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REGISTRATION RIGHTS AGREEMENT
By and Among
THE PRINCIPAL SHAREHOLDERS (DEFINED HEREIN)
and
FLOTEK INDUSTRIES INC.
Common Stock, no par value
Dated as of April 30, 2000
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TABLE OF CONTENTS
<TABLE>
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Page
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1. Registration under Securities Act, Etc 1
1.1 Registration on Request 1
1.2 Piggy-Back Registration 3
1.3 Registration Procedures 4
1.4 Underwritten Offerings 6
1.5 Preparation; Reasonable Investigation 7
1.6 Qualification to Obligations under Registration Covenants 7
1.7 Indemnification 8
2. Definitions 11
3. Rule 144 and Rule 144A 12
4. Amendments and Waivers 12
5. Nominees for Beneficial Owners 12
6. Notices 13
7. Assignment 13
8. Calculation of Percentage Interests in Registrable Securities 13
9. No Inconsistent Agreements 13
10. Remedies 13
11. Severability 13
12. Entire Agreement 14
13. Descriptive Headings 14
14. Governing Law 14
15. Counterparts; Partial Execution 14
16. Term 14
17. Supersession of Existing Registration Rights Agreements 14
</TABLE>
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REGISTRATION RIGHTS AGREEMENT, dated as of April 30, 2000, between Flotek
Industries Inc, an Alberta corporation (the "Company"), and each of the parties
identified on Schedule A hereto (the "Principal Stockholders").
Capitalized terms used herein but not otherwise defined shall have the
meanings given them in Section 2. All Dollar amounts referred to herein are US
Dollars, unless otherwise noted.
1. Registration under Securities Act, Etc.
1.1 Registration on Request.
(a) Request. At any time, or from time to time, upon the written
request of one or more of the Principal Shareholders holding 25% or more of the
Registrable Securities (the "Initiating Holders") that the Company either, as
directed by the Initiating Holders, (i) effect the registration under the
Securities Act or (ii) file a prospectus (which for the purposes of this
agreement shall include a statement of material facts or short form prospectus)
for the purpose of qualifying for distribution in British Columbia or Ontario
pursuant to Applicable Canadian Securities Laws (any such registration or
prospectus filing being hereinafter referred to as a "registration," and any
such registration statement or prospectus being hereinafter referred to as a
"registration statement") of all or part of such Initiating Holders' Registrable
Securities, the Company promptly will give written notice of such requested
registration to all of the other Principal Shareholders, and thereupon the
Company will use reasonable efforts to effect, at the earliest possible date,
the registration under the Securities Act or the Applicable Canadian Securities
Laws, as directed by the Initiating Holders in their request, of (i) the
Registrable Securities which the Company has been so requested to register by
such Initiating Holders, and (ii) all other Registrable Securities which the
Company has been requested to register by the other Principal Shareholders (such
holders together with the Initiating Holders hereinafter are referred to as the
"Selling Holders") by written request given to the Company within 30 days after
the giving of such written notice by the Company, all to the extent requisite to
permit the disposition of the Registrable Securities so to be registered.
(b) Registration of Other Securities. Whenever the Company shall
effect a registration pursuant to this Section 1.1, no securities other than
Registrable Securities held by Principal Shareholders shall be included among
the securities covered by such registration unless Selling Holders of greater
than 51% of the Registrable Securities to be included in such registration shall
have consented in writing to the inclusion of such other securities, which
consent shall not be unreasonably withheld or delayed, provided, however, that
no such other securities shall be included in such registration to the extent
that such inclusion would reduce the number of Registrable Securities in such
registration that any Selling Holder has requested be included therein.
(c) Registration Statement Form. Registrations under this Section
1.1 shall be on such appropriate registration form of the Commission or the form
required under Applicable Canadian Securities Laws, as the case may be, as shall
be reasonably selected by the Company.
