the same right or benefit that
would be available to Chisholm from application of such
provision of the Chisholm Guaranty Agreement; and
"(b) In the event that application of any provision
of the Chisholm Guaranty Agreement would result in a right or
benefit to Chisholm and this guaranty does not contain an
analogous provision, then, without the necessity of any
further action, this guaranty shall be deemed amended to
provide Lender with the same right or benefit that would be
available to Chisholm from application of such provision of
the Chisholm Guaranty Agreement."
(b) The Guarantors heretofore have guaranteed payment of the
Indebtedness (as defined in the applicable Guaranty Agreement) and, by its
execution and delivery hereof, each of the Guarantors consents unconditionally
and irrevocably to the terms and conditions of this Agreement. Each Guarantor
further acknowledges and agrees that there are no existing claims, defenses,
counterclaims or rights of setoff whatsoever with respect to its Guaranty.
Agreement for Second Extension and Amendment of Loan Documents
As of January 14, 1999 - Page 4 of 10
<PAGE> 5
SECTION 5. SECURITY AGREEMENTS.
Each of the Security Agreements respectively entered into by Borrower,
Petrovalve International Inc., an Alberta corporation, Petrovalve, Inc., a
Delaware corporation, USA Petrovalve, Inc., a Texas corporation, and Turbeco,
Inc., a Texas corporation, on the one hand, and TOSI, on the other hand, in
connection with the transactions contemplated by the Loan Agreement hereby is
amended by adding thereto a new Section 17, as follows:
"Section 17. Harmonization with Chisholm Security Agreements.
Debtor acknowledges that Debtor has entered into a Security Agreement
with Chisholm Energy Partners, L.L.C., a Texas limited liability
company, (the "Chisholm Security Agreement"). Notwithstanding anything
in this Security Agreement or in the Chisholm Security Agreement or in
any other document or instrument entered into in connection therewith
to the contrary, Guarantor hereby covenants and agrees as follows:
"(a) In the event that application of any provision
of the Chisholm Security Agreement would result in a right or
benefit to Secured Party (as defined therein) greater than the
right or benefit that would result to Lender from application
of an analogous provision in this Security Agreement, then,
without the necessity of any further action, this Security
Agreement shall be deemed amended to provide Lender with the
same right or benefit that would be available to Secured Party
from application of such provision of the Chisholm Security
Agreement; and
"(b) In the event that application of any provision
of the Chisholm Security Agreement would result in a right or
benefit to Secured Party and this Security Agreement does not
contain an analogous provision, then, without the necessity of
any further action, this Security Agreement shall be deemed
amended to provide Lender with the same right or benefit that
would be available to Secured Party from application of such
provision of the Chisholm Security Agreement."
SECTION 6. REGISTRATION RIGHTS AGREEMENT.
Pursuant to Section 4 thereof, the Registration Rights Agreement hereby
is amended (with respect to TOSI) by adding thereto a new Section 17, as
follows:
"17. Harmonization with Chisholm Registration Rights
Agreement. The Company and TOSI acknowledge that the Company
and Chisholm Energy Partners, L.L.C. have entered into a
Registration Rights Agreement dated as of February 24, 1999
(the "Chisholm Registration Rights Agreement").
Notwithstanding anything in this Agreement or in the Chisholm
Registration Rights Agreement or in any other document or
Agreement for Second Extension and Amendment of Loan Documents
As of January 14, 1999 - Page 5 of 10
<PAGE> 6
instrument entered into in connection therewith to the
contrary, the Company and TOSI hereby agree as follows:
"(a) In the event that application of any
provision of the Chisholm Registration Rights Agreement would
result in a right or benefit to the Holder (as defined
therein) greater than the right or benefit that would result
to TOSI (in its capacity as a holder of Registrable
Securities) from application of an analogous provision in this
Agreement, then, as to TOSI and without the necessity of any
further action, this Agreement shall be deemed amended to
provide TOSI with the same right or benefit that would be
available to such Holder from application of such provision of
the Chisholm Registration Rights Agreement; and
"(b) In the event that application of any
provision of the Chisholm Registration Rights Agreement would
result in a right or benefit to the Holder (as defined
therein) and this Agreement does not contain an analogous
provision, then, as to TOSI and without the necessity of any
further action, this Agreement shall be deemed amended to
provide TOSI with the same right or benefit that would be
available to such Holder from application of such provision of
the Chisholm Registration Rights Agreement."
