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FLOTEK INDUSTRIES, INC.
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SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DATED AS OF APRIL 30, 2000
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UNITS
CONSISTING OF
SERIES A CONVERTIBLE PREFERRED STOCK
AND
WARRANTS
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TABLE OF CONTENTS
PAGE
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ARTICLE I
THE UNITS: PURCHASE AND SALE OF UNITS
1.1 Authorization and Description of the Units ........................... 1
1.2 Exchange of Senior Notes and Existing Warrants for Units ............. 2
1.3 Closing and Certain Subsequent Events ................................ 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization, Authority and Capitalization of the Company;
Stock Ownership ...................................................... 3
2.2 Subsidiaries ......................................................... 4
2.3 Qualification; Enforceability ........................................ 4
2.4 Financial Statements ................................................. 4
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc .................................................... 4
2.6 Consents and Approvals ............................................... 5
2.7 Litigation ........................................................... 5
2.8 Private Offering ..................................................... 5
2.9 No Defaults; Debt, etc; Liens ........................................ 6
2.10 Environmental Matters ................................................ 6
2.11 Taxes ................................................................ 7
2.12 ERISA ................................................................ 7
2.13 Trade Rights ......................................................... 8
2.14 Commission Filings ................................................... 8
2.15 Affiliate Transactions ............................................... 8
2.16 Full Disclosure ...................................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
3.1 Investment Representation ............................................ 8
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ARTICLE IV
COVENANTS
4.1 Financial Statements; Information .................................... 11
4.2 Corporate Existence .................................................. 13
4.3 Compliance with Laws; Government Filings ............................. 13
4.4 Environmental Matters ................................................ 13
ARTICLE V
MISCELLANEOUS
5.1 Expenses ............................................................. 13
5.2 Reliance on and Survival of Representations and Covenants ............ 14
5.3 Amendment and Waiver ................................................. 14
5.4 Directly or Indirectly ............................................... 14
5.5 Successors and Assigns ............................................... 15
5.6 Notices .............................................................. 15
5.7 LAW GOVERNING ........................................................ 15
5.8 SUBMISSION TO JURISDICTION;
Service of Process ............................................. 15
5.9 Headings, etc ........................................................ 16
5.10 Entire Agreement ..................................................... 16
5.11 Indemnification ...................................................... 16
5.12 Interpretive Provision; Currency ..................................... 17
5.13 Severability ......................................................... 17
5.14 Counterparts ......................................................... 17
5.15 Finder's Fee ......................................................... 17
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Appendices:
Appendix I Definitions
Schedules:
Schedule 1.2 Purchasers
Schedule 2.1(a) Organization; Good Standing
Schedule 2.1(b) Stock Rights
Schedule 2.1(c) Capitalization of the Subsidiaries
Schedule 2.2 Status of Subsidiaries
Schedule 2.5 Compliance with Laws, Etc.
Schedule 2.9 Debts; Liens
Exhibits:
Exhibit A Articles of Amendment; Terms of Series A Convertible Preferred
Stock
Exhibit B Form of Replacement Warrant
Exhibit C Form of Registration Rights Agreement
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of April 30, 2000, between
FLOTEK INDUSTRIES, INC., an Alberta corporation, and each of the PURCHASERS who
have executed this Agreement.
WHEREAS, the capitalized terms used herein have the meaning given to
such terms in Appendix I; and
WHEREAS, the Company has authorized the issuance of and wishes to sell
to each Purchaser the number of Units set forth opposite such Purchaser's name
in Schedule 1.2, in exchange for the surrender of the Senior Notes and Existing
Warrants held by such Purchaser (i.e. a total of 2,365.770 Units are to be
exchanged for Senior Notes in an aggregate amount, including accrued interest,
of $2,365,770 and Existing Warrants to purchase 73,333,332 shares of Common
Stock); and
WHEREAS, each Purchaser wishes to exchange the Senior Notes and
Existing Warrants held by it for the number of Units set forth opposite such
Purchaser's name in Schedule 1.2, subject to the terms and conditions of this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and upon the terms and conditions hereinafter set forth, the Company
and the Purchasers, intending to be mutually bound, agree as follows:
ARTICLE I
THE UNITS: PURCHASE AND SALE OF UNITS
1.1 Authorization and Description of the Units.
The Company has authorized the issuance to the Purchasers of 2,365.77
Units, consisting of 2,365.77 shares of Series A Convertible Preferred Stock
(and the shares of Conversion Stock issuable upon the conversion thereof) and
Replacement Warrants to purchase an aggregate of 78,859,012 shares of Common
Stock, in the individual amounts set forth opposite each Purchaser's name on
Schedule 1.2, in exchange for the surrender of the Senior Notes, in the
aggregate amount, including principal and interest through the date hereof, of
$2,365,770 and Existing Warrants to purchase 73,333,332 shares of Common Stock.
The terms of the Series A Convertible Preferred Stock are set forth in the form
of Articles of Amendment set forth as Exhibit A attached hereto and the form of
each Replacement Warrant is attached as Exhibit B hereto. As soon as practicable
after the date hereof, the Company shall file the Articles of Amendment pursuant
to the Business Corporation Act (Alberta) to create the Series A Preferred
Stock.
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1.2 Exchange of Senior Notes and Existing Warrants for Units.
At the Closing, the Company will sell to each of the Purchasers and
each Purchaser severally will purchase from the Company, subject to the terms
and conditions of this Agreement and in reliance on the representations,
warranties and covenants of the Company contained herein, the number of Units
set forth opposite such Purchaser's name on Schedule 1.2, in consideration of
$1,000 per Unit (as to each Purchaser, the "Purchase Price"), for an aggregate
purchase price of $2,365,770. The Purchase Price shall be payable by the
surrender and delivery by each Purchaser to the Company of the Senior Notes and
the Existing Warrants held by such Purchaser as set forth on such Schedule 1.2.
Subject to the Closing, the Senior Notes shall be deemed to have been
surrendered and canceled as of the date of this Agreement and shall not shall
not accrue interest after the date hereof. This Agreement is intended to qualify
as a plan of reorganization and the transactions contemplated herein are
intended to constitute a tax-free reorganization described in section
368(a)(1)(E) of the Internal Revenue Code.
1.3 Closing and Certain Subsequent Events.
(a) The sale and purchase of Units (the "Closing") shall take place at
the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as soon as practicable after the Company shall
have filed the Articles of Amendment creating the Series A Preferred Stock. At
the Closing (i) the Company will deliver to each Purchaser a duly-completed and
duly-executed certificate representing the shares of Series A Convertible
Preferred Stock, and a duly-executed Replacement Warrant, in the respective
amounts to be purchased by such Purchaser, each dated the date of the Closing
and registered in the name of such Purchaser, against surrender by each
Purchaser of the Senior Notes and Existing Warrants held by it, (ii) each of the
Purchasers shall deliver to the Company UCC termination statements and any other
documents necessary to terminate the security interest of such Purchaser
relating to the Senior Notes being converted and any related financing
statements, and (iii) the Company and the Purchasers shall enter into a
Registration Rights Agreement in the form of Exhibit C. It shall be a condition
to the obligations of the Purchasers to consummate the purchase and sale of the
Units in accordance with the terms and conditions of this Agreement that the
representations and warranties of the Company set forth in Article II hereof be
true and correct as of the Closing to the same extent as if made on the date of
Closing, and that the Company deliver to the Purchasers a certificate of an
appropriate officer of the Company to that effect. It shall be a condition to
the effectiveness of the Closing as to any Purchaser that all Purchasers
consummate the purchase and sale of their respective Units in accordance with
the terms and conditions of this Agreement.
