EXHIBIT 4.3
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REGISTRATION RIGHTS AGREEMENT
By and Among
THE PRINCIPAL SHAREHOLDERS (DEFINED HEREIN)
and
FLOTEK INDUSTRIES INC.
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Common Stock, no par value
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Dated as of April 30, 2000
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TABLE OF CONTENTS
Page
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1. Registration under Securities Act, Etc............................................................. 1
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1.1 Registration on Request..................................................................... 1
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1.2 Piggy-Back Registration..................................................................... 3
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1.3 Registration Procedures..................................................................... 4
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1.4 Underwritten Offerings...................................................................... 6
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1.5 Preparation; Reasonable Investigation....................................................... 7
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1.6 Qualification to Obligations under Registration Covenants................................... 7
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1.7 Indemnification............................................................................. 8
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2. Definitions........................................................................................ 11
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3. Rule 144 and Rule 144A............................................................................. 12
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4. Amendments and Waivers............................................................................. 12
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5. Nominees for Beneficial Owners..................................................................... 12
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6. Notices............................................................................................ 13
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7. Assignment......................................................................................... 13
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8. Calculation of Percentage Interests in Registrable Securities...................................... 13
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9. No Inconsistent Agreements......................................................................... 13
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10. Remedies........................................................................................... 13
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11. Severability....................................................................................... 13
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12. Entire Agreement................................................................................... 14
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13. Descriptive Headings............................................................................... 14
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14. Governing Law...................................................................................... 14
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15. Counterparts; Partial Execution.................................................................... 14
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16. Term............................................................................................... 14
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17. Supersession of Existing Registration Rights Agreements............................................ 14
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REGISTRATION RIGHTS AGREEMENT, dated as of April 30, 2000, between
Flotek Industries Inc, an Alberta corporation (the "Company"), and each of the
parties identified on Schedule A hereto (the "Principal Stockholders").
Capitalized terms used herein but not otherwise defined shall have the
meanings given them in Section 2. All Dollar amounts referred to herein are US
Dollars, unless otherwise noted.
1. Registration under Securities Act, Etc.
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1.1 Registration on Request.
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(a) Request. At any time, or from time to time, upon the
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written request of one or more of the Principal Shareholders holding 25% or more
of the Registrable Securities (the "Initiating Holders") that the Company
either, as directed by the Initiating Holders, (i) effect the registration under
the Securities Act or (ii) file a prospectus (which for the purposes of this
agreement shall include a statement of material facts or short form prospectus)
for the purpose of qualifying for distribution in British Columbia or Ontario
pursuant to Applicable Canadian Securities Laws (any such registration or
prospectus filing being hereinafter referred to as a "registration," and any
such registration statement or prospectus being hereinafter referred to as a
"registration statement") of all or part of such Initiating Holders' Registrable
Securities, the Company promptly will give written notice of such requested
registration to all of the other Principal Shareholders, and thereupon the
Company will use reasonable efforts to effect, at the earliest possible date,
the registration under the Securities Act or the Applicable Canadian Securities
Laws, as directed by the Initiating Holders in their request, of (i) the
Registrable Securities which the Company has been so requested to register by
such Initiating Holders, and (ii) all other Registrable Securities which the
Company has been requested to register by the other Principal Shareholders (such
holders together with the Initiating Holders hereinafter are referred to as the
"Selling Holders") by written request given to the Company within 30 days after
the giving of such written notice by the Company, all to the extent requisite to
permit the disposition of the Registrable Securities so to be registered.
(b) Registration of Other Securities. Whenever the Company
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shall effect a registration pursuant to this Section 1.1, no securities other
than Registrable Securities held by Principal Shareholders shall be included
among the securities covered by such registration unless Selling Holders of
greater than 51% of the Registrable Securities to be included in such
registration shall have consented in writing to the inclusion of such other
securities, which consent shall not be unreasonably withheld or delayed,
provided, however, that no such other securities shall be included in such
registration to the extent that such inclusion would reduce the number of
Registrable Securities in such registration that any Selling Holder has
requested be included therein.