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(d) Effective Registration Statement. A registration requested
pursuant to this Section 1.1 shall not be deemed to have been effected unless a
registration statement with respect thereto has become effective and remained
effective in compliance with the provisions of the Securities Act or Applicable
Canadian Securities Laws, as the case may be, with respect to the disposition of
all Registrable Securities covered by such registration statement for a period
of at least 90 days.
(e) Selection of Underwriters. The underwriter or underwriters of
each underwritten offering of the Registrable Securities so to be registered
shall be selected by the Selling Holders of at least 50% of the Registrable
Securities to be included in such registration and shall be reasonably
acceptable to the Company.
(f) Priority in Requested Registration. If the managing
underwriter of an underwritten offering shall advise the Company in writing (and
the Company shall so advise each Selling Holder of Registrable Securities
requesting registration of such advice) that, in its opinion, the number of
securities requested to be included in such registration is sufficiently large
to materially adversely affect the success of the offering, the Company, except
as provided in the following sentence, will include in such registration, to the
extent of the number and type which the Company is so advised can be sold in
such offering, Registrable Securities requested to be included in such
registration on the following basis:
(i) first, pro rata among the Initiating Holders; and
(ii) second, pro rata among the other Selling Holders.
As used herein, the term "pro rata" among a particular group of shareholders
shall mean allocated among such shareholders proportionally, on the basis of the
number of Registrable Securities held by each shareholder in such group as
compared to the total number of Registrable Securities held by all shareholders
in such group. To the extent that all of the Registrable Securities of Selling
Holders so requested to be registered are excluded from the offering, the
holders of such Registrable Securities shall be deemed not to have used a demand
registration pursuant to this Section 1.1.
(g) Limitations on Registration on Request. Notwithstanding
anything in this Section 1.1 to the contrary, the Company shall not be required
to take any action to file a registration statement pursuant to this Section
1.1:
(i) within 120 days following the effective date of any registered
offering of the Company's securities;
(ii) with respect to any offering having an aggregate sales price
(before deduction of underwriting discounts and expenses of sale) of less
than $500,000;
(iii) with respect to any offering having an aggregate sales price
(before deduction of underwriting discounts and expenses of sale) of more
than $10,000,000 unless such offering is firmly underwritten; or
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(iv) after (A) the Principal Shareholders collectively hold fewer than
100,000 shares of Registrable Securities, or (B) the expiration of the term
of this Agreement.
(h) Expenses. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 1.1.
1.2 Piggy-Back Registration .
(a) Right to Include Registrable Securities. If the Company at any time
proposes to file a registration statement to register any of its securities of
the same class as the Registrable Securities under the Securities Act or the
Applicable Canadian Securities Laws (except for a registration statement or
prospectus filed in connection with an employee benefit plan, a transaction
relating to a merger or business combination, a transaction relating to an
exchange offer, a transaction relating to an acquisition of assets or
securities, or a transaction otherwise described in Rule 145 of the Securities
Act), whether or not for sale for its own account, it will each such time give
prompt written notice to all holders of Registrable Securities of its intention
to do so and of such holders' rights under this Section 1.2. Upon the written
request of any such holder (a "Requesting Holder") (which request shall specify
the amount of Registrable Securities intended to be disposed of by such
Requesting Holder) made as promptly as practicable and in any event within 20
days after the receipt of any such notice (15 days if the Company states in such
written notice or gives telephonic notice to all registered holders of
Registrable Securities, with written confirmation to follow promptly thereafter,
stating that (i) such registration will be on Form S-3 and (ii) such shorter
period of time is required because of a planned filing date), the Company will
use reasonable efforts to effect the registration or file the prospectus under
the Securities Act or the Applicable Canadian Securities Laws, as the case may
be, of all Registrable Securities which the Company has been so requested to
register by the Requesting Holders thereof. No registration effected under this
Section 1.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 1.1.
