Exhibit 10.2
BUSINESS LOAN AGREEMENT
Principal: $854,350.00
Loan Date: 01-04-2002
Maturity: 01-04-2005.
Borrower:Flotek Industries, Inc. (TIN: 77-0709256); Lender: Legacy Bank
Chemical and Equipment Specialties, Inc. (TIN: Legacy Bank
73-1591850); Neal's Technology, Inc. (TIN: PO Box 1109
73-1512452); Plainsman Technology, Inc. (TIN: 2024 N. Hwy 81
73-1218459); PADKO International Incorporated Duncan,OK 73534-1109
(TIN: 73-1443489); Material Translogistics, Inc.
(TIN: 73-1605226); Esses, Inc. (TIN:
73-1386155); Turbeco, Inc. (TIN: 76-0228889);
USA Petrovalve, Inc. (TIN: 76-0448098); Trinity
Tool, Inc. (TIN: 76-0517268); and Petrovalve, Inc.
(TIN: 76-0513130)
7030 Empire Central Drive
Houston, TX 77040
THIS BUSINESS LOAN AGREEMENT dated January 4, 2002, is made and executed between
Flotek Industries, Inc.; Chemical and Equipment Specialties, Inc.; Neal's
Technology, Inc.; Plainsman Technology, Inc.; PADKO International Incorporated;
Material Translogistics, Inc.; Esses, Inc.; Turbeco, Inc.; USA Petrovalve, Inc.;
Trinity Tool, Inc.; and Petrovalve, Inc. ("Borrower") and Legacy Bank ("Lender")
on the following terms and conditions. Borrower has received prior commercial
loans from Lender or has applied to Lender for a commercial loan or loans or
other financial accommodations, including those which may be described on any
exhibit or schedule attached to this Agreement ("Loan"). Borrower understands
and agrees that: (A) in granting, renewing, or extending any Loan, Lender is
relying upon Borrower's representations, warranties, and agreements as set forth
in this Agreement, and (B) all such Loans shall be and remain subject to the
terms and conditions of this Agreement. TERM. This Agreement shall be effective
as of January 4, 2002, and shall continue in full force and effect until such
time as all of Borrower's Loans in favor of Lender have been paid in full,
including principal, interest, costs, expenses, attorneys' fees, and other fees
and charges, or until January 4, 2005.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender the following
documents for the Loan: (1) the Note; (2) Security Agreements granting
to Lender security interests in the Collateral; (3) financing
statements and all other documents perfecting Lender's Security
Interests; (4) evidence of insurance as required below; (5) together
with all such Related Documents as Lender may require for the Loan;
all in form and substance satisfactory to Lender and Lender's counsel.
Borrower's Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
the Related Documents. In addition, Borrower shall have provided such
other resolutions, authorizations, documents and instruments as Lender
or its counsel, may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Document.
Representations and Warranties. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document
or certificate delivered to Lender under this Agreement are true and
correct.
No Event of Default. There shall not exist at the time of any Advance
a condition which would constitute an Event of Default under this
Agreement, or under any Related .Document.
MULTIPLE BORROWERS. This Agreement has been executed by multiple obligors who
are referred to in this Agreement individually, collectively and interchangeably
as "Borrower." Unless specifically stated to the contrary, the word "Borrower"
as used in this Agreement, including without limitation all representations,
warranties and covenants, shall include all Borrowers. Borrower understands and
agrees that, with or without notice to any one Borrower, Lender may (A) make one
or more additional secured or unsecured loans or otherwise extend additional
credit with respect to any other Borrower; (B) with respect to any other
Borrower alter, compromise, renew, extend, accelerate, or otherwise change one
or more times the time for payment or other terms of any indebtedness, including
increases and decreases of the rate of interest on the indebtedness; (C)
exchange, enforce, waive, subordinate, fail or decide not to perfect, and
release any security, with or without the substitution of new collateral; (D)
release, substitute, agree not to sue, or deal with any one or more of
Borrower's or any other Borrower's sureties, endorsers, or other guarantors on
any terms or in any manner Borrower may choose; (E) determine how, when and what
application of payments and credits shall be made on any indebtedness; (F) apply
such security and direct the order or manner of sale of any Collateral,
including without limitation, any non-judicial sale permitted by the terms of
the controlling security agreement or deed of trust, as Lender in its discretion
may determine; (G) sell, transfer, assign or grant participations in all or any
part of the Loan; (H) exercise or refrain from exercising any rights against
Borrower or others, or otherwise act or refrain from acting; (I) settle or
compromise any indebtedness; and (J) subordinate the payment of all or any part
of any of Borrower's indebtedness to Lender to the payment of any liabilities
which may be due Lender or others. REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants to Lender, as of the date of this Agreement, as of the
date of each disbursement of loan proceeds, as of the date of any renewal,
extension or modification of any Loan, and at all times any Indebtedness exists:
Organization. Flotek Industries, Inc. is a corporation for profit
which is, and at all times shall be, duly organized, validly existing,
and in good standing under and by virtue of the laws of the State of
Delaware. Flotek Industries, Inc. is duly authorized to transact
business in all other states in which Flotek Industries, Inc. is doing
business, having obtained all necessary filings, governmental licenses
and approvals for each state in which Flotek Industries, Inc. is doing
business. Specifically, Flotek Industries, Inc. is, and at all times
shall be, duly qualified as a foreign corporation in all states in
which the failure to so qualify would have a material adverse effect
on its business or financial condition. Flotek Industries, Inc. has
the full power and authority to own its properties and to transact the
business in which it is presently engaged or presently proposes to
engage. Flotek Industries, Inc. maintains an office at 7030 Empire
Central Drive, Houston, TX 77040. Unless Flotek Industries, Inc. has
designated otherwise in writing, the principal office is the office at
which Flotek Industries, Inc. keeps its books and records including
its records concerning the Collateral. Flotek Industries, Inc. will
notify Lender prior to any change in the location of Flotek
Industries, Inc.'s state of organization or any change in Flotek
Industries, Inc.'s name. Flotek Industries, Inc. shall do all things
necessary to preserve and to keep in full force and effect its
existence, rights and privileges, and shall comply with all
regulations, rules, ordinances, statutes, orders and decrees of any
governmental or quasi-governmental authority or court applicable to
Flotek Industries, Inc. and Flotek Industries, Inc.'s business
activities. Chemical and Equipment Specialties, Inc. is a corporation
for profit which is, and at all times shall be, duly organized,
validly existing, and in good standing under and by virtue of the laws
of the State of Oklahoma. Chemical and Equipment Specialties, Inc. is
duly authorized to transact business in all other states in which
Chemical and Equipment Specialties, Inc. is doing business, having
obtained all necessary filings, governmental licenses and approvals
for each state in which Chemical and Equipment Specialties, Inc. is
doing business. Specifically, Chemical and Equipment Specialties, Inc.
is, and at all times shall be, duly qualified as, a foreign
corporation in all states in which the failure to so qualify would
have a material adverse effect on its business or financial condition.
Chemical and Equipment Specialties, Inc. has the full power and
authority to own its properties and to transact the business in which
it is presently engaged or presently proposes to engage. Chemical and
Equipment Specialties, Inc. maintains an office at 3109 Stagestand,
Duncan, OK 73533. Unless Chemical and Equipment Specialties, Inc. has
designated otherwise in writing, the principal office is the office at
which Chemical and Equipment Specialties, Inc. keeps its books and
records including its records concerning the Collateral. Chemical and
Equipment Specialties, Inc. will notify Lender prior to, any change in
the location of Chemical and Equipment Specialties, Inc.'s state of
organization or any change in Chemical and Equipment Specialties,
Inc.'s name. Chemical and Equipment Specialties, Inc. shall do all
things necessary to preserve and to keep in full force and effect its
existence, rights and privileges, and shall comply with all
regulations, rules, ordinances, statutes, orders and decrees of any
governmental or quasi-governmental authority or court applicable to
Chemical and Equipment Specialties, Inc. and Chemical and Equipment
Specialties, Inc.'s business activities. Neal's Technology, Inc. is a
corporation for profit which is, and at all times shall be, duly
organized, validly existing, and in good standing under and by virtue
of the laws of the State of Oklahoma. Neal's Technology, Inc. is duly
authorized to transact business in all other states in which Neal's
Technology, Inc. is doing business, having obtained all necessary
filings, governmental licenses and approvals for each state in which
Neal's Technology, Inc. is doing business. Specifically, Neal's
Technology, Inc. is, and at all times shall be, duly qualified as a
foreign corporation in all states in which the failure to so qualify
would have a material adverse effect on its business or financial
condition. Neal's Technology, Inc. has the full power and authority to
own its properties and to transact the business in which it is
presently engaged or presently proposes to engage. Neal's Technology,
Inc. maintains its principal office at 3600 B South 13th Street,
Duncan, OK 73533. Unless Neal's Technology, Inc. has designated
otherwise in writing, this is the principal office at which Neal's
Technology, Inc. keeps its books and records including its records
concerning the Collateral. Neal's Technology, Inc. will notify Lender
prior to any change in the location of Neal's Technology, Inc.'s state
of organization or any change in Neal's Technology, Inc.'s name.
Neal's Technology, Inc. shall do all things necessary to preserve and
to keep in full force and effect its existence, rights and privileges,
and shall comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental or, quasi-governmental
authority or court applicable to Neal's Technology, Inc. and Neal's
Technology, Inc.'s business activities. Plainsman Technology, Inc. is
a corporation for profit which is, and at all times shall be, duly
organized, validly, existing, and in good standing under and by virtue
of the laws of the State of Oklahoma. Plainsman Technology, Inc. is
duly authorized to transact business in all other states in which
Plainsman Technology, Inc. is doing business, having obtained all
necessary filings, governmental licenses and approvals for each state
in which Plainsman Technology, Inc. is doing business. Specifically,
Plainsman Technology, Inc. is, and at all times shall be, duly
qualified as a foreign corporation in all states in which the failure
to so qualify would have a material adverse effect on its business or
financial condition. Plainsman Technology, Inc. has the full power and
authority to own its properties and to transact the business in which
it is presently engaged or presently proposes to engage. Plainsman
Technology, Inc. maintains its principal office at PO Box 557, Marlow,
OK 73055. Unless Plainsman Technology, Inc. has designated otherwise
in writing, this is the principal office at which Plainsman
Technology, Inc. keeps its books and records including its records
concerning the Collateral. Plainsman Technology, Inc. will notify
Lender prior to any change in the location of Plainsman Technology,
Inc.'s state of organization or any change in Plainsman Technology,
Inc.'s name. Plainsman Technology, Inc. shall do all things necessary
to preserve and to keep in full force and effect its existence; rights
and privileges, and shall comply with all regulations, rules,
ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to Plainsman
Technology, Inc. and Plainsman Technology, Inc.'s business activities.
