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EXHIBIT 10.5
AGREEMENT FOR EXTENSION AND AMENDMENT OF LOAN
AGREEMENT, PROMISSORY NOTE AND WARRANT
This Agreement for Extension and Amendment of Loan Agreement,
Promissory Note and Warrant is made on November 2, 1998, to be effective as of
October 16, 1998, 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 XXXX,
X. X., 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) (the "Note") and that certain
Convertible Loan Agreement dated as of October 16, 1997 between Borrower and
Lender (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 October 16, 1998; 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:
1. The maturity date of the Note hereby is extended to January 14,
1999, on which date the Note shall be due and payable in full.
2. Borrower acknowledges and agrees that, as of the effective date
hereof, the principal sum of US$750,000.00 and accrued but unpaid interest on
the Note of US$3,333.33 (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.
3. Simultaneously with the execution and delivery of this Agreement,
Borrower shall pay to Lender in cash (a) all Accrued Interest and (b) $6,859.35
towards the payment of the Lender Expenses.
4. From and after the effective date hereof, interest under the Note
shall be due and payable monthly in arrears on the first day of each calendar
month.
Agreement for Extension and Amendment of Loan Agreement, Promissory Note and
Warrant As of October 16, 1998 - Page 1 of 6
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5. 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.
6. The Guarantors heretofore have guaranteed payment of the
Indebtedness (as such term is defined in the applicable Guaranty) 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.
7. 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.
8. 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
Agreement for Extension and Amendment of Loan Agreement, Promissory Note and
Warrant As of October 16, 1998 - Page 2 of 6
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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.
9. Subject to the provisions of Section 10 below, (a) each and every
reference in the Warrant to "October 16, 1998" is hereby amended to read
"October 16, 1999" and (b) Section 1 of Schedule 2.04 of the Loan Agreement
hereby is amended by deleting the words "the maturity date of the Note" and
adding in their place the words "the date that the original principal amount of
the Note is paid in full."
10. Notwithstanding anything in this Agreement to the contrary, the
parties understand that the amendment to and extension of the Warrant effected
by Section 9(a) above (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 by Section 9(b) above (the
"Loan Conversion Extension"), are subject to the approval of the Vancouver
Stock Exchange ("VSE Approval"), and that VSE Approval has not yet been
obtained. In light of the above, Borrower and Lender understand and agree that
neither the Warrant Amendment nor the Loan Conversion Extension shall be of any
force or effect unless and until VSE Approval has been obtained.
11. Each of the following shall constitute an Event of Default under
Section 6.01(c) of the Loan Agreement:
(a) Borrower's failure to obtain unqualified VSE Approval on or
before December 2, 1998;
(b) The failure by Borrower or by any Guarantor timely to comply with
each of its covenants set forth in this Agreement; and
(c) The breach by Borrower or by any Guarantor of any of its
representations or warranties set forth in this Agreement.
12. 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.
13. 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.
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Warrant As of October 16, 1998 - Page 3 of 6
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14. 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 Section 10 above, the Vancouver Stock Exchange) 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.
15. All capitalized undefined terms used herein shall have the
meanings respectively ascribed to them in the Loan Agreement.
16. 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.
17. Promptly upon Lender's request, Borrower shall obtain the
countersignature to this Agreement, or such other form of acknowledgment or
consent satisfactory to Borrower, of Pacific Corporate Trust Company.
18. 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.
19. 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 Extension and Amendment of Loan Agreement, Promissory Note and
Warrant As of October 16, 1998 - Page 4 of 6
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IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement for Extension and Amendment of Loan Agreement, Promissory Note and
Warrant on November 2, 1998, to be effective as of October 16, 1998.
LENDER: BORROWER:
XXXX, X. X., a Texas limited partnership FLOTEK INDUSTRIES, INC.,
an Alberta corporation
By: Xxxxxx Property Corp.,
a Texas corporation,
General Partner
By: /s/ Xxxxx Xxxxx
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Xxxxx Xxxxx, President and Chief
Executive Officer
By: /s/ X. X. Xxxxxxx, Xx.
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X. X. Xxxxxxx, Xx., President
GUARANTORS:
PETROVALVE INTERNATIONAL, INC.,
an Alberta corporation
By: /s/ Xxxxx Xxxxx
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Xxxxx Xxxxx, President and Chief
Executive Officer
PETROVALVE, INC.,
a Delaware corporation
By: /s/ Xxxxx Xxxxx
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Xxxxx Xxxxx, President and Chief
Executive Officer
(GUARANTORS continued on next page)
Agreement for Extension and Amendment of Loan Agreement, Promissory Note and
Warrant As of October 16, 1998 - Page 5 of 6
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GUARANTORS (continued):
TURBECO, INC., a Texas corporation
By: /s/ Xxxxx Xxxxx
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Xxxxx Xxxxx, President and Chief
Executive Officer
USA PETROVALVE, INC.,
a Texas corporation
By: /s/ Xxxxx Xxxxx
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Xxxxx Xxxxx, President and Chief
Executive Officer
Agreement for Extension and Amendment of Loan Agreement, Promissory Note and
Warrant As of October 16, 1998 - Page 6 of 6
