8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 11, 2008

Flotek Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-13270	90-0023731
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2930 West Sam Houston Parkway North, Suite 300 Houston, Texas	77043
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (713) 849-9911

NOT APPLICABLE

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

Convertible Senior Notes Underwriting Agreement.

On February 11, 2008, Flotek Industries, Inc. (the “Company”) entered into an underwriting agreement (the “Notes Underwriting Agreement”) with the subsidiary guarantors named therein (the “Guarantors”) and Bear, Stearns & Co. Inc. (the “Underwriter”). The Notes Underwriting Agreement relates to the issuance and sale (the “Notes Offering”) of $100.0 million aggregate principle amount of the Company’s 5.25% Convertible Senior Notes due 2028 (the “Notes”). The Notes are guaranteed on a senior, unsecured basis by the Guarantors (the “Guarantee”). Pursuant to the Notes Underwriting Agreement, the Company granted the Underwriter a 13-day over-allotment option to purchase up to an additional $15.0 million aggregate principal amount of Notes. On February 12, 2008, the Underwriter notified the Company that it was exercising the over-allotment option for the full additional $15.0 million aggregate principal amount of the Notes.

The Notes Underwriting Agreement contains customary representations, warranties and agreements by the Company and the Guarantors, and customary conditions to closing, indemnification obligations of both the Company and the Guarantors, on the one hand, and the Underwriter, on the other hand, including for liabilities under the Securities Act of 1933, obligations of the parties and termination provisions.

The Company expects that the net proceeds from the Notes Offering will be approximately $111.1 million since the Underwriter’s over-allotment option has been exercised in full, after deducting the underwriting discounts and commissions and estimated cash offering costs payable by the Company. The Company expects to use the net proceeds from the Notes Offering to finance the purchase price of the previously announced asset acquisition of Teledrift, Inc. (“Teledrift”), which the Company anticipates closing either contemporaneously with, or shortly after, the closing of the Notes Offering, and for general corporate purposes. If the Company does not complete the acquisition of Teledrift, whether as a result of the failure to satisfy closing conditions or otherwise, the Company will use the net proceeds for general corporate purposes.

Common Stock Underwriting Agreement.

Concurrently with the Notes Offering, on February 11, 2008, the Company entered into an underwriting agreement (the “Stock Underwriting Agreement”) with Bear, Stearns International Limited (“BSIL”) and the Underwriter, as agent for BSIL. The Stock Underwriting Agreement relates to the issuance and delivery to BSIL (the “Stock Offering”) of 3,800,000 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock” and, together with the Notes, the “Securities”). The Stock Underwriting Agreement contemplates that the Underwriter will sell the shares of Common Stock loaned to BSIL in accordance with the Share Lending Agreement (as defined below). Under the Stock Underwriting Agreement, the Underwriter will initially offer 3,138,200 loaned shares of Common Stock to the public at $17.50 per share in a fixed price offering and, following such offering, will offer additional loaned shares in variable price offerings from time to time on the terms and in the amounts the Underwriter deems advisable. Accordingly, the Company will not receive any proceeds from the sale of the Common Stock, but will receive a nominal lending fee of $0.0001 per share from BSIL for use of the shares. BSIL or its affiliate will receive all the proceeds from the sale of the shares.

The Stock Underwriting Agreement contains customary representations, warranties and agreements by the Company, and customary conditions to closing, indemnification obligations of the Company, on the one hand, and the Underwriter, on the other hand, including for liabilities under the Securities Act of 1933, obligations of the parties and termination provisions.

The Securities will be offered pursuant to the Company’s shelf registration statement (the “Registration Statement”) on Form S-3 (File No. 333-148384), which was originally declared effective December 28, 2007 and subsequently amended by Post-Effective Amendment No. 1 filed on February 5, 2008, and related prospectuses filed with the Securities and Exchange Commission.

The description of the Notes Underwriting Agreement and Stock Underwriting Agreement contained herein is qualified in its entirety by reference to the Notes Underwriting Agreement and Stock Underwriting Agreement attached hereto as Exhibit 1.1 and Exhibit 1.2, respectively, and incorporated herein by reference.

Share Lending Agreement.

On February 11, 2008, and in connection with the transactions contemplated by the Stock Underwriting Agreement and the Notes Underwriting Agreement, the Company entered into a share lending agreement (the “Share Lending Agreement”) with BSIL and the Underwriter, as agent for BSIL. Under this agreement, the Company agreed to loan to BSIL 3,800,000 shares of Common Stock during a period beginning the date the Company entered into the Share Lending Agreement and ending on February 15, 2028, or earlier, if the Company notifies BSIL in writing of its intent to terminate the Share Lending Agreement in accordance

with the agreement’s terms or in certain other circumstances. BSIL has notified the Company that it will borrow 3,800,000 shares on the closing date of the Stock Offering described above. The Company will not receive any proceeds from the sale of the borrowed shares of Common Stock pursuant to the Share Lending Agreement, but the Company will receive a loan fee of $0.0001 per share for each share of Common Stock that the Company loans to BSIL. Under the Share Lending Agreement, BSIL is permitted to use the shares borrowed from the Company and offered in the Stock Offering only for the purpose of directly or indirectly facilitating the sale of the Notes and the hedging of the Notes by holders.

The delivery of the shares of Common Stock under the Share Lending Agreement is contingent upon the closing of the Notes Offering, and the closing of the Notes Offering is contingent upon the delivery by the Company of 3,800,000 borrowed shares pursuant to the Share Lending Agreement. Share loans under the Share Lending Agreement will terminate and the borrowed shares must be returned to the Company if the Notes Offering is not consummated or upon the termination of the loan availability period (as described in the Share Lending Agreement), as well as under the following circumstances:

• BSIL may terminate all or any portion of a loan at any time; and

• The Company may terminate any or all of the outstanding loans upon a default by BSIL under the Share Lending Agreement, including a breach by BSIL of any of its representations and warranties, covenants or agreements under the Share Lending Agreement, or the bankruptcy of BSIL.

In addition, upon the conversion of the Notes, a number of shares of Common Stock proportional to the conversion rate for such Notes must be returned to the Company. Any borrowed shares returned to the Company cannot be reborrowed.

Any shares that the Company loans to BSIL will be issued and outstanding for corporate law purposes, and accordingly, the holders of the borrowed shares will have all of the rights of a holder of the Company’s outstanding shares, including the right to vote the shares on all matters submitted to a vote of the Company’s shareholders and the right to receive any dividends or other distributions that the Company may pay or makes on its outstanding shares of Common Stock. However, under the Share Lending Agreement, BSIL has agreed:

• To pay, within one business day after the relevant payment date, to the Company an amount equal to any cash dividends that the Company pays on the borrowed shares; and

• To pay or deliver to the Company, upon termination of the loan of borrowed shares, any other distribution, in liquidation or otherwise, that the Company makes on the borrowed shares.

To the extent the borrowed shares the Company initially lends under the Share Lending Agreement and offered in the Stock Offering have not been sold or returned to the Company, BSIL has agreed that it will not vote any such borrowed shares of which it is the record owner. BSIL has also agreed under the Share Lending Agreement that it will not transfer or dispose of any borrowed shares, other than to its affiliates, unless such transfer or disposition is pursuant to a registration statement that is effective under the Securities Act. However, investors that purchase the shares from BSIL (and any subsequent transferees of such purchasers) will be entitled to the same voting rights with respect to those shares as any other holder of Common Stock.

In view of the contractual undertakings of BSIL in the Share Lending Agreement, which have the effect of substantially eliminating the economic dilution that otherwise would result from the issuance of the borrowed shares, the Company believes that under U.S. generally accepted accounting principles currently in effect, the borrowed shares will not be considered outstanding for the purpose of computing and reporting the Company’s earnings per share.

The description of the terms of the Share Lending Agreement contained herein is qualified in its entirety by reference to the Share Lending Agreement attached hereto as Exhibit 10.1 and incorporated herein by reference.

Item 7.01 Regulation FD Disclosure

Pursuant to Regulation FD, the Company issued a press release on February 12, 2008, announcing the pricing of the Notes Offering and the Stock Offering, and entry into the Share Lending Agreement. A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.

Pursuant to General Instruction B.2 of Form 8-K, the information furnished in this Item 7.01, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability provisions of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number	Description
1.1	Underwriting Agreement, dated February 11. 2008, among Flotek Industries, Inc., the guarantors party thereto and Bear, Stearns & Co. Inc.
1.2	Underwriting Agreement, dated February 11, 2008, among Flotek Industries, Inc., Bear, Stearns & Co. Inc. and Bear, Stearns International Limited.
10.1	Share Lending Agreement, dated February 11, 2008, by and among Flotek Industries, Inc., Bear, Stearns & Co. Inc. and Bear, Stearns International Limited.
99.1	Press Release of Flotek Industries, Inc. dated February 12, 2008.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FLOTEK INDUSTRIES, INC.
Date: February 12, 2008	/s/ Lisa G. Meier
	Lisa G. Meier Chief Financial Officer & Vice President

EXHIBIT INDEX

Exhibit Number	Description
1.1	Underwriting Agreement, dated February 11. 2008, among Flotek Industries, Inc., the guarantors party thereto and Bear, Stearns & Co. Inc.
1.2	Underwriting Agreement, dated February 11, 2008, among Flotek Industries, Inc., Bear, Stearns & Co. Inc. and Bear, Stearns International Limited.
10.1	Share Lending Agreement, dated February 11, 2008, by and among Flotek Industries, Inc., Bear, Stearns & Co. Inc. and Bear, Stearns International Limited.
99.1	Press Release of Flotek Industries, Inc. dated February 12, 2008.

EX-1.1

Exhibit 1.1

$100,000,000

5.25% Senior Convertible Notes Due 2028

FLOTEK INDUSTRIES, INC.

UNDERWRITING AGREEMENT

February 11, 2008

BEAR, STEARNS & CO. INC.

383 Madison Avenue

New York, New York 10179

Ladies/Gentlemen:

Flotek Industries, Inc., a corporation organized and existing under the laws of Delaware (the “Company”), proposes, subject to the terms and conditions stated herein, to issue and sell to Bear, Stearns & Co. Inc. (“Bear Stearns” or the “Underwriter”) $100,000,000 aggregate principal amount (the “Firm Securities”) of its 5.25% Senior Convertible Notes Due 2028 (the “Notes”), and, for the sole purpose of covering over-allotments in connection with the sale of the Firm Securities, at the option of the Underwriter, up to an additional $15,000,000 aggregate principal amount (the “Additional Securities”) of its 5.25% Senior Convertible Notes Due 2028. The Firm Securities and any Additional Securities purchased by the Underwriter, together with the Guarantees (as defined below) are referred to herein as the “Securities”. The Securities will be irrevocably and unconditionally guaranteed (the “Guarantees”) by the subsidiaries of the Company listed in Exhibit A hereto that have signed this Agreement (each a “Guarantor” and, collectively, the “Guarantors”), and all to be issued under an indenture, dated as of February 14, 2008 (the “Base Indenture”), between the Company and American Stock Transfer & Trust Company, as Trustee (the “Trustee”), as supplemented by a First Supplemental Indenture thereto, to be dated as of the Closing Date (as defined below) (the “First Supplemental Indenture”), among the Company, the Guarantors and the Trustee. The Base Indenture, as supplemented by the First Supplemental Indenture, is hereafter called the “Indenture”. The Securities will be convertible into shares (the “Underlying Shares”) of common stock of the Company, par value $0.0001 per share (the “Common Stock”), subject to and in accordance with the terms of the Securities. Bear Stearns is acting as the sole manager and underwriter in connection with the offering and sale of the Securities contemplated herein (the “Offering”).

Concurrently with the Offering, the Company, subject to the terms and conditions stated in the Common Stock Underwriting Agreement (as defined below) and the Share Lending Agreement (the “Share Lending Agreement”) dated February 11, 2008 between the Company, Bear, Stearns International Limited (“BSIL”) and Bear Stearns, is issuing and lending to BSIL a share loan up to 3,800,000 shares of its Common Stock, and Bear Stearns proposes to offer (the “Common Stock Offering”) such number of loaned shares as Bear Stearns deems advisable, in an offering registered under the Securities Act of 1933, as amended (the “Act”) by means of a

prospectus supplement. Bear Stearns is acting as the underwriter in the Convertible Notes Offering. The Company and Bear Stearns will be entering into an Underwriting Agreement (the “Common Stock Underwriting Agreement”) with respect to the Common Stock Offering.

1. Representations and Warranties of the Company. The Company and each of the Guarantors jointly and severally hereby represent, and warrant to, and agree with, the Underwriter that:

(a) The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), relating to the Securities, on Form S-3 (No. 333-148384) (the initial filing being referred to as the “Initial Registration Statement”); and such Initial Registration Statement, and any post-effective amendment thereto, each in the form previously delivered to you, became effective upon filing, in such form. No document other than Post-Effective Amendment No. 1 to the Initial Registration Statement and any preliminary prospectus supplements with respect to the Initial Registration Statement has heretofore been filed with the Commission. The various parts of the Initial Registration Statement including all exhibits thereto and including (i) the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act in accordance with Section 4(a) hereof and deemed by virtue of Rule 430B under the Securities Act to be part of the Initial Registration Statement at the time it became effective under the Securities Act with respect to the Underwriter, and (ii) the documents incorporated by reference in the prospectus contained in the Initial Registration Statement at the time such part of the Initial Registration Statement becomes effective, each as amended at the time such part of the Initial Registration Statement became or hereafter becomes effective under the Securities Act with respect to the Underwriter, are hereafter collectively referred to as the “Registration Statement.” Any reference to any amendment to the Registration Statement shall be deemed to refer to and include any annual report of the Company filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), after the effective date of the Initial Registration Statement that is incorporated by reference therein. No stop order suspending the effectiveness of the Initial Registration Statement or any post-effective amendment thereto has been issued and no proceeding for that purpose has been initiated or, to the knowledge of the Company, threatened by the Commission.

The final prospectus supplement together with the base prospectus included in the Initial Registration Statement, in the form in which it has most recently been filed with the Commission on or prior to the date of this Agreement (the “Base Prospectus”) relating to the Securities, in the form filed with the Commission pursuant to Rule 424(b) under the Securities Act, is hereafter referred to as the “Prospectus”. Any preliminary prospectus supplement together with the Base Prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424 under the Securities Act is hereafter referred to as a “Preliminary Prospectus;” and the Preliminary Prospectus relating to the Securities dated February 5, 2008, is hereafter referred to as the “Pricing Prospectus”. Any “issuer free writing prospectus” (as defined in Rule 433 under the Securities Act) relating to the Securities is hereafter referred to as an “Issuer Free Writing Prospectus”; and the Pricing Prospectus, as supplemented by the Issuer Free Writing Prospectuses, if any, attached and listed in Annex III hereto, taken together, are hereafter referred to collectively as the “Pricing Disclosure

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Package”. Any reference herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 that were filed under the Exchange Act on or before the date of such Preliminary Prospectus or Prospectus, as the case may be; and any reference herein to any “amendment” or “supplement” to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include (i) the filing of any document under the Exchange Act after the date of such Preliminary Prospectus or Prospectus, as the case may be, which is incorporated therein by reference and (ii) any such document so filed.

The Company was not an “ineligible issuer” (as defined in Rule 405 under the Securities Act) as of the eligibility determination date for purposes of Rules 164 and 433 under the Securities Act with respect to the offering of the Securities contemplated hereby.

All references in this Agreement to the Registration Statement, any Preliminary Prospectus, Issuer Free Writing Prospectus, the Pricing Prospectus or the Prospectus, or any amendments or supplements to any of the foregoing, shall be deemed to include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System.

(b) At the time of initial filing of the Registration Statement the Company was a “well known seasoned issuer” as defined in Rule 405 under the Securities Act, including not having been an “ineligible issuer” as defined in Rule 405 under the Securities Act. The Registration Statement is an “automatic shelf registration statement,” as defined in Rule 405 under the Securities Act. Neither the Company nor any person acting on its behalf (within the meaning for this clause only, of Rule 163(c)) has made any offer relating to the Securities in reliance on the exemption of Rule 163.

If immediately prior to the Renewal Deadline (as hereinafter defined), any of the Securities remain unsold by the Underwriter and the Underwriter has so informed the Company in writing, the Company will prior to the Renewal Deadline file, if it has not already done so and is eligible to do so, a new automatic shelf registration statement relating to the Securities, in a form reasonably satisfactory to the Underwriter. If the Company is no longer eligible to file an automatic shelf registration statement, the Company will prior to the Renewal Deadline, if it has not already done so, file a new shelf registration statement relating to the Securities, in a form reasonably satisfactory to the Underwriter, and will use its commercially reasonable efforts to cause such registration statement to be declared effective promptly thereafter. The Company will take all other action reasonably necessary or appropriate to permit the public offering and sale of the Securities to continue as contemplated in the expired registration statement relating to the Securities. References herein to the Registration Statement shall include such new automatic shelf registration statement or such new shelf registration statement, as the case may be. “Renewal Deadline” means the third anniversary of the initial effective time of the Registration Statement.

The Company has not received from the Commission any notice pursuant to Rule 401(g)(2) objecting to use of the automatic shelf registration statement form. If at any time when Securities remain unsold by the Underwriter the Company receives from the Commission a notice pursuant to Rule 401(g)(2) or otherwise ceases to be eligible to use the automatic shelf

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registration statement form, the Company will (i) promptly notify the Underwriter, (ii) promptly file a new registration statement or post-effective amendment on the proper form relating to the Securities, in a form satisfactory to the Underwriter, (iii) use its reasonable best efforts to cause such registration statement or post-effective amendment to be declared effective as soon as practicable, and (iv) promptly notify the Underwriter of such effectiveness. The Company will take all other action necessary or appropriate to permit the public offering and sale of the Securities to continue as contemplated in the registration statement that was the subject of the Rule 401(g)(2) notice or for which the Company has otherwise become ineligible. References herein to the Registration Statement shall include such new registration statement or post-effective amendment, as the case may be.

The Company has paid or shall pay the required Commission filing fees relating to the Securities within the time required by Rule 456(b)(1) without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r).

(c) The Registration Statement complies and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will comply in all material respects with the applicable provisions of the Securities Act, the Exchange Act, the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”) and the rules and regulations of the Commission thereunder (the “Rules and Regulations”), and do not and will not, as of the applicable effective date as to each part of the Registration Statement and as of the applicable filing date as to the Prospectus and any amendment thereof or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein (i) in the case of the Registration Statement, not misleading and (ii) in the case of the Prospectus, in the light of the circumstances under which they were made not misleading; provided, however, that this representation and warranty shall not apply to any information contained in or omitted from the Registration Statement or the Prospectus or any amendment thereof or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by the Underwriter specifically for use therein. The parties hereto agree that such information provided by the Underwriter consists solely of the material referred to in Section 16 hereof.

(d) No order preventing or suspending the use of any Preliminary Prospectus or any Issuer Free Writing Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, complied in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the Rules and Regulations, and did not contain 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, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any information contained in or omitted from any Preliminary Prospectus in reliance upon and in conformity with information furnished in writing to the Company by the Underwriter specifically for use therein. The parties hereto agree that such information provided by the Underwriter consists solely of the material referred to in Section 16 hereof.

(e) For purposes of this Agreement, the “Applicable Time” is 7:30 p.m. New York time on February 11, 2008. The Pricing Disclosure Package, as of the Applicable Time, did not, and as of the Closing Date and the Additional Closing Date, if any (each as hereinafter

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defined), will not, contain 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, in light of the circumstances under which they were made, not misleading. Each Issuer Free Writing Prospectus complies in all material respects with the applicable provisions of the Securities Act and the Rules and Regulations, and does not include information that conflicts with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus, and each Issuer Free Writing Prospectus not listed in Annex III hereto, as supplemented by and taken together with the Pricing Disclosure Package, as of the Applicable Time, did not, and as of the Closing Date and the Additional Closing Date, if any, will not, contain 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, in light of the circumstances under which they were made, not misleading. No representation and warranty is made in this Section 1(e) with respect to any information contained in or omitted from the Pricing Disclosure Package or any Issuer Free Writing Prospectus in reliance upon and in conformity with information furnished in writing to the Company by the Underwriter specifically for use therein. The parties hereto agree that such information provided by the Underwriter consists solely of the material referred to in Section 16 hereof.

(f) UHY LLP, who have certified the financial statements and supporting schedules and information of the Company and its subsidiaries that are included or incorporated by reference in the Registration Statement, the Pricing Prospectus or the Prospectus, and Elms, Faris & Company, LLP, whose reports appear or are incorporated by reference in the Registration Statement, the Pricing Prospectus or the Prospectus, who have certified certain other financial statements and supporting schedules and information of Teal Supply Co. (d/b/a Triumph Drilling Tools, Inc.) that are included or incorporated in the Registration Statement, the Pricing Prospectus or the Prospectus, each are independent public accountants as required by the Securities Act, the Exchange Act and the Rules and Regulations.

(g) Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except as disclosed in the Pricing Disclosure Package, (i) the Company has not declared or paid any dividends, or made any other distribution of any kind, on or in respect of its capital stock, (ii) there has not been any material change in the capital stock or long-term or short-term debt of the Company or any of its subsidiaries listed in Exhibit A hereto (each, a “Subsidiary” and, collectively, the “Subsidiaries”), (iii) neither the Company nor any Subsidiary has sustained any material loss or interference with its business or properties from fire, explosion, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding, and (iv) there has not been any material adverse change or any development involving a prospective material adverse change, whether or not arising from transactions in the ordinary course of business, in or affecting the business, financial condition, results of operations, stockholders’ equity, properties or prospects of the Company and the Subsidiaries, taken as a whole (a “Material Adverse Change”). Since the date of the latest balance sheet included, or incorporated by reference, in the Registration Statement and the Pricing Disclosure Package, neither the Company nor any Subsidiary has incurred or undertaken any liabilities or obligations, whether direct or indirect, liquidated or contingent, matured or unmatured, or entered into any transactions, including any acquisition or disposition of any business or asset, which are material to the Company and the Subsidiaries, taken as a whole, except for liabilities, obligations and transactions which are disclosed in the Pricing Disclosure Package.

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(h) The Company has an authorized capitalization as set forth in the Pricing Disclosure Package, and all of the issued and outstanding shares of capital stock of the Company are fully paid and non-assessable and have been duly and validly authorized and issued, in compliance with all applicable state, federal and foreign securities laws and were not issued in violation of or subject to any preemptive or similar right that entitles any person to acquire from the Company or any Subsidiary any Common Stock or other equity security of the Company or any security convertible into, or exercisable or exchangeable for, Common Stock or any other such security (any “Relevant Security”), except for such rights as may have been fully satisfied or waived prior to the effectiveness of the Registration Statement.

(i) The Securities to be delivered on the Closing Date and the Additional Closing Date (as hereinafter defined), if any, have been duly and validly authorized and, when issued and delivered in accordance with this Agreement and duly authenticated pursuant to the Indenture, will be duly and validly issued, fully paid and non-assessable, will have been issued in compliance with all applicable state, federal and foreign securities laws, will constitute valid and legally binding obligations of the Company and the Guarantors entitled to the benefits provided in the Indenture and will not have been issued in violation of or subject to any preemptive or similar right that entitles any person to acquire any Relevant Security from the Company or the Guarantors. The Common Stock and the Securities conform to the descriptions thereof contained in the Registration Statement, the Pricing Prospectus and the Prospectus. Except as disclosed in the Registration Statement and the Pricing Disclosure Package, the Company has no outstanding warrants, options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, or any contracts or commitments to issue or sell, any Relevant Security, except for grants of options subsequent to the date of this agreement pursuant to the Company’s employee benefit plans, which plans are disclosed in the Pricing Disclosure Package. Except as disclosed in the Registration Statement and the Pricing Disclosure Package, no holder of any Relevant Security has any rights to require registration under the Securities Act of any Relevant Security in connection with the offer and sale of the Securities contemplated hereby, and any such rights so disclosed have either been fully complied with by the Company or effectively waived by the holders thereof.

(j) All of the issued shares of capital stock of or other ownership interests in each Subsidiary have been duly and validly authorized and issued and are fully paid and non-assessable and except as disclosed in the Pricing Disclosure Package are owned directly or indirectly by the Company free and clear of any lien, charge, mortgage, pledge, security interest, claim, equity, trust or other encumbrance, preferential arrangement, defect or restriction of any kind whatsoever (any “Lien”).

(k) The Subsidiaries listed on Exhibit A are the only subsidiaries of the Company (within the meaning of Rule 405 under the Securities Act) except for Petrovalve International Inc. Each of the Company and each Subsidiary has been duly organized and validly exists as a corporation, partnership or limited liability company in good standing under the laws of its jurisdiction of organization. Each of the Company and each Subsidiary is duly qualified to do business and is in good standing as a foreign corporation, partnership or limited liability

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company in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing which taken as a whole could not reasonably be expected to have (i) a material adverse effect on the business, financial condition, results of operations, stockholders’ equity, properties or prospects of the Company and the Subsidiaries, taken as a whole; or (ii) an adverse effect on the ability of the Company to consummate the Offering, the pending acquisition of Teledrift Inc. or any other transaction contemplated by this Agreement, the Share Lending Agreement and the Common Stock Underwriting Agreement (a “Material Adverse Effect”).

(l) Each of the Company and each Subsidiary has all requisite power and authority, and all necessary consents, approvals, authorizations, orders, registrations, qualifications, licenses, filings and permits of, with and from all judicial, regulatory and other legal or governmental agencies and bodies and all third parties, foreign and domestic (collectively, the “Consents”), to own, lease and operate its properties and conduct its business as it is now being conducted and as disclosed in the Registration Statement and the Pricing Prospectus, and each such Consent is valid and in full force and effect, except in each case as could not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary has received notice of any investigation or proceedings which, if decided adversely to the Company or any such Subsidiary, could reasonably be expected to result in, the revocation of, or imposition of a materially burdensome restriction on, any such Consent.

(m) This Agreement has been duly and validly authorized, executed and delivered by the Company and the Guarantors.

(n) The Indenture has been duly authorized and, when executed and delivered by the Company and the Guarantors (assuming the authorization, execution and delivery by the Trustee), shall constitute a valid and legally binding instrument of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, moratorium, reorganization and laws of general applicability relating to or affecting creditors’ rights and general equity principles (regardless of whether enforceability is considered in a proceeding in equity or at law) and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. The Indenture conforms, in all material respects, to the description thereof in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(o) Upon issuance and delivery of the Securities in accordance with this Agreement and the Indenture, the Securities (except the Guarantees) will be convertible at the option of the holder thereof into the Underlying Shares in accordance with the terms of the Securities (except the Guarantees); the Underlying Shares reserved for issuance upon conversion of the Securities (except the Guarantees) have been duly authorized and reserved and, when issued upon conversion of the Securities in accordance with the terms of the Securities, will be duly and validly issued, in compliance with all applicable state, federal and foreign securities laws, and will be fully paid and non assessable, and the issuance of the Underlying Shares will not be subject to any preemptive or similar rights.

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(p) The issue and sale of the Securities, the compliance by the Company and the Guarantors with this Agreement, the Indenture and the terms of the Securities and the consummation of the transactions herein contemplated do not and will not (i) conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or result in the creation or imposition of any Lien upon any property or assets of the Company or any Subsidiary pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement, instrument, franchise, license or permit to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or their respective properties, operations or assets may be bound or (ii) violate or conflict with any provision of the certificate or articles of incorporation, by-laws, certificate of formation, limited liability company agreement, partnership agreement or other organizational documents of the Company or any Subsidiary, or (iii) violate or conflict with any statute, law, rule, regulation, ordinance, directive, judgment, decree or order of any court or governmental or regulatory agency or body having jurisdiction over the Company and each Subsidiary, except, in the case of clauses (i) and (iii) above, as could not reasonably be expected to have a Material Adverse Effect.

(q) The certificates for the Underlying Shares conform to the requirements of the New York Stock Exchange and the Delaware General Corporation Law.

(r) No Consent of or with any court, governmental or regulatory agency or body or any third party having jurisdiction over the Company and each Subsidiary, is required for the execution, delivery and performance of this Agreement or consummation of the transactions contemplated by this Agreement, except the registration under the Securities Act of the Securities and such consents as may be required under state securities or blue sky laws or the by-laws and rules of the Financial Industry Regulatory Authority (the “FINRA”) in connection with the purchase and distribution of the Securities by the Underwriter, each of which has been obtained and is in full force and effect.

(s) Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no legal, governmental or regulatory proceedings pending to which the Company or any Subsidiary is a party or of which any property, operations or assets of the Company or any Subsidiary is the subject which, taken as a whole, if determined adversely to the Company or any Subsidiary, could reasonably be expected to have a Material Adverse Effect; to the Company’s knowledge, no such proceeding is threatened or contemplated.

