Exhibit 99.2
CONVERTIBLE LOAN AGREEMENT
THIS CONVERTIBLE LOAN AGREEMENT is made and entered into as of October
16, 1997, by and between Flotek Industries Inc., an Alberta corporation,
whose principal executive offices are located at 0000 Xxxxxx Xxxxxxx Xxxxx,
Xxxxxxx, Xxxxx 00000 (the "Borrower") and XXXX, X. X., a Texas limited
partnership, whose principal executive offices are located at 3900
Thanksgiving Tower, 0000 Xxx Xxxxxx, Xxxxxx, Xxxxx 00000 (the "Lender").
In consideration of the mutual covenants and agreements herein contained
and of the loan hereinafter referred to, the Borrower and the Lender hereby
agree as follows:
ARTICLE 1
GENERAL TERMS
Section 1.01 Certain Definitions. As used in this Agreement, the
following terms shall have the meanings respectively ascribed to them below
unless the context clearly requires otherwise:
"Agreement" shall mean this Convertible Loan Agreement, as the same
may from time to time be amended or supplemented.
"Ancillary Documents" shall mean collectively the Security
Instruments, the Guaranties and the Registration Rights Agreement.
"Balance Sheet" shall mean the audited consolidated balance sheet
of the Borrower and its Subsidiaries for the Borrower's fiscal year
ended February 28, 1997.
"Business Day" shall mean any day other than a Saturday, Sunday or
day on which commercial banks are authorized or required to be closed
under the laws of the State of Texas.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Code" shall mean the United States Internal Revenue Code of 1986,
as amended.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" shall mean the occurrence of any of the events
specified in Section 6.01 hereof, provided that any requirement for
notice or lapse of time or any other condition precedent has been
satisfied.
"Excepted Liens" shall mean: (i) Liens for taxes, assessments or
other governmental charges or levies not yet due and payable or that are
being diligently contested in good faith by appropriate action by or on
behalf of the Borrower or any Subsidiary and for which adequate reserves
have been established; (ii) Liens in connection with worker's
compensation, unemployment insurance or other social-security, old-age-
pension or public-liability obligations; (iii) legal or equitable
encumbrances deemed to exist by reason of negative pledge covenants and
other covenants or undertakings of like nature; (iv) legal or equitable
encumbrances deemed to exist by reason of the existence of any
litigation or other legal proceeding or arising out of a judgment or
award with respect to which an appeal is being diligently prosecuted in
good faith by appropriate action; (v) vendors', carriers',
warehousemen's, repairmen's, mechanics, workers', materialmen's,
construction or other like Liens arising by operation of law in the
ordinary course of business or incident to the construction or
improvement of any Property in respect of obligations that are not yet
due and payable or that are being diligently contested in good faith by
appropriate proceedings by or on behalf of the Borrower or any
Subsidiary and for which adequate reserves have been established; and
(vi) servitude, easements, restrictions, rights of way and other similar
rights in real or immovable Property or any interests therein that, in
each case, do not materially impair the use of such Property for the
purposes for which it is held by the Borrower or any Subsidiary.
"Existing Security Agreement" shall mean that certain Security
Agreement dated September 18, 1997 between the Borrower and the Lender
pursuant to which the Borrower granted a first priority security
interest in the collateral specified therein as security for the
Existing XXXX Loan.
"Existing XXXX Loan" shall mean all indebtedness and obligations of
the Borrower to the Lender pursuant to the loan evidenced by that
certain promissory note dated September 18, 1997 in the original
principal amount of US$293,000.00 made by the Borrower in favor of the
Lender and secured pursuant to the Existing Security Agreement.
"Expenses" shall include, without limitation, any and all court
costs, attorneys' fees (including, without limitation, for trial, appeal
or other proceedings), fees of auditors and accountants and
investigation and pre-litigation expenses that the Lender may incur,
directly or indirectly, together with interest at the post-maturity rate
specified in the Note on each such amount from the date of written
demand or request by the Lender for reimbursement until the date of
reimbursement to the Lender.
"Financial Statements" shall mean the audited consolidated annual
financial statements of the Borrower and its Subsidiaries for the
Borrower's fiscal year ended February 28, 1997, and the unaudited
consolidated interim financial statements of the Borrower and its
Subsidiaries for the Borrower's fiscal quarter ended August 31, 1997
(including all related schedules and notes thereto).
"GAAP" shall mean United States generally-accepted accounting
principles.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other
direction or requirement (including, without limitation, any of the
foregoing which relate to environmental standards or controls, energy
regulations and occupational, safety and health standards or controls)
of any (domestic or foreign) federal, state, county, municipal or other
government, department, commission, board, court, agency or any other
instrumentality of any of them, which exercises jurisdiction over the
Borrower or any of its Property or of any Subsidiary or any of such
Subsidiary's Property.
"Guaranty" shall mean each and every guaranty instrument or
agreement executed and delivered to the Lender by any Subsidiary to
secure any Indebtedness.
"Indebtedness" shall, mean any and all amounts owing or to be owing
by the Borrower to the Lender in connection with this Agreement, the
Note and any Security Instruments, whether principal, interest or
otherwise, and all other liabilities and obligations of the Borrower to
the Lender from time to time existing, whether in connection with this
or any other transaction.
"Judgment" shall have the meaning ascribed to it in Borrower's
promissory note evidencing the Existing XXXX Loan.
"Lien" shall mean any security agreement, financing statement filed
with an appropriate governmental authority, conditional sale or other
title retention agreement, lease, consignment or bailment given for
security purposes, lien, mortgage, pledge, option, preemptive right
(whether contractual or statutory), right of first refusal, encumbrance,
adverse interest, constructive trust or other trust, claim, attachment,
exception to or defect in title or other ownership interest (including,
without limitation, reservations, rights of entry, possibilities of
reverter, encroachments, easements, rights of way, restrictive
covenants, leases and licenses) of any kind, that (i) creates or confers
an interest in property to secure payment or performance of a liability,
obligation or claim, or that retains or reserves such an interest for
such purpose; (ii) grants to any Person the right to purchase or
otherwise acquire, or obligates any Person to sell or otherwise dispose
of, or otherwise results or may result in any Person acquiring, any
property or interest therein; (iii) restricts the transfer of, or the
exercise of any rights or the enjoyment of any benefits arising by
reason of ownership of, any property; or (iv) otherwise constitutes an
interest in or claim against property arising pursuant to common law or
to any law, statute, contract, judgment, order or decree.
"Loan" shall mean the US$750,000.00 loan made by the Lender to the
Borrower pursuant to this Agreement and the Note.
"Material Adverse Effect" shall mean any material and adverse
effect on (i) the assets, liabilities, financial condition, business,
operations, affairs or circumstances of the Borrower or any Subsidiary
individually or of the Borrower and its Subsidiaries on a consolidated
basis from those reflected in the Financial Statements or from the facts
represented or warranted in this Agreement or any Security Instrument,
or (ii) the ability of the Borrower or any Subsidiary individually or of
the Borrower and its Subsidiaries on a consolidated basis to carry out
its business as at the date of this Agreement or as proposed at the date
of this Agreement to be conducted or meet its obligations under this
Agreement, the Note and the Security Instruments on a timely basis.
"Note" shall mean the convertible promissory note made by the
Borrower in favor of the Lender in the form attached as Exhibit 1.01
hereto, together with any and all renewals, extensions for any period,
increases or rearrangements thereof.
"Person" shall mean any individual, corporation, partnership,
limited partnership, limited liability company, joint venture, joint
stock company, association, trust, unincorporated organization, or
federal, state or local government (domestic or foreign) or any agency
or political subdivision thereof, or any other form of entity.
"Plan" shall mean any plan subject to Title IV of ERISA and
maintained by the Borrower or any Subsidiary, or any such plan to which
the Borrower or any Subsidiary is required to contribute on behalf of
its employees.
"Potential Default" shall mean the occurrence of any of the events
specified in Section 6.01 hereof, whether or not any requirement for
notice or lapse of time or other condition precedent has been satisfied.
"Private Placement" shall mean the Borrower's private placement of
11,666,667 units (each consisting of one common share and one warrant
exercisable to purchase one additional common share) for an aggregate of
US$1,250,000.00 that the Borrower announced on September 14, 1997.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible.
"Registration Rights Agreement" shall mean that certain
registration rights agreement of even date herewith by and among, inter
alia, the Lender and the Borrower that provides registration rights for
the Shares issuable upon conversion of the principal amount of the Loan
and upon exercise of the Warrant.
"Security Instruments" shall mean collectively the Existing
Security Agreement and any and all other agreements or instruments now
or hereafter executed and delivered by the Borrower, any Subsidiary or
any other Person in connection with, or as security for the payment or
performance of, any Indebtedness (including, without limitation, the
Existing XXXX Loan, the Note or this Agreement and any and all
financing, continuation and termination statements related thereto), as
such agreements may be amended or supplemented from time to time.
"Shareholder Protection Rights Plan" shall mean the shareholder
protection rights plan evidenced by that certain Shareholder Protection
Rights Plan dated as of July 28, 1993 between the Borrower and Pacific
Corporate Trust Company, as Rights Agent.
