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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 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), 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
Xxxxxxxx Energy Partners, L.L.C., a Texas limited liability company ("Xxxxxxxx
Energy"), as evidenced by that certain Promissory Note made by Borrower in favor
of Xxxxxxxx of even date herewith (as the same may be amended, modified,
renewed, extended or rearranged, the "Xxxxxxxx Note") and, in connection
therewith, is entering into various agreements with Xxxxxxxx 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 "Xxxxxxxx Loan
Agreement"), and is granting to Xxxxxxxx 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:
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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 Xxxxxxxx Loan Agreement. The
Borrower and the Lender acknowledge that the Borrower and Xxxxxxxx
Energy Partners, L.L.C. have entered into a Loan Agreement dated as of
February 24, 1999 (the "Xxxxxxxx Loan Agreement"). Notwithstanding
anything in this Agreement or in the Xxxxxxxx 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
Xxxxxxxx Loan Agreement would result in a right or benefit to Xxxxxxxx
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
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Lender with the same right or benefit that would be available to
Xxxxxxxx Energy from application of such provision of the Xxxxxxxx Loan
Agreement; and
"(b) In the event that application of any provision of the
Xxxxxxxx Loan Agreement would result in a right or benefit to Xxxxxxxx
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 Xxxxxxxx Energy from application of
such provision of the Xxxxxxxx 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 Xxxxxxxx Warrant.
"The Company and the Holder acknowledge that the Company has
issued a Warrant to Purchase Common Stock to Xxxxxxxx Energy Partners,
L.L.C. expiring on February 1, 2009 (the "Xxxxxxxx Warrant").
Notwithstanding anything in this Warrant or in the Xxxxxxxx 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 Xxxxxxxx Warrant (including without limitation the
warrant exercise price) would result in a right or benefit to
Xxxxxxxx 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 Xxxxxxxx Energy from application of such
provision of the Xxxxxxxx Warrant; and
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"(ii) In the event that application of any provision
of the Xxxxxxxx Warrant would result in a right or benefit to
Xxxxxxxx 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
Xxxxxxxx Energy from application of such provision of the
Xxxxxxxx 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 Xxxxxxxx Energy Partners, L.L.C., a Texas limited
liability company, as of February 24, 1999 (the "Xxxxxxxx Guaranty
Agreement"). Notwithstanding anything in this guaranty or in the
Xxxxxxxx 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 Xxxxxxxx Guaranty Agreement would result in a right or
benefit to Xxxxxxxx (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 Xxxxxxxx from application of such
provision of the Xxxxxxxx Guaranty Agreement; and
"(b) In the event that application of any provision
of the Xxxxxxxx Guaranty Agreement would result in a right or
benefit to Xxxxxxxx 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 Xxxxxxxx from application of such provision of
the Xxxxxxxx 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.
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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 XXXX, 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 Xxxxxxxx Security Agreements.
Debtor acknowledges that Debtor has entered into a Security Agreement
with Xxxxxxxx Energy Partners, L.L.C., a Texas limited liability
company, (the "Xxxxxxxx Security Agreement"). Notwithstanding anything
in this Security Agreement or in the Xxxxxxxx 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 Xxxxxxxx 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 Xxxxxxxx Security
Agreement; and
"(b) In the event that application of any provision
of the Xxxxxxxx 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 Xxxxxxxx Security Agreement."
SECTION 6. REGISTRATION RIGHTS AGREEMENT.
Pursuant to Section 4 thereof, the Registration Rights Agreement hereby
is amended (with respect to XXXX) by adding thereto a new Section 17, as
follows:
"17. Harmonization with Xxxxxxxx Registration Rights
Agreement. The Company and XXXX acknowledge that the Company
and Xxxxxxxx Energy Partners, L.L.C. have entered into a
Registration Rights Agreement dated as of February 24, 1999
(the "Xxxxxxxx Registration Rights Agreement").
Notwithstanding anything in this Agreement or in the Xxxxxxxx
Registration Rights Agreement or in any other document or
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instrument entered into in connection therewith to the
contrary, the Company and XXXX hereby agree as follows:
"(a) In the event that application of any
provision of the Xxxxxxxx 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 XXXX (in its capacity as a holder of Registrable
Securities) from application of an analogous provision in this
Agreement, then, as to XXXX and without the necessity of any
further action, this Agreement shall be deemed amended to
provide XXXX with the same right or benefit that would be
available to such Holder from application of such provision of
the Xxxxxxxx Registration Rights Agreement; and
"(b) In the event that application of any
provision of the Xxxxxxxx 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 XXXX and without the necessity of any
further action, this Agreement shall be deemed amended to
provide XXXX with the same right or benefit that would be
available to such Holder from application of such provision of
the Xxxxxxxx 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.
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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.
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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.
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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.
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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:
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 X. Xxxxx
Xxxxx Xxxxx, President and Chief
By: /s/ X. X. Xxxxxxx, Xx. Executive Officer
X. X. Xxxxxxx, Xx., President
GUARANTORS:
PETROVALVE INTERNATIONAL, INC.,
an Alberta corporation
By: /s/ Xxxxx X. Xxxxx
Xxxxx Xxxxx, President and Chief
Executive Officer
PETROVALVE, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxx
Xxxxx Xxxxx, President and Chief
Executive Officer
TURBECO, INC., a Texas corporation
By: /s/ Xxxxx X. Xxxxx
Xxxxx Xxxxx, President and Chief
Executive Officer
USA PETROVALVE, INC.,
a Texas corporation
By: /s/ Xxxxx X. Xxxxx
Xxxxx Xxxxx, President and Chief
Executive Officer
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