(t) The financial statements and pro forma data, including the notes thereto, and the supporting schedules included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus present fairly, in all material respects, the financial position as of the dates indicated and the cash flows and results of operations for the periods specified of the Company and its consolidated subsidiaries and the other entities for which financial statements are included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus; except as otherwise stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, said financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis throughout the periods involved; and the supporting schedules included in the Registration Statement, the Pricing Disclosure Package and

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the Prospectus present fairly, in all material respects, the information required to be stated therein. No other financial statements or supporting schedules are required to be included in the Registration Statement, the Pricing Disclosure Package or the Prospectus by the Securities Act, the Exchange Act or the Rules and Regulations. The other financial and statistical information included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus present fairly the information included therein and have been prepared on a basis consistent with that of the financial statements that are included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus and the books and records of the respective entities presented therein.

(u) The pro forma financial statements included in the Registration Statement, the Pricing Prospectus and the Prospectus have been properly compiled and prepared in accordance with the applicable requirements of the Securities Act, the Exchange Act and the Rules and Regulations and include all adjustments necessary to present fairly in accordance with United States generally accepted accounting principles the pro forma financial position of the respective entity or entities presented therein at the respective dates indicated and their cash flows and the results of operations for the respective periods specified.

(v) The statistical, industry-related and market-related data included in the Registration Statement, the Pricing Disclosure Package and the Prospectus are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate.

(w) The Common Stock has been registered pursuant to Section 12(b) of the Exchange Act. The shares of Common Stock are listed on the New York Stock Exchange (the “NYSE”), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the NYSE, nor has the Company received any notification that the Commission or the NYSE is contemplating terminating such registration or listing; the Company will reserve and keep available at all times, free of pre-emptive rights, shares of Common Stock for the purpose of enabling the Company to satisfy all obligations to issue the Underlying Shares upon any conversion of the Securities.

(x) The Company maintains a system of internal accounting and other controls over the Company and its Subsidiaries sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with United States generally accepted accounting principles and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accounting for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(y) The Company maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that complies with the requirements of the Exchange Act and has been designed by the Company’s principal executive officer and principal financial officer, or under their supervision, to provide reasonable

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assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company’s internal control over financial reporting was effective as of September 30, 2007, there have been no changes to such internal controls since September 30, 2007 and, based on work completed to date in the ordinary course of business, the Company has no reason to believe its internal control over financial reporting is not presently effective; and the Company is not aware of any material weaknesses in its internal control over financial reporting. Since the date of the latest audited financial statements included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

(z) The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its subsidiaries is made known to the Company’s principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective.

(aa) There is and has been no failure on the part of the Company or any of its directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”), including, without limitation, Section 402 related to loans and Sections 302 and 906 related to certifications.

(bb) Neither the Company nor any of its affiliates (within the meaning of Rule 144 under the Securities Act) has taken, directly or indirectly, any action which constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Securities.

(cc) Neither the Company nor any of its affiliates (within the meaning of Rule 144 under the Securities Act) has, prior to the date hereof, made any offer or sale of any securities which could be “integrated” (within the meaning of the Securities Act and the Rules and Regulations) with the offer and sale of the Securities pursuant to the Registration Statement.

(dd) The statements set forth in the Registration Statement, the Pricing Disclosure Package and Prospectus under the captions “Description of Debt Securities”, “Description of the Notes” and “Description of Capital Stock”, insofar as they purport to constitute a summary of the terms of the Securities and the Common Stock, and under the caption “U.S. Federal Income Tax Considerations”, insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair in all material respects.

(ee) The Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and files periodic reports with the Commission, and the conditions for

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use of Form S-3 to register and offer the Securities under the Securities Act have been satisfied. The documents incorporated or deemed to be incorporated by reference in the Pricing Prospectus and the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Securities Act, the Exchange Act and the Rules and Regulations and, when read together with the other information in the Pricing Prospectus or the Prospectus, as applicable, do not contain 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, in the light of the circumstances under which they were made, not misleading.

(ff) Neither the Company nor any Guarantor is and, at all times up to and including consummation of the transactions contemplated by this Agreement, and after giving effect to application of the net proceeds of the Offering as described in the Registration Statement, the Pricing Prospectus and the Prospectus, will not be, required to register as an “investment company” under the Investment Company Act of 1940, as amended, and is not and will not be an entity “controlled” by an “investment company” within the meaning of such act.

(gg) Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or the Underwriter for a brokerage commission, finder’s fee or other like payment in connection with the transactions contemplated by this Agreement or, to the Company’s knowledge, any arrangements, agreements, understandings, payments or issuance with respect to the Company or any of its officers, directors, shareholders, partners, employees, Subsidiaries or affiliates that may affect the Underwriter’s compensation as determined by the FINRA.

(hh) Each of the Company and each Subsidiary owns or leases all such properties as are necessary to the conduct of its business as presently operated and as proposed to be operated as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The Company and the Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of any and all Liens except such as are described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or such as do not taken as a whole materially affect the value of such property or materially interfere with the use made or proposed to be made of such property by the Company and the Subsidiaries; and any real property and buildings held under lease or sublease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material to, and do not materially interfere with, the use made and proposed to be made of such property and buildings by the Company and the Subsidiaries. Neither the Company nor any Subsidiary has received any notice of any claim adverse to its ownership of any real or personal property or of any claim against the continued possession of any real property, whether owned or held under lease or sublease by the Company or any Subsidiary.

(ii) Each of the Company and each Subsidiary (i) owns or possesses the right to use all patents, patent applications, trademarks, service marks, domain names, trade names, trademark registrations, service mark registrations, copyrights, licenses, formulae, customer lists, and know-how and other intellectual property (including trade secrets and other unpatented

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and/or unpatentable proprietary or confidential information, systems or procedures, “Intellectual Property”) necessary for the conduct of their respective businesses as presently conducted and as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus and (ii) has no reason to believe that the conduct of their respective businesses does or will conflict with, and have not received any notice of any claim of conflict with, any such right of others. The Company has taken and will maintain reasonable measures to prevent the unauthorized dissemination or publication of the confidential information of the Company or its subsidiaries. To the Company’s knowledge, there is no infringement by third parties of any such Intellectual Property; there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the Company’s or any Subsidiary’s rights in or to any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company or any Subsidiary infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim.

(jj) The Company and the Subsidiaries maintain insurance in such amounts and covering such risks as the Company reasonably considers adequate for the conduct of its business and the value of its properties and as is customary for companies engaged in similar businesses in similar industries, all of which insurance is in full force and effect, except where the failure to maintain such insurance could not reasonably be expected to have a Material Adverse Effect. There are no material claims by the Company or any Subsidiary under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause. The Company reasonably believes that it will be able to renew its existing insurance as and when such coverage expires or will be able to obtain replacement insurance adequate for the conduct of the business and the value of its properties at a cost that would not have a Material Adverse Effect.

(kk) Each of the Company and each Subsidiary has accurately prepared and timely filed all federal, state, foreign and other tax returns that are required to be filed by it and has paid or made provision for the payment of all taxes, assessments, governmental or other similar charges, including without limitation, all sales and use taxes and all taxes which the Company or any Subsidiary is obligated to withhold from amounts owing to employees, creditors and third parties, with respect to the periods covered by such tax returns (whether or not such amounts are shown as due on any tax return) except such as are immaterial in amount. No deficiency assessment with respect to a proposed adjustment of the Company’s or any Subsidiary’ federal, state, local or foreign taxes is pending or, to the best of the Company’s knowledge, threatened, except such as are immaterial in amount. The accruals and reserves on the books and records of the Company and the Subsidiaries in respect of tax liabilities for any taxable period not finally determined are adequate to meet any assessments and related liabilities for any such period in all material respects and, since December 31, 2006, the Company and the Subsidiaries have not incurred any liability for taxes other than in the ordinary course of its business. There is no tax lien, whether imposed by any federal, state, foreign or other taxing authority, outstanding against the assets, properties or business of the Company or any Subsidiary.

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(ll) No labor disturbance by the employees of the Company or any Subsidiary exists or, to the best of the Company’s knowledge, is imminent and the Company is not aware of any existing or imminent labor disturbances by the employees of any of its or any Subsidiary’s principal suppliers, manufacturers’, customers or contractors, which, in either case (individually or in the aggregate), could reasonably be expected to have a Material Adverse Effect.

(mm) No “prohibited transaction” (as defined in either Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”) or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)), “accumulated funding deficiency” (as defined in Section 302 of ERISA) or other event of the kind described in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan for which the Company or any Subsidiary would have any liability which could, taken as a whole, reasonably be expected to have a Material Adverse Effect; each employee benefit plan for which the Company or any Subsidiary would have any liability is in compliance in all material respects with applicable law, including (without limitation) ERISA and the Code; the Company has not incurred and does not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from any “pension plan”; and each plan for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification.

(nn) There has been no storage, generation, transportation, handling, use, treatment, disposal, discharge, emission, contamination, release or other activity involving any kind of hazardous, toxic or other wastes, pollutants, contaminants, petroleum products or other hazardous or toxic substances, chemicals or materials (“Hazardous Substances”) by, due to, on behalf of, or caused by the Company or any Subsidiary (or, to the Company’s knowledge, any other entity for whose acts or omissions the Company is or may be liable) upon any property now or previously owned, operated, used or leased by the Company or any Subsidiary, or upon any other property, which would be a violation of or give rise to any liability under any applicable law, rule, regulation, order, judgment, decree or permit, common law provision or other legally binding standard relating to pollution or protection of human health and the environment (“Environmental Law”), except for violations and liabilities which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. There has been no disposal, discharge, emission contamination or other release of any kind at, onto or from any such property or into the environment surrounding any such property of any Hazardous Substances with respect to which the Company or any Subsidiary has knowledge, except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary has agreed to assume, undertake or provide indemnification for any liability of any other person under any Environmental Law, including any obligation for cleanup or remedial action, except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. There is no pending or, to the best of the Company’s knowledge, threatened administrative, regulatory or judicial action, claim or notice of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any Subsidiary. No property of the Company or any Subsidiary is subject to any Lien under any Environmental Law. Neither the Company nor any Subsidiary is subject to any order, decree, agreement or other individualized legal requirement related to any Environmental Law.

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(oo) The Company has made available to the Underwriter the Asset Purchase Agreement, dated as of February 4, 2008, by and among the Company, Teledrift Acquisition, Inc., Teledrift, Inc. and certain stockholders named therein (the “Teledrift Purchase Agreement”). The Teledrift Purchase Agreement is in full force and effect as of the date hereof in the form heretofore provided to the Underwriter. With respect to the acquisition contemplated by the Teledrift Purchase Agreement (the “Acquisition”), the Company represents that:

1. The Company is not currently aware of any events, circumstances or facts that would cause the representations or warranties of Teledrift in the Teledrift Purchase Agreement to be inaccurate other than inaccuracies which would not result in a Material Adverse Effect; and

2. Other than consents and approvals from governmental agencies referenced in the Teledrift Purchase Agreement and receipt of the proceeds of this Offering, the Company is not currently aware of any events, circumstances or facts that would prevent the Company from consummating the Acquisition.

(pp) None of the Company, any Subsidiary or, to the Company’s knowledge, any of its employees or agents, has at any time during the last five years (i) made any unlawful contribution to any candidate for foreign office, or failed to disclose fully any such contribution in violation of law, or (ii) made any payment to any federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States of any jurisdiction thereof. The operations of the Company and each Subsidiary are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened. Neither the Company nor any Subsidiary nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

(qq) Neither the Company nor any Subsidiary (i) is in violation of its certificate or articles of incorporation, by-laws, certificate of formation, limited liability company agreement, partnership agreement or other organizational documents, (ii) is in default under, and

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no event has occurred which, with notice or lapse of time or both, would constitute a default under or result in the creation or imposition of any Lien upon any property or assets of the Company or any Subsidiary pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject, or (iii) is in violation of any statute, law, rule, regulation, ordinance, directive, judgment, decree or order of any court, or governmental or regulatory agency or body, having jurisdiction over the Company and any of its Subsidiaries, except (in the case clauses (ii) and (iii) above) for violations or defaults that could not (individually or in the aggregate), reasonably be expected to have a Material Adverse Effect.

(rr) The Company has complied with the requirements of Rule 433 under the Securities Act with respect to each Issuer Free Writing Prospectus including, without limitation, all prospectus delivery, filing, record retention and legending requirements applicable to any such Issuer Free Writing Prospectus. The Company has not (i) distributed any offering material in connection with the Offering other than the Pricing Prospectus, the Prospectus, and any Issuer Free Writing Prospectus set forth on Annex III hereto, or (ii) filed, referred to, approved, used or authorized the use of any “free writing prospectus” as defined in Rule 405 under the Securities Act with respect to the Offering or the Securities, except for any Issuer Free Writing Prospectus set forth in Annex III hereto and any electronic road show previously approved by Bear Stearns.

(ss) Any certificate signed by or on behalf of the Company and delivered to the Underwriter or to counsel for the Underwriter shall be deemed to be a representation and warranty by the Company to the Underwriter as to the matters covered thereby.

2. Purchase, Sale and Delivery of the Securities.

(a) On the basis of the representations, warranties, covenants and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to the Underwriter and the Underwriter agrees to purchase from the Company the Firm Securities at a purchase price of 97.25% of the principal amount thereof (the “Purchase Price”) plus accrued interest, if any, from February 14, 2008 to the date of payment and delivery.

(b) Payment of the purchase price for, and delivery of certificates representing, the Firm Securities shall be made at the office of Davis Polk & Wardwell, (“Underwriter’s Counsel”) in Menlo Park, California, or at such other place as shall be agreed upon by the Underwriter and the Company, at 10:00 A.M., New York City time, on February 14, 2008, or such other time and date as Bear Stearns and the Company may agree upon in writing (such time and date of payment and delivery being herein called the “Closing Date”). Payment of the purchase price for the Firm Securities shall be made by wire transfer in same day funds to or as directed in writing by the Company upon delivery of certificates for the Firm Securities to the Underwriter through the facilities of The Depository Trust Company (“DTC”) for the respective accounts of the Underwriter. Certificates for the Firm Securities shall be registered in such name or names and shall be in such denominations as the Underwriter may request. The Company will permit the Underwriter to examine and package such certificates for delivery at least one full business day prior to the Closing Date.

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(c) In addition, on the basis of the representations, warranties, covenants and agreements herein contained, but subject to the terms and conditions herein set forth, the Company hereby grants to the Underwriter, acting severally and not jointly, the option to purchase up to $15,000,000 aggregate principal amount of Additional Securities, for the sole purpose of covering over-allotments in the sale of Firm Securities by the Underwriter. This option may be exercised at any time and from time to time, in whole or in part on one or more occasions, on or before the thirteenth day following the date of the Prospectus, by written notice from the Underwriter to the Company. Such notice shall set forth the aggregate principal amount of Additional Securities as to which the option is being exercised and the date and time, as reasonably determined by Bear Stearns, when the Additional Securities are to be delivered (any such date and time being herein sometimes referred to as the “Additional Closing Date”); provided, however, that no Additional Closing Date shall occur earlier than the Closing Date or earlier than the second full business day after the date on which the option shall have been exercised nor later than the eighth full business day after the date on which the option shall have been exercised. Notwithstanding the foregoing, any Additional Closing Date must be within the 13-day period beginning on and including the Closing Date. Upon any exercise of the option as to all or any portion of the Additional Securities, the Underwriter agrees to purchase from the Company the Additional Securities specified in the exercise notice at the Purchase Price plus accrued interest, if any, from the Closing Date to the date of payment and delivery.

(d) Payment of the purchase price for and delivery of the Additional Securities shall be made at the office of Underwriter’s Counsel, or at such other place as shall be agreed upon by the Underwriter and the Company, at 10:00 A.M., New York City time, on the Additional Closing Date, or such other time as shall be agreed upon by Bear Stearns and the Company. Payment of the purchase price for the Additional Securities shall be made by wire transfer in same day funds to or as directed in writing by the Company upon delivery of the Additional Securities to the Underwriter through the facilities of DTC for the respective accounts of the Underwriter.

(e) The Firm Securities and Additional Securities, as the case may be, to be purchased by the Underwriter hereunder will be represented by one or more definitive global certificates in book-entry form which will be deposited by or on behalf of the Company with DTC or its designated custodian.

(f) The Company and the Guarantors acknowledge and agree that (i) the terms of this Agreement and the Offering (including the pricing terms of the Offering) were negotiated at arm’s length between sophisticated parties represented by counsel; (ii) no fiduciary, advisory or agency relationship between the Company and the Underwriter or between the Company and the Guarantors has been created as a result of any of the transactions contemplated by this Agreement or the process leading to such transactions, irrespective of whether the Underwriter has advised or is advising any such party on other matters, (iii) the Underwriter’s obligations to the Company in respect of the Offering are set forth in this Agreement in their entirety and (iv) the Company and Guarantors have obtained such legal, tax, accounting and other advice as they deem appropriate with respect to this Agreement and the transactions contemplated hereby and any other activities undertaken in connection therewith, and they are not relying on the Underwriter with respect to any such matters.

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3. Offering. Upon authorization of the release of the Firm Securities by the Underwriter, the Underwriter propose to offer the Securities for sale to the public upon the terms and conditions set forth in the Prospectus.

4. Covenants of the Company and the Guarantors. In addition to the other covenants and agreements of the Company and the Guarantors contained herein, the Company and the Guarantors further covenant and agree with the Underwriter that:

(a) The Company shall prepare the Prospectus in a form approved by you and file such Prospectus pursuant to, and within the time period specified in, Rule 424(b) and Rule 430B under the Securities Act; prior to the last date on which an Additional Closing Date, if any, may occur, the Company shall file no further amendment to the Registration Statement or amendment or supplement to the Prospectus to which you shall object in writing after being furnished in advance a copy thereof and given a reasonable opportunity to review and comment thereon; the Company shall notify you promptly (and, if requested by Bear Stearns, confirm such notice in writing) (i) when the Registration Statement and any amendments thereto become effective, (ii) of any request by the Commission for any amendment of or supplement to the Registration Statement or the Prospectus or for any additional information, (iii) of the Company’s intention to file, or prepare any supplement or amendment to, the Registration Statement, any Preliminary Prospectus, the Prospectus or any Issuer Free Writing Prospectus, (iv) of the mailing or the delivery to the Commission for filing of any amendment of or supplement to the Registration Statement or the Prospectus, (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto, or suspending the use of any Preliminary Prospectus, the Prospectus or any Issuer Free Writing Prospectus or, in each case, of the initiation or threatening of any proceedings therefore, (vi) of the receipt of any comments from the Commission, and (vii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for that purpose. If the Commission shall propose or enter a stop order at any time, the Company will make every effort to prevent the issuance of any such stop order and, if issued, to obtain the lifting of such order as soon as possible.

(b) If at any time when a prospectus relating to the Securities (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required to be delivered under the Securities Act, any event shall have occurred as a result of which the Pricing Disclosure Package (prior to the availability of the Prospectus) or the Prospectus as then amended or supplemented would, in the judgment of the Underwriter or the Company, include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances existing at the time of delivery of such Pricing Disclosure Package or Prospectus (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) to the purchaser, not misleading, or if to comply with the Securities Act, the Exchange Act or the Rules and Regulations it shall be necessary at any time to amend or supplement the Pricing Disclosure Package, the Prospectus or the Registration Statement, or to file any document incorporated by reference in the Registration Statement or the Prospectus or in any amendment thereof or supplement thereto, the Company will notify you promptly and prepare and file with the Commission an appropriate amendment, supplement or document (in form and substance satisfactory to Bear Stearns) that will correct such statement or omission or effect such compliance, and will use its best efforts to have any amendment to the Registration Statement declared effective as soon as possible.

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Notwithstanding anything to the contrary contained herein, the Company may, commencing on or after April 12, 2008, upon written notice to the Underwriter, suspend for up to 15 business days during any fiscal quarter the use of any prospectus which is a part of the Registration Statement (in which event the Underwriter shall discontinue sales of the Offered Securities pursuant to the Registration Statement, but the Underwriter may settle any such sales of Offered Securities) if (i) the Company is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and the Company determines in good faith that the Company’s ability to pursue or consummate such a transaction would be materially adversely affected by any required disclosure of such transaction in the Registration Statement or (ii) the Company has experienced some other material non-public event the immediate disclosure of which, in the good faith judgment of the Company, would materially adversely affect the Company. Upon disclosure of such information or the termination of the condition described above (which shall occur no later than the first to occur of (x) 10 business days after delivery by the Company of written notice suspending use of the Registration Statement or (y) the expiration of the 15^th business day that the Company has suspended use of the Registration Statement during the relevant fiscal quarter), the Company shall provide prompt notice to the Underwriter, shall promptly terminate any suspension of sales it has put into effect and shall take such other actions to permit registered sales of Offered Securities as contemplated in this Agreement.

(c) The Company will not, without the prior consent of Bear Stearns, (i) make any offer relating to the Securities that would constitute a “free writing prospectus” as defined in Rule 405 under the Securities Act, except for any Issuer Free Writing Prospectus set forth in Annex III hereto and any electronic road show previously approved by Bear Stearns, or (ii) file, refer to, approve, use or authorize the use of any “free writing prospectus” as defined in Rule 405 under the Securities Act with respect to the Offering or the Securities, If at any time any event shall have occurred as a result of which any Issuer Free Writing Prospectus as then amended or supplemented would, in the judgment of the Underwriter or the Company, conflict with the information in the Registration Statement, the Pricing Disclosure Package or the Prospectus as then amended or supplemented or would, in the judgment of the Underwriter or the Company, include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances existing at the time of delivery to the purchaser, not misleading, or if to comply with the Securities Act or the Rules and Regulations it shall be necessary at any time to amend or supplement any Issuer Free Writing Prospectus, the Company will notify Bear Stearns promptly and, if requested by Bear Stearns, prepare and furnish without charge to each Underwriter an appropriate amendment or supplement (in form and substance satisfactory to Bear Stearns) that will correct such statement, omission or conflict or effect such compliance.

(d) The Company will not, without the prior consent of Bear Stearns, file any amendment to the Registration Statement for the purposes of complying with Section 10(a)(3) of the Act (whether such amendment is by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the Exchange Act or form of prospectus), including the filing of the 10-K for fiscal year 2007, at any time prior to March 17, 2008. Contemporaneously with the filing of any such amendment, if any of the Securities remain

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unsold by the Underwriter, the Company will file a new registration statement in proper form relating to the Securities as permitted under Rule 415(a)(5) and (a)(6) under the Securities Act, in a form satisfactory to the Underwriter, and use its reasonable best efforts to cause such registration statement or post-effective amendment to be declared effective promptly thereafter. Additionally, pursuant to Rule 415(a)(5)(ii), the Underwriter may make sales of any such unsold Securities pursuant to the Registration Statement prior to the new registration statement being declared effective.

(e) The Company has complied and will comply with the requirements of Rule 433 with respect to each Issuer Free Writing Prospectus including, without limitation, all prospectus delivery, filing, record retention and legending requirements applicable to each such Issuer Free Writing Prospectus; and the Company has caused there to be made available at least one version of a “bona fide electronic road show” (as defined in Rule 433 under the Securities Act) in a manner that causes the Company not to be required, pursuant to Rule 433(d) under the Securities Act, to file with the Commission any road show.

(f) The Company will promptly deliver to each of you and Underwriter’s Counsel a signed copy of the Registration Statement, as initially filed and all amendments thereto, including all consents and exhibits filed therewith, and will maintain in the Company’s files manually signed copies of such documents for at least five years after the date of filing. The Company will promptly deliver to the Underwriter such number of copies of any Preliminary Prospectus, the Prospectus, the Registration Statement, any Issuer Free Writing Prospectus and all amendments of and supplements to such documents, if any, and all documents incorporated by reference in the Registration Statement and Prospectus or any amendment thereof or supplement thereto, as you may reasonably request. Prior to 10:00 A.M., New York time, on the business day next succeeding the date of this Agreement and from time to time thereafter, the Company will furnish the Underwriter with copies of the Prospectus in New York City in such quantities as you may reasonably request.

(g) Promptly from time to time, the Company and the Guarantors will use their best efforts, in cooperation with the Underwriter, to qualify the Securities for offering and sale under the securities laws relating to the offering or sale of the Securities of such jurisdictions, domestic or foreign, as the Underwriter may designate and to maintain such qualification in effect for so long as required for the distribution thereof; except that in no event shall the Company or the Guarantors be obligated in connection therewith to qualify as a foreign corporation or to execute a general consent to service of process.

(h) The Company will make generally available to its security holders as soon as practicable, but in any event not later than twelve months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Securities Act), an earnings statement of the Company and the Subsidiaries (which need not be audited) complying with Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158).

(i) During the period of sixty (60) days from the date of the Prospectus (the “Lock-Up Period”), without the prior written consent of Bear Stearns, the Company and the Guarantors (i) will not, directly or indirectly, issue, offer, sell, agree to issue, offer or sell,

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solicit offers to purchase, grant any call option, warrant or other right to purchase, purchase any put option or other right to sell, pledge, borrow or otherwise dispose of any Relevant Security, publicly announce an intention to do any of the foregoing, (ii) will not establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” (in each case within the meaning of Section 16 of the Exchange Act and the Rules and Regulations) with respect to any Relevant Security, and (iii) will not otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of a Relevant Security, whether or not such transaction is to be settled by delivery of Relevant Securities, other securities, cash or other consideration; and the Company will obtain an undertaking in substantially the form of Annex II hereto of each of its executive officers and directors and its stockholders listed on Schedule I attached hereto, not to engage in any of the aforementioned transactions on their own behalf, other than the sale of Securities as contemplated by this Agreement and the Company’s issuance of Common Stock upon (A) the conversion or exchange of convertible or exchangeable securities outstanding on the date hereof; (B) the exercise of currently outstanding options; (C) the exercise of currently outstanding warrants; and (D) the grant and exercise of options under, or the issuance and sale of shares pursuant to, employee stock option plans in effect on the date hereof, each as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The Company will not file a registration statement under the Securities Act in connection with any transaction by the Company or any person that is prohibited pursuant to the foregoing, except for registration statements on Form S-8 relating to employee benefit plans.

Notwithstanding the foregoing, if (1) during the last 17 days of the Lock-Up Period the Company issues an earnings release or material news or a material event relating to the Company occurs; or (2) prior to the expiration of the Lock-Up Period the Company announces that it will release earnings results during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by the immediately preceding paragraph shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event, as applicable, unless Bear Stearns waives, in writing, such extension. The Company will provide the Underwriter, each executive officer and director of the Company and each stockholder and other person or entity listed on Schedule I attached hereto with prior notice of any such announcement that gives rise to an extension of the Lock-Up Period.

(j) During the period of three years from the effective date of the Registration Statement, the Company will, upon written request, furnish to you copies of all reports or other communications (financial or other) furnished to the Company’s security holders or from time to time published or publicly disseminated by the Company, and will deliver to you (i) as soon as they are available, copies of any reports, financial statements and proxy or information statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as you may from time to time reasonably request (such financial information to be on a consolidated basis to the extent the accounts of the Company and the Subsidiaries are consolidated in reports furnished to its security holders generally or to the Commission); provided, however, that in the case of (ii) above, the Company shall not be required to furnish any such information if, in its reasonable judgment, such furnishing would require the Company to disclose publicly such information

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pursuant to Regulation FD under the Securities Act unless the Underwriter shall have expressly agreed to maintain such disclosed information in confidence. For purposes of this clause (i), any information filed by the Company on EDGAR or readily available via the Company’s website will be deemed furnished to you in satisfaction of this clause (i).

(k) The Company and the Guarantors will use their best efforts to effect and maintain the listing of the Securities and the Underlying Shares on the NYSE.

(l) The Company and the Guarantors shall comply with all the agreements set forth in the representation letter of the Company to DTC relating to the approval of the Securities for “book-entry” transfer.

(m) The Company will apply the net proceeds from the sale of the Securities as set forth under the caption “Use of Proceeds” in the Registration Statement, the Pricing Prospectus and the Prospectus.

(n) The Company, during the period when a prospectus (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required to be delivered under the Securities Act in connection with the offer or sale of the Securities, will file all reports and other documents required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and the Rules and Regulations within the time periods required thereby.

(o) The Company and the Guarantors will not take, and will cause their affiliates (within the meaning of Rule 144 under the Securities Act) not to take, directly or indirectly, any action which constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Securities.

