Exhibit 10.3
PROMISSORY NOTE
Flotek Industries, Inc., a Delaware corporation (hereinafter called
"Maker"), for value received, promises and agrees to pay on or before the
Maturity Date (as hereafter defined), to Oklahoma Facilities LLC, an Oklahoma
limited liability company, or its assigns (hereinafter called "Payee") in lawful
money of the United States of America the principal sum of FIVE HUNDRED THOUSAND
DOLLARS ($500,000), together with interest on the unpaid principal balance at a
rate equal to the 'National Prime' Rate Floating (as reported in the Wall Street
Journal) +4.25% per annum, adjustable as of date of change, (calculated on the
basis of a 365-day year, or a 366-day year in the case of a leap year), but in
no event to exceed the maximum rate of nonusurious interest allowed from time to
time by law (hereinafter called the "Contract Interest Rate"). After maturity
(by acceleration or otherwise), interest shall accrue at a rate equal to the
'National Prime' Rate Floating (as reported in the Wall Street Journal) +7.25%
per annum, adjustable as of date of change (hereinafter called the "Default
Rate"), which indebtedness shall be payable as follows:
o MAKER shall pay the holder hereof on the first day of August,
September, October and November, 2002, the amount of interest which
has accrued pursuant to this Note but has not been paid.
o MAKER shall pay the holder hereof on the first day of December,
2002, and continuing on the first day of each succeeding calendar
month thereafter through and including the earlier of the following
occurrences, namely (i) July 1, 2003, or (ii) until all amounts due
hereunder are paid in full, monthly payments of $8,045 each, applied
first to accrued and unpaid interest, then to reduction of principal.
o MAKER shall further pay the holder hereof periodic principal
payments in amounts equal to each and every payment received by Maker
as payment on the amount owing to Maker or its affiliate by Servicios
Tecnicos Petrovalve under Invoice No. IN000995 dated April 11, 2002 in
the amount of $437,075, such payments by Maker to the holder hereof to
be paid within a reasonable period of time (not to exceed fifteen (15)
days) following receipt by Maker of each such payment on such
receivable.
o All principal and accrued interest remaining unpaid shall be due and
payable in one lump sum payment upon the earlier of the following
occurrences: (i) within a reasonable period of time (not to exceed
fifteen (15) days) following receipt in full by Maker of the amount
owing to Maker or its affiliate by Servicios Tecnicos Petrovalve under
Invoice No. IN000995 dated April 11, 2002 in the amount of $437,075;
or (ii) August 1, 2003.
If any amount owing under this Note is due and payable on a day that is not
a business day, such payment shall instead be due and payable on the next
succeeding business day. Maker has the right to prepay this Note in whole or in
part at any time and from time to time without penalty, on not less than five
business days' prior notice. Any such prepayment shall be applied first to
accrued but unpaid interest, then to principal.
FOR PURPOSES of this Note, an "Event of Default" shall occur whenever: (a)
A default is made in the payment when due of any payment due hereunder or any
amount required to be paid by the Maker under the terms of this Note and such
default continues for five (5) days after such due date, (b) Maker shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts or other
liabilities under any bankruptcy, insolvency or other similar law now or
hereafter in effect, and (c) an involuntary case or other proceeding shall be
commenced against Maker which seeks liquidation, reorganization or other relief
with respect to Maker or its debts or other liabilities under any bankruptcy,
insolvency or other similar law now or hereafter in effect and such involuntary
case or other proceeding shall remain undismissed for a period of 90 days.
IF AN Event of Default shall occur, the holder hereof may, at the option of
the holder, without demand, notice, or presentment, declare the entire unpaid
principal balance of this Note, together with all accrued unpaid interest
thereon, to be due and payable immediately. Upon any such declaration, the
principal of this Note and all accrued interest shall become and be immediately
due and payable, and the holder hereof may thereupon proceed to protect and
enforce the obligations of the Maker hereunder by suit in equity, by action of
law, or by other appropriate proceedings, whether for specific performance (to
the extent permitted by law) of any covenant or agreement contained herein or in
aid of the exercise of any power granted herein, or proceed to enforce the
payment of this Note or to enforce any other legal or equitable right of the
holder hereof.
MAKER agrees to pay all reasonable costs and expenses (including attorneys'
fees and expenses) expended or incurred by Payee in connection with the
enforcement of this Note and collection of any sums due hereunder.
