-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HLc+WjVvO6wO9wMswsIPAMdgb+lRWOQx58f6SY3z+WSqy9fi3UXT35ft7ftBYMwi fgzCCuY84hgw5ZQt62QGeg== 0000950134-99-001408.txt : 19990303 0000950134-99-001408.hdr.sgml : 19990303 ACCESSION NUMBER: 0000950134-99-001408 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19990302 GROUP MEMBERS: DAVID S HUNT GROUP MEMBERS: JW BEAVERS JR GROUP MEMBERS: PITMAN PROPERTY CORP GROUP MEMBERS: TOSI LP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FLOTEK INDUSTRIES INC/CN/ CENTRAL INDEX KEY: 0000928054 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-INDUSTRIAL MACHINERY & EQUIPMENT [5084] IRS NUMBER: 120370187 FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-51879 FILM NUMBER: 99555421 BUSINESS ADDRESS: STREET 1: 7030 EMPIRE CENTRAL DRIVE CITY: HOUSTON STATE: TX ZIP: 77040 BUSINESS PHONE: 7138499911 MAIL ADDRESS: STREET 1: 7030 EMPIRE CENTRAL DRIVE CITY: HOUSTON STATE: TX ZIP: 77040 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TOSI LP CENTRAL INDEX KEY: 0001049282 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752725122 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 3900 THANKSGIVING TOWER STREET 2: 1601 ELM STREET CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2148808485 MAIL ADDRESS: STREET 1: 3900 THNKASGIVING TOWER STREET 2: 1601 ELM STREET CITY: DALLAS STATE: TX ZIP: 75201 SC 13D/A 1 AMENDMENT NO. 2 TO SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Schedule 13D** Under the Securities Exchange Act of 1934 (Amendment No. 2)* Flotek Industries Inc. (Name of Issuer) Common Stock, No Par Value Per Share (Title of Class of Securities) 34339C 10 4 (Cusip Number) Mr. Walter Roach 3900 Thanksgiving Tower 1601 Elm Street Dallas, Texas 75201 (214) 922-0135 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) February 24, 1999 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). **The total number of shares of Stock reported herein is 19,850,000 shares, which constitutes approximately 30.0% of the 65,180,795 shares deemed outstanding pursuant to Rule 13d-3(d)(1)(i) under the Act. Except as otherwise stated herein, all ownership percentages set forth herein assume that there are 45,680,795 shares of Stock outstanding. 2 1. Name of Reporting Person: TOSI, L.P. 2. Check the Appropriate Box if a Member of a Group: (a) [ ] (b) [X] 3. SEC Use Only 4. Source of Funds: OO - See Item 3. 5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): [ ] 6. Citizenship or Place of Organization: Texas 7. Sole Voting Power: -0- Number of Shares Beneficially 8. Shared Voting Power: -0- Owned By Each Reporting 9. Sole Dispositive Power: -0- Person With 10. Shared Dispositive Power: -0- 11. Aggregate Amount Beneficially Owned by Each Reporting Person: 19,500,000 (1) 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares: [X] 13. Percent of Class Represented by Amount in Row (11): 29.9% (2) 14. Type of Reporting Person: PN
2 3 - ------------ (1) Assumes exercise of all of the Warrants and conversion of all of the original principal amount of the Loan into shares of the Stock. See Item 6. (2) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are 65,180,795 shares of the Stock outstanding. 3 4 1. Name of Reporting Person: Pitman Property Corp. 2. Check the Appropriate Box if a Member of a Group: (a) [ ] (b) [X] 3. SEC Use Only 4. Source of Funds: Not Applicable 5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): [ ] 6. Citizenship or Place of Organization: Texas 7. Sole Voting Power: -0- Number of Shares Beneficially 8. Shared Voting Power: -0- Owned By Each Reporting 9. Sole Dispositive Power: -0- Person With 10. Shared Dispositive Power: -0- 11. Aggregate Amount Beneficially Owned by Each Reporting Person: 19,500,000 (1)(2) 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares: [X] 13. Percent of Class Represented by Amount in Row (11): 29.9% (3) 14. Type of Reporting Person: CO
4 5 - ------------ (1) Solely in its capacity as the sole general partner of TOSI, L.P. (2) Assumes exercise of all of the Warrants and conversion of all of the original principal amount of the Loan into shares of the Stock. See Item 6. (3) Assumes, pursuant to Rule 13d-3(d)(1)(i) of the Act, that there are 65,180,795 shares of the Stock outstanding. 5 6 1. Name of Reporting Person: J. W. Beavers, Jr. 2. Check the Appropriate Box if a Member of a Group: (a) [ ] (b) [X] 3. SEC Use Only 4. Source of Funds: Not Applicable 5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): [ ] 6. Citizenship or Place of Organization: USA 7. Sole Voting Power: -0- Number of Shares Beneficially 8. Shared Voting Power: -0- Owned By Each Reporting 9. Sole Dispositive Power: -0- Person With 10. Shared Dispositive Power: -0- 11. Aggregate Amount Beneficially Owned by Each Reporting Person: 19,500,000 (1)(2) 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares: [X] 13. Percent of Class Represented by Amount in Row (11): 29.9% (3) 14. Type of Reporting Person: IN
6 7 - ------------ (1) Solely in his capacity as the President of Pitman Property Corp., which is the sole general partner of TOSI, L.P. (2) Assumes exercise of all of the Warrants and conversion of all of the original principal amount of the Loan into shares of the Stock. See Item 6. (3) Assumes, pursuant to Rule 13d-3(d)(1)(i) of the Act, that there are 65,180,795 shares of the Stock outstanding. 7 8 1. Name of Reporting Person: David S. Hunt 2. Check the Appropriate Box if a Member of a Group: (a) [ ] (b) [X] 3. SEC Use Only 4. Source of Funds: See Item 3. 5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): [ ] 6. Citizenship or Place of Organization: USA 7. Sole Voting Power: 350,000 Number of Shares Beneficially 8. Shared Voting Power: -0- Owned By Each Reporting 9. Sole Dispositive Power: 350,000 Person With 10. Shared Dispositive Power: -0- 11. Aggregate Amount Beneficially Owned by Each Reporting Person: 350,000 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares: [X] 13. Percent of Class Represented by Amount in Row (11): 0.8% 14. Type of Reporting Person: IN
8 9 Pursuant to Rule 13d-2(a) of Regulation 13D-G of the Rules and Regulations under the Securities Exchange Act of 1934, as amended, the undersigned hereby amend their Schedule 13D Statement dated November 10, 1997, as amended by Amendment No. 1 thereto dated November 9, 1998, relating to the common stock, no par value per share (the "Stock"), of Flotek Industries Inc., an Alberta corporation (the "Issuer"). Item 1. SECURITY AND ISSUER. No material change. Item 2. IDENTITY AND BACKGROUND. No material change. Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Item 3 hereby is amended in its entirety to read as follows: Except where a reference to Canadian currency is indicated by the use "CDN," all currency references in this Schedule 13D are to the lawful moneys of the United States of America. All references in this Schedule 13D to Canadian currency assume an exchange rate of CDN$1.40 per $1.00. The source and amount of the funds used by the Reporting Persons to purchase shares of Stock are as follows: REPORTING PERSON SOURCE OF FUNDS AMOUNT OF FUNDS TOSI Contributions from $1,170,000 (1) Partners Pitman Not Applicable Not Applicable JWB Not Applicable Not Applicable DSH (2) $ 37,500 (2) (1) Of this amount, (i) $750,000 represents the funds used to acquire the convertible promissory note evidencing the Loan (as defined in Item 6), the original principal amount of which is convertible into 12,500,000 shares of the Stock at the rate of $0.06 per share of Stock and assumes conversion of the entire original principal amount of the Loan into shares of the Stock and (ii) $420,000 represents the funds to be used to acquire 7,000,000 shares of the Stock pursuant to exercise of the Warrants (as defined in Item 6) at an exercise price of $0.06 per share of Stock and assumes exercise of all of the Warrants. See Item 6. 