5. Covenant of the Underwriter. The Underwriter covenants and agrees with the Company that the Underwriter will not use or refer to any “free writing prospectus” (as defined in Rule 405 under the Securities Act) without the prior written consent of the Company if the Underwriter’s use of or reference to such “free writing prospectus” would require the Company to file with the Commission any “issuer information” (as defined in Rule 433 under the Securities Act).

6. Payment of Expenses. Whether or not the transactions contemplated by this Agreement, the Registration Statement and the Prospectus are consummated or this Agreement is terminated, the Company and the Guarantors hereby jointly and severally agree to pay all costs and expenses incident to the performance of its obligations hereunder, including the following: (i) all expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus, any Issuer Free Writing Prospectus, the Prospectus and any and all amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriter and dealers; (ii) the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration of the Securities under the Securities Act and the Offering; (iii) the cost of producing this Agreement, blue sky survey, closing documents and other instruments, agreements or documents (including any compilations

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thereof) in connection with the Offering; (iv) all expenses in connection with the qualification of the Securities for offering and sale under state or foreign securities or blue sky laws as provided in Section 4(g) hereof, including the fees and disbursements of counsel for the Underwriter in connection with such qualification and in connection with any blue sky survey; (v) the filing fees incident to, and the fees and disbursements of counsel for the Underwriter in connection with, securing any required review by the FINRA of the terms of the Offering; (vi) all fees and expenses in connection with listing the Securities and the Underlying Shares on the NYSE; (vii) all travel expenses of the Company’s officers and employees and any other expense of the Company incurred in connection with attending or hosting meetings with prospective purchasers of the Securities. The Company and the Guarantors will also jointly and severally pay or cause to be paid: (x) the cost and charges of any transfer agent or registrar for the Securities; and (y) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section 6. It is understood, however, that except as provided in Sections 8, 9 and 12 hereof, the Underwriter will pay all of its own costs and expenses, including the fees of its counsel.

7. Conditions of Underwriter’s Obligations. The several obligations of the Underwriter to purchase and pay for the Firm Securities and the Additional Securities, as provided herein, shall be subject to the accuracy of the representations and warranties of the Company and the Guarantors herein contained, as of the date hereof and as of the Closing Date (for purposes of this Section 7, “Closing Date” shall refer to the Closing Date for the Firm Securities and any Additional Closing Date, if different, for the Additional Securities), to the performance by the Company of all of its obligations hereunder, and to each of the following additional conditions:

(a) The Prospectus shall have been filed with the Commission in a timely fashion in accordance with Section 4(a) hereof; no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto, and no stop order suspending or preventing the use of any Preliminary Prospectus, any Issuer Free Writing Prospectus or the Prospectus, shall have been issued by the Commission and no proceedings therefor shall have been initiated or threatened by the Commission; all requests for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction; and all necessary regulatory or stock exchange approvals shall have been received, including the approval of the New York Stock Exchange for the listing of the Securities and the Underlying Shares upon notice of issuance.

(b) At the Closing Date you shall have received the written opinion of Andrews Kurth LLP, counsel for the Company, dated the Closing Date and addressed to the Underwriter, in form and substance satisfactory to you, to the effect set forth in Annex I hereto.

(c) At the Closing Date you shall have received the written opinion of Doherty & Doherty LLP, counsel for the Company, dated the Closing Date and addressed to the Underwriter, in form and substance satisfactory to you, to the effect set forth in Annex I hereto.

(d) At the Closing Date you shall have received the written opinion of Snell & Wilmer LLP, dated the Closing Date and addressed to the Underwriter, in form and substance satisfactory to you, to the effect set forth in Annex I hereto.

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(e) At the Closing Date you shall have received the written opinion of Crowe & Dunlevy PC, dated the Closing Date and addressed to the Underwriter, in form and substance satisfactory to you, to the effect set forth in Annex I hereto.

(f) At the Closing Date, you shall have received the written opinion of Underwriter’s Counsel, dated the Closing Date and addressed to the Underwriter, in form and substance satisfactory to you, with respect to the issuance and sale of the Securities, the Registration Statement, the Pricing Disclosure Package, the Prospectus and such other matters as you may require, and the Company shall have furnished to Underwriter’s Counsel such documents as they may reasonably request for the purpose of enabling them to pass upon such matters.

(g) At the Closing Date you shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of the Company, dated the Closing Date, in form and substance satisfactory to you, as to the accuracy of the representations and warranties of the Company and the Guarantors set forth in Section 1 hereof as of the date hereof and as of the Closing Date, as to the performance by the Company and the Guarantors of all of their obligations hereunder to be performed at or prior to the Closing Date, as to the matters set forth in subsections (a), (j) and (k) of this Section 7, and as to such other matters as you may reasonably request.

(h) At the time this Agreement is executed and at the Closing Date, you shall have received comfort letters, from UHY LLP and Elms, Faris & Company, LLP, independent public accountants for the Company, dated, respectively, as of the date of this Agreement and as of the Closing Date, addressed to the Underwriter and in form and substance satisfactory to the Underwriter and Underwriter’s Counsel.

(i) At the time this Agreement is executed and at the Closing Date, each of you shall have received a certificate, in form and substance satisfactory to the Underwriter and Underwriter’s Counsel, from the Chief Financial Officer of the Company relating to certain financial data of the Company,

(j) (i) Neither the Company nor any Subsidiary shall have sustained, since the date of the latest audited financial statements included or incorporated by reference in the Pricing Prospectus, any material loss or interference with its business or properties from fire, explosion, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding, other than as set forth in the Pricing Prospectus (exclusive of any supplement thereto); and (ii) subsequent to the dates as of which information is given in the Registration Statement (exclusive of any amendment thereto subsequent to the date hereof) and the Pricing Prospectus (exclusive of any supplement thereto), there shall not have been any change in the capital stock or material increase in the short-term or long-term debt of the Company or any Subsidiary or any change or any development involving a change, whether or not arising from transactions in the ordinary course of business, in the business, general affairs, management, condition (financial or otherwise), results of operations, stockholders’ equity, properties or prospects of the Company and the Subsidiaries, taken as a whole, the effect of which, in any such case described above, is, in the judgment of the Underwriter, so material and adverse as to make it impracticable or inadvisable to proceed with the Offering on the terms and in the manner contemplated in the Pricing Prospectus (exclusive of any such supplement).

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(k) On or after the Applicable Time, (i) no downgrading shall have occurred in the rating accorded the Company’s debt securities or preferred stock or the Company’s financial strength or claims paying ability by any “nationally recognized statistical rating organization”, as such term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities or preferred stock or the Company’s financial strength or claims paying ability.

(l) You shall have received a duly executed lock-up agreement from each person who is a director or executive officer of the Company and each stockholder and other person or entity listed on Schedule I hereto, in each case substantially in the form attached hereto as Annex II.

(i) Each of the Share Lending Agreement and the Common Stock Underwriting Agreement shall have been duly and validly executed and the loan of the shares of Common Stock pursuant to the Share Lending Agreement and the Common Stock Offering, substantially on the terms described in the General Disclosure Package, shall have been consummated on the Closing Date.

(j) The Company and the Guarantors shall have furnished the Underwriter and Underwriter’s Counsel with such other certificates, opinions or other documents as they may have reasonably requested.

If any of the conditions specified in this Section 7 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements or letters furnished to you or to Underwriter’s Counsel pursuant to this Section 7 shall not be satisfactory in form and substance to the Underwriter and to Underwriter’s Counsel, all obligations of the Underwriter hereunder may be cancelled by the Underwriter at, or at any time prior to, the Closing Date and the obligations of the Underwriter to purchase the Additional Securities may be cancelled by the Underwriter at, or at any time prior to, the Additional Closing Date. Notice of such cancellation shall be given to the Company in writing or by telephone. Any such telephone notice shall be confirmed promptly thereafter in writing.

8. Indemnification.

(a) The Company and each of the Guarantors jointly and severally agree to indemnify and hold harmless the Underwriter and each person, if any, who controls the Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and each affiliate of the Underwriter within the meaning of Rule 405 under the Securities Act from and against any and all losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to reasonable attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject

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under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in (A) the Registration Statement, as originally filed or any amendment thereof, or in any Preliminary Prospectus, the Pricing Disclosure Package or the Prospectus, or in any supplement thereto or amendment thereof, or in any Issuer Free Writing Prospectus, or in any “issuer information” (as defined in Rule 433(h)(2) under the Securities Act) filed or required to be filed pursuant to Rule 433(d) under the Securities Act, or (B) any other materials or information provided to investors by, or with the approval of, the Company in connection with the Offering, including in any “road show” (as defined in Rule 433 under the Securities Act) for the Offering (“Marketing Materials”), or (ii) the omission or alleged omission to state (A) in the Registration Statement, as originally filed or any amendment thereof, a material fact required to be stated therein or necessary to make the statements therein not misleading, or (B) in any Preliminary Prospectus, the Pricing Disclosure Package or the Prospectus, or in any supplement thereto or amendment thereof, or in any Issuer Free Writing Prospectus, or in any “issuer information” (as defined in Rule 433(h)(2) under the Securities Act) filed or required to be filed pursuant to Rule 433(d) under the Securities Act, or in any Marketing Materials, a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Company and the Guarantors will not be liable in any such case to the extent but only to the extent that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by the Underwriter expressly for use therein. The parties agree that such information provided by the Underwriter consists solely of the material referred to in Section 16 hereof. This indemnity agreement will be in addition to any liability which the Company and the Guarantors may otherwise have, including but not limited to other liability under this Agreement.

(b) The Underwriter shall indemnify and hold harmless the Company, each of the Guarantors, and their respective directors, officers and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to reasonable attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, as originally filed or any amendment thereof, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact included in any Preliminary Prospectus, the Pricing Disclosure Package or the Prospectus, or in any amendment thereof or supplement thereto, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based

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upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with information furnished in writing to the Company by the Underwriter specifically for use therein; provided, however, that in no case shall the Underwriter be liable or responsible for any amount in excess of the underwriting discount applicable to the Securities to be purchased by the Underwriter hereunder. The parties agree that such information provided by the Underwriter consists solely of the material referred to in Section 16 hereof.

(c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of any claims or the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the claim or the commencement thereof (but the failure so to notify an indemnifying party shall not relieve the indemnifying party from any liability which it may have under this Section 8 to the extent that it is not materially prejudiced as a result thereof or otherwise has notice of any such action, and in any event shall not relieve it from any liability that such indemnifying party may have otherwise than on account of the indemnity agreement hereunder). In case any such claim or action is brought against any indemnified party, counsel to such indemnified party shall be selected by such indemnified party. An indemnifying party may participate at its own expense in the defense of any such claim or action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened claim, investigation, action or proceeding in respect of which indemnity or contribution may be or could have been sought by an indemnified party under this Section 8 or Section 9 hereof (whether or not the indemnified party is an actual or potential party thereto), unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such claim, investigation, action or proceeding and (ii) does not include a statement as to or an admission of fault, culpability or any failure to act, by or on behalf of the indemnified party. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by subsections (a) or (b), as applicable, effected without its written consent if (A) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (B) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (C) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

9. Contribution. In order to provide for contribution in circumstances in which the indemnification provided for in Section 8 hereof is for any reason held to be unavailable from any indemnifying party or is insufficient to hold harmless a party indemnified thereunder, the Company, the Guarantors, and the Underwriter shall contribute to the aggregate losses,

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claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company, any contribution received by the Company from persons, other than the Underwriter, who may also be liable for contribution, including persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, officers of the Company who signed the Registration Statement and directors of the Company) as incurred to which the Company and the Underwriter may be subject, in such proportions as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other from the Offering or, if such allocation is not permitted by applicable law, in such proportions as are appropriate to reflect not only the relative benefits referred to above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party or parties on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriter on the other shall be deemed to be in the same proportion as (x) the total proceeds from the Offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company bears to (y) the underwriting discount or commissions received by the Underwriter, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriter on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantors and the Underwriter agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 9 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any judicial, regulatory or other legal or governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 9, (i) the Underwriter shall not be required to contribute any amount in excess of the amount by which the discounts and commissions applicable to the Securities underwritten by it and distributed to the public exceeds the amount of any damages which the Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and (ii) 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. For purposes of this Section 9, each person, if any, who controls the Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each affiliate of the Underwriter within the meaning of Rule 405 under the Securities Act shall have the same rights to contribution as the Underwriter, and each person, if any, who controls the Company within the meaning of

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Section 15 of the Securities Act or Section 20 of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, as applicable, subject in each case to clauses (i) and (ii) of the immediately preceding sentence. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 9 or otherwise.

10. [SECTION INTENTIONALLY OMITTED]

11. Survival of Representations and Agreements. All representations and warranties, covenants and agreements of the Underwriter, the Company and the Guarantors contained in this Agreement or in certificates of officers of the Company or any Subsidiary submitted pursuant hereto, including the agreements contained in Section 4 and 5, the indemnity agreements contained in Section 8 and the contribution agreements contained in Section 9, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Underwriter or any controlling person thereof or by or on behalf of the Company or any Guarantor, any of its officers and directors or any controlling person thereof, and shall survive delivery of and payment for the Securities to and by the Underwriter. The representations contained in Section 1 and the agreements contained in Sections 6, 8, 9 and 12 through 15 hereof shall survive any termination of this Agreement, including termination pursuant to Section 12 hereof.

12. Effective Date of Agreement; Termination.

(a) This Agreement shall become effective when the parties hereto have executed and delivered this Agreement.

(b) The Underwriter shall have the right to terminate this Agreement at any time prior to the Closing Date or to terminate the obligations of the Underwriter to purchase the Additional Securities at any time prior to the Additional Closing Date, as the case may be, if, at or after the Applicable Time, (i) any domestic or international event or act or occurrence has materially disrupted, or in the opinion of the Underwriter will in the immediate future materially disrupt, the market for the Company’s securities or securities in general; or (ii) a suspension or material limitation in trading in securities generally on the NYSE, NASDAQ Stock Market or on the American Stock Exchange shall have occurred; or (iii) a suspension or material limitation in trading in the Company’s securities on the NYSE shall have occurred; or (iv) a banking moratorium has been declared by any state or federal authority or any material disruption in commercial banking or securities settlement or clearance services shall have occurred; or (v) any downgrading shall have occurred in the Company’s corporate credit rating or the rating accorded the Company’s debt securities or preferred stock by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Securities Act) or any such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities; or (vi) (A) there shall have occurred any outbreak or escalation of hostilities or acts of terrorism involving the United

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States or there is a declaration of a national emergency or war by the United States or (B) there shall have been any other calamity or crisis or any change in political, financial or economic conditions if the effect of any such event in (A) or (B), in the judgment of the Underwriter, makes it impracticable or inadvisable to proceed with the offering, sale and delivery of the Firm Securities or the Additional Securities, as the case may be, on the terms and in the manner contemplated by the Prospectus and this Agreement.

(c) Any notice of termination pursuant to this Section 12 shall be in writing.

(d) If this Agreement shall be terminated pursuant to any of the provisions hereof (other than pursuant to Section 10(b) hereof), or if the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriter set forth herein is not satisfied or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof, the Company will, subject to demand by the Underwriter, reimburse the Underwriter for all out-of-pocket expenses (including the reasonable fees and expenses of their counsel), incurred by the Underwriter in connection herewith.

13. Notices. All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing, and:

(a) if sent to the Underwriter, shall be mailed, delivered, or faxed and confirmed in writing, to Bear, Stearns & Co. Inc., 383 Madison Avenue, New York, New York 10179, Attention: Stephen Parish, Senior Managing Director, Equity Transactions Group, with a copy to Underwriter’s Counsel at 1600 El Camino Real, Menlo Park, California 94025, Attention: Julia Cowles, Esq.; and

(b) if sent to the Company or any Guarantor, shall be mailed, delivered, or faxed and confirmed in writing to the Company or such Guarantor and its counsel at the addresses set forth in the Registration Statement, Attention: W. Mark Young, Esq.

14. Parties. This Agreement shall inure solely to the benefit of, and shall be binding upon, the Underwriter, the Company and the Guarantors and the controlling persons, directors, officers, employees and agents referred to in Sections 8 and 9 hereof, and their respective successors and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and said controlling persons and their respective successors, officers, directors, heirs and legal representatives, and it is not for the benefit of any other person, firm or corporation. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of Securities from the Underwriter.

15. Governing Law and Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The Company irrevocably (a) submits to the jurisdiction of any court of the State of New York or the United State District Court for the Southern District of the State of New York for the

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purpose of any suit, action, or other proceeding arising out of this Agreement or any of the agreements or transactions contemplated by this Agreement, the Share Lending Agreement, the Registration Statement, Pricing Disclosure Package and the Prospectus (each, a “Proceeding”), (b) agrees that all claims in respect of any Proceeding may be heard and determined in any such court, (c) waives, to the fullest extent permitted by law, any immunity from jurisdiction of any such court or from any legal process therein, (d) agrees not to commence any Proceeding other than in such courts, and (e) waives, to the fullest extent permitted by law, any claim that such Proceeding is brought in an inconvenient forum. THE COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS) HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE SHARE LENDING AGREEMENT, THE REGISTRATION STATEMENT AND THE PROSPECTUS.

16. The parties acknowledge and agree that, for purposes of Sections 1(c), 1(d), 1(e) and 8 hereof, the information provided by the Underwriter consists solely of the material included in the tenth paragraph under the caption “Description of Share Lending Agreement” and the fourth paragraph, the second sentence of the fifth paragraph and the second and fourth sentences of the final paragraph under the caption “Underwriting” in the Prospectus.

17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. Delivery of a signed counterpart of this Agreement by facsimile transmission shall constitute valid and sufficient delivery thereof.

18. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

19. Time is of the Essence. Time shall be of the essence of this Agreement. As used herein, the term “business day” shall mean any day when the Commission’s office in Washington, D.C. is open for business.

[signature page follows]

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If the foregoing correctly sets forth your understanding, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among us.

Very truly yours,
FLOTEK INDUSTRIES, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO
CAVO DRILLING MOTORS, LTD. CO.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO
CESI CHEMICAL, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman and CEO
FLOTEK PAYMASTER, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO
MATERIAL TRANSLOGISTICS, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO

PADKO INTERNATIONAL INCORPORATED
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO
PETROVALVE, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO
SES HOLDINGS, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO
SOONER ENERGY SERVICES, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO
SPIDLE SALES & SERVICE, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO

TELEDRIFT ACQUISITION, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO
TRINITY TOOL, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO
TURBECO, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO
USA PETROVALVE, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO

Accepted as of the date first above written
BEAR, STEARNS & CO. INC.
By:	/s/ Robert Aberman
Name:	Robert Aberman
Title:	Senior Managing Director

SCHEDULE I

Names of executive officers and directors subject to the lock-up provision

1. Jerry D. Dumas, Sr.

2. Lisa G. Meier

3. Jesse E. Neyman

4. John W. Chisholm

5. Gary M. Pittman

6. Barry E. Stewart

7. Richard O. Wilson

8. William R. Ziegler

EXHIBIT A

Subsidiaries and Guarantors

CAVO Drilling Motors, Ltd. Co.

CESI Chemical, Inc.

Flotek Paymaster, Inc.

Material Translogistics, Inc.

Padko International Incorporated

Petrovalve, Inc.

SES Holdings, Inc.

Sooner Energy Services, Inc.

Spidle Sales & Service, Inc.

Teledrift Acquisition, Inc.

Trinity Tool, Inc.

Turbeco, Inc.

USA Petrovalve, Inc.

ANNEX I

Matters To be Covered by Opinion of Andrews Kurth LLP

1. The Company has the corporate power and authority under the Delaware General Corporation Law (the “DGCL”) to execute and deliver the Underwriting Agreement, the Indenture and the Securities being issued on the date of the opinion. Each of the Guarantors incorporated under the laws of the state of Delaware (each a “Delaware Guarantor”) and each of the Guarantors incorporated under the laws of the state of Texas (each a “Texas Guarantor”) has the corporate or limited liability company power, as the case may be, and authority under the laws of its respective jurisdiction of incorporation or formation, as the case may be, to execute and deliver the Underwriting Agreement and the Indenture (including the Guarantees contained therein).

2. The Common Stock currently outstanding is listed, and the Notes, the Guarantees and Underlying Shares are duly authorized for listing, on the New York Stock Exchange.

3. Each of the Underwriting Agreement, the Indenture and the Securities being issued on the date of the opinion has been duly authorized, executed and delivered by the Company. Each of the Underwriting Agreement and the Indenture has been duly authorized, executed and delivered by the Delaware Guarantors and Texas Guarantors.

4. None of (i) the offering, issuance and sale by the Company of the Securities being issued on the date of the opinion, (ii) the execution, delivery and performance of the Underwriting Agreement, Indenture and the Securities being issued on the date of the opinion by the Company, (iii) the execution, delivery and performance of the Underwriting Agreement and the Indenture by the Guarantors, (iv) the issuance of the guarantees of the Securities being issued on the date of the opinion by the Guarantors or (v) the consummation by the Company and the Guarantors of the transactions contemplated thereby (A) results or will result in any violation of applicable laws of the State of New York, the DGCL or the applicable laws of the United States of America or (B) conflicts or will conflict with or constitutes or will constitute a breach or violation of, or a default (or an event that, with notice or lapse of time or both, would constitute such a default) under any contract listed on Schedule I hereto (other than, with respect to covenants or agreements of a financial or numerical nature or requiring computation, as to which such counsel will not comment).

5. The Indenture constitutes a valid and binding obligation of the Company and each of the Guarantors enforceable against each of them in accordance with its terms, under applicable laws of the State of New York.

6. When authenticated by the Trustee in the manner provided in the Indenture and delivered to and paid for by the Underwriters in accordance with the Underwriting Agreement, the Securities being issued on the date of the opinion will constitute valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, under applicable laws of the State of New York.

7. When the Securities being issued on the date of the opinion have been authenticated by the Trustee in the manner provided in the Indenture and delivered to and paid for by the Underwriters in accordance with the Underwriting Agreement, the guarantee pursuant to the Indenture of the Securities being issued on the date of the opinion will constitute a valid and binding obligation of each Guarantor, enforceable against such Guarantor in accordance with the terms of the Indenture, under the applicable laws of the State of New York.

8. The Underlying Shares reserved for issuance upon conversion of the Firm Securities have been duly authorized and reserved and, when issued upon conversion of the Firm Securities in accordance with the terms of the Securities at conversion prices at or in excess of the par value of such Underlying Shares, will be validly issued, fully paid and non-assessable and the issuance of the Securities and the Underlying Shares will not be subject to any preemptive or similar rights under the Company’s certificate of incorporation or bylaws or under the DGCL.

9. No Governmental Approval, which has not been obtained or taken and is not in full force and effect, is required to authorize, or is required for the execution and delivery by the Company, the Delaware Guarantors or the Texas Guarantors of, the Underwriting Agreement, the Indenture and the Securities being issued on the date of the opinion or the incurrence or performance of its obligations thereunder, or the enforceability of any of the Underwriting Agreement, the Indenture and the Securities being issued on the date of the opinion (including the Guarantees contained therein) against the Company, the Delaware Guarantors or the Texas Guarantors. As used in this paragraph, “Governmental Approval” means any consent, approval, license, authorization or validation of, or filing, recording or registration with, any executive, legislative, judicial, administrative or regulatory body of the State of New York, the State of Delaware or the United States of America, pursuant to (i) applicable laws of the State of New York, (ii) applicable laws of the United States of America or (iii) the DGCL.

10. The statements under the captions “Description of Debt Securities”, “Description of the Notes” and “Description of Capital Stock”, in the Preliminary Prospectus, the Pricing Disclosure Package and the Prospectus, insofar as such statements purport to summarize certain provisions of legal matters, documents or proceedings referred to therein and reviewed by counsel as described in such opinion, fairly summarize such provisions in all material respects, subject to the qualifications and assumptions stated therein.

11. The statements in the Preliminary Prospectus and the Prospectus under the caption “U.S. Federal Income Tax Considerations,” insofar as they refer to statements of law or legal conclusions, fairly summarize the matters referred to therein in all material respects, subject to the qualifications and assumptions stated therein.

12. None of the Company nor any of the Guarantors is, or, after giving effect to the offering and sale of the Notes and the consummation of the share lending transaction, will be, an “investment company” within the meaning of said term as used in the Investment Company Act of 1940, as amended.

Such counsel shall state that (i) the Indenture has been qualified under the Trust Indenture Act of 1939, as amended; (ii) the Registration Statement became automatically effective under

2

the Securities Act upon filing under Rule 462(e) under the Securities Act; (iii) based on oral communication with the Commission, no stop order suspending the effectiveness of the Registration Statement has been issued and, (iv) to such counsel’s knowledge based on such oral communication with the Commission, no proceedings for that purpose have been instituted or threatened by the Commission.

Such counsel shall also state that they have reviewed the documents incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus or any amendment thereof or supplement thereto (other than the financial statements and schedules and other financial data included or incorporated by reference therein, as to which no opinion need be rendered), and that on the basis of such review, such incorporated documents appeared on their face to be appropriately responsive, in all material respects, to the requirements of the Exchange Act and the Rules and Regulations.

In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Company, the independent registered public accounting firm for the Company, your counsel and your representatives, at which the contents of the Registration Statement, the Pricing Disclosure Package and the Prospectus and related matters were discussed, and, although such counsel has not independently verified, is not passing upon, and do not assume any responsibility for the accuracy, completeness or fairness of, the statements contained or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus (except as and to the extent set forth in opinions 10 and 11 above), on the basis of the foregoing (relying to a limited extent with respect to factual matters upon statements by officers and other representatives of the Company and their Subsidiaries):

(a) such counsel confirms that, in their opinion, each of the Registration Statement, as of the latest Effective Date, the Pricing Disclosure Package, as of the Applicable Time, and the Prospectus, as of its date, appeared on its face to be appropriately responsive, in all material respects, to the requirements of the Securities Act and the Rules and Regulations (except that such counsel need not make a statement with respect to Regulation S-T), and

(b) such counsel has not become aware of any documents that are required to be filed as exhibits to the Registration Statement and are not so filed or of any documents that are required to be summarized in the Preliminary Prospectus or the Prospectus, and are not so summarized; and

(c) no facts have come to such counsel’s attention that have led them to believe that (i) the Registration Statement, as of the latest Effective Date, contained an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Pricing Disclosure Package, as of the Applicable Time, contained an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (iii) the Prospectus, as of its date and as of the date of such opinion, contained or contains an untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; it being understood that such counsel expresses no statement or belief in

3

this letter with respect to (A) the financial statements and related schedules, including the notes and schedules thereto and the auditor’s report thereon and (B) any other financial data, included or incorporated or deemed incorporated by reference in, or excluded from, the Registration Statement, the Prospectus or the Pricing Disclosure Package.

In rendering such opinions, such counsel may (A) rely in respect of matters of fact upon certificates of officers and employees for the Company and of the transfer agent of the Company and upon information obtained from public officials, (B) assume that all documents submitted to them as originals are authentic, that all copies submitted to them conform to the originals thereof, and that the signatures on all documents examined by them are genuine, (C) state that their opinion is limited to the DGCL and the laws of the State of Texas, the applicable laws of the United States of America and, with respect to the opinion set forth in paragraph 11 above, United States federal income tax law, and with respect to the enforceability opinions set forth in paragraphs 5, 6 and 7, the contract law of the State of New York, (D) state that they express no opinion with respect to state securities or blue sky laws of any jurisdiction or with respect to the anti-fraud provisions of the federal securities laws, (E) with respect to the opinion expressed in paragraph 1 above as to the valid existence and good standing, state that such opinions are based solely on certificates from the appropriate public officials, and (F) state that such counsel expresses no opinion with respect to (i) any permits to own or operate any real or personal property or (ii) state or local tax statutes to which the Company or any of its Subsidiaries may be subject. In addition, counsel may state that they did not participate in the preparation of the Incorporated Documents and that they have not undertaken any independent investigation with respect to the representations and warranties and other statements of fact included in the exhibits to the Registration Statement or to the documents incorporated by reference in the Registration Statement.

In making its examination of executed documents, such counsel may assume (except to the extent that such counsel expressly opines in its opinion) (1) the valid existence and good standing of each of the parties thereto, (2) that such parties had the power and authority, corporate, partnership, limited liability company or other, to enter into and to incur and perform all their obligations thereunder, (3) the due authorization by all requisite action, corporate, partnership, limited liability company or other, and the due execution and delivery by such parties of such documents and (4) to the extent such documents purport to constitute agreements, that each of such documents constitutes the legal, valid and binding obligation of each party thereto, enforceable against such party in accordance with its terms. In this paragraph, all references to parties to documents shall be deemed to mean and include each of such parties, and each other person (if any) directly or indirectly acting on its behalf.