SECTION 7. FIRST AMENDMENT.
The First Amendment hereby is amended by deleting in its entirety
Section 10 thereof.
SECTION 8. ACKNOWLEDGMENT OF ACCRUED INTEREST AND OTHER OWED AMOUNTS; NO
OFFSETS OR DEFENSES.
Borrower acknowledges and agrees that, as of the date hereof, the
principal sum of US$750,000.00 and accrued but unpaid interest on the Note of
US$27,291.67 (the "Accrued Interest"), as well as certain other amounts as
specified in the Loan Agreement, including without limitation the amounts
specified in Section 4.05 thereof, are due and owing on the Note, and that there
are no offsets or defenses to the Indebtedness, or any part thereof, or any
claim or counterclaim against Lender arising therefrom.
SECTION 9. PAYMENT OF ACCRUED INTEREST AND OTHER OWED AMOUNTS.
Simultaneously with the execution and delivery of this Agreement,
Borrower shall pay to Lender in cash (a) all Accrued Interest and (b)
US$27,759.95 towards the payment of the Lender Expenses.
Agreement for Second Extension and Amendment of Loan Documents
As of January 14, 1999 - Page 6 of 10
<PAGE> 7
SECTION 10. LIENS.
Borrower agrees that the liens evidenced by the Security Instruments,
as well as each and every right, title, claim, equity, lien and security
interest securing payment of the Indebtedness, are hereby renewed, extended and
continued in full force and effect to secure payment of the Indebtedness
(including without limitation the Indebtedness evidenced by the Note as amended
and extended hereby). All liens and security interests held by Lender (including
without limitation under any of the Security Instruments) shall remain first and
prior liens and security interests securing payment of the Indebtedness.
SECTION 11. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES.
Each of Borrower and each Guarantor hereby reaffirms to Lender each and
every representation and warranty made by it in (as applicable) the Loan
Agreement, each Security Instrument, each Guaranty and each other document
contemplated thereby, with the same force and effect as if each such
representation and warranty were separately stated herein and made as of the
date hereof.
SECTION 12. RELEASE.
Each of Borrower and each Guarantor, on its own behalf and on behalf of
its affiliates, successors and assigns (each a "Releasing Party"), hereby
unconditionally, finally and forever releases, compromises and discharges, to
the fullest extent allowed by law, Lender and its partners and each of their
respective partners, directors, officers, employees, members, trustees,
beneficiaries, affiliates, agents and representatives (each a "Released Party")
from and against any and all liabilities, obligations, claims, causes of action,
debts, damages (including, without limitation, special, incidental, indirect or
consequential damages, damages for loss of business profits, business
interruption and loss of business information), losses, penalties, fines,
disputes, agreements, understandings, costs and expenses (including, without
limitation, attorneys' fees, court costs and costs of investigation) of each and
every kind whatsoever, whether absolute or contingent, known or unknown, at any
time on or prior to the date hereof, directly or indirectly arising from, based
upon, relating to or in connection with the Loan Agreement, the Note, the
Indebtedness, the Guaranties or the Security Instruments or any transaction
contemplated by any of them, including without limitation any claim of breach of
fiduciary duty, breach of any duty of fair dealing, breach of funding
commitment, breach of confidence, undue influence, duress, economic coercion,
conflict of interest, negligence, bad faith, malpractice, usury, violations of
the Racketeer Influenced and Corrupt Organizations Act, intentional or negligent
infliction of mental or emotional duress or distress, tortious interference with
contractual relations, breach of contract, deceptive trade practice, slander,
libel or conspiracy (each a "Claim"). Each of Borrower and each Guarantor hereby
(a) acknowledges and agrees that the release set forth in the
immediately-preceding sentence is supported by sufficient and adequate
consideration received by it under this Agreement, (b) represents and warrants,
jointly and severally, to each Released Party that neither it nor any other
Releasing Party has assigned or transferred, in whole or in part, any Claim to
any Person and (c) agrees unconditionally to indemnify, defend and hold harmless
in full each Released Party from and against any and all Claims.
