-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PHIOEboQ1TivjI5CajhWYiSull9nEeWVLtE5ja5iTDOdy1QXKhTNckPg9uHhFU5P KxF3ZyVhxsfR5p9l/WBojg== /in/edgar/work/0000950134-00-008587/0000950134-00-008587.txt : 20001013 0000950134-00-008587.hdr.sgml : 20001013 ACCESSION NUMBER: 0000950134-00-008587 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20001012 GROUP MEMBERS: DAVID S HUNT GROUP MEMBERS: JW BEAVERS JR GROUP MEMBERS: PITMAN PROPERTY CORP GROUP MEMBERS: TOSI LP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FLOTEK INDUSTRIES INC/CN/ CENTRAL INDEX KEY: 0000928054 STANDARD INDUSTRIAL CLASSIFICATION: [5084 ] IRS NUMBER: 770709256 FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-51879 FILM NUMBER: 739207 BUSINESS ADDRESS: STREET 1: 7030 EMPIRE CENTRAL DRIVE CITY: HOUSTON STATE: TX ZIP: 77040 BUSINESS PHONE: 7138499911 MAIL ADDRESS: STREET 1: 7030 EMPIRE CENTRAL DRIVE CITY: HOUSTON STATE: TX ZIP: 77040 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TOSI LP CENTRAL INDEX KEY: 0001049282 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 752725122 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 3900 THANKSGIVING TOWER STREET 2: 1601 ELM STREET CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2148808485 MAIL ADDRESS: STREET 1: 3900 THNKASGIVING TOWER STREET 2: 1601 ELM STREET CITY: DALLAS STATE: TX ZIP: 75201 SC 13D/A 1 d80857a4sc13da.txt AMENDMENT NO. 4 TO SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Schedule 13D** Under the Securities Exchange Act of 1934 (Amendment No. 4)* Flotek Industries Inc. (Name of Issuer) Common Stock, No Par Value Per Share (Title of Class of Securities) 34339C 10 4 (Cusip Number) Mr. Walter Roach 3900 Thanksgiving Tower 1601 Elm Street Dallas, Texas 75201 (214) 922-0135 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) September 7, 2000 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). **The total number of shares of Stock reported herein is 56,145,572 shares, which constitutes approximately 52.9% of the 106,228,867 shares deemed outstanding pursuant to Rule 13d-3(d)(1)(i) under the Act. Except as otherwise stated herein, all ownership percentages set forth herein assume that there are 50,243,295 shares of Stock outstanding. 2 1. Name of Reporting Person: TOSI, L.P. 2. Check the Appropriate Box if a Member of a Group: (a) [ ] (b) [X] 3. SEC Use Only 4. Source of Funds: OO - See Item 3. 5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): [ ] 6. Citizenship or Place of Organization: Texas 7. Sole Voting Power: 27,992,786(1) Number of Shares Beneficially 8. Shared Voting Power: -0- Owned By Each Reporting 9. Sole Dispositive Power: -0- Person With 10. Shared Dispositive Power: -0- 11. Aggregate Amount Beneficially Owned by Each Reporting Person: 55,985,572(2) 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares: [X] 13. Percent of Class Represented by Amount in Row (11): 52.7%(3) 14. Type of Reporting Person: PN 2 3 - ---------- (1) Pursuant to the Designations, Preferences and Rights (the "Certificate of Designations") of the Issuer's Series A Convertible Preferred Stock (the "Series A Preferred"), the holders of shares of Series A Preferred generally are entitled to vote together with the holders of shares of the Stock as a single class and to cast a number of votes equal to the number of full shares of Stock into which the shares of Series A Preferred that they respectively hold are then convertible. Accordingly, acting through its sole general partner, TOSI, L.P. may be deemed to have the sole power to vote or to direct the vote of 27,992,786 shares of the Stock. See Item 6. (2) Assumes exercise of all of the New Warrants and conversion of all of the shares of Series A Preferred beneficially owned by the Reporting Person into shares of the Stock. See Item 6. (3) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are 106,228,867 shares of the Stock outstanding. 3 4 1. Name of Reporting Person: Pitman Property Corp. 2. Check the Appropriate Box if a Member of a Group: (a) [ ] (b) [X] 3. SEC Use Only 4. Source of Funds: Not Applicable 5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): [ ] 6. Citizenship or Place of Organization: Texas 7. Sole Voting Power: 27,992,786(1) Number of Shares Beneficially 8. Shared Voting Power: -0- Owned By Each Reporting 9. Sole Dispositive Power: -0- Person With 10. Shared Dispositive Power: -0- 11. Aggregate Amount Beneficially Owned by Each Reporting Person: 55,985,572(2)(3) 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares: [X] 13. Percent of Class Represented by Amount in Row (11): 52.7%(4) 14. Type of Reporting Person: CO 4 5 - ---------- (1) Pursuant to the Certificate of Designations, the holders of shares of Series A Preferred generally are entitled to vote together with the holders of shares of the Stock as a single class and to cast a number of votes equal to the number of full shares of Stock into which the shares of Series A Preferred that they respectively hold are then convertible. Accordingly, in its capacity as the sole general partner of TOSI, L.P., Pitman Property Corp. may be deemed to have the sole power to vote or to direct the vote of 27,992,786 shares of the Stock. See Item 6. (2) Solely in its capacity as the sole general partner of TOSI, L.P. (3) Assumes exercise of all of the New Warrants and conversion of all of the shares of Series A Preferred beneficially owned by the Reporting Person into shares of the Stock. See Item 6. (4) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are 106,228,867 shares of the Stock outstanding. 5 6 1. Name of Reporting Person: J. W. Beavers, Jr. 2. Check the Appropriate Box if a Member of a Group: (a) [ ] (b) [X] 3. SEC Use Only 4. Source of Funds: Not Applicable 5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): [ ] 6. Citizenship or Place of Organization: USA 7. Sole Voting Power: 27,992,786(1) Number of Shares Beneficially 8. Shared Voting Power: -0- Owned By Each Reporting 9. Sole Dispositive Power: -0- Person With 10. Shared Dispositive Power: -0- 11. Aggregate Amount Beneficially Owned by Each Reporting Person: 55,985,572(2)(3) 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares: [X] 13. Percent of Class Represented by Amount in Row (11): 52.7%(4) 14. Type of Reporting Person: IN 6 7 - ---------- (1) Pursuant to the Certificate of Designations, the holders of shares of Series A Preferred generally are entitled to vote together with the holders of shares of the Stock as a single class and to cast a number of votes equal to the number of full shares of Stock into which the shares of Series A Preferred that they respectively hold are then convertible. Accordingly, in his capacity as the President and controlling person of the sole general partner of TOSI, L.P., J. W. Beavers may be deemed to have the sole power to vote or to direct the vote of 27,992,786 shares of the Stock. See Item 6. (2) Solely in his capacity as the President of Pitman Property Corp., which is the sole general partner of TOSI, L.P. (3) Assumes exercise of all of the New Warrants and conversion of all of the shares of Series A Preferred beneficially owned by the Reporting Person into shares of the Stock. See Item 6. (4) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are 106,228,867 shares of the Stock outstanding. 