"Shares" shall mean the Borrower's common shares.
"Subsidiary" shall mean any Person of which more than fifty percent
(50%) of the issued and outstanding securities having ordinary voting
power for the election of directors or others with analogous power and
authority is owned or controlled, directly or indirectly, by the
Borrower and/or one or more of its subsidiaries.
"VSE" shall mean the Vancouver Stock Exchange.
"Warrant" shall mean that certain Warrant of even date herewith
pursuant to which the Borrower has granted to the Lender the right to
purchase up to 7,000,000 shares of the Borrower's common shares on the
terms and conditions set forth therein.
Section 1.02 Accounting Principles. Any and all determinations of the
character or amount of any asset or liability or item of income or expense
required to be determined or any consolidation or other accounting
computation required to be made under this Agreement shall be made in
accordance with GAAP applied on a basis consistent with the Financial
Statements, except to the extent that such principles are inconsistent with
the requirements of this Agreement. All determinations of financial amounts
on the consolidated basis of the Borrower and its Subsidiaries shall make due
allowance for any minority stock interest in such Subsidiaries.
Section 1.03 Currency. Except where a reference to Canadian currency
is indicated by the use "CDN," all currency references in this Agreement are
references to the lawful moneys of the United States of America and where,
for any purpose in connection with the Loan, it is necessary to refer to the
lawful moneys of Canada, a deemed exchange rate of CDN$1.40 per US$1.00 shall
apply so that, for example, the original principal amount of the Loan
expressed in Canadian funds is CDN$1,050,000.00.
ARTICLE 2
AMOUNT AND TERMS OF LOAN
Section 2.01 Term Loan. Subject to the terms and conditions and relying
on the representations and warranties contained in this Agreement, the Lender
agrees to make, on the date hereof, the Loan, which shall be evidenced by the
Borrower's issuance, execution and delivery of the Note.
Section 2.02 Payment Procedures. All payments and prepayments made by
the Borrower under the Note or this Agreement shall be made to the Lender at
its principal executive offices in immediately available funds before 5:00
p.m., Dallas, Texas time, on the date that such payment is required to be
made. Any payment received and accepted by the Lender after such time shall
be considered for all purposes (including the calculation in interest, to the
extent permitted by law) as having been made on the Lender's next following
Business Day.
Section 2.03 Business Day. If the date for any Loan payment or
prepayment hereunder falls on a day that is not a Business Day, then for all
purposes of the Note and this Agreement the same shall be deemed to have
fallen on the next following Business Day, and such extension of time shall
in such case be included in the computation of payments of interest.
Section 2.04 Conversion of Loan Principal. The principal amount of
the Loan shall be convertible into the common shares of the Borrower on the
terms and conditions set forth in Schedule 2.04 hereto.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, the Borrower
represents and warrants to the Lender (with each such representation and
warranty's being deemed material and relied upon by the Lender irrespective
of whether such materiality and/or reliance actually exists) as follows:
Section 3.01 Corporate Existence. Each of the Borrower and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and is duly
qualified to transact business as a foreign corporation in all jurisdictions
in which the Property owned or leased, or the business transacted by, it
makes such qualification necessary or desirable.
Section 3.02 Corporate Power and Authorization. The Borrower is duly
authorized and empowered to create and issue the Note and the Warrant, to
execute, deliver and perform its obligations under this Agreement, and to
execute, deliver and perform its obligations under the Ancillary Documents to
which it is a party. Each Subsidiary is duly authorized and empowered to
execute, deliver and perform its obligations under the Ancillary Documents to
which it is a party. All corporate action on the Borrower's part necessary
for the due creation and issuance of the Note and the Warrant and for the due
execution, delivery and performance of this Agreement and of the Ancillary
Documents has been duly and effectively taken. All corporate action on each
Subsidiary's part necessary for the due execution, delivery and performance
of the Ancillary Documents to which it is a party has been duly and
effectively taken.
Section 3.03 Binding Obligations. This Agreement, the Note, the
Warrant and the Ancillary Documents to which the Borrower is a party
constitute valid and binding obligations of the Borrower, enforceable against
the Borrower in accordance with their respective terms (except to the extent
that enforcement may be subject to any applicable bankruptcy, insolvency or
similar laws of general application affecting the enforcement of creditors'
rights). Each Ancillary Document to a Subsidiary is a party constitutes the
valid and binding obligations of such Subsidiary, enforceable against such
Subsidiary in accordance with its terms (except to the extent that
enforcement may be subject to any applicable bankruptcy, insolvency or
similar laws of general application affecting the enforcement of creditors'
rights).
Section 3.04 No Legal Bar or Resultant Lien. The Borrower's
execution, delivery and performance of the Note, the Warrant, this Agreement
and the Ancillary Documents to which the Borrower is a party does not and
shall not violate any provisions of its articles or certificate of
incorporation or charter, bylaws or any contract, agreement, instrument or
Governmental Requirement to which the Borrower is subject (other than any
Governmental Requirement the violation of which, either individually or in
the aggregate, would not have a Material Adverse Effect), or result in the
creation or imposition of, or obligation to create, any Lien upon any
Property of the Borrower, other than any Lien permitted by this Agreement.
Each Subsidiary's execution, delivery and performance of the Ancillary
Documents to which it is a party does not and shall not violate any
provisions of such Subsidiary's articles or certificate of incorporation or
charter, bylaws or any contract, agreement, instrument or Governmental
Requirement to which such Subsidiary is subject (other than any Governmental
Requirement the violation of which, either individually or in the aggregate,
would not have a Material Adverse Effect), or result in the creation or
imposition of, or obligation to create, any Lien upon any Property of such
Subsidiary, other than any Lien permitted by this Agreement.
Section 3.05 No Consents. Neither the Borrower's execution, delivery
and performance of the Note, the Warrant, this Agreement and the Ancillary
Documents to which it is a party, nor each Subsidiary's execution, delivery
and performance of the Ancillary Documents to which such Subsidiary is a
party, requires the consent or approval of any other Person.
Section 3.06 Financial Condition. The Financial Statements have been
delivered to the Lender, have been prepared in accordance with GAAP,
consistently applied on a basis consistent with past practice, and fully and
accurately present the financial condition and changes in financial position
of the Borrower and its Subsidiaries as at the date or dates and for the
period or periods therein stated, subject only to typical year-end audit
adjustments. Since the date of the Balance Sheet, no event has occurred with
respect to the Property, operations, business, condition (financial or
otherwise) or prospects of the Borrower or any Subsidiary that could have a
Material Adverse Effect.
Section 3.07 Investments and Guaranties. At the date of this
Agreement, neither the Borrower nor any Subsidiary has made any investment
in, advance to or guarantee of the obligations of any Person except those the
material details of which are disclosed in the Financial Statements.
Section 3.08 Liabilities; Litigation. Except for liabilities incurred
in the ordinary course of business, neither the Borrower nor any Subsidiary
has any material (individually or in the aggregate) liabilities, direct or
contingent, except those the material details of which are set forth in the
Financial Statements. There is no litigation, legal, administrative or
arbitral proceeding, investigation or other action of any nature pending or
threatened against or affecting the Borrower or any Subsidiary that involves
the possibility of any judgment or liability not fully covered by insurance,
and which could have a Material Adverse Effect. No unusual or unduly
burdensome restriction, restraint, or hazard exists by contract, law or
governmental regulation or otherwise relating to the business or Property of
the Borrower or any Subsidiary.
Section 3.09 Taxes; Governmental Charges. The Borrower and its
Subsidiaries have filed all tax returns and reports required to be filed and
have paid all taxes, assessments, fees and other governmental charges levied
upon any of them or upon any of their respective Property or income that are
due and payable, including interest and penalties.
Section 3.10 Liens. The Borrower and its Subsidiaries have good and
marketable title to their respective (individually or in the aggregate)
Property, free and clear of all Liens except for (i) Liens the material
details of which have been set forth in the Financial Statements, (ii) Liens
that do not materially interfere with the occupation, use and enjoyment by
the Borrower or any Subsidiary of any of their respective Property in the
ordinary course of business as presently conducted or materially impair the
value thereof and (iii) Liens in favor of the Lender or otherwise
specifically permitted or contemplated by this Agreement or the Security
Instruments.
Section 3.11 Defaults. Neither the Borrower nor any Subsidiary is in
default, nor has any event or circumstance occurred that, with the passage of
time or the giving of notice or both would constitute a default, under any
loan or credit agreement, indenture, mortgage, deed of trust, security
agreement or other agreement or instrument evidencing or pertaining to any
obligation for the payment of money of the Borrower or any Subsidiary, or
under any material agreement or other instrument to which the Borrower or any
Subsidiary is a party or by which the Borrower or any Subsidiary or any of
their respective Property is or may be bound.
Section 3.12 Casualties; Taking of Property. Since the date of the
Balance Sheet, neither the business nor the Property of the Borrower or any
Subsidiary have been materially and adversely affected as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any domestic or foreign
government or any agency thereof, riot, activities of armed forces or acts of
God or of any public enemy.