4

Matters to be Covered by Opinion of Doherty & Doherty LLP

1. Each of the Company and the Delaware Guarantors and Texas Guarantors has been duly formed and validly exists as a corporation or limited liability company, as the case may be, in good standing under the laws of its jurisdiction of incorporation, with corporate or limited liability company, as the case may be, power and authority to own its properties and conduct its business as described in the Registration Statement, the Disclosure Package and the Prospectus. Each of the Company, and to such counsel’s knowledge, each of the Delaware Guarantors and the Texas Guarantors is duly qualified and in good standing as a foreign corporation or limited liability company, as the case may be, in each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where the failure to be so qualified or in good standing in any such jurisdiction would not have a Material Adverse Effect (as such term is defined in the Underwriting Agreement between the Company and the Underwriter) on the Company and the Guarantors, taken as a whole.

2. The number of authorized, issued and outstanding shares of capital stock of the Company are as set forth in the Registration Statement, the Disclosure Package and the Prospectus. All of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and were not issued in violation of or subject to any preemptive or, to the best of such counsel’s knowledge, similar rights that entitled or would entitle any person to acquire any such shares from the Company upon issuance or sale thereof. All of the issued shares of capital stock of each of the Guarantors have been duly and validly authorized and issued and are fully paid and non-assessable and are owned, directly or through one or more subsidiaries, by the Company.

3. To such counsel’s knowledge and other than as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no judicial, regulatory or other legal or governmental proceedings pending to which the Company or any of its Subsidiaries is a party or of which any property of the Company or any of its Subsidiaries is the subject which, if determined adversely to the Company or any of its Subsidiaries, would individually or in the aggregate have a Material Adverse Effect; and, to the best of such counsel’s knowledge, no such proceedings are threatened or contemplated.

4. None of (i) the offering, issuance and delivery by the Company of the Securities being issued on the date of the opinion, (ii) the execution, delivery and performance of the Underwriting Agreement, the Indenture and the Securities being issued on the date of the opinion by the Company, (iii) the execution, delivery and performance of the Underwriting Agreement and the Indenture by the Guarantors, (iv) the issuance of the guarantees of the Securities being issued on the date of the opinion by the Guarantors or (v) the consummation by the Company and the Guarantors of the transactions contemplated thereby (A) conflicts or will conflict with or constitutes or will constitute a violation of the certificate or articles of incorporation or bylaws or other organizational documents of any of the Company, the Texas Guarantors and the Delaware Guarantors, (B) conflicts or will conflict with or constitutes or will constitute a breach or violation of, or a default (or an event that, with notice or lapse of time or both, would constitute such a default) under, any Identified Contract (other than, with respect to covenants or agreements of a financial or numerical nature or requiring computation, as to which we do not comment), or (C) results or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its Guarantors,

5

which conflicts, breaches, violations, defaults or liens, in the case of clauses (B) or (C), would, individually or in the aggregate, have a material adverse effect on the financial condition, business or results of operations of the Company or any of its Guarantors, taken as a whole, or could materially impair the ability of any of the Company or any of its Guarantors to perform its obligations under the Underwriting Agreement. As used in this paragraph, “Identified Contract” means (1) those contracts listed on an exhibit to the opinion and certified by an officer of the Company to be all contracts filed or required to be filed as an exhibit to the Company’s reports filed with the Securities and Exchange Commission as material contracts pursuant to Items 601(2), (4) or (10) of Regulation S-K ; (2) the Teledrift Purchase Agreement (as defined in the Underwriting Agreement).

In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Company, the independent registered public accounting firm for the Company, your counsel and your representatives, at which the contents of the Registration Statement, the Pricing Disclosure Package and the Prospectus and related matters were discussed, and, although such counsel has not independently verified, is not passing upon, and do not assume any responsibility for the accuracy, completeness or fairness of, the statements contained or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus, on the basis of the foregoing (relying to a limited extent with respect to factual matters upon statements by officers and other representatives of the Company and their Subsidiaries), no facts have come to such counsel’s attention that have led them to believe that (i) the Registration Statement, as of the latest Effective Date, contained an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Pricing Disclosure Package, as of the Applicable Time, contained an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (iii) the Prospectus, as of its date and as of the date of such opinion, contained or contains an untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; it being understood that such counsel expresses no statement or belief in this letter with respect to (A) the financial statements and related schedules, including the notes and schedules thereto and the auditor’s report thereon, (B) any other financial data, included or incorporated or deemed incorporated by reference in, or excluded from, the Registration Statement, the Prospectus or the Pricing Disclosure Package and (C) the Form T-1 included as an exhibit to the Registration Statement.

In rendering such opinions, such counsel may (A) rely in respect of matters of fact upon certificates of officers and employees for the Company and of the transfer agent of the Company and upon information obtained from public officials, (B) assume that all documents submitted to them as originals are authentic, that all copies submitted to them conform to the originals thereof, and that the signatures on all documents examined by them are genuine, (C) state that their opinion is limited to the DGCL and the laws of the State of Texas and the applicable laws of the United States of America, (D) state that they express no opinion with respect to state securities or blue sky laws of any jurisdiction or (except as set forth in the preceding paragraph) with respect to the anti-fraud provisions of the federal securities laws, (E) state that such counsel expresses no opinion with respect to (i) any permits to own or operate any real or personal property or (ii) state or local tax statutes to which the Company or any of its Subsidiaries may be subject.

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In making its examination of executed documents, such counsel may assume (except to the extent that such counsel expressly opines in its opinion) (1) the valid existence and good standing of each of the parties thereto, (2) that such parties had the power and authority, corporate, partnership, limited liability company or other, to enter into and to incur and perform all their obligations thereunder, (3) the due authorization by all requisite action, corporate, partnership, limited liability company or other, and the due execution and delivery by such parties of such documents and (4) to the extent such documents purport to constitute agreements, that each of such documents constitutes the legal, valid and binding obligation of each party thereto, enforceable against such party in accordance with its terms. In this paragraph, all references to parties to documents shall be deemed to mean and include each of such parties, and each other person (if any) directly or indirectly acting on its behalf.

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Matters to be Covered by Opinion of Crowe & Dunlevy, PC

1. Each of the Guarantors incorporated under the laws of the state of Oklahoma (each an “Oklahoma Guarantor”) is a corporation or limited liability company validly existing and in good standing under the laws of the state of Oklahoma and each has also requisite corporate power to execute and deliver the Guarantees;

2. The Guarantees (as defined in the Indenture) issued by each of the Oklahoma Guarantors have been duly authorized, executed, and delivered by the Oklahoma Guarantors, and, assuming the Convertible Notes have been authorized by the Company, when the Convertible Notes have been duly executed and authenticated in accordance with the provisions of the Indenture, the Guarantees will be valid and binding obligations of the Oklahoma Guarantors;

3. The Underwriting Agreement has been duly authorized, executed and delivered by the Oklahoma Guarantors.

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Matters to be Covered by Opinion of Snell & Wilmer LLP

1. The Guarantor incorporated under the laws of the state of Utah (the “Utah Guarantor”) is a corporation or limited liability company validly existing and in good standing under the laws of the state of Utah and has requisite corporate power to execute and deliver the Guarantee;

2. The Guarantee (as defined in the Indenture) issued by the Utah Guarantor has been duly authorized, executed, and delivered by the Utah Guarantor and, assuming the Convertible Notes have been authorized by the Company, when the Convertible Notes have been duly executed and authenticated in accordance with the provisions of the Indenture, the Guarantee will be valid and binding obligations of the Utah Guarantor;

3. The Underwriting Agreement has been duly authorized, executed and delivered by the Utah Guarantor.

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ANNEX II

Form of Lock-Up Agreement

February     , 2008

Bear, Stearns & Co. Inc.

383 Madison Avenue

New York, New York 10179

Attention: Equity Transactions Group

Flotek Industries, Inc. Lock-Up Agreement

Ladies and Gentlemen:

This letter agreement (this “Agreement”) relates to the proposed public offering (the “Offering”) by Flotek Industries, Inc., a Delaware corporation (the “Company”), of its     % Senior Convertible Notes Due 2028 (the “Notes”) and the related offering of common stock of the Company, $0.0001 par value per share (the “Common Stock”), loaned to Bear, Stearns International Limited (“BSIL”), represented by Bear, Sterns & Co. Inc. as agent for BSIL (in such capacity, the “Agent”), pursuant to a Share Lending Agreement between the Company and BSIL (the “Common Stock Offering”).

In order to induce you (the “Underwriter”) to underwrite the Offering, the undersigned hereby agrees that, without the prior written consent of Bear, Stearns & Co. Inc. (“Bear Stearns”), during the period from the date hereof until sixty (60) days from the date of the final prospectus for the Offering (the “Lock-Up Period”), the undersigned (a) will not, directly or indirectly, offer, sell, agree to offer or sell, solicit offers to purchase, grant any call option or purchase any put option with respect to, pledge, borrow or otherwise dispose of any Relevant Security (as defined below), and (b) will not establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” with respect to any Relevant Security (in each case within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder), or otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of a Relevant Security, whether or not such transaction is to be settled by delivery of Relevant Securities, other securities, cash or other consideration, or publicly announce an intention to do any of the foregoing. As used herein “Relevant Security” means the common stock of the Company, par value $0.0001 per share (the “Common Stock”), any other equity security of the Company or any of its subsidiaries and any security convertible into, or exercisable or exchangeable for, any Common Stock or other such equity security. This Agreement shall not apply to (A) transfers of shares of Common Stock or securities convertible into Common Stock as a gift of gifts or as intra family transfers or transfers to trusts or family limited partnerships for estate planning purposes or (B) transfers of Common Stock or any security convertible into Common Stock by will or intestacy; provided, as to clauses (A) and (B), each resulting transferee of shares of Common Stock or securities convertible into Common Stock executes and delivers to you an agreement satisfactory to you certifying that such transferee is bound by the terms of this Agreement and has been in compliance with the terms hereof since the date first written above as if it had been an original party hereto.

During the Lock-Up Period, the undersigned may exercise options or warrants to purchase Common Stock, provided, in such case, that the shares of Common Stock issued upon exercise shall remain subject to this Agreement.

Notwithstanding the preceding paragraph, if (1) during the last 17 days of the Lock-Up Period the Company issues an earnings release or material news or a material event relating to the Company occurs; or (2) prior to the expiration of the Lock-Up Period the Company announces that it will release earnings results during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by the immediately preceding paragraph shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event, as applicable, unless Bear Stearns waives, in writing, such extension. The undersigned acknowledges that the Company has agreed in the underwriting agreement for the Offering to provide notice to the undersigned of any event that would result in an extension of the Lock-Up Period pursuant to this paragraph, and the undersigned agrees that any such notice properly delivered will be deemed to have been given to, and received by, the undersigned.

The undersigned hereby authorizes the Company during the Lock-Up Period to cause any transfer agent for the Relevant Securities to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, Relevant Securities for which the undersigned is the record holder and, in the case of Relevant Securities for which the undersigned is the beneficial but not the record holder, agrees during the Lock-Up Period to cause the record holder to cause the relevant transfer agent to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, such Relevant Securities. The undersigned hereby further agrees that, without the prior written consent of Bear Stearns, during the Lock-up Period the undersigned (x) will not file or participate in the filing with the Securities and Exchange Commission of any registration statement except for registration statements on Form S-8 relating to employee benefit plans, or circulate or participate in the circulation of any preliminary or final prospectus or other disclosure document with respect to any proposed offering or sale of a Relevant Security and (y) will not exercise any rights the undersigned may have to require registration with the Securities and Exchange Commission of any proposed offering or sale of a Relevant Security.

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement and that this Agreement constitutes the legal, valid and binding obligation of the undersigned, enforceable in accordance with its terms. Upon request, the undersigned will execute any additional documents necessary in connection with enforcement hereof. Any obligations of the undersigned shall be binding upon the successors and assigns of the undersigned from the date first above written.

It is understood that, if the Underwriting Agreement for the Offering does not become effective or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Notes and the Stock, the undersigned shall be released from all obligations under this letter.

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This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Delivery of a signed copy of this letter by facsimile transmission shall be effective as delivery of the original hereof.

Very truly yours,

By:

Print Name:

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ANNEX III

Issuer Free Writing Prospectuses included in the Pricing Disclosure Package

EX-1.2

Exhibit 1.2

3,800,000 shares of

Common Stock

(par value $0.0001 per share)

FLOTEK INDUSTRIES, INC.

UNDERWRITING AGREEMENT

February 11, 2008

BEAR, STEARNS INTERNATIONAL LIMITED

c/o Bear, Stearns & Co. Inc.

383 Madison Avenue

New York, New York 10179

BEAR, STEARNS & CO. INC.

383 Madison Avenue

New York, New York 10179

Ladies/Gentlemen:

Flotek Industries, Inc., a corporation organized and existing under the laws of Delaware (the “Company”), subject to the terms and conditions stated herein and pursuant to the Share Lending Agreement (the “Share Lending Agreement”) dated February 11, 2008 between the Company and Bear, Stearns International Limited (“BSIL”), represented by Bear, Stearns & Co. Inc. as agent for BSIL (in such capacity, the “Agent”), proposes to issue and lend to BSIL as a share loan 3,800,000 shares of common stock, $0.0001 par value per share (the “Common Stock”) of the Company. Bear, Stearns & Co. Inc. (“Bear Stearns” or the “Underwriter”) proposes to offer to the public as soon as it deems advisable after this Agreement has been executed and delivered, such number of loaned shares of Common Stock as the Underwriter deems advisable in a fixed price offering (the Common Stock offered in such offering, the “Fixed Price Securities”) and, following such offering, to offer additional loaned shares in a variable price offering from time to time on the terms and in the amounts the Underwriter deems advisable (the Common Stock offered in such offering, the “Variable Price Securities”). The Fixed Price Securities and the Variable Price Securities are referred to collectively as the “Offered Securities”.

As used herein, the “Additional Offering Period” means each day during the period commencing on the date hereof and ending on the Final Sale on which the Underwriter offers or sells Variable Price Securities. The term “Final Sale” means the sale by the Underwriter of the last share of the Variable Price Securities.

Concurrently with the issuance of the Offered Securities (the “Offering”), the Company is offering (the “Convertible Notes Offering”) in an offering registered under the

Securities Act of 1933, as amended (the “Act”) by means of a prospectus supplement, up to $100,000,000 aggregate principal amount of its 5.25% Convertible Senior Notes due 2028 (the “Notes”). Bear Stearns is acting as the underwriter in the Convertible Notes Offering. The Company has granted the Underwriter an option (the “Option”) to purchase up to an additional $15,000,000 aggregate principal amount of Notes. The Company and Bear Stearns will be entering into an underwriting agreement (the “Convertible Notes Underwriting Agreement”) with respect to the Convertible Notes Offering.

1. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, BSIL and the Underwriter as of the date hereof, as of the Applicable Time (as defined below) and as of each day during the Additional Offering Period, as follows:

(a) The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), relating to the Offered Securities, on Form S-3 (No. 333-148384) (the initial filing being referred to as the “Initial Registration Statement”); and such Initial Registration Statement, and any post-effective amendment thereto, each in the form previously delivered to you, became effective upon filing, in such form. No document other than Post Effective Amendment No. 1 to the Initial Registration Statement and any preliminary prospectus supplements with respect to the Initial Registration Statement has heretofore been filed with the Commission. The various parts of the Initial Registration Statement including all exhibits thereto and including (i) the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act in accordance with Section 4(a) hereof and deemed by virtue of Rule 430B under the Securities Act to be part of the Initial Registration Statement at the time it became effective under the Securities Act with respect to the Underwriter, and (ii) the documents incorporated by reference in the prospectus contained in the Initial Registration Statement at the time such part of the Initial Registration Statement becomes effective, each as amended at the time such part of the Initial Registration Statement became or hereafter becomes effective under the Securities Act with respect to the Underwriter, are hereafter collectively referred to as the “Registration Statement.” Any reference to any amendment to the Registration Statement shall be deemed to refer to and include any annual report of the Company filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), after the effective date of the Initial Registration Statement that is incorporated by reference therein. No stop order suspending the effectiveness of the Initial Registration Statement or any post-effective amendment thereto has been issued and no proceeding for that purpose has been initiated or, to the knowledge of the Company, threatened by the Commission.

The final prospectus supplement together with the base prospectus included in the Initial Registration Statement, in the form in which it has most recently been filed with the Commission on or prior to the date of this Agreement (the “Base Prospectus”) relating to the Offered Securities, in the form filed with the Commission pursuant to Rule 424(b) under the Securities Act, is hereafter referred to as the “Prospectus”. Any preliminary prospectus supplement together with the Base Prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424 under the Securities Act is hereafter referred to as a “Preliminary Prospectus;” and the Preliminary Prospectus relating to the Offered

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Securities dated February 5, 2008, is hereafter referred to as the “Pricing Prospectus”. Any “issuer free writing prospectus” (as defined in Rule 433 under the Securities Act) relating to the Offered Securities is hereafter referred to as an “Issuer Free Writing Prospectus”; and the Pricing Prospectus, as supplemented by the Issuer Free Writing Prospectuses, if any, attached and listed in Annex III hereto, taken together, are hereafter referred to collectively as the “Pricing Disclosure Package”. Any reference herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 that were filed under the Exchange Act on or before the date of such Preliminary Prospectus or Prospectus, as the case may be; and any reference herein to any “amendment” or “supplement” to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include (i) the filing of any document under the Exchange Act after the date of such Preliminary Prospectus or Prospectus, as the case may be, which is incorporated therein by reference and (ii) any such document so filed.

The Company was not an “ineligible issuer” (as defined in Rule 405 under the Securities Act) as of the eligibility determination date for purposes of Rules 164 and 433 under the Securities Act with respect to the offering of the Offered Securities contemplated hereby.

All references in this Agreement to the Registration Statement, any Preliminary Prospectus, Issuer Free Writing Prospectus, the Pricing Prospectus or the Prospectus, or any amendments or supplements to any of the foregoing, shall be deemed to include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System.

(b) At the time of initial filing of the Registration Statement the Company was a “well known seasoned issuer” as defined in Rule 405 under the Securities Act, including not having been an “ineligible issuer” as defined in Rule 405 under the Securities Act. The Registration Statement is an “automatic shelf registration statement,” as defined in Rule 405 under the Securities Act. Neither the Company nor any person acting on its behalf (within the meaning for this clause only, of Rule 163(c)) has made any offer relating to the Securities in reliance on the exemption of Rule 163.

If immediately prior to the Renewal Deadline (as hereinafter defined), any of the Offered Securities remain unsold by the Underwriter or BSIL, and the Underwriter or BSIL has so informed the Company in writing, the Company will prior to the Renewal Deadline file, if it has not already done so and is eligible to do so, a new automatic shelf registration statement relating to the Offered Securities, in a form reasonably satisfactory to the Underwriter and BSIL. If the Company is no longer eligible to file an automatic shelf registration statement, the Company will prior to the Renewal Deadline, if it has not already done so, file a new shelf registration statement relating to the Offered Securities, in a form reasonably satisfactory to the Underwriter and BSIL, and will use its commercially reasonable efforts to cause such registration statement to be declared effective promptly thereafter. The Company will take all other action reasonably necessary or appropriate to permit the public offering and sale of the Offered Securities to continue as contemplated in the expired registration statement relating to the Offered Securities. References herein to the Registration Statement shall include such new automatic shelf registration statement or such new shelf registration statement, as the case may be. “Renewal Deadline” means the third anniversary of the initial effective time of the Registration Statement.

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The Company has not received from the Commission any notice pursuant to Rule 401(g)(2) objecting to use of the automatic shelf registration statement form. If at any time when Offered Securities remain unsold by the Underwriter or BSIL the Company receives from the Commission a notice pursuant to Rule 401(g)(2) or otherwise ceases to be eligible to use the automatic shelf registration statement form, the Company will (i) promptly notify the Underwriter and BSIL, (ii) promptly file a new registration statement or post-effective amendment on the proper form relating to the Offered Securities, in a form satisfactory to the Underwriter and BSIL, (iii) use its reasonable best efforts to cause such registration statement or post-effective amendment to be declared effective as soon as practicable, and (iv) promptly notify the Underwriter and BSIL of such effectiveness. The Company will take all other action necessary or appropriate to permit the public offering and sale of the Offered Securities to continue as contemplated in the registration statement that was the subject of the Rule 401(g)(2) notice or for which the Company has otherwise become ineligible. References herein to the Registration Statement shall include such new registration statement or post-effective amendment, as the case may be.

The Company has paid or shall pay the required Commission filing fees relating to the Offered Securities within the time required by Rule 456(b)(1) without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r).

(c) The Registration Statement complies and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will comply in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the rules and regulations of the Commission thereunder (the “Rules and Regulations”), and do not and will not, as of the applicable effective date as to each part of the Registration Statement, as of the applicable filing date as to the Prospectus and any amendment thereof or supplement thereto, as of the date hereof, at the Applicable Time and on each day of the Additional Offering Period, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein (i) in the case of the Registration Statement, not misleading and (ii) in the case of the Prospectus, in the light of the circumstances under which they were made not misleading; provided, however, that this representation and warranty shall not apply to any information contained in or omitted from the Registration Statement or the Prospectus or any amendment thereof or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by the Underwriter specifically for use therein. The parties hereto agree that such information provided by the Underwriter consists solely of the material referred to in Section 15 hereof.

(d) No order preventing or suspending the use of any Preliminary Prospectus or any Issuer Free Writing Prospectus has, as of the date hereof, at the Applicable Time and on each day of the Additional Offering Period been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, complied in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the Rules and Regulations, and did not contain 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, in light of the circumstances

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under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any information contained in or omitted from any Preliminary Prospectus in reliance upon and in conformity with information furnished in writing to the Company by the Underwriter specifically for use therein. The parties hereto agree that such information provided by the Underwriter consists solely of the material referred to in Section 15 hereof.

(e) For purposes of this Agreement, the “Applicable Time” is 7:30 p.m. New York time on February 11, 2008. The Pricing Disclosure Package, as of the Applicable Time, did not, and as of the Closing Date and each day of the Additional Offering Period, will not, contain 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, in light of the circumstances under which they were made, not misleading. Each Issuer Free Writing Prospectus complies in all material respects with the applicable provisions of the Securities Act and the Rules and Regulations, and does not include information that conflicts with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus, and each Issuer Free Writing Prospectus not listed in Annex III hereto, as supplemented by and taken together with the Pricing Disclosure Package, as of the Applicable Time, did not, and as of the Closing Date and each day of the Additional Offering Period, will not, contain 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, in light of the circumstances under which they were made, not misleading. No representation and warranty is made in this Section 1(e) with respect to any information contained in or omitted from the Pricing Disclosure Package or any Issuer Free Writing Prospectus in reliance upon and in conformity with information furnished in writing to the Company by the Underwriter specifically for use therein. The parties hereto agree that such information provided by the Underwriter consists solely of the material referred to in Section 15 hereof.

(f) UHY LLP, who have certified the financial statements and supporting schedules and information of the Company and its subsidiaries that are included or incorporated by reference in the Registration Statement, the Pricing Prospectus or the Prospectus, and Elms, Faris & Company, LLP, whose reports appear or are incorporated by reference in the Registration Statement, the Pricing Prospectus or the Prospectus, who have certified certain other financial statements and supporting schedules and information of Teal Supply Co. (d/b/a Triumph Drilling Tools, Inc.) that are included or incorporated in the Registration Statement, the Pricing Prospectus or the Prospectus, each are independent public accountants as required by the Securities Act, the Exchange Act and the Rules and Regulations.

(g) Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except as disclosed in the Pricing Disclosure Package, (i) the Company has not declared or paid any dividends, or made any other distribution of any kind, on or in respect of its capital stock, (ii) there has not been any material change in the capital stock or long-term or short-term debt of the Company or any of its subsidiaries listed in Exhibit A hereto (each, a “Subsidiary” and, collectively, the “Subsidiaries”), (iii) neither the Company nor any Subsidiary has sustained any material loss or interference with its business or properties from fire, explosion, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any

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legal or governmental proceeding, and (iv) there has not been any material adverse change or any development involving a prospective material adverse change, whether or not arising from transactions in the ordinary course of business, in or affecting the business, financial condition, results of operations, stockholders’ equity, properties or prospects of the Company and the Subsidiaries, taken as a whole (a “Material Adverse Change”). Since the date of the latest balance sheet included, or incorporated by reference, in the Registration Statement and the Pricing Disclosure Package, neither the Company nor any Subsidiary has incurred or undertaken any liabilities or obligations, whether direct or indirect, liquidated or contingent, matured or unmatured, or entered into any transactions, including any acquisition or disposition of any business or asset, which are material to the Company and the Subsidiaries, taken as a whole, except for liabilities, obligations and transactions which are disclosed in the Pricing Disclosure Package.

(h) The Company has an authorized capitalization as set forth in the Pricing Disclosure Package, and all of the issued and outstanding shares of capital stock of the Company are fully paid and non-assessable and have been duly and validly authorized and issued, in compliance with all applicable state, federal and foreign securities laws and were not issued in violation of or subject to any preemptive or similar right that entitles any person to acquire from the Company or any Subsidiary any Common Stock or other equity security of the Company or any security convertible into, or exercisable or exchangeable for, Common Stock or any other such security (any “Relevant Security”), except for such rights as may have been fully satisfied or waived prior to the effectiveness of the Registration Statement.

(i) The Offered Securities to be delivered on the Closing Date have been duly and validly authorized and, when issued and delivered in accordance with this Agreement and the Loan Fee (as defined in the Share Lending Agreement) has been paid in accordance with the Share Lending Agreement, will be duly and validly issued, fully paid and non-assessable, will have been issued in compliance with all applicable state, federal and foreign securities laws and will not have been issued in violation of or subject to any preemptive or similar right that entitles any person to acquire any Relevant Security from the Company. The Common Stock and the Offered Securities conform to the descriptions thereof contained in the Registration Statement, the Pricing Prospectus and the Prospectus. Except as disclosed in the Registration Statement and the Pricing Disclosure Package, the Company has no outstanding warrants, options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, or any contracts or commitments to issue or sell, any Relevant Security, except for grants of options subsequent to the date of this agreement pursuant to the Company’s employee benefit plans, which plans are disclosed in the Pricing Disclosure Package. Except as disclosed in the Registration Statement and the Pricing Disclosure Package, no holder of any Relevant Security has any rights to require registration under the Securities Act of any Relevant Security in connection with the offer and sale of the Offered Securities contemplated hereby, and any such rights so disclosed have either been fully complied with by the Company or effectively waived by the holders thereof.

(j) All of the issued shares of capital stock of or other ownership interests in each Subsidiary have been duly and validly authorized and issued and are fully paid and non-assessable and except as disclosed in the Pricing Disclosure Package are owned directly or indirectly by the Company free and clear of any lien, charge, mortgage, pledge, security interest, claim, equity, trust or other encumbrance, preferential arrangement, defect or restriction of any kind whatsoever (any “Lien”).

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(k) The Subsidiaries listed on Exhibit A are the only subsidiaries of the Company (within the meaning of Rule 405 under the Securities Act) except for Petrovalve International Inc. Each of the Company and each Subsidiary has been duly organized and validly exists as a corporation, partnership or limited liability company in good standing under the laws of its jurisdiction of organization. Each of the Company and each Subsidiary is duly qualified to do business and is in good standing as a foreign corporation, partnership or limited liability company in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing which taken as a whole could not reasonably be expected to have (i) a material adverse effect on the business, financial condition, results of operations, stockholders’ equity, properties or prospects of the Company and the Subsidiaries, taken as a whole; or (ii) an adverse effect on the ability of the Company to consummate the Offering, the pending acquisition of Teledrift Inc. or any other transaction contemplated by this Agreement, the Share Lending Agreement or the Convertible Notes Underwriting Agreement (a “Material Adverse Effect”).

(l) Each of the Company and each Subsidiary has all requisite power and authority, and all necessary consents, approvals, authorizations, orders, registrations, qualifications, licenses, filings and permits of, with and from all judicial, regulatory and other legal or governmental agencies and bodies and all third parties, foreign and domestic (collectively, the “Consents”), to own, lease and operate its properties and conduct its business as it is now being conducted and as disclosed in the Registration Statement and the Pricing Prospectus, and each such Consent is valid and in full force and effect, except in each case as could not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary has received notice of any investigation or proceedings which, if decided adversely to the Company or any such Subsidiary, could reasonably be expected to result in, the revocation of, or imposition of a materially burdensome restriction on, any such Consent.

(m) This Agreement has been duly and validly authorized, executed and delivered by the Company.