9 10 (2) In connection with the transactions described in Item 6, the Issuer paid DSH a finder's fee of $37,500 in the form of 350,000 shares of the Stock at a deemed price of CDN$0.15 (approximately $0.107) per share of Stock. Item 4. PURPOSE OF TRANSACTION. No material change. Item 5. INTEREST IN SECURITIES OF THE ISSUER. Item 5(a) hereby is amended in its entirety to read as follows: (a) TOSI The aggregate number of shares of the Stock that TOSI owns beneficially, pursuant to Rule 13d-3 of the Act, is 19,500,000, which constitute approximately 29.9% of the 65,180,795 shares of the Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Act. Pitman Because of its position as the sole general partner of TOSI, Pitman may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of an aggregate of 19,500,000 shares of the Stock, which constitute approximately 29.9% of the 65,180,795 shares of the Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Act. JWB Because of his position as President and controlling person of the sole general partner of TOSI, JWB may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of an aggregate of 19,500,000 shares of the Stock, which constitute approximately 29.9% of the 65,180,795 shares of the Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Act. DSH Pursuant to Rule 13d-3 of the Act, DSH beneficially owns 350,000 shares of the Stock, which constitutes approximately 0.8% of the outstanding shares of the Stock. To the best of the knowledge of each of the Reporting Persons, other than as set forth above, none of the persons named in Item 2 herein is the beneficial owner of any shares of the Stock. 10 11 (b) - (e) No material change. Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Item 6 hereby partially is amended by adding at the end thereof the following: On February 24, 1999, to be effective as of January 14, 1999, the Issuer, the Subsidiaries and TOSI entered into an Agreement for Second Extension and Amendment of Loan Documents, which is filed herewith as Exhibit 10.6 (the "Second Extension Agreement"). In connection with a financing transaction (the "Chisholm Financing") closed on February 24, 1999 between the Issuer and Chisholm Energy Partners, L.L.C. ("Chisholm"), TOSI and Chisholm entered into an Intercreditor Agreement, which is filed herewith as Exhibit 10.7 (the "Intercreditor Agreement"). The descriptions that follow of the Second Extension Agreement and the Intercreditor Agreement are not, and do not purport to be, complete, and are qualified in their entirety by reference to such Exhibits 10.6 and 10.7, respectively. Pursuant to the Second Extension Agreement and subject to the terms and conditions set forth therein, (a) the maturity date of the Note has been extended to August 24, 1999 (provided, however, that TOSI may extend the maturity date of the Note for an additional sixty days), (b) the Issuer no longer has the right to prepay the Note without TOSI's consent, (c) the expiration date of the Warrants has been extended until February 1, 2009, (d) the Issuer and the Subsidiaries have released TOSI from any and all claims relating to the Loan Agreement, the Note, the Security Instruments (as defined in the Loan Agreement) and the Guaranties (as defined in the Loan Agreement) and (e) each of the following shall constitute an "Event of Default" under Section 6.01(c) of the Loan Agreement: (i) the failure by the Issuer or any Subsidiary timely to comply with each of its covenants set forth in the Second Extension Agreement and (ii) the breach by the Issuer or by any Subsidiary of any of its representations or warranties set forth in the Second Extension Agreement. The Issuer has agreed to pay on demand all of TOSI's out-of-pocket expenses in connection with the Second Extension Agreement and the transactions contemplated thereby, including attorneys' fees and costs and expenses relating to the preparation and filing of this Amendment No. 2 to Schedule 13D Statement, and that such amounts shall constitute "Indebtedness" within the meaning of the Loan Agreement, the Security Instruments and the Guaranties. The Second Extension Agreement deletes in its entirety Section 10 of the first Extension Agreement, which made the Warrant Amendment and the Loan Conversion Extension contingent upon approval of the Vancouver Stock Exchange. In addition, the Second Extension Agreement provides that, in the event that the application of any provision of a Chisholm Financing document would result in a right or benefit to Chisholm greater than, or in addition to, the right or benefit that would result to TOSI from application of the analogous provision (if applicable) in an analogous document under the Loan, then, without any further action, the TOSI document shall be deemed amended to provide TOSI with the same right or benefit that would be available to Chisholm from application of such provision of such 11 12 Chisholm Financing document. The effect of this provision includes, without limitation, a change in the Warrant exercise price and in the Convertible Loan Agreement conversion price from CDN$0.15 to US$0.06 per share of Stock and, accordingly, an increase in the number of shares of Stock issuable upon conversion of the original principal amount of the Loan from 7,000,000 to 12,500,000. The Intercreditor Agreement provides that TOSI and Chisholm shall be pari passu as to all collateral pledged by the Issuer and the Subsidiaries in which either TOSI or Chisholm has a security interest. TOSI and Chisholm have agreed, upon the request of either of them, to establish written procedures with respect to the protection, collection and enforcement of the collateral and not to take any action with respect to the collateral except in accordance with such procedures. The Intercreditor Agreement provides that no increase in the principal amount, change in the interest rate, or change in the term of payment of principal or interest of the Notes (as defined therein), and no material modification, amendment or supplement to a Loan Agreement (as defined therein) or a Security Instrument (as defined therein) shall be made, and that no event of default shall be waived, without the written consent of both TOSI and Chisholm. Pursuant to the Intercreditor Agreement, Chisholm generally has released TOSI from liability in connection with TOSI's physical possession of collateral that requires such physical possession to perfect a security interest therein. The Intercreditor Agreement has no effect on TOSI's right to exercise the Warrants and/or to convert the original principal amount of the Loan into Shares. Except as set forth herein or in the Exhibits filed or to be filed herewith, there are no other contracts, arrangements, understandings or relationships with respect to the Stock owned by the Reporting Persons. Item 7. MATERIAL TO BE FILED AS EXHIBITS. Item 7 hereby partially is amended by adding to the end thereof the following: Exhibit 10.6 -- Agreement for Second Extension and Amendment of Loan Documents dated February 24, 1999, to be effective as of January 14, 1999, by and among Flotek Industries, Inc., Petrovalve International, Inc., Petrovalve, Inc., Turbeco, Inc., USA Petrovalve, Inc. and TOSI, L.P. Exhibit 10.7 -- Intercreditor Agreement dated as of February 24, 1999, by and between Chisholm Energy Partners, L.L.C. and TOSI, L.P. Exhibit 99.1 -- Agreement pursuant to Rule 13d-1(f)(1)(iii) 12 13 After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: March 2, 1999 /s/ David S. Hunt David S. Hunt, individually and as attorney-in-fact for: TOSI, L.P. (1) PITMAN PROPERTY CORP. (2) J. W. BEAVERS, JR. (3) (1) A power of attorney authorizing David S. Hunt to act on behalf of TOSI, L.P. previously has been filed with the Commission. (2) A power of attorney authorizing David S. Hunt to act on behalf of Pitman Property Corp. previously has been filed with the Commission. (3) A power of attorney authorizing David S. Hunt to act on behalf of J. W. Beavers, Jr. previously has been filed with the Commission. 13 14 EXHIBIT INDEX