PADKO International Incorporated is a corporation for profit which is,
and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the State of
Oklahoma. PADKO International Incorporated is duly authorized to
transact business in all other states in which PADKO International
Incorporated is doing business, having obtained all necessary filings,
governmental licenses and approvals for each state in which PADKO
International Incorporated is doing business. Specifically, PADKO
International Incorporated is, and at all times shall be, duly
qualified as a foreign corporation in all states in which the failure
to so qualify would have a material adverse effect on its business or
financial condition. PADKO International Incorporated has the full
power and authority to own its, properties and to transact the
business in which it is presently engaged or presently proposes to
engage. PADKO International Incorporated maintains its principal
office at 15 North 9th, Duncan, OK 73533. Unless PADKO International
Incorporated has designated otherwise in writing, this is the
principal office at which PADKO International Incorporated keeps its
books and records including its records concerning the Collateral.
PADKO International Incorporated will notify Lender prior to any
change in the location of PADKO International Incorporated's state of
organization or any change in PADKO International Incorporated's name.
PADKO International Incorporated shall do all things necessary to
preserve and to keep in full force and effect its existence, rights
and privileges, and shall comply with all regulations, rules,
ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to PADKO
International Incorporated and PADKO International Incorporated's
business activities. Material Translogistics, Inc. is a corporation
for profit which is, and at all times shall be, duly organized,
validly existing, and in good standing under and by virtue of the laws
of the State of Texas. Material Translogistics, Inc. is duly
authorized to transact business in all other states in which Material
Translogistics, Inc. is doing business, having obtained all necessary
filings, governmental licenses and approvals for each state in which
Material Translogistics, Inc. is doing business. Specifically,
Material Translogistics, Inc. is, and at all times shall be, duly
qualified as a foreign corporation in all states in which the failure
to so qualify would have a material adverse effect on its business or
financial condition. Material Translogistics, Inc. has the full power
and authority to own its properties and to transact the business in
which it is presently engaged or presently proposes to engage.
Material Translogistics, Inc. maintains an office at 3600 B South 13th
Street, Duncan, OK 73533. Unless Material Translogistics, Inc. has
designated otherwise in writing, the principal office is the office at
which Material Translogistics, Inc. keeps its books and records
including its records concerning the Collateral. Material
Translogistics, Inc. will notify Lender prior to any change in the
location of Material. Translogistics, Inc.'s state of organization or
any change in Material Translogistics, Inc.'s name. Material
Translogistics, Inc. shall do all things necessary to preserve and to
keep in full force and effect its existence, rights and privileges;
and shall comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental or quasi-governmental authority
or, court applicable to Material Translogistics, Inc. and Material
Translogistics, Inc.'s business activities. Esses, Inc. is a
corporation for profit which is, and at all times shall be, duly
organized, validly existing, and in good standing under and by virtue
of the laws of the State of Oklahoma. Esses, Inc. is duly authorized
to transact business in all other states in which Esses, Inc. is doing
business, having obtained all necessary filings, governmental licenses
and approvals for each state in which Esses, Inc. is doing business.
Specifically, Esses, Inc. is, and at all times shall be, duly
qualified as a foreign corporation in all states in which the failure
to so qualify would have a material adverse effect on its business or
,financial condition. Esses, Inc. has the full power and authority to
own its properties and to transact the business in which it is
presently engaged or presently proposes to engage. Esses, Inc.
maintains its principal office at 301 Industrial Dr., Duncan, OK
73533. Unless Esses, Inc. has designated otherwise in writing, this is
the principal office at which Esses, Inc. keeps its books and records
.including its records concerning the Collateral. Esses, Inc. will
notify Lender prior to any change in the location of Esses, Inc.'s
state of organization or any change in Esses, Inc.'s name. Esses, Inc.
shall do all things necessary to preserve and to keep in full force
and effect its existence, rights and privileges, and shall comply with
all regulations, rules, ordinances, statutes, orders and decrees of
any governmental or quasi-governmental authority or court applicable
to Esses, Inc. and Esses, Inc.'s business activities. Turbeco, Inc. is
a corporation for profit which is, and at all times shall be, duly
organized, validly existing, and in good standing under and by virtue
of the laws of the State of Texas. Turbeco, Inc. is duly authorized to
transact business in all other states in which Turbeco, Inc. is doing
business, having obtained all necessary filings, governmental licenses
and approvals for each state in which Turbeco, Inc. is doing business.
Specifically, Turbeco, Inc. is, and at all times shall be, duly
qualified as a foreign corporation in all states in which the failure
to so qualify would have a material adverse effect on its business or
financial condition. Turbeco, Inc. has the full power and authority to
own its properties and to transact the business in which it is
presently engaged or presently proposes to engage. Turbeco, Inc.
maintains its principal office at 7030 Empire Central Drive, Houston,
TX 77040. Unless Turbeco, Inc. has designated otherwise in writing,
this is the principal office at which Turbeco, Inc. keeps its books
and records including its records concerning the Collateral. Turbeco,
Inc. will notify Lender prior to any change in the location of
Turbeco, Inc.'s state of organization or any change in Turbeco, Inc.'s
name. Turbeco, Inc. shall do all things necessary to preserve and to
keep in full force and effect its existence, rights and privileges,
and shall comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental or quasi-governmental authority
or court applicable to Turbeco, Inc. and Turbeco, Inc.'s business
activities. USA Petrovalve, Inc. is a corporation for profit which is,
and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the State of Texas.
USA Petrovalve, Inc. is duly authorized to transact business in all
other states in which USA Petrovalve, Inc. is doing business, having
obtained all necessary filings, governmental licenses and approvals
for each state in which USA Petrovalve, Inc. is doing business.
Specifically, USA Petrovalve, Inc. is, and at all times shall be, duly
qualified as a foreign corporation in all states in which the failure
to so qualify would have a material adverse effect on its business or
financial condition. USA Petrovalve, Inc. has the full power and
authority to own its properties and to transact the business in which
it is presently engaged or presently proposes to engage. USA
Petrovalve, Inc. maintains its principal office at 7030 Empire Central
Drive, Houston, TX 77040. Unless USA Petrovalve, Inc. has designated
otherwise in writing, this is the principal office at which USA
Petrovalve, Inc. keeps its books and records including its records
concerning the Collateral. USA Petrovalve, Inc. will notify Lender
prior to any change in the location of USA Petrovalve, Inc.'s state of
organization or any change in USA Petrovalve, Inc.'s name. USA
Petrovalve, Inc. shall do all things necessary to preserve and to keep
in full force and effect its existence, rights and privileges, and
shall comply with all regulations; rules, ordinances, statutes, orders
and decrees of any governmental or quasi-governmental authority or
court applicable to USA Petrovalve, Inc. and USA Petrovalve, Inc.'s
business activities. Trinity Tool, Inc. is a corporation for profit
which is, and at all times shall be, duly organized, validly existing,
and in good standing under and by virtue of the laws of the State of
Texas. Trinity Tool, Inc. is duly authorized to transact business in
all other states in which Trinity Tool, Inc. is doing business, having
obtained all necessary filings, governmental licenses and approvals
for each state in which Trinity Tool, Inc. is doing business.
Specifically, Trinity Tool, Inc. is, and at all times shall be, duly
qualified as a foreign corporation in all states in which the failure
to so qualify would have a material adverse effect on its business or
financial condition. Trinity Tool, Inc. has the full power and
authority to own its properties and to transact the business in which
it is presently engaged or presently proposes to engage. Trinity Tool,
Inc. maintains its principal office at PO Box 899, Mason, TX 76856.
Unless Trinity Tool, Inc. has designated otherwise in writing, this is
the principal office at which Trinity Tool, Inc. keeps its books and
records including its records concerning the Collateral. Trinity Tool,
Inc. will notify Lender prior to any change in the location of Trinity
Tool, Inc.'s state of organization or any change in Trinity Tool,
Inc.'s name. Trinity Tool, Inc. shall do all things necessary to
preserve and to keep in full force and effect its existence, rights
and privileges, and shall comply with all regulations, rules,
ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to Trinity Tool, Inc.
and Trinity Tool, Inc.'s business activities. Petrovalve, Inc. is a
corporation for profit which is, and at all times shall be, duly
organized, validly existing, and in good standing under and by virtue
of the laws of the State of Delaware. Petrovalve, Inc. is duly
authorized to transact business in all other states in which
Petrovalve, Inc. is doing business, having obtained all necessary
filings, governmental licenses and approvals for each state in which
Petrovalve, Inc. is doing business. Specifically, Petrovalve, Inc. is,
and at all times shall be, duly qualified as a foreign corporation in
all states in which the failure to so qualify would have a material
adverse effect on its business or financial condition. Petrovalve,
Inc. has the full power and authority to own its properties and to
transact the business in which it is presently engaged or presently
proposes to engage. Petrovalve, Inc. maintains its principal office at
7030 Empire Central Drive, Houston, TX 77040. Unless Petrovalve, Inc.
has designated otherwise in writing, this is the principal office at
which Petrovalve, Inc. keeps its books and records including its
records concerning the Collateral. Petrovalve, Inc. will notify Lender
prior to any change in the location of Petrovalve, Inc.'s state of
organization or any change in Petrovalve, Inc.'s name. Petrovalve,
Inc. shall do all things necessary to preserve and to keep in full
force and effect its existence, rights and privileges, and shall
comply with all regulations, rules, ordinances, statutes, orders and
decrees of any governmental or quasi-governmental authority or court
applicable to Petrovalve, Inc. and Petrovalve, Inc.'s business
activities.
Assumed Business Names. Borrower has filed or recorded all documents
or filings required by law relating to all assumed business names used
by Borrower. Excluding the name of Borrower, the following is a
complete list of all assumed business names under which Borrower does
business: None.
Authorization. Borrower's execution, delivery, and performance of this
Agreement and all the Related Documents have been duly authorized by
all necessary action by Borrower and do not conflict with, result in a
violation of, or constitute a default under (1) any provision of
Petrovalve, Inc.'s articles of incorporation or organization, or
bylaws, or any agreement or other instrument binding upon Borrower or
(2) any law, governmental regulation, court decree, or order
applicable to Borrower or to Borrower's properties.
Financial Information. Each of Borrower's financial statements
supplied to Lender truly and completely disclosed Borrower's financial
condition as of the date of the statement, and there has been no
material adverse change in Borrower's financial condition subsequent
to the date of the most recent financial statement supplied to Lender.