(c) Registration Statement Form. Registrations under this
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Section 1.1 shall be on such appropriate registration form of the Commission or
the form required under Applicable Canadian Securities Laws, as the case may be,
as shall be reasonably selected by the Company.
(d) Effective Registration Statement. A registration
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requested pursuant to this Section 1.1 shall not be deemed to have been effected
unless a registration statement with respect thereto has become effective and
remained effective in compliance with the provisions of the Securities Act or
Applicable Canadian Securities Laws, as the case may be, with respect to the
disposition of all Registrable Securities covered by such registration statement
for a period of at least 90 days.
(e) Selection of Underwriters. The underwriter or
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underwriters of each underwritten offering of the Registrable Securities so to
be registered shall be selected by the Selling Holders of at least 50% of the
Registrable Securities to be included in such registration and shall be
reasonably acceptable to the Company.
(f) Priority in Requested Registration. If the managing
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underwriter of an underwritten offering shall advise the Company in writing (and
the Company shall so advise each Selling Holder of Registrable Securities
requesting registration of such advice) that, in its opinion, the number of
securities requested to be included in such registration is sufficiently large
to materially adversely affect the success of the offering, the Company, except
as provided in the following sentence, will include in such registration, to the
extent of the number and type which the Company is so advised can be sold in
such offering, Registrable Securities requested to be included in such
registration on the following basis:
(i) first, pro rata among the Initiating Holders; and
(ii) second, pro rata among the other Selling Holders.
As used herein, the term "pro rata" among a particular group of shareholders
shall mean allocated among such shareholders proportionally, on the basis of the
number of Registrable Securities held by each shareholder in such group as
compared to the total number of Registrable Securities held by all shareholders
in such group. To the extent that all of the Registrable Securities of Selling
Holders so requested to be registered are excluded from the offering, the
holders of such Registrable Securities shall be deemed not to have used a demand
registration pursuant to this Section 1.1.
(g) Limitations on Registration on Request. Notwithstanding
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anything in this Section 1.1 to the contrary, the Company shall not be required
to take any action to file a registration statement pursuant to this Section
1.1:
(i) within 120 days following the effective date of any
registered offering of the Company's securities;
(ii) with respect to any offering having an aggregate sales price
(before deduction of underwriting discounts and expenses of sale) of
less than $500,000;
(iii) with respect to any offering having an aggregate sales price
(before deduction of underwriting discounts and expenses of sale) of
more than $10,000,000 unless such offering is firmly underwritten; or
(iv) after (A) the Principal Shareholders collectively hold fewer
than 100,000 shares of Registrable Securities, or (B) the expiration of
the term of this Agreement.
(h) Expenses. The Company will pay all Registration Expenses
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in connection with any registration requested pursuant to this Section 1.1.
1.2 Piggy-Back Registration.
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(a) Right to Include Registrable Securities. If the Company
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at any time proposes to file a registration statement to register any of its
securities of the same class as the Registrable Securities under the Securities
Act or the Applicable Canadian Securities Laws (except for a registration
statement or prospectus filed in connection with an employee benefit plan, a
transaction relating to a merger or business combination, a transaction relating
to an exchange offer, a transaction relating to an acquisition of assets or
securities, or a transaction otherwise described in Rule 145 of the Securities
Act), whether or not for sale for its own account, it will each such time give
prompt written notice to all holders of Registrable Securities of its intention
to do so and of such holders' rights under this Section 1.2. Upon the written
request of any such holder (a "Requesting Holder") (which request shall specify
the amount of Registrable Securities intended to be disposed of by such
Requesting Holder) made as promptly as practicable and in any event within 20
days after the receipt of any such notice (15 days if the Company states in such
written notice or gives telephonic notice to all registered holders of
Registrable Securities, with written confirmation to follow promptly thereafter,
stating that (i) such registration will be on Form S-3 and (ii) such shorter
period of time is required because of a planned filing date), the Company will
use reasonable efforts to effect the registration or file the prospectus under
the Securities Act or the Applicable Canadian Securities Laws, as the case may
be, of all Registrable Securities which the Company has been so requested to
register by the Requesting Holders thereof. No registration effected under this
Section 1.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 1.1.