EXHIBIT DESCRIPTION 10.1 Convertible Loan Agreement, previously filed as Exhibit 99.2 with the Schedule 13D Statement dated November 10, 1997. 10.2 Registration Rights Agreement, previously filed as Exhibit 99.3 with the Schedule 13D Statement dated November 10, 1997. 10.3 Lock-Up Agreement, previously filed as Exhibit 99.4 with the Schedule 13D Statement dated November 10, 1997. 10.4 Warrants, previously filed as Exhibit 99.5 with the Schedule 13D Statement dated November 10, 1997. 10.5 Agreement for Extension and Amendment of Loan Agreement, Promissory Note and Warrant dated November 2, 1998, to be effective as of October 16, 1998, by and among Flotek Industries, Inc., Petrovalve International, Inc., Petrovalve, Inc., Turbeco, Inc., USA Petrovalve, Inc. and TOSI, L.P., previously filed with Amendment No. 1 to the Schedule 13D Statement dated November 9, 1998. 10.6 Agreement for Second Extension and Amendment of Loan Documents dated February 24, 1999, to be effective as of January 14, 1999, by and among Flotek Industries, Inc., Petrovalve International, Inc., Petrovalve, Inc., Turbeco, Inc., USA Petrovalve, Inc. and TOSI, L.P., filed herewith. 10.7 Intercreditor Agreement dated as of February 24, 1999, by and between Chisholm Energy Partners, L.L.C. and TOSI, L.P., filed herewith. 24.1 Power of Attorney of TOSI, L.P., previously filed with the Schedule 13D Statement dated November 10, 1997. 24.2 Power of Attorney of Pitman Property Corp., previously filed with the Schedule 13D Statement dated November 10, 1997. 24.3 Power of Attorney of J. W. Beavers, Jr., previously filed with the Schedule 13D Statement dated November 10, 1997. 99.1 Agreement pursuant to Rule 13d-1(f)(1)(iii), filed herewith.
EX-10.6 2 AGREEMENT FOR 2ND EXTENSION/AMENDMENT OF LOAN DOC. 1 EXHIBIT 10.6 AGREEMENT FOR SECOND EXTENSION AND AMENDMENT OF LOAN DOCUMENTS This Agreement for Second Extension and Amendment of Loan Documents is made on February 24, 1999, to be effective as of January 14, 1999, by and among Flotek Industries, Inc., an Alberta corporation ("Borrower"), Petrovalve International, Inc., an Alberta corporation, Petrovalve, Inc., a Delaware corporation, Turbeco, Inc., a Texas corporation, and USA Petrovalve, Inc., a Texas corporation (each a "Guarantor"), and TOSI, L. P., a Texas limited partnership ("Lender"). WHEREAS, under and by virtue of that certain Promissory Note dated October 16, 1997, in the principal amount of SEVEN HUNDRED FIFTY THOUSAND AND NO/100 UNITED STATES DOLLARS (US$750,000.00), as extended and amended pursuant to that certain Agreement for Extension and Amendment of Loan Agreement, Promissory Note and Warrant among Borrower, Guarantors and Lender dated as of October 16, 1998 (the "First Amendment") (the "Note"), and that certain Convertible Loan Agreement dated as of October 16, 1997 between Borrower and Lender, as extended and amended pursuant to the First Amendment (the "Loan Agreement"), Borrower is indebted to Lender in the principal amount of the Note and accrued but unpaid interest thereon, as well as for certain other amounts as specified in the Loan Agreement, including without limitation the amounts specified in Section 4.05 thereof; WHEREAS, the Note matured on January 14, 1999 but to date remains unpaid; WHEREAS, contemporaneously herewith Borrower is borrowing $150,000 from Chisholm Energy Partners, L.L.C., a Texas limited liability company ("Chisholm Energy"), as evidenced by that certain Promissory Note made by Borrower in favor of Chisholm of even date herewith (as the same may be amended, modified, renewed, extended or rearranged, the "Chisholm Note") and, in connection therewith, is entering into various agreements with Chisholm Energy, including without limitation that certain Loan Agreement of even date herewith (as the same may, from time to time, be amended or supplemented, the "Chisholm Loan Agreement"), and is granting to Chisholm Energy options and warrants to purchase shares of Borrower's common stock; and WHEREAS, Borrower has requested that Lender extend the maturity date of the Note and Lender is willing to do so on the terms and conditions set forth herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which the parties hereby acknowledge, the parties hereby agree as follows: Agreement for Second Extension and Amendment of Loan Documents As of January 14, 1999 - Page 1 of 10 2 SECTION 1. NOTE. (a) The maturity date of the Note hereby is extended to the date that is one-hundred eighty (180) days from the date hereof, on which date the Note shall be due and payable in full; provided, however, that Lender may, in its sole discretion, extend the maturity date of the Note for an additional sixty (60) days. (b) The Note hereby is amended by deleting the following sentence: "Borrower may at any time pay the full amount of this Note without the payment of any premium, penalty or fee." and replacing it with the following sentence: "Borrower may not prepay this Note in whole or in part without in each instance Lender's specific prior written consent." SECTION 2. LOAN AGREEMENT. (a) Each of the following shall constitute an Event of Default under Section 6.01(c) of the Loan Agreement: (i) The failure by Borrower or by any Guarantor timely to comply with each of its covenants set forth in this Agreement; and (ii) The breach by Borrower or by any Guarantor of any of its representations or warranties set forth in this Agreement. (b) The Loan Agreement hereby is amended by adding thereto a new Section 5.11, as follows: "Section 5.11. Harmonization with Chisholm Loan Agreement. The Borrower and the Lender acknowledge that the Borrower and Chisholm Energy Partners, L.L.C. have entered into a Loan Agreement dated as of February 24, 1999 (the "Chisholm Loan Agreement"). Notwithstanding anything in this Agreement or in the Chisholm Loan Agreement or in any other document or instrument entered into in connection therewith to the contrary, the Borrower and the Lender hereby agree as follows: "(a) In the event that application of any provision of the Chisholm Loan Agreement would result in a right or benefit to Chisholm Energy (as defined therein) greater than the right or benefit that would result to the Lender from application of an analogous provision in this Agreement, then, without the necessity of any further action, this Agreement shall be deemed amended to provide the Agreement for Second Extension and Amendment of Loan Documents As of January 14, 1999 - Page 2 of 10 3 Lender with the same right or benefit that would be available to Chisholm Energy from application of such provision of the Chisholm Loan Agreement; and "(b) In the event that application of any provision of the Chisholm Loan Agreement would result in a right or benefit to Chisholm Energy and this Loan Agreement does not contain an analogous provision, then, without the necessity of any further action, this Loan Agreement shall be deemed amended to provide the Lender with the same right or benefit that would be available to Chisholm Energy from application of such provision of the Chisholm Loan Agreement." SECTION 3. WARRANT. (a) Each and every reference in the Warrant to "October 16, 1999" is hereby amended to read "February 1, 2009." (b) The Warrant hereby is amended by adding thereto a new Section 1(e), as follows: "(e) In the event that, at the time of desired exercise, applicable restrictions of the Vancouver Stock Exchange do not permit the issuance of the Warrant Stock at the then-applicable Warrant Price, then, notwithstanding anything in this Warrant to the contrary, the Holder, at its election, may exercise this Warrant at the lowest price-per-share that will be in conformity with such restrictions." (c) The Warrant hereby is amended by adding thereto a new Section 12, as follows: "12. Harmonization with Chisholm Warrant. "The Company and the Holder acknowledge that the Company has issued a Warrant to Purchase Common Stock to Chisholm Energy Partners, L.L.C. expiring on February 1, 2009 (the "Chisholm Warrant"). Notwithstanding anything in this Warrant or in the Chisholm Warrant or in any other document or instrument entered into in connection therewith to the contrary, the Company and the Holder hereby agree as follows: "(i) In the event that application of any provision of the Chisholm Warrant (including without limitation the warrant exercise price) would result in a right or