Agreement for Second Extension and Amendment of Loan Documents
As of January 14, 1999 - Page 7 of 10
<PAGE> 8
SECTION 13. CERTAIN VANCOUVER STOCK EXCHANGE MATTERS.
The parties understand that the amendment to and extension of the
Warrant effected hereby (the "Warrant Amendment"), and the amendment and
extension of the period within which Lender may convert the principal amount of
the Loan into common shares of Borrower effected hereby (the "Loan Conversion
Amendment"), are subject to the approval of the Vancouver Stock Exchange
("VSE"), and that VSE Approval has not yet been obtained. Accordingly, the
Company shall promptly take such action as is reasonably required to obtain such
VSE approval or to remove the necessity for such VSE approval, including
effecting a reverse stock split of its common stock or the delisting of its
common stock from the VSE. Notwithstanding anything in this Agreement to the
contrary, however, as between the Borrower and the Lender, the Warrant Amendment
and the Loan Conversion Amendment shall be in full force and effect and
enforceable in accordance with their respective terms.
SECTION 14. PROVISION OF ADDITIONAL DOCUMENTS.
Each of Borrower and each Guarantor agrees upon request to execute and
deliver to Lender any and all such additional documents and instruments as
Lender may deem necessary or appropriate to carry out the purposes and intent of
this Agreement.
SECTION 15. MATERIALITY OF TERMS AND CONDITIONS.
Each of Borrower and each Guarantor acknowledges and agrees that each
and every term and condition of this Agreement is independently material to, and
is being relied upon by, Lender, and that Lender would not agree to enter into
this Agreement, to amend and extend the maturity date of the Note or otherwise
to carry out the transactions contemplated by this Agreement but for each and
every such term and condition.
SECTION 16. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THIS AGREEMENT.
Each of Borrower and each Guarantor represents and warrants to Lender
that (a) the natural person executing and delivering this Agreement on its
behalf has been duly authorized and empowered by all necessary corporate action
to execute and deliver this Agreement on behalf of such corporation, (b) this
Agreement is a valid and binding obligation of such corporation enforceable
against such corporation in accordance with its terms and (c) the execution and
delivery of this Agreement does not, and the performance of this Agreement will
not, (i) violate or be inconsistent with such corporation's charter documents,
(ii) violate any Governmental Requirement or the rules or regulations of any
self-regulatory organization (including without limitation, but subject to the
other provisions hereof, the VSE) to which such corporation is subject or (iii)
violate or constitute a default (or an event that, with notice or lapse of time
or both, would constitute such a default) under any contract or agreement to
which such corporation is a party or by which such corporation or any of its
assets is or may be bound or affected.
Agreement for Second Extension and Amendment of Loan Documents
As of January 14, 1999 - Page 8 of 10
<PAGE> 9
SECTION 17. CERTAIN UNDEFINED TERMS.
All capitalized undefined terms used herein shall have the meanings
respectively ascribed to them in the Loan Agreement.
SECTION 18. PAYMENT OF CERTAIN ADDITIONAL EXPENSES.
Borrower agrees (a) to pay in cash on demand all out-of-pocket expenses
incurred by Lender in connection with this Agreement and the transactions
contemplated hereby including, without limitation, attorneys' fees and costs and
expenses relating to the preparation and filing of an amendment to Lender's
Schedule 13D on file with the Securities and Exchange Commission and (b) that
all amounts due and payable to Lender pursuant to clause (a) above shall
constitute "Indebtedness" within the meaning of the Loan Agreement, the Security
Instruments and the Guaranties.
SECTION 19. COUNTERSIGNATURE.
Promptly upon Lender's request, Borrower shall obtain a
countersignature to this Agreement, or such other form of acknowledgment or
consent satisfactory to Borrower, of Pacific Corporate Trust Company.
SECTION 20. AGREEMENTS AND INSTRUMENTS TO REMAIN IN FULL FORCE AND EFFECT.
As amended by this Agreement, the Loan Agreement, the Note and the
Warrant, and all other documents relating to the Indebtedness (including without
limitation the Loan Agreement, the Security Instruments and the Guaranties), are
and shall remain in full force and effect.
SECTION 21. SEVERABILITY.
If any provision of this Agreement or the application thereof to any
Person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provisions to any other
Person or circumstance shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
SECTION 22. ENTIRE AGREEMENT.