Section 3.13 Compliance with the Law. Neither the Borrower nor any
Subsidiary:
(a) is in violation of any Governmental Requirement (other than
any Governmental Requirement the failure to be in compliance with which,
either individually or in the aggregate, would not have a Material
Adverse Effect); or
(b) has failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of any of its
Property or the conduct of its business;
which violation or failure could have (in the event such violation or failure
were asserted by any Person through appropriate action) a Material Adverse
Effect.
Section 3.14 ERISA. The Borrower and its Subsidiaries are in
compliance with the applicable provisions of ERISA, and no "reportable
event," as such term is defined in Section 4043 of ERISA, has occurred with
respect to any Plan of the Borrower or any Subsidiary.
Section 3.15 Capitalization.
(a) The Borrower's issued and outstanding capital stock consists solely
of the capital stock set forth in Schedule 3.15 hereto. The Borrower has not
issued, or agreed to issue, any Shares or any securities convertible into, or
exchangeable with, Shares or entered into, issued or granted, or agreed to
enter into, issue or grant, any rights, plans, options, warrants or
agreements for the purchase or acquisition (whether or not contingent) of any
capital stock (collectively, "Stock Rights") other than as set forth in such
Schedule 3.15. All of the Borrower's issued and outstanding capital stock
was duly authorized and validly issued and is fully-paid and nonassessable.
All of the Borrower's issuances of its capital stock and Stock Rights were
made in compliance with all applicable laws and with VSE rules and
regulations.
(b) Except as to Petrovalve International (Barbados) Inc., of which the
Borrower owns beneficially and of record 98% of the issued and outstanding
capital stock, the Borrower owns, directly or indirectly, 100% of the issued
and outstanding capital stock of all of the Subsidiaries. All of the capital
stock of each Subsidiary was duly authorized and validly issued and is fully-
paid and nonassessable. The capital stock of Petrovalve International Inc.,
an Alberta corporation, Petrovalve, Inc., a Delaware corporation, USA
Petrovalve, Inc., a Texas corporation, and Turbeco, Inc., a Texas
corporation, that has been pledged to the Lender as part of the security for
the Loan constitutes all of the capital stock of such corporations. No
Subsidiary has issued, or agreed to issue, any shares of capital stock or any
securities convertible into, or exchangeable with, shares of capital stock or
entered into, issued or granted, or agreed to enter into, issue or grant, any
Stock Rights.
Section 3.16 Trade Rights. There are no pending or threatened claims
against the Borrower or any Subsidiary alleging infringement of, or conflict
with the rights of others under, any patent, patent application, trademark,
service xxxx, copyright, trade secret or similar intangible franchise,
license or right (collectively, "Trade Rights") and, to the best of the
Borrower's knowledge, no reasonable basis exists for any such allegation.
Section 3.17 Necessary Approvals. The Borrower and each Subsidiary
validly holds all permits, licenses, approvals and Trade Rights necessary or
desirable to enable it to conduct its business as it is currently conducted.
Section 3.18 No Material Misstatements. No information that the
Borrower or any Subsidiary has furnished to the Lender in any form in
connection with the negotiation of this Agreement contained or contains any
material misstatement of fact or omitted or omits to state a material fact or
any fact necessary to make the statements contained therein not misleading.
ARTICLE 4
AFFIRMATIVE COVENANTS
The Borrower shall at all times comply with the covenants contained in
this Article 4 for so long as any part of the Indebtedness remains
outstanding:
Section 4.01 Financial Statements and Reports. The Borrower shall
promptly furnish to the Lender from time to time such information regarding
the business and affairs and financial condition of the Borrower and its
Subsidiaries as the Lender may reasonably request, and shall also furnish to
the Lender the following:
(a) Annual Reports. Promptly after becoming available and in any event
within 140 days after the close of each fiscal year of the Borrower (or such
shorter period of time within which the Borrower must file such information
with the Commission), the audited consolidated and consolidating balance
sheets of the Borrower and its Subsidiaries as at the end of such year, the
audited consolidated and consolidating statements of profit and loss of the
Borrower and its Subsidiaries for such year and the audited consolidated and
consolidating statements of reconciliation of capital accounts of the
Borrower and its Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year,
accompanied by the related report of the Borrower's independent public
accountants, which report shall be to the effect that such statements have
been prepared in accordance with GAAP consistently applied throughout the
period indicated except to the extent stated therein; and
(b) Quarterly Reports. Promptly after becoming available and in any
event within 60 (or such shorter period of time within which the Borrower
must file such information with the Commission) days after the end of each of
the first three quarterly periods in each fiscal year of the Borrower, the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such period, the consolidated and consolidating
statements of profit and loss of the Borrower and its Subsidiaries for such
quarter and for the period from the beginning of the fiscal year to the close
of such quarter, and the consolidated and consolidating statements of
reconciliation of capital accounts of the Borrower and its Subsidiaries for
such quarter and for the period from the beginning of the fiscal year to the
close of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the immediately-
preceding fiscal year, certified by the principal financial officer of the
Borrower to have been prepared in accordance with GAAP consistently applied
throughout the period indicated except to the extent stated therein, subject
to typical changes resulting from year-end adjustments; and
(c) Audit Reports. Promptly upon receipt thereof, one copy of each
other report submitted to the Borrower or any Subsidiary by independent
accountants in connection with any annual, interim or special audit made by
them of the books of the Borrower or any Subsidiary.
(d) Commission and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Borrower to stockholders generally, and of each regular
or periodic report and any registration statement, prospectus or written
communication (other than transmittal letters) in respect thereof filed by
the Borrower with, or received by the Borrower in connection therewith from,
any securities exchange or the Commission.
Section 4.02 Certificates of Compliance. Concurrently with the
furnishing of the annual and quarterly financial statements pursuant to
Subsections 4.01(a) and (b) hereof, the Borrower shall furnish or cause to be
furnished to the Lender a certificate in form and substance satisfactory to
the Lender signed by the principal financial officer of the Borrower stating
(i) that the Borrower has fulfilled its obligations under this Agreement, the
Note, the Warrant and the Security Instruments; and (ii) that all
representations made herein and therein continue to be true and correct (or
specifying the nature of any change), or, if any Potential Default shall have
occurred and be continuing, specifying such Potential Default and the nature
and status thereof; and (iii) containing or accompanied by such financial or
other details, information and material as the Lender reasonably may request
to evidence such compliance.
Section 4.03 Taxes and Other Liens. The Borrower shall pay and
discharge promptly all taxes, assessments and governmental charges or levies
imposed upon the Borrower or any Subsidiary or upon the income or any
Property of the Borrower or any Subsidiary as well as all claims of any kind
(including claims for labor, materials, supplies and rent) that, if unpaid,
might become a Lien upon any or all of the Property of the Borrower or any
Subsidiary; provided, however, that neither the Borrower nor any Subsidiary
shall be required to pay any such tax, assessment, charge, levy or claim if
the amount, applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings diligently conducted by or on behalf of
the Borrower or its Subsidiary, and if the Borrower or its Subsidiary shall
have set up reserves therefor adequate under GAAP.
Section 4.04 Maintenance of Rights and Property. The Borrower shall
and shall cause each Subsidiary to (i) maintain its corporate existence,
rights and franchises; (ii) observe and comply with all Governmental
Requirements (other than any Governmental Requirement the violation of which,
either individually or in the aggregate, would not have a Material Adverse
Effect); and (iii) maintain its Property in good operating condition at all
times and make all repairs, replacements, additions, betterments and
improvements to its Property as are necessary or appropriate to enable the
Borrower and each Subsidiary to conduct their respective businesses properly
and efficiently at all times.
Section 4.05 Payment of the Lender's Costs, Fees and Expenses.
Promptly upon the Lender's written request, the Borrower shall pay (or shall
reimburse the Lender for) all Expenses that the Lender may incur, directly or
indirectly, in connection with:
(a) the preparation and negotiation of this Agreement and all other
documents and instruments contemplated hereby (including without limitation,
all Security Instruments), and any and all amendments hereto or thereto and
consents or waivers hereunder or thereunder);
(b) the Lender's satisfaction of any of the Borrower's obligations
under this Agreement or any Security Instrument;
(c) the collection of the Note, or the enforcement of the Lender's
rights under this Agreement, the Warrant or any of the Ancillary Documents;
and
(d) the recording or filing of Security Instruments.
Section 4.06 Insurance. The Borrower and its Subsidiaries now
maintain (and the Borrower shall, and shall cause each Subsidiary to,
continue to maintain), with financially sound and reputable insurers,
insurance with respect to their respective Property and businesses against
such liabilities, casualties, risks and contingencies and in such types and
amounts as is customary for Persons engaged in the same or similar businesses
and similarly situated. Upon the Lender's request, the Borrower shall
furnish, or cause to be furnished, to the Lender from time to time a summary
of the insurance coverage of the Borrower and its Subsidiaries in form and
substance satisfactory to the Lender and, if requested, shall furnish the
Lender with true and complete copies of the applicable policies. In the case
of any fire, accident or other casualty causing loss or damage to any
Property of the Borrower or a Subsidiary, the proceeds of such policies shall
be used (i) to repair or replace the damaged Property or (ii) to prepay the
Indebtedness.