benefit to Chisholm Energy (as defined therein) greater than the right or benefit that would result to the Holder from application of an analogous provision in this Warrant, then, without the necessity of any further action, this Warrant (including without limitation the Warrant Price) shall be deemed amended to provide the Holder with the same right or benefit that would be available to Chisholm Energy from application of such provision of the Chisholm Warrant; and Agreement for Second Extension and Amendment of Loan Documents As of January 14, 1999 - Page 3 of 10 4 "(ii) In the event that application of any provision of the Chisholm Warrant would result in a right or benefit to Chisholm Energy and this Warrant does not contain an analogous provision, then, without the necessity of any further action, this Warrant shall be deemed amended to provide the Holder with the same right or benefit that would be available to Chisholm Energy from application of such provision of the Chisholm Warrant." SECTION 4. GUARANTIES. (a) Each of the Guaranty Agreements respectively made by the Guarantors in favor of Lender in connection with the transactions contemplated by the Loan Agreement hereby is amended by adding thereto a new Section 11, as follows: "11. Guarantor acknowledges that Guarantor has made a Guaranty Agreement in favor of Chisholm Energy Partners, L.L.C., a Texas limited liability company, as of February 24, 1999 (the "Chisholm Guaranty Agreement"). Notwithstanding anything in this guaranty or in the Chisholm Guaranty Agreement or in any other document or instrument entered into in connection therewith to the contrary, Guarantor hereby covenants and agrees as follows: "(a) In the event that application of any provision of the Chisholm Guaranty Agreement would result in a right or benefit to Chisholm (as defined therein) greater than the right or benefit that would result to Lender from application of an analogous provision in this guaranty, then, without the necessity of any further action, this guaranty shall be deemed amended to provide Lender with the same right or benefit that would be available to Chisholm from application of such provision of the Chisholm Guaranty Agreement; and "(b) In the event that application of any provision of the Chisholm Guaranty Agreement would result in a right or benefit to Chisholm and this guaranty does not contain an analogous provision, then, without the necessity of any further action, this guaranty shall be deemed amended to provide Lender with the same right or benefit that would be available to Chisholm from application of such provision of the Chisholm Guaranty Agreement." (b) The Guarantors heretofore have guaranteed payment of the Indebtedness (as defined in the applicable Guaranty Agreement) and, by its execution and delivery hereof, each of the Guarantors consents unconditionally and irrevocably to the terms and conditions of this Agreement. Each Guarantor further acknowledges and agrees that there are no existing claims, defenses, counterclaims or rights of setoff whatsoever with respect to its Guaranty. Agreement for Second Extension and Amendment of Loan Documents As of January 14, 1999 - Page 4 of 10 5 SECTION 5. SECURITY AGREEMENTS. Each of the Security Agreements respectively entered into by Borrower, Petrovalve International Inc., an Alberta corporation, Petrovalve, Inc., a Delaware corporation, USA Petrovalve, Inc., a Texas corporation, and Turbeco, Inc., a Texas corporation, on the one hand, and TOSI, on the other hand, in connection with the transactions contemplated by the Loan Agreement hereby is amended by adding thereto a new Section 17, as follows: "Section 17. Harmonization with Chisholm Security Agreements. Debtor acknowledges that Debtor has entered into a Security Agreement with Chisholm Energy Partners, L.L.C., a Texas limited liability company, (the "Chisholm Security Agreement"). Notwithstanding anything in this Security Agreement or in the Chisholm Security Agreement or in any other document or instrument entered into in connection therewith to the contrary, Guarantor hereby covenants and agrees as follows: "(a) In the event that application of any provision of the Chisholm Security Agreement would result in a right or benefit to Secured Party (as defined therein) greater than the right or benefit that would result to Lender from application of an analogous provision in this Security Agreement, then, without the necessity of any further action, this Security Agreement shall be deemed amended to provide Lender with the same right or benefit that would be available to Secured Party from application of such provision of the Chisholm Security Agreement; and "(b) In the event that application of any provision of the Chisholm Security Agreement would result in a right or benefit to Secured Party and this Security Agreement does not contain an analogous provision, then, without the necessity of any further action, this Security Agreement shall be deemed amended to provide Lender with the same right or benefit that would be available to Secured Party from application of such provision of the Chisholm Security Agreement." SECTION 6. REGISTRATION RIGHTS AGREEMENT. Pursuant to Section 4 thereof, the Registration Rights Agreement hereby is amended (with respect to TOSI) by adding thereto a new Section 17, as follows: "17. Harmonization with Chisholm Registration Rights Agreement. The Company and TOSI acknowledge that the Company and Chisholm Energy Partners, L.L.C. have entered into a Registration Rights Agreement dated as of February 24, 1999 (the "Chisholm Registration Rights Agreement"). Notwithstanding anything in this Agreement or in the Chisholm Registration Rights Agreement or in any other document or Agreement for Second Extension and Amendment of Loan Documents As of January 14, 1999 - Page 5 of 10 6 instrument entered into in connection therewith to the contrary, the Company and TOSI hereby agree as follows: "(a) In the event that application of any provision of the Chisholm Registration Rights Agreement would result in a right or benefit to the Holder (as defined therein) greater than the right or benefit that would result to TOSI (in its capacity as a holder of Registrable Securities) from application of an analogous provision in this Agreement, then, as to TOSI and without the necessity of any further action, this Agreement shall be deemed amended to provide TOSI with the same right or benefit that would be available to such Holder from application of such provision of the Chisholm Registration Rights Agreement; and "(b) In the event that application of any provision of the Chisholm Registration Rights Agreement would result in a right or benefit to the Holder (as defined therein) and this Agreement does not contain an analogous provision, then, as to TOSI and without the necessity of any further action, this Agreement shall be deemed amended to provide TOSI with the same right or benefit that would be available to such Holder from application of such provision of the Chisholm Registration Rights Agreement." SECTION 7. FIRST AMENDMENT. The First Amendment hereby is amended by deleting in its entirety Section 10 thereof. SECTION 8. ACKNOWLEDGMENT OF ACCRUED INTEREST AND OTHER OWED AMOUNTS; NO OFFSETS OR DEFENSES. Borrower acknowledges and agrees that, as of the date hereof, the principal sum of US$750,000.00 and accrued but unpaid interest on the Note of US$27,291.67 (the "Accrued Interest"), as well as certain other amounts as specified in the Loan Agreement, including without limitation the amounts specified in Section 4.05 thereof, are due and owing on the Note, and that there are no offsets or defenses to the Indebtedness, or any part thereof, or any claim or counterclaim against Lender arising therefrom. SECTION 9. PAYMENT OF ACCRUED INTEREST AND OTHER OWED AMOUNTS. Simultaneously with the execution and delivery of this Agreement, Borrower shall pay to Lender in cash (a) all Accrued Interest and (b) US$27,759.95 towards the payment of the Lender Expenses. Agreement for Second Extension and Amendment of Loan Documents As of January 14, 1999 - Page 6 of 10 7 SECTION 10. LIENS. Borrower agrees that the liens evidenced by the Security Instruments, as well as each and every right, title, claim, equity, lien and security interest securing payment of the Indebtedness, are hereby renewed, extended and continued in full force and effect to secure payment of the Indebtedness (including without limitation the Indebtedness evidenced by the Note as amended and extended hereby). All liens and security interests held by Lender (including without limitation under any of the Security Instruments) shall remain first and prior liens and security interests securing payment of the Indebtedness. SECTION 11. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. Each of Borrower and each Guarantor hereby reaffirms to Lender each and every representation and warranty made by it in (as applicable) the Loan Agreement, each Security Instrument, each Guaranty and each other document contemplated thereby, with the same force and effect as if each such representation and warranty were separately stated herein and made as of the date hereof. SECTION 12. RELEASE. Each of Borrower and each Guarantor, on its own behalf and on behalf of its affiliates, successors and assigns (each a "Releasing Party"), hereby unconditionally, finally and forever releases, compromises and discharges, to the fullest extent allowed by law, Lender and its partners and each of their respective partners, directors, officers, employees, members, trustees, beneficiaries, affiliates, agents and representatives (each a "Released Party") from and against any and all liabilities, obligations, claims, causes of action, debts, damages (including, without limitation, special, incidental, indirect or consequential damages, damages for loss of business profits, business interruption and loss of business information), losses, penalties, fines, disputes, agreements, understandings, costs and expenses (including, without limitation, attorneys' fees, court costs and costs of investigation) of each and every kind whatsoever, whether absolute or contingent, known or unknown, at any time on or prior to the date hereof, directly or indirectly arising from, based upon, relating to or in connection with the Loan Agreement, the Note, the Indebtedness, the Guaranties or the Security Instruments or any transaction contemplated by any of them, including without limitation any claim of breach of fiduciary duty, breach of any duty of fair dealing, breach of funding commitment, breach of confidence, undue influence, duress, economic coercion, conflict of interest, negligence, bad faith, malpractice, usury, violations of the Racketeer Influenced and Corrupt Organizations Act, intentional or negligent infliction of mental or emotional duress or distress, tortious interference with contractual relations, breach of contract, deceptive trade practice, slander, libel or conspiracy (each a "Claim"). Each of Borrower and each Guarantor hereby (a) acknowledges and agrees that the release set forth in the immediately-preceding sentence is supported by sufficient and adequate consideration received by it under this Agreement, (b) represents and warrants, jointly and severally, to each Released Party that neither it nor any other Releasing Party has assigned or transferred, in whole or in part, any Claim to any Person and (c) agrees unconditionally to indemnify, defend and hold harmless in full each Released Party from and against any and all Claims. Agreement for Second Extension and Amendment of Loan Documents As of January 14, 1999 - Page 7 of 10 8 SECTION 13. CERTAIN VANCOUVER STOCK EXCHANGE MATTERS. The parties understand that the amendment to and extension of the Warrant effected hereby (the "Warrant Amendment"), and the amendment and extension of the period within which Lender may convert the principal amount of the Loan into common shares of Borrower effected hereby (the "Loan Conversion Amendment"), are subject to the approval of the Vancouver Stock Exchange ("VSE"), and that VSE Approval has not yet been obtained. Accordingly, the Company shall promptly take such action as is reasonably required to obtain such VSE approval or to remove the necessity for such VSE approval, including effecting a reverse stock split of its common stock or the delisting of its common stock from the VSE. Notwithstanding anything in this Agreement to the contrary, however, as between the Borrower and the Lender, the Warrant Amendment and the Loan Conversion Amendment shall be in full force and effect and enforceable in accordance with their respective terms. SECTION 14. PROVISION OF ADDITIONAL DOCUMENTS. Each of Borrower and each Guarantor agrees upon request to execute and deliver to Lender any and all such additional documents and instruments as Lender may deem necessary or appropriate to carry out the purposes and intent of this Agreement. SECTION 15. MATERIALITY OF TERMS AND CONDITIONS. Each of Borrower and each Guarantor acknowledges and agrees that each and every term and condition of this Agreement is independently material to, and is being relied upon by, Lender, and that Lender would not agree to enter into this Agreement, to amend and extend the maturity date of the Note or otherwise to carry out the transactions contemplated by this Agreement but for each and every such term and condition. SECTION 16. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THIS AGREEMENT. Each of Borrower and each Guarantor represents and warrants to Lender that (a) the natural person executing and delivering this Agreement on its behalf has been duly authorized and empowered by all necessary corporate action to execute and deliver this Agreement on behalf of such corporation, (b) this Agreement is a valid and binding obligation of such corporation enforceable against such corporation in accordance with its terms and (c) the execution and delivery of this Agreement does not, and the performance of this Agreement will not, (i) violate or be inconsistent with such corporation's charter documents, (ii) violate any Governmental Requirement or the rules or regulations of any self-regulatory organization (including without limitation, but subject to the other provisions hereof, the VSE) to which such corporation is subject or (iii) violate or constitute a default (or an event that, with notice or lapse of time or both, would constitute such a default) under any contract or agreement to which such corporation is a party or by which such corporation or any of its assets is or may be bound or affected. Agreement for Second Extension and Amendment of Loan Documents As of January 14, 1999 - Page 8 of 10 9 SECTION 17. CERTAIN UNDEFINED TERMS. All capitalized undefined terms used herein shall have the meanings respectively ascribed to them in the Loan Agreement. SECTION 18. PAYMENT OF CERTAIN ADDITIONAL EXPENSES. Borrower agrees (a) to pay in cash on demand all out-of-pocket expenses incurred by Lender in connection with this Agreement and the transactions contemplated hereby including, without limitation, attorneys' fees and costs and expenses relating to the preparation and filing of an amendment to Lender's Schedule 13D on file with the Securities and Exchange Commission and (b) that all amounts due and payable to Lender pursuant to clause (a) above shall constitute "Indebtedness" within the meaning of the Loan Agreement, the Security Instruments and the Guaranties. SECTION 19. COUNTERSIGNATURE. Promptly upon Lender's request, Borrower shall obtain a countersignature to this Agreement, or such other form of acknowledgment or consent satisfactory to Borrower, of Pacific Corporate Trust Company. SECTION 20. AGREEMENTS AND INSTRUMENTS TO REMAIN IN FULL FORCE AND EFFECT. As amended by this Agreement, the Loan Agreement, the Note and the Warrant, and all other documents relating to the Indebtedness (including without limitation the Loan Agreement, the Security Instruments and the Guaranties), are and shall remain in full force and effect. SECTION 21. SEVERABILITY. If any provision of this Agreement or the application thereof to any