Borrower has no material contingent obligations except as disclosed in
such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or
agreement Borrower is required to give under this Agreement when
delivered will constitute legal, valid, and binding obligations of
Borrower enforceable against Borrower in accordance with their
respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has good title to all
of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled
in Borrower's legal name, and Borrower has not used or filed a
financing statement under any other name for at least the last five
(5) years.
Hazardous Substances. Except as disclosed to and acknowledged by
Lender in writing, Borrower represents and warrants that: (1) During
the period of Borrower's ownership of Borrower's Collateral, there has
been no use, generation, manufacture, storage, treatment, disposal,
release or threatened release of any Hazardous Substance by any person
on, under, about or from any of the Collateral, (2) Borrower has no
knowledge of, or reason to believe that there has been (a) any breach
or violation of any Environmental Laws; (b) any use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substance on, under, about or from the
Collateral by any prior owners or occupants of any of the Collateral;
or (c) any actual or threatened litigation or claims of any kind by
any person relating to such matters, (3) Neither Borrower nor any
tenant, contractor, agent or other authorized user of any of the
Collateral shall use, generate, manufacture, store, treat, dispose of
or release any Hazardous Substance on, under, about or from any of the
Collateral; and any such activity shall be conducted in compliance
with all applicable federal, state, and local laws, regulations, and
ordinances, including without limitation all Environmental Laws.
Borrower authorizes Lender and its agents to enter upon the Collateral
to make such inspections and tests as Lender may deem appropriate to
determine compliance of the Collateral with this section of the
Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall not be
construed to create any responsibility or liability on the part of
Lender to Borrower or to any other person. The representations and
warranties contained herein are based on Borrower's due diligence in
investigating the Collateral for hazardous waste and Hazardous
Substances. Borrower hereby (1) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower
becomes liable for cleanup or other costs under any such laws, and (2)
agrees to indemnify and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses which
Lender may directly or indirectly sustain or suffer resulting from a
breach of this section of the Agreement or as a consequence of any
use, generation, manufacture, storage, disposal, release or threatened
release of a hazardous waste or substance on the Collateral. The
provisions of this section of the Agreement, including the obligation
to indemnify, shall survive the payment of the Indebtedness and the
termination, expiration or satisfaction of this Agreement and shall
not be affected by Lender's acquisition of any interest in any of the
Collateral, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those for
unpaid taxes) against Borrower is pending or threatened, and no other
event has occurred which may materially adversely affect Borrower's
financial condition or properties, other than litigation, claims, or
other events, if any, that have been disclosed to and acknowledged by
Lender in writing.
Taxes. To the best of Borrower's knowledge, all of Borrower's tax
returns and reports that are or were required to be filed, have been
filed, and all taxes, assessments and other governmental charges have
been paid in full, except those presently being or to be contested by
Borrower in good faith in the ordinary course of business and for
which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or, affecting any of the Collateral directly or
indirectly securing repayment of Borrower's Loan and Note, that would
be prior or that may in any way be superior to Lender's Security
Interests and rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements (if
any), and all Related Documents are binding upon the signers thereof,
as well as upon their successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so
long as this Agreement remains in effect, Borrower will:
Notices of Claims and Litigation. Promptly inform Lender in writing of
(1) all material adverse changes in Borrower's financial condition,
and (2) all existing and all threatened litigation, claims,
investigations, administrative proceedings or, similar actions
affecting Borrower or any Guarantor which could materially affect the
financial condition of Borrower or the financial condition of any
Guarantor.
Financial Records. Maintain its books and records in accordance with
GAAP, applied on a consistent basis, and permit Lender to examine and
audit Borrower's books and records at all reasonable times.
Financial Statements. Furnish Lender with the following:
Annual Statements: As soon as available, but in no event later
than thirty (30) days after the end of each fiscal year,
Borrower's balance sheet and income statement for the year
ended, prepared by Borrower in form satisfactory to Lender.
Interim Statements. As soon as available, but in no event
later than thirty (30) days after the end of each month,
Borrower's balance sheet and profit and loss statement for the
period ended, prepared by Borrower.
Tax Returns. As soon as available, but in no event later than
thirty (30) days after the applicable filing date for the tax
reporting period ended, Federal and other governmental tax
returns, prepared by a certified public accountant
satisfactory to Lender.
All financial reports required to be provided under this Agreement
shall be prepared in accordance with GAAP, applied on a consistent
basis, and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and
statements, as Lender may request from time to time.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect
to Borrower's properties and operations, in form, amounts, coverages
and with insurance companies acceptable to Lender. Borrower, upon
request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be cancelled or
diminished without of least ten (10) days prior written notice to
Lender. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default of Borrower or any other person.
In connection with all policies covering assets in which Lender, holds
or is offered a security interest for the Loans, Borrower will provide
Lender with such lender's loss payable or other endorsements as Lender
may require.
Insurance Reports. Furnish to Lender; upon request of Lender, reports
on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following:
(1) the name of the insurer; (2) the risks insured; (3) the amount of
the policy; (4) the properties insured; (5) the then current property
values on the basis of which insurance has been obtained, and the
manner of determining those values; and (6) the expiration date of the
policy. In addition, upon request of Lender (however not more often
than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value
or replacement cost of any Collateral. The cost of such appraisal
shall be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and
any other party and notify Lender immediately in, writing of any
default in connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income, or profits.
Performance. Perform and comply, in a timely manner, with all terms,
conditions, and provisions set forth in this Agreement, in the Related
Documents, and in all other instruments and agreements between
Borrower and Lender. Borrower shall notify Lender immediately in
writing of any default in connection with any agreement.
Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender
of any change in executive and management personnel; conduct its
business affairs in a reasonable and prudent manner.
Environmental Studies. Promptly conduct and complete at Borrower's
expense, all such investigations, studies, samplings and testings as
may be requested by Lender or any governmental authority relative to
any substance, or any waste or by product of any substance defined as
toxic or a hazardous substance under applicable federal, state, or
local law, rule, regulation, order or directive, at or affecting any
property or any facility owned, leased or used by Borrower.
Compliance with Governmental Requirements. Comply with all laws,
ordinances, and regulations, now or hereafter in effect, of all
governmental authorities applicable to the conduct of Borrower's
properties, businesses and operations, and to the use or occupancy of
the Collateral, including without limitation, the Americans With
Disabilities Act. Borrower may contest in good faith any such law,
ordinance, or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Borrower has
notified Lender in writing prior to doing so and so long as, in
Lender's sole opinion, Lender's interests in the Collateral are not
jeopardized. Lender may require Borrower to post adequate security or
a surety bond, reasonably satisfactory to Lender, to protect Lender's
interest.
Inspection. Permit employees or agents of Lender at any reasonable
time to inspect any and all Collateral for the Loan or Loans and
Borrower's other properties and to examine or audit Borrower's books,
accounts, and records and to make copies and memoranda of Borrower's
books, accounts, and records. If Borrower now or at any time hereafter
maintains any records (including without limitation computer generated
records and computer software programs for the generation of such
records) in the possession of a third party, Borrower, upon request of
Lender, shall notify such party to permit Lender free access, to such
records at all reasonable times, and to provide Lender with copies of
any records it may request, all at Borrower's expense.
Compliance Certificates. Unless waived in writing by Lender, provide
Lender at least annually, with a certificate executed by Borrower's
chief financial officer, or other officer or person acceptable to
Lender, certifying that the representations and warranties set forth
in this Agreement are true and correct as of the date of the
certificate and further certifying that, as of the date of the
certificate, no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with any and all Environmental Laws; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on Borrower's part or on the part of any third party, on
property owned and/or occupied by Borrower, any environmental activity
where damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with
any environmental activity whether or not there is damage to the
environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
assignments, financing statements, instruments, documents and other
agreements as Lender or its attorneys may reasonably request to
evidence and secure the Loans and to perfect all Security Interests.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower's failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note or at the highest rate authorized by
law, from the date incurred or paid by Lender to the date of repayment by
Borrower. All such expenses will become a part of the Indebtedness and, at
Lender's option, will (A) be payable on demand; (B) be added to the balance of
the Note and be apportioned among and be payable with any installment payments
to become due during either (1) the term of any applicable insurance policy; or
(2) the remaining term of the Note; or (C) be treated as a balloon payment which
will be due and payable at the Note's maturity. If Lender is required by law to
give Borrower notice before or after Lender makes an expenditure, Borrower
agrees that notice sent by regular mail at least five (5) days before the
expenditure is made or notice delivered two (2) days before the expenditure is
made is sufficient, and that notice within sixty (60) days after the expenditure
is made is reasonable.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (1) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume indebtedness for borrowed
money, including capital leases, (2) sell, transfer, mortgage, assign,
pledge, lease, grant a security interest in, or encumber any of
Borrower's assets (except as allowed as Permitted Liens), or (3) sell
with recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (1) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (2) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, or
(3) pay any dividends on Borrower's stock (other than dividends
payable in its stock), provided, however that notwithstanding the
foregoing, but only so long as no Event of Default has occurred and is
continuing or would result from the payment of dividends, if Borrower
is a "Subchapter S Corporation" (as defined in the Internal Revenue
Code of 1986, as amended), Borrower may pay cash dividends on its
stock to its shareholders from time to time in amounts necessary to
enable the shareholders to pay income taxes and make estimated income
tax payments to satisfy their liabilities under federal and state law
which arise solely from their status as Shareholders of a Subchapter S
Corporation because of their ownership of shares of Borrower's stock,
or purchase or retire any of Borrower's outstanding shares or alter or
amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance
money or assets, (2) purchase, create or acquire any interest in any
other enterprise or entity, or (3) incur any obligation as surety or
guarantor other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (D) , any
Guarantor, seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in
good faith deems itself insecure, even though no Event of Default shall have
occurred.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.
DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Payment Default. Borrower fails to make any payment when due under the
Loan.
Other Defaults. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or
in any of the Related Documents or to comply with or to perform any
term obligation, covenant or condition contained in any other
agreement between Lender and Borrower.
Default in Favor of Third Parties. Borrower or any Grantor defaults
under any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's or any
Grantor's property or Borrower's or any Grantor's ability to repay the
Loans or perform their respective obligations under this Agreement or
any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to lender by Borrower or on Borrower's behalf under this
Agreement or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished or
becomes false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as
a going business, the Insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency laws
by or against Borrower.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any collateral document to create a valid and perfected security
interest or lien) at any time and for any reason.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by
any governmental agency against any collateral securing the loan. This
includes a garnishment of any of Borrower's accounts, including
deposit accounts, with lender. However, this Event of Default shall
not apply if there is a good faith dispute by Borrower as to the
validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives lender written
notice of the creditor or forfeiture proceeding and deposits with
lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by lender, in its sole discretion,
as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of,
or liability under, any Guaranty of the Indebtedness. In the event of
a death, Lender, at its option, may, but shall not be required to,
permit the Guarantor's estate to assume unconditionally the
obligations arising under the guaranty in a manner satisfactory to
Lender, and, in doing so, cure any Event of Default.