THIS AGREEMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
(INCLUDING WITHOUT LIMITATION THE LOAN AGREEMENT, THE NOTE, THE SECURITY
INSTRUMENTS AND THE GUARANTIES, IN EACH CASE, TO THE EXTENT APPLICABLE, AS
AMENDED BY THIS AGREEMENT) REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENT AMONG THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES RELATING TO THE INDEBTEDNESS.
Agreement for Second Extension and Amendment of Loan Documents
As of January 14, 1999 - Page 9 of 10
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
for Second Extension and Amendment of Loan Documents on the date first above
written, to be effective as of January 14, 1999.
LENDER: BORROWER:
TOSI, L. P., a Texas limited partnership FLOTEK INDUSTRIES, INC.,
an Alberta corporation
By: Pitman Property Corp.,
a Texas corporation, General Partner By: /s/ Jerry D. Dumas
Jerry Dumas, President and Chief
By: /s/ J. W. Beavers, Jr. Executive Officer
J. W. Beavers, Jr., President
GUARANTORS:
PETROVALVE INTERNATIONAL, INC.,
an Alberta corporation
By: /s/ Jerry D. Dumas
Jerry Dumas, President and Chief
Executive Officer
PETROVALVE, INC.,
a Delaware corporation
By: /s/ Jerry D. Dumas
Jerry Dumas, President and Chief
Executive Officer
TURBECO, INC., a Texas corporation
By: /s/ Jerry D. Dumas
Jerry Dumas, President and Chief
Executive Officer
USA PETROVALVE, INC.,
a Texas corporation
By: /s/ Jerry D. Dumas
Jerry Dumas, President and Chief
Executive Officer
Agreement for Second Extension and Amendment of Loan Documents
As of January 14, 1999 - Page 10 of 10
<PAGE> 1
EXHIBIT 10.7
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (as the same may, from time to time, be
amended or supplemented, herein called the "Agreement") dated as of this 24th
day of February, 1999, by and between TOSI, L.P., a Texas limited partnership
("Tosi"), and CHISHOLM ENERGY PARTNERS, L.L.C., a Texas limited liability
company ("Chisholm"), and for the purposes stated herein, FLOTEK INDUSTRIES
INC., an Alberta corporation ("Borrower") and Subsidiaries (as defined below),
join in the execution of this Agreement;
W I T N E S S E T H:
WHEREAS, Borrower and Tosi are parties to that certain Convertible Loan
Agreement dated October 16, 1997, as amended by that certain Agreement for
Extension and Amendment of Loan Agreement, Promissory Note and Warrant dated
November 2, 1998 and by that certain Agreement for Second Extension and
Amendment of Loan Documents dated February 24, 1999 (said loan agreement, as the
same may, from time to time, be amended or supplemented, herein called the "Tosi
Loan Agreement") under the terms of which Borrower executed and delivered a
promissory note (said note, as the same may be amended, modified, renewed,
extended or rearranged, is called the "Tosi Note") in the original principal
amount of US$750,000; and
WHEREAS, the Tosi Note is secured as provided in the Tosi Loan
Agreement by the "Security Instruments" (as defined therein) including, among
other security documents, (i) that certain Security Agreement (the "Tosi
Security Agreement") between Borrower and Tosi dated as of September 18, 1997
and (ii) those certain guaranties and/or security agreements executed by any and
all Subsidiaries of Borrower including, without limitation, Petrovalve
International Inc., Petrovalve, Inc., USA Petrovalve, Inc., and Turbeco, Inc.