Person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to any other Person or circumstance shall not be affected thereby and shall be enforced to the greatest extent permitted by law. SECTION 22. ENTIRE AGREEMENT. THIS AGREEMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS (INCLUDING WITHOUT LIMITATION THE LOAN AGREEMENT, THE NOTE, THE SECURITY INSTRUMENTS AND THE GUARANTIES, IN EACH CASE, TO THE EXTENT APPLICABLE, AS AMENDED BY THIS AGREEMENT) REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT AMONG THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES RELATING TO THE INDEBTEDNESS. Agreement for Second Extension and Amendment of Loan Documents As of January 14, 1999 - Page 9 of 10 10 IN WITNESS WHEREOF, the parties hereto have entered into this Agreement for Second Extension and Amendment of Loan Documents on the date first above written, to be effective as of January 14, 1999. LENDER: BORROWER: TOSI, L. P., a Texas limited partnership FLOTEK INDUSTRIES, INC., an Alberta corporation By: Pitman Property Corp., a Texas corporation, General Partner By: /s/ Jerry D. Dumas Jerry Dumas, President and Chief By: /s/ J. W. Beavers, Jr. Executive Officer J. W. Beavers, Jr., President GUARANTORS: PETROVALVE INTERNATIONAL, INC., an Alberta corporation By: /s/ Jerry D. Dumas Jerry Dumas, President and Chief Executive Officer PETROVALVE, INC., a Delaware corporation By: /s/ Jerry D. Dumas Jerry Dumas, President and Chief Executive Officer TURBECO, INC., a Texas corporation By: /s/ Jerry D. Dumas Jerry Dumas, President and Chief Executive Officer USA PETROVALVE, INC., a Texas corporation By: /s/ Jerry D. Dumas Jerry Dumas, President and Chief Executive Officer Agreement for Second Extension and Amendment of Loan Documents As of January 14, 1999 - Page 10 of 10 EX-10.7 3 INTERCREDITOR AGREEMENT DATED FEBRUARY 24, 1999 1 EXHIBIT 10.7 INTERCREDITOR AGREEMENT THIS INTERCREDITOR AGREEMENT (as the same may, from time to time, be amended or supplemented, herein called the "Agreement") dated as of this 24th day of February, 1999, by and between TOSI, L.P., a Texas limited partnership ("Tosi"), and CHISHOLM ENERGY PARTNERS, L.L.C., a Texas limited liability company ("Chisholm"), and for the purposes stated herein, FLOTEK INDUSTRIES INC., an Alberta corporation ("Borrower") and Subsidiaries (as defined below), join in the execution of this Agreement; W I T N E S S E T H: WHEREAS, Borrower and Tosi are parties to that certain Convertible Loan Agreement dated October 16, 1997, as amended by that certain Agreement for Extension and Amendment of Loan Agreement, Promissory Note and Warrant dated November 2, 1998 and by that certain Agreement for Second Extension and Amendment of Loan Documents dated February 24, 1999 (said loan agreement, as the same may, from time to time, be amended or supplemented, herein called the "Tosi Loan Agreement") under the terms of which Borrower executed and delivered a promissory note (said note, as the same may be amended, modified, renewed, extended or rearranged, is called the "Tosi Note") in the original principal amount of US$750,000; and WHEREAS, the Tosi Note is secured as provided in the Tosi Loan Agreement by the "Security Instruments" (as defined therein) including, among other security documents, (i) that certain Security Agreement (the "Tosi Security Agreement") between Borrower and Tosi dated as of September 18, 1997 and (ii) those certain guaranties and/or security agreements executed by any and all Subsidiaries of Borrower including, without limitation, Petrovalve International Inc., Petrovalve, Inc., USA Petrovalve, Inc., and Turbeco, Inc. (each a "Subsidiary" and collectively, the "Subsidiaries"), all of which "Security Instruments", as the same may have been heretofore or may hereafter be amended, are collectively called the "Tosi Security Instruments", any and all security interests held by Tosi under the Tosi Security Instruments are collectively called the "Tosi Security Interests", and all collateral now or hereafter held to secure the Indebtedness (as defined in the Tosi Loan Agreement) is hereinafter collectively called the "Collateral"; and WHEREAS, Borrower and Chisholm are parties to that certain Loan Agreement dated February 24, 1999 (as the same may, from time to time, be amended or supplemented, herein called the "Chisholm Loan Agreement" and, jointly with the Tosi Loan Agreement, the "Loan Agreements") under the terms of which Borrower executed and delivered a promissory note (said note, and any renewal, extension or rearrangement thereof, is called the "Chisholm Note"; the Tosi Note and the Chisholm Note are hereinafter sometimes collectively called the "Notes" or singularly a "Note") in the original principal amount of US$150,000; and WHEREAS, the Chisholm Note is secured as provided in the Chisholm Loan Agreement by the "Documents" (as defined therein) including, among other security documents, (i) that certain Security Agreement between Borrower and Chisholm and (ii) those certain guaranty and security agreements executed by Subsidiaries, all of which "Documents", as the same may hereafter be amended or supplemented, are collectively called the "Chisholm Security Instruments" (said 2 Chisholm Security Instruments and the Tosi Security Instruments are collectively called the "Security Instruments"), and any and all security interests held by Chisholm under the Chisholm Security Instruments are collectively called the "Chisholm Security Interests" (said Chisholm Security Interests and the Tosi Security Interests are collectively called the "Security Interests"), which Chisholm Security Instruments cover the Collateral; and WHEREAS, Chisholm's obligation to advance funds under the Chisholm Loan Agreement is conditioned upon, among other things, Chisholm holding a security interest in all of the Collateral of Borrower and Subsidiaries which is pari passu as described herein with the Tosi Security Interests and Tosi and Chisholm (hereinafter sometimes collectively called the "Secured Parties" or singularly a "Secured Party") entering into this Agreement; and WHEREAS, Tosi and Chisholm are desirous of entering into this Agreement to determine, between themselves, the rights and priorities of their respective claims in respect of the Collateral and to provide for certain other matters; and WHEREAS, Secured Parties recognize that coordinated acts may from time to time be in the best interests of Secured Parties in connection with the Collateral; and NOW, THEREFORE, Tosi and Chisholm hereby agree as follows: Section 1. Grant of Security Interest and Relative Priority. Subject to the terms and conditions of this Agreement, Tosi hereby waives application of Section 6(i)(ii) of the Tosi Security Agreement to Borrower's and each Subsidiary's grant of a security interest to Chisholm pursuant to the Chisholm Security Instruments as in effect on the date hereof. Secured Parties each agree that, as between themselves and notwithstanding the priority of the Tosi Security Interests over the Chisholm Security Interests, but subject to the terms and conditions of this Agreement, the Chisholm Security Interests shall be of equal dignity and pari passu with the Tosi Security Interests in proportion to the respective Percentage Interests of Secured Parties. As used herein, "Percentage Interests" shall mean, on the date of determination, the ratio of (i) aggregate indebtedness (whether under the Notes, the Security Instruments or otherwise) that Borrower owes to Tosi or Chisholm, as the case may be, to (ii) the then outstanding aggregate indebtedness (whether under the Notes, the Security Instruments or otherwise) that Borrower owes to both Tosi and Chisholm. Section 2. Benefits of Collateral. Where possession of Collateral is required to perfect the Security Interests, Tosi shall hold such Collateral required to be pledged and deposited by Borrower or a Subsidiary under the terms of the Security Instruments, along with all payments and proceeds arising therefrom, for the benefit of both Secured Parties as ratable security for the payment of the Notes in accordance with the