(b) Upon the surrender by the Purchasers of their respective Senior
Notes and Existing Warrants, the Company shall deliver to each Purchaser a copy
of all such Senior Notes marked "Paid in Full" and a copy of all such Existing
Warrants marked "Canceled." The Company shall file with all appropriate
governmental offices the UCC termination statements referenced in subsection (a)
above and shall deliver a copy of the file-stamped copies thereof to each
Purchaser promptly upon receipt.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Purchaser as follows:
2.1 Organization, Authority and Capitalization of the Company;
Stock Ownership.
(a) The Company is a corporation duly continued, validly existing and,
subject to Schedule 2.1(a), in good standing under the laws of the Province of
Alberta, Canada, and has all requisite corporate power and authority to own or
hold under lease the property it purports to own or hold under lease, to carry
on its business as now conducted, to enter into this Agreement and the other
Exhibits to which it is or is to be a party, to issue and sell the Securities,
to perform its obligations under this Agreement, the Securities and the other
Exhibits to which it is or is to be a party and to consummate the transactions
contemplated hereby and thereby. Upon the filing of the Articles of Amendment,
the Company will have, by all necessary corporate action (no action of
stockholders of the Company being required by law, by its charter or by-laws, or
otherwise in connection therewith), duly authorized the execution and delivery
of this Agreement and the other Exhibits to which it is or is to be a party, the
issuance and sale of the Securities and the performance of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby.
(b) The authorized capital stock of the Company consists solely of (i)
an unlimited number of shares of Common Stock and (ii) an unlimited number of
shares of preferred stock, all of which are undesignated as to series. There are
50,243,295 shares of Common Stock outstanding as of April 30, 2000. All of the
Company's authorized capital stock has been duly and validly authorized, and
either is, or will be when issued, duly and validly issued and outstanding and
is, or will be when issued, fully paid and nonassessable. None of the Company's
authorized capital stock is subject to any Stock Rights, other than as set forth
in Schedule 2.1(b). All securities of the Company have been issued in compliance
with the Securities Act and applicable state and provincial securities laws. The
Conversion Stock has been duly authorized and reserved for issuance, is not
subject to any Stock Rights and, when issued in the manner referred to in the
Series A Convertible Preferred Stock and the Replacement Warrants, will be
validly issued, fully paid and nonassessable.
(c) Schedule 2.1(c) sets forth the authorized, issued and outstanding
capital stock of each Subsidiary, including the record ownership thereof, and
the ownership interests of the Company (direct and indirect), in any other
Person. There are no liens on any capital stock of any Subsidiary or on the
Company's ownership interests in any other Person. None of the shares of capital
stock of any Subsidiary are subject to any Stock Rights.
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2.2 Subsidiaries.
Except as set forth in Schedule 2.2, each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, has all requisite corporate power and
authority to own or hold under lease the property it purports to own or hold
under lease, and to carry on its business as conducted by it.
2.3 Qualification; Enforceability.
(a) Each of the Company and each Subsidiary is duly qualified or
licensed and in good standing as a foreign corporation duly authorized to do
business in each jurisdiction in which the nature of the activities or the
character of the properties owned or leased makes such qualification or
licensing necessary, except for jurisdictions in which the failure to be so
qualified would not have a Material Adverse Effect.
(b) This Agreement, the Series A Convertible Preferred Stock, the
Replacement Warrants and the other Exhibits hereto have been (or at the Closing
will be, as the case may be) duly executed and delivered by the Company, and,
assuming due execution and delivery by the Purchasers of this Agreement and the
Exhibits that require execution by the Purchasers, constitute (or upon execution
and delivery at the Closing, will constitute) the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect relating to or affecting the enforcement of
creditors' rights generally or by the application of equitable principles
(whether such application is considered in equity or in law).
2.4 Financial Statements.
The Company has furnished to each Purchaser a true and complete copy
of the Financial Statements. The Financial Statements were prepared in
accordance with GAAP, applied on a consistent basis throughout the periods
specified, and present fairly in all material respects the financial position of
the Company and its Subsidiaries for the respective periods specified. Except as
specifically described in the Financial Statements, neither the Company nor any
Subsidiary has as of the date thereof any material liabilities, contingent or
otherwise, which under GAAP are required to be disclosed therein.
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc.
(a) Neither the Company nor any Subsidiary is (i), subject to Schedule
2.5, in violation of any term or provision of its corporate charter or by-laws
or (ii) in violation of or default under (A) any term or provision of any
agreement, indenture, mortgage, instrument, permit or license to which it is a
party or by which it or any of its properties may be bound or affected or (B) to
the Company's knowledge, subject to Schedule 2.5 and Schedule 2.1 (a), any
existing statute, law, governmental rule, regulation or ordinance, or any order
of any court, arbitrator or Governmental Body applicable to it or its properties
(including, without limitation, any statute, law, rule, regulation, ordinance or
order relating to occupational health and safety
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standards, or equal employment practice requirements), the consequences of which
violation or default, either in any one case or taken together with all other
such violations or defaults, (x) could have a Material Adverse Effect or (y)
could materially and adversely affect the ability of the Company to perform its
obligations under this Agreement, the Series A Convertible Preferred Stock, the
Replacement Warrants or any other Exhibit to which the Company is a party.
(b) Neither the execution, delivery or performance by the Company of
this Agreement, the Securities, or any other Exhibit to which it is a party, nor
compliance by the Company with the respective terms hereof and thereof will
result in (i) any violation of or be in conflict with or constitute a default
under (A) any term or provision of the corporate charter or by-laws of the
Company or any Subsidiary, (B) any term or provision of any agreement,
indenture, mortgage, instrument, permit or license to which it is a party or by
which it or any of its properties may be bound or affected, or (C) to the
Company's knowledge, any existing statute, law, governmental rule, regulation or
ordinance, or any order of any court, arbitrator or Governmental Body applicable
to it or its properties, or (ii) the creation of (or impose any obligation on
the Company or any Subsidiary to create) any lien upon any of the properties or
assets of the Company or any Subsidiary.
2.6 Consents and Approvals.
Other than the filing of Articles of Amendment, no consent, approval
or authorization of, or filing or registration with, or the taking of any other
action in respect of, any Governmental Body or any other Person (including any
trustee or holder of any indebtedness, securities or other obligations of the
Company or any Subsidiary) is required (i) for or in connection with the valid
execution and delivery by the Company of, or the performance by the Company of
any obligation under, this Agreement, the Securities or any other Exhibit to
which it is a party or the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the offer,
issuance, sale and delivery of the Securities, or (ii) as a condition to the
legality, validity or enforceability as against the Company of this Agreement,
the Securities or any other Exhibit to which it is a party.
2.7 Litigation.
There are no actions, suits or proceedings pending (or, to the
knowledge of the Company, threatened) against the Company or any Subsidiary or
affecting any of their respective properties in any court or before any
arbitrator of any kind or before or by any Governmental Body, which (i) question
the validity or legality of this Agreement, the Series A Convertible Preferred
Stock or the Replacement Warrants or any other Exhibit or any action taken or to
be taken pursuant hereto or thereto or (ii) might result, either in any one case
or in the aggregate, in (A) a material impairment of the ability of the Company
to perform its obligations under this Agreement or any other Exhibit to which it
is a party, or (B) a Material Adverse Effect.
2.8 Private Offering.
Neither the Company nor any other Person acting on behalf of the
Company has taken, or will take, any action which would subject the issuance or
sale of the Securities to
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Section 5 of the Securities Act or to the registration or qualification
requirements of any applicable state or provincial securities law.