(b) Priority in Incidental Registrations. If the managing
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underwriter of any underwritten offering shall deliver a written opinion to the
holders of Registrable Securities that the total amount of Registrable
Securities requested to be included in such registration would have a material
adverse effect on such offering then the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in (or during the time of) such offering, first, all securities proposed by
the Company to be sold for its own account, and second, such Registrable
Securities requested to be included in such registration pursuant to this
Agreement, pro rata among Requesting Holders; provided that if securities are
being offered for the account of other persons or entities as well as the
Company, such reduction shall not represent a greater fraction of the number of
securities intended to be offered by holders of Registrable Securities than the
fraction of similar reductions imposed on such other persons or entities over
the amount of securities they intended to offer.
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(c) Expenses. The Company will pay all Registration
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Expenses in connection with any registration effected pursuant to this Section
1.2.
1.3 Registration Procedures. If and whenever the Company is
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required to effect the registration of any Registrable Securities under the
Securities Act or the Applicable Canadian Securities Laws as provided in
Sections 1.1 and 1.2. the Company will, as expeditiously as possible, use
reasonable efforts to:
(i) prepare and (within 120 days after the end of the
period within which requests for registration may be given to the
Company or in any event as soon thereafter as practicable) file with
the Commission or the Canadian Securities Regulators the requisite
registration statement to effect such registration and thereafter
use reasonable efforts to cause such registration statement to
become effective;
(ii) prepare and file with the Commission or the Canadian
Securities Regulators such amendments and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act or
the Applicable Canadian Securities Laws, as the case may be, with
respect to the disposition of all Registrable Securities covered by
such registration statement for a period of at least 90 days;
(iii) furnish to each seller of Registrable Securities
covered by such registration statement, such number of conformed
copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the
Securities Act or the Applicable Canadian Securities Laws, as the
case may be, and such other documents, as such seller may reasonably
request;
(iv) register or qualify all Registrable Securities and
other securities covered by any registration statement under the
Securities Act, under Applicable Canadian Securities Laws, under
such other securities or blue sky laws of such States of the United
States of America where an exemption is not available and as the
sellers of Registrable Securities covered by such registration
statement shall reasonably request; keep such registration or
qualification in effect for so long as such registration statement
remains in effect; and take any other action which may be reasonably
necessary or advisable to enable such sellers to consummate the
disposition in such jurisdictions of the securities to be sold by
such sellers, except that (x) the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (iv) be obligated to be so
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qualified or to consent to general service of process in any such
jurisdiction and (y) the Company shall not be required to register
or qualify Registrable Securities in any state or province where
such qualification or registration would place an undue burden on
the Company or which would require that the Company consent or agree
to restrictions, covenants, or qualifications which the Company
deems unacceptable;
(v) cause all Registrable Securities covered by such
registration statement to be registered with or approved by such
other federal, provincial or state governmental agencies or
authorities as may be necessary in the opinion of counsel to the
Company and counsel to the underwriters to enable the seller or
sellers thereof to consummate the disposition of such Registrable
Securities;
(vi) furnish at the effective date of such registration
statement and, if applicable, the date of the closing under the
underwriting agreement, to each seller of Registrable Securities,
and each such seller's underwriters, a signed counterpart of (x) an
opinion of counsel for the Company, dated the effective date of such
registration statement and (y) a "comfort" letter signed by the
independent public accountants who have certified the Company's
financial statements included or incorporated by reference in such
registration statement, covering substantially the same matters with
respect to such registration statement (and the prospectus included
therein) and, in the case of the accountants' comfort letter, with
respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to the
underwriters in underwritten public offerings of securities and, in
the case of the accountants' comfort letter, such other financial
matters, and, in the case of the legal opinion, such other legal
matters, as the sellers of the Registrable Securities covered by
such registration statement, or the underwriters, may reasonably
request;
(vii) notify each seller of Registrable Securities covered by
such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act or the
Applicable Canadian Securities Laws, upon discovery that, or upon
the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, in the light of the circumstances
under which they were made, and at the request of any such seller
promptly prepare and furnish to it a reasonable number of copies of
a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made;
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(viii) otherwise comply with all applicable rules and
regulations of the Commission and the Canadian Securities
Regulators, and, if required, make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than
eighteen months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder, and promptly
furnish to each such seller of Registrable Securities a copy of any
amendment or supplement to such registration statement or
prospectus;
(ix) keep each Selling Holder and each Requesting Holder
advised in writing as to the initiation and progress of any
registration under Section 1.1 or 1.2 hereunder, as the case may be;
(x) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all
Registrable Securities covered by such registration statement from
and after a date not later than the effective date of such
registration; and
(xi) list all Registrable Securities covered by such
registration statement on any securities exchange on which
Registrable Securities of the same class and, if applicable, series,
covered by such registration statement are then listed or on the
Nasdaq Stock Market ("Nasdaq") if the Registrable Securities are
reported on Nasdaq.