(n) The Share Lending Agreement has been duly authorized, executed and delivered by the Company, and constitutes a valid and legally binding instrument of the Company, enforceable against the Company in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, moratorium, reorganization and laws of general applicability relating to or affecting creditors’ rights and general equity principles (regardless of whether enforceability is considered in a proceeding in equity or at law).

(o) The issue and sale of the Offered Securities, the compliance by the Company with this Agreement and the Share Lending Agreement and the consummation of the transactions contemplated by this Agreement and the Share Lending Agreement do not and will not (i) conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a

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default) under, or result in the creation or imposition of any Lien upon any property or assets of the Company or any Subsidiary pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement, instrument, franchise, license or permit to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or their respective properties, operations or assets may be bound or (ii) violate or conflict with any provision of the certificate or articles of incorporation, by-laws, certificate of formation, limited liability company agreement, partnership agreement or other organizational documents of the Company or any Subsidiary, or (iii) violate or conflict with any statute, law, rule, regulation, ordinance, directive, judgment, decree or order of any court or governmental or regulatory agency or body having jurisdiction over the Company and each Subsidiary, except, in the case of clauses (i) and (iii) above, as could not reasonably be expected to have a Material Adverse Effect.

(p) The certificates for the Offered Securities conform to the requirements of the New York Stock Exchange and the Delaware General Corporation Law.

(q) No Consent of or with any court, governmental or regulatory agency or body or any third party having jurisdiction over the Company and each Subsidiary, is required for the execution, delivery and performance of this Agreement, the Share Lending Agreement or consummation of the transactions contemplated by this Agreement and the Share Lending Agreement, except the registration under the Securities Act of the Offered Securities and such consents as may be required under state securities or blue sky laws or the by-laws and rules of the Financial Industry Regulatory Authority (the “FINRA”) in connection with the purchase and distribution of the Offered Securities by the Underwriter, each of which has been obtained and is in full force and effect.

(r) Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no legal, governmental or regulatory proceedings pending to which the Company or any Subsidiary is a party or of which any property, operations or assets of the Company or any Subsidiary is the subject which, taken as a whole, if determined adversely to the Company or any Subsidiary, could reasonably be expected to have a Material Adverse Effect; to the Company’s knowledge, no such proceeding is threatened or contemplated.

(s) The financial statements and pro forma data, including the notes thereto, and the supporting schedules included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus present fairly, in all material respects, the financial position as of the dates indicated and the cash flows and results of operations for the periods specified of the Company and its consolidated subsidiaries and the other entities for which financial statements are included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus; except as otherwise stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, said financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis throughout the periods involved; and the supporting schedules included in the Registration Statement, the Pricing Disclosure Package and the Prospectus present fairly, in all material respects, the information required to be stated therein. No other financial statements or supporting schedules are required to be included in the Registration Statement, the Pricing Disclosure Package or the Prospectus by the Securities Act,

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the Exchange Act or the Rules and Regulations. The other financial and statistical information included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus present fairly the information included therein and have been prepared on a basis consistent with that of the financial statements that are included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus and the books and records of the respective entities presented therein.

(t) The pro forma financial statements included in the Registration Statement, the Pricing Prospectus and the Prospectus have been properly compiled and prepared in accordance with the applicable requirements of the Securities Act, the Exchange Act and the Rules and Regulations and include all adjustments necessary to present fairly in accordance with United States generally accepted accounting principles the pro forma financial position of the respective entity or entities presented therein at the respective dates indicated and their cash flows and the results of operations for the respective periods specified.

(u) The statistical, industry-related and market-related data included in the Registration Statement, the Pricing Disclosure Package and the Prospectus are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate.

(v) The Common Stock has been registered pursuant to Section 12(b) of the Exchange Act. The shares of Common Stock are listed on the New York Stock Exchange (the “NYSE”), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the NYSE, nor has the Company received any notification that the Commission or the NYSE is contemplating terminating such registration or listing.

(w) The Company maintains a system of internal accounting and other controls over the Company and its Subsidiaries sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with United States generally accepted accounting principles and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accounting for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(x) The Company maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that complies with the requirements of the Exchange Act and has been designed by the Company’s principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company’s internal control over financial reporting was effective as of September 30, 2007, there have been no changes to such internal controls since September 30, 2007 and, based on work completed to date in the ordinary course of business, the Company has

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no reason to believe its internal control over financial reporting is not presently effective; and the Company is not aware of any material weaknesses in its internal control over financial reporting. Since the date of the latest audited financial statements included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

(y) The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its subsidiaries is made known to the Company’s principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective.

(z) There is and has been no failure on the part of the Company or any of its directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”), including, without limitation, Section 402 related to loans and Sections 302 and 906 related to certifications.

(aa) Neither the Company nor any of its affiliates (within the meaning of Rule 144 under the Securities Act) has taken, directly or indirectly, any action which constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Offered Securities.

(bb) Neither the Company nor any of its affiliates (within the meaning of Rule 144 under the Securities Act) has, prior to the date hereof, made any offer or sale of any securities which could be “integrated” (within the meaning of the Securities Act and the Rules and Regulations) with the offer and sale of the Offered Securities pursuant to the Registration Statement.

(cc) The statements set forth in the Registration Statement, the Pricing Disclosure Package and Prospectus under the caption “Description of Capital Stock”, insofar as they purport to constitute a summary of the terms of the Common Stock, and under the caption “U.S. Federal Income Tax Considerations for Non-U.S. Holders”, insofar as they purport to describe the provisions of the laws, transactions and documents referred to therein, are accurate, complete and fair in all material respects.

(dd) The Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and files periodic reports with the Commission, and the conditions for use of Form S-3 to register and offer the Offered Securities under the Securities Act have been satisfied. The documents incorporated or deemed to be incorporated by reference in the Pricing Prospectus and the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Securities Act, the Exchange Act and the Rules and Regulations and, when read together with the other information in the Pricing Prospectus or the Prospectus, as applicable, do not contain an

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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, in the light of the circumstances under which they were made, not misleading.

(ee) The Company is not and, at all times up to and including consummation of the transactions contemplated by this Agreement and the Share Lending Agreement and at all times during the Additional Offering Period, and after giving effect to application of the net proceeds of the Offering as described in the Registration Statement, the Pricing Prospectus and the Prospectus, will not be, required to register as an “investment company” under the Investment Company Act of 1940, as amended, and is not and will not be an entity “controlled” by an “investment company” within the meaning of such act.

(ff) Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or the Underwriter for a brokerage commission, finder’s fee or other like payment in connection with the transactions contemplated by this Agreement or, to the Company’s knowledge, any arrangements, agreements, understandings, payments or issuance with respect to the Company or any of its officers, directors, shareholders, partners, employees, Subsidiaries or affiliates that may affect the Underwriter’s compensation as determined by the FINRA.

(gg) Each of the Company and each Subsidiary owns or leases all such properties as are necessary to the conduct of its business as presently operated and as proposed to be operated as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The Company and the Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of any and all Liens except such as are described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or such as do not taken as a whole materially affect the value of such property or materially interfere with the use made or proposed to be made of such property by the Company and the Subsidiaries; and any real property and buildings held under lease or sublease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material to, and do not materially interfere with, the use made and proposed to be made of such property and buildings by the Company and the Subsidiaries. Neither the Company nor any Subsidiary has received any notice of any claim adverse to its ownership of any real or personal property or of any claim against the continued possession of any real property, whether owned or held under lease or sublease by the Company or any Subsidiary.

(hh) Each of the Company and each Subsidiary (i) owns or possesses the right to use all patents, patent applications, trademarks, service marks, domain names, trade names, trademark registrations, service mark registrations, copyrights, licenses, formulae, customer lists, and know-how and other intellectual property (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures, “Intellectual Property”) necessary for the conduct of their respective businesses as presently conducted and as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus and (ii) has no reason to believe that the conduct of their respective businesses does or will conflict with, and have not received any notice of any claim of conflict with, any such

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right of others. The Company has taken and will maintain reasonable measures to prevent the unauthorized dissemination or publication of the confidential information of the Company or its subsidiaries. To the Company’s knowledge, there is no infringement by third parties of any such Intellectual Property; there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the Company’s or any Subsidiary’s rights in or to any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company or any Subsidiary infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim.

(ii) The Company and the Subsidiaries maintain insurance in such amounts and covering such risks as the Company reasonably considers adequate for the conduct of its business and the value of its properties and as is customary for companies engaged in similar businesses in similar industries, all of which insurance is in full force and effect, except where the failure to maintain such insurance could not reasonably be expected to have a Material Adverse Effect. There are no material claims by the Company or any Subsidiary under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause. The Company reasonably believes that it will be able to renew its existing insurance as and when such coverage expires or will be able to obtain replacement insurance adequate for the conduct of the business and the value of its properties at a cost that would not have a Material Adverse Effect.

(jj) Each of the Company and each Subsidiary has accurately prepared and timely filed all federal, state, foreign and other tax returns that are required to be filed by it and has paid or made provision for the payment of all taxes, assessments, governmental or other similar charges, including without limitation, all sales and use taxes and all taxes which the Company or any Subsidiary is obligated to withhold from amounts owing to employees, creditors and third parties, with respect to the periods covered by such tax returns (whether or not such amounts are shown as due on any tax return) except such as are immaterial in amount. No deficiency assessment with respect to a proposed adjustment of the Company’s or any Subsidiary’ federal, state, local or foreign taxes is pending or, to the best of the Company’s knowledge, threatened, except such as are immaterial in amount. The accruals and reserves on the books and records of the Company and the Subsidiaries in respect of tax liabilities for any taxable period not finally determined are adequate to meet any assessments and related liabilities for any such period in all material respects and, since December 31, 2006, the Company and the Subsidiaries have not incurred any liability for taxes other than in the ordinary course of its business. There is no tax lien, whether imposed by any federal, state, foreign or other taxing authority, outstanding against the assets, properties or business of the Company or any Subsidiary.

(kk) No labor disturbance by the employees of the Company or any Subsidiary exists or, to the best of the Company’s knowledge, is imminent and the Company is not aware of any existing or imminent labor disturbances by the employees of any of its or any Subsidiary’s principal suppliers, manufacturers’, customers or contractors, which, in either case (individually or in the aggregate), could reasonably be expected to have a Material Adverse Effect.

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(ll) No “prohibited transaction” (as defined in either Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”) or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)), “accumulated funding deficiency” (as defined in Section 302 of ERISA) or other event of the kind described in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan for which the Company or any Subsidiary would have any liability which could, taken as a whole, reasonably be expected to have a Material Adverse Effect; each employee benefit plan for which the Company or any Subsidiary would have any liability is in compliance in all material respects with applicable law, including (without limitation) ERISA and the Code; the Company has not incurred and does not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from any “pension plan”; and each plan for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification.

(mm) There has been no storage, generation, transportation, handling, use, treatment, disposal, discharge, emission, contamination, release or other activity involving any kind of hazardous, toxic or other wastes, pollutants, contaminants, petroleum products or other hazardous or toxic substances, chemicals or materials (“Hazardous Substances”) by, due to, on behalf of, or caused by the Company or any Subsidiary (or, to the Company’s knowledge, any other entity for whose acts or omissions the Company is or may be liable) upon any property now or previously owned, operated, used or leased by the Company or any Subsidiary, or upon any other property, which would be a violation of or give rise to any liability under any applicable law, rule, regulation, order, judgment, decree or permit, common law provision or other legally binding standard relating to pollution or protection of human health and the environment (“Environmental Law”), except for violations and liabilities which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. There has been no disposal, discharge, emission contamination or other release of any kind at, onto or from any such property or into the environment surrounding any such property of any Hazardous Substances with respect to which the Company or any Subsidiary has knowledge, except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary has agreed to assume, undertake or provide indemnification for any liability of any other person under any Environmental Law, including any obligation for cleanup or remedial action, except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. There is no pending or, to the best of the Company’s knowledge, threatened administrative, regulatory or judicial action, claim or notice of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any Subsidiary. No property of the Company or any Subsidiary is subject to any Lien under any Environmental Law. Neither the Company nor any Subsidiary is subject to any order, decree, agreement or other individualized legal requirement related to any Environmental Law.

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(nn) None of the Company, any Subsidiary or, to the Company’s knowledge, any of its employees or agents, has at any time during the last five years (i) made any unlawful contribution to any candidate for foreign office, or failed to disclose fully any such contribution in violation of law, or (ii) made any payment to any federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States of any jurisdiction thereof. The operations of the Company and each Subsidiary are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened. Neither the Company nor any Subsidiary nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

(oo) The Company has made available to the Underwriter the Asset Purchase Agreement, dated as of February 4, 2008, by and among the Company, Teledrift, Inc. and Teledrift Acquisition, Inc. (the “Teledrift Purchase Agreement”). The Teledrift Purchase Agreement is in full force and effect as of the date hereof in the form heretofore provided to the Underwriter. With respect to the acquisition contemplated by the Teledrift Purchase Agreement (the “Acquisition”), the Company represents that:

1. the Company is not currently aware of any events, circumstances or facts that would cause the representations or warranties of Teledrift Inc. in the Teledrift Purchase Agreement to be inaccurate other than inaccuracies which would not result in a Material Adverse Effect; and

2. other than consents and approvals from governmental agencies referenced in the Teledrift Purchase Agreement, the Company is not currently aware of any events, circumstances or facts that would prevent the Company from consummating the Acquisition.

(pp) Neither the Company nor any Subsidiary (i) is in violation of its certificate or articles of incorporation, by-laws, certificate of formation, limited liability company agreement, partnership agreement or other organizational documents, (ii) is in default under, and no event has occurred which, with notice or lapse of time or both, would constitute a default under or result in the creation or imposition of any Lien upon any property or assets of the Company or any Subsidiary pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of

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its property or assets is subject, or (iii) is in violation of any statute, law, rule, regulation, ordinance, directive, judgment, decree or order of any court, or governmental or regulatory agency or body, having jurisdiction over the Company or any of its Subsidiaries, except (in the case clauses (ii) and (iii) above) for violations or defaults that could not (individually or in the aggregate), reasonably be expected to have a Material Adverse Effect.

(qq) The Company has complied with the requirements of Rule 433 under the Securities Act with respect to each Issuer Free Writing Prospectus including, without limitation, all prospectus delivery, filing, record retention and legending requirements applicable to any such Issuer Free Writing Prospectus. The Company has not (i) distributed any offering material in connection with the Offering other than the Pricing Prospectus, the Prospectus, and any Issuer Free Writing Prospectus set forth on Annex III hereto, or (ii) filed, referred to, approved, used or authorized the use of any “free writing prospectus” as defined in Rule 405 under the Securities Act with respect to the Offering or the transactions contemplated in this Agreement or the Share Lending Agreement, except for any Issuer Free Writing Prospectus set forth in Annex III hereto and any electronic road show previously approved by Bear Stearns.

(rr) Any certificate signed by or on behalf of the Company and delivered to the Underwriter or to counsel for the Underwriter shall be deemed to be a representation and warranty by the Company to the Underwriter as to the matters covered thereby.

2. Issuance, Transfer and Delivery of the Offered Securities. (a) On the basis of the representations, warranties, covenants and agreements herein contained and subject to the terms and conditions set forth herein and in the Share Lending Agreement, the Company agrees to issue to BSIL in exchange for payment of the Loan Fee, and BSIL agrees to borrow from the Company, pursuant to Borrowing Notices (as defined in the Share Lending Agreement), the Offered Securities specified in such Borrowing Notice. This Agreement constitutes a “Borrowing Notice” pursuant to Section 2(b) of the Share Lending Agreement with respect to 3,800,000 shares of common stock. Upon issuance to BSIL of the Fixed Price Securities, the Underwriter agrees to purchase the Fixed Price Securities from BSIL. From time to time during the Additional Offering Period, BSIL agrees to sell to the Underwriter, and the Underwriter agrees to purchase from BSIL, the Variable Price Securities in such amounts as may be requested by the Underwriter.

(b) In accordance with the Share Lending Agreement, delivery of the Offered Securities shall be made at 10:00 A.M., New York City time, on February 14, 2008, or such other time on the same or such other date as the Agent and the Company shall agree in writing, against payment of the Loan Fee applicable to such Offered Securities. Payment of the Loan Fee for the Offered Securities shall be made by wire transfer in same day funds to or as directed in writing by the Company upon delivery of certificates for the Offered Securities to BSIL through the facilities of The Depository Trust Company (“DTC”) for the account of BSIL or to its order or, with respect to any Offered Securities purchased by the Underwriter as provided in Section 2(a) above, for the account of the Underwriter or to its order. Certificates for the Offered Securities shall be registered in such name or names and shall be in such denominations as BSIL or the Underwriter, as applicable, may request, or in accordance with the terms of the Share Lending Agreement. The time and date of the initial delivery and payment of the Offered Securities is hereinafter referred to as the “Closing Date”.

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(c) The documents to be delivered on the Closing Date on behalf of the parties hereto pursuant to Section 7 of this Agreement shall be delivered at the offices of Davis Polk & Wardwell, 1600 El Camino Real, Menlo Park, California 94025. The Company will deliver the Offered Securities to or as instructed by BSIL or the Underwriter, as applicable, in a form reasonably acceptable to BSIL or the Underwriter, as applicable.

(d) The Company acknowledges and agrees that (i) the terms of this Agreement, the Share Lending Agreement and the Offering (including the pricing terms of the Offering) were negotiated at arm’s length between sophisticated parties represented by counsel; (ii) no fiduciary, advisory or agency relationship between the Company and the Underwriter or between the Company and BSIL has been created as a result of any of the transactions contemplated by this Agreement, the Share Lending Agreement or the process leading to such transactions, irrespective of whether any Underwriter has advised or is advising any such party on other matters, (iii) the Underwriter’s obligations to the Company in respect of the Offering are set forth in this Agreement in their entirety and (iv) it has obtained such legal, tax, accounting and other advice as it deems appropriate with respect to this Agreement, the Share Lending Agreement and the transactions contemplated hereby and any other activities undertaken in connection therewith, and it is not relying on the Underwriter or BSIL with respect to any such matters.

3. Offering by the Underwriter. (a) It is understood that the Underwriter proposes to offer the Offered Securities for sale to the public upon the terms and conditions set forth in the Pricing Prospectus and as specified in this Agreement. As soon as the Underwriter deems advisable after this Agreement has been executed and delivered, the Underwriter proposes to conduct the Offering of the Fixed Price Securities. In addition, as soon as the Underwriter deems advisable after such Offering of the Fixed Price Securities has been completed, the Underwriter proposes to conduct the Offering of Variable Price Securities during the Additional Offering Period.

(b) If at any time a Prospectus Event (as defined below) occurs, the Company shall orally so notify BSIL and the Underwriter (such oral notice to be promptly followed by written notice), and upon receipt of such oral notice, BSIL and the Underwriter shall cease sales of Offered Securities. The Company shall not communicate to BSIL or the Underwriter the nature of any such Prospectus Event. After giving any such notice, the Company shall take the actions provided in Section 4(b). The Company acknowledges that, for purposes of Section 4(b), a prospectus relating to the Offered Securities is required to be delivered under the Act by the Underwriter until the Offered Securities has been sold. Promptly following the correction of any Prospectus Event, the Company shall orally so notify BSIL and the Underwriter (such oral notice to be promptly followed by written notice), and upon receipt of such oral notice, BSIL and the Underwriter may recommence sales of Offered Securities pursuant to an updated prospectus supplement, if required by the Underwriter.

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4. Covenants of the Company. In addition to the other covenants and agreements of the Company contained herein, until the Final Sale, the Company further covenants and agrees with BSIL and the Underwriter that:

(a) The Company shall prepare the Prospectus in a form approved by each of you and file such Prospectus pursuant to, and within the time period specified in, Rule 424(b) and Rule 430B under the Securities Act; prior to the Final Sale, the Company shall file no further amendment to the Registration Statement or amendment or supplement to the Prospectus to which you shall object in writing after being furnished in advance a copy thereof and given a reasonable opportunity to review and comment thereon; the Company shall notify each of you promptly (and, if requested by Bear Stearns, confirm such notice in writing) (i) when the Registration Statement and any amendments thereto become effective, (ii) of any request by the Commission for any amendment of or supplement to the Registration Statement or the Prospectus or for any additional information, (iii) of the Company’s intention to file, or prepare any supplement or amendment to, the Registration Statement, any Preliminary Prospectus, the Prospectus or any Issuer Free Writing Prospectus prior to the Final Sale, (iv) of the mailing or the delivery to the Commission for filing of any amendment of or supplement to the Registration Statement or the Prospectus, prior to the Final Sale, (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto, or suspending the use of any Preliminary Prospectus, the Prospectus or any Issuer Free Writing Prospectus or, in each case, of the initiation or threatening of any proceedings therefore, (vi) of the receipt of any comments from the Commission, and (vii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Offered Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for that purpose. If the Commission shall propose or enter a stop order at any time, the Company will make every effort to prevent the issuance of any such stop order and, if issued, to obtain the lifting of such order as soon as possible.

(b) If at any time when a prospectus relating to the Offered Securities (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required to be delivered under the Securities Act or at any time during the Additional Offering Period, any event shall have occurred as a result of which the Pricing Disclosure Package (prior to the availability of the Prospectus) or the Prospectus as then amended or supplemented would, in the judgment of the Underwriter, BSIL or the Company, include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances existing at the time of delivery of such Pricing Disclosure Package or Prospectus (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) to the purchaser, not misleading, or if to comply with the Securities Act, the Exchange Act or the Rules and Regulations it shall be necessary at any time to amend or supplement the Pricing Disclosure Package, the Prospectus or the Registration Statement, or to file any document incorporated by reference in the Registration Statement or the Prospectus or in any amendment thereof or supplement thereto (any of the foregoing constituting a “Prospectus Event”), the Company will notify each of you promptly and prepare and file with the Commission an appropriate amendment, supplement or document (in form and substance satisfactory to Bear Stearns and BSIL) that will correct such statement or omission or effect such compliance, and will use its best efforts to have any amendment to the Registration Statement declared effective as soon as possible.

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Notwithstanding anything to the contrary contained herein, the Company may, commencing on or after April 12, 2008, upon written notice to the Underwriter, suspend for up to 15 business days during any fiscal quarter the use of any prospectus which is a part of the Registration Statement (in which event the Underwriter shall discontinue sales of the Offered Securities pursuant to the Registration Statement, but the Underwriter may settle any such sales of Offered Securities) if (i) the Company is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and the Company determines in good faith that the Company’s ability to pursue or consummate such a transaction would be materially adversely affected by any required disclosure of such transaction in the Registration Statement or (ii) the Company has experienced some other material non-public event the immediate disclosure of which, in the good faith judgment of the Company, would materially adversely affect the Company. Upon disclosure of such information or the termination of the condition described above (which shall occur no later than the first to occur of (x) 10 business days after delivery by the Company of written notice suspending use of the Registration Statement or (y) the expiration of the 15^th business day that the Company has suspended use of the Registration Statement during the relevant fiscal quarter), the Company shall provide prompt notice to the Underwriter, shall promptly terminate any suspension of sales it has put into effect and shall take such other actions to permit registered sales of Offered Securities as contemplated in this Agreement.

(c) The Company will not, without the prior consent of Bear Stearns and BSIL, (i) make any offer relating to the Offered Securities that would constitute a “free writing prospectus” as defined in Rule 405 under the Securities Act, except for any Issuer Free Writing Prospectus set forth in Annex III hereto and any electronic road show previously approved by Bear Stearns, or (ii) file, refer to, approve, use or authorize the use of any “free writing prospectus” as defined in Rule 405 under the Securities Act with respect to the Offering or the Offered Securities. If at any time any event shall have occurred as a result of which any Issuer Free Writing Prospectus as then amended or supplemented would, in the judgment of the Underwriter, BSIL or the Company, conflict with the information in the Registration Statement, the Pricing Disclosure Package or the Prospectus as then amended or supplemented or would, in the judgment of the Underwriter, BSIL or the Company, include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances existing at the time of delivery to the purchaser, not misleading, or if to comply with the Securities Act or the Rules and Regulations it shall be necessary at any time to amend or supplement any Issuer Free Writing Prospectus, the Company will notify Bear Stearns and BSIL promptly and, if requested by Bear Stearns, prepare and furnish without charge to the Underwriter and BSIL an appropriate amendment or supplement (in form and substance satisfactory to Bear Stearns) that will correct such statement, omission or conflict or effect such compliance.

(d) The Company will not, without the prior consent of Bear Stearns and BSIL, file any amendment to the Registration Statement for the purposes of complying with Section 10(a)(3) of the Act (whether such amendment is by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the Exchange Act or form of prospectus), including the filing of the 10-K for fiscal year 2007, at any time prior to March 17, 2008. Contemporaneously with the filing of any such amendment the Company will file a new registration statement in proper form relating to the Offered Securities as permitted under Rule 415(a)(5) and (a)(6) under the Securities Act, in a form satisfactory to the Underwriter and BSIL,

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and use its reasonable best efforts to cause such registration statement or post-effective amendment to be declared effective promptly thereafter. Additionally, pursuant to Rule 415(a)(5)(ii), the Underwriter may make sales of the Offered Securities pursuant to the Registration Statement prior to the new registration statement being declared effective.

(e) The Company will not, without the prior consent of Bear Stearns, issue any press release or similar document containing new financial or accounting information for the year or three months ended December 31, 2007 at any time prior to March 12, 2007. Additionally, prior to the Final Sale, the Company shall not, except as may be required by law, issue any press release or similar document containing new or updated financial or accounting information unless it shall have delivered to the Underwriter and BSIL, a supplemental letter of UHY LLP, in accordance with Section 4(q) of this Agreement, confirming such financial or accounting data.

(f) The Company has complied and will comply with the requirements of Rule 433 with respect to each Issuer Free Writing Prospectus including, without limitation, all prospectus delivery, filing, record retention and legending requirements applicable to each such Issuer Free Writing Prospectus; and the Company has caused there to be made available at least one version of a “bona fide electronic road show” (as defined in Rule 433 under the Securities Act) in a manner that causes the Company not to be required, pursuant to Rule 433(d) under the Securities Act, to file with the Commission any road show.

(g) The Company will promptly deliver to each of you and Underwriter’s Counsel a signed copy of the Registration Statement, as initially filed and all amendments thereto, including all consents and exhibits filed therewith, and will maintain in the Company’s files manually signed copies of such documents for at least five years after the date of filing. The Company will promptly deliver to the Underwriter such number of copies of any Preliminary Prospectus, the Prospectus, the Registration Statement, any Issuer Free Writing Prospectus and all amendments of and supplements to such documents, if any, and all documents incorporated by reference in the Registration Statement and Prospectus or any amendment thereof or supplement thereto, as you may reasonably request. Prior to 10:00 A.M., New York time, on the business day next succeeding the date of this Agreement and from time to time thereafter, the Company will furnish the Underwriter with copies of the Prospectus in New York City in such quantities as you may reasonably request.

(h) Promptly from time to time, the Company will use its best efforts, in cooperation with the Underwriter, to qualify the Offered Securities for offering and sale under the securities laws relating to the offering or sale of the Offered Securities of such jurisdictions, domestic or foreign, as the Underwriter may designate and to maintain such qualification in effect for so long as required for the distribution thereof; except that in no event shall the Company be obligated in connection therewith to qualify as a foreign corporation or to execute a general consent to service of process.

(i) The Company will make generally available to its security holders as soon as practicable, but in any event not later than twelve months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Securities Act), an earnings statement of the Company and the Subsidiaries (which need not be audited) complying with Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158).

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(j) During the period of sixty (60) days from the date of the Prospectus (the “Lock-Up Period”), without the prior written consent of Bear Stearns, the Company (i) will not, directly or indirectly, issue, offer, sell, agree to issue, offer or sell, solicit offers to purchase, grant any call option, warrant or other right to purchase, purchase any put option or other right to sell, pledge, borrow or otherwise dispose of any Relevant Security, publicly announce an intention to do any of the foregoing, (ii) will not establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” (in each case within the meaning of Section 16 of the Exchange Act and the Rules and Regulations) with respect to any Relevant Security, and (iii) will not otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of a Relevant Security, whether or not such transaction is to be settled by delivery of Relevant Securities, other securities, cash or other consideration; and the Company will obtain an undertaking in substantially the form of Annex II hereto of each of its executive officers and directors and its stockholders listed on Schedule I attached hereto, not to engage in any of the aforementioned transactions on their own behalf, other than (A) the sale of Offered Securities as contemplated by this Agreement, (B) the issuance and sale of the Convertible Senior Notes due 2028 in connection with the Convertible Notes Offering and the issuance of Common Stock upon the conversion thereof, (C) the conversion or exchange of convertible or exchangeable securities outstanding on the date hereof; (D) the exercise of currently outstanding options; (E) the exercise of currently outstanding warrants; and (F) the grant and exercise of options under, or the issuance and sale of shares pursuant to, employee stock option plans in effect on the date hereof, each as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The Company will not file a registration statement under the Securities Act in connection with any transaction by the Company or any person that is prohibited pursuant to the foregoing, except for registration statements on Form S-8 relating to employee benefit plans.