2.9 No Defaults; Debt, etc; Liens.
(a) Schedule 2.9 correctly lists (i) all secured and unsecured funded
debt of the Company and any Subsidiary and (ii) any liens (other than Permitted
Liens) on any assets of the Company or any Subsidiary, in each case, as of the
date hereof. No default or event of default, after giving effect to the issuance
and sale of the Units and the consummation of the other transactions
contemplated by this Agreement and the Exhibits, will exist (or, but for the
waiver thereof, would exist) under any instrument or agreement evidencing,
providing for the issuance or securing of, or otherwise relating to, any such
debt or liens.
(b) There is no pending foreclosure with respect to any assets or
properties of the Company or any Subsidiary, and as of the Closing there will
not be any pending foreclosure with respect thereto.
2.10 Environmental Matters.
(a) To the best of the Company's knowledge, the Company and the
Subsidiaries hold all Environmental Permits required under all Environmental
Laws except to the extent failure to have any such Environmental Permit has not
had and will not have a Material Adverse Effect.
(b) To the best of the Company's knowledge, the Company and the
Subsidiaries currently are, and at all times heretofore have been, in compliance
with all terms and conditions of all such Environmental Permits and all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in all applicable Environmental
Laws except to the extent failure to comply therewith, in any one case or in the
aggregate, has not had and will not have a Material Adverse Effect.
(c) Neither any of the Company nor any Subsidiary has ever received,
and, to the Company's knowledge, no predecessor in interest of any the Company
and the Subsidiaries has ever received in respect of any of the Company
Premises, from any Governmental Body or other Person any written notice of, and
the Company has no knowledge of, any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans that could
reasonably be expected to interfere with or prevent compliance or continued
compliance in all material respects with the Environmental Permits referred to
in Section 2.10(a) or any scheduled renewals thereof or any Environmental Laws,
or that could reasonably be expected to give rise to any liability on the part
of any of the Company and the Subsidiaries or otherwise form the basis of any
claim, action, demand, request, notice, suit, proceeding, hearing, study or
investigation (collectively, "Environmental Claims") involving any of the
Company and the Subsidiaries based on or related to (i) a violation or alleged
violation of any Environmental Law or (ii) the manufacture, refining,
generation, processing, distribution, use, sale, treatment, receipt, storage,
disposal, transport, arranging for transport or handling, or the emission,
discharge, release or threatened release into the environment, of any Hazardous
Substance, other than
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liabilities or Environmental Claims referred to in this Section 2.10(c) that
have not had and will not have, either in any one case or in the aggregate, a
Material Adverse Effect.
(d) To the best of the Company's knowledge, there has not been any
civil, criminal or administrative action, suit, demand, summons, citation,
claim, hearing, notice or demand letter, information request, notice of
violation, judgment, order, lien, investigation, study or proceeding pending or
threatened against any of the Company or the Subsidiaries, or against any
predecessor in interest thereof, in its capacity as such, relating to any such
Environmental Permits or any scheduled renewals thereof or any Environmental
Laws that has had or will have, either in any one case or in the aggregate, a
Material Adverse Effect.
(e) To the best of the Company's knowledge, (i) no part of the Company
Premises or, so far as is known to the Company, the area surrounding the Company
Premises is being used, or has been used at any time in the past, to
manufacture, generate, refine, process, distribute, use, sell, treat, receive,
store, dispose of, transport, arrange for transport of, handle, or conduct any
other activity involving any Hazardous Substance except in a manner that has
been in compliance in all material respects with all applicable Environmental
Laws and Environmental Permits and to an extent that has not had and will not
have a Material Adverse Effect; and (ii) neither the Company nor any Subsidiary
is conducting or has ever conducted any such activities anywhere else except in
a manner that has been in compliance in all material respects with all
applicable Environmental Laws and Environmental Permits and to an extent that
has not had and will not have a Material Adverse Effect.
2.11 Taxes. Each of the Company and its Subsidiaries has timely filed
in proper form all income, franchise, sales, use, property, excise, payroll,
withholding and other Tax returns that it is required to file with any
Governmental Body (collectively, "Tax Returns"). All of such Tax Returns are
true and correct. All Taxes due or payable by the Company or any of its
Subsidiaries on or before the date hereof pursuant to such Tax Returns or
otherwise have been paid. There is no unpaid interest, penalty or addition to
Tax due or claimed to be due by the Company or by any of its Subsidiaries, nor
is there any unpaid Tax deficiency, determination or assessment outstanding
against the Company or any of its Subsidiaries. No audits of any Tax Return are
pending or threatened, nor are any waivers of any statute of limitations or
extensions of time for the determination or assessment of Tax deficiencies in
effect for the Company or for any of its Subsidiaries. There is no Action
against the Company or any of its Subsidiaries for the purpose of assessment or
collection of Taxes by any Governmental Body. Neither the Company nor any of its
Subsidiaries is a party to any written consent with any Governmental Body to
extend the period for assessment or collection of any Taxes, or to any written
agreement with any Governmental Body concerning liability for Taxes. Neither the
Company nor any of its Subsidiaries is a party to any Tax-sharing or Tax-benefit
agreement, arrangement or understanding. The Company and each of its
Subsidiaries has (i) complied in all respects with all applicable Laws relating
to the withholding of income Taxes, social security Taxes and Medicare Taxes and
(ii) paid over to the appropriate Governmental Bodies all such withholding Taxes
that are required to be paid as of the date hereof.
2.12 ERISA. The Company and its Subsidiaries are in compliance with
the applicable provisions of ERISA, and no "reportable event," as such term is
defined in Section 4043 of ERISA, has occurred with respect to any Plan of the
Borrower or any Subsidiary.
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2.13 Trade Rights. There are no pending or threatened claims against
the Borrower or any of its Subsidiaries alleging infringement of, or conflict
with the rights of others under, any patent, patent application, trademark,
service ▇▇▇▇, copyright, trade secret or similar intangible franchise, license
or right ("Trade Rights") and, to the best of the Company's, no reasonable basis
exists for any such allegation. The Company and each of its Subsidiaries owns
exclusively or has a valid and subsisting exclusive license to use all of the
Trade Rights that it uses in connection with its business.
2.14 Commission Filings. The Company has timely filed all filings
required to be made by it with the Commission. At the time of filing, all of the
information set forth in each Company filing with the Commission was true and
correct in all material respects and did not omit to state a material fact
necessary to make the statements therein not misleading.
2.15 Affiliate Transactions. There is no direct or indirect
transaction or proposed transaction between the Company and any of its
employees, directors or officers, or any of their respective immediate family
members, or any affiliates of any of them (each a "Related Party"), not
conducted on an arm's-length basis on terms and conditions no more favorable or
unfavorable to the Company than would have been obtainable generally from
unrelated third parties. The Company is not indebted, directly or indirectly, to
any Related Party other than in connection with expenses or advances of expenses
incurred in the ordinary course of business or relocation expenses of employees.
To the best of the Company's knowledge, no Related Party is indebted to the
Company or has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation that competes with the
Company, except that Related Parties may own stock in publicly traded companies
that may compete with the Company.
2.16 Full Disclosure.
(a) All of the information provided to Purchasers under this Agreement
and the Exhibits hereto is true and correct in all material respects.
(b) The Company has not failed to disclose to Purchaser in writing any
material fact in connection with the Company, the Securities or any of the
transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS Each
Purchaser, severally as to itself, represents and warrants as follows:
3.1 Investment Representation. (a) The Purchaser of the Series A
Convertible Preferred Stock and of the Replacement Warrants hereby acknowledges
that the Series A Convertible Preferred Stock and the Replacement Warrants are
not being registered (i) under the
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Securities Act of 1933, as amended (the "Act") or (ii) under any applicable
state securities law; and that the Company's reliance on the Section 4(2)
exemption of the Act and under applicable state securities laws is predicated in
part on the representations hereby made to the Company in the Agreement.