The Company may require each seller of Registrable Securities, as to which any
registration is being effected, to furnish the Company such information
regarding such seller and the distribution of such securities, as required by
law or the Commission or the Canadian Securities Regulators, or which the
Company's counsel otherwise deems appropriate.
Each holder of Registrable Securities agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in subdivision (vii) of this Section 1.3 , such holder will forthwith
discontinue such holder's disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until such
holder's receipt of the copies of the supplemented or amended prospectus
contemplated by subdivision (vii) of this Section 1.3 and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
1.4 Underwritten Offerings.
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(a) Requested Underwritten Offerings. If requested by the
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underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 1.1, the Company will use all
reasonable efforts to enter into
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an underwriting agreement with such underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to each such
holder and the underwriters and to contain such representations and warranties
by the Company aand such other terms as are generally prevailing in agreement of
that type, including, without limitation, indemnities to the effect and to the
extent provided in Section 1.7. The holders of the Registrable Securities
negotiation of the underwriting agreement. Such holders of Registrable
Securities to be sold by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and all other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable the Company or
the underwriters other than representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution or any other representations required by applicable law.
(b) Incidental Underwritten Offerings. If the Company proposes to
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register any of its securities under the Securities Act or the Applicable
Canadian Securities Laws as contemplated by Section 1.2 and such securities are
to be distributed by or through one or more underwriters, the Company will, if
requested by any Requesting Holder of Registrable Securities, use reasonable
efforts to arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such Requesting Holder among the securities
of the Company to be distributed by such underwriters. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any such
Requesting Holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Requesting Holder, such Requesting Holder's Registrable Securities and such
Requesting Holder's intended method of distribution or any other representations
required by applicable law.
1.5 Preparation; Reasonable Investigation. In connection with the
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preparation and filing of each registration statement under the Securities Act
or the Applicable Canadian Securities Laws pursuant to this Agreement, the
Company (i) shall give the holders of Registrable Securities registered under
such registration statement, their underwriters, if any, and their respective
counsel and accountants the reasonable opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission or the Canadian Securities Regulators, and each
amendment thereof or supplement thereto, and (ii) shall promptly notify the
registered holders of Registrable Securities and their counsel of any stop order
issued or threatened by the Commission or any Canadian Securities
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Regulators and take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered.
1.6 Qualification to Obligations under Registration Covenants. The
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Company shall be entitled to postpone for a reasonable period of time (but not
exceeding 120 days) the filing of any registration statement otherwise required
to be prepared and filed by it pursuant to Section 1.1 if (i) the Company
determines, in its reasonable judgment, that such registration and offering
would interfere with any financing, acquisition, corporate reorganization or
other material transaction involving the Company or any of its affiliates or
(ii) the Company is in possession of information concerning it or its business
and affairs, the public disclosure of which would have a material adverse effect
on the Company and which the Company has determined it is not legally obligated
to disclose, and the Company promptly gives the holders of Registrable
Securities requesting registration thereof pursuant to Section 1.1 written
notice of such determination, containing a general statement of the reasons for
such postponement and an approximation of the anticipated delay. If the Company
shall so postpone the filing of a registration statement, Initiating Holders
requesting registration thereof pursuant to Section 1.1 shall have the right to
withdraw the request for registration by giving written notice to the Company
within 30 days after receipt of the notice of postponement and, in the event of
such withdrawal, such request shall not be counted for purposes of the requests
for registration to which holders of Registrable Securities are entitled
pursuant to Section 1.1 hereof.
