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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 XXXX, X.X., a Texas limited partnership
("Xxxx"), and XXXXXXXX ENERGY PARTNERS, L.L.C., a Texas limited liability
company ("Xxxxxxxx"), 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 Xxxx 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 "Xxxx
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 "Xxxx Note") in the original principal
amount of US$750,000; and
WHEREAS, the Xxxx Note is secured as provided in the Xxxx Loan
Agreement by the "Security Instruments" (as defined therein) including, among
other security documents, (i) that certain Security Agreement (the "Xxxx
Security Agreement") between Borrower and Xxxx 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 "Xxxx Security Instruments", any and all
security interests held by Xxxx under the Xxxx Security Instruments are
collectively called the "Xxxx Security Interests", and all collateral now or
hereafter held to secure the Indebtedness (as defined in the Xxxx Loan
Agreement) is hereinafter collectively called the "Collateral"; and
WHEREAS, Borrower and Xxxxxxxx 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 "Xxxxxxxx Loan Agreement" and,
jointly with the Xxxx 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 "Xxxxxxxx Note"; the
Xxxx Note and the Xxxxxxxx Note are hereinafter sometimes collectively called
the "Notes" or singularly a "Note") in the original principal amount of
US$150,000; and
WHEREAS, the Xxxxxxxx Note is secured as provided in the Xxxxxxxx Loan
Agreement by the "Documents" (as defined therein) including, among other
security documents, (i) that certain Security Agreement between Borrower and
Xxxxxxxx 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 "Xxxxxxxx Security Instruments" (said
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Xxxxxxxx Security Instruments and the Xxxx Security Instruments are collectively
called the "Security Instruments"), and any and all security interests held by
Xxxxxxxx under the Xxxxxxxx Security Instruments are collectively called the
"Xxxxxxxx Security Interests" (said Xxxxxxxx Security Interests and the Xxxx
Security Interests are collectively called the "Security Interests"), which
Xxxxxxxx Security Instruments cover the Collateral; and
WHEREAS, Xxxxxxxx'x obligation to advance funds under the Xxxxxxxx Loan
Agreement is conditioned upon, among other things, Xxxxxxxx holding a security
interest in all of the Collateral of Borrower and Subsidiaries which is pari
passu as described herein with the Xxxx Security Interests and Xxxx and Xxxxxxxx
(hereinafter sometimes collectively called the "Secured Parties" or singularly a
"Secured Party") entering into this Agreement; and
WHEREAS, Xxxx and Xxxxxxxx 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, Xxxx and Xxxxxxxx hereby agree as follows:
Section 1. Grant of Security Interest and Relative Priority. Subject to
the terms and conditions of this Agreement, Xxxx hereby waives application of
Section 6(i)(ii) of the Xxxx Security Agreement to Borrower's and each
Subsidiary's grant of a security interest to Xxxxxxxx pursuant to the Xxxxxxxx
Security Instruments as in effect on the date hereof. Secured Parties each agree
that, as between themselves and notwithstanding the priority of the Xxxx
Security Interests over the Xxxxxxxx Security Interests, but subject to the
terms and conditions of this Agreement, the Xxxxxxxx Security Interests shall be
of equal dignity and pari passu with the Xxxx 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 Xxxx or Xxxxxxxx, 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 Xxxx and Xxxxxxxx.
Section 2. Benefits of Collateral. Where possession of Collateral is
required to perfect the Security Interests, Xxxx 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 Xxxx or Xxxxxxxx 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
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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.
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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:
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(a) If to Xxxx:
3900 Thanksgiving Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xx. Xxxxx X. Xxxx
Fax: 000-000-0000
(b) If to Xxxxxxxx:
Xxxxxxxx Energy Partners, L.L.C.
0000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxxx
Fax: 000-000-0000
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 Xxxx
and Xxxxxxxx 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 Xxxx nor Xxxxxxxx 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 Xxxx or Xxxxxxxx shall not, in and of itself, require any written
consent of the other party to any waiver of such Event of Default unless Xxxx or
Xxxxxxxx specifically requests the other party to take or express some formal
position with respect to such default.
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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 Xxxx
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 Xxxx and Xxxxxxxx. 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 Xxxx 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 Xxxxxxxx. As to any Xxxx action or
failure to act in connection with Tosi's holding of such Collateral prior to the
date hereof, Xxxxxxxx, in consideration of Tosi's willingness to enter into this
Agreement, hereby releases and discharges Xxxx 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 Xxxx action or failure to act in connection with the
discharge of Tosi's efforts contemplated under Section 2 from and after the date
hereof, Xxxxxxxx hereby releases and discharges Xxxx 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 Xxxx 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 Xxxx.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
XXXX, X.X.
By: Xxxxxx Property Corp.,a Texas
corporation, General Partner
By /s/ X. X. Xxxxxxx, Xx.
X. X. Xxxxxxx, Xx., President
"Xxxx"
XXXXXXXX ENERGY PARTNERS, L.L.C.
By /s/ Xxxx Xxxxxxxx
Its Managing Director
"Xxxxxxxx"
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APPROVED:
FLOTEK INDUSTRIES INC.
By Xxxxx X. Xxxxx
Its
"Borrower"
PETROVALVE INTERNATIONAL INC.
By Xxxxx X. Xxxxx
Its
PETROVALVE, INC.
By Xxxxx X. Xxxxx
Its
USA PETROVALVE, INC.
By Xxxxx X. Xxxxx
Its
TURBECO, INC.
By Xxxxx X. Xxxxx
Its
"Subsidiaries"
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