IT IS the intention of Maker and Payee to conform strictly to applicable
usury laws. Accordingly, if the transactions contemplated hereby would be
usurious under applicable law (including the laws of the State of Oklahoma and
the laws of the United States of America), then, in that event, notwithstanding
anything to the contrary herein or in any agreement entered into in connection
with or as security for this Note, it is agreed that the aggregate of all
consideration which constitutes interest under applicable law that is taken,
reserved, contracted for, charged or received under this Note or under any of
the other aforesaid agreements or otherwise in connection with this Note shall
under no circumstances exceed the maximum amount of interest allowed by
applicable law, and any excess shall be canceled automatically and, if
theretofore paid, shall be credited on the Note by the holder hereof (or, to the
extent that this Note shall have been or would thereby be paid in full, refunded
to the Maker).
THE PAYMENT of this Note is secured pursuant to the terms of a Security
Agreement dated the date hereof between Maker and Payee (the 'Security
Agreement').
MAKER agrees that $284,040 of the proceeds of the loan evidenced by this
Note shall be advanced by Payee directly to Jan-L Construction Co.,
Inc.('Jan-L'), for the immediate payment and satisfaction in full to Jan-L of
the amount owing by a subsidiary of Maker to Jan-L under Application and
Certificate for Payment dated March 5, 2002. Maker further agrees that Payee
shall directly advance to Jan-L, out of the proceeds of the loan evidenced by
this Note, Jan-L's attorney fees actually incurred in connection with the filing
of its Mechanics and Materialmen's Lien (but in no event to exceed $1,650).
THIS NOTE has been executed and delivered in the State of Texas but shall
be construed in accordance with and governed by the laws of the State of
Oklahoma and of the United States of America. Maker and Payee agree that the
venue for any action brought to enforce, construe, invalidate, or in any other
respect dealing with this Note shall exclusively be in the District Court of
Stephens County, State of Oklahoma.
FLOTEK INDUSTRIES, INC.
By:/s/ Jerry D. Dumas, Sr.
--------------------------
Name:Jerry D. Dumas, Sr.
Title:CEO of Flotek Industries, Inc.
COLLATERAL ASSIGNMENT OF RECEIVABLE
THAT FLOTEK INDUSTRIES, INC., and PETROVALVE, INC., whose address is 7030
Empire Central Drive, Houston, Texas 77040 ("Obligors"), for a good and valuable
consideration paid, the receipt and sufficiency of which is hereby acknowledged,
hereby TRANSFER, ASSIGN and CONVEY unto OKLAHOMA FACILITIES, LIMITED LIABILITY
COMPANY, an Oklahoma limited liability company ("Secured Party"), and further
grant to Secured Party a security interest in the accounts receivable described
in Exhibit A (referred to as the "Collateral" or the "Pledged Receivable").
TO HAVE AND TO HOLD the above described Collateral, together with all
rights and privileges which the Obligors may have by virtue of being the legal
and equitable owners and holder of said Collateral.
This transfer and assignment is made to secure the performance and payment
of that certain Promissory Note dated July 19, 2002 by and between Flotek
Industries, Inc. and Secured Party (herein called the "Note"), payable by Flotek
Industries, Inc. to the order of Secured Party, all renewals and extensions
thereof, and upon full payment thereof this transfer shall be null and void and
the Collateral shall, at the expense of Obligors, be retransferred, without
warranty or recourse, to Obligors by Secured Party.
Obligors warrant and covenant that (i) they own the Collateral above
described and have good right and title to the same and full right, authority
and power to convey the same to Secured Party as herein set forth and are
granting a valid first security interest to Secured Party in and to the
Collateral, (ii) the outstanding principal balance on the Collateral owing
Obligors is as described in Exhibit "A" hereto, and (iii) the principal places
of business and states of corporate registration (issuance of corporate charter)
of the Obligors and their predecessor and affiliate companies are only in the
States of Delaware, Texas and/or Oklahoma.
In the event of default in the payment of any sums due under the Note in
accordance with the terms thereof, as may be applicable, Secured Party may
elect, Obligors hereby expressly waiving notice, demand and presentment, to
declare the entire indebtedness hereby secured immediately due and payable.
