exv10w3



 





Exhibit 10.3




REVOLVING LINE OF CREDIT PROMISSORY NOTE




			
	 	 	 
	$40,000,000.00
	 	October 15, 2006






     FOR VALUE RECEIVED, in the manner, on the dates and in the amounts herein stipulated, NATURAL
GAS SERVICES GROUP, INC., a Colorado corporation (“Borrower”), hereby promises and agrees
to pay to the order of WESTERN NATIONAL BANK, a national banking association (“Lender”), in
Midland, Midland County, Texas, the principal sum of FORTY MILLION AND NO/100 DOLLARS
($40,000,000.00) (the “Total Principal Amount”), or such amount less than the Total
Principal Amount which is outstanding from time to time if the total amount outstanding under this
Promissory Note (this “Note”) is less than the Total Principal Amount, together with
interest at the rate of Seven and one-half percent (7.50%) per annum on such portion of the Total
Principal Amount which has been advanced to Borrower from the date advanced until paid as
hereinafter provided. Interest on the indebtedness evidenced by this Note shall be calculated on
the basis of a three hundred sixty (360) day year.



     This Note is given in renewal, extension and modification, but not in extinguishment, of that
certain Revolving Line of Credit Promissory Note dated January 3, 2006, in the original principal
amount of $2,000,000.00, as modified effective March 24, 2006, and further modified on August 28,
2006, which note was given in renewal, extension and modification, but not in extinguishment, of
that certain Revolving Line of Credit Promissory Note dated January 3, 2005, in the original
principal amount of $2,000,000.00, as modified effective May 1, 2005, which note was given in
renewal, extension and modification, but not extinguishment, of that certain Revolving Line of
Credit Promissory Note, dated May 28, 2004, in the original principal amount of $750,000.00, which
note was given in renewal, extension and modification, but not in extinguishment, of that certain
Revolving Line of Credit Promissory Note dated March 26, 2003, as modified effective March 15,
2004, by and between Borrower and Lender, and is the Revolving Line of Credit Promissory Note
referred to in the Second Amended and Restated Loan Agreement, dated as of November 3, 2003, as
subsequently amended and restated from time to time (the “Prior Loan Agreements”). This Note is
made pursuant to that certain Seventh Amended and Restated Loan Agreement, as the same may be
amended, supplemented or otherwise modified from time to time (the “Loan Agreement”), by
and among Borrower, the Guarantor, and the Lender, and is subject to the terms and conditions
thereof. Reference is made to the Loan Agreement for provisions for the disbursement of funds
hereunder and for a further statement of the rights, remedies, powers, privileges, benefits, duties
and obligations of Borrower and Lender under the Loan Agreement and this Note. Terms used herein
which are defined in the Loan Agreement shall have such defined meanings unless otherwise defined
herein. The holder of this Note shall be entitled to the benefits of the Loan Agreement.



     Advances and Subsequent Advances under this Note shall be made in accordance with the
provisions of the Loan Agreement. Subject to the terms hereof and of the Loan Agreement, Borrower
may borrow, repay and reborrow at any time and from time to time under this Note; provided,
however, that the principal sum outstanding hereunder at any one time shall never



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exceed the lesser of (i) $40,000,000.00 or (ii) the amount available for advance under this Note
calculated in accordance with the terms of the Loan Agreement.



     Interest on the outstanding principal balance of this Note shall be due and payable monthly on
the first (1stth) day of each month, commencing November 1, 2006. The then outstanding
principal balance of this Note and all accrued and unpaid interest shall be due and payable on
October 1, 2008. All of the past due principal and accrued interest hereunder shall, at the option
of Lender, bear interest from maturity (stated or by acceleration) until paid at a rate per annum
equal to the Highest Lawful Rate. The interest rate on this Note is a fixed rate until maturity.
Any adjustment downward as a result of Borrower’s request or otherwise is subject to an adjustment
fee.



     This Note is secured as provided in the Loan Agreement and in the other Loan Papers, to which
reference is hereby made for a description of the properties and assets in which a lien and
security interest has been granted, the nature and extent of the security, the terms and conditions
upon which the liens and security interests were granted and the rights of the holder of this Note
with respect thereto.



     Time is of the essence of this Note. Upon the occurrence of any one or more of the Events of
Default specified in the Loan Agreement (after expiration of any applicable notice and cure
periods), all amounts then remaining unpaid on (a) this Note and (b) the Multiple Advance Term Note
dated October 15, 2006, from Borrower to Lender in the original principal amount of $16,891,105.87,
shall become, or may be declared to be, immediately due and payable, all as provided therein.



     Upon the occurrence and during the continuance of any Event of Default, or if Borrower or
Guarantor become insolvent, however evidenced, Lender is hereby authorized at any time and from
time to time, without prior notice to Borrower or Guarantor, to setoff and apply any and all
deposits (general or special, time or demand, provisional or final) at any time held or other
indebtedness at any time owing by Lender to or for the credit or the account of Borrower or
Guarantor against any and all of the Obligations, irrespective of whether or not Lender shall have
made any demand under the Loan Agreement or this Note and although such Obligations may be
unmatured. Lender agrees promptly to notify Borrower or Guarantor after any such setoff and
application, provided that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of Lender under this paragraph are in addition to other rights
and remedies (including, without limitation, other rights of setoff) which Lender may have.