(b) Priority in Incidental Registrations. If the managing underwriter
of any underwritten offering shall deliver a written opinion to the holders of
Registrable Securities that the total amount of Registrable Securities requested
to be included in such registration would have a material adverse effect on such
offering then the Company will include in such registration, to the extent of
the number which the Company is so advised can be sold in (or during the time
of) such offering, first, all securities proposed by the Company to be sold for
its own account, and second, such Registrable Securities requested to be
included in such registration pursuant to this Agreement, pro rata among
Requesting Holders; provided that if securities are being offered for the
account of other persons or entities as well as the Company, such reduction
shall not represent a greater fraction of the number of securities intended to
be offered by holders of Registrable Securities than the fraction of similar
reductions imposed on such other persons or entities over the amount of
securities they intended to offer.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration effected pursuant to this Section 1.2.
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1.3 Registration Procedures . If and whenever the Company is required to
effect the registration of any Registrable Securities under the Securities Act
or the Applicable Canadian Securities Laws as provided in Sections 1.1 and 1.2.
the Company will, as expeditiously as possible, use reasonable efforts to:
(i) prepare and (within 120 days after the end of the period within
which requests for registration may be given to the Company or in any event
as soon thereafter as practicable) file with the Commission or the Canadian
Securities Regulators the requisite registration statement to effect such
registration and thereafter use reasonable efforts to cause such
registration statement to become effective;
(ii) prepare and file with the Commission or the Canadian Securities
Regulators such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the provisions of
the Securities Act or the Applicable Canadian Securities Laws, as the case
may be, with respect to the disposition of all Registrable Securities
covered by such registration statement for a period of at least 90 days;
(iii) furnish to each seller of Registrable Securities covered by such
registration statement, such number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act or the Applicable Canadian Securities
Laws, as the case may be, and such other documents, as such seller may
reasonably request;
(iv) register or qualify all Registrable Securities and other
securities covered by any registration statement under the Securities Act,
under Applicable Canadian Securities Laws, under such other securities or
blue sky laws of such States of the United States of America where an
exemption is not available and as the sellers of Registrable Securities
covered by such registration statement shall reasonably request; keep such
registration or qualification in effect for so long as such registration
statement remains in effect; and take any other action which may be
reasonably necessary or advisable to enable such sellers to consummate the
disposition in such jurisdictions of the securities to be sold by such
sellers, except that (x) the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to general
service of process in any such jurisdiction and (y) the Company shall not
be required to register or qualify Registrable Securities in any state or
province where such qualification or registration would place an undue
burden on the Company or which would require that the Company consent
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or agree to restrictions, covenants, or qualifications which the Company
deems unacceptable;
(v) cause all Registrable Securities covered by such registration
statement to be registered with or approved by such other federal,
provincial or state governmental agencies or authorities as may be
necessary in the opinion of counsel to the Company and counsel to the
underwriters to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) furnish at the effective date of such registration statement and,
if applicable, the date of the closing under the underwriting agreement, to
each seller of Registrable Securities, and each such seller's underwriters,
a signed counterpart of (x) an opinion of counsel for the Company, dated
the effective date of such registration statement and (y) a "comfort"
letter signed by the independent public accountants who have certified the
Company's financial statements included or incorporated by reference in
such registration statement, covering substantially the same matters with
respect to such registration statement (and the prospectus included
therein) and, in the case of the accountants' comfort letter, with respect
to events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
comfort letters delivered to the underwriters in underwritten public
offerings of securities and, in the case of the accountants' comfort
letter, such other financial matters, and, in the case of the legal
opinion, such other legal matters, as the sellers of the Registrable
Securities covered by such registration statement, or the underwriters, may
reasonably request;
(vii) notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act or the Applicable
Canadian Securities Laws, upon discovery that, or upon the happening of any
event as a result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, in the light of
the circumstances under which they were made, and at the request of any
such seller promptly prepare and furnish to it a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(viii) otherwise comply with all applicable rules and regulations of
the Commission and the Canadian Securities Regulators, and, if required,
make available to its security holders, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months, but
not more than eighteen months, beginning with the first full calendar month
after the effective date of such registration statement, which earnings
statement shall satisfy the
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provisions of Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder, and promptly furnish to each such seller of Registrable
Securities a copy of any amendment or supplement to such registration
statement or prospectus;
(ix) keep each Selling Holder and each Requesting Holder advised in
writing as to the initiation and progress of any registration under Section
1.1 or 1.2 hereunder, as the case may be;
(x) provide and cause to be maintained a transfer agent and registrar
(which, in each case, may be the Company) for all Registrable Securities
covered by such registration statement from and after a date not later than
the effective date of such registration; and
(xi) list all Registrable Securities covered by such registration
statement on any securities exchange on which Registrable Securities of the
same class and, if applicable, series, covered by such registration
statement are then listed or on the Nasdaq Stock Market ("Nasdaq") if the
Registrable Securities are reported on Nasdaq.