respective Percentage Interests of Secured Parties. All payments and proceeds of every kind from any Collateral, when directly received by a Secured Party (whether from payments on or with respect to the Collateral, from foreclosure and sale to third parties, from sale of Collateral subsequent to a foreclosure at which Tosi or Chisholm was the purchaser, or otherwise), shall be held by it as a part of the Collateral and, except as otherwise expressly provided hereinafter, shall be applied to the Notes in the manner set forth in Section 3. Unless and until the Notes are paid in full, upon payment of a Note, the Secured Party holding any Collateral given to secure such Note 2 3 shall not re-deliver or release any such Collateral to Borrower or any Subsidiary, but shall deliver any such Collateral to the Secured Party whose Note is then unpaid and outstanding. Notwithstanding anything in this Agreement to the contrary, however, Borrower agrees that all payments of principal it makes under the Notes shall be made to both Secured Parties in accordance with their respective Percentage Interests (except to the extent that a Secured Party may choose to convert part or all of such principal into shares of Borrower's common stock in accordance with the provisions of the applicable Loan Agreement). Section 3. Status of Collateral in Event of Default. Irrespective of the time, order or method of attachment, perfection or filing of liens or security interests in the Collateral granted to either of Secured Parties for either of the Notes, the net proceeds of any sale, enforcement or other disposition of any of the Collateral, following the occurrence of an Event of Default or the net proceeds of any distributions or credits received by a Secured Party following any marshaling of the assets of Borrower or a Subsidiary (whether in bankruptcy, reorganization, winding-up proceedings or similar proceedings, or otherwise), or following confirmation of a plan of arrangement or plan of reorganization of Borrower or a Subsidiary, shall be applied by Secured Parties or any of their respective agents, nominees or assigns, as follows: (i) First, to the payment, of all costs and expenses incurred by a Secured Party including reasonable compensation to its agents and counsel; (ii) Second, to the payment of the amounts due for principal of and interest on the Notes then outstanding, without preference or priority of such indebtedness owing to one Secured Party over another, or of principal over interest, or of interest over principal to the extent described in Section 1 hereof in accordance with the respective Percentage Interests of the Secured Parties; (iii) Third, to the satisfaction of any subordinate lien or security interest in the Collateral to the extent required by law; and (v) Fourth, to the payment to Borrower or a Subsidiary, its successors or assigns, or as a court of competent jurisdiction may direct, or otherwise as required by law, if any surplus is then remaining from such proceeds. Section 4. Expenses. By the terms of each of the Loan Agreements and the Security Instruments, Borrower agrees to pay to each of Secured Parties all reasonable expenses (including expenses for legal services) of or incident to the exercise or enforcement of any of the provisions thereof, or any actual or attempted sale, or any exchange, enforcement, collection, compromise or settlement of any of the Collateral, and for the care thereof and defending or asserting rights and claims of Secured Parties in respect thereto, by or otherwise, including expenses of insurance; and Secured Parties agree that all such expenses shall be indebtedness to a Secured Party to the extent incurred by a Secured Party and not paid by Borrower, secured by the Collateral under the Security Instruments. 3 4 Section 5. Rights of Secured Parties. Before or after the existence of any event of default under any Note, Loan Agreement or Security Instrument (an "Event of Default") and upon request of either Secured Party, Secured Parties shall meet or otherwise confer to establish written procedures to be taken by either or both Secured Parties for the protection, collection and enforcement of the Collateral. Neither Secured Party shall act with respect to the Collateral except in accordance with the written procedures as established by Secured Parties; however, if within fifteen (15) Business Days after a Secured Party has requested that Secured Parties meet or otherwise confer, if Secured Parties, notwithstanding their reasonable efforts made in good faith, have failed to meet or otherwise agree upon and establish such procedures, a Secured Party, in its sole reasonable discretion, in good faith and upon notice to the other Secured Party, may (but is not required to) take whatever action it deems necessary to protect and enforce the Collateral or the rights of such Secured Party under its Security Instruments. In any such case such Secured Party, in its own name or in the name of Borrower or a Subsidiary, may enforce any of the pledged Collateral or the security therefor by any mode provided under the applicable Security Instruments or by applicable law, and may collect, receive and receipt for all proceeds receivable on account of ownership of the pledged Collateral which proceeds shall be disbursed under the provisions of Section 3. Section 6. Notice of Action to Enforce Note. If either Secured Party desires to accelerate the maturity of its Note or to otherwise demand payment in accordance with the terms thereof prior to the stated maturity thereof, such Secured Party will first give the other Secured Party written notice of its intent to take such action, which notice shall be given no less than five (5) Business Days before the date of such action. Nothing herein contained shall affect or impair either Secured Party's right, which is absolute and unconditional, to enforce the payment of its Note; provided, however, that no Secured Party may enforce, or demand enforcement of, any rights or the Security Interests with respect to the Collateral except upon the terms and conditions elsewhere stated in this Agreement. Section 7. Learning of Default. Each Secured Party will promptly inform the other Secured Party of any Event of Default under its Loan Agreement or any Security Instrument to the extent that the party learning thereof considers such Event of Default to be a material, substantial or serious Event of Default. Section 8. Notices. All notices provided for or permitted to be given under this Agreement must be in writing and must be given either by depositing that writing in the United States mail, addressed to the recipient, postage paid, and registered or certified with return receipt requested or by delivering that writing to the recipient in person; by courier; or by facsimile transmission; and a notice given under this Agreement is effective on receipt by the party to which such notice was sent. All notices to be sent to a party hereunder must be sent to or made at the addresses given for that party as follows: 4 5 (a) If to Tosi: 3900 Thanksgiving Tower 1601 Elm Street Dallas, Texas 75201 Attention: Mr. David S. Hunt Fax: 214-880-7101 (b) If to Chisholm: Chisholm Energy Partners, L.L.C. 1160 Dairy Ashford, Suite 125 Houston, Texas 77079 Attention: John Chisholm Fax: 281-497-7974 or to such other address or telecopy number as a party may by written notice designate to the other party in accordance herewith. Section 9. Benefits. This Agreement is solely for the benefit of Tosi and Chisholm and their successors or assigns, and neither Borrower or a Subsidiary nor any other Person shall have any right, benefit, priority or interest under or by reason of this Agreement. Section 10. Term. This Agreement shall remain in effect until all the Notes are paid in full, notwithstanding the fact that either of the Loan Agreements may terminate prior to such time; provided, however, that Secured Parties may at any time mutually agree in writing to cancel this Agreement or any portions hereof. Section 11. Amendments, Waivers and Releases. No modification, amendment