Change In Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Loan is impaired.
Right to Cure. If any default, other than a default on Indebtedness,
is curable and if Borrower or Grantor, as the case may be, has not
been given a notice of a similar default within the preceding twelve
(12) months, it may be cured (and no Event of Default will have
occurred) if Borrower or Grantor, as the case may be, after receiving
written notice from Lender demanding cure of such default: (1) cure
the default within ten (10) days; or (2) if the cure requires more
than ten (10) days, immediately initiate steps which Lender deems in
Lender's sole discretion to be sufficient to cure the default and
thereafter continue and complete all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. All prior and
contemporaneous representations and discussions concerning such
matters either are included in this document or do not constitute an
aspect of the agreement of the parties. Except as may be specifically
set forth in this Agreement, no conditions precedent or subsequent, or
any kind whatsoever, exist with respect to Borrower's obligations
under this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of
Lender's costs and expenses, including Lender's attorneys' fees and
Lender's legal expenses, incurred in connection with the enforcement
of this Agreement. Lender may hire or pay someone else to help enforce
this Agreement, and Borrower shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's attorneys' fees and
legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and
any anticipated post-judgment collection services. Borrower also shall
pay all court costs and such additional fees as may be directed by the
court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
Consent to Loan Participation. Borrower agrees and consents to
Lender's sale or transfer, whether now or later, of one or more
participation interests in the Loan to one or more purchasers, whether
related or unrelated to Lender. Lender may provide, without any
limitation whatsoever, to any one or more purchasers, or potential
purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower
hereby waives any rights to privacy Borrower may have with respect to
such matters. Borrower additionally waives any and all notices of sale
of participation interests, as well as all notices of any repurchase
of such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as
the absolute owners of such interests in the Loan and will have all
the rights granted under the participation agreement or agreements
governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or
later against Lender or against any purchaser of such a participation
interest and unconditionally agrees that either Lender or such
purchaser may enforce Borrower's obligation under the Loan
irrespective of the failure or insolvency of any holder an any
interest in the Loan. Borrower further agrees that the purchaser of
any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
Governing Law. This Agreement will be governed by, construed and
enforced in accordance with federal law and the laws of the State of
Oklahoma. This Agreement has been accepted by Lender in the State of
Oklahoma.
Joint and Several Liability. All obligations of Borrower under this
Agreement shall be joint and several, and all references to Borrower
shall mean each and every Borrower. This means that each Borrower
signing below is responsible for all obligations in this Agreement.
Where anyone or more of the parties is a corporation, partnership,
limited liability company or similar entity, it is not necessary for
Lender to inquire into the powers of any of the officers, directors,
partners, members, or other agents acting or purporting to act on the
entity's behalf, and any obligations made or created in reliance upon
the professed exercise of such powers shall be guaranteed under this
Agreement.
No Waiver by Lender. Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any
other right. A waiver by Lender of a provision of this Agreement shall
not prejudice or constitute a waiver of Lender's right otherwise to
demand strict compliance with that provision or any other provision of
this Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any of Borrower's
or any Grantor's obligations as to any future transactions. Whenever
the consent of Lender is required under this Agreement, the granting
of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in
the sole discretion of Lender.
Notices. To the extent permitted by applicable law, any notice
required to be given under this Agreement shall be given in writing,
and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited
with a nationally recognized overnight courier, or, if mailed, when
deposited in the United States mail, as first class, certified or
registered mail postage prepaid, directed to the addresses shown near
the beginning of this Agreement. Any party may change its address for
notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change
the party's address. For notice purposes, Borrower agrees to keep
Lender informed at all times of Borrower's current address. To the
extent permitted by applicable law, if there is more than one
Borrower, any notice given by Lender to any Borrower is deemed to be
notice given to all Borrowers.
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be illegal, invalid, or unenforceable as to any
person or circumstance, that finding shall not make the offending
provision illegal, invalid, or unenforceable as to any other person or
circumstance. If feasible, the offending provision shall be considered
modified so that it becomes legal, valid and enforceable. If the
offending provision cannot be so modified, it shall be considered
deleted from this Agreement. Unless otherwise required by law, the
illegality, invalidity, or unenforceability of any provision of this
Agreement shall not affect the legality, validity or enforceability of
any other provision of this Agreement.
Subsidiaries and Affiliates of Borrower. To the extent the context of
any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word
"Borrower" as used in this Agreement shall include all of Borrower's
subsidiaries and affiliates. Notwithstanding the foregoing however,
under no circumstances shall this Agreement be construed to require
Lender to make any Loan or other financial accommodation to any of
Borrower's subsidiaries or affiliates.
Successors and Assigns. All covenants and agreements contained by or
on behalf of Borrower shall bind Borrower's successors and assigns and
shall inure to the benefit of Lender and its successors and assigns.
Borrower shall not, however, have the right to assign Borrower's
rights under this Agreement or any interest therein, without the prior
written consent of Lender.
Survival of Representations and Warranties. Borrower understands and
agrees that in making the Loan, Lender is relying on all
representations, warranties, and covenants made by Borrower in this
Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement or the Related Documents.
Borrower further agrees that regardless of any investigation made by
Lender, all such representations, warranties and covenants, will
survive the making of the Loan and delivery to Lender of ,the Related
Documents, shall be continuing in nature, and shall remain in full
force and effect until such time as Borrower's Indebtedness shall be
paid in full, or until this Agreement shall be terminated in the
manner provided above, whichever is the last to occur.
Time is of the Essence. Time is of the essence in the performance of
this Agreement.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:
Advance. The word "Advance" means a disbursement of Loan funds made,
or to be made, to Borrower or on Borrower's behalf on a line of credit
or multiple advance basis under the terms and conditions of this
Agreement.
Agreement. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or, modified from time to
time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.
Borrower. The word "Borrower" means Flotek Industries, Inc.; Chemical
and Equipment Specialties, Inc.; Neal's Technology, Inc.; Plainsman
Technology, Inc.; PADKO International Incorporated; Material
Translogistics, Inc.; Esses, Inc.; Turbeco, Inc.; USA Petrovalve,
Inc.; Trinity Tool, Inc.; and Petrovalve, Inc., and all other persons
and entities signing the Note in whatever capacity.
Collateral. The word "Collateral" means all property and assets
granted as collateral security for a Loan, whether real or personal
property, whether granted directly or indirectly, whether granted now
or in the future, and whether granted in the form of a security
interest, mortgage, collateral mortgage, deed of trust, assignment,
pledge, crop pledge, chattel mortgage, collateral chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or
lien interest whatsoever, whether created by law, contract, or
otherwise.
Environmental Laws. The words "Environmental Laws" mean any and all
state, federal and local statutes, regulations and ordinances relating
to the protection of human health or the environment, including
without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.; or
other applicable state or federal laws, rules, or regulations adopted
pursuant thereto.
Event of Default. The words "Event of Default" mean any of the events
of default set forth in this Agreement in the default section of this
Agreement.
GAAP. The word "GAAP" means generally accepted accounting principles.
Grantor. The word "Grantor" means each and all of the persons or
entities granting a Security Interest in any Collateral for the Loan,
including without limitation all Borrowers granting such a Security
Interest.
Guarantor. The word "Guarantor" means any guarantor, surety, or
accommodation party of any or all of the Loan.
Guaranty. The word "Guaranty" means the guaranty from Guarantor to
Lender; including without limitation a guaranty of all or part of the
Note.
Hazardous Substances. The words "Hazardous Substances" mean materials
that, because of their quantity, concentration or physical, chemical
or infectious characteristics, may cause or pose a present or
potential hazard to human health or the environment when improperly
used, treated, stored, disposed of, generated, manufactured,
transported or otherwise handled. The words "Hazardous Substances" are
used in their very broadest sense and include without limitation any
and all hazardous or toxic substances, materials or waste as defined
by or listed under the Environmental Laws. The term "Hazardous
Substances" also includes, without limitation, petroleum and petroleum
by products or any fraction thereof and asbestos.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced
by the Note or Related Documents, including all principal and interest
together with all other indebtedness and costs and expenses for which
Borrower is responsible under this Agreement or under any of the
Related Documents.
Lender. The word "Lender" means Legacy Bank, its successors and
assigns.
Loan. The word "Loan" means any and all loans and financial
accommodations from Lender to Borrower whether now or hereafter
existing, and however evidenced, including without limitation those
lows and financial accommodations described herein or described on any
exhibit or schedule attached to this Agreement from time to time.
Note. The word "Note" means the Note executed by Flotek Industries,
Inc.; Chemical, and Equipment Specialties, Inc.; Neal's Technology,
Inc.; Plainsman Technology, Inc.; PADKO International Incorporated;
Material Translogistics, Inc., Esses, Inc.; Turbeco, Inc.; USA
Petrovalve, Inc.; Trinity Tool, Inc.; and Petrovalve, Inc. in the
principal amount of $854,350.00 dated January 4, 2002, together with
all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the note or credit agreement.
Permitted Liens. The words "Permitted Liens" mean (1) liens and
security interests securing Indebtedness owed by Borrower to Lender;
(2) liens for taxes, assessments, or similar charges either not yet
due or being contested in good faith; (3) liens of materialmen,
mechanics, warehousemen, or carriers, or other like liens arising in
the ordinary course of business and securing obligations which are not
yet delinquent; (4) purchase money liens or purchase money security
interests, upon or in any, property acquired or held by Borrower in
the ordinary course of business to secure indebtedness outstanding on
the date of this Agreement or permitted to be incurred under the
paragraph of this Agreement titled "Indebtedness and Liens"; (5) liens
and security interests which, as of the date of this Agreement, have
been disclosed to and approved by the Lender in writing; and (6) those
liens and security interests which in the aggregate constitute an
immaterial and insignificant monetary amount with respect to the net
value of Borrower's assets.
Related Documents. The words "Related Documents" mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security
deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Loan.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.
Security Interest. The words "Security Interest" mean, without
limitation, any and all types of collateral security, present and
future, whether in the form of a lien, charge, encumbrance; mortgage,
deed of trust, security deed, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt, lien or title
retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever whether
created by law, contract, or otherwise.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS
DATED JANUARY 4, 2002.
BORROWER:
FLOTEK INDUSTRIES, INC.
By:/s/ Jerry D. Dumas, Sr.