1.7 Indemnification.
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(a) Indemnification by the Company. The Company will, and
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hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Section 1.1 or 1.2, each seller of any Registrable
Securities covered by such registration statement and each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act or the Applicable Canadian Securities
Laws, and their respective directors, officers, partners, employees and
affiliates against any losses, claims, damages or liabilities, joint or several,
to which such seller or underwriter or any such director, officer, partner,
employee, affiliate or controlling person may become subject under the
Securities Act or the Applicable Canadian Securities Laws or otherwise,
including, without limitation, the reasonable fees and expenses of legal
counsel, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act or the Applicable Canadian
Securities Laws, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the Company will
reimburse such seller or underwriter and each such director, officer, partner,
employee, affiliate and controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided, that the Company
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shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in
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respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such seller or underwriter, as the case may be,
specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer, employee,
affiliate, partner or controlling person and shall survive the transfer of such
securities by such seller.
(b) Indemnification by the Sellers. As a condition to
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including any Registrable Securities in any registration statement, the Company
shall have received an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and hold harmless the
Company, and each director of the Company, each officer of the Company and each
other Person, if any, who participates as an underwriter in the offering or sale
of such securities and each other Person who controls the Company or any such
underwriter within the meaning of the Securities Act or the Applicable Canadian
Securities Laws, and their respective directors, officers, partners, employees
and affiliates, against any losses, claims, damages or liabilities, joint or
several, to which such person may become subject under the Securities Act or the
Applicable Canadian Securities Laws or otherwise, including, without limitation,
the reasonable fees and expenses of legal counsel, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act or the Applicable Canadian Securities Laws, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, and to reimburse such person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; but only to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such seller, specifically stating that it is for use
in the preparation thereof; provided, however, that the liability of such
indemnifying party under this Section 1.7(b) shall be limited to the amount of
proceeds received by such indemnifying party in the offering giving rise to such
liability. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller.
(c) Notices of Claims, etc. Within ten days of receipt by
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an indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 1.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the
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latter of the commencement of such action; provided, however, that the failure
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of any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 1.7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof, provided, however, that if the
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indemnified party reasonably believes it is advisable for it to be represented
by separate counsel because there exists a conflict of interest between its
interests and those of the indemnifying party with respect to such claim, or
there exist defenses available to such indemnified party which may not be
available to the indemnifying party, or if the indemnifying party shall fail to
assume responsibility for such defense, the indemnified party may retain counsel
satisfactory to it and the indemnifying party shall pay all reasonable fees and
expenses of such counsel. No indemnifying party shall be liable for any
settlement of any action or proceeding effected without its written consent. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation or which requires action by the indemnified party.
(d) Contribution. If the indemnification provided for in
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this Section 1.7 shall for any reason be held by a court to be unavailable to an
indemnified party under subparagraph (a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under subparagraph (a) or (b) hereof, the indemnified
party and the indemnifying party under subparagraph (a) or (b) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the relative fault of
the Company and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company and such prospective sellers from the offering of the securities
covered by such registration statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Such prospective sellers' obligations to
contribute as provided in this subparagraph (d) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld or delayed.
10
(e) Other Indemnification. Indemnification and contribution
---------------------
similar to that specified in the preceding subdivisions of this Section 1.7
(with appropriate modifications) shall be given by the Company and each seller
of Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or provincial law or
any regulation of any governmental authority other than the Securities Act or
the Applicable Canadian Securities Laws.
(f) Indemnification Payments. The indemnification and
------------------------
contribution required by this Section 1.7 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
2. Definitions. As used herein, unless the context otherwise
-----------
requires, the following terms have the following respective meanings:
"Affiliate" means, with respect to any person, any other person
---------
that directly or indirectly controls or is controlled by or is under common
control with such person.