(b) The Purchaser will not sell or transfer all or any part of the
Series A Convertible Preferred Stock or Replacement Warrants unless and until he
shall first have given notice to the Company describing such sale or transfer
and, if reasonably requested by the Company, furnished to the Company either (a)
an opinion, reasonably satisfactory to counsel for the Company, of counsel
skilled in securities matters (selected by the Purchaser and reasonably
satisfactory to the Company) to the effect that the proposed sale or transfer
may be made without registration under the Act and without registration or
qualification under applicable state law, or (b) an interpretive letter from the
Securities and Exchange Commission to the effect that no enforcement action will
be recommended if the proposed sale or transfer is made without registration
under the Act. The Purchaser acknowledges that the Series A Convertible
Preferred Stock and the Replacement Warrants (and upon any conversion or
exercise thereof, the certificates representing the Common Stock) subscribed for
hereby will bear a legend restricting transfer thereof as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ISSUED
PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR
QUALIFICATION PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS BASED,
IN PART, ON AN INVESTMENT REPRESENTATION ON THE PART OF THE PURCHASER
THEREOF. THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED,
DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM."
(c) The Company may refuse to recognize a transfer of the Series A
Convertible Preferred Stock or the Replacement Warrants on its books should a
Purchaser attempt to transfer the Series A Convertible Preferred Stock or the
Replacement Warrants otherwise than in compliance with this Section 3.1.
(d) The Purchaser has adequate means of providing for his current
needs and possible personal contingencies, he anticipates no need now or in the
foreseeable future to sell the Series A Convertible Preferred Stock or the
Replacement Warrants (or upon any exercise thereof, the Common Stock) which he
is purchasing and he can afford the loss of his entire investment in the
Company.
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(e) The Purchaser has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of
investment in the Company and of making an informed investment decision.
(f) The Purchaser confirms that all documents, records and books
pertaining to his proposed investment in the Company have been made available to
him. The Purchaser is aware that no federal or state agency has passed upon the
Securities or made any finding or determination concerning the fairness of the
investment represented thereby.
(g) The Purchaser had an opportunity to ask questions of and receive
answers from representatives of the Company concerning the terms and conditions
of this investment, and all such questions have been answered to the full
satisfaction of the Purchaser. The Purchaser understands that no person other
than the Company has been authorized to make any representation or warranty
other than as contained herein (including the Exhibits hereto) and, if made,
such representation may not be relied on unless it is made in writing and signed
by the Company. The Company has not rendered any investment or tax advice to the
Purchaser with respect to the suitability of an investment in the Securities or
the tax consequences thereof. The Company has urged each Purchaser to consult
his own tax adviser concerning any tax matters relating to this investment.
(h) The Securities that the Purchaser is acquiring will be acquired
for his own account for investment. The Purchaser intends to hold the Series A
Convertible Preferred Stock and the Replacement Warrants (and upon any
conversion or exercise thereof, the Conversion Stock) indefinitely and, subject
to his rights under the Registration Rights Agreement, he is not purchasing such
Securities with a view toward distribution in a manner which would require
registration under the Securities Act, and he does not presently have any
reasons to anticipate any change in his circumstances or other particular
occasion or event which would cause him to sell, the Series A Convertible
Preferred Stock and the Replacement Warrants (or upon any conversion or exercise
thereof, the Conversion Stock) which he is purchasing hereunder, subject,
nevertheless, to any requirement of law that the disposition of his property
shall at all times be within his control.
(i) The Purchaser acknowledges that it has been called to his
attention by those individuals with whom he has dealt in connection with his
investment in the Company that his investment in the Company involves a high
degree of risk.
(j) The Purchaser has received no representations or warranties from
the Company other than those contained herein (including the Schedules and
Exhibits hereto) or otherwise furnished in writing and signed by the Company.
(k) The Purchaser, if a corporation, partnership, trust or other form
of business entity: is authorized and otherwise duly qualified to purchase and
hold the Securities and to enter into this Agreement and the Exhibits hereto to
which it is a signatory; represents that the purchase of the Securities will not
result in a breach of or violation of the terms or provisions of, or constitute
a default under, the certificate of incorporation, by-laws, or other charter
document of such entity or any indenture or other agreement or instrument by
which the entity or its property is bound, or violate any applicable law,
administrative regulation, or court decree; and
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15
represents that such entity has its principal place of business as set forth on
its signature page and that such entity has not been formed for the specific
purpose of acquiring the Securities. If the Purchaser is one of the
aforementioned entities, it shall supply any additional written information that
reasonably may be required by the Company.
(l) All of the information that the Purchaser has heretofore furnished
or which is set forth in this Agreement and the Schedules and Exhibits hereto
with respect to his financial position and business status is correct and
complete in all material respects as of the date of this Agreement and, if there
should be any material and adverse change in such information prior to the
Closing, the Purchaser will promptly furnish the revised or corrected
information to the Company.
ARTICLE IV
COVENANTS
The Company, so long as any Series A Convertible Preferred Stock shall
be outstanding, agrees to perform and comply with each of the following
covenants.
4.1 Financial Statements; Information.
The Company shall furnish to each Holder of the Series A Convertible
Preferred Stock the following:
(a) Financial Information. The Company shall send, or cause to be
sent, to each Holder (i) its consolidated audited annual financial statements,
fairly and accurately presenting in all material respects the financial
condition and the results of operations and cash flows of the Company and its
Subsidiaries, prepared in accordance with GAAP, as soon as is practicable after
the same have been issued, together with the report thereon by independent
public auditors but in any event no later than ninety (90) days after the end of
such fiscal year, (ii) its unaudited quarterly consolidated financial
statements, of each of the first three fiscal quarters of its fiscal year,
fairly and accurately presenting in all material respects the financial
condition and the results of operations and cash flows of the Company and its
Subsidiaries, prepared in accordance with GAAP, as soon as is practicable after
the end of each fiscal quarter but in any case within forty-five days of the end
of its fiscal quarters, certified by its duly authorized chief financial
officer, and (iii) such financial or other information relating to the Company
and its Subsidiaries or any of the transactions contemplated by this Agreement
or any Exhibit to which the Company is a party, as may be reasonably requested
by Holders of at least a majority of the shares of Common Stock that would then
be issuable upon (i) conversion of all of the then- outstanding shares of Series
A Convertible Preferred Stock and (ii) exercise of all of the then- outstanding
Replacement Warrants.
(b) Information Delivered to Creditors. Concurrently with the
furnishing thereof, copies of any statements, reports or documents relating to
the business or condition generally of the Company or any Subsidiary which are
furnished by the Company or any Subsidiary to any holder of funded debt of the
Company or Subsidiary, or any notices which are
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16
so furnished, in each case pursuant to the terms of any indenture, loan, credit
or similar agreement and not otherwise required to be furnished pursuant to any
other clause of this Section 4.1
(c) Commission and Other Reports. Promptly upon their becoming
available (and in any event within five Business Days thereafter), copies of (i)
all financial statements, reports, notices, proxy statements and other
information sent or made available generally by the Company to any class of its
security holders (in their capacity as such) or by any Subsidiary to any class
of its security holders other than the Company or another Subsidiary, (ii) all
regular and periodic reports and all registration statements, forms and
prospectuses filed by the Company or any of its Subsidiaries with any securities
exchange or with the Commission, (iii) all press releases and other statements
made available generally by the Company or any of its Subsidiaries to the public
concerning material developments in the business of the Company or any of its
Subsidiaries, and (iv) all material notices or other communications received by
the Company or by any of its Subsidiaries from any Governmental Body (including
without limitation the Commission).