     Borrower and any and all co-makers, endorsers, guarantors and sureties severally waive notice
(including, but not limited to, notice of protest, notice of dishonor, notice of intent to
accelerate and notice of acceleration), demand, presentment for payment, protest, diligence in
collecting or bringing suit and the filing of suit for the purpose of fixing liability, and consent
that the time of payment hereof may be extended and re-extended from time to time without notice to
them or any of them, and each agrees that



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his, her or its liability on or with respect to this Note shall not be affected, diminished or
impaired by any (a) release of any security at any time existing for this Note, (b) substitution
for any security at any time existing for this Note, or (c) failure to perfect (or to maintain
perfection of) any lien on or security interest in any such security, in each case in whole or in
part, with or without notice, before or after maturity.



     It is the intention of Borrower and Lender that Lender shall conform strictly to usury laws
applicable to it. Accordingly, if the transactions contemplated by the Loan Agreement and this
Note would be usurious as to Lender under laws applicable to it (including the laws of the United
States of America and the State of Texas or any other jurisdiction whose laws may be mandatorily
applicable to Lender notwithstanding the other provisions of the Loan Agreement and this Note),
then, in that event, notwithstanding anything to the contrary in this Note, the Loan Agreement or
any other Loan Paper or other agreement entered into in connection with or as security for this
Note, (i) the aggregate of all consideration which is contracted for, taken, reserved, charged or
received by Lender under this Note, the Loan Agreement or any other Loan Paper or agreement entered
into in connection with or as security for this Note shall under no circumstances exceed the
maximum amount allowed by such applicable law, and any excess shall be credited by Lender on the
principal amount of the Obligations to Lender (or, to the extent that the principal amount of the
Obligations shall have been or would thereby be paid in full, refunded by Lender to the Borrower);
and (ii) in the event that the maturity of this Note is accelerated by reason of an Event of
Default under the Loan Agreement or otherwise, or in the event of any prepayment, then such
consideration that constitutes interest under law applicable to Lender may never include more than
the maximum amount allowed by such applicable law, and excess interest, if any, provided for in
this Note, the Loan Agreement or otherwise shall be cancelled automatically by Lender as of the
date of such acceleration or prepayment and, if theretofore paid, shall be credited by Lender on
the principal amount of the Obligations (or, to the extent that the principal amount of such
Obligations shall have been or would thereby be paid in full, refunded by Lender to the Borrower).



     To the extent that Texas Finance Code Section 303.002 is relevant to Lender for the purposes
of determining the Highest Lawful Rate, the applicable rate ceiling under such provisions shall be
determined by the indicated (weekly) rate ceiling from time to time in effect, subject to Lender’s
right subsequently to change such method in accordance with applicable law. Notwithstanding
anything to the contrary contained herein or in any of the other Loan Papers, it is not the
intention of the Lender to accelerate the maturity of any interest that has not accrued at the time
of such acceleration or to collect unearned interest at the time of such acceleration.



     THIS NOTE HAS BEEN EXECUTED UNDER, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS, EXCEPT AS SUCH LAWS ARE PREEMPTED BY APPLICABLE FEDERAL LAWS. THIS
NOTE HAS BEEN ENTERED INTO IN MIDLAND COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR ALL PURPOSES
IN MIDLAND



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COUNTY, TEXAS. COURTS WITHIN THE STATE OF TEXAS SHALL HAVE JURISDICTION OVER ANY AND ALL DISPUTES
BETWEEN BORROWER AND LENDER, WHETHER AT LAW OR IN EQUITY, AND VENUE IN ANY SUCH DISPUTE, WHETHER IN
FEDERAL OR STATE COURTS, SHALL BE LAID IN MIDLAND COUNTY, TEXAS. BORROWER HEREBY CONSENTS TO
PERSONAL JURISDICTION IN MIDLAND COUNTY, TEXAS AND WAIVES ANY RIGHTS IT MAY HAVE TO BE SUED
ELSEWHERE.



     BORROWER AND THE HOLDER OF THIS NOTE (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG BORROWER AND SUCH HOLDER ARISING
OUT OF OR IN ANY WAY RELATED TO THIS NOTE, AND OTHER LOAN DOCUMENT OR ANY RELATIONSHIP BETWEEN
HOLDER AND BORROWER RELATED TO THE LOAN EVIDENCED BY THE LOAN DOCUMENTS. THIS PROVISION IS A
MATERIAL INDUCEMENT TO THE HOLDER OF THIS NOTE TO PROVIDE THE FINANCING DESCRIBED HEREIN AND IN THE
OTHER LOAN DOCUMENTS.



     THIS NOTE, THE LOAN AGREEMENT, AND THE OTHER LOAN PAPERS REPRESENT THE ENTIRE AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE
PARTIES.



	 	 	 	 	 
	 	NATURAL GAS SERVICES GROUP, INC.

 	 
	 	By:  	     /s/ Stephen C. Taylor
 	 
	 	 	     Stephen C. Taylor, President 	 
	 	 	 	 
	 




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