7 8 1. Name of Reporting Person: David S. Hunt 2. Check the Appropriate Box if a Member of a Group: (a) [ ] (b) [X] 3. SEC Use Only 4. Source of Funds: See Item 3. 5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): [ ] 6. Citizenship or Place of Organization: USA 7. Sole Voting Power: 160,000 Number of Shares Beneficially 8. Shared Voting Power: -0- Owned By Each Reporting 9. Sole Dispositive Power: 160,000 Person With 10. Shared Dispositive Power: -0- 11. Aggregate Amount Beneficially Owned by Each Reporting Person: 160,000 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares: [X] 13. Percent of Class Represented by Amount in Row (11): 0.3% 14. Type of Reporting Person: IN 8 9 Pursuant to Rule 13d-2(a) of Regulation 13D-G of the Rules and Regulations under the Securities Exchange Act of 1934, as amended, the undersigned hereby amend their Schedule 13D Statement dated November 10, 1997, as amended by Amendment No. 1 thereto dated November 9, 1998, by Amendment No. 2 thereto dated March 2, 1999, and by Amendment No. 3 thereto dated March 5, 1999, relating to the common stock, no par value per share (the "Stock"), of Flotek Industries Inc., an Alberta corporation (the "Issuer"). Item 1. SECURITY AND ISSUER. No material change. Item 2. IDENTITY AND BACKGROUND. No material change. Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Item 3 hereby is amended in its entirety to read as follows: Except where a reference to Canadian currency is indicated by the use of the prefix "CDN," all currency references in this Schedule 13D are to the lawful moneys of the United States of America. The source and amount of the funds used by the Reporting Persons to purchase shares of Stock are as follows:
REPORTING PERSON SOURCE OF FUNDS AMOUNT OF FUNDS TOSI Contributions from $1,589,783(1) Partners Pitman Not Applicable Not Applicable JWB Not Applicable Not Applicable DSH (2) $ 37,500(2)
(1) Of this amount, (i) $750,000 represents the funds that were used to acquire the convertible promissory note evidencing the Loan, the outstanding principal balance and accrued but unpaid interest of which was exchanged for 839.792 Units, and (ii) $839,783 represents the funds to be used to acquire 27,992,786 shares of the Stock pursuant to the exercise of all of the New Warrants and assumes exercise of all of the New Warrants. See Item 6. (2) In connection with the transactions described in Item 6 of the Schedule 13D, the Issuer paid DSH a finder's fee of $37,500 in the form of 350,000 shares of the Stock at a deemed 9 10 price of CDN$0.15 (approximately $0.107, based on an assumed currency exchange rate of CDN$1.40 per $1.00 at the time of the payment) per share of Stock. Item 4. PURPOSE OF TRANSACTION. No material change. Item 5. INTEREST IN SECURITIES OF THE ISSUER. Items 5(a) and (b) hereby are amended in their entirety to read as follows: (a) TOSI The aggregate number of shares of the Stock that TOSI owns beneficially, pursuant to Rule 13d-3 of the Act, is 55,985,572, which constitute approximately 52.7% of the 106,228,867 shares of the Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Act. Pitman Because of its position as the sole general partner of TOSI, Pitman may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of an aggregate of 55,985,572 shares of the Stock, which constitute approximately 52.7% of the 106,228,867 shares of the Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Act. JWB Because of his position as President and controlling person of the sole general partner of TOSI, JWB may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of an aggregate of 55,985,572 shares of the Stock, which constitute approximately 52.7% of the 106,228,867 shares of the Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Act. DSH Pursuant to Rule 13d-3 of the Act, DSH beneficially owns 160,000 shares of the Stock, which constitutes approximately 0.3% of the outstanding shares of the Stock. To the best of the knowledge of each of the Reporting Persons, other than as set forth above, none of the persons named in Item 2 herein is the beneficial owner of any shares of the Stock. (b) TOSI 10 11 Pursuant to the Designations, Preferences and Rights (the "Certificate of Designations") of the Issuer's Series A Convertible Preferred Stock (the "Series A Preferred"), the holders of shares of Series A Preferred generally are entitled to vote together with the holders of shares of the Stock as a single class and to cast a number of votes equal to the number of full shares of Stock into which the shares of Series A Preferred that they respectively hold are then convertible. Accordingly, acting through its sole general partner, TOSI may be deemed to have the sole power to vote or to direct the vote of 27,992,786 shares of the Stock. Pitman Pursuant to the Certificate of Designations, the holders of shares of Series A Preferred generally are entitled to vote together with the holders of shares of the Stock as a single class and to cast a number of votes equal to the number of full shares of Stock into which the shares of Series A Preferred that they respectively hold are then convertible. Accordingly, in its capacity as the sole general partner of TOSI, Pitman may be deemed to have the sole power to vote or to direct the vote of 27,992,786 shares of the Stock. JWB Pursuant to the Certificate of Designations, the holders of shares of Series A Preferred generally are entitled to vote together with the holders of shares of the Stock as a single class and to cast a number of votes equal to the number of full shares of Stock into which the shares of Series A Preferred that they respectively hold are then convertible. Accordingly, in his capacity as the President and controlling person of the sole general partner of TOSI, JWB may be deemed to have the sole power to vote or to direct the vote of 27,992,786 shares of the Stock. DSH DSH has the sole power to vote or to direct the vote and to dispose or to direct the disposition of 160,000 shares of the Stock. Item 5(c) hereby partially is amended by adding at the end thereof the following: During the past sixty (60) days, the Reporting Persons have sold shares of the Stock in the over-the-counter market as follows:
Reporting Person Date Number of Shares Sold Price Per Share DSH 08/15/00 15,000 $0.095