----------------------------------------------------------
Jerry D. Dumas, Sr., CEO of Flotek Industries, Inc.
By:/s/ Randall D. Keys
----------------------------------------------------------
Randall D. Keys, Chief Financial Officer of
Flotek Industries, Inc.
By:/s/ Glenn S. Penny
----------------------------------------------------------
Glenn S. Penny, President of Flotek Industries, Inc.
CHEMICAL AND EQUIPMENT SPECIALTIES, INC.
By:/s/ Jerry D. Dumas, Sr.
----------------------------------------------------------
Jerry D. Dumas, Sr., CEO of Chemical and Equipment of
Chemical and Equipment Specialties, Inc.
By:/s/ Randall D. Keys
----------------------------------------------------------
Randall D. Keys, Chief Financial Officer of
Chemical and Equipment Specialties, Inc.
By:/s/ Glenn S. Penny
----------------------------------------------------------
Glenn S. Penny, President of Chemical and Equipment
Specialties, Inc.
NEAL'S TECHNOLOGY, INC.
By:/s/ Jerry D. Dumas, Sr.
----------------------------------------------------------
Jerry D. Dumas, Sr., CEO of Neal's Technology, Inc.
By:/s/ Glenn S. Penny
----------------------------------------------------------
Glenn S.Penny, President of Neal's Technology, Inc.
By:/s/ Tom D. Morton
----------------------------------------------------------
Tom D. Morton, Vice President of Neal's Technology, Inc.
PLAINSMAN TECHNOLOGY, INC.
By:/s/ Jerry D. Dumas, Sr.
----------------------------------------------------------
Jerry D. Dumas, Sr., CEO of Plainsman Technology, Inc.
By:/s/ Glenn S. Penny
----------------------------------------------------------
Glenn S.Penny, President of Plainsman Technology, Inc.
By:/s/ Tom D. Morton
----------------------------------------------------------
Tom D. Morton, Vice President of Plainsman Technology, Inc.
ESSES, INC.
By:/s/ Jerry D. Dumas, Sr.
----------------------------------------------------------
Jerry D. Dumas, Sr., CEO of Esses, Inc.
By:/s/ Glenn S. Penny
----------------------------------------------------------
Glenn S. Penny, President of Esses, Inc.
By:/s/ Tom D. Morton
----------------------------------------------------------
Tom D. Morton, Vice President of Esses, Inc.
PADKO INTERNATIONAL, INCORPORATED
By:/s/ Jerry D. Dumas, Sr.
----------------------------------------------------------
Jerry D. Dumas, Sr., CEO of PADKO International
Incorporated
By:/s/ Glenn S. Penny
----------------------------------------------------------
Glenn S.Penny, President of PADKO International Incorporated
By:/s/ Tom D. Morton
----------------------------------------------------------
Tom D. Morton, Vice President of PADKO
International Incorporated
TURBECO, INC.
By:/s/ Jerry D. Dumas, Sr.
----------------------------------------------------------
Jerry D. Dumas, Sr., CEO of Turbeco, Inc.
By:/s/ Glenn S. Penny
----------------------------------------------------------
Glenn S. Penny, President of
Turbeco, Inc.
By:/s/ Tom D. Morton
----------------------------------------------------------
Tom D. Morton, Vice President of Turbeco, Inc.
USA PETROVALVE, INC.
By:/s/ Jerry D. Dumas, Sr.
----------------------------------------------------------
Jerry D. Dumas, Sr., CEO of USA Petrovalve, Inc.
By:/s/ Glenn S. Penny
----------------------------------------------------------
Glenn S. Penny, President of USA
Petrovalve, Inc.
By:/s/ Tom D. Morton
----------------------------------------------------------
Tom D. Morton, Vice President of USA Petrovalve, Inc.
TRINITY TOOL, INC.
By:/s/ Jerry D. Dumas, Sr.
----------------------------------------------------------
Jerry D. Dumas, Sr., CEO of Trinity Tool, Inc.
By:/s/ Glenn S. Penny
----------------------------------------------------------
Glenn S. Penny, President of
Trinity Tool, Inc.
By:/s/ Tom D. Morton
----------------------------------------------------------
Tom D. Morton, Vice President of Trinity Tool, Inc.
MATERIAL TRANSLOGISTICS, INC.
By:/s/ Jerry D. Dumas, Sr.
----------------------------------------------------------
Jerry D. Dumas, Sr., CEO of Material Translogistics, Inc.
By:/s/ Glenn S. Penny
----------------------------------------------------------
Glenn S. Penny, President of
Material
Translogistics, Inc.
By:/s/ Tom D. Morton
----------------------------------------------------------
Tom D. Morton, Vice President of Material
Translogistics, Inc.
PETROVALVE, INC.
By:/s/ Jerry D. Dumas, Sr.
----------------------------------------------------------
Jerry D. Dumas, Sr., CEO of Petrovalve, Inc.
By:/s/ Glenn S. Penny
----------------------------------------------------------
Glenn S. Penny, President of
Petrovalve, Inc.
By:/s/ Tom D. Morton
----------------------------------------------------------
Tom D. Morton, Vice President of Petrovalve, Inc.
LENDER:
LEGACY BANK
By:/s/ Authorized Signer
----------------------------------------------------------
Authorized Signer
PROMISSORY NOTE
Principal: $854,350.00
Loan Date: 01-04-2002
Maturity: 01-04-2005
Borrower:Flotek Industries, Inc. (TIN: 77-0709256); Lender: Legacy Bank
Chemical and Equipment Specialties, Inc. (TIN: Legacy Bank
73-1591850); Neal's Technology, Inc. (TIN: PO Box 1109
73-1512452); Plainsman Technology, Inc. (TIN: 2024 N. Hwy 81
73-1218459); PADKO International Incorporated Duncan,OK 73534-1109
(TIN: 73-1443489); Material Translogistics, Inc.
(TIN: 73-1605226); Esses, Inc. (TIN:
73-1386155); Turbeco, Inc. (TIN: 76-0228889);
USA Petrovalve, Inc. (TIN: 76-0448098); Trinity
Tool, Inc. (TIN: 76-0517268); and Petrovalve, Inc.
(TIN: 76-0513130)
7030 Empire Central Drive
Houston, TX 77040
PROMISE TO PAY. Flotek Industries, Inc., Chemical and Equipment Specialties,
Inc., Neal's Technology, Inc.; Plainsman Technology, Inc.; PADKO International
Incorporated; Material Translogistics, Inc.; Esses, Inc.; Turbeco, Inc.; USA
Petrovalve, Inc.; Trinity Tool, Inc.; and Petrovalve, Inc, ("Borrower") jointly
and severally promise to pay to Legacy Bank ("Lender"), or order, in lawful
money of the United States of America, the principal amount of Eight Hundred
Fifty-four Thousand Three Hundred Fifty & 00/100 Dollars ($854,350.00), together
with interest on the unpaid principal balance from January 4, 2002, until paid
in full.
PAYMENT. Subject to any payment changes resulting from changes in the Index,
Borrower will pay this loan in 36 payments of $25,923.07 each payment.
Borrower's first payment is due February 4, 2002, and all subsequent payments
are due on the same day of each month after that. Borrower's final payment will
be due on January 4, 2005, and will be for all principal and all accrued
interest not yet paid. Payments include principal and interest. Unless otherwise
agreed or required by applicable law, payments will be applied first to any
unpaid collection costs and any late charges, then to any unpaid interest, and
any remaining amount to principal. The annual interest rate for this Note is
computed on a 365/360 basis; that is, by applying the ratio of the annual
interest rate over a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the minimum prime
lending rate for large U.S. Money Center Commercial banks as published in the
Money Rate Section of the Wall Street Journal (the "Index"). The Index is not
necessarily the lowest rate charged by Lender on its loans. If the Index becomes
unavailable during the term of this loan, Lender may designate a substitute
index after notice to Borrower. Lender will tell Borrower the current Index rate
upon Borrower's request. The interest rate change will not occur more often than
each quarter. Borrower understands that Lender may make loans based on other
rates as well. The Index currently is 4.750% per annum. The interest rate to be
applied to the unpaid principal balance of this Note will be at a rate of 1.000
percentage point over the Index, resulting in an initial rate of 5.750% per
annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law. Whenever increases occur
in the interest rate, Lender, at its option, may do one or more of the
following: (A) increase Borrower's payments to ensure Borrower's loan will pay
off by its original final maturity date, (B) increase Borrower's payments to
cover accruing interest, (C) increase the number of Borrower's payments, and (D)
continue Borrower's payments at the same amount and increase Borrower's final
payment.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments under the payment schedule.
Rather, early payments will reduce the principal balance due and may result in
Borrower's making fewer payments. Borrower agrees not to send Lender payments
marked "paid in full", "without recourse", or similar language. If Borrower
sends such a payment, Lender may accept it without losing any of Lender's rights
under this Note, and Borrower will remain obligated to pay any further amount
owed to Lender. All written communications concerning disputed amounts,
including any check or other payment instrument that indicates that the payment
constitutes "payment in full" of the amount owed or that is tendered with other
conditions or limitations or as full satisfaction of a disputed amount must be
mailed or delivered to: Legacy Bank, Legacy Bank, PO Box 1109, 2024 N Hwy 81,
Duncan, OK 73534-1109.
LATE CHARGE. If a payment is 11 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment or $20.00,
whichever is greater.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the variable interest rate on this Note to 21.000% per annum. The
interest rate will not exceed the maximum rate permitted by applicable law.
DEFAULT. Each of the following shall constitute an event of default
("Event of Default") under this Note:
Payment Default. Borrower fails to make any payment when due under
this Note.
Other Defaults. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Note or in
any of the related documents or to comply with onto perform any term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
Default in Favor of Third Parties. Borrower or any Grantor defaults
under any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other creditor
or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's obligations
under this Note, or any of the related documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note
or the related documents is false or misleading in any material
respect, either, now or at the time made or furnished or becomes false
or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This
includes a garnishment of any of Borrower's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies
or a surety bond for the creditor or forfeiture proceeding, in an
amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any guarantor, endorser, surety, or accommodation party of
any of the indebtedness or any guarantor, endorser, surety, or
accommodation party dies or becomes incompetent, or revokes or disputes
the validity of, or liability under, any guaranty of the indebtedness
evidenced by this Note. In the event of a death, Lender, at its option,
may, but shall not be required to, permit the guarantor's estate to
assume unconditionally the obligations arising under the guaranty in a
manner satisfactory to Lender, and, in doing so, cure any Event of
Default.
Change In Ownership. Any change in ownership of twenty-five percent
(25 %) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of this Note is impaired.