(each a "Subsidiary" and collectively, the "Subsidiaries"), all of which
"Security Instruments", as the same may have been heretofore or may hereafter be
amended, are collectively called the "Tosi Security Instruments", any and all
security interests held by Tosi under the Tosi Security Instruments are
collectively called the "Tosi Security Interests", and all collateral now or
hereafter held to secure the Indebtedness (as defined in the Tosi Loan
Agreement) is hereinafter collectively called the "Collateral"; and
WHEREAS, Borrower and Chisholm are parties to that certain Loan
Agreement dated February 24, 1999 (as the same may, from time to time, be
amended or supplemented, herein called the "Chisholm Loan Agreement" and,
jointly with the Tosi Loan Agreement, the "Loan Agreements") under the terms of
which Borrower executed and delivered a promissory note (said note, and any
renewal, extension or rearrangement thereof, is called the "Chisholm Note"; the
Tosi Note and the Chisholm Note are hereinafter sometimes collectively called
the "Notes" or singularly a "Note") in the original principal amount of
US$150,000; and
WHEREAS, the Chisholm Note is secured as provided in the Chisholm Loan
Agreement by the "Documents" (as defined therein) including, among other
security documents, (i) that certain Security Agreement between Borrower and
Chisholm and (ii) those certain guaranty and security agreements executed by
Subsidiaries, all of which "Documents", as the same may hereafter be amended or
supplemented, are collectively called the "Chisholm Security Instruments" (said
<PAGE> 2
Chisholm Security Instruments and the Tosi Security Instruments are collectively
called the "Security Instruments"), and any and all security interests held by
Chisholm under the Chisholm Security Instruments are collectively called the
"Chisholm Security Interests" (said Chisholm Security Interests and the Tosi
Security Interests are collectively called the "Security Interests"), which
Chisholm Security Instruments cover the Collateral; and
WHEREAS, Chisholm's obligation to advance funds under the Chisholm Loan
Agreement is conditioned upon, among other things, Chisholm holding a security
interest in all of the Collateral of Borrower and Subsidiaries which is pari
passu as described herein with the Tosi Security Interests and Tosi and Chisholm
(hereinafter sometimes collectively called the "Secured Parties" or singularly a
"Secured Party") entering into this Agreement; and
WHEREAS, Tosi and Chisholm are desirous of entering into this Agreement
to determine, between themselves, the rights and priorities of their respective
claims in respect of the Collateral and to provide for certain other matters;
and
WHEREAS, Secured Parties recognize that coordinated acts may from time
to time be in the best interests of Secured Parties in connection with the
Collateral; and
NOW, THEREFORE, Tosi and Chisholm hereby agree as follows:
Section 1. Grant of Security Interest and Relative Priority. Subject to
the terms and conditions of this Agreement, Tosi hereby waives application of
Section 6(i)(ii) of the Tosi Security Agreement to Borrower's and each
Subsidiary's grant of a security interest to Chisholm pursuant to the Chisholm
Security Instruments as in effect on the date hereof. Secured Parties each agree
that, as between themselves and notwithstanding the priority of the Tosi
Security Interests over the Chisholm Security Interests, but subject to the
terms and conditions of this Agreement, the Chisholm Security Interests shall be
of equal dignity and pari passu with the Tosi Security Interests in proportion
to the respective Percentage Interests of Secured Parties. As used herein,
"Percentage Interests" shall mean, on the date of determination, the ratio of
(i) aggregate indebtedness (whether under the Notes, the Security Instruments or
otherwise) that Borrower owes to Tosi or Chisholm, as the case may be, to (ii)
the then outstanding aggregate indebtedness (whether under the Notes, the
Security Instruments or otherwise) that Borrower owes to both Tosi and Chisholm.
Section 2. Benefits of Collateral. Where possession of Collateral is
required to perfect the Security Interests, Tosi shall hold such Collateral
required to be pledged and deposited by Borrower or a Subsidiary under the terms
of the Security Instruments, along with all payments and proceeds arising
therefrom, for the benefit of both Secured Parties as ratable security for the
payment of the Notes in accordance with the respective Percentage Interests of
Secured Parties. All payments and proceeds of every kind from any Collateral,
when directly received by a Secured Party (whether from payments on or with
respect to the Collateral, from foreclosure and sale to third parties, from sale
of Collateral subsequent to a foreclosure at which Tosi or Chisholm was the
purchaser, or otherwise), shall be held by it as a part of the Collateral and,
except as otherwise expressly provided hereinafter, shall be applied to the
Notes in the manner set forth in Section 3. Unless and until the Notes are paid
in full, upon payment of a Note, the Secured Party holding any Collateral given
to secure such Note
2
<PAGE> 3
shall not re-deliver or release any such Collateral to Borrower or any
Subsidiary, but shall deliver any such Collateral to the Secured Party whose
Note is then unpaid and outstanding. Notwithstanding anything in this Agreement
to the contrary, however, Borrower agrees that all payments of principal it
makes under the Notes shall be made to both Secured Parties in accordance with
their respective Percentage Interests (except to the extent that a Secured Party
may choose to convert part or all of such principal into shares of Borrower's
common stock in accordance with the provisions of the applicable Loan
Agreement).