(d) - (e) No material change. 11 12 Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Item 6 hereby partially is amended by adding at the end thereof the following: On September 7, 2000, the Issuer entered into a Securities Purchase and Exchange Agreement dated as of April 30, 2000 with all of the holders of the Issuer's Senior Notes and Existing Warrants, as defined therein (the "Exchange Agreement"). Pursuant to the Exchange Agreement, each holder of the Issuer's Senior Notes and Existing Warrants, including TOSI (the "Surrendering Holders"), surrendered all of its Senior Notes and Existing Warrants in exchange for Units, each consisting of (i) one share of the Issuer's Series A Convertible Preferred Stock (the "Series A Preferred"), currently convertible into 33,333 shares of the Stock, and (ii) warrants (the "New Warrants") to purchase 33,333 shares of the Stock at a current exercise price of $0.03 per share (the "Exchange"). In the Exchange, TOSI surrendered the Note and the Warrants in exchange for 839.792 Units. The New Warrants currently entitle TOSI to acquire up to 27,992,786 shares of the Stock at the exercise price of $0.03 per share. The New Warrants are exercisable, at TOSI's option, at any time and from time to time until August 31, 2010. Other than as set forth above, the terms and conditions of New Warrants are substantially the same as those of the Warrants. In connection with the Exchange, the Registration Rights Agreement was terminated and, in lieu thereof, the Issuer, TOSI and the other Surrendering Holders entered into a new Registration Rights Agreement dated as of April 30, 2000 (the "New Registration Rights Agreement"). Pursuant to the New Registration Rights Agreement, the Issuer granted registration rights with respect to the shares of Stock issuable upon conversion of the Series A Preferred and upon exercise of the New Warrants that, as to TOSI, are substantially the same as those granted in the Registration Rights Agreement, except that TOSI is no longer limited to two demands for registration of the Registrable Securities under the Act (or, alternatively, for qualification of the Registrable Securities for distribution pursuant to the securities laws of the provinces of British Columbia or Ontario) at the Issuer's expense during the six-year term thereof. The descriptions of the Exchange Agreement, the New Warrants and the New Registration Rights Agreement set forth herein are not, and do not purport to be, complete, and are qualified in their entirety by reference to such agreements and instruments, copies of the forms of which are filed herewith as Exhibits 10.8, 10.9 and 10.10. Reference is made to the "Name/Structure Change Alberta Corporation - Registration Statement" that the Issuer filed with the Province of Alberta on August 31, 2000 for a complete description of all of the rights and preferences of the Series A Preferred. Except as set forth herein or in the Exhibits filed or to be filed herewith, there are no other contracts, arrangements, understandings or relationships with respect to the Stock owned by the Reporting Persons. 12 13 Item 7. MATERIAL TO BE FILED AS EXHIBITS. Item 7 hereby partially is amended by adding to the end thereof the following: Exhibit 10.8 -- Form of Securities Purchase and Exchange Agreement dated as of April 30, 2000 by and among Flotek Industries Inc., TOSI, L.P. and the other signatories thereto Exhibit 10.9 -- Form of Warrant to Purchase Common Stock of Flotek Industries Inc. issued to TOSI, L.P. Exhibit 10.10 -- Form of Registration Rights Agreement dated as of April 30, 2000 by and among Flotek Industries Inc., TOSI, L.P. and the other signatories thereto Exhibit 99.1 -- Agreement pursuant to Rule 13d-1(f)(1)(iii) 13 14 After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: October 12, 2000 /s/ DAVID S. HUNT ------------------------------------ David S. Hunt, individually and as attorney-in-fact for: TOSI, L.P.(1) PITMAN PROPERTY CORP.(2) J. W. BEAVERS, JR.(3) (1) A power of attorney authorizing David S. Hunt to act on behalf of TOSI, L.P. previously has been filed with the Commission. (2) A power of attorney authorizing David S. Hunt to act on behalf of Pitman Property Corp. previously has been filed with the Commission. (3) A power of attorney authorizing David S. Hunt to act on behalf of J. W. Beavers, Jr. previously has been filed with the Commission. 15 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 10.1 Convertible Loan Agreement, previously filed as Exhibit 99.2 with the Schedule 13D Statement dated November 10, 1997. 10.2 Registration Rights Agreement, previously filed as Exhibit 99.3 with the Schedule 13D Statement dated November 10, 1997. 10.3 Lock-Up Agreement, previously filed as Exhibit 99.4 with the Schedule 13D Statement dated November 10, 1997. 10.4 Warrants, previously filed as Exhibit 99.5 with the Schedule 13D Statement dated November 10, 1997. 10.5 Agreement for Extension and Amendment of Loan Agreement, Promissory Note and Warrant dated November 2, 1998, to be effective as of October 16, 1998, by and among Flotek Industries Inc., Petrovalve International, Inc., Petrovalve, Inc., Turbeco, Inc., USA Petrovalve, Inc. and TOSI, L.P., previously filed with Amendment No. 1 to the Schedule 13D Statement dated November 9, 1998. 10.6 Agreement for Second Extension and Amendment of Loan Documents dated February 24, 1999, to be effective as of January 14, 1999, by and among Flotek Industries Inc., Petrovalve International, Inc., Petrovalve, Inc., Turbeco, Inc., USA Petrovalve, Inc. and TOSI, L.P., previously filed with Amendment No. 2 to the Schedule 13D Statement dated March 2, 1999. 10.7 Intercreditor Agreement dated as of February 24, 1999, by and between Chisholm Energy Partners, L.L.C. and TOSI, L.P., previously filed with Amendment No. 2 to the Schedule 13D Statement dated March 2, 1999. 10.8 Form of Securities Purchase and Exchange Agreement dated as of April 30, 2000 by and among Flotek Industries Inc., TOSI, L.P. and the other signatories thereto, filed herewith. 10.9 Form of Warrant to Purchase Common Stock of Flotek Industries Inc. issued to TOSI, L.P., filed herewith. 10.10 Form of Registration Rights Agreement dated as of April 30, 2000 by and among Flotek Industries Inc., TOSI, L.P. and the other signatories thereto, filed herewith. 24.1 Power of Attorney of TOSI, L.P., previously filed with the Schedule 13D Statement dated November 10, 1997. 24.2 Power of Attorney of Pitman Property Corp., previously filed with the Schedule 13D Statement dated November 10, 1997. 24.3 Power of Attorney of J. W. Beavers, Jr., previously filed with the Schedule 13D Statement dated November 10, 1997. 99.1 Agreement pursuant to Rule 13d-1(f)(1)(iii), filed herewith.