The Company may require each seller of Registrable Securities, as to which any
registration is being effected, to furnish the Company such information
regarding such seller and the distribution of such securities, as required by
law or the Commission or the Canadian Securities Regulators, or which the
Company's counsel otherwise deems appropriate.
Each holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
subdivision (vii) of this Section 1.3 , such holder will forthwith discontinue
such holder's disposition of Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until such holder's receipt of
the copies of the supplemented or amended prospectus contemplated by subdivision
(vii) of this Section 1.3 and, if so directed by the Company, will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, then in such holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice.
1.4 Underwritten Offerings .
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 1.1, the Company will use all
reasonable efforts to enter into an underwriting agreement with such
underwriters for such offering, such agreement to be reasonably satisfactory in
substance and form to each such holder and the underwriters and to contain such
representations and warranties by the Company and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
indemnities to the effect and to the extent provided in Section 1.7. The holders
of the Registrable Securities proposed to be sold by such underwriters will
reasonably cooperate with the Company in the negotiation of the underwriting
agreement. Such holders of Registrable Securities to be sold by
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such underwriters shall be parties to such underwriting agreement and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any such
holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution or any other representations required by applicable law.
(b) Incidental Underwritten Offerings. If the Company proposes to
register any of its securities under the Securities Act or the Applicable
Canadian Securities Laws as contemplated by Section 1.2 and such securities are
to be distributed by or through one or more underwriters, the Company will, if
requested by any Requesting Holder of Registrable Securities, use reasonable
efforts to arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such Requesting Holder among the securities
of the Company to be distributed by such underwriters. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any such
Requesting Holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Requesting Holder, such Requesting Holder's Registrable Securities and such
Requesting Holder's intended method of distribution or any other representations
required by applicable law.
1.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
or the Applicable Canadian Securities Laws pursuant to this Agreement, the
Company (i) shall give the holders of Registrable Securities registered under
such registration statement, their underwriters, if any, and their respective
counsel and accountants the reasonable opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission or the Canadian Securities Regulators, and each
amendment thereof or supplement thereto, and (ii) shall promptly notify the
registered holders of Registrable Securities and their counsel of any stop order
issued or threatened by the Commission or any Canadian Securities Regulators and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
1.6 Qualification to Obligations under Registration Covenants . The Company
shall be entitled to postpone for a reasonable period of time (but not exceeding
120 days) the filing of any registration statement otherwise required to be
prepared and filed by it pursuant to Section 1.1 if (i) the Company determines,
in its reasonable judgment, that such registration and offering would interfere
with any financing, acquisition, corporate reorganization or other
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material transaction involving the Company or any of its affiliates or (ii) the
Company is in possession of information concerning it or its business and
affairs, the public disclosure of which would have a material adverse effect on
the Company and which the Company has determined it is not legally obligated to
disclose, and the Company promptly gives the holders of Registrable Securities
requesting registration thereof pursuant to Section 1.1 written notice of such
determination, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay. If the Company shall
so postpone the filing of a registration statement, Initiating Holders
requesting registration thereof pursuant to Section 1.1 shall have the right to
withdraw the request for registration by giving written notice to the Company
within 30 days after receipt of the notice of postponement and, in the event of
such withdrawal, such request shall not be counted for purposes of the requests
for registration to which holders of Registrable Securities are entitled
pursuant to Section 1.1 hereof.