Notwithstanding the foregoing, if (1) during the last 17 days of the Lock-Up Period the Company issues an earnings release or material news or a material event relating to the Company occurs; or (2) prior to the expiration of the Lock-Up Period the Company announces that it will release earnings results during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by the immediately preceding paragraph shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event, as applicable, unless Bear Stearns waives, in writing, such extension. The Company will provide the Underwriter and any co-managers, each officer and director of the Company and each stockholder and other person or entity listed on Schedule I attached hereto with prior notice of any such announcement that gives rise to an extension of the Lock-Up Period.

(k) Until the period that ends three years from the later of (x) the effective date of the Registration Statement and (y) the termination of the Additional Offering Period, the Company will, upon written request, furnish to you copies of all reports or other communications (financial or other) furnished to the Company’s security holders or from time to time published or publicly disseminated by the Company, and will deliver to you (i) as soon as they are

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available, copies of any reports, financial statements and proxy or information statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as you may from time to time reasonably request (such financial information to be on a consolidated basis to the extent the accounts of the Company and the Subsidiaries are consolidated in reports furnished to its security holders generally or to the Commission); provided, however, that in the case of (ii) above, the Company shall not be required to furnish any such information if, in its reasonable judgment, such furnishing would require the Company to disclose publicly such information pursuant to Regulation FD under the Securities Act unless the Underwriter shall have expressly agreed to maintain such disclosed information in confidence. For purposes of this clause (j), any information filed by the Company on EDGAR or readily available via the Company’s website will be deemed furnished to you in satisfaction of this clause (j).

(l) The Company will use its best efforts to effect and maintain the listing of the Common Stock, including the Offered Securities, on the NYSE.

(m) The Company, during the period when a prospectus (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required to be delivered under the Securities Act in connection with the offer or sale of the Offered Securities and during the Additional Offering Period, will file all reports and other documents required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and the Rules and Regulations within the time periods required thereby.

(n) The Company will not take, and will cause its affiliates (within the meaning of Rule 144 under the Securities Act) not to take, directly or indirectly, any action which constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Offered Securities.

(o) The Company agrees to deliver, or cause to be delivered, to the Underwriter and BSIL, during the period when a prospectus (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required to be delivered under the Securities Act in connection with the offer or sale of the Offered Securities and during the Additional Offering Period, on each date after the Closing Date on which the Registration Statement or Prospectus is amended or supplemented or at any other time when, in the judgment of the Underwriter, it would be reasonable to request supplemental letters of Andrews Kurth LLP and Doherty & Doherty LLP, upon the request of the Underwriter or BSIL, supplemental letters of Andrews Kurth LLP and Doherty & Doherty LLP in substantially the same form as the “negative assurance” paragraphs contained in the form of legal opinion of those firms attached hereto as Annex I.

(p) From time to time during the Additional Offering Period, if the Underwriter notifies the Company that it proposes to sell any of the Offered Securities, the Company shall cause the Chief Executive Office and the Chief Financial Officer of the Company to participate in telephonic due diligence sessions with representatives of BSIL and the Underwriter, which sessions shall not be held more often than once a calendar week, and shall

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use its commercially reasonable efforts to make available to BSIL and the Underwriter such documents of the Company as BSIL and/or the Underwriter shall reasonably request to conduct due diligence.

(q) The Company agrees to deliver, or cause to be delivered, to the Underwriter and BSIL, during the period when a prospectus (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required to be delivered under the Securities Act in connection with the offer or sale of the Offered Securities and during the Additional Offering Period, on each date after the Closing Date on which the Registration Statement or Prospectus is amended or supplemented because of new or updated financial or accounting information or in the judgment of the Underwriter it would be reasonable to request an updated comfort letter and upon the request of the Underwriter, supplemental letters of UHY LLP and Elms, Faris & Company, LLP in substantially the same form as those delivered on the Closing Date pursuant to Section 7 hereof.

(r) During the Additional Offering Period, the Company agrees to provide, or cause to be provided, upon the filing of a report with the Securities and Exchange Commission required to be filed pursuant to the Exchange Act or at such time that in the judgment of the Underwriter it would be reasonable to request an updated comfort letter and upon the request of the Underwriter, a certificate of the Chief Executive Officer and Chief Financial Officer of the Company, dated within one business day of the filing of such report with the Securities and Exchange Commission, in form and substance satisfactory to each of you, as to the accuracy of the representations and warranties of the Company set forth in Section 1 hereof as of the date thereof, as to the performance by the Company of all of its obligations hereunder to be performed during the Additional Offering Period, as to the matters set forth in Section 7, and as to such other matters as you may reasonably request.

5. Covenant of the Underwriter. The Underwriter covenants and agrees with the Company that the Underwriter will not use or refer to any “free writing prospectus” (as defined in Rule 405 under the Securities Act) without the prior written consent of the Company if the Underwriter’s use of or reference to such “free writing prospectus” would require the Company to file with the Commission any “issuer information” (as defined in Rule 433 under the Securities Act).

6. Payment of Expenses. Whether or not the transactions contemplated by this Agreement, the Share Lending Agreement, the Registration Statement and the Prospectus are consummated or this Agreement or the Share Lending Agreement is terminated, the Company hereby agrees to pay all costs and expenses incident to the performance of its obligations hereunder, including the following: (i) all expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus, any Issuer Free Writing Prospectus, the Prospectus and any and all amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriter and dealers; (ii) the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration of the Offered Securities under the Securities Act and the Offering; (iii) the cost of producing this Agreement and the Share Lending Agreement, blue sky survey, closing documents and other instruments, agreements or documents (including any compilations thereof) in connection with the Offering; (iv) all expenses in connection with the qualification

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of the Offered Securities for offering and sale under state or foreign securities or blue sky laws as provided in Section 4(h) hereof, including the fees and disbursements of counsel for the Underwriter in connection with such qualification and in connection with any blue sky survey; (v) the filing fees incident to, and the fees and disbursements of counsel for the Underwriter in connection with, securing any required review by the FINRA of the terms of the Offering; (vi) all fees and expenses in connection with listing the Offered Securities on the NYSE; (vii) all travel expenses of the Company’s officers and employees and any other expense of the Company incurred in connection with attending or hosting meetings with prospective purchasers of the Offered Securities. The Company also will pay or cause to be paid: (x) the cost and charges of any transfer agent or registrar for the Offered Securities; and (y) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section 6. It is understood, however, that except as provided in Sections 8, 9 and 12 hereof, the Underwriter and BSIL will pay all of their own costs and expenses, including the fees of their counsel.

7. Conditions of Underwriter’s Obligations. The obligations of the Underwriter to purchase and pay for the Offered Securities and of BSIL borrowing the Offered Securities, as provided herein, shall be subject to the accuracy of the representations and warranties of the Company herein contained, as of the date hereof and as of the Closing Date, to the performance by the Company of all of its obligations hereunder, and to each of the following additional conditions:

(a) The Prospectus shall have been filed with the Commission in a timely fashion in accordance with Section 4(a) hereof; no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto, and no stop order suspending or preventing the use of any Preliminary Prospectus, any Issuer Free Writing Prospectus or the Prospectus, shall have been issued by the Commission and no proceedings therefor shall have been initiated or threatened by the Commission; all requests for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction; and all necessary regulatory or stock exchange approvals shall have been received, including the approval of the New York Stock Exchange for the listing of the Offered Securities upon notice of issuance.

(b) At the Closing Date, each of you shall have received the written opinions of Andrews & Kurth LLP, counsel for the Company, dated the Closing Date and addressed to the Underwriter and BSIL, in form and substance satisfactory to each of you, to the effect set forth in Annex I hereto.

(c) At the Closing Date, each of you shall have received the written opinion of Doherty & Doherty LLP, counsel for the Company, dated the Closing Date and addressed to the Underwriter and BSIL, in form and substance satisfactory to you, to the effect set forth in Annex I hereto.

(d) At the Closing Date, each of you shall have received the written opinion of Underwriter’s Counsel, dated the Closing Date and addressed to the Underwriter and BSIL, in form and substance satisfactory to each of you, with respect to the issuance and sale of the Offered Securities, the Registration Statement, the Pricing Disclosure Package, the

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Prospectus and such other matters as each of you may require, and the Company shall have furnished to Underwriter’s Counsel such documents as they may reasonably request for the purpose of enabling them to pass upon such matters.

(e) At the Closing Date, each of you shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of the Company, dated the Closing Date, in form and substance satisfactory to you, as to the accuracy of the representations and warranties of the Company set forth in Section 1 hereof as of the date hereof and as of the Closing Date, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to the Closing Date, as to the matters set forth in subsections (a), (h) and (i) of this Section 7, and as to such other matters as you may reasonably request.

(f) At the time this Agreement is executed and at the Closing Date, each of you shall have received comfort letters, from UHY LLP and Elms, Faris & Company, LLP, independent public accountants for the Company, dated, respectively, as of the date of this Agreement and as of the Closing Date, addressed to the Underwriter and BSIL and in form and substance satisfactory to the Underwriter, BSIL and Underwriter’s Counsel.

(g) At the time this Agreement is executed and at the Closing Date, each of you shall have received a certificate, in form and substance satisfactory to the Underwriter, BSIL and Underwriter’s Counsel, from the Chief Financial Officer of the Company relating to certain financial data of the Company.

(h) (i) Neither the Company nor any Subsidiary shall have sustained, since the date of the latest audited financial statements included or incorporated by reference in the Pricing Prospectus, any material loss or interference with its business or properties from fire, explosion, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding, other than as set forth in the Pricing Prospectus (exclusive of any supplement thereto); and (ii) subsequent to the dates as of which information is given in the Registration Statement (exclusive of any amendment thereto subsequent to the date hereof) and the Pricing Prospectus (exclusive of any supplement thereto), there shall not have been any change in the capital stock or material increase in the short-term or long-term debt of the Company or any Subsidiary or any change or any development involving a change, whether or not arising from transactions in the ordinary course of business, in the business, general affairs, management, condition (financial or otherwise), results of operations, stockholders’ equity, properties or prospects of the Company and the Subsidiaries, taken as a whole, the effect of which, in any such case described above, is, in the judgment of the Underwriter or BSIL, so material and adverse as to make it impracticable or inadvisable to proceed with the Offering on the terms and in the manner contemplated in the Pricing Prospectus (exclusive of any such supplement).

(i) On or after the Applicable Time, (i) no downgrading shall have occurred in the rating accorded the Company’s debt securities or preferred stock or the Company’s financial strength or claims paying ability by any “nationally recognized statistical rating organization”, as such term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities or preferred stock or the Company’s financial strength or claims paying ability.

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(j) You shall have received a duly executed lock-up agreement from each person who is a director or executive officer of the Company and each stockholder and other person or entity listed on Schedule I hereto, in each case substantially in the form attached hereto as Annex II.

(k) The Offered Securities delivered on the Closing Date are validly issued, fully paid and nonassessable and conform to the information in the General Disclosure Package and to the description of the Offered Securities contained in the Prospectus; none of the Offered Securities have been issued in violation of any preemptive or similar rights of any security holder; and by the Closing Date, the Offered Securities have been approved for listing on the NYSE, subject only to notice of issuance.

(l) All outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable; none of the outstanding shares of capital stock of the Company have been issued in violation of any preemptive or similar rights of any security holder.

(m) The Convertible Notes Offering, substantially on the terms described in the General Disclosure Package, shall have been consummated on the Closing Date.

(n) The Company shall have furnished the Underwriter, BSIL and Underwriter’s Counsel with such other certificates, opinions or other documents as they may have reasonably requested.

If any of the conditions specified in this Section 7 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements or letters furnished to each of you or to Underwriter’s Counsel pursuant to this Section 7 shall not be satisfactory in form and substance to the Underwriter, BSIL and to Underwriter’s Counsel, all obligations of the Underwriter hereunder may be cancelled by the Underwriter at, or at any time prior to, the Closing Date. Notice of such cancellation shall be given to the Company in writing or by telephone. Any such telephone notice shall be confirmed promptly thereafter in writing.

8. Indemnification.

(a) The Company shall indemnify and hold harmless the Underwriter, BSIL and the Agent and each person, if any, who controls the Underwriter, BSIL or the Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and each affiliate of the Underwriter, BSIL or the Agent within the meaning of Rule 405 under the Securities Act from and against any and all losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to reasonable attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities,

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claims, damages or expenses (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in (A) the Registration Statement, as originally filed or any amendment thereof, or in any Preliminary Prospectus, the Pricing Disclosure Package or the Prospectus, or in any supplement thereto or amendment thereof, or in any Issuer Free Writing Prospectus, or in any “issuer information” (as defined in Rule 433(h)(2) under the Securities Act) filed or required to be filed pursuant to Rule 433(d) under the Securities Act, or (B) any other materials or information provided to investors by, or with the approval of, the Company in connection with the Offering, including in any “road show” (as defined in Rule 433 under the Securities Act) for the Offering (“Marketing Materials”), or (ii) the omission or alleged omission to state (A) in the Registration Statement, as originally filed or any amendment thereof, a material fact required to be stated therein or necessary to make the statements therein not misleading, or (B) in any Preliminary Prospectus, the Pricing Disclosure Package or the Prospectus, or in any supplement thereto or amendment thereof, or in any Issuer Free Writing Prospectus, or in any “issuer information” (as defined in Rule 433(h)(2) under the Securities Act) filed or required to be filed pursuant to Rule 433(d) under the Securities Act, or in any Marketing Materials, a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Company will not be liable in any such case to the extent but only to the extent that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by the Underwriter expressly for use therein. The parties agree that such information provided by the Underwriter consists solely of the material referred to in Section 15 hereof. This indemnity agreement will be in addition to any liability which the Company may otherwise have, including but not limited to other liability under this Agreement.

(b) The Underwriter shall indemnify and hold harmless the Company, each of the directors of the Company, each of the officers of the Company who shall have signed the Registration Statement and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to reasonable attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, as originally filed or any amendment thereof, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact included in any Preliminary Prospectus, the Pricing Disclosure Package or the Prospectus, or in any amendment thereof or supplement thereto, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance

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upon and in conformity with information furnished in writing to the Company by the Underwriter specifically for use therein; provided, however, that in no case shall the Underwriter or BSIL be liable or responsible for any amount in excess of the underwriting discount applicable to the Notes to be purchased by the Underwriter pursuant to the Convertible Notes Underwriting Agreement (without duplication to any payment made under Section 8(b) and 9 of the Convertible Notes Underwriting Agreement). The parties agree that such information provided by the Underwriter consists solely of the material referred to in Section 15 hereof.

(c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of any claims or the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the claim or the commencement thereof (but the failure so to notify an indemnifying party shall not relieve the indemnifying party from any liability which it may have under this Section 8 to the extent that it is not materially prejudiced as a result thereof or otherwise has notice of any such action, and in any event shall not relieve it from any liability that such indemnifying party may have otherwise than on account of the indemnity agreement hereunder). In case any such claim or action is brought against any indemnified party, counsel to such indemnified party shall be selected by such indemnified party. An indemnifying party may participate at its own expense in the defense of any such claim or action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened claim, investigation, action or proceeding in respect of which indemnity or contribution may be or could have been sought by an indemnified party under this Section 8 or Section 9 hereof (whether or not the indemnified party is an actual or potential party thereto), unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such claim, investigation, action or proceeding and (ii) does not include a statement as to or an admission of fault, culpability or any failure to act, by or on behalf of the indemnified party. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by subsections (a) or (b), as applicable, effected without its written consent if (A) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (B) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (C) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

9. Contribution. In order to provide for contribution in circumstances in which the indemnification provided for in Section 8 hereof is for any reason held to be unavailable from any indemnifying party or is insufficient to hold harmless a party indemnified thereunder, the Company and the Underwriter shall contribute to the aggregate losses, claims, damages,

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liabilities and expenses of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company, any contribution received by the Company from persons, other than the Underwriter, who may also be liable for contribution, including persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, officers of the Company who signed the Registration Statement and directors of the Company) as incurred to which the Company, the Underwriter, BSIL and the Agent may be subject, in such proportions as is appropriate to reflect the relative fault of the Company on the one hand and the Underwriter and BSIL on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of each of the Company, the Underwriter and BSIL shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriter and BSIL on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Underwriter and BSIL agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 9 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any judicial, regulatory or other legal or governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 9, (i) the Underwriter and BSIL shall not be required to contribute any amount in excess of the amount by which the discounts and commissions applicable to the Notes purchased by the Underwriter pursuant to the Convertible Notes Underwriting Agreement and distributed to the public exceeds the amount of any damages which the Underwriter and BSIL has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission (including, and without duplication of, any payment made under Section 8(b) and 9 of the Convertible Notes Underwriting Agreement) and (ii) 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. For purposes of this Section 9, each person, if any, who controls the Underwriter or BSIL within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each affiliate of the Underwriter within the meaning of Rule 405 under the Securities Act shall have the same rights to contribution as such party, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, as applicable, subject in each case to clauses (i) and (ii) of the immediately preceding sentence. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution

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may be made against another party or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 9 or otherwise.

10. Survival of Representations and Agreements. All representations and warranties, covenants and agreements of the Underwriter and the Company contained in this Agreement or in certificates of officers of the Company or any Subsidiary submitted pursuant hereto, including the agreements contained in Section 4 and 5, the indemnity agreements contained in Section 8 and the contribution agreements contained in Section 9, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Underwriter or any controlling person thereof or by or on behalf of the Company, any of its officers and directors or any controlling person thereof, and shall survive delivery of and payment for the Offered Securities to and by the Underwriter. The representations contained in Section 1 and the agreements contained in Sections 6, 8, 9 and 11 through 14 hereof shall survive any termination of this Agreement, including termination pursuant to Section 11 hereof.

11. Effective Date of Agreement; Termination.

(a) This Agreement shall become effective when the parties hereto have executed and delivered this Agreement.

(b) The Underwriter and BSIL shall have the right to terminate this Agreement at any time prior to the Final Sale, if, at or after the execution of this Agreement, (i) any domestic or international event or act or occurrence has materially disrupted, or in the opinion of the Underwriter will in the immediate future materially disrupt, the market for the Company’s securities or securities in general; or (ii) a suspension or material limitation in trading in securities generally on the NYSE, NASDAQ Stock Market or on the American Stock Exchange shall have occurred; or (iii) a suspension or material limitation in trading in the Company’s securities on the NYSE shall have occurred; or (iv) a banking moratorium has been declared by any state or federal authority or any material disruption in commercial banking or securities settlement or clearance services shall have occurred; or (v) any downgrading shall have occurred in the Company’s corporate credit rating or the rating accorded the Company’s debt securities or preferred stock by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Securities Act) or any such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities; or (vi) (A) there shall have occurred any outbreak or escalation of hostilities or acts of terrorism involving the United States or there is a declaration of a national emergency or war by the United States or (B) there shall have been any other calamity or crisis or any change in political, financial or economic conditions if the effect of any such event in (A) or (B), in the judgment of the Underwriter, makes it impracticable or inadvisable to proceed with the offering, sale and delivery of the Offered Securities, as the case may be, on the terms and in the manner contemplated by the Prospectus and this Agreement.

(c) Any notice of termination pursuant to this Section 11 shall be in writing.

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(d) If this Agreement shall be terminated pursuant to any of the provisions hereof (other than pursuant to Section 10(b) hereof), or if the sale of the Offered Securities provided for herein is not consummated because any condition to the obligations of BSIL or the Underwriter set forth herein is not satisfied or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof, the Company will, subject to demand by the Underwriter, reimburse the Underwriter and BSIL for all out-of-pocket expenses (including the reasonable fees and expenses of their counsel), incurred by the Underwriter and BSIL in connection herewith.

12. Notices. All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing, and:

(a) if sent to the Underwriter, shall be mailed, delivered, or faxed and confirmed in writing, to Bear, Stearns & Co. Inc., 383 Madison Avenue, New York, New York 10179, Attention: Stephen Parish, Senior Managing Director, Equity Transactions Group, with a copy to Underwriter’s Counsel at 1600 El Camino Real, Menlo Park, California 94025, Attention: Julia Cowles, Esq.; and

(b) if sent to the Company, shall be mailed, delivered, or faxed and confirmed in writing to the Company and its counsel at the addresses set forth in the Registration Statement, Attention: W. Mark Young, Esq.

13. Parties. This Agreement shall inure solely to the benefit of, and shall be binding upon, the Underwriter, BSIL and the Company and the controlling persons, directors, officers, employees and agents referred to in Sections 8 and 9 hereof, and their respective successors and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and said controlling persons and their respective successors, officers, directors, heirs and legal representatives, and it is not for the benefit of any other person, firm or corporation. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of Offered Securities from the Underwriter.

14. Governing Law and Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The Company irrevocably (a) submits to the jurisdiction of any court of the State of New York or the United State District Court for the Southern District of the State of New York for the purpose of any suit, action, or other proceeding arising out of this Agreement or any of the agreements or transactions contemplated by this Agreement, the Share Lending Agreement, the Registration Statement, Pricing Disclosure Package and the Prospectus (each, a “Proceeding”), (b) agrees that all claims in respect of any Proceeding may be heard and determined in any such court, (c) waives, to the fullest extent permitted by law, any immunity from jurisdiction of any such court or from any legal process therein, (d) agrees not to commence any Proceeding other than in such courts, and (e) waives, to the fullest extent permitted by law, any claim that such Proceeding is brought in an inconvenient forum. THE COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT PERMITTED BY LAW, ON BEHALF OF ITS

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RESPECTIVE EQUITY HOLDERS AND CREDITORS) HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE SHARE LENDING AGREEMENT, THE REGISTRATION STATEMENT AND THE PROSPECTUS.

15. The parties acknowledge and agree that, for purposes of Sections 1(c), 1(d), 1(e) and 8 hereof, the information provided by the Underwriter consists solely of the material included in the tenth paragraph under the caption “Share Lending Agreement; Concurrent Offering of Convertible Notes” and the second paragraph (except for the last sentence thereof) and the third paragraph (except for the last sentence thereof) under the caption “Underwriting” in the Prospectus.

16. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. Delivery of a signed counterpart of this Agreement by facsimile transmission shall constitute valid and sufficient delivery thereof.

17. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

18. Time is of the Essence. Time shall be of the essence of this Agreement. As used herein, the term “business day” shall mean any day when the Commission’s office in Washington, D.C. is open for business.

[signature page follows]

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If the foregoing correctly sets forth your understanding, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among us.

Very truly yours,
FLOTEK INDUSTRIES, INC.
By:	/s/ Jerry D. Dumas, Sr.
Name:	Jerry D. Dumas, Sr.
Title:	Chairman, President and CEO

Accepted as of the date first above written BEAR, STEARNS & CO. INC.
By:	/s/ Stephen Parish
Name:	Stephen Parish
Title:	Senior Managing Director
BEAR, STEARNS INTERNATIONAL LIMITED
By:	/s/ Michael O’Donovan
Name:	Michael O’ Donovan
Title:	Authorized Signatory
BEAR, STEARNS & CO. INC., as Agent
By:	/s/ Stephen Parish
Name:	Stephen Parish
Title:	Senior Managing Director

SCHEDULE I

Names of executive officers and directors subject to the lock-up provision

1. Jerry D. Dumas, Sr.

2. Lisa G. Meier

3. Jesse E. Neyman

4. John W. Chisholm

5. Gary M. Pittman

6. Barry E. Stewart

7. Richard O. Wilson

8. William R. Ziegler

EXHIBIT A

Subsidiaries

CAVO Drilling Motors, Ltd. Co.

CESI Chemical, Inc.

Flotek Paymaster, Inc.

Material Translogistics, Inc.

Padko International Incorporated

Petrovalve, Inc.

SES Holdings, Inc.

Sooner Energy Services, Inc.

Spidle Sales & Service, Inc.

Teledrift Acquisition, Inc.

Trinity Tool, Inc.

Turbeco, Inc.

USA Petrovalve, Inc.

ANNEX I

Matters To be Covered by Opinion of Andrews Kurth LLP

1. The Company has the corporate power and authority under the Delaware General Corporation Law (the “DGCL”) to execute and deliver the Underwriting Agreement and the Share Lending Agreement and to perform its obligations thereunder.

2. The Offered Securities to be delivered on the Closing Date have been duly and validly authorized and, when delivered in accordance with the Underwriting Agreement and the Share Lending Agreement and, upon payment of the Loan Fee, will be duly and validly issued and outstanding, fully paid and non-assessable and will not have been issued in violation of or subject to preemptive or, to the best of such counsel’s knowledge, similar rights, including but not limited to rights under the Company’s articles of incorporation or bylaws or under Delaware law, that entitle or will entitle any person to acquire any Offered Securities from the Company upon issuance or sale thereof.

3. The Common Stock currently outstanding is listed, and the Offered Securities are duly authorized for listing, on the New York Stock Exchange.

4. The Underwriting Agreement has been duly authorized, executed and delivered by the Company.

5. None of (i) the offering, issuance and delivery by the Company of the Offered Securities being delivered on the date of the opinion, (ii) the execution, delivery and performance of the Underwriting Agreement and the Share Lending Agreement by the Company, or (iii) the consummation by the Company of the transactions contemplated thereby (A) results or will result in any violation of applicable laws of the State of New York, the DGCL or the applicable laws of the United States of America or (B) conflicts or will conflict with or constitutes or will constitute a breach or violation of, or a default (or an event that, with notice or lapse of time or both, would constitute such a default) under any contract listed on Schedule I hereto (other than, with respect to covenants or agreements of a financial or numerical nature or requiring computation, as to which such counsel will not comment).

6. The Share Lending Agreement has been duly and validly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, under the applicable laws of the State of New York.

7. No Governmental Approval, which has not been obtained or taken and is not in full force and effect, is required to authorize, or is required for the execution and delivery by the Company of, the Underwriting Agreement or the Share Lending Agreement or the performance of its obligations thereunder, or the enforceability of the Underwriting Agreement or the Share Lending Agreement against the Company. As used in this paragraph, “Governmental Approval” means any consent, approval, license, authorization or validation of, or filing, recording or registration with, any executive, legislative, judicial, administrative or regulatory body of the State of New York, the State of Delaware or the United States of America, pursuant to (i) applicable laws of the State of New York, (ii) applicable laws of the United States of America or (iii) the DGCL.

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8. The statements under the captions “Description of Capital Stock” and “Share Lending Agreement; Concurrent Offering of Convertible Notes” in the Preliminary Prospectus, the Pricing Disclosure Package and the Prospectus, insofar as such statements purport to summarize certain provisions of legal matters, documents or proceedings referred to therein and reviewed by counsel as described in such opinion, fairly summarize such provisions in all material respects, subject to the qualifications and assumptions stated therein.

9. The statements in the Preliminary Prospectus and the Prospectus under the caption “U.S. Federal Income Tax Considerations for Non-U.S. Holders,” insofar as they refer to statements of law or legal conclusions, fairly summarize the matters referred to therein in all material respects, subject to the qualifications and assumptions stated therein.

10. The Company is not, and, after giving effect to the offering and sale of the Offered Securities and the consummation of the share lending transaction, will not be, an “investment company” within the meaning of said term as used in the Investment Company Act of 1940, as amended.

Such counsel shall state that (i) the Registration Statement became automatically effective under the Securities Act upon filing under Rule 462(e) under the Securities Act; (ii) based on oral communication with the Commission, no stop order suspending the effectiveness of the Registration Statement has been issued and, (iii) to such counsel’s knowledge based on such oral communication with the Commission, no proceedings for that purpose have been instituted or threatened by the Commission.

Such counsel shall also state that they have reviewed the documents incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus or any amendment thereof or supplement thereto (other than the financial statements and schedules and other financial data included or incorporated by reference therein, as to which no opinion need be rendered), and that on the basis of such review, such incorporated documents appeared on their face to be appropriately responsive, in all material respects, to the requirements of the Exchange Act and the Rules and Regulations.