EX-10.8 2 d80857a4ex10-8.txt FORM OF SECURITIES PURCHASE/EXCHANGE AGREEMENT 1 ================================================================================ FLOTEK INDUSTRIES, INC. ---------- SECURITIES PURCHASE AND EXCHANGE AGREEMENT DATED AS OF APRIL 30, 2000 ---------- UNITS CONSISTING OF SERIES A CONVERTIBLE PREFERRED STOCK AND WARRANTS ================================================================================ 2 TABLE OF CONTENTS
PAGE ---- 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
-ii- 3 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
-iii- 4 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 5 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. 6 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 Satterlee Stephens Burke & Burke LLP, 230 Park Avenue, 11th Floor, New York, New York 10169, 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. -2- 7 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. -3- 8 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 -4- 9 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 -5- 10 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 -6- 11 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. -7- 12 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 mark, 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 -8- 13 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. -9- 14 (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 -10- 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 -11- 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 -12- 17 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. -13- 18 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. -14- 19 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 7030 Empire Central Drive, Houston, Texas 77040 (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 HARRIS 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. -15- 20 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 -16- 21 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. -17- 22 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: ------------------------------------------ Jerry D. Dumas, Sr., President and CEO PURCHASERS: 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 23 --------------------------------------------- Thomas H. O'Neill, Jr., an individual --------------------------------------------- James Wadsworth, an individual --------------------------------------------- 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 24 --------------------------------------------- Arvind Sanger, an individual --------------------------------------------- Nancy Naples O'Neill, an individual --------------------------------------------- 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 25 NOW Ventures, LLC By: ------------------------------------------ Thomas H. O'Neill, Jr., Managing Member --------------------------------------------- Tom Bandy, an individual --------------------------------------------- Steven A. Webster, 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) TOSI, L.P. $ 750,000 $ 89,792 $ 839,792 25,000,000 839.792 3900 Thanksgiving Tower 1601 Elm Street Dallas, Texas 75201 Attention: Mr. David S. Hunt Fax: 214-880-7101 TIN: CHISHOLM ENERGY PARTNERS, L.L.C $ 540,000 $ 50,001 $ 590,001 18,000,000 590.001 Chisholm Energy Partners, L.L.C 1160 Dairy Ashford Suite 125 Houston, Texas 77079 Attention: John Chisholm Fax: 281-497-7974 TIN: WILLIAM R. ZIEGLER $ 100,000 $ 5,751 $ 105,751 3,333,333 105.751 Satterlee Stephens Burke & Burke LLP 230 Park Avenue, 11th Floor New York, NY 10169 Fax: 212-682-9112 TIN: HINCKLEY BROOK, INC. $ 35,000 $ 2,819 $ 37,819 1,166,667 37.819 7030 Empire Central Drive Houston, Texas 77040 Attention: Jerry Dumas Fax: 713-896-4511 TIN: SAXTON RIVER CORPORATION $ 55,000 $ 6,551 $ 61,551 1,833,333 61.551 7030 Empire Central Drive Houston, Texas 77040 Attention: Jerry Dumas Fax: 713-896-4511 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) THOMAS H. O'NEILL, JR $ 25,000 $ 806 $ 25,806 833,333 25.806 c/o William R. Ziegler Satterlee Stephens Burke & Burke LLP 230 Park Avenue, 11th Floor New York, NY 10169 Fax: 212-682-9112 TIN: JAMES WADSWORTH $ 50,000 $ 1,458 $ 51,458 1,666,667 51.458 c/o William R. Ziegler Satterlee Stephens Burke & Burke LLP 230 Park Avenue, 11th Floor New York, NY 10169 Fax: 212-682-9112 TIN: OLIVER W. ROBERTSON $ 100,000 $ 1,570 $ 101,570 3,333,333 101.570 7030 Empire Central Dr. Houston, Texas 77040 Fax: 713-466-8386 TIN: PAUL ATANASIO $ 25,000 $ 625 $ 25,625 833,333 25.625 c/o William R. Ziegler Satterlee Stephens Burke & Burke LLP 230 Park Avenue, 11th Floor New York, NY 10169 Fax: 212-682-9112 TIN: JOHN DALRYMPLE $ 20,000 $ 256 $ 20,256 666,667 20.256 c/o William R. Ziegler Satterlee Stephens Burke & Burke LLP 230 Park Avenue, 11th Floor New York, NY 10169 Fax: 212-682-9112 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) CHARLES E. MURPHY, JR. $ 100,000 $ 1,750 $ 101,750 3,333,333 101.750 c/o William R. Ziegler Satterlee Stephens Burke & Burke LLP 230 Park Avenue, 11th Floor New York, NY 10169 Fax: 212-682-9112 TIN: SPRINGFIELD TRADING S. A. $ 100,000 $ 1,639 $ 101,639 3,333,333 101.639 c/o William R. Ziegler Satterlee Stephens Burke & Burke LLP 230 Park Avenue, 11th Floor New York, NY 10169 Fax: 212-682-9112 TIN: JEFFREY R. FREEDMAN $ 50,000 $ 639 $ 50,639 1,666,667 50.639 c/o William R. Ziegler Satterlee Stephens Burke & Burke 230 Park Avenue, 11th Floor New York, NY 10169 Fax: 212-682-9112 TIN: ARVIND SANGER $ 25,000 $ 128 $ 25,128 833,333 25.128 c/o William R. Ziegler Satterlee Stephens Burke & Burke LLP 230 Park Avenue, 11th Floor New York, NY 10169 Fax: 212-682-9112 TIN: NANCY NAPLES O'NEILL $ 25,000 $ 389 $ 25,389 833,333 25.389 c/o William R. Ziegler Satterlee Stephens Burke & Burke LLP 230 Park Avenue, 11th Floor New York, NY 10169 Fax: 212-682-9112 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) RICHARD H. JUKES $ 25,000 $ 424 $ 25,424 833,333 25.424 611 Santa Maria St Sugar Land, Texas 77478 Fax: TIN: SMITH FAMILY 1999 PARTNERSHIP LTD $ 25,000 $ 424 $ 25,424 833,333 25.424 107 Fountainbleau Ave Longview, Texas 75605 Fax: TIN: NOW VENTURES, LLC $ 50,000 $ 0 $ 50,000 1,666,667 50.000 50 Fountain Plaza Buffalo, NY 14202 Fax: (716) 842-2514 TIN: TOM BANDY $ 50,000 $ 333 $ 50,333 1,666,667 50.333 7880 San Felipe Ste. 200 Houston, TX 77063 Fax: TIN: STEVEN A. WEBSTER $ 50,000 $ 417 $ 50,417 1,666,667 50.417 ------------ ------------ ------------ ------------ ------------ 901 Threadneedle Houston, Texas 77079 Fax: 713-558-3011 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) Saxton River computer lease (2 years) Hinckley Brook 3 autos (36 months) Saxton River machinery, Mason, 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 EX-10.9 3 d80857a4ex10-9.txt FORM OF WARRANT TO PURCHASE COMMON STOCK 1 [FORM OF REPLACEMENT WARRANT] WARRANT TO PURCHASE COMMON STOCK OF FLOTEK INDUSTRIES, INC. VOID AFTER 5:30 P.M. NEW YORK CITY TIME ON THE EXPIRATION DATE ______ Shares of Warrant No. __ Warrant Stock 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 OF 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. FLOTEK