1.7 Indemnification.
(a) Indemnification by the Company. The Company will, and hereby does,
indemnify and hold harmless, in the case of any registration statement filed
pursuant to Section 1.1 or 1.2, each seller of any Registrable Securities
covered by such registration statement and each other Person who participates as
an underwriter in the offering or sale of such securities and each other Person,
if any, who controls such seller or any such underwriter within the meaning of
the Securities Act or the Applicable Canadian Securities Laws, and their
respective directors, officers, partners, employees and affiliates against any
losses, claims, damages or liabilities, joint or several, to which such seller
or underwriter or any such director, officer, partner, employee, affiliate or
controlling person may become subject under the Securities Act or the Applicable
Canadian Securities Laws or otherwise, including, without limitation, the
reasonable fees and expenses of legal counsel, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act or the Applicable Canadian Securities Laws, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, and the Company will reimburse such seller or underwriter and each
such director, officer, partner, employee, affiliate and controlling Person for
any legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such seller or underwriter, as the case may be,
specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer, employee,
affiliate, partner or controlling person and shall survive the transfer of such
securities by such seller.
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(b) Indemnification by the Sellers. As a condition to including any
Registrable Securities in any registration statement, the Company shall have
received an undertaking satisfactory to it from the prospective seller of such
Registrable Securities, to indemnify and hold harmless the Company, and each
director of the Company, each officer of the Company and each other Person, if
any, who participates as an underwriter in the offering or sale of such
securities and each other Person who controls the Company or any such
underwriter within the meaning of the Securities Act or the Applicable Canadian
Securities Laws, and their respective directors, officers, partners, employees
and affiliates, against any losses, claims, damages or liabilities, joint or
several, to which such person may become subject under the Securities Act or the
Applicable Canadian Securities Laws or otherwise, including, without limitation,
the reasonable fees and expenses of legal counsel, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act or the Applicable Canadian Securities Laws, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, and to reimburse such person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; but only to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such seller, specifically stating that it is for use
in the preparation thereof; provided, however, that the liability of such
indemnifying party under this Section 1.7(b) shall be limited to the amount of
proceeds received by such indemnifying party in the offering giving rise to such
liability. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller.
(c) Notices of Claims, etc. Within ten days of receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 1.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 1.7, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof,
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provided, however, that if the indemnified party reasonably believes it is
advisable for it to be represented by separate counsel because there exists a
conflict of interest between its interests and those of the indemnifying party
with respect to such claim, or there exist defenses available to such
indemnified party which may not be available to the indemnifying party, or if
the indemnifying party shall fail to assume responsibility for such defense, the
indemnified party may retain counsel satisfactory to it and the indemnifying
party shall pay all reasonable fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement of any action or
proceeding effected without its written consent. No indemnifying party shall,
without the consent of the indemnified party, consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation or which
requires action by the indemnified party.
(d) Contribution. If the indemnification provided for in this Section
1.7 shall for any reason be held by a court to be unavailable to an indemnified
party under subparagraph (a) or (b) hereof in respect of any loss, claim, damage
or liability, or any action in respect thereof, then, in lieu of the amount paid
or payable under subparagraph (a) or (b) hereof, the indemnified party and the
indemnifying party under subparagraph (a) or (b) hereof shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of the Company
and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company and such prospective sellers from the offering of the securities
covered by such registration statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Such prospective sellers' obligations to
contribute as provided in this subparagraph (d) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld or delayed.