Section 3. Status of Collateral in Event of Default. Irrespective of
the time, order or method of attachment, perfection or filing of liens or
security interests in the Collateral granted to either of Secured Parties for
either of the Notes, the net proceeds of any sale, enforcement or other
disposition of any of the Collateral, following the occurrence of an Event of
Default or the net proceeds of any distributions or credits received by a
Secured Party following any marshaling of the assets of Borrower or a Subsidiary
(whether in bankruptcy, reorganization, winding-up proceedings or similar
proceedings, or otherwise), or following confirmation of a plan of arrangement
or plan of reorganization of Borrower or a Subsidiary, shall be applied by
Secured Parties or any of their respective agents, nominees or assigns, as
follows:
(i) First, to the payment, of all costs and expenses incurred
by a Secured Party including reasonable compensation to its agents and counsel;
(ii) Second, to the payment of the amounts due for principal
of and interest on the Notes then outstanding, without preference or priority of
such indebtedness owing to one Secured Party over another, or of principal over
interest, or of interest over principal to the extent described in Section 1
hereof in accordance with the respective Percentage Interests of the Secured
Parties;
(iii) Third, to the satisfaction of any subordinate lien or
security interest in the Collateral to the extent required by law; and
(v) Fourth, to the payment to Borrower or a Subsidiary, its
successors or assigns, or as a court of competent jurisdiction may direct, or
otherwise as required by law, if any surplus is then remaining from such
proceeds.
Section 4. Expenses. By the terms of each of the Loan Agreements and
the Security Instruments, Borrower agrees to pay to each of Secured Parties all
reasonable expenses (including expenses for legal services) of or incident to
the exercise or enforcement of any of the provisions thereof, or any actual or
attempted sale, or any exchange, enforcement, collection, compromise or
settlement of any of the Collateral, and for the care thereof and defending or
asserting rights and claims of Secured Parties in respect thereto, by or
otherwise, including expenses of insurance; and Secured Parties agree that all
such expenses shall be indebtedness to a Secured Party to the extent incurred by
a Secured Party and not paid by Borrower, secured by the Collateral under the
Security Instruments.
3
<PAGE> 4
Section 5. Rights of Secured Parties. Before or after the existence of
any event of default under any Note, Loan Agreement or Security Instrument (an
"Event of Default") and upon request of either Secured Party, Secured Parties
shall meet or otherwise confer to establish written procedures to be taken by
either or both Secured Parties for the protection, collection and enforcement of
the Collateral. Neither Secured Party shall act with respect to the Collateral
except in accordance with the written procedures as established by Secured
Parties; however, if within fifteen (15) Business Days after a Secured Party has
requested that Secured Parties meet or otherwise confer, if Secured Parties,
notwithstanding their reasonable efforts made in good faith, have failed to meet
or otherwise agree upon and establish such procedures, a Secured Party, in its
sole reasonable discretion, in good faith and upon notice to the other Secured
Party, may (but is not required to) take whatever action it deems necessary to
protect and enforce the Collateral or the rights of such Secured Party under its
Security Instruments. In any such case such Secured Party, in its own name or in
the name of Borrower or a Subsidiary, may enforce any of the pledged Collateral
or the security therefor by any mode provided under the applicable Security
Instruments or by applicable law, and may collect, receive and receipt for all
proceeds receivable on account of ownership of the pledged Collateral which
proceeds shall be disbursed under the provisions of Section 3.
Section 6. Notice of Action to Enforce Note. If either Secured Party
desires to accelerate the maturity of its Note or to otherwise demand payment in
accordance with the terms thereof prior to the stated maturity thereof, such
Secured Party will first give the other Secured Party written notice of its
intent to take such action, which notice shall be given no less than five (5)
Business Days before the date of such action. Nothing herein contained shall
affect or impair either Secured Party's right, which is absolute and
unconditional, to enforce the payment of its Note; provided, however, that no
Secured Party may enforce, or demand enforcement of, any rights or the Security
Interests with respect to the Collateral except upon the terms and conditions
elsewhere stated in this Agreement.