Section 4.07 Accounts and Records. The Borrower shall keep, and shall
cause each Subsidiary to keep, books of record and account in which full,
true and correct entries shall be made of all dealings or transactions in
relation to their respective business and activities, in accordance with
GAAP, consistently applied except for changes in accounting principles or
practices with which the Borrower's independent public accountants concur.
Section 4.08 Right of Inspection.
The Borrower shall permit any officer, employee or agent of the Lender
to visit and inspect any of the Borrower's Property, to examine the
Borrower's books of record and accounts and to take copies and extracts
therefrom, and to discuss the Borrower's affairs, finances and accounts with
the Borrower's officers, accountants and auditors, all at such times and
places as the Lender reasonably may require.
The Borrower shall cause each Subsidiary to permit any officer, employee
or agent of the Lender to visit and inspect any of such Subsidiary's
Property, to examine such Subsidiary's books of record and accounts and to
take copies and extracts therefrom, and to discuss such Subsidiary's affairs,
finances and accounts with such Subsidiary's officers, accountants and
auditors, all at such times and places as the Lender reasonably may require.
Section 4.09 Notice of Certain Events. The Borrower shall notify the
Lender promptly if the Borrower learns of the occurrence of:
(a) any event that constitutes a Potential Default, and shall in such
case provide with the notice a detailed statement by a responsible officer of
the Borrower of the steps being taken to cure the effect of such Potential
Default; or
(b) the receipt of any notice from, or the taking of any other action
by, the holder of any promissory note, debenture or other evidence of
indebtedness of the Borrower or any Subsidiary or of any security (as defined
in the Securities Act of 1933, as amended) of the Borrower or any Subsidiary
with respect to a claimed default, and shall in such case provide with the
notice a detailed statement by a responsible officer of the Borrower
specifying the notice given or other action taken by such holder and the
nature of the claimed default and what action the Borrower or its Subsidiary
is taking or proposes to take with respect thereto; or
(c) any legal, judicial or regulatory proceedings affecting the
Borrower or any Subsidiary or any of their respective Property in which the
amount involved is material and is not covered by insurance or that, if
adversely determined, could have a Material Adverse Effect; or
(d) any pending or threatened dispute between the Borrower or any
Subsidiary and any governmental or regulatory body or any other Person that,
if adversely determined, could have a Material Adverse Effect.
Section 4.10 ERISA Information and Compliance. The Borrower shall
promptly furnish to the Lender (i), if the Lender requests, copies of each
annual and other report with respect to each Plan or any trust created
thereunder promptly after the filing thereof with the United States Secretary
of Labor or the Pension Benefit Guaranty Corporation and (ii), immediately
upon becoming aware of the occurrence of any "reportable event," as such term
is defined in Section 4043 of ERISA, or of any "prohibited transaction," as
such term is defined in Section 4975 of the Code, in connection with any Plan
or any trust created thereunder, a written notice signed by the President or
the principal financial officer of the Borrower specifying the nature
thereof, what action the Borrower or any of its Subsidiaries is taking or
proposes to take with respect thereto and, when known, any action taken by
the Internal Revenue Service with respect thereto. The Borrower shall fund,
or shall cause its Subsidiaries to fund, all current service pension
liabilities as they are incurred under the provisions of all Plans from time
to time in effect for the benefit of employees of the Borrower or any of its
Subsidiaries, and comply with all applicable provisions of ERISA.
Section 4.11 Use of Proceeds. The proceeds of the Note shall be
applied by the Borrower only for the following purposes and only in the
following order:
(a) to pay all of the Lender's Expenses in connection with the Existing
XXXX Loan;
(b) to pay all of the Lender's Expenses described in Section 4.05;
(c) to pay all amounts due under the Existing XXXX Loan;
(d) to pay the Borrower's indebtedness as set forth in Schedule 4.11
hereto; and
(e) for working capital and other general corporate purposes.
Section 4.12 VSE Listing. The Borrower shall ensure at all times
that:
(a) the maximum number of Shares then-issuable upon conversion of the
principal amount of the Loan and upon exercise of the Warrant are listed on
the VSE;
(b) the Borrower is not in default of its listing agreement with the
VSE; and
(c) trading in the Shares is not suspended for any reason.
Section 4.13 Reservation of Shares. The Borrower shall ensure that, at
all times, the Borrower has duly reserved for issuance out of its authorized
capital the maximum number of Shares issuable upon conversion of the
principal amount of the Loan and upon exercise of the Warrant.
Section 4.14 Status of Warrant upon Issuance. The Lender shall take
delivery of the Warrant at the Closing free and clear of all Liens.
Section 4.15 Status of Shares upon Issuance. All Shares issued upon
conversion of the principal amount of the Loan, upon exercise of the Warrant
and in payment of the finder's fee described in Section 7.02(b) shall be duly
authorized, validly issued, fully paid and nonassessable, and free and clear
of all Liens.
Section 4.16 Lender's Right of First Refusal with respect to Future
Borrower Financings. The Borrower hereby grants to the Lender a right of
first refusal with respect to future Borrower financings on the terms and
conditions set forth in Schedule 4.16 hereto.
ARTICLE 5
NEGATIVE COVENANTS
The Borrower shall at all times comply with the covenants contained in
this Article 5 so long as any part of the Indebtedness remains outstanding:
Section 5.01 Indebtedness. The Borrower shall not, and shall not
permit any Subsidiary to, incur, create, assume or suffer to exist any
indebtedness or obligation for payment of money (including obligations for
the payment of rentals) other than the Indebtedness, or to guarantee or in
any way to be or become liable in respect of, or to be responsible for, any
such indebtedness or obligation of any other Person in any way other than in
the ordinary course of business.
Section 5.02 Liens. The Borrower shall not, and shall not permit any
Subsidiary to, incur, create, assume or suffer to exist any Lien on any of
its Property (now held or hereafter acquired) other than (a) Liens securing
the payment of any Indebtedness and (b) Excepted Liens.
Section 5.03 Investments, Loans and Advances. The Borrower shall not,
and shall not permit any Subsidiary to, make or permit to remain outstanding
any loans or advances to or investments in any Person other than in the
ordinary course of business.
Section 5.04 Dividends, Distributions and Redemptions. The Borrower
shall not declare or pay any dividend or distribution, or purchase, redeem,
retire or otherwise acquire for value any of its capital stock now or
hereafter outstanding, return any capital to its stockholders, or make any
distribution of its assets to its stockholders as such, or permit any of its
Subsidiaries to purchase or otherwise acquire for value any capital stock of
the Borrower.
Section 5.05 Fundamental Corporate Transactions. The Borrower shall
not merge or consolidate with, or sell, assign, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all,
substantially all or an integral portion of its Property (whether now owned
or hereafter acquired) to, any Person, or permit any Subsidiary to do so,
except that any Subsidiary may merge into or consolidate with or transfer
Property to any other Subsidiary and any Subsidiary may merge into or
transfer Property to the Borrower; provided, however, that, in each case,
immediately thereafter and giving effect thereto, no event shall occur and be
continuing that constitutes a Potential Default or an Event of Default and
that, in the case of any such merger or consolidation to which the Borrower
is a party, the Borrower is the surviving corporation.
Section 5.06 Sales and Leasebacks. The Borrower shall not, and shall
not permit any subsidiary to, enter into any arrangement, directly or
indirectly, with any Person whereby the Borrower or any Subsidiary shall sell
or transfer any Property, whether now owned or hereafter acquired, and
whereby the Borrower or any Subsidiary shall then or thereafter rent or lease
as lessee such Property or any part thereof or other Property which the
Borrower or any Subsidiary intends to use for substantially the same purpose
or purposes as the Property sold or transferred.
Section 5.07 ERISA Compliance. The Borrower shall not at any time
permit any Plan maintained by it or any Subsidiary to:
(a) engage in any "prohibited transaction," as such term is defined in
Section 4975 of the Code, as amended;
(b) incur any "accumulated funding deficiency," as such term is defined
in Section 302 of ERISA; or
(c) terminate any such Plan in a manner which could result in the
imposition of a Lien on the Property of the Borrower or any Subsidiary
pursuant to Section 4068 of ERISA.
Section 5.08 Nature of Business. The Borrower shall not, and shall
not permit any Subsidiary to, materially change the character of its business
as carried on at the date hereof.
Section 5.09 Margin Stock. Neither the Borrower nor any Subsidiary
shall take any action that might cause the Note, this Agreement or any of the
Security Instruments to violate Regulation U of the Board of Governors of the
United States Federal Reserve System (12 C.F.R. Part 221) (the "Federal
Reserve Board") or any other regulation of the Federal Reserve Board or to
violate Section 7 of the Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be
in effect.
Section 5.10 VSE Listing. The Borrower shall not de-list, or allow
the de-listing of, the Shares from the VSE unless such de-listing occurs at
a time when such Shares are listed on the NASDAQ Stock Market or other
nationally-recognized United States stock market.
ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events. Any of the following events shall be considered
an "Event of Default:"
(a) the Borrower fails to pay when due any installment of principal or
interest on the Note or other Indebtedness; or
(b) any of the Borrower's representations or warranties set forth
herein, in the Note, in the Warrant or in any Ancillary Document to which it
is a party, or any Subsidiary's representations or warranties set forth in
any Ancillary Document to which it is a party, proves to have been incorrect
in any material respect as of the date hereof or thereof; or any
representation, statement (including financial statement), certificate,
request or other document furnished pursuant to or under this Agreement, the
Note, the Warrant or any Ancillary Document proves to have been incorrect in
any material respect as of the date when made or deemed made; or
(c) the Borrower fails duly, timely and fully to perform or observe any
of its covenants or agreements set forth in Section 4.11, Article 5 and
Section 7.04 of this Agreement; or
(d) the Borrower fails duly, timely and fully to perform or observe any
of its covenants or agreements set forth in this Agreement (other than any
such covenants and agreements set forth in Section 4.11, Article 5 or Section
7.04 hereof), and such failure continues unremedied for a period of 10 days
after the earlier of (i) the Lender's notice thereof to the Borrower and (ii)
such failure otherwise becomes known to the Borrower; or
(e) the Borrower defaults in any of its obligations under the Warrant
or any of the Ancillary Documents to which it is a party and such default is
not cured within the grace period, if any, provided therein, or a Subsidiary
defaults in any of its obligations under any of the Ancillary Documents to
which it is a party and such default is not cured within the grace period, if
any, provided therein; or
(f) an involuntary case or other proceeding is commenced against the
Borrower that seeks liquidation, reorganization or other relief with respect
to it or its debts or other liabilities under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its Property, and such involuntary case or other
proceeding shall remain undismissed or unstayed for a period of 30 days; or
an order for relief against the Borrower shall be entered in any such case
under the Federal Bankruptcy Code; or
(g) the Borrower commences a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts or other liabilities under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its Property, or shall consent to any such relief or to
the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to,
or shall admit in writing its inability to, pay its debts generally as they
become due, or shall take any corporate action to authorize or effect any of
the foregoing; or
(h) the Borrower or any Subsidiary discontinues or materially alters
its usual business; or
(i) the Borrower fails to make any payment due on any other
indebtedness or obligation for the payment of money; or any event shall occur
or any condition shall exist in respect of any such indebtedness or
obligation, or under any agreement or instrument under or by which any such
indebtedness or obligation is created, evidenced or secured, the effect of
which, with notice, lapse of time, or both, is to cause or to permit any
holder of such indebtedness or obligation to cause such indebtedness or
obligation, or a portion thereof, to become due prior to its stated maturity
or prior to its regularly scheduled dates of payment; or
(j) the Borrower shall fail within 30 days to pay, bond or otherwise
discharge any judgment or order for the payment of money in excess of $50,000
that is not otherwise being satisfied in accordance with its terms or is not
stayed on appeal; or
(k) any Subsidiary takes, suffers or permits to exist as to such
Subsidiary any of the events or conditions referred to in Subsections
6.01(f), (g), (h), (i) or (j) hereof; or
(l) any Security Instrument shall for any reason, except to the extent
permitted by the terms thereof, cease to be in full force and effect and
valid, binding enforceable in accordance with its terms (except to the extent
that enforcement may be subject to any applicable bankruptcy, insolvency or
similar laws of general application affecting the enforcement of creditors'
rights), or cease to create a valid and perfected Lien of the priority
required thereby on any of the collateral purported to be covered thereby, or
the Borrower shall so state in writing; or
(m) the Lender notifies the Borrower that the Lender in good faith has
a sound reason to be insecure with respect to the Note or any other
Indebtedness, giving the Lender's reason for such insecurity in such notice,
and the Lender continues to have a sound reason to be insecure for a period
of 30 days after the delivery of such notice; or
(n) the Judgment has not been satisfied and released in full; or
(o) the liens securing the indebtedness that was the subject of the
Judgment have not been released in full and the evidences of such releases
properly recorded; or
(p) any receivership ordered by the court in connection with the
Judgment has not been dissolved; or
(q) the Lender ceases at any time to have at least one person that it
has designated serving on the Borrower's Board of Directors (each a "Lender-
designated Director"); or
(r) the Borrower increases the size of its Board of Directors without
the consent of each Lender-designated Director.
Section 6.02 Remedies. Upon the occurrence of any Event of Default
described in Subsection 6.01(f) or (g), hereof, or in Subsection 6.01(k) to
the extent that such Subsection refers to Subsection 6.01(f) or (g) hereof,
the obligations, if any, of the Lender hereunder shall immediately terminate,
and the entire amount of all Indebtedness then outstanding shall become
automatically and immediately due and payable, all without written notice and
without presentment, demand, protest, notice of protest or dishonor, notice
of intention to accelerate, notice of acceleration or any other notice of
default of any kind, all of which are hereby expressly waived by the
Borrower. Upon the occurrence and at any time during the continuance of any
other Event of Default, by written notice to the Borrower the Lender may (i)
declare all Indebtedness to be immediately due and payable without
presentment, demand, protest, notice of protest or dishonor, notice of
intention to accelerate or other notice of default of any kind, all of which
are hereby expressly waived by the Borrower, and/or (ii) terminate the
obligations, if any, of the Lender hereunder unless and until the Lender
shall reinstate same in writing.
Section 6.03 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, or if the Borrower becomes insolvent,
however evidenced, the Lender is hereby authorized at any time and from time
to time, without notice to the Borrower (any such notice being expressly
waived by the Borrower), to set-off and apply any and all moneys at any time
held and other indebtedness at any time owing by the Lender to the Borrower
against any and all of the Indebtedness of the Borrower, irrespective of
whether or not the Lender shall have made any demand under this Agreement or
the Note and although such obligations may be unmatured. The Lender agrees
promptly to notify the Borrower after any such setoff and application,
provided that the failure to give such notice shall not affect the validity
of such set-off and application. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) that the Lender may have.
ARTICLE 7
CONDITIONS OF LENDING
The obligation of the Lender to make the Loan is subject to the
conditions precedent stated in this Article 7 wherein each document to be
delivered to the Lender shall be in form and substance satisfactory to it.
Section 7.01 Closing. The closing of the Loan (the "Closing") shall
take place contemporaneously with the execution of this Agreement; provided,
however, that the Borrower's issuance of any securities in connection with
the Closing shall not occur until the VSE has granted formal approval of the
transactions contemplated hereby.
Section 7.02 Conditions Precedent to the Loan. As conditions
precedent to Lender's making of the Loan, the following shall occur prior to
or at the Closing:
(a) the Borrower shall have duly and validly issued, executed and
delivered the Note and the Warrant to the Lender;
(b) the Borrower shall have paid to Xxxxx X. Xxxx a finder's fee of
CDN$52,200.00 (US$37,500.00) in the form of 350,000 Shares issued to him at
a deemed price of CDN$0.15 per Share;
(c) the Borrower shall have effected the appointment or election of one
Lender-designated person to the Borrower's Board of Directors;
(d) the Borrower shall have entered into a three-year employment
agreement with Xxxxxxx X. Xxxxxx on terms and conditions acceptable to the
Lender;
(e) the Borrower shall have consummated the Private Placement on terms
and conditions acceptable to the Lender;
(f) the Borrower shall have terminated the Shareholder Protection
Rights Plan;
(g) Xxxxxx Xxxxxxxxx and Camuri Holding LLP shall have entered into an
agreement not to reduce their respective holdings of Shares on terms and
conditions acceptable to the Lender;
(h) the Borrower shall have paid in full the Expenses specified in
Section 4.11(a) and (b) in cash by wire transfer of such funds to such
account as the Lender shall have designated;
(i) the Borrower shall have repaid in full all amounts owing under the
Existing XXXX Loan in cash by wire transfer of such funds to such account as
the Lender shall have designated; and
(j) the Borrower shall have made the following additional deliveries to
the Lender:
(i) to the extent that the Province of Alberta issues such
documents or their respective analogues, certificates of existence and
good standing of the Borrower in the Province of Alberta;
(ii) a certificate of the Secretary or Assistant Secretary of the
Borrower certifying (A) the Borrower's charter and bylaws, (B) duly
adopted resolutions of the Borrower's board of directors in form and
substance satisfactory to the Lender with respect to the authorization
of this Agreement, the Note, the Warrant and the Ancillary Documents to
which the Borrower is a party, and the officers of the Borrower
authorized to sign such instruments, and (C) specimen signatures of the
officers so authorized;
(iii) a certificate of the Secretary or Assistant Secretary of
each Subsidiary that is guaranteeing the Loan certifying (A) such
Subsidiary's charter and bylaws, (B) duly adopted resolutions of such
Subsidiary's board of directors in form and substance satisfactory to
the Lender with respect to the authorization of the Ancillary Documents
to which such Subsidiary is a party, and the officers of such Subsidiary
authorized to sign such instruments, and (C) specimen signatures of the
officers so authorized;
(iv) a legal opinion of the Borrower's legal counsel addressed to
the Lender in form and substance satisfactory to the Lender;
(v) duly-executed originals (in such number as the Lender
reasonably shall request) of the Registration Rights Agreement; and
(vi) such other documents and things as the Lender reasonably shall
request in writing at least three (3) days prior to the Closing.