In the event of default in the payment of said obligation when due or
declared due, Secured Party shall have the right to sell the Collateral at
public sale or private sale, as permitted under the Uniform Commercial Code of
the State of Oklahoma, and Secured Party shall transfer to the purchaser at such
sale said Collateral, and the recitals in such transfer shall be prima facie
evidence of the truth of the matters therein stated and all prerequisites to
such sale required hereunder and under the laws of this State shall be presumed
to have been performed. The proceeds of the sale shall be applied first to
reasonable expenses of the sale and then toward the payment of the Note
rendering the balance, if any, and surplus, if any, to the person or persons
legally entitled thereto under the Uniform Commercial Code of the State of
Oklahoma. Secured Party shall have the right to purchase at any such sale, as
permitted under the Uniform Commercial Code of the State of Oklahoma.
Secured Party, in addition to the rights and remedies provided in the
preceding paragraph, shall have the rights and remedies of a Secured Party under
the Uniform Commercial Code of the State of Oklahoma, and Secured Party shall be
entitled to avail itself of all such other rights and remedies as may now or
hereafter exist at law or in equity for the collection of said indebtedness and
the foreclosure of the security interest created hereby and the resort to any
remedy provided hereunder or provided by the Uniform Commercial Code of Oklahoma
or by any other law of the State of Oklahoma, shall not prevent the concurrent
employment of any other appropriate remedy or remedies.
The requirement of reasonable notice to Obligors of the time and place of
any public sale of the Collateral, or of the time after which any private sale
or any other intended disposition thereof is to be made, shall be met if such
notice is mailed, postage prepaid, to Obligors at the address of Obligors
designated at the beginning of this instrument, at least ten (10) days before
the date of any public sale or at least ten (10) days before the time after
which any private sale or other disposition is to be made.
Secured Party may remedy any default, without waiving same, or may waive
any default without waiving any prior or subsequent default.
The security interest herein created shall not be affected by or affect any
other security taken for the obligation hereby secured, or any part thereof, and
any extensions may be made of the obligation without affecting the priority of
this security interest or the validity thereof without reference to any third
party, and the obligee of said obligation shall not be limited by any election
of remedies if it chooses to foreclose this security interest by suit. The right
to sell under the terms hereof shall also exist cumulative with said suit and
one method shall not bar the other, but both may be extended at the same or
different times, nor shall one be a defense to the other.
The pronouns used in this agreement are in the masculine gender but shall
be construed as feminine or neuter as occa-sion may require. "Secured Party" and
"Obligors" as used in this agreement include, shall bind and inure to the
benefit of the respective heirs, executors or administrators, successors,
representatives, receivers, trustee and assigns of such parties.
The law governing this secured transaction shall be the Uniform Commercial
Code as adopted in the State of Oklahoma and other applicable laws of the State
of Oklahoma. All terms used herein which are defined in the Uniform Commercial
Code of the State of Oklahoma shall have the same meaning herein as in said
Code.
Obligors authorize Secured Party, at Secured Party's option and subsequent
to default on the Note, to collect and receipt for any and all sums becoming due
upon the Promissory Notes, such sums to be held by Secured Party without
liability for interest thereon, and apply the same toward the payment of the
Promissory Notes as and when the same becomes payable and Secured Party shall
have the full control of the Collateral until the Promissory Notes are fully
paid and shall have the further right to release the lien or liens securing the
Promissory Notes upon the full and final payment thereof to Secured Party, but
Secured Party is under no obligation to make or enforce the collection of the
Promissory Notes and the failure of Secured Party for any cause to make or
enforce the collection thereof shall not in any way prejudice the right of
Secured Party to thereafter make or enforce collection thereof or in any way
affect the indebtedness to Secured Party hereby secured.
EXECUTED this 25th day of July, 2002.
"OBLIGORS":
FLOTEK INDUSTRIES, INC.
By:/s/ Jerry D. Dumas, Sr.
--------------------------
Name: Jerry D. Dumas, Sr.
Title:CEO of Flotek Industries, Inc.
PETROVALVE, INC.
By:/s/ Jerry D. Dumas, Sr.
--------------------------
Name: Jerry D. Dumas, Sr.
Title:CEO of Petrovalve, Inc.
EXHIBIT "A"
The Collateral is:
The amounts owed by Servicios Tecnicos Petrovalve to the Obligor pursuant to
the following invoice:
Document No. Doc. Date Due Date Amount
IN000995 4/11/02 5/11/02 $437,075.00