"Applicable Canadian Securities Laws" means the securities acts
-----------------------------------
or similar statutes in effect in each of British Columbia and Ontario, Canada,
and having application to the Company or any transaction or proposed transaction
to which the Company is a party, as they may be amended or replaced from time to
time, and includes the regulations and rules promulgated thereunder, and further
includes all policies, rules and mandatory guidelines imposed by The Vancouver
Stock Exchange, The Toronto Stock Exchange or any other securities exchange on
which the securities of the Company are, at any relevant time, posted for
trading.
"Canadian Securities Regulators" means the Securities Commissions
------------------------------
or similar regulatory authorities having jurisdiction in each of British
Columbia and Ontario, Canada, and further includes The Vancouver Stock Exchange,
The Toronto Stock Exchange or any other securities exchange on which the
securities of the Company are, at any relevant time, posted for trading.
"Commission" means the Securities and Exchange Commission or any
----------
other federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include a reference to the comparable section, if any, of any such similar
federal statute.
"Initiating Holder" is defined in Section 1.1.
-----------------
"Person" means any individual, corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
11
"Registrable Securities" means (i) the shares of Common Stock
----------------------
owned on the date hereof by the parties hereto or issued or issuable to the
parties hereto pursuant to the exercise of options (whether or not presently or
then exercisable) or warrants or the conversion of convertible securities owned
by them, or which they have the right to acquire pursuant to that certain
Securities Purchase and Exchange Agreement of even date herewith, on the date
hereof, and (ii) any Related Registrable Securities. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (a) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act or the Applicable Canadian
Securities Laws and such securities shall have been disposed of in accordance
with such registration statement, (b) they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, (c) they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent public distribution of them shall not require
registration of them under the Securities Act, or (d) they shall have ceased to
be outstanding. All references to percentages of Registrable Securities shall be
calculated pursuant to Section 8.
"Registration Expenses" means all expenses incident to the
---------------------
Company's performance of or compliance with Section 1, including, without
limitation, all registration, filing and NASD fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and disbursements
of counsel for the Company and of its independent public accountants, including
the expenses of "cold comfort" letters required by or incident to such
performance and compliance, and any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (excluding any underwriting
discounts or commissions with respect to the Registrable Securities or any other
fee measured by the number or amount of Registrable Securities).
"Related Registrable Securities" means any securities of the
------------------------------
Company issued or issuable with respect to the securities by way of a dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise.
"Requesting Holder" is defined in Section 1.2.
-----------------
"Securities Act" means the Securities Act of 1933, or any
--------------
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such similar statute.
"Selling Holder" is defined in Section 1.1.
--------------
3. Rule 144 and Rule 144A. Upon the request of any holder of
----------------------
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with the requirements of Rules 144 or
144A under the Securities Act.
12
4. Amendments and Waivers. This Agreement may be amended with
----------------------
the written consent of the Company and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such amendment,
action or omission to act, of each holder or holders of the Registrable
Securities affected by such amendment, action or omission to act.
5. Nominees for Beneficial Owners. In the event that any
------------------------------
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by any holder or holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances and
evidence reasonably satisfactory to it of such owner's beneficial ownership of
such Registrable Securities.
6. Notices. All notices, demands and other communications to
-------
any party hereto provided for or permitted hereunder shall be made in writing
and shall be by registered or certified first-class mail, return receipt
requested, telex, telegram, telecopier, reputable courier service or personal
delivery, addressed to it in the manner set forth on the signature page hereto,
or at such other address as it shall have furnished to the other parties hereto
in writing. All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being sent by reputable courier service; three business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; and when receipt is acknowledged, if telecopied.
7. Assignment. This Agreement shall be binding upon and inure
----------
to the benefit of and be enforceable by the parties hereto and, with respect to
the Company, its respective successors and assigns and, with respect to each
other party hereto, any holder who is an affiliate or successor entity to such
party or a transferee therefrom of any Registrable Securities, subject to the
provisions respecting the minimum numbers of percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein. The parties hereto, other than the
Company (and not any other holder of Registrable Securities or any other
Person), shall be permitted, in connection with a transfer or disposition of
Registrable Securities, to eliminate or impose conditions or constraints on the
ability of the transferee, as a holder of Registrable Securities, to request a
registration pursuant to Sections 1.1 and 1.2 and shall provide the Company with
copies of such conditions or constraints and the identity of such transferees.