INDUSTRIES, INC. (the "Company"), an Alberta corporation, for value received, hereby agrees to sell upon the terms and on the conditions hereinafter set forth, but no later than 5:30 p.m., New York City Time, on the Expiration Date (as hereinafter defined) to _______________, the registered holder hereof (the "Holder"), having an address set forth in the Warrant Register maintained by the Company, under the terms as hereinafter set forth, _______________ (_____________) fully paid and non-assessable shares of the Company's Common Stock, no par value (the "Warrant Stock"), at a purchase price per share of Three U.S. Cents (US$0.03) (as adjusted as provided herein, the "Warrant Price") pursuant to this Warrant (the "Warrant"). This Warrant is being issued in accordance with the terms of that certain Securities Purchase and Exchange Agreement of even date herewith (the "Securities Purchase Agreement") between the Company and the initial Holder, inter alia. The number of shares of Warrant Stock to be so issued and the Warrant Price are subject to adjustment as hereinafter set forth. The term "Common Stock" shall mean, when used herein, unless the context otherwise requires, the stock and other securities and property at the time receivable upon the exercise of this Warrant. 2 1. Exercise of Warrant. (a) The Holder may exercise this Warrant according to its terms by surrendering this Warrant to the Company at the address set forth in Section 10, the subscription form attached hereto having then been duly executed by the Holder, accompanied by cash, certified check or bank draft in payment of the purchase price for the number of shares of the Warrant Stock specified in the subscription form, or as otherwise provided in this Warrant prior to 5:30 p.m., local New York City time, on the Expiration Date. The Expiration Date shall be April 30, 2010. The purchase price of the shares of Warrant Stock as to which this Warrant shall be exercised shall be paid to the Company at the time of exercise either in cash, in Common Stock of the Company already owned by the Holder, by the relinquishment of a portion of this Warrant having a total fair market value equal to the purchase price, or any combination of the foregoing. For purposes of this Section, the fair market value of the portion of this Warrant that is relinquished shall be the excess of (x) the fair market value at the time of exercise of the number of shares of Warrant Stock subject to the portion of this Warrant that is relinquished over (y) the aggregate exercise price specified in this Warrant with respect to such shares. The fair market value of the Warrant Stock shall be equal to the average of the closing sales prices of the Company's Common Stock on any stock exchange or market on which the Company's Common Stock is then traded on the ten trading days immediately preceding the date of exercise. If the exchange or market does not report sales prices, the fair market value of the Warrant Stock shall be equal to the average of the average of the closing bid and ask prices of the Company's Common Stock on the ten trading days immediately preceding the date of exercise. If the Company's Common Stock is then traded on more than one exchange or market, the fair market value shall be the highest of fair market values determined as provided above. If the Company's Common Stock is not then traded on any exchange or market, the fair market value shall be determined in good faith by the Board of Directors of the Company. (b) This Warrant may be exercised in whole or in part so long as any exercise in part hereof would not involve the issuance of fractional shares of Warrant Stock. If exercised in part, the Company shall deliver to the Holder a new Warrant, identical in form, in the name of the Holder, evidencing the right to purchase the number of shares of Warrant Stock as to which this Warrant has not been exercised, which new Warrant shall be signed by the President and the Secretary or the Assistant Secretary of the Company. The term Warrant as used herein shall include any subsequent Warrant issued as provided herein. (c) No fractional share or scrip representing fractional shares shall be given upon the exercise of this Warrant. The Company shall pay cash in lieu of fractions with respect to the Warrants based upon the Warrant Price at the time of exercise of this Warrant. -2- 3 (d) In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the Warrant Stock so purchased, registered in the name of the Holder, shall be delivered to the Holder within a reasonable time after such rights shall have been so exercised. The person or entity in whose name any certificate for the Warrant Stock is issued upon exercise of the rights represented by this Warrant shall for all purposes be deemed to have become the holder of record of such shares immediately prior to the close of business on the date on which the Warrant was surrendered and payment of the Warrant Price and any applicable taxes was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the opening of business on the next succeeding date on which the stock transfer books are open. 2. Disposition of Warrant Stock and Warrant. (a) By the acceptance of this Warrant, the Holder hereby acknowledges and covenants that this Warrant and any Warrant Stock purchased pursuant thereto are and will be held for investment and not for distribution; provided that: (i) the Warrant and/or Warrant Stock may not be transferred by the Holder, (A) unless an exemption is available under the Securities Act of 1933, as amended, and the rules and regulations promulgated by the Securities and Exchange Commission thereunder (collectively the "Act"), and to a person who, in the reasonable opinion of counsel to the Company, is a person to whom the Warrant and/or Warrant Stock may be transferred legally without registration and without the delivery of a current prospectus under the Act with respect thereto and then only against receipt of (x) an agreement of such person to comply with the provisions of this Section 2 with respect to any resale or other disposition of such securities and (y) an agreement by such person that he is acquiring such securities for investment and not for distribution except in compliance with the Act; or (B) except to a person upon delivery of a prospectus relating to the Warrant and/or Warrant Stock then meeting the requirements of the Act; (ii) the Warrant Stock shall be issued upon exercise of this Warrant only in compliance with the Act; and (iii) the Warrant and the Warrant Stock may be pledged to a lender to secure the debt of the Holder. (b) If, at the time of issuance of the shares issuable upon exercise of this Warrant, no registration statement is in effect with respect to such shares under applicable provisions of the Act, the Company may at its election require that the Holder provide the Company with written reconfirmation of the Holder's investment intent and that any stock certificate delivered to the Holder of a surrendered Warrant shall bear legends reading substantially as follows: -3- 4 "Transfer of the shares represented by this certificate is subject to