In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Company, the independent registered public accounting firm for the Company, your counsel and your representatives, at which the contents of the Registration Statement, the Pricing Disclosure Package and the Prospectus and related matters were discussed, and, although such counsel has not independently verified, is not passing upon, and do not assume any responsibility for the accuracy, completeness or fairness of, the statements contained or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus (except as and to the extent set forth in opinions 8 and 9 above), on the basis of the foregoing (relying to a limited extent with respect to factual matters upon statements by officers and other representatives of the Company and their Subsidiaries):

(a) such counsel confirms that, in their opinion, each of the Registration Statement, as of the latest Effective Date, the Pricing Disclosure Package, as of the Applicable

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Time, and the Prospectus, as of its date, appeared on its face to be appropriately responsive, in all material respects, to the requirements of the Securities Act and the Rules and Regulations (except that such counsel need not make a statement with respect to Regulation S-T), and

(b) such counsel has not become aware of any documents that are required to be filed as exhibits to the Registration Statement and are not so filed or of any documents that are required to be summarized in the Preliminary Prospectus or the Prospectus, and are not so summarized; and

(c) no facts have come to such counsel’s attention that have led them to believe that (i) the Registration Statement, as of the latest Effective Date, contained an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Pricing Disclosure Package, as of the Applicable Time, contained an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (iii) the Prospectus, as of its date and as of the date of such opinion, contained or contains an untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; it being understood that such counsel expresses no statement or belief in this letter with respect to (A) the financial statements and related schedules, including the notes and schedules thereto and the auditor’s report thereon and (B) any other financial data, included or incorporated or deemed incorporated by reference in, or excluded from, the Registration Statement, the Prospectus or the Pricing Disclosure Package.

In rendering such opinions, such counsel may (A) rely in respect of matters of fact upon certificates of officers and employees for the Company and of the transfer agent of the Company and upon information obtained from public officials, (B) assume that all documents submitted to them as originals are authentic, that all copies submitted to them conform to the originals thereof, and that the signatures on all documents examined by them are genuine, (C) state that their opinion is limited to the DGCL and the laws of the State of Texas, the applicable laws of the United States of America and, with respect to the opinion set forth in paragraph 9 above, United States federal income tax law, and with respect to the enforceability opinions set forth in paragraphs 4 and 6, the contract law of the State of New York, (D) state that they express no opinion with respect to state securities or blue sky laws of any jurisdiction or with respect to the anti-fraud provisions of the federal securities laws, (E) with respect to the opinion expressed in paragraph 1 above as to the valid existence and good standing, state that such opinions are based solely on certificates from the appropriate public officials, and (F) state that such counsel expresses no opinion with respect to (i) any permits to own or operate any real or personal property or (ii) state or local tax statutes to which the Company or any of its Subsidiaries may be subject. In addition, counsel may state that they did not participate in the preparation of the Incorporated Documents and that they have not undertaken any independent investigation with respect to the representations and warranties and other statements of fact included in the exhibits to the Registration Statement or to the documents incorporated by reference in the Registration Statement.

In making its examination of executed documents, such counsel may assume (except to the extent that such counsel expressly opines in its opinion) (1) the valid existence and good

3

standing of each of the parties thereto, (2) that such parties had the power and authority, corporate, partnership, limited liability company or other, to enter into and to incur and perform all their obligations thereunder, (3) the due authorization by all requisite action, corporate, partnership, limited liability company or other, and the due execution and delivery by such parties of such documents and (4) to the extent such documents purport to constitute agreements, that each of such documents constitutes the legal, valid and binding obligation of each party thereto, enforceable against such party in accordance with its terms. In this paragraph, all references to parties to documents shall be deemed to mean and include each of such parties, and each other person (if any) directly or indirectly acting on its behalf.

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Matters to be Covered by Opinion of Doherty & Doherty LLP

1. The Company and each Subsidiary of the Company incorporated in the States of Delaware or Texas (the “Specified Subsidiaries”) has been duly formed and validly exists as a corporation or limited liability company, as the case may be, in good standing under the laws of its jurisdiction of incorporation with corporate or limited liability company, as the case may be, power and authority to own its properties and conduct its business as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. Each of the Company, and to such counsel’s knowledge, each of the Specified Subsidiaries, is duly qualified and in good standing as a foreign corporation or limited liability company, as the case may be, in each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where the failure to be so qualified or in good standing in any such jurisdiction would not have a Material Adverse Effect (as such term is defined in the Underwriting Agreement between the Company and the Underwriter) on the Company and its Subsidiaries, taken as a whole.

2. The number of authorized, issued and outstanding shares of capital stock of the Company are as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus. All of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and were not issued in violation of or subject to any preemptive or, to the best of such counsel’s knowledge, similar rights that entitled or would entitle any person to acquire any such shares from the Company upon issuance or sale thereof. All of the issued shares of capital stock of each of the Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable and are owned, directly or through one or more subsidiaries, by the Company.

3. To such counsel’s knowledge and other than as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no judicial, regulatory or other legal or governmental proceedings pending to which the Company or any of its Subsidiaries is a party or of which any property of the Company or any of its Subsidiaries is the subject which, if determined adversely to the Company or any of its Subsidiaries, would individually or in the aggregate have a Material Adverse Effect; and, to the best of such counsel’s knowledge, no such proceedings are threatened or contemplated.

4. None of (i) the offering, issuance and delivery by the Company of the Offered Securities being delivered on the date of the opinion, (ii) the execution, delivery and performance of the Underwriting Agreement and the Share Lending Agreement by the Company or (iii) the consummation by the Company of the transactions contemplated thereby (A) conflicts or will conflict with or constitutes or will constitute a violation of the certificate or articles of incorporation or bylaws or other organizational documents of the Company or any Specified Subsidiary, (B) conflicts or will conflict with or constitutes or will constitute a breach or violation of, or a default (or an event that, with notice or lapse of time or both, would constitute such a default) under any Identified Contract (other than, with respect to covenants or agreements of a financial or numerical nature or requiring computation, as to which we do not comment), or (C) results or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its Subsidiaries, which

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conflicts, breaches, violations, defaults or liens, in the case of clauses (B) or (C), would, individually or in the aggregate, have a material adverse effect on the financial condition, business or results of operations of the Company or any of its Subsidiaries, taken as a whole, or could materially impair the ability of the Company to perform its obligations under the Underwriting Agreement or the Share Lending Agreement. As used in this paragraph, “Identified Contract” means (1) those contracts listed on an exhibit to the opinion and certified by an officer of the Company to be all contracts filed or required to be filed as an exhibit to the Company’s reports filed with the Securities and Exchange Commission as material contracts pursuant to Items 601(2), (4) or (10) of Regulation S-K ; (2) the Teledrift Purchase Agreement (as defined in the Underwriting Agreement).

In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Company, the independent registered public accounting firm for the Company, your counsel and your representatives, at which the contents of the Registration Statement, the Pricing Disclosure Package and the Prospectus and related matters were discussed, and, although such counsel has not independently verified, is not passing upon, and do not assume any responsibility for the accuracy, completeness or fairness of, the statements contained or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus, on the basis of the foregoing (relying to a limited extent with respect to factual matters upon statements by officers and other representatives of the Company and their Subsidiaries), no facts have come to such counsel’s attention that have led them to believe that (i) the Registration Statement, as of the latest Effective Date, contained an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Pricing Disclosure Package, as of the Applicable Time, contained an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (iii) the Prospectus, as of its date and as of the date of such opinion, contained or contains an untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; it being understood that such counsel expresses no statement or belief in this letter with respect to (A) the financial statements and related schedules, including the notes and schedules thereto and the auditor’s report thereon or (B) any other financial data, included or incorporated or deemed incorporated by reference in, or excluded from, the Registration Statement, the Prospectus or the Pricing Disclosure Package.

In rendering such opinions, such counsel may (A) rely in respect of matters of fact upon certificates of officers and employees for the Company and of the transfer agent of the Company and upon information obtained from public officials, (B) assume that all documents submitted to them as originals are authentic, that all copies submitted to them conform to the originals thereof, and that the signatures on all documents examined by them are genuine, (C) state that their opinion is limited to the DGCL and the laws of the State of Texas and the applicable laws of the United States of America, (D) state that they express no opinion with respect to state securities or blue sky laws of any jurisdiction or (except as set forth in the preceding paragraph) with respect to the anti-fraud provisions of the federal securities laws, (E) state that such counsel expresses no opinion with respect to (i) any permits to own or operate any real or personal property or (ii) state or local tax statutes to which the Company or any of its Subsidiaries may be subject.

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In making its examination of executed documents, such counsel may assume (except to the extent that such counsel expressly opines in its opinion) (1) the valid existence and good standing of each of the parties thereto, (2) that such parties had the power and authority, corporate, partnership, limited liability company or other, to enter into and to incur and perform all their obligations thereunder, (3) the due authorization by all requisite action, corporate, partnership, limited liability company or other, and the due execution and delivery by such parties of such documents and (4) to the extent such documents purport to constitute agreements, that each of such documents constitutes the legal, valid and binding obligation of each party thereto, enforceable against such party in accordance with its terms. In this paragraph, all references to parties to documents shall be deemed to mean and include each of such parties, and each other person (if any) directly or indirectly acting on its behalf.

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ANNEX II

Form of Lock-Up Agreement

February     , 2008

Bear, Stearns & Co. Inc.

383 Madison Avenue

New York, New York 10179

Attention: Equity Transactions Group

Flotek Industries, Inc. Lock-Up Agreement

Ladies and Gentlemen:

This letter agreement (this “Agreement”) relates to the proposed public offering (the “Offering”) by Flotek Industries, Inc., a Delaware corporation (the “Company”), of its __% Senior Convertible Notes Due 2028 (the “Notes”) and the related offering of common stock of the Company, $0.0001 par value per share (the “Common Stock”), loaned to Bear, Stearns International Limited (“BSIL”), represented by Bear, Sterns & Co. Inc. as agent for BSIL (in such capacity, the “Agent”), pursuant to a Share Lending Agreement between the Company and BSIL (the “Common Stock Offering”).

In order to induce you (the “Underwriter”) to underwrite the Offering, the undersigned hereby agrees that, without the prior written consent of Bear, Stearns & Co. Inc. (“Bear Stearns”), during the period from the date hereof until sixty (60) days from the date of the final prospectus for the Offering (the “Lock-Up Period”), the undersigned (a) will not, directly or indirectly, offer, sell, agree to offer or sell, solicit offers to purchase, grant any call option or purchase any put option with respect to, pledge, borrow or otherwise dispose of any Relevant Security (as defined below), and (b) will not establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” with respect to any Relevant Security (in each case within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder), or otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of a Relevant Security, whether or not such transaction is to be settled by delivery of Relevant Securities, other securities, cash or other consideration, or publicly announce an intention to do any of the foregoing. As used herein “Relevant Security” means the common stock of the Company, par value $0.0001 per share (the “Common Stock”), any other equity security of the Company or any of its subsidiaries and any security convertible into, or exercisable or exchangeable for, any Common Stock or other such equity security. This Agreement shall not apply to (A) transfers of shares of Common Stock or securities convertible into Common Stock as a gift of gifts or as intra family transfers or transfers to trusts or family limited partnerships for estate planning purposes or (B) transfers of Common Stock or any security convertible into Common Stock by will or intestacy; provided, as to clauses (A) and (B), each resulting transferee of shares of Common Stock or securities convertible into Common Stock executes and delivers to you an agreement satisfactory to you certifying that such transferee is bound by the terms of this Agreement and has been in compliance with the terms hereof since the date first written above as if it had been an original party hereto.

During the Lock-Up Period, the undersigned may exercise options or warrants to purchase Common Stock, provided, in such case, that the shares of Common Stock issued upon exercise shall remain subject to this Agreement.

Notwithstanding the preceding paragraph, if (1) during the last 17 days of the Lock-Up Period the Company issues an earnings release or material news or a material event relating to the Company occurs; or (2) prior to the expiration of the Lock-Up Period the Company announces that it will release earnings results during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by the immediately preceding paragraph shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event, as applicable, unless Bear Stearns waives, in writing, such extension. The undersigned acknowledges that the Company has agreed in the underwriting agreement for the Offering to provide notice to the undersigned of any event that would result in an extension of the Lock-Up Period pursuant to this paragraph, and the undersigned agrees that any such notice properly delivered will be deemed to have been given to, and received by, the undersigned.

The undersigned hereby authorizes the Company during the Lock-Up Period to cause any transfer agent for the Relevant Securities to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, Relevant Securities for which the undersigned is the record holder and, in the case of Relevant Securities for which the undersigned is the beneficial but not the record holder, agrees during the Lock-Up Period to cause the record holder to cause the relevant transfer agent to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, such Relevant Securities. The undersigned hereby further agrees that, without the prior written consent of Bear Stearns, during the Lock-up Period the undersigned (x) will not file or participate in the filing with the Securities and Exchange Commission of any registration statement except for registration statements on Form S-8 relating to employee benefit plans, or circulate or participate in the circulation of any preliminary or final prospectus or other disclosure document with respect to any proposed offering or sale of a Relevant Security and (y) will not exercise any rights the undersigned may have to require registration with the Securities and Exchange Commission of any proposed offering or sale of a Relevant Security.

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement and that this Agreement constitutes the legal, valid and binding obligation of the undersigned, enforceable in accordance with its terms. Upon request, the undersigned will execute any additional documents necessary in connection with enforcement hereof. Any obligations of the undersigned shall be binding upon the successors and assigns of the undersigned from the date first above written.

It is understood that, if the Underwriting Agreement for the Offering does not become effective or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Notes and the Stock, the undersigned shall be released from all obligations under this letter.

This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Delivery of a signed copy of this letter by facsimile transmission shall be effective as delivery of the original hereof.

Very truly yours,

By:

Print Name:

ANNEX III

Issuer Free Writing Prospectuses included in the Pricing Disclosure Package

EX-10.1

Exhibit 10.1

SHARE LENDING AGREEMENT

Dated as of February 11, 2008

Among

FLOTEK INDUSTRIES, INC. (“Lender”),

and

BEAR, STEARNS INTERNATIONAL LIMITED (“Borrower”), through BEAR,

STEARNS & CO. INC., as agent for Borrower (“Borrowing Agent”).

This Agreement sets forth the terms and conditions under which Borrower may borrow from Lender shares of its Common Stock.

The parties hereto agree as follows:

SECTION 1. Certain Definitions. The following capitalized terms shall have the following meanings:

“Business Day” means a day, other than a Saturday or Sunday, on which (i) regular trading occurs in the principal trading market for the Common Stock and (ii) the Clearing Organization is open.

“Cash” means any coin or currency of the United States as at the time shall be legal tender for payment of public and private debts.

“Clearing Organization” means The Depository Trust Company, or, if agreed to by Borrower and Lender, a Securities Intermediary at which Borrower (or Borrowing Agent) and Lender both maintain accounts.

“Closing Price” on any day means, with respect to the Common Stock (i) if the Common Stock is listed or admitted to trading on a U.S. securities exchange registered under the Exchange Act or is included in the OTC Bulletin Board Service (operated by the Financial Industry Regulatory Authority, Inc.), the last reported sale price, regular way, in the principal trading session on such day on such market on which the Common Stock is then listed, admitted to trading or included (or, if the day of determination is not a Business Day, the last preceding Business Day) and (ii) if the Common Stock is not so listed or admitted to trading or if the last reported sale price is not obtainable (even if the Common Stock is listed, admitted to trading or included on such market), the average of the bid prices for the Common Stock obtained from as many dealers in the Common Stock (which may include Borrower or its affiliates), but not exceeding three, as shall furnish bid prices to the Borrower.

“Common Stock” means shares of Common Stock, par value $0.0001 per share, of Lender, or any other security into which the Common Stock shall be exchanged or converted as the result of any merger, consolidation, other business combination, reorganization, reclassification, recapitalization or other corporate action (including, without limitation, a reorganization in bankruptcy).

“Convertible Notes” means the $100,000,000 aggregate principal amount of 5.25% Convertible Senior Notes due 2028 issued by Lender, or up to $115,000,000 aggregate principal amount to the extent the option to purchase additional Convertible Notes (the “Option”) is exercised in full as set forth in the underwriting agreement relating to the Convertible Notes.

“Convertible Notes Settlement Date” means February 14, 2008.

“Cutoff Time” shall mean 10:00 a.m. in the jurisdiction of the Clearing Organization, or such other time on a Business Day by which a transfer of Loaned Shares must be made by Borrower or Lender to the other, as shall be determined in accordance with market practice.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Guarantor” means Bear Stearns Companies Inc.

“Indenture” means the Indenture dated February 14, 2008, as supplemented by the First Supplemental Indenture dated February 14, 2008, each amongst Lender, the guarantors party thereto and American Stock Transfer & Trust Company, as trustee, pursuant to which the Convertible Notes are to be issued, as such Indenture is in effect as of the Convertible Notes Settlement Date.

“Lender’s Designated Account” means the securities account of Lender maintained on the books of Borrower, as Securities Intermediary, and designated “Flotek Industries, Inc.” (account number 353-09741-1-6), established simultaneously with the execution of this Agreement.

“Loaned Shares” means shares of Common Stock initially transferred to the Borrower in a Loan hereunder until such Loan or portion thereof is terminated and a corresponding number of Loaned Shares is transferred to Lender pursuant to this Agreement; provided that in respect of any such share of Common Stock initially transferred to the Borrower by Lender and subsequently transferred by the Borrower to another transferee, “Loaned Shares” means an equivalent number of shares of identical Common Stock. If, as the result of a stock dividend, stock split or reverse stock split, the number of outstanding shares of Common Stock is increased or decreased, then the number of Loaned Shares under outstanding Loans shall, effective as of the payment or delivery date of any such event, be proportionately increased or decreased, as the case may be. If any new or

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different security (or two or more securities) shall be exchanged for the outstanding shares of Common Stock as the result of any reorganization, merger, consolidation, reclassification, recapitalization or other corporate action (including, without limitation, a reorganization in bankruptcy), such new or different security (or such two or more securities collectively) shall, effective upon such exchange, be deemed to become a Loaned Share in substitution for the former Loaned Share for which such exchange is made, and in the same proportion for which such exchange is made. For purposes of return of Loaned Shares by Borrower or purchase or sale of securities pursuant to Section 4 or Section 10, such term shall mean securities of the same issuer, class and quantity as the Loaned Shares as adjusted pursuant to the two preceding sentences.

“Maximum Number of Shares” means 3,800,000 shares of Common Stock, subject to the following adjustments:

(a) If, as the result of a stock dividend, stock split or reverse stock split, the number of outstanding shares of Common Stock is increased or decreased, the Maximum Number of Shares shall, effective as of the payment or delivery date of any such event, be proportionally increased or decreased, as the case may be.

(b) If, pursuant to a merger, consolidation, other business combination, reorganization, reclassification, recapitalization or other corporate action (including, without limitation, a reorganization in bankruptcy), the Common Stock is exchanged for, or converted into, cash, the Maximum Number of Shares shall be proportionately reduced (to the extent Common Stock is exchanged for, or converted into, cash) on the effective date of such event.

(c) If any Convertible Notes are tendered for conversion to Lender in accordance with the terms of such Convertible Notes, the Maximum Number of Shares shall, effective as of the date Lender delivers cash and/or shares of Common Stock in satisfaction of the related conversion obligation, be reduced by a number of shares of Common Stock (rounded down to the nearest whole share) equal to the product of the Maximum Number of Shares immediately prior to such conversion and a fraction, the numerator of which is the principal amount of Convertible Notes tendered for conversion and the denominator of which is the principal amount of Convertible Notes outstanding as of initial issuance (plus any amount of Convertible Notes issued pursuant to the Option).

(d) Upon the termination of any Loan pursuant to Section 4 the Maximum Number of Shares shall be reduced by the number of Loaned Shares surrendered by Borrower to Lender.

(e) Notwithstanding the foregoing, if, at any time after the Convertible Notes Settlement Date, the Maximum Number of Shares exceeds the product of (i) the aggregate principal amount of Convertible Notes issued on such date plus, as

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of any time prior to the expiration of the Option, Convertible Notes issuable upon exercise of the Option, divided by $1,000, and (ii) the Conversion Rate (as such term is used in the Indenture), then, effective at such time, the Maximum Number of Shares shall be reduced by such excess.

“Securities Act” means the Securities Act of 1933, as amended.

“Securities Intermediary” means a “securities intermediary” as defined by Section 8-102(a)(14) of the UCC.

“UCC” means the Uniform Commercial Code, as in effect in the State of New York, as in effect from time to time. Any reference to particular sections of the UCC shall be deemed to embrace successor renumbered provisions thereof.

SECTION 2. Loans of Shares; Transfers of Loaned Shares.

(a) Subject to the terms and conditions of this Agreement, Lender hereby agrees to make available for borrowing on the Convertible Notes Settlement Date, a number of shares of Common Stock equal to the Maximum Number of Shares.

(b) Subject to the terms and conditions of this Agreement, Borrower may by written notice to Lender on or prior to the Convertible Notes Settlement Date (a “Borrowing Notice”), seek to initiate a transaction in which Lender will lend Loaned Shares to Borrower through the issuance by Lender of such Loaned Shares to Borrower upon the terms, and subject to the conditions, set forth in this Agreement (each such issuance and loan, a “Loan”). Such Loan shall be confirmed by a schedule and receipt listing the Loaned Shares provided by Lender to Borrower (the “Confirmation”). Such Confirmation shall constitute conclusive evidence with respect to the Loan, including the number of shares of Common Stock that are the subject of the Loan, to which the Confirmation relates, unless a written objection to the Confirmation specifying the reasons for the objection is received by Lender from Borrower within five Business Days after the delivery of the Confirmation to Borrower; provided that in no event shall the delivery of the Confirmation or any such objection thereto delay the transfer of Loaned Shares to which a Borrowing Notice relates pursuant to clause (d) below.

(c) Notwithstanding anything to the contrary in this Agreement, Borrower shall not be permitted to borrow or have any right to take delivery of, or otherwise receive or be deemed to have received, any shares of Common Stock hereunder to the extent (but only to the extent) that after such receipt of such Common Stock (i) the “beneficial ownership” (within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) of Common Stock by Borrower or any affiliate of Borrower subject to aggregation with Borrower under such Section 11 and such rules would exceed

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9.9%, as determined by the Borrower in its sole discretion, or (ii) Borrower would be subject to Section 16(b) of the Exchange Act, as determined by the Borrower in its sole discretion, and any Loan hereunder shall be void and have no effect to the extent (but only to the extent) that such “beneficial ownership” would be in excess of 9.9% or Borrower would become subject to Section 16(b) of the Exchange Act. If any delivery owed to Borrower hereunder is not made, in whole or in part, as a result of this provision, Lender’s obligation to make such delivery shall not be extinguished and Lender shall make such delivery as promptly as practicable after, but in no event later than one Business Day after, Borrower gives notice to Lender that such delivery would not result in such “beneficial ownership” being in excess of 9.9% or Borrower becoming subject to Section 16(b) of the Exchange Act. If, notwithstanding the foregoing, any delivery of Common Stock is erroneously made to Borrower or Borrower otherwise receives or is deemed to have received Common Stock in excess of the foregoing limitation contrary to the first sentence of this clause (c), such Common Stock shall remain the property of the Lender and the Borrower shall be deemed to hold the same as bailee of Lender and shall have no voting, dispositive control or pecuniary interest with respect thereto.

(d) Lender shall transfer Loaned Shares to Borrower on or before the Cutoff Time on the date specified in the Borrowing Notice for the commencement of a Loan, which date shall not be earlier than the third Business Day following receipt by Lender of the Borrowing Notice. Delivery of the Loaned Shares to Borrower shall be made in the manner set forth under Section 11 below.

SECTION 3. Loan Fee. Borrower agrees to pay Lender a single loan fee per Loan (a “Loan Fee”) equal to $0.0001 per Loaned Share. The Loan Fee shall be paid by Borrower on or before the time of transfer of the Loaned Shares pursuant to Section 2(d) on a delivery-versus-payment basis through the facilities of the Clearing Organization. Lender agrees that the Loan Fee will constitute consideration for the issuance of the Loaned Shares to be issued by Lender.

SECTION 4. Loan Terminations.

(a) Borrower may terminate all or any portion of a Loan on any Business Day by giving written notice thereof to Lender and transferring the corresponding number of Loaned Shares to Lender, without any consideration being payable in respect thereof by Lender to Borrower.

(b) All outstanding Loans, if any, shall terminate on the date this Agreement terminates pursuant to Section 13 (the “Facility Termination Date”) and all Loaned Shares under outstanding Loans shall be delivered by Borrower to Lender, without any consideration being payable in respect thereof by Lender to Borrower, no later than the fifth Business Day following the Facility Termination Date.

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(c) If on any date, the aggregate number of Loaned Shares under outstanding Loans exceeds the Maximum Number of Shares, the number of Loaned Shares in excess of the Maximum Number of Shares shall be delivered by Borrower to Lender, without any consideration being payable in respect thereof by Lender to Borrower, no later than the third Business Day following such date. Upon receipt of a conversion notice from any holder of Convertible Notes, Lender shall notify Borrower within two Business Days of receipt of such conversion notice.

(d) If, as a result of complying with this Section 4 as promptly as reasonably practicable (but subject to applicable law, regulation or policy), (i) the “beneficial ownership” (within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) of Common Stock by Borrower or any affiliate of Borrower subject to aggregation with Borrower under such Section 11 and such rules would exceed 9.9%, as determined by Borrower in its sole discretion, or (ii) Borrower would be subject to Section 16(b) of the Exchange Act, as determined by Borrower in its sole discretion, then Borrower shall be permitted to extend the date on which Loaned Shares are due under this Section 4 for all or a portion of the corresponding delivery obligation but in no event longer than such time to allow Borrower to return such Loaned Shares, through one transaction or a series of transactions, without causing such “beneficial ownership” to be in excess of 9.9% or Borrower to become subject to Section 16(b) of the Exchange Act, as determined by the Borrower in its sole discretion. In addition, if Borrower is unable to satisfy its obligations to deliver any Common Stock under this Section 4 due to illiquidity in the market for Common Stock, Borrower shall, upon prior written notice to Lender, deliver such Common Stock as promptly as reasonably practicable thereafter.

SECTION 5. Distributions.

(a) If Lender pays a cash dividend or makes a cash distribution in respect of all of its outstanding Common Stock, Borrower shall pay to Lender, within one Business Day after the payment of such dividend or distribution, an amount in cash equal to the product of (i) the amount per share of such dividend or distribution and (ii) the aggregate number of Loaned Shares under outstanding Loans as of the record date of such dividend or distribution.

(b) If Lender makes a distribution in respect of all of its outstanding Common Stock in property or securities, including any options, warrants, rights or privileges in respect of securities (other than a distribution of Common Stock as to which the number of Loaned Shares shall be adjusted pursuant to the definition of “Loaned Shares,” but including any options, warrants, rights or privileges exercisable for, convertible into or exchangeable for Common Stock) (a “Non-Cash Distribution”), then (i) Non-Cash Distributions shall be treated as additional Loans of such Non-Cash Distribution in an amount equal to the product

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of (x) the amount per share of Common Stock of such Non-Cash Distribution and (y) the aggregate number of Loaned Shares under outstanding Loans as of the record date of such dividend or distribution, and (ii) the definition of “Loaned Share” shall be deemed to be modified to include the per share of Common Stock kind and amount of such Non-Cash Distribution.

SECTION 6. Rights in Respect of Loaned Shares.

Subject to the terms of this Agreement, and except as otherwise agreed by Borrower and Lender, Borrower, insofar as it is the record owner of Loaned Shares, shall have all of the incidents of ownership in respect of any such Loaned Shares until such Loaned Shares are required to be delivered to Lender in accordance with the terms of this Agreement, including the right to transfer the Loaned Shares to others. Borrower agrees that it or any of its affiliates that are the record owner of any Loaned Shares initially transferred to Borrower from Lender as a Loan hereunder will not vote or provide any consent or take any similar action with respect to such Loaned Shares on any matter submitted to a vote of Lender’s shareholders during the term of the Loan; provided, however that, for the avoidance of doubt, this sentence shall only apply to Loaned Shares transferred to Borrower that have not been offered and sold in a registered public offering in accordance with the terms of the Underwriting Agreement dated as of the date hereof among Borrower, Lender and Borrowing Agent or returned to Lender in accordance with the terms of this Agreement.

SECTION 7. Representations and Warranties.