(d) Audit Reports. Promptly upon receipt thereof, one copy of each
other report submitted to the Company or to any of its Subsidiaries by
independent accountants in connection with any annual, interim or special audit
made by them of the books of the Company or any of its Subsidiaries.
(e) Defaults, etc. Promptly upon and in any event within five Business
Days after any officer of the Company obtains knowledge that any Person has
given any notice to the Company or any of its Subsidiaries or taken any other
action with respect to a claimed default under or in respect of any debt for
borrowed money in excess of $100,000 or with respect to the occurrence or
existence of any event or condition of such type, written notice in reasonable
detail specifying the facts and circumstances of such condition, event or action
and the Company's proposed course of action with respect thereto.
(f) Litigation, etc. Promptly and in any event within five Business
Days after any officer of the Company obtains knowledge of any litigation,
administrative proceeding or judgment (i) affecting the Company or any of its
Subsidiaries which involves claims against the Company or its Subsidiaries
aggregating, when taken together with all other such litigation, proceedings and
judgments, $100,000 which are not considered by the Company, in its reasonable
judgment, to be covered by insurance, or (ii) relating in any material way to
this Agreement, the Securities or any other Exhibit hereto, notice thereof
specifying in each case in reasonable detail the facts and circumstances
surrounding such litigation, proceeding or judgment.
(g) Certificates of Compliance. Concurrently with the furnishing of
the annual and quarterly financial statements pursuant to subsection (a) above,
the Company shall furnish or cause to be furnished to each Purchaser a
certificate in form and substance reasonably satisfactory thereto signed by the
Company's chief executive officer stating (i) that the Company has timely
fulfilled all of its obligations under this Agreement, the Securities and the
other Exhibits hereto; and (ii) that all representations made herein and therein
continue to be true and
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correct or specifying the nature of any change that has caused any such
representation to no longer be true and correct; and (iii) containing or
accompanied by such financial or other details, information and material as such
Purchaser reasonably may request to evidence such compliance.
4.2 Corporate Existence.
The Company will, and will cause each of its Subsidiaries to, do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence.
4.3 Compliance with Laws; Government Filings.
The Company shall, and shall cause each of its Subsidiaries to, comply
in all material respects with all laws, statutes, rules, regulations and
ordinances and all orders of, and restrictions imposed by, any court, arbitrator
or Governmental Body in respect of the conduct of the business of the Company or
Subsidiary and the ownership of the properties of the Company or Subsidiary
(including, without limitation, applicable laws, statutes, rules, regulations,
ordinances and orders relating to occupational health and safety standards,
consumer protection and equal employment opportunities), except to the extent
that the applicability or validity of any such law, statute, rule, regulation,
ordinance or order is being contested in good faith by appropriate and timely
actions or proceedings diligently pursued, and for which such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made.
4.4 Environmental Matters.
(a) The Company shall, and shall cause each of its Subsidiaries to,
(i) obtain and maintain in full force and affect all Environmental Permits that
may be required from time to time in order for the Company and such Subsidiary
to comply in all material respects with all Environmental Laws applicable to the
Company or such Subsidiaries and (ii) be and remain in compliance in all
material respects with all terms and conditions of all such Environmental
Permits and with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
all applicable Environmental Laws.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, (i) cause or allow (A) any Hazardous Substance to be present at
any time on, in, under or above the Company Premises or any part thereof or (B)
the Company Premises or any part thereof to be used at any time to manufacture,
generate, refine, process, distribute, use, sell, treat, receive, store, dispose
of, transport, arrange for transport of, handle, or be involved in any other
activity involving, any Hazardous Substance, or (ii) conduct any such activities
described in the foregoing clause (i) on the Company Premises or anywhere else,
except, in each case referred to in the foregoing clauses (i) and (ii), in a
manner that is in compliance in all material respects with all applicable
Environmental Laws and Environmental Permits and to an extent that will not have
a Material Adverse Effect.
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ARTICLE V
MISCELLANEOUS
5.1 Expenses.
Whether or not the transactions contemplated by Article I hereof are
consummated (unless the failure to consummate such transactions is due to a
continuing breach by the Purchasers of their obligations hereunder), the Company
shall: (a) directly pay the reasonable fees and expenses of special counsel to
each Purchaser incurred in connection with such transactions or in connection
with any actual or proposed amendment, waiver or consent pursuant to the
provisions hereof, and all other expenses in connection with the foregoing
(including, without limitation, (i) document production and reproduction
expenses and (ii) attorneys' fees and other costs and expenses incurred in
connection with any filings with the Commission occasioned by the transactions
contemplated hereby); (b) reimburse each Purchaser for his reasonable
out-of-pocket expenses in connection with each such actual or proposed
amendment, waiver or consent pursuant to the provisions of this Agreement, and
any items of the character referred to in clause (a) which shall have been paid
by any Purchaser; and (c) pay all documentary, stamp or similar taxes (including
interest and penalties) which may be payable in respect of the execution and
delivery or issuance (but not the transfer) of any of the Series A Convertible
Preferred Stock or Replacement Warrants or of any amendment of, or waiver or
consent under or with respect to, this Agreement, any of the Series A
Convertible Preferred Stock, the Replacement Warrants or any other Exhibit and
save each Purchaser harmless and indemnify each Purchaser against any loss or
liability resulting from nonpayment or delay in payment of any such tax. The
obligations of the Company under this Section shall survive payment for and
transfer of any Series A Convertible Preferred Stock or Replacement Warrants.
5.2 Reliance on and Survival of Representations and Covenants.
Each agreement, covenant, representation and warranty of the Company
herein or in any Exhibit or of (or on behalf of) the Company in any certificate
or other instrument delivered pursuant hereto or thereto shall: (a) be deemed to
be independently material and to have been relied upon by each Purchaser,
notwithstanding any investigation heretofore or hereafter made by each Purchaser
or on his behalf, and (b) survive the execution and delivery of this Agreement
and the issuance of the Securities to each Purchaser and any investigation made
at any time by him or on his behalf or any disposition of any of the Securities.
5.3 Amendment and Waiver. Any term, provision, covenant, agreement or
condition of this Agreement may be amended or modified, or compliance therewith
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by one or more substantially concurrent
written instruments signed by the Company and by Holders of not less than
66 2/3% of the shares of Common Stock that would then be issuable upon (i)
conversion of all of the then-outstanding shares of Series A Convertible
Preferred Stock and (ii) exercise of all of the then-outstanding Replacement
Warrants.
5.4 Directly or Indirectly.
Where any provision of this Agreement refers to actions to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether the action in question is taken directly or indirectly by
such Person.
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5.5 Successors and Assigns.
All covenants and agreements in this Agreement by or on behalf of the
respective parties hereto shall bind and inure to the benefit of their
respective successors and, in the case of any Holder, registered assigns. The
provisions of this Agreement are intended to be for the benefit of all Holders
from time to time, and shall be enforceable by any such Holder, whether or not
an express assignment to such Holder of rights under this Agreement has been
made by the Purchaser or his successors or assigns.