Section 7.03 Closing Deliveries of the Lender. At the Closing and
following the satisfaction or waiver of the conditions precedent set forth in
Section 7.02, the Lender shall deliver the proceeds of the Loan by wire
transfer to such account as the Borrower reasonably shall request.
Section 7.04 Subsequent Deliveries. Notwithstanding anything to the
contrary in this Article 7, the parties acknowledge and agree that, due to
the necessity of having the Closing occur at the earliest possible time, the
Borrower may not be able to satisfy all of the conditions precedent to the
Closing required by Section 7.02 prior to or at the Closing. In
consideration of the Lender's willingness to close the Loan without such
satisfaction, the Borrower covenants and agrees that the Borrower shall
satisfy all of such conditions precedent required pursuant to Section 7.02
but not satisfied prior to or at the Closing as soon as possible following
the Closing, but in any event no later than fifteen (15) Business Days
thereafter, except that consummation of the Private Placement referenced in
Section 7.02(e) must occur in any event no later than thirty (30) Business
Days thereafter.
ARTICLE 8
MISCELLANEOUS
Section 8.01 Proof of Indebtedness. The Lender's records shall be
prima facie proof as to:
(a) the amount of principal, interest or other moneys under the Loan
owing at any time;
(b) the existence of any default in the payment of any moneys under the
Note; and
(c) whether any demand for payment under the Note has been made.
Section 8.02 Time of Essence. Time shall be of the essence of each
and every provision hereof and of the Note.
Section 8.03 Notices. Any notice required or permitted to be given
under or in connection with this Agreement, the Security Instruments or the
Note shall (except as may otherwise be expressly required therein) be in
writing and shall be delivered (a) by certified mail, return receipt
requested, (b) by overnight delivery service, (c) by facsimile transmission,
confirmed telephonically or (d) personally to an executive officer of the
receiving party. All such communications shall be mailed, sent or delivered
as follows:
If to the Borrower:
Flotek Industries Inc.
0000 Xxxxxx Xxxxxxx Xxxxx
Xxxxxxx XX 00000
Attention: President
Telephone: 713/000-0000
Facsimile: 713/896-4511
If to the Lender:
XXXX, X. X.
x/x X. X. Xxxxxxx, Xx.
0000 Xxxxxxxxxxxx Tower
0000 Xxx Xxxxxx
Xxxxxx XX 00000
Telephone: 214/000-0000
Facsimile: 214/880-7101
Any communication delivered in accordance with this Section shall be deemed
received (a), if delivered by certified mail, return receipt requested, on
the date of delivery indicated on the return receipt, (b), if delivered by
overnight delivery service, on the following Business Day, (c), if delivered
by facsimile transmission, on the date that the transmission is confirmed
telephonically or (d), if personally to an executive officer of the receiving
party, on the date of such delivery.
Section 8.04 Amendments and Waivers. This Agreement may not be
modified, amended or terminated orally and no waiver of compliance with any
provision or condition hereof and no consent provided for herein shall be
effective unless evidenced by an instrument in writing duly executed by the
party hereto sought to be charged with such waiver or consent. No course of
dealing on the part of the Lender, its officers, employees, consultants or
agents, nor any failure or delay by the Lender with respect to exercising any
right, power or privilege of the Lender under this Agreement, the Note or any
Security Instrument shall operate as a waiver thereof. No waiver of any term
or provision hereof shall be construed as a further or continuing waiver of
such term or provision or any other term or provision.
Section 8.05 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 provision to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by
law as long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party.
Section 8.06 Survival. All covenants and agreements of the Borrower
herein, in the Note, the Warrant and in the Ancillary Documents not fully
performed before the date hereof or thereof and all representations and
warranties of the Borrower herein or therein shall survive the execution and
delivery hereof and thereof.
Section 8.07 Successors and Assigns. All of the Borrower's covenants
and agreements set forth in this Agreement, the Note and the Security
Instruments shall bind its successors and assigns and shall inure to the
benefit of the Lender and its successors and assigns; provided, however, that
the Borrower may not assign its rights or obligations under this Agreement or
any interest herein, without in each instance the Lender's prior written
consent.
Section 8.08 Renewal, Extension or Rearrangement. All provisions of
this Agreement and of the Security Instruments relating to the Note or other
Indebtedness shall apply with equal force and effect to each and all
promissory notes hereafter executed that represent, in whole or in part, a
renewal, extension for any period, increase or rearrangement of any part of
the Indebtedness originally represented by the Note or of any part of such
other Indebtedness.
Section 8.09 Cumulative Rights. The Lender's rights and remedies
under this Agreement, the Note and each Security Instrument shall be
cumulative, and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 8.10 Further Assurances. At the Borrower's sole cost and
expense, each of the Lender, the Borrower and each Subsidiary covenants and
agrees to execute any and all such further documents and instruments and to
do such further things as the Lender in its sole discretion may deem
necessary or appropriate to implement fully and carry out the intent of this
Agreement, the Note, the Warrant and the Ancillary Documents.
Section 8.11 Governing Law. This Agreement and the Note are contracts
made under, and shall be construed in accordance with and governed by, the
laws of the Province of Alberta (exclusive of any such laws that pertain to
conflicts of laws).
Section 8.12 Entire Agreement. This Agreement, the Note, the Warrant
and the Ancillary Documents embody the entire agreement and understanding
between the Lender and the Borrower with respect to the subject matter hereof
and thereof and supersede all prior agreements and understandings between
such parties in such regard.
Section 8.13 Schedules and Exhibits. The schedules and exhibits
attached to this Agreement are incorporated herein and shall be considered a
part of this Agreement for the purposes stated herein, except that in the
event of any conflict between any of the provisions of such schedules and
exhibits and the provisions of the text of this Agreement, the provisions of
the text of this Agreement shall prevail.
Section 8.14 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same instrument. Signatures exchanged
by facsimile transmission shall be deemed to constitute original, manually-
executed signatures and shall be fully binding.
Section 8.15 Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
IN WITNESS WHEREOF, the parties hereto have entered into this
Convertible Loan Agreement as of the date first above written.
BORROWER: FLOTEK INDUSTRIES INC.
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx, President and
Chief Executive Officer
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: CFO and Exec VP
LENDER: XXXX, X.X., a Texas limited partnership
By: Xxxxxx Property Corp.,
a Texas corporation, General Partner
By: /s/ X. X. Xxxxxxx, Xx.
X. X. Xxxxxxx, Xx., President
Exhibit 1.01
Form of Promissory Note
October ___, 1997
US$750,000.00
FOR VALUE RECEIVED, FLOTEK INDUSTRIES INC., an Alberta corporation
("Borrower"), promises to pay to the order of XXXX, X.X., a Texas limited
partnership ("Lender"), on or before October ___, 1998, at its office at 3900
Thanksgiving Tower, 0000 Xxx Xxxxxx, Xxxxxx, Xxxxx 00000, or at such other
location as Lender may designate, in immediately available funds, SEVEN
HUNDRED FIFTY THOUSAND AND NO/100 UNITED STATES DOLLARS (US$750,000.00).
Borrower will also pay interest on the unpaid principal balance outstanding
from time to time at a fixed rate of ten percent (10%) per annum, payable
quarterly in arrears.
Interest will be computed on the basis of the actual number of days
elapsed and a year comprising 360 days, unless such calculation would result
in a usurious interest rate, in which case such interest will be calculated
on the basis of a 365 or 366 day year, as the case may be.
All past due principal and interest on this Note will, at Lender's
option, bear interest at the maximum nonusurious rate of interest ("Highest
Lawful Rate") or, if applicable law does not provide for a maximum
nonusurious rate of interest, at a rate per annum equal to 18%.
Borrower covenants to apply the total amount advanced by Lender
hereunder only in the manner set forth in that certain Convertible Loan
Agreement of even date herewith between Borrower and Lender (the "Loan
Agreement"). Borrower understands and acknowledges that Lender would not be
willing to make the loan evidenced hereby but for Borrower's covenant set
forth in the immediately-preceding sentence.
All undefined capitalized terms used in this Note shall have the
meanings respectively ascribed to them in the Loan Agreement.
In addition to all principal and accrued interest on this Note, Borrower
agrees to pay: (a) all reasonable costs and expenses incurred by or on behalf
of Lender and all owners and holders of this Note in attempting to collect
this Note through probate, reorganization, bankruptcy or any other
proceeding; and (b) reasonable attorneys fees if and when this Note is placed
in the hands of an attorney for collection.
The outstanding principal amount of the Loan evidenced by this Note
shall be convertible into common shares of Borrower in the manner and to the
extent set forth in the Loan Agreement.
Borrower and Lender intend to conform strictly to applicable usury laws.