(a) Each of Borrower and Lender represents and warrants to the other that:

(i) it has full power to execute and deliver this Agreement, to enter into the Loans contemplated hereby and to perform its obligations hereunder;

(ii) it has taken all necessary action to authorize such execution, delivery and performance;

(iii) this Agreement constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms;

(iv) the execution, delivery and performance of this Agreement does not and will not violate, contravene, or constitute a default under, (A) its certificate of incorporation, bylaws or other governing documents, (B) any laws, rules or regulations of any governmental authority to which it is subject, (C) any contracts, agreements or instrument to which it is a party or (D) any judgment, injunction, order or decree by which it is bound,

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except, in the case of each of clauses (C) and (D), for any such violation, contravention or default that would not reasonably be expected to have a material adverse effect on the financial condition, business, properties or results of operations of Lender and its subsidiaries, or Borrower and its affiliates, as applicable, taken as a whole; provided that any violation, contravention or default that would impact the performance of any party’s obligations under this Agreement shall be deemed to have a material adverse effect on the financial condition, business, properties or results of operations of such party and not qualify for the exception to clauses (C) and (D) described above; and

(v) this Agreement is not unsuitable for it in the light of such party’s financial situation, investment objectives and needs and it is entering into this Agreement in reliance upon such tax, accounting, regulatory, legal and financial advice as it deems necessary and not upon any view expressed by the other or the Borrowing Agent.

(b) Lender represents and warrants to Borrower, as of the date hereof, and as of the date any Loaned Shares are transferred to Borrower in respect of any Loan hereunder, that the Loaned Shares and all other outstanding shares of Common Stock of the Lender have been duly authorized and, upon the issuance and delivery of the Loaned Shares to Borrower in accordance with the terms and conditions hereof, and subject to the contemporaneous or prior receipt of the applicable Loan Fee by Lender, the Loaned Shares will be duly authorized, validly issued, fully paid non-assessable shares of Common Stock; and the stockholders of Lender have no preemptive rights with respect to the Loaned Shares.

(c) Lender represents and warrants to Borrower, as of the date hereof, and as of the date any Loaned Shares are transferred to Borrower in respect of any Loan hereunder, that the outstanding shares of Common Stock are listed on The New York Stock Exchange (the “NYSE”) and the Loaned Shares have been approved for listing on the NYSE, subject to official notice of issuance.

(d) Lender represents and warrants to Borrower, as of the date hereof, and as of the date any Loaned Shares are transferred to Borrower in respect of any Loan hereunder, that Lender is not “insolvent” (as such term is defined under Section 101(32) of Title 11 of the United States Code (the “Bankruptcy Code”) and any applicable state law) and Lender would be able to purchase the Maximum Number of Shares in compliance with the laws of Lender’s jurisdiction of organization.

(e) The representations and warranties of Borrower and Lender under this Section 7 shall remain in full force and effect at all times during the term of this Agreement and shall survive the termination of this Agreement for any reason.

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SECTION 8. Covenants.

(a) Borrower covenants and agrees with Lender that, in so far as it is the record owner of any Loaned Shares transferred to Borrower by Lender as a Loan hereunder and offered pursuant to a registered public offering on or about the date hereof, such Loaned Shares will be used for the purpose of directly or indirectly facilitating the sale of the Convertible Notes and the hedging of the Convertible Notes by the holders thereof.

(b) Borrower covenants and agrees with Lender that it will not transfer or dispose of any Loaned Shares transferred to Borrower by Lender as a Loan hereunder of which it is the record owner except pursuant to a registration statement that is effective under the Securities Act; provided that Borrower may transfer any such Loaned Shares to any of its affiliates without a registration statement so long as such affiliate transferee does not transfer or dispose of such Loaned Shares to any non-affiliated transferee except pursuant to a registration statement that is effective under the Securities Act.

(c) Lender agrees and acknowledges that Borrower has represented to Lender that Borrower is a “financial institution,” “swap participant” and “financial participant” within the meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of the Bankruptcy Code. The parties hereto further agree and acknowledge (A) that this Agreement is intended to be a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which each payment and delivery hereunder is a “settlement payment,” or “margin payment,” as such terms are defined in Section 741(8) and Section 741(5) of the Bankruptcy Code, and a “swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment and delivery hereunder is a “transfer,” as such term is defined in Section 101(54) of the Bankruptcy Code, and (B) that Borrower is intended to be entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the Bankruptcy Code.

(d) Lender covenants and agrees that, on any day on which Lender effects any repurchase of shares of Common Stock, Lender shall give Borrower a written notice of the number of its outstanding shares of Common Stock (a “Repurchase Notice”) if, following such repurchase, the number of outstanding shares of Common Stock shall have decreased by more than 1.0% since the immediately preceding Repurchase Notice (or, in the case of the first such Repurchase Notice, the number of outstanding shares of Common Stock as of the date hereof); provided that, as of any date, for purposes of calculating the number of outstanding shares of Common Stock as of the date of the immediately preceding Repurchase Notice, such number shall be adjusted as set forth in clauses (a) and (b) of the definition of “Maximum Number of Shares” above, to the same extent the number of shares of Common Stock are adjusted therein, and

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only to the extent that any of the events listed in such clauses (a) and (b) have occurred between the date of the immediately preceding Repurchase Notice and such date.

(e) Lender covenants and agrees that, unless otherwise agreed to by Borrower in writing, Lender shall not, nor shall cause any other person to, directly or indirectly, purchase shares of Common Stock such that, after giving effect to such purchase, the aggregate number of Loaned Shares under outstanding Loans shall be in excess of 25% of the number of outstanding shares of Common Stock at such time.

(f) Lender covenants and agrees that, on the date hereof, Lender shall provide to Borrower a properly executed Internal Revenue Service Form W-9.

SECTION 9. Events of Default.

(a) All Loans, and any further obligation to make Loans under this Agreement, may, at the option of Lender by a written notice to Borrower (which option shall be deemed exercised, even if no notice is given, immediately upon the occurrence of an event specified in either Section 9(a)(iii) or Section 9(a)(iv) below), be terminated (i) immediately upon the occurrence of any of the events set forth in Section 9(a)(iii) or Section 9(a)(iv) below and (ii) two Business Days following such notice upon the occurrence of any of the other events set forth below, (each, a “Borrower Default”):

(i) Borrower fails to deliver Loaned Shares to Lender as required by Section 4;

(ii) Borrower fails to deliver or pay to Lender when due any cash, securities or other property as required by Section 5;

(iii) the filing by or on behalf of Borrower of a voluntary petition or an answer seeking reorganization, arrangement, readjustment of its debts or for any other relief under any bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution, winding-up or liquidation or similar act or law, of any state, federal or other applicable foreign jurisdictions, now or hereafter existing (“Bankruptcy Law”), or any action by Borrower for, or consent or acquiescence to, the appointment of a receiver trustee, custodian or similar official of Borrower, or of all or a substantial part of its property; or the making by Borrower of a general assignment for the benefit of creditors; or the admission by Borrower in writing of its inability to pay its debts as they become due;

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(iv) the filing of any involuntary petition against Borrower in bankruptcy or seeking reorganization, arrangement, readjustment of its debts or for any other relief under any Bankruptcy Law and an order for relief by a court having jurisdiction in the premises shall have been issued or entered therein; or any other similar relief shall be granted under any applicable federal or state law or law of any other applicable foreign jurisdictions; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee or other officer having similar powers over Borrower or over all or a part of its property shall have been entered; or the involuntary appointment of an interim receiver, trustee or other custodian of Borrower or of all or a substantial part of its property; or the issuance of a warrant of attachment, execution or similar process against any substantial part of the property of Borrower; and continuance of any such event for 15 consecutive calendar days unless dismissed, bonded to the satisfaction of the court having jurisdiction in the premises or discharged;

(v) Borrower fails to provide any indemnity as required by Section 12;

(vi) Borrower notifies Lender of its inability to or intention not to perform Borrower’s obligations hereunder or otherwise disaffirms, rejects or repudiates any of its obligations hereunder; or

(vii) any representation made by Borrower under this Agreement in connection with any Loan or Loans hereunder shall be incorrect or untrue in any material respect during the term of any Loan hereunder or Borrower fails to comply in any material respect with any of its covenants under this Agreement.

(b) All Loans, and any further obligation to make Loans under this Agreement, may, at the option of Borrower by a written notice to Lender, be terminated two Business Days following such notice by Borrower upon the occurrence of any of the events set forth below (each, a “Lender Default,” and any Lender Default or Borrower Default, a “Default”):

(i) the filing by or on behalf of Lender of a voluntary petition or an answer seeking reorganization, arrangement, readjustment of its debts or for any other relief under any Bankruptcy Law, or any action by Lender for, or consent or acquiescence to, the appointment of a receiver, trustee, custodian or similar official of Lender, or of all or a substantial part of its property; or the making by Lender of a general assignment for the benefit of creditors; or the admission by Lender in writing of its inability to pay its debts as they become due; or

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(ii) the filing of any involuntary petition against Lender in bankruptcy or seeking reorganization, arrangement, readjustment of its debts or for any other relief under any Bankruptcy Law and an order for relief by a court having jurisdiction in the premises shall have been issued or entered therein; or any other similar relief shall be granted under any applicable federal or state law or law of any other applicable foreign jurisdictions; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee or other officer having similar powers over Lender or over all or a part of its property shall have been entered; or the involuntary appointment of an interim receiver, trustee or other custodian of Lender or of all or a substantial part of its property; or the issuance of a warrant of attachment, execution or similar process against any substantial part of the property of Lender; and continuance of any such event for 15 consecutive calendar days unless dismissed, bonded to the satisfaction of the court having jurisdiction in the premises or discharged.

SECTION 10. Lender’s Remedies.

(a) Notwithstanding anything to the contrary herein, if Borrower is required to return Loaned Shares pursuant to Section 4 and, on the date on which Borrower is required to return Loaned Shares pursuant to Section 4, the purchase of Common Stock by Borrower in an amount equal to all or any portion of the number of Loaned Shares to be delivered to Lender shall 1) be prohibited by any law, rules or regulation of any governmental authority to which it is or would be subject, 2) violate, or would upon such purchase likely violate, any order or prohibition of any court, tribunal or other governmental authority, 3) require the prior consent of any court, tribunal or governmental authority prior to any such repurchase or 4) subject Borrower, in the commercially reasonable judgment of Borrower, to any liability or potential liability under any applicable federal securities laws (other than Section 11 and Section 16(b) of the Exchange Act or illiquidity in the market for Common Stock, in which events Section 4(d) hereof shall govern) (each of (i), (ii), (iii) and (iv), a “Legal Obstacle”), then, in each case, Borrower shall immediately notify Lender of the Legal Obstacle and the basis therefor, whereupon Borrower’s obligation to deliver Loaned Shares to Lender shall be suspended until such time as no Legal Obstacle with respect to such obligations shall exist (a “Repayment Suspension”). Following the occurrence of and during the continuation of any Repayment Suspension, Borrower shall use its reasonable best efforts to remove or cure the Legal Obstacle as soon as practicable; provided that, to the extent such Legal Obstacle is caused, directly or indirectly by Lender (including a bankruptcy or insolvency of Lender), Lender shall promptly reimburse all reasonable costs and expenses (including legal counsel to Borrower) incurred or, at Borrower’s election, provide reasonably adequate surety or guarantee for any such costs and expenses that may be incurred by Borrower, in each case in removing or curing such Legal Obstacle.

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If Borrower is unable to remove or cure the Legal Obstacle within a reasonable period of time under the circumstances, Borrower shall pay to Lender, in lieu of the delivery of Loaned Shares otherwise required to be delivered, an amount in immediately available funds (the “Replacement Cash”) equal to the product of the Closing Price as of the Business Day immediately preceding the date Borrower makes such payment and the number of Loaned Shares otherwise required to be delivered.

(b) If Borrower shall fail to deliver Loaned Shares to Lender on the due date when any Loan is terminated under Section 4 or Borrower shall fail to pay the Replacement Cash to Lender in accordance with Section 10(a) above (to the extent Borrower is permitted and elects to pay Replacement Cash), then, in either case, in addition to any other remedies available to Lender under this Agreement or under applicable law, Lender shall have the right (without further notice to Borrower) to purchase a like number of shares of Common Stock (and, Non-Cash Distributions, if applicable pursuant to Section 5(b)) (“Replacement Shares”) in the principal market for such securities in a commercially reasonable manner (and Lender shall promptly notify Borrower of the aggregate purchase price of the Replacement Shares upon the exercise of such right); provided that Lender shall not be permitted to exercise its right to purchase Replacement Shares if Borrower is delivering Loaned Shares to Lender in accordance with Section 4(d), and provided further that if any Repayment Suspension or failure to deliver shall exist and be continuing, Lender shall not be permitted to exercise its right to purchase Replacement Shares unless Borrower shall fail to deliver the Loaned Shares or pay the Replacement Cash to Lender in accordance with Section 10(a) above. To the extent Lender shall exercise such right, Borrower’s obligation to return a like amount of Loaned Shares or to pay the Replacement Cash, as applicable, shall terminate and Borrower shall be liable to Lender for the purchase price of such Replacement Shares (plus all other amounts, if any, due to Lender hereunder). The purchase price of Replacement Shares purchased under this Section 10 shall include broker’s fees and commissions and all other reasonable costs, fees and expenses related to such purchase and sale. In the event Lender exercises its rights under this Section 10, Lender may elect in its sole discretion, in lieu of purchasing all or a portion of the Replacement Shares, to be deemed to have made such purchase of Replacement Shares for an amount equal to the Closing Price of the Common Stock on the date Lender elects to exercise this remedy. The parties hereby agree that repurchase of the Replacement Shares in a manner intended to allow the Lender to avail itself of the safe harbor provided by Rule 10b-18 under the Exchange Act shall be considered commercially reasonable.

SECTION 11. Transfers.

(a) All transfers of Loaned Shares to Borrower hereunder shall be made by the crediting by a Clearing Organization of such financial assets to the Borrower’s “securities account” (within the meaning of Section 8-501 of the UCC)

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maintained with such Clearing Organization. All transfers of Loaned Shares to Lender hereunder shall be made by the crediting of such Loaned Shares to Lender’s Designated Account (whereupon, for the avoidance of doubt, such Loaned Shares credited to Lender’s Designated Account shall become the property of Lender, and Borrower shall have no voting, dispositive control or pecuniary interest with respect thereto). In every transfer of “financial assets” (within the meaning of Section 8-102(a)(9) of the UCC) hereunder, the transferor shall take all steps necessary (i) to effect a delivery of such financial assets to the transferee under Section 8-301 of the UCC, or to cause the creation of a security entitlement in favor of the transferee in such financial assets under Section 8-501 of the UCC, (ii) to enable the transferee to obtain “control” (within the meaning of Section 8-106 of the UCC), and (iii) to provide the transferee with comparable rights under any similar law or regulation of any other jurisdiction that is applicable to such transfer.

(b) Except as otherwise provided herein, all transfers of cash hereunder to Borrower or Lender shall be by wire transfer in immediately available, freely transferable funds.

(c) A transfer of securities or cash may be effected under this Section 11 on any day except (i) a day on which the transferee is closed for business at its address set forth in Section 16 or (ii) a day on which a Clearing Organization or wire transfer system is closed, if the facilities of such Clearing Organization or wire transfer system are required to effect such transfer. Any transfer not effected because of this clause (c) shall be made on the next following day on which such transfer may be made.

SECTION 12. Indemnities.

(a) Lender hereby agrees to indemnify and hold harmless Borrower and its affiliates and its former, present and future directors, officers, employees and other agents and representatives from and against any and all liabilities, judgments, claims, settlements, losses, damages, fees, liens, taxes, penalties, obligations and expenses (including, without limitation, any losses relating to Borrower’s market activities as a consequence of becoming, or of the risk of becoming, subject to Section 16(b) of the Exchange Act, including, without limitation, any forbearance from market activities or cessation of market activities and any losses in connection therewith) incurred or suffered by any such person or entity directly or indirectly arising from, by reason of, or in connection with, (i) any breach by Lender of any of its representations or warranties contained in Section 7 or (ii) any breach by Lender of any of its covenants or agreements in this Agreement.

(b) Borrower hereby agrees to indemnify and hold harmless Lender and its affiliates and its former, present and future directors, officers, employees and

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other agents and representatives from and against any and all liabilities, judgments, claims, settlements, losses, damages, fees, liens, taxes, penalties, obligations and expenses incurred or suffered by any such person or entity directly or indirectly arising from, by reason of, or in connection with (i) any breach by Borrower of any of its representations or warranties contained in Section 7 or (ii) any breach by Borrower of any of its covenants or agreements in this Agreement.

(c) In case any claim or litigation which might give rise to any obligation of a party under this Section 12 (each an “Indemnifying Party”) shall come to the attention of the party seeking indemnification hereunder (the “Indemnified Party”), the Indemnified Party shall promptly notify the Indemnifying Party in writing of the existence and amount thereof; provided that the failure of the Indemnified Party to give such notice shall not adversely affect the right of the Indemnified Party to indemnification under this Agreement, except to the extent the Indemnifying Party is materially prejudiced thereby. The Indemnifying Party shall promptly notify the Indemnified Party in writing if it accepts such claim or litigation as being within its indemnification obligations under this Section 12. Such response shall be delivered no later than 30 days after the initial notification from the Indemnified Party; provided that, if the Indemnifying Party reasonably cannot respond to such notice within 30 days, the Indemnifying Party shall respond to the Indemnified Party as soon thereafter as reasonably possible.

(d) An Indemnifying Party shall be entitled to participate in and, if (i) in the judgment of the Indemnified Party such claim can properly be resolved by money damages alone and the Indemnifying Party has the financial resources to pay such damages and (ii) the Indemnifying Party admits that this indemnity fully covers the claim or litigation, the Indemnifying Party shall be entitled to direct the defense of any claim at its expense, but such defense shall be conducted by legal counsel reasonably satisfactory to the Indemnified Party. An Indemnified Party shall not make any settlement of any claim or litigation under this Section 12 without the written consent of the Indemnifying Party.

SECTION 13. Termination of Agreement.

(a) This Agreement shall terminate upon the earliest of (i) the date as of which Lender has notified Borrower in writing of its intention to terminate this Agreement at any time after the entire principal amount of Convertible Notes ceases to be outstanding and the Lender has settled all payments or deliveries in respect of such Convertible Notes (as such settlement may be extended pursuant to market disruption events or otherwise pursuant to the Indenture), whether as a result of conversion, redemption, repurchase, cancellation, at maturity or otherwise, (ii) the written agreement of Lender and Borrower to so terminate, (iii) the termination of the underwriting agreement relating to the Convertible Notes

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without issuance of the Convertible Notes or the failure of the initial offering of the Convertible Notes to close, in each case pursuant to the terms of such underwriting agreement and the Indenture, (iv) the occurrence of a Borrower Default, at the option of the Lender, as set forth in Section 9(a) and (v) the occurrence of a Lender Default, at the option of the Borrower, as set forth in Section 9(b).

(b) Unless otherwise agreed in writing by Borrower and Lender, the provisions of Section 12 shall survive the termination of this Agreement.

SECTION 14. Delegation.

Neither party shall delegate its obligations under this Agreement without the prior written consent of the other party, and any attempt to delegate obligations arising under this Agreement without such consent shall be void; provided that notwithstanding the foregoing and anything to the contrary herein, Borrower may designate any person to deliver Loaned Shares to Lender when due in accordance with this Agreement and to otherwise perform Borrower’s obligations in respect of this Agreement and any such designee may assume such obligations. Borrower shall only be discharged of its obligations to Lender to the extent of any such delivery or performance.

SECTION 15. Transfer and Assignment.

Neither party shall transfer or assign its rights or obligations under this Agreement without the prior written consent of the other party, and any attempt to transfer or assign any rights or obligations arising under this Agreement without such consent shall be void; provided that notwithstanding the foregoing and anything to the contrary herein, Borrower shall have the right to assign its rights and obligations under this Agreement to any of its affiliates and be released from all of its obligations under this Agreement so long as the guarantee executed and delivered by Guarantor in accordance with Section 19 (or a replacement guarantee in substantially the same form) shall remain in full force and effect.

SECTION 16. Notices.

(a) All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when received.

(b) All such notices and other communications shall be directed to the following address:

(i) If to Borrower or Borrowing Agent to:

Bear, Stearns & Co. Inc.

383 Madison Avenue

New York, NY 10179

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(ii) If to Securities Intermediary to:

Bear, Stearns & Co. Inc.

383 Madison Avenue

New York, NY 10179

(iii) If to Lender to:

Flotek Industries, Inc.

2930 West Sam Houston

Parkway North, Suite 300

Houston, Texas 77043

Attention: Lisa G. Meier

Facsimile: (713) 849-9911

(c) In the case of any party, at such other address as may be designated by written notice to the other parties.

SECTION 17. Governing Law; Submission To Jurisdiction; Severability.

(a) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, but excluding any choice of law provisions that would require the application of the laws of a jurisdiction other than New York.

(b) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH COURT, SOLELY FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS OBLIGATIONS HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY LOAN HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF RESIDENCE OR DOMICILE.

(c) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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(d) To the extent permitted by law, the unenforceability or invalidity of any provision or provisions of this Agreement shall not render any other provision or provisions herein contained unenforceable or invalid.

SECTION 18. Counterparts. This Agreement may be executed in any number of counterparts, and all such counterparts taken together shall be deemed to constitute one and the same agreement.

SECTION 19. Parent Guarantee.

On or prior to the date of the transfer of Loaned Shares to the Borrower in a Loan pursuant to this Agreement, Bear Stearns Companies Inc., a Delaware corporation, will execute a parent guarantee in favor of the Lender substantially in the form of Annex A hereto.

SECTION 20. Amendments.

No amendment or modification in respect of this Agreement shall be effective unless it shall be in writing and signed by the parties hereto.

SECTION 21. Capacity of Borrowing Agent.

Borrowing Agent is acting in connection with this Agreement solely in its capacity as Borrowing Agent for Lender and Borrower pursuant to instructions from Borrower and Lender. Borrowing Agent shall have no responsibility or personal liability to Lender or Borrower arising from any failure by Lender or Borrower to pay or perform any obligations hereunder, or to monitor or enforce compliance by Lender or Borrower with any obligation hereunder. Each of Lender and Borrower agrees to proceed solely against the other to collect or recover any securities or monies owing to it in connection with or as a result of this Agreement. Borrowing Agent shall otherwise have no liability in respect of this Agreement, except for its gross negligence or willful misconduct in performing its duties as Borrowing Agent.

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IN WITNESS WHEREOF, the parties hereto have executed this Share Lending Agreement as of the date and year first above written.

FLOTEK INDUSTRIES, INC. as Lender		BEAR, STEARNS INTERNATIONAL LIMITED as Borrower
By:	/s/ Jerry D. Dumas, Sr.	By:	/s/ Michael O’Donovan
Name:	Jerry D. Dumas, Sr.	Name:	Michael O’Donovan
Title:	Chairman, President and CEO	Title:	Authorized Signatory
		BEAR, STEARNS & CO. INC. as Borrowing Agent
		By:	/s/ Robert Aberman
		Name:	Robert Aberman
		Title:	Senior Managing Director

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Annex A

Form of Parent’s Guarantee

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EX-99.1

Exhibit 99.1

PRESS RELEASE

FOR IMMEDIATE RELEASE	CONTACT:	Brian Shannon
February 12, 2008		713.849.9911
		bshannon@flotekind.com

FLOTEK INDUSTRIES, INC. ANNOUNCES PRICING OF $100 MILLION

OF CONVERTIBLE SENIOR NOTES AND

ENTRY INTO SHARE LENDING AGREEMENT

HOUSTON, February 12, 2008, Flotek Industries, Inc. (NYSE:FTK) a technology-driven global supplier of drilling and production related products and services to the energy and mining industries, announced today that it has priced its previously announced offering of $100 million aggregate principal amount of convertible senior notes. Flotek also announced that it has granted the underwriter a 13-day option to purchase an additional $15 million aggregate principal amount of the convertible notes, solely to cover over-allotments. Flotek intends to use the net proceeds of the convertible notes offering to finance the purchase of its recently announced intended acquisition of Teledrift, Inc and for other general corporate purposes.

The convertible notes will be convertible, under certain circumstances, into shares of Flotek common stock, cash, or a combination thereof, at Flotek’s option, at an initial conversion price of approximately $22.75 per share of Flotek common stock, which is equivalent to an initial conversion rate of 43.9560 shares of Flotek common stock per $1,000 principal amount of convertible notes and represents a 30% premium to the price at which Flotek’s common stock was offered in the concurrent common stock offering described below. The conversion rate and the conversion price will be subject to adjustment in certain circumstances. In addition, in certain circumstances following certain corporate transactions that occur prior to February 15, 2013 and that also constitute a fundamental change, the conversion rate for a holder who elects to convert its convertible notes in connection with such corporate transaction will be increased.

The convertible notes will bear interest at a rate of 5.25% per annum and will also bear contingent interest, in certain circumstances, for periods commencing with the six-month period beginning on February 15, 2013. The convertible notes will mature on February 15, 2028 and may not be redeemed by Flotek prior to February 15, 2013, after which they may be redeemed at 100% of the principal amount plus accrued and unpaid interest. Holders of the convertible notes may require Flotek to repurchase some or all of the convertible notes on each of February 15, 2013, 2018 and 2023 or if Flotek is involved in certain types of corporate transactions or other events constituting a fundamental change, at 100% of the principal amount plus accrued and unpaid interest. The notes will be senior unsecured obligations of Flotek and will be guaranteed by certain of Flotek’s subsidiaries.

Concurrently with the offering of the convertible notes, Flotek has entered into a share lending agreement with Bear, Stearns International Limited (“BSIL”), as principal, and Bear, Stearns & Co. Inc. (“Bear Stearns”), as agent for BSIL, under which it has agreed to loan to BSIL up to 3,800,000 shares of its common stock. Flotek has also entered into an underwriting agreement with Bear Stearns, pursuant to which BSIL intends to sell shares of Flotek’s common stock that BSIL will be entitled to borrow from Flotek under the share lending agreement. These shares are being offered in an underwritten offering registered under the Securities Act of 1933, as amended, pursuant to Flotek’s existing shelf registration statement in order to facilitate hedging transactions undertaken by the purchasers of convertible notes. Flotek will not receive any of the proceeds from this sale of common stock but will receive a nominal lending fee from BSIL under the share lending agreement. BSIL will generally be required to return the borrowed shares as the convertible notes are converted, upon redemption of the convertible notes and upon the occurrence of certain other events. The delivery of common stock pursuant to the share lending agreement is contingent upon the closing of the convertible notes offering, and the closing of the convertible notes offering is contingent upon the delivery of common stock pursuant to the share lending agreement.

While the borrowed shares will be considered issued and outstanding for corporate law purposes, Flotek does not expect the borrowed shares offered and sold by BSIL to be dilutive to its earnings per share calculation because of the requirements for BSIL to return those shares to Flotek on or about February 15, 2028, or earlier in certain circumstances.

The convertible notes offering is expected to close on February 14, 2008, subject to customary closing conditions. Bear, Stearns & Co. Inc. was the sole manager for the offering of the convertible notes.

Flotek has filed a registration statement with the SEC for the offering of the convertible notes and common stock to which this communication relates. The offering of the convertible notes and common stock is being made by means of separate prospectus supplements and a final term sheets. Before you invest, you should read the prospectus, prospectus supplement and final term sheet in the registration statement and other documents Flotek has filed with the SEC for more complete information about Flotek and these offerings. You may get these documents for free by visiting the SEC website at http://www.sec.gov . Alternatively, you can request a copy of the relevant prospectus, the related prospectus supplement and the final term sheet by calling Bear Stearns at 1-866-803-9204.

This announcement is neither an offer to sell nor a solicitation to buy any of these securities and shall not constitute and offer, solicitation or sale in any jurisdiction in which such and offer, solicitation or sale is unlawful.

About Flotek Industries, Inc

Flotek is a technology driven global supplier of drilling and production related products and services to the energy and mining industries. We offer our products and services through both our own sales force and through independent representatives. Our major customers include leading oilfield service providers, major and independent oil and gas exploration and production companies, and onshore and offshore drilling contractors. Flotek is a publicly traded company headquartered in Houston, Texas and it’s common shares are traded on the New York Stock Exchange under the ticker symbol “FTK”.

For additional information, please visit Flotek’s website at www.flotekind.com.

Forward-Looking Statements:

This Press Release contains forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Flotek Industries, Inc.’s business, financial condition, results of operations and prospects. Words such as expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Press Release.

Although forward-looking statements in this Press Release reflect the good faith judgment of management, such statements can only be based on facts and factors currently known to management. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, but are not limited to, demand for oil and natural gas drilling services in the areas and markets in which the Company operates, competition, obsolescence of products and services, the Company’s ability to obtain financing to consummate proposed acquisitions and to support its operations, environmental and other casualty risks, and the impact of government regulation. Further information about the risks and uncertainties that may impact the Company are set forth in the Company’s most recent filings on Form 10-K (including without limitation in the “Risk Factors” Section) and Form 10-Q, and in the Company’s other SEC filings and publicly available documents. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Press Release. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Press Release.