certain restrictions set forth in the Warrant pursuant to which these shares were purchased from the Company. Copies of those restrictions are on file at the principal offices of the Company, and no transfer of such shares or of this certificate, or of any shares or other securities (or certificates therefor) issued in exchange for or in respect of such shares, shall be effective unless and until the terms and conditions therein set forth shall have been complied with." "The shares represented by this certificate have not been registered under the Securities Act of 1933, and may not be sold, transferred, pledged or otherwise disposed of in the absence of an effective registration statement under the Securities Act of 1933 or an opinion of counsel satisfactory to the issuer of this certificate that registration is not required under said Act." In addition, so long as the foregoing legend may remain on any stock certificate delivered to the Holder, the Company may maintain appropriate "stop transfer" orders with respect to such certificates and the shares represented thereby on its books and records and with those to whom it may delegate registrar and transfer functions. 3. Reservation of Shares. The Company hereby agrees that at all times there shall be reserved for issuance upon the exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance upon exercise of this Warrant and that the par value of such shares will at all times be less than or equal to the applicable Warrant Price. The Company further agrees that all shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, free from all taxes, liens and charges with respect to the issuance thereof other than taxes, if any, in respect of any transfer occurring contemporaneously with such issuance and other than transfer restrictions imposed by federal and state securities laws. 4. Capital Adjustments. This Warrant is subject to the following further provisions: (a) Recapitalization, Reclassification and Succession. If any recapitalization of the Company or reclassification of its Common Stock or any merger or consolidation of the Company into or with a corporation or other business entity, or the sale or transfer of all or substantially all of the Company's assets or of any successor corporation's assets to any other corporation or business entity (any such corporation or other business entity being included within the meaning of the term "successor corporation") shall be effected, at any time while this Warrant remains outstanding and unexpired, then, as a condition of such recapitalization, reclassification, merger, consolidation, sale or transfer, lawful and adequate provision shall be made whereby the Holder of this Warrant thereafter shall have the right to receive upon the -4- 5 exercise hereof as provided in Section 1 and in lieu of the shares of Common Stock immediately theretofore issuable upon the exercise of this Warrant, such shares of capital stock, securities or other property as may be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of shares of Common Stock immediately theretofore issuable upon the exercise of this Warrant had such recapitalization, reclassification, merger, consolidation, sale or transfer not taken place, and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such consummation. (b) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its Common Stock, the number of shares of Warrant Stock purchasable upon exercise of this Warrant shall be proportionately adjusted. (c) Certain Dividends and Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, Common Stock, then the number of shares of Warrant Stock purchasable upon exercise of this Warrant shall be adjusted to that number determined by multiplying the number of shares of Warrant Stock so purchasable immediately prior to such record date by a fraction (i) the numerator of which shall be the sum of (A) the total number of outstanding shares of Common Stock immediately prior to such record date and (B) the total number of shares of Common Stock issuable pursuant to such dividend or distribution, and (ii) the denominator of which shall be the total number of shares of Common Stock outstanding immediately prior to such record date. (d) Corresponding Warrant Price Adjustment. Whenever the number of shares of Warrant Stock purchasable upon the exercise of the rights granted to the Holder herein is increased or decreased as provided in Section 4 (b) or (c), the Warrant Price payable for the exercise of such rights shall be adjusted by multiplying such Warrant Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of shares of Warrant Stock purchasable upon the exercise of such rights immediately prior to such adjustment, and of which the denominator shall be the number of shares of Warrant Stock purchasable immediately thereafter. (e) Certain Other Warrant Price Adjustments. (i) If the Company at any time while this Warrant is outstanding and unexpired issues and sells, or is deemed to have issued and sold (as provided in Section 4(e)(ii) or (iii)), any shares of Common Stock, for a consideration per share of less than the Warrant Price in effect immediately prior to the issuance of such additional Common Stock, then, immediately following the issue and sale of such additional Common Stock, the Warrant Price shall be adjusted by multiplying the Warrant Price in effect immediately before the issuance of such additional Common Stock by the number determined by dividing: (A) An amount equal to (1) the total number of shares of Common Stock outstanding immediately following the last previous adjustment of the Warrant Price -5- 6 pursuant to this Section 4 (or on the date hereof if there shall have been no previous adjustment) multiplied by the Warrant Price in effect immediately prior to such issuance, plus (2) the consideration, if any, received or deemed to have been received by the Company upon such issuance and upon the issuance of any Common Stock issued subsequent to the last previous adjustment of the Warrant Price pursuant to this Section 4 (or subsequent to the date hereof if there shall have been no such previous adjustment), by (B) The total number of shares of Common Stock outstanding immediately after the issuance of such additional Common Stock (or which would have been outstanding but for retirement of Common Stock or acquisitions of Common Stock by or for the account of the Company during the period covered by the computation) multiplied by the Warrant Price in effect immediately prior to such issuance. (ii) If the Company at any time while this Warrant is outstanding and unexpired grants any rights, warrants or options (other than the rights granted herein or in any stock option plan of the Company covering officers, directors, consultants or employees of the Company) to subscribe for Common Stock or any securities convertible or exchangeable into Common Stock (such rights, warrants and options being called the "Options" and such securities convertible into Common Stock the "Convertible Securities"), then the maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of the Convertible Securities will be deemed to have