Section 7. Learning of Default. Each Secured Party will promptly inform
the other Secured Party of any Event of Default under its Loan Agreement or any
Security Instrument to the extent that the party learning thereof considers such
Event of Default to be a material, substantial or serious Event of Default.
Section 8. Notices. All notices provided for or permitted to be given
under this Agreement must be in writing and must be given either by depositing
that writing in the United States mail, addressed to the recipient, postage
paid, and registered or certified with return receipt requested or by delivering
that writing to the recipient in person; by courier; or by facsimile
transmission; and a notice given under this Agreement is effective on receipt by
the party to which such notice was sent. All notices to be sent to a party
hereunder must be sent to or made at the addresses given for that party as
follows:
4
<PAGE> 5
(a) If to Tosi:
3900 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
Attention: Mr. David S. Hunt
Fax: 214-880-7101
(b) If to Chisholm:
Chisholm Energy Partners, L.L.C.
1160 Dairy Ashford, Suite 125
Houston, Texas 77079
Attention: John Chisholm
Fax: 281-497-7974
or to such other address or telecopy number as a party may by written notice
designate to the other party in accordance herewith.
Section 9. Benefits. This Agreement is solely for the benefit of Tosi
and Chisholm and their successors or assigns, and neither Borrower or a
Subsidiary nor any other Person shall have any right, benefit, priority or
interest under or by reason of this Agreement.
Section 10. Term. This Agreement shall remain in effect until all the
Notes are paid in full, notwithstanding the fact that either of the Loan
Agreements may terminate prior to such time; provided, however, that Secured
Parties may at any time mutually agree in writing to cancel this Agreement or
any portions hereof.
Section 11. Amendments, Waivers and Releases. No modification,
amendment or supplement to this Agreement shall be made without the written
consent of Secured Parties. No increase in the principal amount, change in the
interest rate, or change in the term of payment of principal or interest of
either of the Notes and no material modification, amendment or supplement to a
Loan Agreement or a Security Instrument shall be made without the written
consent of Secured Parties. Without the written consent of both Secured Parties,
neither Tosi nor Chisholm shall waive any Event of Default of Borrower or a
Subsidiary or voluntarily make or consent to any release, substitution or
exchange of the Collateral. Notwithstanding the foregoing, however, it is
recognized that defaults, such as misrepresentations of fact or failure to
perform covenants which are not material to Secured Parties' credit decisions or
position or interest payments which may on occasion be a few days late, are
sometimes not declared against Borrower, and that the failure to declare a
default by Tosi or Chisholm shall not, in and of itself, require any written
consent of the other party to any waiver of such Event of Default unless Tosi or
Chisholm specifically requests the other party to take or express some formal
position with respect to such default.
5
<PAGE> 6
Section 12. Joint Venture Disclaimer. Neither the execution of this
Agreement, nor the pro-rata treatment between Secured Parties in respect of the
Notes and the proceeds of the Collateral, nor any agreement to share in profits
or losses arising as a result of this Agreement, nor the actions of Tosi
contemplated by Section 2 hereof is intended to be or to create, and the
foregoing shall not be construed to be, any partnership, joint venture or other
joint enterprise between Secured Parties.
Section 13. Trust Disclaimer. No right, duty or obligation of a Secured
Party under or pursuant to this Agreement is intended to be or create, and none
of the foregoing shall be construed to be or create, any express, implied,
constructive trust or fiduciary relationship between Tosi and Chisholm. The
parties hereto agree and stipulate that neither party is acting as a trustee for
the other party.
Section 14. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the matters stated herein
and therein and any other matters relating to the transactions described or
referred to herein and therein. Therefore, this Agreement supersedes any other
agreements or communications which may be deemed to be agreements between the
parties hereto relating to said matters.
Section 15. Multiple Counterparts. This Agreement may be executed in
two or more counterparts, and it shall not be necessary that the signatures of
all parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
Section 16. Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Texas.
Section 17. Joinder of Borrower. Borrower and each Subsidiary join in
the execution of this Agreement to acknowledge the terms and provisions hereof
and to consent to Tosi's actions contemplated by Section 2 hereof. Borrower and
each Subsidiary further acknowledge and agree that unless and until the Notes
are paid in full, upon payment of a Note, the Secured Party holding such Note
and any Collateral given to secure the same shall not be required to re-deliver
or release any such Collateral to Borrower or any Subsidiary, such Secured Party
being authorized and directed to deliver any such Collateral to a Secured Party
whose Note is then unpaid and outstanding.