or supplement to this Agreement shall be made without the written consent of Secured Parties. No increase in the principal amount, change in the interest rate, or change in the term of payment of principal or interest of either of the Notes and no material modification, amendment or supplement to a Loan Agreement or a Security Instrument shall be made without the written consent of Secured Parties. Without the written consent of both Secured Parties, neither Tosi nor Chisholm shall waive any Event of Default of Borrower or a Subsidiary or voluntarily make or consent to any release, substitution or exchange of the Collateral. Notwithstanding the foregoing, however, it is recognized that defaults, such as misrepresentations of fact or failure to perform covenants which are not material to Secured Parties' credit decisions or position or interest payments which may on occasion be a few days late, are sometimes not declared against Borrower, and that the failure to declare a default by Tosi or Chisholm shall not, in and of itself, require any written consent of the other party to any waiver of such Event of Default unless Tosi or Chisholm specifically requests the other party to take or express some formal position with respect to such default. 5 6 Section 12. Joint Venture Disclaimer. Neither the execution of this Agreement, nor the pro-rata treatment between Secured Parties in respect of the Notes and the proceeds of the Collateral, nor any agreement to share in profits or losses arising as a result of this Agreement, nor the actions of Tosi contemplated by Section 2 hereof is intended to be or to create, and the foregoing shall not be construed to be, any partnership, joint venture or other joint enterprise between Secured Parties. Section 13. Trust Disclaimer. No right, duty or obligation of a Secured Party under or pursuant to this Agreement is intended to be or create, and none of the foregoing shall be construed to be or create, any express, implied, constructive trust or fiduciary relationship between Tosi and Chisholm. The parties hereto agree and stipulate that neither party is acting as a trustee for the other party. Section 14. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters stated herein and therein and any other matters relating to the transactions described or referred to herein and therein. Therefore, this Agreement supersedes any other agreements or communications which may be deemed to be agreements between the parties hereto relating to said matters. Section 15. Multiple Counterparts. This Agreement may be executed in two or more counterparts, and it shall not be necessary that the signatures of all parties hereto be contained on any one counterpart hereof; each counterpart shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 16. Governing Law. This Agreement shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of Texas. Section 17. Joinder of Borrower. Borrower and each Subsidiary join in the execution of this Agreement to acknowledge the terms and provisions hereof and to consent to Tosi's actions contemplated by Section 2 hereof. Borrower and each Subsidiary further acknowledge and agree that unless and until the Notes are paid in full, upon payment of a Note, the Secured Party holding such Note and any Collateral given to secure the same shall not be required to re-deliver or release any such Collateral to Borrower or any Subsidiary, such Secured Party being authorized and directed to deliver any such Collateral to a Secured Party whose Note is then unpaid and outstanding. Section 18. Arbitration. Any dispute related to this Agreement (a "Dispute") which is not resolved within any applicable resolution period, shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association then currently in effect, by an arbitrator (the "Arbitrator") appointed in accordance with such rules. Arbitration may be commenced upon written demand of any party to this Agreement for resolution of such Dispute. The arbitration hearing shall be conducted at a time and place set by the Arbitrator, provided that such hearing must occur within thirty (30) days of the appointment of the Arbitrator. The decision of the Arbitrator shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. The non-prevailing party shall pay all costs of the arbitration including the costs and fees (including reasonable attorneys fees) of the prevailing party. 6 7 Section 19. Acknowledgment and Release. The parties acknowledge and agree that Tosi holds, and will continue to hold, the Collateral that requires possession to perfect a security interest therein pursuant to the terms of Section 2 hereof as an accommodation to Chisholm. As to any Tosi action or failure to act in connection with Tosi's holding of such Collateral prior to the date hereof, Chisholm, in consideration of Tosi's willingness to enter into this Agreement, hereby releases and discharges Tosi and its partners and each of their respective officers, directors, shareholders, members, partners, affiliates, employees, agents and representatives from and against any and all liabilities, obligations, claims, causes of action, debts, damages (including, without limitation, special, incidental, indirect or consequential damages, damages for loss of business profits, business interruption and loss of business interruption information), losses, penalties, fines, disputes, agreements, understandings, costs and expenses (including, without limitation, attorneys' fees, court costs and costs of investigation of each and every kind whatsoever, whether absolute or contingent, known or unknown, at any time, directly or indirectly) (collectively, the "Claims") in connection with any such action or failure to act. As to any Tosi action or failure to act in connection with the discharge of Tosi's efforts contemplated under Section 2 from and after the date hereof, Chisholm hereby releases and discharges Tosi and its partners and each of their respective officers, directors, shareholders, members, partners, affiliates, employees, agents and representatives from and against any and all Claims in connection with any such action or failure to act to the extent that any such action or failure to act shall not be attributable to Tosi's gross negligence or willful misconduct. Section 20. Contingent Effectiveness. Notwithstanding anything in this Agreement to the contrary, this Agreement shall be of no force and effect unless and until Tosi has received in cash the amount provided in Section 3 of that certain Agreement for Second Extension and Amendment of Loan Documents of even date herewith among, inter alia, Borrower and Tosi. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. TOSI, L.P. By: Pitman Property Corp.,a Texas corporation, General Partner By /s/ J. W. Beavers, Jr. J. W. Beavers, Jr., President "Tosi" CHISHOLM ENERGY PARTNERS, L.L.C. By /s/ John Chisholm Its Managing Director "Chisholm" 7 8 APPROVED: FLOTEK INDUSTRIES INC. By Jerry D. Dumas Its "Borrower" PETROVALVE INTERNATIONAL INC. By Jerry D. Dumas Its PETROVALVE, INC. By Jerry D. Dumas Its USA PETROVALVE, INC. By Jerry D. Dumas Its TURBECO, INC. By Jerry D. Dumas Its "Subsidiaries" 8 EX-99.1 4 AGREEMENT PURSUANT TO RULE 13D-1(F)(1)(III) 1 Exhibit 99.1 Pursuant to Rule 13d-1(f)(1)(iii) of Regulation 13D-G of the General Rules and Regulations of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, the undersigned agrees that the statement to which this Exhibit is attached is filed on behalf of each of them in the capacities set forth below. /s/ David S. Hunt David S. Hunt, individually and as attorney-in-fact for: TOSI, L.P. (1) PITMAN PROPERTY CORP. (2) J. W. BEAVERS, JR. (3) (1) A power of attorney authorizing David S. Hunt to act on behalf of TOSI, L.P. previously has been filed with the Commission. (2) A power of attorney authorizing David S. Hunt to act on behalf of Pitman Property Corp. previously has been filed with the Commission. (3) A power of attorney authorizing David S. Hunt to act on behalf of J. W. Beavers, Jr. previously has been filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----