Therefore, the total amount of interest (as defined under applicable law)
contracted for, charged or collected under this Note will never exceed the
Highest Lawful Rate. If Lender contracts for, charges or receives any excess
interest, it will be deemed a mistake. Lender will automatically reform the
contract or charge to conform to applicable law and, if excess interest has
been received, Lender will either refund the excess to Borrower or credit the
excess on the unpaid principal amount of this Note. All amounts constituting
interest will be spread throughout the full term of this Note in determining
whether interest exceeds lawful amounts.
The unpaid principal balance of this Note at any time will be the total
amount advanced by Lender, less the amount of all payments of principal.
Borrower may at any time pay the full amount of this Note without the payment
of any premium, penalty or fee.
"Loan Document" means this Note and any document or instrument
evidencing, securing, guaranteeing or given in connection with this Note
including, without limitation, the Loan Agreement, the Warrant and the
Registration Rights Agreement. "Obligations" means all principal, interest
and other amounts which are or become owing under this Note or any other Loan
Document. "Obligor" means Borrower and any guarantor, surety, co-signer, or
other person who may now or hereafter be obligated to pay all or any part of
the Obligations. Where appropriate, the masculine gender includes the
feminine and the neuter and the singular number includes the plural number.
Each Obligor severally waives notice, demand, presentment for payment,
notice of nonpayment, notice of intent to accelerate, notice of acceleration,
protest, notice of protest and the filing of suit and diligence in collecting
this Note and all other demands and notices, and consents and agrees that its
liabilities and obligations will not be released or discharged by any or all
of the following, whether with or without notice to it or any other Obligor,
and whether before or after the stated maturity hereof: (i) extensions of the
time of payment; (ii) renewals; (iii) acceptances of partial payments; (iv)
releases or substitutions of any collateral or any Obligor; and (v) failure,
if any, to perfect or maintain perfection of any security interest in any
collateral. Each Obligor agrees that acceptance of any partial payment will
not constitute a waiver and that waiver of any default will not constitute
waiver of any prior or subsequent default.
This Note is governed by the laws of the Province of Alberta (exclusive
of any such laws that pertain to conflicts of laws). If any provision of
this Note is illegal or unenforceable, that illegality or unenforceability
will not affect the remaining provisions of this Note. BORROWER(S) AND
LENDER AGREE THAT THIS NOTE WILL BE PERFORMED IN DALLAS COUNTY, TEXAS, AND
THAT SUCH COUNTY IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY
BORROWER(S) OR LENDER, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION
OR PROCEEDING AGAINST BORROWER(S) MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT IN SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, BORROWER(S) HEREBY IRREVOCABLY (A)
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. BORROWER(S) AGREES THAT SERVICE OF PROCESS UPON IT MAY
BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS
ADDRESS SPECIFIED BELOW. LENDER MAY SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW AND MAY BRING ANY ACTION OR PROCEEDING AGAINST BORROWER(S)
OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER PROPER
JURISDICTIONS OR VENUES.
For purposes of this Note, any assignee or subsequent holder of this
Note will be considered the "Lender," and any successor or successors to
Borrower will be considered, jointly and severally, the "Borrower."
Payment of this Note is secured pursuant to the Existing Security
Agreement and other Security Instruments.
Debtor's signature below may delivered to Lender by facsimile
transmission, and any such facsimile signature shall be deemed for all
purposes to constitute an original, manually-executed signature and shall be
fully binding to the same extent as if it were in fact Debtor's original,
manually-executed signature.
NO COURSE OF DEALING BETWEEN BORROWER AND LENDER, NO COURSE OF
PERFORMANCE, NO TRADE PRACTICES AND NO EXTRINSIC EVIDENCE OF ANY NATURE MAY
BE USED TO CONTRADICT OR MODIFY ANY TERM OF THIS NOTE OR ANY OTHER LOAN
DOCUMENT.
THIS NOTE IS SUBJECT TO ALL OF THE TERMS AND CONDITIONS SET FORTH IN THE
LOAN AGREEMENT.
THIS NOTE AND THE OTHER LOAN DOCUMENTS COLLECTIVELY REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THEM.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Borrower has executed this Note effective as of
October ___, 1997.
BORROWER:
FLOTEK INDUSTRIES INC.,
an Alberta corporation
0000 Xxxxxx Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
By:
Xxxxxxx X. Xxxxxx, President and
Chief Executive Officer
By:
Name:
Title:
Schedule 2.04
Conversion
1. Conversion Right. The Borrower hereby grants to the Lender the
sole and exclusive right and option (the "Conversion Right") to convert, at
any time and from time to time until 4:00 p.m. Xxxxxxxxx, Xxxxxxx Xxxxxxxx,
Xxxxxx time on the maturity date of the Note, in whole or in part, the then-
outstanding principal amount of the Note (the "Principal Balance") into a
maximum of 7,000,000 Shares at the price of CDN$0.15 per Share (the
"Conversion Price"), subject to adjustment as hereinafter provided.
2. Manner of Exercise of Conversion Right.
(a) On each occasion on which the Lender desires to convert all or a
portion of the Principal Balance into Shares, the Lender shall deliver a
written notice (the "Notice of Exercise") to the Borrower specifying:
(i) the amount of the Principal Balance to be converted, expressed in
Canadian dollars; and
(ii) , with respect to each Person in whose name the Lender wishes
Shares to be issued, such Person's exact name, address, telephone number
and social security number or taxpayer identification number and, if
such Person is other than a natural person, the name of a natural person
authorized to act on such Person's behalf.
(b) Upon receipt of a Notice of Exercise, the Borrower shall promptly:
(i) direct its transfer agent to issue one or more certificates
representing the Shares into which the portion of the Principal Balance
referenced in subsection (a)(i) above is then convertible to the
respective Persons and in the respective amounts set forth in the Notice
of Exercise;
(ii) deliver such certificates to such Persons at the addresses
specified in the Notice of Exercise; and
(iii) if applicable, deliver to the Lender a check for any amount
payable in lieu of fractional shares pursuant to Section 4 below.
3. Capital Adjustments.
The Shares issuable upon conversion of part or all of the original
principal amount of the Note is subject to the following adjustments:
(a) Recapitalization, Reclassification and Succession. If any
recapitalization of the Borrower or reclassification of its Shares or any
merger or consolidation of the Borrower into or with a corporation or other
business entity, or the sale or transfer of all or substantially all of the
Borrower's assets or of any successor corporation's assets to any other
corporation or business entity (any such corporation or other business
entity's being included within the meaning of the term "successor
corporation") shall be effected at any time while any principal amount of the
Note remains outstanding then, as a condition of such recapitalization,
reclassification, merger, consolidation, sale or transfer, lawful and
adequate provision shall be made whereby the Lender thereafter shall have the
right to receive upon the conversion of the principal amount of the Note then
outstanding (at a given time, the "Principal Balance") and in lieu of the
Shares immediately theretofore issuable upon the conversion of the Principal
Balance, such shares of capital stock, securities or other property as may be
issued or payable with respect to or in exchange for a number of outstanding
Shares equal to the number of Shares immediately theretofore issuable upon
the conversion of the Principal Balance had such recapitalization,
reclassification, merger, consolidation, sale or transfer not taken place
and, in each such case, the terms of the Loan Agreement shall be applicable
to the shares of capital stock or other securities or property receivable
upon the conversion of the Principal Balance after such consummation.
(b) Subdivision or Combination of Shares. If, at any time while any
principal amount of the Note remains outstanding, the Borrower shall
subdivide or combine its Shares, the number of Shares purchasable upon
conversion of the Principal Balance shall be proportionately adjusted.
(c) Certain Dividends and Distributions. If, at any time while any
principal amount of the Note remains outstanding, the Borrower shall take a
record of the holders of Shares for the purpose of entitling them to receive
a dividend payable in, or other distribution of, Shares, then the number of
Shares purchasable upon conversion of the Principal Balance shall be adjusted
to that number determined by multiplying the number of Shares so purchasable
immediately prior to such record date by a fraction (i) the numerator of
which shall be the sum of (A) the total number of outstanding Shares
immediately prior to such record date and (B) the total number of Shares
issuable pursuant to such dividend or distribution, and (ii) the denominator
of which shall be the total number of Shares outstanding immediately prior to
such record date.
(d) Corresponding Conversion Price Adjustment. Whenever the number of
Shares purchasable upon the conversion of the Principal Balance is increased
or decreased as provided in subsections (b) or (c) above, the Conversion
Price shall be adjusted by multiplying the Conversion Price immediately prior
to such adjustment by a fraction, the numerator of which shall be the number
of Shares purchasable upon the conversion of the Principal Balance
immediately prior to such adjustment, and the denominator of which shall be
the number of Shares purchasable immediately thereafter.
(e) Certain Shares Excluded. The number of Shares outstanding at any
given time for purposes of the adjustments set forth in this Section shall
exclude any shares then directly or indirectly held in the treasury of the
Borrower.
(f) Deferral and Cumulation of De Minimis Adjustments. The Borrower
shall not be required to make any adjustment of the Conversion Price pursuant
to this Section if the amount of such adjustment would be less than one
percent (1%) of the Conversion Price in effect immediately before the event
that would otherwise have given rise to such adjustment. In such case,
however, any adjustment that otherwise would have been required to be made
shall be made at the time of and together with the next subsequent adjustment
which, together with any adjustment or adjustments so carried forward, shall
amount to not less than one percent (1%) of the Conversion Price in effect
immediately before the event giving rise to such next subsequent adjustment.