5.6 Notices.
Unless otherwise expressly provided in this Agreement, all notices,
opinions and other communications provided for in this Agreement shall be in
writing and delivered by hand or mailed, first class postage prepaid, return
receipt requested or sent by overnight courier, or by confirmed telefax
transmission (confirmed by hand-delivered, mailed or overnight courier copy)
addressed (a) if to the Company, to the Company at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (with a copy sent by telefax transmission to it at (713)
896-4511), marked to the attention of the President, or at such other address as
the Company may hereafter designate by notice in accordance with this Section to
each Holder of Series A Convertible Preferred Stock or Replacement Warrants at
the time outstanding, or (b) if to the Purchasers, at the address of each
Purchaser as set forth in Schedule 1.2 or at such other address as such
Purchaser may hereafter designate by notice in accordance with this Section to
the Company, or (c) if to any other Holder of any Series A Convertible Preferred
Stock or Replacement Warrants, at the address of such Holder as it appears on
the Company's records.
5.7 LAW GOVERNING.
THIS AGREEMENT AND ALL AMENDMENTS, SUPPLEMENTS, MODIFICATIONS, WAIVERS
AND CONSENTS RELATING HERETO OR THERETO SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF TEXAS.
5.8 SUBMISSION TO JURISDICTION;
Service of Process.
(a) IN RELATION TO ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT OR THE SECURITIES, THE COMPANY AND EACH PURCHASER HEREBY CONSENTS
TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTIES OF
▇▇▇▇▇▇ OR DALLAS, STATE OF TEXAS, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT OR THE SECURITIES MAY BE LITIGATED IN
SUCH COURTS, AND THE COMPANY AND EACH PURCHASER WAIVES ANY OBJECTION WHICH IT
MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY
PROCEEDING IN ANY SUCH COURT.
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5.9 Headings, etc.
The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning or construction of any of
the terms hereof. Unless otherwise specified, any reference in this Agreement to
a particular section, clause or other subdivision, or a particular schedule or
exhibit, shall be considered a reference to that section, clause or other
subdivision of, or to that schedule or exhibit to, this Agreement.
5.10 Entire Agreement.
This Agreement (including the Appendices, Schedules and Exhibits
hereto) embodies the entire agreement and understanding among the Company and
the Purchasers and supersedes all prior agreements and understandings among such
parties relating to the subject matter hereof. In particular, and
notwithstanding anything to the contrary that may be set forth therein, the
Senior Notes, the Existing Warrants, the loan agreements providing for the
issuance of the Senior Notes, the Guaranty Agreements executed by certain
subsidiaries of the Company with respect to the Senior Notes, the Security
Agreements executed by those subsidiaries with respect to the Senior Notes, the
Registration Rights Agreements executed by the Company with respect to the
Senior Notes, and the Second Intercreditor Agreement, dated March 16, 2000, by
and among the Company and certain of the Purchasers, shall terminate
automatically upon consummation of the Closing without the necessity of any
further action and thereafter shall have no further force or effect.
5.11 Indemnification.
In consideration of the execution and delivery of this Agreement by
each Purchaser, the Company hereby agrees to indemnify, defend and hold each
Purchaser and each Holder from time to time, and each officer, director, general
and limited partner (and each director and officer thereof), affiliate,
controlling Person, employee and agent of any of them (herein collectively
called the "Indemnitees") free and harmless in full from and against, and to pay
in cash promptly upon demand, any and all claims, actions, causes of action,
suits or other proceedings (whether or not any such Indemnitee is a party
thereto), losses, liabilities and damages, and expenses in connection therewith,
including, without limitation, reasonable fees and disbursements of counsel,
consultants and experts and claims relating to personal injury or property
damage or the enforcement of this indemnity (herein called the "Indemnified
Liabilities", which term shall not include, however, in respect of any
particular Indemnitee, liabilities incurred by reason of the gross negligence or
willful misconduct of such Indemnitee) incurred by the Indemnitees or any of
them as a result of, or arising out of, or relating to, any failure of any
representation or warranty of the Company set forth herein to be true and
correct when made or any failure by the Company to comply with any of its
covenants or agreements set forth herein. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Company hereby
agrees to make the maximum contribution to the payment of each of the
Indemnified Liabilities which is permissible under applicable law. The
provisions of, and obligations of the Company under, this Section 5.12 shall
survive the execution and delivery of this Agreement, the delivery or transfer
of any Series A Convertible Preferred Stock or Replacement Warrants, the
enforcement of any provision hereof or thereof, the consummation of
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the transactions to occur at the Closing, and any amendments or waivers, and
shall be enforceable by each Indemnitee separately or together; and any such
Indemnitee seeking to enforce the indemnification provided for hereunder may
initially proceed directly against the Company without first resorting to any
other rights of indemnification or otherwise that it may have.
5.12 Interpretive Provision; Currency.
Wherever any representation, warranty or other statement made by the
Company in this Agreement is limited to the best of the Company's knowledge,
such limitation shall mean the actual knowledge or awareness of any person who,
on the date hereof, is an executive officer or director of the Company after due
inquiry of the circumstances thereof. Unless otherwise expressly provided in a
particular instance, all references herein to dollars or "$" shall mean United
States dollars.
5.13 Severability.
Any provision of this Agreement which shall be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or enforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
5.14 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument. A facsimile of the signature of a party to this Agreement or any
related document shall be sufficient to bind that party.
5.15 Finder's Fee.
(a) The Company represents and warrants that it has not incurred any
obligation or liability to any broker or finder for any fee or payment with
respect to the offering or sale of the Units and agrees to indemnify and hold
the Purchasers harmless against any claims or liabilities asserted against them
by any person acting or claiming to act as a broker or finder on behalf of the
Company or any Subsidiary.
(b) Each Purchaser represents and warrants that it has not incurred
any obligation or liability to any broker or finder for any fee or payment with
respect to the offering or sale of the Units and agrees to indemnify and hold
the Company harmless against any claims or liabilities asserted against them by
any person acting or claiming to act as a broker or finder on behalf of such
Purchaser.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first before written.
COMPANY:
FLOTEK INDUSTRIES, INC.
By:
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., President and CEO
PURCHASERS:
▇▇▇▇, ▇.▇.
By: ▇▇▇▇▇▇ Property Corp., a Texas
corporation, General Partner
By:
-------------------------------------
▇. ▇. ▇▇▇▇▇▇▇, ▇▇., President
▇▇▇▇▇▇▇▇ ENERGY PARTNERS, L.L.C.
By:
------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Managing Director
---------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual
23
---------------------------------------------
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇., an individual
---------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, an individual
---------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, an individual
---------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual
---------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual
---------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, an individual
---------------------------------------------
Springfield Trading S.A.
By
-------------------------------------------
Name:
Title:
---------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual
24
---------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, an individual
---------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇'▇▇▇▇▇, an individual
---------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual
▇▇▇▇▇ FAMILY 1999 PARTNERSHIP LTD
By:
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Co-Trustee
By:
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Co-Trustee
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, INC.
By:
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
▇▇▇▇▇▇ RIVER CORPORATION
By:
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
25
NOW Ventures, LLC
By:
------------------------------------------
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇., Managing Member
---------------------------------------------
▇▇▇ ▇▇▇▇▇, an individual
---------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual
26
APPENDIX I
DEFINITIONS
As used in this Agreement the following terms shall have the meanings
ascribed thereto:
"Agreement" means this agreement, as it may be amended from time to
time, including all schedules and exhibits hereto.
"Articles of Amendment" means the Articles of Amendment to be filed
with the Alberta Municipal Affairs Registries pursuant to the Business
Corporation Act (Alberta) to create the Series A Convertible Preferred Stock out
of the authorized but undesignated first preferred shares of the Company, in the
form of Exhibit A hereto.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which commercial banks are required or authorized by law or
regulation to be closed in New York, New York.
"Closing" has the meaning set forth in Section 1.3.
"Commission" means the Securities and Exchange Commission or any other
United States agency at the time administering the Securities Act.