(e) Other Indemnification. Indemnification and contribution similar to
that specified in the preceding subdivisions of this Section 1.7 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or provincial law or
any regulation of any governmental authority other than the Securities Act or
the Applicable Canadian Securities Laws.
(f) Indemnification Payments. The indemnification and contribution
required by this Section 1.7 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
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<PAGE> 13
2. Definitions. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
"Affiliate" means, with respect to any person, any other person that
directly or indirectly controls or is controlled by or is under common control
with such person.
"Applicable Canadian Securities Laws" means the securities acts or similar
statutes in effect in each of British Columbia and Ontario, Canada, and having
application to the Company or any transaction or proposed transaction to which
the Company is a party, as they may be amended or replaced from time to time,
and includes the regulations and rules promulgated thereunder, and further
includes all policies, rules and mandatory guidelines imposed by The Vancouver
Stock Exchange, The Toronto Stock Exchange or any other securities exchange on
which the securities of the Company are, at any relevant time, posted for
trading.
"Canadian Securities Regulators" means the Securities Commissions or
similar regulatory authorities having jurisdiction in each of British Columbia
and Ontario, Canada, and further includes The Vancouver Stock Exchange, The
Toronto Stock Exchange or any other securities exchange on which the securities
of the Company are, at any relevant time, posted for trading.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of any such similar
federal statute.
"Initiating Holder" is defined in Section 1.1.
"Person" means any individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
"Registrable Securities" means (i) the shares of Common Stock owned on the
date hereof by the parties hereto or issued or issuable to the parties hereto
pursuant to the exercise of options (whether or not presently or then
exercisable) or warrants or the conversion of convertible securities owned by
them, or which they have the right to acquire pursuant to that certain
Securities Purchase and Exchange Agreement of even date herewith, on the date
hereof, and (ii) any Related Registrable Securities. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (a) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act or the Applicable Canadian
Securities Laws and such securities shall have been disposed of in accordance
with such registration statement, (b) they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, (c) they shall have been otherwise
11
<PAGE> 14
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent public
distribution of them shall not require registration of them under the Securities
Act, or (d) they shall have ceased to be outstanding. All references to
percentages of Registrable Securities shall be calculated pursuant to Section 8.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 1, including, without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of "cold comfort" letters required by or incident to such performance
and compliance, and any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities (excluding any underwriting discounts or
commissions with respect to the Registrable Securities or any other fee measured
by the number or amount of Registrable Securities).
"Related Registrable Securities" means any securities of the Company issued
or issuable with respect to the securities by way of a dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise.
"Requesting Holder" is defined in Section 1.2.
"Securities Act" means the Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time. References to a particular section of the
Securities Act of 1933 shall include a reference to the comparable section, if
any, of any such similar statute.
"Selling Holder" is defined in Section 1.1.
3. Rule 144 and Rule 144A. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with the requirements of Rules 144 or 144A under the
Securities Act.
4. Amendments and Waivers. This Agreement may be amended with the written
consent of the Company and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of each holder or holders of the Registrable Securities
affected by such amendment, action or omission to act.
5. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by any holder or holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities
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<PAGE> 15
so elects, the Company may require assurances and evidence reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
6. Notices. All notices, demands and other communications to any party
hereto provided for or permitted hereunder shall be made in writing and shall be
by registered or certified first-class mail, return receipt requested, telex,
telegram, telecopier, reputable courier service or personal delivery, addressed
to it in the manner set forth on the signature page hereto, or at such other
address as it shall have furnished to the other parties hereto in writing. All
such notices and communications shall be deemed to have been duly given: when
delivered by hand, if personally delivered; one business day after being sent by
reputable courier service; three business days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; and when
receipt is acknowledged, if telecopied.
7. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and, with respect to the
Company, its respective successors and assigns and, with respect to each other
party hereto, any holder who is an affiliate or successor entity to such party
or a transferee therefrom of any Registrable Securities, subject to the
provisions respecting the minimum numbers of percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein. The parties hereto, other than the
Company (and not any other holder of Registrable Securities or any other
Person), shall be permitted, in connection with a transfer or disposition of
Registrable Securities, to eliminate or impose conditions or constraints on the
ability of the transferee, as a holder of Registrable Securities, to request a
registration pursuant to Sections 1.1 and 1.2 and shall provide the Company with
copies of such conditions or constraints and the identity of such transferees.
8. Calculation of Percentage Interests in Registrable Securities. For
purposes of this Agreement, all references to a percentage of the Registrable
Securities shall be calculated based upon the number of shares of Registrable
Securities outstanding or issuable pursuant to outstanding options (whether or
not presently or then exercisable), warrants or convertible securities at the
time such calculation is made.
9. No Inconsistent Agreements. The Company will not hereafter enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
10. Remedies. Each party hereto and each holder of Registrable securities
is entitled to exercise all rights granted by law, including recovery of
damages; such rights not to extend to incidental or consequential damages.
11. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the
Purchaser shall be enforceable to the fullest extent permitted by law.
13
<PAGE> 16
12. Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement supersedes all prior agreements and understandings
between the Company and any of the Principal Stockholders with respect to the
registration of any Company securities under applicable securities laws.
13. Descriptive Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
14. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Texas applicable to agreements made and to be performed entirely
within such State.
15. Counterparts; Partial Execution. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument. This
Agreement shall be fully enforceable against the Company by any Principal
Shareholder who is a signatory hereto regardless of whether any other Principal
Shareholder is also a signatory hereto.
16. Term. This Agreement shall be effective for the period commencing on
the date hereof and expiring on the date six years from the date hereof.
17. Supersession of Existing Registration Rights Agreements. This Agreement
supersedes in their entirety any and all currently existing agreements between
the Company and any of the Principal Stockholders with respect to the
registration of any Company securities under applicable securities laws.
[The remainder of this page has intentionally been left blank]
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<PAGE> 17
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.
FLOTEK INDUSTRIES, INC.
By:
-----------------------------------------
Jerry D. Dumas, Sr., President and CEO
TOSI, L.P.
By: Pitman Property Corp., a Texas
corporation, General Partner
By:
-------------------------------------
J. W. Beavers, Jr., President
CHISHOLM ENERGY PARTNERS, L.L.C.
By:
-----------------------------------------
John W. Chisholm, Managing Director
-----------------------------------------
William R. Ziegler, an individual
-----------------------------------------
Thomas H. O'Neill, Jr., an individual
-----------------------------------------
James Wadsworth, an individual
<PAGE> 18
-----------------------------------------
Oliver W. Robertson, an individual
-----------------------------------------
Paul Atanasio, an individual
-----------------------------------------
Charles E. Murphy, an individual
-----------------------------------------
John Dalrymple, an individual
Springfield Trading S.A.
By
---------------------------------------
Name:
Title:
-----------------------------------------
Jeffrey R. Freedman, an individual
-----------------------------------------
Arvind Sanger, an individual
-----------------------------------------
Nancy Naples O'Neill, an individual
<PAGE> 19
-----------------------------------------
Richard H. Jukes, an individual
SMITH FAMILY 1999 PARTNERSHIP
LTD
By:
--------------------------------------
James H. Smith, Co-Trustee
By:
--------------------------------------
Joyce B. Smith, Co-Trustee
HINCKLEY BROOK, INC.
By:
--------------------------------------
Jerry Dumas, President
SAXTON RIVER CORPORATION
By:
--------------------------------------
Jerry Dumas, President
NOW Ventures, LLC
By:
--------------------------------------
Thomas H. O'Neill, Jr., Managing
Member
--------------------------------------
[Tom Bandy], an individual
<PAGE> 20
--------------------------------------
Steven A. Webster, an individual
--------------------------------------
Marlin Investors, L.L.C.
By
--------------------------------------
William R. Ziegler, Managing Member
-----------------------------------------
Charles A. Dickinson, Jr.