(g) Duration of Adjusted Conversion Price. Following each computation
or readjustment of an adjusted Conversion Price as provided in this Section,
the new adjusted Conversion Price shall remain in effect until a further
computation or readjustment thereof is required.
4. Notices to Lender.
(a) Notice of Record Date. In case:
(i) the Borrower shall take a record of the holders of Shares (or
other capital stock or securities at the time receivable upon the
exercisable of the Principal Balance) for the purpose of entitling them
to receive any dividend (other than a cash dividend payable out of
earned surplus of the Borrower) or other distribution, or any right to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right; or
(ii) of any capital reorganization of the Borrower, any
reclassification of the capital stock of the Borrower, any consolidation
with or merger of the Borrower into another corporation, or any
conveyance of all or substantially all of the assets of the Borrower to
another corporation; or
(iii) of any voluntary dissolution, liquidation or winding-up
of the Borrower;
then, and in each such case, the Borrower shall mail or cause to be mailed to
the Lender a notice specifying, as the case may be, (1) the date on which a
record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right or (2) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up is
to take place, and the time, if any, is to be fixed, as of which the record
holders of Shares shall be entitled to exchange their Shares (or such other
capital stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 30 days prior to the record date therein specified or, if no
record date shall have been specified, at least 30 days prior to such other
specified date.
(b) Notice of Adjustments. Whenever any Conversion Price shall be
adjusted pursuant to Section 3 hereof, the Borrower shall promptly deliver to
the Lender a certificate signed by its President or by any Vice President,
and by its Treasurer or any Assistant Treasurer or its Secretary or any
Assistant Secretary, setting forth in reasonable detail the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated and the Conversion Price after giving effect to
such adjustment.
5. No Requirement to Issue Fractional Shares. The Borrower shall not
be required to issue fractional Shares upon conversion of part or all of the
Principal Balance pursuant to the Lender's exercise of the Conversion Right.
In lieu thereof, the Borrower shall be entitled to pay to the Lender in cash
an amount equal (to the nearest cent) to the appropriate fraction of the
value (which shall be the last reported sale price if a sale took place
within 60 days of the applicable Notice of Exercise or, if none, a deemed
value of CDN$0.15 per Share) of a Share on the date that the Borrower
receives the Notice of Exercise.
Schedule 3.15
Capitalization
as of October 7, 1997
Common Shares Issued and Outstanding 25,757,297
Reserved for exercise of outstanding Warrants 3,274,000
Reserved for exercise of outstanding Options 2,140,000
Reserved for exercise of Options not yet approved* 935,000
Common Shares Fully Diluted before Private Placement and 32,106,297
Related Matters Announced September 14, 1997
Reserved for issuance in settlement of outstanding indebtedness 5,000,000
Reserved for issuance in consideration of Turbeco option 2,500,000
Issuable as part of Unit Private Placement 11,666,667
Reserved for issuance upon exercise of Warrants granted 11,666,667
as part of Unit Private Placement
Reserved for issuance upon exercise of Detachable Warrants 7,000,000
granted as part of Convertible Loan Private Placement
Reserved for issuance upon conversion of Convertible Loan 7,000,000
made as part of Convertible Loan Private Placement
Reserved for finders' fees in connection with Unit Private 808,333
Placement and Convertible Loan Private Placement
__________
Common Shares Fully Diluted After All of the Above 77,747,964
__________________________
* An option to purchase up to 300,000 shares is to be granted to Xxxxxxx
Xxxxxx in connection with his proposed employment agreement and, under that
agreement, he may by meeting certain performance goals, become entitled to
grants of additional options exercisable to purchase a maximum of an
additional 600,000 shares. In addition, options to purchase up to an
aggregate of an additional 35,000 shares are reserved for grants to
employees. These options are subject to acceptance by the Vancouver Stock
Exchange.
Schedule 4.11
Indebtedness to be Paid with the Proceeds of the Loan
(all amounts expressed in Canadian dollars)
Lender's Expenses in connection with the
September 18, 1997 XXXX, X. X. $410,200 loan undetermined
September 18, 1997 XXXX, X.X. loan $410,200
Lender's Expenses specified in Section 4.05 hereof undetermined
Suppliers:
Downhole Products 164,900
BHP 89,700
A-1 Carbide 69,000
Xxxxxxx Xxxxxxxxx
40,020
Karnin 10,000
H & O Grindless 9,000
Total Suppliers 382,620
Other Accounts Payable 200,000
Working Capital
(including inventory) remainder, if any, after payment of the above
Schedule 4.16
Right of First Refusal with respect to Future Borrower Financings
1.01 The Borrower will give written notice (a "Notice") to
the Lender of the terms of any further financing (in each case, a
"Financing") that it requires or proposes to obtain by way of a public or
private offering of its securities (including, without limitation, equity,
debt or derivative securities) during the twenty-four (24) months (the
"Term") next following the Closing Date.
1.02 Each Notice will contain the material terms and conditions of the
proposed Financing, including without limitation the proposed price and the
nature and size thereof.
1.03 The Lender will have the right of first refusal to provide up to
37.5% (the "Lender's Proportionate Share") of any Financing during the Term.
1.04 The right of first refusal must in each instance be exercised by
the Lender within thirty (30) days next following receipt of the applicable
Notice by giving the Borrower written notice (an "Exercise Notice') that the
Lender will provide the Lender's Proportionate Share of the Financing, in
whole or in part, on the terms set forth in the Notice.
1.05 Immediately upon receipt of any Exercise Notice, Borrower will:
(a) provide a copy of same to each of Xxxxxx Investors, L.L.C. and
Xxxxxxx Xxxxxxxxx ("Other Rightholders"), who have been granted
rights of first refusal pursuant to agreements (the "Other
Agreements") made between the Other Rightholders and Borrower
in connection with the financing announced by the Borrower on
September 14, 1997 to provide up to 50.0% and 12.5% (the "Other
Rightholders' Proportionate Shares"), respectively, of any
Financing proposed during the Term; and
(b) provide copies of the exercise notices (the "Other Exercise
Notices") given to the Borrower by Other Rightholders pursuant
to the Other Agreements;
and in the event that the Borrower does not receive an Exercise Notice or one
or both of the Other Exercise Notices in respect of a Financing, the Borrower
will give notice (in each case a "Second Notice") to such effect to the
Lender and/or one or both of the Rightholders, as circumstances require.
1.06 If the Lender fails to give an Exercise Notice within thirty (30)
days next following receipt of the applicable Notice or elect in an Exercise
Notice to provide less than the Lender's Proportionate Shares of such
Financing, the Borrower will then be free for a period of (3) months (subject
to the rights of the Other Rightholders to provide the Other Rightholders'
Proportionate Shares of such proposed Financing as a result of the timely
giving of notice of their intention to do so and their rights under the Other
Agreements) to make other arrangements to obtain the unfunded portion of the
proposed Financing from another source, including the Other Rightholders, on
the same terms or on terms no less favorable to the Borrower than are set
forth in the applicable Notice.
1.07 In the event that one or both of the Other Rightholders elects not
to provide all such Other Rightholder's Proportionate Share of such
Financing, the Lender may, by further notice to the Borrower given not later
than ten (10) days after the Lender's receipt of the Other Exercise Notices
or Second Notices, as the case may be, elect to provide some or all of that
portion of the Financing (the "Remaining Financing") which one or both of the
Other Rightholders (a "Non-participating Rightholder") has not elected to
provide; provided, however, that if one of the Other Rightholders (the
"Participating Rightholder") also elects to provide some or all of the
Remaining Financing, and if the additional elections of the Lender and the
Participating Rightholder are greater in the aggregate than the Remaining
Financing, then the Lender and the Participating Rightholder shall share in
the Remaining Financing pro rata according to their percentage interests set
forth herein.
1.08 The failure by Lender in any one or more instances to provide all
or any portion of the Lender's Proportionate Share of any Financing shall not
deprive the Lender of its right of first refusal in any other instances.
1.09 The right of first refusal granted hereunder is conditional upon
consummation of the Closing.
1.10 The right of first refusal granted hereunder will not affect the
Borrower's right to obtain fiscal agency or investment banking services that
it requires or proposes to obtain during the Term, whether or not in
connection with any Financing or any proposed amalgamation, merger,
acquisition, takeover, plan of arrangement or other restructuring, including,
without limitation, the preparation of fairness opinions and the like.
1.11 The Borrower will not amend the terms of or grant extensions of
time in respect of any rights of first refusal previously granted or which
may hereafter be granted to either of the Other Rightholders pursuant to the
Other Agreement without, at the option of the Lender, amending the terms of
or granting extensions of time in respect of the right of first refusal
granted to the Lender hereunder in the same manner and to the same extent as
the Borrower has agreed to amend the terms of one or both of the Other
Agreements or to grant any extension of time in respect of one or both of the
Other Agreements.