been outstanding and to have been issued and sold by the Company, and the appropriate adjustment to the Warrant Price will be made in accordance with Section 4(e)(i). For purposes of this paragraph, the consideration of the shares of Common Stock issuable upon the exercise of such Options will be equal to the total amount received or receivable by the Company for the granting of the Options plus the minimum aggregate amount of additional consideration due the Company upon the exercise of the Options (plus, in the case of the Options relating to Convertible Securities, any additional consideration payable upon the issuance or sale and the conversion and exchange thereof). (iii) If the Company at any time while this Warrant is outstanding and unexpired issues or sells any Convertible Securities, then the maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities will be deemed to be outstanding and to have been issued or sold by the Company, and the appropriate adjustment to the Warrant Price will be made in accordance with Section 4(e)(i). For purposes of this paragraph, the consideration for the shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities will be equal to the total amount received or receivable by the Company for the issue or sale of such Convertible Securities plus the minimum aggregate amount of additional consideration, if any, payable upon the conversion or exchange thereof. (iv) If at any time while this Warrant is outstanding and unexpired the purchase price per share for any Option, or any additional consideration payable to the Company -6- 7 upon the exercise of any Option or upon conversion of a Convertible Security, or the rate at which any Convertible Securities are convertible or exchangeable into Common Stock, is reduced, then the consideration for the shares of Common Stock issuable upon the exercise or conversion thereof will be recalculated giving effect to such reduction, and immediately after any such price reduction or rate reduction becomes effective, the appropriate adjustment to the Warrant Price will be made in accordance with Section 4(e)(i). Notwithstanding the foregoing, (1) no further adjustments in the Warrant Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities; (2) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Company, or decrease or increase in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Warrant Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities (provided, however, that no such adjustment of the Warrant Price shall affect Common Stock previously issued upon conversion of the Warrant; (3) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Warrant Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if: (A) in the case of Convertible Securities or Options for Common Stock the only additional shares of Common Stock issued were the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Company for the issue of all such Options, whether or not exercised, plus the consideration actually received by the Company upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or exchange and (B) in the case of Options for Convertible Securities only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Company for the additional shares of Common Stock deemed to have been then issued was the consideration actually received by the -7- 8 Company for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Company (determined as described above) upon the issue of the Convertible Securities with respect to which such Options were actually exercised; (4) in the case of any Options which expire by their terms not more than 30 days after the date of issue thereof, no adjustment of the Warrant Price shall be made until the expiration or exercise of all such Options, whereupon such adjustment shall be made in the same manner provided in clause (3) above; (5) no adjustments in the Warrant Price shall be made in respect of grants of stock pursuant to employee benefit plans of the Company; (6) no adjustments in the Warrant Price shall be made in respect of the issuance of Warrant Stock upon exercise of the Warrant or in respect of the issuance of Common Stock upon conversion of the Series A Preferred Stock of the Company issued on the date hereof; (7) no further adjustments in the Warrant Price shall be made under this paragraph (e) in respect of adjustments required pursuant to paragraphs (a) through (c) of this Section 4. (f) Certain Shares Excluded. The number of shares of Common Stock outstanding at any given time for purposes of the adjustments set forth in this Section 4 shall exclude any shares then directly or indirectly held in the treasury of the Company. (g) Deferral and Cumulation of De Minimis Adjustments. The Company shall not be required to make any adjustment of the Warrant Price pursuant to this Section 4 if the amount of such adjustment would be less than one percent (1%) of the Warrant Price in effect immediately before the event that would otherwise have given rise to such adjustment. In such case, however, any adjustment that would otherwise have been required to be made shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than one percent (1%) of the Warrant Price in effect immediately before the event giving rise to such next subsequent adjustment. (h) Duration of Adjusted Warrant Price. Following each computation or readjustment of an adjusted Warrant Price as provided in this Section 4, the new adjusted Warrant Price shall remain in effect until a further computation or readjustment thereof is required. 5. Notices to Holders. (a) Notice of Record Date. In case: (i) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercisable of this Warrant) for the purpose of entitling them to receive any dividend (other than a cash dividend payable out -8- 9 of earned surplus of the Company) or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or (ii) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation with or merger of the Company into another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation; or (iii) of any voluntary dissolution, liquidation or winding-up of the Company; then, and in each such case, the Company will mail or cause to be mailed to the Holder hereof at the time outstanding a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any, is to be fixed, as of which the holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed at least 30 days prior to the record date therein specified, or if no record date shall have been specified therein, at least 30 days prior to such other specified date. (b) Notice of Adjustments. Whenever any Warrant Price shall be adjusted, pursuant to Section 4 hereof, the Company shall promptly make a certificate signed by its Chairman, its CEO, its President or a Vice President and by its Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary, setting forth in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Warrant Price after giving effect to such adjustment, and shall promptly cause copies of such certificates to be mailed (by first class mail, postage prepaid) to the Holder of this Warrant. 6. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company of evidence satisfactory to it, in the exercise of its reasonable discretion, of the ownership and the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Company and, in the case of mutilation, upon surrender and cancellation thereof, the Company will execute and deliver in lieu thereof, without expense to the Holder, a new Warrant of like tenor dated the date hereof. -9- 10 7. Warrant Holder Not a Stockholder. The Holder of this Warrant, as such, shall not be entitled by reason of this Warrant to any rights whatsoever as a stockholder of the Company. 8. Transfer; Register. Subject to the provisions of Section 2 above, this Warrant is transferable in the same manner and with the same effect as in the case of a negotiable instrument payable to a specified person. The Warrants shall be issued in registered form only and the Company shall keep a register (the "Warrant Register") in which provisions shall be made for the registration of the Warrants and the registration of transfers thereof. Such Register shall be kept at the principal office of the Company and the Company is hereby appointed the "Warrant Registrar" for the purpose of registering the Warrants and transfers of the Warrants. Subject to compliance with the provisions of Section 2 hereof and Article III of the Securities Purchase Agreement by a transferee, upon surrender for registration of transfer of any Warrant at the principal office of the Company and compliance with the provisions of Section 2 hereof and Section 3.1 of the Securities Purchase Agreement, if applicable, the Company shall execute and deliver, in the name of the designated transferee, a new Warrant. The Company shall treat the individual or entity in whose name each Warrant is registered on the Warrant Register as the sole and absolute owner thereof, notwithstanding any contrary notice. 9. Registration Rights. The Holder shall have certain registration rights with respect to the Warrant Shares, all as set forth in a Registration Rights Agreement of even date herewith among the Company, the Holder and certain other Holders. 10. Notices. Any notice required or contemplated by this Warrant shall be deemed to have been duly given if transmitted by registered or certified mail, return receipt requested, to the Company at 7030 Empire Central Drive, Houston, Texas 77040, Attention: President, or to the Holder at the name and address set forth in the Warrant Register maintained by the Company. 11. Choice of Law. This Warrant shall be governed by the local laws of the Texas, except to the extent that the law of the Company's jurisdiction of organization is required to be applied. -10- 11 IN WITNESS WHEREOF, the undersigned has duly signed this Warrant as of this 30th day of April, 2000. FLOTEK INDUSTRIES, INC. By: --------------------------------------- Jerry D. Dumas, Sr., President and CEO 12 ASSIGNMENT FORM FOR VALUE RECEIVED, the Undersigned Holder of the attached Warrant, hereby sells, assigns and transfers unto _______________________________ the right to purchase ______________________________ shares of Common Stock of FLOTEK INDUSTRIES, INC. evidenced by the attached Warrant, and does hereby irrevocably constitute and appoint _________________________________ Attorney to transfer the said Warrant on the books of the Company with full power of substitution. HOLDER: ------------------------------------------ Name: Dated: , ------------------ ------ In the presence of: - --------------------------------- Name: (NOTE: The signature of the Holder on the foregoing Assignment must correspond exactly to the name as written on the face of the Warrant, without any alteration, enlargement or change whatsoever.) 13 SUBSCRIPTION FORM The Undersigned, the Holder of the attached Warrant, hereby irrevocably elects to exercise purchase rights represented by such Warrant for, and to purchase thereunder, the following shares of Common Stock of FLOTEK INDUSTRIES, INC.:
Number of Shares Purchase Price Per Share
The undersigned herewith makes payment of $_____ therefor, and requests that certificates for such shares (and any warrants or other property issuable upon such exercise) be issued in the name of and delivered to __________ whose address is __________ and, if such shares shall not include all of the shares issuable under such warrant, that a new warrant of like tenor and date for the balance of the shares issuable thereunder be delivered to the undersigned. HOLDER: ------------------------------------------ Name: Dated: , ------------------ ------ EX-10.10 4 d80857a4ex10-10.txt FORM OF REGISTRATION RIGHTS AGREEMENT 1 ================================================================================ 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 ================================================================================ 2 TABLE OF CONTENTS
Page ---- 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
3 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. 4 (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 2 5 (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. 3 6 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 7 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 5 8 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 6 9 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 7 10 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. 8 11 (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, 9 12 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. 10 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 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 12 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 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] 14 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 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 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 20 -------------------------------------- Steven A. Webster, an individual -------------------------------------- Marlin Investors, L.L.C. By -------------------------------------- William R. Ziegler, Managing Member ----------------------------------------- Charles A. Dickinson, Jr. EX-99.1 5 d80857a4ex99-1.txt AGREEMENT PURSUANT TO RULE 13D-1(F)(1)(III) 1 EXHIBIT 99.1 Pursuant to Rule 13d-1(f)(1)(iii) of Regulation 13D-G of the General Rules and Regulations of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, the undersigned agrees that the statement to which this Exhibit is attached is filed on behalf of each of them in the capacities set forth below. /s/ DAVID S. HUNT --------------------------------------- David S. Hunt, individually and as attorney-in-fact for: TOSI, L.P. (1) PITMAN PROPERTY CORP. (2) J. W. BEAVERS, JR. (3) (1) A power of attorney authorizing David S. Hunt to act on behalf of TOSI, L.P. previously has been filed with the Commission. (2) A power of attorney authorizing David S. Hunt to act on behalf of Pitman Property Corp. previously has been filed with the Commission. (3) A power of attorney authorizing David S. Hunt to act on behalf of J. W. Beavers, Jr. previously has been filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----