8. Calculation of Percentage Interests in Registrable
--------------------------------------------------
Securities. For purposes of this Agreement, all references to a percentage of
----------
the Registrable Securities shall be calculated based upon the number of shares
of Registrable Securities outstanding or issuable pursuant to outstanding
options (whether or not presently or then exercisable), warrants or convertible
securities at the time such calculation is made.
13
9. No Inconsistent Agreements. The Company will not hereafter
---------------------------
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement.
10. Remedies. Each party hereto and each holder of Registrable
--------
securities is entitled to exercise all rights granted by law, including recovery
of damages; such rights not to extend to incidental or consequential damages.
11. Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Purchaser shall be enforceable to the fullest extent permitted by law.
12. Entire Agreement. This Agreement is intended by the parties
----------------
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement supersedes all prior agreements and
understandings between the Company and any of the Principal Stockholders with
respect to the registration of any Company securities under applicable
securities laws.
13. Descriptive Headings. The descriptive headings of the
--------------------
several sections and paragraphs of this Agreement are inserted for reference
only and shall not limit or otherwise affect the meaning hereof.
14. Governing Law. This Agreement shall be construed and
-------------
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of Texas applicable to agreements made and to be performed
entirely within such State.
15. Counterparts; Partial Execution. This Agreement may be
-------------------------------
executed in any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument. This Agreement shall be fully enforceable against the Company by any
Principal Shareholder who is a signatory hereto regardless of whether any other
Principal Shareholder is also a signatory hereto.
16. Term. This Agreement shall be effective for the period
----
commencing on the date hereof and expiring on the date six years from the date
hereof.
17. Supersession of Existing Registration Rights Agreements.
-------------------------------------------------------
This Agreement supersedes in their entirety any and all currently existing
agreements between the Company and any of the Principal Stockholders with
respect to the registration of any Company securities under applicable
securities laws.
[The remainder of this page has intentionally been left blank]
14
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
FLOTEK INDUSTRIES, INC.
By:______________________________________
Xxxxx X. Xxxxx, Xx., President and CEO
XXXX, X.X.
By: Xxxxxx Property Corp., a Texas
corporation, General Partner
By:________________________________
X. X. Xxxxxxx, Xx., President
XXXXXXXX ENERGY PARTNERS, L.L.C.
By:______________________________________
Xxxx X. Xxxxxxxx, Managing Director
_________________________________________
Xxxxxxx X. Xxxxxxx, an individual
_________________________________________
Xxxxxx X. X'Xxxxx, Xx., an individual
_________________________________________
Xxxxx Xxxxxxxxx, an individual
15
______________________________________
Xxxxxx X. Xxxxxxxxx, an individual
______________________________________
Xxxx Xxxxxxxx, an individual
______________________________________
Xxxxxxx X. Xxxxxx, an individual
______________________________________
Xxxx Xxxxxxxxx, an individual
Springfield Trading S.A.
By____________________________________
Name:
Title:
______________________________________
Xxxxxxx X. Xxxxxxxx, an individual
______________________________________
Xxxxxx Xxxxxx, an individual
______________________________________
Xxxxx Xxxxxx X'Xxxxx, an individual
16
_________________________________________
Xxxxxxx X. Xxxxx, an individual
XXXXX FAMILY 1999 PARTNERSHIP LTD
By:______________________________________
Xxxxx X. Xxxxx, Co-Trustee
By:______________________________________
Xxxxx X. Xxxxx, Co-Trustee
XXXXXXXX XXXXX, INC.
By:______________________________________
Xxxxx Xxxxx, President
XXXXXX RIVER CORPORATION
By:______________________________________
Xxxxx Xxxxx, President
NOW Ventures, LLC
By:______________________________________
Xxxxxx X. X'Xxxxx, Xx., Managing
Member
_________________________________________
[Xxx Xxxxx], an individual
17
_________________________________________
Xxxxxx X. Xxxxxxx, an individual
Xxxxxx Investors, L.L.C.
By_______________________________________
Xxxxxxx X. Xxxxxxx, Managing Member
_________________________________________
Xxxxxxx X. Xxxxxxxxx, Xx.
18