Section 18. Arbitration. Any dispute related to this Agreement (a
"Dispute") which is not resolved within any applicable resolution period, shall
be settled by binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then currently in effect, by an
arbitrator (the "Arbitrator") appointed in accordance with such rules.
Arbitration may be commenced upon written demand of any party to this Agreement
for resolution of such Dispute. The arbitration hearing shall be conducted at a
time and place set by the Arbitrator, provided that such hearing must occur
within thirty (30) days of the appointment of the Arbitrator. The decision of
the Arbitrator shall be final, and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof. The non-prevailing
party shall pay all costs of the arbitration including the costs and fees
(including reasonable attorneys fees) of the prevailing party.
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Section 19. Acknowledgment and Release. The parties acknowledge and
agree that Tosi holds, and will continue to hold, the Collateral that requires
possession to perfect a security interest therein pursuant to the terms of
Section 2 hereof as an accommodation to Chisholm. As to any Tosi action or
failure to act in connection with Tosi's holding of such Collateral prior to the
date hereof, Chisholm, in consideration of Tosi's willingness to enter into this
Agreement, hereby releases and discharges Tosi and its partners and each of
their respective officers, directors, shareholders, members, partners,
affiliates, employees, agents and representatives from and against any and all
liabilities, obligations, claims, causes of action, debts, damages (including,
without limitation, special, incidental, indirect or consequential damages,
damages for loss of business profits, business interruption and loss of business
interruption information), losses, penalties, fines, disputes, agreements,
understandings, costs and expenses (including, without limitation, attorneys'
fees, court costs and costs of investigation of each and every kind whatsoever,
whether absolute or contingent, known or unknown, at any time, directly or
indirectly) (collectively, the "Claims") in connection with any such action or
failure to act. As to any Tosi action or failure to act in connection with the
discharge of Tosi's efforts contemplated under Section 2 from and after the date
hereof, Chisholm hereby releases and discharges Tosi and its partners and each
of their respective officers, directors, shareholders, members, partners,
affiliates, employees, agents and representatives from and against any and all
Claims in connection with any such action or failure to act to the extent that
any such action or failure to act shall not be attributable to Tosi's gross
negligence or willful misconduct.
Section 20. Contingent Effectiveness. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall be of no force and effect unless
and until Tosi has received in cash the amount provided in Section 3 of that
certain Agreement for Second Extension and Amendment of Loan Documents of even
date herewith among, inter alia, Borrower and Tosi.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
TOSI, L.P.
By: Pitman Property Corp.,a Texas
corporation, General Partner
By /s/ J. W. Beavers, Jr.
J. W. Beavers, Jr., President
"Tosi"
CHISHOLM ENERGY PARTNERS, L.L.C.
By /s/ John Chisholm
Its Managing Director
"Chisholm"
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<PAGE> 8
APPROVED:
FLOTEK INDUSTRIES INC.
By Jerry D. Dumas
Its
"Borrower"
PETROVALVE INTERNATIONAL INC.
By Jerry D. Dumas
Its
PETROVALVE, INC.
By Jerry D. Dumas
Its
USA PETROVALVE, INC.
By Jerry D. Dumas
Its
TURBECO, INC.
By Jerry D. Dumas
Its
"Subsidiaries"
8
<PAGE> 1
Exhibit 99.1
Pursuant to Rule 13d-1(f)(1)(iii) of Regulation 13D-G of the General
Rules and Regulations of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, the undersigned agrees that the
statement to which this Exhibit is attached is filed on behalf of each of them
in the capacities set forth below.
/s/ David S. Hunt
David S. Hunt, individually and as
attorney-in-fact for:
TOSI, L.P. (1)
PITMAN PROPERTY CORP. (2)
J. W. BEAVERS, JR. (3)
(1) A power of attorney authorizing David S. Hunt to act on behalf of TOSI,
L.P. previously has been filed with the Commission.
(2) A power of attorney authorizing David S. Hunt to act on behalf of
Pitman Property Corp. previously has been filed with the Commission.
(3) A power of attorney authorizing David S. Hunt to act on behalf of J. W.
Beavers, Jr. previously has been filed with the Commission.