"Common Stock" means common stock of the Company, no par value.
"Company" means Flotek Industries, Inc., an Alberta corporation.
"Company Premises" means real property in which (a) the Company, (b)
any Subsidiary of the Company or (c) any Person which has at any time been a
Subsidiary of the Company at any time has or ever had any direct or indirect
interest, including, without limitation, ownership thereof, or any arrangement
for the lease, rental or other use thereof, or the retention or claim of any
mortgage or security interest therein or thereon.
"Conversion Stock" means the shares of Common Stock issuable upon
conversion of the Series A Convertible Preferred Stock and upon exercise of the
Replacement Warrants.
"Environmental Claims" has the meaning set forth in Section 2.11(c).
"Environmental Law" means any Law relating to (a) the environment,
human health or safety, including, without limitation, emissions, discharges,
releases or threatened releases of Hazardous Substances into the environment
(including, without limitation, air, surface water, groundwater or land), or (b)
the manufacture, generation, refining, processing, distribution, use, sale,
treatment, receipt, storage, disposal, transport, arranging for transport, or
handling of Hazardous Substances,
27
"Environmental Permit" means any and all permits, consents, licenses,
approvals and registrations of any nature at any time required pursuant to or in
order to comply with any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exhibit" means any of the exhibits to this Agreement, including such
exhibits as executed and delivered pursuant to the terms of this Agreement.
"Existing Warrants" means the warrants to purchase Common Stock of the
Company issued in connection with the issuance of the Senior Notes being
converted pursuant to this Agreement. The aggregate number of Existing Warrants
is 73,333,332, and the number of Existing Warrants held by each Purchaser, and
being canceled pursuant to this Agreement, is set forth on Schedule 1.2.
"Financial Statements" means (i) the audited consolidated balance
sheet, statement of operations and cash flows of the Company and the
Subsidiaries as of and for the period ended February 29, 2000, and (ii) the
unaudited consolidated balance sheets, statements of operations and cash flows
of the Company and the Subsidiaries as of and for the period ended May 31, 2000,
in each case, together with the notes thereto.
"GAAP" means generally accepted accounting principles as from time to
time set forth in the opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants and in statements by the
Financial Accounting Standards Board or in such opinions and statements of such
other entities as shall be approved by a significant segment of the accounting
profession in the United States of America.
"Governmental Body" means any federal, state, provincial, municipal,
local or other governmental department, commission, board, bureau, agency,
instrumentality, political subdivision or taxing authority of any country.
"Hazardous Substances" means collectively, contaminants; pollutants;
toxic or hazardous chemicals, substances, materials, wastes and constituents;
petroleum products; poly-chlorinated biphenyls; medical wastes; infectious
wastes; asbestos; paint containing lead; and urea formaldehyde.
"Holder" means initially a Purchaser and thereafter such person who
from time to time is the registered Holder of Series A Convertible Preferred
Stock or Replacement Warrants.
"Indemnified Liabilities" has the meaning set forth in Section 5.12.
"Indemnitees" has the meaning set forth in Section 5.12.
"Law" means any past, present or future common law, statute,
ordinance, code, treaty, law, rule, regulation, ordinance, code, plan, permit,
grant, franchise, concession,
28
restriction, agreement, Order, technical or other standard, requirement or
procedure, in each case enacted, adopted, promulgated, applied or followed by
any Governmental Body.
"Material Adverse Effect" means any circumstance or event which is
material and adverse to the financial condition or business operations or
prospects of the Company and its Subsidiaries, taken as a whole.
"Orders" means any and all judgments, writs, injunctions, awards,
decrees, findings, rulings or orders of any Governmental Body.
"Permitted Liens" means (i) liens of carriers, warehousemen, mechanics
and materialmen incurred in the ordinary course of business securing sums not
overdue; (ii) liens incurred in the ordinary course of business in connection
with workmen's compensation, unemployment insurance or other forms of government
insurance or benefits, relating to employees, securing sums (a) not overdue or
(b) being diligently contested in good faith provided that adequate reserves
with respect thereto are maintained on the books of the Company in conformity
with GAAP, (iii) liens for taxes (a) not yet due or (b) being diligently
contested in good faith, provided that adequate reserves with respect thereto
are maintained on the books of the Company in conformity with GAAP.
"Person" means a corporation, a general partnership, a limited
partnership, a limited liability company, a trust, an organization or business,
an association, an individual, a Government Body or any other entity.
"Plan" means any plan subject to Title IV of ERISA and maintained by
the Company or by any of its Subsidiaries, or any such plan to which the Company
or any of its Subsidiaries is required to contribute on behalf of its employees.
"Purchaser" means a person set forth on Schedule 1.2 with respect to
that number of Units set forth opposite his name, and Purchasers means two or
more Purchasers.
"Replacement Warrant" means a warrant of the Company to purchase
shares of Common Stock at an exercise price of $0.03 per share, in the form of
Exhibit B.
"Securities" means the Units and the Conversion Stock.
"Securities Act" means the Securities Act of 1933, or any similar
United States statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Senior Notes" means the promissory notes evidencing the debt of the
Company being converted pursuant to this Agreement. The aggregate principal
amount of the Senior Notes is $2,200,000 and are held by the Purchasers in the
individual amounts set forth on Schedule 1.2.
"Series A Convertible Preferred Stock" means the Series A Convertible
Preferred Stock of the Company to be created upon the filing of the Articles of
Amendment.
29
"Stock Rights" means any rights (either preemptive or otherwise) or
warrants to subscribe for or to purchase, or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, or any capital stock
or other securities convertible into or exchangeable for, any capital stock or
other securities of a given Person.
"Subsidiary" means any corporation or other legal entity 50% or more
of the voting equity of which is owned by the Company or another Subsidiary of
the Company. For these purposes voting equity means the capital stock or other
form of ownership which ordinarily, in the absence of contingencies, entitles
the holder to elect corporate directors or persons performing similar functions.
"Taxes" means any and all taxes, charges, fees, levies or other
similar assessments or liabilities (including, without limitation, income,
receipts, ad valorem, value added, excise, property (whether real property or
personal property), sales, transfer, occupation, service, stamp, use, licensing,
withholding, employment or unemployment, payroll, share, capital, surplus,
profits, franchise, occupational, net worth or other taxes) imposed by any
Governmental Body, whether computed on a separate, consolidated, unitary or
combined basis or in any other manner, and any interest, fines, penalties,
assessments, deficiencies or additions to any such tax.
"Unit" means a unit of securities consisting of one share of Series A
Convertible Preferred Stock and a detachable Replacement Warrant to purchase
33,333 shares of Common Stock at an exercise price of $0.03, issued by the
Company.