Cure Provisions. If any default other than a default in payment is
curable and if Borrower has not been given a notice of a breach of the
same provision, of this Note within the preceding twelve (12) months,
it may be cured (and no event, of default will have occurred) if
Borrower, after receiving written notice from Lender demanding cure of
such default: (1) cures the default within ten (10) days; or (2) if the
cure requires more than ten (10) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to cure
the default and thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses, whether or not there is a lawsuit, including
without limitation all attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), and appeals. If not prohibited by applicable law, Borrower also
will pay any court costs, in addition to all other sums provided by law.
GOVERNING LAW. This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of Oklahoma. This Note has
been accepted by Lender in the State of Oklahoma.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower
makes a payment on Borrower's loan and the check or other payment order
including any preauthorized charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.
COLLATERAL. Borrower acknowledges this Note is secured by in addition to any
other collateral this note is also secured by Security agreements and Mortgages
on real property in Stephens County, Oklahoma from Chemical and Equipment
Specialties, Inc. to Legacy Bank dated 01-23-2001, 05-30-2001 and 9-28-2001 and
filed with the clerk of Oklahoma County, Oklahoma.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.
NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Please notify us if we report any inaccurate information about your account(s)
to a consumer reporting agency. Your written notice describing the specific
inaccuracy(ies) should be sent to us at the following address; Legacy Bank PO
Box 1038 Hinton, OK 73047.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Each Borrower understands and
agrees that, with or without notice to Borrower, Lender may with respect to any
other Borrower (a) make one or more additional secured or unsecured loans or
otherwise extend additional credit; (b) alter, compromise, renew, extend,
accelerate, or otherwise change one or more times the time for payment or other
terms any indebtedness, including increases and decreases of the rate of
interest on the indebtedness; (c) exchange, enforce, waive, subordinate, fail or
decide not to perfect, and release any security, with or without the
substitution of new collateral; (d) apply such security and direct the order or
manner of sale thereof, including without limitation, any non-judicial sale
permitted by the terms of the controlling security agreements, as Lender in its
discretion may determine; (e) release, substitute, agree not to sue, or deal
with any one or more of Borrower's sureties, endorsers, or other guarantors on
any terms or in any manner Lender may choose; and (f) determine how, when and
what application of payments and credits shall be made on any other indebtedness
owing by such other Borrower. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The obligations
under this Note are joint and several.
PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. EACH BORROWER
AGREES TO THE TERMS OF THE NOTE. BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED
COPY OF THIS PROMISSORY NOTE.
BORROWER:
FLOTEK INDUSTRIES, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Flotek Industries, Inc.
By:/s/ Randall D. Keys
-----------------------------------------------------
Randall D. Keys, Chief Financial Officer
of Flotek, Industries, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S. Penny, President of Flotek Industries, Inc.
CHEMICAL AND EQUIPMENT SPECIALTIES, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Chemical and Equipment
Specialties, Inc.
By:s/ Randall D. Keys
-----------------------------------------------------
Randall D.Keys, Chief Financial Officer
of Chemical and Equipment Specialties, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S. Penny, President of Chemical and Equipment
Specialties, Inc.
NEAL'S TECHNOLOGY, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Neal's Technology, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S.Penny, President of Neal's Technology, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Neal's
Technology, Inc.
PLAINSMAN TECHNOLOGY, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Plainsman Technology, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S.Penny,Presiden of Plainsman Technology, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Plainsman Technology, Inc.
ESSES, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Esses, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S.Penny, President of Esses, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Esses, Inc.
PADKO INTERNATIONAL, INCORPORATED
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of PADKO International Incorporated
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S. Penny, President of PADKO International Incorporated
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of PADKO
International Incorporated
TURBECO, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Turbeco, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S. Penny, President of
Turbeco, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Turbeco, Inc.
USA PETROVALVE, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of USA Petrovalve, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S. Penny, President of USA
Petrovalve, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of USA Petrovalve, Inc.
TRINITY TOOL, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Trinity Tool, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S. Penny, President of
Trinity Tool, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Trinity Tool, Inc.
MATERIAL TRANSLOGISTICS, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Material Translogistics, Inc.
By:/s/ Glenn S. Penny
----------------------------------------------------
Glenn S.Penny, President of Material Translogistics, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Material
Translogistics, Inc.
PETROVALVE, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Petrovalve, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S.Penny, President of Petrovalve, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Petrovalve, Inc.
COMMERCIAL SECURITY AGREEMENT
Principal: $854,350.00
Loan Date: 01-04-2002
Maturity: 01-04-2005
Borrower:Flotek Industries, Inc. (TIN: 77-0709256); Lender: Legacy Bank
Chemical and Equipment Specialties, Inc. (TIN: Legacy Bank
73-1591850); Neal's Technology, Inc. (TIN: PO Box 1109
73-1512452); Plainsman Technology, Inc. (TIN: 2024 N. Hwy 81
73-1218459); PADKO International Incorporated Duncan,OK 73534-1109
(TIN: 73-1443489); Material Translogistics, Inc.
(TIN: 73-1605226); Esses, Inc. (TIN:
73-1386155); Turbeco, Inc. (TIN: 76-0228889);
USA Petrovalve, Inc. (TIN: 76-0448098); Trinity
Tool, Inc. (TIN: 76-0517268); and Petrovalve, Inc.
(TIN: 76-0513130)
7030 Empire Central Drive
Houston, TX 77040
THIS COMMERCIAL SECURITY AGREEMENT dated January 4, 2002, is made and executed
between Flotek Industries, Inc.; Chemical and Equipment Specialties, Inc.;
Neal's Technology, Inc.; Plainsman Technology, Inc.; PADKO International
Incorporated; Material Translogistics, Inc.; Esses, Inc.; Turbeco, Inc.; USA
Petrovalve, Inc.; Trinity Tool, Inc.; and Petrovalve, Inc. ("Grantor") and
Legacy Bank ("Lender").
GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender
a security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.
COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:
All Inventory, Chattel Paper, Accounts, Equipment and General
Intangibles including but not limited to a contract between
Schlumberger Inc. and Material Translogistics, Inc. for the Raceland,
LA transload facility, together with the following property: All
Fixtures.
In addition, the word "Collateral" also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(A) All accessions, attachments, accessories, tools, parts, supplies,
replacements of and additions to any of the collateral described
herein, whether added now or later.
(B) All products and produce of any of the property described in this
Collateral section.
(C) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising, out of a sale, lease, or
other disposition of any of the property described in this Collateral
section.
(D) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section, and sums due from a third party
who has damaged or destroyed the Collateral or from that party's
insurer, whether due to judgment, settlement or other process.
(E) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
Despite any other provision of this Agreement, Lender is not granted and will
not have, a nonpurchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law. In
addition, if because of the type of any Property, Lender is required to give a
notice of the right to cancel under Truth in Lending for the Indebtedness, then
Lender will not have a security interest in such Collateral unless and until
such a notice is given.
CROSS-COLLATERALIZATION. In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon, of Grantor to Lender,
or any one or more of them, as well as all claims by Lender against Grantor or
any one or more of them, whether now existing or hereafter arising, whether
related or unrelated to the purpose of the Note, whether voluntary or otherwise,
whether due or not due, direct or indirect, determined or undetermined, absolute
or contingent, liquidated or unliquidated whether Grantor may be liable
individually or jointly with others, whether obligated as guarantor, surety,
accommodation party or otherwise, and whether recovery upon such amounts may be
or hereafter may become barred by any statute of limitations, and whether the
obligation to repay such amounts may be or hereafter may become otherwise
unenforceable. However, this Agreement shall not secure, and the "Indebtedness"
shall not include, any obligations arising under Chapters 3 and 4 of Title 79,
Revised Civil Statutes of Texas, 1925, as amended.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts' and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:
Perfection of Security Interest. Grantor agrees to execute financing
statements and to take whatever other actions are requested by Lender
to perfect and continue Lender's security interest in the Collateral.
Upon request of Lender, Grantor will deliver to Lender any and all of
the documents evidencing or constituting the Collateral, and Grantor
will note Lender's interest upon any and all chattel paper if not
delivered to Lender for possession by Lender.
Notices to Lender. Grantor will promptly notify Lender in writing at
Lender's address shown above (or such other addresses as Lender may
designate from time to time) prior to any (1) change in Grantor's
name; (2) change in Grantor's assumed business name(s); (3) change in
the management of any Corporation Grantor; (4) change in the
authorized signer(s); (5) change in Grantor's principal office
address; (6) change in Grantor's state of organization; (7) conversion
of Grantor to a new or different type of business entity; or (8)
change in any other aspect of Grantor that directly or indirectly
relates to any agreements between Grantor and Lender. No change in
Grantor's name or state of organization will take effect until after
Lender has received notice.
No Violation. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is
a party, and its certificate or articles of incorporation and bylaws
do not prohibit any term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, as defined by the
Uniform Commercial Code, the Collateral is enforceable in accordance
with its terms, is genuine, and fully complies with all applicable
laws and regulations concerning form, content and manner of
preparation and execution, and all persons appearing to be obligated
on the Collateral have authority and capacity to contract and are in
fact obligated as they appear to be on the Collateral. At the time any
Account becomes subject to a security interest in favor of Lender, the
Account shall be a good and valid account representing an undisputed;
bona fide indebtedness incurred by the account debtor, for merchandise
held subject to delivery instructions or previously shipped or
delivered pursuant to a contract of sale, or for services previously
performed by Grantor with or for the account debtor. So long as this
Agreement remains in effect, Grantor shall not, without Lender's prior
written consent, compromise, settle, adjust, or extend payment under
or with regard to any such Accounts. There shall be no setoffs or,
counterclaims, against any of the Collateral, and no agreement shall
have been made under which any deductions or discounts may be claimed
concerning the Collateral except, those disclosed to Lender in
writing.
Location of the Collateral. Except in the ordinary course of Grantor's
business, Grantor agrees to keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts or general
intangibles, the records concerning the Collateral) at Grantor's
address shown above or at such other locations as are acceptable to
Lender. Upon Lender's request, Grantor will deliver to Lender in form
satisfactory to Lender a schedule of real properties and Collateral
locations relating to Grantor's operations, including without
limitation the following: (1) all real property Grantor owns or is
purchasing; (2) all real property Grantor is renting or leasing; (3)
all storage facilities Grantor owns, rents, leases, or uses; and (4)
all other properties where Collateral is or may be located.
Removal of the Collateral. Except in the ordinary course of Grantor's
business, including the sales of inventory, Grantor shall not remove
the Collateral from its existing location without Lender's prior
written consent. To the extent that the Collateral consists of
vehicles, or other titled property, Grantor shall not take or permit
any action which would require application for certificates of title
for the vehicles outside the State of Texas, without Lender's prior
written consent. Grantor shall, whenever requested, advise Lender of
the exact location of the Collateral.