30
SCHEDULE 1.2
PURCHASERS
TOTAL DEBT EXISTING NO. OF UNITS
PRINCIPAL AMT INTEREST ON BEING WARRANTS SUBSCRIBED
OF DEBT BEING DEBT BEING EXCHANGED BEING EXCHANGED(1) FOR
PURCHASER EXCHANGED (P) EXCHANGED (I) (P+I=T) (P/.03) (T/$1,000)
▇▇▇▇, ▇.▇. $ 750,000 $ 89,792 $ 839,792 25,000,000 839.792
3900 Thanksgiving Tower
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
▇▇▇▇▇▇▇▇ ENERGY PARTNERS, L.L.C $ 540,000 $ 50,001 $ 590,001 18,000,000 590.001
▇▇▇▇▇▇▇▇ Energy Partners, L.L.C
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 100,000 $ 5,751 $ 105,751 3,333,333 105.751
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, INC. $ 35,000 $ 2,819 $ 37,819 1,166,667 37.819
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
▇▇▇▇▇▇ RIVER CORPORATION $ 55,000 $ 6,551 $ 61,551 1,833,333 61.551
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
31
TOTAL DEBT EXISTING NO. OF UNITS
PRINCIPAL AMT INTEREST ON BEING WARRANTS SUBSCRIBED
OF DEBT BEING DEBT BEING EXCHANGED BEING EXCHANGED(1) FOR
PURCHASER EXCHANGED (P) EXCHANGED (I) (P+I=T) (P/.03) (T/$1,000)
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇ $ 25,000 $ 806 $ 25,806 833,333 25.806
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $ 50,000 $ 1,458 $ 51,458 1,666,667 51.458
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ $ 100,000 $ 1,570 $ 101,570 3,333,333 101.570
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
▇▇▇▇ ▇▇▇▇▇▇▇▇ $ 25,000 $ 625 $ 25,625 833,333 25.625
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $ 20,000 $ 256 $ 20,256 666,667 20.256
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
32
TOTAL DEBT EXISTING NO. OF UNITS
PRINCIPAL AMT INTEREST ON BEING WARRANTS SUBSCRIBED
OF DEBT BEING DEBT BEING EXCHANGED BEING EXCHANGED(1) FOR
PURCHASER EXCHANGED (P) EXCHANGED (I) (P+I=T) (P/.03) (T/$1,000)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. $ 100,000 $ 1,750 $ 101,750 3,333,333 101.750
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
SPRINGFIELD TRADING S. A. $ 100,000 $ 1,639 $ 101,639 3,333,333 101.639
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ $ 50,000 $ 639 $ 50,639 1,666,667 50.639
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
▇▇▇▇▇▇ ▇▇▇▇▇▇ $ 25,000 $ 128 $ 25,128 833,333 25.128
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇'▇▇▇▇▇ $ 25,000 $ 389 $ 25,389 833,333 25.389
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
33
TOTAL DEBT EXISTING NO. OF UNITS
PRINCIPAL AMT INTEREST ON BEING WARRANTS SUBSCRIBED
OF DEBT BEING DEBT BEING EXCHANGED BEING EXCHANGED(1) FOR
PURCHASER EXCHANGED (P) EXCHANGED (I) (P+I=T) (P/.03) (T/$1,000)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ $ 25,000 $ 424 $ 25,424 833,333 25.424
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax:
TIN:
▇▇▇▇▇ FAMILY 1999 PARTNERSHIP LTD $ 25,000 $ 424 $ 25,424 833,333 25.424
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax:
TIN:
NOW VENTURES, LLC $ 50,000 $ 0 $ 50,000 1,666,667 50.000
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
TIN:
▇▇▇ ▇▇▇▇▇ $ 50,000 $ 333 $ 50,333 1,666,667 50.333
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇. ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax:
TIN:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 50,000 $ 417 $ 50,417 1,666,667 50.417
------------ ------------ ------------ ------------ ------------
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
TIN:
TOTAL $ 2,200,000 $ 165,770 $ 2,365,770 73,333,332 2,365.770
(1) Includes the number of shares of Common Stock into which the Senior Notes
held by the respective Purchaser are convertible.
34
SCHEDULE 2.1(a)
ORGANIZATION; GOOD STANDING
The Company was an exchange issuer under the Securities Act (British Columbia)
R.S.B.C. 1996, c.418, (the "Act") until April 21, 1999 when the common shares of
the Company were de-listed from the Vancouver Stock Exchange at the request of
the Company. Due to the fact the Company failed to file certain required
financial records, on November 3, 1999 the British Columbia Securities
Commission (the "BCSC") ordered under section 164(l) of the Act that all trading
in the securities of the Company cease until the requisite records were filed.
Specifically, the Company failed to file:
(a) a comparative financial statement for its financial year ended
February 28, 1999, as required under Section 145 of the Securities
Rules, B.C. Reg. 194/97 (the "Rules");
(b) interim financial statements for the three month period ended May 31,
1999 and for the six month period ended August 31, 1999, as required
under Section 144(l) of the Rules; and
(c) a quarterly report for the period ended February 28, 1999, as required
under Section 152 of the Rules (the "Required Records").
The Required Records were filed on January 28, 2000 and on February 4, 2000 the
BCSC notified the Company's Canadian counsel that the following additional
information was required in order for the Company to bring its filings up to
date:
(a) a reconciliation to Canadian GAAP and/or GAAS per Section 2(2), 2(3)
and 2(4) of the Rules;
(b) breakdowns of certain expenditures per Schedule "B" of Form 61 (see
also Section 3(9) of the Rules)
(i) General & Administration - $735,065.00
(ii) Cost of Sales - $1,149,343.00
(iii) Selling - $1,015,172.00; and
(c) confirmation that revised statements have been distributed to security
holders.
The BCSC also advised that the audit report was still under review by its Chief
Accountant.
On February 18, 2000 the interim financial statements for the third quarter
ending November 30, 1999 were filed with the BCSC.
In addition, comparative financial statements for the financial year ended
February 28, 2000 were due July 18, 2000 and interim financial statements for
the three month period ended May 31, 2000 were due July 30, 2000.
Finally, Flotek failed to file its annual report for 1999 with Alberta Corporate
Registry.
35
SCHEDULE 2.1(b)
STOCK RIGHTS
In addition to the 73,333,332 Existing Warrants being canceled pursuant to this
Agreement, as of April 30, 2000, there are options outstanding to purchase an
aggregate of 5,635,000 shares of Common Stock granted to officers, directors and
employees of the Company. The exercise prices of those options range from
US$0.03 per share to CDN$0.17 per share.
36
SCHEDULE 2.1(c)
CAPITALIZATION OF SUBSIDIARIES
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION AUTHORIZED CAPITAL OUTSTANDING
Turbeco, Inc. Texas 500 shares of common 500 shares of
stock common stock
USA Petrovalve, Inc. Texas 100,000 shares of common 1,000 shares of
stock common stock
Petrovalve International Barbados 1,000,000 shares of 1,000 shares of
(Barbados), Inc. common stock common stock
Petrovalve, Inc. Delaware 1,000,000 shares of 1,000 shares of
common stock common stock
Petrovalve International, Alberta, Canada 20,000 shares each of 7,450 shares of
Inc. Class A voting shares; Class A voting
Class B voting shares; shares
Class B redeemable
preferred stock; and
Class D non-voting shares
37
SCHEDULE 2.2
STATUS OF SUBSIDIARIES
Petrovalve International, Inc. ("PII") has not filed all of the reports
required to be filed by it under the Alberta Business Corporations Act and has
been involuntarily dissolved/stricken off by the Alberta authorities. The
Company has been informed that once such filings have been brought up to date,
the existence of PII may be reinstated. The Company intends to diligently pursue
such steps as are required to reinstate PII.
38
SCHEDULE 2.5
COMPLIANCE WITH LAWS, ETC.
NONE
39
SCHEDULE 2.9
DEBTS; LIENS
1. The Senior Notes, described on Schedule 1.2. The Senior Notes are secured
by substantially all of the assets of the Company.
2. Capital Leases:
Newcourt Lease equipment (1 year)
▇▇▇▇▇▇ River computer lease (2 years)
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 3 autos (36 months)
▇▇▇▇▇▇ River machinery, ▇▇▇▇▇, TX
Copelco Lease, Printer/copier
Mellon Lease, forklift, Lafayette
3. Property Mortgage in Mason, Texas in the original principal amount of
$135,000; current principal balance is $111,337.95.
4. Ford Motor Credit, purchase of 2 vehicles