Transactions Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business, or as
otherwise provided for in this Agreement, Grantor shall not sell,
offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to
buyers who qualify as a buyer in the ordinary course of business. A
sale in the ordinary course of Grantor's business does not include a
transfer in partial or total satisfaction of a debt or any bulk sale.
Grantor shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest, encumbrance,
or charge, other than the security interest provided for in this
Agreement, without the prior written consent of Lender. This includes
security interests even if junior in right to the security interests
granted under this Agreement. Unless waived by Lender, all proceeds
from any disposition of the Collateral (for whatever reason) shall be
held in trust for Lender and shall not be commingled with any other
funds; provided however, this requirement shall not constitute consent
by Lender to any sale or other disposition. Upon receipt, Grantor
shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that Grantor holds
good and marketable title to the Collateral, free and clear of all
liens and encumbrances except for the lien of this Agreement. No
financing statement covering any of the Collateral is on file in any
public office other than those which reflect the security interest
created by this Agreement or to which Lender has specifically
consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
Repairs and Maintenance. Grantor agrees to keep and maintain, and to
cause others to keep and maintain, the Collateral in good order,
repair and condition at all times while this Agreement remains in
effect. Grantor further agrees to pay when due all claims for work
done on, or services rendered or material furnished in connection with
the Collateral so that no lien or encumbrance may ever attach to or be
filed against the Collateral.
Inspection of Collateral. Lender and Lender's designated
representatives and agents shall have the right at all reasonable
times to examine and inspect the Collateral wherever located.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon
this Agreement, upon any promissory note or notes evidencing the
Indebtedness, or upon any of the other Related Documents. Grantor may
withhold any such payment or may elect to contest any lien if Grantor
is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the Collateral
is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs,
Lender's reasonable attorneys' fees or other charges that could accrue
as a result of foreclosure or sale of the Collateral. In any contest
Grantor shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor
shall name Lender as an additional obligee under any surety bond
furnished in the contest proceedings. Grantor further agrees to
furnish Lender with evidence that such taxes, assessments, and
governmental and other charges have been paid in full and in a timely
manner. Grantor may withhold any such payment or may elect to contest
any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's
interest in the Collateral is not jeopardized.
Compliance with Governmental Requirements. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable to
the ownership, production, disposition, or use of the Collateral.
Grantor may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the Collateral,
in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement
remains a lien on the Collateral, used in violation of any
Environmental Laws or for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of
any Hazardous Substance. The representations and warranties contained
herein are based on Grantor's due diligence in investigating the
Collateral for Hazardous Substances. Grantor hereby (1) releases and
waives any future claims against Lender for indemnity or contribution
in the event Grantor becomes liable for cleanup or other costs under
any Environmental Laws, and (2) agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach
of this provision of this Agreement. This obligation to indemnify
shall survive the payment of the Indebtedness and the satisfaction of
this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain
all risks insurance, including without limitation fire, theft and
liability coverage together with such other insurance as Lender may
require with respect to the Collateral, in form, amounts, coverages
and basis reasonably, acceptable to Lender. Grantor, upon request of,
Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished
without at least ten (10) days' prior written notice to Lender and not
including any disclaimer of the insurer's liability for failure to
give such a notice. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be
impaired in any way by any act, omission or default of Grantor or any
other person. In connection with all policies covering assets in which
Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may
require. If Grantor at any time fails to obtain or maintain any
insurance as required under this Agreement, Lender may (but shall not
be obligated to) obtain such insurance as Lender deems appropriate,
including if Lender so chooses "single interest insurance," which will
cover only Lender's interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify
Lender of any loss or damage to the Collateral. Lender may make proof
of loss if Grantor fails to do so within fifteen (15) days of the
casualty. All proceeds of any insurance on the Collateral, including
accrued proceeds thereon, shall be held by Lender as part of the
Collateral. If Lender consents to repair or replacement of the damaged
or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the
reasonable cost of repair or restoration. If Lender does not consent
to repair or replacement of the Collateral, Lender shall retain a
sufficient amount of the proceeds to pay all of the Indebtedness, and
shall pay the balance to Grantor. Any proceeds which have not been
disbursed within six (6) months after their receipt and which Grantor
has not committed to the repair or restoration of the Collateral shall
be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Grantor of a sum estimated by Lender
to be sufficient to produce, at least fifteen (15) days before the
premium due date, amounts at least equal to the insurance premiums to
be paid. .If fifteen (15) days before payment is due, the reserve
funds are insufficient, Grantor shall upon demand pay any deficiency
to Lender. The reserve funds shall be held by Lender as a general
deposit and shall constitute a non-interest-bearing account which
Lender may satisfy by payment of the insurance premiums required to be
paid by Grantor as they become due. Lender does not hold the reserve
funds in trust for Grantor, and Lender is not the agent of Grantor for
payment of the insurance premiums required to be paid by Grantor. The
responsibility for the payment of premiums shall remain Grantor's sole
responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following:
(1) the name of the insurer; (2) the risks insured; (3) the amount of
the policy; (4) the property insured; (5) the then current value on
the basis of which insurance has been obtained and the manner of
determining that value; and (6) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to Lender
determine, as applicable, the cash value or replacement cost of the
Collateral.
Financing Statements. Grantor authorizes Lender to file a UCC-1
financing statement, or alternatively, a copy of this Agreement to
perfect Lender's security interest. At Lender's request, Grantor
additionally agrees to sign all other documents that are necessary to
perfect, protect, and continue Lender's security interest in the
Property. Grantor will pay all filing fees, title transfer fees, and
other fees and costs involved unless prohibited by law or unless
Lender is required by law to pay such fees and costs. Grantor
irrevocably appoints Lender to execute lien entry forms, financing
statements and documents of title in Grantor's name and to execute all
documents necessary to transfer title if there is a default. Lender
may file a copy of this Agreement as a financing statement. If Grantor
changes Grantor's name or address, or the name or address of any
person granting a security interest under this Agreement changes,
Grantor will promptly notify the Lender of such change.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note or at the highest rate authorized by
law, from the date incurred or paid by Lender to the date of repayment by
Grantor. All such expenses will become a part of the Indebtedness and, at
Lender's option, will (A) be payable on demand; (B) be added to the balance of
the Note and be apportioned among and be payable with any installment payments
to become due during either (1) the term of any applicable insurance policy; or
(2) the remaining term of the Note; or (C) be treated as a balloon payment which
will be due and payable at the Note's maturity. The Agreement also will secure
payment of these amounts. Such right shall be in addition to all other rights
and remedies to which Lender may be entitled upon Default. If Lender is required
by law to give Grantor notice before or after Lender makes an expenditure,
Grantor agrees that notice sent by regular mail at least five (5) days before
the expenditure is made or notice delivered two (2) days before the expenditure
is made is sufficient, and that notice within sixty (60) days after the
expenditure is made is reasonable.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
Payment Default. Grantor fails to make any payment when due under the
Indebtedness.
Other Defaults. Grantor fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or
in any of the Related Documents or to comply with or to perform any
term, obligation, covenant or condition contained in any other
agreement between Lender and Grantor.
Default in Favor of Third Parties. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Grantor's
property or Grantor's or any Grantor's ability to repay the
Indebtedness or perform their respective obligations under this
Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Grantor or on Grantor's behalf under this
Agreement or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished or
becomes false or misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any collateral document to create a valid and perfected security
interest or lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a
receiver for any part of Grantor's property, any assignment for the
benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency laws
by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against any collateral securing the Indebtedness.
This includes a garnishment of any of Grantor's accounts, including
deposit accounts, with Lender. However, this Event of Default shall
not apply if there is a good faith dispute by Grantor as to the
validity or reasonableness of the claim which is the basis of the
creditor or, forfeiture proceeding and if Grantor gives Lender written
notice of the creditor or forfeiture proceeding and deposits with
Lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by Lender, in its sole discretion,
as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to guarantor, endorser, surety, or accommodation party of any
of the Indebtedness or guarantor, endorser, surety, or accommodation
party dies or becomes incompetent or revokes or disputes the validity
of, or liability under, any Guaranty of the Indebtedness.
Adverse Change. A material adverse change occurs in Grantor's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
Cure Provisions. If any default, other than a default in payment is
curable and if Grantor has not been given a notice of a breach of the
same provision of this Agreement within the preceding twelve (12)
months, it may be cured (and no event of default will have occurred)
if Grantor, after receiving written notice from Lender demanding cure
of such default: (1) cures the default within ten (10) days; or (2) if
the cure requires more than ten (10) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to
cure the default and thereafter continues and completes all reasonable
and necessary steps sufficient to produce compliance as soon as
reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights, of a
secured party under the Oklahoma Uniform Commercial Code. In addition, and
without limitation, Lender may exercise any one or more of the following rights
and remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to
pay, immediately due and payable, without notice of any kind to
Grantor.
Assemble Collateral. Lender may require Grantor to deliver to Lender
all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral. Lender may
require Grantor to assemble the Collateral and make it available to
Lender at a place to be designated by Lender. Lender also shall have
full power to enter upon the property of Grantor to take possession of
and remove the Collateral. If the Collateral contains other goods not
covered by this Agreement at the time of repossession, Grantor agrees
Lender may take such other goods, provided that Lender makes
reasonable efforts to return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise dispose of the Collateral. Unless the
Collateral in whole or in part is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized
market, Lender will give Grantor, and other persons as required by
law, reasonable notice of the time and place of any public sale, or of
the time after which any private sale or other disposition is to be
made. Notwithstanding any other provision of this Agreement, any
requirement of notice for this purpose shall be met if notice is
provided at least ten (10) days before sale or other disposition or
action. Lender shall be entitled to, and Grantor shall be liable for,
all reasonable costs and expenditures incurred in realizing on
Lender's security interest, including without limitation, all court
costs, fees for sale, selling costs and reasonable attorneys' fees as
set forth in the Note or in this Agreement. All such costs shall be
secured by the security interest in the Collateral covered by this
Agreement.
Appoint Receiver. In any action by Lender for the foreclosure of this
Agreement, whether by judicial foreclosure or power of sale, Lender
shall be entitled to the appointment of a receiver upon any failure of
Grantor to comply with any term, obligation, covenant, or condition
contained in this Agreement, the Note, or any Related Documents.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from
the Collateral. Lender may at any time in Lender's discretion transfer
any Collateral into Lender's own name or that of Lender's nominee and
receive the payments, rents, income, and revenues therefrom and hold
the same as security for the Indebtedness or apply it to payment of
the Indebtedness in such order of preference as Lender may determine.
Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses inaction, or
similar property, Lender may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize on the Collateral
as Lender may determine, whether or not Indebtedness or Collateral is
then due. For these purposes, Lender may, on behalf of and in the name
of Grantor, receive, open and dispose of mail addressed to Grantor;
change any address to which mail and payments are to be sent; and
endorse notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to payment, shipment, or storage of
any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to
Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any
deficiency remaining on the Indebtedness due to Lender after
application of all amounts received from the exercise of the rights
provided in this Agreement. Grantor shall be liable for a deficiency
even if the transaction described in this subsection is a sale of
accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Uniform
Commercial Code, as may be amended from time to time. In addition,
Lender shall have and may exercise any or all other rights and
remedies it may have available at law, in equity, or otherwise.
Election of Remedies. Except as may be prohibited by applicable law,
all of Lender's rights and remedies, whether evidenced by this
Agreement, the Related Documents, or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to
perform an obligation of Grantor under this Agreement, after Grantor's
failure to perform, shall not affect Lender's right to declare a
default and exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. All prior and
contemporaneous representations and discussions concerning such
matters either are included in this document or do not constitute an
aspect of the agreement of the parties. Except as may be specifically
set forth in this Agreement, no conditions precedent or subsequent, of
any kind whatsoever, exist with respect to Grantor's obligations under
this Agreement. No alteration of or amendment to this Agreement shall
be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including Lender's attorneys' fees and
Lender's legal expenses, incurred in connection with the enforcement
of this Agreement. Lender may hire or pay someone else to help enforce
this Agreement, and Grantor shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's attorneys' fees and
legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and
any anticipated post-judgment collection services. Grantor also shall
pay all court costs and such additional fees as may be directed by the
court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
Governing Law. This Agreement will be governed by, construed and
enforced in accordance with federal law and the laws of the State of
Oklahoma. This Agreement has been accepted by Lender in the State of
Oklahoma.
Joint and Several Liability. All obligations of Grantor under this
Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor. This means that each Grantor
signing below is responsible for all obligations in this Agreement.
Where any one or more of the parties is a corporation, partnership,
limited liability company or similar entity, it is not necessary for
Lender to inquire into the powers of any of the officers, directors,
partners, members, or other agents acting or purporting to act on the
entity's behalf, and any obligations made or created in reliance upon
the professed exercise of such powers shall be guaranteed under this
Agreement.
No Waiver by Lender. Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any
other right. A waiver by Lender of a provision of this Agreement shall
not prejudice or constitute a waiver of Lender's right otherwise to
demand strict compliance with that provision or any other provision of
this Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Grantor, shall constitute a waiver of any of
Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance
shall not constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be granted
or withheld in the sole discretion of Lender.
Notices. To the extent permitted by applicable law, any notice
required to be given under this Agreement shall be given in writing,
and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited
with a nationally recognized overnight courier, or, if mailed, when
deposited in the United States mail, as first class, certified or
registered mail postage prepaid, directed to the addresses shown near
the beginning of this Agreement. Any party may change its address for
notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change
the party's address. For notice purposes, Grantor agrees to keep
Lender informed at all times of Grantor's current address. To the
extent permitted by applicable law, if there is more than one Grantor,
any notice given by Lender to any Grantor is deemed to be notice given
to all Grantors.
Power of Attorney. Grantor hereby appoints Lender as Grantor's
irrevocable attorney-in-fact for the purpose of executing any
documents necessary to perfect, amend, or to continue the security
interest granted in this Agreement or to demand termination of filings
of other secured parties. Lender may at any time, and without further
authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use
as a financing statement. Grantor will reimburse Lender for all
expenses for the perfection and the continuation of the perfection of
Lender's security interest in the Collateral.
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be illegal, invalid, or unenforceable as to any
person or circumstance, that finding shall not make the off ending
provision illegal, invalid, or unenforceable as to any other person or
circumstance. If feasible, the offending provision shall be considered
modified so that it becomes legal, valid and enforceable. If the
offending provision cannot be so modified, it shall be considered,
deleted from this Agreement. Unless otherwise required bylaw, the
illegality, invalidity, or unenforceability of any provision of this
Agreement shall not affect the legality, validity or enforceability of
any other provision of this Agreement.
Successors and Assigns. Subject to any limitations stated in this
Agreement on transfer of Grantor's interest, this Agreement shall be
binding upon and inure to the benefit of the parties, their successors
and assigns. If ownership of the Collateral becomes vested in a person
other than Grantor, Lender, without notice to Grantor, may deal with
Grantor's successors with reference to this Agreement and the
Indebtedness by way of forbearance or extension without releasing
Grantor from the obligations of this Agreement or liability under the
Indebtedness.
Survival of Representations and Warranties. All representations,
warranties, and agreements made by Grantor in this Agreement shall
survive the execution and delivery of this Agreement, shall be
continuing in nature, and shall remain in full force and effect until
such time as Grantor's Indebtedness shall be paid in full.
Time is of the Essence. Time is of the essence in the performance of
this Agreement.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code:
Account. The word "Account" means a trade account, account receivable,
other receivable, or other right, to payment for goods sold, or
services rendered owing to Grantor (or to a third party grantor
acceptable to Lender).
Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Commercial Security Agreement from time to time.
Borrower. The word "Borrower" means Flotek Industries, Inc.; Chemical
and Equipment Specialties, Inc.; Neal's Technology, Inc.; Plainsman
Technology, Inc.; PADKO International Incorporated; Material
Translogistics, Inc.; Esses, Inc.; Turbeco, Inc.; USA Petrovalve,
Inc.; Trinity Tool, Inc.; and Petrovalve, Inc., and all other persons
and entities signing the Note in whatever capacity.
Collateral. The word "Collateral" means all of Grantor's right, title
and interest in and to all the Collateral as described in the
Collateral Description section of this Agreement.
Default. The word "Default" means the Default set forth in this
Agreement in the section titled "Default".
Environmental Laws. The words "Environmental Laws" mean any and all
state, federal and local statutes, regulations and ordinances relating
to the protection of human health or the environment, including
without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9601; et seq. ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act; 42 U.S.C. Section 6901, et seq., or
other applicable state or federal laws, rules, or regulations adopted
pursuant thereto.
Event of Default. The words Event of Default" mean any of the events
of default set forth in this Agreement in the default section of this
Agreement.
Grantor. The word "Grantor" means Flotek Industries, Inc.; Chemical
and Equipment Specialties, Inc.; Neal's Technology, Inc.; Plainsman
Technology, Inc.; PADKO International Incorporated; Material
Translogistics, Inc.; Esses, Inc.; Turbeco, Inc.; USA Petrovalve,
Inc.; Trinity Tool, Inc.; and Petrovalve, Inc.
Guaranty. The word "Guaranty" means the guaranty from guarantor,
endorser, surety, or accommodation party to Lender, including without
limitation a guaranty of all or part of the Note.
Hazardous Substances. The words "Hazardous Substances" mean materials
that, because of their quantity, concentration or physical, chemical
or infectious characteristics, may cause or pose a present or
potential hazard to human health or the environment when improperly
used, treated, stored, disposed of, generated, manufactured,
transported or otherwise handled. The words "Hazardous Substances" are
used in their very broadest sense and include without limitation any
and all hazardous or toxic substances, materials or waste as defined
by or listed under the Environmental Laws. The term "Hazardous
Substances" also includes, without limitation, petroleum and petroleum
by-products or any fraction thereof and asbestos.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced
by the Note or Related Documents, including all principal and interest
together with all other indebtedness and costs and expenses for which
Grantor is responsible under this Agreement or under any of the
Related Documents.
Lender. The word "Lender" means Legacy Bank, its successors and
assigns.
Note. The word "Note" means the Note executed by Flotek Industries,
Inc.; Chemical and Equipment Specialties, Inc.; Neal's Technology,
Inc.; Plainsman Technology, Inc.; PADKO International Incorporated;
Material Translogistics, Inc.; Esses, Inc.; Turbeco, Inc.; USA
Petrovalve, Inc.; Trinity Tool, Inc.; and Petrovalve, Inc.in the
principal amount of $854,350.00 dated January 4,2002, together with
all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and, substitutions for the note or credit
agreement.
Property. The word "Property" means all of Grantor's right, title and
interest in and to all the Property as described in the "Collateral
Description" section of this Agreement.
Related Documents. The words "Related Documents" mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security
deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
GRANTOR HAS READ AN UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JANUARY 4, 2002.
GRANTOR:
FLOTEK INDUSTRIES, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Flotek Industries, Inc.
By:/s/ Randall D. Keys
-----------------------------------------------------
Randall D. Keys, Chief Financial Officer
of Flotek, Industries, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S. Penny, President of Flotek Industries, Inc.
CHEMICAL AND EQUIPMENT SPECIALTIES, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Chemical and Equipment
Specialties, Inc.
By:s/ Randall D. Keys
-----------------------------------------------------
Randall D.Keys, Chief Financial Officer
of Chemical and Equipment Specialties, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S. Penny, President of Chemical and Equipment
Specialties, Inc.
NEAL'S TECHNOLOGY, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Neal's Technology, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S.Penny, President of Neal's Technology, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Neal's
Technology, Inc.
PLAINSMAN TECHNOLOGY, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Plainsman Technology, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S.Penny,Presiden of Plainsman Technology, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Plainsman Technology, Inc.
ESSES, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Esses, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S.Penny, President of Esses, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Esses, Inc.
PADKO INTERNATIONAL, INCORPORATED
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of PADKO International Incorporated
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S. Penny, President of PADKO International Incorporated
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of PADKO
International Incorporated
TURBECO, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Turbeco, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S. Penny, President of
Turbeco, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Turbeco, Inc.
USA PETROVALVE, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of USA Petrovalve, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S. Penny, President of USA
Petrovalve, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of USA Petrovalve, Inc.
TRINITY TOOL, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Trinity Tool, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S. Penny, President of
Trinity Tool, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Trinity Tool, Inc.
MATERIAL TRANSLOGISTICS, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Material Translogistics, Inc.
By:/s/ Glenn S. Penny
----------------------------------------------------
Glenn S.Penny, President of Material Translogistics, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Material
Translogistics, Inc.
PETROVALVE, INC.
By:/s/ Jerry D. Dumas, Sr.
-----------------------------------------------------
Jerry D. Dumas, Sr., CEO of Petrovalve, Inc.
By:/s/ Glenn S. Penny
-----------------------------------------------------
Glenn S.Penny, President of Petrovalve, Inc.
By:/s/ Tom D. Morton
-----------------------------------------------------
Tom D. Morton, Vice President of Petrovalve, Inc.